1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 2001
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 (I.R.S. 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:
As of July 16, 2001, the Registrant had outstanding 9,232,137 shares of
common stock, $.01 par value per share.
2
INDEX
USA TRUCK, INC.
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited).
Condensed Consolidated Balance Sheets - June 30, 2001 and December 31, 2000 3
Condensed Consolidated Statements of Operations - Three Months Ended
and Six Months Ended June 30, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows - Six Months Ended
June 30, 2001 and 2000 5
Notes to Condensed Consolidated Financial Statements - June 30, 2001 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. 15
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 6. Exhibits and Reports on Form 8-K. 16
Page 2
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2001 2000(1)
-------------- --------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,518,420 $ 1,674,730
Accounting Receivable:
Trade - less allowance for doubtful accounts
(2001 - $305,491; 2000 - $303,203) 31,011,641 30,019,565
Other 1,683,735 3,853,642
Inventories 457,868 382,639
Deferred income taxes 1,623,524 1,607,633
Prepaid expenses and other current assets 4,000,781 4,200,618
-------------- --------------
Total current assets 40,295,969 41,738,827
PROPERTY AND EQUIPMENT 202,494,827 203,146,633
ACCUMULATED DEPRECIATION AND AMORTIZATION (56,268,232) (55,417,751)
-------------- --------------
146,226,595 147,728,882
Other assets 153,269 451,115
-------------- --------------
Total assets $ 186,675,833 $ 189,918,824
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 1,633,137 $ 1,487,086
Trade accounts payable 6,423,338 5,870,192
Accrued expenses 13,347,356 10,131,717
Current maturities of long-term debt 9,694,839 12,867,611
-------------- --------------
Total current liabilities 31,098,670 30,356,606
LONG-TERM DEBT, LESS CURRENT MATURITIES 62,456,186 65,660,268
DEFERRED INCOME TAXES 20,653,491 21,111,025
INSURANCE AND CLAIMS ACCRUALS 2,573,665 2,810,214
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; 1,000,000 shares authorized:
none issued -- --
Common Stock, $.01 par value; 16,000,000 shares authorized; issued shares
(2001 - 9,250,986; 2000 - 9,282,889) 92,510 92,829
Additional paid-in capital 11,099,143 11,318,279
Retained earnings 58,808,537 58,934,889
Less treasury stock, at cost (2001 - 18,849; 2000 - 59,835) (106,369) (365,286)
-------------- --------------
Total stockholders' equity 69,893,821 69,980,711
-------------- --------------
Total liabilities and stockholders' equity $ 186,675,833 $ 189,918,824
============== ==============
- ----------
1: The balance sheet at December 31, 2000 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 consolidated financial statements.
Page 3
4
USA TRUCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
2001 2000 2001 2000
-------------- -------------- -------------- --------------
OPERATING REVENUES $ 64,220,633 $ 58,348,467 $ 125,129,007 $ 113,492,892
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 27,425,889 23,140,800 53,733,228 45,652,134
Operations and maintenance 21,432,180 17,426,194 41,492,541 35,135,102
Operating taxes and licenses 1,094,628 1,017,650 2,106,509 2,193,526
Insurance and claims 3,188,893 3,673,090 6,258,908 6,482,599
Communications and utilities 676,121 688,986 1,360,660 1,400,978
Depreciation and amortization 6,656,289 6,726,299 13,382,232 13,547,444
Other 2,183,330 2,198,614 4,638,118 4,804,213
-------------- -------------- -------------- --------------
62,657,330 54,871,633 122,972,196 109,215,996
-------------- -------------- -------------- --------------
OPERATING INCOME 1,563,303 3,476,834 2,156,811 4,276,896
OTHER EXPENSES (INCOME):
Interest expense 1,158,264 1,478,484 2,444,296 2,855,049
(Gain) or Loss on disposal of assets (14,665) 64,646 (33,603) 99,419
Other, net (34,273) (9,710) (45,260) 30,187
-------------- -------------- -------------- --------------
1,109,326 1,533,420 2,365,443 2,984,655
-------------- -------------- -------------- --------------
INCOME (LOSS) BEFORE INCOME TAXES 453,977 1,943,414 (208,632) 1,292,241
INCOME TAX EXPENSE (BENEFIT) 175,420 763,347 (82,270) 506,559
-------------- -------------- -------------- --------------
NET INCOME (LOSS) $ 278,557 $ 1,180,067 $ (126,352) $ 785,682
============== ============== ============== ==============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,240,270 9,297,761 9,235,174 9,292,823
============== ============== ============== ==============
Basic net income (loss) per share $ 0.03 $ 0.13 $ (0.01) $ 0.08
============== ============== ============== ==============
Average shares outstanding (Diluted) 9,266,526 9,302,194 9,235,174 9,297,256
============== ============== ============== ==============
Diluted net income (loss) per share $ 0.03 $ 0.13 $ (0.01) $ 0.08
============== ============== ============== ==============
See notes to condensed consolidated financial statements.
