<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-19858
USA TRUCK, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 71-0556971
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3108 INDUSTRIAL PARK ROAD 72956
VAN BUREN, ARKANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (501) 471-2500
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of
the Registrant on February 27, 1998 was $60,098,745. (The characterization of
officers and directors of the Registrant as affiliates for purposes of this
computation should not be construed as an admission for any other purpose that
any such person is in fact an affiliate of the Registrant).
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 27, 1998
----- --------------------------------
Common Stock, par value $.01 per share 9,379,868 shares
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K into Which the
Document is Incorporated
Document ------------------------
-------- Part III
Portions of the Proxy Statement to be
sent to stockholders in connection
with 1998 Annual Meeting
<PAGE> 2
USA TRUCK, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. CAPTION PAGE
- -------- ------- ----
PART I
<S> <C> <C>
1. Business................................................................................. 1
2. Properties............................................................................... 6
3. Legal Proceedings........................................................................ 6
4. Submission of Matters to a Vote of Security Holders...................................... 6
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.................... 7
6. Selected Financial Data.................................................................. 8
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 9
8. Financial Statements and Supplementary Data.............................................. 15
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................... 29
PART III
10. Directors and Executive Officers of the Registrant....................................... 29
11. Executive Compensation................................................................... 29
12. Security Ownership of Certain Beneficial Owners and Management........................... 29
13. Certain Relationships and Related Transactions........................................... 29
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 30
Signatures............................................................................... 35
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
USA Truck, Inc. (the "Company" or "USA Truck") is engaged in the
transportation of general commodity freight in interstate and foreign commerce.
Operations are conducted primarily east of the Rocky Mountains, but the Company
holds authority to transport and does transport freight between all points in
the continental United States, other than intrastate, and between all points in
the U.S., on the one hand, and the Canadian provinces of Ontario and Quebec, on
the other. The principal types of freight transported include automotive parts
and materials, tires, paper and paper products, glass, retail store merchandise,
chemicals, aluminum and manufacturing materials and supplies. USA Truck does not
transport Class A or Class B explosives, garbage, radioactive materials or
hazardous wastes. The Company does not operate any flatbed, tanker or other
specialized trailers.
USA Truck transports freight in truckload quantities from individual
shippers to single or multiple destinations on an as-needed basis. Its business
consists primarily of medium haul shipments, more than 700 but less than 1,000
miles. For 1995, 1996 and 1997, the average length of haul for Company tractors
was 900 miles, 878 miles and 920 miles, respectively.
The Company was incorporated in 1983 as a wholly-owned subsidiary of
Arkansas Best Corporation. In December 1988, the stock of the Company was sold
to management, and the Company completed its initial public offering of Common
Stock in late March 1992.
The Company's principal offices are located at 3108 Industrial Park
Road, Van Buren, Arkansas 72956, and its telephone number is (501) 471-2500.
BUSINESS STRATEGY
USA Truck's principal competitive strength is its ability and
commitment to consistently provide superior service to shippers. Although price
is a primary concern to all shippers, many of the Company's customers are
high-volume shippers that require a flexible and dependable source of motor
carrier service tailored to specific needs, including pickup or delivery within
narrow time windows. The Company's strategy is to provide a premium service to
meet these needs and to charge compensating rates for such service. This
approach has found increasing acceptance. See "Business -- Competition".
The Company is committed to prompt freight pickup, consistent on-time
delivery and twenty-four hours a day, seven days a week dispatching. It has
taken a number of steps to meet these commitments. In particular, it (i) uses
only its own tractors and trailers, rather than owner-operators, to provide
greater flexibility and control over quality of service, better work performance
from drivers and better insurance rates; (ii) adheres to strict maintenance and
cleaning schedules to avoid breakdowns and delays; (iii) provides detailed
routing instructions for, and maintains satellite communications with, drivers
to expedite delivery; (iv) maintains trailer pools at strategic locations to
minimize the time between customer order and pickup; and (v) provides extra
trailers to high volume shippers for loading and unloading at their convenience.
USA Truck utilizes cost-efficient communications throughout its
operations. The Company has EDI (electronic data interchange) arrangements with
several of its largest customers, providing them with access through their
computer systems to current information on the status of their shipments.
Beginning in the third quarter of 1997, the Company began installing two-way,
satellite based mobile messaging and position-locating equipment in all of its
tractors. This equipment is designed to fulfill customers' heightened need for
real time transit information as well as provide the Company with an enhanced
and cost-effective method of communications between its drivers and its
operations personnel. The system permits fleet managers to contact drivers
virtually anywhere in the Company's market area. These capabilities are intended
to shorten response time to customers, as well as to allow drivers rest time
while awaiting assignment. The installation of the equipment was completed in
the fourth quarter of 1997.
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The Company has designed its own management information software
systems, which it operates on a mainframe computer that the Company acquired
during 1997. This system became operational during the second quarter of 1997,
when the Company's software was migrated to the new computer. Prior to that, the
Company was on-line with a mainframe computer through a contractual agreement
with a third party. These data processing capabilities enhance operating
efficiency by providing immediate access to detailed information concerning
equipment, cargo, customer's location, credit history, billing arrangements and
specific customer requirements. They also permit the Company to respond quickly
and accurately to customers' requests and assist in balancing equipment
availability throughout the market area. Management believes these information
software systems and computer hardware will be sufficient to support the
Company's expansion plans at least through 1999 without substantial additional
expenditures in the data processing area.
MARKETING AND SALES
The Company focuses its marketing efforts on customers with demanding
requirements and heavy shipping needs within the regions where the Company
operates. This permits the Company to concentrate available equipment in its
primary service area, enabling it to be more responsive to customer needs. USA
Truck's Marketing and Operations Departments have primary responsibility for
developing and implementing the Company's marketing strategy and retaining
customer accounts.
The Marketing Department solicits and responds to customer orders and
maintains close customer contact regarding service requirements and rates. A
high percentage of the Company's business is from repeat customers. For the year
ended December 31, 1997, at least 95% of USA Truck's operating revenues was
derived from customers that were customers of the Company prior to 1997.
USA Truck establishes rates through individual negotiations with
customers and through contracts tailored to the specific needs of shippers.
For the year ended December 31, 1997, the Company's ten largest
customers accounted for 44.3% of revenues and its three largest customers
accounted for 25.8% of revenues, with more than 1,050 other customers accounting
for the balance. One customer, Wal-Mart Stores, Inc., accounted for 12.6% of
revenues for the year.
No other customer accounted for more than 10% of revenues.
Customers are generally required to have credit approval before
dispatch. The Company bills customers at or shortly after pickup, and for the
last three years receivables collection has averaged approximately 31 days from
the billing date.
OPERATIONS
The Operations Department consists of two divisions: the Load
Coordinator Group and the Fleet Manager Group.
Load coordinators are responsible for efficiently matching available
equipment with customer needs, and they serve as the contact with customers'
receiving and shipping personnel. Load coordinators also have primary
responsibility for minimizing empty miles, and they work closely with the
Marketing Department to increase equipment utilization.
The average distance between loads as a percentage of total miles
(empty mile factor) is a standard measurement in the truckload industry. The
empty mile factor generally decreases as average length of haul and density of
trucks in an area increase. The Company's commitment to on-time pickup often
requires a tractor to travel farther to complete a pickup than it would have to
travel if the Company delayed the pickup until a tractor became available in the
area. USA Truck's empty mile factor was 10.05% for the year ended December 31,
1997.
Fleet managers supervise fleets of approximately 48 drivers each and
serve as the drivers' primary contacts with the Company. Fleet managers monitor
the location of equipment and direct its movement in the most efficient and safe
manner practicable.
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DRIVERS AND OTHER PERSONNEL
Driver recruitment and retention continue to be difficult. Recruitment
is difficult because Company standards are high and because of declining
enrollment in driving schools. Retention is difficult because of wage and job
fulfillment considerations. Driver turnover, especially in the early months of
employment, is a significant problem, and the competition for qualified drivers
is intense. Although USA Truck has experienced difficulty with driver turnover,
it has been able to attract and retain qualified drivers sufficient to support
its operations. To attract and retain drivers, the Company must continue to
provide safe, attractive and comfortable equipment, direct access to management,
and competitive wages, benefits and financial incentives designed to encourage
longer term employment.
Drivers' pay is calculated on the basis of miles driven and increases
with tenure. In 1997, drivers averaged 502 miles per work day. Drivers are also
paid bonuses based on productivity and tenure. For 1997, the Company's drivers
earned bonuses totaling approximately $1,203,000. During 1997, the Company's
drivers earned wages and bonuses averaging $.29 per mile.
At December 31, 1997, USA Truck employed 1,304 persons, of which 962
were drivers, none of whom was represented by a collective bargaining unit. In
the opinion of management, the Company's relationship with its employees is
satisfactory.
SAFETY
USA Truck's safety program is designed to create an accident-free
working environment and to enforce governmental safety regulations. The Company
controls the maximum speed of its tractors with electronic governing equipment,
and all its tractors are equipped with anti-lock braking systems. The Company
has received a number of awards based on its safety record, including the 1996
Fleet Safety Award for large carriers, awarded by the Truckload Carriers
Association.
Safety records are one of several hiring criteria used by USA Truck,
and safe equipment handling techniques are an important part of new driver
training. The Company also conducts pre-employment, random and post-accident
drug testing in accordance with Department of Transportation ("DOT")
regulations.
REVENUE EQUIPMENT AND MAINTENANCE
The Company's current policy is to replace most tractors within 42
months from the date of purchase, which permits the Company to maintain
substantial warranty coverage throughout the period of ownership. USA Truck
replaces its tractors and trailers based on various factors, including the used
equipment market, prevailing interest rates, technological improvements, fuel
efficiency and durability. The following table shows the number of units and age
of revenue equipment operated by the Company at December 31, 1997:
<TABLE>
<CAPTION>
TRACTORS TRAILERS
------------------------- -------------------------
AVERAGE AVERAGE
MODEL MONTHS MONTHS
YEAR NUMBER IN SERVICE NUMBER IN SERVICE
----- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
1998 306 4 390 4
1997 284 12 285 13
1996 124 25 236 24
1995 234 35 264 35
1994 59 43 307 47
1993 -- -- 232 60
1992 -- -- 115 68
1991 -- -- 99 82
------ ---- ----- ------
Total 1,007 19 1,928 33
====== ==== ===== ======
</TABLE>
At December 31, 1997, USA Truck operated 1,007 conventional sleeper
tractors and 1,928 van trailers. To simplify driver and mechanic training,
control the cost of spare parts and tire inventory and provide for a more
efficient vehicle maintenance program, the Company buys tractors and trailers
manufactured to its specifications. In
3
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deciding which equipment to buy, it considers a number of factors, including
safety, economy, resale value and driver comfort. All of the Company's tractors
are equipped with Detroit Diesel Series 60 engines, air-ride suspension and
anti-lock brakes. The Company's equipment is maintained through a strict
preventive maintenance program designed to minimize equipment downtime and to
enhance trade-in value.
Beginning with the November 1995 trailer purchases, the Company began
converting its trailer fleet from 48-foot long and 102 inches wide trailers to
53-foot long and 102 inches wide trailers. Because of this conversion process,
the Company's trailer to tractor ratio was 1.9-to-1 at December 31, 1997 and
will probably increase until the conversion process is substantially completed,
before returning to its historical 1.7-to-1 ratio. Management believes the
1.7-to-1 ratio is ideal for the Company's operations, in that it promotes
efficiency and provides the flexibility needed to serve customer needs. As of
December 31, 1997, 811 of the 1,928 trailers in the Company's trailer fleet were
53-foot models. All future purchases of trailers will be 53-foot models. The
Company is undertaking this conversion in order to meet its customers'
requirements and to continue to provide an efficient balance between trailer
capacity and weight and length limitations in the various states and Canada.
During 1997 the Company financed revenue equipment through its
collateralized, $28.5 million revolving credit agreement (the "General Line of
Credit" or "Line of Credit"), through conventional financing and lease-purchase
arrangements. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources". All of
its revenue equipment is pledged to secure its obligations under such financing
arrangements.
REVENUE EQUIPMENT ACQUISITION PROGRAM
During 1998 and 1999, the Company plans to acquire 460 and 336 new
tractors and 210 and 500 new trailers, respectively. This will result in net
increases of 172 and 177 tractors and 111 and 266 trailers, respectively. As of
February 27, 1998, contracts had been executed for the acquisition of all 460
tractors and 210 trailers to be acquired in 1998 and 336 tractors to be acquired
in 1999. Although these contracts fix the price at which the Company may acquire
this equipment, the Company has the right in its discretion to decrease or
increase the number of tractors or trailers to be purchased during the year at
agreed prices. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources".
During 1997, the Company acquired 416 new tractors (a net increase of
146) and 505 new trailers (a net increase of 419). The Company purchased more
new tractors and trailers in 1997 than anticipated, in response to current
economic conditions and strong demand in the truckload industry.
