U.S. Xpress Enterprises, Inc. Reports First Quarter 2019 Results

CHATTANOOGA, Tenn.–(BUSINESS WIRE)–U.S. Xpress Enterprises, Inc. (NYSE:USX) (the “Company”) today announced
results for the first quarter of 2019.

First Quarter 2019 Highlights

  • Operating revenue of $415.4 million compared to $425.7 million the
    first quarter of 2018
  • Adjusted operating revenue increased $2.9 million, excluding the
    impact of our discontinued Mexico operations and fuel surcharge
  • Operating income of $12.6 million compared to $14.9 million in the
    first quarter of 2018
  • Operating ratio of 97.0% compared to 96.5% in the first quarter of 2018
  • Adjusted operating ratio1, a non-GAAP measure, of 95.7%, a
    40 basis point improvement compared to the first quarter of 2018
  • Net income attributable to controlling interest of $4.7 million, or
    $0.10 per diluted share, compared to $1.2 million in the first quarter
    of 2018
  • Adjusted net income attributable to controlling interest1,
    a non-GAAP measure, of $7.3 million, or $0.15 per diluted share,
    compared to $1.2 million in the first quarter of 2018

First Quarter Financial Performance

  Quarter Ended March 31,
  2019         2018  
Operating revenue $ 415,363 $ 425,708
Revenue, excluding fuel surcharge $ 375,312 $ 382,858
Operating income $ 12,638 $ 14,854
Adjusted operating income1 $ 16,038 $ 14,854
Operating ratio 97.0 % 96.5 %
Adjusted operating ratio1 95.7 % 96.1 %
Net income attributable to controlling interest $ 4,721 $ 1,159
Adjusted net income loss attributable to controlling interest1 $ 7,312 $ 1,159
Earnings per diluted share $ 0.10 nm
Adjusted earnings per diluted share1,2 $ 0.15 nm
 
1 See GAAP to non-GAAP reconciliation in the schedules
following this release
2 2018 EPS not comparable due to minimal
outstanding shares prior to IPO
 

Eric Fuller, President and CEO, commented, “We were pleased to deliver
our seventh consecutive quarter of year-over-year adjusted operating
income improvement and the highest earnings of any first quarter in our
company’s history. Overall, our team performed well despite a softer
freight environment and more severe winter weather than last year.
Looking to the balance of 2019, we remain positive as we expect the
freight environment to improve seasonally, our network efficiency to
rise as we complete the repositioning of equipment from cross-border
lanes and the productivity of our operations to benefit from our many
internal initiatives including our goal of achieving a frictionless
order.”

Enterprise Update

Operating revenue was $415.4 million, a decrease of $10.3 million
compared to the first quarter of 2018. Excluding revenue from the
Company’s Mexico operations which were discontinued in January 2019,
operating revenue increased $2.9 million excluding fuel surcharge. The
increase was attributable to a 3.8% increase in revenue per mile, mostly
offset by a decrease of $8.3 million in brokerage revenue.

Operating income for the first quarter of 2019 was $12.6 million, which
compares to $14.9 million achieved in the first quarter of 2018.
Excluding $3.4 million of cost to exit the Company’s Mexico operations,
adjusted operating income for the first quarter of 2019 was $16.0
million, compared to $14.9 million for the 2018 quarter. Adjusted
operating ratio for the first quarter of 2019 was 95.7%, a 40 basis
point improvement compared to the first quarter of 2018.

Net income attributable to controlling interest for the first quarter of
2019 was $4.7 million compared to $1.2 million in the prior year
quarter. Adjusted net income attributable to controlling interest for
the first quarter of 2019 was $7.3 million, compared to $1.2 million in
the 2018 quarter. Adjusted earnings per diluted share were $0.15 for the
first quarter of 2019.

Truckload Segment

  Quarter Ended March 31,
2019   2018
Over-the-road
Average revenue per tractor per week1 $ 3,616 $ 3,850
Average revenue per mile1 $ 1.985 $ 1.972
Average revenue miles per tractor per week 1,822 1,952
Average tractors 3,617 3,622
Dedicated
Average revenue per tractor per week1 $ 3,961 $ 3,544
Average revenue per mile1 $ 2.337 $ 2.183
Average revenue miles per tractor per week 1,695 1,623
Average tractors 2,658 2,623
Consolidated
Average revenue per tractor per week1 $ 3,762 $ 3,721
Average revenue per mile1 $ 2.128 $ 2.051
Average revenue miles per tractor per week 1,768 1,814
Average tractors 6,275 6,245
 
1 Excluding fuel surcharge revenues

The above table excludes revenue, miles and tractors for services
performed in Mexico.

