USA Truck, Inc. Announces Improved Earnings for the Fourth Quarter of 2008

USA Truck, Inc. (NASDAQ: USAK) today announced base revenue of $92.9 million for the three months ended December 31, 2008, a decrease of 2.9% from $95.7 million for the same quarter of 2007. Net income increased to $0.6 million for the quarter ended December 31, 2008, from a net loss of $1.6 million for the same quarter of 2007. Diluted earnings per share increased to $0.06, which includes an adjustment of $0.03 per share for an operating asset impairment charge, for the quarter ended December 31, 2008, from a net loss of $0.15 for the same quarter of 2007.

Base revenue increased 1.6% to $397.6 million for the twelve months ended December 31, 2008, from $391.2 million for the same period of 2007. Net income increased to $3.1 million for the twelve months ended December 31, 2008, from $0.1 million for the same period of 2007. Diluted earnings per share increased to $0.31, which includes adjustments of $0.05 per share for asset impairment charges, for the twelve months ended December 31, 2008, from $0.01 for the same period of 2007.

In comparing the financial results of the quarter ended December 31, 2008 to the comparable period of 2007, Clifton R. Beckham, President and CEO of the Company, made the following statement:

"While we are not satisfied with our results, we are proud of our year-over-year improvements in the face of unprecedented economic conditions. We believe that these results reflect tangible progress as we continue to implement our long-term strategic plan.

"Freight conditions during the fourth quarter were quite possibly the most challenging that we have ever experienced and that opinion is supported by several truckload industry indices and an avalanche of macroeconomic indicators.

"Although diesel fuel prices declined during the quarter, the decline was not sufficient to offset deteriorating freight demand throughout the quarter. We believe lower diesel prices provided a working capital boost to marginal carriers during the quarter, thus allowing them to continue their operations thereby exacerbating the imbalance between industry truck supply and freight demand.

"While we are pleased with our progress toward achieving our long-term strategic objectives, the deterioration in the freight environment took its toll on our performance this quarter. The most significant impact of the deterioration was a reduction in Trucking base revenue, which resulted in a 3.4% decline in our tractor utilization. Operating margin was squeezed as Trucking base revenue declined at a faster rate than fixed costs could be removed from our system. The reduced utilization muted the effects of the falling fuel prices (since those lower prices are only relevant if we are running miles).

"We made progress on the various initiatives we have underway to help us achieve our strategic goals of better return on capital and more consistent earnings. Some of that progress came in the form of tactical countermeasures to help offset the current economic challenges while others remain long-term focused:

• We reduced our Company-owned fleet size by approximately 250 tractors, or 10.3%, during the quarter. We are committed to maintaining the proper fleet size necessary to protect our pricing yield and equipment utilization.
• The reduction in our Company-owned fleet targeted those tractors with the highest miles and resulted in an impairment charge of approximately $0.03 per share during the quarter as their book value had to be adjusted down to their market value. We plan to dispose of roughly half of those high-mileage tractors during the first quarter of 2009.
• During the fourth quarter of 2008, we increased our owner-operator fleet from 94 to 151, which partially offset the reduction in Company-owned tractors. The higher proportion of owner operators in the fleet (6.3% at December 31, 2008 as compared to 2.3% at December 31, 2007) is an example of our increased focus on capital management. That focus has yielded meaningful year-over-year improvements relative to the incremental increase in capital deployed on our balance sheet.
• We endeavored over the past year to improve the productivity of our non-driver personnel by using a combination of performance-driven management and a more focused, process-driven approach to managing our business. In that regard, we experienced an 18.7% reduction in our non-driver head count during 2008. We remain committed to challenging and empowering our employees while holding them accountable for performance. We continue to believe that is the best path to service our customers, produce results for our stockholders and reward our employees.
• Depressed freight volumes and increased competition for available loads drove down our revenue per tractor per week. We worked hard to protect our pricing, which put even more pressure on tractor utilization and drove up empty miles. However, we did improve our Trucking base revenue per loaded mile 3.0%, and our improved operational efficiency was evident in the 6.9% increase in Velocity (defined as the number of times we load our fleet each week). We are currently designing a more robust and balanced freight network. Securing the freight necessary for the new network will be difficult in the near-term, but we intend to be ready to execute an upgrade of our freight network as business conditions improve in the future.
• Our "War on Accidents" initiative continues to produce positive results. The frequency of our DOT accidents, for which we typically incur the most cost, declined approximately 17.0%, leading to a 50 basis point reduction in overall insurance and claims expense.
• Though impacted by the overall industry decline in demand, our asset-light Strategic Capacity Solutions division continued its growth trajectory.
  • Brokerage base revenue grew 75.8% to $3.3 million for the quarter. For the year, Brokerage revenue grew 86.8% to $15.3 million, short of our goal to double it this year to $18.0 million. We are learning more about the brokerage business with each passing quarter and we are incorporating those lessons into our brokerage model, which we intend to expand in 2009.
  • We moved our first intermodal load in December 2007, and set a modest goal of $2.0 million in base revenue for 2008. We more than doubled that goal with $4.6 million during the full-year 2008, including $1.6 million during the fourth quarter. We are still on the steep slope of the learning curve, and are working hard to further integrate intermodal into our trucking operations to make the integration as seamless as possible for our customers as 2009 unfolds.
• Though we have reduced our revenue and earnings potential by decreasing the size of our Company-owned tractor fleet, we believe that growth in our Brokerage and Intermodal service offerings and our owner-operator tractor fleet present less capital-intensive opportunities for us to replace that reduced potential. Consistent with our long-term strategic plan, we are positioning our business model for greater return on capital, particularly when economic conditions improve.

