<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
September 30, 2000 0-24806
U.S. XPRESS ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
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)
</TABLE>
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 September 30, 2000, 10,828,654 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>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements................................ 3
------
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2000 and 1999......................... 4
Consolidated Balance Sheets as of September 30,
2000 and December 31, 1999....................................... 5
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2000 and 1999.................... 7
Notes to Consolidated Financial Statements....................... 8
Item 2. Management's Discussion and Analysis of
------
Financial Condition and Results of Operations.................... 11
Item 3. Quantitative and Qualitative Disclosure About Market Risk........ 17
------
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K................................. 18
------
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 nine months ended September 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 Nine Months Ended
September 30, September 30,
----------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating Revenue $ 197,135 $ 180,702 $ 591,403 $ 518,406
========= ========== ========= =========
Operating Expenses:
Salaries, wages and benefits 70,887 69,863 215,248 202,143
Fuel and fuel taxes 33,334 26,517 100,057 71,143
Vehicle rents 14,871 14,665 44,616 40,137
Depreciation and amortization, net of gain on sale 8,697 7,389 24,802 21,496
Purchased transportation 26,311 20,916 79,216 60,421
Operating expense and supplies 13,225 11,980 37,629 33,020
Insurance premiums and claims 8,246 7,769 24,771 19,859
Operating taxes and licenses 3,288 3,705 10,191 10,524
Communications and utilities 2,751 3,287 8,502 9,069
General and other operating 8,899 8,073 25,781 24,132
Non-recurring charge - litigation settlement - - - 1,250
--------- ---------- --------- ---------
Total operating expenses 190,509 174,164 570,813 493,194
--------- ---------- --------- ---------
Income from Operations 6,626 6,538 20,590 25,212
Interest Expense, net 4,145 3,105 11,511 9,374
--------- ---------- --------- ---------
Income Before Income Taxes 2,481 3,433 9,079 15,838
Income Tax Provision 1,113 1,375 3,757 6,337
--------- ---------- --------- ---------
Net Income $ 1,368 $ 2,058 $ 5,322 $ 9,501
========= ========== ========= =========
Earnings Per Share - basic $ 0.10 $ 0.14 $ 0.37 $ 0.64
========= ========== ========= =========
Weighted average shares - basic 13,904 14,733 14,210 14,870
========= ========== ========= =========
Earnings Per Share - diluted $ 0.10 $ 0.14 $ 0.37 $ 0.64
========= ========== ========= =========
Weighted average shares - diluted 13,965 14,783 14,277 14,945
========= ========== ========= =========
</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 September 30, 2000 December 31, 1999
================================================================ ================== =================
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 43 $ 259
Customer receivables, net of allowance 109,565 101,870
Other receivables 6,382 9,807
Prepaid insurance and licenses 5,804 2,078
Operating and installation supplies 4,442 6,078
Deferred income taxes 2,148 2,148
Other current assets 7,021 2,092
------------------ -----------------
Total current assets 135,405 124,332
------------------ -----------------
Property and Equipment, at cost:
Land and buildings 24,264 16,677
Revenue and service equipment 242,114 223,991
Furniture and equipment 20,817 19,169
Leasehold improvements 19,015 16,043
------------------ -----------------
306,210 275,880
Less accumulated depreciation and amortization (89,022) (69,547)
------------------ -----------------
Net property and equipment 217,188 206,333
------------------ -----------------
Other Assets:
Goodwill, net 67,980 70,161
Other 17,276 8,211
------------------ -----------------
Total other assets 85,256 78,372
------------------ -----------------
Total Assets $ 437,849 $ 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 September 30, 2000 December 31, 1999
================================================================ ================== =================
(Unaudited)
<S> <C> <C>
Current Liabilities:
Accounts payable $ 15,279 $ 16,556
Book overdraft 2,243 886
Accrued wages and benefits 9,257 7,268
Claims and insurance accruals 7,009 5,530
Other accrued liabilities 7,438 5,074
Current maturities of long-term debt 9,354 1,182
------------------ -----------------
Total current liabilities 50,580 36,496
------------------ -----------------
Long-Term Debt, net of current maturities 194,289 181,256
------------------ -----------------
Deferred Income Taxes 28,406 26,526
