-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GY02ufOQ69HOeiRiF9/UumX4c/cm/ImSXtGBCdrHTBZexOdYeQNb+q6LIb9U6EXu HWsjE3kyeKnhCpRflN+iRw== 0000931763-98-002216.txt : 19980817 0000931763-98-002216.hdr.sgml : 19980817 ACCESSION NUMBER: 0000931763-98-002216 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: US XPRESS ENTERPRISES INC CENTRAL INDEX KEY: 0000923571 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 621378182 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24806 FILM NUMBER: 98691189 BUSINESS ADDRESS: STREET 1: 2931 SOUTH MARKET ST CITY: CHATTANOOGA STATE: TN ZIP: 37410 BUSINESS PHONE: 6156967377 MAIL ADDRESS: STREET 1: 2931 SOUTH MARKET ST CITY: CHATTONOOGA STATE: TN ZIP: 37410 10-Q 1 FORM 10-Q 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, 1998 0-24806 U.S. XPRESS ENTERPRISES, INC. (Exact name of registrant as specified in its charter)
NEVADA 62-1378182 (State or other jurisdiction of (I.R.S. employer identification no.) Incorporation or organization) 2931 SOUTH MARKET STREET CHATTANOOGA, TENNESSEE 37410 (423) 697-7377 (Address of principal executive offices) (Zip Code) (Registrant's telephone no.) _________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ As of June 30, 1998, 12,010,245 shares of the registrant's Class A common stock, par value $.01 per share, and 3,040,262 shares of Class B common stock, par value $.01 per share, were outstanding. U.S. XPRESS ENTERPRISES, INC. INDEX
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Consolidated Financial Statements............................................. 3 ------ Consolidated Statements of Operations for the Three Months Ended June 30, 1998 and 1997..................................... 4 Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997................................................... 5 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1998 and 1997............................................... 7 Notes to Consolidated Financial Statements............................................ 8 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.............................................18 ------ SIGNATURES........................................................................................19
2 U.S. XPRESS ENTERPRISES, INC. PART I FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS The interim consolidated financial statements contained herein reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the financial condition and results of operations for the periods presented. They have been prepared by the Company, without audit, in accordance with the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the six months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments consisted only of items that are of a normal recurring nature. These interim consolidated financial statements should be read in conjunction with the Company's latest annual consolidated financial statements (which are included in the 1997 Annual Report to Stockholders in the Company's Form 10-K filed with the Securities and Exchange Commission on March 31, 1998). 3
U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ---------- ---------- ---------- ---------- OPERATING REVENUE $ 38,433 $ 107,933 $ 262,343 $ 199,497 ---------- ---------- ---------- ---------- OPERATING EXPENSES: Salaries, Wages and Benefits 56,444 43,875 108,170 82,347 Fuel and Fuel Taxes 18,668 16,450 37,131 32,752 Vehicle Rents 7,947 7,224 15,833 13,343 Depreciation & Amortization 5,719 2,523 11,184 5,304 Purchased Transportation 13,033 8,843 23,662 13,989 Operating Expense & supplies 8,697 6,926 16,318 12,339 Insurance Premiums & Claims 4,621 3,550 8,840 6,520 Operating Taxes & Licenses 2,156 1,700 4,312 3,206 Communications & Utilities 2,155 1,874 4,169 3,383 General & Other Operating 7,371 6,933 13,870 13,296 ---------- ---------- ---------- ---------- Total Operating Expenses 126,811 99,898 243,489 186,479 ---------- ---------- ---------- ---------- INCOME FROM OPERATIONS 11,622 8,035 18,854 13,018 OTHER INCOME AND (EXPENSES): Interest Expense (2,190) (1,582) (3,962) (2,967) Other Income (Expense) 33 11 50 21 ---------- ---------- ---------- ---------- (2,157) (1,571) (3,912) (2,946) INCOME BEFORE INCOME TAX PROVISION 9,465 6,464 14,942 10,072 INCOME TAX PROVISION 3,783 2,585 5,976 4,024 ---------- ---------- ---------- ---------- NET INCOME $ 5,682 $ 3,879 $ 8,966 $ 6,048 ========== ========== ========== ========== EARNINGS PER SHARE-BASIC $ 0.38 $ 0.32 $ 0.60 $ 0.50 ========== ========== ========== ========== WEIGHTED AVERAGE SHARES - BASIC 15,049 12,101 15,043 12,093 ========== ========== ========== ========== EARNINGS PER SHARE - DILUTED $ 0.38 $ 0.32 $ 0.59 $ 0.50 ========== ========== ========== ========== WEIGHTED AVERAGE SHARES - DILUTED 15,152 12,209 15,155 12,197 ========== ========== ========== ==========
