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 September 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 .
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Commission file number 0-19858
USA TRUCK, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 71-0556971
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3200 INDUSTRIAL PARK ROAD
VAN BUREN, ARKANSAS 72956
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(Address of principal executive offices) (Zip Code)
(501) 471-2500
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Registrant's telephone number, including area code
Not applicable
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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:
9,224,354 shares of common stock, $.01 par value, were outstanding on
October 11, 2000.
2
INDEX
USA TRUCK, INC.
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Balance Sheets - September 30, 2000 and December 31, 1999 3
Condensed Statements of Income and Comprehensive Income - Three
months ended and Nine months ended September 30, 2000 and 1999 4
Condensed Statements of Cash Flows - Nine months ended September 30,
2000 and 1999 5
Notes to Condensed Financial Statements - September 30, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 17
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED BALANCE SHEETS
September 30, December 31,
2000 1999
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(unaudited) (note)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,594,469 $ 2,145,707
Accounting receivable:
Trade, less allowance for doubtful accounts
(2000 - $ 300,000; 1999 - $ 269,150) 27,401,472 26,649,235
Other 1,384,559 5,509,866
Inventories 447,792 301,907
Deferred income taxes 1,473,893 1,208,413
Prepaid expenses and other current assets 3,276,596 3,634,056
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Total current assets 37,578,781 39,449,184
PROPERTY AND EQUIPMENT 200,735,462 186,011,130
ACCUMULATED DEPRECIATION AND AMORTIZATION (52,163,575) (43,873,074)
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148,571,887 142,138,056
OTHER ASSETS 462,130 452,448
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Total assets $ 186,612,798 $ 182,039,688
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 1,376,882 $ 1,116,485
Trade accounts payable 4,922,625 5,139,164
Accrued expenses 10,831,686 11,065,604
Current maturities of long-term debt 13,648,298 10,956,533
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Total current liabilities 30,779,491 28,277,786
LONG-TERM DEBT, LESS CURRENT MATURITIES 63,362,255 64,452,648
DEFERRED INCOME TAXES 18,442,726 17,008,364
LONG-TERM INSURANCE AND CLAIMS ACCRUALS 2,690,214 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 - 9,282,273; 1999 - 9,387,041) 92,823 93,870
Additional paid-in capital 11,318,281 12,271,685
Retained earnings 60,138,867 58,840,827
Less treasury stock, at cost (2000 - 34,841; 1999 - 122,011) (211,859) (1,098,206)
------------- -------------
Total stockholders' equity 71,338,112 70,108,176
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Total liabilities and stockholders' equity $ 186,612,798 $ 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.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2000 1999 2000 1999
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OPERATING REVENUES $ 55,532,933 $ 40,416,850 $ 169,025,826 $ 114,733,801
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 22,481,959 17,226,077 68,134,094 49,136,967
Operations and maintenance 17,600,858 10,568,323 52,735,960 27,826,856
Operating taxes and licenses 1,003,875 664,956 3,197,401 2,049,575
Insurance and claims 2,986,921 2,111,627 9,469,520 5,702,704
Communications and utilities 722,640 543,748 2,123,618 1,412,364
Depreciation and amortization 6,452,810 4,359,715 20,000,254 12,874,750
Other 2,185,590 1,855,864 6,989,803 4,220,977
------------- ------------- ------------- -------------
53,434,653 37,330,310 162,650,650 103,224,193
------------- ------------- ------------- -------------
OPERATING INCOME 2,098,280 3,086,540 6,375,176 11,509,608
OTHER (INCOME) EXPENSE:
Interest expense 1,286,366 298,310 4,141,415 949,658
Loss or (Gain) on disposal of assets 27,333 (1,998) 126,752 (9,758)
Other, net (58,111) 12,285 (27,924) (35,407)
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1,255,588 308,597 4,240,243 904,493
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INCOME BEFORE INCOME TAXES 842,692 2,777,943 2,134,933 10,605,115
INCOME TAXES 330,335 1,088,954 836,894 4,157,206
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NET INCOME AND COMPREHENSIVE INCOME $ 512,357 $ 1,688,989 $ 1,298,039 $ 6,447,909
============= ============= ============= =============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,257,973 9,298,377 9,299,393 9,369,589
============= ============= ============= =============
Basic net income per share $ 0.06 $ 0.18 $ 0.14 $ 0.69
============= ============= ============= =============
Average shares outstanding (Diluted) 9,264,116 9,335,972 9,305,409 9,408,583
============= ============= ============= =============
Diluted net income per share $ 0.06 $ 0.18 $ 0.14 $ 0.69
============= ============= ============= =============
See notes to condensed financial statements.