INSURANCE
The primary risk areas in the motor carrier industry are cargo loss and damage,
personal injury, property damage and workers' compensation claims. Management
believes that its insurance coverages are sufficient in each of these areas. It
is qualified as a workers' compensation self-insurer in the States of Arkansas
and Louisiana. The workers' compensation self-insurance is secured by $300,000
in certificates of deposit. In June 1993, the Company received authority to
self-insure for cargo loss and damage claims and up to $1.0 million per
occurrence for bodily injury and property damage ("BIPD") claims. These
self-insurance arrangements are secured by $1.01 million in letters of credit
with the Federal Highway Administration. During 1997, the self-insurance
retention levels were $1.0 million for BIPD and $500,000 for workers'
compensation claims per occurrence. The Company has insurance coverage for cargo
loss and damage claims exceeding $100,000 per occurrence and coverage for
physical damage to its tractors and trailers with a self insurance level of
$10,000 per occurrence. The Company has excess general liability coverage in
amounts substantially exceeding minimum legal requirements and believed to be
sufficient to protect the Company against material loss.
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FUEL AVAILABILITY AND COST
The motor carrier industry is dependent upon the availability of diesel
fuel, and fuel shortages or increases in fuel taxes or fuel costs have adversely
affected, and may in the future adversely affect the profitability of USA Truck.
Fuel prices have fluctuated widely and fuel taxes have generally increased in
recent years. The Company has not experienced difficulty in maintaining
necessary fuel supplies, and in the past the Company generally has been able to
recover increases in fuel costs and fuel taxes from customers through increased
freight rates, though it was not able to fully offset certain significant
increases in fuel costs during 1995 and 1996. There can be no assurance that the
Company will be able to recover any future increases in fuel costs and fuel
taxes through increased rates.
COMPETITION
The trucking industry is highly competitive. It is characterized by
ease of entry and by many small carriers having revenues of less than $1 million
per year, with relatively few carriers being able to achieve revenues exceeding
$100 million per year. The principal means of competition in the truckload
segment of the industry are service and price, with rate discounting being
particularly intense during economic downturns. Although the Company competes
primarily on the basis of service rather than rates, rate discounting continues
to be a factor in obtaining and retaining business. Although the number of firms
competing in the truckload segment has increased dramatically since industry
deregulation in 1980, the industry appears to be undergoing a consolidation
phase. Furthermore, a depressed economy tends to increase both price and service
competition from alternative modes such as less-than-truckload carriers and
railroads. Management believes that further growth in the truckload segment of
the industry is likely to be achieved through a shift in market shares among
competitors rather than through an increase in the size of the market.
USA Truck competes primarily with other truckload carriers and
shipper-owned fleets and, to a lesser extent, with railroads and
less-than-truckload carriers. A number of truckload carriers have much greater
financial resources, own more revenue equipment and carry a larger volume of
freight than does the Company.
The Company also competes with truckload and less-than-truckload
carriers for qualified drivers. See "Business -- Drivers and Other Personnel".
TRADEMARK
The Company's name and logo are registered with the United States
Patent And Trademark Office and the Canadian Trade Marks Office. The Company
believes that its trademark has significant value and is important to its
marketing efforts.
REGULATION
USA Truck is a motor carrier regulated by the DOT and other federal and
state agencies. The Company's business activities in the United States are
subject to broad federal, state and local laws and regulations beyond those
applicable to most business activities. These regulated business activities
include, among other things, service area, routes traveled, equipment
specifications, commodities transported, rates and charges, accounting systems,
financial reporting and insurance coverages. The Company's Canadian business
activities are subject to similar requirements imposed by the laws and
regulations of the Dominion of Canada and provincial laws and regulations.
Motor carrier operations are subject to safety requirements prescribed
by the DOT, governing interstate operation, and by Canadian provincial
authorities. Matters such as weight and equipment dimensions are also subject to
federal, state and provincial regulations.
The Company is subject to federal, state, provincial and local
environmental laws and regulations. Management believes that the Company is in
substantial compliance with such laws and regulations and that costs of such
compliance will not have a material adverse effect on its competitive position,
operations or financial condition or require a material increase in currently
anticipated capital expenditures.
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ITEM 2. PROPERTIES
The Company owns its headquarters in Van Buren, Arkansas, located on 63
acres, of which 23 acres were acquired in 1997. This site has approximately
84,000-square feet of office, training and driver housing space within two
structures, a 12,000-square foot maintenance facility and a 2,500-square foot
dock. In the second quarter of 1997, the Company completed construction of a new
57,000-square foot corporate headquarters next to its existing headquarters
facility in Van Buren, Arkansas. The previously existing 27,000-square foot
facility will be refurbished over the next several years to house additional
training, maintenance and support services. This facility also contains
above-ground fuel tanks with a capacity of 40,000 gallons.
The Company operates a maintenance and driver facility in West Memphis,
Arkansas, situated on roughly 16 acres with 13 acres of paved tractor and
trailer parking behind fence, a 10,000-square foot shop, a four-lane drive
through fueling station containing above ground fuel tanks with a capacity of
37,000 gallons and drivers' sleeping quarters that can house 36 drivers. The
drivers' quarters also include a recruiting office and driver training center
for new drivers. The Company owns 13 of the 16 acres and leases the remainder
under a long-term lease agreement with an initial term ending in November 2044.
Located at the intersection of I-40 and I-55, this facility is an ideal location
for these activities.
In August 1995, the Company began operating its maintenance and driver
facility in Shreveport, Louisiana, with 15 acres of paved tractor and trailer
parking behind fence, a 12,000-square foot shop, a two-lane drive through
fueling station containing above ground fuel tanks with a capacity of 37,000
gallons and a drivers' sleeping quarters that can house 32 drivers. The drivers'
quarters also include a recruiting office and driver training center for new
drivers. The facility is located on 20 acres of land owned by the Company near
I-20 on US Hwy. 80 and is strategically located near several major customers in
the area.
In June 1996 the Company began operating its maintenance and driver
facility in Vandalia, Ohio, with 4 acres of paved tractor and trailer parking
behind fence, a 2,400-square foot shop, a one-lane drive through fueling station
containing a below ground fuel tank with a capacity of 10,000 gallons and a
drivers' sleeping quarters that can house 22 drivers. The drivers' quarters also
include a sales office. The facility is located on approximately 5 acres of land
owned by the Company near I-75 & US Hwy. 40 and is strategically located for
these activities.
The Company leases, on a month-to-month basis, parking and office
facilities in East Peoria and Blue Island, Illinois.
Management believes that its facilities will be sufficient for its
operations at least through 1998.
See "Item 1. Business -- Revenue Equipment and Maintenance" and "Item
1. Business -- Revenue Equipment Acquisition Program" for information regarding
the Company's revenue equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its
business, primarily involving claims for personal injury and property damage
incurred in the transportation of freight. It maintains insurance covering
liabilities resulting from personal injury and property damage claims.
Management believes that adverse results in one or more of these cases would not
have a material adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders
during the fourth quarter of the fiscal year covered by this Annual Report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol: USAK. The following table sets forth the high and low closing sales
prices for the Company's Common Stock as reported by The Nasdaq Stock Market for
1997 and 1996.
<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- --------- ------
<S> <C> <C>
First Quarter.............................................. $ 9.00 7.75
Second Quarter............................................. $ 11.63 9.00
Third Quarter.............................................. $ 12.50 10.75
Fourth Quarter............................................. $ 13.88 11.38
1996 HIGH LOW
- ---- --------- ------
First Quarter ............................................. $ 13.50 10.75
Second Quarter............................................. $ 13.25 10.50
Third Quarter.............................................. $ 10.88 8.75
Fourth Quarter............................................. $ 9.50 8.00
</TABLE>
As of February 27, 1998, there were 315 holders of record (including
brokerage firms and other nominees) of the Company's Common Stock. The Company
estimates that there were approximately 2,175 beneficial owners of the Common
Stock as of that date.
The Company has never paid a cash dividend on its Common Stock. It is
the current intention of the Company's Board of Directors to continue to retain
earnings to finance the growth of the Company rather than to pay cash dividends.
Any future payments of cash dividends will depend upon the financial condition,
results of operations and capital commitments of the Company as well as other
factors deemed relevant by the Board of Directors. Covenants contained in the
Company's General Line of Credit may limit the Company's ability to pay
dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods and at the dates
indicated, selected financial data of the Company. The data should be read in
conjunction with the financial statements and related notes contained in Item 8
of this Annual Report and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------
1997 1996 1995 1994 1993
-----------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues........................ $129,507 $ 108,313 $102,400 $ 92,511 $75,875
Operating expenses and costs:
Salaries, wages and employee benefits.. 53,122 45,122 42,860 38,094 31,346
Operations and maintenance............. 34,189 31,064 26,909 23,144 19,927
Operating taxes and licenses........... 2,160 1,964 1,822 1,575 1,374
Insurance and claims................... 6,773 6,422 5,146 3,632 3,061
Communications and utilities........... 1,828 1,612 1,285 980 1,012
Depreciation and amortization.......... 13,608 11,839 11,145 9,125 7,472
Other.................................. 3,659 4,038 2,794 2,075 1,661
--------------------------------------------------
115,339 102,061 91,961 78,625 65,853
--------------------------------------------------
Operating income.......................... 14,168 6,252 10,439 13,886 10,022
Other (income) expenses:
Interest expense....................... 1,380 730 799 781 709
Gain on disposal of assets............. (2) (9) (1) (118) (1)
Other, net............................. (191) (4) (152) 138 (29)
--------------------------------------------------
1,187 717 646 801 679
--------------------------------------------------
Income before income taxes................ 12,981 5,535 9,793 13,085 9,343
Income taxes.............................. 5,078 2,153 3,756 5,018 3,764
--------------------------------------------------
Net Income................................ $ 7,903 $ 3,382 $ 6,037 $ 8,067 $ 5,579
==================================================
Basic:
Net income per share (1)............... $ 0.84 $ 0.36 $ 0.62 $ 0.84 $ 0.58
==================================================
Average shares outstanding (1)......... 9,356 9,463 9,684 9,651 9,601
--------------------------------------------------
Diluted:
Net income per share (1)............... $ 0.83 $ 0.35 $ 0.60 $ 0.81 $ 0.57
==================================================
Average shares outstanding (1)......... 9,485 9,620 10,030 9,904 9,874
--------------------------------------------------
Cash dividends per share.................. -- -- -- -- --
BALANCE SHEET DATA (AT END OF YEAR):
Current assets............................ $ 20,292 $ 16,825 $ 16,008 $ 12,516 $11,371
Current liabilities....................... 20,762 15,193 13,295 10,764 8,627
Total assets.............................. 113,518 86,330 78,980 66,435 54,711
Long-term debt, less current maturities... 27,057 15,867 13,361 9,427 10,898
Stockholders' equity...................... 52,373 44,424 43,157 38,645 30,478
</TABLE>
- --------------------
(1) On December 3, 1993, the Company effected a 2 for 1 stock split in the form
of a 100% stock dividend on outstanding shares of the Company's Common Stock.
All references to share and per share data in this table have been retroactively
restated to give effect to the stock split.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items to
operating revenues for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
---------------------------
<S> <C> <C> <C>
Operating revenues ...................... 100.0% 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and employee benefits 41.0 41.7 41.9
Operations and maintenance .......... 26.4 28.7 26.3
Operating taxes and licenses ........ 1.7 1.8 1.8
Insurance and claims ................ 5.2 5.9 5.0
Communications and utilities ........ 1.4 1.5 1.2
Depreciation and amortization ....... 10.5 10.9 10.9
Other ............................... 2.9 3.7 2.7
-------------------------
89.1 94.2 89.8
-------------------------
Operating income ........................ 10.9 5.8 10.2
Other (income) expenses:
Interest expense .................... 1.1 0.7 0.8
Gain on disposal of assets .......... -- -- --
Other, net .......................... (0.2) -- (0.2)
-------------------------
0.9 0.7 0.6
-------------------------
Income before income taxes .............. 10.0 5.1 9.6
Income taxes ............................ 3.9 2.0 3.7
-------------------------
Net income .............................. 6.1% 3.1% 5.9%
=========================
</TABLE>
RESULTS OF OPERATIONS
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating revenues increased 19.6% to $129.5 million in 1997 from
$108.3 million in 1996, resulting from increased business with existing
customers and additional business from new customers. Average revenue per mile
remained unchanged at $1.11 in both 1997 and 1996. The empty mile factor
decreased to 10.05% in 1997 from 10.16% of paid miles in 1996. There was a 14.0%
increase in the number of shipments to 114,022 in 1997 from 99,979 in 1996. This
volume improvement was made possible by an increase of 16.6% in the average
number of tractors operated from 802 in 1996 to 935 in 1997. The net effect of
the volume improvement and the Company's continuing fleet expansion was an
increase of 2.8% in miles per tractor per week to 2,475 in 1997 from 2,407 in
1996.
Operating expenses and costs as a percentage of revenues improved to
89.1% in 1997 from 94.2% in 1996. This change resulted primarily from a
decrease, on a percentage of revenue basis, in salaries, wages and employee
benefits expenses, in operations and maintenance costs, in insurance and claims
expenses, in depreciation and amortization expense and in other expenses.
