USA TRUCK INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2002

OR

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

For the transition period from __________ to __________

Commission File Number 0-19858

USA TRUCK, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 71-0556971
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

3200 INDUSTRIAL PARK ROAD 72956
VAN BUREN, ARKANSAS (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (479) 471-2500

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)

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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer
(as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended).
Yes [ ] No [X]

The aggregate market value of the voting stock held by nonaffiliates of
the Registrant computed by reference to the price at which the common equity was
last sold as of the last business day of the Registrant's most recently
completed second quarter was $51,041,140 (the characterization of officers and
directors of the Registrant as affiliates for purposes of this computation
should not be construed as an admission for any other purpose that any such
person is in fact an affiliate of the Registrant).

The number of shares outstanding of the Registrant's Common Stock, par
value $ .01, as of February 19, 2003 is 9,325,908.

DOCUMENTS INCORPORATED BY REFERENCE

Part of Form 10-K into Which the
Document Document is Incorporated
-------- ------------------------
Portions of the Proxy Statement to be sent to stockholders Part III
in connection with 2003 Annual Meeting

USA TRUCK, INC.

TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

GENERAL

USA Truck, Inc. (the "Company" or "USA Truck") is engaged in the
transportation of general commodity freight in interstate and foreign commerce.
Operations are conducted primarily east of the Rocky Mountains, but the Company
holds authority to transport and does transport freight between all points in
the continental United States, other than intrastate, and the Canadian provinces
of Ontario and Quebec. The Company also transports freight between points in the
U.S. and Canadian provinces of Ontario and Quebec and provides through trailer
service in and out of Mexico. The Company contracts Mexican carriers to
transport freight, using the Company's trailers and the Mexican carrier's
tractors, while in Mexico. The trailer exchange between the Company and the
Mexican carrier takes place at the Company's facility in Laredo, Texas. Revenue
from foreign countries represents less than 7% of total revenues of the Company
for each of the past three years. The principal types of freight transported
include automotive parts and materials, tires, paper and paper products, glass,
retail store merchandise, chemicals, aluminum and manufacturing materials and
supplies. USA Truck does not transport Class A or Class B explosives, garbage,
radioactive materials or hazardous wastes.

USA Truck transports freight in truckload quantities from individual
shippers to single or multiple destinations on an as-needed basis. Its business
consists primarily of medium haul shipments, more than 700 but less than 1,200
miles. For 2000, 2001 and 2002 the average length of haul for Company tractors
was 871 miles, 826 miles and 796, respectively.

The Company's principal offices are located at 3200 Industrial Park
Road, Van Buren, Arkansas 72956, and its telephone number is (479) 471-2500.

Our Internet address is http://www.usa-truck.com. You can review the
filings USA Truck has made with the U.S. Securities and Exchange Commission
("SEC"), free of charge by linking directly from the investor relations
section of our web site to EDGAR, a database maintained by the SEC. EDGAR is the
Electronic Data Gathering, Analysis and Retrieval system where you can find our
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

BUSINESS STRATEGY

USA Truck's principal competitive strength is its ability and
commitment to consistently provide superior service to shippers. Although price
is a primary concern to all shippers, many of the Company's customers are
high-volume shippers that require a flexible and dependable source of motor
carrier service tailored to specific needs, including pickup or delivery within
narrow time windows. The Company's strategy is to provide a premium service to
meet these needs and to charge compensating rates for such service. This
approach has found increasing acceptance. See "Business--Competition".

The Company is committed to prompt freight pickup, consistent on-time
delivery and twenty-four hours a day, seven days a week dispatching. It has
taken a number of steps to meet these commitments. In particular, the Company
(i) adheres to strict maintenance and cleaning schedules to avoid breakdowns and
delays; (ii) provides detailed routing instructions for, and maintains satellite
communications with, drivers to expedite delivery; (iii) maintains trailer pools
at strategic locations to minimize the time between customer order and pickup;
and (iv) provides extra trailers to high-volume shippers for loading and
unloading at their convenience.

USA Truck utilizes cost-efficient communications throughout its
operations. The Company provides EDI (electronic data interchange) arrangements
with several of its largest customers, providing them with access through their
computer systems to current information on the status of their shipments. The
Company utilizes two-way, satellite based mobile messaging and position-locating
equipment in all of its tractors. This equipment is designed to fulfill
customers' heightened need for real-time transit information as well as provide
the Company with an enhanced and cost-effective method of communications between
its drivers and its operations personnel. The system provides fleet managers the
ability to contact drivers virtually anywhere in the Company's market area.
These capabilities are intended to shorten response time to customers, as well
as to allow drivers uninterrupted rest time while awaiting assignment.

1

The Company has designed its own management information software
systems, which it operates on a mainframe computer. The Company has also
designed its own e-commerce software systems, which operate on several platforms
and connect to the Company's mainframe computer and the internet. Through this
expanded business-to-business ("B2B") system, USA Truck's customers can check
equipment availability and track the progress of their loads through the
Company's web site.

These communication and data processing capabilities enhance operating
efficiency by providing immediate access to detailed information concerning
equipment, cargo, customer locations, credit history, billing arrangements and
specific customer requirements. They also permit the Company to respond quickly
and accurately to customers' requests and assist in balancing equipment
availability throughout its market area. Management believes these information
software systems and computer hardware will be sufficient to support the
Company's expansion plans at least through 2004 without substantial additional
expenditures in the data processing area.

The Company offers additional services through its USA Logistics
Division. USA Logistics provides many services that are not necessarily through
the general fleet including, but not limited to, dedicated fleet services,
private fleet conversions, brokerage services and third party logistics ("3PL")
services. USA Logistics represented 9.7%, 12.3% and 15.4% of Company revenues
(exclusive of fuel surcharge) in 2000, 2001 and 2002, respectively.

MARKETING AND SALES

The Company focuses its marketing efforts on customers with demanding
requirements and heavy shipping needs within the primary regions where the
Company operates. This permits the Company to concentrate available equipment in
its primary service area, enabling it to be more responsive to customer needs.
USA Truck's Marketing and Operations Departments have primary responsibility for
developing and implementing the Company's marketing strategy and retaining
customer accounts.

The Marketing Department solicits and responds to customer orders and
maintains close customer contact regarding service requirements and rates. A
high percentage of the Company's business is from repeat customers. For the year
ended December 31, 2002, more than 97% of USA Truck's operating revenues were
derived from customers that were customers of the Company prior to 2002.

USA Truck establishes rates through individual negotiations with
customers and through contracts tailored to the specific needs of shippers.

For the year ended December 31, 2002, the Company's ten largest
customers accounted for 33% of revenues and its three largest customers
accounted for approximately 17% of revenues, with more than 1,600 other
customers accounting for the balance. No single customer accounted for more than
10% of revenues.

Although the Company prefers direct relationships with its shippers,
significant marketing activity takes place through 3PL service providers.
Securing freight through a third party benefits the Company by providing access
to a variety of volume shippers, many of which require their carriers to conduct
business with their designated third party. Conversely, such third party
arrangements reduce the Company's direct relationship with its shippers.

Customers are required to have credit approval before dispatch. The
Company bills customers at or shortly after delivery, and, for the last three
years, receivables collection has averaged approximately 35 days from the
billing date.

OPERATIONS

The Operations Department consists of two primary divisions: the Load
Coordinator Group and the Fleet Manager Group.

Load coordinators are responsible for efficiently matching available
equipment with customer needs, and they serve as the contact with customers'
receiving and shipping personnel. Load coordinators also have primary
responsibility for minimizing empty miles, and they work closely with the
Marketing Department to increase equipment utilization.

The average distance traveled between loads as a percentage of total
miles traveled (empty mile factor) is a standard measurement in the truckload
industry. The empty mile factor generally decreases as average length of haul
and density of trucks in an area increase. The Company's commitment to on-time
pickup often requires a tractor to

2

travel farther to complete a pickup than it would have to travel if the Company
delayed the pickup until a tractor became available in the area. USA Truck's
empty mile factor was 9.24% for the year ended December 31, 2002.

Fleet managers supervise fleets of approximately 60 drivers each and
serve as the drivers' primary contact with the Company. Fleet managers monitor
the location of equipment and direct its movement in the most efficient and safe
manner practicable.

DRIVERS AND OTHER PERSONNEL

Driver recruitment and retention are vital to the success of the
Company. Recruiting drivers is difficult because Company standards are high and
because of declining enrollment in driving schools. Retention is difficult
because of wage and job fulfillment considerations. Driver turnover, especially
in the early months of employment, is a significant problem, and the competition
for qualified drivers is intense. Although USA Truck has experienced difficulty
with driver turnover, it has been able to attract and retain a sufficient number
of qualified drivers to support its operations. To attract and retain drivers,
the Company must continue to provide safe, attractive and comfortable equipment,
direct access to management and competitive wages and benefits designed to
encourage longer-term employment.

