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

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

Third Quarter 2019 Highlights

  • Operating revenue of $428.5 million compared to $460.2 million in the third quarter of 2018
  • Operating income of $3.3 million compared to $22.9 million in the third quarter of 2018
  • Operating ratio of 99.2% compared to 95.0% in the third quarter of 2018
  • Net loss attributable to controlling interest of $1.4 million, or $0.03 per diluted share, compared to Net Income of $16.1 million in the third quarter of 2018

Third Quarter Financial Performance

Three Months Ended September 30, Nine Months Ended September 30,

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Operating revenue

$

428,503

 

$

460,227

 

$

1,257,728

 

$

1,335,693

 

Revenue, excluding fuel surcharge

$

386,666

 

$

413,887

 

$

1,133,162

 

$

1,199,553

 

Operating income

$

3,282

 

$

22,892

 

$

24,707

 

$

57,764

 

Adjusted operating income1

$

3,282

 

$

22,892

 

$

28,637

 

$

64,201

 

Operating ratio

 

99.2

%

 

95.0

%

 

98.0

%

 

95.7

%

Adjusted operating ratio1

 

99.2

%

 

94.5

%

 

97.5

%

 

94.6

%

Net income (loss) attributable to controlling interest

$

(1,446

)

$

16,129

 

$

5,947

 

$

17,903

 

Adjusted net income (loss) attributable to controlling interest1

$

(1,446

)

$

16,129

 

$

8,736

 

$

28,573

 

Earnings (losses) per diluted share

$

(0.03

)

$

0.33

 

$

0.12

 

$

0.76

 

Adjusted earnings (losses) per diluted share1

$

(0.03

)

$

0.33

 

$

0.18

 

$

1.22

 

Eric Fuller, President and CEO, commented, “The third quarter was marked by continued industry-wide overcapacity of tractors in relation to freight demand. This overcapacity continued to pressure our revenue per mile as well as our ability to optimize equipment utilization, particularly in the non-contracted spot portions of our Over-the-Road Truckload operations. We believe the pricing environment was further impacted by unprecedented and unsustainable rate competition from digital freight brokers.”

Mr. Fuller continued, “Similar to the second quarter of 2019, the majority of our Truckload segment made progress as average revenue per mile increased 5.6% in our dedicated business and 2.6% in our contracted over the road business, which together cover approximately 85% of our Truckload segment revenue. However, pricing in our non-contracted, or USX Spot business, deteriorated sequentially and was down more than 35% versus the third quarter of 2018, while gross margin in our Brokerage business declined 160 basis points. While we are clearly not satisfied with our results, we are encouraged by the operational improvements that we are driving across our organization and are optimistic that they will more visibly evidence themselves in our financial results through next year.”

Enterprise Update

Operating revenue was $428.5 million, a decrease of $31.7 million compared to the third quarter of 2018. Excluding revenue from the Company’s Mexico operations which were discontinued in January 2019, operating revenue decreased $18.3 million. The decrease was primarily attributable to a decrease of $19.0 million in Brokerage revenue.

Operating income for the third quarter of 2019 was $3.3 million compared to $22.9 million in the third quarter of 2018. Operating ratio for the third quarter of 2019 was 99.2% compared to 95.0% in the prior year quarter.

Net loss attributable to controlling interest for the third quarter of 2019 was $1.4 million compared to Net Income of $16.1 million in the prior year quarter.

Truckload Segment

Three Months Ended September 30, Nine Months Ended September 30,

2019

2018

 

2019

2018

Over the road
Average revenue per tractor per week*

$

3,479

$

3,957

$

3,572

$

3,917

Average revenue per mile*

$

1.910

$

2.072

$

1.949

$

2.022

Average revenue miles per tractor per week

 

1,821

 

1,910

 

1,832

 

1,937

Average tractors

 

3,785

 

3,511

 

3,671

 

3,574

Dedicated
Average revenue per tractor per week*

$

4,011

$

3,791

$

3,998

$

3,663

Average revenue per mile*

$

2.408

$

2.281

$

2.367

$

2.234

Average revenue miles per tractor per week

 

1,666

 

1,662

 

1,689

 

1,640

Average tractors

 

2,748

 

2,690

 

2,693

 

2,678

Consolidated
Average revenue per tractor per week*

$

3,703

$

3,885

$

3,752

$

3,808

Average revenue per mile*

$

2.109

$

2.156

$

2.118

$

2.104

Average revenue miles per tractor per week

 

1,756

 

1,802

 

1,772

 

1,810

Average tractors

 

6,533

 

6,201

 

6,364

 

6,252

* Excluding fuel surcharge revenues
The above table excludes revenue, miles and tractors for services performed in Mexico.

