UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021March 31, 2022
or
☐ | 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: 1-35740
USA TRUCK INC.
(Exact name of registrant as specified in its charter)
| | |
Delaware | | 71-0556971 |
(State or other jurisdiction of incorporation | | (I.R.S. Employer Identification No.) |
or organization) | | |
| | |
3200 Industrial Park Road | | |
Van Buren, Arkansas | | 72956 |
(Address of principal executive offices) | | (Zip Code) |
479-471-2500
(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: |
Common Stock, $0.01 Par Value | USAK | 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. 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). 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 [ ] | Accelerated filer ☒ | Non-accelerated filer [ ] |
Smaller reporting company ☒ | | Emerging growth company ☐ |
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 ☐ No [X]
The number of shares outstanding of the registrant’s common stock, as of July 23, 2021,April 22, 2022, was 8,894,2619,007,867
USA TRUCK INC.
TABLE OF CONTENTS
| | | | | | | | | | | ||||||||
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| Page | ||||||||||
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| | | Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2021 and December 31, 2020 | | 2 | | | Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2022 and December 31, 2021 | | 2 | ||||||||
| | | | 3 | | | | 3 | ||||||||||
| | | | 4 | | | | 4 | ||||||||||
| | | | 5 | | | | 5 | ||||||||||
| | | Notes to Condensed Consolidated Financial Statements (unaudited) | | 6 | | | Notes to Condensed Consolidated Financial Statements (unaudited) | | 6 | ||||||||
| Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 13 | | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 13 | |||||||||||
| | 27 | | | 25 | |||||||||||||
| | 28 | | | 25 | |||||||||||||
| | | | | | | | | ||||||||||
| | 28 | | | 26 | |||||||||||||
| | 28 | | | 26 | |||||||||||||
| | 28 | | | 26 | |||||||||||||
| | 28 | | | 26 | |||||||||||||
| | 28 | | | 26 | |||||||||||||
| | 28 | | | 26 | |||||||||||||
| | 29 | | | 27 | |||||||||||||
| | | | 30 | | | | 28 |
PART I – FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
USA TRUCK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| | | | | | | | | | |
Assets | June 30, 2021 | | December 31, 2020 | March 31, 2022 | | December 31, 2021 | ||||
Current assets: | (in thousands, except share data) | (in thousands, except share data) | ||||||||
Cash and restricted cash (restricted cash of $117 and $243, respectively) | $ | 2,014 | | $ | 325 | |||||
Accounts receivable, net of allowance for doubtful accounts of $548 and $617, respectively |
| 80,061 | |
| 63,984 | |||||
Other receivables |
| 4,193 | |
| 2,873 | |||||
Cash and restricted cash (restricted cash of $8,567 and $405, respectively) | $ | 20,593 | | $ | 1,352 | |||||
Receivables, net of allowance for doubtful accounts of $278 and $490, respectively |
| 109,856 | |
| 100,166 | |||||
Inventories |
| 1,397 | |
| 975 |
| 1,300 | |
| 1,387 |
Assets held for sale |
| — | |
| 2,635 | |||||
Prepaid expenses and other current assets |
| 6,475 | |
| 8,749 |
| 9,864 | |
| 10,103 |
Total current assets |
| 94,140 | |
| 79,541 |
| 141,613 | |
| 113,008 |
Property and equipment: |
|
| |
|
|
|
| |
|
|
Land and structures |
| 34,120 | |
| 33,488 |
| 34,274 | |
| 34,266 |
Revenue equipment |
| 296,551 | |
| 305,509 |
| 318,339 | |
| 316,492 |
Service, office and other equipment |
| 30,604 | |
| 30,331 |
| 31,507 | |
| 31,213 |
Property and equipment, at cost |
| 361,275 | |
| 369,328 |
| 384,120 | |
| 381,971 |
Accumulated depreciation and amortization |
| (160,549) | |
| (150,173) |
| (168,380) | |
| (175,024) |
Property and equipment, net |
| 200,726 | |
| 219,155 |
| 215,740 | |
| 206,947 |
Operating leases - right of use assets | | 25,891 | | | 28,154 | | 21,342 | | | 22,898 |
Goodwill | | 5,231 | |
| 5,231 | | 5,231 | |
| 5,231 |
Other intangibles, net |
| 14,460 | |
| 15,105 |
| 13,493 | |
| 13,815 |
Other assets |
| 2,835 | |
| 3,046 |
| 3,253 | |
| 2,136 |
Total assets | $ | 343,283 | | $ | 350,232 | $ | 400,672 | | $ | 364,035 |
Liabilities and Stockholders’ Equity |
|
| |
|
|
|
| |
|
|
Current liabilities: |
|
| |
|
|
|
| |
|
|
Accounts payable | $ | 33,069 | | $ | 27,045 | $ | 43,098 | | $ | 36,378 |
Current portion of insurance and claims accruals |
| 8,814 | |
| 9,846 |
| 8,740 | |
| 8,973 |
Accrued expenses |
| 11,630 | |
| 10,798 |
| 13,047 | |
| 10,006 |
Current finance lease obligations | | 11,852 | | | 11,655 | | 16,983 | | | 14,095 |
Current operating lease obligations | | 7,127 | | | 6,838 | | 6,475 | | | 6,679 |
Long-term debt, current maturities | | 3,404 | | | 6,791 | | 16,890 | | | 11,069 |
Total current liabilities |
| 75,896 | |
| 72,973 |
| 105,233 | |
| 87,200 |
Other long-term liabilities |
| 2,837 | |
| 4,817 |
| 334 | |
| 342 |
Long-term debt, less current maturities | | 74,342 | | | 81,352 | | 57,188 | | | 63,355 |
Long-term finance lease obligations | | 48,397 | | | 54,482 | | 70,033 | | | 56,274 |
Long-term operating lease obligations | | 19,145 | | | 21,690 | | 15,287 | | | 16,644 |
Deferred income taxes |
| 21,435 | |
| 23,414 |
| 21,512 | |
| 21,914 |
Insurance and claims accruals, less current portion |
| 8,003 | |
| 6,803 |
| 6,881 | |
| 6,881 |
Total liabilities |
| 250,055 | |
| 265,531 |
| 276,468 | |
| 252,610 |
Commitments and contingencies | | — | |
| — | |||||
Stockholders’ equity: |
|
| |
|
|
|
| |
|
|
Preferred Stock, $0.01 par value; 1,000,000 shares authorized; NaN issued |
| 0 | |
| 0 |
| 0 | |
| 0 |
Common Stock, $0.01 par value; 30,000,000 shares authorized; issued 12,252,916 shares, and 12,037,966 shares, respectively |
| 123 | |
| 120 | |||||
Common Stock, $0.01 par value; 30,000,000 shares authorized; issued 12,455,160 shares, and 12,263,030 shares, respectively |
| 125 | |
| 123 | |||||
Additional paid-in capital |
| 62,268 | |
| 60,692 |
| 65,322 | |
| 63,752 |
Retained earnings |
| 86,305 | |
| 78,515 |
| 116,394 | |
| 103,283 |
Less treasury stock, at cost (3,349,720 shares, and 3,293,223 shares, respectively) |
| (55,468) | |
| (54,626) | |||||
Less treasury stock, at cost (3,446,463 shares, and 3,367,418 shares, respectively) |
| (57,637) | |
| (55,733) | |||||
Total stockholders’ equity |
| 93,228 | |
| 84,701 |
| 124,204 | |
| 111,425 |
Total liabilities and stockholders’ equity | $ | 343,283 | | $ | 350,232 | $ | 400,672 | | $ | 364,035 |
See accompanying notes to condensed consolidated financial statements.
2
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 | ||||||
| | (in thousands, except per share data) | | | (in thousands, except per share data) | ||||||||||||||
Operating revenue | | $ | 170,031 | | $ | 123,737 | | $ | 328,536 | | $ | 250,510 | | | $ | 201,063 | | $ | 158,505 |
| | | | | | | | | | | | | | | | | | | |
Operating expenses: | | | | | | | | | | | | | | | | | | | |
Salaries, wages and employee benefits | |
| 36,488 | |
| 33,636 | |
| 73,043 | |
| 69,481 | | |
| 41,887 | |
| 36,555 |
Fuel and fuel taxes | |
| 12,414 | |
| 8,082 | |
| 23,858 | |
| 19,945 | | |
| 17,037 | |
| 11,444 |
Depreciation and amortization | |
| 9,163 | |
| 10,034 | |
| 18,733 | |
| 20,045 | | |
| 8,024 | |
| 9,570 |
Insurance and claims | |
| 5,181 | |
| 4,009 | |
| 10,990 | |
| 9,866 | | |
| 6,623 | |
| 5,809 |
Equipment rent | |
| 2,048 | |
| 1,880 | |
| 3,997 | |
| 3,731 | | |
| 1,834 | |
| 1,949 |
Operations and maintenance | |
| 8,783 | |
| 9,062 | |
| 15,849 | |
| 18,399 | | |
| 8,515 | |
| 7,066 |
Purchased transportation | |
| 82,938 | |
| 49,276 | |
| 157,041 | |
| 97,090 | | |
| 98,319 | |
| 74,103 |
Operating taxes and licenses | |
| 1,323 | |
| 1,349 | |
| 2,595 | |
| 2,508 | | |
| 1,260 | |
| 1,272 |
Communications and utilities | |
| 796 | |
| 906 | |
| 1,600 | |
| 1,719 | | |
| 1,006 | |
| 804 |
(Gain) loss on disposal of assets, net | |
| (140) | |
| (16) | |
| (317) | |
| 22 | | ||||||
Asset impairments | | | 0 | | | 588 | | | — | | | 588 | | ||||||
Gain on disposal of assets, net | |
| (6,401) | |
| (177) | |||||||||||||
Other | |
| 4,108 | |
| 3,931 | |
| 8,172 | |
| 8,428 | | |
| 4,276 | |
| 4,064 |
Total operating expenses | |
| 163,102 | |
| 122,737 | |
| 315,561 | |
| 251,822 | | |
| 182,380 | |
| 152,459 |
Operating income (loss) | |
| 6,929 | |
| 1,000 | |
| 12,975 | |
| (1,312) | | ||||||
Operating income | |
| 18,683 | |
| 6,046 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Other expenses: | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
|
Interest expense, net | |
| 1,014 | | | 1,235 | | | 2,039 | | | 2,919 | | |
| 1,417 | | | 1,025 |
Other, net | |
| 49 | | | 64 | | | 110 | | | 110 | | |
| 68 | | | 61 |
Total other expenses, net | |
| 1,063 | |
| 1,299 | |
| 2,149 | |
| 3,029 | | |
| 1,485 | |
| 1,086 |
Income (loss) before income taxes | |
| 5,866 | |
| (299) | |
| 10,826 | |
| (4,341) | | ||||||
Income tax expense (benefit) | |
| 1,673 | | | 632 | | | 3,036 | | | (859) | | ||||||
Income before income taxes | |
| 17,198 | |
| 4,960 | |||||||||||||
Income tax expense | |
| 4,087 | | | 1,363 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Consolidated net income (loss) and comprehensive income (loss) | | $ | 4,193 | | $ | (931) | | $ | 7,790 | | $ | (3,482) | | ||||||
Consolidated net income and comprehensive income | | $ | 13,111 | | $ | 3,597 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Net earnings (loss) per share: | |
|
| |
|
| |
|
| |
|
| | ||||||
Net earnings per share: | |
|
| |
|
| |||||||||||||
Average shares outstanding (basic) | |
| 8,806 | | | 8,820 | | | 8,826 | | | 8,737 | | |
| 8,831 | | | 8,841 |
Basic earnings (loss) per share | | $ | 0.48 | | $ | (0.11) | | $ | 0.88 | | $ | (0.40) | | ||||||
Basic earnings per share | | $ | 1.48 | | $ | 0.41 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Average shares outstanding (diluted) | |
| 8,947 | |
| 8,820 | |
| 8,976 | |
| 8,737 | | |
| 9,043 | |
| 9,007 |
Diluted earnings (loss) per share | | $ | 0.47 | | $ | (0.11) | | $ | 0.87 | | $ | (0.40) | | ||||||
Diluted earnings per share | | $ | 1.45 | | $ | 0.40 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
See accompanying notes to condensed consolidated financial statements.
