usa-truck.com
USA Truck Company Overview
USA Truck is a dry van truckload carrier transporting general commodities via our Truckload
and Dedicated Freight service offerings. We transport commodities throughout the
continental United States and into and out of portions of Canada. We also transport general
commodities into and out of Mexico by allowing through-trailer service from our terminal
in Laredo, Texas. Our Strategic Capacity Solutions and Intermodal operating segments
provide customized transportation solutions using our technology and multiple modes
of transportation, including our assets and the assets of our partner carriers.
It begins with you.sm
This phrase has a dual objective at USA Truck — to serve as both an overall message
to our customers (and potential customers) and as a constant reminder to our team
members why we are in business.
Annual Report 2012
Selected Financial Data
(Dollars in thousands except per share amounts)
Base revenue
Operating (loss) income
Net (loss) income
Diluted (loss) earnings per share
Total assets
Long-term debt
Stockholders’ equity
Operating ratio*
Total tractors in-service, including
independent contractors (end of period)
Total trailers (end of period)
Average miles per tractor per week
Year Ended December 31,
2012
$408,719
(23,186)
(17,540)
(1.70)
331,706
122,530
109,561
2011
$411,026
(12,649)
(10,777)
(1.05)
336,191
98,927
126,972
2010
$386,883
92
(3,308)
(0.32)
327,385
79,750
137,708
2009
$331,520
(6,607)
(7,177)
(0.70)
330,700
39,116
140,546
2008
$397,557
12,147
3,140
0.31
332,268
79,364
146,773
105.7%
103.1%
99.9%
102.0%
96.9%
2,202
6,091
1,802
2,257
6,318
1,839
2,363
6,716
2,016
2,328
7,214
1,972
2,392
7,351
2,216
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge,
as a percentage of base revenue.
Corporate Information
This annual report and the statements contained herein are submitted for the general information of stockholders of
the Company and are not intended to induce any sale or purchase of securities or to be used in connection therewith.
Corporate Headquarters
3200 Industrial Park Road
Van Buren, AR 72956
Telephone: (479) 471-2500
Annual Meeting
May 8, 2013
10:00 a.m. local time
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, AR 72956
Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
Common Stock
Traded on the NASDAQ
Global Select Market under the Symbol: USAK
Website
usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2012 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 13, 2013, the person making the request was a beneficial owner of shares of the Common Stock of the Company.
SECURIT
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Part III
Item No.
USA TRUCK, INC.
TABLE OF CONTENTS
Caption
PART I
Page
1. Business .............................................................................................................................
1A. Risk Factors .......................................................................................................................
1B. Unresolved Staff Comments ..............................................................................................
2. Properties ...........................................................................................................................
3. Legal Proceedings ..............................................................................................................
2
10
16
16
17
4. Mine Safety Disclosures .................................................................................................... 17
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 .....................................................................
Exhibit Index .....................................................................................................................
PART IV
18
19
19
33
34
58
58
58
59
59
59
59
59
60
61
PART I
Item 1. BUSINESS
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, and such statements are subject to the safe harbor created by those
sections, and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than
statements of historical or current 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,”
“goals,” “may,” “will,” “should,” “could,” “potential,” “continue,” “future” and similar terms and phrases.
Forward-looking statements are based on currently available operating, financial, and competitive information.
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. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the section entitled "Item 1.A., Risk Factors," set forth
below. 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 such forward-looking statements speak only as of the date of this Annual Report on Form 10-K. You are
cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances
on which any such information is based.
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.
General
We are an international truckload carrier providing transportation of general commodities throughout the
continental United States, into and out of Mexico and into and out of portions of Canada. Generally, we transport
full dry van trailer loads of freight from origin to destination without intermediate stops or handling. To complement
our Truckload operations, we provide dedicated, brokerage and rail intermodal services. For shipments into Mexico,
we transfer our trailers to tractors operated by Mexican carriers at a facility in Laredo, Texas, which is operated by
our wholly-owned subsidiary. Through our asset based and non-asset based capabilities, we transport many types of
freight for a diverse customer base in industries such as industrial machinery and equipment, rubber and plastics,
retail stores, paper products, durable consumer goods, metals, electronics and chemicals. Our business is classified
into three operating and reportable segments: our Trucking operating segment consisting primarily of our Truckload
and Dedicated Freight service offerings; our Strategic Capacity Solutions (“SCS”) operating segment consisting
entirely of our freight brokerage service offering; and our rail Intermodal operating segment.
Our truckload freight services utilize equipment we own or equipment owned by independent contractors for
the pick-up and delivery of freight. Our Truckload service offering transports freight over irregular routes as a
medium- to long-haul common carrier. Our Dedicated Freight service offering provides similar transportation
services, but does so pursuant to agreements whereby we make our equipment available to a specific customer for
shipments over particular routes at specified times. Our rail Intermodal service offering provides our customers cost
savings alternatives to Truckload with a slightly slower transit speed, while allowing us to reposition our equipment
to maximize our freight network yield. At December 31, 2012, our Trucking fleet consisted of 2,202 in-service
tractors and 6,061 in-service trailers and our average length-of-haul for 2012 was 542 miles.
Our SCS and Intermodal operating segments are intended to provide services which complement our Trucking
services, primarily to existing customers of our Trucking operating segment. A majority of the customers using our
SCS and Intermodal services are also customers of our Trucking operating segment. For the year ended December
31, 2012, our SCS and Intermodal operating segments represented approximately 22.0% and 5.2%, respectively, of
our consolidated revenue.
2
The discussion of our business in this Item 1 focuses primarily on Trucking, which is our dominant segment,
producing 72.8% of our total base revenue in 2012.
We were incorporated in Delaware in September 1986 as a wholly-owned subsidiary of ABF Freight System,
Inc., and we were 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.
Background
From 2009 and through the first quarter of 2012, we pursued a strategy of positioning our assets into freight
lanes with a shortened length of haul. That strategy did not yield the anticipated operational or financial results, and
accordingly, during the second quarter of 2012, we began implementing a long-term turnaround plan that we
anticipate will improve our operational performance and return the Company to sustained profitability. We engaged
industry consultants to aid in the design of the plan, and we hired, as key members of our management team,
industry veterans to provide additional expertise in specific subject matters such as freight pricing.
During 2012, we took several key steps to build a solid foundation on which to implement the turnaround plan:
We enhanced the composition of our Board of Directors, including the addition of deep operational
turnaround experience;
We reconstituted our management team, refined the role of Chief Operating Officer for our Trucking
segment and initiated a professional search process to fill that role; and
We refinanced our revolving balance sheet debt to provide what we believe is sufficient time to effect
the turnaround.
The turnaround plan is comprised of three primary components: yield management, operational execution and
driver retention.
Yield Management. We identified, as a significant contributor to our diminished asset productivity in
recent years, an inefficient and underpriced freight network. During the spring of 2012, we redesigned
our freight network to provide additional focus on operational efficiency by selecting specific markets
and lanes in which to build density because we believe that will allow us to utilize more efficiently our
tractors and our drivers’ available hours of service. We determined the greatest impediment to that
efficiency was an excessive presence of short-haul freight (under 300 miles) in our network. During
the summer of 2012, we initiated a proactive effort to re-price or replace much of our short-haul freight
and other under-performing loads. The progress we made in this area can be seen in the simultaneous
increase in our length-of-haul and a corresponding improvement in our base Trucking revenue per
loaded mile (pricing typically deteriorates at longer lengths-of-haul).
Our long-term objective is to continually improve the performance of our freight network (as measured
by base revenue per seated tractor per week) through, among other things, building density in specific
lanes and markets with specific shippers. We call this process of continual improvement “yield
management.”
Operational Execution. During 2012, we restructured our Trucking operations to support enhanced
processes. Those processes are designed to improve daily tractor availability, daily freight booking
volume and balance, and the efficient matching of available freight with available capacity. We made
significant progress in this area during 2012, which can be seen in our improved miles per seated truck
per week in the fourth quarter. We also identified several Company-wide opportunities to better
3
control costs and improve operational efficiency. We are implementing those projects, many of which
will require multiple quarters to fully implement.
Our long-term objective is to incrementally improve operational execution by identifying and
eliminating waste in the dispatch process through improved visibility into the details of our operations.
Driver Retention. Excessive driver turnover has a material adverse impact on our performance,
particularly in the areas of customer service, productivity, safety and costs. During the second half of
2012, we enhanced our efforts to retain qualified drivers through a variety of internal initiatives. As a
result of those initiatives, at the end of 2012, the number of unseated trucks in our fleet decreased
substantially. Our long-term objective is to meaningfully reduce driver turnover by implementing a
program we call “Driver Community.”
We anticipate we will also continue to aggressively grow our Specialized Services business units (SCS and
Intermodal). These business units complement our traditional Trucking service offerings, providing our customers
with additional sources of capacity at competitive prices. They also require far less invested capital. Our SCS
operating segment consists entirely of our freight brokerage service offering, which matches customer shipments
with available equipment of third party authorized carriers and provides services that complement our Trucking
operations. Our rail Intermodal service offering provides our customers cost savings over Truckload with a slightly
slower transit speed, while allowing us to reposition our equipment. In November 2012, we began the transition of
our intermodal model from a private-containers based model to a less asset intensive model, which is expected to
continue throughout the first quarter of 2013.
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.
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 40 largest
truckload carriers accounted for approximately $22.8 billion of the for-hire truckload market in 2011. We were
ranked number 26 of the largest for-hire truckload carriers based on total revenue for 2011. 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, private 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. Although an increase in the size of the market would benefit all
truckload carriers, we believe that successful carriers are likely to grow primarily by offering additional services to
their customers and acquiring a greater market share.
Marketing and Sales
We focus the majority of our marketing efforts on customers with premium service requirements and who have
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. We believe it also helps us achieve premium
rates and develop long-term, service-oriented relationships. Our team members 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 2012, approximately 92% of our total revenue was derived from customers that were customers prior to 2012,
and we have provided services to our top 10 customers for an average of approximately 10 years. We provided
service to 1,346 customers in 2012.
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 ............................................................
29%
18%
6%
31%
21%
6%
Year Ended December 31,
2012
2011
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 2012, receivables collection averaged approximately 38 days from the billing date, compared to an
average of approximately 34 days during 2011.
Operations
USA Truck is a dry van truckload carrier transporting general commodities via our Truckload and Dedicated
Freight service offerings. We transport commodities throughout the continental United States and into and out of
portions of Canada. We also transport general commodities into and out of Mexico by allowing through-trailer
service from our terminal in Laredo, Texas. The following table shows our total Company average length-of-haul
and the average length-of-haul for two of our Trucking segment’s service offerings, in miles, for the periods
indicated.
Total Trucking ...................................................................
Truckload .......................................................................
Dedicated Freight ...........................................................
542
554
385
532
544
396
Year Ended December 31,
2012
2011
Our Operations Department consists primarily of our driver managers, load planners and customer service
representatives. Each driver manager supervises approximately 40 drivers in our various service offerings, and our
driver managers are the primary contacts with our drivers. They monitor the location of equipment and direct its
movement in the safest, most efficient and practicable manner. Load planners assign all available units and loads in
a manner that maximizes profit and minimizes costs. Customer service representatives book the freight and ensure
on-time delivery by monitoring loads. The Operations Department focuses on making trucks available for dispatch,
selecting profitable freight and efficiently matching that freight to available trucks, all of which must be achieved
without sacrificing customer service, equipment utilization, driver retention or safety.
We operate primarily in the U.S. with minor operations in Canada and Mexico. Substantially all of our revenue
is generated from within the U.S. All of our tractors are domiciled in the U.S., and for the past three years, we
estimate that less than ten percent of our revenue has been generated in Canada and Mexico. We do not separately
track domestic and foreign revenue from customers or domestic and foreign long-lived assets, and providing such
information would not be meaningful.
Safety
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. The evaluation of an applicant’s safety
record is one of several essential criteria we use when hiring drivers. We conduct pre-employment, random,
reasonable suspicion and post-accident alcohol and substance abuse testing in accordance with the Department of
Transportation (“DOT”) regulations.
Safety training for new drivers begins in orientation, when newly hired team members 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
5
trained to communicate safe driving techniques to our new drivers. New drivers who graduate from our on-the-road
program must then successfully complete post-training classroom and road testing before being assigned to their
own tractor. Additionally, all Company drivers participate in on-going training that focuses on collision prevention.
To reinforce and promote safety concepts Company-wide, we conduct two “live” safety training classes each
year and provide other 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 operations
and other non-driver personnel to address specific safety-related issues and concerns.
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. We have safety
personnel at our high traffic terminal locations around the country to provide hands-on remedial and skills
development training to our drivers.
We have an economic awards program to reward those drivers who have achieved specified safety milestones.
Drivers are recognized at the annual President’s Million Mile Banquet, and outstanding drivers are also recognized
in Company-wide publications and media releases announcing the drivers’ achievements. Driver safety
achievements are also noted with special jackets, uniform patches, caps, letters of recognition and other awards 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, assists us in our goal of
having equipment that 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 65 miles per hour. In
addition, substantially all tractors added since 2008 are equipped with stability control systems, which 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 with licensed insurance carriers in amounts that are above those for which we self-
insure. 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. An unexpected loss or
changing conditions in the insurance market could adversely affect premium levels. As a result, our insurance and
claims expense could increase, or we could raise our self-insured retention or decrease our aggregate coverage limits
when our policies are renewed or replaced. If these expenses increase, if we have to increase our reserves, 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 our success. Recruiting drivers is challenging given our hiring
standards and because enrollment levels in driving schools are volatile. 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. We have seen the driver market tighten
as a result of the DOT’s Compliance Safety Accountability program (“CSA”) (formerly “Comprehensive Safety
Analysis 2010”) and other regulatory changes, and we expect that to continue. In order 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.
In addition to the Company drivers we employ, we enter into contracts with independent contractors, who
provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per
mile. We also enter into lease-purchase agreements with eligible drivers to allow them the opportunity to purchase a
Company-owned tractor while concurrently becoming an independent contractor.
Driver pay is calculated primarily on the basis of miles driven and increases based on tenure and driver
performance. We believe our current pay scale is competitive with industry peers.
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On March 16, 2013, we had approximately 2,990 team members, including approximately 2,320 driver team
members. We do not have any team members represented by a collective bargaining unit. In the opinion of
management, our relationship with our team members is good.
Revenue Equipment and Maintenance
Our policy is to replace most tractors within 36 to 45 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 more closely 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 purchase and replacement decisions based on a number of factors, including new
equipment prices, the used equipment market, demand for our freight services, prevailing interest rates,
technological improvements, regulatory changes, fuel efficiency, equipment durability, 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 conjunction with our strategic objective of
positioning us 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 us to improve the
profitability of our existing tractors before we consider materially adding to the fleet size.
In January 2011, we began installing trailer tracking technology and cargo sensors and at December 31, 2012,
we had outfitted approximately 5,500 trailers with this technology. This new technology has contributed to more
efficient asset utilization across our fleet, improved customer satisfaction through better asset allocation and load
visibility and enhanced load security. This technology is designed to provide managers the ability to view trailer
assets in real-time and run customizable management and operational reports for each trailer in their fleet, which is
allowing us to operate with a more efficient trailer-to-tractor ratio than we would otherwise.
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,
2011
2012
Tractors:
Acquired .............................................................................
325
Disposed .............................................................................
383
End of period total ............................................................ 2,246
Average age at end of period (in months) .....................
32
Trailers:
Acquired .............................................................................
300
Disposed .............................................................................
527
End of period total ............................................................ 6,091
Average age at end of period (in months) .....................
77
490
625
2,304
28
300
698
6,318
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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 purchase tractors and trailers manufactured to our specifications.
In deciding which equipment to purchase, a number of factors are considered, including safety, fuel economy,
expected resale value, trade terms 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 credit agreement, capital lease-purchase arrangements,
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 independent operators for the use of their tractors and
drivers in our operations. We offer a lease-purchase program to drivers interested in owning their own equipment
and becoming independent contractors. Prior to October 2012, the program offered qualified drivers the opportunity
to purchase their own tractors through a third-party financing program. In October 2012, we began offering in-
house financing for this program, whereby our drivers can purchase tractors directly from us. At December 31,
2012, we had 101 independent contractors under contract with us, which included 23 lease-purchase operators.
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Beginning January 1, 2010, new federal emissions requirements became effective for all heavy-duty engines.
These new requirements reduce the levels of specified emissions from heavy-duty engines manufactured in or after
2010, and resulted in cost increases when we acquired tractors equipped with these engines. In order to comply with
the standards, new emissions control technologies, such as selective catalytic reduction (“SCR”) strategies and
advanced exhaust gas recirculation (“EGR”) systems, are being utilized. In anticipation of an increase in the
purchase price of new equipment related to the 2010 emissions requirements, we accelerated the purchase of 100
replacement tractors in 2009 and purchased another 300 pre-2010 emission regulated replacement tractors during the
first and second quarters of 2010. As of December 31, 2012, we had 929 tractors, or 41% of our fleet, with the 2010
emission engines including 849 tractors with SCR technology and 80 tractors with Advanced EGR technology.
Technology
We maintain a data center that utilizes both a battery backup and a diesel generator for electrical redundancy.
