<PAGE>
UNITED STATES
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, 2000 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 ____
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As of June 30, 2000, 10,899,529 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.
1
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U.S. XPRESS ENTERPRISES, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements............................. 3
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Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2000 and 1999........................... 4
Consolidated Balance Sheets as of June 30,
2000 and December 31, 1999.................................... 5
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999....................... 7
Notes to Consolidated Financial Statements.................... 8
Item 2. Management's Discussion and Analysis of
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Financial Condition and Results of Operations................. 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk..... 17
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders........... 18
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Item 6. Exhibits and Reports on Form 8-K.............................. 18
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SIGNATURES.................................................... 20
</TABLE>
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 six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000. 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 1999 Annual Report to Stockholders in the Company's
Form 10-K filed with the Securities and Exchange Commission on March 30, 2000).
3
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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,
-------------------------- --------------------------
2000 1999 2000 1999
-------------- --------- -------------- ---------
<S> <C> <C> <C> <C>
Operating Revenue $ 202,427 $ 176,439 $ 394,267 $ 337,704
-------------- --------- -------------- ---------
Operating Expenses:
Salaries, wages and benefits 72,787 68,893 144,362 132,280
Fuel and fuel taxes 32,856 23,248 66,723 44,627
Vehicle rents 14,886 13,572 29,746 25,471
Depreciation and amortization, net of gain on sale 8,237 7,206 16,104 14,107
Purchased transportation 27,648 20,210 52,904 39,504
Operating expense and supplies 12,859 11,149 24,405 21,040
Insurance premiums and claims 8,891 6,708 16,525 12,090
Operating taxes and licenses 3,517 3,770 6,903 6,819
Communications and utilities 2,719 2,812 5,751 5,782
General and other operating 8,905 8,305 16,881 16,059
Non-recurring charge - litigation settlement - 1,250 - 1,250
-------------- --------- -------------- ---------
Total operating expenses 193,305 167,123 380,304 319,029
-------------- --------- -------------- ---------
Income from Operations 9,122 9,316 13,963 18,675
Interest Expense, net 3,972 3,104 7,366 6,269
-------------- --------- -------------- ---------
Income Before Income Taxes 5,150 6,212 6,597 12,406
Income Tax Provision 2,066 2,485 2,644 4,962
-------------- --------- -------------- ---------
Net Income $ 3,084 $ 3,727 $ 3,953 $ 7,444
============== ========= ============== =========
Earnings Per Share - basic $ 0.22 $ 0.25 $ 0.28 $ 0.50
============== ========= ============== =========
Weighted average shares - basic 14,204 14,917 14,364 14,940
============== ========= ============== =========
Earnings Per Share - diluted $ 0.22 $ 0.25 $ 0.27 $ 0.50
============== ========= ============== =========
Weighted average shares - diluted 14,282 14,989 14,434 15,027
============== ========= ============== =========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
4
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U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
Assets June 30, 2000 December 31, 1999
----------------------------------------------------------------------------- --------------- -------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 50 $ 259
Customer receivables, net of allowance 105,183 101,870
Other receivables 8,452 9,807
Prepaid insurance and licenses 7,077 2,078
Operating and installation supplies 4,809 6,078
Deferred income taxes 2,148 2,148
Other current assets 7,603 2,092
--------------- -------------------
Total current assets 135,322 124,332
--------------- -------------------
Property and Equipment, at Cost:
Land and buildings 23,297 16,677
Revenue and service equipment 239,409 223,991
Furniture and equipment 19,753 19,169
Leasehold improvements 17,819 16,043
--------------- -------------------
300,278 275,880
Less accumulated depreciation and amortization (82,635) (69,547)
--------------- -------------------
Net property and equipment 217,643 206,333
--------------- -------------------
Other Assets:
Goodwill, net 69,141 70,161
Other 11,426 8,211
--------------- -------------------
Total other assets 80,567 78,372
--------------- -------------------
Total Assets $ 433,532 $ 409,037
=============== ===================
</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 Except Share Data)
