<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
June 30, 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 June 30, 1999, 11,718,875 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 20
<PAGE>
U.S. XPRESS ENTERPRISES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.......................... 3
- ------
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1999 and 1998........................ 4
Consolidated Balance Sheets as of June 30,
1999 and December 31, 1998................................. 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 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 19
- ------
SIGNATURES................................................. 20
</TABLE>
2
<PAGE>
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 six months ended June 30, 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>
U.S. 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,
1999 1998 1999 1998
-------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Operating Revenue $ 176,439 $ 138,433 $ 337,704 $ 262,343
-------------- --------- -------------- ---------
Operating Expenses:
Salaries, wages and benefits 68,710 56,510 131,925 108,293
Fuel and fuel taxes 23,248 18,668 44,627 37,131
Vehicle rents 13,572 7,947 25,471 15,833
Depreciation and amortization, net of gain on sale 7,206 5,718 14,107 11,184
Purchased transportation 20,210 13,033 39,504 23,662
Operating expense and supplies 10,969 8,697 20,676 16,318
Insurance premiums and claims 7,070 4,556 12,809 8,717
Operating taxes and licenses 3,770 2,156 6,819 4,312
Communications and utilities 2,812 2,155 5,782 4,169
General and other operating 8,306 7,338 16,059 13,820
Non-recurring charge - litigation settlement 1,250 - 1,250 -
-------------- --------- -------------- ---------
Total operating expenses 167,123 126,778 319,029 243,439
-------------- --------- -------------- ---------
Income from Operations 9,316 11,655 18,675 18,904
Interest Expense, net 3,104 2,190 6,269 3,962
-------------- --------- -------------- ---------
Income Before Income Taxes 6,212 9,465 12,406 14,942
Income Taxes 2,485 3,783 4,962 5,976
-------------- --------- -------------- ---------
Net Income $ 3,727 $ 5,682 $ 7,444 $ 8,966
============== ========= ============== =========
Earnings Per Share - Basic $ 0.25 $ 0.38 $ 0.50 $ 0.60
============== ========= ============== =========
Weighted Average Shares - Basic 14,917 15,049 14,940 15,043
============== ========= ============== =========
Earnings Per Share - Diluted $ 0.25 $ 0.38 $ 0.50 $ 0.59
============== ========= ============== =========
Weighted Average Shares - Diluted 14,989 15,152 15,027 15,155
============== ========= ============== =========
</TABLE>
4
<PAGE>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------------- --------------------------
(Unaudited)
<S> <C> <C>
Assets
- -----------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 1,838 $ 6,613
Customer receivables, net of allowance 96,467 94,814
Other receivables 19,684 22,327
Prepaid insurance and licenses 7,272 3,411
Operating and installation supplies 5,863 5,214
Deferred income taxes 4,631 4,223
Other current assets 3,449 1,312
-------------------------- --------------------------
Total current assets 139,204 137,914
-------------------------- --------------------------
Property and Equipment, at cost:
Land and buildings 9,643 9,771
Revenue and service equipment 209,071 229,377
Furniture and equipment 17,492 14,864
Leasehold improvements 16,752 15,136
-------------------------- --------------------------
252,958 269,148
Less accumulated depreciation and amortization (57,974) (52,221)
-------------------------- --------------------------
Net property and equipment 194,984 216,927
-------------------------- --------------------------
Other Assets:
Goodwill, net 70,340 64,806
Other 7,615 6,892
-------------------------- --------------------------
Total other assets 77,955 71,698
-------------------------- --------------------------
Total Assets $ 412,143 $ 426,539
========================== ==========================
</TABLE>
5
<PAGE>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------------------- --------------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- -----------------------------------------------------------------
Current Liabilities:
Accounts payable $ 12,958 $ 17,090
Accrued wages and benefits 8,650 6,573
Claims and insurance accruals 3,857 8,382
Other accrued liabilities 9,158 6,694
Current maturities of long-term debt 561 869
------------------------- --------------------------
Total current liabilities 35,184 39,608
------------------------- --------------------------
Long-Term Debt, net of current maturities 183,317 202,450
------------------------- --------------------------
