USA Truck's (USAK) CEO James Reed on Q3 2017 Results - Earnings Call Transcript

USA Truck, Inc. (NASDAQ:USAK) Q3 2017 Earnings Conference Call November 3, 2017 9:00 AM ET

Executives

Jimmie Acklin – Financial Reporting Manager

James Reed – President and Chief Executive Officer

Jason Bates – Executive Vice President and Chief Financial Officer

Analysts

Brad Delco – Stephens

John Engstrom – Stiefel

Barry Haimes – Sage Asset Management

Operator

Good morning, and welcome to the USA Truck Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jimmie Acklin, Financial Reporting Manager. Please go ahead.

Jimmie Acklin

Good morning, and welcome to USA Truck’s third quarter earnings conference call. Joining us this morning from the company are James Reed, President and Chief Executive Officer; Jason Bates, Executive Vice President and Chief Financial Officer; Jim Craig, Chief Commercial Officer and President, USAT Logistics; and Werner Hugo, Senior Vice President of Trucking Operations.

Please be reminded that this call will contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended; and Section 21E of the Securities Exchange Act of 1934, as amended; and such statements are subject to the Safe Harbor created by those sections and are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995, as amended.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review and consider the factors that may affect future results and other disclosures by the company in its press releases, annual report on Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made.

Also, on today’s conference call, management will be referring to certain non-GAAP financial measures in its analysis of the results that supplement the GAAP financial statement. A reconciliation of these non-GAAP measures to GAAP is provided in the table at the end of the slide presentation that’s accompanying today’s call.

Now, I will turn the call over to James.

James Reed

Thanks Jimmie. I hope everyone had a chance to review our earnings release from last night. The third quarter of 2017 was an important quarter for our business that it marks the first quarter since 2015, that we’ve reported on adjusted positive earnings in the first quarter with our senior team fully assembled. It’s remarkable to see what a group of people equally yoked in a common cause with a shared vision and purpose and accomplished in a short period of time.

Several of our team joined us just in May, so as I think through process of getting them on board, getting their families moved, aligning them with our direction and progress, getting their insights into the business and devising and executing plans that have immediate impact. It’s clear to me and I hope to you that this journey is just beginning. As we discuss our results this morning it would be easy to be jubilant and the fact that we finally became profitable. I, of course, am pleased for our employees, our shareholders and our community, they all deserve the rewards that come with being part of a winning team.

But just being profitable does not constitute victory for us. In our results, we continue to see opportunity for growth, we continue to see gaps to close with our peer group and we continue to see a business that is poised to continue on a path – the past and plans just as we have laid out in the past.

Before we began, I want to welcome and recognize that we added the final piece to our management team in the third quarter with the addition of Jeff Harris as our Maintenance leader. This vitally important contributor to our success rounds out full leadership team covering all of our functional bases. I encourage you to review our earlier press release about Jeff, he represents the best of the best and as an MDP level addition to our outstanding leadership team.

Now let’s turn to Slide 3 for a look at our consolidated results on the slide presentation we provided. Freight demand in third quarter on a seasonally adjusted basis was relatively average when compared to the same period in prior years. While the natural disasters in Texas and Florida increased demand during the quarter, they negatively impacted utilization but had a slight upward effect on rate.

Indicative of the company’s ongoing efforts consolidated operating revenue came in at $114.2 million for the quarter or an 8.3% increase year-over-year. This marks the first positive year-over-year change in quarterly revenues since in 2014. Consolidated operating income was $1.8 million and net income was $400,000 or $0.05 per diluted share, making this quarter the first profitable quarter for our shareholders since 2015, as I mentioned before.

Additionally, consolidated adjusted operating ratio for the quarter was 98.2% this represents an improvement of 180 basis points year-over-year and 480 basis points sequentially. Our trucking adjusted operating ratio for the quarter was 101.8% representing an improvement of 50 basis points year-over-year and 580 basis points sequentially. And our USAT Logistics team had an adjusted operating ratio in that for the quarter that was 91.5%. This represents an improvement of 330 basis points year-over-year and 280 basis points sequentially.

