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As Of Filer Filing For·On·As Docs:Size 11/04/19 USA Truck Inc 10-Q 9/30/19 70:7.3M |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.17M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 28K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 28K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
51: R1 Document and Entity Information HTML 74K
13: R2 Condensed Consolidated Balance Sheets HTML 141K
35: R3 Condensed Consolidated Balance Sheets HTML 42K
(Parenthetical)
61: R4 Condensed Consolidated Statements of Income (Loss) HTML 100K
And
52: R5 Condensed Consolidated Statements of Stockholders' HTML 103K
Equity
15: R6 Condensed Consolidated Statements of Cash Flows HTML 123K
38: R7 Basis of Presentation HTML 26K
59: R8 New Accounting Pronouncements HTML 23K
54: R9 Revenue Recognition HTML 98K
65: R10 Segment Reporting HTML 106K
46: R11 Equity Compensation and Employee Benefit Plans HTML 23K
22: R12 Intangible Assets and Goodwill HTML 65K
30: R13 Accrued Expenses HTML 35K
66: R14 Insurance Premium Financing HTML 23K
47: R15 Long-Term Debt HTML 41K
23: R16 Leases and Right of Use Assets HTML 113K
31: R17 Income Taxes HTML 25K
67: R18 (Loss) Earnings Per Share HTML 62K
45: R19 Legal Proceedings HTML 23K
17: R20 Restructuring, Impairment and Other Costs HTML 74K
41: R21 Correction of Immaterial Errors HTML 46K
63: R22 Description of Business and Summary of Significant HTML 22K
Accounting Policies (Policies)
56: R23 Revenue Recognition (Tables) HTML 95K
18: R24 Segment Reporting (Tables) HTML 104K
42: R25 Intangible Assets and Goodwill (Tables) HTML 70K
64: R26 Accrued Expenses (Tables) HTML 34K
57: R27 Long-Term Debt (Tables) HTML 39K
16: R28 Leases and Right of Use Assets (Tables) HTML 163K
44: R29 (Loss) Earnings Per Share (Tables) HTML 62K
29: R30 Restructuring, Impairment and Other Costs (Tables) HTML 73K
20: R31 Correction of Immaterial Errors (Tables) HTML 45K
49: R32 Revenue Recognition (Details) HTML 25K
69: R33 Revenue Recognition - Disaggregation of Revenue by HTML 55K
Type (Details)
28: R34 Segment Reporting (Details) HTML 21K
19: R35 Segment Reporting - Segment Reporting Information HTML 45K
by Segment (Details)
48: R36 Equity Compensation and Employee Benefit Plans HTML 28K
(Details)
68: R37 INTANGIBLE ASSETS AND GOODWILL - Schedule of HTML 38K
Intangible Asset - Finite life (Details)
26: R38 INTANGIBLE ASSETS AND GOODWILL - Carrying Amount HTML 30K
of Goodwill By Segment (Details)
21: R39 INTANGIBLE ASSETS AND GOODWILL - Future HTML 40K
Amortization Expense (Details)
40: R40 Accrued Expenses (Details) HTML 32K
12: R41 Insurance Premium Financing (Details) HTML 23K
55: R42 LONG-TERM DEBT - Summary of Long-term Debt HTML 36K
(Details)
60: R43 Long-Term Debt (Details) HTML 78K
39: R44 LEASES AND RIGHT OF USE ASSETS - Revenue Equipment HTML 28K
(Details)
11: R45 LEASES AND RIGHT OF USE ASSETS - Components of HTML 35K
Lease Expense (Details)
53: R46 LEASES AND RIGHT OF USE ASSETS - Supplemental HTML 63K
Balance Sheet Information (Details)
58: R47 LEASES AND RIGHT OF USE ASSETS - Supplemental Cash HTML 34K
Flow Information (Details)
36: R48 LEASES AND RIGHT OF USE ASSETS - Maturities of HTML 69K
Lease Liabilities (Details)
14: R49 Leases and Right of Use Assets (Details) HTML 37K
24: R50 Income Taxes (Details) HTML 27K
33: R51 (LOSS) EARNINGS PER SHARE - Computation of Basic HTML 54K
and Diluted Loss Per Share (Details)
70: R52 Restructuring, Impairment and Other Costs HTML 46K
(Details)
50: R53 Restructuring, Impairment and Other Costs - HTML 35K
Restructuring and Executive Severance (Details)
25: R54 RESTRUCTURING, IMPAIRMENT AND OTHER COSTS - HTML 30K
Executive Severance by Segment (Details)
34: R55 Correction of Immaterial Errors (Details) HTML 51K
62: XML IDEA XML File -- Filing Summary XML 123K
43: XML XBRL Instance -- usak-20190930x10q_htm XML 1.89M
27: EXCEL IDEA Workbook of Financial Reports XLSX 64K
7: EX-101.CAL XBRL Calculations -- usak-20190930_cal XML 183K
8: EX-101.DEF XBRL Definitions -- usak-20190930_def XML 324K
9: EX-101.LAB XBRL Labels -- usak-20190930_lab XML 1.04M
10: EX-101.PRE XBRL Presentations -- usak-20190930_pre XML 706K
6: EX-101.SCH XBRL Schema -- usak-20190930 XSD 127K
32: JSON XBRL Instance as JSON Data -- MetaLinks 273± 403K
37: ZIP XBRL Zipped Folder -- 0000883945-19-000140-xbrl Zip 217K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM i 10-Q
(Mark One)
i ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i September 30, 2019
or
i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from - to - .
Commission File Number: i 1-35740
i USA TRUCK INC.
(Exact name of registrant as specified in its charter)
| | |
i Delaware | | i 71-0556971 |
(State or other jurisdiction of incorporation | | (I.R.S. Employer Identification No.) |
or organization) | | |
| | |
i 3200 Industrial Park Road | | |
i Van Buren, i Arkansas | | i 72956 |
(Address of principal executive offices) | | (Zip Code) |
i 479- i 471-2500
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | |
Title of each class | Trading Symbol(s): | Name of each exchange on which registered: |
i Common Stock, $0.01 Par Value | i USAK | i The
NASDAQ Stock Market LLC |
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. i Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). i Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| | |
Large accelerated filer [ ] | i Accelerated filer ☒ | Smaller reporting company i ☒ |
Non-accelerated filer [ ] | | Emerging growth company i ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No [X]
The number of shares outstanding of the registrant’s common stock, as of October 17, 2019, was i 8,572,778.
USA TRUCK INC.
| | | | |
Item No. |
| Caption |
| Page |
| | | | |
| | | ||
| | Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2019 and December 31, 2018 | | 2 |
| | | 3 | |
| | | 4 | |
| | | 5 | |
| | Notes to Condensed Consolidated Financial Statements (unaudited) | | 6 |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 17 | |
| | 31 | ||
| | 32 | ||
| | | | |
| | 32 | ||
| | 33 | ||
| | 33 | ||
| | 33 | ||
| | 33 | ||
| | 33 | ||
| | 33 | ||
| | | 34 |
PART I – FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
USA TRUCK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | | | |
Assets | | ||||
Current assets: | (in thousands, except share data) | ||||
Cash | $ | i 284 | | $ | i 989 |
Accounts receivable, net of allowance for doubtful accounts of $ i 367 and $ i 575, respectively |
| i 55,078 | |
| i 57,189 |
Other receivables |
| i 6,874 | |
| i 5,688 |
Inventories |
| i 718 | |
| i 722 |
Assets held for sale |
| i 4,357 | |
| i 2,611 |
Prepaid expenses and other current assets |
| i 4,816 | |
| i 7,675 |
Total current assets |
| i 72,127 | |
| i 74,874 |
Property and equipment: |
|
| |
|
|
Land and structures |
| i 32,818 | |
| i 32,434 |
Revenue equipment |
| i 295,790 | |
| i 280,623 |
Service, office and other equipment |
| i 30,130 | |
| i 28,094 |
Property and equipment, at cost |
| i 358,738 | |
| i 341,151 |
Accumulated depreciation and amortization |
| ( i 116,698) | |
| ( i 115,766) |
Property and equipment, net |
| i 242,040 | |
| i 225,385 |
Operating leases - right of use assets | | i 12,077 | | | — |
Goodwill | | i 5,231 | |
| i 4,926 |
Other intangibles, net |
| i 16,793 | |
| i 17,837 |
Other assets |
| i 1,662 | |
| i 1,003 |
Total assets | $ | i 349,930 | | $ | i 324,025 |
Liabilities and Stockholders’ Equity |
|
| |
|
|
Current liabilities: |
|
| |
|
|
Accounts payable | $ | i 23,759 | | $ | i 23,482 |
Current portion of insurance and claims accruals |
| i 13,512 | |
| i 15,852 |
Accrued expenses |
| i 7,313 | |
| i 9,366 |
Current finance lease obligations | | i 19,469 | | | i 17,292 |
Current operating lease obligations | | i 7,556 | | | — |
Long-term debt, current maturities | | i 1,647 | | | i — |
Insurance premium financing |
| — | |
| i 4,435 |
Total current liabilities |
| i 73,256 | |
| i 70,427 |
Deferred gain |
| i 119 | |
| i 84 |
Long-term debt, less current maturities | | i 87,093 | | | i 85,300 |
Long-term finance lease obligations | | i 68,610 | | | i 53,460 |
Long-term operating lease obligations | | i 4,568 | | | — |
Deferred income taxes |
| i 23,564 | |
| i 23,518 |
Insurance and claims accruals, less current portion |
| i 10,209 | |
| i 9,963 |
Total liabilities |
| i 267,419 | |
| i 242,752 |
Stockholders’ equity: |
|
| |
|
|
Preferred Stock, $ i i 0.01 / par value; i i 1,000,000 / shares authorized; none issued |
| i — | |
| i — |
Common Stock, $ i i 0.01 / par value; i i 30,000,000 / shares authorized; issued i 11,988,480 shares, and i 12,011,495 shares, respectively |
| i 120 | |
| i 120 |
Additional paid-in capital |
| i 62,585 | |
| i 66,433 |
Retained earnings |
| i 78,596 | |
| i 78,467 |
Less treasury stock, at cost ( i 3,415,662 shares, and i 3,650,060 shares, respectively) |
| ( i 58,790) | |
| ( i 63,747) |
Total stockholders’ equity |
| i 82,511 | |
| i 81,273 |
Total liabilities and stockholders’ equity | $ | i 349,930 | | $ | i 324,025 |
See accompanying notes to condensed consolidated financial statement
2
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND
COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
| | (in thousands, except per share data) | | ||||||||||
Operating revenue | | $ | i 130,924 | | $ | i 132,583 | | $ | i 398,520 | | $ | i 392,977 | |
| | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | |
Salaries, wages and employee benefits | |
| i 32,846 | |
| i 31,540 | |
| i 102,742 | |
| i 95,423 | |
Fuel and fuel taxes | |
| i 13,842 | |
| i 13,823 | |
| i 41,575 | |
| i 41,286 | |
Depreciation and amortization | |
| i 9,652 | |
| i 6,735 | |
| i 27,595 | |
| i 21,392 | |
Insurance and claims | |
| i 6,499 | |
| i 5,946 | |
| i 20,939 | |
| i 16,889 | |
Equipment rent | |
| i 2,427 | |
| i 2,916 | |
| i 7,715 | |
| i 7,785 | |
Operations and maintenance | |
| i 8,829 | |
| i 8,237 | |
| i 24,583 | |
| i 25,111 | |
Purchased transportation | |
| i 51,281 | |
| i 52,640 | |
| i 148,634 | |
| i 157,495 | |
Operating taxes and licenses | |
| i 1,218 | |
| i 1,136 | |
| i 3,646 | |
| i 2,900 | |
Communications and utilities | |
| i 967 | |
| i 674 | |
| i 2,453 | |
| i 2,064 | |
Gain on disposal of assets, net | |
| ( i 696) | |
| ( i 901) | |
| ( i 700) | |
| ( i 1,466) | |
Impairment of assets held for sale | |
| i 1 | |
| i — | |
| i 368 | |
| i — | |
Reversal of restructuring, impairment and other costs | | | i — | | | i — | | | i — | | | ( i 639) | |
Other | |
| i 4,092 | |
| i 4,034 | |
| i 13,100 | |
| i 12,231 | |
Total operating expenses | |
| i 130,958 | |
| i 126,780 | |
| i 392,650 | |
| i 380,471 | |
Operating (loss) income | |
| ( i 34) | |
| i 5,803 | |
| i 5,870 | |
| i 12,506 | |
| | | | | | | | | | | | | |
Other expenses: | |
|
| |
|
| |
|
| |
|
| |
Interest expense, net | |
| i 1,615 | |
| i 811 | |
| i 4,951 | |
| i 2,462 | |
Other, net | |
| i 145 | |
| i 420 | |
| i 453 | |
| i 653 | |
Total other expenses, net | |
| i 1,760 | |
| i 1,231 | |
| i 5,404 | |
| i 3,115 | |
(Loss) income before income taxes | |
| ( i 1,794) | |
| i 4,572 | |
| i 466 | |
| i 9,391 | |
Income tax (benefit) expense | |
| ( i 421) | |
| i 1,272 | |
| i 337 | |
| i 2,512 | |
| | | | | | | | | | | | | |
Consolidated net (loss) income and comprehensive (loss) income | | $ | ( i 1,373) | | $ | i 3,300 | | $ | i 129 | | $ | i 6,879 | |
| | | | | | | | | | | | | |
Net (loss) earnings per share: | |
|
| |
|
| |
|
| |
|
| |
Average shares outstanding (basic) | |
| i 8,564 | |
| i 8,223 | |
| i 8,509 | |
| i 8,170 | |
Basic (loss) earnings per share | | $ | ( i 0.16) | | $ | i 0.40 | | $ | i 0.02 | | $ | i 0.84 | |
| | | | | | | | | | | | | |
Average shares outstanding (diluted) | |
| i 8,564 | |
| i 8,240 | |
| i 8,522 | |
| i 8,193 | |
Diluted (loss) earnings per share | | $ | ( i 0.16) | | $ | i 0.40 | | $ | i 0.02 | | $ | i 0.84 | |
See accompanying notes to condensed consolidated financial statements.