Mr. Fuller said, “While the severe decline in USX Spot rates pressured our OTR results, contract rates grew low single digits in the quarter. Our Dedicated division continued to perform at record levels by achieving more than $4,000 per tractor per week for the second consecutive quarter. The initiatives put in place to improve the division’s execution are driving these strong results and the outlook for Dedicated remains strong as rates grew more than 5% in the quarter.”

Mr. Fuller added, “As we execute across a broad range of initiatives designed to improve our performance, we are encouraged by the early results that we are seeing as a result of our redesigned driver training facilities, the first of which opened in January. Driver turnover for those who have completed the training has started to decline which partially contributed to our OTR tractor growth this quarter. We are cautiously optimistic that this positive trend will continue as we update our driver training facilities across the country. We are also encouraged by our progress toward our goal of achieving the frictionless order which we expect to enhance end to end data quality with the focus on improving our operational execution and our drivers’ day to day experience.”

In the Over-the-Road division, average revenue per tractor per week declined 12.1% compared with the third quarter of 2018. Average revenue per mile decreased 7.8% compared with the 2018 quarter, while average revenue miles per tractor per week decreased 4.7%. The impact on average revenue per tractor per week was a result of the less favorable freight environment.

The Dedicated division’s average revenue per tractor per week increased 5.8% compared to the third quarter of 2018. The increase was primarily the result of a 5.6% increase in average revenue per mile. We continue to see consistent results in our Dedicated division despite the current adverse market conditions.

Brokerage Segment

Three Months Ended September 30, Nine Months Ended September 30,

 

2019

 

 

2018

 

 

 

2019

 

 

2018

 

Brokerage revenue

$

46,036

 

$

65,060

 

$

131,737

 

$

177,962

 

Gross margin %

 

12.0

%

 

13.6

%

 

15.2

%

 

13.3

%

Load Count

 

36,634

 

 

42,891

 

 

100,154

 

 

124,276

 

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 $46.0 million in the third quarter of 2019 compared to $65.1 million in the third quarter of 2018, on fewer loads and decreased revenue per load. Brokerage operating loss was $0.1 million in the third quarter of 2019 as compared to operating income of $3.0 million in the year ago quarter.

Liquidity and Capital Resources

As of September 30, 2019, we had $119.2 million of liquidity (defined as cash plus availability under the Company’s revolving credit facility), $434.2 million of net debt (defined as long-term debt, including current maturities, less cash balances), and $238.8 million of total stockholders’ equity. Year to date capital expenditures, net of proceeds, related primarily to tractors and trailers were $103.0 million through September 30, 2019, excluding equipment financed under operating leases.

Outlook

The Company previously issued guidance of a 95.5% to 97.5% adjusted operating ratio for calendar 2019, with the upper end assuming market conditions remained consistent with July’s conditions. Sequential deterioration in the Company’s Over-the-Road average revenue per mile and Brokerage gross margin more than offset an increase in Dedicated average revenue per mile. If current market conditions persist through the end of the year, management would expect the Company’s full year adjusted operating ratio to exceed 97.5%. To provide additional context, the Company’s adjusted operating ratio for the full year would approximate 98.5% if the current market environment experienced through October persists through year-end.

Conference Call

The Company will hold a conference call to discuss its third quarter results at 8:00 a.m. (Eastern Time) on November 1, 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 Third Quarter 2019 Earnings Conference Call. A replay will be available starting at 11:00 a.m. (Eastern Time) on November 1, 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 13695252. The replay will be available until 11:59 p.m. (Eastern Time) on November 8, 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.

