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 $54.1 million in the fourth quarter of 2019 compared to $64.9 million in the fourth quarter of 2018, primarily as a result of decreased revenue per load. Brokerage operating loss was $2.0 million in the fourth quarter of 2019 as compared to operating income of $3.0 million in the year ago quarter.
Liquidity and Capital Resources
During the quarter the Company closed on a new $250 million credit facility. The former facility was fully paid off with proceeds of new facility and contemporaneous real estate and equipment financings. The refinancing supports several goals including improved pricing, the ability to grow the borrowing base with the business, and additional flexibility to execute the plan to convert a significant portion of our fleet from operating lease financing to owned financing over time.
As of December 2019, we had $123.0 million of liquidity (defined as cash plus availability under the Company’s revolving credit facility), $390.4 million of net debt (defined as long-term debt, including current maturities, less cash balances), and $230.8 million of total stockholders' equity. Capital expenditures, net of proceeds, related primarily to tractors and trailers were $81.6 million for 2019, excluding equipment financed under operating leases. We had approximately $20.0 million of net capital expenditures close in early January, which were originally planned to close in December. Had this transaction closed in December our capital expenditures would have approximated $100.0 million for the year. In addition, as previously disclosed, we refinanced our primary credit agreement in January 2020. Following expected post-closing perfection actions, liquidity under the new facility is expected to be over $100 million.
Outlook
The Company’s baseline assumptions for 2020 include slow growth in industry-wide truckload shipments, a continued reduction of total truckload capacity from the market, which is expected to drive an inflection in pricing later in the year, and relatively benign cost inflation. The first quarter is generally our weakest quarter of the year as we experience lower revenue per tractor and higher costs than the other quarters due to seasonal freight fluctuations and harsher operating conditions. While we see positive trends in certain areas, there continues to be uncertainty in the short-term environment, which will impact the actual sequential margin deterioration in the first quarter. We continue to believe that market conditions will improve in the back half 2020. The timing and magnitude of market changes will have a significant impact on our quarterly results given our substantial operating leverage.
Conference Call
The Company will hold a conference call to discuss its fourth quarter results at 8:30 a.m. (Eastern Time) on February 6, 2020. 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 Fourth Quarter 2019 Earnings Conference Call. A replay will be available starting at 11:30 a.m. (Eastern Time) on February 6, 2020, and can be accessed by dialing 1-844-512-2921 or, for international callers, 1-412-317-6671. The passcode for the replay is 13698255. The replay will be available until 11:59 p.m. (Eastern Time) on February 13, 2020.
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 operating ratio or 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.
Contact:
U.S. Xpress Enterprises, Inc.
Brian Baubach
Sr. Vice President Corporate Finance and Investor Relations
investors@usxpress.com
Source: U.S. Xpress Enterprises, Inc.
| Condensed Consolidated Income Statements (unaudited) |
| | | Quarter Ended December 31, | | | Year Ended December 31, | |
| (in thousands, except per share data) | | 2019 | | | 2018 | | | 2019 | | | 2018 | |
| Operating Revenue: | | | | | | | | | | | | |
| Revenue, excluding fuel surcharge | | $ | 405,288 | | | $ | 422,530 | | | $ | 1,538,450 | | | $ | 1,622,083 | |
| Fuel surcharge | | | 44,345 | | | | 46,692 | | | | 168,911 | | | | 182,832 | |
| Total operating revenue | | | 449,633 | | | | 469,222 | | | | 1,707,361 | | | | 1,804,915 | |
| Operating Expenses: | | | | | | | | | | | | | | | | |
| Salaries, wages and benefits | | | 140,914 | | | | 135,252 | | | | 530,885 | | | | 535,994 | |
| Fuel and fuel taxes | | | 48,062 | | | | 54,009 | | | | 189,800 | | | | 227,525 | |
| Vehicle rents | | | 23,039 | | | | 19,727 | | | | 80,064 | | | | 78,639 | |
| Depreciation and amortization, net of (gain) loss | | | 19,839 | | | | 24,558 | | | | 94,337 | | | | 97,954 | |
| Purchased transportation | | | 132,572 | | | | 131,756 | | | | 481,589 | | | | 481,945 | |
| Operating expense and supplies | | | 30,956 | | | | 28,662 | | | | 118,394 | | | | 118,064 | |
| Insurance premiums and claims | | | 25,770 | | | | 20,612 | | | | 88,959 | | | | 85,075 | |
| Operating taxes and licenses | | | 3,737 | | | | 3,701 | | | | 13,849 | | | | 14,133 | |
| Communications and utilities | | | 2,269 | | | | 2,426 | | | | 8,928 | | | | 9,575 | |
| Gain on sale of subsidiary | | | (161 | ) | | | - | | | | (831 | ) | | | - | |
| Impairment of assets held for sale | | | - | | | | 10,693 | | | | - | | | | 10,693 | |
| General and other operating | | | 21,273 | | | | 16,684 | | | | 75,317 | | | | 66,412 | |
| Total operating expenses | | | 448,270 | | | | 448,080 | | | | 1,681,291 | | | | 1,726,009 | |
| Operating Income | | | 1,363 | | | | 21,142 | | | | 26,070 | | | | 78,906 | |
| Other Expenses (Income): | | | | | | | | | | | | | | | | |
| Interest Expense, net | | | 5,269 | | | | 5,095 | | | | 21,635 | | | | 34,866 | |
| Early extinguishment of debt | | | - | | | | - | | | | - | | | | 7,753 | |
| Equity in loss of affiliated companies | | | 6,793 | | | | 131 | | | | 7,063 | | | | 381 | |
| Other, net | | | - | | | | 101 | | | | 26 | | | | 136 | |
| Impairment in equity method investments | | | - | | | | 1,804 | | | | - | | | | 1,804 | |
| | | | 12,062 | | | | 7,131 | | | | 28,724 | | | | 44,940 | |
| Income (Loss) Before Income Taxes | | | (10,699 | ) | | | 14,011 | | | | (2,654 | ) | | | 33,966 | |
| Income Tax Provision (Benefit) | | | (1,114 | ) | | | 6,779 | | | | 389 | | | | 7,860 | |
| Net Income (Loss) | | | (9,585 | ) | | | 7,232 | | | | (3,043 | ) | | | 26,106 | |
| Net Income (Loss) attributable to non-controlling interest | | | 9 | | | | 235 | | | | 604 | | | | 1,207 | |
| Net Income (Loss) attributable to controlling interest | | $ | (9,594 | ) | | $ | 6,997 | | | $ | (3,647 | ) | | $ | 24,899 | |
| | | | | | | | | | | | | | | | | |
| Income (Loss) Per Share | | | | | | | | | | | | | | | | |
| Basic earnings (losses) per share | | $ | (0.20 | ) | | $ | 0.14 | | | $ | (0.07 | ) | | $ | 0.84 | |
| Basic weighted average shares outstanding | | | 49,022 | | | | 48,319 | | | | 48,788 | | | | 29,470 | |
| Diluted earnings (losses) per share | | $ | (0.20 | ) | | $ | 0.14 | | | $ | (0.07 | ) | | $ | 0.83 | |
| Diluted weighted average shares outstanding | | | 49,022 | | | | 49,466 | | | | 48,788 | | | | 30,133 | |
