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MarketScreener Homepage  >  Equities  >  Nyse  >  U.S. Xpress Enterprises, Inc.    USX

U.S. XPRESS ENTERPRISES, INC.

(USX)
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U S Xpress Enterprises : US XPRESS ENTERPRISES INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

10/30/2020 | 09:41am EST
The unaudited condensed consolidated financial statements include the accounts
of U.S. Xpress Enterprises, Inc., a Nevada corporation, and its consolidated
subsidiaries. References in this report to "we," "us," "our," the "Company," and
similar expressions refer to U.S. Xpress Enterprises, Inc. and its consolidated
subsidiaries. All significant intercompany transactions and accounts have been
eliminated in consolidation.

This 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 Form 10-Q, 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, our strategic initiatives,
and our digital fleet,Variant, future customer relationships, future growth of
dedicated contract services, future fluctuations in purchased transportation
expense and fuel surcharge reimbursement, future driver market conditions and
driver turnover and retention rates, any projections of earnings, revenues, cash
flows, dividends, capital expenditures, operating ratio, or other financial
items, expected cash flows, expected operating improvements, 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, driver training, hair follicle testing, and
renewal rates, 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 fleet size and management, the market value of used equipment, including
gain on sale, 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,  the anticipated effect of the COVID-19 pandemic, 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 sections
entitled "Item 1A. Risk Factors," set forth in our Annual Report on Form 10-K
for the year ended December 31, 2019 and our Quarterly Report on Form 10-Q for
the quarter ended March 31, 2020. Readers should review and consider the factors
discussed in "Item 1A. Risk Factors," set forth in our Annual Report on
Form 10-K for the year ended December 31, 2019 and our Quarterly Report on Form
10-Q for the quarter ended March 31, 2020, along with various disclosures in our
press releases, stockholder reports, and other filings with the SEC.

All such forward-looking statements speak only as of the date of this Form 10-Q.
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.

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Overview
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
September 30, 2020, our fleet consisted of approximately 6,500 tractors and
approximately 13,500 trailers, including approximately 1,900 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
and information technology infrastructure are established and capable of
handling significantly larger volumes without meaningful additional investment.

COVID - 19 Business Update



Operational Update



Given the rapid on-set and spread of COVID-19, we moved quickly to enable our
office employees to work remotely starting March 16th and during that week
transitioned more than 1,400 employees, or over 95% of our corporate office
staff, to a work from home environment. Since then, non-remote personnel have
largely been limited to employees working on-site at customer locations and shop
technicians working in our facilities, all of whom are following strict
protocols to ensure their safety.



We have instituted policies to facilitate effective communication in this
environment.  For non-driving employees, we ensure multiple daily contacts with
direct reports and have developed key performance indicators, facilitated by our
digital capabilities, to measure our operational effectiveness. We have also
implemented a hotline and support staff to ensure employees have access to
necessary medical services as well as ensuring an adequate supply of safety
equipment, including masks and gloves, for our workers who are on the
frontlines, and providing regular cleaning and disinfecting of our facilities.
U.S. Xpress' employees are playing an essential role in the country's fight
against COVID-19 as they work to keep critical supplies moving and store shelves
stocked. We are working daily with our drivers to keep them informed and safe in
this rapidly changing environment.



For new drivers, we have leveraged our new driver training program as well as created a virtual orientation program that allows drivers to complete work remotely and, therefore, avoiding a majority of classroom work. This is an attractive innovation for drivers and has positively contributed to our recruiting efforts.




Market and Customer Update



We have a strong and diversified customer base with our top 25 customers
representing 71% of 2019 revenues. Our volumes through the third quarter
remained consistent primarily as a result of our customer mix. The fluctuations
in volume in the general freight market and in specific industries related to
COVID-19 have not negatively impacted the volumes of the Company's major
Dedicated accounts, which are concentrated in the discount retail and grocery
market sectors.


Liquidity and Capital Resources




Due to uncertainties regarding the depth and duration of the economic impact of
the COVID-19 crisis, as well as the impact of re-starting various components of
the global supply chain at different times, we have considered many different
scenarios.


We do not anticipate material liquidity constraints or any issues with our ongoing ability to remain in compliance with our Credit Facility.



Executive Summary



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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. 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 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 to our Dedicated service offering and Variant,
our digital fleet, from certain underperforming portions of our Over-the-Road
("OTR") service offering. 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. During the third quarter, we continued to see
tangible, financial benefits of our strategic initiatives focused on utilizing
technology to improve our processes, accelerate the velocity of our business,
reduce the number of our preventable accidents, improve our customers' and
drivers' satisfaction, and lower our costs.