The data center also houses two fully redundant air systems. The move to virtualized hardware over the coming
year will offer the ability to provide redundancy at all levels that we believe will result in virtually no down-time for
all major systems. Over the past five years, we have been slowly transitioning our technology base from legacy
mainframe based applications to third party systems. These include TMW for our operational systems, Microsoft
Dynamics for our financial systems, TMW Synergize for document storage, and Microfocus for hosting remaining
legacy systems. This has allowed us to streamline our support to a single platform, both saving cost and allowing us
to focus all our development efforts on a single platform. We continue to use our internal development capabilities
to create customized decision-support tools for our operating personnel. Our computer systems are monitored 24
hours a day by experienced information systems professionals. While we employ many preventive measures,
including daily backup of our information systems processes, we do not currently have a wholly redundant backup
for our information systems as a part of our catastrophic business continuity plan but we believe the conversion to a
server platform will allow us to focus our efforts to develop and implement such a plan in the near future.
The technology we use in our business enhances all aspects of our operations and enables us to consistently
deliver superior service to our customers. We are able to closely monitor the location of all our tractors and to
communicate with our drivers in real time through the use of a satellite-based equipment tracking and driver
communication system. 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 accessorial charges, which are charges to customers for additional services such as loading, unloading or
equipment delays. In addition, we utilize satellite-based equipment tracking devices and cargo sensors on most of
our trailers. These tracking devices provide us with visibility on the locations and load status of our trailers at all
times.
Regulation
Our operations are regulated and licensed by various government agencies, including the 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 Company currently has a satisfactory DOT safety rating, which is the highest
available rating. The DOT, through the Federal Motor Carrier Safety Administration (the “FMCSA”), imposes
safety and fitness regulations on us and our drivers, including rules that restrict driver hours-of-service. On
December 27, 2011, the FMCSA published its 2011 Hours of Service Final Rule (the “2011 Rule”). The 2011 Rule
requires drivers to take 30-minute breaks after eight hours of consecutive driving and reduces the total number of
hours a driver is permitted to work during each week from 82 hours to 70 hours. The 2011 Rule also provides that
the 34-hour restart may only be used once per week and must include two rest periods between one a.m. and five
a.m. These rule changes are scheduled to become effective July 1, 2013. The 2011 Rule also adjusted the definition
of “off duty time” to exclude from hourly limits driver time spent in a parked vehicle, which became effective
February 27, 2012, and also defined what hours-of-service rule violations are considered “egregious,” providing for
enhanced penalties to carriers when such violations occur.
We are unable to predict how a court may address challenges to the 2011 Rule and to what extent the FMCSA
might attempt to materially revise the rules under the current or future presidential administrations. On the whole,
however, we believe these modifications to the current rule will 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 2011 Rule is stricken by a court, but any such proposed rules could increase costs in our industry or
decrease productivity.
The FMCSA also is considering revisions to the existing rating system and the safety labels assigned to motor
carriers evaluated by the DOT. We currently have a satisfactory DOT rating, which is the highest available rating
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under the current safety rating scale. If we were to receive a conditional or unsatisfactory DOT safety rating, it could
adversely affect our business because some of our customer contracts require a satisfactory DOT safety rating, and a
conditional or unsatisfactory rating could negatively impact or restrict our operations. Under the revised rating
system being considered by the FMCSA, our safety rating could be evaluated more regularly, and our safety rating
would reflect a more in-depth assessment of safety-based violations.
The FMCSA has adopted CSA as its enforcement and compliance scheme. Under CSA, fleets are evaluated and
ranked based on certain safety-related standards. The methodology for determining a carrier’s DOT safety rating has
been expanded to include the on-road safety performance of the carrier’s drivers. As a result, certain current and
potential drivers may no longer be eligible to drive for us, our fleet could be ranked poorly as compared to our peer
firms, and our safety rating could be adversely impacted. A reduction in eligible drivers or a poor fleet ranking may
result in difficulty attracting and retaining qualified drivers, and could cause our customers to direct their business
away from us and to carriers with higher fleet rankings, which would adversely affect our results of operations.
The FMCSA issued new rules that would require nearly all carriers, including us, to install and use electronic,
on-board recorders (“EOBRs”) in their tractors to electronically monitor truck miles and enforce hours of service.
These rules were vacated by the Seventh Circuit Court of Appeals in August 2011. Congress passed a federal
transportation bill in July 2012 that requires promulgation of rules mandating the use of EOBRs by July 2013 with
full adoption for all trucking companies no later than July 2015. It is uncertain if this adoption date will be
challenged or extended. Such installation could cause an increase in driver turnover, adverse information in
litigation, cost increases and decreased asset utilization.
Other agencies, such as the Department of Homeland Security, also regulate our equipment, operations and
drivers. In the aftermath of the September 11, 2001 terrorist attacks, federal, state and municipal authorities
implemented and continue to implement various security measures, including checkpoints and travel restrictions on
large trucks. The Transportation Security Administration (the "TSA") has adopted regulations that require
determination by the TSA that each driver who applies for or renews his license for carrying hazardous materials is
not a security threat. This could reduce the pool of qualified drivers, which could require us to increase driver
compensation, limit fleet growth, or let trucks sit idle. These regulations also could complicate the matching of
available equipment with hazardous material shipments, thereby increasing our response time and our deadhead
miles on customer shipments. As a result, it is possible that we may fail to meet the needs of our customers or may
incur increased expenses to do so.
The Environmental Protection Agency (the “EPA”) 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 became effective on January 1, 2010. Compliance with the regulations has increased the cost of our new
tractors and operating expenses while reducing fuel economy. In May 2010, an executive memorandum was signed
directing the National Highway Traffic Safety Administration ("NHTSA") and the EPA to develop new, stricter fuel
efficiency standards for heavy trucks. In October 2010, the NHTSA and the EPA proposed regulations that regulate
fuel efficiency and greenhouse gas emissions, beginning in 2014.
The California Air Resource Board also has adopted emission control regulations which will be applicable to all
commercial vehicles traveling within the state of California. Beginning December 31, 2012, pre-2011 model year
53-foot or longer box-type trailers must meet the same requirements as 2011 model year and newer trailers or we
must have prepared and submitted a compliance plan, based on fleet size, which allows us to phase in our
compliance over time. Federal and state lawmakers also have proposed potential limits on carbon emissions under a
variety of climate-change proposals. Compliance with such regulations has increased the cost of our new trailers,
may increase the cost of any new trailers that will operate in California, may require us to retrofit certain of our pre-
2011 model year trailers that will operate in California, and could impair equipment productivity and increase our
operating expenses. These adverse effects, combined with the uncertainty as to the reliability of the newly-designed
diesel engines and the residual value of these vehicles, could materially increase our costs or otherwise adversely
affect our business or operations.
In order to reduce exhaust emissions, some states and municipalities have begun to restrict the locations and
amount of time where diesel-powered tractors, such as ours, may idle. These restrictions could force us to alter our
drivers' behavior, purchase on-board power units that do not require the engine to idle, or face a decrease in
productivity.
Tax and other regulatory authorities have, in the past, sought to assert that independent contractor drivers in the
trucking business are employees rather than independent contractors. Federal legislators have introduced legislation
in the past to make it easier for tax and other authorities to reclassify independent contractor drivers as employees,
including legislation to increase recordkeeping requirements for those using independent contractor drivers and to
9
heighten the penalties of employers who misclassify their employees and are found to have violated employees’
overtime and/or wage requirements. Additionally, federal legislators have sought to abolish the current safe harbor
allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a
long-standing, recognized practice. If our independent contractors are determined to be our employees, we would
incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor,
employment, and tort laws, including for prior periods, as well as potential liability for employee benefits and tax
withholding.
We are not aware of any noncompliance with any applicable federal, state, provincial and local environmental
laws and regulations, and we believe costs of 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.
At the time we fully upgrade our fleet with EOBRs, we expect to incur additional cost, which we believe will not
have a material impact on our consolidated financial position, results of operations and cash flow. However, at this
time, we are not able to project the impact, if any, the EOBR upgrade will have on our tractor productivity.
Seasonality
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations─Seasonality.”
Item 1A. RISK FACTORS
Our future results may be affected by a number of factors of which we have little or no control. The following
discussion of risk factors contains forward-looking statements as discussed in Item 1 above and in the Cautionary
Note Regarding Forward-Looking Statements in Item 7 of Part II of this Annual Report on Form 10-K. The
following issues, uncertainties, and risks, among others, should be considered in evaluating our business and
growth outlook.
Our business is subject to economic, credit 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, such as the period from 2007 to 2009, and by 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.
There has been widespread concern over the credit markets and their effect on the economy. If the economy and
credit markets 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. Although some stability has returned to the equity
markets, there still exists enough economic uncertainty that could cause the market price of our securities to be
volatile.
If the credit markets 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, current operations, results of operations, and potential
investments.
We are subject to increases in costs and other events that are outside our control that could materially affect our
results of operations. Such cost increases include, but are not limited to, fuel and energy prices, taxes and interest
rates, tolls, license and registration fees, insurance, revenue equipment and related maintenance costs, and healthcare
and other benefits for our employees. Changing impacts of regulatory measures could impair our operating
efficiency and productivity, decrease our revenues, and result in higher operating costs. In addition, declines in the
10
resale value of revenue equipment can also affect our revenues and cash flows. From time-to-time, various federal,
state or local taxes also increase, including taxes on fuels. We cannot predict whether, or in what form, any such
increase applicable to us will be enacted, but such an increase could adversely affect our results of operations.
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 achieve and maintain profitability. These factors
include:
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.
Some of our competitors periodically reduce their freight rates to gain business, especially during times of
economic slowdown, which may limit our ability to maintain or increase freight rates, maintain our margins
or maintain growth in our business.
Some of our customers also operate their own private trucking fleets, and they may decide to transport
more of their own freight.
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.
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.
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.
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.
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.
We have a recent history of net losses and may be unsuccessful in improving our profitability.
For the years ended December 31, 2012 and 2011, we incurred net losses of $17.7 million and $10.8 million,
respectively. Achieving profitability depends upon numerous factors, including our ability to increase our average
revenue per tractor, increase velocity, and control expenses. We might not achieve profitability or, if we do, we may
not be able to sustain or increase profitability in the future. If we are unable to achieve profitability, our liquidity,
financial position, and results of operations will continue to be adversely affected.
We have begun implementing a long-term turnaround plan to improve our operational performance and to
return the Company to sustained profitability. We sought broad input in the design of the plan, which included the
hiring, as key members of our management team, of industry veterans with expertise in specific subject matters such
as freight pricing. We may be unsuccessful in implementing our plan effectively or achieving sustainable
improvement from these efforts. Further, we may devote a significant amount of management and financial
resources and not achieve the desired results.
We may not be successful in implementing new management and operating procedures and cost savings
initiatives.
We recently have made changes to our management team and structure, as well as our operating
procedures. These changes may not be successful or may not achieve the desired results. We may require
additional training or different personnel to implement successfully these procedures, all of which may result in
additional expense, delays in obtaining results, or disruptions to our operations. Some of these changes include
customer service and driver management changes and cost savings initiatives. These changes and initiatives may
not improve our results of operations, including miles per tractor, system velocity, seated truck count, and base
revenue per mile. In addition, we may not be successful in achieving the expected savings in our cost structure. In
11
such event, our revenue, financial results, and ability to operate profitably could be negatively impacted. Further,
our operating results may be negatively affected by a failure to further penetrate our existing customer base, cross-
sell our services, pursue new customer opportunities, and manage the operations and expenses of our new or
growing services.
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. Due to our significant self-
insured amounts, we have significant exposure to fluctuations in the number and severity of claims and the risk of
being required to accrue or pay additional amounts if our estimates are revised or the claims ultimately prove to be
more severe than originally assessed.
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. Healthcare legislation and inflationary cost increases also could negatively impact our financial
results. Although we cannot presently determine the extent of the impact healthcare costs will have on our financial
performance, we do expect such costs will increase.
Our Revolver and other financing arrangements contain certain covenants, restrictions, and requirements, and
we may be unable to comply with the covenants, restrictions, and requirements. A default could result in the
acceleration of all or part of our outstanding indebtedness, which could have an adverse effect on our financial
condition, liquidity, results of operations, and the price of our common stock.
On August 24, 2012, we entered into a new $125.0 million revolving credit agreement (the “Revolver”). We
also have numerous other financing arrangements. Although there are no negative covenants relating to financial
ratios or minimum balance sheet requirements, the Revolver contains certain restrictions and covenants relating to,
among other things, dividends, liens, acquisitions and dispositions outside of the ordinary course of business and
affiliate transactions. In addition, the $125.0 million Revolver has an accordion feature whereby we may elect to
increase the size of the Revolver by up to $50.0 million, subject to customary conditions and lender participation. If
we fail to comply with any of our financing arrangement covenants, restrictions and requirements, we will be in
default under the relevant agreement, which could cause cross-defaults under our other financing arrangements. In
the event of any such default, if we failed to obtain replacement financing, amendments to, or waivers under the
applicable financing arrangements, our lenders could cease making further advances, declare our debt to be
immediately due and payable, fail to renew letters of credit, impose significant restrictions and requirements on our
operations, institute foreclosure procedures against their collateral or impose significant fees and transaction
costs. If acceleration occurs, it may be difficult or expensive to refinance the accelerated debt or we may have to
issue equity securities, which would dilute stock ownership. Even if new financing is made available to us, more
stringent borrowing terms may mean that credit is not available to us on acceptable terms. A default under our
financing arrangements could cause a materially adverse effect on our liquidity, financial condition and results of
operations.
We have significant ongoing capital requirements that could adversely affect our financial condition, results of
operations and cash flows if we are unable to generate sufficient cash from operations, or obtain financing on
favorable terms.
The truckload industry is capital intensive. Historically, we have depended on cash from operations, borrowings
from banks and finance companies, and lease instruments to expand and upgrade our revenue equipment. We expect
that capital expenditures to replace and upgrade our revenue equipment will increase from the level we experienced
in 2012. The additional expenditures will be required to upgrade our tractor and trailer fleet, which has increased in
age over the historical average age, and to expand our revenue equipment fleet, as justified by increased freight
volumes. If we are unable to generate sufficient cash from operations and obtain borrowing on favorable terms in
the future, we may have to limit our fleet size, enter into less favorable financing arrangements, or operate our
revenue equipment for longer periods. Accordingly, we may be unable to decrease the age of, or expand, our tractor
and trailer fleet, which would materially and adversely affect our financial condition.
We depend on the proper functioning, availability, and security of our information and communication systems,
and a systems failure or unavailability or a security breach could cause a significant disruption to and adversely
affect our business.
12
We depend on the proper functioning, availability, and security of our communications and data processing
systems in operating our business. Our information and communication 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 formally documented catastrophic
disaster recovery plan or a fully redundant alternate processing capability. If any of our critical information or
communication systems fail or become otherwise unavailable or experience a security breach, 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, to bill for services
accurately or in a timely manner, and to communicate internally and with our drivers, customers, and vendors. 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 are in the midst of a multi-year process to migrate our legacy mainframe platform and internally developed
software applications to server-based platforms. We purchased off-the-shelf products for our core software needs
and developed value-added, decision-support software applications internally. In July 2011, we migrated our
Operations system from our legacy mainframe onto off-the-shelf software, which had a significant adverse effect on
our business and operating results. Although this was the most significant and risky part of our multi-year process,
we have a few remaining systems to convert which could also cause delays, complications or additional costs, which
could have a material adverse effect on our business and operating results.
We receive and transmit confidential data with and among our customers, drivers, vendors, employees, and
service providers in the normal course of business. Despite our implementation of secure transmission techniques,
internal data security measures, and monitoring tools, our information and communication systems are vulnerable to
security threats and breach attempts from both external and internal sources. Any such breach could result in
disruption of communications with our customers, drivers, vendors, employees, and service providers and access,
viewing, misappropriation, altering, or deleting information in our systems, including customer, driver, vendor,
employee, and service provider information and our proprietary business information. A security breach could
damage our business operations and reputation and could cause us to incur costs associated with repairing our
systems, increased security, customer notifications, lost revenues, litigation, regulatory action, and reputational
damage.
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 2012, our top 10
customers accounted for approximately 29% of our revenue, our top five customers accounted for approximately
18% of our revenue and our largest customer accounted for approximately 6% of our revenue. Economic conditions
and capital markets may adversely affect our customers and their ability to remain solvent. Our customers’ financial
difficulties can negatively impact our results of operations and financial condition, especially if our customers were
to delay or default on payments to us. 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 and other key personnel, 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 ourselves for
long-term revenue growth.
We operate in a highly regulated industry, and changes in existing regulations or violations of existing or future
regulations could have a material adverse effect on our operations and profitability.
We operate in the United States pursuant to operating authority granted by the DOT and in various Canadian
provinces pursuant to operating authority granted by the Ministries of Transportation and Communications in such
provinces. Our Company drivers and independent contractors also must comply with the safety and fitness
regulations of the DOT, including those relating to drug and alcohol testing and hours-of-service. Such matters as
weight and equipment dimensions also are subject to government regulations. We also may become subject to new
13
or more restrictive regulations relating to exhaust emissions, drivers’ hours-of-service, ergonomics, on-board
reporting of operations, collective bargaining, security at ports and other matters affecting safety or operating
methods. Future laws and regulations may be more stringent, require changes in our operating practices, influence
the demand for transportation services, or require us to incur significant additional costs. Higher costs incurred by
us or by our suppliers who pass the costs on to us through higher prices could adversely affect our results of
operations. The Regulation section in Item 1 of Part 1 of this Annual Report on Form 10-K discusses in detail
several proposed, pending and final regulations that could significantly affect our business and operations.