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity June 30, 2000 December 31, 1999
----------------------------------------------------------------------------- --------------- -------------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 13,964 $ 16,556
Book overdraft 8,317 886
Accrued wages and benefits 9,524 7,268
Claims and insurance accruals 5,741 5,530
Other accrued liabilities 7,175 5,074
Current maturities of long-term debt 1,669 1,182
--------------- -------------------
Total current liabilities 46,390 36,496
--------------- -------------------
Long-Term Debt, net of current maturities 195,358 181,256
--------------- -------------------
Deferred Income Taxes 27,849 26,526
--------------- -------------------
Other Long-term Liabilities 2,902 3,232
--------------- -------------------
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, 13,124,118 and 13,087,545
shares issued and outstanding at June 30,
2000 and December 31, 1999, respectively 131 131
Common stock Class B, $.01 par value, 7,500,000
shares authorized, 3,040,262 shares issued and
outstanding at June 30, 2000 and December 31, 1999 30 30
Additional paid-in capital 104,493 104,259
Retained earnings 78,685 74,732
Treasury Stock Class A, at cost (2,224,589 and 1,619,289 shares at
June 30, 2000 and December 31, 1999) (22,073) (17,392)
Notes receivable from stockholders (233) (233)
--------------- -------------------
Total stockholders' equity 161,033 161,527
--------------- -------------------
Total Liabilities And Stockholders' Equity $ 433,532 $ 409,037
=============== ===================
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
6
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U.S. XPRESS ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 3,953 $ 7,444
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred income tax provision 1,323 2,481
Depreciation and amortization 16,425 14,860
Gain on sale of equipment (321) (753)
Change in operating assets and liabilities, net of acquistions:
Receivables (3,541) 903
Prepaid insurance and licenses (4,998) (4,526)
Operating and installation supplies 1,271 (441)
Other assets (7,320) (4,223)
Accounts payable and other accrued liabilities 181 (7,336)
Accrued wages and benefits 2,256 2,078
Other 32 44
------------- -------------
Net cash provided by operating activities 9,261 10,531
------------- -------------
Cash Flows from Investing Activities:
Payments for purchase of property and equipment (31,963) (35,304)
Proceeds from sales of property and equipment 5,663 44,116
Acquisition of businesses, net of cash acquired - (1,798)
Investment in Transplace.com (750) -
------------- -------------
Net cash provided by (used in) investing activities (27,050) 7,014
------------- -------------
Cash Flows from Financing Activities:
Net borrowings (payments) under lines of credit 15,563 (20,000)
Book overdraft 7,431 -
Payment of long-term debt (974) (411)
Proceeds from exercise of stock options 8 -
Proceed from issuance of common stock, net 194 124
Purchase of Class A Common Stock (4,642) (2,033)
------------- -------------
Net cash provided by (used in) financing activities 17,580 (22,320)
------------- -------------
Net Decrease in Cash and Cash Equivalents (209) (4,775)
Cash and Cash Equivalents, beginning of period 259 6,613
------------- -------------
Cash and Cash Equivalents, end of period $ 50 $ 1,838
============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest 7,365 6,183
Cash paid during the period for income taxes 0 4,965
</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
(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
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 is 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 78,000 and 72,000 equivalent
shares in the three month period ended June 30, 2000 and 1999, respectively, and
70,000 and 87,000 equivalent shares in the six month period ended June 30, 2000
and 1999, respectively.
Reclassifications
Certain reclassifications have been made in the 1999 financial statements
to conform to the 2000 presentation.
8
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Book Overdraft
Book overdraft represents outstanding checks in excess of current cash
levels. The Company will fund the book overdraft from its line of credit and
operating cash flows.
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 $7,966,000 outstanding at June 30,
2000. The letters of credit are maintained primarily to support the Company's
insurance program.
4. 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.
As amended by SFAS No. 137, 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. The Company will adopt
Statement 133 in the quarter ended March 31, 2001. 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).
Adoption of the Statement could increase the volatility in earnings and
other comprehensive income, however, based on the nature of the Company's
current and anticipated level of derivative instruments and hedging activities,
the Company does not believe the impact would be material.
