Bigger.
Bigger.
Better.
Better.
Built To Serve.
Built To Serve.
Annual Report 1999
Company Profile
Company Profile
USA Truck is a medium haul, common and
contract carrier specializing in truckload
quantities of general commodities. The
Company operates in the 48 contiguous
United States and the Canadian provinces
of Ontario and Quebec and in Mexico
through the gateway city of Laredo,Texas.
Table of Contents
Table of Contents
To Our Stockholders ................................
Financial Highlights ..................................
Report Card ..............................................
Recruiting and Retention .........................
Small Steps, Big Gains ..............................
The Mexican Connection .......................
2
3
4
6
8
9
Surfin’ USA Truck ...................................... 10
USA Logistics, Service First ....................... 13
Sales Force ................................................ 14
We'll Make It Right ................................... 16
Directors and Officers .............................. 19
Ten-Year Financial Statistics ..................... 20
Corporate Information ............................. 22
Business .................................................... 23
Selected Financial Data ............................ 27
Management’s Discussion
and Analysis .............................................. 28
Report of Ernst & Young LLP,
Independent Auditors ............................... 34
Financial Statements ................................. 35
U S A T R U C K , I N C .
1
To Our Stockholders
To Our Stockholders
The calendar year 1999 was an
Financially, our Company had record
and pricing elements. We believe
important year for our Company. It
revenues in 1999 of $166.4 million,
USA Truck is well-positioned to be
was a year of change where we saw
up 15 percent from a year earlier. Net
considered as a core carrier for any of
internal growth, expanding dedicated
profit decreased 17.7 percent to $8.6
the nation's largest shippers.
business and an acquisition that
million and diluting earnings per
enhances the Company’s competitive
share decreased proportionately to
The winners in the coming decade
position through continuing growth
$.92. Cash flow remains at a record
are going to be the companies with
in target markets.
level, generating an EBITDA of $34.5
the most motivated people working
million. Stockholders’ equity
with the best systems and the ones
During the past year we concentrated
exceeded $70 million at the end
who can improve service while
on our customers’ needs whether
of the year.
lowering costs. That takes a
that was increased volume,
dedicated effort and investing in the
competitive pricing, dedicated
Looking forward, we will continue to
future. USA Truck has been quietly
service, service to Mexico, single
be challenged by volatile fuel prices
doing that over the past several years.
point of contact customer service or
and driver turnover, but we will meet
Internet access. Our on-time delivery
that challenge as we have in the past.
The Company is positioned better
is at a record level, aided by an
We are excited about the growth
than ever for continued strong
operational commitment and
brought about by the CCC Express
growth. Barring an unforeseen
enhanced computer software such as
acquisition. Annualizing the two
decrease in economic activity in our
“Drop and Swap,” which is used to
months of post-acquisition revenues
key markets, we believe 2000 will be
identify and correct a predicted
shows the Company running at a
another strong year for USA Truck.
service failure. Our active account list
$220 million pace. This will allow a
grew 15 percent this year to 1,600
lot of room for margin improvements
Thank you for your
accounts at the end of 1999.
as we have time to work on the cost
continued support.
J. B. Speed
Chairman
Robert M. Powell
President & Chief
Executive Officer
2
U S A T R U C K , I N C .
Financial Highlights
Financial Highlights
(Dollars in thousands except per share amounts)
Year Ended December 31,
1999
1998
1997
1996
1995
Operating Revenue ..................................
$166,363
$145,216
$129,507
$108,313
$102,400
Operating Income ...................................
Net Income ..............................................
Diluted Earnings Per Share ......................
15,836
8,642
.92
18,960
10,497
1.11
14,169
7,903
0.83
Total Assets ..............................................
182,040
119,611
113,518
Long – Term Obligations .........................
Stockholders’ Equity ................................
Operating Ratio .......................................
Total Tractors (end of period) .................
Total Trailers ( end of period) ..................
Avg. Miles Per Tractor Per Week ...............
64,453
70,108
90.5%
1,713
3,525
2,404
19,058
62,734
86.9%
1,132
2,004
2,441
27,057
52,373
89.1%
1,007
1,928
2,475
6,252
3,382
0.35
86,330
15,867
44,424
94.2%
862
1,510
2,407
10,439
6,037
0.60
78,908
13,361
43,157
89.8%
782
1,378
2,382
Price Range of Common Stock
Price Range of Common Stock
The Company’s Common Stock trades on The Nasdaq Stock Market under the symbol: USAK.
1999
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Sales Price
High
$10.44
$ 9.38
$ 9.25
$ 8.13
Low
$10.19
$ 9.16
$ 8.88
$ 7.75
1998
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Sales Price
High
$16.13
$17.00
$17.88
$12.63
Low
$10.75
$14.25
$10.13
$ 9.25
The high and low sales prices for the
The Company has never paid a cash
as other factors deemed relevant by
Common Stock as reported on Nasdaq
dividend on its Common Stock. It is
the Board of Directors. Covenants
on March 8, 2000 were 8.13 and 8.00,
the current intention of the Company’s
contained in the Company’s General
respectively. As of that date, the
Board of Directors to retain earnings to
Line of Credit may limit the Company’s
Company had 264 stockholders of
finance the growth of the Company
ability to pay dividends.
record, including brokerage firms and
rather than pay cash dividends. Any
other nominees. The Company
future payments of cash dividends will
estimates that there were
depend upon the financial condition,
approximately 1,888 beneficial owners
results of operations and capital
of its Common Stock as of that date.
commitments of the Company as well
U S A T R U C K , I N C .
3
Report Card
Report Card
Wonder how we’re doing? The
numbers show we’re making the
grade, with honors, and headed for
the top of the class.
USA Truck had record revenues of
$166,363,356 in 1999 for the 11th
consecutive year, meeting our goal of
15 percent growth. In addition to
increasing our business with current
customers and starting new customer
relationships, we aggressively targeted
dedicated and other logistics markets.
USA Truck increased its driver
recruiting budget by 150 percent for
1999 to keep up with growth and
unprecedented driver turnover. Like a
rose, even a blooming economy has its
thorns. This thriving economy is
providing ample revenue
4
U S A T R U C K , I N C .
opportunities, but it is also providing
plenty of alternative job opportunities
for truck drivers, making driver
retention a difficult proposition.
Despite those challenges, and rising
fuel costs in the fourth quarter, we
once again posted strong earnings
of $8,641,502, or $0.92 per
diluted share.
USA Truck also reported solid
earnings before interest, taxes,
depreciation and amortization
(EBITDA) during 1999, generating
more than $34 million, or $3.70 per
share. This number is an indication of
the company’s ability to meet its
operating, or variable, cash needs as
they come due. USA Truck was in a
very good position to do that in 1999.
U S A T R U C K , I N C .
5
Recruiting and Retention
Recruiting and Retention
When it comes to recruiting and
In 1999, we increased our drivers
operators. A new on-line computer
retaining drivers, we can’t afford to
hired count by 67 percent, compared
system for recruiting now enables us
indulge in another familiar type of
to our fleet growth of 55 percent.
to identify our most fertile and sterile
R & R -- rest and relaxation. There
recruiting areas, so we can commit
simply can be no letdown on our part
We were able to stay ahead of our
our resources accordingly.
in this vital area.
growth by restructuring our
relationships
USA Truck is in a better position than
with truck
ever before to meet the hiring needs
driving schools
of our Company. We will continue to
to ensure a
evaluate our recruiting and retention
steady stream of
policies every quarter and adjust to
student drivers
the changing needs of our fleet.
to participate in
our five-week
From a service perspective, we
training
have no choice. Rest and relaxation
program. We
are poor substitutes for recruiting
also put a
and retention.
The strong economy has made the job
renewed emphasis on recruiting
market tight and increased the
experienced drivers and owner-
volatility among fleet drivers who are
looking for a better deal. USA Truck
spent a considerable amount of
money in 1999 to recruit drivers. The
results were spectacular, but more
important was the fact that we turned
a corner philosophically.
They say that necessity is the mother
of invention, and necessity has
spawned a challenge to our creativity.
USA Truck’s increasing need for
drivers to fuel growth, along with the
unfortunate upswing in the turnover
rate, has forced us to reinvent the way
we recruit drivers.
6
U S A T R U C K , I N C .
U S A T R U C K , I N C .
7
Small Steps, Big Gains
Small Steps, Big Gains
One of our core philosophies has
It was no accident that USA Truck
Because of that proximity, we were
always been steady, controlled revenue
waited as long as it did to enter the
able to hire many CCC Express
growth. Years ago, we set a goal to
acquisition game. While many of our
employees, providing us valuable
increase our revenue at an average rate
competitors were joining the
liaisons with customers and drivers.
of 15 percent a year. We knew that at
consolidation frenzy that swept the
The benefits of this are most evident in
that rate we could double our size
truckload industry during the 90’s, we
the Operations area where we were
every five years and do it slowly
were quietly and conservatively
able to hire virtually all of the
enough to maintain our profit margins.
studying acquisition candidates. We
personnel, providing a more seamless
wanted our first one to be a good fit
transition for the drivers. CCC Express
for our current operations and a good
employed an Operations staff with a
investment for our
great deal of industry experience.
stockholders, and
Coupled with USA Truck’s own
we accomplished
Operations personnel, this acquisition
just that.
solidified a tremendous team of
professionals dedicated to driver
CCC Express, Inc.
satisfaction, customer service and
shared much in
equipment utilization.
common with USA
Truck. It operated
This acquisition has allowed our
in similar lanes at
company to grow substantially without
similar rates and
the burden of hiring and training new
Our first decade was a testament to
hauled general commodities
drivers to fill the new tractors in a
that philosophy. Through meticulously
comparable distances for many of our
highly competitive recruiting climate.
planning and monitoring our revenue
existing customers, as well as several
Further, with increased equipment
equipment purchases and trades, we
very desirable new customers. Its
availability to customers, USA Truck is
grew at an average rate of 15 percent
revenue equipment was comparable
now poised to be a major player in the
during our first 10 years.
to ours and its general offices were
truckload market for years to come.
located in Fort Smith,Arkansas,
USA Truck kicked off its second decade
just across the Arkansas River from
in a much more aggressive fashion. On
our own headquarters in
November 1, 1999, we set sail on our
Van Buren, Arkansas.
maiden voyage into the waters of
mergers and acquisitions by purchasing
the assets of CCC Express, Inc. for
$35.3 million. Our fleet size grew by
43 percent overnight!
8
U S A T R U C K , I N C .
The Mexican Connection
The Mexican Connection
USA Truck is continually looking for
new markets for its services. Over the
past few years, there has been a
tremendous demand for international
shipping. To better serve our
customers, we are now hauling
freight over most of North America.
For more than a decade, we have
served the Canadian provinces of
Ontario and Quebec. Our revenue
north of the border has been steady
and rewarding. During 1999, we
made significant strides to establish a
stronger presence in the Mexican
truckload market through the
gateway city of Laredo,Texas.
