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Third Quarter 2015 Earnings Call Presentation
November 4, 2015
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866-652-5200 (U.S. / Canada)
412-317-6060 (International)
access code: 10072729
2
Forward-Looking Statements
This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21Eof the Securities Exchange Act of 1934, as amended. Such forward-looking statements are made pursuant to the provisions of the Private SecuritiesLitigation Reform Act of 1995. These statements generally may be identified by their use of terms or phrases such as “expects,” “estimates,”“anticipates,” “projects,” “believes,” “plans,” “goals,” “intends,” “may,” “will,” “should,” “could,” “potential,” “continue,” “future” and terms or phrases ofsimilar substance. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject torisks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially fromthose set forth in, contemplated by, or underlying the forward-looking statements. Accordingly, actual results may differ materially from those set forthin the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by theCompany in its press releases, Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. Any forward-lookingstatement speaks only as of the date on which it is made. We disclaim any obligation to update or revise any forward-looking statements to reflectactual results or changes in the factors affecting the forward-looking information. In light of these risks and uncertainties, the forward-looking eventsand circumstances discussed in this presentation might not occur.
Non-GAAP Financial Data
This presentation includes the use of EBITDA, Adjusted EBITDA, Adjusted Operating Ratio and Adjusted EPS, financial measures that are not inaccordance with generally accepted accounting principles (“GAAP”). Each such measure is a supplemental non-GAAP financial measure that is usedby management and external users of our financial statements, such as industry analysts, investors and lenders. While management believes suchmeasures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with GAAP. Please see theAppendix to this presentation for a reconciliation to the closest GAAP financial measures.
The Company defines EBITDA as net income, plus interest expense net of interest income, provision for income taxes, and depreciation andamortization. It defines Adjusted EBITDA as these items plus non-cash equity compensation, loss on extinguishment of debt and defense costsincurred primarily in connection with the unsolicited proposal to acquire USA Truck and the restructuring, severance and related costs. Adjustedoperating ratio is calculated as total operating expenses, net of fuel surcharges and the restructuring, severance and related costs, as a percentage ofoperating revenue excluding fuel surcharge revenue. Adjusted earnings per diluted share is defined as income before income taxes plus loss onextinguishment of debt, defense costs and the restructuring, severance and related costs reduced by income taxes divided by weighted averagediluted shares outstanding. Because not all companies use identical calculations, the Company's presentation of non-GAAP financial measures maynot be comparable to similarly titled measures of other companies.
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.
DISCLOSURE STATEMENT
3
125.9
109.8
368.5
342.4
250
300
350
400
20
60
100
140
3Q14 3Q15 YTD 14 YTD 15
0.38
0.43
0.41
0.89
0.20
0.40
0.60
0.80
1.00
0.35
0.37
0.39
0.41
0.43
0.45
3Q14 3Q15 YTD 14 YTD 15
7.5
5.510.1
15.8
0
6
12
18
0
4
8
12
3Q14 3Q15 YTD 14 YTD 15
(1) Base revenue excludes fuel surcharge revenue.(2) 3Q15 and YTD 15 include restructuring charge of $2.9 million.(3) See Appendix for GAAP reconciliation and calculation of adjusted earnings per share.(4) Operating income and adjusted earnings per share for prior year periods have been recast to apply a new accounting policy for tires.
($/Sh)
3Q Consolidated Results
Sustainable profitability
3Q15 base revenue declined $16.2 million YOY
3Q15 operating income declined $2.1 million YOY
– Excluding restructuring charge, increased $0.8 million, or 11.2% YOY
3Q15 consolidated adjusted OR of 92.4%
($/M)
($/M) ($/M)
($/M)
($/Sh)
4
97.5
92.8
102.5
96.0
92
96
100
104
81
90
99
108
3Q14 3Q15 YTD 14 YTD 15
(1) Base revenue excludes fuel surcharge revenue.(2) See Appendix for GAAP reconciliation and calculation of adjusted operating ratio and adjusted operating expenses.(3) 3Q15 and YTD 15 adjusted for restructuring charge of $2.9 million.(4) Adjusted operating ratio for prior year periods have been recast to apply a new accounting policy for tires.
