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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission file number 0-19858
USA TRUCK, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 71-0556971
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3108 INDUSTRIAL PARK ROAD
VAN BUREN, ARKANSAS 72956
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(Address of principal executive offices) (Zip Code)
(501) 471-2500
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Registrant's telephone number, including area code
Not applicable
- --------------------------------------------------------------------------------
Former name, address and former fiscal year, if changed since last report.
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
9,420,201 shares of common stock, $.01 par value, were outstanding on
October 26, 1998.
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INDEX
USA TRUCK, INC.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements (unaudited) Page
----
<S> <C> <C>
Condensed Balance Sheets -- September 30, 1998 and December 31, 1997 3
Condensed Statements of Income and Comprehensive Income -- Three
months and nine months ended September 30, 1998 and 1997 4
Condensed Statements of Cash Flows -- Nine months ended September 30,
1998 and 1997 5
Notes to Condensed Financial Statements -- September 30, 1998 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 16
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,340,261 $ 3,667,311
Accounts receivable:
Trade, less allowance for doubtful accounts
(1998 - $ 134,999; 1997 - $ 170,250) 14,458,593 12,613,314
Other 993,774 282,407
Inventories 262,292 291,691
Deferred income taxes 1,792,292 1,956,115
Prepaid expenses and other current assets 1,711,135 1,481,317
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Total current assets 20,558,347 20,292,155
PROPERTY AND EQUIPMENT 127,113,115 120,496,101
ACCUMULATED DEPRECIATION AND AMORTIZATION (33,987,217) (30,314,193)
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93,125,898 90,181,908
SECURITY DEPOSITS 1,745,478 1,745,478
OTHER ASSETS 1,298,629 1,298,629
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Total assets $ 116,728,352 $ 113,518,170
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 359,381 $ 371,730
Trade accounts payable 2,107,066 3,125,666
Accrued expenses 13,001,453 10,978,135
Current maturities of long-term debt 5,422,334 6,285,986
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Total current liabilities 20,890,234 20,761,517
LONG-TERM DEBT, LESS CURRENT MATURITIES 19,563,539 27,056,954
DEFERRED INCOME TAXES 13,716,185 11,641,824
LONG-TERM INSURANCE AND CLAIMS ACCRUALS 1,990,614 1,684,614
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 1,000,000 shares
authorized; none issued -- --
Common stock, par value $.01 per share; 16,000,000 shares
authorized; issued shares (1998 - 9,421,201; 1997 - 9,374,868) 94,212 93,749
Additional paid-in capital 12,863,625 12,577,336
Retained earnings 47,659,977 39,702,176
Less treasury stock, at cost (1998 - 4,648; 1997 - 0) shares (50,034) --
------------- -------------
Total stockholders' equity 60,567,780 52,373,261
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Total liabilities and stockholders' equity $ 116,728,352 $ 113,518,170
============= =============
</TABLE>
NOTE: The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. See notes to condensed financial statements.
