USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
(479) 471-2500
usa-truck.com
2008 Annual Report
Mission Statement
U
SA Truck’s mission is to provide innovative and
superior transportation solutions that exceed our
customers’ expectations. We will foster an ethical and
safe culture where our employees are challenged,
empowered and rewarded to continuously improve
customer and shareholder value.
L
ike people, corporations need a strong moral and
philosophical compass to guide them so they do not stray
from what is important. At USA Truck, we understand what is
important for us to be successful. The Bars & Stars embody our
seven core values and provide a touchstone to help our employees
make good decisions and exercise sound judgment in the day-to-
day execution of their job responsibilities. We cannot go wrong if
we use this value system as our guide.
At USA Truck, we understand what we
can be the best in the world at, what
we are deeply passionate about and
what drives our economic engine.
That understanding is represented by
the intersection of three circles, which
Jim Collins refers to as the Hedgehog
concept in his book Good to Great.
The shield shape created by that
intersection appears on the Bars &
Stars as the Sell It, Book It, Move It
and Collect It road signs.
Selecting and developing leaders is
tough. Selecting and developing great
leaders is brutal. At USA Truck,
leadership is all about the
characteristics of people placed into
leadership roles. The symbol of
leadership, the fluer-de-lis, is not taken
lightly by our management team.
We subscribe to a theory of cost
management called Zero Overhead
Growth “Z.O.G.”. It symbolizes
our maniacal commitment to fixed
costs control. We chose the Greek
mythological character Sisyphus as
our metaphor for cost control
because it is a burden we must
bear eternally.
We are in the business of transporting
freight and our success depends on
how well we execute our business
processes which we refer to as the
“Highway to Success”. By focusing on
our most basic business processes –
Sell It, Book It, Move It and Collect It –
we gain clarity into which activities add
value for our customers and we
simultaneously identify and minimize
wasteful activities that do not.
A flywheel is a mechanical device resistant to
sudden changes in its rate of rotation due to
its weight and balance. Turning a flywheel is
like moving a company in a way that begins
to produce results. As the momentum
builds, the results continuously improve
with less brute force required to sustain
improvements. For us, the flywheel is the
ultimate expression of customer, employee
and stockholder alignment.
At USA Truck, our torch symbolizes
intellectual honesty. Intellectual honesty
means that we see things for the way they
actually are, not the way we want them to be.
At USA Truck, we believe that it is always in
the best interest of our stakeholders to “do
the right thing.” Like us as individuals, our
Company is nothing without the honor of
its name.
25 Years of Service
Selected Financial Data
F
ollowing deregulation of the trucking industry in 1980, Arkansas
On January 1, 1989, six principals led by Mr. Powell purchased
Best Corporation (ABC), parent to ABF Freight System, Inc.
USA Truck from ABC for the purchase price of $2.4 million in cash
(ABF), started a small, non-union truckload carrier named Crawford
plus the assumption of over $25 million in debt. Three of the six
Produce, Inc. (CPI). That small company began with less than ten
principals were already operating USA Truck and had vast experience
tractors, but turned a profit and slowly grew. In 1986, this small
as life-long ABF employees. In March 1992, USA Truck completed
subsidiary was incorporated under the name USA Truck, Inc. Robert
its Initial Public Offering at a split adjusted price of $6.25. Since
M. Powell, our current Chairman, was the Senior executive at ABF
then, USA Truck has grown its revenue at an average annual rate
responsible for managing several of these small subsidiaries.
of 12.2% and has been profitable every single year.
In 1988, ABC was the target of a hostile acquisition. ABC secured a
white knight willing to take the company private, but was unable to
finance the entire purchase price of the company. To raise cash and
eliminate debt, the new owner sold several ABC subsidiaries,
including USA Truck.
Base revenue ..............................................
Operating income .......................................
Net income ..................................................
Diluted earnings per share .........................
Total assets ..................................................
Long-term debt ...........................................
Stockholders’ equity ...................................
Operating ratio* ..........................................
Total tractors (end of period) ....................
Total trailers (end of period) .....................
Average miles per tractor per week ...........
(Dollars in thousands except per share amounts)
Year Ended December 31,
2008
$ 397,557
12,147
3,140
0.31
332,268
79,363
$ 146,773
2007
$ 391,188
8,310
140
0.01
332,938
70,212
$ 143,191
2006
$ 385,301
26,404
12,441
1.08
339,494
67,817
$ 159,558
2005
$ 376,629
33,497
15,568
1.51
308,079
67,589
$ 149,833
2004
$ 335,880
17,799
7,432
0.79
288,154
115,114
$ 85,528
96.9%
2,392
7,351
2,216
97.9%
2,557
7,024
2,313
93.1%
2,571
6,770
2,271
91.1%
2,414
5,542
2,415
94.7%
2,231
5,682
2,361
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of base revenue.
Base Revenue
Dollars in millions
Net Income
Dollars in millions
376.6
385.3
391.2
397.6
335.8
15.6
12.4
7.4
04
05
06
07
08
04
05
06
3.1
08
0.1
07
Diluted Earnings per Share
Dollars
EBITDA per Diluted Share*
Dollars
7.30
5.71
6.34
6.15
5.37
1.51
1.08
0.79
0.31
0.01
04
05
06
07
08
04
05
06
07
08
* EBITDA is defined in the Financial Statistics section of the Ten Year Statistical History in this annual report.
To Our Stockholders
O
ur performance improved during 2008. Our base revenue grew
1.6%, our operating margin expanded by 100 basis points and
our net income and earnings per share grew from $140,000 and
$0.01 per share to $3.1 million and $0.31 per share, respectively.
We are proud of these improvements, but these results do not tell the
full story about USA Truck’s journey in 2008.
Last year can best be described by the word “change” – change in the
global economy, domestic political change and change throughout USA
Truck. It was a year in which we expanded exponentially our understanding
of the freight transportation business and applied those lessons learned to
change our operating model. We established a fresh strategic direction for
USA Truck based on an in-depth study of the factors that drive stockholder
value and operating performance in our industry.
VISION. Our primary long-term strategic objectives – to expand the
value of our Common Stock through improved returns on capital and to
improve the consistency of our earnings growth – precipitated the need to
make two fundamental changes within our Company. First, deep
organizational change was necessary to retool USA Truck to maximize returns
on capital and de-emphasize our historical strategy of growing our tractor
fleet. Second, a fresh operational approach was necessary to break our long-
term addiction to long-haul freight and instead focus on freight network yield.
A clear vision for USA Truck’s future emerged in 2008.
Our internal assessment indicated needs for a stronger technology platform
and more effective personnel capabilities. Two initiatives were designed to
turn those opportunities into competitive advantages.
Project Tech. For a variety of reasons, our legacy mainframe computer
platform had become a competitive disadvantage for us. To bolster our
ability to support the more rapid decision-making that our evolving
business model demands, we began a three-year process to migrate our
legacy mainframe platform and internally-developed software applications
to server-based platforms. We will purchase off-the-shelf products for
our core software needs, and develop value-added decision-support
software applications internally.
Project People. We recognize that aligning the interests and efforts of
every employee at USA Truck is essential to achieving our long-term
strategic objectives. During 2008, we instituted several programs designed
to create that alignment. From job descriptions to performance evaluations
to talent management, we have challenged, empowered and rewarded our
employees for performance. We endeavored last year to improve the
productivity of our non-driver personnel by using a combination of
performance-driven management and a more focused, process-driven
approach to managing our business. We believe that is the best path to
more efficiently serving our customers, producing results for our
stockholders and rewarding our employees.
PLANNING. Transforming that vision into results required a well-
conceived plan. Our team went to work assessing marketplace realities and
internal capabilities. We identified eight major initiatives that we believed
were essential to effecting the fundamental changes needed within the
Company to achieve our long-term strategic objectives.
As the vast majority of our revenue came from our truckload operations
during 2008, we believe that most of our initiatives should be focused on
improving the returns on capital and earnings consistency within those
operations. Historically, we focused on a 900-mile length-of-haul as our
primary trucking strategy. Late in 2008, for the first time in our
December 31,
2004
2003
2002
2001
2000
1999
$
$
$
$
$
Year ended December 31,
2004
2003
$
2002
$
2001
$
2000
$
1999
$
166,091
$
$
$
$
$
$
$
$
$
$
56,659
288,154
56,148
115,114
202,626
85,528
335,880
27,225
363,105
345,306
17,799
3,572
14,227
6,795
7,432
9,398
0.79
17.4%
94.7%
7,432
3,539
6,795
17,766
35,871
53,637
1.89
5.71
3.97
9.10
2.9%
9.1%
61.6%
2,231
5,682
18
39
2.5:1
2,285
2,218
702
2,920
3.2:1
45,541
222,549
42,962
74,300
145,053
77,496
286,080
12,583
298,663
287,813
10,850
2,622
8,228
4,873
3,355
9,370
0.36
6.5%
96.2%
3,355
2,557
4,873
10,785
30,611
41,396
4.42
3.99
8.27
1.6%
4.4%
51.5%
2,079
25
4,461
54
2.1:1
2,263
2,029
635
2,664
3.2:1
35,387
188,851
38,263
49,451
114,759
74,092
268,510
5,263
273,773
264,301
9,472
3,105
6,367
3,765
2,602
9,348
0.28
9.9%
96.5%
2,602
3,127
3,765
9,494
27,811
1,916
30
4,311
52
2.3:1
2,263
1,810
529
2,339
3.4:1
34,414
182,411
31,770
56,451
111,238
71,173
244,396
8,045
252,441
246,466
5,975
4,196
1,779
692
1,087
9,279
11.8%
97.6%
1,087
4,344
692
6,123
26,418
32,541
1,780
22
3,668
51
2.1:1
2,285
1,741
507
2,248
3.4:1
$
$
$
$
$
$ 94
$
$ 0.12
$
$
0.92
Year ended December 31,
2004
2003
$
2002
$
2001
$
2000
$
1999
$
$ 1.15
$
$
$
$
$ 37,305
$ 1.02
$ 3.99
$
$
3.52
7.93
1.4%
3.6%
47.2%
$
$ 0.66
$ 3.51
$ 3.87
$
7.67
0.6%
1.5%
48.0%
$ 32,356
$ 0.60
$ 3.49
$
$
3.15
7.56
0.1%
0.1%
51.7%
$ 34,461
$ 1.70
$
3.68
$ 1.37
$
7.49
5.7%
13.0%
50.3%
December 31,
2004
2003
2002
2001
2000
1999
41,739
189,919
30,357
65,660
119,938
69,981
218,593
7,992
226,585
220,940
5,645
5,490
155
61
9,260
0.01
31.6%
97.4%
94
5,408
61
5,563
26,793
1,738
23
3,400
43
2.0:1
2,103
1,685
488
2,173
3.5:1
39,449
182,040
28,277
64,453
111,932
70,108
272
166,363
150,517
15,846
1,633
14,213
5,571
8,642
9,354
14.4%
90.5%
8,642
1,656
5,571
15,869
18,592
1,713
23
3,525
46
2.1:1
2,316
1,637
469
2,106
3.5:1
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of base revenue.
**Funded debt to total capital as reported above is based upon net debt (both current and long-term, less cash) divided by total debt plus stockholders’ equity.
Ten Year Statistical History
2007
$
2006
$
2005
$
Balance Sheet Statistics
(Dollars in thousands)
Current assets ..................................................................................
$
$
$
2008
2007
2006
2005
$
Total assets ......................................................................................
Current liabilities .............................................................................
Long-term debt – less current maturities .........................................
Total liabilities .................................................................................
Total stockholders’ equity ................................................................
Income Statement Statistics
(Dollars in thousands - except per share amounts)
Base revenue ...................................................................................
$
$
$
$
$
$
$
$
$
Fuel surcharge revenue ....................................................................
Total revenue ...................................................................................
Operating expenses .........................................................................
Operating income ............................................................................
Other expenses, net .........................................................................
Income before income taxes ............................................................
Income taxes ...................................................................................
Net income ......................................................................................
Diluted shares outstanding (in thousands) ......................................
Diluted earnings per share ..............................................................
Revenue, before fuel surcharge – year-to-year change ........................
Operating ratio* ...............................................................................
Financial Statistics
(Dollars in thousands - except per share amounts)
Net income (“Earnings”) .................................................................
Interest ............................................................................................
Income taxes (“Taxes”) ...................................................................
Earnings before interest and taxes (“EBIT”) ...................................
Depreciation and amortization .........................................................
Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
EBIT per diluted share .....................................................................
EBITDA per diluted share ................................................................
Operating cash flow per diluted share .............................................
Stockholders’ equity per diluted share .............................................
Return on average assets .................................................................
Return on average equity .................................................................
Funded debt to total capital** ..........................................................
Operating Statistics
(All numbers include owner-operators except as noted “Company”)
Total tractors in service (end of period) ..........................................
Average months in service – Company tractors ................................
Total Company trailers (end of period) ...........................................
Average months in service – Company trailers .................................
Trailer to tractor ratio ......................................................................
Average miles per tractor per week .................................................
Drivers (excluding students in training) ..........................................
Average non-drivers .........................................................................
Total drivers and non-drivers ...........................................................
Driver to non-driver ratio ................................................................
51,038
332,268
52,538
79,364
185,495
146,773
2008
397,557
138,063
535,620
523,473
12,147
4,782
7,365
4,225
3,140
10,238
0.31
1.6%
96.9%
3,140
4,643
4,225
12,008
50,919
62,927
1.17
6.15
6.43
14.34
0.9%
2.2%
39.3%
2,392
7,351
24
51
3.1:1
2,216
2,506
747
3,253
3.4:1
65,807
332,938
66,701
70,212
189,747
143,191
391,188
90,921
482,109
473,799
8,310
5,152
3,158
3,018
140
10,651
0.01
1.5%
97.9%
140
5,130
3,018
8,288
49,093
57,381
0.78
5.37
13.40
0.0%
0.1%
36.8%
2,557
25
7,024
42
2.7:1
2,236
2,582
808
3,390
3.2:1
$
$
$
$
$
$
2008
2007
$
2006
$
2005
$
$
$
$
$
$
5.48
$
$
$
$
$
$
$
$
$
$
2008
2007
2006
2005
63,804
339,494
66,588
67,817
179,936
159,558
385,301
80,317
465,618
439,214
26,404
4,058
22,346
9,905
12,441
11,561
1.08
2.3%
93.1%
12,441
4,192
9,905
26,538
46,739
73,277
2.30
6.34
6.60
13.80
3.8%
8.1%
34.6%
2,571
21
6,770
36
2.6:1
2,186
2,497
840
3,337
3.0:1
60,791
308,079
53,616
67,589
158,246
149,833
376,629
63,074
439,703
406,206
33,497
4,810
28,687
13,119
15,568
10,328
1.51
12.1%
91.1%
15,568
4,829
13,119
33,516
41,890
75,406
3.25
7.30
5.48
14.51
5.2%
13.2%
36.9%
2,414
19
5,542
38
2.3:1
2,325
2,474
730
3,204
3.4:1
Company’s history, we designed a freight network to maximize yield,
which we define as the optimal combination of tractor utilization, pricing,
empty miles and variable operating costs. We now know the specific
traffic lanes in which we want to move freight, and the required volumes
and prices necessary to maximize yield. We believe that bringing this
defined freight network to life through the following initiatives launched
during 2008 will allow us to achieve our long-term strategic objectives.
initiative laid the foundation for the development of our defined freight
network. While yield is not driven exclusively by pricing, we were able
to increase our Trucking base revenue per total mile by 1.9% during
2008. We also reduced the tractor fleet we had in service by
approximately 250 tractors during the fourth quarter to help us maintain
that pricing level. We are committed to managing our freight operations
to maximize yield.
Project Velocity. The marketplace for truckload freight has changed.
The proliferation of retail distribution centers and the growing rail
intermodal market share in long-haul lanes have decreased truckload
freight volume in those long-haul lanes. The marketplace is forcing
truckload carriers into shorter-haul markets, but operational execution
in those markets is very challenging and requires tremendous intensity
and discipline. Though we are targeting network yield (not length-of-
haul), we recognize that our model will be shorter-haul biased simply
because that market is where the more profitable freight volumes will be
found. Thus, it was imperative for us to prepare the Company to execute
in the shorter-haul environment. We define “Velocity” as the measure of
the number of times we load our fleet each week. Our Project Velocity
was designed to maximize that number, and it produced encouraging
results. During 2008, we improved our velocity 8.6% while shortening
our length-of-haul 8.4% from 784 miles to 718 miles, and we did it
while improving our empty mile percentage by 40 basis points from
11.1% to 10.7%.
Yield Management. The concept of freight network yield was foreign
to us prior to 2008, so it was necessary to launch an initiative to educate
our people about yield and to start incorporating it into our business
processes and performance measurements. Our Yield Management
Cost Discipline. USA Truck has long been an industry leader in
operating cost per mile. However, cost is such a critical component for
network yield that we revisited our entire cost structure during 2008. We
now manage costs weekly, and we have divided it into two buckets:
variable costs per mile and total fixed costs. Our primary goal is obviously
to keep costs as low as possible, but we also want to improve the flexibility
within the cost structure so it can be quickly adjusted as economic
conditions change. For example, we reduced our driver pay scale for
new-hires twice last year, which resulted in a significant cost reduction in
2008 compared to 2007. We have also devoted considerable attention to
fuel costs, to gross margins in our asset-light service offerings and to an
assortment of fixed costs including non-driver wages (which we reduced
considerably throughout the year as we trimmed non-driver headcount by
approximately 19%).
War on Accidents. Another area where we see potential for
meaningful cost reduction is insurance and claims. Our approach to
safety is simple; hire better drivers, train them better and hold them
accountable for performance. There are many moving parts to this
initiative, but the basic formula is working. During 2008, our accident
frequency declined approximately 17.1 %, leading to a 70 basis point
reduction in overall insurance and claims expense.
(continues)
Bringing our freight network design to life and successfully
implementing all of the above six initiatives will be quite an
accomplishment, but it will not be enough for us to consistently grow
our earnings or to produce returns on capital exceeding our cost of
capital through the ups and downs of our cyclical industry. Nor will
those initiatives provide the integrated bundle of services that our
customers will demand.
That is why our plan calls for more than just asset-based
truckload services. That is why we have launched two asset-light
initiatives through our Strategic Capacity Solutions operating
segment that are designed to boost our returns on capital, to
provide another source of sustainable earnings growth and to
offer our customers flexible capacity for their transportation
needs in a variety of service and cost levels.
Rail Intermodal Service Launch. In late December 2007, we
moved our first load of rail intermodal freight. During 2008, we
produced base revenue of $4.6 million, more than doubling our goal
of $2.0 million for 2008. We remain on the steep slope of the
learning curve, but we are committed to further incorporating
intermodal into our trucking operations to make the integration as
seamless as possible for our customers as 2009 unfolds.
Brokerage Service Growth. We grew our brokerage business
86.8% to $15.3 million. Despite falling short of our 2008 goal of
$18.0 million, we continue to gain more knowledge of the brokerage
business and we are incorporating that knowledge into our brokerage
model, which we intend to expand in 2009.
Our new strategic direction, objectives and supporting initiatives are part
of a long-term strategic plan that we call VEVA (Vision for Economic
Value Added). VEVA is a detailed, quarter-by-quarter operating plan
designed to expand our Common Stock valuation multiples to the mean
of our truckload peer group’s by the end of 2010 (Phase I) by earning a
10% return on capital and simultaneously driving our weighted average
cost of capital below 10%. By 2013, VEVA calls for the expansion of our
Common Stock valuation multiples beyond our truckload peer group’s
mean by sustaining or improving our capital management targets and
leveraging a more diversified business model to produce a 10%
compounded annual earnings growth rate (Phase II).
EXECUTION. VEVA is clearly an ambitious plan. We subscribe
to the old adage that “the devil is in the details.” While the plan is
aggressive, we believe that it is achievable. Our success depends on
our ability to execute.
Strategic plans do not execute; people do. We have painstakingly
identified the key performance indicators (KPI) for VEVA, set targets
for each of them and assigned ownership to individual employees who
have accepted responsibility for them and are held accountable for
results daily. Executive management is providing resources, removing
barriers and working closely with middle management and front-line
personnel to ensure that those targets are met. While the returns on
capital and earnings growth goals are ambitious, the individual KPI
targets are reasonable. By focusing on those individual KPI targets, we
believe that we can reach our long-term strategic objectives.
Economic factors will play a big role in determining when we reach
those objectives. The last quarter of 2008 and into the early months
of 2009 was the most difficult operating environment that we have ever
seen. Not only have the challenging conditions made it difficult to
make the changes to our operating model that VEVA demands, but it
has also consumed our time and resources because of the hands-on
management required to navigate through it.
The economic recession could delay the time frames we have set for
VEVA, but it has not changed our strategic direction. We are pleased
with the progress we have made operationally and culturally, and we
believe that our strong balance sheet and cash flow will serve us well
during these turbulent times.
In 2009, we will work hard to execute the VEVA plan and to stay
focused on our vision for USA Truck. Ultimately, we want to be the
Company that everyone wants to work for, the transportation Company
that customers call when service matters and the stock that investors
want to own.
As always, thank you for your continued support.
Robert M. Powell
Chairman of the Board
Clifton R. Beckham
President and Chief
Executive Officer
Clifton R. Beckham
President, Chief Executive Officer
and Director
Garry R. Lewis
Executive Vice President,
Chief Operating Officer
Darron R. Ming
Vice President, Finance,
Chief Financial Officer
and Treasurer
Directors and Officers
Robert M. Powell
Chairman of the Board
Richard B. Beauchamp
Director (General Partner, Norris Taylor
& Company, Accounting Firm)
Terry A. Elliott
Director (Chief Financial Officer,
Safe Foods Corporation,
Food Safety Company)
William H. Hanna
Director (President, Hanna Oil
and Gas, Oil and Gas Exploration)
Joe D. Powers
Director (Retired Chairman and
CEO of Merchants National
Bank of Fort Smith, Arkansas
and Former Chairman of the
Advisory Board of Regions Bank
of Fort Smith, Arkansas)
James B. Speed
Director (Retired Chairman of
the Board, USA Truck, Inc.)
M. Eric Brown
Senior Vice President, Operations
Michael R. Weindel, Jr.
Vice President, People
J. Rodney Mills
Vice President, Safety,
General Counsel
and Secretary
Craig S. Shelly
Vice President,
Corporate Strategy
Rick A. Davis
Vice President, Information Systems
B. Chad Van Kooten
Vice President, Sales
D. Burton Weis
Vice President, Human Resources
Corporate Information
This Annual Report and the statements contained herein are submitted for the general information of the stockholders of the Company
and are not intended to induce any sale or purchase of securities or to be used in connection therewith.
Corporate Headquarters
3200 Industrial Park Road
Van Buren, Arkansas 72956
Telephone: (479) 471-2500
Common Stock
Traded on the NASDAQ Global Select
Market under the Symbol: USAK
Annual Meeting
May 6, 2009
10:00 a.m. local time
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Web Site
www.usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2008 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 J. Rodney Mills, Secretary of the Company, at the Company’s executive offices, 3200 Industrial Park
Road, Van Buren, Arkansas 72956. The written request must state that as of March 9, 2009, the person making the request was a
beneficial owner of shares of the Common Stock of the Company.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE OF
1934
For the fiscal year ended December 31, 2008
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
[ ]
ACT OF 1934
For the transition period from __________ to __________
OR
0-19858
(Commission file number)
USA Truck, Inc.
(Exact name of registrant as specified in its charter)
71-0556971
Delaware
(I.R.S. Employer Identification No.)
(State or other jurisdiction of incorporation)
3200 Industrial Park Road
Van Buren, Arkansas
(Address of principal executive offices)
72956
(Zip Code)
(479) 471-2500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Common Stock, $0.01 Par Value
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer____ Accelerated Filer __X__ Non-Accelerated Filer _____ Smaller Reporting Company____
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
The aggregate market value of the voting stock held by nonaffiliates of the registrant computed by reference to the price at which the
common equity was last sold as of the last business day of the registrant’s most recently completed second quarter was $90,191,521 (in making
this calculation the registrant has assumed, without admitting for any purpose, that all executive officers, directors and affiliated holders of more
than 10% of the registrant’s outstanding common stock, and no other persons, are affiliates).
The number of shares outstanding of the registrant’s Common Stock, par value $0.01, as of February 23, 2009 is 10,414,139.
DOCUMENTS INCORPORATED BY REFERENCE
Document
Portions of the Proxy Statement to be sent to stockholders
in connection with 2009 Annual Meeting
Part of Form 10-K into which the Document is Incorporated
Part III
USA TRUCK, INC.
TABLE OF CONTENTS
Item
Caption
PART I
Page
1. Business ...............................................................................................................................
1A. Risk Factors .........................................................................................................................
1B. Unresolved Staff Comments................................................................................................
2. Properties .............................................................................................................................
3. Legal Proceedings ...............................................................................................................
4. Submission of Matters to a Vote of Security Holders .........................................................
PART II
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities ............................................................................................
6. Selected Financial Data .......................................................................................................
7.
Management’s Discussion and Analysis of Financial Condition and Results of
Operations ...........................................................................................................................
7A. Quantitative and Qualitative Disclosure about Market Risk ...............................................
8. Financial Statements and Supplementary Data ...................................................................
9.
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure ............................................................................................................................
9A. Controls and Procedures ......................................................................................................
9B. Other Information ................................................................................................................
PART III
10. Directors, Executive Officers and Corporate Governance ..................................................
11. Executive Compensation .....................................................................................................
12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ............................................................................................................
13. Certain Relationships and Related Transactions and Director Independence .....................
14. Principal Accountant Fees and Services ..............................................................................
15. Exhibits and Financial Statement Schedules .......................................................................
Signatures ............................................................................................................................
PART IV
2
9
14
14
15
15
16
18
19
32
33
54
54
56
56
56
56
56
56
57
58
PART I
Item 1. BUSINESS
We are a dry van truckload carrier who transports general commodities throughout the continental United States
and into and out of Mexico and portions of Canada. For shipments into Mexico, we transfer our trailers to tractors
operated by Mexican trucking companies at the facility in Laredo, Texas, which is operated by the Company’s wholly-
owned subsidiary. We transport many types of freight and provide complementary third party logistics and freight
brokerage services for a diverse customer base. We provide our services for such industries as industrial machinery
and equipment, rubber and plastics, retail stores, paper products, durable consumer goods, metals, electronics and
chemicals.
