~~[X]~~
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~ September 30, 2019

~~[ ]~~
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38528

~~001-38528~~

U.S. Xpress Enterprises, Inc.

(Exact name of registrant as specified in its charter)

~~Nevada~~		~~62-1378182~~
Nevada	62-1378182
(State or other jurisdiction of incorporation		(I.R.S. Employer Identification No.)
or organization)

4080 Jenkins Road
Chattanooga, Tennessee		37421
(Address of principal executive offices)		(Zip Code)

(423) 510-3000

(~~Registrant's~~Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value	USX	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes ~~[X]~~☒	No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).


Yes ~~[X]~~☒	No ~~[ ]~~☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule ~~12b-2~~12b‑2 of the Exchange Act.


Large accelerated filer ~~[ ]~~☐		Accelerated filer ~~[ ]~~☐
Non-accelerated filer ~~[X]~~☒	Smaller reporting company ~~[ ]~~☒
	Emerging growth company ~~[ ]~~☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b-2~~12b‑2 of the Exchange Act).

~~Yes [ ]~~

~~No [X]~~

~~Securities registered pursuant to Section 12(b) of the Act:~~

~~Title of each class~~	~~Trading symbol(s)~~	~~Name of each exchange on which registered~~
~~Class A Common Stock, $0.01 par value~~ Yes ☐	~~USX~~	~~The New York Stock Exchange~~ No ☒

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock, as of the latest practicable date ~~April 30,~~October 31, 2019.

Class A Common Stock, $0.01 par value: ~~32,994,211~~

33,278,230

Class B Common Stock, $0.01 par value: ~~15,616,551~~15,687,101

Table of Contents

TABLE OF CONTENTS

~~PART I~~ ~~FINANCIAL INFORMATION~~
	PART I FINANCIAL INFORMATION	~~Page~~ ~~Number~~
		Page Number

Item 1.	Unaudited Condensed Consolidated Financial Statements Three and Nine Months Ended ~~March 31,~~September 30, 2019 and 2018

	Unaudited Condensed Consolidated Balance Sheets	3

	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	4

	Unaudited Condensed Consolidated Statements of Cash Flows	5

	Unaudited Condensed Consolidated Statement of Stockholder’s Equity (Deficit)	6

	Notes to Unaudited Condensed Consolidated Financial Statements	7

Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	35 37

Item 4.	Controls and Procedures	35 37


	PART II OTHER INFORMATION
		Page Number

Item 1.	Legal Proceedings	36 39

Item 1A.	Risk Factors	37 39

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37 43

Item 3.	Defaults Upon Senior Securities	37 43

Item 4.	Mine Safety Disclosures	37 43

Item 5.	Other Information	37 43

Item 6.	Exhibits	~~Exhibits~~	38

~~Page 2~~

~~TABLE OF CONTENTS~~

U.S. Xpress Enterprises, Inc.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2019 and December 31, 2018

March 31, December 31,
(in thousands, except share amounts) 2019 2018

Assets
Current assets
Cash and cash equivalents $ 2,095 $ 9,892
Customer receivables, net of allowance of $101 and $59 at March 31, 2019 and December 31, 2018, respectively 185,710 190,254
Other receivables 19,474 20,430
Prepaid insurance and licenses 15,793 11,035
Operating supplies 7,548 7,324
Assets held for sale 8,086 33,225
Other current assets 15,860 13,374
Total current assets 254,566 285,534
Property and equipment, at cost 904,209 898,530
Less accumulated depreciation and amortization (385,281 ) (379,813 )
Net property and equipment 518,928 518,717
Other assets
Operating lease right of use assets 186,941 -
Goodwill 57,708 57,708
Intangible assets, net 28,492 28,913
Other 24,858 19,615
Total other assets 297,999 106,236
Total assets $ 1,071,493 $ 910,487
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable $ 63,368 $ 63,808
Book overdraft 5,233 -
Accrued wages and benefits 23,588 24,960
Claims and insurance accruals, current 43,586 47,442
Other accrued liabilities 8,386 8,120
Liabilites associated with assets held for sale - 6,856
Current portion of operating lease liabilities 56,893 -
Current maturities of long-term debt and finance leases 95,117 113,094
Total current liabilities 296,171 264,280
Long-term debt and finance leases, net of current maturities 314,049 312,819
Less debt issuance costs (1,264 ) (1,347 )
Net long-term debt and finance leases 312,785 311,472
Deferred income taxes 21,385 19,978
Long-term liabilities associated with assets held for sale - 8,353
Other long-term liabilities 6,483 7,713
Claims and insurance accruals, long-term 60,518 60,304
Noncurrent operating lease liabilities 129,927 -
Commitments and contingencies (Notes 6 and 7) - -
Stockholders' Equity
Common stock Class A, $.01 par value, 140,000,000 shares authorized at March 31, 2019 and December 31, 2018,32,930,419 and 32,859,292 issued and outstanding at March 31, 2019 and December 31, 2018, respectively 329 329
Common stock Class B, $.01 par value, 35,000,000 authorized at March 31, 2019 and December 31, 2018, 15,616,551 and 15,486,560 issued and outstanding at March 31, 2019 and December 31, 2018, respectively 156 155
Additional paid-in capital 252,559 251,742
Accumulated deficit (12,614 ) (17,335 )
Stockholders' equity 240,430 234,891
Noncontrolling interest 3,794 3,496
Total stockholders' equity 244,224 238,387
Total liabilities and stockholders' equity $ 1,071,493 $ 910,487

See Notes to Unaudited Condensed Consolidated Financial Statements

~~Page 3~~

~~TABLE OF CONTENTS~~

U.S. Xpress Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2019 and 2018

Three Months Ended
March 31,
(in thousands, except per share amounts) 2019 2018

Operating revenue
Revenue, before fuel surcharge $ 375,312 $ 382,858
Fuel surcharge 40,051 42,850
Total operating revenue 415,363 425,708
Operating expenses
Salaries, wages, and benefits 124,563 132,924
Fuel and fuel taxes 46,904 58,389
Vehicle rents 18,976 20,022
Depreciation and amortization, net of (gain) loss on sale of property 23,062 24,706
Purchased transportation 114,005 101,776
Operating expenses and supplies 27,945 29,791
Insurance premiums and claims 24,353 20,170
Operating taxes and licenses 3,173 3,401
Communications and utilities 2,265 2,466
General and other operating expenses 17,479 17,209
Total operating expenses 402,725 410,854
Operating income 12,638 14,854
Other expense (income)
Interest expense, net 5,603 12,658
Equity in loss of affiliated companies 89 296
Other, net 26 (75 )
5,718 12,879
Income before income tax provision 6,920 1,975
Income tax provision 1,901 593
Net total and comprehensive income 5,019 1,382
Net total and comprehensive income attributable to noncontrolling interest 298 223
Net total and comprehensive income attributable to controlling interest $ 4,721 $ 1,159

Earnings per share
Basic earnings per share $ 0.10 $ 0.18
Basic weighted average shares outstanding 48,394 6,385
Diluted earnings per share $ 0.10 $ 0.18
Diluted weighted average shares outstanding 49,391 6,385

See Notes to Unaudited Condensed Consolidated Financial Statements

~~Page 4~~

~~TABLE OF CONTENTS~~

U.S. Xpress Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2019 and 2018

Three Months Ended
March 31,
(in thousands) 2019 2018

Operating activities
Net income $ 5,019 $ 1,382
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax provision 1,407 190
Depreciation and amortization 21,833 23,901
Losses on sale of equipment 1,229 805
Share based compensation 856 208
Other 308 1,688
Changes in operating assets and liabilities:
Receivables 3,560 (10,706 )
Prepaid insurance and licenses (4,761 ) (5,242 )
Operating supplies (285 ) (936 )
Other assets 383 (1,582 )
Accounts payable and other accrued liabilities (2,844 ) (13,936 )
Accrued wages and benefits (1,226 ) 2,365
Net cash provided by (used in) operating activities 25,479 (1,863 )
Investing activities
Payments for purchases of property and equipment (36,604 ) (26,871 )
Proceeds from sales of property and equipment 13,115 8,176
Sale of subsidiary, net of cash (9,002 ) -
Net cash used in investing activities (32,491 ) (18,695 )
Financing activities
Borrowings under lines of credit - 102,676
Payments under lines of credit - (82,950 )
Borrowings under long-term debt 14,355 23,438
Payments of long-term debt (31,128 ) (36,062 )
Payments of financing costs and original issue discount - (14 )
Payments of long-term consideration for business acquistion (990 ) (1,010 )
Tax withholding related to net share settlement of restricted stock awards (39 ) -
Repurchase of membership units - (51 )
Book overdraft 5,233 9,469
Net cash provided by (used in) financing activities (12,569 ) 15,496
Change in cash previously included in assets held for sale 11,784 -
Net change in cash and cash equivalents (7,797 ) (5,062 )
Cash and cash equivalents
Beginning of year 9,892 9,232
End of period $ 2,095 $ 4,170
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 5,620 $ 11,249
Cash refunded during the year for income taxes (91 ) (330 )
Supplemental disclosure of significant noncash investing and financing activities
Debt obligations relieved in conjunction with the divesture of Xpress Internacional $ 7,109 $ -
Capital lease extinguishments 33 764
Uncollected proceeds from asset sales - 1,706

See Notes to Unaudited Condensed Consolidated Financial Statements

~~Page 5~~

~~TABLE OF CONTENTS~~

~~U.S. Xpress Enterprises, Inc.~~

~~Unaudited Condensed Consolidated Statement of Stockholders' Equity (Deficit)~~

~~Three Months Ended March 31, 2019 and 2018~~43

Additional Non Total Redeemable
(in thousands, except share amounts) Class A Class B Paid Accumulated Controlling Stockholders' Restricted
Stock Stock In Capital Deficit Interest Equity (Deficit) Units

Balances at December 31, 2017 $ 64 $ - $ 1 $ (43,459 ) $ 2,289 $ (41,105 ) $ 3,281
Share based compensation - - - - - - 208
Adoption of ASC 606 - - - 1,459 - 1,459 -
Dividend of repurchased membership units - - - - - - (51 )
Net income - - - 1,159 223 1,382 -
Balances at March 31, 2018 $ 64 $ - $ 1 $ (40,841 ) $ 2,512 $ (38,264 ) $ 3,438

Additional Non Total
(in thousands, except share amounts) Class A Class B Paid Accumulated Controlling Stockholders'
Stock Stock In Capital Deficit Interest Equity

Balances at December 31, 2018 $ 329 $ 155 $ 251,742 $ (17,335 ) $ 3,496 $ 238,387
Share based compensation - - 856 - - 856
Vesting of 201,119 restricted units - 1 (39 ) - - (38 )
Net income - - - 4,721 298 5,019
Balances at March 31, 2019 $ 329 $ 156 $ 252,559 $ (12,614 ) $ 3,794 $ 244,224

See Notes to Unaudited Condensed Consolidated Financial Statements

Page 2

~~Page 6~~

~~TABLE OF CONTENTS~~

Table of Contents

U.S. Xpress Enterprises, Inc.