See notes to condensed financial statements.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
OPERATING REVENUES $ 36,266,931 $ 32,890,769 $ 108,877,380 $ 95,630,055
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 15,067,522 13,336,040 45,791,659 39,739,515
Operations and maintenance 8,389,124 8,441,197 25,399,416 25,733,004
Operating taxes and licenses 633,155 531,209 1,928,211 1,618,719
Insurance and claims 1,646,942 1,660,428 5,135,251 4,698,708
Communications and utilities 396,216 480,521 1,032,317 1,363,947
Depreciation and amortization 4,124,730 3,562,933 12,129,781 9,960,940
Other 955,532 884,485 2,999,304 2,696,783
------------- ------------- ------------- -------------
31,213,221 28,896,813 94,415,939 85,811,616
------------- ------------- ------------- -------------
OPERATING INCOME 5,053,710 3,993,956 14,461,441 9,818,439
OTHER (INCOME) EXPENSE:
Interest expense 439,572 420,554 1,387,552 958,765
(Gain) or loss on disposal of assets (43,598) (1,231) (37,088) (1,731)
Other, net 39,067 (192,655) 86,751 (153,990)
------------- ------------- ------------- -------------
435,041 226,668 1,437,215 803,044
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 4,618,669 3,767,288 13,024,226 9,015,395
INCOME TAXES 1,796,662 1,465,475 5,066,424 3,506,989
------------- ------------- ------------- -------------
NET INCOME AND
COMPREHENSIVE INCOME $ 2,822,007 $ 2,301,813 $ 7,957,802 $ 5,508,406
============= ============= ============= =============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,417,520 9,358,868 9,407,007 9,368,654
============= ============= ============= =============
Basic net income per share $ 0.30 $ 0.25 $ 0.85 $ 0.59
============= ============= ============= =============
Average shares outstanding (Diluted) 9,512,954 9,508,090 9,490,087 9,484,178
============= ============= ============= =============
Diluted net income per share $ 0.30 $ 0.24 $ 0.84 $ 0.58
============= ============= ============= =============
</TABLE>
See notes to condensed financial statements.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
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1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,957,802 $ 5,508,406
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 12,129,781 9,960,940
Provision for doubtful accounts 22,500 22,500
Deferred income taxes 2,238,184 192,299
Gain on sale of assets (37,088) (1,731)
Changes in operating assets and liabilities:
Receivables (2,579,146) (1,100,923)
Inventories and prepaid expenses (200,419) 75,592
Bank drafts payable, accounts payable and accrued expenses 1,079,612 7,642,571
Insurance and claims accruals 306,000 306,000
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Net cash provided by operating activities 20,917,226 22,605,654
INVESTING ACTIVITIES:
Purchases of property and equipment (19,789,795) (28,589,242)
Purchases of investments 0 (217,956)
Proceeds from sale of assets 5,574,321 6,363,917
Increase in other assets 0 5,775
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Net cash used by investing activities (14,215,474) (22,437,506)
FINANCING ACTIVITIES:
Borrowings under long-term debt 11,425,000 25,053,208
Proceeds from the exercise of stock options 286,754 275,046
Payments to repurchase common stock (123,772) (597,378)
Principal payments on long-term debt (15,300,000) (19,063,208)
Principal payments on capitalized lease obligations (5,316,784) (5,656,551)
------------ ------------
Net cash (used) provided by financing activities (9,028,802) 11,117
------------ ------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,327,050) 179,265
Cash and cash equivalents at beginning of period 3,667,311 1,486,946
------------ ------------
Cash and cash equivalents at end of period $ 1,340,261 $ 1,666,211
============ ============
</TABLE>
See notes to condensed financial statements.
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USA TRUCK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended September 30, 1998,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. For further information, refer to the financial
statements and footnotes thereto included in the annual report on Form 10-K of
USA Truck, Inc. (the "Company") for the year ended December 31, 1997.
NOTE B--COMMITMENTS
As of October 26, 1998, the Company had remaining commitments for the purchases
of revenue equipment in the aggregate amount of approximately $10.0 million in
1998 and $34.3 million in 1999.
NOTE C--CAPITAL STOCK TRANSACTIONS
During the nine-month period ended September 30, 1998, the Company made
purchases in the aggregate of 9,750 additional shares of its outstanding common
stock on the open market for $123,772 pursuant to the repurchase program
authorized by the Board of Directors in September 1995. Of this amount, 5,102
shares were distributed pursuant to the Company's Employee Stock Purchase Plan,
to participants in such Plan.
On July 9, 1998, the Company announced that its Board of Directors had
authorized the Company to purchase up to 500,000 shares of its outstanding
common stock over a three-year period dependent upon market conditions. Common
stock purchases under the authorization may be made from time to time on the
open market or in privately negotiated transactions at prices determined by the
Chairman of the Board or President of the Company. This new authorization became
effective upon the expiration of the Company's existing stock repurchase program
in September 1998. Under this new authorization, the Company had repurchased
45,000 shares of common stock as of October 26, 1998. The Board of Directors
previously authorized the Company to purchase up to 500,000 shares of its common
stock during the three-year period from September 1995 to September 1998. Under
such previous authorization, the Company had repurchased 449,250 shares of
common stock upon the expiration of the authorization.
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Company adopted Financial Accounting Standards Board Statement No.
128, Earnings per Share (SFAS 128); therefore earnings per share amounts for the
quarter ended and the nine-month period ended September 30, 1997 have been
restated to conform to the SFAS 128 requirements.
