<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file number
March 31, 1999 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)
4080 Jenkins Road (423) 510-3000
CHATTANOOGA, TENNESSEE 37421 (Registrant's telephone no.)
(Address of principal executive offices)
(Zip Code)
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 March 31, 1999, 11,935,471 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.
Page 1 of 17
<PAGE>
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 March 31, 1999 and 1998............... 4
Consolidated Balance Sheets as of March 31,
1999 and December 31, 1998......................... 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998......... 7
Notes to Consolidated Financial Statements......... 8
Item 2. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations...... 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................... 16
- ------
SIGNATURES......................................... 17
2
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U.S. XPRESS ENTERPRISES, INC.
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The interim consolidated financial statements contained herein reflect
all adjustments that, 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 three months ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1999. 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 1998 Annual Report to Stockholders in the Company's
Form 10-K filed with the Securities and Exchange Commission on March 31, 1999).
3
<PAGE>
<TABLE>
<CAPTION>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
March 31,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
OPERATING REVENUE $ 161,266 $ 123,909
------------- -------------
OPERATING EXPENSES:
Salaries, wages and benefits 63,216 51,783
Fuel and fuel taxes 21,379 18,463
Vehicle rents 11,900 7,886
Depreciation & amortization 6,902 5,466
Purchased transportation 19,294 10,629
Operating expense & supplies 9,707 7,621
Insurance premiums & claims 5,739 4,162
Operating taxes & licenses 3,048 2,155
Communications & utilities 2,970 2,014
General & other operating expenses 7,796 6,501
------------- -------------
Total operating expenses 151,951 116,680
------------- -------------
INCOME FROM OPERATIONS 9,315 7,229
------------- -------------
OTHER INCOME AND (EXPENSE):
Interest expense, net (3,165) (1,771)
Other income, net 44 17
------------- -------------
(3,121) (1,754)
------------- -------------
INCOME BEFORE INCOME TAX PROVISION 6,194 5,475
INCOME TAX PROVISION 2,477 2,193
------------- -------------
NET INCOME $ 3,717 $ 3,282
============= =============
EARNINGS PER SHARE - BASIC $ 0.25 $ 0.22
============= =============
WEIGHTED AVERAGE SHARES - BASIC 14,963 15,037
============= =============
EARNINGS PER SHARE - DILUTED $ 0.25 $ 0.22
============= =============
WEIGHTED AVERAGE SHARES - DILUTED 15,068 15,159
============= =============
(See accompanying Notes to Consolidated Financial Statements)
</TABLE>
4
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<TABLE>
<CAPTION>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
ASSETS March 31, 1999 December 31, 1998
- ---------------------------------------------------------------------- ------------------------ ------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 4,122 $ 6,613
Customer receivables, net of allowance 93,233 94,814
Other receivables 19,905 22,327
Prepaid insurance and licenses 9,694 3,411
Operating and installation supplies 4,878 5,214
Deferred income taxes 4,084 4,223
Other current assets 2,536 1,312
------------------------ ------------------------
Total current assets 138,452 137,914
------------------------ ------------------------
PROPERTY AND EQUIPMENT, at cost:
Land and buildings 10,413 9,771
Revenue and service equipment 216,528 229,377
Furniture and equipment 17,855 14,864
Leasehold improvements 15,412 15,136
------------------------ ------------------------
260,208 269,148
Less accumulated depreciation and amortization (53,380) (52,221)
------------------------ ------------------------
Net property and equipment 206,828 216,927
------------------------ ------------------------
OTHER ASSETS:
Goodwill, net 69,246 64,806
Other 7,155 6,892
------------------------ ------------------------
Total other assets 76,401 71,698
------------------------ ------------------------
TOTAL ASSETS $ 421,681 $ 426,539
======================== ========================
(See accompanying Notes to Consolidated Financial Statements)
5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 1999 December 31, 1998
- ----------------------------------------------------------------------------- ---------------- -------------------
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 14,547 $ 17,090
Accrued wages and benefits 8,921 6,573
Claims and insurance accruals 5,254 8,382
Other accrued liabilities 2,197 6,694
Current maturities of long-term debt 921 869
---------------- -------------------
Total current liabilities 31,840 39,608
---------------- -------------------
LONG-TERM DEBT, net of current maturities 199,784 202,450
---------------- -------------------
DEFERRED INCOME TAXES 30,059 28,820
---------------- -------------------
OTHER LONG-TERM LIABILITIES 1,778 1,994