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS) 4 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands)
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- (Unaudited) ASSETS - --------------------------------------------------- CURRENT ASSETS: Cash and cash equivalents $ 1,607 $ 2,734 Customer receivables, Net of Allowance 70,796 58,496 Other receivables 5,021 9,085 Prepaid insurance and licenses 4,350 1,488 Operating and Installation supplies 4,767 4,213 Deferred income taxes 3,717 3,092 Other current assets 2,532 508 ------------- ----------------- Total current assets 92,790 79,616 ------------- ----------------- PROPERTY AND EQUIPMENT, AT COST: Land and buildings 7,693 6,845 Revenue and service equipment 184,717 151,081 Furniture and equipment 14,368 13,062 Leasehold improvements 24,150 9,411 ------------- ----------------- 230,928 180,399 Less accumulated depreciation and amortization (44,236) (44,344) Net property and equipment 186,692 136,055 ------------- ----------------- OTHER ASSETS: Goodwill, net 38,798 12,593 Other 6,283 5,513 ------------- ----------------- Total Other Assets 45,081 18,106 ------------- ----------------- TOTAL ASSETS $ 324,563 $ 233,777 ============= =================
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS) 5 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands)
JUNE 30, 1998 DECEMBER 31, 1997 ------------- ----------------- LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) - ------------------------------------------------------- CURRENT LIABILITIES: Accounts Payable $ 11,619 $ 8,634 Accrued Wages and Benefits 7,068 4,325 Claims and Insurance Accruals 4,781 5,750 Other Accrued Liabilities 4,735 5,200 Current Maturities of Long-Term Debt 263 12,336 ------------- ----------------- Total current liabilities 28,466 36,245 ------------- ----------------- LONG-TERM DEBT, NET OF CURRENT MATURITIES 128,655 50,678 ------------- ----------------- DEFERRED INCOME TAXES 27,967 17,352 ------------- ----------------- OTHER LONG-TERM LIABILITIES 1,634 1,009 ------------- ----------------- STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value, 2,000,000 shares authorized, no shares issued Common stock Class A, $.01 par value, 120 120 30,000,000 shares authorized, 12,010,245 and $11,979,584 shares issued and outstanding at June 30, 1998 and December 31, 1997, respectively Common stock Class B, $.01 par value, 7,500,000 30 30 shares authorized, 3,040,262 shares issued and outstanding at June 30, 1998 and December 31, 1997 Additional paid-in capital 86,324 85,942 Retained earnings 51,600 42,634 Notes receivable from stockholders (233) (233) ------------- ----------------- Total stockholders' equity 137,841 128,493 ------------- ----------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 324,563 $ 233,777 ============= =================
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS) 6 U.S. XPRESS ENTERPRISES CONSOLIDATED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 8,966 $ 6,048 Adjustments to reconcile net income to net cash provided by (used in) operating activities Deferred income tax provision 4,883 3,103 Depreciation & Amortization 11,415 6,324 Gain on sale of equipment (231) (1,020) Change in receivables (1,265) (7,768) Change in prepaid insurance (2,729) (1,725) Change in operating supplies (46) 220 Change in other assets (3,304) 416 Change in accounts payable and other accrued liabilities (5,758) (7,312) Change in accrued wages and benefits 1,813 2,708 Other 31 2 -------- -------- Net cash provided by (used in) operating activities 13,748 996 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Payments for purchase of property and equipment (59,975) 2,268 Proceeds from sales of property and equipment 32,630 14,020 Repayment of notes receivable from stockholders Acquisition of businesses, net of cash acquired (50,785) (8,038) -------- -------- Net cash used in investing activities (78,130) 8,250 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowing (payments) under lines of credit 96,500 1,500 Payment of long-term debt (33,597) (32,635) Borrowings under long-term debt 23,991 Proceeds from exercise of stock options 77 192 Proceed from issuance of common stock, net 275 Forfeiture of 9,195 shares restricted stock (21) Change in other liabilities -------- -------- Net cash provided by (used in) financing activities 63,255 (6,973) -------- -------- NET INCREASE (DECREASE) IN CASH (1,127) 2,273 Cash, beginning of period 2,734 2,997 -------- -------- Cash, end of period $ 1,607 $ 5,270 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest $ 2,005 $ 2,605 Cash paid during the period for income taxes $ 1,677 $ 2,588
(SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS) 7 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 1. ORGANIZATION AND OPERATIONS U. S. Xpress Enterprises, Inc. (the "Company") provides transportation services through two subsidiaries. U.S. Xpress, Inc. ("U.S. Xpress") is a truckload carrier serving the Continental United States, Canada and Mexico. CSI/Crown, Inc. ("CSI/Crown") provides transportation and logistics services to the floorcovering industry. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated. PROPERTY AND EQUIPMENT Property and equipment is carried at cost. Depreciation and amortization of property and equipment are computed using the straight-line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives of the related assets (net of salvage value) as follows: Buildings 10-30 years ------------------------------------------------- Revenue and service equipment 3-7 years ------------------------------------------------- Furniture and equipment 3-7 years ------------------------------------------------- Leasehold improvements 5-6 years ------------------------------------------------- Expenditures for normal maintenance and repairs are expensed. Renewals or betterments that affect the nature of an asset or increase its useful life are capitalized. CONTRACT WAGES Effective January 1, 1997, the Company entered into an agreement with Employee Solutions, Inc. ("ESI"), a Professional Employer Organization (PEO) in which the PEO is a co-employer with the Company for substantially all of the Company's personnel. The PEO is responsible for processing all of the Company's payroll, including tax reporting, and provides group health benefits and worker's compensation coverage. On July 22, 1998, the Company filed suit against ESI in the United States District Court for the Eastern District of Tennessee, at Chattanooga, in an action alleging breach of contract and seeking contractual and punitive damages. The complaint alleges that ESI agreed to perform certain employer organization services for Enterprises, including administration of programs related to wages, payroll taxes, worker's compensation, employee benefit programs and other insurance and related administration services. Enterprises has alleged that ESI breached its contract to provide such services and has wrongfully attempted to 8 terminate the contract. Enterprises seeks declaratory relief against ESI to enforce the contract's arbitration provisions, and also seeks reimbursement of approximately $545,000 wrongfully withheld by ESI, and other contractual and punitive damages. Effective August 20, 1998, the contract with ESI will terminate and U.S. Xpress will assume total control of all payroll. The Company presently believes that the contract termination and litigation will not have a material adverse impact on the Company. FUEL PURCHASE COMMITMENTS The Company uses both derivative financial instruments and forward purchase commitments to mitigate the effects of fluctuations in the price of fuel. During the six months ended June 30, 1998, the Company did not have in place any derivative financial instruments for fuel price protection. The Company did utilize fuel purchase commitments ranging from 1,500,000 gallons in January to 1,000,000 gallons in June 1998. The Company has additional commitments ranging from 1,000,000 gallons per month in July 1998 to 750,000 gallons per month in December of 1999 at varying price levels. EARNINGS PER SHARE Effective for the period ended December 31, 1997, the Company adopted Statement of Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS No. 128"), which changes the criteria for reporting earnings per share ("EPS") by replacing primary EPS with basic EPS and fully diluted EPS with diluted EPS. All prior EPS data have been restated. The difference in basic and diluted EPS is due to the assumed conversion of outstanding options resulting in approximately 103,000 and 108,000 equivalent shares in the three month period ended June 30, 1998 and 1997, respectively, and 112,000 and 104,000 equivalent shares in the six month period ended June 30, 1998 and 1997, respectively. RECLASSIFICATIONS Certain reclassifications have been made in the fiscal 1997 financial statements to conform with the 1998 presentation. 