Drivers' pay is calculated on the basis of miles driven and increases
with tenure. In 2002, drivers averaged 499 paid miles per workday. In October
2000, the Company implemented a 16% driver pay increase. With this pay increase,
the Company eliminated incentive pay from its pay package except for drivers in
its dedicated services division. The pay increase substantially raised the
experience level of the fleet and quickly enabled the Company to man 100% of the
fleet with drivers by early 2001. In response, the Company developed a
three-phase plan to bring driver wages more into line with historical levels
while maintaining the improvements made in the areas of driver retention and
safety. All three phases affect new hires only and have no effect on existing
drivers. Phase-I, effective in the second quarter of 2001, capped the amount of
experience paid to newly hired drivers. Phase-II, effective in the third quarter
of 2001, lowered the pay scale for drivers with less than one year of industry
experience in strategic points along that scale. Both of these changes served to
level off the growth of driver wages. Phase-III, effective October 1, 2001,
lowered the pay scale for drivers with more than a year of industry experience
in strategic points along that scale. Phase-III is designed to reduce driver pay
as a percent of revenue without substantially affecting the strides we have made
in the areas of safety, recruiting and retention. In December 2002, the Company
further reduced the pay scale for drivers with more than a year of industry
experience in strategic points along that scale. However, unlike the pay scale
reductions that took place in 2001 that only affected new hires, this change
applied to existing drivers as well. The reduced pay scale remains very
competitive among industry peers.

As of December 31, 2002, USA Truck employed 2,339 persons, of which
1,810 were drivers, none of whom was represented by a collective bargaining
unit. In the opinion of management, the Company's relationship with its
employees is satisfactory.

SAFETY

USA Truck's safety program is designed to attain the Company's goal of
an accident-free working environment and to enforce governmental safety
regulations. The Company controls the maximum speed of its tractors with
electronic governing equipment, and all of its tractors are equipped with
anti-lock braking systems.

The evaluation of safety records is one of several criteria used by USA
Truck to hire driver employees. Safe equipment handling techniques are an
important part of new driver training. The Company also conducts pre-employment,
random and post-accident drug testing in accordance with Department of
Transportation ("DOT") regulations.

The Company incorporates many programs designed to manage fleet safety
including, but not limited to, periodic meetings at remote facilities, a point
system to evaluate individual driver safety, a company-wide communication
network to facilitate rapid response to safety failures, a driver counseling and
retraining system and an overall commitment to safety and compliance throughout
the Company and management hierarchy.

3

REVENUE EQUIPMENT AND MAINTENANCE

The Company's current policy is to replace most tractors within 42
months from the date of purchase (see "Business--Revenue Equipment Acquisition
Program" for details concerning the 2002, 2003 and 2004 tractor trading
schedules, which will extend beyond the standard 42 months), which permits the
Company to maintain substantial warranty coverage throughout the period of
ownership. USA Truck replaces its tractors and trailers based on various
factors, including the used equipment market, prevailing interest rates,
technological improvements, fuel efficiency and durability.

The following table shows the number and age of revenue equipment owned
and operated by the Company or operated under capital leases as of December 31,
2002:

At December 31, 2002, USA Truck operated 1,916 conventional sleeper
tractors, including 41 owner-operator tractors and 8 tractors under operating
leases, and 4,311 van trailers, including 32 trailers under operating leases. To
simplify driver and mechanic training, control the cost of spare parts and tire
inventory and provide for a more efficient vehicle maintenance program, the
Company buys tractors and trailers manufactured to its specifications. In
deciding which equipment to buy, it considers a number of factors, including
safety, economy, resale value and driver comfort. Most of the Company's tractors
are equipped with Detroit Diesel Series 60 12.7-liter engines, air-ride
suspension and anti-lock brakes. The Company's equipment is maintained through a
strict preventive maintenance program designed to minimize equipment downtime
and to enhance trade-in value.

Beginning with the November 1995 trailer purchases, the Company began
converting its trailer fleet from 48 foot long and 102 inch wide trailers to 53
foot long and 102 inch wide trailers. Many shippers do not allow carriers to use
48 foot trailers to transport their freight. Because this conversion process
continues and additional trailers are required to serve Mexico (see
"Business--General"), the Company's trailer to tractor ratio (including
owner-operator tractors and tractors and trailers under operating leases) was
2.25 to 1 at December 31, 2002. Management believes that a 2.25 to 1 ratio is
sufficient for the Company's operations, in that it promotes efficiency and
provides the flexibility needed to serve customer needs. As of December 31,
2002, 3,988 of the 4,279 trailers owned by the Company were 53-foot models. All
future purchases of fleet trailers will be 53-foot models, with the possible
exception of specialized trailers for dedicated services. The Company is
undertaking this conversion in order to meet its customers' requirements and to
continue to provide an efficient balance between trailer capacity and weight and
length limitations in the various states and provinces.

During 2002, the Company financed revenue equipment purchases through
either its collateralized, $60 million revolving credit agreement (the "Senior
Credit Facility"), or through capital lease-purchase arrangements. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources". All of the Company's revenue
equipment is pledged to secure its obligations under such financing
arrangements.

4

In addition to company-owned tractors, the Company contracts with
owner-operators for the use of their tractors and drivers in the Company's
operations. At December 31, 2002, 41 owner-operator tractors were under contract
with the Company. The Company does not plan to increase the size of its
owner-operator fleet significantly in proportion to its company-owned fleet in
2003.

REVENUE EQUIPMENT ACQUISITION PROGRAM

During 2002, the Company acquired 221 new tractors (a net increase of
150) and 717 new trailers (a net increase of 643). The Company purchased 183
more trailers in 2002 than anticipated in response to a shortage of available
trailers caused by increased utilization of owner-operators by the Company.

The Company extended the useful lives and reduced the salvage value on
those groups of tractors that would have traded in 2002 under normal used
tractor market conditions. These extended lives (60 months) and reduced salvage
values (14 percent of original cost of equipment) yielded an increased
depreciation charge to pre-tax earnings in 2002 of approximately $0.4 million.
Extending the lives on tractors resulted in an increased charge to net income in
2002 for maintenance costs. The Company has instituted an aggressive trade
schedule in 2003 and plans to institute an aggressive trade schedule in 2004 to
reduce the average age of its tractor fleet and to resume trading most tractors
within 42 months from the date of purchase as it did prior to 2002. As the
average age of the tractor fleet decreases, these additional maintenance costs
will decrease as well.

During 2003 and 2004, the Company plans to acquire 754 and 1,169 new
tractors and 522 and 960 new trailers, respectively. These acquisitions and the
disposals during the year will result in net increases of 284 and 320 tractors
and net increases of 185 and 627 trailers, respectively. As of March 6, 2003,
contracts had been executed for the acquisition of all 754 tractors and 522
trailers to be acquired in 2003.

In April 2003, the Company will take delivery of its first tractors
with new exhaust gas recirculation ("EGR") engines. For additional information
regarding ECR engines, see "Business--Regulation" below.

INSURANCE

The primary risk areas in the motor carrier industry are cargo loss and
damage, personal injury, property damage and workers' compensation claims.
Management believes that its insurance coverages are sufficient in each of these
areas. The Company is qualified as a workers' compensation self-insurer in the
State of Arkansas, which is secured by a $0.2 million letter of credit and in
Louisiana, which is secured by a $0.1 million letter of credit. In June 1993,
the Company received federal authority to self-insure for cargo loss and damage
claims and for bodily injury and property damage ("BIPD") claims. These
self-insurance arrangements are secured by $1.01 million in letters of credit
with the Federal Highway Administration and an additional $0.85 million in
letters of credit with the Company's insurance carriers. The DOT temporarily
revoked the Company's authority as a self-insurer for cargo loss and damage
claims and for BIPD claims from January 6, 2003 until January 13, 2003 as
described in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Department of Transportation Compliance
Review."

In 2002, the Company changed its annual insurance renewal date from
January 1 to October 1. From January 1, 2002 to September 30, 2002, the
Company's self-insurance retention levels were $2.0 million for BIPD claims per
occurrence, $0.75 million for workers' compensation claims per occurrence, and
$0.1 million for cargo loss and damage claims per occurrence. The Company opted
to completely self-insure for physical damage to its tractors and trailers
during this period with the exception that the Company carried catastrophic
physical damage coverage to protect the Company against natural disasters. As of
October 1, 2002, the Company's worker's compensation, cargo loss and damage and
physical damage claims self-insurance retention levels remained unchanged.
However, the Company lowered its self-insured retention level with respect to
BIPD claims to $1.0 million per occurrence plus a 25% corridor per occurrence in
the $1.0 million to $3.0 million excess coverage layer. The Company has excess
general liability coverage in amounts substantially exceeding minimum legal
requirements and believed to be sufficient to protect the Company against
material loss.

5

COMPETITION

The trucking industry is highly competitive. It is characterized by
ease of entry and by many small carriers having revenues of less than $1 million
per year, with relatively few carriers being able to achieve revenues exceeding
$100 million per year. The principal means of competition in the truckload
segment of the industry are service and price, with rate discounting being
particularly intense during economic downturns. Although the Company competes
primarily on the basis of service rather than rates, rate discounting continues
to be a factor in obtaining and retaining business. Although the number of firms
competing in the truckload segment has increased dramatically since industry
deregulation in 1980, the industry continues to undergo a consolidation phase.
Furthermore, a depressed economy tends to increase both price and service
competition from alternative modes such as less-than-truckload carriers and
railroads. Management believes that further growth in the truckload segment of
the industry is likely to be achieved by acquiring greater market share rather
than through an increase in the size of the market.

USA Truck competes primarily with other truckload carriers and
shipper-owned fleets and, to a lesser extent, with railroads and
less-than-truckload carriers. A number of truckload carriers have greater
financial resources, own more revenue equipment and carry a larger volume of
freight than does the Company.

The Company also competes with truckload and less-than-truckload
carriers for qualified drivers. See "Business--Drivers and Other Personnel".

