USA TRUCK INC (Form: 10-Q, Received: 08/03/2017 16:35:27)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2017

[ ]	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)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes [X]

No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):

Large accelerated filer [ ]		Accelerated filer [X]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)		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 27, 2017, was 8,296,870.

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	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, 2017 and December 31, 2016	2
	Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) –Three and six months ended June 30, 2017 and June 30, 2016	3
	Condensed Consolidated Statement of Stockholders’ Equity (unaudited) – Six months ended June 30, 2017	4
	Condensed Consolidated Statements of Cash Flows (unaudited) – Six months ended June 30, 2017 and June 30, 2016	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	27
4.	Controls and Procedures	27
	PART II – OTHER INFORMATION
1.	Legal Proceedings	28
1A.	Risk Factors	28
2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
3.	Defaults Upon Senior Securities	28
4.	Mine Safety Disclosures	28
5.	Other Information	28
6.	Exhibits	29
	Signatures	30

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PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

USA TRUCK, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)

	June 30,			December 31,
	2017			2016
				(as recast)
Assets
Current assets:
Cash	$	166		$	122
Accounts receivable, net of allowance for doubtful accounts of $959 and $608, respectively		56,024			55,127
Other receivables		3,591			6,986
Inventories		413			413
Assets held for sale		1,034			4,661
Prepaid expenses and other current assets		4,527			6,187
Total current assets		65,755			73,496
Property and equipment:
Land and structures		31,772			31,500
Revenue equipment		250,238			269,953
Service, office and other equipment		26,131			25,295
Property and equipment, at cost		308,141			326,748
Accumulated depreciation and amortization		(114,232	)		(106,465	)
Property and equipment, net		193,909			220,283
Other assets		1,070			1,189
Total assets	$	260,734		$	294,968
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	18,807		$	18,779
Current portion of insurance and claims accruals		12,873			10,665
Accrued expenses		8,696			7,533
Current maturities of capital leases		14,761			16,742
Insurance premium financing		1,314			3,943
Total current liabilities		56,451			57,662
Deferred gain		582			652
Long-term debt		80,175			96,600
Capital leases, less current maturities		31,560			35,133
Deferred income taxes		31,580			37,775
Insurance and claims accruals, less current portion		9,424			8,558
Total liabilities		209,772			236,380
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized; none issued		--			--
Common Stock, $.01 par value; 30,000,000 shares authorized; issued 12,154,788 shares, and 12,156,376 shares, respectively		122			122
Additional paid-in capital		68,373			68,375
Retained earnings		50,227			57,963
Less treasury stock, at cost (3,853,064 shares, and 3,849,815 shares, respectively)		(67,760	)		(67,872	)
Total stockholders’ equity		50,962			58,588
Total liabilities and stockholders’ equity	$	260,734		$	294,968

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

(UNAUDITED)

(in thousands, except per share data)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Revenue
Operating revenue	$	107,358		$	109,888		$	209,028		$	220,506

Operating expenses
Salaries, wages and employee benefits		29,221			30,627			59,860			63,201
Fuel and fuel taxes		10,479			11,391			21,253			21,580
Depreciation and amortization		6,879			7,599			14,523			14,871
Insurance and claims		5,561			5,438			13,893			10,206
Equipment rent		2,633			1,861			4,747			3,722
Operations and maintenance		7,950			10,299			14,521			19,512
Purchased transportation		41,005			38,030			78,408			74,432
Operating taxes and licenses		1,024			1,260			1,974			2,381
Communications and utilities		598			851			1,264			1,731
Gain on disposal of assets, net		(77	)		(182	)		(337	)		(578	)
Restructuring, impairment and other costs		--			--			--			5,264
Other		5,051			3,271			8,287			7,104
Total operating expenses		110,324			110,445			218,393			223,426
Operating loss		(2,966	)		(557	)		(9,365	)		(2,920	)

Other expenses
Interest expense, net		950			731			1,953			1,295
Other, net		128			133			226			337
Total other expenses, net		1,078			864			2,179			1,632
Loss before income taxes		(4,044	)		(1,421	)		(11,544	)		(4,552	)
Income tax benefit		(1,198	)		(75	)		(3,808	)		(1,399	)

Consolidated net loss and comprehensive loss	$	(2,846	)	$	(1,346	)	$	(7,736	)	$	(3,153	)

Net loss per share
Average shares outstanding (basic)		8,028			8,734			8,028			9,069
Basic loss per share	$	(0.35	)	$	(0.15	)	$	(0.96	)	$	(0.35	)

Average shares outstanding (diluted)		8,028			8,734			8,028			9,069
Diluted loss per share	$	(0.35	)	$	(0.15	)	$	(0.96	)	$	(0.35	)

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

	Common
	Stock						Additional
				Par			Paid-in			Retained			Treasury
	Shares			Value			Capital			Earnings			Stock			Total
Balance at December 31, 2016		12,156		$	122		$	68,041		$	58,172		$	(67,872	)	$	58,463
Effect of adoption of share-based payment pronouncement ASU 2016-09 (see note 2)		--			--			334			(209	)		--			125
Balance at December 31, 2016, as recast		12,156		$	122		$	68,375		$	57,963		$	(67,872	)	$	58,588
Issuance of treasury stock		--			--			(169	)		--			112			(57	)
Stock-based compensation		--			--			152			--			--			152
Restricted stock award grant		195			2			(2	)		--			--			--
Forfeited restricted stock		(198	)		(2	)		2			--			--			--
Net share settlement related to restricted stock vesting		2			--			15			--			--			15
Net loss		--			--			--			(7,736	)		--			(7,736	)
Balance at June 30, 2017		12,155		$	122		$	68,373		$	50,227		$	(67,760	)	$	50,962

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	Six Months Ended
	June 30,
	2017			2016
Operating activities:
Net loss	$	(7,736	)	$	(3,153	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		14,523			14,871
Provision for doubtful accounts		--			440
Deferred income tax (benefit), net		(6,196	)		2,443
Share-based compensation		152			393
Gain on disposal of assets, net		(337	)		(578	)
Impairment of property and equipment		--			1,070
Other		(70	)		(82	)
Changes in operating assets and liabilities:
Accounts receivable		944			(1,391	)
Inventories and prepaid expenses		1,660			351
Accounts payable and accrued liabilities		3,328			(275	)
Insurance and claims accruals		3,075			1,204
Other long-term assets and liabilities		119			103
Net cash provided by operating activities		9,462			15,396
Investing activities:
Capital expenditures		(3,468	)		(27,065	)
Proceeds from sale of property and equipment		9,856			12,696
Proceeds from operating sale leaseback		10,980			--
Net cash provided by (used in) investing activities		17,368			(14,369	)
Financing activities:
Borrowings under long-term debt		11,855			46,237
Payments on long-term debt		(30,996	)		(19,637	)
Payments on capitalized lease obligations		(5,467	)		(3,487	)
Net change in bank drafts payable		(2,136	)		(2,108	)
Excess tax (benefit) payments from exercise of stock options		--			(55	)
Purchase of common stock		--			(20,904	)
Net payments on stock-based awards		15			(38	)
Issuance of treasury stock		(57	)		--
Net cash (used in) provided by financing activities		(26,786	)		8

Increase in cash		44			1,035
Cash:
Beginning of period		122			87
End of period	$	166		$	1,122
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	1,936		$	1,283
Income taxes		124			132
Supplemental disclosure of non-cash investing activities:
Purchases of revenue equipment included in accounts payable		--			7,932

See accompanying notes to condensed consolidated financial statements.

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USA TRUCK, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 30, 2017

NOTE 1 – BASIS OF PRESENTATION

In the opinion of the management of USA Truck, Inc., the accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and footnote disclosures normally included in financial statements required by GAAP have been condensed or omitted. All normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. These financial statements should be read in conjunction with the financial statements, and footnotes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

References to the “Company,” “we,” “us,” “our” or similar terms refer to USA Truck, Inc. and its subsidiary.

NOTE 2 – NEW ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to implement this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard provides for using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts with Customers – Deferral of the Effective Date, which delayed the effectiveness of ASU 2014-09 to annual periods beginning after December 15, 2017, and interim periods therein. The Company is in the process of reviewing customer contracts, but we believe our transportation revenue recognized under the new standard will generally approximate revenue under current standards, in that we recognize transportation revenue proportionately as we perform the transportation service for our customer. The Company plans to complete its evaluation in 2017, including an assessment of the new expanded disclosure requirements and a final determination of the transition method it will use to adopt the new standard.

In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize a right-to-use asset and a lease obligation for all leases. Lessees are permitted to make an accounting policy election to not recognize an asset and liability for leases with a term of twelve months or less. Lessor accounting under the new standard is substantially unchanged. Additional qualitative and quantitative disclosures, including significant judgments made by management, will be required. The new standard, which will become effective for the Company beginning with the first quarter 2019, requires a modified retrospective transition approach and includes a number of practical expedients. Early adoption of the standard is permitted. The Company is currently evaluating the impacts the adoption of this accounting guidance will have on the condensed consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows. The Company adopted the provisions of ASU 2016-09 as of January 1, 2017. As a result, the Company changed its accounting policy to recognize forfeitures as they occur. Accordingly, the Company recognized a net cumulative adjustment of $0.1 million for the adoption of the impact of removing forfeitures, net of income taxes, charged to stockholder’s equity at December 31, 2016. The requirement to recognize excess tax benefits and deficiencies as income tax expense or benefit in the income statement was applied prospectively, with no material impact on the financial statements for the quarter ended June 30, 2017.

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NOTE 3 – NOTE RECEIVABLE

During 2010, the Company sold its terminal facility in Shreveport, Louisiana. In connection with this sale, the Company received cash in the amount of $0.2 million and a note receivable in the amount of $2.1 million which was recorded in the line item “Other Receivables” in the accompanying condensed consolidated balance sheets. The purchaser-debtor was to make monthly payments to the Company, with interest, until the balance of the note receivable was paid through a lump sum payment due in November 2015. The Company had previously deferred $0.7 million of gain on the sale of the property, with the gain recognized into earnings only as monthly payments on the note receivable were received.

The purchaser-debtor defaulted on the note receivable in November 2015, at which time the Company began legal action to collect the remaining balance. The foreclosure sale was held on April 26, 2017, and a successful bid was placed by a third party for $1.6 million, which exceeded the $1.4 million carrying value of the note. During the second quarter of 2017, the Company received cash from the foreclosure sale and recognized a $0.2 million gain.

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 approved at the Annual Meeting of Stockholders on May 10, 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. As of June 30, 2017, 583,690 shares remain available under the Incentive Plan for the issuance of future equity-based compensation awards.

NOTE 5 – SEGMENT REPORTING

The Company’s two reportable segments are Trucking and USAT Logistics.

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

USAT Logistics. USAT Logistics’ service offerings consist of freight brokerage and rail intermodal services. Both of these service offerings match customer shipments with available equipment of authorized third-party motor carriers and provide services that complement the Company’s Trucking operations. The Company provides these services primarily 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.

In determining its reportable segments, the Company’s management 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.

Revenue equipment assets are not allocated to USAT Logistics, because USAT Logistics brokers freight services to customers through arrangements with third party motor carriers who utilize their own equipment. To the extent rail intermodal 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.

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A summary of operating revenue by segment is as follows (in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Operating revenue	2017			2016			2017			2016
Trucking revenue (1)	$	71,731		$	75,750		$	142,202		$	151,786
Trucking intersegment eliminations		(186	)		(246	)		(377	)		(580	)
Trucking operating revenue		71,545			75,504			141,825			151,206
USAT Logistics revenue (2)		36,878			37,087			69,528			72,997
USAT Logistics intersegment eliminations		(1,065	)		(2,703	)		(2,325	)		(3,697	)
USAT Logistics operating revenue		35,813			34,384			67,203			69,300
Total operating revenue	$	107,358		$	109,888		$	209,028		$	220,506

(1)

Includes foreign revenue of $9.1 million and $18.8 million for the three and six months ended June 30, 2017, respectively, and $9.6 million and $19.3 million for the three and six months ended June 30, 2016, respectively. All foreign revenue is collected in U.S. dollars.

(2)

USAT Logistics de Mexico was established on March 4, 2017. Foreign revenue for the three and six months ended June 30, 2017 was $0.2 million and $0.2 million, respectively.

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Operating (loss) income	2017			2016			2017			2016
Trucking	$	(4,843	)	$	(2,733	)	$	(11,971	)	$	(7,102	)
USAT Logistics		1,877			2,176			2,606			4,182
Total operating loss	$	(2,966	)	$	(557	)	$	(9,365	)	$	(2,920	)

A summary of depreciation and amortization by segment is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Depreciation and amortization	2017		2016		2017		2016
Trucking	$	6,759	$	7,470	$	14,323	$	14,620
USAT Logistics		120		129		200		251
Total depreciation and amortization	$	6,879	$	7,599	$	14,523	$	14,871

NOTE 6 – ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

	June 30,		December 31,
Accrued expenses	2017		2016
Salaries, wages and employee benefits	$	4,385	$	2,480
Federal and state tax accruals		1,855		1,579
Restructuring, impairment and other costs (1)		973		1,404
Other (2)		1,483		2,070
Total accrued expenses	$	8,696	$	7,533

(1)

Refer to Note 12 for additional information regarding the restructuring, impairment and other costs.

(2)

As of June 30, 2017 and December 31, 2016, no single item included within other accrued expenses exceeded 5.0% of our total current liabilities.

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NOTE 7 – LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2017		2016
Revolving credit agreement	$	80,175	$	96,600

In February 2015, the Company entered into a new senior secured revolving credit facility (the “Credit Facility”) with a group of lenders and Bank of America, N.A., as agent (“Agent”). Contemporaneously with the funding of the Credit Facility, the Company paid off the obligations under and terminated its prior credit facility.