Mr. Fuller said, “The freight environment was more difficult this year
than in the 2018 quarter due to various factors, including inventory
levels, weather, and moderately increased truckload supply. Despite the
more challenging market, contract rates remained strong, up 8.0% over
the 2018 quarter, based on long-term relationships with customers that
value our service, technology, and committed baseline capacity.
Typically, about 80% of the volume in our Over-the-Road division is
contracted while approximately 20% is non-contracted. In the first
quarter, the less favorable environment pressured our rates and miles in
the non-contract portion of our Over-the-Road Truckload division as spot
rates declined more than 20%.”

Mr. Fuller continued, “Despite the more challenging conditions in the
spot market which is more aligned with seasonal, project, and cyclical
fluctuations, our Truckload segment produced solid revenue performance
driven by our Dedicated division which continued to deliver strong
performance and helped to lead a 1.1% increase in average revenue per
tractor per week across our Truckload segment. Overall, the Truckload
segment achieved an adjusted operating ratio of 96.0% for the first
quarter of 2019, a 20 basis point improvement compared to the adjusted
operating ratio of 96.2% achieved in the first quarter of 2018.”

In the Over-the-Road division, average revenue per tractor per week
declined 6.1% compared with the first quarter of 2018. Average revenue
per mile increased 0.7% compared with the 2018 quarter, while average
revenue miles per tractor per week decreased 6.7%. The impact on average
revenue per tractor per week resulted from unfavorable weather
conditions, the transition out of the Company’s Mexico operations, and
the less favorable freight environment.

The Dedicated division’s average revenue per tractor per week increased
11.8% compared to the first quarter of 2018. The increase was primarily
the result of a 7.1% increase in average revenue per mile and a 4.4%
increase in average revenue miles per tractor per week. The increase in
utilization and revenue per mile was the result of successful efforts
made in 2018 designed to improve the business mix by allocating capital
to new and existing accounts with a better combination of rate and
utilization.

Brokerage Segment

    Quarter Ended March 31,
  2019         2018  
Brokerage revenue $ 46,244 $ 54,541
Gross margin % 17.5 % 14.0 %
Load Count 33,819 39,250
 

The brokerage segment continues to provide additional selectivity for
the Company’s assets to optimize yield while at the same time offering
more capacity solutions to customers. Brokerage segment revenue
decreased to $46.2 million in the first quarter of 2019 compared to
$54.5 million in the first quarter of 2018, on fewer loads and decreased
revenue per load. The revenue decrease was more than offset by higher
gross margin, as transportation cost per load decreased significantly
due to sourcing third party capacity more efficiently. As a result,
operating income increased 18.9% to $2.8 million in the first quarter of
2019 as compared to the year ago quarter.

Liquidity and Capital Resources

As of March 31, 2019, U.S. Xpress had $120.4 million of liquidity
(defined as cash plus availability under the Company’s revolving credit
facility), $407.1 million of net debt (defined as long-term debt,
including current maturities, less cash balances), and $244.2 million of
total stockholders’ equity. Capital expenditures, net of proceeds,
related primarily to tractors and trailers were $23.5 million in the
first quarter of 2019.

Outlook

For the balance of the year we are focused on three main priorities. The
first is optimizing our Truckload network and resulting average revenue
per tractor per week through repositioning equipment and allocating
capacity between our Dedicated and Over-the-Road segments. The second is
improving the experience of our professional truck drivers, including
their safety and security. And, the third is advancing our technology
initiatives centered on digital load matching, automated load acceptance
and prioritization, and our goal of achieving a 100% frictionless order.

Capitalizing on digital technologies will continue to afford U.S. Xpress
competitive advantages. Over time, we expect to achieve driver, cost,
and load planning efficiencies as a result of our frictionless order
initiatives. In addition, selecting and implementing the right
equipment, logistics planning, and automated decision making
technologies will further position U.S. Xpress as one of the leaders in
our industry. Driving technology development, training, and
implementation without losing ground on core operations will be critical
to both our success and our goal of delivering enhanced profitability.