TRADEMARK

USA Truck's name and logo are registered with the United States Patent
and Trademark Office, the Canadian Trade Marks Office, and the Mexican
Industrial Property Institute. The USA Logistics Division's name and logo are
also registered with the United States Patent and Trademark Office. The Company
believes its trademarks have significant value and are important to its
marketing efforts. The trademark registration in each country is renewable
indefinitely at the option of the Company.

REGULATION

USA Truck is a motor carrier regulated by the DOT and other federal and
state agencies. The Company's business activities in the United States are
subject to broad federal, state and local laws and regulations beyond those
applicable to most business activities. These regulated business activities
include, among other things, service area, routes traveled, equipment
specifications, commodities transported, rates and charges, accounting systems,
financial reporting and insurance coverages. The Company's Canadian business
activities are subject to similar requirements imposed by the laws and
regulations of the Dominion of Canada and provincial laws and regulations.

Motor carrier operations are subject to safety requirements prescribed
by the DOT, governing interstate operation and by Canadian provincial
authorities. Matters such as weight and equipment dimensions are also subject to
federal, state and provincial regulations.

In April 2003, the Company will take delivery of its first tractors
with new EGR engines. These new engines are the product of lower emission
standards set forth by the Environmental Protection Agency and are required on
all class eight diesel engines produced in the United States effective October
1, 2002. The engine technology is designed to emit cleaner emissions by
recirculating exhaust gasses back through the engine instead of directly into
the atmosphere. The reliability, fuel efficiency and maintenance costs of the
new engines are relatively unknown because the engines have been re-engineered,
have more complex components and burn at hotter temperatures. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Protection Agency Engine Mandate".

The Company is subject to federal, state, provincial and local
environmental laws and regulations. Management believes that the Company is in
substantial compliance with such laws and regulations and that costs of such
compliance will not have a material adverse effect on its competitive position,
operations or financial condition or require a material increase in currently
anticipated capital expenditures.

SEASONALITY

See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Seasonality".

6

ITEM 2. PROPERTIES

The Company owns its headquarters in Van Buren, Arkansas, located on 63
acres. This site has approximately 84,000 square-foot of office, training and
driver housing space within two structures, a 12,000 square-foot maintenance
facility and a 2,500 square-foot dock. In 1997, the Company completed
construction of a 57,000 square-foot corporate headquarters next to its existing
headquarters facility in Van Buren, Arkansas. The previously existing 27,000
square-foot facility has been partially refurbished and will continue to be
refurbished over the next several years to house additional training,
maintenance and support services. This facility also contains aboveground fuel
tanks with a capacity of 40,000 gallons.

The Company owns and operates a maintenance and driver facility in West
Memphis, Arkansas, situated on roughly 32 acres with 29 acres of paved tractor
and trailer parking behind fence, a 17,200 square-foot shop, an eight-lane
drive-through fueling station containing aboveground fuel tanks with a capacity
of 37,000 gallons and drivers' sleeping quarters that can house 36 drivers. The
drivers' quarters also include a recruiting office and driver-training center
for new drivers. The Company owns 29 of the 32 acres and leases the remainder
under a long-term lease agreement with an initial term ending in November 2044.
Located at the intersection of I-40 and I-55, this facility is an ideal location
for these activities.

The Company owns and operates a maintenance and driver facility in
Shreveport, Louisiana, with 15 acres of paved tractor and trailer parking behind
fence, a 12,000 square-foot shop, a two-lane drive-through fueling station
containing aboveground fuel tanks with a capacity of 37,000 gallons and drivers'
sleeping quarters that can house 32 drivers. The drivers' quarters also include
a recruiting office and driver-training center for new drivers. The facility is
located on 20 acres of land owned by the Company near I-20 on US Hwy. 80.

The Company owns a maintenance and driver facility in Vandalia, Ohio,
with approximately eight acres of paved tractor and trailer parking behind
fence, a 2,400 square-foot shop, a one-lane drive-through fueling station
containing a belowground fuel tank with a capacity of 10,000 gallons and
drivers' sleeping quarters that can house 22 drivers. The facility is
strategically located near I-75 & I-70. The Company discontinued operations at
this facility upon the completion of a new maintenance and driver facility in
Butler Township, Ohio in April 2002, as described in the following paragraph.
This facility is currently for sale.

The Company completed construction on a new maintenance and driver
facility in Butler Township, Ohio in April 2002 located only 4 miles from its
Vandalia, Ohio facility. This facility is situated on 44 acres of land with 15
acres of paved tractor and trailer parking behind fence, a 21,000 square-foot
shop, a six-lane drive-through fueling station containing aboveground fuel tanks
with a capacity of 36,000 gallons and drivers' sleeping quarters that can house
21 drivers. The drivers' quarters also include a driver-training center for new
drivers. The facility is located near I-75 & I-70. The Company also has the
option to purchase nearly ten additional acres adjacent to the Butler Township
property. This option expires in late March 2003.

In November 2001, the Company signed a three-year lease agreement for
maintenance facilities in Bethel, Pennsylvania. This facility has approximately
ten acres of tractor and trailer parking and a 28,000 square-foot shop and
transfer building. The Company has two one-year options to renew the lease.

The Company leases, on a month-to-month basis, office facilities in
East Peoria, Illinois and office and parking facilities in Laredo, Texas and
Blue Island, Illinois.

Management believes that its facilities will be sufficient for its
operations at least through 2003.

See "Item 1. Business--Revenue Equipment and Maintenance" and "Item 1.
Business--Revenue Equipment Acquisition Program" for information regarding the
Company's revenue equipment.

ITEM 3. LEGAL PROCEEDINGS

The Company is a party to routine litigation incidental to its
business, primarily involving claims for personal injury and property damage
incurred in the transportation of freight. It maintains insurance covering
liabilities in excess of certain self insured retention levels resulting from
bodily injury and property damage claims. See "Item 1. Insurance" for
information regarding the Company's insurance claims. Though management believes
these claims to be routine and immaterial to the financial position of the
company, adverse results of one or more of these claims could have a material
adverse effect on the financial position or results of operations of the
Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company did not submit any matter to a vote of security holders
during the fourth quarter of the fiscal year covered by this Annual Report.

7

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock trades on The NASDAQ Stock Market under the
symbol: USAK. The following table sets forth the high and low closing sales
prices for the Company's Common Stock as reported by The NASDAQ Stock Market for
2002 and 2001.

As of February 19, 2003, there were 223 holders of record (including
brokerage firms and other nominees) of the Company's Common Stock. The Company
estimates that there were approximately 2,653 beneficial owners of the Common
Stock as of that date.

The Company has never paid a cash dividend on its Common Stock. It is
the current intention of the Company's Board of Directors to continue to retain
earnings to finance the growth of the Company rather than to pay cash dividends.
Any future payments of cash dividends will depend upon the financial condition,
results of operations and capital commitments of the Company as well as other
factors deemed relevant by the Board of Directors. Covenants contained in the
Senior Credit Facility may limit the Company's ability to pay dividends.

The following table represents the Company's equity compensation plans,
including both stockholder approved plans and non-stockholder approved plans.
The section entitled "Compensation of Directors" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 7, 2003
contains a summary explanation of the Nonemployee Director's Stock Option Plan,
which has been adopted without the approval of stockholders and is incorporated
herein by reference.

8

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth, for the periods and at the dates
indicated, selected financial data of the Company. The data should be read in
conjunction with the financial statements and related notes contained in Item 8
of this Annual Report and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

9

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

The Company's success depends on its ability to efficiently manage its
resources in the delivery of truckload transportation services to its customers.
Resource requirements vary with customer demand, which may be subject to
seasonal or general economic conditions. The Company's ability to adapt to
changes in customer transportation requirements is a key element in efficiently
deploying resources and in making capital investments in tractors and trailers.
Although the Company's business volume is not highly concentrated, the Company
may also be affected by the financial failure of its customers or a loss of a
customer's business from time-to-time.

The Company's greatest resource requirements include qualified drivers,
tractors, trailers and related costs of operating its equipment (such as diesel
fuel ("fuel") and related fuel taxes, driver pay, insurance and supplies and
maintenance). The Company has historically been successful mitigating its risk
to increases in fuel prices by recovering additional fuel surcharges from its
customers. The Company's financial results are also affected by availability of
qualified drivers and the market for new and used tractors and trailers. Because
the Company is completely self-insured for physical damage to its tractors and
trailers, with the exception that the Company carries catastrophic physical
damage coverage to protect the Company against natural disasters, and is
partially self-insured for cargo loss and damage, BIPD claims, and physical
damage claims on its trucks and for workers' compensation benefits for its
employees (supplemented by premium-based coverage above certain dollar levels),
financial results may also be affected by driver safety, medical costs, the
weather, the legal and regulatory environment, and the costs of insurance
coverage to protect against catastrophic losses.

The most significant accounting policies and estimates that affect our
financial statements include the following:

(1) Selections of estimated useful lives and salvage values for
purposes of depreciating tractors and trailers. Depreciable
lives of tractors and trailers range from 3 years to 10 years.
Estimates of salvage value at the expected date of trade-in or
sale (for example 3.5 years for a tractor) are based on the
expected market values of equipment at the time of disposal.

(2) Estimates of accrued liabilities for liability insurance
claims, physical damage losses and workers' compensation. The
insurance and claims accruals (current and long-term) are
recorded at the estimated ultimate payment amounts and are
based upon individual case estimates, including negative
development, and estimates of incurred-but-not-reported losses
based upon past experience.

(3) Revenues are recognized based on a method whereby revenue is
allocated between fiscal years based on relative transit time
in each period and direct expenses are expensed as incurred.

