10-Q 1 d10q.txt QUARTERLY REPORT 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 March 31, 2001 0-24806 U.S. XPRESS ENTERPRISES, INC. NEVADA 62-1378182 (State or other jurisdiction of (I.R.S. employer identification no.) Incorporation or organization) 4080 Jenkins Road (423) 510-3000 CHATTANOOGA, TENNESSEE 37421 (Registrant's telephone no.) (Address of principal executive offices) (Zip Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ ------- As of March 31, 2001, 10,691,120 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 March 31, 2001 and 2000.......................... 4 Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000.................................... 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000.................... 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..... 15 ------ PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................. 16 ------ SIGNATURES.................................................... 17 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 that, in the opinion of management, are necessary for a fair statement of the financial condition and results of operations for the periods presented. They have been prepared by the Company, without audit, in accordance with the instructions to Form 10-Q and the rules and regulations of the Securities and Exchange Commission and do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. 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 2000 Annual Report to Stockholders in the Company's Form 10-K filed with the Securities and Exchange Commission on April 2, 2001). 3 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited)
Three Months Ended March 31, ---------------------------------- 2001 2000 -------------- -------------- Operating Revenue $ 186,478 $ 191,841 -------------- -------------- Operating Expenses: Salaries, wages and benefits 71,292 72,084 Fuel and fuel taxes 32,107 33,867 Vehicle rents 14,601 14,860 Depreciation and amortization, net of gain on sale 9,316 7,867 Purchased transportation 23,146 25,257 Operating expense and supplies 12,524 11,546 Insurance premiums and claims 7,355 7,124 Operating taxes and licenses 3,140 3,386 Communications and utilities 2,909 3,032 General and other operating 7,954 7,976 -------------- -------------- Total operating expenses 184,344 186,999 ============== ============== Income from Operations 2,134 4,842 Interest Expense, net 4,165 3,395 ============== ============== Income (Loss) Before Income Taxes (2,031) 1,447 Income Tax Provision (Benefit) (811) 579 -------------- -------------- Net Income (Loss) $ (1,220) $ 868 ============== ============== Earnings (Loss) Per Share - basic $ (0.09) $ 0.06 ============== ============== Weighted average shares - basic 13,728 14,523 ============== ============== Earnings (Loss) Per Share - diluted $ (0.09) $ 0.06 ============== ============== Weighted average shares - diluted 13,728 14,582 ============== ==============
(See Accompanying Notes to Consolidated Financial Statements) 4 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands)
Assets March 31, 2001 December 31, 2000 ------------------------------------------------------------------- ---------------- ------------------- (Unaudited) Current Assets: Cash and cash equivalents $ 227 $ 34 Customer receivables, net of allowance 91,336 89,184 Other receivables 10,889 14,294 Prepaid insurance and licenses 11,156 2,664 Operating and installation supplies 3,303 4,312 Deferred income taxes 2,929 2,249 Other current assets 7,132 4,051 ---------------- ------------------- Total current assets 126,972 116,788 ---------------- ------------------- Property and Equipment, at cost: Land and buildings 26,799 24,952 Revenue and service equipment 257,832 249,773 Furniture and equipment 21,413 21,299 Leasehold improvements 20,280 19,456 ---------------- ------------------- 326,324 315,480 Less accumulated depreciation and amortization (99,750) (96,578) ---------------- ------------------- Net property and equipment 226,574 218,902 ---------------- ------------------- Other Assets: Goodwill, net 67,022 67,498 Investment in Transplace.com 5,815 5,815 Other 11,508 11,239 ---------------- ------------------- Total other assets 84,345 84,552 ---------------- ------------------- Total Assets $ 437,891 $ 420,242 ================ ===================
(See Accompanying Notes to Consolidated Financial Statements) 5 U.S. XPRESS ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands Except Share Data)
Liabilities and Stockholders' Equity March 31, 2001 December 31, 2000 ---------------------------------------------------------------------- ------------------------ ------------------------ (Unaudited) Current Liabilities: Accounts payable $ 13,938 $ 19,060 Book overdraft 5,273 2,940 Accrued wages and benefits 10,103 8,523 Claims and insurance accruals 11,480 8,704 Other accrued liabilities 5,336 3,190 Current maturities of long-term debt 184,510 1,501 ------------------------ ------------------------ Total current liabilities 230,640 43,918 ------------------------ ------------------------ Long-Term Debt, net of current maturities 11,629 179,908 ------------------------ ------------------------ Deferred Income Taxes 36,902 36,902 ------------------------ ------------------------ Other Long-Term Liabilities 3,321 2,579 ------------------------ ------------------------ 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, 13,235,509 and 13,210,467 shares issued at March 31, 2001 and December 31, 2000, respectively 132 132 Common stock Class B, $.01 par value, 7,500,000 shares authorized, 3,040,262 shares issued and outstanding at March 31, 2001 and December 31, 2000 30 30 Additional paid-in capital 105,231 105,124 Retained earnings 75,577 76,797 Other comprehensive income (447) Treasury Stock Class A, at cost (2,544,389 shares at March 31, 2001 and December 31, 2000) (24,483) (24,483) Notes receivable from stockholders (233) (233) Unamortized compensation on restricted stock (408) (432) ------------------------ ------------------------ Total stockholders' equity 155,399 156,935 ------------------------ ------------------------ Total Liabilities and Stockholders' Equity $ 437,891 $ 420,242 ======================== ========================