5. Recent Events
In March 2000, the Company entered into an agreement with five other large
nationwide transportation companies - Covenant Transport, Inc.; J.B. Hunt
Transport Services, Inc.; M.S. Carriers, Inc.; Swift Transportation Co., Inc.;
and Werner Enterprises, Inc. - pursuant to which the parties merged their
logistics business units on July 1, 2000 into a commonly-owned, Internet based
transportation logistics company named Transplace.com. The Company now holds a
13% interest in the newly-formed logistics company. The other owners have the
following equity interests: Covenant, 13%; J.B. Hunt, 28%; M.S. Carriers,
9
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14%; Swift, 16%; and Werner, 16%. The Company's logistics business revenue for
the six months ended June 30, 2000 was $7,901,000. As of June 30, 2000 the
Company had invested $750,000 in this joint venture. In July 2000, the merger
was consummated and an additional $4,250,000 in cash was contributed to
Transplace.com to complete the Company's $5,000,000 required investment.
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 services to the
floorcovering industry. Substantially all intersegment sales prices are market
based. The Company evaluates performance based on operating income of the
respective business units.
U.S. Xpress CSI/Crown Consolidated
----------- --------- ------------
Three Months Ended June 30, 2000
----------------------------------
Revenues - external customers $186,891 $15,536 $202,427
Intersegment revenues 1,175 - 1,175
Operating income 8,081 1,041 9,122
Total assets 413,368 20,164 433,532
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
Six Months Ended June 30, 2000
----------------------------------
Revenues - external customers $365,375 $28,892 $394,267
Intersegment revenues 2,463 - 2,463
Operating income 12,502 1,461 13,963
Total assets 413,368 20,164 433,532
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
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 $3,972 and $3,104 for the three months ended June 30,
2000 and 1999, respectively, and $7,366 and $6,269 for the six months ended June
30, 2000 and 1999, respectively.
10
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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,
---------------------------------- ---------------------------------
2000 1999 2000 1999
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Operating Revenue 100.0% 100.0% 100.0% 100.0%
-------------- -------------- -------------- -------------
Operating Expenses:
Salaries, wages and benefits 36.0 39.0 36.6 39.2
Fuel and fuel taxes 16.2 13.2 16.9 13.2
Vehicle rents 7.4 7.7 7.5 7.5
Depreciation and amortization, net of gain on sale 4.1 4.1 4.1 4.2
Purchased transportation 13.7 11.5 13.4 11.7
Operating expense and supplies 6.4 6.3 6.2 6.2
Insurance premiums and claims 4.4 3.8 4.2 3.6
Operating taxes and licenses 1.7 2.1 1.8 2.0
Communications and utilities 1.3 1.6 1.5 1.7
General and other operating 4.3 4.7 4.3 4.8
Non-recurring charge - litigation settlement - 0.7 - 0.4
-------------- -------------- -------------- -------------
Total operating expenses 95.5 94.7 96.5 94.5
-------------- -------------- -------------- -------------
Income from Operations 4.5 5.3 3.5 5.5
Interest Expense, net 2.0 1.8 1.8 1.8
-------------- -------------- -------------- -------------
Income Before Income Taxes 2.5 3.5 1.7 3.7
Income Tax Provision 1.0 1.4 0.7 1.5
-------------- -------------- -------------- -------------
Net Income 1.5% 2.1% 1.0% 2.2%
============== ============== ============== =============
</TABLE>
11
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Comparison of the Three Months Ended June 30, 2000 to the Three Months
Ended June 30, 1999
Operating revenue during the three-month period ended June 30, 2000
increased $26.0 million, or 14.7%, to $202.4 million, compared to $176.4 million
during the same period in 1999. U.S. Xpress revenue increased $25.6 million, or
15.8%, due primarily to a 10.5% increase in revenue miles, a 2.4% increase in
average revenue per mile to $1.225 from $1.196 in 1999, and a $6.3 million
increase in fuel surcharge revenue. Revenue miles increased due to an increase
in the average number of tractors by 429, or 9.2%, to 5,069 from 4,640, and a
3.6% increase in utilization as measured in miles per tractor per week.