---------------- -------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000
shares authorized, no shares issued -- --
Common stock Class A, $.01 par value,
30,000,000 shares authorized, 13,069,760 and 13,017,867
shares issued and outstanding at March 31,
1999 and December 31, 1998, respectively 131 130
Common stock Class B, $.01 par value, 7,500,000
shares authorized, 3,040,262 shares issued and
outstanding at March 31, 1999 and December 31, 1998, respectively 30 30
Additional paid-in capital 104,090 103,255
Retained earnings 67,068 63,351
Treasury stock, Class A (1,134,289 shares), at cost (12,866) (12,866)
Notes receivable from stockholders (233) (233)
---------------- -------------------
Total stockholders' equity 158,220 153,667
---------------- -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 421,681 $ 426,539
================ ===================
(See accompanying Notes to Consolidated Financial Statements)
6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,717 $ 3,282
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Deferred income tax provision 1,239 1,100
Depreciation & amortization 7,387 5,220
(Gain) loss on sale of equipment (485) 246
Change in receivables 3,388 4,668
Change in prepaid insurance (6,947) (4,595)
Change in operating supplies 336 (182)
Change in other assets (3,613) (1,350)
Change in accounts payable and other accrued liabilities (10,629) (5,926)
Change in accrued wages and benefits 2,348 2,453
Other 4 4
--------------- ---------------
Net cash provided by (used in) operating activities (3,255) 4,920
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for purchases of property and equipment (13,342) (26,102)
Proceeds from sales of property and equipment 18,196 11,526
Acquisition of business, net of cash acquired -- (50,785)
--------------- ---------------
Net cash provided by (used in) investing activities 4,854 (65,361)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing (payments) under lines of credit (4,000) 87,500
Payments of long-term debt (214) (24,096)
Proceeds from exercise of stock options -- 60
Proceed from issuance of common stock, net 124 275
--------------- ---------------
Net cash provided by (used in) financing activities (4,090) 63,739
--------------- ---------------
NET INCREASE (DECREASE) IN CASH (2,491) 3,298
Cash and cash equivalents, beginning of period 6,613 2,734
--------------- ---------------
Cash and cash equivalents, end of period $ 4,122 $ 6,032
--------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 2,826 $ 1,749
=============== ===============
Cash paid during the period for income taxes $ 3,613 $ 1,474
=============== ===============
</TABLE>
(See accompanying Notes to Consolidated Financial Statements)
7
<PAGE>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Operations
U. S. Xpress Enterprises, Inc. (the "Company") provides transportation and
logistics services through two business segments. U.S. Xpress, Inc. ("U.S.
Xpress") is a truckload carrier serving the continental United States and parts
of 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.
Earnings Per Share
The difference in basic and diluted EPS is due to the assumed conversion of
outstanding options resulting in approximately 105,000 and 122,000 equivalent
shares in the three month period ended March 31, 1999 and 1998, respectively.
Reclassifications
Certain reclassifications have been made in the fiscal 1998 financial
statements to conform to the 1999 presentation.
8
<PAGE>
3. Commitments and Contingencies
Effective January 1, 1997, the Company entered into an agreement with
Employee Solutions, Inc. ("ESI"), a Professional Employer Organization ("PEO")
in which the PEO was a co-employer with the Company for substantially all of the
Company's personnel. The PEO was responsible for the processing and
administration of the Company's payroll, including tax reporting, and provided
group health benefits and workers' compensation coverage. On July 20, 1998, ESI
notified the Company it was terminating its agreement with the Company. In July
1998, the Company filed suit against ESI in the United States District Court for
the Eastern District of Tennessee, at Chattanooga. The complaint alleged that
ESI agreed to perform certain employer organization services for the Company,
including administration of programs related to wages, payroll taxes, workers'
compensation, employee benefit programs and other insurance and related
administration services. The Company has alleged that ESI breached its contract
to provide such services and wrongfully attempted to terminate the contract.
Effective August 20, 1998, the contract with ESI terminated and the Company
assumed total control of all payroll functions. The Company seeks reimbursement
of amounts wrongfully withheld by ESI, and other contractual and punitive
damages. On December 2, 1998, an agreed order was entered submitting all
matters in dispute between the parties to binding arbitration which is presently
set to be completed in the second quarter of 1999. At March 31, 1999, the
Company has approximately $2.4 million included in other receivables related to
amounts wrongfully withheld by ESI. The Company presently believes that the
contract termination and arbitration will not have a material adverse impact on
the Company.