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 $80.0 million, exercisable in increments of $20.0 million. The Credit Facility is a five-year facility scheduled to terminate on February 5, 2020. 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 that was set at 0.50% through May 31, 2016, and will be adjusted quarterly thereafter to between 0.25% and 1.00% 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 that was set at 1.50% through May 31, 2016, and thereafter adjusted two days prior to each 30-day interest period for a term equivalent to such period between 1.25% and 2.00% 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 swing line sub-facility in an aggregate amount of $20.0 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% of eligible investment grade accounts receivable (reduced to 85% in certain situations), plus (ii) 85% of eligible non-investment grade accounts receivable, plus (iii) the lesser of (a) 85% of eligible unbilled accounts receivable and (b) $10.0 million, plus (iv) the product of 85% multiplied by the net orderly liquidation value percentage applied to the net book value of eligible revenue equipment, plus (v) 85% multiplied by the net book value of otherwise eligible newly acquired revenue equipment that has not yet been subject to an appraisal. 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 financial covenant, which requires a consolidated fixed charge coverage ratio of at least 1.0 to 1.0, that springs in the event excess availability under the Credit Facility falls below 10% of the lenders’ total commitments. Management believes the Company’s excess availability will not fall below 10%, or $17.0 million, and expects the Company to remain in compliance with all debt covenants during the next twelve months. The Company anticipates potentially falling below $34.0 million in availability, or 20% of the lenders’ commitments under the Credit Facility, during 2017, which may restrict 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.

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 payable 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.

The Company had no overnight borrowings under the Credit Facility as of June 30, 2017. The average interest rate including all borrowings made under the Credit Facility as of June 30, 2017, was 3.0%. As debt is repriced on a monthly basis, the borrowings under the Credit Facility approximate fair value. As of June 30, 2017, the Company had outstanding $5.4 million in letters of credit and had approximately $42.2 million available under the Credit Facility.

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Note 8 – LEASES AND Commitments

CAPITAL LEASES

The Company leases certain equipment under capital leases with terms ranging from 15 to 60 months. Balances related to these capitalized leases are included in property and equipment in the accompanying condensed consolidated balance sheets and are set forth in the table below for the periods indicated (in thousands).

	Capitalized Costs		Accumulated Amortization		Net Book Value
June 30, 2017	$	69,504	$	21,751	$	47,753
December 31, 2016		69,748		17,428		52,320

The Company has capitalized lease obligations relating to revenue equipment as of June 30, 2017 of $46.3 million, of which $14.8 million represents the current portion. Such leases have various termination dates extending through October 2020 and contain renewal or fixed price purchase options. The effective interest rates on the leases range from nil to 3.11% as of June 30, 2017. The lease agreements require payment of property taxes, maintenance and operating and non-operating expenses. Amortization of capital leases was $1.7 million and $3.6 million for the three and six months ended June 30, 2017, respectively, and $1.2 million and $2.5 million for the three and six months ended June 30, 2016, respectively.

OPERATING LEASES

Rent expense associated with operating leases was $3.1 million and $5.6 million for the three and six months ended June 30, 2017, respectively, and $2.4 million and $4.5 million for the three and six months ended June 30, 2016, respectively. Rent expense relating to tractors, trailers and other operating equipment is included in the “Equipment rent,” line item while rent expense relating to office equipment is included in the “Operations and maintenance” line item in the accompanying condensed consolidated statements of operations.

As of June 30, 2017, the future minimum payments, including interest, under capitalized leases with initial terms of one year or more and future rentals under operating leases for certain facilities, office equipment and revenue equipment with initial terms of one year or more were as follows for the years indicated (in thousands).

	2017		2018		2019		2020		2021		Thereafter
Capital leases	$	15,957	$	8,331	$	13,825	$	10,252	$	--	$	--
Operating leases		11,306		9,565		7,191		1,828		211		492

During the first quarter of 2017, the Company completed a sale-leaseback transaction under which it sold certain owned tractors to an unrelated party for net proceeds of $11.0 million and entered into an operating lease with the buyer for a term of 41 months. The Company recorded a liability of approximately $0.03 million representing the gain on the sale and will amortize such amount to earnings ratably over the lease term. The deferred gain is included in the “Deferred gain” line item in the accompanying condensed consolidated balance sheet.

OTHER COMMITMENTS

As of June 30, 2017, the Company had $8.6 million in commitments for purchases of revenue and non-revenue equipment, of which none are cancellable.

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NOTE 9 – INCOME tAXES

During the three months ended June 30, 2017 and 2016, the Company’s effective tax rate was 29.6% and 5.3%, respectively. During the six months ended June 30, 2017 and 2016, the Company’s effective tax rate was 33.0% and 30.7%, respectively. Income tax expense varies from the amount computed by applying the statutory federal tax rate to income before income taxes primarily due to state income taxes and certain non-deductible expenses including a per diem pay structure for 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 gross pay, before taxes. Per diem pay is partially nondeductible 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 nondeductible 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 is significant.

When the result of the expected annual effective tax rate is not deemed reliable and distorts the income tax provision for an interim period, the Company calculates the income tax provision or benefit using the cut-off method, which results in an income tax provision or benefit based solely on the year-to-date pretax income or loss as adjusted for permanent differences on a pro rata basis.

NOTE 10 – LOSS PER SHARE

Basic loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted loss per share is computed by adjusting the weighted average number of shares of common stock outstanding by common stock equivalents attributable to dilutive stock options and restricted stock. The computation of diluted loss per share does not assume conversion, exercise or contingent issuance of securities that would have an antidilutive effect on loss per share.

The following table sets forth the computation of basic and diluted loss per share (in thousands, except per share amounts):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
Numerator:	2017			2016			2017			2016
Net loss	$	(2,846	)	$	(1,346	)	$	(7,736	)	$	(3,153	)
Denominator:
Denominator for basic earnings per share – weighted average shares		8,028			8,734			8,028			9,069
Effect of dilutive securities:
Employee stock options and restricted stock		--			--			--			--
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion		8,028			8,734			8,028			9,069
Basic loss per share	$	(0.35	)	$	(0.15	)	$	(0.96	)	$	(0.35	)
Diluted loss per share	$	(0.35	)	$	(0.15	)	$	(0.96	)	$	(0.35	)
Weighted average anti-dilutive employee stock options and restricted stock		--			20			2			7

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NOTE 11 – 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 or results of operations in any given reporting period.

NOTE 12 – RESTRUCTURING, IMPAIRMENT AND OTHER COSTS

During 2016, the Company took steps to streamline and simplify its operations to better align its cost structure. The Company closed a total of four facilities, and reduced headcount across multiple departments. Expenses incurred in implementing the restructuring plan included cancellation penalties for certain contracts with independent contractors, costs related to involuntary terminations, facility lease termination costs, costs associated with the development, communication and administration of these initiatives and asset write-offs.

The following tables summarize the Company’s liabilities, charges, and cash payments related to the restructuring plan made during the six months ended June 30, 2017 (in thousands):

	Accrued Balance December 31, 2016		Costs Incurred		Payments			Expenses/ Charges		Accrued Balance June 30, 2017
Compensation and benefits	$	81	$	--	$	(81	)	$	--	$	--
Facility closing expenses		1,323		--		(350	)		--		973
Total	$	1,404	$	--	$	(431	)	$	--	$	973

	Three Months Ended June 30,				Six Months Ended June 30,
Costs incurred	2017		2016		2017		2016
Trucking	$	--	$	--	$	--	$	4,848
USAT Logistics		--		--		--		416
Total	$	--	$	--	$	--	$	5,264

The following tables summarize the Company’s liabilities, charges, and cash payments related to executive severance agreements made during the six months ended June 30, 2017 (in thousands):

Accrued

Balance

December 31,

2016

Costs

Incurred

Payments

Expenses/

Charges

Accrued

Balance

June 30,

2017

Severance costs in salaries, wages and employee benefits

277

899

(726

)

450

Total

277

899

(726

)

450

	Three Months Ended June 30,				Six Months Ended June 30,
Costs incurred	2017		2016		2017		2016
Trucking	$	56	$	697	$	642	$	697
USAT Logistics		26		--		257		--
Total	$	82	$	697	$	899	$	697

In May 2016, the Company’s board of directors unanimously approved a separation agreement between Michael K. Borrows and the Company and accepted Mr. Borrows’ resignation as Executive Vice President and Chief Financial Officer. The Company recognized severance costs associated with Mr. Borrows’ departure of approximately $0.7 million, which were recorded in the “Salaries, wages and employee benefits” line item in the condensed consolidated statements of operations and comprehensive (loss) income for the Company’s Form 10-Q for the quarter ended June 30, 2016. At June 30, 2017, the Company had approximately $0.1 million accrued for severance benefits remaining to be paid to Mr. Borrows.

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In January 2017, the Company’s board of directors unanimously approved separation agreements between John R. Rogers (the “Rogers Separation Agreement”), the Company’s former President and Chief Executive Officer, and Christian C. Rhodes (the “Rhodes Separation Agreement”), the Company’s former Chief Information Officer. Per the material terms of the Rogers Separation Agreement, Mr. Rogers received (i) severance pay in the form of salary continuation payments equal to his base salary at the time his employment ended ($425,000) for a period of twelve months, subject to ongoing compliance with certain non-competition, non-solicitation, non-disparagement and confidentiality covenants in favor of the Company, (ii) a lump sum separation payment of $120,000 and (iii) a lump sum payment of $30,000 for moving and transition expenses. Per the material terms of the Rhodes Separation Agreement, Mr. Rhodes received a lump sum payment of $171,125. The Company recognized severance costs associated with the departures of Messrs. Rogers and Rhodes of approximately $0.6 million and $0.2 million, respectively, which were recorded in the “Salaries, wages and employee benefits” line item in the accompanying condensed consolidated statements of operations and comprehensive loss. At June 30, 2017, the Company had approximately $0.2 million and nil accrued for severance benefits remaining to be paid to Mr. Rogers and Mr. Rhodes, respectively.

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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 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 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:

●

future driver market,

●

future ability to grow market share,

●

future driver and customer-facing employee compensation,

●

future ability and cost to recruit and retain drivers and customer-facing employees,

●

future asset utilization,

●

the amount, timing and price of future acquisitions and dispositions of revenue equipment, size and age of the Company’s fleet and anticipated gains or losses resulting from dispositions,

●

future depreciation and amortization expense,

●

future safety performance,

●

future profitability,

●

future industry capacity,

●

future effects of restructuring actions,

●

future pricing rates and freight network,

●

future fuel prices and surcharges, fuel efficiency and hedging arrangements,

●

future insurance and claims and litigation expense,

●

future salaries, wages and employee benefits costs,

●

future purchased transportation use and expense,

●

future operations and maintenance costs,

●

future USAT Logistics growth and profitability,

●

inflation,

●

future indebtedness,

●

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,

●

expected liquidity and sources of capital resources,

●

future size of our 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,” “intends,” “plans,” “goals,” “may,” “will,” ”would,” “should,” “could,” “potential,” “continue,” “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, 2016 and other filings with the Securities and Exchange Commission (the “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.

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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 subsidiary.

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:

Our Business – 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.

Our Business

USA Truck offers a broad range of truckload motor carrier and freight brokerage and logistics services to a diversified customer base that spans a variety of industries. 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 and rail intermodal service offerings.

The Trucking segment provides truckload transportation, including dedicated services, of various products, goods and materials. The Trucking segment primarily uses its own purchased or leased tractors and trailers to provide the services and is commonly referred to as “asset-based” trucking. The Company’s USAT Logistics service matches customer shipments with available equipment of authorized third-party motor carriers and provides services that complement the Company’s Trucking operations. USAT Logistics provides these services primarily 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.

Revenue for the Company’s Trucking segment is substantially generated by transporting freight for customers, and is predominantly affected by the rates per mile received from customers, the number of tractors in operation, and the number of revenue-generating miles per tractor. The Company supplements its Trucking operating revenue by charging for fuel surcharge and ancillary services such as stop-off pay, loading and unloading activities, tractor and trailer detention and other similar services.

Operating expenses that have a major impact on the profitability of the Trucking segment fall into two categories: variable and fixed. The largest portion is the variable costs or mostly variable costs of transporting freight for customers. These costs include driver wages and benefits, fuel and fuel taxes, payments to independent contractors for purchased transportation, operating and maintenance expense and insurance and claims expense. The costs vary mostly according to miles operated, but also have controllable components based on percentage of compensated miles, shop and dispatch efficiency, safety and claims experience.

The most significant fixed or mostly fixed expenses include the capital costs of our assets (depreciation, rent and interest), compensation of non-driving employees and portions of insurance and maintenance expenses. These expenses are partially controllable through managing our fleet size and facilities infrastructure, headcount efficiency improvements and operating safely.

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Fuel expense can fluctuate significantly with diesel fuel prices and is one of our most volatile variable expenses. To mitigate the Company’s exposure to fuel price increases, it recovers from its customers fuel surcharges that generally recoup 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 its fuel surcharge program mitigates some exposure to rising fuel costs, the Company continues to have exposure to increasing fuel costs related to empty miles, fuel inefficiency due to engine idle time and other factors, including the extent to which the surcharge paid by the customer is 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, or DOE, index. Therefore, 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, the opposite is true. Because of the volatility of fuel prices, the Company evaluates its profitability primarily based on net fuel cost per company tractor mile, because this measure reflects the net impact of fuel prices and surcharge collection, uncompensated miles and changes in mix between company tractors and independent contractor tractor miles.

The key statistics used to evaluate Trucking segment performance, net of fuel surcharge, include (i) base Trucking revenue per seated tractor per week, (ii) average base revenue per loaded mile, (iii) average miles per seated tractor per week, (iv) deadhead percentage, (v) average loaded miles per trip, (vi) average number of seated tractors and (vii) adjusted operating ratio. In general, the Company’s average miles per seated tractor per week, rate per mile and deadhead percentage are affected by industry-wide freight volumes, industry-wide trucking capacity and the competitive environment, which factors are mostly beyond the Company’s control, as well as by its sales and marketing efforts, service levels and efficiency of its operations, over which the Company has significant control.

The USAT Logistics segment provides services that complement Trucking services. Unlike the Trucking segment, the USAT Logistics segment is non-asset based and is instead dependent upon qualified employees, 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 USAT Logistics segment’s financial performance by reviewing the gross margin percentage (revenue less purchased transportation expenses expressed as a percentage of revenue) and gross margin. The 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.

