USA Truck nets $1.1M profit

Company reports improvement in 10th-straight quarter

USA Truck posted a profitable first quarter for the first time in eight years, benefiting from a strong freight environment, lower diesel fuel prices and fuel efficiency measures.

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Arkansas Democrat-Gazette

Graphs showing USA Truck first quarter information.

The Van Buren-based company reported net income of $1.1 million, or 11 cents per share, for the first quarter of 2015. The results were an improvement from a year ago, when USA Truck lost $1.6 million, or 15 cents per share.

USA Truck also reported $115.5 million in base revenue, a slight decrease from $117.6 million in the first quarter of 2014. Its total revenue of $132.9 million -- which reflected fuel surcharge earnings of $17.4 million -- missed analyst expectations of $147.5 million. USA Truck reported total revenue of $145.5 million, including $27.9 million in fuel surcharges, during the first quarter of 2014.

The first quarter of 2015 represented the 10th-consecutive quarter of financial improvement as USA Truck moves forward in its turnaround plan even though Chief Executive Officer John Simone remains on leave for a "serious medical condition." Tom Glaser, USA Truck's interim chief operating officer, said the company is off to a "solid start" in 2015.

"This quarter's results reflect positive contributions from both our trucking segment and [Strategic Capacity Solutions] segment, once again demonstrating the benefits of USA Truck's integrated service offerings," Glaser said.

Revenue in the company's trucking segment rose to $81.5 million, which was a 1.7 percent increase from $80.2 million in the first quarter of 2014. The company benefited by charging higher rates, and Glaser said business increased with a new dedicated freight service, which is part of USA Truck's shift to become a "capacity solutions provider with complementary services."

Glaser called USA Truck's lower fuel expenses another bright spot, reporting $18 million after costs reached $33 million for the first quarter of 2014.

Brad Delco, an analyst with Stephens Inc. in Little Rock, said there were obvious benefits from the lower cost of diesel. But Delco said USA Truck has made important strides in fuel efficiency as well. USA Truck reported a 4.8 percent improvement in miles per gallon.

"They've improved their miles per gallon, which is more of a sustainable improvement," Delco said. "They're reinvesting in their fleet. They're bringing down the average age of their equipment. Newer equipment is more fuel efficient, so those benefits are becoming more apparent in these results."

The company's brokerage division didn't enjoy the same success as the trucking division during the first quarter, generating $33.9 million in revenue. It was a 9.4 percent decrease from a first-quarter record of $37.4 million in 2014, which Glaser said was a reflection of last year's strong market.

USA Truck was able to take advantage of disruptions caused by winter storms a year ago, but better weather during the first three months of 2015 affected revenue. Executives also said there were higher operating expenses as USA Truck invests in future growth in the division.

"We're working really hard in [Strategic Capacity Solutions] in order to improve the top line and attract more capacity and I think there is a number of plans to do that as well, the growth in offices and some of the folks in the brokerage business," said Michael Borrows, the company's chief financial officer. "I think it's a story that's going to continue to play out as the year unfolds."

Borrows said the company ended the quarter with $106.2 million in outstanding debt, which represented an $11.3 million improvement since the end of 2014. USA Truck projects spending $65 million in capital improvements this year, which includes plans to purchase 400 new tractors and at least 1,200 trailers to help reduce the age of its fleet.

The company also announced plans to raise driver pay beginning June 1 in its efforts to attract and retain drivers. Glaser said he couldn't quantify the exact amount because of the differences in pay for experienced drivers and trainees, but he estimated it would be a "double-digit increase overall."

"Despite an economy that is growing, albeit at a moderate pace, their fleet count is shrinking," Delco said. "It's not because there's not demand. It's because there's not a supply of drivers to provide the services. So what does that mean? You have to get more competitive with your compensation packages to attract people to the company. ... I imagine that's going to stabilize the fleet count."

USA Truck did not provide an update on Simone's condition during Tuesday's conference call.

Robert Peiser, chairman of the board of directors, said the company would continue to respect Simone's privacy. But Peiser said Glaser and USA Truck's "very experienced management team" were following through on the business plan laid out earlier this year.

USA Truck will hold its shareholders meeting Thursday. USA Truck ended Tuesday trading at $24.39, down 98 cents per share.

"Our whole team is pulling together to build on our momentum and fulfill our ambition of making 2015 even better," Glaser said. "We're still in the very early innings of USA Truck's transformation and while we're proud of what we've accomplished thus far, there's plenty of room to realize earnings, leverage and drive increased return on our invested capital."

Business on 05/06/2015

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