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USA TRUCK, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30,
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2000 1999
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OPERATING ACTIVITIES:
Net income $ 1,298,039 $ 6,447,909
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 20,000,254 12,874,750
Provision for doubtful accounts 30,850 27,000
Deferred income taxes 1,168,882 1,942,986
Loss (Gain) on sale of assets 126,752 (9,758)
Changes in operating assets and liabilities:
Receivables 3,342,220 (5,151,213)
Inventories and prepaid expenses 211,576 256,166
Bank drafts payable, accounts payable and accrued expenses (190,060) 1,358,588
Insurance and claims accruals - long term 497,500 306,000
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Net cash provided by operating activities 26,486,013 18,052,428
INVESTING ACTIVITIES:
Purchases of property and equipment (16,965,425) (21,892,762)
Proceeds from sale of property and equipment 10,825,851 4,840,667
Proceeds from sale of investments -- 968,196
(Gain) Loss on sale of investments -- (5,911)
Increase in other asset (9,682) --
------------ ------------
Net cash used by investing activities (6,149,256) (16,089,810)
FINANCING ACTIVITIES:
Borrowing under long-term debt 66,432,545 12,253,000
Proceeds from the exercise of stock options -- 178,719
Proceeds from sale of treasury stock 95,841 77,683
Refund of security deposits -- 1,744,739
Payments to repurchase common stock (163,944) (1,211,820)
Principal payments on long-term debt (74,922,545) (10,653,000)
Principal payments on capitalized lease obligations (10,329,892) (5,118,304)
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Net cash used by financing activities (18,887,995) (2,728,983)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,448,762 (766,365)
Cash and cash equivalents at beginning of period 2,145,707 1,779,643
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Cash and cash equivalents at end of period $ 3,594,469 $ 1,013,278
============ ============
See notes to condensed financial statements.
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USA TRUCK, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 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 nine-month period ended September
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 October 11, 2000, the Company had remaining commitments for purchases
of revenue equipment in the aggregate amount of approximately $9.8 million in
2000 and $36.9 million in 2001. As part of these commitments, the Company has
contracts for the purchase of 396 tractors and the sale of 396 tractors during
2001. These contracts are cancelable by either USA Truck or the vendor within a
certain time period before delivery of the equipment. If the terms of the
contracts are carried out, the Company could recognize an after-tax, non-cash
loss from such sales of up to $0.5 million during 2001. Most of these losses are
expected to occur in the fourth quarter of that year on certain groups of
tractors. They result from the sale of such tractors by the Company at prices
that will likely be below the depreciated cost of such tractors as carried on
the Company's books. The low sales prices for such vehicles result from an
unusually poor used tractor market caused, for the most part, by oversupply of
vehicles. Beginning in the fourth quarter of 2000, the Company will increase
slightly the depreciation rate on its tractors, which will result in a slightly
increased charge to net income for that year. Provided the Company can secure
better pricing, it will attempt to limit these losses by obtaining direct sales
which could yield prices closer to book values on these tractors and reduce
these contractual capital losses.
NOTE C - CAPITAL STOCK TRANSACTIONS
During the nine-month period ended September 30, 2000, the Company
purchased 29,600 shares of its outstanding common stock on the open market for
approximately $188,700 pursuant to the repurchase program authorized by the
Board of Directors in July 1998. The Company distributed 10,037 treasury shares,
pursuant to the Company's Employee Stock Purchase Plan, to participants in such
Plan. On October 11, 2000, the Company granted an additional 185,000 options to
purchase shares of common stock.
As of September 30, 2000, 5,070,401 shares of the 9,247,432 shares
outstanding were owned either directly or beneficially by executive officers or
directors of the Company.
NOTE D - LONG-TERM DEBT
On April 28, 2000, the Company signed a new senior credit facility (the
"Senior Credit Facility") that provides 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.
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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 and subsequently terminated the General
Line of Credit.
NOTE E - NEW ACCOUNTING PRONOUNCEMENTS AND ACCOUNTING CHANGES
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities.
The Statement addresses the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts and hedging
activities. The Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. Derivatives that are not hedges must be
adjusted to fair value through income. If a derivative is a hedge, depending on
the nature of the hedge, changes in the fair value of the derivative will either
be offset against the change in fair value of the hedged asset, liability, or
firm commitment through earnings, or recognized in other comprehensive income
until the hedged item is recognized in earnings. In June 1999, the FASB issued
Statement No. 137, which deferred for one year the implementation date of FASB
Statement No. 133. As a result, Statement No. 133 is effective for the Company
in 2001. Management believes that Statement No. 133 will not have a material
effect on the financial position or results of operations of the Company.