Management periodically re-evaluates these estimates as events and
circumstances change. Together with the effects of the matters discussed above,
these factors may significantly impact the Company's results of operations from
period-to-period.

10

RESULTS OF OPERATIONS

The following table sets forth the percentage relationship of certain
items to operating revenues, before fuel surcharge, for the years indicated:

(1) Net of fuel surcharge

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

Operating revenues, before fuel surcharge, increased 9.9% to $268.5
million in 2002 from $244.4 million in 2001. The Company believes this increase
is due primarily to an increase of 7.5% in the average number of tractors
operated from 1,751 (including 25 owner-operators) in 2001 to 1,882 (including
74 owner-operators) in 2002 and to a 162.2% increase in 3PL and brokerage
revenues to $16.5 million in 2002 from $6.3 million for 2001 and, to a lesser
extent, the increase in the average revenue per mile. Direct expenses associated
with 3PL and brokerage revenues and owner-operator fees comprise purchased
transportation expense. Average revenue per mile (exclusive of fuel surcharge)
increased to $1.209 in 2002 from $1.155 in 2001 primarily due to the
abovementioned increase in 3PL and brokerage revenues and, to a lesser extent,
an increase in the average rate per mile charged. The number of shipments
increased 9.6% to 253,063 in 2002 from 231,002 in 2001. Miles per tractor per
week decreased 1.4% from 2,364 in 2001 to 2,332 in 2002 primarily due to an
increase in the percentage of unmanned tractors from 1.2% of the fleet in 2001
to 5.9% of the fleet in 2002. The increase in the percentage of unmanned
tractors was primarily the result of an increase in the number of Company-owned
tractors and driver turnover exceeding the number of drivers hired. The empty
mile factor decreased to 9.24% of paid miles in 2002 from 9.82% of paid miles in
2001. The decreased empty mile factor was primarily the result of improved
freight demand in the Company's operating areas and, to a lesser extent, reduced
quantities of inbound loads into areas where there are few available outbound
loads.

Operating expenses and costs as a percentage of revenues, before fuel
surcharge, decreased to 96.5% in 2002 from 97.4% in 2001.

11

The decrease in salaries, wages and employee benefits costs, as a
percentage of revenue, before fuel surcharge, was primarily the result of the
Company implementing a per diem pay program for its drivers during April 2002
and increases in 3PL and brokerage revenues and the Company's owner-operator
fleet. The average number of owner-operators in the Company's fleet increased
from 25 in 2001 to 74 in 2002.

The decrease in fuel and fuel taxes costs, as a percentage of revenue,
before fuel surcharge, was primarily due to a decrease in fuel prices and the
abovementioned increases in 3PL and brokerage revenues and the Company's
owner-operator fleet.

The decrease in depreciation and amortization expense, as a percentage
of revenue, before fuel surcharge, was primarily the result of the
abovementioned increases in 3PL and brokerage revenues and the Company's
owner-operator fleet. These increases were partially offset by slightly higher
depreciation expense on extended lived tractors (See "Item 1. Business--Revenue
Equipment Acquisition Program").

The increase in purchased transportation costs, as a percentage of
revenue, before fuel surcharge, was primarily due to the abovementioned
increases in 3PL and brokerage revenues and the Company's owner-operator fleet
described above.

The decrease in operations and maintenance costs, as a percentage of
revenue, before fuel surcharge, was primarily the result of the abovementioned
increases in 3PL and brokerage revenues and the Company's owner-operator fleet
and a reduction in operations and maintenance costs per Company-owned tractor.
The reduction in operations and maintenance costs per Company-owned tractor is
due to the Company performing a greater percentage of maintenance work at its
terminal facilities and implementing more cost effective methods for purchasing
tires and equipment parts.

The increase in insurance and claims costs, as a percentage of revenue,
before of fuel surcharge, was primarily due to a 322.7% increase in liability,
cargo and workers' compensation insurance premiums in 2002 compared to 2001 and,
to a lesser extent, a 134.9% increase in adverse claims accruals for 2002
compared to 2001. These increases were partially offset by the abovementioned
increases in 3PL and brokerage revenues and the Company's owner-operator fleet.

As a result of the foregoing factors, operating income increased 43.5%
to $9.3 million, or 3.5% of revenue, before fuel surcharge, in 2002 from $6.5
million, or 2.7% of revenue, before fuel surcharge, in 2001.

Interest expense decreased to $3.1 million in 2002 from $4.3 million in
2001, resulting primarily from interest rate decreases on the Company's Senior
Credit Facility (as defined under "Liquidity and Capital Resources" herein) and,
to a lesser extent, from a decrease in average borrowings under the Company's
Senior Credit Facility described under the "Liquidity and Capital Resources"
section herein.

As a result of the above factors, income before taxes increased to $6.4
million, or 2.4% of revenue, before fuel surcharge, in 2002 from $1.8 million,
or 0.7% of revenue, before fuel surcharge, in 2001.

The Company's effective tax rate was 59.1% in 2002 and 38.9% in 2001.
The effective rates varied from the statutory Federal tax rate of 34% primarily
due to state income taxes and certain non-deductible expenses including a per
diem pay structure implemented by the Company during the second quarter of 2002.
Due to the nondeductible effect of per diem, the Company's tax rate will
fluctuate in future periods as earnings fluctuate.

As a result of the aforementioned factors, net income increased to $2.6
million, or 1.0% of revenue, before fuel surcharge, in 2002 from $1.1 million,
or 0.4% of revenue, before fuel surcharge in 2001, representing an increase in
diluted net income per share to $.28 in 2002 from $.12 in 2001. The number of
shares used in the calculation of diluted net income per share for 2002 and 2001
were 9,347,560 and 9,279,268, respectively.

The principal means of competition in the truckload segment of the
industry are service and rates, with rate discounting being particularly intense
during economic downturns in order to maintain desired revenue levels. Although
the Company competes primarily on the basis of its service provided to its
customers rather than rates charged, rate discounting continues to be a factor
in obtaining and retaining business. The number of firms competing in the
truckload segment of the industry has increased dramatically since the
deregulation of the industry in 1980. Also, a depressed economy tends to
increase the competitive pressure placed on rate and service from alternative
modes of transportation such as less-than-truckload and railroads. The Company's
management believes

12

that the truckload segment of the market has reached a certain level of maturity
as the market exists currently and that the Company's further growth in the
truckload segment of the industry is likely to be attained by increasing its
market share rather than through an increase in the overall size of the market.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Operating revenues, before fuel surcharge, increased 11.8% to $244.4
million in 2001 from $218.6 million in 2000. The Company believes this increase
is due primarily to the reduction in unmanned tractors, additional business from
existing customers and, to a lesser extent, the marketing efforts by the
Company's logistics division. All expenses associated with 3PL and brokerage
revenues and owner-operator fees comprise purchased transportation expense.
Average revenue per mile (exclusive of fuel surcharge) increased to $1.155 in
2001 from $1.143 in 2000 primarily due to an increase in brokerage and 3PL
revenue. The empty mile factor increased to 9.82% of paid miles in 2001 from
9.16% of paid miles in 2000 primarily due to soft freight demand in 2001 and, to
a lesser extent, to the decrease in the average length of haul to 826 miles per
shipment in 2001 from 871 miles per shipment in 2000. There was a 15.7% increase
in the number of shipments to 231,002 in 2001 from 199,611 in 2000. This volume
improvement was made possible primarily by the fact that the number of unmanned
tractors dramatically declined to 1.2% of the fleet in 2001 from 9.2% of the
fleet in 2000 and, to a lesser extent, by a 2.1% increase in the average number
of tractors owned during the year from 1,740 in 2000 to 1,751 during 2001. The
net effect of the volume increase and the Company's continuing fleet expansion
was a 7.9% increase in miles per tractor per week from 2,190 in 2000 to 2,364 in
2001.

Operating expenses and costs as a percentage of revenues, before fuel
surcharge, remained unchanged at 97.4% in 2001 from 97.4% in 2000.

The increase in salaries, wages and employee benefits cost, as a
percentage of revenue, before fuel surcharge, was primarily the result of an
11.6% increase in driver wages from $.318 per mile in 2000 to $.356 in 2001.
This increase was partially offset by a 2.7% decrease in salaries, wages and
employee benefits, as a percentage of revenue, before fuel surcharge, other than
driver wages.

The decrease in fuel and fuel taxes costs, as a percentage of revenue,
before fuel surcharge, was primarily the result of a 10.4% decrease in fuel cost
resulting from a $.098 decrease in the average price per gallon in 2001 from
2000 and an improvement in fuel efficiency to 6.43 miles per gallon in 2001 from
6.31 miles per gallon in 2000. Fuel efficiency is affected by several factors
including tractor idle time management, driver quality, engine technology and
weather conditions in North America.

The decrease in depreciation and amortization expense, as a percentage
of revenue, before fuel surcharge, resulted from a 7.9% increase in tractor
utilization from 2000 to 2001, as mentioned above, and a 0.7% increase in
revenue per mile partially offset by slightly higher depreciation rates on
certain groups of equipment.

The increase in purchased transportation costs, as a percentage of
revenue, before fuel surcharge, was primarily due to the abovementioned
increases in brokerage and 3PL revenue described above.

The decrease in insurance and claims costs, as a percentage of revenue,
before fuel surcharge, resulted from a 25.9% decrease in the number of accidents
from 3,142 in 2000 to 2,328 in 2001 despite a 10.6% increase in fleet miles.