TRUCKING 3Q RESULTS
($/M)
(%)
Pricing discipline offset by 18.4% lower revenue miles and 12.0% lower volume
3Q15 adjusted operating expenses(2)
decreased 17.8% YOY
$3.9 million net fuel benefit
3Q15 adjusted OR of 92.8%
86.1
74.3
249.5
236.2
210
220
230
240
250
20
40
60
80
100
3Q14 3Q15 YTD 14 YTD 15
(%)
($/M)
5
TRUCKING: 3Q ACTIONS TO ACCELERATE TURNAROUND
Martin Tewari - President, Trucking
Chris Parsons – VP, Maintenance
Billy Cartright – VP, Safety & Recruiting
CEO direct reports: President, Trucking; VP, Maintenance
Pricing, sales, safety & recruiting, operations & dedicated report to President, Trucking
Realigned roles and responsibilities
Closed 2 maintenance facilities
Outsourced roadside assistance to a 3rd party
Transitioned to new maintenance software on October 1
Began comprehensive review of maintenance activities
Improving load planning process
Enhancing customer service
Improving network efficiencies
Focused driver retention and driver quality
6
TRUCKING: 4Q PRIORITIES TO ACCELERATE TURNAROUND
✔ Rationalize fixed costs and SG&A to better align overhead with reduced tractor fleet
✔ Reduce tractor fleet size by 400 in FY2015
Complete review of maintenance facilities and preventative maintenance approach
Adhere to pricing and operational standards; prioritize ROIC and network density over size of operations
Optimize scheduling and dispatch protocol
Leverage network planning tools
Finalize and implement incentive plan to align all operations functions on the same goals
Expand network to increase miles and productivity
Complete comprehensive review of maintenance activities
Implement training and education program to better utilize software
Improve Trucking OR in line with peers
Drive ROIC off sustainable platform
7
45.3
38.5
135.2
115.8
100
110
120
130
140
0
20
40
60
3Q14 3Q15 YTD 14 YTD 15
86.6
91.5
86.2
91.3
77
84
91
98
0
0.4
0.8
1.2
3Q14 3Q15 YTD 14 YTD 15
Gross margin remained solid at 18.3%
Opened 2 new branch offices; expanded footprint at existing offices
Work underway to implement customer facing technology
– On target to complete implementation in 1Q16
Adjusted OR of 91.5%, in line with expectations
(1) See Appendix for GAAP reconciliation and calculation of adjusted operating ratio.
SCS ASSET LIGHT3Q RESULTS
($/M)
(%)
($/M)
(%)
8
($/MM) 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15
Total Debt ($) 114.4 117.5 106.2 85.8 74.0
Total Capitalization ($) 215.5 216.6 207.4 190.1 176.9
Debt to Adj. EBITDA (1) 2.1x 1.9x 1.6x 1.3x 1.1x
Cash Flow from Operations ($) 19.6 11.6 19.7 19.9 19.2
(1) See Appendix for GAAP reconciliation and calculation of adjusted EBITDA.
