USA Truck, Van Buren, Ark., announced base revenue of $103.8 million for the second quarter ended June 30, an increase of 2.1% from $101.7 million for the same quarter of 2007.
Net income increased from $1.6 million for the quarter ended June 30, 2007 to $2.1 million for the same quarter of 2008. Diluted earnings per share increased from $0.15 for the quarter ended June 30, 2007 to $0.21 for the same quarter of 2008.
Base revenue increased 2.5% from $196.2 million for the six months ended June 30, 2007 to $201.0 million for the same period of 2008. Net income decreased 88.9% from $1.7 million for the six months ended June 30, 2007 to $0.2 million for the same period of 2008. Diluted earnings per share decreased 87.5% from $0.16 for the six months ended June 30, 2007 to $0.02 for the same period of 2008.
"Conditions in the truckload industry have been challenging, characterized by suppressed freight volumes due to the slowing U.S. economy and record diesel fuel costs," said Clifton R. Beckham, President and CEO. "This difficult operating environment appears to have caused an escalating exodus of truckload capacity from the marketplace.
"Our internal efforts, coupled with diminishing industry capacity, have resulted in a stabilization of our pricing and tractor utilization. While we are still well short of our ultimate utilization goal of 2,500 miles per tractor per week, we are encouraged by our progress this quarter (+0.8%). We are particularly pleased with our improved utilization and our reduced empty mile factor (-55 basis points) in light of our shortened loaded length of haul (-9.1%), which typically portends reduced utilization and higher empty miles. Our shorter length of haul is the product of a shift among our customers to shorten their supply chains in the face of higher transportation costs (mostly due to fuel) and our own strategic efforts to serve the shorter-haul markets.
"Shorter lengths of haul typically produce higher revenue per mile. Our base trucking revenue per total mile did improve (+1.2%), but we are not satisfied with the improvement we achieved. Years of continuous fleet growth coupled with the current economic environment have made it difficult to reach an acceptable balance of fleet capacity and freight demand. We believe that we are now approaching such a balance, which will pave the way for us to implement a yield management initiative and thus begin the arduous process of improving our revenue per mile through better freight selection. We will restrict capacity additions to our trucking fleet until we have reached and sustained an acceptable return on our existing capital investment, which requires an annual operating ratio of approximately 89%.
"In addition to the shortened length of haul, a close analysis of our income statement this quarter reveals that our internal strategic initiatives are yielding positive results:
• Our goal is to grow our owner-operator fleet to 120 by year-end and we were at 89 at the end of the quarter. Progress toward that goal (a weighted average increase of 54) year-over-year coupled with a reduction in Company-owned tractors (a weighted average decrease of 98) shifted expenses from wages, fuel, depreciation and maintenance into purchased transportation.
• We also have goals to double the size of our brokerage base revenue (to approximately $20 million) and to break into the rail intermodal market with $2 million of related base revenue in 2008. We made progress toward both goals this quarter. Quarterly growth in our brokerage base revenue (up 63% to $4.4 million) and in our intermodal base revenue (up to $630,000 from zero) also shifted margin from asset-related cost lines into purchased transportation.
"Consistently achieving an 89% operating ratio will not only require more efficient revenue production, but also disciplined management of costs.
• While our fuel costs were down as a percentage of base revenue, the decrease could have been greater if not for escalating diesel fuel prices. Soaring fuel prices (+58% per gallon) impacted our operating margin approximately 50 basis points ($0.03 per share). We were able to limit the extent of this impact through business model diversification into less asset-intensive operations, capital investments made to boost our tractor fuel economy, tighter control of uncompensated miles, a disciplined idle time management program and our customers' willingness to pay reasonable fuel surcharges.
• Our "War on Accidents" safety initiative focusing on accident prevention through comprehensive driver selection, training and accountability has begun to produce results (140 basis point improvement in insurance and claims expense). Costs were down in all major accident-related categories as the frequency of Department of Transportation reportable accidents fell 30% to their lowest levels since the second quarter of 2006.
• A softer labor market for drivers and our focus on driver selection and training resulted in one of our lowest quarterly driver turnover rates this decade (88%), which helped drive down other operating expenses and costs by 60 basis points through reduced recruiting costs.
"Several favorable factors came together this quarter such as our successful safety and fuel conservation efforts, tightening industry capacity and driver availability. We are aware of the possibility that those volatile factors may not be sustainable in the near term, and we realize that we have posted our best operating ratios in the second calendar quarter during four of the past five full years. Our immediate challenge is to sustain the improvements that we have made thus far, and then improve upon them."