The DOT’s Compliance Safety Accountability program could adversely affect our profitability and operations,
our ability to maintain or grow our fleet, and our customer relationships.
Under CSA, drivers and fleets are evaluated and ranked based on certain safety-related standards. The
methodology for determining a carrier’s DOT safety rating has been expanded to include the on-road safety
performance of the carrier’s drivers. As a result, certain current and potential drivers may no longer be eligible to
drive for us, our fleet could be ranked poorly as compared to our peer firms, and our safety rating could be adversely
impacted. A reduction in eligible drivers or a poor fleet ranking may result in difficulty attracting and retaining
qualified drivers, increased competition for drivers with favorable safety ratings, increased driver-related
compensation costs, and loss of business as our customers direct their business away from us and to carriers with
higher fleet safety ratings, which would adversely affect our results of operations. From time to time we may, and in
the past have, exceeded the established intervention thresholds under certain categories. Based on these unfavorable
ratings, our drivers may be prioritized for intervention action or roadside inspection by regulatory authorities, and
our customers may be less likely to assign loads to us. Additionally, we may incur greater than expected expenses
in our attempts to improve our scores.
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, to
meet the more restrictive EPA emissions standards promulgated in 2007 and in January 2010, vendors have had to
introduce new engine technology. 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, the volume and terms of diesel fuel purchase
commitments, 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,
natural 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 from 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 two years, the failure to
recover fuel price increases resulted in a materially negative impact to our results of operations. For example, any
current week’s fuel surcharge rate is based on the prior week’s national average diesel price. Thus, in periods of
rising prices, the current week’s fuel surcharge is based on the prior week’s lower diesel price while we are paying
the current week’s higher diesel price at the pump. Also, during times of low freight volumes, shippers can use their
negotiating leverage to impose less compensatory fuel surcharge policies. A failure to improve our fuel price
protection through these measures, further increases in fuel prices, or a shortage or rationing 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, from time to time 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. Regulatory requirements, including CSA, have also reduced the number of
14
eligible drivers. Because of the shortage of qualified drivers and intense competition for drivers from other trucking
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 driver turnover rate. Driver turnover 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 transportation 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 four of our facilities and one leased
facility has below-ground bulk fuel storage tanks. 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 January 2010. Engines manufactured after October 2002 generally cost more, produce lower fuel mileage,
and require additional maintenance compared with earlier models. As of December 31, 2012, 99% of our fleet is
equipped with the 2007 and 2010 emission standard 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.
An integral component of our operations is the business we conduct 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.
Increased prices, reduced productivity, design changes of new engines, and restricted availability of new revenue
equipment and fluctuations in the prices of used 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, 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 EPA emissions standards that began in 2002,
with additional new requirements implemented in 2007 and January 2010, have required vendors to introduce new
15
engines. 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, 2012, approximately 99% of our tractor fleet was comprised of tractors with
engines that met the EPA mandated clean air standards that became effective in 2007 and 2010. Tractors that meet
the 2007 and 2010 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. Further, as with any engine redesign, there is a risk that the newly-designed engines will have
unforeseen problems that could adversely impact our business.
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. The market demand for used equipment has been difficult to forecast and, although our equipment
disposal schedule may fluctuate, we currently expect the market demand and gains on disposal in 2013 to be less
than those of 2012. When the used equipment market is weak, it may increase our net capital expenditures for new
revenue equipment, decrease our gains on sale of revenue equipment (or create a loss 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.
We depend on third parties, particularly in our brokerage and rail intermodal businesses, and service instability
from these providers could increase our operating costs and reduce our ability to offer brokerage and rail
intermodal services, which could adversely affect our revenue, results of operations and customer relationships.
Our brokerage business is dependent upon the services of third-party capacity providers, including other
truckload carriers. These third-party providers seek other freight opportunities and may require increased
compensation in times of improved freight demand or tight trucking capacity. Our inability to secure the services of
these third parties, or increases in the prices we must pay to secure such services, could have an adverse effect on
our operations and profitability.
Our rail intermodal business utilizes railroads and some third-party drayage carriers to transport freight for our
customers. In most markets, rail service is limited to a few railroads or even a single railroad. Any future reduction
in service by the railroads with which we have or in the future may have relationships is likely to increase the cost of
the rail-based services we provide and could reduce the reliability, efficiency, timeliness, and overall attractiveness
of our rail-based intermodal services. Furthermore, railroads increase shipping rates as market conditions
permit. Price increases could result in higher costs to our customers and reduce or eliminate our ability to offer
intermodal services. In addition, we may not be able to negotiate additional contracts with railroads to expand our
capacity, add additional routes, or obtain multiple providers, which could limit our ability to provide this service.
Our stockholder rights plan and classified Board of Directors could deter acquisition proposals and make it
difficult for a third party to acquire control of the Company. This could have a negative effect on the price of our
common stock.
We have a stockholder rights plan and a classified Board of Directors to ensure fair treatment in the event of an
unsolicited takeover attempt regarding the Company to ensure that the Company and its Board of Directors have
adequate time to review any unsolicited takeover attempt for adequacy and fairness. These defenses could
discourage potential acquisition proposals and could delay or prevent a change in control of the Company. These
deterrents could adversely affect the price of our common stock and make it difficult to remove and replace
members of our Board of Directors or management.
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, SCS 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 which is leased to another party.
Our network consists of 21 facilities, which includes SCS offices and one terminal facility in Laredo, Texas,
which is one of the largest inland freight gateway cities between the U.S. and Mexico, operated by a wholly-owned
subsidiary, International Freight Services, Inc. We are actively seeking locations for additional facilities as we
16
expand our brokerage footprint. As of December 31, 2012, our active terminal, SCS and administrative facilities
were located in or near the following cities:
Terminal facilities:
Van Buren, Arkansas
West Memphis, Arkansas
Chicago, Illinois
Vandalia, Ohio
Laredo, Texas
Roanoke, Virginia (1)
Denton, Texas
Atlanta, Georgia
Carlisle, Pennsylvania
Phoenix, Arizona (2)
SCS facilities:
Springdale, Arkansas
College Park, Georgia
Naperville, Illinois
Addison, Texas
Buffalo, New York
Roseville, California
Van Buren, Arkansas
Salt Lake City, Utah
Seattle, Washington
Los Angeles, California
Intermodal facilities:
San Diego, California
Van Buren, Arkansas
Administrative facilities:
Burns Harbor, Indiana
Shop
Driver
Facilities
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
No
No
No
Yes
No
No
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No
No
No
No
No
Yes
No
No
No
No
Yes
No
Fuel
Yes
Yes
No
Yes
No
Yes
No
Yes
No
No
No
No
No
No
No
No
Yes
No
No
No
No
Yes
No
Dispatch
Office
Own or
Lease
Yes
No
No
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Own
Own/Lease
Lease
Own
Own/Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Own
Lease
Lease
Lease
Lease
Own
Yes
Lease
(1) Effective February 1, 2013, this terminal facility was closed.
(2) During the first quarter of 2013, this terminal facility was closed.
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 July 28, 2008, a former commission sales agent, Mr. William Blankenship (“Blankenship”), filed an action
in the United States District Court, Western District of Arkansas entitled William Blankenship, Jr. v. USA Truck,
Inc., asking the court to set aside a previously consummated settlement agreement between the parties. The matter
was dismissed by the District Court based upon our Motion to Dismiss, but was later reinstated by the 8th Circuit
Court of Appeals and set for trial in the United States District Court in Fort Smith, Arkansas. In October 2011, the
trial was held in the United States District Court, and the jury returned a verdict in our favor on all counts and
determined that we had no additional liability in this matter. On December 13, 2011, the court entered an order
awarding the Company its costs and attorney’s fees incurred in defending the case totaling approximately $0.2
million. Blankenship has now appealed the jury verdict and court order, and the matter is once again pending before
the 8th Circuit Court of Appeals.
Item 4. MINE SAFETY DISCLOSURES
None.
17
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, 2012
Fourth Quarter .............................................................................................. $
Third Quarter ................................................................................................
Second Quarter ..............................................................................................
First Quarter ..................................................................................................
3.69
5.70
7.96
9.46
Year Ended December 31, 2011
Fourth Quarter ................................................................................................. $
Third Quarter ...................................................................................................
Second Quarter ................................................................................................
First Quarter ....................................................................................................
10.35
12.41
13.15
13.49
$
$
2.65
3.63
4.47
7.39
7.30
6.75
9.75
11.68
As of March 18, 2013, there were 195 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 March 18, 2013, the closing price of our common stock on the NASDAQ Global Select Market was $4.95
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. Our Revolver places restrictions on our ability to pay dividends.
Equity Compensation Plan Information
The following table provides information about our equity compensation plans as of December 31, 2012. The
equity compensation plan that has been approved by our stockholders is our 2004 Equity Incentive 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)
112,151 (1)
$12.54 (2)
665,860 (3)
--
112,151
--
$12.54
--
665,860
Plan Category
Equity Compensation Plans
Approved by Security Holders .......
Equity Compensation Plans Not
Approved by Security Holders .......
Total ............................................
(1) Includes only common stock subject to outstanding stock options and does not include: (i) 72,587 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 (ii) 31,797 unvested shares
of restricted stock, which will vest in annual increments, and which do not require the payment of exercise
prices.
The above 104,384 shares exclude 9,074 shares of performance based restricted stock, which was deemed
to be forfeited June 30, 2011, and such forfeiture will become effective April 1, 2013.
18
(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 1,100,000 to
1,125,000 on May 8, 2013, the date of our 2013 Annual Meeting. The share numbers included in the table
do not reflect this adjustment or any future adjustments. The 665,860 shares that remain available for
future grants may be granted as stock options under our 2004 Equity Incentive Plan, or 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 October 21, 2009, our Board of Directors approved the repurchase of up to 2,000,000 shares of our common
stock which expired on October 21, 2012. Subject to applicable timing and other legal requirements, repurchases
could have been made on the open market or in privately negotiated transactions on terms approved by our
Chairman of the Board or President. Repurchased shares may be retired or held in treasury for future use for
appropriate corporate purposes including issuance in connection with awards under our employee benefit plans.
During the years ended December 31, 2011 and 2012, we did not repurchase any shares of our common stock.
Currently, we do not have an approved repurchase authorization.
Item 6.
SELECTED FINANCIAL DATA
Not required.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Cautionary Note Regarding 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, and such statements are subject to the safe harbor created by those
sections, and the Private Securities Litigation Reform Act of 1995, as amended. All statements, other than
statements of historical or current 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,”
“goals,” “may,” “will,” “should,” “could,” “potential,” “continue,” “future” and similar terms and phrases.
Forward-looking statements are based on currently available operating, financial, and competitive information.
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. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the section entitled "Item 1.A., Risk Factors," set forth
above. 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 such forward-looking statements speak only as of the date of this Annual Report on Form 10-K. You are
cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to
reflect any change in our expectations with regard thereto or any change in the events, conditions, or circumstances
on which any such information is based.
All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in
their entirety by this cautionary statement.
19
References to the “Company,” “we,” “us,” “our” and words of similar import refer to USA Truck, Inc. and its
subsidiary.
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 service
offerings 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.
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 primarily 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. Our business is classified into three operating and reportable
segments: our Trucking operating segment consisting primarily of our Truckload and Dedicated Freight service
offerings; our SCS operating segment consisting entirely of our freight brokerage service offering; and our rail
Intermodal operating segment.
Substantially all of our base revenue from the three reportable 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, 2012 and 2011, Trucking base
revenue represented 72.8% and 78.2% of total base revenue, respectively, with the remaining base revenue being
generated by our SCS and Intermodal operating segments.
Our SCS and Intermodal operating segments are intended to provide services which complement our Trucking
services, primarily to existing customers of our Trucking operating segment. A majority of the customers using our
SCS and Intermodal services are also customers of our Trucking operating segment. For the years ended December
31, 2012 and 2011, our SCS operating segment represented approximately 22.0% and 16.3%, respectively, of our
consolidated revenue. For the years ended December 31, 2012 and 2011, our Intermodal operating segment
represented approximately 5.2% and 5.5%, respectively, of our consolidated revenue.
We generally charge customers for our services on a per-mile basis. The expenses which have a major impact
on our profitability 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 and benefits.
Trucking. Trucking includes the following primary service offerings provided to our customers:
Truckload. Our Truckload service offering provides truckload freight services as a medium- to long-haul
common carrier. We have provided Truckload services since our inception, and we derive the largest
portion of our revenues from these services.
Dedicated Freight. Our Dedicated Freight service offering is a variation of our Truckload 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. Our SCS operating segment consists of our freight brokerage service offering
which matches customer shipments with available equipment of authorized carriers and provides 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
20
transportation needs. To date, a majority of the customers of SCS have also engaged us to provide services
through one or more of our Trucking service offerings.
Intermodal. 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 offering provides our customers cost savings over Truckload with a slightly slower
transit speed, while allowing us to reposition our equipment to maximize our freight network yield. During
August 2010, we entered into a long-term agreement with BNSF Railway to lease 53’ domestic intermodal
containers. Prior to the agreement, the majority of Intermodal’s revenue was derived from trailer-on-flat-car
service. Because of the lack of lane density, we reduced the number of our leased containers from 500 to
approximately 125. Our container contract with BNSF expired on December 31, 2012. Accordingly, we are
scheduled to return the remaining leased containers to BNSF during the first quarter and plan to transition
profitable intermodal freight to other sources of capacity throughout 2013.
Results of Operations
On January 31, 2013, we issued a news release announcing our preliminary revenues and results of operations
for the fourth quarter of 2012. Subsequent to the issuance of this news release, and in conjunction with the
completion of normal quarter- and year-end closing and audit procedures, we recorded additional adjustments to
operating and other expenses that increased our reported net loss by approximately $0.1 million, or $0.01 per share.
Executive Overview
Asset-Based Trucking Operations
We experienced improving operating fundamentals toward the end of the third quarter and into the fourth
quarter. The improvement is reflected in our financial results as we narrowed our loss per share in the fourth quarter
of 2012 by 26.2% to $0.31, compared to a $0.42 loss in the fourth quarter of 2011. Sequentially, we nearly cut in
half the third quarter's $0.59 loss per share in what has historically been a seasonally weaker quarter for us.
Fourth quarter improvement was most evident in our Trucking segment, where we produced year-over-year
revenue growth for the first time since the second quarter of 2011. Base Trucking revenue grew 3.4% despite a
3.1% reduction in the average fleet size. Base revenue per tractor per week improved 6.7% to $2,720 on an
improved freight mix and a substantially larger seated tractor count.
Our yield management activities during the third quarter, which adversely impacted volumes during that quarter
as we re-priced underperforming freight, began to produce results during the fourth quarter. We replaced volumes
lost during the third quarter with better-performing freight, as evidenced by the combination of a 2.2% improvement
in rate per loaded mile and a 6.7% increase in loaded length-of-haul. Pricing typically falls at longer lengths-of-
haul, so the fact that we grew both simultaneously indicates improving lane flow (directionality, density, and market
selection). We realigned our customer base during the fourth quarter, including the replacement of four of our top
25 Trucking shippers, while reducing concentration with our largest shippers. We expect some of our new
customers to grow into our top 25 customer list in the first half of 2013.
The improved freight mix and the better operational execution helped us to increase miles per seated tractor per
week by 1.3% to 1,931 miles. The heightened empty mile factor (up 92 basis points to 12.0%) suggests that we still
need additional freight volume to better utilize our equipment. We are executing a detailed strategy that we believe
will grow volumes in specific markets and lanes during this winter's freight bidding season.
Perhaps our largest accomplishment during the fourth quarter involved cutting our unseated tractor count by
more than 50%, to 92 from 213 sequentially versus the third quarter of 2012. The seated tractor count growth was
made possible primarily by lower driver turnover, which improved throughout the fourth quarter to an annualized
rate of 83% in December 2012, compared to 107% in December 2011. We attribute the improvement to enhanced
Company-wide focus on driver retention, freight better suited to our network, and more consistent miles. The
combination of our seated tractor count and greater miles per seated tractor led to a 5.5% improvement in overall
tractor utilization to 1,850 miles per in-service tractor per week.
The key operating metric charts below (Miles per Seated Tractor per Week, Loaded Revenue per Mile,
Unseated Tractors, and Base Revenue per Tractor per Week) reflect the results we have experienced for the periods
indicated.