(1) 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 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. Further, management uses non-GAAP Adjusted Operating Ratio, Adjusted Operating Income, Adjusted Net Income Attributable to Controlling Interest, and Adjusted EPS measures on a supplemental basis to remove items that may not be an indicator of performance from period-to-period. 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 should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. You should not consider the non-GAAP measures used herein 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.

Pursuant to the requirements of Regulation G and Regulation S-K, we have provided reconciliations of Adjusted Operating Ratio, Adjusted Operating Income, Adjusted Net Income Attributable to Controlling Interest, and Adjusted EPS to the most comparable GAAP financial measures at the end of this press release.

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,” “target,” “optimistic,” “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, expected adjusted operating ratio, the expected impact of our driver, frictionless order and other initiatives, , 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); 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; 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, intermodal, and brokerage (including digital brokerage) 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; disruptions to our information technology; the cost of and our ability to effectively and efficiently implement technology initiatives; 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)  
                               Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share data)

 

2019

 

 

 

2018

 

 

 

2019

 

 

 

2018

Operating Revenue:                             
  Revenue, excluding fuel surcharge

 $

      386,666

 

 $

      413,887

 

 $

   1,133,162

 

 $

   1,199,553

   Fuel surcharge  

 

           41,837

 

 

 

           46,340

 

 

 

         124,566

 

 

 

         136,140

   Total operating revenue

 

         428,503

 

 

         460,227

 

 

      1,257,728

 

 

      1,335,693

Operating Expenses:                           
  Salaries, wages and benefits

 

         134,887

 

 

         128,117

 

 

         389,971

 

 

         400,742

  Fuel and fuel taxes           

 

           47,460

 

 

 

           57,423

 

 

 

         141,738

 

 

 

         173,516

  Vehicle rents               

 

           19,470

 

 

           19,497

 

 

           57,025

 

 

           58,912

  Depreciation and amortization, net of (gain) loss  

 

           26,684

 

 

 

           24,541

 

 

 

           74,498

 

 

 

           73,396

  Purchased transportation    

 

         122,433

 

 

         129,732

 

 

         349,017

 

 

         350,189

  Operating expense and supplies  

 

           29,525

 

 

 

           30,538

 

 

 

           87,438

 

 

 

           89,402

  Insurance premiums and claims 

 

           19,570

 

 

           25,128

 

 

           63,189

 

 

           64,463

  Operating taxes and licenses    

 

             3,533

 

 

 

             3,522

 

 

 

           10,112

 

 

 

           10,432

  Communications and utilities  

 

             2,209

 

 

             2,258

 

 

             6,659

 

 

             7,149

  Gain on sale of subsidiary  

 

                     –

 

 

 

                     –

 

 

 

               (670

)

 

 

                     –

  General and other operating   

 

           19,450

 

 

           16,579

 

 

           54,044

 

 

           49,728

   Total operating expenses     

 

         425,221

 

 

 

         437,335

 

 

 

      1,233,021

 

 

 

      1,277,929

Operating Income

 

             3,282

 

 

           22,892

 

 

           24,707

 

 

           57,764

Other Expenses (Income):                                                                    
Interest Expense, net

 

             5,467

 

 

             4,815

 

 

           16,366

 

 

           29,771

Early extinguishment of debt  

 

                     –

 

 

 

                     –

 

 

 

                     –

 

 

 

             7,753

Equity in loss of affiliated companies

 

                  91

 

 

                  73

 

 

                270

 

 

                250

Other, net  

 

                     –

 

 

 

               (133

)

 

 

                  26

 

 

 

                  34

 

             5,558

 

 

 

             4,755

 

 

 

           16,662

 

 

 

           37,808

Income (Loss) Before Income Taxes   

 

            (2,276

)

 

 

           18,137

 

 

 

             8,045

 

 

 

           19,956

Income Tax Provision (Benefit)

 

               (813

)

 

 

             1,679

 

 

 

             1,503

 

 

             1,081

Net Income (Loss)  

 

            (1,463

)

 

 

           16,458

 

 

 

             6,542

 

 

 

           18,875

Net Income (Loss) attributable to non-controlling interest

 