3. COMMITMENTS AND CONTINGENCIES The Company is party to certain legal proceedings incidental to its business. The ultimate disposition of these matters, in the opinion of management, based in part on the advice of legal counsel, will not have a material adverse effect on the Company's financial position or results of operations. The Company has letters of credit of $4,290,000 outstanding at June 30, 1998. The letters of credit are maintained primarily to support the Company's insurance program. 4. DEBT In January, 1998, the Company obtained a new revolving credit facility providing capacity of up to $200,000,000. A portion of the availability under this new line was 9 immediately used to retire the existing line of credit and pay off other long term indebtedness bearing higher interest rates. The credit facility operates as a revolving credit facility until its maturity in January, 2001. Interest on outstanding borrowings is based the London Interbank Offered Rate plus applicable margins, as defined in the credit agreement. The facility has optional one year extensions, with the agreement of all parties. In August 1998 the Company entered into an agreement to increase the capacity under the line of credit from $200,000,000 to $225,000,000. The other provisions of the credit facility remain unchanged. In February, 1998, the Company entered into Interest Rate Swap agreements providing for the Company to pay a fixed interest rate on $35,000,000 of its borrowings under the Line of Credit. The agreements provide for the Company to pay interest at a rate of approximately 5.72%, plus the applicable credit margin, for five years. Borrowings (including letters of credit) under the Credit Agreement are limited to the lesser of (a) 90% of the book value of eligible revenue equipment plus 85% of eligible receivables; or (b) $200,000,000. At June 30, 1998, $69.7 million of available borrowings were unused under the facility. The Credit Agreement contains a number of covenants that limit, among other things, the payment of dividends, the incurrence of additional debt, and liens on assets as security for other indebtedness. The Credit Agreement also requires the Company to meet certain financial tests, including a minimum amount of net worth, a minimum amount of fixed charge coverage and a maximum amount of leverage. The Company was in compliance with these covenants at June 30, 1998. LEASE ON HEADQUARTERS In March, 1998, the Company entered into an Agreement with a financial institution to provide funding for the construction of a new headquarters facility. When completed, the building will contain approximately 100,000 square feet of space for administrative and operating functions of the Company. It will be located in a commercial park in Chattanooga, Tennessee. The new building will be leased under an operating lease with an initial term of five years and providing for mutually agreeable extension terms of up to three years each. As of June 30, 1998, approximately $4.5 million had been expended for the construction of the facility. Upon completion of this facility, the Company will consolidate its administrative and operating functions and terminate its leases at its Market Street and Shallowford Road facilities also in Chattanooga. The expected completion date is December, 1998. 5. ACQUISITION OF VICTORY EXPRESS, INC. Effective January 29, 1998, the Company acquired Victory Express, Inc., a non-union truckload carrier based in Medway, Ohio, for $51 million in cash and assumption of 10 approximately $2 million in debt. Prior to the acquisition, Victory had annual revenues of approximately $65 million. Victory Express serves customers located primarily in the Midwest and on the Eastern seaboard. The company employs approximately 790 persons, including approximately 640 drivers and driver trainees. Through this acquisition, management expects the Company to significantly expand its regional capabilities in the Midwest and extend its regional service capabilities to the East Coast. Victory Express' customer base is largely centered in automotive, paper, retail and air freight markets. In addition, U.S. Xpress continues to be presented with opportunities for additional business from its customers in the Midwest. 6. PRO FORMA FINANCIAL INFORMATION The following Pro Forma Financial Information is based on the historical financial statements of U.S. Xpress and adjusted to give effect to the acquisition of Victory Express. The Pro Forma Consolidated Statement of Operations for the six months ended June 30, 1997 and 1998, give effect to the acquisition as if it had occurred on January 1, 1997. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable.