Total revenue for the third quarter of 2020 increased by $3.0 million to $431.5
million as compared to the third quarter of 2019. The increase was primarily a
result of a 21.6% increase in Brokerage revenue to $56.0 million, a 2.9%
increase in average revenue per mile, a 0.7% increase in average revenue miles
per tractor per week, partially offset by a 2.1% decrease in average tractors
and a $14.0 million decrease in fuel surcharge revenue. Excluding the impact of
fuel surcharge revenue, third quarter revenue increased $17.0 million to $403.7
million, an increase of 4.4% as compared to the prior year quarter.

Operating income for the third quarter of 2020 was $15.9 million compared to
operating income of $3.3 million in the third quarter of 2019. We delivered a
96.3% operating ratio for the quarter which is an improvement relative to the
99.2% operating ratio reported in the third quarter of 2019. Our profitability
increased largely as a result of a 2.9% increased revenue per mile combined with
lower claims expense and other costs, offset by a higher percentage of unseated
trucks in our legacy OTR fleet and a decrease in our Brokerage segment gross
margin to 6.7% compared to 12.0% in the prior year quarter.

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.
During the second quarter of 2020 we launched our digital fleet, since branded
as Variant, which is a fleet that is largely recruited, planned, dispatched and
managed using artificial intelligence and digital platforms. Variant is a
completely new paradigm for operating trucks in an OTR environment that is
provided to the driver through a proprietary app-based driver experience. We
developed the concept as a hypothesis in 2018 based in part on the business
models of the digital freight brokerages. As venture capital backed, digital
brokers began to enter the market utilizing cutting edge technology and a new
operating model, we believed there was an opportunity to take this approach and
apply it to our asset based business in order to drive improved profitability
and growth. During 2019, we began building our technology leadership and teams
to construct the necessary databases, applications, and processes to launch a
pilot fleet with a small number of trucks in the fourth quarter of 2019.  The
test was successful and we expanded the pilot fleet to approximately 100 trucks
in the first quarter of 2020. Given the positive results of the first quarter
pilot we moved to a full production model, scaling the business to approximately
400 trucks in the second quarter of 2020 and adding approximately 100 trucks
during the third quarter. Phase one of our plan is to convert a total of 900 OTR
solo trucks, with the lowest returns, to our Variant platform over the next few
quarters. Phase two of our plan will be to potentially convert an additional
1,200 trucks over the next four to six quarters.  While the conversion will not
be linear, we expect our margins to expand further. Within our Variant fleet
during the third quarter, we continued to experience an approximate 20%
improvement in utilization per truck, a dramatic decrease in driver turnover of
approximately 70%, improved safety, and a higher level of on-time service. We
believe that we can further scale this platform while maintaining these positive
results and continuing to further enhance the capabilities of this new
technology. We will continue to focus on implementing and executing our
initiatives that we expect will continue to drive sustainable improved
performance over time.



As we look to the fourth quarter of 2020, we expect our driver recruiting in
Variant to pick up, which we are already beginning to see through October.  This
increase is expected to deliver improved results, which should effectively
offset the turnover that we have experienced in our legacy OTR fleet and
slightly improve our profitability for the fourth

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quarter of 2020 as we expect to experience improved spot and contract pricing.

As we continue to scale Variant into the first quarter of 2021, we then expect to experience sustainable margin expansion over the course of the next year.

In regards to the market, our baseline assumptions for the balance of 2020
include a general sequential economic recovery that may be volatile at times,
increasing inventory re-stocking, tight trucking capacity, and relatively benign
cost inflation outside of driver-related and insurance premium expenses.  These
conditions combined with a continued shortage of drivers are expected to be
supportive of the market and rates through next year which will have to support
significant increases in driver pay, some of which are already in place.  As a
result, we expect contract rates in 2021 to increase on average by 10-15% with
the driver shortage likely extending the cycle as we believe there will be up to
200,000 fewer drivers compared to the beginning of the year.



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. Our Variant fleet is included
within our OTR service offering. 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.

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.

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

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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 or load 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 per
tractor per period, in each case excluding fuel surcharge revenue.

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 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. Because of the inverse
relationship between vehicle rents and depreciation and amortization, we review
both line items together.

Approximately 26.6% of our total tractor fleet was operated by independent
contractors at September 30, 2020. 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 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

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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 three and nine months ended September 30, 2020 and 2019 is as follows:




                                        Three Months Ended            Nine Months Ended
                                          September 30,                 September 30,
                                        2020           2019          2020           2019

                                      (dollars in thousands)        (dollars in thousands)
Revenue, before fuel surcharge      $    403,679$ 386,666$ 1,190,463$ 1,133,162
Fuel surcharge                            27,790        41,837         96,051        124,566
Total operating revenue             $    431,469$ 428,503$ 1,286,514$ 1,257,728




For the quarter ended September 30, 2020, our total operating revenue increased
by $3.0 million, or 0.7%, compared to the same quarter in 2019, and our revenue,
before fuel surcharge increased by $17.0 million, or 4.4%. The primary factors
driving the increases in total operating revenue and revenue, before fuel
surcharge, were increased pricing in our Truckload and Brokerage segment and
increased volumes in our Brokerage segment offset partially by decreased
utilization in our Truckload segment.