Turning to the market backdrop, the second quarter freight environment
remains subdued relative to normal seasonality, and in comparison to the
strongest market in 20 years which we experienced in the second quarter
of 2018. While we expect ongoing improvements in network efficiency from
the exit of our Mexico business and in operating efficiency from our
strategic initiatives, the change in market conditions since our fourth
quarter call has changed our expectations on second quarter earnings.
While we continue to expect our initiatives and an improving market
backdrop to allow us to improve our adjusted operating ratio on a
sequential basis we now expect our second quarter adjusted operating
ratio to deteriorate as compared to the year ago comparable quarter.

We believe the operating improvements implemented over the past several
years have positioned the Company to better manage market fluctuations
such as those that we are now experiencing. Our current guidance of
delivering a 93.0% adjusted operating ratio for the full year 2019
remains achievable, though it is dependent on market conditions
strengthening through the balance of the second quarter. As a result, we
plan to update our full year adjusted operating ratio guidance when we
will have better visibility on the freight market and our full year
results.

Conference Call

The Company will hold a conference call to discuss its first quarter
results at 5:00 p.m. (Eastern Time) on May 2, 2019. The conference call
can be accessed live over the by phone dialing 1-877-423-9813 or, for
international callers, 1-201-689-8573 and requesting to be joined to the
U.S. Xpress First Quarter 2019 Earnings Conference Call. A replay will
be available starting at 8:00 p.m. (Eastern Time) on May 2, 2019, and
can be accessed by dialing 1-844-512-2921 or, for international callers,
1-412-317-6671. The passcode for the replay is 13689811. The replay will
be available until 11:59 p.m. (Eastern Time) on May 9, 2019.

Interested investors and other parties may also listen to a simultaneous
webcast of the conference call by logging onto the investor relations
section of the Company’s website at investor.usxpress.com. The online
replay will remain available for a limited time beginning immediately
following the call. Supplementary information for the conference call
will also be available on this website.

Non-GAAP Financial Measures

In addition to our net income determined in accordance with U.S.
generally accepted accounting principles (‘‘GAAP’’), we evaluate
operating performance using certain non-GAAP measures, including
Adjusted Operating Ratio, Adjusted Operating Expenses, Adjusted
Operating Income, Adjusted Net Income Attributable to Controlling
Interest, and Adjusted EPS (on a consolidated and, as applicable,
segment basis). Management believes the use of non-GAAP measures assists
investors and securities analysts in understanding the ongoing operating
performance of our business by allowing more effective comparison
between periods. The non-GAAP information provided is used by our
management and may not be comparable to similar measures disclosed by
other companies. The non-GAAP measures used herein have limitations as
analytical tools, and you should not consider them in isolation or as
substitutes for analysis of our results as reported under GAAP.
Management compensates for these limitations by relying primarily on
GAAP results and using non-GAAP financial measures on a supplemental
basis.

About U.S. Xpress Enterprises

Founded in 1985, U.S. Xpress Enterprises, Inc. is the nation’s fifth
largest asset-based truckload carrier by revenue, providing services
primarily throughout the United States. We offer customers a broad
portfolio of services using our own truckload fleet and third‐party
carriers through our non‐asset‐based truck brokerage network. Our modern
fleet of tractors is backed up by a team of committed professionals
whose focus lies squarely on meeting the needs of our customers and our
drivers.