21
2,150
2,100
2,050
2,000
1,950
1,900
1,850
1,800
300
250
200
150
100
50
Miles per Seate
M
d Tractor per W
Week
Loaded Rev
venue per Mil
e
$1.68
$1.67
$1.66
$1.65
$1.64
$1.63
$1.62
$1.61
$1.60
$1.59
$1.58
$1.57
$1.56
1st QTR
2nd Q
QTR
3rd QTR
4th QTR
1st QTR
1
2nd QT
TR
3rd QTR
4th QTR
011
20
2012
201
11
2012
Unseate
ed Tractors
Ba
se Revenue p
er Tractor per
Week
$2,850
$2,800
$2,750
$2,700
$2,650
$2,600
$2,550
$2,500
$2,450
$2,400
1st QTR
1
2nd QT
TR
3rd QTR
4th QTR
1st QTR
2nd Q
QTR
3rd QTR
4th QTR
011
20
2012
201
11
2012
Our S
income by
conditions
is continuin
gross marg
SCS segment c
y 13.4% in the
during the fou
ng to deliver p
gins on less rev
continued to d
e fourth quarte
urth quarter. S
profitable result
venue and were
deliver strong
r. Gross marg
CS represented
ts with minima
e immaterial to
performance,
gin expanded
d 21.2% of our
al capital inves
o our financial r
growing base
by 30 basis po
r total base rev
stment. Interm
results.
revenue by 1
oints on slight
venue during th
modal operation
17.6% and ope
tly improved m
he fourth quart
ns experienced
erating
market
ter and
d better
Balance S
heet and Liqu
uidity
At De
compared
our Revolv
we are req
incurred ne
equipment
operating p
sources of
we can ma
expansion
financing w
loss for 20
ecember 31, 20
to 47.4% at D
ver and had app
uired to mainta
et capital expe
less proceeds
plan anticipate
liquidity are a
ake no assuran
plans either fo
will be availab
12.
012, our outsta
December 31, 2
proximately $1
ain of approxim
enditures (purch
s from the sal
es capital exp
adequate to sup
nce, however, t
or the remaind
ble, if at all, in
anding debt, les
2011. At Dece
19.9 million of
mately $18.8 m
hases of prope
le of property
enditures grea
pport our opera
that our source
der of this year
amounts requi
ss cash, repres
ember 31, 2012
f available borr
million). For th
erty and equipm
and equipmen
ater than those
ating needs for
es of liquidity
r or for the nex
ired or on term
sented 55.1% o
2, we were in
rowing capacit
the twelve mon
ment plus liabi
nt) of approxi
e for 2012. W
r the next twelv
will be suffici
xt several year
ms satisfactory
of our balance
compliance w
ty (net of the m
nths ended Dec
ility incurred f
imately $32.2
We believe ou
ve months. De
ient to fund ou
rs, or that any
to us, especial
sheet capitaliz
with the covena
minimum avail
cember 31, 20
for leases on re
million. Our
ur balance she
espite this adeq
ur operations a
necessary add
lly in light of o
zation,
ants of
lability
12, we
evenue
r 2013
et and
quacy,
and all
ditional
our net
Note Rega
arding Presenta
ation
By ag
rates we ch
surcharge i
the fuel su
costs and
reement with
harge our cust
is designed to
urcharge increa
expenses to to
our customers
tomers as diese
approximately
ases our reven
otal revenue,
, and consisten
el fuel prices i
offset increase
nue at different
including the
nt with industr
increase above
es in fuel costs
t rates for each
fuel surcharge
22
ry practice, we
e an agreed up
s above the bas
h period. We
e, could provi
e add a gradua
pon baseline pr
seline. Fuel pr
e believe that c
ide a distorted
ated surcharge
rice per gallon
rices are volatil
comparing ope
d comparison
to the
n. The
le, and
erating
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 operations included in this report.
Base revenues from our SCS operating segment, consisting entirely of base revenues from our freight brokerage
service offering, have fluctuated in recent periods. This service offering typically 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 SCS
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 the other expenses presented in the consolidated statements of
operations in the period-to-period comparisons below.
Fiscal Year Ended December 31, 2012 Compared to Fiscal Year Ended December 31, 2011
Results of Operations – Combined Services
Total base revenue decreased 0.6% from $411.0 million to $408.7 million. We reported a net loss for all
service offerings of $17.7 million ($1.71 per share), as compared to a net loss of $10.8 million ($1.05 per share).
Our effective tax rate increased from 31.5% to 35.2%. 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, adjusted for 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
Relationship of Certain Items to Base Trucking Revenue
The following table sets forth the percentage relationship of certain items to base revenue of our Trucking
operating segment for the periods indicated. Fuel and fuel taxes are shown net of fuel surcharges.
Base revenue ........................................................................
Operating expenses and costs:
Salaries, wages and employee benefits ...........................
Fuel and fuel taxes...........................................................
Purchased transportation .................................................
Depreciation and amortization ........................................
Operations and maintenance ...........................................
Insurance and claims .......................................................
Operating taxes and licenses ...........................................
Communications and utilities ..........................................
Gain on disposal of revenue equipment, net....................
Other ................................................................................
Total operating expenses and costs ............................
Operating loss .....................................................................
Year Ended December 31,
2011
2012
100.0 %
100.0 %
44.1
15.6
6.7
15.0
13.6
6.8
1.8
1.3
(0.7)
5.8
110.0
(10.0)%
40.4
15.6
8.3
15.2
12.3
6.9
1.6
1.3
(1.1)
5.5
106.0
(6.0) %
23
Key Operating Statistics:
Operating loss (in thousands) ................................................ $
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) ................................
Operating ratio (5) ................................................................
(1) Total miles include both loaded and empty miles.
Year Ended December 31,
2011
2012
(18,762)
(29,848)
221,765
205,776
$
11.4 %
2,184
94,220
1,802
542
2,606
2,184
110.0 %
$
11.0 %
2,313
95,878
1,839
532
2,664
2,235
106.0 %
(2) The empty mile factor is the number of miles traveled for which we are not typically compensated by any
customer as a percent of total miles traveled.
(3) Tractors include Company-operated tractors in-service plus tractors operated by independent contractors.
(4) Average miles per trip is based upon loaded miles divided by the number of Trucking shipments.
(5) Operating ratio is based upon total operating expenses, net of fuel surcharge revenue, as a percentage of
base revenue.
Base revenue from our Trucking operating segment decreased from $321.3 million to $297.6 million. The
decrease was primarily the result of:
Our total miles and our average miles per tractor per week decreased 7.2% and 2.0%, respectively.
The size of our fleet decreased 5.6%.
The total number of loads dispatched decreased 9.1%.
Our empty mile factor increased 3.6%.
The operating ratio for our Trucking operating segment deteriorated by 4.0 percentage points of base Trucking
revenue to 110.0% due to the following factors:
Salaries, wages and employee benefits increased 3.7 percentage points of base Trucking revenue due in
large part to a 7.4% reduction in base Trucking revenue and a 28.9% reduction in the percentage of our
tractor fleet comprised of independent contractors. As the percentage of our fleet comprised of
independent contractors decreases, the percentage of our fleet comprised of Company drivers increases,
along with the associated salaries, wages and benefits for such Company drivers. During 2012, we
continued to see evidence of a tightening market of eligible drivers related to the implementation of CSA,
which caused our total driver compensation costs to increase 4.2% on a per mile basis as we needed to offer
sign-on bonuses to attract new drivers, we increased non-mileage pay to help us retain drivers, and we
raised driver pay for new drivers with less than one year experience. New hours-of-service rules scheduled
to go into effect in 2013 may further reduce the pool of eligible drivers and may lead to increases in driver
related expenses that would increase salaries, wages and employee benefits. We also have experienced an
increase in the frequency and severity of workers’ compensation claims, which have increased by
approximately $2.0 million or 69.1%. In addition to the above, medical payments made under our
employee benefits plan increased approximately $1.1 million or 23.7%.
Fuel and fuel taxes expense, net of fuel surcharge, remained flat as a percentage of base Trucking revenue.
Tractor utilization was 2.0% lower during 2012 as compared to 2011, which caused fuel and fuel taxes as a
percentage of revenue to increase as trucks spent more time idling. While fuel costs generally have been
higher in 2012, improved fuel purchasing and fuel surcharge collections as compared to 2011 lowered our
net fuel cost per gallon (fuel cost per gallon minus fuel surcharge collections per gallon) by approximately
$0.06. Additionally, our fuel economy improved 1.2% as we added new, more fuel efficient trucks to the
fleet. We anticipate fuel costs will continue to be affected in the future by price fluctuations, the terms and
collectability of fuel surcharge revenue, fuel efficiency and the percentage of total miles driven by
independent contractors.
24
Purchased transportation, which is comprised of independent contractors’ compensation and fees paid to
Mexican carriers, decreased 1.6 percentage points of base Trucking revenue. This decrease was the result
of a reduction of 43 independent contractors, or 28.9%, included in our fleet. Over the longer term, we
expect our purchased transportation expense to increase if we achieve our goal to grow our independent
contractor fleet and our cross-border Mexico business. In the event that we are unable to recruit and retain
independent contractors, this expense could continue to fall, causing a corresponding increase in fuel and
fuel taxes expense and salaries, wages and employee benefits expense.
Depreciation and amortization decreased 0.2 percentage points of base Trucking revenue primarily due to
an overall decrease in the size of our tractor and trailer fleets. As of December 31, 2012, we reduced our
total tractor count by 42 units as compared to December 31, 2011, representing units shut down due to high
mileage and trade life cycles. We also reduced our trailer count by 227 year over year as part of our plan to
reduce the number of trailers because of our investment in trailer tracking devices. As a result of our plan
to reduce the age of our fleet and the increased costs of new equipment, we expect depreciation and
amortization expense to increase as a percentage of base Trucking revenue in future periods. Absent
offsetting improvements in average revenue per tractor or growth in our independent contractor fleet and
non-asset based operations, our expense in this category as a percentage of revenue could increase going
forward if equipment prices continue to inflate.
Operations and maintenance expense increased 1.3 percentage points of base Trucking revenue primarily
due to a 10.0% increase in direct repair costs related to new engine emissions requirements mandated by
the EPA, various requirements imposed by California's Air Resources Board, the higher mileage equipment
remaining in our fleet and the increase in the cost of parts and tires. Our average tractor age at December
31, 2012 was 32 months compared to 28 months at December 31, 2011, whereas our average trailer age
was 77 months and 71 months, respectively. Operations and maintenance expense may increase in the
future if we delay the purchase of new equipment and the age of our equipment continues to increase.
Insurance and claims expense decreased 0.1 percentage points of base Trucking revenue year over year;
however, the actual amount of insurance and claims expense decreased by approximately $2.0 million. The
mild winter during the first quarter along with the continuing education of our drivers regarding accident
prevention assisted us in reducing insurance and claims expense. If we are able to successfully execute our
safety initiatives, we would expect insurance and claims expense to continue to decrease over the long
term, though remaining volatile from period-to-period.
Other expense increased 0.3 percentage points of base Trucking revenue as a result of the write off of
approximately $0.5 million of deferred debt issuance costs associated with our prior credit facility, which
we refinanced in August 2012. This expense category decreased approximately $0.4 million as compared
to 2011; however, lower tractor utilization resulted in this item increasing as a percentage of revenue.
Gain on the disposal of equipment decreased 0.4 percentage points of base Trucking revenue as a result of
fewer sales of our tractors and trailers due to a reduced level of equipment inventory to sell. If the used
equipment market was to soften or we decided to keep our equipment for a longer period of time, gains on
disposal of equipment could decrease.
Results of Operations – Strategic Capacity Solutions
The following table sets forth certain information relating to our SCS operating segment for the periods
indicated:
Year Ended December 31,
Total SCS revenue (1) ................................................... $
Intercompany revenue ...................................................
Total SCS revenue, less intercompany revenue ......... $
2012
128,135
(24,761)
103,374
Operating income (in thousands) ................................... $
Gross margin (2) ............................................................
7,788
13.9 %
(1) Includes fuel surcharge revenue.
$
$
$
2011
93,118
(12,094)
81,024
7,100
15.1 %
(2) Gross margin is calculated by taking total SCS revenue less purchased transportation and dividing that
amount by total SCS revenue. This calculation includes intercompany revenue and expenses.
25
Total revenue, less intercompany revenue, from our SCS operating segment increased 27.6% to $103.4 million
from $81.0 million, while operating income increased 9.7% to $7.8 million from $7.1 million. This increase was
primarily a result of the continued expansion of our SCS workforce. This increase was partially offset by a 7.6%
decline in gross margin resulting primarily from a softer freight environment and an increase in purchased
transportation expense. If we are successful in continuing to build our SCS business, we would expect to see the
percentage of our total revenue coming from SCS continue to grow. Our gross margin from our SCS business may
continue to decline if the market remains tepid.
Results of Operations – Intermodal Operations
The following table sets forth certain information relating to our Intermodal operating segment for the periods
indicated:
Year Ended December 31,
2011
2012
Total Intermodal revenue (1) ......................................... $
Intercompany revenue ...................................................
28,215
(705)
Total Intermodal revenue, less intercompany
revenue
$
27,510
Operating income (in thousands) ................................... $
Gross margin (2) ............................................................
(1,212)
17.8 %
(1) Includes fuel surcharge revenue.
$
$
$
32,478
(2,246)
30,232
(987)
11.5 %
(2) Gross margin is calculated by taking total Intermodal revenue less purchased transportation and dividing
that amount by total Intermodal revenue. This calculation includes intercompany revenue and expenses.
Total revenue, less intercompany revenue, from our Intermodal operating segment decreased 9.0% to $27.5
million from $30.2 million. We experienced difficulty building the lane density necessary to efficiently operate the
containers we leased from BNSF Railway to overcome the fixed costs associated with them. In November 2012, we
began transitioning our Intermodal model to a less asset-intensive and more variable cost-based model. Our
container contract with BNSF expired on December 31, 2012, and we are scheduled to return the remaining leased
containers to BNSF during the first quarter.
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, primarily due
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 over the past three 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 prices 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 an agreed upon baseline price per gallon. 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 typically do not receive compensation from
customers. Overall, the market fuel prices per gallon were higher in 2012 than they were in 2011.
At December 31, 2012, we did not have any long-term fuel purchase contracts, and we have not entered into
any other hedging arrangements that protect us against fuel price increases.
26
Off-Balance Sheet Arrangements
From time to time, we enter into operating leases relating to certain facilities, office equipment and revenue
equipment that are not reflected in our balance sheet. We do not currently have off-balance sheet arrangements that
have or are reasonably likely to have a material current or future effect on our consolidated financial condition,
revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Liquidity and Capital Resources
On August 24, 2012, we entered into a $125.0 million Revolver with Wells Fargo Capital Finance, LLC, as
Administrative Agent and PNC Bank, as Syndication Agent. The Revolver, which expires in 2017, is secured by
substantially all of our assets, and can be expanded up to $175.0 million, subject to customary conditions and lender
participation. Proceeds received under the Revolver were used, in part, to repay the approximately $75.9 million
outstanding under our credit agreement with Branch Banking and Trust Company, dated April 19, 2010 (the "Credit
Agreement").
During the year ended December 31, 2012, the maximum amounts borrowed under the Credit Agreement and
the Revolver, including letters of credit, reached approximately 79.6% and 71.2%, respectively, of the total amounts
available at their highest points. We ended the year with outstanding borrowings, including letters of credit, equal to
approximately 69.1 % of the total amount available under the Revolver. The maximum amount borrowed and the
percentage of the amount available excluded the accordion feature applicable to each credit facility. At December
31, 2012, we had approximately $19.9 million available under our Revolver (net of the minimum availability we are
required to maintain of approximately $18.8 million). Our balance sheet debt, less cash, represents 55.1% of our
total capitalization, and we have no material off-balance sheet debt. During 2012, our Board of Directors authorized
the use of up to $50.0 million in new capital leases under existing facilities through 2012, and at December 31,
2012, we had approximately $22.2 million of availability. In January 2013, the Board of Directors authorized the
use of up to $45.0 million in new capital leases under existing facilities through 2013. We financed approximately
$27.8 million of our 2012 tractor purchases with 36 and 45 month, fixed-rate capital leases, and we also refinanced
two tractor purchase leases approximating $3.7 million retaining their remaining terms of 15 and 23 months. Our
capital leases currently represent 38.5% of our total debt and carry an average fixed rate of 2.3%. Not only does that
provide us with a natural hedge against recent London Interbank Offered Rate (“LIBOR”) volatility, but it has also
freed up availability on our Revolver. We produced $11.2 million in free cash flow (cash flow from operations less
cash used in investing activities) during 2012, which was approximately $8.9 million more than 2011.
The nature of our business requires 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 Credit Agreement and Revolver, and capital lease purchase arrangements.
We have historically met our working capital needs with cash flows from operations and with borrowings under
financing arrangements. We use these financing arrangements, in addition to our Revolver, to minimize fluctuations
in cash flow needs and to provide flexibility in financing revenue equipment purchases.
During the year ended December 31, 2012, we incurred net capital expenditures (purchases of property and
equipment plus liability incurred for leases on revenue equipment less proceeds from the sale of property and
equipment) of approximately $32.2 million (excluding approximately $3.7 million relating to revenue equipment
that we took possession of during 2011 and funded during 2012). During the year ended December 31, 2012, we
also incurred net capital expenditures of $0.7 million for facility expansions and other expenditures. We expect our
2013 capital expenditures to be greater than 2012.
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, especially in light of our net loss for 2012.
If the credit markets erode or we are unable to comply with the requirements of our Revolver, we 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, and 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 unsuccessful in obtaining sufficient financing because we are
unable to access the capital markets on acceptable terms, it could impact our ability to provide services to our
customers and may materially and adversely affect our business, financial results, and results of operations.
