USA Truck announced the purchase of Davis Transfer Co., a family-owned trucking company based in Carnesville, Ga., for $53 million in cash and stock, a deal that signals the start of a more aggressive growth strategy at USA Truck by the company’s new management team.
“Davis represents a unique opportunity to add capacity, loyal customers and exceptional drivers — all of whom are committed to the continued strong performance of the business,” USA Truck CEO James Reed said.
Reed joined USA Truck in October 2016 and has led a financial turnaround for the Van Buren, Ark., truckload carrier, which had become a takeover target itself as the company’s stock price slumped in response to sinking profits.
USA Truck returned to profitability in 2017 after posting annual profits only three times in the prior nine years and has seen continued improvement in its operations this year as the market for trucking strengthened.
USA Truck ranks No. 69 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
Reed said the acquisition of Davis will help both companies.
“We believe this acquisition gives USA Truck a greater presence in the Southeast and provides three key strategic opportunities: increased alignment with driver domiciles, enhanced maintenance facility presence and financial synergies,” Reed said.
“We intend to drive improvements to the maintenance cost structure of both USA Truck and Davis by leveraging Davis’ existing terminal infrastructure, [and] we anticipate the realization of certain financial synergies, especially in the procurement area,” he added.
Davis generates annual revenue of about $50 million and maintains an operating ratio in the upper 80s. The operating ratio is calculated by dividing total operating expenses by total revenue, and it is a key measure of profitability in trucking.
Jason Bates, executive vice president and chief financial officer of USA Truck, told TT that Davis will continue to operate as an independent business, in part, because the company did not want to disturb ongoing efforts to improve operations at USA Truck.
“We’re still trying to fix ourselves,” Bates said. “We have a ways to go.”
Davis truck courtesy of USA Truck
With Davis, USA Truck will gain access to freight moving in and out of the Southeast, which will help balance loads the company already is carrying in the Northeast and Midwest, he added.
Under terms of the buyout, Todd Davis will join USA Truck as a vice president and continue to operate the business with little or no change in staff or in its terminal facilities in Georgia and Florida.
According to Bates, Davis uses a combination of company drivers and owner-operators to provide hauling services. The company also operates a brokerage division as does USA Truck. The Davis fleet consists of 180 tractors and 850 trailers, according to registration data on file with the U.S. Department of Transportation.
Todd Davis is the son of Gary Davis, who with his brother, Bill, ran the business for the past two decades. The company was founded in 1959 by Harry Davis.
“The Davis family has been a great steward of the organization, with a strong track record of success and profitability,” Reed said in a statement. “This partnership reflects the next natural step in the progression and growth of Davis.”