Our truckload freight services, which we conduct through two divisions that comprise the Trucking segment of our
operations, consist of transportation services in which we use equipment that we own or owner-operator equipment for
the pick-up and delivery of freight. Our General Freight division transports freight over irregular routes as a short- to
medium-haul common carrier. Our Dedicated Freight division provides similar transportation services, but pursuant to
agreements whereby we make our equipment available to a specific customer for shipments over particular routes at
specified times. During December 2007, we began offering and including Trailer-on-Flat-Car Intermodal service
offering as part of our truckload freight services revenue to the extent Company equipment is used in providing the
service. At December 31, 2008, our Trucking fleet consisted of 2,392 tractors and 7,351 trailers and our average
length-of-haul was 718 miles.
Through our Freight Brokerage division and our Container-on-Flat-Car Intermodal service offering, which
comprise our Strategic Capacity Solutions operating segment, we provide services such as transportation scheduling,
routing and mode selection, which typically do not involve the use of our equipment or owner-operator equipment. We
have traditionally provided these services primarily as supplemental services to customers who have also engaged us to
provide truckload freight services.
For reporting purposes, we aggregate the financial data for our Trucking operating segment and our Strategic
Capacity Solutions operating segment. The discussion of our business in this Item 1 focuses primarily on Trucking,
which is our dominant segment, producing 95.8% of our total base revenue in 2008.
We were incorporated in Delaware in September 1986 as a wholly owned subsidiary of ABF Freight System, Inc.
and the company was purchased by management in December 1988. The initial public offering of our common stock
was completed in March 1992.
Our principal offices are located at 3200 Industrial Park Road, Van Buren, Arkansas 72956, and our telephone
number is (479) 471-2500.
This Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and all
other reports filed with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) can be obtained free of charge by visiting our
website at http://www.usa-truck.com. Information contained on our website is not incorporated into this Annual Report
on Form 10-K, and you should not consider information contained on our website to be part of this report.
Additionally, you may read all of the materials that we file with the SEC by visiting the SEC’s Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. If you would like information about the operation of the Public
Reference Room, you may call the SEC at 1-800-SEC-0330. You may also visit the SEC’s website at www.sec.gov.
This site contains reports, proxy and information statements, and other information regarding our company and other
companies that file electronically with the SEC.
Strategic Objectives
We have studied our business carefully over the past year to determine the best path to narrowing the current and
historic disparity between our stock’s valuation and the stocks of our peers. Going forward, we will pursue three
primary strategic objectives.
(cid:2) More closely manage our financial returns. Our goal is to produce a return on capital that meets or exceeds
10% while simultaneously managing our cost of capital below that 10% threshold, thus adding economic value
for our shareholders. Over the years, we have consistently injected capital into our business but have not
generally been satisfied with the return on that capital. We are now utilizing our own internal cost of capital as
the basis for establishing internal rates of return objectives on various business activities.
2
(cid:2)
(cid:2)
Improve earnings consistency relative to the Standard & Poor’s 500. Since our initial public stock offering,
our earnings per share results have been inconsistent, which we believe has contributed to a disparity in
valuations between our common stock and that of our peers. The inconsistency is caused by many factors,
including unpredictable insurance and claims costs and our relatively low outstanding share count. However,
the most fundamental factor is the volatility inherent in our traditional business model.
Our traditional model, which was primarily medium length-of-haul, produced industry-leading operating
margins when freight demand was plentiful, but we struggled under that model when freight demand was
scarce. A significant majority of our revenue is now derived from a shorter length-of-haul, as we knew we
could not meet our objectives unless we made some changes to that business model. These business model
changes are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Results of Operations - Executive Overview.”
While our revenue production has been volatile throughout the economic cycles, our cost discipline has not.
We are consistently one of the lowest cost operators in the truckload industry. Maintaining our cost discipline
will be crucial if we are to achieve our objective of improved earnings consistency.
Position USA Truck for long-term revenue growth. Our objective is to create enough operating margin to
consistently produce a 10% return on capital. Once we consistently produce that rate of return, profitable top-
line revenue growth will again be our primary vehicle to grow shareholder value. We are laying the
foundations to position ourselves for future growth opportunities.
Operating Objectives
Our operating strategy includes the following important elements:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
(cid:2)
Provide superior service to shippers. Our principal competitive strength is our ability and commitment to
consistently provide superior service to our customers. Although price is a primary concern to all shippers,
many of our customers are high-volume shippers that require a flexible and dependable source of motor carrier
service. These customers often have specific requirements, including pick-up or delivery within narrow time
windows or real-time information about shipment status. Our strategy is to provide a premium service to meet
these needs and to charge competitive rates for that service. Key elements of our premium service include the
following:
(cid:2) We are committed to consistent on-time performance.
(cid:2) We provide dispatching and maintenance services twenty-four hours a day, seven days a week.
(cid:2) We maintain trailer pools at strategic locations to minimize the time it takes to respond to a customer’s
order. We also provide extra trailers to high-volume shippers for loading and unloading at their
convenience.
(cid:2) We have strict hiring and performance standards for our drivers and emphasize safety, customer
satisfaction and on-time service in our training.
Control discipline. Our goal is to achieve an operating ratio that will allow us to earn sufficient returns on
investment. To attain that goal, we are committed to a thorough cost-control system using benchmarks.
Earn Premium Rates. We are committed to earning premium rates that are commensurate with our superior
service. To achieve the rates we desire, we utilize technology, leverage customer relationships and our
premium service reputation and continually upgrade our freight mix by eliminating or repricing the least
profitable lanes. Although the current economic environment is challenging, we are committed to earning
premium rates.
Adhere to disciplined equipment replacement cycles and maintenance schedules. We believe that late model,
well-maintained revenue equipment is essential to financial performance, customer service, driver satisfaction
and a positive public image. Our policy is to operate our tractors for 36 to 42 months and our trailers for 84 to
120 months before replacement, subject to temporary changes in response to market conditions. We believe
that replacing equipment at those intervals generally yields the most economically feasible balance of
maintenance costs and sale or trade-in values. We also perform preventive maintenance on our tractor and
trailer fleets at regular intervals to improve their sale or trade-in values, to maintain driver satisfaction and to
reduce long-term maintenance costs and customer service failures.
Continue investing in new technology. We continually invest in new and upgraded technology to provide the
most efficient service possible to our customers. We provide electronic data interchange arrangements with
3
larger customers, real-time shipment status information, two-way satellite-based messaging and position-
locating equipment in all of our tractors, operational software packages designed to enhance service and
economic efficiencies and an interactive website that provides load tendering and shipment tracing capabilities
to our customers. We use a number of computing platforms to operate software packages such as satellite
communications, load matching and optical document storage. Historically, we have developed many of our
software applications internally. We have recently begun to implement new hardware and software systems
purchased from third-party vendors for a number of our key processes. We believe the new systems should
both increase the efficiency of our operations and require less time from internal technical personnel.
(cid:2) Develop our management team. We are committed to developing a management team capable of leading our
company well into the future. We have invested time and resources to cultivate talent within our organization
and believe that we have a management team in place to guide our business for the long term. Our
management personnel are partially compensated with performance-based incentives and equity awards
designed to provide managers with a long-term equity interest in the company.
Industry and Competition
The trucking industry includes both private fleets and for-hire carriers. Private fleets consist of trucks owned and
operated by shippers that move their own goods. For-hire carriers include both truckload and less-than-truckload
operations. Truckload carriers dedicate an entire trailer to one customer from origin to destination. Less-than-
truckload carriers pick up multiple shipments from multiple shippers on a single truck and then route the goods through
terminals or service centers, where freight may be transferred to other trucks with similar destinations for delivery.
Truckload carriers typically transport shipments weighing more than 10,000 pounds, while less-than-truckload carriers
typically transport shipments weighing less than 10,000 pounds.
We operate primarily in the highly fragmented for-hire truckload segment of the market. The for-hire segment is
highly competitive and includes thousands of carriers, none of which dominates the market. This segment is
characterized by many small carriers having revenues of less than $1 million per year and relatively few carriers with
revenues exceeding $100 million per year. Measured by annual revenue, the 42 largest truckload carriers accounted for
approximately $29.4 billion, or approximately 21.4%, of the for-hire truckload market in 2007. We were ranked
number 16 of the largest truckload carriers based on total revenue for 2007, according to Transport Topics. The
industry continues to undergo consolidation. In addition, the recent challenging economic times have contributed to the
failure of many trucking companies and made entry into the industry more difficult.
We compete primarily with other truckload carriers, shipper-owned fleets and, to a lesser extent, railroads and less-
than-truckload carriers. A number of truckload carriers have greater financial resources, own more revenue equipment
and carry a larger volume of freight than we do. We also compete with truckload and less-than-truckload carriers for
qualified drivers.
The principal means of competition in the truckload segment of the industry are service and price, with rate
discounting being particularly intense during economic downturns. Although we compete more on the basis of service
rather than rates, rate discounting continues to be a factor in obtaining and retaining business. Furthermore, a depressed
economy tends to increase both price and service competition from alternative modes such as less-than-truckload
carriers, as well as intermodal carriers. We believe that successful truckload carriers are likely to grow primarily by
offering additional services to their customers and acquiring greater market share and, to a lesser extent, through an
increase in the size of the market.
Marketing and Sales
We focus the majority of our marketing efforts on customers with premium service requirements and heavy
shipping needs within our primary operating areas. This permits us to position available equipment strategically so that
we can be more responsive to customer needs. It also helps us achieve premium rates and develop long-term, service-
oriented relationships. Our employees have a thorough understanding of the needs of shippers in many industries.
These factors allow us to provide reliable, timely service to our customers. For 2008, approximately 97.4% of our total
revenue was derived from customers that were customers before 2008, and we have provided services to our top 10
customers for an average of approximately14 years. We provided service to 859 customers in 2008, and approximately
33.3 % of our total revenue for 2008 was derived from Standard & Poor’s 500 companies.
4
The table below shows the percentage of our total revenue attributable to our top ten and top five customers and
largest customer for the periods indicated.
Top 10 customers ............................................................
Top 5 customers ...............................................................
Largest customer ..............................................................
32%
21%
6%
34%
22%
6%
36%
23%
8%
Year Ended December 31,
2006
2007
2008
Our Sales Department solicits and responds to customer orders and maintains close customer contact regarding
service requirements and rates. We typically establish rates through individual negotiations with customers. For our
Dedicated Freight services, rates are fixed under contracts tailored to the specific needs of shippers.
While we prefer direct relationships with our customers, we recognize that obtaining shipments through other
providers of transportation or logistics services is a significant marketing opportunity. Securing freight through a third
party enables us to provide services for high-volume shippers to which we might not otherwise have access because
many of them require their carriers to conduct business with their designated third party logistics provider.
We require customers to have credit approval before dispatch. We bill customers at or shortly after delivery and,
during 2008, receivables collection averaged approximately 30 days from the billing date.
Operations
While we provide our services throughout the continental United States, we conduct most of our freight transport
operations east of the Rocky Mountains. The following table shows our total company average length-of-haul and the
average length-of-haul for the two operating divisions in our Trucking segment, in miles, for the periods indicated.
Total company ..............................................................
Trucking divisions:
Year Ended December 31,
2006
2007
2008
837
718
784
General Freight .........................................................
Dedicated Freight .....................................................
769
406
827
493
882
562
Our Operations Department consists primarily of our fleet managers and freight coordinators. Each fleet manager
supervises approximately 35 to 55 drivers in our various divisions and our fleet managers are the primary contacts with
our drivers. They monitor the location of equipment and direct its movement in the safest and most efficient manner
practicable. Freight coordinators assign all available units and loads in a manner that maximizes profit and minimizes
costs. The Operations Department focuses on achieving continual improvement in the areas of customer service,
equipment utilization, driver retention and safety.
Safety
We are committed to continually improving our safety performance. The Safety Department’s mission is to more
sharply focus our efforts to create the safest possible environment for our drivers and the motoring public, provide the
safest possible service to our customers, reduce insurance and claims costs and foster a top-to-bottom culture of safety
throughout the company.
We emphasize safe work habits as a core value throughout our organization, and we engage in proactive training
and education relating to safety concepts, processes and procedures for all employees. The evaluation of an applicant’s
safety record is one of several essential criteria we use to hire drivers. We conduct pre-employment, random,
reasonable suspicion and post-accident alcohol and substance abuse testing in accordance with the U.S. Department of
Transportation regulations.
Safety training for new drivers begins in orientation, when newly hired employees are taught safe driving and work
techniques that emphasize the importance of our commitment to safety. Upon completion of orientation, new student
drivers are required to undergo on-the-road training for four to six weeks with experienced commercial motor vehicle
drivers who have been selected for their professionalism and commitment to safety and who are trained to communicate
safe driving techniques to our new drivers. New drivers must successfully complete the training period and pass a road
test before being assigned to their own tractor. We also offer a Driver Skills Development Course, with one-on-one
training tailored to assist drivers in developing specific skills. And, all Company drivers participate in the Smith
5
System® training program. The Smith System® is a nationally recognized training program for professional drivers that
focuses on collision prevention through hands-on training.
In addition to our ongoing efforts to promote safety concepts company-wide, we conduct two “live” safety training
classes each year and provide other monthly training courses designed to keep our drivers up-to-date on safety topics
and to reinforce and advance professional driving skills. Additionally, the Safety Department conducts safety meetings
with dispatch personnel to address specific safety-related issues and concerns.
The Safety Department also conducts “safety blitzes” at our high-traffic terminals, in addition to the regular safety
meetings. These periodic blitzes are designed to keep safety at the forefront for our drivers and other employees, and
supplement our regular meetings by targeting specific safety issues such as proper backing techniques, DOT
inspections or mirror check stations and require active participation from the drivers.
We also have in place a corrective action program designed to evaluate each driver’s safety record to help
determine whether a driver needs additional training and whether the driver is eligible for continued employment. We
have a company-wide communication network designed to facilitate rapid response to safety issues and a driver
counseling and retraining system to assist drivers who need additional assistance or training.
In 2008, we established an economic awards program to reward those drivers who have achieved specified safety
milestones. Drivers are recognized at the President’s Million Mile Banquet and outstanding drivers are also recognized
in company-wide publications and media releases announcing the driver’s achievements. Driver safety achievements
are noted with special uniform patches, caps and door decals for their tractors that identify the driver as having reached
a safety milestone.
We maintain a modern fleet of tractors and trailers. This factor, in conjunction with the regular safety inspections
that our drivers and our Maintenance Department conduct on our equipment, helps to ensure that the equipment is well-
maintained and safe. Our tractors are equipped with anti-lock braking systems and electronic governing equipment that
limits the maximum speed of our tractors to no more than 63 miles per hour. In addition, the tractors we added in 2007
and 2008 are equipped with automatic transmissions and stability control systems, which will assist in further reducing
the potential for accidents.
Insurance and Claims
The primary risks for which we obtain insurance are cargo loss and damage, personal injury, property damage,
workers’ compensation and employee medical claims. We self-insure for a portion of claims exposure in each of these
areas.
We maintain insurance above the amounts for which we self-insure with licensed insurance carriers. Although we
believe the aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that one or
more claims could exceed our aggregate coverage limits. Insurance carriers have raised premiums for many businesses,
including trucking companies. As a result, our insurance and claims expense could increase, or we could raise our self-
insured retention when our policies are renewed. If these expenses increase, if we experience a claim in excess of our
coverage limits, or if we experience a claim for which coverage is not provided, our results of operations and financial
condition could be materially and adversely affected.
Drivers and Other Personnel
Driver recruitment and retention are vital to success in our industry. Recruiting drivers is challenging because our
standards are high and enrollment in driving schools has been declining. Retention is difficult because of wage and job
fulfillment considerations. Driver turnover, especially in the early months of employment, is a significant problem in
our industry, and the competition for qualified drivers is intense. Although we have had significant driver turnover
during certain periods in the past, we have been able to attract and retain a sufficient number of qualified drivers to
support our operations. To attract and retain drivers we must continue to provide safe, attractive and comfortable
equipment, direct access to management and competitive wages and benefits designed to encourage longer-term
employment.
Drivers’ pay is calculated primarily on the basis of miles driven, and it increases with tenure. We believe our
current pay scale is competitive with industry peers.
On February 23, 2009, we had approximately 3,025 employees, including approximately 2,400 drivers. We do not
have any employees represented by a collective bargaining unit. In the opinion of management, our relationship with
our employees is good.
6
Revenue Equipment and Maintenance
Our policy is to replace most tractors within 36 to 42 months and most trailers within 84 to 120 months from the
date of purchase. Because maintenance costs increase as equipment ages, we believe these trade intervals allow us to
control our maintenance costs and to economically balance those costs with the equipment’s expected sale or trade
values. Such trade intervals also permit us to maintain substantial warranty coverage throughout our period of
ownership.
We make equipment purchasing and replacement decisions on the basis of various factors, including new
equipment prices, the used equipment market, demand for our freight services, prevailing interest rates, technological
improvements, regulatory changes, fuel efficiency, durability of the equipment, equipment specifications and the
availability of drivers. Therefore, depending on the circumstances, we may accelerate or delay the acquisition and
disposition of our tractors or trailers from time to time. In that regard, in an effort to protect our pricing yield and
equipment utilization, during the fourth quarter of 2008, we reduced the number of Company-owned tractors we had in
service by approximately 250 tractors or 10.3%. The reduction targeted those tractors with the highest miles and
resulted in an impairment charge of approximately $0.03 per share as their book value had to be adjusted down to their
market value. We plan to dispose of roughly half of those high-mileage tractors during the first half of 2009. In
conjunction with our strategic objective of positioning the Company for long-term revenue growth, we will add
equipment as the freight market and driver availability dictate. Generally, our primary business strategy of earning
greater returns on capital requires that we improve the profitability of our existing tractors before we consider adding to
the fleet size materially.
The following table shows the number of units and average age of revenue equipment that we owned or operated
under capital leases as of the indicated dates.
Year Ended December 31,
2006
2007
2008
Tractors:
Acquired ............................................................................
786
Disposed ............................................................................
786
End of period total ............................................................ 2,499
Average age at end of period (in months) ....................
24
Trailers:
Acquired ............................................................................
450
Disposed ............................................................................
123
End of period total ............................................................ 7,351
Average age at end of period (in months) ....................
51
442
495
2,499
25
583
329
7,024
42
818
668
2,552
21
1,642
414
6,770
36
During the fourth quarter of 2008, we removed from service approximately 250 Company-owned tractors. The
reduction in the Company-owned fleet targeted those tractors with the highest miles and resulted in an impairment
charge in the amount of approximately $0.5 million relating to certain of those tractors. This write down, which
adjusted the book value of the tractors down to their market value, is included in Other operating expenses in the
accompanying Consolidated Statements of Income.
To simplify driver and mechanic training, control the cost of spare parts and tire inventory and provide for a more
efficient vehicle maintenance program, we buy tractors and trailers manufactured to our specifications. In deciding
which equipment to buy, we consider a number of factors, including safety, fuel economy, expected resale value and
driver comfort. We have a strict preventive maintenance program designed to minimize equipment downtime and
enhance sale or trade-in values.
We finance revenue equipment purchases through our Senior Credit Facility, capital lease-purchase arrangements,
the proceeds from sales or trades of used equipment and cash flows from operations. Substantially all of our tractors
and trailers are pledged to secure our obligations under financing arrangements.
In addition to tractors that we own, we contract with owner-operators for the use of their tractors and drivers in our
operations. During the third quarter of 2007, we introduced a lease-purchase program to drivers interested in owning
their own equipment and becoming independent owner-operators. The program offers qualified drivers the opportunity
to purchase their own tractors through a third party financing program. The drivers may purchase tractors directly from
us or from outside sources. At December 31, 2008, 151 owner-operator tractors were under contract with us, which
included 32 lease-purchase operators.
Beginning January 1, 2007, all newly manufactured heavy-duty truck engines were required to comply with new,
more stringent emission standards mandated by the Environmental Protection Agency. To address the risk of buying
7
new engines without adequate internal testing and to delay the cost impact of these new emission standards, we
accelerated our revenue equipment acquisition program and trade intervals before January 1, 2007. In addition,
approximately 87% of the tractors we purchased in 2007 were equipped with engines produced prior to January 2007.
In 2010, new federal emissions requirements will become effective for all heavy-duty engines. These new requirements
further limit the levels of specified emissions from new heavy-duty engines manufactured in or after 2010, and will
likely result in cost increases for both acquiring and operating these engines. In order to comply with the standards, new
emissions control technologies, such as selective catalytic reduction strategies and advanced exhaust gas recirculation
systems, are being utilized. Based on current and expected freight demands, capacity already in the market and fuel and
performance expectations of the new engines, we do not believe that an accelerated purchase program of tractors is
warranted. Our intentions for 2009 purchases are to only replace tractors that meet our existing trade schedule.
Technology
We maintain a data center using several different computing platforms ranging from personal computers to an IBM
mainframe system. We have developed the majority of our software applications internally, including payroll, billing,
dispatch, accounting and maintenance programs. In order to enhance the service we provide our customers, we
determined that our mainframe software applications needed to be replaced. Accordingly, over the next three years we
will replace those applications with off-the-shelf, server-based products. Our computer systems are monitored 24 hours
a day by experienced information services professionals. While we employ many preventive measures, including daily
back-up of our information system processes, we do not currently have a comprehensive catastrophic disaster recovery
plan for our information systems.
The technology we use in our business enhances the efficiency of all aspects of our operations and enables us to
consistently deliver superior service to our customers. This technology includes a Qualcomm satellite-based equipment
tracking and driver communication system, which allows us to closely monitor the location of all our tractors and to
communicate with our drivers in real time. This enables us to efficiently dispatch drivers in response to customers’
requests, to provide real-time information to our customers about the status of their shipments and to provide
documentation supporting our assessorial charges, which are charges to customers for things such as loading, unloading
or delays. We have also implemented load optimization software, which is designed to match available equipment with
shipments in a way that best satisfies a number of criteria including empty miles, the driver’s available hours of service
and home-time needs. This licensed software assists us in planning for transfers of loaded trailers between our tractors,
allowing us to further enhance efficient allocation of our equipment, improve customer service and take full advantage
of our drivers’ available hours of service.
Regulation
Our operations are regulated and licensed by various government agencies, including the Department of
Transportation (“DOT”). Our Canadian business activities are subject to similar requirements imposed by the laws and
regulations of Canada, as well as its provincial laws and regulations. The DOT, through the Federal Motor Carrier
Safety Administration (“FMCSA”), imposes safety and fitness regulations on us and our drivers. New rules that limit
driver hours-of-service were adopted effective January 4, 2004, and then modified effective October 1, 2005 (“2005
Rules”). In July 2007, a federal appeals court vacated portions of the 2005 Rules. Two of the key portions that were
vacated include the expansion of the driving day from 10 hours to 11 hours, and the “34-hour restart”, which allowed
drivers to restart calculations of the weekly on-duty time limits after the driver had at least 34 consecutive hours off
duty. The court indicated that, in addition to other reasons, it vacated these two portions of the 2005 Rules because
FMCSA failed to provide adequate data supporting its decision to increase the driving day and provide for the 34-hour
restart. In November 2008, following the submission of additional data by FMCSA and a series of appeals and related
court rulings, FMCSA published its Final Rule, which retains the 11 hour driving day and the 34-hour restart.
However, advocacy groups may continue to challenge the Final Rule. We are unable to predict how a court may rule
on such challenges and to what extent the new presidential administration may become involved in this issue. On the
whole, however, we believe a court's decision to strike down the Final Rule would decrease productivity and cause
some loss of efficiency, as drivers and shippers may need to be retrained, computer programming may require
modifications, additional drivers may need to be employed or engaged, additional equipment may need to be acquired,
and some shipping lanes may need to be reconfigured. We are also unable to predict the effect of any new rules that
might be proposed if the Final Rule is stricken by a court, but any such proposed rules could increase costs in our
industry or decrease productivity.
The Environmental Protection Agency adopted emissions control regulations that require progressive reductions in
exhaust emissions from diesel engines manufactured on or after October 1, 2002. More stringent reductions became
effective on January 1, 2007 for engines manufactured on or after that date, and further reductions are scheduled to
become effective in 2010. Compliance with the regulations has increased the cost of our new tractors and operating
expenses while reducing fuel economy, and it is anticipated that the 2010 changes may further adversely impact those
8
areas.
We believe that we are in substantial compliance with applicable federal, state, provincial and local environmental
laws and regulations and costs of such compliance will not have a material adverse effect on our competitive position,
operations or financial condition or require a material increase in currently anticipated capital expenditures.
Seasonality
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations(cid:2)Seasonality.”
Forward-Looking Statements
This Annual Report on Form 10-K contains certain statements that may be considered forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of historical fact, are statements that could be
deemed forward-looking statements, including without limitation: any projections of earnings, revenues, or other
financial items; any statement of plans, strategies, and objectives of management for future operations; any statements
concerning proposed new services or developments; any statements regarding future economic conditions or
performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. Such
statements may be identified by their use of terms or phrases such as “expects,” “estimates,” “projects,” “believes,”
“anticipates,” “intends,” “plans,” “may,” “will,” “should,” “could,” “potential,” “continue,” “future” and similar terms
and phrases. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be
predicted or quantified, which could cause future events and actual results to differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements. Readers should review and consider the factors
discussed under the heading "Risk Factors" in Item 1A of this Annual Report on Form 10-K, along with various
disclosures in our press releases, stockholder reports, and other filings with the Securities and Exchange Commission.
All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their
entirety by this cautionary statement.
References to the “Company,” “we,” “us,” “our” and words of similar import refer to USA Truck, Inc. and its
subsidiary.
Item 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the following risks and
uncertainties which could cause our actual results to differ materially from the results contemplated by the forward-
looking statements contained in this report and in our other filings with the Securities and Exchange Commission.
Our business is subject to economic and business factors affecting the trucking industry that are largely out of our
control, any of which could have a material adverse effect on our operating results.
The factors that have negatively affected us, and may do so in the future, include volatile fuel prices, excess
capacity in the trucking industry, surpluses in the market for used equipment, higher interest rates, higher license and
registration fees, increases in insurance premiums, higher self-insurance levels, increases in accidents and adverse
claims and difficulty in attracting and retaining qualified drivers and independent contractors.
We are also affected by recessionary economic cycles and downturns in customers’ business cycles. Economic
conditions may adversely affect our customers and their ability to pay for our services. It is not possible to predict the
effects of armed conflicts or terrorist attacks and subsequent events on the economy or on consumer confidence in the
United States, or the impact, if any, on our future results of operations.