Page 4
5
USA TRUCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
----------------------------------
2001 2000
-------------- --------------
OPERATING ACTIVITIES:
Net (loss) income $ (126,352) $ 785,682
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 13,382,232 13,547,444
Provision for doubtful accounts 24,000 21,000
Deferred income taxes (473,425) 1,118,877
(Gain) Loss on disposal of assets (33,603) 99,419
Changes in operating assets and liabilities:
Receivables 1,153,831 1,877,309
Inventories, prepaid expenses and other current assets 124,608 (232,636)
Bank drafts payable, accounts payable and accrued expenses 3,914,836 (3,818,806)
Insurance and claims accruals - long-term (236,549) 240,000
-------------- --------------
Net cash provided by operating activities 17,729,578 13,638,289
INVESTING ACTIVITIES:
Purchases of property and equipment (19,295,175) (10,118,362)
Proceeds from sale of assets 7,448,833 8,456,098
Changes in other assets 297,846 (13,300)
-------------- --------------
Net cash used by investing activities (11,548,496) (1,675,564)
FINANCING ACTIVITIES:
Borrowings under long-term debt 72,016,000 56,132,545
Proceeds from the exercise of stock options 2 --
Proceeds from sale of treasury stock 39,460 64,605
Payments to repurchase common stock -- (45,973)
Principal payments on long-term debt (69,484,000) (61,022,545)
Principal payments on capitalized lease obligations (8,908,854) (7,622,961)
-------------- --------------
Net cash used by financing activities (6,337,392) (12,494,329)
-------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (156,310) (531,604)
Cash and cash equivalents at beginning of period 1,674,730 2,145,707
-------------- --------------
Cash and cash equivalents at end of period $ 1,518,420 $ 1,614,103
============== ==============
See notes to condensed consolidated financial statements.
Page 5
6
USA TRUCK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2001
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States 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, 2001, are not necessarily indicative of the results that
may be expected for the year ended December 31, 2001. 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, 2000.
NOTE B--COMMITMENTS
As of July 11, 2001, the Company had remaining commitments for purchases of
revenue equipment in the aggregate amount of approximately $22.0 million in
2001. As part of these commitments, the Company has remaining contracts for the
purchase of 279 tractors and the sale of 262 tractors during 2001. Either the
Company or the vendor may cancel these contracts within a certain time period
before delivery of the equipment. If these contracts are completed, the Company
will recognize an after-tax, non-cash loss from such sales of up to $0.5 million
during 2001. We expect to incur most of this loss when we sell a certain group
of tractors in the fourth quarter of 2001 at a price that is likely to be lower
than the depreciated value of such tractors as carried on the Company's books.
The low sales prices for these vehicles will likely be the result of an
unusually poor used tractor market caused, for the most part, by oversupply of
vehicles. Beginning in the fourth quarter of 2000, the Company increased
slightly the depreciation rate on some of its tractors, which will result in a
slightly increased charge to net income for 2001. Provided the Company can
secure better pricing, it will attempt to limit this loss by selling these
tractors to unrelated third-parties which could yield prices closer to book
values on these tractors and reduce these contractual capital losses. The
Company also had a commitment for the soil excavation and preparation for an
expanded terminal facility in Butler Township, Ohio in 2001 for approximately
$0.2 million.