Despite the improved consolidated operating results, the trucking segment albeit improved year-over-year continue to operate at a loss generating a loss of $1.2 million for the quarter versus a loss of $1.5 million for the third quarter of 2016. This loss was primarily driven by the combination of higher driver wages and owner operator expense stemming from our second quarter increases elevated driver recruiting expenses associated with seating our unmanned truck and the general under utilization of tractors relative to our desired levels, which was partially offset by our improving yield as we continue to work on refining the network.

During the third quarter USAT Logistics operating revenue increased 17.7% versus the third quarter and 5.5% versus the second quarter of 2017. And I should clarify that 17.7% was versus the third quarter of 2016. This represents the second consecutive quarter of revenue growth and the highest year-over-year increase since the third quarter of 2014. USAT Logistics generated operating income of $3 million for the quarter up $1.5 million versus the third quarter of 2016 and $1.1 million versus the second quarter of this year.

Moving now to Slide 4, base rate per loaded mile in the trucking segment increased $0.13 a mile or 7.6% versus the third quarter of 2016 and $0.09 or 5.3% versus the second quarter of 2017. This increase in rates was driven by the ongoing review of pricing and network strategies, customers, markets and lands there are central to our ongoing efforts to turn around the trucking business. Freight was further aided by the hurricane related effects, which contributed approximately $0.01 to rates during the quarter.

Miles per seated truck per week decreased 4.1% versus the third quarter of 2016, down 82 miles per tractor per week year-over-year and down 63 miles per tractor per week sequentially. However, the unseated tractor percentage was 6.5% in the quarter and increased over the third quarter of 2016 by 1.1% but a marked improvement over the second quarter of 2017, which came in at 8%. This was a focus for us as the quarter developed and I’m happy to report that our September average unseated tractor percentage was 5% in line with our previously stated target.

Base revenue per seated tractor per week among our most critical measures improved for the fifth consecutive quarter to $3,127 up $130 or 4.3% versus the third quarter of 2016 and up $0.81 or 2.7% versus the second quarter of 2017. The focus in our trucking business has been and will remain improving our safety, increasing rate through further densification of the network and disciplined pricing and improving our utilization. This last point of utilization has become an area of intense focus for the business, as it is central to the ongoing transformation of USA Truck.

I’ll now turn the call over to Jason to give you an update on our Logistics business and our financial position.

Jason Bates

Great. Thank you, James. If we turn to Slide 5, as noted previously in the third quarter USAT Logistics generated revenues of $37.8 million, that’s up 17.7% year-over-year and 5.5% sequentially as James alluded to. Gross margin came in at $7.6 million for the quarter reflecting a $1.6 million or 25.9% year-over-year improvement and a 14.6% improvement sequentially. Stronger demand drove margin levels higher improving to 20.2%. This represents 130 basis point improvement year-over-year and 170 basis point improvement sequentially.

We are pleased to report that the team has successfully increased load counts during the third quarter of 2017 by approximately 1,000 loads when compared to the prior year. Year-to-date revenue for USAT Logistics has grown $3.6 million or 3.5% over the 2016 levels reflecting annual growth in the business. During the third quarter the margins in our Logistics business benefited from a capacity demand imbalance in the marketplace, which was bolstered by the hurricanes and other natural disasters. We saw margins expand sequentially during the quarter peaking in September. However, we expect to see both margin and volume return to more normalized levels in the fourth quarter and beyond.

If we turn to Slide 6, you’ll note that as of September 30, 2017 our total debt and capital lease obligations net of cash, or net debt was $120.7 million and our stockholders equity was $51.5 million. Net debt to adjusted EBITDA decrease sequentially to 5.8 times compared with 6.4 times as of the end of the second quarter. The company had approximately $45.4 million of liquidity available under it’s credit facility as of the end of the third quarter.