Unaudited Condensed Consolidated Balance Sheets

September 30, 2019 and December 31, 2018


	September 30,		December 31,
(in thousands, except share amounts)	2019		2018
Assets
Current assets
Cash and cash equivalents	$	4,442	$	9,892
Customer receivables, net of allowance of $75 and $59 at September 30, 2019 and December 31, 2018, respectively		193,047		190,254
Other receivables		18,345		20,430
Prepaid insurance and licenses		23,221		11,035
Operating supplies		7,706		7,324
Assets held for sale		10,399		33,225
Other current assets		19,057		13,374
Total current assets		276,217		285,534
Property and equipment, at cost		939,889		898,530
Less accumulated depreciation and amortization		(403,891)		(379,813)
Net property and equipment		535,998		518,717
Other assets
Operating lease right of use assets		250,062		—
Goodwill		57,708		57,708
Intangible assets, net		27,642		28,913
Other		31,067		19,615
Total other assets		366,479		106,236
Total assets	$	1,178,694	$	910,487
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable	$	87,161	$	63,808
Book overdraft		3,833		—
Accrued wages and benefits		24,085		24,960
Claims and insurance accruals, current		51,125		47,442
Other accrued liabilities		9,433		8,120
Liabilities associated with assets held for sale		—		6,856
Current portion of operating lease liabilities		70,246		—
Current maturities of long-term debt and finance leases		82,669		113,094
Total current liabilities		328,552		264,280
Long-term debt, net of current maturities		351,492		312,819
Less unamortized discount and debt issuance costs		(1,301)		(1,347)
Net long-term debt		350,191		311,472
Deferred income taxes		20,996		19,978
Long-term liabilities associated with assets held for sale		—		8,353
Other long-term liabilities		6,599		7,713
Claims and insurance accruals, long-term		53,370		60,304
Noncurrent operating lease liabilities		179,600		—
Commitments and contingencies (Notes 7 and 8)		—		—
Stockholders' Equity
Common stock Class A, $.01 par value, 140,000,000 shares authorized at September 30, 2019 and December 31, 2018, respectively, 33,278,230 and 32,859,292 issued and outstanding at September 30, 2019 and December 31, 2018, respectively		333		329
Common stock Class B, $.01 par value, 35,000,000 authorized at September 30, 2019 and December 31, 2018, respectively, 15,687,101 and 15,486,560 issued and outstanding at September 30, 2019 and December 31, 2018, respectively		157		155
Additional paid-in capital		249,665		251,742
Accumulated deficit		(11,388)		(17,335)
Stockholders' equity		238,767		234,891
Noncontrolling interest		619		3,496
Total stockholders' equity		239,386		238,387
Total liabilities, redeemable restricted units and stockholders' equity	$	1,178,694	$	910,487

See Notes to Unaudited Condensed Consolidated Financial Statements

~~March 31,~~

Page 3

Table of Contents

U.S. Xpress Enterprises, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

Three and Nine Months Ended September 30, 2019 and 2018


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2019		2018		2019		2018
Operating revenue
Revenue, before fuel surcharge	$	386,666	$	413,887	$	1,133,162	$	1,199,553
Fuel surcharge		41,837		46,340		124,566		136,140
Total operating revenue		428,503		460,227		1,257,728		1,335,693
Operating expenses
Salaries, wages, and benefits		134,887		128,117		389,971		400,742
Fuel and fuel taxes		47,460		57,423		141,738		173,516
Vehicle rents		19,470		19,497		57,025		58,912
Depreciation and amortization, net of (gain) loss on sale of property		26,684		24,541		74,498		73,396
Purchased transportation		122,433		129,732		349,017		350,189
Operating expenses and supplies		29,525		30,538		87,438		89,402
Insurance premiums and claims		19,570		25,128		63,189		64,463
Operating taxes and licenses		3,533		3,522		10,112		10,432
Communications and utilities		2,209		2,258		6,659		7,149
General and other operating expenses		19,450		16,579		54,044		49,728
Gain on sale of subsidiary		—		—		(670)		—
Total operating expenses		425,221		437,335		1,233,021		1,277,929
Operating income		3,282		22,892		24,707		57,764
Other expense (income)
Interest expense, net		5,467		4,815		16,366		29,771
Early extinguishment of debt		—		—		—		7,753
Equity in loss of affiliated companies		91		73		270		250
Other, net		—		(133)		26		34
		5,558		4,755		16,662		37,808
Income (loss) before income tax provision		(2,276)		18,137		8,045		19,956
Income tax provision (benefit)		(813)		1,679		1,503		1,081
Net total and comprehensive income (loss)		(1,463)		16,458		6,542		18,875
Net total and comprehensive income (loss) attributable to noncontrolling interest		(17)		329		595		972
Net total and comprehensive income (loss) attributable to controlling interest	$	(1,446)	$	16,129	$	5,947	$	17,903
Earnings (loss) per share
Basic earnings (loss) per share	$	(0.03)	$	0.33	$	0.12	$	0.77
Basic weighted average shares outstanding		48,984		48,296		48,709		23,118
Diluted earnings (loss) per share	$	(0.03)	$	0.33	$	0.12	$	0.76
Diluted weighted average shares outstanding		48,984		49,597		49,289		23,638

See Notes to Unaudited Condensed Consolidated Financial Statements

Page 4

1.	~~Organization and Operations~~

Table of Contents

U.S. Xpress Enterprises, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2019 and 2018


	Nine Months Ended
	September 30,
(in thousands)	2019		2018
Operating activities
Net income	$	6,542	$	18,875
Adjustments to reconcile net income to net cash provided by operating activities:
Early extinguishment of debt		—		7,753
Deferred income tax provision		1,018		3,458
Depreciation and amortization		68,813		68,687
Losses on sale of equipment		5,685		4,709
Share based compensation		2,810		1,356
Other		783		(2,091)
Interest paid-in-kind		—		(7,516)
Gain on sale of subsidiary		(670)		—
Changes in operating assets and liabilities:
Receivables		(5,650)		(30,102)
Prepaid insurance and licenses		(12,189)		(9,754)
Operating supplies		(443)		(96)
Other assets		(4,800)		(4,190)
Accounts payable and other accrued liabilities		22,076		(11,531)
Accrued wages and benefits		(729)		5,304
Net cash provided by operating activities		83,246		44,862
Investing activities
Payments for purchases of property and equipment		(127,899)		(125,556)
Proceeds from sales of property and equipment		33,301		36,915
Other		(2,000)		(500)
Sale of subsidiary, net of cash		(6,432)		—
Net cash used in investing activities		(103,030)		(89,141)
Financing activities
Borrowings under lines of credit		56,200		219,332
Payments under lines of credit		(53,300)		(248,665)
Borrowings under long-term debt		78,803		289,943
Payments of long-term debt		(73,472)		(464,375)
Payments of financing costs and original issue discount		(170)		(4,162)
Proceeds from IPO, net of issuance costs		—		246,685
Payments of long-term consideration for business acquisition		(990)		(1,010)
Purchase of noncontrolling interest		(8,659)		—
Tax withholding related to net share settlement of restricted stock awards		(44)		—
Proceeds from issuance of common stock under ESPP		349		—
Repurchase of membership units		—		(217)
Book overdraft		3,833		3,626
Net cash provided by financing activities		2,550		41,157
Cash included in assets held for sale		11,784		—
Net change in cash and cash equivalents		(5,450)		(3,122)
Cash and cash equivalents
Beginning of year		9,892		9,232
End of period	$	4,442	$	6,110
Supplemental disclosure of cash flow information
Cash paid during the year for interest	$	16,102	$	42,306
Cash paid during the year for income taxes		311		1,368
Supplemental disclosure of significant noncash investing and financing activities
Debt obligations relieved in conjunction with the divesture of Xpress Internacional	$	7,109	$	—
Property and equipment amounts accrued in accounts payable		1,622		—
Capital lease extinguishments		40		1,096
Uncollected proceeds from asset sales		1,607		231

See Notes to Unaudited Condensed Consolidated Financial Statements

Page 5

Table of Contents

U.S. Xpress Enterprises, Inc.

Unaudited Condensed Consolidated Statement of Stockholders' Equity (Deficit)

Three and Nine Months Ended September 30, 2019 and 2018


					Additional				Non		Total
	Class A		Class B		Paid		Accumulated		Controlling		Stockholders'
(in thousands, except share amounts)	Stock		Stock		In Capital		Deficit		Interest		Equity
Balances at December 31, 2018	$	329	$	155	$	251,742	$	(17,335)	$	3,496	$	238,387
Share based compensation		—		—		856		—		—		856
Vesting of restricted units		—		1		(39)		—		—		(38)
Net income		—		—		—		4,721		298		5,019
Balances at March 31, 2019		329		156		252,559		(12,614)		3,794		244,224
Share based compensation		—		—		1,024		—		—		1,024
Vesting of restricted units		3		1		(10)		—		—		(6)
Purchase of noncontrolling interest		—		—		(5,187)		—		(3,472)		(8,659)
Net income		—		—		—		2,672		314		2,986
Balances at June 30, 2019		332		157		248,386		(9,942)		636		239,569
Share based compensation		—		—		930		—		—		930
Issuance of common stock under ESPP		1		—		349		—		—		350
Net loss		—		—		—		(1,446)		(17)		(1,463)
Balances at September 30, 2019	$	333	$	157	$	249,665	$	(11,388)	$	619	$	239,386


					Additional				Non		Total		Redeemable
	Class A		Class B		Paid		Accumulated		Controlling		Stockholders'		Restricted
(in thousands, except share amounts)	Stock		Stock		In Capital		Deficit		Interest		Equity (Deficit)		Units
Balances at December 31, 2017	$	64	$	—	$	1	$	(43,459)	$	2,289	$	(41,105)	$	3,281
Share based compensation		—		—		—		—		—		—		208
Adoption of ASC 606		—		—		—		1,459		—		1,459		—
Dividend of repurchased membership units		—		—		—		—		—		—		(51)
Net income		—		—		—		1,159		223		1,382		—
Balances at March 31, 2018		64		—		1		(40,841)		2,512		(38,264)		3,438
Share based compensation		—		—		238		—		—		238		183
Cancel 6,384,877 US Xpress Enterprises shares		(64)		—		—		64		—		—		—
Issuance of 16,046,624 shares of Class A Stock in Reorganization		160		—		(11)		(149)		—		—		—
Issuance of 15,486,560 shares of Class B Stock in Reorganization		—		155		(6)		(149)		—		—		—
Transfer from temporary equity to permanent equity		—		—		3,455		—		—		3,455		(3,455)
Issuance of 16,668,000 shares of Class A stock in Initial Public Offering, net of underwriting discounts and offering costs		167		—		246,931		—		—		247,098		—
Vesting of restricted stock		1		—		(1)		—		—		—		—
Dividend of repurchased membership units		—		—		—		—		—		—		(166)
Net income		—		—		—		615		420		1,035		—
Balances at June 30, 2018		328		155		250,607		(40,460)		2,932		213,562		—
Share based compensation		—		—		727		—		—		727		—
Issuance of 16,668,000 shares of Class A stock in Initial Public Offering, net of underwriting discounts and offering costs		—		—		(414)		—		—		(414)		—
Net income		—		—		—		16,129		329		16,458		—
Balances at September 30, 2018	$	328	$	155	$	250,920	$	(24,331)	$	3,261	$	230,333	$	—

See Notes to Unaudited Condensed Consolidated Financial Statements

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U.S. Xpress Enterprises, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2019

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~~

2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed 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.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with Article 10 of Regulation S-X promulgated under the Securities Act of 1933, as amended. The preparation of financial statements in conformity with 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. In the opinion of management, the accompanying financial statements include all adjustments that are necessary for a fair statement of the results of the interim periods presented, such adjustments being of a normal recurring nature.

Certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. The December 31, 2018 balance sheet was derived from our audited balance sheet as of that date. The Company’s operating results are subject to seasonal trends when measured on a quarterly basis; therefore operating results for the three and nine months ended ~~March 31,~~September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2018.

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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

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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 condensed consolidated balance sheet. We recognize lease expense for these leases on a straight-line basis over the lease term.

Recently Issued Accounting Standards

In January 2017, the FASB issued Accounting Standards Update (“ASU”) ~~2017-04,~~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 ASU ~~2018-02~~2017‑04 will have a material impact on the consolidated financial statements.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU ~~2016-02,~~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 6, Leases for additional information.

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3.	~~Divesture of Xpress Internacional~~

Divesture of Xpress Internacional

In January 2019, we sold our 95% interest in Xpress Internacional. The purchase price was approximately $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~~During the quarter ended June 30, 2019, we updated the fair value of the tractors ~~approximated~~to $1.8 million from the previously recorded $2.5 million ~~on January 17, 2019~~ and ~~has not changed~~recorded an additional cash receivable for $1.5 million as a result of ~~March 31, 2019.~~lower than expected purchase expenses at Xpress Internacional. The business met the criteria for the presentation as held for sale as of December 31, 2018. The assets of business held for sale were not material to our consolidated revenues or consolidated operating income. We recognized an impairment in the amount of $10.7 million in December 2018, related to the disposal group as the carrying value exceeded the fair value. We ~~did not recognize any~~recognized a subsequent gain ~~or loss~~ during the quarter ended ~~March 31, 2019.~~June 30, 2019 of $0.7 million.