Recently, there has been widespread concern over the instability of the credit markets and the current credit market
effects on the economy. If the economy and credit markets continue to weaken, our business, financial results, and
results of operations could be materially and adversely affected, especially if consumer confidence declines and
domestic spending decreases. Additionally, the stresses in the credit market have caused uncertainty in the equity
markets, which may result in volatility of the market price for our securities.
If the credit markets continue to erode, we also may not be able to access our current sources of credit and our
lenders may not have the capital to fund those sources. We may need to incur additional indebtedness or issue debt or
equity securities in the future to refinance existing debt, fund working capital requirements, make investments, or for
general corporate purposes. As a result of contractions in the credit market, as well as other economic trends in the
credit market industry, we may not be able to secure financing for future activities on satisfactory terms, or at all. If we
are not successful in obtaining sufficient financing because we are unable to access the capital markets on financially
9
economical or feasible terms, it could impact our ability to provide services to our customers and may materially and
adversely affect our business, financial results, current operations, results of operations, and potential investments.
We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to
adequately address downward pricing pressures and other factors that may adversely affect our ability to compete
with other carriers.
Numerous competitive factors could impair our ability to maintain our current profitability. These factors include:
(cid:2) We compete with many other truckload carriers of varying sizes and, to a lesser extent, with less-than-
truckload carriers and railroads, some of which have more equipment or greater capital resources, or other
competitive advantages.
(cid:2)
Some of our competitors periodically reduce their freight rates to gain business, especially during times of
reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates,
maintain our margins or maintain growth in our business.
(cid:2) Many customers reduce the number of carriers they use by selecting so-called “core carriers” as approved
service providers, and in some instances we may not be selected.
(cid:2) Many customers periodically accept bids from multiple carriers for their shipping needs, and this process may
depress freight rates or result in the loss of some of our business to competitors.
(cid:2)
The trend toward consolidation in the trucking industry may create large carriers with greater financial
resources and other competitive advantages relating to their size, and we may have difficulty competing with
these larger carriers.
(cid:2) Advances in technology require increased investments to remain competitive, and our customers may not be
willing to accept higher freight rates to cover the cost of these investments.
(cid:2)
(cid:2)
Competition from internet-based and other logistics and freight brokerage companies may adversely affect our
customer relationships and freight rates.
Economies of scale that may be passed on to smaller carriers by procurement aggregation providers may
improve their ability to compete with us.
Ongoing insurance and claims expenses could significantly reduce our earnings.
If the number or severity of claims increases or if the costs associated with claims otherwise increase, our operating
results will be adversely affected. The time that such costs are incurred may significantly impact our operating results
for a particular quarter, as compared to the comparable quarter in the prior year. In addition, if we were to lose our
ability to self-insure for any significant period of time, our insurance costs would materially increase and we could
experience difficulty in obtaining adequate levels of coverage.
Recently, insurance carriers have decreased insurance premiums for many trucking companies. Our reduction in
premiums resulted partially from an improved claims experience factor. However, we could experience increases in
our insurance premiums in the future if we have an increase in coverage, a reduction in our self-retention level or if our
claims experience deteriorates. If our insurance or claims expense increases, and we are unable to offset the increase
with higher freight rates, our earnings could be materially and adversely affected.
We have significant ongoing capital requirements that could affect our profitability if we are unable to generate
sufficient cash from operations.
The trucking industry is very capital intensive. If we are unable to generate sufficient cash from operations in the
future, we may have to limit our growth, enter into additional financing arrangements or operate our revenue equipment
for longer periods, any of which could have a material adverse effect on our profitability.
10
We depend on the proper functioning and availability of our information systems.
We depend on the proper functioning and availability of our communications and data processing systems in
operating our business. Our information systems are protected through physical and software safeguards. However,
they are still vulnerable to fire, storm, flood, power loss, telecommunications failures, physical or software break-ins
and similar events. We do not have a catastrophic disaster recovery plan or a fully redundant alternate processing
capability. If any of our critical information systems fail or become otherwise unavailable, we would have to perform
the functions manually, which could temporarily impact our ability to manage our fleet efficiently, to respond to
customers’ requests effectively, to maintain billing and other records reliably and to bill for services accurately or in a
timely manner. Our business interruption insurance may be inadequate to protect us in the event of a catastrophe. Any
system failure, security breach or other damage could interrupt or delay our operations, damage our reputation and
cause us to lose customers, any of which could have a material adverse effect on our business.
We have begun a three-year process to migrate our legacy mainframe platform and internally developed software
applications to server-based platforms. We will purchase off-the-shelf products for our core software needs, and
develop value-added decision-support software applications internally. Any delays or complications associated with or
the failure of this project could have a material adverse effect on our business and operating results.
We depend on our major customers, the loss of one or more of which could have a material adverse effect on our
business.
A significant portion of our revenue is generated from our major customers. For fiscal year 2008, our top 10
customers accounted for approximately 32% of our revenue, our top five customers accounted for approximately 21%
of our revenue and our largest customer accounted for approximately 6% of our revenue. Generally, we do not have
long-term contracts with our major customers and we cannot assure you that our customer relationships will continue as
presently in effect. A reduction in or termination of our services by one or more of our major customers could have a
material adverse effect on our business and operating results.
If we are unable to retain our key executives, our business, financial condition and results of operations could be
harmed.
We are dependent upon the services of our executive management team. We do not maintain key-person life
insurance on any members of our management team. The loss of their services could have a material adverse effect on
our operations and future profitability. We must continue to develop and retain a core group of managers if we are to
realize our goal of expanding our operations, improve our earnings consistency and position the Company for long-
term revenue growth.
We operate in a highly regulated industry and increased costs of compliance with, or liability for violation of,
existing or future regulations could have a material adverse effect on our business.
The U.S. Department of Transportation and various state agencies exercise broad powers over our business,
generally governing such activities as authorization to engage in motor carrier operations, safety, insurance
requirements and financial reporting. We may also become subject to new or more restrictive regulations relating to
fuel emissions and ergonomics. Our Canadian business activities are subject to similar requirements imposed by the
laws and regulations of Canada and its provincial laws and regulations. Compliance with such regulations could
substantially reduce equipment productivity, and the costs of compliance could increase our operating expenses. Our
employee drivers and independent contractors also must comply with the safety and fitness regulations promulgated by
the Department of Transportation, including those relating to drug and alcohol testing and hours of service. The
Transportation Security Administration of the U.S. Department of Homeland Security adopted regulations that will
require all drivers who haul hazardous materials to undergo background checks by the Federal Bureau of Investigation
upon renewal of their licenses. While we have historically required all of our drivers to obtain this qualification, these
new regulations could reduce the availability of qualified drivers, which could require us to adjust our driver
compensation package, limit the growth of our fleet or let tractors sit idle. These regulations could also complicate the
process of matching available equipment with shipments that include hazardous materials, thereby increasing the time it
takes us to respond to customer orders and increasing our empty miles.
In July 2007, a federal appeals court vacated portions of the 2005 Rules. Two of the key portions that were
vacated include the expansion of the driving day from 10 hours to 11 hours, and the "34-hour restart," which allowed
drivers to restart calculations of the weekly on-duty time limits after the driver had at least 34 consecutive hours off
duty. The court indicated that, in addition to other reasons, it vacated these two portions of the 2005 Rules because
FMCSA failed to provide adequate data supporting its decision to increase the driving day and provide for the 34-hour
restart. In November 2008, following the submission of additional data by FMCSA and a series of appeals and related
11
court rulings, FMCSA published its Final Rule, which retains the 11 hour driving day and the 34-hour restart.
However, advocacy groups may continue to challenge the Final Rule. We are unable to predict how a court may rule
on such challenges and to what extent the new presidential administration may become involved in this issue. On the
whole, however, we believe a court's decision to strike down the Final Rule would decrease productivity and cause
some loss of efficiency, as drivers and shippers may need to be retrained, computer programming may require
modifications, additional drivers may need to be employed or engaged, additional equipment may need to be acquired,
and some shipping lanes may need to be reconfigured. We are also unable to predict the effect of any new rules that
might be proposed if the Final Rule is stricken by a court, but any such proposed rules could increase costs in our
industry or decrease productivity. Failures to comply with Department of Transportation safety regulations or
downgrades in our safety rating could have a material adverse impact on our operations or financial condition. A
downgrade in our safety rating could cause us to lose the ability to self-insure. The loss of our ability to self-insure for
any significant period of time would materially increase our insurance costs. In addition, we may experience difficulty
in obtaining adequate levels of coverage in that event.
On December 26, 2007, FMCSA published a Notice of Proposed Rulemaking in the Federal Register regarding
minimum requirements for entry level driver training. Under the proposed rule, a commercial driver's license applicant
would be required to present a valid driver training certificate obtained from an accredited institution or program.
Entry-level drivers applying for a Class A commercial driver's license would be required to complete a minimum of 120
hours of training, consisting of 76 classroom hours and 44 driving hours. The current regulations do not require a
minimum number of training hours and require only classroom education. Drivers who obtain their first commercial
driver's license during the three-year period after FMCSA issues a Final Rule would be exempt. FMCSA has not
established a deadline for issuing the Final Rule, but the comment period expired on May 23, 2008. If the rule is
approved as written, this rule could materially impact the number of potential new drivers entering the industry and,
accordingly, negatively impact our results of operations.
Decreases in the availability of new tractors and trailers could have a material adverse effect on our operating
results.
From time to time, some tractor and trailer vendors have reduced their manufacturing output due, for example, to
lower demand for their products in economic downturns or a shortage of component parts. As conditions changed,
some of those vendors have had difficulty fulfilling the increased demand for new equipment. There have been periods
when we were unable to purchase as much new revenue equipment as we needed to sustain our desired growth rate and
to maintain a late-model fleet. We may experience similar difficulties in future periods. Also, vendors had to introduce
new engines meeting the more restrictive Environmental Protection Agency emissions standards in 2007 and will have
to do so for the emissions standards which are currently scheduled to become effective in 2010. An inability to
continue to obtain an adequate supply of new tractors or trailers could have a material adverse effect on our results of
operations and financial condition.
Fluctuations in the price or availability of fuel, hedging activities and the volume and terms of diesel fuel purchase
commitments, and surcharge collection and surcharge policies approved by customers may increase our costs of
operation, which could materially and adversely affect our profitability.
Fuel is one of our largest operating expenses. Diesel fuel prices fluctuate greatly due to economic, political, and
other factors beyond our control. Fuel also is subject to regional pricing differences. From time-to-time we may use
hedging contracts and volume purchase arrangements to attempt to limit the effect of price fluctuations. If we do hedge,
we may be forced to make cash payments under the hedging arrangements. We use a fuel surcharge program to
recapture a portion of the increases in fuel prices over a base rate negotiated with our customers. Our fuel surcharge
program does not protect us against the full effect of increases in fuel prices. The terms of each customer's fuel
surcharge program vary and certain customers have sought to modify the terms of their fuel surcharge programs to
minimize recoverability for fuel price increases. Over the past year, the failure to recover fuel price increases resulted
in a materially negative impact to our results of operations. A failure to improve our fuel price protection through these
measures, further increases in fuel prices, or a shortage of diesel fuel, could materially and adversely affect our results
of operations.
Increases in driver compensation or difficulty in attracting and retaining qualified drivers could adversely affect our
profitability.
Like many truckload carriers, we experience substantial difficulty in attracting and retaining sufficient numbers of
qualified drivers, including independent contractors. In addition, due in part to current economic conditions, including
the higher cost of fuel, insurance, and tractors, the available pool of independent contractor drivers has been
declining. Because of the shortage of qualified drivers and intense competition for drivers from other trucking
12
companies, we expect to continue to face difficulty increasing the number of our drivers, including independent
contractor drivers. The compensation we offer our drivers and independent contractors is subject to market conditions,
and we may find it necessary to continue to increase driver and independent contractor compensation in future periods.
In addition, we and our industry suffer from a high turnover rate of drivers. Our high turnover rate requires us to
continually recruit a substantial number of drivers in order to operate existing revenue equipment. If we are unable to
continue to attract and retain a sufficient number of drivers, we could be required to adjust our compensation packages,
let tractors sit idle, or operate with fewer tractors and face difficulty meeting shipper demands, all of which would
adversely affect our growth and profitability.
Our operations are subject to various environmental laws and regulations, the violation of which could result in
substantial fines or penalties.
We are subject to various environmental laws and regulations dealing with the hauling and handling of hazardous
materials, fuel storage tanks, air emissions from our vehicles and facilities, engine idling, and discharge and retention of
storm water. We operate in industrial areas, where truck terminals and other industrial activities are located, and where
groundwater or other forms of environmental contamination may have occurred. Our operations involve the risks of
fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others. We also maintain above-
ground bulk fuel storage tanks and fueling islands at five of our facilities. A small percentage of our freight consists of
low-grade hazardous substances, which subjects us to a wide array of regulations. Although we have instituted
programs to monitor and control environmental risks and promote compliance with applicable environmental laws and
regulations, if we are involved in a spill or other accident involving hazardous substances, if there are releases of
hazardous substances we transport, or if we are found to be in violation of applicable laws or regulations, we could be
subject to liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a
materially adverse effect on our business and operating results.
Regulations limiting exhaust emissions became effective in 2002 and became progressively more restrictive in
2007 and 2010. Engines manufactured after October 2002 generally cost more, produce lower fuel mileage, and
require additional maintenance compared with earlier models. All of our tractors are equipped with these engines. We
expect additional cost increases and possibly degradation in fuel mileage from the 2007 engines. These adverse effects,
combined with the uncertainty as to the reliability of the newly designed diesel engines and the residual values of these
vehicles, could increase our costs or otherwise adversely affect our business or operations.
If we cannot effectively manage the challenges associated with doing business internationally, our revenues and
profitability may suffer.
Our success is dependent upon the success of our operations in Mexico and, to a lesser extent, Canada, and we are
subject to risks of doing business internationally, including fluctuations in foreign currencies, changes in the economic
strength of the countries in which we do business, difficulties in enforcing contractual obligations and intellectual
property rights, burdens of complying with a wide variety of international and United States export and import laws,
and social, political, and economic instability. Additional risks associated with our foreign operations, including
restrictive trade policies and imposition of duties, taxes, or government royalties by foreign governments, are present
but largely mitigated by the terms of NAFTA.
Seasonality and the impact of weather affect our operations and profitability.
Our tractor productivity decreases during the winter season because inclement weather impedes operations, and
some shippers reduce their shipments after the winter holiday season. Revenue can also be affected by bad weather and
holidays, since revenue is directly related to available working days of shippers. At the same time, operating expenses
increase, with fuel efficiency declining because of engine idling and harsh weather creating higher accident frequency,
increased claims, and more equipment repairs. We could also suffer short-term impacts from weather-related events
such as hurricanes, blizzards, ice storms, and floods that could harm our results or make our results more volatile.
13
Increased prices, reduced productivity, and restricted availability of new revenue equipment may adversely affect our
earnings and cash flows.
We are subject to risk with respect to prices for new tractors. Prices may increase, for among other reasons, due to
government regulations applicable to newly manufactured tractors and diesel engines and due to commodity prices and
pricing power among equipment manufacturers. More restrictive Environmental Protection Agency, or EPA, emissions
standards that began in 2002 with additional new requirements implemented in 2007 have required vendors to introduce
new engines. Additional EPA mandated emission standards will become effective for newly manufactured trucks
beginning in January 2010. Our business could be harmed if we are unable to continue to obtain an adequate supply of
new tractors and trailers. As of December 31, 2008, approximately 19% of our tractor fleet was comprised of tractors
with engines that met the EPA mandated clean air standards that became effective January 1, 2007. Tractors that meet
the 2007 standards are more expensive than non-compliant tractors, and we expect to continue to pay increased prices
for equipment as we continue to increase the percentage of our fleet that meets the EPA mandated clean air standards.
In addition, a decreased demand for used revenue equipment could adversely affect our business and operating
results. We rely on the sale and trade-in of used revenue equipment to partially offset the cost of new revenue
equipment. When the supply of used revenue equipment exceeds the demand for used revenue equipment, as it did
during 2008, the general market value of used revenue equipment decreases. Should this current condition continue, it
would increase our capital expenditures for new revenue equipment, decrease our gains on sale of revenue equipment,
or increase our maintenance costs if management decides to extend the use of revenue equipment in a depressed
market, any of which could have a material adverse effect on our operating results.
Our business is subject to certain credit factors affecting the global economy that are largely out of our control and
that could have a material adverse effect on our operating results.
Recently, there has been widespread concern over the instability of the credit markets and the current credit market
effects on the economy. If the economy and credit markets continue to weaken, our business, financial results and
results of operations could be materially and adversely affected, especially if consumer confidence further declines and
domestic spending continues to decrease. Additionally, the stresses in the credit market have caused uncertainty in the
equity markets, which may result in volatility of the market price for our securities.
If the credit markets continue to erode, we also may not be able to access our current sources of credit and our
lenders may not have the capital to fund those sources. We may need to incur additional indebtedness or issue debt or
equity securities in the future to refinance existing debt, fund working capital requirements, make investments or for
general corporate purposes. As a result of contractions in the credit market, as well as other economic trends in the
credit market industry, we may not be able to secure financing for future activities on satisfactory terms, or at all. If we
are not successful in obtaining sufficient financing because we are unable to access the capital markets on financially
economical or feasible terms, it could impact our ability to provide services to our customers and may materially and
adversely affect our business, financial results, results of operations and potential investments
Item 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved written SEC staff comments regarding our periodic or current reports under the Securities
Exchange Act of 1934 received 180 days or more before the end of the fiscal year to which this annual report on Form
10-K relates.
Item 2.
PROPERTIES
Our executive offices and headquarters are located on approximately 104 acres in Van Buren, Arkansas. This
facility consists of approximately 117,000 square feet of office, training and driver facilities and approximately 30,000
square feet of maintenance space within two structures. The facility also has approximately 11,000 square feet of
warehouse space and two other structures with approximately 22,000 square feet of office and warehouse space leased
to another party.
We operate a network of eight additional facilities, including one in Laredo, Texas, operated by a wholly owned
subsidiary, which is one of the largest inland freight gateway cities between the U.S. and Mexico. These additional
facilities contain maintenance shops, driver facilities, fuel tanks and/or office space. Our facilities currently are located
in or near the following cities:
14
Van Buren, Arkansas
West Memphis, Arkansas
Blue Island, Illinois
Burns Harbor, Indiana
Shreveport, Louisiana
Vandalia, Ohio
Spartanburg, South Carolina
Laredo, Texas
Roanoke, Virginia
Shop
Yes
Yes
No
No
Yes
Yes
Yes
Yes
Yes
Driver
Facilities
Yes
Yes
No
No
Yes
Yes
Yes
No
No
Fuel
Yes
Yes
No
No
Yes
Yes
No
No
Yes
Office
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Own or
Lease
Own
Own/Lease
Lease
Lease
Own
Own
Own
Own
Lease
During 2008, the leases on the Company’s Bethel, Pennsylvania and East Peoria, Illinois facilities were canceled
by us.
We currently own two facilities in the Dayton, OH market, one of which is not being used. During the third
quarter of 2008, we recorded an asset impairment charge in the amount of approximately $0.3 million to write down the
asset’s value to its estimated market value, net of costs of disposal. This write down is included in Other expenses in
the accompanying Consolidated Statements of Income. On October 23, 2008, we entered into a contract to sell this
facility, which is expected to close during the first quarter of 2009.
Item 3. LEGAL PROCEEDINGS
We are a party to routine litigation incidental to our business, primarily involving claims for personal injury and
property damage incurred in the transportation of freight. Though we believe these claims to be routine and immaterial
to our long-term financial position, adverse results of one or more of these claims could have a material adverse effect
on our financial position, results of operations or cash flow.
On May 22, 2006, a former independent sales agent filed a lawsuit against us entitled All-Ways Logistics, Inc. v.
USA Truck, Inc., in the U.S. District Court for the Eastern District of Arkansas, Jonesboro Division, alleging, among
other things, breach of contract, breach of implied duty of good faith and fair dealing, and tortious interference with
business relations. The plaintiff alleged that we breached and wrongfully terminated our commission sales agent
agreement with it and improperly interfered with its business relationship with certain of its customers. In early
August 2007, the jury returned an unfavorable verdict in this contract dispute. The jury held that we breached the
contract and awarded the plaintiff damages of approximately $3.0 million, which was accrued during the quarter ended
September 30, 2007. In its December 4, 2007 order, the court denied substantially all of USA Truck’s motions for
post-trial relief and granted the plaintiff’s motions for pre-judgment interest, attorney’s fees and costs in an amount
totaling approximately $1.7 million, which was accrued during the fourth quarter of 2007. The court’s order also
awarded the plaintiff post-judgment interest, of which we accrued approximately $0.2 million for the year ended
December 31, 2008. On January 2, 2008, we filed an appeal of the verdict and the court’s order, and on September 25,
2008, we presented an oral argument before the 8th Circuit United States Court of Appeals seeking to overturn the
verdict. The Court of Appeals has not yet ruled on the matter.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
We did not submit any matter to a vote of security holders during the fourth quarter of the fiscal year covered by
this annual report.
15
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
Our Common Stock is quoted on the NASDAQ Global Select Market under the symbol “USAK.” The following
table sets forth, for the periods indicated, the high and low sale prices of our Common Stock as reported by the
NASDAQ Global Select Market.
Price Range
High
Low
Year Ended December 31, 2008
Fourth Quarter ............................................................................................... $
Third Quarter .................................................................................................
Second Quarter ..............................................................................................
First Quarter ..................................................................................................
17.05
19.53
13.42
15.89
Year Ended December 31, 2007
Fourth Quarter .................................................................................................. $
Third Quarter ...................................................................................................
Second Quarter .................................................................................................
First Quarter .....................................................................................................
15.88
19.13
17.16
17.62
$
11.53
9.50
11.60
11.26
$ 12.52
15.11
15.43
15.45
As of February 23, 2009, there were 206 holders of record (including brokerage firms and other nominees) of our
Common Stock. We estimate that there were approximately 1,600 beneficial owners of the Common Stock as of that
date. On February 23, 2009, the last reported sale price of our Common Stock on the NASDAQ Global Select Market
was $12.77 per share.
Dividend Policy
We have not paid any dividends on our Common Stock to date, and we do not anticipate paying any dividends at
the present time. We currently intend to retain all of our earnings, if any, for use in the expansion and development of
our business. The covenants of our Senior Credit Facility would prohibit us from paying dividends if such payment
would cause us to be in violation of any of the covenants in that Facility.
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of December 31, 2008. The
equity compensation plans that have been approved by our stockholders are our 2004 Equity Incentive Plan and our
2003 Restricted Stock Award Plan and one plan under which options remain outstanding, but no new options may be
granted, which is our Employee Stock Option Plan. We do not have any equity compensation plans under which equity
awards are outstanding or may be granted that have not been approved by our stockholders.
Number of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants and Rights
(a)
Weighted-average
Exercise Price of
Outstanding Options,
Warrants and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
(c)
429,300(1)
$16.24(2)
563,975(3)
--
429,300
--
$16.24
--
563,975
Plan Category
Equity Compensation Plans
Approved by Security Holders .......
Equity Compensation Plans Not
Approved by Security Holders ........
Total .............................................
(1) Includes 208,000 unvested shares of restricted stock, which will vest in annual increments, subject to the
attainment of specified performance goals, and which do not require the payment of exercise prices; and
221,300 shares of Common Stock subject to outstanding stock options.
16
(2) Excludes shares of restricted stock, which do not require the payment of exercise prices.
(3) Pursuant to the terms of our 2004 Equity Incentive Plan, on the day of each annual meeting of our
stockholders for a period of nine years, beginning with the 2005 annual meeting and ending with the 2013
annual meeting, the maximum number of shares of Common Stock available for issuance under this plan
(including shares issued prior to each such adjustment) is automatically increased by a number of shares equal
to the lesser of (i) 25,000 shares or (ii) such lesser number of shares (which may be zero or any number less
than 25,000) as determined by our Board of Directors. Pursuant to this adjustment provision, the maximum
number of shares available for issuance under this plan will increase from 1,000,000 to 1,025,000 on May 6,
2009, the date of our 2009 annual meeting. The share numbers included in the table do not reflect this
adjustment or any future adjustments. The shares that remain available for future grants include 475,975
shares that may be granted as stock options under our 2004 Equity Incentive Plan, 38,000 shares that may be
issued as performance-based restricted stock under our 2003 Restricted Stock Award Plan and an additional
50,000 shares that may be awarded under the 2003 Restricted Stock Award Plan upon contribution of such
shares to us by our current Chairman of the Board, in his discretion, in accordance with the Plan. The 475,975
shares subject to future grant under our 2004 Equity Incentive Plan may, alternatively, be issued as restricted
stock, stock units, performance shares, performance units or other incentives payable in cash or stock.
Repurchase of Equity Securities
On January 24, 2007, we publicly announced that our Board of Directors authorized the repurchase of up to
2,000,000 shares of our outstanding Common Stock over a three-year period ending January 24, 2010. We may make
Common Stock purchases under this program on the open market or in privately negotiated transactions at prices
determined by our Chairman of the Board or President. Our Board had previously approved an authorization, publicly
announced on October 19, 2004, to repurchase up to 500,000 shares and the remaining balance of 264,000 shares was
repurchased during the first quarter of 2007 at a total cost of approximately $4.3 million. During the year ended
December 31, 2007, we repurchased a total of 834,099 shares of our Common Stock under the current authorization, at
a total cost of approximately $13.1 million. During the year ended December 31, 2008, no shares of our Common
Stock were repurchased. Our current repurchase authorization has 1,165,901 shares remaining.
Common Stock repurchases during the quarter ended December 31, 2008 are as follows:
Period
October 1, 2008 - October 31, 2008 ..........
November 1, 2008 - November 30, 2008 ...
December 1, 2008 - December 31, 2008 ....
Total ...........................................................
Total Number
of
Shares (or
Units)
Purchased
Average
Price Paid
per Share (or
Unit)
Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs
Maximum Number
(or Approximate
Dollar Value) of
Shares (or Units)
that
May Yet Be
Purchased Under the
Plans or Programs
1,165,901
1,165,901
1,165,901
1,165,901
--
--
--
--
--
--
--
--
--
--
--
--
17
Item 6.
SELECTED FINANCIAL DATA
You should read the following selected consolidated financial data and other operating information along with
“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8.
Financial Statements and Supplementary Data.” We derived the selected consolidated Statements of Income and
Balance Sheets data as of and for each of the five years ended December 31, 2008 from our audited financial
statements.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
(in thousands, except per share data and key operating statistics)
Year Ended December 31,
2006
2005
2007
2008
2004
Statements of Income Data:
Revenue:
Trucking revenue .................................... $
Strategic Capacity Solutions revenue ....
