<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 0-19858
USA TRUCK, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 71-0556971
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3108 INDUSTRIAL PARK ROAD 72956
VAN BUREN, ARKANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (501) 471-2500
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates
of the Registrant on February 26, 1999 was $50,120,763. (The characterization
of officers and directors of the Registrant as affiliates for purposes of this
computation should not be construed as an admission for any other purpose that
any such person is in fact an affiliate of the Registrant).
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
Class Outstanding at February 26, 1999
----- --------------------------------
Common Stock, par value $.01 per share 9,440,097 shares
DOCUMENTS INCORPORATED BY REFERENCE
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Part of Form 10-K into Which the
Document Document is Incorporated
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<S> <C>
Portions of the Proxy Statement to be sent to stockholders Part III
in connection with 1999 Annual Meeting
</TABLE>
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USA TRUCK, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM NO. CAPTION PAGE
- -------- ------- ----
<S> <C> <C>
PART I
1. Business................................................................................. 1
2. Properties............................................................................... 6
3. Legal Proceedings........................................................................ 6
4. Submission of Matters to a Vote of Security Holders...................................... 6
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters.................... 7
6. Selected Financial Data.................................................................. 8
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 9
7A. Quantitative and Qualitative Disclosure about Market Risk................................ 16
8. Financial Statements and Supplementary Data.............................................. 17
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure........................................................................... 31
PART III
10. Directors and Executive Officers of the Registrant....................................... 31
11. Executive Compensation................................................................... 31
12. Security Ownership of Certain Beneficial Owners and Management........................... 31
13. Certain Relationships and Related Transactions........................................... 31
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.......................... 32
Signatures............................................................................... 37
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
USA Truck, Inc. (the "Company" or "USA Truck") is engaged in the
transportation of general commodity freight in interstate and foreign commerce.
Operations are conducted primarily east of the Rocky Mountains, but the Company
holds authority to transport and does transport freight between all points in
the continental United States, other than intrastate, and between all points in
the U.S., on the one hand, and the Canadian provinces of Ontario and Quebec, on
the other. The Company also provides the U.S. and Canadian portions of
shipments between points in the U.S. and Canadian provinces of Ontario and
Quebec, on the one hand, and points in Mexico, on the other. The Company
transfers freight to, or receives freight from Mexican carriers at the
U.S.-Mexico border in Laredo, Texas. Revenue from foreign countries represents
less than 5% of total revenues of the Company for each of the past three years.
The principal types of freight transported include automotive parts and
materials, tires, paper and paper products, glass, retail store merchandise,
chemicals, aluminum and manufacturing materials and supplies. USA Truck does
not transport Class A or Class B explosives, garbage, radioactive materials or
hazardous wastes. The Company does not operate any flatbed, tanker, or other
specialized trailers.
USA Truck transports freight in truckload quantities from individual
shippers to single or multiple destinations on an as-needed basis. Its business
consists primarily of medium haul shipments, more than 700 but less than 1,000
miles. For 1996, 1997, and 1998, the average length of haul for Company
tractors was 878 miles, 920 miles, and 916 miles, respectively.
The Company was incorporated in 1983 as a wholly owned subsidiary of
Arkansas Best Corporation. In December 1988, the stock of the Company was sold
to management, and the Company completed its initial public offering of Common
Stock in late March 1992.
The Company's principal offices are located at 3108 Industrial Park
Road, Van Buren, Arkansas 72956, and its telephone number is (501) 471-2500.
BUSINESS STRATEGY
USA Truck's principal competitive strength is its ability and
commitment to consistently provide superior service to shippers. Although price
is a primary concern to all shippers, many of the Company's customers are
high-volume shippers that require a flexible and dependable source of motor
carrier service tailored to specific needs, including pickup or delivery within
narrow time windows. The Company's strategy is to provide a premium service to
meet these needs and to charge compensating rates for such service. This
approach has found increasing acceptance. See "Business -- Competition".
The Company is committed to prompt freight pickup, consistent on-time
delivery, and twenty-four hours a day, seven days a week dispatching. It has
taken a number of steps to meet these commitments. In particular, it (i)
adheres to strict maintenance and cleaning schedules to avoid breakdowns and
delays; (ii) provides detailed routing instructions for, and maintains
satellite communications with, drivers to expedite delivery; (iii) maintains
trailer pools at strategic locations to minimize the time between customer
order and pickup; and (iv) provides extra trailers to high volume shippers for
loading and unloading at their convenience.
USA Truck utilizes cost-efficient communications throughout its
operations. The Company provides EDI (electronic data interchange) arrangements
with several of its largest customers, providing them with access through their
computer systems to current information on the status of their shipments.
Beginning in the third quarter of 1997, the Company began installing two-way,
satellite based mobile messaging and position-locating equipment in all of its
tractors. This equipment is designed to fulfill customers' heightened need for
real time transit information as well as provide the Company with an enhanced
and cost-effective method of communications between its drivers and its
operations personnel. The system permits fleet managers to contact drivers
virtually anywhere in the
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Company's market area. These capabilities are intended to shorten response time
to customers, as well as to allow drivers uninterrupted rest time while
awaiting assignment. The installation of the equipment was completed in the
fourth quarter of 1997.
The Company has designed its own management information software
systems, which it operates on a mainframe computer that the Company acquired
during 1997. This system became operational during the second quarter of 1997,
when the Company's software was migrated to the new computer. Prior to that,
the Company was on-line with a mainframe computer through a contractual
agreement with a third party. These data processing capabilities enhance
operating efficiency by providing immediate access to detailed information
concerning equipment, cargo, customer's location, credit history, billing
arrangements and specific customer requirements. They also permit the Company
to respond quickly and accurately to customers' requests and assist in
balancing equipment availability throughout the market area. Management
believes these information software systems and computer hardware will be
sufficient to support the Company's expansion plans at least through 2000
without substantial additional expenditures in the data processing area.
MARKETING AND SALES
The Company focuses its marketing efforts on customers with demanding
requirements and heavy shipping needs within the regions where the Company
operates. This permits the Company to concentrate available equipment in its
primary service area, enabling it to be more responsive to customer needs. USA
Truck's Marketing and Operations Departments have primary responsibility for
developing and implementing the Company's marketing strategy and retaining
customer accounts.
The Marketing Department solicits and responds to customer orders and
maintains close customer contact regarding service requirements and rates. A
high percentage of the Company's business is from repeat customers. For the
year ended December 31, 1998, at least 94% of USA Truck's operating revenues
was derived from customers that were customers of the Company prior to 1998.
USA Truck establishes rates through individual negotiations with
customers and through contracts tailored to the specific needs of shippers.
For the year ended December 31, 1998, the Company's ten largest
customers accounted for 42.0% of revenues and its three largest customers
accounted for 22.5% of revenues, with more than 1,000 other customers
accounting for the balance. One customer, Wal-Mart Stores, Inc., accounted for
10.2% of revenues for the year. No other customer accounted for more than 10%
of revenues.
Customers are generally required to have credit approval before
dispatch. The Company bills customers at or shortly after pickup, and for the
last three years receivables collection has averaged approximately 31 days from
the billing date.
OPERATIONS
The Operations Department consists of two primary divisions: the Load
Coordinator Group and the Fleet Manager Group.
Load coordinators are responsible for efficiently matching available
equipment with customer needs, and they serve as the contact with customers'
receiving and shipping personnel. Load coordinators also have primary
responsibility for minimizing empty miles, and they work closely with the
Marketing Department to increase equipment utilization.
The average distance between loads as a percentage of total miles
(empty mile factor) is a standard measurement in the truckload industry. The
empty mile factor generally decreases as average length of haul and density of
trucks in an area increase. The Company's commitment to on-time pickup often
requires a tractor to travel farther to complete a pickup than it would have to
travel if the Company delayed the pickup until a tractor became available in
the area. USA Truck's empty mile factor was 9.78% for the year ended December
31, 1998.
Fleet managers supervise fleets of approximately 60 drivers each and
serve as the drivers' primary contact with the Company. Fleet managers monitor
the location of equipment and direct its movement in the most efficient and
safe manner practicable.
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DRIVERS AND OTHER PERSONNEL
Driver recruitment and retention continue to be difficult. Recruitment
is difficult because Company standards are high and because of declining
enrollment in driving schools. Retention is difficult because of wage and job
fulfillment considerations. Driver turnover, especially in the early months of
employment, is a significant problem, and the competition for qualified drivers
is intense. Although USA Truck has experienced difficulty with driver turnover,
it has been able to attract and retain qualified drivers sufficient to support
its operations. To attract and retain drivers, the Company must continue to
provide safe, attractive and comfortable equipment, direct access to
management, and competitive wages, benefits and financial incentives designed
to encourage longer-term employment.
Drivers' pay is calculated on the basis of miles driven and increases
with tenure. In 1998, drivers averaged 488 miles per workday. On October 18,
1998, the Company implemented a pay increase for drivers that resulted in an
average increase in total base compensation of approximately 6% per driver.
Drivers are also paid bonuses based on productivity. For 1998, the Company's
drivers earned bonuses totaling approximately $1,178,000. During 1998, the
Company's drivers earned wages and bonuses averaging $.30 per mile. Because of
the recent pay increase, the Company expects that average pay per mile will
increase in 1999.
At December 31, 1998, USA Truck employed 1,404 persons, of which 1,057
were drivers, none of whom was represented by a collective bargaining unit. In
the opinion of management, the Company's relationship with its employees is
satisfactory.
SAFETY
USA Truck's safety program is designed to create an accident-free
working environment and to enforce governmental safety regulations. The Company
controls the maximum speed of its tractors with electronic governing equipment,
and all its tractors are equipped with anti-lock braking systems. The Company
has received a number of awards based on its safety record, including the 1996
Fleet Safety Award for large carriers, awarded by the Truckload Carriers
Association.
Safety records are one of several hiring criteria used by USA Truck,
and safe equipment handling techniques are an important part of new driver
training. The Company also conducts pre-employment, random and post-accident
drug testing in accordance with Department of Transportation ("DOT")
regulations.
REVENUE EQUIPMENT AND MAINTENANCE
The Company's current policy is to replace most tractors within 42
months from the date of purchase, which permits the Company to maintain
substantial warranty coverage throughout the period of ownership. USA Truck
replaces its tractors and trailers based on various factors, including the used
equipment market, prevailing interest rates, technological improvements, fuel
efficiency and durability. The following table shows the number of units and
age of revenue equipment operated by the Company at December 31, 1998:
<TABLE>
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TRACTORS TRAILERS
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AVERAGE AVERAGE
MODEL MONTHS MONTHS
YEAR NUMBER IN SERVICE NUMBER IN SERVICE
- ---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
1999 177 4 -- --
1998 471 14 599 14
1997 284 24 284 25
1996 123 37 234 36
1995 77 42 262 47
1994 -- -- 303 59
1993 -- -- 229 72
1992 -- -- 93 79
----- --- ----- ---
Total 1,132 19 2,004 39
===== === ===== ===
</TABLE>
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At December 31, 1998, USA Truck operated 1,132 conventional sleeper
tractors and 2,004 van trailers. To simplify driver and mechanic training,
control the cost of spare parts and tire inventory and provide for a more
efficient vehicle maintenance program, the Company buys tractors and trailers
manufactured to its specifications. In deciding which equipment to buy, it
considers a number of factors, including safety, economy, resale value and
driver comfort. All of the Company's tractors are equipped with Detroit Diesel
Series 60 12.7-liter engines, air-ride suspension, and anti-lock brakes. The
Company's equipment is maintained through a strict preventive maintenance
program designed to minimize equipment downtime and to enhance trade-in value.
Beginning with the November 1995 trailer purchases, the Company began
converting its trailer fleet from 48-foot long and 102 inches wide trailers to
53-foot long and 102 inches wide trailers. Because of this conversion process,
the Company's trailer to tractor ratio was 1.8-to-1 at December 31, 1998 and
will probably increase until the conversion process is substantially completed.
Management believes that a 1.8-to-1 ratio is ideal for the Company's
operations, in that it promotes efficiency and provides the flexibility needed
to serve customer needs. As of December 31, 1998, 1,018 of the 2,004 trailers
in the Company's trailer fleet were 53-foot models. All future purchases of
trailers will be 53-foot models. The Company is undertaking this conversion in
order to meet its customers' requirements and to continue to provide an
efficient balance between trailer capacity and weight and length limitations in
the various states and Canada.
During 1998, the Company financed revenue equipment through its
collateralized, $20 million revolving credit agreement (the "General Line of
Credit" or "Line of Credit"), through conventional financing and lease-purchase
arrangements. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources". All of
its revenue equipment is pledged to secure its obligations under such financing
arrangements.