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USA TRUCK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1998
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
As of January 1, 1998, the Company adopted Financial Accounting Standards Board
Statement 130, Reporting Comprehensive Income (SFAS No. 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components; however, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. During the quarter ended and the
nine-month period ended September 30, 1998, the Company's comprehensive income
is the same as net income.
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FORM 10-Q
USA TRUCK, INC.
Item 2. 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 periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- ------------------------------
1998 1997 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 41.6 40.5 42.1 41.6
Operations and maintenance 23.1 25.7 23.3 26.9
Operating taxes and licenses 1.8 1.6 1.8 1.7
Insurance and claims 4.5 5.0 4.7 4.9
Communications and utilities 1.1 1.5 0.9 1.4
Depreciation and amortization 11.4 10.8 11.1 10.4
Other 2.6 2.7 2.8 2.8
-------------- -------------- -------------- --------------
86.1 87.8 86.7 89.7
-------------- -------------- -------------- --------------
OPERATING INCOME 13.9 12.2 13.3 10.3
OTHER (INCOME) EXPENSE:
Interest expense 1.2 1.3 1.2 1.0
(Gain) or loss on disposal of assets (0.1) 0.0 0.0 0.0
Other, net 0.1 (0.6) 0.1 (0.2)
-------------- -------------- -------------- --------------
1.2 0.7 1.3 0.8
-------------- -------------- -------------- --------------
INCOME BEFORE INCOME TAXES 12.7 11.5 12.0 9.5
INCOME TAXES 4.9 4.5 4.7 3.7
-------------- -------------- -------------- --------------
NET INCOME AND
COMPREHENSIVE INCOME 7.8% 7.0% 7.3% 5.8%
============== ============== ============== ==============
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended September 30, 1998 Compared to Quarter Ended September 30, 1997
Operating revenues increased 10.3% to $36.3 million in the third quarter of
1998 from $32.9 million for the same quarter of 1997, resulting from increased
business with existing customers and additional business from new customers plus
an increase in average revenue per mile. Average revenue per mile increased to
$1.118 in 1998 from $1.105 in 1997. The empty mile factor decreased to 9.54% in
1998 from 10.20% of paid miles in the third quarter of 1997. There was a 9.0%
increase in the number of
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shipments to 32,423 in 1998 from 29,742 in 1997. This volume improvement was
made possible by an increase of 13.7% in the average number of tractors operated
from 954 in 1997 to 1,085 in 1998. The net effect of the volume improvement and
the Company's continuing fleet expansion was a decrease of 4.2% in miles per
tractor per week from 2,438 in 1997 to 2,336 in 1998.
Operating expenses and costs as a percentage of revenues decreased to 86.1%
in 1998 from 87.8% in 1997. This change resulted primarily from a decrease, on a
percentage of revenue basis, in operations and maintenance costs, in insurance
and claims expense and in communications and utilities expense. These decreases
were partially offset by increases, on a percentage of revenue basis, in
depreciation and amortization expense. The percentage decrease, relative to
revenues, in operations and maintenance costs was primarily the result of a
decrease of 16 cents per gallon in the average cost of fuel in the third quarter
of this year compared to the same period last year, and by a slight increase in
fuel efficiency to 6.51 average miles per gallon in 1998 from 6.44 in 1997. The
percentage decrease, relative to revenues, in insurance and claims expense was
due to a decrease in the number and severity of accidents in the third quarter
of 1998 as compared to the same period last year. The decrease in communications
and utilities expense, as a percentage of revenue and in actual dollars,
reflects the installation and use of the Company's two-way, satellite-based
mobile messaging and position-locating equipment in all of its tractors. This
equipment has greatly reduced the Company's telephone expenses and increased the
efficiency of communications with drivers. In addition, these devices have
enabled the Company to eliminate the cost associated with the global paging
system the Company was previously utilizing in its operations. The increase in
salaries, wages, and employee benefits was due to an increase in aggregate
driver pay along with an increase in incentives earned by employees due to
improved operating and financial performance of the Company in the third quarter
of this year compared to the same period last year. The increase in depreciation
and amortization expense reflects the effects of timing differences between
trade-in cycles and purchasing schedules along with an increase in the cost of
tractors and trailers when compared to those being retired.
