USA Truck Reports First Quarter 2019 Results

USA Truck, Inc. (NASDAQ: USAK), a leading capacity solutions provider, today announced its financial results for the three months ended March 31, 2019.

For the quarter ended March 31, 2019, consolidated operating revenue was $134.0 million compared to $125.0 million for the prior-year period. Base revenue, which excludes fuel surcharge revenue, was $118.4 million compared to $110.3 million for the 2018 period. The Company reported net income of $1.5 million, or $0.18 per diluted share for the first quarter 2019 and adjusted net income of $2.0 million, or $0.24 per diluted share, compared to net income and adjusted net income of $1.0 million, or $0.13 per diluted share and $1.1 million, or $0.14 per diluted share, respectively, for the same quarter in 2018. The Company's first quarter 2019 consolidated operating ratio was 97.1%, compared to 98.1% in the comparable 2018 quarter.

President and CEO James Reed commented, "The first quarter of 2019 marks the 2^nd consecutive first quarter of profitability and the most profitable first quarter since 2006. Add that to seven consecutive quarters of profitability, and our leadership team can drop the ‘new’ moniker - this team continues to improve results quarter after quarter and year after year. The first quarter was important in the making of USA Truck’s narrative about our ability to compete, our self-help story, and our position in the marketplace.

The quarter presented a complex environment with dropping spot rates that put pressure on our logistics business, a continued challenging driver market, increasing fuel prices, relative seasonally soft first quarter demand, and another unusually difficult weather season. Despite that, USA Truck grew revenue 7.2% and trucking revenues grew 20.4%. Even after all of the above, our team increased earnings per share by $0.05 per diluted share, or 38.5%, and adjusted earnings per share by $0.10 per diluted share, or 71.4%, year over year.

The team here is unwavering in its commitment to continue to improve results and outpace market forces in our operational and financial measures. It was a tough quarter, but we persevered and produced a result that demonstrates progress toward becoming one of the best performing companies in our sector. USA Truck is, indeed, back and we are eager to achieve our full potential.”

Trucking: For the first quarter of 2019, Trucking operating revenue (before intersegment eliminations) increased $16.1 million, or 20.4%, to $94.9 million, compared to the first quarter of 2018. This increase was primarily due to a 11.7% increase in base revenue per loaded mile. Trucking adjusted operating income was $2.3 million for the 2019 period, reflecting an adjusted operating ratio of 97.2%, compared to an adjusted operating loss of $0.6 million and an adjusted operating ratio of 100.8% for the comparable 2018 period. This represents an improvement of $2.1 million year-over-year in operating income and a 360 basis point improvement in operating ratio.

Trucking operations showed the following during the first quarter 2019:

• Base revenue per available tractor per week increased $129 per week, or 4.0%, when compared to the first quarter of 2018, and decreased $72 per week, or 2.1% sequentially, primarily due to a seasonally robust 4^th quarter freight environment and a seasonally slower 1^st quarter freight environment.
• Base revenue per loaded mile increased 11.7% to $2.244 for first quarter 2019 from $2.009 in first quarter 2018, and decreased $0.117, or 5.0% sequentially, in line with seasonal norms.
• Loaded miles per available tractor per week decreased 112 miles, or 6.9%, when compared to the first quarter of 2018, but increased sequentially by 44 miles per tractor, or 3.0%. Deadhead percentage for first quarter 2019 increased 70 basis points year-over-year, but improved 200 points sequentially.
• The average seated tractor count for the first quarter of 2019 was 1,767, which represented a 15.2% increase compared to our first quarter 2018 average of 1,534, and a 2 tractor increase sequentially over the fourth quarter 2018 average of 1,765. Average unseated tractor percentage for first quarter 2019 was 7.8% compared to 5.3% for the first quarter of 2018 and increased 150 basis points sequentially. These changes were primarily related to the increasingly challenging driver recruiting environment, combined with the OEM equipment delays late last year.

USAT Logistics: Operating revenue (before intersegment eliminations) was $41.4 million for the first quarter of 2019, a decrease of $5.3 million, or 11.4% year-over-year. Operating income decreased $0.5 million, or 19.0% year-over-year. We continue to deepen carrier and customer relationships regardless of market dynamics.

• Gross margin dollars decreased 2.5%, or $0.2 million year-over-year, to $7.7 million for the first quarter 2019, and increased 18.3%, or $1.2 million sequentially.
• Gross margin percentage for the first quarter of 2019 increased to 18.5% from 16.9% when compared to the same quarter in 2018, and increased 350 basis points sequentially from 15.0% for the fourth quarter of 2018.