Total base revenue .............................
Fuel surcharge revenue ...........................
Total revenue .....................................
381,055
16,502
397,557
138,063
535,620
$ 382,064
9,124
391,188
90,921
482,109
$ 370,780
14,521
385,301
80,317
465,618
$ 358,522
18,107
376,629
63,074
439,703
$ 314,431
21,449
335,880
27,225
363,105
Operating expenses and costs:
Fuel and fuel taxes ..................................
Salaries, wages and employee benefits ...
Depreciation and amortization ................
Purchased transportation .........................
Insurance and claims...............................
Operations and maintenance ...................
Operating taxes and licenses ...................
Litigation verdict ....................................
Communications and utilities .................
Gain on disposal of assets .......................
Other .......................................................
Total operating expenses and costs ...
Operating income .......................................
Other expenses (income):
Interest expense ......................................
Other, net ................................................
Total other expenses, net ..................
Income before income taxes .......................
Income tax expense ....................................
189,042
157,729
50,919
40,323
28,999
27,729
6,456
--
4,075
(19)
18,220
523,473
12,147
4,643
139
4,782
7,365
4,225
153,023
162,236
49,093
18,609
31,144
25,815
6,368
4,690
3,787
(395)
19,429
473,799
138,629
152,998
46,739
19,815
27,006
21,919
6,610
--
3,362
(541)
22,677
439,214
121,026
143,164
41,890
24,710
26,172
21,178
6,224
--
3,220
(1,144)
19,766
406,206
81,722
125,953
35,871
28,317
26,224
24,736
5,653
--
3,039
(1,040)
14,831
345,306
8,310
26,404
33,497
17,799
5,130
22
5,152
3,158
3,018
4,192
(134)
4,058
22,346
9,905
4,829
(19)
4,810
28,687
13,119
3,539
33
3,572
14,227
6,795
Net income ................................................. $
3,140
$
140
$
12,441
$
15,568
$
7,432
Per share information:
Average shares outstanding (Basic) ...........
Basic earnings per share ............................ $
Average shares outstanding (Diluted) ........
Diluted earnings per share ........................ $
10,220
0.31
10,238
0.31
10,596
0.01
10,651
0.01
11,353
1.10
11,561
1.08
$
$
10,034
1.55
10,328
1.51
$
$
$
$
$
$
9,268
0.80
9,398
0.79
18
SELECTED CONSOLIDATED FINANCIAL AND OPERATING INFORMATION (continued)
Other Financial Data:
2008
Year Ended December 31,
2007
2006
2005
2004
Operating ratio (1) ..............................................
Cash flows from operations ................................$
Capital expenditures, net (2) ...............................
96.9 %
97.9 %
93.1 %
91.1 %
94.7 %
65,869 $ 58,585
39,967
64,997
$ 76,249
74,583
$ 56,552
56,525
$ 37,292
89,379
Key Operating Statistics:
Base Trucking revenue per tractor per week ......$
Average miles per tractor per week ....................
Empty mile factor (3) ..........................................
Weighted average number of tractors (4) ...........
Total miles (loaded and empty) (in thousands) ..
Average miles per tractor ...................................
Average miles per trip (5) ...................................
Average age of tractors, at end of period (in
months)
Average age of trailers, at end of period (in
months) ...........................................................
Balance Sheets Data:
Cash and cash equivalents ..................................$
Total assets ........................................................
Long-term debt, capital leases and note
payable, including current portion ..................
Stockholders’ equity ...........................................
Total debt, less cash, to total capitalization
ratio .................................................................
2,869
2,216
10.7 %
2,540
294,248
115,846
718
$
$
2,842
2,236
2,831
2,186
$
$
2,936
2,325
2,766
2,285
11.1 %
10.3 %
8.7 %
8.4 %
2,578
300,577
116,593
784
2,512
286,317
113,980
837
2,342
283,921
121,230
837
2,174
259,725
119,469
839
24
51
25
42
21
36
19
38
18
39
1,541
332,268
$
8,014
332,938
$
7,132
339,494
$
994
308,079
$
1,189
288,154
97,605
146,773
96,162
143,191
95,406
159,558
89,232
149,833
140,442
85,528
39.3 %
36.8 %
34.6 %
37.4 %
62.1 %
(1) Operating ratio is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of base
revenue.
(2) Capital expenditures, net equals cash purchases of property and equipment plus the liability incurred for leases
on revenue equipment less proceeds from the sale of property and equipment.
(3) The empty mile factor is the number of miles traveled for which we are not typically compensated by any
customer as a percentage of total miles traveled.
(4) Weighted average number of tractors includes company-operated tractors plus owner-operator tractors.
(5) Average miles per trip is based upon loaded miles divided by the number of Trucking shipments.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (or
MD&A) is intended to help the reader understand USA Truck, Inc., our operations and our present business
environment. MD&A is provided as a supplement to and should be read in conjunction with our consolidated financial
statements and notes thereto and other financial information that appears elsewhere in this report. This overview
summarizes the MD&A, which includes the following sections:
Our Business – a general description of our business, the organization of our operations and the divisions that
comprise our operations.
Results of Operations – an analysis of our consolidated results of operations for the three years presented in our
consolidated financial statements and a discussion of seasonality, the potential impact of inflation and fuel availability
and cost.
19
Off-Balance Sheet Arrangements – a discussion of significant financial arrangements, if any, that are not reflected
on our balance sheet.
Liquidity and Capital Resources – an analysis of cash flows, sources and uses of cash, debt, equity and contractual
obligations.
Critical Accounting Estimates – a discussion of accounting policies that require critical judgment and estimates.
Our Business
We operate in the for-hire truckload segment of the trucking industry. Customers in a variety of industries engage
us to haul truckload quantities of freight, with the trailer we use to haul that freight being assigned exclusively to that
customer’s freight until delivery. We have various service offerings, which we combine into two operating segments,
through which we provide transportation services. We aggregate the financial data for these operating segments into
one reportable segment for purposes of our public reporting.
We previously organized our divisions into three segments, as described in “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended
December 31, 2005. Due to the evolution of our business over the past few years, during the quarter ended June 30,
2006, we reclassified our five divisions into two segments for internal reporting and monitoring purposes. The
information we present in this report reflects this change.
Our business is classified into the Trucking operating segment and the Strategic Capacity Solutions operating
segment, which we previously designated as operating divisions. Our Trucking operating segment includes those
transportation services in which we use Company-owned tractors and owner-operator tractors, as well as Trailer-on-
Flat-Car rail intermodal service. Our Strategic Capacity Solutions operating segment, which we previously referred to
as USA Logistics, consists of services such as freight brokerage, transportation scheduling, routing and mode selection,
as well as Container-on-Flat-Car rail intermodal service, which typically do not involve the use of Company-owned or
owner-operator equipment. Both Trucking and Strategic Capacity Solutions have similar economic characteristics and
are impacted by virtually the same economic factors as discussed elsewhere in this report. Accordingly, they have been
aggregated into one segment for financial reporting purposes.
Substantially all of our base revenue from both segments is generated by transporting, or arranging for the
transportation of, freight for customers, and is predominantly affected by the rates per mile received from our customers
and similar operating costs. For the years ended December 31, 2008, 2007 and 2006, Trucking base revenue
represented 95.8%, 97.7% and 96.2% of total base revenue, respectively, with remaining base revenue being generated
through Strategic Capacity Solutions.
We generally charge customers for our services on a per-mile basis. The main factors that impact our profitability
on the expense side are the variable costs of transporting freight for our customers. The variable costs include fuel
expense, insurance and claims, and driver-related expenses, such as wages, benefits, training and recruitment.
Trucking. Trucking includes the following primary service offerings provided to our customers:
(cid:2) General Freight. Our General Freight service offering provides truckload freight services as a short- to
medium-haul common carrier. We have provided General Freight services since our inception and we derive
the largest portion of our revenues from these services. Beginning with the first quarter of 2008, we began
including our regional freight operations as part of our General Freight service offering for reporting purposes.
Regional freight refers to truckload freight services that involve a length-of-haul of approximately 500 miles
or less.
(cid:2)
Trailer-on-Flat-Car. During December 2007, we began including rail intermodal service revenue to the extent
Company equipment is used in providing the service. Our Trailer-on-Flat-Car service offering provides our
customers cost savings over General Freight with a transit speed slightly slower. It also allows us to reposition
our equipment to maximize our freight network yield.
(cid:2) Dedicated Freight. Our Dedicated Freight service offering is a variation of our General Freight service,
whereby we agree to make our equipment and drivers available to a specific customer for shipments over
particular routes at specified times. In addition to serving specific customer needs, our Dedicated Freight
service offering also aids in driver recruitment and retention.
Strategic Capacity Solutions. Strategic Capacity Solutions includes the following primary service offerings
provided to our customers:
20
(cid:2)
(cid:2)
Freight Brokerage. Our Freight Brokerage service offering matches customer shipments with available
equipment of other carriers when it is not feasible to use our own equipment.
Container-on-Flat-Car. During December 2007, we began including rail intermodal service revenue to the
extent Company equipment is not used in providing the service. Our Container-on-Flat-Car service offering
matches customer shipments with available containers of other carriers when it is not feasible to use our own
equipment.
Our Strategic Capacity Solutions service offerings provide services that complement our Trucking operations. We
provide these services primarily to our existing Trucking customers, many of whom prefer to rely on a single carrier, or
a small group of carriers, to provide all of their transportation needs. To date, a majority of the customers of Strategic
Capacity Solutions have also engaged us to provide services through one or more of our Trucking service offerings.
During December 2007, we also began offering rail intermodal services. Intermodal shipping is a method of
transporting freight using multiple modes of transportation between origin and destination, with the freight remaining in
a trailer or special container throughout the trip. Our rail intermodal service offerings involve transporting, or
arranging the transportation of, freight on trucks to a third party who uses a different mode of transportation,
specifically rail, to complete the other portion of the shipment. For the year ended December 31, 2008, rail intermodal
service offerings generated approximately 1.2% of total base revenue.
Results of Operations
Executive Overview
In 2008, our base revenue grew 1.6%, our operating margin improved by 100 basis points and our net income and
earnings per share grew from $140,000 and $0.01 per share to $3.1 million and $0.31 per share, respectively. We are
proud of these improvements, but these results do not tell the full story about USA Truck’s journey in 2008.
Last year can best be described by the word “change” – change in the global economy, domestic political change
and change throughout USA Truck. It was a year in which we expanded exponentially our understanding of the freight
transportation business and applied those lessons learned to change our operating model. We established a fresh
strategic direction for USA Truck based on an in-depth study of the factors that drive shareholder value and operating
performance in our industry.
VISION. Our primary long-term strategic objectives – to expand the value of our Common Stock through
improved returns on capital and to improve the consistency of our earnings growth – precipitated the need to make two
fundamental changes within our Company. First, deep organizational change was necessary to retool USA Truck to
maximize returns on capital and de-emphasize our historical strategy to grow our tractor fleet. Second, a fresh
operational approach was necessary to break our long-term addiction to long-haul freight and instead focus on freight
network yield. A clear vision for USA Truck’s future emerged in 2008.
PLANNING. Transforming that vision into results required a well-conceived plan. Our team went to work
assessing marketplace realities and internal capabilities. We identified eight major initiatives that we believed were
essential to effecting the fundamental change needed within the Company to achieve our long-term strategic objectives.
Our internal assessment indicated needs for a stronger technology platform and more effective personnel
capabilities. Two initiatives were designed to turn those opportunities into competitive advantages.
1. Project Tech. For a variety of reasons, our legacy mainframe computer platform had become a competitive
disadvantage for us. To bolster our ability to support the more rapid decision-making that our evolving
business model demands, we began a three-year process to migrate our legacy mainframe platform and
internally-developed software applications to server-based platforms. We will purchase off-the-shelf products
for our core software needs, and develop value-added decision-support software applications internally.
2. Project People. We recognize that aligning the interests and efforts of every employee at USA Truck is
essential to achieving our long-term strategic objectives. During 2008, we instituted several programs
designed to create that alignment. From job descriptions to performance evaluations to talent management, we
have challenged, empowered and rewarded our employees for performance. We endeavored last year to
improve the productivity of our non-driver personnel by using a combination of performance-driven
management and a more focused, process-driven approach to managing our business. We believe that is the
best path to service our customers, produce results for our stockholders and reward our employees.
As the vast majority of our revenue came from our truckload operations during 2008, we believe that most of our
initiatives should be focused on improving the returns on capital and earnings consistency within those operations.
Historically, we focused on a 900-mile length-of-haul as our primary trucking strategy. Late in 2008, for the first time
21
in our Company’s history, we designed a freight network to maximize yield, which we define as the optimal
combination of tractor utilization, pricing, empty miles and variable operating costs. We now know the specific traffic
lanes in which we want to move freight, and the required volumes and prices. We believe that bringing this defined
freight network to life through the following initiatives launched during 2008 will allow us to achieve our long-term
strategic objectives.
3. Project Velocity. The marketplace for truckload freight has changed. The proliferation of retail distribution
centers and the growing rail intermodal market share in long-haul lanes have decreased truckload freight
volume in those long-haul lanes. The marketplace is forcing truckload carriers into shorter-haul markets, but
operational execution in those markets is very challenging and requires tremendous intensity and discipline.
Though we are targeting network yield (not length-of-haul), we recognize that our model will be shorter-haul
biased simply because that market is where the freight volumes are. Thus, it was imperative for us to prepare
the Company to execute in the shorter-haul environment. We define “Velocity” as the measure of the number
of times we load our fleet each week. Our Project Velocity was designed to do just that, and it produced
encouraging results. During 2008, we improved our velocity 8.6% while shortening our length-of-haul 8.4%
from 784 miles to 718 miles, and we did it while improving our empty mile percentage by 40 basis points from
11.1% to 10.7%.
4. Yield Management. The concept of freight network yield was foreign to us prior to 2008, so it was necessary
to launch an initiative to educate our people about yield and to start incorporating it into our business
processes and performance measurements. Our Yield Management initiative laid the foundation for the
development of our defined freight network. While yield is not driven exclusively by pricing, we were able to
increase our Trucking base revenue per total mile by 1.9% during 2008. We also reduced our tractor fleet by
approximately 250 tractors during the fourth quarter to help us maintain that pricing level. We are committed
to managing our freight operations to maximize yield.
5. Cost Discipline. USA Truck has long been an industry leader in operating cost per mile. However, cost is
such a critical component for network yield that we revisited our entire cost structure during 2008. We now
manage costs weekly, and we look at it in two buckets: variable costs per mile and total fixed costs. Our
primary goal is obviously to keep costs as low as possible, but we also want to improve the flexibility within
the cost structure so it can be quickly adjusted as economic conditions change. For example, we reduced our
driver pay scale for new-hires twice last year, which resulted in a significant cost reduction in 2008 compared
to 2007. We have also devoted considerable attention to fuel costs, to gross margins in our asset-light service
offerings and to an assortment of fixed costs including non-driver wages (which we reduced considerably
throughout the year as we trimmed non-driver headcount by 18.7%).
6. War on Accidents. Another area where we see potential for meaningful cost reduction is insurance and claims.
Our approach to safety is simple: hire better drivers, train them better and hold them accountable for
performance. There are many moving parts to this initiative, but the basic formula is working. During 2008,
our accident frequency declined 17.1%, leading to a 70 basis point reduction in overall insurance and claims
expense.
Bringing our freight network design to life and successfully implementing all of the above six initiatives will be
quite an accomplishment, but it will not be enough for us to consistently grow our earnings or to produce returns on
capital exceeding our cost of capital through the ups and downs of our cyclical industry. Nor will those initiatives
provide the integrated bundle of services that our customers will demand.
That is why our plan calls for more than just asset-based truckload services. That is why we have launched two
asset-light initiatives through our Strategic Capacity Solutions operating segment that are designed to boost our returns
on capital, to provide another source of sustainable earnings growth and to offer our customers flexible capacity for
their transportation needs in a variety of service and cost levels.
7. Rail Intermodal Service Launch. In late December 2007, we moved our first load of rail intermodal freight.
During 2008, we produced base revenue of $4.6 million, more than doubling our goal of $2.0 million for 2008.
We remain on the steep slope of the learning curve, but we are committed to further incorporating intermodal
into our trucking operations to make the integration as seamless as possible for our customers as 2009 unfolds.
8. Brokerage Service Growth. We grew brokerage 86.8% to $15.3 million, short of our 2008 goal of $18.0
million. Despite falling short of our goal, we continue to gain more knowledge of the brokerage business and
we are incorporating that knowledge into our brokerage model, which we intend to expand in 2009.
Our new strategic direction, objectives and supporting initiatives are part of a long-term strategic plan that we call
VEVA (Vision for Economic Value Added). VEVA is a detailed, quarter-by-quarter operating plan designed to expand
22
our Common Stock valuation multiples to the mean of our truckload peer group by the end of 2010 (Phase I) by earning
a 10% return on capital and simultaneously driving our weighted average cost of capital below 10%. By 2013, VEVA
calls for the expansion of our Common Stock valuation multiples beyond our truckload peer group’s mean by
sustaining or improving our capital management targets and leveraging a more diversified business model to produce a
10% compounded annual earnings growth rate (Phase II).
EXECUTION. VEVA is clearly an ambitious plan. We subscribe to the old adage that “the devil is in the
details.” While the plan is aggressive, we believe that it is achievable. Our success depends on our ability to execute.
Strategic plans do not execute; people do. We have painstakingly identified the key performance indicators (KPI)
for VEVA, set targets for each of them and assigned ownership to individual employees who have accepted
responsibility for them and are held accountable for results daily. Executive management is providing resources,
removing barriers and working closely with middle management and front-line personnel to ensure that those targets
are met. While the returns on capital and earnings growth goals are ambitious, the individual KPI targets are
reasonable. By focusing on those individual KPI targets, we believe that we can reach our long-term strategic
objectives.
Economic factors will play a big role in determining when we reach those objectives. The last quarter of 2008 into
the early months of 2009 was the most difficult operating environment that we have ever seen. Not only have the
challenging conditions made it difficult to make the changes to our operating model that VEVA demands, but it has
also consumed our time and resources because of the hands-on management required to navigate through it.
The economic recession could delay the timeframes set forth by VEVA, but it has not changed our strategic
direction. We are pleased with the progress we have made operationally and culturally, and we believe that our strong
balance sheet and cash flow will serve us well during these turbulent times.
Note Regarding Presentation
By agreement with our customers, and consistent with industry practice, we add a graduated surcharge to the rates
we charge our customers as diesel fuel prices increase above an agreed upon baseline price per gallon. The surcharge is
designed to approximately offset increases in fuel costs above the baseline. Fuel prices are volatile, and the fuel
surcharge increases our revenue at different rates for each period. We believe that comparing operating costs and
expenses to total revenue, including the fuel surcharge, could provide a distorted comparison of our operating
performance, particularly when comparing results for current and prior periods. Therefore, we have used base revenue,
which excludes the fuel surcharge revenue, and instead taken the fuel surcharge as a credit against the fuel and fuel
taxes and purchased transportation line items in the table setting forth the percentage relationship of certain items to
base revenue below.
We do not believe that a reconciliation of the information presented on this basis and corresponding information
comparing operating costs and expenses to total revenue would be meaningful. Data regarding both total revenue,
which includes the fuel surcharge, and base revenue, which excludes the fuel surcharge, is included in the consolidated
statements of income included in this report.
Base revenues from our Strategic Capacity Solutions operating segment, consisting primarily of base revenues
from our Freight Brokerage service offering, have fluctuated in recent periods. This service offering does not involve
the use of our tractors and trailers. Therefore, an increase in these revenues tends to cause expenses related to our
operations that do involve our equipment—including fuel expense, depreciation and amortization expense, operations
and maintenance expense, salaries, wages and employee benefits and insurance and claims expense—to decrease as a
percentage of base revenue, and a decrease in these revenues tends to cause those expenses to increase as a percentage
of base revenue with a related change in purchased transportation expense. Since changes in Strategic Capacity
Solutions revenues generally affect all such expenses, as a percentage of base revenue, we do not specifically mention it
as a factor in our discussion of increases or decreases in those expenses in the period-to-period comparisons below.
Base revenues from our Strategic Capacity Solutions operating segment increased approximately 80.9% from
December 31, 2007 to December 31, 2008. However, base revenues from our Strategic Capacity Solutions operating
segment represented only 4.2%, 2.3% and 3.8%, of total base revenue for the years ended December 31, 2008, 2007
and 2006, respectively.
23
Relationship of Certain Items to Base Revenue
The following table sets forth the percentage relationship of certain items to base revenue for the years indicated.
The period-to-period comparisons below should be read in conjunction with this table and our consolidated statements
of income and accompanying notes.
Base revenue ..............................................................
Operating expenses and costs:
Salaries, wages and employee benefits ..................
Fuel and fuel taxes (1) (2) ......................................
Depreciation and amortization ...............................
Purchased transportation (2) ..................................
Insurance and claims ..............................................
Operations and maintenance ..................................
Operating taxes and licenses ..................................
Litigation verdict ....................................................
Communications and utilities .................................
Gain on disposal of revenue equipment, net ..........
Other ......................................................................
Total operating expenses and costs ..................
Operating income ......................................................
Other expenses:
Interest expense ......................................................
Other, net ...............................................................
Total other expenses, net ..................................
Income before income taxes .....................................
Income tax expense ...................................................
Net income ..................................................................
(1) Net of fuel surcharges.
Year Ended December 31,
2007
100.0 %
2008
100.0 %
2006
100.0 %
39.7
13.8
12.8
9.2
7.3
7.0
1.5
--
1.0
--
4.6
96.9
3.1
1.2
--
1.2
1.9
1.1
0.8 %
41.5
16.3
12.4
4.4
8.0
6.6
1.6
1.2
1.0
(0.1)
5.0
97.9
2.1
1.3
--
1.3
0.8
0.8
-- %
39.7
15.8
12.1
4.5
7.0
5.6
1.7
--
0.9
(0.1)
5.9
93.1
6.9
1.1
--
1.1
5.8
2.6
3.2 %
(2) In 2008, the Company allocated fuel surcharge revenue to the Trucking and the Strategic Capacity Solutions
operating segments. For purposes of this table, fuel surcharge revenue is netted against fuel and fuel taxes and
purchased transportation expense. Percentages for 2007 and 2006 have been recalculated to reflect this
reclassification.
Fiscal Year Ended December 31, 2008 Compared to Fiscal Year Ended December 31, 2007
Results of Operations – Combined Services
Our base revenue grew 1.6% from $391.2 million to $397.6 million, for the reasons addressed in the Trucking and
the Strategic Capacity Solutions sections, below.
Net income for all divisions was $3.1 million as compared to $0.1 million for 2007.
Overall, our operating ratio improved by 1.0 percentage points of base revenue to 96.9% as a result of the
following factors:
(cid:2)
(cid:2)
Salaries, wages and employee benefits decreased by 1.8 percentage points of base revenue due to a
160.5% increase in the average number of owner-operators and a 3.8% increase in base revenue per mile.
If we are able to continue to increase owner-operators as a percentage of our total fleet, we would expect
salaries, wages and employee benefits would continue to decrease as a percentage of base revenue absent
offsetting increases in those expenses.
Fuel and fuel taxes decreased by 2.5 percentage points of base revenue primarily due to a 7.8% decrease
in the net price paid for diesel fuel, a 1.1 percentage point decrease in out-of-route miles and, as
mentioned above, an increase in the average number of owner-operators, which bear their own fuel
expenses.
24
(cid:2)
Insurance and claims decreased by 0.7 percentage point of base revenue primarily due to a decrease in
adverse claims experience and a reduction in the frequency of accidents. Department of Transportation
reportable accidents fell approximately 23.1% in 2008. If we are able to continue to successfully execute
our “War on Accidents” safety initiative we would expect insurance and claims expense to gradually
decrease in the long term, though remaining volatile from period-to-period.
(cid:2) Operations and maintenance increased by 0.4 percentage points of base revenue as direct repair costs on
our tractors and trailers increased 5.0% due to a 7.1% increase in the average age of the tractor fleet for
the year from 22.1 months in 2007 to 23.7 months in 2008 and a 30.5% increase in the average age of our
trailer fleet for the year.
(cid:2)
Purchased transportation increased by 4.8 percentage points of base revenue due primarily to the increase
in carrier expense associated with our Strategic Capacity Solutions operating segment and the above-
mentioned increase in owner-operator tractors. We expect this expense will continue to increase when
compared to prior periods if we can achieve our goals to grow our owner-operator fleet and increase the
revenue of our Strategic Capacity Solutions operating segment.
(cid:2) Other operating expenses decreased by 0.4 percentage points of base revenue primarily due to a decrease
in driver recruiting costs of 13.8%. The reduction in driver recruiting costs resulted from lower driver
turnover (-8.3%) and an accommodating market for hiring drivers.
(cid:2) Our effective tax rate decreased from 95.6% in 2007 to 57.4% in 2008. Income tax expense varies from
the amount computed by applying the federal tax rate to income before income taxes primarily due to state
income taxes, net of federal income tax effect and due to permanent differences, the most significant of
which is the effect of the per diem pay structure for drivers. Due to the partially nondeductible effect of
per diem payments, our tax rate will vary in future periods based on fluctuations in earnings and in the
number of drivers who elect to receive this pay structure.
Results of Operations – Trucking
Key Operating Statistics:
Fiscal Year Ended December 31,
2008
Total miles (in thousands) (1) ...........................................
Empty mile factor (2) ........................................................
Weighted average number of tractors (3) .........................
Average miles per tractor per period ................................
Average miles per tractor per week ..................................
Average miles per trip (4) .................................................
Base Trucking revenue per tractor per week .................... $
Number of tractors at end of period (3) ............................
294,248
10.7 %
2,540
115,846
2,216
718
2,869
2,392
2007
300,577
11.1 %
2,578
116,593
2,236
784
2,842
2,557
$
(1)
(2)
(3)
(4)
Base Revenue
Total miles include both loaded and empty miles.
The empty mile factor is the number of miles traveled for which we are not typically compensated by
any customer as a percentage of total miles traveled.
Tractors include Company-operated tractors currently in service plus owner-operator tractors.
Average miles per trip is based upon loaded miles divided by the number of Trucking shipments.
Base revenue from Trucking decreased by 0.3% to $381.1 million. The decrease was the result of several factors:
(cid:2) A decrease in the miles per tractor per week (-0.9%) and a decrease in the weighted average number of
tractors (-1.5%).
