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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended September 30, 2004

OR

For the transition period from              to             

Commission File Number 0-19858

USA Truck, Inc.

(Exact name of Registrant as specified in its charter)

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

Former name, former address and former fiscal year, if changed since last report: Not applicable.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

The number of shares outstanding of the Registrant’s Common Stock, par value $ .01, as of October 19, 2004 is 9,340,646.

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INDEX

USA TRUCK, INC.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

USA TRUCK, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

See notes to consolidated financial statements.

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USA TRUCK, INC.

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)

See notes to consolidated financial statements.

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USA TRUCK, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

See notes to consolidated financial statements.

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USA TRUCK, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

September 30, 2004

Forward-Looking Statements

This report contains forward-looking statements and information that are based on our current beliefs and expectations and assumptions we have made based upon information currently available. Forward-looking statements include statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, and may be identified by words such as “will,” “could,” “should,” “may,” “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 we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will be realized. If one or more of the risks or uncertainties underlying such expectations materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those expected. Among the key factors that are not within our control and that have a direct bearing on operating results are increases in fuel prices, adverse weather conditions, increased regulatory burdens and the impact of increased rate competition. Our results have also been, and will continue to be, significantly affected by fluctuations in general economic conditions, as our tractor utilization is 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 have adversely impacted our operating results and our ability to grow and will continue to do so. Results for any specific period could also be affected by various unforeseen events, such as unusual levels of equipment failure or vehicle accident claims. Additional risks associated with our operations are discussed in our Annual Report on Form 10-K for the year ended December 31, 2003, under the heading “Risk Factors” in Item 1 of that report.

All forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by this cautionary statement.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this report might not occur.

References to the “Company,” “we,” “us,” “our” and words of similar import refer to USA Truck, Inc. and its subsidiary.

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments considered necessary for a fair presentation) have been included. Operating results for the three-month and nine-month periods ended September 30, 2004, are not necessarily indicative of the results that may be expected for the year ended December 31, 2004. For further information, refer to the financial statements and footnotes thereto included in the Annual Report on Form 10-K of USA Truck, Inc. (the “Company”) for the year ended December 31, 2003.

NOTE B – 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 Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS 123”), for our stock option plans; therefore, no compensation cost has been recognized. However, we have recognized $0.2 million, net of tax, of compensation expense related to our restricted stock plan (See Note G). Had compensation cost for our stock option plans been determined based on the

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fair value at the grant date consistent with the provisions of SFAS 123, our pro forma net income would have been as follows:

(in thousands, except per share amounts)

NOTE C – COMMITMENTS

As of September 30, 2004, we had commitments for purchases of revenue equipment in the aggregate amount of approximately $35.9 million through January of 2005. As part of these commitments, we have contracts remaining for the purchase of 281 tractors and 750 trailers during 2004. Either the Company or the vendor may cancel these contracts upon advance notice.

We have maintained an aggressive revenue equipment trade schedule in 2003 and 2004 to reduce the average age of our revenue equipment fleet.

As of September 30, 2004, we were also committed to spend $3.4 million on facility expansions.

NOTE D – NEW ACCOUNTING PRONOUNCEMENTS

In March of 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51 (“FIN 46”). FIN 46 addresses consolidation by business enterprises of variable interest entities. FIN 46 is effective for variable interest entities for periods ending after December 15, 2003, and for all other types of entities for periods ending after March 15, 2004. The adoption of FIN 46 did not impact our financial statements and related disclosures.

NOTE E – CONTINGENCIES

We are party to routine litigation incidental to our business, primarily involving claims for personal injury and property damage incurred in the transportation of freight. We maintain insurance covering liabilities in excess of certain self-insured retention levels for bodily injury and property damage claims. Though management believes these claims to be routine and immaterial to our long-term financial position, adverse results of one or more of these claims could have a material adverse effect on our financial position or results of operations.

NOTE F – DERIVATIVE FINANCIAL INSTRUMENTS

We record derivative financial instruments in the balance sheet as either an asset or liability at fair value, with classification as current or long-term depending on the duration of the instrument.