Net income increased from $1.6 million for the quarter ended June 30, 2007 to $2.1 million for the same quarter of 2008. Diluted earnings per share increased from $0.15 for the quarter ended June 30, 2007 to $0.21 for the same quarter of 2008.
Base revenue increased 2.5% from $196.2 million for the six months ended June 30, 2007 to $201.0 million for the same period of 2008. Net income decreased 88.9% from $1.7 million for the six months ended June 30, 2007 to $0.2 million for the same period of 2008. Diluted earnings per share decreased 87.5% from $0.16 for the six months ended June 30, 2007 to $0.02 for the same period of 2008.
"Conditions in the truckload industry have been challenging, characterized by suppressed freight volumes due to the slowing U.S. economy and record diesel fuel costs," said Clifton R. Beckham, President and CEO. "This difficult operating environment appears to have caused an escalating exodus of truckload capacity from the marketplace.
"Our internal efforts, coupled with diminishing industry capacity, have resulted in a stabilization of our pricing and tractor utilization. While we are still well short of our ultimate utilization goal of 2,500 miles per tractor per week, we are encouraged by our progress this quarter (+0.8%). We are particularly pleased with our improved utilization and our reduced empty mile factor (-55 basis points) in light of our shortened loaded length of haul (-9.1%), which typically portends reduced utilization and higher empty miles. Our shorter length of haul is the product of a shift among our customers to shorten their supply chains in the face of higher transportation costs (mostly due to fuel) and our own strategic efforts to serve the shorter-haul markets.
"Shorter lengths of haul typically produce higher revenue per mile. Our base trucking revenue per total mile did improve (+1.2%), but we are not satisfied with the improvement we achieved. Years of continuous fleet growth coupled with the current economic environment have made it difficult to reach an acceptable balance of fleet capacity and freight demand. We believe that we are now approaching such a balance, which will pave the way for us to implement a yield management initiative and thus begin the arduous process of improving our revenue per mile through better freight selection. We will restrict capacity additions to our trucking fleet until we have reached and sustained an acceptable return on our existing capital investment, which requires an annual operating ratio of approximately 89%.
"In addition to the shortened length of haul, a close analysis of our income statement this quarter reveals that our internal strategic initiatives are yielding positive results:
• Our goal is to grow our owner-operator fleet to 120 by year-end and we were at 89 at the end of the quarter. Progress toward that goal (a weighted average increase of 54) year-over-year coupled with a reduction in Company-owned tractors (a weighted average decrease of 98) shifted expenses from wages, fuel, depreciation and maintenance into purchased transportation.
• We also have goals to double the size of our brokerage base revenue (to approximately $20 million) and to break into the rail intermodal market with $2 million of related base revenue in 2008. We made progress toward both goals this quarter. Quarterly growth in our brokerage base revenue (up 63% to $4.4 million) and in our intermodal base revenue (up to $630,000 from zero) also shifted margin from asset-related cost lines into purchased transportation.
"Consistently achieving an 89% operating ratio will not only require more efficient revenue production, but also disciplined management of costs.
• While our fuel costs were down as a percentage of base revenue, the decrease could have been greater if not for escalating diesel fuel prices. Soaring fuel prices (+58% per gallon) impacted our operating margin approximately 50 basis points ($0.03 per share). We were able to limit the extent of this impact through business model diversification into less asset-intensive operations, capital investments made to boost our tractor fuel economy, tighter control of uncompensated miles, a disciplined idle time management program and our customers' willingness to pay reasonable fuel surcharges.
• Our "War on Accidents" safety initiative focusing on accident prevention through comprehensive driver selection, training and accountability has begun to produce results (140 basis point improvement in insurance and claims expense). Costs were down in all major accident-related categories as the frequency of Department of Transportation reportable accidents fell 30% to their lowest levels since the second quarter of 2006.
• A softer labor market for drivers and our focus on driver selection and training resulted in one of our lowest quarterly driver turnover rates this decade (88%), which helped drive down other operating expenses and costs by 60 basis points through reduced recruiting costs.
"Several favorable factors came together this quarter such as our successful safety and fuel conservation efforts, tightening industry capacity and driver availability. We are aware of the possibility that those volatile factors may not be sustainable in the near term, and we realize that we have posted our best operating ratios in the second calendar quarter during four of the past five full years. Our immediate challenge is to sustain the improvements that we have made thus far, and then improve upon them."
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