Fueled by
Technology
and Tenacity
2019 ANNUAL REPORT
Driving Operational
Efficiency through
Strategic Initiatives
As one of the nation’s largest asset-based trucking companies—including
being a Top 10 provider of dedicated contract services—we know how
important our trucks and trailers are. But are they our most valuable asset?
Not the way we see it.
Here at U.S. Xpress, we don’t just run on horsepower, we run on the
brainpower of thousands of visionaries and problem-solvers. Their ideas are
all helping us discover and explore new ways to do business and improve
service and efficiency for our customers. And we’re already seeing results.
By the Numbers
42%
of company trucks in
dedicated operation
21%
increase in average
tractors in dedicated over
last four years
25K
independent carriers
now included in our
brokerage network
4M+
40K
5TH
customer and driver touch
points eliminated
parking spaces presented to
drivers through in-cab tech
largest publicly traded asset-
based truckload carrier
$1.7B
15TH
8.5K+
in revenue
year as EPA SmartWay Partner
problem solvers
U.S. XPRESS ENTERPRISES, INC. 2019 ANNUAL REPORT 1
We’re capitalizing on
tech to create competitive
advantages that will
position us as a best-in-
class solutions provider.
IDEAS FUELED BY INNOVATION We’re embracing
next-generation technology and data-driven
approaches to improve the customer experience and
drive efficiencies across the company. We alleviated a
major pain point for drivers by presenting over 40,000
parking spaces through their in-cab technology to help
them maximize their Hours of Service and to find a safe
place to take a break.
Along with helping drivers succeed, we are using
technology to help eliminate friction in the order process
for everyone involved, improving on-time performance,
and removing unnecessary steps along the way. In fact, to
lead the charge in making technology-enabled
improvements, we’ve expanded our tech personnel by
60%, including three PhD data scientists.
2
Julie Van de Kamp
VP of Customer Experience
“ After 12 years working in the
industry, I’ve found that
sometimes the simplest ideas
are the best. My team and I knew
we needed to start making the
customer experience process
simpler. But how? Turns out, it was
as simple as assigning them one
contact point. It made things so
much easier—for us and them.”
U.S. XPRESS ENTERPRISES, INC. 2019 ANNUAL REPORT 3
IDEAS FUELED BY CUSTOMERS In 2019, we took a hard look
at the values we hold true as a company. The somewhat
painful truth was that we had lost our customer focus at
some point along the way. This realization led us to do a
reset at every level of the company with the introduction of
a new set of core values that keep the customers front and
center along with an insistence on working together and
being unafraid to take calculated risks. While we recognize
that changing a mindset doesn’t happen overnight, we’re
taking several steps in the right direction.
Our Customer Experience team has taken particularly
large strides in putting customers first by streamlining
day-to-day interactions and giving each customer one
single touchpoint, whether their freight is being carried
through our asset-based business or brokered through a
3rd party carrier.
Ralph Romero
VP of Talent Management
“I’ve worked in talent management for
a long time, but one of the most
rewarding projects I’ve ever worked
on has been the Professional Driver
Development initiative at U.S. Xpress.
Since rolling it out, there has already
been a 6% decrease in driver turnover
and 20% reduction in preventable
accidents among participating
drivers. These kinds of results are
really what keep me going. I’m so
lucky to be part of such a relentless
team that was able to come together
to make it happen.”
4
We’re continuing to improve
our service offerings.
IDEAS FUELED BY TENACITY Ever mindful of the need to
continually evolve our service offerings to meet the needs
of our customers, we’re taking steps to enhance the
options we have today while looking for new ways to
serve tomorrow.
With the growing demand for dedicated business, we have
expanded our dedicated service offering to comprise 42%
of our company’s total fleet, increasing our average
tractors in dedicated by 21% over the last 4 years.
Now we’re gearing up to take it to the next level with a
new focus on professional driver development that gives
plenty of attention to the specialized skills needed to
deliver that particular service.
We have also started the process of converting our
brokerage network, now 25,000 independent carriers
strong, to a digital management system that drives
efficiencies and response times for both drivers
and customers.
IDEAS FUELED BY RESPONSIBILITY As problem solvers,
we are dedicated not only to caring for our customers’
freight but also for our planet, our people and the
communities we serve.
Proudly entering our 15th year as an EPA SmartWay
Partner, we’re even prouder to have won two SmartWay
Excellence Awards for our industry-leading efficiency and
contribution to clean air.
We take our responsibility for keeping the nation’s roads
as safe as possible very seriously. That’s one reason we’ve
partnered with Truckers Against Trafficking to train our
drivers to recognize and report instances of human
trafficking, a multi-billion-dollar industry that enslaves
about 40 million people worldwide.
In the spirit of safe roads, we’ve taken our driver safety
efforts well above and beyond standard practice or even
national requirements. With hair testing conducted for all
new truck drivers at U.S. Xpress and forward-facing event
recorders installed across our fleet, we’re trying to do
everything we can to keep the roads safe for our drivers
and the millions of motorists driving alongside them.
U.S. XPRESS ENTERPRISES, INC. 2019 ANNUAL REPORT 5
Letter to our
Shareholders
Change is here
ERIC FULLER PRESIDENT AND CHIEF EXECUTIVE OFFICER
In 2019, we competed for freight in a highly volatile market, and we
invested materially in the future of our enterprise as we continued to make
advances in automation of core functions, implementation of safety training
and technology, and improved execution of our large and growing
dedicated contract unit.
6
We also renewed our focus on the customer, to offer a
differentiated level of service and analytics. As we enter
2020, I am struck by how quickly the landscape has
changed as our nation battles the spread of Covid-19
which has dramatically impacted how we live and work.
In this period of uncertainty, we are committed to
keeping our employees safe and our customers’ product
moving across the country. U.S. Xpress provides a critical
service to our customers and their customers as millions
of Americans depend on us to ship their product and
keep their store shelves stocked. We are quickly adapting
to the changing environment and working with our
drivers, on a daily basis, to keep them informed and safe.
Importantly, the investments that we have made in our
Company position us to not only overcome the near term
challenges that we face but succeed over the long term
as our market continues to rapidly evolve.
Looking back at 2019, our financial results were
disappointing as our industry experienced increased
capacity relative to volumes, which drove spot rates down
to levels we haven’t seen in over ten years. This challenging
market backdrop was further impacted by an erratic trade
policy and new digital disruptors operating at negative
margins. As a company, we had some bumps but also
some big wins in areas of strategic focus. Our internal
initiatives set a foundation for further improvement as we
continue to advance our company. We must continue to
execute on our current initiatives, find new ways to operate
based on years of experience and knowledge, and
capitalize on new technologies like those now being
deployed by venture-backed digital companies. This is the
clear focus of our executive management team in 2020.
Drilling down into our results in more detail, our internal
initiatives were overshadowed by poor performance in
our Over-The-Road division. Volumes and rates slipped
through the year, and our decision to divest our Mexico
operations, while still the right long-term decision,
coincided with the downturn in the spot market, forcing
us to expose more of our capacity to rapidly falling rates.
As a result, companywide operating margins deteriorated
by over 500 basis points through the year, putting us
solidly in the third tier of our competitive peer group. It
has been, and continues to be, our main focus to improve
profitability through the cycle with the goal of eventually
delivering margins in line with or better than the industry
over time. However, our long-term goal is not to focus on
what is thought of as our peer group today, but on a
broader subset of companies that are more diverse in
their service offerings and revenue base.
While our financial results were disappointing, we had
many big wins spread across the organization. The most
evident was in our Dedicated division where revenue, on a
per truck basis, increased by almost 8% and was the
highest that we have seen in the history of our Company.
This was driven by improved utilization per truck and rates
that were up 3%, year over year. These improvements
were the result of successful efforts that we made to
improve the business mix in Dedicated by allocating
capital to new and existing accounts with a better
combination of rate and utilization. Looking forward, our
goal is to organically grow Dedicated to more than 50% of
total Company tractors, given the stability that the division
provides through economic cycles.
We have also been focused on improving our safety
results given our desire to be a good corporate citizen
and put the best quality truck and driver out on the road
and around our friends and families. There is also a
significant financial benefit to this initiative, since our
accident costs, reflected mostly in our insurance line
item, is one of our largest costs. To achieve this goal, we
have focused on three primary areas.
First, we rolled out forward looking event recorders in all of
our trucks starting in May 2018. This gives us an additional
tool for coaching our drivers and identifying the root cause
of accidents, which are often the fault of others.
Second, we have revamped our driver training program,
starting at the beginning of 2019, which was based on a
more hands on approach, as opposed to a dense
classroom curriculum. We opened two facilities this past
year and plan to open more facilities in 2020 with a goal of
using this new training for 100% of our drivers, over time.
Lastly, we rolled out hair follicle drug testing at the
beginning of 2019 for all student hires and expanded that
initiative to include testing of all experienced drivers in
the back half of 2019.
All combined, we expect these initiatives to lead to a
better quality of driver for U.S. Xpress, which I believe will
lead to a lower claims expense, over time.
We also took a strong approach to our equipment
management strategy. We were able to seat additional
tractors and eliminate unproductive equipment, allowing
us to drive revenue production without increasing our
fixed cost infrastructure.
U.S. XPRESS ENTERPRISES, INC. 2019 ANNUAL REPORT 7
Along with this is an increased focus on our customers.
We have always provided solid service to our customers
but allowed the culture of “the customer is the most
important thing in our business” to slip away some. It’s
easy to divert your focus from customers to drivers when
your industry struggles with triple digit workforce
turnover. Therefore, we have redesigned our structure to
prioritize the customer. We are focused around
providing the highest level of service expected from our
customers while driving their costs down. With a new
operating structure, new compensation strategy, and
new management in both sales and customer
experience we can drive growth in our revenues in all
areas of our business.
To conclude, 2019 was a year of transformation for U.S.
Xpress; one where we were focused on the future. While
we partner with our employees and customers to
successfully battle the coronavirus over the near term, we
will also continue to implement these transformational
initiatives through the year. We believe our investments
will start to show results as we roll out multiple operating
models in our asset and non-asset based businesses that
are designed for the future with improved margins, lower
unit cost, and ultimate scalability. This will be a year in
which we leverage cutting edge technology to drive cost
out and revenue production up through automation and
optimization. The results of our work will show in our
numbers for years to come and will set us apart from our
current competitors, new entrants, and larger capacity
solutions providers.
As you can see, I am very excited with what the future
holds for U.S. Xpress.
Eric Fuller, President and Chief Executive Officer
We needed to drive real change across our organization
as well as implement foundational improvements to
position U.S. Xpress to be successful in a rapidly changing
industry. Through 2017 and 2018, we focused on our
planning methodology, our fleet manager structure, and
our operational incentives, all essential building blocks to
the initiatives that we are implementing today such as the
‘frictionless order’. While we have made strong progress
implementing our strategic initiatives designed to
improve our performance, it was not enough to insulate
our financial results from the challenging market
conditions we experienced this past year. The ultimate
responsibility for our poor performance lies with me, of
course, which is why I took a long look at why we saw such
a deterioration in performance during this market down
cycle. I asked tough questions that ultimately led to
additional systems, operational, compensation structure,
cultural, and even leadership changes over 2019. We
believe these changes will create momentum in both
growth and margin improvement that will become evident
in 2020 and continue for years to come.
As we reimagine our systems, operations, and culture, we
aren’t focusing on how to create the best operating
model with a lens to the past, but one to the future. Our
focus is on creating a company that’s engineered to
compete in a future full of advanced technology,
automation, and high optimization. I believe that the
adoption of advanced technology in our industry is
accelerating beyond anything we’ve ever experienced
before. Machine learning, automation, and advanced
databases that were mostly limited to large multi-national
technology companies are now being deployed by both
new entrants and incumbents. In fact, I believe that
companies that continue to operate with a 1980’s or
1990’s operating model and technology will cease to be
in business in ten years or so.
As a result, our focus is not just rooted in a systems
upgrade or a layering in of new software but a wholesale
redesign of our operating model. Workflow, systems,
personnel, and branding have all been given careful
thought to not be the company we want to be tomorrow
but the company we want to be in five to ten years. And,
this was also done in the context of a company that will
be a large capacity provider that can service our
customers at a high level with near unlimited capacity
and at rates that are highly competitive to anything they
can get in the marketplace.
8
Cautionary Note Regarding Forward-looking Statements
BUSINESS
This Annual Report (this “Annual Report”) contains certain statements that may be considered forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and such statements are
subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as
amended. All statements, other than statements of historical or current fact, are statements that could be deemed
forward-looking statements, including without limitation: any projections of earnings, revenues or other financial
items; any statement of plans, strategies, outlook, growth prospects or objectives of management for future operations;
our operational and financial targets; general economic trends, performance or conditions and trends in the industry
and markets; the competitive environment in which we operate; any statements concerning proposed new services,
technologies or developments; and any statement of belief and any statements of assumptions underlying any of the
foregoing. In this Annual Report, statements relating to the impact of new accounting standards, future tax rates,
expenses, and deductions, expected freight demand, capacity, and volumes, potential results of a default under our
Credit Facility or other debt agreements, expected sources of working capital and liquidity (including our mix of debt,
finance leases, and operating leases as means of financing revenue equipment), expected capital expenditures,
expected fleet age and mix of owned versus leased equipment, expected impact of technology, including the impact of
event recorders and our strategic initiatives, future customer relationships, future growth of dedicated contract
services and brokerage, future growth in independent contractors and related purchased transportation expense and
fuel surcharge reimbursement, future growth of our lease-purchase program, future driver market conditions and
driver turnover and retention rates, any projections of earnings, revenues, cash flows, dividends, capital expenditures,
or other financial items, expected cash flows, expected operating improvements, including improvements in our
working capital, any statements regarding future economic conditions or performance, any statement of plans,
strategies, programs and objectives of management for future operations, including the anticipated impact of such
plans, strategies, programs and objectives, future rates and prices, future utilization, future depreciation and
amortization, future salaries, wages, and related expenses, including driver compensation, future insurance and
claims expense, including the impact of the installation of event recorders, future fluctuations in fuel costs and fuel
surcharge revenue, including the future effectiveness of our fuel surcharge program, strategies for managing fuel
costs, political conditions and regulations, including trade regulation, quotas, duties or tariffs, and any future changes
to the foregoing, future fluctuations in operating expenses and supplies, future fleet size and management, the market
value of used equipment, including gain on sale, future residual value guarantees, any statements concerning
proposed acquisition plans, new services or developments, the anticipated impact of legal proceedings on our
financial position and results of operations, expected progress on internal control remediation efforts, among others,
are forward-looking statements. Such statements may be identified by their use of terms or phrases such as “believe,”
“may,” “could,” “should,” “expects,” “estimates,” “projects,” “anticipates,” “plans,” “intends,” “outlook,”
“strategy,” “target,” “optimistic,” “focus,” “continue,” “will” and similar terms and phrases. Such statements are
based on currently available operating, financial and competitive information. Forward-looking statements 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. Factors that could cause or contribute to such differences include, but are not limited to, those
discussed in the section entitled “Risk Factors,” set forth below. Readers should review and consider the factors
discussed in “Risk Factors,” along with various disclosures in our press releases, stockholder reports, and other
filings with the Securities and Exchange Commission (“SEC”).
All such forward-looking statements speak only as of the date of this Annual Report. You are cautioned not to place
undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our
expectations with regard thereto or any change in the events, conditions, or circumstances on which any such
statement is based.
References in this Annual Report to “we,” “us,” “our,” or the “Company” or similar terms refer to U.S. Xpress
Enterprises, Inc., and its subsidiaries.
1
GENERAL
Our Business
We believe we are the fifth largest asset-based truckload carrier in the United States by revenue, generating over
$1.7 billion in total operating revenue in 2019. We provide services primarily throughout the United States, with a
focus in the densely populated and economically diverse eastern half of 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. As of December 31, 2019, our fleet consisted of approximately 6,900 tractors and approximately 15,500
trailers, including approximately 2,000 tractors provided by independent contractors. All of our tractors have been
equipped with electronic logs since 2012, and our systems and network are engineered for compliance with the federal
electronic log mandate. Our terminal network is established and capable of handling significantly larger volumes
without meaningful additional investment. In June 2018, we completed our initial public offering (the “IPO”).
For much of our history, we focused primarily on scaling our fleet and expanding our service offerings to support
sustainable, multi-faceted relationships with customers. More recently, we have focused on our core service offerings
and refined our network to focus on shorter, more profitable lanes with more density, which we believe are more
attractive to drivers. Over the last five years, we have recruited and developed new executive and operational
management teams with significant industry experience and instilled a new culture of professional management. These
changes, which are ongoing, helped us to maintain relatively stable profitability during the weak truckload market of
2016 and early 2017, and drive significant improvements to profitability during the strong truckload market beginning
in the second half of 2017.
Our Service Offerings
We organize our service offerings into two reportable segments, Truckload and Brokerage. The Truckload segment
offers asset-based truckload services, including the over-the-road (“OTR”) and dedicated contract services described
below. Our Brokerage segment is principally engaged in non-asset-based freight brokerage services. We believe many
customers seek truckload operators that offer both asset-based and non-asset-based services to help ensure capacity
will be available as needed. We believe that each of our service offerings, on a stand-alone revenue basis, would
represent one of the largest participants in its respective market.
Below is a brief overview of our service offerings:
)
%
5
8
(
d
a
o
l
k
c
u
r
T
Approximate
% of 2019
Revenue(1)
48%
OTR
Description
Transports a full trailer of freight for a single customer
from origin to destination, typically without
intermediate stops or handling
Short-term contracts and spot moves that include
irregular route moves without volume and capacity
commitments
Tractors are operated with one driver or a team of two
drivers to handle more time-sensitive, higher margin
freight
Routes are generally between 450 and 1,050 miles in
length
Fuel surcharge programs help us offset most of the
negative impact of rising fuel prices associated with
loaded or billed miles
2
37%
12%
Dedicated
Contract
Brokerage
Contractually assigned equipment, drivers and on-site
personnel to address customers’ needs for committed
capacity and service levels
Multi-year initial contract term with guaranteed
volumes and pricing
We have renewed substantially all of our dedicated
contracts after the initial contract term
Fuel costs are typically more predictable and less
volatile under the fixed and variable pricing of these
contracts
Historically, our dedicated contract customers
generally adjust pricing to account for driver wage
increases, although these adjustments may not be
contractually required
Non-asset-based freight brokerage service through
which loads are contracted to third-party carriers
Allocation strategy designed to maximize profitability
of our Truckload fleet before outsourcing loads to
third-party carriers
In the past 12 months, we have utilized the capacity of
approximately 25,000 third-party carriers
(1) Based on revenue, before fuel surcharge. Approximately 3% of revenue is attributable to other ancillary services.
While we primarily operate in the eastern half of the United States, we provide services into and out of Mexico. In
January 2019, we sold our interest in Xpress Internacional. Even following our sale of Xpress Internacional, we expect
to have business to and from Mexico via a more variable cost model using third party carriers. During 2019, 2018
and 2017, substantially all of our operating revenue was generated in the United States.
Customer Relationships
We maintain a diverse, long-standing customer base that includes many Fortune 500 companies, including Amazon,
Dollar General, Dollar Tree, FedEx, Home Depot, Kroger, Procter & Gamble, Target, Tractor Supply and Walmart.
Our customers fall within a broad spectrum of geographies and end markets, including retail, food and beverage,
e-commerce and packages, manufacturing and consumer products. No other category comprised more than
five percent of the end markets we served at December 31, 2019. Relationships with our top ten customers exceed ten
years on average. For the year ended December 31, 2019, our largest customer, Walmart Inc., accounted for
approximately 12% of our revenue, excluding fuel surcharge.
Tractor and Trailer Fleets
We operate a modern fleet of approximately 4,900 company-owned tractors and approximately 15,500 trailers, and
we also contract for additional tractor capacity through approximately 2,000 independent contractors, who provide
both the tractor and a driver and, except for the trailer, which we generally provide, bear the operating expenses of
each load. Our company tractor fleet continues to adopt the most advanced technology in today’s market including
electronic logging devices (“ELDs”), electronic speed limiters, electronic roll stability, improved aerodynamics and
fuel efficiency technologies, enhanced tractor connectivity with remote updating capabilities, improved automatic
transmissions, lane departure and collision warning / avoidance systems and upgraded braking systems. Each of our
company tractors is also equipped with onboard communication units that offer real time freight positioning to our
customers and instant communication between our drivers and us, and event recorders. We believe event recorders
will give us the ability to better train our drivers with respect to safe driving behavior, which in turn may help reduce
insurance costs over time.
Tractors and trailers represent our most substantial capital investments. In general, we expect to operate a tractor for
approximately 475,000 miles, which when averaged across our fleet as of December 31, 2019 equates to
approximately 4.5 years of operation (while most major components are under warranty) and a trailer for up to
10 years or more of operation. We depreciate or finance our equipment over their useful lives and down to salvage
values that we expect to represent fair market value at the expected time of sale. Our ongoing capital expenditures are
significant, and our annual depreciation expense is expected to be approximately equal to maintenance capital
3
expenditures, net of proceeds of dispositions, assuming a constant percentage of leased versus owned equipment and
a constant trade cycle. In practice, we vary our trade cycle and financing based on the market for new and used tractors,
the quality, dependability and cost per mile to operate the equipment, our capital budget, expected tax benefits and
other factors. Based on the volumes we purchase, we believe that we have a cost advantage in the procurement of new
tractors and trailers compared to the prices paid by small trucking companies.
Our company tractors had an average age of approximately 1.7 years at December 31, 2019. During 2020, we expect
to continue to replace tractors as they reach approximately 475,000 miles, which we expect will result in an average
tractor age of approximately 1.6 years at December 31, 2020.
Our Competitive Strengths
We believe the following competitive strengths provide us with a strong foundation to continue to improve our
profitability and stockholder value:
Industry leading truckload operator with significant scale
We believe we are the fifth largest asset-based truckload carrier in the United States in 2019 by total operating revenue
and we believe our large scale provides us with significant benefits. These benefits include economies of scale on
major expenditures such as tractors, trailers and fuel, as well as our overall infrastructure. Additionally, we can offer
an enhanced value proposition for large customers who seek efficiency in sourcing capacity from a limited number of
carriers and flexible capacity to accommodate seasonal surge volumes. Our established and well-maintained terminal
network is capable of handling meaningfully larger volumes without meaningful additional investment.
Complementary mix of services to afford flexibility and stability throughout economic cycles
Our service offerings have unique characteristics and are subject to differing market forces, which we believe allows
us to respond effectively through economic cycles.
OTR
OTR business involves short-term customer contracts without pricing or volume guarantees that allow us to benefit
from periods of supply and demand imbalance and price volatility. This is the largest part of our business and the
overall truckload market.
Dedicated
Dedicated business features committed rates, lanes and volumes under contracts that generally afford us greater
revenue predictability over the contract period and help smooth the impact of market cycles. Additionally, our
dedicated contract service offering generally has higher driver retention rates than our OTR service offering, which
we believe is because our professional drivers prefer the more predictable time at home that dedicated routes offer. In
addition, this increased visibility allows us to commit and invest fleet resources with a more predictable return profile.
We intend to grow this portion of our business as a percentage of our average tractors.
Brokerage
Brokerage capacity allows us to aggregate volume and to flex the amount allocated to our own fleet with freight cycles.
Typically, we allocate more loads to our OTR fleet during slow freight demand to keep our assets productive, and
more loads to third-party carriers during higher freight demand to maintain control over customer freight and make a
margin on outsourcing the moves. By retaining control over significantly more freight than we are able to serve with
our own assets, and allocating the available loads first to our own tractors, we have more choices for optimizing the
utilization and pricing of our fleet every day and throughout market cycles.
Long-standing, diverse and resilient customer base
We maintain a long-standing customer base that includes many Fortune 500 companies with national footprints,
including Amazon, Dollar General, Dollar Tree, FedEx, Home Depot, Kroger, Procter & Gamble, Target, Tractor
Supply and Walmart. As of December 31, 2019, relationships with our top ten customers exceeded ten years on
average. Our portfolio of blue-chip customers allows us to benefit from the less cyclical and more-stable demand from
4
grocery and dollar stores in addition to increasing demand due to secular growth trends in end-markets such as
e-commerce. We also benefit from significant cross-selling opportunities among large key customers, as all of our top
ten customers use at least two of our three service offerings, which allows us to have multiple points of contact with
our customers and take advantage of varying bid cycles.
Modern fleet and maintenance system designed to optimize life cycle investment and minimize operating costs
Our fleet represents our largest capital investment, a visible representation of our brand for customers and drivers and
a large portion of our controllable costs. We select, maintain and dispose of our fleet based on rigorous analysis of our
investments and operating costs.
Our modern and well-maintained fleet consisted of approximately 4,900 company tractors with an average age of
approximately 1.7 years and approximately 15,500 trailers at December 31, 2019. We also contracted for
approximately 2,000 tractors provided by independent contractors at December 31, 2019. We equip our tractors with
carefully selected components based on initial cost, maintenance requirements, warranty coverage, safety and
efficiency advantages, driver preference and resale value. Our company tractor fleet is technologically advanced and
equipped with safety and efficiency features, including using electronic logs since 2012, electronic speed limiters,
automatic transmissions, lane departure and collision warning systems, air disc brakes and high performance wide
brake drums and electronic roll stability. In addition, we have installed forward-facing event recorders in our company
tractors, which we expect to further enhance our safety program and reduce insurance and claims costs over time.
Over the past several years, we have developed a disciplined and effective in-house maintenance program designed
to actively manage these assets based on customized timetables for preventive maintenance and replacement of parts.
We believe this approach, coupled with our in-house maintenance facilities and in-house technicians dedicated to fleet
maintenance, helps us effectively manage our maintenance cost per mile, keeps drivers on the road efficiently and
creates an attractive asset and record for resale.
Motivated management team focused on tactical execution and leadership in the truckload market
Our management and operations team has been carefully assembled to obtain a mix of industry veterans from
successful competitors and high-performing internal candidates, all of whom are motivated to perform in our
transparent, metric-driven environment. Our President and Chief Executive Officer, Eric Fuller, has over 20 years of
experience at U.S. Xpress and has been responsible for developing the team and spearheading our transformation
program over the last five years. Our management team’s compensation and ownership of our common stock provide
further incentive to improve business performance and profitability. In addition, with active positions in industry
associations, such as the American Trucking Associations, Inc. (“ATA”), our management team provides us with a
key role in the discussions that we believe are shaping the future of the industry. We believe our leadership team is
well-positioned to execute our strategy and remains a key driver of our financial and operational success.
Our Strategies
We believe we possess the scale, infrastructure and service offerings to compete effectively in our markets, our
opportunity for further improvement is significant, and our strategies are designed to enhance stockholder value.
Improve profitability and grow revenue as appropriate to the market cycle
Improve asset productivity by using advanced technology to optimize dispatch miles in all cycles and
actively upgrade freight mix when volumes permit
Control non-essential costs and seek efficiencies throughout the enterprise
Pursue driver training and safety initiatives as a core cultural value
Continue to leverage our service mix to manage through all market cycles
Grow our revenue base prudently with a focus on dedicated contract service and brokerage by
cross-selling our services with existing customers and pursuing new customer opportunities
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Capitalize on high return on investment potential of advanced technology, automation, and optimization
Continue to use our scale and relationships to gain early access to technological advances and evaluate
the costs and benefits
Incubate, develop, and implement operating efficiencies across our enterprise using our USX Ventures
technology development group
Pursue use of artificial intelligence to accommodate individual drivers’ preferences with the goal of
improving driver satisfaction and retention
Apply data analytics across the billions of dollars of freight spend we see every year to capture and
optimize the execution of our customers’ loads and our network
Partner with equipment manufacturers to test, evaluate and refine electric, autonomous and other
advanced vehicle technology
Maintain flexibility through long-term enterprise planning and conservative financial policies
Maximize our free cash flow generation by managing expenses, taxes and capital expenditures
Convert equipment financing over time toward owned equipment from operating leased equipment to
gain tax benefits and flexibility in trade cycles
llocate capital toward dedicated contract services, which offers more predictable revenue streams and
greater asset productivity, and brokerage, which requires limited capital investment and affords
network-balancing freight volumes
Target a conservative leverage profile, taking into consideration both owned and leased financing
Company Drivers
Professional truck drivers are the backbone of our success and the heart of the Company. Responsibility for driver
retention flows throughout our organization and every office and maintenance employee is expected to take the
necessary steps to keep our drivers satisfied and productive. Keeping our drivers satisfied and safe is the guiding
principle behind our modern fleet, training programs and driver compensation. Company drivers are eligible to
participate in our health care plan and certain voluntary plans, including life insurance and disability plans, dental and
vision plans and our 401(k) plan.
Our drivers are subject to certain hiring guidelines related to driving history, accident and safety history, physical
standards and drug and alcohol testing. Upon meeting certain criteria, applicants are invited to attend an orientation at
one of our service centers. The on-site orientation is focused on introducing a driver to the concepts and training
necessary to be a successful, professional driver, including training related to safety, life on the road, our operations
and equipment and electronic log operation. The on-site orientation also includes a road test.
Independent Contractors
In addition to the company drivers that we employ, we enter into contracts with independent contractors. Independent
contractors operate their own tractors (although some employ drivers they hire) and provide their services to us under
contractual arrangements. Except for generally providing independent contractors with the use of our trailers, they are
responsible for the ownership and operating expenses and are compensated by us primarily on a rate per mile basis.
By operating safely and productively, independent contractors can improve their own profitability and ours. We
believe that the fleet of independent contractors we engage provides significant advantages that primarily arise from
the motivation of business ownership. Independent contractors tend to produce more miles per tractor per week. As
of December 31, 2019, the approximately 2,000 independent contractors we engage comprised approximately 28% of
our available capacity, as measured by tractor count.
Services offered to independent contractors include insurance, maintenance and fuel. Through our wholly owned
insurance captive subsidiary, Xpress Assurance, Inc. (“Xpress Assurance”), independent contractors can purchase
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occupational accident, physical damage and other types of insurance. Independent contractors also are able to procure
at their expense fuel and maintenance services at our truckload service centers.
Employment
As of December 31, 2019, we employed approximately 8,572 employees, of whom approximately 6,298 were drivers,
approximately 316 were maintenance technicians and approximately 1,958 were office employees, including
operations staff, sales and marketing, recruiting, safety and other support personnel. None of our domestic employees
are covered by a collective bargaining agreement.
Insurance
We retain high deductibles on a significant portion of our claims exposure and related expenses associated with third
party bodily injury and property damage, employee medical expenses, workers’ compensation, physical damage to
our equipment and cargo loss. See “Risk Factors.” We currently carry the following material types of insurance, which
generally have the retention amounts, maximum benefits per claim and other limitations noted:
commercial automobile liability excess coverage approximately $300.0 million of coverage per
occurrence subject to a $3.0 million retention per occurrence with annual aggregate limits within the
$3.0 to $10.0 million layer of $14.0 million and a three-year policy aggregate of $28.0 million;
general liability, business auto liability and excess employer’s liability coverage: approximately $300.0
million of coverage per occurrence subject to a $25,000 deductible per occurrence for general liability
claims, $50,000 deductible per occurrence for business auto claims and $500,000 deductible for excess
employer’s liability:
cargo damage and loss: $2.0 million limit per tractor or trailer subject to a $250,000 retention per
occurrence;
workers’ compensation/employers’ liability: statutory coverage limits subject to a $500,000 retention
for each accident or disease;
employment practices and wage and hour liability: $25.0 million aggregate limit in coverage subject to
a $1.0 million retention for employment practices and $2.5 million retention for wage and hour for either
a single claim or a class action;
directors’ and officers’ insurance: $75.0 million aggregate limit of coverage subject to a $1.0 million
retention with various sub-limits;
fiduciary liability policy: $10.0 million aggregate limit of coverage subject to a $10,000 retention;
employee healthcare: we retain each employee health care claim and maintain stop loss insurance of
$1.0 million;
crime insurance: $5.0 million of coverage subject to a $100,000 retention; and
underground storage tank liability: $5.0 million in coverage with deductibles ranging from $25,000 to
$75,000.
Regulation
Transportation Regulations
Our operations are regulated and licensed by various government agencies, including the Department of
Transportation (“DOT”), Environmental Protection Agency (“EPA”) and the Department of Homeland security
(“DHS”). These and other federal and state agencies also regulate our equipment, operations, drivers and third-party
carriers.
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The DOT, through the Federal Motor Carrier Safety Administration (“FMCSA”), imposes safety and fitness
regulations on us and our drivers, including rules that restrict driver hours-of-service. Changes to such hours-of-service
rules can negatively impact our productivity and affect our operations and profitability by reducing the number of
hours per day or week our drivers may operate and/or disrupting our network. However, in August 2019, the FMCSA
issued a proposal to make changes to its hours-of-service rules that would allow truck drivers more flexibility with
their 30-minute rest break and with dividing their time in the sleeper berth. It also would extend by two hours the duty
time for drivers encountering adverse weather, and extend the shorthaul exemption by lengthening the drivers’
maximum on-duty period from 12 hours to 14 hours. It is unclear how long the process of finalizing a final rule will
take, if one does come to fruition. Any future changes to hours-of-service rules could materially adversely affect our
results of operations and profitability.
There are two methods of evaluating the safety and fitness of carriers. The first method is the application of a safety
rating that is based on an onsite investigation and affects a carrier’s ability to operate in interstate commerce. We
currently have a satisfactory DOT safety rating for our U.S. operations under this method, which is the highest
available rating under the current safety rating scale. If we were to receive a conditional or unsatisfactory DOT safety
rating, it could materially adversely affect our business, as some of our existing customer contracts require a
satisfactory DOT safety rating. In January 2016, the FMCSA published a Notice of Proposed Rulemaking outlining a
revised safety rating measurement system, which would replace the current methodology. Under the proposed rule,
the current three safety ratings of “satisfactory,” “conditional” and “unsatisfactory” would be replaced with a single
safety rating of “unfit,” and a carrier would be deemed fit when no rating was assigned. Moreover, the proposed rules
would use roadside inspection data in addition to investigations and onsite reviews to determine a carrier’s safety
fitness on a monthly basis. Under the current rules, a safety rating can only be given upon completion of a
comprehensive onsite audit or review. Under the proposed rules, a carrier would be evaluated each month and could
be given an “unfit” rating if the data collected from roadside inspections, investigations and onsite reviews did not
meet certain standards. The proposed rule underwent a public comment period extending into May 2016 and several
industry groups and lawmakers have expressed their disagreement with the proposed rule, arguing that it violates the
requirements of the Fixing America’s Surface Transportation Act (the “FAST Act”), and that the FMCSA must first
finalize its review of the Compliance, Safety, Accountability program (“CSA”) scoring system, described in further
detail below. Based on this feedback and other concerns raised by industry stakeholders, in March 2017, the FMCSA
withdrew the Notice of Proposed Rulemaking related to the new safety rating system. In its notice of withdrawal, the
FMCSA noted that a new rulemaking related to a similar process may be initiated in the future. Therefore, it is
uncertain if, when or under what form any such rule could be implemented. The FMCSA also recently indicated its
intent to perform a new study on the causation of crashes. Although it remains unclear whether such a study will
ultimately be undertaken and completed, the results of such a study could spur further proposed and/or final rules in
regards to safety and fitness.