The Company is party to certain other 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 $13,092,000 outstanding at March 31,
1999. The letters of credit are maintained primarily to support the Company's
insurance program.
4. Acquisitions of Victory Express, Inc. and PST Vans, Inc. and
Pro Forma Financial Information
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, in a transaction accounted for
by the purchase method of accounting.
Effective August 28, 1998, the Company acquired PST Vans, Inc., a non-union
truckload carrier based in Salt Lake City, Utah for $12.3 million in cash,
issuance of
9
<PAGE>
approximately 1,036,348 shares of U.S. Xpress stock, and the assumption of $52.0
million in debt, in a transaction accounted for by the purchase method of
accounting.
The results of operations of Victory Express and PST Vans are included in
the accompanying consolidated financial statements from the dates of their
respective acquisitions. The pro forma financial information below is based on
the historical financial statements of U.S. Xpress Enterprises, PST Vans, and
Victory Express and adjusted as if the acquisitions had occurred on January 1,
1998, with certain assumptions made that management believes to be reasonable.
This information is for comparative purposes only and does not purport to be
indicative of the results of operations that would have occurred had the
transactions been completed at the beginning of the respective periods or
indicative of the results that may occur in the future (in thousands, except
share data).
Three Months Ended
March 31,
------------------
1999 1998
-------- --------
Operating revenue $161,266 $164,678
Net income 3,717 3,479
Earnings per share - basic 0.25 0.22
Earnings per share - diluted 0.25 0.22
Weighted average shares - basic 14,963 16,039
Weighted average shares - diluted 15,068 16,161
5. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings, unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement the Statement as of the beginning of any fiscal
quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). Statement 133 cannot be applied retroactively. Statement 133 must
be applied to (a) derivative instruments and (b) certain derivative instruments
embedded in hybrid
10
<PAGE>
contracts that were issued, acquired or substantively modified after December
31, 1997 (and, at the Company's election, before January 1, 1998).
The Statement could increase the volatility in earnings and other
comprehensive income, however, based on the Company's current and anticipated
level of derivative instruments and hedging activities, the Company does not
believe the impact would be material.
6. Operating Segments
The Company has two reportable segments based on the types of services it
provides to its customers: U.S. Xpress, which provides truckload operations and
related logistics services throughout the continental United States and parts of
Canada and Mexico, and CSI/Crown, which provides transportation and logistics
services to the floorcovering industry. All intersegment sales prices are
market based. The Company evaluates performance based on operating income of
the respective business units.
<TABLE>
<CAPTION>
U.S. Xpress CSI/Crown Consolidated
----------- --------- ------------
<S> <C> <C> <C>
Quarter Ended March 31, 1999
- ----------------------------
Revenues--external customers $147,132 $14,134 $161,266
Intersegment revenues 1,240 - 1,240
Operating income 9,047 268 9,315
Total assets 402,439 19,242 421,681
Quarter Ended March 31, 1998
- ----------------------------
Revenues--external customers $108,149 $15,760 $123,909
Intersegment revenues 1,414 - 1,414
Operating income 6,996 233 7,229
Total assets 295,836 19,844 315,680
</TABLE>
The difference in consolidated operating income as shown above and consolidated
income before income tax provision on the consolidated statements of operations
is interest expense, net of $3,165 and $1,771 and other income, net of $44 and
$17 for the quarter ended March 31, 1999 and 1998, respectively.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
U.S. Xpress Enterprises, Inc. (the "Company") provides transportation and
logistics services through two business segments. U.S. Xpress, Inc. (U.S.
Xpress) is a truckload carrier serving the continental United States and parts
of Canada and Mexico. CSI/Crown, Inc. ("CSI/Crown") provides transportation and
logistics services to the floorcovering industry.
