USA Truck on Friday (Aug. 24) announced a new credit agreement a few weeks ahead of a period set to begin on Sept. 7 in which the trucking company would have faced more penalties for breach of covenants on an earlier credit agreement.
The new agreement, made with Wells Fargo Capital Finance and PNC Bank, essentially puts all assets of the company up as collateral for a new $125 million revolving credit agreement. Of that, Van Buren-based USA Truck has access to $28.3 million, with $75.9 million repaying the obligation of the previous credit agreement.
Also, the new agreement comes with an overall interest savings of 1.25% compared to the previous credit arrangement.
"We are pleased by this strong show of support from Wells Fargo and PNC Bank, two of the most knowledgeable and experienced senior lenders to the trucking industry,” USA Truck President and CEO Cliff Beckham said in a statement. “The structure of the new Revolver affords us significant advantages over our prior credit facility by dramatically increasing our operating flexibility, improving our liquidity, and lowering our ongoing interest rate margin. The access to more stable capital is expected to better support our efforts to improve operating results in future periods."
The agreement comes with a capital expenditure limit of $53.8 million in 2012 and $71 million in 2013. The company said the limits afford “adequate capacity for maintaining a modern fleet.”
Prior to the new deal, USA Truck paid at least $400,000 in penalties for breach of finance covenants, and conditions weren’t expected to improve.
“We do not believe that we will be in compliance with all of our covenants based upon our September 30, 2012 results,” USA Truck officials noted in the company’s most recent 10Q. “Commencing September 7, 2012, and at various dates through October 31, 2012, we must take further steps to protect the interests of our existing lenders if the Credit Agreement is not refinanced by such dates.”
An inability to generate cash has been a problem for the longhaul carrier. For the first six months of 2012, the company lost $8.359 million, more than the $2.118 million lost during the same period of 2011.
USA Truck posted a 2011 net income loss of $10.777 million, more than triple the loss during 2010 and in a year when other trucking companies began to see improved financials. Also, 2011 marked the third consecutive year of losses for USA Truck. In 2010, the company reported a loss of $3.308 million, and a $7.177 million loss in 2009.
Market watchers don’t see positive earnings in the near future. Analysts estimate a per share loss of 14 cents in the third quarter, and a per share loss of 7 cents in the fourth quarter.
The company avoided a hostile takeover attempt by Indianapolis-based Celadon Group in late 2011. At least one analyst has said the company remains at risk of a takeover in the near future. The company employs around 500 at its Van Buren headquarters.
Beckham voiced optimism in the statement issued Friday.
“This new facility represents an exciting step forward for USA Truck, and I would like to thank our internal team and our new lenders for their efforts to get it closed and funded promptly. It provides a boost of confidence for our employees, customers and stockholders, and enables us to focus our full attention on improving our operational execution.”
Shares of USA Truck (NASDAQ: USAK) closed Friday at $3.70, down 4 cents from the opening price. During the past 52 weeks, the thinly traded stock has traded at a $10.35 high and a $3.68 low.