3
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
|
| Common Stock |
| Additional |
| | |
| | |
| | |
| Common Stock |
| Additional |
| | |
| | |
| | | ||||||||
| | | | Par | | Paid-in | | Retained | | Treasury | | | | | | | Par | | Paid-in | | Retained | | Treasury | | | | ||||||||
| | Shares | | Value | | Capital | | Earnings | | Stock | | Total | | Shares | | Value | | Capital | | Earnings | | Stock | | Total | ||||||||||
| | (in thousands) | | (in thousands) | ||||||||||||||||||||||||||||||
Balance at December 31, 2020 |
| 12,038 | | $ | 120 | | $ | 60,692 | | $ | 78,515 | | $ | (54,626) | | $ | 84,701 | |||||||||||||||||
Balance at December 31, 2021 |
| 12,263 | | $ | 123 | | $ | 63,752 | | $ | 103,283 | | $ | (55,733) | | $ | 111,425 | |||||||||||||||||
Stock-based compensation |
| — | |
| — | |
| 168 | |
| — | |
| — | |
| 168 |
| — | |
| — | |
| 748 | |
| — | |
| — | |
| 748 |
Restricted stock award grant |
| 193 | |
| 2 | |
| (2) | |
| — | |
| — | |
| — |
| 199 | |
| 2 | |
| (2) | |
| — | |
| — | |
| — |
Forfeited restricted stock | | (4) | |
| — | |
| — | |
| — | |
| — | | | — | | — | |
| — | |
| 1,416 | |
| — | |
| (1,416) | | | — |
Net share settlement related to vested equity awards |
| — | |
| — | |
| 797 | |
| — | |
| (802) | |
| (5) |
| (7) | |
| — | |
| (592) | |
| — | |
| (488) | |
| (1,080) |
Net income |
| — | |
| — | |
| — | |
| 3,597 | |
| — | |
| 3,597 |
| — | |
| — | |
| — | |
| 13,111 | |
| — | |
| 13,111 |
Balance at March 31, 2021 |
| 12,227 | | | 122 | | | 61,655 | | | 82,112 | | | (55,428) | | | 88,461 | |||||||||||||||||
Stock-based compensation |
| — | |
| — | |
| 577 | |
| — | |
| — | |
| 577 | |||||||||||||||||
Restricted stock award grant |
| 26 | |
| 1 | |
| — | |
| — | |
| — | |
| 1 | |||||||||||||||||
Net share settlement related to vested equity awards |
| — | |
| — | |
| 36 | |
| — | |
| (40) | |
| (4) | |||||||||||||||||
Net income |
| — | |
| — | |
| — | |
| 4,193 | |
| — | |
| 4,193 | |||||||||||||||||
Balance at June 30, 2021 |
| 12,253 | | $ | 123 | | $ | 62,268 | | $ | 86,305 | | $ | (55,468) | | $ | 93,228 | |||||||||||||||||
Balance at March 31, 2022 |
| 12,455 | | $ | 125 | | $ | 65,322 | | $ | 116,394 | | $ | (57,637) | | $ | 124,204 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
|
| Common Stock |
| Additional |
| | |
| | |
| | |
| Common Stock |
| Additional |
| | |
| | |
| | | ||||||||
| | | | Par | | Paid-in | | Retained | | Treasury | | | | | | | Par | | Paid-in | | Retained | | Treasury | | | | ||||||||
| | Shares | | Value | | Capital | | Earnings | | Stock | | Total | | Shares | | Value | | Capital | | Earnings | | Stock | | Total | ||||||||||
| | (in thousands) | | (in thousands) | ||||||||||||||||||||||||||||||
Balance at December 31, 2019 |
| 11,988 | | $ | 120 | | $ | 63,238 | | $ | 73,769 | | $ | (58,916) | | $ | 78,211 | |||||||||||||||||
Issuance of treasury stock |
| — | |
| — | |
| (4,327) | |
| — | |
| 4,327 | |
| — | |||||||||||||||||
Balance at December 31, 2020 |
| 12,038 | | $ | 120 | | $ | 60,692 | | $ | 78,515 | | $ | (54,626) | | $ | 84,701 | |||||||||||||||||
Stock-based compensation |
| — | |
| — | |
| 471 | |
| — | |
| — | |
| 471 |
| — | |
| — | |
| 168 | |
| — | |
| — | |
| 168 |
Restricted stock award grant |
| 193 | |
| 2 | |
| (2) | |
| — | |
| — | |
| — | |||||||||||||||||
Forfeited restricted stock | | (15) | |
| — | |
| — | |
| — | |
| — | | | — | | (4) | |
| — | |
| 390 | |
| — | |
| (390) | | | — |
Net share settlement related to vested equity awards |
| (11) | |
| — | |
| (57) | |
| — | |
| — | |
| (57) |
| — | |
| — | |
| 407 | |
| — | |
| (412) | |
| (5) |
Net loss |
| — | |
| — | |
| — | |
| (2,551) | |
| — | |
| (2,551) | |||||||||||||||||
Balance at March 31, 2020 |
| 11,962 | | | 120 | | | 59,325 | | | 71,218 | | | (54,589) | | | 76,074 | |||||||||||||||||
Issuance of treasury stock |
| — | |
| — | |
| (123) | |
| — | |
| 123 | |
| — | |||||||||||||||||
Stock-based compensation |
| — | |
| — | |
| 363 | |
| — | |
| — | |
| 363 | |||||||||||||||||
Restricted stock award grant |
| 74 | |
| — | |
| — | |
| — | |
| — | |
| — | |||||||||||||||||
Net loss |
| — | |
| — | |
| — | |
| (931) | |
| — | |
| (931) | |||||||||||||||||
Balance at June 30, 2020 |
| 12,036 | | $ | 120 | | $ | 59,565 | | $ | 70,287 | | $ | (54,466) | | $ | 75,506 | |||||||||||||||||
Net income |
| — | |
| — | |
| — | |
| 3,597 | |
| — | |
| 3,597 | |||||||||||||||||
Balance at March 31, 2021 |
| 12,227 | | $ | 122 | | $ | 61,655 | | $ | 82,112 | | $ | (55,428) | | $ | 88,461 |
See accompanying notes to condensed consolidated financial statements.
4
USA TRUCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | | |
| | Six Months Ended June 30, | | Three Months Ended March 31, | ||||||||
|
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||
Operating activities: | | (in thousands) | | (in thousands) | ||||||||
Net income (loss) | | $ | 7,790 | | $ | (3,482) | ||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
| | |
| | ||||||
Net income | | $ | 13,111 | | $ | 3,597 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| | ||||||
Depreciation and amortization | |
| 18,733 | |
| 20,045 | |
| 8,024 | |
| 9,570 |
Bad debt expense | | | (102) | | | 478 | ||||||
Deferred income tax (benefit) expense, net | |
| (1,979) | |
| 807 | ||||||
Share-based compensation | |
| 745 | |
| 834 | ||||||
(Gain) loss on disposal of assets, net | |
| (317) | |
| 22 | ||||||
Asset impairments | |
| — | |
| 588 | ||||||
Bad debt benefit | | | (205) | | | — | ||||||
Deferred income tax benefit, net | |
| (402) | |
| (984) | ||||||
Stock-based compensation | |
| 748 | |
| 168 | ||||||
Gain on disposal of assets, net | |
| (6,401) | |
| (177) | ||||||
Other | |
| 71 | |
| 40 | |
| 165 | |
| 4 |
Changes in operating assets and liabilities: | |
| | |
| | |
| | |
| |
Accounts and other receivables | |
| (18,174) | |
| (5,797) | |
| (9,484) | |
| (18,089) |
Inventories and prepaid expenses | |
| 1,852 | |
| 1,172 | |
| 1,100 | |
| (82) |
Accounts payable and accrued expenses | |
| 6,213 | |
| 1,594 | |
| 9,465 | |
| 14,431 |
Insurance and claims accruals | |
| 357 | |
| (2,745) | |
| (75) | |
| 878 |
Other long-term assets and liabilities | |
| 503 | |
| 850 | |
| (2,233) | |
| (3,332) |
Net cash provided by operating activities | | $ | 15,692 | | $ | 14,406 | | $ | 13,813 | | $ | 5,984 |
Investing activities: | |
|
| |
| | |
|
| |
| |
Capital expenditures | | | (1,066) | | | (9,809) | | | (754) | | | (395) |
Proceeds from sale of property and equipment | | | 6,141 | | | 1,459 | | | 12,002 | | | 5,451 |
Net cash provided by (used in) investing activities | | $ | 5,075 | | $ | (8,350) | ||||||
Net cash provided by investing activities | | $ | 11,248 | | $ | 5,056 | ||||||
Financing activities: | |
|
| |
|
| |
|
| |
|
|
Borrowings under long-term debt | |
| 28,760 | |
| 33,200 | |
| 6,000 | |
| 13,150 |
Payments on long-term debt | |
| (39,156) | |
| (27,492) | |
| (49,321) | |
| (16,169) |
Principal payments on financing lease obligations | |
| (5,888) | |
| (11,366) | |
| (2,508) | |
| (2,992) |
Payment of debt issuance costs | | | (774) | | | — | ||||||
Net change in bank drafts payable | |
| (2,785) | |
| (346) | |
| (111) | |
| (2,429) |
Proceeds from issuance of long-term debt | |
| 41,974 | |
| — | ||||||
Net payments for tax withholdings for vested stock-based awards | |
| (9) | |
| (57) | |
| (1,080) | |
| (5) |
Net cash used in financing activities | | $ | (19,078) | | $ | (6,061) | | $ | (5,820) | | $ | (8,445) |
Increase (decrease) in cash and restricted cash | | | 1,689 | | | (5) | ||||||
Increase in cash and restricted cash | | | 19,241 | | | 2,595 | ||||||
Cash and restricted cash: | |
|
| |
|
| |
|
| |
|
|
Beginning of period | |
| 325 | |
| 97 | |
| 1,352 | |
| 325 |
End of period | | $ | 2,014 | | $ | 92 | | $ | 20,593 | | $ | 2,920 |
Supplemental disclosure of cash flow information: | |
|
| |
|
| |
| | |
|
|
Cash paid during the period for: | |
|
| |
|
| |
|
| |
|
|
Interest | | $ | 2,106 | | $ | 2,704 | | $ | 1,303 | | $ | 1,059 |
Income taxes, net of refunds | |
| 6,623 | |
| 29 | |
| 21 | |
| — |
Supplemental disclosure of non-cash investing: | |
| | |
|
| |
| | |
| |
Sales of revenue equipment included in other receivables | | $ | — | | $ | 730 | ||||||
Purchase of revenue equipment included in accounts payable | | | 1,021 | | | — | | | 430 | | | — |
See accompanying notes to condensed consolidated financial statements.
5
USA TRUCK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2021March 31, 2022
NOTE 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 June 30, 2021March 31, 2022 and December 31, 20202021 and our results of operations and comprehensive income (loss) for the three and six months ended June 30, 2021March 31, 2022 and 2020.2021.
These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) 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. Additionally, the Company has elected to utilize certain abbreviated reporting requirements available to smaller reporting companies. 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, 2020.2021.
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, 2021.2022.
The accompanying condensed consolidated financial statements include USA Truck Inc., and its wholly owned subsidiaries: International Freight Services, Inc. (“IFS”), a Delaware corporation; USA Truck, LLC, a Delaware limited liability company; USA Truck Fleetco, LLC, a Delaware limited liability company; USA Truck Logistics, LLC, a Delaware limited liability company; Skyraider Risk Retention Group Inc. (“SRRG”), a South Carolina corporation; Davis Transfer Company Inc. (“DTC”), a Georgia corporation; Davis Transfer Logistics Inc. (“DTL”), a Georgia corporation; and B & G Leasing, L.L.C. (“B & G”), a Georgia limited liability company. Collectively, DTC, DTL and B&G comprise “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 condensed consolidated financial statements. Certain amounts reported in prior periods have been reclassified to conform to the current year presentation.
Change in estimate
The Company reviews the estimated useful lives and salvage values of its fixed assets on an ongoing basis, based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice. During the first quarter of 2022, the Company increased the salvage value of its tractor fleet to better reflect current estimates of the value of such equipment upon its retirement. This change is being accounted for as a change in estimate. During the three months ended March 31, 2022, this change in estimate resulted in a decrease in depreciation and amortization expense of approximately $0.9 million.
Risks and Uncertainties
We continue to monitor the progression of the COVID-19 pandemic, including the outbreak of new strains of the virus, further government responses, including vaccine, testing, and mask mandates, and development of treatments and vaccines and the resulting potential effect on our financial position, results of operations, cash flows and liquidity. These events could have an impact in future periods on certain estimates used in the preparation of our financial results, including, but not limited to impairment of goodwill, other intangible assets and other long-lived assets, income tax provision, and recoverability of certain receivables. Should the current recoveryefforts to recover from the pandemic deteriorate or stall, the impact on our operations could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.
6
Accounting standards issued but not yet adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This update requires measurement and recognition of expected versus incurred credit losses for financial assets held. ASU 2016-13 is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for smaller reporting companies.years. We continue to evaluate the effect of adopting ASU 2016-13, but believe the effects will not be significant and will be limited to the valuation of the Company’s trade receivables. The Company expects to adopt ASU 2016-13 using the modified retrospective approach.
