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Table of Contents

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, 2020

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
(NASDAQ Global Select Market)

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

Smaller reporting company

Non-accelerated filer [ ]

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 24, 2020, was 8,762,377.

Table of Contents

USA TRUCK INC.

TABLE OF CONTENTS

Item No.

    

Caption

    

Page

PART I – FINANCIAL INFORMATION

1.

Financial Statements

Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2020 and December 31, 2019

2

Condensed Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (unaudited) - Three and six months ended June 30, 2020 and June 30, 2019

3

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) - Three and six months ended June 30, 2020 and June 30, 2019

4

Condensed Consolidated Statements of Cash Flows (unaudited) - Six months ended June 30, 2020 and June 30, 2019

5

Notes to Condensed Consolidated Financial Statements (unaudited)

6

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

3.

Quantitative and Qualitative Disclosures About Market Risk

28

4.

Controls and Procedures

28

PART II – OTHER INFORMATION

1.

Legal Proceedings

29

1A.

Risk Factors

29

2.

Unregistered Sales of Equity Securities and Use of Proceeds

30

3.

Defaults Upon Senior Securities

30

4.

Mine Safety Disclosures

30

5.

Other Information

30

6.

Exhibits

31

Signatures

32

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

USA TRUCK INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

Assets

June 30, 2020

December 31, 2019

Current assets:

(in thousands, except share data)

Cash

$

92

$

97

Accounts receivable, net of allowance for doubtful accounts of $810 and $369, respectively

 

53,362

 

49,853

Other receivables

 

7,947

 

5,408

Inventories

 

786

 

769

Assets held for sale

 

1,082

 

2,542

Prepaid expenses and other current assets

 

6,666

 

7,855

Total current assets

 

69,935

 

66,524

Property and equipment:

 

  

 

  

Land and structures

 

33,474

 

33,077

Revenue equipment

 

320,623

 

309,573

Service, office and other equipment

 

31,077

 

30,235

Property and equipment, at cost

 

385,174

 

372,885

Accumulated depreciation and amortization

 

(142,414)

 

(124,216)

Property and equipment, net

 

242,760

 

248,669

Operating leases - right of use assets

7,866

11,775

Goodwill

5,231

 

5,231

Other intangibles, net

 

15,773

 

16,453

Other assets

 

1,209

 

2,058

Total assets

$

342,774

$

350,710

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

24,197

$

29,421

Current portion of insurance and claims accruals

 

9,702

 

12,466

Accrued expenses

 

8,338

 

6,518

Current finance lease obligations

25,928

30,779

Current operating lease obligations

3,028

6,050

Long-term debt, current maturities

3,064

6,165

Total current liabilities

 

74,257

 

91,399

Other long-term liabilities

 

1,629

 

80

Long-term debt, less current maturities

92,158

83,349

Long-term finance lease obligations

60,363

58,397

Long-term operating lease obligations

4,966

5,812

Deferred income taxes

 

24,824

 

24,017

Insurance and claims accruals, less current portion

 

9,071

 

9,445

Total liabilities

 

267,268

 

272,499

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 12,036,279 shares, and 11,987,572 shares, respectively

 

120

 

120

Additional paid-in capital

 

59,565

 

63,238

Retained earnings

 

70,287

 

73,769

Less treasury stock, at cost (3,273,902 shares, and 3,434,231 shares, respectively)

 

(54,466)

 

(58,916)

Total stockholders’ equity

 

75,506

 

78,211

Total liabilities and stockholders’ equity

$

342,774

$

350,710

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

USA TRUCK INC.