In addition to the safety rating system, the FMCSA has adopted the CSA program as an additional safety enforcement
and compliance model that evaluates and ranks fleets on certain safety-related standards. The CSA program analyzes
data from roadside inspections, moving violations, crash reports from the last two years and investigation results. The
data is organized into seven categories. Carriers are grouped by category with other carriers that have a similar number
of safety events (e.g., crashes, inspections or violations) and carriers are ranked and assigned a rating percentile to
prioritize them for interventions if they are above a certain threshold. Currently, these scores do not have a direct
impact on a carrier’s safety rating. However, the occurrence of unfavorable scores in one or more categories may
(i) affect driver recruiting and retention by causing high-quality drivers to seek employment with other carriers,
(ii) cause our customers to direct their business away from us and to carriers with higher fleet rankings, (iii) subject
us to an increase in compliance reviews and roadside inspections, (iv) cause us to incur greater than expected expenses
in our attempts to improve unfavorable scores or (v) increase our insurance expenses, any of which could adversely
affect our results of operations and profitability.
Under the CSA, these scores were initially made available to the public in five of the seven categories. However,
pursuant to the FAST Act, which was signed into law in December 2015, the FMCSA was required to remove from
public view the previously available CSA scores while it reviews the reliability of the scoring system. During this
period of review by the FMCSA, we will continue to have access to our own scores and will still be subject to
intervention by the FMCSA when such scores are above the intervention thresholds. A study was conducted and
delivered to the FMCSA in June 2017 with several recommendations to make the CSA program more fair, accurate,
and reliable. In late June 2018, the FMCSA provided a report to Congress outlining the changes it may make to the
CSA program in response to the study. Such changes include the testing and possible adoption of a revised risk
modeling theory, potential collection and dissemination of additional carrier data and revised measures for
intervention thresholds. The adoption of such changes is contingent on the results of the new modeling theory and
additional public feedback. Therefore, it is unclear if, when and to what extent such changes to the CSA program will
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occur. However, any changes that increase the likelihood of us receiving unfavorable scores could materially adversely
affect our results of operations and profitability.
Following the 2001 terrorist attacks, the DHS and other federal, state and municipal authorities implemented and
continue to implement various security measures, including checkpoints and travel restrictions on large trucks. The
Transportation Safety Administration requires that each driver who applies for or renews his or her license for carrying
hazardous materials is not a security threat. This requirement has reduced the pool of qualified drivers who are
permitted to transport hazardous materials. These regulations also could complicate the matching of available
equipment with hazardous material shipments, thereby increasing our response time and our empty miles on customer
shipments. As a result, we could possibly fail to meet certain customer needs or incur increased expenses to do so,
either of which could materially adversely affect our business, financial condition and results of operations.
In November 2015, the FMCSA published its final rule related to driver coercion, which took effect in January 2016.
Under this rule, carriers, shippers, receivers, or transportation intermediaries that are found to have coerced drivers to
violate certain FMCSA regulations (including hours-of-service rules) may be fined up to $16,000 for each offense.
The final rule requiring the use of ELDs was published in December 2015. This rule requires drivers of commercial
motor vehicles that are required to keep logs to be ELD-compliant by December 2017. Enforcement of this rule was
phased in, as states did not begin putting tractors out of service for non-compliance until April 1, 2018. However, on
a state-by-state basis, carriers were subject to citations for non-compliance with the rule after the December 2017
compliance deadline. For those carriers who had automatic onboard recording devices (“AOBRDs”) installed prior to
the December 2017 compliance deadline, the deadline to be fully compliant is December 2019. We currently use
AOBRDs and were fully converted to ELDs by the December 2019 deadline. We do not believe that the conversion
from AOBRDs to ELDs will have any material impact on our operations. However, we believe that more effective
hours-of-service enforcement under this rule may improve our competitive position by causing all carriers to adhere
more closely to hours-of-service requirements.
In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing
results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers
of FMCSA drug and alcohol testing requirements. Motor carriers will be required to query the clearinghouse to ensure
drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them
from operating commercial motor vehicles. The final rule became effective on January 4, 2017, with a compliance
date of January 6, 2020. In December 2019, however, the FMCSA announced a final rule extending by three years the
date for state driver’s licensing agencies to comply with certain Drug and Alcohol Clearinghouse requirements. The
December 2016 commercial driver’s license rule required states to request information from the Clearinghouse about
individuals prior to issuing, renewing, upgrading or transferring a CDL. This new action will allow states’ compliance
with the requirement, which was set to begin January 2020, to be delayed until January 2023. That being said, the
FMCSA has indicated it will allow states the option to voluntarily query Clearinghouse information beginning January
2020. The compliance date of January 2020 remained in place for all other requirements set forth in the Clearinghouse
final rule, however. Upon implementation, the rule may reduce the number of available drivers in an already
constrained driver market.
Other rules have been recently proposed or made final by the FMCSA, including (i) a rule requiring the use of speed
limiting devices on heavy duty tractors to restrict maximum speeds, which was proposed in 2016, and (ii) a rule setting
forth minimum driver-training standards for new drivers applying for commercial driver’s licenses for the first time
and to experienced drivers upgrading their licenses or seeking a hazardous materials endorsement, which was made
final in December 2016, with a compliance date in February 2020 (FMCSA officials have recently reported, however,
that they are delaying implementation of the final rule by two years). In July 2017, the DOT announced that it would
no longer pursue a speed limiter rule, but left open the possibility that it could resume such a pursuit in the future. In
2019, U.S. Congressional representatives proposed a similar rule related to speed-limiting devices. The effect of these
rules, to the extent they become effective, could result in a decrease in fleet production and driver availability, either
of which could materially adversely affect our business, financial condition and results of operations.
In March 2014, the Ninth Circuit Court of Appeals held that California state wage and hour laws are not preempted
by federal law. The case was appealed to the Supreme Court of the United States, which denied certiorari in May
2015, and accordingly, the Ninth Circuit Court of Appeals decision stood. However, in December 2018, the FMCSA
granted a petition filed by the ATA and in doing so determined that federal law does preempt California’s wage and
hour laws, and interstate truck drivers are not subject to such laws. The FMCSA’s decision has been appealed by labor
groups, and multiple lawsuits have been filed in federal courts seeking to overturn the decision, and thus it’s uncertain
whether it will stand. Other current and future state and local wage and hour laws, including laws related to employee
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meal breaks and rest periods, may also vary significantly from federal law. Further, driver piece rate compensation,
which is an industry standard, has been attacked as non-compliant with state minimum wage laws and lawsuits have
recently been filed and/or adjudicated against carriers demanding compensation for sleeper berth time, layovers, rest
breaks and pre-trip and post-trip inspections, the outcome of which could have major implications for the treatment
of time that drivers spend off-duty (whether in a truck’s sleeper berth or otherwise) under applicable wage laws. Both
of these issues are adversely impacting the Corporation and the industry as a whole, with respect to the practical
application of the laws, thereby resulting in additional cost. As a result, we, along with other companies in our industry,
are subject to an uneven patchwork of wage and hour laws throughout the United States. In the past, certain legislators
have proposed federal legislation to preempt state and local wage and hour laws; however, passage of such legislation
is uncertain. If federal legislation is not passed, we will either need to comply with the most restrictive state and local
laws across our entire fleet, or revise our management systems to comply with varying state and local laws. Either
solution could result in increased compliance and labor costs, driver turnover, decreased efficiency, and amplified
legal exposure.
Tax and other regulatory authorities, as well as independent contractors themselves, have increasingly asserted that
independent contractor drivers in the trucking industry are employees rather than independent contractors and our
classification of independent contractors has been the subject of audits by such authorities from time to time. Federal
legislation has been introduced in the past that would make it easier for tax and other authorities to reclassify
independent contractors as employees, including legislation to increase the recordkeeping requirements for those that
engage independent contractor drivers and to increase the penalties for companies who misclassify their employees
and are found to have violated employees’ overtime and/or wage requirements. Additionally, federal legislators have
sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent
contractors if they are following a long-standing, recognized practice, extend the Fair Labor Standards Act to
independent contractors and impose notice requirements based on employment or independent contractor status and
fines for failure to comply. Some states have put initiatives in place to increase their revenue from items such as
unemployment, workers’ compensation and income taxes and a reclassification of independent contractors as
employees would help states with this initiative.
Recently, courts in certain states have issued decisions that could result in a greater likelihood that independent
contractors would be judicially classified as employees in such states. In September 2019, California enacted A.B. 5
(“AB5”), a new law that changed the landscape of the state’s treatment of employees and independent contractors.
AB5 provides that the three-pronged “ABC Test” must be used to determine worker classification in wage-order
claims. Under the ABC Test, a worker is presumed to be an employee—and the burden to demonstrate their
independent contractor status is on the hiring company through satisfying all 3 of the following criteria:
the worker is free from control and direction in the performance of services; and
the worker is performing work outside the usual course of the business of the hiring company; and
the worker is customarily engaged in an independently established trade, occupation, or business.
How AB5 will be enforced is still to be determined. While it was set to go into effect in January 2020, a federal judge
in California issued a preliminary injunction barring the enforcement of AB5 on the trucking industry while the
California Trucking Association (“CTA”) moves forward with its suit seeking to invalidate AB5. While this
preliminary injunction provides temporary relief to the enforcement of AB5, it remains unclear how long such relief
will last, and whether the CTA will ultimately be successful in invalidating the law. It is also possible AB5 will spur
similar legislation in states other than California, which could adversely affect our results of operations and
profitability.
Further, class actions and other lawsuits have been filed against certain members of our industry seeking to reclassify
independent contractors as employees for a variety of purposes, including workers’ compensation and health care
coverage. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of
independent contractor status. If independent contractors we contract with are determined to be employees, we would
incur additional exposure under federal and state tax, workers’ compensation, unemployment benefits, labor,
employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax
withholdings.
Environmental Regulations
From time to time we engage in the transportation of hazardous substances. Additionally, some of our tractor terminals
are located in areas where groundwater or other forms of environmental contamination could occur. Our operations
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involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among others.
Certain of our facilities have wash facilities, waste oil or fuel storage tanks and fueling islands. If we are involved in
a spill or other accident involving hazardous substances, if there are releases of hazardous substances we transport, if
soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in
violation of applicable laws or regulations, we could be subject to cleanup costs and liabilities, including substantial
fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business,
financial condition and results of operations.
In August 2011, the National Highway Traffic Safety Administration (the “NHTSA”) and the EPA adopted a new
rule that established the first-ever fuel economy and greenhouse gas standards for medium and heavy-duty vehicles,
including the tractors we employ (the “Phase 1 Standards”). The Phase 1 Standards apply to tractor model years 2014
to 2018 and require the achievement of an approximate 20 percent reduction in fuel consumption by the 2018 model
year, which equates to approximately four gallons of fuel for every 100 miles traveled. In addition, in February 2014,
President Obama announced that his administration would begin developing the next phase of tighter fuel efficiency
and greenhouse gas standards for medium-and heavy-duty tractors and trailers (the “Phase 2 Standards”). In October
2016, the EPA and NHTSA published the final rule mandating that the Phase 2 Standards will apply to trailers
beginning with model year 2018 and tractors beginning with model year 2021. The Phase 2 Standards require nine
percent and 25 percent reductions in emissions and fuel consumption for trailers and tractors, respectively, by 2027.
We believe these requirements will result in additional increases in new tractor and trailer prices and additional parts
and maintenance costs incurred to retrofit our tractors and trailers with technology to achieve compliance with such
standards, which could materially adversely affect our business, financial condition, results of operations and
profitability, particularly if such costs are not offset by potential fuel savings, but we cannot predict the extent to which
our operations and productivity will be impacted. In October 2017, the EPA announced a proposal to repeal the Phase 2
Standards as they relate to gliders (which mix refurbished older components, including transmissions and
pre-emission-rule engines, with a new frame, cab, steer axle, wheels and other standard equipment). The outcome of
such proposal is still undetermined as the EPA continues to consider congressionally requested investigations into the
legality of the proposal and the merits of an anti-glider study that was published four days after the proposal became
official. Additionally, implementation of the Phase 2 Standards as they relate to trailers has been delayed due to a
provisional stay granted in October 2017 by the U.S. Court of Appeals for the District of Columbia, which is
overseeing a case against the EPA by the Truck Trailer Manufacturers Association, Inc. regarding the Phase 2
Standards.
In January 2020, the EPA announced it is seeking input on reducing emissions of nitrogen oxides and other pollutants
from heavy-duty trucks. The EPA is aiming to release proposed standards for the new plan, commonly referred to as
the “Cleaner Trucks Initiative,” later in 2020, and may take final action as soon as 2021. The EPA is targeting 2027
for these new standards to take effect.
The California Air Resources Board (“CARB”) also adopted emission control regulations that will be applicable to
all heavy-duty tractors that pull 53-foot or longer box-type trailers within the State of California. The tractors and
trailers subject to these CARB regulations must be either EPA SmartWay certified or equipped with low-rolling
resistance tires and retrofitted with SmartWay-approved aerodynamic technologies. Enforcement of these CARB
regulations for 2011 model year equipment began in January 2010 and have been phased in over several years for
older equipment. In order to comply with the CARB regulations, we submitted a large fleet compliance plan to CARB
in June 2010. In addition, in February 2017 CARB proposed California Phase 2 standards that would generally align
with the federal Phase 2 Standards, with some minor additional requirements, and as proposed would stay in place
even if the federal Phase 2 Standards are affected by action from President Trump’s administration. In February 2019,
the California Phase 2 standards became final. Thus, even if the trailer provisions of the Phase 2 Standards are
permanently removed, we would still need to ensure the majority of our fleet is compliant with the California Phase 2
standards, which may result in increased equipment costs and could adversely affect our operating results and
profitability. CARB has also recently announced intentions to adopt regulations ensuring that 100% of tractors
operating in California are operating with battery or fuel cell-electric engines in the future. Whether these regulations
will ultimately be adopted remains unclear. We will continue monitoring our compliance with the CARB regulations.
Federal and state lawmakers also have proposed potential limits on carbon emissions under a variety of climate-change
proposals. Compliance with such regulations has increased the cost of our new tractors, may increase the cost of any
new trailers that will operate in California, may require us to retrofit certain of our pre-2011 model year trailers that
operate in California and could impair equipment productivity and increase our operating expenses. These adverse
effects, combined with the uncertainty as to the reliability of the newly designed diesel engines and the residual values
of these vehicles, could materially increase our costs or otherwise materially adversely affect our business, financial
condition and results of operations.
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In order to reduce exhaust emissions, some states and municipalities have begun to restrict the locations and amount
of time where diesel-powered tractors may idle. These restrictions could force us to purchase on-board power units
that do not require the engine to idle or to alter its drivers’ behavior, which could result in increased costs.
In addition to the foregoing laws and regulations, our operations are subject to other federal, state and local
environmental laws and regulations, many of which are implemented by the EPA and similar state agencies. Such
laws and regulations generally govern the management and handling of hazardous materials, discharge of pollutants
into the air, surface water and other environmental media, and groundwater preservation and disposal of certain
various substances. We do not believe that our compliance with these statutory and regulatory measures has had a
material adverse effect on our business, financial condition and results of operations.
Food Safety Regulations
In April 2016, the Food and Drug Administration published a final rule establishing requirements for shippers, loaders,
carriers by motor vehicle and rail vehicle and receivers engaged in the transportation of food, to use sanitary
transportation practices to ensure the safety of the food they transport as part of the Food Safety Modernization Act
(“FSMA”). This rule sets forth requirements related to (i) the design and maintenance of equipment used to transport
food, (ii) the measures taken during food transportation to ensure food safety, (iii) the training of carrier personnel in
sanitary food transportation practices and (iv) maintenance and retention of records of written procedures, agreements
and training related to the foregoing items. These requirements will take effect for larger carriers such as us in April
2017. The FSMA is applicable to us not only as a carrier, but we are also considered a shipper when acting in the role
of broker. We believe we have been in compliance with the FSMA since the compliance date. However, if we are
found to be in violation of applicable laws or regulations related to the FSMA or if we transport food or goods that
are contaminated or are found to cause illness and/or death, we could be subject to substantial fines, lawsuits, penalties
and/or criminal and civil liability, any of which could have a material adverse effect on our business, financial
condition and results of operations.
Executive and Legislative Climate
The regulatory environment has changed under the administration of President Trump. In January 2017, the President
signed an executive order requiring federal agencies to repeal two regulations for each new one they propose and
imposing a regulatory budget, which would limit the amount of new regulatory costs federal agencies can impose on
individuals and businesses each year. In December 2019, the DOT announced a final rule indicating it is codifying
this directive on our industry. This rule and any other anti-regulatory action by the President and/or Congress may
inhibit future new regulations and/or lead to the repeal or delayed effectiveness of existing regulations. Therefore, it
is uncertain how we may be impacted in the future by existing, proposed or repealed regulations.
The United States Mexico Canada Agreement (“USMCA”) has been ratified by the United States and Mexico but
must be ratified by the Parliament of Canada before it enters into effect. The USMCA is designed to modernize food
and agriculture trade, advance rules of origin for automobiles and trucks, and enhance intellectual property protections,
among other matters, according to the Office of the U.S. Trade Representative. It is difficult to predict at this stage
what could be the impact of the USMCA on the economy, including the transportation industry. However, given the
amount of North American trade that moves by truck, if the USMCA enters into effect, it could have a significant
impact on supply and demand in the transportation industry, and could adversely impact the amount, movement and
patterns of freight we transport.
With the FAST Act set to expire in September 2020, Congress has noted its intent to consider a multiyear highway
measure that would update the FAST Act. However, if Congress fails to reauthorize the FAST Act or pass updated
replacement legislation by the September 2020 deadline and proceeds to manage transportation policy via short-term
legislative directives, there will be uncertainty that could have a negative impact on our operations.
For further discussion regarding these laws and regulations, please see the section entitled “Risk Factors.”
Seasonality
In the trucking industry, revenue has historically decreased as customers reduce shipments following the winter
holiday season and as inclement weather impedes operations. At the same time, operating expenses have generally
increased, with fuel efficiency declining because of engine idling and weather, causing more physical damage
equipment repairs and insurance claims and costs. For the reasons stated, first quarter results historically have been
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lower than results in each of the other three quarters of the year. Over the past several years, we have seen increases
in demand at varying times, including surges between Thanksgiving and the year-end holiday season.
Available Information
Our website address is investor.usxpress.com. Our Annual Report on Form 10-K, our quarterly reports on Form 10-
Q, our current reports on Form 8-K and all other reports filed with the Securities and Exchange Commission pursuant
to Section 13(a) or 15 (d) of the Securities Exchange Act of 1934, can be obtained free of charge by visiting our
website. Information contained in or available through our website is not incorporated by reference into, and you
should not consider such information to be part of, this Annual Report. The SEC maintains an internet site that
contains reports, proxy and information statements, and other information regarding issuers that file electronically
with the SEC at www.sec.gov.
We are a Nevada corporation. We were founded by Max Fuller and Patrick Quinn in 1985 and commenced operations
in the transportation business in 1986.
RISK FACTORS
When evaluating the Company, the following discussion of risk factors, which contains forward-looking statements
as discussed in “Cautionary Note Regarding Forward-looking Statements” above, should be considered in conjunction
with the other information contained in this Annual Report. If we are unable to mitigate and/or are exposed to any of
the following risks in the future, then there could be a material, adverse effect on our business, financial condition and
results of operations.
Our business is subject to general economic, business and regulatory factors affecting the truckload industry that
are largely beyond our control, any of which could have a material adverse effect on our results of operations.
The truckload industry is highly cyclical, and our business is dependent on a number of factors that may have a
negative impact on our results of operations, many of which are beyond our control. We believe that some of the most
significant of these factors are economic changes that affect supply and demand in transportation markets, such as:
recessionary economic cycles, such as the period from 2007 through 2009;
changes in customers’ inventory levels and practices, including shrinking product/package sizes, and in
the availability of funding for their working capital;
excess truck capacity in comparison with shipping demand;
driver shortages and increases in drivers’ compensation;
industry compliance with ongoing regulatory requirements;
fluctuations in foreign exchange rates and imposition of domestic or foreign trade tariffs; and
downturns in customers’ business cycles, including as a result of declines in consumer spending.
Several of the above factors were evident in the 2016 and 2019 freight environments, which led to higher inventories,
weakened demand and pressure on rates. Similar conditions in the future could have a material adverse effect on our
business, financial condition and results of operations.
Additionally, economic conditions that decrease shipping demand or increase the supply of available tractors and
trailers can exert downward pressure on rates and equipment utilization, thereby decreasing asset productivity. The
risks associated with these factors are heightened when the U.S. economy is weakened. Some of the principal risks
during such times are as follows:
we may experience low overall freight levels, which may impair our asset utilization;
certain of our customers may face credit issues and cash flow problems that may lead to payment delays,
increased credit risk, bankruptcies and other financial hardships that could result in even lower freight
demand and may require us to increase our allowance for doubtful accounts;
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freight patterns may change as supply chains are redesigned, resulting in an imbalance between our
capacity and our customers’ freight demand;
customers may solicit bids for freight from multiple trucking companies or select competitors that offer
lower rates from among existing choices in an attempt to lower their costs, and we might be forced to
lower our rates or lose freight;
we may be forced to accept more loads from freight brokers, where freight rates are typically lower, or
may be forced to incur more non-revenue miles to obtain loads; and
lack of access to current sources of credit or lack of lender access to capital, leading to an inability to
secure financing on satisfactory terms, or at all.
We are also subject to cost increases outside our control that could materially reduce our profitability if we are unable
to increase our rates sufficiently. Such cost increases include, but are not limited to, increases in fuel prices, driver
and office employee wages, purchased transportation costs, interest rates, taxes, tolls, license and registration fees,
insurance, revenue equipment and related maintenance, tires and other components and healthcare and other benefits
for our employees. Further, we may not be able to appropriately adjust our costs to changing market demands. In order
to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands.
In periods of rapid change, it is more difficult to match our staffing level to our business needs.
In addition, events outside our control, such as deterioration of U.S. transportation infrastructure and reduced
investment in such infrastructure, strikes or other work stoppages at our facilities or at customer, port, border or other
shipping locations, trade tariffs, actual or threatened outbreaks of disease or other public health risks, armed conflicts
or terrorist attacks, efforts to combat terrorism, military action against a foreign state or group located in a foreign
state or heightened security requirements could lead to wear, tear and damage to our equipment, driver dissatisfaction,
reduced economic demand and freight volumes, reduced availability of credit, increased prices for fuel or temporary
closing of the shipping locations or U.S. borders. Such events or enhanced security measures in connection with such
events could impair our operating efficiency and productivity and result in higher operating costs.
Changing impacts of regulatory measures could impair our operating efficiency and productivity, decrease our
revenues and profitability and result in higher operating costs. In addition, declines in the resale value of revenue
equipment can affect our profitability and cash flows. From time to time, various U.S. federal, state or local taxes are
also increased, including taxes on fuel. We cannot predict whether, or in what form, any such tax increase applicable
to us will be enacted, but such an increase could materially adversely affect our profitability.
Increases in driver compensation or difficulties attracting and retaining qualified drivers could materially adversely
affect our profitability and ability to maintain or grow our fleet.
Like many truckload carriers, we experience substantial difficulty in attracting and retaining sufficient numbers of
qualified drivers, which includes the engagement of independent contractors. Our industry is subject to a shortage of
qualified drivers. Such shortage is exacerbated during periods of economic expansion, in which alternative
employment opportunities, including in the construction and manufacturing industries, which may offer better
compensation and/or more time at home, are more plentiful and freight demand increases, or during periods of
economic downturns, in which unemployment benefits might be extended and financing is limited for independent
contractors who seek to purchase equipment, or the scarcity or growth of loans for students who seek financial aid for
driving school. Regulatory requirements, including those related to safety ratings, ELDs and hours-of-service changes
and an improved economy could further reduce the pool of eligible drivers or force us to increase driver compensation
to attract and retain drivers. We have seen evidence that stricter hours-of-service regulations adopted by the DOT in
the past have tightened, and, to the extent new regulations are enacted, may continue to tighten, the market for eligible
drivers. The lack of adequate tractor parking along some U.S. highways and congestion caused by inadequate highway
funding may make it more difficult for drivers to comply with hours-of-service regulations and cause added stress for
drivers, further reducing the pool of eligible drivers. We believe that the required implementation of ELDs has and
may further tighten such market. A shortage of qualified drivers and intense competition for drivers from other
trucking companies will create difficulties in maintaining or increasing the number of our drivers and may restrain our
ability to engage independent contractors. We have implemented driver pay increases to address this shortage and we
are implementing initiatives aimed at reducing the daily friction faced by our drivers in hopes of reducing turnover.
However, the compensation we offer our drivers and independent contractor expenses are subject to market conditions
and our initiatives to reduce driver turnover may prove unsuccessful, therefore we may find it necessary to further
increase driver compensation, change the structure of our driver compensation and/or become subject to increased
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independent contractor expenses in future periods, which could materially adversely affect our growth and
profitability.
In addition, we suffer from a high turnover rate of drivers and our turnover rate is higher than the industry average
and compared to our peers. This high turnover rate requires us to spend significant resources recruiting a substantial
number of drivers in order to operate existing revenue equipment and subjects us to a higher degree of risk with respect
to driver shortages than our competitors. Our use of team-driven tractors in our expedited service offering requires
two drivers per tractor, which further increases the number of drivers we must recruit and retain in comparison to
operations that require one driver per tractor. Our driver hiring standards, including hair follicle drug testing, could
further reduce the pool of available drivers from which we would hire. If we are unable to continue to attract and retain
a sufficient number of drivers, we could be forced to, among other things, continue to adjust our compensation
packages or operate with fewer tractors and face difficulty meeting shipper demands, either of which could materially
adversely affect our growth and profitability.
Our engagement of independent contractors to provide a portion of our capacity exposes us to different risks than
we face with our tractors driven by company drivers.
Our contracts with independent contractors are governed by the federal leasing regulations, which impose specific
requirements on us and the independent contractors. If more stringent federal leasing regulations are adopted,
independent contractors could be deterred from becoming independent contractor drivers, which could materially
adversely affect our goal of maintaining our current fleet levels of independent contractors.
Pursuant to our fuel surcharge program with independent contractors, we pay independent contractors we contract
with a fuel surcharge that increases with the increase in fuel prices. A significant increase or rapid fluctuation in fuel
prices could cause our costs under this program to be higher than the revenue we receive under our customer fuel
surcharge programs.
We provide financing to certain qualified independent contractors. If we are unable to provide such financing in the
future, due to liquidity constraints or other restrictions, we may experience a decrease in the number of independent
contractors we are able to engage. Further, if independent contractors we engage default under or otherwise terminate
the financing arrangement and we are unable to find a replacement independent contractor or seat the tractor with a
company driver, we may incur losses on amounts owed to us with respect to the tractor.
Independent contractors are third-party service providers, as compared with company drivers, who are employed by
us. As independent business owners, they may make business or personal decisions that may conflict with our best
interests. For example, if a load is unprofitable, route distance is too far from home, personal scheduling conflicts
arise, or for other reasons, independent contractors may deny loads of freight from time to time. In these
circumstances, we must be able to deliver the freight timely in order to maintain relationships with customers, and if
we fail to meet certain customer needs or incur increased expenses to do so, this could materially adversely affect our
business, financial condition, and results of operations. Furthermore, the autonomy of our independent contractors
may frustrate any attempts to further utilize the capacity provided by independent contractors.
If the independent contractors we contract with are deemed by regulators or judicial process to be employees, our
business, financial condition and results of operations could be materially adversely affected.
Tax and other regulatory authorities, as well as independent contractors themselves, have increasingly asserted that
independent contractor drivers in the trucking industry are employees rather than independent contractors, and our
classification of independent contractors has been the subject of audits by such authorities from time to time. Federal
legislation has been introduced in the past that would make it easier for tax and other authorities to reclassify
independent contractors as employees, including legislation to increase the recordkeeping requirements for those that
engage independent contractor drivers and to increase the penalties for companies who misclassify their employees
and are found to have violated employees’ overtime and/or wage requirements. Additionally, federal legislators have
sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent
contractors if they are following a long-standing, recognized practice, to extend the Fair Labor Standards Act to
independent contractors and to impose notice requirements based on employment or independent contractor status and
fines for failure to comply. Some states have put initiatives in place to increase their revenue from items such as
unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as
employees would help states with this initiative. Recently, courts in certain states have issued decisions that could
result in a greater likelihood that independent contractors would be judicially classified as employees in such states.
In September 2019, California enacted a law that made it more difficult for workers to be classified as independent
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contractors (as opposed to employees). For further discussion of this new California law, please see "Regulation"
under “Business.” Further, class actions and other lawsuits have been filed against certain members of our industry
seeking to reclassify independent contractors as employees for a variety of purposes, including workers’ compensation
and health care coverage. In addition, companies that use lease-purchase independent contractor programs, such as
us, have been more susceptible to reclassification lawsuits, and several recent decisions have been made in favor of
those seeking to classify independent contractor truck drivers as employees. Taxing and other regulatory authorities
and courts apply a variety of standards in their determination of independent contractor status. If the independent
contractors with whom we contract are determined to be employees, we would incur additional exposure under federal
and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior
periods, as well as potential liability for employee benefits and tax withholdings, and our business, financial condition
and results of operations could be materially adversely affected.
We have a history of net losses.
We have generated a profit in two of the last five years. Improving profitability depends upon numerous factors,
including our ability to successfully execute both our ongoing and planned strategic initiatives, such as increasing our
fleet efficiency and utilization, decreasing driver turnover and further refinement of our business mix profile. We may
not be able to improve profitability in the future. If we are unable to improve our profitability, our liquidity, business,
financial condition and results of operations may be materially adversely affected.
We may not be successful in achieving our business strategies.
Many of our business strategies require time, significant management and financial resources and successful
implementation. Consequently, we may be unable to effectively and successfully implement our business strategies.
We also cannot ensure that our operating results, including our operating margins, will not be materially adversely
affected by future changes in and expansion of our business, including the expected expansion of our dedicated
contract service and brokerage service offerings and our increased focus on the implementation of technology to
improve our execution and reduce friction, or by changes in economic conditions. Further, many of our strategic
initiatives are focused on the development and deployment of technology. These new technology-driven initiatives
have a high degree of risk, as they involve unproven business strategies and technologies with which we have limited
or no prior experience. Because such offerings and technologies are new, they may involve unforeseen expenses and
regulatory and other risks. There can be no assurance that these initiatives will generate sufficient revenue to offset
any new expenses or liabilities associated with these new investments. It is also possible that technology developed
or deployed by others will render our technology noncompetitive or obsolete. Further, our development and
deployment efforts with respect to new technologies could distract management from current operations, and will
divert capital and other resources from our historical operations. Despite the implementation of our operational and
tactical strategies and initiatives, we may be unsuccessful in achieving a reduction in our operating ratio in the time
frames we expect or at all. Further, our results of operations may be materially adversely affected by a failure to further
penetrate our existing customer base, cross-sell our services, secure new customer opportunities and manage the
operations and expenses of new or growing services. There is no assurance that we will be successful in achieving any
of our business strategies. Even if we are successful in executing our business strategies, we still may not achieve our
goals.
We operate in a highly competitive and fragmented industry, and numerous competitive factors could impair our
ability to improve our profitability and materially adversely affect our results of operations.
Numerous competitive factors could impair our ability to improve our profitability and materially adversely affect our
results of operations, including:
we compete with many other truckload carriers of varying sizes and service offerings (including
intermodal) and, to a lesser extent, with (i) less-than-truckload carriers, (ii) railroads and (iii) other
transportation and brokerage companies, several of which have access to more equipment and greater
capital resources than we do;
many of our competitors periodically reduce their freight rates to gain business, especially during times
of reduced growth in the economy, which may limit our ability to maintain or increase freight rates or
to maintain or expand our business or may require us to reduce our freight rates in order to maintain
business and keep our equipment productive;
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we may increase the size of our fleet during periods of high freight demand during which our competitors
also increase their capacity, and we may experience losses in greater amounts than such competitors
during subsequent cycles of softened freight demand if we are required to dispose of assets at a loss to
match reduced freight demand;
we may have difficulty recruiting and retaining drivers because our competitors offer better
compensation or working conditions;
some of our larger customers are other transportation companies and/or also operate their own private
trucking fleets, and they may decide to transport more of their own freight;
some shippers have reduced or may reduce the number of carriers they use by selecting preferred carriers
as approved service providers or by engaging dedicated providers, and we may not be selected;
many customers periodically solicit bids from multiple carriers for their shipping needs and this process
may depress freight rates or result in a loss of business to competitors;
consolidation in the trucking industry may create other large carriers with greater financial resources
and other competitive advantages, and we may have difficulty competing with them;
advances in technology may require us to increase investments in order to remain competitive, and our
customers may not be willing to accept higher freight rates to cover the cost of these investments;
our competitors may have better safety records than us or a perception of better safety records;
higher fuel prices and, in turn, higher fuel surcharges to our customers may cause some of our customers
to consider freight transportation alternatives, including rail transportation;
the U.S. Xpress brand name is a valuable asset that is subject to the risk of adverse publicity (whether
or not justified), which could result in the loss of value attributable to our brand and reduced demand
for our services;
competition from freight brokerage companies may materially adversely affect our customer
relationships and freight rates;
new digital entrants with cheaper sources of capital could inhibit our ability to compete,
our competitors may have better technology that may lead to increased operating efficiencies, reduced
costs, a better ability to recruit drivers and more demand for their services, and
economies of scale that procurement aggregation providers may pass on to smaller carriers may improve
such carriers’ ability to compete with us.
We retain high deductibles on a significant portion of our claims exposure, which could significantly increase the
volatility of, and decrease the amount of, our earnings and materially adversely affect our results of operations.
We retain high deductibles on a significant portion of our claims exposure and related expenses associated with
third-party bodily injury and property damage, employee medical expenses, workers’ compensation, physical damage
to our equipment and cargo loss. We currently retain a deductible of approximately $3.0 million per occurrence for
automobile bodily injury and property damage through our captive risk retention group and up to $500,000 per
occurrence for workers’ compensation claims, both of which can make our insurance and claims expense higher or
more volatile than if we maintained lower retentions. Effective September 1, 2018, we have a $3.0 million retention
and an aggregate limit of $14.0 million in our $3.0 to $10.0 million layer of excess insurance coverage for automobile
bodily injury and property damage. Additionally, with respect to our third-party insurance, reduced capacity in the
insurance market for trucking risks can make it more difficult to obtain both primary and excess insurance, can
necessitate procuring insurance offshore, and could result in increases in collateral requirements on those primary
lines that require securitization.
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We have liability coverage limits of $300.0 million per occurrence. If any claim were to exceed coverage limits, we
would bear the excess in addition to our other retained amounts. Our insurance and claims expense could increase, or
we could find it necessary to raise our retained amounts or decrease our coverage limits when our policies are renewed
or replaced. Our initiatives aimed at reducing insurance premiums and claims expense, such as installation of forward-
facing event recorders, hair follicle drug testing, and additional driver training, could prove unsuccessful. In addition,
although we endeavor to limit our exposure arising with respect to such claims, we also may have exposure if carriers
hired by our Brokerage segment are inadequately insured for any accident. Our results of operations and financial
condition may be materially adversely affected if (i) these expenses increase, (ii) we are unable to find excess coverage
in amounts we deem sufficient, (iii) we experience a claim in excess of our coverage limits, (iv) we experience a claim
for which we do not have coverage or for which our insurance carriers fail to pay or (v) we experience increased
accidents. We have in the past, and may in the future, incur significant expenses for deductibles and retentions due to
our accident experience.
If we are required to accrue or pay additional amounts because claims prove to be more severe than our recorded
liabilities, our financial condition and results of operations may be materially adversely affected.