As discussed last quarter, we have a modest CapEx plan for the remainder of the year. Any free cash flow will be directed towards the repayment of debt with the goal of further reducing our leverage ratio to more comfortable levels. Our long-term goal is to continue to reduce our leverage ratio into the 2.5 to 3 times range. We expect to make progress on this goal in the fourth quarter with additional progress throughout 2018.

With that I’ll pass the call back to James.

James Reed

Thanks Jason. We’ve previously provided a range of operating improvements that we expected would be accretive to result this year. And we’ve largely delivered on those. Slide 7, shows the focus areas we said were most critical to our success raising price and seating trucks. We said we would, by our pricing in network reengineering, raise base revenue per seated truck by 3% to 5% by the end of the year. But we accomplished that one quarter early with the revenue per seated truck measured $3,127 in the quarter or 4.3% higher than the baseline.

And as we look to the fourth quarter, we expect to surpass the top end of our range on that measure alone. We said we would increase seated tractor count 5% to 7% versus the fourth quarter 2016 average truck count and we’re now exiting the third quarter with 1,628 seated tractors or 5.2% over the baseline. We expect this is where we will be through the end of the year.

While recruiting has absolutely become more difficult, retention remains a concern. We believe our unique insights into our driver turnover and more importantly the way we engage our drivers every day makes our ability to recruit and retain an important capability in our business. One area of concern is with our owner operator program early this year we deployed an innovative best-in-class automated freight selection and dispatch that gives our independent owner operator more say in their freight opportunities and that has been a great success.

However, during the quarter two of our key partners who are important to our recruitment and placement of owner operator in our fleet change their financing programs in meaningful ways that negatively impacted our fleet. We’ve identified new industry partners, who we believe are even better than the prior options and we are ramping them up. In the third quarter, our owner operator fleet was approximately 20% of the fleet and right now it’s close to 17% of the fleet about where we exited the second quarter and will be so through the end of the year.

Moving now to Slide 9, cost reduction is fundamentals to who we are. Fixed controllable costs are down $4.1 million year-over-year and in the high end of the $3 million to $4.5 million cost savings range we had initially indicated a year ago. With the addition of our new Maintenance leader and with the full leadership now assembled, we intend to as Grove Grove wrote, fight like the devil on our cost. Expect to hear more from us about that in our future earnings calls.

As Jason stated, we expect improved cash loan EBITDA versus 2016 sufficient to cover future CapEx requirement going into 2018 and maintaining our fleet strategy. We reiterate an expectation of consistent performance and another quarter of positive net income in the fourth quarter. We already touched on unseated trucks, but as an area of focus and to empathize this I’m happy to report that as of just this morning our unseated percentage is below 5% at 4.8%.

Among the best we’ve ever seen in our company’s history and a clear indication that this team can deliver on its commitment. We still expect USAT Logistics to generate approximately 35% of consolidated revenue by the end of 2017. In the third quarter it represented just north of 33% of consolidated revenue for the second consecutive quarter, excluding fuel basis it is 35% of operating revenues. Our Logistics business grew revenues quarter-over-quarter for the second consecutive quarter and the second time in just 11 quarter. It was a fantastic result.

In summary, our Logistics business is a great new story, consistently producing healthy margins and a growing base of business with limited invested capital require to run it. Our long-term focus remains on running a well executing trucking business paired with its profitable Logistics business. It is a powerful combination and we believe we have the business, the people and the customers to deliver on that. Well this is a time for our team to have some pride and signs of positive progress, we still see significant opportunity particularly in our trucking business.

And so our focus is now squarely on taking the consistent improvements we’ve seen in the trucking business operating metrics and translating that into profitability. I don’t want anyone to expect monthly detail in the future but in the third quarter we had our first profitable month in trucking in over a year and only the third profitable month since 2015. We are making progress in the business with the capable leadership team, we now have in place are making difference every day.

This team has made a habit out of exceeding our expectation, I’m not willing to commit the fourth quarter profitability in trucking right now but you can bet that’s what this team is focused on. The results for this quarter are reflective of a willful and intentional plan that we set three quarters ago with specific actions that we have implemented and its working. One regret is that this quarter into a lesser extent the fourth quarter are the last real opportunities to see the fruits of our plan and labor coming to bear without the market tailwinds, which will drive upside in 2018. Don’t get us wrong, we’ll take the tailwind but we will continue to measure our relative performance to our competitors as a measure of our progress as we close the performance GAAP with them.