REVENUE EQUIPMENT ACQUISITION PROGRAM
During 1999 and 2000, the Company plans to acquire 353 and 563 new
tractors and 500 and 401 new trailers, respectively. This will result in net
increases of 151 and 189 tractors and 303 and 148 trailers, respectively. As of
February 26, 1999, contracts had been executed for the acquisition of all 353
tractors and 500 trailers to be acquired in 1999. Although these contracts fix
the price at which the Company may acquire this equipment, the Company has the
right in its discretion to decrease or increase the number of tractors or
trailers to be purchased during the year at agreed prices. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
During 1998, the Company acquired 342 new tractors (a net increase of
125) and 210 new trailers (a net increase of 76). The Company purchased more
new tractors and trailers in 1998 than anticipated, in response to current
economic conditions and strong demand in the truckload industry.
INSURANCE
The primary risk areas in the motor carrier industry are cargo loss
and damage, personal injury, property damage and workers' compensation claims.
Management believes that its insurance coverages are sufficient in each of
these areas. It is qualified as a workers' compensation self-insurer in the
States of Arkansas and Louisiana. The workers' compensation self-insurance is
secured by $300,000 in certificates of deposit. In June 1993, the Company
received authority to self-insure for cargo loss and damage claims and up to
$1.0 million per occurrence for bodily injury and property damage ("BIPD")
claims. These self-insurance arrangements are secured by $1.01 million in
letters of credit with the Federal Highway Administration. During 1998, the
self-insurance retention levels were $1.0 million for BIPD and $500,000 for
workers' compensation claims per occurrence. The Company has insurance coverage
for cargo loss and damage claims exceeding $100,000 per occurrence and coverage
for physical damage to its tractors and trailers with a self-insurance level of
$10,000 per occurrence. The Company has excess general liability coverage in
amounts substantially exceeding minimum legal requirements and believed to be
sufficient to protect the Company against material loss.
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FUEL AVAILABILITY AND COST
The motor carrier industry is dependent upon the availability of
diesel fuel, and fuel shortages or increases in fuel taxes or fuel costs have
adversely affected, and may in the future adversely affect the profitability of
USA Truck. Fuel prices have fluctuated widely and fuel taxes have generally
increased in recent years. The Company has not experienced difficulty in
maintaining necessary fuel supplies, and in the past the Company generally has
been able to recover all but the most significant increases in fuel costs and
fuel taxes from customers through increased freight rates. Diesel prices
declined during 1998, but there can be no assurance that diesel prices will
continue to decrease or remain below the higher prices experienced in recent
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.
COMPETITION
The trucking industry is highly competitive. It is characterized by
ease of entry and by many small carriers having revenues of less than $1
million per year, with relatively few carriers being able to achieve revenues
exceeding $100 million per year. The principal means of competition in the
truckload segment of the industry are service and price, with rate discounting
being particularly intense during economic downturns. Although the Company
competes primarily on the basis of service rather than rates, rate discounting
continues to be a factor in obtaining and retaining business. Although the
number of firms competing in the truckload segment has increased dramatically
since industry deregulation in 1980, the industry appears to be undergoing a
consolidation phase. Furthermore, a depressed economy tends to increase both
price and service competition from alternative modes such as
less-than-truckload carriers and railroads. Management believes that further
growth in the truckload segment of the industry is likely to be achieved
through a shift in market shares among competitors rather than through an
increase in the size of the market.
USA Truck competes primarily with other truckload carriers and
shipper-owned fleets and, to a lesser extent, with railroads and
less-than-truckload carriers. A number of truckload carriers have much greater
financial resources, own more revenue equipment and carry a larger volume of
freight than does the Company.
The Company also competes with truckload and less-than-truckload
carriers for qualified drivers. See "Business -- Drivers and Other Personnel".
TRADEMARK
The Company's name and logo are registered with the United States
Patent and Trademark Office, the Canadian Trade Marks Office, and the Mexican
Industrial Property Institute. The Company believes its trademark has
significant value and is important to its marketing efforts. The trademark
registration in each country is renewable indefinitely at the option of the
Company.
REGULATION
USA Truck is a motor carrier regulated by the DOT and other federal
and state agencies. The Company's business activities in the United States are
subject to broad federal, state and local laws and regulations beyond those
applicable to most business activities. These regulated business activities
include, among other things, service area, routes traveled, equipment
specifications, commodities transported, rates and charges, accounting systems,
financial reporting and insurance coverages. The Company's Canadian business
activities are subject to similar requirements imposed by the laws and
regulations of the Dominion of Canada and provincial laws and regulations.
Motor carrier operations are subject to safety requirements prescribed
by the DOT, governing interstate operation, and by Canadian provincial
authorities. Matters such as weight and equipment dimensions are also subject
to federal, state, and provincial regulations.
The Company is subject to federal, state, provincial, and local
environmental laws and regulations. Management believes that the Company is in
substantial compliance with such laws and regulations and that costs of such
compliance will not have a material adverse effect on its competitive position,
operations or financial condition or require a material increase in currently
anticipated capital expenditures.
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ITEM 2. PROPERTIES
The Company owns its headquarters in Van Buren, Arkansas, located on
63 acres. This site has approximately 84,000-square feet of office, training,
and driver housing space within two structures, a 12,000-square foot
maintenance facility, and a 2,500-square foot dock. In the second quarter of
1997, the Company completed construction of a new 57,000-square foot corporate
headquarters next to its existing headquarters facility in Van Buren, Arkansas.
The previously existing 27,000-square foot facility will be refurbished over
the next several years to house additional training, maintenance and support
services. This facility also contains aboveground fuel tanks with a capacity of
40,000 gallons.
The Company operates a maintenance and driver facility in West
Memphis, Arkansas, situated on roughly 16 acres with 13 acres of paved tractor
and trailer parking behind fence, a 17,200-square foot shop, an eight-lane
drive through fueling station containing above ground fuel tanks with a
capacity of 37,000 gallons and drivers' sleeping quarters that can house 36
drivers. During 1998, the Company expanded the shop by 7,200 square feet and
added four additional lanes to its drive through fueling station. The drivers'
quarters also include a recruiting office and driver training center for new
drivers. The Company owns 13 of the 16 acres and leases the remainder under a
long-term lease agreement with an initial term ending in November 2044. Located
at the intersection of I-40 and I-55, this facility is an ideal location for
these activities.
In August 1995, the Company completed construction of and began
operating its maintenance and driver facility in Shreveport, Louisiana, with 15
acres of paved tractor and trailer parking behind fence, a 12,000-square foot
shop, a two-lane drive through fueling station containing above ground fuel
tanks with a capacity of 37,000 gallons and a drivers' sleeping quarters that
can house 32 drivers. The drivers' quarters also include a recruiting office
and driver training center for new drivers. The facility is located on 20 acres
of land owned by the Company near I-20 on US Hwy. 80 and is strategically
located near several major customers in the area.
In June 1996, the Company began operating its maintenance and driver
facility in Vandalia, Ohio, with approximately five acres of paved tractor and
trailer parking behind fence, a 2,400-square foot shop, a one-lane drive
through fueling station containing a below ground fuel tank with a capacity of
10,000 gallons and a drivers' sleeping quarters that can house 22 drivers. The
drivers' quarters also include a sales office. The Company owned facility is
located near I-75 & I-70 and is strategically located for these activities.
The Company leases, on a month-to-month basis, parking and office
facilities in East Peoria and Blue Island, Illinois.
Management believes that its facilities will be sufficient for its
operations at least through 1999.
See "Item 1. Business -- Revenue Equipment and Maintenance" and "Item
1. Business -- Revenue Equipment Acquisition Program" for information regarding
the Company's revenue equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to routine litigation incidental to its
business, primarily involving claims for personal injury and property damage
incurred in the transportation of freight. It maintains insurance covering
liabilities resulting from personal injury and property damage claims.
Management believes that adverse results in one or more of these cases would
not have a material adverse effect on the financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders
during the fourth quarter of the fiscal year covered by this Annual Report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades on The Nasdaq Stock Market under the
symbol: USAK. The following table sets forth the high and low closing sales
prices for the Company's Common Stock as reported by The Nasdaq Stock Market
for 1998 and 1997.
<TABLE>
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1998 HIGH LOW
- ---- ---- ---
<S> <C> <C>
First Quarter.............................................. $ 16.13 $ 10.88
Second Quarter............................................. $ 16.94 $ 14.25
Third Quarter.............................................. $ 17.00 $ 10.25
Fourth Quarter............................................. $ 12.38 $ 9.50
</TABLE>
<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- ---- ---
<S> <C> <C>
First Quarter ............................................. $ 9.00 $ 7.75
Second Quarter............................................. $ 11.63 $ 9.00
Third Quarter.............................................. $ 12.50 $ 10.75
Fourth Quarter............................................. $ 13.88 $ 11.38
</TABLE>
As of February 26, 1999, there were 287 holders of record (including
brokerage firms and other nominees) of the Company's Common Stock. The Company
estimates that there were approximately 2,150 beneficial owners of the Common
Stock as of that date.
The Company has never paid a cash dividend on its Common Stock. It is
the current intention of the Company's Board of Directors to continue to retain
earnings to finance the growth of the Company rather than to pay cash
dividends. Any future payments of cash dividends will depend upon the financial
condition, results of operations and capital commitments of the Company as well
as other factors deemed relevant by the Board of Directors. Covenants contained
in the Company's General Line of Credit may limit the Company's ability to pay
dividends.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, for the periods and at the dates
indicated, selected financial data of the Company. The data should be read in
conjunction with the financial statements and related notes contained in Item 8
of this Annual Report and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations".
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------------------------
1998 1997 1996 1995 1994
-------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues .......................... $ 145,216 $ 129,507 $ 108,313 $ 102,400 $ 92,511
Operating expenses and costs:
Salaries, wages and employee benefits .... 61,297 53,122 45,122 42,860 38,094
Operations and maintenance ............... 33,401 34,189 31,064 26,909 23,144
Operating taxes and licenses ............. 2,547 2,160 1,964 1,822 1,575
Insurance and claims ..................... 7,250 6,773 6,422 5,146 3,632
Communications and utilities ............. 1,469 1,828 1,612 1,285 980
Depreciation and amortization ............ 16,179 13,608 11,839 11,145 9,125
Other .................................... 4,113 3,659 4,038 2,794 2,075
--------- --------- --------- --------- ---------
126,256 115,339 102,061 91,961 78,625
--------- --------- --------- --------- ---------
Operating income ............................ 18,960 14,168 6,252 10,439 13,886
Other (income) expenses:
Interest expense ......................... 1,715 1,380 730 799 781
Gain on disposal of assets ............... (37) (2) (9) (1) (118)
Other, net ............................... 102 (191) (4) (152) 138
--------- --------- --------- --------- ---------
1,780 1,187 717 646 801
--------- --------- --------- --------- ---------
Income before income taxes .................. 17,180 12,981 5,535 9,793 13,085
Income taxes ................................ 6,683 5,078 2,153 3,756 5,018
--------- --------- --------- --------- ---------
Net Income .................................. $ 10,497 $ 7,903 $ 3,382 $ 6,037 $ 8,067
========= ========= ========= ========= =========
Basic:
Net income per share ..................... $ 1.12 $ 0.84 $ 0.36 $ 0.62 $ 0.84
========= ========= ========= ========= =========
Average shares outstanding ............... 9,400 9,356 9,463 9,684 9,651
========= ========= ========= ========= =========
Diluted:
Net income per share ..................... $ 1.11 $ 0.83 $ 0.35 $ 0.60 $ 0.81
========= ========= ========= ========= =========
Average shares outstanding ............... 9,466 9,485 9,620 10,028 9,904
========= ========= ========= ========= =========
Cash dividends per share .................... -- -- -- -- --
BALANCE SHEET DATA (AT END OF YEAR):
Current assets .............................. $ 20,459 $ 20,292 $ 16,825 $ 16,008 $ 12,516
Current liabilities ......................... 21,151 20,762 15,193 13,295 10,764
Total assets ................................ 119,611 113,518 86,330 78,980 66,435
Long-term debt, less current maturities ..... 19,058 27,057 15,867 13,361 9,427
Stockholders' equity ........................ 62,734 52,373 44,424 43,157 38,645
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain items to
operating revenues for the years indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------------------------------
<S> <C> <C> <C>
Operating revenues ...................... 100.0% 100.0% 100.0%
Operating expenses and costs:
Salaries, wages and employee benefits 42.2 41.0 41.7
Operations and maintenance .......... 23.0 26.4 28.7
Operating taxes and licenses ........ 1.8 1.7 1.8
Insurance and claims ................ 5.0 5.2 5.9
Communications and utilities ........ 1.0 1.4 1.5
Depreciation and amortization ....... 11.1 10.5 10.9
Other ............................... 2.8 2.9 3.7
----- ----- -----
86.9 89.1 94.2
----- ----- -----
Operating income ........................ 13.1 10.9 5.8
Other (income) expenses:
Interest expense .................... 1.2 1.1 0.7
Gain on disposal of assets .......... -- -- --
Other, net .......................... 0.1 (0.2) --
----- ----- -----
1.3 0.9 0.7
----- ----- -----
Income before income taxes .............. 11.8 10.0 5.1
Income taxes ............................ 4.6 3.9 2.0
----- ----- -----
Net income .............................. 7.2% 6.1% 3.1%
===== ===== =====
</TABLE>
RESULTS OF OPERATIONS
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Operating revenues increased 12.1% to $145.2 million in 1998 from
$129.5 million in 1997, resulting from increased business with existing
customers and additional business from new customers. Average revenue per mile
increased to $1.12 in 1998 from $1.11 in 1997. The empty mile factor decreased
to 9.78% in 1998 from 10.05% of paid miles in 1997. There was a 12.4% increase
in the number of shipments to 128,179 in 1998 from 114,022 in 1997. This volume
improvement was made possible by an increase of 13.2% in the average number of
tractors operated from 935 in 1997 to 1,058 in 1998. The net effect of the
volume improvement and the Company's continuing fleet expansion was a decrease
of 1.4% in miles per tractor per week from 2,475 in 1997 to 2,441 in 1998.