6
NOTE 2 – REVENUE RECOGNITION
The following tables set forth revenue disaggregated by revenue type and segment:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | ||||||||||||||||||||||
| | 2021 | | 2020 | ||||||||||||||||||||
|
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total | ||||||||
Revenue type | | (in thousands) | ||||||||||||||||||||||
Freight | | $ | 90,712 | | $ | 72,204 | | $ | (13,545) | | $ | 149,371 | | $ | 78,514 | | $ | 35,040 | | $ | (3,461) | | $ | 110,093 |
Fuel surcharge | |
| 12,038 | |
| 5,569 | |
| (534) | |
| 17,073 | |
| 8,083 | | | 2,618 | | | (167) | |
| 10,534 |
Accessorial | |
| 2,611 | |
| 976 | |
| — | |
| 3,587 | |
| 2,030 | | | 1,080 | | | — | |
| 3,110 |
Total | | $ | 105,361 | | $ | 78,749 | | $ | (14,079) | | $ | 170,031 | | $ | 88,627 | | $ | 38,738 | | $ | (3,628) | | $ | 123,737 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||
| | 2021 | | 2020 | | 2022 | | 2021 | ||||||||||||||||||||||||||||||||||||||||
|
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total |
| Trucking |
| USAT Logistics |
| Eliminations |
| Total | ||||||||||||||||
Revenue type | | (in thousands) | | (in thousands) | ||||||||||||||||||||||||||||||||||||||||||||
Freight | | $ | 181,727 | | $ | 134,666 | | $ | (26,149) | | $ | 290,244 | | $ | 159,417 | | $ | 66,707 | | $ | (6,154) | | $ | 219,970 | | $ | 97,572 | | $ | 87,934 | | $ | (12,446) | | $ | 173,060 | | $ | 91,015 | | $ | 62,462 | | $ | (12,604) | | $ | 140,873 |
Fuel surcharge | |
| 22,358 | |
| 9,866 | |
| (909) | |
| 31,315 | |
| 19,371 | |
| 5,695 | |
| (520) | |
| 24,546 | |
| 16,224 | |
| 8,440 | |
| (6) | |
| 24,658 | |
| 10,319 | | | 4,296 | | | (375) | |
| 14,240 |
Accessorial | |
| 4,379 | |
| 2,598 | |
| — | |
| 6,977 | |
| 3,834 | |
| 2,160 | |
| — | |
| 5,994 | |
| 2,275 | |
| 1,070 | |
| — | |
| 3,345 | |
| 1,769 | | | 1,623 | | | — | |
| 3,392 |
Total | | $ | 208,464 | | $ | 147,130 | | $ | (27,058) | | $ | 328,536 | | $ | 182,622 | | $ | 74,562 | | $ | (6,674) | | $ | 250,510 | | $ | 116,071 | | $ | 97,444 | | $ | (12,452) | | $ | 201,063 | | $ | 103,103 | | $ | 68,381 | | $ | (12,979) | | $ | 158,505 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
At June 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had contract assets, representing our right to consideration for transportation services not yet billed, of $2.2$2.1 million and $1.1$1.6 million, respectively.
NOTE 3 – SEGMENT REPORTING
The Company’s 2 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 expenses, operating ratios and operating income, as well as on key operating statistics, to make operating decisions.
Trucking. Trucking is comprised of truckload and dedicated freight service offerings. Truckload service offerings provide motor carrier services as a medium-haul common and contract carrier, utilizing equipment owned or leased by the Company or independent contractors. Dedicated freight service offerings provide 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. 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 | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
Operating revenue | | (in thousands) | ||||||||||
Trucking revenue (1) | | $ | 105,361 | | $ | 88,627 | | $ | 208,464 | | $ | 182,622 |
Trucking intersegment eliminations | |
| (259) | |
| (707) | |
| (586) | |
| (1,701) |
Trucking operating revenue | |
| 105,102 | |
| 87,920 | |
| 207,878 | |
| 180,921 |
USAT Logistics revenue | |
| 78,749 | |
| 38,738 | |
| 147,130 | |
| 74,562 |
USAT Logistics intersegment eliminations | |
| (13,820) | |
| (2,921) | |
| (26,472) | |
| (4,973) |
USAT Logistics operating revenue | |
| 64,929 | |
| 35,817 | |
| 120,658 | |
| 69,589 |
Total operating revenue | | $ | 170,031 | | $ | 123,737 | | $ | 328,536 | | $ | 250,510 |
| | | | | | | | | | | | |
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
Operating revenue | | (in thousands) | ||||
Trucking revenue (1) | | $ | 116,071 | | $ | 103,103 |
Trucking intersegment eliminations | |
| (43) | |
| (327) |
Trucking operating revenue | |
| 116,028 | |
| 102,776 |
USAT Logistics revenue | |
| 97,444 | |
| 68,381 |
USAT Logistics intersegment eliminations | |
| (12,409) | |
| (12,652) |
USAT Logistics operating revenue | |
| 85,035 | |
| 55,729 |
Total operating revenue | | $ | 201,063 | | $ | 158,505 |
| | | | | | |
1) | Includes foreign revenue of |
A summary of operating income (loss) by segment is as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||||
Operating income (loss) | | (in thousands) | ||||||||||||||||
Operating income | | (in thousands) | ||||||||||||||||
Trucking | | $ | 3,057 | | $ | 1,176 | | $ | 6,577 | | $ | (511) | | $ | 12,628 | | $ | 3,520 |
USAT Logistics | |
| 3,872 | |
| (176) | |
| 6,398 | |
| (801) | |
| 6,055 | |
| 2,526 |
Total operating income (loss) | | $ | 6,929 | | $ | 1,000 | | $ | 12,975 | | $ | (1,312) | ||||||
Total operating income | | $ | 18,683 | | $ | 6,046 | ||||||||||||
| | | | | | | | | | | | | | | | | | |
A summary of depreciation and amortization by segment is as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||||
Depreciation and amortization | | (in thousands) | | (in thousands) | ||||||||||||||
Trucking | | $ | 8,901 | | $ | 9,697 | | $ | 18,197 | | $ | 19,473 | | $ | 7,721 | | $ | 9,297 |
USAT Logistics | |
| 262 | |
| 337 | |
| 536 | |
| 572 | |
| 303 | |
| 273 |
Total depreciation and amortization | | $ | 9,163 | | $ | 10,034 | | $ | 18,733 | | $ | 20,045 | | $ | 8,024 | | $ | 9,570 |
| | | | | | | | | | | | | | | | | | |
NOTE 4 – EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS
The Company adopted the 2014 Omnibus Incentive Plan (the “Incentive Plan”) in May 2014, which provided for the granting of up to 500,000 shares of common stock through equity-based awards to directors, officers and other key employees and consultants.employees. 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 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 500,000 shares. As of June 30, 2021, 331,935March 31, 2022, 195,983 shares remain available under the Incentive Plan for the issuance of future equity-based compensation awards.
8
NOTE 5 – ACCRUED EXPENSES
Accrued expenses consist of the following:
| | | | | | |
| | June 30, 2021 | | December 31, 2020 | ||
| | (in thousands) | ||||
Salaries, wages and employee benefits | | $ | 8,523 | | $ | 6,142 |
Federal and state tax accruals | |
| 1,215 | |
| 2,649 |
Other (1) | |
| 1,892 | |
| 2,007 |
Total accrued expenses | | $ | 11,630 | | $ | 10,798 |
| | | | | | |
| | | | | | |
| | March 31, 2022 | | December 31, 2021 | ||
| | (in thousands) | ||||
Salaries, wages and employee benefits | | $ | 8,350 | | $ | 7,318 |
Federal and state tax accruals | |
| 2,469 | |
| 685 |
Other | |
| 2,228 | |
| 2,003 |
Total accrued expenses | | $ | 13,047 | | $ | 10,006 |
| | | | | | |
NOTE 6 – DEBT
Long-term debt consisted of the following:
| | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 | ||||
| | (in thousands) | | (in thousands) | ||||||||
Revolving credit agreement | | $ | 66,900 | | $ | 73,025 | | $ | — | | $ | 38,000 |
Sale-leaseback finance obligations | | | 9,082 | | | 9,913 | | | 30,909 | | | 32,739 |
Insurance premium financing (2020) | | | 1,654 | | | 5,064 | ||||||
Term loans | | | 41,351 | | | — | ||||||
Insurance premium financing | | | 1,762 | | | 3,601 | ||||||
Other | | | 110 | | | 141 | | | 56 | | | 84 |
| | | 77,746 | | | 88,143 | | | 74,078 | | | 74,424 |
Less current maturities | | | (3,404) | | | (6,791) | | | (16,890) | | | (11,069) |
Total long-term debt | | $ | 74,342 | | $ | 81,352 | | $ | 57,188 | | $ | 63,355 |
| | | | | | | | | | | | |
CreditNew credit facility
On January 31, 2019,2022, the Company entered into a five year, $225.0 millionnew senior secured revolving credit facility (the “Credit Facility”) with a group of lenders and BMO Harris Bank, of America, N.A., as agent (the “Agent”(“Agent”) pursuant to the terms of an Amended and Restated Loan and Security Agreement. On April 7, 2020, the Company, in accordance. Contemporaneously with the termsfunding of the Credit Agreement, provided notice to the Agent that effective as of April 20, 2020,Facility, the Company was permanently reducingpaid off the revolvingobligations under its prior credit commitment under the Credit Agreement by $55.0 millionfacility and terminated such that the revolving credit commitment is now $170.0 million.facility.
The Credit Facility is structured as a $170.0$130.0 million revolving credit facility, with an accordion feature that, so long as no event of default exists, allows the Company to request ancan increase in the revolving credit facility of up to $75.0$60 million, exercisable in increments of at least $20.0$20 million. The Credit Facility is a five yearfive-year facility scheduled to terminate on January 31, 2024.2027. Borrowings under the Credit Facility are classified as either “basesecured overnight financing rate loans”(“SOFR”) loans or “LIBOR loans.”“Base Rate Loans”. SOFR Loans accrue interest at SOFR plus an applicable margin that is set at 1.25% through March 31, 2022 and adjusted quarterly thereafter between 1.25% and 1.75% based on the Company’s consolidated fixed charge coverage ratio. Base rate loansRate Loans accrue interest at a base rate equal to the Agent’s prime rate plus an applicable margin that is set at 0.25% through March 31, 2022 and adjusted quarterly thereafter between 0.25% and 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 1.25% and 1.75% based on the Company’s consolidated fixed charge coverage ratio. The Credit Facility includes, within its $170.0$130.0 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $15.0 million and a swinglineswing line sub-facility (the “Swingline”) in an aggregate amount of $25.0 million. An unused line fee of 0.25% is applied to the average daily amount by which the lenders’ aggregate revolving commitments exceed the outstanding principal amount of revolver loans and the aggregate undrawn amount of all outstanding letters of credit issued under the Credit Facility. The Credit Facility is secured by a pledge of substantially allcertain of the Company’s assets, except forwith the notable exclusions of 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) $170.0 million; or (B) the sum of (i) 85.0% of eligible accounts receivable, plus (ii) 90.0% of eligible investment grade accounts receivable (reduced to 85.0% in certain situations), plus (ii) 85.0% of eligible non-investment grade accounts receivable, plus (iii) the lesser of (a) 85.0% of eligible unbilled accounts receivable and (b) $10.0$17.5 million, plus (iv) the product of 85.0% multiplied by the net orderly liquidation value percentage applied to the net book value of eligible revenue equipment, plus (v) 85.0% multiplied by the net book value of otherwise eligible newly acquired revenue equipment that has not yet been subject to an appraisal.equipment. The borrowing base is reduced by an availability reserve, including reserves based on dilution and certain other customary reserves. The Credit Facility contains a single springing financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0. The financial covenant springs only in the event excess availability under the Credit Facility drops below (i) 10.0% of the lenders’ total commitments under the Credit Facility and (ii) $13.0 million. As of March 31, 2022, availability under the Credit Facility was $130.0 million.
9
The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts outstanding under the Credit Facility may be accelerated, and the lenders’ commitments may be terminated. The Credit Facility contains certain restrictions and covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate transactions, and other indebtedness.
Previous credit facility
The previous credit facility was a $170.0 million revolving credit facility, with a $75.0 million accordion feature exercisable in increments of at least $20.0 million. The previous credit facility was a five year facility scheduled to terminate on January 31, 2024. Borrowings under the previous credit facility were classified as either “base rate loans” or “LIBOR loans”, and included a letter of credit sub-facility in aggregate of $15.0 million and a swingline sub-facility in aggregate of $25.0 million. An unused line fee of 0.25% was 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 previous credit facility. The previous credit facility was secured by a pledge of substantially all of the Company’s assets, except for any real estate or revenue equipment financed outside the previous credit facility.
The previous credit facility contained a single financial covenant which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0 that iswas triggered in the event excess availability under the Credit Facility fallsfell below 10.0% of the lenders’ total commitments. Also,commitments, and 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 arewere triggered in the event excess availability under the Credit Facility fallsfell below 20.0% of the lenders’ total commitments.Additionally, the Company recognized charges in the first quarter of 2022 of $0.3 million associated with the write-off of unamortized debt issuance costs associated with the previous credit facility to the interest expense line item.
Restricted cash
The Company had 0 overnight borrowings under the Swingline as of June 30, 2021. The average interest rate including all borrowings made under the Credit Facility as of June 30, 2021 was 1.49%. As debt is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value. As of June 30, 2021, the Company hadhas $7.9 million in letters of credit that were supported by the previous credit facility. Upon termination of the previous credit facility, the Company was required to cash collateralize the letters of credit at 105% of the outstanding and had $86.6 million availableamounts, or $8.3 million. Upon transition of the letters of credit to borrow under the Credit Facility, takingthe funds will be transferred to an unrestricted account and the restrictions will lapse.
Term loans
In January 2022, the Company entered into account borrowing base availability.a series of term loans totaling approximately $42.0 million. These term loans are secured by operating equipment with varying degrees of remaining lives, with loan durations corresponding to the remaining useful lives and ranging from 36 to 96 months. The average interest rate on the loans was 3.2%. The proceeds from these loans were used to pay off the balance of our previous credit facility. Under these agreements, the Company will make monthly payments of approximately $0.7 million for the first 36 months. After that time, the monthly obligation will reduce as each term loan is repaid.
