USA Truck, Inc.
USA Truck, Inc.
Sales: $226.6 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: USAK
NAIC: 484121 General Freight Trucking, Long Distance Truckload
USA Truck, Inc. provides full-load trucking services for medium haul shipping, distances from 700 to 1,000 miles one way, specializing in just-in-time delivery. USA Truck serves the contiguous 48 states, primarily east of the Rocky Mountains; Quebec, and Ontario, Canada; and Mexico through Laredo, Texas. A fleet of more than 1,700 tractors, and 3,400 48-foot and 53-foot trailers carry over 650 truckloads per day. The company transports “dry van” goods, such as paper and paper products, glass, retail merchandise, automotive parts, aluminum, chemicals, and manufacturing materials.
Formation of Company Following Trucking Industry Deregulation: 1983
Arkansas Best Corporation formed CPI, Inc. in 1983 (three years later the subsidiary would be renamed USA Truck), following deregulation of the trucking industry by the Interstate Commerce Commission (ICC). Previously, the ICC required trucking companies to purchase rights to specific travel routes, charging particularly high rates for full “truckload” shipping than for less-than-load (LTL) shipping. Deregulation allowed trucks to travel any route without prior authorization or fee payments. With such restrictions removed, trucking companies had more flexibility in route scheduling and could now deliver fully loaded trailers for the customer to unload, leaving the tractor free to travel to the next destination. Thus trucking companies no longer needed personnel for loading and unloading freight and required fewer truck terminals for storage. Deregulation presented the opportunity for truckload businesses to operate at a lower cost, prompting the formation of many new trucking companies.
USA Truck became an independent company in 1988 when six executives from Arkansas Best subsidiary ABF Freight purchased USA Truck for $20.4 million—$2.4 million in cash and the balance in assumed debt. Assets included the 63 acres of land and facilities in Van Buren, Arkansas. An 84,000-square-foot building housed administrative offices, driver quarters, a driver training facility, and a 12,000-square-foot equipment maintenance shop. Diesel fueling stations with a 40,000 gallon capacity and a 2,500-square-foot dock occupied the site also. The company owned or leased driver support and equipment maintenance facilities in Louisiana, Kentucky, Illinois, and Ohio. USA Truck operated a fleet of 296 tractors and 503 trailers at the time of the acquisition. A mainframe computer utilizing proprietary software allowed for efficient and flexible driver and equipment scheduling.
USA Truck began its independent existence with more than 150 years of high-level management experience among its executives, who included James B. Speed as chairman and Robert M. Powell as president. Having experience with larger shipping operations at ABF and operational capacity for more than twice USA Truck's existing business, management determined from the outset to expand the company's base of business. The group also prepared to take the company public.
With these intentions in mind, USA Truck sought to improve its operations and reduce expenses. The company saved on interest and depreciation by operating with a low tractor-to-trailer ratio, at 1.7 to 1, compared to an industry average of 2.3 to 1. Tractor equipment incorporated fuel efficient Series 60 Detroit Diesel engines, built to specifications determined by USA Truck. Also, a computer tracked and controlled idle speed for fuel efficiency. Not only did the equipment help reduce fuel expense, it also resulted in fuel tax refunds from several states.
Operational improvements involved hiring and retaining quality truck drivers in an industry notorious for high turnover. In choosing to grow with its own drivers, rather than hiring contract drivers, USA Truck sought to improve working conditions for its employees. USA Truck paid top wages in the industry. Moreover, since its drivers were paid by the mile, the company wanted to keep them on-the-road for a steady income, low mileage being one of the prime reasons that drivers quit their jobs. The company also cut road tours from six to two weeks on average. A meeting with senior drivers on comfort and safety led USA Truck to order new equipment with antilock brakes, power steering, air ride suspension, and temperature controlled sleepers. The company expanded its drivers center at its West Memphis, Arkansas, facility. The $1 million project provided sleeping quarters, private showers, a lounge, laundry facilities, and a training classroom.
Though management at USA Truck attempted to maintain a growth rate limited to 15 percent of revenues, the company experienced 25 percent growth in 1990 and 15 percent in 1991. In 1987 USA Truck averaged 99,000 miles per tractor and averaged 113 loads per work day; by 1991 those numbers improved to an average of 122,000 miles per tractor and 201 loads per work day. Efforts to refine processes and control expenses were rewarded with improvement in operating ratios, from 95.8 percent in 1987 to 88.9 percent in 1991. Stated another way, net profit margin increased from 4.2 percent to 11.1 percent. The empty mile factor, the number of non-revenue producing miles traveled, declined from 11.9 percent of total miles traveled to 10.7 percent. With 413 tractors and 750 trailers, USA Truck saw revenues and net income reach $53 million and $2 million, respectively, in 1991.