The decrease in other expenses, as a percentage of revenue, before fuel
surcharge, resulted primarily from reduced recruiting and training costs brought
about by a lower driver turnover rate and a more competitive driver compensation
program.

As a result of the foregoing factors, operating income increased 11.9%
to $6.5 million, or 2.6% of revenue, before fuel surcharge, in 2001 from $5.8
million or, 2.6% of revenues, before fuel surcharge, in 2000.

13

Interest expense decreased to $4.3 million in 2001 from $5.4 million in
2000, resulting primarily from significantly lower outstanding debt balances and
lower interest rates.

The Company had other income, net of $148,000 during 2001 compared to
other expenses, net of $83,000 in 2000. This increase in other income, net was
due to a variety of factors, no single one of which accounted for more than half
of the increase.

As a result of the above factors, income before taxes increased to $1.8
million, or 0.7% of revenue, before fuel surcharge, in 2001 from $0.2 million,
or 0.1% of revenue, before fuel surcharge, in 2000.

The Company's effective tax rate was 38.9% in 2001 and 39.2% in 2000.
The effective rates varied from the statutory Federal tax rate of 34% primarily
due to state income taxes and certain non-deductible expenses.

As a result of the aforementioned factors, net income increased to $1.1
million, or 0.4% of revenue, before fuel surcharge, in 2001 from $0.1 million,
or 0.01% of revenue, before fuel surcharge in 2000, representing an increase in
diluted net income per share to $.12 in 2001 from $.01 in 2000. The number of
shares used in the calculation of diluted net income per share for 2001 and 2000
were 9,279,268 and 9,260,044, respectively.

INFLATION

The effect of inflation on revenue and operating costs has been minimal
in recent years. Most of the Company's operating expenses are inflation
sensitive, with increases in inflation generally resulting in increased
operating costs and expenses. The effect of inflation-driven cost increases on
the Company's overall operating costs would not be expected to be greater for
the Company than for its competitors.

SEASONALITY

In the trucking industry generally, revenues decrease as customers
reduce shipments during the winter holiday season and as inclement weather
impedes operations. At the same time, operating expenses increase, due primarily
to decreased fuel efficiency and increased maintenance costs. Future revenues
could be impacted if customers reduce shipments due to temporary plant closings,
which historically have occurred during July and December.

FUEL AVAILABILITY AND COST

The motor carrier industry is dependent upon the availability of fuel,
and fuel shortages or increases in fuel taxes or fuel costs have adversely
affected, and may in the future adversely affect the profitability of USA Truck,
Inc. Fuel prices have fluctuated widely and fuel taxes have generally increased
in recent years. The Company has not experienced difficulty in maintaining
necessary fuel supplies, and in the past the Company generally has been able to
recover most of the increases in fuel costs and fuel taxes from customers
through increased freight rates. Overall, the Company experienced lower fuel
prices in 2002, however, fuel prices increased throughout the year. There also
can be no assurance that the Company will be able to recover any future
increases in fuel costs and fuel taxes through increased rates.

OPERATIONAL DATA

The following table sets forth certain operational information for the
last three fiscal years:

14

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not currently have any off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on the
Company's financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.

LIQUIDITY AND CAPITAL RESOURCES

On April 28, 2000, the Company signed the Senior Credit Facility that
provides a working capital line of credit of $60.0 million, including letters of
credit not exceeding $5.0 million. Bank of America, N.A. is the agent bank and
SunTrust Bank and U.S. Bank (formerly Firstar Bank, N.A.) are participants in
the Senior Credit Facility. As of December 31, 2002, approximately $33.7 million
was available under the Senior Credit Facility. The Senior Credit Facility
matures on April 28, 2005. At any time prior to April 28, 2005, subject to
certain conditions, the balance outstanding on the Senior Credit Facility may be
converted, at the Company's option, to a four-year term loan requiring 48 equal
monthly principal payments plus interest. The Senior Credit Facility bears
variable interest based on the lenders prime rate, or federal funds rate plus a
certain percentage or LIBOR plus a certain percentage, which is determined based
on the Company's attainment of certain financial ratios. The effective interest
rate on the Company's borrowings under the credit facility for the year ended
December 31, 2002 was 3.98%. A quarterly commitment fee is payable on the unused
credit line and bears a rate which is determined based on the Company's
attainment of certain financial ratios. As of December 31, 2002 the rate was
0.20%. This credit facility is collateralized by accounts receivable and all
otherwise unencumbered equipment (See Note 4 to the Financial Statements). On
March 30, 2001, the Company amended its Senior Credit Facility to modify the
covenants and more accurately align them with the Company's recent operating
performance resulting from the general economic conditions in the truckload
market. The Company modified its grid pricing which is based on certain
financial ratios. The amended applicable rate increments were increased slightly
for certain financial ratios. The Company does not expect the increase in rates
to have a significant impact on the Company's financial statements.

The continued growth of the Company's business has required significant
investments in new equipment. The Company has financed revenue equipment
purchases with cash flows from operations and through borrowings under the
Senior Credit Facility and capital lease-purchase arrangements. The Company has
historically met its working capital needs with cash flows from operations and
occasionally with borrowings under the Senior Credit Facility. The Company uses
the Senior Credit Facility to minimize fluctuations in cash flow needs and to
provide flexibility in financing revenue equipment purchases. Cash flows from
operations were $32.9 million for 2002 and $36.0 million for 2001.

As of December 31, 2002, capital leases in the aggregate principal
amount of $18.3 million were outstanding under lease commitments that expired
prior to January 1, 2002 with an average interest rate of 5.43% per annum.

On January 6, 2000, the Company entered into a lease commitment
agreement (the "2000 Equipment TRAC Lease Commitment A") to facilitate the
leasing of tractors. The 2000 Equipment TRAC Lease Commitment A was amended on
November 7, 2000 to provide for a maximum borrowing amount of approximately
$16.5 million through the end of 2001. The 2000 Equipment TRAC Lease Commitment
A was amended again on November 5, 2001 to provide for a maximum borrowing
amount of $5.5 million during the calendar year 2002. The 2000 Equipment TRAC
Lease Commitment A was amended a third time on November 6, 2002 to provide for a
maximum borrowing amount of $10.0 million during the calendar year 2003. Each
capital lease under this lease commitment has a repayment period of 42 months.
Borrowings are limited based on the principal amounts outstanding under capital
leases entered into under the current amendment to this lease commitment. During
2002, the Company entered into capital leases under this lease commitment in the
amount of $5.2 million. As of December 31, 2002, $10.0 million remained
available under the 2000 Equipment TRAC Lease Commitment A. The interest rate on
the capital leases under this lease commitment fluctuates in relation to the
interest rate for the three-year Treasury Note as published in The Wall Street
Journal and is fixed upon execution of each lease. As of December 31, 2002,
capital leases in the aggregate principal amount of $14.6 million were
outstanding under this lease commitment with an average interest rate of 4.95%
per annum.

On November 5, 2001, the Company entered into a lease commitment
agreement (the "2002 Equipment TRAC Lease Commitment A"), to facilitate the
leasing of tractors. The 2002 Equipment TRAC Lease Commitment A provided for a
maximum borrowing amount of approximately $5.5 million during the calendar year
2002. Each capital lease under this lease commitment has a repayment period of
42 months. Borrowings are limited based on the principal amounts outstanding
under capital leases entered into under this lease commitment. During 2002, the
Company entered into capital leases under this lease commitment in the amount of
$5.5 million. As of December 31,

15

2002, no funds remained available under the 2002 Equipment TRAC Lease Commitment
A. The interest rate on the capital leases under this lease commitment
fluctuates in relation to either the interest rate for the three-year Treasury
Note or the one year LIBOR as published in The Wall Street Journal, whichever
provides for the higher interest rate, and is fixed upon execution of a lease.
As of December 31, 2002, capital leases in the aggregate principal amount of
$4.7 million were outstanding under this lease commitment with an average
interest rate of 4.35% per annum.

On November 8, 2001, the Company entered into a lease commitment
agreement (the "2002 Equipment TRAC Lease Commitment B"), to facilitate the
leasing of tractors. The 2002 Equipment TRAC Lease Commitment B provided for a
maximum borrowing amount of approximately $7.0 million during the calendar year
2002. Each capital lease under this lease commitment has a repayment period of
42 months. Borrowings are limited based on the principal amounts outstanding
under capital leases entered into under this lease commitment. During 2002, the
Company entered into capital leases under this lease commitment in the amount of
$6.2 million. As of December 31, 2002, no funds remained available under the
2002 Equipment TRAC Lease Commitment B. The interest rate on the capital leases
under this lease commitment fluctuates in relation to lessor's cost of funds and
is fixed upon execution of a lease. As of December 31, 2002, capital leases in
the aggregate principal amount of $6.1 million were outstanding under this lease
commitment with an average interest rate of 3.27% per annum.

On November 5, 2002, the Company entered into a lease commitment
agreement (the "2003 Equipment TRAC Lease Commitment A"), to facilitate the
leasing of tractors. The 2003 Equipment TRAC Lease Commitment A provides for a
maximum borrowing amount of approximately $5.0 million during the calendar year
2003. Each capital lease under this lease commitment has a repayment period of
42 months. Borrowings are limited based on the principal amounts outstanding
under capital leases entered into under this lease commitment. The interest rate
on the capital leases under this lease commitment fluctuates in relation to
either the interest rate for the three-year Treasury Note or the one year LIBOR
as published in The Wall Street Journal, whichever provides for the higher
interest rate, and is fixed upon execution of a lease.

