Conditions improve, but USA Truck posts another loss

Van Buren-based USA Truck again posted a quarterly loss, but the loss was lower than expected, cash flow improved and revenue was up almost 14% – overall a much-needed improvement for a company facing a hostile takeover and five consecutive years of losses.

The trucking company reported Thursday (Oct. 17) a third-quarter loss of $602,000, a big improvement over the $6.072 million loss posted in the third quarter of 2012. The 6 cent per share loss was better than the consensus estimate of 10 cents per share.

For the first three quarters of the year, the income loss for USA Truck is $3.975 million, better than the almost $19.5 million loss during the same period of 2012.

Total revenue during the third quarter was $141.822 million, up 13.99% compared to the third quarter of 2012. Revenue during the first three quarters of the year reached $413.587 million, up almost 10% compared to the same period in 2012.

John Simone, who was hired in February as USA Truck president and CEO with the primary purpose of turning the company around, said the quarterly figures reflect the early efforts to reach profitability.

"We are pleased with our sequential and year-over-year progress and expect to build even further on the strong business momentum we have established. The sustainability of this momentum is demonstrated by the increasing rate of improvement in our bottom-line results – up 49% in the first quarter of 2013, 60% in the second quarter, and 90% in the third quarter,” Simone said in the earnings report.

He said the momentum should result in “significantly improved quarter-over-quarter results in the fourth quarter irrespective of industry conditions and seasonality."

Simone said improvements in insurance and claims, maintenance costs and tractor utilization helped reduce the income loss.

EBITDA, CASH FLOW GAINS
Another sign of improvement was in the posted earnings before interest, taxes, depreciation and amortization (EBITDA). The EBITDA for USA Truck during the third quarter was $12.04 million, well ahead of the $2.744 million during the same quarter of 2012. The EBITDA for the first three quarters of 2013 is $30.135 million, more than double the $14.236 million during the same period of 2012.

The company also saw gains in its logistics and brokerage business, Strategic Capacity Solutions. The division produced third quarter revenue of $32.095 million, up 13.1% compared to the 2012 quarter. Year-to-date, revenue in the quarter is $87.218 million, up 6.4% compared to the same period in 2012. The relatively new business has accounted for more than 26% of USA Truck base revenue during the first three quarters of 2013.

The quarter also saw the company begin to improve its debt situation by using improved cash flow to reduce debt by $5 million. USA Truck ended the quarter with $140.9 million in outstanding debt.

"The pay down was made possible by improved cash flow from operations, which has more than doubled year-over-year for both the quarter and nine months ended September 30. The strengthening cash flow also enabled us to expand available borrowing capacity on our revolving credit facility to $29.5 million,” Simone said in the statement.

THE KNIGHT FIGHT
The improved financials could provide USA Truck officials with leverage to push back against a hostile takeover attempt by Phoenix-based Knight Transportation, or help negotiate for a higher per share acquisition price from Knight.

Knight made public its bid for USA Truck on Sept. 26. The $9 per share bid at the time was a 39% premium from USA Truck’s share price on Sept. 25. The share purchase and assumption of liabilities creates a $242 million deal.

The USA Truck management and Board of Directors have said the Knight offer “substantially undervalues” the company and does not reflect the value of potential gains from ongoing turnaround initiatives. USA Truck has reported four consecutive years of losses. During the first half of 2013, the company reported a loss of $3.5 million, better than the $8.4 million in the same period of 2012.

At risk in a deal with Knight would be the more than 400 jobs at USA Truck’s corporate headquarters in Van Buren.

USA Truck shares (NASDAQ: USAK) closed Wednesday at $9.05. During the past 52 weeks the share price has ranged from a $9.33 high to a $2.65 low.