Knight Transportation: USA Truck Shows Only 'Limited Improvement'

by Lance Turner  on Monday, Nov. 4, 2013 7:15 am  

Knight Transportation Inc. of Phoenix, Ariz., whose buyout offer to USA Truck Inc. of Van Buren has been rejected by USA Truck's board of directors, on Monday continued to press its case for a takeover.

In a news release, Knight said USA Truck's third-quarter financial results show "only limited improvement," and that USA Truck's recent share price surge "is unsupported by either industry or company specific fundamentals."

Knight details those claims and others in a 17-page presentation (PDF) explaining its case for a takeover. Among its criticisms:

  • USA Truck's accounting changes have "enhanced earnings" and "mitigated further erosion to its book value."
  • USA Truck's share price isn't supported by the market or its outlook.
  • USA Truck has "consistently" underinvested in its fleet and equipment. 

Knight also continued to criticize USA Truck's turnaround plan, saying it "remains fraught with significant execution risk."

An administrative assistant to USA Truck CEO John Simone said Monday that the company didn't "have a statement at this time."

Knight revealed in September that it had offered USA Truck $9 per share in cash for the company in August. USA Truck rejected the offering, saying it undervalued the companyKnight's takeover offer is worth $242 million, including an equity value of USA Truck at $95 million and $147 million in company debt. It said the $9 per share price represents a "significant premium" of about 39 percent to USA Truck's closing price the day before the offer was made public.

Since Knight made the offer public, USA Truck's share price (Nasdaq: USAK) has risen 55 percent to $13.64.

USA Truck reported third-quarter earnings on Oct. 17. In an accompanying news release, USA Truck executives touted the firm's progress, citing a narrower third-quarter loss, $602,000, as revenue rose 13.5 percent to $141.8 million.

"The continued, accelerating improvement in our results clearly illustrates the rapid progress we're making in our turnaround," USA Truck President and CEO John Simone said in the earnings news release. "The third quarter of 2013 marked our fourth consecutive quarter of substantially improved operating and bottom-line results. Our increased cash flow enabled us to pay down debt for the first time since the fourth quarter of 2011.

"These achievements are even more impressive given the challenging conditions the truckload industry has been facing and the fact that our third quarter is usually seasonally weaker than our second."

On Monday, Knight criticized USA Truck's turnaround efforts and said that while it still thinks $9 per share is fair, it would consider raising its takeover offer.

"Knight remains confident that its premium proposal is significantly more attractive than USA Truck’s standalone prospects, and Knight remains willing to modestly increase the proposed purchase price if USA Truck can demonstrate value that has not already been identified," the company said.



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