NEW ACCOUNTING PRONOUNCEMENTS (Policies)

12 Months Ended

Dec. 31, 2021

NEW ACCOUNTING PRONOUNCEMENTS

Description of business

Description of business

USA Truck Inc., a Delaware corporation and subsidiaries (together, the “Company”), is headquartered in Van Buren, Arkansas.  The Company transports freight throughout the contiguous United States, into and out of portions of Canada, and into and out of Mexico by offering through-trailer service from our terminal in Laredo, Texas.  The Company has two reportable segments: (i) Trucking, consisting of the Company’s truckload and dedicated freight service offerings, and (ii) USAT Logistics, consisting of the Company’s freight brokerage, logistics, and rail intermodal service offerings.

Basis of presentation

Basis of presentation

The accompanying consolidated financial statements include the accounts and operations of USA Truck Inc., and present our financial position as of December 31, 2021 and 2020 and the results of our operations, comprehensive income and cash flows for the years ended December 31, 2021 and 2020.  The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”), and include all adjustments necessary for the fair presentation of the periods presented.  

The accompanying consolidated financial statements include USA Truck Inc., and its wholly owned subsidiaries: International Freight Services, Inc. (“IFS”), a Delaware corporation; USA Truck, LLC, a Delaware limited liability company; USA Truck Fleetco, LLC, a Delaware limited liability company; USA Truck Logistics, LLC, a Delaware limited liability company; Skyraider Risk Retention Group Inc. (“SRRG”), a South Carolina corporation; Davis Transfer Company Inc. (“DTC”), a Georgia corporation; Davis Transfer Logistics Inc. (“DTL”), a Georgia corporation; and B & G Leasing, L.L.C. (“B & G”), a Georgia limited liability company.  References in this report to “it,” “we,” “us,” “our,” or the “Company,” and similar expressions refer to USA Truck Inc. and its subsidiaries.  All significant intercompany balances and transactions have been eliminated in preparing the consolidated financial statements.  Certain amounts reported in prior periods have been reclassified to conform to the current year presentation.

Risks and uncertainties

Risks and uncertainties

In 2020, the rapid spread of the COVID-19 pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy.  We continue to monitor the progression of the pandemic, including the outbreak of new strains of the virus, further government responses, including vaccine, testing, and mask mandates, and development of treatments and vaccines and the resulting potential effect on our financial position, results of operations, cash flows and liquidity.  Should the efforts to recover from the pandemic deteriorate or stall, the impact on our operations could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.  

Use of estimates

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.  Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors which management believes to be reasonable under the circumstances.  As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

Change in estimate

Change in estimate

The Company reviews the estimated useful lives and salvage values of its fixed assets on an ongoing basis, based upon, among other things, our experience with similar assets, conditions in the used revenue equipment market, and prevailing industry practice.  During the first quarter of 2020, the Company lowered the salvage value of its tractor fleet from 30% to 25% to better reflect then-current estimates of the value of such equipment upon its retirement.  This change was accounted for as a change in estimate, and resulted in an increase in depreciation and amortization expense of approximately $2.7 million for the year ended December 31, 2020. No changes were made to the estimated lives or salvage values of our fixed assets during 2021.

Cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less when acquired.  We had restricted cash of $0.4 million and $0.2 million at December 31, 2021 and 2020, respectively.  This cash is restricted by insurance regulation for the purpose of funding potential insurance claim losses to be paid by our wholly owned captive insurance company and is included in the “Cash and restricted cash” line item in our consolidated balance sheet.  

Bank overdrafts

Bank overdrafts

The Company classifies bank overdrafts in current liabilities as accounts payable and does not offset other positive bank account balances located at the same or other financial institutions.  Bank overdrafts generally represent checks written that have not yet cleared the Company’s bank accounts.  The majority of the Company’s bank accounts are zero balance accounts that are funded at the time items clear against the account by drawings against a line of credit; therefore, the outstanding checks represent bank overdrafts.  Bank overdrafts as of December 31, 2021 and 2020 were approximately $2.6 million and $5.2 million, respectively.

Allowance for doubtful accounts

Allowance for doubtful accounts

The allowance for doubtful accounts is management’s estimate of the amount of probable credit losses in the Company’s existing accounts receivable.  Management reviews the financial condition of customers for granting credit and determines the allowance based on analysis of individual customers’ financial condition, historical write-off experience and national economic conditions.  The Company evaluates the adequacy of its allowance for doubtful accounts quarterly.  The Company does not have any off-balance sheet credit exposure related to its customers.