CSI/Crown revenues increased $.5 million due primarily to a 6.3% linehaul rate
increase.
Operating expenses represented 95.5% of operating revenue for the three
months ended June 30, 2000, compared to 94.7% during the same period in 1999.
Salaries, wages and benefits as a percentage of revenue were 36.0% during
the three months ended June 30, 2000, compared to 39.0% during the same period
in 1999. The decrease was primarily attributable to an increase in the number of
owner-operators to 714 at June 30, 2000, compared to 466 at June 30, 1999. All
owner-operator expenses are reflected as purchased transportation.
Fuel and fuel taxes as a percentage of operating revenue were 16.2% during
the three months ended June 30, 2000, compared to 13.2% during the same period
in 1999. This increase was due to the significant increase in fuel prices in the
three months ended June 30, 2000, compared to the same period in 1999. The price
of fuel increased approximately 35.0%. The Company's exposure to increases in
fuel prices is currently managed by fuel surcharges to its customers.
Vehicle rents as a percentage of operating revenue were 7.4% during the
three months ended June 30, 2000 compared to 7.7% during the same period of
1999. Depreciation and amortization as a percentage of operating revenue was
4.1% for both the three months ended June 30, 2000 and the same period in 1999.
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, 2000 were $.1 million compared to a gain of $.3 million
for the same period in 1999. Overall, as a percentage of operating revenue,
vehicle rents and depreciation were 11.5% during the three months ended June 30,
2000, compared to 11.8% during the same period in 1999.
Purchased transportation as a percentage of operating revenue was 13.7%
during the three months ended June 30, 2000, compared to 11.5% during the same
period in 1999. The increase was primarily due to an increase of the Company's
owner-operator fleet to 714 as of June 30, 2000 from 466 as of June 30, 1999.
Owner-operators provide a tractor and driver incurring substantially all of
their operating expenses in exchange for a fixed payment per mile, which is
included in purchased transportation. Owner-operator miles increased to 25.7
million miles in the three months ended June 30, 2000 compared to 15.8 million
miles during the same period in 1999.
12
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Insurance premiums & claims as a percentage of operating revenue were 4.4%
during the three months ended June 30, 2000 compared to 3.8% during the same
period in 1999. The increase is due primarily to an increase in premiums, and
increases in claims and losses related to cargo and physical damage.
General and other operating expenses as a percentage of operating revenue
were 4.3% during the three months ended June 30, 2000, compared to 4.7% during
the same period in 1999. This decrease was primarily due to the 14.7% increase
in revenue, while many expenses included in general and other operating expenses
are relatively fixed.
In the three months ended June 30, 1999 the Company had a non-recurring
charge of $1.3 million which was the 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, 2000 decreased
$.2 million, or 2.1%, to $9.1 million from $9.3 million during the same period
in 1999. As a percentage of operating revenue, income from operations was 4.5%
for the three months ended June 30, 2000 and 5.3% for the same period in 1999.
13
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Comparison of the Six Months Ended June 30, 2000 to the Six Months
Ended June 30, 1999
Operating revenue during the six-month period ended June 30, 2000 increased
$56.5 million, or 16.7%, to $394.3 million, compared to $337.7 million during
the same period in 1999. U.S. Xpress revenue increased $57.0 million, or 18.3%,
due primarily to a 15.0% increase in revenue miles, a 1.16% increase in average
revenue per mile to $1.211 from $1.192 in 1999, and a $11.5 million increase in
fuel surcharge revenue. Revenue miles increased due to an increase in the
average number of tractors by 384, or 8.3%, to 4,987 from 4,603, and a 7.0%
increase in utilization as measured in miles per tractor per week. CSI/Crown
revenues decreased $.2 million, resulting in part from the closure of certain
non-performing facilities.
Operating expenses represented 96.5% of operating revenue for the six
months ended June 30, 2000, compared to 94.5% during the same period in 1999.