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND

COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

    

(in thousands, except per share data)

Operating revenue

$

123,737

$

133,622

$

250,510

$

267,596

Operating expenses:

Salaries, wages and employee benefits

 

33,636

 

33,806

 

69,481

 

69,896

Fuel and fuel taxes

 

8,082

 

14,102

 

19,945

 

27,733

Depreciation and amortization

 

10,034

 

9,125

 

20,045

 

17,943

Insurance and claims

 

4,009

 

7,160

 

9,866

 

14,440

Equipment rent

 

2,336

 

2,568

 

4,628

 

5,288

Operations and maintenance

 

8,606

 

8,481

 

17,502

 

15,754

Purchased transportation

 

49,276

 

49,072

 

97,090

 

97,353

Operating taxes and licenses

 

1,349

 

1,311

 

2,508

 

2,428

Communications and utilities

 

906

 

719

 

1,719

 

1,486

(Gain) loss on disposal of assets, net

 

(16)

 

141

 

22

 

(4)

Asset impairments

588

367

588

367

Other

 

3,931

 

4,787

 

8,428

 

9,008

Total operating expenses

 

122,737

 

131,639

 

251,822

 

261,692

Operating income (loss)

 

1,000

 

1,983

 

(1,312)

 

5,904

Other expenses:

 

  

 

  

 

  

 

  

Interest expense, net

 

1,235

1,595

 

2,919

 

3,336

Other, net

 

64

171

 

110

 

308

Total other expenses, net

 

1,299

 

1,766

 

3,029

 

3,644

(Loss) income before income taxes

 

(299)

 

217

 

(4,341)

 

2,260

Income tax expense (benefit)

 

632

 

216

 

(859)

 

758

Consolidated net (loss) income and comprehensive (loss) income

$

(931)

$

1

$

(3,482)

$

1,502

Net (loss) earnings per share:

 

  

 

  

 

  

 

  

Average shares outstanding (basic)

 

8,820

 

8,554

 

8,737

 

8,479

Basic (loss) earnings per share

$

(0.11)

$

0.00

$

(0.40)

$

0.18

Average shares outstanding (diluted)

 

8,820

 

8,567

 

8,737

 

8,498

Diluted (loss) earnings per share

$

(0.11)

$

0.00

$

(0.40)

$

0.18

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

USA TRUCK INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

    

Common Stock

    

Additional

    

    

    

Par

Paid-in

Retained

Treasury

Shares

Value

Capital

Earnings

Stock

Total

(in thousands)

Balance at December 31, 2019

 

11,988

$

120

$

63,238

$

73,769

$

(58,916)

$

78,211

Issuance of treasury stock

 

 

 

(4,327)

 

 

4,327

 

Stock-based compensation

 

 

 

471

 

 

 

471

Forfeited restricted stock

(15)

 

 

 

 

Net share settlement related to restricted stock vesting

 

(11)

 

 

(57)

 

 

 

(57)

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

    

Common Stock

    

Additional

    

    

    

Par

Paid-in

Retained

Treasury

Shares

Value

Capital

Earnings

Stock

Total

(in thousands)

Balance at December 31, 2018

 

12,012

$

120

$

66,433

$

78,467

$

(63,747)

$

81,273

Issuance of treasury stock

 

 

 

(4,558)

 

 

4,558

 

Stock-based compensation

 

 

 

589

 

 

 

589

Net share settlement related to restricted stock vesting

 

(5)

 

 

(72)

 

 

 

(72)

Net income

 

 

 

 

1,501

 

 

1,501

Balance at March 31, 2019

 

12,007

120

62,392

79,968

(59,189)

83,291

Issuance of treasury stock

 

 

 

(378)

 

 

378

 

Stock-based compensation

 

 

 

705

 

 

 

705

Forfeited restricted stock

 

(18)

 

 

 

 

 

Net share settlement related to restricted stock vesting

 

 

 

(1)

 

 

 

(1)

Net income

 

 

 

 

1

 

 

1

Balance at June 30, 2019

 

11,989

$

120

$

62,718

$

79,969

$

(58,811)

$

83,996

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Six Months Ended June 30, 

    

2020

    

2019

Operating activities:

(in thousands)

Net (loss) income

$

(3,482)

$

1,502

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

 

 

Depreciation and amortization

 

20,045

 

17,943

Bad debt expense

478

(140)

Deferred income tax, net

 

807

 

774

Share-based compensation

 

834

 

1,294

Loss (gain) on disposal of assets, net

 

22

 

(4)

Asset impairments

 

588

 

367

Other

 

40

 

127

Changes in operating assets and liabilities:

 

 

Accounts and other receivables

 

(5,797)

 

(6,283)

Inventories and prepaid expenses

 

1,172

 

2,930

Accounts payable and accrued liabilities

 