By March 1992, USA Truck was ready take the company public with an initial offering of 1.2 million shares at $12.50 each. The stock sold well given the size of the company. Experienced management, its excellent operating systems, and a high profit margin made USA Truck an attractive investment. After expenses, the company netted $13 million from the offering. Over 20 percent of USA Truck employees purchased stock during the offering. The share value of the company doubled in 1992, as revenues increased 20 percent to $63 million and net income doubled to $4.1 million.
Much of USA Truck's success stemmed from a careful selection of customers and specialization in high volume and just-in-time delivery. The trucking service concentrated on high volume transportation needs, such as shipping paper and paper products for International Paper, tire fabric for Goodyear, and auto parts for General Motors. For a 3 percent premium over regular shipping rates, USA Truck scheduled pick-up and delivery for a specific day and hour, often scheduling deliveries on short notice. These services were facilitated by placing trailer pools in strategic locations and furnishing high volume customers with extra trailers for convenient loading and unloading. The company utilized 48-foot, “dry van” trailers, with no refrigeration, and only accepted full loads. These types of delivery services tended to experience fewer price fluctuations, providing stable, predictable income. A broad base of customers, with no customer comprising more than 10 percent of revenues, prevented dependence on a single industry and risk of a sudden, severe decline in business.
Internal Growth, Investment in Infrastructure During Mid-1990s
Company management considered driver retention an important aspect of providing quality service on schedule and its efforts to find and retain good drivers produced positive results. In 1993 USA Truck saved $500,000 in retraining costs and driver turnover had declined from 105 percent to 85 percent per year, compared to an industry average of 100 percent turnover per year and an industry high of 200 percent turnover.
To better serve its drivers and to ensure timely delivery, the company initiated a roadside assistance program. Drivers contacted the “breakdown room” when a problem arose, such as a broken fan belt, and received information about the nearest repair shop and instructions on how to get the problem resolved and still deliver the freight on time. The company expressed its motto of driver relations with a sign that said, “Please communicate with our drivers as if one of your family members was sitting in the passenger seat.”
USA Truck's revenues rose as the prosperity of the 1990s stimulated trade and shipping. In 1994 USA Truck operated a fleet of 711 tractors and 1,202 trailers with 712 drivers, garnering $92.5 million in revenues and $8.1 million in net income. Average miles per tractor per week peaked at 2,565 miles, but stabilized at approximately 2,400 miles in the years that followed with the conversion to 53-foot trailers, beginning in 1995.
As USA Truck increased the number of trucks and drivers on the road, the company developed new support facilities for drivers. A driver support and maintenance facility opened in Shreveport, Louisiana, in August 1995. The center housed sleeping quarters for 32 drivers, a recruiting office, a driver training center, and a 12,000-square-foot truck maintenance shop. Outdoor facilities involved 15 acres of paved, fenced parking and a two-lane fueling station with a 37,000 gallon capacity. A driver center opened in Vandalia, Ohio, in June 1996. That facility provided 22 sleeping quarters, a 2,400-square-foot maintenance shop, a 10,000 gallon capacity, one-lane fueling station, and eight acres of paved, fenced parking. In addition to a recruiting office, USA Truck installed a sales office at that facility.
USA Truck has adopted the slogan “Running With Pride.” This phrase demonstrates our commitment to being on time — all the time — knowing that our jobs depend on conformance with our customers' requirements. USA Truck takes pride in being nothing short of the best that we can be .
Revenues increased to $108.3 million in 1996, a year of slow growth for the company, at 5.8 percent, especially after three consecutive years of 20 percent growth from 1992 to 1994 and 11 percent growth in 1995. By the end of 1996 USA Truck operated 862 tractors and 1,510 trailers, employing 922 drivers. Net income dropped to $3.4 million, however, a 44 percent decrease from the previous year. Factors affecting operating income included high fuel costs, driver shortages resulting in higher recruiting and training expenses, and industry overcapacity resulting in flat trucking rates. The company rebounded as fuel prices decreased and a strong economy fostered a high level of tractor utilization. Revenues increased 10 percent to $129.5 million in 1997, while net income reached $7.9 million.
