2015 Annual Report
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.
Home Office
3200 Industrial Park Road
Van Buren, AR 72956
Telephone: (479) 471-2500
Annual Meeting
May 3, 2016
10 a.m. Central Daylight Time (CDT)
USA Truck, Inc.
3200 Industrial Park Road
Van Buren, AR 72956
Independent Registered Public Accounting Firm
Grant Thornton LLP
2431 E. 61st Street, Suite 500
Tulsa, OK 74136
Transfer Agent and Registrar
Continental Stock Transfer and Trust Company
17 Battery Place
New York, NY 10004
Telephone: 800-509-5586
Common Stock
Traded on the NASDAQ
Global Select Market under
the Symbol: USAK
Website
usa-truck.com
On February 23, 2016 the Company filed its Sarbanes-Oxley Section 302 Certifications as exhibits to the Company’s Annual
Report on Form 10-K for the period ended December 31, 2015.
Upon written request of any shareholder, the Company will furnish without charge a copy of the Company’s 2015 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 David F. Marano, Secretary of the Company, at the Company’s executive offices,
3200 Industrial Park Road, Van Buren, Arkansas 72956. The written request must state that as of March 9, 2016, the person
making the request was a beneficial owner of shares of the common stock of the Company.
Star Values
Our culture speaks volumes about who we are as a Company. As USA Truck team members, our daily goal is to exhibit
the Star Values that are critical to helping us Exceed Expectations. These Star Values are: Safety, Team Members, Integrity,
Customers and Accountability. When we live these values, success is inevitable.
Whistleblower Hotline
To confidentially report issues of theft or fraud, contact AuditCommittee@usa-truck.com or call 800-326-9847.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
0-19858
(Commission file number)
Delaware
(State or other jurisdiction of incorporation)
71-0556971
(I.R.S. Employer Identification No.)
USA Truck, Inc.
(Exact name of registrant as specified in its charter)
3200 Industrial Park Road
Van Buren, Arkansas
(Address of principal executive offices)
72956
(Zip Code)
(479) 471-2500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 Par Value
Name of each exchange on which registered
The NASDAQ Stock Market LLC (NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large Accelerated Filer____ Accelerated Filer X Non-Accelerated Filer ____ Smaller Reporting Company ____
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
The aggregate market value of the common equity held by non-affiliates of the Registrant (assuming for these purposes that all executive
officers, directors, and affiliated holders of more than 10% of the Registrant’s outstanding common stock are “affiliates” of the Registrant) as of
June 30, 2015, the last business day of the Registrant's most recently completed second fiscal quarter, was approximately $219,871,807 (based on
the closing sale price of the Registrant's common stock on that date as reported by Nasdaq).
As of February 15, 2016, 9,758,733 shares of the registrant’s common stock, par value $0.01 per share, were outstanding.
USA TRUCK, INC.
TABLE OF CONTENTS
Caption
PART I
Item No.
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
5.
PART II
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
Page
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1
Cautionary Note Regarding Forward-Looking Statements
Part I.
This Annual Report on Form 10-K for the year ended December 31, 2015 (this “Form 10-K”) contains certain
statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act, 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:
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any projections of earnings, revenue, or other financial items;
any statement of projected future operations or processes;
any statement of plans, strategies, and objectives of management for future operations;
any statement concerning proposed new services or developments;
any statement regarding future economic conditions or performance; and
any statement of belief and any statement of assumptions underlying any of the foregoing.
In this Form 10-K, statements relating to:
future insurance and claims experience;
future driver market;
future driver compensation;
future acquisitions and dispositions of revenue equipment;
future prices of revenue equipment;
future profitability;
future fuel prices, hedging arrangements, and efficiency;
our ability to recover costs through our fuel surcharge program;
future purchased transportation expense;
future operations and maintenance costs;
future depreciation and amortization;
future effects of inflation;
expected capital resources and sources of liquidity;
future indebtedness;
future share repurchases, if any;
future effects of restructuring activities;
expected capital expenditures; and
future income tax rates,
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among others, are forward-looking statements. Such statements may be identified by their use of terms or phrases such as
“expects,” “estimates,” “projects,” “believes,” “anticipates,” “focus,” “intends,” “plans,” “goals,” “may,” “if,”
“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 1A., Risk Factors.” Readers should review and consider the factors discussed under the heading
“Risk Factors” in Item 1A of this Form 10-K, along with various disclosures in our press releases, stockholder reports,
and other filings with the Securities and Exchange Commission (the “SEC”).
All such forward-looking statements speak only as of the date of this 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.
2
Item 1. BUSINESS
General
USA Truck is the nation's twenty-sixth largest truckload carrier based on 2014 operating revenue according to
Transport Topics. In 2015, the Company generated $507.9 million in operating revenue and $23.1 million in operating
income. As of December 31, 2015, the Company’s fleet of 1,832 tractors was comprised of 1,568 company tractors and 264
independent contractor tractors. The Company owned 6,200 trailers as of December 31, 2015.
The Company transports commodities throughout the continental United States and into and out of portions of
Canada. USA Truck also transports general commodities into and out of Mexico by allowing through-trailer service from
its terminal in Laredo, Texas. In addition to truckload and dedicated freight service offerings, the Company provides freight
brokerage and rail intermodal service offerings through its Strategic Capacity Solutions (“SCS”) segment. USA Truck is
headquartered in Van Buren, Arkansas, with terminals, offices, and staging facilities located throughout the United States.
The Company has two reportable segments: (i) trucking, consisting of the Company’s truckload and dedicated freight
service offerings and (ii) SCS, consisting of the Company’s freight brokerage and rail intermodal service offerings. Based
on several factors, including the relatively small size of the Company’s rail intermodal service offering and the
interrelationship of the freight brokerage and rail intermodal operations, the Company aggregates its freight brokerage and
rail intermodal service offerings into a single reportable segment. Financial information regarding these segments is
provided in the notes to the consolidated financial statements in Part II, Item 8 of this Form 10-K.
Truckload freight services utilize Company-owned equipment or equipment owned by independent contractors for the
pick-up and delivery of freight. Truckload services transport freight over irregular routes as a medium-to long-haul
common carrier. Dedicated freight services provides similar transportation services, but does so pursuant to agreements
whereby the Company makes equipment available to a specific customer for shipments over particular routes at specified
times.
SCS provides services which complement USA Truck’s trucking services, primarily to existing customers of its
trucking segment. SCS represented approximately 30%, 30%, and 25% of USA Truck’s consolidated operating revenue in
2015, 2014, and 2013, respectively.
Long-Term Turnaround Plan
USA Truck’s top priorities remain improving its operating performance and increasing stockholder value. The
Company’s long-term turnaround plan has three main components: profitable revenue, operational excellence, and cost
effectiveness. During 2015, progress in executing the Company’s turnaround plan has contributed to a 160 basis point
increase in operating margin versus 2014, positive cash flow, and our most profitable year since 2006. During 2014, the
Company achieved a 470 basis point improvement in operating margin versus 2013.
Profitable Revenue: The Company continues to refine its freight network toward a more efficient mix of lanes and
markets in its truckload business, particularly focusing on better utilization of Company tractors with an emphasis on key
metrics, such as miles per seated truck per week and base trucking revenue per seated truck per week. Base trucking
revenue per seated truck per week improved approximately 2.7% during 2015, compared to 2014.
Operational Excellence and Cost Effectiveness. During 2015, the Company continued to focus on improving customer
service and cost reduction initiatives for fuel, maintenance, interest and debt costs, as well as other areas requiring cost
containment. During 2015, the Company took steps to streamline and simplify its operations to better align the Company's
cost structure and better serve its customers. In the Company's trucking segment, the Company closed its maintenance
facilities in Denton, Texas and Carlisle, Pennsylvania. Additionally, the Company began to outsource its road assistance
function to a third party during the fourth quarter of 2015. These initiatives are expected to improve operating productivity
and enhance capacity utilization. The Company recognized approximately $2.7 million (pretax) in restructuring, severance
and related charges. Going forward, the Company intends to focus on operational execution initiatives that it believes will
improve safety performance, asset productivity, driver retention, fuel economy, maintenance operations and customer
service.
The Company continued to make progress in executing its turnaround plan in 2015. Management believes that the
Company is well-positioned to complete the turnaround plan of its trucking segment and generate long-term profitability.
To increase stockholder value in 2016, the Company expects to evolve from the stated goal of sustained profitability to
maximize the profitability of the business segments and increase the Company's return on invested capital.
3
Operations
The Company focuses significant marketing efforts on customers with premium service requirements and who have
consistent shipping needs within USA Truck’s primary operating areas which are predominantly located in the eastern half
of the United States. One or more of the Company’s service offerings are marketed to customers, with over 90% of the
Company’s top 100 customers utilizing more than one service in 2015. This permits the strategic positioning of available
equipment and allows the Company to provide its customers with a full array of transportation solutions. In addition, USA
Truck team members have cultivated a thorough understanding of the needs of shippers in key industries. The Company
believes this helps it develop long-term, service-oriented relationships with its customers.
USA Truck has a diversified freight and customer base. During 2015, the Company’s largest 5, 10, 25 and 50
customers comprised approximately 27%, 38%, 57% and 71% of its revenues, respectively. No single customer generated
more than 10% of the Company’s revenues in 2015. The Company provided service to more than 900 customers in 2015
across all USA Truck service offerings.
While the Company prefers direct relationship with customers, obtaining shipments through other providers of
transportation or logistics services is a significant opportunity. Securing freight through a third party enables USA Truck to
provide services for high-volume shippers to which it might not otherwise have access because many of these shippers
require their carriers to conduct business with their designated third party logistics provider.
Customers are billed at or shortly after delivery and, during 2015, receivables collection averaged approximately 38
days from the billing date, compared to an average of approximately 44 days and 40 days during 2014 and 2013,
respectively. The decrease in days to collection has resulted from various initiatives including improvements to the
Company’s billing procedures, an increased focus on customers with aged receivables, improving communication with
customers and improving efficiency in the Company’s internal collection process.
The Company primarily operates in the United States and operates in Mexico and Canada. Most of the Company’s
operating revenue is generated from within the United States. During 2015, 2014 and 2013 approximately 8%, 10% and
10%, respectively, of the Company’s operating revenue was generated in Mexico and Canada. All Company tractors are
domiciled in the United States. The Company does not separately track domestic and foreign long-lived assets. Providing
such information would not be meaningful to the business. Substantially all of the Company’s long-lived assets are, and
have been for the last three fiscal years, located within the United States.
The Company’s trucking segment is supported primarily by driver managers, load planners and customer service
representatives. These teams monitor the location of equipment and direct its movement in a safe, efficient and practicable
manner. Each driver manager supervises assigned drivers and is the primary contact with the drivers. Load planners assign
all available units and loads in a manner designed to maximize profit and minimize costs. Customer service representatives
work to fulfill shippers’ needs, solicit freight, and ensure on-time delivery by monitoring loads. The Company makes trucks
available for dispatch, selecting profitable freight with a network and yield management focus, and efficiently matches that
freight to available truck capacity, all of which the Company strives to achieve without sacrificing customer service,
equipment utilization, driver retention or safety.
The SCS segment has a network of 13 branch offices located throughout the continental United States. The business
model is built around the capabilities of Company team members to make available consistent service to customers. The
specific locations of branch offices are selected for the availability of talent in those markets. SCS employed approximately
100 people as of December 31, 2015. Most of the SCS team interacts directly with customers, matching customers’ freight
needs with available third party capacity in the marketplace. SCS also has staff that screen and select third party carriers
that are used to transport the freight.
Revenue Equipment
We operate a modern Company tractor fleet to help attract drivers, promote safe operations, and reduce
maintenance and repair costs. The following table shows the age of the Company owned and leased tractors and trailers
as of December 31, 2015:
4
Model Year:
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005 and beyond
Total
Tractors (1)
Trailers
400
298
250
243
377
--
--
--
--
--
--
--
1,568
1,548
500
400
298
--
--
396
437
566
1,213
492
350
6,200
(1) Excludes 264 independent contractor tractors.
The Company’s equipment purchase and replacement decisions are based on a number of factors, including new
equipment prices, the used equipment market, demand for freight services, prevailing interest rates, technological
improvements, regulatory changes, cost per mile, fuel efficiency, equipment durability, equipment specifications and driver
comfort. Therefore, depending on the circumstances, the Company may accelerate or delay the acquisition and disposition
of its tractors or trailers from time to time. Generally, USA Truck’s primary business strategy of fully leveraging the
significant capital investment in the current fleet of tractors and trailers requires the Company to strive to maximize the
profitability of its existing assets before considering a material increase in the fleet size.
During 2015, the Company undertook an initiative to downsize the tractor fleet, resulting in a net decrease of
approximately 400 tractors as the Company focused on its network, customer profitability and reduce its unsented tractors
in its trucking segment. Goals of this initiative were to further improve fuel economy, reduce maintenance costs and
improve the reliability of the Company’s equipment for the benefit of its drivers and customers.
To simplify driver and mechanic training, control the cost of spare parts and tire inventory and provide for a more
efficient vehicle maintenance program, the Company purchases tractors and trailers manufactured to its specifications. The
Company has a comprehensive preventive maintenance program designed to minimize equipment downtime and enhance
sale or trade-in values.
The Company finances the purchase of revenue equipment through its cash flows from operations, revolving credit
agreement, capital lease arrangements, fair market value lease agreements and proceeds from sales or trades of used
equipment. Substantially all of the Company’s tractors and trailers are pledged to secure its obligations under financing
arrangements.
During 2015, all Company and independent contractor tractors were equipped with PeopleNet in-cab technology,
enabling two-way communications between the Company and its drivers, through both standardized and freeform
messaging, including electronic logging. This enables USA Truck to dispatch drivers efficiently in response to customers’
requests, to provide real-time information to customers about the status of their shipments and to provide documentation
supporting various accessorial charges. Accessorial costs are charges to customers for additional services such as loading,
unloading or equipment delays. In addition, the Company utilizes satellite-based equipment tracking devices and cargo
sensors on virtually all of its trailers. These tracking devices provide the Company with visibility on the locations and load
status of its trailers.
Safety and Risk Management
The Company emphasizes safe work habits as a core value throughout the entire organization, and provides proactive
training and education relating to safety concepts, processes and procedures. The Company conducts pre-employment,
random, reasonable suspicion and post-accident alcohol and substance abuse testing in accordance with the Department of
Transportation (“DOT”) regulations and the Company’s own policies.
Safety training for new drivers begins in orientation, when newly hired team members are taught safe driving and work
techniques that emphasize the Company’s commitment to safety. Upon completion of orientation, new student drivers are
required to undergo on-the-road training for four to six weeks with experienced commercial motor vehicle drivers who
have been selected for their professionalism and commitment to safety and who are trained to communicate safe driving
techniques to new drivers. New drivers who graduate from the program must also successfully complete post-training
5
classroom and road testing before being assigned to their own tractor. Additionally, all Company drivers participate in on-
going training that focuses on collision and injury prevention, among other safety concepts.
The primary risks for which the Company is insured are cargo loss and damage, liability, personal injury, property
damage, workers’ compensation and employee medical expenses. USA Truck also self-insures for a portion of claims
exposure in each of these areas. 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 team members. 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 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.
Although the Company believes the aggregate insurance limits should be sufficient to cover reasonably expected
claims, it is possible that one or more claims could exceed the Company’s aggregate coverage limits. An unexpected loss or
changing conditions in the insurance market could adversely affect premium levels. As a result, the Company’s insurance
and claims expense could increase, or USA Truck could raise its self-insured retention or decrease the Company’s
aggregate coverage limits when its policies are renewed or replaced. If these costs increase, if reserves are increased, if
claims in excess of coverage limits are experienced, or if a claim is experienced where coverage is not provided, the
Company’s results of operations and financial condition in any one quarter or annual period could be materially and
adversely affected.
Team Members
As of December 31, 2015, the Company had approximately 2,300 team members, of which about 73% were Company
drivers. No team members are subject to union contracts or part of a collective bargaining unit. The Company believes
team member relations to be good.
Recruitment, training, and retention of a professional driver workforce, the Company’s most valuable asset, are
essential to the Company’s continued growth and meeting the service requirements of its customers. USA Truck hires
qualified professional drivers who hold a valid commercial driver’s license, satisfy applicable federal and state safety
performance and measurement requirements, and meet USA Truck’s hiring parameters. These guidelines relate primarily to
safety history, road test evaluations, and various other evaluations, which include physical examinations and mandatory
drug and alcohol testing. In order to attract and retain safe drivers who are committed to customer service and safety, the
Company focuses its operations for drivers around a collaborative and supportive team environment. The Company
provides comfortable, late model equipment, direct communication with senior management, competitive wages and
benefits, and other incentives designed to encourage driver safety, retention, and long-term employment. The Company
values its relationship with its drivers and structures its driver retention model with a focus on a long-term career with USA
Truck. Drivers are compensated on a per mile basis, based on the length of haul and a predetermined number of miles.
Drivers are also compensated for additional services provided to customers. Drivers and other employees are encouraged to
participate in the Company’s 401(k) program, and Company-sponsored health, life, and dental plans. The Company
believes these factors help in attracting, recruiting, and retaining professional drivers in a competitive driver market.
Independent Contractors
In addition to Company drivers, USA Truck enters 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. The Company intends
to continue to grow the use of independent contractors. As of December 31, 2015, the Company had contracts with 264
independent contractors, representing an increase of approximately 28% compared to the prior year.
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. 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 as few as
one truck and relatively few carriers with revenues exceeding $100 million per year.
USA Truck competes 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 USA Truck. The principal competitive factors in the truckload segment of the industry
6
are service and price, with rate discounting becoming particularly important during economic downturns. USA Truck’s
focus is to differentiate itself primarily on the basis of service rather than rates. Although an increase in the size of the
market would benefit all truckload carriers, management believes that successful carriers are likely to grow by offering
additional services to its customers based on customer needs and acquiring a greater market share.
Environmental Regulation
EPA regulations limiting exhaust emissions became more restrictive in 2010. In 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 2011, the NHTSA and the EPA adopted final rules that established the first-ever
fuel economy and greenhouse gas standards for medium- and heavy-duty vehicles. These standards apply to model years
2014 to 2018, which are required to achieve an approximate 20 percent reduction in fuel consumption by 2018, and equates
to approximately four gallons of fuel for every 100 miles traveled. In addition, in February 2014, President Obama
announced that his administration will begin developing the next phase of tighter fuel efficiency standards for medium- and
heavy-duty vehicles and directed the EPA and NHTSA to develop new fuel efficiency and greenhouse gas standards by
March 31, 2016. In response, in June 2015, the EPA and NHTSA jointly proposed new stricter standards that would apply
to trailers beginning with model year 2018 and tractors beginning with model year 2021. After an extended comment
period ending in October 2015, a final rule has not yet been published. If this rule or a similar rule was enacted, the
Company believes these requirements could result in increased new tractor prices and additional parts and maintenance
costs incurred to retrofit its tractors with technology to achieve compliance with such standards, which could adversely
affect its operating results and profitability, particularly if such costs are not offset by potential fuel savings. The Company
cannot predict, however, the extent to which its operations and productivity will be impacted.
The California Air Resource Board (“CARB”) also has adopted emission control regulations which will be applicable
to all heavy-duty tractors that pull 53-foot or longer box-type trailers within the state of California. The tractors and trailers
subject to these regulations must be either EPA Smart Way certified or equipped with low-rolling, resistance tires and
retrofitted with Smart Way-approved aerodynamic technologies. Enforcement of these CARB regulations for model year
2011 equipment began in 2010 and will be phased in over several years for older equipment. The Company currently
purchases Smart Way certified equipment in its new tractor and trailer acquisitions. Federal and state lawmakers also have
proposed potential limits on carbon emissions under a variety of other climate-change proposals. Compliance with such
regulations may increase the cost of new tractors and trailers, may require USA Truck to retrofit its equipment, and could
impair equipment productivity and increase the Company’s 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 USA Truck’s operating expenses or otherwise adversely affect its business or operations.
Other Regulation
The Company’s operations are regulated and licensed by various United States federal and state, Canadian provincial,
and Mexican federal agencies. Interstate motor carrier operations are subject to safety requirements prescribed by the DOT.
