Experience
Response
Opportunity
USA Truck, Inc. • 3200 Industrial Park Road • Van Buren, Arkansas 72956 • 501-471-2500
www.usa-truck.com
Annual Report 2000
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.
USA TRUCK, INC.
Notes to Financial Statements (continued)
11. Quarterly Results of Operations (Unaudited)
The tables below present quarterly financial information for 2000 and 1999:
2000
Three Months Ended
March 31
June 30
September 30
December 31
Operating revenues ··················································· $55,144,425
Operating expenses and costs ·································· 54,344,363
Operating income ·····················································
800,062
Other expenses, net ··················································
1,451,235
(Loss) income before income taxes ··························
(651,173)
Income tax (benefit) expense···································
(256,788)
Net (Loss) income ·····················································
$(394,385)
$ 58,348,467
54,871,633
3,476,834
1,533,420
1,943,414
763,347
$ 1,180,067
$ 55,532,933
53,434,653
2,098,280
1,255,588
842,692
330,335
$ 512,357
$ 57,559,612
58,139,869
(580,257)
1,399,970
(1,980,227)
(776,249)
$ (1,203,978)
Average shares outstanding (basic) ···························
Basic (loss) earnings per share··································
9,266,229
($.04)
Average shares outstanding (diluted)························
Diluted (loss) earnings per share ······························
9,288,976
($.04)
9,297,761
$.13
9,302,194
$.13
9,257,973
$.06
9,264,116
$.06
9,222,264
($.13)
9,228,370
($.13)
1999
Three Months Ended
March 31
June 30
September 30
December 31
Operating revenues ··················································· $36,199,447
32,063,006
Operating expenses and costs ··································
4,136,441
Operating income ·····················································
313,880
Other expenses, net ··················································
3,822,561
Income before income taxes ····································
Income taxes ·····························································
1,498,444
$2,324,117
Net income································································
$ 38,117,504
33,830,877
4,286,627
282,016
4,004,611
1,569,808
$ 2,434,803
$ 40,416,850
37,330,310
3,086,540
308,597
2,777,943
1,088,954
$ 1,688,989
$ 51,629,555
47,302,491
4,327,064
719,180
3,607,884
1,414,291
$ 2,193,593
Average shares outstanding (basic) ···························
Basic earnings per share ···········································
9,392,817
$.25
Average shares outstanding (diluted)························
Diluted earnings per share········································
9,452,481
$.25
9,373,109
$.26
9,410,750
$.26
9,298,377
$.18
9,335,972
$.18
9,257,361
$.24
9,287,601
$.24
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.
45
Table of Contents
To Our Stockholders ............................................
Financial Highlights .............................................
Report Card ............................................................
Man and Machine ................................................
2
3
4
6
Rocket Fuel ............................................................. 10
The Tractor Trading Frenzy ............................... 13
Roller Coaster Ride ............................................... 14
Ten Year Financial Statistics .............................. 16
Directors and Officers ......................................... 18
Corporate Information ........................................ 19
Business ................................................................... 20
Selected Financial Data ...................................... 24
Management’s Discussion
and Analysis .......................................................... 25
Report of Ernst & Young LLP,
Independent Auditors ........................................ 31
Financial Statements ........................................... 32
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:
2000
Weighted-Average
Options
Exercise Price Options
1999
Weighted-Average
Exercise Price
Outstanding-beginning
of year
Granted
Exercised
Canceled
Expired
Outstanding-end of year
258,200
185,000
(32,000)
(10,000)
(20,600)
380,600
$ 8.09
5.49
6.25
6.96
11.53
$ 6.85
323,200
--
(65,000)
--
--
258,200
Exercisable at end of year
104,800
$ 8.10
95,600
$ 7.72
--
6.25
--
--
$ 8.09
$ 7.85
1998
Weighted-Average
Exercise Price
$ 6.90
11.59
6.30
--
--
$ 7.72
Options
356,400
46,000
(79,200)
--
--
323,200
103,000
$ 6.46
Exercise prices for options outstanding as of December 31, 2000 ranged from $5.44 to $13.00. The weighted-average
fair value of options granted during 2000 and 1998 were $2.33 and $4.30. No options were granted during 1999. The
weighted-average remaining contractual life of these options is 3.59 years.
No options were exercised for cash in 2000. In 1999 and 1998, 44,595 and 45,240 options, respectively, were exercised
for cash. In 2000, 1999 and 1998 additional options of 30,200, 20,405 and 33,960 respectively, were exercised by the
exchange of 29,419, 15,056 and 16,971 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 2000, 1999 and 1998 consistent with the provisions of SFAS 123, the
Company's pro forma net income would have been $20,808, $8,603,394 and $10,431,143, pro forma basic earnings per
share would have been $.00, $.92 and $.1.11, and pro forma diluted earnings per share would have been $.00, $.92 and
$1.10, 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 2000: dividend yield of 0%; expected volatility of
0.336%; risk-free interest rates range from 5.77% to 5.92% and expected lives range from 3 to 7 years. 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.
44
To Our Stockholders
USA TRUCK, INC.
Notes to Financial Statements (continued)
USA Truck took some lumps during the
We have implemented an aggressive
We see the labor market loosening in
8. Employee Benefit Plans
year 2000. Our Company posted $227
recovery plan with very specific goals in
2001, further strengthening our driver
million in revenues last year, our twelfth
response. The plan is centered on a
hiring position. Coupled with declining
consecutive year of sales growth.
substantial driver pay increase that was
interest rates and an under-capacity in
However, our profit decreased 98.9% to
effective October 1, 2000, the crux of
the industry forecasted by many analysts,
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 $788,400, $634,000 and $652,000 for 2000, 1999 and 1998,
respectively.
$94,000, or $.01 per fully diluted share.
which is to improve the quality and
we believe this plan will return us to the
9. Earnings per Share
amount of driving experience of newly
circle of top truckload carriers in terms
The following table sets forth the computation of basic and diluted earnings per share:
While we are not proud of our bottom
hired drivers.
of profitability.
line, we are proud of our reaction to the
adversity we faced last year. Our
The payback should come in the form of
We also said goodbye to one of our
management team has thoroughly
drastically reduced driver turnover and
original six Officers, Breck Speed, who
Numerator:
Year Ended December 31,
1999
1998
2000
studied the issues contributing to last
reduction of related cost, fewer and less
retired in October 2000, after 12 years as
year’s substandard performance. Based
expensive accidents, better utilization
Chairman of the Board. His presence and
on what we found, we have
and more consistent customer service.
his many years of experience in the
implemented a recovery plan that
We are proud to announce that we
trucking business will be missed.We
specifically targets both our strengths
manned our last available tractor on
wish him well in his retirement. Mr.
and our weaknesses.
February 15, 2001, ahead of the February
Speed will continue as a Director of the
Net Income ································································································
$ 94,061
$ 8,641,502
$ 10,497,149
Denominator:
Denominator for basic earnings per
share-weighted average shares ······························································
$ 9,253,843
$ 9,324,037
$ 9,399,727
Effect of dilutive securities:
Employee stock options ········································································
6,201
30,404
66,244
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ··························································
$ 9,260,044
$ 9,354,441
$ 9,465,971
28 goal.
Company.
Basic earnings per share ·················································································
What we found was that a series of
external economic events – an
USA Truck continues to wage war on
Thank you for your support and stay
unprecedented tightening in the labor
costs with an in-depth benchmarking
tuned…we think the best is yet to come.
market, a sagging used tractor market,
program to compare our current
skyrocketing fuel prices, steadily
profitability to that of prior years. We
climbing interest rates and a slowing
have identified areas where costs other
economy – catalyzed by our November
than those related to driver quality have
1, 1999 acquisition of CCC Express, Inc.,
crept up on us. Concerted efforts are
came together in 2000 to adversely
being made to bring those costs back in
affect our net income.
line with historical performance.
$.01
$.01
$.93
$.92
$1.12
$1.11
--
Diluted earnings per share··············································································
Anti-dilutive employee stock options ·····························································
79,600
94,600
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.
President, Chief Executive Officer
and Chairman
2
43
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,
1999
1998
2000
Current
Federal·············································································································
State·················································································································
Total current ···································································································
Deferred
Federal·············································································································
State·················································································································
Total deferred··································································································
Total income tax expense···············································································
$ (3,642,796) $ 2,406,997 $ 2,812,318
553,846
3,366,164)
--
(3,642,796)
367,222
2,774,219
3,152,732
550,709
3,703,441
2,883,617
433,347
3,316,964
$ 60,645 $ 5,571,497 $ 6,683,128
2,350,248
447,030
2,797,278
During 2000, 1999 and 1998, the Company made income tax payments of approximately $66,250, $3,105,300, and
$3,484,000, 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.
Selected Financial Data
(Dollars in thousands except per share amounts)
Year Ended December 31,
2000
1999
1998
1997
1996
Operating Revenue ............................................
$226,585
$166,363
$145,216
$129,507
$108,313
Operating Income ...............................................
Net Income ............................................................
Diluted Earnings Per Share ..............................
5,795
94
.01
15,836
8,642
.92
18,960
10,497
1.11
14,169
7,903
0.83
Total Assets ............................................................
189,919
182,040
119,611
113,518
Long – Term Obligations ..................................
Stockholders’ Equity ...........................................
Operating Ratio ....................................................
Total Tractors (end of period) .........................
Total Trailers ( end of period) ..........................
Average Miles Per Tractor Per Week .............
65,660
69,981
97.4%
1,759
3,400
2,190
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
In 2000, the Company generated $396,742 in a state net operating loss carry forward, which will expire in 2020. The
Company also generated alternative minimum tax credits of $263,838. These credits have no expiration date.
Price Range of Common Stock
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···············································································
Year Ended December 31,
1999
1998
2000
$ 52,600 $ 4,832,420 $ 5,841,294
(7,224)
75,038
(81,017)
39,397
21,248
(336,172)
98,131
92,682
5,695,935
987,193
$ 60,645 $ 5,571,497 $ 6,683,128
(276,846)
58,846
142,825
4,757,245
814,252
Effective tax rate ·····························································································
39.2%
39.2%
38.9%
The Company’s Common Stock trades on The Nasdaq Stock Market under the symbol: USAK.
Sales Price
Sales Price
2000
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$ 8.81
$ 7.94
$ 7.19
$ 6.50
Low
$ 7.25
$ 5.38
$ 5.38
$ 5.19
1999
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$10.44
$ 9.38
$ 9.25
$ 8.13
Low
$10.19
$ 9.16
$ 8.88
$ 7.75
The high and low sales prices for the
of its Common Stock as of that date.
results of operations and capital
Common Stock as reported on Nasdaq
The Company has never paid a cash
commitments of the Company as well
on March 7, 2001 were $6.00 and
dividend on its Common Stock. It is
as other factors deemed relevant by
$5.94, respectively. As of that date, the
the current intention of the Company’s
the Board of Directors. Covenants
Company had 240 stockholders of
Board of Directors to retain earnings to
contained in the Company’s General
record, including brokerage firms and
finance the growth of the Company
Line of Credit may limit the Company’s
other nominees. The Company
rather than pay cash dividends. Any
ability to pay dividends.
estimates that there were
future payments of cash dividends will
approximately 1,940 beneficial owners
depend upon the financial condition,
42
3
Report Card
USA Truck once again achieved record
revenues of $226,585,437 in 2000, the
12th consecutive year we’ve grown.We
will continue to penetrate the
Mexican, logistics and dedicated
service markets in search of new
revenue streams.We will continue to
examine operations in order to serve
present customers more efficiently.
It was a tough year for the entire
truckload segment. Several factors and
events conspired against the trucking
industry, making 2000 a lean year. A
tight labor market drove costs of
recruiting and retaining qualified
drivers to never-before-seen heights.
We have responded with one of the
most competitive driver pay packages
in the industry. The used tractor
market made a sharp down turn due to
a record number of bankruptcies and
business failures within the trucking
industry. We responded by forming our
own used equipment sales department
in order to capture a greater
percentage of return on our used
revenue equipment. Skyrocketing fuel
prices cut deeply into 2000 profits.We
have responded with a computerized
USA TRUCK, INC.
Notes to Financial Statements (continued)
6. Leases and Commitments
Capital lease obligations of $20,421,263, $21,908,219 and $6,763,522 were incurred during the years ended
December 31, 2000, 1999 and 1998, respectively.
At December 31, 2000, the future minimum payments under capitalized leases with initial terms of one year or more
were $15,146,492 for 2001, $13,481,486 for 2002, $17,760,502 for 2003 and $1,349,203 for 2004. The present value
of net minimum lease payments was $43,620,879 which includes the current portion of the capital leases of
$12,867,611 and excludes amounts representing interest of $4,116,805.
At December 31, 2000, property and equipment included capitalized leases which had capitalized costs of
$58,048,308, accumulated amortization of $14,081,766 and a net book value of $43,966,542. 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. 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 $37,974,000 at December 31, 2000.
7. Federal and State Income Taxes
Significant components of the Company's deferred tax liabilities and assets as of December 31, 2000 and 1999 are
as follows:
December 31,
2000
1999
Noncurrent deferred tax liabilities:
Tax over book depreciation·················································································
Capitalized leases ·································································································
Total noncurrent deferred tax liabilities·································································
Noncurrent deferred tax assets:
Alternative minimum tax credits ·········································································
Net operating losses·····························································································
Total noncurrent deferred tax assets······································································
Net current deferred tax liabilities ·········································································
$ 21,433,405
,338,222
21,771,627
(263,838)
(396,764)
(660,602)
$ 21,111,025
$ 16,904,280
,104,084
17,008,364
--
--
--
$ 17,008,364
Current deferred tax assets:
Revenue recognition ····························································································
Accrued expenses not deductible until paid·······················································
Allowance for doubtful accounts·········································································
Total current deferred tax assets ············································································
Current deferred tax liabilities:
$ (42,661)
(3,033,282)
(115,323)
(3,191,266)
$ (89,392)
(2,389,894)
(99,166)
(2,578,452)
Prepaid expenses deductible when paid·····························································
Net current deferred tax assets ··············································································
1,583,633
$ (1,607,633)
1,370,039
(1,208,413)
$
4
41
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,
2000
$ 34,907,000
43,620,879
78,527,879
(12,867,611)
$ 65,660,268
1999
$ 38,990,000
36,419,181
75,409,181
(10,956,533)
$ 64,452,648
(1) The Company's revolving credit agreement (the "Senior Credit Facility"), effective April 28, 2000, provides for
available borrowings of $60,000,000, including letters of credit not exceeding $5,000,000. The Senior Credit
Facility matures on April 28, 2005, 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 federal funds
rate 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, 2000 was 7.58%. A quarterly commitment fee of 1/5% per annum is payable on the
unused credit line. The Senior Credit Facility is collateralized by accounts receivable and all otherwise
unencumbered equipment. The Company has outstanding letters of credit of approximately $1,210,000 at
December 31, 2000.
The Senior Credit Facility requires the Company to meet certain financial covenants and to maintain a minimum
tangible net worth of approximately $65,846,000 at December 31, 2000. The Company was in compliance with
these covenants at December 31, 2000. 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 February 2004 and contain renewal or fixed price purchase options. The effective
interest rates on the leases range from 4.50% to 11.56% at December 31, 2000.The lease agreements require the
Company to pay property taxes, maintenance and operating expenses.