3
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
|
| Common Stock |
| Additional |
| | |
| | |
| | | ||||
| | | | Par | | Paid-in | | Retained | | Treasury | | | | ||||
| | Shares | | Value | | Capital | | Earnings | | Stock | | Total | |||||
| | (in thousands) | |||||||||||||||
Balance at December 31, 2018, as originally filed |
| i 12,012 | | | i 120 | | | i 66,433 | | | i 77,664 | | | ( i 63,747) | | | i 80,470 |
Correction of error (Note 15) |
| — | |
| — | |
| — | |
| i 803 | |
| — | |
| i 803 |
Balance at December 31, 2018 |
| i 12,012 | |
| i 120 | |
| i 66,433 | |
| i 78,467 | |
| ( i 63,747) | |
| i 81,273 |
Issuance of treasury stock |
| — | |
| — | |
| ( i 4,558) | |
| — | |
| i 4,558 | |
| — |
Stock-based compensation |
| — | |
| — | |
| i 589 | |
| — | |
| — | |
| i 589 |
Net share settlement related to restricted stock vesting |
| ( i 5) | |
| — | |
| ( i 72) | |
| — | |
| — | |
| ( i 72) |
Net income |
| — | |
| — | |
| — | |
| i 1,501 | |
| — | |
| i 1,501 |
Balance at March 31, 2019 |
| i 12,007 | |
| i 120 | |
| i 62,392 | |
| i 79,968 | |
| ( i 59,189) | |
| i 83,291 |
Issuance of treasury stock |
| — | |
| — | |
| ( i 378) | |
| — | |
| i 378 | |
| — |
Stock-based compensation |
| — | |
| — | |
| i 705 | |
| — | |
| — | |
| i 705 |
Forfeited restricted stock |
| ( i 18) | |
| — | |
| — | |
| — | |
| — | |
| — |
Net share settlement related to restricted stock vesting |
| — | |
| — | |
| ( i 1) | |
| — | |
| — | |
| ( i 1) |
Net income |
| — | |
| — | |
| — | |
| i 1 | |
| — | |
| i 1 |
Balance at June 30, 2019 |
| i 11,989 | |
| i 120 | |
| i 62,718 | |
| i 79,969 | |
| ( i 58,811) | |
| i 83,996 |
Issuance of treasury stock |
| — | |
| — | |
| ( i 21) | |
| — | |
| i 21 | |
| — |
Stock-based compensation |
| — | |
| — | |
| ( i 107) | |
| — | |
| — | |
| ( i 107) |
Net share settlement related to restricted stock vesting |
| ( i 1) | |
| — | |
| ( i 5) | |
| — | |
| — | |
| ( i 5) |
Net loss | | — | |
| — | |
| — | |
| ( i 1,373) | |
| — | |
| ( i 1,373) |
Balance at September 30, 2019 |
| i 11,988 | | | i 120 | |
| i 62,585 | |
| i 78,596 | |
| ( i 58,790) | |
| i 82,511 |
| | | | | | | | | | | | | | | | | |
|
| Common Stock |
| Additional |
| | |
| | |
| | | ||||
| | | | Par | | Paid-in | | Retained | | Treasury | | | | ||||
| | Shares | | Value | | Capital | | Earnings | | Stock | | Total | |||||
| | (in thousands) | |||||||||||||||
Balance at December 31, 2017 |
| i 12,142 | |
| i 121 | |
| i 68,667 | |
| i 65,460 | |
| ( i 67,760) | |
| i 66,488 |
Issuance of treasury stock |
| — | |
| — | |
| ( i 2,094) | |
| — | |
| i 2,094 | |
| — |
Stock-based compensation |
| — | |
| — | |
| ( i 136) | |
| — | |
| — | |
| ( i 136) |
Forfeited restricted stock | | ( i 49) | |
| — | |
| — | |
| — | |
| — | | | — |
Net share settlement related to restricted stock vesting |
| ( i 2) | |
| — | |
| ( i 40) | |
| — | |
| — | |
| ( i 40) |
Net income |
| — | |
| — | |
| — | |
| i 1,035 | |
| — | |
| i 1,035 |
Balance at March 31, 2018 |
| i 12,091 | |
| i 121 | |
| i 66,397 | |
| i 66,495 | |
| ( i 65,666) | |
| i 67,347 |
Issuance of treasury stock |
| — | |
| — | |
| ( i 894) | |
| — | |
| i 894 | |
| — |
Stock-based compensation |
| — | |
| — | |
| i 304 | |
| — | |
| — | |
| i 304 |
Forfeited restricted stock |
| ( i 76) | |
| ( i 1) | |
| i 1 | |
| — | |
| — | |
| — |
Net share settlement related to restricted stock vesting |
| — | |
| — | |
| ( i 70) | |
| — | |
| — | |
| ( i 70) |
Net income |
| — | |
| — | |
| — | |
| i 2,544 | |
| — | |
| i 2,544 |
Balance at June 30, 2018 |
| i 12,015 | |
| i 120 | |
| i 65,738 | |
| i 69,039 | |
| ( i 64,772) | |
| i 70,125 |
Issuance of treasury stock | | — | |
| — | |
| i 204 | |
| — | |
| ( i 204) | | | — |
Stock-based compensation | | — | |
| — | |
| i 437 | |
| — | |
| — | | | i 437 |
Forfeited restricted stock | | ( i 3) | |
| — | |
| — | |
| — | |
| — | | | — |
Net share settlement related to restricted stock vesting | | — | |
| — | |
| ( i 24) | |
| — | |
| — | | | ( i 24) |
Net income | | — | |
| — | |
| — | |
| i 3,300 | |
| — | | | i 3,300 |
Balance at September 30, 2018 | | i 12,012 | |
| i 120 | |
| i 66,355 | |
| i 72,339 | |
| ( i 64,976) | |
| i 73,838 |
See accompanying notes to condensed consolidated financial statements.
4
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2019 |
| 2018 | ||
Operating activities: | | (in thousands) | ||||
Net income | | $ | i 129 | | $ | i 6,879 |
Adjustments to reconcile net income to net cash provided by operating activities: | |
|
| |
|
|
Depreciation and amortization | |
| i 27,595 | |
| i 21,392 |
Deferred income tax, net | |
| i 46 | |
| ( i 1,321) |
Share-based compensation | |
| i 1,187 | |
| i 605 |
Gain on disposal of assets, net | |
| ( i 700) | |
| ( i 1,466) |
Impairment of assets held for sale | |
| i 368 | |
| i — |
Reversal of restructuring, impairment and other costs | | | — | | | ( i 639) |
Other | |
| i 84 | |
| i 290 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Accounts and other receivables | |
| i 925 | |
| ( i 3,436) |
Inventories and prepaid expenses | |
| i 3,401 | |
| i 2,117 |
Accounts payable and accrued liabilities | |
| ( i 4,385) | |
| i 3,833 |
Insurance and claims accruals | |
| ( i 1,558) | |
| i 505 |
Other long-term assets and liabilities | |
| ( i 658) | |
| i 171 |
Net cash provided by operating activities | | $ | i 26,434 | | $ | i 28,930 |
Investing activities: | |
|
| |
|
|
Acquisition of Davis Transfer Company (net of cash) | |
| ( i 305) | |
| — |
Capital expenditures | | | ( i 25,156) | | | ( i 12,787) |
Proceeds from sale of property and equipment | | | i 8,771 | | | i 8,776 |
Proceeds from operating sale leaseback | |
| — | |
| i 5,323 |
Net cash (used in) provided by investing activities | | $ | ( i 16,690) | | $ | i 1,312 |
Financing activities: | |
|
| |
|
|
Borrowings under long-term debt | |
| i 72,125 | |
| i 28,210 |
Payments on long-term debt | |
| ( i 85,310) | |
| ( i 47,550) |
Proceeds from obligation under finance lease | | | i 12,795 | | | i — |
Payments on obligation under finance lease | | | ( i 605) | | | — |
Payments on finance lease obligations | | | ( i 10,021) | | | ( i 11,564) |
Payment of debt issuance costs | | | ( i 538) | | | i — |
Net change in bank drafts payable | |
| i 1,183 | |
| i 731 |
Net payments for tax withholdings for vested stock-based awards | |
| ( i 78) | |
| ( i 134) |
Net cash used in financing activities | | $ | ( i 10,449) | | $ | ( i 30,307) |
Decrease in cash | | | ( i 705) | | | ( i 65) |
Cash: | |
|
| |
|
|
Beginning of period | |
| i 989 | |
| i 71 |
End of period | | $ | i 284 | | $ | i 6 |
Supplemental disclosure of cash flow information: | |
|
| |
|
|
Cash paid during the period for: | |
|
| |
|
|
Interest | | $ | i 4,253 | | $ | i 2,469 |
Income taxes | |
| i 1,189 | |
| i 3,586 |
Supplemental disclosure of non-cash investing: | |
|
| |
|
|
Sales of revenue equipment included in accounts receivable | | $ | i 1,240 | | $ | — |
Purchase of revenue equipment included in accounts payable | | | i 1,420 | | | i 60 |
See accompanying notes to condensed consolidated financial statements.
5
USA TRUCK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
iNOTE 1 – BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the accounts and operations of USA Truck Inc., and present our financial position as of September 30, 2019 and December 31, 2018 and the results of our operations, comprehensive (loss) income and cash flows for the nine months ended September 30, 2019 and 2018.
These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles ("GAAP") of the United States. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
These condensed consolidated financial statements and notes are unaudited. However, in the opinion of management, these condensed consolidated financial statements reflect all normal recurring adjustments necessary for a fair presentation of the results for the periods presented. Results for interim periods are not necessarily indicative of results to be expected for the full year ending December 31, 2019.
The accompanying unaudited condensed consolidated financial statements include USA Truck Inc., and its wholly owned subsidiaries: International Freight Services, Inc. ("IFS"), a Delaware corporation; Davis Transfer Company Inc., a Georgia corporation ("DTC"), Davis Transfer Logistics Inc., a Georgia corporation ("DTL"), and B & G Leasing, L.L.C., a Georgia limited liability company, ("B & G," and collectively with DTC and DTL, "Davis Transfer Company"). References in this report to "it," "we," "us," "our," or the "Company," and similar expressions refer to USA Truck Inc. and its subsidiaries. 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.
iNOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS
i In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), which required lessees to recognize a right-of-use ("ROU") asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Lessor accounting under the new standard is substantially unchanged. Additional qualitative and quantitative disclosures, including significant judgments made by management, are required. The Company adopted the new standard beginning with the first quarter of 2019 using a modified retrospective transition approach, which included a number of practical expedients. The effect of the adoption is reflected within the condensed consolidated financial statements (see Note 10 - Leases and Right of Use Assets).
