U.S. Xpress Enterprises has announced it has reached agreements to increase its ownership interest in both Arnold Transportation Services and Total Transportation to 80 percent from 49 percent, for a total of $7.8 million in cash. The transactions, subject to customary closing conditions and execution of definitive agreements, are expected to close prior to the end of the first quarter of 2006.
For 2005, Arnold and Total contributed $2.8 million of equity in earnings for the company, reported combined revenue of $317.0 million and combined net income of about $5.7 million, and achieved an operating ratio of about 94.7 percent. 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.
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, the two affiliated companies currently operate about 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.
“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,” says Max Fuller, co-chairman of Chattanooga, Tenn.-based U.S. Xpress. “Their strong performance, along with the opportunity to accelerate incremental improvements in operating and financing costs, led us to amend our previous agreements to 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.”