The Company made interest payments of approximately $5,378,000, $1,490,000 and $1,699,000 during 2000, 1999
and 1998, respectively. The Company capitalized approximately $12,500 and $6,800 in interest as a result of
construction during 2000 and 1998, respectively.
fuel surcharge recovery program that is
already performing well. We are also
upgrading our fleet with the more
aerodynamic and fuel optimized
Freightliner Columbia class tractors.
Rising interest rates also put a crunch
on our bottom line due to the debt
servicing costs associated with our
November 1, 1999 acquisition of CCC
Express, Inc. Even with the added cost
caused by the rate hike, our acquisition
of CCC Express Inc. continues to
benefit the operational potential of USA
Truck and allows us
to spread our fixed costs over a much
larger revenue base.
All of these factors together culminated
in a net income of $94,061, or $0.01
per diluted share.
Despite the reduced profit, USA Truck
posted strong earnings before interest,
taxes, depreciation and amortization
(EBITDA) during 2000, generating over
$32 million, or $3.50 per share. This
number is a strong indication of our
company’s ability to meet its operating,
or variable, cash needs.
40
5
Man and Machine
The Scouting Report
Just as a thoroughbred horse needs a
to compete with multiple industries in
Our new package included a nickel
jockey or the space shuttle requires an
the booming economy for the services
per mile raise for all one-year drivers
astronaut,
tractors cannot operate
of our drivers.
without their drivers. These impressive,
(traditionally the most volatile group)
and the overall pay scale reaches 43
sophisticated marvels of engineering
We battled the problem with brute
cents per mile – the highest in the
cannot generate revenue without a
force by funneling more and more
entire truckload industry. The effects
professional behind
the wheel.
resources into our student recruiting
were immediate and dramatic. By
Equipment utilization
is the
load-
arena. However, by the third quarter,
year-end we had cut the unmanned
bearing wall in the structure that is the
our unmanned tractors approached
number of tractors nearly in half,
truckload industry. Tractors must keep
14% of our fleet. We responded with a
turnover was reduced substantially
rolling to produce stockholder value.
new strategy.
Unmanned tractors played a pivotal
role in 2000 for USA Truck.
The
coincidence of two events accentuated
The Game Plan
and the number of experienced
drivers hired has continued to
increase each month.
We set some aggressive goals to make
this problem for us. First, we inherited
USA Truck undertook a
certain that we pay for the plan
unmanned tractors in the acquisition of
comprehensive study of its driver
through cost savings in several areas.
CCC Express, Inc. on November 1, 1999.
pay package and that of the industry.
The crux of the plan is built around
Then an overheating economy pushed
We meticulously crafted a package
hiring a higher percentage of
the national unemployment rate to
that would be both highly
record lows, further tightening the
competitive and specifically address
available pool of drivers. Near full-
our driver quality standards. The
employment
in 2000 meant that
result was a pay package, unveiled
recruiting qualified drivers, never an
October 1, 2000, that is one of
easy proposition, became more difficult
the finest in the industry. Driver
with stiffer competition from every
rolls have increased dramatically
quarter of the marketplace. In addition
and the quality and experience
to hiring drivers, retention became a
of the drivers in the USA Truck
more precarious task as we were forced
fleet has risen accordingly.
USA TRUCK, INC.
Notes to Financial Statements (continued)
2. Acquisition (continued)
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.
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 what would have occurred had the acquisition been made on January 1, 1998, or of results which may
occur in the future.
December 31,
1999
1998
Operating revenues ····························································································
Net Income·········································································································
Basic earnings per share·····················································································
Diluted earnings per share ·················································································
$ 222,089,793
6,127,054
$.66
$.65
$ 211,937,321
9,074,624
$.97
$.96
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
Prepaid licenses and taxes······················································································
Prepaid insurance ···································································································
Other ······················································································································
4. Accrued Expenses
Accrued expenses consist of the following:
December 31,
Salaries, wages, bonuses and employee benefits ····················································
Insurance and claims accruals················································································
Other ······················································································································
2000
$ 1,484,736
1,938,554
777,328
$ 4,200,618
1999
$ 1,381,345
2,039,749
212,962
$ 3,634,056
2000
$ 2,471,160
5,032,871
2,627,686
$ 10,131,717
1999
$ 4,352,233
3,585,366
3,128,005
$ 11,065,604
6
39
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
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).
Advertising Costs
The Company expenses advertising costs as they are incurred. Total advertising costs for the period ended December 31,
2000, 1999 and 1998 were $1,770,000, $1,628,000, and $1,416,000 respectively.
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.
In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The Statement has been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards requiring that every derivative instrument
be recorded in the balance sheet as either an asset or liability at its fair value. The Company is currently evaluating the
requirements of SFAS No. 133 and does not anticipate that the adoption will have a material effect on earnings or the
financial position of the Company.
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.
38
experienced over-the-road drivers,
supplemented with a small percentage
of inexperienced student drivers.
Our new pay package made it possible
to address the need to find more
drivers while simultaneously making
it possible to increase driver quality.
In the face of a treacherous driver
shortage we were actually able to
become more selective in our overall
hiring process. As the overall effect
of our new pay package continues
to influence the quality of our
drivers, USA Truck’s drivers are
again the premier force in the
truckload segment.
We expect our more experienced,
professional driving force to improve
tractor utilization, reduce accident
frequency and severity, vastly reduce
recruiting and retention costs and
provide a higher level of service for
our customers. Initial indications are
confirming our expectations.
Management monitors progress
towards each of our specific goals
monthly, weekly and in some instances
even daily. Driver turnover, the mix of
Man and Machine
The Game Plan
experienced drivers and students as
fundamentals happen for the
that drivers are still given the
well as equipment utilization are
continued growth of our company.
opportunity to express their concerns
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Property and Equipment (continued)
During 2000, the Company made certain changes in the estimated lives and salvage values of certain revenue equipment
to better reflect the Company's experience as to service lives and resale values of that revenue equipment. Effective June
1, 2000, the Company changed the estimated lives and salvage values of its trailers. This change decreased depreciation
expense and increased net income by approximately $563,500 during 2000. Effective October 1, 2000, the Company
changed the salvage values of certain types of its tractors. This change increased depreciation expense and decrease net
income by approximately $200,000 during 2000.
constantly tracked in order to
in a meaningful way.
Claims Liabilities
recognize trends as they develop. This
Other programs are in place to make
is made possible by our sophisticated
drivers’ lives at USA Truck more
The most visible aspect of our overall
computer capacity that is able to
rewarding and comfortable.We have
response to the driver shortage of
process and analyze operational data
rededicated our efforts to enhance the
2000 is the modernization of our
as soon as it is recorded. The plan
overall training of our entire
tractor fleet. Just as every jockey
was implemented to put USA Truck
Operations staff. A new series of
would love the opportunity to work
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 2000 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 $1,210,000 in letters of credit.
The workers' compensation self-insurance is secured by $100,000 in certificates of deposit maturing during 2001. The
certificates of deposit are included in other assets on the balance sheet as of December 31, 2000 and 1999.
back on the road toward solid growth,
video courses was put into place in
with Secretariat, few astronauts would
Revenue Recognition
a strong bottom line and a healthy
order to remind Operations personnel
volunteer for a trip to the aging Mir
return on our stockholders’
of the importance of interpersonal
space station. Truck drivers are no
investment. Now, as ever, we are
driver relations. We have also begun
different. USA Truck has long
committed to making these
to use an interactive CD-ROM
provided its drivers with outstanding
developed by Truckload Carrier
tractors updated with the most recent
Association called “Daily Dispatch
Challenge.” This ‘flight simulator’
approach allows dispatchers to
experience a variety of high pressure
scenarios in which driver relations
becomes an integral part of dispatch
problem solving. Our Driver Relations
area maintains close personal contact
with our drivers, responding to
individual needs.As USA Truck
continues to grow, it is paramount
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.
8
37
USA TRUCK, INC.
Notes to Financial Statements
December 31, 2000
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 8% and 7% of net trade receivables as of December 31, 2000 and 1999,
respectively. The same customer represented approximately 6% and 6% of revenues for the years ended December 31,
2000 and 1999, 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 10 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.
Man and Machine
The Game Plan
technology. This commitment to ride
more comfort on the road has been a
the wave of technological
success. Simple things like armrests,
advancement, however, has always
improved road vision and more
been tempered by our concern for
comfortable on-the-road living areas
quality. The increased comfort and
have improved overall driver
drivability of the Columbia class
satisfaction.That means better driver
tractor is one of the major reasons we
retention and ultimately lower
have been able to attract some of the
recruiting costs.
best drivers in the country.
Make no mistake, USA Truck has
Beginning in November of 2000, we
responded to the experience of 2000
committed ourselves to purchasing
and positioned itself to return to the
the new Freightliner Columbia class
top of the industry by addressing our
tractor. The Columbia provides many
most precious resources - our drivers.
creature comforts that our older
tractors did not, without a substantial
increase in price.
The reception of the Columbia class
by our drivers has been
overwhelming. Driving is a more
demanding lifestyle than
most people engage
in, and the
chance to give
our drivers
36
9
Rocket Fuel
The Scouting Report
The meteoric rise in the price of oil,
the fuel market of 2000 will only
We continue to maintain a strict
well publicized
in 2000, hit the
strengthen profitability in the future.
governing policy of 63 miles per hour
trucking industry hard and USA Truck
for the entire fleet. We believe this
was no exception. Our average cost
The most obvious tool to recover losses
maximum speed gives us the optimum
per gallon of diesel fuel jumped $.33 in
caused by fuel prices is the “fuel
mix of fuel efficiency and driver
2000 from 1999’s price level.
The
surcharge” added to freight billings. The
satisfaction, while allowing USA Truck
added pre-tax cost of that price
surcharge only applies to revenue miles.
to make on-time deliveries and still be
increase was approximately $3.1
Therefore, we continually strive to
an industry leader in fuel economy.
million after fuel surcharge recoveries.
minimize the number of empty and out-
Another method of controlling fuel cost
of-route miles logged by our fleet. USA
The Game Plan
Truck invested in computer software
technology designed to automatically
There is very little that can be done
calculate and bill fuel surcharges to our
about the price of fuel. This said,
customers while also plotting optimum
however, very effective measures can
routes to minimize empty miles.
be taken to minimize the effect of fuel
Our new technology also serves as
prices on our bottom line. Since the
an immediate measurement and
fluctuation in fuel costs is an everyday
report system. This addition leads
is by creating efficiencies in overall fuel
concern of the trucking industry we
to more accurate and efficient fuel
consumption. Options that improve
feel very strongly that our responses to
surcharge collections.
fuel economy are specified in our new
Columbia class tractor orders. The
aerodynamic body design of the new
Columbia and new advances governing
miles per hour contributes to optimum
fuel efficiencies on the open road. In
addition, the Columbia class features
“Optimized Idle” settings which further
increase fuel efficiencies. Each tractor
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 current assets·····························
Bank drafts payable, trade accounts payable and
2000
Year Ended December 31,
1999
1998
$ 94,061
$ 8,641,502
$ 10,497,149
26,792,923
82,200
3,703,441
149,788
18,591,780
121,900
2,797,278
(9,297)
16,179,143
30,000
3,316,964
(37,088)
(1,796,306)
(647,294)
(17,186,596)
(609,527)
(1,363,041)
(1,103,891)
accrued expenses·····················································································
Insurance and claims accruals - long-term ··················································
Net cash provided by operating activities······························································
167,742
617,500
29,164,055
1,103,205
100,100
13,550,345
539,981
408,000
28,467,217
Investing activities
Purchases of property and equipment···································································
Purchase of CCC Express, Inc. ···············································································
Proceeds from sale of equipment ··········································································
Proceeds from sale of investments·········································································
Decrease (increase) in other assets ········································································
Net cash used by investing activities ·····································································
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 (used by) provided by financing activities··············································
(27,011,263)
--
14,898,989
--
1,333
(12,110,941)
89,606,979
5
128,813
--
(350,344)
(93,689,979)
(13,219,565)
(17,524,091)
(29,492,589)
(22,891,055)
9,651,337
968,196
(153,165)
(41,917,276)
55,685,310
278,718
116,776
1,745,478
(1,662,883)
(19,595,310)
(7,835,094)
28,732,995
(21,731,600)
--
6,395,382
--
31,150
(15,305,068)
14,325,000
291,563
104,987
--
(585,962)
(22,800,000)
(6,385,405)
(15,049,817)
(Decrease) increase in cash and cash equivalents ·················································
Cash and cash equivalents:
(470,977)
366,064
(1,887,668)
Beginning of year ································································································
End of year ··········································································································
2,145,707
$ 1,674,730
1,779,643
$ 2,145,707
3,667,311
$ 1,779,643
See accompanying notes.
10
35
USA TRUCK, INC.
Statements of Stockholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Total
Balance at January 1, 1998 ········································
Exercise of stock options, net (Note 10) ··············
Tax benefit of stock options (Note 7) ··················
Purchases of 54,750 shares of common
$ 93,749
622
--
$ 12,577,336
, 290,941
, 53,065
$ 39,702,176
--
--
--
--
--
$ 52,373,261
,291,563
, 53,065
stock into treasury·············································
--
--
--
,(585,962)
,(585,962)
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
out of treasury stock ·········································
Net income for 1999 ·········································
Balance at December 31, 1999··································
Exercise of stock options, net (Note 10) ··············
Purchase of 58,200 shares of common stock
into treasury ······················································
Transfer of 13,643 shares of treasury Stock
to Employee Stock Purchase Plan ·····················
Retirement of 106,733 shares out of
--
--
94,371
499
--
--
(1,000)
--
93,870
26
--
--
--
--
12,921,342
,278,219
--
10,497,149
50,199,325
--
,104,987
--
480,975
--
,104,987
10,497,149
62,734,063
,278,718
--
--
,(927,876)
--
12,271,685
(21)
--
--
--
--
--
8,641,502
58,840,827
--
1,662,883
1,662,883
,116,776
,116,776
,928,876
--
(1,098,206)
--
--
8,641,502
70,108,176
5
--
--
,(350,344)
,(350,344)
,128,813
,128,813
,954,451
--
94,061
$ ,(365,286) $ 69,980,711
--,
treasury stock ····················································
Net income for 2000·············································
Balance at December 31, 2000··································
(1,067)
--
$ 92,829
,(953,384)
--
$ 11,318,280
--
94,061
$ 58,934,888
See accompanying notes.
34
engine monitors its own internal
power requirements which can
dramatically decrease the fuel
consumed while stationary.
Each of our trucks is also equipped with
QUALCOMM’s SensorTRACS® which
allows us to capture fuel consumption
data instantly.With this SensorTRACS®
satellite technology, data from every
truck in our fleet can be monitored for
efficiency regardless of a tractor’s
location. USA Truck places a premium
on holding down the high costs of fuel.
We will continue to take advantage of
new means to conserve fuel as they
become available
USA TRUCK, INC.