As a result of the foregoing factors, operating income increased 26.5% to
$5.1 million, or 13.9% of revenues, in 1998 from $4.0 million, or 12.2% of
revenues, in 1997.
Interest expense increased 4.5% to $440,000 in 1998 from $421,000 in 1997,
resulting primarily from an increase in borrowings used primarily in connection
with revenue equipment purchases, partially offset by a decrease in interest
rates, in the aggregate, on both short-term and long-term debt.
As a result of the above, income before income taxes increased 22.6% to
$4.6 million, or 12.7% of revenues, in 1998 from $3.8 million, or 11.5% of
revenues, in 1997.
The Company's effective tax rate remained unchanged at 38.9% for both 1998
and 1997. 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 22.6% to
$2.8 million, or 7.8% of revenues, in 1998 from $2.3 million, or 7.0% of
revenues, in 1997, an increase of 25.0% in diluted net income per share to $.30
from $.24. The number of shares used in the calculation of diluted net income
per share for the third quarters of 1998 and 1997 were 9,512,954 and 9,508,090,
respectively. Total shares outstanding at September 30, 1998, were 9,416,553.
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Nine-Months Ended September 30, 1998 Compared to Nine-Months Ended September 30,
1997
Operating revenues increased 13.9% to $108.9 million in 1998 from $95.6
million in 1997, resulting from increased business with existing customers and
additional business from new customers plus an increase in average revenue per
mile. Average revenue per mile increased to $1.118 in 1998 from $1.105 in 1997.
The empty mile factor decreased to 9.93% in 1998 from 10.21% of paid miles in
the same period of 1997. There was an 11.8% increase in the number of shipments
to 96,267 in 1998 from 86,079 in 1997. This volume improvement was made possible
by an increase of 15.1% in the average number of tractors operated from 916 in
1997 to 1,054 in 1998. The net effect of the volume improvement and the
Company's continuing fleet expansion was a decrease of 2.2% in miles per tractor
per week from 2,486 in 1997 to 2,432 in 1998.
Operating expenses and costs as a percentage of revenues decreased to 86.7%
in 1998 from 89.7% in 1997, for the same reasons discussed above in the
comparison of the quarter ended September 30, 1998 to the quarter ended
September 30, 1997. For the nine-month period, the average cost of fuel
decreased 15.4 cents per gallon and fuel efficiency improved to 6.37 average
miles per gallon in 1998 from 6.29 in 1997.
As a result of the foregoing factors, operating income increased 47.3% to
$14.5 million, or 13.3% of revenues, in 1998 from $9.8 million, or 10.3% of
revenues, in 1997.
Interest expense increased 44.7% to $1.4 million in 1998 from $959,000 in
1997, resulting primarily from an increase in borrowings used primarily in
connection with revenue equipment purchases, partially offset by a decrease in
interest rates, in the aggregate, on both short-term and long-term debt.
As a result of the above, income before income taxes increased 44.5% to
$13.0 million, or 12.0% of revenues, in 1998 from $9.0 million, or 9.5% of
revenues, in 1997.
The Company's effective tax rate remained unchanged at 38.9% for both 1998
and 1997. 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 44.7% to
$8.0 million, or 7.3% of revenues, in 1998 from $5.5 million, or 5.8% of
revenues, in 1997, an increase of 44.5% in diluted net income per share to $.84
from $.58. The number of shares used in the calculation of diluted net income
per share for the nine-month periods ended September 30, 1998 and 1997 were
9,490,087 and 9,484,178, respectively.
SEASONALITY
In the motor carrier industry generally, revenues are lower in the first
and fourth quarters as customers decrease shipments during the winter holiday
season and as inclement weather impedes operations. These factors historically
have tended to decrease net income in the first and fourth quarters. 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
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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 all but the most significant increases in fuel costs and fuel taxes from
customers through increased freight rates. Diesel prices declined during the
nine-month period ended September 30, 1998 but have increased subsequent to that
date. There can be no assurance that diesel prices will not increase further or
that they will remain below the higher prices experienced in prior periods.