Salaries, wages and employee benefits decreased, relative to revenues, primarily
from favorable experience in employee health benefits. The percentage decrease,
relative to revenues, in operations and maintenance was primarily the result of
a decrease of 2.2 cents per gallon in the average cost of fuel in 1997 compared
to 1996, and of an increase in fuel efficiency to 6.29 average miles per gallon
in 1997 from 6.12 in 1996. The percentage decrease, relative to revenues, in
insurance and claims expenses was due to a decrease in the number and severity
of accidents in 1997 as compared to last year. The overall net cost of those
accidents incurred was reduced by insurance coverage for physical damage to
tractors and trailers with a self insurance level of $10,000 per occurrence,
effective January 1, 1997. The decrease in depreciation and amortization
expense, as a percentage of revenue, reflects the 2.8% increase in utilization
as mentioned above. Other expenses decreased, in both dollars and relative to
revenues, due to a variety of factors, no single one of which accounted for more
than half of the decrease.
9
<PAGE> 12
As a result of the foregoing factors, operating income increased 126.6%
to $14.2 million, or 10.9% of revenues, in 1997 from $6.3 million, or 5.8% of
revenues, in 1996.
Interest expense increased 89.0% to $1.4 million in 1997 from $730,000
in 1996, resulting primarily from an increase in borrowings to facilitate
equipment purchases, partially offset by a decrease in interest rates, in the
aggregate, on both short-term and long-term debt.
Other income, net, increased, both in dollar amount and on a percentage
of revenue basis, from $4,000 in 1996 to $191,000 in 1997. This was due to a
variety of factors, no single one of which accounted for more than half of the
increase.
As a result of the above, income before income taxes increased 134.5%
to $13.0 million, or 10.0% of revenues, in 1997 from $5.5 million, or 5.1% of
revenues, in 1996.
The Company's effective tax rate increased to 39.1% in 1997 from 38.9%
in 1996. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income increased 133.7%
to $7.9 million, or 6.1% of revenues, in 1997 from $3.4 million, or 3.1% of
revenues, in 1996, a increase of 137.1% in diluted net income per share to $.83
from $.35. The number of shares used in the calculation of diluted net income
per share for 1997 and 1996 were 9,484,570 and 9,619,919, respectively.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Operating revenues increased 5.8% to $108.3 million in 1996 from $102.4
million in 1995, resulting from increased business with existing customers and
additional business from new customers. Average revenue per mile remained
unchanged at $1.11 in both 1996 and 1995. The empty mile factor decreased to
10.16% in 1996 from 10.69% of paid miles in 1995. There was a 9.3% increase in
the number of shipments to 99,979 in 1996 from 91,460 in 1995. This volume
improvement was made possible by an increase of 4.0% in the average number of
tractors operated from 771 in 1995 to 802 in 1996. The net effect of the volume
improvement and the Company's continuing fleet expansion was an increase of 1.0%
in miles per tractor per week to 2,407 in 1996 from 2,382 in 1995.
Operating expenses and costs as a percentage of revenues increased to
94.2% in 1996 from 89.8% in 1995. This change resulted primarily from an
increase, on a percentage of revenue basis, in operations and maintenance costs,
in insurance and claims expenses, in communications and utilities and in other
expenses. These increases were partially offset by decreases, on a percentage of
revenue basis, in salaries, wages, and employee benefits. The decreases in
salaries, wages, and employee benefits were due to the fact that the increase in
aggregate driver pay was offset by a decrease in incentives earned by employees
due to a decrease in the operational and financial performance of the Company.
The percentage increase, relative to revenues, in operations and maintenance was
primarily the result of an increase of 12.1 cents per gallon in the average cost
of fuel in 1996 year compared to the prior year, partially offset by an increase
in fuel efficiency to 6.12 average miles per gallon in 1996 from 6.08 in 1995.
The percentage increase, relative to revenues, in insurance and claims expense
was due to an increase in the number and severity of accidents in 1996 as
compared to prior year. The number and severity of accidents decreased in the
second half of the year as driver retention improved from the unusually low
levels the Company experienced in the first half of 1996. Communications and
utilities increased, on a percentage of revenue basis, due to the aggregate
effect of a slight increase in service costs and the expiration of usage
incentives that were available in the telecommunications industry in 1995. Other
expenses increased, relative to revenues, due to a variety of factors, no single
one of which accounted for more than half of the increase. One such factor was
an increase of approximately $389,000 in information system programming and
processing costs.
As a result of the foregoing factors, operating income decreased 40.1%
to $6.3 million, or 5.8% of revenues, in 1996 from $10.4 million, or 10.2% of
revenues, in 1995.
Interest expense decreased 8.6% to $730,000 in 1996 from $799,000 in
1995, resulting primarily from a decrease in interest rates, in the aggregate,
on both short-term and long-term debt.
10
<PAGE> 13
Other expenses, net, remained unchanged, on a percentage of revenue
basis, between 1996 and 1995. This was due to the fact that the decrease in
interest expense was offset by the decrease in interest income and gains on
disposal of assets.
As a result of the above, income before income taxes decreased 43.5% to
$5.5 million, or 5.1% of revenues, in 1996 from $9.8 million, or 9.6% of
revenues, in 1995.
The Company's effective tax rate increased to 38.9% in 1996 from 38.4%
in 1995. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income decreased 44.0%
to $3.4 million, or 3.1% of revenues, in 1996 from $6.0 million, or 5.9% of
revenues, in 1995, a decrease of 41.7% in diluted net income per share to $.35
from $.60. The number of shares used in the calculation of diluted net income
per share for 1996 and 1995 were 9,619,919 and 10,028,478, respectively.
INFLATION
The effect of inflation on operating costs has been minimal in recent
years. Most of the Company's operating expenses are inflation sensitive, with
increases in inflation generally resulting in increased operating costs and
expenses. The effect of inflation-driven cost increases on the Company's overall
operating costs would not be expected to be greater for the Company than for its
competitors.
SEASONALITY
In the trucking industry generally, revenues decrease as customers
reduce shipments during the winter holiday season and as inclement weather
impedes operations. At the same time, operating expenses increase, due primarily
to decreased fuel efficiency and increased maintenance costs. Future revenues
could be impacted if customers reduce shipments due to temporary plant closings,
which historically have occurred during July and December.
FUEL AVAILABILITY AND COST
The motor carrier industry is dependent upon the availability of diesel
fuel, and fuel shortages or increases in fuel taxes or fuel costs have adversely
affected, and may in the future adversely affect the profitability of USA Truck.
Fuel prices have fluctuated widely and fuel taxes have generally increased in
recent years. The Company has not experienced difficulty in maintaining
necessary fuel supplies, and in the past the Company generally has been able to
recover increases in fuel costs and fuel taxes from customers through increased
freight rates, though it was not able to fully offset certain significant
increases in fuel costs during 1995 and 1996. There can be no assurance that the
Company will be able to recover any future increases in fuel costs and fuel
taxes through increased rates.
OPERATIONAL DATA
The following table sets forth certain operational information for the
last three fiscal years:
<TABLE>
<CAPTION>
---------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Total loads moved during the year......................... 114,022 99,979 91,460
Average number of tractors operated during the year....... 935 802 771
Number of tractors operated at year end................... 1,007 862 782
Number of trailers operated at year end................... 1,928 1,510 1,378
Total tractor miles during the year....................... 133,941,037 113,406,333 107,409,091
</TABLE>
11
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The continued growth of the Company's business has required significant
investments in new revenue equipment. USA Truck has financed revenue equipment
purchases with cash flows from operations and through borrowings, including
borrowings under the General Line of Credit, and capitalized lease obligations.
Working capital needs have generally been met with cash flows from operations
and occasionally with borrowings under the General Line of Credit. Although the
Company has not relied significantly on the General Line of Credit to meet
working capital requirements, it does experience cyclical cash flow needs common
to the industry. The Company uses the General Line of Credit to minimize these
fluctuations and to provide flexibility in financing revenue equipment. Cash
flows from operations were $28.3 million for 1997 and $14.9 million for 1996.
The Company's General Line of Credit provides for available borrowings
of up to $28.5 million, including letters of credit not exceeding $5.0 million.
As of December 31, 1997, approximately $16.0 million was available under the
General Line of Credit. The General Line of Credit matures on April 30, 2000,
prior to which time, subject to certain conditions, the amount outstanding can
be converted at any time, at the Company's option, to a four-year term loan
requiring 48 equal monthly principal payments plus interest. The interest rate
on the General Line of Credit (8.50% at December 31, 1997) fluctuates between
the lender's prime rate or prime plus 1/2% or LIBOR, depending upon the ratio of
the Company's debt to tangible net worth. Under the General Line of Credit, the
Company has the right to borrow at a rate related to the Eurodollar rate when
this rate is less than the lender's prime rate. A quarterly commitment fee of
1/4% per annum is payable on the unused amount. The principal maturity can be
accelerated if the borrowing base (based on percentages of receivables and
otherwise unsecured equipment) does not support the principal balance
outstanding. The General Line of Credit is collateralized by accounts receivable
and all otherwise unencumbered equipment. The Company has the option under
certain conditions and at certain rates to fix the rate and term on portions of
the outstanding balance of the General Line of Credit. See Note 4 to the
Financial Statements.
On November 19, 1997 the Company entered into a lease commitment
agreement (the "Equipment TRAC Lease Commitment"), with another financial
institution to facilitate the leasing of tractors. The Equipment TRAC Lease
Commitment has a commitment term ending on December 31, 1998 and provides for a
maximum borrowing amount of $12.6 million. Each capital lease will have a
repayment period of 42 months. Borrowings are limited based on the amounts
outstanding under capital leases entered into under this agreement. As of
December 31, 1997 $12.6 million remained available under the Equipment TRAC
Lease Commitment. The interest rate on the capital leases under the Equipment
TRAC Lease Commitment fluctuates in relation to the interest rate for
3 1/2-year Treasury Notes as published in The Wall Street Journal and is fixed
upon execution of a lease.
On November 13, 1996 the Company amended its lease commitment agreement
(the "TRAC Lease Commitment"), dated January 24, 1996, to extend the term and
increase the borrowing limit to an amount equal to the sum of the current
outstanding balance plus $10.0 million, resulting in a new lease commitment with
a maximum aggregate borrowing amount of $16.0 million. The TRAC Lease Commitment
facilitates the leasing of tractors. The commitment term ended on December 31,
1997. Each capital lease has a repayment period of 42 months. The interest rate
on the capital leases under the TRAC Lease Commitment fluctuates in relation to
the weekly average interest rate for 2-year Constant Maturity Treasury
Securities as published by the Federal Reserve and is fixed upon execution of
lease. As of December 31, 1997, capital leases in the aggregate principal amount
of $14.7 million were outstanding under the TRAC Lease Commitment.
The Company's long-term debt, excluding current portion, increased by
70.5% to $27.1 million at December 31, 1997 from $15.9 million at December 31,
1996. This increase was primarily the result of borrowings under the TRAC Lease
Commitment and the General Line of Credit for revenue equipment purchases and
the repurchase of common stock of the Company.
During the years 1998 and 1999, the Company plans to make approximately
$68.8 million in capital expenditures. At December 31, 1997, USA Truck was
committed to spend $34.7 million of this amount for revenue equipment in 1998,
and $31.5 million of this amount is currently budgeted for revenue equipment in
1999. The commitments to purchase revenue equipment are cancelable by the
Company if certain conditions are met. The balance of the expected capital
expenditures will be used for maintenance and office equipment and facility
improvements.
12
<PAGE> 15
The General Line of Credit, the Equipment TRAC Lease Commitment,
equipment leases and cash flows from operations should be adequate to fund the
Company's operations and expansion plans through the end of 1998. There can be
no assurance, however, that such sources will be sufficient to fund Company
operations and all expansion plans through such date, or that any necessary
additional financing will be available, if at all, in amounts required or on
terms satisfactory to the Company. The Company expects to continue to fund its
operations with cash flows from operations, equipment leases, the General Line
of Credit, and the Equipment TRAC Lease Commitment for the foreseeable future.
In September 1995, the Board of Directors authorized the Company to
repurchase up to 500,000 shares of its outstanding common stock, on the open
market or in privately negotiated transactions, from time to time over a period
of three years. As of February 27, 1998, the Company had purchased 440,500
shares pursuant to this authorization at an aggregate purchase price of $4.4
million, including 40,500 shares purchased in 1997 at an aggregate purchase
price of $329,000. On May 7, 1997, the Board of Directors authorized the
retirement of all shares purchased prior to May 6, 1997, which resulted in the
retirement of 185,500 shares of treasury stock that had been purchased at an
aggregate cost of $1.6 million. The Company had previously retired 254,000
shares of treasury stock on May 8, 1996. In addition, 672 of the remaining 1,000
repurchased shares have been resold under the Company's Employee Stock Purchase
Plan (the "Plan"). The Company may continue to purchase shares in the future for
purposes of the Plan, or otherwise if, in the view of management, the common
stock is undervalued relative to the Company's performance and prospects for
continued growth. Any such purchases would be funded with cash flows from
operations or the General Line of Credit.
