USA Truck posts third quarter gain, on track to end five years of losses (Updated)

With a better than expected third quarter net income of $2.717 million, Van Buren-based USA Truck is on track in 2014 to end five consecutive years of losses.

The third quarter net income of $2.717 million was an improvement over the $602,000 loss in the same quarter of 2013. Also, the 26 cents per share in income was a big jump over the consensus estimate of 10 cents per share.

Total revenue in the quarter was $153.618 million, better than the $141.822 million in the third quarter of 2013 and just above the consensus estimate of $153.4 million.

For the first nine months of 2014, the trucking company posted $1.85 million in net income, a wide swing from the $4.474 million loss during the same period of 2013. Total revenue for the first nine months is $452.405 million, better than the $413.587 million in 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.

"Both our Trucking and asset-light Strategic Capacity Solutions (SCS) businesses realized revenue gains and positive operating income, a direct outcome of our intense focus on operational effectiveness, while also benefiting from today's strong demand environment,” USA Truck President and CEO John Simone said in the earnings report.

Gains in the trucking sector were boosted by an increase in revenue per loaded mile. Total miles driven in the quarter declined 1.64%, but the base revenue per loaded mile increased to $1.819 in the third quarter compared to $1.663 in the same quarter of 2013. Overall, the base trucking revenue per seated tractor in the quarter was $3,170 compared to $2,948 in the same quarter of 2013. This overall gain was made with an average of 71 fewer tractors in the mix during the third quarter.

Simone noted in the earnings report that tractor utilization can improve.

“Our focus on unseated truck count continues to be a top priority and we believe our driver recruitment and retention efforts are making incremental inroads in this important area. We believe these efforts, as well as our strategic and operational initiatives, will continue to drive improvement in our truckload business,” Simone noted.

The star of the quarter for USA Truck was the Strategic Capacity Solutions division – the logistics and brokerage unit. Operating revenue during the quarter was $49.359 million, or more than 32% of total revenue. That is up from 27.2% during the same quarter of 2013. For the first nine months of 2014, SCS division operating revenue was 31.94% of total USA Truck revenue, up from 25.99% in the same period of 2013.

UPDATED INFO: A direct benefit to the bottom line was $4.775 million less spent on fuel in the quarter. Michael Borrows, chief financial officer with USA Truck, told The City Wire that $3.1 million of that was from a 10.5% improvement in fuel mileage. The remainder – about $1.6 million – was the result of falling diesel fuel prices during the quarter.

The federal Energy Information Administration shows that diesel fuel prices nationwide have fallen from an average of $3.943 per gallon in May 2014 to $3.681 in October, a decline of 6.64%.

Simone said fuel efficiencies have resulted from several technological and mechanical changes, including reducing idle times to five minutes and setting road speeds. He said the company is cycling more than 2,000 trucks through maintenance shops to make the changes. The process should be finished by the end of 2014, and the upfront expense will pay off in bigger efficiency gains in future quarters, Simone said.

Economic conditions are more favorable for the trucking industry than they have been in many years, but Simone said USA Truck needed many fundamental changes to be able to take advantage of the improved conditions.

“Certainly the market has given us a tailwind … but without the improvements in efficiencies we would not have been able to accomplish what we have,” Simone said, adding later in the interview that a “rate (increase) alone is not enough to overcome the inertia of a poorly run operation.”

The company was able to push rates higher to post a 9.4% increase in rate per loaded mile during the third quarter, which was up from 7.1% in the second quarter.

A potential drag on future gains is the ongoing driver shortage in the national trucking sector. USA Truck, which is trying to end five consecutive years of financial losses, has had to overcome a morale and image problem among drivers. Simone said early in his tenure with USA Truck that a better relationship with drivers was a top priority.

“I am pleased with the progress we’ve made with re-imaging the brand (with drivers) since I arrived,” Simone said during Monday’s interview.

He said morale among drivers driver is improving because the company is “changing the way we interact and value our drivers.” Part of that value is a year-over-year increase of $1.8 million for driver pay and benefits – an increase of 4.6%.

Overall, Simone said USA Truck began fourth quarter strong and he is “optimistic” holiday shipping will remain strong.

The earnings report also included the following information.
• For the year to date, the company reduced debt by a total of $14.5 million, and in the past 12 months, the company reduced debt by $26.5 million. Debt decreased during the third quarter by $10.7 million, sequentially to $114.4 million. 

• Fleet fuel efficiency initiatives produced a 10.5% improvement in miles-per-gallon, or $3.2 million, while offsetting higher driver-related costs.

• For the first nine months of the year, the company spent more than $2.59 million on legal and other related costs. The expense was primarily related to the hostile takeover attempt of USA Truck by Knight Transportation.

USA Truck shares (NASDAQ: USAK) were set to open Monday at $17.50. During the past 52 weeks the share price ranged from a $19.57 high to a $11.95 low.