USX - U.S. Xpress Enterprises Inc. Reports Second Quarter 2019 Results

U.S. Xpress Enterprises, Inc. (NYSE:USX) (the “Company”) today announced results for the second quarter of 2019.

Second Quarter 2019 Highlights

• Operating revenue of $413.9 million compared to $449.8 million in the second quarter of 2018
• Operating income of $8.8 million compared to $20.0 million in the second quarter of 2018
• Operating ratio of 97.9% compared to 95.5% in the second quarter of 2018
• Adjusted operating ratio¹, a non-GAAP measure, of 97.5% compared to 93.4% in the second quarter of 2018
• Net income attributable to controlling interest of $2.7 million, or $0.05 per diluted share, compared to $0.6 million in the second quarter of 2018
• Adjusted net income attributable to controlling interest¹, a non-GAAP measure, of $2.9 million, or $0.06 per diluted share, compared to $11.3 million in the second quarter of 2018

Second Quarter Financial Performance

Eric Fuller, President and CEO, commented, “The freight market remained challenging through the second quarter driven by weaker than seasonal demand combined with capacity growth as a result of more favorable market conditions in 2018. This supply - demand imbalance severely pressured spot pricing through the quarter which adversely impacted parts of our business. Looking forward, we expect conditions to firm, as capacity slowly exits the market while at the same time we approach a more seasonally busy time of the year. We believe we have the strategy, management team, revenue base, modern fleet, and capital structure that position us very well to execute upon our initiatives, drive further operational gains, and deliver long term value for our shareholders.”

Enterprise Update

Operating revenue was $413.9 million, a decrease of $35.9 million compared to the second quarter of 2018. Excluding revenue from the Company’s Mexico operations which were discontinued in January 2019, operating revenue decreased $22.4 million. The decrease was primarily attributable to a decrease of $18.9 million in Brokerage revenue and to a lesser extent a 1.4% reduction in average revenue miles per tractor per week.

Operating income for the second quarter of 2019 was $8.8 million compared to $20.0 million in the second quarter of 2018. Adjusted operating income¹ for the second quarter of 2019 was $9.3 million, compared to $26.5 million for the 2018 quarter. Operating ratio for the second quarter of 2019 was 97.9% and adjusted operating ratio¹ 97.5%.

Net income attributable to controlling interest for the second quarter of 2019 was $2.7 million compared to $0.6 million in the prior year quarter. Adjusted net income attributable to controlling interest¹ for the second quarter of 2019 was $2.9 million, compared to $11.3 million in the 2018 quarter. Earnings per diluted share were $0.05 for the second quarter of 2019 and adjusted earnings per diluted share¹ were $0.06.

Truckload Segment

Mr. Fuller said, “The more challenging freight market through the second quarter pushed spot pricing down by more than 30% in our OTR division which adversely impacted our OTR results. These headwinds overshadowed what remained a strong contract market where contract rates rose 8%, year over year, in our OTR division. Conversely, our Dedicated division performed well in the second quarter as average revenue per tractor per week grew 10.2% driven by our initiative to improve our customer mix as well as our execution. Of note, Dedicated rates were up 5.4% in the second quarter and the outlook for this division remains positive.”

Mr. Fuller added, “Our drivers remain our most important asset and in an effort to improve driver satisfaction we created a new driver development program. This program provides continuous learning opportunities for our drivers with the goal of providing the knowledge, skills and abilities necessary for a successful career. While still early in its roll out, we are seeing positive results from those drivers who have completed this training versus those who have not. We are optimistic that, overtime, this training will improve our drivers’ satisfaction and retention while also reducing their accident rate and the Company’s insurance expense.”

In the Over-the-Road division, average revenue per tractor per week declined 8.4% compared with the second quarter of 2018. Average revenue per mile decreased 3.3% compared with the 2018 quarter, while average revenue miles per tractor per week decreased 5.3%. The impact on average revenue per tractor per week resulted from the less favorable freight environment.

The Dedicated division’s average revenue per tractor per week increased 10.2% compared to the second quarter of 2018. The increase was primarily the result of a 5.4% increase in average revenue per mile and a 4.5% 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

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 $39.5 million in the second quarter of 2019 compared to $58.4 million in the second quarter of 2018, on fewer loads and decreased revenue per load. Brokerage operating income was $1.3 million in the second quarter of 2019 as compared to $1.4 million in the year ago quarter.

Liquidity and Capital Resources

As of June 30, 2019, we had $121.0 million of liquidity (defined as cash plus availability under the Company’s revolving credit facility), $436.9 million of net debt (defined as long-term debt, including current maturities, less cash balances), and $239.6 million of total stockholders' equity. Capital expenditures, net of proceeds, related primarily to tractors and trailers were $90.4 million in the first half of 2019.

Outlook

Mr. Fuller commented, “The freight environment has remained under pressure through the summer though we do expect conditions to firm, as capacity slowly exits the market while at the same time we approach a more seasonally busy time of the year. For the full year 2019, we expect our full year adjusted operating ratio¹ to be in a range from 95.5% to 97.5%. To provide context, the high end of our full year guidance range assumes that the current market environment as experienced through June and July persists through year end.”

Conference Call

The Company will hold a conference call to discuss its second quarter results at 5:00 p.m. (Eastern Time) on August 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 Second Quarter 2019 Earnings Conference Call. A replay will be available starting at 8:00 p.m. (Eastern Time) on August 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 13692290. The replay will be available until 11:59 p.m. (Eastern Time) on August 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, our network efficiency, expected adjusted operating ratio and capital expenditures, the expected impact of our driver initiatives, 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; disruptions to our information technology and our inability to 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.