YEAR 2000 ISSUES
The Company believes that the computer equipment and software used by
the Company will function properly with respect to dates in the Year 2000 and
thereafter. The Company has reviewed its computer systems, using both internal
and external resources, and has made and continues to make certain modifications
to address Year 2000 issues. The Company is in the process of communicating with
its significant suppliers and customers to determine the extent to which
interfaces with such entities are vulnerable to Year 2000 issues and the extent
to which any products purchased from such entities are vulnerable to Year 2000
issues. The Company presently believes that the Year 2000 issues will not
require the Company to incur any material cost or pose significant operational
problems for the Company directly or as a result of any Year 2000 issue of
suppliers or customers.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share (SFAS 128). The standard replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods in this
Annual Report have been presented, and where appropriate, restated to conform to
the SFAS 128 requirements.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No.
130). The provisions of SFAS No. 130 require companies to classify items of
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the financial statements. The
Company's comprehensive income items are not material; accordingly, the effect
of adopting this statement will not be material when it becomes effective for
fiscal 1998.
13
<PAGE> 16
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements and information that
are based on management's belief as well as assumptions made by, and information
currently available to management. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will be realized. Should one or more of
the risks or uncertainties underlying such expectations materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those expected. Among the key factors that are not within the Company's control
and that may have a direct bearing on operating results are increases in diesel
prices, adverse weather conditions or driver turnover and the impact of
increased rate competition or competition for qualified drivers. The Company's
results may also be significantly affected by fluctuations in general economic
conditions, as the Company's utilization rates are directly related to business
levels of shippers in a variety of industries. Results for any specific period
could also be affected by various unforeseen events, such as unusual levels of
equipment failure or accident claims.
14
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1997
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Auditors ......................................................................... 16
Balance Sheets as of December 31, 1997 and 1996......................................................... 17
Statements of Income for the years ended December 31, 1997, 1996 and 1995............................... 18
Statements of Stockholders' Equity for the years ended December 31, 1997, 1996 and 1995................. 19
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995........................... 20
Notes to Financial Statements........................................................................... 21
</TABLE>
15
<PAGE> 18
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
USA Truck, Inc.
We have audited the accompanying balance sheets of USA Truck, Inc. as of
December 31, 1997 and 1996, and the related statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Truck, Inc. at December 31,
1997 and 1996, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Little Rock, Arkansas
January 20, 1998
16
<PAGE> 19
USA TRUCK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 3,667,311 $ 1,486,946
Receivables (Note 4):
Trade, less allowance for doubtful accounts of
$170,250 in 1997 and $113,000 in 1996 ............ 12,613,314 10,972,451
Other .............................................. 282,407 1,766,443
Inventories .......................................... 291,691 176,759
Deferred income taxes (Note 6) ....................... 1,956,115 933,091
Prepaid expenses and other current assets (Note 2) ... 1,481,317 1,489,555
------------------------------
Total current assets .................................... 20,292,155 16,825,245
Property and equipment (Notes 4 and 5):
Land and structures .................................. 14,052,722 13,096,686
Revenue equipment ....................................... 96,571,178 79,086,248
Service, office and other equipment .................. 9,872,201 2,675,028
------------------------------
120,496,101 94,857,962
Accumulated depreciation and amortization ............ (30,314,193) (28,089,739)
------------------------------
90,181,908 66,768,223
Security deposits (Note 4) .............................. 1,745,478 1,745,478
Other assets ............................................ 1,298,629 990,901
------------------------------
Total assets ............................................ $ 113,518,170 $ 86,329,847
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Bank drafts payable .................................. $ 371,730 $ 606,371
Trade accounts payable .................................. 3,125,666 1,378,551
Accrued expenses (Note 3) ............................ 10,978,135 7,190,198
Current maturities of long-term debt (Notes 4 and 5) . 6,285,986 6,018,289
------------------------------
Total current liabilities ............................... 20,761,517 15,193,409
Long-term debt, less current maturities (Notes 4 and 5) . 27,056,954 15,867,365
Deferred income taxes (Note 6) .......................... 11,641,824 9,568,464
Insurance and claims accruals ........................... 1,684,614 1,276,614
Commitments and contingencies (Notes 4, 5 and 11)
Stockholders' equity (Notes 4 and 9):
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; none issued ............................ -- --
Common Stock, $.01 par value; 16,000,000 shares
authorized; issued 9,374,868 shares in 1997
and 9,499,636 shares in 1996 ....................... 93,749 94,996
Additional paid-in capital ........................... 12,577,336 13,837,785
Retained earnings .................................... 39,702,176 31,798,704
Less treasury stock, at cost (145,000 shares in 1996) -- (1,307,490)
------------------------------
Total stockholders' equity .............................. 52,373,261 44,423,995
------------------------------
Total liabilities and stockholders' equity .............. $ 113,518,170 $ 86,329,847
==============================
</TABLE>
See accompanying notes.
17
<PAGE> 20
USA TRUCK, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C>
Operating revenues .............................. $ 129,507,242 $ 108,312,633 $ 102,400,353
Operating expenses and costs:
Salaries, wages and employee benefits (Note 7) 53,122,136 45,122,323 42,859,567
Operations and maintenance ................... 34,188,558 31,064,185 26,908,540
Operating taxes and licenses ................. 2,160,408 1,963,888 1,822,295
Insurance and claims ......................... 6,773,001 6,422,064 5,146,409
Communications and utilities ................. 1,827,608 1,612,030 1,284,957
Depreciation and amortization ................ 13,607,835 11,839,187 11,144,969
Other ........................................ 3,658,992 4,037,196 2,794,443
-----------------------------------------------
115,338,538 102,060,873 91,961,180
-----------------------------------------------
Operating income ................................ 14,168,704 6,251,760 10,439,173
Other (income) expenses:
Interest expense ............................. 1,379,481 729,885 798,633
Gain on disposal of assets ................... (1,731) (9,770) (933)
Other, net ................................... (190,641) (3,835) (151,566)
-----------------------------------------------
1,187,109 716,280 646,134
-----------------------------------------------
Income before income taxes ...................... 12,981,595 5,535,480 9,793,039
Income taxes (Note 6):
Current ...................................... 4,027,787 1,219,993 2,518,831
Deferred ..................................... 1,050,336 933,309 1,236,800
-----------------------------------------------
5,078,123 2,153,302 3,755,631
-----------------------------------------------
Net income ...................................... $ 7,903,472 $ 3,382,178 $ 6,037,408
===============================================
Net income per share (Notes 8 and 9):
Basic earnings per share ..................... $ .84 $ .36 $ .62
===============================================
Diluted earnings per share ................... $ .83 $ .35 $ .60
===============================================
</TABLE>
See accompanying notes.
18
<PAGE> 21
USA TRUCK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995 ........ $ 96,904 $ 16,168,854 $ 22,379,118 $ -- $ 38,644,876
Exercise of stock options
(Note 9) .................... 243 151,507 -- -- 151,750
Purchases of 152,000 shares of
Common Stock into treasury .. -- -- -- (1,677,313) (1,677,313)
Net income for 1995 ........... -- -- 6,037,408 -- 6,037,408
---------------------------------------------------------------------------
Balance at December 31, 1995 ...... 97,147 16,320,361 28,416,526 (1,677,313) 43,156,721
Exercise of stock options, net
(Note 9) .................... 389 271,725 -- -- 272,114
Tax benefit of stock options
(Note 6) .................... -- 35,856 -- -- 35,856
Purchases of 247,000 shares of
Common Stock into treasury .. -- -- -- (2,422,874) (2,422,874)
Retirement of 254,000 shares of
treasury stock .............. (2,540) (2,790,157) -- 2,792,697 --
Net income for 1996 ........... -- -- 3,382,178 -- 3,382,178
---------------------------------------------------------------------------
Balance at December 31, 1996 ...... 94,996 13,837,785 31,798,704 (1,307,490) 44,423,995
Exercise of stock options, net
(Note 9) .................... 608 374,439 -- -- 375,047
Purchases of 40,500 shares of
Common Stock into treasury .. -- -- -- (329,253) (329,253)
Retirement of 185,500 shares of
treasury stock .............. (1,855) (1,634,888) -- 1,636,743 --
Net income for 1997 ........... -- -- 7,903,472 -- 7,903,472
---------------------------------------------------------------------------
Balance at December 31, 1997 ...... $ 93,749 $ 12,577,336 $ 39,702,176 $ -- $ 52,373,261
===========================================================================
</TABLE>
See accompanying notes.
19
<PAGE> 22
USA TRUCK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1997 1996 1995
--------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ........................................... $ 7,903,472 $ 3,382,178 $ 6,037,408
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................... 13,607,835 11,839,187 11,144,969
Provision for doubtful accounts ................. 30,000 148,713 12,572
Deferred income taxes ................................ 1,050,336 933,309 1,236,800
Gain on disposal of assets ...................... (1,731) (9,770) (933)
Gain on sale of investments ..................... -- -- (39,441)
Changes in operating assets and liabilities:
Receivables ................................... (186,827) (964,109) (2,309,946)
Inventories, prepaid expenses and other
current assets .............................. (106,694) 11,043 (247,920)
Bank drafts payable, trade accounts payable and
accrued expenses ............................ 5,568,536 (1,031,939) 1,971,130
Insurance and claims accruals - long-term ..... 408,000 562,077 114,537
--------------------------------------------
Net cash provided by operating activities ............ 28,272,927 14,870,689 17,919,176
INVESTING ACTIVITIES
Purchases of property and equipment .................. (32,777,855) (16,996,876) (18,656,581)
Purchases of investments ............................. -- -- (2,397,997)
Proceeds from sale of equipment ...................... 8,174,217 4,894,329 4,480,733
Proceeds from sale of investments .................... -- -- 2,437,438
Increase in other assets ............................. (307,728) (117,777) (168,683)
--------------------------------------------
Net cash used by investing activities ................ (24,911,366) (12,220,324) (14,305,090)
FINANCING ACTIVITIES
Borrowings under long-term debt ...................... 29,553,208 14,280,000 9,000,000
Proceeds from the exercise of stock options .......... 375,047 272,114 151,750
Payments to repurchase common stock .................. (597,379) (2,154,749) (1,677,313)
Principal payments on long-term debt ................. (23,828,208) (11,880,000) (5,750,000)
Principal payments on capitalized lease obligations .. (6,683,864) (3,337,176) (2,862,728)
Security deposits on capitalized lease obligations ... -- -- (1,745,478)
--------------------------------------------
Net cash used by financing activities ................ (1,181,196) (2,819,811) (2,883,769)
--------------------------------------------
Increase (Decrease) in cash and cash equivalents ..... 2,180,365 (169,446) 730,317
Cash and cash equivalents:
Beginning of year ................................. 1,486,946 1,656,392 926,075
--------------------------------------------
End of year ....................................... $ 3,667,311 $ 1,486,946 $ 1,656,392
============================================
</TABLE>
See accompanying notes.
20
<PAGE> 23
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
USA Truck, Inc. (the "Company"), operates as a truckload motor carrier with
operating authority to provide service throughout the continental United States
and parts of Canada and Mexico.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair value.
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations and generally does not require
collateral. The Company maintains reserves for potential credit losses. Such
losses have been within management's expectations.
One customer represented approximately 11% and 10% of net trade receivables as
of December 31, 1997 and 1996, respectively. A different customer represented
13% of revenues for the year ended December 31, 1997.
INVENTORIES
Inventories consist primarily of tires, fuel and supplies and are stated at the
lower of cost (first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line method
using the following estimated useful lives: structures - 5 to 39.5 years;
revenue equipment - 3 to 7 years; and service, office and other equipment - 3 to
20 years. Gains and losses on asset sales are reflected in the year of disposal.
Trade-in allowances in excess of book value of revenue equipment are accounted
for by adjusting the cost of assets acquired. Tires purchased with revenue
equipment are capitalized as a part of the cost of such equipment, with
replacement tires being inventoried and expensed when placed in service.
21
<PAGE> 24
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLAIMS LIABILITIES
The Company is self-insured up to certain limits for bodily injury, property
damage, workers' compensation, and cargo loss and damage claims. Provisions are
made for both the estimated liabilities for known claims as incurred and
estimates for those incurred but not reported. In 1997 the Company was
self-insured up to $1,000,000 per occurrence for bodily injury, property damage
and $500,000 for workers' compensation claims, and up to $100,000 per occurrence
for cargo loss and damage claims. These self-insurance arrangements are secured
by $1,010,000 in letters of credit.
The workers' compensation self-insurance is secured by $300,000 in certificates
of deposit maturing during 1998. The certificates of deposit are included in
other assets on the balance sheet as of December 31, 1997 and 1996.
REVENUE RECOGNITION
Revenues are recognized based on a method whereby revenue is allocated between
reporting periods based on relative transit time in each period and direct
expenses are allocated on the same basis.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets include temporary differences
relating to depreciation, capitalized leases and certain revenues and expenses.