Sale-leaseback transactions
In July 2019,December 2021, the Company entered into a sale-leaseback transaction whereby it sold tractorstrailers for approximately $2.3$24.5 million and concurrently entered into a finance lease agreement for the sold tractorstrailers with a five year48 month term. Under the lease agreement, the Company paid an initialwill make monthly paymentpayments of approximately $0.03 million. At$0.5 million, and at the end of the lease, the Company has the option to purchase the tractors.trailers for nominal consideration. 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 $10.5 million and concurrently entered into a finance lease agreement for the sold tractors with a five year term. Under the lease agreement, the Company paid an initial monthly payment of approximately $0.1 million. At the end of the lease, the Company has the option tobargain purchase the tractors for the greater of fair market value or 32.5% of the original cost. 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.
Insurance premium financing
In October 2020,2021, the Company entered into a short-term agreement to finance approximately $5.1$5.5 million with a third-party financing company for a portion of the Company’s annual insurance premiums.
NOTE 7 – LEASES
The components of lease expense for each of the periods presented are as follows:
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
| | (in thousands) | ||||||||||
Operating lease costs | | $ | 1,908 | | $ | 2,052 | | $ | 3,842 | | $ | 4,218 |
Finance lease costs: | | | | | | | | | | | | |
Amortization of assets | |
| 2,782 | |
| 4,784 | |
| 6,796 | |
| 9,507 |
Interest on lease liabilities | |
| 639 | |
| 763 | |
| 1,309 | |
| 1,553 |
Total finance lease costs | |
| 3,421 | |
| 5,547 | |
| 8,105 | |
| 11,060 |
Variable and short-term lease costs | |
| 703 | |
| 284 | |
| 1,286 | |
| 411 |
Total lease costs | | $ | 6,032 | | $ | 7,883 | | $ | 13,233 | | $ | 15,689 |
| | | | | | | | | | | | |
10
NOTE 7 – LEASES AND OTHER COMMITMENTS
The components of lease expense for each of the periods presented are as follows:
| | | | | | |
| | Three Months Ended | ||||
| | March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Operating lease costs | | $ | 2,030 | | $ | 1,934 |
Finance lease costs: | | | | | | |
Amortization of assets | |
| 3,143 | |
| 4,014 |
Interest on lease liabilities | |
| 782 | |
| 670 |
Total finance lease costs | |
| 3,925 | |
| 4,684 |
Variable and short-term lease costs | |
| 498 | |
| 583 |
Total lease costs | | $ | 6,453 | | $ | 7,201 |
| | | | | | |
Supplemental information and balance sheet location related to leases is as follows:
| | | | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 | | March 31, 2022 | | December 31, 2021 | ||||||||
Operating leases: | | (dollars in thousands) | | (dollars in thousands) | ||||||||||||
Operating leases - right-of-use assets | | $ | 25,891 |
| $ | 28,154 | | $ | 21,342 |
| $ | 22,898 | ||||
| | | | | | | | | | | | | | | | |
Current operating lease obligations | |
| 7,127 | |
| 6,838 | |
| 6,475 | |
| 6,679 | ||||
Long-term operating lease obligations | |
| 19,145 | |
| 21,690 | |
| 15,287 | |
| 16,644 | ||||
Total operating lease liabilities | | $ | 26,272 | | $ | 28,528 | | $ | 21,762 | | $ | 23,323 | ||||
| | | | | | | | | | | | | | | | |
Finance leases: | | | | |
| | | | ||||||||
Finance leases and assets subject to sale leasebacks: | | | | |
| | | | ||||||||
Property and equipment, at cost | |
| 86,114 | |
| 86,281 | |
| 157,548 | |
| 137,736 | ||||
Accumulated amortization | |
| (28,595) | |
| (22,991) | |
| (51,820) | |
| (47,699) | ||||
Property and equipment, net | | $ | 57,519 | | $ | 63,290 | | $ | 105,728 | | $ | 90,037 | ||||
| | | | | | | | | | | | | | | | |
Finance lease obligations: | | | | | | | | | ||||||||
Current finance lease obligations | |
| 11,852 | |
| 11,655 | |
| 16,983 | |
| 14,095 | ||||
Long-term finance lease obligations | |
| 48,397 | |
| 54,482 | |
| 70,033 | |
| 56,274 | ||||
| | $ | 60,249 | | $ | 66,137 | | $ | 87,016 | | $ | 70,369 | ||||
| | | | | | | | | | | | | | | | |
Weighted average remaining lease term: | |
| (in months) | |
| (in months) | |
| (in months) | |
| (in months) | ||||
Operating leases | |
| 54 | |
| 60 | |
| 48 | |
| 50 | ||||
Finance leases | |
| 37 | |
| 43 | |
| 37 | |
| 35 | ||||
| | | | | | | | | | | | | | | | |
Weighted average discount rate: | | | | | | | | | | | | | | | | |
Operating leases | |
| 4.53 | % | |
| 4.59 | % | |
| 4.55 | % | |
| 4.53 | % |
Finance leases | |
| 3.73 | % | |
| 3.73 | % | |
| 3.34 | % | |
| 3.69 | % |
| | | | | | | | | | | | | | | | |
11
Supplemental cash flow information related to leases is as follows for the sixthree months ended:
| | | | | | | | | | | | |
| | June 30, 2021 | | June 30, 2020 | | March 31, 2022 | | March 31, 2021 | ||||
Cash paid for amounts included in measurement of liabilities: | | (in thousands) | | (in thousands) | ||||||||
Operating cash flows from operating leases | | $ | 71 | | $ | 42 | | $ | 165 | | $ | 4 |
Operating cash flows from finance leases | | | 1,309 | | | 1,553 | | | 782 | | | 670 |
Financing cash flows from finance leases | | | 5,888 | | | 11,366 | | | 2,508 | | | 2,992 |
| | | | | | | | | | | | |
ROU assets obtained in exchange for lease liabilities: | | | | | | | | | | | | |
Operating leases | | $ | 170 | | $ | — | | $ | — | | $ | 170 |
Finance leases | | | — | | | 8,481 | | | 20,082 | | | — |
| | | | | | | | | | | | |
OTHER COMMITMENTS
As of June 30, 2021,March 31, 2022, the Company had $27.8$74.9 million in purchase commitments for the acquisition of revenue equipment, of which NaN were$20.9 million was cancellable. It is anticipated that these purchase commitments will be funded primarily through the use of operating leases, with down payments being funded first through cash provided by operations and proceeds from the sale of used revenue equipment and secondarily from borrowings under the Company’s Credit Facility.
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 these spaces was approximately $0.04 million for the three months ended June 30, 2021 and 2020 and $0.08 million for the six months ended June 30, 2021 and 2020. This expense is included in the “Operations and maintenance” line item in the accompanying condensed consolidated statements of income (loss) and comprehensive income (loss).
11
NOTE 8 – INCOME TAXES
During the three months ended June 30,March 31, 2022 and 2021 and 2020 the Company’s effective tax rate was 28.5%23.8% and 211.4%27.5%, respectively. DuringThe effective rate varied from the six months ended June 30, 2021statutory federal tax rate primarily due to state income taxes and 2020, the Company’s effectivecertain non-deductible expenses. The fiscal 2022 tax rate was 28.0% and 19.8%, respectively. The Company’s effective tax rate, when compared to the federal statutory rate of 21%, is primarily affected by state income taxes, netvesting of federal incomeequity-based compensation at a higher stock price than the price at which it was granted, which resulted in a decrease to tax effectexpense. Additionally, in fiscal 2022, the Company benefited from The Consolidated Appropriations Act of 2021 that increased the deduction for the current year periods,cost of food or beverage provided by a restaurant to be 100% deductible in 2021 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 their 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.
During the interim periods for the year ended December 31, 2020, the Company used the cut-off method to calculate taxes for the applicable interim periods. Due to more certainty in their financial forecasts for the current fiscal year, the Company has returned to its historical method for calculating the provision for income taxes during interim reporting periods. As such, we have calculated taxes for the six2022. The three months ended June 30,March 31, 2021, by applying an estimatehowever, did not benefit from The Consolidated Appropriations Act of 2021 because the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) adjusted for discrete items for the reporting period.legislation was not passed until December 2021.
NOTE 9 – EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per share:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | ||||||||||||
| | June 30, | | June 30, | | March 31, | ||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| 2022 |
| 2021 | ||||||
Numerator: | | (in thousands, except per share amounts) | | (in thousands, except per share amounts) | ||||||||||||||
Net income (loss) | | $ | 4,193 | | $ | (931) | | $ | 7,790 | | $ | (3,482) | ||||||
Net income | | $ | 13,111 | | $ | 3,597 | ||||||||||||
Denominator: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Denominator for basic earnings (loss) per share – weighted average shares | |
| 8,806 | |
| 8,820 | |
| 8,826 | |
| 8,737 | ||||||
Denominator for basic earnings per share – weighted average shares | |
| 8,831 | |
| 8,841 | ||||||||||||
Effect of dilutive securities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Employee restricted stock and incentive stock options | |
| 141 | |
| — | |
| 150 | |
| — | |
| 212 | |
| 166 |
Denominator for diluted earnings (loss) per share – adjusted weighted average shares and assumed conversion | |
| 8,947 | |
| 8,820 | |
| 8,976 | |
| 8,737 | ||||||
Basic earnings (loss) per share | | $ | 0.48 | | $ | (0.11) | | $ | 0.88 | | $ | (0.40) | ||||||
Diluted earnings (loss) per share | | $ | 0.47 | | $ | (0.11) | | $ | 0.87 | | $ | (0.40) | ||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion | |
| 9,043 | |
| 9,007 | ||||||||||||
Basic earnings per share | | $ | 1.48 | | $ | 0.41 | ||||||||||||
Diluted earnings per share | | $ | 1.45 | | $ | 0.40 | ||||||||||||
Weighted average anti-dilutive employee restricted stock and incentive stock options | |
| 114 | |
| 348 | |
| 126 | |
| 393 | |
| 74 | |
| 234 |
| | | | | | | | | | | | | | | | | | |
12
NOTE 10 – 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, results of operations or cash flows in any given reporting period.
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 statement about the expected impact, evolution, duration or severity of the novel coronavirus (“COVID-19”) global pandemic, including our anticipated actions and responses thereto and the potential impact on our business, operations, customers, employees, financial results and financial |
● | 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:
● | the impact of public health crises, including COVID-19, |
● | future driver market, |
● | future strategy and strategic initiatives, |
● | future ability to grow market share, |
● | future driver and customer-facing employee compensation, |
● | future ability and cost to recruit and retain drivers, |
● | 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, |
● | future safety performance, |
● | future profitability, |
● | future industry capacity, |
● | future deployment of technology, |
● | future pricing rates and freight network, |
● | future fuel prices and surcharges, fuel efficiency and hedging arrangements, |
● | future insurance and claims |
● | future salaries, wages and employee benefits costs, |
● | future efforts to expand our use of independent contractors, purchased transportation use and expense, |
● | future operations and maintenance costs, |
● | future USAT Logistics growth and profitability, |
13
● | future trends in operating expenses expected to result from growing our USAT Logistics business and increasing |
13
independent contractors, |
● | future impact of regulations, |
● | future use of derivative financial instruments, |
● |
inflation and supply chain shortages, |
● | 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, |
● | future equipment market, |
● | 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 |
among others, are forward-looking statements. Such statements may be identified by their use of terms or phrases such as “expects,” “estimates,” “projects,” “believes,” “anticipates,” “focus,” “intends,” “plans,” “goals,” “may,” “if,” “will,” “would,” “should,” “could,” “potential,” “continue,” “designed,” “likely,” “foresee,” “seek,” “target,” “forecast,” “intends,” “hopes,” “strategy,” “objective,” “mission,” “outlook,” “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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2020,2021, and other filings with the Securities and Exchange Commission (the “SEC”).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:
Business Overview – 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.
14
Business Overview
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 or capacity provided by independent contractors to provide services to customers and is commonly referred to as “asset-based” trucking. The Company’s USAT Logistics segment provides services that 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 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.segment.
Revenue for the Company’s Trucking segment is substantially generated by transporting freight for customers, and is predominantly affected by rates per mile, the number of tractors in operation, and the number of revenue-generating miles per tractor. The Company also generates revenue through fuel surcharge and ancillary services such as stop-off pay, loading and unloading activities, tractor and trailer detention, expediting charges, repositioning charges and other similar services.
Operating expenses fall into two categories: variable and fixed. Variable expenses, or mostly variable expenses, constitute the majority of the expenses associated with transporting freight for customers, and include driver wages and benefits, fuel and fuel taxes, payments to independent contractors, (also referred to as purchased transportation), operating and maintenance expense and insurance and accident claims expense. These expenses vary primarily according tobased upon miles operated, but also have controllable components based on percentage of compensated miles, shop and dispatch efficiency, and safety and claims experience.
Fixed expenses, or mostly fixed expenses, include the capital costs of our assets (depreciation, amortization, rent and interest), compensation of non-driving employees and portions of insurance and maintenance expenses. These expenses are partially controllable through management of fleet size and facilities infrastructure, headcount efficiency, and safety.