1,594

 

(809)

Insurance and claims accruals

 

(2,745)

 

(1,220)

Other long-term assets and liabilities

 

850

 

(727)

Net cash provided by operating activities

$

14,406

$

15,754

Investing activities:

 

  

 

Acquisition of Davis Transfer Company (net of cash)

 

 

(305)

Capital expenditures

(9,809)

(25,209)

Proceeds from sale of property and equipment

1,459

7,643

Net cash used in investing activities

$

(8,350)

$

(17,871)

Financing activities:

 

  

 

  

Borrowings under long-term debt

 

33,200

 

53,700

Payments on long-term debt

 

(26,440)

 

(55,249)

Principal payments on financing lease obligations

 

(11,366)

 

(6,375)

Proceeds from obligation under finance lease

10,471

Payments on obligation under finance lease

(1,052)

(219)

Payment of debt issuance costs

(538)

Net change in bank drafts payable

 

(346)

 

(391)

Net payments for tax withholdings for vested stock-based awards

 

(57)

 

(73)

Net cash (used in) provided by financing activities

$

(6,061)

$

1,326

Decrease in cash

(5)

(791)

Cash:

 

  

 

  

Beginning of period

 

97

 

989

End of period

$

92

$

198

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid during the period for:

 

  

 

  

Interest

$

2,704

$

2,986

Income taxes

 

29

 

998

Supplemental disclosure of non-cash investing:

 

 

  

Sales of revenue equipment included in other receivables

$

730

$

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

June 30, 2020

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, 2020 and December 31, 2019 and our results of operations, comprehensive (loss) income and cash flows for the three and six months ended June 30, 2020 and 2019.

These condensed consolidated financial statements and notes are prepared pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and do not include all of the information normally included with financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) of the United States.  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, 2019.

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, 2020.

The accompanying condensed consolidated financial statements include USA Truck Inc., and its wholly owned subsidiaries: International Freight Services, Inc. (“IFS”), a Delaware corporation; Davis Transfer Company Inc. (“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 2020, the Company lowered the salvage value of its tractor fleet from 30% to 25% 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 and six months ended June 30, 2020, this change in estimate resulted in an increase in depreciation and amortization expense of approximately $0.3 million and $0.8 million, respectively.

Risks and Uncertainties

In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency.  The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.  In view of the rapidly changing business environment, unprecedented market volatility and heightened degree of uncertainty resulting from COVID-19, we are currently unable to fully determine its future impact on our business.  However, we continue to monitor the progression of the pandemic, further government response and development of treatments and vaccines and their 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 pandemic continue for an extended

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period of time, the impact on our operations could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.

Accounting standards issued but not yet adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 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.  For smaller reporting companies, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.  We are currently evaluating the effect of adopting ASU 2016-13.

NOTE 2 – REVENUE RECOGNITION

The following tables set forth revenue disaggregated by revenue type and segment:

Three Months Ended June 30, 

2020

2019

Trucking

    

USAT Logistics

    

Eliminations

    

Total

    

Trucking

    

USAT Logistics

    

Eliminations

    

Total

Revenue type

(in thousands)

Freight

$

78,514

$

35,040

$

(3,461)

$

110,093

$

82,664

$

34,698

$

(2,209)

$

115,153

Fuel surcharge

 

8,083

 

2,618

 

(167)

 

10,534

 

13,034

4,087

(220)

 

16,901

Accessorial

 

2,030

 

1,080

 

 

3,110

 

778

790

 

1,568

Total

$

88,627

$

38,738

$

(3,628)

$

123,737

$

96,476

$

39,575

$

(2,429)

$

133,622

Six Months Ended June 30, 

2020

2019

Trucking

    

USAT Logistics

    

Eliminations

    

Total

    

Trucking

    

USAT Logistics

    

Eliminations

    

Total

Revenue type

(in thousands)

Freight

$

159,417

$

66,707

$

(6,154)

$

219,970

$

164,086

$

71,328

$

(4,420)

$

230,994

Fuel surcharge

 

19,371

 

5,695

 

(520)

 

24,546

 

24,799

 

7,929

 

(387)

 

32,341

Accessorial

 

3,834

 

2,160

 

 

5,994

 

2,493

 

1,768

 

 

4,261

Total

$

182,622

$

74,562

$

(6,674)

$

250,510

$

191,378

$

81,025

$

(4,807)

$

267,596

At June 30, 2020 and December 31, 2019, the Company had contract assets, respresenting our right to consideration for transportation services not yet billed, of $1.4 million and $0.9 million, respectively.

