USA Truck Spins Out, Burns Rubber
by June 20, 2005 12:00 am 97 views
With a record slump still visible in the rear-view mirror, USA Truck Inc. of Van Buren is coming off its best year ever in 2004 and a record first quarter in 2005.
Company officials said the mid-haul carrier used strategic planning in 2001 to tune up its customer relations, retool its management team and put the pedal to a benchmarking program that’s got the publicly traded firm back on track.
USA Truck had a 13.8 percent increase in first quarter operating revenue and a 174 percent jump in net income. Those numbers back up a 121.5 percent increase in net revenue and a 17.4 percent increase in 2004 revenue.
“2004 was a respectable year,” said Cliff Beckham, the firm’s chief financial officer. “But we have been working really hard on our margins in lots of different areas over the last few years. In the first quarter of 2005, really we started seeing some big benefits of that, and that’s where you see the earnings grow so quickly.”
The surges come after the company worked on a plan to bounce back from a record low in 2000. That year the company had a 98.9 percent drop in net income, down to just $94,000.
Management worked hard to pull the company back up to the level of its glory days in the 1990s. The road has been paved with twists and turns, but things are finally in the black for the red, white and blue trucking firm.
USA Truck specializes in truckload quantities of general freight.
It has terminals in Shreveport, La., Butler Township, Ohio, Bethel, Pa. and West Memphis, its largest one. In 2004, USA Truck had 2,231 tractors and 5,682 trailers across 48 states, plus Mexico and Canada.
Mountain Climbing
Jerry Orler and Robert Powell were executives at fellow publicly traded carrier Arkansas Best Corp. in Fort Smith when they and four others bought USA Truck in 1988. USA Truck was started in 1982 as a division ABC.
Orler, the firm’s president, and Powell, USA Truck’s chairman and CEO, helped steer the company through a decade of peaks and valleys during the 1990s.
USA Truck crested one financial hill in 1998 by netting $10.5 million. But instead of taking a profit, executives reinvested that money in the firm by launching USA Logistics — a division that provides a cadre of logistical services for a variety of customers.
Things took off, despite a few more dips in the road.
Beckham said USA Logistics accounted for 20 percent of the company’s 2004 revenue, up from 18 percent in 2003. The division also grew 34 percent last year, up 12 percent from 2003.
“[USA Logistics] gives us additional service to provide to customers so that we can be a one-stop shop,” Beckham said. “We can provide general truckload services to them, dedicated freight, brokerage services or third party logistic services.
“It’s something that the transportation marketplace asked for, the customers asked for it, and we tried to respond to it. It’s been a nice growth vehicle, and it’s been fairly profitable.”
Carco Indigestion
Things took off after the logistics expansion, but there were difficulties.
USA Truck acquired Carco Carrier Corp. of Fort Smith in 1999 for $34 million. The addition increased USA Truck’s fleet size by 45 percent. More employees and almost doubling the fleet size started to take its toll on the company.
This acquisition collided with economic hard times in 2000 and USA Truck’s profitable run skidded to a stop.
“We call it the perfect storm,” Beckham said.
That storm apparently left a slippery road in front of USA Truck. The company’s profit slid to $94,000 in net income in 2000 from $8.6 million in 1999, according to its annual report.
The “perfect storm” rained down on other trucking companies as well. It just happened to hit at a time when USA Truck was trying to digest a huge acquisition.
So Orler expected some bumps in the road.
“You would expect some kind of disruption,” he said. “The acquisition was an O.K. acquisition. A lot of things happened right after that. The economy slowed down and then 9/11. Interest rates went up and all the things you can imagine after that.”
Used Prices Slump
The used tractor and trailer market is also critical for trucking firms. USA Truck tries to get about 40 percent of the original truck value back when trading a used vehicle. In 2000, the value of used tractors and trailers went down, Beckham said.
“Prior to 1999, we were getting 50 to 55 percent [of the original value],” Powell said. “After that happened, we fell back to 30 percent or less. The used market was flooded.”
After looking at their finances, the firm’s leaders decided to work out some issues that plagued the company. A recovery plan had been discussed and was ready to be implemented.
“There are really two things that we did that . . . can explain all of that,” Beckham said. “One of them is that we retooled the management team. We got the right people in the right places. Then we developed a benchmarking program so we can compare our operating performance today back to what it was in 1998.”
Beckham said his firm looked closely at the areas where it lost momentum and slipped below 1998’s performance levels. Once they figured out why some areas were below par, they worked on a plan to fix them. The plan showed signs of working in 2001.
“Little by little over the past several years we started seeing those factors line back up,” Beckham said. “That’s why you see the income improving.”
Motoring On
In 2001, things picked up and net income increased from $94,000 to more than $1 million, according to USA Truck’s 2001 annual report. The next year it jumped 139 percent, and in 2003 it increased 29 percent. However, it wasn’t until the 2004 numbers were released that Orler and Powell could hear the faint whisper of a comeback.
Net income for 2004 increased to $7.4 million, edging closer to 1998’s record numbers. Operating revenue also saw a major boost, going up to $335 million, showing a steady increase year over year.
“We do a huge amount of business with S&P 500 companies, and they tend to have significant growth every year,” Orler said. “We have to grow to grow with them. Most of our growth comes from existing customers.”
Because USA Truck grows 15 percent annually, Beckham said, the business doubles every five years. That growth means adding space and personnel.
“We have 580 employees in Van Buren,” Beckham said. “I think we’ve grown 4 or 5 percent since the beginning of the year.”
The company is adding a $4 million, 33,000-SF addition to its existing headquarters building, Beckham said. The expansion, slated to be finished in late July, is the second phase of the building, designed to accommodate the 500 employees that the company plans to add over the next five years.
A third phase of the building is designed to accommodate a $1 billion company, Beckham said.
USA Truck’s volume of employees gives quite a bit back to the community, Beckham said. Van Buren’s population in 2000 was 16,192, according to the U.S. Census Bureau.
Beckham said he estimates that the payroll for USA Truck’s 580 employees will generate an economic impact of about $20 million in 2005.
The company is expanding another old building next to its corporate office. Last year, it spent $1 million building a new shop.