1998 1997 ------- ------- OPERATING REVENUE 267,405 229,787 INCOME FROM OPERATIONS 19,329 15,319 INCOME BEFORE INCOME TAX PROVISION 15,072 10,273 NET INCOME 9,044 6,168 EARNINGS PER SHARE - BASIC 0.60 0.51 EARNINGS PER SHARE - DILUTED 0.60 0.51
7. YEAR 2000 COMPLIANCE Some computer systems that use two digits to indicate a year will not be able to process data properly for the year 2000. The Company has assessed the ability of its software and operating systems to function in the year 2000 and beyond. Systems in use by the Company in operations, accounting and purchasing are year 2000 compliant. Testing of U.S. Xpress systems for year 2000 compliance is scheduled for July 1998. Systems in use at CSI/Crown are presently 50% compliant with year 2000 requirements. Programming to make CSI/Crown systems compliant is expected to be completed by December 1998. Testing of CSI/Crown systems is scheduled for March 1999. 11 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 in the United States, Canada and Mexico. The Company has two operating subsidiaries, U.S. Xpress, Inc. ("U.S. Xpress") and CSI/Crown, Inc. ("CSI/Crown"). U.S. Xpress provides three principal services: I) time-definite and expedited services with medium and long lengths of haul of 800 to 3,000 miles; ii) time-definite and expedited regional services with lengths of haul of 100 to 1,200 miles in the Western, Southeastern, Midwestern and Eastern regions of the United States; and iii) expedited truckload transportation brokerage services that primarily serve the air freight industry. CSI/Crown consolidates floorcovering products into truckload quantities, arranges truckload transportation to company-owned distribution centers and third-party agent facilities throughout the United States and Canada for local delivery to floorcovering distributors, retailers and contractors. RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the components of the consolidated statements of income expressed as a percentage of operating revenue:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ------------------------ ----------------------- OPERATING REVENUE 100.0% 100.0% 100.0% 100.0% ------ ------ ------ ------ OPERATING EXPENSES: Salaries, Wages and Benefits 40.8 40.7 41.2 41.3 Fuel and Fuel Taxes 13.5 15.2 14.2 16.4 Vehicle Rents 5.7 6.7 6.0 6.7 Depreciation & Amortization 4.1 2.3 4.3 2.7 Purchased Transportation 9.4 8.2 9.0 7.0 Operating Expense & supplies 6.3 6.4 6.2 6.2 Insurance Premiums & Claims 3.3 3.3 3.4 3.3 Operating Taxes & Licenses 1.6 1.6 1.6 1.6 Communications & Utilities 1.6 1.7 1.6 1.7 General & Other Operating 5.3 6.5 5.3 6.6 ------ ------ ------ ------ Total Operating Expenses 91.6 92.6 92.8 93.5 ------ ------ ------ ------ INCOME FROM OPERATIONS 8.4 7.4 7.2 6.5 OTHER INCOME AND (EXPENSES): Interest Expense (1.6) (1.5) (1.5) (1.5) Other Income (Expense) 0.1 ------ ------ ------ ------ (1.6) (1.4) (1.5) (1.5) INCOME BEFORE INCOME TAX PROVISION 6.8 6.0 5.7 5.0 INCOME TAX PROVISION (2.7) (2.4) (2.3) (2.0) ------ ------ ------ ------ NET INCOME 4.1 3.6 3.4 3.0 ====== ====== ====== ======
12 COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1998 TO THE THREE MONTHS ENDED JUNE 30, 1997 Operating revenue during the three month period ended June 30, 1998 increased $30.5 million, or 28.3%, to $138.4 million, compared to $107.9 million during the same period in 1997. This increase resulted partially from the first quarter acquisition of Victory Express in January 1998, which contributed $15.1 million of the $30.5 million increase. U.S. Xpress linehaul operations contributed $ 15.4 million to the increase due to increased revenue miles and $1.6 million increase in logistics revenue. Operating expenses represented 91.6% of operating revenue for the three months ended June 30, 1998, compared to 92.6% during the same period in 1997. Salaries, wages and employee benefits as a percentage of revenue were 40.8% during the three months ended June 30, 1998, compared to 40.7% during the same period in 1997. The increase is attributable to a two cents per mile increase to drivers in July 1997, offset by a 46.5% increase in the number of owner operators. Fuel and fuel taxes as a percentage of operating revenue were 13.5% during the three months ended June 30, 1998, compared to 15.2% during the same period in 1997. This decrease was primarily attributable to 13.3% decrease in average price per gallon offset by a small decrease in average miles per gallon. As a percentage of operating revenue, excluding logistics and non-transportation revenue, fuel and fuel taxes were 14.2% during the three months ended June 30, 1998, compared to 16.1% during the same period in fiscal 1997. The Company's exposure to increases in fuel prices in 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 5.7% during the three months ended June 30, 1998, compared to 6.7% during the same period in 1997. Depreciation and amortization as a percentage of operating revenue was 4.1% for the three months ended June 30, 1998, compared to 2.3% during the same period in 1997. 