USA Truck says smaller 1Q net loss an ‘improvement’

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USA Truck Inc. today, April 16, announced base revenue of $82.8 million for the quarter ended March 31, a decrease of 14.7 percent from $97.1 million for the same quarter of 2008. The company incurred a net loss of $1.88 million, an improvement from a net loss of $1.95 million.

“This quarter presented the most challenging operating environment that we have ever experienced,” said Clifton R. Beckham, president and chief executive officer of Van Buren, Ark.-based USA Truck. “The quarter was characterized by a severe contraction in freight volume resulting from the current economic recession and from inventory reductions by both manufacturers and retailers.”

Though the current freight recession began in the third quarter of 2006, freight volume declines accelerated markedly between November 2008 and January 2009, Beckham said. “Although volumes have stabilized since January, albeit at historically low levels, the truckload industry continues to be plagued by too many trucks chasing too little freight, which is spawning fierce, and often irrational, price competition,” he said.

Beckham attributed the lower net loss to substantially matching the revenue decline with cost reductions and by continuing to execute the company’s VEVA (Vision for Economic Value Added) strategic plan — the objectives of which are to improve returns on capital and reduce earnings volatility over time — which included reducing the company-owned tractor fleet by 10.2 percent (6.7 percent net of owner-operator tractor additions) and continued implementation of its “Project People” initiative, which is designed to align the interests and efforts of every employee to achieve long-term strategic objectives.

“As the tenets of that initiative were implemented, we experienced a 19.9 percent reduction in our nondriver head count,” said Beckham, which raised USA Truck’s driver-to-nondriver ratio from 3.5:1 to 4.1:1. “Our balance sheet, cash flow and borrowing availability are all stronger today than they were a year ago. Despite higher equipment maintenance costs during the quarter, we are comfortable with the age and mileage of our tractor fleet. We will continue to protect our balance sheet with conservative capital expenditure decisions during 2009.”

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Looking to the next few quarters, it is hard to predict when freight demand will improve, Beckham said. “We anticipate that freight availability will remain near historical lows for the foreseeable future, which will hinder near-term earnings,” he said. “We have identified additional cost-cutting opportunities to implement during the second quarter, but we are cognizant that costs are not the primary hurdle to improving earnings for USA Truck. We are consistently among the best cost managers in the truckload industry as measured by operating costs per mile. Cutting costs too aggressively could jeopardize our ability to capitalize on the inevitable economic recovery.

“In the short term, any changes in our earnings are likely to be driven by changes in general freight demand and supply,” Beckham said. “Over the long term, the key to unlocking our earnings leverage lies in our pricing, which has lagged the industry average due to the nuances of our historical long-haul model. Improving our pricing does not necessarily require that we raise our prices, but rather that we refine the mix of lanes within our freight network to yield better average pricing. Thus, we will continue to focus all of our activities and resources on our freight network to drive yield improvements to the extent possible in this challenging economic environment.

“We have made tremendous progress in repositioning USA Truck to compete in today’s truckload industry, and we are confident that we are poised to be a big winner when industry conditions improve as demand returns and/or as excess truck capacity finally exits the marketplace,” Beckham said.