As I noted last quarter our response to these improved results is to raise the bar higher and higher until we take our place as one of the best names in the business. Our team is now in place and finally had a quarter together to show that we are capable and this is just the beginning. I can’t wait to see what happens as our network strategy gets to run its course through the bid cycle in 2018 as our operations team drives utilization to greater height than USA Truck has recently seen and as our USAT Logistics team continue to refine and strengthen its position an a market leader.

Branden with that, we’ll now open the call to questions. Thank you.

Question-and-Answer Session

Operator

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Brad Delco with Stephens. Please go ahead.

Brad Delco

Good morning James, Jason. How are you guys?

James Reed

Good Brad. How are you?

Brad Delco

Wonderful. James, I just want to ask a couple of question specifically on truckload. Really good rate progress in the quarter, I know you got a little help from the hurricane that you called out. Length of haul did shrink, which I know helps rate but it also hurts utilization. Is there any way to sort of parse out how hard utilization was hit maybe from storm disruption versus – I’m assuming a conscious decision to shorten the length of haul get some greater density in some of those lanes.

James Reed

Yes, I mean that’s a question that we have leading us, that we’ve been working on. I mean, there’s an interesting dynamic in the quarter our actual utilization drop-off came actually in July, more than it did in August and September. And part of that and I want to say – and I want everyone to listen carefully, it was because of a change in how we reported it. The prior management had included some miles in our number that we decided the team, we don’t think they are more out our out miles and they are miles that should be attributed to our utilization.

So we made a little bit of adjustment and Jason how many – kind of what the impact was that.

Jason Bates

Yes. I mean, I don’t have the exact number, but I think it’s important to note that it was a combination of that but the greater impact to the utilization in the month of July was the fact that we were – that’s when we were really on board in a lot of these trucks. We had a lot of unseated trucks as we disclosed previously and at the end of the second quarter and so there was a concerted effort to seat those trucks. And anytime you see a bunch of trucks it disrupts the network a little bit, which caused some utilization headwinds in the month of July.

Then a lot of the – more active work that Warner and the team have been doing really started to take hold in the month of August and September. We – essentially we were running some analyses because we anticipated a question about the utilization impacts, the hurricanes and we’re looking at the average hours under load in the Florida and in the Houston market and we’re still working on calculating the weighted impact. But I can tell you that there were loads that historically would have been in the 40 hour – 30 hour, 40 hour range that end up taking up to 150 hours. And so we know that there was definitely an impact but we haven’t quantified exactly what the mathematical piece was.

James Reed

And let me just address the length of haul question. So I actually talked to Rick Hainlen, who’s our network guide last week about this very question. Our length of haul is declining, one of things I said two quarters ago is that we had some latent untapped opportunity in our network. So we really just kind of reshuffling what we’ve got to maximize our opportunity to make sure that we’re running lanes where we can be more dense and as we’ve been reshuffling the deck so to speak, we’ve shortened the length of haul.

We expect as we get through our bid process and actually have our intentional network implications run through the system in 2018 the length of haul will pop back up a bit going into next year. So, sorry we don’t have specific numbers on those. As Jason said, we’re working on it, we generally understand the dynamics to be – we changed a little bit of how we reported internally that affected us a – call it 25 to 30 miles. Jason and his team are doing the analysis on what the exact impact is. But unlike some others and I’m not here to opine on their results. We don’t really think that the hurricanes affected our utilization that much.

And then finally our length of haul is down because we’ve been kind of rearranging our existing network. But through our efforts, we actually expected to climb up a little bit more next year. So I hope that directionally helpful.

Brad Delco

That’s very helpful. I was curious how much of that length of haul was intentional because I would imagine Warner would have come through and you probably cut out a bunch of lanes and shuffled a lot of the network around. And I just wanted to get a sense of how much of that was intentional.