Statements of Income
Year Ended December 31,
1999
1998
2000
Operating revenues ································································································
$ 226,585,437 $ 166,363,356
$ 145,216,121
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 expenses (income):
Interest expense·································································································
Loss (gain) on disposal of assets ········································································
Other, net············································································································
Income before income taxes··················································································
Income tax (benefit) expense (Note 7):
Current ···············································································································
Deferred ·············································································································
Net income ·············································································································
$
91,453,590
71,567,226
4,248,497
14,318,596
2,802,007
26,792,923
9,607,679
220,790,518
5,794,919
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
5,407,723
,149,788
, 82,702
5,640,213
,154,706
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
(3,642,795)
3,703,440
, 60,645
$, 94,061
2,774,219
2,797,278
5,571,497
$ 8,641,502
3,366,164
3,316,964
6,683,128
$ 10,497,149
Net income per share (Notes 9 and 10):
Basic earnings per share ····················································································
Diluted earnings per share·················································································
$0.01
$0.01
$0.93
$0.92
$1.12
$1.11
See accompanying notes.
33
Financial Statements
The Tractor Trading Frenzy
USA TRUCK, INC.
Balance Sheets
December 31,
2000
1999
Assets
Current assets:
Cash and cash equivalents················································································
Receivables (Note 5):
Trade, less allowance for doubtful accounts of
$303,203 in 2000 and $269,150 in 1999··················································
Other ············································································································
Inventories ········································································································
Deferred income taxes (Note 7) ······································································
Prepaid expenses and other current assets (Note 3)·······································
Total current assets·································································································
$
1,674,730
$
2,145,707
30,019,565
3,853,642
382,639
1,607,633
4,200,618
41,738,827
26,649,235
5,509,866
,301,907
1,208,413
3,634,056
39,449,184
Property and equipment (Notes 5 and 6):
Land and structures ··························································································
Revenue equipment··························································································
Service, office and other equipment ································································
Accumulated depreciation and amortization ···················································
Other assets ············································································································
Total assets··············································································································
18,519,687
170,109,906
14,517,040
203,146,633
(55,417,751)
147,728,882
451,115
$ 189,918,824
16,798,699
155,546,718
13,665,713
186,011,130
(43,873,074)
142,138,056
,452,448
$ 182,039,688
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················································································
1,487,086
5,870,192
10,131,717
12,867,611
30,356,606
65,660,268
21,111,025
2,810,214
$
1,116,485
5,139,164
11,065,604
10,956,533
28,277,786
64,452,648
17,008,364
2,192,714
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 9,282,889 shares in 2000
and 9,387,041 shares in 1999·······································································
Additional paid-in capital··················································································
Retained earnings ·····························································································
Less treasury stock, at cost (59,835 shares in 2000 and 122,011
–
–
, 92,829
11,318,279
58,934,889
, 93,870
12,271,685
58,840,827
shares in 1999) ·····························································································
Total stockholders' equity ······················································································
Total liabilities and stockholders' equity ································································
(,365,286)
69,980,711
$ 189,918,824
(1,098,206)
70,108,176
$ 182,039,688
See accompanying notes.
The Scouting Report
After the success of our responses to the
ourselves to take advantage of future
we have positioned ourselves to respond
unmanned tractor and fuel price issues,
opportunities and capture the true value
quickly in a market known to fluctuate.
we turned our attention to the free-
of our assets.
falling used tractor market. Overcapacity
in the industry and lower new tractor
orders drove down the prices dealers
The Game Plan
By eliminating the dealer factor, USA Truck
now has more control over its resources.
We have already experienced success and
expect more to follow as we become even
were willing to pay for trade-ins during
USA Truck has taken several steps to
more familiar in the direct sale used
2000. We were able to minimize our
reduce the effects of a floundering used
revenue equipment marketplace.
equipment
losses to approximately
tractor market.We decided on a two-
$150,000 on trades in 2000 despite
pronged response for both short and long
In addition to our used equipment sales
unfavorable economic forces.
term results. First, we have developed an
department, we adjusted the depreciation
area within our Maintenance Department
on a portion of our fleet on October 1,
In addition, the weak market has been
with a mandate to sell used equipment
2000. This accounting adjustment more
further exacerbated by an additional
directly to current and potential buyers.
accurately reflects a market that has
flood of used vehicles brought on by a
The obvious benefit is the reduction of
undergone massive changes. In terms of
record number of bankruptcies and
dealerships brokering our transactions.We
profitability, fiscal loss on trade for some
business failures within the trucking
are now able to capture a higher percent
used tractors has been reduced.
industry. We remain a healthy and viable
of each transaction value. Another benefit
company and have managed to position
of our used truck sales department is that
1759
1713
1132
1007
862
782
711
571
412
496
0
32
13
Roller Coaster Ride
Report of Ernst & Young LLP,Independent Auditors
Report of Ernst & Young LLP,Independent Auditors
The Scouting Report
The new millennium greeted the U.S.
record number of trucking companies
constant infusion of technology to
economy with a virtual roller coaster
were forced to file for bankruptcy or
optimize billing and collection. Further,
ride. A rapidly expanding economy
close their doors during 2000.
we have held the line on cash outflows
early in the year soon gave way to
plummeting stock markets.
The
Federal Reserve Board countered the
The Game Plan
and depreciation expenses by limiting
capital expenditures to revenue
generating assets.
unstable and apparently overheating
Like fuel prices, we have little control
economy with multiple increases in
over interest rates. What we do have
USA Truck is optimistic about the future.
the prime lending rate. Unfortunately,
control over, however, is the amount of
Our past experience and know-how has
these federal hikes came just on the
debt we maintain.We have been
allowed us to grow each year, and this
heels of USA Truck’s acquisition of CCC
working diligently to reduce our debt
same experience has helped us steer
Express, Inc. on November 1, 1999. The
and will continue to do so during 2001.
ourselves through the year 2000. We
increased interest rates coupled with
In addition to our own response to this
have addressed the confluence of
our acquisition debt increased our
issue, additional relief has already come
factors that impinged on last year’s
interest expense to $5.4 million in
in a series of interest rate cuts by the
profitability by responding in ways that
2000, compared to $1.7 million in debt
Federal Reserve Board in early 2001.
make our company stronger. We have
maintenance a year earlier.
done more than survive a lean year, we
We have streamlined our customer
have positioned ourselves to take
Due to the rate increases, the U.S.
payment process by taking advantage of
advantage of future opportunities. We
economy began to slow and this
Electronic Data Interchange. EDI allows
believe our recovery plans and the
cooling period had a dramatic impact
us to make direct billing arrangements
responses we have already made make
on the entire trucking industry. Many
with customers which has improved
USA Truck worthy of that optimism.
companies
were
completely
cash flow. Other improvements include
unprepared
for
the change
in
our institution of a more efficient
economic climate and as a result, a
organizational structure and the
The Board of Directors and Stockholders
USA Truck, Inc.
We have audited the accompanying balance sheets of USA Truck, Inc. as of December 31, 2000 and 1999, and the
related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 2000. 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, 2000 and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in
the United States.
Little Rock,Arkansas
January 19, 2001
14
31
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.
In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The Statement has been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards requiring that every derivative instrument
be recorded in the balance sheet as either an asset or liability at its fair value. The Company is currently evaluating the
requirements of SFAS No. 133 and does not anticipate that the adoption will have a material effect on earnings or the
financial position of the Company.
Quantitative and Qualitative Disclosure About Market Risk
The Company's Senior Credit Facility provides for borrowings which bear interest at variable rates based on either a prime
rate, federal funds rate plus 1/2% or LIBOR plus a certain percentage which is determined based on the Company's
attainment of certain financial ratios. At December 31, 2000, the Company had $34.9 million outstanding pursuant to the
Senior Credit Facility. The Company believes that the effect, if any, of reasonably possible near-term changes in interest
rates on the Company's financial position, results of operations, and cash flows should not be material.
All customers are required to pay for 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.
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.
30
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
2000
1999
1998
1997
$
$
$
$
$
$
41,739
189,919
30,357
65,660
119,938
69,981
2000
226,585
220,790
5,795
5,640
155
61
94
9,260,011
0.01
36.2%
97.4%
2000
5,562
0.60
32,355
3.50
3.15
7.53
0.1%
0.1%
51.2%
8.0%
1.0
464
$
$
$
$
$
$
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%
1997
14,361
1.54
27,969
2.99
3.02
5.59
7.9%
16.3%
36.2%
7.0%
10.4
379
2000
1999
1998
1997
1,759
23
3,400
43
1.9:1
2,404
1,667
488
2,155
3.42
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
As of December 31, 2000, capital leases in the aggregate principal amount of $4.6 million were outstanding under a prior lease
commitment with an average interest rate of 5.26% per annum
On January 11,2000,the Company entered into a lease commitment agreement (the "2000 TRAC Lease Commitment A"),to facilitate
the leasing of tractors. The 2000 Equipment TRAC Lease Commitment A was amended on November 7, 2000 to provide for a
maximum borrowing amount of approximately $16.5 million. Each capital lease will have a repayment period of 42 months.
Borrowings are limited based on the amounts outstanding under capital leases entered into under this agreement. As of December
31, 2000, $8.3 million remained available under the 2000 Equipment TRAC Lease Commitment A. The interest rate on the capital
leases under this lease commitment fluctuates in relation to the interest rate for the three year Treasury Note as published in The
Wall Street Journal and is fixed upon execution of each lease. As of December 31, 2000, capital leases in the aggregate principal
amount of $8.2 million were outstanding under this lease commitment with an average interest rate of 6.63% per annum. During,
2000, the Company entered into capital leases under this lease commitment in the amount of $9.1 million.
On January 31, 2000, the Company entered into a lease commitment agreement (the "2000 TRAC Lease Commitment B"), dated
January 31, 2000, to facilitate the leasing of tractors. The 2000 Equipment TRAC Lease Commitment B was amended on October
18, 2000 to provide for a maximum borrowing amount of approximately $19.6 million. Each capital lease will have a repayment
period of either 36 or 42 months. Borrowings are limited based on the amounts outstanding under capital leases entered into under
this agreement. As of December 31, 2000, $12.0 million remained available under the 2000 Equipment TRAC Lease Commitment
B. The interest rate on the capital leases under this lease commitment fluctuates in relation to the one year LIBOR as published in
The Wall Street Journal and is fixed upon execution of a lease. As of December 31, 2000, capital leases in the aggregate principal
amount of $7.6 million were outstanding under this lease commitment with an average interest rate of 6.58% per annum. During
2000, the Company entered into capital leases under this lease commitment in the amount of $8.3 million.
As of December 31, 2000, the Company had debt obligations of approximately $78.5 million, including amounts borrowed under
the facilities described above, of which approximately $12.9 million were current obligations. During 2000, the Company made
borrowings under the facilities described above of $89.6 million, while retiring $106.9 million in debt. The retired debt had an
average interest rate of approximately 6.98%.
During the years 2001 and 2002, the Company plans to make approximately $99.9 million in capital expenditures. At December
31, 2000, USA Truck was committed to spend $41.0 million of this amount for revenue equipment in 2001, and $52.7 million of
this amount is currently budgeted for revenue equipment in 2002. The commitments to purchase revenue equipment are
cancelable by the Company if certain conditions are met. The balance of the expected capital expenditures will be used for
maintenance and office equipment and facility improvements.
The Senior Credit Facility, the Equipment TRAC Lease Commitment A, the Equipment TRAC Lease Commitment B equipment leases
and cash flows from operations should be adequate to fund the Company's operations and expansion plans through the end of
2001. There can be no assurance,however,that such sources will be sufficient to fund Company operations and all expansion plans
through such date, or that any necessary additional financing will be available, if at all, in amounts required or on terms satisfactory
to the Company. The Company expects to continue to fund its operations with cash flows from operations, equipment leases, the
Senior Credit Facility,the Equipment TRAC Lease Commitment A,the Equipment TRAC Lease Commitment Board for the foreseeable
future.
On July 9, 1998, the Company's Board of Directors authorized the Company to purchase up to 500,000 shares of its outstanding
common stock over a three-year period dependent upon market conditions. Common stock purchases under the authorization
may be made from time to time on the open market or in privately negotiated transactions at prices determined by the Chairman
of the Board and President of the Company. This new authorization became effective in September 1998 upon the expiration of
the Company's existing stock repurchase program. 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. On May 3, 2000, the Board of Directors
authorized the retirement of 106,733 shares of treasury stock that had been purchased at an aggregate cost of $.9 million. As of
December 31,2000,the Company had purchased 289,800 shares pursuant to this new authorization at an aggregate purchase price
of $2,475,000. In addition, as of December 31, 2000, 23,232 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 Senior Credit Facility.
16
29
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 most of the increases
in fuel costs and fuel taxes from customers through increased freight rates. Diesel prices increased during 2000 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:
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 ·································································
199,611
1,740
1,738
3,400
220,210,709
147,484
1,223
1,713
3,524
169,587,327
128,179
1,058
1,132
2,004
148,590,937
Year Ended December 31,
1999
2000
1998
Liquidity and Capital Resources
On April 28, 2000, the Company signed a new senior credit facility (the "Senior Credit Facility") that provides a working capital
line of credit of $60.0 million,including letters of credit not exceeding $5.0 million. The Company repaid all amounts due under
the General Line of Credit in the amount of $36.1 million and subsequently terminated the General Line of Credit. Bank of
America, N.A. is the agent bank and SunTrust Bank and Firstar Bank, N.A. are participants in the Senior Credit Facility. As of
December 31, 2000, approximately $23.9 million was available under the Senior Credit Facility. This credit facility matures on
April 28, 2005, 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 Senior Credit
Facility bears variable interest based on the lenders prime rate, or federal funds rate plus 1/2% or LIBOR plus a certain
percentage, which is determined based on the Company's attainment of certain financial ratios. The effective interest rate on
the Company's borrowings under the credit facility for the year ending December 31,2000 was 7.92%. A quarterly commitment
fee is payable on the unused credit line and bears a rate which is determined based on the Company's attainment of certain
financial ratios. As of December 31, 2000 the rate was 1/5%. This credit facility is collateralized by accounts receivable and all
otherwise unencumbered equipment. See Note 5 to the Financial Statements.
The continued growth of the Company's business has required significant investments in new equipment. USA Truck has
financed revenue equipment purchases with cash flows from operations and through borrowings under the Company's
General Line of Credit or Senior Credit Facility, conventional financing and lease-purchase arrangements. The Company has
generally met its working capital needs with cash flows from operations and occasionally with borrowings under the General
Line of Credit or Senior Credit Facility. The Company has relied significantly on the General Line of Credit or Senior Credit
Facility to meet working capital requirements since the acquisition of the assets of CCC Express. The Company uses the Senior
Credit Facility to minimize fluctuations in cash flow needs and to provide flexibility in financing revenue equipment purchases.
Cash flows from operations were $29.2 million for 2000 and $13.6 million for 1999.
The Company is a party to a lease commitment agreement (the "Equipment TRAC Lease Commitment"), dated November 19,
1997, to facilitate the leasing of tractors. The Equipment TRAC Lease Commitment was amended on October 12, 1999 to
provide for available borrowings of up to $6,000,000 available during the remainder of 1999 and until October 12, 2000. Each
capital lease under this lease commitment has a repayment period of either 36 or 42 months. As of December 31, 2000, capital
leases in the aggregate principal amount of $20.5 million were outstanding under the Equipment TRAC Lease Commitment
with an average interest rate of 5.75% per annum. During 2000, the Company entered into capital leases under this facility in
the amount of $3.1 million.