For the nine months ended September 30, 2020, our total operating revenue
increased by $28.8 million, or 2.3%, compared to the same period in 2019, and
our revenue, before fuel surcharge increased by $57.3 million, or 5.1%. The
primary factors driving the increases in total operating revenue and revenue,
before fuel surcharge, were increased volumes in our Truckload and Brokerage
segment, offset partially by decreased pricing.

As a result of our customer mix we did not experience a decline in overall
freight volumes during this COVID-19 pandemic as the majority of our customers
did not shutdown. However, our spot rates did suffer a decline early in the
second quarter due to capacity from other verticals becoming available as their
customer base saw a reduction in volumes.  During the third quarter, we saw spot
market rates exceed contract rates for the first time in seven quarters, and we
expect contract rates in 2021 to increase on average 10-15%.

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A summary of our revenue generated by segment for the three and nine months ended September 30, 2020 and 2019 is as follows:




                                          Three Months Ended            Nine Months Ended
                                            September 30,                 September 30,
                                          2020           2019          2020           2019

                                        (dollars in thousands)        (dollars in thousands)
Truckload revenue, before fuel
surcharge                             $    347,709$ 340,630$ 1,037,988$ 1,001,425
Fuel surcharge                              27,790        41,837         96,051        124,566
Total Truckload operating revenue          375,499       382,467      1,134,039      1,125,991
Brokerage operating revenue                 55,970        46,036        152,475        131,737
Total operating revenue               $    431,469$ 428,503$ 1,286,514$ 1,257,728




The following is a summary of our key Truckload segment performance indicators,
before fuel surcharge for the three and nine months ended September 30, 2020 and
2019.




                                                   Three Months Ended        Nine Months Ended
                                                     September 30,            September 30,
                                                    2020         2019         2020        2019
Over the road
Average revenue per tractor per week             $    3,680$ 3,479$    3,566$ 3,572
Average revenue per mile                         $    2.047$ 1.910$    1.921$ 1.949
Average revenue miles per tractor per week            1,798       1,821         1,856      1,832
Average tractors                                      3,684       3,785         3,781      3,671
Dedicated
Average revenue per tractor per week             $    4,065$ 4,011$    4,085$ 3,998
Average revenue per mile                         $    2.353$ 2.408$    2.360$ 2.367
Average revenue miles per tractor per week            1,728       1,666         1,731      1,689
Average tractors                                      2,710       2,748         2,717      2,693
Consolidated
Average revenue per tractor per week             $    3,843$ 3,703$    3,783$ 3,752
Average revenue per mile                         $    2.173$ 2.109$    2.097$ 2.118
Average revenue miles per tractor per week            1,768       1,756    
    1,804      1,772
Average tractors                                      6,394       6,533         6,498      6,364




For the quarter ended September 30, 2020, our Truckload revenue, before fuel
surcharge increased by $7.1 million, or 2.1%, compared to the same quarter in
2019. The primary factors driving the changes in Truckload revenue, were a 2.9%
increase in average revenue per mile, a 0.7% increase in average revenue miles
per tractor per week partially offset by a 2.1% decrease in average available
tractors. During the quarter ended September 30, 2020, our OTR rates increased
7.2% due primarily to an increase in spot rates offset by an approximate 2.9%
decline in our contract rates compared to the same quarter in 2019. Our
Dedicated revenue per tractor per week increased 1.4% during the quarter ended
September 30, 2020 as compared to the same period in 2019. Fuel surcharge
revenue decreased by $14.0 million, or 33.6%, to $27.8 million, compared with
$41.8 million in the same quarter in 2019. The Department of Energy ("DOE")
national weekly average fuel price per gallon averaged approximately $0.598 per
gallon lower for the quarter ended September 30, 2020 compared to the same
quarter in 2019. The decrease in fuel surcharge revenue primarily relates to
decreased fuel prices combined with a slight decrease in revenue miles compared
to the same quarter in 2019.

For the nine months ended September 30, 2020, our Truckload revenue, before fuel
surcharge increased by $36.6 million, or 3.7%, compared to the same period in
2019. The primary factors driving the changes in Truckload revenue, were a 2.1%
increase of average available tractors, a 1.8% increase in average revenue miles
per tractor per week partially offset by a 1.0% decrease in average revenue per
mile. During the nine months ended September 30, 2020, our OTR rates decreased
1.4% due primarily to a decline of in our contract rates of approximately 4.3%
compared to the same period in 2019. Our Dedicated revenue per tractor per week
increased 2.2% during the nine months ended September 30, 2020 due primarily to
a 2.5% increase in average revenue miles per tractor per week as compared to the
same period in 2019. Fuel

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surcharge revenue decreased by $28.5 million, or 22.9%, to $96.1 million,
compared with $124.6 million in the same period in 2019. The Department of
Energy ("DOE") national weekly average fuel price per gallon averaged
approximately $0.464 per gallon lower for the nine months ended September 30,
2020 compared to the same period in 2019. The decrease in fuel surcharge revenue
primarily relates to decreased fuel prices partially offset by a 4.4% increase
in revenue miles compared to the same period in 2019.