Jason Bates

That’s right. Brad, sorry to interrupt, I don’t mean to ask a question on your behalf. But I’ll just preemptively say, and we’re less concerned about that right now because we did the revenue per tractor per week go up yet again a lot of that attributable to pricing but also the network changes that we’re making. So that gives us confidence that we’re headed the right direction.

Brad Delco

And then I like seeing the seated truck count, I mean, under 5% I typically think of it as “full employment”. Is that a fair way to be thinking about it? Could you really be better on percentage of your fleet that’s seated just because of sort of natural attrition and churn?

James Reed

So there is kind of two factors in play there, one is the one that you pointed out, which is you’ve got some natural attrition and you’ve got a balance or recruiting efforts, which I mentioned had gotten more expensive during the quarter compared to prior quarters and so that challenge. The other one is just inherently in trucking, you have long-term racks that are being repaired, you have trucks that have a blown engine that are in the shop for long periods of time. There’s a portion of your fleet that just isn’t available to you because it’s being fixed or otherwise isn’t available to be assigned to a driver.

So we really think 5% the consistent target that we want to be at. I would be quite surprised if we operated below 5% versus the same period. Our goal is to operator at 5%, because the point you made, I mean, it’s kind of as low as you can naturally go without having luck on your side not having trucks down for long-term maintenance and long-term repairs.

Brad Delco

That makes sense. And then final question and I’ll jump back in queue. Some information came out yesterday afternoon, with truck orders for the month of October, it seem like everybody in the country decided they wanted to order trucks in October. Can you give us any sort of insight is to what your plans are for next year? Is it bringing down the age, trying to grow the fleet? Just generally speaking what’s kind you think the preliminary thoughts there?

Jason Bates

Yes. So it’s funny, we were at the ATA last week and you could tell – I mean that’s everyone orders everything in October because everyone’s all together at the ATA and they’re all talking about who is buying more, as in with who. What we can tell you is that we haven’t made any firm decisions yet on exactly what we’re going to be ordering. But I can tell you that our goal is to keep our fleet age right around 3% or a little bit above 3% next year. We exited the quarter at right around 2.7%, 2.8% and we’re not looking to add any trucks in the fourth quarter.

And so going into next year, we’ll get on to a normal replacement cycle. And that will necessitate roughly what’s called approximately 300 trucks next year that we’ll be buying to kind of keep that fleet age right around that level. So again, we haven’t made any firm decisions on whom or who we’ll be purchasing those from, but that’s kind of the plan right now.

Brad Delco

Okay. Great. Thanks guys. I’ll jump back in queue.

James Reed

Thanks Brad.

Operator

Our next question comes from John Engstrom with Stiefel. Please go ahead.

John Engstrom

Yes, good morning guys. Thank you for your time.

James Reed

Hey, John.

John Engstrom

So I think there’s a lot of awesome metrics here, and I was hoping to first ask you a question around the one that’s perhaps most discussed in the industry and that how since 1Q 2017 to this report, you’ve increased your driver count by, I think, it’s 65 drivers, even more since 4Q 2016. Sort of what levers are you guys pulling, is it more miles on the tractor to have more effective compensation without actually needing to pay higher wages per mile, or sort of – can you talk to us a little bit about what your driver retention and recruiting strategy is?

James Reed

Yes, for sure. So this is an area where we spend a lot of time and effort and it’s not perfected, that’s for sure. But we think we’ve got some good things going on. So, on the recruitment and let’s pay front, let’s talk about those together. We did have to spend more money than we had hoped to recruit in the quarter. It is getting harder to recruit, which we believe when we look at our turnover reason, we saw a spike in the quarter for people that are taking local jobs, which for us was code for going to the construction industry. So we’ve got some competitive challenges there just because of where the economy is and we’re not complaining about it, it’s just kind of is what it is.