• Revenue per load decreased 14.9%, or $0 per load year-over-year, and 5.1%, or $0 per load, over fourth quarter of 2018.
• Load count increased 4.1%, or 1,098 loads year-over-year, and 1.2%, or 317 loads, over fourth quarter of 2018.

Segment Results

The following table includes key operating results and statistics by reportable segment:

		Three Months Ended
		March 31,
Trucking:		2019				2018
Operating revenue (before intersegment eliminations) (in thousands)		$	94,902			$	78,846
Operating income (loss) (in thousands) (1)		$	1,609			$	(464	)
Adjusted operating income (loss) (in thousands) (2)		$	2,291			$	(567	)
Operating ratio (3)		98.3		%		100.6		%
Adjusted operating ratio (4)		97.2		%		100.8		%
Total miles (in thousands) (5)		42,764				38,542
Deadhead percentage (6)		13.4		%		12.7		%
Base revenue per loaded mile		$	2.244			$	2.009
Average number of available tractors (7)		1,916				1,619
Average number of in-service tractors (8)		1,954				1,654
Loaded miles per available tractor per week		1,504				1,616
Base revenue per available tractor per week		$	3,375			$	3,246
Average loaded miles per trip		487				539
USAT Logistics:
Operating revenue (before intersegment eliminations) (in thousands)		$	41,449			$	46,775
Operating income (in thousands) (1)		$	2,312			$	2,856
Adjusted operating income (in thousands) (2)		$	2,312			$	3,031
Gross margin (in thousands) (9)		$	7,687			$	7,884
Gross margin percentage (10)		18.5		%		16.9		%
Load count (in thousands)		27.6				26.5

(1)	Operating income (loss) is calculated by deducting operating expenses (before intersegment eliminations) from operating revenue (before intersegment eliminations).
(2)	Adjusted operating income (loss) is calculated by deducting operating expenses (before intersegment eliminations) excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, amortization of acquisition related intangibles and transaction costs related to acquisition, net of fuel surcharge revenue(a) from operating revenue (before intersegment eliminations), net of fuel surcharge revenue.
(3)	Operating ratio is calculated as operating expenses (before intersegment eliminations) as a percentage of operating revenue (before intersegment eliminations).
(4)	Adjusted operating ratio is calculated as operating expenses (before intersegment eliminations) excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, amortization of acquisition-related intangibles, and transaction costs related to acquisition, net of fuel surcharge revenue, as a percentage of operating revenue (before intersegment eliminations) excluding fuel surcharge revenue(a).
(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 all those Company tractors that are available to be dispatched, including available unseated tractors, and our independent contractor fleet.
(8)	In-service tractors include all of the tractors in the Company fleet, including Company-operated tractors and independent contractors.
(9)	Gross margin is calculated by deducting USAT Logistics purchased transportation expense from USAT Logistics operating revenue (before intersegment eliminations).
(10)	Gross margin percentage is calculated as gross margin divided by USAT Logistics operating revenue (before intersegment eliminations).

Balance Sheet and Liquidity

As of March 31, 2019, total debt and lease liabilities was $182.0 million, total debt and lease liabilities, net of cash (“Net Debt”)^(a), was $181.4 million and total stockholders’ equity was $83.3 million. Net Debt to Adjusted EBITDAR^(a) for the trailing twelve months ended March 31, 2019 was 2.6x giving proforma effect to the Davis Transfer acquisition. The Company had approximately $50.0 million available to borrow under its Credit Facility as of March 31, 2019.

First Quarter 2019 Conference Call Information

USA Truck will hold a conference call to discuss its first quarter 2019 results on Friday, April 26, 2019 at 8:00 AM CT / 9:00 AM ET. To participate in the call, please dial 1-844-824-3828 (U.S./Canada) or 1-412-317-5138 (International). A live webcast of the conference call will be broadcast in the Investor Relations section of the Company’s website www.usa-truck.com, under the “Events & Presentations” tab of the “Investor Relations” menu. For those who cannot listen to the live broadcast, the presentation materials and an audio replay of the call will be available at our website, www.usa-truck.com, under the “Events & Presentations” tab of the “Investor Relations” menu, or may be accessed using the following link: https://services.choruscall.com/links/usak190426.html. A telephone replay of the call will also be available through May 3, 2019, and may be accessed by calling 1-877-344-7529 (U.S.), 1-855-669-9658 (Canada), or 1-412-317-0088 (International) and by referencing conference ID #10130809.

