U.S. Xpress Cuts Corporate Staff Ahead of Knight-Swift Deal
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After losses widened in the first quarter of the year, U.S. Xpress has cut its corporate staff for the third time in the past year as the Chattanooga-based trucking giant prepares to merge with the larger Knight-Swift Transportation Holdings Inc.
U.S. Xpress declined to detail the number of staff reductions it has made this spring in preparation for its merger with Knight-Swift, a Phoenix-based trucking giant that announced plans in March to buy U.S. Xpress for more than $800 million. But in a statement May 12, U.S. Xpress spokeswoman Mary Fortune said the staff cuts were made in response to a slowdown in shipping activity.
“We did recently make the difficult decision to reduce roles in a few business areas in response to challenging market conditions,” she said in a statement May 12. “Our industry is experiencing a prolonged lack of freight demand that has negatively affected trucking and logistics companies. We are no exception.”
The latest round of layoffs at U.S. Xpress follows job cuts last year that cut about 140 jobs at the corporate headquarters in both May and August of 2022.
U.S. Xpress has about 1,400 employees at its corporate office in Ooltewah and has a total of more than 10,000 employees and contractors working as drivers, maintenance workers and other logistics roles.
Company Losses Grow
In a financial filing released May 10, U.S. Xpress reported that company losses widened across most of the business in the first quarter compared with a year ago as the freight market slowed. The company reported a net loss of nearly $27.1 million, or 52 cents per share, in the first quarter of this year, compared with a net loss of $8.9 million, or 18 cents per share a year earlier.
U.S. Xpress said revenues prior to fuel surcharges declined by 5.7% from $464.3 million in the first quarter of 2022 to $437.8 million in the first three months of 2023.
“For the three months ended March 31, 2023, the primary factors driving the decreases in total operating revenue ... were decreased pricing in our truckload segment, decreased loads in our brokerage segment and decreased miscellaneous revenues,” U.S. Xpress said in its quarterly financial report.
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The company did not issue a news release or conduct a call with industry analysts about the latest quarterly results as it has done in the past.
While revenues dropped for the trucking giant, U.S. Xpress reported that salary and other employee costs rose by 7.5% to $181.7 million from $169 million.
Class Action Lawsuits
Despite the higher employee costs, the company still faced lawsuits over lack of pay from some workers under California wage and hour requirements. In its filing with the U.S. Securities and Exchange Commission, U.S. Xpress disclosed it recently agreed to pay $4.7 million to settle claims from California workers saying the company failed to pay required wages or provide enough employee meal or rest breaks under California law.
The company also said it has agreed to pay $13 million to settle claims that the company made false or misleading statements in its initial 2018 public stock offering, pending final approval of the settlement by the court.
U.S. Xpress issued stock in 2018 when it once again became a publicly traded company with shares initially priced at $16 per share. But the stock plunged by more than 90% before Knight-Swift agreed earlier this year to buy U.S. Xpress for $808 million, or $6.15 per share.
In 2018 and 2019, eight class action complaints were filed against U.S. Xpress in Tennessee state courts alleging the company made false or misleading statements about its financial condition.
U.S. Xpress is one of the nation’s largest trucking companies with more than $2.2 billion in revenues in 2022. The company has 7,200 tractors and approximately 15,100 trailers on the road.
Knight-Swift, which is the nation’s seventh largest truck carrier with over 21,000 tractors and more than 75,000 trailers, also reported a 10.4% drop in revenues during the first three months of 2023 as trucking shipments slowed.
Knight-Swift reported net income attributable to the company of $104.3 million, or 64 cents a share, for the three months ending March 31. In the same period a year earlier, Knight-Swift earned $208.3 million, $1.25 a share.
The results were nearly 23% below the consensus estimate of what earnings would be for Knight-Swift in the quarter, according to Zacks Consensus Estimate.
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“We recognize that we cannot entirely escape the cyclicality of the full truckload industry,” Knight-Swift CEO David Jackson said during an April 20 call with investors. “But we have taken intentional steps for years to maximize our performance in every phase of the cycle.”
Jackson said Knight-Swift is targeting to close its purchase of U.S. Xpress early in the third quarter of this year.
“We expect the recently announced acquisition of U.S. Xpress to be one of the factors that enables us to achieve, yet again, another higher high in the strengthening phase as supply attrition makes way for a correction,” Jackson said in the quarterly earnings report in April.
U.S. Xpress ranks No. 23 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 62 on the TT Top 100 list of the largest logistics companies in North America. Knight-Swift ranks No. 7 on the for-hire TT 100.