We accrue the costs of the uninsured portion of pending claims based on estimates derived from our evaluation of the
nature and severity of individual claims and an estimate of future claims development based upon historical claims
development trends. Actual settlement of our retained claim liabilities could differ from our estimates due to a number
of uncertainties, including evaluation of severity, legal costs and claims that have been incurred but not reported. Due
to our high retained amounts, we have significant exposure to fluctuations in the number and severity of claims. If we
are required to accrue or pay additional amounts because our estimates are revised or the claims ultimately prove to
be more severe than originally assessed, our financial condition and results of operations may be materially adversely
affected.
Insuring risk through our captive insurance companies could materially adversely affect our operations.
We utilize two captive insurers to transfer or fund risks. Mountain Lake Risk Retention Group, Inc. (“Mountain Lake
RRG”) is a state-regulated, captive risk retention group owned by two of our operating subsidiaries, U.S. Xpress, Inc.
and Total Transportation of Mississippi LLC (“Total”). Mountain Lake RRG writes the primary auto insurance
liability policies for U.S. Xpress, Inc. and Total; a portion of this risk is transferred to Mountain Lake RRG and the
remaining risk is retained as a deductible by the insured subsidiaries. Through our second captive insurer, Xpress
Assurance, we participate as a reinsurer in certain third party risks related to various types of insurance policies sold
to drivers who carry passengers in tractors and independent contractors engaged by U.S. Xpress, Inc. and Total. The
use of the captives necessarily involves retaining certain risks that might otherwise be covered by traditional insurance
products, and increases in the number or severity of claims that Mountain Lake RRG and Xpress Assurance insure
have in the past, and could in the future, materially adversely affect our earnings, business, financial condition and
results of operations.
Increases in collateral requirements that support our insurance program and could materially adversely affect our
operations.
To comply with certain state insurance regulatory requirements, cash and/or cash equivalents must be paid to certain
of our third-party insurers, to state regulators and to our captive insurance companies and restricted as collateral to
ensure payment for anticipated losses. Significant future increases in the amount of collateral required by third-party
insurance carriers and regulators would reduce our liquidity and could materially adversely affect our business,
financial condition, results of operations and capital resources.
Our captive insurance companies are subject to substantial government regulation.
Our captive insurance companies are regulated by state authorities. State regulations generally provide protection to
policy holders, rather than stockholders, and generally involve:
approval of premium rates for insurance;
standards of solvency;
minimum amounts of statutory capital surplus that must be maintained;
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limitations on types and amounts of investments;
regulation of dividend payments and other transactions between affiliates;
regulation of reinsurance;
regulation of underwriting and marketing practices;
approval of policy forms;
methods of accounting; and
filing of annual and other reports with respect to financial condition and other matters.
These regulations may increase our costs, limit our ability to change premiums, restrict our ability to access cash held
by these subsidiaries and otherwise impede our ability to take actions we deem advisable.
Increased prices for new revenue equipment, design changes of new engines, future use of autonomous tractors,
volatility in the used equipment market, decreased availability of new revenue equipment and the failure of
manufacturers to meet their obligations to us could materially adversely affect our business, financial condition,
results of operations and profitability.
We are subject to risk with respect to higher prices for new tractors. We have experienced an increase in prices for
new tractors over the past few years, and the resale value of the tractors has not increased to the same extent. Prices
have increased and may continue to increase, due, in part, to (i) government regulations applicable to newly
manufactured tractors and diesel engines , (ii) increases in commodity prices and (iii) and due to the pricing discretion
of equipment manufacturers in periods of high demand. More restrictive EPA and state emissions standards have
required vendors to introduce new engines. Compliance with such regulations has increased the cost of our new
tractors and could impair equipment productivity, result in lower fuel mileage and increase our operating expenses.
These adverse effects, combined with the uncertainty as to the reliability of the vehicles equipped with the newly
designed diesel engines and the residual values realized from the disposition of these vehicles, could increase our costs
or otherwise materially adversely affect our business, financial condition and results of operations as the regulations
become effective. Furthermore, future use of autonomous tractors could increase the price of new tractors and decrease
the value of used non-autonomous tractors.
A depressed market for used equipment could require us to trade our revenue equipment at depressed values or to
record losses on disposal or impairments of the carrying values of our revenue equipment that is not protected by
residual value arrangements. Used equipment prices are subject to substantial fluctuations based on freight demand,
supply of used tractors, availability of financing, the presence of buyers for export to foreign countries and commodity
prices for scrap metal. If there is a deterioration of resale prices, it could have a material adverse effect on our business,
financial condition and results of operations. Trades at depressed values, decreases in proceeds under equipment
disposals and impairments of the carrying values of our revenue equipment could materially adversely affect our
business, financial condition and results of operations.
Tractor and trailer vendors may reduce their manufacturing output in response to lower demand for their products in
economic downturns or shortages of component parts. A decrease in vendor output may materially adversely affect
our ability to purchase a quantity of new revenue equipment that is sufficient to sustain our desired growth rate and to
maintain a late-model fleet. Moreover, an inability to obtain an adequate supply of new tractors or trailers could have
a material adverse effect on our business, financial condition and results of operations.
Certain of our revenue equipment financing arrangements have balloon payments at the end of the finance terms equal
to the values we expect to be able to obtain in the used market. To the extent the used market values are lower than
such balloon payments, we may be forced to sell the equipment at a loss and our results of operations would be
materially adversely affected.
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Our profitability may be materially adversely impacted if our capital investments do not match customer demand
for invested resources or if there is a decline in the availability of funding sources for these investments.
The truckload industry generally, and our truckload offering in particular, is capital intensive and asset heavy, and our
policy of maintaining a young, technology-equipped fleet requires us to expend significant amounts in capital
expenditures annually. The amount and timing of such capital expenditures depend on various factors, including
anticipated freight demand and the price and availability of assets. If anticipated demand differs materially from actual
usage, our capital-intensive Truckload segment may have too many or too few assets. Moreover, resource
requirements vary based on customer demand, which may be subject to seasonal or general economic conditions.
During periods of decreased customer demand, our asset utilization may suffer, and we may be forced to sell
equipment on the open market or turn in equipment under certain equipment leases in order to right size our fleet. This
could cause us to incur losses on such sales or require payments in connection with equipment we turn in, particularly
during times of a softer used equipment market, either of which could have a material adverse effect on our
profitability. Our ability to select profitable freight and adapt to changes in customer transportation requirements is
important to efficiently deploy resources and make capital investments in tractors and trailers (with respect to our
Truckload segment) or obtain qualified third-party carriers at a reasonable price (with respect to our Brokerage
segment).
We expect to pay for projected capital expenditures with cash flows from operations, proceeds from equity sales or
financing available under our existing debt instruments. Although our business volume is not highly concentrated, our
customers’ financial failures or loss of customer business may materially adversely affect us. If we were unable to
generate sufficient cash from operations, we would need to seek alternative sources of capital, including financing, to
meet our capital requirements. In the event that we are unable to generate sufficient cash from operations or obtain
financing on favorable terms in the future, we may have to limit our fleet size, enter into less favorable financing
arrangements or operate our revenue equipment for longer periods, any of which could have a materially adverse
effect on our profitability.
Upgrading our tractors to reduce the average age of our fleet may not increase our profitability or result in cost
savings as expected or at all.
Upgrades of our tractor fleet may not result in an increase in profitability or cost savings. Expected improvements in
operating ratio may lag behind new tractor deliveries, primarily because in executing a tractor fleet upgrade, we may
experience costs associated with preparing our old tractors for trade, and our new tractors for integration into our fleet,
and lost driving time while swapping revenue equipment. Further, tractor prices have increased and may continue to
increase, due in part to government regulations applicable to newly manufactured tractors and diesel engines.
In addition, we cannot be certain that an agreement will be reached on price, equipment trade-ins or other terms that
we deem favorable. If we do enter an agreement for the purchase of new tractors, we could be exposed to the risk that
the new tractor deliveries will be delayed. Accordingly, we are subject to an increased risk that upgrades of our tractor
fleet will not result in the operational results, cost savings and increases in profitability that we expect.
Difficulty in obtaining materials, equipment, goods and services from our vendors and suppliers could adversely
affect our business.
We are dependent upon our suppliers for certain products and materials, including our tractors, trailers and chassis.
We manage our OTR fleet to an approximate 475,000 mile trade cycle with an average tractor age of approximately
1.7 years as of December 31, 2019. Accordingly, we rely on suppliers of our tractors, trailers and components to
maintain the age of our fleet. If we fail to maintain favorable relationships with our vendors and suppliers, or if our
vendors and suppliers are unable to provide the products and materials we need or undergo financial hardship, we
could experience difficulty in obtaining needed goods and services because of production interruptions, limited
material availability or other reasons, or we may not be able to obtain favorable pricing or other terms. As a result,
our business and operations could be adversely affected.
We are dependent on systems, networks and other information technology assets (and the data contained therein)
and a failure in the foregoing, including those caused by cybersecurity breaches, could cause a significant
disruption to our business and we may incur increasing costs in efforts to minimize those risks and comply with
regulatory standards.
Our business depends on the efficient and uninterrupted operation of our systems, networks and other information
technology assets (and the data contained therein). This includes information and electronic data interchange systems
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that we have developed, both by creating these systems in-house or by adapting purchased or off-the-shelf applications
to suit our needs. Our information and electronic data interchange systems are used for receiving and planning loads,
dispatching drivers and other capacity providers, billing customers and load tracking and storing the data related to
the foregoing activities. We also maintain information security policies to protect our systems, networks and other
information technology assets (and the data contained therein) from cybersecurity breaches and threats, such as
hackers, malware and viruses; however, such policies cannot ensure the protection of our systems, networks and other
information technology assets (and the data contained therein). We currently maintain our hardware systems and
infrastructure at our Chattanooga, Tennessee headquarters, along with an off-site secondary data center and computer
equipment at each of our truckload service centers. If we are unable to prevent system violations or other unauthorized
access to our systems, networks and other information technology assets (and the data contained therein), we could
be subject to significant fines and lawsuits and our reputation could be damaged, or our business operations could be
interrupted, any of which could have a material adverse effect on our financial performance and business operations.
Furthermore, recently enacted data privacy laws, such as the California Consumer Privacy Act that became effective
on January 1, 2020 and provides new data privacy rights for consumers and operational requirements for companies,
may result in increased liability and amplified compliance and monitoring costs, any of which could have a material
adverse effect on our financial performance and business operations.
Our operations, and those of our technology and communications service providers are vulnerable to interruption by
fire, natural disasters, power loss, telecommunications failure, network disruptions, cyber-attacks, terrorist attacks,
Internet failures, malicious intrusions, computer viruses and other events that may be beyond our control. Although
we attempt to reduce the risk of disruption to our business operations through redundant computer systems and
networks, backup systems and a disaster recovery off-site alternate location, there can be no assurance that such
measures will be effective. Furthermore, many of our strategic initiatives would require further integration of
technology into our operations, which could exacerbate the effects of any such interruption. If any of our critical
information technology assets fail or become otherwise unavailable, whether as a result of a cybersecurity breach,
upgrade project or otherwise, we would have to perform certain functions manually, which could temporarily impact
our ability to manage our fleet efficiently, respond to customers’ requests effectively, maintain billing and other
records reliably, and bill for services and prepare financial statements accurately or in a timely manner. Although we
maintain business interruption insurance, it may be inadequate to protect us in the event of an unforeseeable and
extreme catastrophe. Any significant system failure, upgrade complication, security breach or other system disruption
could interrupt or delay our operations, damage our reputation, cause us to lose customers or impact our ability to
manage our operations and report our financial performance, any of which could have a material adverse effect on our
business, financial condition and results of operations. In addition, we are currently dependent on a single vendor
platform to support certain information technology functions. If the stability or capability of such vendor is
compromised and we were forced to migrate to a new platform, it could materially adversely affect our business,
financial condition and results of operations.
Our existing and future indebtedness could limit our flexibility in operating our business or adversely affect our
business and our liquidity position.
We have significant amounts of indebtedness outstanding, including obligations under a new credit facility we entered
into in January 2020 that is structured as a $250.0 million revolving credit facility (the “Credit Facility”), equipment
installment notes, finance leases and secured notes. As of December 31, 2019, we had indebtedness of $396.0 million.
While our goal is to reduce our leverage, our indebtedness may increase from time to time in the future for various
reasons, including fluctuations in results of operations, capital expenditures and potential acquisitions. Any
indebtedness we incur and restrictive covenants contained in financing agreements governing such indebtedness
could:
make it difficult for us to satisfy our obligations, including making interest payments on our debt
obligations;
limit our ability to obtain additional financing to operate our business;
require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing our ability
to use our cash flow to fund capital expenditures and working capital and other general operational
requirements;
expose us to the risk of increased interest rates relating to any of our indebtedness at variable rates;
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limit our flexibility to plan for and react to changes in our business and/or changing market conditions;
place us at a competitive disadvantage relative to some of our competitors that have less, or less
restrictive, debt than us;
limit our ability to pursue acquisitions or cause us to make non-strategic divestitures; and
increase our vulnerability to general adverse economic and industry conditions, including changes in
interest rates or a downturn in our business or the economy.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition
and results of operations or cause a significant decrease in our liquidity and impair our ability to pay amounts due on
our indebtedness. Significant repayment penalties may limit our flexibility. In addition, our Credit Facility contains
usual and customary restrictive covenants for a facility of this nature including, among other things, restrictions on
our ability to incur certain additional indebtedness or issue guarantees, to create liens on our assets, to make
distributions on or redeem equity interests, to make investments and to engage in mergers, consolidations, or
acquisitions, and, if our excess availability is less than a specified amount, requires us to maintain a fixed charge
coverage ratio of at least 1:00:1:00.
We may be adversely affected by changes in the method of determining the London Interbank Offered Rate
(“LIBOR”) or the replacement of LIBOR with an alternative reference rate.
In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks
to submit LIBOR rates after 2021, which is expected to result in these widely used reference rates no longer being
available. Borrowings under the Credit Facility are classified as either "base rate loans" or "LIBOR loans." Borrowings
under the Credit Facility are classified as either “base rate loans” or “eurodollar rate loans”. Base rate loans accrue
interest at a base rate equal to the highest of (A) the Federal Funds Rate plus 0.50%, (B) the Agent’s prime rate, and
(C) LIBOR plus 1.00% plus an applicable margin that is set at 0.50% through June 30, 2020 and adjusted quarterly
thereafter between 0.25% and 0.75% based on the ratio of the daily average availability under the Credit Facility to
the daily average of the lesser of the borrowing base or the revolving credit facility. Eurodollar rate loans accrue
interest at LIBOR plus an applicable margin that is set at 1.50% through June 30, 2020 and adjusted quarterly thereafter
between 1.25% and 1.75% based on the ratio of the daily average availability under the Credit Facility to the daily
average of the lesser of the borrowing base or the revolving credit facility. Potential changes to LIBOR, as well as
uncertainty related to such potential changes and the establishment of any alternative reference rate, may adversely
affect our cost of capital. At this time, we cannot predict the overall effect of the modification or discontinuation of
LIBOR or the establishment of any alternative benchmark rate.
In the future, we may need to obtain additional financing that may not be available or, if it is available, may result
in a reduction in the percentage ownership of our then-existing stockholders.
We may need to raise additional funds in order to:
finance unanticipated working capital requirements, capital investments or refinance existing
indebtedness;
develop or enhance our technological infrastructure and our existing products and services;
fund strategic relationships;
respond to competitive pressures; and
acquire complementary businesses, technologies, products or services.
If the economy and/or the credit markets weaken, or we are unable to enter into capital or operating leases to acquire
revenue equipment on terms favorable to us, our business, financial results and results of operations could be
materially adversely affected, especially if consumer confidence declines and domestic spending decreases. If
adequate funds are not available or are not available on acceptable terms, our ability to fund our strategic initiatives,
take advantage of unanticipated opportunities, develop or enhance technology or services or otherwise respond to
competitive pressures could be significantly limited. If we raise additional funds by issuing equity or convertible debt
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securities, the percentage ownership of our then-existing stockholders may be reduced, and holders of these securities
may have rights, preferences or privileges senior to those of our then-existing stockholders.
We are exposed to the credit, reputational and relationship risks of certain of our current and former equity
investments.
Certain of our current and former equity investments, including Parker Global Enterprises, Inc. (“Parker”), XPS
Logisti-K Systems, S.A.P.I. de C.V. (“Logisti-K”), Dylka Distribuciones Logisti-K S.A. de C.V. (“Dylka”) and Xpress
Internacional, have amounts owing to us. Furthermore, we may have overlapping customers and vendors with Parker,
Logisti-K, Dylka and Xpress Internacional. Any financial hardships of Parker, Logisti-K, Dylka, or Xpress
Internacional could lead to delay or nonpayment of amounts owed to us, strain our relationships with overlapping
customers and vendors, and damage our reputation. The occurrence of any of the foregoing events could have a
material adverse effect on our business, financial condition and results of operations. Such risks may be heightened
during a weak freight environment.
Fluctuations in the price or availability of fuel or surcharge collection may increase our costs of operation, which
could materially adversely affect our profitability.
Fuel is one of our largest operating expenses. Diesel fuel prices fluctuate greatly due to factors beyond our control,
such as political events, terrorist activities, armed conflicts, commodity futures trading, depreciation of the dollar
against other currencies, weather events and other natural or man-made disasters, each of which may lead to an
increase in the cost of fuel. Fuel prices also are affected by the rising demand for fuel in developing countries, including
China, and could be materially adversely affected by the use of crude oil and oil reserves for purposes other than fuel
production and by diminished drilling activity. Such events may lead not only to increases in fuel prices, but also to
fuel shortages and disruptions in the fuel supply chain. Because our operations are dependent upon diesel fuel,
significant diesel fuel cost increases, shortages, rationings, or supply disruptions would materially adversely affect our
business, financial condition and results of operations.
Fuel also is subject to regional pricing differences and is often more expensive on the West Coast of the United States,
where we have operations. Increases in fuel costs, to the extent not offset by rate per mile increases or fuel surcharges,
have a material adverse effect on our operations and profitability. While we have fuel surcharge programs in place
with a majority of our customers, which historically have helped us offset the majority of the negative impact of rising
fuel prices associated with loaded or billed miles, we also incur fuel costs that cannot be recovered even with respect
to customers with which we maintain fuel surcharge programs, such as those associated with non-revenue generating
miles, the time when our engines are idling and fuel for refrigeration units on our refrigerated trailers. Moreover, the
terms of each customer’s fuel surcharge program vary, and certain customers have sought to modify the terms of their
fuel surcharge programs to minimize recoverability for fuel price increases. In addition, because our fuel surcharge
recovery lags behind changes in fuel prices, our fuel surcharge recovery may not capture the increased costs we pay
for fuel, especially when prices are rising. This could lead to fluctuations in our levels of reimbursement, which have
occurred in the past. During periods of low freight volumes, shippers can use their negotiating leverage to impose fuel
surcharge policies that provide a lower reimbursement of our fuel costs. There is no assurance that our fuel surcharge
program can be maintained indefinitely or will be sufficiently effective. Our results of operations would be negatively
affected to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel
surcharge program.
As of December 31, 2019, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.
We operate in a highly regulated industry, and increased direct and indirect costs of compliance with, or liability
for violations of, existing or future regulations could have a material adverse effect on our business.
We have authority to operate in the United States, as granted by the DOT, Mexico (as granted by the Secretaría de
Comunicaciones y Transportes), and various Canadian provinces (as granted by the Ministries of Transportation and
Communication in such provinces). In the United States, we are also regulated by the EPA, the DHS and other agencies
in states in which we operate. Our company drivers, independent contractors and third-party carriers also must comply
with the applicable safety and fitness regulations of the DOT, including those relating to drug and alcohol testing,
driver safety performance and hours-of-service. Matters such as weight, equipment dimensions, exhaust emissions,
fuel efficiency and hazardous material transportation, storage and disposal are also subject to government regulations.
We also may become subject to new or more restrictive regulations relating to fuel efficiency, exhaust emissions,
hours-of-service, drug and alcohol testing, ergonomics, on-board reporting of operations, collective bargaining,
security at ports, speed limiters, driver training and other matters affecting safety or operating methods. Future laws
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and regulations may be more stringent, require changes in our operating practices, influence the demand for
transportation services or require us to incur significant additional costs. Higher costs incurred by us, or by our
suppliers who pass the costs onto us through higher supplies and materials pricing, or liabilities we may incur related
to our failure to comply with existing or future regulations could adversely affect our results of operations. In addition,
the Trump administration has indicated a desire to reduce regulatory burdens that constrain growth and productivity
and also to introduce legislation such as infrastructure spending that could improve our growth and productivity, to
the extent implemented.
In January 2016, the FMCSA proposed changes to the DOT’s safety rating system, which would determine unfit
carriers on a monthly basis using roadside inspection data in addition to investigations and onsite reviews. This change
was expected to significantly increase the number of carriers deemed unfit and potentially unable to continue to
operate. In March 2017, in response to significant objection by the industry, the FMCSA withdrew the proposed
changes but noted that new rulemaking related to a similar process may be initiated in the future. Therefore, it is
uncertain if, when or under what form any such new rule could be implemented. New rulemaking related to the DOT’s
safety rating system or changes to the CSA program that impacts our safety rating or CSA scores could materially
adversely affect our results of operations. The FMCSA also recently announced plans to conduct a new study on the
causation of certain crashes. Although it remains unclear whether such a study will ultimately be undertaken and
completed, the results of such a study could spur further proposed and/or final rules regarding safety and fitness in the
U.S.
In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing
results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers
of FMCSA drug and alcohol testing requirements. Motor carriers will be required to query the clearinghouse to ensure
drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them
from operating commercial motor vehicles. The final rule became effective on January 4, 2017, with a compliance
date of January 6, 2020. In December 2019, however, the FMCSA announced a final rule extending by three years the
date for state driver’s licensing agencies to comply with certain Drug and Alcohol Clearinghouse requirements. The
December 2016 commercial driver’s license rule required states to request information from the Clearinghouse about
individuals prior to issuing, renewing, upgrading or transferring a CDL. This new action will allow states’ compliance
with the requirement, which was set to begin January 2020, to be delayed until January 2023.
In addition, other rules have been recently proposed or made final by the FMCSA, including (i) a rule requiring the
use of speed limiting devices on heavy duty tractors to restrict maximum speeds, which was proposed in 2016 and
(ii) a rule setting forth minimum driver-training standards for new drivers applying for commercial driver’s licenses
for the first time and to experienced drivers upgrading their licenses or seeking a hazardous materials endorsement,
which was made final in December 2016 with a compliance date in February 2020 (FMCSA officials have recently
reported, however, that they are delaying implementation of the final rule by two years). In July 2017, the DOT
announced that it would no longer pursue a speed limiter rule, but left open the possibility that it could resume such a
pursuit in the future. In 2019, U.S. Congressional representatives proposed a similar rule related to speed-limiting
devices. The effect of these rules, to the extent they become effective, could result in a decrease in fleet production
and/or driver availability, either of which could materially adversely affect our business, financial condition and results
of operations.
U.S. Congressional representatives also proposed a bill in 2019 that would pave the way for commercial drivers
younger than 21 to drive tractors across state lines. This new bill, which would lower the age requirement of 21 to 18
for interstate commercial driving if certain requirements are met, received support from the ATA during a February
2020 Senate hearing. It is unclear how long the process of finalizing such a bill will take, however, if one comes to
fruition at all.
In March 2014, the U.S. Ninth Circuit Court of Appeals held that the application of California state wage and hour
laws to interstate truck drivers is not pre-empted by U.S. federal law. The case was appealed to the U.S. Supreme
Court, which denied certiorari in May 2015, and accordingly, the Ninth Circuit Court of Appeals decision stands.
However, in December 2018, the FMCSA granted a petition filed by the American Trucking Associations and in
doing so determined that federal law does pre-empt California’s wage and hour laws, and interstate truck drivers are
not subject to such laws. The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been
filed in U.S. federal courts seeking to overturn the decision, and thus it’s uncertain whether it will stand. Current and
future U.S. state and local wage and hour laws, including laws related to employee meal breaks and rest periods, may
vary significantly from U.S. federal law. Further, driver piece rate compensation, which is an industry standard, has
been attacked as non-compliant with state minimum wage laws. Both of these issues are adversely impacting the
Corporation and the industry as a whole, with respect to the practical application of the laws, thereby resulting in
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additional cost. As a result, we, along with other companies in our industry, are subject to an uneven patchwork of
wage and hour laws throughout the United States. Legislation to preempt state and local wage and hour laws has been
proposed in the past; however, passage of such legislation is uncertain. If federal legislation is not passed, we will
either need to comply with the most restrictive state and local laws across our entire fleet, or revise our management
systems to comply with varying state and local laws. Either solution could result in increased compliance and labor
costs, driver turnover, decreased efficiency, and amplified legal exposure, any of which could adversely affect our
results of operations
The NHTSA, the EPA and certain states, including California, have adopted regulations that are aimed at reducing
tractor emissions and/or increasing fuel economy of the equipment we use. Certain of these regulations are currently
effective, with stricter emission and fuel economy standards becoming effective over the next several years. Other
regulations have been proposed that would similarly increase these standards. The effects of these regulations have
been and may continue to be increases in new tractor and trailer prices, additional parts and maintenance costs,
impaired productivity and uncertainty as to the reliability of the newly designed diesel engines and the residual values
of our equipment. Such effects could materially adversely affect our business, financial condition and results of
operations.
Changes in existing regulations and implementation of new regulations, such as those related to trailer size limits,
emissions and fuel economy, hours-of-service, mandating ELDs and drug and alcohol testing in Canada, the United
States and Mexico, could increase capacity in the industry or improve the position of certain competitors, either of
which could negatively impact pricing and volumes or require additional investments by us. The short and long term
impacts of changes in legislation or regulations are difficult to predict and could materially adversely affect our results
of operations.
Safety-related evaluations and rankings under CSA could materially adversely affect our profitability and
operations, our ability to maintain or grow our fleet and our customer relationships.
Under the CSA program, fleets are evaluated and ranked against their peers based on certain safety-related standards.
Carriers are grouped by category with other carriers that have a similar number of safety events (i.e. crashes,
inspections, or violations) and carriers are ranked and assigned a rating percentile or score to prioritize them for
interventions if they are above a certain threshold. As a result, our fleet could be ranked poorly as compared to peer
carriers, which could have an adverse effect on our business, financial condition and results of operations. We recruit
and retain first-time drivers to be part of our fleet, and these drivers may have a higher likelihood of creating adverse
safety events under CSA. The occurrence of future deficiencies could affect driver recruitment by causing high-quality
drivers to seek employment with other carriers or limit the pool of available drivers or could cause our customers to
direct their business away from us and to carriers with higher fleet safety rankings, either of which would materially
adversely affect our business, financial condition and results of operations. In addition, future deficiencies could
increase our insurance expenses. Additionally, competition for drivers with favorable safety backgrounds may
increase, which could necessitate increases in driver-related compensation costs. Further, we may incur greater than
expected expenses in our attempts to improve unfavorable scores. Since our driver turnover is higher than the industry
average, any events that decrease the pool of available drivers or increase the competition for drivers may have a
disproportionately negative impact on us versus our competitors.
Certain of our subsidiaries are currently exceeding the established intervention thresholds in one or more of the seven
CSA safety-related categories. Based on these unfavorable ratings, we may be prioritized for an intervention action or
roadside inspection, either of which could materially adversely affect our business, financial condition and results of
operations. In addition, customers may be less likely to assign loads to us. While we have put procedures in place in
an attempt to address areas where we are exceeding and have in the past exceeded the thresholds, we cannot assure
you these measures will be effective.
In December 2015, Congress passed the FAST Act, which calls for significant CSA reform. The FAST Act directs
the FMCSA to conduct studies of the scoring system used to generate CSA rankings to determine if it is effective in
identifying high-risk carriers and predicting future crash risk. This study was conducted and delivered to the FMCSA
in June 2017 with several recommendations to make the CSA program more fair, accurate and reliable. In late June
2018, the FMCSA provided a report to Congress outlining the changes it may make to the CSA program in response
to the study. Such changes include the testing and possible adoption of a revised risk modeling theory, potential
collection and dissemination of additional carrier data and revised measures for intervention thresholds. The adoption
of such changes is contingent on the results of the new modeling theory and additional public feedback. Thus, it is
unclear if, when and to what extent such changes to the CSA program will occur. Additionally, with the FAST Act
set to expire in September 2020, the U.S. Congress has noted its intent to consider a multiyear highway measure that
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would update the FAST Act, which could lead to further changes to the CSA program. Any changes that increase the
likelihood of us receiving unfavorable scores could materially adversely affect our results of operations and
profitability.
Receipt of an unfavorable DOT safety rating could have a material adverse effect on our operations and
profitability.
We currently have a satisfactory DOT rating for our U.S. operations, which is the highest available rating under the
current safety rating scale. If we were to receive a conditional or unsatisfactory DOT safety rating, it could materially
adversely affect our business, financial condition and results of operations as customer contracts may require a
satisfactory DOT safety rating, and a conditional or unsatisfactory rating could materially adversely affect or restrict
our operations.
The FMCSA has proposed regulations that would modify the existing rating system and the safety labels assigned to
motor carriers evaluated by the DOT. Under regulations that were proposed in 2016, the methodology for determining
a carrier’s DOT safety rating would be expanded to include the on-road safety performance of the carrier’s drivers
and equipment, as well as results obtained from investigations. Exceeding certain thresholds based on such
performance or results would cause a carrier to receive an unfit safety rating. The proposed regulations were
withdrawn in March 2017, but the FMCSA noted that a similar process may be initiated in the future. If similar
regulations were enacted and we were to receive an unfit or other negative safety rating, our business would be
materially adversely affected in the same manner as if we received a conditional or unsatisfactory safety rating under
the current regulations. In addition, poor safety performance could lead to increased risk of liability, increased
insurance, maintenance and equipment costs and potential loss of customers, which could materially adversely affect
our business, financial condition and results of operations.
We face litigation risks that could have a material adverse effect on the operation of our business.
Our business is subject to the risk of litigation by employees, applicants, independent contractor drivers, customers,
vendors, government agencies, stockholders and other parties through private actions, class actions, administrative
proceedings, regulatory actions and other processes. Recently, we and several other trucking companies have been
subject to lawsuits, including class action lawsuits, alleging violations of various federal and state wage and hour laws
regarding, among other things, minimum wage, meal and rest periods, overtime eligibility and failure to pay for all
hours worked. A number of these lawsuits have resulted in the payment of substantial settlements or damages by other
carriers.
The outcome of litigation, particularly class action lawsuits, such as our pending wage and hour class action lawsuit,
the independent contractor putative class action lawsuit and the putative class action lawsuits arising out of our IPO,
and regulatory actions, is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits
may remain unknown for substantial periods of time. See “Legal Proceeding.” Additionally, the cost to defend
litigation may also be significant. Not all claims are covered by our insurance (including wage and hour claims), and
there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. To the extent we
experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our retention
amounts, or cause increases in future premiums, the resulting expenses could have a material adverse effect on our
business, financial condition and results of operations.
In addition, we may be subject, and have been subject in the past, to litigation resulting from trucking accidents. The
number and severity of litigation claims may be worsened by distracted driving by both truck drivers and other
motorists. These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or
damages and increases of our insurance costs.
We are a defendant in putative class action lawsuits and a stockholder derivative lawsuit arising out of our IPO
and we may be involved in additional litigation in the future. Such lawsuits could result in substantial costs and
divert management's attention.
In 2018, a putative class action lawsuit alleging violations of federal securities laws was filed naming us and certain
of our officers and directors as defendants. Plaintiffs also named as defendants the underwriters in our IPO. Since
then, several other actions making substantially the same allegations have been filed. The plaintiffs in these lawsuits
generally allege that our registration statement and prospectus related to our IPO contained materially false or
misleading statements. Additionally, one of these lawsuits alleges that the Company, its Chief Executive Officer and
its Chief Financial Officer made false and/or misleading statements and/or material omissions in press releases,
26
earnings calls, investor conferences, television interviews, and filings made with the SEC subsequent to our IPO.
Furthermore, a stockholder derivative lawsuit was filed against five of our executives and our independent board
members (the “Individual Defendants”), naming the Company as a nominal defendant. The complaint alleges that the
Company made false and/or misleading statements in the registration statement and prospectus filed with the SEC in
connection with our IPO and that the Individual Defendants breached their fiduciary duties by causing or allowing the
Company to make such statements. The complaint alleges that the Company has been damaged by the alleged
wrongful conduct as a result of, among other things, being subjected to the time and expense of the securities class
action lawsuits that have been filed relating to our IPO. In addition to a claim for alleged breach of fiduciary duties,
the lawsuit alleges claims against the Individual Defendants for unjust enrichment, abuse of control, gross
mismanagement, and waste of corporate assets.
These lawsuits may divert financial and management resources that would otherwise be used to benefit our operations.
Although we deny the material allegations in the lawsuits and intend to defend ourselves vigorously, defending the
lawsuits could result in substantial costs. No assurances can be given that the results of these matters will be favorable
to us. In addition, we may be the target of securities-related litigation in the future, both related and unrelated to the
existing class action lawsuits. Such litigation could divert our management’s attention and resources, result in
substantial damages, costs and expense and have an adverse effect on our business, financial condition and results of
operations.
We are generally obligated to indemnify our current and former directors and officers in connection with lawsuits and
related litigation or settlement amounts. We maintain director and officer insurance to protect us from such lawsuits,
however, we are responsible for meeting certain deductibles under the policies. In addition, we cannot assure you that
such policies will adequately protect us from lawsuits or that costs and expenses related to lawsuits will not exceed
the coverage provided under such policies. Further, as a result of the pending lawsuits, the costs of director and officer
insurance may increase and the availability of coverage may decrease. As a result, we may not be able to maintain our
current levels of director and officer insurance at a reasonable cost, or at all, which might make it more difficult to
attract qualified candidates to serve as executive officers or directors. The effect of these lawsuits involving our
officers and directors and the resolution of these matters may result in significant damages, costs and expenses, which
could have a material adverse impact on our business, financial condition and results of operations.
We evaluate these and other litigation claims and legal proceedings to assess the probability of unfavorable outcomes
and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish
reserves or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates
are based on the information available to management at the time and involve a significant amount of management
judgment. Actual outcomes or losses may differ materially from our current assessments and estimates, and any
adverse resolution of litigation pending or threatened against us could have a material adverse impact on our business,
financial condition and results of operations.
Management and key employee turnover or failure to attract and retain qualified management and other key
personnel, could materially adversely affect our business, financial condition and results of operations.
We depend on the leadership and expertise of our executive management team and other key personnel to design and
execute our strategic and operating plans. While we have employment agreements in place with these executives,
there can be no assurance we will continue to retain their services and we may become subject to significant severance
payments if our relationship with these executives is terminated under certain circumstances. Further, turnover,
planned or otherwise, in these or other key leadership positions may materially adversely affect our ability to manage
our business efficiently and effectively, and such turnover can be disruptive and distracting to management, may lead
to additional departures of existing personnel and could have a material adverse effect on our operations and future
profitability. We must recruit, develop and retain a core group of managers to realize our goal of expanding our
operations, improving our earnings consistency and positioning ourselves for long-term operating revenue growth.
We have several major customers, and the loss of, or significant reduction of business with, one or more of them
could have a material adverse effect on our business, financial condition and results of operations.