The Company expects to continue to focus on key objectives that it believes will return USA Truck to profitability: building a leadership team; Trucking turnaround; improving base revenue yield; reducing costs; and gross margin growth at USAT Logistics. With those objectives in mind, management continues to work toward refining the Company’s freight network to achieve a more optimal mix of lanes and markets in its Trucking business, seating a higher percentage of the Company’s fleet and growing its independent contractor fleet and focus on improving rates, all with the goal of better utilizing our in-service tractors and improving key operating metrics. 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.

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Results of Operations

The following table sets forth the condensed consolidated statements of operations and comprehensive loss in dollars (in thousands) and percentage of consolidated operating revenue and the percentage increase or decrease in the dollar amounts (in thousands) of those items compared to the prior year.

	Three Months Ended June 30,
	2017									2016
	$			% Operating Revenue			% Adjusted Operating Ratio (1)			$			% Operating Revenue			% Adjusted Operating Ratio (1)			% Change in Dollar Amounts
Base revenue	$	96,038			89.5	%				$	99,513			90.6	%					(3.5	)%
Fuel surcharge revenue		11,320			10.5						10,375			9.4						9.1
Operating revenue	$	107,358			100.0	%				$	109,888			100.0	%					(2.3	)

Operating expenses		110,324			102.8			103.0	%		110,445			100.5			99.9	%		(0.1	)
Operating loss		(2,966	)		(2.8	)		(3.0	)		(557	)		(0.5	)		0.1			432.5

Other expenses:
Interest expense		950			0.9						731			0.7						30.0
Other, net		128			0.1						133			0.1						(3.8	)
Total other expenses, net		1,078			1.0						864			0.8						24.8
Loss before income taxes		(4,044	)		(3.8	)					(1,421	)		(1.3	)					184.6
Income tax benefit		(1,198	)		(1.1	)					(75	)		(0.1	)					1,490.5

Consolidated net loss	$	(2,846	)		(2.7	)%				$	(1,346	)		(1.2	)%					111.5	%

	Six Months Ended June 30,
	2017									2016
	$			% Operating Revenue			% Adjusted Operating Ratio (1)			$			% Operating Revenue			% Adjusted Operating Ratio (1)			% Change in Dollar Amounts
Base revenue	$	185,866			88.9	%				$	201,530			91.4	%					(7.8	)%
Fuel surcharge revenue		23,162			11.1						18,976			8.6						22.1
Operating revenue	$	209,028			100.0	%				$	220,506			100.0	%					(5.2	)

Operating expenses		218,393			104.5			104.6	%		223,426			101.3			98.5	%		(2.3	)
Operating loss		(9,365	)		(4.5	)		(4.6	)		(2,920	)		(1.3	)		1.5			220.7

Other expenses:
Interest expense		1,953			0.9						1,295			0.6						50.8
Other, net		226			0.1						337			0.1						(32.9	)
Total other expenses, net		2,179			1.0						1,632			0.7						33.5
Loss before income taxes		(11,544	)		(5.5	)					(4,552	)		(2.0	)					153.6
Income tax benefit		(3,808	)		(1.8	)					(1,399	)		(0.6	)					172.2

Consolidated net loss	$	(7,736	)		(3.7	)%				$	(3,153	)		(1.4	)%					145.4	%

(1)

The adjusted operating ratio calculation for operating expenses is calculated as operating expenses, net of fuel surcharges and other items, as a percent of operating revenue excluding fuel surcharge revenue. Other items in this presentation are the restructuring, impairment and other costs and severance costs included in salaries, wages and employee benefits. See note 12 of the footnotes in this Form 10-Q. Adjusted operating ratio is a non-GAAP financial measure. See “Use of Non-GAAP Financial Information” and “Consolidated Reconciliations” and “Segment Reconciliations” below for the uses and limitations associated with adjusted operating ratio and other non-GAAP financial measures.

Use of Non-GAAP Financial Information

The Company uses the terms “adjusted operating ratio” and “adjusted (loss) earnings per diluted share” throughout this Form 10-Q. Adjusted operating ratio and adjusted (loss) earnings per diluted share, as defined here, are non-GAAP financial measures, as defined by the SEC. Management uses adjusted operating ratio and adjusted (loss) earnings per diluted share as supplements to the Company’s GAAP results in evaluating certain aspects of its business, as described below.

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Adjusted operating ratio is calculated as operating expenses less restructuring, impairment and other costs and severance costs included in salaries, wages and employee benefits, net of fuel surcharge, as a percentage of operating revenue excluding fuel surcharge revenue. Adjusted (loss) earnings per diluted share is defined as earnings or loss before income taxes plus loss on extinguishment of debt, restructuring, impairment and other costs and severance costs included in salaries, wages and employee benefits reduced by our normalized statutory income tax rate, divided by weighted average diluted shares outstanding.

The Company’s chief operating decision-makers focus on adjusted operating ratio and adjusted (loss) earnings per diluted share 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 consistent basis for comparing results of operations. Management believes its presentation of adjusted operating ratio and adjusted (loss) earnings per diluted share is useful because it provides investors and securities analysts the same information that the Company uses internally for purposes of assessing its core operating performance.

Adjusted operating ratio and adjusted (loss) earnings per diluted share are not substitutes for operating margin or any other measure derived solely from GAAP measures. There are limitations to using non-GAAP measures such as adjusted operating ratio and adjusted (loss) earnings per diluted share. Although management believes that adjusted operating ratio and adjusted (loss) earnings per diluted share can make an evaluation of the Company’s operating performance more consistent 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 adjusted operating ratio and adjusted (loss) earnings per diluted share differently. As a result, it may be difficult to use adjusted operating ratio, adjusted (loss) earnings per diluted share 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, reconciliations of non-GAAP financial measures to GAAP financial measures have been provided in the tables below for operating ratio (dollar amounts in thousands):

Adjusted operating ratio:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Operating revenue	$	107,358		$	109,888		$	209,028		$	220,506
Less:
Fuel surcharge revenue		11,320			10,375			23,162			18,976
Base revenue		96,038			99,513			185,866			201,530
Operating expense		110,324			110,445			218,393			223,426
Adjusted for:
Restructuring, impairment and other costs		--			--			--			(5,264	)
Severance costs in salaries, wages and employee benefits		(82	)		(697	)		(899	)		(697	)
Fuel surcharge revenue		(11,320	)		(10,375	)		(23,162	)		(18,976	)
Adjusted operating expense	$	98,922		$	99,373		$	194,322		$	198,489
Operating ratio		102.8	%		100.5	%		104.5	%		101.3	%
Adjusted operating ratio		103.0	%		99.9	%		104.6	%		98.5	%

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Adjusted (loss) earnings per share:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Loss per share	$	(0.35	)	$	(0.15	)	$	(0.96	)	$	(0.35	)
Adjusted for:
Severance costs in salaries, wages and employee benefits		0.01			0.08			0.11			0.08
Restructuring, impairment and other costs		--			--			--			0.58
Income tax expense effect of adjustments		--			(0.03	)		(0.04	)		(0.25	)
Adjusted (loss) earnings per share	$	(0.34	)	$	(0.10	)	$	(0.89	)	$	0.06

Segment reconciliations

The tables below set forth the Trucking and USAT Logistics segment adjusted operating ratio (which is a non-GAAP financial measure as defined by the SEC) as if fuel surcharge is excluded from operating revenue and is instead reported as a reduction of operating expenses. Pursuant to the requirements of Regulation S-K, a reconciliation of this non-GAAP financial measure to the associated GAAP financial measure has been provided in the tables below for operating ratio (dollar amounts in thousands).

*Trucking* *Segment*	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Revenue	$	71,731		$	75,750		$	142,202		$	151,786
Less: intersegment eliminations		186			246			377			580
Operating revenue		71,545			75,504			141,825			151,206
Less: fuel surcharge revenue		8,828			8,227			18,015			15,048
Base revenue		62,717			67,277			123,810			136,158
Operating expense		76,388			78,238			153,796			158,308
Adjusted for:
Restructuring, impairment and other costs		--			--			--			(4,848	)
Severance costs in salaries, wages and employee benefits		(56	)		(697	)		(642	)		(697	)
Fuel surcharge revenue		(8,828	)		(8,227	)		(18,015	)		(15,048	)
Adjusted operating expense	$	67,504		$	69,314		$	135,139		$	137,715
Operating ratio		106.8	%		103.6	%		108.4	%		104.7	%
Adjusted operating ratio		107.6	%		103.0	%		109.2	%		101.1	%

*USAT Logistics Segment*	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Revenue	$	36,878		$	37,087		$	69,528		$	72,997
Less: intersegment eliminations		1,065			2,703			2,325			3,697
Operating revenue		35,813			34,384			67,203			69,300
Less: fuel surcharge revenue		2,492			2,148			5,147			3,928
Base revenue		33,321			32,236			62,056			65,372
Operating expense		33,936			32,207			64,597			65,118
Adjusted for:
Severance costs in salaries, wages and employee benefits		(26	)		--			(257	)		(416	)
Fuel surcharge revenue		(2,492	)		(2,148	)		(5,147	)		(3,928	)
Adjusted operating expense	$	31,418		$	30,059		$	59,193		$	60,774
Operating ratio		94.8	%		93.7	%		96.1	%		94.0	%
Adjusted operating ratio		94.3	%		93.2	%		95.4	%		93.0	%

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Key Operating Statistics by Segment

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Trucking:
Operating revenue (in thousands)	$	71,545		$	75,504		$	141,825		$	151,206
Operating loss (in thousands) (1)	$	(4,843	)	$	(2,733	)	$	(11,971	)	$	(7,102	)
Operating ratio (2)		106.8	%		103.6	%		108.4	%		104.7	%
Adjusted operating ratio (3)		107.6	%		103.0	%		109.2	%		101.1	%
Total miles (in thousands) (4)		40,833			44,979			81,283			88,850
Deadhead percentage (5)		12.8	%		12.6	%		13.0	%		12.5	%
Base revenue per loaded mile	$	1.762		$	1.712		$	1.751		$	1.752
Average number of in-service tractors (6)		1,722			1,834			1,713			1,825
Average number of seated tractors (7)		1,584			1,743			1,574			1,751
Average miles per seated tractor per week		2,007			1,985			2,010			1,952
Base revenue per seated tractor per week	$	3,046		$	2,969		$	3,042		$	2,991
Average loaded miles per trip		560			594			569			578

USAT Logistics:
Operating revenue (in thousands)	$	35,813		$	34,384		$	67,203		$	69,300
Operating income (in thousands) (1)	$	1,877		$	2,176		$	2,606		$	4,182
Gross margin (in thousands) (8)	$	6,620			6,714			11,979			13,432
Gross margin percentage (9)		18.5	%		19.5	%		17.8	%		19.4	%

(1)

Operating (loss) income is calculated by deducting operating expenses from operating revenues.

(2)

Operating ratio is calculated as operating expenses as a percentage of operating revenue.

(3)

(4)

Total miles include both loaded and empty miles.

(5)

Deadhead percentage is calculated by dividing empty miles into total miles.

(6)

Tractors include company-operated tractors in service, plus tractors operated by independent contractors.

(7)

Seated tractors are those occupied by drivers.

(8)

Gross margin is calculated by taking revenue less purchased transportation.

(9)

Gross margin percentage is calculated by taking operating revenue less purchased transportation expense, net of intercompany expenses, and dividing that amount by operating revenue.

Results of Operations—Segment Review

Trucking operating revenue

For the three months ended June 30, 2017, Trucking operating revenue decreased 5.2% to $71.5 million, compared to $75.5 million for the same period in 2016. Trucking base revenue decreased 6.8% to $62.7 million, compared to $67.3 million for the second quarter of 2016. The decrease in operating revenue was primarily attributable to the 9.1% decrease in average seated tractor count, which drove a 4.0% decrease in the number of Trucking shipments and a 9.2% decrease in total miles driven, partially offset by a 2.9% increase in base revenue per loaded mile. Also contributing to the decrease was a 20 basis point increase in deadhead percentage.

During the six months ended June 30, 2017, Trucking operating revenue decreased 6.2% to $141.8 million, compared to $151.2 million for the same period of 2016. Trucking base revenue decreased 9.1% to $123.8 million, from $136.2 million for the same period in 2016. The decreases in operating revenue and base revenue were attributable to a 10.1% decrease in the average number of seated tractors, a 7.6% decrease in the number of Trucking shipments, a 50 basis point increase in deadhead percentage, and a slight decrease in base rate per loaded mile.

The freight market continued to be challenging in the first six months of 2017, though we began to see signs of improvement during the second quarter of 2017. During the first quarter of 2017, freight rates and volume were affected by weak demand and excess trucking capacity. During the second quarter, freight volume recovered slightly and on a year-over-year basis we saw rates begin to improve. While Trucking capacity is currently available in the market, the Company believes the upcoming changes in Trucking regulations should begin to tighten the capacity market in late 2017 and into 2018; however, in July 2017, the House Transportation Committee approved a bill that could have the effect of delaying or repealing the implementation of the rule requiring all carriers to use electronic logging devices (“ELDs”). Such a delay or repeal could affect the timing and extent to which capacity exits the market. During the second quarter, the Company embarked on a strategic review of our current customer base, lanes, pricing and network positions in order to improve rate per loaded mile. Moving forward, the Company expects year-over-year improvements in rate per mile when compared to those experienced during the latter half of 2016, and will continue to focus efforts on refining its network and improving the productivity of its assets.

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Trucking operating loss

Trucking generated an operating loss of $4.8 million in the second quarter of 2017 compared to an operating loss of $2.7 million for the same period in 2016, primarily resulting from a 9.1% decrease in average seated tractor count driving 9.4% fewer loaded miles, offset slightly by a 2.6% increase in base revenue per seated tractor per week.

For the six months ended June 30, 2017, Trucking generated an operating loss of $12.0 million, compared to an operating loss of $7.1 million in the 2016 period, primarily the result of a 8.5% decrease in total revenue miles, a 7.6% decrease in number of Trucking shipments, a 50 basis point increase in deadhead percentage, and a slight decrease in base rate per loaded mile.

