Second quarter income positive for USA Truck – finally

One positive quarter does not a turnaround make, but Van Buren-based USA Truck posted second quarter net income of $722,000, better than the $1.398 million loss in the same quarter of 2013 and the first quarter in the black in three years.

Per share earnings of 7 cents also beat the consensus estimate of a 2-cent per share loss. Total revenue for the quarter was $153.298 million, better than the consensus estimate of $152.32 million.

For the first half of 2014 the trucking company has lost $867,000, better than the $3.872 million loss posted during the same period of 2013. USA Truck posted a net loss of $9.11 million in 2013. While an improvement compared to the net loss of $17.671 million in 2012, it marked the fifth consecutive year of losses for the trucking company.

“We posted our first quarter of positive net income in three years,” President and CEO John Simone said in the earnings report. “While continuing the work of implementing our turnaround plan, the progress we are making is evident in virtually every area of our business. … The Company’s improved second-quarter performance was driven by a 12.1% increase in base revenue, while operating expenses net of fuel surcharge collections increased only 7.4%, yielding a 410-basis point improvement in operating margin – a testament to the multiple revenue growth, operational and cost-efficiency initiatives we have implemented.”

Investors liked the report. The thinly-traded USA Truck shares (NASDAQ: USAK) were up more than 4.5% in early morning trading after closing Wednesday at $18.58. During the past 52 weeks the share price ranged from a $19.57 high to a $5.28 low.

The second quarter numbers would have been even better, but the company had a $2.2 million charge – 13 cents per share – to cover legal costs primarily related to the effort to defend against a hostile takeover attempt by Knight Transportation. Knight and USA Truck agreed to a “standstill” arrangement in early February, which effectively ended the takeover attempt.

Another boost to income and revenue is the continued growth of Strategic Capacity Solutions (SCS), USA Truck’s brokerage and logistics division. Revenue in the division for the quarter was $41.762 million, up over the $30.028 million in the 2013 quarter. Operating income in the division was $5.991 million in the quarter, more than double the $2.163 million in the 2013 quarter.

For the first half of 2014, SCS operating income was $11.069 million, up 233.9% compared to the $3.315 million in the same period of 2013.

“This performance was made possible by crisp execution within this highly efficient service against the backdrop of a market characterized by strengthening demand and tight capacity,” Simone said in the statement. “Our SCS segment accounted for over one-third of our consolidated base revenue during the quarter, substantially strengthening and diversifying our integrated business model.”

Despite the better numbers, the company continues to struggle in a few key areas. The operating ratio for the first half of the year was 104.8%, up from 104.4% in the same period of 2013. The ratio indicates that company lost 4.8 cents for each dollar in revenue. Also, the empty mile factor during the first half of 2014 rose to 12.3% from 11.4% in the same period of 2013. The average number of seated tractors fell from 2,115 in the first half of 2013 to 2,040 in the 2014 period. The number of parked trucks rose from 4.9% in the first half of 2013 to 8% in the first half of 2014.

However, tighter capacity and increased demand across the U.S. freight industry allowed the company to command higher rates. The base revenue per loaded mile was $1.72 in the first half of 2014, better than $1.635 million in the same period of 2013.

“Although fixed costs were pressured during the quarter by elevated employee medical benefit plan costs, we achieved improvements in critical areas such as insurance and claims, fuel and maintenance costs. We also took steps we believe will increase our seated truck count, which remains one of management’s top priorities as the availability of qualified drivers continues to be problematic across the truckload industry,” Simone explained in the report.