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, 2002
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.
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(Exact name of Registrant as specified in its charter)
<Table>
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)
</Table>
(479) 471-2500
----------------------------------------------------
(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:
As of July 17, 2002, the Registrant had outstanding 9,324,908 shares of
common stock, $.01 par value per share.
INDEX
USA TRUCK, INC.
<Table>
<Caption>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
------
Condensed Consolidated Balance Sheets - June 30, 2002 (unaudited)
and December 31, 2001 3
Condensed Consolidated Statements of Operations (unaudited) - Three
Months Ended and Six Months Ended June 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows (unaudited) - Six
Months Ended June 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial Statements (unaudited) -
June 30, 2002 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
</Table>
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
USA TRUCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
June 30, December 31,
2002 2001(1)
--------------- ---------------
(unaudited) (audited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,605,996 $ 1,976,228
Accounts Receivable:
Trade - less allowance for doubtful accounts
(2002 - $297,216; 2001 - $260,771) 29,415,814 25,823,304
Other 563,276 3,068,554
Inventories 743,214 474,279
Deferred income taxes 1,695,170 673,000
Prepaid expenses and other current assets 4,319,008 2,398,410
--------------- ---------------
Total current assets 38,342,478 34,413,775
PROPERTY AND EQUIPMENT 218,634,773 207,945,810
ACCUMULATED DEPRECIATION AND AMORTIZATION (70,714,674) (60,102,406)
--------------- ---------------
147,920,099 147,843,404
OTHER ASSETS 154,083 154,295
--------------- ---------------
Total assets $ 186,416,660 $ 182,411,474
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank drafts payable $ 1,865,516 $ 1,537,585
Trade accounts payable 4,366,312 4,029,960
Accrued expenses 15,716,764 13,173,442
Current maturities of long-term debt 16,998,925 13,029,318
--------------- ---------------
Total current liabilities 38,947,517 31,770,305
LONG-TERM DEBT, LESS CURRENT MATURITIES 49,824,794 56,450,817
DEFERRED INCOME TAXES 22,879,969 20,488,511
INSURANCE AND CLAIMS ACCRUALS 2,507,765 2,528,365
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
(2002 - 9,324,908; 2001 - 9,267,693) 93,249 92,677
Additional paid-in capital 11,399,298 11,138,506
Retained earnings 60,826,101 60,022,099
Less treasury stock, at cost (2002 - 10,981; 2001 - 14,135) (62,033) (79,806)
--------------- ---------------
Total stockholders' equity 72,256,615 71,173,476
--------------- ---------------
Total liabilities and stockholders' equity $ 186,416,660 $ 182,411,474
=============== ===============
</Table>
(1) The balance sheet at December 31, 2001 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
USA TRUCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
REVENUE:
Revenue, before fuel surcharge $ 68,924,995 $ 61,877,997 $ 130,570,440 $ 120,165,468
Fuel surcharge 1,067,865 2,342,636 1,264,575 4,963,539
--------------- --------------- --------------- ---------------
Total revenues 69,992,860 64,220,633 131,835,015 125,129,007
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 27,195,500 27,425,889 53,871,488 53,733,228
Operations and maintenance 24,832,918 21,432,180 44,938,519 41,492,541
Operating taxes and licenses 1,098,147 1,094,628 2,118,256 2,106,509
Insurance and claims 4,169,637 3,188,893 7,852,754 6,258,908
Communications and utilities 690,494 676,121 1,387,417 1,360,660
Depreciation and amortization 6,798,107 6,656,289 13,420,889 13,382,232
Other 2,513,453 2,183,330 4,584,580 4,638,118
--------------- --------------- --------------- ---------------
67,298,256 62,657,330 128,173,903 122,972,196
--------------- --------------- --------------- ---------------
OPERATING INCOME 2,694,604 1,563,303 3,661,112 2,156,811
OTHER EXPENSES (INCOME):
Interest expense 754,361 1,158,264 1,583,890 2,444,296
Gain on disposal of assets (15,969) (14,665) (10,328) (33,603)
Other, net (63,156) (34,273) (53,725) (45,260)
--------------- --------------- --------------- ---------------
675,236 1,109,326 1,519,837 2,365,443
--------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 2,019,368 453,977 2,141,275 (208,632)
INCOME TAX EXPENSE (BENEFIT) 1,289,219 175,420 1,337,273 (82,270)
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $ 730,149 $ 278,557 $ 804,002 $ (126,352)
=============== =============== =============== ===============
PER SHARE INFORMATION:
Average shares outstanding (Basic) 9,313,158 9,240,270 9,292,138 9,235,174
=============== =============== =============== ===============
Basic net income (loss) per share $ 0.08 $ 0.03 $ 0.09 $ (0.01)
=============== =============== =============== ===============
Average shares outstanding (Diluted) 9,363,262 9,266,526 9,342,242 9,235,174
=============== =============== =============== ===============
Diluted net income (loss) per share $ 0.08 $ 0.03 $ 0.09 $ (0.01)
=============== =============== =============== ===============
</Table>
See notes to condensed consolidated financial statements.