4.	~~Income Taxes~~

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4. Noncontrolling Interest

In June 2019, we purchased the remaining 10% noncontrolling interest of Total Transportation of Mississippi for a purchase price of $8.7 million. The book value of the noncontrolling interest prior to the equity purchase was $3.5 million and the remaining $5.2 million was a reduction to additional paid in capital.

5. Income Taxes

The Company’s provision for income taxes for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 is based on the estimated annual effective tax rate, plus discrete items. The following table presents the provision for income taxes and the effective tax rates for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 (in thousands):


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Income (loss) before Income Taxes	$	(2,276)		$	18,137		$	8,045		$	19,956
Income tax provision (benefit)		(813)			1,679			1,503			1,081
Effective tax rate		35.7	%		9.3	%		18.7	%		5.4	%

Three Months Ended
March 31,
2019 2018
Income before Income Taxes $ 6,920 $ 1,975
Income tax provision 1,901 593
Effective tax rate 27.5 % 30.0 %

The difference between the Company’s effective tax rate for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 and the US statutory rate of 21% primarily relates to nondeductible expenses, nontaxable insurance benefits, federal income tax credits, state income taxes (net of federal benefit), Global Intangible Low-Taxed Income earned by certain foreign subsidiaries, the effect of taxes on foreign earnings and certain ~~other immaterial~~ discrete items.

5.	~~Long-Term Debt~~

6. Long-Term Debt

Long-term debt at ~~March 31,~~September 30, 2019 and December 31, 2018 consists of the following (in thousands):


	September 30, 2019		December 31, 2018
Line of credit, maturing June 2023	$	2,900	$	—
Term loan agreement, interest rate of 4.3% and 4.8% at September 30, 2019 and December 31, 2018, respectively, maturing June 2023		187,500		195,000
Revenue equipment installment notes with finance companies, weighted average interest rate of 4.7% and 5.0% at September 30, 2019 and December 31, 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 $225.0 million and $197.1 million at September 30, 2019 and December 31, 2018		210,666		184,867
Mortgage note payables, interest rates ranging from 6.26% to 6.99% at September 30, 2019 and December 31, 2018 due in monthly installments with final maturities at various dates through September 2031, secured by real estate with a net book value of $20.5 million and $24.1 million at September 30, 2019 and December 31, 2018		18,041		18,861
Other		408		6,872
		419,515		405,600
Less: Debt issuance costs		(1,301)		(1,347)
Less: Current maturities of long-term debt		(75,269)		(106,383)
	$	342,945	$	297,870

March 31,
2019
December 31, 2018
Term loan agreement, interest rate of 4.7% and 4.8% at March 31, 2019 and December 31, 2018, respectively maturing June 2023 $ 192,500 $ 195,000
Revenue equipment installment notes with finance companies, weighted average interest rate of 5.0% and 5.0% at March 31, 2019 and December 31, 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 $188.3 million and $197.1 million in March 2019 and December 2018 176,954 184,867
Mortgage note payables, interest rates ranging from 5.25% to 6.99% at March 31, 2019 andDecember 31, 2018 due in monthly installments with final maturities as various dates through September 2031, secured by real estate with a net book value of $23.8 million and $24.1 million at March 2019 and December 2018 18,574 18,861
Other 4,081 6,872
392,109 405,600
Less: Debt issuance costs (1,264 ) (1,347 )
Less: Current maturities of long-term debt (86,492 ) (106,383 )
$ 304,353 $ 297,870

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~~New~~

Credit Facility

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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 are classified as either “base rate loans” or “Eurodollar rate loans.” Base rate loans accrue 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 requires 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 includes, 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 has 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.~~Facility. The Credit Facility will mature on June 18, 2023.

On September 30, 2019, we entered into the First Amendment to the Credit Facility, which among other things, amended certain financial covenants to gain additional flexibility to operate our business in the normal course and continue to invest in the future.

Borrowings under the Credit Facility are 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 is 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.

The Credit Facility contains 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 requires us to meet specified financial ratios and tests, including a maximum leverage ratio and a minimum interest coverage ratio.

At ~~March 31,~~September 30, 2019, the Revolving Facility had issued collateralized letters of credit in the face amount of $31.7 million, with $0$2.9 million borrowings outstanding and ~~$118.3~~$115.4 million available to borrow and the Term Facility had ~~$192.5~~$187.5 million outstanding.

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. At ~~March 31,~~September 30, 2019, the Company was in compliance with all financial covenants prescribed by the Credit Facility.

6.	~~Leases~~

7. Leases

We have operating and finance leases with terms of 1 year to 10 years for certain revenue and service equipment and office and terminal facilities.

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The table below presents the lease-related assets and liabilities recorded on the balance sheet (in thousands):


Leases	Classification	September 30, 2019
Assets
Operating	Operating lease right-of-use assets	$	250,062
Finance	Property and equipment, net		17,981
Total leased assets		$	268,043

Liabilities
Current
Operating	Current portion of operating lease liabilities	$	70,246
Finance	Current maturities of long-term debt and finance leases		7,400
Noncurrent
Operating	Noncurrent operating lease liabilities		179,600
Finance	Long-term debt and finance leases, net of current maturities		7,246
Total lease liabilities		$	264,492

Leases Classification March 31, 2019
Assets
Operating Operating lease right-of-use assets $ 186,941
Finance Property and equipment, net 19,921
Total leased assets $ 206,862

Liabilities
Current
Operating Current portion of operating lease liabilities $ 56,893
Finance Current maturities of long-term debt and finance leases 8,625
Noncurrent
Operating Noncurrent operating lease liabilities 129,927
Finance Long-term debt and finance leases, net of current maturities 8,432
Total lease liabilities $ 203,877

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The table below presents certain information related to the lease costs for finance and operating leases (in thousands):


			Three Months		Nine Months
			Ended		Ended
Lease Cost	Classification	September 30, 2019		September 30, 2019
Operating lease cost	Vehicle rents and General and other operating	$	19,917	$	59,156
Finance lease cost:
Amortization of finance lease assets	Depreciation and amortization		760		2,365
Interest on lease liabilities	Interest expense		252		848
Short-term lease cost	General and other operating		1,250		2,353
Total lease cost		$	22,179	$	64,722


	Nine Months
	Ended September
Cash Flow Information	30, 2019
Cash paid for operating leases included in operating activities	$	59,156
Cash paid for finance leases included in operating activities	$	848
Cash paid for finance leases included in financing activities	$	5,624

Operating lease right-of-use assets obtained in exchange for lease obligations	$	116,222
Operating lease right-of-use assets and liabilities relieved in conjunction with divesture of Xpress Internacional	$	2,018

Lease Cost Classification March 31, 2019
Operating lease cost Vehicle rents and General and other operating $ 20,167
Finance lease cost:
Amortization of finance lease assets Depreciation and amortization 808
Interest on lease liabilities Interest expense 318
Short-term lease cost General and other operating 311
Total lease cost $ 21,604

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Cash Flow Information

Three Months Ended
March 31,
2019

Cash paid for operating leases included in operating activities $ 20,167
Cash paid for finance leases included in operating activities $ 318
Cash paid for finance leases included in financing activities $ 3,155

Operating lease right-of-use assets obtained in exchange for lease obligations $ 23,975
Operating lease right-of-use assets and liabilities relieved in conjunction with divesture of Xpress Internacional $ 2,018

Lease Term and Discount Rate
Weighted-Average Remaining Lease Term (years) Weighted-Average Discount Rate
Operating leases 4.1 5.2 %
Finance leases 3.4 5.3 %

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	Weighted‑Average	Weighted-
	Remaining Lease	Average
Lease Term and Discount Rate	Term (years)	Discount Rate
Operating leases	4.0	5.3	%
Finance leases	3.3	4.6	%

As of ~~March 31,~~September 30, 2019, future maturities of lease liabilities were as follows (in thousands):


	September 30, 2019
	Finance		Operating
2019	$	1,333	$	21,375
2020		7,522		77,376
2021		4,081		66,349
2022		1,423		51,564
2023		1,423		35,572
Thereafter		296		23,728
		16,078		275,964
Less: Amount representing interest		(1,432)		(26,118)
Total	$	14,646	$	249,846

March 31, 2019
Finance Operating
2019 $ 4,236 $ 49,948
2020 7,544 52,785
2021 4,084 41,805
2022 1,427 27,115
2023 1,427 18,794
Thereafter 297 17,842
19,015 208,289
Less: Amount representing interest (1,958 ) (21,469 )
Total $ 17,057 $ 186,820

As of December 31, 2018, minimum lease payments under capital and operating leases were as follows (in thousands):


	December 31, 2018
	Capital		Operating
2019	$	7,797	$	60,303
2020		7,564		42,632
2021		4,086		35,302
2022		1,427		20,751
2023		1,427		15,884
Thereafter		297		14,080
		22,598	$	188,952
Less: Amount representing interest		(2,285)
		20,313
Less: Current portion		(6,711)
	$	13,602

December 31, 2018
Capital Operating
2019 $ 7,797 $ 60,303
2020 7,564 42,632
2021 4,086 35,302
2022 1,427 20,751
2023 1,427 15,884
Thereafter 297 14,080
22,598 $ 188,952
Less: Amount representing interest (2,285 )
20,313
Less: Current portion (6,711 )
$ 13,602

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7.	~~Commitments and Contingencies~~

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.

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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 matter is currently in discovery, and a jury trial has been requested. There is currently no trial date set. 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.

Telephone Consumer Protection Act Claim

A class action was filed against our subsidiary U.S. Xpress, Inc. in the U.S. District Court for the Western District of Virginia on December 11, 2017 and amended on March 7, 2018, alleging violations of the Telephone Consumer Protection Act, for two separate proposed classes. The putative classes ~~include~~included all persons within the United States to whom the Company either initiated a telephone call to a cellular telephone number using an automatic telephone dialing system or initiated a call to a residential telephone number using an artificial or pre-recorded voice at any time from December 11, 2013 to present. ~~The~~Prior to certification of the class, the parties reached a settlement agreement, and the court dismissed the lawsuit ~~seeks statutory damages for each violation, injunctive relief and attorneys’ fees and costs. The Company successfully moved to dismiss the claims related to calls made to residential lines~~with prejudice on grounds that the plaintiff lacked standing to assert such claims. The Court denied the Company’s Motion to Dismiss claims for all purported class members residing outside the State of Virginia for lack of personal jurisdiction. The matter is currently in discovery and is set for trial beginning January 13, 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.

July 23, 2019.

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.~~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.

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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"~~(“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

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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.

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.~~

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.~~

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 us 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.

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”),

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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 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 ~~operators, who leased equipment~~drivers from ~~us, and who were designated as independent contractors.~~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 have filed a Motion to Compel Arbitration. The matter is not yet in discovery, 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.

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Other

The Company had letters of credit of $31.7 million outstanding as of ~~March 31,~~September 30, 2019. The letters of credit are maintained primarily to support the Company’s insurance program.

The Company had cancelable commitments outstanding at ~~March 31,~~September 30, 2019 to acquire revenue equipment ~~and real estate~~ for approximately ~~$201.4~~$84.5 million ~~and~~ during the remainder of ~~2019.~~2019 and $13.1 million in 2020. These purchase commitments are expected to be financed by long-term debt, operating leases, proceeds from sales of existing equipment, and cash flows from operations.

8.	~~Share-based Compensation~~

9. 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.