Changes in the derivative instrument’s fair value must be recognized currently in earnings unless specific hedge accounting criteria are met. For cash flow hedges that meet the criteria, the derivative instrument’s gains and losses, to the extent effective, are recognized in accumulated other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings.

Effective March 27, 2003, we entered into an interest rate swap agreement with a notional amount of $10 million. Under this swap agreement, we pay a fixed rate of 1.99%, while receiving a floating rate equal to the “3-month” LIBOR as of the second London Business Day prior to each floating rate reset date (1.95% as of September 30, 2004). The floating rate is fixed for the three-month period following each reset date. This interest rate swap agreement terminates on March 27, 2005.

We designated the $10 million interest rate swap as a cash flow hedge of our exposure to variability in future cash flow resulting from the interest payments indexed to the “3-month” LIBOR. Changes in future cash flows from the interest rate swap will offset changes in interest payments on the first $10 million of our current Senior Credit Facility or future “3-month” LIBOR-based borrowings that reset on the second London Business Day prior

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to the start of the next interest period. The fair value of the swap agreement was a liability on September 30, 2004 of approximately $8,000.

The effective portion of the cumulative gain or loss on the swap agreement will be reported as a component of accumulated other comprehensive income or loss in stockholders’ equity and will be reclassified into current earnings by March 27, 2005, the termination date for this swap agreement. We reported no gain or loss for the quarter ended September 30, 2004 as a result of hedge ineffectiveness, other derivative instruments’ gain or loss or the discontinuance of a cash flow hedge. Future changes in the swap arrangement including termination of the swap agreement, swap notional amount, hedged portion or forecasted Credit Agreement borrowings below $10 million may result in a reclassification of any gain or loss reported in other comprehensive income into earnings.

The measurement of hedge effectiveness is based upon a comparison of the floating-rate component of the swap and the hedged floating-rate on the underlying liability. The calculation of ineffectiveness involves a comparison of the present value of the cumulative change in the expected future cash flows on the variable component of the swap and the present value of the cumulative change in the expected future interest cash flows on the floating-rate liability.

NOTE G – RESTRICTED STOCK

On August 22, 2003, our Board of Directors approved the USA Truck, Inc. 2003 Restricted Stock Award Plan (the “Plan”), under which we may issue up to 150,000 shares of common stock as awards of restricted stock to our officers. Both the Plan and the awards made under the Plan were approved by our shareholders on May 5, 2004. Awards under the Plan vest over a period of not less than five years. Vesting of awards is also subject to the achievement of such performance goals as may be set by our Board of Directors. The shares of restricted stock are nontransferable prior to vesting. Shares issued as restricted stock awards under the Plan will consist solely of shares of common stock contributed to the Company by our Chief Executive Officer. No previously unissued shares will be issued under the Plan. Any shares not subject to outstanding awards when the Plan terminates, and any shares forfeited after the Plan terminates, will be returned to our Chief Executive Officer.

On August 22, 2003, our Chief Executive Officer contributed 100,000 shares of his common stock to the Company for purposes of issuance under the Plan. On August 22, 2003, we issued an aggregate of 100,000 shares of common stock as restricted stock awards to certain of our officers. Each award will vest in five equal annual increments on March 1 of each year beginning in 2005 and ending in 2009, subject to the achievement of performance goals based on year-over-year increases in retained earnings. The shares of common stock subject to each increment of an award are subject to forfeiture if a recipient’s employment with us is terminated, or if the specified performance goal is not achieved, prior to the increment’s vesting date. An increment may vest with respect to one-half of the shares covered by that increment if 90% of the related performance goal is met. Any forfeited shares will be available for future awards under the Plan. With the approval of the Plan by our shareholders, the fair market value of the 100,000 shares of common stock contributed for the plan totaling $1.2 million was recognized as contributed paid-in capital. The unvested shares granted under the plan are reflected as unearned compensation in stockholders’ equity. The unearned compensation will be amortized over the vesting period as compensation expense based on management’s assessment as to whether achievement of the performance goals is probable. The amount of compensation expense will be adjusted on a quarterly basis based on changes in the market value of our common stock up to the date the shares vest. To the extent the performance goals are not achieved and there is not full vesting in the shares awarded, the compensation expense recognized to the extent of the non-vested and forfeited shares will be reversed. During the quarter ended September 30, 2004, we recognized $0.2 million of compensation expense related to the Plan.