On December 3, 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in Financial
Statements, which among other guidance clarifies certain conditions to be met in
order to recognize revenue. On June 26, 2000, the SEC issued SAB 101B,
Amendment: Revenue Recognition in Financial Statements, which delayed the
effective date of SAB 101 for registrants with fiscal years beginning between
December 16, 1999 and March 15, 2000. SAB 101 is effective for the Company in
the fourth quarter of 2000. Management believes that SAB 101 will not have a
material effect on the financial position or results of operations of the
Company.
Effective October 1, 2000, the Company made certain changes in the salvage
values of certain types of tractors to better reflect current used-revenue
equipment market conditions and the Company's experience as to resale value of
its tractors. This is expected to increase depreciation expense and decrease
fourth quarter net income by approximately $0.2 million.
NOTE F - SUBSEQUENT EVENTS
On October 1, 2000 the Company instituted a driver pay increase. The new
pay scale will increase the Company's ranking among other dry-van carriers in
driver pay. The increased pay scale is expected to help the Company attract and
retain qualified drivers, increase the number of experienced drivers hired and
reduce costs associated with recruiting, training and accidents, while
increasing productivity. The Company estimates that the pay increase will raise
driver wage expense by approximately 3.1% of revenue however, cost efficiencies,
productivity improvement and rate adjustments are expected to reduce the impact
over subsequent quarters.
As previously announced, Mr. J. B. Speed retired from his position as
Chairman of the Board effective at the regular Quarterly Board Meeting held on
October 11, 2000. Mr. Speed is one of the original participants in the group
that acquired the Company in December 1988 and has served as Chairman since that
date. Mr. Robert M. Powell was elected Chairman of the Board at the same
meeting. Mr. Powell retained his duties as President and Chief Executive
Officer.
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FORM 10-Q
USA TRUCK, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth the percentage relationship of certain items
to operating revenues for the periods indicated:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
OPERATING REVENUES 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 40.5 42.6 40.3 42.8
Operations and maintenance 31.7 26.2 31.2 24.3
Operating taxes and licenses 1.8 1.7 1.9 1.8
Insurance and claims 5.4 5.2 5.6 5.0
Communications and utilities 1.3 1.3 1.3 1.2
Depreciation and amortization 11.6 10.8 11.8 11.2
Other 3.9 4.6 4.1 3.7
------ ------ ------ ------
96.2 92.4 96.2 90.0
------ ------ ------ ------
OPERATING INCOME 3.8 7.6 3.8 10.0
OTHER (INCOME) EXPENSE:
Interest expense 2.3 0.8 2.5 0.8
(Gain) or Loss on disposal of assets -- -- 0.1 --
Other, net (0.1) -- -- --
------ ------ ------ ------
2.2 0.8 2.6 0.8
------ ------ ------ ------
INCOME BEFORE INCOME TAXES 1.6 6.8 1.2 9.2
INCOME TAXES 0.6 2.7 0.5 3.6
------ ------ ------ ------
NET INCOME AND COMPREHENSIVE INCOME 1.0% 4.1% 0.7% 5.6%
====== ====== ====== ======
RESULTS OF OPERATIONS
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30, 1999
Operating revenues increased 37.4% to $55.5 million in the third quarter of
2000 from $40.4 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, additional business from existing customers and to a lesser extent, the
Company's logistics services, dedicated fleet operations, and private fleet
conversions. The increase in revenue was partially offset by a reduction in
tractor utilization when comparing the third quarter of 2000 to the same quarter
in 1999. Average revenue per mile increased to $1.198 in the third quarter of
2000 from $1.122 in 1999. The number of shipments
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increased 37.9% to 49,786 in 2000 from 36,114 in 1999. This volume improvement
was made possible by an increase of 53.3% in the average number of tractors
operated from 1,134 in 1999 to 1,738 in 2000. As the Company has expanded its
fleet, miles per tractor per week decreased 14.7% from 2,482 in 1999 to 2,118 in
2000. The empty mile factor decreased to 9.23% in 2000 from 9.32% of paid miles
in the third quarter of 1999. The increase in revenue was partially offset by a
decline in the average miles per tractor per week of 364 miles, which
approximates a 16.5% lack of revenue for the third quarter of 2000.