Matters such as weight and equipment dimensions are also subject to United States federal and state regulation and
Canadian provincial regulations. The Company operates in the United States pursuant to operating authority granted by the
DOT, in various Canadian provinces pursuant to operating authority granted by the Ministries of Transportation and
Communications in such provinces, and within Mexico pursuant to operating authority granted by Secretaria de
Comunicaciones y Transportes. To the extent that the Company conducts operations outside the United States, it is subject
to the Foreign Corrupt Practices Act, which generally prohibits United States companies and their intermediaries from
bribing foreign officials for the purpose of obtaining or retaining favorable treatment.
The DOT, through the Federal Motor Carrier Safety Administration (the “FMCSA”), imposes safety and fitness
regulations on the Company and its drivers, including rules that restrict driver hours-of-service. In December 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 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. (together, the “2011 Restart Restrictions”). These
rule changes became effective in July 2013.
In December 2014, the 2015 Omnibus Appropriations bill was signed into law. Among other things, the legislation
provided temporary relief from the 2011 Restart Restrictions, and essentially reverted back to the more straight forward 34-
hour restart rule that was in effect before the 2011 Rule became effective. In 2016, Congress is expected to consider a study
conducted by the FMCSA related to the 2011 Restart Restrictions. Congressional action based on the findings of the study
could result in a reinstatement or continued suspension of the 2011 Restart Restrictions. If the 2011 Restart Restrictions are
reinstated, the Company may experience a decrease in production similar to that experienced during 2013 and 2014 when
the 2011 Restart Restrictions were in effect.
7
There are two methods of evaluating the safety and fitness of carriers. The first method is the application of a safety
rating that is based on an onsite investigation and affects a carrier’s ability to operate in interstate commerce. The Company
currently has a satisfactory DOT safety rating under this method, which is the highest available rating under the current
safety rating scale. If USA Truck were to receive a conditional or unsatisfactory DOT safety rating, it could adversely
affect the Company’s business, as some of its existing customer contracts require a satisfactory DOT safety rating. In
January 2016, the FMCSA published a Notice of Proposed Rulemaking outlining a revised safety rating measurement
system, which would replace the current methodology. Under the proposed rules, the current three safety ratings of
“satisfactory,” “conditional,” and “unsatisfactory” would be replaced with a single safety rating of “unfit.” Moreover, data
from roadside inspections and the results from all investigations would be used to determine a carrier’s fitness on an
ongoing basis. This would replace the current methodology of determining a carrier’s fitness based solely on infrequent
comprehensive onsite reviews. The proposed rules will undergo a 90-day public comment period, after which, a final rule
could either be published or become subject to further legislative reviews and delays. Therefore, it is uncertain if or when
these proposed rules could take effect.
In addition to the safety rating system, the FMCSA has adopted the Compliance Safety Accountability program
(“CSA”) as an additional safety enforcement and compliance model that evaluates and ranks fleets on certain safety-related
standards. The CSA program analyzes data from roadside inspections, moving violations, crash reports from the last two
years, and investigation results. The data is organized into seven categories. Carriers are grouped by category with other
carriers that have a similar number of safety events (e.g., crashes, inspections, or violations) and carriers are ranked and
assigned a rating percentile to prioritize them for interventions if they are above a certain threshold. Currently, these scores
do not have a direct impact on a carrier’s safety rating. However, the occurrence of unfavorable scores in one or more
categories may (i) affect driver recruiting and retention by causing high-quality drivers to seek employment with other
carriers, (ii) cause USA Truck’s customers to direct their business away from the Company and to carriers with higher fleet
safety rankings, (iii) subject the Company to an increase in compliance reviews and roadside inspections, or (iv) cause the
Company to incur greater than expected expenses in its attempts to improve unfavorable scores, any of which could
adversely affect the Company’s results of operations and profitability.
Under CSA, these scores were initially made available to the public in five of the seven categories. However, pursuant
to the FAST Act, which was signed into law in December 2015, the FMCSA is required to remove from public view the
previously available CSA scores while it reviews the reliability of the scoring system. During this period of review by the
FMCSA, the Company will continue to have access to its own scores and will still be subject to intervention by the
FMCSA when such scores are above the intervention thresholds. Currently, the Company is exceeding the established
intervention thresholds in one of the seven categories of CSA, in comparison to its peer group; however, the Company
continues to maintain a satisfactory rating with the DOT. The Company will continue to promote improvement of scores in
all seven categories with ongoing reviews of all safety-related policies, programs and procedures for their effectiveness.
In 2011, the FMCSA issued new rules that would require nearly all carriers, including USA Truck, to install and use
electronic on-board recording devices (“EOBRs,” now referred to as electronic logging devices, or “ELDs”) in their
tractors to electronically monitor truck miles and enforce hours-of-service. These rules, however, were vacated by the
Seventh Circuit Court of Appeals in August 2011. The final rule related to mandatory use of ELDs was published in
December 2015, and requires the use of ELDs by nearly all carriers by December 10, 2017. The Company has proactively
installed ELDs on 100% of its tractor fleet.
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 USA Truck to increase driver compensation, limit fleet growth, or allow
trucks to sit idle. These regulations also could complicate the successful pairing of available equipment with hazardous
material shipments, thereby increasing the Company’s response time and deadhead miles on customer shipments.
Consequently, it is possible that the Company may fail to meet the needs of its customers or may incur increased expenses.
In November 2015, the FMCSA published its final rule related to driver coercion, which took effect on January 29,
2016. Under this rule, carriers, shippers, receivers, or transportation intermediaries that are found to have coerced drivers to
violate certain FMCSA regulations (including hours-of-service rules) may be fined up to $16,000 for each offense. The
FMCSA and certain legislators have proposed other rules that may be published as early as 2016, including (i) the use of
speed limiting devices on heavy duty trucks to restrict maximum speeds, (ii) the creation of a national clearinghouse so
employers and prospective employers could query to determine if current or prospective drivers have had any drug/alcohol
positives or refusals, and (iii) an increase in the allowable length of twin trailers from 28 feet to 33 feet. If these rules take
effect, they could result in a decrease in fleet production, driver availability, and freight tonnage available to full truckload
carriers, all of which could adversely affect USA Truck’s business or operations.
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For further discussion regarding such laws and regulations, refer to the “Risk Factors” section under Part 1, Item 1A of
this Form 10-K.
Seasonality
In the trucking industry, revenue has historically followed a seasonal pattern for various commodities and customer
businesses. Peak freight demand has historically occurred in the months of September, October and November. After the
December holiday season and during the remaining winter months, freight volumes are typically lower as many customers
reduce shipment levels. Operating expenses have historically been higher in the winter months due primarily to decreased
fuel efficiency, increased cold weather-related maintenance costs of revenue equipment and increased insurance and claims
costs attributed to adverse winter weather conditions. The Company has historically attempted and expects to continue to
attempt to minimize the impact of seasonality through its diverse customer solutions offerings by seeking additional freight
from certain customers during traditionally slower shipping periods and focusing on transporting consumer nondurable
products. Revenue can and may also be impacted by weather, holidays and the number of business days that occur during a
given period, as revenue is directly related to the available working days of shippers.
Available Information
USA Truck was incorporated in Delaware in September 1986 as a wholly owned subsidiary of ABF Freight System,
Inc., and was purchased by management in December 1988. The initial public offering of the Company’s common stock
was completed in March 1992.
The Company’s principal offices are located at 3200 Industrial Park Road, Van Buren, Arkansas 72956, and its
telephone number is (479) 471-2500.
The Company maintains a website where additional information regarding USA Truck’s business and operations may
be found. The website address is www.usa-truck.com. The website provides certain investor information available free of
charge, including the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, stock ownership reports filed under Section 16 of the Exchange Act, and any amendments to such reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The website also includes Interactive Data Files
required to be posted pursuant to Rule 405 of SEC Regulation S-T. Information provided on the Company website is not
incorporated by reference into this Form 10-K, and you should not consider information on our website to be part of this
Form 10-K.
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 USA Truck and other companies that file
electronically with the SEC.
ITEM 1A. RISK FACTORS
The following risks and uncertainties may cause our actual results, business, financial condition and cash flows to
differ from those anticipated in the forward-looking statements included in this Form 10-K. You should not place undue
reliance on forward-looking statements made herein because such statements speak only to the date they were made. We
undertake no obligation or duty to revise or update any forward-looking statements contained herein to reflect subsequent
events or circumstances or the occurrence of unanticipated events. Also refer to the Cautionary Note Regarding Forward-
Looking Statements in Part I of this Form 10-K.
Our business is subject to general 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.
Our industry is highly cyclical, and our business is dependent on a number of factors that may have a material adverse
effect on our results of operations, many of which are beyond our control. Some of the most significant of these factors are
economic changes that affect supply and demand in transportation markets, including recessionary economic cycles, such
as the period from 2007 to 2009, and the uncertainty surrounding such supply and demand in 2016; changes in customers’
inventory levels and in the availability of funding for their working capital; excess tractor capacity in comparison with
shipping demand; and downturns in customers’ business cycles.
We are also affected by recessionary economic cycles, such as the period from 2007 to 2009. Such economic
conditions can decrease freight demand and increase the supply of available tractors and trailers, thereby exerting
downward pressure on rates and equipment utilization and may adversely affect our customers and their ability to pay for
our services. The risks associated with these factors are heightened when the United States economy is weakened. Some of
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the principal risks during such times, that we have experienced during prior recessionary periods, are as follows: reduction
in overall freight levels, which may impair asset utilization; customers facing credit issues and cash flow problems that may
lead to payment delays, increased credit risk, bankruptcies, and other financial hardships that could result in even lower
freight demand and may require us to increase our allowance for doubtful accounts; changing freight patterns as supply
chains are redesigned, resulting in an imbalance between capacity and freight demand; customers bidding our freight or
selecting competitors that offer lower rates from among existing choices in an attempt to lower costs, in which case, we
may be forced to lower rates or lose freight; accepting more freight from brokers, where freight rates are typically lower, or
incurrence of more non-revenue miles to obtain loads; and lack of access to current sources of credit or lack of lender
access to capital, leading to an inability to secure financing on satisfactory terms, or at all.
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 premiums, revenue equipment and related maintenance costs, and healthcare
and other benefits for our employees. We could be affected by strikes or other work stoppages at our service centers or at
customer, port, border, or other shipping locations. Changing impacts of regulatory measures could impair our operating
efficiency and productivity, decrease our operating revenue and profitability, and result in higher operating costs. In
addition, declines in the resale value of revenue equipment can also affect our operating income 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 and profitability.
In addition, we cannot predict future economic conditions, fuel price fluctuations, or how consumer confidence could
be affected by actual or threatened armed conflicts or terrorist attacks, government efforts to combat terrorism, military
action against a foreign state or group located in a foreign state, or heightened security requirements. Enhanced security
measures could impair our operating efficiency and productivity and result in higher operating costs.
We operate in a highly competitive and fragmented industry, and our business may suffer if we are unable to adequately
address downward pricing pressures and other factors that may adversely affect our ability to compete with other
carriers.
Numerous competitive factors could impair our ability to maintain and improve 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.
● Many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced
economic growth, 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 non-asset-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.
Our revolving credit agreement 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 any outstanding indebtedness, which could have an adverse effect on our financial
condition, liquidity, results of operations, and the market price of our common stock.
In February 2015, we entered into a new senior secured revolving credit agreement (the “Credit Facility”) with a
group of lenders and Bank of America, N.A., as agent. Contemporaneously with the funding of the Credit Facility, we paid
off the obligations under our prior credit facility and terminated such facility. We also have other financing arrangements.
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The Credit Facility contains a single springing financial covenant, which requires a consolidated fixed charge
coverage ratio of at least 1.0 to 1.0. The financial covenant springs only in the event excess availability under the Credit
Facility drops below 10% of the lenders’ total commitments under the Credit Facility. The Credit Facility contains certain
restrictions and covenants related to, among other things, dividends, liens, acquisitions and dispositions, affiliate
transactions, and other indebtedness. The Credit Facility is secured by a pledge of substantially all of our assets, with the
notable exclusion of any real estate or revenue equipment financed outside the Credit Facility. The Credit Facility 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 Credit Facility may be accelerated, and the lenders’
commitments may be terminated.
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 or amendments to, or waivers under, the applicable
financing arrangements, existing lenders could cease to make further advances, could declare existing debt to be
immediately due and payable, could fail to renew letters of credit, could impose significant restrictions and requirements on
our operations, could institute foreclosure proceedings against collateralized assets, or could impose significant fees and
transaction costs. If acceleration occurs, it may be difficult or expensive to refinance the accelerated debt or the issuance of
additional equity securities could dilute stock ownership. Even if new financing can be procured, more stringent borrowing
terms could mean that credit is not available to us on acceptable terms. A default under these financing arrangements could
cause a materially adverse effect on the liquidity, financial condition, and results of operations.
We have significant ongoing capital requirements that could adversely affect our profitability if we are unable to
generate sufficient cash from operations, or obtain financing on favorable terms.
The truckload industry is capital intensive, and our policy of operating newer equipment requires us to expend
significant amounts annually. We expect to pay for projected capital expenditures with cash flows from operations,
borrowings under the Credit Facility, proceeds from the sale of used revenue equipment, and, to a lesser extent, capital and
operating leases. We base our equipment purchase and replacement decisions on a number of factors, including new
equipment prices, the used equipment market, demand for freight services, prevailing interest rates, technological
improvements, regulatory changes, cost per mile, fuel efficiency, equipment durability, equipment specifications, and
driver comfort.
In the future, if we are unable to generate sufficient cash from operations or obtain borrowing on favorable terms, we
may be forced to limit our fleet size, enter into less favorable financing arrangements, or operate revenue equipment for
longer periods, any of which could materially and adversely affect profitability.
We self-insure for a significant portion of our claims exposure, which could significantly increase the volatility of, and
decrease the amount of, our earnings.
Our future insurance and claims expense could reduce our earnings and make our earnings more volatile. We self-
insure for a significant portion of our claims exposure and related expenses. We accrue amounts for liabilities based on our
assessment of claims that arise and our insurance coverage for the periods in which the claims arise, and we evaluate and
revise these accruals from time to time based on additional information. 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 estimates are revised or claims ultimately prove to be more severe than originally assessed.
Historically, we have had to adjust our reserves, and future significant adjustments may occur. Further, our self-insured
retention levels could change and result in more volatility than in recent years.
We maintain insurance above the amounts for which we self-insure with licensed insurance carriers. Although we
believe our aggregate insurance limits will be sufficient to cover reasonably expected claims, it is possible that one or more
claims could exceed our aggregate coverage limits. If any claim was to exceed our coverage, we would bear the excess, in
addition to other self-insured amounts. Our insurance and claims expense could increase, or we could find it necessary to
raise our self-insured retention or decrease our aggregate coverage limits when our policies are renewed or replaced. Our
operating results and financial condition may be adversely affected if these expenses increase, if we experience a claim in
excess of our coverage limits, if we experience a claim for which we do not have coverage, if we experience an increase in
the number of claims, or if we have to increase our reserves.
Healthcare legislation and inflationary cost increases also could negatively impact financial results by increasing
annual employee healthcare costs going forward. We cannot presently determine the extent of the impact healthcare costs
will have on our financial performance. In addition, rising healthcare costs could force us to make changes to existing
benefits program, which could negatively impact our ability to attract and retain employees.
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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, weather,
and other factors beyond our control, each of which may lead to an increase in the price of fuel. Fuel pricing is also affected
by regional differences. Additionally, fuel pricing also can be affected by the rising demand in developing countries and
could be adversely impacted by the use of crude oil and oil reserves for other purposes and diminished drilling activity.
Such events may lead not only to increases in fuel prices, but also to fuel shortages and disruptions in the fuel supply chain.
Our operations are dependent upon diesel fuel, and accordingly, significant diesel fuel cost increases, shortages, or supply
disruptions could materially and adversely affect our results of operations and financial condition.
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 enter into hedging contracts, we may be forced to make cash payments under the hedging
arrangements. In addition, in times of falling diesel fuel prices, including recently, our costs will not be reduced to the same
extent they would have reduced had we not entered into the hedging contracts. Accordingly, in times of falling diesel fuel
prices, our profitability may not increase to the extent it would have increased without the hedging contract.
We use a fuel surcharge program to recapture a portion of the increases in fuel prices over a base rate negotiated with
our customers. The 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. A failure to improve our fuel price protection through these
measures, increases in fuel prices, a shortage or rationing of diesel fuel, or significant payments under hedging
arrangements could materially and adversely affect our results of operations.
Fluctuations in the prices of used revenue equipment may adversely affect our earnings and cash flows.
A decreased demand for used revenue equipment could adversely affect us and our 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 is difficult to forecast and, although our equipment disposal schedule may fluctuate, we currently expect
the market demand and gains on disposal in 2016 to be significantly less than the Company experienced in 2015 as we
downsized the fleet and were able to take advantage of a favorable used tractor and trailer markets. 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 we decide to
extend the use of revenue equipment in a depressed market, any of which could have a material adverse effect on our
operating results.
Increased prices, reduced productivity and scarcity of financing for new revenue equipment may adversely affect our
earnings and cash flows.
We are subject to risk with respect to higher prices for new tractors. Prices have increased and may continue to
increase, due in part to government regulations applicable to newly manufactured tractors and diesel engines and the
pricing discretion of equipment manufacturers. In addition, we have recently equipped our tractors with safety,
aerodynamics, and other options that increase the price of new tractors. More restrictive Environmental Protection Agency
emissions standards have required vendors to introduce new engines. Compliance with such regulations has increased the
cost of our new tractors and could impair equipment productivity, lower fuel mileage, and increase operating expenses.
These adverse effects, combined with the uncertainty as to the reliability of the vehicles equipped with the newly designed
diesel engines and the residual values realized from the disposition of these vehicles, could increase our costs or otherwise
adversely affect our business or operations as the regulations become effective.
We have a combination of agreements and non-binding statements of indicative trade values covering the terms of
trade-in commitments from our primary equipment vendors for disposal of a portion of our revenue equipment. From time
to time, prices we expect to receive under these arrangements may be higher than the prices we would receive in the open
market. We may suffer a financial loss upon disposition of our equipment if these vendors refuse or are unable to meet their
financial obligations under these agreements, if we do not enter into definitive agreements consistent with the indicative
trade values, if we fail to or are unable to enter into similar arrangements in the future, or if we do not purchase the number
of replacement units from the vendors required for such trade-ins.
Our indebtedness and capital and operating lease obligations could adversely affect our ability to respond to changes in
our industry or business.
As a result of our level of debt, capital leases, operating leases, and encumbered assets, we believe:
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● our vulnerability to adverse economic conditions and competitive pressures is heightened;
● we will continue to be required to dedicate a substantial portion of our cash flows from operations to lease payments
and repayment of debt, limiting the availability of cash for other purposes;
● our flexibility in planning for, or reacting to, changes in our business and industry will be limited;
● our profitability is sensitive to fluctuations in interest rates because some of our debt obligations are subject to variable
interest rates, and future borrowings and lease financing arrangements will be affected by any such fluctuations;
● our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, or other
purposes may be limited; and
● we may be required to issue additional equity securities to raise funds, which would dilute the ownership position of
our stockholders.
Our financing obligations could negatively impact our future operations, ability to satisfy our capital needs, or ability
to engage in other business activities. We also cannot assure you that additional financing will be available to us when
required or, if available, will be on terms satisfactory to us.
We have a recent history of net losses and may be unsuccessful in maintaining or increasing profitability.
We have generated a profit in two of the last five years. Maintaining and improving profitability depends upon
numerous factors, including the ability to increase average revenue per tractor, increase velocity, improve driver retention,
and control operating expenses. Despite recent results, we may not be able to maintain or increase profitability in the future.
If we are unable to maintain our profitability, then our liquidity, financial position, and results of operations may be
adversely affected.
We may not be successful in implementing new management, operating procedures, and cost savings initiatives as part
of our long-term turnaround plan.