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, 1998 were $0.5 million compared to gains of $0.7 million during the same period in 1997. Overall, as a percentage of operating revenue, vehicle rents and depreciation were 10.2% during the three months ended June 30, 1998, compared to 9.6% during the same period in 1997. The increase in depreciation and the corresponding decrease in vehicle rent is due primarily from the company exercising its purchase option on tractors previously financed with operating leases. In August 1997, the Company used most of the proceeds from the secondary offering to payoff leases. The savings from these payoffs were offset in part by an increase in depreciation expense. The overall increase in expense is due primarily from replacing older trailers which were fully depreciated in 1997 with new leased trailers in 1998. 13 Purchased transportation as a percentage of operating revenue was 9.4% during the three months ended June 30, 1998, compared to 8.2% during the same period in 1997. This increase is partially due to an increase of the Company's owner operator fleet to 145 as of June 30, 1998 from 99 at June 30, 1997. This increase was also due to a 55.7% increase in logistics revenue, which is serviced by outside agents. General and other operating expenses as a percentage of operating revenue were 5.3% during the three months ended June 30, 1998, compared to 6.5% during the same period in 1997. The decrease was primarily due to many general and operating expenses increasing at a lower incremental rate than revenue. Additionally, the company eliminated some terminals during the second and third quarters in 1997 which reduced building rent and overhead expenses in 1998. Income from operations for the three months ended June 30, 1998 increased $3.6 million, or 45.0%, to $11.6 million from $8.0 million during the same period in 1997. As a percentage of operating revenue, income from operations was 8.4% for the three months ended June 30, 1998, compared to 7.4% in 1997. 14 COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1998 TO THE SIX MONTHS ENDED JUNE 30, 1997 Operating revenue during the six month period ended June 30, 1998 increased $62.8 million, or 31.5%, to $262.3 million, compared to $199.5 million during the same period in 1997. This increase resulted partially from the first quarter acquisition of Victory Express which contributed $25.5 million of the $62.8 million increase. U.S. Xpress linehaul operations contributed $37.3 million to the increase due to increased revenue miles and $4.6 million increase in logistics revenue. Operating expenses represented 92.8% of operating revenue for the six months ended June 30, 1998, compared to 93.5% during the same period in 1997. Salaries, wages and employee benefits as a percentage of revenue were 41.2% during the six months ended June 30, 1998, compared to 41.3% during the same period in 1997. The decrease is due in part to 46.5% increased in the use of owner-operators. All owner-operator expenses and purchased linehaul services are reflected as purchased transportation. This decrease was offset by a two cent per mile pay increase to drivers that went into effect July 5, 1997. Fuel and fuel taxes as a percentage of operating revenue were 14.2% during the six months ended June 30, 1998, compared to 16.4% during the same period in 1997. This decrease was primarily attributable to 13.9% decrease in average price per gallon. The percentage decrease was mitigated by logistics and non- transportation revenue of $13.9 million during the six months ended June 30, 1998, compared to $11.3 million during the same period in 1997. As a percentage of operating revenue, excluding logistics and non-transportation revenue, fuel and fuel taxes were 14.9% during the six months ended June 30, 1998, compared to 17.4% during the same period in 1997. 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 6.0% during the six months ended June 30, 1998, compared to 6.7% during the same period in 1997. Depreciation and amortization as a percentage of operating revenue was 4.3% for the six months ended June 30, 1998, compared to 2.7% during the same period in 1997. 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, 1998 were $0.2 million compared to gains of $1.0 million during the same period in 1997. Overall, as a percentage of operating revenue, vehicle rents and depreciation were 10.4% during the six months ended June 30, 1998, compared to 9.9% during the same period in 1997. In August 1997, the Company used most of the proceeds from the secondary offering to payoff leases. The savings from these payoffs were off set in part by an increase in depreciation expense. The overall increase in expense was due in part to replacing older fully depreciated trailers in 1997 with new leased trailers in 1998 as well as an increased use of temporary trailers in the first quarter of 1998. 