Forward-Looking Statements

This press release contains certain statements that may be considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and such statements are subject to the
safe harbor created by those sections and the Private Securities
Litigation Reform Act of 1995, as amended. Such statements may be
identified by their use of terms or phrases such as “expects,”
“estimates,” “projects,” “believes,” “anticipates,” “plans,” “intends,”
“outlook,” “strategy,” “focus,” “continue,” “will,” “could,” “should,”
“may,” and similar terms and phrases. In this press release, such
statements may include, but are not limited to, statements in the
“Outlook” section, statements regarding the freight environment, our
network efficiency, and the productivity of our operations for the
balance of 2019, and any other statements concerning: any projections of
earnings, revenues, cash flows, capital expenditures, or other financial
items; any statement of plans, strategies, or objectives for future
operations; any statements regarding future economic or industry
conditions or performance; and any statements of belief and any
statements of assumptions underlying any of the foregoing.
Forward-looking statements are based upon the current beliefs and
expectations of our management and are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified, which
could cause future events and actual results to differ materially from
those set forth in, contemplated by, or underlying the forward-looking
statements. The following factors, among others, could cause actual
results to differ materially from those in the forward-looking
statements: general economic conditions, including inflation and
consumer spending; political conditions and regulations, including
future changes thereto; changes in tax laws or in their interpretations
and changes in tax rates; future insurance and claims experience,
including adverse changes in claims experience and loss development
factors, or additional changes in management’s estimates of liability
based upon such experience and development factors that cause our
expectations of insurance and claims expense to be inaccurate or
otherwise impacts our results; impact of pending or future legal
proceedings; future market for used revenue equipment and real estate;
future revenue equipment prices; future capital expenditures, including
equipment purchasing and leasing plans and equipment turnover (including
expected trade-ins); expected fleet age; future depreciation and
amortization; changes in management’s estimates of the need for new
tractors and trailers; future ability to generate sufficient cash from
operations and obtain financing on favorable terms to meet our
significant ongoing capital requirements; our ability to maintain
compliance with the provisions of our credit agreement; expected freight
environment, including freight demand, rates, capacity, and volumes;
future asset utilization; loss of one or more of our major customers;
our ability to renew dedicated service offering contracts on the terms
and schedule we expect; surplus inventories, recessionary economic
cycles, and downturns in customers’ business cycles; strikes, work
slowdowns, or work stoppages at the Company, customers, ports, or other
shipping related facilities; increases or rapid fluctuations in fuel
prices, as well as fluctuations in surcharge collection, including, but
not limited to, changes in customer fuel surcharge policies and
increases in fuel surcharge bases by customers; interest rates, fuel
taxes, tolls, and license and registration fees; increases in
compensation for and difficulty in attracting and retaining qualified
professional drivers and independent contractors; seasonal factors such
as harsh weather conditions that increase operating costs; competition
from trucking, rail, and intermodal competitors; regulatory requirements
that increase costs, decrease efficiency, or reduce the availability of
drivers, including revised hours-of-service requirements for drivers and
the Federal Motor Carrier Safety Administration’s Compliance, Safety,
Accountability program that implemented new driver standards and
modified the methodology for determining a carrier’s Department of
Transportation safety rating; future safety performance; our ability to
reduce, or control increases in, operating costs; future third-party
service provider relationships and availability; execution of the
Company’s current business strategy or changes in the Company’s business
strategy; the ability of the Company’s infrastructure to support future
organic or inorganic growth; our ability to identify acceptable
acquisition candidates, consummate acquisitions, and integrate acquired
operations; in relation to exiting our fixed cost investment in
U.S.-Mexico cross border business, the actual costs of severance, leased
vehicle turn-in, equipment repositioning, and other expenses associated
with exiting the operations; the impact of supply and demand on
availability and pricing of replacement loads for tractors in our U.S.
network; the prices obtained for assets being disposed of; and the
timing and amount of deferred consideration collected; our ability to
adapt to changing market conditions and technologies; costs, diversion
of management’s attention, and potential payments made in connection
with the multiple class action lawsuits arising out of our IPO; and our
ability to remediate several outstanding material weaknesses. Readers
should review and consider these factors along with the various
disclosures by the Company in its press releases, stockholder reports,
and filings with the Securities and Exchange Commission. We disclaim any
obligation to update or revise any forward-looking statements to reflect
actual results or changes in the factors affecting the forward-looking
information.

     
Condensed Consolidated Income Statements (unaudited)
Quarter Ended March 31,
(in thousands, except per share data) 2019 2018
Operating Revenue:
Revenue, excluding fuel surcharge $ 375,312 $ 382,858
Fuel surcharge   40,051   42,850  
Total operating revenue   415,363   425,708  
Operating Expenses:
Salaries, wages and benefits 124,563 132,924
Fuel and fuel taxes 46,904 58,389
Vehicle rents 18,976 20,022
Depreciation and amortization, net of (gain) loss 23,062 24,706
Purchased transportation 114,005 101,776
Operating expense and supplies 27,945 29,791
Insurance premiums and claims 24,353 20,170
Operating taxes and licenses 3,173 3,401
Communications and utilities 2,265 2,466
General and other operating   17,479   17,209  
Total operating expenses   402,725   410,854  
Operating Income 12,638 14,854
Other Expenses (Income):
Interest Expense, net 5,603 12,658
Equity in loss of affiliated companies 89 296
Other, net   26   (75 )
  5,718     12,879  
Income Before Income Taxes 6,920 1,975
Income Tax Provision   1,901     593  
Net Income   5,019     1,382  
Net Income attributable to non-controlling interest   298     223  
Net Income attributable to controlling interest $ 4,721   $ 1,159  
 