Our revenues from Mexican loads
increased to $5.4 million in 1999
from $2.8 million in 1998 -- a
whopping 93 percent growth rate!
There are several economic
advantages to servicing Mexico,
including increased length of
haul and a wider customer base.
USA Truck is committed to
becoming a major player in
multi-national shipping lanes.
U S A T R U C K , I N C .
9
Surfin’USA Truck
Surfin’USA Truck
1 0
U S A T R U C K , I N C .
For several years now, USA Truck has been
quietly upgrading its technology and
developing software from within. Our
philosophy of internally developing our
mainframe applications not only gives our
programming staff invaluable experience,
but it also customizes all of our systems,
allowing for better customer service.
All of our systems, regardless of their
platforms, are routed through our central
mainframe. Our new website is simply an
extension of our fundamental philosophy
of centering all of our technology around
the mainframe.
Our staff has worked diligently over
the past few years developing and
maintaining systems for the Company’s
various departments. Now we’re focusing
that energy and know-how on the
worldwide web.
While our new site will be on the cutting
edge of technology and provide customers
with all the bells and whistles they want,
it will also be an area requiring constant
upgrades and improvements as we move
forward. We’re committed to serving our
customers and stockholders with the
latest Internet technology.
Our website was designed specifically
with the customer in mind. Our
marketing department was instrumental
in its design and participated in every
stage of its development. Features
such as load tracing, load tendering,
available equipment maps, rate
requests and more are all driven by
intense customer demand.
The site also offers accommodations
for stockholders and potential
investors, including a strong investor
relations presentation complete
with links to up-to-the-minute stock
information from NASDAQ and
all SEC filings.
You may visit us at www.usa-truck.com.
U S A T R U C K , I N C .
1 1
USA Logistics’
principal
competitive strength
is its ability
and commitment
to provide consistent
premium service
to shippers that
demand a higher
level of service
than is generally
available
in the truckload
market.
1 2
U S A T R U C K , I N C .
USA Logistics, Service First
USA Logistics, Service First
Everyone likes options. New car buyers
are turning to transportation partners like
19 dedicated projects, a private fleet
want leather seats, power locks and
USA Logistics. We will purchase a
conversion and a robust brokerage
windows, CD players and a sporty look;
shipper’s fleet and manage it as a
business. As of December 31, 1999,
and they want it at a competitive price.
dedicated fleet for the shipper. Through
the USA Logistics fleet included
Our customers are no different. That’s
this arrangement, the shipper retains the
142 tractors and $11.5 in revenue.
why we began operating our
service levels they experienced with their
USA Logistics division in the fourth
private fleet and are allowed to focus on
quarter of 1998.
their core competencies.
Today’s shippers are interested in carriers
USA Logistics’ greatest asset is its ability to
that can satisfy their total freight needs.
offer a true third-party logistics service.
Whether it’s truckload, less-than-truckload
Our highly trained, innovative Marketing
or rail, USA Logistics can deliver.
and Operations staff specialize in
listening to our customers needs then
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D riv e r s
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M aintenance
M aintenance
All Distribution
All Distribution
Ele
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ents
m
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A focal point of this division is dedicated
developing, implementing and managing
The division was founded on aggressive,
service. Through a dedicated service
a customized transportation solution to
relentless marketing. Name recognition is
partnership with USA Logistics, our
meet our customers’ needs.
paramount in the booming logistics
customers are provided a specific
industry. This core philosophy, along with
number of assets (drivers and equipment)
This winning combination of
an emphasis on customer service, made
to meet their transportation needs. This
transportation solutions is designed
the phenomenal growth possible. The
consistent group of drivers provides a
to give shippers one-stop shopping
CCC Express acquisition also contributed
knowledgeable work force resulting in
regardless of their transportation needs.
substantially, adding 76 tractors and 11
superior levels of customer service.
dedicated projects, as well as a senior
Customer advantages to this ‘bundle’ of
sales executive. Projecting post-
services go beyond hassle-free shipping.
acquisition numbers,
It also relieves them of the expense and
USA Logistics is anticipating 2000
burden associated with administering
revenues in excess of $25 million.
their own trucking operation, including
labor, fuel, equipment, insurance and
USA Logistics’ mission is to provide
authority procurement.
consistent coverage to all customers. In
order to do this, we must maintain our
This division has shown tremendous
high standards and strive to achieve total
revenue growth during its first five
customer satisfaction. Our slogan,
Operating a trucking company can be an
quarters. At the end of 1998, the fledgling
“Running with Pride,” is indicative of our
expensive and exhausting endeavor.
division had three dedicated projects
commitment to being on time all the
That’s why many private fleets – those
requiring 37 tractors and generating
time, knowing that our jobs depend on
fleets owned and operated by large
revenue of $1.5 million. One year later, it
conformance to customer requirements.
retailers, manufacturers and distributors –
has grown 667 percent and now boasts
U S A T R U C K , I N C .
1 3
Sales Force
Sales Force
The lifeblood of any company is
single-point-of-contact staff
its sales force. Not only can a
members led by a veteran
seasoned, well-trained sales force
member of management.
generate strong revenue, but it can
also take care of the customer
The single-point-of-contact
with that personal touch.
concept spares customers the
aggravation of voice mail and the
At USA Truck, we have been
‘hot potato’ syndrome, where they
molding our sales effort to meet
are transferred from person to
both the sales demands of the
person in search of answers. We
North American truckload market
want our customers’ needs met
and growing customer service
quickly and in a professional,
demands. In addition to sales
courteous manner. No more
people, whose main responsibility
passing the buck -- it stops with us.
it is to generate revenue, we have
created a formal customer service
department that employs 11
32
25
22
16
14
1 4
U S A T R U C K , I N C .
U S A T R U C K , I N C .
1 5
With the fierce competition in the
trucking industry these days,our
survival hinges on doing right by our
customers. We think that’s our
strength,and we’re always looking for
ways to make things better.
USA Truck has vowed to eliminate
anything and everything that inhibits
customer satisfaction. We’ve already
discussed how our recent acquisition,
USA Logistics,our enhanced web site
and our expanding international
business can better serve our
customers. Those are the high-profile
projects we’ve developed. However,
we’re proud to say there are several
less visible ones that are every bit as
important to a satisfied customer.
Details like well-maintained revenue
equipment and experienced personnel
can make a world of difference in our
competitive industry.
We’ll Make It Right
We’ll Make It Right
1 6
U S A T R U C K , I N C .
Maintenance
Quality tools in the hands of a skilled
The Company benefits at trade time
carpenter can become instruments of
when the market rewards this
art. High-end revenue equipment in the
comprehensive maintenance plan with
hands of an experienced,well-trained
favorable pricing.
driver can have the same effect.
Stockholders reap the benefits of all
USA Truck operates a modern fleet of
of the above,owning shares in a
late model revenue equipment. On
company that is efficient,
average,our tractors and trailers have
competitive and profitable.
only been on the road for 23 and 46
months,respectively. In addition to our
strict equipment purchase and trade
schedule,we have a thorough,on-line
preventive maintenance computer
system to keep our equipment
functioning as efficiently as the day it
rolled off the assembly line.
Our tractors are equipped with
optimized idle and are governed to run
at a maximum speed of 63 miles per
hour,drastically improving both fuel
economy and safety.
There is little doubt that these quality
assurance programs pay dividends for
drivers,customers and stockholders
alike. Drivers keep running miles and
making money in a comfortable,reliable
tractor. Customers can count on one of
the lowest preventable accident rates per
mile in the industry,reduced service
failures because of equipment
breakdown and more competitive rates.
U S A T R U C K , I N C .
1 7
Experienced Personnel
More often than not,experience makes
people more effective at anything they
do. Trucking is no different. A Fleet
Manager who’s been around the block a
few times is going to be more effective
at keeping drivers happy and keeping
tractors rolling.
Experience translates into better
performance for our stockholders
and better service for our customers.
USA Truck generally targets young,
college graduates to fill operational jobs.
That is still our fundamental hiring plan,
but a few years ago we began putting
extra emphasis on hiring more
experienced personnel.
On average,an operations employee at
USA Truck has been working in the
trucking industry for 11 years,up from
eight years in 1997.
We believe that our drivers,customers
and stockholders derive a great deal of
benefit from that experience,and our
record reflects that.
1 8
U S A T R U C K , I N C .
Directors and Officers
Directors and Officers
James B. Speed
Chairman of the Board and Director
Robert M. Powell
President, Chief Executive Officer and Director
Jerry D. Orler
Vice President, Finance, Chief Financial Officer,
Secretary and Director
George R. Jacobs
Vice President, Operations and Director
Patrick N. Majors
Vice President, Sales
Dwain R. Key
Vice President, Corporate Development
Gary I. Davis
Vice President, Maintenance
Jerry W. Cottingham
Vice President, Logistics
Roland S. Boreham
Director (Chairman of the Board,
Baldor Electric Company)
Jim L. Hanna
Director (President, Hanna Oil and Gas)
Bobby W. Caldwell
Treasurer
Clifton R. Beckham
Controller
U S A T R U C K , I N C .
1 9
Ten Year Statistical History
Ten Year Statistical History
Balance Sheet Statistics
(Dollars in thousands)
Current assets
Total assets
Current liabilities
Long-term debt - less current maturities
Total liabilities
Total shareholders' equity
Income Statement Statistics
(Dollars in thousands - except per share amounts)
Revenue
Operating expenses
Operating income
Other expenses, net
Income before income taxes
Income taxes
Net income
Diluted or primary (*) shares outstanding
Diluted or primary (*) earnings per share
Revenue - year-to-year change
Operating ratio
Financial Statistics
(Dollars in thousands - except per share amounts)
EBIT
EBIT per share
EBITDA
EBITDA per share
Operating cash flow per share
Book value per share
Return on average assets
Return on average equity
Funded debt to total capital
Maintenance and repairs to fixed assets
Times interest earned
Revenue per non-driver
Operating Statistics
Total tractors (end of period)
Average months in service - tractors
Total trailers (end of period)
Average months in service - trailers
Trailer to tractor ratio
Average miles per tractor per week
Drivers
Non-drivers
Total employees
Driver to non-driver ratio
1999
1998
1997
1996
$
$
$
$
$
$
39,449
182,040
28,278
64,453
111,932
70,108
1999
166,363
150,526
15,837
1,624
14,213
5,571
8,642
9,354,441
0.92
14.6%
90.5%
1999
15,869
1.7
34,460
3.70
1.45
7.47
5.7%
13.0%
51.1%
6.1%
9.6
355
$
$
$
$
20,459
119,611
21,151
19,058
56,877
62,734
1998
145,216
126,256
18,960
1,780
17,180
6,683
10,497
9,465,971
1.11
12.1%
86.9%
1998
$ 18,895
2.01
35,074
3.73
3.03
6.65
9.0%
18.2%
27.2%
6.4%
11.0
418
$
$
$
$
$
$
$
20,292
113,518
20,762
27,057
61,145
52,373
1997
129,507
115,339
14,168
1,187
12,981
5,078
7,903
9,484,570
0.83
19.6%
89.1%
$
$
$
$
16,825
86,330
15,193
15,867
41,906
44,424
1996
108,313
102,061
6,252
717
5,535
2,153
3,382
9,619,919
0.35
5.8%
94.2%
1997
1996
14,361
1.54
27,969
2.99
3.02
5.59
7.9%
16.3%
36.2%
7.0%
10.4
379
$
$
6,265
0.66
18,104
1.91
1.57
4.68
4.1%
7.7%
31.5%
8.9%
8.6
372
1999
1998
1997
1996
1,713
23
3,525
46
2.1:1
2,405
1,600
469
2,069
3.41
1,132
19
2,004
39
1.8:1
2,441
1,057
347
1,404
3.05
1,007
19
1,928
33
1.9:1
2,475
962
342
1,304
2.81
862
23
1,510
34
1.8:1
2,407
922
291
1,213
3.17
2 0
U S A T R U C K , I N C .