Page 4
USA TRUCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
Six Months Ended
June 30,
----------------------------------
2002 2001
--------------- ---------------
OPERATING ACTIVITIES:
Net income (loss) $ 804,002 $ (126,352)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 13,420,889 13,382,232
Provision for doubtful accounts 35,800 24,000
Deferred income taxes 1,369,288 (473,425)
Gain on disposal of assets (10,328) (33,603)
Changes in operating assets and liabilities:
Accounts receivable (1,123,032) 1,153,831
Inventories, prepaid expenses and other current assets (2,189,533) 124,608
Bank drafts payable, accounts payable and accrued expenses 3,207,605 3,914,836
Insurance and claims accruals (20,600) (236,549)
--------------- ---------------
Net cash provided by operating activities 15,494,091 17,729,578
INVESTING ACTIVITIES:
Purchases of property and equipment (6,173,213) (19,295,175)
Proceeds from disposal of assets 259,945 7,448,833
Changes in other assets 212 297,846
--------------- ---------------
Net cash used by investing activities (5,913,056) (11,548,496)
FINANCING ACTIVITIES:
Borrowings under long-term debt 25,172,000 72,016,000
Principal payments on long-term debt (27,212,000) (69,484,000)
Principal payments on capitalized lease obligations (8,190,404) (8,908,854)
Proceeds from the exercise of stock options 239,935 2
Proceeds from sale of treasury stock 39,202 39,460
--------------- ---------------
Net cash used by financing activities (9,951,267) (6,337,392)
--------------- ---------------
DECREASE IN CASH AND CASH EQUIVALENTS (370,232) (156,310)
Cash and cash equivalents at beginning of period 1,976,228 1,674,730
--------------- ---------------
Cash and cash equivalents at end of period $ 1,605,996 $ 1,518,420
=============== ===============
</Table>
See notes to condensed consolidated financial statements.
Page 5
USA TRUCK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 2002
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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, 2002, are not necessarily indicative of the results that
may be expected for the year ended December 31, 2002. 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, 2001.
NOTE B--COMMITMENTS
As of June 30, 2002, the Company had remaining commitments for purchases of
revenue equipment in the aggregate amount of approximately $19.5 million in
2002. As part of these commitments, the Company has remaining contracts for the
purchase of 110 tractors during 2002. Either the Company or the vendor may
cancel these contracts within a certain time period before delivery of the
equipment.
The Company does not intend to trade tractors during the calendar year 2002
because of the continued weakness in the used tractor market. The Company has
decided to extend the useful lives on those groups of tractors that would have
traded in 2002 under normal used tractor market conditions. These extended lives
(54 months) will yield an increased depreciation charge to pre-tax earnings in
2002 of approximately $0.4 million.
The Company will aggressively pursue selling to unrelated third parties the
tractors on which useful lives have been extended if it can secure satisfactory
pricing through its internal tractor sales efforts. Anytime the market price
equals the book value on such equipment, it will be sold immediately even if it
has not yet served its full extended life. The Company will continue to take all
necessary measures to minimize the effects of the poor used tractor market on
the Company's operation.