28
Year Ended December 31,
$
1996
108,313
102,061
6,252
717
5,535
2,153
3,382
9,619,919
0.35
5.8%
94.2%
$
$
$
1995
102,400
91,961
10,439
646
9,793
3,756
6,037
10,028,478
0.60
10.7%
89.8%
Year Ended December 31,
1996
1995
$
6,265
0.66
18,104
1.91
1.57
4.68
4.1%
7.7%
31.5%
8.9%
8.6
372
$
$
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,
1996
1995
1994
1993
1992
1991
$
$
16,825
86,330
15,193
15,867
41,906
44,424
$
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
1992
63,038
55,167
7,871
1,093
6,778
2,724
4,054
*
9,150,214
*
0.44
20.0%
87.5%
$
$
$
10,987
38,566
10,056
20,022
31,487
7,079
1991
52,538
46,731
5,807
2,462
3,345
1,342
2,003
*
7,200,000
*
0.28
15.0%
88.9%
$
1994
1993
$
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%
$
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
$
$
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
December 31,
1996
862
23
1,510
34
1.8:1
2,407
922
291
1,213
3.17
1995
1994
1993
1992
1991
782
19
1,378
32
1.8:1
2,382
778
255
1,033
3.05
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
17
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
Directors and Officers
Robert M. Powell
President, Chief Executive Officer and Chairman
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, Dedicated Services/Logistics
Gary I. Davis
Vice President, Maintenance
Jerry W. Cottingham
Vice President, Dedicated Services/Logistics Sales
Roland S. Boreham
Director (Chairman of the Board,
Baldor Electric Company)
Jim L. Hanna
Director (President, Hanna Oil and Gas)
Joe D. Powers
Director (Chairman of the Advisory Board of
Regions Bank of Fort Smith, Arkansas)
Bobby W. Caldwell
Treasurer
Clifton R. Beckham
Controller
Breck Speed
Director
The percentage increase, relative to revenues, in operations and maintenance cost was primarily the result of 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.
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.
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.
18
27
As a result of the foregoing factors, operating income decreased 63.4% to $5.8 million, or 2.6% of revenue, in 2000 from $15.8
million or, 9.5% of revenues, in 1999.
Interest expense increased to $5.41 million from $1.65 million in 1999, resulting primarily from a substantial increase in
borrowings following the acquisition of CCC Express on November 1, 1999.
The Company had other expense, net of $83,000 during 2000 compared to other income, net of $23,000 in 1999. 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 factors, income before taxes decreased to $155,000, or 0.1% of revenues, in 2000 from $14.2 million,
or 8.5% of revenues, in 1999.
The Company's effective tax rate was 39.2% in 2000 and 1999. The effective rates varied from the statutory Federal tax rate
of 34% primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income decreased to $94,000, or 0.1% of revenues, in 2000 from $8.6 million,
or 5.2% of revenues in 1999, representing a decrease in diluted net income per share to $.01 from $.92. The number of shares
used in the calculation of diluted net income per share for 2000 and 1999 were 9,260,011 and 9,354,441.
The principal means of competition in the truckload segment of the industry are service and rates,with rate discounting being
particularly intense during economic downturns in order to maintain desired revenue levels. Although the Company
competes primarily on the basis of its service provided to its customers rather than rates charged, rate discounting continues
to be a factor in obtaining and retaining business. The number of firms competing in the truckload segment of the industry
has increased dramatically since the deregulation of the industry in 1980. Also, a depressed economy tends to increase the
competitive pressure placed on rate and service from alternative modes of transportation such as less-than-truckload and
railroads. The Company's management believes that the truckload segment of the market has reached a certain level of
maturity as the market exists currently and that the Company's further growth in the truckload segment of the industry is
likely to be attained by increasing its market share rather than through an increase in the overall size of the market.
The Company experienced higher driver turnover and a reduction in equipment utilization as well as increased insurance
costs in the first three quarter of 2000 because of large number of students and inexperienced drivers hired during this
period. In order to combat this trend, the Company issued a 16% driver pay increase on October 1, 2000. With this pay
increase, the Company eliminated incentive pay from its pay package except for drivers in its dedicated services division. This
pay increase was implemented in order to dramatically improve driver recruiting efforts by attracting more experienced
drivers than in the past and improve driver retention by offering a more competitive pay package than most other companies
in the truckload segment of the industry. This pay raise will increase driver wages by approximately 3% of revenue annually.
Management has set goals for recruiting, retention, driver and equipment utilization and claims cost to be achieved in order
to recover this additional wage cost. More experienced drivers will also help the Company provide superior customer
service.
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.
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 2000 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.
AUDITORS
Ernst & Young LLP
425 West Capitol, Suite 3600
Little Rock, Arkansas 72201
TRANSFER AGENT AND REGISTRAR
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
CORPORATE HEADQUARTERS
3200 Industrial Park Road
Van Buren, Arkansas 72956
Telephone: 501-471-2500
ANNUAL MEETING
May 2, 2001
10 a.m.
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
COMMON STOCK
Traded on The Nasdaq Stock Market
under the Symbol: USAK
WEB SITE
http://www.usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2000 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 Pak Road,Van Buren,Arkansas 72956. The written request must state that as of March 7,
2001 the person making the request was a beneficial owner of shares of the common stock of the Company.
26
19
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 6% 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.
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
1998, 1999, and 2000, the average length of haul for Company tractors was 916 miles, 908 miles, and 871 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.
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 provides fleet managers the ability 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.
Management’s Discussion and Analysis
The following table sets forth the percentage relationship of certain items to operating revenues for the years indicated:
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 expenses (income):
Interest expense ······················································································
Loss on disposal of assets ········································································
Other, net ·································································································
·················································································································
Income before income taxes ··········································································
Income tax expense························································································
Net income ·····································································································
Results of Operations
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Year Ended December 31,
1999
1998
2000
100.0%
100.0%
100.0%
40.4
31.6
1.9
6.3
1.2
11.8
4.2
97.4
2.6
2.4
0.1
--
2.5
0.1
--
0.1%
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%
Operating revenues increased 36.2% to $226.6 million in 2000 from $166.4 million in 1999 ,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 $1.18 in 2000 from $1.13 in 1999. The empty mile factor decreased to 9.16% of paid
miles in 2000 from 9.26% of paid miles in 1999. There was a 35.3% increase in the number of shipments to 199,611 in 2000
from 147,484 in 1999. This volume improvement was made possible by an increase of 42.4% in the average number of
tractors operated during 1999 from 1,223 to 1,740 during 2000. The net effect of the volume increase and the Company's
continuing fleet expansion was a decrease of 8.9% in miles per tractor per week from 2,404 in 1999 to 2,190 in 2000.
Operating expenses and costs as a percentage of revenues rose to 97.4% in 2000 from 90.5% in 1999. This change resulted
primarily from an increase, on a percent of revenue basis, in operations and maintenance cost, insurance and claims cost,
depreciation and amortization expense and other expenses. These increases were partially offset by a decrease, on a percent
of revenue basis, in salaries, wages and employee benefits. The percentage increase, relative to revenues, in operations and
maintenance cost was primarily the result of a an increase of 33.2 cents per gallon in the average cost of fuel in 2000
compared to 1999, combined with a decrease in fuel efficiency to 6.31 average miles per gallon in 2000 from 6.46 in 1999.
The increase in insurance and claims cost, as a percentage of revenue and in actual dollars, resulted from an increase in the
number of accidents during 2000 compared to 1999. The increase in depreciation and amortization expense, as a percent of
revenue, resulted from a decline in tractor utilization from 1999 to 2000, as mentioned above. The increase in other expenses,
as a percentage of revenue, resulted primarily from higher recruiting and training costs brought about by a higher driver
turnover rate and increased competition for drivers. The percentage decrease, relative to salaries, wages and employee
benefits expense for 2000 compared to 1999 was due to the reduction in management and executive incentives for 2000,
which are based on the profitability of the Company, the effects of fuel surcharges and the elimination of a substantial portion
of drivers' incentives earned during the fourth quarter of 2000 which resulted from a change in the drivers' pay package,
except for drivers in the Company's dedicated services division, that eliminated incentive pay and overall, increased mileage
based pay by 16%. Because salaries, wages and employee benefits expense consumes a larger portion of revenue than do
other expenses, it is affected to a larger extent by the fuel surcharges included in revenue rate increases.
20
25
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.
Year Ended December 31,
2000
1999
1998
1997
1996
(In thousands, except per share amounts)
$ 226,585
$ 166,363
$ 145,216
$ 129,507
$ 108,313
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 expenses (income):
Interest expense ············································
Loss (gain) on disposal of assets ···················
Other, net·······················································
Income before income taxes ·····························
Income taxes······················································
Net Income ························································
91,454
71,567
4,248
14,318
2,802
26,793
9,608
220,790
5,795
5,408
150
82
5,640
155
61
$ 94
Basic:
Net income per share····································
Average shares outstanding ···························
$ .01
9,254
Diluted:
Net income per share····································
Average shares outstanding ···························
Cash dividends per share ···································
$ .01
9,260
--
Balance Sheet Data (at end of year):
Current assets·····················································
Current liabilities ···············································
Total assets ·························································
Long-term debt, less current maturities ·············
Stockholders' equity···········································
$ 41,739
30,357
189,919
65,660
69,981
70,198
42,480
3,005
7,987
2,000
18,592
6,265
150,527
15,836
1,655
(9)
(23)
1,623
14,213
5,571
$ 8,642
$
$
.93
9,324
.92
9,354
--
$ 39,449
28,277
182,040
64,453
70,108
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
1,715
(37)
102
1,780
17,180
6,683
$ 10,497
1,380
(2)
(191)
1,187
12,981
5,078
7,903
$
$
1.12
9,400
$ 0.84
9,356
$ 1.11
9,466
--
$ 20,459
21,151
119,611
19,058
62,734
$
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
0.36
9,463
0.35
9,620
--
$
$
$
$ 16,825
15,193
86,330
15,867
44,424
The Company has designed its own management information software systems, which it operates on a mainframe computer.
This system became operational during the second quarter of 1997, when the Company's software was migrated to its
mainframe computer. Prior to that, the Company used a mainframe computer through a contractual agreement with a third
party. The Company has also designed its own e-commerce software systems, which operate on several platforms and connect
to the Company's mainframe computer and the internet. Through this expanded business-to-business ("B2B") system, USA
Truck's customers can check equipment availability and track the progress of their loads through the Company's web site.
Although the Company prefers direct relationships with its shippers, marketing activity through third party logistics ("3PL")
providers is encouraged. Many of these 3PL providers offer daily load posting which is conducted through e-commerce.
These communication and 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 its market area. Management believes these information software systems and computer
hardware will be sufficient to support the Company's expansion plans at least through 2002 without substantial additional
expenditures in the data processing area.
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, 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.
The acquired operations include a fleet of 498 tractors and 1,103 dry van trailers, which the Company has used in its truckload
motor carrier business. The acquisition equated to 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, 2000, at least 92% of USA Truck's operating revenues were derived from customers that were customers of the Company
prior to 2000.
USA Truck establishes rates through individual negotiations with customers and through contracts tailored to the specific needs
of shippers.
For the year ended December 31, 2000, the Company's ten largest customers accounted for 31% of revenues and its three
largest customers accounted for approximately 15% of revenues, with more than 2,300 other customers accounting for the
balance. No customer accounted for more than 10% of revenues.
Customers are generally required to have credit approval before dispatch. The Company bills customers at or shortly after
pickup, and, for the last three years, receivables collection has averaged approximately 33 days from the billing date.
24
21
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
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 9.16% for the year ended December 31, 2000.
Fleet managers supervise fleets of approximately 58 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.
The evaluation of safety records is one of several criteria used by USA Truck to hire driver employees. 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 2000, the Company acquired 470 new tractors (a net increase of 20) and 453 new trailers (a net decrease of 125).
The Company purchased 267 fewer new tractors and 197 fewer trailers in 2000 than anticipated in response to the
shortage of qualified drivers in the truckload industry. At December 31, 2000, USA Truck operated 1,738 conventional
sleeper tractors and 3,400 van trailers. To simplify driver and mechanic training, control the cost of spare parts and tire
inventory and provide for a more efficient vehicle maintenance program, the Company buys tractors and trailers
manufactured to its specifications. In deciding which equipment to buy, it considers a number of factors, including safety,
economy, resale value and driver comfort. Most of the Company's tractors are equipped with Detroit Diesel Series 60 12.7-
liter engines, air-ride suspension, and anti-lock brakes. The Company's equipment is maintained through a strict preventive
maintenance program designed to minimize equipment downtime and to enhance trade-in value.
The Company's current policy is to replace most tractors within 42 months from the date of purchase, which permits the
Company to maintain substantial warranty coverage throughout the period of ownership. 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.
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 2.0-to-1 at December 31, 2000. Management
believes that a 2.0-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, 2000, 2,848 of the 3,400 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 2001 and 2002, the Company plans to acquire 517 and 647 new tractors and 224 and 360 new trailers, respectively.
These acquisitions and the disposals during the year will result in a net decrease of 18 and a net increase of 252 tractors and
net increases of 187 and 360 trailers, respectively. As of February 16, 2001, contracts had been executed for the acquisition of
all 517 tractors and 224 trailers to be acquired in 2001. Although these contracts fix the price at which the Company may
acquire this equipment, the Company has the right in its discretion to decrease or increase the number of tractors or trailers
to be purchased during the year at agreed prices. If the terms of the contracts are carried out, the Company could recognize
an after-tax, non-cash loss from such sales of up to $0.5 million during 2001. Most of these losses are expected to occur in the
fourth quarter of that year on certain groups of tractors. They result from the sale of such tractors by the Company at prices
that will likely be below the depreciated cost of such tractors as carried on the Company's books. The low sales prices for such
vehicles result from an unusually poor used tractor market caused, for the most part, by oversupply of vehicles. During the
fourth quarter of 2000, the Company increased the depreciation rate on its tractors, which resulted in a slightly increased
charge to net income for 2000. Provided the Company can secure better pricing, it will attempt to limit these losses by
obtaining direct sales which could yield prices closer to book values on these tractors and reduce these contractual capital
losses.
Trademark
USA Truck'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. During 2000, the Company registered its trademark for its logistics division with
the United States Patent and Trademark Office. The Company believes its trademarks have significant value and are important
to its marketing efforts. The trademark registration in each country is renewable indefinitely at the option of the Company.
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
has been partially refurbished and will continue to 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 29
acres of paved tractor and trailer parking behind fence, a 17,200-square foot shop, an eight-lane drive through fueling station
containing aboveground 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 aboveground fuel tanks with a capacity of 37,000 gallons and 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, USA Truck began operating its maintenance and driver facility in Vandalia, Ohio, with approximately eight 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 drivers' sleeping quarters that can house 22 drivers. 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 plans to purchase property near this current facility, which will allow the Company
to build a new maintenance facility and expand its ability to service its equipment and house drivers at this location.
With the exception of the Vandalia, Ohio facility mentioned above, management believes that its facilities will be sufficient for
its operations at least through 2001.
22
23
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
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 9.16% for the year ended December 31, 2000.
Fleet managers supervise fleets of approximately 58 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.