There also can be no assurance that the Company will be able to recover any
future increases in fuel costs and fuel taxes through increased rates.
LIQUIDITY & CAPITAL RESOURCES
The continued growth of the Company's business has required significant
investments in new equipment. USA Truck has financed revenue equipment purchases
with cash flows from operations and through borrowings under the Company's
collateralized revolving credit agreement (the "General Line of Credit") and
conventional financing and lease-purchase arrangements. 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
purchases. Cash flows from operations were $20.9 million for the nine-month
period ended September 30, 1998 as compared to $22.6 million in the comparable
period of 1997.
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 September 30, 1998, approximately $20.0 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 September 30, 1998) 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 of the available borrowings. The
principal maturity can be accelerated if the borrowing base (based on a
percentage 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.
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
September 30, 1998, $11.8 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
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amount equal to the sum of the current outstanding balance plus $10.0 million,
resulting in a new lease commitment with a maximum 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. As of September 30, 1998, capital leases in the aggregate
principal amount of $12.8 million were outstanding under the TRAC Lease
Commitment with an average interest rate of 5.24%.
At September 30, 1998, the Company had debt obligations of approximately
$25.0 million, including amounts borrowed under the facilities described above,
of which approximately $5.4 million were current obligations. During the third
quarter of 1998, the Company made borrowings under the General Line of Credit of
$350,000, while retiring $8.0 million in debt. The retired debt had an average
interest rate of approximately 6.88%.
During the years 1998 and 1999, the Company plans to make approximately
$70.1 million in capital expenditures, including $18.6 million expended as of
September 30, 1998. At September 30, 1998, USA Truck was committed to spend
$10.0 million of the remaining amount for revenue equipment in 1998. The Company
is also committed to spend $34.3 million 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.
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. In September 1998, this repurchase authorization expired. Upon
expiration of this authorization, the Company had purchased 449,250 shares
pursuant to this authorization at an aggregate purchase price of $4.6 million.
On May 7, 1997, the Board of Directors authorized the retirement of all shares
purchased prior to May 6, 1997 and not previously retired, 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, as of September 30, 1998,
5,102 of the remaining 9,750 repurchased shares had been resold under the
Company's Employee Stock Purchase Plan.
In addition, on July 9, 1998, the Company's Board of Directors authorized
the Company to purchase up to 500,000 shares of its outstanding common stock
over a three-year period dependent upon market conditions. Common stock
purchases under the authorization may be made from time to time on the open
market or in privately negotiated transactions at prices determined by the
Chairman of the Board or President of the Company. This new authorization became
effective in September 1998 upon the expiration of the Company's existing stock
repurchase program. As of October 26, 1998, the Company had purchased 45,000
shares pursuant to this new authorization at an aggregate purchase price of
$462,000. The Company may continue to purchase shares in the future if, in the
view of management, the common stock is undervalued relative to the Company's
performance and prospects
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<PAGE> 13
for continued growth. Any such purchases would be funded with cash flows from
operations or the General Line of Credit.
YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. The Company
recognizes that the arrival of the year 2000 poses a unique worldwide challenge
to the ability of systems to recognize the date change from December 31, 1999 to
January 1, 2000. The year 2000 issue could result, at the Company and elsewhere,
in system failures or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions or
to engage in other normal business activities.
The Company has undertaken various initiatives intended to ensure that its
computer equipment and software will function properly with respect to dates in
the Year 2000 and thereafter. For this purpose, the term "computer equipment and
software" includes systems that are commonly thought of as IT systems, including
accounting, data processing, dispatch, and telephone/PBX systems, and other
miscellaneous systems, as well as systems that are not commonly thought of as IT
systems, such as heating and air conditioning systems, fax machines, tractor
engine electronic control modules, or other miscellaneous systems. Both IT and
non-IT systems may contain imbedded technology, which complicates the Company's
identification, assessment, remediation, and testing efforts. Based upon its
identification and assessment efforts to date, the Company believes that certain
computer equipment and software it currently uses will require replacement or
modification. In addition, in the ordinary course of replacing computer
equipment and software, the Company attempts to obtain replacements that are
Year 2000 compliant. Utilizing both internal and external resources to identify
and assess needed Year 2000 remediation, the Company currently anticipates that
its Year 2000 identification, assessment, remediation, and testing efforts,
which began in November 1997, will be completed by June 30, 1999, and that such
efforts will be completed prior to any currently anticipated impact on its
computer equipment and software. As of October 15, 1998, the Company estimates
that it had completed approximately 80% of the initiatives that it believes will
be necessary to fully address potential Year 2000 issues relating to its
computer equipment and software. The projects comprising the remaining 20% of
the initiatives are in process and expected to be completed on or about June 30,
1999.