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 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 three and nine months ended September 30, 2020 and
2019.




                             Three Months Ended         Nine Months Ended
                               September 30,              September 30,
                             2020          2019         2020         2019
Gross margin percentage         6.7 %        12.0 %        6.1 %       15.2 %




For the quarter ended September 30, 2020, our Brokerage revenue increased by
$9.9 million, or 21.6%, compared to the same quarter in 2019. The primary factor
driving the increase in Brokerage revenue was a 14.9% increase in average
revenue per load and a 5.9% increase in load count. We experienced a decrease in
our gross margin to 6.7% in the third quarter of 2020 compared to 12.0% in the
same quarter of 2019, due to a $241 increase in cost per load caused by
tightened truckload capacity partially offset by a $187 increase in average
revenue per load compared to the same quarter in 2019. During the third quarter
of 2020, 76.0% of our freight was contracted while 24.0% was sourced through the
spot market.  We are currently working to increase the percentage of freight
sourced through the spot market and increasing the contractual rates to better
match current market conditions.



For the nine months ended September 30, 2020, our Brokerage revenue increased by
$20.7 million, or 15.7%, compared to the same period in 2019. The primary factor
driving the increase in Brokerage revenue was a 23.0% increase in load count
partially offset by a 5.9% decrease in average revenue per load. We experienced
a decrease in our gross margin to 6.1% in the nine months ended September 30,
2020 compared to 15.2% in the same period of 2019, due to a $78 decrease in
revenue per load combined with a $46 increase in cost per load compared to the
same period in 2019. We continue to work on improving our operating margin in
this segment and expect the operating ratio to improve approximately 500 basis
points for the fourth quarter.

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 Benefits


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.

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The following is a summary of our salaries, wages and benefits for the three and nine months ended September 30, 2020 and 2019:




                                           Three Months Ended               Nine Months Ended
                                             September 30,                    September 30,
                                           2020           2019              2020           2019

                                         (dollars in thousands)           (dollars in thousands)
Salaries, wages and benefits           $    137,541$ 134,862$    412,889$ 389,907
% of total operating revenue                   31.9 %        31.5 %             32.1 %        31.0 %
% of revenue, before fuel surcharge            34.1 %        34.9 %        
    34.7 %        34.4 %




For the quarter ended September 30, 2020, salaries, wages and benefits increased
$2.7 million, or 2.0%, compared with the same quarter in 2019. The increases in
absolute dollar terms were due primarily to a $5.2 million increase in office
wages due in part to a 7.8% increase in headcount as we continue to invest in
our ongoing initiatives. During the quarter ended September 30, 2020, our
workers' compensation expense and group health claims expense decreased
approximately 16.3%, due to decreased workers compensation and group health
claims expense as compared to the same quarter in 2019.

For the nine months ended September 30, 2020, salaries, wages and benefits
increased $23.0 million, or 5.9%, compared with the same period in 2019. The
increases in absolute dollar terms were due primarily to $11.7 million of higher
driver wages due in part to a 4.7% increase in company driver miles and a $12.8
million increase in office wages due in part to a 6.9% increase in headcount as
we continue to invest in our ongoing initiatives. During the nine months ended
September 30, 2020, our workers' compensation expense and group health claims
expense decreased approximately 2.6%, due to decreased workers compensation and
group health claims expense as compared to the same period in 2019.

In the near term, we believe salaries, wages and benefits will increase as a
result of significant driver pay increases, some of which are already in place,
due to a shortage of qualified drivers.

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 three and nine months ended September 30, 2020 and 2019:




                                           Three Months Ended               Nine Months Ended
                                             September 30,                    September 30,
                                           2020            2019             2020           2019

                                         (dollars in thousands)           (dollars in thousands)
Fuel and fuel taxes                    $      33,208$ 47,315$    103,265$ 141,252
% of total operating revenue                     7.7 %       11.0 %              8.0 %        11.2 %
% of revenue, before fuel surcharge              8.2 %       12.2 %        
     8.7 %        12.5 %




For the quarter ended September 30, 2020, fuel and fuel taxes decreased $14.1
million, or 29.8%, compared with the same quarter in 2019. The decrease in fuel
and fuel taxes was primarily the result of a 25.4% decrease in the average fuel
price per gallon, a 5.4% increase in average miles per gallon, partially offset
by a slight increase in company driver miles compared to the same quarter in
2019.