------------------ -----------------
Other Long-Term Liabilities 2,849 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, 13,210,043 and 13,087,545
shares issued and outstanding at September 30,
2000 and December 31, 1999, respectively 132 131
Common stock Class B, $.01 par value, 7,500,000
shares authorized, 3,040,262 shares issued and
outstanding at September 30, 2000 and December 31, 1999 30 30
Additional paid-in capital 105,121 104,259
Retained earnings 80,054 74,732
Treasury Stock Class A, at cost (2,381,389 and 1,619,289 shares at
September 30, 2000 and December 31, 1999) (23,379) (17,392)
Notes receivable from stockholders (233) (233)
------------------ -----------------
Total stockholders' equity 161,725 161,527
------------------ -----------------
Total Liabilities and Stockholders' Equity $ 437,849 $ 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>
Nine Months Ended
September 30,
--------------------------------
2000 1999
============== ==============
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income 5,322 9,501
Adjustments to reconcile net income to
net cash provided by operating activities:
Deferred income tax provision 1,880 3,169
Depreciation and amortization 25,031 22,332
Gain on sale of equipment (230) (836)
Change in operating assets and liabilities, net of acquisitions:
Receivables (5,815) (1,007)
Prepaid insurance and licenses (3,726) (4,563)
Operating and installation supplies 1,637 (172)
Other assets (7,792) (3,391)
Accounts payable and other accrued liabilities 3,329 (8,799)
Accrued wages and benefits 1,990 3,512
Other 35 50
-------------- --------------
Net cash provided by operating activities 21,661 19,796
-------------- --------------
Cash Flows from Investing Activities:
Payments for purchase of property and equipment (40,806) (55,996)
Proceeds from sales of property and equipment 7,007 56,850
Acquisition of businesses, net of cash acquired - (1,798)
Investment in Transplace.com (5,000) -
-------------- --------------
Net cash used in investing activities (38,799) (944)
-------------- --------------
Cash Flows from Financing Activities:
Net borrowings (payments) under lines of credit 12,248 (18,000)
Borrowings of long-term debt 10,000 -
Book overdraft 1,357 -
Payment of long-term debt (1,043) (664)
Proceeds from exercise of stock options 8 -
Proceed from issuance of common stock, net 340 242
Purchase of Class A Common Stock (5,988) (4,320)
-------------- --------------
Net cash provided by (used in) financing activities 16,922 (22,742)
-------------- --------------
Net Decrease in Cash and Cash Equivalents (216) (3,890)
Cash and Cash Equivalents, beginning of period 259 6,613
-------------- --------------
Cash and Cash Equivalents, end of period 43 2,723
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest $ 11,743 $ 9,632
Cash paid during the period for income taxes $ - $ 6,079
</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
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 61,000 and 50,000 equivalent
shares in the three month period ended September 30, 2000 and 1999,
respectively, and 67,000 and 75,000 equivalent shares in the nine month period
ended September 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 $6,575,000 outstanding at September
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 businesses 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. In July
9
<PAGE>
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
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.
<TABLE>
<CAPTION>
U.S. Xpress CSI/Crown Consolidated
----------- --------- ------------
<S> <C> <C> <C>
Three Months Ended September 30, 2000
---------------------------------------
Revenues - external customers $181,387 $15,748 $197,135
Intersegment revenues 1,211 - 1,211
Operating income 5,367 1,259 6,626
Total assets 417,912 19,937 437,849
Three Months Ended September 30, 1999
---------------------------------------
Revenues - external customers $165,831 $14,871 $180,702
Intersegment revenues 1,661 - 1,661
Operating income 5,565 973 6,538
Total assets 398,092 18,882 416,974
Nine Months Ended September 30, 2000
---------------------------------------
Revenues - external customers $546,764 $44,639 $591,403
Intersegment revenues 3,674 - 3,674
Operating income 17,871 2,719 20,590
Total assets 417,912 19,937 437,849
Nine Months Ended September 30, 1999
---------------------------------------
Revenues - external customers $474,408 $43,998 $518,406
Intersegment revenues 3,921 - 3,921
Operating income 23,048 2,164 25,212
Total assets 398,092 18,882 416,974
</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 $4,145 and $3,105 for the three months ended
September 30, 2000 and 1999, respectively, and $11,511 and $9,374 for the nine
months ended September 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
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.
