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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1 TO
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file number
JUNE 30, 1998 0-24806
U.S. XPRESS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
NEVADA 62-1378182
(State or other jurisdiction of (I.R.S. employer identification no.)
Incorporation or organization)
2931 SOUTH MARKET STREET
CHATTANOOGA, TENNESSEE 37410 (423) 697-7377
(Address of principal executive offices) (Zip Code) (Registrant's telephone no.)
----------------------------------------
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
------- -------
As of June 30, 1998, 12,010,245 shares of the registrant"s Class A common
stock, par value $.01 per share, and 3,040,262 shares of Class B common stock,
par value $.01 per share, were outstanding.
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U.S. XPRESS ENTERPRISES, INC.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.................... 3
Consolidated Statements of Operations
for the Three Months Ended June 30, 1998 and 1997............ 4
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997.......................... 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997...................... 7
Notes to Consolidated Financial Statements................... 8
2
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AMENDMENT NO. 1
The undersigned Registrant hereby amends Part I, Item 1 of its Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 (the "Form 10-Q") and
files such amended Part I, Item 1 herewith.
PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
The interim consolidated financial statements contained herein reflect all
adjustments which, in the opinion of management, are necessary for a fair
statement of the financial condition and results of operations for the periods
presented. They have been prepared by the Company, without audit, in accordance
with the instructions to Form 10-Q and the rules and regulations of the
Securities and Exchange Commission and do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1998. In the opinion of management, all adjustments necessary for
a fair presentation of such financial statements have been included. Such
adjustments consisted only of items that are of a normal recurring nature.
These interim consolidated financial statements should be read in
conjunction with the Company's latest annual consolidated financial statements
(which are included in the 1997 Annual Report to Stockholders in the Company's
Form 10-K filed with the Securities and Exchange Commission on March 31, 1998).
3
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US XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 138,433 $ 107,933 $ 262,343 $ 199,497
-------------- -------------- ------------- -------------
OPERATING EXPENSES:
Salaries, Wages and Benefits 56,444 43,875 108,170 82,347
Fuel and Fuel Taxes 18,668 16,450 37,131 32,752
Vehicle Rents 7,947 7,224 15,833 13,343
Depreciation & Amortization 5,719 2,523 11,184 5,304
Purchased Transportation 13,033 8,843 23,662 13,989
Operating Expense & supplies 8,697 6,926 16,318 12,339
Insurance Premiums & Claims 4,621 3,550 8,840 6,520
Operating Taxes & Licenses 2,156 1,700 4,312 3,206
Communications & Utilities 2,155 1,874 4,169 3,383
General & Other Operating 7,371 6,933 13,870 13,296
-------------- -------------- ------------- -------------
Total Operating Expenses 126,811 99,898 243,489 186,479
-------------- -------------- ------------- -------------
INCOME FROM OPERATIONS 11,622 8,035 18,854 13,018
OTHER INCOME AND (EXPENSES):
Interest Expense (2,190) (1,582) (3,962) (2,967)
Other Income (Expense) 33 11 50 21
-------------- -------------- ------------- -------------
(2,157) (1,571) (3,912) (2,946)
INCOME BEFORE INCOME TAX PROVISION 9,465 6,464 14,942 10,072
INCOME TAX PROVISION 3,783 2,585 5,976 4,024
============== ============== ============= =============
NET INCOME $ 5,682 $ 3,879 $ 8,966 $ 6,048
============== ============== ============= =============
EARNINGS PER SHARE-BASIC $ 0.38 $ 0.32 $ 0.60 $ 0.50
============== ============== ============= =============
WEIGHTED AVERAGE SHARES - BASIC 15,049 12,101 15,043 12,093
============== ============== ============= =============
EARNINGS PER SHARE - DILUTED $ 0.38 $ 0.32 $ 0.59 $ 0.50
============== ============== ============= =============
WEIGHTED AVERAGE SHARES - DILUTED 15,152 12,209 15,155 12,197
============== ============== ============= =============
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
PAGE 4 OF 12
4
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U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------- -----------------------
(Unaudited)
<S> <C> <C>
ASSETS
- ----------------------------------------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,607 $ 2,734
Customer receivables, Net of Allowance 70,796 58,496
