1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] transition report pursuant to section 13 or 15(d) of the securities
exchange act of 1934
For the transition period from to .
--------------- -------------
Commission file number 0-19858
USA TRUCK, INC.
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 71-0556971
------------------------------ -------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3200 INDUSTRIAL PARK ROAD
VAN BUREN, ARKANSAS 72956
-------------------------------------- --------
(Address of principal executive offices) (Zip Code)
(501) 471-2500
--------------------------------------------------
Registrant's telephone number, including area code
Not applicable
--------------------------------------------------------------------------
Former name, address and former fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
9,263,301 shares of common stock, $.01 par value, were outstanding on July
14, 2000.
2
INDEX
USA TRUCK, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited) Page
----
Condensed Balance Sheets - June 30, 2000 and December 31, 1999 3
Condensed Statements of Income and Comprehensive Income - Three
months ended and Six months ended June 30, 2000 and 1999 4
Condensed Statements of Cash Flows - Six months ended June 30,
2000 and 1999 5
Notes to Condensed Financial Statements - June 30, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Item 3. Quantitative and Qualitative Disclosures about Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 15
Page 2
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED BALANCE SHEETS
June 30, December 31,
2000 1999
------------- --------------
(unaudited) (note)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,614,103 $ 2,145,707
Accounts receivable:
Trade, less allowance for doubtful accounts
(2000 - $ 285,099; 1999 - $ 269,150) 28,997,824 26,649,235
Other 1,262,968 5,509,866
Inventories 424,865 301,907
Deferred income taxes 1,253,403 1,208,413
Prepaid expenses and other current assets 3,746,479 3,634,056
------------- -------------
Total current assets 37,299,642 39,449,184
PROPERTY AND EQUIPMENT 195,143,904 186,011,130
ACCUMULATED DEPRECIATION AND AMORTIZATION (47,407,184) (43,873,074)
------------- -------------
147,736,720 142,138,056
OTHER ASSETS 463,003 452,448
------------- -------------
Total assets $ 185,499,365 $ 182,039,688
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 1,396,430 $ 1,116,485
Trade accounts payable 2,707,003 5,139,164
Accrued expenses 9,399,014 11,065,604
Current maturities of long-term debt 13,387,145 10,956,533
------------- -------------
Total current liabilities 26,889,592 28,277,786
LONG-TERM DEBT, LESS CURRENT MATURITIES 67,092,338 64,452,648
DEFERRED INCOME TAXES 18,172,231 17,008,364
LONG-TERM INSURANCE AND CLAIMS ACCRUALS 2,432,714 2,192,714
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; 1,000,000 shares
authorized; none issued -- --
Common stock, par value $.01 per share; 16,000,000 shares
authorized; issued shares (2000 - 9,280,308; 1999 -
9,387,041) 92,803 93,870
Additional paid-in capital 11,318,300 12,271,685
Retained earnings 59,626,510 58,840,827
Less treasury stock at cost (2000 - 16,557; 1999 - 122,011) (125,123) (1,098,206)
------------- -------------
Total stockholders' equity 70,912,490 70,108,176
------------- -------------
Total liabilities and stockholders' equity $ 185,499,365 $ 182,039,688
============= =============
NOTE: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements.