Operating expenses and costs as a percentage of revenues increased to 96.2%
in 2000 from 92.4% in 1999. This change resulted primarily from increases, on a
percentage of revenue basis, in operations and maintenance costs and
depreciation and amortization. These increases were partially offset by a
decrease, on a percentage of revenue basis, in salaries, wages and employee
benefits and other expenses. The increase in operations and maintenance costs
was primarily the result of an increase of in the average cost of fuel combined
with a decrease in the average fuel efficiency of our fleet. The average cost of
fuel has increased 29.9 cents per gallon in the third quarter of this year
compared to the same period last year. This translates into approximately $2.5
million in additional fuel expense, on a pre-tax basis, in the third quarter of
2000 compared to the same quarter of 1999. Also attributing to the increase in
operations and maintenance costs is a reduction in fuel efficiency, which has
decreased to 6.42 miles per gallon for the third quarter of 2000 from 6.59 for
the same quarter of 1999. This represents approximately $0.3 million in
additional fuel expense, on a pre-tax basis, for the third quarter of 2000
compared to the same quarter of 1999. 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 percentage decrease, relative to
revenue, in salaries, wages and employee benefits was partially due to the
increase in the average revenue per mile, as mentioned above and partially due
to the reduction in management incentives accrued which are based on the
Company's financial operating results. The decrease in other expenses, relative
to revenues, was related to a reallocating of recruiting and training expenses
and the increase in the average revenue per mile.
As a result of the foregoing factors, operating income decreased 32.0% to
$2.1 million, or 3.8% of revenues, in 2000 from $3.1 million, or 7.6% of
revenues, in 1999.
Interest expense increased 331.2% to $1.3 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 and an
increase in the average borrowing rate from 6.91% to 7.46%.
Other income, net decreased to a negative to $58,100 in 2000 from $12,300
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 69.7% to
$0.8 million, or 1.6% of revenues, in 2000 from $1.1 million, or 6.8% 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.
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As a result of the aforementioned factors, net income decreased 69.7% to
$0.5 million, or 1.0% of revenues, in 2000 from $1.7 million, or 4.1% of
revenues, in 1999, representing a decrease of 66.7% in diluted net income per
share to $.06 from $.18. The number of shares used in the calculation of diluted
net income per share for the third quarters of 2000 and 1999 were 9,264,116 and
9,335,972, respectively. Total shares outstanding at September 30, 2000, were
9,247,432.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Operating revenues increased 47.3% to $169.0 million in 2000 from $114.7
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 $1.181 in 2000 from
$1.115 in 1999. The number of shipments increased 46.2% to 149,079 during 2000
from 101,943 during 1999. This volume improvement was made possible by an
increase of 55.8% in the average number of tractors operated from 1,114 in 1999
to 1,736 in 2000. Although the Company has continued to expand its fleet, miles
per tractor per week decreased 10.7% from 2,430 in 1999 to 2,170 in 2000. The
empty mile factor decreased to 9.1% in 2000 from 9.5% of paid miles in 1999. The
increase in revenue was partially offset by a decline in the average miles per
tractor per week of 260 miles, which approximates a 12.0% lack of revenue for
2000.
Operating expenses and costs as a percentage of revenues increased to 96.2%
in 2000 from 90.0% in 1999. This change resulted primarily from increases, on a
percentage of revenue basis, in operations and maintenance costs, insurance and
claims, and 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 in the average cost of
fuel combined with a decrease in the average fuel efficiency of the fleet. The
average cost of fuel has increased 36.9 cents per gallon in the third quarter of
this year compared to the same period last year which equates to approximately
$9.6 million in additional fuel expense, on a pre-tax basis, for 2000 compared
to 1999. Also attributing to the increase in operations and maintenance costs is
a reduction in fuel efficiency, which has decreased to 6.32 miles per gallon
during 2000 from 6.52 for 1999. This represents approximately $1.1 million in
additional fuel expense, on a pre-tax basis, for 2000 compared to 1999. The
increase in insurance and claims was due to an increase in the quantity 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 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 increase in the average
revenue per mile, as mentioned above and partially due to the reduction in
management incentives accrued which are based on the Company's financial
operating results.
As a result of the foregoing factors, operating income decreased 44.6% to
$6.4 million, or 3.8% of revenues, in 2000 from $11.5 million, or 10.0% of
revenues, in 1999.
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Interest expense increased 336.1% to $4.1 million in 2000 from $0.9 million
in 1999, resulting primarily from a substantial increase in total borrowings to
fund the acquisition of the assets of CCC Express and an increase in the average
borrowing rate from 6.10% to 7.55%.
Other income, net decreased to $27,900 in 2000 from $35,400 in 1999,
resulting primarily from an increase in fines expense partially offset by an
increase in traffic management fees and a reduction of officer life insurance
premium expense.