Operating expenses and costs as a percentage of revenues improved to
86.9% in 1998 from 89.1% 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 salaries, wages, and employee benefits and 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 1998 compared to 1997, and by
an increase in fuel efficiency to 6.41 average miles per gallon in 1998 from
6.29 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
1998 as compared to 1997. The decrease in communications and utilities expense,
as a percentage of revenue and in actual dollars, reflects the installation in
December 1997 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, an
increase in driver total base compensation of approximately 6% per driver in
October 1998,
9
<PAGE> 12
along with an increase in incentives earned by employees due to improved
operating and financial performance of the Company in 1998 compared to 1997.
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 33.8%
to $19.0 million, or 13.1% of revenues, in 1998 from $14.2 million, or 10.9% of
revenues, in 1997.
Interest expense increased 24.3% to $1.7 million in 1998 from $1.4
million in 1997, resulting primarily from an increase in borrowings to
facilitate equipment purchases, partially offset by a decrease in interest
rates, in the aggregate, on both short-term and long-term debt.
The Company had other income, net, of $191,000 in 1997, compared to
other expense, net, of $102,000 in 1998. This increase in other expense, net
was due to a variety of factors, no single one of which accounted for more than
half of the increase.
As a result of the above, income before income taxes increased 32.3%
to $17.2 million, or 11.8% of revenues, in 1998 from $13.0 million, or 10.0% of
revenues, in 1997.
The Company's effective tax rate decreased to 38.9% in 1998 from 39.1%
in 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 32.8%
to $10.5 million, or 7.2% of revenues, in 1998 from $7.9 million, or 6.1% of
revenues, in 1997, an increase of 33.8% in diluted net income per share to
$1.11 from $.83. The number of shares used in the calculation of diluted net
income per share for 1998 and 1997 were 9,465,971 and 9,484,570, respectively.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Operating revenues increased 19.6% to $129.5 million in 1997 from
$108.3 million in 1996, resulting from increased business with existing
customers and additional business from new customers. Average revenue per mile
remained unchanged at $1.11 in both 1997 and 1996. The empty mile factor
decreased to 10.05% in 1997 from 10.16% of paid miles in 1996. There was a
14.0% increase in the number of shipments to 114,022 in 1997 from 99,979 in
1996. This volume improvement was made possible by an increase of 16.6% in the
average number of tractors operated from 802 in 1996 to 935 in 1997. The net
effect of the volume improvement and the Company's continuing fleet expansion
was an increase of 2.8% in miles per tractor per week to 2,475 in 1997 from
2,407 in 1996.
Operating expenses and costs as a percentage of revenues improved to
89.1% in 1997 from 94.2% in 1996. This change resulted primarily from a
decrease, on a percentage of revenue basis, in salaries, wages and employee
benefits expenses, in operations and maintenance costs, in insurance and claims
expenses, in depreciation and amortization expense and in other expenses.
Salaries, wages and employee benefits decreased, relative to revenues,
primarily from favorable experience in employee health benefits. The percentage
decrease, relative to revenues, in operations and maintenance was primarily the
result of a decrease of 2.2 cents per gallon in the average cost of fuel in
1997 compared to 1996, and of an increase in fuel efficiency to 6.29 average
miles per gallon in 1997 from 6.12 in 1996. The percentage decrease, relative
to revenues, in insurance and claims expenses was due to a decrease in the
number and severity of accidents in 1997 as compared to 1996. The overall net
cost of those accidents incurred was reduced by insurance coverage for physical
damage to tractors and trailers with a self-insurance level of $10,000 per
occurrence, effective January 1, 1997. The decrease in depreciation and
amortization expense, as a percentage of revenue, reflects the 2.8% increase in
utilization as mentioned above. Other expenses decreased, in both dollars and
relative to revenues, due to a variety of factors, no single one of which
accounted for more than half of the decrease.
As a result of the foregoing factors, operating income increased
126.6% to $14.2 million, or 10.9% of revenues, in 1997 from $6.3 million, or
5.8% of revenues, in 1996.
10
<PAGE> 13
Interest expense increased 89.0% to $1.4 million in 1997 from $730,000
in 1996, resulting primarily from an increase in borrowings to facilitate
equipment purchases, partially offset by a decrease in interest rates, in the
aggregate, on both short-term and long-term debt.
Other income, net, increased, both in dollar amount and on a
percentage of revenue basis, from $4,000 in 1996 to $191,000 in 1997. This was
due to a variety of factors, no single one of which accounted for more than
half of the increase.
As a result of the above, income before income taxes increased 134.5%
to $13.0 million, or 10.0% of revenues, in 1997 from $5.5 million, or 5.1% of
revenues, in 1996.
The Company's effective tax rate increased to 39.1% in 1997 from 38.9%
in 1996. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income increased 133.7%
to $7.9 million, or 6.1% of revenues, in 1997 from $3.4 million, or 3.1% of
revenues, in 1996, an increase of 137.1% in diluted net income per share to
$.83 from $.35. The number of shares used in the calculation of diluted net
income per share for 1997 and 1996 were 9,484,570 and 9,619,919, respectively.
INFLATION
The effect of inflation on operating costs has been minimal in recent
years. Most of the Company's operating expenses are inflation sensitive, with
increases in inflation generally resulting in increased operating costs and
expenses. The effect of inflation-driven cost increases on the Company's
overall operating costs would not be expected to be greater for the Company
than for its competitors.
SEASONALITY
In the trucking industry generally, revenues decrease as customers
reduce shipments during the winter holiday season and as inclement weather
impedes operations. At the same time, operating expenses increase, due
primarily to decreased fuel efficiency and increased maintenance costs. Future
revenues could be impacted if customers reduce shipments due to temporary plant
closings, which historically have occurred during July and December.
FUEL AVAILABILITY AND COST
The motor carrier industry is dependent upon the availability of
diesel fuel, and fuel shortages or increases in fuel taxes or fuel costs have
adversely affected, and may in the future adversely affect the profitability of
USA Truck. Fuel prices have fluctuated widely and fuel taxes have generally
increased in recent years. The Company has not experienced difficulty in
maintaining necessary fuel supplies, and in the past the Company generally has
been able to recover all but the most significant increases in fuel costs and
fuel taxes from customers through increased freight rates. Diesel prices
declined during 1998, but there can be no assurance that diesel prices will
continue to decrease or remain below the higher prices experienced in recent
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.
11
<PAGE> 14
OPERATIONAL DATA
The following table sets forth certain operational information for the
last three fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Total loads moved during the year ..................... 128,179 114,022 99,979
Average number of tractors operated during the year ... 1,058 935 802
Number of tractors operated at year end ............... 1,132 1,007 862
Number of trailers operated at year end ............... 2,004 1,928 1,510
Total tractor miles during the year ................... 148,590,937 133,941,037 113,406,333
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The continued growth of the Company's business has required
significant investments in new revenue equipment. USA Truck has financed
revenue equipment purchases with cash flows from operations and through
borrowings, including borrowings under the General Line of Credit, and
capitalized lease obligations. Working capital needs have generally been met
with cash flows from operations and occasionally with borrowings under the
General Line of Credit. Although the Company has not relied significantly on
the General Line of Credit to meet working capital requirements, it does
experience cyclical cash flow needs common to the industry. The Company uses
the General Line of Credit to minimize these fluctuations and to provide
flexibility in financing revenue equipment. Cash flows from operations were
$28.5 million for 1998 and $28.3 million for 1997.
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 based upon its evaluation of the Company's borrowing
requirements. As of December 31, 1998, approximately $16.1 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 year ending December 31, 1998 was 6.81%. Under
the General Line of Credit, the Company has the right to borrow at a rate
related to the Eurodollar rate when this rate is less than the lender's prime
rate. A quarterly commitment fee of 1/4% per annum is payable on the unused
amount. The principal maturity can be accelerated if the borrowing base (based
on percentages of receivables and otherwise unsecured equipment) does not
support the principal balance outstanding. The General Line of Credit is
collateralized by accounts receivable and all otherwise unencumbered equipment.
The Company has the option under certain conditions and at certain rates to fix
the rate and term on portions of the outstanding balance of the General Line of
Credit. See Note 4 to the Financial Statements.
On 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 a maximum 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 December 31, 1998, $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 December
31, 1998, capital leases in the aggregate principal amount of $8.6 million were
outstanding under the Equipment TRAC Lease Commitment with an average interest
rate of 4.04% per annum.
As of December 31, 1998, capital leases in the aggregate principal
amount of $12.8 million were outstanding under a prior lease commitment with an
average interest rate of 5.25% per annum.
12
<PAGE> 15
The Company's long-term debt, excluding current portion, decreased by
29.6% to $19.1 million at December 31, 1998 from $27.1 million at December 31,
1997. This decrease was from the retirement of $14.8 million in debt, partially
offset by increased borrowings under the Equipment TRAC Lease Commitment for
revenue equipment purchases. The retired debt had an average interest rate of
approximately 6.60% and was retired with cash flow from operations.
During the years 1999 and 2000, the Company plans to make
approximately $82.7 million in capital expenditures. At December 31, 1998, USA
Truck was committed to spend $31.9 million of this amount for revenue equipment
in 1999, and $47.2 million of this amount is currently budgeted 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 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 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 December 31, 1998,
7,961 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 December 31, 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 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
13
<PAGE> 16
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
February 15, 1999, the Company estimates that it had completed approximately
95% 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 5% 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 - 06/99 100%
------------------ ---------------
Remediation of departmental system issues 01/98 - 06/99 100%
------------------ ---------------
Upgrades to telephone/PBX and other systems 01/98 - 06/99 100%
------------------ ---------------
Electronic data interchange trading partner conversions 01/98 - 06/99 100%
------------------ ---------------
Desktop and individual systems assessment and remediation 01/98 - 06/99 100%
------------------ ---------------
Assessment of non-IT systems 01/98 - 09/98 100%
------------------ ---------------
Remediation of non-IT systems 05/98 - 06/99 90%
- -------------------------------------------------------------------------------------------------------------
</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
February 15, 1999, the Company had received responses from approximately 99% of
such third parties. However, only 9% 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 by 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 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 $95,000, which will be funded from operating cash
flows. Such amount represents approximately 2.5% of the Company's total actual
and anticipated IT expenditures for fiscal 1998 through fiscal 1999. As of
December 31, 1998, the Company had incurred costs of approximately $21,000
related to its Year 2000 program. All of the $21,000 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.
14
<PAGE> 17
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 amounts for all periods in this
Annual Report have been presented, and where appropriate, restated to conform
to the SFAS 128 requirements.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS
130). The provisions of SFAS 130 require companies to classify items of
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the financial statements. The
Company's comprehensive income items are not material; accordingly, the
adoption of this statement in 1998 had no impact on the Company's financial
statements.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131). The Company's operations are
comprised entirely of one segment. This statement was adopted in 1998 and had
no impact on the disclosures in the Company's financial statements.
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This statement provides guidance on the
capitalization of certain costs incurred in developing or acquiring
internal-use computer software. This statement was adopted in 1998 and did not
have a significant impact on the Company's financial statements.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements and information that
are based on management's belief as well as assumptions made by, and
information currently available to management. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will be realized.
Should one or more of the risks or uncertainties underlying such expectations
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those expected. Among the key factors that are not
within the Company's control and that may have a direct bearing on operating
results are increases in diesel prices, adverse weather conditions or driver
turnover and the impact of increased rate competition or competition for
qualified drivers. The Company's results may also be significantly affected by
fluctuations in general economic conditions, as the Company's utilization rates
are directly related to business levels of shippers in a variety of industries.