Page 3
4
USA TRUCK, INC.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30
-------------------------------- --------------------------------
2000 1999 2000 1999
------------ ------------ ------------- ------------
OPERATING REVENUES $ 58,348,467 $ 38,117,504 $ 113,492,892 $ 74,316,950
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 23,140,800 16,254,412 45,652,134 31,910,890
Operations and maintenance 17,426,194 8,915,103 35,135,102 17,258,532
Operating taxes and licenses 1,017,650 681,313 2,193,526 1,384,619
Insurance and claims 3,673,090 1,952,991 6,482,599 3,591,077
Communications and utilities 688,986 458,725 1,400,978 868,616
Depreciation and amortization 6,726,299 4,285,820 13,547,444 8,515,035
Other 2,198,614 1,282,513 4,804,213 2,365,113
------------ ------------ ------------- ------------
54,871,633 33,830,877 109,215,996 65,893,882
------------ ------------ ------------- ------------
OPERATING INCOME 3,476,834 4,286,627 4,276,896 8,423,068
OTHER (INCOME) EXPENSE:
Interest expense 1,478,484 321,172 2,855,049 651,348
Loss or (gain) on disposal of assets 64,646 - 99,419 (7,760)
Other, net (9,710) (39,156) 30,187 (47,692)
------------ ------------ ------------- ------------
1,533,420 282,016 2,984,655 595,896
------------ ------------ ------------- ------------
INCOME BEFORE INCOME TAXES 1,943,414 4,004,611 1,292,241 7,827,172
INCOME TAXES 763,347 1,569,808 506,559 3,068,252
------------ ------------ ------------- ------------
NET INCOME AND
COMPREHENSIVE INCOME $ 1,180,067 $ 2,434,803 $ 785,682 $ 4,758,920
============ ============ ============= ============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,297,761 9,373,109 9,292,823 9,384,410
============ ============ ============= ============
Basic net income per share $ 0.13 $ 0.26 $ 0.08 $ 0.51
============ ============ ============= ============
Average shares outstanding (Diluted) 9,302,194 9,410,475 9,297,256 9,423,291
============ ============ ============= ============
Diluted net income per share $ 0.13 $ 0.26 $ 0.08 $ 0.51
============ ============ ============= ============
See notes to condensed financial statements.
Page 4
5
USA TRUCK, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30,
----------------------------------
2000 1999
------------- ------------
OPERATING ACTIVITIES:
Net income $ 785,682 $ 4,758,920
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 13,547,444 8,515,035
Provision for doubtful accounts 21,000 18,000
Deferred income taxes 1,118,877 1,091,103
Loss (gain) on sale of assets 99,419 (7,760)
Changes in operating assets and liabilities:
Receivables 1,877,309 (2,194,648)
Inventories and prepaid expenses (232,636) 46,458
Bank drafts payable, accounts payable and accrued expenses (3,818,806) (3,130,473)
Insurance and claims accruals - long-term 240,000 204,000
------------- ------------
Net cash provided by operating activities 13,638,289 9,300,635
INVESTING ACTIVITIES:
Purchases of property and equipment (10,118,362) (14,294,773)
Proceeds from sale of assets 8,456,098 4,044,748
Proceeds from sale of investments -- 968,196
Gain on sale of investments -- (5,911)
Increase in other assets (13,300) --
------------- ------------
Net cash used by investing activities (1,675,564) (9,287,740)
FINANCING ACTIVITIES:
Borrowings under long-term debt 56,132,545 10,003,000
Proceeds from the exercise of stock options -- 178,719
Proceeds from sale of treasury stock 64,605 56,134
Refund on security deposits -- 1,745,108
Payments to repurchase common stock (45,973) (1,101,181)
Principal payments on long-term debt (61,022,545) (7,153,000)
Principal payments on capitalized lease obligations (7,622,961) (4,025,094)
------------- ------------
Net cash used by financing activities (12,494,329) (296,314)
------------- ------------
DECREASE IN CASH AND CASH EQUIVALENTS (531,604) (283,419)
Cash and cash equivalents at beginning of period 2,145,707 1,779,643
------------- ------------
Cash and cash equivalents at end of period $ 1,614,103 $ 1,496,224
============= ============
See notes to condensed financial statements.
Page 5
6
USA TRUCK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2000
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments considered necessary for a fair presentation)
have been included. Operating results for the six-month period ended June 30,
2000, are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. For further information, refer to the financial
statements and footnotes thereto included in the annual report on Form 10-K of
USA Truck, Inc. (the "Company") for the year ended December 31, 1999.
NOTE B--COMMITMENTS
As of July 14, 2000, the Company had remaining commitments for purchases of
revenue equipment in the aggregate amount of approximately $22.0 million in 2000
and $42.2 million in 2001. The Company also had remaining commitments to
purchase certain other assets for approximately $6.0 million in 2000.