USAT Logistics operating revenue

For the three months ended June 30, 2017, operating revenue for USAT Logistics increased 4.2% to $35.8 million from $34.4 million, for the same period in 2016. The increase was largely due to a 6.8% increase in revenue per order. The Company remains focused on gaining market share and improving gross margin within the USAT Logistics segment. The USAT Logistics de Mexico office in Celaya, Mexico became fully operational in the latter part of the second quarter and generated approximately $0.2 million in revenue for the quarter.

For the six months ended June 30, 2017, operating revenue decreased 3.0% to $67.2 million from $69.3 million, for the corresponding period in 2016, primarily resulting from a 3.1% decrease in load volumes.

USAT Logistics operating income

USAT Logistics operating income decreased $0.3 million to $1.9 million in the second quarter of 2017, or 13.8%, compared to $2.2 million in the second quarter of 2016. Decreased operating income was largely due to the decrease in gross margin percentage attributable to a more difficult logistics environment in the first half of 2017 that was the result of tighter capacity and associated higher costs to procure capacity for contracted logistics business.

For the six months ended June 30, 2017, operating income decreased 37.7% to $2.6 million from $4.2 million for the corresponding period in 2016, primarily resulting from compressed margins in the currently weak truckload brokerage market, which less effectively covered our costs.

Consolidated Operating Expenses

The following table summarizes the consolidated operating expenses (dollar amounts in thousands) 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,
	2017										2016										% Change
Operating Expenses:	$			% Operating Revenue			Adjusted Operating Ratio (1)				$			% Operating Revenue			Adjusted Operating Ratio (1)				2017 to 2016
Salaries, wages and employee benefits	$	29,221			27.2	%		30.3	%	(1)	$	30,627			27.9	%		30.1	%	(1)		(4.6	)%
Fuel and fuel taxes		10,479			9.8			(0.9	)	(2)		11,391			10.4			1.0		(2)		(8.0	)
Depreciation and amortization		6,879			6.4			7.2				7,599			6.9			7.6				(9.5	)
Insurance and claims		5,561			5.2			5.8				5,438			4.9			5.5				2.3
Equipment rent		2,633			2.5			2.7				1,861			1.7			1.9				41.5
Operations and maintenance		7,950			7.3			8.3				10,299			9.4			10.3				(22.8	)
Purchased transportation		41,005			38.2			42.7				38,030			34.6			38.2				7.8
Operating taxes and licenses		1,024			1.0			1.1				1,260			1.1			1.3				(18.7	)
Communications and utilities		598			0.6			0.6				851			0.8			0.9				(29.7	)
Gain on disposal of assets, net		(77	)		(0.1	)		(0.1	)			(182	)		(0.2	)		(0.2	)			(57.7	)
Other		5,051			4.6			5.3				3,271			3.0			3.3				54.4
Total operating expenses	$	110,324			102.8	%		103.0	%		$	110,445			100.5	%		99.9	%			(0.1	)%

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	Six Months Ended June 30,
	2017										2016										% Change
Operating Expenses:	$			% Operating Revenue			Adjusted Operating Ratio (1)				$			% Operating Revenue			Adjusted Operating Ratio (1)				2017 to 2016
Salaries, wages and employee benefits	$	59,860			28.6	%		31.7	%	(1)	$	63,201			28.7	%		31.0	%	(1)		(5.3	)%
Fuel and fuel taxes		21,253			10.2			(1.0	)	(2)		21,580			9.8			1.3		(2)		(1.5	)
Depreciation and amortization		14,523			6.9			7.8				14,871			6.7			7.4				(2.3	)
Insurance and claims		13,893			6.7			7.5				10,206			4.6			5.1				36.1
Equipment rent		4,747			2.3			2.6				3,722			1.7			1.8				27.5
Operations and maintenance		14,521			7.0			7.8				19,512			8.8			9.7				(25.6	)
Purchased transportation		78,408			37.5			42.2				74,432			33.8			36.9				5.3
Operating taxes and licenses		1,974			0.9			1.1				2,381			1.1			1.2				(17.1	)
Communications and utilities		1,264			0.6			0.7				1,731			0.8			0.9				(27.0	)
Gain on disposal of assets, net		(337	)		(0.2	)		(0.2	)			(578	)		(0.3	)		(0.3	)			(41.7	)
Restructuring, impairment and other costs		--			--			--				5,264			2.4			N/A				N/A
Other		8,287			4.0			4.4				7,104			3.2			3.5				16.7
Total operating expenses	$	218,393			104.5	%		104.6	%		$	223,426			101.3	%		98.5	%			(2.3	)%

(1)

The percent of base revenue calculation for operating expenses is calculated as operating expenses, net of fuel surcharges and other items, as a percent of operating revenue excluding fuel surcharge revenue. Other items in this presentation are the restructuring, impairment and other costs and severance costs included in salaries, wages and employee benefits. See note 12 of the footnotes in this Form 10-Q for additional information regarding the restructuring, impairment and other costs.

(2)	The percent of base revenue calculation for fuel and fuel surcharge expense is calculated as fuel and fuel taxes, net of fuel surcharge.

Salaries, wages and employee benefits

The decrease in salaries, wages and employee benefits expense during the second quarter of 2017, when compared to the same quarter in 2016, was primarily due to the 0.7% increase in the independent contractor fleet, for which payments are reflected in purchased transportation, combined with a 7.5% reduction in the Company-owned tractor fleet. As part of a reduction in force, headcount in both Trucking and USAT Logistics were reduced during the quarter as the Company continued to align the non-driving support staff with the number of seated tractors, which also contributed to the decrease in salaries, wages and employee benefits expense, and is expected to reduce annualized staff wages and employee benefits by approximately $1.6 million. The Company incurred $0.1 million, net-of-tax, in implementing the reduction in force.

For the six months ended June 30, 2017, the decrease in salaries, wages and employee benefits expense was primarily due to an 8.7% reduction in the Company’s tractor fleet and an increase of approximately 8% in the independent contractor fleet, partially offset by a $1.5 million cost recorded by the Company in the first quarter of 2017 associated with an adverse development of prior year layers of workers’ compensation claims.

The rate of compensation paid to Company drivers per mile has increased in recent periods and we expect this cost will increase in future periods due to driver pay increases, the most recent of which became effective April 4, 2017. Management believes that the market for drivers will remain tight, and as such, expects driver wages and hiring expenses, which include recruiting and advertising costs, 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 consist primarily of 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 decreases in fuel and fuel taxes for the three and six month periods ended June 30, 2017 resulted from a 9.2% and an 8.5% decrease in total revenue miles, respectively, and improved miles per gallon, offset by an 11.1% and a 17.1% increase in average diesel fuel prices per gallon, as reported by the DOE, compared to the three and six month periods in 2016, respectively. Fuel efficiency initiatives undertaken, such as trailer skirts, idle-control, more fuel-efficient engines and driver training programs, have contributed to improvements in our fuel expense on a cost per company tractor mile basis.

The Company expects to continue managing its idle time and truck speeds and partnering with customers to adjust fuel surcharge programs to recover a fair portion of rising fuel costs. Going forward, the Company’s net fuel expense is expected to fluctuate as a percentage of revenue based on factors such as diesel fuel prices, percentage recovered from fuel surcharge programs, deadhead percentage, the percentage of revenue generated from independent contractors and the success of fuel efficiency initiatives.

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Equipment rent and depreciation and amortization

Equipment rent expenses are those related to revenue equipment under operating leases. Depreciation and amortization of property and equipment consists primarily of depreciation for Company-owned tractors and trailers and amortization of those financed with capital leases. 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. 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. The increase in equipment rent expense during both the three and six month periods ended June 30, 2017 were the result of the Company entering into an operating sale leaseback transaction in March 2017 for 90 tractors and the increased use of operating leases for the acquisition of trailers. The decrease in depreciation and amortization expense in the three and six month periods ended June 30, 2017, as compared to the same periods in 2016, are primarily attributable to a smaller Company fleet and more equipment being acquired through lease arrangements instead of purchases.

The Company will continue to focus on improving asset utilization, matching customer demand and strengthening load profitability initiatives. Further, the acquisition costs of new revenue equipment could increase due to the continued implementation of emissions requirements, the inclusion of improved safety features, and improved fuel efficiency. As a result, management expects to see an increase in depreciation and amortization expense from new tractors. The Company expects equipment rent to increase as we anticipate utilizing operating leases for the purchase of the remaining trailers throughout the remainder of the year.

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 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 accruals, developments in prior-year claims and insurance premiums and self-insured amounts. Insurance and claims expense increased significantly during the six months ended June 30, 2017 due to a $3.0 million actuarial analysis adjustment stemming from adverse development in our prior year claim layers. The Company expects insurance and claims expense to continue to be volatile over the long-term. In addition, insurance carriers have raised premiums for many businesses, including those in the trucking industry, and the Company’s insurance and claims expense could increase if it has a similar experience at renewal or replacement, or the Company could find it necessary to raise its self-insured retention or decrease its aggregate coverage limits.

Operations and maintenance

Operations and maintenance expense consists primarily of vehicle repairs and maintenance, general and administrative expenses and other costs. Operating and maintenance expenses are primarily affected by the age of the Company-owned fleet of 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. Operations and maintenance expense for the three and six month periods ended June 30, 2017 decreased as a result of the smaller size of the revenue generating Company tractor fleet, which decreased approximately 8% and 9%, respectively, when compared to the same three and six month periods in 2016. Additionally, fewer outside repairs contributed to the year over year reduction on a cost per mile basis in operations and maintenance spend.

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, including fuel surcharge reimbursement paid to such parties. For the second quarter 2017, purchased transportation expense increased primarily due to a 0.7% increase in the size of the Company’s independent contractor fleet compared to the 2016 period.

For the six months ended June 30, 2017, the increase in purchased transportation expense was primarily due to the 7.9% growth in the size of the independent contractor fleet compared to the 2016 period, partially offset by the reduced freight volumes in USAT Logistics. Moving forward, the Company is continuing to pursue its objective of growing 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 expected regulatory changes. Increasing independent contractor capacity has shifted (and assuming all other factors remain equal, is expected to continue to shift), and growth of USAT Logistics will shift, expenses to the “Purchased transportation” line item with offsetting reductions in employee driver wages and related expenses, net fuel expense (as independent contractors generate fuel surcharge revenue, while the related cost of their fuel is included with their compensation in purchased transportation), maintenance and capital expenditures.

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Gain on disposal of assets, net

The decreases in gain on disposal of assets, net, during both the three and six month periods of 2017 reflect lower fleet reductions in the 2017 periods compared to the 2016 periods. During the 2016 periods, the Company reduced its fleet through the accelerated disposal of older, less efficient tractors and trailers.

Restructuring, impairment and other costs

See Note 12 to the condensed consolidated financial statements for discussion of restructuring, impairment and other costs.

Other expenses

The increases in other expenses are primarily due to a $1.3 million expense relating to new management hires during the second quarter of 2017 and a change in compensation structure for the board of directors resulting in a $0.3 million increase in expense during the quarter. To preserve shares under the Incentive Plan for incentive compensation to key employees, especially in light of the Company’s recent stock price that consumes more shares when granting awards, the board of directors elected to receive their customary annual equity award in cash and each director then used the net-tax proceeds to purchase shares in the open market.

Interest expense

For both the three and six months ended June 30, 2017, interest expense increased primarily due to increased interest rates on outstanding borrowings. See Note 7 to the condensed consolidated financial statements for further discussion of the Company’s Credit Facility.

Income tax expense

The Company’s effective tax rate was 29.6% and 33.0% for the three and six months ended June 30, 2017, respectively. The effective tax rate for the three and six months ended June 30, 2016, was 5.3% and 30.7% respectively. The Company’s effective tax rate, when compared to the federal statutory rate of 35%, is primarily due to state income taxes and certain non-deductible expenses including a per diem pay structure for 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 gross pay, before taxes. Per diem pay is partially nondeductible 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 nondeductible 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 is significant. Because the Company continued to incur losses during the three-month period ended June 30, 2017, the estimated provision calculation was updated to reflect the impact of the non-deductible expenses on the effective tax rate. This resulted in a reduction to the effective tax rate during the three months ended June 30, 2017. Due to the effect of the non-deductible per diem payments, the Company’s tax rate will fluctuate in future periods based on fluctuations in earnings and in the number of drivers who elect to participate in the per diem program.

Liquidity and Capital Resources

USA Truck’s business has required, and will continue to require, significant investments. In the Company’s Trucking segment, where investments are substantial, the primary investments are in new revenue equipment and to a lesser extent, in technology and working capital. In the Company’s USAT Logistics segment, where investments are modest, 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 capital and operating leases. Based on expected financial conditions, net capital expenditures, results of 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.

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Long-term debt, financing notes and capital leases decreased during the second quarter by $4.1 million from the first quarter to $127.8 million. As of June 30, 2017, the Company had outstanding $5.4 million in letters of credit and had approximately $42.2 million available to borrow under the Credit Facility. Net of cash, debt represented 71.4% of total capitalization. Fluctuations in the outstanding balance and related availability under the Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through other sources of financing, as well as the nature and timing of receipt of proceeds from disposals of property and equipment.

Cash Flows

	Six Months Ended June 30,
(in thousands)	2017			2016
Net cash provided by operating activities	$	9,462		$	15,396
Net cash provided by (used in) investing activities		17,368			(14,369	)
Net cash (used in) provided by financing activities		(26,786	)		8

Operating Activities – Cash generated from operations decreased by $5.9 million in the first six months of 2017, compared to the same period in 2016. The decrease in cash provided by operating activities was primarily due to decreased operating revenues, partially offset by improved collection procedures.

Investing Activities – For the six months ended June 30, 2017, net cash provided by investing activities was $17.4 million, compared to $14.4 million used by investing activities during the same period in 2016. The $31.7 million increase in cash provided by investing activities primarily reflects $11.0 million in proceeds from an operating sale leaseback transaction that was completed in March 2017 for 90 tractors which the Company owned, and a $23.6 million decrease in capital expenditures, offset by a $2.8 million decrease in proceeds from the sale of property and equipment.

Financing Activities – Cash used in financing activities was $26.8 million for the first six months of 2017, compared to zero during the same period in 2016. The increase in cash used was primarily attributable to an $11.4 million increase in payments on long-term debt combined with a $34.4 million reduction in borrowing under the Credit Facility. At June 30, 2017, the Company had borrowings of long-term debt, financing notes and capital leases of $127.8 million, down from $131.9 million at March 31, 2017.