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For the nine months ended September 30, 2020, fuel and fuel taxes decreased
$38.0 million, or 26.9%, compared with the same period in 2019. The decrease in
fuel and fuel taxes was primarily the result of a 24.5% decrease in the average
fuel price per gallon and a 5.6% increase in average miles per gallon, partially
offset by a 4.7% increase in company driver miles compared to the same period in
2019.

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:




                                          September 30,                    September 30,
                                        2020           2019              2020           2019

                                      (dollars in thousands)           (dollars in thousands)
Total fuel surcharge revenue        $     27,790$  41,837$     96,051$ 124,566
Less: fuel surcharge revenue
reimbursed to independent
contractors                                6,838        11,874             25,360        34,587
Company fuel surcharge revenue            20,952        29,963            
70,691        89,979
Total fuel and fuel taxes           $     33,208$  47,315$    103,265$ 141,252
Less: company fuel surcharge
revenue                                   20,952        29,963             70,691        89,979
Net fuel expense                    $     12,256$  17,352$     32,574$  51,273
% of total operating revenue                 2.8 %         4.0 %              2.5 %         4.1 %
% of revenue, before fuel
surcharge                                    3.0 %         4.5 %              2.7 %         4.5 %




For the quarter ended September 30, 2020, net fuel expense decreased $5.1
million, or 29.4%, compared with the same quarter in 2019. During the quarter
ended September 30, 2020, the decrease in net fuel expenses was primarily the
result of a 25.4% decrease in the average fuel price per gallon, a 5.4% increase
in average miles per gallon, partially offset by a $9.0 million decrease in
company fuel surcharge revenue as compared to the same quarter in 2019.

For the nine months ended September 30, 2020, net fuel expense decreased $18.7
million, or 36.5%, compared with the same period in 2019. During the nine months
ended September 30, 2020, the decrease in net fuel expenses was primarily the
result of a 24.5% decrease in the average fuel price per gallon, a 5.6% increase
in average miles per gallon, partially offset by a 4.7% increase in company
driver miles and a $19.3 million decrease in company fuel surcharge revenue
compared to the same period in 2019.

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.

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.

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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 three and nine months ended September 30, 2020 and 2019:




                                        Three Months Ended               Nine Months Ended
                                          September 30,                    September 30,
                                        2020            2019             2020           2019

                                      (dollars in thousands)           (dollars in thousands)
Vehicle rents                       $      20,956$ 19,470$     64,168$  57,025
Depreciation and amortization,
net of (gains) losses on sale of
property                                   25,785       26,684             77,871        74,498
Vehicle rents and depreciation
and amortization of property and
equipment                           $      46,741$ 46,154$    142,039$ 131,523
% of total operating revenue                 10.8 %       10.8 %             11.0 %        10.5 %
% of revenue, before fuel
surcharge                                    11.6 %       11.9 %             11.9 %        11.6 %




For the quarter ended September 30, 2020, vehicle rents increased $1.5 million
or 7.6% compared to the same quarter in 2019. The increase in vehicle rents was
primarily due to increased trailers financed under operating leases compared to
the same quarter in 2019. Depreciation and amortization, net of (gains) losses
on sale of property and equipment decreased $0.9 million, or 3.4%, compared to
the same quarter in 2019. The decrease in depreciation and amortization is
primarily due to decreased owned tractors combined with lower depreciation per
tractor partially offset by increased software amortization as compared to the
same quarter in 2019.

For the nine months ended September 30, 2020, vehicle rents increased $7.1
million or 12.5% compared to the same period in 2019. The increase in vehicle
rents was primarily due to increased trailers and tractors financed under
operating leases compared to the same period in 2019. Depreciation and
amortization, net of (gains) losses on sale of property and equipment increased
$3.4 million, or 4.5%, compared to the same period in 2019. The increase in
depreciation and amortization is primarily due to increased software
amortization as compared to the same period in 2019.

We continue to evaluate our planned capital expenditures and estimate 2020 net
capital expenditures to approximate $100.0 to $120.0 million, which includes an
approximate $20.0 million transaction that carried over from the fourth quarter
of 2019.

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.

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The following is a summary of our purchased transportation for the three and nine months ended September 30, 2020 and 2019:




                                           Three Months Ended               Nine Months Ended
                                             September 30,                    September 30,
                                           2020           2019              2020           2019

                                         (dollars in thousands)           (dollars in thousands)
Purchased transportation               $    125,997$ 122,433$    373,117$ 349,017
% of total operating revenue                   29.2 %        28.6 %             29.0 %        27.7 %
% of revenue, before fuel surcharge            31.2 %        31.7 %        
    31.3 %        30.8 %




For the quarter ended September 30, 2020, purchased transportation increased
$3.6 million, or 2.9%, compared to the same quarter in 2019. The increase in
purchased transportation reflected a 5.9% increase in our Brokerage load count,
a 21.8% increase in cost per Brokerage load partially offset by a 7.2% decrease
in independent contractor miles and a 42.4% decrease in fuel surcharge paid to
independent contractors as compared to the same quarter in 2019.