27
Cash Flows
(in thousands)
Year Ended December 31,
2011
2012
Net cash provided by operating activities ......................................... $
Net cash used in investing activities .................................................
Net cash used in financing activities .................................................
15,536 $
(4,348)
(12,105)
23,662
(21,410)
(2,319)
Cash generated from operations decreased $8.1 million during 2012 as compared to 2011. Several factors
contributed to the decrease:
Our net loss increased $6.9 million, from $10.8 million in 2011 to $17.7 million in 2012.
A decrease in depreciation and amortization of $4.2 million, from $49.3 million to $45.1 million. The
decrease in depreciation and amortization was due to an overall decrease in our revenue equipment
counts. As of December 31, 2012, we reduced our total tractor count by 58 units as compared to
December 31, 2011, representing units shut down due to high mileage and trade life cycles. We also
reduced our trailer count by 227 year over year as part of our plan to reduce the number of trailers
because of our investment in trailer tracking devices.
A decrease in our deferred tax liability of approximately $4.6 million due primarily to a decrease in the
excess of tax depreciation over that recorded per books offset by a slight increase in prepaid expenses.
A decrease in gains on the sale of equipment of $1.5 million from 2011 to 2012 as a result of a decline
in our used equipment inventory due to our trade cycle.
A decrease in cash of $0.9 million resulting from an increase in the number of days it takes us to
collect accounts receivable.
A decrease in cash used in trade accounts payable and accrued expenses of $2.0 million resulting from
the timing of both equipment purchases and payment for broker carrier expenses.
A $3.1 million decrease in the use of cash relating to insurance and claims accruals, as we experienced
a decline in accident frequency and severity during 2012 as compared to 2011, with the most
significant decline occurring in the last half of 2012.
Cash used in investing activities decreased $17.2 million in 2012 as compared to 2011. This decrease resulted
primarily from a decrease in cash used to purchase equipment. Cash used to purchase property and equipment
decreased $22.4 million during 2012 as compared to 2011. This decrease was primarily due to two factors: the
method utilized to finance the acquisition of revenue equipment and the number of tractors we purchased. In regard
to the financing of the equipment, we primarily utilized lease-based financing during 2012 whereas we primarily
utilized borrowings from our Credit Agreement to fund revenue equipment acquisitions during 2011. For 2012, we
leased $27.8 million in revenue equipment acquisitions compared to $21.2 million during 2011, and, during 2012,
we also refinanced two tractor purchase leases approximating $3.6 million. In regard to the volume of purchases, in
2012 we purchased 325 tractors compared to 490 tractors during 2011. Cash proceeds from the sale of equipment
decreased $5.4 million primarily due to a decline in the number of units sold. During 2012, we sold $17.7 million of
property and equipment as compared to $23.1 million during the prior year.
Cash used in financing activities decreased $9.8 million in 2012 as compared to 2011. The main driver of the
decrease related to borrowings under our Credit Agreement and our Revolver. Our net borrowing decreased $6.2
million, from $18.9 million in 2011 to $12.7 million in 2012. The decline in borrowing primarily related to reduced
number of units purchased during 2012. In addition to the decrease in borrowing, we also experienced an increase
in principal payment on capital lease obligations. The $2.6 million increase in cash used for capital lease obligations
was due to a larger proportion of funding from capital leases compared to funding revenue equipment purchases
with our Credit Agreement and Revolver.
Debt
On April 19, 2010, we entered into a Credit Agreement with Branch Banking and Trust Company as
Administrative Agent, which replaced our Amended and Restated Senior Credit Facility which was scheduled to
mature on September 1, 2010. The Credit Agreement provided for available borrowings of up to $100.0 million,
including letters of credit not to exceed $25.0 million. The Credit Agreement provided 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, subject to certain conditions.
28
The Second Amendment to the Credit Agreement, among other things, (i) amended the “Applicable Margin”
and “Applicable Unused Fee Rate”, (ii) eased the consolidated leverage ratio through the 2012 calendar year, and
(iii) eased the consolidated fixed charge coverage ratio through the 2012 calendar year.
On August 24, 2012, we entered into a $125.0 million Revolver with Wells Fargo Capital Finance, LLC, as
Administrative Agent, and PNC Bank. The Revolver, which expires in 2017, is secured by substantially all of our
assets, and includes letters of credit not to exceed $15.0 million. In addition, the $125.0 million Revolver has an
accordion feature whereby we may elect to increase the size of the Revolver by up to $50.0 million, subject to
customary conditions and lender participation. The Revolver is governed by a borrowing base with advances
against eligible billed and unbilled accounts receivable and eligible revenue equipment, and has a first priority
perfected security interest in all of the business assets (excluding tractors and trailers financed through capital leases
and real estate) of the Company. Proceeds from the Revolver were used to pay off the outstanding balance of the
Credit Agreement. Proceeds were also used to fund certain fees and expenses associated with the Revolver and will
be used to finance working capital, capital expenditures and for general corporate purposes.
The Revolver contains a minimum excess availability requirement equal to 15.0% of the maximum revolver
amount (currently $18.75 million) and an annual capital expenditure limit ($53.8 million for calendar year 2012,
increasing to $71.0 million in 2013 and with further increases thereafter). If a collateral cushion, referred to as
suppressed availability, of at least $30.0 million in excess of the maximum facility size is not maintained, the
advance rate on eligible revenue equipment is reduced by 5.0%, and the value attributable to eligible revenue
equipment starts to decline in monthly increments. The Revolver contains a total capital expenditure limitation.
The Revolver does not contain any financial maintenance covenants.
The Revolver bears interest at rates typically based on the Wells Fargo prime rate or LIBOR, in each case plus
an applicable margin. The Base Rate is equal to the greatest of (a) the prime lending rate as publicly announced
from time to time by Wells Fargo Bank N.A., (b) the Federal Funds Rate plus 1.0%, and (c) the three month LIBOR
Rate plus 1.0%. The Base Rate at December 31, 2012 was 1.5%. The LIBOR Rate is the rate at which dollar
deposits are offered to major banks in the London interbank market two business days prior to the commencement
of the requested interest period. Most borrowings are expected to be based on the LIBOR rate option. The
applicable margin ranges from 2.25% to 2.75% based on average excess availability and at December 31, 2012 it
was 2.5%.
The Revolver includes usual and customary events of default for a facility of this nature and provides that, upon
the occurrence and continuation of an event of default, payment of all amounts payable under the Revolver may be
accelerated, and the lenders’ commitments may be terminated. Although there are no negative covenants relating to
financial ratios or minimum balance sheet requirements, the Revolver contains certain restrictions and covenants
relating to, among other things, dividends, liens, acquisitions and dispositions outside of the ordinary course of
business and affiliate transactions.
Applicable Margin means, as of any date of determination, the following margin based upon the most
recent average excess availability calculation; provided, however, that for the period from the closing date
through the testing period ended December 31, 2012, the Applicable Margin was at Level II and at any
time that an Event of Default exists, the Applicable Margin shall be at Level III.
Level
I
II
Average Excess
Availability
≥ $50,000,000
< $50,000,000 but
≥ $30,000,000
III
< $30,000,000
Applicable Margin in
respect of Base Rate
Loans under the Revolver
Applicable Margin in respect of LIBOR
Rate Loans under the Revolver
2.25%
2.50%
2.75%
1.25%
1.50%
1.75%
29
We paid a $1.5 million closing fee. In addition, we are required to pay a fee on the unused amount of the
Revolver as set forth in the table below, which is due and payable monthly in arrears. For the period from the
closing date through December 31, 2012, the unused fee was at Level II.
Average Used Portion of
the Revolver plus
Outstanding Letters of
Credit
Applicable Unused
Revolver Fee Margin
> $60,000,000
< $60,000,000
0.375%
0.500%
Level
I
II
The interest rate on our overnight borrowings under the Revolver at December 31, 2012 was 4.75%. The
interest rate including all borrowings made under the Revolver at December 31, 2012 was 3.0%. The weighted
average interest rate on our borrowings under the agreements for the year ended December 31, 2012 was 3.1%. A
quarterly commitment fee is payable on the unused portion of the credit line and at December 31, 2012, the rate was
0.5% per annum. The Revolver is collateralized by all non-leased revenue equipment having a net book value of
approximately $172.8 million at December 31, 2012, and all billed and unbilled accounts receivable. As we reprice
our debt on a monthly basis, the borrowings under the Revolver approximate its fair value. At December 31, 2012,
we had outstanding $2.8 million in letters of credit and had approximately $19.9 million available under the
Revolver (net of the minimum availability we are required to maintain of approximately $18.75 million).
In connection with the payoff of the outstanding balance of the Credit Agreement, we wrote off the remaining
unamortized debt issuance costs incurred at the inception of the debt. The write off amounted to approximately $0.5
million and is included in Other Operating Expenses and Costs in the accompanying Consolidated Statements of
Operations.
Equity
At December 31, 2012, we had stockholders’ equity of $109.4 million and total debt including current
maturities of $138.3 million, resulting in a total debt, less cash, to total capitalization ratio of 55.1% compared to
47.4% at December 31, 2011.
Purchases and Commitments
As of December 31, 2012, our forecasted capital expenditures, net of proceeds from the sale or trade of revenue
equipment, for 2013 were $47.3 million, approximately $42.3 million of which relates to revenue equipment. We
may change the amount of the capital expenditures based on our operating performance. Should we decrease our
capital expenditures for tractors and trailers, we would expect the age of our equipment to increase. To the extent
further capital expenditures are feasible based on our financial covenants and operating cash requirements, we
would use the balance of $5.0 million primarily for property acquisitions, facility construction and improvements
and maintenance and office equipment.
The following table represents our outstanding contractual obligations for rental expense under operating leases
at December 31, 2012:
(in thousands)
Payments Due By Period
Rental obligations ............................... $
2,914
$
1,290
$
1,242 $
Total
Less than 1
year
1-3 years
3-5 years
86
More than 5
years
$
296
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, 2012, we incurred net capital expenditures for
revenue equipment of approximately $31.5 million (excluding approximately $3.7 million relating to revenue
equipment that we took possession of during 2011 and funded during 2012), including approximately $2.8 million
of revenue equipment that we took possession of during the first nine months of 2012, but have not yet funded. Of
the net capital expenditures for revenue equipment, $27.8 million were capital lease obligations. During the year
ended December 31, 2012, we also incurred net capital expenditures of $0.7 million for facility expansions and other
expenditures.
30
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:
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. Expenses are recognized as
incurred.
Revenue generated by SCS and Intermodal 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 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, used equipment market conditions, demand for our freight services,
prevailing interest rates, technological improvements, fuel efficiency, equipment durability, equipment
specifications and driver availability. 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.
However, given the current economic environment, previously established salvage values need to be more
closely monitored to assure that book values do not exceed market values. We continually review salvage
values to address this issue.
To the extent depreciable lives and salvage values are changed, such changes are recorded in accordance
with the applicable generally accepted accounting principles existing at the time of change.
Effective May 1, 2011, we changed the time period over which we depreciate our 2005 model year and
newer trailers and changed the amount of the salvage value to which those trailers are being depreciated.
The depreciation time period was changed to 14 years from 10 years, and the salvage value was changed to
31
$500 from 25.0% of the original purchase price. For the year ended December 31, 2012, this change in
estimate resulted in a reduction of depreciation expense on a pre-tax basis of approximately $2.3 million
and on a net-of-tax basis of approximately $1.4 million ($0.13 per share). For the year ended December
31, 2011, this change in estimate resulted in a reduction of depreciation expense on a pre-tax basis of
approximately $1.6 million and on a net-of-tax basis of approximately $1.0 million ($0.10 per share).
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 forfeitures. As we have not paid 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 operations. 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 and from net operating loss carryforwards. 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 more likely than not, a valuation allowance is established for the amount determined not to
be realizable. We have not recorded a valuation allowance at December 31, 2012, 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 the year ended December 31, 2012, 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 operations.
Prepaid tires. Commencing when the replacement tires, including recaps, are placed into service, we
account for them as prepaid expenses and amortize their cost over varying time periods, ranging from 18 to
30 months depending on the type of tire.
Impairment of long-lived assets. We review our long-lived assets for impairment in accordance with Topic
ASC 360, Property, Plant and Equipment. This authoritative guidance provides that whenever there are
certain significant events or changes in circumstances the value of long-lived assets or groups of assets
must be tested to determine if their value can be recovered from their future cash flows. In the event that
undiscounted cash flows expected to be generated by the asset are less than the carrying amount, the asset
or group of assets must be evaluated to determine if an impairment of value exists. Impairment exists if the
carrying value of the asset exceeds its fair value.
In light of the sustained general economic downturn in the United States and world economies, the decline
in our market capitalization and our net operating losses in recent years, triggering events and changes in
circumstances have occurred, which required us to test our long-lived assets for recoverability at December
31, 2012.
32
We test for the recoverability of all of our long-lived assets as a single group at the entity level and examine
the forecasted future cash flows generated by our revenue equipment, including its eventual disposition, to
determine if those cash flows exceed the carrying value of our long-lived assets. At December 31, 2012
and 2011, we determined that no impairment of value existed.
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 DISCLOSURES ABOUT MARKET RISK
Not required.
33
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
USA TRUCK, INC.
ANNUAL REPORT ON FORM 10-K
YEAR ENDED DECEMBER 31, 2012
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm .............................................................................
Consolidated Balance Sheets as of December 31, 2012 and 2011 ...................................................................
Consolidated Statements of Operations for the years ended December 31, 2012 and 2011 ............................
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012 and 2011 ............
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012 and 2011 ............
Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011 ...........................
Notes to Consolidated Financial Statements ....................................................................................................
35
36
37
38
39
40
41
Page
34
REPORT OF 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 (the “Company”) as of December 31, 2012 and 2011, and the related consolidated statements of
operations, comprehensive loss, changes in shareholders’ equity, and cash flows for the years then ended. 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. The Company is not required to have, nor were
we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements, 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, 2012 and 2011, and the results of their
operations and their cash flows for the years then ended in conformity with accounting principles generally accepted
in the United States of America.
GRANT THORNTON LLP
Tulsa, OK
March 22, 2013
35
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 $418 in 2012 and $420 in
2011 ............................................................................................................
Other ..............................................................................................................
Inventories .........................................................................................................
Prepaid expenses and other current assets .........................................................
Total current assets ........................................................................................
December 31,
2012
2011
1,742 $
2,659
64,491
2,089
1,790
15,415
85,527
Property and equipment:
Land and structures ...........................................................................................
Revenue equipment ...........................................................................................
Service, office and other equipment ..................................................................
Property and equipment, at cost .....................................................................
Accumulated depreciation and amortization .....................................................
Property and equipment, net ..........................................................................
Note receivable .......................................................................................................
Other assets .............................................................................................................
Total assets .....................................................................................................$
31,478
362,007
14,770
408,255
(164,641)
243,614
1,979
374
331,494 $
Liabilities and stockholders’ equity
Current liabilities:
Bank drafts payable ...........................................................................................$
Trade accounts payable .....................................................................................
Current portion of insurance and claims accruals .............................................
Accrued expenses ..............................................................................................
Note payable ......................................................................................................
Deferred income taxes .......................................................................................
Current maturities of long-term debt and capital leases ....................................
Total current liabilities ...................................................................................
Deferred gain ..........................................................................................................
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 ....
Preferred Share Purchase Rights, $0.01 par value; 150,000 shares authorized;
none issued ....................................................................................................
Common Stock, $0.01 par value; authorized 30,000,000 shares; issued
11,770,265 shares in 2012 and 11,791,997 shares in 2011 ............................
Additional paid-in capital ..................................................................................
Retained earnings ..............................................................................................
Less treasury stock, at cost (1,337,568 shares in 2012 and 1,347,941 shares
in 2011) ..........................................................................................................
Accumulated other comprehensive loss ............................................................
Total stockholders’ equity ..............................................................................
Total liabilities and stockholders’ equity .......................................................$
See accompanying notes.
36
5,150 $
22,484
6,915
7,710
1,352
1,304
14,403
59,318
646
122,530
35,953
3,617
--
--
--
118
65,259
65,767
(21,714)
--
109,430
331,494 $
55,359
1,582
1,831
13,466
74,897
31,377
372,331
15,853
419,561
(160,761)
258,800
2,003
491
336,191
5,044
21,691
3,418
7,790
1,370
1,693
19,146
60,152
612
98,927
45,193
4,335
--
--
--
118
65,284
83,438
(21,868)
--
126,972
336,191
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenue:
Trucking revenue .................................................................................$
Strategic Capacity Solutions revenue ..................................................
Intermodal revenue ..............................................................................
Base revenue ....................................................................................
Fuel surcharge revenue ........................................................................
Total revenue ...................................................................................
Operating expenses and costs:
Salaries, wages and employee benefits ...............................................
Fuel and fuel taxes ...............................................................................
Purchased transportation .....................................................................
Depreciation and amortization ............................................................
Operations and maintenance ..............................................................
Insurance and claims ...........................................................................
Operating taxes and licenses ...............................................................
Communications and utilities ..............................................................
Gain on disposal of assets ...................................................................
Other ....................................................................................................
Total operating expenses and costs ..................................................