Salaries, wages and benefits as a percentage of revenue were 36.6% during
the six months ended June 30, 2000, compared to 39.2% during the same period in
1999. The decrease was primarily attributable to an increase in the average
number of owner-operators in the six months ended June 30, 2000 to 674, compared
to 474 for the same period in 1999. All owner-operator expenses are reflected as
purchased transportation.
Fuel and fuel taxes as a percentage of operating revenue were 16.9% during
the six months ended June 30, 2000, compared to 13.2% during the same period in
1999. This increase was due to the significant increase in fuel prices in the
six months ended June 30, 2000, compared to the same period in 1999. The price
of fuel increased approximately 36.0%. The Company's exposure to increases in
fuel prices is currently managed by fuel surcharges to its customers.
Vehicle rents as a percentage of operating revenue were 7.5% for both the
six months ended June 30, 2000 and the same period of 1999. Depreciation and
amortization as a percentage of operating revenue was 4.1% during the six months
ended June 30, 2000, compared to 4.2% during the same period in 1999. 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, 2000 were $.3 million compared to a gain of $.8 million
for the same period in 1999. Overall, as a percentage of operating revenue,
vehicle rents and depreciation were 11.6% during the six months ended June 30,
2000, compared to 11.7% during the same period in 1999.
Purchased transportation as a percentage of operating revenue was 13.4%
during the six months ended June 30, 2000, compared to 11.7% during the same
period in 1999. The increase was primarily attributable to an increase in the
average number of owner-operators in the six months ended June 30, 2000 to 674,
compared to 474 for the same period in 1999. Owner-operators provide a tractor
and driver incurring substantially all of their operating expenses in exchange
for a fixed payment per mile, which is included in purchased transportation.
Owner-operator miles increased to 48.3 million miles in the six months ended
June 30, 2000 compared to 30.3 million miles during the same period in 1999.
14
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Insurance premiums & claims as a percentage of operating revenue were 4.2%
during the six months ended June 30, 2000 compared to 3.6% during the same
period in 1999. The increase is due primarily to an increase in premiums, and
increases in claims and losses related to cargo and physical damage.
General and other operating expenses as a percentage of operating revenue
were 4.3% during the six months ended June 30, 2000, compared to 4.8% during the
same period in 1999. This decrease was primarily due to the 16.7% increase in
revenue, while many expenses included in general and other operating expenses
are relatively fixed.
In the six months ended June 30, 1999 the Company had a non-recurring
charge of $1.3 million which was the 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, 2000 decreased
$4.7 million, or 25.2%, to $14.0 million from $18.7 million during the same
period in 1999. As a percentage of operating revenue, income from operations
was 3.5% for the six months ended June 30, 2000 and 5.5% for the same period in
1999.
Liquidity and Capital Resources
The Company's primary sources of liquidity and capital resources during the
six month period ended June 30, 2000 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, 2000, the Company had in place a $225.0 million credit facility with a
group of banks with a weighted-average interest rate of 7.9%, of which $24.0
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, 2000, of which $9.5 million was
available for borrowing.
Cash provided by operations was $9.3 million during the six months ended
June 30, 2000, compared to $10.5 million during the same period last year. Net
cash used in investment activities was $27.1 million in the six months ended
June 30, 2000, compared to cash provided by investing activities of $7.0 million
during the same period in 1999. Of the cash used in investment activities,
$32.0 million was used to acquire additional property and equipment for the six
months ended June 30, 2000, compared to $35.3 million during the same period of
1999. Net cash provided by financing activities was $17.6 million during the
six months ended June 30, 2000, compared to cash used in financing activities of
$22.3 million during the same period of 1999.
During the six month period ended June 30, 2000, U.S. Xpress acquired
approximately 605,000 shares of common stock at an average price of $7.73 per
share. The Board of Directors has authorized the repurchase of up to $10 million
of the Company's outstanding common stock.
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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
The Company has completed all Year 2000 modifications to its software and
operating systems. The Company has not experienced any interruption of service
from suppliers or to customers resulting from Year 2000 system issues. In the
event that any of the Company's significant suppliers or customers have not
successfully achieved Year 2000 compliance, the Company's business or operations
could be adversely affected. The costs to the Company in achieving Year 2000
compliance were not material.