Results of Operations
The following table sets forth, for the periods indicated, the components
of the consolidated statements of operations expressed as a percentage of
operating revenue:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------------
1999 1998
-------------------- ---------------------
<S> <C> <C>
OPERATING REVENUE 100.0% 100.0%
-------------------- ---------------------
OPERATING EXPENSES:
Salaries, wages and benefits 39.2 41.8
Fuel and fuel taxes 13.3 14.9
Vehicle rents 7.4 6.4
Depreciation & amortization 4.3 4.4
Purchased transportation 12.0 8.6
Operating expense & supplies 6.0 6.2
Insurance premiums & claims 3.6 3.4
Operating taxes & licenses 1.9 1.7
Communications & utilities 1.8 1.6
General & other operating 4.7 5.2
-------------------- ---------------------
Total operating expenses 94.2 94.2
-------------------- ---------------------
INCOME FROM OPERATIONS 5.8 5.8
-------------------- ---------------------
OTHER INCOME AND (EXPENSE):
Interest expense, net (2.0) (1.4)
Other income, net - -
-------------------- ---------------------
(2.0) (1.4)
-------------------- ---------------------
INCOME BEFORE INCOME TAX PROVISION 3.8 4.4
INCOME TAX PROVISION 1.5 1.8
-------------------- ---------------------
NET INCOME 2.3% 2.6%
==================== =====================
</TABLE>
12
<PAGE>
Comparison of the Three Months Ended March 31, 1999 to the
Three Months Ended March 31, 1998
Operating revenue during the three month period ended March 31, 1999
increased $37.4 million, or 30.1%, to $161.3 million, compared to $123.9 million
during the same period in 1998. The revenue increase was primarily attributable
to a 44.2% increase in weighted average tractors to 4,723 in 1999, compared to
3,275 in 1998, due in part to the acquisitions of Victory Express in January
1998 and PST Vans in August 1998. The Company's average revenue per loaded mile
increased 1.5% to $1.186, versus $1.168 in 1998, due principally to per mile
rate increases.
Operating expenses represented 94.2% of operating revenue for the three
months ended March 31, 1999 and 1998.
Salaries, wages and employee benefits as a percentage of revenue were 39.2%
during the three months ended March 31, 1999, compared to 41.8% during the same
period in 1998. The decrease is primarily attributable to an increase in the
number of owner-operators to 480 at March 31, 1999, compared to 131 at March 31,
1998. The August 1998 acquisition of PST Vans accounted for 277 of the
increase. All owner-operator expenses are reflected as purchased transportation.
Fuel and fuel taxes as a percentage of operating revenue were 13.3% during
the three months ended March 31, 1999, compared to 14.9% during the same period
in 1998. The decrease in fuel expense was due primarily to the increase in the
use of owner-operators, who pay for their fuel purchases, and a decrease in the
average price per gallon of fuel. The Company's exposure to increases in fuel
prices is managed by fuel surcharges to its customers and, on a limited basis,
by hedges against fluctuations in fuel prices.
Vehicle rents as a percentage of operating revenue were 7.4% during the
three months ended March 31, 1999, compared to 6.4% during the same period of
1998. Depreciation and amortization as a percentage of operating revenue was
4.3% for the three months ended March 31, 1999, compared to 4.4% during the same
period in 1998. The Company includes gains and losses from the sale of revenue
equipment in depreciation expense. Net gains from the sale of revenue equipment
for the three months ended March 31, 1999 were $0.4 million compared to a loss
of $0.2 million during the same period in 1998. Overall, as a percentage of
operating revenue, vehicle rents and depreciation were 11.7% during the three
months ended March 31, 1999, compared to 10.8% during the same period in 1998.
This increase was due primarily to a reduction in equipment utilization (revenue
per tractor per week) in the three month period ended March 31, 1999, compared
to the same period during 1998.
Purchased transportation as a percentage of operating revenue was 12.0%
during the three months ended March 31, 1999, compared to 8.6% during the same
period in 1998. This increase is primarily due to an increase of the Company's
owner-operator fleet to 480 as of March 31, 1999 from 131 as of March 31, 1998.
13
<PAGE>
General and other operating expenses as a percentage of operating revenue
were 4.7% during the three months ended March 31, 1999, compared to 5.2% during
the same period in 1998. This decrease was primarily due to the 30.1% increase
in revenue, while many expenses included in general and other operating expenses
are relatively fixed.
Income from operations for the three months ended March 31, 1999 increased
$2.1 million, or 28.9%, to $9.3 million from $7.2 million during the same period
in 1998. As a percentage of operating revenue, income from operations was 5.8%
for the three months ended March 31, 1999 and 1998.
Interest expense during the three month period ended increased $1.4
million, or 78.7%, to $3.2 million, compared to $1.8 million during the same
period in 1998. This increase is due primarily to the increase in outstanding
debt incurred to finance the 1998 acquisitions of Victory Express and PST Vans.