EARNINGS PER SHARE
Basic earnings per share is computed based on the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per share
is computed by adjusting the weighted average shares outstanding by common stock
equivalents attributable to dilutive options.
COMPENSATION TO EMPLOYEES
Stock based compensation to employees is accounted for based on the intrinsic
value method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share (SFAS 128). The standard replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where appropriate, restated to conform to the SFAS 128
requirements.
22
<PAGE> 25
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income (SFAS No. 130). The
provisions of SFAS No. 130 require companies to classify items of comprehensive
income by their nature in a financial statement and display the accumulated
balance of other comprehensive income separately from retained earnings and
additional paid-in capital in the financial statements. The Company's
comprehensive income items are not material; accordingly, the effect of adopting
this statement will not be material when it becomes effective for fiscal 1998.
2. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Prepaid licenses and taxes........................................ $ 345,114 $ 432,239
Prepaid insurance................................................. 958,824 865,087
Other............................................................. 177,379 192,229
------------------------------
$ 1,481,317 $ 1,489,555
==============================
</TABLE>
3. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Salaries, wages, bonuses and employee benefits.................... $ 4,451,409 $ 3,001,152
Insurance and claims accruals..................................... 4,334,109 2,799,864
Other............................................................. 2,192,617 1,389,182
------------------------------
$ 10,978,135 $ 7,190,198
==============================
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1997 1996
------------------------------
<S> <C> <C>
Revolving credit agreement (1).................................... $ 11,375,000 $ 5,650,000
Capitalized lease obligations (2)................................. 21,967,940 16,235,654
33,342,940 21,885,654
Less current maturities........................................... (6,285,986) (6,018,289)
------------------------------
$ 27,056,954 $ 15,867,365
==============================
</TABLE>
23
<PAGE> 26
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
(1) The Company's revolving credit agreement (the "Line of Credit")
provides for available borrowings of $28,500,000, including letters of
credit not exceeding $5,000,000. The Line of Credit matures on April
30, 2000, prior to which time, subject to certain conditions, the
remaining balance may be converted at any time at the Company's option
to a term loan requiring forty-eight equal monthly principal payments
plus interest. The Company has outstanding letters of credit of
approximately $1,110,000 at December 31, 1997. The credit facility
bears variable interest (8.50% at December 31, 1997) based on the
lenders prime rate, prime plus 1/2% or LIBOR. A quarterly commitment
fee of 1/4% per annum is payable on the unused credit line. The Line of
Credit is collateralized by accounts receivable and all otherwise
unencumbered equipment.
The Line of Credit requires the Company to meet certain financial
covenants and to maintain a minimum tangible net worth of approximately
$33,500,000 at December 31, 1997. The Company was in compliance with
these covenants at December 31, 1997. The covenants would prohibit the
payment of dividends by the Company if such payment would cause the
Company to be in violation of any of the covenants. The carrying amount
reported in the balance sheet for borrowings under the Line of Credit
approximates its fair value since the interest rate is variable.
(2) The leases extend through January, 2002 and contain renewal or fixed
price purchase options. The effective interest rates on the leases
range from 3.6% to 7.9% at December 31, 1997. The lease agreements
require the Company to pay property taxes, maintenance and operating
expenses. In 1995 the Company made security deposits of $1,745,478
relating to certain of these leases.
The Company made interest payments of approximately $1,454,000, $793,000 and
$837,000 during 1997, 1996 and 1995, respectively. The Company capitalized
$86,600 and $85,800 in interest as a result of construction of its new corporate
office building during 1997 and 1996, respectively.
5. LEASES AND COMMITMENTS
Capital lease obligations of $12,416,151, $6,141,601 and $4,107,008 were
incurred during the years ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997 the future minimum payments under capitalized leases with
initial terms of one year or more were $7,207,075 for 1998, $5,829,344 for 1999,
$5,710,015 for 2000, $5,306,635 for 2001 and $13,280 in 2002. The present value
of net minimum lease payments was $21,967,940 which includes the current portion
of the capital leases of $6,285,986 and excludes amounts representing interest
of $2,085,129.
At December 31, 1997 property and equipment included capitalized leases which
had capitalized costs of $27,246,295, accumulated amortization of $6,075,925 and
a net book value of $21,170,370. At December 31, 1996 property and equipment
included capitalized leases which had capitalized costs of $22,278,560,
accumulated amortization of $6,856,908 and a net book value of $15,421,652.
Amortization of leased assets is included in depreciation and amortization
expense.
Commitments to purchase revenue equipment, which are cancelable by the Company
if certain conditions are met, aggregated approximately $36 million at December
31, 1997.
24
<PAGE> 27
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FEDERAL AND STATE INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
----------------------------
<S> <C> <C>
Noncurrent deferred tax liabilities:
Tax over book depreciation ............... $ 11,623,611 $ 9,624,818
Capitalized Leases .......................... 18,213 --
Total noncurrent deferred tax liabilities ... 11,641,824 9,624,818
Noncurrent deferred tax assets:
Capitalized leases ....................... -- (56,354)
----------------------------
Net noncurrent deferred tax liabilities ..... $ 11,641,824 $ 9,568,464
============================
Current deferred tax assets:
Revenue recognition ...................... $ (86,131) $ (85,007)
Accrued expenses not deductible until paid (2,296,296) (1,367,699)
Allowance for doubtful accounts .......... (62,450) (41,947)
----------------------------
Total current deferred tax assets ........... (2,444,877) (1,494,653)
Current deferred tax liabilities:
Prepaid expenses deductible when paid .... 488,762 561,562
----------------------------
Net current deferred tax assets ............. $ (1,956,115) $ (933,091)
============================
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1997 1996 1995
------------------------------------
<S> <C> <C> <C>
Current
Federal ............................................................................ $3,491,181 $1,009,834 $2,163,006
State .............................................................................. 536,606 210,159 355,825
------------------------------------
Total current ...................................................................... 4,027,787 1,219,993 2,518,831
Deferred
Federal ............................................................................ 862,092 830,388 1,045,583
State .............................................................................. 188,244 102,921 191,217
------------------------------------
Total deferred ..................................................................... 1,050,336 933,309 1,236,800
------------------------------------
Total income tax expense ........................................................... $5,078,123 $2,153,302 $3,755,631
====================================
</TABLE>
During 1997, 1996 and 1995, the Company made income tax payments of
approximately $3,644,000, $1,255,000, and $2,490,000, respectively.
25
<PAGE> 28
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FEDERAL AND STATE INCOME TAXES (CONTINUED)
A reconciliation between the effective income tax rate and the statutory federal
income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1997 1996 1995
-------------------------------------------
<S> <C> <C> <C>
Income tax at 34% statutory federal rate $ 4,413,742 $ 1,882,063 $ 3,329,633
Federal income tax effects of:
State income taxes .................. (246,449) (106,447) (185,994)
Nondeductible expenses .............. (3,582) 47,566 39,828
Other ............................... 189,562 17,040 25,122
-------------------------------------------
Federal income taxes ................... 4,353,273 1,840,222 3,208,589
State income taxes ..................... 724,850 313,080 547,042
-------------------------------------------
Total income tax expense ............... $ 5,078,123 $ 2,153,302 $ 3,755,631
===========================================
Effective tax rate ..................... 39.1% 38.9% 38.4%
===========================================
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company sponsors the USA Truck, Inc. Employees' Investment Plan, a tax
deferred savings plan under section 401(k) of the Internal Revenue Code, that
covers substantially all employees. Employees can contribute up to 15% of their
compensation, with the Company matching 50% of the first 4% of compensation
contributed by each employee. Company matching contributions were approximately
$558,000, $491,000 and $485,000 for 1997, 1996 and 1995, respectively.
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Numerator:
Net Income ........................... $ 7,903,472 $ 3,382,178 $ 6,037,408
Denominator:
Denominator for basic earnings per
share - weighted average shares .... 9,355,671 9,462,717 9,684,474
Effect of dilutive securities:
Employee stock options ............. 128,899 157,202 344,004
---------------------------------------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ... 9,484,570 9,619,919 10,028,478
=======================================
Basic earnings per share ................ $ .84 $ .36 $ .62
=======================================
Diluted earnings per share .............. $ .83 $ .35 $ .60
=======================================
</TABLE>
26
<PAGE> 29
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. COMMON STOCK TRANSACTIONS
The Company has a stock option plan which provides for the granting of incentive
or nonqualified options to purchase up to 800,000 shares of Common Stock to
officers and other key employees. No options may be granted under this plan for
less than the fair market value of the Common Stock at the date of the grant.
Although the exercise period is determined when options are actually granted, no
option will be exercised later than 10 years after it is granted.
The Company also has a nonqualified stock option plan for directors who are not
officers or employees of the Company, which provides for the granting of options
to purchase up to 50,000 shares of Common Stock. The exercise period for options
granted under the plan will begin three years after the date of grant and end
five years after such date, provided that an option will terminate upon the
termination of a holder's service as a director of the Company, subject to
certain grace periods if such termination of service occurs after the option has
vested.
A summary of the Company's stock option activity, and related information for
the years ended December 31, follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------------------------- ----------------------------- ---------------------------------
WEIGHTED-AVERAGE Weighted-Average Weighted-Average
OPTIONS EXERCISE PRICE Options Exercise price Options Exercise Price
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning
of year 425,320 $ 6.87 533,520 $ 6.61 676,400 $ 6.78
Granted 9,600 9.73 62,400 10.67 -- --
Exercised (63,320) 6.25 (41,400) 7.05 (24,280) 6.25
Canceled (15,200) 10.50 (129,200) 7.57 (118,600) 7.67
-----------------------------------------------------------------------------------------------
Outstanding-end of year 356,400 $ 6.90 425,320 $ 6.87 533,520 $ 6.61
===============================================================================================
Exercisable at end of year 142,200 $ 6.25 134,120 $ 6.25 102,320 $ 6.58
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$6.25 to $13.00 The weighted-average fair value of options granted during 1997
and 1996 were $4.46 and $3.86, respectively. The weighted-average remaining
contractual life of these options is 4.52 years.
In 1997, 1996 and 1995, 60,007, 38,210 and 24,280 options, respectively, were
exercised for cash. In 1997 and 1996 additional options of 3,313 and 3,190
respectively, were exercised by the exchange of 2,588 and 2,492 shares of stock
respectively, (with a market value equal to the exercise price of the options).
The exchanged shares were then canceled.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123). Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation cost for the Company's two stock option plans been
determined based on the fair value at the grant date for awards in 1997 and 1996
consistent with the provisions of SFAS 123, the Company's pro forma net income
would have been $7,852,172 and $3,346,948 and pro forma earnings per share would
have been $.83 and $.35. There were no options granted in 1995.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following weighted-average assumptions
were used for grants in 1997: dividend yield of 0%; expected volatility of
0.535%; risk-free interest rates range from 5.45% to 6.17% and expected lives
range from 3 to 5 years. The following weighted-average assumptions were used
for grants in 1996: dividend yield of 0%; expected volatility of 0.884%;
risk-free interest rates range from 5.24% to 6.65% and expected lives range from
3 to 6 years.
27
<PAGE> 30
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 1997 and 1996:
<TABLE>
<CAPTION>
1997
THREE MONTHS ENDED
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
-----------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues ........................... $30,660,109 $32,079,177 $32,890,769 $33,877,187
Operating expenses and costs ................. 28,338,729 28,576,075 28,896,813 29,526,921
-----------------------------------------------------
Operating income ............................. 2,321,380 3,503,102 3,993,956 4,350,266
Other expenses, net .......................... 223,831 352,545 226,668 384,065
-----------------------------------------------------
Income before income taxes ................... 2,097,549 3,150,557 3,767,288 3,966,201
Income taxes ................................. 815,947 1,225,567 1,465,475 1,571,134
-----------------------------------------------------
Net income ................................... $ 1,281,602 $ 1,924,990 $ 2,301,813 $ 2,395,067
=====================================================
Average shares outstanding (basic) ........... 9,338,825 9,408,270 9,358,868 9,359,216
=====================================================
Basic earnings per share ..................... $ .14 $ .20 $ .25 $ .26
=====================================================
Average shares outstanding (diluted) ......... 9,415,695 9,528,750 9,508,090 9,522,347
=====================================================
Diluted earnings per share ................... $ .14 $ .20 $ .24 $ .25
=====================================================
</TABLE>
<TABLE>
<CAPTION>
1996
Three Months Ended
-----------------------------------------------------
March 31, June 30, September 30, December 31,
-----------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues ........................... $25,914,003 $26,751,038 $27,292,778 $28,354,814
Operating expenses and costs ................. 24,443,739 25,292,272 25,326,484 26,998,378
-----------------------------------------------------
Operating income ............................. 1,470,264 1,458,766 1,966,294 1,356,436
Other expenses, net .......................... 228,906 196,589 140,550 150,235
-----------------------------------------------------
Income before income taxes ................... 1,241,358 1,262,177 1,825,744 1,206,201
Income taxes ................................. 483,110 494,031 710,214 465,947
-----------------------------------------------------
Net income ................................... $ 758,248 $ 768,146 $ 1,115,530 $ 740,254
=====================================================
shares outstanding (basic) ................... 9,496,716 9,551,331 9,456,387 9,408,930
=====================================================
Basic earnings per share ..................... $ .08 $ .08 $ .12 $ .08
=====================================================
Average shares outstanding (diluted) ......... 9,716,547 9,724,668 9,593,760 9,505,590
=====================================================
Diluted earnings per share ................... $ .08 $ .08 $ .12 $ .08
=====================================================
</TABLE>
11. LITIGATION
The Company is not a party to any pending legal proceedings which management
believes to be material to the financial condition of the Company. The Company
maintains liability insurance against risks arising out of the normal course of
its business.