(See Accompanying Notes to Consolidated Financial Statements) 6 U.S. XPRESS ENTERPRISES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended March 31, ------------------------------------------------ 2001 2000 --------------------- -------------------- Cash Flows from Operating Activities: Net Income (Loss) $ (1,220) $ 868 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Deferred income tax provision (benefit) (406) 290 Depreciation and amortization 9,400 8,064 Gain on sale of equipment (84) (197) Change in operating assets and liabilities, net of acquistions Receivables 1,253 5,044 Prepaid insurance and licenses (8,492) (7,795) Operating and installation supplies 1,047 96 Other assets (4,176) (5,086) Accounts payable and other accrued liabilities 314 (6,483) Accrued wages and benefits 1,580 2,350 Other 27 12 --------------------- -------------------- Net cash used in operating activities (757) (2,837) --------------------- -------------------- Cash Flows from Investing Activities: Payments for purchase of property and equipment (25,361) (21,208) Proceeds from sales of property and equipment 9,143 3,867 --------------------- -------------------- Net cash used in investing activities (16,218) (17,341) --------------------- -------------------- Cash Flows from Financing Activities: Net borrowings under lines of credit 15,801 14,972 Payments of long-term debt (1,070) (873) Book overdraft 2,333 6,274 Proceed from issuance of common stock 104 194 Purchase of Class A Common Stock - (541) --------------------- -------------------- Net cash provided by financing activities 17,168 20,026 --------------------- -------------------- Net Increase (Decrease) in Cash and Cash Equivalents 193 (152) Cash and Cash Equivalents, beginning of period 34 259 --------------------- -------------------- Cash and Cash Equivalents, end of period 227 107 --------------------- -------------------- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest, net of capitalized interest $ 4,140 $ 3,588 Cash (refunded) paid during the period for income taxes $ (2,776) $ 104
(See Accompanying Notes to Consolidated Financial Statements) 7 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 59,000 equivalent shares in the three month period ended March 31, 2000. Due to the loss in 2001, the outstanding options are anti-dilutive and are not considered in EPS. Reclassifications Certain reclassifications have been made in the 2000 financial statements to conform to the 2001 presentation. 8 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 In February 2001, Forward Air filed suit against the Company in the United States District Court, Eastern District of Tennessee at Greeneville, asserting claims for trademark and service mark infringement, unfair competition, consumer protection violations, inducement to breach contract, and unjust enrichment. The claims arose out of the Company's use of the name "Dedicated Xpress Services, Inc.." In its lawsuit, Forward Air asserts that after it purchased the assets of Dedicated Transportation Services, Inc., the Company engaged in activity designed to interfere with Forward Air's use of those assets, to destroy the value of those assets, to interfere with Forward Air's contract rights, to defame Forward Air, and to unfairly compete with Forward Air. Forward Air's claim is for unspecified damages and injunctive relief, preventing the Company from using the name `Dedicated Xpress Services, Inc." The Company believes that the claims asserted by Forward Air are without merit, and intends to vigorously defend its lawsuit. The Company is party to certain other legal proceedings incidental to its business. The ultimate disposition of such other matters, in the opinion of management, based in part upon an assessment of the likelihood of an adverse disposition of such matters, will not have a material adverse effect on the Company's financial position or results of operations. The Company has letters of credit of $8,176,000 outstanding at March 31, 2001. The letters of credit are maintained primarily to support the Company's insurance program. 4. Derivative Financial Instruments The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for Derivative Instruments and Hedging Activities," as amended, on January 1, 2001. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at fair value. The Company has designated its interest rate swap agreements as cash flow hedge instruments. The swap agreements are used to manage exposure to interest rate movement by effectively changing the variable rate to a fixed rate. The critical terms of the interest rate swap agreements and the related debt are different with regard to maturity date; therefore, the Company expects some hedge ineffectiveness in the hedge relationship. Changes in fair value of the interest rate agreements will be recognized in other comprehensive income, until the hedged items are recognized in earnings. The Company has hedged its exposure to interest rate movement through September 8, 2003. At January 1, 2001, the swap agreements were in a favorable position by $159,088. In accordance with the transition provision of SFAS No. 133, the cumulative effect of an accounting change adjustment on January 1, 2001, was $98,635 in accumulated other comprehensive income, net of income tax. At March 31, 2001, the fair market value of the swap agreements decreased due primarily to a reduction in interest rates. The derivative 9 financial instruments were adjusted to a liability of $721,242. Accumulated other comprehensive income was adjusted to an accumulated loss of $447,274 net of income tax. At March 31, 2001, the interest rate swaps were deemed to be an effective cash flow hedge swap and there was no income statement impact related to hedge ineffectiveness. 