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.
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Item 3. Quantitative and Qualitative Disclosure About Market Risk
Interest Rate Risk
The Company has interest rate exposure arising from the Company's line of
credit, which has variable interest rates. At June 30, 2000, the Company had
$193 million of variable rate debt. The Company has interest rate swap
agreements which convert floating rates to fixed rates for a total notional
amount of $45 million. If interest rates on the Company's variable rate debt,
after considering interest rate swaps, were to increase by 10% from their June
30, 2000 rates for the next twelve months, the increase in interest expense
would be approximately $1 million.
Commodity Price Risk
Fuel is one of the Company's largest expenditures. The price and
availability of diesel fuel fluctuates due to changes in production, seasonality
and other market factors generally outside the Company's control. Many of the
Company's customer contracts contain fuel surcharge provisions to mitigate
increases in the cost of fuel. However, there is no assurance that such fuel
surcharges could be used to offset future increases in fuel prices.
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U.S. XPRESS ENTERPRISES, INC.
PART II-OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held on May 4, 2000.
(b) The meeting was held to consider and vote upon the election of Directors
for the following year. All Directors were elected with the results of the vote
summarized as follows:
FOR WITHHELD ABSTAIN TOTAL
--- -------- ------- -----
Patrick E. Quinn 14,585,176 25,741 - 14,610,917
William K. Farris 14,585,176 25,741 - 14,610,917
E. William Lusk, Jr. 14,585,176 25,741 - 14,610,917
A. Alexander Taylor, II 14,585,176 25,741 - 14,610,917
Max L. Fuller 14,585,176 25,741 - 14,610,917
Ray M. Harlin 14,585,176 25,741 - 14,610,917
Robert J. Sudderth, Jr. 14,585,176 25,741 - 14,610,917
At the annual meeting, Shareholders also ratified the appointment of Arthur
Andersen LLP as independent accountants for the forthcoming fiscal year. The
results of the vote are summarized as follows:
FOR WITHHELD ABSTAIN TOTAL
--- -------- ------- -----
14,578,672 29,847 2,398 14,610,917
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None
(ii) Exhibits Filed with this Report
10.39 First Amendment to the Investment and Participation Agreement dated as
of November 12, 1999, among U.S. Xpress Enterprises, Inc. and Wachovia
Capital Investments, Inc.
10.40 Second Amendment to the Investment and Participation Agreement dated as
of March 30, 2000, among U.S. Xpress Enterprises, Inc. and Wachovia
Capital Investments, Inc.
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10.41 Third Amendment to the Investment and Participation Agreement dated as
of June 13, 2000, among U.S. Xpress Enterprises, Inc. and Wachovia
Capital Investments, Inc.
10.42 U.S. Xpress Enterprises Employment Agreement with Cort J. Dondero dated
as of June 13, 2000 by and between U.S. Xpress Enterprises, Inc. and
Cort J. Dondero.
10.43 Initial Subscription Agreement of Transplace.Com, LLC entered into as
of April 19, 2000 by Transplace.Com, LLC, a Nevada Limited Liability
Company, and Covenant Transport, Inc., J.B. Hunt Transport Services,
Inc., M.S. Carriers, Inc., Swift Transportation Co., Inc., U.S. Xpress
Enterprises, Inc., and Werner Enterprises, Inc.
10.44 Operating Agreement of Transplace.Com made and entered into as of April
19, 2000, by and among Covenant Transport, Inc., J.B. Hunt Transport
Services, Inc., M.S. Carriers, Inc., Swift Transportation Co., Inc.,
U.S. Xpress Enterprises, Inc., and Werner Enterprises, Inc., and
Transplace.com, LLC.
27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the three
month period ended June 30, 2000.
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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 thereunto duly authorized.
U.S. XPRESS ENTERPRISES, INC.
-----------------------------
(Registrant)
Date: August 14, 2000 By: /s/ Patrick E. Quinn
-----------------------
Patrick E. Quinn
President
Date: August 14, 2000 By: /s/ Ray M. Harlin
------------------------
Ray M. Harlin
Principal Financial Officer
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