<PAGE> 1
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 June 30, 1999
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)
3200 INDUSTRIAL PARK ROAD
VAN BUREN, ARKANSAS 72956
- ---------------------------------------- ---------------------------------
(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:
9,303,141 shares of common stock, $.01 par value, were outstanding on July
29, 1999.
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INDEX
USA TRUCK, INC.
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page
----
<S> <C>
Condensed Balance Sheets -- June 30, 1999 and December 31, 1998 3
Condensed Statements of Income and Comprehensive Income -- Three
months and six months ended June 30, 1999 and 1998 4
Condensed Statements of Cash Flows -- Six months ended June 30,
1999 and 1998 5
Notes to Condensed Financial Statements -- June 30, 1999 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Item 3. Quantitative and Qualitative Disclosure about Market Risk 16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 17
Item 6. Exhibits and Reports on Form 8-K. 17
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(unaudited) (note)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,496,224 $ 1,779,643
Accounts receivable:
Trade, less allowance for doubtful accounts
(1999 - $ 171,176; 1998 - $ 140,670) 15,686,590 13,928,848
Other 718,820 299,914
Inventories 299,320 236,338
Deferred income taxes 1,111,657 1,573,365
Prepaid expenses and other current assets 2,531,121 2,640,561
------------- -------------
Total current assets 21,843,732 20,458,669
PROPERTY AND EQUIPMENT 135,948,708 132,908,913
ACCUMULATED DEPRECIATION AND AMORTIZATION (38,066,365) (36,769,320)
------------- -------------
97,882,343 96,139,593
SECURITY DEPOSITS 370 1,745,478
OTHER ASSETS 305,194 1,267,479
------------- -------------
Total assets $ 120,031,639 $ 119,611,219
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 823,406 $ 425,485
Trade accounts payable 2,032,370 3,397,593
Accrued expenses 8,976,198 11,139,369
Current maturities of long-term debt 5,256,768 6,188,241
------------- -------------
Total current liabilities 17,088,742 21,150,688
LONG-TERM DEBT, LESS CURRENT MATURITIES 18,814,195 19,057,816
DEFERRED INCOME TAXES 15,205,433 14,576,038
LONG-TERM INSURANCE AND CLAIMS ACCRUALS 2,296,614 2,092,614
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 (1999 - 9,367,541; 1998 - 9,437,097) 93,675 94,371
Additional paid-in capital 12,171,879 12,921,342
Retained earnings 54,958,245 50,199,325
Less treasury stock, at cost (1999 - 64,400 shares; 1998 - 46,789 shares) (597,144) (480,975)
------------- -------------
Total stockholders' equity 66,626,655 62,734,063
------------- -------------
Total liabilities and stockholders' equity $ 120,031,639 $ 119,611,219
============= =============
</TABLE>
NOTE: The balance sheet at December 31, 1998 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.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 38,117,504 $ 37,387,246 $ 74,316,950 $ 72,610,449
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 16,254,412 15,641,708 31,910,890 30,724,137
Operations and maintenance 8,915,103 8,607,191 17,258,532 17,010,292
Operating taxes and licenses 681,313 689,492 1,384,619 1,295,056
Insurance and claims 1,952,991 1,810,916 3,591,077 3,488,310
Communications and utilities 458,725 314,476 868,616 636,101
Depreciation and amortization 4,285,820 4,088,077 8,515,035 8,005,051
Other 1,282,513 1,056,972 2,365,113 2,043,772
------------ ------------ ------------ ------------
33,830,877 32,208,832 65,893,882 63,202,719
------------ ------------ ------------ ------------
OPERATING INCOME 4,286,627 5,178,414 8,423,068 9,407,730
OTHER (INCOME) EXPENSE:
Interest expense 321,172 551,724 651,348 947,980