The evaluation of safety records is one of several criteria used by USA Truck to hire driver employees. 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 2000, the Company acquired 470 new tractors (a net increase of 20) and 453 new trailers (a net decrease of 125).
The Company purchased 267 fewer new tractors and 197 fewer trailers in 2000 than anticipated in response to the
shortage of qualified drivers in the truckload industry. At December 31, 2000, USA Truck operated 1,738 conventional
sleeper tractors and 3,400 van trailers. To simplify driver and mechanic training, control the cost of spare parts and tire
inventory and provide for a more efficient vehicle maintenance program, the Company buys tractors and trailers
manufactured to its specifications. In deciding which equipment to buy, it considers a number of factors, including safety,
economy, resale value and driver comfort. Most of the Company's tractors are equipped with Detroit Diesel Series 60 12.7-
liter engines, air-ride suspension, and anti-lock brakes. The Company's equipment is maintained through a strict preventive
maintenance program designed to minimize equipment downtime and to enhance trade-in value.
The Company's current policy is to replace most tractors within 42 months from the date of purchase, which permits the
Company to maintain substantial warranty coverage throughout the period of ownership. 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.
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 2.0-to-1 at December 31, 2000. Management
believes that a 2.0-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, 2000, 2,848 of the 3,400 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 2001 and 2002, the Company plans to acquire 517 and 647 new tractors and 224 and 360 new trailers, respectively.
These acquisitions and the disposals during the year will result in a net decrease of 18 and a net increase of 252 tractors and
net increases of 187 and 360 trailers, respectively. As of February 16, 2001, contracts had been executed for the acquisition of
all 517 tractors and 224 trailers to be acquired in 2001. Although these contracts fix the price at which the Company may
acquire this equipment, the Company has the right in its discretion to decrease or increase the number of tractors or trailers
to be purchased during the year at agreed prices. If the terms of the contracts are carried out, the Company could recognize
an after-tax, non-cash loss from such sales of up to $0.5 million during 2001. Most of these losses are expected to occur in the
fourth quarter of that year on certain groups of tractors. They result from the sale of such tractors by the Company at prices
that will likely be below the depreciated cost of such tractors as carried on the Company's books. The low sales prices for such
vehicles result from an unusually poor used tractor market caused, for the most part, by oversupply of vehicles. During the
fourth quarter of 2000, the Company increased the depreciation rate on its tractors, which resulted in a slightly increased
charge to net income for 2000. Provided the Company can secure better pricing, it will attempt to limit these losses by
obtaining direct sales which could yield prices closer to book values on these tractors and reduce these contractual capital
losses.
Trademark
USA Truck'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. During 2000, the Company registered its trademark for its logistics division with
the United States Patent and Trademark Office. The Company believes its trademarks have significant value and are important
to its marketing efforts. The trademark registration in each country is renewable indefinitely at the option of the Company.
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
has been partially refurbished and will continue to 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 29
acres of paved tractor and trailer parking behind fence, a 17,200-square foot shop, an eight-lane drive through fueling station
containing aboveground 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 aboveground fuel tanks with a capacity of 37,000 gallons and 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, USA Truck began operating its maintenance and driver facility in Vandalia, Ohio, with approximately eight 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 drivers' sleeping quarters that can house 22 drivers. 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 plans to purchase property near this current facility, which will allow the Company
to build a new maintenance facility and expand its ability to service its equipment and house drivers at this location.
With the exception of the Vandalia, Ohio facility mentioned above, management believes that its facilities will be sufficient for
its operations at least through 2001.
22
23
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.
Year Ended December 31,
2000
1999
1998
1997
1996
(In thousands, except per share amounts)
$ 226,585
$ 166,363
$ 145,216
$ 129,507
$ 108,313
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 expenses (income):
Interest expense ············································
Loss (gain) on disposal of assets ···················
Other, net·······················································
Income before income taxes ·····························
Income taxes······················································
Net Income ························································
91,454
71,567
4,248
14,318
2,802
26,793
9,608
220,790
5,795
5,408
150
82
5,640
155
61
$ 94
Basic:
Net income per share····································
Average shares outstanding ···························
$ .01
9,254
Diluted:
Net income per share····································
Average shares outstanding ···························
Cash dividends per share ···································
$ .01
9,260
--
Balance Sheet Data (at end of year):
Current assets·····················································
Current liabilities ···············································
Total assets ·························································
Long-term debt, less current maturities ·············
Stockholders' equity···········································
$ 41,739
30,357
189,919
65,660
69,981
70,198
42,480
3,005
7,987
2,000
18,592
6,265
150,527
15,836
1,655
(9)
(23)
1,623
14,213
5,571
$ 8,642
$
$
.93
9,324
.92
9,354
--
$ 39,449
28,277
182,040
64,453
70,108
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
1,715
(37)
102
1,780
17,180
6,683
$ 10,497
1,380
(2)
(191)
1,187
12,981
5,078
7,903
$
$
1.12
9,400
$ 0.84
9,356
$ 1.11
9,466
--
$ 20,459
21,151
119,611
19,058
62,734
$
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
0.36
9,463
0.35
9,620
--
$
$
$
$ 16,825
15,193
86,330
15,867
44,424
The Company has designed its own management information software systems, which it operates on a mainframe computer.
This system became operational during the second quarter of 1997, when the Company's software was migrated to its
mainframe computer. Prior to that, the Company used a mainframe computer through a contractual agreement with a third
party. The Company has also designed its own e-commerce software systems, which operate on several platforms and connect
to the Company's mainframe computer and the internet. Through this expanded business-to-business ("B2B") system, USA
Truck's customers can check equipment availability and track the progress of their loads through the Company's web site.
Although the Company prefers direct relationships with its shippers, marketing activity through third party logistics ("3PL")
providers is encouraged. Many of these 3PL providers offer daily load posting which is conducted through e-commerce.
These communication and 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 its market area. Management believes these information software systems and computer
hardware will be sufficient to support the Company's expansion plans at least through 2002 without substantial additional
expenditures in the data processing area.
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, 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.
The acquired operations include a fleet of 498 tractors and 1,103 dry van trailers, which the Company has used in its truckload
motor carrier business. The acquisition equated to 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, 2000, at least 92% of USA Truck's operating revenues were derived from customers that were customers of the Company
prior to 2000.
USA Truck establishes rates through individual negotiations with customers and through contracts tailored to the specific needs
of shippers.
For the year ended December 31, 2000, the Company's ten largest customers accounted for 31% of revenues and its three
largest customers accounted for approximately 15% of revenues, with more than 2,300 other customers accounting for the
balance. No customer accounted for more than 10% of revenues.
Customers are generally required to have credit approval before dispatch. The Company bills customers at or shortly after
pickup, and, for the last three years, receivables collection has averaged approximately 33 days from the billing date.
24
21
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 6% 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.
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
1998, 1999, and 2000, the average length of haul for Company tractors was 916 miles, 908 miles, and 871 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.
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 provides fleet managers the ability 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.
Management’s Discussion and Analysis
The following table sets forth the percentage relationship of certain items to operating revenues for the years indicated:
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 expenses (income):
Interest expense ······················································································
Loss on disposal of assets ········································································
Other, net ·································································································
·················································································································
Income before income taxes ··········································································
Income tax expense························································································
Net income ·····································································································
Results of Operations
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Year Ended December 31,
1999
1998
2000
100.0%
100.0%
100.0%
40.4
31.6
1.9
6.3
1.2
11.8
4.2
97.4
2.6
2.4
0.1
--
2.5
0.1
--
0.1%
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%
Operating revenues increased 36.2% to $226.6 million in 2000 from $166.4 million in 1999 ,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 $1.18 in 2000 from $1.13 in 1999. The empty mile factor decreased to 9.16% of paid
miles in 2000 from 9.26% of paid miles in 1999. There was a 35.3% increase in the number of shipments to 199,611 in 2000
from 147,484 in 1999. This volume improvement was made possible by an increase of 42.4% in the average number of
tractors operated during 1999 from 1,223 to 1,740 during 2000. The net effect of the volume increase and the Company's
continuing fleet expansion was a decrease of 8.9% in miles per tractor per week from 2,404 in 1999 to 2,190 in 2000.
Operating expenses and costs as a percentage of revenues rose to 97.4% in 2000 from 90.5% in 1999. This change resulted
primarily from an increase, on a percent of revenue basis, in operations and maintenance cost, insurance and claims cost,
depreciation and amortization expense and other expenses. These increases were partially offset by a decrease, on a percent
of revenue basis, in salaries, wages and employee benefits. The percentage increase, relative to revenues, in operations and
maintenance cost was primarily the result of a an increase of 33.2 cents per gallon in the average cost of fuel in 2000
compared to 1999, combined with a decrease in fuel efficiency to 6.31 average miles per gallon in 2000 from 6.46 in 1999.
The increase in insurance and claims cost, as a percentage of revenue and in actual dollars, resulted from an increase in the
number of accidents during 2000 compared to 1999. The increase in depreciation and amortization expense, as a percent of
revenue, resulted from a decline in tractor utilization from 1999 to 2000, as mentioned above. The increase in other expenses,
as a percentage of revenue, resulted primarily from higher recruiting and training costs brought about by a higher driver
turnover rate and increased competition for drivers. The percentage decrease, relative to salaries, wages and employee
benefits expense for 2000 compared to 1999 was due to the reduction in management and executive incentives for 2000,
which are based on the profitability of the Company, the effects of fuel surcharges and the elimination of a substantial portion
of drivers' incentives earned during the fourth quarter of 2000 which resulted from a change in the drivers' pay package,
except for drivers in the Company's dedicated services division, that eliminated incentive pay and overall, increased mileage
based pay by 16%. Because salaries, wages and employee benefits expense consumes a larger portion of revenue than do
other expenses, it is affected to a larger extent by the fuel surcharges included in revenue rate increases.
20
25
As a result of the foregoing factors, operating income decreased 63.4% to $5.8 million, or 2.6% of revenue, in 2000 from $15.8
million or, 9.5% of revenues, in 1999.
Interest expense increased to $5.41 million from $1.65 million in 1999, resulting primarily from a substantial increase in
borrowings following the acquisition of CCC Express on November 1, 1999.
The Company had other expense, net of $83,000 during 2000 compared to other income, net of $23,000 in 1999. 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 factors, income before taxes decreased to $155,000, or 0.1% of revenues, in 2000 from $14.2 million,
or 8.5% of revenues, in 1999.
The Company's effective tax rate was 39.2% in 2000 and 1999. The effective rates varied from the statutory Federal tax rate
of 34% primarily due to state income taxes and certain non-deductible expenses.
As a result of the aforementioned factors, net income decreased to $94,000, or 0.1% of revenues, in 2000 from $8.6 million,
or 5.2% of revenues in 1999, representing a decrease in diluted net income per share to $.01 from $.92. The number of shares
used in the calculation of diluted net income per share for 2000 and 1999 were 9,260,011 and 9,354,441.
The principal means of competition in the truckload segment of the industry are service and rates,with rate discounting being
particularly intense during economic downturns in order to maintain desired revenue levels. Although the Company
competes primarily on the basis of its service provided to its customers rather than rates charged, rate discounting continues
to be a factor in obtaining and retaining business. The number of firms competing in the truckload segment of the industry
has increased dramatically since the deregulation of the industry in 1980. Also, a depressed economy tends to increase the
competitive pressure placed on rate and service from alternative modes of transportation such as less-than-truckload and
railroads. The Company's management believes that the truckload segment of the market has reached a certain level of
maturity as the market exists currently and that the Company's further growth in the truckload segment of the industry is
likely to be attained by increasing its market share rather than through an increase in the overall size of the market.
The Company experienced higher driver turnover and a reduction in equipment utilization as well as increased insurance
costs in the first three quarter of 2000 because of large number of students and inexperienced drivers hired during this
period. In order to combat this trend, the Company issued a 16% driver pay increase on October 1, 2000. With this pay
increase, the Company eliminated incentive pay from its pay package except for drivers in its dedicated services division. This
pay increase was implemented in order to dramatically improve driver recruiting efforts by attracting more experienced
drivers than in the past and improve driver retention by offering a more competitive pay package than most other companies
in the truckload segment of the industry. This pay raise will increase driver wages by approximately 3% of revenue annually.
Management has set goals for recruiting, retention, driver and equipment utilization and claims cost to be achieved in order
to recover this additional wage cost. More experienced drivers will also help the Company provide superior customer
service.
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.
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 2000 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.
AUDITORS
Ernst & Young LLP
425 West Capitol, Suite 3600
Little Rock, Arkansas 72201
TRANSFER AGENT AND REGISTRAR
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
CORPORATE HEADQUARTERS
3200 Industrial Park Road
Van Buren, Arkansas 72956
Telephone: 501-471-2500
ANNUAL MEETING
May 2, 2001
10 a.m.
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
COMMON STOCK
Traded on The Nasdaq Stock Market
under the Symbol: USAK
WEB SITE
http://www.usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2000 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 Pak Road,Van Buren,Arkansas 72956. The written request must state that as of March 7,
2001 the person making the request was a beneficial owner of shares of the common stock of the Company.
26
19
Directors and Officers
Robert M. Powell
President, Chief Executive Officer and Chairman
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, Dedicated Services/Logistics
Gary I. Davis
Vice President, Maintenance
Jerry W. Cottingham
Vice President, Dedicated Services/Logistics Sales
Roland S. Boreham
Director (Chairman of the Board,
Baldor Electric Company)
Jim L. Hanna
Director (President, Hanna Oil and Gas)
Joe D. Powers
Director (Chairman of the Advisory Board of
Regions Bank of Fort Smith, Arkansas)
Bobby W. Caldwell
Treasurer
Clifton R. Beckham
Controller
Breck Speed
Director
The percentage increase, relative to revenues, in operations and maintenance cost was primarily the result of 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.
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.
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.
18
27
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 most of the increases
in fuel costs and fuel taxes from customers through increased freight rates. Diesel prices increased during 2000 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:
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 ·································································
199,611
1,740
1,738
3,400
220,210,709
147,484
1,223
1,713
3,524
169,587,327
128,179
1,058
1,132
2,004
148,590,937
Year Ended December 31,
1999
2000
1998
Liquidity and Capital Resources
On April 28, 2000, the Company signed a new senior credit facility (the "Senior Credit Facility") that provides a working capital
line of credit of $60.0 million,including letters of credit not exceeding $5.0 million. The Company repaid all amounts due under
the General Line of Credit in the amount of $36.1 million and subsequently terminated the General Line of Credit. Bank of
America, N.A. is the agent bank and SunTrust Bank and Firstar Bank, N.A. are participants in the Senior Credit Facility. As of
December 31, 2000, approximately $23.9 million was available under the Senior Credit Facility. This credit facility matures on
April 28, 2005, 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 Senior Credit
Facility bears variable interest based on the lenders prime rate, or federal funds rate plus 1/2% or LIBOR plus a certain
percentage, which is determined based on the Company's attainment of certain financial ratios. The effective interest rate on
the Company's borrowings under the credit facility for the year ending December 31,2000 was 7.92%. A quarterly commitment
fee is payable on the unused credit line and bears a rate which is determined based on the Company's attainment of certain
financial ratios. As of December 31, 2000 the rate was 1/5%. This credit facility is collateralized by accounts receivable and all
otherwise unencumbered equipment. See Note 5 to the Financial Statements.