December 31,
1995
1994
1993
1992
1991
1990
$
$
16,008
78,980
13,295
13,361
35,823
43,157
$
12,516
66,435
10,764
9,427
27,790
38,645
$
11,371
54,711
8,627
10,898
24,233
30,478
$
8,860
41,846
7,829
7,023
17,147
24,699
$
10,987
38,566
10,056
20,022
31,487
7,079
9,642
37,511
8,966
22,855
32,436
5,075
Year Ended December 31,
$
$
$
1995
102,400
91,961
10,439
646
9,793
3,756
6,037
10,028,478
0.60
10.7%
89.8%
1994
1993
1992
1991
1990
$
92,511
78,625
13,886
801
13,085
5,018
8,067
9,903,682
$ 0.81
21.9%
85.0%
$
$
75,875
65,853
10,022
679
9,343
3,764
5,579
9,873,665
$ 0.57
20.4%
86.8%
$
$
$
$
63,038
55,167
7,871
1,093
6,778
2,724
4,054
$
$
52,538
46,731
5,807
2,462
3,345
1,342
2,003
*
9,150,214
*
0.44
20.0%
87.5%
*
7,200,000
*
$
0.28
15.0%
88.9%
$
45,684
40,774
4,910
1,305
3,605
1,483
2,122
*
7,200,000
*
$ 0.29
$
25.6%
89.3%
Year Ended December 31,
1995
10,592
1.09
21,737
2.24
1.85
4.44
8.3%
14.8%
25.8%
8.7%
13.3
402
$
$
December 31,
1995
782
19
1,378
32
1.8:1
2,382
778
255
1,033
3.05
1994
$ 13,866
1.37
22,991
2.28
2.08
3.99
13.3%
23.3%
22.6%
8.7%
17.8
390
$
1993
1992
1991
1990
$
$
10,052
1.00
17,524
1.75
1.31
3.16
11.6%
20.2%
29.5%
9.3%
14.2
383
$
$
8,021
0.88
14,858
1.62
1.32
2.70
10.1%
25.5%
25.2%
10.1%
6.5
354
$
$
5,709
0.79
11,640
1.62
0.99
0.98
5.3%
33.0%
75.5%
9.5%
2.4
313
$
$
5,681
0.79
10,425
1.45
0.99
0.70
6.5%
52.9%
82.1%
9.9%
2.7
313
1994
1993
1992
1991
1990
711
17
1,202
31
1.7:1
2,565
712
237
949
3.00
571
18
1,023
35
1.8:1
2,551
563
198
761
2.84
496
25
840
37
1.7:1
2,508
508
178
686
2.85
412
22
705
43
1.7:1
2,404
418
168
586
2.49
363
12
622
38
1.7:1
2,414
358
146
504
2.45
U S A T R U C K , I N C .
2 1
Corporate information
Corporate information
This annual report and the statements contained herein are submitted for the general information of stockholders of
the Company and are not intended to induce any sale or purchase of securities or to be used in connection therewith.
The 1999 Annual Report filed with the Securities and Exchange Commission on Form 10-K is available to stockholders
upon request by writing to the Secretary at the executive offices.
A U D I TO R S
Ernst & Young LLP
A N N U A L M E E T I N G
May 3, 2000
425 West Capitol, Suite 3600
10 a.m.
Little Rock, Arkansas 72201
USA Truck, Inc.
T R A N S F E R A G E N T A N D R E G I ST R A R
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
C O R P O R AT E H E A D Q U A RT E R S
3200 Industrial Park Road
Van Buren, Arkansas 72956
Telephone: 501-471-2500
3200 Industrial Park Road
Van Buren, Arkansas 72956
C O M M O N STO C K
Traded on The Nasdaq Stock Market
under the Symbol: USAK
W E B S I T E
http://www.usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 1999 Annual
Report on Form 10-K, as filed with the Securities and Exchange Commission, including the financial statements and
schedules thereto. The written request should be sent to Jerry D. Orler, Secretary of the Company, at the Company’s
executive offices, 3200 Industrial Park Road,Van Buren,Arkansas 72956. The written request must state that as of March 8,
2000 the person making the request was a beneficial owner of shares of the common stock of the Company.
2 2
U S A T R U C K , I N C .
Business
Business
General
USA Truck, Inc. (the "Company" or "USA Truck") is engaged in the transportation of general commodity freight in interstate
and foreign commerce. Operations are conducted primarily east of the Rocky Mountains, but the Company holds authority
to transport and does transport freight between all points in the continental United States, other than intrastate, and
between all points in the U.S., on the one hand, and the Canadian provinces of Ontario and Quebec, on the other. The
Company also provides the U.S. and Canadian portions of shipments between points in the U.S. and Canadian provinces
of Ontario and Quebec, on the one hand, and points in Mexico, on the other. The Company transfers freight to, or receives
freight from, Mexican carriers at the U.S.-Mexico border in Laredo,Texas. Revenue from foreign countries represents less
than 5% of total revenues of the Company for each of the past three years. The principal types of freight transported
include automotive parts and materials, tires, paper and paper products, glass, retail store merchandise, chemicals,
aluminum and manufacturing materials and supplies. USA Truck does not transport Class A or Class B explosives, garbage,
radioactive materials or hazardous wastes. The Company does not operate any flatbed, tanker, or other specialized trailers.
USA Truck transports freight in truckload quantities from individual shippers to single or multiple destinations on an as-
needed basis. Its business consists primarily of medium haul shipments, more than 700 but less than 1,000 miles. For
1997, 1998, and 1999, the average length of haul for Company tractors was 920 miles, 916 miles, and 908 miles, respectively.
The Company's principal offices are located at 3200 Industrial Park Road, Van Buren, Arkansas 72956, and its telephone
number is (501) 471-2500.
Business Strategy
USA Truck's principal competitive strength is its ability and commitment to consistently provide superior service to
shippers. Although price is a primary concern to all shippers, many of the Company's customers are high-volume shippers
that require a flexible and dependable source of motor carrier service tailored to specific needs, including pickup or
delivery within narrow time windows. The Company's strategy is to provide a premium service to meet these needs and
to charge compensating rates for such service. This approach has found increasing acceptance.
See "Business --
Competition".
The Company is committed to prompt freight pickup, consistent on-time delivery, and twenty-four hours a day, seven days
a week dispatching. It has taken a number of steps to meet these commitments. In particular, the Company (i) adheres
to strict maintenance and cleaning schedules to avoid breakdowns and delays; (ii) provides detailed routing instructions
for, and maintains satellite communications with, drivers to expedite delivery; (iii) maintains trailer pools at strategic
locations to minimize the time between customer order and pickup; and (iv) provides extra trailers to high volume
shippers for loading and unloading at their convenience.
USA Truck utilizes cost-efficient communications throughout its operations. The Company provides EDI (electronic data
interchange) arrangements with several of its largest customers, providing them with access through their computer
systems to current information on the status of their shipments. Beginning in the third quarter of 1997, the Company
began installing two-way, satellite based mobile messaging and position-locating equipment in all of its tractors. This
equipment is designed to fulfill customers’ heightened need for real time transit information as well as provide the
Company with an enhanced and cost-effective method of communications between its drivers and its operations
personnel. The system permits fleet managers to contact drivers virtually anywhere in the Company’s market area. These
capabilities are intended to shorten response time to customers, as well as to allow drivers uninterrupted rest time while
awaiting assignment. The installation of the equipment was completed in the fourth quarter of 1997.
U S A T R U C K , I N C .
2 3
The Company has designed its own management information software systems, which it operates on a mainframe computer
that the Company acquired in 1997. This system became operational during the second quarter of 1997, when the Company's
software was migrated to the new computer. Prior to that, the Company used a mainframe computer through a contractual
agreement with a third party. These data processing capabilities enhance operating efficiency by providing immediate access
to detailed information concerning equipment, cargo, customer locations, credit history, billing arrangements and specific
customer requirements. They also permit the Company to respond quickly and accurately to customers' requests and assist in
balancing equipment availability throughout the market area. Management believes these information software systems and
computer hardware will be sufficient to support the Company's expansion plans at least through 2001 without substantial
additional expenditures in the data processing area.
Recent Events
On November 1, 1999, pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") dated October 31, 1999, the
Company acquired substantially all the assets of CARCO Carrier Corporation, an Arkansas corporation, which operated under
the name CCC Express, Inc. ("CCC"), for a purchase price of $35.3 million. The purchase price, which was subject to certain
post-closing adjustments, consisted of (i) a cash payment of approximately $3.0 million; (ii) the assumption of approximately
$6.5 million of liabilities including equipment notes held by Bank Boston, Mellon U.S. Leasing and Banc of America Leasing &
Capital LLC and (iii) the refinancing with Banc One Leasing Corporation and Deposit Guaranty National Bank of approximately
$25.8 million in other debt secured by equipment. The cash portion of the purchase price was paid with available cash and
proceeds of borrowings under the Company’s credit facilities with Deposit Guaranty National Bank. The purchase price was
equal to the net book value of CCC on the closing date,as adjusted in accordance with the Asset Purchase Agreement,plus $2.0
million. In connection with the acquisition, the Company’s borrowing limit under its General Line of Credit with Deposit
Guaranty National Bank was increased from $20.0 million to $35.0 million effective October 28, 1999.
The acquired operations include a fleet of 498 tractors and 1,103 dry van trailers, which the Company will use in its truckload
motor carrier business. The acquisition represents an increase of 43% in the tractor fleet of the Company,which operated 1,149
tractors and 2,266 dry van trailers before the transaction. As part of the transaction, the Company also assumed three leases
for dedicated shop and fuel facilities.
Marketing and Sales
The Company focuses its marketing efforts on customers with demanding requirements and heavy shipping needs within the
regions where the Company operates. This permits the Company to concentrate available equipment in its primary service
area, enabling it to be more responsive to customer needs. USA Truck's Marketing and Operations Departments have primary
responsibility for developing and implementing the Company's marketing strategy and retaining customer accounts.