As part of the long-term turnaround plan, we have implemented changes to our management team and structure, as
well as operating procedures. These changes may not be successful or may not achieve the desired results. Additional
training or different personnel may be required, which may result in additional expense, delays in obtaining results, or
disruptions to operations. Some of these implemented changes include customer service and driver management changes
and cost savings initiatives. These changes and initiatives may not improve our results of operations, including asset
productivity, tractor utilization, driver retention and base revenue per mile. In addition, we may not be successful in
achieving the expected savings in our cost structure, including the areas of insurance and claims, equipment maintenance,
equipment operating costs, and fuel economy. In 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. There is no assurance we will be successful in achieving our long-term
turnaround plan and initiatives. If we are unsuccessful in implementing our long-term turnaround plan and initiatives, our
financial condition, results of operations, and cash flows could be adversely affected.
Management and key employee turnover or failure to attract and retain qualified management and other key personnel,
could harm our business, financial condition, and results of operations.
We depend on the leadership and expertise of our executive management team and other key personnel to design and
execute our strategic and operating plans, including our current efforts to grow and improve the profitability of our trucking
and SCS segments. Our management team has experienced significant changes in recent years and may continue to
experience change. Turnover, planned or otherwise, in key leadership positions may adversely impact our ability to manage
our business efficiently and effectively, and such turnover can be disruptive and distracting to management, may lead to
additional departures of existing personnel, and could have a material adverse effect on our operations and future
profitability. We must recruit, develop and retain a core group of managers to realize our goal of expanding our operations,
improving our earnings consistency, and positioning ourselves for long-term operating revenue growth.
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 professional drivers, including independent contractors. The trucking industry periodically
experiences a shortage of qualified drivers, particularly during periods of economic expansion, in which alternative
employment opportunities are more plentiful and freight demand increases, or during periods of economic downturns, in
which unemployment benefits might be extended and financing is limited for independent contractors who seek to purchase
equipment or for students who seek financial aid for driving school. Regulatory requirements, including CSA and hours-of-
service, and an improved economy could further reduce the number of eligible drivers or force us to increase driver
compensation to attract and retain drivers. Due to the shortage of qualified professional drivers and intense competition for
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drivers from other trucking companies, we expect to continue to face difficulty increasing the number of our drivers,
including independent contractors. The compensation we offer our drivers and independent contractors is subject to market
conditions, and, as market conditions change, we may find it necessary to increase driver and independent contractor
compensation in future periods. For example, we implemented a significant increase in driver pay during the second quarter
of 2015.
In addition, we and our industry suffer from a high driver turnover rate. The high driver turnover rate requires us to
continually recruit a substantial number of drivers 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, among other things, adjust our compensation
packages, increase the number of tractors without drivers, or operate with fewer tractors and face difficulty meeting shipper
demands, all of which could adversely affect our growth and profitability.
If our independent contractors are deemed by regulators or judicial process to be employees, our business and results of
operations could be adversely affected.
Tax and other regulatory authorities have asserted that independent contractor drivers in the trucking industry are
employees rather than independent contractors. Federal legislation has been introduced in the past that would make it easier
for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the
recordkeeping requirements for those that engage independent contractor drivers and to increase the penalties for
companies 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, extend the Fair
Labor Standards Act to independent contractors, and impose notice requirements based on employment or independent
contractor status and fines for failure to comply. Some states have put initiatives in place to increase their revenue from
items such as unemployment, workers’ compensation, and income taxes, and a reclassification of independent contractors
as employees would help states with this initiative. Taxing and other regulatory authorities and courts apply a variety of
standards in their determination of independent contractor status. If our independent contractors are determined to be
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 withholdings.
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 or 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. For this business, we do not own or control the transportation assets that deliver our customers’ freight, and do not
employ the people directly involved in delivering the freight. This reliance could also cause delays in reporting certain
events, including recognizing revenue and claims. 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 could significantly limit our ability to serve our customers on competitive terms.
Additionally, if we are unable to secure sufficient equipment or other transportation services to meet our commitments to
our customers or provide services on competitive terms, our operating results could be materially and adversely affected.
Our ability to secure sufficient equipment or other transportation services is affected by many risks beyond our control,
including equipment shortages in the transportation industry, particularly among contracted truckload carriers, interruptions
in service due to labor disputes, changes in regulations impacting transportation, and changes in transportation rates.
We derive a significant portion of our revenues from our major customers, the loss of one or more of which could have
a material adverse effect on our business.
We generate a significant portion of our operating revenue from our major customers. Generally, we do not have
long-term contracts with our major customers. Accordingly, in response to economic conditions, supply and demand in the
industry, our performance, our customers’ internal initiatives, or other factors, our customers may reduce or eliminate their
use of our services, or threaten to do so to gain pricing or other concessions from us.
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 these
customers were to delay or default on payments to us. For some of our customers, we have entered into multi-year
contracts, and the rates we charge may not remain advantageous. 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.
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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 U.S. Department of Transportation (the
“DOT”), in various Canadian provinces pursuant to operating authority granted by the Ministries of Transportation and
Communications, and our Mexican business activities are subject to operating authority granted by Secretaria de
Communicaciones y Transportes. 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, driver safety performance, and hours-
of-service. Matters such as weight, equipment dimensions, and exhaust emissions are also subject to government
regulations. We also may become subject to new or more restrictive regulations relating to exhaust emissions, drivers’
hours-of-service, ergonomics, on-board reporting of operations, collective bargaining, security at ports, speed limiters, 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 we incur, or higher costs incurred by suppliers who pass the costs on to us, could adversely affect our results
of operations.
The CSA program adopted by the FMCSA could adversely affect our profitability and operations, our ability to maintain
or grow our fleet, and our customer relationships.
Under CSA, fleets are evaluated and ranked against their peers based on certain safety-related standards. As a result,
certain current and potential drivers may not be hired to drive for us and our fleet could be ranked poorly as compared to
our peer firms. We recruit and retain first-time drivers to be part of our fleet, and these drivers may have a higher likelihood
of creating adverse safety events under CSA. The occurrence of future deficiencies could affect driver recruitment by
causing high-quality drivers to seek employment with other carriers or could cause our customers to direct their business
away from us and to carriers with higher fleet safety rankings, either of which would adversely affect our results of
operations. Additionally, competition for drivers with favorable safety ratings may increase and thus could necessitate
increases in driver-related compensation costs. Further, we may incur greater than expected expenses in our attempts to
improve our scores or as a result of those scores.
We have exceeded the established intervention thresholds under certain CSA categories. Based on these unfavorable
ratings, we may be prioritized for an intervention action or roadside inspection, or our driver recruiting and retention may
be affected by causing high-quality drivers to seek employment with other carriers, any of which could adversely affect our
results of operations. In addition, customers may be less likely to assign loads to us. We have procedures in place in an
attempt to address areas where we have exceeded the thresholds. However, we cannot assure you these measures will be
effective.
Receipt of an unfavorable DOT safety rating could have a material adverse effect on our operations and profitability.
We currently have a satisfactory DOT rating, which is the highest available rating under the current safety rating
scale. If we were to receive a conditional or unsatisfactory DOT safety rating, it could adversely affect our business as
customer contracts may require a satisfactory DOT safety rating, and a conditional or unsatisfactory rating could negatively
impact or restrict our operations.
The FMCSA also has proposed regulations that would modify the existing rating system and the safety labels assigned to
motor carriers evaluated by the DOT. Under the proposed regulations, the methodology for determining a carrier’s DOT
safety rating would be expanded to include the on-road safety performance of the carrier’s drivers and equipment, as well
as results obtained from investigations. Exceeding certain thresholds based on such performance or results would cause a
carrier to receive an unfit safety rating. If these proposed regulations are enacted and we were to receive an unfit safety
rating, our business would be adversely affected in the same manner as if we received a conditional or unsatisfactory safety
rating under the current regulations.
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 several 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. Additionally, increasing efforts to control emissions of greenhouse gases may
have an adverse effect on us. Federal and state lawmakers are considering a variety of climate-change proposals and new
15
greenhouse gas regulations that could increase the cost of new tractors, impair productivity and increase our operating
expenses. 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 material adverse effect on our business and operating results.
If we cannot effectively manage the challenges associated with doing business internationally, our operating revenue
and profitability may suffer.
A 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 Mexico and Canada, 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.
Litigation may adversely affect our business, financial condition, and results of operations.
Our business is subject to the risk of litigation by employees, independent contractor drivers, customers, vendors,
government agencies, stockholders, and other parties through private actions, class actions, administrative proceedings,
regulatory actions, and other processes. Recently, trucking companies have been subject to lawsuits, including class action
lawsuits, alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal
breaks, rest periods, overtime eligibility, and failure to pay for all hours worked. A number of these lawsuits have resulted
in the payment of substantial settlements or damages by the defendants.
The outcome of litigation, particularly class action lawsuits and regulatory actions, is difficult to assess or quantify,
and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The
cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance
that our coverage limits will be adequate to cover all amounts in dispute. To the extent we experience claims that are
uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause
increases in future premiums, the resulting expenses could have a material adverse effect on our business, results of
operations, financial condition, or cash flows.
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.
We depend on the proper functioning, availability, and security of our information and communication systems,
including financial reporting and operating systems, in operating our business. These systems are protected through
physical and software safeguards, but are still vulnerable to fire, storm, flood, power loss, telecommunications failures,
physical or software break-ins, terrorist attacks, Internet failures, computer viruses, and similar events beyond our control.
If the information or communication systems fail, otherwise become unavailable, or experience a security breach, manually
performing functions 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, to
communicate internally and with drivers, customers, and vendors, and to prepare financial statements accurately or in a
timely manner. Business interruption insurance may be inadequate to protect us in the event of a catastrophe. Any system
failure, upgrade complication, security breach, or other system disruption could interrupt or delay operations, damage our
reputation, impact our ability to manage our operations and report financial performance, and cause the loss of customers,
any of which could have a material adverse effect on existing and future 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 still have a few remaining systems to convert, and could experience
delays, complications, or additional costs, any of which could have a material adverse effect on our business and operating
results. We anticipate the legacy mainframe applications should be completely migrated to newer platforms during 2016.
During 2014, we began to host all of our production systems at a remote data center designed to store and preserve our
data. This data center replicates all production data back to the data center at our headquarters, which protects our
information in the event of a fire or other significant disaster. This redundant data center allows the data related to our
systems to be recovered following an incident. However, recovery of such data may not immediately restore our ability to
utilize our information and communications systems. In the event such systems were significantly damaged, it could take
several days before our systems regain functionality. Additionally, although we attempt to reduce the risk of disruption to
16
our business operations should a disaster occur through redundant computer systems and networks, such as the one
described above, and other backup systems, there can be no assurance that such measures will be effective in restoring lost
data or restoring the functionality of our information and communication systems.
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 operating
revenue, litigation, regulatory action, and reputational damage.
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 make our results of operations more volatile. Consequently, weather and other
seasonal events could adversely affect our operating results.
We face various risks associated with stockholder activists.
Activist stockholders have advocated for certain changes at the Company. Such activist stockholders or potential
stockholders may attempt to gain additional representation on or control of our board of directors, the possibility of which
may create uncertainty regarding our future. These perceived uncertainties may make it more difficult to attract and retain
qualified personnel, raise customer concerns, or cause volatility in the price of our common stock. The presence of such
activist stockholders also may create a significant distraction for our management team and require us to expend significant
time and resources, depending on the nature of the activists’ activities. We have entered into cooperation agreements with
certain activist stockholders, which contain certain restrictions on such stockholders’ ability to vote their shares other than
in accordance with our board of directors’ recommendations and require such stockholders to abide by certain standstill
provisions. However, the restrictions and requirements in these cooperation agreements are scheduled to end on the date
that is 10 days prior to the expiration of the advance notice period for stockholder nomination of directors at our 2017
annual meeting of stockholders. We cannot assure you that we will be able to agree to terms for similar agreements with
any other activist stockholders that might acquire an interest in our Company.
A potential proxy contest would be disruptive to our operations and cause it to incur substantial costs. The U.S.
Securities and Exchange Commission has proposed to give stockholders the ability to include their director nominees and
their proposals relating to a stockholder nomination process in our proxy materials, which would make it easier for activists
to nominate directors to our board of directors. The Commission’s proposed rule was struck down by a federal court in
2011. However, in recent years, many public companies have received, and in some instances adopted, stockholder
proposals allowing certain stockholders the ability to nominate directors to such company’s board of directors, and we may
receive similar stockholder proposals. Future stockholder proposals, proxy contests and the presence of additional activist
stockholder nominees on our board of directors could interfere with our ability to execute our long-term turnaround plan
and other strategic initiatives, be costly and time-consuming, disrupt our operations, and divert the attention of our
management and employees.
Additionally, we could be subjected to activist stockholder lawsuits. Such lawsuits are time-consuming and could
require us to incur substantial legal fees and proxy costs in defending our position. Among other things, such lawsuits
divert management's time and attention from operations and can also cause distractions among our employees.
Certain provisions of our corporate documents and Delaware law 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.
Provisions in our Restated and Amended Certificate of Incorporation (“Certificate of Incorporation”) may discourage,
delay, or prevent a change of control or changes in our board of directors or management that our stockholders may
consider favorable. For example, our Certificate of Incorporation authorizes the board of directors to issue up to 1,000,000
shares of “blank check” preferred stock. Without stockholder approval, our board of directors has the authority to attach
special rights, including voting and dividend rights, to this preferred stock, which could make it more difficult for a third
party to acquire the Company. Our Certificate of Incorporation also provides:
17
●
●
●
●
●
●
for a classified board of directors, whereby directors serve for three-year terms, with approximately one-third of the
directors coming up for re-election each year, making it more difficult for a third party to obtain control of the board of
directors through a proxy contest;
that vacancies on the board of directors may be filled only by the remaining directors in office, even if only one
director remains in office;
that directors may only be removed for “cause” and only by the affirmative vote of the holders of at least a majority of
our outstanding common stock;
that the affirmative vote of the holders of at least 66 2/3% of the voting power of our outstanding common stock is
required to approve any merger or consolidation with any other business entity that requires approval of the
stockholders;
that stockholders can only act by written consent if such consent is signed by the holders of at least 66 2/3% of our
outstanding common stock; and
that each of the provisions set forth above may only be amended by the holders of at least 66 2/3% of our outstanding
common stock.
Our Amended and Restated Bylaws also require advance notice of all stockholder proposals, including nominations
for election as director, and provide that a special meeting of stockholders may be called only by the Chairman of the
Board, the Chief Executive Officer, the President, or by a majority of the board of directors. We have in the past adopted a
stockholder rights plan, which was voluntarily terminated by the board of directors in April 2014, and may in the future
adopt new stockholder rights plans. We are also subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law. Under these provisions, if anyone becomes an “interested stockholder,” we may not enter into a
“business combination” with that person for three years without special approval, which could discourage a third party
from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203, “interested
stockholder” means, generally, someone owning 15% or more of our outstanding voting stock or an affiliate of ours that
owned 15% or more of the outstanding voting stock during the past three years, subject to certain exceptions as described
in Section 203. These provisions will apply even if the change may be considered beneficial by some of our stockholders,
and thereby negatively affect the price that investors might be willing to pay in the future for our common stock. In
addition, to the extent that these provisions discourage an acquisition of our Company or other change of control
transaction, they could deprive stockholders of opportunities to realize takeover premiums for their shares of our common
stock.
Knight Transportation, Inc.’s unsolicited takeover proposal was, and any future unsolicited offers may be, disruptive to
our business.
In September 2013, Knight Transportation, Inc. (“Knight”) announced its unsolicited takeover proposal for our
outstanding common stock. Responding to Knight’s unsolicited proposal, exploring the availability of alternative
transactions that reflected our full intrinsic value and instituting legal action in connection with Knight’s tender offer
created a significant distraction for our management team and required us to expend significant time and resources, and any
future unsolicited proposals may lead to similar disruptions. Such proposals may disrupt our business by causing
uncertainty among current and potential employees, suppliers, and customers, which could negatively impact our financial
condition, results of operations and strategic initiatives and cause volatility in our stock price. These consequences, alone or
in combination, may have a material adverse effect on our business. Additionally, we have entered into a change of
control/severance plan with certain of our officers and members of our management team. The participants of the change of
control arrangements may be entitled to severance payments and benefits upon a termination of their employment by us
without cause or by them for good reason in connection with a change of control of the Company (each as defined in the
applicable plan). The change of control arrangements may not be adequate to allow us to retain critical employees during a
time when a change of control is being proposed or is imminent.
Item 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved written SEC staff comments regarding the Company’s 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 Form 10-K
relates.
Item 2.
PROPERTIES
USA Truck’s 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. The headquarters 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 are currently leased to
a third party.
18
The Company’s network consists of 20 facilities, which includes SCS offices and one terminal facility in Laredo,
Texas, which is one of the largest inland freight gateway cities between the United States and Mexico, operated by a wholly
owned subsidiary, International Freight Services, Inc. The Company is actively seeking locations for additional facilities as
the Company expands its SCS footprint. As of December 31, 2015, the Company’s active facilities were located in or near
the following cities:
Trucking facilities:
Van Buren, Arkansas
West Memphis, Arkansas
Atlanta, Georgia
Chicago, Illinois
Vandalia, Ohio
Spartanburg, South Carolina
Laredo, Texas
SCS facilities:
Springdale, Arkansas
Van Buren, Arkansas
Roseville, California
Los Angeles, California
Jacksonville, Florida
Atlanta, Georgia
Oak Brook, Illinois
Kansas City, Kansas
Buffalo, New York
Addison, Texas
El Paso, Texas
Salt Lake City, Utah
Seattle, Washington
Administrative facilities:
Burns Harbor, Indiana
Shop
Driver
Facilities
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
No
No
No
No
No
No
No
No
No
No
No
No
Fuel
No (1)
No (1)
No
No
No (1)
No
No
No
No (1)
No
No
No
No
No
No
No
No
No
No
No
No
Dispatch
Office
Yes
Yes
Yes
No
No
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Own or
Lease
Own
Own/Lease (2)
Lease
Lease
Own
Own
Own/Lease (3)
Lease
Own
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
Lease
(1) Infrastructure is in place, but not currently utilized.
(2) USA Truck, Inc. owns the terminal facility and holds an easement relating to less than one acre.
(3) USA Truck, Inc. owns the terminal facility and leases an adjacent four acres for tractor and trailer parking.
Item 3.
LEGAL PROCEEDINGS
USA Truck 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 in a quarter or annual reporting period.
Item 4. MINE SAFETY DISCLOSURES
None.
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
USA Truck’s 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 the Company’s common stock as
reported by the NASDAQ Global Select Market.
19
Quarter Ended:
March 31
June 30
September 30
December 31
2015
2014
High
Low
High
Low
$
32.14 $
29.08
24.29
21.32
25.01 $
21.19
16.33
15.99
15.77 $
19.57
19.50
28.70
11.95
14.67
16.59
13.90
As of February 12, 2016, there were 181 holders of record (including brokerage firms and other nominees) of USA
Truck common stock. On February 12, 2016, the closing price per share of USA Truck common stock on the NASDAQ
Global Select Market was $16.11.
Dividend Policy
The Company has not paid any dividends on its common stock to date, and does not anticipate paying any dividends at
the present time. The Company currently intends to retain all of its earnings, if any, for use in the expansion and
development of its business and reduction of debt. The Company’s Credit Facility places restrictions on its ability to pay
dividends. Future payments of dividends will depend upon the Company’s financial condition, results of operations, capital
commitments, restrictions under then-existing agreements, and other factors the Company deems relevant.
Equity Compensation Plan Information
For information on USA Truck’s equity compensation plans, please refer to Item 12 of Part III of this Form 10-K.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information, as of December 31, 2015, with respect to the Company’s
compensation plans and other arrangements under which shares of common stock are authorized for issuance.
Plan Category
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)
Equity Compensation Plans Approved by Security Holders
Equity Compensation Plans Not Approved by Security Holders
Total
15,610 (1) $
--
15,610
$
5.40 (2)
--
5.40
Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c)
364,235 (3)
--
364,235
(1) Includes only common stock subject to outstanding stock options and does not include: (i) 25,052 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) 85,889 unvested shares of restricted stock, which will vest
in annual increments, and which do not require the payment of exercise prices. These 110,941 shares exclude 4,376
shares from layers 6-7 of performance based restricted stock which have been deemed forfeited in prior years. Such
forfeitures will become effective in varying amounts in April of 2015 through 2017.