A significant portion of our revenue is generated from a small number of major customers, the loss of, or significant
reduction of business with, one or more of which could have a material adverse effect on our business. For the year
ended December 31, 2019, our top 25 customers, based on revenue, accounted for approximately 71.2% of our
revenue; our top ten customers, approximately 55.3% of our revenue; our top five customers, approximately 40.4%
of our revenue; and our largest customer, Walmart Inc., accounted for approximately 12.3% of our revenue, in each
case, calculated excluding fuel surcharge. A substantial portion of our freight is from customers in the retail industry.
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As such, our volumes are largely dependent on consumer spending and retail sales, and our results may be more
susceptible to trends in unemployment and retail sales than carriers that do not have this concentration. In addition,
our major customers engage in bid processes and other activities periodically (including currently) in an attempt to
lower their costs of transportation. We may not choose to participate in these bids or, if we participate, may not be
awarded the freight, either of which circumstances could result in a reduction of our freight volumes with these
customers. In this event, we could be required to replace the volumes elsewhere at uncertain rates and volumes, suffer
reduced equipment utilization or reduce the size of our fleet. Failure to retain our existing customers, or enter into
relationships with new customers, each on acceptable terms, could materially impact our business, financial condition,
results of operations and ability to meet our current and long-term financial forecasts.
Economic conditions and capital markets may materially adversely affect our customers and their ability to remain
solvent. Our customers’ financial difficulties can negatively impact our results of operations and financial condition
and our ability to comply with the covenants under our debt agreements, especially if they were to delay or default on
payments to us. Generally, we do not have contractual relationships that guarantee any minimum volumes with our
customers, and we cannot assure you that our customer relationships will continue as presently in effect. Our dedicated
contract service offering is typically subject to longer term written contracts than our OTR service offering. However,
certain of these contracts contain cancellation clauses, including our “evergreen” contracts, which automatically renew
for one year terms but that can be terminated more easily. There is no assurance any of our customers, including our
dedicated contract customers, will continue to utilize our services, renew our existing contracts, or continue at the
same volume levels. Despite the existence of contractual arrangements with our customers, certain of our customers
may nonetheless engage in competitive bidding processes that could negatively impact our contractual relationship.
In addition, certain of our major customers may increasingly use their own truckload and delivery fleets, which would
reduce our freight volumes. A reduction in or termination of our services by one or more of our major customers,
including our dedicated contract customers, could have a material adverse effect on our business, financial condition
and results of operations.
In addition, the size and market concentration of some of our customers may allow them to exert increased pressure
on the prices, margins and non-monetary terms of our contracts.
We depend on third-party service providers, particularly in our Brokerage segment, and service instability from
these providers could increase our operating costs and reduce our ability to offer brokerage services, which could
materially adversely affect our revenue, business, financial condition, results of operations and customer
relationships.
Our Brokerage segment is dependent upon the services of third-party carriers, including other truckload carriers. For
this business, we do not own or control the transportation assets that deliver our customers’ freight and we do not
employ the providers directly involved in delivering the freight. These third-party providers may seek other freight
opportunities and/or require increased compensation in times of improved freight demand or tight truckload capacity.
If we are unable to secure the services of these third parties or if we become subject to increases in the prices we must
pay to secure such services, our business, financial condition and results of operations may be materially adversely
affected, and we may be unable to serve our customers on competitive terms. Our ability to secure sufficient equipment
or other transportation services may be affected by many risks beyond our control, including equipment shortages in
the transportation industry, particularly among contracted truckload carriers, new entrants with different business
models, interruptions in service due to labor disputes, driver shortage, changes in regulations impacting transportation
and changes in transportation rates.
We may not make acquisitions in the future, which could impede growth, or if we do, we may not be successful in
integrating any acquired businesses, either of which could have a material adverse effect on our business.
Historically, a key component of our growth strategy has been to pursue acquisitions of complementary businesses.
We currently do not expect to make any material acquisitions over the next few years, which could impede growth. If
we do make acquisitions, we cannot assure that we will be successful in negotiating, consummating or integrating the
acquisitions. If we succeed in consummating future acquisitions, our business, financial condition and results of
operations, may be materially adversely affected because:
some of the acquired businesses may not achieve anticipated revenue, earnings or cash flows;
we may assume liabilities that were not disclosed to us or otherwise exceed our estimates;
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we may be unable to integrate acquired businesses successfully, or at all, and realize anticipated
economic, operational and other benefits in a timely manner, which could result in substantial costs and
delays or other operational, technical or financial problems;
acquisitions could disrupt our ongoing business, distract our management and divert our resources;
we may experience difficulties operating in markets in which we have had no or only limited direct
experience;
we may incur transactions costs and acquisition-related integration costs;
we could lose customers, employees and drivers of any acquired company;
we may incur additional indebtedness; and
we may issue additional shares of our Class A common stock, which would dilute the ownership of our
then-existing stockholders.
We are subject to certain risks arising from our Mexican operations.
We have operations in Mexico, representing approximately $2.4 million of our revenue in 2019, excluding fuel
surcharge. Even following our sale of Xpress Internacional, we expect to have business to and from Mexico through
a more variable cost model using third party carriers. As a result, we are subject to risks of doing business
internationally, including fluctuations in foreign currencies, changes in the economic strength of Mexico, difficulties
in enforcing contractual obligations and intellectual property rights, burdens of complying with a wide variety of
international and U.S. export and import laws, economic sanctions and social, political and economic instability. We
must also comply with applicable anti-corruption and anti-bribery laws such as the U.S. Foreign Corrupt Practices Act
and local laws prohibiting corrupt payments to government officials. We cannot guarantee compliance with all
applicable laws, and violations could result in substantial fines, sanctions, civil or criminal penalties, competitive or
reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of
operations and our consolidated performance.
In addition, if we are unable to maintain our Free and Secure Trade (“FAST”), Business Alliance for Secure Commerce
(“BASC”) and U.S. C-TPAT certification statuses, we may have significant border delays, which could cause our
Mexican operations to be less efficient than those of competitor truckload carriers also operating in Mexico that obtain
or continue to maintain FAST, BASC and C-TPAT certifications. We also face additional risks associated with our
foreign operations, including restrictive trade policies and imposition of duties, taxes or government royalties imposed
by the Mexican government, to the extent not preempted by the terms of the North American Free Trade Agreement
(“NAFTA”) or its proposed replacement, the United-States-Mexico-Canada Agreement (“USMCA”), which has been
ratified by the U.S. and Mexico, but must be ratified by Canada in order to go into effect. In addition, changes to
NAFTA, USMCA (if ratified by Canada) or other treaties governing our business could materially adversely affect
our international business. It is also uncertain how the USMCA, if ratified by Canada, will impact foreign trade and
our Mexican operations. Factors that substantially affect the operations of our business in Mexico may have a material
adverse effect on our overall results of operations. Additionally, the management team for our Mexican operations is
relatively small and each member of the management team has significant impact on the performance and results of
our Mexican operations. The loss of one or more of the management members could have a negative effect on our
Mexican revenue and results of operations and on our consolidated performance.
Changes to trade regulation, quotas, duties or tariffs, caused by the changing U.S. and geopolitical environments
or otherwise, may increase our costs and materially adversely affect our business.
Actions by the Trump administration have led to the imposition of tariffs on certain imported steel and aluminum. The
implementation of these tariffs, as well as the imposition of additional tariffs or quotas or changes to certain trade
agreements, including tariffs applied to goods traded between the United States and China, could, among other things,
increase the costs of the materials used by our suppliers to produce new revenue equipment or increase the price of
fuel. Such cost increases for our revenue equipment suppliers would likely be passed on to us, and to the extent fuel
prices increase, we may not be able to fully recover such increases through rate increases or our fuel surcharge
program, either of which could have a material adverse effect on our business.
29
The USMCA could also impact the amount, movement and patterns of freight we transport.
Our business depends on our reputation and the value of the U.S. Xpress brand, and if we are unable to protect
our brand name or proprietary and other intellectual property rights, our competitive position may be harmed.
We believe that the U.S. Xpress brand name symbolizes high-quality service and reliability and is a significant sales
and marketing tool to which we devote substantial resources to promote and protect. Adverse publicity, whether or
not justified, related to activities by our drivers, independent contractors or agents, such as accidents, customer service
issues or noncompliance with laws, could tarnish our reputation and reduce the value of our brand. With the increased
use of social media outlets, adverse publicity can be disseminated quickly and broadly, making it difficult for us to
respond effectively. Damage to our reputation and loss of value in our brand could reduce the demand for our services
and have a material adverse effect on our financial condition and results of operations, and require additional resources
to rebuild our reputation and restore the value of our brand.
In addition, we depend on the protection of our proprietary and other intellectual property rights, including service
marks, trademarks, domain names, patents, copyrights, confidential information and similar intellectual property
rights. We rely on a combination of laws and contractual restrictions with employees, independent contractors,
customers, suppliers, affiliates and others to establish and protect these proprietary and other intellectual property
rights. Despite our efforts to protect our proprietary and other intellectual property rights, third parties may use our
proprietary and other intellectual property information without our authorization and may otherwise misappropriate,
infringe or violate the same, and efforts to prevent or police such unauthorized use or misappropriation, including
instituting litigation, may consume significant resources, which could materially adversely affect our business, distract
our management and divert our resources.
Developments in labor and employment law and any unionizing efforts by employees could have a material adverse
effect on our results of operations.
We face the risk that Congress, federal agencies or one or more states could approve legislation or regulations
significantly affecting our businesses and our relationship with our employees, such as the previously proposed federal
legislation referred to as the Employee Free Choice Act, which would have substantially liberalized the procedures
for union organization. None of our domestic employees are currently covered by a collective bargaining agreement,
but any attempt by our employees to organize a labor union could result in increased legal and other associated costs.
Additionally, given the National Labor Relations Board’s “speedy election” rule, our ability to timely and effectively
address any unionizing efforts would be difficult. If we entered into a collective bargaining agreement with our
domestic employees, the terms could materially adversely affect our costs, efficiency and ability to generate acceptable
returns on the affected operations.
Additionally, the Department of Labor issued a final rule in 2016 raising the minimum salary basis exemption from
overtime payments for executive, administrative and professional employees. The rule purported to increase the
minimum salary from the current amount of $23,660 to $47,476 and aimed to count non-discretionary bonus,
commission and other incentive payments towards the minimum salary requirement. The rule was scheduled to go
into effect on December 1, 2016. However, the rule was temporarily enjoined from going into effect in November
2016, and later invalidated in August 2017, after several states and business groups filed separate lawsuits against the
Department of Labor challenging the rule. However, on January 1, 2020, a similar final rule adopted by the Department
of Labor went into effect, raising the current minimum salary level for exempt employees from $455 per week, or
$23,660 annually, to $684 per week, or $35,568 annually, and allowing for up to 10 percent of the standard salary
level to come from non-discretionary bonuses and incentive payments (including commissions) that are paid at least
annually. This rule, and any future rule similar to this rule that impacts the way we classify certain positions, increases
our payment of overtime wages or increases the salaries we are required to pay to currently exempt employees to
maintain their exempt status may have a material adverse effect on our business, financial condition and results of
operations.
These types of cases have increased since March 2014 when the Ninth Circuit Court of Appeals held that the
application of California state wage and hour laws to interstate truck drivers is not preempted by federal law. The case
was appealed to the Supreme Court of the United States, which denied certiorari in May 2015, and accordingly, the
Ninth Circuit Court of Appeals decision stood. However, in December 2018, the FMCSA granted a petition filed by
the ATA and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate
truck drivers are not subject to such laws. The FMCSA’s decision has been appealed by labor groups and multiple
lawsuits have been filed in federal courts seeking to overturn the decision, and thus it’s uncertain whether it will stand.
Other current and future state and local wage and hour laws, including laws related to employee meal breaks and rest
30
periods, may also vary significantly from federal law. As a result, we, along with other companies in the industry, are
subject to an uneven patchwork of wage and hour laws throughout the United States. In the past, certain legislators
have proposed federal legislation to solidify the preemption of state and local wage and hour laws applied to interstate
truck drivers; however, passage of such legislation is uncertain. If federal legislation is not passed, we may either need
to comply with the most restrictive state and local laws across our entire fleet, or revise our management systems to
comply with varying state and local laws. Either solution could result in increased compliance and labor costs, driver
turnover and decreased efficiency.
Seasonality and the impact of weather and other catastrophic events affect our operations and profitability.
Our tractor productivity decreases during the winter season because inclement weather impedes operations and some
shippers reduce their shipments after the winter holiday season. Revenue may also be adversely affected by inclement
weather and holidays, since revenue is directly related to available working days of shippers. At the same time,
operating expenses increase and fuel efficiency declines because of engine idling and harsh weather creating higher
accident frequency, increased claims and higher equipment repair expenditures. We also may suffer from
weather-related or other unforeseen events such as tornadoes, hurricanes, blizzards, ice storms, floods, fires,
earthquakes and explosions. These events may disrupt fuel supplies, increase fuel costs, disrupt freight shipments or
routes, affect regional economies, damage or destroy our assets or adversely affect the business or financial condition
of our customers, any of which could materially adversely affect our results of operations or make our results of
operations more volatile.
Our total assets include goodwill and other intangibles. If we determine that these items have become impaired in
the future, net income could be materially adversely affected.
As of December 31, 2019, we had recorded goodwill of $57.7 million and other intangible assets of $27.2 million
primarily as a result of certain customer relationships connected with certain acquisition-related transactions and trade
names. Goodwill represents the excess of the consideration paid by us over the estimated fair value of identifiable net
assets acquired by us. We may never realize the full value of our goodwill or intangible assets. Any future
determination requiring the write-off of a significant portion of goodwill or other intangible assets would have a
material adverse effect on our business, financial condition and results of operations.
Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially adversely
affect our tax obligations and effective tax rate.
In December 2017, the U.S. enacted comprehensive tax legislation, commonly referred to as the 2017 Tax Cuts and
Jobs Act (the “Act”). The new law requires complex computations not previously required by U.S. tax law. As such,
the application of accounting guidance for such items is currently uncertain. Further, compliance with the new law
and the accounting for such provisions require preparation and analysis of information not previously required or
regularly produced. In addition, the U.S. Department of Treasury has broad authority to issue regulations and
interpretative guidance that may significantly impact how we will apply the law and impact our results of operations
in future periods. Accordingly, while we have provided a provisional estimate on the effect of the new law in our
accompanying audited financial statements, further regulatory or U.S. generally accepted accounting principles
(“GAAP”) accounting guidance for the law, our further analysis on the application of the law, and refinement of our
initial estimates and calculations could materially change our current provisional estimates, which could in turn
materially affect our tax obligations and effective tax rate. There are also likely to be significant future impacts that
these tax reforms will have on our future financial results and our business strategies. In addition, there is a risk that
states or foreign jurisdictions may amend their tax laws in response to these tax reforms, which could have a material
adverse effect on our results.
The price of our Class A common stock may fluctuate significantly.
The trading price of our Class A common stock has been and is likely to continue to be volatile and subject to wide
price fluctuations in response to various factors, many of which are beyond our control, including those described
above and the following:
actual or anticipated fluctuations in our quarterly or annual financial results;
the financial guidance we may provide to the public, any changes in such guidance or our failure to
meet such guidance;
31
failure of industry or securities analysts to maintain coverage of us, changes in financial estimates
or downgrades of our Class A common stock or our sector by any industry or securities analysts that
follow us or our failure to meet such estimates;
downgrades in our credit ratings or the credit ratings of our competitors;
market factors, including rumors, whether or not correct, involving us or our competitors;
unfavorable market reactions to allegations regarding the safety of our or our competitors' services
and costs or negative publicity arising out of any potential litigation and/or government
investigations resulting therefrom;
fluctuations in stock market prices and trading volumes of securities of similar companies;
sales or anticipated sales of large blocks of our Class A common stock;
short selling of our Class A common stock by investors;
limited "public float" in the hands of a small number of persons whose sales or lack of sales of our
Class A common stock could result in positive or negative pricing pressure on the market price for
our Class A common stock;
our ability to satisfy our ongoing capital requirements and unanticipated cash needs or adverse
market reaction to any additional indebtedness we may incur or securities we may issue in the future;
additions or departures of key personnel;
announcements of new commercial relationships, acquisitions or other strategic transactions, or
entry into new markets or exit from markets by us or our competitors;
failure of any of our initiatives, including our growth strategy, to achieve commercial success;
regulatory or political developments;
changes in accounting principles or methodologies;
litigation or governmental investigations;
negative publicity about us in the media and online; and
general financial market conditions or events.
Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and
continue to affect the market prices of equity securities of many companies. These fluctuations sometimes have been
unrelated or disproportionate to the operating performance of those companies. In addition, certain index providers,
such as FTSE Russell and S&P Dow Jones, have announced restrictions that limit or preclude inclusion of companies
with multiple-class share structures in certain indexes. Because of our dual-class structure, we may be excluded from
these indexes and we cannot assure you that other stock indexes will not take similar actions. Given the sustained flow
of investment funds into passive strategies that seek to track certain indexes, exclusion from stock indexes would
likely preclude investment by many of these funds and could make our Class A common stock less attractive to other
investors. These and other factors may cause the market price and demand for our Class A common stock to fluctuate
substantially, which may limit or prevent investors from readily selling their shares of Class A common stock and
may otherwise adversely affect the price or liquidity of our Class A common stock.
32
We previously identified four material weaknesses in our internal control over financial reporting. We have
concluded that we have remediated three of such material weaknesses. If our remediation of the remaining material
weakness is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain
an effective system of internal controls in the future, we may not be able to accurately or timely report our financial
condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value
of our Class A common stock.
Prior to our IPO, we were not required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-
Oxley Act and were therefore not required to make a formal assessment of the effectiveness of our internal controls
over financial reporting for that purpose. Since our IPO, we have been required to comply with the SEC's rules
implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which has required management to certify financial
and other information in our quarterly and annual reports and provide an annual management report on the
effectiveness of controls over financial reporting. We were required to make our first annual assessment of our internal
controls over financial reporting pursuant to Section 404 (including an auditor attestation on management's internal
controls report) in this Annual Report.
As disclosed in “Controls and Procedures” of this report, during the course of preparing for our IPO, we identified
four material weaknesses in our internal control over financial reporting. As of December 31, 2019, we have concluded
that we had remediated material weaknesses related to (i) the design of controls over income tax accounting (ii)
evidential matter supporting the design and implementation of our controls and (iii) the control activities component
of the Committee of Sponsoring Organizations of the Treadway Commission framework. However, as of December
31, 2019, we had a material weakness in our internal control over financial reporting related to a failure to maintain
an effective control environment as a result of key information technology general controls being implemented in the
quarter ending December 31, 2019, which did not allow an ample instances of control operations to determine
operational effectiveness. Management believes additional time is needed to demonstrate the sustainability and
effectiveness of the established controls before concluding on remediation of the material weakness. There is no
assurance that we will effectively remediate the material weakness or that we will not identify additional material
weaknesses in our internal control over financial reporting in the future.
If we fail to effectively remediate the material weakness in our control environment, if we identify future material
weaknesses in our internal controls over financial reporting, or if we are unable to comply with the demands that have
been placed upon us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a
timely manner, we may be unable to accurately report our financial results, or report them within the timeframes
required by the SEC. We also could become subject to sanctions or investigations by the NYSE, the SEC or other
regulatory authorities. In addition, if we are unable to assert that our internal control over financial reporting is
effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness
of our internal control over financial reporting, when required, investors may lose confidence in the accuracy and
completeness of our financial reports, we may face restricted access to the capital markets and our stock price may be
adversely affected.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, our
market or our competitors, or if they change their recommendations regarding our Class A common stock in a
negative way, the price and trading volume of our Class A common stock could decline.
The trading market for our Class A common stock is influenced by the research and reports that industry or securities
analysts may publish about us, our business, our market or our competitors. If any of the analysts who cover us change
their recommendation regarding our Class A common stock in a negative way, or provide more favorable relative
recommendations about our competitors, the price of our Class A common stock would likely decline. If any analyst
who covers us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the
financial markets, which in turn could cause our Class A common stock price or trading volume to decline.
The large number of shares eligible for public sale in the future, or the perception of the public that these sales
may occur, could depress the market price of our Class A common stock.
The market price of our Class A common stock could decline as a result of (i) sales of a large number of shares of our
Class A common stock, particularly sales by our directors, employees (including our executive officers) and
significant stockholders, and (ii) a large number of shares of our Class A common stock being registered or offered
for sale (including upon the conversion of Class B shares for Class A shares and the subsequent sale by the holders
thereof). These sales, or the perception that these sales could occur, may depress the market price of our Class A
common stock. Any shares of Class B common stock sold to non-family members will automatically convert to
33
Class A common stock upon such sale. In addition to the sale of existing Class A shares, our charter does not limit the
conversion of shares of Class B common stock into shares of Class A common stock upon transfer by the holders
thereof and as a result, all of the shares of Class B common stock may be converted into shares of Class A common
stock, which could have a negative effect on the market price of the outstanding shares of Class A common stock.
Additionally, entities affiliated with Mr. Max Fuller have negatively pledged 8,261,776 shares of Class B common
stock as security for a loan, as well as the equity of the entities holding such shares. If the lender for such loan were
to foreclose on the entities holding such shares and sell such shares into the market, it could result in (i) a decrease of
the market price of the outstanding share of Class A stock, (ii) an increase volatility in the market price of the
outstanding shares of Class A common stock and (iii) a change in control of the Company. Our Board of Directors
has approved, subject to stockholder approval, an amendment to our Second Amended and Restated Articles of
Incorporation ("Articles of Incorporation") that would allow trusts and entities affiliated with Messrs. Max Fuller and
Eric Fuller and Ms. Lisa Pate to pledge shares of Class B common stock without automatic conversion to Class A
common stock, in addition to their ability to pledge shares of Class B common stock individually without automatic
conversion to Class A common stock. Accordingly, subject to approval by our Board of Directors, to the extent
required by our Executive and Director Stock Ownership, Retention, and Anti-Hedging and Pledging Policy, all shares
of Class B common stock would be eligible for pledging.
The dual class structure of our common stock has the effect of concentrating voting control with certain members
of the Fuller and Quinn families (or trusts for the benefit of any of them or entities owned by any of them), which
limits or precludes the ability of other stockholders to influence corporate matters.
Our Class B common stock has five votes per share, and our Class A common stock has one vote per share.
Stockholders who hold shares of Class B common stock, Messrs. Max Fuller and Eric Fuller and Ms. Pate
(collectively, the "Qualifying Stockholders") and certain trusts for the benefit of any of them or their family members
or certain entities owned by any of them or their family members (collectively with the Qualifying Stockholders, the
"Class B Stockholders"), hold approximately 70.2% of the voting power of our outstanding capital stock. Because of
the five-to-one voting ratio between our Class B common stock and Class A common stock, the Class B Stockholders
collectively will continue to control a majority of the combined voting power of our common stock and therefore be
able to control all matters submitted to our stockholders for approval so long as the shares of Class B common stock
represent at least 16.7% of all outstanding shares of our Class A common stock and Class B common stock. This
concentrated control will limit or preclude the ability of our other stockholders to influence corporate matters for the
foreseeable future. The interests of the Class B Stockholders may conflict with the interests of our other stockholders,
and they may take actions affecting us with which other stockholders disagree. For example, the Class B Stockholders
could take actions that would have the effect of delaying, deterring or preventing a change in control or other business
combination that might otherwise be beneficial to us and our stockholders. In addition, certain of the Class B
Stockholders have been engaged from time to time in certain related party transactions with us. Further, Messrs. Eric
Fuller and Max Fuller and Mses. Pate and Janice Fuller, the wife of Max Fuller, have entered into a voting agreement
(the "Voting Agreement") under which each has granted a voting proxy with respect to the shares of Class B common
stock subject to the voting agreement. Mr. Eric Fuller and Ms. Janice Fuller have initially designated Mr. Max Fuller
as his or her proxy and Mr. Max Fuller and Ms. Pate have each initially designated Mr. Eric Fuller as his or her proxy.
Accordingly, upon death or incapacity of any of Messrs. Eric Fuller or Max Fuller or Ms. Pate, voting control would
remain concentrated with certain members of the Fuller and/or Quinn families.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A
common stock, except for transfers among certain members of the Fuller and Quinn families (or trusts for the benefit
of any of them or entities owned by any of them) effected for estate planning or charitable purposes. The conversion
of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting
power of those holders of Class B common stock who retain their shares in the long term.
Furthermore, as a "controlled company" within the meaning of the NYSE rules, we qualify for and, in the future, may
opt to rely on, exemptions from certain corporate governance requirements, including having a majority of
independent directors, as well as having nominating and corporate governance and compensation committees
composed entirely of independent directors. If in the future we choose to rely on such exemptions, the interests of our
Qualifying Stockholders may differ from those of our other stockholders and the other stockholders may not have the
same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for
NYSE-listed companies. Our status as a controlled company could make our Class A common stock less attractive to
some investors or otherwise harm our stock price.
34
We do not currently expect to pay any cash dividends.
The continued operation and growth of our business will require substantial funding. Accordingly, we do not currently
expect to pay any cash dividends on shares of our common stock. Any determination to pay dividends in the future
will be at the discretion of our Board of Directors and will depend upon our results of operations, financial condition,
contractual restrictions, including restrictive covenants contained in our financing agreements, restrictions imposed
by applicable law, capital requirements and other factors our Board of Directors deems relevant. Additionally, under
our Credit Facility, we are restricted from paying cash dividends except in limited circumstances. Accordingly, in
order for stockholders to realize a gain on their investment, the price of our common stock would need to increase,
which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common
stock.
Provisions in our charter documents or Nevada law may inhibit a takeover, which could limit the price investors
might be willing to pay for our Class A common stock.
Our Articles of Incorporation, our Amended and Restated Bylaws ("Bylaws"), and Nevada corporate law contain
provisions that could delay, discourage or prevent a change of control or changes in our Board of Directors or
management that a stockholder might consider favorable. For example, our Articles of Incorporation authorize our
Board of Directors to issue preferred stock without stockholder approval and to set the rights, preferences and other
terms thereof, including voting rights of those shares; our Articles of Incorporation do not provide for cumulative
voting in the election of directors, which would otherwise allow holders of less than a majority of stock to elect some
directors; our Class B common stock possesses disproportionate voting rights; and our Bylaws provide that a
stockholder must provide advance notice of business to be brought before an annual meeting or to nominate candidates
for election as directors at an annual meeting of stockholders. These provisions will apply even if the change may be
considered beneficial by some of our stockholders, and thereby negatively affect the price that investors might be
willing to pay in the future for our Class A common stock. In addition, to the extent that these provisions discourage
an acquisition of our company or other change in control transaction, they could deprive stockholders of opportunities
to realize takeover premiums for their shares of our Class A common stock.
Our Articles of Incorporation designate the Eighth Judicial District Court of Clark County of the State of Nevada
as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our
stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us
or our directors, officers or employees.
Our Articles of Incorporation provide that, unless we consent in writing to an alternative forum, the Eighth Judicial
District Court of Clark County of the State of Nevada will be the sole and exclusive forum for any and all actions,
suits or proceedings, whether civil, administrative or investigative or that asserts any claim or counterclaim brought
in our name or on our behalf, any derivative action (i) asserting a claim of breach of a fiduciary duty owed by any of
our directors, officers or employees to us or our stockholders, (ii) arising or asserting a claim arising pursuant to any
provision the Nevada Statutes, our Articles of Incorporation or our Bylaws or (iii) asserting a claim that is governed
by the internal affairs doctrine, in each such case subject to the Eighth Judicial District Court of Clark County having
personal jurisdiction over the indispensable parties named as defendant. Any person purchasing or otherwise acquiring
any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to this provision
of our Articles of Incorporation. This choice of forum provision may limit our stockholders' ability to bring certain
claims, including claims against our directors, officers or employees, in a judicial forum that the stockholder finds
favorable and therefore may discourage lawsuits with respect to such claims. Stockholders who do bring a claim in
the Eighth Judicial District Court of Clark County could face additional litigation and related costs in pursuing any
such claim, particularly if they do not reside in or near Nevada. The Eighth Judicial District Court of Clark County
may also reach different judgments or results than would other courts, including courts where a stockholder
considering an action may be located or would otherwise choose to bring the action, and such judgments or results
may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our
Articles of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions
or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which
could have a material adverse effect on our business, financial condition or results of operations.
35
PROPERTIES
We own or lease administrative offices and truck terminals (which may include fleet operations, equipment
maintenance, driver orientation/training, fuel station and equipment parking) throughout the continental United States,
none of which are individually material.
LEGAL PROCEEDINGS
We are involved in various litigation and claims primarily arising in the normal course of business, which include
claims for personal injury or property damage incurred in the transportation of freight. Our insurance program for
liability, physical damage and cargo damage involves varying risk retention levels. Claims in excess of these risk
retention levels are covered by insurance in amounts that management considers to be adequate. Based on its
knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of claims
and pending litigation, taking into account existing reserves, will not have a materially adverse effect on us.
Information relating to legal proceedings is included in Note 12 of the accompanying consolidated financial
statements, and is incorporated herein by reference.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Class A common stock is traded on The New York Stock Exchange, under the symbol “USX.”
Holders of Record
As of February 19, 2020, we had approximately eight stockholders of record of our Class A common stock; however,
we estimate our actual number of stockholders is much higher because a substantial number of our shares are held of
record by brokers or dealers for their customers in street names. As of February 19, 2020, Messrs. Eric and Max
Fuller and Ms. Lisa Quinn Pate, together with certain trusts for the benefit of any of them and certain entities owned
by any of them, owned all of the outstanding Class B common stock.
Dividend Policy
We currently intend to retain all available funds and any future earnings for use in the development and expansion of
our business, the repayment of debt and for general corporate purposes. Any future determination to pay dividends
and other distributions will be at the discretion of our Board of Directors. Such determinations will depend on then-
existing conditions, including our financial condition and results of operations, contractual restrictions, including
restrictive covenants contained in our financing agreements, capital requirements and other factors that our Board of
Directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
See “Equity Compensation Plan Information” of this Annual Report for certain information concerning shares of our
Class A and Class B common stock authorized for issuance under our equity compensation plans.
Issuer Purchases of Equity Securities
We did not purchase any of our Class A or Class B common stock during the year ended December 31, 2019.
SELECTED FINANCIAL DATA
The selected financial data set forth below is not necessarily indicative of results of future operations and should be
read in conjunction with “Management's Discussion and Analysis of Financial Condition and Results of Operations”
and the Company's consolidated financial statements and notes thereto included in this Annual Report.
36
Operating revenues
Income from operations (1)
Net income (loss) (2)
Net income (loss) attributable to
controlling interest
Basic earnings (loss) per share
Diluted earnings (loss) per share
Operating ratio
Total assets
Total debt, including finance lease
obligations and current portion
Stockholders' equity (deficit)
As of December 31,
2019
$ 1,707,361
26,070
(3,043)
2018
$ 1,804,915
78,906
26,106
2017
$ 1,555,385
28,608
(3,937)
2016
$ 1,451,205
27,731
(15,974)
2015
$ 1,541,103
47,613
4,692
(3,647)
(0.07)
(0.07)
98.5 %
24,899
0.84
0.83
95.6 %
(4,060)
(0.64)
(0.64)
98.2 %
(16,524)
(2.59)
(2.59)
98.1 %
4,102
0.64
0.64
96.9 %
1,140,109
910,487
820,571
639,431
776,495
394,821
230,836
424,566
238,387
605,538
(41,105)
431,022
(37,168)
488,390
(21,194)
(1) During the 4th quarter of 2018, we incurred an impairment charge of $10.7 million related to our disposition
of Xpress Internacional interest in January 2019
(2) During the 4th quarter of 2019, we incurred an impairment charge of $6.8 million related to our note receivable
from Arnold.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read together
with “Business” in this Annual Report, as well as the consolidated financial statements and accompanying footnotes
in this Annual Report. This discussion contains forward-looking statements as a result of many factors, including those
set forth under “Risk Factors” and “Cautionary Note Regarding Forward-looking Statements” of this Annual Report,
and elsewhere in this report. These statements are based on current expectations and assumptions that are subject to
risks and uncertainties. Actual results could differ materially from those discussed.
Overview
We believe we are the fifth largest asset-based truckload carrier in the United States by revenue, generating over
$1.7 billion in total operating revenue in 2019. We provide services primarily throughout the United States, with a
focus in the densely populated and economically diverse eastern half of 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. As of December 31, 2019, our fleet consisted of approximately 6,900 tractors and approximately 15,500
trailers, including approximately 2,000 tractors provided by independent contractors. All of our tractors have been
equipped with electronic logs since 2012, and our systems and network are engineered for compliance with the recent
federal electronic log mandate. Our terminal network infrastructure is established and capable of handling significantly
larger volumes without meaningful additional investment.
For much of our history, we focused primarily on scaling our fleet and expanding our service offerings to support
sustainable, multi-faceted relationships with customers. More recently, we have focused on our core service offerings
and refined our network to focus on shorter, more profitable lanes with more density, which we believe are more
attractive to drivers. Over the last five years, we have recruited and developed new executive and operational
management teams with significant industry experience and instilled a new culture of professional management. These
changes, which are ongoing, were reflected in our 2018 and the first quarter of 2019 financial results where we
delivered the highest earnings of any first quarter in the history of the Company. During the second through fourth
quarters of 2019, the freight market we experienced was challenging driven by excess capacity as a result of more
favorable market conditions in 2018. This supply-demand imbalance severely pressured spot pricing during this time,
which adversely impacted parts of our business. We believe the pricing environment was further impacted by
unprecedented and unsustainable rate competition from digital freight brokers. Looking forward over the longer term,
we expect conditions to firm in the second half of 2020, as capacity slowly exits the market, including in response to
the implementation of the Drug and Alcohol Clearinghouse in the first quarter of 2020, other regulatory constraints,
and increasing insurance premiums that could cause smaller carriers to exit the market. 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 stockholders. For 2020 we are
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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
(“OTR”) service offerings. 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 digitization of our loads and
business, automated load acceptance and prioritization, and our goal of achieving a frictionless order.
Total revenue for 2019 decreased by $97.6 million to $1.7 billion as compared to 2018. The decrease was primarily a
result of a 23.5% decrease in Brokerage revenue to $185.9 million, and a $13.9 million decrease in fuel surcharge
revenue partially offset by an increase in average tractors combined with increased miscellaneous revenue. Excluding
the impact of fuel surcharge revenue, revenue decreased $83.6 million to $1.5 billion, a decrease of 5.2% as compared
to the prior year. Our Mexico operations accounted for $2.4 million of our total operating revenue for 2019, compared
to $53.4 million in 2018.
Operating income for 2019 was $26.1 million compared to the $78.9 million achieved in 2018. We delivered a 98.5%
operating ratio for the year which is an increase relative to the 95.6% operating ratio reported in 2018. Our profitability
declined largely as a result of the challenging market conditions described above. Our OTR fleet saw revenue per
tractor per week decline 9.2% from $3,917 in 2018 to $3,558 in 2019. This degradation was partially offset by progress
in our Dedicated fleet which saw revenue per tractor per week increase 7.8% to $4,007 in 2019 from 2018. In addition,
driver pay increased approximately $0.05 cents per mile compared to the prior year as a result of inflation and lower
utilization.
We are continuing to focus on our driver centric initiatives, such as increased miles and modern equipment, to both
retain the professional drivers who have chosen to partner with us and attract new professional drivers to our team. 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 implementation, we are seeing positive results from those
drivers who have completed this training versus those who have not. We are optimistic that, over time, this training
will improve our drivers’ satisfaction and retention while also reducing their accident rate and the Company’s
insurance and claims expense. We will continue to focus on implementing and executing our initiatives that we expect
will continue to drive sustainable improved performance over time.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this
document generally discusses 2019 and 2018 items and year-to-year comparisons between 2019 and 2018.
Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this document
can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part
II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Reportable Segments
Our business is organized into two reportable segments, Truckload and Brokerage. Our Truckload segment offers
truckload services, including OTR trucking and dedicated contract services. Our OTR service offering transports a
full trailer of freight for a single customer from origin to destination, typically without intermediate stops or handling
pursuant to short-term contracts and spot moves that include irregular route moves without volume and capacity
commitments. Tractors are operated with a solo driver or, when handling more time-sensitive, higher-margin freight,
a team of two drivers. Our dedicated contract service offering provides similar freight transportation services, but with
contractually assigned equipment, drivers and on-site personnel to address customers’ needs for committed capacity
and service levels pursuant to multi-year contracts with guaranteed volumes and pricing. Our Brokerage segment is
principally engaged in non-asset-based freight brokerage services, where loads are contracted to third-party carriers.
Truckload Segment
In our Truckload segment, we generate revenue by transporting freight for our customers in our OTR and dedicated
contract service offerings. Our OTR service offering provides solo and expedited team services through one-way
movements of freight over routes throughout the United States. While we primarily operate in the eastern half of the
United States, we provide services into and out of Mexico. In January 2019, we sold our interest in Xpress
Internacional. Even following our sale of Xpress Internacional, we expect to have business to and from Mexico
through a more variable cost model using third party carriers. Our dedicated contract service offering devotes the use
of equipment to specific customers and provides services through long-term contracts. Our Truckload segment
provides services that are geographically diversified but have similar economic and other relevant characteristics, as
they all provide truckload carrier services of general commodities and durable goods to similar classes of customers.
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We are typically paid a predetermined rate per load or per mile for our Truckload services. We enhance our revenue
by charging for tractor and trailer detention, loading and unloading activities and other specialized services. Consistent
with industry practice, our typical customer contracts (other than those contracts in which we have agreed to dedicate
certain tractor and trailer capacity for use by specific customers) do not guarantee load levels or tractor availability.
This gives us and our customers a certain degree of flexibility to negotiate rates up or down in response to changes in
freight demand and trucking capacity. In our dedicated contract service offering, which comprised approximately
41.3% of our Truckload operating revenue, and approximately 42.1% of our Truckload revenue, before fuel surcharge,
for 2019, we provide service under contracts with fixed terms, volumes and rates. Dedicated contracts are often used
by our customers with high-service and high-priority freight, sometimes to replace private fleets previously operated
by them. We expect to grow our dedicated business as a percentage of our average tractors.
Generally, in our Truckload segment, we receive fuel surcharges on the miles for which we are compensated by
customers. Fuel surcharge revenue mitigates the effect of price increases over a negotiated base rate per gallon of fuel;
however, these revenues may not fully protect us from all fuel price increases. Our fuel surcharges to customers may
not fully recover all fuel increases due to engine idle time, out-of-route miles and non-revenue generating miles that
are not generally billable to the customer, as well as to the extent the surcharge paid by the customer is insufficient.
The main factors that affect fuel surcharge revenue are the price of diesel fuel and the number of revenue miles we
generate. Although our surcharge programs vary by customer, we generally attempt to negotiate an additional penny
per mile charge for every five-cent increase in the U.S. Department of Energy’s (the “DOE”) national average diesel
fuel index over an agreed baseline price. Our fuel surcharges are billed on a lagging basis, meaning we typically bill
customers in the current week based on a previous week’s applicable index. Therefore, in times of increasing fuel
prices, we do not recover as much as we are currently paying for fuel. In periods of declining prices, the opposite is
true. Based on the current status of our empty miles percentage and the fuel efficiency of our tractors, we believe that
our fuel surcharge recovery is effective.
The main factors that affect our operating revenue in our Truckload segment are the average revenue per mile we
receive from our customers, the percentage of miles for which we are compensated and the number of shipments and
miles we generate. Our primary measures of revenue generation for our Truckload segment are average revenue per
loaded mile and average revenue miles per tractor per period, in each case excluding fuel surcharge revenue and
revenue and miles from services in Mexico.
In our Truckload segment, our most significant operating expenses vary with miles traveled and include (i) fuel,
(ii) driver-related expenses, such as wages, benefits, training and recruitment and (iii) costs associated with
independent contractors (which are primarily included in the “Purchased transportation” line item). Expenses that
have both fixed and variable components include maintenance and tire expense and our total cost of insurance and
claims. These expenses generally vary with the miles we travel, but also have a controllable component based on
safety, fleet age, efficiency and other factors. Our main fixed costs include vehicle rent and depreciation of long-term
assets, such as revenue equipment and service center facilities, the compensation of non-driver personnel and other
general and administrative expenses.
Our Truckload segment requires substantial capital expenditures for purchase of new revenue equipment. We use a
combination of operating leases and secured financing to acquire tractors and trailers, which we refer to as revenue
equipment. When we finance revenue equipment acquisitions with operating leases, we record an operating lease right
of use asset and an operating lease liability on our consolidated balance sheet, and the lease payments in respect of
such equipment are reflected in our consolidated statement of comprehensive income (loss) in the line item “Vehicle
rents.” When we finance revenue equipment acquisitions with secured financing, the asset and liability are recorded
on our consolidated balance sheet, and we record expense under “Depreciation and amortization” and “Interest
expense.” Typically, the aggregate monthly payments are similar under operating lease financing and secured
financing. We use a mix of finance leases and operating leases with individual decisions being based on competitive
bids, tax projections and contractual restrictions. We expect our vehicle rents, depreciation and amortization and
interest expense will be impacted by changes in the percentage of our revenue equipment acquired through operating
leases versus equipment owned or acquired through finance leases. Because of the inverse relationship between
vehicle rents and depreciation and amortization, we review both line items together.
Approximately 28% of our total tractor fleet was operated by independent contractors at December 31, 2019.
Independent contractors provide a tractor and a driver and are responsible for all of the costs of operating their
equipment and drivers, including interest and depreciation, vehicle rents, driver compensation, fuel and other
expenses, in exchange for a fixed payment per mile or percentage of revenue per invoice plus a fuel surcharge pass-
through. Payments to independent contractors are recorded in the “Purchased transportation” line item. When
independent contractors increase as a percentage of our total tractor fleet, our “Purchased transportation” line item
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typically will increase, with offsetting reductions in employee driver wages and related expenses, net of fuel (assuming
all other factors remain equal). The reverse is true when the percentage of our total fleet operated by company drivers
increases.
Brokerage Segment
In our Brokerage segment, we retain the customer relationship, including billing and collection, and we outsource the
transportation of the loads to third-party carriers. For this segment, we rely on brokerage employees to procure
third-party carriers, as well as information systems to match loads and carriers.
Our Brokerage segment revenue is mainly affected by the rates we obtain from customers, the freight volumes we
ship through our third-party carriers and our ability to secure third-party carriers to transport customer freight. We
generally do not have contracted long-term rates for the cost of third-party carriers, and we cannot assure that our
results of operations will not be adversely impacted in the future if our ability to obtain third-party carriers changes or
the rates of such providers increase.
The most significant expense of our Brokerage segment, which is primarily variable, is the cost of purchased
transportation that we pay to third-party carriers, and is included in the “Purchased transportation” line item. This
expense generally varies depending upon truckload capacity, availability of third-party carriers, rates charged to
customers and current freight demand and customer shipping needs. Other operating expenses are generally fixed and
primarily include the compensation and benefits of non-driver personnel (which are recorded in the “Salaries, wages
and benefits” line item) and depreciation and amortization expense.
The key performance indicator in our Brokerage segment is gross margin percentage (which is calculated as brokerage
revenue less purchased transportation expense expressed as a percentage of total operating revenue). Gross
margin percentage can be impacted by the rates charged to customers and the costs of securing third-party carriers.
Our Brokerage segment does not require significant capital expenditures and is not asset-intensive like our Truckload
segment.
Results of Operations
Revenue
We generate revenue from two primary sources: transporting freight for our customers (including related fuel
surcharge revenue) and arranging for the transportation of customer freight by third-party carriers. We have two
reportable segments: our Truckload segment and our Brokerage segment. Truckload revenue, before fuel surcharge
and truckload fuel surcharge are primarily generated through trucking services provided by our two Truckload service
offerings (OTR and dedicated contract). Brokerage revenue is primarily generated through brokering freight to
third-party carriers.
Our total operating revenue is affected by certain factors that relate to, among other things, the general level of
economic activity in the United States, customer inventory levels, specific customer demand, the level of capacity in
the truckload and brokerage industry, the success of our marketing and sales efforts and the availability of drivers,
independent contractors and third-party carriers.
A summary of our revenue generated by type for the periods indicated is as follows:
Revenue, before fuel surcharge
Fuel surcharge
Total operating revenue
Year Ended December 31,
2019
2018
(in thousands)
$ 1,538,450 $ 1,622,083
182,832
$ 1,707,361 $ 1,804,915
168,911
For 2019, our total operating revenue decreased by $97.6 million, or 5.4%, compared to 2018, and our revenue, before
fuel surcharge decreased by $83.6 million, or 5.2%. Our Mexico operations accounted for $2.4 million of our total
operating revenue for 2019, compared to $53.4 million in 2018. The primary factors driving the decreases in total
operating revenue and revenue, before fuel surcharge, excluding our Mexico operations, were decreased volumes and
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pricing in our Brokerage segment, decreased fuel surcharge revenues and decreased miles per tractor in our Truckload
segment partially offset by increased average tractors combined with increased miscellaneous revenues.
A summary of our revenue generated by segment for the periods indicated is as follows:
Truckload revenue, before fuel surcharge
Fuel surcharge
Total Truckload operating revenue
Brokerage operating revenue
Total operating revenue
Year Ended December 31,
2019
2018
(in thousands)
$ 1,352,583 $ 1,379,266
182,832
1,562,098
242,817
$ 1,707,361 $ 1,804,915
168,911
1,521,494
185,867
In 2018, our operations in Mexico represented approximately 3%, of our revenue, excluding fuel surcharge. In January
2019, we sold our interest in Xpress Internacional. Even following our sale of Xpress Internacional, we expect to have
business to and from Mexico through a more variable cost model using third party carriers.
The following is a summary of our key Truckload segment performance indicators, before fuel surcharge and
excluding miles from services in Mexico, for the periods indicated. Average tractors, average company-owned tractors
and average independent contractor tractors exclude tractors in Mexico.
Over the road
Average revenue per tractor per week
Average revenue per mile
Average revenue miles per tractor per week
Average tractors
Dedicated
Average revenue per tractor per week
Average revenue per mile
Average revenue miles per tractor per week
Average tractors
Consolidated
Average revenue per tractor per week
Average revenue per mile
Average revenue miles per tractor per week
Average tractors
Year Ended
December 31,
2019
2018
$ 3,558 $ 3,917
$ 1.949 $ 2.041
1,919
3,562
1,825
3,712
$ 4,007 $ 3,717
$ 2.375 $ 2.259
1,645
2,701
1,687
2,727
$ 3,748 $ 3,831
$ 2.122 $ 2.127
1,801
6,263
1,767
6,439
For 2019, our Truckload revenue, before fuel surcharge decreased by $26.7 million, or 1.9%, compared to 2018. Our
Mexico operations accounted for $2.4 million of our Truckload revenue for 2019, compared to $53.4 million in 2018.
The primary factors driving the changes in Truckload revenue, excluding Mexico operations, were a 1.9% decrease
in average revenue miles per tractor and a slight decrease in revenue per loaded mile primarily due to a greater than
30% decrease in spot rates partially offset by an approximate 4.5% increase in our contractual rate, an increase of
$16.5 million in miscellaneous revenue, and a 2.8% increase in average available tractors. Fuel surcharge revenue
decreased by $13.9 million, or 7.6%, to $168.9 million, compared with $182.8 million in 2018. The DOE national
weekly average fuel price per gallon averaged approximately $0.12 per gallon lower for 2019 compared to 2018. The
decrease in fuel surcharge revenue primarily relates to decreased fuel prices offset by a slight increase in revenue
miles compared to 2018.
The key performance indicator of our Brokerage segment is gross margin percentage (brokerage revenue less
purchased transportation expense expressed as a percentage of total operating revenue). Gross margin percentage can
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be impacted by the rates charged to customers and the costs of securing third-party carriers. The following table lists
the gross margin percentage for our Brokerage segment for the years ended December 31, 2019 and 2018.
Gross margin percentage
Year Ended
December 31,
2018
2019
12.9 % 13.4 %
For 2019, our Brokerage revenue decreased by $57.0 million, or 23.5%, compared to 2018. The primary factors driving
the decrease in Brokerage revenue were a 15.1% decrease in load count combined with a 9.8% decrease in average
revenue per load. We experienced a decrease in our gross margin to 12.9% in 2019, compared to 13.4% in 2018.
During the fourth quarter of 2019 we experienced pressure on our Brokerage gross margins as a result of capacity
tightening, which increased our cost on a per load basis. Additionally, in an effort to increase our truckload rate per
mile, we procured contractual business at prices that were at a premium to the spot market but a discount to current
contractual rates. The combination of lower revenue per load with a higher cost per load due to these two factors led
to a decrease in gross margins. We anticipate continued pressure on our brokerage gross margins in 2020.
Operating Expenses
For comparison purposes in the discussion below, we use total operating revenue and revenue, before fuel surcharge
when discussing changes as a percentage of revenue. As it relates to the comparison of expenses to revenue, before
fuel surcharge, we believe that removing fuel surcharge revenue, which is sometimes a volatile source of revenue
affords a more consistent basis for comparing the results of operations from period-to-period.
Individual expense line items as a percentage of total operating revenue also are affected by fluctuations in
the percentage of our revenue generated by independent contractor and brokerage loads.
Salaries, wages, and related expenses
Salaries, wages and benefits consist primarily of compensation for all employees. Salaries, wages and benefits are
primarily affected by the total number of miles driven by company drivers, the rate per mile we pay our company
drivers, employee benefits such as health care and workers’ compensation, and to a lesser extent by the number of,
and compensation and benefits paid to, non-driver employees.
The following is a summary of our salaries, wages and benefits for the periods indicated:
Salaries, wages and benefits
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
(dollars in thousands)
2018
$ 530,885 $ 535,994
31.1 %
34.5 %
29.7 %
33.0 %
For 2019, salaries, wages and benefits decreased $5.1 million, or 1.0%, compared with 2018. Our Mexican operations
accounted for $0.5 million in salaries, wages and benefits in 2019, compared to $12.1 million in 2018. Our driver
wages increased slightly due to increased driver pay on a per mile basis as a result of higher incentive-based pay and
lower utilization as compared to 2018. In addition to the decrease related to our Mexico operations, during 2019 we
also had decreases related to $6.4 million of lower compensation expense related to the payout of our stock
appreciation rights and IPO bonuses during the second quarter of 2018 offset by the $4.0 million gain on life insurance
in the third quarter of 2018. During 2019, our group health and workers’ compensation expense increased
approximately 5.6%, due to increased group health claims expense offset by positive trends in our workers’
compensation claims compared to 2018. In the near term, we believe salaries, wages and benefits will increase as a
result of a tight driver market, wage inflation and higher healthcare costs. As a percentage of revenue, we expect
salaries, wages and benefits will fluctuate based on our ability to generate offsetting increases in average revenue per
total mile and the percentage of revenue generated by independent contractors and brokerage operations, for which
payments are reflected in the “Purchased transportation” line item.
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Fuel and fuel taxes
Fuel and fuel taxes consist primarily of diesel fuel expense and fuel taxes for our company-owned and leased tractors.
The primary factors affecting our fuel and fuel taxes expense are the cost of diesel fuel, the miles per gallon we realize
with our equipment and the number of miles driven by company drivers.
We believe that the most effective protection against net fuel cost increases in the near term is to maintain an effective
fuel surcharge program and to operate a fuel-efficient fleet by incorporating fuel efficiency measures, such as auxiliary
heating units, installation of aerodynamic devices on tractors and trailers and low‑rolling resistance tires on our
tractors, engine idle limitations and computer-optimized fuel-efficient routing of our fleet.
The following is a summary of our fuel and fuel taxes for the periods indicated:
Fuel and fuel taxes
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
2018
$ 189,800
(dollars in thousands)
$ 227,525
11.1 %
12.3 %
12.6 %
14.0 %
For 2019, fuel and fuel taxes decreased $37.7 million, or 16.6%, compared with 2018. The decrease in fuel and fuel
taxes was primarily the result of a 5.4% decrease in company driver miles, a $10.6 million decrease due to the divesture
of our Mexico business, a 3.3% increase in our average miles per gallon and the DOE fuel price per gallon decrease
of 3.8% compared to 2018.
To measure the effectiveness of our fuel surcharge program, we calculate “net fuel expense” by subtracting fuel
surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors, which is included
in purchased transportation) from our fuel expense. Our net fuel expense as a percentage of revenue, before fuel
surcharge, is affected by the cost of diesel fuel net of surcharge collection, the percentage of miles driven by company
tractors and our percentage of non-revenue generating miles, for which we do not receive fuel surcharge revenues.
Net fuel expense as a percentage of revenue, before fuel surcharge, is shown below:
Total fuel surcharge revenue
Less: fuel surcharge revenue reimbursed to independent
contractors
Company fuel surcharge revenue
Total fuel and fuel taxes
Less: company fuel surcharge revenue
Net fuel expense
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
2018
(dollars in thousands)
$ 168,911
$ 182,832
46,862
$ 122,049
$ 189,800
122,049
$ 67,751
41,898
$ 140,934
$ 227,525
140,934
$ 86,591
4.0 %
4.4 %
4.8 %
5.3 %
For 2019, net fuel expense decreased $18.8 million, or 21.8%, compared with 2018. During 2019, the decrease in net
fuel expenses was primarily the result of a $10.6 million decrease due to the divesture of our Mexico business, a 5.4%
decrease in company driver miles, and a 3.3% increase in average miles per gallon, offset by increased fuel surcharge
paid to independent contractors. Independent contractors accounted for 27.3% of the average tractors available
compared to 22.1% in 2018. In the near term, our net fuel expense is expected to fluctuate as a percentage of total
operating revenue and revenue, before fuel surcharge, based on factors such as diesel fuel prices, the percentage
recovered from fuel surcharge programs, the percentage of uncompensated miles, the percentage of revenue generated
by independent contractors, the percentage of revenue generated by team-driven tractors (which tend to generate
higher miles and lower revenue per mile, thus proportionately more fuel cost as a percentage of revenue).
Vehicle Rents and Depreciation and Amortization
Vehicle rents consist primarily of payments for tractors and trailers financed with operating leases. The primary factors
affecting this expense item include the size and age of our tractor and trailer fleets, the cost of new equipment and the
relative percentage of owned versus leased equipment.
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Depreciation and amortization consists primarily of depreciation for owned tractors and trailers. The primary factors
affecting these expense items include the size and age of our tractor and trailer fleets, the cost of new equipment and
the relative percentage of owned equipment and equipment acquired through debt or finance leases versus equipment
leased through operating leases. We use a mix of finance leases and operating leases to finance our revenue equipment
with individual decisions being based on competitive bids and tax projections. Gains or losses realized on the sale of
owned revenue equipment are included in depreciation and amortization for reporting purposes.
Vehicle rents and depreciation and amortization are closely related because both line items fluctuate depending on the
relative percentage of owned equipment and equipment acquired through finance leases versus equipment leased
through operating leases. Vehicle rents increase with greater amounts of equipment acquired through operating leases,
while depreciation and amortization increases with greater amounts of owned equipment and equipment acquired
through finance leases. Because of the inverse relationship between vehicle rents and depreciation and amortization,
we review both line items together.
The following is a summary of our vehicle rents and depreciation and amortization for the periods indicated:
Vehicle rents
Depreciation and amortization, net of (gains) losses on sale of
property
Vehicle rents and depreciation and amortization of property
and equipment
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
2018
(dollars in thousands)
$ 80,064
$ 78,639
94,337
97,954
$ 174,401
$ 176,593
10.2 %
11.3 %
9.8 %
10.9 %
For 2019, vehicle rents increased $1.4 million, or 1.8%, compared to 2018. The increase in vehicle rents was primarily
due to increased trailers financed under operating leases compared to 2018. Depreciation and amortization decreased
$3.6 million, or 3.7%, compared to 2018. The decrease in depreciation and amortization is primarily due to a decrease
in loss on sale of property and equipment of $3.3 million compared to 2018. This reduction in our loss was primarily
the result of a $2.7 million gain related to the sale of our Laredo terminal and a $1.2 million gain related to a sale
leaseback transaction. Both of these transactions were executed in the fourth quarter of 2019. Looking forward to
2020, excluding any change in our percentage allocation of owned versus leased equipment due to available financing
terms, we expect to spend approximately $140.0 to $150.0 million in net capital expenditures which will keep the
average age of our equipment relatively constant. The balance of our equipment procurement will be funded through
operating leases.
Purchased Transportation
Purchased transportation consists of the payments we make to independent contractors, including fuel surcharge
reimbursements paid to independent contractors, in our Truckload segment, and payments to third-party carriers in
our Brokerage segment.
The following is a summary of our purchased transportation for the periods indicated:
Purchased transportation
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
2018
(dollars in thousands)
$ 481,589
$ 481,945
28.2 %
31.3 %
26.7 %
29.7 %
For 2019, purchased transportation decreased $0.3 million, or 0.1%, compared to 2018. The change in purchased
transportation was primarily due to a $57.0 million decrease in Brokerage revenue partially offset by a 27.1% increase
in average independent contractors and a $5.0 million increase in fuel surcharge reimbursement to independent
contractors as compared to 2018.
Because we reimburse independent contractors for fuel surcharges we receive, we subtract fuel surcharge revenue
reimbursed to them from our purchased transportation. The result, referred to as purchased transportation, net of fuel
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surcharge reimbursements, is evaluated as a percentage of total operating revenue and as a percentage of revenue,
before fuel surcharge, as shown below:
Year Ended December 31,
2019
(dollars in thousands)
2018
Purchased transportation
Less: fuel surcharge revenue reimbursed to independent
contractors
46,862
Purchased transportation, net of fuel surcharge reimbursement $ 434,727
% of total operating revenue
% of revenue, before fuel surcharge
$ 481,589
25.5 %
28.3 %
$ 481,945
41,898
$ 440,047
24.4 %
27.1 %
For 2019, purchased transportation, net of fuel surcharge reimbursement, decreased $5.3 million, or 1.2%, compared
to 2018. This decrease was primarily due to the $57.0 million decrease in Brokerage revenue offset by the 27.1%
increase in average independent contractors compared to 2018. This expense category will fluctuate with the number
and percentage of loads hauled by independent contractors and third-party carriers, as well as the amount of fuel
surcharge revenue passed through to independent contractors. If industry-wide trucking capacity continues to tighten
in relation to freight demand, we may need to increase the amounts we pay to third-party carriers and independent
contractors, which could increase this expense category on an absolute basis and as a percentage of total operating
revenue and revenue, before fuel surcharge, absent an offsetting increase in revenue. We continue to actively attempt
to expand our Brokerage segment and recruit independent contractors. Our recent success in growing our lease-
purchase program and independent contractor drivers have contributed to increased purchased transportation expense.
If we are successful in continuing these efforts, we would expect this line item to increase as a percentage of total
operating revenue and revenue, before fuel surcharge.
Operating Expenses and Supplies
Operating expenses and supplies consist primarily of ordinary vehicle repairs and maintenance costs, driver
on-the-road expenses, tolls and advertising expenses related to driver recruiting. Operating expenses and supplies are
primarily affected by the age of our company-owned and leased fleet of tractors and trailers, the number of miles
driven in a period and driver turnover.
The following is a summary of our operating expenses and supplies for the periods indicated:
Operating expenses and supplies
% of total operating revenue
% of revenue, before fuel surcharge
Year Ended December 31,
2019
2018
(dollars in thousands)
$ 118,394
$ 118,064
6.9 %
7.7 %
6.5 %
7.3 %
For 2019, operating expenses and supplies increased $0.3 million, or 0.3%, compared to 2018. Our Mexican operations
accounted for $0.3 million in operating expenses and supplies in 2019, compared to $6.9 million in 2018. The primary
factors driving the increase in operating expenses and supplies excluding our Mexico operations were increased driver
hiring and recruiting costs and other operational expenses.
Insurance Premiums and Claims
Insurance premiums and claims consists primarily of retained amounts for liability (personal injury and property
damage), physical damage and cargo damage, as well as insurance premiums. The primary factors affecting our
insurance premiums and claims are the frequency and severity of accidents, trends in the development factors used in
our actuarial accruals and developments in large, prior year claims. The number of accidents tends to increase with
the miles we travel. With our significant retained amounts, insurance claims expense may fluctuate significantly and
impact the cost of insurance premiums and claims from period-to-period, and any increase in frequency or severity of
claims or adverse loss development of prior period claims would adversely affect our financial condition and results
of operations. We renewed our liability insurance policies on September 1, 2018 and reduced our deductible to $3.0
million per occurrence.
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The following is a summary of our insurance premiums and claims expense for the periods indicated:
Year Ended December 31,
Insurance premiums and claims
% of total operating revenue
% of revenue, before fuel surcharge
2018
2019
(dollars in thousands)
$ 85,075
$ 88,959
5.2 %
5.8 %
4.7 %
5.2 %
For 2019, insurance premiums and claims increased $3.9 million, or 4.6%, compared to 2018. Insurance premiums
and claims increased primarily due to increased physical damage claims primarily as a result of adverse weather in
the first quarter of 2019 as compared to 2018. During the fourth quarter of 2017, we began installing event recorders
on our tractors, and we had installed event recorders in substantially all of our tractors in our fleet as of the second
quarter of 2018. We believe we have an opportunity to reduce our insurance and claims expense over time as a result
of 1) having completed the installation of event recorders in 2018, 2) the successful launch of our redeveloped driver
training facilities, and 3) our decision to implement hair follicle testing for all of our drivers in the fourth quarter of
2019. While we have not yet seen measurable financial results from these initiatives, we believe our increase in
expense in 2019 relative to 2018 would have been greater absent the combination of the above initiatives.
General and Other Operating Expenses
General and other operating expenses consist primarily of driver recruiting costs, legal and professional services fees,
general and administrative expenses and other costs.
The following is a summary of our general and other operating expenses for the periods indicated:
Year Ended December 31,
General and other operating expenses
% of total operating revenue
% of revenue, before fuel surcharge
2018
2019
(dollars in thousands)
$ 66,412
$ 75,317
4.4 %
4.9 %
3.7 %
4.1 %
For 2019, general and other operating expenses increased $8.9 million, or 13.4%, compared to 2018. General and
other expenses increased primarily due to higher driver hiring costs combined with increased professional and
administrative costs partially offset by $5.1 million in lower expenses related to the divesture of our Mexico business.
We expect general and other operating expenses to increase in the future due in part to higher driver recruiting costs
related to continued tightening of the driver market.
Impairment of Equity Method Investments and Note Receivable
During 2019, we converted $5.0 million of Arnold receivables to a note receivable and advanced an additional $2.0
million. In the fourth quarter of 2019, we recorded an impairment charge of $6.8 million as the collectability of the
note is remote.
Interest
Interest expense consists of cash interest, amortization of original issuance discount and deferred financing fees and
purchase commitment interest related to our obligation to acquire the remaining equity interest in Xpress Internacional.
In January 2019, we sold our equity interest in Xpress Internacional and were relieved of this obligation.
The following is a summary of our interest expense for the periods indicated:
Interest expense, excluding non-cash items
Original issue discount and deferred financing amortization
Purchase commitment interest
Interest expense, net
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Year Ended December 31,
2019
2018
(in thousands)
$ 21,000 $ 33,330
1,728
635
(192)
—
$ 21,635 $ 34,866
For 2019, interest expense decreased $13.2 million, primarily due to 2019 reflecting a full year of our new capital
structure which resulted from our IPO in June 2018 as compared to 2018 which reflected only six months of the new
capital structure. In addition, during 2019 we had decreased equipment and revolver borrowings combined with lower
interest rates related to our term loan compared to 2018.
Overview
LIQUIDITY AND CAPITAL RESOURCES
Our business requires substantial amounts of cash to cover operating expenses as well as to fund capital expenditures,
working capital changes, principal and interest payments on our obligations, lease payments, letters of credit to support
insurance requirements and tax payments when we generate taxable income. Recently, we have financed our capital
requirements with borrowings under our Credit Facility, cash flows from operating activities, direct equipment
financing, operating leases and proceeds from equipment sales.
We make substantial net capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet and
strategically expand our fleet. During 2020, we currently plan to replace owned tractors with new owned tractors as
they reach approximately 475,000 miles. Additionally, we expect to replace our tractor lease maturities with a mix of
owned and leased replacements as we convert a portion of our leased tractors to owned. As a result of our 2020
replacement cycle, we expect the average age of our tractor fleet to decline to approximately 1.6 years as we exit the
year. Our mix of owned and leased equipment may vary over time due to tax treatment, financing options and
flexibility of terms, among other factors.
We believe we can fund our expected cash needs, including debt repayment, in the short-term with projected cash
flows from operating activities, borrowings under our Credit Facility and direct debt and lease financing we believe
to be available for at least the next 12 months. Over the long-term, we expect that we will continue to have significant
capital requirements, which may require us to seek additional borrowings, lease financing or equity capital. We have
obtained a significant portion of our revenue equipment under operating leases, which are not reflected as net capital
expenditures but are recorded as operating lease liabilities on our balance sheet. The availability of financing and
equity capital will depend upon our financial condition and results of operations as well as prevailing market
conditions.
Sources of Liquidity
Credit Facility
In June 2018, we entered into a credit facility that contained a $150.0 million revolving facility and a $200.0 million
term facility. At December 31, 2019, the revolving facility had issued collateralized letters of credit in the face amount
of $32.7 million, with $0 borrowings outstanding and $117.3 million available to borrow and the term facility had
$150.0 million outstanding. Our former credit facility was set to mature on June 18, 2023.
On January 28, 2020, we entered into the Credit Facility and contemporaneously with the funding of the Credit Facility
paid off obligations under our then existing credit facility and terminated such facility. The Credit Facility is a $250.0
million revolving credit facility, with an uncommitted accordion feature that, so long as no event of default exists,
allows the Company to request an increase in the revolving credit facility of up to $75.0 million.
The Credit Facility is a five-year facility scheduled to terminate on January 28, 2025. Borrowings under the Credit
Facility are classified as either “base rate loans” or “eurodollar rate loans”. Base rate loans accrue interest at a base
rate equal to the highest of (A) the Federal Funds Rate plus 0.50%, (B) the Agent’s prime rate, and (C) LIBOR plus
1.00% plus an applicable margin that is set at 0.50% through June 30, 2020 and adjusted quarterly thereafter between
0.25% and 0.75% based on the ratio of the daily average availability under the Credit Facility to the daily average of
the lesser of the borrowing base or the revolving credit facility. Eurodollar rate loans accrue interest at LIBOR plus
an applicable margin that is set at 1.50% through June 30, 2020 and adjusted quarterly thereafter between 1.25% and
1.75% based on the ratio of the daily average availability under the Credit Facility to the daily average of the lesser of
the borrowing base or the revolving credit facility. The Credit Facility includes, within its $250.0 million revolving
credit facility, a letter of credit sub-facility in an aggregate amount of $75.0 million and a swingline sub-facility in an
aggregate amount of $25.0 million. An unused line fee of 0.25% is applied to the average daily amount by which the
lenders’ aggregate revolving commitments exceed the outstanding principal amount of revolver loans and aggregate
undrawn amount of all outstanding letters of credit issued under the Credit Facility. The Credit Facility is secured by
47
a pledge of substantially all of the Company’s assets, excluding, among other things, any real estate or revenue
equipment financed outside the Credit Facility.
Borrowings under the Credit Facility are subject to a borrowing base limited to the lesser of (A) $250.0 million; or
(B) the sum of (i) 87.5% of eligible billed accounts receivable, plus (ii) 85.0% of eligible unbilled accounts receivable
(less than 30 days), plus (iii) 85.0% of the net orderly liquidation value percentage applied to the net book value of
eligible revenue equipment, plus (iv) the lesser of (a) 80.0% the fair market value of eligible real estate or (b) $25.0
million. The Credit Facility contains a single springing financial covenant, which requires a consolidated fixed charge
coverage ratio of at least 1.0 to 1.0. The financial covenant is tested only in the event excess availability under the
Credit Facility is less than the greater of (A) 10.0% of the lesser of the borrowing base or revolving credit facility or
(B) $20.0 million.
The Credit Facility includes usual and customary events of default for a facility of this nature and provides that, upon
the occurrence and continuation of an event of default, payment of all amounts payable under the Credit Facility may
be accelerated, and the lenders’ commitments may be terminated. The Credit Facility contains certain restrictions and
covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate transactions, and
other indebtedness.
See Notes 9 and 10 to the accompanying consolidated financial statements for additional disclosures regarding our
debt and leases, respectively.
Cash Flows
Our summary statements of cash flows for the periods indicated are set forth in the table below:
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Operating Activities
Year Ended December 31,
2019
2018
(in thousands)
$ 103,749 $ 112,347
(166,089)
66,186
(81,630)
(38,108)
For 2019, we generated cash flows from operating activities of $103.7 million, a decrease of $8.6 million compared
to 2018. The decrease was due primarily to a $47.5 million decrease in net income adjusted for noncash items, partially
offset by a $31.4 decrease in our operating assets and liabilities and a $7.5 million interest paid in kind decrease. Our
operating assets and liabilities decreased $31.4 million during 2019, as compared to 2018, due in part to increased
accounts receivable collections, and decreased payments for accounts payable and other accrued liabilities partially
offset by an increase in accrued wages and benefit payments related to timing of payments. Our net income adjusted
for noncash items decreased in part due to decreased revenue per tractor, decreased gross margins within our
Brokerage segment combined with increased driver wages and equipment costs partially offset by decreased interest
expense.
Investing Activities
For 2019, net cash flows used in investing activities were $81.6 million, a decrease of $84.5 million compared to 2018.
This decrease is primarily the result of decreased equipment purchases as compared to 2018 combined with increased
proceeds from sale of property and equipment. During the fourth quarter of 2019, we received proceeds in the amount
of $31.6 million related to a terminal sale and a sale leaseback transaction. We expect our net capital expenditures for
calendar year 2020 will approximate $140.0 million to $150.0 million to execute our equipment replacement strategy
and will be financed with cash from operations, borrowings on our line of credit and secured debt financing.
Financing Activities
For 2019, net cash flows used in financing activities were $38.1 million, compared to $66.2 million provided by
financing activities in 2018. The change is primarily due to increased debt repayments in excess of debt borrowings
and IPO funds combined with the purchase of the remaining 10% of Total Transportation for $8.7 million as compared
to the same period in 2018. During June of 2018, we completed our IPO and received approximately $246.6 million
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in cash net of expenses. The proceeds from the IPO were primarily used to pay down existing debt resulting in a net
decrease of $236.2 million
Working Capital
As of December 31, 2019, we had a working capital deficit of $48.8 million, representing a $70.1 million decrease in
our working capital from December 31, 2018. Our current liabilities increased by $69.9 million as a result of the
adoption of the new lease standard. When we analyze our working capital, we typically exclude balloon payments in
the current maturities of long-term debt as these payments are typically either funded with the proceeds from
equipment sales or addressed by extending the maturity of such payments. We believe this facilitates a more
meaningful analysis of our changes in working capital from period-to-period. Excluding balloon payments included
in current maturities of long-term debt and the current portion of our operating lease liability as of December 31, 2019,
we had a working capital surplus of $36.8 million, compared with a working capital surplus of $83.3 million at
December 31, 2018. Excluding only the balloon payments included in current maturities of debt, we had a working
capital deficit of $33.0 million at December 31, 2019. The decrease in working capital was a result of decreased
receivables and assets held for sale combined with increased accounts payable, claims and insurance accruals and
current maturities of long term debt excluding balloon payments. Assets held for sale decreased primarily due to the
divesture of Xpress Internacional in January 2019.