NOTE C--CAPITAL STOCK TRANSACTIONS
During the six-month period ended June 30, 2001, the Company did not
repurchase any of its outstanding common stock on the open market pursuant to
the repurchase program authorized by the Board of Directors in July 1998.
However, the Company did distribute 2,715 treasury shares, pursuant to the
Company's Employee Stock Purchase Plan, to participants in such plan. During the
second quarter of 2001, the Company cancelled 35,000 shares of treasury stock.
Page 6
7
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Statement has
been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
either an asset or liability at its fair value. The Company adopted SFAS No.
133, as amended by SFAS No. 137, on January 1, 2001. The adoption had no effect
on earnings or the financial position on the Company.
NOTE E -- SUBSEQUENT EVENTS
None.
Page 7
8
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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2001 2000 2001 2000
-------- -------- -------- --------
OPERATING REVENUES 100.0% 100.0% 100.0% 100.0%
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 42.7 39.7 42.9 40.2
Operations and maintenance 33.4 29.9 33.2 31.0
Operating taxes and licenses 1.7 1.7 1.7 1.9
Insurance and claims 5.0 6.3 5.0 5.7
Communications and utilities 1.1 1.2 1.1 1.3
Depreciation and amortization 10.4 11.5 10.7 11.9
Other 3.4 3.8 3.7 4.2
-------- -------- -------- --------
97.7 94.0 98.3 96.2
-------- -------- -------- --------
OPERATING INCOME 2.3 6.0 1.7 3.8
OTHER EXPENSES (INCOME):
Interest expense 1.8 2.5 2.0 2.6
(Gain) or Loss on disposal of assets -- 0.1 -- 0.1
Other, net (0.1) -- -- --
-------- -------- -------- --------
1.7 2.6 2.0 2.7
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES 0.6 3.3 (0.3) 1.1
INCOME TAX EXPENSE (BENEFIT) 0.3 1.3 (0.1) 0.4
-------- -------- -------- --------
NET INCOME (LOSS) 0.3% 2.0% (0.2)% 0.7%
======== ======== ======== ========
RESULTS OF OPERATIONS
Quarter Ended June 30, 2001 Compared to Quarter Ended June 30, 2000
Operating revenues increased 10.1% to $64.2 million in the second quarter
of 2001 from $58.4 million for the same quarter of 2000. The Company believes
this increase is due primarily to the reduction in unassigned tractors,
additional business from existing customers and, to a lesser extent, the new
marketing efforts implemented for the Company's logistics services, dedicated
fleet operations, and private fleet conversions. Average revenue per mile
increased to $1.184 in the second quarter of 2001 from $1.182 in the same
quarter of 2000. The number of shipments increased 16.25% to 59,022 in 2001 from
50,785 in 2000. This volume improvement was made possible by an increase of 1.7%
in the average number of tractors operated from 1,742
Page 8
9
in 2000 to 1,771 in 2001, and to a greater extent, the fact that the number of
unassigned tractors has dramatically declined and almost all of our tractors
have been assigned to a driver during the second quarter of 2001. As a result of
the improved driver situation, miles per tractor per week increased 8.2% from
2,248 in 2000 to 2,432 in 2001. However, the empty mile factor increased to
9.88% in the second quarter of 2001 from 8.96% of paid miles in the second
quarter of 2000. The increased empty mile factor was primarily the result of the
average length of haul declining 6.4% from 885 miles in the second quarter of
2000 to 828 miles in the same quarter this year.
