U.S. Xpress Owners Monetize Holdings With Stock Offering

May 09, 2018 by Jerry Hirsch, @Jerryhirsch

Management and the families who own U.S. Xpress Enterprises Inc. plan to take advantage of the current favorable trucking market and offer a limited number of shares in an initial public offering.

The sale could raise as much as $100 million for the individuals but allow them to retain firm control of the Chattanooga, Tenn., trucking company through a dual share class structure, each with different voting rights.

The offering comes at a time when freight demand is high, rates are on the rise and U.S. Xpress has swung to a profit after piling up a string of losses.

In documents filed with the Securities and Exchange Commission on Monday outlining the terms of the offering, U.S. Xpress said trucking rates rose 14.4 percent in the first quarter of this year over the same period a year earlier.

“The truckload market is cyclical, and it is currently experiencing increases in volumes and rates, primarily due to tightening driver supply coupled with increasing industrial and retail freight demand,” the company said.

Additionally, a new federal regulation forcing truckers to digitally track their driving hours with an electronic logging device, or ELD, to ensure they comply with so-called hours of service rules is providing a boost to large trucking firms by chasing some independent and small operators out of the business.

“Industry observers believe that enforcement of the ELD mandate will reduce the miles driven by certain historically non-compliant carriers, which are predominantly smaller operators. This dynamic is expected to further constrain capacity and encourage a level playing field for carriers that previously offered lower rates to customers and covered their costs and compensated their drivers by operating excessive miles,” the company said.

U.S. Xpress adopted electronic logs in 2012 and said its systems and network are engineered for compliance with the recent federal electronic log mandate.

The company earned $1.2 million in the first quarter, compared with a loss of $4.4 million in the same period in 2017.

It lost $4 million last year and has logged an annual profit only once in the last five years, according to the filing.

It will trade on the New York Stock Exchange under the symbol USX.

With $1.6 billion in annual revenue last year, U.S. Xpress said it is the fifth largest full truckload carrier in the U.S. Its fleet has 6,800 semi-tractors and 16,000 trailers. That includes about 1,300 big rigs operated by independent contractors.

Management at U.S. Xpress plans to sell shares on the New York Stock Exchange under the USX ticker symbol. (Photo: U.S. Xpress)

The company included only the basic information about its offering in its SEC filing. The $100-million figure is an estimate provided by Renaissance Capital, a provider of pre-initial public offering investment research.

The selling shareholders include Eric Fuller, the company’s chief executive and president. Max Fuller, the motor carrier’s co-founder and executive chairman also is participating, according to the SEC filing. Another seller is Lisa Quinn Pate, currently a director and chief administrative officer. Pate is the daughter of Patrick Quinn, who co-founded the company with Max Fuller in 1985.

The filing did not detail how many shares each would sell, only listing the potential sellers. It did provide compensation information. U.S. Xpress paid Max Fuller $3.5 million last year.  Eric Fuller earned $2.3 million and Lisa Quinn Pate collected $1.5 million.

They will remain firmly in control of the business thanks to a dual class stock structure. All will be selling “A” shares which will include one vote per share owned. But they will retain “B” shares, each of which will have five votes.

The offering document said that “certain members of the Fuller and Quinn families” will “effectively control all matters submitted to our stockholders for a vote.”

The company completed a public offering in 1994 and operated as a Nasdaq-listed business until 2007 when Max Fuller and Patrick Quinn took it private.

Last year, the company promoted Eric Fuller and Lisa Quinn Pate to their top management positions as part of a succession plan.

U.S. Xpress also launched several initiatives that it said will improve its financial performance.

They include a load planning initiative designed to minimize the miles that empty trucks drive and better utilize drivers’ hours.

“We believe the focus on drivers’ hours more effectively utilizes our scarcest resource and improves driver satisfaction. Following this change, miles per seated tractor per week and driver turnover rate both improved,” the company said.

It also began a fleet management pilot program on 250 tractors in which its fleet managers increased communications with drivers to anticipate and fix issues such as home time planning and load scheduling.

“Inbound driver calls declined and driver turnover decreased, resulting in more time for our managers to proactively solve problems, thereby improving our efficiency and utilization,” the company said. “We have seen similar results as we continue to roll out this program to the rest of our fleet, which we expect to complete during 2018.”

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