(Gain) or loss on disposal of assets -- 6,510 (7,760) 6,510
Other, net (39,156) 40,675 (47,692) 47,684
------------ ------------ ------------ ------------
282,016 598,909 595,896 1,002,174
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 4,004,611 4,579,505 7,827,172 8,405,556
INCOME TAXES 1,569,808 1,781,428 3,068,252 3,269,762
------------ ------------ ------------ ------------
NET INCOME AND
COMPREHENSIVE INCOME $ 2,434,803 $ 2,798,077 $ 4,758,920 $ 5,135,794
============ ============ ============ ============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,373,109 9,418,826 9,384,410 9,378,054
============ ============ ============ ============
Basic net income per share $ 0.26 $ 0.30 $ 0.51 $ 0.55
============ ============ ============ ============
Average shares outstanding (Diluted) 9,410,475 9,531,054 9,423,291 9,478,162
============ ============ ============ ============
Diluted net income per share $ 0.26 $ 0.29 $ 0.51 $ 0.54
============ ============ ============ ============
</TABLE>
See notes to condensed financial statements.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,758,920 $ 5,135,794
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,515,035 8,005,051
Provision for doubtful accounts 18,000 (24,982)
Deferred income taxes 1,091,103 1,483,451
(Gain) Loss on sale of assets (7,760) 6,510
Changes in operating assets and liabilities:
Receivables (2,194,648) (1,307,584)
Inventories and prepaid expenses 46,458 (621,404)
Bank drafts payable, accounts payable and accrued expenses (3,130,473) 1,326,259
Insurance and claims accruals - long-term 204,000 204,000
------------ ------------
Net cash provided by operating activities 9,300,635 14,207,095
INVESTING ACTIVITIES:
Purchases of Property and Equipment (14,294,773) (18,517,634)
Proceeds from sale of assets 4,044,748 3,469,521
Proceeds from sale of investments 968,196 --
Gain on sale of investments (5,911) --
------------ ------------
Net cash used by investing activities (9,287,740) (15,048,113)
FINANCING ACTIVITIES:
Borrowings under long-term debt 10,003,000 11,075,000
Proceeds from the exercise of stock options 178,719 270,254
Proceeds from sale of treasury stock 56,134 --
Refund of security deposits 1,745,108 --
Payments to repurchase common stock (1,101,181) (57,747)
Principal payments on long-term debt (7,153,000) (8,250,000)
Principal payments on capitalized lease obligations (4,025,094) (4,359,786)
------------ ------------
Net cash used by financing activities (296,314) (1,322,279)
------------ ------------
DECREASE IN CASH AND CASH EQUIVALENTS (283,419) (2,163,297)
Cash and cash equivalents at beginning of period 1,779,643 3,667,311
------------ ------------
Cash and cash equivalents at end of period $ 1,496,224 $ 1,504,014
============ ============
</TABLE>
See notes to condensed financial statements.
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USA TRUCK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
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 six-month period ended June 30, 1999, are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1999. 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, 1998.
NOTE B--COMMITMENTS
As of July 29, 1999, the Company had remaining commitments for the purchases of
revenue equipment in the aggregate amount of approximately $18.9 million in 1999
and $45.7 million in 2000.
NOTE C--CAPITAL STOCK TRANSACTIONS
During the six-month period ended June 30, 1999, the Company purchased 123,000
shares of its outstanding common stock on the open market for approximately $1.1
million pursuant to the repurchase program authorized by the Board of Directors
in July 1998. The Company distributed 5,389 treasury shares pursuant to the
Company's Employee Stock Purchase Plan, to participants in such Plan.