Extending the lives on tractors will also result in an increased charge to
net income in 2002 for maintenance costs. Although the dollar impact cannot be
accurately estimated for the remainder of 2002, the Company is taking steps to
minimize it through an expansion of its maintenance facilities in Laredo, Texas
and Bethel, Pennsylvania as well as an expanded facility in Butler Township,
Ohio.
The Company has a commitment for the expanded terminal facility in Butler
Township, Ohio. Construction began in the third quarter of 2001 and was
completed in the second quarter of 2002. Approximately $0.1 million remains
outstanding of the original commitment.
Page 6
NOTE C--CAPITAL STOCK TRANSACTIONS
During the six-month period ended June 30, 2002, 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 October 2001.
However, the Company did distribute 3,154 treasury shares, pursuant to the
Company's Employee Stock Purchase Plan, to participants in such plan during the
six-month period ended June 30, 2002.
NOTE D--NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards Board No. 141, "Business Combinations" (SFAS
141), and No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141
eliminates the pooling-of-interests method of accounting for business
combinations and requires any business combination completed after June 30,
2001, to be accounted for by the purchase method. Additionally, SFAS 141 changes
the criteria to recognize intangible assets apart from goodwill. Under SFAS 142,
goodwill and indefinite lived intangible assets are no longer amortized but are
reviewed annually, or more frequently if impairment indicators arise, for
impairment. Separable intangible assets that have finite lives will continue to
be amortized over their useful lives. Because of the different transition dates
for goodwill and intangible assets acquired on or before June 30, 2001, and
those acquired after that date, pre-existing goodwill and intangibles will be
amortized during this transition period until adoption, whereas new goodwill and
other intangible assets acquired after June 30, 2001, will not be amortized.
Companies are required to adopt SFAS 142 in their fiscal year beginning after
December 15, 2001. The Company adopted SFAS 142 on January 1, 2002. These
statements did not have a material impact on the Company.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of;" however, it retains the fundamental provisions of that
Statement related to the recognition and measurement of the impairment of
long-lived assets to be "held and used." In addition, the Statement provides
some guidance on estimating cash flows when performing a recoverability test,
requires that a long-lived asset to be disposed of other than by sale (e.g.,
abandoned) be classified as "held and used" until it is disposed of and
establishes more restrictive criteria to classify an asset as "held for sale".
This statement did not have a material impact on the Company.
NOTE E -- SUBSEQUENT EVENTS
None.
Page 7
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, before fuel surcharge, for the periods indicated:
<Table>
<Caption>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ---------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
REVENUE, BEFORE FUEL SURCHARGE 100.0 % 100.0 % 100.0 % 100.0 %
OPERATING EXPENSES AND COSTS:
Salaries, wages and employee benefits 39.5 44.3 41.3 44.7
Operations and maintenance (1) 34.5 30.9 33.4 30.4
Operating taxes and licenses 1.6 1.8 1.6 1.8
Insurance and claims 6.0 5.2 6.0 5.2
Communications and utilities 1.0 1.1 1.1 1.1
Depreciation and amortization 9.9 10.8 10.3 11.1
Other 3.6 3.5 3.5 3.9
--------------- --------------- --------------- ---------------
96.1 97.5 97.2 98.2
--------------- --------------- --------------- ---------------
OPERATING INCOME 3.9 2.5 2.8 1.8
OTHER EXPENSES (INCOME):
Interest expense 1.1 1.9 1.2 2.0
Gain on disposal of assets -- -- -- --
Other, net (0.1) (0.1) -- --
--------------- --------------- --------------- ---------------
1.0 1.8 1.2 2.0
--------------- --------------- --------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 2.9 0.7 1.6 (0.2)
INCOME TAX EXPENSE (BENEFIT) 1.9 0.3 1.0 (0.1)
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) 1.1 % 0.5 % 0.6 % (0.1)%
--------------- --------------- --------------- ---------------
</Table>
(1) Net of fuel surcharge
RESULTS OF OPERATIONS
Quarter Ended June 30, 2002 Compared to Quarter Ended June 30, 2001
Operating revenue, before diesel fuel ("fuel") surcharge, increased 11.4%
to $68.9 million in the second quarter of 2002 from $61.9 million for the same
quarter of 2001. The Company believes this increase is due primarily to an
increase of 6.4% in the average number of tractors operated from 1,770
(including 18 owner-operators) in the second quarter of 2001 to 1,883 (including
95 owner-operators) in the same quarter of 2002 and to a 321.8% increase in
third party logistics and brokerage revenues to $4.3 million in the second
quarter of 2002 from $1.0
Page 8
million for the same quarter of 2001. Average revenue per mile (exclusive of
fuel surcharge) increased to $1.208 in the second quarter of 2002 from $1.140 in
the same quarter of 2001 primarily due to the abovementioned increase in third
party logistics and brokerage revenues. The number of shipments increased 8.7%
to 64,177 in the second quarter of 2002 from 59,022 in the same quarter of 2001.