For the nine months ended September 30, 2020, purchased transportation increased
$24.1 million, or 6.9%, compared to the same period in 2019. The increase in
purchased transportation reflected a 23.0% increase in our Brokerage load count,
a 4.1% increase in our cost per Brokerage load combined with a 4.6% increase in
independent contractor miles partially offset by a 26.7% decrease in fuel
surcharge paid to independent contractors as compared to the same period in
2019.

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
surcharge reimbursements, is evaluated as a percentage of total operating
revenue and as a percentage of revenue, before fuel surcharge, as shown below:




                                      Three Months Ended               Nine Months Ended
                                        September 30,                    September 30,
                                      2020           2019              2020           2019

                                    (dollars in thousands)           (dollars in thousands)
Purchased transportation          $    125,997$ 122,433$    373,117$ 349,017
Less: fuel surcharge revenue
reimbursed to independent
contractors                              6,838        11,874             25,360        34,587
Purchased transportation, net
of fuel surcharge
reimbursement                     $    119,159$ 110,559$    347,757$ 314,430
% of total operating revenue              27.6 %        25.8 %            
27.0 %        25.0 %
% of revenue, before fuel
surcharge                                 29.5 %        28.6 %             29.2 %        27.7 %



For the quarter ended September 30, 2020, purchased transportation, net of fuel
surcharge reimbursement, increased $8.6 million, or 7.8%, compared to the same
quarter in 2019. The increase in purchased transportation reflected a 5.9%
increase in our Brokerage load count, a 21.8% increase in cost per Brokerage
load partially offset by a 7.2% decrease in independent contractor miles as
compared to the same quarter in 2019.

For the nine months ended September 30, 2020, purchased transportation, net of
fuel surcharge reimbursement, increased $33.3 million, or 10.6%, compared to the
same period in 2019. The increase in purchased transportation reflected a 23.0%
increase in our Brokerage load count, a 4.1% increase in our cost per Brokerage
load combined with a 4.6% increase in independent contractor miles as compared
to the same period in 2019.

Operating Expenses and Supplies


Operating expenses and supplies consist primarily of ordinary vehicle repairs
and maintenance costs, driver on-the-road expenses, tolls and driver recruiting
costs. 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.

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The following is a summary of our operating expenses and supplies expense for the three and nine months ended September 30, 2020 and 2019:




                                                  Three Months Ended              Nine Months Ended
                                                    September 30,                   September 30,
                                                  2020            2019            2020           2019

                                                (dollars in thousands)          (dollars in thousands)
Operating expenses and supplies               $      33,927$ 36,147$    101,249$ 104,744
% of total operating revenue                            7.9 %        8.4 %             7.9 %         8.3 %
% of revenue, before fuel surcharge                     8.4 %        9.3 % 
           8.5 %         9.2 %




For the quarter ended September 30, 2020, operating expenses and supplies
decreased $2.2 million, or 6.1%, compared to the same quarter in 2019. The
decrease in operating expenses and supplies is primarily due to decreased costs
associated with the student driver training program suspended during the second
quarter of 2020.

For the nine months ended September 30, 2020, operating expenses and supplies
decreased $3.5 million, or 3.3%, compared to the same period in 2019. The
decrease in operating expenses and supplies is primarily due to decreased driver
hiring related costs and costs associated with the student driver training
program as compared to the same period in 2019.

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.

The following is a summary of our insurance premiums and claims expense for the three and nine months ended September 30, 2020 and 2019:




                                           Three Months Ended               Nine Months Ended
                                             September 30,                    September 30,
                                           2020            2019             2020           2019

                                         (dollars in thousands)           (dollars in thousands)
Insurance premiums and claims          $      17,835$ 19,570$     65,141$  63,189
% of total operating revenue                     4.1 %        4.6 %              5.1 %         5.0 %
% of revenue, before fuel surcharge              4.4 %        5.1 %        
     5.5 %         5.6 %



For the quarter ended September 30, 2020, insurance premiums and claims decreased $1.7 million, or 8.9%, compared to the same quarter in 2019. This decrease is primarily due to decreased physical damage and liability claims expense partially offset by increased excess liability premiums as compared to the same quarter in 2019. Effective September 1, 2020 we renewed our auto liability excess insurance policies increasing our annual premiums by approximately $5.0 million due to a challenging reinsurance market.