^(a) About Non-GAAP Financial Information

In addition to our GAAP results, this press release also includes certain non-GAAP financial measures, as defined by the SEC. The terms base revenue, “Net Debt”, “EBITDAR”, “Adjusted EBITDAR”, “Adjusted operating ratio”, “Adjusted operating income (loss)", "Adjusted net income (loss)”, and “Adjusted earnings (loss) per diluted share”, as we define them, are not presented in accordance with GAAP.

The Company defines Net Debt as total debt, including insurance premium financing and lease liabilities, net of cash. The Company defines EBITDAR as net income (loss), plus interest expense net of interest income, provision for income tax expense (benefit), depreciation and amortization and rent. The Company defines Adjusted EBITDAR as EBITDAR plus non-cash equity compensation, restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, and transaction costs related to acquisition. Adjusted operating ratio is calculated as operating expenses excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits and amortization of acquisition related intangibles, net of fuel surcharge revenue, as a percentage of operating revenue, excluding fuel surcharge revenue. Adjusted operating income (loss) is defined as operating income (loss) excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, amortization of acquisition related intangibles, and transaction costs related to acquisition. Adjusted net income (loss) is defined as net income (loss) excluding restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, amortization of acquisition related intangibles, and transaction costs related to acquisition. Adjusted earnings (loss) per diluted share is defined as earnings (loss) per diluted share plus the per-share impact of restructuring, impairment and other costs, severance costs included in salaries, wages and employee benefits, and transaction costs related to acquisition, plus or minus the per share tax impact of those adjustments using a statutory income tax rate. The per-share impact of each item is determined by dividing it by the weighted average diluted shares outstanding. These financial measures supplement our GAAP results in evaluating certain aspects of our business. We believe that using these measures improves comparability in analyzing our performance because they remove the impact of items from our operating results that, in our opinion, do not reflect our core operating performance. Management and the board of directors focus on Net Debt, EBITDAR, Adjusted EBITDAR, Adjusted operating ratio, Adjusted operating income (loss), Adjusted net income (loss), and Adjusted earnings (loss) per diluted share as key measures of our performance, all of which are reconciled to the most comparable GAAP financial measures and further discussed below. We believe our presentation of these non-GAAP financial 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.

Net Debt, EBITDAR, Adjusted EBITDAR, Adjusted operating ratio, Adjusted operating income (loss), Adjusted net income (loss), and Adjusted earnings (loss) per diluted share are not substitutes for their comparable GAAP financial measures, such as total debt, net income, cash flows from operating activities, operating ratio, diluted earnings per share, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

Pursuant to the requirements of Regulation G and Regulation S-K, we have provided reconciliations of EBITDAR, Adjusted EBITDAR, Adjusted operating ratio, Adjusted operating income (loss), Adjusted net income (loss), and Adjusted earnings (loss) per diluted share to the most comparable GAAP financial measures at the end of this press release.

Cautionary Statement Concerning Forward-Looking Statements

Financial information in this press release is preliminary and based upon information available to the Company as of the date of this press release. As such, this information remains subject to the completion of our quarterly review procedures, and the filing of the related Quarterly Report on Form 10-Q, which could result in changes, some of which could be material, to the preliminary information provided in this press release.

This press release contains 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. Such forward-looking statements are made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. These statements generally may be identified by their use of terms or phrases such as “seek,” “expects,” “estimates,” “anticipates,” “projects,” “believes,” “hopes,” “plans,” “goals,” “intends,” “may,” “might,” “likely,” “will,” “should,” “would,” “could,” “potential,” “predict,” “continue,” “strategy,” “future” and terms or phrases of similar substance. Forward-looking statements are based upon the current beliefs and expectations of our management and 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. Accordingly, actual results may differ materially from those set forth in the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by the Company in its press releases, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the Securities and Exchange Commission. Any forward-looking statement speaks only as of the date on which it is made. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information, except as required by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release might not occur. All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement.

References to the “Company,” “we,” “us,” “our” and words of similar import refer to USA Truck, Inc. and its subsidiary.