/ iNOTE 3 – REVENUE RECOGNITION
Revenue is measured based upon consideration specified in a contract with a customer. The Company recognizes revenue over time, as contractual performance obligations are satisfied by transferring the benefit of the service to our customer. The benefit is transferred to the customer as the service is provided and revenue is recognized accordingly via time-based metrics. A corresponding contract asset of $ i 1.2 million and $ i 1.1 million was recorded in the September 30, 2019 and December 31, 2018 balance sheets, respectively, in the Accounts receivable, net line item. The Company is entitled to receive payment as it satisfies performance obligations with customers. The amount of remaining performance
/6
obligations relating to loads in process at 11:59 pm as of the end of each reporting period was deemed to be immaterial. Our business consists of i two reportable segments, Trucking and USAT Logistics (see Note 4 - Segment Reporting).
iThe following tables set forth revenue disaggregated by revenue type and segment:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||||||||||||||||
| | 2019 | | 2018 | ||||||||||||||||||||
|
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total | ||||||||
Revenue type | | (in thousands) | ||||||||||||||||||||||
Freight | | $ | i 80,002 | | $ | i 34,753 | | $ | ( i 1,778) | | $ | i 112,977 | | $ | i 72,924 | | $ | i 43,647 | | $ | ( i 3,051) | | $ | i 113,520 |
Fuel surcharge | |
| i 12,274 | |
| i 3,991 | |
| ( i 250) | |
| i 16,015 | |
| i 12,002 | |
| i 4,283 | |
| ( i 303) | |
| i 15,982 |
Accessorial | |
| i 1,311 | |
| i 621 | |
| i — | |
| i 1,932 | |
| i 1,875 | |
| i 1,206 | |
| i — | |
| i 3,081 |
Total | | $ | i 93,587 | | $ | i 39,365 | | $ | ( i 2,028) | | $ | i 130,924 | | $ | i 86,801 | | $ | i 49,136 | | $ | ( i 3,354) | | $ | i 132,583 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | ||||||||||||||||||||||
| | 2019 | | 2018 | ||||||||||||||||||||
|
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total | ||||||||
Revenue type | | (in thousands) | ||||||||||||||||||||||
Freight | | $ | i 244,089 | | $ | i 106,081 | | $ | ( i 6,199) | | $ | i 343,971 | | $ | i 212,858 | | $ | i 129,955 | | $ | ( i 4,462) | | $ | i 338,351 |
Fuel surcharge | |
| i 37,073 | |
| i 11,920 | |
| ( i 636) | |
| i 48,357 | |
| i 35,324 | |
| i 12,086 | |
| ( i 420) | |
| i 46,990 |
Accessorial | |
| i 3,803 | |
| i 2,389 | |
| i — | |
| i 6,192 | |
| i 3,150 | |
| i 4,486 | |
| i — | |
| i 7,636 |
Total | | $ | i 284,965 | | $ | i 120,390 | | $ | ( i 6,835) | | $ | i 398,520 | | $ | i 251,332 | | $ | i 146,527 | | $ | ( i 4,882) | | $ | i 392,977 |
iNOTE 4 – SEGMENT REPORTING
The Company’s i two reportable segments are Trucking and USAT Logistics. In determining its reportable segments, the Company’s chief operating decision maker 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.
Trucking. Trucking is comprised of one-way truckload and dedicated freight motor carrier services. Truckload provides motor carrier services as a medium-haul common and contract carrier. USA Truck has provided truckload motor carrier services since its inception, and continues to derive the largest portion of its gross revenue from these services. Dedicated freight provides truckload motor carrier services to specific customers for movement of freight over particular routes at specified times.
USAT Logistics. USAT Logistics’ service offerings consist of freight brokerage, logistics, and rail intermodal services. Each of these service offerings match customer shipments with available equipment of authorized third-party motor carriers and other service providers. The Company provides these services to many existing Trucking customers, many of whom prefer to rely on a single service provider, or a small group of service providers, to provide all their transportation solutions.
Revenue equipment assets are not allocated to USAT Logistics as freight services for customers are brokered through arrangements with third-party motor carriers who utilize their own equipment. To the extent rail intermodal or other USAT Logistics 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 USAT Logistics based on the Company-owned assets specifically utilized to generate USAT Logistics revenue. All intercompany transactions between segments reflect rates similar to those that would be negotiated with independent third parties. All other expenses for USAT Logistics are specifically identifiable direct costs or are allocated to USAT Logistics based on relevant cost drivers, as determined by management.
/7
A summary of operating revenue by segment is as follows:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Operating revenue | | (in thousands) | | ||||||||||
Trucking revenue (1) | | $ | i 93,587 | | $ | i 86,801 | | $ | i 284,965 | | $ | i 251,332 | |
Trucking intersegment eliminations | |
| ( i 233) | |
| ( i 1,272) | |
| ( i 1,002) | |
| ( i 1,501) | |
Trucking operating revenue | |
| i 93,354 | |
| i 85,529 | |
| i 283,963 | |
| i 249,831 | |
USAT Logistics revenue | |
| i 39,365 | |
| i 49,136 | |
| i 120,390 | |
| i 146,527 | |
USAT Logistics intersegment eliminations | |
| ( i 1,795) | |
| ( i 2,082) | |
| ( i 5,833) | |
| ( i 3,381) | |
USAT Logistics operating revenue | |
| i 37,570 | |
| i 47,054 | |
| i 114,557 | |
| i 143,146 | |
Total operating revenue | | $ | i 130,924 | | $ | i 132,583 | | $ | i 398,520 | | $ | i 392,977 | |
| (1) | Includes foreign revenue of $ i 9.5 million and $ i 10.6 million for the three months ended September 30, 2019 and 2018, respectively, and $ i 28.5 million and $ i 31.6 million for the nine months ended September 30, 2019 and 2018, respectively. All foreign revenue is collected in U.S. dollars. |
A summary of operating (loss) income by segment is as follows:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 | | ||||
Operating (loss) income | | (in thousands) | | ||||||||||
Trucking | | $ | ( i 278) | | $ | i 2,605 | | $ | i 2,168 | | $ | i 4,294 | |
USAT Logistics | |
| i 244 | |
| i 3,198 | |
| i 3,702 | |
| i 8,212 | |
Total operating (loss) income | | $ | ( i 34) | | $ | i 5,803 | | $ | i 5,870 | | $ | i 12,506 | |
A summary of depreciation and amortization by segment is as follows:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Depreciation and amortization | | (in thousands) | | ||||||||||
Trucking | | $ | i 9,435 | | $ | i 6,562 | | $ | i 26,867 | | $ | i 20,887 | |
USAT Logistics | |
| i 217 | |
| i 173 | |
| i 728 | |
| i 505 | |
Total depreciation and amortization | | $ | i 9,652 | | $ | i 6,735 | | $ | i 27,595 | | $ | i 21,392 | |
/
iNOTE 5 – 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 provided for the granting of up to i 500,000 shares of common stock through equity-based awards to directors, officers and other key employees and consultants. The First Amendment to the Incentive Plan was adopted in May 2017, which, among other things, increased the number of shares of common stock available for issuance under the Incentive Plan by an additional i 500,000 shares. The Second Amendment to the Incentive Plan was adopted in May 2019, which, among other things, increased the number of shares of common stock available for issuance under the Incentive Plan by an additional i 500,000 shares. As of September 30, 2019, i 597,830 shares remain available under the Incentive Plan for the issuance of future equity-based compensation awards.
/ i
8
NOTE 6 – INTANGIBLE ASSETS AND GOODWILL
iThe following tables summarizes intangible assets and amortization expense as of and for the period ended September 30, 2019:
| | | | | | | | | | | |
| | ||||||||||
| | Amortization |
| | |
| | |
| | |
| | period | | Gross | | Accumulated | | Net intangible | |||
|
| (years) | | Amount | | Amortization | | assets | |||
| | (in thousands) | |||||||||
Trade name | | indefinite | | $ | i 5,000 | | $ | i — | | $ | i 5,000 |
Non-compete agreement | | i 2 | |
| i 140 | |
| i 54 | |
| i 86 |
Customer relationships | | i 10 | |
| i 12,900 | |
| i 1,193 | |
| i 11,707 |
Total intangible assets | |
| | $ | i 18,040 | | $ | i 1,247 | | $ | i 16,793 |
iChanges in carrying amount of goodwill by reportable segment is as follows:
| | | | | | |
|
| Trucking |
| USAT Logistics | ||
| | (in thousands) | ||||
Balance at December 31, 2018 | | $ | i 4,926 | | $ | i — |
Working capital adjustment | |
| i 305 | |
| i — |
Balance at September 30, 2019 | | $ | i 5,231 | | $ | i — |
The above intangible assets have a weighted average remaining life of i 108 months. The expected remaining amortization of these assets for the next five successive years and thereafter is as follows:
i
| | | |
| | (in thousands) | |
2019 (remaining) |
| $ | i 315 |
2020 | |
| i 1,346 |
2021 | |
| i 1,288 |
2022 | |
| i 1,288 |
2023 | |
| i 1,288 |
2024 | | | i 1,288 |
Thereafter | |
| i 4,980 |
Total | | $ | i 11,793 |
iNOTE 7 – ACCRUED EXPENSES
iAccrued expenses consisted of the following:
| | | | | | |
| | | ||||
| | (in thousands) | ||||
Salaries, wages and employee benefits | | $ | i 4,494 | | $ | i 5,775 |
Federal and state tax accruals | |
| i 1,406 | |
| i 1,898 |
Other (1) | |
| i 1,413 | |
| i 1,693 |
Total accrued expenses | | $ | i 7,313 | | $ | i 9,366 |
| (1) | No single item included within other accrued expenses exceeded 5.0% of our total current liabilities. |
| (2) | See Note 15 - Correction of Immaterial Errors for information regarding the revision. |
9
NOTE 8 – INSURANCE PREMIUM FINANCING
During October 2018, the Company entered into agreements to finance approximately $ i 4.7 million to third-party financing companies for the Company’s annual insurance premiums. During the quarter ended September 30, 2019, this note payable was paid in full.
During October 2019, the Company entered into an agreement to finance approximately $ i 4.5 million with a third-party financing company for a portion of the Company's annual insurance premiums.
/ iNOTE 9 – LONG-TERM DEBT
iLong-term debt consisted of the following:
| | | | | | |
| | | ||||
| | (in thousands) | ||||
Revolving credit agreement | | $ | i 76,550 | | $ | i 85,300 |
Obligations under finance lease (Note 10) | | | i 12,190 | | | — |
| | | i 88,740 | | | i 85,300 |
Less current maturities | | | ( i 1,647) | | | — |
Total long-term debt | | $ | i 87,093 | | $ | i 85,300 |
On January 31, 2019, the Company, entered into a i five year, $ i 225.0 million senior secured revolving credit facility (the "Credit Facility") with a group of lenders and Bank of America, N.A., as agent (the "Agent") pursuant to the terms of an Amended and Restated Loan and Security Agreement. The Credit Facility replaced the Company’s previous i five year, $ i 170.0 million senior secured revolving credit facility dated February 15, 2015.
The Credit Facility is structured as a $ i 225.0 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 $ i 75.0 million, exercisable in increments of at least $ i 20.0 million. The Credit Facility is a i five year facility scheduled to terminate on January 31, 2024. 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 adjusted quarterly between i 0.25% and i 0.75% based on the Company’s consolidated fixed charge coverage ratio. LIBOR loans accrue interest at the London Interbank Offered Rate ("LIBOR") plus an applicable margin adjusted quarterly between i 1.25% and i 1.75% based on the Company’s consolidated fixed charge coverage ratio. The Credit Facility includes, within its $ i 225.0 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $ i 15.0 million and a swingline sub-facility (the "Swingline") in an aggregate amount of $ i 25.0 million. An unused line fee of i 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, except for any real estate or revenue equipment financed outside the Credit Facility.
Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $ i 225.0 million; or (B) the sum of (i) i 90.0% of eligible investment grade accounts receivable (reduced to i 85.0% in certain situations), plus (ii) i 85.0% of eligible non-investment grade accounts receivable, plus (iii) the lesser of (a) i 85.0% of eligible unbilled accounts receivable and (b) $ i 10.0 million, plus (iv) the product of i 85.0% multiplied by the net orderly liquidation value percentage applied to the net book value of eligible revenue equipment, plus (v) i 85.0% multiplied by 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 financial covenant, which requires a consolidated fixed charge coverage ratio of at least i 1.0 to i 1.0 that is triggered in the event excess availability under the Credit Facility falls below i 10.0% of the lenders’ total commitments. Also, certain restrictions regarding the Company’s ability to pay dividends, make certain investments, prepay certain indebtedness, execute share repurchase programs and enter into certain acquisitions and hedging arrangements are triggered in the event excess availability under the Credit Facility falls below i 20.0% of the lenders’ total commitments.
/10
The Company had i no borrowings under the Swingline as of September 30, 2019. The average interest rate including all borrowings made under the Credit Facility as of September 30, 2019 was i 3.7%. As debt is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value. As of September 30, 2019, the Company had $ i 5.9 million in letters of credit outstanding and had approximately $ i 54.7 million available to borrow under the Credit Facility taking into account borrowing base availability.
iNOTE 10 – LEASES AND RIGHT OF USE ASSETS
The Company adopted ASU 2016-02 on January 1, 2019. The standard requires lessees to recognize a ROU asset and lease liability for all leases. Some of our leases contain both lease and non-lease components, which we have elected to treat as a single lease component. We have also elected not to recognize in our consolidated balance sheets leases that have an original lease term, including reasonably certain renewal or purchase options, of twelve months or less for all classes of underlying assets. Lease costs for short-term leases are recognized on a straight-line basis over the lease term. We elected the package of transition practical expedients for existing contracts, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification and determination of initial direct costs.
The Company leases property and equipment under finance and operating leases. The Company has operating and finance leases for revenue equipment, real estate, information technology equipment (primarily servers and copiers), and various other equipment used in operating our business. Certain leases for revenue equipment and information technology include options to purchase or extend, guarantee residual values, or early termination rights. Determining the lease term and amount of lease payments to include in the calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option or feature is reasonably certain, and if the optional period and payments should be included in the calculation of the associated ROU asset and liability. In making this determination, we consider all relevant economic factors that would compel us to exercise or not exercise an option or feature.
When available, we use the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for all of our leases. In such cases, we use an estimate of our incremental borrowing rate to discount lease payments based on information available at lease commencement.
