Carrier posts 3rd-straight loss

‘Painful cuts’ on way to control expenses, USA Truck says

Graphs showing USA Truck Inc. third quarter information.
Graphs showing USA Truck Inc. third quarter information.

USA Truck Inc. posted its third-straight quarterly loss Friday, and company leaders spoke of "painful cuts" in order to maintain "an intense focus on managing costs" companywide.

The Van Buren-based company had a $734,000 deficit for the third quarter ending Sept. 30, or a 9-cent loss per share, down 126.9 percent from last year's $2.7 million third-quarter profit. It reported total revenue of $105.5 million, 14.6 percent under the $123.5 million made in 2015.

The company missed the 9 cents profit per share expected by the average of analysts aggregated by Yahoo Finance. The previous two quarterly reports this year included a $1.8 million loss followed by a $1.3 million loss.

"We're not satisfied obviously with where we are from a profitability standpoint," President and Chief Executive Officer Randy Rogers said in an earnings call, blaming "tough" market conditions.

During the call, USA Truck officials sounded optimistic and outlined a "solid plan to downsize some of the fixed costs that we have throughout the organization," to the tune of $3 million to $4.5 million in savings.

Some positions will not be refilled, and some back-office departments such as nondriver payroll will be outsourced in these "painful cuts," Rogers explained. The cuts will include "cost reductions that make sense," he said. No details were provided on how many jobs might be affected.

"They're focusing on the one thing they really have some control over, which is expenses," said Bob Williams, senior vice president and managing director at Simmons First Investment Group. "You can't fix a soft economy. You can't fix how much it costs to fuel a truck. You're at the mercies of the market there."

In its truckload asset-based segment, USA Truck had a $1.5 million loss over the quarter, with revenue dropping 13.7 percent from 2015 to $73.4 million.

In a news release Rogers said the segment has shrunk its company tractor fleet by 6.3 percent, having sold its 2012 models and 30 percent of its 2013 models, which were becoming expensive to maintain and difficult to operate.

Martin Tewari, president of the segment, noted on the call that the company has made "significant progress" in reducing its noncontract business to less than 2 percent of total load count in favor of more stable, committed freight customers. Its independent contractor fleet has grown to 17 percent of the total, he said, compared with 13 percent last year. In addition, the segment has moved to outsource fleet maintenance services to third parties, all with an eye toward improving profit margins.

As Rogers highlighted in the news release, the company has set a goal of growing its asset-light segment, USAT Logistics, to 50 percent of total business, mirroring many of its competitors. It stands today at 30 percent. It posted $32.1 million in revenue for the third quarter, a 16.7 percent drop from the year before.

Division President Jim Craig blamed the dip on "a very soft and volatile freight environment," saying it had nothing to do with customer retention or satisfaction.

Craig said on the call that "incredible unpredictability and wild swings in demand levels and purchase transportation rates" of 2016 are "unlike anything I've seen in my 34 years in this business." The executive management team went on to explain that they believe the "schizophrenic" climate has been difficult and has varied highly week-to-week for the past quarter.

Unlike the trucking division, USAT Logistics posted a profit of $1.5 million in operating income, though still down 48.4 percent compared with last year's report. Rogers said the segment made "significant progress toward our goals" by improving service and cutting operating costs, though he noted that progress will continue to be offset by the loss of certain dedicated accounts.

"Clearly what you have is a positive trend because the losses have been reduced and part of the company has actually returned to the black," Williams said.

Craig also explained that the logistics segment has consolidated its Seattle and Buffalo offices to just sales functions to "protect our revenue while substantially reducing our overhead expenses for 2017."

In addition, the company's 22-person sales department will be shifted under Craig's day-to-day supervision, featuring a new structure designed to sell "the entire service portfolio of USA Truck and USAT Logistics."

"In the underlying metrics there's some signs of improving trends," said Brad Delco, transport analyst at Stephens Inc. "But there's still a lot of work to be done and a lot of improvements to be realized to return the company to industry-average profitability."

As Rogers put it in the release, "While encouraged by our progress, we recognize our results have not reached our goals and are committed to achieving substantial improvements in profitability."

When asked in the earnings call whether the company will be able to post a profit in the fourth quarter, he answered that the economic climate is "uncertain for sure."

USA Truck shares trading on the Nasdaq exchange closed down nearly 12 percent at $7.67 on Friday.

Business on 11/05/2016

Upcoming Events