From a pay standpoint, we had announced previously that we made a pay increase in April that got us more on par with our competitors. And then one of the tactical things we did last Q4, this actually predates all of our management team, we had changed – actually Jim was here. We had changed our driver bonus program, which is based on productivity, safety and fuel compliance from a quarterly payout to monthly payout. And so, those things combined kind of suggest an environment where we are making sure that we’re competitive on pay and it’s a bit harder to recruit people, but we’re doing – we’re carrying the water there.

On the retention side, we’re very excited about what we’re doing there. This is – Werner is in the room with us today, and it’s one of his passions and its frankly, one of the differentiated things that he brought to the job as a former driver himself. He kind of gets the dignity and respect angle of being a driver, just like we all do, but he gets it in is bones, and so he’s developed the comprehensive program where we have consistent outreach to drivers, we proactively address issues that they have either via push information they sent to us or via their scorecard where we can see that their miles of their pay is falling off. Werner and his team are doing proactive outreach to go, connect with those drivers, and we think that’s having a good impact.

And then the other thing, I mentioned once before, and we don’t want to go into a lot of details on this, but we have a really robust analytical logistic regression model we developed in-house to help us understand kind of the cause of drivers departing. And Werner and his team are using that analysis to help inform their consciousness about how to do the outreach, but that all sounds kind of sexy and cool, but at the end of the day, it really is about how you treat them about consistent touches and more than anything, our kind of internal dogma, if you will, is the best way we can give drivers a meaningful work and pay increases to give them more miles. And so we are just totally focused right now on increasing utilization and we won’t go into the details here.

But what Werner is doing, his approach is consistent with what you’ve heard from us on everything else in the business. They’re setting goals, they are measuring performance for those goals, they coaching kneecap-to-kneecap and nose-to-nose with people to improve that. And we’ve seen particularly recently, some pretty fantastic improvement – and fantastic is the relative word, right, but they’re getting utilization improvements week-over-week and we’re excited to see where that takes us. But that’s a Big John utilization impact, or excuse me, a retention impact.

Jason Bates

Yes, John. We get this question a lot, because there are a lot of people anticipating rate increase needs going into next year with the market the way it is, but right, wrong or otherwise, our loaded miles per truck per week lags the many people in the industry. And so, as long as our pay is right where it needs to be on an average mileage basis, then it’s just a matter of getting those drivers more miles. And so as we do that, coming from a lower base, our drivers will feel the rate increase in terms of take-home pay without us having to actually incur headwinds on that front.

John Engstrom

Yes. I think that all make sense. And that’s great. I mean you can clearly see it in the numbers. There are 2 core phrases that you guys mentioned which I was hoping to build on, it’s a really good parlay. The first was a treatment in touches and the second was utilization. To start with the first, treatment in touches, circa a year ago, a component of this strategy was to outsource a lot of the maintenance and I want to say divest from some of the real estate as it pertains to the maintenance facilities.

And one thing we hear tangentially around that space is that, one of the big touches is when a driver has some sort of event on the road, being able to go to a maintenance facility or have a branded touch there, is a big deal. And I know that’s something that you guys are in sort of reverse course on. I was wondering if you could give us an update on your sort of maintenance strategy? I know you had a new hire, how you are thinking about managing that across the enterprise? Any color on that’s appreciated.

James Reed

Yes. So let me take that. And I’m going to keep it at kind of strategic levels. We’re are not going to make any announcement on this call and you didn’t ask us too new facilities or anything like that, but I think what you pointed out was – is very astute right, the best operators in our business, for cost reasons, but also for driver interaction reasons have multiple facilities and if you look at our facilities, we don’t really have anything east of Dayton, Ohio, but a lot of our operation is east of Dayton, Ohio. So we are actively – we’ve already done the analysis and made the decision that we’re going to begin expanding our facilities.

We will tell you more about the footprint and the schedule and stuff like that in future calls, but strategically, we do want to touch the drivers more frequently. We want them to get back touch and feel of a concerned organization that cares about them. And that’s more important really than anything else I’m going to say after this. After this part is – there is cost element to that too, bringing OTR spend in-house is a great way for us to reduce our variable cost and our analysis supports that. So that’s something we’re working on.