Miles per tractor per week decreased 2.7% from 2,432 in the second quarter of
2001 to 2,367 in the same quarter of 2002 primarily due to a 193.0% increase in
the percentage of unmanned tractors to 6.30% in the second quarter of 2002 from
2.15% for the same quarter of 2001. The empty mile factor decreased from 9.88%
of paid miles in the second quarter of 2001 to 9.17% of paid miles in the same
quarter of 2002. The decreased empty mile factor was primarily the result of
improved freight demand in the Company's operating areas and, to a lesser
extent, reduced quantities of inbound loads into areas where there are few
available outbound loads.
Operating expenses and costs, as a percentage of revenue, before fuel
surcharge, decreased to 96.1% in 2002 from 97.5% in 2001.
The decrease in salaries, wages and employee benefits costs, as a
percentage of revenue, net of fuel surcharge, was primarily the result of the
Company implementing a per diem pay program for its drivers during April 2002
and increases in third party logistics and brokerage revenues and the Company's
owner-operator fleet. The average number of owner-operators in the Company's
fleet increased from 18 in the second quarter of 2001 to 95 in the same quarter
of 2002. These reductions in salaries were partially offset by a slight increase
in driver pay per mile, net of the per diem effect.
The increase in operations and maintenance costs, as a percentage of
revenue, net of fuel surcharge, was primarily the result of a 190.2% increase in
purchased transportation expense (third party logistics carrier expense,
brokerage carrier expense, Mexican carrier expense and owner-operator fees) to
$4.8 million in the second quarter of 2002 from $1.6 million for the same
quarter of 2001. The increased expenses are due to the increases in third party
logistics and brokerage revenues and the Company's owner-operator fleet
described above. These increases were partially offset by a 3.8% decrease in the
average price per gallon, net of fuel surcharge.
The increase in insurance and claims was primarily due to a 187.7% increase
in liability, cargo and workers' compensation insurance premiums in the second
quarter of 2002 compared to the same quarter in 2001.
The decrease in depreciation and amortization expense, as a percentage of
revenue, before fuel surcharge, was primarily the result of the abovementioned
increases in third party logistics and brokerage revenues and the Company's
owner-operator fleet for the second quarter of 2002 compared to the same quarter
in 2001. These increases were partially offset by slightly higher depreciation
expense on extended lived tractors (See "Note B--Commitments").
As a result of the foregoing factors, operating income increased 72.4% to
$2.7 million, or 3.9% of revenue, before fuel surcharge, in 2002 from $1.6
million, or 2.5% of revenue, before fuel surcharge, in 2001.
Interest expense decreased 34.9% to $0.8 million in 2002 from $1.2 million
in 2001, resulting primarily from interest rate decreases on the Company's
Senior Credit Facility (as defined under "Liquidity and Capital Resources"
herein) and, to a lesser extent, from a decrease
Page 9
in average borrowings under the Company's Senior Credit Facility described under
the "Liquidity and Capital Resources" section herein.
As a result of the above, income before income taxes increased 344.8% to
$2.0 million, or 2.9% of revenue, before fuel surcharge, in 2002 from $0.5
million, or 0.7% of revenue, before fuel surcharge, in 2001.
