USA Provides Top Driver Pay

USA Truck Inc. has taken strange measures to battle its industry’s slim margins. It’s given raises and purchased new tractors.

In order to curb turnover and attract experienced drivers, the Van Buren company has the highest salary top out in the industry with 43 cents per mile, up from the previous cap of 36 cents.

“There are a few [companies] that start their drivers higher,” said USA President, Chairman and CEO Robert M. Powell, “but as far as the cap, we’ve got the highest. We had the big pay increase last October. Depending on years of experience, we gave anywhere from a 12 to 14 percent increase overnight. We also raised the starting pay.”

It’s a move that has paid off for USA, which is at full driver capacity for its 1,700 tractors. About 200 of those tractors are a new Columbia Class design by Freightliner, purchased from Northwest Arkansas Truck & Equipment Inc. in Springdale. USA, which also has 3,450 trailers, is converting its entire fleet to the Columbia Class. The model’s aerodynamic design offers increased visibility and more comfort for the drivers.

USA has used the same FLD body style for the past 18 years, but with it soon going out of production, Powell wanted his fleet to have something other than the readily available Century Class. “It just had too many bells and whistles on it,” Powell said. “And there was more maintenance involved. This one is more of a compromise. I feel like it fits our needs better. I feel like it will be for the next 10 years the class “A” truck leader. I know our drivers like it.”

USA is a medium haul, common and contract carrier specializing in truckload quantities of general commodities. Founded in 1983, it operates in the 48 contiguous United States, Mexico and the Canadian provinces of Ontario and Quebec.

Like all trucking companies, USA has suffered recently. But unlike most, the depths have not been drastic ones. Its stock shares have ranged from $4.88 to $7.94 in the last year, hovering mostly around its closing of $6.30 on May 4.

“USA’s management has done as good a job as possible identifying and resolving internal issues,” said Dan Moore, a trucking analyst with Little Rock securities firm Stephens Inc. “Six months ago, driver recruitment and retention were problems. But they’ve had a large pay increase that resulted in getting drivers and filling their entire fleet.”

Nevertheless, USA went through what chief financial officer Jerry Orler called “a tough year.” The company’s net income was $8.6 million in 1999 but only $94,061 in 2000. And in the first fiscal quarter of 2001, USA had a net loss of $404,910.

Analysts have said that even when the economy was running smoothly last year, truckers were contending with higher fuel prices, rising insurance rates and credit problems that impacted revenue and profit margins.

Jeffrey Kauffman, a trucking analyst with Merrill Lynch, said on his Web site, “What we’re seeing in the general economy now is really a reflection of what was going on in the trucking industry six months ago. We’ve always used trucking and air freight as leading indicators of what’s going on in most of the economies around the world.”

Kauffman also contends that if the industry’s history repeats itself, once things begin to take a positive turn, the overall economy should follow suit within “a couple of months.”

Orler and Powell agreed they are beginning to at least see signs of light at the end of the tunnel.

“Over the past few quarters, we have been addressing the issue of revenue growth with declining net income caused by sagging equipment utilization,” Powell said in a release with the first-quarter report. “We are pleased to announce that the trend is beginning to turn, and we are seeing positive results from our efforts.”

USA’s operating revenues for the first quarter ending March 31 were up 10.5 percent to $60.9 million from the same quarter last year. In fact, the last 10 years have seen an average of 17 percent growth per year in revenue. A record of $166 million was acheived in 1999. On Nov. 1 of 1999, USA acquired the assets of CARCO Carrier Corporation (CCC Express), a 498-tractor fleet from Fort Smith.

It was an acquisition that today, Powell quite candidly admits probably wasn’t the best of moves.

“[CCC] had done about $50 million in revenue that year, but in view of what used truck prices have turned into, the timing and everything with the acquisition wasn’t ideal. But that’s all hindsight.”

Gas nightmares

Trucking companies know what they did last summer — worried about rising fuel costs. And with gas prices expected to reach the $2 plateau soon, perhaps even close to $3, those companies are seeing a return of their fears from the summer of 2000.

Powell said no one could have anticipated the recent skyrocketing costs.

“We thought we were pretty well locked in at $1.34 or a $1.35 a gallon back in March,” Powell said. “Fortunately, we’ve got contracts at a lot of places, or otherwise we would be paying more than this.

“[Gas] has gone through the roof on us. It’s hard to say what’s going to happen. We keep a daily watch on the prices. We’re assessing a fuel surge charge when it reaches a certain level on the formula we’ve got.”

USA trucks will often run outer route miles — avoiding the shortest distance between two points in order to stay on the much safer and more easily accessible interstate routes. But in Arkansas, particularly on interstates 40 and 30, that’s not much comfort for drivers. While I-40 — especially the stretch from Little Rock to West Memphis — is regarded as one of the worst interstates in the country, Powell sees being headquartered in Van Buren as a near perfect situation.

“We’re sitting right here at I-540 and I-40, and hopefully some day they’ll finish the road all the way down to Texarkana,” Powell said. “Right now it’s platted to come right through Kibler Bottoms here in Van Buren, and that’s right where we are.”

Powell did admit the condition of I-40 was “terrible.”

Can’t drive 65

USA trucks have computer governors that only allow a maximum speed of 65 miles-per-hour. It makes for better fuel economy, even if it’s not the most attractive restriction to USA drivers.

“We get information from the engine that comes directly into our computers,” Powell said. “They’re pretty fool-proof. We know on a daily basis what the fuel economy is on each truck.

“You see some trucks running down the road at 75 miles-an-hour or faster. But the faster they go, the more catastrophic accident it will be if they have one. You have to try to strike a happy medium. You want the driver to get the miles he needs to make a living. And we are paying as high as anybody in the industry today.”

As for the remainder of 2001, Powell said getting USA’s costs in line is one of the main goals.

“It’s reasonable to assume that USA’s [earnings per share] are likely to improve immensely when the macro environment improves,” Moore said. “And the question is not if it will improve but when is it going to improve. And from an investment opportunity, I would say USA will improve.”