For the nine months ended September 30, 2020, insurance premiums and claims
increased $2.0 million, or 3.1%, compared to the same period in 2019. This
increase is primarily due to increased liability claims and excess premium
expense partially offset by decreased physical damage claims expense as we did
not experience the same frequency of physical damage claims as compared to the
same period in 2019.

Since the second quarter of 2018, substantially all of the tractors in our fleet
have been equipped with event recorders. We continue to believe we have an
opportunity to reduce our 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,

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(3) our decision to implement hair follicle testing for all of our drivers in
the fourth quarter of 2019, and (4) the successful launch of Variant, our
digital fleet, which is currently experiencing fewer preventable accidents per
million miles than our OTR legacy fleet combined with the suspension of our OTR
student program. In the third quarter of 2020 we experienced over 30% fewer
preventable accidents than we did in the prior year quarter which we believe
contributed greatly to our lower insurance and claims expense despite higher
premiums.  Although a decrease in frequency in claims reduced our expense during
the quarter, to the extent we have an increase in severity these savings could
be partially or fully offset.

General and Other Operating Expenses

General and other operating expenses consist primarily of 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:


                                            Three Months Ended               Nine Months Ended
                                              September 30,                    September 30,
                                            2020            2019             2020           2019

                                          (dollars in thousands)           (dollars in thousands)
General and other operating expenses    $      14,783$ 12,998$     42,663$  37,288
% of total operating revenue                      3.4 %        3.0 %              3.3 %         3.0 %
% of revenue, before fuel surcharge               3.7 %        3.4 %       
      3.6 %         3.3 %




For the quarter ended September 30, 2020, general and other operating expenses
increased $1.8 million, or 13.7%, compared to the same quarter in 2019. General
and other expenses increased primarily due to increased terminal rents due to
the sale leaseback transaction in the fourth quarter of 2019 combined with
increased other professional and administrative expenses partially offset by
reduced travel and entertainment expenses as compared to the same quarter in
2019.

For the nine months ended September 30, 2020, general and other operating
expenses increased $5.4 million, or 14.4%, compared to the same period in 2019.
General and other expenses increased primarily due to increased terminal rents
due to the sale leaseback transaction in the fourth quarter of 2019 combined
with slight increases in other professional and administrative expenses offset
by reduced travel and entertainment expenses as compared to the same period
in
2019.


Liquidity and Capital Resources

Overview


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, finance leases, operating leases and proceeds from equipment sales.

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. The availability of financing and
equity capital will depend upon our financial condition and results of
operations as well as prevailing market conditions.

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At September 30, 2020, we had approximately $32.7 million of outstanding letters of credit, $0 million in outstanding borrowings and $147.5 million of availability under our $250.0 million Credit Facility.

Sources of Liquidity

Credit Facility


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 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.

At September 30, 2020, the Credit Facility had issued collateralized letters of
credit in the face amount of $32.7 million, with $0 million borrowings
outstanding and $147.5 million available to borrow. We do not anticipate
material liquidity constraints or any issues with our ongoing ability to remain
in compliance with our Credit Facility.

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Cash Flows

Our summary statements of cash flows for the nine months ended September 30, 2020 and 2019 are set forth in the table below:




                                                           Nine Months Ended
                                                             September 30,
                                                          2020           2019

                                                         (dollars in thousands)
Net cash provided by operating activities              $   101,914    $   

83,246

Net cash used in investing activities                  $  (95,270)    $ 

(103,030)

Net cash (used in) provided by financing activities $ (4,909)$ 2,550





Operating Activities

For the nine months ended September 30, 2020, we generated cash flows from
operating activities of $101.9 million, an increase of $18.7 million compared to
the same period in 2019. The increase was due primarily to a $11.0 million
increase in net income adjusted for noncash items combined with a $7.9 million
increase in our operating liabilities partially offset by increased operating
assets. Our operating liabilities increased $7.9 million during the nine months
ended September 30, 2020 as compared to the same period in 2019, due in part to
increased accrued wages and benefits related to timing of payments, increased
long-term liabilities as a result of deferred payroll taxes in conjunction with
the Coronavirus Aid, Relief and Economic Security Act enacted March 2020,
partially offset by decreased accounts payable and other accrued liabilities
related to timing of payments. Our increase in net income adjusted for noncash
items was due in part to increased average revenue miles per tractor, decreased
interest expense offset by decreases in our Brokerage gross margin.

Investing Activities


For the nine months ended September 30, 2020, net cash flows used in investing
activities were $95.3 million, a decrease of $7.8 million compared to the same
period in 2019. This decrease is primarily the result of decreased proceeds from
sale of subsidiary during the nine months ended September 30, 2020. Our net
capital expenditures during the nine months ended September 30, 2020 were $93.4
million compared to $94.6 million in the same period of 2019. We expect our net
capital expenditures for calendar year 2020 will approximate $100.0 million to
$120.0 million and will be 100% financed with secured equipment notes or finance
leases and will not require any use of cash or borrowings under our Credit
Facility.