NOTE H – SEGMENT INFORMATION

We have one reportable segment consisting of two operating divisions, our General Freight division and our USA Logistics division. We aggregate the financial data for those divisions because they have similar economic characteristics and meet the other aggregation criteria of FASB Statement of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information (“SFAS 131”). Through our General Freight division, we operate as a dry van truckload carrier transporting general commodities over irregular routes, with a medium length of haul, which is generally defined as between 800 and 1,200 miles per trip. Our USA Logistics division provides comparable dry van truckload services within specific geographic regions and in dedicated fleet operations as well as freight brokerage and third party logistics management services. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” for a more complete description of these services.

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NOTE I – RECLASSIFICATIONS

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

NOTE J – EARNINGS PER SHARE

The difference in basic and diluted weighted average shares is due to the assumed conversion of outstanding stock options. The following table sets forth the computation of basic and diluted earnings per share:

(in thousands, except per share amounts)

NOTE K – COMPREHENSIVE INCOME

Comprehensive income is comprised of net income plus the market value adjustment on our interest rate swap, which is designated as a cash flow hedge. Comprehensive income consisted of the following components:

(in thousands)

NOTE L – SUBSEQUENT EVENTS

On October 20, 2004, our Board of Directors authorized the repurchase of up to 500,000 shares of our outstanding common stock over a three-year period ending October 19, 2007, dependent upon market conditions. We may make common stock purchases under the authorization from time to time on the open market or in privately negotiated transactions at prices determined by our Chairman of the Board or President. We may reissue repurchased shares under our equity compensation plans or as otherwise directed by the Board of Directors. The Board of Directors previously authorized the repurchase of up to 500,000 shares of our common stock during the three-year period from October 17, 2001 to October 16, 2004. We had purchased 4,000 shares pursuant to that prior authorization, all of which were purchased in October 2004, and we had 496,000 shares remaining available under that prior authorization after those purchases. We did not make any repurchases during the quarter ended September 30, 2004.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our consolidated financial statements and notes thereto and other financial information that appears elsewhere in this report.

Overview

We operate in the for hire truckload segment of the trucking industry. Shippers of freight in a variety of industries engage us to haul truckload quantities of freight, with the trailer we use to haul that freight being assigned exclusively to that shipper’s freight until delivery. We charge shippers for these services on a per-mile basis. We have two operating divisions through which we provide these services, and we aggregate the financial data for those divisions for purposes of our public reporting. We refer to our two operating divisions internally as our General Freight division and our USA Logistics division.

General Freight Division. Our General Freight division provides truckload freight services as a medium-haul common carrier. In the truckload industry, companies whose average length of haul is more than 800 miles but less than 1,200 miles are often referred to as medium-haul carriers. Our average length of haul has been within that range throughout our history. We have provided general freight services since our inception, and we derive the largest portion of our revenues from these services.

USA Logistics Division. Our USA Logistics division provides four basic services to our customers: dedicated freight, regional freight, third party logistics and brokerage services. The phrases “dedicated freight” and “regional freight” refer to variations of our traditional general freight services. Third party logistics and brokerage services are supplementary services that we provide as a complement to our truckload freight services.

Dedicated freight services are truckload freight services we provide pursuant to contracts with our customers under which we agree to make our equipment available for shipments over particular routes at specified times and dates. Regional freight refers to truckload freight services that involve a length of haul that is generally less than 500 miles. It is not always possible to operate at full capacity entirely within the General Freight division’s medium haul range. For this reason, and in order to aid in driver recruitment and retention, we have recently begun to accept shipments that originate and terminate within a smaller geographic area; specifically, the areas around two of our facilities, with lengths of haul generally less than 500 miles.