Deferred Income Taxes 31,301 28,820
------------------------- --------------------------
Other Long-Term Liabilities 2,388 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, 13,073,164 and 13,017,867
shares issued and outstanding at June 30,
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 June 30, 1999 and December 31, 1998 30 30
Additional paid-in capital 104,130 103,255
Retained earnings 70,795 63,351
Treasury Stock Class A (1,354,289 shares), at cost (14,900) (12,866)
Notes receivable from stockholders (233) (233)
------------------------- --------------------------
Total stockholders' equity 159,953 153,667
------------------------- --------------------------
Total Liabilities and Stockholders' Equity $ 412,143 $ 426,539
========================= ==========================
</TABLE>
6
<PAGE>
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1999 1998
------------------ ----------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 7,444 $ 8,966
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred income tax provision 2,481 4,883
Depreciation & amortization 14,860 11,415
Gain on sale of equipment (753) (231)
Change in receivables 903 (1,265)
Change in prepaid insurance (4,526) (2,729)
Change in operating supplies (441) (46)
Change in other assets (4,223) (3,304)
Change in accounts payable and other accrued liabilities (7,336) (5,785)
Change in accrued wages and benefits 2,078 1,813
Other 44 31
------------------ ----------------------
Net cash provided by operating activities 10,531 13,748
------------------ ----------------------
Cash Flows from Investing Activities:
Payments for purchases of property and equipment (35,304) (59,975)
Proceeds from sales of property and equipment 44,116 32,630
Acquisition of businesses, net of cash acquired (1,798) (50,785)
------------------ ----------------------
Net cash provided by (used in) investing activities 7,014 (78,130)
------------------ ----------------------
Cash Flows from Financing Activities:
Net borrowing (payments) under lines of credit (20,000) 96,500
Payments of long-term debt (411) (33,597)
Proceeds from exercise of stock options - 77
Proceeds from issuance of common stock, net 124 275
Purchase of 220,000 shares of Class A Common Stock (2,033) -
------------------ ----------------------
Net cash provided by (used in) financing activities (22,320) 63,255
------------------ ----------------------
Net Decrease in Cash and Cash Equivalents (4,775) (1,127)
Cash and Cash Equivalents, beginning of period 6,613 2,734
------------------ ----------------------
Cash and Cash Equivalents, end of period $ 1,838 $ 1,607
------------------ ----------------------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ 6,183 $ 2,005
================== ======================
Cash paid during the period for income taxes $ 4,965 $ 1,677
================== ======================
</TABLE>
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 72,000 and 103,000 equivalent
shares in the three month period ended June 30, 1999 and 1998, respectively, and
87,000 and 112,000 equivalent shares in the six month period ended June 30, 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 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. On July 22, 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 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 requested
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. On May 27,
1999, prior to arbitration, a settlement agreement and release was completed. As
a result of the settlement, the Company recorded a non-recurring charge of $1.3
million to operating expense in the quarter ending June 30, 1999.
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 $10,662,000 outstanding at June 30,
1999. The letters of credit are maintained primarily to support the Company's
insurance program.
4. Acquisitions
During 1999, the Company paid approximately $1.8 million of additional
consideration for acquisitions prior to 1999, according to the terms of the
purchase agreements.
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, the
issuance of 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.
9
<PAGE>
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).
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1999 1998
-------- ----------------
<S> <C> <C>
Operating revenue $337,704 $338,285
Net income 7,444 9,524
Earnings per share - basic 0.50 0.59
Earnings per share - diluted 0.50 0.59
Weighted average shares - basic 14,940 16,079
Weighted average shares - diluted 15,027 16,191
</TABLE>
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,
2000. 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 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.