As of September 30, 2019, the Company has entered into leases with lessors who do not participate in the Credit Facility. Currently, such leases do not contain cross-default provisions with the Credit Facility.
Revenue Equipment
In addition to the revenue equipment owned by the Company, we currently lease i 1,112 tractors and i 808 trailers. Of the leased revenue equipment, i 764 tractors and i 759 trailers are classified as finance leases and i 348 tractors and i 49 trailers are classified as operating leases. Some of these assets are leased on a month-to-month basis and the leases can be terminated without penalty. The lease term for these types of leases is determined by the length of the underlying customer contract or based on the judgment of management. These leases are treated as short-term as the cumulative ROU is less than 12 months over the term of the contract. The Company uses the leased revenue equipment for the same operational purposes as its owned equipment.
Real Estate
We have operating and finance leases for office space, terminal facilities, and drop yards. Many of our leases contain charges for common area maintenance or other miscellaneous expenses that are updated based on landlord estimates. Due to this variability, the cash flows associated with these charges are not included in the minimum lease payments used in determining the ROU asset and associated lease liability.
Some of our real estate leases contain options to renew or extend the lease or terminate the lease before the expiration date. These options are factored into the determination of the lease term and lease payments when their exercise is considered to be reasonably certain.
/11
Information Technology and Other Equipment
The Company leases information technology and other equipment, primarily servers and copiers, in the course of our operations.
Components of Lease Expense
iThe components of lease expense for the three and nine months ended September 30, 2019 are as follows:
| | | | | | |
| | Three Months Ended | | Nine Months Ended | ||
| | | ||||
| | (in thousands) | ||||
Operating lease costs |
| $ | i 2,355 |
| $ | i 6,870 |
Finance lease costs: | | | | | | |
Amortization of assets | |
| i 3,903 | |
| i 9,553 |
Interest on lease liabilities | |
| i 671 | |
| i 1,820 |
Total finance lease costs | |
| i 4,574 | |
| i 11,373 |
Variable and short-term lease costs | |
| i 71 | |
| i 844 |
Total lease costs |
| $ | i 7,000 |
| $ | i 19,087 |
iSupplemental information and balance sheet location related to leases is as follows:
i
| | | | |
| | Nine Months Ended | | |
| |
| ||
Operating leases: | | (in thousands) |
| |
Operating lease right-of-use assets |
| $ | i 12,077 | |
| | | | |
Current operating lease obligations | |
| i 7,556 | |
Long-term operating lease obligations | |
| i 4,568 | |
Total operating lease liabilities |
| $ | i 12,124 | |
| | | | |
Finance leases: | | | | |
Property and equipment, at cost | |
| i 127,798 | |
Accumulated amortization | |
| ( i 27,851) | |
Property and equipment, net |
| $ | i 99,947 | |
| | | | |
Current finance lease obligations | |
| i 19,469 | |
Long-term finance lease obligations | |
| i 68,610 | |
|
| $ | i 88,079 | |
| | | | |
Weighted average remaining lease term: | |
| (in months) | |
Operating leases | |
| i 41 months | |
Finance leases | |
| i 45 months | |
| | | | |
Weighted average discount rate: | | | | |
Operating leases | |
| i 4.07 | % |
Finance leases | |
| i 3.37 | % |
/12
Supplemental cash flow information related to leases is as follows:
| | | |
| | Nine Months Ended | |
| | ||
Cash paid for amounts included in measurement of liabilities: | | (in thousands) | |
Operating cash flows from operating leases |
| $ | i 48 |
Operating cash flows from finance leases | | | i 1,820 |
Financing cash flows from finance leases | | | i 10,021 |
| | | |
ROU assets obtained in exchange for lease liabilities: | | | |
Operating leases | | | i 1,393 |
Finance leases | | | i 27,348 |
iMaturities of lease liabilities as of September 30, 2019 are as follows:
i
| | | | | | |
| | Finance Leases | | Operating Leases | ||
| | (in thousands) | ||||
2019 (remaining) | | $ | i 4,690 | | $ | i 1,381 |
2020 | | | i 32,539 | | | i 6,016 |
2021 | | | i 11,777 | | | i 1,680 |
2022 | | | i 11,777 | | | i 1,115 |
2023 | | | i 22,635 | | | i 789 |
Thereafter | | | i 12,297 | | | i 1,394 |
Total lease payments | | | i 95,715 | | | i 12,375 |
Less: Imputed interest | | | ( i 7,636) | | | ( i 251) |
Total lease obligations | | | i 88,079 | | | i 12,124 |
Less: Current obligations | | | ( i 19,469) | | | ( i 7,556) |
Long-term lease obligations | | $ | i 68,610 | | $ | i 4,568 |
/OTHER COMMITMENTS
As of September 30, 2019, the Company had $ i 29.2 million in noncancellable commitments for purchases of revenue and non-revenue equipment. We anticipate funding these commitments with cash flows from operating and financing activities.
RELATED PARTY LEASE
In the normal course of business, the Company leases office and shop space from a related party under a monthly operating lease. Rent expense for this space was approximately $ i 0.03 million and $ i 0.1 million for the three and nine months ended September 30, 2019. This expense is included in the "Operations and maintenance" line item in the accompanying consolidated statement of (loss) income and comprehensive (loss) income.
SALE-LEASEBACK TRANSACTIONS
In July 2019, the Company entered into a sale-leaseback transaction whereby it sold tractors for approximately $ i 2.3 million and concurrently entered into a finance lease agreement for the sold tractors with a i five year term. Under the lease agreement, the Company paid an initial monthly payment of approximately $ i 0.03 million. At the end of the lease, the Company has the option to purchase the tractors. This transaction does not qualify for sale-leaseback accounting due to the option to repurchase the tractors and is therefore treated as a financing obligation.
In April 2019, the Company entered into a sale-leaseback transaction whereby it sold tractors for approximately $ i 10.5 million and concurrently entered into a finance lease agreement for the sold tractors with a i five year term. Under the lease agreement, the Company paid an initial monthly payment of approximately $ i 0.1 million. At the end of the lease, the Company has the option to purchase the tractors for the greater of fair market value or i 32.5% of the original cost. This
13
transaction does not qualify for sale-leaseback accounting due to the option to repurchase the tractors and is therefore treated as a financing obligation.
iNOTE 11 – INCOME TAXES
During the three months ended September 30, 2019 and 2018, the Company’s effective tax rate was i 23.5% and i 27.8%, respectively. During the nine months ended September 30, 2019 and 2018, the Company’s effective tax rate was i 72.3% and i 26.7%, respectively. The Company’s effective tax rate, when compared to the federal statutory rate of i 21%, is primarily affected by state income taxes, net of federal income tax effect for the current year periods, and permanent differences, the most significant of which is the effect of the partially non-deductible per diem pay structure for our drivers. Drivers may elect to receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases the Company’s drivers’ net pay per mile, after taxes, while decreasing gross pay, before taxes. Per diem pay is partially non-deductible by the Company under current IRS regulations. As a result, salaries, wages and employee benefits costs are slightly lower and effective income tax rates are higher than the statutory rate. Due to the partially non-deductible effect of per diem pay, the Company’s tax rate will change based on fluctuations in earnings (losses) and in the number of drivers who elect to receive this pay structure. Generally, as pretax income or loss increases, the impact of the driver per diem program on the Company’s effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pretax income or loss, while in periods where earnings are at or near breakeven the impact of the per diem program on the Company’s effective tax rate can be significant.
Additionally, during 2019 the Company’s tax rate has been negatively affected by vesting of equity-based compensation at a lower stock price than the price at which it was granted, resulting in an increase to tax expense and the effective tax rate.
/
iNOTE 12 – (LOSS) EARNINGS PER SHARE
iThe following table sets forth the computation of basic and diluted (loss) earnings per share:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Numerator: | | (in thousands, except per share amounts) | | ||||||||||
Net (loss) income | | $ | ( i 1,373) | | $ | i 3,300 | | $ | i 129 | | $ | i 6,879 | |
Denominator: | |
|
| |
|
| |
|
| |
|
| |
Denominator for basic earnings per share – weighted average shares | |
| i 8,564 | |
| i 8,223 | |
| i 8,509 | |
| i 8,170 | |
Effect of dilutive securities: | |
|
| |
|
| |
|
| |
|
| |
Employee restricted stock and incentive stock options | |
| — | |
| i 17 | |
| i 13 | |
| i 23 | |
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion | |
| i 8,564 | |
| i 8,240 | |
| i 8,522 | |
| i 8,193 | |
Basic (loss) earnings per share | | $ | ( i 0.16) | | $ | i 0.40 | | $ | i 0.02 | | $ | i 0.84 | |
Diluted (loss) earnings per share | | $ | ( i 0.16) | | $ | i 0.40 | | $ | i 0.02 | | $ | i 0.84 | |
Weighted average anti-dilutive employee restricted stock and incentive stock options | |
| i 509 | |
| i 106 | |
| i 421 | |
| i 72 | |
/
iNOTE 13 – LEGAL PROCEEDINGS
The Company 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 management believes these claims to be 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 financial position or results of operations in any given reporting period.
14
NOTE 14 – RESTRUCTURING, IMPAIRMENT AND OTHER COSTS
On March 7, 2019, Johannes Hugo resigned as Senior Vice President - Trucking Operations. Pursuant to Mr. Hugo’s resignation, the Executive Compensation Committee (the "Committee") approved a separation agreement with Mr. Hugo (the "Hugo Separation Agreement"). Pursuant to the Hugo Separation Agreement, Mr. Hugo received (i) salary continuation through April 6, 2019, (ii) vesting of i 1,934 shares of restricted stock that vested on March 22, 2019, (iii) noncompete payments equal to his then-current base salary for a period of i twelve months subject to ongoing compliance with certain non-competition, non-solicitation, non-disparagement, and confidentiality covenants in favor of the Company, and (iv) a prorated cash payment, if and to the extent earned, under the short term cash incentive compensation program adopted by the Committee for 2019. In addition, the Hugo Separation Agreement contained a customary release of claims in favor of the Company. Total costs associated with Mr. Hugo’s resignation were $ i 0.3 million and were recorded in the "Salaries, wages and employee benefits" line item in the accompanying condensed consolidated statements of (loss) income and comprehensive (loss) income.
In March 2018, the Company announced the retirement of James Craig, the Company’s former Executive Vice President, Chief Commercial Officer, and President – USAT Logistics. Effective March 23, 2018, in connection with Mr. Craig’s retirement, the Committee approved a separation agreement (the "Craig Separation Agreement") with the following terms: (i) salary continuation through May 31, 2018, (ii) non-compete payments equal to his current salary for a period of i twelve months subject to ongoing compliance with certain non-competition, non-solicitation, non-disparagement, and confidentiality covenants in favor of the Company, (iii) a prorated cash payment under the short-term cash incentive compensation program adopted by the Committee for 2018, and (iv) accelerated vesting of i 5,488 shares of time-vested restricted stock of the Company scheduled to vest on July 30, 2018 and i 5,488 shares of performance-vested restricted stock of the Company scheduled to vest on July 30, 2018 depending on performance relative to USAT Logistics performance goals. Total costs associated with Mr. Craig’s retirement were $ i 0.7 million and were recorded in the "Salaries, wages and employee benefits" line item in the accompanying condensed consolidated statements of (loss) income and comprehensive (loss) income. At September 30, 2019, all costs associated with the Craig Separation Agreement have been paid.