Assets held for sale

Assets held for sale

When we plan to dispose of property by sale, the asset is carried in the financial statements at the lower of the carrying amount or estimated fair value, less cost to sell, and is reclassified to Assets held for sale.  Additionally, after such reclassification, there is no further depreciation taken on the asset.  In order for an asset to be classified as held for sale, management must approve and commit to a formal plan of disposition, the sale must be anticipated during the ensuing year, the asset must be actively marketed, available for immediate sale, and meet certain other specified criteria.  

Goodwill

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of acquired businesses.  Goodwill is not amortized, but instead is evaluated for impairment periodically.  We evaluate goodwill for impairment annually during the fourth quarter, or more often if events or circumstances indicate that goodwill might be impaired.  The reporting unit or units used to evaluate and measure goodwill for impairment are determined primarily from the manner in which the business is managed or operated.  A reporting unit is an operating segment or a component that is one level below an operating segment.  There were no impairments of goodwill during 2021 or 2020.

Intangibles

Intangibles

Intangibles include a trade name, customer relationships and indefinite lived intangible assets.  The customer relationships are subject to amortization and are amortized on a straight-line basis over their useful lives.  We periodically evaluate our intangible assets for impairment upon occurrence of events or changes in circumstances that indicate the carrying amount of intangible assets may not be recoverable (see Note 4 – Intangible Assets).  

Treasury stock

Treasury stock

The Company uses the cost method to record treasury stock purchases whereby the entire cost of the acquired shares of our common stock is recorded as treasury stock (at cost).  When the Company subsequently reissues these shares, proceeds in excess of cost upon the issuance of treasury shares are credited to additional paid in capital, while any deficiency is charged to additional paid in capital.  For the year ended December 31, 2021, the Company recorded credits to additional paid in capital of $1.1 million for the return of treasury stock.  For the year ended December 31, 2020, the Company recorded charges to additional paid in capital of $4.3 million for the issuance of shares awarded as equity grants.  

Earnings per share data

Earnings per share data

The Company calculates basic earnings per share based on the weighted average number of its common shares outstanding for the applicable period.  The Company calculates diluted earnings per share based on the weighted average number of its common shares outstanding for the period plus all potentially dilutive securities using the treasury stock method, whereby the Company assumes that all such shares are converted into common shares at the beginning of the period, if deemed to be dilutive.  If the Company incurs a loss from continuing operations, the effect of potentially dilutive common stock equivalents are excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive.  Performance shares are excluded from contingent shares for purposes of calculating diluted weighted average shares until the performance measure criteria is probable and shares are likely to be issued.

Inventories

Inventories

Inventories consist of tires and parts, and are stated at the lower of cost or net realizable value on a first-in first-out basis.

Property and equipment

Property and equipment

Property and equipment is capitalized in accordance with the Company’s asset capitalization policy.  The capitalized property is depreciated by the straight-line method using the following estimated useful lives: structures – 15 years to 40 years; revenue equipment – 5 to 14 years; and service, office and other equipment – 3 to 10 years.  

Leases

Leases

The Company leases property and equipment under finance and operating leases.  The Company has operating and finance leases for revenue equipment, real estate, information technology equipment (primarily servers and copiers), and various other equipment used in operating our business.  Certain leases for revenue equipment and information technology include options to purchase or extend, guarantee residual values, or early termination rights.  Determining the lease term and amount of lease payments to include in the calculation of the right-of-use (“ROU”) asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option or feature is reasonably certain, and if the optional period and payments should be included in the calculation of the associated ROU asset and liability.  In making this determination, we consider all relevant economic factors that would compel us to exercise or not exercise an option or feature.

We recognize a ROU asset and lease liability for operating leases that meet the criteria of Accounting Standards Codification 842.  Some of our leases contain both lease and non-lease components, which we have elected to treat as a single lease component.  We have also elected not to recognize in our consolidated balance sheets leases that have an original lease term, including reasonably certain renewal or purchase options, of twelve months or less for all classes of underlying assets.  Lease costs for short-term leases are recognized on a straight-line basis over the lease term.  When

available, we use the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for all of our leases.  In such cases, we use an estimate of our incremental borrowing rate to discount lease payments based on information available at lease commencement.

Depreciable lives and salvage value of assets; valuation of long-lived assets

Depreciable lives and salvage value of assets; valuation of long-lived assets

We review the appropriateness of depreciable lives and salvage values for each category of property and equipment on an annual basis, or when market factors dictate.  These studies utilize models, which take into account actual usage, physical wear and tear, and replacement history to calculate remaining life of our asset base.  We also make assumptions regarding future conditions in determining potential salvage values.  These assumptions impact the amount of depreciation expense recognized in the period and any gain or loss once the asset is disposed.  Actual disposition values may be greater or less than expected due to the length of time before disposition.