Results for any specific period could also be affected by various unforeseen
events, such as unusual levels of equipment failure or accident claims.
15
<PAGE> 18
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's General Line of Credit agreement provides for borrowings
which bear interest at variable rates based on either a prime rate or the
LIBOR. At December 31, 1998, the Company had $2.9 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 Company 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.
16
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors ......................................................................... 18
Balance Sheets as of December 31, 1998 and 1997......................................................... 19
Statements of Income for the years ended December 31, 1998, 1997 and 1996............................... 20
Statements of Stockholders' Equity for the years ended December 31, 1998, 1997 and 1996................. 21
Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996........................... 22
Notes to Financial Statements........................................................................... 23
</TABLE>
17
<PAGE> 20
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
USA Truck, Inc.
We have audited the accompanying balance sheets of USA Truck, Inc. as of
December 31, 1998 and 1997, and the related statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1998. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Truck, Inc. at December
31, 1998 and 1997, and the results of its operations and its cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG LLP
Little Rock, Arkansas
January 20, 1999
18
<PAGE> 21
USA TRUCK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1998 1997
--------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 1,779,643 $ 3,667,311
Receivables (Note 4):
Trade, less allowance for doubtful accounts of
$140,670 in 1998 and $170,250 in 1997 .............. 13,928,848 12,613,314
Other ................................................ 299,914 282,407
Inventories ............................................ 236,338 291,691
Deferred income taxes (Note 6) ......................... 1,573,365 1,956,115
Prepaid expenses and other current assets (Note 2) ..... 2,640,561 1,481,317
------------- -------------
Total current assets ...................................... 20,458,669 20,292,155
Property and equipment (Notes 4 and 5):
Land and structures .................................... 14,637,631 14,052,722
Revenue equipment ......................................... 107,323,786 96,571,178
Service, office and other equipment .................... 10,947,496 9,872,201
------------- -------------
132,908,913 120,496,101
Accumulated depreciation and amortization .............. (36,769,320) (30,314,193)
------------- -------------
96,139,593 90,181,908
Security deposits ......................................... 1,745,478 1,745,478
Other assets .............................................. 1,267,479 1,298,629
------------- -------------
Total assets .............................................. $ 119,611,219 $ 113,518,170
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank drafts payable .................................... $ 425,485 $ 371,730
Trade accounts payable .................................... 3,397,593 3,125,666
Accrued expenses (Note 3) .............................. 11,139,369 10,978,135
Current maturities of long-term debt (Notes 4 and 5) ... 6,188,241 6,285,986
------------- -------------
Total current liabilities ................................. 21,150,688 20,761,517
Long-term debt, less current maturities (Notes 4 and 5) ... 19,057,816 27,056,954
Deferred income taxes (Note 6) ............................ 14,576,038 11,641,824
Insurance and claims accruals ............................. 2,092,614 1,684,614
Commitments and contingencies (Notes 5 and 11)
Stockholders' equity (Notes 4 and 9):
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; none issued .............................. -- --
Common Stock, $.01 par value; 16,000,000 shares
authorized; issued 9,437,097 shares in 1998
and 9,374,868 shares in 1997 ......................... 94,371 93,749
Additional paid-in capital ............................. 12,921,342 12,577,336
Retained earnings ...................................... 50,199,325 39,702,176
Less treasury stock, at cost (46,789 shares in 1998) ... (480,975) --
------------- -------------
Total stockholders' equity ................................ 62,734,063 52,373,261
------------- -------------
Total liabilities and stockholders' equity ................ $ 119,611,219 $ 113,518,170
============= =============
</TABLE>
See accompanying notes.
19
<PAGE> 22
USA TRUCK, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------
1998 1997 1996
---------------------------------------------------
<S> <C> <C> <C>
Operating revenues .................................. $ 145,216,121 $ 129,507,242 $ 108,312,633
Operating expenses and costs:
Salaries, wages and employee benefits (Note 7) ... 61,296,860 53,122,136 45,122,323
Operations and maintenance ....................... 33,400,982 34,188,558 31,064,185
Operating taxes and licenses ..................... 2,547,449 2,160,408 1,963,888
Insurance and claims ............................. 7,249,853 6,773,001 6,422,064
Communications and utilities ..................... 1,468,485 1,827,608 1,612,030
Depreciation and amortization .................... 16,179,143 13,607,835 11,839,187
Other ............................................ 4,113,158 3,658,992 4,037,196
------------- ------------- -------------
126,255,930 115,338,538 102,060,873
------------- ------------- -------------
Operating income .................................... 18,960,191 14,168,704 6,251,760
Other (income) expenses:
Interest expense ................................. 1,714,662 1,379,481 729,885
Gain on disposal of assets ....................... (37,088) (1,731) (9,770)
Other, net ....................................... 102,340 (190,641) (3,835)
------------- ------------- -------------
1,779,914 1,187,109 716,280
------------- ------------- -------------
Income before income taxes .......................... 17,180,277 12,981,595 5,535,480
Income taxes (Note 6):
Current .......................................... 3,366,164 4,027,787 1,219,993
Deferred ......................................... 3,316,964 1,050,336 933,309
------------- ------------- -------------
6,683,128 5,078,123 2,153,302
------------- ------------- -------------
Net income .......................................... $ 10,497,149 $ 7,903,472 $ 3,382,178
============= ============= =============
Net income per share (Notes 8 and 9):
Basic earnings per share ......................... $ 1.12 $ .84 $ .36
============= ============= =============
Diluted earnings per share ....................... $ 1.11 $ .83 $ .35
============= ============= =============
</TABLE>
See accompanying notes.
20
<PAGE> 23
USA TRUCK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 ............ $ 97,147 $ 16,320,361 $28,416,526 $(1,677,313) $ 43,156,721
Exercise of stock options, net
(Note 9) ........................ 389 271,725 -- -- 272,114
Tax benefit of stock options
(Note 6) ........................ -- 35,856 -- -- 35,856
Purchases of 247,000 shares of
common stock into treasury ...... -- -- -- (2,422,874) (2,422,874)
Retirement of 254,000 shares
of treasury stock ............... (2,540) (2,790,157) -- 2,792,697 --
Net income for 1996 ............... -- -- 3,382,178 -- 3,382,178
-------- ------------ ----------- ----------- ------------
Balance at December 31, 1996 .......... 94,996 13,837,785 31,798,704 (1,307,490) 44,423,995
Exercise of stock options, net
(Note 9) ........................ 608 374,439 -- -- 375,047
Purchases of 40,500 shares of
common stock into treasury ...... -- -- -- (329,253) (329,253)
Retirement of 185,500 shares
of treasury stock ............... (1,855) (1,634,888) -- 1,636,743 --
Net income for 1997 ............... -- -- 7,903,472 -- 7,903,472
-------- ------------ ----------- ----------- ------------
Balance at December 31, 1997 .......... 93,749 12,577,336 39,702,176 -- 52,373,261
Exercise of stock options, net
(Note 9) ........................ 622 290,941 -- -- 291,563
Tax benefit of stock options
(Note 6) ........................ -- 53,065 -- -- 53,065
Purchases of 54,750 shares of
common stock into treasury ...... -- -- -- (585,962) (585,962)
Sale of 7,961 shares of treasury
stock to employee stock
purchase plan ................... -- -- -- 104,987 104,987
Net income for 1998 ............... -- -- 10,497,149 -- 10,497,149
-------- ------------ ----------- ----------- ------------
Balance at December 31, 1998 .......... $ 94,371 $ 12,921,342 $50,199,325 $ (480,975) $ 62,734,063
======== ============ =========== =========== ============
</TABLE>
See accompanying notes.
21
<PAGE> 24
USA TRUCK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1998 1997 1996
------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ............................................... $ 10,497,149 $ 7,903,472 $ 3,382,178
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ....................... 16,179,143 13,607,835 11,839,187
Provision for doubtful accounts ..................... 30,000 30,000 148,713
Deferred income taxes .................................... 3,316,964 1,050,336 933,309
Gain on disposal of assets .......................... (37,088) (1,731) (9,770)
Changes in operating assets and liabilities:
Receivables ....................................... (1,363,041) (186,827) (964,109)
Inventories, prepaid expenses and other
current assets .................................. (1,103,891) (106,694) 11,043
Bank drafts payable, trade accounts payable and
accrued expenses ................................ 539,981 5,568,536 (1,031,939)
Insurance and claims accruals - long-term ......... 408,000 408,000 562,077
------------ ------------ ------------
Net cash provided by operating activities ................ 28,467,217 28,272,927 14,870,689
INVESTING ACTIVITIES
Purchases of property and equipment ...................... (21,731,600) (32,777,855) (16,996,876)
Proceeds from sale of equipment .......................... 6,395,382 8,174,217 4,894,329
Increase in other assets ................................. 31,150 (307,728) (117,777)
------------ ------------ ------------
Net cash used by investing activities .................... (15,305,068) (24,911,366) (12,220,324)
FINANCING ACTIVITIES
Borrowings under long-term debt .......................... 14,325,000 29,553,208 14,280,000
Proceeds from the exercise of stock options .............. 291,563 375,047 272,114
Proceeds from sale of treasury stock ..................... 104,987 -- --
Payments to repurchase common stock ...................... (585,962) (597,379) (2,154,749)
Principal payments on long-term debt ..................... (22,800,000) (23,828,208) (11,880,000)
Principal payments on capitalized lease obligations ...... (6,385,405) (6,683,864) (3,337,176)
------------ ------------ ------------
Net cash used by financing activities .................... (15,049,817) (1,181,196) (2,819,811)
------------ ------------ ------------
Increase (Decrease) in cash and cash equivalents ......... (1,887,668) 2,180,365 (169,446)
Cash and cash equivalents:
Beginning of year ..................................... 3,667,311 1,486,946 1,656,392
------------ ------------ ------------
End of year ........................................... $ 1,779,643 $ 3,667,311 $ 1,486,946
============ ============ ============
</TABLE>
See accompanying notes.
22
<PAGE> 25
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
USA Truck, Inc. (the "Company"), operates as a truckload motor carrier with
operating authority to provide service throughout the continental United States
and parts of Canada and Mexico.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair value.
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations and generally does not require
collateral. The Company maintains reserves for potential credit losses. Such
losses have been within management's expectations.
One customer represented approximately 11% and 12% of net trade receivables as
of December 31, 1998 and 1997, respectively. A different customer represented
approximately 10% and 13% of revenues for the years ended December 31, 1998 and
1997, respectively.
INVENTORIES
Inventories consist primarily of tires, fuel and supplies and are stated at the
lower of cost (first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line
method using the following estimated useful lives: structures - 5 to 39.5
years; revenue equipment - 3 to 7 years; and service, office and other
equipment - 3 to 20 years. Gains and losses on asset sales are reflected in the
year of disposal. Trade-in allowances in excess of book value of revenue
equipment are accounted for by adjusting the cost of assets acquired. Tires
purchased with revenue equipment are capitalized as a part of the cost of such
equipment, with replacement tires being inventoried and expensed when placed in
service.
23
<PAGE> 26
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CLAIMS LIABILITIES
The Company is self-insured up to certain limits for bodily injury, property
damage, workers' compensation, and cargo loss and damage claims. Provisions are
made for both the estimated liabilities for known claims as incurred and
estimates for those incurred but not reported. In 1998 the Company was
self-insured up to $1,000,000 per occurrence for bodily injury and property
damage, up to $500,000 for workers' compensation claims, and up to $100,000 per
occurrence for cargo loss and damage claims. These self-insurance arrangements
are secured by $1,010,000 in letters of credit.
The workers' compensation self-insurance is secured by $300,000 in certificates
of deposit maturing during 1999. The certificates of deposit are included in
other assets on the balance sheet as of December 31, 1998 and 1997.
REVENUE RECOGNITION
Revenues are recognized based on a method whereby revenue is allocated between
reporting periods based on relative transit time in each period and direct
expenses are allocated on the same basis.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets include temporary
differences relating to depreciation, capitalized leases and certain revenues
and expenses.
EARNINGS PER SHARE
Earnings per share amounts are computed based on Financial Accounting Standards
Board Statement No. 128, Earnings per Share. Basic earnings per share is
computed based on the weighted average number of shares of common stock
outstanding during the year excluding any dilutive effects of options. Diluted
earnings per share is computed by adjusting the weighted average shares
outstanding by common stock equivalents attributable to dilutive options.
COMPENSATION TO EMPLOYEES
Stock based compensation to employees is accounted for based on the intrinsic
value method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25). Under APB 25 because the exercise price of
employee stock options equaled the market price of the underlying stock on the
grant date, no compensation expense is recorded. The Company has adopted the
disclosure - only provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123).
