(An article about the subsequent earnings call U.S. Xpress management held with analysts after this announcement can be found here.)
Truckload carrier U.S. Xpress, which is seeking to implement an entirely new model under its Variant initiative but whose finances are those of a company that mostly missed out on the recent freight market boom, is undertaking restructuring and cost-cutting.
The move, announced after the stock market close Wednesday, is not entirely surprising; news of significant layoffs at the company were reported in late August. But with the news of layoffs at U.S. Xpress widely disseminated two weeks ago, the latest announcement about personnel changes amounted to further detailing the dismissals.
In its statement, U.S. Xpress (NYSE: USX) said it had “identified significant personnel efficiencies as a result of eliminating organization overlaps and duplicative functions.” As a result of the changes it has made, U.S. Xpress expects to reduce annualized wage costs by $20 million beginning in the fourth quarter, which commences Oct. 1.
In the second quarter, U.S. Xpress reported wages and other compensation of $181.4 million, which annualized would be approximately $725 million.
The company is reorganizing into two divisions. The Dedicated division will remain as a stand-alone operation. But the company is also creating a division called Highway Services. It will include its legacy over-the-road operations, Variant and its brokerage activities.
Justin Harness, who has been the president of Dedicated, will become president of Highway Services. Brandon Danneffell was most recently senior vice president of the brokerage division; he will now become president of the Dedicated division.
In the prepared statement, U.S. Xpress CEO Eric Fuller said Harness “led the turnaround of our Dedicated division over the last year and a half.” His said Danneffell’s experience “will be invaluable in the Dedicated division, where strong performance requires close partnerships with customers.”
“The priorities of our Dedicated and Brokerage businesses will not change with today’s announcement,” Fuller said.
U.S. Xpress already had a significant personnel move announced last month when it was disclosed that Chief Commercial Officer Jake Lawson would leave the company.
The company scheduled a conference call with analysts Thursday morning at 8:30 to discuss its plans. On its most recent conference call to discuss second-quarter earnings, there was no analyst participation.
Other cutbacks announced in the prepared statement include terminating the company’s Atlanta office. That had been the headquarters of Variant and had been touted by the company as a key part of its approach to hiring the type of top tech talent — possibly out of nearby Atlanta colleges like Georgia Tech — needed to produce the software at Variant. That will be an annualized savings of $2 million. The company is looking at other real estate divestiture opportunities, according to the statement.
Between the personnel cutbacks and the other reductions, such as real estate, U.S. Xpress said it would eliminate about $25 million in annual costs.
But the far bigger cost reduction would come in capital expenditures. Capex for 2022 is expected to be $150 million net of proceeds, and that figure has not changed. But net capex for 2023 is now projected at less than $100 million, “as [U.S. Xpress] implements a revised trade cycle management initiative and reduces software development costs.”
Anticipating any questions about its survival, the U.S. Xpress statement said its liquidity “remains strong,” with cash plus access to a revolving credit facility totaling $135 million as of the end of August. But the company’s cash on its balance sheet was about $3.15 million at the end of June. At the close of December, it was almost $5.7 million.
U.S. Xpress stock is down 72.4% in the past 52 weeks, according to data provided by Barchart. It closed Wednesday at $2.52 and is up from its 52-week low of $2.13 recorded on June 23.
The company through six months was not profitable, posting a net loss of 19 cents per share. The U.S. Xpress statement suggested stiffer losses might be ahead, as it said it expects about $15 million in additional insurance and claims expenses, “primarily driven by one large claim.”
That $15 million is compared to the 2022 second quarter. In that quarter, U.S. Xpress reported both insurance claims and premiums of $23.4 million but did not break out the claims/premiums split.
Disclosure: FreightWaves founder and CEO Craig Fuller retains ownership of U.S. Xpress shares through his family trust.
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