29
<PAGE> 31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on
accounting and financial disclosure matters during any period covered by the
financial statements filed herein or any period subsequent thereto.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors", "Executive Officers" and
"Section 16(a) Compliance" in the Company's proxy statement for the annual
meeting of stockholders to be held on May 6, 1998, set forth certain information
with respect to the directors, nominees for election as directors and executive
officers of the Company and are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 6, 1998, sets
forth certain information with respect to the compensation of management of the
Company and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The sections entitled "Outstanding Stock and Voting Rights" and
"Election of Directors" in the Company's proxy statement for the annual meeting
of stockholders to be held on May 6, 1998, set forth certain information with
respect to the ownership of the Company's voting securities and are incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 6, 1998, sets
forth certain information with respect to relations of and transactions by
management of the Company and is incorporated herein by reference.
29
<PAGE> 32
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. Financial statements.
The following financial statements of the Company are included in Part II,
Item 8 of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Balance Sheets as of December 31, 1997 and 1996................................................. 17
Statements of Income for the years ended December 31, 1997, 1996 and 1995....................... 18
Statements of Stockholders' Equity for years ended December 31, 1997, 1996 and 1995............. 19
Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995................... 20
Notes to Financial Statements................................................................... 21
2. The following financial statement schedule of the Company is included in
Item 14(d):
Schedule II - Valuation and Qualifying Accounts................................................ 33
</TABLE>
Schedules other than the schedule listed above have been omitted since the
required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the financial statements or the notes thereto.
3. Listing of exhibits.
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
3.1 Restated and Amended Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-1, Registration No. 33-45682, filed with the
Securities and Exchange Commission on February 13, 1992 [the "Form S-1"]).
3.2 Bylaws of the Company as currently in effect (incorporated by reference
to Exhibit 3.2 to Amendment No. 1 to the Form S-1 filed with the
Securities and Exchange Commission on March 19, 1992 ["Amendment No. 1"]).
3.3 Certificate of Amendment to Certificate of Incorporation of the Company
filed March 17, 1992 (incorporated by reference to Exhibit 3.3 to
Amendment No. 1).
4.1 Specimen certificate evidencing shares of the Common Stock, $.01 par
value, of the Company (incorporated by reference to Exhibit 4.1 to the
Form S-1).
4.2 Fourth Amended and Restated Revolving Credit Agreement dated December 30,
1992, between the Company and Deposit Guaranty National Bank, as Lender
(incorporated by reference to Exhibit 4.2 to the Company's annual report
on Form 10-K for the year ended December 31, 1992).
4.3 Fourth Amended and Restated Revolving Note of the Company dated December
30, 1992, in the maximum principal amount of $12,000,000 payable to
Deposit Guaranty National Bank, executed in connection with the credit
facility filed as Exhibit 4.2 (incorporated by reference to Exhibit 4.3
to the Company's annual report on Form 10-K for the year ended December
31, 1992).
</TABLE>
30
<PAGE> 33
<TABLE>
<S> <C>
4.4 Fifth Amendment to Fourth Amended and Restated Revolving Credit Agreement
dated December 30, 1996, between the Company and Deposit Guaranty
National Bank, as Lender (incorporated by reference to Exhibit 4.5 to the
Company's annual report on Form 10-K for the year ended December 31,
1996).
4.5 * Sixth Amendment to Fourth Amended and Restated Revolving Credit Agreement
dated December 30, 1997, between the Company and Deposit Guaranty
National Bank, as Lender.
4.6 * Sixth Amendment to Fourth Amended and Restated Revolving Note of the
Company dated December 30, 1997, in the maximum principal amount of
$28,500,000 payable to Deposit Guaranty National Bank, executed in
connection with the credit facility filed as Exhibit 4.5.
4.7 TRAC Lease Commitment Agreement dated January 24, 1996, between the
Company and Fleet Credit Corporation, as Lender. (incorporated by
reference to Exhibit 4.9 to the Company's annual report on Form 10-K for
the year ended December 31, 1995).
4.8 * First Amendment to TRAC Lease Commitment Agreement dated November 13,
1996, between the Company and Fleet Credit Corporation, as Lender.
4.9 * Equipment TRAC Lease Commitment Agreement dated November 12, 1997 and
accepted November 19, 1997, between the Company and Banc One Leasing
Corporation, as Lender.
4.10 Instruments with respect to long-term debt not exceeding 10% of the total
assets of the Company have not been filed. The Company agrees to furnish a
copy of such instruments to the Securities and Exchange Commission upon
request.
10.1 Employee Stock Option Plan of the Company (incorporated by reference to
Exhibit 10.6 to the Form S-1).
10.2 Nonqualified Stock Option Plan for Nonemployee Directors of the Company
(incorporated by reference to Exhibit 10.7 to the Form S-1) terminated
in January 1997, except with respect to outstanding options.
10.3 Description of Incentive Compensation Plan for executive officers of the
Company (incorporated by reference to Exhibit 10.8 to the Form S-1).
10.4 1997 Nonqualified Stock Option Plan for Nonemployee Directors of the
Company (incorporated by reference to Exhibit 99.1 to the Company's
Registration Statement on Form S-8, Registration No. 333-20721, filed
with the Securities and Exchange Commission on January 30, 1997).
21 The Company has no subsidiaries.
23 * Consent of Ernst & Young LLP, Independent Auditors.
27.1 * 1997 Financial Data Schedule
</TABLE>
31
<PAGE> 34
27.2 * Restated 1996 Financial Data Schedule
* Filed herewith.
Management Compensatory Plans:
-Employee Stock Option Plan (Exhibit 10.1)
-Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit 10.2)
-Incentive Compensation Plan (Exhibit 10.3)
-1997 Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit 10.4)
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of the fiscal year
covered by this Annual Report.
32
<PAGE> 35
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1997
ITEM 14 (d)
FINANCIAL STATEMENT SCHEDULE
33
<PAGE> 36
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
USA TRUCK, INC.
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
------------------------------------------------------------
(1)
BALANCE AT CHARGED BALANCE
BEGINNING TO COST DEDUCTIONS END
DESCRIPTION OF PERIOD AND EXPENSES -OTHER OF PERIOD
------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts............ $ 113,000 $ 30,000 $ 27,250 (a) $ 170,250
============================================================
Year ended December 31, 1996: Deducted from asset accounts:
Allowance for doubtful accounts............ $ 104,000 $ 148,713 $ (139,713) (a) $ 113,000
============================================================
Year ended December 31, 1995: Deducted from asset accounts:
Allowance for doubtful accounts............ $ 95,500 $ 12,572 $ (4,072) (a) $ 104,000
============================================================
</TABLE>
(a) Uncollectible accounts written off, net recoveries.
34
<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
USA TRUCK, INC.
(Registrant)
By: /s/ ROBERT M. POWELL By: /s/ JERRY D. ORLER
----------------------------------- --------------------------------
Robert M. Powell Jerry D. Orler
President and Chief Executive Vice President - Finance, Chief
Officer Financial Officer and Secretary
Date: March 26, 1998 Date: March 26, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
---------- ----- ----
<S> <C> <C>
/s/ ROBERT M. POWELL President, Chief Executive Officer March 26, 1998
- ------------------------------- and Director
Robert M. Powell
/s/ JERRY D. ORLER Vice President - Finance, March 26, 1998
- ------------------------------- Chief Financial Officer, Secretary
Jerry D. Orler and Director
/s/ J.B. SPEED Director March 26, 1998
- -------------------------------
James B. Speed
/s/ GEORGE R. JACOBS Director March 26, 1998
- -------------------------------
George R. Jacobs
/s/ JIM L. HANNA Director March 26, 1998
- -------------------------------
Jim L. Hanna
/s/ ROLAND S. BOREHAM Director March 26, 1998
- -------------------------------
Roland S. Boreham, Jr.
</TABLE>
35
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
-------- ------- -------------
<S> <C>
3.1 Restated and Amended Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-1, Registration No.
33-45682, filed with the Securities and Exchange
Commission on February 13, 1992 [the "Form S-1"]).
3.2 Bylaws of the Company as currently in effect (incorporated by
reference to Exhibit 3.2 to Amendment No. 1 to the Form S-1
filed with the Securities and Exchange Commission on March 19,
1992 ["Amendment No. 1"]).
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company filed March 17, 1992 (incorporated by reference to
Exhibit 3.3 to Amendment No. 1).
4.1 Specimen certificate evidencing shares of the Common
Stock, $.01 par value, of the Company (incorporated by
reference to Exhibit 4.1 to the Form S-1).
4.2 Fourth Amended and Restated Revolving Credit Agreement
dated December 30, 1992, between the Company and Deposit
Guaranty National Bank, as Lender (incorporated by
reference to Exhibit 4.2 to the Company's annual report on
Form 10-K for the year ended December 31, 1992).
4.3 Fourth Amended and Restated Revolving Note of the Company
dated December 30, 1992, in the maximum principal amount
of $12,000,000 payable to Deposit Guaranty National Bank,
executed in connection with the credit facility filed as
Exhibit 4.2 (incorporated by reference to Exhibit 4.3 to
the Company's annual report on Form 10-K for the year
ended December 31, 1992).
4.4 Fifth Amendment to Fourth Amended and Restated Revolving
Credit Agreement dated December 30, 1996, between the
Company and Deposit Guaranty National Bank, as Lender
(incorporated by reference to Exhibit 4.5 to the Company's
annual report on Form 10-K for the year ended December 31,
1996).
4.5 * Sixth Amendment to Fourth Amended and Restated Revolving Credit
Agreement dated December 30, 1997, between the Company and
Deposit Guaranty National Bank, as Lender.
4.6 * Sixth Amendment to Fourth Amended and Restated Revolving Note of
the Company dated December 30, 1997, in the maximum principal
amount of $28,500,000 payable to Deposit Guaranty National
Bank, executed in connection with the credit facility filed as
Exhibit 4.5.
4.7 TRAC Lease Commitment Agreement dated January 24, 1996,
between the Company and Fleet Credit Corporation, as
Lender. (incorporated by reference to Exhibit 4.9 to the
Company's annual report on Form 10-K for the year ended
December 31, 1995).
</TABLE>
36
<PAGE> 39
<TABLE>
<S> <C>
4.8 * First Amendment to TRAC Lease Commitment Agreement dated
November 13, 1996, between the Company and Fleet Credit
Corporation, as Lender.
4.9 * Equipment TRAC Lease Commitment Agreement dated November 12,
1997 and accepted November 19, 1997, between the Company and
Banc One Leasing Corporation, as Lender.
4.10 Instruments with respect to long-term debt not exceeding
10% of the total assets of the Company have not been
filed. The Company agrees to furnish a copy of such
instruments to the Securities and Exchange Commission upon
request.
10.1 Employee Stock Option Plan of the Company (incorporated by
reference to Exhibit 10.6 to the Form S-1).
10.2 Nonqualified Stock Option Plan for Nonemployee Directors
of the Company (incorporated by reference to Exhibit 10.7
to the Form S-1) terminated in January 1997, except with
respect to outstanding options.
10.3 Description of Incentive Compensation Plan for executive
officers of the Company (incorporated by reference to Exhibit
10.8 to the Form S-1).
10.4 1997 Nonqualified Stock Option Plan for Nonemployee
Directors of the Company (incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement on
Form S-8, Registration No. 333-20721, filed with the
Securities and Exchange Commission on January 30, 1997).
21 The Company has no subsidiaries.
23 * Consent of Ernst & Young LLP, Independent Auditors.
27.1 * 1997 Financial Data Schedule
27.2 * Restated 1996 Financial Data Schedule
</TABLE>
- ------------------------------
* Filed herewith.
37
<PAGE> 1
Exhibit 4.5
SIXTH AMENDMENT TO FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SIXTH AMENDMENT TO FOURTH AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "Agreement") is made and entered into as of the 30th day of
December, 1997, by and between USA TRUCK, INC., a Delaware corporation (the
"Borrower"), and DEPOSIT GUARANTY NATIONAL BANK, a national banking association
(the "Lender").
WHEREAS, pursuant to that certain Fourth Amended and Restated Revolving
Credit Agreement, dated December 30, 1992, as amended July 21, 1993, December
12, 1993, December 22, 1994, and December 28, 1995, and December 30, 1996 (as
further amended, modified and supplemented from time to time, the "Credit
Agreement"), between Borrower and Lender, Borrower and Lender entered into
certain agreements regarding certain indebtedness and obligations of Borrower to
Lender;
WHEREAS, Borrower has requested, and Lender has agreed to make, certain
amendments to the Credit Agreement in accordance with the terms hereof, and
WHEREAS, Borrower and Lender desire to amend the Credit Agreement in
accordance with the terms hereof;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
1. Defined Terms. All capitalized terms used and not otherwise defined
(including, without limitation, in the language amendatory to the Credit
Agreement contained herein) shall have the respective meanings given such terms
in the Credit Agreement.