On November 5, 2002, the Company entered into a lease commitment
agreement (the "2003 Equipment TRAC Lease Commitment B"), to facilitate the
leasing of tractors. The 2003 Equipment TRAC Lease Commitment B provides for a
maximum borrowing amount of approximately $10.0 million during the calendar year
2003. Each capital lease under this lease commitment has a repayment period of
42 months. Borrowings are limited based on the principal amounts outstanding
under capital leases entered into under this lease commitment. The interest rate
on the capital leases under this lease commitment fluctuates in relation to
lessor's cost of funds and is fixed upon execution of a lease.

On November 27, 2002, the Company entered into a lease commitment
agreement (the "2003 Equipment TRAC Lease Commitment C"), to facilitate the
leasing of tractors. The 2003 Equipment TRAC Lease Commitment C provides for a
maximum borrowing amount of approximately $12.0 million during the calendar year
2003. Each capital lease under this lease commitment has a repayment period of
42 months. Borrowings are limited based on the principal amounts outstanding
under capital leases entered into under this lease commitment. The interest rate
on the capital leases under this lease commitment fluctuates in relation to the
interest rate for the three-year Treasury Note as published in the Federal
Reserve Statistical Release H.15 and is fixed upon execution of a lease.

As of December 31, 2002, the Company had debt obligations under the
above-listed lease commitments of approximately $43.7 million. During 2002, the
Company made borrowings under these lease commitments of $16.9 million, while
retiring $16.7 million in debt under these lease commitments. During 2003, the
Company may borrow up to $37.0 million under these lease commitments.

As of December 31, 2002, the Company had debt obligations of
approximately $68.6 million, including amounts borrowed under the Senior Credit
Facility and capital leases described above, of which approximately $19.1
million were current obligations. During 2002, the Company made borrowings under
the Senior Credit Facility of $60.6 million, while retiring $78.4 million in
debt under the Senior Credit Facility and the other debt facilities described
above. The retired debt had an average interest rate of approximately 4.34%.

During the years 2003 and 2004, the Company plans to make approximately
$183.5 million in capital expenditures. At December 31, 2002, the Company was
committed to spend $58.5 million and budgeted to spend an additional $15.3
million of this amount for revenue equipment in 2003, and the Company was
committed to spend $16.1 million and budgeted to spend an additional $93.0
million of this amount for revenue equipment in 2004. The commitments to
purchase revenue equipment are cancelable by the Company if certain conditions
are met. The

16

balance of the expected capital expenditures of $0.6 million will be used for
maintenance and office equipment and facility improvements.

The Senior Credit Facility, the 2000 TRAC Lease Commitment A, the 2003
TRAC Lease Commitment A, the 2003 TRAC Lease Commitment B and the 2003 TRAC
Lease Commitment C equipment leases and cash flows from operations should be
adequate to fund the Company's operations and expansion plans through the end of
2003. There can be no assurance, however, that such sources will be sufficient
to fund Company operations and all expansion plans through such date, or that
any necessary additional financing will be available at all, much less in
amounts required or on terms satisfactory to the Company. The Company expects to
continue to fund its operations with cash flows from operations, the Senior
Credit Facility, and the 2000 TRAC Lease Commitment A, the 2003 TRAC Lease
Commitment A, the 2003 TRAC Lease Commitment B and the 2003 TRAC Lease
Commitment C equipment leases for the foreseeable future.

See "Item 1. Business--Revenue Equipment Acquisition Program."

On July 9, 1998, the Company's Board of Directors authorized the
Company to purchase up to 500,000 shares of its outstanding common stock over a
three-year period ending September 30, 2001 dependent upon market conditions.
Common stock purchases under the authorization could be made from time to time
on the open market or in privately negotiated transactions at prices determined
by the Chairman of the Board or President of the Company. During the period the
Company had purchased 289,800 shares pursuant to this authorization at an
aggregate purchase price of $2.5 million. The Board of Directors has authorized
the retirement of 241,733 shares of treasury stock that had been purchased at an
aggregate cost of $2.1 million. In addition, as of December 31, 2002, 41,812 of
the remaining 48,067 repurchased shares had been resold under the Company's
Employee Stock Purchase Plan.

On October 17, 2001, the Company announced that its Board of Directors
had authorized the Company to purchase up to 500,000 shares of its outstanding
common stock over a three-year period dependent upon market conditions. Common
stock purchases under the authorization may be made from time to time on the
open market or in privately negotiated transactions at prices determined by the
Chairman of the Board or President of the Company. The Company may purchase
shares in the future if, in the view of management, the common stock is
undervalued relative to the Company's performance and prospects for continued
growth. Any such purchases would be funded with cash flows from operations or
the Senior Credit Facility. As of December 31, 2002, no shares had been
purchased pursuant to this authorization.

The following table represents the Company's outstanding contractual
obligations at December 31, 2002, excluding letters of credit.

(1) Long-Term Debt Obligations consist of the Company's Senior Credit Facility
that matures on April 28, 2005 as described above in Liquidity and Capital
Resources.

NEW ACCOUNTING PRONOUNCEMENTS

See "Item 8. Financial Statements and Supplementary Data--Note 1. to
the Financial Statements: Summary of Significant Accounting Policies."

DEPARTMENT OF TRANSPORTATION COMPLIANCE REVIEW

A DOT compliance review of the Company took place in late 2002 and
revealed deficiencies in the Company's safety and compliance program. As a
result, the DOT downgraded the Company's Satisfactory safety rating to a
Conditional safety rating on November 22, 2002.

17

The Company took the review very seriously and immediately began
necessary actions to correct the review deficiencies, which resulted in the DOT
reinstating the Company's Satisfactory safety rating on January 13, 2003 after
performing a follow-up compliance review in early January 2003. As a result of
the temporary Conditional safety rating, the Company lost its authority to
self-insure for cargo loss and damage claims and for BIPD claims from January 6,
2003 to January 13, 2003, as described in "Item 1. Business--Insurance."
According to DOT regulations, a carrier's authority as a self-insurer must be
revoked on the 45th day following the date it receives a less than Satisfactory
safety rating. By the end of those 45 days, the carrier must obtain first-dollar
insurance for all self-insured retention levels. The Company had such insurance
in place on January 6, 2003. Once the Company's Satisfactory safety rating was
reinstated, the Company immediately reapplied for authorization to self-insure
for cargo loss and damage claims and for BIPD claims. That authorization was
granted effective January 13, 2003.

ENVIRONMENTAL PROTECTION AGENCY ENGINE MANDATE

In April 2003, the Company will take delivery of its first tractors
with new EGR engines. See "Item 1. Business--Regulation" for details regarding
the new engines. The increased cost of tractors equipped with EGR engines that
the Company has committed to purchase in 2003 will yield an increased
depreciation charge to pre-tax earnings of approximately $0.2 million in 2003
and $0.7 million in 2004. Although there is a possibility of increased
maintenance cost, management does not expect this to have a material impact on
financial performance of the Company.

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements and information that
are based on management's current beliefs and expectations and assumptions made
by it based upon information currently available. Forward-looking statements
include statements relating to the Company's plans, strategies, objectives,
expectations, intentions, and adequacy of resources, may be identified by words
such as "will", "could", "should", "believe", "expect", "intend", "plan",
"schedule", "estimate", "project" and similar expressions. These statements are
based on current expectations and are subject to uncertainty and change.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will be realized. Should one or more of the risks or uncertainties
underlying such expectations materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those expected. Among the key
factors that are not within the Company's control and that may have a direct
bearing on operating results are increases in fuel prices, adverse weather
conditions and the impact of increased rate competition. The Company's results
may also be significantly affected by fluctuations in general economic
conditions, as the Company's utilization rates are directly related to business
levels of shippers in a variety of industries. In addition, shortages of
qualified drivers and intense or increased competition for drivers may adversely
impact the Company's operating results and its ability to grow. Results for any
specific period could also be affected by various unforeseen events, such as
unusual levels of equipment failure or vehicle accident claims.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As reported in the notes to the financial statements and in the
Liquidity and Capital Resources section of this Form 10-K, as of April 28, 2000,
the Company entered into the Senior Credit Facility with a multi-bank group. The
Senior Credit Facility agreement provides for borrowings that bear interest at
variable rates based on either a prime rate or the LIBOR. At December 31, 2002,
the Company had $24.9 million outstanding pursuant to the Senior Credit
Facility. At December 31, 2002, the Company also had $43.7 million outstanding
pursuant to capital lease obligations. However, the interest rates on these
capital leases are fixed upon execution of each lease. If interest rates on
the Company's existing variable rate debt were to increase by 10% from their
December 31, 2002 rates for the next 12 months, the Company's interest expense
would increase by $0.1 million for that time period. The Company believes that
such an increase in interest rates would not have a material effect on the
Company's financial position, results of operations and cash flows.

All customers are required to pay for the Company's services in U.S.
dollars. Although the Canadian Government makes certain payments, such as tax
refunds, to the Company in Canadian dollars, any foreign currency exchange risk
associated with such payments is insignificant.

The Company does not engage in hedging transactions relating to fuel or
any other commodity.

18

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

USA TRUCK, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2002

INDEX TO FINANCIAL STATEMENTS

19

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
USA Truck, Inc.