(cid:2) General Freight revenue decreased 1.6%. This decrease was partially offset by the addition of our Trailer-
on-Flat-Car Intermodal service offering (from zero to $4.0 million) and a 1.7% increase in Dedicated
Freight base revenue.
(cid:2) Although diesel fuel prices declined during the second half of 2008, the decline was not enough to offset
deteriorating freight demand. We believe these lower diesel prices provided a working capital boost to
25
marginal carriers, thus allowing them to continue their operations thereby exacerbating the imbalance
between industry truck supply and freight demand.
(cid:2)
The deterioration in the freight environment took its toll on our performance this year. The most
significant impact of the deterioration was a reduction in Trucking base revenue, which resulted in a 0.9%
decline in our tractor utilization. Operating margin was squeezed as Trucking base revenue declined at a
faster rate than fixed costs could be removed from our system. The reduced utilization muted the effects
of the falling fuel prices during the second half of the year (since lower fuel prices are only relevant if we
are running miles).
(cid:2) Depressed freight volumes and increased competition for available loads drove down our revenue per
tractor per week. However, we did improve our Trucking base revenue per loaded mile 1.4%, and our
improved operational efficiency was evident in the 8.6% increase in Velocity (defined as the number of
times we load our fleet each week).
Results of Operations – Strategic Capacity Solutions
We have strategically targeted Freight Brokerage and Rail Intermodal for growth. We established goals for 2008
to double the size of our Freight Brokerage base revenue to approximately $18 million and to establish a presence in the
rail intermodal market with $2 million of related base revenue in 2008. We finished the year with base revenue from
Strategic Capacity Solutions that increased 80.9% to $16.5 million primarily due to an 86.8% increase in our Freight
Brokerage base revenue, short of our 2008 objective. Base revenue from our Container-on-Flat-Car service offering
grew from zero to $0.6 million. As indicated above, the remaining portion of our rail intermodal service offerings is
classified into our Trucking operating segment.
Fiscal Year Ended December 31, 2007 Compared to Fiscal Year Ended December 31, 2006
Results of Operations – Combined Services
Our base revenue grew 1.5% from $385.3 million to $391.2 million, for the reasons addressed in the Trucking and
the Strategic Capacity Solutions sections, below.
Net income for all divisions was $0.1 million as compared to $12.4 million for 2006.
Overall, our operating ratio increased by 4.8 percentage points of base revenue to 97.9% due primarily to lower
freight volumes and as a result of the following factors:
(cid:2)
(cid:2)
(cid:2)
Salaries, wages and employee benefits increased by 1.8 percentage points of base revenue due to a 17.1%
increase in non-driver wages, a 2.5% increase in driver wages per mile and a 3.3% decrease in base
revenue per mile.
Fuel and fuel taxes increased by 0.8 percentage points of base revenue primarily due to 6.5% increase in
the price paid for diesel fuel, and a 3.3% decrease in base revenue per mile.
Insurance and claims increased by 1.0 percentage point of base revenue primarily due to settlement of
prior year claims and an elevated frequency of accidents.
(cid:2) Operations and maintenance increased by 1.0 percentage point of base revenue primarily due to a 16.3%
increase in the average age of the tractor fleet for the year from 19.0 months to 22.1 months, which
contributed to an increase in direct repair costs per unit by an average of 20.7%.
(cid:2)
(cid:2)
Purchased transportation decreased by 0.4 percentage points of base revenue due primarily to the decrease
in carrier expense associated with our Third Party Logistics division, partially offset by an increase in
owner-operator costs.
In early August, a jury returned an unfavorable verdict in a litigated contract dispute. The jury held that
USA Truck breached a contract and awarded the plaintiff damages of approximately $3.0 million. This
verdict had a negative impact on third quarter diluted earnings per share of approximately $0.17. In
December, the court ruled that we owed approximately $1.7 million in pre-judgment interest and legal
fees. This ruling negatively impacted fourth quarter diluted earnings per share by approximately $0.10.
As of December 31, 2007, we have accrued all amounts awarded to the plaintiff, in the aggregate amount
of the $4.7 million. On January 2, 2008, the Company filed an appeal of the verdict and the court’s order.
(cid:2) Other expenses decreased by 0.9 percentage points of base revenue due primarily to a 33.7 percentage
point decrease in driver turnover, which decreased the cost associated with recruiting and retaining
qualified drivers 27.7%.
26
(cid:2) Our effective tax rate increased from 44.3% in 2006 to 95.6% in 2007. Income tax expense varies from
the amount computed by applying the federal tax rate to income before income taxes primarily due to state
income taxes, net of federal income tax effect and due to permanent differences, the most significant of
which is the effect of the per diem pay structure for drivers. Due to the partially nondeductible effect of
per diem payments, our tax rate will vary in future periods based on fluctuations in earnings and in the
number of drivers who elect to receive this pay structure.
Results of Operations – Trucking
Key Operating Statistics:
Fiscal Year Ended December 31,
2007
Total miles (in thousands) (1) ...........................................
Empty mile factor (2) ........................................................
Weighted average number of tractors (3) .........................
Average miles per tractor per period ................................
Average miles per tractor per week ..................................
Average miles per trip (4) .................................................
Base Trucking revenue per tractor per week .................... $
Number of tractors at end of period (3) ............................
300,577
11.1 %
2,578
116,593
2,236
784
2,842
2,557
$
2006
286,317
10.3 %
2,512
113,980
2,200
837
2,831
2,571
(1)
(2)
(3)
(4)
Base Revenue
Total miles include both loaded and empty miles.
The empty mile factor is the number of miles traveled for which we are not typically compensated by
any customer as a percentage of total miles traveled.
Tractors include Company-operated tractors currently in service plus owner-operator tractors.
Average miles per trip is based upon loaded miles divided by the number of Trucking shipments.
Base revenue from Trucking grew by 3.0% to $382.1 million. The increase was the result of several factors:
(cid:2)
Regional Freight base revenue grew 37.2% on a 43.5% increase in tractors. Most measures of operating
performance took a step backwards in this difficult freight environment. For this reason we do not plan to
grow our Regional fleet until we make improvements in the key performance measures of this division,
particularly base revenue per tractor per week, which decreased 4.7%.
(cid:2) Dedicated Freight base revenue decreased 11.3% due mostly to a reduction in the tractor count by 17.4%
while the base revenue per tractor per week increased 6.9%. Over the past year, we have made several
changes to our freight mix by adding new customer accounts that provide fewer miles, but higher revenue
per mile and removing certain customer accounts that provided more miles but lower revenue per mile.
(cid:2) General Freight base revenue increased 1.1%, and base revenue per tractor per week increased 0.3%. This
slight increase was primarily due to a 2.5% increase in miles per tractor per week. General Freight had a
decrease in base revenue per loaded mile of 1.4%. Our General Freight division model is more dependent
on miles per tractor per week, thus it was impacted more by softer freight demand.
(cid:2) Overall, we grew the average size of our Trucking tractor fleet by 2.6%. We grew the average size of the
Company-owned tractor fleet by 1.8% to 2,540 tractors and increased the average size of our owner-
operator fleet by 137.5% to 38 tractors. We plan to aggressively grow our owner-operator fleet primarily
by converting Company drivers to owner-operator drivers through our new lease-purchase program.
Results of Operations – Strategic Capacity Solutions
Base revenue from Strategic Capacity Solutions decreased by 37.2% to $9.1 million. Freight brokerage base
revenue decreased to $8.2 million, a 0.3% decrease. During 2006, we implemented a strategic redeployment of our
resources toward less complex logistics services in which we can provide a level of on-time, quality service
commensurate with the services we provide through our Trucking divisions. As a result, the base revenue derived from
those logistics services decreased by 85.2% to $0.9 million.
27
Seasonality
In the trucking industry, revenues generally 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 our customers,
particularly those with manufacturing operations, reduce shipments due to temporary plant closings. Historically, many
of our customers have closed their plants for maintenance or other reasons during January and July.
Inflation
Although most of our operating expenses are inflation sensitive, the effect of inflation on revenue and operating
costs has been minimal in recent years. The effect of inflation-driven cost increases on our overall operating costs
would not be expected to be greater for us than for our competitors.
Fuel Availability and Cost
The motor carrier industry is dependent upon the availability of fuel. Fuel shortages or increases in fuel taxes or
fuel costs have adversely affected our profitability and will continue to do so. Fuel prices have fluctuated widely and
fuel taxes have generally increased in recent years. We have not experienced difficulty in maintaining necessary fuel
supplies, and in the past we generally have been able to partially offset increases in fuel costs and fuel taxes through
increased freight rates and through a fuel surcharge that increases incrementally as the price of fuel increases above a
certain baseline price. Typically, we are not able to fully recover increases in fuel prices through rate increases and fuel
surcharges, primarily because those items do not provide any benefit with respect to empty and out-of-route miles, for
which we do not typically receive compensation from customers. We do not have any long-term fuel purchase
contracts and we have not entered into any hedging arrangements that protect us against fuel price increases. Overall,
the market fuel prices per gallon were higher in 2008 and 2007 than they were in 2006.
Off-Balance Sheet Arrangements
From time to time we enter into operating leases for certain facilities and office equipment that are not reflected in
our balance sheet and we do not believe those leases have or are reasonably likely to have a material current or future
effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources. We do not have any other off-balance sheet arrangements.
Liquidity and Capital Resources
The continued growth of our business has required significant investments in new revenue equipment. We have
financed new tractor and trailer purchases predominantly with cash flows from operations, the proceeds from sales or
trades of used equipment, borrowings under our Senior Credit Facility and capital lease-purchase arrangements. We
have historically met our working capital needs with cash flows from operations and with borrowings under our
Facility. During 2008, the maximum amount borrowed under the Facility, including letters of credit was approximately
74.6% of the total amount available and we ended the year with outstanding borrowings, including letters of credit
equal to approximately 39.8% of the total amount available. We use the Facility to minimize fluctuations in cash flow
needs and to provide flexibility in financing revenue equipment purchases. At December 31, 2008, we had
approximately $60.2 million available under our Facility and $9.4 million of availability for new capital leases under
existing lease facilities. Management is not aware of any known trends or uncertainties that would cause a significant
change in our sources of liquidity. We expect our principal sources of capital to be sufficient to finance our operations,
annual debt maturities, lease commitments, letter of credit commitments, stock repurchases and capital expenditures
over the next twelve months. There can be no assurance, however, that such sources will be sufficient to fund our
operations and all expansion plans for the next several years, or that any necessary additional financing will be
available, if at all, in amounts required or on terms satisfactory to us.
Our balance sheet debt, less cash, represents just 39.3% of our total capitalization, and we have no material off-
balance sheet debt. We have financed most of our 2008 tractor purchases with 42-month, fixed–rate capital leases. Our
capital leases currently represent 64.7 % of our total debt and carry an average fixed rate of 4.0%. Not only does that
provide us with a natural hedge against recent London Interbank Offered Rate volatility, but it has also freed up
availability on our revolving credit line on which we could currently borrow up to an additional $60.2 million without
violating any of our current financial covenants. Despite a heavy tractor trading program, we produced $39.5 million in
free cash flow (cash flow from operations less net capital expenditures) during 2008, which was only $2.7 million less
than that of 2007 when we purchased a relatively small number of tractors. We expect our 2009 capital expenditures to
more resemble 2007 levels than those of 2008. In summary, based on our operating results, anticipated future cash
flows, and current availability under our Facility and capital lease-purchase arrangements that we expect will be
available to us, we do not expect to experience significant liquidity constraints in the foreseeable future.
28
If the credit markets continue to erode, we also may not be able to access our current sources of credit and our
lenders may not have the capital to fund those sources. We may need to incur additional indebtedness or issue debt or
equity securities in the future to refinance existing debt, fund working capital requirements, make investments or for
general corporate purposes. As a result of contractions in the credit market, as well as other economic trends in the
credit market industry, we may not be able to secure financing for future activities on satisfactory terms, or at all. If we
are not successful in obtaining sufficient financing because we are unable to access the capital markets on financially
economical or feasible terms, it could impact our ability to provide services to our customers and may materially and
adversely affect our business, financial results, results of operations and potential investments.
Cash Flows
(in thousands)
Year Ended December 31,
2007
2008
Net cash provided by operating activities .......................... $
Net cash used in investing activities ...................................
Net cash (used in) provided by financing activities ...........
$
65,869
(26,359)
(45,983)
$
58,585
(16,394)
(41,309)
2006
76,249
(70,496)
385
Cash generated from operations increased $7.3 million during 2008 as compared to 2007, as a result of an increase
in net income of $3.0 million, a decrease in accounts receivable of $8.8 million resulting from improved collection
procedures and decreased freight volumes, an increase in payables and accrued expenses of $6.6 million the most
significant component of which is a $2.1 million increase in income tax accrual, and a decrease in insurance and claims
accruals of $8.2 million. Cash generated from operations decreased $17.7 million during 2007 as compared to 2006.
The change was primarily due to a decrease in net income of $12.3 million and a decrease in deferred income taxes of
$5.7 million from 2006 to 2007.
Cash used in investing activities increased $10.0 million during 2008 as compared to 2007, due to an increase in
expenditures for revenue equipment. Cash used in investing activities decreased $54.1 million during 2007 as
compared to 2006, due to a decrease in expenditures for revenue equipment.
Cash used in financing activities increased $4.7 million during 2008 as compared to 2007. The change was
primarily due to a reduction in net borrowings on our Senior Credit Facility, which was made possible by a $14.9
million increase in capital leases and a decrease in bank drafts payable. Cash used in financing activities was $41.3
million in 2007 compared to cash provided by financing activities of $0.4 million in 2006. The $41.7 million
difference is due primarily to a reduction in net borrowings on our Senior Credit Facility and an increase in repurchases
of our common stock.
Debt
On September 1, 2005, we entered into an Amended and Restated Senior Credit Facility, which restated in its
entirety and made certain amendments to our previously amended facility dated as of April 28, 2000. The Facility was
amended to, among other things, increase the maximum borrowing amount to $100.0 million, subject to a borrowing
base calculation. The Facility includes a sublimit of up to $25.0 million for letters of credit and matures September 1,
2010.
The Facility is collateralized by revenue equipment having a net book value of approximately $183.4 million at
December 31, 2008 and all trade and other accounts receivable. The Facility provides an accordion feature allowing us
to increase the maximum borrowing amount by up to an additional $75.0 million in the aggregate in one or more
increases no less than six months prior to the maturity date, subject to certain conditions. At this time, the Company
does not anticipate the need to exercise the accordion feature or, if needed, we do not expect to encounter any
difficulties in doing so. The maximum borrowing including the accordion feature may not exceed $175.0 million
without the consent of the lenders. At December 31, 2008, $33.2 million was outstanding under the Facility.
The Facility bears variable interest based on the agent bank’s prime rate, the federal funds rate plus a certain
percentage or the London Interbank Offered Rate plus a certain percentage, which is determined based on our
attainment of certain financial ratios. For the year ended December 31, 2008, the effective interest rate was 4.3%. A
quarterly commitment fee is payable on the unused credit line at a rate which is determined based on our attainment of
certain financial ratios. At December 31, 2008, the rate was 0.2% per annum.
The Facility contains various covenants, which require us to meet certain quarterly financial ratios. In the event we
fail to cure an event of default, the loan can become immediately due and payable. As of December 31, 2008, we were
in compliance with the covenants.
29
Certain leases contain cross-default provisions with our other financing agreements.
Equity
At December 31, 2008, we had stockholders’ equity of $146.8 million and debt of $97.6 million, resulting in a total
debt, less cash, to total capitalization ratio of 39.3% compared to 36.8% at December 31, 2007.
Purchases and Commitments
As of December 31, 2008, our forecasted capital expenditures, net of proceeds from the sale of revenue equipment,
for 2009 were $38.6 million, $32.1 million of which relates to revenue equipment. We expect to use the balance of
$6.5 million primarily for property acquisitions, facility construction, improvements and maintenance and office
equipment. We routinely evaluate our equipment acquisition needs and adjust our purchase and disposition schedules
from time to time based on our analysis of factors such as freight demand, the availability of drivers and the condition
of the used equipment market. During the year ended December 31, 2008, we made $65.0 million of net capital
expenditures, including $61.6 million for revenue equipment purchases ($38.6 million of which were capital lease
obligations) and a net of $3.4 million was for facility expansions and non-revenue equipment.
The following table represents our outstanding contractual obligations at December 31, 2008:
Total
2009
(in thousands)
Payments Due By Period
2010-2011
2012-2013
Thereafter
Contractual Obligations:
33,200
Long-term debt obligations (1) ............$
67,634
Capital lease obligations (2) ................
12,476
Purchase obligations (3) ......................
Rental obligations ................................
1,085
Total ...................................................$ 114,395
$
$
--
19,067
12,476
443
31,986
$
$
33,200
36,662
--
289
70,151
$
$
--
11,905
--
22
11,927
$
$
--
--
--
331
331
(1) Long-term debt obligations, excluding letters of credit in the amount of $6.6 million, consist of our Senior
Credit Facility, which matures on September 1, 2010.
(2) Includes interest payments not included in the balance sheet.
(3) Purchase obligations include commitments to purchase approximately $12.4 million of revenue equipment
none of which is cancelable by us upon advance written notice.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. We base our assumptions, estimates and judgments on historical experience,
current trends and other factors that management believes to be relevant at the time our consolidated financial
statements are prepared. Actual results could differ from those estimates, and such differences could be material.
The most significant accounting policies and estimates that affect our financial statements include the following:
(cid:2)
(cid:2)
Revenue recognition and related direct expenses based on relative transit time in each period. Revenue
generated by Trucking is recognized in full upon completion of delivery of freight to the receiver’s location.
For freight in transit at the end of a reporting period, we recognize revenue pro rata based on relative transit
time completed as a portion of the estimated total transit time in accordance with EITF 91-9, Method 5 issued
by the Emerging Issues Task Force of the Financial Accounting Standards Board. Expenses are recognized as
incurred.
Revenue generated by Strategic Capacity Solutions is recognized upon completion of the services provided.
Revenue is recorded on a gross basis, without deducting third party purchased transportation costs, as we act
as a principal with substantial risks as primary obligor.
Management believes these policies most accurately reflect revenue as earned and direct expenses, including
third party purchased transportation costs, as incurred.
Selections of estimated useful lives and salvage values for purposes of depreciating tractors and trailers. We
operate a significant number of tractors and trailers in connection with our business. We may purchase this
equipment or acquire it under leases. We depreciate purchased equipment on the straight-line method over the
estimated useful life down to an estimated salvage or trade-in value. We initially record equipment acquired
30
under capital leases at the net present value of the minimum lease payments and amortize it on the straight-line
method over the lease term. Depreciable lives of tractors and trailers range from three years to ten years. We
estimate the salvage value at the expected date of trade-in or sale based on the expected market values of
equipment at the time of disposal.
We make equipment purchasing and replacement decisions on the basis of various factors, including, but not
limited to, new equipment prices, the condition of the used equipment market, demand for our freight services,
prevailing interest rates, technological improvements, fuel efficiency, durability of the equipment, equipment
specifications and the availability of drivers. Therefore, depending on the circumstances, we may accelerate or
delay the acquisition and disposition of our tractors and trailers from time to time, based on an operating
principle whereby we pursue trade intervals that economically balance our maintenance costs and expected
trade-in values in response to the circumstances existing at that time. Such adjustments in trade intervals may
cause us to adjust the useful lives or salvage values of our tractors or trailers. By changing the relative
amounts of older equipment and newer equipment in our fleet, adjustments in trade intervals also increase and
decrease the average age of our tractors and trailers, whether or not we change the useful lives or salvage
values of any tractors or trailers. We also adjust depreciable lives and salvage values based on factors such as
changes in prevailing market prices for used equipment. We periodically monitor these factors in order to
keep salvage values in line with expected market values at the time of disposal. Adjustments in useful lives
and salvage values are made as conditions warrant and when we believe that the changes in conditions are
other than temporary. These adjustments result in changes in the depreciation expense we record in the period
in which the adjustments occur and in future periods. These adjustments also impact any resulting gain or loss
on the ultimate disposition of the revenue equipment. Management believes our estimates of useful lives and
salvage values have been materially accurate as demonstrated by the insignificant amounts of gains and losses
on revenue equipment dispositions in recent periods.
To the extent depreciable lives and salvage values are changed, such changes are recorded in accordance with
the applicable provisions of Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and
FASB Statement No. 3.
Estimates of accrued liabilities for claims involving bodily injury, physical damage losses, employee health
benefits and workers’ compensation. We record both current and long-term claims accruals at the estimated
ultimate payment amounts based on information such as individual case estimates, historical claims experience
and an estimate of claims incurred but not reported. The current portion of the accrual reflects the amounts of
claims expected to be paid in the next twelve months. In making the estimates we rely on past experience with
similar claims, negative or positive developments in the case and similar factors. We do not discount our
claims liabilities.
Stock option valuation. The assumptions used to value stock options are dividend yield, expected volatility,
risk-free interest rate, expected life and anticipated forfeiture. As we do not pay any dividends on our
Common Stock, the dividend yield is zero. Expected volatility represents the measure used to project the
expected fluctuation in our share price. We use the historical method to calculate volatility with the historical
period being equal to the expected life of each option. This calculation is then used to determine the potential
for our share price to increase over the expected life of the option. The risk-free interest rate is based on an
implied yield on United States zero-coupon treasury bonds with a remaining term equal to the expected life of
the outstanding options. Expected life represents the length of time we anticipate the options to be outstanding
before being exercised. Based on historical experience, that time period is best represented by the option’s
contractual life. Anticipated forfeitures represent the number of shares under options we expect to be forfeited
over the expected life of the options.
Accounting for Income Taxes. Our deferred tax assets and liabilities represent items that will result in taxable
income or a tax deduction in future years for which we have already recorded the related tax expense or
benefit in our consolidated statements of income. Deferred tax accounts arise as a result of timing differences
between when items are recognized in our consolidated financial statements compared to when they are
recognized in our tax returns. Significant management judgment is required in determining our provision for
income taxes and in determining whether deferred tax assets will be realized in full or in part. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. We periodically assess the
likelihood that all or some portion of deferred tax assets will be recovered from future taxable income. To the
extent we believe recovery is not probable, a valuation allowance is established for the amount determined not
(cid:2)
(cid:2)
(cid:2)
31
to be realizable. We have not recorded a valuation allowance at December 31, 2008, as all deferred tax assets
are more likely than not to be realized.
We believe that we have adequately provided for our future tax consequences based upon current facts and
circumstances and current tax law. During 2008, we made no material changes in our assumptions regarding
the determination of income tax liabilities. However, should our tax positions be challenged, different
outcomes could result and have a significant impact on the amounts reported through our consolidated
statements of income.
We periodically reevaluate these policies as circumstances dictate. Together these factors may significantly impact
our consolidated results of operations, financial position and cash flow from period to period.
New Accounting Pronouncements
See “Item 8. Financial Statements and Supplementary Data—Note 1. to the Financial Statements: New Accounting
Pronouncements.”
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We experience various market risks, including changes in interest rates, foreign currency exchange rates and
commodity prices.
Interest Rate Risk. We are exposed to interest rate risk primarily from our Senior Credit Facility. Our Senior
Credit Facility, as amended, provides for borrowings that bear variable interest based on the agent bank’s prime rate,
the federal funds rate plus a certain percentage or the London Interbank Offered Rate plus a certain percentage. At
December 31, 2008, we had $33.2 million outstanding pursuant to our Senior Credit Facility. Assuming the
outstanding balance at year end remained constant throughout the upcoming year, a hypothetical one-percentage point
increase in interest rates applicable to the Senior Credit Facility would increase our annual interest expense by
approximately $0.33 million.
On October 21, 2008, we entered into an interest rate swap agreement with a notional amount of $9.0 million with
an effective date of October 21, 2008. We designated the $9.0 million interest rate swap as a cash flow hedge of our
exposure to variability in future cash flow resulting from the interest payments indexed to the three-month London
Interbank Offered Rate. The rate on the swap is fixed at 4.25% until January 20, 2009.
On February 6, 2009, we entered into a $10.0 million dollar interest rate swap agreement with an effective date of
February 19, 2009. The rate on the swap is fixed at 1.57% until February 19, 2011. The interest rate swap agreement
will be accounted for as a cash flow hedge.
Foreign Currency Exchange Rate Risk. We require all customers to pay for our services in U.S. dollars. Although
the Canadian government makes certain payments, such as tax refunds, to us in Canadian dollars, any foreign currency
exchange risk associated with such payments is not material.
Commodity Price Risk. Fuel prices have fluctuated greatly and have generally increased in recent years. In some
periods, our operating performance was adversely affected because we were not able to fully offset the impact of higher
diesel fuel prices through increased freight rates and fuel surcharges. We cannot predict the extent to which high fuel
price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases.
We do not have any long-term fuel purchase contracts, and we have not entered into any hedging arrangements, that
protect us against fuel price increases. Volatile fuel prices will continue to impact us significantly. A significant
increase in fuel costs, or a shortage of diesel fuel, could materially and adversely affect our results of operations. These
costs could also exacerbate the driver shortages our industry experiences by forcing independent contractors to cease
operations.
32
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2008
INDEX TO FINANCIAL STATEMENTS
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm ..........................................
Consolidated Balance Sheets as of December 31, 2008 and 2007 ...................................................................
Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006 ........................
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008, 2007 and 2006 ..
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006 .................
Notes to Consolidated Financial Statements .....................................................................................................
34
35
36
37
38
39
Page
33
REPORT OF GRANT THORNTON LLP
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and
Stockholders of USA Truck, Inc.
We have audited the accompanying consolidated balance sheets of USA Truck, Inc. (a Delaware Corporation) and
subsidiary (collectively referred to as the “Company”) as of December 31, 2008 and 2007, and the related consolidated
statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31,
2008. 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 the standards of the Public Company Accounting Oversight Board (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 consolidated financial statements referred to above present fairly, in all material respects, the
financial position of USA Truck, Inc. and subsidiary as of December 31, 2008 and 2007, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), USA Truck, Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) and our report dated February 26, 2009, expressed an unqualified opinion on the
effectiveness of internal control over financial reporting.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 26, 2009
34
USA Truck, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
Assets
Current assets:
Cash and cash equivalents .................................................................................$
Accounts receivable:
Trade, less allowance for doubtful accounts of $204 in 2008 and $81 in
2007 ..........................................................................................................
Other ..............................................................................................................
Inventories ........................................................................................................