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS
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. For the quarter ended and
six-month period ended June 30, 1999, 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 Six Months Ended
June 30, June 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 42.7 41.8 42.9 42.3
Operations and maintenance 23.4 23.0 23.2 23.4
Operating taxes and licenses 1.8 1.8 1.9 1.8
Insurance and claims 5.1 4.9 4.8 4.8
Communications and utilities 1.2 0.9 1.2 0.9
Depreciation and amortization 11.2 10.9 11.5 11.0
Other 3.4 2.8 3.2 2.8
-------- -------- -------- --------
88.8 86.1 88.7 87.0
-------- -------- -------- --------
OPERATING INCOME 11.2 13.9 11.3 13.0
OTHER (INCOME) EXPENSE:
Interest expense 0.8 1.5 0.9 1.3
(Gain) or loss on disposal of assets -- -- -- --
Other, net (0.1) 0.1 (0.1) 0.1
-------- -------- -------- --------
0.7 1.6 0.8 1.4
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 10.5 12.3 10.5 11.6
INCOME TAXES 4.1 4.8 4.1 4.5
-------- -------- -------- --------
NET INCOME AND
COMPREHENSIVE INCOME 6.4% 7.5% 6.4% 7.1%
======== ======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Quarter Ended June 30, 1999 Compared to Quarter Ended June 30, 1998
Operating revenues increased 2.0% to $38.1 million in the second quarter of
1999 from $37.4 million for the same quarter of 1998. The Company believes this
increase is due primarily to the expansion of its marketing team and the new
marketing efforts implemented for the Company's logistics services, dedicated
fleet operations, and private fleet conversions and to additional business from
new customers. Average revenue per mile remained virtually unchanged at $1.118
in 1999 and $1.119 in 1998. There was a 1.6% increase in the number of shipments
to
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33,745 in 1999 from 33,203 in 1998. This volume improvement was made possible by
an increase of 4.4% in the average number of tractors operated from 1,058 in
1998 to 1,105 in 1999. The net effect of the volume improvement and the
Company's continuing fleet expansion was a decrease of 2.3% in miles per tractor
per week from 2,506 in 1998 to 2,449 in 1999. The empty mile factor decreased to
9.50% in 1999 from 9.99% of paid miles in the second quarter of 1998.
Operating expenses and costs as a percentage of revenues increased to 88.8%
in 1999 from 86.1% in 1998. This change resulted primarily from an increase, on
a percentage of revenue basis, in salaries, wages, and employee benefits, in
operations and maintenance costs, in insurance and claims expense, in
communications and utilities expense, in depreciation and amortization expense
and in other expenses. The increase in salaries, wages, and employee benefits
was due to an increase in aggregate driver pay, which resulted from an increase
in driver total base compensation of approximately 5% per driver in October
1998. The percentage increase, relative to revenues, in operations and
maintenance costs was primarily the result of an increase in costs to maintain
and repair road equipment and an increase of 1.2 cents per gallon in the average
cost of fuel in the second quarter of this year compared to the same period last
year, partially offset by an increase in fuel efficiency to 6.73 average miles
per gallon in 1999 from 6.47 in 1998. The increase, relative to revenues, in
insurance and claims expense was due to a slight increase in the number and
severity of accidents in the second quarter of 1999 as compared to the same
period last year. The increase in communications and utilities expense, as a
percentage of revenue, reflects the elimination of operational credits
associated with installation in late 1997 and use of the Company's two-way,
satellite-based mobile messaging and position-locating equipment in all of its
tractors. 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. Other expenses increased, relative to revenues, due to a
variety of factors, including a 20% increase in recruiting expenses. However, no
single factor accounted for more than half of the increase in other expenses.
As a result of the foregoing factors, operating income decreased 17.2% to
$4.3 million, or 11.2% of revenues, in 1999 from $5.2 million, or 13.9% of
revenues, in 1998.
Interest expense decreased 41.8% to $321,000 in 1999 from $552,000 in 1998,
resulting primarily from a decrease in interest rates, in the aggregate, on both
short-term and long-term debt, and a decrease in total outstanding debt.
Other, net expense decreased 196.3% to $(39,000) in 1999 from $41,000 in
1998, resulting primarily from an increase in detention charges imposing on
customers for detaining equipment and interest income.
As a result of the above, income before income taxes decreased 12.6% to
$4.0 million, or 10.5% of revenues, in 1999 from $4.6 million, or 12.3% of
revenues, in 1998.
The Company's effective tax rate increased to 39.2% in 1999 from 38.9% in
1998. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
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As a result of the aforementioned factors, net income decreased 13.0% to
$2.4 million, or 6.4% of revenues, in 1999 from $2.8 million, or 7.5% of
revenues, in 1998, a decrease of 10.3% in diluted net income per share to $.26
from $.29. The number of shares used in the calculation of diluted net income
per share for the second quarters of 1999 and 1998 were 9,410,475 and 9,531,054,
respectively. Total shares outstanding at June 30, 1999, were 9,303,141.