The following tables summarize the Company’s liabilities, charges, and cash payments related to executive severance agreements made during the three and nine months ended September 30, 2019 and 2018:
i
| | | | | | | | | | | | | | | |
|
| Accrued |
| | |
| | |
| | |
| Accrued | ||
| | Balance | | | | | | | | | | | Balance | ||
| | December 31, | | Costs | | | | | | | | ||||
| | 2018 | | Incurred | | Payments | | Expenses/Charges | | 2019 | |||||
| | (in thousands) | |||||||||||||
Severance costs included in salaries, wages and employee benefits | | $ | i 247 | | $ | i 319 | | $ | ( i 384) | | $ | i — | | $ | i 182 |
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
Costs incurred | | (in thousands) | | ||||||||||
Trucking | | $ | i — | | $ | i — | | $ | i 319 | | $ | i 484 | |
USAT Logistics | |
| i — | |
| i — | |
| i — | |
| i 227 | |
Total | | $ | i — | | $ | i — | | $ | i 319 | | $ | i 711 | |
/ i
15
NOTE 15 – CORRECTION OF IMMATERIAL ERRORS
In connection with the preparation of our condensed consolidated financial statements for the three months ended March 31, 2019, we identified immaterial errors related to the recognition of certain income and expenses in the prior quarterly and annual periods. In accordance with U.S. Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No. 99, "Materiality," and SAB No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," we evaluated the errors and determined that the related impact was not material to our financial statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our results of operations for the three months ended March 31, 2019. Accordingly, we have adjusted our condensed consolidated balance sheet at December 31, 2018. The impact of the errors on the Company’s three months ended March 31, 2018 condensed consolidated statements of (loss) income and comprehensive (loss) income, consolidated statement of cash flows, and retained earnings were deemed to be immaterial and will be adjusted in conjunction with our annual report on Form 10-K for the year ended December 31, 2019. We will also correct previously reported financial information for such immaterial errors in our future filings, as applicable.
iThe effects of the adjustment on the individual line items within our condensed consolidated balance sheet at December 31, 2018 are as follows:
| | | | | | | | | |
| | ||||||||
| | As Reported | | Adjustments | | As Adjusted | |||
| (in thousands) | ||||||||
Accounts receivable, net |
| $ | i 56,003 |
| $ | i 1,186 |
| $ | i 57,189 |
Other receivables | |
| i 5,104 | |
| i 584 | | | i 5,688 |
Prepaid expenses and other current assets | |
| i 7,224 | |
| i 451 | | | i 7,675 |
Accounts payable | |
| i 22,453 | |
| i 1,029 | | | i 23,482 |
Accrued expenses | |
| i 8,977 | |
| i 389 | | | i 9,366 |
Retained earnings | |
| i 77,664 | |
| i 803 | | | i 78,467 |
Total stockholders' equity | |
| i 80,470 | |
| i 803 | | | i 81,273 |
16
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Forward-Looking Statements
This report contains certain statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, (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:
| ● | any projections of earnings, revenue, costs, or other financial items; |
| ● | any statement of projected future operations or processes; |
| ● | any statement of plans, strategies, goals, and objectives of management for future operations; |
| ● | any statement concerning acquisitions, or 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 Quarterly Report on Form 10-Q, statements relating to:
| ● | future driver market, |
| ● | future ability to grow market share, |
| ● | future driver and customer-facing employee compensation, |
| ● | future ability and cost to recruit and retain drivers and customer-facing employees, |
| ● | future asset utilization, |
| ● | the amount, timing and price of future acquisitions and dispositions of revenue equipment, size and age of the Company’s fleet, mix of fleet between Company-owned and independent contractors and anticipated gains or losses resulting from dispositions, |
| ● | future depreciation and amortization expense, including useful lives and salvage values of equipment and intangible assets, |
| ● | future safety performance, |
| ● | future profitability, |
| ● | future industry capacity, |
| ● | future pricing rates and freight network, |
| ● | future fuel prices and surcharges, fuel efficiency and hedging arrangements, |
| ● | future insurance and claims and litigation expense, |
| ● | future salaries, wages and employee benefits costs, |
| ● | future purchased transportation use and expense, |
| ● | future operations and maintenance costs, |
| ● | future use of derivative financial instruments and the impact of increasing interest rates and diesel fuel costs, |
| ● | future asset sales of non-revenue assets, |
| ● | our intention about the payment of dividends, |
| ● | inflation, |
| ● | future indebtedness, |
| ● | future liquidity and borrowing availability and capacity, |
| ● | the impact of pending and future litigation and claims, |
| ● | future availability and compliance with covenants under our revolving credit facility, |
| ● | expected amount and timing of capital expenditures, |
| ● | expected liquidity and sources of capital resources, including the mix of financing and operating leases, |
| ● | future size of the independent contractor fleet, and |
| ● | future income tax rates |
17
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," "intends," "plans," "goals," "may," "will," "would," "should," "could," "potential," "continue," "future" and similar terms and phrases. Forward-looking statements are based on currently available operating, financial and competitive information. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled "Item 1.A, Risk Factors," in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and other filings with the Securities and Exchange Commission (the "SEC").
All such forward-looking statements speak only as of the date of this report. You are cautioned not to place undue reliance on such forward-looking statements. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in management’s expectations with regard thereto or any change in the events, conditions or circumstances on which any such information is based, except as required by law.
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" or similar terms refer to USA Truck Inc. and its subsidiaries.
Overview
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to help the reader more fully understand the operations and present business environment of USA Truck Inc. MD&A is provided as a supplement to, and should be read in conjunction with, the condensed consolidated financial statements and notes thereto and other financial information that appears elsewhere in this report. This overview summarizes the MD&A, which includes the following sections:
Our Business – a general description of our business, the organization of our operations and the service offerings that comprise our operations.
Results of Operations – an analysis of the consolidated results of operations for the periods presented in the condensed consolidated financial statements included in this filing and a discussion of seasonality, the potential impact of inflation and fuel availability and cost.
Liquidity and Capital Resources – an analysis of cash flows, sources and uses of cash, debt, equity and contractual obligations.
Our Business
USA Truck offers a broad range of truckload motor carrier and freight brokerage 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 motor carrier services, in which volumes typically are not contractually committed, and dedicated contract motor carrier 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, subject to certain cancellation rights, and (ii) USAT Logistics, consisting of freight brokerage, logistics, and rail intermodal service offerings.
The Trucking segment provides one-way truckload transportation, including dedicated services, of various products, goods and materials. The Trucking segment primarily uses its own purchased or leased tractors and trailers to provide services to customers and is commonly referred to as "asset-based" trucking. The Company’s USAT Logistics services match customer shipments with available equipment of authorized third-party motor carriers and other service providers and provide services that complement the Company’s Trucking operations. USAT Logistics provides these services primarily to existing Trucking customers, many of whom prefer to rely on a single service provider, or a small group of service providers, to provide all their transportation solutions.
18
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. The Company supplements its Trucking operating revenue by charging for fuel surcharge and ancillary services such as stop-off charges, loading and unloading activities, tractor and trailer detention, expedited charges, repositioning charges and other similar services.
Operating expenses that have a major impact on the profitability of the Trucking segment fall into two categories: variable and fixed. Variable costs, or mostly variable costs, constitute the majority of the costs associated with transporting freight for customers, and include driver wages and benefits, fuel and fuel taxes, payments to independent contractors for purchased transportation, operating and maintenance expense and insurance and claims expense. These costs vary primarily according to miles operated, but also have controllable components based on percentage of compensated miles, shop and dispatch efficiency, and safety and claims experience.
The most significant fixed costs, or mostly fixed costs, include the capital costs of our assets (depreciation, rent and interest), compensation of non-driving employees and portions of insurance and claims expenses. These expenses are partially controllable through management of fleet size and facilities infrastructure, headcount efficiency, and operating safely.
Fuel and fuel tax expense can fluctuate significantly with changes in diesel fuel prices and is one of our most volatile variable expenses. To mitigate the Company’s exposure to fuel price increases, it recovers from its customers fuel surcharges that historically have recouped 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 the Company’s fuel surcharge program mitigates some exposure to rising fuel costs, the Company continues to have exposure to increasing fuel costs related to empty miles, out-of-route 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 higher fuel costs, 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 in fuel surcharge revenue as it pays for fuel. In periods of declining prices, the opposite is true.
The key statistics used to evaluate Trucking segment performance, net of fuel surcharge revenue, include (i) base revenue per available tractor per week, (ii) base revenue per loaded mile, (iii) loaded miles per available tractor per week, (iv) deadhead percentage, (v) average loaded miles per trip, (vi) average number of available tractors and (vii) adjusted operating ratio. In general, the Company’s loaded miles per available tractor per week, base revenue per loaded mile and deadhead percentage are affected by industry-wide freight volumes, industry-wide trucking capacity and the competitive environment, which factors are mostly beyond the Company’s control, as well as by its sales and marketing efforts, service levels and efficiency of its operations, over which the Company has significant control.
The USAT Logistics segment is non-asset based and is dependent upon skilled employees, information systems and third-party capacity providers. The largest expense related to the USAT Logistics segment is purchased transportation expense. Other operating expenses consist primarily of salaries, wages and employee benefits. The Company evaluates the financial performance of the USAT Logistics segment by reviewing gross margin (USAT Logistics operating revenue less USAT Logistics purchased transportation expense) and the gross margin percentage (USAT Logistics operating revenue less USAT Logistics purchased transportation expense expressed as a percentage of USAT Logistics operating revenue). The gross margin can be impacted by the rates charged to customers and the costs of securing third-party capacity. USAT Logistics 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.
We plan to continue our focus on improving results through disciplined network management and pricing, enhanced partnerships with customers, and improved execution in our day-to-day operations, as well as our ongoing safety initiatives. By focusing on these key objectives, management believes it will make progress on its goals of improving the Company’s operating performance and increasing stockholder value.
19
Results of Operations
The following table sets forth the condensed consolidated statements of (loss) income and comprehensive (loss) income in dollars and percentage of consolidated operating revenue and the percentage increase or decrease in the dollar amounts of those items compared to the prior year.
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | | ||||||||||||
| | 2019 | | 2018 | | | | ||||||||||
|
| | |
| |
| Adjusted |
| | |
| |
| Adjusted |
| Change | |
| | | | | Operating | | Operating | | | | | Operating | | Operating | | in Dollar | |
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | Amounts | |
|
| $ |
| % |
| % |
| $ |
| % |
| % |
| % | | ||
| | (in thousands) | | ||||||||||||||
Base revenue | | $ | 114,909 |
| 87.8 | |
| | $ | 116,601 |
| 87.9 | |
| | (1.5) | % |
Fuel surcharge revenue | |
| 16,015 |
| 12.2 | |
| |
| 15,982 |
| 12.1 | |
| | 0.2 | |
Operating revenue | | | 130,924 |
| 100.0 | |
| | | 132,583 |
| 100.0 | |
| | (1.3) | |
| | | | | | | | | | | | | | | | | |
Operating expenses | |
| 130,958 |
| 100.0 | | 99.7 | |
| 126,780 |
| 95.6 | | 95.0 | | 3.3 | |
Operating (loss) income | |
| (34) |
| (0.0) | | | |
| 5,803 |
| 4.4 | | | | (100.6) | |
| | | | | | | | | | | | | | | | | |
Other expenses: | |
|
|
|
| |
| |
|
|
|
| |
| | | |
Interest expense | |
| 1,615 |
| 1.2 | |
| |
| 811 |
| 0.6 | |
| | 99.1 | |
Other, net | |
| 145 |
| 0.1 | |
| |
| 420 |
| 0.3 | |
| | (65.5) | |
Total other expenses, net | |
| 1,760 |
| 1.3 | |
| |
| 1,231 |
| 0.9 | |
| | 43.0 | |
(Loss) income before income taxes | |
| (1,794) |
| (1.4) | |
| |
| 4,572 |
| 3.4 | |
| | (139.2) | |
Income tax (benefit) expense | |
| (421) |
| (0.3) | |
| |
| 1,272 |
| 1.0 | |
| | (133.1) | |
| | | | | | | | | | | | | | | | | |
Consolidated net (loss) income | | $ | (1,373) |
| (1.0) | |
| | $ | 3,300 |
| 2.5 | |
| | (141.6) | % |
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | | | ||||||||||||
| | 2019 | | 2018 | | | | ||||||||||
|
| | |
| |
| Adjusted |
| | |
| |
| Adjusted |
| Change | |
| | | | | Operating | | Operating | | | | | Operating | | Operating | | in Dollar | |
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | Amounts | |
|
| $ |
| % |
| % |
| $ |
| % |
| % |
| % | | ||
| | (in thousands) | | ||||||||||||||
Base revenue | | $ | 350,163 | | 87.9 | |
| | $ | 345,987 | | 88.0 | |
| | 1.2 | % |
Fuel surcharge revenue | | | 48,357 | | 12.1 | |
| | | 46,990 | | 12.0 | |
| | 2.9 | |
Operating revenue | | | 398,520 |
| 100.0 | |
| | | 392,977 |
| 100.0 | |
| | 1.4 | |
| | | | | | | | | | | | | | | | | |
Operating expenses | | | 392,650 | | 98.5 | | 97.9 | | | 380,471 | | 96.8 | | 96.4 | | 3.2 | |
Operating income | | | 5,870 | | 1.5 | | | | | 12,506 | | 3.2 | | | | (53.1) | |
| | | | | | | | | | | | | | | | | |
Other expenses: | | |
| |
| |
| | |
| |
| |
| | | |
Interest expense | | | 4,951 | | 1.3 | |
| | | 2,462 | | 0.6 | |
| | 101.1 | |
Other, net | | | 453 | | 0.1 | |
| | | 653 | | 0.2 | |
| | (30.6) | |
Total other expenses, net | | | 5,404 |
| 1.4 | |
| | | 3,115 |
| 0.8 | |
| | 73.5 | |
Income before income taxes | | | 466 |
| 0.1 | |
| | | 9,391 |
| 2.4 | |
| | (95.0) | |
Income tax expense | | | 337 | | 0.1 | |
| | | 2,512 | | 0.6 | |
| | (86.6) | |
| | | | | | | | | | | | | | | | | |
Consolidated net income | | $ | 129 |
| 0.0 | |
| | $ | 6,879 |
| 1.8 | |
| | (98.1) | % |
| (1) | Adjusted operating ratio is calculated as operating expenses excluding severance costs included in salaries, wages and employee benefits, restructuring, impairment and other costs (reversal), amortization of acquisition related intangibles, and transaction costs related to acquisition, net of fuel surcharge revenue, as a percentage of operating revenue excluding fuel surcharge revenue. Adjusted operating ratio is a non-GAAP financial measure. See "Use of Non-GAAP Financial Information", "Consolidated Reconciliations" and "Segment Reconciliations" below for the uses and limitations associated with adjusted operating ratio and other non-GAAP financial measures. |
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Use of Non-GAAP Financial Information
The Company uses the terms "adjusted operating ratio", "adjusted earnings (loss) per diluted share", and "adjusted operating income (loss)" throughout this MD&A. Adjusted operating ratio, adjusted earnings (loss) per diluted share, and adjusted operating income (loss), as defined here, are non-GAAP financial measures as defined by the SEC. Management uses adjusted operating ratio, adjusted earnings (loss) per diluted share, and adjusted operating income (loss) as supplements to the Company’s GAAP results in evaluating certain aspects of its business, as discussed below.