In connection with third party logistics services, we provide a variety of freight handling services for our customers, including arranging for the transportation of freight. Our freight brokerage services involve matching a customer’s shipments with available equipment of other truckload carriers, when it is not feasible to use our own equipment. We began providing third party logistics and brokerage services to meet the demands of our freight customers, many of whom prefer to rely on a single carrier, or a small group of carriers, to provide all of their transportation needs. To date, a significant majority of our third party logistics and brokerage customers have also engaged us to provide truckload freight services.

Critical Accounting Policies

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.

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

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We periodically re-evaluate these policies as circumstances change. Together with the effects of the matters discussed above, these factors may significantly impact our consolidated results of operations, financial position and cash flow from period to period.

Results of Operations

Note Regarding Presentation

By agreement with our customers, and consistent with industry practice, we add a graduated surcharge to the rates we charge our customers as diesel fuel prices increase above an industry-standard baseline price per gallon. The surcharge is designed to approximately offset increases in fuel costs above the baseline. Fuel prices are volatile, and the fuel surcharge increases our revenue at different rates for each period. We believe that comparing operating costs and expenses to total revenue, including the fuel surcharge, could provide a distorted comparison of our operating performance, particularly when comparing results for current and prior periods. Therefore, we have excluded the fuel surcharge from revenue and, instead, taken it as a credit against the fuel and fuel taxes line item in the table below. We believe that this presentation is a more meaningful measure of our operating performance than a presentation comparing operating costs and expenses to total revenue, including the fuel surcharge.

We do not believe that a reconciliation of the information presented on this basis and corresponding information comparing operating costs and expenses to total revenue would be meaningful. Revenue data, on both a total basis and excluding the fuel surcharge, is included in the Consolidated Statements of Income (unaudited) included in this Form 10-Q.

The following period-to-period comparisons should be read in conjunction with the following table and the Consolidated Statements of Income (unaudited). Unless otherwise indicated, references to increases or decreases in expense items refer to increases or decreases as a percentage of revenue, before fuel surcharge.

Revenues from our third party logistics and brokerage services have increased in recent periods. These services do not typically involve the use of our tractors and trailers. Therefore, the increase in these revenues tends to cause expenses related to our operations that do involve our equipment — including depreciation and amortization expense, operations and maintenance expense, salaries, wages and employee benefits, and insurance and claims expense — to decrease as a percentage of revenue. Since the increase in these revenues generally affects all such expenses, as a percentage of revenue, we do not specifically mention it as a factor in our discussion of increases or decreases in those expenses in the period-to-period comparisons below.

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

Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003

Operating revenue, before fuel surcharge, increased 15.6% from $73.9 million in the third quarter of 2003 to $85.4 million in the same quarter of 2004. This increase was due primarily to an increase of 11.1% in the average number of tractors operated from 2,006 (including 39 owner-operators) in the third quarter of 2003 to 2,228 (including 42 owner-operators) in the same quarter of 2004.

Average revenue per mile, before fuel surcharge, increased 4.3% from $1.248 in the third quarter of 2003 to $1.302 in the same quarter of 2004 due primarily to an increase in the average rate per mile charged to customers. The number of shipments increased 20.2% from 71,971 in the third quarter of 2003 to 86,513 in the same quarter of 2004 due primarily to the increase in the average number of tractors. The empty mile factor decreased from 8.9% of paid miles in the third quarter of 2003 to 8.3% of paid miles in the same quarter of 2004. The improved revenue per mile and empty mile factor were primarily the result of improved freight demand in our operating areas. Increases in revenue per mile, before fuel surcharge, will reduce expenses as a percentage of revenue, before fuel surcharge, and vice versa.

The increase in salaries, wages and employee benefits expense, as a percentage of revenue, before fuel surcharge, was primarily the result of an increase in the cost of employee benefits and an increase in monetary incentive compensation accrued for employees due to improved financial performance of the Company in the third quarter of 2004 compared to the same period of 2003. These factors were partially offset by a decrease in workers’ compensation expense.