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The following is a summary of the Incentive Plan restricted stock and restricted stock unit activity for the ~~three~~nine months ended ~~March 31,~~September 30, 2019:


		Weighted
	Number of	Average Grant
	Units	Date Fair Value
Unvested at December 31, 2018	270,742	$	14.20
Granted	788,926		7.86
Vested	(91,269)		13.26
Forfeited	(127,516)		9.00
Unvested at September 30, 2019	840,883	$	9.18

Weighted
Number of Average Grant
Units Date Fair Value
Unvested at December 31, 2018 270,742 $ 14.20
Granted 461,775 8.94
Vested 31,845 15.77
Forfeited 5,500 16.00
Unvested at March 31, 2019 695,172 $ 10.62

~~The~~

Service based restricted stock grants vest over periods of one to five ~~years.~~years and account for 665,883 of the unvested shares. Performance based awards account for 175,000 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 $0.6 million and $1.8 million during the three and nine months ended ~~March 31, 2019.~~September 30, 2019, respectively and $0.4 million for the three and nine months ended September 30, 2018. At ~~March 31,~~September 30, 2019, ~~and December 31, 2018,~~ the Company had ~~$6.3 million and $2.8~~$4.9 million in unrecognized compensation expense related to the ~~above~~service based restricted stock awards which is expected to be recognized over a weighted average period of approximately ~~3.4 years and 3.3 years, respectively.~~

2.9 years.

The following is a summary of the Incentive Plan stock option activity from December 31, 2018 to ~~March 31,~~September 30, 2019:


		Weighted
	Number of	Average Grant
	Units	Date Fair Value
Unvested at December 31, 2018	177,260	$	6.09
Granted	244,785		4.41
Vested	(44,312)		6.09
Forfeited/Canceled	(24,631)		6.09
Unvested at September 30, 2019	353,102	$	4.93

Weighted
Number of Average Grant
Units Date Fair Value
Unvested at December 31, 2018 177,260 $ 6.09
Granted 244,785 4.41
Unvested at March 31, 2019 422,045 $ 5.12

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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 $0.1 million and $0.4 million during the three and nine months ended September 30, 2019, respectively and $0.1 million for the three and nine months ended ~~March 31, 2019.~~September 30, 2018. The fair value of the stock ~~option grant~~options granted during 2019 was estimated using the Black-Scholes method as of the grant date using the following assumptions:


Strike price	$	9.40
Risk-free interest rate		2.50	%
Expected dividend yield		0	%
Expected volatility		45.65	%
Expected term (in years)		6.25

At ~~March 31,~~September 30, 2019, ~~and December 31, 2018,~~ the Company had ~~$1.7 million and $0.8~~$1.3 million in unrecognized compensation expense related to the stock option awards which is expected to be recognized over a weighted average period of approximately ~~3.0 years and 3.5~~2.9 years.

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Pre-IPO Restricted Stock Units

Prior to the IPO, the Company provided for restricted membership unit awards in New Mountain Lake under the 2008 Restricted Stock Plan in order to compensate the Company’s employees and to promote the success of the Company’s business.

~~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.~~

The following is a summary of the ~~Company’s~~activity related to restricted stock ~~unit activity~~units issued prior to the IPO for the ~~three~~nine months ended ~~March 31,~~September 30, 2019:


	Number of	Weighted
	Units	Average
Unvested at December 31, 2018	1,401,674	$	2.00
Vested	(453,334)		1.70
Forfeited	(103,893)		2.15
Unvested at September 30, 2019	844,447	$	2.14

Number of Weighted
Units Average
Unvested at December 31, 2018 1,401,674 $ 2.00
Vested 173,320 2.15
Unvested at March 31, 2019 1,228,354 $ 1.98

The vesting schedule for these restricted unit grants range from 3 to 7 years. The Company recognized compensation expense of ~~$0.2~~$0.1 million and ~~$0.2~~$0.4 million during the three and nine months ended ~~March 31,~~September 30, 2019, respectively, and $0.2 million and $0.8 million during the three and nine months ended September 30, 2018, respectively. At ~~March 31,~~September 30, 2019, ~~and December 31, 2018,~~ the Company had approximately ~~$2.0 million and $2.2~~$1.5 million in unrecognized compensation expense related to restricted units, which is expected to be recognized over a weighted average period of approximately ~~3.7 and 4.1 years, respectively.~~4.2 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 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 $0.1 million and $0.2 million for the three and nine months ended September 30, 2019, respectively, associated with the plan.

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9.	~~Fair Value Measurements~~

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 standard.

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 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.

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~~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.~~

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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 liabilities measured at fair value at ~~March 31,~~September 30, 2019 and December 31, 2018 (in thousands):


	2019
	Fair Value		Input Level
Liabilities
Forward Contract	$	—	—

	2019
	Fair Value		Input Level
Liabilities
Forward Contract	$	-		3

		2018
	Fair Value		Input Level		2018
					Fair Value		Input Level
Liabilities
Forward Contract	$	1,793		3	$	1,793	3

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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 ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 (in thousands):


	Nine Months Ended
	September 30,
	2019		2018
Balance at beginning of year	$	1,793	$	1,985
Divesture of Xpress Internacional		(1,793)		—
Forward Contract Adjustment		—		8
Balance at end of period	$	—	$	1,993

Three Months Ended
March 31,
2019 2018
Balance at beginning of year $ 1,793 $ 1,985
Divesture of Xpress Internacional 1,793 -
Forward Contract Adjustment - (48 )
Balance at end of period $ - $ 1,937

At December 31, 2018, the physically settled forward contract was reclassified to long term liabilities associated with assets held for sale and in January 2019 relieved in conjunction with the disposal of Xpress Internacional.

~~10.~~

~~Earnings per Share~~

11. Earnings per Share

Basic earnings per share is calculated by dividing net income 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 per share. The Company excluded ~~989,717~~1,639,577 and 643,988 equity awards for the three and nine months ended ~~March 31,~~September 30, 2019, respectively and 398,260 for the three and nine months ended September 30, 2018 as inclusion would be anti-dilutive.

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The basic and diluted earnings per share calculations for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018, respectively, are presented below (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Net income (loss)	$	(1,463)	$	16,458	$	6,542	$	18,875
Net income (loss) attributable to noncontrolling interest		(17)		329		595		972
Net income (loss) attributable to common stockholders	$	(1,446)	$	16,129	$	5,947	$	17,903

Basic weighted average of outstanding shares of common stock		48,984		48,296		48,709		23,118
Dilutive effect of equity awards		—		1,301		580		520
Diluted weighted average of outstanding shares of common stock		48,984		49,597		49,289		23,638

Basic earnings (loss) per share	$	(0.03)	$	0.33	$	0.12	$	0.77
Diluted earnings (loss) per share	$	(0.03)	$	0.33	$	0.12	$	0.76

Three Months Ended
March 31,
2019 2018
Net income $ 5,019 $ 1,382
Net income attributable to noncontrolling interest 298 223
Net income attributable to common stockholders $ 4,721 $ 1,159

Basic weighted average of outstanding shares of common stock 48,394 6,385
Dilutive effect of equity awards 997 -
Diluted weighted average of outstanding shares of common stock 49,391 6,385

Basic earnings per share $ 0.10 $ 0.18
Diluted earnings per share $ 0.10 $ 0.18

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~~11.~~

~~Segment Information~~

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,, prior to the divesture of Xpress Internacional, 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. ~~During the three months ended March 31, 2019, the Truckload segment accounted for approximately 89% of consolidated revenue.~~

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. ~~During the three months ended March 31, 2019, the Brokerage segment accounted for approximately 11% of consolidated revenue.~~

The following table summarizes our segment information (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues
Truckload	$	382,467	$	395,167	$	1,125,991	$	1,157,731
Brokerage		46,036		65,060		131,737		177,962
Total Operating Revenue	$	428,503	$	460,227	$	1,257,728	$	1,335,693

Operating Income (Loss)
Truckload	$	3,345	$	19,857	$	20,689	$	50,950
Brokerage		(63)		3,035		4,018		6,814
Total Operating Income	$	3,282	$	22,892	$	24,707	$	57,764

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Three Months Ended
March 31,
2019 2018
Revenues
Truckload $ 369,119 $ 371,167
Brokerage 46,244 54,541
Total Operating Revenue $ 415,363 $ 425,708

Operating Income
Truckload $ 9,842 $ 12,503
Brokerage 2,796 2,351
Total Operating Income $ 12,638 $ 14,854

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A measure of assets is not applicable, as segment assets are not regularly reviewed by the Chief Operating Decision Maker for evaluating performance or allocating resources.

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Information about the geographic areas in which the Company conducted business during the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 is summarized below (in thousands). 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. In January 2019, we disposed of our Mexican business.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenues
United States	$	428,503	$	446,822	$	1,255,356	$	1,295,900
Foreign countries
Mexico		—		13,405		2,372		39,793
Total	$	428,503	$	460,227	$	1,257,728	$	1,335,693

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Three Months Ended
March 31,
2019 2018
Revenues
United States $ 412,991 $ 412,852
Foreign countries
Mexico 2,372 12,856
Total $ 415,363 $ 425,708

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~~ITEM 2.~~

~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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~~. 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; including competition from digital freight brokers; 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,~~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 and lease arrangements as means of financing revenue equipment), future interest expense, expected capital expenditures, expected fleet age and mix of owned versus leased equipment, expected impact of technology, including the impact of event recorders, future customer relationships, future use of dedicated contracts, 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 ~~Adjusted Operating Ratio, Adjusted Operating Income and~~ 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 and recognition of incentive plan awards, 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, 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, future incentive plan awards, excepted progress of internal control remediation efforts, among others, are forward-looking statements. Forward-looking 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~~sections entitled “Item 1A. Risk Factors,” set forth in this Form 10-Q and our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018. Readers should review and consider the factors discussed in “Item 1A. Risk Factors,” set forth in this Form 10-Q and our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018, 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.~~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~~

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Overview

We are the fifth largest asset‑based truckload carrier in the United States by revenue, generating over $1.8 billion in total operating revenue in 2018. 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 ~~March 31,~~September 30, 2019, our fleet consisted of approximately ~~6,600~~7,100 tractors and approximately 15,000 trailers, including approximately ~~1,900~~2,100 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.

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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. Over the last four 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 ~~continue to see earnings improvement as a result of these changes and initiatives. We experienced our seventh consecutive quarter of year over year Adjusted Operating Income improvement in~~delivered the ~~first quarter of 2019 and the~~ highest ~~adjusted~~ earnings of any first quarter in the history of the Company. During the second and third quarter 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 through the second and third quarters 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. We expect the fourth quarter of 2019 to exhibit a continuation of negative market conditions experienced through October. Looking forward over the longer term, we expect conditions to firm, 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 the balance of 2019 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 between our Dedicated and Over-the-Road ~~segments.~~(“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 ~~digital load matching,~~digitization of our loads and business, automated load acceptance and prioritization, and our goal of achieving a ~~100%~~ frictionless order.

Total revenue for the ~~first~~third quarter of 2019 decreased by ~~$10.3~~$31.7 million to ~~$415.4~~$428.5 million as compared to the ~~first~~third quarter of 2018. The decrease was primarily a result of a ~~15.2%~~29.2% decrease in ~~brokerage~~Brokerage revenue to ~~$46.2~~$46.0 million, and a ~~$2.8~~$4.5 million decrease in fuel surcharge revenue. Excluding the impact of fuel surcharge revenue, ~~first~~third quarter revenue decreased ~~$7.5~~$27.2 million to ~~$375.3~~$386.7 million, a decrease of ~~2.0%~~6.6% as compared to the prior year quarter. ~~Excluding our~~Our Mexico operations accounted for $0 of our total operating revenue ~~remained essentially constant~~for the three months ended September 30, 2019, compared to $13.4 million in the ~~same~~third quarter ~~in 2018 and our revenue excluding fuel surcharge increased $2.9 million or 0.8% compared to the same quarter in~~of 2018.

Operating income for the ~~first~~third quarter of 2019 was ~~$12.6~~$3.3 million compared to the ~~$14.9~~$22.9 million achieved in the ~~first~~third quarter of 2018. ~~Excluding costs related~~We delivered a 99.2% operating ratio for the third quarter which is an increase relative to the ~~transition~~95.0% operating ratio reported in the third quarter of 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 12.1% from $3,957 in the third quarter of 2018 to $3,479 in the current year quarter. This degradation was partially offset by progress in our ~~Mexico operations, first~~Dedicated fleet which saw revenue per tractor per week increase 5.8% to $4,011 in the current year quarter ~~Adjusted Operating Income was $16.0 million. For~~from the ~~definition~~third quarter of ~~Adjusted Operating Income and a reconciliation~~2018. In addition, driver pay increased approximately $0.06 cents per mile compared to the ~~most directly comparable GAAP measure, see “Use of Non-GAAP Financial Information.”~~

~~We continue to see a limited supply of professional drivers which we believe will limit significant growth during 2019. As~~prior year quarter as a result weof 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

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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.