The continued growth of the Company's business has required significant investments in new equipment. USA Truck has
financed revenue equipment purchases with cash flows from operations and through borrowings under the Company's
General Line of Credit or Senior Credit Facility, conventional financing and lease-purchase arrangements. The Company has
generally met its working capital needs with cash flows from operations and occasionally with borrowings under the General
Line of Credit or Senior Credit Facility. The Company has relied significantly on the General Line of Credit or Senior Credit
Facility to meet working capital requirements since the acquisition of the assets of CCC Express. The Company uses the Senior
Credit Facility to minimize fluctuations in cash flow needs and to provide flexibility in financing revenue equipment purchases.
Cash flows from operations were $29.2 million for 2000 and $13.6 million for 1999.
The Company is a party to a lease commitment agreement (the "Equipment TRAC Lease Commitment"), dated November 19,
1997, to facilitate the leasing of tractors. The Equipment TRAC Lease Commitment was amended on October 12, 1999 to
provide for available borrowings of up to $6,000,000 available during the remainder of 1999 and until October 12, 2000. Each
capital lease under this lease commitment has a repayment period of either 36 or 42 months. As of December 31, 2000, capital
leases in the aggregate principal amount of $20.5 million were outstanding under the Equipment TRAC Lease Commitment
with an average interest rate of 5.75% per annum. During 2000, the Company entered into capital leases under this facility in
the amount of $3.1 million.
28
Year Ended December 31,
$
1996
108,313
102,061
6,252
717
5,535
2,153
3,382
9,619,919
0.35
5.8%
94.2%
$
$
$
1995
102,400
91,961
10,439
646
9,793
3,756
6,037
10,028,478
0.60
10.7%
89.8%
Year Ended December 31,
1996
1995
$
6,265
0.66
18,104
1.91
1.57
4.68
4.1%
7.7%
31.5%
8.9%
8.6
372
$
$
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,
1996
1995
1994
1993
1992
1991
$
$
16,825
86,330
15,193
15,867
41,906
44,424
$
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
1992
63,038
55,167
7,871
1,093
6,778
2,724
4,054
*
9,150,214
*
0.44
20.0%
87.5%
$
$
$
10,987
38,566
10,056
20,022
31,487
7,079
1991
52,538
46,731
5,807
2,462
3,345
1,342
2,003
*
7,200,000
*
0.28
15.0%
88.9%
$
1994
1993
$
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%
$
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
$
$
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
December 31,
1996
862
23
1,510
34
1.8:1
2,407
922
291
1,213
3.17
1995
1994
1993
1992
1991
782
19
1,378
32
1.8:1
2,382
778
255
1,033
3.05
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
17
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
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
2000
1999
1998
1997
$
$
$
$
$
$
41,739
189,919
30,357
65,660
119,938
69,981
2000
226,585
220,790
5,795
5,640
155
61
94
9,260,011
0.01
36.2%
97.4%
2000
5,562
0.60
32,355
3.50
3.15
7.53
0.1%
0.1%
51.2%
8.0%
1.0
464
$
$
$
$
$
$
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%
1997
14,361
1.54
27,969
2.99
3.02
5.59
7.9%
16.3%
36.2%
7.0%
10.4
379
2000
1999
1998
1997
1,759
23
3,400
43
1.9:1
2,404
1,667
488
2,155
3.42
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
As of December 31, 2000, capital leases in the aggregate principal amount of $4.6 million were outstanding under a prior lease
commitment with an average interest rate of 5.26% per annum
On January 11,2000,the Company entered into a lease commitment agreement (the "2000 TRAC Lease Commitment A"),to facilitate
the leasing of tractors. The 2000 Equipment TRAC Lease Commitment A was amended on November 7, 2000 to provide for a
maximum borrowing amount of approximately $16.5 million. Each capital lease will have a repayment period of 42 months.
Borrowings are limited based on the amounts outstanding under capital leases entered into under this agreement. As of December
31, 2000, $8.3 million remained available under the 2000 Equipment TRAC Lease Commitment A. The interest rate on the capital
leases under this lease commitment fluctuates in relation to the interest rate for the three year Treasury Note as published in The
Wall Street Journal and is fixed upon execution of each lease. As of December 31, 2000, capital leases in the aggregate principal
amount of $8.2 million were outstanding under this lease commitment with an average interest rate of 6.63% per annum. During,
2000, the Company entered into capital leases under this lease commitment in the amount of $9.1 million.
On January 31, 2000, the Company entered into a lease commitment agreement (the "2000 TRAC Lease Commitment B"), dated
January 31, 2000, to facilitate the leasing of tractors. The 2000 Equipment TRAC Lease Commitment B was amended on October
18, 2000 to provide for a maximum borrowing amount of approximately $19.6 million. Each capital lease will have a repayment
period of either 36 or 42 months. Borrowings are limited based on the amounts outstanding under capital leases entered into under
this agreement. As of December 31, 2000, $12.0 million remained available under the 2000 Equipment TRAC Lease Commitment
B. The interest rate on the capital leases under this lease commitment fluctuates in relation to the one year LIBOR as published in
The Wall Street Journal and is fixed upon execution of a lease. As of December 31, 2000, capital leases in the aggregate principal
amount of $7.6 million were outstanding under this lease commitment with an average interest rate of 6.58% per annum. During
2000, the Company entered into capital leases under this lease commitment in the amount of $8.3 million.
As of December 31, 2000, the Company had debt obligations of approximately $78.5 million, including amounts borrowed under
the facilities described above, of which approximately $12.9 million were current obligations. During 2000, the Company made
borrowings under the facilities described above of $89.6 million, while retiring $106.9 million in debt. The retired debt had an
average interest rate of approximately 6.98%.
During the years 2001 and 2002, the Company plans to make approximately $99.9 million in capital expenditures. At December
31, 2000, USA Truck was committed to spend $41.0 million of this amount for revenue equipment in 2001, and $52.7 million of
this amount is currently budgeted for revenue equipment in 2002. The commitments to purchase revenue equipment are
cancelable by the Company if certain conditions are met. The balance of the expected capital expenditures will be used for
maintenance and office equipment and facility improvements.
The Senior Credit Facility, the Equipment TRAC Lease Commitment A, the Equipment TRAC Lease Commitment B equipment leases
and cash flows from operations should be adequate to fund the Company's operations and expansion plans through the end of
2001. There can be no assurance,however,that such sources will be sufficient to fund Company operations and all expansion plans
through such date, or that any necessary additional financing will be available, if at all, in amounts required or on terms satisfactory
to the Company. The Company expects to continue to fund its operations with cash flows from operations, equipment leases, the
Senior Credit Facility,the Equipment TRAC Lease Commitment A,the Equipment TRAC Lease Commitment Board for the foreseeable
future.
On July 9, 1998, the Company's Board of Directors authorized the Company to purchase up to 500,000 shares of its outstanding
common stock over a three-year period dependent upon market conditions. Common stock purchases under the authorization
may be made from time to time on the open market or in privately negotiated transactions at prices determined by the Chairman
of the Board and President of the Company. This new authorization became effective in September 1998 upon the expiration of
the Company's existing stock repurchase program. 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. On May 3, 2000, the Board of Directors
authorized the retirement of 106,733 shares of treasury stock that had been purchased at an aggregate cost of $.9 million. As of
December 31,2000,the Company had purchased 289,800 shares pursuant to this new authorization at an aggregate purchase price
of $2,475,000. In addition, as of December 31, 2000, 23,232 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 Senior Credit Facility.
16
29
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.
In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The Statement has been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards requiring that every derivative instrument
be recorded in the balance sheet as either an asset or liability at its fair value. The Company is currently evaluating the
requirements of SFAS No. 133 and does not anticipate that the adoption will have a material effect on earnings or the
financial position of the Company.
Quantitative and Qualitative Disclosure About Market Risk
The Company's Senior Credit Facility provides for borrowings which bear interest at variable rates based on either a prime
rate, federal funds rate plus 1/2% or LIBOR plus a certain percentage which is determined based on the Company's
attainment of certain financial ratios. At December 31, 2000, the Company had $34.9 million outstanding pursuant to the
Senior Credit Facility. The Company believes that the effect, if any, of reasonably possible near-term changes in interest
rates on the Company's financial position, results of operations, and cash flows should not be material.
All customers are required to pay for 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.
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.
30
Roller Coaster Ride
Report of Ernst & Young LLP,Independent Auditors
Report of Ernst & Young LLP,Independent Auditors
The Scouting Report
The new millennium greeted the U.S.
record number of trucking companies
constant infusion of technology to
economy with a virtual roller coaster
were forced to file for bankruptcy or
optimize billing and collection. Further,
ride. A rapidly expanding economy
close their doors during 2000.
we have held the line on cash outflows
early in the year soon gave way to
plummeting stock markets.
The
Federal Reserve Board countered the
The Game Plan
and depreciation expenses by limiting
capital expenditures to revenue
generating assets.
unstable and apparently overheating
Like fuel prices, we have little control
economy with multiple increases in
over interest rates. What we do have
USA Truck is optimistic about the future.
the prime lending rate. Unfortunately,
control over, however, is the amount of
Our past experience and know-how has
these federal hikes came just on the
debt we maintain.We have been
allowed us to grow each year, and this
heels of USA Truck’s acquisition of CCC
working diligently to reduce our debt
same experience has helped us steer
Express, Inc. on November 1, 1999. The
and will continue to do so during 2001.
ourselves through the year 2000. We
increased interest rates coupled with
In addition to our own response to this
have addressed the confluence of
our acquisition debt increased our
issue, additional relief has already come
factors that impinged on last year’s
interest expense to $5.4 million in
in a series of interest rate cuts by the
profitability by responding in ways that
2000, compared to $1.7 million in debt
Federal Reserve Board in early 2001.
make our company stronger. We have
maintenance a year earlier.
done more than survive a lean year, we
We have streamlined our customer
have positioned ourselves to take
Due to the rate increases, the U.S.
payment process by taking advantage of
advantage of future opportunities. We
economy began to slow and this
Electronic Data Interchange. EDI allows
believe our recovery plans and the
cooling period had a dramatic impact
us to make direct billing arrangements
responses we have already made make
on the entire trucking industry. Many
with customers which has improved
USA Truck worthy of that optimism.
companies
were
completely
cash flow. Other improvements include
unprepared
for
the change
in
our institution of a more efficient
economic climate and as a result, a
organizational structure and the
The Board of Directors and Stockholders
USA Truck, Inc.
We have audited the accompanying balance sheets of USA Truck, Inc. as of December 31, 2000 and 1999, and the
related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended
December 31, 2000. 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, 2000 and 1999, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in
the United States.
Little Rock,Arkansas
January 19, 2001
14
31
Financial Statements
The Tractor Trading Frenzy
USA TRUCK, INC.
Balance Sheets
December 31,
2000
1999
Assets
Current assets:
Cash and cash equivalents················································································
Receivables (Note 5):
Trade, less allowance for doubtful accounts of
$303,203 in 2000 and $269,150 in 1999··················································
Other ············································································································
Inventories ········································································································
Deferred income taxes (Note 7) ······································································
Prepaid expenses and other current assets (Note 3)·······································
Total current assets·································································································
$
1,674,730
$
2,145,707
30,019,565
3,853,642
382,639
1,607,633
4,200,618
41,738,827
26,649,235
5,509,866
,301,907
1,208,413
3,634,056
39,449,184
Property and equipment (Notes 5 and 6):
Land and structures ··························································································
Revenue equipment··························································································
Service, office and other equipment ································································
Accumulated depreciation and amortization ···················································
Other assets ············································································································
Total assets··············································································································
18,519,687
170,109,906
14,517,040
203,146,633
(55,417,751)
147,728,882
451,115
$ 189,918,824
16,798,699
155,546,718
13,665,713
186,011,130
(43,873,074)
142,138,056
,452,448
$ 182,039,688
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················································································
1,487,086
5,870,192
10,131,717
12,867,611
30,356,606
65,660,268
21,111,025
2,810,214
$
1,116,485
5,139,164
11,065,604
10,956,533
28,277,786
64,452,648
17,008,364
2,192,714
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 9,282,889 shares in 2000
and 9,387,041 shares in 1999·······································································
Additional paid-in capital··················································································
Retained earnings ·····························································································
Less treasury stock, at cost (59,835 shares in 2000 and 122,011
–
–
, 92,829
11,318,279
58,934,889
, 93,870
12,271,685
58,840,827
shares in 1999) ·····························································································
Total stockholders' equity ······················································································
Total liabilities and stockholders' equity ································································
(,365,286)
69,980,711
$ 189,918,824
(1,098,206)
70,108,176
$ 182,039,688
See accompanying notes.
The Scouting Report
After the success of our responses to the
ourselves to take advantage of future
we have positioned ourselves to respond
unmanned tractor and fuel price issues,
opportunities and capture the true value
quickly in a market known to fluctuate.
we turned our attention to the free-
of our assets.
falling used tractor market. Overcapacity
in the industry and lower new tractor
orders drove down the prices dealers
The Game Plan
By eliminating the dealer factor, USA Truck
now has more control over its resources.
We have already experienced success and
expect more to follow as we become even
were willing to pay for trade-ins during
USA Truck has taken several steps to
more familiar in the direct sale used
2000. We were able to minimize our
reduce the effects of a floundering used
revenue equipment marketplace.
equipment
losses to approximately
tractor market.We decided on a two-
$150,000 on trades in 2000 despite
pronged response for both short and long
In addition to our used equipment sales
unfavorable economic forces.
term results. First, we have developed an
department, we adjusted the depreciation
area within our Maintenance Department
on a portion of our fleet on October 1,
In addition, the weak market has been
with a mandate to sell used equipment
2000. This accounting adjustment more
further exacerbated by an additional
directly to current and potential buyers.
accurately reflects a market that has
flood of used vehicles brought on by a
The obvious benefit is the reduction of
undergone massive changes. In terms of
record number of bankruptcies and
dealerships brokering our transactions.We
profitability, fiscal loss on trade for some
business failures within the trucking
are now able to capture a higher percent
used tractors has been reduced.
industry. We remain a healthy and viable
of each transaction value. Another benefit
company and have managed to position
of our used truck sales department is that
1759
1713
1132
1007
862
782
711
571
412
496
0
32
13
USA TRUCK, INC.
Statements of Income
Year Ended December 31,
1999
1998
2000
Operating revenues ································································································
$ 226,585,437 $ 166,363,356
$ 145,216,121
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 expenses (income):
Interest expense·································································································
Loss (gain) on disposal of assets ········································································
Other, net············································································································
Income before income taxes··················································································
Income tax (benefit) expense (Note 7):
Current ···············································································································
Deferred ·············································································································
Net income ·············································································································
$
91,453,590
71,567,226
4,248,497
14,318,596
2,802,007
26,792,923
9,607,679
220,790,518
5,794,919
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
5,407,723
,149,788
, 82,702
5,640,213
,154,706
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
(3,642,795)
3,703,440
, 60,645
$, 94,061
2,774,219
2,797,278
5,571,497
$ 8,641,502
3,366,164
3,316,964
6,683,128
$ 10,497,149
Net income per share (Notes 9 and 10):
Basic earnings per share ····················································································
Diluted earnings per share·················································································
$0.01
$0.01
$0.93
$0.92
$1.12
$1.11
See accompanying notes.
