Truckload carrier USA Truck said it lost $4.3 million in the third quarter, bringing its year-to-date loss to $6.4 million compared to a $1.5 million loss for the first nine months of 2010.
A 1.9 percent uptick in revenue to $102.6 million was offset by major problems with a computer system upgrade, softer-than-expected freight volumes and a persistently high number of unmanned tractors.
“We have addressed a number of the underlying problems, but we still have work to do in order to achieve sustained profitability,” Chief Executive Officer Cliff Beckham said in a statement.
The Van Buren, Ark., carrier recently migrated to a new fleet management software system, but the magnitude and duration of the disruption during the transition was “much greater than we had anticipated” and impacted operations, he said.
The conversion to a new operating system was complicated by problems with a customized portion of the software, which hampered the ability of dispatchers to identify, plan and route loads for several weeks. The problems were not apparent during system testing with small volumes of transactions, officials previously said.
“We believe the ripple effects included significant disruption to our load velocity, overly conservative booking of customers’ loads, lost freight opportunities, and increased driver turnover,” Beckham said.
The company also phased out service on two major accounts, one due to non-renewal of the contract by a customer and the other because of inadequate pricing that USA Truck felt it could no longer support. USA Truck said the weak economy made it more difficult to replace the lost business with profitable freight.
“Industry-wide, we believe freight demand and trucking capacity are in relative equilibrium, but the spot market is less robust than during the second quarter. This contributed to a reduction in overall miles and an increase in our percentage of non-revenue miles,” Beckham said.
For the quarter, tractor utilization decreased 13.2 percent and empty miles increased two-tenths of a point to 12.4 percent of total miles driven versus the third quarter of 2010. Truck revenue per mile increased 7.2 percent, but was exceeded by costs for driver wages, fuel, equipment repairs, insurance and claims. The decrease in tractor utilization led to less effective coverage of the carrier’s fixed costs and the increased in empty miles limited the recovery of fuel surcharges.
USA Truck said revenue for its freight brokerage division increased 82 percent and gross margin increased 80 percent.
Beckham said USA Truck has “significant liquidity to operate the business,” including a $28.2 million revolving credit agreement and a similar amount through equipment financing commitments.
During the third quarter, the company idled 49 tractors because of the lack of drivers. It also scaled back the number of tractors it plans to purchase in the second half of the year from 250 to 155, thereby reducing capital expenditures from $18 million to $10 million.
To improve performance, the company has streamlined its executive team from nine members to five since the second quarter.
Beckham announced that David Hartline had joined the company Aug. 1 as chief operating officer and recently assumed responsibility for all sales, pricing and operations activities in the trucking segment. As part of the realignment, USA Truck dissolved its corporate strategy department. Management information systems and engineering now report to the chief financial officer instead, the company said.
Hartline previously worked at Heartland Express, widely considered one of the most efficient truckload carriers in the country.
“Since August, we have been implementing changes in our operational discipline, market emphasis, customer service, and driver relations to reflect the experience and philosophies of our Chief Operating Officer for
Trucking. Along with the implementation of our new operating system, this has required a significant investment in training our operations personnel. We believe certain metrics associated with on-time delivery, pre-booking of freight, load planning, freight market selection, and driver miles are beginning to show improvement,” he said.
“Nevertheless, revenue-related operational measures currently indicate potential softness in fourth quarter operating results. We caution, however, that it remains too early in the quarter to draw definite conclusions because of the numerous changes underway and the significant operating leverage in our income statement.”
USA Truck has improved its fuel purchasing efficiency, reduced headcount, implemented new maintenance procedures, and identified a wide range of additional cost-saving measures that are expected to contribute to several million dollars of annual savings. These savings are expected to be phased in over the fourth quarter, the company said.
It reported earnings on Oct. 21. — Eric Kulisch
Operational struggles put USA Truck in the red
