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U.S. Xpress Enterprises, Inc. Reports Second Quarter 2018 Results

August 2, 2018

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--Aug 2, 2018--U.S. Xpress Enterprises, Inc. (NYSE:USX) (the “Company”) today announced results for the second quarter of 2018.

Second Quarter 2018 Highlights

Total Operating Revenue of $449.8 million, an increase of 21.4% compared to second quarter 2017 Operating Income of $20.0 million compared to $2.7 million in the second quarter 2017 Adjusted Operating Income, a non-GAAP measure, of $26.5 million compared to $5.1 million in the second quarter of 2017 Operating ratio of 95.5%, a 380 basis point improvement compared to second quarter 2017 Adjusted Operating Ratio, a non-GAAP measure, of 93.4%, a 510 basis point improvement compared to second quarter 2017 IPO proceeds net of fees and expenses used to reduce net debt by approximately $236.2 million

Second Quarter Financial Performance

Eric Fuller, President and CEO, commented, “Over the last three years we have implemented a complete overhaul of the Company’s strategy and operations that we expect will improve execution and profitability. To achieve our goal, we changed the Company’s culture and recruited the expertise necessary to drive our transformation. We also implemented several strategic initiatives focused on improving driver retention, increasing our asset utilization, creating synergies for our customers within our different service offerings and driving a culture of cost management. The early success of our initiatives can clearly be seen in our second quarter results where we delivered our best Adjusted Operating Ratio since 1998. That said, we are not satisfied with our results and believe we can improve as we continue to execute our strategy designed to deliver an operating ratio in line with our peer group.”

“Another sign of our successful execution was our initial public offering where our shares began trading on the NYSE on June 14 th. Our IPO was the culmination of years of hard work by our employees combined with the strong partnership and support of our customers and partners. Our offering is an important step in the transformation and growth of U.S. Xpress and I am excited with the many opportunities that lie ahead,” concluded Mr. Fuller.

Enterprise Update

Total revenue for the second quarter of 2018 increased by $79.4 million to $449.8 million as compared to the second quarter of 2017. The increase was primarily a result of an 11.4% increase in the Company’s average revenue per loaded mile (excluding fuel surcharge revenue), a 56.2% increase in brokerage revenue to $58.4 million, and a $15.1 million increase in fuel surcharge revenue. Excluding the impact of fuel surcharges, second quarter revenue increased $64.3 million to $402.8 million, an increase of 19.0% as compared to the prior year quarter.

Operating income for the second quarter of 2018 was $20.0 million which compares favorably to the $2.7 million achieved in the second quarter of 2017. Excluding one-time costs related to the Company’s IPO transaction completed in June of 2018, second quarter Adjusted Operating Income was $26.5 million. The second quarter 2018 Adjusted Operating Ratio was 93.4%, representing a 510 basis point improvement as compared to the second quarter of 2017. The Adjusted Operating Ratio of 93.4% for the second quarter is the Company’s lowest operating ratio in 20 years.

Truckload Segment

Mr. Fuller said, “Overall, we remain optimistic as we continue to execute our strategy and market conditions remain strong. Of note, we experienced improving rates and volumes through the second quarter and expect no catalyst over the near term that would negatively impact current trends. That said, we continue to see an erosion of professional driver availability. As a result, we are continuing to focus on our driver centric initiatives to both retain the professional drivers who have chosen to partner with us and to attract new professional drivers to our team. We believe this focus allowed us to offset the difficult conditions, which have created a significant professional driver supply challenge for the broader industry as we slightly increased our tractor count during the second quarter of 2018 through an 11% reduction in our driver turnover percentage. The environment in the third quarter of 2018 remains strong from a rate and volume perspective and we are currently anticipating rates to further increase on a sequential basis as we continue to implement contract rate increases in both our over the road and dedicated divisions.”

The Truckload segment achieved an Adjusted Operating Ratio of 92.7% for the second quarter of 2018, a 540 basis point improvement as compared to the Adjusted Operating Ratio of 98.1% achieved in the second quarter of 2017. The improvement was due to the continued successful implementation of the Company’s strategic initiatives as well as broader market conditions.