24
<PAGE> 27
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. This statement
was adopted in 1998 and had no impact on the Company's financial statements.
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information. The Company's operations are comprised entirely of one
segment. This statement was adopted in 1998 and had no impact on the
disclosures in the Company's financial statements.
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. This statement provides guidance on the
capitalization of certain costs incurred in developing or acquiring
internal-use computer software. This statement was adopted in 1998 and did not
have a significant impact on the Company's financial statements.
2. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
-------------------------
<S> <C> <C>
Prepaid licenses and taxes .... $ 938,881 $ 345,114
Prepaid insurance ............. 1,624,315 958,824
Other ......................... 77,365 177,379
---------- ----------
$2,640,561 $1,481,317
========== ==========
</TABLE>
3. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
Salaries, wages, bonuses and employee benefits ... $ 4,825,956 $ 4,451,409
Insurance and claims accruals .................... 4,071,832 4,334,109
Other ............................................ 2,241,581 2,192,617
----------- -----------
$11,139,369 $10,978,135
=========== ===========
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
Revolving credit agreement (1) ....... $ 2,900,000 $ 11,375,000
Capitalized lease obligations (2) .... 22,346,057 21,967,940
------------ ------------
25,246,057 33,342,940
Less current maturities .............. (6,188,241) (6,285,986)
------------ ------------
$ 19,057,816 $ 27,056,954
============ ============
</TABLE>
25
<PAGE> 28
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
(1) The Company's revolving credit agreement (the "Line of Credit")
provides for available borrowings of $20,000,000, including letters of
credit not exceeding $5,000,000. The Line of Credit matures on April
30, 2001, prior to which time, subject to certain conditions, the
remaining balance may be converted at any time at the Company's option
to a term loan requiring forty-eight equal monthly principal payments
plus interest. The credit facility bears variable interest based on
the lenders 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 credit facility for the year ending December 31,
1998 was 6.81%. A quarterly commitment fee of 1/4% per annum is
payable on the unused credit line. The Line of Credit is
collateralized by accounts receivable and all otherwise unencumbered
equipment. The Company has outstanding letters of credit of
approximately $1,010,000 at December 31, 1998.
The Line of Credit requires the Company to meet certain financial
covenants and to maintain a minimum tangible net worth of
approximately $38,700,000 at December 31, 1998. The Company was in
compliance with these covenants at December 31, 1998. The covenants
would prohibit the payment of dividends by the Company if such payment
would cause the Company to be in violation of any of the covenants.
The carrying amount reported in the balance sheet for borrowings under
the Line of Credit approximates its fair value since the interest rate
is variable.
(2) The leases extend through July, 2002 and contain renewal or fixed
price purchase options. The effective interest rates on the leases
range from 3.8% to 5.7% at December 31, 1998. The lease agreements
require the Company to pay property taxes, maintenance and operating
expenses.
The Company made interest payments of approximately $1,699,000, $1,454,000 and
$793,000 during 1998, 1997 and 1996, respectively. The Company capitalized
$6,800 and $86,600 in interest as a result of construction during 1998 and
1997, respectively.
5. LEASES AND COMMITMENTS
Capital lease obligations of $6,763,522, $12,416,151 and $6,141,601 were
incurred during the years ended December 31, 1998, 1997 and 1996, respectively.
At December 31, 1998, the future minimum payments under capitalized leases with
initial terms of one year or more were $7,204,228 for 1999, $7,088,033 for
2000, $6,684,652 for 2001 and $3,344,409 for 2002. The present value of net
minimum lease payments was $22,346,057 which includes the current portion of
the capital leases of $6,188,241 and excludes amounts representing interest of
$1,975,265.
At December 31, 1998, property and equipment included capitalized leases which
had capitalized costs of $28,666,354, accumulated amortization of $6,957,207
and a net book value of $21,709,147. At December 31, 1997 property and
equipment included capitalized leases which had capitalized costs of
$27,246,295, accumulated amortization of $6,075,925 and a net book value of
$21,170,370. Amortization of leased assets is included in depreciation and
amortization expense.
Commitments to purchase revenue equipment, which are cancelable by the Company
if certain conditions are met, aggregated approximately $31,909,000 at December
31, 1998.
26
<PAGE> 29
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FEDERAL AND STATE INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets as
of December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1997
------------------------------
<S> <C> <C>
Noncurrent deferred tax liabilities:
Tax over book depreciation ................... $ 14,512,768 $ 11,623,611
Capitalized leases .............................. 63,270 18,213
------------ ------------
Total noncurrent deferred tax liabilities ....... $ 14,576,038 $ 11,641,824
============ ============
Current deferred tax assets:
Revenue recognition .......................... $ (116,286) $ (86,131)
Accrued expenses not deductible until paid ... (2,420,906) (2,296,296)
Allowance for doubtful accounts .............. (53,033) (62,450)
------------ ------------
Total current deferred tax assets ............... (2,590,225) (2,444,877)
Current deferred tax liabilities:
Prepaid expenses deductible when paid ........ 1,016,860 488,762
------------ ------------
Net current deferred tax assets ................. $ (1,573,365) $ (1,956,115)
============ ============
</TABLE>
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1998 1997 1996
----------------------------------------
<S> <C> <C> <C>
Current
- -------
Federal ..................... $2,812,318 $3,491,181 $1,009,834
State ....................... 553,846 536,606 210,159
---------- ---------- ----------
Total current ............... 3,366,164 4,027,787 1,219,993
Deferred
- --------
Federal ..................... 2,883,617 862,092 830,388
State ....................... 433,347 188,244 102,921
---------- ---------- ----------
Total deferred .............. 3,316,964 1,050,336 933,309
---------- ---------- ----------
Total income tax expense .... $6,683,128 $5,078,123 $2,153,302
========== ========== ==========
</TABLE>
During 1998, 1997 and 1996, the Company made income tax payments of
approximately $3,484,000, $3,644,000, and $1,255,000, respectively.
During 1998 and 1996, the Company recognized a tax benefit of $53,065 and
$35,856 related to stock options, respectively. These amounts were added to
additional paid-in capital.
27
<PAGE> 30
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. FEDERAL AND STATE INCOME TAXES (CONTINUED)
A reconciliation between the effective income tax rate and the statutory
federal income tax rate is as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1998 1997 1996
-----------------------------------------------
<S> <C> <C> <C>
Income tax at 34% statutory federal rate .... $ 5,841,294 $ 4,413,742 $ 1,882,063
Federal income tax effects of:
State income taxes ....................... (336,172) (246,449) (106,447)
Nondeductible expenses ................... 98,131 (3,582) 47,566
Other .................................... 92,682 189,562 17,040
----------- ----------- -----------
Federal income taxes ........................ 5,695,935 4,353,273 1,840,222
State income taxes .......................... 987,193 724,850 313,080
----------- ----------- -----------
Total income tax expense .................... $ 6,683,128 $ 5,078,123 $ 2,153,302
=========== =========== ===========
Effective tax rate .......................... 38.9% 39.1% 38.9%
=========== =========== ===========
</TABLE>
7. EMPLOYEE BENEFIT PLANS
The Company sponsors the USA Truck, Inc. Employees' Investment Plan, a tax
deferred savings plan under section 401(k) of the Internal Revenue Code, that
covers substantially all employees. Employees can contribute up to 15% of their
compensation, with the Company matching 50% of the first 4% of compensation
contributed by each employee. Company matching contributions were approximately
$652,000, $558,000 and $491,000 for 1998, 1997 and 1996, respectively.
8. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Numerator:
Net Income ............................... $10,497,149 $7,903,472 $3,382,178
Denominator:
Denominator for basic earnings per
share - weighted average shares ........ 9,399,727 9,355,671 9,462,717
Effect of dilutive securities:
Employee stock options ................. 66,244 128,899 157,202
----------- ---------- ----------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ......... 9,465,971 9,484,570 9,619,919
=========== ========== ==========
Basic earnings per share .................... $ 1.12 $ .84 $ .36
=========== ========== ==========
Diluted earnings per share .................. $ 1.11 $ .83 $ .35
=========== ========== ==========
</TABLE>
28
<PAGE> 31
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
9. COMMON STOCK TRANSACTIONS
The Company has a stock option plan which provides for the granting of
incentive or nonqualified options to purchase up to 800,000 shares of common
stock to officers and other key employees. No options may be granted under this
plan for less than the fair market value of the common stock at the date of the
grant. Although the exercise period is determined when options are actually
granted, no option will be exercised later than 10 years after it is granted.
The Company also has a nonqualified stock option plan for directors who are not
officers or employees of the Company, which provides for the granting of
options to purchase up to 25,000 shares of common stock. No options may be
granted under this plan with exercise prices of less than the fair market value
of the common stock at the date of grant. Although the exercise period is
determined when options are actually granted, options will vest no less than
six months or more than three years after the grant date and may not be
exercised later than five years after the grant date.
A summary of the Company's stock option activity, and related information for
the years ended December 31, follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------- -------------------------------- ------------------------------
WEIGHTED-AVERAGE Weighted-Average Weighted-Average
OPTIONS EXERCISE PRICE Options Exercise Price Options Exercise Price
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning
of year 356,400 $ 6.90 425,320 $ 6.87 533,520 $ 6.67
Granted 46,000 11.59 9,600 9.73 62,400 10.67
Exercised (79,200) 6.30 (63,320) 6.25 (41,400) 7.05
Canceled -- -- (15,200) 10.50 (129,200) 7.57
------- ------- ------- ------- ------- -------
Outstanding-end of year 323,200 $ 7.72 356,400 $ 6.90 425,320 $ 6.87
======= ======= ======= ======= ======= =======
Exercisable at end of year 103,000 $ 6.46 142,200 $ 6.25 134,120 $ 6.25
</TABLE>
Exercise prices for options outstanding as of December 31, 1998 ranged from
$9.88 to $11.75 The weighted-average fair value of options granted during 1998
and 1997 were $4.30 and $4.46, respectively. The weighted-average remaining
contractual life of these options is 2.44 years.
In 1998, 1997 and 1996, 45,240, 60,007 and 38,210 options, respectively, were
exercised for cash. In 1998 and 1997 additional options of 33,960 and 3,313
respectively, were exercised by the exchange of 16,971 and 2,588 shares of
stock respectively, (with a market value equal to the exercise price of the
options). The exchanged shares were then canceled.
Since the Company has adopted the disclosure-only provisions of SFAS 123, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the Company's two stock option plans been determined
based on the fair value at the grant date for awards in 1998, 1997 and 1996
consistent with the provisions of SFAS 123, the Company's pro forma net income
would have been $10,431,143, $7,852,172 and $3,346,948, pro forma basic
earnings per share would have been $1.11, $.84 and $.35, and pro forma diluted
earnings per share would have been $1.10, $.83 and $.35, respectively.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following weighted-average assumptions
were used for grants in 1998: dividend yield of 0%; expected volatility of
0.457%; risk-free interest rates range from 4.29% to 5.44% and expected lives
range from 3 to 5 years. The following weighted-average assumptions were used
for grants in 1997: dividend yield of 0%; expected volatility of 0.535%;
risk-free interest rates range from 5.45% to 6.17% and expected lives range
from 3 to 5 years. The following weighted-average assumptions were used for
grants in 1996: dividend yield of 0%; expected volatility of 0.884%; risk-free
interest rates range from 5.24% to 6.65% and expected lives range from 3 to 6
years.