NOTE 3 – SEGMENT REPORTING

The Company’s two reportable segments are Trucking and USAT Logistics.  In determining its reportable segments, the Company’s chief operating decision maker focuses on financial information, such as operating revenue, operating expense categories, operating ratios and operating income, as well as on key operating statistics, to make operating decisions.

Trucking. Trucking is comprised of one-way truckload and dedicated freight motor carrier services.  Truckload provides motor carrier services as a medium-haul common and contract carrier.  USA Truck has provided truckload motor carrier services since its inception, and continues to derive the largest portion of its gross revenue from these services.  Dedicated freight provides truckload motor carrier services to specific customers for movement of freight over particular routes at specified times.

USAT Logistics. USAT Logistics’ service offerings consist of freight brokerage, logistics, and rail intermodal services.  Each of these service offerings match customer shipments with available equipment of authorized third-party motor carriers and other service providers.  The Company provides these services to many existing Trucking customers, many of whom prefer to rely on a single service provider, or a small group of service providers, to provide all their transportation solutions.

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Revenue equipment assets are not allocated to USAT Logistics as freight services for customers are brokered through arrangements with third-party motor carriers who utilize their own equipment.  To the extent rail intermodal or other USAT Logistics operations require the use of Company-owned assets, they are obtained from the Company’s Trucking segment on an as-needed basis.  Depreciation and amortization expense is allocated to USAT Logistics based on the Company-owned assets specifically utilized to generate USAT Logistics revenue.  All intercompany transactions between segments reflect rates similar to those that would be negotiated with independent third parties.  All other expenses for USAT Logistics are specifically identifiable direct costs or are allocated to USAT Logistics based on relevant cost drivers, as determined by management.

A summary of operating revenue by segment is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

    

Operating revenue

(in thousands)

Trucking revenue (1)

$

88,627

$

96,476

$

182,622

$

191,378

Trucking intersegment eliminations

 

(707)

 

(407)

 

(1,701)

 

(769)

Trucking operating revenue

 

87,920

 

96,069

 

180,921

 

190,609

USAT Logistics revenue

 

38,738

 

39,575

 

74,562

 

81,025

USAT Logistics intersegment eliminations

 

(2,921)

 

(2,022)

 

(4,973)

 

(4,038)

USAT Logistics operating revenue

 

35,817

 

37,553

 

69,589

 

76,987

Total operating revenue

$

123,737

$

133,622

$

250,510

$

267,596

1)Includes foreign revenue of $7.5 million and $9.4 million for the three months ended June 30, 2020 and 2019, respectively, and $16.1 million and $19.0 million for the six months ended June 30, 2020 and 2019, respectively.

A summary of operating income (loss) by segment is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Operating income (loss)

(in thousands)

Trucking

$

1,176

$

837

$

(511)

$

2,445

USAT Logistics

 

(176)

 

1,146

 

(801)

 

3,459

Total operating income (loss)

$

1,000

$

1,983

$

(1,312)

$

5,904

A summary of depreciation and amortization by segment is as follows:

Three Months Ended

Six Months Ended

June 30, 

June 30, 

    

2020

    

2019

    

2020

    

2019

Depreciation and amortization

(in thousands)

Trucking

$

9,697

$

8,853

$

19,473

$

17,432

USAT Logistics

 

337

 

272

 

572

 

511

Total depreciation and amortization

$

10,034

$

9,125

$

20,045

$

17,943

NOTE 4 – EQUITY COMPENSATION AND EMPLOYEE BENEFIT PLANS

The Company adopted the 2014 Omnibus Incentive Plan (the “Incentive Plan”) in May 2014.  The Incentive Plan replaced the 2004 Equity Incentive Plan and provided for the granting of up to 500,000 shares of common stock through equity-based awards to directors, officers and other key employees and consultants.  The First Amendment to the Incentive Plan was adopted in May 2017, which, among other things, increased the number of shares of common stock available for issuance under the Incentive Plan by an additional 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, 2020, 488,617 shares remain available under the Incentive Plan for the issuance of future equity-based compensation awards.