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 Nine Months Ended
September 30, September 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 38.7 36.4 39.0
Fuel and fuel taxes 16.9 14.7 16.9 13.7
Vehicle rents 7.5 8.1 7.5 7.7
Depreciation and amortization, net of gain on sale 4.4 4.1 4.2 4.1
Purchased transportation 13.3 11.6 13.4 11.7
Operating expense and supplies 6.7 6.6 6.4 6.4
Insurance premiums and claims 4.2 4.3 4.2 3.8
Operating taxes and licenses 1.7 2.1 1.7 2.0
Communications and utilities 1.4 1.8 1.4 1.7
General and other operating 4.5 4.4 4.4 4.8
Non-recurring charge - litigation settlement - - - 0.2
------------ ---------- ---------- ----------
Total operating expenses 96.6 96.4 96.5 95.1
------------ ---------- ---------- ----------
Income from Operations 3.4 3.6 3.5 4.9
Interest Expense, net 2.1 1.7 2.0 1.8
------------ ---------- ---------- ----------
Income Before Income Taxes 1.3 1.9 1.5 3.1
Income Tax Provision 0.6 0.8 0.6 1.3
------------ ---------- ---------- ----------
Net Income 0.7% 1.1% 0.9% 1.8%
============ ========== ========== ==========
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
11
<PAGE>
Comparison of the Three Months Ended September 30, 2000 to the Three Months
Ended September 30, 1999
Operating revenue during the three-month period ended September 30, 2000
increased $16.4 million, or 9.1%, to $197.1 million, compared to $180.7 million
during the same period in 1999. U.S. Xpress revenue increased $15.5 million, or
9.4%, due primarily to a 3.6% increase in revenue miles, a 2.8% increase in
average revenue per mile to $1.228 from $1.195 in 1999, and a $7.0 million
increase in fuel surcharge revenue. Revenue miles increased due to an increase
in the average number of tractors by 216, or 4.6%, to 4,909 from 4,693, and a
3.3% increase in utilization as measured by revenue per tractor per week.
CSI/Crown revenues increased $.9 million, or 5.9%, due primarily to a 3.5%
increase in linehaul volume.
Operating expenses represented 96.6% of operating revenue for the three
months ended September 30, 2000 compared to 96.4% during the same period in
1999.
Salaries, wages and benefits as a percentage of revenue were 36.0% during
the three months ended September 30, 2000, compared to 38.7% during the same
period in 1999. The decrease was primarily attributable to an increase in the
number of owner-operators to 637 at September 30, 2000, compared to 501 at
September 30, 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 three months ended September 30, 2000, compared to 14.7% during the same
period in 1999. This increase was due to the significant increase in fuel prices
in the three months ended September 30, 2000, compared to the same period in
1999. The price of fuel increased over 25.0%. The Company's exposure to
increases in fuel prices is currently mitigated by fuel surcharges to its
customers.
Vehicle rents as a percentage of operating revenue were 7.5% during the
three months ended September 30, 2000 compared to 8.1% during the same period of
1999. Depreciation and amortization as a percentage of operating revenue was
4.4% during the three months ended September 30, 2000, compared to 4.1% during
the same period in 1999. The Company includes gains and losses from the sale of
revenue equipment in depreciation expense. Net losses from the sale of revenue
equipment for the three months ended September 30, 2000 were $.1 million
compared to a gain of $.1 million for the same period in 1999. Overall, as a
percentage of operating revenue, vehicle rents and depreciation were 11.9%
during the three months ended September 30, 2000, compared to 12.2% during the
same period in 1999.
Purchased transportation as a percentage of operating revenue was 13.3%
during the three months ended September 30, 2000, compared to 11.6% during the
same period in 1999. The increase was primarily due to an increase of the
Company's owner-operator fleet to 637 as of September 30, 2000 from 501 as of
September 30, 1999. Owner-operators provide a tractor and driver and incur
substantially all of their operating expenses in exchange for a fixed payment
per mile, which is included in purchased transportation. Owner-operator miles
12
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increased to 24.4 million miles in the three months ended September 30, 2000
compared to 17.4 million miles during the same period in 1999.
The effective tax rate was 44.9% during the three months ended September
30, 2000, compared to 40.1% during the same period in 1999. The increase
primarily resulted from non-deductible goodwill amortization being a larger
percentage of year-to-date income before income taxes.
Income from operations for the three months ended September 30, 2000
increased $.1 million, or 1.3%, to $6.6 million from $6.5 million during the
same period in 1999. As a percentage of operating revenue, income from
operations was 3.4% for the three months ended September 30, 2000 and 3.6% for
the same period in 1999.
13
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Comparison of the Nine Months Ended September 30, 2000 to the Nine Months
Ended September 30, 1999
Operating revenue during the nine-month period ended September 30, 2000
increased $73.0 million, or 14.1%, to $591.4 million, compared to $518.4 million
during the same period in 1999. U.S. Xpress revenue increased $72.4 million, or
15.3%, due primarily to an 11.0% increase in revenue miles, a 2.0% increase in
average revenue per mile to $1.217 from $1.193 in 1999, and an $18.5 million
increase in fuel surcharge revenue. Revenue miles increased due to an increase
in the average number of tractors by 328, or 7.1%, to 4,961 from 4,633, and a
5.6% increase in utilization as measured by revenue per tractor per week.