(2) Excludes shares of restricted stock, which do not require the payment of exercise prices.
(3) The 364,235 shares that remain available for future grants may be granted as stock options under our 2014 Omnibus
Incentive Plan, or alternatively, be issued as restricted stock, stock units, performance shares, performance units or
other incentives payable in cash or stock.
20
Repurchase of Equity Securities
The table below sets forth the information with respect to purchases of the Company’s common stock made by or on
behalf of USA Truck during the quarter ended December 31, 2015:
(c) Total
Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
(d) Maximum
Number of
Common Shares
that May Yet Be
Purchased
Under the
Publicly
Announced
Plans or
Programs
(a) Total
Number of
Shares
Purchased
(b) Weighted
Average Price
Paid per Share
216,023 $
--
239,300 $
48 $
252,436 $
--
707,807 $
18.85
--
19.12
19.92
18.16
--
18.69
216,023
--
239,300
--
252,436
--
707,759
537,998
--
298,698
--
46,262
--
46,262
Period
October 1-31, 2015
Repurchase Program (1)
Other Transactions (2)
November 1-30, 2015
Repurchase Program (1)
Other Transactions (2)
December 1-31, 2015
Repurchase Program (1)
Other Transactions (2)
Total
(1) In July 2015, the Company’s Board of Directors authorized the repurchase of up to 1,000,000 shares of the
Company’s common stock over a three-year period ending July 28, 2018. Share repurchases, if any, will be made
using a variety of methods, which may include open market purchases, privately negotiated transactions or block
trades, or any combination of such methods, in accordance with applicable insider trading and other securities laws
and regulations. During the quarter ended December 31, 2015, the Company repurchased a total of 707,759 shares at
a weighted average price of $18.69 per share for an aggregate cost of approximately $13.2 million. As of December
31, 2015, 953,738 shares were repurchased and on January 8, 2016, the Company had repurchased the full million
shares of common stock included in the repurchase program authorized in 2015.
(2) Shares of common stock withheld to offset tax withholding obligations that occurred upon vesting and release of
restricted shares. The withholding of shares was permitted under the applicable award agreements and was not part
of any stock repurchase plan.
Item 6.
SELECTED FINANCIAL DATA
Change in Accounting Principles
During 2015, the Company changed its accounting policy for tires. Prior to this change, the cost of the replacement
tires placed in service was reported as prepaid tires and amortized based on estimated usage of the tires. Under the new
policy, the cost of tires mounted on purchased revenue equipment is capitalized as part of the total equipment cost and is
depreciated over the useful life of the related equipment. Subsequent replacement tires are expensed at the time those tires
are placed in service. Management believes this new policy is preferable under the circumstances because it provides a
more precise method for recognizing expenses related to tires consistent with industry practice. Comparative financial
statements for all prior periods have been recast to apply the new policy retrospectively, and are reflected under columns
marked “Recast”.
During November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which
simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be
classified as noncurrent in a statement of financial position. The Company has early adopted ASU 2015-17 effective
December 31, 2015 on a retrospective basis. Adoption of this ASU resulted in a reclassification of the Company’s net
current deferred tax asset as an offset to the net noncurrent deferred tax liability in its Consolidated Balance Sheet as of
December 31, 2014. The reclassification resulted in a $7.7 million decrease in the current deferred income tax asset and the
long-term noncurrent deferred income tax liability. Comparative financial statements for all prior periods have been recast
to apply the new policy retrospectively, and are reflected under columns marked “Recast”.
21
Selected Financial Data
The following selected financial data should be read in conjunction with “Management's Discussion and Analysis of
Financial Condition and Results of Operations,” under Part II, Item 7 of this Form 10-K and the consolidated financial
statements and accompanying footnotes under Part II, Item 8 of this Form 10-K (dollar amounts in thousands).
2015
Year Ended December 31,
2013
(Recast)
2014
(Recast)
2012
(Recast)
2011
(Recast)
Consolidated statement of operations data:
Operating revenue
Operating income (loss)
Net income (loss)
Diluted earnings (loss) per share
Consolidated balance sheet data:
Cash and cash equivalents
Total assets
Long-term debt, capital leases and note
payable, including current portion
Stockholders’ equity
Total debt, less cash, to total capitalization
ratio
Other financial data:
$
$
507,934
23,071
11,069
1.06
602,477 $
17,653
6,285
0.60
555,005 $ 512,428 $
(23,446)
(10,101)
(17,778)
(9,993)
(1.72)
(0.97)
519,408
(13,565)
(11,341)
(1.10)
$
87
286,456
$
205 $
303,944
14 $
301,552
1,742 $
322,321
2,659
327,191
101,435
93,777
117,512
99,068
128,891
92,397
138,285
102,172
119,443
119,821
51.9%
54.2%
58.2%
56.8%
48.8%
Adjusted operating ratio (1) (unaudited)
94.3%
96.4%
100.9%
105.7%
103.3%
(1) Non-GAAP Financial Measure Reconciliation – Unaudited
The Company reports certain financial measures that are not prescribed or authorized by U.S. generally accepted
accounting principles (“GAAP”). Management’s reasons for reporting these non-GAAP measures are provided below, and
the accompanying tables reconcile the most directly comparable GAAP measures to the non-GAAP measures.
USA Truck uses the term “adjusted operating ratio” throughout this Form 10-K. Adjusted operating ratio, as defined
here, is a non-GAAP financial measure, as defined by the SEC. Management uses adjusted operating ratio as a supplement
to the Company’s GAAP results in evaluating certain aspects of its business, as described below.
Adjusted operating ratio is calculated as operating expenses less unusual items, net of fuel surcharges, as a percentage
of operating revenue excluding fuel surcharge revenue.
USA Truck’s Board of Directors and chief operating decision-makers also focus on adjusted operating ratio as an
indicator of the Company’s performance from period to period. Management believes fuel surcharge can be volatile and
eliminating the impact of this source of revenue (by netting fuel surcharge revenue against fuel expense) affords a more
consistent basis for comparing results of operations.
Management believes its presentation of adjusted operating ratio is useful because it provides investors and securities
analysts the same information that the Company uses internally for purposes of assessing its core operating performance.
Adjusted operating ratio is not a substitute for operating margin or any other measure derived solely from GAAP
measures. There are limitations to using non-GAAP measures such as adjusted operating ratio. Although management
believes that adjusted operating ratio can make an evaluation of the Company’s operating performance more consistent
because it removes items that, in management’s opinion, do not reflect its core operating performance, other companies in
the transportation industry may define adjusted operating ratio differently. As a result, it may be difficult to use adjusted
operating ratio or similarly named non-GAAP measures that other companies may use to compare the performance of those
companies to USA Truck’s performance.
Consolidated Reconciliations
Pursuant to the requirements of Regulation G, reconciliations of non-GAAP financial measures to GAAP financial
measures have been provided in the table below for operating ratio (dollar amounts in thousands):
22
Operating revenue
Less:
Fuel surcharge revenue
Base revenue
Operating expense
Adjusted for:
Long-term claims liability reserve adjustment
(1)
Restructuring, severance and related charges (2)
Fuel surcharge revenue
$
Adjusted operating expense
Operating ratio
Adjusted operating ratio
Segment Reconciliations
Trucking Segment
Revenue
Less: intersegment eliminations
Operating revenue
Less: fuel surcharge revenue
Base revenue
Operating expense
Adjusted for:
2015
Year Ended December 31,
2013
(Recast)
2014
(Recast)
2012
(Recast)
555,005 $ 512,428 $
2011
(Recast)
519,408
$
507,934
$
602,477 $
58,981
448,953
484,863
108,133
494,344
584,824
111,150
443,855
565,106
103,709
408,719
535,874
108,382
411,026
532,973
--
(2,742)
(58,981)
423,140
$
95.5%
94.3%
--
--
(108,133)
476,691 $
97.1%
96.4%
--
(5,970)
--
--
(111,150)
(103,709)
447,986 $ 432,165 $
104.6%
105.7%
101.8%
100.9%
--
--
(108,382)
424,591
102.6%
103.3%
2015
Year Ended
December 31,
2014
(Recast)
$
$
$
356,528
2,048
354,480
46,799
307,681
343,392
$
$
$
424,082 $
587
423,495
87,198
336,297 $
426,617 $
2013
(Recast)
418,601
486
418,115
91,840
326,275
437,216
Long-term claims liability reserve
adjustment (1)
Restructuring, severance and related charges
(2)
Fuel surcharge revenue
Adjusted operating expense
$
Operating ratio
Adjusted operating ratio
SCS Segment
Revenue
Less: intersegment eliminations
Operating revenue
Less: fuel surcharge revenue
Base revenue
Operating expense
Adjusted for:
Fuel surcharge revenue
Adjusted operating expense
Operating ratio
Adjusted operating ratio
--
--
(5,970)
(2,742)
(46,799)
293,851
$
96.9%
95.5%
--
(87,198)
339,419 $
100.7%
100.9%
--
(91,840)
339,406
104.6%
104.0%
Year Ended
December 31,
2014
2015
2013
158,295
4,841
153,454
12,182
141,272
141,471
$
$
$
(12,182)
$
129,289
92.2%
91.5%
192,924 $
13,942
178,982
20,935
158,047 $
158,207 $
(20,935)
137,272 $
88.4%
86.9%
146,492
9,602
136,890
19,310
117,580
127,890
(19,310)
108,580
93.4%
92.3%
$
$
$
$
(1) During 2013, management conducted an in-depth review of its long-term claims liability and engaged a third party
actuary and recorded an increase of $6.0 million to its long-term claims liability.
(2) During 2015, the Company recognized $2.7 million in restructuring, severance and related charges relating to the
termination of employment of certain executives and the closure of two maintenance facilities. See “Item 8.
Financial Statements and Supplementary Data – Note 14: Restructuring, severance and related charges” in this Form
10-K for further discussion.
23
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read
together with the Business section in Part 1, Item 1, as well as the consolidated financial statements and accompanying
footnotes in Part II, Item 8, of this Form 10-K. This discussion contains forward-looking statements as a result of many
factors, including those set forth under Part I, Item 1A. “Risk Factors,” Part I “Cautionary Note Regarding Forward
Looking Statements,” and elsewhere in this report. These statements are based on current expectations and assumptions that
are subject to risks and uncertainties. Actual results could differ materially from those discussed herein. MD&A
summarizes the financial statements from management’s perspective with respect to the Company’s financial condition,
results of operations, liquidity and other factors that may affect actual results.
The MD&A is organized in the following sections:
● Overview
● Results of Operations
● Liquidity and Capital Resources
● Contractual Obligations and Commitments
● Off-Balance Sheet Arrangements
● Critical Accounting Policies
Overview
USA Truck offers a broad range of truckload and logistics services to a diversified customer base that spans a variety
of industries. The Company has two reportable segments: (i) trucking, consisting of one-way truckload services, in which
volumes typically are not contractually committed, and dedicated contract services, in which a combination of equipment
and drivers is contractually committed to a particular customer, typically for a duration of at least one year, and (ii) SCS,
consisting of freight brokerage and rail intermodal service offerings, in which the Company retains control of the customer
relationship and contract for the use of a third party’s transportation assets. The trucking segment provides truckload
transportation, including dedicated services, of various products, goods, and materials. The Company’s SCS service
offering matches customer shipments with available equipment of authorized carriers and provides services that
complement the Company’s trucking operations. SCS provides these services primarily to existing trucking customers,
many of whom prefer to rely on a single carrier, or a small group of carriers, to provide all their transportation solutions.
Revenue for the Company’s trucking segment is substantially generated by transporting freight for customers, and is
predominantly affected by the rates per mile received from customers, the number of tractors in operation, and the number
of revenue generating miles per tractor. USA Truck enhances its trucking operating revenue by charging for fuel surcharge,
stop-off pay, loading and unloading activities, tractor and trailer detention and other ancillary services.
Operating expenses that have a major impact on the profitability of the trucking segment are primarily the variable
costs or mostly variable costs of transporting freight for customers. These costs include driver salaries and benefits, fuel
and fuel taxes, payments to independent contractors, operating and maintenance expense and insurance and claims. In
addition, the fixed or mostly fixed costs associated with non-driving personnel, terminal infrastructure, and depreciation,
interest, rent, and gain or loss on disposition of revenue equipment, can significantly affect the Company’s margins to the
extent revenue from this segment is spread over more or less fixed cost burden.
To mitigate exposure to fuel price increases, the Company recovers from its customers additional fuel surcharges that
generally recoup a majority of the increased fuel costs; however, the Company cannot assure the recovery levels
experienced in the past will continue in future periods. Although its fuel surcharge program mitigates some exposure to
rising fuel costs, the Company continues to have exposure to increasing fuel costs related to empty miles, fuel inefficiency
due to engine idle time, and other factors, including the extent to which the surcharge paid by the customer is insufficient to
compensate for fuel expense, particularly in times of rapidly increasing fuel prices. The main factors that affect fuel
surcharge revenue are the price of diesel fuel and the number of loaded miles. The fuel surcharge is billed on a lagging
basis, meaning the Company typically bills customers in the current week based on the previous week’s applicable United
States Department of Energy, or DOE, index. Therefore, in times of increasing fuel prices, the Company does not recover
as much as it is currently paying for fuel. In periods of declining prices, the opposite is true.
The key statistics used to evaluate trucking revenue, net of fuel surcharge, are (i) base trucking revenue per seated
tractor per week (ii) average miles per seated tractor per week, (iii) average base revenue per loaded mile, (iv) deadhead
percentage, (v) average loaded miles per trip and (vi) average number of seated tractors. In general, the Company’s average
miles per tractor per week, rate per mile, and deadhead percentage are affected by industry-wide freight volumes, industry-
24
wide trucking capacity and the competitive environment, which factors are beyond the Company’s control, as well as by its
service levels and efficiency of its operations, over which the Company has significant control.
The SCS segment provides services that complement trucking services, primarily to existing customers of the trucking
segment. Unlike the trucking segment, the SCS segment is non asset based and is instead dependent upon qualified
employees, information systems and qualified third-party capacity providers. The largest expense related to the SCS
segment is purchased transportation expense. Other operating expenses consist primarily of salaries, wages and benefits.
The Company evaluates the SCS segment’s financial performance by reviewing the gross margin percentage (revenue less
purchased transportation expenses expressed as a percentage of revenue) and the operating income percentage. The gross
margin can be impacted by fluctuations in freight volumes and industry-wide trucking capacity. SCS often achieves better
gross margins during periods of imbalance between supply and demand than times of balanced supply and demand,
although periods of transition to tight capacity also can compress margins. In addition, SCS operating income percentage is
impacted by gross margin and by the amount of revenue we are able to spread across our personnel and technology costs.
USA Truck generated earnings per share, or EPS, of $1.06 per diluted share for the year ended December 31, 2015,
compared to $0.60 per diluted share in 2014. The growth in EPS was driven primarily by improvements in the Company’s
trucking operating segment, where an improvement of $14.2 million in operating income more than offset an $8.8 million
reduction in operating income in the Company’s SCS segment. The trucking segment adjusted operating ratio decreased
540 basis points to 95.5% in 2015, compared to 100.9% in 2014. This was primarily due to the strategy to decrease the fleet
during 2015, by a net 417 tractors as the Company focused on its network, customer profitability and reduce its unseated
tractors in its trucking segment . This reduction in tractors enabled the Company to sell high cost tractors and trailers,
which generated $6.4 million or 210 basis points improvement in adjusted operating ratio. The other main factors that
contributed to higher operating income in the Company’s trucking segment were: lower diesel fuel prices, higher base
revenue per loaded mile, and cost control initiatives. The main factor that contributed to lower operating income in the
Company’s SCS segment was lower revenue per SCS employee in 2015, compared with 2014, as a result of the
extraordinary imbalance of freight demand in excess of trucking capacity experienced in 2014 returning to more
normalized levels in 2015.
Moving forward, the Company’s goals are to grow revenues, improve asset utilization, and strive for additional cost
and process improvements. By focusing on these areas, management believes it will make progress on its goals of
improving the Company’s return on invested capital and stockholder value.
Results of Operations
The following tables summarize the consolidated statements of operations (dollar amounts in thousands) and
percentage of consolidated operating revenue and the percentage increase or decrease in the dollar amounts of those items
compared to the prior year.
2015
%
Operating
Revenue
% Base
Revenue
(3)
$
$
2014
%
Operating
Revenue
(Recast)
% Base
Revenue
(3)
$ 448,953
58,981
$ 507,934
88.4%
11.6
100.0%
$ 494,344
108,133
$ 602,477
82.1%
17.9
100.0%
%
Change
in
Dollar
Amounts
(9.2)%
(45.5)
(15.7)
484,863
23,071
95.5%
4.5
94.3% 584,824
5.7 17,653
97.1%
2.9
96.4%
3.6
(17.1)%
30.7
Base revenue
Fuel surcharge revenue
Operating revenue
Operating expenses
Operating income
Other expenses:
Interest expense
Defense costs (1)
Loss on extinguishment of debt (2)
Other, net
Total other expenses, net
Income before income taxes
Income tax expense
2,237
--
750
743
3,730
19,341
8,272
0.4
--
0.2
0.1
0.7
3.8
1.6
3,008
0.5
2,764
--
--
0.2
245
0.1
0.8
6,017
4.9 11,636
5,351
1.8
0.5
0.5
--
--
1.0
1.9
0.9
0.6
0.6
--
--
1.2
2.4
1.1
(25.6)
(100.0)
100.0
203.3
(38.0)
66.2
54.6
Net income
$ 11,069
2.2%
3.1% $
6,285
1.0%
1.3%
76.1%
25
% Base
Revenue
(3)
$
2013
%
Operating
Revenue
%
Change
in
% Base
Revenue(3)
Dollar
Amounts
$
2014
%
Operating
Revenue
(Recast)
$494,344
108,133
$602,477
82.1%
17.9
100.0%
$443,855
111,150
$555,005
(Recast)
80.0%
20.0
100.0%
11.4%
(2.7)
8.6
584,824
17,653
97.1%
2.9
96.4% 565,106
3.6 (10,101)
101.8%
(1.8)
100.9%
(0.9)
3.5%
274.8
Base revenue
Fuel surcharge revenue
Operating revenue
Operating expenses
Operating income
Other expenses:
Interest expense
Defense costs (1)
Other, net
Total other expenses, net
Income (loss) before income taxes
Income tax expense (benefit)
3,008
2,764
245
6,017
11,636
5,351
0.5
0.5
--
1.0
1.9
0.9
3,662
0.6
1,480
0.6
(711)
--
1.2
4,431
2.4 (14,532)
(4,539)
1.1
0.7
0.2
(0.1)
0.8
(2.6)
(0.8)
0.8
0.3
(0.2)
0.9
(1.8)
(0.9)
(17.9)
86.8
134.5
35.8
180.1
217.9
Net income
$
6,285
1.0%
1.3%
(9,993)
(1.8)%
(0.9)%
162.9%
(1) Defense costs are the legal and related costs incurred in connection with the unsolicited proposal from another
trucking Company to acquire USA Truck and related litigation and activists costs, pretax.
(2) Loss on extinguishment of debt represents the write-off of the deferred financing fees associated with the previous
revolving credit facility.
(3) The percent of base revenue calculation for operating expenses is calculated as operating expenses, net of fuel
surcharges and unusual items, as a percent of operating revenue excluding fuel surcharge revenue. This presentation
adjusts the unusual items associated with the claims reserve liability adjustment of $6.0 million in 2013 and the
restructuring, severance and related charges of $2.7 million in 2015.
Results of Operations—Segment Review
Trucking:
Operating revenue (in thousands)
Operating income (loss) (in thousands) (1)
Adjusted operating ratio (2)
Total miles (in thousands) (3)
Deadhead percentage (4)
Base revenue per loaded mile
Average number of in-service tractors (5)
Average number of seated tractors (6)
Average miles per seated tractor per week
Base revenue per seated tractor per week
Average loaded miles per trip
Strategic Capacity Solutions:
Operating revenue (in thousands)
Operating income (in thousands) (1)
Gross margin (7)
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
354,480
11,088
$
95.5%
186,686
12.6%
1.885
1,970
1,824
1,963
3,235
582
$
423,495 $
(3,122)
100.9%
215,479
12.7%
1.788
2,202
2,047
2,019
3,151 $
612
418,115
(19,101)
104.0%
223,923
11.8%
1.654
2,232
2,119
2,027
2,957
599
153,454
11,983
$
18.0%
178,982 $
20,775
17.7%
136,890
9,000
14.2%
$
$
$
(1) Operating income or loss is calculated by deducting operating expenses from operating revenue.