Adjusted operating ratio is calculated as operating expenses excluding severance costs included in salaries, wages and employee benefits, restructuring, impairment and other costs (reversal), amortization of acquisition related intangibles, and transaction costs relating to acquisition, net of fuel surcharge revenue, as a percentage of operating revenue excluding fuel surcharge revenue. Adjusted earnings (loss) per diluted share is defined as earnings (loss) per diluted share plus the per share impact of severance costs included in salaries, wages and employee benefits, restructuring, impairment and other costs, amortization of acquisition related intangibles, and transaction costs related to acquisition, plus or minus the per share tax impact of those adjustments using a statutory income tax rate. The per share impact of each item is determined by dividing it by the weighted average diluted shares outstanding. Adjusted operating income (loss) is defined as operating income (loss) excluding severance costs included in salaries, wages and employee benefits, restructuring, impairment and other costs, amortization of acquisition related intangibles, and transaction costs related to acquisition.
The Company’s chief operating decision-maker focuses on adjusted operating ratio, adjusted earnings (loss) per diluted share and adjusted operating income (loss) as indicators of the Company’s performance from period to period.
Management believes removing the impact of the above described items from the Company’s operating results affords a more consistent basis for comparing results of operations. Management believes its presentation of adjusted operating ratio, adjusted earnings (loss) per diluted share and adjusted operating income (loss) is useful to investors and other users because it provides them the same information that we use internally for purposes of assessing our core operating performance.
Adjusted operating ratio and adjusted earnings (loss) per diluted share are not substitutes 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, adjusted earnings (loss) per diluted share and adjusted operating income (loss). Although management believes that adjusted operating ratio, adjusted earnings (loss) per diluted share and adjusted operating income (loss) can make an evaluation of the Company’s operating performance more consistent because these measures remove items that, in management’s opinion, do not reflect its core operating performance, other companies in the transportation industry may define adjusted operating ratio, adjusted earnings (loss) per diluted share and adjusted operating income (loss) differently. As a result, it may be difficult to use adjusted operating ratio, adjusted earnings (loss) per diluted share and adjusted operating income (loss) or similarly named non-GAAP measures that other companies may use, to compare the performance of those companies to USA Truck’s performance.
Pursuant to the requirements of Regulation S-K, reconciliations of non-GAAP financial measures to GAAP financial measures have been provided in the tables below.
21
Consolidated Reconciliations
Adjusted operating ratio:
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | | |||||||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
| | (in thousands) | | ||||||||||
Operating revenue | | $ | 130,924 | | $ | 132,583 | | $ | 398,520 | | $ | 392,977 | |
Less: Fuel surcharge revenue | | | (16,015) | | | (15,982) | | | (48,357) | | | (46,990) | |
Base revenue | | | 114,909 | | | 116,601 | | | 350,163 | | | 345,987 | |
Operating expense | |
| 130,958 | |
| 126,780 | |
| 392,650 | |
| 380,471 | |
Adjusted for: | |
|
| |
|
| |
|
| |
|
| |
Severance costs included in salaries, wages, and employee benefits | |
| — | |
| — | |
| (319) | |
| (711) | |
Reversal of restructuring, impairment and other costs | |
| — | |
| — | |
| — | |
| 639 | |
Amortization of acquisition related intangibles | | | (340) | |
| — | |
| (1,043) | |
| — | |
Fuel surcharge revenue | |
| (16,015) | |
| (15,982) | |
| (48,357) | |
| (46,990) | |
Adjusted operating expense | | $ | 114,603 | | $ | 110,798 | | $ | 342,931 | | $ | 333,409 | |
Operating (loss) income | | $ | (34) | | $ | 5,803 | | $ | 5,870 | | $ | 12,506 | |
Adjusted operating income | | $ | 306 | | $ | 5,803 | | $ | 7,232 | | $ | 12,578 | |
Operating ratio | | | 100.0 | % | | 95.6 | % | | 98.5 | % | | 96.8 | % |
Adjusted operating ratio | |
| 99.7 | % | | 95.0 | % | | 97.9 | % | | 96.4 | % |
Adjusted earnings (loss) per diluted share:
| | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | ||||||||
| | September 30, | | |||||||||
| | 2019 |
| 2018 |
| 2019 |
| 2018 | ||||
| | | ||||||||||
(Loss) earnings per diluted share |
| $ | (0.16) |
| $ | 0.40 |
| $ | 0.02 |
| $ | 0.84 |
Adjusted for: | | | | | | | | | | | | |
Severance costs included in salaries, wages and employee benefits | |
| — | |
| — | |
| 0.04 | |
| 0.09 |
Reversal of restructuring, impairment and other costs | |
| — | |
| — | |
| — | |
| (0.08) |
Amortization of acquisition related intangibles | |
| 0.04 | |
| — | |
| 0.12 | |
| — |
Transaction costs related to acquisition | | | — | |
| 0.04 | |
| — | |
| 0.04 |
Income tax effect of adjustments | |
| (0.01) | |
| (0.01) | |
| (0.04) | |
| (0.01) |
Adjusted (loss) earnings per diluted share |
| $ | (0.13) |
| $ | 0.43 |
| $ | 0.14 |
| $ | 0.88 |
22
Segment Reconciliations
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
Trucking Segment |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
| | (in thousands) | | ||||||||||
Operating revenue | | $ | 93,354 | | $ | 85,529 | | $ | 283,963 | | $ | 249,831 | |
Intersegment activity | |
| 233 | |
| 1,272 | |
| 1,002 | |
| 1,501 | |
Operating revenue (before intersegment eliminations) | |
| 93,587 | |
| 86,801 | |
| 284,965 | |
| 251,332 | |
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (12,274) | |
| (12,002) | |
| (37,073) | |
| (35,324) | |
Base revenue | | $ | 81,313 | | $ | 74,799 | | $ | 247,892 | | $ | 216,008 | |
Operating expense (before intersegment eliminations) | | $ | 93,865 | | $ | 84,196 | | $ | 282,797 | | $ | 247,038 | |
Adjusted for: | |
|
| |
|
| |
|
| |
|
| |
Severance costs included in salaries, wages, and employee benefits | |
| — | | | — | | | (319) | | | (484) | |
Reversal of restructuring, impairment and other costs | |
| — | | | — | | | — | | | 587 | |
Amortization of acquisition related intangibles | |
| (340) | | | — | | | (1,043) | | | — | |
Fuel surcharge revenue | |
| (12,274) | |
| (12,002) | |
| (37,073) | |
| (35,324) | |
Adjusted operating expense | | $ | 81,251 | | $ | 72,194 | | $ | 244,362 | | $ | 211,817 | |
Operating (loss) income | | $ | (278) | | $ | 2,605 | | $ | 2,168 | | $ | 4,294 | |
Adjusted operating income | | $ | 62 | | $ | 2,605 | | $ | 3,530 | | $ | 4,191 | |
Operating ratio | |
| 100.3 | % |
| 97.0 | % |
| 99.2 | % |
| 98.3 | % |
Adjusted operating ratio | |
| 99.9 | % |
| 96.5 | % |
| 98.6 | % |
| 98.0 | % |
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 30, | | September 30, | | ||||||||
USAT Logistics Segment |
| 2019 |
| 2018 |
| 2019 |
| 2018 |
| ||||
| | (in thousands) | | ||||||||||
Operating revenue | | $ | 37,570 | | $ | 47,054 | | $ | 114,557 | | $ | 143,146 | |
Intersegment activity | |
| 1,795 | |
| 2,082 | |
| 5,833 | |
| 3,381 | |
Operating revenue (before intersegment eliminations) | |
| 39,365 | |
| 49,136 | |
| 120,390 | |
| 146,527 | |
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (3,991) | |
| (4,283) | |
| (11,920) | |
| (12,086) | |
Base revenue | | $ | 35,374 | | $ | 44,853 | | $ | 108,470 | | $ | 134,441 | |
Operating expense (before intersegment eliminations) | | $ | 39,121 | | $ | 45,938 | | $ | 116,688 | | $ | 138,315 | |
Adjusted for: | |
|
| |
|
| |
|
| |
|
| |
Severance costs included in salaries, wages, and employee benefits | |
| — | | | — | | | — | | | (227) | |
Reversal of restructuring, impairment and other costs | | | — | | | — | | | — | | | 52 | |
Fuel surcharge revenue | |
| (3,991) | |
| (4,283) | |
| (11,920) | |
| (12,086) | |
Adjusted operating expense | | $ | 35,130 | | $ | 41,655 | | $ | 104,768 | | $ | 126,054 | |
Operating income | | $ | 244 | | $ | 3,198 | | $ | 3,702 | | $ | 8,212 | |
Adjusted operating income | | $ | 244 | | $ | 3,198 | | $ | 3,702 | | $ | 8,387 | |
Operating ratio | |
| 99.4 | % |
| 93.5 | % |
| 96.9 | % |
| 94.4 | % |
Adjusted operating ratio | |
| 99.3 | % |
| 92.9 | % |
| 96.6 | % |
| 93.8 | % |
23
Key Operating Statistics by Segment
| | | | | | | | | | | | | |
| Three Months Ended | | | Nine Months Ended | | ||||||||
| September 30, | | | | |||||||||
| 2019 | | 2018 | |
| 2019 | | 2018 | | ||||
Trucking: | (in thousands) | | |||||||||||
Operating revenue (before intersegment eliminations) (in thousands) | $ | 93,587 | | $ | 86,801 | | | $ | 284,965 | | $ | 251,332 | |
Operating (loss) income (1) (in thousands) | $ | (278) | | $ | 2,605 | | | $ | 2,168 | | $ | 4,294 | |
Adjusted operating income (2) (in thousands) | $ | 62 | | $ | 2,605 | | | $ | 3,530 | | $ | 4,191 | |
Operating ratio (3) |
| 100.3 | % |
| 97.0 | % | |
| 99.2 | % |
| 98.3 | % |
Adjusted operating ratio (4) |
| 99.9 | % |
| 96.5 | % | |
| 98.6 | % |
| 98.0 | % |
Total miles (5) (in thousands) |
| 44,850 | |
| 38,171 | | |
| 132,297 | |
| 116,274 | |
Deadhead percentage (6) |
| 13.5 | % |
| 13.8 | % | |
| 13.2 | % |
| 13.3 | % |
Base revenue per loaded mile | $ | 2.097 | | $ | 2.237 | | | $ | 2.159 | | $ | 2.130 | |
Average number of seated tractors |
| 1,862 | |
| 1,534 | | |
| 1,815 | |
| 1,542 | |
Average number of available tractors (7) |
| 1,991 | |
| 1,641 | | |
| 1,941 | |
| 1,633 | |
Average number of in-service tractors (8) |
| 2,020 | |
| 1,672 | | |
| 1,973 | |
| 1,664 | |
Loaded miles per available tractor per week | | 1,498 | | | 1,526 | | | | 1,517 | | | 1,583 | |
Base revenue per available tractor per week | $ | 3,142 | | $ | 3,415 | | | $ | 3,275 | | $ | 3,370 | |
Average loaded miles per trip | | 488 | | | 516 | | | | 491 | | | 526 | |
| | | | | | | | | | | | | |
USAT Logistics: |
| | |
| | | |
| | |
| | |
Operating revenue (before intersegment eliminations) (in thousands) | $ | 39,365 | | $ | 49,136 | | | $ | 120,390 | | $ | 146,527 | |
Operating income (1) (in thousands) | $ | 244 | | $ | 3,198 | | | $ | 3,702 | | $ | 8,212 | |
Adjusted operating income (2) (in thousands) | $ | 244 | | $ | 3,198 | | | $ | 3,702 | | $ | 8,387 | |
Gross margin (9) (in thousands) | $ | 4,822 | | $ | 8,338 | | | $ | 19,041 | | $ | 23,735 | |
Gross margin percentage (10) |
| 12.2 | % |
| 17.0 | % | |
| 15.8 | % |
| 16.2 | % |
Load count (in thousands) |
| 30.9 | |
| 28.6 | | |
| 87.4 | |
| 85.2 | |
| (1) | Operating (loss) income is calculated by deducting operating expenses (before intersegment eliminations) from operating revenue (before intersegment eliminations). |
| (2) | Adjusted operating income is calculated by deducting operating expenses (before intersegment eliminations) excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, amortization of acquisition related intangibles and transaction costs related to acquisition, net of fuel surcharge revenue from operating revenue (before intersegment eliminations), net of fuel surcharge revenue. |
| (3) | Operating ratio is calculated as operating expenses (before intersegment eliminations) as a percentage of operating revenue (before intersegment eliminations). |
| (4) | Adjusted operating ratio is calculated as operating expenses (before intersegment eliminations) excluding severance costs included in salaries, wages and employee benefits, restructuring, impairment and other costs, amortization of acquisition related intangibles, and transaction costs related to acquisition, net of fuel surcharge revenue, as a percentage of operating revenue (before intersegment eliminations) excluding fuel surcharge revenue. |
| (5) | Total miles include both loaded and empty miles. |
| (6) | Deadhead percentage is calculated by dividing empty miles by total miles. |
| (7) | Available tractors are a) all Company tractors that are available to be dispatched, including available unseated tractors, and b) all tractors in the independent contractor fleet. |
| (8) | In-service tractors include all of the tractors in the Company fleet (Company-operated tractors) and all the tractors in the independent contractor fleet. |
| (9) | Gross margin is calculated by deducting USAT Logistics purchased transportation expense from USAT Logistics operating revenue (before intersegment eliminations). |
| (10) | Gross margin percentage is calculated as gross margin divided by USAT Logistics operating revenue (before intersegment eliminations). |
24
Results of Operations—Segment Review
Trucking operating revenue
During the three months ended September 30, 2019, Trucking operating revenue (before intersegment eliminations) increased 7.8% to $93.6 million, compared to $86.8 million for the same period in 2018. Trucking base revenue (before intersegment eliminations) increased 8.7% to $81.3 million, compared to $74.8 million for the third quarter of 2018. The increase in operating revenue was the result of a 21.4% increase in average number of seated tractors and a 17.5% increase in total miles driven as a result of the Davis Transfer acquisition during the fourth quarter of 2018, offset partially by a 6.3% decrease in base revenue per loaded mile.