Operating loss .........................................................................................
Other expenses (income):
Interest expense ...................................................................................
Other, net .............................................................................................
Total other expenses, net .................................................................
Loss before income taxes ..........................................................................
Income tax benefit:
Current.................................................................................................
Deferred ...............................................................................................
Total income tax benefit ..................................................................
Net loss .......................................................................................................$
Net loss per share:
Basic loss per share .............................................................................$
Diluted loss per share ..........................................................................$
See accompanying notes.
Year Ended December 31,
2011
2012
297,624
89,831
21,264
408,719
103,709
512,428
142,263
131,162
127,949
45,058
43,559
20,556
5,504
4,124
(2,151)
17,676
535,700
(23,272)
4,052
(64)
3,988
(27,260)
--
(9,589)
(9,589)
(17,671)
(1.71)
(1.71)
$
$
$
$
321,283
67,085
22,658
411,026
108,382
519,408
136,538
137,195
120,076
49,263
42,179
22,501
5,460
4,395
(3,615)
18,065
532,057
(12,649)
3,345
(252)
3,093
(15,742)
--
(4,965)
(4,965)
(10,777)
(1.05)
(1.05)
37
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
December 31,
2012
Net loss ........................................................................................................ $
(17,671)
$
2011
(10,777)
Change in fair value of interest rate swap, net of income tax benefit of
$(1) for the year ended December 31, 2011 ..............................................
--
(1)
Reclassification of derivative net losses to statement of operations, net of
income tax of $7 for the year ended December 31, 2011 ..........................
Total comprehensive loss .............................................................................$
See accompanying notes.
--
(17,671)
$
10
(10,768)
38
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Common Stock Additional
Paid-in
Capital
Par
Shares Value
Accumulated
Other
Retained
Earnings
Treasury Comprehensive
Income/(Loss)
Stock
94,215 $ (21,783) $
--
--
--
--
--
--
--
--
--
--
--
--
(115)
--
--
--
--
--
--
30
--
(10,777)
83,438 $ (21,868) $
--
--
--
--
154
--
--
--
(11) $
--
--
--
--
--
--
--
1
Total
137,708
15
6
--
16
--
--
(7)
1
10
--
--
-- $
10
--
(10,777)
126,972
--
--
--
--
--
131
--
--
--
--
(17,671)
--
65,767 $ (21,714) $
--
--
-- $
(2)
(17,671)
109,430
--
--
--
2
6
--
(1)
--
--
--
--
--
--
17
(61)
115
16
--
--
Balance at December 31, 2010 .................11,835 $ 118 $ 65,169 $
Exercise of stock options ........................
15
Excess tax benefit from stock options
and Restricted Stock ..............................
Transfer of stock into (out of) Treasury
Stock ......................................................
Stock-based compensation ......................
Restricted stock award grant ...................
Forfeited restricted stock .........................
Net share settlement related to
Restricted Stock vesting ........................
Change in fair value of interest rate
swap, net of income tax benefit of $(1) .
Reclassification of derivative net losses
to statement of operations, net of
income tax of $7 ....................................
Return of forfeited restricted stock ........
Net loss .....................................................
Balance at December 31, 2011 .................11,792 $ 118 $ 65,284 $
Transfer of stock into (out of) Treasury
Stock ......................................................
Stock-based compensation ......................
Restricted stock award grant ...................
Forfeited restricted stock .........................
Net share settlement related to restricted
stock vesting ..........................................
Net loss .....................................................
Balance at December 31, 2012 .................11,770 $ 118 $ 65,259 $
(154)
131
--
--
--
--
26
(48)
--
(30)
--
--
--
--
--
--
--
--
--
--
--
(2)
--
--
--
--
--
(7)
--
--
--
See accompanying notes.
39
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Net loss .............................................................................................................. $
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ......................................................................
Provision for doubtful accounts ....................................................................
Deferred income taxes ..................................................................................
Excess tax benefit from exercise of stock options and vesting of restricted
stock ..............................................................................................................
Stock based compensation ............................................................................
Gain on disposal of assets .............................................................................
Recognition of deferred gain ........................................................................
Impairment of Goodwill ...............................................................................
Changes in operating assets and liabilities:
Accounts receivable ...................................................................................
Inventories, prepaid expenses and other current assets ..............................
Trade accounts payable and accrued expenses ...........................................
Insurance and claims accruals ....................................................................
Net cash provided by operating activities ...............................................
Investing activities
Purchases of property and equipment ..........................................................
Proceeds from sale of property and equipment ............................................
Change in other assets ..................................................................................
Net cash used in investing activities .......................................................
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 increase in bank drafts payable .............................................................
Excess tax benefit from exercise of stock options .......................................
Proceeds from exercise of stock options ......................................................
Net cash used in financing activities ......................................................
Decrease in cash and cash equivalents ................................................................
Cash and cash equivalents:
Year Ended December 31,
2011
2012
(17,671) $
(10,777)
45,058
153
(9,588)
--
131
(2,151)
34
126
(9,792)
1,098
4,416
3,722
15,536
(22,014)
17,651
15
(4,348)
276,556
(263,811)
(23,136)
(1,820)
106
--
--
(12,105)
(917)
49,263
59
(4,957)
(6)
16
(3,615)
(6)
--
(9,017)
(332)
2,456
578
23,662
(44,449)
23,070
(31)
(21,410)
121,988
(103,088)
(20,578)
(1,465)
811
6
7
(2,319)
(67)
Beginning of period .....................................................................................
End of period ................................................................................................ $
2,659
1,742
$
2,726
2,659
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .................................................................................................... $
4,274
$
3,423
Supplemental schedule of non-cash investing and financing activities:
Liability incurred for leases on revenue equipment .....................................
Liability incurred for notes payable .............................................................
Purchases of revenue equipment included in accounts payable ...................
Purchases of fixed assets included in long-term debt .................................
27,757
1,801
--
355
21,235
1,826
3,744
--
See accompanying notes.
40
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2012
1. Summary of Significant Accounting Policies
Description of Business
USA Truck (the “Company”) is a truckload carrier providing transportation of general commodities throughout
the continental United States, into and out of Mexico and into and out of portions of Canada. Generally, the
Company transports full dry van trailer loads of freight from origin to destination without intermediate stops or
handling. To complement the Company’s Truckload operations, it provides dedicated, brokerage and rail intermodal
services. For shipments into Mexico, the Company transfers its trailers to tractors operated by Mexican carriers at a
facility in Laredo, Texas, which is operated by the Company’s wholly-owned subsidiary. Through the Company’s
asset based and non-asset based capabilities, it transports many types of freight for a diverse customer base in a
variety of industries.
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 collectability. 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 2012 and 2011, the Company’s top ten customers generated 29% and 31% of total revenue,
respectively. During the two year period ended December 31, 2012, 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 as receivables
collection averaged approximately 38 days from the billing date.
The following table provides a summary of the activity in the allowance for doubtful accounts for 2012 and
2011:
(in thousands)
Year Ended December 31,
2011
2012
Balance at beginning of year ................................................................... $
Amounts charged to expense ...................................................................
Uncollectible accounts written off, net of recovery .................................
Balance at end of year ............................................................................. $
420
153
(155)
418
$
$
444
59
(83)
420
Use of 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
41
financial statements and accompanying notes. Some of the significant estimates made by management include, but
are not limited to, allowances for doubtful accounts, the fair value of derivative instruments, useful lives for
depreciation and amortization, estimates related to our share-based compensation plan, deferred taxes and reserves
for claims liabilities. Actual results could differ from those estimates.
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 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 2009, 2010, 2011 and 2012 tax years and in February 2013, the Company received notice
that its 2011 federal tax return is being examined. 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.
Property and Equipment
Property and equipment is recorded at cost. For financial reporting purposes, the cost of such property is
depreciated 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. Asset sales are made for
cash and gains and losses on those sales are reflected in the year of disposal. Revenue equipment acquired under
capital lease is amortized 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 amortized under the
Company’s prepaid tire policy.
Effective May 1, 2011, the Company changed the time period over which it depreciates its 2005 model year and
newer trailers and it changed the amount of the salvage value to which those trailers are being depreciated. The
depreciation time period was changed to 14 years from 10 years and the salvage value was changed to $500 from
25.0% of the original purchase price. The effect of this change in estimate is as follows for the years indicated:
December 31, 2012 ................................................$
December 31, 2011 .................................................
2,257 $
1,590
(in thousands, except per share data)
Net of Tax
Pre-tax Basis
Per Share Effect
0.13
0.10
1,392 $
981
We review our long-lived assets for impairment in accordance with Topic ASC 360, Property, Plant and
Equipment. This authoritative guidance provides that whenever there are certain significant events or changes in
circumstances the value of long-lived assets or groups of assets must be tested to determine if their value can be
recovered from their future cash flows. In the event that undiscounted cash flows expected to be generated by the
asset are less than the carrying amount, the asset or group of assets must be evaluated to determine if an impairment
of value exists. Impairment exists if the carrying value of the asset exceeds its fair value.
In light of the sustained general economic downturn in the United States and world economies, the decline in
our market capitalization and our net operating losses in recent years, triggering events and changes in
circumstances have occurred, which required us to test our long-lived assets for recoverability at December 31,
2012.
We test for the recoverability of all of our long-lived assets as a single group at the entity level and examine the
forecasted future cash flows generated by our revenue equipment, including its eventual disposition, to determine if
those cash flows exceed the carrying value of our long-lived assets. At December 31, 2012 and 2011, we
determined that no impairment of value existed.
42
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 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.
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.
The following table shows capitalized interest and interest expense for the years indicated:
(in thousands)
Capitalized
Interest
Interest
Expense
December 31, 2012 ..................... $
December 31, 2011 ......................
$
--
43
4,052
3,345
Loss Per Share
Basic loss per share is computed based on the weighted average number of shares of common stock outstanding
during the year. Diluted loss per share is computed by adjusting the weighted average shares outstanding by
common stock equivalents attributable to dilutive stock options and restricted stock.
Change in Accounting Estimate
Effective December 31, 2012, the Company changed the method it uses to determine the current and long-term
portion of its estimate of workers’ compensation claims accrual. In the past, the Company would estimate the total
amount it determined a claim would cost and accrue a reserve over time as that claim progressed toward settlement.
Currently, when the Company estimates the total amount a claim will cost, it accrues the full amount of the estimate
and only adjusts that amount for any subsequent changes that become evident as facts and circumstances develop.
The Company believes that this change more clearly and appropriately reflects the current balance needed to accrue
for workers’ compensation claims and thus, more reasonably and accurately reports the claims accrual amounts on
its consolidated balance sheet. At December 31, 2012, the net result of this change in estimate was a reclassification
of an accrual amount from insurance and claims accruals, less current portion of insurance and claims accruals in the
amount of approximately $1.4 million. This change in estimate did not have any impact on the Company’s
consolidated results of 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.
Expenses are recognized as incurred.
43
Revenue generated by the Company’s SCS and Intermodal operating segments is recognized upon completion
of the services provided. Revenue is recorded on a gross basis, without deducting third party purchased
transportation costs, as the Company acts 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
Currently, there are no new accounting pronouncements that were issued to be effective in 2012 or subsequent
thereto that would have a material impact on the Company’s financial reporting.
2. Segment Reporting
The service offerings provided by the Company 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. The Company classifies its business into three operating and reportable segments: our Trucking
operating segment consisting of our Truckload and Dedicated Freight service offerings; our SCS operating segment
consisting of our freight brokerage service offering; and our rail Intermodal operating segment. SCS and Intermodal
operating segments are intended to provide services that complement the Company’s Trucking services, primarily to
existing customers of its Trucking operating segment. Those complementary services consist of services such as
freight brokerage, transportation scheduling, routing and mode selection. A majority of the customers using our
SCS and Intermodal services are also customers of our Trucking operating segment.
December 31, 2012 .......
December 31, 2011 ........
Trucking
72.8 %
78.2 %
Percent of Base Revenue
SCS
22.0 %
16.3 %
Intermodal
5.2 %
5.5 %
Except with respect to the relatively minor components of our operations that do not involve the use of our
trucks, key operating statistics for all three segments include, for example, revenue per mile and miles per tractor per
week. While the operations of our SCS segment typically 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.
Our Intermodal business does involve the use of our equipment as we utilize our trailers and leased containers to
provide this service. Accordingly, the operations of this segment are subject to the same general regulatory
environment and cost sensitivities imposed upon our Trucking operations.
Assets are not allocated to our SCS segment as the significant majority of our SCS operations provide truckload
freight services to our customers through arrangements with third party carriers who utilize their own equipment.
Assets are not allocated to our Intermodal segment as our Intermodal containers are utilized under operating leases
with BNSF Railway, which are not capitalized. To the extent our Intermodal operations require the use of
Company-owned trailers, they are obtained from our Trucking segment on an as-needed basis. Accordingly, we
allocate all of our assets to our Trucking segment. However, depreciation and amortization expense is allocated to
our SCS segment based on the various assets specifically utilized to generate revenue. All intercompany
transactions between segments are consummated at rates similar to those negotiated with independent third parties.
All other expenses are allocated to our SCS segment based on headcount and specifically identifiable direct costs, as
appropriate.
44
A summary of base revenue and fuel surcharge revenue by reportable segments is as follows:
Base revenue
Trucking ...................................................................... $
SCS ..............................................................................
Intermodal ....................................................................
Eliminations .................................................................
Total base revenue ....................................................
Fuel surcharge revenue
Trucking ......................................................................
SCS ..............................................................................
Intermodal ....................................................................
Eliminations .................................................................
Total fuel surcharge revenue ....................................
Total revenue....................................................... $
(in thousands)
Revenue
Year Ended December 31,
2011
2012
297,624
109,525
21,802
(20,232)
408,719
83,920
18,610
6,413
(5,234)
103,709
512,428
$
$
321,283
78,105
24,396
(12,758)
411,026
86,869
15,013
8,082
(1,582)
108,382
519,408
A summary of operating (loss) income by reportable segments is as follows:
(in thousands)
Operating (loss) income
Year Ended December 31,
2011
2012
Operating (loss) income
Trucking ...................................................................... $
SCS ..............................................................................
Intermodal ....................................................................
Operating (loss) income ........................................... $
(29,848)
7,788
(1,212)
(23,272)
$
$
(18,762)
7,100
(987)
(12,649)
A summary of assets by reportable segments is as follows:
(in thousands)
Total Assets
December 31,
2012
2011
Total Assets
Trucking ...................................................................... $
Corporate and Other ....................................................
Total Assets ............................................................. $
218,145
113,349
331,494
$
$
231,776
104,415
336,191
A summary of amortization and depreciation by reportable segments is as follows:
(in thousands)
Depreciation and Amortization
Year Ended December 31,
2011
2012
Depreciation and Amortization
Trucking ...................................................................... $
SCS ..............................................................................
Intermodal ....................................................................
Corporate and Other .....................................................
Total Depreciation and Amortization ....................... $
42,165
121
379
2,393
45,058
$
$
46,307
77
441
2,438
49,263
45
3. Leases Receivable
During the fourth quarter of 2012, the Company began entering into lease-purchase agreements with certain of
its drivers to allow them the opportunity to purchase a Company-owned tractor while concurrently becoming an
independent contractor. At December 31, 2012, the Company had entered into ten such agreements and had
approximately $0.6 million included in Other Accounts Receivable in the accompanying Consolidated Balance
Sheet. The Company believes these receivables are adequately collateralized; however, it has recorded an allowance
for uncollectability in the approximate amount of five thousand dollars to cover any expenses it would incur in the
event of a default.
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
Prepaid tires ...................................................................................... $
Prepaid licenses, permits and tolls ....................................................
Prepaid insurance .............................................................................
Other .................................................................................................
Total prepaid expenses and other current assets .......................... $
5. Note Receivable
(in thousands)
December 31,
2012
2011
9,174
1,951
1,649
2,641
15,415
$
$
8,999
2,114
1,409
944
13,466
During November 2010, the Company sold its terminal facility in Shreveport, Louisiana. In connection with
this sale, the buyer gave the Company cash in the amount of $0.2 million and a note receivable in the amount of $2.1
million. The note receivable bears interest at an annual rate of 7.0%, matures in five years and has scheduled
principal and interest payments based on a 30-year amortization schedule. A balloon payment in the approximate
amount of $1.9 million is payable to the Company at the end of the note term. Accordingly, the Company deferred
the approximate $0.7 million gain on the sale of this facility, and will record this gain into earnings as payments on
the note receivable are received. The Company believes that the note receivable balance at December 31, 2012, in
the approximate amount of $2.0 million, is fully collectible and accordingly has not recorded any valuation
allowance against the note receivable.
6. Derivative Financial Instruments
The Company records derivative financial instruments in the balance sheet as either an asset or liability at fair
value based on the active market in which the derivative financial instrument is traded, 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. The Company records the gains and losses in
other operating expenses and costs in its consolidated statements of operations.
7. Accrued Expenses
Accrued expenses consist of the following:
Salaries, wages, bonuses and employee benefits .............................. $
Other (1) ...........................................................................................
Total accrued expenses ................................................................ $
(in thousands)
December 31,
2012
2011
3,779
3,931
7,710
$
$
3,411
4,379
7,790
(1) As of December 31, 2012 and 2011, no single item included within other accrued expenses exceeded 5.0%
of the Company’s total current liabilities.