Debt and Capitalized Lease Obligations

See Notes 7 and 8 to the condensed consolidated financial statements for further discussion of the revolving Credit Facility and capital lease obligations.

Off-Balance Sheet Arrangements

Operating leases have been an important source of financing for equipment used in operations, office equipment and certain facilities. As of June 30, 2017, the Company leased certain revenue equipment, facilities and information technology software under operating leases. Assets held under operating leases are not carried on the condensed consolidated balance sheets, and lease payments with regard to such assets are reflected in the condensed consolidated statements of operations and comprehensive loss in the “Equipment rent” and, for office equipment, in the “Operations and maintenance” line items. Equipment rent expense related to the Company’s revenue equipment operating leases was $2.6 million and $1.9 million for the three months ended June 30, 2017, and 2016, respectively. Rent expense related to the Company’s revenue equipment operating leases was $4.7 million and $3.7 million for the six months ended June 30, 2017, and 2016, respectively.

Rent expense related to the other equipment and facilities leases was $0.4 million and $0.5 million for the three months ended June 30, 2017, and 2016, respectively. Rent expense related to the other equipment and facilities leases was $0.8 million and $0.8 million for the six months ended June 30, 2017, and 2016, respectively. Other than such operating leases, the Company has no other off-balance sheet arrangements that have or are reasonably likely to have a material effect on the condensed consolidated financial statements.

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The following table represents outstanding contractual obligations for rent expense under operating leases as of June 30, 2017 (in thousands):

	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Facilities	$	1,409	$	410	$	596	$	237	$	166
Computer hardware rented		235		235		--		--		--
Revenue equipment		28,949		10,661		16,160		1,802		326
Total rental obligations	$	30,593	$	11,306	$	16,756	$	2,039	$	492

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. 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 weather 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.

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. The effect of inflation-driven cost increases on overall operating costs is not expected to be greater for the Company than for its competitors.

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. The Company 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 able to fully recover increases in fuel prices through rate increases and fuel surcharges, primarily because those items do not provide any benefit 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, average diesel fuel prices per gallon, as reported by the DOE, increased 11.1% and 17.1% for the three and six months ended June 30, 2017 compared to the prior year periods.

As of June 30, 2017, the Company did not have any long-term fuel purchase contracts, and has not entered into any fuel hedging arrangements.

Equity

As of June 30, 2017, the Company had stockholders’ equity of $51.0 million and total debt and capital leases including current maturities, of $127.8 million, resulting in a total debt, less cash, to total capitalization ratio of 71.4% compared to 72.2% as of December 31, 2016.

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, 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, 2017, the Company had $8.6 million in commitments for the acquisition of revenue and non-revenue equipment, none of which are cancellable.

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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 condensed consolidated financial statements are prepared. Actual results could differ from those estimates, and such differences could be material. During the six months ended June 30, 2017, there were no material changes to the Company’s critical accounting policies and estimates, compared to those disclosed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company experiences various market risks, including changes in interest rates and commodity prices. Because the Company’s operations are largely confined to the U.S., the Company is not subject to a material amount of foreign currency risk.

Interest Rate Risk. The Company is exposed to interest rate risk primarily from its Credit Facility. The Company’s Credit Facility bears variable interest based on the type of borrowing and on the Agent’s prime rate or the LIBOR plus a certain percentage determined based on a pricing grid dependent upon certain financial ratios. As of June 30, 2017, the Company had $80.2 million outstanding pursuant to its Credit Facility, excluding letters of credit of $5.4 million. Assuming the outstanding balance as of June 30, 2017 remained constant, a hypothetical one-percentage point increase in interest rates applicable to its Credit Facility would increase the Company’s interest expense over a one-year period by approximately $0.8 million.

Commodity Price Risk. The Company is subject to commodity price risk with respect to purchases of fuel. In recent years, fuel prices have fluctuated greatly and have generally increased. In some periods, the Company’s operating performance was adversely affected because it was not able to fully offset the impact of higher diesel fuel prices through increased freight rates and fuel surcharge revenue recoveries. Management cannot predict how fuel price levels will continue to fluctuate in the future or the extent to which fuel surcharge revenue recoveries could be collected to offset any increases. As of June 30, 2017, the Company did not have any derivative financial instruments to reduce its exposure to fuel price fluctuations, but may use such instruments in the future. Accordingly, volatile fuel prices may continue to impact the Company significantly. A significant increase in fuel costs, or a shortage of diesel fuel, could materially and adversely affect the Company’s results of operations. Further, higher fuel costs could contribute to driver shortages in the trucking industry generally by forcing independent contractors to cease operations. Based on the Company’s expected fuel consumption for the remainder of 2017, a 10% increase in the average price per gallon would result in a $2.1 million increase in fuel expense before taking into account application of the Company’s fuel surcharge program.

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, as of June 30, 2017 the PEO and PFO have concluded that the Company’s disclosure controls and procedures are 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 Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to management, including the PEO and PFO, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2017, 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, does not expect that the Company’s disclosure procedures and controls and its internal controls will 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.

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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 or results of operations 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, 2016, describes some of the risks and uncertainties associated with the business. In addition, in July 2017, the House Transportation Committee approved a bill that could have the effect of delaying or repealing the implementation of the rule requiring all carriers to use ELDs, and could materially affect our business and results of operations if capacity exits the market later than expected or does not tighten as anticipated. 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 Number			Exhibit
3.1			Restated and Amended Certificate of Incorporation of the Company as currently in effect, including all Certificates of Amendment thereto (incorporated by reference to Exhibit 3.1 to the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2013).
3.2			Amended and Restated Bylaws of the Company as currently in effect (incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 24, 2017).
4.1			Specimen certificate evidencing shares of the common stock, $.01 par value, of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-1, Registration No. 33-45682, filed with the Securities and Exchange Commission on February 13, 1992).
10.1			First Amendment to USA Truck, Inc. 2014 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Company’s Amended and Restated Schedule 14A filed on April 7, 2017)
10.2	*#		Employment Letter between the Company and Jason R. Bates
10.3	*#		Executive Severance and Change in Control Agreement between the Company and Jason R. Bates, dated April 18, 2017
10.4	*#		Employment Letter between the Company and Johannes P. Hugo
10.5	*#		Executive Severance and Change in Control Agreement between the Company and Johannes P. Hugo, dated June 5, 2017
31.1	#		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	#		Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	##		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	##		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document.
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.

References:
*		Management contract or compensatory plan, contract or arrangement.
#		Filed herewith.
##		Furnished herewith.

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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.
			(Registrant)


Date:	August 3, 2017	By:	/s/ James D. Reed
			(Signature) James D. Reed
			President and Chief Executive Officer




Date:	August 3, 2017	By:	/s/ Jason R. Bates
			(Signature) Jason R. Bates
			Executive Vice President and Chief Financial Officer

EXHIBIT 10.2

April 18, 2017

Mr. Jason Bates

357 N Cloverfield Circle

Litchfield Park, AZ 85340

Dear Jason,

We are pleased to have you serve in the position of Executive Vice President and Chief Financial Officer of USA Truck, Inc. (the "Company"). The following outlines the terms of employment, but does not constitute a contract of employment or a guarantee of employment. This offer is subject to final approval by the Company's Board of Directors.

Compensation

	•	Your annual base salary will be $300,000, which will be paid in monthly installments on the last business day of each month of employment in the amount of $25,000.00

	•	You will participate in the established Company Management Bonus Plan, beginning in 2017. For 2017, you will be entitled to:

•

A target cash bonus of 60% of your base salary for 2017 with a maximum attainment level of 150% of the bonus target, depending upon actual performance relative to goals determined by the Executive Compensation Committee of the Company’s Board of Directors (the “Committee”). This bonus will be prorated from your start date for the remainder of 2017;

•

STIP (short term incentive plan) – An equity grant of restricted shares of the Company’s common stock equal to up to 30% (with a target of 18%) of your prorated base salary for 2017. The restricted shares awarded will be at target and based upon your prorated annualized base salary and the closing price of the Company’s common stock on the award date, with the opportunity for additional restricted shares to be earned up to maximum. Vesting of this award depends upon performance relative to goals established by the Committee, and is subject to additional time vesting. The Committee will determine whether such performance goals have been achieved in early 2018 following receipt of the Company’s fiscal year 2017 audited financial results, at which time some or all of the restrictive shares may be forfeited if the performance goals are partially achieved or not achieved, or additional restricted shares may be granted if the performance goals are achieved above the target level. The non-forfeited restricted shares will then vest 25% per annum, subject to continued employment and certain other forfeiture provisions. For example, if the Committee determines on January 31, 2018 that the performance goals for 2017 have been achieved at the target level, none of the restricted shares granted would be forfeited, 25% of the restricted shares will vest on the first anniversary of your start date, and the remaining restricted shares will vest in annual installments of 25% each, commencing January 31, 2019.

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•

With respect to the STIP award, upon the occurrence of a Payment Trigger described in subparagraph (ii) of Paragraph (L) of Section 1 of Exhibit A hereto, (i) if the Payment Trigger occurs prior to the date results are certified, then 75% of the target amount will vest on the Payment Trigger and the remainder will be automatically forfeited, and (ii) if the Payment Trigger occurs after the date results are certified, any unvested (and non-forfeited) portion will immediately vest in full on the Payment Trigger.

●

LTIP (long term incentive plan) – You will be eligible to participate in the Company’s LTIP plan, whereby you will be eligible to receive a performance based equity grant or an equivalently valued award settled in cash, as determined by the Company, equivalent to a target amount of 60% of your base salary, up to a maximum grant equivalent to 100% of your base salary, based upon the attainment of certain Company objectives during the applicable performance period, as prescribed and approved by the Committee. Such grant will be based upon the closing price of the Company’s common stock on the award date. Full details related to any said grant, including but not limited to specific Company objectives, vesting criteria, and the duration of the performance period will be more fully described in the award agreement relating to such grant.

●

With respect to the LTIP award, you will have the same vesting as other senior executives upon the occurrence of such Payment Trigger.

●

You will receive a cash bonus of $250,000, payable in two (2) equal installments - $125,000 of which will be payable promptly following your start date and the remaining $125,000 of said bonus will be payable on October 31, 2017, provided you and your family have established full time residency and completed your permanent relocation to the Van Buren/Fort Smith, Arkansas, area and you are continuously employed by the Company through October 31, 2017. Notwithstanding the foregoing, failure to complete your and your family’s permanent relocation to the Van Buren/Fort Smith, Arkansas area on or before October 31, 2017, or your failure to be continuously employed by the Company through such date will result in complete forfeiture of your rights to both installments of this bonus and will require an immediate repayment in full of the initial installment. Additionally, this bonus is contingent on continuous full time employment with the Company for at least 24 months following your start date. If your employment is terminated by the Company with Cause, or voluntarily by you, at any time after October 31, 2017 and prior to the expiration of 24 months from your start date, you shall repay the $250,000 cash bonus on a pro-rated basis in relation to the portion of such 24 month period during which you are actually employed by the Company.

●

You will receive an additional bonus of $100,000, payable as either an equity grant equivalent to $100,000 worth of restricted shares based on the closing price of the Company’s common stock on your start date with the Company, or as cash as calculated below, as determined by the Company. If paid in cash, such cash payments will be made in two (2) installments on the following dates, subject to your continuous employment with the Company through each date: (1) first anniversary of your start date with the Company; (2) second anniversary of your start date with the Company, with the amount of cash to be paid on each date calculated by converting $50,000 to shares of USAK stock based on the closing price of the USAK stock on your start date with the Company (rounded consistent with Company practice), and paying the cash equivalent of that share amount, based on the trading price of USAK stock on the payment date. For example, if the closing price of USAK the day prior to your start date is $7.50 the converted share amount would be 6,666 based upon the Company's rounding practice. If the USAK stock price in your first anniversary date is $10.00, you would receive a cash bonus payment of $66,660 ($10.00 per share x 6,666 shares). The same calculation would apply on your second anniversary (adjusted for the share price at that time). If paid in equity, any restricted shares granted will vest in two (2) equal annual installments with the first installment vesting on the first anniversary of your start date with the Company and the second installment vesting on the second anniversary of your start date with the Company, subject to your continuous employment with the Company as of each vesting date.

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	•	You may be required to serve as an officer and/or director of one or more subsidiaries of the Company, for which you will receive no additional compensation.

	•	Your position with the Company requires that you establish full-time residency in the Van Buren/Ft. Smith, Arkansas, area for you and your family. To assist with your interim residency and timely relocation, you will receive a reimbursement allowance for reasonable transitional housing expenses, including meals and travel expenses (flights or mileage) and temporary housing for rental property through July 31, 2017. The aforementioned expense reimbursement allowance related to flights will include one basic coach-class airfare ticket paid for by the Company every two (2) weeks until July 31, 2017. Any mileage reimbursement(s) will be at the Company’s standard rate(s), in accordance with its standard reimbursement policies.

		In addition, you will receive a one-time net payment of $60,000 as a relocation bonus payable by the Company once you have scheduled your and your family’s permanent relocation to the Van Buren/Ft. Smith, Arkansas area, and you agree that full-time residency and permanent relocation of you and your family will be completed on or before October 31, 2017. In the event said relocation is not completed on or before October 31, 2017, you agree that you will not be eligible to receive said relocation bonus and must repay any amount(s) related to this relocation bonus to the Company. Once you have established full-time residency and permanent relocation in the Ft. Smith/Van Buren, Arkansas, area of you and your family, you will also receive a one-time net payment equal to the customary realtor commissions payable upon the sale of your current home in Arizona.

	•	You will be provided a laptop and smart phone at the Company's expense.

•

The Company will also pay you the net amount for 90 days of COBRA coverage to assist you in continual coverage of your current healthcare plan during the mandatory waiting period.

•

All payments provided for hereunder will be subject to required withholding of federal, state and local income, excise, and employment-related taxes.

Benefits

•

You will receive four (4) weeks paid vacation per year.

•

You are eligible for, and may participate in, the Company's 401(k) Plan subject to Company policies and the terms of that plan as in effect from time to time.

•

You are eligible for, and may participate in, the Company's Employee Stock Purchase Plan subject to Company policies and the terms of that plan as in effect from time to time.