NOTE C--CAPITAL STOCK TRANSACTIONS
During the six-month period ended June 30, 2000, the Company purchased
7,900 shares of its outstanding common stock on the open market for
approximately $46,000 pursuant to the repurchase program authorized by the Board
of Directors in July 1998. The Company distributed 6,621 treasury shares,
pursuant to the Company's Employee Stock Purchase Plan, to participants in such
Plan.
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING CHANGES
In March 2000, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 44 ("FIN 44"), Accounting of Certain Transactions
involving Stock Compensation an interpretation of APB Opinion No. 25. FIN 44
clarifies the application of Opinion 25 for (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for determining whether a
plan qualifies as a noncompensatory plan, (c) the accounting consequence of
various modifications to the terms of a previously fixed stock option or award,
and (d) the accounting for an exchange of stock compensation awards in a
business combination.
FIN 44 is effective July 1, 2000, but certain conclusions cover specific
events that occur after either December 15, 1998, or January 12, 2000.
Management believes that FIN 44 will not have a material effect on the financial
position or results of operations of the Company.
Effective June 1, 2000, the Company made certain changes in the estimated
useful lives and salvage values of its trailers to better reflect the Company's
experience as to service lives and resale value of its trailers. This change
decreased depreciation expense and increased second quarter net income by
approximately $80,500, or $.01 per share.
NOTE E--SUBSEQUENT EVENTS
None
Page 6
7
USA TRUCK, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth the percentage relationship of certain items
to operating revenues for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2000 1999 2000 1999
------ -------- ------ --------
OPERATING REVENUES 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 39.7 42.7 40.2 42.9
Operations and maintenance 29.9 23.4 31.0 23.2
Operating taxes and licenses 1.7 1.8 1.9 1.9
Insurance and claims 6.3 5.1 5.7 4.8
Communications and utilities 1.2 1.2 1.3 1.2
Depreciation and amortization 11.5 11.2 11.9 11.5
Other 3.8 3.4 4.2 3.2
------ ------- ------- -------
94.0 88.8 96.2 88.7
------ ------- ------- -------
OPERATING INCOME 6.0 11.2 3.8 11.3
OTHER (INCOME) EXPENSE:
Interest expense 2.5 0.8 2.6 0.9
(Gain) or loss on disposal of assets 0.1 -- 0.1 --
Other, net -- (0.1) -- (0.1)
------ ------- ------- -------
2.6 0.7 2.7 0.8
------ ------- ------- -------
INCOME BEFORE INCOME TAXES 3.3 10.5 1.1 10.5
INCOME TAXES 1.3 4.1 0.4 4.1
------ ------- ------- -------
NET INCOME AND COMPREHENSIVE INCOME 2.0% 6.4% 0.7% 6.4%
====== ======= ======= =======
RESULTS OF OPERATIONS
Quarter Ended June 30, 2000 Compared to Quarter Ended June 30, 1999
Operating revenues increased 53.1% to $58.3 million in the second quarter
of 2000 from $38.1 million for the same quarter of 1999. The Company believes
this increase is due primarily to the acquisition of the assets of CCC Express
on November 1, 1999 and related business, the expansion of the Company's
marketing team and the new marketing efforts implemented for the Company's
logistics services, dedicated fleet operations, and private fleet conversions
and to additional business from existing customers. Average revenue per mile
increased to $1.182 in the second quarter of 2000 from $1.118 in 1999. The
number of shipments increased 50.5% to
Page 7
8
50,785 in 2000 from 33,745 in 1999. This volume improvement was made possible by
an increase of 57.7% in the average number of tractors operated from 1,105 in
1999 to 1,742 in 2000. Although the Company has continued to expand its fleet,
miles per tractor per week decreased 8.2% from 2,449 in 1999 to 2,248 in 2000.
The empty mile factor decreased to 9.0% in 2000 from 9.5% of paid miles in the
second quarter of 1999.
