Arkansas Trucking Companies See Tailwinds from Good Economy


What a difference a year makes for Arkansas trucking.

When Dan Cushman looks back, he skips past 2016 and even 2017 to focus on the good old days of 2015. Cushman, CEO of P.A.M. Transportation Services Inc. of Tontitown, says a healthy economy is finally bringing relief to rate-crunched trucking companies.

For the first three quarters of this year, P.A.M. has reported revenue of $329.2 million and income of $17.9 million, both up significantly from a year ago, when P.A.M. had revenue of $280.2 million and income of $7.3 million. The fourth quarter of 2017 saw a huge boost to P.A.M. ’s bottom line because of the corporate tax cut passed in December, but, excluding the tax cut benefit, P.A.M. finished 2017 with income of $14.6 million.

(The corporate tax reform gave P.A.M. more than $24 million to help rosy up its bottom line for fiscal 2017.)

“I think everybody is finally seeing some rate relief,” Cushman said. “2016 and 2017 were real difficult years, and we saw some great depression” in rates.

In 2015, P.A.M. had a record year of profits with $21.4 million in income. Even a modestly profitable fourth quarter could see the company surpass that for this fiscal year.

P.A.M.’s profits have come even though it, like others, has raised pay for drivers. An ongoing driver shortage has made recruitment and retention of good drivers a daily headache for transportation companies.

During the past couple of years, especially in 2016, the driver shortage coupled with a manufacturing lull put huge pressure on companies like P.A.M. Cushman said shippers held firm on low prices while companies were having to pay more to drivers; as the economy has strengthened, even the shippers have begun to relent.

“We have gone to our customers and told them we are giving our drivers pay increases; I see customers more understanding and supportive and willing to help us, honestly, like never before,” Cushman said. “I think shippers started feeling more of a capacity crunch than they had before and said, ‘Uh, oh, this could get ugly.’

“We paid our drivers more ahead of getting rate increases because we couldn’t wait any longer. I can’t speak for the industry, but I think that others did, too, and shippers realized, OK, we have to support our carrier base. Our customers certainly have.”

Rebuilt USA Truck
James Reed had a different challenge when he took over as CEO at USA Truck Inc. in Van Buren in January 2017. The company was ailing and unprofitable and had struggled since the death of former CEO John Simone in 2016.

Reed took over a company that would almost immediately report an annual loss of $7.7 million in 2016, additional financial gloom on top of annual losses every year from 2009 to 2013.

Reed went to work restructuring internal strategy and operations while focusing the company on a disciplined rate and route network. It was slow rowing, but USA Truck has now reported five consecutive profitable quarters.

For the first three quarters of 2018, USA Truck had revenue of $392.9 million and income of $6.9 million, up from revenue of $323.3 million and income of $7.5 million, which came after a $12 million income tax reform boost.

Reed acknowledged that a strong economy helped USA Truck’s turnaround but said the new management had created “sustainable change.”

“There’s no doubt that having the tailwinds of a strong market are helpful but — but — when we started we had the worst rate per loaded mile in the industry compared to everybody else, and now we’re second highest in the industry,” Reed said.

“No matter what the rate environment is, that reflects a total change in strategy. It is really about our business process. ... The tailwinds of the market have helped a little bit, but we are fundamentally in a different spot in the key measures.”

One measure most transportation companies focus on is revenue per loaded truck per week, or something similar. USA Truck’s metric is up 20.5 percent this year compared with last.

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Reed said USA Truck’s rate used to be abysmal but the new strategy of being disciplined in pricing over their route network has paid off. Reed said USA Truck’s rate is second in the industry only to Knight Transportation of Phoenix, a sign that the company is on the right track.

“Were we able to raise that price because of the tailwinds? Absolutely, it was easier to do that in that environment,” Reed said. “If we had only taken advantage of the tailwinds, we would have only moved up proportionally with the competition and we still would be in last place. We leapfrogged everybody.”

Ideal Growth
USA Truck’s resurgence stoked morale in the company and gave Reed and his team the opportunity to expand. In mid-October, USA Truck paid $53 million for Davis Transfer Co. of Georgia, giving the company a stronger southeastern presence and 250 more tractors.

Reed said the corporate tax rebate helped USA Truck because it gave the company the ability to fund driver pay raises and equipment upgrades and make prudent expansion acquisitions. Unlike many corporations, USA Truck has not used any of its tax refunds on share buybacks.

“As excited as we are with the results and it has afforded us the flexibility to make a great acquisition like Davis Transfer, we are still the tallest short people,” said Reed, quickly pointing out he, too, is short. “If you compare us against the best of the best, we are still from a profitability standpoint at the bottom of the spectrum. It has given us a little bit of breathing room. It has made our whole company thirstier and hungrier to get even better. We know we still have a long ways to go.”

Cushman said he is always on the lookout for expansion possibilities but hasn’t found one to his liking. P.A.M. did start a program this year that promises strong economic returns for the company.

It is called B1 and involves Mexican drivers delivering goods to and from the United States.

P.A.M. is heavily involved in the automobile industry, a prominent sector in Mexico.

The program has Mexican drivers with valid work visas deliver loads to a point in the United States. This is allowed as long as the driver returns to Mexico with a load — which Cushman and his team have to arrange so as not to create dead time.

Cushman said the program now has about 100 Mexican drivers and has been successful so far. Cushman said it is programs such as B1 that have helped P.A.M. expand its fleet by 22 percent without acquiring any external capacity.

“We are looking at every means possible to feed and fuel our driver growth,” Cushman said. “This is certainly one of those opportunities, and we are taking advantage of it. It is one of those things that has allowed us to grow our fleet 22 percent. The growth has been all organic since I got here.”