We have audited the accompanying consolidated balance sheets of USA Truck, Inc.
and subsidiaries as at December 31, 2002 and 2001, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 2002. Our audits also included the
financial statement schedules listed in the Index at Item 14(a). These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of USA Truck, Inc. at December 31,
2002 and 2001, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Little Rock, Arkansas
January 22, 2003

20

USA TRUCK, INC.

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

21

USA TRUCK, INC.
CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes.

22

USA TRUCK, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See accompanying notes.

23

USA TRUCK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

24

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2002

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

USA Truck, Inc. ("the Company"), operates as a truckload motor carrier with
operating authority to provide service throughout the continental United States
and parts of Canada and Mexico.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All intercompany accounts and significant
intercompany transactions have been eliminated in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates its
fair value.

CONCENTRATION OF CREDIT RISK

The Company performs ongoing credit evaluations and generally does not require
collateral. The Company maintains reserves for potential credit losses. Such
losses have been within management's expectations. Accounts receivable are
comprised of a diversified customer base that results in a lack of concentration
of credit risk.

USE OF 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. Actual results could differ from those estimates.

INVENTORIES

Inventories consist primarily of tires, fuel and supplies and are stated at the
lower of cost (first-in, first-out basis) or market.

INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets include temporary differences
relating to depreciation, capitalized leases and certain revenues and expenses.

25

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. For financial reporting purposes,
the cost of such property is depreciated principally by the straight-line method
using the following estimated useful lives: structures - 5 to 39.5 years;
revenue equipment - 3 to 10 years; and service, office and other equipment - 3
to 20 years. Gains and losses on asset sales are reflected in the year of
disposal. Trade-in allowances in excess of book value of revenue equipment are
accounted for by adjusting the cost of assets acquired. Tires purchased with
revenue equipment are capitalized as a part of the cost of such equipment, with
replacement tires being inventoried and expensed when placed in service.

During 2000, the Company made certain changes in the estimated lives and salvage
values of certain revenue equipment to better reflect the Company's experience
as to service lives and resale values of that revenue equipment. Effective June
1, 2000, the Company changed the estimated lives and salvage values of its
trailers. This change decreased depreciation expense by approximately $563,500
during 2000. Effective October 1, 2000, the Company changed the salvage values
of certain types of its tractors. This change increased depreciation expense by
approximately $200,000 during 2000. During 2002, the Company lowered the salvage
value and extended the lives on a group of tractors from 42 months to 60 months.
These extended lives and reduced salvage values yielded an increased
depreciation charge of $400,000 in 2002.

CLAIMS LIABILITIES

The Company is self-insured up to certain limits for bodily injury, property
damage, workers' compensation, and cargo loss and damage claims. Provisions are
made for both the estimated liabilities for known claims as incurred and
estimates for those incurred but not reported. As of December 31, 2002, the
Company was self-insured up to the first $1,000,000 per occurrence for bodily
injury and property damage, up to $750,000 for workers' compensation claims, and
up to $100,000 per occurrence for cargo loss and damage claims. The Company also
is responsible for 25% of the next $2,000,000 per occurrence for bodily injury
and property damage claims. For the period January 1, 2002 to September 30,
2002, the Company was self-insured up to $2,000,000 per occurrence for bodily
injury and property damage, up to $750,000 for workers' compensation claims, and
up to $100,000 per occurrence for cargo loss and damage claims at December 31,
2002. These self-insurance arrangements are secured by $1,410,000 in letters of
credit.

COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE

The Company accounts for internally developed software in accordance with
Statement of Position No. 98-1 ("SOP 98-1"), Accounting for Cost of Computer
Software Developed for or Obtained for Internal Use. As a result, the Company
capitalizes qualifying computer software costs incurred during the "application
development stage." For financial reporting purposes, capitalized software costs
are amortized by the straight-line method over 60 months. The amount of costs
capitalized within any period is dependent on the nature of software development
activities and projects in each period.

26

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

Revenues are recognized based on a method whereby revenue is allocated between
reporting periods based on relative transit time in each period and direct
expenses are expensed as incurred.

ADVERTISING COSTS

The Company expenses advertising costs as they are incurred. Total advertising
costs for the period ended December 31, 2002, 2001 and 2000 were $2,345,000,
$1,337,000, and $1,770,000 respectively.

STOCK BASED COMPENSATION

Stock based compensation to employees is accounted for based on the intrinsic
value method under Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25"). Under APB 25, if the exercise price of
employee stock options equals the market price of the underlying stock on the
grant date, no compensation expense is recorded. The Company has adopted the
disclosure - only provisions of Statement of Financial Accounting Standards
("SFAS") No. 123, Accounting for Stock-Based Compensation ("SFAS 123").

Since the Company has adopted the disclosure-only provisions of SFAS 123, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the Company's two stock option plans been determined based
on the fair value at the grant date for awards in 2002, 2001 and 2000 consistent
with the provisions of SFAS 123, the Company's pro forma net income would have
been as follows:

EARNINGS PER SHARE

Earnings per share amounts are computed based on SFAS No. 128, Earnings per
Share. Basic earnings per share is computed based on the weighted average number
of shares of common stock outstanding during the year excluding any dilutive
effects of options. Diluted earnings per share is computed by adjusting the
weighted average shares outstanding by common stock equivalents attributable to
dilutive options.

RECLASSIFICATIONS

Certain reclassifications have been made in the prior year's financial
statements to conform to the current year's presentation.

27

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board issued SFAS No. 146
Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146").
SFAS 146 supersedes Emerging Issues Task Force ("EITF") Issue No. 94-3. The
principal difference between SFAS 146 and EITF Issue No. 94-3 relates to when an
entity can recognize a liability related to exit or disposal activities. SFAS
146 requires that a liability be recognized for a cost associated with an exit
or disposal activity when the liability is incurred. EITF Issue No. 94-3 allowed
a liability related to an exit or disposal activity to be recognized at the date
an entity commits to an exit plan. The provisions of SFAS 146 are effective for
all exit or disposal activities initiated after January 1, 2003. This statement
is not expected to have a material impact on the Company.

On December 31, 2002, the Financial Accounting Standards Board issued SFAS No.
148 ("SFAS 148"), Accounting for Stock-Based Compensation - Transition and
Disclosure. SFAS 148 amends SFAS 123, Accounting for Stock-Based Compensation,
to provide alternative methods of transition to the fair value method of
accounting for stock-based employee compensation. In addition, SFAS 148
amendment of the transition and annual disclosure provisions of SFAS 123 is
effective for the Company for their year ending after December 31, 2002, The
disclosure requirements for interim financial statements containing condensed
consolidated financial statements are effective for interim periods beginning in
2003. The Company does not intend on adopting the fair value method of
accounting for stock-based compensation of SFAS 123 and accordingly SFAS 148 is
not expected to have a material impact on the Company's reported results of
operations or financial position in 2003.

2. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

3. ACCRUED EXPENSES

Accrued expenses consist of the following:

28

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consists of the following:

(1) The Company's revolving credit agreement ("the Senior Credit
Facility"), effective April 28, 2000, provides for available
borrowings of $60,000,000, including letters of credit not
exceeding $5,000,000. The Senior Credit Facility matures on
April 28, 2005, prior to which time, subject to certain
conditions, the remaining balance may be converted at any time
at the Company's option to a term loan requiring forty-eight
equal monthly principal payments plus interest. The credit
facility bears variable interest based on the lenders prime
rate, or federal funds rate plus a certain percentage or LIBOR
plus a certain percentage, which is determined based on the
Company's attainment of certain financial ratios. The
effective interest rate on the Company's borrowings under the
credit facility for the year ended December 31, 2002 was
3.98%. A quarterly commitment fee is payable on the unused
portion of the credit line and bears a rate which is
determined based on the Company's attainment of certain
financial ratios. At December 31, 2002, the rate was .20% per
annum. The Senior Credit Facility is collateralized by
accounts receivable and all otherwise unencumbered equipment.
The Company has outstanding letters of credit of approximately
$1,410,000 at December 31, 2002.

The Senior Credit Facility requires the Company to meet
certain financial covenants and to maintain a minimum tangible
net worth of approximately $67,873,000 at December 31, 2002.
The Company was in compliance with these covenants at December
31, 2002. The covenants would prohibit the payment of
dividends by the Company if such payment would cause the
Company to be in violation of any of the covenants. The
carrying amount reported in the balance sheet for borrowings
under the Line of Credit approximates its fair value.

(2) The Company's capitalized lease obligations extend through
June 2006 and contain renewal or fixed price purchase options.
The effective interest rates on the leases range from 3.20% to
7.34% at December 31, 2002. The lease agreements require the
Company to pay property taxes, maintenance and operating
expenses.

The Company made interest payments of approximately $3,295,000, $4,483,000 and
$5,378,000 during 2002, 2001 and 2000, respectively.

29

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LEASES AND COMMITMENTS

Capital lease obligations of $16,889,844, $13,323,678 and $20,421,263 were
incurred during the years ended December 31, 2002, 2001 and 2000, respectively.

At December 31, 2002, the future minimum payments under capitalized leases with
initial terms of one year or more were $21,060,585 for 2003, $8,571,996 for
2004, $12,356,550 for 2005 and $4,254,260 for 2006. The present value of net
minimum lease payments was $43,680,749, which includes the current portion of
the capital leases of $19,143,501 and excludes amounts representing interest of
$2,562,642.

At December 31, 2002, property and equipment included capitalized leases, which
had capitalized costs of $61,281,219, accumulated amortization of $18,483,176
and a net book value of $42,798,043. At December 31, 2001, property and
equipment included capitalized leases, which had capitalized costs of
$60,080,041, accumulated amortization of $16,986,378 and a net book value of
$43,093,663. Amortization of leased assets is included in depreciation and
amortization expense.

