Taking a big cost-cutting leap after several smaller efforts, leaders of U.S. Xpress Enterprises are reorganizing the publicly traded carrier, cutting a “significant” number of jobs, and planning to trim capital spending by a third in 2023. The company also said it expects to see the cost of third-quarter insurance claims climb by $15 million from the spring.
The reorganization underway has created a division for U.S. Xpress’ dedicated unit and one grouping its legacy over-the-road, technology-driven Variant, and brokerage businesses. Until now, the company has been organized among truckload and brokerage lines. President and CEO Eric Fuller said the new structure will refocus U.S. Xpress on the blocking and tackling of running its business—"Without that, we can't be successful," he told analysts on a conference call—and should improve the company’s network planning and help it more efficiently allocate freight between its own and third-party assets.
See also: U.S. Xpress sales chief to depart
The company, which employed about 2,400 office personnel at the end of 2021, isn’t disclosing how many people are losing their jobs as part of the reorganization but said the annual savings from those layoffs are concentrated among technology workers and will save it $20 million over the course of a year. Fuller said his team also has made various other cuts that will generate another $3 million on an annual basis.
As part of the restructuring, U.S. Xpress also has ended its lease for the Atlanta office space that housed most of the Variant team, a move that will cost it $1.2 million in the third quarter but save it $2 million on an annualized basis. Other properties also may be sold to help lighten U.S Xpress’ debt load.
Fuller said the cuts are needed at Chattanooga-based U.S. Xpress (No. 18 on the FleetOwner 500: Top For-Hire Fleets of 2022 list) based on the softening freight market and the need for the company to lower its debts. As of June 30, U.S. Xpress’ long-term debt and lease obligations totaled $308 million while its shareholders’ equity was $273 million.
“The investments we made in our digital enablement initiatives over the last few years will be incorporated into our newly realigned divisions,” Fuller said, adding that the company is moving on from Variant's tech-first approach and "skinnying down" its strategy. “We believe this model will allow for the optimal allocation of all available OTR freight across company and third-party capacity, allowing selectivity for our assets while providing additional capacity for our customers.”
The expected savings from Fuller’s restructuring plan will come on top of an estimated $10 million of annual savings from a reorganization about nine months ago of Variant; as well as significantly lower executive compensation costs following the departure of four senior officials in the past year—most recently Chief Commercial Officer Jake Lawson.
In addition to the $25 million in forecasted savings, Fuller said U.S. Xpress will next year also spend less than $100 million on capital equipment, a drop of more than $50 million from its expected 2022 total. The drop will come from a combination of lower software development spending and extending the life cycles of its trucks by 100,000 miles, which will, over time, lift the average age of U.S Xpress' equipment from 22 months to 27 months.
On the insurance front today, the U.S. Xpress team said claim settlements have picked up as courts clear a backlog of cases. Based mostly on one large claim, the company expects that line item to be about $15 million more in the third quarter than the second quarter’s $23.4 million.
Shares of U.S. Xpress (Ticker: USX) closed at $2.52 Sept. 7 before Fuller and his team announced their plans and were up 2% in pre-market trading the following morning. Year to date, they have lost more than half their value, trimming the company’s market capitalization to about $130 million.