Deferred income taxes .......................................................................................
Prepaid expenses and other current assets .........................................................
Total current assets .................................................................................................
Property and equipment:
Land and structures ...........................................................................................
Revenue equipment ...........................................................................................
Service, office and other equipment .................................................................
Accumulated depreciation and amortization .....................................................
December 31,
2008
2007
1,541 $
8,014
36,597
2,261
1,541
4,717
4,381
51,038
36,101
354,712
23,923
414,736
(133,863)
280,873
Other assets ............................................................................................................
Total assets .............................................................................................................$
357
332,268 $
Liabilities and stockholders’ equity
Current liabilities:
Bank drafts payable...........................................................................................$
Trade accounts payable .....................................................................................
Current portion of insurance and claims accruals .............................................
Accrued expenses ..............................................................................................
Note payable .....................................................................................................
Current maturities of long-term debt and capital leases .....................................
Total current liabilities ...........................................................................................
Long-term debt and capital leases, less current maturities ......................................
Deferred income taxes .............................................................................................
Insurance and claims accruals, less current portion ...............................................
Commitments and contingencies ............................................................................
Stockholders’ equity:
Preferred Stock, $0.01 par value; 1,000,000 shares authorized; none issued ...
Common Stock, $0.01 par value; authorized 30,000,000 shares; issued
11,777,439 shares in 2008 and 11,560,160 shares in 2007 ...........................
Additional paid-in capital .................................................................................
Retained earnings ..............................................................................................
Less treasury stock, at cost (1,366,500 shares in 2008 and 1,352,500 shares
4,500 $
7,533
10,106
12,158
1,285
16,956
52,538
79,364
48,563
5,030
--
--
118
64,171
104,700
2007) .............................................................................................................
Accumulated other comprehensive income ......................................................
Total stockholders’ equity ......................................................................................
Total liabilities and stockholders’ equity ...............................................................$
(22,163)
(53)
146,773
332,268 $
See accompanying notes.
35
44,563
2,187
1,172
5,420
4,451
65,807
35,382
338,036
18,448
391,866
(125,090)
266,776
355
332,938
11,785
7,429
11,965
9,572
1,538
24,412
66,701
70,212
48,024
4,810
--
--
116
63,487
101,560
(21,972)
--
143,191
332,938
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Year Ended December 31,
2007
2006
2008
Revenue:
Base revenue ................................................................... $
Fuel surcharge revenue ...................................................
Total revenue ................................................................
397,557
138,063
535,620
$
391,188 $
90,921
482,109
162,236
153,023
49,093
18,609
31,144
25,815
6,368
4,690
3,787
(395)
19,429
473,799
8,310
5,130
22
5,152
3,158
188
2,830
3,018
140 $
0.01 $
0.01 $
385,301
80,317
465,618
152,998
138,629
46,739
19,815
27,006
21,919
6,610
--
3,362
(541)
22,677
439,214
26,404
4,192
(134)
4,058
22,346
1,422
8,483
9,905
12,441
1.10
1.08
Operating expenses and costs:
Salaries, wages and employee benefits ...........................
Fuel and fuel taxes ..........................................................
Depreciation and amortization ........................................
Purchased transportation .................................................
Insurance and claims .......................................................
Operations and maintenance ...........................................
Operating taxes and licenses ...........................................
Litigation verdict .............................................................
Communications and utilities ..........................................
Gain on disposal of assets ...............................................
Other ...............................................................................
Total operating expenses and costs ..............................
Operating income .................................................................
Other expenses (income):
Interest expense ...............................................................
Other, net ........................................................................
Total other expenses, net ..............................................
Income before income taxes .................................................
Income tax expense:
Current ............................................................................
Deferred ..........................................................................
Total income tax expense .............................................
Net income ........................................................................... $
Net income per share:
Basic earnings per share .................................................. $
Diluted earnings per share .............................................. $
See accompanying notes.
157,729
189,042
50,919
40,323
28,999
27,729
6,456
--
4,075
(19)
18,220
523,473
12,147
4,643
139
4,782
7,365
2,950
1,275
4,225
3,140
0.31
0.31
$
$
$
36
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Accumulated
Other
Stock
Treasury Comprehensive Unearned
Income/(Loss) Compensation
-- $
--
(60) $
--
(1,286) $
--
Total
149,833
486
213
(4,199)
73
711
--
--
--
--
1,286
--
-- $
--
12,441
159,558
--
--
--
895
(12)
(17,403)
--
--
--
-- $
--
13
140
143,191
--
--
--
--
186
23
286
--
--
--
--
--
--
--
-- $
--
--
--
--
--
--
-- $
--
--
--
--
(53)
--
--
(53) $
--
--
--
-- $
(53)
--
3,140
146,773
Common Stock Additional
Paid-in
Shares Value Capital
Par
Retained
Earnings
--
1
58
485
88,979 $
Balance at January 1, 2006 ................ 11,415 $ 114 $ 62,086 $
Exercise of stock options ...................
Tax benefit on exercise of stock
options ..............................................
Purchase of 230 shares of Common
Sale of 2 shares of treasury stock to
employee stock purchase plan ..........
Stock based compensation .................
Elimination of unearned
compensation ...................................
Net income for 2006 ..........................
Balance at December 31, 2006 .......... 11,473 $ 115 $ 62,230 $ 101,420 $
(1,286)
--
--
12,441
213
--
21
711
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
--
(4,199)
52
--
--
--
(4,207) $
--
--
1
88
894
Exercise of stock options ...................
Tax charge on exercise of stock
options ..............................................
Purchase of 1,098 shares of
Common Stock into treasury ............
Retirement of forfeited restricted
stock .................................................
Stock based compensation .................
Net income for 2007 ..........................
Balance at December 31, 2007 ............ 11,561 $ 116 $ 63,487 $ 101,560 $ (21,972) $
(362)
--
--
362
13
--
--
--
140
(17,403)
--
--
--
--
--
--
(12)
--
--
--
--
--
--
--
--
Exercise of stock options ...................
17
Tax benefit on exercise of stock
options ..............................................
Stock Based Compensation ...............
Retirement of forfeited restricted
stock .................................................
--
--
--
--
--
--
--
186
23
286
191
--
--
--
--
--
--
--
(191)
Change in fair value of interest rate
swap, net of income tax benefit of
$(33) .................................................
Restricted stock award grant ..............
Net income for 2008 ..........................
Balance at December 31, 2008 ............ 11,778 $ 118 $ 64,171 $ 104,700 $ (22,163) $
--
--
3,140
--
200
--
--
(2)
--
--
--
--
--
2
--
See accompanying notes.
37
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2007
2006
2008
Operating activities
Net income ..................................................................................................$
Adjustments to reconcile net income to net cash provided by
operating activities:
3,140
$
140
$
12,441
Depreciation and amortization ...............................................................
Provision for doubtful accounts .............................................................
Deferred income taxes ............................................................................
Excess tax benefit from exercise of stock options .................................
Write off of tax asset on exercise of stock options ................................
Stock based compensation .....................................................................
Gain on disposal of property and equipment .........................................
Changes in operating assets and liabilities:
Accounts receivable .............................................................................
Inventories, prepaid expenses and other current assets .......................
Trade accounts payable, accrued expenses and note payable ..............
Insurance and claims accruals ..............................................................
Net cash provided by operating activities ........................................
50,919
134
1,242
(23)
--
286
(19)
7,758
(299)
4,370
(1,639)
65,869
49,093
(15)
2,831
(39)
51
13
(395)
(1,051)
3,573
(2,192)
6,576
58,585
46,739
36
8,482
(213)
--
711
(541)
5,491
(2,939)
7,043
(1,001)
76,249
Investing activities
Purchases of property and equipment ....................................................
Proceeds from sale of property and equipment .....................................
Change in other assets ...........................................................................
Net cash used in investing activities ................................................
(57,186)
30,829
(2)
(26,359)
(32,338)
16,116
(172)
(16,394)
(100,921)
30,442
(17)
(70,496)
Financing activities
Borrowings under long-term debt .........................................................
Principal payments on long-term debt ...................................................
Principal payments on capitalized lease obligations ..............................
Principal payments on note payable ......................................................
Net (decrease) increase in bank drafts payable......................................
Payments to repurchase Common Stock ...............................................
Excess tax benefit (charge) from exercise of stock options ..................
Proceeds from sale of treasury stock .....................................................
Proceeds from exercise of stock options ...............................................
Net cash (used in) provided by financing activities .........................
120,689
(130,582)
(27,051)
(1,963)
(7,285)
--
23
--
186
(45,983)
155,278
(150,178)
(27,836)
(2,299)
246
(17,403)
(12)
--
895
(41,309)
201,431
(177,007)
(22,202)
(2,534)
4,124
(4,199)
213
73
486
385
Decrease (increase) in cash and cash equivalents .........................................
(6,473)
882
Cash and cash equivalents:
Beginning of period .........................................................................
End of period ....................................................................................$
8,014
1,541
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest ..............................................................................................$
Income taxes ....................................................................................
Supplemental schedule of non-cash investing and financing activities:
Liability incurred for leases on revenue equipment ..............................
Liability incurred for note payable ........................................................
4,789
499
38,640
1,710
See accompanying notes.
$
$
7,132
8,014
$
$
5,154
560
23,745
2,046
6,138
994
7,132
3,977
2,206
4,104
2,178
38
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008
1. Summary of Significant Accounting Policies
Description of Business
USA Truck (the “Company”) is a short- to medium-haul, dry van truckload carrier transporting general
commodities throughout the continental United States and between locations in the United States and Canada. The
Company transports general commodities into Mexico by allowing through-trailer service on our trailers through the
facility in the city of Laredo, Texas, which is operated by the Company’s wholly-owned subsidiary.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All
intercompany accounts and significant intercompany transactions have been eliminated in consolidation. The Company
has no investments in or contractual obligations with variable interest entities.
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. On occasion, the Company will accumulate balances in a money market account in an amount that exceeds the
depository bank’s federally insured limit. Because these balances are accumulated on a short-term basis, the Company
does not believe its exposure to loss to be a significant risk.
Accounts Receivable and Concentration of Credit Risk
The Company extends credit to its customers in the normal course of business. The Company performs ongoing
credit evaluations and generally does not require collateral. Trade accounts receivable are recorded at their invoiced
amounts, net of allowance for doubtful accounts. The Company evaluates the adequacy of its allowance for doubtful
accounts quarterly. Accounts outstanding longer than contractual payment terms are considered past due and are
reviewed individually for collectibility. The Company maintains reserves for potential credit losses based upon its loss
history and specific receivables aging analysis. Receivable balances are written off when collection is deemed unlikely.
Such losses have been within management’s expectations.
Accounts receivable are comprised of a diversified customer base that results in a lack of concentration of credit
risk. During 2008, 2007 and 2006, the Company’s top ten customers generated 32%, 34% and 36% of total revenue,
respectively. During the three year period ended December 31, 2008, no single customer represented more than 10% of
total revenue. Other accounts receivable consists primarily of proceeds from the sale of revenue equipment. The
carrying amount reported in the balance sheet for accounts receivable approximates fair value based on the fact that the
receivables collection averaged approximately 30 days from the billing date.
The following table provides a summary of the activity in the allowance for doubtful accounts for 2008, 2007 and
2006:
Balance at beginning of year .....................................................
Amounts (credited) charged to expense ....................................
Uncollectible accounts written off, net of recovery ..................
Balance at end of year ...............................................................
$
$
Use of Estimates
(in thousands)
Year Ended December 31,
2008
2007
2006
81
135
(12)
204
$
$
96
(15)
--
81
$
$
104
36
(44)
96
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States 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.
39
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Significant Accounting Policies (continued)
Inventories
Inventories consist of tires, fuel, supplies and Company store merchandise and are stated at the lower of cost (first-
in, first-out basis) or market.
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. The Company adopted the provisions of FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, Accounting for Income
Taxes (“FIN 48”) on January 1, 2007 and has analyzed filing positions in its federal and applicable state tax returns as
well as in all open tax years. The only periods subject to examination for its federal returns are the 2005, 2006 and 2007
tax years. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and
penalties as operating expenses. The Company believes that its income tax filing positions and deductions will be
sustained on audit and do not anticipate any adjustments that will result in a material change to its consolidated
financial position, results of operations and cash flows. Therefore, no reserves for uncertain income tax positions have
been recorded pursuant to FIN 48. At January 1, 2008, the Company had no unrecognized tax benefits and we have not
recorded any through December 31, 2008. In addition, the Company did not record a cumulative effect adjustment
related to the adoption of FIN 48.
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. Revenue equipment acquired under capital lease is depreciated over the
lease term. 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.
We currently own two facilities in the Dayton, OH market, one of which is not being used. During the third
quarter of 2008, we recorded an asset impairment charge in the amount of approximately $0.3 million to write down the
asset’s value to its estimated market value, net of costs of disposal. This write down is included in Other expenses in
the accompanying Consolidated Statements of Income. On October 23, 2008, we entered into a contract to sell this
facility, which is expected to close during the first quarter of 2009.
During the fourth quarter of 2008, the Company removed from service approximately 250 tractors. The reduction
in the Company-owned fleet targeted those tractors with the highest miles and resulted in an impairment charge in the
amount of approximately $0.5 million relating to certain of those tractors. This write down, which adjusted the book
value of the tractors down to their market value, is included in Other operating expenses in the accompanying
Consolidated Statements of Income. The Company intends to dispose of roughly half of those high mileage tractors
during the first half of 2009.
Claims Liabilities
The Company is self-insured up to certain limits for bodily injury, property damage, workers’ compensation, cargo
loss and damage claims and medical benefits. Provisions are made for both the estimated liabilities for known claims as
incurred and estimates for those incurred but not reported.
The Company’s self-insurance retention levels are $0.5 million for workers’ compensation claims per occurrence,
$0.05 million for cargo loss and damage claims per occurrence and $1.0 million for bodily injury and property damage
claims per occurrence. For medical benefits, the Company self-insures up to $0.25 million per plan participant per year
with an aggregate claim exposure limit determined by the Company’s year-to-date claims experience and its number of
covered lives. The Company is completely self-insured for physical damage to its own tractors and trailers, except that
40
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Significant Accounting Policies (continued)
the Company carries catastrophic physical damage coverage to protect against natural disasters. The Company
maintains insurance above the amounts for which it self-insures, to certain limits, with licensed insurance carriers. The
Company has excess general, auto and employer’s liability coverage in amounts substantially exceeding minimum legal
requirements, and the Company believes this coverage is sufficient to protect against material loss.
The Company records claims accruals at the estimated ultimate payment amounts based on information such as
individual case estimates or historical claims experience. The current portion reflects the amounts of claims expected to
be paid in the next twelve months. In making the estimates of ultimate payment amounts and the determinations of the
current portion of each claim the Company relies on past experience with similar claims, negative or positive
developments in the case and similar factors. The Company re-evaluates these estimates and determinations each
reporting period based on developments that occur and new information that becomes available during the reporting
period.
Interest
The Company capitalizes interest on major projects during construction. Interest is capitalized based on the
average interest rate on related debt. Capitalized interest was $0.06 million, $0.02 million and $0.02 million in 2008,
2007 and 2006, respectively. Interest expense was $4.6 million, $5.1 million and $4.2 million in 2008, 2007 and 2006,
respectively.
Earnings Per Share
Basic earnings per share is computed based on the weighted average number of shares of Common Stock
outstanding during the year. Diluted earnings per share is computed by adjusting the weighted average shares
outstanding by Common Stock equivalents attributable to dilutive stock options and restricted stock.
Segment Reporting
The service offerings we provide relate to the transportation of truckload quantities of freight for customers in a
variety of industries. The services generate revenue, and to a great extent incur expenses, primarily on a per mile basis.
Our business is classified into the Trucking operating segment and the Strategic Capacity Solutions operating segment,
which we previously designated as operating divisions. These two operating segments are aggregated into one segment
for financial reporting purposes in accordance with FASB Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”). Trucking consists primarily of
our General Freight and Dedicated Freight divisions, which provide truckload freight services. The results of our
regional freight operations, which we previously reported as a separate division, are now included as part of the results
of our General Freight division. We previously referred to our freight brokerage operations as our “Strategic Capacity
Solutions” division. We now use “Strategic Capacity Solutions” to refer to the operating segment, which now consists
primarily of our Freight Brokerage service offering. This service offering within the Strategic Capacity Solutions
operating segment is intended to provide services that complement our Trucking services, primarily to existing
customers of our Trucking operating segment. A majority of the customers of Strategic Capacity Solutions have also
engaged us to provide services through one or more of our Trucking service offerings. Our Strategic Capacity
Solutions operating segment represents a relatively minor part of our business, generating approximately 4.2%, 2.3%
and 3.8% of our total base revenue for the years ended December 31, 2008, 2007 and 2006, respectively. In addition,
during December 2007, we began offering rail intermodal services. The operating segment into which our rail
intermodal service offerings are classified depends on whether or not Company equipment is used in providing the
service. If Company equipment is used, those results are included in our Trucking operating segment. If Company
equipment is not used, those results are included in our Strategic Capacity Solutions operating segment. For the year
ended December 31, 2008, rail intermodal service offerings generated approximately 1.2% of total base revenue.
Our business is classified into the Trucking operating segment and the Strategic Capacity Solutions operating
segment, which we previously designated as operating divisions. Our Trucking operating segment includes those
transportation services in which we use Company-owned tractors and owner-operator tractors, as well as Trailer-on-
Flat-Car rail intermodal service. Our Strategic Capacity Solutions operating segment, which we previously referred to
as USA Logistics, consists of services such as freight brokerage, transportation scheduling, routing and mode selection,
41
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Significant Accounting Policies (continued)
as well as Container-on-Flat-Car rail intermodal service, which typically do not involve the use of Company-owned or
owner-operator equipment. Both Trucking and Strategic Capacity Solutions have similar economic characteristics and
are impacted by virtually the same economic factors as discussed elsewhere in this report.
Our decision to aggregate our two operating segments into one reporting segment was based on factors such as the
similar economic and operating characteristics of our service offerings and our centralized internal management
structure. Except with respect to the relatively minor components of our operations that do not involve the use of our
tractors, key operating statistics include, for example, revenue per mile and miles per tractor per week. While the
operations of our Strategic Capacity Solutions service offerings do not involve the use of our equipment and drivers, we
nevertheless provide truckload freight services to our customers through arrangements with third party carriers who are
subject to the same general regulatory environment and cost sensitivities imposed upon our Trucking operations.
Revenue Recognition
Revenue generated by the Company’s Trucking operating segment is recognized in full upon completion of
delivery of freight to the receiver’s location. For freight in transit at the end of a reporting period, the Company
recognizes revenue pro rata based on relative transit time completed as a portion of the estimated total transit time in
accordance with EITF 91-9, Method 5 issued by the Emerging Issues Task Force (“EITF”) of the FASB. Expenses are
recognized as incurred.
Revenue generated by our Strategic Capacity Solutions operating segment is recognized upon completion of the
services provided. Revenue is recorded on a gross basis, without deducting third party purchased transportation costs,
as we act as a principal with substantial risks as primary obligor.
Management believes these policies most accurately reflect revenue as earned and direct expenses, including third
party purchased transportation costs, as incurred.
New Accounting Pronouncements
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161
changes the disclosure requirements for derivative instruments and hedging activities by requiring enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, and
its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial
position, financial performance, and cash flows. SFAS 161 becomes effective for us on January 1, 2009, and we do not
expect it to have a material impact on our financial reporting.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities (“SFAS 159”), which provides companies with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in
accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities
differently. SFAS 159 establishes presentation and disclosure requirements designed to facilitate comparisons between
companies that choose different measurement attributes for similar types of assets and liabilities and to more easily
understand the effect on earnings of a company’s choice to use fair value. SFAS 159 also requires entities to display
the fair value of the selected assets and liabilities on the face of the balance sheet. SFAS 159 does not eliminate
disclosure requirements of other accounting standards, including fair value measurement disclosures in Statement of
Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”), discussed below. Unrealized gains
and losses on items for which the fair value option has been elected are reported in earnings. This statement became
effective for us on January 1, 2008, and did not have a material impact on our financial position, results of operations
and cash flows.
In September 2006, the FASB issued SFAS 157. SFAS 157 defines fair value, establishes a framework for
measuring fair value in General Accepted Accounting Principles (“GAAP”) and expands disclosures about fair value
measurements. This statement was published due to the different definitions of fair value that are among the many
accounting pronouncements that require fair value measurements and the limited guidance for applying those
definitions in GAAP. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer
42
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Summary of Significant Accounting Policies (continued)
a liability in an orderly transaction between market participants at the measurement date. This statement became
effective for us on January 1, 2008, and did not have a material impact on our financial position, results of operations
and cash flows.
2. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
(in thousands)
December 31,
2008
2007
Prepaid licenses, permits and tolls .................................................... $
Prepaid insurance ..............................................................................
Other .................................................................................................
Total prepaid expenses and other current assets .......................... $
2,169
1,307
905
4,381
$
$
2,121
1,552
778
4,451
3. Derivative Financial Instruments
We record derivative financial instruments in the balance sheet as either an asset or liability at fair value, with
classification as current or long-term depending on the duration of the instrument.
Changes in the derivative instrument’s fair value must be recognized currently in earnings unless specific hedge
accounting criteria are met. For cash flow hedges that meet the criteria, the derivative instrument’s gains and losses, to
the extent effective, are recognized in accumulated other comprehensive income and reclassified into earnings in the
same period during which the hedged transaction affects earnings.
On October 21, 2008, we entered into an interest rate swap agreement with a notional amount of $9.0 million with
an effective date of October 21, 2008. We designated the $9.0 million interest rate swap as a cash flow hedge of our
exposure to variability in future cash flow resulting from the interest payments indexed to the three-month London
Interbank Offered Rate (“LIBOR”). The rate on the swap is fixed at 4.25% until January 20, 2009.
On February 6, 2009, USA Truck, Inc. entered into a $10 million dollar interest rate swap agreement with an
effective date of February 19, 2009. The rate on the swap is fixed at 1.57% until February 19, 2011. The interest rate
swap agreement will be accounted for as a cash flow hedge.
4. Comprehensive Income
Comprehensive income was comprised of net income plus the market value adjustment on our interest rate swap
that expired on January 20, 2009, which was designated as a cash flow hedge. Comprehensive income consisted of the
following components:
(in thousands)
December 31,
2008
Net income .................................................................................... $
Change in fair value of interest rate swap, net
of income tax benefit of $(33).....................................................
Total comprehensive income ........................................................ $
3,140
(53)
3,087
5. Accrued Expenses
Accrued expenses consist of the following:
Salaries, wages, bonuses and employee benefits .............................. $
Other (1) ............................................................................................
Total accrued expenses ................................................................ $
4,118
8,040
12,158
$
$
3,869
5,703
9,572
(in thousands)
December 31,
2008
2007
43
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Accrued Expenses (continued)
(1) As of December 31, 2008 and 2007, no single item included within other accrued expenses exceeded 5.0% of
the Company’s total current liabilities.
6. Note Payable
At December 31, 2008, the Company had an unsecured note payable of $1.3 million payable in monthly
installments of principal and interest of approximately $145,600 that matures on September 1, 2009, bearing interest at
4.8%. At December 31, 2007, the Company had an unsecured note payable of $1.5 million payable in monthly
installments of principal and interest of approximately $174,600 that matured on September 1, 2008, bearing interest at
5.3%. Both of these notes payable were used to finance a portion of the Company’s annual insurance premiums at a
favorable fixed rate of interest.
7. Long-term Debt
Long-term debt consists of the following:
Revolving credit agreement (1).............................................................$
Capitalized lease obligations (2) ...........................................................
Less current maturities ..........................................................................
Long-term debt, less current maturities .................................................$
(in thousands)
December 31,
2008
2007
33,200
63,120
96,320
16,956
79,364
$
$
43,093
51,531
94,624
24,412
70,212
(1) Our Amended and Restated Senior Credit Facility provides for available borrowings of $100.0 million,
including letters of credit not exceeding $25.0 million. Availability may be reduced by a borrowing base limit
as defined in the Facility. At December 31, 2008, we had approximately $33.2 million in borrowing and $6.6
million in letters of credit outstanding, and $60.2 million available under the Facility. The Facility matures on
September 1, 2010. The Facility provides an accordion feature allowing us to increase the maximum
borrowing amount by up to an additional $75.0 million in the aggregate in one or more increases no less than
six months prior to the maturity date, subject to certain conditions. Accordingly, the Facility can be increased
to $175.0 million at our option, with the additional availability provided by the current lenders, at their
election, or by other lenders. At this time, the Company does not anticipate the need to exercise the accordion
feature or, if needed, we do not expect to encounter any difficulties in doing so. The Facility bears variable
interest based on the agent bank’s prime rate, or the federal funds rate plus a certain percentage or the LIBOR
plus a certain percentage, which is determined based on our attainment of certain financial ratios. The interest
rate on our borrowings under the Facility at December 31, 2008 was 4.3%. A quarterly commitment fee is
payable on the unused portion of the credit line and bears a rate which is determined based on our attainment
of certain financial ratios. At December 31, 2008, the rate was 0.2% per annum. The Facility is collateralized
by revenue equipment having a net book value of $183.4 million at December 31, 2008, and all trade and other
accounts receivable. The Facility requires us to meet certain financial covenants and to maintain a minimum
tangible net worth of approximately $133.9 million at December 31, 2008. We were in compliance with these
covenants at December 31, 2008. The covenants would prohibit the payment of dividends by us if such
payment would cause us to be in violation of any of the covenants. The carrying amount reported in the
balance sheet for borrowings under the Facility approximates its fair value as the applicable interest rates
fluctuate with changes in current market conditions.
(2) Our capitalized lease obligations have various termination dates extending through April 2012 and contain
renewal or fixed price purchase options. The effective interest rates on the leases range from 3.3% to 5.0% at
December 31, 2008. The lease agreements require us to pay property taxes, maintenance and operating
expenses.
8. Leases and Commitments
The Company leases certain revenue equipment under capital leases with terms from three to five years. At
December 31, 2008, property and equipment included capitalized leases, which had capitalized costs of $81.6 million,
accumulated amortization of $18.8 million and a net book value of $62.8 million. At December 31, 2007, property and
44
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Leases and Commitments (continued)
equipment included capitalized leases, which had capitalized costs of $78.7 million, accumulated amortization of $27.4
million and a net book value of $51.3 million. Amortization of leased assets is included in depreciation and
amortization expense and totaled $13.0 million, $14.2 million and $15.9 million for the years ended December 31,
2008, 2007 and 2006, respectively.