Six-Months Ended June 30, 1999 Compared to Six-Months Ended June 30, 1998
Operating revenues increased 2.4% to $74.3 million in 1999 from $72.6
million in 1998, resulting from increased business with existing customers and
additional business from new customers offset by a slight decrease in average
revenue per mile. Average revenue per mile decreased to $1.112 in 1999 from
$1.118 in 1998. The empty mile factor decreased to 9.59% in 1999 from 10.13% of
paid miles in the first six months of 1998. There was a 3.1% increase in the
number of shipments to 65,829 in 1999 from 63,844 in 1998. This volume
improvement was made possible by an increase of 6.3% in the average number of
tractors operated from 1,039 in 1998 to 1,104 in 1999. The net effect of the
volume improvement and the Company's continuing fleet expansion was a decrease
of 3.1% in miles per tractor per week from 2,481 in 1998 to 2,403 in 1999.
Operating expenses and costs as a percentage of revenues increased to 88.7%
in 1999 from 87.0% in 1998. This change resulted primarily from an increase, on
a percentage of revenue basis, in salaries, wages, and employee benefits, in
communications and utilities expense, in depreciation and amortization expense
and in other expenses. The increase in salaries, wages, and employee benefits
was due to an increase in aggregate driver pay, which resulted from an increase
in driver total base compensation of approximately 5% per driver in October
1998. The increase in communications and utilities expense, as a percentage of
revenue, reflects the elimination of operational credits associated with
installation in late 1997 and use of the Company's two-way, satellite-based
mobile messaging and position-locating equipment in all of its tractors. 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. Other expenses increased, relative to revenues, due to a variety of
factors, including a 20% increase in recruiting expenses. However, no single
factor accounted for more than half of the increase in other expenses. The
percentage decrease, relative to revenues, in operations and maintenance costs
was primarily the result of a 4.7 cent decrease in the average cost of fuel per
gallon and an improvement in fuel efficiency to 6.48 average miles per gallon in
1999 from 6.31 in 1998, partially offset by an increase in costs to maintain and
repair road equipment.
As a result of the foregoing factors, operating income decreased 10.5% to
$8.4 million, or 11.3% of revenues, in 1999 from $9.4 million, or 13.0% of
revenues, in 1998.
Interest expense decreased 31.3% to $651,000 in 1999 from $948,000 in 1998,
resulting primarily from a decrease in interest rates, in the aggregate, on both
short-term and long-term debt, and a decrease in total outstanding debt.
Other, net expense decreased 200.0% to $(48,000) in 1999 from $48,000 in
1998, resulting primarily from an increase in detention charges and interest
income.
As a result of the above, income before income taxes decreased 6.9% to $7.8
million, or 10.5% of revenues, in 1999 from $8.4 million, or 11.6% of revenues,
in 1998.
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The Company's effective tax rate increased to 39.2% in 1999 from 38.9% in
1998. 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 7.3% to
$4.8 million, or 6.4% of revenues, in 1999 from $5.1 million, or 7.1% of
revenues, in 1998, a decrease of 5.6% in diluted net income per share to $.51
from $.54. The number of shares used in the calculation of diluted net income
per share for the six-month periods ended June 30, 1999 and 1998 were 9,423,291
and 9,478,162, 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 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 generally declined
during 1998 and the three-month period ended March 31, 1999 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 $9.3 million for the six-month period
ended June 30, 1999 as compared to $14.2 million in the comparable period of
1998.
The Company's General Line of Credit provides for available borrowings of
up to $20.0 million, including letters of credit not exceeding $5.0 million. The
Company decreased the maximum borrowing limit from $28.5 million to the current
level in October 1998 based upon its evaluation of the Company's borrowing
requirements. As of June 30, 1999, approximately
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$13.24 million was available under the General Line of Credit. The General Line
of Credit matures on April 30, 2001, 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
fluctuates between the lender's prime rate, or prime plus 1/2% or LIBOR plus a
certain percentage which is determined based on the Company's attainment of
certain financial ratios. The effective interest rate on the Company's
borrowings under the General Line of Credit for the six-month period ending June
30, 1999 was 6.08%. 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.