About USA Truck

USA Truck provides comprehensive capacity solutions to a broad and diverse customer base throughout North America. Our Trucking and USAT Logistics divisions blend an extensive portfolio of asset and asset-light services, offering a balanced approach to supply chain management including customized truckload, dedicated contract carriage, intermodal and third-party logistics freight management services. For more information, visit usa-truck.com or usatlogistics.com.

This press release and related information will be available to interested parties at our investor relations website, http://investor.usa-truck.com.

USA TRUCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except per share data)
		Three Months Ended
		March 31,
Revenue		2019				2018
Operating revenue		$	133,974			$	125,013
Operating expenses
Salaries, wages and employee benefits		36,090				32,237
Fuel and fuel taxes		13,631				13,479
Depreciation and amortization		8,818				7,180
Equipment rent		2,720				2,718
Insurance and claims		7,280				5,602
Operations and maintenance		7,273				7,961
Purchased transportation		48,281				49,038
Operating taxes and licenses		1,117				502
Communications and utilities		767				713
Gain on disposal of assets, net		(145		)		(169		)
Restructuring, impairment and other costs (reversal)		—				(639		)
Other		4,221				3,999
Total operating expenses			130,053				122,621
Operating income		3,921				2,392
Other expenses
Interest expense, net		1,741				818
Other, net		137				120
Total other expenses, net		1,878				938
Income before income taxes		2,043				1,454
Income tax expense		542				419
Consolidated net income and comprehensive income		$	1,501			$	1,035
Net earnings per share
Average shares outstanding (basic)		8,375				8,035
Basic earnings per share		$	0.18			$	0.13
Average shares outstanding (diluted)		8,399				8,040
Diluted earnings per share		$	0.18			$	0.13

GAAP TO NON-GAAP RECONCILIATIONS
(UNAUDITED)
(dollar amounts in thousands, except per share amounts)
ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION, RENT
		Three Months Ended
		3/31/2019				12/31/2018				9/30/2018				6/30/2018
Net income		$	1,501			$	5,325			$	3,300			$	2,544
Add:
Depreciation and amortization		8,818				6,932				6,735				7,477
Equipment rent		2,720				3,055				2,916				2,151
Income tax expense		542				1,862				1,272				821
Interest expense, net		1,741				1,187				811				833
EBITDAR		15,322				18,361				15,034				13,826
Add:
Non-cash equity compensation		589				559				437				304
Severance costs included in salaries, wages and employee benefits		319				—				—				—
Transaction costs relating to acquisition		—				239				325				—
Adjusted EBITDAR		$	16,230			$	19,159			$	15,796			$	14,130

ADJUSTED NET INCOME RECONCILIATION
		Three Months Ended
		March 31,
		2019				2018
Net income		$	1,501			$	1,035
Adjusted for:
Severance costs included in salaries, wages and employee benefits		319				711
Restructuring, impairment and other costs (reversal)		—				(639		)
Amortization of acquisition related intangibles		363				—
Transaction costs relating to acquisition		—				—
Income tax effect of adjustments		(174		)		(19		)
Adjusted net income		$	2,009			$	1,088

ADJUSTED EARNINGS PER DILUTED SHARE RECONCILIATION
		Three Months Ended
		March 31,
		2019				2018
Earnings per diluted share		$	0.18			$	0.13
Adjusted for:
Severance costs included in salaries, wages and employee benefits		0.04				0.09
Restructuring, impairment and other costs (reversal)		—				(0.08		)
Amortization of acquisition related intangibles		0.04				—
Income tax effect of adjustments		(0.02		)		—
Adjusted earnings per diluted share		$	0.24			$	0.14

NET DEBT RECONCILIATION
		Three Months Ended
		March 31,
		2019				2018
Total current debt and lease liabilities		$	28,141			$	9,502
Long-term debt		92,450				53,750
Leases, less current maturities		61,406				27,600
Less: Cash		(584		)		(6		)
Net Debt		$	181,413			$	90,846