New developments in 1997 included trailer service to Mexico through Laredo, Texas, whereby USA Truck delivered or received Laredo freight for transfer into Mexico or the United States. The company added 53-foot trailers to its fleet to serve this market, expanding by more than 20 percent to 1,928 trailers, and adding 71 tractors for a total of 1,033 at the end of 1997. In 1997 the company installed onboard communications via two-way satellite mobile messaging and global positioning (GPS). The system allowed the company to provide real-time transit data to its customers and it gave drivers undisturbed rest while waiting for a new assignment.
Driver support facilities were expanded at two sites in Arkansas. Completion of a new 57,000-square-foot headquarters at Van Buren allowed refurbishment to begin on the existing 27,000-square-foot building for use as a training, maintenance, and driver support facility. In 1998 the company augmented the West Memphis, Arkansas facility adding 7,200 square feet to the existing 17,200-square-foot maintenance shop, and four new fueling lanes. The company also opened a driver recruitment and training office there.
In May 1999 the company installed Drop & Swap software to its dispatch technology, giving the company drivers more control over their work schedules. Called the Driver Home Initiative, the software recommended routes that drivers could swap by applying real-time vehicle tracking data to the pre-dispatch assignment planning system. The system enabled enroute changes and relays so that drivers could arrive home in time for that special occasion.
Continuing Growth, Fluctuating Profits During Economic Slowdown of Late 1990s
In November 1999, USA Truck purchased Carco Carrier Corporation, which operated under the name CCC Express and provided medium-haul, truckload shipping. The $37 million acquisition expanded USA Truck's fleet with 498 tractors and 1,103 dry van trailers. The company expected annual revenue to increase approximately $60 million, the amount of CCC Express's 1998 revenues, while consolidation of redundant operations reduced overhead.
The timing of the acquisition was somewhat ill-fated as high interest rates, an unprecedented driver shortage, and a 50 percent increase in diesel fuel costs eroded earnings. Much of CCC Express's fleet did not have drivers, requiring intense driver recruiting and training efforts and doubling those expenses in 1999. In addition to higher training and recruiting costs, the insufficient number of drivers affected the company in two ways. With a high number of unmanned vehicles, peaking at 275 in August 2000, driver turnover reduced overall equipment utilization. The high number of inexperienced drivers resulted in more accidents, causing related increases in insurance claims and costs.
To attract experienced drivers, the company instituted a 16 percent pay increase on October 1, 2000. The cost was offset by elimination of incentive pay, except for drivers providing dedicated services, and decreased incentive pay to managers and executives, such incentives being tied to profitability. The strategy worked as turnover slowed, the number of experienced drivers increased, and the accident rate declined. The equipment utilization rate improved and recruiting and training expenses decreased. Also, the company purchased 267 fewer tractors and 197 fewer trailers than planned for 2000 due to the driver shortage; this led to a net increase of 25 tractors in the fleet, a total of 1,738, and a net decrease of 125 trailers, for a total of 3,400 trailers at year-end. In January 2001, only 93 tractors remained unmanned and by mid-February the company reached 100 percent tractor driver availability.
Working conditions for drivers continued to be a priority. Dispatch personnel received driver relations training to improve interpersonal communication, especially in solving problems. An interactive CD-ROM, called “Daily Dispatch Challenge,” simulated several difficult situations that a dispatcher might confront which required skilled interpersonal communication to resolve.
USA Truck applied a number of strategies to handle the increase in fuel prices. A computerized system automatically determined the fuel surcharge billed to customers. Since the surcharge applied only to revenue producing miles, however, empty miles still added $3.1 million to fuel expense, an average per gallon increase of ten cents over 1998. The company worked to minimize empty miles by using a system that determined the shortest routes, resulting in a 9.2 percent empty mile factor. To improve fuel efficiency the company instituted a 63 miles per hour speed policy and, beginning with equipment replacement in November 2000, the company purchased fuel efficient, aerodynamic Freightliner Columbia tractors. The tractors featured monitors that automatically set an “optimized idle.” The model also provided greater comfort for drivers with armrests, better visibility, and better on-the-road living quarters.
- Forerunner of USA Truck is created.
- USA Truck becomes independent company following leveraged buyout of subsidiary from Arkansas Best.