During the nine months ended September 30, 2019, Trucking operating revenue (before intersegment eliminations) increased 13.4% to $285.0 million, compared to $251.3 million for the same period of 2018. Trucking base revenue increased 14.8% to $247.9 million, from $216.0 million for the same period in 2018. The changes in operating revenue and base revenue resulted from a 22.0% increase in Trucking shipments, which fueled a 13.8% increase in total miles driven primarily as a result of the Davis Transfer acquisition during the fourth quarter of 2018, a 1.4% increase in base revenue per loaded mile and a 10 basis point improvement in deadhead percentage.
Trucking operating (loss) income
For the third quarter of 2019, Trucking reported an operating loss of ($0.3) million compared to 2.6 million for the same period in 2018. This decrease was stemming from a 11.5% increase in operating expenses (before intersegment eliminations) and a 6.3% decrease in base revenue per loaded mile, offset by the 7.8% increase in operating revenue (before intersegment eliminations) discussed above.
For the nine months ended September 30, 2019, operating income decreased 49.5% to $2.2 million from $4.3 million for the corresponding period in 2018. This change was primarily resulting from the 13.4% change in operating revenue driven by the increase in total miles, additional seated tractors that resulted from the acquisition of Davis Transfer during the fourth quarter of 2018, and 1.4% increase in base revenue per loaded mile.
USAT Logistics operating revenue
For the three months ended September 30, 2019, USAT Logistics operating revenue (before intersegment eliminations) decreased 19.9% to $39.4 million compared to $49.1 million for the same period in 2018. The year-over-year change in operating revenue was the result of a 25.8% decrease in revenue per load, offset by an 8.0% increase in load volume.
For the nine months ended September 30, 2019, operating revenue decreased 17.8% to $120.4 million from $146.5 million, for the corresponding period in 2018, as a result of the 19.8% decrease in revenue per load, offset by a 2.5% increase in load volume.
USAT Logistics operating income
USAT Logistics generated operating income of $0.2 million in the third quarter of 2019, a decrease of $3.0 million, or 92.4%, compared to $3.2 million in the third quarter of 2018. As mentioned above, the 19.9% decrease in operating revenue (before intersegment eliminations) offset by the 8.0% increase in load volume contributed primarily to the drop in operating income.
For the nine months ended September 30, 2019, operating income decreased 54.9% to $3.7 million from $8.2 million for the corresponding period in 2018. This change was the result of the 17.8% decrease in operating revenue (before intersegment eliminations) mentioned above, driven by the decreased revenue per load partially offset by the increased load count and a 15.6% decrease in operating expenses (before intersegment eliminations).
25
Consolidated Operating Expenses
The following table summarizes the consolidated operating expenses 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.
| | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | |
| ||||||||||||
| | 2019 | | 2018 | | % change | | ||||||||||
|
| | |
| |
| Adjusted | | | |
| |
| Adjusted | | |
|
| | | | | Operating | | Operating | | | | | Operating | | Operating | | 2019 to |
|
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | 2018 | |
| | $ | | % | | % | | $ | | % | | % | | % |
| ||
Operating Expenses: | | (dollars in thousands) | | ||||||||||||||
Salaries, wages and employee benefits |
| $ | 32,846 |
| 25.1 | % | 28.6 | % | $ | 31,540 |
| 23.8 | % | 27.0 | % | 4.1 | % |
Fuel and fuel taxes | | | 13,842 |
| 10.6 |
| (1.9) | (1)(2) | | 13,823 |
| 10.4 |
| (1.9) | (1)(2) | 0.1 | |
Depreciation and amortization | | | 9,652 |
| 7.4 |
| 8.1 | (1) | | 6,735 |
| 5.1 |
| 5.8 | | 43.3 | |
Insurance and claims | | | 6,499 |
| 5.0 |
| 5.7 | | | 5,946 |
| 4.5 |
| 5.1 | | 9.3 | |
Equipment rent | | | 2,427 |
| 1.8 |
| 2.1 | | | 2,916 |
| 2.2 |
| 2.5 | | (16.8) | |
Operations and maintenance | | | 8,829 |
| 6.7 |
| 7.6 | | | 8,237 |
| 6.2 |
| 7.1 | | 7.2 | |
Purchased transportation | | | 51,281 |
| 39.2 |
| 44.6 | | | 52,640 |
| 39.7 |
| 45.1 | | (2.6) | |
Operating taxes and licenses | | | 1,218 |
| 0.9 |
| 1.1 | | | 1,136 |
| 0.9 |
| 1.0 | | 7.2 | |
Communications and utilities | | | 967 |
| 0.7 |
| 0.8 | | | 674 |
| 0.5 |
| 0.6 | | 43.5 | |
Gain on disposal of assets, net | | | (696) |
| (0.5) |
| (0.6) | | | (901) |
| (0.7) |
| (0.8) | | (22.8) | |
Impairment of assets held for sale | | | 1 | | 0.0 | | 0.0 | | | — | | — | | — | | N/A | |
Other | | | 4,092 |
| 3.1 |
| 3.6 | | | 4,034 |
| 3.0 |
| 3.5 | | 1.4 | |
Total operating expenses |
| $ | 130,958 |
| 100.0 | % | 99.7 | % | $ | 126,780 |
| 95.6 | % | 95.0 | % | 3.3 | % |
| | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | | |
| ||||||||||||
| | 2019 | | 2018 | | % change | | ||||||||||
|
| | |
| |
| Adjusted | | | |
| |
| Adjusted | | |
|
| | | | | Operating | | Operating | | | | | Operating | | Operating | | 2019 to |
|
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | 2018 | |
| | $ | | % | | % | | $ | | % | | % | | % |
| ||
Operating Expenses: | | (dollars in thousands) | | ||||||||||||||
Salaries, wages and employee benefits |
| $ | 102,742 |
| 25.8 | % | 29.3 | % (1) | $ | 95,423 |
| 24.3 | % | 27.4 | % (1) | 7.7 | % |
Fuel and fuel taxes | | | 41,575 |
| 10.4 |
| (1.9) | (1)(2) | | 41,286 |
| 10.5 |
| (1.6) | (1)(2) | 0.7 | |
Depreciation and amortization | | | 27,595 |
| 6.9 |
| 7.6 | (1) | | 21,392 |
| 5.4 |
| 6.2 | | 29.0 | |
Insurance and claims | | | 20,939 |
| 5.3 |
| 6.0 | | | 16,889 |
| 4.3 |
| 4.9 | | 24.0 | |
Equipment rent | | | 7,715 |
| 1.9 |
| 2.2 | | | 7,785 |
| 2.0 |
| 2.3 | | (0.9) | |
Operations and maintenance | | | 24,583 |
| 6.2 |
| 7.0 | | | 25,111 |
| 6.4 |
| 7.3 | | (2.1) | |
Purchased transportation | | | 148,634 |
| 37.3 |
| 42.4 | | | 157,495 |
| 40.1 |
| 45.5 | | (5.6) | |
Operating taxes and licenses | | | 3,646 |
| 0.9 |
| 1.0 | | | 2,900 |
| 0.7 |
| 0.8 | | 25.7 | |
Communications and utilities | | | 2,453 |
| 0.6 |
| 0.7 | | | 2,064 |
| 0.5 |
| 0.6 | | 18.8 | |
Gain on disposal of assets, net | | | (700) |
| (0.2) |
| (0.2) | | | (1,466) |
| (0.4) |
| (0.4) | | (52.3) | |
Impairment of assets held for sale | | | 368 |
| 0.1 |
| 0.1 | | | — |
| — |
| — | | N/A | |
Reversal of restructuring, impairment and other costs | | | — | | — | | — | | | (639) | | (0.2) | | — | (1) | (100.0) | |
Other | | | 13,100 |
| 3.3 |
| 3.7 | | | 12,231 |
| 3.1 |
| 3.5 | | 7.1 | |
Total operating expenses |
| $ | 392,650 |
| 98.5 | % | 97.9 | % | $ | 380,471 |
| 96.8 | % | 96.4 | % | 3.2 | % |
| (1) | Adjusted operating ratio is calculated as the applicable operating expense excluding severance costs included in salaries, wages, and employee benefits, restructuring, impairment and other costs, amortization of acquisition related intangibles, and transaction costs related to acquisition, net of fuel surcharge revenue, as a percentage of operating revenue excluding fuel surcharge revenue. |
| (2) | Calculated as fuel and fuel taxes, net of fuel surcharge revenue. |
26
Salaries, wages and employee benefits
The increases in salaries, wages and employee benefits expense during the three and nine months ended September 30, 2019 was primarily due to impact of a driver wage increase given in recent quarters paired with increased total revenue miles of 17.5% and 13.8%, respectively, and the impact of the acquisition of Davis Transfer in the fourth quarter of 2018.
The rate of compensation paid to Company drivers per mile has increased in recent periods and we expect this cost will increase in future periods due to driver pay increases, the most recent of which became effective during the third quarter of 2018. This expense item will also be affected by the percentage of Trucking miles operated by independent contractors instead of Company employed drivers.
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. The slight increases in fuel and fuel taxes for the three and nine months ended September 30, 2019 is the result of the 17.5% and 13.8% increases, respectively, in total miles driven when compared to the same periods in 2018, paired with decreases in both quarter and year to date periods in the price per gallon of diesel fuel. The primary reason for the increase in revenue miles was the purchase of Davis Transfer during the fourth quarter of 2018. The Company has undertaken fuel efficiency initiatives, such as installing trailer skirts, idle control, more fuel-efficient engines and implementing driver training programs, which have contributed to improvements in our fuel expense on a cost per Company tractor mile basis.
In future periods, management anticipates the Company’s net fuel expense to fluctuate as a percentage of 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. The Company expects to continue managing its idle time and truck speeds and partnering with customers to adjust fuel surcharge programs to recover a fair portion of rising fuel costs.
Depreciation and amortization and equipment rent
Depreciation and amortization of property and equipment consists primarily of depreciation for Company-owned tractors and trailers and amortization of those financed with finance 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. Equipment rent expenses are those related to revenue equipment under operating leases. 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 USAT Logistics. For the three months ended September 30, 2019, equipment rent expense decreased 16.8%, and remained flat for the nine months ended September 30, 2019, compared to the 2018 period.
Depreciation and amortization expense increased as a percentage of both operating and base revenue for the three and nine months ended September 30, 2019, when compared to the same periods in 2018, due in part to the Davis Transfer acquisition in the fourth quarter 2018 and lower revenues as discussed previously. The current quarter was negatively affected by additional depreciation on certain revenue equipment as a result of the deterioration in pricing in the used equipment market. The Company intends to continue it’s focus on improving asset utilization, matching customer demand and strengthening load profitability initiatives. Further, the acquisition costs of new revenue equipment could increase due to the inclusion of improved safety and fuel efficiency features. As a result, management expects to see an increase in depreciation and amortization expense from new tractors, and expects equipment rent to increase as the use of operating leases increase.
27
Insurance and claims
Insurance and claims expense consists of insurance premium and experience expenses for claims for third-party 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 drivers and independent contractors, the frequency and severity of accidents, trends in the development factors used in the Company’s actuarial developments in prior-year claims, insurance premiums and self-insured amounts. For the three and nine months ended September 30, 2019, insurance and claims expense increased in dollars spent by 9.3% and 24.0%, respectively, and increased as a percentage of both operating and base revenue compared to the prior year periods. These increases were due in part to the operations of Davis Transfer, which was acquired in the fourth quarter of 2018, and to the increased auto liability expenses during the quarter.