29
<PAGE> 32
USA TRUCK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 1998 and 1997:
<TABLE>
<CAPTION>
1998
THREE MONTHS ENDED
------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues ..................... $35,223,203 $37,387,246 $36,266,931 $36,338,741
Operating expenses and costs ........... 30,993,887 32,208,832 31,213,221 31,839,990
----------- ----------- ----------- -----------
Operating income ....................... 4,229,316 5,178,414 5,053,710 4,498,751
Other expenses, net .................... 403,265 598,909 435,041 342,699
----------- ----------- ----------- -----------
Income before income taxes ............. 3,826,051 4,579,505 4,618,669 4,156,052
Income taxes ........................... 1,488,334 1,781,428 1,796,662 1,616,704
----------- ----------- ----------- -----------
Net income ............................. $ 2,337,717 $ 2,798,077 $ 2,822,007 $ 2,539,348
=========== =========== =========== ===========
Average shares outstanding (basic) ..... 9,378,054 9,418,826 9,417,520 9,375,927
=========== =========== =========== ===========
Basic earnings per share ............... $ .25 $ .30 $ .30 $ .27
=========== =========== =========== ===========
Average shares outstanding (diluted) ... 9,478,162 9,531,054 9,512,954 9,442,155
=========== =========== =========== ===========
Diluted earnings per share ............. $ .25 $ .29 $ .30 $ .27
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
1997
Three Months Ended
------------------------------------------------------------
March 31, June 30, September 30, December 31,
------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating revenues ..................... $30,660,109 $32,079,177 $32,890,769 $33,877,187
Operating expenses and costs ........... 28,338,729 28,576,075 28,896,813 29,526,921
----------- ----------- ----------- -----------
Operating income ....................... 2,321,380 3,503,102 3,993,956 4,350,266
Other expenses, net .................... 223,831 352,545 226,668 384,065
----------- ----------- ----------- -----------
Income before income taxes ............. 2,097,549 3,150,557 3,767,288 3,966,201
Income taxes ........................... 815,947 1,225,567 1,465,475 1,571,134
----------- ----------- ----------- -----------
Net income ............................. $ 1,281,602 $ 1,924,990 $ 2,301,813 $ 2,395,067
=========== =========== =========== ===========
Average shares outstanding (basic) ..... 9,338,825 9,408,270 9,358,868 9,359,216
=========== =========== =========== ===========
Basic earnings per share ............... $ .14 $ .20 $ .25 $ .26
=========== =========== =========== ===========
Average shares outstanding (diluted) ... 9,415,695 9,528,750 9,508,090 9,522,347
=========== =========== =========== ===========
Diluted earnings per share ............. $ .14 $ .20 $ .24 $ .25
=========== =========== =========== ===========
</TABLE>
11. LITIGATION
The Company is not a party to any pending legal proceedings which management
believes to be material to the financial condition of the Company. The Company
maintains liability insurance against risks arising out of the normal course of
its business.
30
<PAGE> 33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in or disagreements with accountants on
accounting and financial disclosure matters during any period covered by the
financial statements filed herein or any period subsequent thereto.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors", "Executive Officers"
and "Section 16(a) Compliance" in the Company's proxy statement for the annual
meeting of stockholders to be held on May 5, 1999, set forth certain
information with respect to the directors, nominees for election as directors
and executive officers of the Company and are incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 5, 1999,
sets forth certain information with respect to the compensation of management
of the Company and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Outstanding Stock and Voting Rights" and
"Election of Directors" in the Company's proxy statement for the annual meeting
of stockholders to be held on May 5, 1999, set forth certain information with
respect to the ownership of the Company's voting securities and are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 5, 1999,
sets forth certain information with respect to relations of and transactions by
management of the Company and is incorporated herein by reference.
31
<PAGE> 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:
1. Financial statements.
The following financial statements of the Company are included in Part II,
Item 8 of this report:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Balance Sheets as of December 31, 1998 and 1997................................................. 19
Statements of Income for the years ended December 31, 1998, 1997 and 1996....................... 20
Statements of Stockholders' Equity for years ended December 31, 1998, 1997 and 1996............. 21
Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996................... 22
Notes to Financial Statements................................................................... 23
</TABLE>
2. The following financial statement schedule of the Company is included in
Item 14(d):
<TABLE>
<S> <C>
Schedule II - Valuation and Qualifying Accounts................................................ 36
</TABLE>
Schedules other than the schedule listed above have been omitted since the
required information is not present or not present in amounts sufficient to
require submission of the schedule, or because the information required is
included in the financial statements or the notes thereto.
3. Listing of exhibits.
Exhibit No. Exhibit
----------- -------
3.1 Restated and Amended Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1,
Registration No. 33-45682, filed with the Securities
and Exchange Commission on February 13, 1992 [the "Form
S-1"]).
3.2 Bylaws of the Company as currently in effect
(incorporated by reference to Exhibit 3.2 to Amendment
No. 1 to the Form S-1 filed with the Securities and
Exchange Commission on March 19, 1992 ["Amendment No.
1"]).
3.3 Certificate of Amendment to Certificate of
Incorporation of the Company filed March 17, 1992
(incorporated by reference to Exhibit 3.3 to Amendment
No. 1).
4.1 Specimen certificate evidencing shares of the Common
Stock, $.01 par value, of the Company (incorporated by
reference to Exhibit 4.1 to the Form S-1).
4.2 Fourth Amended and Restated Revolving Credit Agreement
dated December 30, 1992, between the Company and
Deposit Guaranty National Bank, as Lender (incorporated
by reference to Exhibit 4.2 to the Company's annual
report on Form 10-K for the year ended December 31,
1992).
4.3 Fourth Amended and Restated Revolving Note of the
Company dated December 30, 1992, in the maximum
principal amount of $12,000,000 payable to Deposit
Guaranty National Bank, executed in connection with the
credit facility filed as Exhibit 4.2 (incorporated by
reference to Exhibit 4.3 to the Company's annual report
on Form 10-K for the year ended December 31, 1992).
32
<PAGE> 35
4.4 Fifth Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated December 30, 1996,
between the Company and Deposit Guaranty National Bank,
as Lender (incorporated by reference to Exhibit 4.5 to
the Company's annual report on Form 10-K for the year
ended December 31, 1996).
4.5 Sixth Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated December 30, 1997,
between the Company and Deposit Guaranty National Bank,
as Lender (incorporated by reference to Exhibit 4.5 to
the Company's annual report on Form 10-K for the year
ended December 31, 1997).
4.6 Sixth Amendment to Fourth Amended and Restated
Revolving Note of the Company dated December 30, 1997,
in the maximum principal amount of $28,500,000 payable
to Deposit Guaranty National Bank, executed in
connection with the credit facility filed as Exhibit
4.5 (incorporated by reference to Exhibit 4.6 to the
Company's annual report on Form 10-K for the year ended
December 31, 1997).
4.7* Seventh Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated October 30, 1998,
between the Company and Deposit Guaranty National Bank,
as Lender.
4.8* Seventh Amendment to Fourth Amended and Restated
Revolving Note of the Company dated October 30, 1998,
in the maximum principal amount of $20,000,000 payable
to Deposit Guaranty National Bank, executed in
connection with the credit facility filed as Exhibit
4.7.
4.9 TRAC Lease Commitment Agreement dated January 24, 1996,
between the Company and Fleet Credit Corporation, as
Lender. (incorporated by reference to Exhibit 4.9 to
the Company's annual report on Form 10-K for the year
ended December 31, 1995).
4.10 First Amendment to TRAC Lease Commitment Agreement
dated November 13, 1996, between the Company and Fleet
Credit Corporation, as Lender (incorporated by
reference to Exhibit 4.8 to the Company's annual report
on Form 10-K for the year ended December 31, 1997).
4.11 Equipment TRAC Lease Commitment Agreement dated
November 12, 1997 and accepted November 19, 1997,
between the Company and Banc One Leasing Corporation,
as Lender (incorporated by reference to Exhibit 4.9 to
the Company's annual report on Form 10-K for the year
ended December 31, 1997).
4.12* First Amendment dated December 30, 1998, to the
Equipment TRAC Lease Commitment Agreement dated
November 12, 1997 and accepted November 19, 1997,
between the Company and Banc One Leasing Corporation,
as Lender.
4.13 Instruments with respect to long-term debt not
exceeding 10% of the total assets of the Company have
not been filed. The Company agrees to furnish a copy of
such instruments to the Securities and Exchange
Commission upon request.
10.1 Employee Stock Option Plan of the Company (incorporated
by reference to Exhibit 10.6 to the Form S-1).
33
<PAGE> 36
10.2 Nonqualified Stock Option Plan for Nonemployee
Directors of the Company (incorporated by reference to
Exhibit 10.7 to the Form S-1) terminated in January
1997, except with respect to outstanding options.
10.3 Description of Incentive Compensation Plan for
executive officers of the Company (incorporated by
reference to Exhibit 10.8 to the Form S-1).
10.4 1997 Nonqualified Stock Option Plan for Nonemployee
Directors of the Company (incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement on
Form S-8, Registration No. 333-20721, filed with the
Securities and Exchange Commission on January 30,
1997).
21 The Company has no subsidiaries.
23* Consent of Ernst & Young LLP, Independent Auditors.
27* 1998 Financial Data Schedule
- --------------
* Filed herewith.
Management Compensatory Plans:
-Employee Stock Option Plan (Exhibit 10.1)
-Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit 10.2)
-Incentive Compensation Plan (Exhibit 10.3)
-1997 Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit 10.4)
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of the fiscal year
covered by this Annual Report.
34
<PAGE> 37
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 1998
ITEM 14(d)
FINANCIAL STATEMENT SCHEDULE
35
<PAGE> 38
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
USA TRUCK, INC.
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
--------------------------------------------------------------
(1)
BALANCE AT CHARGED BALANCE
BEGINNING TO COST DEDUCTIONS END
DESCRIPTION OF PERIOD AND EXPENSES -OTHER OF PERIOD
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Deducted from asset accounts:
Allowance for doubtful accounts .......................... $170,250 $ 30,000 $ 59,580(a) $140,670
-------- -------- --------- --------
Year ended December 31, 1997: Deducted from asset accounts:
Allowance for doubtful accounts .......................... $113,000 $ 30,000 $ 27,250(a) $170,250
-------- -------- --------- --------
Year ended December 31, 1996: Deducted from asset accounts:
Allowance for doubtful accounts .......................... $104,000 $148,713 $(139,713)(a) $113,000
-------- -------- --------- --------
</TABLE>
(a) Uncollectible accounts written off, net recoveries
36
<PAGE> 39
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
USA TRUCK, INC.
(Registrant)
By: /s/ ROBERT M. POWELL By: /s/ JERRY D. ORLER
-------------------------------- -------------------------------
Robert M. Powell Jerry D. Orler
President and Chief Executive Vice President - Finance, Chief
Officer Financial Officer and Secretary
Date: March 25, 1999 Date: March 25, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ ROBERT M. POWELL President, Chief Executive Officer March 25, 1999
- ------------------------------------- and Director
Robert M. Powell
/s/ JERRY D. ORLER Vice President - Finance, March 25, 1999
- ------------------------------------- Chief Financial Officer, Secretary
Jerry D. Orler and Director
/s/ J.B. SPEED Director March 25, 1999
- -------------------------------------
James B. Speed
/s/ GEORGE R. JACOBS Director March 25, 1999
- -------------------------------------
George R. Jacobs
/s/ JIM L. HANNA Director March 25, 1999
- -------------------------------------
Jim L. Hanna
/s/ ROLAND S. BOREHAM Director March 25, 1999
- -------------------------------------
Roland S. Boreham, Jr.
</TABLE>
37
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
<S> <C>
3.1 Restated and Amended Certificate of Incorporation of
the Company (incorporated by reference to Exhibit 3.1
to the Company's Registration Statement on Form S-1,
Registration No. 33-45682, filed with the Securities
and Exchange Commission on February 13, 1992 [the "Form
S-1"]).
3.2 Bylaws of the Company as currently in effect
(incorporated by reference to Exhibit 3.2 to Amendment
No. 1 to the Form S-1 filed with the Securities and
Exchange Commission on March 19, 1992 ["Amendment No.
1"]).
3.3 Certificate of Amendment to Certificate of
Incorporation of the Company filed March 17, 1992
(incorporated by reference to Exhibit 3.3 to Amendment
No. 1).
4.1 Specimen certificate evidencing shares of the Common
Stock, $.01 par value, of the Company (incorporated by
reference to Exhibit 4.1 to the Form S-1).
4.2 Fourth Amended and Restated Revolving Credit Agreement
dated December 30, 1992, between the Company and
Deposit Guaranty National Bank, as Lender (incorporated
by reference to Exhibit 4.2 to the Company's annual
report on Form 10-K for the year ended December 31,
1992).
4.3 Fourth Amended and Restated Revolving Note of the
Company dated December 30, 1992, in the maximum
principal amount of $12,000,000 payable to Deposit
Guaranty National Bank, executed in connection with the
credit facility filed as Exhibit 4.2 (incorporated by
reference to Exhibit 4.3 to the Company's annual report
on Form 10-K for the year ended December 31, 1992).
4.4 Fifth Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated December 30, 1996,
between the Company and Deposit Guaranty National Bank,
as Lender (incorporated by reference to Exhibit 4.5 to
the Company's annual report on Form 10-K for the year
ended December 31, 1996).
4.5 Sixth Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated December 30, 1997,
between the Company and Deposit Guaranty National Bank,
as Lender (incorporated by reference to Exhibit 4.5 to
the Company's annual report on Form 10-K for the year
ended December 31, 1997).
4.6 Sixth Amendment to Fourth Amended and Restated
Revolving Note of the Company dated December 30, 1997,
in the maximum principal amount of $28,500,000 payable
to Deposit Guaranty National Bank, executed in
connection with the credit facility filed as Exhibit
4.5 (incorporated by reference to Exhibit 4.6 to the
Company's annual report on Form 10-K for the year ended
December 31, 1997).