On December 30, 1998, the Company amended its lease commitment agreement
(the "Equipment TRAC Lease Commitment"), dated November 19, 1997 with another
financial institution to facilitate the leasing of tractors. The Equipment TRAC
Lease Commitment was amended to extend the commitment term to December 31, 1999
and provide for an additional borrowing amount of $12.4 million during 1999.
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 June 30, 1999, $12.4 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. As of June 30, 1999, capital leases in the
aggregate principal amount of $6.2 million were outstanding under the Equipment
TRAC Lease Commitment with an average interest rate of 4.60% per annum.
As of June 30, 1999, capital leases in the aggregate principal amount of
$10.7 million were outstanding under a prior lease commitment with an average
interest rate of 5.38% per annum.
As of June 30, 1999, the Company had debt obligations of approximately
$24.1 million, including amounts borrowed under the facilities described above,
of which approximately $5.3 million were current obligations. During the first
six months of 1999, the Company made borrowings under the General Line of Credit
of $10.0 million, while retiring $7.2 million in debt. The retired debt had an
average interest rate of approximately 6.32%.
During the years 1999 and 2000, the Company plans to make approximately
$82.7 million in capital expenditures, including $14.3 million expended as of
June 30, 1999. At June 30, 1999, USA Truck was committed to spend an additional
$18.9 million of this amount for revenue equipment in 1999, and $45.7 million of
this amount is currently committed for revenue equipment in 2000. 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
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plans through the end of 1999. 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 July 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 authorization became effective in September 1998
upon the expiration of the Company's prior stock repurchase program. As of June
30, 1999, the Company had purchased 168,000 shares pursuant to this new
authorization at an aggregate purchase price of $1,563,000. On May 5, 1999, the
Board of Directors authorized the retirement of 100,000 shares of treasury stock
that had been purchased at an aggregate cost of $928,876. In addition, as of
June 30, 1999, 3,600 of the remaining 68,000 repurchased shares had been resold
under the Company's Employee Stock Purchase Plan. 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 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, the Company has replaced or modified
certain computer equipment and software. The Company has also replaced or
modified certain equipment and software used in non-IT systems. The Company
anticipates that such replacement and modification relating to non-IT systems
will be completed by October 1999. 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's
Year 2000 identification, assessment, remediation, and testing efforts, which
began in November 1997, were substantially completed by June 30, 1999, prior to
any impact on its computer equipment and software. As of July 29, 1999, the
Company
Page 12
<PAGE> 13
estimates that it had completed approximately 99% of the initiatives that it
believes will be necessary to fully address potential Year 2000 issues relating
to its computer equipment and software.
<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 - 10/98 100%
Remediation of departmental system issues 01/98 - 12/98 100%
Upgrades to telephone/PBX and other systems 01/98 - 12/98 100%
Electronic data interchange trading partner conversions 01/98 - 12/98 100%
Desktop and individual systems assessment and remediation 01/98 - 12/98 100%
Assessment of non-IT systems 01/98 - 09/98 100%
Remediation of non-IT systems 05/98 - 10/99 95%
</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 July
27, 1999, the Company had received responses from approximately 99% of such
third parties. However, only 10% 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 to significant vendors, service providers, and customers that did not
initially respond, or whose responses were deemed unsatisfactory by the Company,
was completed on November 1, 1998, with responses due by January 15, 1999. As a
result of the second telephone survey, only an additional 18% of all third
parties contacted provided either verbal or written assurances that they expect
to address all their significant Year 2000 issues on a timely basis. The Company
continues to send written requests to new customers to inquire about their
significant Year 2000 issues and how they are going to address those issues. In
light of the low rate of satisfactory responses to the Company's inquiries, the
Company can give no assurance that interfaces with third parties will not be
vulnerable to Year 2000 issues or that disruptions to the Company's business
will not occur as a result of such issues.
