U.S. Xpress Enterprises Inc., one of the nation’s largest trucking companies, raised $267 million in its first day of trading as a public company on the New York Stock Exchange on Thursday.
Eric Fuller, the Chattanooga, Tenn., company’s chief executive, talked to Trucks.com about the offering, the truck driver shortage and the transition from using diesel as a fuel to hydrogen and electric trucks. An edited version of that conversation is below, but first, here are the details about the company’s offering.
U.S. Xpress, which operates mostly on the East Coast, sold 18.1 million shares of its Class A common stock at $16 per share. That was below the motor carrier’s expected offering price of $18 to $20 a share. It will use the money largely to pay off debt.
The stock closed at $16.68. That gives the company a market capitalization of $804 million, or the closing price multiplied by the 48.2 million shares outstanding.
The offering raised an additional $22.4 million for the families who own the company. They sold 1.4 million Class A shares. Max Fuller, the motor carrier’s founder, Eric Fuller, and Lisa Quinn Pate, another company executive and daughter of the other co-founder, will retain firm control of the business. With other family members, the group will control about 83 percent of the voting shares.
The company lost $4 million on $1.6 billion in revenue in 2017, according to documents filed with the U.S. Securities and Exchange Commission in May.
Why take U.S. Xpress public again now?
We’ve been going through a big transformation from a company very focused around entrepreneurial growth. As I came into my role in 2015, one of the things I wanted to do is transition to what I would consider a more professionally managed focus. We brought people in that were more metrics, data and process oriented. Of our 94 top management team members we’ve replaced 64 since 2015.
Then, as we changed leadership, we started changing the culture. You’ve got to drive the right culture to pivot and have the right focus.
The third piece in changing our operations was getting the kind of margin improvement we needed in our business. Once we did that we were at a point now where we are starting to close the gap in relation to our peers, and now is an opportunistic time to take advantage of going public.
We are in a very strong trucking cycle and that is going to last quite a while in large part because of the driver situation. It’s harder and harder to find drivers. We don’t see that changing anytime soon.
What is the solution to the trucking industry’s driver shortage?
I don’t see some big major solution in the near term. We are not a career choice for a lot of people. We are competing against manufacturing and against construction and those jobs today are probably a little more attractive than ours. What to do is to somehow make the job more attractive. But it’s also about lifestyle and work-life balance. But it’s a blessing and a curse. In one sense it’s tough, but in another sense it prolongs this cycle. It puts a lot of barriers to entry so small carriers are less inclined to enter the industry.
Why did you team up with Nikola Motor Co. to order one of its new hydrogen-electric semi-trucks?
We are always looking into new technology, for opportunities to kind of differentiate ourselves. I am a big believer that there will be some significant new technology in the next couple years and it will really separate the haves and the have-nots. A Nikola tractor or a Tesla tractor, either way we think the operations costs will be a significant improvement over operating costs for diesel tractors. So that could really separate ourselves in a highly fragmented industry that probably won’t be able to source that capacity because you will have limited production in the near term. And I think drivers will be excited about the new technology and say, “I want a truck that looks like that.”
Are you going to be a Tesla Semi Truck customer?
I think we will look at all manufacturers and see what’s out there. We are big proponents of testing new equipment and looking at the new trucks at least gives you a seat at the table and a chance to look at what makes sense. We are not necessarily committed to anything but constantly want to be out at the forefront.
Is the company now structured to be more consistently profitable?
Yes. When you are as levered as we have been in the past, and admittedly a lot of that debt came with large interest rates, taking debt off the table is very positive. That helps to reduce a lot of our expense and it will help us to drive profits. Success drives success so as we start to drive some costs down and have less debt on the balance sheet, it will give us more opportunities.
Do you plan Acquisitions?
Potentially. In the near term I would say where we can create the most value is in our own operations and driving improvement in our performance. But as we look out past that I think there is real opportunity in the market. And I do think consolidation is going to happen on some scale over the next couple years. And part of the reason we wanted to do this (IPO) is to position ourselves for that.
Will the boom in truck freight last?
Yes. If you look historically most of these big trucking cycles end as people build back capacity. But there is no catalyst to do that. You do that by bringing in new drivers. But with the unemployment rate sitting below 4 percent, I don’t see that happening. It will last probably to the next recession so ending in a more macro-driven cycle.
Why create two classes of company stock?
We’ve been through a big transformation and that transformation has involved a lot of heavy lifting. So we want to stay consistent and not get thrown off balance. We felt having that dual class is prudent to help us keep on track.