As a result of the above, income before income taxes decreased 79.9% to
$2.1 million, or 1.2% of revenues, in 2000 from $10.6 million, or 9.2% 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 79.9% to
$1.3 million, or 0.7% of revenues, in 2000 from $6.4 million, or 5.6% of
revenues, in 1999, representing a decrease of 79.7% in diluted net income per
share to $.14 from $.69. The number of shares used in the calculation of diluted
net income per share for 2000 and 1999 were 9,305,409 and 9,408,583,
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 and through a fuel surcharge
which increases incrementally as the price of fuel increases. Diesel prices
increased significantly during 1999 and the nine-month period ended September
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. The
Company does not participate in fuel price hedging activities.
LIQUIDITY & CAPITAL RESOURCES
On April 28, 2000, the Company signed a new senior credit facility (the
"Senior Credit Facility") that provides 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.
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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 and subsequently terminated the General
Line of Credit.
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 equipment purchases.
Cash flows from operations were $26.5 million for the nine-month period ended
September 30, 2000 as compared to $18.1 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
September 30, 2000, capital leases in the aggregate principal amount of $21.6
million were outstanding under the Equipment TRAC Lease Commitment with an
average interest rate of 5.75% per annum. During the nine-month period ending
September 30, 2000, the Company entered into capital leases under this facility
in the amount of $3.1 million.
As of September 30, 2000, capital leases in the aggregate principal amount
of $5.0 million were outstanding under a prior lease commitment with an average
interest rate of 5.26% 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 September 30, 2000, $7.1 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 September 30, 2000, capital leases in the
aggregate principal amount of $8.5 million were outstanding under this lease
commitment with an average interest rate of 6.63% per annum. During the
nine-month period ending September 30, 2000, the Company entered into capital
leases under this lease commitment in the amount of $9.1 million.
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
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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 September 30, 2000, $8.6 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 September 30, 2000, capital leases in the aggregate principal amount of $7.9
million were outstanding under this lease commitment with an average interest
rate of 6.6% per annum. During the nine-month period ending September 30, 2000,
the Company entered into capital leases under this lease commitment in the
amount of $8.3 million.
As of September 30, 2000, the Company had debt obligations of approximately
$77.0 million, including amounts borrowed under the facilities described above,
of which approximately $13.6 million were current obligations. During the first
nine months of 2000, the Company made borrowings under the facilities described
above of $86.9 million, while retiring $85.3 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
$77.7 million in capital expenditures, including $31.0 million expended as of
September 30, 2000. As of September 30, 2000, USA Truck had committed to spend
an additional $9.8 million of this amount for revenue equipment in 2000, and
$36.5 million of this amount is currently committed for revenue equipment in
2001. 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 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 September 30, 2000, the Company had purchased 261,200 shares pursuant to this
new authorization at an aggregate purchase price of $2.3 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 September 30, 2000, 19,626 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.
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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 October 11, 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
In June 1998, the FASB issued Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. The Statement addresses the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts and hedging activities. The Statement will require the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If a
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. In June 1999, the FASB issued Statement No. 137, which deferred for
one year the implementation date of FASB Statement No. 133. As a result,
Statement No. 133 is effective for the Company in 2001. Management believes that
Statement No. 133 will not have a material effect on the financial position or
results of operations of the Company.
On December 3, 1999, the SEC issued Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements, which among other guidance
clarifies certain conditions to be met in order to recognize revenue. On June
26, 2000, the SEC issued SAB 101B, Amendment: Revenue Recognition in Financial
Statements, which delayed the effective date of SAB 101 for registrants with
fiscal years beginning between December 16, 1999 and March 15, 2000. SAB 101 is
effective for the Company in the fourth quarter of 2000. Management believes
that SAB 101 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
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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.
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FORM 10-Q
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
September 30, 2000, the Company had $30.5 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 October
11, 2000, the Company had $26.5 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.
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FORM 10-Q
USA TRUCK, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
11.1 Statement Re: Computation of Earnings Per Share
27 Financial Data Schedule
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the nine
months ended September 30, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
USA TRUCK, INC.
(Registrant)
Date: 10/19/00 /s/ ROBERT M. POWELL
--------------------------- -------------------------------
ROBERT M. POWELL
Chairman, President and
Chief Executive Officer
Date: 10/19/00 /s/ JERRY D. ORLER
--------------------------- -------------------------------
JERRY D. ORLER
Vice President-Finance and
Chief Financial Officer
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FORM 10-Q
INDEX TO EXHIBITS
USA TRUCK, INC.
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
11.1 Statement Re: Computation of Earnings Per Share 20
27 Financial Data Schedule 21