And then just something tactically that Jeff has already implemented in the very short period of time that he’s been here, we put inspection lanes back into our facilities at two of our four facilities. And what that means to a lay person is, when a truck comes in, his guys look at it top to bottom to see if there are any issues and he shared that our board this week that just blew my mind, that over 50% of the tires that are coming on these trucks and trailers into the yard have some sort of issue, under inflation, over inflation, thread depth, something that could be a safety issue or not as important as a safety issue, but a maintenance issue over the road down the road.

And so we think by those proactive activities, we are increasing the touch point that we’re having with them, we are increasing our – improving our safety and we firmly believe that we’re lowering our long-term maintenance cost to that. There is an initial burst right now, it costs a lot of money to replace those tires that we didn’t know were bad in the past. But I think that a one-time thing we get through that and we expect great things from Jeff, down the road. So kind of a comprehensive answer, but that’s all a long-winded way to say, you’re right, and we agree with that and that is our strategy.

John Engstrom

Yes, that’s tremendous. I appreciate that depth and I would imagine that, that could have a lever on reducing your turnover as well, but perhaps it’s very difficult to measure, I don’t how I’d measure, even if I had all the numbers in front of me. So the other element pertain to utilization and I guess, to some extent pricing. Given that you guys have so much going on internally with row and lane selection, and reallocation and utilization, and also renegotiation of contracts, I’m kind of just going to take the highroad here, instead of getting bogged down a lot of details. I’m just – it is really simple and just, – the question I’m going to ask you is, of your total book of business, how much did you go to market within this past quarter?

James Reed

That’s a really interesting question, and I’m going to dodge it a little bit. I don’t know the answer off the top of my head. I was more forward-looking. I can tell you, between now and June, 53% of our business goes to market from a bidding standpoint and we like that dynamics given where the marketplace is. More of what you saw in our pricing, just to kind of lever up your question, was just that I mean, Rick came in May, he has even had time to rebid price and get it through the network. What you’ve seen is almost exclusively network management and better use of our existing network. And then on the utilization front, I think that, as I said on the call that’s an intense focus area for us that we’re seeking to improve. So sorry to dive into your question, I don’t know the answer off the top of my head? Do you know?

Jason Bates

Yes, it’s roughly 24% that we had in the fourth – in the third quarter.

John Engstrom

Yes, that’s very helpful. And to James’ point, which I’m conscious of and didn’t want to get stuck in, obviously there’s a lot of things going on internally on the operation side, which plays into what’s being called price on the release. But could also just be an aliment of route selection. So that it really a very good point. Okay, those are all my questions. Thank you very much for the detail. That’s very helpful.

Jason Bates

Thanks John.

Operator

[Operator Instructions] Our next our next question comes from Barry Haimes with Sage Asset Management. Please go ahead.

Barry Haimes

Good morning guys. Thanks for taking the question. Just to follow-up on that last point, the 24% that repriced, I think you’ve said in the third quarter. Can you give us any metrics around that mean median range in terms of the price increases? And just following up on the 53% of the business to bid between now and June, if we were to say sort of percent of your capacity kind of price for 2018 versus percent that still needs to get rebid and any flavor on that. And then I just had one more follow-up. Thanks.

James Reed

So in terms of how much the increase was – here’s what we’ve said in past quarters than it was true in this quarter as well. We’ve kind of been in the 3% to 5% range on average in what we’ve repriced through the bid process. That kind of addresses your first question. As you look forward, it’s interesting we’ve heard all kinds of irrational stuff in the marketplace, but we kind of – we take our better word and we forward tested against the volume in the mix and there’s a little bit of a guess right, because it’s not really yours until you move the freight. But we anticipate that being kind of in the 5% range going forward. So that’s kind of how the 53% that’s where I that to bottom line where we expect it.