•

The Company is currently a sponsor of the Arkansas Best Federal Credit Union and you may be eligible to participate in programs made available to the Company's employees.

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•

You are eligible for, and may participate in, the Company's Medical, Dental and Vision and Prescription Drug plans subject to Company policies and the terms of those plans as in effect from time to time.

•

You will receive $1,000 per year to be applied towards premium payments on a supplemental term life insurance or you may choose to receive it as wages in your monthly payroll check (at the rate of $83.33 per month).

Confidential Information or Trade Secrets

You will observe all rules, regulations, and security requirements of the Company concerning the safety of persons and property. You agree that you will comply with the Company's employee handbook, Code of Business Conduct and Ethics Policy, the Open Door Policy, the Whistleblower Policy, the Stock Ownership and Anti-Hedging and Pledging Policy, the Clawback Policy, and any other policies of the Company as they relate to employees, officers, or directors of the Company.

Executive Severance and Change in Control Agreement

You and the Company will enter into an Executive Severance and Change in Control Agreement in the form of Exhibit A attached hereto and incorporated by reference herein.

This letter does not create an express or implied contract of employment or any other contractual commitment. This letter contains the complete, final, and exclusive embodiment of the understanding between you and the Company regarding the terms of your employment and supersedes in all respects any prior or other agreement or understanding, written or oral, between you and the Company with respect to the subject matter of this letter. Your employment relationship with the Company is on an at-will basis, which means that either you or the Company may terminate the employment relationship at any time for any reason or no reason, consistent with applicable law. Notwithstanding the terms of this letter, the Company shall have the right change its compensation, welfare, benefit, incentive, and employment plans, policies, and terms from time to time in its sole discretion.

You represent and warrant that your signing of this letter and the performance of your obligations under it (including, without limitation, your employment with the Company and your performance of services for the Company) will not breach or be in conflict with any covenant not to compete and/or similar obligations by which you are or may be bound. You also agree that you will not disclose to or use on behalf of the Company any proprietary information of another person or entity without that person's or entity's consent.

We look forward to you joining USA Truck, Inc., and ask that you acknowledge your acceptance of the terms of this letter by signing below and faxing or emailing the signed letter to my attention.

Sincerely,

/s/ James D. Reed

James D. Reed

President and Chief Executive Officer

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	Agreed and Accepted



	/s/ Jason R. Bates
	Jason R. Bates



	04/18/2017
	Date

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Exhibit A

[Executive Severance and Change In Control Agreement Attached]

Page 6 of 6

EXHIBIT 10.3

EXECUTIVE SEVERANCE AND CHANGE IN CONTROL AGREEMENT

This Executive Severance and Change in Control Agreement (this “Agreement”), dated as of April 18, 2017, is made by and between USA Truck, Inc., a Delaware corporation (as hereinafter defined, the “Company”), and Jason Bates, Executive Vice President and Chief Financial Officer of the Company (as hereinafter defined, the “Executive”).

WHEREAS, the Company and the Executive have entered into that Employment Letter Agreement by and between the Company and the Executive dated April 18, 2017, (the "Employment Letter Agreement"); and

WHEREAS, the Company and the Executive desire to set forth the circumstances under which the Executive may receive payments under this Agreement.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

1.	Defined Terms.

For purposes of this Agreement, the following terms shall have the meanings indicated below:

(A) “Board” shall mean the Board of Directors of the Company, as constituted from time to time.

(B) “Cause” for termination by the Company of the Executive's employment shall mean (i) failure by the Executive to perform the essential functions of the Executive’s position with the Company, other than any failure resulting from the Executive's incapacity due to physical or mental disability; (ii) failure to comply with any lawful directive by the Board; (iii) a material violation by the Executive of the corporate governance guidelines, code of ethics, insider trading policy, governance policy, or other policy of the Company; (iv) a breach of any fiduciary duty to Company; (v) misconduct in the course and scope of employment by the Executive that is injurious to the Company, from a monetary or reputational standpoint; (vi) any attempt to willfully obtain any personal profit from any transaction which is adverse to the interests of the Company or any of its subsidiaries and in which the Company or any of its subsidiaries has an interest or any other act of fraud or embezzlement against the Company, any of its subsidiaries or any of its customers or suppliers; (vii) a breach by the Executive of any of the covenants contained in Sections 14, 15, and 16 of this Agreement; (viii) the repeated use of alcohol by the Executive that interferes with the Executive's duties, the use of illegal drugs by the Executive, or a violation by the Executive of the drug and/or alcohol policies of the Company; (ix) violation of any applicable law, rule or regulation, including without limitation the Sarbanes-Oxley Act of 2002 or other federal or state securities law, rule, or regulation; or (x) the conviction or plea of guilty or nolo contendere to a felony or a misdemeanor involving moral turpitude. With respect to subsections (i), (ii) and (iii) above, the Executive shall be notified in writing (including via email) of any alleged failure, breach or violation, such notice shall specify in reasonable detail the facts and circumstances claimed to constitute Cause under subsections (i), (ii) or (iii) as applicable and the Executive shall be given at least fifteen (15) calendar days to remedy or cure any failure, breach or violation. For purposes of this definition following a Change in Control, the Board’s determination of “Cause” must be made in good faith.

(i) Any “Person” as defined in Section 3(a)(9) of the Exchange Act, and as used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act (but excluding the Company and any employee benefit plan sponsored or maintained by the Company (including any trustee of such plan acting as trustee)), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities (other than indirectly as a result of the Company’s redemption of its own securities); or

(ii) The consummation of any merger or other business combination of the Company, a sale of more than 50% of the Company’s assets, the liquidation or dissolution of the Company or any combination of one or more of the foregoing transactions (the “Transactions”) other than a Transaction immediately following which either (x) the stockholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own more than 50% of the voting power, directly or indirectly, of (A) the surviving corporation in any such merger or other business combination; (B) the purchaser of or successor to the Company’s assets; (C) both the surviving corporation and the purchaser in the event of any combination of Transactions; or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be ((A), (B), (C) or (D), as applicable, the “Surviving Entity”) or (y) the Incumbent Directors, as defined below, shall continue to serve as a majority of the board of directors of the Surviving Entity without an agreement or understanding that such Incumbent Directors will later surrender such majority; or

(iii) Within any twenty-four (24)-month period, the individuals who were directors immediately before the beginning of such period (the “Incumbent Directors”) shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to the Company, including any Surviving Entity. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of, or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a Person who commenced or threatened to commence an election contest or proxy solicitation by or on behalf of a Person (other than the Board) or who has entered into an agreement to effect a Change in Control or expressed an intention to cause such a Change in Control).

(D) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(E) “Company” shall mean USA Truck, Inc. and any successor to its business or assets, by operation of law or otherwise.

(F) “Constructive Termination” shall mean the occurrence of any of the following, without the Executive’s express written consent, at any time within twelve (12) months following a Change in Control:

(i) material diminution in the overall scope of the Executive’s duties, authorities and responsibilities from those held by the Executive immediately prior to the time of a Change in Control;

(ii) geographic relocation of the Executive’s assigned principal business location to a location greater than forty (40) miles from the place of the Executive’s principal business location immediately prior to the time of a Change in Control; or

(iii) diminution by ten percent (10%) or more of the Executive’s annual base salary or target bonus in effect immediately prior to the time of a Change in Control.

(G) “Date of Termination” shall have the meaning stated in Paragraph (B) of Section 5 hereof.

(H) “Disability” shall mean a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Executive to be unable to perform the duties of his or her position of employment or any substantially similar position of employment.

(I) “Executive” shall mean the individual named in the first paragraph of this Agreement.

(J) “Incumbent Directors” shall mean directors who were directors of the Company as of the date hereof or who are appointed, elected or nominated to the Board in accordance with the following sentence. It is understood that any individual becoming a member of the Board subsequent to the date hereof whose appointment was approved by a vote of at least a two-thirds majority of the Continuing Directors remaining in office at the time of appointment or whose election or nomination for election by the Company’s stockholders was approved by a vote of at least a two-thirds majority of the Continuing Directors remaining in office at the time of election or nomination shall be considered, for purposes of this Agreement, as though such individual were a Continuing Director on the date hereof.

(K) “Notice of Termination” shall have the meaning stated in Paragraph (A) of Section 5 hereof.

(L) “Payment Trigger” shall mean any of the following that occurs during the term of this Agreement:

(i) termination of the Executive’s employment by the Company without Cause, at any time other than within twelve (12) months following a Change in Control, and other than as a result of the Executive’s Disability; or

(ii) Constructive Termination of the Executive while the Executive remains employed by the Company or its successor, or termination of the Executive’s employment by the Company without Cause within twelve (12) months following a Change in Control occurring during the term of this Agreement.

For the avoidance of doubt, a termination of the Executive by the Company for Disability shall not be deemed a termination of the Executive without Cause.

(M) “Person” shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to time, as modified and used in Sections 13(d) and 14(d) thereof; except that, a Person shall not include (i) the Company, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or (iii) an underwriter temporarily holding securities pursuant to an offering of such securities.

2.	Term of Agreement.

This Agreement shall be effective as of the date set forth in the first paragraph of this Agreement and shall continue in effect until the Date of Termination or the death of the Executive; provided, that all covenants (including, without limitation, the covenants of the Executive contained in Sections 14, 15, and 16 of this Agreement and the covenants of the Company following a Payment Trigger) shall survive in accordance with their terms.

3.	General Provisions.

(A) The Company hereby represents and warrants to the Executive that the execution and delivery of this Agreement and the performance by the Company of the actions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company. This Agreement is a legal, valid and legally binding obligation of the Company enforceable in accordance with its terms.

(B) No amount or benefit shall be payable under this Agreement unless there shall have occurred a Payment Trigger during the term of this Agreement.

(C) This Agreement and the Employment Letter Agreement shall not be construed as creating an express or implied contract of employment and, except as otherwise agreed in writing between the Executive and the Company, the Executive shall not have any right to be retained in the employ of the Company. Notwithstanding the immediately preceding sentence or any other provision of this Agreement, any purported termination of the Executive’s employment that is not effected in accordance with a Notice of Termination satisfying Paragraph (A) of Section 5 shall not be effective for purposes of this Agreement. The Executive’s continued employment for any period of time after a Payment Trigger, up to the maximum time specified in Paragraph (B) of Section 5, shall not constitute a waiver of the Executive’s rights with respect to any payment obligations of the Company under this Agreement. The waiver by the Executive of any particular event meeting the definition of or constituting a Constructive Termination shall not operate as a waiver by the Executive of any benefits or rights under this Agreement should any subsequent event or circumstance occur that constitutes a Constructive Termination under this Agreement.

4.	Payments Due Upon a Payment Trigger.

(A) The Company shall pay to the Executive the payments described in this Section 4 upon the occurrence of a Payment Trigger during the term of this Agreement.

(B) (i) Upon the occurrence of a Payment Trigger during the term of this Agreement arising by reason of the circumstances described in subparagraph (i) of Paragraph (L) of Section 1:

(a) the Company shall pay the Executive monthly payments, in cash, equal to one-twelfth (1/12) of the Executive's annual base salary in effect immediately prior to the Date of Termination, on or as near as practicable to the same date in each month as monthly installments (each of which shall be considered a separate "payment" for purposes of Code Section 409A, as defined in Section 23) of the annual base salary were made to the Executive prior to the Date of Termination, for a period of twelve (12) months following the Date of Termination or such lesser number of months Executive is employed by the Company (pro-rated for partial months);

(b) the Company shall pay to the Executive a lump sum amount, in cash, if and to the extent earned, under any short term cash incentive compensation plan for the fiscal year in which the Date of Termination occurs, which plan has been adopted by the Executive Compensation Committee of the Board prior to the Date of Termination, pro-rated for the number of days Executive was employed by the Company in the applicable fiscal year through the Date of Termination, and payable at the time and on the same basis as paid to recipients still employed by the Company; and

(c) the Company shall pay the Executive any other amounts (other than any payment of short term cash incentive compensation described in Section 4(B)(i)(b) above or Section 4(C) below) that may be due to the Executive under any employee welfare, benefit, vacation, equity, or long term incentive plan then in effect to the extent the Executive is an eligible participant, subject to and upon the terms and conditions set forth in any such plan.

(ii) Upon the occurrence of a Payment Trigger during the term of this Agreement arising by reason of the circumstances described in subparagraph (ii) of Paragraph (L) of Section 1:

(a) the Company shall pay the Executive a lump sum payment, in cash, equal to the sum of one hundred fifty percent (150%) of the Executive's annual base salary in effect immediately prior to the Date of Termination, provided that if the Change in Control does not constitute a change in control event as defined in Code Section 409A, then the portion of the lump sum payment, if any, that is considered deferred compensation subject to Code Section 409A shall be paid in installments as described in Section 4(B)(i)(a);

(b) to the extent the Executive has established full time residency in the Van Buren/Ft. Smith, Arkansas, area for Executive and his family, the Company shall pay to the Executive a lump sum payment, in cash, equal to the amount set forth on the signature page to this Agreement (if any) and identified as relocation services benefit, to defray the Executive's costs of relocation services;

(c) the Company shall pay to the Executive a lump sum amount, in cash, equal to one hundred fifty percent (150%) of the target amount of any short term incentive cash compensation plan for the fiscal year in which the Date of Termination occurs, which plan has been adopted by the Executive Compensation Committee of the Board prior to the Date of Termination, that would have been paid to the Executive for the fiscal year in which the Date of Termination occurs, assuming all performance and other vesting criteria were satisfied for such year; provided, that if no short term cash incentive cash compensation plan has been adopted for the fiscal year in which the Date of Termination occurs, such target amount will be equal to the Executive’s target amount under the short term incentive cash compensation plan adopted by the Executive Compensation Committee of the Board for the fiscal year immediately preceding the fiscal year in which the Date of Termination occurs;

(d) the Company shall reimburse, on an after-tax basis, any premiums paid by the Executive pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), during a period of eighteen (18) months following the Date of Termination; and

(e) the Company shall pay the Executive any other amounts (other than any payment of short term cash incentive compensation described in Section 4(B)(ii)(c) or Section 4(C)) that may be due the Executive under any employee welfare, benefit, vacation, equity, or long term incentive plan then in effect to the extent the Executive is an eligible participant, subject to and upon the terms and conditions set forth in any such plan.