At December 31, 2008, the future minimum payments under capitalized leases with initial terms of one year or
more were $19.1 million for 2009, $21.1 million for 2010, $15.5 million for 2011 and $11.9 million for 2012. As of
December 31, 2008, the remaining minimum capital lease payments were $63.1 million, which excludes amounts
representing interest of $4.5 million. The current portion of net minimum lease payments, including interest, is $19.1
million.
From time to time we enter into operating leases for certain facilities and office equipment. Rent expense under
those operating leases was $1.2 million, $1.2 million and $0.9 million in 2008, 2007 and 2006, respectively. At
December 31, 2008 the Company was obligated to pay future rentals under those operating leases of $0.4 million, $0.2
million, $0.1 million, $0.01 million, $0.01 million and $0.3 million for 2009, 2010, 2011, 2012, 2013 and thereafter,
respectively.
Certain leases contain cross-default provisions with other financing agreements of the Company.
Commitments to purchase revenue equipment (including capital leases) and other fixed assets aggregated
approximately $12.5 million at December 31, 2008.
9. Federal and State Income Taxes
Significant components of the Company’s deferred tax liabilities and assets are as follows:
(in thousands)
December 31,
2008
2007
Current deferred tax assets:
Accrued expenses not deductible until paid ...........................................$
Equity Incentive Plan ..............................................................................
Alternative Minimum Tax credit ............................................................
Revenue recognition ...............................................................................
Allowance for doubtful accounts ............................................................
Total current deferred tax assets ..................................................................
$
5,755
360
-
204
78
6,397
Current deferred tax liability:
Prepaid expenses deductible when paid..................................................
Total current deferred tax liability ...............................................................
Net current deferred tax assets .....................................................................$
(1,680)
(1,680)
$
4,717
Noncurrent deferred tax assets:
Capitalized leases ....................................................................................$
Interest rate swap ....................................................................................
Non-compete agreement .........................................................................
Total noncurrent deferred tax assets ............................................................
137 $
33
129
299
6,355
289
278
174
31
7,127
(1,707)
(1,707)
5,420
49
-
151
200
Noncurrent deferred tax liabilities:
Tax over book depreciation ....................................................................
Other .......................................................................................................
Total noncurrent deferred tax liabilities .......................................................
Net deferred tax liabilities ............................................................................$
(48,834)
(28)
(48,862)
(48,563) $
(48,201)
(23)
(48,224)
(48,024)
45
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Federal and State Income Taxes (continued)
For the year ended December 31, 2008, the Company’s effective tax rate decreased to 57.4% from 95.6%. This
decrease of 38.2% was primarily due to an increase in pre-tax income, which made the nondeductible items less of an
impact to the overall tax rate. The change in the effective tax rate resulted in an increase of the deferred tax liability of
approximately $0.5 million and a decrease in the deferred tax asset of approximately $0.7 million.
Significant components of the provision for income taxes are as follows:
Current:
Federal .........................................................................$
State .............................................................................
Total current ...............................................................
Deferred:
Federal .........................................................................
State .............................................................................
Total deferred .............................................................
Total income tax expense ...........................................$
(in thousands)
Year Ended December 31,
2007
2008
2006
2,443
507
2,950
1,056
219
1,275
4,225
$
$
156
$
32
188
2,344
486
2,830
$
3,018
1,178
244
1,422
7,027
1,456
8,483
9,905
A reconciliation between the effective income tax rate and the statutory federal income tax rate is as follows:
Income tax at statutory federal rate .................................$
Federal income tax effects of:
State income taxes .....................................................
Per diem and other nondeductible meals and
entertainment .............................................................
Other ..........................................................................
Federal income taxes .................................................
State income taxes ...........................................................
Total income tax expense ................................................$
Effective tax rate .............................................................
(in thousands)
Year Ended December 31,
2007
2008
2006
2,504
$
1,074
$
7,572
(258)
1,274
(55)
3,465
760
4,225
57.4%
(189)
(615)
1,685
(109)
2,461
557
$
3,018
$
95.6%
1,634
(494)
8,097
1,808
9,905
44.3%
The effective rates varied from the statutory federal tax rate primarily due to state income taxes and certain non-
deductible expenses including a per diem pay structure for drivers. Due to the partially nondeductible effect of per
diem pay, the Company’s tax rate will fluctuate in future periods based on fluctuations in earnings and in the number of
drivers who elect to receive this pay structure.
10. Employee Benefit Plans
The Company sponsors the USA Truck, Inc. Employees’ Investment Plan, a tax deferred savings plan under
section 401(k) of the Internal Revenue Code that covers substantially all employees. Employees can contribute up to
50% of their compensation, subject to statutory limits, with the Company matching 50% of the first 4% of
compensation contributed by each employee. Employees’ rights to employer contributions vest after three years from
their date of employment. Company matching contributions to the plan were approximately $0.7 million, $0.8 million
and $0.7 million for 2008, 2007 and 2006, respectively.
46
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock Plans
The current equity compensation plans that have been approved by our stockholders are our 2004 Equity Incentive
Plan and our 2003 Restricted Stock Award Plan. There is also one other plan, our Employee Stock Option Plan, under
which options remain outstanding, but no new options may be granted. We do not have any equity compensation plans
under which equity awards are outstanding or may be granted that have not been approved by our stockholders.
The USA Truck, Inc. 2004 Equity Incentive Plan provides for the granting of incentive or nonqualified options or
other equity-based awards covering up to 1,000,000 shares of Common Stock to directors, officers and other key
employees. On the day of each annual meeting of stockholders of the Company for a period of nine years, which
commenced with the annual meeting of stockholders in 2005 and will end with the annual meeting of stockholders in
2013, the maximum number of shares of Common Stock that is available for issuance under the Plan is automatically
increased by that number of shares equal to the lesser of 25,000 shares or such lesser number of shares (which may be
zero or any number less than 25,000) as determined by the Board. No options were granted under this plan for less than
the fair market value of the Common Stock as defined in the plan at the date of the grant. Although the exercise period
is determined when options are granted, no option may be exercised later than 10 years after it is granted. Options
granted under this plan generally vest ratably over five years. The option price under this plan is the fair market value
of the Company’s common stock at the date the options were granted, except that the exercise prices of options granted
to the Chairman of the Board are equal to 110% of the fair market value of the Company’s common stock at the date
those options were granted. The exercise prices of outstanding options granted under the 2004 Equity Incentive Plan
range from $11.47 to $30.22 as of December 31, 2008. At December 31, 2008, approximately 475,975 shares were
available for granting future options or other equity awards under this plan. The Company issues new shares upon the
exercise of stock options.
Effective January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement of
Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123(R)”), using the modified-
prospective transition method. Under the modified-prospective transition method, the prior period’s financial
statements are not restated. Compensation cost recognized in 2006 includes: (a) compensation cost for all share-based
payments granted prior to, but not yet vested as of January 1, 2006 and (b) compensation cost for all share-based
payments granted subsequent to January 1, 2006. The compensation cost is based on the grant-date fair value
calculated using a Black-Scholes-Merton option-pricing formula and is amortized over the vesting period in accordance
with provisions of SFAS 123(R). For the year ended December 31, 2008, the Company recognized approximately $0.3
million in compensation expense related to incentive and non-qualified stock options granted under its 2004 Equity
Incentive Plan. For each of the years ended December 31, 2007 and 2006, the Company recognized approximately
$0.3 million in compensation expense related to incentive and non-qualified stock options granted under its 2004
Equity Incentive Plan. The adoption of SFAS 123(R) impacted the Company’s results of operations by increasing
salaries, wages and employee benefits expense and increasing deferred income taxes. Such increases were immaterial
in amount. Accordingly, the adoption of SFAS 123(R) had no effect on the Company’s basic and diluted earnings per
share for the year ended December 31, 2006.
Prior to the adoption of SFAS 123(R), the Company presented all tax benefits of deductions resulting from the
exercise of stock options as operating cash flows in the Consolidated Statements of Cash Flows. SFAS 123(R) requires
the cash flows resulting from the tax benefits of tax deductions in excess of the compensation cost recognized for those
options (excess tax benefits) to be classified as financing cash flows.
47
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock Plans (continued)
Information related to option activity for the year ended December 31, 2008 is as follows:
Number of
Options
298,450
--
(18,775)
(58,375)
221,300
108,200
Weighted
Average
Exercise Price
15.61
$
--
10.90
14.72
16.24
14.47
$
Weighted
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic Value
(1)
46,955
2.1
0.7
$
$
222,930
159,922
Outstanding - beginning of year .............
Granted ...................................................
Exercised ................................................
Cancelled/forfeited/expired ....................
Outstanding at December 31, 2008 ........
Exercisable at December 31, 2008 (2) ...
(1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds
the exercise price of the option. The per share market value of the Company’s Common Stock, as determined
by the closing price on December 31, 2008 (the last trading day of the fiscal year), was $13.79. The intrinsic
value for options exercised in 2008 was $46,955 and in 2007 was $484,752.
(2) The fair value of the options exercisable at December 31, 2008 was $0.5 million.
Information related to the weighted average fair value of stock option activity for the year ended December 31,
2008 is as follows:
Nonvested options - December 31, 2007 .................
Granted (1) ...............................................................
Forfeited ...................................................................
Vested .......................................................................
Nonvested options - December 31, 2008 .................
Number of Shares
Under Options
188,000
--
(8,700)
(66,200)
113,100
Weighted Average
Fair Value
$
16.84
--
17.23
14.94
17.93
(1) Weighted average fair value for options granted in 2007 was $7.74 and in 2006 was $11.67.
48
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock Plans (continued)
The exercise price, number, weighted average remaining contractual life of options outstanding and the number of
options exercisable as of December 31, 2008 is as follows:
Exercise
Price
$
11.47
12.10
12.62
12.66
14.50
15.83
16.08
17.06
22.54
22.93
30.22
Number of Options
Outstanding
Weighted Average
Remaining Contractual
Life (in years)
Number of
Options
Exercisable
81,900
9,600
5,000
9,600
2,400
5,000
4,500
35,000
60,050
4,500
3,750
221,300
1.3
0.1
0.3
1.6
5.7
5.6
0.6
3.6
2.7
1.3
2.1
2.1
56,300
9,600
5,000
6,400
--
--
2,250
6,200
19,450
1,500
1,500
108,200
The following assumptions were used to value the stock options granted during the years indicated:
Dividend yield ............................................
Expected volatility ......................................
Risk-free interest rate .................................
Expected life ...............................................
2008
--
--
--
--
2007
0%
38.7% - 49.9%
4.2% - 5.0%
3 to 9 years
2006
0%
40.2% - 52.1%
4.4% - 5.0%
2 to 7 years
Expected volatility is a measure of the expected fluctuation in share price. The Company uses the historical
method to calculate volatility with the historical period being equal to the expected life of each option. This calculation
is then used to determine the potential for the share price to increase over the expected life of the option. Expected life
represents the length of time the options are anticipated to be outstanding before being exercised. Based on historical
experience, that time period is best represented by the option’s contractual life. The risk-free interest rate is based on
an implied yield on United States zero-coupon treasury bonds with a remaining term equal to the expected life of the
outstanding options. In addition to the above, the Company also includes a factor for anticipated forfeiture, which
represents the number of shares under options expected to be forfeited over the expected life of the option.
The 2003 Restricted Stock Award Plan allows the Company to issue up to 150,000 shares of Common Stock as
awards of restricted stock to its officers, 100,000 shares of which have been awarded. Awards under the Plan vest over
a period of no less than five years and vesting of awards is also subject to the achievement of performance goals set by
the Board of Directors based on criteria set forth in the Plan. The fair value of the 100,000 shares of Common Stock
subject to the awards previously granted are being amortized over the vesting period as compensation expense based on
management’s assessment as to whether achievement of the performance goals is probable. To the extent the
performance goals are not achieved and there is not full vesting in the shares awarded, the compensation expense
recognized to the extent of the non-vested and forfeited shares will be reversed. Prior to the adoption of SFAS 123(R)
on January 1, 2006, the Company recorded any unamortized compensation related to the restricted stock awards as
unearned compensation in equity. In accordance with the provisions of SFAS 123(R), the compensation expense
recognized is based on the market value of the Company’s Common Stock on the date the restricted stock award is
granted and is not adjusted in subsequent periods. The amount recognized is amortized over the vesting period. The
stock-based compensation (credit) expense that was recognized related to the Company’s restricted stock awards was
$0.01 million, ($0.2) million and $0.4 million in 2008, 2007 and 2006, respectively, and is included in salaries, wages
and employee benefits in the consolidated statements of income. The stock-based compensation expense related to
restricted stock awards decreased in 2008 and 2007 because of the forfeiture of shares previously awarded due to the
49
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock Plans (continued)
Company not meeting designated performance goals for either year and for the termination of the employment of an
officer of the Company in 2007. Accordingly, the compensation expense previously recognized for the 14,000
shares that were to vest on March 1, 2009 and the 24,000 shares that were to vest on March 1, 2008, based on 2008
and 2007 performance, respectively, has been reversed. The 14,000 shares will remain outstanding until their
scheduled vesting date of March 1, 2009, at which time their forfeiture will become effective. The 24,000 shares
remained outstanding until their scheduled vesting date of March 1, 2008 at which time their forfeiture became
effective. For financial statement purposes, the 14,000 forfeited shares and the 24,000 forfeited shares have been
recorded as treasury stock at December 31, 2008 and 2007, respectively.
Information related to the 2003 Restricted Stock Award Plan for the year ended December 31, 2008 is as
follows:
Number of
Shares
Weighted Average
Fair Value
Nonvested shares - December 31, 2007 .................
Granted ...................................................................
Forfeited .................................................................
Vested .....................................................................
Nonvested shares - December 31, 2008 .................
$
22,000
--
(14,000)
--
8,000
20.37
--
16.21
--
27.66
On July 16, 2008, the Executive Compensation Committee of the Board of Directors of the Company, pursuant
to the 2004 Equity Incentive Plan, granted thereunder awards totaling 200,000 restricted shares of the Company’s
Common Stock to certain officers of the Company. The grants were made effective as of July 18, 2008 and were
valued at $12.13 per share, which was the closing price of the Company’s Common Stock on that date. Each
participating officer’s restricted shares of Common Stock will vest in varying amounts over the ten year period
beginning April 1, 2011, subject to the Company’s attainment of retained earnings growth. Management must
attain an average five-year trailing retained earnings annual growth rate of 10.0% (before dividends) in order for the
shares to qualify for full vesting (pro rata vesting will apply down to 50.0% at a 5.0% annual growth rate). Any
shares that fail to vest as a result of the Company’s failure to attain a performance goal will revert to the 2004
Equity Incentive Plan where they will remain available for grants under the terms of that plan until that plan expires
in 2014.
Information related to the 2008 Restricted Stock Award for the year ended December 31, 2008 is as follows:
Number of
Shares
Weighted Average
Fair Value
Nonvested shares - December 31, 2007 .................
Granted ...................................................................
Forfeited .................................................................
Vested .....................................................................
Nonvested shares - December 31, 2008 .................
$
--
200,000
--
--
200,000
--
12.13
--
--
12.13
As of December 31, 2008, unrecognized compensation expense that related to stock options and restricted stock
was $0.3 million and $2.3 million, respectively, which is expected to be recognized over a weighted average period
of approximately 2.1 years for stock options and 7.1 years for restricted stock.
On January 28, 2009, the Executive Compensation Committee of the Board of Directors of the Company
approved the USA Truck, Inc. Executive Team Incentive Plan. The Plan consists of cash and equity incentive
awards. The cash incentives will be awarded upon the achievement of predetermined results in designated
performance measurements, which will be identified by the Committee on an annual basis. Plan participants will be
paid a cash percentage of their base salaries corresponding with the level of results achieved. As determined by the
Committee on an annual basis, Plan participants are also eligible for an annual Equity Incentive Award consisting of
Company Common Stock. The Equity Incentive Awards will consist of a combination of Restricted Stock Awards
(“RSA’s”) and Incentive Stock Options (“ISO’s”). The value of the equity award to each participant will be granted
fifty percent in the form of RSA’s and fifty percent in the form of ISO’s, as defined. To the extent options fail to
50
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Stock Plans (continued)
qualify as “incentive stock options” under IRS regulations, they will be non-qualified stock options. Annual awards
approved by the Committee will be granted quarterly and will vest one-third each year on August 1, beginning the
year following the year in which the shares are awarded.
12. Earnings per Share
The following table sets forth the computation of basic and diluted earnings per share:
(in thousands, except per share amounts)
Year Ended December 31,
2007
2006
2008
Numerator:
Net income ........................................................................$
3,140
$
140
$
12,441
Denominator:
Denominator for basic earnings per share – weighted
average shares .................................................................
Effect of dilutive securities:
Restricted Stock Award Plan .........................................
Employee stock options ................................................
Denominator for diluted earnings per share – adjusted
weighted average shares and assumed conversions ........
Basic earnings per share .......................................................$
Diluted earnings per share ....................................................$
Stock option shares not included in earnings per share
calculation for the periods presented because their effect is
anti-dilutive ..........................................................................
13. Common Stock Transactions
10,220
10,596
11,353
--
18
18
--
55
55
68
140
208
10,238
0.31
0.31
$
$
10,651
0.01
0.01
11,561
1.10
1.08
$
$
117
132
90
On January 24, 2007, the Company publicly announced that its Board of Directors authorized the repurchase of
up to 2,000,000 shares of its outstanding Common Stock over a three-year period ending January 24, 2010. The
Company may make Common Stock purchases under this program on the open market or in privately negotiated
transactions at prices determined by its Chairman of the Board or President. The Board had previously approved an
authorization, publicly announced on October 19, 2004, to repurchase up to 500,000 shares and the remaining
balance of 264,000 shares was repurchased during the first quarter of 2007 at a total cost of approximately $4.3
million. During the year ended December 31, 2008, the Company did not repurchase any shares of its Common
Stock. During the year ended December 31, 2007, we repurchased a total of 834,099 shares of its Common Stock
under the current authorization, at a total cost of approximately $13.1 million. The Company’s current repurchase
authorization has 1,165,901 shares remaining.
14. Fair Value of Financial Instruments
At December 31, 2008 and 2007, the amount reported in the Company’s balance sheets for its Senior Credit
Facility and capital leases approximate their fair value.
15. Litigation
The Company is a party to routine litigation incidental to our business, primarily involving claims for personal
injury and property damage incurred in the transportation of freight. Though management believes these claims to
be routine and immaterial to the long-term financial position of the Company, adverse results of one or more of
these claims could have a material adverse effect on the financial position of the Company, results of operations or
cash flow.
51
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Litigation (continued)
On May 22, 2006, a former independent sales agent filed a lawsuit against us entitled All-Ways Logistics, Inc. v.
USA Truck, Inc., in the U.S. District Court for the Eastern District of Arkansas, Jonesboro Division, alleging,
among other things, breach of contract, breach of implied duty of good faith and fair dealing, and tortious
interference with business relations. The plaintiff alleged that we breached and wrongfully terminated our
commission sales agent agreement with it and improperly interfered with its business relationship with certain of its
customers. In early August, the jury returned an unfavorable verdict in this contract dispute. The jury held that we
breached the contract and awarded the plaintiff damages of approximately $3.0 million, which was accrued during
the quarter ended September 30, 2007. In its December 4, 2007 order, the court denied substantially all of USA
Truck’s motions for post-trial relief and granted the plaintiff’s motions for pre-judgment interest, attorney’s fees and
costs in an amount totaling approximately $1.7 million, which was accrued during the fourth quarter of 2007. The
court’s order also awarded the plaintiff post-judgment interest, of which we accrued approximately $0.2 million for
the year ended December 31, 2008. On January 2, 2008, the Company filed an appeal of the verdict and the court’s
order and on September 25, 2008, the Company presented an oral argument before the 8th Circuit United States
Court of Appeals. The Court of Appeals has not yet ruled on the matter.
16. Quarterly Results of Operations (Unaudited)
The tables below present quarterly financial information for 2008 and 2007:
(in thousands, except per share amounts)
2008
Three Months Ended
Operating revenues .................................... $
Operating expenses and costs ....................
Operating (loss) income ............................
Other expenses, net ...................................
(Loss) income before income taxes ...........
Income tax (benefit) expense ....................
Net (loss) income....................................... $
Average shares outstanding (basic) ...........
Basic (loss) earnings per share .................. $
Average shares outstanding (diluted) ........
Diluted (loss) earnings per share ............... $
March 31,
June 30,
$
127,238
128,647
(1,409)
1,169
(2,578)
(632)
(1,946) $
10,211
(0.19) $
10,211
(0.19) $
146,127
141,017
5,110
1,058
4,052
1,917
2,135
10,220
0.21
10,227
0.21
$
September 30, December 31,
$
116,167
113,571
2,596
1,098
1,498
899
599
146,089
140,238
5,851
1,458
4,393
2,041
2,352
$
$
10,223
0.23
10,251
0.23
$
$
10,225
0.06
10,244
0.06
$
$
Note - The above amounts have been previously reported in the Company’s quarterly reports on Form 10-Q.
Certain line items in those quarterly reports may not total the corresponding amount reported in this Annual Report
on Form 10-K due to rounding.
52
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Quarterly Results of Operations (Unaudited) (continued)
(in thousands, except per share amounts)
2007
Three Months Ended
Operating revenues .................................... $
Operating expenses and costs ....................
Operating income (loss) ............................
Other expenses, net ...................................
Income (loss) before income taxes ............
Income tax expense (benefit) ....................
Net income (loss)....................................... $
Average shares outstanding (basic) ...........
Basic earnings (loss) per share .................. $
Average shares outstanding (diluted) ........
Diluted earnings (loss) per share ............... $
March 31,
June 30,
112,451
110,362
2,089
1,230
859
779
80
11,062
0.01
11,188
0.01
$
$
$
$
124,389
119,555
4,834
1,428
3,406
1,786
1,620
10,671
0.15
10,780
0.15
September 30, December 31,
$
122,526
123,173
(647)
1,244
(1,891)
(314)
(1,577)
122,743 $
120,708
2,035
1,250
785
769
16 $
$
10,429
-- $
10,535
-- $
10,370
(0.15)
10,370
(0.15)
$
$
Note - The above amounts have been previously reported in the Company’s quarterly reports on Form 10-Q.
Certain line items in those quarterly reports may not total the corresponding amount reported in this Annual Report
on Form 10-K due to rounding.
53
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to our
Company, including our consolidated subsidiaries, is made known to the officers who certify our financial reports
and to other members of senior management and the Board of Directors. Our management, with the participation of
our Chief Executive Officer (the “CEO”) and our Chief Financial Officer (the “CFO”), conducted an evaluation of
the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act). Based on this evaluation, as of December 31, 2008, our CEO and CFO have concluded that our
disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within
the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to management,
including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
Changes in Internal Control Over Financial Reporting
No changes occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2008, that materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-(f) promulgated under the
Exchange Act as a process designed by, or under the supervision of, the principal executive officer and principal
financial officer and effected by the Board of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:
1. Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of our assets;
2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of our management and
directors; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of our assets that could have a material effect on our financial statements.
Under the supervision and with the participation of our management, including our CEO and CFO, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set
forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on our management's evaluation under the criteria set forth in Internal Control -
Integrated Framework, management concluded that our internal control over financial reporting was effective as of
December 31, 2008. The effectiveness of our internal control over financial reporting as of December 31, 2008 has
been audited by Grant Thornton LLP, an independent registered accounting firm, as stated in their attestation report,
which is included herein.
Design and Changes in Internal Control over Financial Reporting
Disclosure controls and procedures are controls and other procedures that are designed to ensure that
information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. In accordance
with these controls and procedures, information is accumulated and communicated to management, including our
CEO, as appropriate, to allow timely decisions regarding disclosures. There were no changes in our internal control
54
over financial reporting that occurred during the quarter ended December 31, 2008, that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
USA Truck, Inc.
We have audited USA Truck, Inc. (a Delaware Corporation) and subsidiary, collectively, the “Company’s”, internal
control over financial reporting as of December 31, 2008, based on criteria established in Internal Control—
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by
COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of USA Truck, Inc. and subsidiary, as of December 31, 2008 and
2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three
years in the period ended December 31, 2008 and our report dated February 26, 2009, expressed an unqualified
opinion on those consolidated financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 26, 2009
55
Item 9B. OTHER INFORMATION
There is no information that we are required to report, but did not report, on Form 8-K during the fourth
quarter of 2008.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The sections entitled “Additional Information Regarding the Board of Directors—Biographical Information”,
“Executive Officers” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Security Ownership of Certain
Beneficial Owners, Directors and Executive Officers,” “Audit Committee,” and “Corporate Governance and
Related Matters” in our proxy statement for the annual meeting of stockholders to be held on May 6, 2009, set forth
certain information with respect to the directors, nominees for election as directors and executive officers and are
incorporated herein by reference.
Our Code of Business Conduct and Ethics (“Code of Ethics”), which applies to all directors, officers and
employees, and sets forth the conduct and ethics expected of all affiliates and employees of the Company, is
available at our Internet address http://www.usa-truck.com, under the “Corporate Governance” tab of the “Investor
Relations” page. Any amendment to, or waivers of, any provision of the Code of Ethics that apply to our principal
executive, financial and accounting officers, or persons performing similar functions, will be posted at that same
location on our website.
Item 11. EXECUTIVE COMPENSATION
The sections entitled “Executive Compensation,” “Director Compensation,” “Compensation Committee
Interlocks and Insider Participation” and “Compensation Committee Report” in our proxy statement for the annual
meeting of stockholders to be held on May 6, 2009, set forth certain information with respect to the compensation of
management and Directors and related matters and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The section entitled “Security Ownership of Certain Beneficial Owners, Directors and Executive Officers” in
our proxy statement for the annual meeting of stockholders to be held on May 6, 2009, sets forth certain information
with respect to the ownership of our voting securities and is incorporated herein by reference. See “Item 5. Market
for Registrant’s Common Equity and Related Stockholder Matters,” of this annual report on Form 10-K, which sets
forth certain information with respect to our equity compensation plans.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The sections entitled “Certain Transactions” and “Additional Information Regarding the Board of Directors –
Board Meeting, Director Independence and Committees – Director Independence” in our proxy statement for the
annual meeting of stockholders to be held on May 6, 2009, set forth certain information with respect to relations of
and transactions by management and the independence of our directors and nominees for election as directors and is
incorporated herein by reference.