8. Note Payable
On October 11, 2012, the Company entered into an unsecured note payable of $1.8 million. The note, which is
scheduled to mature on September 1, 2013, is payable in monthly installments of principal and interest of
approximately $0.2 million and bears interest at 1.8%. The balance of the note payable at December 31, 2012 was
46
$1.4 million. The note is being used to finance a portion of the Company’s annual insurance premiums and is
payable to a third party other than the insurance company.
On October 14, 2011, the Company entered into an unsecured note payable of $1.8 million. The note, which
was payable in monthly installments of principal and interest of approximately $0.2 million and bore interest at
1.9%, matured on September 1, 2012. The note was payable to a third party other than the insurance company and
was being used to finance a portion of the Company’s annual insurance premiums.
9. Long-term Debt
Long-term debt consists of the following:
Revolving credit agreement (1) .............................................................$
Capitalized lease obligations and other long-term debt (2) ...................
Less current maturities ..........................................................................
Long-term debt, less current maturities .................................................$
(in thousands)
December 31,
2012
2011
83,513 $
53,420
136,933
(14,403)
122,530 $
68,800
49,273
118,073
(19,146)
98,927
(1) On April 19, 2010, we entered into a Credit Agreement with Branch Banking and Trust Company as
Administrative Agent, which replaced our Amended and Restated Senior Credit Facility which was
scheduled to mature on September 1, 2010. The Credit Agreement provided for available borrowings of up
to $100.0 million, including letters of credit not to exceed $25.0 million. Availability could be reduced by
a borrowing base limit as defined in the Credit Agreement. The Credit Agreement provided 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, subject to certain conditions. The Credit Agreement bore variable
interest based on the type of borrowing and on the Administrative Agent’s prime rate or the LIBOR plus a
certain percentage, which was determined based on our attainment of certain financial ratios. A quarterly
commitment fee was payable on the unused portion of the credit line and bore a rate which was determined
based on our attainment of certain financial ratios. Our obligations under the Credit Agreement were
guaranteed by the Company and secured by a pledge of substantially all of our assets with the exception of
real estate. The Credit Agreement included usual and customary events of default for a facility of that
nature and provided that, upon the occurrence and continuation of an event of default, payment of all
amounts payable under the Credit Agreement could be accelerated, and the lenders’ commitments could be
terminated. The Credit Agreement contained certain restrictions and covenants relating to, among other
things, dividends, liens, acquisitions and dispositions outside of the ordinary course of business, and
affiliate transactions. The Credit Agreement was set to expire on April 19, 2014.
On August 24, 2012, we entered into a $125.0 million Revolver with Wells Fargo Capital Finance, LLC, as
Administrative Agent, and PNC Bank. The Revolver, which expires in 2017, is secured by substantially all
of our assets, and includes letters of credit not to exceed $15.0 million. In addition, the $125.0 million
Revolver has an accordion feature whereby we may elect to increase the size of the Revolver by up to
$50.0 million, subject to customary conditions and lender participation. The Revolver is governed by a
borrowing base with advances against eligible billed and unbilled accounts receivable and eligible revenue
equipment, and has a first priority perfected security interest in all of the business assets (excluding tractors
and trailers financed through capital leases and real estate) of the Company. Proceeds from the Revolver
were used to pay off the outstanding balance of the Credit Agreement. Proceeds were also used to fund
certain fees and expenses associated with the Revolver and will be used to finance working capital, capital
expenditures and for general corporate purposes.
The Revolver contains a minimum excess availability requirement equal to 15.0% of the maximum
revolver amount (currently $18.75 million) and an annual capital expenditure limit ($53.8 million for
calendar year 2012, increasing to $71.0 million in 2013 and with further increases thereafter). If a
collateral cushion, referred to as suppressed availability, of at least $30.0 million in excess of the maximum
facility size is not maintained, the advance rate on eligible revenue equipment is reduced by 5.0% and the
value attributable to eligible revenue equipment starts to decline in monthly increments. The Revolver
contains a total capital expenditure limitation. The Revolver does not contain any financial maintenance
covenants.
47
The Revolver bears interest at rates typically based on the Wells Fargo prime rate or LIBOR, in each case
plus an applicable margin. The Base Rate is equal to the greatest of (a) the prime lending rate as publicly
announced from time to time by Wells Fargo Bank N.A., (b) the Federal Funds Rate plus 1.0%, and (c) the
three month LIBOR Rate plus 1.0%. The Base Rate at December 31, 2012 was 1.5%. The LIBOR Rate is
the rate at which dollar deposits are offered to major banks in the London interbank market two business
days prior to the commencement of the requested interest period. Most borrowings are expected to be
based on the LIBOR rate option. The applicable margin ranges from 2.25% to 2.75% based on average
excess availability and at December 31, 2012 it was 2.5%.
The Revolver includes usual and customary events of default for a facility of this nature and provides that,
upon the occurrence and continuation of an event of default, payment of all amounts payable under the
Revolver may be accelerated, and the lenders’ commitments may be terminated. The Revolver contains
certain restrictions and covenants relating to, among other things, dividends, liens, acquisitions and
dispositions and affiliate transactions.
Applicable Margin means, as of any date of determination, the following margin based upon the most
recent average excess availability calculation; provided, however, that for the period from the closing date
through the testing period ended December 31, 2012, the Applicable Margin was at Level II and at any
time that an Event of Default exists, the Applicable Margin shall be at Level III.
Level
I
II
Average Excess
Availability
≥ $50,000,000
< $50,000,000 but
≥ $30,000,000
III
< $30,000,000
Applicable Margin in
respect of Base Rate
Loans under the Revolver
Applicable Margin in respect of LIBOR
Rate Loans under the Revolver
1.25%
1.50%
1.75%
2.25%
2.50%
2.75%
We paid a $1.5 million closing fee. In addition, the Company is required to pay a fee on the unused
amount of the Revolver as set forth in the table below, which is due and payable monthly in arrears. For
the period from the closing date through December 31, 2012, the unused fee was at Level II.
Average Used Portion of
the Revolver plus
Outstanding Letters of
Credit
Applicable Unused
Revolver Fee Margin
> $60,000,000
< $60,000,000
0.375%
0.500%
Level
I
II
The interest rate on our overnight borrowings under the Revolver at December 31, 2012 was 4.75%. The
interest rate including all borrowings made under the Revolver at December 31, 2012 was 3.0%. The
weighted average interest rate on the Company’s borrowings under the agreements for the year ended
December 31, 2012 was 3.1%. A quarterly commitment fee is payable on the unused portion of the credit
line and at December 31, 2012, the rate was 0.5% per annum. The Revolver is collateralized by all non-
leased revenue equipment having a net book value of approximately $172.8 million at December 31, 2012,
and all billed and unbilled accounts receivable. As the Company reprices its debt on a monthly basis, the
borrowings under the Revolver approximate its fair value. At December 31, 2012, the Company had
outstanding $2.8 million in letters of credit and had approximately $19.9 million available under the
Revolver (net of the minimum availability we are required to maintain of approximately $18.75 million).
In connection with the payoff of the outstanding balance of the Credit Agreement, the Company wrote off
the remaining unamortized debt issuance costs incurred at the inception of the debt. The write off
amounted to approximately $0.5 million and is included in Other Operating Expenses and Costs in the
accompanying Consolidated Statements of Operations.
(2) The Company’s capitalized lease obligations have various termination dates extending through June 30,
2016 and contain renewal or fixed price purchase options. The effective interest rates on the leases range
48
from 1.6% to 4.0% at December 31, 2012. The lease agreements require the Company to pay property
taxes, maintenance and operating expenses.
10. Leases and Commitments
The Company leases certain revenue equipment under capital leases with terms of 36, 42 or 45 months.
Balances related to these capitalized leases are included in property and equipment in the accompanying
consolidated balance sheets and are set forth in the table below as of December 31 for the years indicated.
December 31, 2012 ........... $
December 31, 2011 ............
67,788
72,272
Capitalized Costs
(in thousands)
Accumulated Amortization
16,366
$
22,525
$
Net Book Value
51,422
49,747
Amortization of leased assets is included in depreciation and amortization expense in the accompanying
consolidated statements of operations. Rent expense relating to operating leases for facilities and certain revenue
equipment is included in operations and maintenance expense and rent expense relating to operating leases for office
equipment is included in other operating expenses and costs. The total rent expense incurred is included in the
accompanying consolidated statements of operations. Amortization of leased assets and rent expense under
operating leases are reflected in the table below for the years indicated.
(in thousands)
For the Year Ended December 31,
2012
2011
Amortization of leased assets .............................. $
Rent expense under operating leases ...................
$
10,745
3,148
12,447
3,914
We have entered into leases with lenders who participated in the Credit Agreement and who participate in the
Revolver. Those leases contain cross-default provisions with the Credit Agreement and the Revolver, which
replaced the Credit Agreement. We have also entered into leases with other lenders who do not participate in our
Revolver. Multiple leases with lenders who do not participate in our Revolver generally contain cross-default
provisions.
At December 31, 2012, the future minimum payments under capitalized leases with initial terms of one year or
more and future rentals under operating leases for certain facilities, office equipment and revenue equipment with
initial terms of one year or more were as follows for the years indicated.
Future minimum payments .......... $ 16,368
Future rentals under operating
leases ...........................................
1,290
2013
(in thousands)
2014
$ 13,451
2015
$ 21,862
2016
$ 5,761
$
1,009
233
44
2017
--
42
Thereafter
--
$
296
As of December 31, 2012, the remaining minimum capital lease payments were $53.2 million, which excludes
amounts representing interest of $4.3 million. The current portion of net minimum lease payments, including
interest, is $16.4 million.
We routinely monitor our equipment acquisition needs and adjust our purchase schedule from time to time
based on our analysis of factors such as new equipment prices, the condition of the used equipment market, demand
for our freight services, prevailing interest rates, technological improvements, fuel efficiency, equipment durability,
equipment specifications and the availability of qualified drivers.
During 2012, our Board of Directors authorized the use of up to $50.0 million in new capital leases under
existing facilities through 2012, and at December 31, 2012, we had approximately $22.2 million of availability. In
January 2013, the Board of Directors authorized the use of up to $45.0 million in new capital leases under existing
facilities through 2013.
As of December 31, 2012, we had commitments for purchases of revenue equipment in the approximate amount
of $23.2 million, and approximately $0.02 million for non-revenue purchases.
49
11. Federal and State Income Taxes
Significant components of the Company’s deferred tax assets and liabilities are as follows:
(in thousands)
December 31,
2012
2011
Current deferred tax assets:
Accrued expenses not deductible until paid ............................................$
Equity Incentive Plan ..............................................................................
Revenue recognition ...............................................................................
Allowance for doubtful accounts ............................................................
Other ........................................................................................................
Total current deferred tax assets ...................................................................
Current deferred tax liabilities:
Prepaid expenses deductible when paid ..................................................
Total current deferred tax liabilities .............................................................
Net current deferred tax liabilities ................................................................$
Noncurrent deferred tax assets:
Non-compete agreement .........................................................................
Net operating loss carryforwards ............................................................
Total noncurrent deferred tax assets .............................................................
3,885 $
266
277
162
16
4,606
(5,910)
(5,910)
(1,304) $
41
16,452
16,493
Noncurrent deferred tax liabilities:
Tax over book depreciation .....................................................................
Capitalized leases ....................................................................................
Other .......................................................................................................
Total noncurrent deferred tax liabilities .......................................................
Net noncurrent deferred tax liabilities ..........................................................$
(52,237)
(215)
6
(52,446)
(35,953) $
2,766
299
229
161
15
3,470
(5,163)
(5,163)
(1,693)
63
12,551
12,614
(57,612)
(157)
(38)
(57,807)
(45,193)
The Company's federal net operating loss carryforwards are currently available to offset future federal taxable
income, if any, and will expire during the period 2029 through 2032. Approximately $8.1 million of the Company’s
state net operating loss carryforwards will expire during the period 2014 through 2023 and approximately $37.0
million will expire during the period 2024 through 2032. The Company expects to fully utilize these net operating
loss carryforwards in future years before they expire.
Significant components of the provision (benefits) for income taxes are as follows:
(in thousands)
Year Ended December 31,
2011
2012
Current:
Federal ........................................................................$
State ............................................................................
Total current ..............................................................
$
--
--
--
--
--
--
Deferred:
Federal ........................................................................
State ............................................................................
Total deferred ............................................................
Total income tax (benefit) expense ...........................$
(7,943)
(1,646)
(9,589)
(9,589) $
(4,113)
(852)
(4,965)
(4,965)
50
A reconciliation between the effective income tax rate and the statutory federal income tax rate is as follows:
Income tax (benefit) expense at statutory federal rate .....$
Federal income tax effects of:
State income tax expense ...........................................
Per diem and other nondeductible meals and
entertainment ..............................................................
Other ..........................................................................
Federal income tax (benefit) expense ..............................
State income tax (benefit) expense ..................................
Total income tax (benefit) expense .................................$
Effective tax rate .............................................................
(in thousands)
Year Ended December 31,
2011
2012
(9,268) $
(5,352)
558
290
748
19
(7,943)
(1,646)
(9,589) $
35.2%
900
49
(4,113)
(852)
(4,965)
31.5%
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.
12. 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 team members. Team members can
contribute up to 50.0% of their compensation, subject to statutory limits, with the Company matching 50.0% of the
first 4.0% of compensation contributed by each team member. Team members’ rights to employer contributions
vest after three years from their date of employment. Effective April 1, 2009, the Company suspended its
contribution match.
13. Stock Plans
The current equity compensation plan that has been approved by the Company’s stockholders is its 2004 Equity
Incentive Plan. The Company does not have any equity compensation plans under which equity awards are
outstanding or may be granted that have not been approved by its 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 1,100,000 shares of common stock to directors, officers and other key
team members. 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 three to 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.
At December 31, 2012, 665,860 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.
Compensation cost recognized in 2012 and 2011 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 recognized over the vesting period.
Compensation expense related to incentive and nonqualified stock options granted under the Company’s plans
is included in salaries, wages and employee benefits in the accompanying consolidated statements of operations.
The amount of compensation expense recognized, net of forfeiture recoveries, is reflected in the table below for the
years indicated.
51
Compensation expense
(in thousands)
For the Year Ended December 31,
2012
2011
$
67
$
65
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 Executive Team Incentive 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. Executive
Team Incentive 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, Executive Team Incentive Plan participants
are also eligible for an annual Equity Incentive Award consisting of Company common stock, issued under the 2004
Equity Incentive Plan. The Equity Incentive Awards will consist of a combination of Restricted Stock Awards
(“RSAs”) and Incentive Stock Options (“ISOs”). The value of the equity award to each participant will be granted
fifty percent in the form of RSAs and fifty percent in the form of ISOs, as defined. To the extent options fail to
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. On January 26, 2011 and February 6, 2012, the Committee
approved the granting of the annual awards for 2011 and 2012, respectively, under this plan.
The following grants were made in accordance with the terms of the Executive Team Incentive Plan for the
years indicated.
Grant Date
2012
February 1 ..............................................
May 2 .....................................................
August 1 ................................................
November 1 ...........................................
2011
February 1 ..............................................
May 2 .....................................................
August 1 ................................................
November 1 ...........................................
(1) Net of forfeited shares.
Restricted
Shares (1)
Number of
Shares Under
Options (1)
Grant Price
(2)
597
773
1,277
1,854
3,262
2,798
4,483
3,244
1,201
1,764
3,514
7,522
10,988
13,225
22,247
6,342
8.94
6.91
4.18
2.88
12.20
12.52
12.11
9.03
(2) The shares were valued at the closing price of the Company’s common stock on the dates of awards.
Information related to option activity for the year ended December 31, 2012 is as follows:
Number of
Options
127,884
22,790
--
(22,895)
(15,628)
112,151
68,365
Weighted-
Average
Exercise Price
14.80
$
5.69
--
12.68
20.85
12.54
14.77
$
$
Weighted-
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic Value
(1)
$
--
2.5
1.4
$
$
5,038
--
Outstanding - beginning of year ..........
Granted (2) ...........................................
Exercised .............................................
Cancelled/forfeited ..............................
Expired ................................................
Outstanding at December 31, 2012 ......
Exercisable at December 31, 2012 ......
(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, 2011 (the last trading day of the fiscal year), was $13.23.
52
The intrinsic value for options exercised in 2011 was $7,424. During the year ended December 31, 2012,
no options were exercised.
(2) The weighted-average grant date fair value of options granted during 2012 and 2011 was $2.43 and $2.99,
respectively.
The exercise price, number, weighted-average remaining contractual life of options outstanding and the number
of options exercisable as of December 31, 2012 are as follows:
Exercise
Price
Number of Options
Outstanding
Weighted-Average
Remaining Contractual
Life (in years)
Number of
Options
Exercisable
$
2.85
2.88
4.18
6.91
8.94
9.03
11.19
12.11
12.20
12.21
12.52
13.61
13.88
14.18
14.50
16.49
18.58
22.54
30.22
1,250
7,522
3,514
1,764
6,931
4,809
11,489
9,107
6,138
5,765
8,386
3,730
9,034
6,737
8,386
3,297
3,592
10,200
500
112,151
4.6
4.6
4.6
4.6
4.2
3.4
1.3
3.4
3.4
2.3
3.4
2.3
1.3
1.3
1.3
2.3
2.3
0.8
0.1
2.5
--
--
--
--
--
1,775
11,489
3,358
2,264
4,056
3,094
2,626
9,034
6,737
8,386
2,318
2,528
10,200
500
68,365
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 (in years) ...................................................