<TABLE>
<CAPTION>
PERCENT
YEAR 2000 INITIATIVE TIME FRAME COMPLETE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Initial IT system assessment 11/97 - 09/98 100%
Remediation of central system issues 01/98 - 06/99 98%
Remediation of departmental system issues 01/98 - 06/99 5%
Upgrades to telephone/PBX and other systems 01/98 - 06/99 60%
Electronic data interchange trading partner conversions 01/98 - 06/99 25%
Desktop and individual systems assessment and remediation 01/98 - 06/99 50%
Assessment of non-IT systems 01/98 - 09/98 100%
Remediation of non-IT systems 05/98 - 06/99 10%
</TABLE>
The Company has also conducted telephone surveys and mailed letters to
significant vendors and service providers, and has verbally communicated with
many strategic customers to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues and whether the products obtained
from and services provided by such entities are Year 2000 compliant. As of
October 15, 1998, the Company had received responses from approximately 98% of
such third parties, and 3% of the companies that have responded have provided
either verbal or written assurances that they expect to address all their
significant Year 2000 issues on a timely basis. A follow-up telephone survey or
mailing
Page 13
<PAGE> 14
to significant vendors, service providers, and customers that did not initially
respond, or whose responses were deemed unsatisfactory by the Company, will be
completed by November 1, 1998, with responses due by January 15, 1999.
The Company believes that the cost of its Year 2000 identification,
assessment, remediation and testing efforts, as well as currently anticipated
costs to be incurred by the Company with respect to Year 2000 issues of third
parties, will not exceed $85,000, which will be funded from operating cash
flows. Such amount represents approximately 2.4% of the Company's total actual
and anticipated IT expenditures for fiscal 1998 through fiscal 1999. As of
September 30, 1998, the Company had incurred costs of approximately $18,000
related to its Year 2000. All of the $18,000 relates to analysis, repair, or
replacement of existing software, upgrades of existing software, or evaluation
of information received from significant vendors, service providers, or
customers. Other non-Year 2000 IT efforts have not been materially delayed or
impacted by Year 2000 projects. The Company presently believes that the Year
2000 issue will not pose significant operational problems for the Company.
However, if all Year 2000 issues are not properly identified, remediation and
testing is not effected with respect to problems that are identified, or such
remediation and testing are not completed timely, there can be no assurance that
the Year 2000 issue will not materially adversely affect the Company's
relationships with customers, vendors, or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems or business.
The Company has begun, but not yet completed, a comprehensive analysis
of the operational problems and costs (including loss of revenues) that would be
reasonably likely to result from the failure by the Company and certain third
parties to complete efforts necessary to achieve Year 2000 compliance on a
timely basis. A contingency plan has not been developed for dealing with the
most reasonably likely worst case scenario, and such scenario has not yet been
clearly identified. The Company currently plans to complete such analysis and
contingency planning by September 30, 1999.
The Company does not plan to engage an independent expert to evaluate
its Year 2000 identification, assessment, remediation, and testing efforts.
However, the Company has had certain of its systems reviewed and assessed by
third parties, who focused on the Year 2000 compliance of systems essential to
the performance by the Company of its obligations to such third parties. After
these reviews and assessments, the third parties have given such systems a
"satisfactory" rating relating to Year 2000 compliance.
The costs of the Company's Year 2000 identification, assessment,
remediation, and testing efforts and the dates on which the Company believes it
will complete such efforts are based upon management's best estimates, which
were derived using numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans, and
other factors. There can be no assurance that these estimates will prove to be
accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to locate and correct all relevant computer
codes, the ability to identify, assess, remediate, and test all embedded
technology, and similar uncertainties.