Other receivables 5,021 9,085
Prepaid insurance and licenses 4,350 1,488
Operating and Installation supplies 4,767 4,213
Deferred income taxes 3,717 3,092
Other current assets 2,532 508
---------------- ---------------------
Total current assets 92,790 79,616
---------------- ---------------------
PROPERTY AND EQUIPMENT, AT COST:
Land and buildings 7,693 6,845
Revenue and service equipment 184,717 151,081
Furniture and equipment 14,368 13,062
Leasehold improvements 24,150 9,411
---------------- ---------------------
230,928 180,399
Less accumulated depreciation and amortization (44,236) (44,344)
Net property and equipment 186,692 136,055
---------------- ---------------------
OTHER ASSETS:
Goodwill, net 38,798 12,593
Other 6,283 5,513
---------------- ---------------------
Total Other Assets 45,081 18,106
---------------- ---------------------
TOTAL ASSETS $ 324,563 $ 233,777
================ =====================
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
5
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U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
--------------------------- -----------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------
CURRENT LIABILITIES:
Accounts Payable $ 11,619 $ 8,634
Accrued Wages and Benefits 7,068 4,325
Claims and Insurance Accruals 4,781 5,750
Other Accrued Liabilities 4,735 5,200
Current Maturities of Long-Term Debt 263 12,336
------------------------ -------------------------
Total current liabilities 28,466 36,245
------------------------ -------------------------
LONG-TERM DEBT, NET OF CURRENT MATURITIES 128,655 50,678
------------------------ -------------------------
DEFERRED INCOME TAXES 27,967 17,352
------------------------ -------------------------
OTHER LONG-TERM LIABILITIES 1,634 1,009
------------------------ -------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued
Common stock Class A, $.01 par value, 120 120
30,000,000 shares authorized, 12,010,245 and
11,979,584 shares issued and outstanding at
June 30, 1998 and December 31, 1997, respectively
Common stock Class B, $.01 par value, 7,500,000 30 30
shares authorized, 3,040,262 shares issued and
outstanding at June 30, 1998 and December 31, 1997
Additional paid-in capital 86,324 85,942
Retained earnings 51,600 42,634
Notes receivable from stockholders (233) (233)
------------------------ -------------------------
Total stockholders' equity 137,841 128,493
------------------------ -------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 324,563 $ 233,777
======================== =========================
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
6
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<TABLE>
<CAPTION>
U.S. XPRESS ENTERPRISES CONSOLIDATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
JUNE 30,
1998 1997
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 8,966 $ 6,048
Adjustments to reconcile net income to
net cash provided by (used in) operating activities
Deferred income tax provision 4,883 3,103
Depreciation & Amortization 11,415 6,324
Gain on sale of equipment (231) (1,020)
Change in receivables (1,265) (7,768)
Change in prepaid insurance (2,729) (1,725)
Change in operating supplies (46) 220
Change in other assets (3,304) 416
Change in accounts payable and
other accrued liabilities (5,785) (7,312)
Change in accrued wages
and benefits 1,813 2,708
Other 31 2
-------- --------
Net cash provided by (used in) operating activities 13,748 996
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchase of property and equipment (59,975) 2,268
Proceeds from sales of property and equipment 32,630 14,020
Repayment of notes receivable from stockholders
Acquisition of businesses, net of cash acquired (50,785) (8,038)
-------- --------
Net cash used in investing activities (78,130) 8,250
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (pmts) under lines of credit 96,500 1,500
Payment of long-term debt (33,597) (32,635)
Borrowings under long-term debt 23,991
Proceeds from exercise of stock options 77 192
Proceed from issuance of common stock, net 275
Forfeiture of 9,195 shares restricted stock (21)
Change in other liabilities
-------- --------
Net cash provided by (used in) financing activities 63,255 (6,973)
-------- --------
NET INCREASE (DECREASE) IN CASH (1,127) 2,273
Cash, beginning of period 2,734 2,997
-------- --------
Cash, end of period $ 1,607 $ 5,270
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 2,005 $ 2,605
Cash paid during the period for income taxes $ 1,677 $ 2,588
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
7
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U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. ORGANIZATION AND OPERATIONS
U. S. Xpress Enterprises, Inc. (the "Company") provides transportation
services through two subsidiaries. U.S. Xpress, Inc. ("U.S. Xpress") is a
truckload carrier serving the Continental United States, Canada and Mexico.