(2) Trucking segment adjusted operating ratio (non-GAAP) presented as if fuel surcharges and unusual items are
excluded from operating revenue and instead reported as a reduction of operating expenses, excluding intersegment
activity. Pursuant to the requirements of Regulation G, reconciliations of non-GAAP financial measures to GAAP
financial measures have been provided in Part 1, Item 6. Selected Financial Data in this Form 10-K.
(3) Total miles include both loaded and empty miles.
26
(4) Deadhead percentage is calculated by dividing empty miles into total miles.
(5) Tractors include company-operated tractors in service, plus tractors operated by independent contractors.
(6) Seated tractors are those occupied by drivers.
(7) Gross margin is calculated by taking revenue less purchased transportation expense and dividing that amount by
revenue. This calculation includes intercompany revenue and expenses and fuel surcharge revenue.
Trucking operating revenue
During 2015, the Company completed its plan to downsize its tractor fleet by approximately 400 tractors to help focus
on its network, customer profitability and reduce its unseated tractors in its trucking segment. This plan contributed to an
8.5% decrease in base revenue due to 10.9% less seated tractors which generated 13.2% lower loaded miles partially offset
by a 2.7% increase in average base revenue per tractor per week. Fuel surcharge revenue was down primarily due to the
lower loaded miles as well as the 30.4% lower DOE average price of diesel fuel throughout 2015. Management believes
that the tractor fleet hit its lowest level during the third quarter of 2015 and will continue to focus on improving the utility
of the trucks throughout 2016 before adding additional tractors into the fleet.
During 2014, the increases in trucking’s operating revenue were primarily the result of a 6.7% increase in the trucking
base revenue per seated tractor per week, driven by a 8.3% increase in trucking base revenue per loaded mile. The increase
in trucking operating revenue was partially offset by a decrease of 72 seated tractors in 2014, compared to 2013.
Trucking operating income (loss)
The improvement in trucking operating income was driven primarily by a $6.4 million increase in gain on sale of
equipment (210 basis point improvement in adjusted operating ratio) associated with the plan to downsize the tractor fleet
in 2015. This reduction of the high cost tractors in the fleet has positioned the Company with a tractor fleet age of 26.5
months and management believes it will be able to continue to improve its recruiting of experienced drivers and
maintenance expense during 2016. Additionally, improvements in pricing (540 basis point improvement in base revenue
per loaded mile) and fuel expense were partially offset by a 3.9% increase in driver wages during 2015.
During 2014, the improvement in operating ratio and adjusted operating ratio was primarily driven by the increase in
average base revenue per loaded mile noted above, a continued focus on controlling costs, and a 7.6% improvement in the
fuel economy (measured by miles per gallon) in Company tractors due to specific ongoing initiatives targeted at improving
fuel efficiency, as well as the addition of more fuel efficient tractors to the Company’s fleet. Additionally, overall lower
fuel pricing during 2014 yielded savings for the Company of approximately $5.8 million, compared to the year ended
December 31, 2013.
SCS operating revenue
Decreases in operating revenue resulted primarily from 1.0% lower load volumes and lower pricing, both of which
were directly related to the softened spot market experienced during 2015. Total revenue per employee decreased 25.1%
during 2015, primarily due to the expansion of two new offices in 2015, resulting in a 14.4% increase in headcount to
support the anticipated growth of this segment as well as higher transportation costs charged by carriers.
Increased revenues during 2014 were primarily related to an approximate 10% increase in load volumes, and a 30.2%
increase in operating revenue per SCS employee over the levels experienced in 2013. All were directly related to the
capacity constraints brought on by challenging weather conditions and driver shortages.
SCS operating income
Decreases in SCS operating income resulted from headcount continuing to exceed the revenue base, as revenue growth
was dampened as a result of the softer freight market. Accordingly, gross profit per employee decreased 26.8%, compared
to the same period in 2014. The opposite occurred in 2014, compared to 2013, when gross profit per SCS employee grew
63.1% in a robust market.
Consolidated Operating Expenses
The following table summarizes the consolidated operating expenses (dollar amounts in thousands) and percentage
of consolidated operating revenue, consolidated base revenue and the percentage increase or decrease in the dollar
amounts of those items compared to the prior year.
27
2015
%
Operating
Revenue
% Base
Revenue
(1)
$
$
2014
%
Operating
Revenue
(Recast)
% Base
Revenue
(1)
%
Change
2015 to
2014
Operating Expenses:
Salaries, wages and employee
benefits
Fuel and fuel taxes
Depreciation and amortization
Insurance and claims
Equipment rents
Operations and maintenance
Purchased transportation
Operating taxes and licenses
Communications and utilities
Gain on sale of assets
Restructuring, severance and related
charges
Other
Total operating expenses
$ 140,649
58,511
37,480
21,183
4,424
39,644
161,370
5,720
3,599
(7,547)
2,742
17,088
$ 484,863
27.7%
11.5
7.4
4.2
0.9
7.8
31.8
1.1
0.7
(1.5)
0.5
3.4
95.5%
31.3% $ 153,410
116,092
13.0
44,071
8.3
24,910
4.7
3,089
1.0
45,634
8.8
172,117
35.9
5,589
1.3
4,062
0.8
(1,107)
(1.7)
--
0.6
16,957
3.8
94.3% $ 584,824
25.5 %
19.3
7.3
4.1
0.5
7.6
28.6
0.9
0.7
(0.2 )
--
2.8
97.1 %
31.0%
23.5
8.9
5.0
0.6
9.2
34.8
1.1
0.8
(0.2)
--
3.4
96.4%
(8.3)%
(49.6)
(15.0)
(15.0)
43.2
(13.1)
(6.2)
2.3
(11.4)
581.8
100.0
0.8
(17.1)%
%
Change
2014
%
Operating
Revenue
(Recast)
$
% Base
Revenue
(1)
$
2013
%
Operating
Revenue
(Recast)
% Base
Revenue
(1)
2014 to
2013
Operating Expenses:
Salaries, wages and employee
benefits
Fuel and fuel taxes
Depreciation and amortization
Insurance and claims
Equipment rents
Operations and maintenance
Purchased transportation
Operating taxes and licenses
Communications and utilities
Gain on sale of assets
Other
Total operating expenses
$ 153,410
116,092
44,071
24,910
3,089
45,634
172,117
5,589
4,062
(1,107)
16,957
$ 584,824
25.5%
19.3
7.3
4.1
0.5
7.6
28.6
0.9
0.7
(0.2)
2.8
97.1%
31.0% $ 143,762
23.5 135,548
8.9 44,947
5.0 27,253
0.6
--
9.2 50,928
34.8 139,091
5,406
1.1
4,117
0.8
(1,648)
(0.2)
3.4 15,702
96.4% $ 565,106
25.9%
24.4
8.1
4.9
--
9.2
25.1
1.0
0.7
(0.3)
2.8
101.8%
32.4%
30.5
10.1
6.1
--
11.5
31.3
1.2
0.9
(0.4)
3.5
100.9%
6.7%
(14.4)
(1.9)
(8.6)
100.0
(10.4)
23.7
3.4
(1.3)
32.8
8.0
3.5%
(1) The percent of base revenue calculation for operating expenses is calculated as operating expenses, net of fuel
surcharges and unusual items, as a percent of operating revenue excluding fuel surcharge revenue. This presentation
adjusts the unusual items associated with the claims reserve liability adjustment of $6.0 million in 2013 and the
restructuring, severance and related charges of $2.7 million in 2015.
Salaries, wages and employee benefits
Salaries, wages, and employee benefits consist primarily of compensation for all employees. Salaries, wages, and
employee benefits are primarily affected by the total number of miles driven by Company drivers, the rate per mile the
Company pays its Company drivers, employee benefits (including, but not limited to, health care and workers’
compensation), and to a lesser extent by the number of, and compensation and benefits paid to, non-driver employees.
The decreases experienced in salaries, wages and employee benefits expenses during 2015 were primarily due to a
15.6% decrease in the number of company drivers, a 10.9% reduction in the average seated truck count, offset by 3.9%
higher driver pay. Also, during the third quarter, the Company enhanced its Paid Time Off (“PTO”) policy, converting from
28
an anniversary date vesting period to a calendar year vesting period. The Company reversed approximately $1.4 million of
its vacation reserve, as PTO is no longer accrued for carry over balances.
Salaries, wages, and employee benefit expenses for 2014 increased when compared to 2013, due to the continuation of
increased driver labor costs in the tight market for drivers, as well as associated payroll taxes. During July 2014, the
Company implemented a banded pay increase to its drivers which accounted for approximately $5.7 million of the increase
in salaries, wages and employee benefits expense. Additionally, employee medical benefit costs increased approximately
$3.0 million during the year ended December 31, 2014, compared to 2013.
The compensation paid to the Company drivers and other employees has increased and may need to increase further in
future periods if the economy strengthens and other employment alternatives become more available. Furthermore,
management believes that the market for drivers continues to tighten; therefore, it expects hiring expenses to continue to
increase in order to attract a sufficient number of qualified drivers to operate the Company fleet.
Fuel and fuel taxes
Fuel and fuel taxes consist primarily of diesel fuel expense for Company-owned tractors and fuel taxes. The primary
factors affecting the Company’s fuel expense are the cost of diesel fuel, the fuel economy of Company equipment, and the
number of miles driven by company drivers.
During 2015, fuel and fuel taxes decreased compared to 2014, as a result of lower prices and volume, better fuel
procurement and effectively managing the fuel surcharge program as well as the fleet reductions undertaken during the
year. Of the $57.6 million reduction in fuel expense, $31.3 million resulted from decreased price per gallon, $25.3 million
resulted from decreased volumes, and approximately $1.0 million resulted from increased equipment efficiencies. The
decrease in the average age of the fleet contributed to a 1.0% increase in the Company miles per gallon during 2015.
During 2014, fuel and fuel taxes decreased compared to 2013, as a result of better efficiency, lower pricing and lower
volumes. Improved fuel efficiency in the Company’s fleet resulted in savings of $9.1 million in 2014, compared to 2013.
Overall fuel prices during 2014 yielded savings for the Company of approximately $5.8 million, compared to the 2013.
Decreased volumes reflected savings to the Company of approximately $4.5 million, compared to the prior year.
The Company expects to continue managing its idle time and truck speeds, investing in more fuel-efficient,
aerodynamic equipment to improve its fuel miles per gallon, locking in fuel hedges when deemed appropriate, and
partnering with customers to adjust fuel surcharge programs that are inadequate to recover a fair portion of rising fuel costs.
Going forward, the Company’s fuel and fuel taxes is expected to fluctuate as a percentage of operating revenue based on
factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, deadhead percentage, the percentage
of revenue generated from independent contractors, and the success of fuel efficiency initiatives.
Equipment rents and depreciation and amortization
Equipment rents are those related to revenue equipment and other equipment and facilities under operating leases.
Depreciation and amortization of property and equipment consists primarily of depreciation for Company-owned tractors
and trailers and amortization of those financed with capital leases. The primary factors affecting this expense include the
number and age of Company tractors and trailers, the acquisition cost of new equipment, and the salvage values and useful
lives assigned to the equipment. These largely fixed costs fluctuate as a percentage of base revenue primarily with increases
and decreases in average base revenue per tractor and the percentage of base revenue contributed by trucking versus SCS.
During 2015, decreases in equipment rents and depreciation and amortization resulted primarily from a 15.6%
reduction in the average number of Company tractors as part of the Company’s plan to downsize its tractor fleet, partially
offset by a higher number of operating leases for revenue equipment due to more favorable lease terms. Moving forward,
management expects to see decreases in equipment rents and depreciation and amortization expense due to the smaller size
of its tractor and trailer fleet, partially offset by higher prices of new revenue equipment.
For 2014, the increase in equipment rents and depreciation and amortization expense reflected a small decrease in the
number of tractors, offset by higher equipment replacement costs and by the Company entering into operating leases for
revenue equipment.
Insurance and claims
Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated
payments and expenses for claims for bodily injury, property damage, cargo damage, and other casualty events. The
primary factors affecting the Company’s insurance and claims expense are the number of miles driven by its Company
29
drivers and independent contractors, the frequency and severity of accidents, trends in the development factors used in the
Company’s actuarial accruals, and developments in prior-year claims.
The decrease in insurance and claims expense for 2015 was the result of lower frequency and severity experienced
through the current year layer resulted in reduced claim expense. During 2015, the Company was able to reduce its cargo
loss incurred by $1.0 million. The Company expects insurance and claims expense to improve over the long-term.
During 2014, excluding the $4.0 million actuarial adjustment recorded in December 2013, insurance and claims
expense increased slightly, compared to 2013. This year-over-year increase was due primarily to the increase in reserves
associated with unfavorable developments on prior year loss layers based on new information received during the current
period.
Operations and maintenance
Operations and maintenance expense consists primarily of vehicle repairs and maintenance, general and administrative
expenses, and other costs. Operating and maintenance expenses are primarily affected by the age of the Company-owned
fleet of tractors and trailers, the number of miles driven in a period and, to a lesser extent, by efficiency measures in the
Company’s maintenance facility.
Operations and maintenance expense decreases were primarily the result of the implementation of maintenance
strategies focused on increased routine maintenance. During the third quarter of 2015, the Company outsourced its road
assistance department and closed two of its facilities which did not fit into the network effectively. While fluctuations in
repair costs are anticipated moving forward, management believes maintenance costs will trend downward over the long
term as the Company has been able to decrease the average age of its revenue equipment.
Operations and maintenance expense decreased during 2014, compared to 2013. The decrease was primarily due to the
increase in the routine maintenance program implemented in 2013, which generated lower costs for repairs performed over
the road during 2014.
Purchased transportation
Purchased transportation consists of the payments the Company makes to independent contractors, railroads, and third-
party carriers that haul loads brokered to them, including fuel surcharge reimbursement paid to such parties.
The decrease in purchased transportation expense was primarily associated with a 28.2% increase in the size of the
Company’s independent contractor fleet, offset by a 14.3% decrease in SCS operating revenue. The Company is continuing
to pursue its objective of growing its independent contractor fleet as a percentage of its total fleet, which could further
increase purchased transportation expense. Increasing independent contractor capacity has shifted (and assuming all other
factors remain equal, is expected to continue to shift) expenses to the purchased transportation line item with offsetting
reductions in employee driver wages and related expenses, net of fuel (as independent contractors generate fuel surcharge
revenue, while the related cost of their fuel is included with their compensation in purchased transportation), maintenance,
and capital costs.
During 2014, purchased transportation expense increases were primarily resulted from the 34.4% operating revenue
growth in the Company’s SCS segment and the 45.5% increase in the size of the Company’s independent contractor fleet,
both related to the record breaking SCS operating revenue.
Gain on disposal of assets, net
The large increase in gain on disposal of assets, net, during 2015, reflects the completion of the Company’s plan to
decrease the fleet through the accelerated disposal of older tractors to reduce the number of unseated tractors. Additionally,
the Company disposed of approximately 1,300 high cost trailers, reducing the average age of the trailer fleet to 68 months.
This has been a transformational year for the modernization of the Company’s revenue equipment and moving forward, the
Company expects gains on the sale of revenue equipment to be less significant than in 2015.
Other expenses
Other expenses increased slightly, compared to the same period in 2014, primarily as a result of increases in consulting
services, legal and professional fees, and licensing fees relating to technology upgrades.
For the year ended 2014, other expenses increased primarily as a result of an upward adjustment in the Company’s bad
debt reserve during 2014, and increased expenses related to driver retention and recruiting.
30
Consolidated Non-Operating Expenses
Interest expense, net
The decrease in interest expense, net for 2015, resulted from the strategic shift to debt instruments that carry lower
interest rates. The strengthening of the Company’s balance sheet has afforded the Company the opportunity to take
advantage of historically low interest rates and replace its previous revolving credit facility with a new revolving credit
facility. See “Item 8. Financial Statements and Supplementary Data – Note 6: Long-Term Debt” in this Form 10-K for
further discussion of the Company’s credit facility, which was entered into in February 2015.
During 2014, the decrease in interest expense was primarily due to the Company’s payments on its various financing
arrangements throughout the year. The Company has focused on reducing debt balances as it has strengthened its balance
sheet, which has afforded the opportunity to replace less favorable financing instruments with more advantageous ones.
Defense costs
For the year ended December 31, 2014, the Company recorded $2.8 million in legal and defense costs, or $0.27 per
diluted share, compared to approximately $1.5 million, or $0.14 per diluted share, in 2013. These costs were incurred
primarily in connection with Knight Transportation’s unsolicited proposal to acquire USA Truck, the related litigation and
the February 2014 Settlement Agreement.
Loss on extinguishment of debt
In February 2015, the Company entered into its new revolving Credit Facility (the “Credit Facility”), which resulted in
a loss on debt extinguishment of $0.8 million in the first quarter of 2015, representing the write-off of the deferred
financing fees associated with the previous revolving credit facility.
Income tax expense (benefit)
The Company’s effective tax rate for the years ended December 31, 2015, 2014 and 2013, were 42.8%, 46.0%, and
31.2%, respectively. The Company’s effective tax rate, when compared to the federal statutory rate of 35%, is primarily
affected by state income taxes, net of federal income tax effect, and permanent differences, the most significant of which is
the effect of the partially non-deductible per diem pay structure for our drivers. The recurring impact of this permanent
non-deductible difference incurred in operating our business causes our tax rate to increase as our pretax earnings or loss
approaches zero. Generally, as pretax income increases, the impact of the driver per diem program on our effective tax rate
decreases, because aggregate per diem pay becomes smaller in relation to pretax income, while in periods where earnings
are at or near breakeven the impact of the per diem program on our effective tax rate is significant.
Liquidity and Capital Resources
USA Truck’s business has required, and will continue to require, significant investments. In the Company’s trucking
business, where investments are substantial, the primary investments are in new revenue equipment and to a lesser extent,
in technology, service centers and working capital. In the Company’s SCS business, where investment is modest, the
primary investments are in technology and working capital. USA Truck’s primary sources of liquidity have been funds
provided by operations, borrowings under the Company’s line of credit, sales of used revenue equipment and, to a lesser
extent, capital and operating leases. Based on expected financial conditions, net capital expenditures, results of operations
and related net cash flows and other sources of financing, management believes the Company’s sources of liquidity to be
adequate to meet current and projected needs, and the Company does not expect to experience any material liquidity
constraints in the foreseeable future.
During 2015, the Company generated approximately $60.1 million in cash flows from operations, compared with
$51.9 million in 2014 and $35.9 million in 2013. The increase in cash flows from operations resulted primarily from
increases in net income in each period, as well as a decrease in accounts receivable during 2015 associated with lower fuel
surcharge balances and fewer loads hauled.
The Company incurred net capital expenditures of approximately $19 million in 2015, reflecting investments of
approximately $66.2 million, primarily in new revenue equipment, less $46.7 million in proceeds of equipment sales
(including a sale leaseback). The proceeds of equipment sales were elevated in 2015, compared to other years because of a
reduction in the size of the Company’s revenue equipment fleet, and new investments were impacted by leasing a portion
of the new equipment under operating leases. On an ongoing basis, net capital expenditures are expected to be higher in
future periods absent further increases in the use of operating leases to finance equipment acquisitions. The Company used
available cash after net capital expenditures primarily to lower outstanding debt balances by approximately $16.1 million
and repurchased approximately 1.0 million of the Company’s outstanding shares of common stock for $17.9 million.
31
Cash Flows
Operating Activities – The $8.2 million increase in net cash provided by operating activities was primarily driven by
$11.5 million reduction in accounts receivable as the Company reduced its DSO to approximately 38 days during 2015.
Additionally, the Company generated $5.4 million more operating income during 2015.