The Marketing Department solicits and responds to customer orders and maintains close customer contact regarding service
requirements and rates. A high percentage of the Company's business is from repeat customers. For the year ended December
31, 1999, at least 93% of USA Truck's operating revenues were derived from customers that were customers of the Company
prior to 1999.
USA Truck establishes rates through individual negotiations with customers and through contracts tailored to the specific needs
of shippers.
Operations
The Operations Department consists of two primary divisions: the Load Coordinator Group and the Fleet Manager Group.
Load coordinators are responsible for efficiently matching available equipment with customer needs, and they serve as the
contact with customers' receiving and shipping personnel. Load coordinators also have primary responsibility for minimizing
empty miles, and they work closely with the Marketing Department to increase equipment utilization.
The average distance between loads as a percentage of total miles (empty mile factor) is a standard measurement in the
truckload industry. The empty mile factor generally decreases as average length of haul and density of trucks in an area
2 4
U S A T R U C K , I N C .
increase. The Company's commitment to on-time pickup often requires a tractor to travel farther to complete a pickup
than it would have to travel if the Company delayed the pickup until a tractor became available in the area. USA Truck's
empty mile factor was 9.26% for the year ended December 31, 1999.
Fleet managers supervise fleets of approximately 55 drivers each and serve as the drivers' primary contact with the
Company. Fleet managers monitor the location of equipment and direct its movement in the most efficient and safe
manner practicable.
Safety
USA Truck's safety program is designed to meet the Company’s goal of an accident-free working environment and to
enforce governmental safety regulations. The Company controls the maximum speed of its tractors with electronic
governing equipment, and all its tractors are equipped with anti-lock braking systems.
Safety records are one of several hiring criteria used by USA Truck, and safe equipment handling techniques are an
important part of new driver training. The Company also conducts pre-employment, random and post-accident drug
testing in accordance with Department of Transportation ("DOT") regulations.
Revenue Equipment
During 1999, the Company acquired 381 new tractors (a net increase of 83) and 600 new trailers (a net increase of 417).
The Company purchased 68 fewer new tractors in 1999 than anticipated in response to the shortage of qualified drivers
in the truckload industry. The process of converting to 53-foot trailers, growth in dedicated service and freight into
Mexico, which traditionally requires more trailers that regular dry-van service, necessitated increasing the trailer fleet by
114 units above the amount anticipated. The CCC Express acquisition added an additional 498 tractors and 1,103 trailers
to the fleet. The Company purchases equipment manufactured to its specifications, which provides efficiencies in training,
parts inventory and maintenance. Equipment selection is based on safety, economy, resale value, driver comfort, and other
factors. Management establishes and adjusts equipment purchase schedules to maintain acceptable equipment utilization
rates in relation to current economic conditions in the truckload industry. The Company has a strict preventive
maintenance program designed to minimize equipment downtime and to enhance trade-in value.
USA Truck replaces its tractors and trailers based on various factors, including the used equipment market, prevailing
interest rates, technological improvements, fuel efficiency and durability. Currently, the Company replaces most tractors
within 42 months from the date of purchase, thereby maintaining substantial warranty coverage throughout the period of
ownership.
Beginning with the November 1995 trailer purchases, the Company began converting its trailer fleet from 48-foot long and
102 inches wide trailers to 53-foot long and 102 inches wide trailers. Because of this conversion process and additional
trailers required to serve Mexico, the Company's trailer to tractor ratio was 2.1-to-1 at December 31, 1999. Management
believes that a 2.1-to-1 ratio is ideal for the Company's operations, in that it promotes efficiency and provides the flexibility
needed to serve customer needs. As of December 31, 1999, 2,475 of the 3,524 trailers in the Company's trailer fleet were
53-foot models. All future purchases of trailers will be 53-foot models. The Company is undertaking this conversion in
order to meet its customers' requirements and to continue to provide an efficient balance between trailer capacity and
weight and length limitations in the various states and Canada.
During 2000 and 2001, the Company plans to acquire 641 and 695 new tractors and 650 and 825 new trailers, respectively.
This will result in net increases of 66 and 267 tractors and 111 and 546 trailers, respectively.
Trademark
The Company's name and logo are registered with the United States Patent and Trademark Office, the Canadian Trade Marks
Office, and the Mexican Industrial Property Institute. The Company believes its trademark has significant value and is
important to its marketing efforts. The trademark registration in each country is renewable indefinitely at the option of
the Company.
U S A T R U C K , I N C .
2 5
Properties
The Company owns its headquarters in Van Buren,Arkansas, located on 63 acres. This site has approximately 84,000-square
feet of office, training, and driver housing space within two structures, a 12,000-square foot maintenance facility and a
2,500-square foot dock. In the second quarter of 1997, the Company completed construction of a new 57,000-square foot
corporate headquarters next to its existing headquarters facility in Van Buren, Arkansas. The previously existing 27,000-
square foot facility will be refurbished over the next several years to house additional training, maintenance and support
services. This facility also contains aboveground fuel tanks with a capacity of 40,000 gallons.
The Company operates a maintenance and driver facility in West Memphis,Arkansas, situated on roughly 32 acres with 13
acres of paved tractor and trailer parking behind fence, a 17,200-square foot shop, an eight-lane drive through fueling
station containing above ground fuel tanks with a capacity of 37,000 gallons and drivers' sleeping quarters that can house
36 drivers. During 1998, the Company expanded the shop by 7,200 square feet and added four additional lanes to its drive
through fueling station. The drivers' quarters also include a recruiting office and driver training center for new drivers.
The Company owns 29 of the 32 acres and leases the remainder under a long-term lease agreement with an initial term
ending in November 2044. Located at the intersection of I-40 and I-55, this facility is an ideal location for these activities.
In August 1995, the Company completed construction of and began operating its maintenance and driver facility in
Shreveport, Louisiana, with 15 acres of paved tractor and trailer parking behind fence, a 12,000-square foot shop, a two-
lane drive through fueling station containing above ground fuel tanks with a capacity of 37,000 gallons and a drivers'
sleeping quarters that can house 32 drivers. The drivers' quarters also include a recruiting office and driver training center
for new drivers. The facility is located on 20 acres of land owned by the Company near I-20 on US Hwy. 80 and is
strategically located near several major customers in the area.
In June 1996, the Company began operating its maintenance and driver facility in Vandalia, Ohio, with approximately five
acres of paved tractor and trailer parking behind fence, a 2,400-square foot shop, a one-lane drive through fueling station
containing a below ground fuel tank with a capacity of 10,000 gallons and a drivers' sleeping quarters that can house 22
drivers. During 1999 the company acquired approximately 3 acres of adjoining land and plans to use this space for truck
and trailer parking as soon as it can be prepared. The drivers' quarters also include a sales and recruiting office. The
Company owned facility is located near I-75 & I-70 and is strategically located for these activities.
The Company leases, on a month-to-month basis, parking and office facilities in East Peoria and Blue Island, Illinois, New
Paris, Indiana and Fayetteville, North Carolina.
Management believes that its facilities will be sufficient for its operations at least through 2000.
2 6
U S A T R U C K , I N C .
Selected Financial Data
Selected Financial Data
The following table sets forth, for the periods and at the dates indicated, selected financial data of the Company. The data
should be read in conjunction with the financial statements and related notes contained in this Annual Report.
1999
Year Ended December 31,
1997
(In thousands, except per share amounts)
1998
1996
1995
$
166,363
$
145,216
$
129,507
$
108,313
$
102,400
Statement of Operations Data:
Operating revenues.............................................
Operating expenses and costs:
Salaries, wages and employee benefits..........
Operations and maintenance ........................
Operating taxes and licenses.........................
Insurance and claims .....................................
Communications and utilities........................
Depreciation and amortization......................
Other .............................................................
Operating income ...............................................
Other (income) expenses:
Interest expense ............................................
Gain on disposal of assets .............................
Other, net .......................................................
Income before income taxes ..............................
70,198
42,480
3,005
7,987
2,000
18,592
6,265
150,527
15,836
61,297
33,401
2,547
7,250
1,469
16,179
4,113
126,256
18,960
53,122
34,189
2,160
6,773
1,828
13,608
3,659
115,339
14,168
1,655
(9)
(23)
1,623
14,213
1,715
(37)
102
1,780
17,180
1,380
(2)
(191)
1,187
12,981
Income taxes.......................................................
Net Income .........................................................
5,571
8,642
6,683
10,497
Basic:
Net income per share....................................
Average shares outstanding ...........................
Diluted:
Net income per share....................................
Average shares outstanding ...........................
Cash dividends per share....................................
Balance Sheet Data (at end of year):
Current assets .....................................................
Current liabilities ................................................
Total assets ..........................................................
Long-term debt, less current maturities ..............
Stockholders’ equity............................................
$
$
$
.93
9,324
.92
9,354
–
39,449
28,277
182,040
64,453
70,108
$
$
$
1.12
9,400
1.11
9,466
–
20,459
21,151
119,611
19,058
62,734
$
$
$
5,078
7,903
0.84
9,356
0.83
9,485
–
20,292
20,762
113,518
27,057
52,373
45,122
31,064
1,964
6,422
1,612
11,839
4,038
102,061
6,252
730
(9)
(4)
717
5,535
2,153
3,382
42,860
26,909
1,822
5,146
1,285
11,145
2,794
91,961
10,439
799
(1)
(152)
646
9,793
3,756
6,037
$
$
$
0.36
9,463
0.35
9,620
--
16,825
15,193
86,330
15,867
44,424
$
$
$
0.62
9,684
0.60
10,028
--
16,008
13,295
78,980
13,361
43,157
U S A T R U C K , I N C .
2 7
Management’s Discussion and Analysis
Management’s Discussion and Analysis
The following table sets forth the percentage relationship of certain items to operating revenues for the years indicated:
Year Ended December 31,
1998
1997
1999
Operating revenues...................................................
Operating expenses and costs:
100.0%
100.0%
100.0%
Salaries, wages and employee benefits..............
Operations and maintenance ............................
Operating taxes and licenses.............................
Insurance and claims .........................................
Communications and utilities............................
Depreciation and amortization..........................
Other .................................................................
Operating income .....................................................
Other (income) expenses:
Interest expense ................................................
Gain on disposal of assets .................................
Other, net...........................................................
Income before income taxes ....................................
Income taxes.............................................................
Net income ...............................................................
