USA Truck again posts loss

Down for 5th-straight quarter, firm resets profitability goal

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

USA Truck on Wednesday reported its fifth-consecutive quarterly loss and postponed its expectation of profitability to the third quarter of this year.

The company previously promised profitability within the first half of 2017.

The $4.9 million the Van Buren trucking and brokerage company lost in the first quarter was nearly three times the $1.8 million loss for the same quarter in 2016. It breaks down to a loss of 61 cents per share for the quarter that ended March 31, missing the average analyst expectation of a 12-cent loss. Total revenue dropped 8 percent to $101.7 million, from $110.6 million during the first quarter of 2016.

"Our results have not met our own high standards, and we're looking forward to leading USA Truck into the future on a much faster path," James Reed, the company's president and CEO, said in an earnings call.

"Our intensity and immediacy are still new to many here. We lost people in the quarter who simply were not keen on being accountable to results or felt the pace to be uncomfortable," he said. "We wish them well, but we will not abandon our approach as we shared last quarter."

The company lost several executives during the quarter, including former chief executive Randy Rogers and Chris Rhodes, the chief information officer. Martin Tewari, president of the trucking segment, and Kandice Harshaw, vice president of human resources, also resigned. USA Truck reportedly spent $817,000 in severance payments for the quarter.

"James is certainly instilling a culture of accountability, which is needed," said Brad Delco, transport analyst at Stephens Inc.

The company's struggling trucking segment lost $7.1 million in the quarter, compared with a $4.4 million loss in the first quarter of last year. While base revenue per loaded mile dropped to $1.74 from $1.79, Reed pointed out in the call that average miles per seated tractor per week increased nearly 5 percent.

Reed said insurance and claims costs continue to be a "burden" in the trucking segment. The total spent during the quarter nearly doubled from the same quarter last year, to $8.3 million.

"One factor at play," he said in the call, "is the loss history of the business reflects a materially higher fleet size that created liability that age and develop over time despite our relatively smaller current fleet size."

He said the company had increased driver pay by an average of 1.5 cents per mile to stay competitive in recruiting and to improve driver retention. He said the company is close to its goal of making one-fifth of its fleet independent contractors.

"If you don't have drivers in your seats, there is only one way to get them there: You've got to pay them," Delco said. "If you're not paying them market rates, you are not going to get drivers in your seats. That's one of many challenges in this industry."

Operating ratio for the quarter worsened to 110.1 from 105.8 last year. The smaller the operating ratio, the greater the ability to turn a profit.

Delco defined a "healthy" operating ratio in the industry as "at least better than a 93."

USAT Logistics, the company's brokerage segment, reported a profit of $729,000, but it was far below the $2 million profit of last year's first quarter. Revenue dropped by about $3 million to $31.4 million.

"The brokerage market didn't do us any favors in the first quarter, but we are not going to use that as an excuse," Reed said. "We simply didn't get the job done."

Jim Craig, president of the segment and chief commercial officer, said in the call that the electronic logging mandate that will take effect in December could have a positive effect on business. As noncompliant carriers close down, rates will improve as there will be fewer trucks on the road. USA Truck, like many carriers of its size, already uses electronic logs.

Reed said he expects the brokerage segment to make up about 35 percent of total revenue by the end of the year. That number is currently around 31 percent.

Despite another quarterly loss, Reed remained optimistic. "We are disappointed with our slow start, yet we are taking the right actions to build a solid operating company with a bright future," he said.

"The quarter still leaves a lot to be desired. It's hard to turn around a trucking company in a quarter or two," Delco said. "They seem to be getting better productivity from their assets, and they seem to be getting better freight rates, both of which will be needed to drive better profitability, while also managing their costs."

Stocks trading on the Nasdaq exchange closed at $6.57, the lowest since the fall of 2013.

Business on 05/04/2017

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