Operating expenses and costs as a percentage of revenues increased to 94.0%
in 2000 from 88.8% in 1999. This change resulted primarily from increases, on a
percentage of revenue basis, in operations and maintenance costs, insurance and
claims, depreciation and amortization and other expenses. These increases were
partially offset by a decrease, on a percentage of revenue basis, in salaries,
wages and employee benefits. The increase in operations and maintenance costs
was primarily the result of an increase of 34.2 cents per gallon in the average
cost of fuel in the second quarter of this year compared to the same period last
year, combined with a decrease in average fuel efficiency to 6.42 miles per
gallon in 2000 from 6.73 in 1999. The increase in insurance and claims was due
to an increase in the quantity and severity of accidents. The increase in
depreciation and amortization was due to an increase in the cost of tractors and
trailers when compared to those being retired and to a reduction in the average
miles per tractor per week as mentioned above. The increase in other expenses,
relative to revenues, was related to our increased efforts to recruit and train
qualified drivers in order to replace lost drivers and grow our fleet. The
percentage decrease, relative to revenue, in salaries, wages and employee
benefits was partially due to the decrease in empty miles as mentioned above and
partially due to the reduction in operating-based incentives accrued.
As a result of the foregoing factors, operating income decreased 18.9% to
$3.5 million, or 6.0% of revenues, in 2000 from $4.3 million, or 11.2% of
revenues, in 1999.
Interest expense increased 360.3% to $1.5 million in 2000 from $0.3 million
in 1999, resulting primarily from a substantial increase in total borrowings to
fund the acquisition of the assets of CCC Express on November 1, 1999.
Other, net expense increased to a negative to $9,700 in 2000 from a
negative $39,200 in 1999, resulting primarily from a reduction in miscellaneous
income and an increase in miscellaneous expense, partially offset by an increase
in interest income.
As a result of the above, income before income taxes decreased 51.5% to
$1.9 million, or 3.3% of revenues, in 2000 from $4.0 million, or 10.5% of
revenues, in 1999.
The Company's effective tax rate of 39.2% for 2000 did not change from
1999. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income decreased 51.5% to
$1.2 million, or 2.0% of revenues, in 2000 from $2.4 million, or 6.4% of
revenues, in 1999, representing a decrease of 50.0% in diluted net income per
share to $.13 from $.26. The number of shares used in the calculation of diluted
net income per share for the second quarters of 2000 and 1999 were 9,302,194 and
9,410,475, respectively. Total shares outstanding at June 30, 2000, were
9,263,752.
Page 8
9
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Operating revenues increased 52.7% to $113.5 million in 2000 from $74.3
million in 1999. The Company believes this increase is due primarily to the
acquisition of the assets of CCC Express on November 1, 1999 and related
business, the expansion of the Company's marketing team and the new marketing
efforts implemented for the Company's logistics services, dedicated fleet
operations, and private fleet conversions and to additional business from
existing customers. Average revenue per mile increased to $1.173 in 2000 from
$1.112 in 1999. The number of shipments increased 50.8% to 99,293 in 2000 from
65,829 in 1999. This volume improvement was made possible by an increase of
57.2% in the average number of tractors operated from 1,104 in 1999 to 1,736 in
2000. Although the Company has continued to expand its fleet, miles per tractor
per week decreased 8.6% from 2,403 in 1999 to 2,196 in 2000. The empty mile
factor decreased to 9.0% in 2000 from 9.6% of paid miles in 1999.
Operating expenses and costs as a percentage of revenues increased to 96.2%
in 2000 from 88.7% in 1999. This change resulted primarily from increases, on a
percentage of revenue basis, in operations and maintenance costs, insurance and
claims, depreciation and amortization and other expenses. These increases were
partially offset by a decrease, on a percentage of revenue basis, in salaries,
wages and employee benefits. The increase in operations and maintenance costs
was primarily the result of an increase of 40.6 cents per gallon in the average
cost of fuel this year compared to last year, combined with a decrease in
average fuel efficiency to 6.28 miles per gallon in 2000 from 6.48 in 1999. The
increase in insurance and claims was due to an increase in the quantity and
severity of accidents. The increase in depreciation and amortization was due to
an increase in the cost of tractors and trailers when compared to those being
retired and to a reduction in the average miles per tractor per week as
mentioned above. The increase in other expenses, relative to revenues, was
related to our increased efforts to recruit and train qualified drivers in order
to replace lost drivers and grow our fleet. The percentage decrease, relative to
revenue, in salaries, wages and employee benefits was partially due to the
decrease in empty miles as mentioned above and partially due to the reduction in
operating-based incentives accrued.