33
USA TRUCK, INC.
Statements of Stockholders’ Equity
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Total
Balance at January 1, 1998 ········································
Exercise of stock options, net (Note 10) ··············
Tax benefit of stock options (Note 7) ··················
Purchases of 54,750 shares of common
$ 93,749
622
--
$ 12,577,336
, 290,941
, 53,065
$ 39,702,176
--
--
--
--
--
$ 52,373,261
,291,563
, 53,065
stock into treasury·············································
--
--
--
,(585,962)
,(585,962)
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
out of treasury stock ·········································
Net income for 1999 ·········································
Balance at December 31, 1999··································
Exercise of stock options, net (Note 10) ··············
Purchase of 58,200 shares of common stock
into treasury ······················································
Transfer of 13,643 shares of treasury Stock
to Employee Stock Purchase Plan ·····················
Retirement of 106,733 shares out of
--
--
94,371
499
--
--
(1,000)
--
93,870
26
--
--
--
--
12,921,342
,278,219
--
10,497,149
50,199,325
--
,104,987
--
480,975
--
,104,987
10,497,149
62,734,063
,278,718
--
--
,(927,876)
--
12,271,685
(21)
--
--
--
--
--
8,641,502
58,840,827
--
1,662,883
1,662,883
,116,776
,116,776
,928,876
--
(1,098,206)
--
--
8,641,502
70,108,176
5
--
--
,(350,344)
,(350,344)
,128,813
,128,813
,954,451
--
94,061
$ ,(365,286) $ 69,980,711
--,
treasury stock ····················································
Net income for 2000·············································
Balance at December 31, 2000··································
(1,067)
--
$ 92,829
,(953,384)
--
$ 11,318,280
--
94,061
$ 58,934,888
See accompanying notes.
34
engine monitors its own internal
power requirements which can
dramatically decrease the fuel
consumed while stationary.
Each of our trucks is also equipped with
QUALCOMM’s SensorTRACS® which
allows us to capture fuel consumption
data instantly.With this SensorTRACS®
satellite technology, data from every
truck in our fleet can be monitored for
efficiency regardless of a tractor’s
location. USA Truck places a premium
on holding down the high costs of fuel.
We will continue to take advantage of
new means to conserve fuel as they
become available
Rocket Fuel
The Scouting Report
The meteoric rise in the price of oil,
the fuel market of 2000 will only
We continue to maintain a strict
well publicized
in 2000, hit the
strengthen profitability in the future.
governing policy of 63 miles per hour
trucking industry hard and USA Truck
for the entire fleet. We believe this
was no exception. Our average cost
The most obvious tool to recover losses
maximum speed gives us the optimum
per gallon of diesel fuel jumped $.33 in
caused by fuel prices is the “fuel
mix of fuel efficiency and driver
2000 from 1999’s price level.
The
surcharge” added to freight billings. The
satisfaction, while allowing USA Truck
added pre-tax cost of that price
surcharge only applies to revenue miles.
to make on-time deliveries and still be
increase was approximately $3.1
Therefore, we continually strive to
an industry leader in fuel economy.
million after fuel surcharge recoveries.
minimize the number of empty and out-
Another method of controlling fuel cost
of-route miles logged by our fleet. USA
The Game Plan
Truck invested in computer software
technology designed to automatically
There is very little that can be done
calculate and bill fuel surcharges to our
about the price of fuel. This said,
customers while also plotting optimum
however, very effective measures can
routes to minimize empty miles.
be taken to minimize the effect of fuel
Our new technology also serves as
prices on our bottom line. Since the
an immediate measurement and
fluctuation in fuel costs is an everyday
report system. This addition leads
is by creating efficiencies in overall fuel
concern of the trucking industry we
to more accurate and efficient fuel
consumption. Options that improve
feel very strongly that our responses to
surcharge collections.
fuel economy are specified in our new
Columbia class tractor orders. The
aerodynamic body design of the new
Columbia and new advances governing
miles per hour contributes to optimum
fuel efficiencies on the open road. In
addition, the Columbia class features
“Optimized Idle” settings which further
increase fuel efficiencies. Each tractor
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 current assets·····························
Bank drafts payable, trade accounts payable and
2000
Year Ended December 31,
1999
1998
$ 94,061
$ 8,641,502
$ 10,497,149
26,792,923
82,200
3,703,441
149,788
18,591,780
121,900
2,797,278
(9,297)
16,179,143
30,000
3,316,964
(37,088)
(1,796,306)
(647,294)
(17,186,596)
(609,527)
(1,363,041)
(1,103,891)
accrued expenses·····················································································
Insurance and claims accruals - long-term ··················································
Net cash provided by operating activities······························································
167,742
617,500
29,164,055
1,103,205
100,100
13,550,345
539,981
408,000
28,467,217
Investing activities
Purchases of property and equipment···································································
Purchase of CCC Express, Inc. ···············································································
Proceeds from sale of equipment ··········································································
Proceeds from sale of investments·········································································
Decrease (increase) in other assets ········································································
Net cash used by investing activities ·····································································
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 (used by) provided by financing activities··············································
(27,011,263)
--
14,898,989
--
1,333
(12,110,941)
89,606,979
5
128,813
--
(350,344)
(93,689,979)
(13,219,565)
(17,524,091)
(29,492,589)
(22,891,055)
9,651,337
968,196
(153,165)
(41,917,276)
55,685,310
278,718
116,776
1,745,478
(1,662,883)
(19,595,310)
(7,835,094)
28,732,995
(21,731,600)
--
6,395,382
--
31,150
(15,305,068)
14,325,000
291,563
104,987
--
(585,962)
(22,800,000)
(6,385,405)
(15,049,817)
(Decrease) increase in cash and cash equivalents ·················································
Cash and cash equivalents:
(470,977)
366,064
(1,887,668)
Beginning of year ································································································
End of year ··········································································································
2,145,707
$ 1,674,730
1,779,643
$ 2,145,707
3,667,311
$ 1,779,643
See accompanying notes.
10
35
USA TRUCK, INC.
Notes to Financial Statements
December 31, 2000
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 8% and 7% of net trade receivables as of December 31, 2000 and 1999,
respectively. The same customer represented approximately 6% and 6% of revenues for the years ended December 31,
2000 and 1999, 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 10 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.
Man and Machine
The Game Plan
technology. This commitment to ride
more comfort on the road has been a
the wave of technological
success. Simple things like armrests,
advancement, however, has always
improved road vision and more
been tempered by our concern for
comfortable on-the-road living areas
quality. The increased comfort and
have improved overall driver
drivability of the Columbia class
satisfaction.That means better driver
tractor is one of the major reasons we
retention and ultimately lower
have been able to attract some of the
recruiting costs.
best drivers in the country.
Make no mistake, USA Truck has
Beginning in November of 2000, we
responded to the experience of 2000
committed ourselves to purchasing
and positioned itself to return to the
the new Freightliner Columbia class
top of the industry by addressing our
tractor. The Columbia provides many
most precious resources - our drivers.
creature comforts that our older
tractors did not, without a substantial
increase in price.
The reception of the Columbia class
by our drivers has been
overwhelming. Driving is a more
demanding lifestyle than
most people engage
in, and the
chance to give
our drivers
36
9
Man and Machine
The Game Plan
experienced drivers and students as
fundamentals happen for the
that drivers are still given the
well as equipment utilization are
continued growth of our company.
opportunity to express their concerns
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Property and Equipment (continued)
During 2000, the Company made certain changes in the estimated lives and salvage values of certain revenue equipment
to better reflect the Company's experience as to service lives and resale values of that revenue equipment. Effective June
1, 2000, the Company changed the estimated lives and salvage values of its trailers. This change decreased depreciation
expense and increased net income by approximately $563,500 during 2000. Effective October 1, 2000, the Company
changed the salvage values of certain types of its tractors. This change increased depreciation expense and decrease net
income by approximately $200,000 during 2000.
constantly tracked in order to
in a meaningful way.
Claims Liabilities
recognize trends as they develop. This
Other programs are in place to make
is made possible by our sophisticated
drivers’ lives at USA Truck more
The most visible aspect of our overall
computer capacity that is able to
rewarding and comfortable.We have
response to the driver shortage of
process and analyze operational data
rededicated our efforts to enhance the
2000 is the modernization of our
as soon as it is recorded. The plan
overall training of our entire
tractor fleet. Just as every jockey
was implemented to put USA Truck
Operations staff. A new series of
would love the opportunity to work
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 2000 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 $1,210,000 in letters of credit.
The workers' compensation self-insurance is secured by $100,000 in certificates of deposit maturing during 2001. The
certificates of deposit are included in other assets on the balance sheet as of December 31, 2000 and 1999.
back on the road toward solid growth,
video courses was put into place in
with Secretariat, few astronauts would
Revenue Recognition
a strong bottom line and a healthy
order to remind Operations personnel
volunteer for a trip to the aging Mir
return on our stockholders’
of the importance of interpersonal
space station. Truck drivers are no
investment. Now, as ever, we are
driver relations. We have also begun
different. USA Truck has long
committed to making these
to use an interactive CD-ROM
provided its drivers with outstanding
developed by Truckload Carrier
tractors updated with the most recent
Association called “Daily Dispatch
Challenge.” This ‘flight simulator’
approach allows dispatchers to
experience a variety of high pressure
scenarios in which driver relations
becomes an integral part of dispatch
problem solving. Our Driver Relations
area maintains close personal contact
with our drivers, responding to
individual needs.As USA Truck
continues to grow, it is paramount
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.
8
37
USA TRUCK, INC.
Notes to Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
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).
Advertising Costs
The Company expenses advertising costs as they are incurred. Total advertising costs for the period ended December 31,
2000, 1999 and 1998 were $1,770,000, $1,628,000, and $1,416,000 respectively.
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.
In June, 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. The Statement has been amended by SFAS No. 137 and is effective for all quarters of fiscal years
beginning after June 15, 2000. It establishes accounting and reporting standards requiring that every derivative instrument
be recorded in the balance sheet as either an asset or liability at its fair value. The Company is currently evaluating the
requirements of SFAS No. 133 and does not anticipate that the adoption will have a material effect on earnings or the
financial position of the Company.
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.
38
experienced over-the-road drivers,
supplemented with a small percentage
of inexperienced student drivers.
Our new pay package made it possible
to address the need to find more
drivers while simultaneously making
it possible to increase driver quality.
In the face of a treacherous driver
shortage we were actually able to
become more selective in our overall
hiring process. As the overall effect
of our new pay package continues
to influence the quality of our
drivers, USA Truck’s drivers are
again the premier force in the
truckload segment.
We expect our more experienced,
professional driving force to improve
tractor utilization, reduce accident
frequency and severity, vastly reduce
recruiting and retention costs and
provide a higher level of service for
our customers. Initial indications are
confirming our expectations.
Management monitors progress
towards each of our specific goals
monthly, weekly and in some instances
even daily. Driver turnover, the mix of
Man and Machine
The Scouting Report
Just as a thoroughbred horse needs a
to compete with multiple industries in
Our new package included a nickel
jockey or the space shuttle requires an
the booming economy for the services
per mile raise for all one-year drivers
astronaut,
tractors cannot operate
of our drivers.
without their drivers. These impressive,
(traditionally the most volatile group)
and the overall pay scale reaches 43
sophisticated marvels of engineering
We battled the problem with brute
cents per mile – the highest in the
cannot generate revenue without a
force by funneling more and more
entire truckload industry. The effects
professional behind
the wheel.
resources into our student recruiting
were immediate and dramatic. By
Equipment utilization
is the
load-
arena. However, by the third quarter,
year-end we had cut the unmanned
bearing wall in the structure that is the
our unmanned tractors approached
number of tractors nearly in half,
truckload industry. Tractors must keep
14% of our fleet. We responded with a
turnover was reduced substantially
rolling to produce stockholder value.
new strategy.
Unmanned tractors played a pivotal
role in 2000 for USA Truck.
The
coincidence of two events accentuated
The Game Plan
and the number of experienced
drivers hired has continued to
increase each month.
We set some aggressive goals to make
this problem for us. First, we inherited
USA Truck undertook a
certain that we pay for the plan
unmanned tractors in the acquisition of
comprehensive study of its driver
through cost savings in several areas.
CCC Express, Inc. on November 1, 1999.
pay package and that of the industry.
The crux of the plan is built around
Then an overheating economy pushed
We meticulously crafted a package
hiring a higher percentage of
the national unemployment rate to
that would be both highly
record lows, further tightening the
competitive and specifically address
available pool of drivers. Near full-
our driver quality standards. The
employment
in 2000 meant that
result was a pay package, unveiled
recruiting qualified drivers, never an
October 1, 2000, that is one of
easy proposition, became more difficult
the finest in the industry. Driver
with stiffer competition from every
rolls have increased dramatically
quarter of the marketplace. In addition
and the quality and experience
to hiring drivers, retention became a
of the drivers in the USA Truck
more precarious task as we were forced
fleet has risen accordingly.
USA TRUCK, INC.
Notes to Financial Statements (continued)
2. Acquisition (continued)
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.
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 what would have occurred had the acquisition been made on January 1, 1998, or of results which may
occur in the future.
December 31,
1999
1998
Operating revenues ····························································································
Net Income·········································································································
Basic earnings per share·····················································································
Diluted earnings per share ·················································································
$ 222,089,793
6,127,054
$.66
$.65
$ 211,937,321
9,074,624
$.97
$.96
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
December 31,
Prepaid licenses and taxes······················································································
Prepaid insurance ···································································································
Other ······················································································································
4. Accrued Expenses
Accrued expenses consist of the following:
December 31,
Salaries, wages, bonuses and employee benefits ····················································
Insurance and claims accruals················································································
Other ······················································································································
2000
$ 1,484,736
1,938,554
777,328
$ 4,200,618
1999
$ 1,381,345
2,039,749
212,962
$ 3,634,056
2000
$ 2,471,160
5,032,871
2,627,686
$ 10,131,717
1999
$ 4,352,233
3,585,366
3,128,005
$ 11,065,604
6
39
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,
2000
$ 34,907,000
43,620,879
78,527,879
(12,867,611)
$ 65,660,268
1999
$ 38,990,000
36,419,181
75,409,181
(10,956,533)
$ 64,452,648
(1) The Company's revolving credit agreement (the "Senior Credit Facility"), effective April 28, 2000, provides for
available borrowings of $60,000,000, including letters of credit not exceeding $5,000,000. The Senior Credit
Facility matures on April 28, 2005, 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 federal funds
rate 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, 2000 was 7.58%. A quarterly commitment fee of 1/5% per annum is payable on the
unused credit line. The Senior Credit Facility is collateralized by accounts receivable and all otherwise
unencumbered equipment. The Company has outstanding letters of credit of approximately $1,210,000 at
December 31, 2000.
The Senior Credit Facility requires the Company to meet certain financial covenants and to maintain a minimum
tangible net worth of approximately $65,846,000 at December 31, 2000. The Company was in compliance with
these covenants at December 31, 2000. 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 February 2004 and contain renewal or fixed price purchase options. The effective
interest rates on the leases range from 4.50% to 11.56% at December 31, 2000.The lease agreements require the
Company to pay property taxes, maintenance and operating expenses.