We will increase driver pay effective in mid-December 2004. The pay increase will impact approximately 80% of our drivers and is comprised of a one-cent per mile increase for all eligible drivers plus an additional one-cent per mile for eligible drivers with zero to nine months of experience. We estimate that affected drivers will receive an average pay increase of $0.0126 per mile. The increase is intended to address driver recruiting and retention objectives by maintaining our pay scale’s competitive position relative to our peers with whom we directly compete for drivers.

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The increase in fuel and fuel taxes, as a percentage of revenue, before fuel surcharge, was primarily due to a 29.7% increase in the average cost of diesel fuel per gallon from the third quarter of 2003 to the same quarter of 2004. The increases in fuel costs outpaced what we were able to recover from our customers in the form of fuel surcharges.

The decrease in operations and maintenance expense, as a percentage of revenue, before fuel surcharge, was primarily due to decreased maintenance costs resulting from the reduced average ages of our tractor and trailer fleets from 29 and 55 months, respectively, during the third quarter of 2003 to 20 and 48 months, respectively, during the third quarter of 2004.

The increase in insurance and claims expense, as a percent of revenue, before fuel surcharge, was primarily due to an increase in expenses associated with bodily injury and property damage claims and, to a lesser extent, cargo claims. These factors were partially offset by a reduction in expenses associated with accident damage to our own revenue equipment.

Our effective tax rate decreased from 52.5% in the third quarter of 2003 to 49.9% in the same quarter of 2004. The effective rates varied from the statutory federal tax rate of 34% due to state income taxes and certain non-deductible expenses, primarily per diem payments. Drivers may elect to receive non-taxable per diem pay in lieu of a portion of their taxable wages. This per diem program increases our drivers’ net pay per mile, after taxes. As a result, salaries, wages, and benefits are slightly lower, and the Company’s effective income tax rate is higher.

Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003

Operating revenue, before fuel surcharge, increased 18.3% from $211.9 million in the nine months ended September 30, 2003 to $250.7 million for the same period of 2004. This increase was due primarily to an increase of 12.2% in the average number of tractors operated from 1,933 (including 37 owner-operators) in the nine months ended September 30, 2003 to 2,169 (including 43 owner-operators) for the same period of 2004.

Average revenue per mile, before fuel surcharge, increased 4.7% from $1.235 in the nine months ended September 30, 2003 to $1.293 for the same period of 2004 due primarily to an increase in the average rate per mile charged to customers. The number of shipments increased 19.4% from 207,897 in the nine months ended September 30, 2003 to 248,268 for the same period of 2004 due primarily to the increase in the average number of tractors. The empty mile factor decreased from 9.1% of paid miles in the nine months ended September 30, 2003 to 8.3% of paid miles for the same period of 2004. The improved revenue per mile and empty mile factor were primarily the result of improved freight demand in our operating areas. Increases in revenue per mile, before fuel surcharge, will reduce expenses as a percentage of revenue, before fuel surcharge, and vice versa.

The decrease in salaries, wages and employee benefits expense, as a percentage of revenue, before fuel surcharge, was primarily the result of the above-mentioned increase in the average revenue per mile, before fuel surcharge. This factor was partially offset by an increase in monetary incentive compensation accrued for employees due to improved financial performance of the Company from the nine months ended September 30, 2003 to the same period of 2004 and by an increase in employee benefits.

The increase in fuel and fuel taxes, as a percentage of revenue, before fuel surcharge, was primarily due to a 14.4% increase in the average cost of diesel fuel per gallon from the nine months ended September 30, 2003 to the same period of 2004. The increases in fuel costs outpaced what we were able to recover from our customers in the form of fuel surcharges.

The decrease in operations and maintenance expense, as a percentage of revenue, before fuel surcharge, was primarily due to decreased maintenance costs resulting from the reduced average ages of our tractor and trailer fleets from 31 and 55 months, respectively, for the nine months ended September 30, 2003 to 21 and 51 months, respectively, for the same period of 2004.

The increase in insurance and claims expense, as a percent of revenue, before fuel surcharge, was primarily due to an increase in expenses associated with accident damage to our own revenue equipment and an increase in expenses associated with bodily injury and property damage claims.