10
<PAGE>
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>
Three Months Ended June 30, 1999
- --------------------------------
Revenues - external customers $ 161,446 $ 14,993 $ 176,439
Intersegment revenues 1,020 - 1,020
Operating income 8,457 859 9,316
Total assets 393,259 18,884 412,143
Three months Ended June 30, 1998
- --------------------------------
Revenues - external customers $ 118,067 $ 20,366 $ 138,433
Intersegment revenues 1,513 - 1,513
Operating income 10,663 992 11,655
Total assets 303,509 21,054 324,563
Six Months Ended June 30, 1999
- --------------------------------
Revenues - external customers $ 308,577 $ 29,127 $ 337,704
Intersegment revenues 2,260 - 2,260
Operating income 17,485 1,190 18,675
Total assets 393,259 18,884 412,143
Six Months Ended June 30, 1998
- --------------------------------
Revenues - external customers $ 226,217 $ 36,126 $ 262,343
Intersegment revenues 2,926 - 2,926
Operating income 17,594 1,310 18,904
Total assets 303,509 21,054 324,563
</TABLE>
The difference in consolidated operating income as shown above and consolidated
income before income tax provision on the consolidated statements of operations
is net interest expense of $3,104 and $2,190 for the three months ended June
30, 1999 and 1998, respectively, and $6,269 and $3,962 for the six months ended
June 30, 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 Six Months Ended
June 30, June 30,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating Revenue 100.0% 100.0% 100.0% 100.0%
-------------- -------------- -------------- --------------
Operating Expenses:
Salaries, wages and benefits 38.9 40.8 39.1 41.3
Fuel and fuel taxes 13.2 13.5 13.2 14.2
Vehicle rents 7.7 5.7 7.5 6.0
Depreciation & amortization, net of gain on sale 4.1 4.1 4.2 4.3
Purchased transportation 11.5 9.4 11.7 9.0
Operating expense & supplies 6.2 6.3 6.1 6.2
Insurance premiums & claims 4.0 3.3 3.8 3.3
Operating taxes & licenses 2.1 1.6 2.0 1.6
Communications & utilities 1.6 1.6 1.7 1.6
General & other operating 4.7 5.3 4.8 5.3
Non-recurring charge - litigation settlement 0.7 - 0.4 -
-------------- -------------- -------------- --------------
Total operating expenses 94.7 91.6 94.5 92.8
-------------- -------------- -------------- --------------
Income from Operations 5.3 8.4 5.5 7.2
Interest Expense, net 1.8 1.6 1.8 1.5
-------------- -------------- -------------- --------------
Income Before Income Taxes 3.5 6.8 3.7 5.7
Income Taxes 1.4 2.7 1.5 2.3
-------------- -------------- -------------- --------------
Net Income 2.1% 4.1% 2.2% 3.4%
============== ============== ============== ==============
</TABLE>
12
<PAGE>
Comparison of the Three Months Ended June 30, 1999 to the Three Months
Ended June 30, 1998
Operating revenue during the three-month period ended June 30, 1999
increased $38.0 million, or 27.5%, to $176.4 million, compared to $138.4 million
during the same period in 1998. U.S. Xpress revenue increased $43.4 million due
primarily to a 34.7% increase in revenue miles and increase in average revenue
per loaded mile to $1.196, versus $1.178 in 1998, due principally to per mile
rate increases. Weighted average tractors increased to 4,640 during the three
month period ended June 30, 1999, compared to 3,193 during the same period in
1998, due largely to the acquisitions of Victory Express in January 1998 and PST
Vans in August 1998. CSI/Crown revenues decreased $5.4 million resulting from a
program to eliminate unprofitable revenues, including the closure of certain
non-performing facilities.
Operating expenses represented 94.7% of operating revenue for the three
months ended June 30, 1999, compared to 91.6% during the same period in 1998.
Salaries, wages and benefits as a percentage of revenue were 38.9% during
the three months ended June 30, 1999, compared to 40.8% during the same period
in 1998. The decrease was primarily attributable to an increase in the number
of owner-operators to 451 at June 30, 1999, compared to 145 at June 30, 1998.
All owner-operator expenses are reflected as purchased transportation.
CSI/Crown salaries, wages and benefits decreased 27.9% during the three months
ended June 30, 1999, compared to the same period in 1998 due to the facility
closures described above and efficiencies gained through a new bar-coding
process.