42.2
25.5
1.8
4.8
1.2
11.2
3.8
90.5
9.5
1.0
–
–
1.0
8.5
3.3
5.2%
42.2
23.0
1.8
5.0
1.0
11.1
2.8
86.9
13.1
1.2
–
0.1
1.3
11.8
4.6
7.2%
41.0
26.4
1.7
5.2
1.4
10.5
2.9
89.1
10.9
1.1
–
(0.2)
0.9
10.0
3.9
6.1%
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Operating revenues increased 14.6% to $166.4 million in 1999 from $145.2 million in 1998, resulting from increased
business with existing customers, additional business from new customers and the acquisition of CCC Express on
November 1, 1999. Average revenue per mile increased to $1.13 in 1999 from $1.12 in 1998. The empty mile factor
decreased to 9.26% of paid miles in 1999 from 9.78% of paid miles in 1998. There was a 15.1% increase in the number of
shipments to 147,484 in 1999 from 128,179 in 1998. This volume improvement was made possible by an increase of 15.6%
in the average number of tractors operated from 1,058 in 1998 to 1,223 in 1999. The net effect of the volume improvement
and the Company’s continuing fleet expansion was a decrease of 1.5% in miles per tractor per week from 2,441 in 1998
to 2,404 in 1999.
Operating expenses and costs as a percentage of revenues rose to 90.5% in 1999 from 86.9% in 1998. This change resulted
primarily from an increase, on a percent of revenue basis, in operations and maintenance cost, communications and
utilities, and other expenses. These increases were partially offset by a decrease, on a percent of revenue basis, in insurance
and claims. The percentage increase, relative to revenues, in operations and maintenance cost was primarily the result of
a an increase of 10 cents per gallon in the average cost of fuel in 1999 compared to 1998, offset by an increase in fuel
efficiency to 6.46 average miles per gallon in 1999 from 6.41 in 1998. The increase in communications and utilities
expense, as a percentage of revenue and in actual dollars, reflects the usage credits issued with the purchase of Qualcomm
units in 1997 being used to reduce rates in 1998. The increase in other expenses, as a percentage of revenue, resulted
primarily from higher recruiting costs brought about by a higher driver turnover rate and increased competition for
drivers. The percentage decrease, relative to revenues, in insurance and claims expense was due to a decrease in the
number and severity of accidents in 1999 compared to 1998.
As a result of the foregoing factors, operating income decreased 16.5% to $15.8 million, or 9.5% of revenue, in 1999 from
$19.0 million or, 13.1% of revenues, in 1998.
2 8
U S A T R U C K , I N C .
Interest expense decreased 3.5% to $1.65 million from $1.72 million in 1998, resulting primarily from reduction in
borrowings for most of the year offset by a substantial increase in borrowings following the acquisition of CCC Express
on November 1, 1999.
The Company had other income, net of $23,000 during 1999 compared to other expense, net of $102,000 in 1998. This
increase in other income, net was due to a variety of factors, no single one of which accounted for more than half of the
increase.
As a result of the above factors, income before taxes decreased 17.3% to $14.2 million, or 8.5% of revenues, in 1999 from
$17.2 million, or 11.8% of revenues, in 1998.
The Company’s effective tax rate increased to 39.2% in 1999 from 38.9% in 1998. 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 17.7% to $8.6 million, or 5.2% of revenues, in 1999 from
$10.5 million, or 7.2% of revenues in 1998, representing a decrease of 17.1% in diluted net income per share to $.92 from
$1.11. The number of shares used in the calculation of diluted net income per share for 1999 and 1998 were 9,354,441
and 9,465,971.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Operating revenues increased 12.1% to $145.2 million in 1998 from $129.5 million in 1997, resulting from increased
business with existing customers and additional business from new customers. Average revenue per mile increased to
$1.12 in 1998 from $1.11 in 1997. The empty mile factor decreased to 9.78% in 1998 from 10.05% of paid miles in 1997.
There was a 12.4% increase in the number of shipments to 128,179 in 1998 from 114,022 in 1997. This volume
improvement was made possible by an increase of 13.2% in the average number of tractors operated from 935 in 1997 to
1,058 in 1998. The net effect of the volume improvement and the Company's continuing fleet expansion was a decrease
of 1.4% in miles per tractor per week from 2,475 in 1997 to 2,441 in 1998.
Operating expenses and costs as a percentage of revenues improved to 86.9% in 1998 from 89.1% in 1997. This change
resulted primarily from a decrease, on a percentage of revenue basis, in operations and maintenance costs, in insurance and
claims expense and in communications and utilities expense. These decreases were partially offset by increases, on a
percentage of revenue basis, in salaries, wages, and employee benefits and in depreciation and amortization expense. The
percentage decrease, relative to revenues, in operations and maintenance costs was primarily the result of a decrease of 16
cents per gallon in the average cost of fuel in 1998 compared to 1997, and by an increase in fuel efficiency to 6.41 average
miles per gallon in 1998 from 6.29 in 1997. The percentage decrease, relative to revenues, in insurance and claims expense
was due to a decrease in the number and severity of accidents in 1998 as compared to 1997. The decrease in
communications and utilities expense, as a percentage of revenue and in actual dollars, reflects the installation in
December 1997 of the Company’s two-way, satellite-based mobile messaging and position-locating equipment in all of its
tractors. This equipment has greatly reduced the Company’s telephone expenses and increased the efficiency of
communications with drivers. In addition, these devices have enabled the Company to eliminate the cost associated with
the global paging system the Company was previously utilizing in its operations. The increase in salaries, wages, and
employee benefits was due to an increase in aggregate driver pay, an increase in driver total base compensation of
approximately 6% per driver in October 1998, along with an increase in incentives earned by employees due to improved
operating and financial performance of the Company in 1998 compared to 1997. The increase in depreciation and
amortization expense reflects the effects of timing differences between trade-in cycles and purchasing schedules along
with an increase in the cost of tractors and trailers when compared to those being retired.
As a result of the foregoing factors, operating income increased 33.8% to $19.0 million, or 13.1% of revenues, in 1998 from
$14.2 million, or 10.9% of revenues, in 1997.
Interest expense increased 24.3% to $1.7 million in 1998 from $1.4 million in 1997, resulting primarily from an increase
in borrowings to facilitate equipment purchases, partially offset by a decrease in interest rates, in the aggregate, on both
short-term and long-term debt.
U S A T R U C K , I N C .
2 9
The Company had other income, net, of $191,000 in 1997, compared to other expense, net, of $102,000 in 1998. This
increase in other expense, net was due to a variety of factors, no single one of which accounted for more than half of the
increase.
As a result of the above, income before income taxes increased 32.3% to $17.2 million, or 11.8% of revenues, in 1998 from
$13.0 million, or 10.0% of revenues, in 1997.
The Company's effective tax rate decreased to 38.9% in 1998 from 39.1% in 1997. The effective rates varied from the
statutory Federal tax rate of 34% primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income increased 32.8% to $10.5 million, or 7.2% of revenues, in 1998 from
$7.9 million, or 6.1% of revenues, in 1997, an increase of 33.8% in diluted net income per share to $1.11 from $.83. The
number of shares used in the calculation of diluted net income per share for 1998 and 1997 were 9,465,971 and 9,484,570,
respectively.
Inflation
The effect of inflation on operating costs has been minimal in recent years. Most of the Company's operating expenses
are inflation sensitive, with increases in inflation generally resulting in increased operating costs and expenses. The effect
of inflation-driven cost increases on the Company's overall operating costs would not be expected to be greater for the
Company than for its competitors.
Seasonality
In the trucking industry generally, revenues decrease as customers reduce shipments during the winter holiday season and
as inclement weather impedes operations. At the same time, operating expenses increase, due primarily to decreased fuel
efficiency and increased maintenance costs. Future revenues could be impacted if customers reduce shipments due to
temporary plant closings, which historically have occurred during July and December.
Fuel Availability and Cost
The motor carrier industry is dependent upon the availability of diesel fuel, and fuel shortages or increases in fuel taxes or
fuel costs have adversely affected, and may in the future adversely affect the profitability of USA Truck. Fuel prices have
fluctuated widely and fuel taxes have generally increased in recent years. The Company has not experienced difficulty in
maintaining necessary fuel supplies, and in the past the Company generally has been able to recover all but the most
significant increases in fuel costs and fuel taxes from customers through increased freight rates. Diesel prices increased
during 1999 and there can be no assurance when diesel prices will decrease to price levels experienced in recent periods.
There also can be no assurance that the Company will be able to recover any future increases in fuel costs and fuel taxes
through increased rates.
Operational Data
The following table sets forth certain operational information for the last three fiscal years:
Year Ended December 31,
1998
1997
1999
Total loads moved during the year ............................................
Average number of tractors operated during the year ..............
Number of tractors operated at year end ..................................
Number of trailers operated at year end ...................................
Total tractor miles during the year ............................................
147,484
1,223
1,713
3,524
169,587,327
128,179
1,058
1,132
2,004
148,590,937
114,022
935
1,007
1,928
133,941,037
3 0
U S A T R U C K , I N C .
Liquidity and Capital Resources
The continued growth of the Company's business has required significant investments in new revenue equipment. USA
Truck has financed revenue equipment purchases with cash flows from operations and through borrowings, including
borrowings under the General Line of Credit and capitalized lease obligations. Working capital needs have generally been
met with cash flows from operations and occasionally through borrowings under the General Line of Credit. Although the
Company historically has not relied significantly on the General Line of Credit to meet working capital requirements, it
does experience cyclical cash flow needs common to the industry. The Company uses the General Line of Credit to
minimize these fluctuations and to provide flexibility in financing revenue equipment. Cash flows from operations were
$13.6 million for 1999 and $28.5 million for 1998.
The Company's General Line of Credit provides for available borrowings of up to $40.0 million, including letters of credit
not exceeding $5.0 million. The Company increased the maximum borrowing limit from $20.0 million to the current level
based upon its evaluation of the Company’s borrowing requirements. As of December 31, 1999, approximately $1.0 million
was available under the General Line of Credit. The General Line of Credit matures on April 30, 2001, prior to which time,
subject to certain conditions, the amount outstanding can be converted at any time, at the Company's option, to a four-year
term loan requiring 48 equal monthly principal payments plus interest. The interest rate on the General Line of Credit
fluctuates between the lender's prime rate, or prime plus 1/2% or LIBOR plus a certain percentage which is determined
based on the Company’s attainment of certain financial ratios. The effective interest rate on the Company’s borrowings
under the General Line of Credit for the year ending December 31, 1999 was 6.48%. The principal maturity can be
accelerated if the borrowing base does not support the principal balance outstanding. The General Line of Credit is
collateralized by accounts receivable and all otherwise unencumbered equipment. The Company has the option under
certain conditions and at certain rates to fix the rate and term on portions of the outstanding balance of the General Line
of Credit. See Note 4 to the Financial Statements.
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 December 31,
1999, capital leases in the aggregate principal amount of $21.7 million were outstanding under the Equipment TRAC Lease
Commitment with an average interest rate of 5.66% per annum.
As of December 31, 1999, capital leases in the aggregate principal amount of $9.3 million were outstanding under a prior
lease commitment with an average interest rate of 5.25% per annum.
The Company's long-term debt, excluding current debt, increased by 238.2% to $64.4 million at December 31, 1999 from
$19.1 million at December 31, 1998. This increase resulted from increased borrowings under the Equipment TRAC Lease
Commitment for revenue equipment purchases and the acquisition of CCC Express, Inc., partially offset by the retirement
of $14.8 million in debt. The retired debt had an average interest rate of approximately 6.6% and was repaid with cash
flow from operations.