Working capital deficits are common to many trucking companies that operate by financing revenue equipment
purchases through borrowing or finance leases and who use operating leases. When we finance revenue equipment
through borrowing or finance leases, the principal amortization scheduled for the next twelve months is categorized
as a current liability, although the revenue equipment is classified as a long-term asset. Consequently, each purchase
of revenue equipment financed with borrowing or finance leases decreases working capital. Similarly, our operating
lease right of use assets are classified as long-term, while a portion of the corresponding lease liabilities are classified
as a current liability. We believe a working capital deficit has little impact on our liquidity. Based on our expected
financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other
sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and
projected needs and we do not expect to experience material liquidity constraints in the foreseeable future.
Contractual Obligations and Commercial Commitments
The table below summarizes our contractual obligations as of December 31, 2019:
Payments Due by Period
Less than
1 year
1-3 years
More than
5 years
3-5 years
(in thousands)
Total
Long-term debt obligations(1)
Finance lease obligations(2)
Operating lease obligations(3)
Purchase obligations(4)
Other obligations(5)
Total contractual obligations(6)
$ 91,597 $ 129,216 $ 189,403 $ 24,459 $ 434,675
12,441
310,856
111,203
1,023
$ 289,667 $ 265,592 $ 254,957 $ 59,982 $ 870,198
1,720
63,834
—
—
5,504
130,872
—
—
5,217
80,627
111,203
1,023
—
35,523
—
—
(1) Including interest obligations on long-term debt, excluding fees. The table assumes long-term debt is held to
maturity and does not reflect events subsequent to December 31, 2019.
(2) Including interest obligations on finance lease obligations.
(3) We lease certain revenue and service equipment and office and service center facilities under long-term, non-
cancelable operating lease agreements expiring at various dates through December 2034. Revenue equipment
lease terms are generally three to five years for tractors and five to eight years for trailers. The lease terms and
any subsequent extensions generally represent the estimated usage period of the equipment, which is generally
substantially less than the economic lives. Certain revenue equipment leases provide for guarantees by us of a
portion of the specified residual value at the end of the lease term. The maximum potential amount of future
payments (undiscounted) under these guarantees is approximately $91.5 million at December 31, 2019. The
residual value of a portion of the related leased revenue equipment is covered by repurchase or trade agreements
between us and the equipment manufacturer.
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(4) We had commitments outstanding at December 31, 2019 to acquire revenue equipment. The revenue equipment
commitments are cancelable, subject to certain adjustments in the underlying obligations and benefits. These
purchase commitments are expected to be financed by operating leases, long-term debt, proceeds from sales of
existing equipment and cash flows from operating activities.
(5) Represents a commitment to fund the remaining purchase price of a small truckload carrier we acquired in 2017.
(6) Excludes deferred taxes and long or short-term portion of self-insurance claims accruals.
Off-Balance Sheet Arrangements
The Company has letters of credit of $32.7 million outstanding as of December 31, 2019. The letters of credit are
maintained primarily to support the Company’s insurance program.
The Company had cancelable commitments outstanding at December 31, 2019 to acquire revenue equipment for
approximately $111.2 million in 2020. These purchase commitments are expected to be financed by operating leases,
long-term debt, proceeds from sales of existing equipment, and cash flows from operations.
INFLATION
Inflation in the price of revenue equipment, tires, diesel fuel, health care, operating tolls and taxes and other items has
impacted our operating costs over the past several years. A prolonged or more severe period of inflation in these or
other items would adversely affect our results of operations unless freight rates correspondingly increase. Historically,
the majority of the increase in fuel costs has been passed on to our customers through a corresponding increase in fuel
surcharge revenue, making the impact of the increased fuel costs on our results of operations less severe. Inflation
related to other costs is not directly covered from our customers through a surcharge mechanism. Because these
potential cost increases would be relatively consistent across the industry, we would expect corresponding rate
increases generally to offset these increased costs over time. If these and other costs escalate and we are unable to
recover such costs timely with effective fuel surcharges and rate increases, it would have an adverse effect on our
operations and profitability.
CRITICAL ACCOUNTING POLICIES
In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of
results of operations and financial position in the preparation of our financial statements in conformity with GAAP.
Actual results could differ significantly from those estimates under different assumptions and conditions. We believe
that the following discussion addresses our most critical accounting policies, which are those that are most important
to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective
and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently
uncertain.
Recognition of Revenue
We adopted ASU 2014-09 effective January 1, 2018 by using the modified retrospective transition approach and
recognizing the cumulative effect of the change in retained earnings for all contracts. The primary impact of adopting
Accounting Standards Codification (“ASC”) 606 is the earlier recognition of revenue for loads that are in route as of
the balance sheet date. Under previous GAAP, we recognized revenue and direct costs when shipments were delivered.
Under ASC 606, we are required to recognize revenue and related direct costs over time as the shipment is being
delivered. The adoption of ASC 606 resulted in a positive cumulative adjustment to opening equity of approximately
$1.5 million.
We generate revenues primarily from shipments executed by our Truckload and Brokerage operations. Those
shipments are our performance obligations, arising under contracts we have entered into with customers. Under the
terms of a contract, revenue is recognized when obligations are satisfied, which occurs over time with the transit of
shipments from origin to destination. Fuel, driver wages and purchased transportation are similarly accrued over time.
This is appropriate as the customer simultaneously receives and consumes the benefits as we perform our obligation.
Revenue is measured as the amount of consideration we expect to receive in exchange for providing services. The
most significant judgment used in recognition of revenue is the determination of percent of total miles to be driven
for a completed trip as the basis for determining the amount of revenue to be recognized for partially fulfilled
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obligations. Accessorial charges for fuel surcharge, loading and unloading, stop charges, and other immaterial charges
are part of the consideration we receive for the single performance obligation of delivering shipments. Contracts
entered into with our customers do not contain material financing components.
Certain incremental revenue-related costs associated with obtaining a contract are capitalized. The majority of revenue
contracts with our customers have a duration of one year or less and do not require any significant start-up costs, and
as such, costs incurred to obtain contracts associated with these contracts are expensed as incurred. For contracts with
durations exceeding one year, incremental start-up costs are capitalized and amortized on a straight line basis over the
contract period which materially represents the period of revenue generation. Capitalized start-up costs are immaterial
to us for all periods presented.
Through our Brokerage operations, we outsource the transportation of the loads to third-party carriers. We are a
principal in these arrangements, and therefore records revenue associated with these contracts on a gross basis. We
have the primary responsibility to meet the customer’s requirements. We invoice and collect from our customers and
also maintain discretion over pricing. Additionally, we are responsible for selection of third-party transportation
providers to the extent used to satisfy customer freight requirements.
Income Taxes
Significant management judgment is required in determining our provision for income taxes and in determining
whether deferred tax assets will be realized in full or in part. Deferred tax assets and liabilities are measured using
enacted tax rates that are expected to apply to taxable income in years in which the temporary differences are expected
to be recovered or settled. When it is more likely than not that all or some portion of specific deferred tax assets, such
as state tax credit carry-forwards or state net operating loss carry-forwards will not be realized, a valuation allowance
must be established for the amount of the deferred tax assets that are determined to be not realizable.
The determination of the combined tax rate used to calculate our provision for income taxes for both current and
deferred income taxes also requires significant judgment by management. We value the net deferred tax asset or
liability by using enacted tax rates that we believe will be in effect when these temporary differences are recovered or
settled. We use the combined tax rates at the time the financial statements are prepared since more accurate information
is not available. If changes in the federal statutory rate or significant changes in the statutory state and local tax rates
occur prior to or during the reversal of these items or if our filing obligations were to change materially, this could
change the combined rate and, by extension, our provision for income taxes. We account for uncertain tax positions
in accordance with ASC 740, Income Taxes and record a liability when such uncertainties meet the more likely than
not recognition threshold.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-
line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful lives
of the related assets (net of estimated salvage value or trade-in value). We generally use estimated useful lives of three
to five years for tractors and 10 or more years for trailers with estimated salvage values ranging from 25% to 50% of
the capitalized cost. The depreciable lives of our revenue equipment represent the estimated usage period of the
equipment, which is generally substantially less than the economic lives. The residual value of a substantial portion
of our equipment is covered by repurchase or trade agreements between us and the equipment manufacturer.
Periodically, we evaluate the useful lives and salvage values of our revenue equipment and other long-lived assets
based upon, but not limited to, our experience with similar assets including gains or losses upon dispositions of such
assets, conditions in the used equipment market and prevailing industry practices. Changes in useful lives or salvage
value estimates, or fluctuations in market values that are not reflected in our estimates, could have a material impact
on our financial results. Further, if our equipment manufacturer does not perform under the terms of the agreements
for guaranteed trade-in values, such non-performance could have a materially negative impact on financial results.
We review our property and equipment whenever events or circumstances indicate the carrying amount of the asset
may not be recoverable. An impairment loss equal to the excess of carrying amount over fair value would be
recognized if the carrying amount of the asset is not recoverable.
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Goodwill and Other Intangible Assets
When testing for goodwill impairment, we first assess qualitative factors to determine whether it is necessary to
perform the two-step quantitative goodwill impairment test. We are not required to calculate the fair value of a
reporting unit unless we determine, based on the qualitative review, that it is more likely than not that its fair value is
less than its carrying amount. Current guidance includes events and circumstances for us to consider when conducting
the qualitative assessment. In the fourth quarter of 2019, we evaluated goodwill using the qualitative factors prescribed
to determine whether to perform the two-step quantitative goodwill impairment test. The assessment of qualitative
factors requires judgment, including identification of reporting units, evaluation of macroeconomic conditions,
analysis of industry and market conditions, measurement of cost factors and identification of entity-specific events
(such as financial performance).
Trade names are valued based on various factors including the projected revenue stream associated with the intangible
asset. The Company’s trade names have an indefinite life. In 2013, we adopted ASU 2012-02, Testing Indefinite-
Lived Intangible Assets for Impairment, which allows companies to waive comparing the fair value of indefinite-lived
intangible assets to their carrying amounts in assessing the recoverability of these assets if, based on qualitative factors,
it is more likely than not that the fair value of the indefinite-lived intangible assets is greater than their carrying
amounts. In the fourth quarter of 2019, the Company performed the qualitative assessment of its indefinite-lived
intangible assets and concluded it was more likely than not that the fair value of each of the assets is greater than its
carrying amount. Therefore, the Company concluded it was not necessary to perform the quantitative impairment test.
Claims and Insurance Accruals
Claims and insurance accruals consist of estimates of cargo loss, physical damage, group health, liability (personal
injury and property damage) and workers’ compensation claims and associated legal and other expenses within our
established retention levels. Claims in excess of retention levels are generally covered by insurance in amounts we
consider adequate. Claims accruals represent the uninsured portion of pending claims including estimates of adverse
development of known claims, plus an estimated liability for incurred but not reported claims and the associated
expense. Accruals for cargo loss, physical damage, group health, liability and workers’ compensation claims are
estimated based on our evaluation of the type and severity of individual claims and historical information, primarily
our own claims experience, along with assumptions about future events combined with the assistance of independent
actuaries in the case of workers’ compensation and liability. Changes in assumptions as well as changes in actual
experience could cause these estimates to change in the near future.
Workers’ compensation and liability claims are particularly subject to a significant degree of uncertainty due to the
potential for growth and development of the claims over time. Claims and insurance reserves related to workers’
compensation and liability are estimated by a third-party actuary and we refer to these estimates in establishing the
reserve. Liability reserves are estimated based on historical experience and trends, the type and severity of individual
claims and assumptions about future costs. Further, in establishing the workers’ compensation and liability reserves,
we must take into account and estimate various factors, including, but not limited to, assumptions concerning the
nature and severity of the claim, the effect of the jurisdiction on any award or settlement, the length of time until
ultimate resolution, inflation rates in health care and in general, interest rates, legal expenses and other factors. Our
actual experience may be different than our estimates, sometimes significantly. Changes in assumptions made in
actuarial studies could potentially have a material effect on the provision for workers’ compensation and liability
claims. Additionally, if any claim were to exceed our coverage limits, we would have to accrue for and pay the excess
amount, which could have a material adverse effect on our financial condition, results of operations and cash flows.
Lease Accounting Transactions
We adopted ASC 842 using the modified retrospective approach and applied the transition provisions with an effective
date as of January 1, 2019 for leases that existed on that date. Prior period results continue to be presented under ASC
840 based on the accounting originally in effect for such periods. We elected the “package of practical expedients”
under ASC 842 which permits us to not reassess our historical assessments of (1) whether contracts are or contain
leases, (2) lease classification and (3) initial direct costs. We also elected the practical expedient to not reassess certain
land easements. We did not elect the use-of-hindsight practical expedient during the transition of ASC 842. Adoption
of ASC 842 resulted in the recording of operating lease ROU assets and corresponding operating lease liabilities of
approximately $183.0 million.
We determine if an arrangement is a lease or contains a lease at inception and perform an analysis to determine whether
the lease is an operating lease or a finance lease. We measure right-of-use (“ROU”) assets and lease liabilities at the
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lease commencement date based on the present value of the remaining lease payments. As most of our leases do not
provide a readily determinable implicit rate, we estimate an incremental borrowing rate based on the credit quality of
the Company and by comparing interest rates available in the market for similar borrowings, and adjusting this amount
based on the impact of collateral over the term of each lease. We use this rate to discount the remaining lease payments
in measuring the ROU asset and lease liability. We use the implicit rate when readily determinable. We recognize
lease expense for operating leases on a straight-line basis over the lease term. For our finance leases, we recognize
amortization expense from the amortization of the ROU asset and interest expense on the related lease liability. We
do not separate lease and nonlease components of contracts, except for certain leased information technology assets
that are embedded within various service agreements. The lease components included in those agreements are included
in the ROU asset and lease liability, and the amounts are not significant.
Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet. We recognize
lease expense for these leases on a straight-line basis over the lease term.
We are liable for residual value guarantees in connection with certain of our operating leases of certain revenue
equipment. If we do not purchase this leased equipment from the lessor at the end of the lease term, we are liable to
the lessor for an amount equal to the shortage (if any) between the proceeds from the sale of the equipment and an
agreed value up to a maximum shortfall per unit. For certain of these tractors, we have residual value agreements from
manufacturers at amounts sufficient to satisfy our residual obligation to the lessors. For all other equipment (or to the
extent we believe any manufacturer will refuse or be unable to meet its obligation), we are required to recognize
additional rental expense to the extent we believe the fair market value at the lease termination will be less than our
obligation to the lessor. We believe that proceeds from the sale of equipment under operating leases would exceed the
payment obligation on substantially all operating leases. The estimated values at lease termination involve
management judgments.
Recent Accounting Pronouncements
See Note 2 of the accompanying consolidated financial statements for information about recent accounting
pronouncements.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk is affected by changes in interest rates. Historically, we have used a combination of fixed rate and
variable rate obligations to manage our interest rate exposure. Fixed rate obligations expose us to the risk that interest
rates might fall. Variable rate obligations expose us to the risk that interest rates might rise. We currently do not have
any interest rate swaps although we may enter into such swaps in the future.
We are exposed to variable interest rate risk principally from our Credit Facility. We are exposed to fixed interest rate
risk principally from equipment notes and mortgages. At December 31, 2019, we had net borrowings totaling $396.0
million comprised of $150.0 million of variable rate borrowings and $246.0 million of fixed rate borrowings.
Accordingly, holding other variables constant (including borrowing levels), the earnings impact of a one-percentage
point increase/decrease in interest rates would not have a significant impact on our consolidated financial statements.
Fuel is one of our largest expenditures. The price and availability of diesel fuel fluctuate due to changes in production,
seasonality and other market factors generally outside our control. Most of our customer contracts contain fuel
surcharge provisions to mitigate increases in the cost of fuel. Fuel surcharges to customers do not fully recover all fuel
increases because customers generally pay surcharges on a mileage basis and therefore do not generally pay for fuel
consumed while traveling out-of-route or non-revenue generating miles, while the tractor is idling and in certain other
instances. We believe that our fuel surcharge program adequately protects us from risks relating to fluctuating fuel
prices, and accordingly, we terminated all fuel purchase arrangements as of December 31, 2017, and do not expect to
enter into fuel purchase arrangements in the near term. We cannot predict the extent to which fuel prices will increase
or decrease in the future or the extent to which fuel surcharges could be collected.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of U.S. Xpress Enterprises, Inc. and subsidiaries, including the consolidated
balance sheets as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive income
(loss), of stockholders’ deficit and of cash flows for each of the three years in the period ended December 31, 2019,
together with the related notes, and the report of PricewaterhouseCoopers LLP, our independent registered public
53
accounting firm as of December 31, 2019 and 2018, for each of the three years in the period ended December 31, 2019
are set forth at pages 58 through 88 elsewhere in this report.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On March 10, 2020, the Audit Committee dismissed PricewaterhouseCoopers LLP (“PwC”) as its independent
registered public accounting firm.
The reports of PwC on the financial statements for the fiscal years ended December 31, 2019 and 2018 contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principle. During the fiscal years ended December 31, 2019 and December 31, 2018 and the subsequent
interim period through March 10, 2020, there were no disagreements (as that term is defined in Item 304(a)(1)(iv) of
Regulation S-K and the related instructions to Item 304) with PwC on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements if not resolved to the satisfaction
of PwC would have caused PwC to make reference thereto in its reports on the Company’s financial statements for
such years. During the fiscal years ended December 31, 2019 and 2018 and the subsequent interim period through
March 10, 2020, there have been no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-
K), except for the material weaknesses identified in the Company’s internal control over financial reporting related to
(1) ineffective information technology controls with respect to program development, change management, computer
operations, and user access to programs and data, (2) the design of controls over income tax accounting, (3) evidential
matter supporting the design and implementation of controls, and (4) the control activities component of the COSO
framework. The material weaknesses described in (2), (3), and (4) were subsequently remediated as of December 31,
2019.
On March 11, 2020, the accounting firm of Grant Thornton was engaged by the Audit Committee as the Company’s
new independent registered public accounting firm to perform independent audit services for the Company for the
fiscal year ending December 31, 2020 (including with respect to the Company's quarterly period ending March 31,
2020), effective immediately.
During the fiscal year ended December 31, 2019 and December 31, 2018 and through the subsequent interim period
as of March 11, 2020, neither the Company, nor any party on behalf of the Company, consulted with Grant Thornton
with respect to either (i) the application of accounting principles to a specified transaction, either completed or
proposed, or the type of the audit opinion that might be rendered with respect to the Company's consolidated financial
statements, and no written report or oral advice was provided to the Company by Grant Thornton that was an important
factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue,
or (ii) any matter that was subject to any “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation
S-K and the related instructions) or a “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-
K).
Evaluation of Disclosure Controls and Procedures
CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), has
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of December 31, 2019. This evaluation is performed to determine if our
disclosure controls and procedures are effective to provide reasonable assurance that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to
management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure
and are effective to provide reasonable assurance that such information is recorded, processed, summarized and
reported within the time periods specified by the SEC’s rules and forms. Due to the material weakness described
below and the Company’s evaluation, the CEO and CFO have concluded that our disclosure controls and procedures
were not effective to provide reasonable assurance as of December 31, 2019.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f).
54
Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process
that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from
human failures. Internal control over financial reporting also can be circumvented by collusion or improper
management override. Because of such limitations, there is a risk that material misstatements will not be prevented or
detected on a timely basis by internal control over financial reporting. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of our
internal control over financial reporting as of December 31, 2019. In making this assessment, management used the
criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control - Integrated Framework (2013). Based on this assessment, management has concluded that the Company did
not maintain effective internal control over financial reporting as of December 31, 2019, due to the material weakness
discussed below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not
be prevented or detected on a timely basis.
We did not design effective information technology general computer controls with respect to program development,
change management, computer operation, and user access to programs and data. This deficiency did not result in a
material misstatement to our annual or interim consolidated financial statements. However, this deficiency could
result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a
material misstatement to the annual or interim financial statements that would not be prevented or detected. Therefore,
we concluded the deficiency is a material weakness.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which
appears in this 2019 Annual Report.
Remediation of Previously Disclosed Material Weaknesses
Income Taxes
We previously identified a material weakness in the design of controls over income tax accounting. During 2019, we
implemented new control activities and enhanced the design of our existing quarterly and year-end control activities
over income tax accounting. Based on the results of our testing, we have concluded that the controls are adequately
designed and have operated effectively for a sufficient period of time during 2019. Accordingly, the material weakness
in the design of controls over income tax accounting is remediated as of December 31, 2019.
Evidential Matter
We previously identified a material weakness in respect to the evidential matter supporting the design and
implementation of our controls. During 2019, we designed, implemented, and enhanced controls over the retention of
evidential matter supporting the design, implementation, and operating effectiveness of controls. Based on the results
of our testing, we have concluded that there was sufficient evidential matter to support the design, implementation,
and operating effectiveness of controls. Accordingly, the material weakness with respect to the evidential matter
supporting the design and implementation of our controls is remediated as of December 31, 2019.
Control Activities
We previously identified a material weakness in respect to the control activities component of the COSO framework.
During 2019, we designed, implemented, and enhanced control activities throughout our organization. Based on the
results of our testing, we have concluded that these control activities are adequately designed and have operated
effectively for a sufficient period of time during 2019. Accordingly, the material weakness with respect to the control
activities component of the COSO framework is remediated as of December 31, 2019.
Remediation Efforts and Status of Remaining Material Weakness
Information Technology General Controls:
55
During 2019, we implemented new or enhanced existing controls governing program development, change
management, computer operations, and user access to programs and data. However, we believe additional time is
needed to demonstrate the sustainability and effectiveness of the established controls before concluding on
remediation.
Changes in Internal Control Over Financial Reporting
During the fiscal quarter ended December 31, 2019, we made enhancements to our information technology controls
governing change management and access to programs and data that have materially affected, or are reasonably likely
to materially affect, our internal control over financial reporting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table provides certain information, as of December 31, 2019, with respect to our compensation plans
and other arrangements under which shares of our Class A common stock are authorized for issuance.
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to be
issued upon exercise of Weighted average exercise
price of outstanding options,
warrants and rights
(b)
outstanding options,
warrants and rights
(a)
Number of securities
remaining eligible for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
1,548,379 (1) $
11.93 (2)
3,988,937 (3)
—
1,548,379 $
—
11.93
—
3,988,937
(1) Represents 242,877 shares of Class A common stock underlying unvested Class A RSUs granted under our
Restricted Membership Units Plan (the “RMUP”) prior to the IPO and 712,264 shares of Class A common stock
underlying unvested Class A RSUs, 195,824 shares of Class A common stock underlying unvested Class A
restricted stock awards and 397,414 shares of Class A common stock underlying unexercised Class A options
granted under our 2018 Omnibus Incentive Plan (the “Incentive Plan”).
(2) The weighted-average exercise price does not reflect the shares that will be issued in connection with the
settlement of RSUs and restricted stock awards, since they have no exercise price.
(3) Includes 1,768,877 Class A shares available for issuance under the Incentive Plan and 2,220,060 Class A shares
available for issuance under our Employee Stock Purchase Plan of which 98,179 were subsequently issued on
January 2, 2020.
The following table provides certain information, as of December 31, 2019, with respect to our compensation plans
and other arrangements under which shares of our Class B common stock are authorized for issuance.
Plan category
Equity compensation plans approved
by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to be
issued upon exercise of Weighted average exercise
price of outstanding options,
warrants and rights
(b)
outstanding options,
warrants and rights
(a)
issuance under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
Number of securities
remaining eligible for future
600,011 (1) $
—
600,011 $
— (2)
—
—
—
—
—
(1) Represents unvested Class B RSUs granted under the RMUP prior to the IPO.
56
(2) There is no weighted-average exercise price since RSUs have no exercise price.
We incorporate by reference the information set forth under the section entitled “Security Ownership of Certain
Beneficial Owners and Management” in the Proxy Statement.
A copy of our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the Securities
and Exchange Commission, may be obtained by stockholders of record without charge upon written request to
Nathan Harwell, Executive Vice President, Chief Legal Officer, and Secretary, at 4080 Jenkins Road,
Chattanooga, Tennessee 37421.
57
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of U.S. Xpress Enterprises, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of U.S. Xpress Enterprises, Inc. and its subsidiaries
(the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive
income (loss), of stockholders' equity (deficit) and of cash flows for each of the three years in the period ended
December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material
respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control
over financial reporting existed as of that date related to ineffective information technology general computer controls
with respect to program development, change management, computer operation, and user access to programs and data.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not
be prevented or detected on a timely basis. The material weakness referred to above is described in Management’s
Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness
in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial
statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting
does not affect our opinion on those consolidated financial statements.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
accounts for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in management's report referred to above. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
58
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 4, 2020
We have served as the Company’s auditor since 2015.
59
U.S. Xpress Enterprises, Inc.
Consolidated Balance Sheets
December 31, 2019 and 2018
(in thousands, except share amounts)
Assets
Current assets
Cash and cash equivalents
Customer receivables, net of allowance of $63 and $59 at December 31, 2019 and December 31, 2018,
respectively
Other receivables
Prepaid insurance and licenses
Operating supplies
Assets held for sale
Other current assets
Total current assets
Property and equipment, at cost
Less accumulated depreciation and amortization
Net property and equipment
Other assets
Operating lease right of use assets
Goodwill
Intangible assets, net
Other
Total other assets
Total assets
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable
Book overdraft
Accrued wages and benefits
Claims and insurance accruals, current
Other accrued liabilities
Liabilities associated with assets held for sale
Current portion of operating lease liabilities
Current maturities of long-term debt and finance leases
Total current liabilities
Long-term debt, net of current maturities
Less unamortized discount and debt issuance costs
Net long-term debt
Deferred income taxes
Long-term liabilities associated with assets held for sale
Other long-term liabilities
Claims and insurance accruals, long-term
Noncurrent operating lease liabilities
Commitments and contingencies (Note 12)
Stockholders' Equity
Common stock Class A, $.01 par value, 140,000,000 shares authorized at December 31, 2019 and
December 31, 2018, respectively, 33,314,141 and 32,859,292 issued and outstanding at
December 31, 2019 and December 31, 2018, respectively
Common stock Class B, $.01 par value, 35,000,000 authorized at December 31, 2019 and
December 31, 2018, respectively, 15,687,101 and 15,486,560 issued and outstanding at
December 31, 2019 and December 31, 2018, respectively
Additional paid-in capital
Accumulated deficit
Stockholders' equity
Noncontrolling interest
Total stockholders' equity
Total liabilities, redeemable restricted units and stockholders' equity
See Notes to Consolidated Financial Statements
60
December 31, December 31,
2019
2018
$
5,687
$
9,892
$
$
183,706
15,253
11,326
7,193
17,732
15,831
256,728
880,101
(388,318)
491,783
276,618
57,708
27,214
30,058
391,598
1,140,109
68,918
1,313
24,110
51,910
9,127
—
69,866
80,247
305,491
315,797
(1,223)
314,574
20,692
—
5,249
56,910
206,357
—
$
$
190,254
20,430
11,035
7,324
33,225
13,374
285,534
898,530
(379,813)
518,717
—
57,708
28,913
19,615
106,236
910,487
63,808
—
24,960
47,442
8,120
6,856
—
113,094
264,280
312,819
(1,347)
311,472
19,978
8,353
7,713
60,304
—
—
333
329
157
250,700
(20,982)
230,208
628
230,836
1,140,109
$
$
155
251,742
(17,335)
234,891
3,496
238,387
910,487
U.S. Xpress Enterprises, Inc.
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31, 2019, 2018 and 2017
(in thousands, except per share amounts)
Operating revenue
Revenue, before fuel surcharge
Fuel surcharge
Total operating revenue
Operating expenses
Salaries, wages, and benefits
Fuel and fuel taxes
Vehicle rents
Depreciation and amortization, net of (gain) loss on sale of property
Purchased transportation
Operating expenses and supplies
Insurance premiums and claims
Operating taxes and licenses
Communications and utilities
General and other operating expenses
Gain on sale of subsidiary
Impairment of assets held for sale
Total operating expenses
Operating income
Other expense (income)
Interest expense, net
Early extinguishment of debt
Impairment of equity method investments or note receivable
Equity in loss of affiliated companies
Other, net
Income (loss) before income tax provision
Income tax provision (benefit)
Net total and comprehensive income (loss)
2019
2018
2017
$ 1,538,450 $ 1,622,083 $ 1,417,173
138,212
1,555,385
182,832
1,804,915
168,911
1,707,361
530,885
189,800
80,064
94,337
481,589
118,394
88,959
13,849
8,928
75,317
(831)
—
1,681,291
26,070
535,994
227,525
78,639
97,954
481,945
118,064
85,075
14,133
9,575
66,412
—
10,693
1,726,009
78,906
543,735
219,515
74,377
93,369
308,624
126,700
77,430
13,769
7,683
61,575
—
—
1,526,777
28,608
21,635
—
6,793
270
26
28,724
(2,654)
389
(3,043)
34,866
7,753
1,804
381
136
44,940
33,966
7,860
26,106
49,758
—
—
1,350
(1,376)
49,732
(21,124)
(17,187)
(3,937)
Net total and comprehensive income (loss) attributable to noncontrolling
interest
604
1,207
123
Net total and comprehensive income (loss) attributable to controlling
interest
$
(3,647) $
24,899 $
(4,060)
Earnings (loss) per share
Basic earnings (loss) per share
Basic weighted average shares outstanding
Diluted earnings (loss) per share
Diluted weighted average shares outstanding
$
$
(0.07) $
0.84 $
48,788
29,470
(0.07) $
0.83 $
48,788
30,133
(0.64)
6,385
(0.64)
6,385
See Notes to Consolidated Financial Statements
61
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U.S. Xpress Enterprises, Inc.
Consolidated Statements of Cash Flows
December 31, 2019, 2018 and 2017
(in thousands)
Operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Early extinguishment of debt
Impairments of assets held for sale and equity method investments and note receivable
Equity in loss of affiliated companies
Deferred income tax provision (benefit)
Depreciation and amortization
Losses on sale of equipment
Share based compensation
Other
Interest paid-in-kind
Gain on sale of subsidiary
Changes in operating assets and liabilities:
Receivables
Prepaid insurance and licenses
Operating supplies
Other assets
Accounts payable and other accrued liabilities
Accrued wages and benefits
Net cash provided by operating activities
Investing activities
Payments for purchases of property and equipment
Proceeds from sales of property and equipment
Acquisition of business
Other
Sale of subsidiary, net of cash
Net cash used in investing activities
Financing activities
Borrowings under lines of credit
Payments under lines of credit
Borrowings under long-term debt
Payments of long-term debt
Payments of financing costs and original issue discount
Proceeds from IPO, net of issuance costs
Payments of long-term consideration for business acquisition
Purchase of noncontrolling interest
Tax withholding related to net share settlement of restricted stock awards
Proceeds from issuance of common stock under ESPP
Repurchase of membership units
Book overdraft
Net cash (used in) provided by financing activities
Cash included in assets held for sale
Net change in cash and cash equivalents
Cash and cash equivalents
Beginning of year
End of period
Supplemental disclosure of cash flow information
Cash paid during the year for interest
Cash paid (refunded) during the year for income taxes
Supplemental disclosure of significant noncash investing and financing activities
Lease conversion
Finance lease additions
Finance lease extinguishments
Assumption of debt
Debt obligations relieved in conjunction with the divesture of Xpress Internacional
Financing costs accrued in accounts payable
Property and equipment amounts accrued in accounts payable
Uncollected proceeds from asset sales
Year Ended
December 31,
2018
2019
2017
$
(3,043) $
26,106 $
(3,937)
—
6,793
270
714
90,484
3,853
3,846
660
—
(831)
7,149
(3,294)
70
(7,790)
5,572
(704)
103,749
(151,751)
77,966
—
(2,000)
(5,845)
(81,630)
107,300
(107,300)
106,341
(136,228)
(190)
—
(990)
(8,659)
(44)
349
—
1,313
(38,108)
11,784
(4,205)
7,753
12,497
381
5,691
90,831
7,123
2,248
(2,360)
(7,516)
—
(8,972)
(4,006)
725
(3,438)
(21,020)
6,304
112,347
—
—
1,350
(20,156)
91,340
2,029
673
2,067
1,452
—
(32,051)
45
(510)
(529)
41,930
1,691
85,394
(223,939)
55,370
—
2,480
—
(166,089)
(240,417)
32,183
(2,219)
(758)
—
(211,211)
292,332
(321,665)
362,013
(504,180)
(4,166)
246,616
(1,010)
—
—
—
(217)
(3,537)
66,186
(11,784)
660
387,973
(358,640)
224,102
(118,834)
(5,844)
—
—
—
—
—
(523)
3,537
131,771
—
5,954
$
$
$
9,892
5,687 $
9,232
9,892 $
3,278
9,232
21,136 $
58
47,406 $
1,603
44,073
(208)
— $
—
40
—
7,109
—
3,552
62
— $
439
1,146
—
—
—
1,213
2,671
34,169
1,505
222
5,377
—
1,162
1,196
424
See Notes to Consolidated Financial Statements
63
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
1. Organization and Operations
U.S. Xpress Enterprises, Inc. and its consolidated subsidiaries (collectively, the “Company”, “we”, “us”, “our”, and
similar expressions) provide transportation services throughout the United States and Mexico, with a focus in the
densely populated and economically diverse eastern half of the United States. The Company offers its customers a
broad portfolio of services using its own asset-based truckload fleet and third-party carriers through our non-asset-
based truck brokerage network. The Company has two reportable segments, Truckload and Brokerage. Our
Truckload segment offers asset-based truckload services, including over-the-road (“OTR”) trucking and dedicated
contract services. Our Brokerage segment is principally engaged in non-asset-based freight brokerage services,
where loads are contracted to third-party carriers.
U.S. Xpress Enterprises, Inc. completed its initial public offering in June 2018 (the “IPO” or the “offering”). Prior
to the offering U.S. Xpress Enterprises, Inc. was wholly owned by New Mountain Lake Holdings, LLC (“New
Mountain Lake”). New Mountain Lake was formed on October 12, 2007 solely for the purpose of taking U.S.
Xpress Enterprises, Inc. private and holding 100% ownership of U.S. Xpress Enterprises, Inc. Immediately prior
to the effectiveness of the offering, we completed a series of transactions (collectively, the “Reorganization”)
pursuant to which New Mountain Lake merged with and into the Company, with the Company continuing as the
surviving corporation.
In connection with the Reorganization, we adopted the Second Amended and Restated Certificate of Incorporation
of the Company, and converted into and exchanged the issued and outstanding membership units of New Mountain
Lake immediately prior to the Reorganization for the Company’s common stock. We provided for the issuance of
4.6666667 shares of Class A common stock for each Class B non-voting membership unit in New Mountain Lake
and 4.6666667 shares of Class B common stock for each Class A voting membership unit in New Mountain Lake.