Fuel and fuel taxes as a percentage of operating revenue were 13.2% during
the three months ended June 30, 1999, compared to 13.5% during the same period
in 1998. The decrease was primarily due to the increase in the use of owner-
operators, who pay for their fuel purchases. 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 7.7% during the
three months ended June 30, 1999, compared to 5.7% during the same period of
1998. The increase resulted from increased operating leases for tractors to
2,902 and trailers to 4,019 at June 30, 1999, compared to 1,828 leased tractors
and 1,845 leased trailers at June 30, 1998. Depreciation and amortization as a
percentage of operating revenue was 4.1% for the three months ended June 30,
1999, compared to 4.1% during the same period of 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 June 30,
1999 were $.3 million compared to a gain of $.5 million for the same period in
1998. Overall, as a percentage of operating revenue, vehicle rents and
depreciation were 11.8% during the three months ended June 30, 1999, compared to
9.8% during the same period in 1998. This increase was primarily due to a
reduction in equipment utilization (revenue per tractor per week) in the three
month period ended June 30, 1999, compared to the same period during 1998.
13
<PAGE>
Purchased transportation as a percentage of operating revenue was 11.5%
during the three months ended June 30, 1999, compared to 9.4% during the same
period in 1998. The increase was primarily due to an increase of the Company's
owner-operator fleet to 451 as of June 30, 1999 from 145 as of June 30, 1998.
Insurance premiums & claims as percentage of operating revenue was 4.0%
during the three months ended June 30, 1999, compared to 3.3% during the same
period in 1998. The increase is due primarily to increase in cargo insurance
premiums and the reduction in equipment utilization.
General and other operating expenses as a percentage of operating revenue
were 4.7% during the three months ended June 30, 1999, compared to 5.3% during
the same period in 1998. This decrease was primarily due to the 27.5% increase
in revenue, while many expenses included in general and other operating expenses
are relatively fixed.
Non-recurring charge - litigation settlement was $1.3 million as a result
of the settlement of litigation with a professional employer organization that
formerly administered the Company's payroll and benefits systems.
Income from operations for the three months ended June 30, 1999 decreased
$2.3 million, or 20.1%, to $9.3 million from $11.7 million during the same
period in 1998. As a percentage of operating revenue, income from operations
was 5.3% for the three months ended June 30, 1999 and 8.4% for the same period
in 1998.
Interest expense during the three month period ended June 30, 1999
increased $.9 million, or 41.7%, to $3.1 million, compared to $2.2 million
during the same period in 1998. This increase was primarily due to the increase
in outstanding debt incurred to finance the 1998 acquisitions of Victory Express
and PST Vans.
14
<PAGE>
Comparison of the Six Months Ended June 30, 1999 to the Six Months Ended
June 30, 1998
Operating revenue during the six month period ended June 30, 1999 increased
$75.4 million, or 28.7%, to $337.7 million, compared to $262.3 million during
the same period in 1998. U.S. Xpress revenue increased $82.4 million due
primarily to a 33.9% increase in revenue miles and increase in average
revenue per loaded mile to $1.192, versus $1.173 in 1998, due principally to per
mile rate increases. Weighted average tractors increased to 4,603 during the
six month period ended June 30, 1999, compared to 3,190 during the same period
in 1998, due largely to the acquisitions of Victory Express in January 1998 and
PST Vans in August 1998. CSI/Crown revenues decreased $7.0 million resulting
from a program to eliminate unprofitable revenues, including the closure of
certain non-performing facilities.
Operating expenses represented 94.5% of operating revenue for the six
months ended June 30, 1999, compared to 92.8% during the same period in 1998.
Salaries, wages and benefits as a percentage of revenue were 39.1% during
the six months ended June 30, 1999, compared to 41.3% during the same period in
1998. The decrease was primarily attributable to an increase in the number of
owner-operators to 451 at June 30, 1999, compared to 145 at June 30, 1998. All
owner-operator expenses are reflected as purchased transportation. CSI/Crown
salaries, wages and benefits decreased 21.7% during the six months ended June
30, 1999, compared to the same period in 1998 due to the facility closures
described above and efficiencies gained through a new bar-coding process.
Fuel and fuel taxes as a percentage of operating revenue were 13.2% during
the six months ended June 30, 1999, compared to 14.2% during the same period in
1998. The decrease was primarily due to the increase in the use of owner-
operators, who pay for their fuel purchases. 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 7.5% during the six
months ended June 30, 1999, compared to 6.0% during the same period of 1998. The
increase resulted from increased operating leases for tractors to 2,902 and
trailers to 4,019 at June 30, 1999, compared to 1,828 leased tractors and 1,845
leased trailers at June 30, 1998. Depreciation and amortization as a percentage
of operating revenue was 4.2% for the six months ended June 30, 1999, compared
to 4.3% during the same period of 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 six months ended June 30, 1999 were $.8
million compared to a gain of $.2 million for the same period in 1998. Overall,
as a percentage of operating revenue, vehicle rents and depreciation were 11.7%
during the six months ended June 30, 1999, compared to 10.3% during the same
period in 1998. This increase was primarily due to a reduction in equipment
utilization (revenue per tractor per week) in the six month period ended June
30, 1999, compared to the same period during 1998.