During the years 2000 and 2001, the Company plans to make approximately $134 million in capital expenditures. At
December 31, 1999, USA Truck was committed to spend $63.7 million of this amount for revenue equipment in 2000, and
$64.2 million of this amount is currently budgeted 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 maintenance and office equipment and facility improvements.
The General Line of Credit, the Equipment TRAC Lease Commitment, equipment leases and cash flows from operations
should be adequate to fund the Company's operations and expansion plans through the end of 2000. There can be no
assurance, however, that such sources will be sufficient to fund Company operations and all expansion plans through such
date, or that any necessary additional financing will be available, if at all, in amounts required or on terms satisfactory to
the Company. The Company expects to continue to fund its operations with cash flows from operations, equipment leases,
the General Line of Credit, and the Equipment TRAC Lease Commitment for the foreseeable future.
U S A T R U C K , I N C .
3 1
On July 9, 1998, the Company’s Board of Directors authorized the Company to purchase up to 500,000 shares of its
outstanding common stock over a three-year period dependent upon market conditions. Common stock purchases under
the authorization may be made from time to time on the open market or in privately negotiated transactions at prices
determined by the Chairman of the Board or President of the Company. This new authorization became effective in
September 1998 upon the expiration of the Company’s existing stock repurchase program. As of December 31, 1999, the
Company had purchased 231,600 shares pursuant to this new authorization at an aggregate purchase price of $2,125,000.
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 December 31, 1999, 9,589 of the remaining 131,600
repurchased shares had been resold under the Company’s Employee Stock Purchase Plan. The Company may continue to
purchase shares in the future if, in the view of management, the common stock is undervalued relative to the Company’s
performance and prospects for continued growth. Any such purchases would be funded with cash flows from operations
or the General Line of Credit.
Year 2000 Issues
The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the
applicable year. 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 February 24, 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 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. This statement provides guidance on the capitalization
of certain costs incurred in developing or acquiring internal-use computer software. This statement was adopted in 1998
and did not have a significant impact on the Company’s financial statements.
Quantitative and Qualitative Disclosure About Market Risk
The Company’s General Line of Credit agreement provides for borrowings which bear interest at variable rates based on
either a prime rate or the LIBOR. At December 31, 1999, the Company had $39.0 million outstanding pursuant to the
General Line of Credit. The Company believes that the effect, if any, of reasonably possible near-term changes in interest
rates on the Company’s financial position, results of operations, and cash flows should not be material.
All customers are required to pay for Company services in U.S. dollars. Although the Canadian Government makes certain
payments, such as tax refunds, to the Company in Canadian dollars, any foreign currency exchange risk associated with
such payments is insignificant.
The Company does not engage in hedging transactions relating to diesel fuel or any other commodity.
3 2
U S A T R U C K , I N C .
Forward-Looking Statements
This report contains forward-looking statements and information that are based on management’s belief as well as
assumptions made by, and information currently available to management. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations
will be realized. Should one or more of the risks or uncertainties underlying such expectations materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from those expected. Among the key factors
that are not within the Company’s control and that may have a direct bearing on operating results are increases in diesel
prices, adverse weather conditions or driver turnover and the impact of increased rate competition or competition for
qualified drivers. The Company’s results may also be significantly affected by fluctuations in general economic conditions,
as the Company’s utilization rates are directly related to business levels of shippers in a variety of industries. Results for
any specific period could also be affected by various unforeseen events, such as unusual levels of equipment failure or
accident claims.
U S A T R U C K , I N C .
3 3
Report of Ernst & Young LLP,Independent Auditors
Report of Ernst & Young LLP,Independent Auditors
The Board of Directors and Stockholders
USA Truck, Inc.
We have audited the accompanying balance sheets of USA Truck, Inc. as of December 31, 1999 and 1998, and the
related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of USA Truck, Inc. at December 31, 1999 and 1998, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in
the United States.
Little Rock,Arkansas
January 18, 2000
3 4
U S A T R U C K , I N C .
Financial Statements
Financial Statements
USA TRUCK, INC.
Balance Sheets
Assets
Current assets:
Cash and cash equivalents ......................................................................
Receivables (Note 5):
Trade, less allowance for doubtful accounts of
$269,150 in 1999 and $140,670 in 1998.........................................
Other....................................................................................................
Inventories ..............................................................................................
Deferred income taxes (Note 7).............................................................
Prepaid expenses and other current assets (Note 3) .............................
Total current assets .....................................................................................
Property and equipment (Notes 5 and 6):
Land and structures.................................................................................
Revenue equipment ................................................................................
Service, office and other equipment.......................................................
Accumulated depreciation and amortization..........................................
Security deposits .........................................................................................
Other assets.................................................................................................
Total assets ..................................................................................................
Liabilities and stockholders' equity
Current liabilities:
Bank drafts payable .................................................................................
Trade accounts payable...........................................................................
Accrued expenses (Note 4) ....................................................................
Current maturities of long-term debt (Note 5).......................................
Total current liabilities ................................................................................
Long-term debt, less current maturities (Notes 5 and 6)...........................
Deferred income taxes (Note 7).................................................................
Insurance and claims accruals ....................................................................
Commitments and contingencies (Notes 6 and 12)
Stockholders' equity (Notes 5 and 9):
Preferred Stock, $.01 par value; 1,000,000 shares
authorized; none issued .......................................................................
Common Stock, $.01 par value; 16,000,000 shares
authorized; issued 9,387,041 shares in 1999
and 9,437,097 shares in 1998..............................................................
Additional paid-in capital ........................................................................
Retained earnings....................................................................................
Less treasury stock, at cost (122,011 shares in 1999 and 46,789
December 31,
1999
1998
$
2,145,707
$
1,779,643
26,649,235
5,509,866
301,907
1,208,413
3,634,056
39,449,184
16,798,699
155,546,718
13,665,713
186,011,130
(43,873,074)
142,138,056
–
452,448
182,039,688
1,116,485
5,139,164
11,065,604
10,956,533
28,277,285
64,452,648
17,008,364
2,192,714
13,928,848
299,914
236,338
1,573,365
2,640,561
20,458,669
14,637,631
107,323,786
10,947,496
132,908,913
(36,769,320)
96,139,593
1,745,478
1,267,479
119,611,219
425,485
3,397,593
11,139,369
6,188,241
21,150,688
19,057,816
14,576,038
2,092,614
$
$
$
$
–
--
93,870
12,271,685
58,840,827
94,371
12,921,342
50,199,325
shares in 1998) ....................................................................................
Total stockholders' equity ...........................................................................
Total liabilities and stockholders' equity.....................................................
(1,098,206)
70,108,176
182,039,688
$
(480,975)
62,734,063
119,611,219
$
See accompanying notes.
U S A T R U C K , I N C .
3 5
USA TRUCK, INC.
Statements of Income
Year Ended December 31,
1998
1997
1999
Operating revenues ....................................................
$
166,363,356
$
145,216,121
$
129,507,242
Operating expenses and costs:
Salaries, wages and employee benefits (Note 8)
Operations and maintenance..............................
Operating taxes and licenses..............................
Insurance and claims ..........................................
Communications and utilities .............................
Depreciation and amortization ...........................
Other...................................................................
Operating income ......................................................
Other (income) expenses:
Interest expense .................................................
Gain on disposal of assets...................................
Other, net ............................................................
Income before income taxes......................................
Income taxes (Note 7):
Current................................................................
Deferred ..............................................................
Net income.................................................................
$
Net income per share (Notes 9 and 10):
Basic earnings per share .....................................
Diluted earnings per share .................................
See accompanying notes.
70,197,581
42,480,525
3,005,166
7,987,208
1,999,548
18,591,780
6,264,876
150,526,684
15,836,672
61,296,860
33,400,982
2,547,449
7,249,853
1,468,485
16,179,143
4,113,158
126,255,930
18,960,191
53,122,136
34,188,558
2,160,408
6,773,001
1,827,608
13,607,835
3,658,992
115,338,538
14,168,704
1,655,558
(9,297)
(22,588)
1,623,673
14,212,999
1,714,662
(37,088)
102,340
1,779,914
17,180,277
1,379,481
(1,731)
(190,641)
1,187,109
12,981,595
2,774,219
2,797,278
5,571,497
8,641,502
3,366,164
3,316,964
6,683,128
10,497,149
$
4,027,787
1,050,336
5,078,123
7,903,472
$
$0.93
$0.92
$1.12
$1.11
$.84
$.83
3 6
U S A T R U C K , I N C .
USA TRUCK, INC.
Statements of Stockholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Total
$
94,996
$
13,837,785
$
31,798,704
$
(1,307,490)
$
44,423,995
608
374,439
--
--
--
--
--
375,047
(329,253)
(329,253)
(1,855)
--
93,749
(1,634,888)
--
12,577,336
--
7,903,472
39,702,176
1,636,743
--
--
--
7,903,472
52,373,261
622
290,941
--
--
53,065
--
--
--
--
--
--
291,563
53,065
(585,962)
(585,962)
--
--
94,371
--
--
12,921,342
--
10,497,149
50,199,325
104,987
--
(480,975)
104,987
10,497,149
62,734,063
Balance at January 1, 1997.....................
Exercise of stock options, net
(Note 10)..................................
Purchases of 40,500 shares of
common stock into treasury ....
Retirement of 185,500 shares
of treasury stock.......................
Net income for 1997......................
Balance at December 31, 1997 ..............
Exercise of stock options, net
(Note 10)..................................
Tax benefit of stock options
(Note 7)....................................
Purchases of 54,750 shares of
common stock into treasury ....
Sale of 7,961 shares of treasury
stock to employee stock
purchase plan ...........................
Net income for 1998......................
Balance at December 31, 1998 ..............
Exercise of stock options, net
(Note 10)..................................
Purchase of 186,600 shares of
common stock into treasury ....
Sale of 11,379 shares of
treasury stock to employee
stock purchase plan .................
Retirement of 100,000 shares
499
278,219
--
--
--
--
out of treasury stock ................
Net income for 1999......................
Balance at December 31, 1999 ..............
$
(1,000)
--
93,870
(927,876)
--
12,271,685
$
See accompanying notes.
--
--
--
--
8,641,502
58,840,827
$
--
278,718
(1,662,883)
(1,662,883)
116,776
116,776
928,876
--
$
(1,098,206)
$
--
8,641,502
70,108,176
U S A T R U C K , I N C .
3 7
USA TRUCK, INC.
Statements of Cash Flows
Operating activities
Net income............................................................................
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................................
Provision for doubtful accounts................................
Deferred income taxes..............................................
Gain on disposal of assets .........................................
Changes in operating assets and liabilities:
Receivables ...........................................................