The holders of Class A common stock are entitled to one vote per share and the holders of Class B common stock
are entitled to five votes per share. In the offering, the Company sold 16,668,000 shares of Class A common stock
at a price of $16 per share to the public and received net proceeds of $246.6 million, after deducting underwriting
discounts and commissions and offering expenses.
Under our Articles of Incorporation, our authorized capital stock consists of 140,000,000 shares of Class A common
stock, par value $0.01 per share, 35,000,000 shares of Class B common stock, par value $0.01 per share, and
9,333,333 shares of preferred stock, the rights and preferences of which may be designated by the Board of
Directors.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned and majority-
owned subsidiaries. All significant intercompany transactions and accounts have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates, and such
differences could be material. Significant estimates include useful lives of property and equipment and related
salvage value, claims reserves for liability and workers’ compensation claims and valuation allowance for deferred
tax assets.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid investment instruments with an original maturity of three
months or less.
64
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Customer Receivables and Allowances
Customer receivables are recorded at the invoiced amount, net of allowances for uncollectible accounts and revenue
adjustments. The allowances for uncollectible accounts and revenue adjustments are based on historical experience
as well as any known trends or uncertainties related to customer billing and account collectability. The Company
reviews the adequacy of its allowance for doubtful accounts on a quarterly basis. Past due balances over contractual
payment terms and exceeding specified amounts are reviewed individually for collectability. Receivable balances
are written off when collection is deemed unlikely.
Operating Supplies
Operating supplies consist primarily of parts, materials and supplies for servicing the Company’s revenue and
service equipment. Operating supplies are recorded at the lower of cost (on a first-in, first-out basis) or market.
Tires purchased as part of revenue and service equipment are capitalized as part of the cost of the equipment.
Replacement tires are charged to expense when placed in service.
Assets Held for Sale
Assets held for sale are comprised primarily of revenue equipment no longer being utilized in continuing operations
which are available and ready for sale. Assets held for sale are no longer subject to depreciation and are recorded
at the lower of depreciated book value or fair market value less selling costs. The Company expects to sell these
assets within the next twelve months. At December 31, 2019, assets held for sale was comprised of revenue
equipment and a terminal. At December 31, 2018, assets held for sale included revenue equipment of approximately
$5.2 million and assets of a business held for sale of approximately $28.0 million. See Note 4, Divesture of Xpress
International for more discussion related to the sale of our interest in Xpress Internacional S.A. de C.V. (Xpress
Internacional) during January 2019.
Property and Equipment
Property and equipment are carried at cost. Depreciation of property and equipment is computed using the straight-
line method for financial reporting purposes and accelerated methods for tax purposes over the estimated useful
lives of the related assets (net of salvage values ranging from 25.0% to 50.0% of revenue equipment). The
Company periodically evaluates the estimated useful lives and salvage values of its revenue equipment, due to
changes in business needs and expected usage of the equipment. Upon the retirement of property and equipment,
the related asset cost and accumulated depreciation are removed from the accounts and any gain or loss is included
in depreciation and amortization expense in the Company’s consolidated statements of comprehensive income.
Expenditures for normal maintenance and repairs are expensed. Renewals or betterments that affect the nature of
an asset or increase its useful life are capitalized.
Leases
We determine if an arrangement is a lease or contains a lease at inception and perform an analysis to determine
whether the lease is an operating lease or a finance lease. We measure right-of-use (“ROU”) assets and lease
liabilities at the lease commencement date based on the present value of the remaining lease payments. As most of
our leases do not provide a readily determinable implicit rate, we estimate an incremental borrowing rate based on
the credit quality of the Company and by comparing interest rates available in the market for similar borrowings,
and adjusting this amount based on the impact of collateral over the term of each lease. We use this rate to discount
the remaining lease payments in measuring the ROU asset and lease liability. We use the implicit rate when readily
determinable. We recognize lease expense for operating leases on a straight-line basis over the lease term. For our
finance leases, we recognize amortization expense from the amortization of the ROU asset and interest expense on
the related lease liability. We do not separate lease and nonlease components of contracts, except for certain leased
information technology assets that are embedded within various service agreements. The lease components
included in those agreements are included in the ROU asset and lease liability, and the amounts are not significant.
65
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Leases with an initial term of twelve months or less are not recorded on the consolidated balance sheet. We
recognize lease expense for these leases on a straight-line basis over the lease term.
Impairment of Long Lived Assets
The Company reviews its long-lived assets, including property and equipment, for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not be recoverable. Expected future cash
flows are used to analyze whether an impairment has occurred. If the sum of the expected undiscounted cash flows
is less than the carrying value of the long-lived asset, then an impairment loss is recognized. We measure the
impairment loss by comparing the fair value of the asset to its carrying value. Fair value is determined based on a
discounted cash flow analysis or the appraised value of the assets, as appropriate.
Goodwill
In 2013, the Company adopted Accounting Standards Update (ASU) 2011-08, Testing Goodwill for Impairment,
which allows companies to first assess qualitative factors to determine whether it is necessary to perform the two-
step quantitative goodwill impairment test. Under this standard, the Company would not be required to calculate
the fair value of a reporting unit unless the Company determines, based on the qualitative review, that it is more
likely than not that its fair value is less than its carrying amount. The standard includes events and circumstances
for the Company to consider when conducting the qualitative assessment.
The quantitative impairment test consists of two different steps. The first step identifies potential impairment by
comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value exceeds
its carrying amount, goodwill is not considered impaired and the second step of the test is unnecessary. If the
carrying amount of a reporting unit’s goodwill exceeds its fair value, the second step measures the impairment loss,
if any. The second step compares the implied fair value of goodwill with the carrying amount of that goodwill. The
implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business
combination. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment
loss is recognized in an amount equal to that excess.
The Company performs an annual goodwill impairment analysis at the reporting unit level as of October 1 each
year or when an event occurs which might cause or indicate impairment. The Company performed the qualitative
assessment in the fourth quarter of 2019 and 2018 and concluded it was more likely than not that the fair value of
the Truckload reporting unit was greater than its carrying amount.
Intangible Assets
Customer relationships are valued as part of acquisition-related transactions using the income appraisal
methodology. The income appraisal methodology includes a determination of the present value of future monetary
benefits to be derived from the anticipated income, or ownership, of the subject asset. The value of customer
relationships includes the value expected to be realized from existing contracts as well as from expected renewals
of such contracts and is calculated using unweighted and weighted total undiscounted cash flows as part of the
income appraisal methodology. Customer relationships are amortized over seven to fifteen years. The Company
tests intangible assets with definite lives for impairment if conditions exist that indicate the carrying value may not
be recoverable. There was no impairment of customer relationships in 2019 and 2018.
Trade names are valued based on various factors including the projected revenue stream associated with the
intangible asset. The Company’s trade names have an indefinite life and are not amortized. In the fourth quarter
of 2019 and 2018, the Company performed the qualitative assessment of its trade name assets and concluded it was
more likely than not that the fair value of each of the assets is greater than its carrying amount. Therefore, the
Company concluded it was not necessary to perform the quantitative impairment test.
66
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Book Overdraft
Book overdraft represents outstanding checks in excess of current cash levels. The Company funds its book
overdraft from its line of credit and operating cash flows.
Deferred Financing Costs
The Company presents debt issuance costs as a direct deduction from the related debt, consistent with debt
discounts. Debt issuance costs associated with revolving line-of-credit arrangements are presented as an asset. All
such debt issuance costs are amortized ratably over the term of the arrangement. Term loan debt issuance costs
excluding original issue discount, net of accumulated amortization were $1.2 million and $1.3 million at December
31, 2019 and 2018, respectively. Revolver gross debt issuance costs were $1.5 million at December 31, 2019 and
2018, offset by accumulated amortization of $0.5 million and $0.2 million at December 31, 2019 and 2018,
respectively. Debt issuance cost amortization expense excluding original issue discount was $0.3 million, $1.6
million and $3.4 million in 2019, 2018 and 2017, respectively.
Recognition of Revenue
The Company generates revenues primarily from shipments executed by the Company’s Truckload and Brokerage
operations. Those shipments are the Company’s performance obligations, arising under contracts we have entered
into with customers. Under such contracts, revenue is recognized when obligations are satisfied, which occurs over
time with the transit of shipments from origin to destination. This is appropriate as the customer simultaneously
receives and consumes the benefits as the Company performs its obligation. Revenue is measured as the amount of
consideration the Company expects to receive in exchange for providing services. The most significant judgment
used in recognition of revenue is the determination of miles driven as the basis for determining the amount of
revenue to be recognized for partially fulfilled obligations. Accessorial charges for fuel surcharge, loading and
unloading, stop charges, and other immaterial charges are part of the consideration we receive for the single
performance obligation of delivering shipments. Contracts entered into with our customers do not contain material
financing components.
The majority of revenue contracts with our customers have a duration of one year or less and do not require any
significant start-up costs, and as such, costs incurred to obtain contracts associated with these contracts are expensed
as incurred. For contracts with durations exceeding one year, incremental start-up costs are capitalized and
amortized on a straight line basis over the contract period which materially represents the period of revenue
generation. Incremental capitalized start-up costs totaled $3.2 million and $3.3 million at December 31, 2019 and
2018, respectively, and are included in other current assets in our consolidated balance sheets. Amortization
expense associated with our start up costs was $1.5 million and $1.2 million in 2019 and 2018, respectively.
Through the Company’s Brokerage operations, the Company outsources the transportation of the loads to third-
party carriers. The Company is a principal in these arrangements, and therefore records revenue associated with
these contracts on a gross basis. The Company has the primary responsibility to meet the customer’s requirements.
The Company invoices and collects from its customers and also maintains discretion over pricing. Additionally,
the Company is responsible for selection of third-party transportation providers to the extent used to satisfy
customer freight requirements.
The timing of revenue recognition, billings, cash collections, and allowance for doubtful accounts results in billed
and unbilled receivables on our consolidated balance sheet. The Company receives the unconditional right to bill
when shipments are delivered to their destination. We generally receive payment within 40 days of completion of
performance obligations. Unbilled receivables recorded on the consolidated balance sheet were $2.7 million and
$2.9 million at December 31, 2019 and 2018, respectively and are included in customer receivables in the
consolidated balance sheets.
67
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Income Taxes
Income taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statements carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that
includes the enactment date.
The Company evaluates the need for a valuation allowance on deferred tax assets based on whether it believes that
it is more likely than not all deferred tax assets will be realized. A consideration of future taxable income is made
as well as on-going prudent feasible tax planning strategies in assessing the need for valuation allowances. In the
event it is determined all or part of a deferred tax asset would not be able to be realized, management would record
an adjustment to the deferred tax asset and recognize a charge against income at that time.
The Company’s estimate of the potential outcome of any uncertain tax issue is subject to its assessment of relevant
risks, facts and circumstances existing at that time. The Company accounts for uncertain tax positions in accordance
with ASC 740, Income Taxes, and records a liability when such uncertainties meet the more likely than not
recognition threshold. Potential accrued interest and penalties related to unrecognized tax benefits are recognized
as a component of income tax expense.
Concentration of Credit Risk
Concentrations of credit risk with respect to customer receivables are limited due to the large number of entities
comprising the Company’s customer base and their dispersion across many different industries. Revenues from the
Company’s largest customer accounted for 12.3% of total consolidated revenues before fuel surcharge during 2019.
The Company performs ongoing credit evaluations and generally does not require collateral.
Stock-Based Compensation
The Company has stock-based compensation plans that provide for grants of equity to its management in the form
of stock options, stock appreciation rights, stock awards, restricted stock units, performance awards, performance
units, and any other form established by the Compensation Committee. Stock-based compensation is recognized
over the period for which an employee is required to provide service in exchange for the award. Stock-based
compensation expense is included in salaries, wages, and benefits in the consolidated statements of comprehensive
income.
Claims and Insurance Accruals
Claims and insurance accruals consist of cargo loss, physical damage, group health, liability (personal injury and
property damage) and workers’ compensation claims and associated legal and other expenses within the Company’s
established retention levels. Claims in excess of retention levels are generally covered by insurance in amounts the
Company considers adequate. Claims accruals represent the uninsured portion of the loss and if we are the primary
obligor, the insured portion of pending claims at December 31, 2019 and 2018, plus an estimated liability for
incurred but not reported claims and the associated expense. Accruals for cargo loss, physical damage, group health,
liability and workers’ compensation claims are estimated based on the Company’s evaluation of the type and
severity of individual claims and future development based on historical trends. At December 31, 2019 and 2018,
the amount recorded for both workers’ compensation and auto liability were based in part upon actuarial studies
performed by a third-party actuary.
At December 31, 2019 and 2018, the Company had a claim accrual and corresponding receivable for the amount
above its self-insured retention of $0.4 million, which the Company believes should be sufficient to resolve the
remaining claims. The Company believes the insurers will provide their portion of the remaining claims.
68
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Recently Issued Accounting Standards
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments -Credit Losses (Topic 326) amending how
entities will measure credit losses for most financial assets and certain other instruments that are not measured at
fair value through net income. The guidance requires the application of a current expected credit loss model, which
is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting
periods beginning after December 15, 2019, with early adoption permitted. The Company believes the adoption of
this guidance will not have a material impact on its financial statements.
In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the
Test for Goodwill Impairment,” which eliminates Step 2 from the goodwill impairment testing process. Step 2
measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the
carrying amount. Under the new standard, a goodwill impairment loss is measured as the excess of the carrying
value of a reporting unit over its fair value. The provisions of this update are effective for fiscal years beginning
after December 15, 2019. The Company has evaluated the provisions of the pronouncement and does not expect
the adoption of this guidance will have a material impact on the consolidated financial statements.
On December 18, 2019, the FASB issued ASU 2019-12, which modifies ASC 740 to simplify the accounting for
income taxes. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning
after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including
adoption in interim or annual periods for which financial statements have not yet been issued. The Company has
not early adopted this guidance and will continue to evaluate the impact on its financial statements.
Recently Adopted Accounting Standards
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” and has subsequently issued supplemental
and/or clarifying ASUs (collectively “ASC 842”), in order to increase transparency and comparability by
recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing
arrangements. We adopted ASC 842 using the modified retrospective approach and applied the transition provisions
with an effective date as of January 1, 2019 for leases that existed on that date. Prior period results continue to be
presented under ASC 840 based on the accounting originally in effect for such periods. We elected the “package
of practical expedients” under ASC 842 which permits us to not reassess our historical assessments of (1) whether
contracts are or contain leases, (2) lease classification and (3) initial direct costs. We also elected the practical
expedient to not reassess certain land easements. We did not elect the use-of-hindsight practical expedient during
the transition of ASC 842. Adoption of ASC 842 resulted in the recording of operating lease ROU assets and
corresponding operating lease liabilities of approximately $183.0 million. The adoption of ASC 842 also resulted
in increased disclosure, including qualitative and quantitative disclosures about the nature, amount, timing, and
uncertainty of cash flows arising from leases. See the “Leases” section of this note and Note 10, Leases for
additional information.
3. Income Taxes
The components of income (loss) before income taxes are as follows (in thousands):
2019
2018
$ (2,848) $ 27,262 $ (27,722)
6,598
6,704
$ (2,654) $ 33,966 $ (21,124)
194
2017
Domestic
Mexico
Income (loss) before Income Taxes
69
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
The income tax provision (benefit) for 2019, 2018 and 2017 consists of the following (in thousands):
Current
Federal
State
Mexico
Deferred
Federal
State
Mexico
Income tax provision (benefit)
2019
2018
2017
$
— $ (1,358) $
(325)
—
(325)
911
2,616
2,169
(31)
605
2,396
2,970
(21,190)
(546)
79
1,260
954
—
(20,157)
714
389 $ 7,860 $ (17,187)
5,113
788
(210)
5,691
$
A reconciliation of the income tax provision (benefit) as reported in the consolidated statements of comprehensive
income to the amounts computed by applying federal statutory rate of 21% for 2019 and 2018 and 35% for 2017,
respectively is as follows (in thousands):
2019
2018
2017
Federal income tax at statutory rate
State income taxes, net of federal income tax benefit
Nondeductible per diem paid to drivers
Xpress Internacional activity
Tax credits
Provision to return adjustment
Valuation allowance
Foreign transition tax on deemed distribution
Global intangible low-taxed income (GILTI)
Tax Act impact of federal rate change
Basis difference on assets held for sale
Change in reserve for uncertain tax positions and settlements
Affirmative issue - imputed interest expense
Non-taxable life insurance death benefit
Expiration of federal capital loss carryforward
Excess tax benefits on share-based compensation
Deferred Mexican withholding tax
Other, net
$
(558) $ 7,132 $ (7,437)
(597)
1,319
1,633
2,476
1,182
1,173
76
1,616
(71)
(970)
(1,611)
(1,341)
248
35
(138)
950
2,433
567
2,315
(30)
—
—
1,217
—
(14,723)
—
—
—
(2,524)
—
146
(3,278)
(755)
(1,223)
1,223
—
—
(1,004)
—
—
1,826
—
—
(651)
(459)
876
(876)
—
676
(149)
338
389 $ 7,860 $ (17,187)
Income tax provision (benefit)
$
At December 31, 2018, our analysis is complete for amounts recorded related to the Act. The final amount of the
one-time transition tax imposed by the Act was favorably adjusted by $0.2 million from the original provision
provided in the December 31, 2017 financial statements. There were no other material adjustments related to the
impact of the Act.
Prior to the enactment of the Tax Act, the Company was indefinitely reinvested with respect to undistributed
earnings of foreign subsidiaries. At December 31, 2017, the Company changed its assertion and established a
deferred tax liability of $0.9 million related to foreign withholding taxes that it would incur should it repatriate
these historic earnings. As of December 31, 2018, the Company had an executed letter of intent to sell the stock of
the foreign subsidiaries for which it had previously reflected the $0.9 million deferred tax liability. Since the
Company no longer expects to repatriate these earnings in the future and, instead, sold the stock of these foreign
subsidiaries on January 17, 2019, it has fully reversed the related deferred tax liability. As a result of the Company’s
70
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
disposal of its interests in all foreign subsidiaries on January 17, 2019, there are no longer any undistributed earnings
from foreign subsidiaries that can be indefinitely reinvested,
The tax effect of temporary differences that give rise to significant portions of deferred tax assets and liabilities at
December 31, 2019 and 2018, consists of the following (in thousands):
Deferred tax assets
Allowance for doubtful accounts
Insurance and claims reserves
Compensation and employee benefits
Net operating loss and credit carryforwards
Net capital loss carryforward
Finance lease obligations
Investment in subsidiaries
Operating lease liabilities
Notes receivable reserve
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Property and equipment
Intangibles
Prepaid license fees
Right of use assets
Other
Total deferred tax liabilities
Net deferred tax liability
2019
2018
$ 2,075 $ 1,333
22,503
2,973
53,552
—
4,782
6,660
—
—
551
(5,826)
$ 131,117 $ 86,528
21,657
3,394
31,983
4,860
2,660
151
67,860
2,639
231
(6,393)
7,541
1,011
67,958
285
$ 75,014 $ 97,073
8,007
974
—
452
$ 151,809 $ 106,506
$ 20,692 $ 19,978
The Company had approximately $22.0 million and $0 of federal capital loss carryforwards, $64.3 million and
$177.7 million of federal operating loss carryforwards, $138.8 million and $122.3 million of state operating loss
carryforwards and $0.5 million and $0.6 million of state tax credit carryforwards at December 31, 2019 and 2018,
respectively. Federal operating losses created before 2018 of $24.6 million expire in 2037 while federal losses
created in 2019 of $39.7 million do not expire and may be carried forward indefinitely. The federal credit
carryforward of $11.0 million will begin to expire in the years 2031 through 2039. The state loss carryforwards of
$138.8 million begin to expire in the years 2020 and forward, depending on the state and may be used to offset
otherwise taxable income. State tax credit carryforwards of $0.5 million expire in the years 2020 through 2028.
The Company has a valuation allowance of $6.4 million and $5.8 million at December 31, 2019 and 2018,
respectively, to offset the tax benefit of certain state operating loss carryforwards, state credit carryforwards, and
federal capital loss carryforwards. The valuation allowance increased by $0.6 million and $2.4 million during the
years ended December 31, 2019 and December 31, 2018, respectively, due to the addition of capital loss
carryforwards, and the change in certain separate company state operating loss carryforwards and certain state tax
credit carryforwards which the Company does not currently believe it will be able to utilize before the applicable
expiration date of each item.
Deferred tax valuation
allowances
Fiscal year ended
December 31, 2017
December 31, 2018
December 31, 2019
Balance at
beginning of Charges to costs Charges to other
period
and expenses
accounts
Balance at end
Deductions
of period
$
$
$
3,530 $
3,393 $
5,826 $
1,081 $
5,654 $
1,839 $
— $ 1,218 $
— $ 3,221 $
— $ 1,272 $
3,393
5,826
6,393
71
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
For the years ended December 31, 2019, 2018 and 2017, the Company had a balance of unrecognized tax benefits
of $0, $0.8 million and $5.5 million respectively, which is a component of other long-term liabilities.
Beginning balance
Additions based on tax positions taken in prior years
Reductions due to settlements
Reductions as a result of a lapse of the applicable statute of
limitations
Balance at December 31
$
2019
2018
2017
829 $ 5,506 $ 5,200
306
829
—
—
—
(829)
—
— $
(5,506)
—
829 $ 5,506
$
Interest and penalties related to uncertain tax positions are classified as income tax expense in the consolidated
statement of comprehensive income. This amounted to $0, $0.1 million and $0.1 million for 2019, 2018 and 2017,
respectively.
Only tax years 2015 and forward remain subject to examination by federal and state tax jurisdictions, other than
the current IRS audit. This audit is focused on amended federal income tax returns filed for 2009-2012 and relates
only to reported changes in fuel tax credits and agricultural chemicals security credits. Due to events related to this
IRS exam that occurred in 2018, the Company has released the reserve related to these items.
As of December 31, 2019, the Company has settled all uncertain tax positions with the applicable tax
authorities.
4. Divesture of Xpress Internacional
On January 17, 2019, we sold our 95% interest in Xpress Internacional as well as our equity method investments
with operations in Mexico (Dylka Distribuciones Logisti-K, S.A. DE C.V. and XPS Logisti-K Systems, S.A.P.I.
de C.V.). The purchase price was $4.5 million in cash, a $6.0 million note receivable and approximately $2.5
million in contingent consideration related to the completion of selling 110 tractors. The fair value of the tractors
approximated $2.5 million on January 17, 2019. During 2019, we updated the fair value of the tractors to $1.7
million from the previously recorded $2.5 million and recorded an additional net cash receivable for $1.6 million
as a result of lower than expected purchase expenses at Xpress Internacional. The results of operations from the
business classified as assets held for sale were not material to our consolidated revenues or consolidated operating
income. During 2018, we recognized a held for sale impairment in the amount of $11.6 million related to the
disposal group as the net carrying value exceeded the fair value. We recognized a subsequent gain during 2019 of
$0.8 million.
Amounts classified as assets and liabilities held for sale at December 31, 2018 related to the disposal group outlined
above within the consolidated balance sheet are as follows (in thousands):
Total current assets of business held for sale
Property, plant and equipment
Other assets
Total disposal group assets held for sale
Total current liabilities associated with assets held for sale
Long-term liabilities associated with assets held for sale
Total liabilities associated with assets of business held for sale
Held for sale impairment charge
Fair value of disposal group held for sale
$ 28,038
10,635
994
$ 39,667
6,856
$
8,353
$ 15,209
11,629
$ 12,829
72
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
5. Property and Equipment
The cost and lives at December 31, 2019 and 2018, are as follows (in thousands):
Approximate
Lives
Cost
2019
2018
Land and land improvements
Buildings and building improvements
Revenue and service equipment
Furniture and equipment
Leasehold improvements
Computer software
10 − 40 years
3 − 15 years
3 − 7 years
lesser of
useful life or
lease terms
1 − 7 years
$ 15,229 $ 22,130
85,317
648,648
47,482
56,008
645,808
48,682
24,324
90,050
23,027
71,926
$ 880,101 $ 898,530
The Company recognized $84.6 million, $85.9 million and $86.0 million in depreciation expense in 2019, 2018
and 2017, respectively. The Company recognized $3.9 million, $7.1 million and $2.0 million of losses on the sale
of equipment in 2019, 2018 and 2017, respectively, which is included in depreciation and amortization expense in
the consolidated statements of comprehensive income. The Company enters into finance leases for certain revenue
equipment with terms ranging from 24 - 100 months. At December 31, 2019 and 2018, property and equipment
included finance leases with costs of $29.5 million and $39.5 million, and accumulated amortization of $15.9
million and $18.1 million, respectively. Amortization of finance leases is also included in depreciation expense.
The Company recognized $4.1 million, $3.1 million and $3.8 million of computer software amortization expense
in 2019, 2018 and 2017, respectively. Accumulated amortization for computer software was $64.2 million and
$60.2 million as of December 31, 2019 and 2018, respectively.
6. Goodwill
Our U.S. Xpress and Total Transportation of Mississippi (“Total”) reporting units, both of which aggregate into
our Truckload reportable segment, are the only reporting units that have goodwill. The carrying amounts of
goodwill are $52.8 million at U.S. Xpress and $4.9 million at Total at December 31, 2019 and 2018.
7. Intangible Assets
The gross amount of the customer relationships was $21.7 million as of December 31, 2019 and 2018, respectively.
The Company recognized $1.7 million, $1.8 million and $1.6 million of amortization expense in 2019, 2018 and
2017, respectively and accumulated amortization was $17.8 million and $16.1 million as of December 31, 2019
and 2018, respectively. The weighted average remaining useful life for the customer relationships was 3.3 and 4.0
years at December 31, 2019 and 2018, respectively.
The gross carrying value of the indefinite lived trade names was $23.3 million as of December 31, 2019 and 2018,
respectively.
Scheduled amortization expense related to customer relationships for future years is as follows (in thousands):
73
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
2020
2021
2022
2023
2024
Thereafter
8. Equity Investments
Customer
Relationship
1,679
$
1,393
345
345
115
—
3,877
$
At December 31, 2018 the Company had a 38% ownership in XPS Logisti-K Systems, S.A.P.I. de C.V. (“Logisti-
K”), a Mexican based third party logistics business with the remaining 62% interest is owned by management of
Logisti-K, and a 30% neutral investment in Dylka (Distribuciones Logisti-K S.A. de C. V. (“Dylka”), an intra-
Mexican carrier with the remaining 70% interest owned by the management of Dylka with these shareholders also
representing 42% ownership of Logisti-K. The Company had provided the combined companies a $5.0 million
working capital loan. At December 31, 2018, the outstanding amount of the working capital loan was $4.9 million
plus accrued interest. On January 17, 2019, we sold our investments in Logisti-K and Dylka in conjunction with
the sale of Xpress Internacional and entered into promissory notes for the working capital loan plus interest. The
notes have scheduled monthly payments and mature in April 2029. As of December 31, 2019, Logisti-K and Dylka
were in compliance with the terms of the notes.
During 2011 and 2012, the Company obtained common unit ownership interests in DriverTech, LLC (DriverTech).
DriverTech is a provider of onboard computers designed for in-cab use and related software for the trucking
industry. The Company owns 20.73% and certain members of management of the Company own 12.00%. The
remaining 67.27% is owned by other investors. The carrying value of our investment in DriverTech was $0 at
December 31, 2019 and 2018, respectively.
In conjunction with the sale of Arnold Transportation, Inc. (Arnold) to Parker Global Enterprises, Inc. (Parker), the
Company received common stock representing 45% of the outstanding equity interests of Parker. The investment
in Parker is accounted for under the equity method of accounting and was initially recognized at fair value of $10.4
million on January 2, 2013. The carrying amount of the Company’s investment in Parker was $0 as of December
31, 2019 and 2018. In February 2020, we sold our interest in Parker to the management of Parker.
In April 2015, we sold our interest in XGS and received common stock representing 10% of the outstanding equity
interests of XGS valued at $0.2 million, and $5.0 million preferred stock. The investment in XGS was accounted
for under the equity method of accounting and was initially recognized at fair value of $5.2 million on April 13,
2015. During December 2018, the Company’s residual 10% investment along with our preferred stock was
extinguished and we recognized an impairment charge of $0.9 million.
Summarized financial information for the Company’s equity investments aggregated as of December 31, 2019,
2018 and 2017 is as follows (in thousands):
(in thousands)
Current assets
Non-current assets
Total Assets
Current liabilities
Non-current liabilities
Total Liabilities
Net Liabilities
As of December 31,
2018
2019
$ 12,976 $ 23,325
29,297
52,622
14,704
27,680
34,302
62,058
96,360
54,733
83,085
137,818
$ (68,680) $ (85,196)
74
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Total operating revenue
Operating expenses
Operating income (loss)
Net loss
9. Long-Term Debt
For the Years Ended December 31,
2017
2018
2019
$ 115,501 $ 158,414 $ 243,311
247,384
(4,073)
$ (12,512) $ (3,679) $ (12,023)
122,459
(6,958)
151,523
6,891
Long-term debt at December 31, 2019 and 2018 consists of the following (in thousands):
Line of credit, maturing June 2023
Term loan agreement, interest rate of 4.3% and 4.8% at December 31,
2019 and December 31, 2018, respectively, maturing June 2023
Revenue equipment installment notes with finance companies, weighted
average interest rate of 4.7% and 5.0% at December 31, 2019 and 2018,
due in monthly installments with final maturities at various dates through
February 2026, secured by related revenue equipment with a net book
value of $220.4 million and $197.1 million at December 31, 2019 and 2018
Mortgage note payables, interest rates ranging from 6.26% to 6.99% at
December 31, 2019 and 2018 due in monthly installments with final
maturities at various dates through September 2031, secured by real estate
with a net book value of $20.2 million and $24.1 million at December 31,
2019 and 2018
Other
Less: Debt issuance costs
Less: Current maturities of long-term debt
Credit Facilities
$
December 31, 2019 December 31, 2018
—
— $
$
150,000
195,000
208,252
184,867
17,776
8,795
384,823
(1,223)
(75,596)
308,004 $
18,861
6,872
405,600
(1,347)
(106,383)
297,870
In June 2018, we entered into a credit facility that contained a $150.0 million revolving component and a $200.0
million term loan component. The credit facility contained an accordion feature that, so long as no event of default
existed, allowed us to request an increase in the borrowing amounts under the revolving facility or the term facility
by a combined maximum amount of $75.0 million. Borrowings under the credit facility were classified as either
“base rate loans” or “Eurodollar rate loans.” Base rate loans accrued interest at a base rate equal to the agent’s
prime rate plus an applicable margin that was set at 1.25% through September 30, 2018 and adjusted quarterly
thereafter between 0.75% and 1.50% based on our consolidated net leverage ratio. Eurodollar rate loans will accrue
interest at London Interbank Offered Rate, or a comparable or successor rate approved by the administrative agent,
plus an applicable margin that was set at 2.25% through September 30, 2018 and adjusted quarterly thereafter
between 1.75% and 2.50% based on our consolidated net leverage ratio. The credit facility required payment of a
commitment fee on the unused portion of the revolving facility commitment of between 0.25% and 0.35% based
on our consolidated net leverage ratio. In addition, the revolving facility included, within its $150.0 million
revolving credit facility, a letter of credit sub facility in an aggregate amount of $75.0 million and a swingline sub
facility in an aggregate amount of $15.0 million. The term facility had scheduled quarterly principal payments
between 1.25% and 2.50% of the original face amount of the term facility plus any additional amount borrowed
pursuant to the accordion feature of the term facility, with the first such payment occurring on the last day of our
fiscal quarter ending September 30, 2018. The Credit Facility was scheduled to mature on June 18, 2023.
Borrowings under the credit facility were prepayable at any time without premium and are subject to mandatory
prepayment from the net proceeds of certain asset sales and other borrowings. The credit facility was secured by a
pledge of substantially all of our assets, excluding, among other things, certain real estate and revenue equipment
financed outside the credit facility.
75
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
The credit facility contained restrictive covenants including, among other things, restrictions on our ability to incur
additional indebtedness or issue guarantees, to create liens on our assets, to make distributions on or redeem equity
interests, to make investments, to transfer or sell properties or other assets and to engage in mergers, consolidations,
or acquisitions. In addition, the credit facility required us to meet specified financial ratios and tests, including a
maximum leverage ratio and a minimum interest coverage ratio.
At December 31, 2019, the Revolving Facility had issued collateralized letters of credit in the face amount of $32.7
million, with $0 borrowings outstanding and $117.3 million available to borrow and the Term Facility had $150.0
million outstanding.
On January 28, 2020, we entered into a new credit facility (the “Credit Facility”)and contemporaneously with the
funding of the Credit Facility paid off obligations under our then existing credit facility and terminated such facility.
The Credit Facility is a $250.0 million revolving credit facility, with an uncommitted accordion feature that, so
long as no event of default exists, allows the Company to request an increase in the revolving credit facility of up
to $75.0 million.
The Credit Facility is a five-year facility scheduled to terminate on January 28, 2025. Borrowings under the Credit
Facility are classified as either “base rate loans” or “eurodollar rate loans”. Base rate loans accrue interest at a base
rate equal to the highest of (A) the Federal Funds Rate plus 0.50%, (B) the Agent’s prime rate, and (C) LIBOR plus
1.00% plus an applicable margin that is set at 0.50% through June 30, 2020 and adjusted quarterly thereafter
between 0.25% and 0.75% based on the ratio of the daily average availability under the Credit Facility to the daily
average of the lesser of the borrowing base or the revolving credit facility. Eurodollar rate loans accrue interest at
LIBOR plus an applicable margin that is set at 1.50% through June 30, 2020 and adjusted quarterly thereafter
between 1.25% and 1.75% based on the ratio of the daily average availability under the Credit Facility to the daily
average of the lesser of the borrowing base or the revolving credit facility. The Credit Facility includes, within its
$250.0 million revolving credit facility, a letter of credit sub-facility in an aggregate amount of $75.0 million and
a swingline sub-facility in an aggregate amount of $25.0 million. An unused line fee of 0.25% is applied to the
average daily amount by which the lenders’ aggregate revolving commitments exceed the outstanding principal
amount of revolver loans and aggregate undrawn amount of all outstanding letters of credit issued under the Credit
Facility. The Credit Facility is secured by a pledge of substantially all of the Company’s assets, excluding, among
other things, any real estate or revenue equipment financed outside the Credit Facility.
Borrowings under the new Credit Facility are subject to a borrowing base limited to the lesser of (A) $250.0 million;
or (B) the sum of (i) 87.5% of eligible billed accounts receivable, plus (ii) 85.0% of eligible unbilled accounts
receivable (less than 30 days), plus (iii) 85.0% of the net orderly liquidation value percentage applied to the net
book value of eligible revenue equipment, plus (iv) the lesser of (a) 80.0% the fair market value of eligible real
estate or (b) $25.0 million. The Credit Facility contains a single springing financial covenant, which requires a
consolidated fixed charge coverage ratio of at least 1.0 to 1.0. The financial covenant is tested only in the event
excess availability under the Credit Facility is less than the greater of (A) 10.0% of the lesser of the borrowing base
or revolving credit facility or (B) $20.0 million
The Credit Facility includes usual and customary events of default for a facility of this nature and provides that,
upon the occurrence and continuation of an event of default, payment of all amounts payable under the Credit
Facility may be accelerated, and the lenders’ commitments may be terminated. The Credit Facility contains certain
restrictions and covenants relating to, among other things, dividends, liens, acquisitions and dispositions, affiliate
transactions, and other indebtedness.