~~During the balance of 2019, we remain~~ positive as we expect the freight environment to improve seasonally, our network efficiency to rise as we complete the repositioning of equipment from cross-border lanes and the productivity of our operations to benefit from our many internal initiatives including our goal of achieving a frictionless order.

Reportable Segments

Our business is organized into two reportable segments, Truckload and Brokerage. Our Truckload segment offers truckload services, including ~~over-the-road (“OTR”)~~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.

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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 and prior to the divesture of our Mexico business, cross border into and out of Mexico. 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 37.5% of our Truckload operating revenue, and approximately 38.0% of our Truckload revenue, before fuel surcharge, for 2018, 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~~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

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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 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~~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.

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Approximately ~~26.4%~~27.9% of our total tractor fleet was operated by independent contractors at ~~March 31,~~September 30, 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 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.

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The key performance indicator in our Brokerage segment is gross margin percentage (which is calculated as ~~brokerage~~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.

~~Use of Non‑GAAP Financial Information~~

In addition to our net income and operating ratio determined in accordance with GAAP, we evaluate operating performance using certain non-GAAP measures, including Adjusted Operating Income We define Adjusted Operating Income as revenue less operating expenses, net of Mexico transition costs. We believe our presentation of Adjusted Operating Income is useful because it provides investors and securities analysts the same information that we use internally to assess our core operating performance.

The non-GAAP information provided is used by our management and may not be comparable to similar measures disclosed by other companies, because of differing methods used by other companies in calculating Adjusted Operating Income. The non-GAAP measures used herein have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Management compensates for these limitations by relying primarily on GAAP results and using non-GAAP financial measures on a supplemental basis.

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~~The table below compares our GAAP operating income to our non‑GAAP Adjusted Operating Income.~~

Three Months Ended
March 31,
2019 2018
Consolidated GAAP Presentation
(dollars in thousands)

Total operating revenue $ 415,363 $ 425,708
Total operating expenses 402,725 410,854
Operating Income $ 12,638 $ 14,854

Consolidated Non-GAAP Presentation
Total operating revenue $ 415,363 $ 425,708
Fuel Surcharge (40,051 ) (42,850 )
Revenue, before fuel surcharge 375,312 382,858
Total operating expenses 402,725 410,854
Adjusted for:
Fuel Surcharge (40,051 ) (42,850 )
Mexico transition costs (3,400 ) –
Adjusted total operating expenses 359,274 368,004
Adjusted Operating Income $ 16,038 $ 14,854

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 ~~March 31,~~September 30, 2019 and 2018 is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(dollars in thousands)				(dollars in thousands)
Revenue, before fuel surcharge	$	386,666	$	413,887	$	1,133,162	$	1,199,553
Fuel surcharge		41,837		46,340		124,566		136,140
Total operating revenue	$	428,503	$	460,227	$	1,257,728	$	1,335,693

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Revenue before fuel surcharge $ 375,312 $ 382,858
Fuel surcharge 40,051 42,850
Total operating revenue $ 415,363 $ 425,708

For the quarter ended ~~March 31,~~September 30, 2019, our total operating revenue decreased by ~~$10.3~~$31.7 million, or ~~2.4%~~6.9%, compared to the same quarter in 2018, and our revenue, before fuel surcharge decreased by ~~$7.5~~$27.2 million, or ~~2.0%~~6.6%. ~~Excluding our~~Our Mexico operations accounted for $0 of our total operating revenue ~~remained essentially constant~~for the three months ended September 30, 2019, compared to ~~the same quarter~~$13.4 million in ~~2018 and our revenue excluding fuel surcharge increased $2.9 million or 0.8% compared to~~ the same quarter in 2018. The primary factors driving the ~~increases~~decreases in total operating revenue and revenue, before fuel surcharge, excluding our Mexico operations, were decreased volumes and pricing in our Brokerage segment, decreased fuel surcharge revenues and decreased miles per tractor and decreased pricing in our Truckload segment partially offset by increased available tractors.

For the nine months ended September 30, 2019, our total operating revenue decreased by $78.0 million, or 5.8%, compared to the same period in 2018, and our revenue, before fuel surcharge decreased by $66.4 million, or 5.5%. Our Mexico operations accounted for $2.4 million of our total operating revenue for the nine months ended September 30, 2019, compared to $39.8 million in the same period 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 pricing in our Brokerage segment, decreased fuel surcharge revenues and decreased miles per tractor in our Truckload segment offset slightly by improved pricing in our Truckload segment combined with increased miscellaneous ~~revenues, partially offset by decreased volumes and pricing~~revenues. We expect flat to a slight decrease in ~~our Brokerage segment and decreased fuel surcharge revenues. While we are not seeing the same opportunities in the spot market in 2019 compared to 2018, we expect~~ contract rates ~~to continue to increase~~ sequentially during the remainder of ~~2019 and to outpace cost inflation, absent changes in the macroeconomic environment.~~2019.

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A summary of our revenue generated by segment for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(dollars in thousands)				(dollars in thousands)
Truckload revenue, before fuel surcharge	$	340,630	$	348,827	$	1,001,425	$	1,021,591
Fuel surcharge		41,837		46,340		124,566		136,140
Total Truckload operating revenue		382,467		395,167		1,125,991		1,157,731
Brokerage operating revenue		46,036		65,060		131,737		177,962
Total operating revenue	$	428,503	$	460,227	$	1,257,728	$	1,335,693

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Truckload revenue, before fuel surcharge $ 329,068 $ 328,317
Fuel surcharge 40,051 42,850
Total Truckload revenue 369,119 371,167
Brokerage revenue 46,244 54,541
Total operating revenue $ 415,363 $ 425,708

The following is a summary of our key Truckload segment performance indicators, before fuel surcharge and excluding miles from services in Mexico, for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018. Average tractors, average company‑owned tractors and average independent contractor tractors exclude tractors in Mexico.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Over the road
Average revenue per tractor per week	$	3,479	$	3,957	$	3,572	$	3,917
Average revenue per mile	$	1.910	$	2.072	$	1.949	$	2.022
Average revenue miles per tractor per week		1,821		1,910		1,832		1,937
Average tractors		3,785		3,511		3,671		3,574
Dedicated
Average revenue per tractor per week	$	4,011	$	3,791	$	3,998	$	3,663
Average revenue per mile	$	2.408	$	2.281	$	2.367	$	2.234
Average revenue miles per tractor per week		1,666		1,662		1,689		1,640
Average tractors		2,748		2,690		2,693		2,678
Consolidated
Average revenue per tractor per week	$	3,703	$	3,885	$	3,752	$	3,808
Average revenue per mile	$	2.109	$	2.156	$	2.118	$	2.104
Average revenue miles per tractor per week		1,756		1,802		1,772		1,810
Average tractors		6,533		6,201		6,364		6,252

Three Months Ended
March 31,
2019 2018
Over the road
Average revenue per tractor per week $ 3,616 $ 3,850
Average revenue per mile $ 1.985 $ 1.972
Average revenue miles per tractor per week 1,822 1,952
Average tractors 3,617 3,622
Dedicated
Average revenue per tractor per week $ 3,961 $ 3,544
Average revenue per mile $ 2.337 $ 2.183
Average revenue miles per tractor per week 1,695 1,623
Average tractors 2,658 2,623
Consolidated
Average revenue per tractor per week $ 3,762 $ 3,721
Average revenue per mile $ 2.128 $ 2.051
Average revenue miles per tractor per week 1,768 1,814
Average tractors 6,275 6,245

For the quarter ended ~~March 31,~~September 30, 2019, our Truckload revenue, before fuel surcharge ~~increased~~decreased by ~~$0.8~~$8.2 million, or ~~0.2%~~2.3%, compared to the same quarter in 2018. ~~Excluding our~~Our Mexico operations accounted for $0 of our Truckload revenue ~~before fuel surcharge increased $11.2~~for the three months ended September 30, 2019, compared to $13.4 million ~~or 3.6%.~~in the same quarter in 2018. The primary factors driving the ~~increase~~changes in Truckload revenue, excluding Mexico operations, were a ~~3.8%~~5.4% increase ~~in revenue per loaded mile due to increased contract rates, a slight increase in~~of average available tractors combined with an increase of ~~$8.5~~$1.9 million in miscellaneous ~~revenue, partially~~revenue. During the quarter ended September 30, 2019, our OTR rates decreased 7.8% due primarily to spot market rates declining more than 35% offset by ~~2.5% decrease~~an increase in ~~average revenue miles per tractor.~~our contract rates of 2.6% compared to the same quarter in 2018. Our Dedicated rates increased 5.6% during the quarter ended September 30, 2019 as compared to the same period in 2018. Fuel surcharge revenue decreased by ~~$2.8~~$4.5 million, or ~~6.5%~~9.7%, to ~~$40.1~~$41.8 million, compared with ~~$42.9~~$46.3 million in the same quarter in 2018. The Department of Energy (“DOE”) national weekly average fuel price per gallon ~~remained essentially constant~~averaged approximately $0.214 per gallon lower for the quarter ended ~~March 31,~~September 30, 2019 compared to the same quarter in 2018. The decrease in fuel surcharge revenue primarily relates to decreased fuel prices partially offset by a 3.3% increase in revenue miles ~~of 2.7%~~ compared to the same quarter in 2018.

For the nine months ended September 30, 2019, our Truckload revenue, before fuel surcharge decreased by $20.2 million, or 2.0%, compared to the same period in 2018. Our Mexico operations accounted for $2.4 million of our Truckload revenue for the nine months ended September 30, 2019, compared to $39.8 million in the same period in 2018. The primary factors driving the changes in Truckload revenue, excluding Mexico operations, were an increase of $14.4 million in miscellaneous revenue, a 0.7% increase in revenue per loaded mile due to increased contract rates, a 1.8% increase in

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average available tractors partially offset by 2.1% decrease in average revenue miles per tractor. Fuel surcharge revenue decreased by $11.6 million, or 8.5%, to $124.6 million, compared with $136.1 million in the same period in 2018. The DOE national weekly average fuel price per gallon averaged approximately $0.093 per gallon lower for the nine months ended September 30, 2019 compared to the same period in 2018. The decrease in fuel surcharge revenue primarily relates to decreased fuel prices combined with a slight decrease in revenue miles compared to the same period in 2018.

The key performance indicator of our Brokerage segment is gross margin percentage ~~(brokerage~~(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 ~~March 31,~~September 30, 2019 and 2018.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Gross margin percentage	12.0	%	13.6	%	15.2	%	13.3	%

Three Months Ended
March 31,
2019 2018
Gross margin percentage 17.5 % 14.0 %

For the quarter ended ~~March 31,~~September 30, 2019, our Brokerage revenue decreased by ~~$8.3~~$19.0 million, or ~~15.2%~~29.2%, compared to the same quarter in 2018. The primary factors driving the decrease in Brokerage revenue were a ~~13.8%~~14.6% decrease in load count combined with a ~~1.6%~~17.2% decrease in average revenue per load. ~~Average~~We experienced a decrease in our gross margin to 12.0% in the third quarter of 2019 compared to 13.6% due to a $260 decrease in revenue per load partially offset by a $205 decrease in cost per load compared to the same quarter in 2018.

For the nine months ended September 30, 2019, our Brokerage revenue decreased ~~due~~by $46.2 million, or 26.0%, compared to ~~non-contracted spot rates declining more than 20.0%.~~the same period in 2018. The primary factors driving the decrease in Brokerage revenue were a 19.4% decrease in load count combined with an 8.1% decrease in average revenue per load. We experienced an increase in our gross margin to ~~17.5%~~15.2% in the ~~first quarter of~~nine months ended September 30, 2019, compared to ~~14.0%~~13.3% in the same period of the prior year as a result of sourcing third party capacity more efficiently.