As a result of the foregoing factors, operating income decreased 49.2% to
$4.3 million, or 3.8% of revenues, in 2000 from $8.4 million, or 11.3% of
revenues, in 1999.
Interest expense increased 338.3% to $2.9 million in 2000 from $0.7 million
in 1999, resulting primarily from a substantial increase in total borrowings to
fund the acquisition of the assets of CCC Express.
Other, net expense increased to $30,200 in 2000 from a negative $47,700 in
1999, resulting primarily from a decrease in miscellaneous income and an
increase in miscellaneous expense partially offset by an increase in interest
income and reduction in the amount of officer life insurance expense.
As a result of the above, income before income taxes decreased 83.5% to
$1.3 million, or 1.1% of revenues, in 2000 from $7.8 million, or 10.5% of
revenues, in 1999.
The Company's effective tax rate of 39.2% for 2000 did not change from
1999. The effective rates varied from the statutory Federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses.
Page 9
10
As a result of the aforementioned factors, net income decreased 83.5% to $0.8
million, or 0.7% of revenues, in 2000 from $4.8 million, or 6.4% of revenues, in
1999, representing a decrease of 84.3% in diluted net income per share to $.08
from $.51. The number of shares used in the calculation of diluted net income
per share for 2000 and 1999 were 9,297,256 and 9,423,291, respectively.
SEASONALITY
In the motor carrier industry generally, revenues are lower in the first
and fourth quarters as customers decrease shipments during the winter holiday
season and as inclement weather impedes operations. These factors historically
have tended to decrease net income in the first and fourth quarters. Future
revenues could be impacted if customers reduce shipments due to temporary plant
closings, which historically have occurred during July and December.
FUEL AVAILABILITY AND COST
The motor carrier industry depends 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 partially offset significant increases in fuel costs and fuel taxes
from customers through increased freight rates. Diesel prices increased
significantly during 1999 and the six-month period ended June 30, 2000. There
can be no assurance that diesel prices will not increase further or that they
will remain below the higher prices experienced in prior periods. There also can
be no assurance that the Company will be able to recover any future increases in
fuel costs and fuel taxes through increased rates.
LIQUIDITY & CAPITAL RESOURCES
On April 28, 2000, the Company signed a new senior credit facility (the
"Senior Credit Facility") that will provide a working capital line of credit of
$60.0 million, including letters of credit not exceeding $5.0 million. Bank of
America, N.A. is the agent bank and SunTrust Bank and Firstar Bank, N.A. are
participants. The Senior Credit Facility matures on April 28, 2005. The rates
are based on grid pricing which uses the Company's ratio of total funded debt to
earnings before interest, taxes, depreciation, amortization and rent ("EBITDAR")
to determine the points to be added to the base LIBOR rate. A quarterly
commitment fee is payable on the unused amount and the rate is also based on
grid pricing as described above. The Company repaid all amounts due under its
collateralized revolving credit agreement (the "General Line of Credit") in the
amount of $36.1 million.
The continued growth of the Company's business has required significant
investments in new equipment. USA Truck has financed revenue equipment purchases
with cash flows from operations and through borrowings under the Company's
General Line of Credit or Senior Credit Facility, conventional financing and
lease-purchase arrangements. The Company has generally met its working capital
needs with cash flows from operations and occasionally with borrowings under the
General Line of Credit or Senior Credit Facility. The Company has relied
significantly on the General Line of Credit or Senior Credit Facility to meet
working capital requirements since the acquisition of the assets of CCC Express.
The Company uses the Senior Credit Facility to minimize fluctuations in cash
flow needs and to provide flexibility in financing revenue
Page 10
11
equipment purchases. Cash flows from operations were $13.6 million for the
six-month period ended June 30, 2000 as compared to $9.3 million in the
comparable period of 1999.
