USA Truck reported a net income loss of $1.8 million for the first quarter of 2016, a reversal from a year ago when the Van Buren-based company reported $1.6 million in earnings.
Revenue also dipped, by 16.7 percent, to $110.6 million, and USA Truck posted a loss of 19 cents per share for earnings. But the results were affected by $5.3 million in restructuring costs as the company maps out plans under a new management team led by Chief Executive Officer Randy Rogers.
"We have already made significant structural changes in our trucking operations, which, while absolutely necessary to drive long-term growth and shareholder value, are not without some level of short-term disruption and expense which we experienced during the first quarter of 2016," Rogers said.
Earnings adjusted for the restructuring costs were 15 cents per share, beating analyst expectations of 10 cents. Rogers described it as a "solid achievement" in a difficult freight environment.
Brad Delco, a transportation analyst for Stephens Inc. in Little Rock, agreed and pointed to USA Truck's stock as it closed Thursday trading at $18.26 a share, up $1.66.
"Relative to expectations, I thought the quarter was actually quite good," Delco said. "The stock is reacting favorably, which would suggest that the market was pleased with these results as well."
The restructuring costs included closing two "underutilized and inefficient" maintenance buildings, according to USA Truck. The company has closed four maintenance buildings the past six months and has four remaining. In addition, USA Truck shut down two underperforming logistics branches -- leaving it with 10 regional offices -- and an operations terminal in South Carolina.
About 10 percent of the support staff was cut, which Chief Financial Officer Michael Borrows said represented less than 15 people.Discretionary expenses in recruiting and advertising were reduced as well.
The changes are expected to produce total annualized savings of about $2 million, according to Rogers, who was hired Jan. 14.
Delco said: "From time to time you do see restructuring costs. They looked across their asset base and said it makes more sense for us to get rid of these facilities or these locations."
The company's trucking division accounted for $75.7 million in operating revenue during the first quarter, a 21 percent decline from $95.8 million a year ago.
USA Truck has reduced the number of tractors in its fleet by about 400, which played a part in the revenue decline. So did a 50 percent drop in fuel surcharge revenue, the result of lower fuel prices, according to Rogers.
Martin Tewari, president of the trucking division, said USA Truck continues to overhaul its maintenance operations, make improvements in safety and upgrade the quality of drivers. He also said the company is working to redefine its network in a "thoughtful and strategic way."
"As we move through the year, we will layer on more sophisticated network-optimization systems to give us full visibility into what our trucks are doing, the best assignments for each driver and how we can make good decisions across our network," Tewari said.
USA Truck's brokerage and logistics division reported $34.9 million in operating revenue during the quarter, down 5.9 percent from $37.1 million during the same period a year ago. The company changed the name of the segment from Strategic Capacity Solutions to USAT Logistics last month, believing the re-branding will better reflect the company's third-party logistics capabilities.
Rogers said USAT Logistics is working "hand in hand" with the trucking segment, emphasizing collaboration between the divisions. He said the company has been successful the past few months in removing barriers that "quite simply didn't work across the organization" since his arrival.
The collaboration should provide the trucking segment with better access to loads normally contracted out to others by the brokerage branch. Meanwhile, USAT Logistics President Jim Craig said the division will be able to find available loads that fall outside of trucking's service network or available capacity in its plan to "significantly increase" revenue contributions in the future.
Delco said it's clear that USA Truck's new management team's goals are aligned as the company tries to grow and improve it's profitability. He said accomplishing those goals could be challenging, though, in a freight market that isn't as robust.
"I'm impressed by that management team and look forward to seeing what they're able to deliver," Delco said. "I think it's just a little unfortunate the environment we're in is not very conducive to put up as much improvement as I think they're probably capable of. But I'm hoping to be proven wrong."
Business on 05/06/2016