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 ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Salaries, wages and benefits	$	134,887		$	128,117		$	389,971		$	400,742
% of total operating revenue		31.5	%		27.8	%		31.0	%		30.0	%
% of revenue, before fuel surcharge		34.9	%		31.0	%		34.4	%		33.4	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Salaries, wages and benefits $ 124,563 $ 132,924
% of total operating revenue 30.0 % 31.2 %
% of revenue, before fuel surcharge 33.2 % 34.7 %

For the quarter ended ~~March 31,~~September 30, 2019, salaries, wages and benefits ~~decreased $8.4~~increased $6.8 million, or ~~6.3%~~5.3%, compared with the same quarter in 2018. ~~This decrease~~The increases in absolute dollar terms ~~was~~were due primarily to ~~$4.5~~$5.0 million of ~~lower~~higher driver wages ~~as our company~~due to increased driver ~~miles~~pay per mile, a $4.0 million gain on life insurance in the third quarter 2018 offset by $2.9 million in decreased ~~12.6% as compared to~~wages associated with the ~~same quarter in 2018, due primarily to independent contractor miles comprising a greater percentage~~exit of our ~~miles.~~Mexico operations. Our OTR driver pay on a per mile basis increased as a result of higher incentive-based pay and lower utilization as compared to the same quarter in 2018. ~~Our office wages decreased primarily due to the divesture of our Mexico business.~~ During the three months ended ~~March 31,~~September 30, 2019, our workers’ compensation expense and group health claims expense increased approximately 5.2%, due to increased group health claims expense and a slight increase in workers’ compensation premiums as compared to the same quarter in 2018.

For the nine months ended September 30, 2019, salaries, wages and benefits decreased $10.8 million, or 2.7%, compared with the same period in 2018. Our Mexican operations accounted for $0.5 million in salaries, wages and benefits in the nine months ended September 30, 2019, compared to $8.6 million in the same period in 2018. In addition to the decrease related to our Mexico operations, this decrease was due primarily 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. 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 the same period in 2018. During the nine months ended September 30, 2019, our workers’ compensation expense and group health claims expense decreased approximately ~~21.4%~~3.1%, due to positive trends in our workers’ compensation claims ~~partially~~ offset by increased group health claims expense as compared to the same ~~quarter~~period in 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.

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.

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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.

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The following is a summary of our fuel and fuel taxes for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Fuel and fuel taxes	$	47,460		$	57,423		$	141,738		$	173,516
% of total operating revenue		11.1	%		12.5	%		11.3	%		13.0	%
% of revenue, before fuel surcharge		12.3	%		13.9	%		12.5	%		14.5	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Fuel and fuel taxes $ 46,904 $ 58,389
% of total operating revenue 11.3 % 13.7 %
% of revenue, before fuel surcharge 12.5 % 15.3 %

For the quarter ended ~~March 31,~~September 30, 2019, fuel and fuel taxes decreased ~~$11.5~~$10.0 million, or ~~19.7%~~17.4%, compared with the same quarter in 2018. The decrease in fuel and fuel taxes was primarily the result of a ~~12.6%~~6.6% decrease in ~~company driver miles,~~average fuel price per gallon, a ~~$2.5~~$3.1 million decrease due to the divesture of our Mexico business, and a ~~2.9%~~2.5% increase in our average miles per gallon compared to the same quarter in 2018. The average DOE fuel price per gallon ~~remained essentially constant for~~decreased 6.6% to $3.02 per gallon in the quarter ended ~~March 31,~~September 30, 2019, compared to the same quarter in 2018.

For the nine months ended September 30, 2019, fuel and fuel taxes decreased $31.8 million, or 18.3%, compared with the same period in 2018. The decrease in fuel and fuel taxes was primarily the result of a 7.5% decrease in company driver miles, an $8.7 million decrease due to the divesture of our Mexico business, and a 2.4% increase in our average miles per gallon compared to the same period in 2018. The average DOE fuel price per gallon decreased 2.9% to $3.05 per gallon in the nine months ended September 30, 2019, compared to the same period in 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:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Total fuel surcharge revenue	$	41,837		$	46,340		$	124,566		$	136,140
Less: fuel surcharge revenue reimbursed to independent contractors		11,874			11,475			34,587			29,945
Company fuel surcharge revenue		29,963			34,865			89,979			106,195
Total fuel and fuel taxes	$	47,460		$	57,423		$	141,738		$	173,516
Less: company fuel surcharge revenue		29,963			34,865			89,979			106,195
Net fuel expense	$	17,497		$	22,558		$	51,759		$	67,321
% of total operating revenue		4.1	%		4.9	%		4.1	%		5.0	%
% of revenue, before fuel surcharge		4.5	%		5.5	%		4.6	%		5.6	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Fuel surcharge revenue $ 40,051 $ 42,850
Less: fuel surcharge revenue reimbursed to independent contractors 10,480 7,956
Company fuel surcharge revenue 29,571 34,894
Total fuel and fuel taxes $ 46,904 $ 58,389
Less: company fuel surcharge revenue 29,571 34,894
Net fuel expense $ 17,333 $ 23,495
% of total operating revenue 4.2 % 5.5 %
% of revenue, before fuel surcharge 4.6 % 6.1 %

For the quarter ended ~~March 31,~~September 30, 2019, net fuel expense decreased ~~$6.2~~$5.1 million, or ~~26.2%~~22.4%, compared with the same quarter in 2018. During the quarter ended ~~March 31,~~September 30, 2019, the decrease in net fuel expenses was primarily the result of a ~~$2.5~~$3.1 million decrease due to the divesture of our Mexico business ~~2.9%~~and a 2.5% increase in average miles per gallon.

For the nine months ended September 30, 2019, net fuel expense decreased $15.6 million, or 23.1%, compared with the same period in 2018. During the nine months ended September 30, 2019, the decrease in net fuel expenses was primarily the result of an $8.7 million decrease due to the divesture of our Mexico business, a 7.5% decrease in company driver miles, and a 2.4% increase in average miles per gallon, ~~and a decrease in the~~offset by increased fuel surcharge ~~per mile~~ paid to independent

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contractors. Independent contractors accounted for ~~25.4%~~27.1% of the average tractors available compared to ~~17.5%~~21.0% in the same ~~quarter~~period of 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).

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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.

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 ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Vehicle rents	$	19,470		$	19,497		$	57,025		$	58,912
Depreciation and amortization, net of (gains) losses on sale of property		26,684			24,541			74,498			73,396
Vehicle rents and depreciation and amortization of property and equipment	$	46,154		$	44,038		$	131,523		$	132,308
% of total operating revenue		10.8	%		9.6	%		10.5	%		9.9	%
% of revenue, before fuel surcharge		11.9	%		10.6	%		11.6	%		11.0	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Vehicle Rents $ 18,976 $ 20,022
Depreciation and amortization, net of (gains) losses on sale of property 23,062 24,706
Vehicle Rents and Depreciation and amortization of property and equipment $ 42,038 $ 44,728
% of total operating revenue 10.1 % 10.5 %
% of revenue, before fuel surcharge 11.2 % 11.7 %

For the quarter ended ~~March 31,~~September 30, 2019, vehicle rents decreased $1.0 million, or 5.2%, compared to the same quarter in 2018. The decrease in vehicle rents was primarily due to a decrease in the short term trailer rentals and the divesture of our Mexico business asremained constant compared to the same quarter in 2018. Depreciation and amortization, net of (gains) losses on sale of property and equipment ~~decreased $1.6~~increased $2.1 million, or ~~6.6%~~8.7%, compared to the same quarter in 2018. The increase in depreciation and amortization is primarily due to increased owned tractors combined with the higher cost of new tractors.

For the nine months ended September 30, 2019, vehicle rents decreased $1.9 million, or 3.2%, compared to the same period in 2018. The increase in depreciation and amortization is primarily due to an increase in loss on sale of equipment of $1.0 million compared to the same period in 2018. Over the balance of 2019, we currently plan to replace owned ~~tractors with new owned~~and leased tractors as they reach approximately 475,000 miles, and ~~a portion of our leased~~expect to acquire the replacement tractors ~~with owned equipment when their respective lease terminates.~~through operating leases. As a result of our 2019 replacement cycle, which is above normalized levels due to a large purchase of more fuel efficient tractors approximately four years ago, we expect the average age of our company tractor

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fleet will reduce from 28 months as of December 31, 2018 to ~~approximately 18~~less than 24 months as we exit 2019. Our mix of owned and leased equipment may vary over time due to tax, financing and flexibility, among other factors.

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 ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Purchased transportation	$	122,433		$	129,732		$	349,017		$	350,189
% of total operating revenue		28.6	%		28.2	%		27.7	%		26.2	%
% of revenue, before fuel surcharge		31.7	%		31.3	%		30.8	%		29.2	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Purchased transportation $ 114,005 $ 101,776
% of total operating revenue 27.4 % 23.9 %
% of revenue, before fuel surcharge 30.4 % 26.6 %

For the quarter ended ~~March 31,~~September 30, 2019, purchased transportation ~~increased $12.2~~decreased $7.3 million, or ~~12.0%~~5.6%, compared to the same quarter in 2018. The ~~increase~~decrease in purchased transportation was primarily due to a ~~45.9%~~$19.0 million decrease in Brokerage revenue partially offset by a 23.0% increase in average independent contractors as compared to the same quarter in 2018.

For the nine months ended September 30, 2019, purchased transportation decreased $1.2 million, or 0.3%, compared to the same period in 2018. The decrease in purchased transportation was primarily due to a ~~$2.5~~$46.2 million decrease in Brokerage revenue partially offset by a 31.3% increase in average independent contractors and a $4.6 million increase in fuel surcharge reimbursement to independent contractors ~~partially offset by an $8.3 million decrease in Brokerage revenue~~ as compared to the same ~~quarter~~period in 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 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,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Purchased transportation	$	122,433		$	129,732		$	349,017		$	350,189
Less: fuel surcharge revenue reimbursed to independent contractors		11,874			11,475			34,587			29,945
Purchased transportation, net of fuel surcharge reimbursement	$	110,559		$	118,257		$	314,430		$	320,244
% of total operating revenue		25.8	%		25.7	%		25.0	%		24.0	%
% of revenue, before fuel surcharge		28.6	%		28.6	%		27.7	%		26.7	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Purchased transportation $ 114,005 $ 101,776
Less: fuel surcharge revenue reimbursed to independent contractors 10,480 7,956
Purchased transportation, net of fuel surcharge reimbursement $ 103,525 $ 93,820

% of total operating revenue 24.9 % 22.0 %
% of revenue, before fuel surcharge 27.6 % 24.5 %

For the quarter ended ~~March 31,~~September 30, 2019, purchased transportation, net of fuel surcharge reimbursement, ~~increased $9.7~~decreased $7.7 million, or ~~10.3%~~6.5%, compared to the same quarter in 2018. This decrease was primarily due to a $19.0 million decrease in Brokerage revenue partially offset by a 23.0% increase in average independent contractors compared to the same quarter in 2018.

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For the nine months ended September 30, 2019, purchased transportation, net of fuel surcharge reimbursement, decreased $5.8 million, or 1.8%, compared to the same period in 2018. This decrease was primarily due to the ~~45.9%~~$46.2 million decrease in Brokerage revenue partially offset by the 31.3% increase in average independent contractors ~~partially offset by the $8.3 million decrease in Brokerage revenue~~ compared to the same ~~quarter~~period in 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. 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.

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The following is a summary of our operating expenses and supplies for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Operating expenses and supplies	$	29,525		$	30,538		$	87,438		$	89,402
% of total operating revenue		6.9	%		6.6	%		7.0	%		6.7	%
% of revenue, before fuel surcharge		7.6	%		7.4	%		7.7	%		7.5	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Operating expenses and supplies $ 27,945 $ 29,791
% of total operating revenue 6.7 % 7.0 %
% of revenue, before fuel surcharge 7.4 % 7.8 %

For the quarter ended ~~March 31,~~September 30, 2019, operating expenses and supplies decreased ~~$1.8~~$1.0 million, or ~~6.2%~~3.3%, compared to the same quarter in 2018. The decrease was primarily due to $1.8 million decreased operating expenses and supplies related to the divesture of our Mexico business, decreased tractor maintenance expense as the average age has declined by 10 months for the quarter ending September 30, 2019 compared to the same quarter in 2018, partially offset by increased driver recruiting and hiring costs and other operational expenses.