Inventories, prepaid expenses and other
Year Ended December 31,
1998
1997
1999
$
8,641,502
$
10,497,149
$
7,903,472
18,591,780
121,900
2,797,278
(9,297)
16,179,143
30,000
3,316,964
(37,088)
13,607,835
30,000
1,050,336
(1,731)
(17,186,596)
(1,363,041)
(186,827)
current assets ...................................................
Bank drafts payable, trade accounts payable and
accrued expenses.............................................
Insurance and claims accruals - long-term ...........
Net cash provided by operating activities ............................
(609,527)
(1,103,891)
(106,694)
1,103,205
100,100
13,550,345
539,981
408,000
28,467,217
5,568,536
408,000
28,272,927
Investing activities
Purchases of property and equipment..................................
Purchase of CCC Express, Inc. .............................................
Proceeds from sale of equipment .........................................
Proceeds from sale of investments........................................
(Increase) decrease in other assets .......................................
Net cash used by investing activities ....................................
(29,492,589)
(22,891,055)
9,651,337
968,196
(153,165)
(41,917,276)
(21,731,600)
--
6,395,382
--
31,150
(15,305,068)
(32,777,855)
--
8,174,217
--
(307,728)
(24,911,366)
Financing activities
Borrowings under long-term debt.........................................
Proceeds from the exercise of stock options .......................
Proceeds from sale of treasury stock ....................................
Refund of security deposits...................................................
Payments to repurchase common stock ...............................
Principal payments on long-term debt..................................
Principal payments on capitalized lease obligations.............
Net cash provided by (used by) financing activities ............
Increase (decrease) in cash and cash equivalents ................
Cash and cash equivalents:
55,685,310
278,718
116,776
1,745,478
(1,662,883)
(19,595,310)
(7,835,094)
28,732,995
14,325,000
291,563
104,987
--
(585,962)
(22,800,000)
(6,385,405)
(15,049,817)
29,553,208
375,047
--
--
(597,379)
(23,828,208)
(6,683,864)
(1,181,196)
366,064
(1,887,668)
2,180,365
Beginning of year ...........................................................
End of year .....................................................................
$
1,779,643
2,145,707
$
3,667,311
1,779,643
$
1,486,946
3,667,311
See accompanying notes.
3 8
U S A T R U C K , I N C .
USA TRUCK, INC.
Notes to Financial Statements
December 31, 1999
1. Summary of Significant Accounting Policies
Description of Business
USA Truck, Inc. (the "Company"), operates as a truckload motor carrier with operating authority to provide service
throughout the continental United States and parts of Canada and Mexico.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair value.
Concentration of Credit Risk
The Company performs ongoing credit evaluations and generally does not require collateral. The Company maintains
reserves for potential credit losses. Such losses have been within management's expectations.
One customer represented approximately 7% and 11% of net trade receivables as of December 31, 1999 and 1998,
respectively. A different customer represented approximately 9% and 11% of revenues for the years ended December 31,
1999 and 1998, respectively.
Inventories
Inventories consist primarily of tires, fuel and supplies and are stated at the lower of cost (first-in, first-out basis) or market.
Property and Equipment
Property and equipment is recorded at cost. For financial reporting purposes, the cost of such property is depreciated
principally by the straight-line method using the following estimated useful lives: structures - 5 to 39.5 years; revenue
equipment - 3 to 7 years; and service, office and other equipment - 3 to 20 years. Gains and losses on asset sales are
reflected in the year of disposal. Trade-in allowances in excess of book value of revenue equipment are accounted for by
adjusting the cost of assets acquired. Tires purchased with revenue equipment are capitalized as a part of the cost of such
equipment, with replacement tires being inventoried and expensed when placed in service.
U S A T R U C K , I N C .
3 9
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Claims Liabilities
The Company is self-insured up to certain limits for bodily injury, property damage, workers' compensation, and cargo loss
and damage claims. Provisions are made for both the estimated liabilities for known claims as incurred and estimates for
those incurred but not reported. In 1999 the Company was self-insured up to $1,000,000 per occurrence for bodily injury
and property damage, up to $500,000 for workers' compensation claims, and up to $100,000 per occurrence for cargo loss
and damage claims. These self-insurance arrangements are secured by $1,010,000 in letters of credit.
The workers' compensation self-insurance is secured by $300,000 in certificates of deposit maturing during 2000. The
certificates of deposit are included in other assets on the balance sheet as of December 31, 1999 and 1998.
Revenue Recognition
Revenues are recognized based on a method whereby revenue is allocated between reporting periods based on relative
transit time in each period and direct expenses are allocated on the same basis.
Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets include temporary differences relating to depreciation, capitalized leases and
certain revenues and expenses.
Earnings Per Share
Earnings per share amounts are computed based on Financial Accounting Standards Board Statement No. 128, Earnings per
Share. Basic earnings per share is computed based on the weighted average number of shares of common stock
outstanding during the year excluding any dilutive effects of options. Diluted earnings per share is computed by adjusting
the weighted average shares outstanding by common stock equivalents attributable to dilutive options.
Compensation to Employees
Stock based compensation to employees is accounted for based on the intrinsic value method under Accounting Principles
Board Opinion No. 25,Accounting for Stock Issued to Employees (APB 25). Under APB 25 because the exercise price of
employee stock options equaled the market price of the underlying stock on the grant date, no compensation expense is
recorded. The Company has adopted the disclosure – only provisions of Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation (SFAS 123).
4 0
U S A T R U C K , I N C .
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
New Accounting Pronouncements
In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income. This statement was adopted in 1998 and had no impact on the Company’s financial statements.
In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, Disclosures
about Segments of an Enterprise and Related Information. The Company’s operations are comprised entirely of one
segment. This statement was adopted in 1998 and had no impact on the disclosures in the Company’s financial statements.
In 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. This statement provides guidance on the capitalization
of certain costs incurred in developing or acquiring internal-use computer software. This statement was adopted in 1998
and did not have a significant impact on the Company’s financial statements.
2. Acquisition
On November 1, 1999, pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") dated October 31, 1999,
the Company acquired substantially all the assets of CARCO Carrier Corporation, an Arkansas corporation, which operated
under the name CCC Express, Inc. ("CCC"), for a purchase price of $35.3 million.The purchase price consisted of (i) a cash
payment of approximately $3.0 million; (ii) the assumption of approximately $6.5 million of liabilities including equipment
notes and (iii) the refinancing of approximately $25.8 million in other debt secured by equipment. Additionally, $5.9
million of the $25.8 million consisted of a non-cash transaction. The cash portion of the purchase price was paid from
available cash and proceeds of borrowings under the Company’s credit facilities.The purchase price was equal to the net
book value of CCC on the closing date, as adjusted in accordance with the Asset Purchase Agreement, plus $2 million. In
connection with the acquisition, the Company’s borrowing under its General Line of Credit was increased from $20
million to $35 million effective October 28, 1999.
The acquisition has been accounted for under the purchase method. Accordingly, the acquired assets and liabilities have
been recorded at their estimated fair values at the date of acquisition. Operating results of the acquired business are
included in the statements of income from the acquisition date.
U S A T R U C K , I N C .
4 1
USA TRUCK, INC.
Notes to Financial Statements (continued)
2. Acquisition (continued)
2. Acquisition (continued)
The following pro forma summary of results of operations has been prepared as though CCC had been acquired on January
The following pro forma summary of results of operations has been prepared as though CCC had been acquired on January
1, 1998.These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of
1, 1998.These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of
what would have occurred had the acquisition been made on January 1, 1998, or of results which may occur in the future.
what would have occurred had the acquisition been made on January 1, 1998, or of results which may occur in the future.
Operating revenues..........................................................................
Net Income ......................................................................................
Basic earnings per share ..................................................................
Diluted earnings per share ..............................................................
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
Prepaid licenses and taxes ..........................................................................
Prepaid insurance........................................................................................
Other .........................................................................................................
4. Accrued Expenses
Accrued expenses consist of the following:
Salaries, wages, bonuses and employee benefits.........................................
Insurance and claims accruals ....................................................................
Other .........................................................................................................
December 31,
1999
$
222,089,793
6,127,054
$.66
$.65
$
1998
211,937,321
9,074,624
$.97
$.96
December 31,
1999
1,381,345
2,039,749
212,962
3,634,056
$
$
1998
938,881
1,624,315
77,365
2,640,561
December 31,
1999
4,352,233
3,585,366
3,128,005
11,065,604
$
$
1998
4,825,956
4,071,832
2,241,581
11,139,369
$
$
$
$
4 2
U S A T R U C K , I N C .
USA TRUCK, INC.
Notes to Financial Statements (continued)
5. Long-term Debt
Long-term debt consists of the following:
Revolving credit agreement (1) ..................................................................
Capitalized lease obligations (2) .................................................................
Less current maturities................................................................................
December 31,
1999
$
$
38,990,000
36,419,181
75,409,181
(10,956,533)
64,452,648
1998
2,900,000
22,346,057
25,246,057
(6,188,241)
19,057,816
$
$
(1) The Company's revolving credit agreement (the "Line of Credit"), effective December 15, 1999, provides for available
borrowings of $40,000,000, including letters of credit not exceeding $5,000,000. The Line of Credit matures on April
30, 2002, prior to which time, subject to certain conditions, the remaining balance may be converted at any time at
the Company's option to a term loan requiring forty-eight equal monthly principal payments plus interest. The credit
facility bears variable interest based on the lenders prime rate, or prime plus 1/2% or LIBOR plus a certain percentage
which is determined based on the Company’s attainment of certain financial ratios. The effective interest rate on the
Company’s borrowings under the credit facility for the year ending December 31, 1999 was 6.09%. A quarterly
commitment fee of 1/4% per annum is payable on the unused credit line. The Line of Credit is collateralized by
accounts receivable and all otherwise unencumbered equipment. The Company has outstanding letters of credit of
approximately $1,010,000 at December 31, 1999.
The Line of Credit requires the Company to meet certain financial covenants and to maintain a minimum tangible net
worth of approximately $40,300,000 at December 31, 1999. The Company was in compliance with these covenants
at December 31, 1999. The covenants would prohibit the payment of dividends by the Company if such payment
would cause the Company to be in violation of any of the covenants. The carrying amount reported in the balance
sheet for borrowings under the Line of Credit approximates its fair value since the interest rate is variable.
(2) The leases extend through June 2003 and contain renewal or fixed price purchase options. The effective interest rates
on the leases range from 1.89% to 10.15% at December 31, 1999.The lease agreements require the Company to pay
property taxes, maintenance and operating expenses.
The Company made interest payments of approximately $1,490,000, $1,699,000 and $1,454,000 during 1999, 1998 and
1997, respectively. The Company capitalized $6,800 in interest as a result of construction during 1998.
U S A T R U C K , I N C .
4 3
USA TRUCK, INC.
Notes to Financial Statements (continued)
6. Leases and Commitments
Capital lease obligations of $21,908,219, $6,763,522 and $12,416,151 were incurred during the years ended
December 31, 1999, 1998 and 1997, respectively.