Operating expenses and costs as a percentage of revenues increased to 97.7%
in 2001 from 94.0% in 2000. This change resulted primarily from increases, on a
percentage of revenue basis, in salaries, wages and employee benefits and
operations and maintenance costs. These increases were partially offset by a
decrease, on a percentage of revenue basis, in insurance and claims,
depreciation and amortization and other expenses. The increase in salaries,
wages and employee benefits was primarily the result of a 3.5% increase in the
average rate per mile paid to our drivers, which was partially offset by a 0.6%
reduction in the cost of employee benefits for the second quarter of 2001 as
compared to the same quarter of 2000. The increase in operations and maintenance
costs was primarily the result of a 2.6% increase in purchased transportation
costs used in conjunction with our logistics brokerage service, a 0.6% increase
in the cost of repairs and maintenance of the Company's road tractor and road
trailer fleets and, to a lesser extent, an increase of $.029 per gallon in the
average cost of fuel in the second quarter of this year compared to the same
period last year partially offset by an increase in average fuel efficiency to
6.51 miles per gallon in 2001 from 6.42 in 2000. The decrease in insurance and
claims expense was primarily the result of a 34.7% decline in the number of
accidents involving company drivers and revenue equipment from 860 accidents in
the second quarter of 2000 to 562 in the same quarter of 2001. The decrease in
depreciation and amortization expense, on a percentage of revenue basis, was the
result of better utilization of the Company's revenue equipment. The increase in
the average miles per tractor per week equated to an additional $4.7 million in
revenue for the second quarter of 2001, which served to drive depreciation and
amortization down 0.8% as a percentage of revenue. The decrease in other
expenses, relative to revenues, was primarily related to a reduction in
recruiting and training expenses and an increase in the average revenue per
mile.
As a result of the foregoing factors, operating income decreased 55.0% to
$1.6 million, or 2.3% of revenues, in 2001 from $3.5 million, or 6.0% of
revenues, in 2000.
Interest expense decreased 21.7% to $1.2 million in 2001 from $1.5 million
in 2000, resulting primarily from interest rate decreases on the Company's
Senior Credit Facility and, to a lesser extent, from a decrease in average
borrowings under TRAC leases.
As a result of the above, income before income taxes decreased 76.6% to
$0.5 million, or 0.6% of revenues, in 2001 from $1.9 million, or 3.3% of
revenues, in 2000.
The Company's effective tax rate decreased to 38.6% in 2001 from 39.2% in
2000. 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 76.4% to
$0.3 million, or 0.3% of revenues, in 2001 from $1.2 million, or 2.0% of
revenues, in 2000, representing a decrease of 76.9% in diluted net income per
share to $.03 from $.13. The number of shares used in the calculation of diluted
net income per share for the second quarters of 2001 and 2000 were 9,266,526 and
9,302,194, respectively. Total shares outstanding at June 30, 2001, were
9,232,137.
Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000
Operating revenues increased 10.3% to $125.1 million in 2001 from $113.5
million in 2000. The Company believes this increase is due primarily to the
reduction in unassigned tractors and additional business from existing customers
and, to a lesser extent, the new marketing efforts implemented for the Company's
logistics services, dedicated fleet operations, and private fleet conversions.
Average revenue per mile increased to $1.185 in 2001 from $1.173 in 2000. The
number of shipments increased 14.9% to 114,070 in 2001 from 99,293 in 2000. This
volume improvement was made possible by an increase of 1.8% in the average
number of tractors operated from 1,736 in 2000 to 1,767 in 2001, but to a
greater extent, the fact that the number of unassigned tractors has dramatically
declined and almost all of our tractors have been assigned to a driver during
most of 2001. As a result of the improved driver situation, miles per tractor
per week increased 7.1% from 2,196 in 2000 to 2,352 in 2001. However, the empty
mile factor increased to 9.79% in 2001 from 8.98% of paid miles in the first six
months of 2000. The increased empty mile factor was primarily the result of the
average length of haul declining 5.9% from 887 miles in 2000 to 835 miles this
year.
Operating expenses and costs as a percentage of revenues increased to 98.3%
in 2001 from 96.2% in 2000. This change resulted primarily from increases, on a
percentage of revenue basis, in salaries, wages and employee benefits and
operations and maintenance costs. These increases were partially offset by
decreases, on a percentage of revenue basis, in insurance and claims,
depreciation and amortization, and other expenses. The increase in salaries,
wages and employee benefits was primarily the result of a 3.3% increase in the
average rate per mile paid to our drivers partially offset by a 0.4% reduction
in the cost of employee benefits for the first six months of 2001 as compared to
the same period of 2000. The increase in operations and maintenance costs was
primarily the result of a 2.0% increase in purchased transportation costs used
in conjunction with our logistics brokerage service, and 0.7% increase in the
cost of repairs and maintenance of the Company's road tractor and road trailer
fleets. The decrease in insurance and claims expense was primarily the result of
a 28.3% decline in the number of accidents involving company drivers and revenue
equipment from 1,770 accidents in the six-month period ended June 30, 2000 to
1,270 in the same period of 2001. The decrease in depreciation and amortization
expense, on a percentage of revenue basis, was the result of better utilization
of the Company's revenue equipment. The increase in the average miles per
tractor per week equated to an additional $8.1 million in revenue for 2001,
which served to drive depreciation and amortization down 0.9% as a percentage of
revenue. The decrease in other expenses, relative to revenues, was primarily
related to a reduction in recruiting and training expenses and an increase in
the average revenue per mile.