Income Per Share
Basic earnings per share (1) $ 0.10 $ 0.18
Basic weighted average shares outstanding   48,394   6,385  
Diluted earnings per share (1) $ 0.10 $ 0.18
Diluted weighted average shares outstanding   49,391   6,385  
 
     
Condensed Consolidated Balance Sheets (unaudited)
March 31, December 31,
(in thousands)   2019     2018  
Assets
Current assets:
Cash and cash equivalents $ 2,095 $ 9,892
Customer receivables, net of allowance of $101 and $59, respectively 185,710 190,254
Other receivables 19,474 20,430
Prepaid insurance and licenses 15,793 11,035
Operating supplies 7,548 7,324
Assets held for sale 8,086 33,225
Other current assets   15,860     13,374  
Total current assets   254,566     285,534  
Property and equipment, at cost 904,209 898,530
Less accumulated depreciation and amortization   (385,281 )   (379,813 )
Net property and equipment   518,928     518,717  
Other assets:
Operating lease right-of-use assets 186,941
Goodwill 57,708 57,708
Intangible assets, net 28,492 28,913
Other   24,858     19,615  
Total other assets   297,999     106,236  
Total assets $ 1,071,493   $ 910,487  
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 63,368 $ 63,808
Book overdraft 5,233
Accrued wages and benefits 23,588 24,960
Claims and insurance accruals 43,586 47,442
Other accrued liabilities 8,386 8,120
Liabilities associated with assets held for sale 6,856
Current portion of operating leases 56,893
Current maturities of long-term debt and finance leases   95,117     113,094  
Total current liabilities   296,171     264,280  

Long-term debt and finance leases, net of current maturities

314,049 312,819
Less debt issuance costs   (1,264 )   (1,347 )
Net long-term debt and finance leases   312,785     311,472  
Deferred income taxes 21,385 19,978

Long term liabilities associated with assets held for sale

8,353
Other long-term liabilities 6,483 7,713
Claims and insurance accruals, long-term 60,518 60,304
Noncurrent operating lease liability 129,927
Commitments and contingencies
Stockholders’ Equity:
Common Stock 485 484
Additional paid-in capital 252,559 251,742
Accumulated deficit   (12,614 )   (17,335 )
Stockholders’ equity 240,430 234,891
Noncontrolling interest   3,794     3,496  
Total stockholders’ equity   244,224     238,387  
Total liabilities and stockholders’ equity $ 1,071,493   $ 910,487  
 
     
Condensed Consolidated Cash Flow Statements (unaudited)
Quarter Ended March 31,
(in thousands)   2019     2018  
Operating activities
Net income $ 5,019 $ 1,382
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income tax provision 1,407 190
Depreciation and amortization 21,833 23,901
Losses on sale of property and equipment 1,229 805
Share based compensation 856 208
Other 308 1,688
Changes in operating assets and liabilities
Receivables 3,560 (10,706 )
Prepaid insurance and licenses (4,761 ) (5,242 )
Operating supplies (285 ) (936 )
Other assets 383 (1,582 )
Accounts payable and other accrued liabilities (2,844 ) (13,936 )
Accrued wages and benefits   (1,226 )   2,365  
Net cash provided by (used in) operating activities   25,479     (1,863 )
Investing activities
Payments for purchases of property and equipment (36,604 ) (26,871 )
Proceeds from sales of property and equipment 13,115 8,176
Proceeds from sale of subsidiary, net of cash   (9,002 )    
Net cash used in investing activities   (32,491 )   (18,695 )
Financing activities
Borrowings under lines of credit 102,676
Payments under lines of credit (82,950 )
Borrowings under long-term debt 14,355 23,438
Payments of long-term debt and finance leases (31,128 ) (36,062 )
Payments of financing costs (14 )
Tax withholding related to net share settlement of restricted stock
awards
(39 )
Payments of long-term consideration for business acquisition (990 ) (1,010 )
Repurchase of membership units (51 )
Book overdraft   5,233     9,469  
Net cash provided by (used in) financing activities   (12,569 )   15,496  
Change in cash balances of assets held for sale 11,784
Net change in cash and cash equivalents (7,797 ) (5,062 )
Cash and cash equivalents
Beginning of year   9,892     9,232  
End of period $ 2,095   $ 4,170  
 

Contacts

U.S. Xpress Enterprises, Inc.
Brian Baubach
Sr. Vice President
Corporate Finance and Investor Relations
investors@usxpress.com

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