The Company is a party to a lease commitment agreement (the "Equipment TRAC
Lease Commitment"), dated November 19, 1997, to facilitate the leasing of
tractors. The Equipment TRAC Lease Commitment was amended on October 12, 1999 to
provide for available borrowings of up to $6,000,000 available during the
remainder of 1999 and until October 12, 2000. Each capital lease under this
lease commitment has a repayment period of either 36 or 42 months. As of June
30, 2000, capital leases in the aggregate principal amount of $22.7 million were
outstanding under the Equipment TRAC Lease Commitment with an average interest
rate of 5.74% per annum.
As of June 30, 2000, capital leases in the aggregate principal amount of
$7.1 million were outstanding under a prior lease commitment with an average
interest rate of 5.24% per annum.
On January 11, 2000, the Company entered into a lease commitment agreement
(the "2000 TRAC Lease Commitment A"), to facilitate the leasing of tractors. The
2000 Equipment TRAC Lease Commitment A expires on December 31, 2000 and provides
for a maximum borrowing amount of $15.6 million during 2000. Each capital lease
will have a repayment period of either 36 or 42 months. Borrowings are limited
based on the amounts outstanding under capital leases entered into under this
agreement. As of June 30, 2000, $6.8 million remained available under the 2000
Equipment TRAC Lease Commitment A. The interest rate on the capital leases under
this lease commitment fluctuates in relation to the interest rate for the three
year Treasury Note as published in The Wall Street Journal and is fixed upon
execution of each lease. As of June 30, 2000, capital leases in the aggregate
principal amount of $8.8 million were outstanding under this lease commitment
with an average interest rate of 6.77% per annum.
On January 31, 2000, the Company entered into a lease commitment agreement
(the "2000 TRAC Lease Commitment B"), dated January 31, 2000, to facilitate the
leasing of tractors. The 2000 Equipment TRAC Lease Commitment B expires on
December 31, 2000 and provides for a maximum borrowing amount of $16.5 million
during 2000. Each capital lease will have a repayment period of either 36 or 42
months. Borrowings are limited based on the amounts outstanding under capital
leases entered into under this agreement. As of June 30, 2000, $11.2 million
remained available under the 2000 Equipment TRAC Lease Commitment B. The
interest rate on the capital leases under this lease commitment fluctuates in
relation to the one year LIBOR as published in The Wall Street Journal and is
fixed upon execution of a lease. As of June 30, 2000, capital leases in the
aggregate principal amount of $5.3 million were outstanding under this lease
commitment with an average interest rate of 6.9% per annum.
As of June 30, 2000, the Company had debt obligations of approximately
$80.5 million, including amounts borrowed under the facilities described above,
of which approximately $13.4 million were current obligations. During the first
six months of 2000, the Company made borrowings under the facilities described
above of $38.4 million, while retiring $32.2 million in debt. The retired debt
had an average interest rate of approximately 6.9%.
During the years 2000 and 2001, the Company plans to make approximately
$97.9 million in capital expenditures, including $27.7 million expended as of
June 30, 2000. As of June 30, 2000, USA Truck had committed to spend an
additional $22.0 million of this amount for revenue equipment in 2000, and $42.2
million of this amount is currently committed for revenue equipment in 2001. The
commitments to purchase revenue equipment are cancelable by the
Page 11
12
Company if certain conditions are met. The balance of the expected capital
expenditures will be used for certain other assets.
The Senior Credit Facility, equipment leases and cash flows from operations
should be adequate to fund the Company's operations and expansion plans at least
through the end of 2001. 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, the
Senior Credit Facility and equipment leases for the foreseeable future.
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 June 30, 2000, the Company had purchased 239,500 shares pursuant
to this new authorization at an aggregate purchase price of $2.2 million. On May
5, 1999, The Board of Directors authorized the retirement of 100,000 shares of
treasury stock that had been purchased at an aggregate cost of $.9 million. In
addition, as of June 30, 2000, 16,210 of the remaining repurchased shares had
been resold under the Company's Employee Stock Purchase Plan. On May 3, 2000,
the Board of Directors authorized the retirement of 106,733 shares of treasury
stock that had been purchased at an aggregate cost of $.9 million. 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 Senior Credit Facility.