The Company's effective tax rate increased to 63.8% in the second quarter
of 2002 compared to 38.6% in the same quarter of 2001. The effective rates
varied from the statutory federal tax rate of 34% primarily due to state income
taxes and certain non-deductible expenses including a per diem pay structure
implemented by the Company during the second quarter of 2002. Due to the
nondeductible effect of per diem, the Company's tax rate will fluctuate in
future periods as earnings fluctuate.
As a result of the aforementioned factors, net income increased to $0.7
million in 2002 from $0.3 million in 2001. Diluted net income per share
increased to $0.08 per share for the second quarter of 2002 from $0.03 per share
in the same quarter of 2001. The number of shares used in the calculation of
diluted net income per share for the second quarters of 2002 and 2001 were
9,363,262 and 9,266,526, respectively. Total shares outstanding at June 30,
2002, were 9,324,908.
Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001
Operating revenue, before fuel surcharge, increased 8.7% to $130.6 million
in 2002 from $120.2 million in 2001. The Company believes this increase is due
primarily to an increase of 4.1% in the average number of tractors operated from
1,767 (including 17 owner-operators) in 2001 to 1,839 (including 77
owner-operators) in 2002 and to a 292.1% increase in third party logistics and
brokerage revenues to $6.5 million in 2002 from $1.7 million for 2001. Average
revenue per mile (exclusive of fuel surcharge) increased to $1.186 in 2002 from
$1.138 in 2001 primarily due to the abovementioned increase in third party
logistics and brokerage revenues. The number of shipments increased 7.4% to
122,548 in 2002 from 114,070 in 2001. Miles per tractor per week increased 0.3%
from 2,352 in 2001 to 2,358 in 2002 primarily due to increased freight demand
and, to a lesser extent, a company focus on tractor utilization. The empty mile
factor decreased to 9.66% of paid miles in 2002 from 9.79% of paid miles in
2001. The decreased empty mile factor was primarily the result of improved
freight demand in the Company's operating areas and, to a lesser extent, reduced
quantities of inbound loads into areas where there are few available outbound
loads.
Operating expenses and costs, as a percentage of revenue, before fuel
surcharge, decreased to 97.2% in 2002 from 98.2% in 2001.
The decrease in salaries, wages and employee benefits costs, as a
percentage of revenue, net of fuel surcharge, was primarily the result of the
Company implementing a per diem pay program for its drivers during April 2002
and increases in third party logistics and brokerage revenues and the Company's
owner-operator fleet. The average number of owner-operators in the Company's
fleet increased from 17 in 2001 to 77 in 2002. These reductions in salaries were
partially offset by a slight increase in driver pay per mile, net of the per
diem effect.
The increase in operations and maintenance costs, as a percentage of
revenue, net of fuel surcharge, was primarily the result of a 185.2% increase in
purchased transportation expense to
Page 10
$7.3 million in 2002 from $2.5 million for 2001. The increased expenses are due
to the increases in third party logistics and brokerage revenues and the
Company's owner-operator fleet described above. These increases were partially
offset by a 2.9% decrease in the average price per gallon, net of fuel
surcharge.
The increase in insurance and claims was primarily due to a 186.2% increase
in liability, cargo and workers' compensation insurance premiums in 2002
compared to 2001.
The decrease in depreciation and amortization expense, as a percentage of
revenue, before fuel surcharge, was primarily the result of the abovementioned
increases in third party logistics and brokerage revenues and the Company's
owner-operator fleet for 2002 compared to 2001. These increases were partially
offset by slightly higher depreciation expense on extended lived tractors (See
"Note B--Commitments").
As a result of the foregoing factors, operating income increased 69.7% to
$3.7 million, or 2.8% of revenue, before fuel surcharge, in 2002 from $2.2
million, or 1.8% of revenue, before fuel surcharge, in 2001.
Interest expense decreased 35.2% to $1.6 million in 2002 from $2.4 million
in 2001, resulting primarily from interest rate decreases on the Company's
Senior Credit Facility (as defined under "Liquidity and Capital Resources"
herein) and, to a lesser extent, from a decrease in average borrowings under the
Company's Senior Credit Facility described under the "Liquidity and Capital
Resources" section herein.
As a result of the above, income before income taxes increased to $2.1
million, or 1.6% of revenue, before fuel surcharge, in 2002 from a loss before
income taxes of $0.2 million, or (0.2%) of revenue, before fuel surcharge, in
2001.