We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  We evaluate recoverability of assets to be held and used by comparing the carrying amount of an asset to future net cash flows expected to be generated by the asset.  If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, less cost to sell.  The Company performed the impairment analysis of the carrying value of its fleet, which is the lowest level of identifiable cash flows.

Income taxes

Income taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.  Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.  The Company has analyzed filing positions in its federal and applicable state tax returns in all open tax years.  The Company’s policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses.  The Company analyzes its tax positions on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.  The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its consolidated financial position, results of operations and cash flows.  Therefore, no reserves for uncertain income tax positions or associated interest or penalties on uncertain tax positions have been recorded.

Claims accruals

Claims accruals

The primary claims arising against the Company consist of cargo loss and damage, liability, personal injury, property damage, workers’ compensation, and employee medical expenses.  The Company’s self-insurance retention levels are $0.05 million for cargo loss and damage claims per occurrence, $2.0 million for bodily injury and property damage claims per occurrence, and $0.5 million for workers’ compensation claims per occurrence.  The Company utilizes an actuarial specialist to provide an independent assessment of internally developed accident and workers’ compensation accruals twice a year.  If adjustments to previously established accruals are required, such amounts are included in operating expenses in the current period.  The legal expense incurred for individual claims is reserved and paid as part of the total claim expense.  For medical benefits, the Company self-insures up to $0.25 million per plan participant per year with an aggregate claim exposure limit determined by the Company’s year-to-date claims experience and its number of covered team members.  The Company has exposure to fluctuations in the frequency and severity of claims and to variations between its estimated and actual ultimate payouts up to the Company’s self-insured retention level.  Estimates require judgments concerning the nature and severity of the claim, as well as other factors.  Actual settlement of the self-insured claim liabilities could differ from management’s initial assessment due to uncertainties and fact development.  In 2020, the Company formed a captive insurance company, SRRG, to mitigate a portion of our insurance costs.  

Restricted stock

Restricted stock

Restricted stock cannot be sold by the recipient until its restrictions have lapsed.  The Company recognizes compensation expense related to these awards over the vesting periods based on the closing price of the Company’s common stock on the grant dates.  If these awards contain performance criteria, the grant date fair value is set assuming performance at target, which is the expected level of achievement, and management periodically reviews actual performance against the criteria and adjusts compensation expense accordingly.  These shares are considered issued and outstanding under the terms of the respective restricted stock agreements.

Revenue recognition and Disaggregation of revenue

Revenue recognition

Revenue is measured based upon consideration specified in a contract with a customer.  The Company recognizes revenue when its contractual performance obligations are completed, and the benefit of our services has been transferred to the customer.  Typically, the Company’s contractual performance obligations are fulfilled over a short period of time, and a portion of the total revenue that will be billed to the customer is recognized in a reporting period based upon the percentage of the contractual performance obligation that has been completed at the end of the reporting period.  The contract asset, or the amount of remaining performance obligation relating to loads in process at the end of each reporting period, was $1.6 million and $1.1 million for the years ended December 31, 2021 and 2020, respectively, and was recorded in the “Accounts receivable” line item.

Disaggregation of revenue

The Company’s revenue types are freight revenue, fuel surcharge and accessorial.  Freight revenue represents the majority of our revenue and consists of fees earned for freight transportation, excluding fuel surcharge.  Fuel surcharge revenue consists of additional fees earned by the Company in connection with the performance of freight transportation services to partially or completely offset the cost of fuel.  Accessorial revenue consists of ancillary services provided by the Company, including but not limited to, stop-off charges, loading and unloading charges, tractor or trailer detention charges, expedited charges and repositioning charges.  These accessorial charges are recognized as revenue throughout the service provided.  

The following table set forth revenue disaggregated by revenue type:

	Year Ended December 31,
	2021								2020
	Trucking		USAT Logistics		Eliminations		Total		Trucking		USAT Logistics		Eliminations		Total
Revenue type	(in thousands)
Freight	$	383,331	$	296,374	$	(52,658)	$	627,047	$	341,522	$	176,439	$	(24,072)	$	493,889
Fuel surcharge		48,038		22,572		(1,427)		69,183		35,049		11,366		(997)		45,418
Accessorial		9,747		4,410		—		14,157		7,685		4,146		—		11,831
Total	$	441,116	$	323,356	$	(54,085)	$	710,387	$	384,256	$	191,951	$	(25,069)	$	551,138

Accounting standards issued but not yet adopted

Accounting standards issued but not yet adopted

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).  This update requires measurement and recognition of expected versus incurred credit losses for financial assets held.  ASU 2016-13 is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.  We continue to evaluate the effect of adopting ASU 2016-13, but believe the effects will be limited to the Company’s trade receivables and will not be material.