5. Change in Accounting Principle Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133, as amended in June 2000 by SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, which requires that all derivative instruments be reported on the balance sheet at fair value and establishes criteria for design and effectiveness of hedging relationships. The cumulative effect of adopting SFAS No. 133 resulted in an increase of $98,635 to other comprehensive income. 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. U.S. Xpress CSI/Crown Consolidated ----------- ---------- ------------ Three Months Ended March 31, 2001 --------------------------------- Revenues - external customers $172,084 $14,394 $186,478 Intersegment revenues 2,830 - 2,830 Operating income 2,363 (229) 2,134 Total assets 414,974 22,917 437,891 Three Months Ended March 31, 2000 --------------------------------- Revenues - external customers $178,485 $13,356 $191,841 Intersegment revenues 1,288 - 1,288 Operating income 4,422 420 4,842 Total assets 406,495 19,109 425,604 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 $4,165 and $3,395 for the three months ended March 31, 2001 and 2000, respectively. 7. Comprehensive Income Comprehensive income (loss) consisted of the following components for the 3 months ended March 31, 2001 and 2000: March 31, -------------------- 2001 2000 -------- ---- Net income (loss) $(1,220) $868 Net loss on current period cash flow hedges (447) 0 ------- ---- $(1,667) $868 ======= ==== 10 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:
Three Months Ended March 31, ----------------------------------- 2001 2000 -------------- -------------- Operating Revenue 100.0% 100.0% -------------- -------------- Operating Expenses: Salaries, wages and benefits 38.2 37.6 Fuel and fuel taxes 17.2 17.7 Vehicle rents 7.8 7.7 Depreciation and amortization, net of gain on sale 5.0 4.1 Purchased transportation 12.4 13.2 Operating expense and supplies 6.7 6.0 Insurance premiums and claims 3.9 3.7 Operating taxes and licenses 1.7 1.8 Communications and utilities 1.6 1.6 General and other operating 4.4 4.1 -------------- -------------- Total operating expenses 98.9 97.5 -------------- -------------- Income from Operations 1.1 2.5 Interest Expense, net 2.2 1.7 -------------- -------------- Income Before Income Taxes -1.1 0.8 Income Tax Provision -0.4 0.3 -------------- -------------- Net Income -0.7% 0.5% ============== ==============
11 Comparison of the Three Months Ended March 31, 2001 to the Three Months Ended March 31, 2000 Operating revenue during the three-month period ended March 31, 2001 decreased $5.3 million, or 2.8%, to $186.5 million, compared to $191.8 million during the same period in 2000. U.S. Xpress revenue decreased $6.4 million, or 3.6%, due primarily to a 5.1% decrease in revenue miles offset by a 1.6% increase in average revenue per mile to $1.216 from $1.197 in 2000, and a $2.5 million increase in fuel surcharge revenue. The contribution of U.S. Xpress' logistics business in exchange for a 13% interest in Transplace.com decreased revenue by $1.9 million. CSI/Crown revenues increased $1.0 million, or 7.8% due primarily to the revenues of the new deferred air services, which began operations in February 2001. Operating expenses represented 98.9% of operating revenue for the three months ended March 31, 2001 compared to 97.5% during the same period in 2000. Salaries, wages and benefits as a percentage of revenue were 38.2% during the three months ended March 31, 2001, compared to 37.6% during the same period in 2000. This increase was primarily attributable to increases in workers' compensation premiums and claims and group health claims. CSI/Crown wages increased $578,000 due to the start up of the new deferred air services in February 2001. Fuel and fuel taxes as a percentage of operating revenue were 17.2% during the three months ended March 31, 2001, compared to 17.7% during the same period in 2000. This decrease was primarily due to a slight improvement in revenue per mile, while fuel cost per mile remained constant. The Company's exposure to increases in fuel prices is partially mitigated by fuel surcharges to its customers. Vehicle rents as a percentage of operating revenue were 7.8% during the three months ended March 31, 2001 compared to 7.7% during the same period in 2000. Depreciation and amortization as a percentage of operating revenue was 5.0% during the three months ended March 31, 2001, compared to 4.1% during the same period in 2000. The increase is primarily due to the Company replacing older equipment with lower depreciable values with new equipment with higher depreciable values, a higher number of owned tractors, and increased depreciation and amortization related to other operating assets. The Company includes gains and losses from the sale of revenue equipment in depreciation expense. Net gains from the sale of revenue equipment for the three months ended March 31, 2001 were $84,000 compared to a gain of $197,000 for the same period in 2000. Overall, as a percentage of operating revenue, vehicle rents and depreciation were 12.8% during the three months ended March 31, 2001, compared to 11.8% during the same period in 2000. Purchased transportation as a percentage of operating revenue was 12.4% during the three months ended March 31, 2001, compared to 13.2% during the same period in 2000. The decrease reflects the contribution of the Company's logistics business into Transplace in July 2000. Most of the costs associated with logistics revenue were reflected in purchased transportation. 