The Company expects insurance and claims expense to continue to be variable over the long-term. In addition, insurance carriers have generally raised premiums for many businesses, including those in the trucking industry, and the Company experienced a significant rate increase in its most recent renewal, which was effective October 1, 2019. If the Company continues to experience rate increases, it could find it necessary to raise its self-insured retention levels or decrease its aggregate coverage limits.
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’s 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 facilities. Operations and maintenance expense increased for the three months ended September 30, 2019, when compared to the same period in 2018 due to increased costs of maintaining our fleet. For the nine months ended September 30, 2019, operations and maintenance expense decreased in dollars spent and as a percentage of both operating and base revenue as a result of maintenance cost savings stemming from the purchase of new revenue equipment and from efforts to decrease our dependence on outside repairs in more high volume locations.
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 by the Company, including fuel surcharge reimbursement paid to such parties. For both the three and nine months ended September 30, 2019, purchased transportation expense decreased due to a softening spot market.
Gain on disposal of assets, net
During the three and nine months ended September 30, 2019, gain on disposal of assets, net, decreased when compared to the same periods in 2018, primarily resulting from continued fluctuations in the used equipment market. Management believes this variability may continue through the remainder of 2019 and beyond.
Other expenses
The decrease in other expenses for the three months ended September 30, 2019 was due to cost-savings efforts undertaken by management and decreased recruiting and relocation costs. For the nine months ended September 30, 2019 other expenses increased compared to the 2018 period, as a result of increased professional services.
Interest expense
For the three and nine months ended September 30, 2019, interest expense increased primarily due to increased outstanding borrowings related to the purchase of Davis Transfer during the fourth quarter of 2018, as well as the purchase of new revenue equipment. See Note 9 to the condensed consolidated financial statements for further discussion of the Company’s Credit Facility.
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Income tax (benefit) expense
During the three months ended September 30, 2019 and 2018, the Company’s effective tax rate was 23.5% and 27.8%, respectively. During the nine months ended September 30, 2019 and 2018, the Company’s effective tax rate was 72.3% and 26.7%, respectively. The Company’s effective tax rate, when compared to the federal statutory rate of 21%, 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. Drivers may elect to receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases the Company’s drivers’ net pay per mile, after taxes, while decreasing gross pay, before taxes. Per diem pay is partially non-deductible by the Company under current IRS regulations. As a result, salaries, wages and employee benefits costs are slightly lower and effective income tax rates are higher than the statutory rate. Due to the partially non-deductible effect of per diem pay, the Company’s tax rate will change based on fluctuations in earnings (losses) and in the number of drivers who elect to receive this pay structure. Generally, as pretax income or loss increases, the impact of the driver per diem program on the Company’s effective tax rate decreases, because aggregate per diem pay becomes smaller in relation to pretax income or loss, while in periods where earnings are at or near breakeven the impact of the per diem program on the Company’s effective tax rate can be significant. Due to the effect of the non-deductible per diem payments, the Company’s tax rate will fluctuate in future periods based on fluctuations in earnings (losses) and in the number of drivers who elect to participate in the per diem program.
When the result of the expected annual effective tax rate is not deemed reliable and distorts the income tax provision for an interim period, the Company calculates the income tax provision or benefit using the cut-off method, which results in an income tax provision or benefit based solely on the year-to-date pretax income or loss as adjusted for permanent differences on a pro rata basis.
Additionally, during 2019 the Company’s tax rate has been negatively affected by vesting of equity-based compensation at a lower stock price than the price at which it was granted, resulting in an increase to tax expense and the effective tax rate.
Seasonality
In the trucking industry, revenue typically follows a seasonal pattern for various commodities and customer businesses. While peak freight demand has historically occurred in the months of September, October and November, no assurance can be provided that our current year experience will reflect this. 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 driving conditions. Revenue can 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.
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 the Company than for its competitors.
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 our profitability and may continue to do so. The Company has not experienced difficulty in maintaining necessary fuel supplies, and in the past has generally 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 average 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 freight rate increases and fuel surcharges, primarily because those items are not available with respect to empty and out-of-route miles and idling time, 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
29
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, for the three and nine months ended September 30, 2019, average diesel fuel prices per gallon as reported by the DOE, decreased 6.7% and 3.1%, respectively, compared to the same periods in 2018.
As of September 30, 2019, the Company did not have any long-term fuel purchase contracts, and has not entered into any fuel hedging arrangements.
Equity
As of September 30, 2019, the Company had total stockholders’ equity of $82.5 million and total debt and lease liabilities of $188.9 million, resulting in a total debt, less cash, to total capitalization ratio of 69.6% compared to 66.2% as of December 31, 2018.
Purchases and Commitments
The Company routinely monitors equipment acquisition needs and adjusts purchase schedules from time to time based on analysis of factors such as new equipment prices, the condition of the used equipment market, demand for freight services, prevailing interest rates, technological improvements, fuel efficiency, equipment durability, equipment specifications, operating performance and the availability of qualified drivers.
As of September 30, 2019, the Company had $29.2 million in noncancellable commitments for the acquisition of both revenue and non-revenue equipment. We anticipate funding these commitments with operating and financing cash flows or leases.
Liquidity and Capital Resources
USA Truck’s business has required, and will continue to require, significant capital investments. In the Company’s Trucking segment, where capital investments are the most substantial, the primary investments are in new revenue equipment and to a lesser extent, in technology and working capital. In the Company’s USAT Logistics segment, where capital investments are generally more 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 Credit Facility, sales of used revenue equipment, and finance 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.
The Credit Facility contains a single financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0 that is triggered in the event excess availability under the Credit Facility falls below 10.0% of the lenders’ total commitments. Also, certain restrictions regarding the Company’s ability to pay dividends, make certain investments, prepay certain indebtedness, execute share repurchase programs and enter into certain acquisitions and hedging arrangements are triggered in the event excess availability under the Credit Facility falls below 20.0% of the lenders’ total commitments.
Long-term debt, financing notes and lease liabilities was $188.9 million at September 30, 2019, an increase of $28.5 million from $160.5 million at December 31, 2018. As of September 30, 2019, the Company had $5.9 million in letters of credit outstanding and had approximately $54.7 million available to borrow under the Credit Facility taking into account borrowing base availability. Net of cash, debt represented 69.6% of total capitalization. Fluctuations in the outstanding balance and related availability under the Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through other sources of financing, as well as the nature and timing of receipt of proceeds from disposals of property and equipment.
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Cash Flows
| | | | | | |
| | Nine Months Ended | ||||
| | |||||
| | 2019 |
| 2018 | ||
| | (in thousands) | ||||
Net cash provided by operating activities |
| $ | 26,434 |
| $ | 28,930 |
Net cash (used in) provided by investing activities | |
| (16,690) | | | 1,312 |
Net cash used in financing activities | |
| (10,449) | | | (30,307) |
Operating Activities – For the nine months ended September 30, 2019, net cash provided by operating activities was $26.4 million, a decrease of approximately $2.5 million compared to the same period in 2018. This change was primarily the result of a $6.8 million decrease in net income, a $8.2 million increase in accounts payables, a $0.8 million decrease in gain on disposal of assets, net, and a $1.3 million decrease in inventories, offset by a $6.2 million increase in depreciation and amortization expense, a $4.4 million increase in receivables, a $2.1 million increase in insurance and claims accruals, a $1.4 million increase in deferred taxes, and a $0.6 million increase in share-based compensation.
Investing Activities – For the nine months ended September 30, 2019, net cash used in investing activities was $16.7 million, compared to $1.3 million provided by investing activities during the same period in 2018. The $18.0 million increase in cash used in investing activities was primarily attributable to a $12.4 million increase in capital expenditures for the 2019 period and a decrease of $5.3 million resulting from proceeds of an operating sale leaseback undertaken in the 2018 period.
Financing Activities – Cash used in financing activities was $10.4 million for the nine months ended September 30, 2019, compared to $30.3 million used by financing activities during the same period in 2018. The $19.9 million change was due to the $12.8 million in proceeds from sale leaseback transactions completed in 2019, increased borrowings of long-term debt of $43.9 million, offset by an increase of $37.8 million in payments on long-term debt. At September 30, 2019, the Company had borrowings of long-term debt, financing notes and lease liabilities of $188.9 million, up from $160.5 million at December 31, 2018.
Debt and Lease Obligations
See Notes 8, 9, and 10 to the condensed consolidated financial statements for further discussion of the Company’s insurance financing, Credit Facility and lease obligations.
Critical Accounting Policies and 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. The Company bases its assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time its financial statements are prepared. Actual results could differ from those estimates, and such differences could be material. During the nine months ended September 30, 2019, there were no material changes to the Company’s critical accounting policies and estimates, compared to those disclosed in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company experiences various market risks, including changes in interest rates and commodity prices. Because the Company’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. The Company’s Credit Facility bears variable interest based on the type of borrowing and on the Agent’s prime rate or the LIBOR plus, in each case, a certain percentage determined based on a pricing grid that is determined quarterly based on the Company’s consolidated fixed charge coverage ratio. As of September 30, 2019, the Company had $76.6
31
million outstanding pursuant to its Credit Facility, excluding outstanding letters of credit of $5.9 million. Assuming the outstanding balance as of September 30, 2019 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 $0.8 million.
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. 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 September 30, 2019, the Company 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, higher fuel costs could contribute to driver shortages in the trucking industry generally by forcing independent contractors to cease operations. Based on the Company’s expected fuel consumption for the remainder of 2019, a 10% increase in the average price per gallon would result in an increase of approximately $1.4 million in fuel expense before taking into account application of the Company’s fuel surcharge program.
ITEM 4. | CONTROLS AND PROCEDURES |
The Company has established disclosure controls and procedures that are designed to ensure that relevant material information, including information pertaining to any consolidated subsidiaries, is made known to the officers who certify the financial reports and to other members of senior management and the board of directors. Management, with the participation of the Principal Executive Officer (the "PEO") and the Principal Financial Officer (the "PFO") conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, the PEO and PFO have concluded that as of September 30, 2019 the Company’s disclosure controls and procedures were effective at a reasonable assurance level to ensure that the information required to be disclosed in the reports filed or submitted by the Company under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including the PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.
There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management has confidence in the Company’s internal controls and procedures. Nevertheless, management, including the PEO and PFO, understand that the Company’s disclosure procedures and controls and its internal controls cannot prevent all errors or intentional fraud. An internal controls system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal controls 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 internal controls systems, no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, have been, or will be, detected.
PART II - OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
The Company 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 liability insurance to cover liabilities in excess of certain self-insured retention levels. Though management believes these claims to be 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 financial position or results of operations in any given reporting period.
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ITEM 1A. | RISK FACTORS |
While the Company attempts to identify, manage and mitigate risks and uncertainties associated with its business, some level of risk and uncertainty will always be present. The section entitled "Item 1A, Risk Factors," in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, describes some of the risks and uncertainties associated with the Company’s business. These risks and uncertainties have the potential to materially affect the Company’s business, financial condition, results of operations, cash flows, projected results and future prospects.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Issuer Purchases of Equity Securities
None.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | MINE SAFETY DISCLOSURES |
None.
ITEM 5. | OTHER INFORMATION |
None.
ITEM 6. | EXHIBITS |
| | |
Exhibit |
| Exhibit |
3.1 | | |
3.2 | | |
4.1 | | |
31.1 | # | |
31.2 | # | |
32.1 | ## | |
32.2 | ## | |
101.INS | | [XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.] |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | | Cover page Interactive Data File formatted as Inline XBRL (contained in Exhibit 101) |
References:
| | |
# | | |
## | | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | |
| | | USA Truck Inc. | |
| | | (Registrant) | |
| | | ||
Date: | | By: | /s/ James D. Reed | |
| | | (Signature) | |
| | | ||
| | | President and Chief Executive Officer | |
| | | ||
| | | ||
Date: | | By: | /s/ Jason R. Bates | |
| | | (Signature) | |
| | | ||
| | | Executive Vice President and Chief Financial Officer | |
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| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 1/31/24 | ||||
| 12/31/19 | 10-K | |||
| Filed on: | 11/4/19 | |||
| 10/17/19 | ||||
| 10/1/19 | ||||
| For Period end: | 9/30/19 | |||
| 6/30/19 | 10-Q | |||
| 4/6/19 | ||||
| 3/31/19 | 10-Q | |||
| 3/22/19 | 4, 4/A | |||
| 3/7/19 | 8-K | |||
| 1/31/19 | 8-K, SC 13G | |||
| 1/1/19 | ||||
| 12/31/18 | 10-K | |||
| 9/30/18 | 10-Q | |||
| 7/30/18 | ||||
| 6/30/18 | 10-Q | |||
| 5/31/18 | ||||
| 3/31/18 | 10-Q | |||
| 3/23/18 | 3, 4, 8-K | |||
| 12/31/17 | 10-K | |||
| 2/15/15 | ||||
| List all Filings | ||||