USA Truck Takes Move To Prevent Hostile Takeover

Financially troubled USA Truck on Thursday (Nov. 8) announced a “stockholders’ rights plan” that seemingly protects the company from a hostile takeover following a rapid share-price decline that has seen price levels well below any point in the company’s publicly-held history.

The Van Buren-based long-haul carrier also announced board and management changes designed “to bring material improvements to our operating results.”

Improvements are necessary for the company that is on track to post its fourth consecutive year of income loss.

The company reported Oct. 26 that its third quarter revenue fell 2.3% and it lost $6.1 million in the quarter compared to a 2011 third-quarter loss of $4.3 million. The 59 cent per share loss was far worse than the consensus estimate of a 25 cent per share loss from the two analysts who still follow the publicly held trucking company.

For the first nine months of 2012, the long-haul carrier recorded a net loss of $14.4 million, considerably worse than the $6.4 million loss during the same period of 2011. Revenue for the first nine months of 2012 totaled $301.7 million, down from the $310.8 million during the same period of 2011.

The poor financial report comes within the same quarter that USA Truck was able to obtain a new credit line. The new agreement, made with Wells Fargo Capital Finance and PNC Bank, placed all assets of the company up as collateral for a new $125 million revolving credit agreement. Of that, USA Truck has access to $28.3 million, with $75.9 million repaying the obligation of the previous credit agreement.

An inability to generate cash has been a problem for the company. USA Truck posted a 2011 net income loss of $10.77 million, more than triple the loss during 2010 and in a year when other trucking companies began 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.

POISON PILL?
Company officials say the new stock plan “is not intended to prevent a takeover of the Company on terms that are fair to and in the best interests of stockholders.”

However, the plan caps ownership acquisition at 15% and leaves the cap in place for two years “to afford the Company time to implement its turnaround strategy.” The plan also puts in place a 10-day “redemption period” that gives USA Truck officials “the opportunity to negotiate” with anyone who seeks to buy shares beyond the 15% cap.

The plan gives shareholders the right to vote on the plan during the 2014 annual meeting.

“The Board believes it is appropriate to adopt the Rights Plan in light of the significant recent decline in the market price of the Company’s common stock and the fact that the Company is in the process of implementing its turnaround plan. The Company is not aware of any pending unsolicited takeover offer for the Company,” noted the statement issued after the markets closed on Thursday.

The share price of the thinly traded stock (NASDAQ: USAK) closed Thursday at $2.82, down 17 cents. During the past 52 weeks the share price has ranged from a $10.08 high to a $2.65 low.

BOARD CHANGES
The company also said Robert Peiser will succeed Terry Elliot as board chairman, with Elliot staying on the board and continuing to serve as chairman of the audit committee.

Peiser, who earned a master’s degree in finance from Harvard, is known in the corporate world as a turnaround artist.

“Robert A. Peiser has successfully financed, restored profitability to, or otherwise created value in a large number of companies in a variety of industries,” notes the beginning sentence from a Rice University post about Peiser’s role with the university’s Jones Graduate School of Business.

The post says Peiser was “widely credited” with the successful 1995 financial restructuring of Trans World Airlines (TWA) following the carrier’s takeover battle against Carl Icahn. He also served as the president and CEO of Imperial Sugar Co. between 2008 and 2010. In June, Imperial Sugar was acquired by Louis Dreyfus Commodities.

“I believe the plan (USA Truck) management has begun implementing offers a sound platform for returning long term value to stockholders and that the changes announced today will support the execution of the plan,” Peiser said in the statement. “A critical element of the plan is having the time to execute it without unwanted distractions. To that end, I believe the Company has the capital resources and, with the adoption of the Rights Plan, now has another tool to prevent disruption of the plan in a manner that could be detrimental to our stockholders.”

Also, Robert Creager has been appointed to the board. He fills an existing board vacancy and will serve on the audit committee. Creager is a former audit practice leader of the Houston office of PriceWaterhouseCoopers.  He is on the board of GeoMet, an independent natural gas exploration and development company.

OPERATIONS SUPPORT
The company also has hired Thomas Glaser, a former president and COO of Celadon Group, to “begin hands-on sessions with our operations personnel.” USA Truck CEO Cliff Beckham said Glaser is an interim consultant, and the company has “initiated a national search for an experienced operations executive.”

Celadon, which operates Celadon Trucking, purchased $4.66 million in USA Truck shares in early October 2011. Company officials also asked to meet with the USA Truck management to “discuss a possible association” between the two companies.

USA Truck officials rejected the request, and Celadon moved to an easier target. Celadon officials sold the shares of USA Truck on Feb. 28 and on Feb. 29 announced it had “purchased a significant portion of the operating equipment of Teton Transportation, Inc.”

Glaser also appears to be the second attempt to bring experience into its operations. USA Truck hired David Hartline in August 2011 as the executive vice president and chief operations officer. Hartline was hired to bring his almost 20 years of trucking industry experience to USA Truck and help guide “operational execution and leadership development.” Hartline is no longer employed by USA Truck.