In the over the road division, average revenue per tractor per week increased 19.8% in the second quarter of 2018, as compared to the second quarter of 2017. The increase was primarily the result of a 13.3% increase in the division’s average revenue per loaded mile (excluding fuel surcharge revenue) and a 5.8% increase in the division’s revenue miles per tractor per week. Generally, during a challenging driver market with increased demand, utilization will decline because a greater percentage of tractors are in transition onboarding new professional drivers as compared to being productive and because increased freight selectivity slows down overall velocity.

Despite the challenging market for drivers, utilization increased through the successful execution of numerous operational initiatives gaining traction through the quarter. This strong utilization was impacted by the over the road division’s support of dedicated accounts during the quarter, which negatively impacted over the road utilization by approximately 150 basis points. While supporting the dedicated accounts with the Company’s over the road fleet negatively affected our utilization in the second quarter, management believes that when these accounts are operationally established, U.S. Xpress will be able to recognize this increase in over the road utilization.

The dedicated division’s average revenue per tractor per week (excluding fuel surcharge revenue) decreased 2.4% in the second quarter of 2018 as compared to the second quarter of 2017. The decrease was primarily a result of a 9.8% decrease in the division’s revenue miles per tractor per week partially offset by a 8.2% increase in the division’s average revenue per loaded mile (excluding fuel surcharge revenue). The reduction in our utilization was primarily the result of certain accounts’ shipping patterns that performed differently than expected which affected utilization, driver hiring, and retention, and due in part to mix changes in the portfolio. As a result of negotiations related to these accounts that were underperforming from a utilization standpoint, rate increases have been implemented that were effective as of the end of July 2018. Overall, tractor count in the Company’s dedicated division has increased by 15.6% in the second quarter of 2018 as compared to the same period in the prior year and 3.7% sequentially as compared to the first quarter of 2018.

Brokerage Segment

Brokerage segment revenues increased 56.2% to $58.4 million in the second quarter of 2018 as compared to $37.4 million in the second quarter of 2017. The increase was primarily the result of a 21.4% increase in load count and higher revenue on a per load basis, and due in part to higher fuel prices. Brokerage gross margins expanded 130 basis points to 12.2% in the second quarter of 2018 as compared to 10.9% in the second quarter of 2017.

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 our customers.

Liquidity and Capital Resources

As of June 30, 2018, U.S. Xpress had $122.6 million of cash and availability under our revolving credit facility, $385.8 million of net debt and $213.6 million of total stockholders’ equity. IPO proceeds net of fees and expenses were used to reduce net debt by approximately $236.2 million during the quarter. U.S. Xpress is committed to continuing its efforts to strengthen its balance sheet and reducing the Company’s leverage ratio which we believe will further position the Company for future opportunities as they arise. As a result of the significant decrease in debt combined with the new capital structure put in place in conjunction with the IPO, consolidated interest expense in the third quarter of 2018 is expected to approximate $5.0 million as compared to $12.9 million in the third quarter of 2017.

Capital expenditures, net of proceeds, were $28.8 million in the current year quarter and $47.5 million year to date. For 2018, U.S. Xpress expects net capital expenditures will be between $170.0 and $190.0 million. Note, that for 2018 total net capital expenditures are higher than the Company’s normalized annualized replacement requirements. This is primarily a result of the mix of this year’s equipment replacements that will be 100% purchased with none planned for off-balance sheet leases. This ratio results in a higher net capital expenditures number for 2018 than if the Company’s fleet had rotated based on the overall fleet financing profile of approximately two thirds owned and one third leased.

Conference Call

As previously announced, the Company will hold a conference call to discuss its second quarter results at 5:00 p.m. (Eastern Time) on August 2 nd, 2018. The conference call can be accessed live over the by phone dialing 1-877-876-9176 or, for international callers, 1-785-424-1667 and requesting to be joined to the U.S. Xpress Second Quarter Earnings Conference Call. A replay will be available starting at 8:00 p.m. (Eastern Time) on August 2 nd, 2018 and can be accessed by dialing 1-844-512-2921 or, for international callers, 1-412-317-6671. The passcode for the replay is 130463. The replay will be available until 11:59 p.m. (Eastern Time) on August 9 th, 2018.

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 also will 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 (on both a consolidated and segment basis), and Adjusted Net Income. 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 similarly titled 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 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; and our ability to adapt to changing market conditions and technologies. 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.

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