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The section entitled “Independent Registered Public Accounting Firm” in our proxy statement for the annual
meeting of stockholders to be held on May 6, 2009, sets forth certain information with respect to the fees billed by
our independent registered public accounting firm and the nature of services rendered for such fees for each of the
two most recent fiscal years and with respect to our Audit Committee’s policies and procedures pertaining to pre-
approval of audit and non-audit services rendered by our independent registered public accounting firm and is
incorporated herein by reference.
56
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as a part of this report:
Page
1 Financial statements.
The following financial statements of the Company are included in Part II, Item 8 of this report:
Consolidated Balance Sheets as of December 31, 2008 and 2007 .............................................................. 35
Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006 .................. 36
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2008, 2007 and
2006 ......................................................................................................................................................... 37
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006 ............ 38
Notes to Consolidated Financial Statements ............................................................................................... 39
2
Schedules have been omitted since the required information is not applicable or not present in amounts
sufficient to require submission of the schedule, or because the information required is included in the
financial statements or the notes thereto.
3 Listing of exhibits.
The exhibits filed with this report are listed in the Exhibit Index, which is a separate section of this
report, and incorporated in this Item 15(a) by reference.
Management Compensatory Plans:
-Employee Stock Option Plan (Exhibit 10.1)
-Executive Profit-Sharing Incentive Plan (Exhibit 10.2)
-1997 Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit 10.3)
-2003 Restricted Stock Award Plan (Exhibit 10.4)
-Form of Restricted Stock Award Agreement (Exhibit 10.5)
-USA Truck, Inc. 2004 Equity Incentive Plan (Exhibit 10.6)
57
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
USA TRUCK, INC.
(Registrant)
By:
/s/ Clifton R. Beckham
Clifton R. Beckham
President and Chief Executive Officer
By:
/s/ Darron R. Ming
Darron R. Ming
Vice President, Finance, Chief Financial
Officer and Treasurer
Date: February 27, 2009
Date: February 27, 2009
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert M. Powell
Robert M. Powell
/s/ Clifton R. Beckham
Clifton R. Beckham
/s/ Darron R. Ming
Darron R. Ming
/s/ James B. Speed
James B. Speed
/s/ Terry A. Elliott
Terry A. Elliott
/s/ William H. Hanna
William H. Hanna
/s/ Joe D. Powers
Joe D. Powers
/s/ Richard B. Beauchamp
Richard B. Beauchamp
Chairman of the Board and Director
February 27, 2009
President, Chief Executive Officer and Director
February 27, 2009
Vice President, Finance, Chief Financial Officer
and Treasurer (principal financial and accounting
officer)
February 27, 2009
Director
Director
Director
February 27, 2009
February 27, 2009
February 27, 2009
Director
February 27, 2009
Director
February 27, 2009
58
EXHIBIT INDEX
Exhibits to the Annual Report on Form 10-K have been filed with the Securities and Exchange Commission.
Copies of the omitted exhibits are available to any stockholder free of charge. Copies may be obtained either
through the Securities and Exchange Commission’s website: http://www.sec.gov or by submitting a written request
to Mr. J. Rodney Mills, Secretary, USA Truck, Inc., 3200 Industrial Park Road, Van Buren, Arkansas 72956. If
submitting a written request, please mark “2008 10-K Request” on the outside of the envelope containing the
request.
59
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among USA Truck, Inc., The Dow Jones US Index
And The Dow Jones US Trucking Index
$350
$300
$250
$200
$150
$100
$50
$0
12/03
12/04
12/05
12/06
12/07
12/08
USA Truck, Inc.
Dow Jones US
Dow Jones US Trucking
*$100 invested on 12/31/03 in stock & index-including reinvestment of dividends.
Fiscal year ending December 31.
Bringing our freight network design to life and successfully
results daily. Executive management is providing resources, removing
implementing all of the above six initiatives will be quite an
barriers and working closely with middle management and front-line
accomplishment, but it will not be enough for us to consistently grow
personnel to ensure that those targets are met. While the returns on
our earnings or to produce returns on capital exceeding our cost of
capital and earnings growth goals are ambitious, the individual KPI
capital through the ups and downs of our cyclical industry. Nor will
targets are reasonable. By focusing on those individual KPI targets, we
those initiatives provide the integrated bundle of services that our
believe that we can reach our long-term strategic objectives.
customers will demand.
Economic factors will play a big role in determining when we reach
That is why our plan calls for more than just asset-based
those objectives. The last quarter of 2008 and into the early months
truckload services. That is why we have launched two asset-light
of 2009 was the most difficult operating environment that we have ever
initiatives through our Strategic Capacity Solutions operating
seen. Not only have the challenging conditions made it difficult to
segment that are designed to boost our returns on capital, to
make the changes to our operating model that VEVA demands, but it
provide another source of sustainable earnings growth and to
has also consumed our time and resources because of the hands-on
offer our customers flexible capacity for their transportation
management required to navigate through it.
needs in a variety of service and cost levels.
Rail Intermodal Service Launch. In late December 2007, we
The economic recession could delay the time frames we have set for
VEVA, but it has not changed our strategic direction. We are pleased
moved our first load of rail intermodal freight. During 2008, we
with the progress we have made operationally and culturally, and we
produced base revenue of $4.6 million, more than doubling our goal
believe that our strong balance sheet and cash flow will serve us well
of $2.0 million for 2008. We remain on the steep slope of the
during these turbulent times.
learning curve, but we are committed to further incorporating
intermodal into our trucking operations to make the integration as
In 2009, we will work hard to execute the VEVA plan and to stay
seamless as possible for our customers as 2009 unfolds.
focused on our vision for USA Truck. Ultimately, we want to be the
Brokerage Service Growth. We grew our brokerage business
86.8% to $15.3 million. Despite falling short of our 2008 goal of
want to own.
$18.0 million, we continue to gain more knowledge of the brokerage
business and we are incorporating that knowledge into our brokerage
As always, thank you for your continued support.
model, which we intend to expand in 2009.
Company that everyone wants to work for, the transportation Company
that customers call when service matters and the stock that investors
Our new strategic direction, objectives and supporting initiatives are part
of a long-term strategic plan that we call VEVA (Vision for Economic
Value Added). VEVA is a detailed, quarter-by-quarter operating plan
designed to expand our Common Stock valuation multiples to the mean
of our truckload peer group’s by the end of 2010 (Phase I) by earning a
10% return on capital and simultaneously driving our weighted average
cost of capital below 10%. By 2013, VEVA calls for the expansion of our
Common Stock valuation multiples beyond our truckload peer group’s
mean by sustaining or improving our capital management targets and
leveraging a more diversified business model to produce a 10%
compounded annual earnings growth rate (Phase II).
EXECUTION. VEVA is clearly an ambitious plan. We subscribe
to the old adage that “the devil is in the details.” While the plan is
aggressive, we believe that it is achievable. Our success depends on
our ability to execute.
Strategic plans do not execute; people do. We have painstakingly
identified the key performance indicators (KPI) for VEVA, set targets
for each of them and assigned ownership to individual employees who
have accepted responsibility for them and are held accountable for
Robert M. Powell
Chairman of the Board
Clifton R. Beckham
President and Chief
Executive Officer
Directors and Officers
Robert M. Powell
Chairman of the Board
Richard B. Beauchamp
Director (General Partner, Norris Taylor
& Company, Accounting Firm)
Terry A. Elliott
Director (Chief Financial Officer,
Safe Foods Corporation,
Food Safety Company)
William H. Hanna
Director (President, Hanna Oil
and Gas, Oil and Gas Exploration)
Joe D. Powers
Director (Retired Chairman and
CEO of Merchants National
Bank of Fort Smith, Arkansas
and Former Chairman of the
Advisory Board of Regions Bank
of Fort Smith, Arkansas)
James B. Speed
Director (Retired Chairman of
the Board, USA Truck, Inc.)
Clifton R. Beckham
President, Chief Executive Officer
and Director
Garry R. Lewis
Executive Vice President,
Chief Operating Officer
Darron R. Ming
Vice President, Finance,
Chief Financial Officer
and Treasurer
M. Eric Brown
Senior Vice President, Operations
Michael R. Weindel, Jr.
Vice President, People
J. Rodney Mills
Vice President, Safety,
General Counsel
and Secretary
Craig S. Shelly
Vice President,
Corporate Strategy
Rick A. Davis
Vice President, Information Systems
B. Chad Van Kooten
Vice President, Sales
D. Burton Weis
Vice President, Human Resources
Corporate Information
This Annual Report and the statements contained herein are submitted for the general information of the stockholders of the Company
and are not intended to induce any sale or purchase of securities or to be used in connection therewith.
Corporate Headquarters
3200 Industrial Park Road
Van Buren, Arkansas 72956
Telephone: (479) 471-2500
Common Stock
Traded on the NASDAQ Global Select
Market under the Symbol: USAK
Annual Meeting
May 6, 2009
10:00 a.m. local time
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
Web Site
www.usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2008 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 J. Rodney Mills, Secretary of the Company, at the Company’s executive offices, 3200 Industrial Park
Road, Van Buren, Arkansas 72956. The written request must state that as of March 9, 2009, the person making the request was a
beneficial owner of shares of the Common Stock of the Company.
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 stockholders’ equity ................................................................
Income Statement Statistics
(Dollars in thousands - except per share amounts)
Base revenue ...................................................................................
Fuel surcharge revenue ....................................................................
Total revenue ...................................................................................
Operating expenses .........................................................................
Operating income ............................................................................
Other expenses, net .........................................................................
Income before income taxes ............................................................
Income taxes ...................................................................................
Net income ......................................................................................
Diluted shares outstanding (in thousands) ......................................
Diluted earnings per share ..............................................................
Revenue, before fuel surcharge – year-to-year change ........................
Operating ratio* ...............................................................................
Financial Statistics
(Dollars in thousands - except per share amounts)
Net income (“Earnings”) .................................................................
Interest ............................................................................................
Income taxes (“Taxes”) ...................................................................
Earnings before interest and taxes (“EBIT”) ...................................
Depreciation and amortization .........................................................
Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
EBIT per diluted share .....................................................................
EBITDA per diluted share ................................................................
Operating cash flow per diluted share .............................................
Stockholders’ equity per diluted share .............................................
Return on average assets .................................................................
Return on average equity .................................................................
Funded debt to total capital** ..........................................................
Operating Statistics
(All numbers include owner-operators except as noted “Company”)
Total tractors in service (end of period) ..........................................
Average months in service – Company tractors ................................
Total Company trailers (end of period) ...........................................
Average months in service – Company trailers .................................
Trailer to tractor ratio ......................................................................
Average miles per tractor per week .................................................
Drivers (excluding students in training) ..........................................
Average non-drivers .........................................................................
Total drivers and non-drivers ...........................................................
Driver to non-driver ratio ................................................................
$
$
$
$
$
$
$
$
$
$
2008
2007
2006
2005
$
51,038
332,268
52,538
79,364
185,495
146,773
$
65,807
332,938
66,701
70,212
189,747
143,191
$
63,804
339,494
66,588
67,817
179,936
159,558
60,791
308,079
53,616
67,589
158,246
149,833
2008
2007
2006
2005
397,557
138,063
535,620
523,473
12,147
4,782
7,365
4,225
3,140
10,238
0.31
1.6%
96.9%
$
$
$
391,188
90,921
482,109
473,799
8,310
5,152
3,158
3,018
140
10,651
0.01
1.5%
97.9%
$
$
$
385,301
80,317
465,618
439,214
26,404
4,058
22,346
9,905
12,441
11,561
1.08
2.3%
93.1%
$
$
$
376,629
63,074
439,703
406,206
33,497
4,810
28,687
13,119
15,568
10,328
1.51
12.1%
91.1%
2008
2007
2006
2005
3,140
4,643
4,225
12,008
50,919
62,927
1.17
6.15
6.43
14.34
0.9%
2.2%
39.3%
$
$
$
$
$
$
140
5,130
3,018
8,288
49,093
57,381
0.78
5.37
5.48
13.40
0.0%
0.1%
36.8%
$
$
$
$
$
$
12,441
4,192
9,905
26,538
46,739
73,277
2.30
6.34
6.60
13.80
3.8%
8.1%
34.6%
$
$
$
$
$
$
15,568
4,829
13,119
33,516
41,890
75,406
3.25
7.30
5.48
14.51
5.2%
13.2%
36.9%
2008
2007
2006
2005
2,392
24
7,351
51
3.1:1
2,216
2,506
747
3,253
3.4:1
2,557
25
7,024
42
2.7:1
2,236
2,582
808
3,390
3.2:1
2,571
21
6,770
36
2.6:1
2,186
2,497
840
3,337
3.0:1
2,414
19
5,542
38
2.3:1
2,325
2,474
730
3,204
3.4:1
Company’s history, we designed a freight network to maximize yield,
initiative laid the foundation for the development of our defined freight
which we define as the optimal combination of tractor utilization, pricing,
network. While yield is not driven exclusively by pricing, we were able
empty miles and variable operating costs. We now know the specific
to increase our Trucking base revenue per total mile by 1.9% during
traffic lanes in which we want to move freight, and the required volumes
2008. We also reduced the tractor fleet we had in service by
and prices necessary to maximize yield. We believe that bringing this
approximately 250 tractors during the fourth quarter to help us maintain
defined freight network to life through the following initiatives launched
that pricing level. We are committed to managing our freight operations
during 2008 will allow us to achieve our long-term strategic objectives.
to maximize yield.
Project Velocity. The marketplace for truckload freight has changed.
Cost Discipline. USA Truck has long been an industry leader in
The proliferation of retail distribution centers and the growing rail
operating cost per mile. However, cost is such a critical component for
intermodal market share in long-haul lanes have decreased truckload
network yield that we revisited our entire cost structure during 2008. We
freight volume in those long-haul lanes. The marketplace is forcing
now manage costs weekly, and we have divided it into two buckets:
truckload carriers into shorter-haul markets, but operational execution
variable costs per mile and total fixed costs. Our primary goal is obviously
in those markets is very challenging and requires tremendous intensity
to keep costs as low as possible, but we also want to improve the flexibility
and discipline. Though we are targeting network yield (not length-of-
within the cost structure so it can be quickly adjusted as economic
haul), we recognize that our model will be shorter-haul biased simply
conditions change. For example, we reduced our driver pay scale for
because that market is where the more profitable freight volumes will be
new-hires twice last year, which resulted in a significant cost reduction in
found. Thus, it was imperative for us to prepare the Company to execute
2008 compared to 2007. We have also devoted considerable attention to
in the shorter-haul environment. We define “Velocity” as the measure of
fuel costs, to gross margins in our asset-light service offerings and to an
the number of times we load our fleet each week. Our Project Velocity
assortment of fixed costs including non-driver wages (which we reduced
was designed to maximize that number, and it produced encouraging
considerably throughout the year as we trimmed non-driver headcount by
results. During 2008, we improved our velocity 8.6% while shortening
approximately 19%).
our length-of-haul 8.4% from 784 miles to 718 miles, and we did it
while improving our empty mile percentage by 40 basis points from
11.1% to 10.7%.
Yield Management. The concept of freight network yield was foreign
War on Accidents. Another area where we see potential for
meaningful cost reduction is insurance and claims. Our approach to
safety is simple; hire better drivers, train them better and hold them
accountable for performance. There are many moving parts to this
to us prior to 2008, so it was necessary to launch an initiative to educate
initiative, but the basic formula is working. During 2008, our accident
our people about yield and to start incorporating it into our business
frequency declined approximately 17.1 %, leading to a 70 basis point
processes and performance measurements. Our Yield Management
reduction in overall insurance and claims expense.
(continues)
To Our Stockholders
O
ur performance improved during 2008. Our base revenue grew
Our internal assessment indicated needs for a stronger technology platform
1.6%, our operating margin expanded by 100 basis points and
and more effective personnel capabilities. Two initiatives were designed to
our net income and earnings per share grew from $140,000 and
turn those opportunities into competitive advantages.
$0.01 per share to $3.1 million and $0.31 per share, respectively.
We are proud of these improvements, but these results do not tell the
full story about USA Truck’s journey in 2008.
Project Tech. For a variety of reasons, our legacy mainframe computer
platform had become a competitive disadvantage for us. To bolster our
ability to support the more rapid decision-making that our evolving
Last year can best be described by the word “change” – change in the
business model demands, we began a three-year process to migrate our
global economy, domestic political change and change throughout USA
legacy mainframe platform and internally-developed software applications
Truck. It was a year in which we expanded exponentially our understanding
to server-based platforms. We will purchase off-the-shelf products for
of the freight transportation business and applied those lessons learned to
our core software needs, and develop value-added decision-support
change our operating model. We established a fresh strategic direction for
software applications internally.
USA Truck based on an in-depth study of the factors that drive stockholder
value and operating performance in our industry.
VISION. Our primary long-term strategic objectives – to expand the
Project People. We recognize that aligning the interests and efforts of
every employee at USA Truck is essential to achieving our long-term
strategic objectives. During 2008, we instituted several programs designed
value of our Common Stock through improved returns on capital and to
to create that alignment. From job descriptions to performance evaluations
improve the consistency of our earnings growth – precipitated the need to
to talent management, we have challenged, empowered and rewarded our
make two fundamental changes within our Company. First, deep
employees for performance. We endeavored last year to improve the
organizational change was necessary to retool USA Truck to maximize returns
productivity of our non-driver personnel by using a combination of
on capital and de-emphasize our historical strategy of growing our tractor
performance-driven management and a more focused, process-driven
fleet. Second, a fresh operational approach was necessary to break our long-
approach to managing our business. We believe that is the best path to
term addiction to long-haul freight and instead focus on freight network yield.
more efficiently serving our customers, producing results for our
A clear vision for USA Truck’s future emerged in 2008.
stockholders and rewarding our employees.
PLANNING. Transforming that vision into results required a well-
As the vast majority of our revenue came from our truckload operations
conceived plan. Our team went to work assessing marketplace realities and
during 2008, we believe that most of our initiatives should be focused on
internal capabilities. We identified eight major initiatives that we believed
improving the returns on capital and earnings consistency within those
were essential to effecting the fundamental changes needed within the
operations. Historically, we focused on a 900-mile length-of-haul as our
Company to achieve our long-term strategic objectives.
primary trucking strategy. Late in 2008, for the first time in our
December 31,
2004
2003
2002
2001
2000
1999
$
$
$
$
$
$
$
$
$
$
$
56,659
288,154
56,148
115,114
202,626
85,528
45,541
222,549
42,962
74,300
145,053
77,496
Year ended December 31,
2003
2004
335,880
27,225
363,105
345,306
17,799
3,572
14,227
6,795
7,432
9,398
0.79
17.4%
94.7%
$
$
$
286,080
12,583
298,663
287,813
10,850
2,622
8,228
4,873
3,355
9,370
0.36
6.5%
96.2%
Year ended December 31,
2003
2004
7,432
3,539
6,795
17,766
35,871
53,637
1.89
5.71
3.97
9.10
2.9%
9.1%
61.6%
$
3,355
2,557
4,873
10,785
30,611
$
41,396
$ 1.15
4.42
$
3.99
$
8.27
$
1.6%
4.4%
51.5%
December 31,
$
$
$
$
$
35,387
188,851
38,263
49,451
114,759
74,092
$
34,414
182,411
31,770
56,451
111,238
71,173
$
41,739
189,919
30,357
65,660
119,938
69,981
39,449
182,040
28,277
64,453
111,932
70,108
2002
2001
2000
1999
268,510
5,263
273,773
264,301
9,472
3,105
6,367
3,765
2,602
9,348
0.28
9.9%
96.5%
$
244,396
8,045
252,441
246,466
5,975
4,196
1,779
692
1,087
9,279
$ 0.12
11.8%
97.6%
$
$
218,593
7,992
226,585
220,940
5,645
5,490
155
61
$ 94
9,260
0.01
31.6%
97.4%
$
$
$
$
166,091
272
166,363
150,517
15,846
1,633
14,213
5,571
8,642
9,354
0.92
14.4%
90.5%
2002
$
2,602
3,127
3,765
9,494
27,811
$ 37,305
$ 1.02
$ 3.99
3.52
$
7.93
$
1.4%
3.6%
47.2%
2001
$
1,087
4,344
692
6,123
26,418
$
32,541
$ 0.66
$ 3.51
$ 3.87
7.67
$
0.6%
1.5%
48.0%
2000
$
94
5,408
61
5,563
26,793
$ 32,356
$ 0.60
$ 3.49
3.15
$
7.56
$
0.1%
0.1%
51.7%
1999
$
8,642
1,656
5,571
15,869
18,592
$ 34,461
$ 1.70
$
3.68
$ 1.37
7.49
$
5.7%
13.0%
50.3%
2004
2003
2002
2001
2000
1999
2,231
18
5,682
39
2.5:1
2,285
2,218
702
2,920
3.2:1
2,079
25
4,461
54
2.1:1
2,263
2,029
635
2,664
3.2:1
1,916
30
4,311
52
2.3:1
2,263
1,810
529
2,339
3.4:1
1,780
22
3,668
51
2.1:1
2,285
1,741
507
2,248
3.4:1
1,738
23
3,400
43
2.0:1
2,103
1,685
488
2,173
3.5:1
1,713
23
3,525
46
2.1:1
2,316
1,637
469
2,106
3.5:1
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of base revenue.
**Funded debt to total capital as reported above is based upon net debt (both current and long-term, less cash) divided by total debt plus stockholders’ equity.
25 Years of Service
Selected Financial Data
F
ollowing deregulation of the trucking industry in 1980, Arkansas
Best Corporation (ABC), parent to ABF Freight System, Inc.
(ABF), started a small, non-union truckload carrier named Crawford
Produce, Inc. (CPI). That small company began with less than ten
tractors, but turned a profit and slowly grew. In 1986, this small
subsidiary was incorporated under the name USA Truck, Inc. Robert
M. Powell, our current Chairman, was the Senior executive at ABF
responsible for managing several of these small subsidiaries.
On January 1, 1989, six principals led by Mr. Powell purchased
USA Truck from ABC for the purchase price of $2.4 million in cash
plus the assumption of over $25 million in debt. Three of the six
principals were already operating USA Truck and had vast experience
as life-long ABF employees. In March 1992, USA Truck completed
its Initial Public Offering at a split adjusted price of $6.25. Since
then, USA Truck has grown its revenue at an average annual rate
of 12.2% and has been profitable every single year.
In 1988, ABC was the target of a hostile acquisition. ABC secured a
white knight willing to take the company private, but was unable to
finance the entire purchase price of the company. To raise cash and
eliminate debt, the new owner sold several ABC subsidiaries,
including USA Truck.
Base revenue ..............................................
Operating income .......................................
Net income ..................................................
Diluted earnings per share .........................
Total assets ..................................................
Long-term debt ...........................................
Stockholders’ equity ...................................
Operating ratio* ..........................................
Total tractors (end of period) ....................
Total trailers (end of period) .....................
Average miles per tractor per week ...........
(Dollars in thousands except per share amounts)
Year Ended December 31,
2008
2007
2006
2005
2004
$ 397,557
$ 391,188
$ 385,301
$ 376,629
$ 335,880
12,147
3,140
0.31
332,268
79,363
8,310
140
0.01
332,938
70,212
26,404
12,441
1.08
339,494
67,817
33,497
15,568
1.51
308,079
67,589
$ 146,773
$ 143,191
$ 159,558
$ 149,833
96.9%
97.9%
93.1%
91.1%
94.7%
2,392
7,351
2,216
2,557
7,024
2,313
2,571
6,770
2,271
2,414
5,542
2,415
17,799
7,432
0.79
288,154
115,114
$ 85,528
2,231
5,682
2,361
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of base revenue.
Base Revenue
Dollars in millions
Net Income
Dollars in millions
376.6
385.3
391.2
397.6
335.8
15.6
12.4
7.4
04
05
06
07
08
04
05
06
3.1
08
0.1
07
Diluted Earnings per Share
Dollars
EBITDA per Diluted Share*
Dollars
7.30
5.71
6.34
6.15
5.37
1.51
1.08
0.79
0.31
0.01
04
05
06
07
08
04
05
06
07
08
* EBITDA is defined in the Financial Statistics section of the Ten Year Statistical History in this annual report.
Mission Statement
U
SA Truck’s mission is to provide innovative and
superior transportation solutions that exceed our
customers’ expectations. We will foster an ethical and
safe culture where our employees are challenged,
empowered and rewarded to continuously improve
customer and shareholder value.
L
ike people, corporations need a strong moral and
seven core values and provide a touchstone to help our employees
philosophical compass to guide them so they do not stray
make good decisions and exercise sound judgment in the day-to-
from what is important. At USA Truck, we understand what is
day execution of their job responsibilities. We cannot go wrong if
important for us to be successful. The Bars & Stars embody our
we use this value system as our guide.
At USA Truck, we understand what we
can be the best in the world at, what
we are deeply passionate about and
what drives our economic engine.
That understanding is represented by
the intersection of three circles, which
Jim Collins refers to as the Hedgehog
concept in his book Good to Great.
The shield shape created by that
intersection appears on the Bars &
Stars as the Sell It, Book It, Move It
and Collect It road signs.
Selecting and developing leaders is
tough. Selecting and developing great
leaders is brutal. At USA Truck,
leadership is all about the
characteristics of people placed into
leadership roles. The symbol of
leadership, the fluer-de-lis, is not taken
lightly by our management team.
We subscribe to a theory of cost
management called Zero Overhead
Growth “Z.O.G.”. It symbolizes
our maniacal commitment to fixed
costs control. We chose the Greek
mythological character Sisyphus as
our metaphor for cost control
because it is a burden we must
bear eternally.
We are in the business of transporting
freight and our success depends on
how well we execute our business
processes which we refer to as the
“Highway to Success”. By focusing on
our most basic business processes –
Sell It, Book It, Move It and Collect It –
we gain clarity into which activities add
value for our customers and we
simultaneously identify and minimize
wasteful activities that do not.
A flywheel is a mechanical device resistant to
sudden changes in its rate of rotation due to
its weight and balance. Turning a flywheel is
like moving a company in a way that begins
to produce results. As the momentum
builds, the results continuously improve
with less brute force required to sustain
improvements. For us, the flywheel is the
ultimate expression of customer, employee
and stockholder alignment.
At USA Truck, our torch symbolizes
intellectual honesty. Intellectual honesty
means that we see things for the way they
actually are, not the way we want them to be.
At USA Truck, we believe that it is always in
the best interest of our stakeholders to “do
the right thing.” Like us as individuals, our
Company is nothing without the honor of
its name.
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, Arkansas 72956
(479) 471-2500
usa-truck.com
2008 Annual Report