As a result of the foregoing factors, operating income decreased 49.6% to
$2.2 million, or 1.7% of revenues, in 2001 from $4.3 million, or 3.8% of
revenues, in 2000.
Page 10
11
Interest expense decreased 14.4% to $2.4 million in 2001 from $2.9 million
in 2000, resulting primarily from interest rate decreases on the Company's
Senior Credit Facility and, to a lesser extent, from a decrease in average
borrowings under TRAC leases.
As a result of the above, income before income taxes decreased 116.1% to a
loss of $0.2 million, or (0.3%) of revenues, in 2001 from income of $1.3
million, or 1.1% of revenues, in 2000.
The Company's effective tax rate increased to 39.4% in 2001 from 39.2% in
2000. 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 116.1% to a
net loss of $0.1 million, or (0.2%) of revenues, in 2001 from a profit of $0.8
million, or 0.7% of revenues, in 2000, representing a decrease of 112.5% in
diluted net income per share to a net loss per share of $.01 from net income per
share of $.08. The number of shares used in the calculation of diluted net
income per share for 2001 and 2000 were 9,261,319 and 9,297,256, 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 the
Company. Fuel prices have fluctuated greatly 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
through increased freight rates and through a fuel surcharge which increases
incrementally as the price of fuel increases. Diesel prices increased
significantly during 2000 and were slightly higher when comparing the average
price per gallon for the first six months of 2001 to the first six months of
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 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 in the Senior Credit Facility. The Company repaid the balance due
under the General Line of Credit with Deposit Guaranty National Bank in the
amount of $36.1 million and subsequently terminated the General Line of Credit
on April 28, 2000. As of June 30, 2001, approximately $21.3 million was
available under the Senior Credit
Page 11
12
Facility. The Senior Credit Facility matures on April 28, 2005, prior to which
time and, subject to certain conditions, the balance outstanding may 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 Senior Credit
Facility bears variable interest based on the lenders prime rate, or federal
funds rate plus 1/2% or LIBOR plus a certain percentage, which is determined
based on the Company's ratio of total funded debt to EBITDAR to determine the
points to be added to the base LIBOR rate. The effective interest rate on the
Company's borrowings under the Senior Credit Facility for the quarter ending
June 30, 2001 was 6.12%. A quarterly commitment fee is payable on the unused
credit line and bears a rate which is determined based on the Company's ratio of
total funded debt to EBITDAR to determine the applicable rate. As of June 30,
2001 the rate was 0.4%. The Senior Credit Facility is collateralized by accounts
receivable and all otherwise unencumbered equipment. On March 30, 2001, the
Company amended its Senior Credit Facility to modify the covenants and more
accurately align them with the Company's recent operating performance resulting
from the general economic conditions in the truckload market. The Company
modified its grid pricing which is based on its Total Funded Debt to EBITDAR
ratio. The amended applicable rate increments were increased slightly for
certain Total Funded Debt to EBITDAR ratios. The Company does not expect the
increase in rates to have a significant impact on the Company's financial
statements.
The continued growth of the Company's business has required significant
investments in new equipment. The Company 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 historically 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 $17.7 million for the six
months ending June 30, 2001 and $13.6 million for the six months ending June 30,
2000.