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
<S> <C>
4.7* Seventh Amendment to Fourth Amended and Restated
Revolving Credit Agreement dated October 30, 1998,
between the Company and Deposit Guaranty National Bank,
as Lender.
4.8* Seventh Amendment to Fourth Amended and Restated
Revolving Note of the Company dated October 30, 1998,
in the maximum principal amount of $20,000,000 payable
to Deposit Guaranty National Bank, executed in
connection with the credit facility filed as Exhibit
4.7.
4.9 TRAC Lease Commitment Agreement dated January 24, 1996,
between the Company and Fleet Credit Corporation, as
Lender. (incorporated by reference to Exhibit 4.9 to
the Company's annual report on Form 10-K for the year
ended December 31, 1995).
4.10 First Amendment to TRAC Lease Commitment Agreement
dated November 13, 1996, between the Company and Fleet
Credit Corporation, as Lender (incorporated by
reference to Exhibit 4.8 to the Company's annual report
on Form 10-K for the year ended December 31, 1997).
4.11 Equipment TRAC Lease Commitment Agreement dated
November 12, 1997 and accepted November 19, 1997,
between the Company and Banc One Leasing Corporation,
as Lender (incorporated by reference to Exhibit 4.9 to
the Company's annual report on Form 10-K for the year
ended December 31, 1997).
4.12* First Amendment dated December 30, 1998, to the
Equipment TRAC Lease Commitment Agreement dated
November 12, 1997 and accepted November 19, 1997,
between the Company and Banc One Leasing Corporation,
as Lender.
4.13 Instruments with respect to long-term debt not
exceeding 10% of the total assets of the Company have
not been filed. The Company agrees to furnish a copy of
such instruments to the Securities and Exchange
Commission upon request.
10.1 Employee Stock Option Plan of the Company (incorporated
by reference to Exhibit 10.6 to the Form S-1).
10.2 Nonqualified Stock Option Plan for Nonemployee
Directors of the Company (incorporated by reference to
Exhibit 10.7 to the Form S-1) terminated in January
1997, except with respect to outstanding options.
10.3 Description of Incentive Compensation Plan for
executive officers of the Company (incorporated by
reference to Exhibit 10.8 to the Form S-1).
10.4 1997 Nonqualified Stock Option Plan for Nonemployee
Directors of the Company (incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement on
Form S-8, Registration No. 333-20721, filed with the
Securities and Exchange Commission on January 30,
1997).
21 The Company has no subsidiaries.
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
------ ------- -------------
<S> <C>
23* Consent of Ernst & Young LLP, Independent Auditors.
27* 1998 Financial Data Schedule
</TABLE>
- ----------------------
* Filed herewith.
<PAGE> 1
Exhibit 4.7
SEVENTH AMENDMENT TO FOURTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO FOURTH AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "Agreement") is made and entered into as of the 30th day of
October, 1998, by and between USA TRUCK, INC., a Delaware corporation (the
"Borrower"), and FIRST AMERICAN NATIONAL BANK, operating as DEPOSIT GUARANTY
NATIONAL BANK, a national banking association (the "Lender").
WHEREAS, pursuant to that certain Fourth Amended and Restated Revolving
Credit Agreement, dated December 30, 1992, as amended July 21, 1993, December
12, 1993, December 22, 1994, and December 28, 1995, December 30, 1996, and
December 30, 1997(as further amended, modified and supplemented from time to
time, the "Credit Agreement"), between Borrower and Lender, Borrower and Lender
entered into certain agreements regarding certain indebtedness and obligations
of Borrower to Lender;
WHEREAS, Borrower has requested, and Lender has agreed to make, certain
amendments to the Credit Agreement in accordance with the terms hereof, and
WHEREAS, Borrower and Lender desire to amend the Credit Agreement in
accordance with the terms hereof;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender hereby agree
as follows:
1. Defined Terms. All capitalized terms used and not otherwise defined
(including, without limitation, in the language amendatory to the Credit
Agreement contained herein) shall have the respective meanings given such terms
in the Credit Agreement.
2. Amendments to Section 1 of the Credit Agreement.
A. The second paragraph of subsection 1(i) of the Credit
Agreement is hereby amended, in its entirety, to read as
follows:
"The Revolving Note shall (a) be dated the date of the
Seventh Amendment to this Credit Agreement, (b) be payable
to the order of Lender, (c) be in the stated principal
amount equal to the Revolving Loan Commitment, (d) be
payable on the Revolving Loan Commitment Termination Date,
(e) bear interest with respect to the principal amount from
time to time outstanding at the rate per annum specified in
subsection 1(iii) hereof, and (f) be substantially in the
form of Exhibit "A" hereto, with blanks completed in
conformity herewith."
B. The Credit Agreement is hereby amended by deleting in its
entirety subsection 1(iii) of the Credit Agreement and by
substituting in place and instead thereof the following:
"(iii) Interest. Borrower shall pay interest on the
aggregate unpaid balance of all Loans (whether evidenced by
the Revolving Note or the Term Note) at the applicable rates
of interest provided herein, the selection of the applicable
rate or rates of interest to be at Borrower's sole option,
subject to the terms and conditions of this Agreement. The
interest rate applicable to each Loan shall be the
applicable interest rate in effect on the date such Loan is
made (or, from and after the Conversion Date, on the date
the applicable interest rate is selected or applied thereto)
and there shall be no adjustment or modification of such
interest rate during the Interest Period for such Loan. All
interest charged hereunder upon the Eurodollar Loans shall
be due and payable on the last Business Day of each Interest
Period to which such rate applies, and at maturity of the
Revolving Note or Term Note, however such maturity shall
occur. All interest charged
<PAGE> 2
hereunder upon the Domestic Loans shall be payable in
arrears and due on the first Business Day of each month, and
at maturity such maturity shall occur. All interest charged
hereunder upon Fixed Rate Loans shall be payable in arrears
and due on the first Business Day of each month, on the
Fixed Rate Loan Maturity Date and at maturity of the
Revolving Note or Term Note, however such maturity shall
occur. The unpaid principal amount of each Loan (whether
evidenced by the Revolving Note or Term Note) shall bear
interest, calculated on the basis of a 360-day year and the
actual number of days outstanding to but not annum which is
equal to the applicable Domestic Rate, Eurodollar Rate or
Fixed Rate in effect hereunder from time to time. If any
Loan shall not be paid when due, the unpaid principal amount
thereof shall bear interest at a rate per annum equal to the
interest rate determined in accordance with the provisions
of this subsection 1(iii) plus an additional two percent
(2%) (the "Default Rate"). Borrower and Lender acknowledge
that the Applicable Eurodollar Margin as of the date hereof
is .60%."
C. Subsection 1(ix) of the Credit Agreement is hereby amended,
in its entirety, to read as follows:
(ix) Revolving Loan Commitment Termination Date. As
used in the Agreement, the term "Revolving Loan Commitment
Termination Date" shall mean the earlier of April 30, 2001
or such date as the Revolving Loan Commitment is terminated
pursuant to subsection 1(v) hereof."
D. Subsection 1(xii) of the Credit Agreement is hereby amended
by deleting in its entirety the third sentence thereof and
by substituting in place and instead thereof the following:
"Borrower agrees to pay the Lender a non-refundable letter
of credit fee for the period of time that each Letter of
Credit shall be n effect at the rate per annum, calculated
on the basis of a 360-day year and the actual number of days
elapsed, and on the maximum stated amount thereof
outstanding (as the same may be reduced from time to time),
which is equal to (a) if the Funded Debt to Cash Flow Ratio
as of the last day of the immediately preceding fiscal
quarter is greater than or equal to 1.50 to 1, 1.00%; and
(b) if the Funded Debt to Cash Flow Ratio as of the last day
of the immediately preceding fiscal quarter is less than or
equal to 1.50 to 1, .50%. Borrower and Lender acknowledge
that the applicable letter of credit fee hereunder as of the
date hereof is .50%."
3. Amendments to Section 3 of the Credit Agreement.
A. The Credit Agreement is hereby amended to add the following
subsection 3E:
"3E. Year 2000 Compliance. Have (i) begun analyzing the
operations of Borrower that could be adversely affected by
failure to become Year 2000 compliant (that is, that computer
applications, imbedded microchips and other systems will be able
to perform accurately date-sensitive functions prior to and after
December 31, 1999); and (ii) developed a plan for becoming Year
2000 compliant in a timely manner, the implementation of which is
schedule in all material respects. The Borrower reasonably
believes that it will become Year 2000 compliant for its
operations on a timely basis except to the extent that a failure
to do so could not reasonably be expected to have a material
adverse effect upon the financial condition of Borrower. The
Borrower reasonably believes any suppliers and vendors that are
material to the operations of the Borrower will be Year 2000
compliant for their own computer applications except to the
extent that a failure to do so could not reasonably be expected
to have a material adverse effect upon the financial condition or
operations of the Borrower. The Borrower will promptly notify the
Lender in the event the Borrower determines that any computer
application which is material to the operations of the Borrower
or any of its material vendors or suppliers will not be fully
Year 2000 compliant on a timely basis, except to the extent that
such failure could not reasonably be expected to have a material
adverse effect upon the financial condition of the Borrower."
2
<PAGE> 3
4. Amendments to Section of the Credit Agreement.
A. The defined term "Eurodollar Rate" is hereby amended, in its
entirety, to read as follows:
"`Eurodollar Rate' shall mean an interest rate equal to
the sum of (i) the Applicable Eurodollar Margin, plus (ii) a
rate per annum determined pursuant to the following:
London Interbank Rate
---------------------------
100% Minus Eurodollar Reserve Percentage"
B. The defined term "Revolving Loan Commitment" is hereby
amended, in its entirety, to read as follows:
"`Revolving Loan Commitment' means $20,000,000 at all
times during the term of this Agreement."
C. The defined term "Revolving Loan Commitment Termination
Date" is hereby amended, by substituting the date "April 30,
2001" in the place and stead of the date "April 30, 2000".
D. The defined term "Eurodollar Rate" is hereby amended, in its
entirety, to read as follows:
"'Applicable Eurodollar Margin' means (a) if the Funded
Debt to Cash Flow Ratio as of the last day of the
immediately preceding fiscal quarter is greater than 2.10 to
1, 1.20%; (b) if the Funded Debt to Cash Flow Ratio as of
the last day of the immediately preceding fiscal quarter is
less than or equal to 2.10 to 1, but greater than 1.50 to 1,
1.00%; (c) if the Funded Debt to Cash Flow Ratio as of the
last day of the immediately preceding fiscal quarter is less
than or equal to 1.50 to 1, but greater than .90 to 1, .80%;
and (d) if the Funded Debt to Cash Flow Ratio as of the last
day of the immediately preceding fiscal quarter is less than
or equal to .90 to 1, .60%."
E. The defined term "Funded Debt" is hereby added to read as
follows:
"'Funded Debt' shall mean, as of any date, the sum of
the following (without duplication): (a) Debt of the
Borrower and its Subsidiaries as of such date, other than
accrued expenses, trade accounts payable, deferred income
taxes, deferred compensation, unearned revenue and
obligations under any non-competition agreements, (b) Debt
which would be classified as "funded indebtedness" or
"long-term indebtedness" on a consolidated balance sheet of
the Borrower and its Subsidiary prepared as of such date in
accordance with GAAP, (c) all Debt, whether secured or
unsecured, of the Borrower and its Subsidiaries, having a
fixed maturity (or which is renewable or extendable at the
option of the obligor for a specific period) of more than
one year after the date of creation thereof, notwithstanding
the fact that payments in respect thereof (whether
installment, serial maturity or sinking fund payments, or
otherwise) are required to be made by the obligor less than
one year after the date of the creation thereof and
notwithstanding the fact that any amount thereof is at the
time included also in current liabilities of such obligor,
(d) all Debt of the Borrower and its Subsidiaries
outstanding under revolving credit or similar agreements
providing for borrowings (and renewals and extension
thereof) over a period of more than one year,
notwithstanding the fact that any such Debt is created
within one year of the expiration of such agreement, (e) the
present value (discounted at the implicit rate, if known, or
ten percent (10%) per annum otherwise) of all obligations in
respect of capitalized leases of the Borrower and its
Subsidiaries, and (f) the aggregate undrawn amount of all
outstanding Letters of Credit."
3
<PAGE> 4
F. The defined term "Cash Flow" is hereby added to read as
follows:
"'Cash Flow' shall mean the net profit which would be
included on the consolidated income statement of the
Borrower and its Subsidiaries, plus income taxes,
depreciation, amortization charges, minority interests, and
interest expense, and minus equity and earnings (losses) of
unconsolidated affiliates, all determined in accordance with
GAAP."