ADJUSTED OPERATING RATIO RECONCILIATION (UNAUDITED) (dollar amounts in thousands)
Consolidated		Three Months Ended
		March 31,
		2019				2018
Operating revenue		$	133,974			$	125,013
Less: fuel surcharge revenue			(15,607	)			(14,734	)
Base revenue		$	118,367			$	110,279
Operating expense			130,053				122,621
Adjusted for:
Severance costs included in salaries, wages and employee benefits			(319	)			(711	)
Restructuring, impairment and other costs (reversal)			—				639
Amortization of acquisition related intangibles			(363	)			—
Fuel surcharge revenue			(15,607	)			(14,734	)
Adjusted operating expense		$	113,764			$	107,815
Operating income		$	3,921			$	2,392
Adjusted operating income		$	4,603			$	2,464
Operating ratio			97.1	%			98.1	%
Adjusted operating ratio			96.1	%			97.8	%
Trucking Segment		Three Months Ended
		March 31,
		2019				2018
Operating revenue		$	94,561			$	78,733
Intersegment activity			341				113
Operating revenue (before intersegment eliminations)			94,902				78,846
Less: fuel surcharge revenue			(11,765	)			(11,175	)
Base revenue		$	83,137			$	67,671
Operating expense (before intersegment eliminations)			93,293				79,310
Adjusted for:
Severance costs included in salaries, wages and employee benefits			(319	)			(484	)
Restructuring, impairment and other costs (reversal)			—				587
Amortization of acquisition related intangibles			(363	)			—
Fuel surcharge revenue			(11,765	)			(11,175	)
Adjusted operating expense		$	80,846			$	68,238
Operating income (loss)		$	1,609			$	(464	)
Adjusted operating income (loss)		$	2,291			$	(567	)
Operating ratio			98.3	%			100.6	%
Adjusted operating ratio			97.2	%			100.8	%
USAT Logistics Segment		Three Months Ended
		March 31,
		2019				2018
Operating revenue		$	39,413			$	46,280
Intersegment activity			2,036				495
Operating revenue (before intersegment eliminations)			41,449				46,775
Less: fuel surcharge revenue			(3,842	)			(3,559	)
Base revenue		$	37,607			$	43,216
Operating expense (before intersegment eliminations)			39,137				43,919
Adjusted for:
Severance costs in salaries, wages and employee benefits			—				(227	)
Restructuring, impairment and other costs (reversal)			—				52
Fuel surcharge revenue			(3,842	)			(3,559	)
Adjusted operating expense		$	35,295			$	40,185
Operating income		$	2,312			$	2,856
Adjusted operating income		$	2,312			$	3,031
Operating ratio			94.4	%			93.9	%
Adjusted operating ratio			93.9	%			93.0	%

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share data)
Assets		March 31, 2019				December 31, 2018
Current assets:						(revised) (1)
Cash		$	584			$	989
Accounts receivable, net of allowance for doubtful accounts of $484 and $575, respectively		63,345				57,189
Other receivables		4,474				5,688
Inventories		742				722
Assets held for sale		2,296				2,611
Prepaid expenses and other current assets		7,102				7,675
Total current assets		78,543				74,874
Property and equipment:
Land and structures		32,981				32,434
Revenue equipment		290,506				280,623
Service, office and other equipment		28,379				28,094
Property and equipment, at cost		351,866				341,151
Accumulated depreciation and amortization		(115,811		)		(115,766		)
Property and equipment, net		236,055				225,385
Operating leases - right of use assets		15,433				—
Goodwill		5,231				4,926
Other intangibles, net		17,474				17,837
Other assets		1,713				1,003
Total assets		$	354,449			$	324,025
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		29,934				23,482
Current portion of insurance and claims accruals		17,270				15,852
Accrued expenses		7,308				9,366
Current maturities of finance leases		17,574				17,292
Current maturities of operating leases		8,423				—
Insurance premium financing		2,144				4,435
Total current liabilities		82,653				70,427
Deferred gain		223				84
Long-term debt		92,450				85,300
Finance leases, less current maturities		54,396				53,460
Operating leases, less current maturities		7,010				—
Deferred income taxes		24,463				23,518
Insurance and claims accruals, less current portion		9,963				9,963
Total liabilities		271,158				242,752
Stockholders’ equity:
Preferred Stock, $0.01 par value; 1,000,000 shares authorized; none issued		—				—
Common Stock, $0.01 par value; 30,000,000 shares authorized; issued 12,007,077 shares, and 12,011,495 shares, respectively		120				120
Additional paid-in capital		62,392				66,433
Retained earnings		79,968				78,467
Less treasury stock, at cost (3,420,044 shares, and 3,650,060 shares, respectively)		(59,189		)		(63,747		)
Total stockholders’ equity		83,291				81,273
Total liabilities and stockholders’ equity		$	354,449			$	324,025

(1)	The balance sheet as of December 31, 2018 has been revised to include the effect of immaterial prior period adjustments.

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