                 (17

)

 

 

                329

 

 

 

                595

 

 

                972

Net Income (Loss) attributable to controlling interest  

 $

         (1,446

)

 

 $

        16,129

 

 

 $

          5,947

 

 

 $

        17,903

 
Income (Loss) Per Share                
Basic earnings (losses) per share

 $

           (0.03

)

 $

            0.33

 

 $

            0.12

 

 $

            0.77

Basic weighted average shares outstanding  

 

           48,984

 

 

 

           48,296

 

 

 

           48,709

 

 

 

           23,118

Diluted earnings (losses) per share

 $

           (0.03

)

 $

            0.33

 

 $

            0.12

 

 $

            0.76

Diluted weighted average shares outstanding  

 

           48,984

 

 

 

           49,597

 

 

 

           49,289

 

 

 

           23,638

 
Condensed Consolidated Balance Sheets (unaudited)
September 30, December 31,
(in thousands)

 

2019

 

 

 

2018

 

Assets      
Current assets:
Cash and cash equivalents

$

           4,442

 

 

$

           9,892

 

Customer receivables, net of allowance of $75 and $59, respectively

 

193,047

 

 

190,254

 

Other receivables

 

18,345

 

 

 

20,430

 

Prepaid insurance and licenses

 

23,221

 

 

11,035

 

Operating supplies

 

7,706

 

 

 

7,324

 

Assets held for sale

 

10,399

 

 

33,225

 

Other current assets

 

19,057

 

 

 

13,374

 

Total current assets

 

276,217

 

 

285,534

 

Property and equipment, at cost

 

939,889

 

 

 

898,530

 

Less accumulated depreciation and amortization

 

(403,891

)

 

(379,813

)

Net property and equipment

 

535,998

 

 

 

518,717

 

Other assets:
Operating lease right-of-use assets

 

250,062

 

 

 

 

Goodwill

 

57,708

 

 

57,708

 

Intangible assets, net

 

27,642

 

 

 

28,913

 

Other

 

31,067

 

 

19,615

 

Total other assets

 

366,479

 

 

 

106,236

 

Total assets    

$

    1,178,694

 

$

       910,487

 

Liabilities and Stockholders’ Equity       
Current liabilities:
Accounts payable    

$

         87,161

 

 

$

         63,808

 

Book overdraft    

 

3,833

 

 

 

Accrued wages and benefits    

 

24,085

 

 

 

24,960

 

Claims and insurance accruals

 

51,125

 

 

47,442

 

Other accrued liabilities    

 

9,433

 

 

 

8,120

 

Liabilities associated with assets held for sale

 

 

 

6,856

 

Current portion of operating leases

 

70,246

 

 

 

 

Current maturities of long-term debt and finance leases

 

82,669

 

 

113,094

 

Total current liabilities    

 

328,552

 

 

 

264,280

 

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

 

351,492

 

 

312,819

 

Less debt issuance costs

 

(1,301

)

 

 

(1,347

)

Net long-term debt and finance leases

 

350,191

 

 

311,472

 

Deferred income taxes    

 

20,996

 

 

 

19,978

 

Long term liabilites associated with assets held for sale

 

 

 

8,353

 

Other long-term liabilities    

 

6,599

 

 

 

7,713

 

Claims and insurance accruals, long-term    

 

53,370

 

 

60,304

 

Noncurrent operating lease liability

 

179,600

 

 

 

 

Commitments and contingencies

 

 

 

 

Stockholders’ Equity:      
Common Stock

 

490

 

 

484

 

Additional paid-in capital    

 

249,665

 

 

 

251,742

 

Accumulated deficit

 

(11,388

)

 

(17,335

)

Stockholders’ equity 

 

238,767

 

 

 

234,891

 

Noncontrolling interest    

 

619

 

 

3,496

 

Total stockholders’ equity 

 

239,386

 

 

 

238,387

 

Total liabilities and stockholders’ equity

$

    1,178,694

 

$

       910,487

Contacts

U.S. Xpress Enterprises, Inc.

Brian Baubach

Sr. Vice President Corporate Finance and Investor Relations

investors@usxpress.com

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