The Company made interest payments of approximately $5,378,000, $1,490,000 and $1,699,000 during 2000, 1999
and 1998, respectively. The Company capitalized approximately $12,500 and $6,800 in interest as a result of
construction during 2000 and 1998, respectively.
fuel surcharge recovery program that is
already performing well. We are also
upgrading our fleet with the more
aerodynamic and fuel optimized
Freightliner Columbia class tractors.
Rising interest rates also put a crunch
on our bottom line due to the debt
servicing costs associated with our
November 1, 1999 acquisition of CCC
Express, Inc. Even with the added cost
caused by the rate hike, our acquisition
of CCC Express Inc. continues to
benefit the operational potential of USA
Truck and allows us
to spread our fixed costs over a much
larger revenue base.
All of these factors together culminated
in a net income of $94,061, or $0.01
per diluted share.
Despite the reduced profit, USA Truck
posted strong earnings before interest,
taxes, depreciation and amortization
(EBITDA) during 2000, generating over
$32 million, or $3.50 per share. This
number is a strong indication of our
company’s ability to meet its operating,
or variable, cash needs.
40
5
Report Card
USA Truck once again achieved record
revenues of $226,585,437 in 2000, the
12th consecutive year we’ve grown.We
will continue to penetrate the
Mexican, logistics and dedicated
service markets in search of new
revenue streams.We will continue to
examine operations in order to serve
present customers more efficiently.
It was a tough year for the entire
truckload segment. Several factors and
events conspired against the trucking
industry, making 2000 a lean year. A
tight labor market drove costs of
recruiting and retaining qualified
drivers to never-before-seen heights.
We have responded with one of the
most competitive driver pay packages
in the industry. The used tractor
market made a sharp down turn due to
a record number of bankruptcies and
business failures within the trucking
industry. We responded by forming our
own used equipment sales department
in order to capture a greater
percentage of return on our used
revenue equipment. Skyrocketing fuel
prices cut deeply into 2000 profits.We
have responded with a computerized
USA TRUCK, INC.
Notes to Financial Statements (continued)
6. Leases and Commitments
Capital lease obligations of $20,421,263, $21,908,219 and $6,763,522 were incurred during the years ended
December 31, 2000, 1999 and 1998, respectively.
At December 31, 2000, the future minimum payments under capitalized leases with initial terms of one year or more
were $15,146,492 for 2001, $13,481,486 for 2002, $17,760,502 for 2003 and $1,349,203 for 2004. The present value
of net minimum lease payments was $43,620,879 which includes the current portion of the capital leases of
$12,867,611 and excludes amounts representing interest of $4,116,805.
At December 31, 2000, property and equipment included capitalized leases which had capitalized costs of
$58,048,308, accumulated amortization of $14,081,766 and a net book value of $43,966,542. 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. 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 $37,974,000 at December 31, 2000.
7. Federal and State Income Taxes
Significant components of the Company's deferred tax liabilities and assets as of December 31, 2000 and 1999 are
as follows:
December 31,
2000
1999
Noncurrent deferred tax liabilities:
Tax over book depreciation·················································································
Capitalized leases ·································································································
Total noncurrent deferred tax liabilities·································································
Noncurrent deferred tax assets:
Alternative minimum tax credits ·········································································
Net operating losses·····························································································
Total noncurrent deferred tax assets······································································
Net current deferred tax liabilities ·········································································
$ 21,433,405
,338,222
21,771,627
(263,838)
(396,764)
(660,602)
$ 21,111,025
$ 16,904,280
,104,084
17,008,364
--
--
--
$ 17,008,364
Current deferred tax assets:
Revenue recognition ····························································································
Accrued expenses not deductible until paid·······················································
Allowance for doubtful accounts·········································································
Total current deferred tax assets ············································································
Current deferred tax liabilities:
$ (42,661)
(3,033,282)
(115,323)
(3,191,266)
$ (89,392)
(2,389,894)
(99,166)
(2,578,452)
Prepaid expenses deductible when paid·····························································
Net current deferred tax assets ··············································································
1,583,633
$ (1,607,633)
1,370,039
(1,208,413)
$
4
41
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,
1999
1998
2000
Current
Federal·············································································································
State·················································································································
Total current ···································································································
Deferred
Federal·············································································································
State·················································································································
Total deferred··································································································
Total income tax expense···············································································
$ (3,642,796) $ 2,406,997 $ 2,812,318
553,846
3,366,164)
--
(3,642,796)
367,222
2,774,219
3,152,732
550,709
3,703,441
2,883,617
433,347
3,316,964
$ 60,645 $ 5,571,497 $ 6,683,128
2,350,248
447,030
2,797,278
During 2000, 1999 and 1998, the Company made income tax payments of approximately $66,250, $3,105,300, and
$3,484,000, 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.
Selected Financial Data
(Dollars in thousands except per share amounts)
Year Ended December 31,
2000
1999
1998
1997
1996
Operating Revenue ............................................
$226,585
$166,363
$145,216
$129,507
$108,313
Operating Income ...............................................
Net Income ............................................................
Diluted Earnings Per Share ..............................
5,795
94
.01
15,836
8,642
.92
18,960
10,497
1.11
14,169
7,903
0.83
Total Assets ............................................................
189,919
182,040
119,611
113,518
Long – Term Obligations ..................................
Stockholders’ Equity ...........................................
Operating Ratio ....................................................
Total Tractors (end of period) .........................
Total Trailers ( end of period) ..........................
Average Miles Per Tractor Per Week .............
65,660
69,981
97.4%
1,759
3,400
2,190
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
In 2000, the Company generated $396,742 in a state net operating loss carry forward, which will expire in 2020. The
Company also generated alternative minimum tax credits of $263,838. These credits have no expiration date.
Price Range of Common Stock
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···············································································
Year Ended December 31,
1999
1998
2000
$ 52,600 $ 4,832,420 $ 5,841,294
(7,224)
75,038
(81,017)
39,397
21,248
(336,172)
98,131
92,682
5,695,935
987,193
$ 60,645 $ 5,571,497 $ 6,683,128
(276,846)
58,846
142,825
4,757,245
814,252
Effective tax rate ·····························································································
39.2%
39.2%
38.9%
The Company’s Common Stock trades on The Nasdaq Stock Market under the symbol: USAK.
Sales Price
Sales Price
2000
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$ 8.81
$ 7.94
$ 7.19
$ 6.50
Low
$ 7.25
$ 5.38
$ 5.38
$ 5.19
1999
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High
$10.44
$ 9.38
$ 9.25
$ 8.13
Low
$10.19
$ 9.16
$ 8.88
$ 7.75
The high and low sales prices for the
of its Common Stock as of that date.
results of operations and capital
Common Stock as reported on Nasdaq
The Company has never paid a cash
commitments of the Company as well
on March 7, 2001 were $6.00 and
dividend on its Common Stock. It is
as other factors deemed relevant by
$5.94, respectively. As of that date, the
the current intention of the Company’s
the Board of Directors. Covenants
Company had 240 stockholders of
Board of Directors to retain earnings to
contained in the Company’s General
record, including brokerage firms and
finance the growth of the Company
Line of Credit may limit the Company’s
other nominees. The Company
rather than pay cash dividends. Any
ability to pay dividends.
estimates that there were
future payments of cash dividends will
approximately 1,940 beneficial owners
depend upon the financial condition,
42
3
To Our Stockholders
USA TRUCK, INC.
Notes to Financial Statements (continued)
USA Truck took some lumps during the
We have implemented an aggressive
We see the labor market loosening in
8. Employee Benefit Plans
year 2000. Our Company posted $227
recovery plan with very specific goals in
2001, further strengthening our driver
million in revenues last year, our twelfth
response. The plan is centered on a
hiring position. Coupled with declining
consecutive year of sales growth.
substantial driver pay increase that was
interest rates and an under-capacity in
However, our profit decreased 98.9% to
effective October 1, 2000, the crux of
the industry forecasted by many analysts,
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 $788,400, $634,000 and $652,000 for 2000, 1999 and 1998,
respectively.
$94,000, or $.01 per fully diluted share.
which is to improve the quality and
we believe this plan will return us to the
9. Earnings per Share
amount of driving experience of newly
circle of top truckload carriers in terms
The following table sets forth the computation of basic and diluted earnings per share:
While we are not proud of our bottom
hired drivers.
of profitability.
line, we are proud of our reaction to the
adversity we faced last year. Our
The payback should come in the form of
We also said goodbye to one of our
management team has thoroughly
drastically reduced driver turnover and
original six Officers, Breck Speed, who
Numerator:
Year Ended December 31,
1999
1998
2000
studied the issues contributing to last
reduction of related cost, fewer and less
retired in October 2000, after 12 years as
year’s substandard performance. Based
expensive accidents, better utilization
Chairman of the Board. His presence and
on what we found, we have
and more consistent customer service.
his many years of experience in the
implemented a recovery plan that
We are proud to announce that we
trucking business will be missed.We
specifically targets both our strengths
manned our last available tractor on
wish him well in his retirement. Mr.
and our weaknesses.
February 15, 2001, ahead of the February
Speed will continue as a Director of the
Net Income ································································································
$ 94,061
$ 8,641,502
$ 10,497,149
Denominator:
Denominator for basic earnings per
share-weighted average shares ······························································
$ 9,253,843
$ 9,324,037
$ 9,399,727
Effect of dilutive securities:
Employee stock options ········································································
6,201
30,404
66,244
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions ··························································
$ 9,260,044
$ 9,354,441
$ 9,465,971
28 goal.
Company.
Basic earnings per share ·················································································
What we found was that a series of
external economic events – an
USA Truck continues to wage war on
Thank you for your support and stay
unprecedented tightening in the labor
costs with an in-depth benchmarking
tuned…we think the best is yet to come.
market, a sagging used tractor market,
program to compare our current
skyrocketing fuel prices, steadily
profitability to that of prior years. We
climbing interest rates and a slowing
have identified areas where costs other
economy – catalyzed by our November
than those related to driver quality have
1, 1999 acquisition of CCC Express, Inc.,
crept up on us. Concerted efforts are
came together in 2000 to adversely
being made to bring those costs back in
affect our net income.
line with historical performance.
$.01
$.01
$.93
$.92
$1.12
$1.11
--
Diluted earnings per share··············································································
Anti-dilutive employee stock options ·····························································
79,600
94,600
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.
President, Chief Executive Officer
and Chairman
2
43
Table of Contents
To Our Stockholders ............................................
Financial Highlights .............................................
Report Card ............................................................
Man and Machine ................................................
2
3
4
6
Rocket Fuel ............................................................. 10
The Tractor Trading Frenzy ............................... 13
Roller Coaster Ride ............................................... 14
Ten Year Financial Statistics .............................. 16
Directors and Officers ......................................... 18
Corporate Information ........................................ 19
Business ................................................................... 20
Selected Financial Data ...................................... 24
Management’s Discussion
and Analysis .......................................................... 25
Report of Ernst & Young LLP,
Independent Auditors ........................................ 31
Financial Statements ........................................... 32
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:
2000
Weighted-Average
Options
Exercise Price Options
1999
Weighted-Average
Exercise Price
Outstanding-beginning
of year
Granted
Exercised
Canceled
Expired
Outstanding-end of year
258,200
185,000
(32,000)
(10,000)
(20,600)
380,600
$ 8.09
5.49
6.25
6.96
11.53
$ 6.85
323,200
--
(65,000)
--
--
258,200
Exercisable at end of year
104,800
$ 8.10
95,600
$ 7.72
--
6.25
--
--
$ 8.09
$ 7.85
1998
Weighted-Average
Exercise Price
$ 6.90
11.59
6.30
--
--
$ 7.72
Options
356,400
46,000
(79,200)
--
--
323,200
103,000
$ 6.46
Exercise prices for options outstanding as of December 31, 2000 ranged from $5.44 to $13.00. The weighted-average
fair value of options granted during 2000 and 1998 were $2.33 and $4.30. No options were granted during 1999. The
weighted-average remaining contractual life of these options is 3.59 years.
No options were exercised for cash in 2000. In 1999 and 1998, 44,595 and 45,240 options, respectively, were exercised
for cash. In 2000, 1999 and 1998 additional options of 30,200, 20,405 and 33,960 respectively, were exercised by the
exchange of 29,419, 15,056 and 16,971 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 2000, 1999 and 1998 consistent with the provisions of SFAS 123, the
Company's pro forma net income would have been $20,808, $8,603,394 and $10,431,143, pro forma basic earnings per
share would have been $.00, $.92 and $.1.11, and pro forma diluted earnings per share would have been $.00, $.92 and
$1.10, 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 2000: dividend yield of 0%; expected volatility of
0.336%; risk-free interest rates range from 5.77% to 5.92% and expected lives range from 3 to 7 years. 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.
44
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.
USA TRUCK, INC.
Notes to Financial Statements (continued)
11. Quarterly Results of Operations (Unaudited)
The tables below present quarterly financial information for 2000 and 1999:
2000
Three Months Ended
March 31
June 30
September 30
December 31
Operating revenues ··················································· $55,144,425
Operating expenses and costs ·································· 54,344,363
Operating income ·····················································
800,062
Other expenses, net ··················································
1,451,235
(Loss) income before income taxes ··························
(651,173)
Income tax (benefit) expense···································
(256,788)
Net (Loss) income ·····················································
$(394,385)
$ 58,348,467
54,871,633
3,476,834
1,533,420
1,943,414
763,347
$ 1,180,067
$ 55,532,933
53,434,653
2,098,280
1,255,588
842,692
330,335
$ 512,357
$ 57,559,612
58,139,869
(580,257)
1,399,970
(1,980,227)
(776,249)
$ (1,203,978)
Average shares outstanding (basic) ···························
Basic (loss) earnings per share··································
9,266,229
($.04)
Average shares outstanding (diluted)························
Diluted (loss) earnings per share ······························
9,288,976
($.04)
9,297,761
$.13
9,302,194
$.13
9,257,973
$.06
9,264,116
$.06
9,222,264
($.13)
9,228,370
($.13)
1999
Three Months Ended
March 31
June 30
September 30
December 31
Operating revenues ··················································· $36,199,447
32,063,006
Operating expenses and costs ··································
4,136,441
Operating income ·····················································
313,880
Other expenses, net ··················································
3,822,561
Income before income taxes ····································
Income taxes ·····························································
1,498,444
$2,324,117
Net income································································
$ 38,117,504
33,830,877
4,286,627
282,016
4,004,611
1,569,808
$ 2,434,803
$ 40,416,850
37,330,310
3,086,540
308,597
2,777,943
1,088,954
$ 1,688,989
$ 51,629,555
47,302,491
4,327,064
719,180
3,607,884
1,414,291
$ 2,193,593
Average shares outstanding (basic) ···························
Basic earnings per share ···········································
9,392,817
$.25
Average shares outstanding (diluted)························
Diluted earnings per share········································
9,452,481
$.25
9,373,109
$.26
9,410,750
$.26
9,298,377
$.18
9,335,972
$.18
9,257,361
$.24
9,287,601
$.24
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.
45
Experience
Response
Opportunity
USA Truck, Inc. • 3200 Industrial Park Road • Van Buren, Arkansas 72956 • 501-471-2500
www.usa-truck.com
Annual Report 2000