2. Amendments to Section 1 of the Credit Agreement.
A. The second paragraph of subsection 1(i) of the Credit
Agreement is hereby amended, in its entirety, to read
as follows:
"The Revolving Note shall (a) be dated the
date of the Sixth Amendment to this Credit Agreement,
(b) be payable to the order of Lender, (c) be in the
stated principal amount equal to the Revolving Loan
Commitment, (d) be payable on the Revolving Loan
Commitment Termination Date, (e) bear interest with
respect to the principal amount from time to time
outstanding at the rate per annum specified in
subsection 1(iii) hereof, and (f) be substantially in
the form of Exhibit "A" hereto, with blanks completed
in conformity herewith."
B. Subsection 1(ix) of the Credit Agreement is hereby
amended, in its entirety, to read as follows:
(ix) Revolving Loan Commitment Termination
Date. As used in the Agreement, the term "Revolving
Loan Commitment Termination Date" shall mean the
earlier of April 30, 2000 or such date as the
Revolving Loan Commitment is terminated pursuant to
subsection 1(v) hereof."
C. Subsection 1(ix) of the Credit Agreement is hereby
amended to add the following sentence at the end
thereof:
"In order to more fully secure all of the Borrower's
obligations under this Credit Agreement, the
Revolving Note, and if applicable, the Term Note,
Borrower shall
38
<PAGE> 2
execute and deliver to Lender that certain Sixth
Amendment to Security Agreement in the form attached
hereto as Exhibit "C" (the "Security Agreement Sixth
Amendment")."
3. Amendments to Section 9 of the Credit Agreement.
A. The defined term "Eurodollar Rate" is hereby amended,
in its entirety, to read as follows:
"`Eurodollar Rate' shall mean an interest
rate equal to the sum of (i) 1.0%, plus (ii) a rate
per annum determined pursuant to the following:
London Interbank Rate
100% Minus Eurodollar Reserve Percentage"
B. The defined term "Fixed Rate" is hereby amended, in
its entirety, to read as follows:
"`Fixed Rate' shall mean the interest rate
equal to the sum of (i) 1.70 plus (ii) the average
weekly yield per annum on United State Treasury
securities adjusted to having a constant maturity
equal to the applicable Interest Period (e.g., one
year or two years) for such Fixed Rate Loan reported
weekly and constructed by the United States Treasury
Department, based on actually traded marketable
United States Treasury securities, as published by
the Board of Governors of the Federal Reserve System
in Federal Reserve Statistical Release (H.15), or
otherwise by the Federal Reserve. The most recently
published Fixed Rate as of the date of each Fixed
Rate Loan shall be the applicable Fixed Rate under
the Revolving Note or the Term Note, as applicable,
for such Fixed Note Loan. If the foregoing technique
for determining the average weekly yield and the
resulting Fixed Rate is no longer available as of the
dated of a Fixed Rate Loan for computation thereof,
of the applicable Fixed Rate otherwise becomes
unascertainable, Lender in its sole discretion shall
designate as a substitute a comparable reference
rate."
C. The defined term "Loan Documents" is hereby amended
to add at the end thereof the following document in
the definition thereof:
". . . the Security Agreement Sixth
Amendment."
D. The defined term "Revolving Loan Commitment" is
hereby amended, in its entirety, to read as follows:
"`Revolving Loan Commitment' means
$28,500,000 at all times during the term of this
Agreement."
E. The defined term "Revolving Loan Commitment
Termination Date" is hereby amended, by substituting
the date "April 30, 2000" in the place and stead of
the date "April 30, 1999".
4. Representations and Warranties. In order to induce Guaranty to enter
into this Second Amendment, the Borrower represents and warrants to Guaranty as
follows:
A. All the representations and warranties contained in Section 6
of the Credit Agreement, expect to the extent they
specifically relate to an earlier date, are true and correct
on and as of the date of this Agreement and on the date of
execution of this Agreement, as fully as if made on each of
such dates; and immediately on and after the execution of this
Agreement, the Borrower shall be in compliance with all the
terms and provisions set forth in the Credit Agreement, as
amended by this Agreement, on its part to be observed or
performed and no Event of Default specified in Section 5 of
the Credit Agreement, as amended hereby, or any event that
upon notice or lapse of time or both would constitute such an
Event of Default, has occurred and is continuing.
39
<PAGE> 3
B. The execution, delivery and performance of this Agreement, The
Revolving Note and the Security Agreement Sixth Amendment (i)
have been duly authorized by all requisite corporate action,
and (ii) will not violate any provision of law, any order of
any court or other agency of government, the articles of
incorporation or bylaws of the Borrower, or any indenture,
agreement or other instrument to which the Borrower is a party
or by which the borrower or any of its properties or assets
are bound, or be in conflict with, or result in a breech of or
constitute (with due notice or lapse of time or both) a
default under, any such indenture, agreement or other
instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Borrower. Borrower shall
deliver to Lender concurrently with the execution of this
Agreement a Corporate Certificate substantially in the form of
Exhibit "G" attached hereto.
C. Except as is expressly modified and amended hereby, the Credit
Agreement shall remain in full force and effect in accordance
with its terms.
IN WITNESS WHEREOF, the Borrower and Guaranty have caused this
Agreement to be duly executed and delivered by their
authorized representatives, as of the day and year first above
written, but in each case actually on the date appearing
beneath the signature of each party hereto.
USA TRUCK, INC.
By: /s/ JERRY D. ORLER
Title: CFO & Sec.
Execution Date: 12/22/97
DEPOSIT GUARANTY NATIONAL BANK
By: /s/ STEVEN C. KROHN
Title: Senior Vice President
Execution Date: 12/24/97
40
<PAGE> 1
Exhibit 4.6
- -----------
SIXTH AMENDED AND RESTATED REVOLVING NOTE
$28,500,000 December 30, 1997
---------- -----------------
FOR VALUE RECEIVED, USA TRUCK, INC., a corporation organized and
existing under the laws of the State of Delaware ("Borrower"), hereby promises
to pay to the order of DEPOSIT GUARANTY NATIONAL BANK ("Lender") the principal
sum of TWENTY-EIGHT MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS
($28,500,000.00) or, if less, the outstanding aggregate principal amount of all
Revolving Loans (as defined in the Revolving Credit Agreement referred to below)
made by Lender to Borrower, on the Revolving Loan Commitment Termination Date
(as defined in the Revolving Credit Agreement), and to pay interest on the
unpaid principal balance of each Revolving Loan from the date of such Revolving
Loan until said principal amount is paid in full, at the times and at the rate
or rates specified in the Revolving Credit Agreement. During the term of this
Revolving Note the Borrower may borrow, repay and reborrow hereunder.
This Note shall be deemed to be a contract made under the law of the
State of Mississippi and for all purposes shall be governed by and construed in
accordance with the laws of the State of Mississippi.
Borrower expressly waives any presentment, demand, protest or notice of
any kind in connection with this Note, now or hereafter, required by applicable
law.
Borrower agrees to pay and save Lender harmless from and against
liability for payment of all expenses (including, but not limited to, attorneys'
fees and costs) arising in connection with the enforcement by Lender of its
rights under this Note.
Payments of principal and interest are to be made in immediately
available funds to, Deposit Guaranty National Bank, as Agent, at its main office
in Jackson, Mississippi, in lawful money of the United States of America.
This Note is the Revolving Note issued pursuant to that certain Fourth
Amended and Restated Revolving Credit Agreement dated as of December 30, 1992,
as amended July 21, 1993, December 13, 1993, December 22, 1994, December 28,
1995, December 30, 1996, and of even date herewith, between Borrower and Lender
(as amended, modified and restated from time to time, the "Revolving Credit
Agreement") and is entitled to the benefits and subject to the terms thereof.
This Note constitutes an amendment, extension and restatement of that certain
Fourth Amended and Restated Revolving Note from Borrower to Lender dated
December 30, 1992 in the original stated principal amount of $12,000,000. This
Note is subject to prepayment on the terms and in the manner set forth in the
Revolving Credit Agreement, and this Note may be declared due and payable prior
to its date of maturity in accordance with the terms thereof. The Revolving
Credit Agreement also provides for the making by Lender to Borrower of revolving
loan advance from time to time in an amount not to exceed the U. S. Dollar
amount above written and contains provisions for the acceleration of the
maturity hereof upon the terms and conditions therein specified. This note is
subject to conversion to a term note in accordance with the terms and provisions
of the Revolving Credit Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in the State of Mississippi are
authorized to close.
USA TRUCK, INC., a Delaware Corporation
By: /s/ JERRY D. ORLER
Title: C.F.O. & Sec.
41
<PAGE> 1
Exhibit 4.8
- -----------
Fleet Capital Leasing
Mail Stop: RI MO 284
50 Kennedy Plaza, 5th Floor
Providence, RI 02903
November 13, 1996 USA Truck, Inc.
3108 Industrial Park Road
Van Buren, AR 72956
ATTN: Jerry D. Orler, CFO
Re: TRAC Lease Commitment of Fleet Capital Corporation
Dear Mr. Orler:
We are pleased to inform you that your application for a TRAC Lease ("Lease")
with Fleet Capital Corporation has been approved under the following terms and
conditions:
LESSEE USA Truck, Inc.
LESSOR Fleet Capital Corporation
(or its designee)
50 Kennedy Plaza
Providence, RI 02903
EQUIPMENT New 1997 & 1998 Freightliner
tractors which will be titled in the
state of Illinois. Additionally,
Lessor shall have good and
marketable title to the Equipment,
free of all liens and encumbrances.
LEASE AMOUNT Not to exceed $16,000,000.00
which amount shall represent the
Acquisition Cost of the Equipment.
This amount represents a
$6,000,000.00 increase in our
original commitment (refer to
Commitment Letter dated 1/24/96) and
includes the current documented
schedule 01 for $2,047,200.00.
LOCATION OF COLLATERAL 4303 N. Main Street
East Peoria, IL 61611-1489
SECURITY DEPOSIT Lessee will have the option
of providing a refundable,
non-interest bearing Security
Deposit in the amount of forty-two
and one-half percent (42.5%) of the
Acquisition Cost. The applicable
Lease Rate Factor(s) when
consideration is given to the
Security Deposit are listed on the
attached Exhibit A.
USA Truck, Inc. -2- 13-Nov-1996
CLOSING DATE There may be more than one
Closing Date; however, the last
Closing Date shall be on or before
December 31, 1997.
TERM AND PAYMENTS The Lease will have a term of
forty-two (42) months payable in
arrears at the applicable
Lease Rate Factor(s) pursuant to
Exhibit A attached.
The Lease Rate Factor(s) is based on
an assumption that, as of each
Closing Date, the weekly average
interest rate for 2-year Constant
Maturity Treasury Securities as
published in the Federal Reserve
Statistical Release H-15 will be
5.72% ("Index Rate"). Any increase
42
<PAGE> 2
or decrease in this index prior to
funding will result in an adjustment
to the Lease Rate Factor(s).
EXPIRY If the final Closing Date has not
occurred by December 31, 1997, this
Commitment will lapse.
INSURANCE The Lessee shall procure insurance
acceptable to Lessor and Lessee.
Lessor recognizes and accepts that
Lessee is self-insured for property
damage.
END OF LEASE OPTIONS Lessee will have the following
options:
1)Purchase the Equipment for the
TRAC amount which shall be equal to
forty percent (40%) of the original
Acquisition Cost for any TRAC Lease
Schedule.
2)Lessee, on behalf of Lessor, shall
cause the Equipment to be sold to a
third party. Lessor shall also have
right, but not the obligation, to
procure bids for the Equipment. If
the net proceeds of the sale of the
Equipment are less than the TRAC
amount of 40% of the original
Acquisition Cost, then Lessee will
pay to Lessor the deficiency, as a
terminal rental adjustment, provided
that in no event shall the amount,
if any, to be paid by Lessee to
Lessor exceed 40% of the original
Acquisition Cost.
USA Truck, Inc. -3- 13-Nov-1996
TAX BENEFITS It is assumed that the Lessor will
be considered the owner of the
Equipment for state law and federal
income tax purposes, and that the
Lessor will take all Tax Benefits
(including without limitation, all
depreciation deductions) which may
be available with respect to the
Equipment.
LESSEE'S OBLIGATIONS The existing and executed Lease is a
non-cancelable net lease with all
maintenance, risk of loss,
insurance, taxes and other costs and
expenses with respect to the Lease
and Equipment borne by Lessee.