Old Term Loan Agreement
At December 31, 2017, the Company had an outstanding term loan in the amount of $193.2 million.
In June 2018, the Company repaid this term loan with proceeds from the offering and incurred a loss on early
extinguishment of debt. The loss resulted from the write-off of unamortized discount and debt issuance costs of
$0.6 million and $5.3 million, respectively, payment of fees to lenders of $1.4 million and third party fees of $0.1
million.
76
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Old Line of Credit
At December 31, 2017, the Company had $29.3 million outstanding on its $155.0 million senior secured revolving
credit facility.
In June 2018, in connection with the offering and entering into the New Credit Facility, the Company repaid and
terminated this revolving credit facility and incurred a loss on early extinguishment of debt. The loss resulted from
the write-off of debt issuance costs of $0.2 million and payment of fees to lenders of $0.1 million.
Debt Maturities
As of December 31, 2019, the scheduled principal payments of long-term debt, excluding unamortized discount
and debt issuance costs and finance leases are as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
10. Leases
$
75,596
42,602
61,874
179,403
3,904
21,444
$ 384,823
We have operating and finance leases with terms of 1 year to 15 years for certain revenue and service equipment
and office and terminal facilities.
The table below presents the lease-related assets and liabilities recorded on the balance sheet (in thousands):
Leases
Assets
Operating
Finance
Total leased assets
Liabilities
Current
Operating
Finance
Noncurrent
Operating
Finance
Classification
Operating lease right-of-use assets
Property and equipment, net
December 31, 2019
$
$
276,618
13,641
290,259
Current portion of operating lease liabilities
Current maturities of long-term debt and finance leases
$
69,866
4,651
206,357
6,570
287,444
Noncurrent operating lease liabilities
Long-term debt and finance leases, net of current maturities
Total lease liabilities
$
77
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
The table below presents certain information related to the lease costs for finance and operating leases (in
thousands):
Lease Cost
Operating lease cost
Finance lease cost:
Classification
Vehicle rents and General and other operating $
December 31, 2019
81,467
Year
Ended
Amortization of finance lease assets
Interest on lease liabilities
Short-term lease cost
Total lease cost
Depreciation and amortization
Interest expense
General and other operating
3,102
1,093
4,111
89,773
$
Cash Flow Information
Cash paid for operating leases included in operating activities
Cash paid for finance leases included in operating activities
Cash paid for finance leases included in financing activities
Year
Ended December
31, 2019
$
$
$
81,467
1,093
9,049
Operating lease right-of-use assets obtained in exchange for lease obligations
Operating lease right-of-use assets and liabilities relieved in conjunction with
divesture of Xpress Internacional
$
170,855
$
2,018
Lease Term and Discount Rate
Operating leases
Finance leases
Weighted�Average Weighted-
Average
Remaining Lease
Discount Rate
Term (years)
4.4 %
5.4 %
5.0
3.3
As of December 31, 2019, future maturities of lease liabilities were as follows (in thousands):
2020
2021
2022
2023
2024
Thereafter
Less: Amount representing interest
Total
December 31, 2019
Finance
$
Operating
5,217 $ 80,628
71,656
4,081
59,215
1,423
43,588
1,423
20,245
296
35,523
—
310,855
12,440
(34,632)
(1,219)
$ 11,221 $ 276,223
During the fourth quarter of 2019, the Company entered into a sale leaseback transaction involving three terminals.
The Company received proceeds of $23.5 million from the sale of the terminals which was used to pay down our
term loan. The Company will lease back the terminals with an initial lease term of fifteen years at an approximate
initial annual rate of $1.7 million that increases by 1.7% per year throughout the term. The Company accounted for
the leases as operating leases and recorded a right of use asset and operating lease liability in the amount of $20.8
million. The transaction resulted in a gain of approximately $1.2 million which is included in (gain) loss on sale of
property.
78
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Rental expense under noncancelable operating leases during 2018 and 2017 was approximately $78.5 million and
$75.7 million, respectively. Certain revenue equipment leases provide for guarantees by the Company of a portion
of the specified residual value at the end of the lease term. The maximum potential amount of future payments
(undiscounted) under these guarantees is approximately $91.5 million at December 31, 2019. The residual value of
a portion of the related leased revenue equipment is covered by repurchase or trade agreements between the
Company and the equipment manufacturer.
11. Related-Party Transactions
The Company had a $25.5 million note payable to a limited liability company controlled by certain officers of the
Company as of December 31, 2017. The Company repaid the note in the amount of $26.6 million which included
paid in kind interest of $8.6 million as of June 2018.
The Company leased a terminal facility from entities owned by the two principal stockholders of New Mountain
Lake and their respective family trusts. The lease agreement was set to expire in 2020. Rent expense of
approximately $0.5 million and $0.9 million was recognized in connection with these leases during 2018 and 2017,
respectively. In June 2018, the Company purchased the terminal facility for $7.5 million with proceeds from the
offering.
The Company and two principal stockholders of the Company collectively own 32.73% of the outstanding stock
of DriverTech. Total payments by the Company to this provider were $2.4 million, $1.5 million and $1.5 million
in 2019, 2018 and 2017, respectively, primarily for communications hardware. This product is designed specifically
for in-cab use on a Windows platform to enhance communications with the driver.
In connection with the sale of Arnold to Parker, the Company entered into a number of agreements with Parker.
Under the Transition Services Agreement, the Company agreed to perform certain services for Parker, such as
accounting, payroll, human resources, information technology and others. Parker paid the Company approximately
$0.2 million, $0.2 million and $0.2 million under this agreement during 2019, 2018 and 2017, respectively.
The Company entered into a ten-year lease with Arnold for the use of real property located in Grand Prairie, Texas.
Arnold paid the Company approximately $0.4 million, $0.4 million and $0.4 million under these agreements during
2019, 2018 and 2017, respectively.
During 2019, the Company converted $5.0 million in trade receivables to a promissory note and under the note
advanced an additional $2.0 million. In the fourth quarter of 2019, Company recorded a $6.8 million impairment
charge as the collectability of the note was remote. At December 31, 2019 and 2018, $0.2 million and $3.1 million
was due from Arnold and was included in other receivables in the accompanying consolidated balance sheets,
respectively.
12. Commitments and Contingencies
The Company is party to certain legal proceedings incidental to its business. The ultimate disposition of these
matters, in the opinion of management, based in part on the advice of legal counsel, is not expected to have a
materially adverse effect on the Company’s financial position or results of operations.
For the cases described below, management is unable to provide a meaningful estimate of the possible loss or range
of loss because, among other reasons, (1) the proceedings are in various stages; (2) damages have not been sought;
(3) damages are unsupported and/or exaggerated; (4) there is uncertainty as to the outcome of the proceedings,
including pending appeals; and/or (5) there are significant factual issues to be resolved. For these cases, however,
management does not believe, based on currently available information, that the outcomes of these proceedings
will have a material adverse effect on our financial condition, though the outcomes could be material to our
operating results for any particular period, depending, in part, upon the operating results for such period.
79
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
California Wage and Hour Class Action Litigation
On December 23, 2015, a class action lawsuit was filed against us and our subsidiary U.S. Xpress, Inc. in the
Superior Court of California, County of San Bernardino. The case was transferred to the U.S. District Court for the
Central District of California. The putative class includes current and former truck drivers employed by us who
worked or work in California after the completion of their training while residing in California since December 23,
2011 to present. The case alleges that class members were not paid for off-the-clock work, were not provided duty
free meal or break times, and were not paid premium pay in their absence, were not paid minimum wage for all
hours worked, were not provided accurate and complete time and pay records and were not paid all accrued wages
at the end of their employment, all in violation of California law. The class seeks a judgment for compensatory
damages and penalties, injunctive relief, attorney fees and costs and pre- and post-judgment interest. On May 2,
2019, the court dismissed on grounds of preemption the claims alleging failure to provide duty free meal and rest
breaks or to pay premium pay for failure to provide such breaks under California law. The parties have also filed
cross-motions for summary judgment on the remaining claims, and the Company has filed a motion to decertify
the class. The parties are completing supplemental briefing on those motions, and the court has scheduled oral
argument on the motions. The matter is currently in discovery, and a jury trial has set to begin on September 1,
2020. We are currently not able to predict the probable outcome or to reasonably estimate a range of potential
losses, if any. We intend to vigorously defend the merits of these claims.
Stockholder Claims
As set forth below, between November 2018 and April 2019, eight substantially similar putative securities class
action complaints were filed against us and certain other defendants: five in the Circuit Court of Hamilton County,
Tennessee (“Tennessee State Court Cases”), two in the U.S. District Court for the Eastern District of Tennessee
(“Federal Court Cases”), and one in the Supreme Court of the State of New York (“New York State Court Case”).
Two of the Tennessee State Court Cases and one of the Federal Court Cases have been voluntarily dismissed. All
of these matters are in preliminary stages of litigation, and discovery has not yet begun. We are currently not able
to predict the probable outcome or to reasonably estimate a range of potential losses, if any.
On November 21, 2018, a putative class action complaint was filed in the Circuit Court of Hamilton County,
Tennessee against us, five of our officers or directors, and the seven underwriters who participated in our June 2018
initial public offering (“IPO”), alleging violations of Sections 11 and 15 of the Securities Act of 1933 (the
“Securities Act”). The class action lawsuit is based on allegations that the Company made false and/or misleading
statements in the registration statement and prospectus filed with the Securities and Exchange Commission (“SEC”)
in connection with the IPO. The lawsuit is purportedly brought on behalf of a putative class of all persons or entities
who purchased or otherwise acquired the Company’s Class A common stock pursuant and/or traceable to the IPO,
and seeks, among other things, compensatory damages, costs and expenses (including attorneys’ fees) on behalf of
the putative class.
On January 23, 2019, a substantially similar putative class action complaint was filed in the Circuit Court of
Hamilton County, Tennessee, by a different plaintiff alleging claims under Sections 11 and 15 of the Securities Act
against the same defendants as in the action commenced on November 21, 2018. On March 7, 2019, this case was
voluntarily dismissed by the plaintiff.
On January 30, 2019, a substantially similar putative class action complaint was filed in the Circuit Court of
Hamilton County, Tennessee, by a different plaintiff alleging claims under Sections 11 and 15 of the Securities Act
against the same defendants as in the action commenced on November 21, 2018, and also alleging a claim under
Section 12 of the Securities Act.
On February 5, 2019, a substantially similar putative class action complaint was filed in the Circuit Court of
Hamilton County, Tennessee, by a different plaintiff alleging claims under Sections 11 and 15 of the Securities Act
against the same defendants as in the action commenced on November 21, 2018, and also alleging a claim under
Section 12 of the Securities Act.
80
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
On February 6, 2019, a substantially similar putative class action complaint was filed in the Circuit Court of
Hamilton County, Tennessee, by different plaintiffs alleging claims under Sections 11 and 15 of the Securities Act
against the same defendants as in the action commenced on November 21, 2018. On March 19, 2019, this case was
voluntarily dismissed by the plaintiff.
On March 8, 2019, a substantially similar putative class action complaint was filed in the U.S. District Court for
the Eastern District of Tennessee by a different plaintiff alleging claims under Sections 11 and 15 of the Securities
Act against the same defendants as in the action commenced on November 21, 2018. On May 9, 2019, this case
was voluntarily dismissed by the plaintiff.
On March 14, 2019, a substantially similar putative class action complaint was filed in the Supreme Court of the
State of New York, County of New York, by a different plaintiff alleging claims under Sections 11 and 15 of the
Securities Act against the same defendants as in the action commenced on November 21, 2018. The parties have
stipulated to extend the time for defendants to respond to the complaint in this matter pending resolution of the
motions to dismiss filed (or to be filed) in the remaining of the Tennessee State Court Cases and the Federal Court
Cases.
On April 2, 2019, a substantially similar putative class action complaint was filed in the U.S. District Court for the
Eastern District of Tennessee, by a different plaintiff alleging claims under Sections 11 and 15 of the Securities Act
against us and the same five of our officers and directors as in the action commenced on November 21, 2018.
Unlike the previously filed complaints, this complaint did not name as defendants any of the seven underwriters
who participated in our IPO; however, an amended complaint was filed on October 8, 2019 (“Amended Federal
Complaint”) which added all underwriters who participated in the IPO as defendants.
The three remaining Tennessee State Court Cases have been consolidated, and discovery is currently stayed
pending a decision on a motion to dismiss filed by the Company and the other defendants. On July 18, 2019, the
court presiding over the remaining of the Federal Court Cases issued an order appointing lead plaintiff and lead
counsel. Pursuant to a stipulation entered in that matter, the appointed lead plaintiff filed the Amended Federal
Complaint on October 8, 2019.
The Amended Federal Complaint is made on behalf of a putative class that consists of all persons who purchased
or otherwise acquired the Class A common stock of USX between June 14, 2018 and November 1, 2018 and who
were allegedly damaged thereby. In addition, the Amended Federal Complaint alleges additional violations of
Section 10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”) against the Company, its Chief
Executive Office and its Chief Financial Officer. On December 23, 2019, the defendants filed a motion to dismiss
the Amended Federal Complaint in its entirety for failure to allege facts sufficient to state a claim under either the
Securities Act or the Exchange Act.
The complaints in all the actions listed above allege that the Company made false and/or misleading statements in
the registration statement and prospectus filed with the SEC in connection with the IPO, and that, as a result of
such alleged statements, the plaintiffs and the members of the putative classes suffered damages. The Amended
Federal Complaint additionally alleges that the Company, its Chief Executive Officer and its Chief Financial
Officer made false and/or misleading statements and/or material omissions in press releases, earnings calls, investor
conferences, television interviews, and filings made with the SEC subsequent to the IPO. We believe the allegations
made in the complaints are without merit and intend to defend ourselves vigorously in these matters.
Stockholder Derivative Action
On June 7, 2019, a stockholder derivative lawsuit was filed in the District Court for Clark County, Nevada against
five of our executives and all five of our independent board members (collectively, the “Individual Defendants”),
and naming the Company as a nominal defendant. The complaint alleges that the Company made false and/or
misleading statements in the registration statement and prospectus filed with the SEC in connection with the IPO
and that the Individual Defendants breached their fiduciary duties by causing or allowing the Company to make
such statements. The complaint alleges that the Company has been damaged by the alleged wrongful conduct as a
result of, among other things, being subjected to the time and expense of the securities class action lawsuits that
81
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
have been filed relating to the IPO. In addition to a claim for alleged breach of fiduciary duties, the lawsuit alleges
claims against the Individual Defendants for unjust enrichment, abuse of control, gross mismanagement, and waste
of corporate assets. The parties have stipulated to a stay of this proceeding pending the filing of an answer or a
dismissal in the remaining of the Tennessee State Court Cases or the Federal Court Cases. This matter is in the
preliminary stages of litigation and discovery has not yet begun. We are currently not able to predict the probable
outcome or to reasonably estimate a range of potential losses, if any. We believe the allegations made in the
complaint are without merit and intend to defend ourselves vigorously in these matters.
Independent Contractor Class Action
On March 26, 2019, a putative class action complaint was filed in the U.S. District Court for the Eastern District
of Tennessee against us and our subsidiaries U.S. Xpress, Inc. and U.S. Xpress Leasing, Inc. The putative class
includes all individuals who performed work for U.S. Xpress, Inc. or U.S. Xpress Leasing, Inc. as lease drivers
from March 26, 2016 to present. The complaint alleges that independent contractors are improperly designated as
such and should be designated as employees and thus subject to the Fair Labor Standards Act (“FLSA”). The
complaint further alleges that U.S. Xpress, Inc.’s pay practices with regard to the putative class members violated
the minimum wage provisions of the FLSA for the period from March 26, 2016 to present. The complaint further
alleges that we violated the requirements of the Truth in Leasing Act with regard to the independent contractor
agreements and lease purchase agreements we entered into with the putative class members. The complaint further
alleges that we failed to comply with the terms of the independent contractor agreements and lease purchase
agreements entered into with the putative class members, that we violated the provisions of the Tennessee
Consumer Protection Act in advertising, describing and marketing the lease purchase program to the putative class
members, and that we were unjustly enriched as a result of the foregoing allegations. The defendants filed a Motion
to Compel Arbitration on October 18, 2019. On January 17, 2020, the court granted defendants’ motion, in part,
compelling arbitration on all of plaintiff’s claims and denying plaintiff’s motion for conditional certification of a
collective action. The court further stayed the matter pending arbitration, rather than dismissing it entirely. There
has been no discovery in this matter, and we are currently not able to predict the probable outcome or to reasonably
estimate a range of potential losses, if any. We believe the allegations made in the complaint are without merit and
intend to defend ourselves vigorously against the complaints relating to such actions.
The Company has letters of credit of $32.7 million outstanding as of December 31, 2019. The letters of credit are
maintained primarily to support the Company’s insurance program.
The Company had cancelable commitments outstanding at December 31, 2019 to acquire revenue equipment for
approximately $111.2 million in 2020. These purchase commitments are expected to be financed by operating
leases, long-term debt, proceeds from sales of existing equipment, and cash flows from operations.
13. Share-based Compensation
2018 Omnibus Incentive Plan
In June 2018, the Board approved the 2018 Omnibus Incentive Plan (the “Incentive Plan”) to become effective in
connection with the offering. The Company has reserved an aggregate of 3.2 million shares of its Class A common
stock for issuance of awards under the Incentive Plan. Participants in the Incentive Plan will be selected by the
Compensation Committee from the executive officers, directors, employees and consultants of the Company.
Awards under the Incentive Plan may be made in the form of stock options, stock appreciation rights, stock awards,
restricted stock units, performance awards, performance units, and any other form established by the Compensation
Committee pursuant to the Incentive Plan.
82
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
The following is a summary of the Incentive Plan restricted stock and restricted stock unit activity from June 13,
2018 to December 31, 2019:
Weighted
Unvested at June 13, 2018
Granted
Forfeited
Unvested at December 31, 2018
Granted
Vested
Forfeited
Unvested at December 31, 2019
Units
— $
Number of Average Grant
Date Fair Value
—
14.30
16.00
14.20
7.53
11.42
9.17
8.73
287,232
(16,490)
270,742 $
902,285
(125,621)
(139,318)
908,088 $
Service based restricted stock grants vest over periods of one to five years and account for 648,088 of the unvested
shares. Performance based awards account for 260,000 of the unvested shares and vest based upon achievement of
certain performance goals, as defined by the Company. The Company recognized compensation expense related to
service based awards of $2.2 million and $1.0 million during 2019 and 2018, respectively. The Company
recognized compensation expense of $0.3 million related to performance awards. At December 31, 2019, the
Company had $4.3 million in unrecognized compensation expense related to the service based restricted stock
awards which is expected to be recognized over a weighted average period of approximately 2.6 years.
The following is a summary of the Incentive Plan stock option activity from June 13, 2018 to December 31, 2019:
Weighted
Unvested at June 13, 2018
Granted
Forfeited/Canceled
Unvested at December 31, 2018
Granted
Vested
Forfeited/Canceled
Unvested at December 31, 2019
— $
Number of Average Grant
Date Fair Value
Units
—
6.09
6.09
6.09
4.41
6.09
6.09
4.95
192,203
(14,943)
177,260 $
244,785
(44,312)
(18,474)
359,259 $
The stock options vest over a period of four years and expire ten years from the date of grant. The Company
recognized compensation expense of $0.6 million and $0.3 million during 2019 and 2018, respectively. The fair
value of the stock option grant was estimated using the Black-Scholes method as of the grant date using the
following assumptions:
Strike price
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected term (in years)
$
2019
2018
9.40 $ 16.00
2.50 %
0 %
2.91 %
0 %
45.65 % 32.67 %
6.25
6.25
At December 31, 2019, the Company had $1.2 million in unrecognized compensation expense related to the stock
option awards which is expected to be recognized over a period of approximately 2.9 years. As of December 31,
2019, 38,155 options were exercisable with an exercise price of $16.00 and a remaining contractual life of 8.5
years.
83
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Stock Appreciation Rights
In June 2015, the Company approved the 2015 Stock Appreciation Rights Plan. The purpose of the plan was to
attract and retain the best available personnel for positions of substantial responsibility and to provide incentive to
employees to promote the success of the Company’s business. Each holder of an award had the right to receive a
cash payment amounting to the difference between the grant price and the fair market value of the Company’s Class
A common stock on the exercise date. These awards were subject to time-based and performance-based vesting
conditions. For each grant, the number of shares awarded was determined based on a performance condition relating
to certain financial results of the Company. Awards granted vested ratably over a service period of 5 years. The
awards were accounted for as liability classified compensatory awards under ASC 710 and valued using the
intrinsic value method, as permitted by ASC 718 for nonpublic entities, with changes to the value recognized as
compensation expense during each reporting period.
In conjunction with the offering, the Company vested all remaining stock appreciation rights (“SARS”) and settled
the resulting liabilities related thereto. As a result, the Company recorded additional compensation expense in the
amount of $3.2 million in the second quarter of 2018.
The following is a summary of the Company’s SARS activity for 2018 and 2017:
Outstanding at December 31, 2016
Granted
Exercised
Canceled or expired
Outstanding at December 31, 2017
Granted
Exercised
Canceled or expired
Outstanding at December 31, 2018
Number of Grant Date
Exercise Price
9.95
—
9.95
9.95
9.95
—
9.95
9.95
—
Units
72,500
—
(2,175)
(5,075)
65,250
—
(63,250)
(2,000)
—
The Company recognized compensation expense of $3.4 million and $0.3 million during 2018 and 2017,
respectively.
Restricted Stock Units
In August 2008, the U.S. Xpress Enterprises board approved the 2008 Restricted Stock Plan that provided for
restricted membership unit awards in New Mountain Lake in order to compensate the Company’s employees and
to promote the success of the Company’s business.
Redeemable restricted units were subject to certain put rights at the option of the holder or upon the occurrence of
an event that was not solely under the control of the Company. Under the terms of the stock plan, a portion of the
units held by employees of the Company for at least nine months could be put back to the Company at the option
of the holder during a specified period each year and under certain circumstances after termination. These equity
instruments were redeemable at fair value and were classified as temporary equity on the 2017 consolidated balance
sheets in accordance with ASC 480.
As part of the Reorganization (see Note 1), all of the redeemable restricted units of New Mountain Lake were
converted into restricted stock units of the Company, with the same vesting schedules. Therefore, we refer to
redeemable restricted units issued prior to the Reorganization as restricted stock units. At the time of conversion,
the restricted stock unit amounts were reclassified to additional paid in capital. The following is a summary of the
Company’s restricted stock unit activity for 2019, 2018 and 2017:
84
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Unvested at December 31, 2016
Granted
Vested
Forfeited
Unvested at December 31, 2017
Granted
Vested-pre IPO
Forfeited-pre IPO
Unvested at June 13, 2018
Conversion in connection with IPO
Unvested-post IPO
Vested-post IPO
Forfeited-post IPO
Unvested at December 31, 2018
Vested
Forfeited
Unvested at December 31, 2019
Number of Weighted
Units
Average
237,500 $ 6.79
10.37
292,500
6.62
(69,333)
7.69
(14,667)
9.14
446,000
—
—
7.74
(105,307)
7.52
(6,667)
9.62
334,026
4.6666667
2.06
1,558,787
2.67
(144,667)
1.99
(12,446)
2.00
1,401,674
1.70
(454,893)
(103,893)
2.15
842,888 $ 2.14
The vesting schedule for these restricted unit grants range from 3 to 7 years. The Company recognized
compensation expense of $0.5 million, $0.9 million and $0.7 million during 2019, 2018 and 2017, respectively. At
December 31, 2019, the Company had approximately $1.4 million in unrecognized compensation expense related
to restricted units, which is expected to be recognized over a period of approximately 3.9 years. The fair value of
the restricted units and corresponding compensation expense was determined using the income approach.
Employee Stock Purchase Plan
In June 2018, our Employee Stock Purchase Plan (the “ESPP”) became effective. The Company has reserved an
aggregate of 2.3 million shares of its Class A common stock for issuance of under the ESPP. Eligible employees
may elect to purchase shares of our Class A common stock through payroll deductions up to 15% of eligible
compensation. The purchase price of the shares during each offering period will be 85% of the lower of the fair
market value of our Class A common stock on the first trading day of each offering period or the last trading day
of the offering period. The common stock will be purchased in January and July of each year. The first offering
period commenced on January 1, 2019 and we recognized compensation expense of $0.2 million during 2019,
associated with the plan. In July 2019, employees purchased 79,940 shares of the Company’s Class A common
stock for $4.37 per share.
14. Employee Benefit Plan
The Company has a 401(k) retirement plan covering substantially all employees of the Company, whereby
participants may contribute a percentage of their compensation, as allowed under applicable laws. The Plan
provides for discretionary matching contributions by the Company. Participants are 100% vested in participant
contributions. The Company recognized $2.3 million, $1.7 million and $1.7 million in expense under this employee
benefit plan each year for 2019, 2018 and 2017, respectively.
The Company has a nonqualified deferred compensation plan that allows eligible employees to defer a portion of
their compensation. Participants can defer up to 85% of their base salary and up to 100% of their bonus for the
year. Each participant is fully vested in all deferred compensation and earnings; however, these amounts are subject
to general creditor claims until distributed to the participant. The total liability under the deferred compensation
plan was $3.3 million and $3.0 million as of December 31, 2019 and 2018, and is included in other long-term
liabilities in the accompanying consolidated balance sheets. The Company purchased life insurance policies to fund
the future liability. The life insurance policies had a value of $2.8 million and $2.9 million as of December 31,
85
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
2019 and 2018, respectively and are included in other assets in the consolidated balance sheets. During 2018, the
Company recorded a death benefit gain of $4.0 million for one of its insured.
15. Fair Value Measurements
Accounting standards, among other things, define fair value, establish a framework for measuring fair value and
expand disclosure about such fair value measurements. Assets and liabilities measured at fair value are based on
one or more of three valuation techniques provided for in the standards.
The standards clarify that fair value is an exit price, representing the amount that would be received to sell an asset,
based on the highest and best use of the asset, or paid to transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that should be determined based on assumptions
that market participants would use in pricing an asset or liability. As a basis for evaluating such assumptions, the
standards establish a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value as follows:
Level 1 Inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the
Company has the ability to access at the measurement date. An active market is defined as a market
in which transactions for the assets or liabilities occur with sufficient frequency and volume to
provide pricing information on an ongoing basis.
Level 2 Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for
identical or similar assets or liabilities in markets that are not active (markets with few transactions),
inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield
curves, etc.), and inputs that derived principally from or corroborated by observable market data
correlation or other means (market corroborated inputs).
Level 3 Unobservable inputs, only used to the extent that observable inputs are not available, reflect the
Company’s assumptions about the pricing of an asset or liability.
The following table summarizes the changes in the fair value of assets and liabilities measured at fair value using
significant unobservable inputs (Level 3) for the years ended December 31, 2019, 2018 and 2017(in thousands):
Year Ended
December 31,
2018
2019
2017
Balance at beginning of year
Divesture of Xpress Internacional
Forward Contract Adjustment
Balance at end of period
$ 1,793 $ 1,985 $ 2,683
—
(1,793)
—
(698)
— $ 1,793 $ 1,985
—
(192)
$
During 2016, the Company purchased a 5% interest in Xpress Internacional for $2.2 million and had a commitment
to purchase the remaining 5% interest no later than 2020, based on an earnings calculation. The obligation was
considered a physically settled forward contract and the commitment liability was included in other accrued
liabilities and other long-term liabilities on the accompanying balance sheets. In January 2019, the Company
disposed of its interest in Xpress Internacional and the commitment was reclassified to long term liabilities
associated with assets held for sale at December 31, 2018. This liability is classified as Level 3 under the fair value
hierarchy and is based on earnings calculation. The carrying amount of this commitment is accreted through interest
to equal the settlement amount at each reporting date.
The carrying values of cash and cash equivalents, customer and other receivables and accounts payable are
reasonable estimates of their fair values because of the short maturity of these financial instruments. Interest rates
that are currently available to us for issuance of long-term debt with similar terms and remaining maturities are
used to estimate the fair value of our long-term debt, which primarily consists of revenue equipment installment
notes. The fair value of our revenue equipment installment notes approximated the carrying value at December 31,
86
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
2019, as the weighted average interest rate on these notes approximates the market rate for similar debt. Borrowings
under our revolving Credit Facility approximate fair average interest rate on these notes approximates the market
rate for similar debt.
16. Income (Loss) per Share
Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by
the weighted average shares of common stock outstanding during the period, without consideration for common
stock equivalents. Prior to the offering, there were no common stock equivalents which could have had a dilutive
effect on earnings (loss) per share. The Company excluded 2,148,390 and 448,002 equity awards from our diluted
shares for the year ended December 31, 2019 and 2018, respectively as inclusion would be anti-dilutive.
The following is a summary of the Incentive Plan restricted stock and restricted stock unit activity from June 13,
2018 to December 31, 2019:
Year Ended December 31,
2108
2017
2109
Net income (loss)
Net income attributable to noncontrolling interest
Net income (loss) attributable to common stockholders
$ (3,043) $ 26,106 $ (3,937)
123
$ (3,647) $ 24,899 $ (4,060)
1,207
604
Basic weighted average of outstanding shares of common stock
Dilutive effect of equity awards
Diluted weighted average of outstanding shares of common stock
48,788
—
48,788
29,470
663
30,133
6,385
—
6,385
Basic earnings (loss) per share
Diluted earnings (loss) per share
$
$
(0.07) $
(0.07) $
0.84 $
0.83 $
(0.64)
(0.64)
17. Segment Information
The Company’s business is organized into two reportable segments, Truckload and Brokerage. The Truckload
segment offers asset-based truckload services, including OTR trucking and dedicated contract services. These
services are aggregated because they have similar economic characteristics and meet the aggregation criteria
described in the accounting guidance for segment reporting. The Company’s OTR service offering provides solo
and expedited team services through one-way movements of freight over routes throughout the United States and
cross-border into and out of Mexico. The Company’s dedicated contract service offering devotes the use of
equipment to specific customers and provides services through long-term contracts. The Company’s dedicated
contract service offering provides similar freight transportation services, but does so pursuant to agreements where
it makes equipment, drivers and on-site personnel available to a specific customer to address needs for committed
capacity and service levels.
The Company’s Brokerage segment is principally engaged in non-asset-based freight brokerage services, where it
outsources the transportation of loads to third-party carriers. For this segment, the Company relies on brokerage
employees to procure third-party carriers, as well as information systems to match loads and carriers.
The following table summarizes our segment information (in thousands):
87
U.S. Xpress Enterprises, Inc.
Notes to Consolidated Financial Statements
December 31, 2019, 2018 and 2017
Revenues
Truckload
Brokerage
Total Operating Revenue
Operating Income
Truckload
Brokerage
Total Operating Income
Year Ended December 31,
2018
2017
2019
$ 1,521,494 $ 1,562,098 $ 1,382,167
173,218
$ 1,707,361 $ 1,804,915 $ 1,555,385
242,817
185,867
$
$
24,071 $
1,999
26,070 $
69,088 $
9,818
78,906 $
25,200
3,408
28,608
A measure of assets is not applicable, as segment assets are not regularly reviewed by the Chief Operating Decision
Maker (CODM) for evaluating performance or allocating resources.
Information about the geographic areas in which the Company conducts business is summarized below (in
thousands) as of and for the years ended December 31, 2019, 2018 and 2017. Operating revenues for foreign
countries include revenues for (i) shipments with an origin or destination in that country and (ii) other services
provided in that country. If both the origin and destination are in a foreign country, the revenues are attributed to
the country of origin. As of December 31, 2018, the long-lived assets of our Mexican operations were impaired to
a balance of $0.
Revenues
United States
Foreign countries
Mexico
Total
18. Quarterly Financial Data (Unaudited)
2019:
Operating revenues
Operating income
Net income (loss)(1)
Basic earnings (loss) per share
Diluted earnings (loss) per share
2018:
Operating revenues
Operating income(2)
Net income (2) (3)
Basic earnings per share
Diluted earnings per share
Year Ended December 31,
2018
2017
2019
$ 1,704,989 $ 1,751,556 $ 1,504,926
2,372
50,459
$ 1,707,361 $ 1,804,915 $ 1,555,385
53,359
413,862 $ 428,503 $
First Quarter Second Quarter Third Quarter Fourth Quarter
449,633
$ 415,363 $
1,363
12,638
(9,594)
4,721
(0.20)
0.10
(0.20)
0.10
3,282
(1,446)
(0.03)
(0.03)
8,787
2,672
0.05
0.05
449,758 $ 460,227 $
First Quarter Second Quarter Third Quarter Fourth Quarter
469,222
$ 425,708 $
21,142
14,854
6,996
1,159
0.14
0.18
0.14
0.18
22,892
16,129
0.33
0.33
20,018
615
0.04
0.04
(1) Fourth quarter 2019 results include an impairment charge of $6.8 million related to our Arnold note receivable.
(2) Fourth quarter 2018 results include an impairment charge of $10.7 million related to assets of business held for sale
(3) Fourth quarter 2018 results include an impairment charge of $1.8 million related to equity method investments
88
Corporate
Information
EXECUTIVE MANAGEMENT
BOARD OF DIRECTORS
Eric Fuller
President and Chief Executive Officer
Max Fuller
Executive Chairman
Eric Peterson
Chief Financial Officer and Treasurer
Danna Bailey
Chief Brand Officer
Joel Gard
President, Digital Transformation
Jason Grear
Chief Accounting Officer
Justin Harness
Chief Revenue Officer
Nathan Harwell
EVP, Chief Legal Officer, and Secretary
Matt Herndon
Chief Operating Officer
Robert Pischke
Chief Information Officer
Cameron Ramsdell
President, U.S. Xpress Ventures
Amanda Thompson
Chief People Officer
Max Fuller
Executive Chairman and Director
of the Company
Jon F. Beizer
Director of the Company, Investment Partner at
Western Technology Investments
Edward “Ned” H. Braman
Director of the Company, Retired Audit
Partner at Ernest & Young LLP
Jennifer G. Buckner
Director nominee of the Company,
Deputy Chief Information Security Officer
and Senior Vice President, Corporate Security
Governance, Risk, and Compliance for
Mastercard Incorporated
Eric Fuller
President, Chief Executive Officer and
Director of the Company
Dennis A. Nash
Director of the Company, Chief Executive Officer
and Chairman of Kenan Advantage Group, Inc.
John C. Rickel
Director of the Company, Senior Vice President
and Chief Financial Officer of Group 1
Automotive, Inc.
CORPORATE HEADQUARTERS
ANNUAL MEETING OF STOCKHOLDERS
U.S. Xpress Enterprises, Inc.
4080 Jenkins Road
Chattanooga, TN 37421
STOCK EXCHANGE
The Company’s ticker symbol on the
New York Stock Exchange is USX.
STOCK TRANSFER AGENT
American Stock Transfer &
Trust Company, LLC
Telephone: 800.937.5449
U.S. Xpress Enterprises, Inc’s stockholders
are invited to attend our 2020 Annual
Meeting of Stockholders, which will be held
on Wednesday, May 27, 2020 at 11:30 a.m.
Eastern Daylight Time. The meeting will be
held at our corporate headquarters, located
at 4080 Jenkins Road, Chattanooga,
Tennessee 37421.
INVESTOR RELATIONS
For additional financial documents
and information, please visit our investor
relations website at investor.usxpress.com.
Please contact us by phone at
833.879.7737 or by sending an e-mail
to investors@usxpress.com.
U.S. XPRESS ENTERPRISES, INC.
4080 JENKINS ROAD
CHATTANOOGA, TN 37421
USXPRESS.COM