At December 31, 1999, the future minimum payments under capitalized leases with initial terms of one year or more were
$12,731,609 for 2000, $11,203,043 for 2001, $10,012,512 for 2002 and $6,085,516 for 2003. The present value of net
minimum lease payments was $36,419,151 which includes the current portion of the capital leases of $10,956,533 and
excludes amounts representing interest of $3,613,529.
At December 31, 1999, property and equipment included capitalized leases which had capitalized costs of $45,526,083,
accumulated amortization of $7,944,872 and a net book value of $37,581,211. At December 31, 1998 property and
equipment included capitalized leases which had capitalized costs of $28,666,354, accumulated amortization of
$6,957,207 and a net book value of $21,709,147.Amortization of leased assets is included in depreciation and amortization
expense.
Commitments to purchase revenue equipment, which are cancelable by the Company if certain conditions are met,
aggregated approximately $63,700,000 at December 31, 1999.
7. Federal and State Income Taxes
Significant components of the Company's deferred tax liabilities and assets as of December 31, 1999 and 1998 are as
follows:
Noncurrent deferred tax liabilities:
Tax over book depreciation ....................................................................
Capitalized leases ....................................................................................
Total noncurrent deferred tax liabilities .....................................................
Current deferred tax assets:
Revenue recognition ...............................................................................
Accrued expenses not deductible until paid ..........................................
Allowance for doubtful accounts............................................................
Total current deferred tax assets.................................................................
December 31,
1999
1998
$
$
$
16,904,280
104,084
17,008,364
(89,392)
(2,389,894)
(99,166)
(2,578,452)
$
$
$
14,512,768
63,270
14,576,038
(116,286)
(2,420,906)
(53,033)
(2,590,225)
Current deferred tax liabilities:
Prepaid expenses deductible when paid ................................................
Net current deferred tax assets...................................................................
$
1,370,039
(1,208,413)
$
1,016,860
(1,573,365)
4 4
U S A T R U C K , I N C .
USA TRUCK, INC.
Notes to Financial Statements (continued)
7. Federal and State Income Taxes (continued)
Significant components of the provision for income taxes are as follows:
Year Ended December 31,
1998
1997
1999
Current
Federal ...................................................................................
State .......................................................................................
Total current..........................................................................
Deferred
Federal ...................................................................................
State .......................................................................................
Total deferred ........................................................................
Total income tax expense .....................................................
$
$
2,406,997
367,222
2,774,219
2,350,248
447,030
2,797,278
5,571,497
$
$
2,812,318
553,846
3,366,164
2,883,617
433,347
3,316,964
6,683,128
$
$
3,491,181
536,606
4,027,787
862,092
188,244
1,050,336
5,078,123
During 1999, 1998 and 1997, the Company made income tax payments of approximately $3,105,300, $3,484,000, and
$3,644,000, respectively.
During 1998, the Company recognized a tax benefit of $53,065 related to stock options. This amount was added to
additional paid-in capital.
A reconciliation between the effective income tax rate and the statutory federal income tax rate is as follows:
Income tax at 34% statutory federal rate ..............................
Federal income tax effects of:
State income taxes .........................................................
Nondeductible expenses................................................
Other ..............................................................................
Federal income taxes .....................................................
State income taxes ................................................................
Total income tax expense .....................................................
1999
4,832,420
$
(276,846)
58,846
142,825
4,757,245
814,252
5,571,497
$
Year Ended December 31,
1998
5,841,294
$
$
1997
4,413,742
(336,172)
98,131
92,682
5,695,935
987,193
6,683,128
$
(246,449)
(3,582)
189,562
4,353,273
724,850
5,078,123
$
Effective tax rate ...................................................................
39.2%
38.9%
39.1%
U S A T R U C K , I N C .
4 5
USA TRUCK, INC.
Notes to Financial Statements (continued)
8. Employee Benefit Plans
The Company sponsors the USA Truck, Inc. Employees' Investment Plan, a tax deferred savings plan under section 401(k)
of the Internal Revenue Code, that covers substantially all employees. Employees can contribute up to 15% of their
compensation, with the Company matching 50% of the first 4% of compensation contributed by each employee. Company
matching contributions were approximately $634,000, $652,000 and $558,000 for 1999, 1998 and 1997, respectively.
9. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
Year Ended December 31,
1998
1997
1999
Numerator:
Net Income........................................................................
$
8,641,502
$ 10,497,149
$
7,903,472
Denominator:
Denominator for basic earnings per
share - weighted average shares ....................................
9,324,037
9,399,727
9,355,671
Effect of dilutive securities:
Employee stock options ................................................
30,404
66,244
128,899
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ...................................
9,354,441
9,465,971
9,484,570
Basic earnings per share........................................................
Diluted earnings per share ....................................................
$.93
$.92
Anti-dilutive employee stock options....................................
94,600
$1.12
$1.11
--
$.84
$.83
3,000
10. Common Stock Transactions
The Company has a stock option plan which provides for the granting of incentive or nonqualified options to purchase
up to 800,000 shares of common stock to officers and other key employees. No options may be granted under this plan
for less than the fair market value of the common stock at the date of the grant. Although the exercise period is determined
when options are actually granted, no option will be exercised later than 10 years after it is granted.
The Company also has a nonqualified stock option plan for directors who are not officers or employees of the Company,
which provides for the granting of options to purchase up to 25,000 shares of common stock. No options may be granted
under this plan with exercise prices of less than the fair market value of the common stock at the date of grant. Although
the exercise period is determined when options are actually granted, options will vest no less than six months or more
than three years after the grant date and may not be exercised later than five years after the grant date.
4 6
U S A T R U C K , I N C .
USA TRUCK, INC.
Notes to Financial Statements (continued)
10. Common Stock Transactions (continued)
A summary of the Company’s stock option activity, and related information for the years ended December 31,
follows:
Outstanding-beginning
of year
Granted
Exercised
Canceled
Outstanding-end of year
Options
323,200
--
(65,000)
--
258,200
1999
Weighted-Average
Exercise Price
$ 7.72
--
$ 6.25
--
$ 8.09
Options
356,400
46,000
(79,200)
--
323,200
1998
Weighted-Average
Exercise Price
$ 6.90
11.59
6.30
--
$ 7.72
1997
Weighted-Average
Exercise Price
$ 6.87
9.73
6.25
10.50
$ 6.90
Options
425,320
9,600
(63,320)
(15,200)
356,400
Exercisable at end of year
95,600
$ 7.85
103,000
$ 6.46
142,200
$ 6.25
Exercise prices for options outstanding as of December 31, 1999 ranged from $6.25 to $13.00. The weighted-
average fair value of options granted during 1998 was $4.30 and $4.46. No options were granted during 1999.
The weighted-average remaining contractual life of these options is 2.14 years.
In 1999, 1998 and 1997, 44,595, 45,240 and 60,007 options, respectively, were exercised for cash. In 1999,
1998 and 1997 additional options of 20,405, 33,960 and 3,313 respectively, were exercised by the exchange
of 15,056, 16,971 and 2,588 shares of stock respectively, (with a market value equal to the exercise price of
the options). The exchanged shares were then canceled.
Since the Company has adopted the disclosure-only provisions of SFAS 123, no compensation cost has been
recognized for the stock option plans. Had compensation cost for the Company’s two stock option plans been
determined based on the fair value at the grant date for awards in 1999, 1998 and 1997 consistent with the
provisions of SFAS 123, the Company’s pro forma net income would have been $8,603,394, $10,431,143 and
$7,852,172, pro forma basic earnings per share would have been $.92, $1.11 and $.84, and pro forma diluted
earnings per share would have been $.92, $1.10 and $.83, respectively.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model. The following weighted-average assumptions were used for grants in 1999: dividend yield of 0%;
expected volatility of 0.292%; risk-free interest rates range from 4.29% to 5.44% and expected lives range from
3 to 5 years. The following weighted-average assumptions were used for grants in 1998: dividend yield of 0%;
expected volatility of 0.457%; risk-free interest rates range from 4.29% to 5.44% and expected lives range from
3 to 5 years. The following weighted-average assumptions were used for grants in 1997: dividend yield of 0%;
expected volatility of 0.535%; risk-free interest rates range from 5.45% to 6.17% and expected lives range from
3 to 5 years.
U S A T R U C K , I N C .
4 7
USA TRUCK, INC.
Notes to Financial Statements (continued)
11. Quarterly Results of Operations (Unaudited)
The tables below present quarterly financial information for 1999 and 1998:
1999
Three Months Ended
Operating revenues ..............................................
Operating expenses and costs .............................
Operating income ................................................
Other expenses, net .............................................
Income before income taxes ...............................
Income taxes ........................................................
Net income...........................................................
March 31,
36,199,447
32,063,006
4,136,441
313,880
3,822,561
1,498,444
2,324,117
$
$
June 30,
38,117,504
33,830,877
4,286,627
282,016
4,004,611
1,569,808
2,434,803
$
$
$
September 30, December 31,
$
51,629,555
47,302,491
4,327,064
719,180
3,607,884
1,414,291
2,193,593
40,416,850
37,330,310
3,086,540
308,597
2,777,943
1,088,954
1,688,989
$
$
Average shares outstanding (basic) ......................
Basic earnings per share ......................................
9,392,817
$.25
9,373,109
$.26
9,298,377
$.18
9,257,361
$.24
Average shares outstanding (diluted)...................
Diluted earnings per share ..................................
9,452,481
$.25
9,410,750
$.26
9,335,972
$.18
9,287,601
$.24
1998
Three Months Ended
Operating revenues ..............................................
Operating expenses and costs .............................
Operating income ................................................
Other expenses, net .............................................
Income before income taxes ...............................
Income taxes ........................................................
Net income...........................................................
March 31,
35,223,203
30,993,887
4,229,316
403,265
3,826,051
1,488,334
2,337,717
$
$
June 30,
37,387,246
32,208,832
5,178,414
598,909
4,579,505
1,781,428
2,798,077
$
$
September 30,
36,266,931
$
31,213,221
5,053,710
435,041
4,618,669
1,796,662
2,822,007
$
December 31,
36,338,741
$
31,839,990
4,498,751
342,699
4,156,052
1,616,704
2,539,348
$
Average shares outstanding (basic) ......................
Basic earnings per share .....................................
Average shares outstanding (diluted)...................
Diluted earnings per share...................................
9,378,054
$.25
9,478,162
$.25
9,418,826
$.30
9,531,054
$.29
9,417,520
$.30
9,375,927
$.27
9,512,954
$.30
9,442,155
$.27
12. Litigation
The Company is not a party to any pending legal proceedings which management believes to be material to the financial
condition of the Company. The Company maintains liability insurance against risks arising out of the normal course of
its business.
4 8
U S A T R U C K , I N C .
USA Truck, Inc. / 3200 Industrial Park Rd. / Van Buren, AR 72956 / 501-471-2500
www.usa-truck.com