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 additional borrowings of up to $6,000,000 and was available 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, 2001, capital leases in the
aggregate principal amount of $18.3 million were outstanding under the Equipment
TRAC Lease Commitment with an average interest rate of 5.76% 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 was amended on November 7, 2000 to
provide for a maximum borrowing amount of approximately $16.5 million. Each
capital lease will have a repayment period of 42 months. Borrowings are limited
based on the amounts outstanding under capital leases entered into under this
agreement. As of June 30, 2001, $8.7 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, 2001, capital leases in the
aggregate principal amount of $7.5 million were outstanding
Page 12
13
under this lease commitment with an average interest rate of 6.63% per annum.
During the six-month period ended June 30, 2001, the Company did not enter into
any capital leases under this lease commitment.
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 was amended on
October 18, 2000 to provide for a maximum borrowing amount of approximately
$19.6 million. 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, 2001, $12.3 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, 2001, capital leases in the
aggregate principal amount of $7.0 million were outstanding under this lease
commitment with an average interest rate of 6.58% per annum. During the
six-month period ended June 30, 2001, the Company did not enter into any capital
leases under this lease commitment.
As of June 30, 2001, the Company had debt obligations of approximately
$72.2 million, including amounts borrowed under the facilities described above,
of which approximately $9.7 million were current obligations. During the
six-month period ending June 30, 2001, the Company made borrowings under the
Senior Credit Facility of $72.0 million, while retiring $78.4 million in debt
under the Senior Credit Facility and the other debt facilities described above.
The retired debt had an average interest rate of approximately 7.46%.
During the years 2001 and 2002, the Company plans to make approximately
$99.8 million in capital expenditures. At June 30, 2001, the Company was
committed to spend $40.2 million of this amount for revenue equipment in 2001,
and $52.7 million of this amount is currently budgeted for revenue equipment in
2002. 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 Senior Credit Facility, the Equipment TRAC Lease Commitment A, the
Equipment TRAC Lease Commitment B, equipment leases and cash flows from
operations should be adequate to fund the Company's operations and expansion
plans 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, equipment leases, the Senior Credit Facility, the Equipment TRAC
Lease Commitment A, and the Equipment TRAC Lease Commitment B 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 depending 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. As of June 30, 2001, the Company had purchased 289,800
shares pursuant to this new authorization at an aggregate purchase price of $2.5
million and had resold 29,218 of these shares under the Company's Employee Stock
Page 13
14
Purchase Plan. The Board of Directors has authorized the retirement of 241,733
shares of treasury stock that had been purchased at an aggregate cost of $2.1
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.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Statement has
been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards
requiring that every derivative instrument be recorded in the balance sheet as
either an asset or liability at its fair value. The Company adopted SFAS No.
133, as amended by SFAS No. 137, on January 1, 2001. The adoption had no effect
on earnings or the financial position of the Company.
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements and information that are
based on management's current beliefs and expectations and assumptions made by
it based upon information currently available. Forward-looking statements
include statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequacy of resources, may be identified by words
such as "will", "could", "should", "believe", "expect", "intend", "plan",
"schedule", "estimate", "project" and similar expressions. These statements are
based on current expectations and are subject to uncertainty and change.
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 14
15
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
June 30, 2001, the Company had $37.4 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
16, 2001, the Company had $35.9 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 15
16
FORM 10-Q
USA TRUCK, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders of the Company was held on May 2, 2001.
At the meeting, the stockholders elected the person set forth in the table below
to serve as a director for a term expiring at the 2004 Annual Meeting of
Stockholders:
Votes Votes Broker
Nominee For Withheld Non-Votes
------- --- -------- ---------
Robert M. Powell 7,828,490 83,395 -0-
James B. Speed 7,825,502 83,383 -0-
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits
11.1 Statement Re: Computation of Earnings (Loss) Per Share
(B) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the six
months ended June 30, 2001.
Page 16
17
SIGNATURES
In accordance with 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: July 18, 2001 /s/ ROBERT M. POWELL
------------------- ------------------------------------------
ROBERT M. POWELL
Chairman, President and
Chief Executive Officer
Date: July 18, 2001 /s/ JERRY D. ORLER
------------------- ------------------------------------------
JERRY D. ORLER
Vice President-Finance and
Chief Financial Officer
Page 17
18
FORM 10-Q
INDEX TO EXHIBITS
USA TRUCK, INC.
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
11.1 Statement Re: Computation of Earnings (Loss) Per Share 19
Page 18