Our effective tax rate decreased from 60.8% in the nine months ended September 30, 2003 to 52.9% for the same period of 2004. The effective rates varied from the statutory federal tax rate of 34% due to state income taxes and certain non-deductible expenses, primarily per diem payments.

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Seasonality

In the trucking industry, revenues generally 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, particularly those with manufacturing operations, reduce shipments due to temporary plant closings. Historically, many of our customers have closed their plants for maintenance or other reasons during January and July.

Inflation

Although most of our operating expenses are inflation sensitive, with increases in inflation generally resulting in increased operating costs and expenses, the effect of inflation on revenue and operating costs has been minimal in recent years. The effect of inflation-driven cost increases on our overall operating costs is not expected to be greater for us than for our competitors.

Fuel Availability and Cost

The motor carrier industry is dependent upon the availability of fuel. Fuel shortages or increases in fuel taxes or fuel costs have adversely affected our profitability and will continue to do so. Fuel prices have fluctuated widely and fuel taxes have generally increased in recent years. We have not experienced difficulty in maintaining necessary fuel supplies, and historically we have been able to partially offset increases in fuel costs and fuel taxes through increased freight rates and through a fuel surcharge that increases incrementally as the price of fuel increases above a certain baseline price. Typically, we are not able to fully recover increases in fuel prices through rate increases and fuel surcharges primarily because those items do not provide any benefit with respect to empty and out-of-route miles, for which we do not receive compensation from customers. We do not have any long-term fuel purchase contracts and we have not entered into any other hedging arrangements that protect us against fuel price increases.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. From time to time we may enter into operating leases that would not be reflected in our balance sheet.

Liquidity & Capital Resources

The continued growth of our business has required significant investments in new equipment. We have financed new tractor and trailer purchases with cash flows from operations, the proceeds from sales or trades of used equipment, borrowings under our Senior Credit Facility and capital lease-purchase arrangements. We have historically met our working capital needs with cash flows from operations and with borrowings under our Senior Credit Facility. We use our Senior Credit Facility to manage our cash flow needs and to provide flexibility in financing revenue equipment purchases. Cash flows from operations were $21.7 million for the nine months ended September 30, 2004 and $23.2 million for the same period in 2003.

Our Senior Credit Facility, as amended, provides a working capital line of credit of $75.0 million, including letters of credit not exceeding $10.0 million, and includes an accordion feature that allows us, at our option, to increase the facility to $90.0 million. Bank of America, N.A. is the agent bank and SunTrust Bank, U.S. Bank and Regions Bank are participants in the Senior Credit Facility. As of September 30, 2004, approximately $15.2 million was available under the Senior Credit Facility. The Senior Credit Facility matures on April 30, 2007. At any time prior to April 30, 2007, subject to certain conditions, we have the option to convert the balance outstanding on the Senior Credit Facility to a four-year term loan requiring 48 equal monthly principal payments plus interest. The Senior Credit Facility bears variable interest based on the lender’s prime rate, the federal funds rate plus a certain percentage or LIBOR plus a certain percentage, which is determined based on our attainment of certain financial ratios. The effective interest rate on our borrowings under the credit facility as of September 30, 2004, was 3.4%. We have hedged a portion of our exposure to the volatility in variable interest rates by entering into an interest rate swap agreement effective March 27, 2003, on a notional amount of $10 million. See “Item 3. Quantitative and Qualitative Disclosures about Market Risk.” A quarterly commitment fee is payable on the unused credit line at a rate which is determined based on our attainment of certain financial ratios. As of September 30, 2004 the rate was 0.3%. This credit facility is collateralized by accounts receivable and otherwise unencumbered tractors, trailers and other equipment.

On September 30, 2004, we had debt obligations of approximately $119.5 million, including amounts borrowed under the Senior Credit Facility and approximately $61.4 million of capital lease obligations.

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Approximately $19.2 million of these debt obligations were current obligations. During the nine months ended September 30, 2004, we made borrowings under the Senior Credit Facility and lease commitments of $160.0 million, while retiring $125.7 million in debt under these facilities. The borrowings had an average interest rate of approximately 3.4% while the retired debt had an average interest rate of approximately 3.4%.