The Company's effective tax rate increased to 62.5% in 2002 compared to
39.4% in 2001. The effective rates varied from the statutory federal tax rate of
34% primarily due to state income taxes and certain non-deductible expenses
including a per diem pay structure implemented by the Company during the second
quarter of 2002. Due to the nondeductible effect of per diem, the Company's tax
rate will fluctuate in future periods as earnings fluctuate.
As a result of the aforementioned factors, net income increased to $0.8 million
in 2002 from a net loss of $0.1 million in 2001. Diluted net income per share
increased to $0.09 per share for 2002 from a net loss of $0.01 per share in
2001. The number of shares used in the calculation of diluted net income per
share for 2002 and 2001 were 9,342,242 and 9,235,174, 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 fuel, and fuel
shortages or increases in fuel taxes or fuel costs have adversely affected, and
may in the future adversely
Page 11
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. Fuel
prices decreased during 2001 but have risen over the first half of 2002. There
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 U.S. Bank (formerly
Firstar Bank, N.A.) are participants in the Senior Credit Facility. As of June
30, 2002, approximately $34.6 million was available under the Senior Credit
Facility. The Senior Credit Facility matures on April 28, 2005. At any time
prior to April 28, 2005, subject to certain conditions, the balance outstanding
on the Senior Credit Facility may be converted, 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 a certain percentage or LIBOR plus a certain
percentage, which is determined based on the Company's attainment of certain
financial ratios. The effective interest rate on the Company's borrowings under
the Senior Credit Facility for the quarter ended June 30, 2002 was 3.89%. A
quarterly commitment fee is payable on the unused credit line and bears a rate
which is determined based on the Company's attainment of certain financial
ratios. As of June 30, 2002, the rate was 0.25%. This credit facility is
collateralized by accounts receivable and all otherwise unencumbered equipment.
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 Senior Credit Facility, conventional financing and lease-purchase
arrangements. The Company has historically met its working capital needs with
cash flows from operations and with borrowings under the Senior Credit Facility.
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 $15.5 million for the six-month period ended
June 30, 2002 and $17.7 million for the six-month period ended June 30, 2001.
As of June 30, 2002, capital leases in the aggregate principal amount
of $24.6 million were outstanding under prior lease commitments with an average
interest rate of 5.37% per annum.
On January 11, 2000, the Company entered into a lease commitment
agreement (the "2000 Equipment 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 through the end of 2001. The 2000 Equipment TRAC Lease Commitment
A was amended again on November 5, 2001 to provide for a maximum borrowing
amount of $5.5 million during the calendar year 2002. Each capital lease under
this lease commitment will have a repayment period of 42 months. Borrowings are
limited based on the amounts outstanding under capital leases entered into under
this lease
Page 12
commitment. As of June 30, 2002, $3.4 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, 2002, capital leases in the
aggregate principal amount of $13.1 million were outstanding under this lease
commitment with an average interest rate of 5.21% per annum. During the
six-month period ended June 30, 2002, the Company entered into capital leases
under this lease commitment in the amount of $2.1 million.
On November 5, 2001, the Company entered into a lease commitment
agreement (the "2002 Equipment TRAC Lease Commitment A"), to facilitate the
leasing of tractors. The 2002 Equipment TRAC Lease Commitment A provides for a
maximum borrowing amount of approximately $5.5 million during the calendar year
2002. Each capital lease under this lease commitment will have a repayment
period of 42 months. Borrowings are limited based on the amounts outstanding
under capital leases entered into under this lease commitment. As of June 30,
2002, no funds remained available under the 2002 Equipment TRAC Lease Commitment
A. The interest rate on the capital leases under this lease commitment
fluctuates in relation to either the interest rate for the three-year Treasury
Note or the one year LIBOR as published in The Wall Street Journal, whichever
provides for the higher interest rate, and is fixed upon execution of a lease.
As of June 30, 2002, capital leases in the aggregate principal amount of $5.2
million were outstanding under this lease commitment with an average interest
rate of 4.34% per annum. During the six-month period ended June 30, 2002, the
Company entered into capital leases under this lease commitment in the amount of
$5.5 million.