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
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<PAGE> 15
amounts for all periods in this 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
has no comprehensive income items for the periods presented, therefore
comprehensive income is the same as net income for the periods presented.
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 and the impact of increased rate competition.
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. Because of
the pervasiveness and complexity of the Year 2000 problem, it is unlikely that
the Company and all third parties with which the Company does business will be
able to fully remediate all non-compliant systems on a timely basis, and the
failure by the Company and/or such third parties to do so could materially
adversely affect the Company's results of operations. Results for any specific
period could also be affected by various unforeseen events, such as unusual
levels of equipment failure or vehicle accident claims.
Page 15
<PAGE> 16
USA TRUCK, INC.
PART II. OTHER INFORMATION
INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
11.1 Statement Re: Computation of Earnings Per Share
27.1 Financial Data Schedule
27.2 1997 Restated Financial Data Schedule
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
three months ended September 30, 1998.
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<PAGE> 17
SIGNATURES
Pursuant to the requirements 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)
Date: 10/27/98 /s/ ROBERT M. POWELL
----------------- -----------------------------------
ROBERT M. POWELL
President and Chief Executive Officer
Date: 10/27/98 /s/ JERRY D. ORLER
----------------- -----------------------------------
JERRY D. ORLER
Vice President-Finance and
Chief Financial Officer
Page 17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
- -------- -----------------------------------------------
<S> <C>
11.1 Statement Re: Computation of Earnings Per Share
27.1 Financial Data Schedule
27.2 1997 Restated Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
USA TRUCK, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net income and
comprehensive income ...................... $2,822,007 $2,301,813 $7,957,802 $5,508,406
========== ========== ========== ==========
Denominator:
Denominator for basic earnings per
share - weighted average shares ........... 9,417,520 9,358,868 9,407,007 9,368,654
Effect of dilutive securities:-
Employee stock options ..................... 95,434 149,222 83,080 115,524
---------- ---------- ---------- ----------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ............ 9,512,954 9,508,090 9,490,087 9,484,178
========== ========== ========== ==========
Basic earnings per share .................... $ 0.30 $ 0.25 $ 0.85 $ 0.59
========== ========== ========== ==========
Diluted earnings per share .................. $ 0.30 $ 0.24 $ 0.84 $ 0.58
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-Q FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,340,261
<SECURITIES> 0
<RECEIVABLES> 14,593,592
<ALLOWANCES> 134,999
<INVENTORY> 262,292
<CURRENT-ASSETS> 20,558,347
<PP&E> 127,113,115
<DEPRECIATION> 33,987,217
<TOTAL-ASSETS> 116,728,352
<CURRENT-LIABILITIES> 20,890,234
<BONDS> 0
0
0
<COMMON> 94,212
<OTHER-SE> 60,473,568
<TOTAL-LIABILITY-AND-EQUITY> 116,728,352
<SALES> 108,877,380
<TOTAL-REVENUES> 108,877,380
<CGS> 0
<TOTAL-COSTS> 94,415,939
<OTHER-EXPENSES> 1,437,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,387,552
<INCOME-PRETAX> 13,024,226
<INCOME-TAX> 5,066,424
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,957,802
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.84
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-Q FOR THE NINE-MONTH PERIOD ENDED SEPTEMBER 30,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,666,211
<SECURITIES> 0
<RECEIVABLES> 13,817,317
<ALLOWANCES> 162,749
<INVENTORY> 335,440
<CURRENT-ASSETS> 18,997,319
<PP&E> 114,863,957
<DEPRECIATION> 29,132,182
<TOTAL-ASSETS> 107,677,654
<CURRENT-LIABILITIES> 22,129,544
<BONDS> 0
0
0
<COMMON> 93,589
<OTHER-SE> 49,784,606
<TOTAL-LIABILITY-AND-EQUITY> 107,677,654
<SALES> 95,630,055
<TOTAL-REVENUES> 95,630,055
<CGS> 0
<TOTAL-COSTS> 85,811,616
<OTHER-EXPENSES> 803,044
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 958,765
<INCOME-PRETAX> 9,015,395
<INCOME-TAX> 3,506,989
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,508,406
<EPS-PRIMARY> .59
<EPS-DILUTED> .58
</TABLE>