G. The defined term "Funded Debt to Cash Flow Ratio" is hereby
added to read as follows:
"'Funded Debt to Cash Ratio' means the ratio which (a)
Funded Debt bear to (b) Cash Flow. For purposes of this
Credit Agreement, Cash Flow shall be measured quarterly as
the cumulative sum of the most recent four (4) fiscal
quarters' Cash Flow."
5. Representations and Warranties. In order to induce Lender to enter
into this Seventh Amendment, the Borrower represents and warrants to Lender as
follows:
A. All the representations and warranties contained in Section
6 of the Credit Agreement, expect to the extent they
specifically relate to an earlier date, are true and correct
on and as of the date of this Agreement and on the date of
execution of this Agreement, as fully as if made on each of
such dates; and immediately on and after the execution of
this Agreement, the Borrower shall be in compliance with all
the terms and provisions set forth in the Credit Agreement,
as amended by this Agreement, on its part to be observed or
performed and no Event of Default specified in Section 5 of
the Credit Agreement, as amended hereby, or any event that
upon notice or lapse of time or both would constitute such
an Event of Default, has occurred and is continuing.
B. The execution, delivery and performance of this Agreement,
The Revolving Note and the Security Agreement Sixth
Amendment (i) have been duly authorized by all requisite
corporate action, and (ii) will not violate any provision of
law, any order of any court or other agency of government,
the articles of incorporation or bylaws of the Borrower, or
any indenture, agreement or other instrument to which the
Borrower is a party or by which the borrower or any of its
properties or assets are bound, or be in conflict with, or
result in a breech of or constitute (with due notice or
lapse of time or both) a default under, any such indenture,
agreement or other instrument, or result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the
Borrower. Borrower shall deliver to Lender concurrently with
the execution of this Agreement a Corporate Certificate
substantially in the form of Exhibit "G" attached hereto.
C. Except as is expressly modified and amended hereby, the
Credit Agreement shall remain in full force and effect in
accordance with its terms.
IN WITNESS WHEREOF, the Borrower and Lender have caused this Agreement
to be duly executed and delivered by their authorized representatives, as of the
day and year first above written, but in each case actually on the date
appearing beneath the signature of each party hereto.
USA TRUCK, INC.
By: /s/ JERRY D. ORLER
Title: CFO & Sec.
Execution Date: 11/3/98
FIRST AMERICAN NATIONAL BANK,
operating as
DEPOSIT GUARANTY NATIONAL BANK
By: /s/ RONALD L. HENDRIX
Title: Vice President
Execution Date: 11/5/98
4
<PAGE> 1
Exhibit 4.8
SEVENTH AMENDED AND RESTATED REVOLVING NOTE
$20,000,000 October 30, 1998
FOR VALUE RECEIVED, USA TRUCK, INC., a corporation organized and
existing under the laws of the State of Delaware ("Borrower"), hereby promises
to pay to the order of DEPOSIT GUARANTY NATIONAL BANK ("Lender") the principal
sum of TWENTY MILLION AND NO/100 DOLLARS ($20,000,000.00) or, if less, the
outstanding aggregate principal amount of all Revolving Loans (as defined in the
Revolving Credit Agreement referred to below) made by Lender to Borrower, on the
Revolving Loan Commitment Termination Date (as defined in the Revolving Credit
Agreement), and to pay interest on the unpaid principal balance of each
Revolving Loan from the date of such Revolving Loan until said principal amount
is paid in full, at the times and at the rate or rates specified in the
Revolving Credit Agreement. During the term of this Revolving Note the Borrower
may borrow, repay and reborrow hereunder.
This Note shall be deemed to be a contract made under the law of the
State of Mississippi and for all purposes shall be governed by and construed in
accordance with the laws of the State of Mississippi.
Borrower expressly waives any presentment, demand, protest or notice of
any kind in connection with this Note, now or hereafter, required by applicable
law.
Borrower agrees to pay and save Lender harmless from and against
liability for payment of all expenses (including, but not limited to, attorneys'
fees and costs) arising in connection with the enforcement by Lender of its
rights under this Note.
Payments of principal and interest are to be made in immediately
available funds to, Deposit Guaranty National Bank, as Agent, at its main office
in Jackson, Mississippi, in lawful money of the United States of America.
This Note is the Revolving Note issued pursuant to that certain Fourth
Amended and Restated Revolving Credit Agreement dated as of December 30, 1992,
as amended July 21, 1993, December 13, 1993, December 22, 1994, December 28,
1995, December 30, 1996, December 30, 1997, and of even date herewith, between
Borrower and Lender (as amended, modified and restated from time to time, the
"Revolving Credit Agreement") and is entitled to the benefits and subject to the
terms thereof. This Note constitutes an amendment, extension and restatement of
that certain Fourth Amended and Restated Revolving Note from Borrower to Lender
dated December 30, 1992 in the original stated principal amount of $12,000,000.
This Note is subject to prepayment on the terms and in the manner set forth in
the Revolving Credit Agreement, and this Note may be declared due and payable
prior to its date of maturity in accordance with the terms thereof. The
Revolving Credit Agreement also provides for the making by Lender to Borrower of
revolving loan advance from time to time in an amount not to exceed the U. S.
Dollar amount above written and contains provisions for the acceleration of the
maturity hereof upon the terms and conditions therein specified. This note is
subject to conversion to a term note in accordance with the terms and provisions
of the Revolving Credit Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in the State of Mississippi are
authorized to close.
USA TRUCK, INC., a Delaware Corporation
By: /s/ JERRY D. ORLER
Title: C.F.O. & Sec.
<PAGE> 1
Exhibit 4.12
Banc One Leasing Corporation Tel 800 334 5422
PO Box 711085
Columbus OH 43271 1085
Jerry Orler December 30, 1998
Chief Financial Officer
USA Truck, Inc.
3108 Industrial Park
Van Buren, AR 72956
Dear Mr. Orler:
We are pleased to confirm that Banc One Leasing Corporation (LESSOR) has
committed to a new Lease Line of Credit for the calendar year 1999 no to exceed
$12,396,497.00 to USA Truck, Inc. (LESSEE) for the type(s) of equipment as set
forth below:
New Freightliner FLD Sleeper Tractors with Detroit Diesel 12.7 series 60
Engines to be fully described on dealer invoices
This new Commitment will expire November 15, 1999, (to be extended to year-end
1999 upon receipt of year end 1998 audited financial statements) subject to the
following conditions:
1. The amount shall not exceed the amount committed.
2. In LESSOR'S sole judgement, there shall not have been a material
adverse change in the financial condition or business of LESSEE
or any guarantor.
3. There shall not have been a change in the Internal Revenue Code
of 1986 or any regulation thereunder, which in LESSOR'S sole
judgement would adversely affect the economics to LESSOR of the
transaction.
4. The obligations due under any or all Lease Schedules between BANC
ONE LEASING CORPORATION and/or any or all loans with Banc One
Texas, N.A.and USA Truck, Inc. shall be governed by the existing
Master Lease Agreement #0198077 dated July 13, 1993as amended and
shall be cross-defaulted so that a default of the terms of one
schedule may, at the sole option of the LESSOR, be considered a
default of the terms of any or all other schedules.
5. At the end of each fiscal quarter tangible net worth must be more
that the sum of $18,553,000 plus 50% of net profits after tax per
GAAP, subsequent to March 31, 1993.
6. "Lessee's acknowledgement that the obligations of Lessee under
each schedule of the existing Master lease Agreement constitutes
an "obligation" under the Credit Agreement by and between Lessee
and Bank One, Texas, NA."
<PAGE> 2
USA Truck, Inc.
December 30, 1998
Page 2
If the Lease Line of Credit covered by this Commitment is not funded by November
15, 1999, this Commitment shall expire.
LEASE TERM: 42 Months
LEASE TERM RENT: Lessee would be required to make forty-two
(42) equal consecutive monthly rents, each in arrears,
equal to the following Rent Factors as a percentage
of Equipment Cost:
<TABLE>
<CAPTION>
MONTH OF MONTHLY COST OF
DELIVERY RATE FACTOR BORROWING
INCLUDING
40% TRAC
RESIDUAL
<S> <C> <C>
August, 1999 1.724983% 4.9691%
September, 1999 1.720299% 4.8915%
October, 1999 1.717561% 4.8461%
November, 1999 1.713172% 4.7734%
December, 1999 1.708649% 4.6984%
</TABLE>
Example: $2,500,000.00 Approximate equipment cost
x .01717561 October, 1999 rate factor
-------------
$ 42,939.03 Monthly payment
ADJUSTMENTS TO RENT: The current Rent Factor is based upon the U.S. Treasury
Note Index of 4.79% (June, 2003 Treasury Note) per
annum as of December 30, 1998. If the U.S. Treasury
Note Index increased or decreases before the funding
date of a Lease Schedule, then the applicable Rent
Factor shall be adjusted to reflect the effect of the
change in the U.S. Treasury Note Index on the original
implicit rate associated with the original Rent Factor.
However, once a Lease Schedule is funded, the Rent
Factor for that Lease Schedule will remain fixed for
the Lease Term.
<PAGE> 3
USA Truck, Inc.
December 30, 1998
Page 3
INDEX FOR LEASE FACTOR: "U.S. Treasury Note Index" means the yield to maturity
for 3 1/2-Year Treasuries (as defined below as
published in The Wall Street Journal or if not
published in The Wall Street Journal, in a comparable
publication as reasonably determined by Lessor). 3
1/2-Year Treasuries means the U.S. Treasury Notes (not
bills or bonds) which have a maturity month as near as
possible to the month which is 3 1/2-years after the
date the Lessor prepares the applicable funding
documents; provided that 3 1/2-Year Treasuries shall
exclude any stripped U.S. Treasury Notes and any U.S.
Treasury Notes which have multiple maturity or call
dates. If more than one issue of U.S. Treasury Notes
has the applicable maturity month, then the U.S.
Treasury Note with the highest yield to maturity shall
be used to determine the Treasury Note Index.
As it becomes necessary for LESSOR to make progress payments and/or advance
payments to equipment suppliers, these advances will be evidenced by an interim
funding schedule and other relevant documents which are attached. There will be
a documentation fee for each interim funding schedule of $375.00, plus a fee of
$25.00 for each disbursement of funds. If no progress payments are required by
the vendor, no interim lease schedule shall be executed.
This Commitment is subject to the terms and conditions outlined herein,
contained in each Equipment Schedule, and in the Master Lease Agreement. By
execution of this letter and the enclosed Master Lease, you will be agreeing to
these terms. If this Commitment Letter is not received within 15 days of the
above date, this Commitment is withdrawn.
On behalf of Banc One Leasing Corporation, please accept my thanks for the
opportunity to be of service. Should you have any questions, please contact
Shane Taylor at (214) 290-2304.
Sincerely,
/s/ MATT DONOVAN
Matt Donovan
Vice President
Acknowledged and agreed this 30th day of December, 1998.
USA Truck, Inc.
- -----------------------------------
LESSEE
By: /s/ JERRY D. ORLER
- -----------------------------------
Title: C.F.O.
-----------------------------
<PAGE> 4
Bank One
March 12, 1999
Jerry Orler
Chief Financial Officer
USA Truck, Inc.
3108 Industrial Park
Van Buren, AR 72956
RE: Commitment Letter dated December 30, 1998
Dear Mr. Orler:
In respect to the above referenced commitment letter, this letter will serve to
amend the expiration date from November 15, 1999 to December 31, 1999. All other
terms and conditions remain in full force and effect.
Sincerely,
/s/ MATTHEW A. DONOVAN
Matthew A. Donovan
Vice President
<PAGE> 1
Exhibit 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-48027, 333-20721 and 333-40317) pertaining to the Employee
Stock Option Plan, the Nonqualified Stock Option Plan for Nonemployee Directors
and the Employee Stock Purchase Plan, respectively of our report dated January
20, 1999 with respect to the financial statements and schedule of USA Truck,
Inc. included in this Annual Report (Form 10-K) for the year ended December 31,
1998.
ERNST & YOUNG LLP
Little Rock, Arkansas
March 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,779,643
<SECURITIES> 0
<RECEIVABLES> 14,369,432
<ALLOWANCES> 140,670
<INVENTORY> 236,338
<CURRENT-ASSETS> 20,458,669
<PP&E> 132,908,913
<DEPRECIATION> 36,769,320
<TOTAL-ASSETS> 119,611,219
<CURRENT-LIABILITIES> 21,150,688
<BONDS> 0
0
0
<COMMON> 94,371
<OTHER-SE> 62,639,692
<TOTAL-LIABILITY-AND-EQUITY> 119,611,219
<SALES> 145,216,121
<TOTAL-REVENUES> 145,216,121
<CGS> 0
<TOTAL-COSTS> 126,255,930
<OTHER-EXPENSES> 65,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,714,662
<INCOME-PRETAX> 17,180,277
<INCOME-TAX> 6,683,128
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,497,149
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.11
</TABLE>