On November 8, 2001, the Company entered into a lease commitment
agreement (the "2002 Equipment TRAC Lease Commitment B"), to facilitate the
leasing of tractors. The 2002 Equipment TRAC Lease Commitment B provides for a
maximum borrowing amount of approximately $7.0 million during the calendar year
2002. Each capital lease under this lease commitment will have a repayment
period of 42 months. Borrowings are limited based on the amounts outstanding
under capital leases entered into under this lease commitment. As of June 30,
2002, $7.0 million remained available under the 2002 Equipment TRAC Lease
Commitment B. The interest rate on the capital leases under this lease
commitment fluctuates in relation to lessor's cost of funds and is fixed upon
execution of a lease. During the six-month period ended June 30, 2002, the
Company did not enter into any capital leases under this lease commitment.
As of June 30, 2002, the Company had debt obligations of approximately
$66.8 million, including amounts borrowed under the Senior Credit Facility and
lease commitments described above, of which approximately $17.0 million were
current obligations. During the six-month period ended June 30, 2002, the
Company made borrowings under the Senior Credit Facility and lease commitments
described above of $25.2 million, while retiring $27.2 million in debt under
these facilities. The borrowings had an average interest rate of approximately
4.08% while the retired debt had an average interest rate of approximately
4.39%.
During the years 2002 and 2003, the Company plans to make approximately
$129.3 million in capital expenditures. As of June 30, 2002, the Company has
spent and has committed to spend $27.3 million of this amount for revenue
equipment in 2002. The Company has budgeted $98.2 million of this amount for
revenue equipment in 2003. 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.
Page 13
The Senior Credit Facility, the 2000 TRAC Lease Commitment A, the 2002
TRAC Lease Commitment A, the 2002 TRAC Lease Commitment B, cash received from
selling tractors and trailers and cash flows from operations should be adequate
to fund the Company's operations and expansion plans through the end of 2002.
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, the
2000 TRAC Lease Commitment A, the 2002 TRAC Lease Commitment B and other TRAC
leases for the foreseeable future.
On October 17, 2001, 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 ending October 16, 2004 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. The Company may 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. As of June 30, 2002, the Company had purchased no
shares pursuant to this authorization.
NEW ACCOUNTING PRONOUNCEMENTS
See Note D to the financial statements of this quarter's FORM 10-Q for a
description of the most recent accounting pronouncements and their affect, if
any, on 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
FORM 10-Q
USA TRUCK, INC.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As reported in the notes to the financial statements and in the Liquidity
and Capital Resources section of this FORM 10-Q, as of April 28, 2000 and
amended on March 30, 2001, the Company entered into the Senior Credit Facility
with a multi-bank group. The 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, 2002, the Company had $25.4 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.
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 fuel or any
other commodity.
Page 15
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 8, 2002.
At the meeting, the stockholders elected the people set forth in the table below
to serve as directors for a term expiring at the 2005 Annual Meeting of
Stockholders:
<Table>
<Caption>
Votes Votes Broker
Nominee For Withheld Non-Votes
------------- --------- -------- ---------
Jim L. Hanna 8,002,523 31,758 -0-
Joe D. Powers 8,002,523 31,758 -0-
</Table>
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, 2002.
Page 16
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 17, 2002 /s/ ROBERT M. POWELL
--------------------------- ------------------------------------
ROBERT M. POWELL
Chairman and Chief
Executive Officer
Date: July 17, 2002 /s/ JERRY D. ORLER
--------------------------- ------------------------------------
JERRY D. ORLER
President
Date: July 17, 2002 /s/ CLIFTON R. BECKHAM
--------------------------- ------------------------------------
CLIFTON R. BECKHAM
Vice President - Finance, Chief
Financial Officer and Secretary
Page 17
FORM 10-Q
INDEX TO EXHIBITS
USA TRUCK, INC.
<Table>
<Caption>
Sequentially
Exhibit Numbered
Number Exhibit Page
- -------- ------------------------------------------------------ ----------------
11.1 Statement Re: Computation of Earnings (Loss) Per Share 19
</Table>
18