Page 12
13
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. Potentially,
the Year 2000 issue could have resulted, at the Company and at its vendors and
customers, 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. Beginning in
1997, the Company undertook various initiatives intended to ensure that its
computer equipment and software would function properly in the Year 2000 and
thereafter.
As of July 14, 2000, the Company has not experienced any material
adverse effects related to the Year 2000 issue, and none of its key vendors have
reported to the Company any material adverse effects related to the issue. At
this time, the Company does not expect to encounter any Year 2000 issues that
would have a material effect on its results of operations, liquidity and
financial condition. Furthermore, the Company does not anticipate any
significant expenditure in the future related to year 2000 compliance. However,
latent Year 2000 problems may surface at key dates or events in the future.
NEW ACCOUNTING PRONOUNCEMENTS
FIN 44 is effective July 1, 2000, but certain conclusions cover specific
events that occur after either December 15, 1998, or January 12, 2000.
Management believes that the impact of FIN 44 will not have a material effect on
the financial position or results of operations of the Company.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements and information that are
based on management's belief as well as assumptions made by, and information
currently available to management. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will be realized. Should one or more of
the risks or uncertainties underlying such expectations materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those expected. Among the key factors that are not within the Company's control
and that may have a direct bearing on operating results are increases in diesel
prices, adverse weather conditions and the impact of increased rate competition.
The Company's results may also be significantly affected by fluctuations in
general economic conditions, as the Company's utilization rates are directly
related to business levels of shippers in a variety of industries. In addition,
shortages of qualified drivers and intense or increased competition for drivers
may adversely impact the Company's operating results and its ability to grow.
Results for any specific period could also be affected by various unforeseen
events, such as unusual levels of equipment failure or vehicle accident claims.
Page 13
14
USA TRUCK, INC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company's Senior Credit Facility agreement provides for borrowings that
bear interest at variable rates based on either a prime rate or the LIBOR. At
June 30, 2000, the Company had $35.1 million outstanding pursuant to the Senior
Credit Facility. 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.
As reported in the notes to the financial statements in the Liquidity and
Capital Resources section of this Form 10-Q, as of April 28, 2000, the Company
entered into the Senior Credit Facility with a multibank group. All amounts due
under the General Line of Credit were repaid at that time and the facility was
closed. The Senior Credit Facility agreement provides for borrowings that bear
interest at variable rates based on either a prime rate or the LIBOR. At July
14, 2000, the Company had $31.0 million outstanding pursuant to the Senior
Credit Facility. The Company believes that the effect, if any, of reasonably
possible near-term changes in interest rates on the Company's financial
position, results of operations, and cash flows should not be material.
All customers are required to pay for the Company's services in U.S.
dollars. Although the Canadian Government makes certain payments, such as tax
refunds, to the Company in Canadian dollars, any foreign currency exchange risk
associated with such payments is insignificant.
The Company does not engage in hedging transactions relating to diesel fuel
or any other commodity.
Page 14
15
FORM 10-Q
USA TRUCK, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
10.1 Bank of America Commitment Letter
10.2 Bank of America Summary of Terms and Conditions
11.1 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
six months ended June 30, 2000.
Page 15
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA TRUCK, INC.
-------------------------------------
(Registrant)
Date: 07/21/00 /s/ ROBERT M. POWELL
--------------------------- -------------------------------------
ROBERT M. POWELL
President and Chief Executive Officer
Date: 07/21/00 /s/ JERRY D. ORLER
--------------------------- -------------------------------------
JERRY D. ORLER
Vice President-Finance and
Chief Financial Officer
Page 16
17
FORM 10-Q
INDEX TO EXHIBITS
USA TRUCK, INC.
Sequentially
Exhibit Numbered
Number Exhibit Page
------- ------- ------------
10.1 Bank of America Commitment Letter 18
10.2 Bank of America Summary of Terms and Conditions 21
11.1 Statement Re: Computation of Earnings Per Share 28
27 Financial Data Schedule 29