(C) Notwithstanding any provision of any incentive compensation plan adopted by the Executive Compensation Committee of the Board prior to the Date of Termination, and in addition to any payments under Paragraph (B) hereof, the Company shall pay to the Executive a lump sum amount, in cash, equal to the amount of any cash incentive compensation that has been awarded to and earned by the Executive under any cash incentive compensation plan adopted by the Executive Compensation Committee of the Board for a completed fiscal year preceding the occurrence of the Date of Termination but that has not yet been paid to the Executive.

(D) The payments provided for in subparagraph (ii)(a) of Paragraph (B) and, if applicable and due upon the occurrence of a Payment Trigger during the term of this Agreement by reason of the circumstances described in subparagraph (ii) of Paragraph (L) of Section 1, Paragraph (C) of this Section 4 shall be made within a reasonable time following the expiration of the applicable waiting periods following execution and delivery of the General Release (as hereinafter defined).

(E) As a condition to the receipt of the severance and other payment benefits described in this Agreement, the Executive shall execute and comply with the terms of a general release of all claims (the “General Release”) against the Company, its affiliates and representatives, in the form attached hereto as Exhibit A, as updated by the Company for any change in laws. The General Release must be signed, and the period provided therein for revocation must have expired, not later than sixty days from the Date of Termination. Notwithstanding anything to the contrary contained herein, no severance benefits or other payments required under this Agreement shall be paid until the General Release is signed and the revocation period has expired, and any amounts that would otherwise have been paid prior to such date shall be paid within a reasonable time after such date, without interest. Notwithstanding the foregoing, if the sixty-day period after the Date of Termination ends in the calendar year following the year that includes the Date of Termination, no such amount that is subject to Code Section 409A shall be paid sooner than the first day of the year following the year that includes the Date of Termination, regardless of when the General Release is signed.

5.	Termination Procedures.

(A) During the term of this Agreement, any purported termination of the Executive’s employment (other than by reason of death) shall be communicated by a Notice of Termination from one party hereto to the other party hereto in accordance with this Section 5(A). For purposes of this Agreement, a “Notice of Termination” shall mean, (i) in the case of a termination of the Executive’s employment by the Company without Cause, a written notice of termination, (ii) in the case of a termination of the Executive’s employment by the Company for Cause, a written notice of termination, which will indicate the conduct set forth in the definition of Cause in Paragraph (B) of Section 1 that the Executive was found to have violated, and (iii) in the case of the Executive terminating his or her employment with the Company, a written or verbal notice of termination; provided, that a Notice of Termination by the Executive in the case of a Constructive Termination shall specify in reasonable detail the event or circumstance constituting the Constructive Termination under Paragraph (F) of Section 1 of this Agreement, and such notice of Constructive Termination must be provided by the Executive to the Company within sixty (60) days of the initial existence of the condition giving rise to the Constructive Termination. Notwithstanding anything to the contrary contained herein, if the Executive engages in conduct that is reasonably believed to be imminently harmful to the Company, the Company may terminate the Executive’s employment by giving the Executive a verbal Notice of Termination, which may be effective immediately, and which shall be effective for purposes of this Agreement.

(B) "For purposes of this Agreement, a "Notice of Termination" shall mean a written or verbal notice of termination in accordance with Paragraph (A) of Section 5. In the case of a Notice of Termination for Cause, the Notice of Termination will indicate the conduct set forth in the definition of Cause in Paragraph (B) of Section 1 that the Executive was found to have violated."

(C) “Date of Termination” with respect to any purported termination of the Executive’s employment during the term of this Agreement (other than by reason of death) shall mean:

(i) if the Executive’s employment is terminated by the Company for Disability, thirty (30) days after Notice of Termination is given (provided that the Executive shall not have returned to the full-time performance of the Executive’s duties during that thirty (30) day period);

(ii) if the Executive's employment is terminated by the Company for any other reason except in the case of a termination for Cause, the date specified in the Notice of Termination;

(iii) if the Executive’s employment is terminated by the Company for Cause, the date specified in the Notice of Termination; and

(iv) in the case of termination by the Executive (including a Constructive Termination following a Change in Control), thirty (30) days after the date such Notice of Termination is given; provided, in the case of a Constructive Termination, the Notice of Termination contemplated by Paragraph (A) of this Section 5 shall be deemed cancelled, void and of no further force and effect, and no payment obligation of the Company shall arise therefrom, if the Company rescinds or otherwise eliminates or reverses the action or event that would otherwise constitute grounds for Constructive Termination, and so notifies the Executive in writing within thirty (30) days of its receipt of the notice of Constructive Termination. The rescission, elimination or reversal of any such action or event constituting a Constructive Termination shall not operate to release or discharge the Company from any other liability or obligation under this Agreement, including any liability or obligation arising from any subsequent action or event that constitutes a Constructive Termination.

6.	No Mitigation; No Setoff.

The Executive shall not be required to mitigate the amount of any benefits the Company becomes obligated to provide to the Executive in connection with this Agreement by seeking other employment or otherwise. The benefits to be provided to the Executive in connection with this Agreement may not be reduced, setoff or subject to recovery by the Company by any benefits the Executive may receive from other employment, from retirement benefits or otherwise. Further, the amount of any payment or benefit provided for in this Agreement shall not be setoff against any amount claimed to be owed by the Executive to the Company, or otherwise, except for a violation of Section 14, 15, or 16.

7.	Disputes.

(A) If a dispute or controversy arises out of or in connection with this Agreement, the parties shall first attempt in good faith to settle the dispute or controversy by mediation under the Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration or litigation. Thereafter, any remaining unresolved dispute or controversy arising out of or in connection with this Agreement may be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association in a city located within Crawford County, Arkansas. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Executive shall, however, be entitled to seek specific performance of the Company’s obligations hereunder during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall be entitled, in addition to any other rights it may have, to obtain injunctive relief to restrain any breach or threatened breach of, or to otherwise seek specific performance of the Executive's obligations under, any of the covenants contained in Section 14, 15, or 16 of this Agreement during the pendency of any dispute or controversy arising under or in connection with this Agreement, and the Company shall not be obligated to post bond or other security in seeking such relief.

(B) Any legal action concerning this Agreement, other than a mediation or an arbitration described in Paragraph (A) of this Section 7, whether instituted by the Company or the Executive, shall be brought and resolved only in a state or federal court of competent jurisdiction located in Crawford County, Arkansas or the Fort Smith Division of the Western District of Arkansas. The parties hereby irrevocably consent and submit to and shall take any action necessary to subject themselves to the personal jurisdiction of any such court and hereby irrevocably agree that all claims in respect of the action shall be instituted, heard, and determined in such court. The parties agree that such court is a convenient forum, and hereby irrevocably waive, to the fullest extent they may effectively do so, the defense of an inconvenient forum to the maintenance of the action. Any final judgment in the action may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(C) The Company shall pay all costs and expenses, including attorneys’ fees and disbursements, of the Company and the Executive in connection with any legal proceeding (including arbitration), whether or not instituted by the Company or the Executive, relating to the interpretation or enforcement of any provision of this Agreement, that is resolved in favor of the Executive pursuant to a final, unappealable judgment. The Executive shall pay all costs and expenses, including attorneys’ fees and disbursements, of the Company and the Executive in connection with any legal proceeding (including arbitration), whether or not instituted by the Company or the Executive, relating to the interpretation or enforcement of any provision of this Agreement, that is resolved in favor of the Company pursuant to a final, unappealable judgment. The non-prevailing party, as set forth above, shall pay prejudgment interest on any money judgment obtained by the prevailing party as a result of such proceeding, calculated at the rate provided in Section 1274(b)(2)(B) of the Code.

8.	Successors; Binding Agreement.

(A) In addition to any obligations imposed by law upon any successor to the Company, the Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise, and whether or not such a transaction constitutes a Change in Control) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain the assumption and agreement prior to the effectiveness of any succession shall be a breach of this Agreement for which the Executive shall have any and all of the remedies available to him under this Agreement. The provisions of this Section 8 shall continue to apply to each subsequent employer of the Executive bound by this Agreement in the event of any merger, consolidation, or transfer of all or substantially all of the business or assets of that subsequent employer, whether or not that transaction constitutes a Change in Control.

(B) This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees, and legatees. If the Executive shall die while any amount would be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, the amount, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives, or administrators of the Executive’s estate.

9.	Effect on Prior Agreements.

This Agreement contains the complete, final, and exclusive embodiment of the agreement and understanding among the parties hereto regarding severance, change in control, or similar payments to the Executive and supersedes in all respects any prior or other agreement or understanding, written or oral, among the parties with respect to the subject matter of this Agreement, including, but not limited to, Change in Control Severance Agreements, the Employment Letter Agreement, employment agreements or company policies, or other agreements or arrangements with respect to severance, change in control, or similar payments.

10.

Exclusive Remedy.

In the event of a Payment Trigger, the provisions of Section 4 are intended to be and are exclusive and in lieu of any other rights or remedies to which the Executive or the Company may otherwise be entitled (including any contrary provisions in any written or oral employment agreement or arrangement the Executive may have with the Company), whether at law, tort or contract, in equity, or under this Agreement. The Executive shall not be entitled to any severance or Change in Control benefits or rights upon a Payment Trigger other than those benefits expressly set forth in Section 4.

11.

Notices.

For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

To the Company:	USA Truck, Inc.
	3201 Industrial Park Road
	Van Buren, Arkansas 72956
	Attention: Chairman of the Board

To the Executive:	Jason Bates
	357 N. Cloverfield Circle
	Litchfield Park, AZ 85340

12.

Miscellaneous.

No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by the Executive and an officer of the Company specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. All references to sections of the Code shall be deemed also to refer to any successor provisions to such sections.

13.

Governing Law.

The validity, interpretation, construction, and performance of this Agreement shall be governed by the internal, substantive laws of the State of Delaware, without giving effect to the law or principles of conflict of laws of any jurisdiction.

14.

Obligation Not to Solicit and Compete.

The Executive hereby agrees that during his employment with the Company and for a period of twelve (12) months thereafter or, in the event of a Change in Control, eighteen (18) months thereafter (the applicable period being referred to herein as the "Restricted Period"), the Executive will not, directly or indirectly, in any manner (i) attempt to induce or assist others to attempt to induce any officer, employee, driver, independent contractor, customer, or vendor of the Company or its affiliates to terminate its association with or reduce or terminate business with the Company or its affiliates, nor do anything directly or indirectly to interfere with the relationship between the Company or its affiliates and any such persons or concerns, unless part of a management directive, or (ii) engage or invest in, own, manage, operate, finance, control or participate in the ownership, management, operation, financing or control of, be employed by, serve as an agent, officer, director or consultant to, be associated with or in any manner connected with, lend his name or any similar name to, lend his credit or render services or advice to, any Competitive Business (as hereinafter defined) anywhere in North America; provided, in order to bind the Executive to the provisions of Section 14(ii) when there is no Payment Trigger, the Company must make monthly payments, in cash, equal to one-twelfth (1/12) of the Executive’s annual base salary in effect immediately prior to the Date of Termination, on or as near as practicable to the same date in each month as monthly installments of the annual base salary were made to the Executive prior to the Date of Termination, for such portion of the Restricted Period as the Company determines (the "Non-Compete Payments"), which benefits will commence when the General Release is signed and the revocation period has expired. The Company will give the Executive notice within ten (10) days following the Date of Termination if it elects to not make the Non-Compete Payments and, once Non-Compete Payments commence, the Company will give the Executive thirty (30) days' written notice before discontinuing the Non-Compete Payments. The provisions of Section 14(i)will automatically apply to the Executive regardless of whether there is a Payment Trigger and the provisions of Section 14(ii) will automatically apply to the Executive if there is a Payment Trigger; the Executive acknowledging that he has received sufficient consideration for such covenants. For purposes of this Agreement, Competitive Business will mean the interstate or intrastate transportation of freight by truck (motor carrier), interstate or intrastate transportation freight through the use of a combination of rail and truck (intermodal), arranging for the interstate or intrastate transportation of freight by truck or a combination of rail and truck (brokerage), any business conducted by the Company or the Company's affiliates during Executive's employment, and any business where plans were developed during the Executive's employment to engage in such business. Nothing herein will be deemed to prevent the Executive from acquiring through market purchases and owning, solely as an investment, less than two percent (2%) in the aggregate of the equity securities of any issuer whose shares are registered under Section 12(b) or Section 12(g) of the Exchange Act, as amended, and are listed or admitted for trading on any United States national securities exchange or are quoted on any system of automated dissemination of quotations of securities prices in common use, so long as the Executive is not directly or indirectly a member of any "control group" (within the meaning of the rules and regulations of the SEC).

15.

Confidentiality.

The Executive acknowledges that during his employment with the Company, he may acquire confidential proprietary information of the Company or its affiliates ("Confidential Information") that is, and remains, the sole property of the Company. Such Confidential Information is a valuable asset of the Company and substantially contributes to the effective and successful conduct of the Company's business. Confidential Information is intended to remain secret and misappropriation by any means is strictly prohibited. The Executive agrees to comply with the policies and procedures of the Company for protecting Confidential Information and agrees not to disclose to any person or use any Confidential Information obtained by the Executive incident to the Executive's employment or other association with the Company or its affiliates, other than as required for the proper performance of the Executive's duties and responsibilities to the Company or as required by applicable law after notice to the Company and a reasonable opportunity for it to protect Confidential Information. This restriction will continue to apply after the Executive's employment terminates, regardless of the reason for such termination, for so long as such Confidential Information remains confidential or, if sooner, until the expiration of the Restricted Period following the date the Executive's employment with the Company terminates. The obligations of confidentiality imposed by this Section 15 will not apply to Confidential Information that becomes generally known to the public hereafter through no act of the Executive's in breach of this Agreement and no act of any other person in breach of an obligation of confidentiality to the Company. Notwithstanding anything to the contrary herein, the Executive acknowledges that the requirements for confidentiality as set forth in the Company handbook continue to apply to the Executive while the Executive is receiving compensation and benefits under this Agreement and during the Restricted Period.

