USA Truck on Wednesday, Jan. 24, announced the promotion of Jerry D. Orler to chief executive officer and president. Orler, who succeeds Robert M. Powell as CEO, was one of the founders of the Van Buren, Ark.-based company in 1989 and has been a member of the board of directors and an officer of the company since that time.
Orler is a Certified Public Accountant and served as the company’s chief financial officer from 1989 until 2002 when he was promoted to president, an office that he will retain. He also served as secretary from 1992 to 2001. Prior to joining USA Truck, Orler was employed by Arkansas Best Corp. and its subsidiaries for 24 years.
Orler will head up an executive management team that he helped to assemble. During his tenure as president, Orler has been instrumental in starting the company’s regional freight division and in implementing an ISO9000:2000 Quality Management and Assurance system.
“On behalf of the board, I want to thank Bob for his many years of leadership as USA Truck’s first CEO,” Orler said. “Personally, I want to thank him for his support and trust in me, and I look forward to his continued participation in the management of USA Truck and his faithful stewardship of our stockholders’ interests as chairman. The management team and I have our work cut out for us, and we’re anxious to get to it. I’ve got big shoes to fill.”
Powell, who is stepping down as CEO after 18 years, will remain an active chairman of the board, a position that he has held since 2000. Powell began his career with Arkansas Best Freight System in Kansas City, Mo., in 1960 after serving as an aircraft carrier attack aviator in the U.S. Navy.
The time is right for this transition, Powell said. “Jerry Orler and I have worked together in one capacity or another for over 40 years, so I know how important his leadership and energy are to this company,” Powell said. “He’s earned this promotion. It’s time for me to take a step back and let these younger managers take the reigns. I have a great deal of confidence in the management team USA Truck has in place, and I feel certain that I’m leaving the management of the company in capable hands.”
USA Truck also announced quarterly base revenue of $92.2 million for the quarter ended Dec. 31, a decrease of 5.1 percent from $97.1 million for the same quarter of 2005. Net income decreased 71.5 percent from $4.3 million for the quarter ended Dec. 31 to $1.2 million for the same quarter of 2006.
Base revenue increased 2.3 percent from $376.6 million for the year ended Dec. 31, 2005, to $385.3 million for the year 2006. Net income decreased 20.1 percent from $15.6 million for the year ended Dec. 31, 2005 to $12.4 million for the year 2006.
“We experienced declining demand for truckload freight services throughout the quarter consistent with the declining truck tonnage reported by the American Trucking Associations,” Orler said. “This was the most difficult operating environment that we have seen in several years due to the deteriorating demand and the absence of the normal peak shipping season.
Orler said USA Truck also experienced more pricing competition as the quarter unfolded, which created an increasingly challenging environment to generate the necessary revenue volume. “The economic conditions were compounded by the fact that we held firm on our pricing until late in the third quarter, which resulted in pricing during the fourth quarter that was not competitive enough for the conditions in the market,” Orler said. “That point is evidenced by the increase in our base trucking revenue per loaded mile of 3.0 percent and a corresponding 3.5 percentage point increase in the empty mile factor. We are currently adjusting our marketing strategy accordingly.”
Freight demand also was off significantly for the full year, Orler said. “The lack of freight demand resulted in an increase in unmanned tractors and a decline in our miles per tractor per week for both the fourth quarter and full year,” he said. “A surge in driver turnover between May and October also contributed to the increase in our unmanned tractor count, which climbed to 7.3 percent during the fourth quarter, well above our goal of 3.0 percent.”
Although a majority of USA Truck’s margin erosion was attributed to the shortfall in revenue volume, the company also experienced some adverse trends on the expense side, Orler said. “We saw year-over-year increases in driver pay per mile (+7.4%) and fuel cost per gallon net of fuel surcharge recoveries (+5.7%),” he said.
Orler said the company’s management team is developing a number of tactics to address issues leading to volatility and variability in its business model. “While those efforts will not likely yield meaningful results until freight demand improves, we are seeing some encouraging signs of success already,” he said. “Our driver turnover improved by more than 35 percentage points in November and December, and the utilization of our manned tractors improved 2.3 percent over that same time period. Those results have carried over into January. Based on current freight availability, we are also addressing pressures on our utilization rate by adjusting our equipment replacement schedule to reduce the size of our fleet by 50 tractors during January and will not add tractors until both freight demand and driver availability dictate.
“As we reported in our third quarter 2006 earnings release, we intended to and did analyze strategic alternatives throughout the fourth quarter,” Orler said. “While the economic data is mixed, we believe that several difficult quarters lie ahead. However, we proceed into this economic slowdown with an experienced management team and a strong balance sheet. Management is also working with our board of directors to refine our list of strategies to bolster shareholder returns and reduce our earnings volatility.”