Liquidity and Capital Resources
The Company's primary sources of liquidity and capital resources during the
three-month period ended March 31, 1999 were funds provided by operations,
borrowings under lines of credit, proceeds from sales of used revenue equipment,
and the use of long-term operating leases for revenue equipment acquisitions.
At March 31, 1999, the Company had in place a $225.0 million credit facility
with a group of banks with a weighted average interest rate of 5.7%, of which
$26.9 million was available for borrowing. The loan matures January 15, 2002.
Interest on outstanding borrowings is based on the London Interbank Offered Rate
plus applicable margins as defined in the credit agreement. The Company also
had a $10.0 million credit facility at March 31, 1999, all of which was
available for borrowing. In 1999, the Company's primary sources of liquidity
are expected to be funds provided by operations, borrowings under lines of
credit, proceeds from sale of used revenue equipment and long-term operating
lease financing for the acquisition of revenue equipment.
Cash used in operations was $3.3 million during the first three months of
fiscal 1999, compared to cash provided by operations of $4.9 million during the
same period last year. Net cash provided by investment activities was $4.9
million in the first three months of fiscal 1999, compared to cash used in
investing activities of $65.4 million during the same period in 1998. Of the
cash used in investment activities, $13.3 million was used to acquire additional
property and equipment for the first three months of 1999, compared to $26.1
million during the same period of 1998. The Company used $50.8 million, net of
cash acquired, in business acquisitions in the first three months of 1998,
related to the acquisition of Victory Express in January 1998.
Net cash used in financing activities was $4.1 million during the first
three months of fiscal 1999, compared to cash provided by financing activities
of $63.7 million during the same period of 1998. In the first three months of
1998, the Company financed the acquisition of Victory Express and repaid a
substantial portion of its long-term debt with proceeds from the $225.0 million
revolving line of credit established in January 1998.
14
<PAGE>
Management believes that funds provided by operations, available borrowings
under the Company's existing line of credit and long-term operating lease
financing will be sufficient to fund its cash needs and anticipated capital
expenditures through at least the next twelve months.
Inflation
Inflation has not had a material effect on the Company's results of
operations or financial condition during the past three years. However,
inflation higher than experienced during the past three years could have an
adverse effect on the Company's future results.
Seasonality
In the trucking industry, revenue generally shows a seasonal pattern as
customers reduce shipments during and after the winter holiday season and its
inherent weather variations. The Company's operating expenses also have
historically been higher in the winter weather.
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. A complete comprehensive test of the U.S. Xpress
systems for Year 2000 compliance is scheduled for July 1999. Systems in use at
CSI/Crown are presently 50% compliant with Year 2000 requirements. Programming
to make CSI/Crown's systems compliant is expected to be completed by June 30,
1999. Testing of CSI/Crown systems is scheduled for July 1999. U.S. Xpress is
currently obtaining status updates and information concerning the Year 2000
compliance from its suppliers and customers. In the event that any of the
Company's significant suppliers or customers do not successfully and timely
achieve Year 2000 compliance, the Company's business or operations could be
adversely affected. With that in mind, U.S. Xpress is putting in place a plan
to replace those vendors and/or suppliers that will not be compliant. The costs
to the Company in achieving Year 2000 compliance have not been material and are
not expected to be material in the future.
This report may contain forward-looking statements relating to future
events or the future financial performance of the Company. Such forward-looking
statements are within the meaning of that term in Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such statements may include, but not
be limited to, projections of revenues, income or loss, capital expenditures,
acquisitions, plans for growth and future operations, financing needs or plans
or intentions relating to acquisitions by the Company, as well as assumptions
relating to the foregoing. Forward-looking statements are inherently subject to
risks and uncertainties, some of which cannot be predicted or quantified.
Future events and actual results could differ materially from those set forth
in, contemplated by or underlying the forward-looking statements.
15
<PAGE>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No reports were filed on Form 8-K during the three months
ended March 31, 1999.
(b) Financial Data Schedule (for SEC use only)
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. XPRESS ENTERPRISES, INC.
-----------------------------
(Registrant)
Date: May 14, 1999 By: /s/ Patrick E. Quinn
---------------------
Patrick E. Quinn
President
Date: May 14, 1999 By: /s/ Ray M. Harlin
------------------
Ray M. Harlin
Principal Financial Officer
17
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