Chattanooga, TN, February 13, 2006--U.S. Xpress Enterprises, Inc., announced today it has reached agreements in principle to increase its ownership interest in both Arnold Transportation Services Inc., and Total Transportation of Mississippi and affiliated companies to 80% from 49%, for a total of $7.8 million in cash.
The transactions, which are subject to customary closing conditions and execution of definitive agreements, are expected to close prior to the end of the first quarter of 2006.
U.S. Xpress Enterprises, Inc., is the fifth largest publicly owned truckload carrier in the United States. Xpress Global Systems, a wholly owned subsidiary, is a provider of transportation, warehousing, and distribution services to the floor covering industry.
For 2005, Arnold and Total contributed $2.8 million of equity in earnings for the company, reported combined revenue of $317.0 million, combined net income of approximately $5.7 million and achieved an operating ratio of approximately 94.7%. U.S. Xpress anticipates accounting for the operations of both companies on a consolidated basis following the closing of the transactions. As a result, both the combined net income and existing debt of Arnold and Total will be consolidated into U.S. Xpress' income statement and balance sheet. Had the transactions occurred as of December 31, 2005, U.S. Xpress' total debt outstanding, including current maturities, would have increased from $177.2 million to approximately $308 million. Considering the historical and expected cash flows of Arnold and Total, the Company's consolidated fixed-charge coverage and senior-leverage ratios are expected to remain well within the limits of the company's primary credit agreement.
The Arnold management team, led by president and chief executive officer Mike Walters, and the Total management team, led by co-chief executive officers Rick Kale and John Stomps, will continue to manage their respective operations and utilize their existing facilities. Together, these two affiliated companies currently operate approximately 2,000 tractors providing regional and medium length of haul and dedicated dry van truckload services. U.S. Xpress has an exercisable option to purchase the remaining interest in both companies at a specified price based on the current transaction price and specified annual return through December 2007 for Arnold and October 2008 for Total.
Max L. Fuller, co-chairman of U.S. Xpress, stated, "Since acquiring minority interests in Arnold and Total, we have been very impressed with the ability of each management team and their respective employees to execute their business strategy and improve revenue and operating margins. Their strong performance along with the opportunity to accelerate incremental improvements in operating and financing costs led us to amend our previous agreements provide for a partial exercise of our option. Most importantly, the transaction presents an opportunity to enhance value for our shareholders as we expect the transaction to be immediately accretive to earnings following closing and enhance the range of services available to our customers. Continuing the operating structure and excellent working relationships we have enjoyed since our original investment, all three businesses - U.S. Xpress, Arnold and Total - will focus on continuing to meet our customers' expectations while increasing shareholders' returns."