15
<PAGE>
Purchased transportation as a percentage of operating revenue was 11.7%
during the six months ended June 30, 1999, compared to 9.0% during the same
period in 1998. This increase was primarily due to an increase of the Company's
owner-operator fleet to 451 as of June 30, 1999 from 145 as of June 30, 1998.
Insurance premiums & claims as percentage of operating revenue was 3.8%
during the six months ended June 30, 1999, compared to 3.3% during the same
period in 1998. The increase is due primarily to increase in cargo insurance
premiums and the reduction in equipment utilization.
General and other operating expenses as a percentage of operating revenue
were 4.8% during the six months ended June 30, 1999, compared to 5.3% during the
same period in 1998. This decrease was primarily due to the 28.7% increase in
revenue, while many expenses included in general and other operating expenses
are relatively fixed.
Non-recurring charge - litigation settlement was $1.3 million as a result
of the settlement of litigation with a professional employer organization that
formerly administered the Company's payroll and benefits systems.
Income from operations for the six months ended June 30, 1999 decreased $.2
million, or 1.2%, to $18.7 million from $18.9 million during the same period in
1998. As a percentage of operating revenue, income from operations was 5.5% for
the six months ended June 30, 1999 and 7.2% for the same period in 1998.
Interest expense during the six month period ended June 30, 1999 increased
$2.3 million, or 58.2%, to $6.3 million, compared to $4.0 million during the
same period in 1998. The increase was primarily due 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
six-month period ended June 30, 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 June 30, 1999, the Company had in place a $225.0 million credit facility with
a group of banks with a weighted-average interest rate of 6.1%, of which $42.9
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 June 30, 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 provided by operations was $10.5 million during the six months ended
June 30, 1999, compared to cash provided by operations of $13.7 million during
the
16
<PAGE>
same period last year. Net cash provided by investment activities was $7.0
million in the six months ended June 30, 1999, compared to cash used in
investing activities of $78.1 million during the same period in 1998. Of the
cash used in investment activities, $35.3 million was used to acquire additional
property and equipment for the six months ended June 30, 1999, compared to $60.0
million during the same period of 1998. The Company used $50.8 million, net of
cash acquired, in business acquisitions in the first six months of 1998, related
to the acquisition of Victory Express in January 1998. Net cash used in
financing activities was $22.3 million during the six months ended June 30,
1999, compared to cash provided by financing activities of $63.3 million during
the same period of 1998. In the first six 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.
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 was scheduled and started in July 1999, with
subsequent follow-up to be completed in August and September 1999. Systems in
use at CSI/Crown are approximately 50% compliant with Year 2000 requirements.
Replacement of the non-compliant systems started in May 1999 and has an expected
completion date of September 30, 1999. Testing of CSI/Crown systems was
scheduled and started in July 1999, with follow-up testing scheduled in
September 1999. The Company 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,
the Comapany 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.
17
<PAGE>
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.
18
<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 June 30, 1999.
(b) Financial Data Schedule (for SEC use only)
19
<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: August 16, 1999 By: /s/ Patrick E. Quinn
------------------------------
Patrick E. Quinn
President
Date: August 16, 1999 By: /s/ Ray M. Harlin
-----------------------------
Ray M. Harlin
Principal Financial Officer
20
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<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> APR-01-1999 JAN-01-1999
<PERIOD-END> JUN-30-1999 JUN-30-1999
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<SECURITIES> 0 0
<RECEIVABLES> 98,976 0
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<DEPRECIATION> 57,974 0
<TOTAL-ASSETS> 412,143 0
<CURRENT-LIABILITIES> 35,184 0
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0 0
0 0
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<INCOME-TAX> 2,485 4,962
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