"We believe we are poised to weather the uncertainty of the next few quarters. Our balance sheet leverage, less cash, represents just 39.3% of our total capitalization, and we have no material off-balance sheet debt. Despite a heavy tractor trading program, we produced $39.5 million in free cash flow (cash flow from operations less net capital expenditures) during 2008, which was only $2.7 million less than that of 2007 when we purchased a relatively small number of tractors. We expect our 2009 capital expenditures to more resemble 2007 levels than those of 2008. In summary, we are comfortable with our current liquidity situation.

"These past few months have been quite fluid and predicting the near-term future is difficult at best. We are watching the macroeconomic situation closely, including industry capacity. We believe freight demand is likely to remain depressed over the next few quarters. We believe that weak demand, annual tractor registration and insurance renewal payments and continued tight credit during the first few months of 2009 will combine to drive excess capacity from the market. Falling fuel prices were the only material factor we believe aided industry-wide capacity retention, and we do not expect that to be sufficient to outweigh the negative factors for underperforming and undercapitalized competitors going into 2009.

"In the meantime, we will continue the implementation of our long-term strategic plan, and we will manage our capital and our business operations conservatively in the uncertain near-term. We believe that our long-term strategic plan positions our business well for performance in difficult times, but it will require intensity and execution on the part of our team. That will be our focus as 2009 unfolds.”

The following table summarizes the earnings information of USA Truck, Inc. ("Company”) for the periods indicated:

The following table includes key Trucking operations statistics for the periods indicated:

(1) Trucking revenue includes base revenue generated from our General Freight and Dedicated Freight divisions and Trailer-on-Flat-Car Intermodal service offerings. The results of our Regional Freight operations, which we previously reported as a separate division, are now included as part of the results of our General Freight division.

(2) We previously referred to the operating division through which we conduct our freight brokerage operations as our "Strategic Capacity Solutions” division and the operating segment of which that division is a part as "USA Logistics.” We now use "Strategic Capacity Solutions” to refer to that operating segment, which includes base revenue generated by two operating divisions, which we now refer to as Freight Brokerage and Container-on-Flat-Car Intermodal service offerings.

(3) Total miles include both loaded and empty miles.

(4) Tractors include Company-operated tractors plus owner-operator tractors.

(5) Average miles per trip is based upon loaded miles divided by the number of Trucking shipments.

(6) Operating ratio is based upon total operating expenses, net of fuel surcharge, as a percentage of base revenue.

(1) Capital expenditures, net equals cash purchases of property and equipment plus the liability incurred for leases on revenue equipment less proceeds from the sale of property and equipment.

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. These statements generally may be identified by their use of terms or phrases such as "expects,” "estimates,” "anticipates,” "projects,” "believes,” "plans,” "intends,” "may,” "will,” "should,” "could,” "potential,” "continue,” "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 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, and other filings with the Securities and Exchange Commission. 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. 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.

USA Truck is a dry van truckload carrier transporting general commodities via our General and Dedicated Freight divisions and our Trailer-on-Flat-Car Intermodal service offering. We transport commodities throughout the continental United States and into and out of portions of Canada. We also transport general commodities into and out of Mexico by allowing through-trailer service from our terminal in Laredo, Texas. Our Freight Brokerage division and our Container-on-Flat-Car Intermodal service offering provide customized transportation solutions using our technology and multiple modes of transportation including our assets and the assets of our partner carriers.

This press release and related information will be available to interested parties at our web site, http://www.usa-truck.com under the "News Releases” tab of the "Investors” menu.