2012
0%
29.8% - 64.0%
0.5% - 0.7%
3.75 - 4.25
2011
0%
22.6% - 67.1%
0.7% - 1.7%
4.13 - 4.25
The expected volatility is a measure of the expected fluctuation in our share price based on the historical
volatility of our stock. Expected life represents the length of time we anticipate the options to be outstanding before
being exercised. 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, we also include
a factor for anticipated forfeitures, which represents the number of shares under options expected to be forfeited
over the expected life of the options.
The fair value of stock options and restricted stock that vested during the year is as follows for the years
indicated.
(in thousands)
December 31,
2012
2011
Stock options ........................................... $
Restricted stock .......................................
$
177
57
191
91
The 2003 Restricted Stock Award Plan was terminated on August 31, 2009. This plan allowed the Company to
issue up to 150,000 shares of common stock as awards of restricted stock to its officers, of which 100,000 shares
were awarded. The awarded shares consisted solely of shares contributed by its then Chairman of the Board and
were subject to the achievement of performance goals as determined by the Board of Directors. Upon forfeiture of
the final layer of 2,000 shares, no shares remain outstanding under this Plan.
53
During 2012, no activity occurred under the 2003 Restricted Stock Award Plan. The following information
relates to activity under the Plan that occurred during the year ended December 31, 2011.
Number of
Shares
Weighted-Average
Grant Date Fair
Value (1)
Nonvested shares - December 31, 2010 .............
Granted ..............................................................
Forfeited ............................................................
Vested ................................................................
Nonvested shares - December 31, 2011 .............
$
2,000
--
(2,000)
--
--
27.66
--
27.66
--
--
(1) The shares were valued at the average of the high and low trading price of the Company’s common stock
on the date of the award.
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. Compensation expense is included in salaries, wages and employee benefits in
the accompanying consolidated statements of operations, and the amount recognized, net of forfeiture recoveries, is
reflected in the table below for the years indicated.
(in thousands)
For the Year Ended December 31,
2012
2011
Compensation expense (credit)
$
65 $
(49)
On July 16, 2008, the Executive Compensation Committee of the Board of Directors, 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.
During the quarter ended June 30, 2010, management determined that the performance criteria will not be met
for the shares that were to vest on April 1, 2011; therefore, these shares were deemed forfeited and recorded as
Treasury Stock. During the second quarter of 2011, management determined that the performance criteria will not
be met for the shares that were scheduled to vest on April 1, 2012 and April 1, 2013; therefore, these shares were
deemed forfeited and recorded as Treasury Stock. These forfeited shares will remain outstanding until their
scheduled vesting dates, at which time their forfeitures will become effective and the shares will revert to the 2004
Equity Incentive Plan. The table below sets forth the information relating to the forfeitures of these shares.
July 16, 2008 Restricted Stock Award Forfeitures
Date Deemed Forfeited
and Recorded as
Treasury Stock
Shares
Forfeited
(in thousands)
Expense
Recovered
(in thousands)
June 30, 2010
June 30, 2011
June 30, 2011
9 $
8 (1)
15 (1)(2)
70
66
101
Date Shares
Returned to Plan
April 1, 2011
April 1, 2012
April 1, 2013
Scheduled Vest Date
April 1, 2011
April 1, 2012
April 1, 2013
(1) In October 2011, in connection with the termination of employment of a recipient, the forfeiture relating to
approximately 2,000 shares scheduled to vest on April 1, 2012 and 2,000 shares scheduled to vest on April
1, 2013, included herein, became effective. Accordingly, these shares were removed from Treasury Stock
at December 31, 2011. In addition, in connection with the termination of a recipient's employment, the
forfeiture relating to approximately 2,000 shares scheduled to vest on April 1, 2012 and 2,000 shares
54
scheduled to vest on April 1, 2013, included herein, became effective in January 2012. Accordingly, these
shares were removed from Treasury Stock at January 31, 2012.
(2) In December 2012, in connection with the termination of employment of a recipient, the forfeiture relating
to approximately 2,000 shares scheduled to vest on April 1, 2013, included herein, became effective.
Accordingly, these shares were removed from Treasury Stock at December 31, 2012.
Information related to the restricted stock awarded under the 2004 Equity Incentive Plan for the year ended
December 31, 2012, is as follows:
Nonvested shares – December 31, 2011 ............
Granted ..............................................................
Forfeited ............................................................
Vested ................................................................
Nonvested shares – December 31, 2012 ............
Number of Shares
146,624
25,925
(47,081)
(12,010)
113,458
Weighted-Average
Grant Date Fair
Value (1)
$
$
12.14
4.22
12.07
12.34
10.35
(1) The shares were valued at the closing price of the Company’s common stock on the dates of the awards.
Information set forth in the following table is related to stock options and restricted stock as of December 31,
2012.
(in thousands, except weighted average data)
Stock Options
Restricted Stock
Unrecognized compensation expense ................$
Weighted
over which
unrecognized compensation expense is to be
recognized (in years) .........................................
average
period
58
$
1.4
583
4.4
On January 30, 2013, the Executive Compensation Committee of the Company’s Board of Directors granted
Restricted Stock Awards (“RSAs”) in an amount equal to a percentage of the recipient’s annual salary. The value of
the RSAs was based on the closing price of the Company’s common stock on the NASDAQ Stock Market on
February 1, 2013 ($4.98) and a total of 36,961 restricted shares were issued. The shares were issued from the
Company’s 2004 Equity Incentive Plan. The RSAs will vest one-fourth each year beginning February 1, 2014,
conditioned on continued employment and certain other forfeiture provisions. In addition, the Executive
Compensation Committee approved the USA Truck, Inc. Management Bonus Plan. Plan participants, consisting of
executive and other key management personnel, will be paid a cash percentage and an equity percentage of their
base salaries corresponding with the achievement of certain levels of consolidated 2013 pretax income.
On February 15, 2013, in connection with his appointment as President and Chief Executive Officer, Mr. John
M. Simone was granted 75,000 shares of restricted stock, to vest in equal 25% installments over four years,
beginning February 18, 2014. He was also granted 42,910 non-qualified stock options with an exercise price of
$4.83, which was the closing price of the Company's common stock February 19, 2013, to vest in equal 25%
installments over four years, beginning February 18, 2014. Both awards are conditioned on continued employment
and certain other forfeiture provisions.
55
14. Loss per Share
The following table sets forth the computation of basic and diluted loss per share:
Numerator:
Net loss ...................................................................................... $
(17,671)
$
(10,777)
(in thousands, except per share
Year Ended December 31,
2011
2012
Denominator:
Denominator for basic loss per share – weighted average
shares........................................................................................
Effect of dilutive securities:
Employee stock options and restricted stock..........................
Denominator for diluted loss per share – adjusted weighted-
average shares and assumed conversions .................................
Basic loss per share ................................................................
Diluted loss per share .............................................................
Weighted average anti-dilutive employee stock options and
restricted stock ....................................................................
15. Common Stock Transactions
$
$
$
10,310
10,302
--
--
10,310
(1.71)
(1.71)
$
$
$
200
--
--
10,302
(1.05)
(1.05)
144
During the years ended December 31, 2012 and 2011, we did not repurchase any shares of our common stock.
Currently, we do not have an approved repurchase authorization.
16. Fair Value of Financial Instruments
At December 31, 2012 and 2011, the amounts reported in the Company’s consolidated balance sheets for its
Revolver and capital leases approximate their fair value.
17. Litigation
The Company is a party to routine litigation incidental to its business, primarily involving claims for personal
injury and property damage incurred in the transportation of freight. Though the Company believes these claims to
be routine and immaterial to its long-term financial position, adverse results of one or more of these claims could
have a material adverse effect on its financial position, results of operations or cash flow.
On July 28, 2008, a former commission sales agent, Mr. William Blankenship (“Blankenship”), filed an action
in the United States District Court, Western District of Arkansas entitled William Blankenship, Jr. v. USA Truck,
Inc., asking the court to set aside a previously consummated settlement agreement between the parties. The matter
was dismissed by the District Court based upon our Motion to Dismiss, but was later reinstated by the 8th Circuit
Court of Appeals and set for trial in the United States District Court in Fort Smith, Arkansas. In October 2011, the
trial was held in the United States District Court and the jury returned a favorable verdict for the Company on all
counts and determined that the Company had no additional liability in this matter. On December 13, 2011, the
Court entered an order awarding the Company its costs and attorney’s fees incurred in defending the case totaling
approximately $0.2 million. Blankenship has now appealed the jury verdict and Court order, and the matter is once
again pending before the 8th Circuit Court of Appeals.
18. Stockholder Rights Plan
On November 7, 2012, the Company's Board of Directors declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of the Company's common stock, which was paid on November 21,
2012 to stockholders of record at the close of business on such date. The Board of Directors also adopted the Rights
Agreement by and between the Company and Registrar and Transfer Company, as Rights Agent (the "Rights
Agreement").
The Rights will become exercisable (subject to customary exceptions) only if a person or group acquires 15% or
more of the Company's common stock. At a designated time after a person or group becomes an acquiring person,
upon payment of the exercise price of $12.00 per Right, a holder (other than an acquiring person) will be entitled to
purchase $24.00 worth of shares of the Company's common stock (or under certain circumstances, the common
56
stock of an entity that completes a business combination with the Company) at a 50% discount. The Rights
Agreement is set to expire on November 21, 2014; however, the Rights Agreement will continue after the
Company's 2014 Annual Meeting only upon stockholder approval at such meeting. The Company may redeem the
Rights for nominal consideration before the Rights become exercisable.
19. Subsequent Events
On February 15, 2013, the Company’s Board of Directors appointed John M. Simone as the Company's
President and Chief Executive Officer and appointed Mr. Simone to the Board of Directors. Clifton R. Beckham
stepped down from his position as the Company's President and Chief Executive Officer and from his position on
the Board of Directors. Concurrently, Mr. Beckham was appointed Executive Vice President and Chief Financial
Officer of the Company.
20. Quarterly Results of Operations (Unaudited)
The tables below present quarterly financial information for 2012 and 2011:
(in thousands, except per share amounts)
2012
Three Months Ended
March 31,
June 30,
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 ................. $
123,673
130,309
(6,636)
911
(7,547)
(2,674)
(4,873)
10,300
(0.47)
10,300
(0.47)
$
$
$
$
129,569
133,898
(4,329)
975
(5,304)
(1,818)
(3,486)
10,304
(0.34)
10,304
(0.34)
$
September 30,
124,416
$
132,941
(8,525)
1,002
(9,527)
(3,455)
(6,072) $
December 31,
134,771
138,552
(3,781)
1,100
(4,881)
(1,641)
(3,240)
$
10,312
(0.59) $
10,312
(0.59) $
10,313
(0.31)
10,313
(0.31)
$
$
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.
(in thousands, except per share amounts)
2011
Three Months Ended
March 31,
June 30,
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 ................. $
124,042
127,224
(3,182)
732
(3,914)
(1,198)
(2,716)
10,298
(0.26)
10,298
(0.26)
$
$
$
$
139,027
136,815
2,212
795
1,417
819
598
10,306
0.06
10,317
0.06
$
September 30,
130,137
$
135,996
(5,859)
703
(6,562)
(2,257)
(4,305) $
December 31,
126,202
132,021
(5,819)
863
(6,682)
(2,328)
(4,354)
$
10,294
(0.42) $
10,294
(0.42) $
10,297
(0.42)
10,297
(0.42)
$
$
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.
57
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, 2012, 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.
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 at the
reasonable assurance level as of December 31, 2012.
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 over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the
quarter ended December 31, 2012, that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
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 2012.
58
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 8, 2013, 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 team
members, and sets forth the conduct and ethics expected of all affiliates and team members of the Company, is
available at our Internet address http://www.usa-truck.com, under the “Corporate Governance” tab of the
“Investors” menu. 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,” and “Compensation Committee
Interlocks and Insider Participation” in our proxy statement for the annual meeting of stockholders to be held on
May 8, 2013, 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 8, 2013, 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 Meetings, Director Independence and Committees – Director Independence” in our proxy statement for the
annual meeting of stockholders to be held on May 8, 2013, 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 ACCOUNTING 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 8, 2013, 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.
59
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, 2012 and 2011 ............................................................ 36
Consolidated Statements of Operations for the years ended December 31, 2012 and 2011...................... 37
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2012 and 2011...... 38
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012 and 2011 ..... 39
Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011 .................... 40
Notes to Consolidated Financial Statements ............................................................................................. 41
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:
-Executive Profit-Sharing Incentive Plan (Exhibit 10.2)
-Form of Restricted Stock Award Agreement (Exhibit 10.5)
-Form of Stock Option Award Agreement (Exhibit 10.6)
-USA Truck, Inc. 2004 Equity Incentive Plan (Exhibit 10.3)
-USA Truck, Inc. Executive Team Incentive Plan (Exhibit 10.4)
60
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 “2012 10-K Request” on the outside of the envelope containing the request. The written request
must state that as of March 13, 2013, the person making the request was a beneficial owner of shares of the Common
Stock of the Company.
61
Officers and Directors
John M. Simone
President, Chief Executive Officer
and Director
Clifton R. Beckham
Executive Vice President
and Chief Financial Officer
Michael R. Weindel, Jr.
Executive Vice President
and Chief Operations Officer
for SCS and Intermodal
Jaimey D. Malone
Vice President,
Sales
J. Rodney Mills
Vice President,
Risk Management
and General Counsel
Tim Studebaker
Vice President,
Revenue Management
Donald B. Weis
Vice President,
Human Resources
Jeffery L. Burns
Treasurer
Kimberly R. Woodard
Controller
Robert A. Peiser
Chairman of the Board
(Retired Chief Executive Officer
Imperial Sugar Company, Refiner
and Marketer of Sugar Products)
Richard B. Beauchamp
Director
(General Partner, Norris Taylor
& Company, Accounting Firm)
Robert E. Creager
Director
(Retired Partner,
PricewaterhouseCoopers,
Accounting Firm)
Terry A. Elliott
Director
(Retired Chief Administrative Officer
and Chief Financial Officer, Safe Foods
Corporation, Food Safety Company)
William H. Hanna
Director
(President, Hanna Oil and Gas, Oil
and Gas Exploration)
James D. Simpson, III
Director
(Executive Vice President,
Stephens Inc., Investment Banking)
62
Selected Financial Data
(Dollars in thousands except per share amounts)
Base revenue
Operating (loss) income
Net (loss) income
Diluted (loss) earnings per share
Total assets
Long-term debt
Stockholders’ equity
Operating ratio*
Total tractors in-service, including
independent contractors (end of period)
Total trailers (end of period)
Average miles per tractor per week
Year Ended December 31,
2012
$408,719
(23,186)
(17,540)
(1.70)
331,706
122,530
109,561
2011
$411,026
(12,649)
(10,777)
(1.05)
336,191
98,927
126,972
2010
$386,883
92
(3,308)
(0.32)
327,385
79,750
137,708
2009
$331,520
(6,607)
(7,177)
(0.70)
330,700
39,116
140,546
2008
$397,557
12,147
3,140
0.31
332,268
79,364
146,773
105.7%
103.1%
99.9%
102.0%
96.9%
2,202
6,091
1,802
2,257
6,318
1,839
2,363
6,716
2,016
2,328
7,214
1,972
2,392
7,351
2,216
* Operating ratio as reported above is based upon total operating expenses, net of fuel surcharge,
as a percentage of base revenue.
Corporate Information
This annual report and the statements contained herein are submitted for the general information of stockholders of
the Company and are not intended to induce any sale or purchase of securities or to be used in connection therewith.
Corporate Headquarters
3200 Industrial Park Road
Van Buren, AR 72956
Telephone: (479) 471-2500
Annual Meeting
May 8, 2013
10:00 a.m. local time
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, AR 72956
Transfer Agent and Registrar
Registrar and Transfer Company
10 Commerce Drive
Cranford, NJ 07016
Common Stock
Traded on the NASDAQ
Global Select Market under the Symbol: USAK
Website
usa-truck.com
Upon written request of any stockholder, the Company will furnish without charge a copy of the Company’s 2012 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 13, 2013, the person making the request was a beneficial owner of shares of the Common Stock of the Company.
usa-truck.com
USA Truck Company Overview
USA Truck is a dry van truckload carrier transporting general commodities via our Truckload
and Dedicated Freight service offerings. We transport commodities throughout the
continental United States and into and out of portions of Canada. We also transport general
commodities into and out of Mexico by allowing through-trailer service from our terminal
in Laredo, Texas. Our Strategic Capacity Solutions and Intermodal operating segments
provide customized transportation solutions using our technology and multiple modes
of transportation, including our assets and the assets of our partner carriers.
It begins with you.sm
This phrase has a dual objective at USA Truck — to serve as both an overall message
to our customers (and potential customers) and as a constant reminder to our team
members why we are in business.
Annual Report 2012