15 Purchased transportation as a percentage of operating revenue was 9.0% during the six months ended June 30, 1998, compared to 7.0% during the same period in 1997. This increase is partially due to a 46.5% increase in the use of owner operators to 145 as of June 30, 1998 from 99 at June 30, 1997. Additionally, logistics revenue increased 81.8% to $10.0 million during the six months ended June, 1998 from $5.5 million during the same period in 1997. Logistics revenue is serviced primarily by outside agents. General and other operating expenses as a percentage of operating revenue were 5.3% during the six months ended June 30, 1998, compared to 6.6% during the same period in 1997. The decrease was primarily due to many general and operating expenses increasing at a lower incremental rate than revenue. Additionally, the company eliminated some terminals during the second and third quarters in 1997 which reduced building rent and overhead expenses in 1998. Income from operations for the six months ended June 30, 1998 increased $5.9 million, or 45.4%, to $18.9 million from $13.0 million during the same period in 1997. As a percentage of operating revenue, income from operations was 7.2% for the six months ended June 30, 1998, compared to 6.5% during the same period in 1997. 16 LIQUIDITY AND CAPITOL RESOURCES The Company's primary sources of liquidity during the six month period ended June 30, 1998, were funds provided by operations, lines of credit and proceeds from sales of used property and equipment. At June 30, 1998, the Company had in place a $200.0 million credit facility with a group of banks with a weighted average interest rate of 6.40%, of which $69.7 million as available for borrowing. In the remainder of fiscal 1998, the Company's primary sources of liquidity are expected to be funds provided by operations, borrowings under lines of credit and operating leases. Cash generated from operations was $13.7 million during the first six months of fiscal 1998, compared to $0.9 million during the same period last year. Net cash used in investment activities was $78.1 million in the during the first six months of fiscal 1998, compared to $8.3 million generated during the same period in 1997. Of the cash used in investment activities $59.9 million was used to acquire additional property and equipment for the first six months of fiscal 1998. The Company anticipates that expenditures (net of trade- ins) for the acquisition of revenue equipment will be approximately $150.0 million in fiscal 1998 (of which $59.9 million was expended in the first six months) and will be either acquired by purchases or financed through operating leases. The Company used $50.8 million, net of cash acquired, in business acquisitions in the first six months of fiscal 1998 compared to $8.0 million during the same period in 1997. This increase is primarily due to $50.3 million used to acquire Victory Express. Net cash provided by financing activities was $63.3 million during the first six months of fiscal 1998, compared to $6.9 million used for financing activities during the same period of 1997. Net borrowings under lines of credit and long-term debt were $62.9 million during the first six months of fiscal 1998, compared to net repayments of $7.1 million during the same period of 1997. Net borrowings under lines of credit were $96.5 million in the first quarter of fiscal 1998, compared to net borrowings of $1.5 million during the same period of 1997. This increase is primarily due to the borrowings associated with the purchase of Victory Express and the refinancing of equipment under the line of credit, as opposed to operating leases. On January 15, 1998, the Company entered into a $200.0 million loan and security agreement maturing January 15, 2001. Interest on outstanding borrowings is based upon on the London Interbank Offered Rate plus applicable margins, as defined in the credit agreement. The note is collateralized by certain property and equipment of the Company.During August 1998, the Company increased the capacity under this facility by $25,000,000 to an aggregate amount of $225,000,000. The other provisions of the facility remain unchanged. Management believes that funds provided by operations and from borrowings under lines of credit and borrowings under operating leases will be sufficient to fund its cash needs and anticipated capital expenditures through at least the next twelve months. 17 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) A Form 8-K was filed on July 31, 1998 to report the Plan of Merger by and among U.S. Xpress Enterprises and PST Vans, Inc. and to report the lawsuit filed by the Company against Employee Solutions, Inc. (b) Financial Data Schedule (for SEC use only) 18 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, 1998 BY: /S/ PATRICK E. QUINN ---------------------- PATRICK E. QUINN PRESIDENT Date: August 14, 1998 BY: /S/ RAY M. HARLIN -------------------- RAY M. HARLIN PRINCIPAL FINANCIAL OFFICER 19 EX-27 2 FDS
5 1,000 3-MOS 6-MOS DEC-31-1998 DEC-31-1998 APR-01-1998 JAN-01-1998 JUN-30-1998 JUN-30-1998 0 1,607 0 0 0 73,399 0 2,603 0 4,797 0 92,790 0 230,121 0 44,236 0 324,563 0 28,466 0 0 0 0 0 0 0 150 0 137,691 0 324,563 0 0 138,433 262,343 0 0 126,506 243,073 33 50 305 416 2,190 3,962 9,465 14,942 3,783 8,966 0 0 0 0 0 0 0 0 5,682 8,966 .38 .60 .38 .59
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