CSI/Crown, Inc. ("CSI/Crown") provides transportation and logistics services to
the floorcovering industry.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions and accounts
have been eliminated.
Property and Equipment
Property and equipment is carried at cost. Depreciation and amortization
of property and equipment are computed using the straight-line method for
financial reporting purposes and accelerated methods for tax purposes over the
estimated useful lives of the related assets (net of salvage value) as follows:
Buildings 10-30 years
------------------------------------------------
Revenue and service equipment 3-7 years
------------------------------------------------
Furniture and equipment 3-7 years
------------------------------------------------
Leasehold improvements 5-6 years
------------------------------------------------
Expenditures for normal maintenance and repairs are expensed. Renewals or
betterments that affect the nature of an asset or increase its useful life are
capitalized.
Contract Wages
Effective January 1, 1997, the Company entered into an agreement with
Employee Solutions, Inc. ("ESI"), a Professional Employer Organization (PEO) in
which the PEO is a co-employer with the Company for substantially all of the
Company's personnel. The PEO is responsible for processing and administration
of the Company's payroll, including tax reporting, and provides group health
benefits and worker's compensation coverage. On July 22, 1998, the Company
filed suit against ESI in the United States District Court for the Eastern
District of Tennessee, at Chattanooga, in an action alleging breach of contract
and seeking contractual and punitive damages. The complaint alleges that ESI
agreed to perform certain employer organization services for Enterprises,
including administration of programs related to wages, payroll taxes, worker's
compensation, employee benefit programs and other insurance and related
administration services. Enterprises has alleged that ESI breached its contract
to provide such services and has wrongfully attempted to terminate the contract.
Enterprises seeks declaratory relief against ESI to enforce the contract's
arbitration provisions, and also seeks reimbursement of approximately $545,000
wrongfully withheld
8
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by ESI, and other contractual and punitive damages. Effective August 20, 1998
the contract with ESI will terminate and U.S. Xpress will assume total control
of all payroll. The Company presently believes that the contract termination and
litigation will not have a material adverse impact on the Company.
Fuel Purchase Commitments
The Company uses both derivative financial instruments and forward purchase
commitments to mitigate the effects of fluctuations in the price of fuel.
During the six months ended June 30, 1998, the Company did not have in place any
derivative financial instruments for fuel price protection. The Company did
utilize fuel purchase commitments ranging from 1,500,000 gallons in January to
1,000,000 gallons in June 1998. The Company has additional commitments ranging
from 1,000,000 gallons per month in July 1998 to 750,000 gallons per month in
December of 1999 at varying price levels.
Earnings Per Share
Effective for the period ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("SFAS
No. 128"), which changes the criteria for reporting earnings per share ("EPS")
by replacing primary EPS with basic EPS and fully diluted EPS with diluted EPS.
All prior EPS data have been restated. The difference in basic and diluted EPS
is due to the assumed conversion of outstanding options resulting in
approximately 103,000 and 108,000 equivalent shares in the three month period
ended June 30, 1998 and 1997, respectively, and 112,000 and 104,000 equivalent
shares in the six month period ended June 30, 1998 and 1997, respectively.
Reclassifications
Certain reclassifications have been made in the fiscal 1997 financial
statements to conform with the 1998 presentation.
3. COMMITMENTS AND CONTINGENCIES
The Company is party to certain legal proceedings incidental to its
business. The ultimate disposition of these matters, in the opinion of
management, based in part on the advice of legal counsel, will not have a
material adverse effect on the Company's financial position or results of
operations.
The Company has letters of credit of $4,290,000 outstanding at June 30,
1998. The letters of credit are maintained primarily to support the Company's
insurance program.
9
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4. DEBT
In January, 1998, the Company obtained a new revolving credit facility
providing capacity of up to $200,000,000. A portion of the availability under
this new line was immediately used to retire the existing line of credit and pay
off other long term indebtedness bearing higher interest rates. The credit
facility operates as a revolving credit facility until its maturity in January,
2001. Interest on outstanding borrowings is based the London Interbank Offered
Rate plus applicable margins, as defined in the credit agreement. The facility
has optional one year extensions, with the agreement of all parties.
