U.S. Xpress’ first post-IPO earnings report has two significantly better numbers: OR and debt

Photo: truckstockimages.com

U.S. Xpress (NYSE:USX) late Thursday released its first quarterly earnings statement since it went back to public equity markets in early June, and there were several positive steps.

Most significantly for the truckload carrier is that its long-term debt levels, which were a legacy from a decision to take the company private in 2007, have been significantly reduced as a result of both the public offering and the replacement of other debt instruments with more favorable funding sources. In the earnings statement, the company’s long-term debt at the end of the second quarter was $282.2 million, down from $473.2 million a year earlier.

Interest expenses did not drop significantly relative to the second quarter of 2017, presumably because the IPO was fairly late in the three-month period. The second quarter 2018 net interest expense was approximately $12.2 million. But CFO Eric Peterson said on the earnings call with analysts that U.S. Xpress expects to see its consolidated debt payments down to about $5 million in the third quarter.

The other financial figures reported by U.S. Xpress were all strong. Total operating revenue was up 21.4% from the second quarter of 2017; operating income was up more than sevenfold to $20 million.

More significantly, U.S. Xpress reported an adjusted operating ratio of 93.4% (and 92.7% in the truckload division), which was more than 500 basis points better than the corresponding quarter of 2017.  CEO Eric Fuller said recent history is that U.S. Xpress has tended to lag its truckload peers on OR by as much as 700 basis points.

Fuller said the OR was the lowest for U.S. Xpress since 1998.

Unusual for an earnings call, but understandable given that it was the company’s first since its IPO, Fuller reviewed a history of U.S. Xpress and how it got to where it was…and is.

Fuller said the company, founded in 1985, had been focused on revenue growth, making numerous acquisitions and becoming what he said was the fastest trucking company to hit $1 billion in revenue. But between 2000 and 2015, it had an average OR of 98% “as management tried but was unsuccessful in growing the company to consistent profitability.”

That resulted in a shakeup in 2015 when Fuller and Peterson joined the company’s management. “Our clear mandate was to implement a complete overhaul of the company’s strategy and operations to improve execution and profitability,” Fuller said. During the next few years, 61 of the company’s top 94 managers were replaced by both internal promotions or external hires, he added.

A variety of initiatives have been implemented since then, targeted at fleet management and load planning. The focus is not solely on growth but on new core goals: rates, truck count utilization and cost. “We’ve implemented sustainable initiatives with the goal of improving these core metrics and boosting our OR,” Fuller said.

For example, Fuller said a load planning initiative launched last September resulted in an immediate 5% utilization improvement. “As that rises, so does driver pay,” he said.

Fuller addressed several other operational issues at U.S. Xpress:

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