During 2014, the Company generated cash flow from operations primarily as a result of generating higher operating
income during the year ended December 31, 2013, compared to the corresponding period in 2014.
Investing Activities – The Company used $20.2 million less cash for investing activities during the year ended
December 31, 2015, compared to the year ended December 31, 2014. The decrease in cash used was associated with the net
reduction of approximately 400 tractors throughout 2015, coupled with the sale of approximately 1,300 trailers which
generated significant proceeds for the Company.
Increases in net cash used in investing activities during 2014 primarily reflected a $41.4 million increase in capital
expenditures as compared to 2013, offset by $1.1 million in proceeds from the sale of revenue equipment.
Financing Activities – The Company used $28.7 million more cash in financing activities during the year ended
December 31, 2015, compared to the year ended December 31, 2014. The increase in cash used was primarily due to the
share repurchase program announced in August 2015 and the balloon payments on capital leases during 2015.
Cash used in financing activities was reduced during 2014 as compared to 2013, primarily as a result of reinvesting
cash generated by operating activities instead of paying down debt. During 2014, the Company made net repayments of
long-term debt, financing notes and capital leases of $12.8 million.
Debt and Capitalized Lease Obligations
See “Item 8. Financial Statements and Supplementary Data – Note 6: Long-term Debt” and “Item 8. Financial
Statements and Supplementary Data – Note 7: Leases and Commitments” in this Form 10-K for a discussion of the
Company’s revolving credit facility and capital lease obligations.
Contractual Obligations and Commitments
The following table represents USA Truck’s contractual obligations and commercial commitments as of December 31,
2015.
Payments Due By Period
Less than 1
More than 5
Total
year
1-3 years
3-5 years
years
Debt (1)
Capital lease obligations (2)
Purchase obligations (3)
Operating leases – buildings & equipment (4)
Total
$
$
71,984 $
32,115
34,102
35,903
174,104 $
1,584 $
12,800
34,102
8,700
57,186 $
-- $
12,159
--
16,823
28,982 $
70,400 $
7,156
--
8,312
85,868 $
--
--
--
2,068
2,068
(1) Represents revolving line of credit of $70.4 million outstanding plus interest of $1.6 million using a combined
interest rate of 2.25%. On February 5, 2015, the Company replaced its revolving credit facility with a new facility,
which matures in February 2020. See “Item 8. Financial Statements and Supplementary Data – Note 6: Long-term
Debt” in this Form 10-K for further discussion.
(2) Represents remaining payments on capital lease obligations at December 31, 2015. This figure includes $1.1 million
in interest. The borrowings consist of capital leases with financing companies, with fixed borrowing amounts and
fixed interest rates, as set forth on each applicable lease schedule. Accordingly, interest on each lease varies between
lease schedules.
(3) Represents purchase obligations for revenue equipment and facilities, of which a significant portion is expected be
financed with operating cash flows and borrowings under the Credit Facility. The Company generally has the option
to cancel tractor orders with 60 to 90 day notice. As of December 31, 2015, 100.0% of this amount had become non-
cancelable.
(4) Represents future monthly rental obligations under operating leases for tractors, facilities and computer equipment.
Substantially all lease agreements for revenue equipment have fixed payment terms based on the passage of time.
32
Off-Balance Sheet Arrangements
Operating leases have been an important source of financing for equipment used by operations, office equipment, and
certain facilities. As of December 31, 2015, the Company leased certain revenue equipment and information technology
hardware under operating leases. Vehicles and hardware held under operating leases are not carried on the consolidated
balance sheets, and lease payments, with regard to such vehicles, are reflected in the consolidated statements of operations
and comprehensive income (loss) in the “Equipment rents” expense line item. Equipment rents related to the Company’s
revenue equipment operating leases was $4.4 million, $3.0 million and nil for the years ended December 31, 2015, 2014
and 2013, respectively. The total amount of remaining payments under operating leases as of December 31, 2015, was
approximately $35.9 million. Other than such operating leases, no other off-balance sheet arrangements have or are
reasonably likely to have a material effect on the Company’s consolidated financial statements.
Inflation
Most of the Company’s operating expenses are inflation sensitive, and as such, are not always able to be offset through
increases in revenue per mile and cost control efforts. The effect of inflation-driven cost increases on overall operating
costs is not expected to be greater for USA Truck than for its competitors, and has been minor over the past three years.
Fuel Availability and Cost
The trucking industry is dependent upon the availability of fuel. In the past, fuel shortages or increases in fuel taxes or
fuel costs have adversely affected profitability and may continue to do so. USA Truck has not experienced difficulty in
maintaining necessary fuel supplies, and in the past has 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, the Company is 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 the Company generally does not receive compensation from customers. Additionally,
most fuel surcharges are based on the average fuel price as published by the DOE for the week prior to the shipment,
meaning the Company typically bills customers in the current week based on the previous week’s applicable index.
Accordingly, in times of increasing fuel prices, the Company does not recover as much as it is currently paying for fuel. In
periods of declining prices, for a short period of time the inverse is true. Overall, the market fuel prices per gallon were
approximately 30.4% lower during 2015 than they were during 2014, as reported by the DOE.
As of December 31, 2015, the Company did not have any long-term fuel purchase contracts, and has not entered into
any fuel hedging arrangements.
Equity
As of December 31, 2015, USA Truck had stockholders’ equity of $93.8 million and total debt including current
maturities of $101.3 million, resulting in a total debt, less cash, to total capitalization ratio of 51.9% compared to 54.2% as
of December 31, 2014.
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. USA Truck bases its assumptions, estimates and judgments on historical experience, current
trends and other factors that management believes to be relevant at the time its consolidated financial statements are
prepared. Actual results could differ from those estimates, and such differences could be material.
A summary of the significant accounting policies followed in preparation of the Company’s financial statements is
contained in “Item 8. Financial Statements and Supplementary Data – Note 1: Description of the Business and Summary of
Significant Accounting Policies” of this Form 10-K. The most critical accounting policies and estimates that affect the
Company’s financial statements include the following:
Estimated useful lives and salvage values for purposes of depreciating tractors and trailers. USA Truck operates a
significant number of tractors and trailers in connection with its business. The Company may purchase this equipment or
acquire it under leases. Purchased equipment is depreciated on the straight-line method over the estimated useful life down
to an estimated salvage or trade-in value. Equipment acquired under capital leases is recorded at the net present value of the
minimum lease payments and is amortized on the straight-line method over the lease term. Depreciable lives of tractors and
trailers range from three years to ten years. Salvage value is estimated at the expected date of trade-in or sale based on the
expected market values of equipment at the time of disposal.
33
Estimates of accrued liabilities for claims involving bodily injury, physical damage losses, employee health benefits
and workers’ compensation. The primary claims arising against the Company consist of cargo, liability, personal injury,
property damage, workers' compensation, and employee medical expenses. The Company’s insurance programs typically
involve self-insurance with high risk-retention levels. Due to its significant self-insured retention amounts, the Company
has exposure to fluctuations in the number and severity of claims and to variations between its estimated and actual
ultimate payouts. The Company accrues the estimated cost of the uninsured portion of pending claims and an estimate for
allocated loss adjustment expenses including legal and other direct costs associated with a claim. Estimates require
judgments concerning the nature and severity of the claim, historical trends, advice from third-party administrators and
insurers, the size of any potential damage award based on factors such as the specific facts of individual cases, the
jurisdictions involved, the prospect of punitive damages, future medical costs, and inflation estimates of future claims
development, and the legal and other costs to settle or defend the claims. USA Truck records 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 anticipated claims amounts expected to be paid in the next twelve months. The Company does not discount its claims
liabilities.
Accounting for income taxes. USA Truck’s income tax expense, deferred tax assets and liabilities, and liabilities for
unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. Given the
nature of the transportation business, the Company is subject to tax federally and in a number of state jurisdictions.
Significant judgments and estimates are required in determining consolidated income tax expense.
Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating
the Company’s ability to recover deferred tax assets in the jurisdiction in which they arise, management considers all
positive and negative evidence. Management makes judgments in determining the Company’s 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. The likelihood that all or part of deferred tax assets will be recovered from future
taxable income is assessed. To the extent management believes recognition of a deferred tax asset is not more likely than
not to be realized, a valuation allowance is established for the amount(s) determined not to be realizable. USA Truck has
not recorded a valuation allowance at December 31, 2015, as management believes all deferred tax assets are more likely
than not to be realized.
The Company believes its future tax consequences to be adequately provided for based upon current facts and
circumstances and current tax law. During the year ended December 31, 2015, management made no material changes in
its assumptions regarding the determination of its income tax liabilities. However, should the Company’s tax positions be
challenged, different outcomes could result that may have a significant impact on the amounts reported through the
Company’s consolidated statements of operations.
Management periodically reevaluates its accounting policies as circumstances dictate. Together these factors may
significantly impact the Company’s 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: Description of the Business and Summary of
Significant Accounting Policies”.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
USA Truck experiences various market risks, including changes in interest rates and commodity prices. The Company
does not enter into derivatives or other financial instruments for hedging or speculative purposes. Because USA Truck’s
operations are largely confined to the U.S., the Company is not subject to a material amount of foreign currency risk.
Interest Rate Risk. The Company is exposed to interest rate risk primarily from its Credit Facility. Its Credit Facility
bears variable interest based on the type of borrowing and on the Agent’s prime rate or the London Interbank Offered Rate
(“LIBOR”) plus a certain percentage determined based on the Company’s attainment of certain financial ratios. As of
December 31, 2015, the Company had $70.4 million outstanding pursuant to its Credit Facility, excluding letters of credit
of $4.3 million. Assuming the outstanding balance as of December 31, 2015 remained constant, a hypothetical one-
percentage point increase in interest rates applicable to its Credit Facility would increase the Company’s interest expense
over a one-year period by approximately $0.7 million.
34
Commodity Price Risk. The Company is subject to commodity price risk with respect to purchases of fuel. In recent
years, fuel prices have fluctuated greatly and have generally increased, although recently the Company has seen a
significant decrease. In some periods, the Company’s operating performance was adversely affected because it was not able
to fully offset the impact of higher diesel fuel prices through increased freight rates and fuel surcharge revenue recoveries.
Management cannot predict how fuel price levels will continue to fluctuate in the future or the extent to which fuel
surcharge revenue recoveries could be collected to offset any increases. As of December 31, 2015, USA Truck did not have
any derivative financial instruments to reduce its exposure to fuel price fluctuations, but may use such instruments in the
future. Accordingly, volatile fuel prices may continue to impact the Company significantly. A significant increase in fuel
costs, or a shortage of diesel fuel, could materially and adversely affect the Company’s results of operations. Further, these
costs could also exacerbate the driver shortages experienced by the trucking industry by forcing independent contractors to
cease operations. Based on the Company’s fuel consumption during 2015, a 10% increase in the average price per gallon
would result an approximate $5.9 million increase in fuel expense, before possible increases from fuel surcharge revenues.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company as of December 31, 2015 and 2014, together with related notes
and the report of Grant Thornton LLP, independent registered public accountants, are set forth on the following pages.
35
Index to Consolidated Financial Statements
Audited Financial Statements of USA Truck, Inc.
Report of independent registered public accounting firm
Consolidated balance sheets as of December 31, 2015 and 2014
Consolidated statements of operations and comprehensive income (loss) for the years ended December 31, 2015, 2014
and 2013
Consolidated statements of stockholders’ equity for the years ended December 31, 2015, 2014 and 2013
Consolidated statements of cash flows for the years ended December 31, 2015, 2014 and 2013
Notes to Consolidated Financial Statements
Page
37
38
39
40
41
42
Financial Statement Schedules:
All schedules are omitted because they are not applicable, are insignificant, or the required information is shown in the
consolidated financial statements or notes thereto.
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Grant Thornton LLP
2431 E. 61st Street, Suite 500
Tulsa, OK 74136-1208
T 918.877.0800
F 918.877.0805
www.GrantThornton.com
Board of Directors and Stockholders
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, 2015 and 2014, and the related consolidated statements of operations and
comprehensive income (loss), changes in shareholders’ equity, and cash flows for each of the three years in the period
ended December 31, 2015. These consolidated financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these consolidated 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
consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of USA Truck, Inc. and its subsidiary as of December 31, 2015 and 2014, and the results of their operations and
their cash flows for each of the three years in the period ended December 31, 2015 in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 1 to the consolidated financial statements, the Company adopted new accounting guidance in 2015
and 2014, related to the presentation of deferred income taxes.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the Company’s internal control over financial reporting as of December 31, 2015, based on criteria established in
the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 23, 2016 expressed an unqualified opinion.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 23, 2016
37
USA Truck, Inc.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
Assets
Current assets:
Cash
Accounts receivable, net of allowance for doubtful accounts of $608 and $1,020,
respectively
Other receivables
Inventories
Assets held for sale
Income taxes receivable
Prepaid expenses and other current assets
Total current assets
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
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Current portion of insurance and claims accruals
Accrued expenses
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
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized; none issued
Common Stock, $.01 par value; 30,000,000 shares authorized; issued 11,946,253
shares, and 11,873,071 shares, respectively
Additional paid-in capital
Retained earnings
Less treasury stock, at cost (2,286,608 shares, and 1,340,438 shares, respectively)
Total stockholders’ equity
Total liabilities and stockholders’ equity
2015
December 31,
2014
(Recast)
$
87 $
205
53,324
5,094
748
7,979
6,159
4,876
78,267
32,910
289,045
22,156
344,111
(137,327)
206,784
1,405
286,456 $
24,473 $
10,706
8,836
12,190
56,205
701
89,245
37,943
8,585
192,679
71,186
5,604
1,863
3,536
—
5,197
87,591
31,596
348,251
18,812
398,659
(182,964)
215,695
658
303,944
23,582
10,230
8,252
24,048
66,112
589
93,464
35,064
9,647
204,876
—
—
119
67,370
65,871
(39,583)
93,777
286,456 $
119
65,850
54,802
(21,703)
99,068
303,944
$
$
$
See accompanying notes to consolidated financial statements.
38
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)
Operating revenue
Operating expenses:
Salaries, wages and employee benefits
Fuel and fuel taxes
Depreciation and amortization
Insurance and claims
Equipment rents
Operations and maintenance
Purchased transportation
Operating taxes and licenses
Communications and utilities
Gain on disposal of assets, net
Restructuring, severance and related charges
Other
Total operating expenses
Operating income (loss)
Other expenses (income):
Interest expense, net
Defense costs
Loss on extinguishment of debt
Other, net
Total other expenses, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss) and comprehensive income (loss)
Net earnings (loss) per share:
Average shares outstanding (basic)
Basic earnings (loss) per share
Average shares outstanding (diluted)
Diluted earnings (loss) per share
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
507,934 $
602,477 $
555,005
140,649
58,511
37,480
21,183
4,424
39,644
161,370
5,720
3,599
(7,547)
2,742
17,088
484,863
23,071
2,237
--
750
743
3,730
19,341
8,272
11,069 $
10,337
1.07 $
10,401
1.06 $
153,410
116,092
44,071
24,910
3,089
45,634
172,117
5,589
4,062
(1,107)
--
16,957
584,824
17,653
3,008
2,764
--
245
6,017
11,636
5,351
6,285 $
10,356
0.61 $
10,485
0.60 $
143,762
135,548
44,947
27,253
--
50,928
139,091
5,406
4,117
(1,648)
--
15,702
565,106
(10,101)
3,662
1,480
--
(711)
4,431
(14,532)
(4,539)
(9,993)
10,323
(0.97)
10,323
(0.97)
$
$
$
See accompanying notes to consolidated financial statements.
39
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
USA Truck, Inc.
Balance at December 31, 2012
(Recast)
Exercise of stock options
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, 2013
(Recast)
Exercise of stock options
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 income
Balance at December 31, 2014
(Recast)
Exercise of stock options
Excess tax benefit on exercise of
stock options
Transfer of stock out of treasury
stock
Stock-based compensation
Restricted stock award grant
Forfeited restricted stock
Net share settlement related to
restricted stock vesting
Net income
Balance at December 31, 2015
Common Stock
Shares
Par
Value
Additional
Paid-in
Capital
Retained Treasury
Earnings
Stock
Total
11,770
$
--
118 $
--
65,259 $
6
58,510 $
--
(21,714) $
--
102,173
6
--
--
156
(45)
--
--
--
--
1
--
--
--
51
216
(2)
--
--
--
--
--
(3)
--
--
(9,993)
(51)
--
--
--
--
--
--
216
(1)
--
(3)
(9,993)
11,881
$
16
119 $
--
65,527 $
158
48,517 $
--
(21,765) $
--
92,398
158
--
--
21
(35)
(10)
--
11,873
$
32
--
--
--
141
(84)
(16)
--
11,946
$
--
--
--
--
--
--
(62)
366
--
--
--
--
--
--
(139)
--
--
6,285
62
--
--
--
--
--
--
366
--
--
(139)
6,285
119 $
--
65,850 $
168
54,802 $
--
(21,703) $
--
99,068
168
--
--
--
1
(1)
721
(52)
1,093
(1)
1
--
--
--
--
--
(17,880)
--
--
--
--
721
--
--
119 $
(410)
--
67,370 $
--
11,069
65,871 $
--
--
(39,583) $
(17,932)
1,093
--
--
(410)
11,069
93,777
See accompanying notes to consolidated financial statements.
40
USA Truck, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Operating activities
Net income (loss)
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
11,069 $
6,285 $
(9,993)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization
Provision for doubtful accounts
Deferred income taxes
Share-based compensation
Loss on extinguishment of debt
Gain on disposal of assets, net
Other
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
Other long-term assets and liabilities
Net cash provided by operating activities
Investing activities
Purchases of property and equipment
Proceeds from sale of property and equipment
Proceeds from operating sale leaseback
Change in other assets, net
Net cash (used in) provided by 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 change in bank drafts payable
Excess tax benefit from exercise of stock options
Proceeds from capital sale leaseback
Purchase of common stock
Net (payments) or proceeds from stock based awards
Net cash used in financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents:
Beginning of year
End of year
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
Income taxes
Supplemental schedule of non-cash investing and financing
activities:
Liability incurred for notes payable
Purchases of revenue equipment included in accounts payable
37,480
127
2,876
1,093
750
(7,547)
232
11,540
409
1,156
1,689
(749)
60,125
(66,186)
38,774
7,975
--
(19,437)
140,738
(141,456)
(27,121)
(896)
(926)
721
6,308
(17,932)
(242)
(40,806)
(118)
44,071
782
5,279
366
--
(1,107)
(38)
(7,531)
892
1,417
1,462
--
51,878
(56,536)
16,923
--
20
(39,593)
74,168
(67,353)
(18,073)
(1,494)
639
--
--
--
19
(12,094)
191
$
$
205
87 $
14
205 $
2,084 $
9,808
3,359 $
3,003
--
1,279
1,367
34
See accompanying notes to consolidated financial statements.
44,947
187
(5,325)
216
--
(1,648)
(250)
(1,752)
2,537
(3,783)
10,757
--
35,893
(12,924)
15,757
--
38
2,871
78,478
(98,222)
(17,230)
(1,715)
(1,805)
--
--
--
2
(40,492)
(1,728)
1,742
14
3,802
477
1,387
5
41
USA Truck, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
USA Truck, Inc., a Delaware corporation and subsidiary (the “Company”) is a truckload carrier providing
transportation of general commodities throughout the continental United States and into and out of portions of Mexico and
Canada. Generally, the Company transports full dry van trailer loads of freight from origin to destination without
intermediate stops or handling. As a complement to the Company’s truckload operations, it also provides dedicated,
brokerage and rail intermodal services. 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.
Basis of presentation
The accompanying consolidated financial statements include USA Truck, Inc., and its wholly owned subsidiary. All
significant intercompany balances and transactions have been eliminated in preparing the consolidated financial statements.
Certain amounts reported in prior periods have been reclassified to conform to the current year presentation.
The accompanying financial statements have been prepared in accordance with United States generally accepted
accounting principles (“GAAP”), and include all adjustments necessary for the fair presentation of the periods presented.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates
its estimates and assumptions on an ongoing basis using historical experience and other factors which management believes
to be reasonable under the circumstances. As future events and their effects cannot be determined with precision, actual
results could differ significantly from these estimates.