- Initial public offering of stock raises $13 million.
- Company experiences third consecutive year of 20 percent internal growth.
- Satellite-based communications and global positioning system (GPS) is installed in tractors.
- USA Truck acquires CCC Express for $37 million.
- Shortage of truck drivers motivates 16 percent pay increase.
Another problem caused by the slower economy involved the difficulty of selling used equipment. USA Truck replaced most tractors within 42 months of purchase, allowing the company to maintain a fleet with the latest advances in technology, safety, and comfort, as well as to keep repair costs low. A slowdown in the trucking industry led to a slow market for used tractors and trailers, and dealers reduced their trade-in prices. Also, several dealers closed or went into bankruptcy. USA Truck responded to the situation by initiating direct sales of its used equipment, thus retaining all revenues from such sales.
The combination of all of these factors resulted in a net income of only $94,000 in 2000, despite revenues of $226.6 million. Stability of revenues benefited from repeat customers which accounted for 92 percent of revenues. With the economy stabilizing, USA Truck sustained a fairly even level of fleet availability in 2001. A $41 million equipment contract added 517 replacement tractors to the fleet, for a net decrease of 18 tractors, while the 242 new trailers slightly compensated for the previous year's reductions, for a net increase of 187 trailers. USA Truck anticipated a $52.7 million expenditure in 2002, with the purchase of 647 new tractors, for a net increase of 252 tractors, and purchase and net increase of 360 new trailers.
Carco Carrier Corporation.
Load Coordinator Group; Fleet Manager Group.
J.B. Hunt Transport Services, Inc.; Landair Corporation; Swift Transportation Company, Inc.
“Arkansas Best Confirms Units for Sale,” Arkansas Democrat Gazette, July 7, 1988, p. C1.
“Denied Grant Has Freight Hauler Examining Options,” Business First-Columbus, November 24, 2000, p. A16.
Leavitt, Wendy, “Fleets Online,” Fleet Owner, March 2000, p. 148.
Mehlman, William, “Designer Trucking Sets Tone for Independent USA Truck,” Insiders' Chronicle, July 6, 1992, p. 1.
Sullivan, R. Lee, “It's First Class Here, Man',” Forbes, March 14, 1994, p. 102.
USA Truck Chairman J.B. Speed Retiring,” Arkansas Business, September 4, 2000, p. 31.
“USA Truck Inc.,” Arkansas Business, June 19, 2000, p. 31.
“USA Truck Is Expanding in W. Memphis,” Memphis Commercial Appeal, August 19, 1992, p. B4.
“USA Truck Profitable in '91, Struggling to Control Growth,” Arkansas Democrat Gazette, January 12, 1992, p. G1.
Walters, Dixie, “Building for the Long Haul,” Arkansas Business, April 12, 1993, p. 13.
Wood, Jeffrey, “USA Truck, P.A.M. Buyouts Expected to Boost Stock,” Arkansas Business, October 11, 1999, p. 13.
——, “USA Truck Shifts Gears Even Before Acquisition,” Arkansas Business, November 1, 1999, p. 12.
"USA Truck, Inc.." International Directory of Company Histories. . Encyclopedia.com. (September 17, 2018). http://www.encyclopedia.com/books/politics-and-business-magazines/usa-truck-inc
"USA Truck, Inc.." International Directory of Company Histories. . Retrieved September 17, 2018 from Encyclopedia.com: http://www.encyclopedia.com/books/politics-and-business-magazines/usa-truck-inc
Encyclopedia.com gives you the ability to cite reference entries and articles according to common styles from the Modern Language Association (MLA), The Chicago Manual of Style, and the American Psychological Association (APA).
Within the “Cite this article” tool, pick a style to see how all available information looks when formatted according to that style. Then, copy and paste the text into your bibliography or works cited list.
Because each style has its own formatting nuances that evolve over time and not all information is available for every reference entry or article, Encyclopedia.com cannot guarantee each citation it generates. Therefore, it’s best to use Encyclopedia.com citations as a starting point before checking the style against your school or publication’s requirements and the most-recent information available at these sites:
Modern Language Association
The Chicago Manual of Style
American Psychological Association
- Most online reference entries and articles do not have page numbers. Therefore, that information is unavailable for most Encyclopedia.com content. However, the date of retrieval is often important. Refer to each style’s convention regarding the best way to format page numbers and retrieval dates.
- In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.