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 $35,000, which will be funded from operating cash
flows. Such amount represents approximately 1.0% of the Company's total actual
and anticipated IT expenditures for fiscal 1998 through fiscal 1999. As of June
30, 1999, the Company had incurred costs of approximately $31,000 related to its
Year 2000 program. All of the $31,000 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
Page 13
<PAGE> 14
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 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 and, 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
Page 14
<PAGE> 15
utilization rates are directly related to business levels of shippers in a
variety of industries. In addition, shortages of qualified drivers and intense
or increased competition for drivers may adversely impact the Company's
operating results and its ability to grow. 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
FORM 10-Q
USA TRUCK, INC.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company's General Line of Credit agreement provides for borrowings that
bear interest at variable rates based on either a prime rate or the LIBOR. At
June 30, 1999, the Company had $5.75 million outstanding pursuant to the General
Line of Credit. The Company believes that the effect, if any, of reasonably
possible near-term changes in interest rates on the Company's financial
position, results of operations, and cash flows should not be material.
All customers are required to pay for the Company's services in U.S.
dollars. Although the Canadian Government makes certain payments, such as tax
refunds, to the Company in Canadian dollars, any foreign currency exchange risk
associated with such payments is insignificant.
The Company does not engage in hedging transactions relating to diesel fuel
or any other commodity.
Page 16
<PAGE> 17
FORM 10-Q
USA TRUCK, INC.
PART II. OTHER INFORMATION
INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the Company was held on May 5, 1999.
At the meeting, the stockholders elected the person set forth in the table below
to serve as a director for a term expiring at the 2002 Annual Meeting of
Stockholders:
<TABLE>
<CAPTION>
Votes Votes Broker
Nominee For Withheld Non-Votes
---------------- --------- -------- ---------
<S> <C> <C> <C>
Jim L. Hanna 7,903,380 7,045 -0-
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
11.1 Statement Re: Computation of Earnings Per Share
27 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 June 30, 1999.
Page 17
<PAGE> 18
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: 07/29/99 /s/ ROBERT M. POWELL
--------------------------- -----------------------------------
ROBERT M. POWELL
President and Chief Executive Officer
Date: 07/29/99 /s/ JERRY D. ORLER
--------------------------- -----------------------------------
JERRY D. ORLER
Vice President-Finance and Chief
Financial Officer
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
------- ------------------------------------------------ ------------
<S> <C> <C>
11.1 Statement Re: Computation of Earnings Per Share 20
27 Financial Data Schedule 21
</TABLE>
<PAGE> 1
EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
USA TRUCK, INC.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator:
Net income and comprehensive income $ 2,434,803 $ 2,798,077 $ 4,758,920 $ 5,135,794
============ ============ ============ ============
Denominator:
Denominator for basic earnings per
share - weighted average shares 9,373,109 9,418,826 9,384,410 9,378,054
Effect of dilutive securities:-
Employee stock options 37,366 112,228 38,881 100,108
------------ ------------ ------------ ------------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 9,410,475 9,531,054 9,423,291 9,478,162
============ ============ ============ ============
Basic earnings per share $ 0.26 $ 0.30 $ 0.51 $ 0.55
============ ============ ============ ============
Diluted earnings per share $ 0.26 $ 0.29 $ 0.51 $ 0.54
============ ============ ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-Q FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,496,224
<SECURITIES> 0
<RECEIVABLES> 15,857,766
<ALLOWANCES> 171,176
<INVENTORY> 299,320
<CURRENT-ASSETS> 21,843,732
<PP&E> 135,948,708
<DEPRECIATION> 38,066,365
<TOTAL-ASSETS> 120,031,639
<CURRENT-LIABILITIES> 17,088,742
<BONDS> 0
0
0
<COMMON> 93,675
<OTHER-SE> 66,532,980
<TOTAL-LIABILITY-AND-EQUITY> 120,031,639
<SALES> 74,316,950
<TOTAL-REVENUES> 74,316,950
<CGS> 0
<TOTAL-COSTS> 65,893,882
<OTHER-EXPENSES> 595,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 651,348
<INCOME-PRETAX> 7,827,172
<INCOME-TAX> 3,068,252
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,758,920
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
</TABLE>