For the nine months ended September 30, 2019, operating expenses and supplies decreased $2.0 million, or 2.2%, compared to the same period in 2018. The decrease was primarily due to decreased tractor maintenance expense as a result of increased independent contractors and $4.8 million decreased operating expenses and supplies related to the divesture of our Mexico business ~~partially~~ offset by increased driver hiring and recruiting costs ~~compared to the same quarter in 2018.~~and other operational expenses. Independent contractors are responsible for the maintenance of their tractor and now account for ~~25.4%~~27.1% of the total average tractors compared to ~~17.5%~~21.0% in the prior year ~~quarter.~~

period.

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 three and nine months ended ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
Insurance premiums and claims	$	19,570		$	25,128		$	63,189		$	64,463
% of total operating revenue		4.6	%		5.5	%		5.0	%		4.8	%
% of revenue, before fuel surcharge		5.1	%		6.1	%		5.6	%		5.4	%

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Insurance premiums and claims $ 24,353 $ 20,170
% of total operating revenue 5.9 % 4.7 %
% of revenue, before fuel surcharge 6.5 % 5.3 %

For the quarter ended ~~March 31,~~September 30, 2019, insurance premiums and claims ~~increased $4.2~~decreased $5.6 million, or ~~20.7%~~22.1%, compared to the same quarter in 2018. This decrease is primarily due to lower liability expense as we have not experienced the same severity of claims as compared to the same quarter in 2018.

For the nine months ended September 30, 2019, insurance premiums and claims decreased $1.3 million, or 2.0%, compared to the same period in 2018. Insurance premiums and claims ~~increased~~decreased primarily due to decreased liability expense offset by increased physical damage ~~and liability~~ claims primarily as a result of adverse weather in the first quarter of 2019 as compared to the same ~~quarter~~period in 2018. ~~We do not expect our insurance and claims experience in the first quarter of 2019 to be ongoing.~~ 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 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 and claims costs over time. ~~We expect to begin seeing~~While we have not yet seen measurable results from the event recorder installation, we believe we will see improvements during 2020.

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:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
	(dollars in thousands)						(dollars in thousands)
General and other operating expenses	$	19,450		$	16,579		$	54,044		$	49,728
% of total operating revenue		4.5	%		3.6	%		4.3	%		3.7	%
% of revenue, before fuel surcharge		5.0	%		4.0	%		4.8	%		4.1	%

For the quarter ended September 30, 2019, general and other operating expenses increased $2.9 million, or 17.3%, compared to the same quarter in 2018. General and other expenses increased primarily due to higher driver hiring costs combined with increased professional and administrative costs partially offset by $1.3 million in lower expenses related to the ~~second half~~divesture of ~~2019.~~

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our Mexico business.

For the nine months ended September 30, 2019, general and other operating expenses increased $4.3 million, or 8.7%, compared to the same period in 2018. General and other expenses increased primarily due to higher driver hiring costs combined with increased professional and administrative costs partially offset by $3.8 million in lower expenses related to the divesture of our Mexico business.

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 interest in Xpress Internacional and were relieved of this obligation.

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The following is a summary of our interest expense for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
	(dollars in thousands)				(dollars in thousands)
Interest expense, excluding non-cash items	$	5,312	$	4,806	$	15,898	$	28,204
Original issue discount and deferred financing amortization		155		172		468		1,559
Purchase commitment interest		—		(163)		—		8
Interest expense, net	$	5,467	$	4,815	$	16,366	$	29,771

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Interest expense, excluding non-cash items 5,444 11,835
Original issue discount and deferred financing amortization 159 871
Purchase commitment interest - (48 )
Interest expense, net $ 5,603 $ 12,658

For the quarter ended ~~March 31,~~September 30, 2019, interest expense increased $0.7 million, primarily due to increased equipment borrowings compared to the same quarter in 2018.

For the nine months ended September 30, 2019, interest expense decreased ~~$7.1~~$13.4 million, primarily due to decreased equipment and revolver borrowings combined with lower interest rates related to our term loan compared to the same ~~quarter~~period in 2018. Based on the repayment of our prior credit arrangements in connection with the IPO, along with the entry into our existing Credit Facility, we expect our interest expense towill approximate $22.0 million ~~for~~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, 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.

At ~~March 31,~~September 30, 2019, we had approximately $31.7 million of outstanding letters of credit, $0$2.9 million in outstanding borrowings and ~~$118.3~~$115.4 million of availability under our $150.0 million revolving credit facility.

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Sources of Liquidity

Credit Facility

In June 2018, we entered into a new credit facility (the “Credit Facility”) that contains a $150.0 million revolving component (the “Revolving Facility”) and a $200.0 million term loan component (the “Term Facility”). The Credit Facility contains an accordion feature that, so long as no event of default exists, allows 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 are classified as either “base rate loans” or “Eurodollar rate loans.” Base rate loans accrue 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

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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 requires 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 includes, 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 has 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.~~Facility. The Credit Facility will mature on June 18, 2023.

Quarter Ending

September 30, 2019

December 31, 2019

March 31, 2020

June 30, 2020

Existing

New

Existing

New

Existing

New

Existing

New

Leverage Ratio Requirement

3.00x

3.25x

3.00x

3.50x

3.00x

3.50x

3.00x

3.25x

Interest Coverage Requirement

2.00x

1.20x

2.00x

1.20x

2.00x

1.75x

Cash Flows

Our summary statements of cash flows for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 are set forth in the table below:


	Nine Months Ended
	September 30,
	2019		2018
	(dollars in thousands)
Net cash provided by operating activities	$	83,246	$	44,862
Net cash used in investing activities	$	(103,030)	$	(89,141)
Net cash provided by financing activities	$	2,550	$	41,157

Three Months Ended
March 31,
2019 2018
(dollars in thousands)
Net cash provided by (used in) operating activities $ 25,479 $ (1,863 )
Net cash used in investing actitivies $ (32,491 ) $ (18,695 )
Net cash provided by (used in) financing activities $ (12,569 ) $ 15,496

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Operating Activities

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, we generated cash flows from operating activities of ~~$25.5~~$83.2 million, an increase of ~~$27.3~~$38.4 million compared to the same period in 2018. The increase was due primarily to a ~~$2.5 million increase in net income adjusted for noncash items, and a $24.9~~$48.6 million decrease in our operating assets and ~~liabilities. The increase~~liabilities and a $7.5 million interest paid in kind decrease offset by a decrease of $17.8 million in net income adjusted for noncash items was primarily attributable to a 3.8% increase in revenue per loaded mile, improved operating performance at our Brokerage segment and lower interest expense in the three months ended March 31, 2019 as compared to the same period in 2018, partially offset by increased insurance premiums and claims expense.items. Our operating assets and liabilities decreased ~~$24.9~~$48.6 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2019 as compared to the same period in 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 decrease in net income adjusted for noncash items decreased in part due to decreased revenue miles per tractor combined with increased driver wages and equipment costs partially offset by decreased interest expense.

Investing Activities

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, net cash flows used in investing activities were ~~$32.5~~$103.0 million, an increase of ~~$13.8~~$13.9 million compared to the same period in 2018. This increase is primarily the result of ~~increased~~decreased sales of equipment ~~purchases~~ as compared to the same period in 2018, combined with the cash disposed in conjunction with the sale of our Mexico subsidiary. We expect our net capital expenditures for calendar year 2019 will approximate ~~$170.0~~$100.0 million to ~~$190.0~~$115.0 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 the ~~three~~nine months ended ~~March 31,~~September 30, 2019, net cash flows ~~used in~~provided by financing activities were ~~$12.6~~$2.6 million, ~~an increase~~a decrease of ~~$28.1~~$38.6 million compared to the same period in 2018. The ~~increase~~decrease is primarily due to ~~decreased revenue equipment borrowings and net borrowings under our revolving line~~the purchase of ~~credit~~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 $247.1 million 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 ~~March 31,~~September 30, 2019, we had a working capital deficit of ~~$41.6~~$52.3 million, representing ~~an $8.0~~a $63.2 million ~~increase~~decrease in our working capital from ~~March 31, 2018, primarily resulting from decreased other accrued liabilities and accounts payable, partially offset by decreased customer receivables.~~September 30, 2018. Our current liabilities increased by ~~$56.9~~$70.2 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 ~~March 31,~~September 30, 2019, we had a working capital surplus of ~~$60.3~~$49.7 million, compared with a working capital ~~deficit~~surplus of ~~$2.3~~$69.5 million at ~~March 31,~~September 30, 2018. Excluding only the balloon payments included in current maturities of debt, we had a working capital ~~surplus~~deficit of ~~$3.4~~$20.6 million at ~~March 31,~~September 30, 2019.

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.

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Operating Lease Arrangements

We leased approximately ~~2,100~~2,408 tractors and ~~7,900~~7,325 trailers under operating leases at ~~March 31,~~September 30, 2019. Operating leases have been an important source of financing for our revenue equipment. Lease payments in respect of such equipment are reflected in our unaudited condensed consolidated statements of comprehensive income in the line item “Vehicle rents.” Our revenue equipment rental expense including short term rentals was ~~$19.0~~$19.5 million in both the ~~first~~third quarter of 2019 ~~compared with $20.0 million in the first quarter of~~and 2018. The lease terms 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 ~~$27.6~~$80.6 million as of ~~March 31,~~September 30, 2019. The residual value of a portion of the related leased tractor equipment is covered by repurchase or trade agreements between us and equipment manufacturers. We expect the fair market value of the equipment at the end of the lease term will be approximately equal to the residual value.

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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

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019, there were no material changes in our commitments or contractual obligations.

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. We adopted ASC 842, Leases, on January 1, 2019. See Note 2, Summary of Significant Accounting Policies, to our condensed consolidated financial statements included under Part 1, Item 1 of this report. There have been no other significant changes to our accounting policies since the disclosures made in our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks have not changed materially from the market risks reported in our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure 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)~~13a‑15(e) and ~~15d-15(e)~~15d‑15(e) under the Exchange Act) as of ~~March 31,~~September 30, 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

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rules and forms. Due to the material weaknesses described below and the Company’s evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were not effective as of ~~March 31,~~September 30, 2019.

Material Weaknesses in Internal Control over Financial Reporting as of December 31, 2018

As described in our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018, during the course of preparing for our IPO, we identified material weaknesses in our internal control over financial reporting,, some of which continue to exist as of ~~March 31, 2019~~.September 30, 2019. 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 a company’s annual or interim financial statements will not be prevented or detected on a timely basis. We did not maintain effective internal control over financial reporting related to the control activities component of Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, the COSO framework. The control activities material weakness contributed to the following additional material weaknesses: (i) ineffective design of information technology general computer controls with respect to program development, change management, computer operations, and user ~~access~~; access; (ii) ineffective design of controls over income tax accounting; and (iii) insufficient evidential matter to support design of our controls. These deficiencies did not result in a material misstatement to our annual or interim consolidated financial statements. However, t~~here~~there is a risk that these deficiencies could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected.

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Remediation of a Component of a Previously Disclosed Material Weakness

The material weakness related to the ineffective design of information technology general controls with respect to program management, change management computer operations and user access also included a component related to inappropriate segregation of duties with respect to creating and posting journal entries. We have remediated the component of the material weakness related to segregation of duties over creating and posting journal entries by designing, implementing, and testing controls to ensure that journal entries posted into the general ledger are reviewed by a separate individual, thus resulting in proper segregation of duties.

~~Changes in Internal Control Over Financial Reporting~~

~~We are currently~~

Remediation Efforts

Our management, with oversight from our Audit Committee, has initiated a plan to remediate the material weaknesses previously identified in the ~~process~~Annual Report on Form 10-K for the period ended December 31, 2018. These plans include the implementation of ~~remediating the above material weaknesses~~additional controls and ~~have taken numerous steps~~procedures to ~~enhance~~strengthen our internal controls related to the control ~~environment and address~~activities component of internal control over financial reporting. To date, the ~~underlying causes~~following actions have been taken towards our remediation plan:

Information Technology General Controls

As part of our remediation plan with respect to the ~~material weaknesses. These efforts include designing and implementing the appropriate~~design of information technology general controls, management enhanced and implemented controls for: (1) monitoring developers’ access and changes to production, (2) provisioning and reviewing access to financial systems and applications and (3) backup and recovery, security and other general information technology operations.