REPRESENTATIONS &
WARRANTIES Lessee warrants: (a) that all
information submitted to Lessor by
Lessee is true, correct and
complete; and (b) that, except as
otherwise specifically disclosed in
writing to Lessor, neither Lessee,
nor any officer, director or greater
than 10% owner thereof, is subject
to any pending or threatened
government, criminal, civil,
administrative, bankruptcy, tax or
other proceeding, order or judgment
which does or may constitute a lien
or encumbrance on the Equipment or
materially affect the ability of the
Lessee to perform its obligations
under the Lease; nor has any such
person ever been a debtor or
defendant in a bankruptcy or
insolvency proceeding.
TRANSACTION EXPENSES No transaction expenses will be
assessed or incurred by Lessee.
However, Lessee shall be responsible
for any and all titling and
licensing fees.
PROPOSAL FEE Lessor acknowledges receipt of a
Proposal Fee of $25,000.00 from
Lessee. The Proposal Fee will be
applied to the first rental payment
of the first Lease Schedule 01.
43
<PAGE> 3
ASSIGNMENT This Commitment Letter and the Lease
may not be assigned by Lessee
without the prior written consent of
Lessor. Lessor may, in its sole
discretion, sell all or any part of
its interest in the Lease.
CONFIDENTIALITY This Commitment is delivered to the
Lessee with the understanding that
neither it nor any of its terms and
conditions will be disclosed to any
persons or entities, except those
having a confidential
USA Truck, Inc. -4- 13-Nov-1996
relationship with the Lessee in
relation to this transaction or
where disclosure is required by law.
FINANCIAL REPORTING Lessee shall submit to Lessor (i)
within 45 days of the end of each
fiscal quarter and (ii) within 120
days of the end of the end of each
fiscal year, financial statements of
the Lessee, prepared in accordance
with Generally Accepted Accounting
Principles, it being understood that
all such information shall be held
in confidence by Lessor.
OTHER PROVISIONS This Commitment may not be altered
or amended in any way whatsoever
except in writing executed by
authorized officers of Lessor and
Lessee. At Lessor's sole option and
discretion, this Commitment may be
terminated if, prior to any Closing
Date, (i) Lessee breaches any of the
terms hereof, or (ii) there should
be a material adverse change in the
financial condition, operations, or
credit of Lessee.
If the terms hereof are acceptable, please execute and deliver to us not later
than Friday November 22, 1996, the duplicate original of this letter which is
enclosed. Otherwise, this Commitment will, at Lessor's option, expire.
Very truly yours,
Fleet Capital Corporation
By: /s/ PETER C. SALVADORE
Peter C. Salvadore
Senior Lender
AGREED AND ACCEPTED:
USA Truck, Inc.
By: /s/ JERRY D. ORLER
Title: C.F.O.
44
<PAGE> 1
Exhibit 4.9
- -----------
Banc One Leasing
Corporation
1717 Main Street 3rd Floor
Dallas TX 75201
Jerry Orler November 12, 1997
Chief Financial Officer
USA Truck, Inc. REVISED PROPOSAL
3108 Industrial Park Road
Van Buren, AR 72956
Re: TRAC Lease Commitment of Fleet Capital Corporation
Dear Jerry:
Banc One Leasing Corporation is pleased to submit the following lease proposal
for your review and consideration. Upon your approval, this proposal will
constitute Lessee's application to Lessor. This is for discussion purposes only
and the terms and provisions are subject, among other things, to approval in
accordance with Lessor's internal procedures, as well as certain additional
conditions set for in the following.
LESSOR: Banc One Leasing Corporation
LESSEE: USA Truck, Inc.
Van Buren, AR
GUARANTOR: None Anticipated
EQUIPMENT: Approximately 180 New FLD Sleepers
with Detroit Diesel, 12.7 liter
Series 60 engines. Exact quantity to
be determined on a monthly basis.
The Equipment constitutes a "motor
vehicle" within the meaning of
section 7701 (h) of the Internal
Revenue Code of 1986, as amended
(the "Code").
EQUIPMENT COST: Anticipated total cost of
$12,600,000
DELIVERY AND
ACCEPTANCE DATE: Between August 1, 1998 and December
23, 1998
COMMENCEMENT DATE: Monthly on the 15th or 30th
during the month of delivery.
Commencement dates prior to the 15th
or 30th may result in interim rents
prior to lease schedule
commencement.
INTERIM RENT: On the Lease Term Commencement
Date (if other than the 15th or 30th
of the month), Lessee will pay
Interim Rent equal to the product of
the daily equivalent of the Lease
Term Rental factor and the number of
days between the funding date to the
Lease Term Commencement Date.
LEASE TERM: 42 Months
45
<PAGE> 2
LEASE TERM RENT: Lessee would be required
to make forty-two (42) equal
consecutive monthly rents, each in
arrears, equal to the following Rent
Factors as a percentage of Equipment
Cost:
<TABLE>
<CAPTION>
MONTH OF MONTHLY COST OF
DELIVERY RATE FACTOR BORROWING
INCLUDING
40% TRAC
RESIDUAL
<S> <C> <C>
August, 1998 1.745436% 5.3076%
September, 1998 1.740356% 5.2236%
October, 1998 1.737341% 5.1737%
November, 1998 1.732566% 5.0947%
December, 1998 1.727642% 5.0131%
Example: $ 2,500,000.00 Approximate equipment cost
x .01737341 October, 1998 rate factor
-------------- Monthly payment
$ 43,433.53
</TABLE>
ADJUSTMENTS TO RENT: The current Rent Factor is based
upon the U.S. Treasury Note Index of
5.69% (April, 2001 Treasury Note)
per annum as of October 27, 1997. If
the U.S. Treasury Note Index
increased or decreases before the
funding date of a Lease Schedule,
then the applicable Rent Factor
shall be adjusted to reflect the
effect of the change in the U.S.
Treasury Note Index on the original
implicit rate associated with the
original Rent Factor. However, once
a Lease Schedule is funded, the Rent
Factor for that Lease Schedule will
remain fixed for the Lease Term.
INDEX FOR LEASE FACTOR: "U.S. Treasury Note Index" means
the yield to maturity for 3 1/2-Year
Treasuries (as defined below as
published in The Wall Street Journal
or if not published in The Wall
Street Journal, in a comparable
publication as reasonably determined
by Lessor). 3 1/2-Year Treasuries
means the U.S. Treasury Notes (not
bills or bonds) which have a
maturity month as near as possible
to the month which is 3 1/2-years
after the date the Lessor prepares
the applicable funding documents;
provided that 3 1/2-Year Treasuries
shall exclude any stripped U.S.
Treasury Notes and any U.S. Treasury
Notes which have multiple maturity
or call dates. If more than one
issue of U.S. Treasury Notes has the
applicable maturity month, then the
U.S. Treasury Note with the highest
yield to maturity shall be used to
determine the Treasury Note Index.
TERMINAL RENTAL
ADJUSTMENT CLAUSE: As permitted by Section 7701 (h)
of the Code, the lease will contain
a Terminal Rental Adjustment Clause
("TRAC") requiring the total rentals
to be adjusted upward or downward by
reference to the net proceeds
received by Lessor from the sale of
the Equipment following lease
expiration. At the end of the Lease
Term, Lessor shall retain the net
proceeds of the sale of the
vehicle(s) and shall make one of the
following "terminal rental
adjustments": (I) if the vehicle(s)
is/are sold at a net price below the
TRAC Value, then Lessee will pay
----- Lessor al of the shortfall, or
(ii) if the vehicle(s) is/are sold
at a net price above the TRAC Value,
then lessor will pay Lessee all the
----- excess provided.
TRAC VALUE: The agreed upon TRAC value for
each vehicle will be forty percent
(40%) of Equipment Cost.
46
<PAGE> 3
MASTER LEASE: USA Truck has previously executed
a Master Lease Agreement which shall
continue for these lease
transactions
RETURN OPTION: If Lessee does not purchase
the Equipment at the end of the
Lease Term, then Lessee shall return
the Equipment to Lessor at Lessee's
expense; provided that the Equipment
must be in good condition and
working order and must comply with
all terms and conditions of the
Lease.
TYPE OF LEASE: This will be a non-cancelable
net lease transaction, whereby
appraisal, documentation, insurance,
legal, maintenance, operating, and
registration costs, taxes relating
to the purchase, lease, possession
and use for Lessee's account. Lessor
and Lessee intend and agree that
Lessor is and will be the owner of
the Equipment for Federal income tax
purposes.
ASSUMED TAX BENEFITS: The above quotation(s) assume(s)
that the Equipment constitutes
3-year Modified Asset Cost Recover
System property and that the Lessor
will depreciate the Equipment.
Lessee will indemnify the Lessor if
the Assumed Tax Benefits are not
available to the Lessor.
PERSONAL PROPERTY
TAXES: Lessor will allow Lessee to be
responsible for all property tax
filings. Proof of paid personal
property taxes will be required by
Lessor.
DEPOSIT/COMMITMENT FEE: Upon acceptance of this proposal,
Lessee shall remit to Lessor a
deposit check equal to $31,500.00
(.25% of total equipment cost). If
Lessor fails to approve the proposed
transaction, the deposit will be
refunded in full to Lessee without
interest. IF LESSOR APPROVES THE
PROPOSED TRANSACTION, THE DEPOSIT
SHALL BE DEEMED EARNED AND WILL BE
APPLIED FULLY TO THE INITIAL RENTAL
PAYMENTS.
ACCEPTANCE OF
PROPOSAL: Lessee must acknowledge it
acceptance of this lease proposal by
signing and returning the enclosed
copy of this letter to Lessor,
together with the Commitment Fee, by
November 21, 1997.
PROPOSAL ONLY: This letter is not a
commitment to undertake this
specific financing. A commitment can
be issued only after full economic
review and subsequent approval by
the appropriate officers of Lessor.
Lessor reserves the right to decline
the issuance of a commitment for any
reason whatsoever. If a commitment
is issued by Lessor, it may modify
the terms of this proposal and may
add such additional requirements
(including, but not limited to,
requirements of guaranties or other
credit support, and/or special
equipment maintenance and return
conditions) as Lessor may deem
advisable. A commitment shall not be
binding on Lessor unless it is in
writing and signed by Lessor. Lessor
will have sole right of
assignability of this proposal or
any lease between Lessee and Lessor.
Please fell free to contact me if you have any questions, or would like to
discuss this proposal in greater detail. Upon receipt of the signed proposal and
the commitment fee, we will promptly begin the approval process so that we may
be in a position to finalize this transaction with you in a timely manner. Thank
you for allowing us the opportunity to be service to USA Truck!
47
<PAGE> 4
Sincerely,
BANC ONE LEASING CORPORATION
By: /s/ SHANE TAYLOR
TITLE: V.P.-Regional Sales
Officer
Accepted 11-19, 1997
USA TRUCK, INC.
By: /s/ JERRY D. ORLER
Title: C.F.O.
48
<PAGE> 1
Exhibit 23
- ----------
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-48027, 333-20721 and 333-40317) pertaining to the Employee
Stock Option Plan, the Nonqualified Stock Option Plan for Nonemployee Directors
and the Employee Stock Purchase Plan, respectively of our report dated January
20, 1998 with respect to the financial statements and schedule of USA Truck,
Inc. included in this Annual Report (Form 10-K) for the year ended December 31,
1997.
ERNST & YOUNG LLP
Little Rock, Arkansas
March 25, 1998
49
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,667,311
<SECURITIES> 0
<RECEIVABLES> 13,065,971
<ALLOWANCES> 170,250
<INVENTORY> 291,691
<CURRENT-ASSETS> 20,292,155
<PP&E> 120,496,101
<DEPRECIATION> 30,314,193
<TOTAL-ASSETS> 113,518,170
<CURRENT-LIABILITIES> 20,761,517
<BONDS> 0
0
0
<COMMON> 93,749
<OTHER-SE> 52,279,512
<TOTAL-LIABILITY-AND-EQUITY> 113,518,170
<SALES> 129,507,242
<TOTAL-REVENUES> 129,507,242
<CGS> 0
<TOTAL-COSTS> 115,338,538
<OTHER-EXPENSES> (192,372)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,379,481
<INCOME-PRETAX> 12,981,595
<INCOME-TAX> 5,078,123
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,903,472
<EPS-PRIMARY> .84
<EPS-DILUTED> .83
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,486,946
<SECURITIES> 0
<RECEIVABLES> 12,851,894
<ALLOWANCES> 113,000
<INVENTORY> 176,759
<CURRENT-ASSETS> 16,825,245
<PP&E> 94,857,962
<DEPRECIATION> 28,089,739
<TOTAL-ASSETS> 86,329,847
<CURRENT-LIABILITIES> 15,193,409
<BONDS> 0
0
0
<COMMON> 94,996
<OTHER-SE> 44,328,999
<TOTAL-LIABILITY-AND-EQUITY> 86,329,847
<SALES> 108,312,633
<TOTAL-REVENUES> 108,312,633
<CGS> 0
<TOTAL-COSTS> 102,060,873
<OTHER-EXPENSES> (13,605)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 729,885
<INCOME-PRETAX> 5,535,480
<INCOME-TAX> 2,153,302
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,382,178
<EPS-PRIMARY> .36
<EPS-DILUTED> .35
</TABLE>
