The financial struggles at Van Buren-based USA Truck are likely to continue and another attempt could be made to buy out the company, according to Alex Gray, founder of Grayvest and a private investor with more than 20 years of private equity experience.
Also, Jack Waldo, a transportation industry analyst with Little Rock-based Stephens Inc., is lowering his financial outlook for USA Truck.
And it’s not just market watchers who have less than rosy views of the company.
USA Truck issued its 10Q — quarterly federal filing required by the U.S. Securities & Exchange Commission — on Thursday (Aug. 9) saying it has already paid $100,000 for breach of covenants with lenders, and will pay another $300,000 penalty if a new credit agreement is not reached by Aug. 24.
Company officials do not believe, according to the 10Q, that its third quarter results will help resolve its debt situation.
“We do not believe that we will be in compliance with all of our covenants based upon our September 30, 2012 results,” USA Truck officials noted in the 10Q. “Commencing September 7, 2012, and at various dates through October 31, 2012, we must take further steps to protect the interests of our existing lenders if the Credit Agreement is not refinanced by such dates.”
For the first six months of 2012, the company has lost $8.359 million, more than the $2.118 million lost during the same period of 2011.
USA Truck posted a 2011 net income loss of $10.777 million, more than triple the loss during 2010 and in a year when other trucking companies are beginning to see improved financials. Also, 2011 marked the third consecutive year of losses for USA Truck. In 2010, the company reported a loss of $3.308 million, and a $7.177 million loss in 2009.
In an Aug. 6 note at Seeking Alpha, Gray was critical of USA Truck management for not considering an acquisition offer from Indianapolis-based Celadon Group. He also encouraged investors to stay away from buying USA Truck shares.
Executives with Celadon Trucking Services announced Oct. 11 an interest in acquiring or merging with USA Truck, and asked USA Truck management to meet about a possible transaction. At risk in a possible deal would be the about 500 jobs at USA Truck’s corporate headquarters in Van Buren.
On Oct. 21, the USA Truck board said it was not interested in a deal with Celadon. On Feb. 28, Celadon sold its USA Truck shares, effectively ending the takeover attempt.
“Given the continued struggles at (USA Truck) and its inability to deliver value to the shareholders, it is inexcusable that they would simply blow off a meeting with CGI (Celadon) to discuss what possibilities might exist,” Gray said in the note. “It is hard to say if CGI would have put an offer on the table after the discussions, but if they had, it seems likely the offer would have been at least double the current trading price.”
Gray believes another company will come calling on USA Truck, “but there is certainly the risk of more downside before a potential suitor shows its hand.”
“(A)t some point in an industry looking for revenues, USAK will be attractive to other suitors. I would recommend to the USAK Board of Directors that if CGI or any other suitor should come calling … Answer the phone and take the meeting,” Gray noted.
USA Truck declined to comment on Gray's assessment.
Waldo, the analyst with Stephens Inc., said in a July 27 note that he is lowering his share price target from $8 to $6.
“An increasingly cloudy macro environment complicates visibility into how quickly USAK can address challenges in achieving adequate volume to cover its fixed cost network and return to profitability,” Waldo explained. “Given these concerns, we remain comfortable with our Equal-Weight rating and have reduced our PT to $6 (was $8).”
Waldo also pointed to equipment utilization problems for USA Truck.
“A competitive market for hiring and retaining drivers led to an average unmanned tractor count of 12.2% of total fleet, peaking at 14.1% and adding to the headwinds created by a softening economy.”
Shares of USA Truck (NASDAQ: USAK) closed Thursday at $4.14, up 2 cents from the opening trade. During the past 52 weeks the share price has ranged from an $11.48 high to a $4 low.