The Executive also acknowledges that the requirements for confidentiality set forth in the Company handbook continue to apply to the Executive for the term provided therein. Notwithstanding anything to the contrary herein or set forth in the Company handbook, nothing herein or therein will (i) limit Executive's ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, or (iii) limit Executive’s right to receive an award for information provided to any Government Agencies.

16.

Non-disparagement.

The Executive agrees that he will not make to any person or entity any false, disparaging, or derogatory comments about the Company or its affiliates, or their business affairs, directors, officers, employees, drivers, independent contractors, customers, or vendors.

17.

Remedies

Upon breach of any of the covenants contained in Section 14, 15, or 16 of this Agreement, (a) the Company can and may take any and all actions available at law and in equity, including obtaining a restraining order or injunctive relief, (b) all compensation and benefits described in this Agreement will immediately cease, (c) the Executive will remain obligated to comply with the covenants in this Agreement, and (d) the periods set forth above in Sections 14 and 15 will be tolled during any period in which the Executive is in violation of such Section(s) so that the Company is provided with the full benefit of the Restricted Period.

18.	Withholding.

All payments provided for hereunder will be subject to required withholding of federal, state and local income, excise, and employment-related taxes. If any such excise taxes would otherwise be imposed, the Company shall determine in good faith whether the Executive will either receive all of the benefits to which he is entitled under this Agreement, subject to the excise tax, or have his benefits under this Agreement reduced to a level at which the excise tax will not apply, depending upon which approach will provide the Executive with the greater net after-tax benefit.

19.	Severability.

If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

20.	Counterparts.

This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

21.	Payment; Assignment.

Benefits payable under this Agreement will be paid only from the general assets of the Company. No person has any right to or interest in any specific assets of the Company by reason of this Agreement or the Employment Letter Agreement. To the extent benefits under this Agreement are not paid when due to any individual, he or she is a general unsecured creditor of the Company with respect to any amounts due. Benefits payable pursuant to this Agreement and the right to receive future benefits may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered, or subject to any charge.

22.	Further Assurances.

The parties to this Agreement agree to perform, or cause to be performed, such further acts and deeds and to execute and deliver or cause to be executed and delivered, such additional or supplemental documents or instruments as may be reasonably required by the other party to carry into effect the intent and purpose of this Agreement.

23.	Code Section 409A.

It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Code Section 409A (including the Treasury regulations and other published guidance relating thereto) (“Code Section 409A”) so as not to subject the Executive to payment of any additional tax, penalty or interest imposed under Code Section 409A. The provisions of this Agreement shall be construed and interpreted, and if necessary modified or reformed (including any modification or reformation regarding the timing and amount of any payment) to avoid the imputation of any such additional tax, penalty or interest under Code Section 409A yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Executive. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that the Company determines may be considered nonqualified deferred compensation under Code Section 409A upon or following a termination of employment unless such termination is also a "separation from service" within the meaning of Code Section 409A, and, for purposes of any such provision of this Agreement, references to a "termination," "termination of employment" or like term, and the timing thereof, shall mean such a separation from service. Notwithstanding any other provision of this Agreement, in the event the Executive is a “specified employee” as defined in Code Section 409A on the date the Executive incurs a separation from service, as so defined, to the extent required by Code Section 409A, payments and benefits hereunder to which Code Section 409A would apply may not commence to the Executive until the earlier of the first day of the seventh month following the month that includes the Executive’s separation from service (as defined in Code Section 409A) or the date of the Executive’s death and any delayed payments and benefits shall be paid and provided in the aggregate, without interest, no later than ten (10) days following such date. For purposes of Code Section 409A, the Executive's right to receive the payments and benefits hereunder shall be treated as a right to receive a series of separate and distinct payments and benefits. Whenever a payment or benefit hereunder specifies a payment or benefit period with reference to a number of days, the actual date of payment or benefit within the specified period shall be within the sole discretion of the Company. In no event may the Executive, directly or indirectly, designate the calendar year of any payment to be made under this Plan, to the extent such payment is subject to Code Section 409A. The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Code Section 409A, but do not satisfy an exemption from, or the conditions of, Code Section 409A. Any terms of this Agreement that are undefined or ambiguous shall be interpreted by the Company in its discretion in a manner that complies with Code Section 409A to the extent necessary to comply therewith. If for any reason any provision of this Agreement does not accurately reflect its intended establishment of an exemption from or compliance with Code Section 409A, as demonstrated by consistent interpretations or other evidence of intent, such provision shall be considered ambiguous as to its exemption from or compliance with Code Section 409A and shall be interpreted by the Company in a manner consistent with such intent, as determined in the discretion of the Company.

[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]

IN WITNESS WHEREOF, the parties have signed this Agreement as of the date set forth above.

USA TRUCK, INC.

By: /s/ James D. Reed

Name: James D. Reed

Title: CEO

/s/ Jason Bates

Jason Bates

/s/ Jason Bates

Signature

$50,000

Amount of Relocation Services Benefit

Exhibit A

General Release

In exchange for the payments and benefits described in the agreement to which this release is attached (the “Agreement”), Executive, on his own behalf and on behalf of his heirs, executors, administrators, assigns and successors, does hereby covenant not to sue and acknowledges full and complete satisfaction of and hereby releases, absolves and discharges the Company and its Affiliates and their successors and assigns, parents, subsidiaries and affiliates, past and present, as well as their trustees, directors, officers, agents, attorneys, insurers, stockholders and employees, past and present, and each of them (hereinafter collectively referred to as “Releasees”), with respect to and from any and all claims, demands, liens, agreements, contracts, covenants, actions, suits, causes of action, obligations, debts, wages, vacation pay, expenses, attorneys’ fees, damages, judgments, orders and liabilities of whatever kind or nature in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, and whether or not concealed or hidden, which Executive now owns or holds or has at any time heretofore owned or held as against said Releasees, or any of them, arising out of or in any way connected with his employment or other relationships with the Company or its Affiliates, or his separation from any such employment or other relationships (collectively, “Released Claims”), including specifically, but without limiting the generality of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act of 1967, as amended by the Older Worker’s Benefit Protection Act (“ADEA”), the federal Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, the Employee Retirement Income Security Act of 1974, the Worker Adjustment and Retraining Notification Act, or any other employment related federal, state or local law, regulation or ordinance; provided, however, that the foregoing release will not include or affect (and the following are expressly excluded from any Released Claims): (i) Executive’s rights under the Agreement; (ii) Executive’s rights to file claims for workers’ compensation or unemployment insurance benefits, (iii) Executive’s regular and usual salary accrued prior to the Separation Date, accrued but unused vacation through the Separation Date, COBRA continuation coverage and life insurance conversion rights, if any, and (iv) Executive’s rights to provide information, assist or participate in any investigation, proceedings, or litigation concerning any administrative claim with any government agency under any applicable law that protects such rights, or to file such a claim. This General Release does not (i) limit Executive's ability to file a charge or complaint with the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other federal, state or local governmental agency or commission (“Government Agencies”), (ii) limit Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, or (iii) limit Executive’s right to receive an award for information provided to any Government Agencies.

Executive acknowledges that the non-disparagement and confidentiality provisions contained in the Agreement infringe on Executive’s rights described in this release, and Executive agrees that he is aware of and has consented to such infringement. Furthermore, notwithstanding the foregoing release, Executive will continue to be entitled to all of his respective statutory rights to indemnification, including, without limitation, indemnification pursuant to the Company’s organizational documents, insurance policies or under applicable law to the same extent Executive would have had the right to be indemnified absent this release.

Executive acknowledges that he is waiving and releasing any rights he may have under the ADEA and that this waiver and release is knowing and voluntary. Executive and the Company agree that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date (as hereinafter defined) of the Agreement. Executive acknowledges that the consideration given for the Agreement is in addition to anything of value to which he was already entitled. Executive further acknowledges that he has been advised by this writing that:

(a) He should consult with an attorney prior to executing the Agreement;

(b) He has at least twenty-one (21) days within which to consider the Agreement, but if he wishes to sign the Agreement earlier, he may do so by signing the Acknowledgment and Waiver of the 21-day consideration period in the form attached as Exhibit B to the Agreement;

(d) This Agreement will not be effective until the eighth day after Executive executes and does not revoke the Agreement (the “Effective Date”); and

(e) Nothing in the Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties or costs from doing so, unless specifically authorized by federal law. Any revocation must be in writing and hand delivered to the Company by close of business on or before the seventh day from the date that Executive signs the Agreement. In the event that Executive exercises his right of revocation, neither Executive nor any member of the Company or its Affiliates will have any further rights or obligations under the Agreement.

Executive represents and warrants that he has no present knowledge of any injury, illness or disease to him that is or might be compensable as a workers’ compensation claim or similar claim for workplace injuries, illnesses or diseases.

Terms used herein and not otherwise defined will have the meanings set forth in the Agreement to which this Release was attached.

[Signature page follows]

Intending to be legally bound, I have signed this General Release as of the date written below.

Signature: _____________________________________________

Jason Bates

Date Signed:

___________________________________________

Exhibit 10.4

May 1, 2017

Werner Hugo

Dear Werner,

We are pleased to have you serve in the position of Senior Vice President, Trucking Operations of USA Truck, Inc. (the "Company"). The following outlines the terms of employment, but does not constitute a contract of employment or a guarantee of employment. This offer is subject to final approval by the Company's Board of Directors.

Compensation

•

Your annual base salary will be $250,000.00, which will be paid in monthly installments on the last business day of each month of employment in the amount of $20,833.33

•

You will participate in the established Company Management Bonus Plan, beginning in 2017. For 2017, you will be entitled to:

•

With respect to the LTIP award, you will have the same vesting as other senior executives upon the occurrence of such Payment Trigger.

•

You will receive a cash bonus of $125,000, payable in two (2) equal installments – $62,500 of which will be payable promptly following your start date and the remaining $62,500 of said bonus will be payable on October 31, 2017, provided you and your family have established full time residency and completed your permanent relocation to the Van Buren/Fort Smith, Arkansas, area and you are continuously employed by the Company through October 31, 2017. Notwithstanding the foregoing, failure to complete your and your family’s permanent relocation to the Van Buren/Fort Smith, Arkansas area on or before October 31, 2017, or your failure to be continuously employed by the Company through such date will result in complete forfeiture of your rights to both installments of this bonus and will require an immediate repayment in full of the initial installment. Additionally, this bonus is contingent on continuous full time employment with the Company for at least 24 months following your start date. If your employment is terminated by the Company for cause or voluntarily by you at any time after October 31, 2017 and prior to the expiration of 24 months from your start date, you shall repay the $125,000 cash bonus on a pro-rated basis in relation to the portion of such 24 month period during which you are actually employed by the Company.

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You may be required to serve as an officer and/or director of one or more subsidiaries of the Company, for which you will receive no additional compensation.

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Your position with the Company requires that you establish full-time residency in the Van Buren/Ft. Smith, Arkansas, area for you and your family. To assist with your interim residency and timely relocation, you will receive a reimbursement allowance for reasonable transitional housing expenses, including meals and travel expenses (flights or mileage) and temporary housing for rental property through July 31, 2017. The aforementioned expense reimbursement allowance related to flights will include one basic coach-class airfare ticket paid for by the Company every two (2) weeks until July 31, 2017. Any mileage reimbursement(s) will be at the Company’s standard rate(s), in accordance with its standard reimbursement policies.

In addition, you will receive a one-time net payment of $50,000 as a relocation bonus payable by the Company once you have scheduled your and your family’s permanent relocation to the Van Buren/Ft. Smith, Arkansas, area with a moving/relocation service provider and you agree that full-time residency and permanent relocation of you and your family will be completed on or before October 31, 2017. In the event said relocation is not completed on or before October 31, 2017, you agree that you will not be eligible to receive said relocation bonus and must repay any amount(s) related to this relocation bonus to the Company. Once you have established full-time residency and permanent relocation in the Ft. Smith/Van Buren, Arkansas, area of you and your family, you will also receive a one-time net payment equal to the customary realtor commissions payable upon the sale of your current home in Arizona.

• You will be provided a laptop and smart phone at the Company's expense.

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The Company will also pay you the net amount for 90 days of COBRA coverage to assist you in continual coverage of your current healthcare plan during the mandatory waiting period.

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All payments provided for hereunder will be subject to required withholding of federal, state and local income, excise, and employment-related taxes.

Benefits

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You will receive four (4) weeks paid vacation per year.

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You are eligible for, and may participate in, the Company's 401(k) Plan subject to Company policies and the terms of that plan as in effect from time to time.

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You are eligible for, and may participate in, the Company's Employee Stock Purchase Plan subject to Company policies and the terms of that plan as in effect from time to time.

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The Company is currently a sponsor of the Arkansas Best Federal Credit Union and you may be eligible to participate in programs made available to the Company's employees.

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Confidential Information or Trade Secrets

Executive Severance and Change in Control Agreement

You and the Company will enter into an Executive Severance and Change in Control Agreement in the form of Exhibit A attached hereto and incorporated by reference herein.

We look forward to you joining USA Truck, Inc., and ask that you acknowledge your acceptance of the terms of this letter by signing below and faxing or emailing the signed letter to my attention.

Sincerely,

/s/ James D. Reed

James D. Reed

President and Chief Executive Officer

Agreed and Accepted

/s/ Johannes P. Hugo

Werner Hugo

05-02-2017

Date

Exhibit A

[Executive Severance and Change In Control Agreement Attached]

Exhibit 10.5

EXECUTIVE SEVERANCE AND CHANGE IN CONTROL AGREEMENT

This Executive Severance and Change in Control Agreement (this “Agreement”), dated as of May 2, 2017, is made by and between USA Truck, Inc., a Delaware corporation (as hereinafter defined, the “Company”), and Werner Hugo, Senior Vice President – Trucking Operations of the Company (as hereinafter defined, the “Executive”).

WHEREAS, the Company and the Executive have entered into that Employment Letter Agreement by and between the Company and the Executive dated May 1, 2017, (the "Employment Letter Agreement"); and

WHEREAS, the Company and the Executive desire to set forth the circumstances under which the Executive may receive payments under this Agreement.

NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

1. Defined Terms.