In August 1998 the Company entered into an agreement to increase the
capacity under the line of credit from $200,000,000 to $225,000,000. The other
provisions of the credit facility remain unchanged.
In February, 1998, the Company entered into Interest Rate Swap agreements
providing for the Company to pay a fixed interest rate on $35,000,000 of its
borrowings under the Line of Credit. The agreements provide for the Company to
pay interest at a rate of approximately 5.72%, plus the applicable credit
margin, for five years.
Borrowings (including letters of credit) under the Credit Agreement are
limited to the lesser of (a) 90% of the book value of eligible revenue equipment
plus 85% of eligible receivables; or (b) $200,000,000. At June 30, 1998, $69.7
million of available borrowings were unused under the facility.
The Credit Agreement contains a number of covenants that limit, among other
things, the payment of dividends, the incurrence of additional debt, and liens
on assets as security for other indebtedness. The Credit Agreement also
requires the Company to meet certain financial tests, including a minimum amount
of net worth, a minimum amount of fixed charge coverage and a maximum amount of
leverage. The Company was in compliance with these covenants at June 30, 1998.
Lease on Headquarters
In March, 1998, the Company entered into an Agreement with a financial
institution to provide funding for the construction of a new headquarters
facility. When completed, the building will contain approximately 100,000
square feet of space for administrative and operating functions of the Company.
It will be located in a commercial park in Chattanooga, Tennessee. The new
building will be leased under an operating lease with an initial term of five
years and providing for mutually agreeable extension terms of up to three years
each. As of June 30, 1998, approximately $4.5 million had been expended for the
construction of the facility.
Upon completion of this facility, the Company will consolidate its
administrative and operating functions and terminate its leases at its Market
Street and Shallowford Road facilities also in Chattanooga. The expected
completion date is December, 1998.
10
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5. ACQUISITION OF VICTORY EXPRESS, INC.
Effective January 29, 1998, the Company acquired Victory Express, Inc., a
non-union truckload carrier based in Medway, Ohio, for $51 million in cash and
assumption of approximately $2 million in debt. Prior to the acquisition,
Victory had annual revenues of approximately $65 million. Victory Express
serves customers located primarily in the Midwest and on the Eastern seaboard.
The company employs approximately 790 persons, including approximately 640
drivers and driver trainees.
Through this acquisition, management expects the Company to significantly
expand its regional capabilities in the Midwest and extend its regional service
capabilities to the East Coast. Victory Express= customer base is largely
centered in automotive, paper, retail and air freight markets. In addition,
U.S. Xpress continues to be presented with opportunities for additional business
from its customers in the Midwest.
6. PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Financial Information is based on the historical
financial statements of U.S. Xpress and adjusted to give effect to the
acquisition of Victory Express. The Pro Forma Consolidated Statement of
Operations for the six months ended June 30, 1997 and 1998, give effect to the
acquisition as if it had occurred on January 1, 1997. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable.
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
OPERATING REVENUE 267,405 229,787
INCOME FROM OPERATIONS 19,329 15,319
INCOME BEFORE INCOME TAX PROVISION 15,072 10,273
NET INCOME 9,044 6,168
EARNINGS PER SHARE - BASIC 0.60 0.51
EARNINGS PER SHARE - DILUTED 0.60 0.51
</TABLE>
7. YEAR 2000 COMPLIANCE
Some computer systems that use two digits to indicate a year will not be
able to process data properly for the year 2000. The Company has assessed the
ability of its software and operating systems to function in the year 2000 and
beyond. Systems in use by the Company in operations, accounting and purchasing
are year 2000 compliant. Testing of U.S. Xpress systems for year 2000
compliance is scheduled for July 1998. Systems in use at CSI/Crown are
presently 50% compliant with year 2000 requirements. Programming to make
CSI/Crown systems compliant is expected to be completed by December 1998.
Testing of CSI/Crown systems is scheduled for March 1999.
11
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. XPRESS ENTERPRISES, INC.
(REGISTRANT)
DATE: SEPTEMBER 16, 1998 BY: /S/ PATRICK E. QUINN
---------------------------------
PATRICK E. QUINN
PRESIDENT
DATE: SEPTEMBER 16, 1998 BY: /S/ RAY M. HARLIN
-------------------------------
RAY M. HARLIN
PRINCIPAL FINANCIAL OFFICER
12