CSI/Crown revenues increased $.6 million due to a 4.3% increase in linehaul
revenue.
Operating expenses represented 96.5% of operating revenue for the nine
months ended September 30, 2000, compared to 95.1% during the same period in
1999.
Salaries, wages and benefits as a percentage of revenue were 36.4% during
the nine months ended September 30, 2000, compared to 39.0% during the same
period in 1999. The decrease was primarily attributable to an increase in the
average number of owner-operators in the nine months ended September 30, 2000 to
680, 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 nine months ended September 30, 2000, compared to 13.7% during the same
period in 1999. This increase was due to the significant increase in fuel prices
in the nine months ended September 30, 2000, compared to the same period in
1999. The price of fuel increased over 30.0%. The Company's exposure to
increases in fuel prices is currently mitigated by fuel surcharges to its
customers.
Vehicle rents as a percentage of operating revenue were 7.5% during the
nine months ended September 30, 2000, compared to 7.7% during the same period of
1999. Depreciation and amortization as a percentage of operating revenue was
4.2% during the nine months ended September 30, 2000, compared to 4.1% 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 nine months ended September 30, 2000 were $.2 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 11.7% during the nine
months ended September 30, 2000, compared to 11.8% during the same period in
1999.
Purchased transportation as a percentage of operating revenue was 13.4%
during the nine months ended September 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 nine months ended September 30,
2000 to 680, compared to 474 for the same period in 1999. Owner-operators
provide a tractor and driver and incur substantially all of their operating
expenses in exchange for a fixed payment per mile, which is included in
14
<PAGE>
purchased transportation. Owner-operator miles increased to 72.8 million miles
in the nine months ended September 30, 2000, compared to 47.7 million miles
during the same period in 1999.
Insurance premiums and claims as a percentage of operating revenue were
4.2% during the nine months ended September 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 4.4% during the nine months ended September 30, 2000, compared to 4.8%
during the same period in 1999. This decrease was primarily due to the 14.1%
increase in revenue, while many expenses included in general and other operating
expenses are relatively fixed.
In the nine months ended September 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 nine months ended September 30, 2000
decreased $4.6 million, or 18.3%, to $20.6 million from $25.2 million during the
same period in 1999. As a percentage of operating revenue, income from
operations was 3.5% for the nine months ended September 30, 2000 and 4.9% for
the same period in 1999.
Liquidity and Capital Resources
The Company's primary sources of liquidity and capital resources during the
nine month period ended September 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
September 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 8.39%, of which
$36.4 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 September 30, 2000, of which $1.8 million was
available for borrowing. During the quarter ended September 30, 2000, the
Company entered into a long-term loan agreement for $10.0 million to finance the
new Colton, California terminal facility. The term of the loan is 10 years, with
an amortization of 20 years, and carries a variable interest rate that is based
on the 30-day commercial paper rate, plus a margin. This rate can be converted
to a fixed rate at any time up to September 2002.
Cash provided by operations was $21.7 million during the nine months ended
September 30, 2000, compared to $19.8 million during the same period last year.
Net cash used in investment activities was $38.8 million in the nine months
ended September 30, 2000, compared to $.9 million during the same period in
1999. Of the cash used in investment activities, $40.8 million was used to
acquire additional property and equipment for the nine months ended September
30, 2000, compared to $56.0 million during the same
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period of 1999. Net cash provided by financing activities was $16.9 million
during the nine months ended September 30, 2000, compared to cash used in
financing activities of $22.7 million during the same period of 1999.
During the nine month period ended September 30, 2000, U.S. Xpress acquired
approximately 762,100 shares of common stock at an average price of $7.85 per
share. The Board of Directors has authorized the repurchase of up to $10.0
million of the Company's outstanding common stock during 2000.
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 12 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 as a
result of 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 September 30, 2000, the Company
had $200.2 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 $45.0 million. For example, if interest rates on the Company's
variable rate debt, after considering interest rate swaps, were to increase by
10% from their September 30, 2000 rates for the next twelve months, the increase
in interest expense would be approximately $1.1 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 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None
(ii) Exhibits Filed with this Report
No. 27 Financial Data Schedule (For SEC use only)
(b) Reports on Form 8-K
A Form 8-K was filed on July 17, 2000 with the Securities and Exchange
Commission to report the completion of the acquisition of a 13%
membership interest in Transplace.com.
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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: November 14, 2000 By: /s/ Patrick E. Quinn
----------------------------
Patrick E. Quinn
President
Date: November 14, 2000 By: /s/ Ray M. Harlin
----------------------------
Ray M. Harlin
Principal Financial Officer
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