BALANCE SHEET AND LIQUIDITY
YTD $45.4 million reduction in debt and capital lease obligations, net of cash
Completed sale leaseback transactions for revenue equipment during 3Q, generating proceeds of $11.1 million
YTD net cash capital expenditure of approximately $6.0 million
Fleet replenishment plan – on track to exceed 2015 goals
– Dispose of 800 high-cost tractors and acquire 400 new, for a net 400 tractor reduction
– Acquire 1,500 new trailers
Repurchased 245,979 shares under one million share repurchase program during 3Q and over 500,000 shares as of November 3rd
9
APPENDIX
10
GAAP TO NON-GAAP RECONCILIATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
(Recast) (Recast)
Net income $ 2,727 $ 4,006 $ 7,132 $ 2,733
Add:
Depreciation and amortization 8,702 10,792 29,951 33,395
Income tax expense 2,161 2,621 5,595 2,418
Interest, net 493 816 1,672 2,271
EBITDA $ 14,083 $ 18,235 $ 44,350 $ 40,817
Add:
Non-cash equity compensation 446 27 802 246
Defense costs, pretax -- 65 -- 2,593
Restructuring, severance and related charges 2,893 -- 2,893 --
Loss on debt extinguishment, pretax -- -- 750 --
Adjusted EBITDA $ 17,422 $ 18,327 $ 48,795 $ 43,656
(Unaudited)
11
ADJUSTED EARNINGS PER SHARE RECONCILIATION
Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
(Recast) (Recast)
Earnings per diluted share$
0.26 $ 0.38 $ 0.68 $ 0.26
Adjusted for:
Loss on debt extinguishment, net of tax -- -- 0.04 --
Restructuring, severance and related charges, net
of tax 0.17 -- 0.17 --
Defense costs, net of tax -- -- -- 0.15
Adjusted earnings per diluted share $ 0.43 $ 0.38 $ 0.89 $ 0.41
(Unaudited)
12
TRUCKING GAAP RECONCILIATION
Trucking Segment Three Months Ended Nine Months Ended September 30, September 30,
2015 2014 2015 2014
(Recast) (Recast)
Revenue ................................................................$ 85,369 $ 108,440 $ 275,617 $ 317,664
Less: intersegment eliminations ................................ 387
122 1,421 434
Operating revenue ................................................................ 84,982 108,318 274,196 317,230
Less: fuel surcharge revenue ................................ 10,635 22,242 37,953 67,740
Base revenue ................................................................ 74,347 86,076 236,243 249,490
Operating expense ................................................................ 82,522 106,142 267,631 323,568 Adjusted for:
Restructuring, severance and related charges (2,893) -- (2,893) --
Fuel surcharge revenue ................................................................ (10,635) (22,242) (37,953) (67,740)
Adjusted operating expense ................................$ 68,994 $ 83,900 $ 226,785 $ 255,828
Operating ratio ................................................................ 97.1 % 98.0 % 97.6 % 102.0 % Adjusted operating ratio ................................................................ 92.8 % 97.5 % 96.0 % 102.5 %
13
SCS GAAP RECONCILIATION
SCS Segment Three Months Ended Nine Months Ended
September 30, September 30,
2015 2014 2015 2014
Revenue ................................................................$ 39,505 $ 49,359 $ 119,781 $ 144,507
Less: intersegment eliminations ................................ 997 4,059 4,027 9,332
Operating revenue ................................................................ 38,508 45,300 115,754 135,175
Less: fuel surcharge revenue ................................ 3,103 5,430 9,553 16,139
Base revenue ................................................................ 35,405 39,870 106,201 119,036
Operating expense ................................................................ 35,509 39,964 106,520 118,770 Adjusted for:
Fuel surcharge revenue ................................................................ (3,103) (5,430) (9,553) (16,139)
Adjusted operating expense ................................$ 32,406 $ 34,534 $ 96,967 $ 102,631
Operating ratio ................................................................ 92.2 % 88.2 % 92.0 % 87.9 % Adjusted operating ratio ................................................................ 91.5 % 86.6 % 91.3 % 86.2 %
14
(1) Base revenue excludes fuel surcharge revenue.
TRUCKING 3Q OPERATING METRICS
$2,957
$3,151
$3,027
$3,190 $3,170
$3,307
$3,170
$3,293
$2,600
$2,800
$3,000
$3,200
$3,400
4Q13 4Q14 1Q14 1Q15 2Q14 2Q15 3Q14 3Q15
1.7
1.9
1.7
1.8
1.7
1.9
1.8
1.9
1.5
1.7
1.8
2.0
4Q13 4Q14 1Q14 1Q15 2Q14 2Q15 3Q14 3Q15
57.1
52.553.6
50.6
54.8
48.8
54.6
44.6
30.0
38.0
46.0
54.0
62.0
4Q13 4Q14 1Q14 1Q15 2Q14 2Q15 3Q14 3Q15
(000s)
($/M)($)
2,027 2,019 2,023
1,979
2,088
2,008 2,011
1,973
1,860
1,920
1,980
2,040
2,100
4Q13 4Q14 1Q14 1Q15 2Q14 2Q15 3Q14 3Q15
(Miles)