Financing Activities


For the nine months ended September 30, 2020, net cash flows used in financing
activities were $4.9 million, an increase of $7.5 million compared to the same
period in 2019. The increase is primarily due to increased debt repayments as we
are generating more operating cash flows as compared to the same period in 2019.

Working Capital


As of September 30, 2020, we had a working capital deficit of $66.6 million,
representing a $14.3 million decrease in our working capital from September 30,
2019. When we analyze our working capital, we typically exclude balloon payments
in the current maturities of long-term debt and current portion of operating
lease liabilities 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 current portion of operating lease
liabilities as of September 30, 2020, we had a working capital deficit of $32.3
million, compared with a working capital deficit of $10.7 million at September
30, 2019. The decrease in working capital was primarily the result of increased
accounts payable and current maturities of long-term debt combined with
decreased receivables partially offset by increased assets held for sale.

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Working capital deficits are common to many trucking companies that operate by
financing revenue equipment purchases through borrowing, or lease arrangements.
When we finance revenue equipment through borrowing or lease arrangements, the
principal amortization or, in the case of operating leases, the present value of
the lease payments scheduled for the next twelve months, is categorized as a
current liability, although the revenue equipment and operating lease right of
use assets are classified as long-term assets. Consequently, each acquisition of
revenue equipment financed with borrowing, or lease arrangements decreases
working capital. 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.

Off-Balance Sheet Arrangements

The Company had letters of credit of $32.7 million outstanding as of September 30, 2020. The letters of credit are maintained primarily to support the Company's insurance program.

The Company had cancelable commitments outstanding at September 30, 2020 to
acquire revenue equipment for approximately $61.4 million during the remainder
of 2020. These purchase commitments are expected to be financed by operating
leases, long-term debt and proceeds from sales of existing equipment.

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 lower than results
in each of the other three quarters of the year. However, cyclical changes in
the trucking industry, including imbalances in supply and demand, can override
the seasonality faced in the industry. Over the past several years, we have seen
increases in demand at varying times, including surges between Thanksgiving
and
the year-end holiday season.

Contractual Obligations

The table below summarizes our contractual obligations as of September 30, 2020.


                                                                   Payments Due by Period
                                          Less than                                        More than
                                            1 year       1 ­ 3 years      3 ­ 5 years       5 years        Total

                                                                       (in thousands)
Long­term debt obligations(1)             $  121,233$     209,140$      54,459$    40,884$ 425,716
Finance lease obligations(2)                   4,468            2,874              652              -        7,994
Operating lease obligations(3)                84,330          141,629           51,397         34,608      311,964
Purchase obligations(4)                       61,389                -                -              -       61,389

Total contractual obligations(5) $ 271,420$ 353,643 $

   106,508    $    75,492$ 807,063

Including interest obligations on long-term debt, excluding fees. The table (1) assumes long-term debt is held to maturity and does not reflect events

subsequent to September 30, 2020.

(2) Including interest obligations on finance lease obligations.

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 (3) 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


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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 $113.0 million at September 30, 2020. 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.

We had commitments outstanding at September 30, 2020 to acquire revenue

equipment. The revenue equipment commitments are cancelable, subject to (4) 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) Excludes deferred taxes and long or short-term portion of self-insurance

claims accruals.

Critical Accounting Policies


We have reviewed our critical accounting policies and considered whether any new
critical accounting estimates or other significant changes to our accounting
policies require any additional disclosures. There have been no significant
changes to our accounting policies since the disclosures made in our Annual
Report on Form 10-K for the year ended December 31, 2019.

© Edgar Online, source Glimpses

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Financials (USD)
Sales 2020 1 744 M - -
Net income 2020 21,0 M - -
Net Debt 2020 406 M - -
P/E ratio 2020 17,6x
Yield 2020 -
Capitalization 351 M 351 M -
EV / Sales 2020 0,43x
EV / Sales 2021 0,39x
Nbr of Employees 8 572
Free-Float 45,4%
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U.S. Xpress Enterprises, Inc. Technical Analysis Chart | USX | US90338N2027 | MarketScreener
Technical analysis trends U.S. XPRESS ENTERPRISES, INC.
Short TermMid-TermLong Term
TrendsNeutralNeutralBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus OUTPERFORM
Number of Analysts 6
Average target price 10,00 $
Last Close Price 7,07 $
Spread / Highest target 69,7%
Spread / Average Target 41,4%
Spread / Lowest Target 13,2%
EPS Revisions
Managers and Directors
NameTitle
William Eric Fuller President, Chief Executive Officer & Director
Cameron Ramsdell President-U.S. Xpress Ventures
Max L. Fuller Executive Chairman
Eric A. Peterson Chief Financial Officer, Secretary & Treasurer
Edward Hell Braman Independent Director
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