The Company leases certain equipment under operating leases with terms from
three to five years. Rent expense under these obligations was $347,029, $390,512
and $357,841 for the years ended December 31, 2002, 2001 and 2000 respectively.

At December 31, 2002, the future minimum payments under operating leases with
initial terms of one year or more were $303,992 for 2003, $267,909 for 2004,
$210,336 for 2005, $170,772 for 2006, and $98,301 for 2007.

Commitments to purchase revenue equipment (including capital leases) and other
fixed assets, which are cancelable by the Company if certain conditions are met,
aggregated approximately $74,577,000 at December 31, 2002.

30

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. FEDERAL AND STATE INCOME TAXES

Significant components of the Company's deferred tax liabilities and assets are
as follows:

Significant components of the provision for income taxes are as follows:

31

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. FEDERAL AND STATE INCOME TAXES (CONTINUED)

During 2002, 2001 and 2000, the Company made income tax payments of $2,339,991,
$34,625 and $66,250 respectively.

As of December 31, 2002, the Company has approximately $950,000 in state net
operating losses. The Company also has alternative minimum tax credits of
$20,716. These credits have no expiration date.

A reconciliation between the effective income tax rate and the statutory federal
income tax rate is as follows:

The Company's effective tax rate increased to 59.1% in 2002 compared to 38.9% in
2001. The effective rates varied from the statutory federal tax rate of 34%
primarily due to state income taxes and certain non-deductible expenses
including a per diem pay structure for drivers implemented by the Company during
the second quarter of 2002. Due to the nondeductible effect of per diem pay to
drivers, the Company's effective tax rate will exceed the statutory rate, the
extent of which will depend on the level of reported income before taxes.

7. EMPLOYEE BENEFIT PLANS

The Company sponsors the USA Truck, Inc. Employees' Investment Plan, a tax
deferred savings plan under section 401(k) of the Internal Revenue Code that
covers substantially all employees. Employees can contribute 100% of their
compensation, with the Company matching 50% of the first 4% of compensation
contributed by each employee. Company matching contributions to the plan were
approximately $894,600, $938,400 and $788,400 for 2002, 2001 and 2000,
respectively.

32

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share:

9. COMMON STOCK TRANSACTIONS

The Company's stock option plan, which provided for the granting of incentive or
nonqualified options to purchase up to 800,000 shares of common stock to
officers and other key employees expired in February 2002. No options were
granted under this plan for less than the fair market value of the common stock
at the date of the grant. Although the exercise period was determined when
options were granted, no option will be exercised later than 10 years after it
is granted.

The Company also has a nonqualified stock option plan for directors who are not
officers or employees of the Company, which provides for the granting of options
to purchase up to 25,000 shares of common stock. No options may be granted under
this plan with exercise prices of less than the fair market value of the common
stock at the date of grant. Although the exercise period is determined when
options are actually granted, options will vest no less than six months or more
than three years after the grant date and may not be exercised later than five
years after the grant date.

33

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. COMMON STOCK TRANSACTIONS (CONTINUED)

A summary of the Company's stock option activity, and related information for
the years ended December 31, 2002, 2001 and 2000 follows:

Exercise prices for options outstanding as of December 31, 2002 ranged from
$5.44 to $13.31. The options fall into two distinct ranges, from $5.44 to $6.65
and from $12.10 to $13.31. The number of options outstanding in the range from
$5.44 to $6.65 is 136,900, with a weighted-average exercise price of $5.56 and a
weighted-average remaining contractual life of 4.57 years. The number of options
outstanding in the range from $12.10 to $13.31 is 68,600, with a
weighted-average exercise price of $12.20 and a weighted-average remaining
contractual life of 5.91 years. The weighted-average fair value at the grant
date of options granted during 2002, 2001 and 2000 were $7.13, $3.18 and $2.33,
respectively. The weighted-average remaining contractual life of these options
is 5.02 years.

In 2002 and 2001, 22,600 and 4,000 options, respectively, were exercised for
cash. No options were exercised for cash in 2000. In 2002, 2001 and 2000,
additional options of 72,915, 64,000 and 30,200, respectively, were exercised by
the exchange of 38,300, 48,196 and 29,419 shares of stock, respectively, (with a
market value equal to the exercise price of the options). The exchanged shares
were then canceled.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The following assumptions were used to value
the outstanding stock options:

34

USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The tables below present quarterly financial information for 2002 and 2001:

11. LITIGATION

The Company is not a party to any pending legal proceedings which management
believes to be material to the financial condition or results of operations of
the Company. The Company maintains liability insurance against risks, subject to
certain self-insurance limits, arising out of the normal course of its business.

35

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on
accounting and financial disclosure matters during any period covered by the
financial statements filed herein or any period subsequent thereto.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The sections entitled "Additional Information Regarding the Board of
Directors--Biographical Information", "Executive Officers", "Section 16(a)
Compliance" and "Security Ownership of Certain Beneficial Owners, Directors and
Executive Officers" in the Company's proxy statement for the annual meeting of
stockholders to be held on May 7, 2003, set forth certain information with
respect to the directors, nominees for election as directors and executive
officers of the Company and are incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The section entitled "Executive Compensation" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 7, 2003, sets
forth certain information with respect to the compensation of management of the
Company and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The section entitled "Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers" in the Company's proxy statement for the
annual meeting of stockholders to be held on May 7, 2003, set forth certain
information with respect to the ownership of the Company's voting securities and
are incorporated herein by reference. See "Item 5. Market for Registrant's
Common Equity and Related Stockholder Matters", which sets forth certain
information with respect to the Company's equity compensation plans.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section entitled "Certain Transactions" in the Company's proxy
statement for the annual meeting of stockholders to be held on May 7, 2003, sets
forth certain information with respect to relations of and transactions by
management of the Company and is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the date of this report, an evaluation was
performed under the supervision and with the participation of the Company's
management, including the Chief Executive Officer (the "CEO") and the Chief
Financial Officer (the "CFO"), of the effectiveness of the design and operation
of the Company's disclosure controls and procedures. Based on that evaluation,
the Company's management, including the CEO and CFO, concluded that the
Company's disclosure controls and procedures were effective as of December 31,
2002. There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to December 31, 2002.

36

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) THE FOLLOWING DOCUMENTS ARE FILED AS A PART OF THIS REPORT:

1. Financial statements.

The following financial statements of the Company are included in Part II,
Item 8 of this report:

Schedules other than the schedule listed above have been omitted since
the required information is not applicable or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the financial statements or the notes
thereto.

3. Listing of exhibits.

The exhibits filed with this report are listed in the Exhibit Index, which
is a separate section of this report.

Management Compensatory Plans:

- Employee Stock Option Plan (Exhibit 10.1)

- Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit
10.2)

- Incentive Compensation Plan (Exhibit 10.3)

- 1997 Nonqualified Stock Option Plan for Nonemployee Directors (Exhibit
10.4)

(b) REPORTS ON FORM 8-K:

No Form 8-K has been filed during the last quarter of the period covered by
this report.

37

USA TRUCK, INC.

ANNUAL REPORT ON FORM 10-K

YEAR ENDED DECEMBER 31, 2002

ITEM 14 (d)

FINANCIAL STATEMENT SCHEDULE

38

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

USA TRUCK, INC.

(a) Uncollectible accounts written off, net recoveries.

39

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) 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)

By: /s/ ROBERT M. POWELL By: /s/ CLIFTON R. BECKHAM By: /s/ JERRY D. ORLER
--------------------- ------------------------------- ------------------------
Robert M. Powell Clifton R. Beckham Jerry D. Orler
Chairman and Chief Vice President - Finance, Chief President
Executive Officer Financial Officer and Secretary

Date: March 7, 2003 Date: March 7, 2003 Date: March 7, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ ROBERT M. POWELL Chairman, Chief Executive March 7, 2003
- ------------------------------------ Officer and Director
Robert M. Powell

/s/ JERRY D. ORLER President March 7, 2003
- ------------------------------------ and Director
Jerry D. Orler

/s/ J.B. SPEED Director March 7, 2003
- ------------------------------------
James B. Speed

/s/ TERRY A. ELLIOTT Director March 7, 2003
- ------------------------------------
Terry A. Elliott

/s/ JIM L. HANNA Director March 7, 2003
- ------------------------------------
Jim L. Hanna

/s/ ROLAND S. BOREHAM Director March 7, 2003
- ------------------------------------
Roland S. Boreham, Jr.

/s/ JOE D. POWERS Director March 7, 2003
- ------------------------------------
Joe D. Powers

40

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

USA TRUCK, INC.

- --------------------------------------------------------------------------------

I, Robert M. Powell, certify that:

1. I have reviewed this annual report on Form 10-K of USA Truck, Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have;

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 7, 2003

/s/ ROBERT M. POWELL
------------------------------------
Robert M. Powell
Chairman and Chief Executive Officer

41

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

USA TRUCK, INC.

- --------------------------------------------------------------------------------

I, Clifton R. Beckham, certify that:

1. I have reviewed this annual report on Form 10-K of USA Truck, Inc.;

2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have;

a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 7, 2003

/s/ CLIFTON R. BECKHAM
-----------------------------------------
Clifton R. Beckham
Vice President - Finance, Chief Financial
Officer and Secretary

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EXHIBIT INDEX

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* Filed herewith.

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