Cash equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be
cash equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair
value.
Allowance for doubtful accounts
The allowance for doubtful accounts is management’s estimate of the amount of probable credit losses in the
Company’s existing accounts receivable. Management reviews the financial condition of customers for granting credit and
determines the allowance based on analysis of individual customers’ financial condition, historical write-off experience and
national economic conditions. The Company evaluates the adequacy of its allowance for doubtful accounts quarterly. Past
due balances over 90 days and exceeding a specified amount are reviewed individually for collectability. The Company
does not have any off-balance-sheet credit exposure related to its customers.
The following table provides a summary of the activity in the allowance for doubtful accounts for 2015, 2014 and 2013
(in thousands):
Balance at beginning of year
Provision for doubtful accounts
Uncollectible accounts written off, net of recovery
Balance at end of year
Year Ended December 31,
2014
2013
2015
$
$
1,020 $
127
(539)
608 $
610 $
782
(372)
1,020 $
423
187
--
610
42
Assets held for sale
Assets held for sale are comprised of revenue equipment not being utilized in operations and are carried at the lower of
depreciated cost or estimated fair value less expected selling costs when the required criteria, as defined by ASC Topic 360
“Property, Plant and Equipment” are satisfied. Depreciation ceases on the date that the held for sale criteria are met. The
Company expects to sell these assets within the next twelve months.
Inventories
Inventories consist of tires and supplies, and are stated at the lower of cost (first-in, first-out basis) or market.
Prepaid tires
During the third quarter of 2015, the Company changed its accounting policy for tires. Prior to this change, the cost of
original and replacement tires mounted on equipment was reported as prepaid tires and amortized based on estimated
usage. Under the new policy, the cost of original tires mounted on purchased revenue equipment is capitalized as part of the
equipment cost and is depreciated over the useful life of the related equipment. The cost of subsequent replacement tires is
expensed at the time those tires are placed in service. Management believes this new policy is preferable under the
circumstances because it provides a more precise method for recognizing expenses related to tires consistent with industry
practice. For additional information regarding the change in accounting policy for tires, see Note 15, Change in accounting
principle.
Property and equipment
Property and equipment is capitalized at cost. 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 – 4 to 10 years; and service,
office and other equipment – 3 to 20 years. Revenue equipment acquired under capital lease is amortized over the lease
term.
The Company reviews its long-lived assets for impairment whenever events or circumstances indicate the carrying
amount of a long-lived asset may not be recoverable. An impairment loss would be recognized if the carrying amount of
the long-lived asset is not recoverable and the carrying amount exceeds its fair value. For long-lived assets classified as
held and used, the carrying amount is not recoverable when the carrying value of the long-lived asset exceeds the sum of
the future net cash flows.
Income taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial
statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the
financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the
differences are expected to reverse. The Company has analyzed filing positions in its federal and applicable state tax returns
in all open tax years. The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense
and penalties as operating expenses. The Company analyzes its tax positions on the basis of a two-step process in which (1)
it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of
the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the
amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax
authority. The Company believes that its income tax filing positions and deductions will be sustained on audit and does 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 or associated interest or penalties on uncertain tax
positions have been recorded.
Claims accruals
The primary claims arising against the Company consist of cargo loss and damage, liability, personal injury, property
damage, workers' compensation, and employee medical expenses. The Company’s insurance program involves self-
insurance with high risk retention levels. Due to its significant self-insured retention amounts, the Company has exposure
to fluctuations in the frequency and severity of claims and to variations between its estimated and actual ultimate payouts.
Estimates require judgments concerning the nature and severity of the claim, as well as other factors. Actual settlement of
the self-insured claim liabilities could differ from management’s initial assessment due to uncertainties and fact
development.
43
Revenue recognition
Revenue generated by the Company’s trucking operating segment is recognized in full upon 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.
Revenue generated by the Company’s SCS segment is recognized upon completion of the services provided. Revenue
is recorded on a gross basis, without deducting third party purchased transportation costs, because the Company acts as a
principal with substantial risks as primary obligor.
New accounting pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-09,
Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition
guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are
transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those
goods or services. ASU 2014-09 defines a five-step process to implement this core principle and, in doing so, more
judgment and estimates may be required within the revenue recognition process than are required under existing GAAP.
The standard provides for using either of the following transition methods: (i) a full retrospective approach reflecting the
application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a
retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption
(which includes additional footnote disclosures). In August 2015, the FASB issued ASU 2015-14, “Revenue From
Contracts with Customers – Deferral of the Effective Date”, which delayed the effectiveness of ASU 2014-09 to annual
periods beginning after December 15, 2017, and interim periods therein. The adoption of this guidance is not expected to
have a material impact on the Company's consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which
simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities be
classified as noncurrent in a statement of financial position. The Company has early adopted ASU 2015-17 effective
December 31, 2015 on a retrospective basis. Adoption of this ASU resulted in a reclassification of the Company’s net
current deferred tax asset as an offset to the net noncurrent deferred tax liability in its Consolidated Balance Sheet as of
December 31, 2014. The reclassification resulted in a $7.7 million decrease in the current deferred income taxes asset and
the long-term noncurrent deferred income taxes liability.
NOTE 2. SEGMENT REPORTING
The Company’s two reportable segments are trucking and Strategic Capacity Solutions (“SCS”).
Trucking. Trucking is comprised of truckload and dedicated freight services. Truckload provides services as a medium-
to long-haul common carrier. USA Truck has provided truckload services since its inception, and derives the largest portion
of its revenue from these services. Dedicated freight provides truckload services to specific customers for shipments over
particular routes at particular.
Strategic Capacity Solutions. SCS consists of freight brokerage and rail intermodal services. Both of these service
offerings match customer shipments with available equipment of authorized third-party carriers and provide services that
complement the Company’s trucking operations. USA Truck provides these services primarily to existing trucking
customers, many of whom prefer to rely on a single carrier, or a small group of carriers, to provide all their transportation
solutions.
In determining its reportable segments, the Company's management focuses on financial information, such as
operating revenue, operating expense categories, operating ratios, and operating income, as well as on key operating
statistics, to make operating decisions.
Revenue equipment assets are not allocated to SCS, because SCS brokers freight services to customers through
arrangements with third party carriers who utilize their own equipment. To the extent rail intermodal operations require the
use of company-owned assets, they are obtained from the Company’s trucking segment on an as-needed basis. Depreciation
and amortization expense is allocated to SCS based on the Company-owned assets specifically utilized to generate SCS
revenue. All intercompany transactions between segments reflect rates similar to those that would be negotiated with
independent third parties. All other expenses for SCS are specifically identifiable direct costs or are allocated to SCS based
on relevant drivers, as determined by management.
44
A summary of operating revenue by segment is as follows (in thousands):
Operating revenue:
Trucking revenue (1)
Trucking intersegment eliminations
Trucking operating revenue
SCS revenue
SCS intersegment eliminations
SCS operating revenue
Total operating revenue
Year Ended December 31,
2014
2013
2015
$
$
356,528 $
(2,048)
354,480
158,295
(4,841)
153,454
507,934 $
424,082 $
(587)
423,495
192,924
(13,942)
178,982
602,477 $
418,601
(486)
418,115
146,492
(9,602)
136,890
555,005
(1) Includes foreign revenue of $42.0 million, $57.3 million, and $57.1 million for the years ended December 31,
2015, 2014 and 2013, respectively. All foreign revenue is collected in US Dollars.
A summary of operating income (loss) by segment is as follows (in thousands):
Operating income (loss):
Trucking
SCS
Total operating income (loss)
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
$
11,088 $
11,983
23,071 $
(3,122) $
20,775
17,653 $
(19,101)
9,000
(10,101)
A summary of depreciation and amortization by segment is as follows (in thousands):
Depreciation and amortization:
Trucking
SCS
Total depreciation and amortization
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
$
37,140 $
340
37,480 $
43,889 $
182
44,071 $
44,697
250
44,947
NOTE 3. PREPAID AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following (in thousands):
Prepaid licenses, permits and tolls
Prepaid insurance
Other
Total prepaid expenses and other current assets
NOTE 4. NOTE RECEIVABLE
Year Ended December 31,
2014
2015
(Recast)
$
$
1,542 $
2,080
1,254
4,876 $
1,923
1,166
2,108
5,197
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 due
November 2015. The purchaser defaulted on the note receivable by not making the principle payment in November 2015,
and the Company is undertaking actions to collect. The note receivable is secured by a first priority mortgage on the
property. The Company believes based on a recent appraisal the value of the property exceeds the amount of the note
receivable plus collection costs. Accordingly, no valuation allowance has been recorded. The Company had previously
deferred $0.7 million of gain on the sale of the property, with gain recognized into earnings only as payments on the note
receivable were received. During the years ended December 31, 2015, 2014 and 2013, respectively, the Company
recognized approximately $6,200, $7,800, and $7,300, respectively, of this gain.
45
NOTE 5. ACCRUED EXPENSES
Accrued expenses consist of the following (in thousands):
Salaries, wages and employee benefits
Federal and state tax accruals
Restructuring, severance and related charges (1)
Accrued third party maintenance
Other
Total accrued expenses
Year Ended December 31,
2014
2015
4,359 $
1,712
773
525
1,467
8,836 $
7,043
186
--
--
1,023
8,252
$
$
(1) Refer to note 14 of the footnotes to the Company’s consolidated financial statements for additional information regarding
the restructuring, severance and related charges.
NOTE 6. LONG-TERM DEBT
Long-term debt consisted of the following (in thousands):
Revolving credit agreement
Other
Total debt
Less current maturities
Long-term debt, less current maturities
Credit facility
Year Ended December 31,
2014
2015
70,400 $
--
70,400
--
70,400 $
71,000
896
71,896
(896)
71,000
$
$
In February 2015, the Company entered into a new senior secured revolving credit facility (the “Credit Facility”) with
a group of lenders and Bank of America, N.A., as agent (“Agent”). Contemporaneously with the funding of the Credit
Facility, the Company paid off the obligations under its prior credit facility and terminated such facility.
The Credit Facility is structured as a $170.0 million revolving credit facility, with an accordion feature that, so long as
no event of default exists, allows the Company to request an increase in the revolving credit facility of up to $80.0 million,
exercisable in increments of $20.0 million. The Credit Facility is a five-year facility scheduled to terminate on February 5,
2020. Borrowings under the Credit Facility are classified as either “base rate loans” or “LIBOR loans”. Base rate loans
accrue interest at a base rate equal to the Agent’s prime rate plus an applicable margin that is set at 0.50% through May 31,
2016 and adjusted quarterly thereafter between 0.25% and 1.00% based on the Company’s consolidated fixed charge
coverage ratio. LIBOR loans accrue interest at LIBOR plus an applicable margin that is set at 1.50% through May 31, 2016
and adjusted quarterly thereafter between 1.25% and 2.00% based on the Company’s consolidated fixed charge coverage
ratio. The Credit Facility includes, within its $170.0 million revolving credit facility, a letter of credit sub-facility in an
aggregate amount of $15.0 million and a swing line sub-facility in an aggregate amount of $20.0 million. An unused line
fee of 0.25% is applied to the average daily amount by which the lenders’ aggregate revolving commitments exceed the
outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued
under the Credit Facility. The Credit Facility is secured by a pledge of substantially all of the Company’s assets, with the
notable exclusion of any real estate or revenue equipment financed outside the Credit Facility. Additionally, the Company
recognized a charge in the first quarter of 2015 of $0.8 million resulting from the replacement of its previous credit facility
representing the write-off of unamortized deferred financing fees.
Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $170.0 million; or (B)
the sum of (i) 90% of eligible investment grade accounts receivable (reduced to 85% in certain situations), plus (ii) 85% of
eligible non-investment grade accounts receivable, plus (iii) the lesser of (a) 85% of eligible unbilled accounts receivable
and (b) $10.0 million, plus (iv) the product of 85% multiplied by the net orderly liquidation value percentage applied to the
net book value of eligible revenue equipment, plus (v) 85% multiplied the net book value of otherwise eligible newly
acquired revenue equipment that has not yet been subject to an appraisal. The borrowing base is reduced by an availability
reserve, including reserves based on dilution and certain other customary reserves. The Credit Facility contains a single
springing financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0. The financial
covenant springs only in the event excess availability under the Credit Facility drops below 10% of the lenders’ total
commitments under the Credit Facility.
46
The Credit Facility 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 Credit Facility may be
accelerated, and the lenders’ commitments may be terminated. The Credit Facility contains certain restrictions and
covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate transactions, and other
indebtedness.
The Company had $0.9 million of overnight borrowings under the Credit Facility as of December 31, 2015. The
average interest rate including all borrowings made under the Credit Facility as of December 31, 2015 was 1.91%. As debt
is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value. As of December 31, 2015,
the Company had outstanding $4.3 million in letters of credit and had approximately $90.8 million available under the
Credit Facility.
NOTE 7. LEASES AND COMMITMENTS
Capital leases
USA Truck leases certain equipment under capital leases with terms ranging from 15 to 60 months. As of December
31, 2015, the Company has entered into leases with lessors who did not participate in the credit facility. Currently, such
leases do not contain cross-default provisions with the credit facility. 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
for the periods indicated (in thousands).
December 31, 2015
December 31, 2014
Capitalized
Costs
$
45,170 $
75,188
Accumulated
Amortization Net Book Value
32,274
47,418
12,896 $
27,770
The Company has capitalized lease obligations relating to revenue equipment of $31.0 million, of which $12.2 million
represents the current portion. Such leases have various termination dates extending through September 2020 and contain
renewal or fixed price purchase options. The effective interest rates on the leases range from 1.68% to 3.11% as of
December 31, 2015. The lease agreements require payment of property taxes, maintenance and operating expenses.
Amortization of capital leases was $8.3 million, $12.7 million, and $12.7 million for the years ended December 31, 2015,
2014 and 2013, respectively.
During 2015, the Company completed sale-leaseback transactions under which it sold certain owned tractors to an
unrelated party for net proceeds of $6.3 million and entered into a 48-month capital lease agreement with the buyer. As of
December 31, 2015, the Company had recorded a liability of approximately $0.4 million representing the gain on the sale
and will amortize such amount to earnings ratably over the lease term. The deferred gain is included in the deferred gain
line item on the accompanying consolidated balance sheet.
Operating leases
Operating lease payments are set forth in the table below for the periods indicated (in thousands).
Equipment rents
Building and office rents (1)
Total rents
Year Ended December 31,
2014
2013
2015
$
$
4,424
2,297
6,721
$
$
3,089 $
2,225
5,314 $
--
2,778
2,778
(1) A portion of the expense for building and office rents is recorded in the operations and maintenance line item in the
accompanying consolidated statement of operations and comprehensive income (loss).
As of December 31, 2015, the Company has entered into leases with lessors who did not participate in the credit
facility. Currently, such leases do not contain cross-default provisions with the credit facility.
In August 2015, the Company completed two sale-leaseback transactions under which it sold certain owned tractors to
an unrelated party for net proceeds of $8.0 million and entered into two operating leases with terms of 58 and 59 months,
respectively, with the buyer. During 2015, the Company recorded a liability of approximately $0.3 million representing the
gain on the sale and will amortize such amount to earnings ratably over the lease term. The deferred gain is included on the
deferred gain line item in the accompanying consolidated balance sheet.
47
As of December 31, 2015, the future minimum payments including interest 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 (in thousands).
Future minimum payments
Future rentals under operating
leases
Other commitments
2016
2017
2018
2019
2020
$
12,800 $
8,182 $
3,977 $
7,156 $
Thereafter
--
-- $
8,700
8,572
8,251
5,133
3,179
2,068
As of December 31, 2015, the Company had commitments outstanding to acquire revenue equipment in the
approximate amount of $34.1 million. The Company generally has the option to cancel revenue equipment orders within a
60 to 90 day period prior to scheduled production, although the notice period has lapsed for all commitments outstanding as
of December 31, 2015.
NOTE 8. FEDERAL AND STATE INCOME TAXES
Significant components of the Company’s deferred tax assets and liabilities are as follows (dollar amounts in
thousands):
Deferred tax assets:
Accrued expenses not deductible until paid
Equity incentive plan
Revenue recognition
Allowance for doubtful accounts
Net operating loss carry forwards
Capital leases
Federal credits
Other
Total deferred tax assets
Deferred tax liabilities:
Tax over book depreciation
Prepaid expenses deductible when paid
Total deferred tax liabilities
Net deferred tax liabilities
Year Ended December 31,
2014
2015
7,438 $
316
235
232
157
21
--
335
8,734 $
(44,805)
(1,872)
(46,677)
(37,943) $
7,805
184
332
391
3,318
70
1,556
822
14,478
(47,496)
(2,046)
(49,542)
(35,064)
$
$
$
The Company also has certain state NOL carryovers that expire in varying years through 2033. The Company expects
to fully utilize its tax attributes in future years before they expire.
Significant components of the provision (benefit) for income taxes are as follows (in thousands):
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
Total income tax expense (benefit)
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
$
4,526 $
870
5,396
2,985
(109)
2,876
8,272 $
(129) $
201
72
5,383
(104)
5,279
5,351 $
786
--
786
(4,569)
(756)
(5,325)
(4,539)
48
A reconciliation between the effective income tax rate and the statutory federal income tax rate (35% for 2015 35% for
2014 and 34% for 2013) is as follows (dollar amounts in thousands):
Income tax expense (benefit) at statutory federal rate
Federal income tax effects of:
$
State income tax (benefit) expense
Per diem and other nondeductible meals and
entertainment
Other
Federal income tax expense (benefit)
State income tax expense (benefit)
Total income tax expense (benefit)
Effective tax rate
$
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
6,790 $
4,073 $
(4,941)
(289)
(34)
265
702
306
7,509
763
8,272 $
42.8%
872
343
5,254
97
5,351 $
46.0%
875
18
(3,783)
(756)
(4,539)
31.2%
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. Generally, as pretax income increases, the impact of the driver per diem program on
our effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pre-tax income, while in
periods where earnings are at or near breakeven the impact of the per diem program on our effective tax rate is significant.
NOTE 9. EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS
The Company adopted the 2014 Omnibus Incentive Plan (the “Incentive Plan”) in May 2014. The Incentive Plan
replaced the 2004 Equity Incentive Plan and provides for the granting of equity-based awards covering up to 500,000
shares of common stock to directors, officers and other key employees and consultants, in addition to the shares
outstanding at execution of agreement. As of December 31, 2015, 364,235 shares remain available for the issuance of
future equity-based compensation awards.
The components of compensation expense recognized, net of forfeiture recoveries, related to equity-based
compensation is reflected in the table below for the years indicated (in thousands):
Stock options
Restricted stock awards
Equity compensation expense
$
$
147 $
946
1,093 $
31 $
335
366 $
54
162
216
Year Ended December 31,
2014
2013
2015
Compensation expense related to all equity-based compensation awards granted under the Incentive Plan is included in
salaries, wages and employee benefits in the accompanying consolidated statements of operations and comprehensive
income (loss).
Stock options
Stock options are the contingent right of award holders to purchase shares of the Company’s common stock at a stated
price for a limited time. The fair value of each option award is estimated on the date of grant using the Black-Scholes-
Merton option-pricing formula, and is recognized over the vesting period of the award. The vesting period of option awards
is generally 3 or 4 years and awards may be exercised over a three or ten year term. While the Company did not grant any
new stock options in 2015 or 2014, there was a modification to an existing stock option award in 2015 that resulted in a
deemed new award being granted. See Note 14, Restructuring, severance and related charges for further discussion of
equity items.
49
The following assumptions were used to value the stock options granted or deemed to have been granted during the
years indicated:
Dividend yield
Expected volatility
Risk-free interest rate
Expected life (in years)
Year Ended December 31,
2014
2015
2013
0%
62.9%
0.1%
0.5
--
--
--
--
0%
35.6%
1.2%
6.25
The expected volatility is a measure of the expected fluctuation in the Company’s share price based on the historical
volatility of the Company’s stock. Expected life represents the length of time an option contract is anticipated 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, a factor
for anticipated forfeitures is also included, which represents the number of shares under options expected to be forfeited
over the expected life of the options.
