USA Truck losses continue

USA Truck Inc. can’t seem to the outrun the losses and negative operating fundamentals that have plagued the carrier for the past four quarters.

The Van Buren-based trucking firm incurred a net loss of $3.486 million, compared to $598,000 lost in the year-ago period.

Revenue without fuel surcharges slid 4.6% to $103.52 million for the three months ending June 30, as the carrier reported major challenges in its traditional trucking operations with too many unmanned tractors. Fuel surcharges totaled $26.049 million in the quarter, down 14.7% from the prior year.

CEO Cliff Beckham noted in the release that the firm experienced difficulty expanding its customer base amid weaker demand from the manufacturing sector.

Beckham said operationally the firm’s execution has been disappointing but he’s recently hired experienced personnel and engaged industry consultants for a full analysis that he hopes will improve freight planning and overall freight mix.

Wall Street expected a little stronger performance on the revenue side in the quarter but shares traded higher following the earnings release Thursday morning (July 19).

Shares (NASDAQ: USAK) opened trading at $4.73, rising to $4.94 by mid morning on light volume for the thinly traded company.

The ongoing losses during the past year has put the trucking firm out of compliance with its debt covenants, a serious concern for the highly leveraged company.

At the end of June, USA Truck’s debt comprised 50.9% of its balance sheet, up from 47.4% six months earlier.

Beckham said the firm had obtained a waiver for its non-compliance which would buy them a little more time to renegotiate a new five-year revolving credit facility with a different lender. The waiver is good through Sept. 30.

“We anticipate the new facility will afford us improved pricing and significantly greater financial flexibility,” Beckham said.

For the six months ended June 30, USA Truck incurred capital expenditures of approximately $19.9 million. For the balance of 2012 the firm anticipates net capital expenditures to be approximately $7.4 million.

While concerns are warranted, USA Truck did have a few bright spots in the recent quarter.

In the SCS segment (brokerage division) revenue grew to $26.25 million, up 46% from a year ago. This segment improved base revenue per manned tractor and lower fuel expense. An increase in purchased transportation expense pressured the gross margin, and the fixed costs rose faster than freight volumes as continued growth necessitated the addition of branch offices.

Intermodal revenue totaled $5.42 million, up 2% from June 2011 and these two asset-light business units together produced roughly 28% of the company’s total revenue in the recent quarter as the traditional carrier tries to diversify its operation away from its former truck-load model.

That said, the firm’s trucking segment continues to run in reverse. This unit posted $71.84 million in revenue for the recent quarter, down more than 12% from the year-ago period.

Average weekly revenue per tractor declined 9.2% to $2,546. The firm also struggled with a 12.2% unmanned tractor count during the quarter driven by difficulty in hiring and retaining drivers.

Analysts say driver turnover is at its highest rate since early 2008. Turnover rates among large long haul carriers hit 90% in the first quarter of this year, according to the American Trucking Association.

Beckham said the company has implemented a series of recruiting and retention initiatives that has helped bring down the number of unmanned tractors in the past two quarters, but there is more work to do.

Jason Seidl, freight analyst with Dalhman Rose & Co., said carriers will likely face headwinds as the move toward 2013 and the economy sputters at a slower pace than seen earlier this year.

He said there is little room for price gains in freight loads amid tepid demand and more carrier transitioning freight away from truckload to asset-light divisions such as intermodal and brokerage.

FINANCIAL SNAPSHOT
Total Revenue
2Q 2012: $129.569 million
2Q 2011: $139.027 million

Net Income
2Q 2012: $-3.486 million
2Q 2011: $598,000

Earnings Per Share
2Q 2012: -34 cents
2Q 2011: 6 cents