12 Operating expenses and supplies as a percentage of operating revenue were 6.7% during the three months ended March 31, 2001, compared to 6.0% during the same period in 2000. This increase is primarily due to increases in maintenance expenses. Insurance premiums and claims as a percentage of operating revenue were 3.9% during the three months ended March 31, 2001, compared to 3.7% during the same period in 2001. The increase is due primarily to the increases in premiums and claims related to insurance. Interest expense as a percentage of revenue was 2.2% during the three months ended March 31, 2001, compared to 1.7% during the same period in 2000. This increase was primarily due to increased rates on the Company's line of credit and increased borrowings for the Company's Colton, California facility. Income from operations for the three months ended March 31, 2001 decreased $2.7 million, or 55.9%, to $2.1 million from $4.8 million during the same period in 2000. As a percentage of operating revenue, income from operations was 1.1% for the three months ended March 31, 2001 and 2.5% for the same period in 2000. Liquidity and Capital Resources The Company's primary sources of liquidity and capital resources during the three month period ended March 31, 2001 were borrowings under lines of credit, proceeds from sales of used revenue equipment and the use of long-term operating leases for revenue equipment acquisitions. Currently, the Company has in place a $205.0 million credit facility with a group of banks with a weighted-average interest rate of 8.16%, of which $16.8 million was available for borrowing. Cash used in operations was $.8 million during the three months ended March 31, 2001, compared to $2.8 million during the same period last year. Net cash used in investment activities was $16.2 million in the three months ended March 31, 2001, compared to $17.3 million during the same period in 2000. Of the cash used in investment activities, $25.4 million was used to acquire additional property and equipment for the three months ended March 31, 2001, compared to $21.2 million during the same period of 2000. Net cash provided by financing activities was $17.2 million during the three months ended March 31, 2001, compared to $20.0 million during the same period of 2000. At March 31, 2001, the Company was not in compliance with certain financial covenants under its Amended and Restated Credit Agreement (the "Credit Agreement"). The Company's lenders waived compliance with such covenants as of March 31, 2001. Such waiver was conditioned upon the Company having met certain revised financial covenants for the fiscal quarter ending March 31, 2001, which were met, and upon the Company's meeting revised minimum consolidated net worth requirements to June 30, 2001. At present, the Company believes that it will meet these revised covenants, as required. In connection with the waiver, the Company agreed to a reduction in the aggregate amount of commitments under the Credit Agreement to $205 million, and to an increase in the applicable margin for base rate loans to 1.75% and Euro dollar loans to 3.5%, and to payment of certain fees. Additionally, the Company and its lenders expressed their intent to attempt in good faith to amend the Credit Agreement to provide for, among other matters, appropriate changes in certain financial covenants for the remaining term of the bank loan agreement. Accordingly, the Company and its lenders are currently negotiating an amendment of the Credit Agreement. If the Company negotiates an amended agreement, then such agreement, together with cash flows from operations, proceeds from the sale of used revenue equipment and long-term lease financing, will provide sufficient liquidity for the Company's planned operations through the remaining term of the agreement. However, there can be no assurance that such an amendment can be obtained, or can be obtained on terms that are acceptable to the Company. Currently the Company is also pursuing various new long-term financing arrangements to replace the existing revolving credit agreement, which together with cash flows from operations, proceeds from the sale of used revenue equipment and long-term lease financing would be sufficient to fund its cash needs and anticipated capital expenditures through at least the next twelve months. However, there can be no assurance that any such replacement financing agreement can be obtained on terms acceptable to the Company. In 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. 13 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. 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. 14 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 March 31, 2001, the Company had $194 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. For example, if interest rates on the Company's variable rate debt, after considering interest rate swaps, were to increase by 10% from their March 31, 2001 rates for the next twelve months, the increase in interest expense would be approximately $.8 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. 15 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 None (b) Reports on Form 8-K None 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. U.S. XPRESS ENTERPRISES, INC. -------------------------------- (Registrant) Date: May 15, 2001 By: /s/ Patrick E. Quinn ----------------------------- Patrick E. Quinn President Date: May 15, 2001 By: /s/ Ray M. Harlin ----------------------------- Ray M. Harlin Principal Financial Officer 17