The following table summarizes the stock option activity under the Incentive Plan:
Options outstanding - beginning of year
Granted (2)
Exercised
Cancelled/forfeited
Expired
Outstanding at December 31, 2015 (3)
Exercisable at December 31, 2015
Weighted-
Average
Exercise
Price Per
Share
Weighted-
Average
Remaining
Contractual
Life
(in years)
Aggregate
Intrinsic
Value
(in
thousands)
(1)
6.60
4.83
7.50
4.83
13.97
5.40
5.40
$
714
5.35 $
5.35 $
188
188
Number of
Shares
64,636 $
10,727
(37,803)
(21,456)
(494)
15,610 $
15,610 $
(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, 2015, was $17.45.
(2) The weighted-average grant date fair value of options granted during 2015, 2014, and 2013 was 15.17, nil, and
$1.75, respectively.
(3) The exercise prices of outstanding options granted range from $2.88 to $18.58 as of December 31, 2015.
As of December 31, 2015, all outstanding stock options were fully vested and expensed.
Restricted stock awards
Restricted stock awards are shares of the Company’s common stock that are granted subject to defined restrictions. The
estimated fair value of restricted stock awards is based upon the closing price of the Company’s common stock on the date
of grant. The vesting period of restricted stock awards is generally ratably over four years.
Information related to the restricted stock awarded for the year ended December 31, 2015, is as follows:
Nonvested shares – December 31, 2014
Granted
Forfeited
Vested
Nonvested shares – December 31, 2015
Weighted-
Average Grant
Date Fair Value
(1)
Number of
Shares
124,844 $
159,614
(98,847)
(70,294)
115,317 $
8.51
24.95
16.60
13.07
21.55
50
(1) The shares were valued at the closing price of the Company’s common stock on the dates of the awards.
The fair value of stock options and restricted stock that vested during the year is as follows for the periods indicated (in
thousands).
Stock options
Restricted stock
Year Ended December 31,
2014
2013
2015
$
193 $
1,767
49 $
931
60
144
As of December 31, 2015, approximately $1.9 million of unrecognized compensation cost related to nonvested
restricted stock awards is expected to be recognized over a weighted-average period of 2.9 years.
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.
NOTE 10. EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per share (in thousands, except per
share amounts):
Numerator:
Net income (loss)
Denominator:
Denominator for basic earnings (loss) per share – weighted-
average shares
Effect of dilutive securities:
Employee stock options and restricted stock
Denominator for diluted earnings (loss) per share – adjusted
weighted-average shares and assumed conversions
Basic earnings (loss) per share
Diluted earnings (loss) per share
Weighted-average anti-dilutive employee stock options and
restricted stock
NOTE 11. REPURCHASE OF EQUITY SECURITIES
2015
Year Ended December 31,
2014
(Recast)
2013
(Recast)
$
11,069 $
6,285 $
(9,993)
10,337
10,356
10,323
64
129
--
$
$
$
10,401 $
1.07 $
1.06 $
10,485 $
0.61 $
0.60 $
10,323
(0.97)
(0.97)
62
3
103
In July 2015, the Company’s board of directors authorized the repurchase of up to one million shares of the
Company’s common stock over a three-year period ending July 28, 2018. During 2015, the Company, through a Rule
10b5-1 plan, repurchased a total of 953,738 shares at a weighted average price of $18.80 per share for an aggregate cost of
approximately $17.9 million. As of January 8, 2016, the Company had repurchased the full million shares of common stock
included in this repurchase authorization.
In January 2016, the Company’s board of directors authorized the repurchase of up to an additional two million shares
of the Company’s common stock. This authorization will expire in February 2019 unless earlier terminated or extended by
the board of directors. Share repurchases, if any, will be made using a variety of methods, which may include open market
purchases, privately negotiated transactions or block trades, or any combination of such methods, in accordance with
applicable insider trading and other securities laws and regulations. The specific number of shares the Company ultimately
repurchases, and the actual timing and amount of share repurchases, will depend on market conditions and other factors, as
well as the applicable requirements of federal securities law. In addition, the stock repurchase program may be suspended,
extended or terminated by the Company at any time without prior notice, and the Company is not obligated to purchase a
specific number of shares.
51
NOTE 12. LITIGATION
USA Truck is party to routine litigation incidental to its business, primarily involving claims for personal injury and
property damage incurred in the transportation of freight. The Company maintains insurance to cover liabilities in excess of
certain self-insured retention levels. Though it is the opinion of management that these claims are immaterial to the
Company’s long-term financial position, adverse results of one or more of these claims could have a material adverse effect
on the Company’s consolidated financial statements in any given reporting period.
NOTE 13. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The tables below present quarterly financial information for 2015 and 2014 (in thousands, except per share amounts):
Operating revenue
Operating expenses
Operating income
Other, net
Income before income taxes
Income tax expense
Net income
Average shares outstanding (basic)
Basic earnings per share
Average shares outstanding (diluted)
Diluted earnings per share
Operating revenue
Operating expenses
Operating income (loss)
Other, net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Average shares outstanding (basic)
Basic earnings (loss) per share
Average shares outstanding (diluted)
Diluted earnings (loss) per share
March 31,
(Recast)
June 30,
(Recast)
2015
September
30,
December
31,
$
$
$
$
132,887 $
128,361
4,526
1,582
2,944
1,309
1,635 $
133,573 $
127,759
5,814
919
4,895
2,125
2,770 $
123,490 $
118,031
5,459
571
4,888
2,161
2,727 $
117,984
110,712
7,272
658
6,614
2,677
3,937
10,395
0.16 $
10,435
0.27 $
10,442
0.26 $
10,033
0.39
10,516
0.16 $
10,516
0.26 $
10,470
0.26 $
10,059
0.39
March 31,
June 30,
2014
September
30,
December
31,
145,489 $
146,541
(1,052)
1,140
(2,192)
(597)
(1,595) $
(Recast)
153,298 $
149,691
3,607
2,891
716
394
322 $
153,618 $
146,106
7,512
885
6,627
2,621
4,006 $
150,072
142,486
7,586
1,101
6,485
2,933
3,552
10,339
(0.15) $
10,346
0.03 $
10,357
0.39 $
10,374
0.34
10,339
(0.15) $
10,478
0.03 $
10,476
0.38 $
10,492
0.34
$
$
$
$
NOTE 14. RESTRUCTURING, SEVERANCE AND RELATED CHARGES
During 2015, the Company recognized approximately $2.7 million (pretax) in restructuring, severance and related
charges relating to the termination of employment of certain executives and the planned closure of two maintenance
facilities.
During 2015, the Company took steps to streamline and simplify its operations to better align the Company's cost
structure and better serve its customers. In the Company's trucking segment, the Company announced a plan to close its
maintenance facilities in Denton, Texas and Carlisle, Pennsylvania during the third quarter of 2015. Additionally, the
Company has outsourced its road assistance function to a third party. These initiatives are expected to improve operating
productivity and enhance capacity utilization.
52
These initiatives impacted a total headcount of 50 team members. Team members separated from the Company as a
result of these streamlining initiatives were offered severance. The expenses recorded during the year ended December 31,
2015, included costs related to severance; contract termination; communication and administration of these initiatives; and
asset write-offs.
In July 2015, the Company entered into a separation agreement (the “Separation Agreement”) with Mr. John M.
Simone regarding the conclusion of Mr. Simone’s tenure as the Company’s President, Chief Executive Officer, and
Director. Pursuant to the Separation Agreement: (i) Mr. Simone's separation was effective July 7, 2015 (the "Separation
Date"), (ii) Mr. Simone will receive severance pay equal to his base salary as of the Separation Date ($460,000 per year) for
a period of twelve months following the Separation Date, (iii) Mr. Simone will receive a bonus of $230,000 under the
Company's 2015 Management Bonus Plan, payable at the time and on the same basis as paid to recipients still employed by
the Company, (iv) the Company will pay the actual amount of Mr. Simone's COBRA continuation payments for a period of
eighteen months following the Separation Date, (v) Mr. Simone was compensated for his vacation time and paid time off
accrued but not used through the Separation Date, (vi) Mr. Simone was reimbursed for certain expenses associated with the
conclusion of his employment with the Company, and (vii) the following outstanding equity awards held by Mr. Simone
will vest as of the Separation Date: (a) 18,750 shares of restricted stock of the Company scheduled to vest on February 18,
2016 and (b) 10,727 nonqualified stock options of the Company scheduled to vest on February 18, 2016. During 2015, the
Company recognized severance costs associated with Mr. Simone’s departure of approximately $1.3 million, which were
recorded in the line item “Restructuring, severance and related charges” in the Company’s consolidated statements of
operations and comprehensive income (loss).
The following table summarizes the Company’s restructuring liability and cash payments made related to the
restructuring plan as of December 31, 2015 (in thousands):
Severance pay and benefits
Facility closing expenses
Total
NOTE 15. CHANGE IN ACCOUNTING PRINCIPLE
Costs
Incurred Payments
Non-cash
Expenses
Accrued
Balance
$
$
2,160 $
582
2,742 $
(869) $
(562)
(1,431) $
(538) $
--
(538) $
753
20
773
During the third quarter of 2015, the Company changed its accounting policy for tires. Prior to this change, the cost of
original and replacement tires mounted on equipment was reported as prepaid tires and amortized based on estimated
usage. Under the new policy, the cost of original tires mounted on purchased revenue equipment is capitalized as part of the
total equipment cost and is depreciated over the useful life of the related equipment. The cost of subsequent replacement
tires is expensed at the time those tires are placed in service. Management believes this new policy is preferable under the
circumstances because it provides a more precise method for recognizing expenses related to tires consistent with industry
practice. Comparative financial statements for all prior periods have been recast to apply the new policy retrospectively,
and are reflected under columns marked “Recast”.
The following tables present the line items on the statements of operations, balance sheets and statements of cash flows
that were impacted by the accounting change for the periods indicated (dollars in thousands, except per share data).
Balance Sheet
December 31, 2014:
Prepaid expenses and other current assets
Service, office and other equipment
Accumulated depreciation and amortization
Deferred income taxes(1)
Retained earnings
December 31, 2013:
Prepaid expenses and other current assets
Deferred income taxes
Retained earnings
As Originally
Reported
Effect of
Change
As Adjusted
$
$
17,318 $
16,648
(182,724)
38,981
61,081
(12,121) $
2,164
(240)
(3,917)
(6,279)
5,197
18,812
(182,964)
35,064
54,802
16,064 $
36,647
55,049
(10,607) $
(4,073)
(6,533)
5,457
32,574
48,516
53
Statement of Cash Flows
December 31, 2014:
Net income
Depreciation and amortization
Deferred income taxes
Inventories, prepaid expenses and other current assets
Purchases of property and equipment
December 31, 2013:
Net income
Deferred income taxes
Inventories, prepaid expenses and other current assets
Statement of Operations
December 31, 2014:
Operations and maintenance
Depreciation and amortization
Operating income
Income before income taxes
Income tax expense
Net income
Average shares outstanding (basic)
Basic earnings per share
Average shares outstanding (diluted)
Basic earnings per share
December 31, 2013:
Operations and maintenance
Operating loss
Loss before income taxes
Income tax benefit
Net loss
Average shares outstanding (basic)
Basic loss per share
Average shares outstanding (diluted)
Basic loss per share
As Originally
Reported
Effect of
Change
As Adjusted
$
$
6,033 $
43,830
5,121
(621)
(54,372)
252 $
241
158
1,513
(2,164)
(9,110) $
(4,774)
1,103
(883) $
(551)
1,434
6,285
44,071
5,279
892
(56,536)
(9,993)
(5,325)
2,537
As Originally
Reported
Effect of
Change
As Adjusted
$
$
$
$
$
$
$
$
46,285 $
43,830
17,243
11,226
5,193
6,033 $
10,356
0.58 $
10,485
0.58 $
49,494
(8,667)
(13,098)
(3,988)
(9,110) $
10,323
(0.88) $
10,323
(0.88) $
(651) $
241
410
410
158
252 $
--
0.03 $
--
0.02 $
$
$
1,434
(1,434)
(1,434)
(551)
(883) $
--
(0.09) $
--
(0.09) $
45,634
44,071
17,653
11,636
5,351
6,285
10,356
0.61
10,485
0.60
50,928
(10,101)
(14,532)
(4,539)
(9,993)
10,323
(0.97)
10,323
(0.97)
(1) In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which
simplifies the presentation of deferred income taxes. ASU 2015-17 requires that deferred tax assets and liabilities
be classified as noncurrent in a statement of financial position. The Company has early adopted ASU 2015-17
effective December 31, 2015 on a retrospective basis. Adoption of this ASU resulted in a reclassification of the
Company’s net current deferred tax asset as an offset to the net noncurrent deferred tax liability in its Consolidated
Balance Sheet as of December 31, 2014. The reclassification resulted in a $7.7 million decrease in the current
deferred income taxes asset and the long-term noncurrent deferred income taxes liability.
Under ASC 205-45-5, “Accounting Changes and Error Corrections,” the Company is required to report a change in
accounting principle by retrospectively applying the new principle to all prior periods presented, unless it is impractical to
determine the prior-period effect. Accordingly, the Company has adjusted previously reported financial information for all
periods presented.
54
NOTE 16. SUBSEQUENT EVENTS
On January 13, 2016, the Company’s board of directors announced the appointment of John R. (“Randy”) Rogers as
President and Chief Executive Officer of the Company and the appointment of Mr. Rogers to the board of directors as a
Class II director with a term expiring in 2018, effective January 14, 2016. Thomas M. Glaser will continue to serve on the
Company’s board of directors and was appointed Vice Chairman, effective January 14, 2016.
On February 8, 2016, Michael R. Weindel’s employment as Executive Vice President, Strategic Capacity Solutions
(“SCS”) terminated. The Company appointed James Craig as President – SCS effective February 15, 2016.
Effective February 16, 2016, USA Truck, Inc., and the Debtor modified the asset sale agreement (hereinafter referred
to as the “Original Agreement”) for the former USA Truck terminal facility in Shreveport, Louisiana, as a result of default
by the Debtor in November 2015. See Note 4, Note receivable for details of the default and the collateral. The
modifications to the Original Agreement are as follows:
(1) As of January 1, 2016, the Debtor will no longer make monthly payments to USA Truck, Inc., as required under the
Original Agreement.
(2) The Debtor agrees that in addition to the balloon payment of $1.9 million, USA Truck shall be entitled to receive
25% of the net sale proceeds from any future sale (including foreclosure sale) of the property in excess of the
balloon payment, closing costs, and realtor commissions.
(3) At any time, USA Truck retains the right to enforce its rights as creditor, mortgagee, and holder of vendor’s
privilege and declare the unpaid portion of the purchase price, interest, costs, and attorneys’ fees immediately due
and payable. USA Truck’s rights include instituting foreclosure proceedings and/or other legal action.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
In accordance with the requirements of the Exchange Act and SEC rules and regulations promulgated thereunder, the
Company has established and maintains disclosure controls and procedures and internal control over financial reporting.
Management, including the Company’s principal executive officer and principal financial officer, does not expect that the
Company’s disclosure controls and procedures and internal control over financial reporting will prevent all errors,
misstatements, or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system will be met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been detected.
Evaluation of Disclosure Controls and Procedures
USA Truck has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) to ensure that material information relating to the Company, including its consolidated subsidiary, is made
known to the officers who certify the Company’s financial reports and to other members of senior management and the
board of directors. USA Truck management, with the participation of the Company’s principal executive officer and
principal financial officer, conducted an evaluation of the effectiveness of the disclosure controls and procedures. Based on
this evaluation, as of December 31, 2015, USA Truck’s principal executive officer and principal financial officer have
concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level to ensure
that the information required to be disclosed by the Company in reports that the Company files or submits 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 the Company’s principal executive officer and
principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
55
Management’s Report on Internal Control Over Financial Reporting
The management of USA Truck 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 Company 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 receipts and expenditures are
being made only in accordance with authorizations of the Company’s management and directors; and
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Company assets that could have a material effect on the Company’s financial statements.
Under the supervision and with the participation of the Company’s management, including its principal executive
officer and principal financial officer, an evaluation of the effectiveness of its internal controls over financial reporting was
conducted based on the criteria set forth in the Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on management’s evaluation under the criteria set forth in
Internal Control - Integrated Framework (2013), management concluded that the Company’s internal control over
financial reporting was effective at the reasonable assurance level as of December 31, 2015.
The Company’s internal control over financial reporting as of December 31, 2015, has been audited by Grant Thornton
LLP, independent registered public accountants, as attested to in their attestation report included herein.
Changes in Internal Control over Financial Reporting
No changes occurred in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2015, that materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting.
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Grant Thornton LLP
2431 E. 61st Street, Suite 500
Tulsa, OK 74136-1208
T 918.877.0800
F 918.877.0805
www.GrantThornton.com
Board of Directors and Stockholders
USA Truck, Inc.
We have audited the internal control over financial reporting of USA Truck, Inc. (a Delaware corporation) and subsidiary
(the “Company”) as of December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2015, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated financial statements of the Company as of and for the year ended December 31, 2015, and our
report dated February 23, 2016 expressed an unqualified opinion on those consolidated financial statements.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
February 23, 2016
57
Item 9B. OTHER INFORMATION
There is no information that the Company is required to report, but did not report, on Form 8-K during the fourth
quarter of 2015.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required in this Item 10 is hereby incorporated by reference to the information responsive to this Item
contained in the Company’s definitive proxy statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC.
Item 11. EXECUTIVE COMPENSATION
The information required in this Item 11 is hereby incorporated by reference to the information responsive to this Item
contained in the Company’s definitive proxy statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required in this Item 12 is hereby incorporated by reference to the information responsive to this Item
contained in the Company’s definitive proxy statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required in this Item 13 is hereby incorporated by reference to the information responsive to this Item
contained in the Company’s definitive proxy statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required in this Item 14 is hereby incorporated by reference to the information responsive to this Item
contained in the Company’s definitive proxy statement for its 2016 Annual Meeting of Stockholders to be filed with the
SEC.
58
Comparison of 5-Year Cumulative Total Return*
Among USA Truck, Inc., the Dow Jones U.S. Total Return Index and the Dow Jones U.S. Trucking Index.
*$100 invested on 12/31/10 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
Copyright© 2016 Dow Jones & Co. All rights reserved.
The stock performance graph shall not be deemed to be incorporated by reference into any filing made by us under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, notwithstanding any general
statement contained in any such filings incorporating the graph by reference, except to the extent we incorporate such
graph by specific reference.
59
Officers and Directors
John R. Rogers
President, Chief Executive Officer and Director
James A. Craig
President, Strategic Capacity Solutions
N. Martin Tewari
President, Trucking
Michael K. Borrows
Executive Vice President and Chief Financial Officer
Kandice G. Harshaw
Vice President, Human Resources
Joseph M. Kaiser
Vice President, Chief Accounting Officer
David F. Marano
Vice President, Internal Audit and Corporate Secretary
Christian C. Rhodes
Vice President, Chief Information Officer
Troy A. Robertson
Vice President, General Counsel
Robert A. Peiser
Chairman of the Board
Retired President and Chief Executive Officer,
Imperial Sugar Company,
refiner and marketer of sugar products
Thomas M. Glaser
Vice Chairman of the Board
Retired President and Chief Executive Officer,
USA Truck, Inc.
Richard B. Beauchamp
Director
Partner, Norris Taylor & Company,
accounting firm
Robert E. Creager
Director
Retired Partner, PricewaterhouseCoopers, LLP,
accounting firm
Gary R. Enzor
Director
Chairman and Chief Executive Officer,
Quality Distributions, Inc.,
chemical bulk logistics services provider
Barbara J. Faulkenberry
Director
Major General (Ret.), U.S. Air Force
Vice Commander, 18th Air Force,
Scott Air Force Base, IL
Alexander D. Greene
Director
Retired Private Equity Executive,
Brookfield Asset Management,
global asset management firm
William H. Hanna
Director
Chairman and President, Hanna Oil and Gas,
oil and gas exploration
James D. Simpson, III
Director
Executive Vice President, Stephens Inc.,
investment banking firm
We Strengthen our business from the inside out by consistently exceeding
the expectations of both our driving team members and our customers.
usa-truck.com
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