Fuel and fuel tax expense can fluctuate significantly with diesel fuel prices. 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 deadhead miles, out of route miles, fuel inefficiency due to engine idle time and other factors, including the extent to which the surcharges paid by customers are 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 (the “DOE”) Diesel Fuel 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 experienced.
The key statistics used to evaluate Trucking segment performance, in each case 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, (vii) operating ratio, and (vii)(viii) adjusted operating ratio. In general, the Company’s average miles per available tractor per week, rate per mile and deadhead percentages are affected by industry-wide freight volumes and industry-wide trucking capacity, which are mostly beyond the Company’s control. Factors over which the Company has significant control are its sales and marketing efforts, service levels and operational efficiency.
15
Unlike the Trucking segment, theThe USAT Logistics segment is non-asset based and is dependent upon skilled employees, reliable information systems and qualified 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
15
as a percentage of USAT Logistics operating revenue). 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 network engineering initiatives, pricing discipline, 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.
COVID-19
WeThe COVID-19 outbreak, and its variants, have resulted in government authorities in the United States and around the world implementing numerous measures to try to reduce its spread, such as travel bans and restrictions, social distancing, quarantines, shelter in place or total lock-down orders, business limitations and shutdowns, and vaccine, testing, and mask mandates. While many of these measures have been relaxed or rolled back, we continue to monitor the COVID-19 situation and regularly review announcements and recommendations of various government authorities and implement precautionsnew measures as needed. We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to evaluate and take action, as necessary, to preserve adequate liquidity and ensure that our business can continue to operate should current conditions deteriorate. deemed appropriate.
The overall impact of COVID-19 on our consolidated results of operations for the year ended December 31, 2020 and the three and six months ended June 30, 2021March 31, 2022 was not significant, however the impact thatof COVID-19 will have on our consolidated results of operations in future periods remains uncertain. Based on the duration and severity of COVID-19, we may experience decreases in the demand for our services. We will continue to evaluate the nature and extent of these potential impacts to our business, consolidated results of operations, segment results, liquidity and capital resources.
Results of Operations
The following tables summarize the condensed consolidated statements of income (loss) and comprehensive income (loss) 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 June 30, | | | | ||||||||||||
| | 2021 | | 2020 | | | | ||||||||||
|
| | |
| |
| Adjusted |
| | |
| |
| Adjusted |
| Change | |
| | | | | Operating | | Operating | | | | | Operating | | Operating | | in Dollar | |
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | Amounts | |
|
| $ |
| % |
| % |
| $ |
| % |
| % |
| % | | ||
| | (dollars in thousands) | | ||||||||||||||
Base revenue | | $ | 152,958 |
| 90.0 | % |
| | $ | 113,203 |
| 91.5 | % |
| | 35.1 | % |
Fuel surcharge revenue | |
| 17,073 |
| 10.0 | |
| |
| 10,534 |
| 8.5 | |
| | 62.1 | |
Operating revenue | | | 170,031 |
| 100.0 | |
| | | 123,737 |
| 100.0 | |
| | 37.4 | |
| | | | | | | | | | | | | | | | | |
Total operating expenses | |
| 163,102 |
| 95.9 | | 95.3 | |
| 122,737 |
| 99.2 | | 98.6 | | 32.9 | |
Operating income (loss) | |
| 6,929 |
| 4.1 | | | |
| 1,000 |
| 0.8 | | | | — | (2) |
| | | | | | | | | | | | | | | | | |
Other expenses: | |
|
|
|
| |
| |
|
|
|
| |
| | | |
Interest expense | |
| 1,014 |
| 0.6 | |
| |
| 1,235 |
| 1.0 | |
| | (17.9) | |
Other, net | |
| 49 |
| 0.0 | |
| |
| 64 |
| 0.1 | |
| | (23.4) | |
Total other expenses, net | |
| 1,063 |
| 0.6 | |
| |
| 1,299 |
| 1.0 | |
| | (18.2) | % |
Income (loss) before income taxes | |
| 5,866 |
| 3.4 | |
| |
| (299) |
| (0.2) | |
| | — | (2) |
Income tax expense (benefit) | |
| 1,673 |
| 1.0 | |
| |
| 632 |
| 0.5 | |
| | — | (2) |
| | | | | | | | | | | | | | | | | |
Consolidated net income (loss) | | $ | 4,193 |
| 2.5 | % |
| | $ | (931) |
| (0.8) | % |
| | — | (2) |
| | | | | | | | | | | | | | | | | |
16
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, | | | | | Three Months Ended March 31, | | | | ||||||||||||||||||||||||
| | 2021 | | 2020 | | | | | 2022 | | 2021 | | | | ||||||||||||||||||||
|
| | |
| |
| Adjusted |
| | |
| |
| Adjusted |
| Change | |
| | |
| |
| Adjusted |
| | |
| |
| Adjusted |
| Change | |
| | | | | Operating | | Operating | | | | | Operating | | Operating | | in Dollar | | | | | | Operating | | Operating | | | | | Operating | | Operating | | in Dollar | |
| | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | Amounts | | | | | | Revenue | | Ratio (1) | | | | | Revenue | | Ratio (1) | | Amounts | |
|
| $ |
| % |
| % |
| $ |
| % |
| % |
| % | |
| $ |
| % |
| % |
| $ |
| % |
| % |
| % | | ||||
| | (dollars in thousands) | | | (dollars in thousands) | | ||||||||||||||||||||||||||||
Base revenue | | $ | 297,221 | | 90.5 | % |
| | $ | 225,964 | | 90.2 | % |
| | 31.5 | % | | $ | 176,405 |
| 87.7 | % |
| | $ | 144,265 |
| 91.0 | % |
| | 22.3 | % |
Fuel surcharge revenue | | | 31,315 | | 9.5 | |
| | | 24,546 | | 9.8 | |
| | 27.6 | | |
| 24,658 |
| 12.3 | |
| |
| 14,240 |
| 9.0 | |
| | 73.2 | |
Operating revenue | | | 328,536 |
| 100.0 | |
| | | 250,510 |
| 100.0 | |
| | 31.1 | | | | 201,063 |
| 100.0 | |
| | | 158,505 |
| 100.0 | |
| | 26.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total operating expenses | | | 315,561 | | 96.1 | | 95.4 | | | 251,822 | | 100.5 | | 100.1 | | 25.3 | | |
| 182,380 |
| 90.7 | | 89.2 | |
| 152,459 |
| 96.2 | | 95.6 | | 19.6 | |
Operating income (loss) | | | 12,975 | | 3.9 | | | | | (1,312) | | (0.5) | | | | — | (2) | |||||||||||||||||
Operating income | |
| 18,683 |
| 9.3 | | | |
| 6,046 |
| 3.8 | | | | 209.0 | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other expenses: | | |
| |
| |
| | |
| |
| |
| | | | |
|
|
|
| |
| |
|
|
|
| |
| | | |
Interest expense | | | 2,039 | | 0.6 | |
| | | 2,919 | | 1.2 | |
| | (30.1) | | |
| 1,417 |
| 0.7 | |
| |
| 1,025 |
| 0.6 | |
| | 38.2 | |
Other, net | | | 110 | | 0.0 | |
| | | 110 | | 0.0 | |
| | — | | |
| 68 |
| 0.0 | |
| |
| 61 |
| 0.0 | |
| | 11.5 | |
Total other expenses, net | | | 2,149 |
| 0.7 | |
| | | 3,029 |
| 1.2 | |
| | (29.1) | % | |
| 1,485 |
| 0.7 | |
| |
| 1,086 |
| 0.7 | |
| | 36.7 | |
Income (loss) before income taxes | | | 10,826 |
| 3.3 | |
| | | (4,341) |
| (1.7) | |
| | — | (2) | |||||||||||||||||
Income tax expense (benefit) | | | 3,036 | | 0.9 | |
| | | (859) | | (0.3) | |
| | — | (2) | |||||||||||||||||
Income before income taxes | |
| 17,198 |
| 8.6 | |
| |
| 4,960 |
| 3.1 | |
| | 246.7 | | |||||||||||||||||
Income tax expense | |
| 4,087 |
| 2.0 | |
| |
| 1,363 |
| 0.9 | |
| | 199.9 | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (loss) | | $ | 7,790 |
| 2.4 | % |
| | $ | (3,482) |
| (1.4) | % |
| | — | (2) | |||||||||||||||||
Consolidated net income | | $ | 13,111 |
| 6.5 | % |
| | $ | 3,597 |
| 2.3 | % |
| | 264.5 | % | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) |
16
Use of Non-GAAP Financial Information
The Company uses the terms “base revenue”, “adjusted operating ratio” and “adjusted operating income (loss)”income” 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.U.S. Securities and Exchange Commission (“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.
Base revenue is calculated as operating revenue less fuel surcharge revenue and intercompany eliminations. Adjusted operating ratio is calculated as operating expenses excluding severance costs included in salaries, wages and employee benefits, certain asset impairments, and amortization of acquisition related intangibles, net of fuel surcharge revenue, as a percentage of operating revenue excluding fuel surcharge revenue. Adjusted earnings (loss) per diluted shareoperating income is defined as earnings (loss) per diluted share plus the per share impact of severance costs included in salaries, wages and employee benefits, certain asset impairments, andcalculated by deducting operating expenses excluding amortization of acquisition related intangibles, plus or minus the per share tax impactnet of those adjustments using a statutory income tax rate. The per share impactfuel surcharge revenue, from operating revenue, net 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, certain asset impairments, and amortization of acquisition related intangibles.fuel surcharge revenue.
The Company’s chief operating decision-maker focuses on base revenue, 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 consistentrelevant 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)these measures 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.
17
AdjustedBase revenue, adjusted operating ratio and adjusted earnings (loss) per diluted shareoperating income are not substitutes for operating marginrevenue, operating ratio, operating income, 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).measures. Although management believes that base revenue, 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 consistentrelevant 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 base revenue, adjusted operating ratio adjusted earnings (loss) per diluted share and adjusted operating income (loss) differently. As a result, it may be difficult to use base revenue, 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.