During the nine months ended September 30, 2004, we made $73.2 million in capital expenditures including equipment purchases under capital lease arrangements, primarily for revenue equipment.

We planned significant capital expenditures throughout 2004, primarily to reduce the average age of our revenue equipment fleet. At September 30, 2004, we were committed to make approximately $35.3 million in capital expenditures during the remainder of 2004 and an additional $4.0 million in 2005. The majority of the commitments are for revenue equipment, which we can cancel upon advance notice. We believe that the proceeds from our traditional sources of capital will be sufficient to fund these expenditures. We restructured our Senior Credit Facility in 2003 to meet our future expenditure needs and may consider additional financing sources, possibly including public or private offerings of securities. Revenue equipment trading activity may cause significant fluctuations in trade accounts payable and other accounts receivable from period to period, as we record amounts we owe for purchased equipment in trade accounts payable and amounts due us for equipment disposed of in other accounts receivable.

The following table represents our outstanding contractual obligations at September 30, 2004, excluding letters of credit:

Payments Due By Period

(in thousands)

New Accounting Pronouncements

See Note D to the financial statements included in this Form 10-Q for a description of the most recent accounting pronouncements and their effect, if any.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We experience various market risks, including changes in interest rates, foreign currency exchange rates, and commodity prices.

Interest Rate Risk. We are exposed to interest rate risk primarily from our Senior Credit Facility. The Senior Credit Facility, as amended, provides for borrowings that bear interest at variable rates based on either a prime rate or the LIBOR. At September 30, 2004, the Company had $58.1 million outstanding pursuant to the Senior Credit Facility excluding letters of credit.

In an effort to manage the risks associated with changing interest rates, we entered into an interest rate swap agreement effective March 27, 2003 on a notional amount of $10 million. The transaction is intended to provide interest rate protection for us by creating an interest rate neutral position on a portion of our outstanding balance under our Senior Credit Facility by specifically matching notional amounts, maturity dates and interest rate indices, and does not provide us with any additional borrowing capacity. Details regarding the swap, as of September 30, 2004, are as follows:

Foreign Currency Exchange Rate Risk. All customers are required to pay for our services in U.S. dollars. Although the Canadian Government makes certain payments, such as tax refunds, to us in Canadian dollars, any foreign currency exchange risk associated with such payments is not material.

Commodity Price Risk. Fuel prices have fluctuated greatly and have generally increased in recent years. In some periods, our operating performance was adversely affected because we were not able to fully offset the impact of higher diesel fuel prices through increased freight rates and fuel surcharges. We cannot predict the extent to which high fuel price levels will continue in the future or the extent to which fuel surcharges could be collected to offset such increases. We do not have any long-term fuel purchase contracts, and we have not entered into any other hedging arrangements, that protect us against fuel price increases. Volatile fuel prices will continue to impact us significantly. A significant increase in fuel costs, or a shortage of diesel fuel, could materially and adversely affect our results of operations. These costs could also exacerbate the driver shortages our industry experiences by forcing independent contractors to cease operations.

Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the CEO and CFO, concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective. There have been no significant changes in our internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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FORM 10-Q

USA TRUCK, INC.

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On October 21, 2004, we publicly announced that our Board of Directors has authorized the repurchase of up to 500,000 shares of our outstanding common stock over a three-year period ending October 19, 2007, dependent upon market conditions. We may make common stock purchases under the authorization from time to time on the open market or in privately negotiated transactions at prices determined by our Chairman of the Board or President. We may reissue repurchased shares under our equity compensation plans or as otherwise directed by the Board of Directors. The Board of Directors previously authorized the repurchase of up to 500,000 shares of our common stock during the three-year period from October 17, 2001 to October 16, 2004. We had purchased 4,000 shares pursuant to that prior authorization, all of which were purchased in October 2004, and we had 496,000 shares remaining available under that prior authorization after those purchases. We did not make any repurchases during the quarter ended September 30, 2004.

Item 6. Exhibits and Reports on Form 8-K.

None

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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FORM 10-Q

INDEX TO EXHIBITS

USA TRUCK, INC.

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