USA Truck posts Q1 loss of $2.7 million

Generating income from revenue continues to be a struggle for Van Buren-based USA Truck, which posted a first quarter 2011 net income loss of $2.7 million compared to a net loss of $3 million in the 2010 quarter.

The one positive is that the earnings loss of 26 cents per share was not as bad as Wall Street estimates of 27 cents per share.

Another positive is that total revenue gained 17.4% in the first quarter to reach $124.042 million compared to $105.634 million in the first quarter of 2010.

“While we made substantial strategic progress during the quarter, our advances were almost entirely offset by exogenous factors,” Cliff Beckham, USA Truck president and CEO, said in the earnings statement. “(R)ising fuel prices, unusually harsh winter weather, increased government regulation and a tightening market for drivers combined to significantly and adversely impact our results.”

The rising fuel cost, according to the company, was a big hit, resulting in a $2.3 million — or 14 cents per share — hit to the bottom line.

A freight recession that began in the fall of 2006 caught up to USA Truck in late 2008. The long-haul carrier posted a net income loss of $7.177 million in 2009 and a net income loss of $3.308 million in 2010. However, total revenue in 2010 was $460.161 million, up 20.3% compared to 2009. The company posted 2009 revenue of $382.36 million, down 28.6% compared to the $535.62 million in 2008.

The increased government regulation cited by company officials included maintenance requirements for the U.S. Department of Transportation’s Compliance, Safety, Accountability ("CSA") program, new engine emissions requirements mandated by the Environmental Protection Agency and various rules imposed by California’s Air Resources Board.

"Costs to maintain our fleets of tractors and trailers grew by $1.3 million ($0.08 per share) as layers of recent government regulations took their toll (even as we drove down the average age of the fleets),” the company noted.

Another problem was the inability to recruit drivers, leaving about 10% of company trucks idle by the end of the quarter. Weather was partially to blame for hampering driver orientation and recruitment during February, but company execs also cited a shrinking pool of qualified drivers.

The company explained: “We will not lower our hiring standards to man our trucks because the cost of doing so is much higher in the long-term than the short-term costs associated with elevated recruiting expense and reduced tractor utilization (which combined during the quarter to reduce earnings by more than $0.10 per share).”

But it wasn’t all bad during the quarter.

The company’s brokerage division (Strategic Capacity Solutions) grew base revenue by 86.3% during the quarter. The newest division within USA Truck will expand to 10 SCS branch offices after it adds two offices during the second quarter of 2011. The company plans to add more offices in the second half of 2011.

Adding business — using what the company calls its “Spider Web” network — beyond it’s traditional lanes of business improved revenue in the trucking segment by 10 cents per mile.

The company also outlined other areas of financial improvement.
• Improved operating cash flow, free cash flow (cash flow from operations less net cash used in investing activities) increase of approximately $9.7 million.

• The overall balance sheet health — 44.2% total debt, less cash, to total capitalization ratio compared to 45.8% at March 31, 2010.

• Freight and capacity dynamics in the marketplace are favorable for additional pricing gains in the second quarter, which should benefit all three business segments.

"While our first quarter results are disappointing, our underlying strategic progress has been meaningful,” Beckham noted in the earnings report.

USA Truck shares (NASDAQ: USAK) were set to open Thursday morning at $12.60. During the past 52 weeks the share price has ranged from a $18.79 high to a $11.68 low.