And then your final question was the percentage of the capacity it’s priced in through 2018. I would just tell you that, if you think about that 53% that step that then will ultimately go into play in the second half of the year. So I guess if we’re going to be super analytical about I say is about 50-50 half of what we’ve got for next year, is kind of call it on the book, not in terms of it’s a pipeline or anything, but it’s been right through a bid process, and we feel really good about that. And then the remainder of it as I just said, I think it’s about 5% increase is what we’re expecting and that is what is the other half of the book. Jason, you want to answer that?

Jason Bates

Yes, T the only thing I would add to that is, that what James is addressing specifically is the rate action associated with going to customers through the bid process. But I don’t want do site very of the work that Rick came in Werner Hugo in the teams are doing as it relates to mix and freight selection as we’re densifying the network. And that there will be – we anticipate and it hard to quantify because, there’s so many moving pieces, but a lot of the work that we’ve done to realize that 7.6% rate increase you saw this quarter was not a direct result of price action with customers as much as it was being smarter and more disciplined about the freight that we’re hauling in the mix component. So there will be a mix component as well, I just don’t want that to be lost.

Barry Haimes

Right. And just final question is, is it your guys intention to run pretty much to 100% contract or do you have a strategy to keep some capacity for the spot market? Thanks.

James Reed

Great. So there’s a couple ways answer that. On the truckload side, we run call at less than 5% of our business in the spot market. We really on our contract work and Jason used the word that we used in the scripts, the densification of our network to drive our profitably long term. One of the things we’re really focused on is giving consistent somewhat predictable returns overtime and we’ve been talking a lot about this topic, and if the – the pigs get fat and hogs get slaughtered, we’re trying to be extremely disciplined about that. The other side of this that we’ve most been talking about truckload is in the logistics business, and in the logistics business we have had some exposure just by the nature of the business in a good way to upside the comps are playing in the spot market.

And Jim in particular got together with what we called customer load board desk which is a desk that just looked at kind of missed opportunities in the marketplace, and they’ve been inherently a spot type operation. And I think it still less than 20% of our business, but that’s kind of the mix in our business. So less than 5% on the trucking side and thought 20% on the logistics side, you grew that?

Jason Bates

Okay, that’s fair.

Barry Haimes

Great, thanks so much guys. Appreciated.

Jason Bates

Thanks Barry.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to James Reed for any closing remarks.

James Reed

Great. Thanks, Brandon. Thanks everybody for participating in our call, consistency in focus have been important factors in our efforts to USA Truck. And so I’ll close by saying exactly what I did last quarter. Companywide we have been consistent and steady in our focused on execution and accountability. Our team has really come together and it’s an exciting time to be here like all great teams we have appropriate tension when we disagree, but we also have long stretches of unified and committed effort that lead to improved results like we’ve discussed today. We still have a long way to go.

But I want to thank all of our employees drivers and drivers supporting roles like for their continued commitment to our shared vision has moved us further along on this continuum. We aim to be a company that makes a difference in the lives of everyone who works with that or interactive with us and that vision is only accomplished through our people.

A couple of weeks ago we had a driver show up to our all hands company meeting on announced with eight flats, he had decided on his own but he wanted to publicly recognize the fleet managers who would helped him into 13 years as a driver by presenting certificates of appreciation each of them. He called them to the podium by name, but they could be recognized by him and the company in a very public setting. I was so proud that one of our team members felt so compelled by his experience to do something like this of his own free will and choice was a sure sign to author that our culture has turned a corner. Winners recognized the contributions of those who helped them in their journey and here USA Truck we are creating a culture of winners.

Bob Powell, the trucking legend and Co-Founder of USA Truck was in our building several weeks ago, it’s the first time he’s been here in years. We’re proud of our past. We’re proud to be associated with such a man is Mr. Powell and we are increasingly proud of what this company is becoming. We have had a mantra here that we quote win together. I’d like to modify that to say we’re winning together.

Jason I will be in New York on industry conference next week you can find the details in our recent advisory announcement and we look forward to meeting with you and discussing our plan for the business at that time. Thanks again for your attendance and questions today. We’re just getting started and hope to continue to be part of this journey with us. Thank you.

Operator

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.