Consolidated Reconciliations
Pursuant to the requirements of Regulation S-K, Item 10(e) and Regulation G, reconciliations of non-GAAP financial measures to GAAP financial measures have been provided in the tables below.below for base revenue, adjusted operating ratio, and adjusted operating income:
ConsolidatedBase Revenue, Adjusted Operating Ratio, and Adjusted Operating Income
| | | | | | | |
| | Three Months Ended | | ||||
| | March 31, | | ||||
|
| 2022 |
| 2021 |
| ||
| | (in thousands) | |||||
Operating revenue | | $ | 201,063 | | $ | 158,505 | |
Less: Fuel surcharge revenue | | | (24,658) | | | (14,240) | |
Base revenue | | $ | 176,405 | | $ | 144,265 | |
Operating expense | | $ | 182,380 | | $ | 152,459 | |
Adjusted for: | |
|
| |
|
| |
Amortization of acquisition related intangibles | | | (322) | |
| (323) | |
Fuel surcharge revenue | |
| (24,658) | |
| (14,240) | |
Adjusted operating expense | | $ | 157,400 | | $ | 137,896 | |
Operating income | | $ | 18,683 | | $ | 6,046 | |
Adjusted operating income | | $ | 19,005 | | $ | 6,369 | |
Operating ratio | | | 90.7 | % | | 96.2 | % |
Adjusted operating ratio | |
| 89.2 | % | | 95.6 | % |
| | | | | | | |
17
Segment Reconciliations
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | | Three Months Ended | | ||||||||||||
| | June 30, | | June 30, | | |||||||||||||||
Trucking Segment | | March 31, | | |||||||||||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
|
| 2022 |
| 2021 |
| ||||||
| | (in thousands) | | | (in thousands) | |||||||||||||||
Operating revenue | | $ | 170,031 | | $ | 123,737 | | $ | 328,536 | | $ | 250,510 | | | $ | 116,028 | | $ | 102,776 | |
Less: Fuel surcharge revenue | | | (17,073) | | | (10,534) | | | (31,315) | | | (24,546) | | |||||||
Intersegment activity | |
| 43 | |
| 327 | | |||||||||||||
Operating revenue (before intersegment eliminations) | |
| 116,071 | |
| 103,103 | | |||||||||||||
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (16,224) | |
| (10,319) | | |||||||||||||
Base revenue | | $ | 152,958 | | $ | 113,203 | | $ | 297,221 | | $ | 225,964 | | | $ | 99,847 | | $ | 92,784 | |
Operating expense | | $ | 163,102 | | $ | 122,737 | | $ | 315,561 | | $ | 251,822 | | |||||||
Operating expense (before intersegment eliminations) | | $ | 103,443 | | $ | 99,583 | | |||||||||||||
Adjusted for: | |
|
| |
|
| |
|
| |
|
| | |
|
| |
|
| |
Severance costs included in salaries, wages and employee benefits | |
| — | |
| (84) | |
| (34) | |
| (176) | | |||||||
Asset impairment - land | |
| — | |
| (137) | |
| — | |
| (137) | | |||||||
Amortization of acquisition related intangibles | | | (323) | |
| (340) | |
| (645) | |
| (680) | | |
| (322) | | | (323) | |
Fuel surcharge revenue | |
| (17,073) | |
| (10,534) | |
| (31,315) | |
| (24,546) | | |
| (16,224) | |
| (10,319) | |
Adjusted operating expense | | $ | 145,706 | | $ | 111,642 | | $ | 283,567 | | $ | 226,283 | | | $ | 86,897 | | $ | 88,941 | |
Operating income (loss) | | $ | 6,929 | | $ | 1,000 | | $ | 12,975 | | $ | (1,312) | | |||||||
Adjusted operating income (loss) | | $ | 7,252 | | $ | 1,561 | | $ | 13,654 | | $ | (319) | | |||||||
Operating income | | $ | 12,628 | | $ | 3,520 | | |||||||||||||
Adjusted operating income | | $ | 12,950 | | $ | 3,843 | | |||||||||||||
Operating ratio | | | 95.9 | % | | 99.2 | % | | 96.1 | % | | 100.5 | % | |
| 89.1 | % |
| 96.6 | % |
Adjusted operating ratio | |
| 95.3 | % | | 98.6 | % | | 95.4 | % | | 100.1 | % | |
| 87.0 | % |
| 95.9 | % |
| | | | | | | | | | | | | | | | | | | | |
Adjusted earnings (loss) per diluted share
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | Three Months Ended | | ||||||||||||
USAT Logistics Segment | | March 31, | | ||||||||||||||||
| | June 30, | | June 30, |
| 2022 |
| 2021 |
| ||||||||||
| | 2021 |
| 2020 |
| 2021 |
| 2020 | | (in thousands) | | ||||||||
Earnings (loss) per diluted share |
| $ | 0.47 |
| $ | (0.11) |
| $ | 0.87 |
| $ | (0.40) | |||||||
Operating revenue | | $ | 85,035 | | $ | 55,729 | | ||||||||||||
Intersegment activity | |
| 12,409 | |
| 12,652 | | ||||||||||||
Operating revenue (before intersegment eliminations) | |
| 97,444 | |
| 68,381 | | ||||||||||||
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (8,440) | |
| (4,296) | | ||||||||||||
Base revenue | | $ | 89,004 | | $ | 64,085 | | ||||||||||||
Operating expense (before intersegment eliminations) | | $ | 91,389 | | $ | 65,855 | | ||||||||||||
Adjusted for: | | | | | | | | | | | | | |
|
| |
|
| |
Severance costs included in salaries, wages and employee benefits | |
| — | |
| 0.01 | |
| 0.00 | |
| 0.02 | |||||||
Asset impairment - land | |
| — | |
| 0.02 | |
| — | |
| 0.02 | |||||||
Amortization of acquisition related intangibles | |
| 0.04 | |
| 0.04 | |
| 0.07 | |
| 0.08 | |||||||
Income tax effect of adjustments | |
| (0.01) | |
| (0.02) | |
| (0.02) | |
| (0.03) | |||||||
Adjusted earnings (loss) per diluted share |
| $ | 0.50 |
| $ | (0.06) |
| $ | 0.92 |
| $ | (0.31) | |||||||
Fuel surcharge revenue | |
| (8,440) | |
| (4,296) | | ||||||||||||
Adjusted operating expense | | $ | 82,949 | | $ | 61,559 | | ||||||||||||
Operating income | | $ | 6,055 | | $ | 2,526 | | ||||||||||||
Adjusted operating income | | $ | 6,055 | | $ | 2,526 | | ||||||||||||
Operating ratio | |
| 93.8 | % |
| 96.3 | % | ||||||||||||
Adjusted operating ratio | |
| 93.2 | % |
| 96.1 | % | ||||||||||||
| | | | | | | | | | | | | | | | | | | |
18
Segment Reconciliations
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
Trucking Segment | | June 30, | | June 30, | | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
| | (in thousands) | | ||||||||||
Operating revenue | | $ | 105,102 | | $ | 87,920 | | $ | 207,878 | | $ | 180,921 | |
Intersegment activity | |
| 259 | |
| 707 | |
| 586 | |
| 1,701 | |
Operating revenue (before intersegment eliminations) | |
| 105,361 | |
| 88,627 | |
| 208,464 | |
| 182,622 | |
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (12,038) | |
| (8,083) | |
| (22,358) | |
| (19,371) | |
Base revenue | | $ | 93,323 | | $ | 80,544 | | $ | 186,106 | | $ | 163,251 | |
Operating expense (before intersegment eliminations) | | $ | 102,304 | | $ | 87,451 | | $ | 201,887 | | $ | 183,133 | |
Adjusted for: | |
|
| |
|
| |
|
| |
|
| |
Severance costs included in salaries, wages and employee benefits | |
| — | | | (80) | | | (32) | | | (172) | |
Asset impairment - land | |
| — | | | (137) | | | — | | | (137) | |
Amortization of acquisition related intangibles | |
| (323) | | | (340) | | | (645) | | | (680) | |
Fuel surcharge revenue | |
| (12,038) | |
| (8,083) | |
| (22,358) | |
| (19,371) | |
Adjusted operating expense | | $ | 89,943 | | $ | 78,811 | | $ | 178,852 | | $ | 162,773 | |
Operating income (loss) | | $ | 3,057 | | $ | 1,176 | | $ | 6,577 | | $ | (511) | |
Adjusted operating income | | $ | 3,380 | | $ | 1,733 | | $ | 7,254 | | $ | 478 | |
Operating ratio | |
| 97.1 | % |
| 98.7 | % |
| 96.8 | % |
| 100.3 | % |
Adjusted operating ratio | |
| 96.4 | % |
| 97.8 | % |
| 96.1 | % |
| 99.7 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | | ||||||||
USAT Logistics Segment | | June 30, | | June 30, | | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
| | (in thousands) | | | | | | | | ||||
Operating revenue | | $ | 64,929 | | $ | 35,817 | | $ | 120,658 | | $ | 69,589 | |
Intersegment activity | |
| 13,820 | |
| 2,921 | |
| 26,472 | |
| 4,973 | |
Operating revenue (before intersegment eliminations) | |
| 78,749 | |
| 38,738 | |
| 147,130 | |
| 74,562 | |
Less: fuel surcharge revenue (before intersegment eliminations) | |
| (5,569) | |
| (2,618) | |
| (9,866) | |
| (5,695) | |
Base revenue | | $ | 73,180 | | $ | 36,120 | | $ | 137,264 | | $ | 68,867 | |
Operating expense (before intersegment eliminations) | | $ | 74,877 | | $ | 38,914 | | $ | 140,732 | | $ | 75,363 | |
Adjusted for: | |
|
| |
|
| |
|
| |
|
| |
Severance costs included in salaries, wages and employee benefits | |
| — | | | (4) | | | (2) | | | (4) | |
Fuel surcharge revenue | |
| (5,569) | |
| (2,618) | |
| (9,866) | |
| (5,695) | |
Adjusted operating expense | | $ | 69,308 | | $ | 36,292 | | $ | 130,864 | | $ | 69,664 | |
Operating income (loss) | | $ | 3,872 | | $ | (176) | | $ | 6,398 | | $ | (801) | |
Adjusted operating income (loss) | | $ | 3,872 | | $ | (172) | | $ | 6,400 | | $ | (797) | |
Operating ratio | |
| 95.1 | % |
| 100.5 | % |
| 95.7 | % |
| 101.1 | % |
Adjusted operating ratio | |
| 94.7 | % |
| 100.5 | % |
| 95.3 | % |
| 101.2 | % |
| | | | | | | | | | | | | |
19
Key Operating Statistics by Segment
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | Six Months Ended | | | Three Months Ended | | ||||||||||||
| | June 30, | | | June 30, | | | March 31, | | ||||||||||||
Trucking: | | 2021 | | 2020 | |
| 2021 | | 2020 | | | 2022 | | 2021 | | ||||||
Operating revenue (before intersegment eliminations) (in thousands) | | $ | 105,361 | | $ | 88,627 | | | $ | 208,464 | | $ | 182,622 | | | $ | 116,071 | | $ | 103,103 | |
Operating income (loss) (1) (in thousands) | | $ | 3,057 | | $ | 1,176 | | | $ | 6,577 | | $ | (511) | | |||||||
Operating income (1) (in thousands) | | $ | 12,628 | | $ | 3,520 | | ||||||||||||||
Adjusted operating income (2) (in thousands) | | $ | 3,380 | | $ | 1,733 | | | $ | 7,254 | | $ | 478 | | | $ | 12,950 | | $ | 3,843 | |
Operating ratio (3) | |
| 97.1 | % |
| 98.7 | % | |
| 96.8 | % |
| 100.3 | % | |
| 89.1 | % |
| 96.6 | % |
Adjusted operating ratio (4) | |
| 96.4 | % |
| 97.8 | % | |
| 96.1 | % |
| 99.7 | % | |
| 87.0 | % |
| 95.9 | % |
Total miles (5) (in thousands) | |
| 42,700 | |
| 45,961 | | |
| 84,848 | |
| 91,680 | | |
| 38,487 | |
| 42,148 | |
Deadhead percentage (6) | |
| 11.2 | % |
| 13.1 | % | |
| 11.4 | % |
| 13.2 | % | |
| 10.8 | % |
| 11.6 | % |
Base revenue per loaded mile | | $ | 2.461 | | $ | 2.017 | | | $ | 2.475 | | $ | 2.051 | | | $ | 2.907 | | $ | 2.490 | |
Average number of seated tractors | |
| 1,787 | |
| 1,943 | | |
| 1,784 | |
| 1,907 | | |
| 1,716 | |
| 1,782 | |
Average number of available tractors (7) | |
| 1,922 | |
| 2,063 | | |
| 1,907 | |
| 2,018 | | |
| 1,821 | |
| 1,892 | |
Average number of in-service tractors (8) | |
| 1,949 | |
| 2,075 | | |
| 1,936 | |
| 2,039 | | |
| 1,858 | |
| 1,923 | |
Loaded miles per available tractor per week | | | 1,518 | | | 1,489 | | | 1,525 | | | 1,517 | | | | 1,467 | | | 1,532 | | |
Base revenue per available tractor per week | | $ | 3,735 | | $ | 3,003 | | | $ | 3,774 | | $ | 3,111 | | | $ | 4,265 | | $ | 3,814 | |
Average loaded miles per trip | | | 509 | | | 501 | | | 515 | | | 498 | | | | 496 | | | 520 | | |
| | | | | | | | | | | | | | | | | | | | | |
USAT Logistics: | |
| | |
| | | |
| | |
| | | |
| | |
| | |
Operating revenue (before intersegment eliminations) (in thousands) | | $ | 78,749 | | $ | 38,738 | | | $ | 147,130 | | $ | 74,562 | | | $ | 97,444 | | $ | 68,381 | |
Operating income (loss) (1) (in thousands) | | $ | 3,872 | | $ | (176) | | | $ | 6,398 | | $ | (801) | | |||||||
Adjusted operating income (loss) (2) (in thousands) | | $ | 3,872 | | $ | (172) | | | $ | 6,400 | | $ | (797) | | |||||||
Operating income (1) (in thousands) | | $ | 6,055 | | $ | 2,526 | | ||||||||||||||
Adjusted operating income (2) (in thousands) | | $ | 6,055 | | $ | 2,526 | | ||||||||||||||
Gross margin (9) (in thousands) | | $ | 9,733 | | $ | 4,712 | | | $ | 17,958 | | $ | 8,681 | | | $ | 13,259 | | $ | 8,224 | |
Gross margin percentage (10) | |
| 12.4 | % |
| 12.2 | % | |
| 12.2 | % |
| 11.6 | % | |
| 13.6 | % |
| 12.0 | % |
Load count (in thousands) | |
| 37.1 | |
| 33.4 | | |
| 70.2 | |
| 60.6 | | |
| 41.3 | |
| 33.1 | |
| | | | | | | | | | | | | | | | | | | | |
1) | Operating income |
2) | Adjusted operating income |
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 |
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). |
20
19
Results of Operations—Segment Review
Trucking operating revenue
During the three months ended June 30, 2021,March 31, 2022, Trucking operating revenue (before intersegment eliminations) increased 18.9%12.6% to $105.4$116.1 million, compared to $88.6$103.1 million for the same period in 2020.2021. Trucking base revenue (before intersegment eliminations) increased 15.9%7.6% to $93.3$99.8 million compared to $80.5$92.8 million for the secondfirst quarter of 2020.2021. The increase in operating revenue (before intersegment eliminations) resulted primarily from a 22.0%16.7% increase in base revenue per loaded mile andoffset by a 1.9% increase in loaded miles per available tractor per week.
During the six months ended June 30, 2021, Trucking operating revenue (before intersegment eliminations) increased 14.2% to $208.5 million, compared to $182.6 million for the same period in 2020. Trucking base revenue (before intersegment eliminations) increased 14.0% to $186.1 million compared to $163.3 million for the second quarter of 2020. The increase in operating revenue (before intersegment eliminations) resulted primarily from a 20.7% increase in base revenue per loaded mile and a 0.5% increase4.2% decrease in loaded miles per available tractor per week.
Trucking operating income (loss)
For the three months ended June 30, 2021,March 31, 2022, Trucking reported operating income of $3.1$12.6 million compared to operating income of $1.2$3.5 million for the same period in 2020.2021. This improvement was primarily driven by the 18.9%12.6% increase in operating revenue (before intersegment eliminations) discussed above.