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NOTE 5 – ACCRUED EXPENSES

Accrued expenses consist of the following:

June 30, 2020

December 31, 2019

(in thousands)

Salaries, wages and employee benefits

$

5,532

$

3,668

Federal and state tax accruals

 

1,677

 

1,648

Other (1)

 

1,129

 

1,202

Total accrued expenses

$

8,338

$

6,518

1)No single item included within other accrued expenses exceeded 5.0% of our total current liabilities.

NOTE 6 –DEBT

Long-term debt consisted of the following:

June 30, 2020

December 31, 2019

(in thousands)

Revolving credit agreement

$

83,075

$

73,225

Sale leaseback finance obligations

10,731

11,783

Insurance premium financing (2019)

1,416

4,506

95,222

89,514

Less current maturities

(3,064)

(6,165)

Total long-term debt

$

92,158

$

83,349

Credit facility

On January 31, 2019, the Company, entered into a five year, $225.0 million senior secured revolving credit facility (the “Credit Facility”) with a group of lenders and Bank of America, N.A., as agent (the “Agent”) pursuant to the terms of an Amended and Restated Loan and Security Agreement.  The Credit Facility replaced the Company’s previous five year, $170.0 million senior secured revolving credit facility dated February 15, 2015.  On April 7, 2020, the Company, in accordance with the terms of the Credit Agreement, provided notice to the Agent that effective as of April 20, 2020, the Company was permanently reducing the revolving credit commitment under the Credit Agreement by $55.0 million such that the revolving credit commitment is now $170.0 million.  The reduction in the revolving credit commitment will also reduce the fees paid by the Company in connection with such commitment.

The Credit Facility is structured as a $170.0 million revolving credit facility, with an accordion feature that, so long as no event of default exists, allows the Company to request an increase in the revolving credit facility of up to $75.0 million, exercisable in increments of at least $20.0 million.  The Credit Facility is a five year facility scheduled to terminate on January 31, 2024.  Borrowings under the Credit Facility are classified as either “base rate loans” or “LIBOR loans”.  Base rate loans accrue interest at a base rate equal to the Agent’s prime rate plus an applicable margin adjusted quarterly between 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 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $15.0 million and a swingline 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 all of the Company’s assets, except for any real estate or revenue equipment financed outside the Credit Facility.

Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $170.0 million; or (B) the sum of (i) 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 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.  The borrowing

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base is reduced by an availability reserve, including reserves based on dilution and certain other customary reserves.

The Credit Facility contains a single financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0 that is triggered in the event excess availability under the Credit Facility falls below 10.0% of the lenders’ total commitments.  Also, certain restrictions regarding the Company’s ability to pay dividends, make certain investments, prepay certain indebtedness, execute share repurchase programs and enter into certain acquisitions and hedging arrangements are triggered in the event excess availability under the Credit Facility falls below 20.0% of the lenders’ total commitments.

The Company had no borrowings under the Swingline as of June 30, 2020.  The average interest rate including all borrowings made under the Credit Facility as of June 30, 2020 was 2.90%.  As debt is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value.  As of June 30, 2020, the Company had $7.4 million in letters of credit outstanding and had approximately $38 million available to borrow under the Credit Facility taking into account borrowing base availability.

Sale-leaseback transactions

In July 2019, the Company entered into a sale-leaseback transaction whereby it sold tractors for approximately $2.3 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 $0.03 million.  At the end of the lease, the Company has the option to purchase the tractors.  This transaction does not qualify for sale-leaseback accounting due to the option to repurchase the tractors and is therefore treated as a financing obligation.

In April 2019, the Company entered into a sale-leaseback transaction whereby it sold tractors for approximately $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 to 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 2019, the Company entered into a short-term agreement to finance approximately $4.5 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, 

    

2020

    

2019

    

2020

    

2019

(in thousands)

Operating lease costs

$

2,052

$

2,356

$

4,218