Income Tax Accounting

As part of our remediation plan with respect to the controls over income tax ~~accounting. In addition, we are enhancing~~accounting, management implemented quarterly control activities and enhanced and designed specific year-end control activities to assess the accounting for significant complex transactions and other tax related judgments.

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Evidential Matter Support

As part of our ~~process~~remediation plan with respect to ~~retain~~the evidential matter ~~that supports~~supporting the design and implementation of our controls, management implemented controls and enhanced the process for retaining the support evidencing the design and implementation of our controls.

To remediate each of the aforementioned material weaknesses, we require additional time to demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We are committed to maintaining a strong internal control environment, and we expect to continue our efforts to ensure the material weaknesses described above are remediated. While we intend to complete our remediation process as quickly as possible, we cannot estimate a time when the remediation will be complete. ~~Other than the implementation of these additional~~

Changes in Internal Control Over Financial Reporting

The changes described above relating to information technology general controls over (1) monitoring developers’ access and ~~new controls related~~changes to ~~our adoption of ASC 842, Leases, there~~ production and (2) provisioning and reviewing access to certain key financial systems and applications were no changes made in our internal control over financial reporting ~~that occurred~~ during the ~~quarter~~three months ended ~~March 31,~~September 30, 2019 that have materially affected, or ~~that~~ are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management, including our CEO and CFO, recognize that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

PART II OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

We are involved in various other 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 7 to our unaudited condensed consolidated financial statements, and is incorporated herein by reference.

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ITEM 1A.RISK FACTORS

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Our Annual Report on Form ~~10-K~~10‑K for the year ended December 31, 2018, in the section entitled "Item 1A. Risk Factors," describes some of the risks and uncertainties associated with our business. The information presented below describes a restatement of certain of such risk factors and should be read in conjunction with the risk factors included in our Annual Report on Form 10 K for the year ended December 31, 2018. These risks and uncertainties have the potential to materially affect our business, financial condition, results of operations, cash flows, projected results, and future prospects.

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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 in December 2017 and enforcement thereof in April 2018 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 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 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 robust 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

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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.

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 will 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 and Adjusted 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 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. Prior to September 1, 2018, our retention for auto liability was $5.0 million per occurrence and we were responsible for the first $5.0 million aggregate in the $5.0 million 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.

Prior to September 2015, our liability coverage had a limit of $100.0 million per occurrence. Given the increasingly high verdicts in trucking accident cases and our accident experience, among other factors, we increased our liability coverage limit to $300.0 million per occurrence. If any claim were to exceed coverage limits, we would bear the

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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.

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.

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 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.

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.

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

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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.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended ~~March 31, 2018,~~September 30, 2019, we did not engage in unregistered sales of securities or any other transactions required to be reported under this Item 2 of Part II on Form ~~10-Q.~~

10‑Q.

The payment of cash dividends is currently limited by our financing arrangements, including certain covenants under the Credit Facility.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

Not applicable.

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ITEM 6.EXHIBITS

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~~Exhibit~~ ~~Number~~	~~Description~~
~~3.1~~ Exhibit Number	Description
3.1	Second Amended and Restated Articles of Incorporation of U.S. Xpress Enterprises, Inc., dated and effective as of June 8, 2018 (incorporated by reference to Exhibit 3.1 filed with the Company’s Registration Statement on Form ~~S-1/~~S‑1/A (File No. ~~333-224711)~~333‑224711) filed on June 11, 2018).
3.2	Second Amended and Restated Bylaws of U.S. Xpress Enterprises, Inc., dated and effective as of ~~June 8, 2018~~May 24, 2019 (incorporated by reference to Exhibit 3.2 filed with the Company’s ~~Registration Statement~~Current Report on Form ~~S-1/A (File No. 333-224711)~~8-K filed on ~~June 11, 2018)~~filed on May 31, 2019).
~~10.1~~*# 10.1#	~~The Executive Nonqualified Excess Plan Adoption Agreement.~~ First Amendment to Credit Agreement, dated as of September 30, 2019, by and among the Company, the Guarantors party thereto, the Lenders party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swingline Lender.
~~31.1~~# 31.1#	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Eric Fuller, the ~~Company's~~Company’s Principal Executive Officer
~~31.2~~# 31.2#	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Eric Peterson, the ~~Company's~~Company’s Principal Financial Officer
~~32.1~~## 32.1##	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Eric Fuller, the ~~Company's~~Company’s Chief Executive Officer
~~32.2~~## 32.2##	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Eric Peterson, the ~~Company's~~Company’s Chief Financial Officer
101.INS#	XBRL Instance Document
101.SCH#	XBRL Taxonomy Extension Schema Document
101.CAL#	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF#	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB#	XBRL Taxonomy Extension Labels Linkbase Document
101.PRE#	XBRL Taxonomy Extension Presentation Linkbase Document

* Management contract or compensatory plan or arrangement

# Filed herewith.

## Furnished herewith.

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~~SIGNATURE~~

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	U.S. XPRESS ENTERPRISES, INC.

Date: November 5, 2019
~~Date:~~ ~~May 7, 2019~~ By:	~~By:~~	/s/ Eric Peterson
		Eric Peterson
		Chief Financial Officer

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U.S. Xpress Enterprises, Inc.
Unaudited Condensed Consolidated Balance Sheets
March 31, 2019 and December 31, 2018

	March 31,			December 31,
(in thousands, except share amounts)	2019			2018

Assets
Current assets
Cash and cash equivalents	$	2,095		$	9,892
Customer receivables, net of allowance of $101 and $59 at March 31, 2019 and December 31, 2018, respectively		185,710			190,254
Other receivables		19,474			20,430
Prepaid insurance and licenses		15,793			11,035
Operating supplies		7,548			7,324
Assets held for sale		8,086			33,225
Other current assets		15,860			13,374
Total current assets		254,566			285,534
Property and equipment, at cost		904,209			898,530
Less accumulated depreciation and amortization		(385,281	)		(379,813	)
Net property and equipment		518,928			518,717
Other assets
Operating lease right of use assets		186,941			-
Goodwill		57,708			57,708
Intangible assets, net		28,492			28,913
Other		24,858			19,615
Total other assets		297,999			106,236
Total assets	$	1,071,493		$	910,487
Liabilities and Stockholder's Equity
Current liabilities
Accounts payable	$	63,368		$	63,808
Book overdraft		5,233			-
Accrued wages and benefits		23,588			24,960
Claims and insurance accruals, current		43,586			47,442
Other accrued liabilities		8,386			8,120
Liabilites associated with assets held for sale		-			6,856
Current portion of operating lease liabilities		56,893			-
Current maturities of long-term debt and finance leases		95,117			113,094
Total current liabilities		296,171			264,280
Long-term debt and finance leases, net of current maturities		314,049			312,819
Less debt issuance costs		(1,264	)		(1,347	)
Net long-term debt and finance leases		312,785			311,472
Deferred income taxes		21,385			19,978
Long-term liabilities associated with assets held for sale		-			8,353
Other long-term liabilities		6,483			7,713
Claims and insurance accruals, long-term		60,518			60,304
Noncurrent operating lease liabilities		129,927			-
Commitments and contingencies (Notes 6 and 7)		-			-
Stockholders' Equity
Common stock Class A, $.01 par value, 140,000,000 shares authorized at March 31, 2019 and December 31, 2018,32,930,419 and 32,859,292 issued and outstanding at March 31, 2019 and December 31, 2018, respectively		329			329
Common stock Class B, $.01 par value, 35,000,000 authorized at March 31, 2019 and December 31, 2018, 15,616,551 and 15,486,560 issued and outstanding at March 31, 2019 and December 31, 2018, respectively		156			155
Additional paid-in capital		252,559			251,742
Accumulated deficit		(12,614	)		(17,335	)
Stockholders' equity		240,430			234,891
Noncontrolling interest		3,794			3,496
Total stockholders' equity		244,224			238,387
Total liabilities and stockholders' equity	$	1,071,493		$	910,487

See Notes to Unaudited Condensed Consolidated Financial Statements

U.S. Xpress Enterprises, Inc.
Unaudited Condensed Consolidated Statements of Comprehensive Income
Three Months Ended March 31, 2019 and 2018

	Three Months Ended
	March 31,
(in thousands, except per share amounts)	2019		2018

Operating revenue
Revenue, before fuel surcharge	$	375,312	$	382,858
Fuel surcharge		40,051		42,850
Total operating revenue		415,363		425,708
Operating expenses
Salaries, wages, and benefits		124,563		132,924
Fuel and fuel taxes		46,904		58,389
Vehicle rents		18,976		20,022
Depreciation and amortization, net of (gain) loss on sale of property		23,062		24,706
Purchased transportation		114,005		101,776
Operating expenses and supplies		27,945		29,791
Insurance premiums and claims		24,353		20,170
Operating taxes and licenses		3,173		3,401
Communications and utilities		2,265		2,466
General and other operating expenses		17,479		17,209
Total operating expenses		402,725		410,854
Operating income		12,638		14,854
Other expense (income)
Interest expense, net		5,603		12,658
Equity in loss of affiliated companies		89		296
Other, net		26		(75	)
		5,718		12,879
Income before income tax provision		6,920		1,975
Income tax provision		1,901		593
Net total and comprehensive income		5,019		1,382
Net total and comprehensive income attributable to noncontrolling interest		298		223
Net total and comprehensive income attributable to controlling interest	$	4,721	$	1,159

Earnings per share
Basic earnings per share	$	0.10	$	0.18
Basic weighted average shares outstanding		48,394		6,385
Diluted earnings per share	$	0.10	$	0.18
Diluted weighted average shares outstanding		49,391		6,385


See Notes to Unaudited Condensed Consolidated Financial Statements

	March 31, 2019			December 31, 2018
Term loan agreement, interest rate of 4.7% and 4.8% at March 31, 2019 and December 31, 2018, respectively maturing June 2023	$	192,500		$	195,000
Revenue equipment installment notes with finance companies, weighted average interest rate of 5.0% and 5.0% at March 31, 2019 and December 31, 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 $188.3 million and $197.1 million in March 2019 and December 2018		176,954			184,867
Mortgage note payables, interest rates ranging from 5.25% to 6.99% at March 31, 2019 andDecember 31, 2018 due in monthly installments with final maturities as various dates through September 2031, secured by real estate with a net book value of $23.8 million and $24.1 million at March 2019 and December 2018		18,574			18,861
Other		4,081			6,872
		392,109			405,600
Less: Debt issuance costs		(1,264	)		(1,347	)
Less: Current maturities of long-term debt		(86,492	)		(106,383	)
	$	304,353		$	297,870

Leases	Classification	March 31, 2019
Assets
Operating	Operating lease right-of-use assets	$	186,941
Finance	Property and equipment, net		19,921
Total leased assets		$	206,862

Liabilities
Current
Operating	Current portion of operating lease liabilities	$	56,893
Finance	Current maturities of long-term debt and finance leases		8,625
Noncurrent
Operating	Noncurrent operating lease liabilities		129,927
Finance	Long-term debt and finance leases, net of current maturities		8,432
Total lease liabilities		$	203,877

Cash Flow Information	Three Months Ended March 31, 2019
Cash paid for operating leases included in operating activities	$	20,167
Cash paid for finance leases included in operating activities	$	318
Cash paid for finance leases included in financing activities	$	3,155

Operating lease right-of-use assets obtained in exchange for lease obligations	$	23,975
Operating lease right-of-use assets and liabilities relieved in conjunction with divesture of Xpress Internacional	$	2,018

Lease Term and Discount Rate	Weighted-Average Remaining Lease Term (years)		Weighted-Average Discount Rate
Operating leases		4.1		5.2	%
Finance leases		3.4		5.3	%