Forabove while controlling the six months ended June 30, 2021, Trucking reported an operating income of $6.6segment’s fixed cost structure, paired with a $6.2 million compared to an operating loss of $0.5 million for the same period in 2020. This change was largely driven by the 14.2% increase in operatinggains from the sale of used revenue (before intersegment eliminations) discussed above.equipment.
USAT Logistics operating revenue
For the three months ended June 30, 2021,March 31, 2022, USAT Logistics operating revenue (before intersegment eliminations) increased 103.3%42.5% to $78.7$97.4 million compared to $38.7$68.4 million for the same period in 2020.2021. The year-over-year increase in operating revenue (before intersegment eliminations) was the result of an 82.9%14.2% increase in revenue per load and a 11.2% increase in load volume.
For the six months ended June 30, 2021, USAT Logistics operating revenue (before intersegment eliminations) increased 97.3% to $147.1 million compared to $74.6 million for the same period in 2020. The year-over-year change in operating revenue (before intersegment eliminations) was the result of a 70.3% increase in revenue per load, and a 15.8%24.8% increase in load volume.
USAT Logistics operating income (loss)
USAT Logistics reported operating income of $3.9$6.1 million for the three months ended June 30, 2021,March 31, 2022, an increase of $4.0$3.5 million, compared to an operating lossincome of $0.2$2.5 million for the comparable quarter in 2020.2021. This increase was driven largely by 103.3%the 42.5% increase in operating revenue (before intersegment eliminations) discussed above and a 20160 basis point improvement in gross margin.
For the six months ended June 30, 2021, USAT Logistics reported operating income of $6.4 million, an increase of $7.2 million, compared to an operating loss of $0.8 million for the comparable period in 2020. This increase was driven primarily by an 97.3% increase in operating revenue (before intersegment eliminations) and a 60 basis point improvement in gross margin.
21
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 June 30, | | |
| ||||||||||||
| | 2021 | | 2020 | | % change | | ||||||||||
|
| | |
| |
| Adjusted | | | |
| |
| Adjusted | | |
|
| | | | | | | Operating | | | | | | | Operating | | 2021 to |
|
| | Operating Revenue | | Ratio (1) | | Operating Revenue | | Ratio (1) | | 2020 | | ||||||
| | $ | | % | | % | | $ | | % | | % | | % |
| ||
Operating Expenses: | | (dollars in thousands) | | ||||||||||||||
Salaries, wages and employee benefits |
| $ | 36,488 |
| 21.4 | % | 23.9 | % | $ | 33,636 |
| 27.2 | % | 29.6 | % (1) | 8.5 | % |
Fuel and fuel taxes | | | 12,414 |
| 7.3 |
| (3.0) | (1)(2) | | 8,082 |
| 6.5 |
| (2.2) | (1)(2) | 53.6 | |
Depreciation and amortization | | | 9,163 |
| 5.4 |
| 5.8 | (1) | | 10,034 |
| 8.1 |
| 8.6 | (1) | (8.7) | |
Insurance and claims | | | 5,181 |
| 3.0 |
| 3.4 | | | 4,009 |
| 3.2 |
| 3.5 | | 29.2 | |
Equipment rent | | | 2,048 |
| 1.2 |
| 1.3 | | | 1,880 |
| 1.5 |
| 1.7 | | 8.9 | |
Operations and maintenance | | | 8,783 |
| 5.2 |
| 5.7 | | | 9,062 |
| 7.4 |
| 8.0 | | (3.1) | |
Purchased transportation | | | 82,938 |
| 48.8 |
| 54.2 | | | 49,276 |
| 39.8 |
| 43.5 | | 68.3 | |
Operating taxes and licenses | | | 1,323 |
| 0.8 |
| 0.9 | | | 1,349 |
| 1.1 |
| 1.2 | | (1.9) | |
Communications and utilities | | | 796 |
| 0.5 |
| 0.5 | | | 906 |
| 0.7 |
| 0.8 | | (12.1) | |
(Gain) loss on disposal of assets, net | | | (140) |
| (0.1) |
| (0.1) | | | (16) |
| 0.0 |
| 0.0 | | — | (3) |
Asset impairments | | | — | | — | | — | | | 588 | | 0.5 | | 0.4 | (1) | — | (3) |
Other | | | 4,108 |
| 2.4 |
| 2.7 | | | 3,931 |
| 3.2 |
| 3.5 | | 4.5 | |
Total operating expenses |
| $ | 163,102 |
| 95.9 | % | 95.3 | % | $ | 122,737 |
| 99.2 | % | 98.6 | % | 32.9 | % |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |||||||||||||||||
| | Six Months Ended June 30, | | % |
| | | | | | | | | | | | | | | | | | ||||||||||||
| | 2021 | | 2020 | | change | | | Three Months Ended March 31, | | |
| ||||||||||||||||||||||
|
| | |
| |
| Adjusted | | | |
| |
| Adjusted | | |
| | 2022 | | 2021 | | % change | | ||||||||||
| | | | | | | Operating | | | | | | | Operating | | 2021 to |
|
| | |
| |
| Base | | | |
| |
| Base | | 2022 to |
|
| | Operating Revenue | | Ratio (1) | | Operating Revenue | | Ratio (1) | | 2020 | | | Operating Revenue | | Revenue (1) | | Operating Revenue | | Revenue (1) | | 2021 | | ||||||||||||
| | $ | | % | | % | | $ | | % | | % | | % |
| | $ | | % | | % | | $ | | % | | % | | % |
| ||||
Operating Expenses: | | (dollars in thousands) | | | (dollars in thousands) | | ||||||||||||||||||||||||||||
Salaries, wages and employee benefits |
| $ | 73,043 |
| 22.2 | % | 24.6 | % (1) | $ | 69,481 |
| 27.7 | % | 30.7 | % (1) | 5.1 | % |
| $ | 41,887 |
| 20.8 | % | 23.7 | % | $ | 36,555 |
| 23.0 | % | 25.3 | % | 14.6 | % |
Fuel and fuel taxes | | | 23,858 |
| 7.3 |
| (2.5) | (1)(2) | | 19,945 |
| 8.0 |
| (2.0) | (1)(2) | 19.6 | | | | 17,037 |
| 8.5 |
| (4.3) | (2) | | 11,444 |
| 7.2 |
| (1.9) | (2) | 48.9 | |
Depreciation and amortization | | | 18,733 |
| 5.7 |
| 6.1 | (1) | | 20,045 |
| 8.0 |
| 8.6 | (1) | (6.5) | | | | 8,024 |
| 4.0 |
| 4.4 | | | 9,570 |
| 6.0 |
| 6.4 | | (16.2) | |
Insurance and claims | | | 10,990 |
| 3.4 |
| 3.7 | | | 9,866 |
| 3.9 |
| 4.4 | | 11.4 | | | | 6,623 |
| 3.3 |
| 3.8 | | | 5,809 |
| 3.7 |
| 4.0 | | 14.0 | |
Equipment rent | | | 3,997 |
| 1.2 |
| 1.4 | | | 3,731 |
| 1.5 |
| 1.7 | | 7.1 | | | | 1,834 |
| 0.9 |
| 1.0 | | | 1,949 |
| 1.2 |
| 1.3 | | (5.9) | |
Operations and maintenance | | | 15,849 |
| 4.8 |
| 5.3 | | | 18,399 |
| 7.3 |
| 8.0 | | (13.9) | | | | 8,515 |
| 4.3 |
| 4.8 | | | 7,066 |
| 4.5 |
| 4.9 | | 20.5 | |
Purchased transportation | | | 157,041 |
| 47.8 |
| 52.8 | | | 97,090 |
| 38.8 |
| 43.0 | | 61.7 | | | | 98,319 |
| 48.9 |
| 55.7 | | | 74,103 |
| 46.8 |
| 51.4 | | 32.7 | |
Operating taxes and licenses | | | 2,595 |
| 0.8 |
| 0.9 | | | 2,508 |
| 1.0 |
| 1.1 | | 3.5 | | | | 1,260 |
| 0.6 |
| 0.7 | | | 1,272 |
| 0.8 |
| 0.9 | | (0.9) | |
Communications and utilities | | | 1,600 |
| 0.5 |
| 0.5 | | | 1,719 |
| 0.7 |
| 0.7 | | (6.9) | | | | 1,006 |
| 0.5 |
| 0.6 | | | 804 |
| 0.5 |
| 0.6 | | 25.1 | |
Loss (gain) on disposal of assets, net | | | (317) |
| (0.1) |
| (0.1) | | | 22 |
| 0.0 |
| — | | — | (3) | |||||||||||||||||
Asset impairments | | | — | | — | | — | | | 588 | | 0.2 | | 0.2 | (1) | — | (3) | |||||||||||||||||
Gain on disposal of assets, net | | | (6,401) |
| (3.2) |
| (3.6) | | | (177) |
| (0.1) |
| (0.1) | | — | | |||||||||||||||||
Other | | | 8,172 |
| 2.5 |
| 2.7 | | | 8,428 |
| 3.4 |
| 3.7 | | (3.0) | | | | 4,276 |
| 2.1 |
| 2.4 | | | 4,064 |
| 2.6 |
| 2.8 | | 5.2 | |
Total operating expenses |
| $ | 315,561 |
| 96.1 | % | 95.4 | % | $ | 251,822 |
| 100.5 | % | 100.1 | % | 25.3 | % |
| $ | 182,380 |
| 90.7 | % | 89.2 | % (3) | $ | 152,459 |
| 96.2 | % | 95.6 | % (3) | 19.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
1) |
2) | Calculated as fuel and fuel taxes, net of fuel surcharge revenue. |
3) |
2220
Salaries, wages and employee benefits
Salaries, wages and employee benefits consist primarily of compensation for all employees and are primarily affected by the total number of miles driven by Company drivers, the rate per mile paid to Company drivers, employee benefits, (including, but not limited to, healthcare and workers’ compensation), and compensation and benefits paid to non-driver employees.
Salaries,The increase in salaries, wages and employee benefits expense increased for the three and six months ended June 30, 2021, when compared to the same periods in 2020,was primarily due to increases in performance-based compensation.
Duringcompensation and driver and administrative pay, driven higher by a tight driver market and inflation arising during the second quarterlatter half of 2021 and into the Company announced driver pay increases; however, managementcurrent year. Management believes the market for drivers will remain tight, and as such, expects driver wages to continue to increase in order to attract and retain sufficient numbers of qualified drivers to operate the Company’s fleet. This expense item will also be affected by the percentage of Trucking miles operated by independent contractors instead of Company employed drivers and the percentage of revenue generated by USAT Logistics, for which payments are reflected in purchased transportation.
Fuel and fuel taxes
Fuel and fuel taxes consistrelate primarily ofto 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 increase in fuel and fuel taxes for the three and six months ended June 30, 2021March 31, 2022 is primarily due to increases in the price per gallon of diesel fuel compared to the same periodsperiod in 2020.2021. For the three and six months ended June 30, 2021,March 31, 2022, the average diesel fuel prices per gallon as reported by the DOE, increased 32.1% and 14.6%, respectively,48.2% when compared to the same periodsperiod in 2020.2021. This increase was largely offset by a 12.1%73.1% increase in fuel surcharge revenue which increased from $14.2 million for the three months ended March 31, 2021 to $24.7 million for the three months ended March 31, 2022, and 12.7%a 7.5% decrease in total miles driven by companyCompany drivers for the three and six months ended June 30, 2021, respectively.March 31, 2022.
The Company continues to pursue fuel efficiency initiatives, acquiringincluding the acquisition of newer, more fuel-efficient revenue equipment and implementing focused driver training programs, which have contributed to improvements in our fuel expense on a cost per Company tractor mile basis.programs. The Company expects to continue managingto manage its idle time and truck speeds and partneringpartner with customers to align fuel surcharge programs to recover a fair portion of risingits fuel costs. Looking ahead, theThe Company’s net fuel expense is expectedwill likely continue to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, empty mile percentage, the percentage of revenue generated from independent contractors and the success of fuel efficiency initiatives.
Depreciation and amortization and equipment rent
Depreciation and amortization of property and equipment consists primarily of depreciation for Company-owned tractors and trailers, amortization of revenue equipment financed with finance leases, depreciation of facilities, and amortization of intangible assets. 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 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 and six months ended June 30, 2021,March 31, 2022, equipment rent expense increasedremained flat when compared to the 2020 periods due to an increase2021 period.
The decrease in the number of tractors in the Company’s fleet acquired under operating leases.
Depreciationdepreciation and amortization expense decreased forover the three and six months ended June 30, 2021,March 31, 2022, when compared to the same periodsperiod in 20202021 was primarily due to a decreasethe change in fleet sizetractor salvage values that occurred during the first quarter of 2022 to better reflect current estimates of the value of such equipment upon its retirement, and the timing of revenue equipment replacements. The Company believes these changes will more tractors being acquired through operating leases.accurately reflect the value of the revenue equipment on the accompanying condensed consolidated balance sheets.
TheWhile the Company intends to continue its focus on improving asset utilization, matching customer demand growing its independent contractor fleet and strengthening load profitability initiatives. Further, theinitiatives, management expects acquisition costs of new revenue equipment couldto continue to increase in the near term due to the inclusionongoing supply chain issues. Currently, tractor and trailer manufacturers are experiencing shortages of improved safetysemiconductor chips and fuel efficiency features. other component parts and supplies, forcing many to curtail or suspend production, which has led to a lower supply of tractors and trailers and higher prices, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.
2321
Insurance and claims
Insurance and claims expense consists of insurance premiums and the accruals the Company makes for estimated payments and expenses for claims for 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 accrual,accruals, developments in prior-year claims, and insurance premiums and self-insured amounts. For the three and six months ended June 30, 2021,March 31, 2022, insurance and claims expense increased due to less favorable claim experience compared to the prior year periods.period, largely due to increased insurance premiums.
The Company expects insurance and claims expense to continue to be volatile over the long-term. Recently,Because the trucking industry has experiencedcontinues to experience large auto liability verdicts and settlements, causing a decline in the number of carriers and underwriters that write insurance policies or that are willing to provide insurance for trucking companies.companies, the Company expects insurance and claims expense to continue to be volatile. These factors have caused the Company’s insurance premiums to increase during the October 20202021 renewal. The Company also optedcontinues to increase its self-insured retention level from $1 millionevaluate options to $2 millionprevent further expense increases, including the continued use of and decrease aggregate coverage limits to offset the increased premium costs during the current premium year. As a result, the Company looked at alternatives to traditional insurance programs, and formed aformation of additional captive insurance company, SRRG, in an effort to mitigate a portion of the increased insurance costs.companies.
Operations and maintenance
Operations and maintenance expense consists primarily of vehicle repairs and maintenance, generaltolls and administrative expensesweight tickets, and other related costs. OperatingOperations and maintenance expenses are primarily affected by the age of the Company-operated 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. OperationsHowever, a portion of operations and maintenance expenses are comprised of fixed costs, such as travel expenses, facility lease payments and property taxes. The increase in operations and maintenance expense decreased for both the three and six months ended June 30, 2021,March 31, 2022 when compared to the same periodsperiod in 2020. While2021, was the decreaseresult of increased direct repair and tire expenses paired with the resumption of corporate travel, partially offset by lower tolls. Although we are beginning to see improved delivery schedules, management continues to believe that delays in the three month period was marginal,receipt of new tractors, paired with the decrease for six months was primarily due to lower tolls and maintenance expenses. The decrease in maintenance expense was primarily due to decreases in the cost of maintaining our fleet due to such internal initiatives as decreasing the averageoverall age of our Company-owned tractors, limiting outside repairs and adding an additionalfleet will likely affect our maintenance terminalcosts in Waxahachie, Texas.future periods.
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 the three and six months ended June 30, 2021,March 31, 2022, purchased transportation expense increased significantly when compared to the 2020 periods,2021 period, primarily due to anthe continued increase in the volume of brokered loads through our USAT Logistics segment and the use of independent contractors by our Trucking segment.increased third-party capacity costs in a tight capacity market.
The Company is endeavoring to grow its independent contractor fleet as a percentage of its total fleet and growing USAT Logistics, which if successful, could further increase purchased transportation expense, particularly if the Company needs to pay independent contractors more to stay with the Company in light of regulatory changes. In periods of increasing independent contractor capacity, increases in driver wages are shifted from employee driver wages and related expenses to the “Purchased transportation” line item, net of their fuel expense, maintenance and capital expenditures.
Gain on disposal of assets, net
The increase in gain on disposal of assets, net during the three months ended March 31, 2022 when compared to the same quarter in 2021, was due primarily to continued strength in the used equipment market. Management expects that the strong used equipment market will continue through the remainder of this year; however, the first quarter adjustment to salvage values is expected to reduce the magnitude of these gains in future periods.
22
Interest expense, net
For the three and six months ended June 30, 2021,The increase in interest expense, net decreasedfor the three months ended March 31, 2022, was primarily due to the decreased interest rate on our outstanding borrowing and decreases in$0.3 million write-off of unamortized debt issuance costs associated with the outstanding borrowings.Company’s previous credit facility. See Note 6 to the condensed consolidated financial statements for further discussion of the Company’s Credit Facility.
24
Income tax expense (benefit)
During the the three months ended June 30,March 31, 2022 and 2021, and 2020, the Company’s effective tax rate was 28.5%23.8% and 211.4%27.5%, respectively. DuringThe effective rate varied from the six months ended June 30, 2021statutory federal tax rate primarily due to state income taxes and 2020, the Company’s effectivecertain non-deductible expenses. The fiscal 2022 tax rate was 28.0% and 19.8%, respectively. The Company’s effective tax rate, when compared to the federal statutory rate of 21%, is primarily affected by state income taxes, netvesting of federal incomeequity-based compensation at a higher stock price than the price at which it was granted, which resulted in a decrease to tax effectexpense. Additionally, in fiscal 2022, the Company benefited from The Consolidated Appropriations Act of 2021 that increased the deduction for the current year periods,cost of food or beverage provided by a restaurant to be 100% deductible in 2021 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 their 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.
During the interim periods for the year ended December 31, 2020, the Company used the cut-off method to calculate taxes for the applicable interim periods. Due to more certainty in their financial forecasts for the current fiscal year, the Company has returned to its historical method for calculating the provision for income taxes during interim reporting periods. As such, we have calculated taxes for the six2022. The three months ended June 30,March 31, 2021, by applying an estimatehowever, did not benefit from The Consolidated Appropriations Act of 2021 because the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) adjusted for discrete items for the reporting period.legislation was not passed until December 2021.
Seasonality
In the trucking industry, revenue typically follows a seasonal pattern for various commodities and customer businesses. Peak freight demand has historically occurred in the months of September, October and November, however no assurance can be provided that our current or future year experience will reflect this.November. After the December holiday season and during the remaining winter months, freight volumes are typically lower as many customers reduce shipment levels. Operating expenses have historically been higher in the winter months due primarily to decreased fuel efficiency, increased cold weather-related maintenance costs of revenue equipment and increased insurance and claims costs attributed to adverse winter 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. Weather-related events, such as tornadoes, hurricanes, blizzards, ice storms, floods, and fires, could increase in frequency and severity due to climate change.
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. A prolonged period of inflation could cause interest rates, fuel, wages and other operating costs to increase, which could adversely affect the Company’s results of operations unless freight rates correspondingly increase. The effectCompany attempts to limit the effects of inflation through increases in revenue per mile, certain cost control efforts and limiting the effects of fuel prices through fuel surcharges and measures intended to reduce the consumption of fuel. Management also believes that inflation-driven cost increases on overall operating costs iswould not expected to be greatermaterially different for the Company than for its competitors. Additionally, a prolonged period of inflation could reduce overall economic activity and may reduce overall demand for our services.
Fuel Availability and Cost
The trucking industry is dependent upon the availability of fuel. In the past, fuel shortages or increases in fuel taxes or fuel costs have adversely affected profitability and may continue to do so. USA Truck has not experienced difficulty in maintaining necessary fuel supplies, and in the past has 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 ableunable 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 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 six months ended June 30, 2021,March 31, 2022, the average diesel fuel prices per gallon as reported by the DOE, increased 32.1% and 14.6%, respectively,48.2% when compared to the same periodsperiod in 2020.2021.
As of June 30, 2021,March 31, 2022, the Company did not have any long-term fuel purchase contracts and has not entered into any fuel hedging arrangements.
2523
Equity
As of June 30, 2021,March 31, 2022, the Company had total stockholders’ equity of $93.2$124.2 million and total debt and financingfinance lease liabilities of $138.0$161.1 million, resulting in a total debt, less cash (excluding restricted cash), to total capitalization ratio of 59.3%54.5% compared to 64.5%56.4% as of December 31, 2020.2021.
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 and availability, 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 June 30, 2021,March 31, 2022, the Company had $27.8$74.9 million in purchase commitments for the acquisition of revenue equipment, of which none were$20.9 million was cancellable. It is anticipated that these purchase commitments will be funded primarily through the use of operating leases, with down payments being funded first through cash provided by operations and proceeds from the sale of used revenue equipment and secondarily from borrowings under the Company’s Credit Facility.
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 revenue equipment and to a lesser extent, in technology and working capital. In the Company’s USAT Logistics segment, 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 the use of finance and operating leases. Based on expected financial conditions, net capital expenditures, forecasted 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 for the foreseeable future.
On January 31, 2022, the Company entered into the Credit Facility. The Credit Facility is structured as a $130.0 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 $60 million, exercisable in increments of $20 million. Included within its $130.0 million revolving credit facility, is a letter of credit sub-facility in an aggregate amount of $15.0 million and a swing line sub-facility in an aggregate amount of $25.0 million. The Credit Facility is secured by a pledge of certain of the Company’s assets, with the notable exclusions of any real estate or revenue equipment financed outside the Credit Facility.
The Credit Facility contains a single springing financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0 that is triggered1.0. The financial covenant springs only in the event excess availability under the Credit Facility fallsdrops below 10%(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 availabilitycommitments under the Credit Facility falls below 20% of the lenders’ total commitments.and (ii) $13.0 million.
As of June 30, 2021, the Company had $7.9 million in letters of credit outstanding and had $86.6 million available to borrow under the Credit Facility, taking into account borrowing base availability. Fluctuations in the outstanding balance and related availability under the Credit Facility are driven primarily by cash flows from operations, bi-annual appraisals of revenue equipment, the timing and nature of property and equipment additions that are not funded through other sources of financing, and the nature and timing andof receipt of proceeds from disposals of property and equipment. Since closing, the Company has not borrowed on the Credit Facility and had full availability of $130.0 million as of March 31, 2022. The Company expects some reduction in availability in the second quarter as the existing letters of credit are transitioned and collateralized by the Credit Facility.
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Cash Flows
The following table summarizes the sources (uses) of cash for each of the periods presented:
| | | | | | | | | | | | | | | | |
| | Cash Flow | | Six Months Ended June 30, | | Cash Flow | | Three Months Ended March 31, | ||||||||
| | Category | | 2021 | | 2020 | | Category | | 2022 | | 2021 | ||||
Sources of cash: | | | | (in thousands) | | | | (in thousands) | ||||||||
Operating activities - net | | Operating | | $ | 15,692 | | $ | 14,406 | | Operating | | $ | 13,813 | | $ | 5,984 |
Proceeds from sale of property and equipment | | Investing | | | 6,141 | | | 1,459 | | Investing | | | 12,002 | | | 5,451 |
Borrowings under long-term debt | | Financing | | | 28,760 | | | 33,200 | | Financing | | | 6,000 | | | 13,150 |
Proceeds from issuance of long-term debt | | Financing | | | 41,974 | | | — | ||||||||
| | | | | | | | | | | | | | | | |
Uses of cash: | | | | | | | | | | | | | | | | |
Capital expenditures | | Investing | | | (1,066) | | | (9,809) | | Investing | | | (754) | | | (395) |
Payments of long-term debt | | Financing | | | (39,156) | | | (27,492) | | Financing | | | (49,321) | | | (16,169) |
Principal payments on financing lease obligations | | Financing | | | (5,888) | | | (11,366) | | Financing | | | (2,508) | | | (2,992) |
Payments on obligation under finance lease | | Financing | | | — | | | — | ||||||||
Net change in bank drafts payable | | Financing | | | (2,785) | | | (346) | | Financing | | | (111) | | | (2,429) |
| | | | | | | | | | | | | | | | |
Other uses - net | | Financing | | | (9) | | | (57) | | Financing | | | (1,854) | | | (5) |
Increase (decrease) in cash and restricted cash | | | | $ | 1,689 | | $ | (5) | ||||||||
Increase in cash and restricted cash | | | | $ | 19,241 | | $ | 2,595 | ||||||||
| | | | | | | | | | | | | | | | |
Operating activities
Our net cash provided by operating activities infor the sixthree months ended June 30, 2021March 31, 2022 increased from the comparable 20202021 period primarily due to an increase in net income and an increase to accounts payable and accrued expenses, offset by an increase in accounts and other receivables.
Debt and Lease Obligations
See Notes 6 and 7 to the condensed consolidated financial statements for further discussion of the Company’s Credit Facility, insurance financing, 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.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not required.
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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 June 30, 2021March 31, 2022 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 the Company’s management, including the PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.
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There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2021March 31, 2022 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 controls and procedures 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, results of operations or cash flows in any given reporting period.
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, 20202021 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.
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ITEM 6. | EXHIBITS |
| | |
Exhibit | | Exhibit |
3.1 | | |
3.2 | | |
4.1 | | |
10.1* | # | |
10.2 | # | |
10.3 | # | |
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 | Inline | XBRL Taxonomy Extension Schema Document. |
101.CAL | Inline | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF | Inline | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB | Inline | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | Inline | XBRL Taxonomy Extension Presentation Linkbase Document. |
104 | | Cover page Interactive Data File formatted as Inline XBRL (contained in Exhibit 101) |
References:
| | |
| | |
# | | Filed herewith. |
## | | Furnished herewith. |
* | | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish to the SEC a supplemental copy of any omitted schedule upon request by the SEC. |
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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. | |
| | | | |
| | | ||
Date: |
| | By: | /s/ James D. Reed |
| | | (Signature) | |
| | | James D. Reed | |
| | | President and Chief Executive Officer | |
| | | ||
| | | ||
Date: |
| | By: | /s/ Zachary B. King |
| | | (Signature) | |
| | | Zachary B. King | |
| | |
|
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