J. B. Hunt Reports Record Earnings
J. B. Hunt Transport Services Inc., announced third quarter net earnings of $16.8 million, or diluted earnings per share of 42 cents, compared with 2001 third quarter earnings of $4.5 million, or 12 cents per diluted share. The earnings represent the highest recorded third quarter profits in the company's history.
Total operating revenue for the current quarter was $583 million, compared with $537 million during the third quarter of 2001. During the third quarter of 2002, revenue of the company's truck segment was up 2.4%, while the intermodal segment revenue rose 6.7% over the comparable period of 2001. Dedicated segment (DCS) revenue increased 19.3% during the current quarter.
Earnings improved significantly in the quarter as the operating leverage, attributable mostly to the truck segment, began to be realized to a greater degree. The truck operating ratio was 95.3% for the quarter, a 240 basis point improvement vs. the comparable period last year. Net revenue (excluding fuel surcharges) per tractor per week improved 6.6% over the third quarter of 2001 to $2,830 per tractor per week. Rate yields continued to improve as the loaded rate per mile (excluding fuel surcharges) increased 5.2% relative to a year ago. In spite of a lackluster economy, empty miles declined significantly to 9.1% vs. 11.6% for the third quarter a year ago. The higher revenue per mile and lower empty miles are a result of the company's yield management initiatives. Better returns in the truck segment are a prerequisite for re-investment in the truckload business. The company has no plans to add capacity in the truck segment until satisfactory margins are achieved. The average number of trucks was 5,631 for the third quarter 2002 and 5,847 for the third quarter 2001.
In the intermodal segment, the operating ratio was 93.6% for the third quarter of 2002. Intermodal revenue per loaded mile (excluding fuel surcharge) was down 0.5% when compared with the same period in 2001. However, revenue per load increased by 1.3% due to a longer length of haul.
Utilization of company containers as measured in turns per month improved by 7% vs. a year ago. The intermodal segment completed its container modernization program during the quarter and now has 100% 53-foot equipment.
The operating ratio for the DCS segment was 97.5% for the current quarter, a 130 basis point improvement over the same period a year ago. The increase in DCS revenue was driven by growth in the fleet of 370 tractors, new contractual arrangements and growth with existing customers. During the quarter, DCS implemented a number of new projects that absorbed all excess capacity. Upwards of 300 trucks had been idle for several months.
In connection with the new projects, one-time start-up costs of about $2 million were absorbed in the third quarter. Since revenue from the new projects ramped up throughout the quarter, the benefit of a full quarter of revenue on the new projects in the fourth quarter of 2002 and the absence of start-up costs should propel DCS to improving margins going forward.
Increasing fuel prices that are substantially offset with higher fuel surcharge revenues, and higher insurance premiums for the renewal of the company's excess liability coverage, negatively impacted earnings in all segments. Significant increases in operating costs, such as insurance, equipment, labor and maintenance of aging fleets for the truckload, dedicated services and intermodal industries will continue to require increasing freight rates to foster a healthy transportation system.
Due to the lockout of West Coast dock workers during the first part of October and the subsequent return to work on Oct. 9, a shortened time frame for moving imported merchandise into place will occur during the fourth quarter of 2002. The impact to the company has been minimal to date and the company is unable to predict what the ultimate impact, if any, will be during the fourth quarter of 2002. J.B. Hunt's management said it is encouraged by the direction and positive factors demonstrated in improving the long-term profitability of its truck and DCS business segments and believes that progress will continue into 2003.
CF Closure Helps Roadway Out Of A Slump
The bankruptcy of Consolidated Freightways helped boost Roadway out of a freight slump, providing enough new business to bring back the less-than-truckload carrier's laid off workers and even create jobs for some former CF employees.
"In the last week of the quarter our industry changed," said Roadway Corp. Chairman and CEO Michael Wickham. "The shutdown of Consolidated Freightways was unprecedented in its magnitude and abruptness."
CF's closure came just as a trend to improved freight volumes was showing signs of slowing and Roadway, said Wickham, was operating below capacity. In the first three weeks following CF's announcement, Roadway's tonnage increased 17% over seasonal patterns. "The freight is moving at Roadway-established rates, and our Aug. 4 general freight rate increase is holding well," he said. "Now our job is to manage rapid growth in business volumes while continuing to control costs and not add unnecessary capacity."
The new business came too late to impact Roadway's financial numbers for its fiscal third quarter, which ended Sept. 7. Combined revenue for the period was $721 million, up 14.2% from the same period a year ago. Net income was $6.94 million, down from $8.2 million a year ago. Wickham said the company did manage to improve its operating ratio by four-tenths of a percent, to 97.4% for all operations.
For the first three quarters of 2002, revenues totaled $2.05 billion, up 6.8% from the same period last year. Net income was $10.9 million compared to $17.2 million for the same period in 2001,down 36.8%. Roadway Express revenue for the first three quarters was $1.79 billion. Its operating ratio was 98.8%. Revenue per LTL ton was $428.85. New Penn Motor Express revenue was $145.5 million. Its operating ratio was 89.6%. Revenue per LTL ton was $241.43. Arnold Transportation Services had revenues of $119 million. Its operating ratio was 97.8%. Truckload revenue per tractor per week was $2,540.
Wickham said they expect 25-30% revenue growth in fourth quarter and are looking to improve the operating ratio by as much as 2 to 2.5 points.
Celadon Miles, Profits Up For 2002
Indianapolis-based Celadon Group posted operating income of $10.5 million for its fiscal 2002, a $6.2 million increase from the previous year. The company also said it added some 11 million dispatch miles in the fiscal year ending June 30. The increase was due mainly to a strengthening economy and a focused effort to pick up customers of the bankrupt Burlington Motor Carriers, Celadon said.
Consolidated revenues were $337 million compared to $351.8 million for 2001. However, year-ago totals included revenue from Cheetah Transportation, the flatbed operation sold to American Trans Freight in Celadon's fiscal fourth quarter 2001. Also, pass-through revenues in 2002 were reduced by approximately $11 million because a major client shifted coordination and transportation of its Mexico loads to Mexican transportation companies.
Celadon's operating ratio was 96.9% compared to 98.8% a year ago. Salaries, wages and benefits were 29.8% of operating revenues compared to 27.3%. Fuel expenses decreased to 10.7% of revenue from 11.3% last year. Insurance and claims expense was 3.6% of revenue versus 2.9% the previous year. Rent and purchased transportation expenses were 33.3% of revenue compared to 38.1%. The decrease was mainly due to reduced owner-operator expense after the sale of Cheetah, but this was partially offset by increased use of owner-operators in other areas.
Celadon's e-procurement business, Truckers B2B, had revenues of $6.7 million, up from $4.4 million in fiscal 2001. The improvement was due to increased member usage of the tire discount program. Operating income was $900,000 compared to a $2.3 million loss the previous year.
Fleet Capital Corp. has provided a $55 million asset-based credit facility to Celadon, which will be used to help implement its growth strategy, including "selective opportunistic acquisitions."
Morgan Group Shuts Down
Citing the inability to get liability insurance, the Morgan Group suspended operations of its Morgan Drive Away and TDI subsidiaries. The company said it plans to liquidate its assets under Chapter 11 bankruptcy protection. Morgan's liability insurance expired Oct. 3 and the company said it has not been able to secure replacement coverage. Federal regulations require motor vehicles to maintain specified minimums of liability coverage according to the type of cargo hauled.
Last August Morgan sold its Manufactured Housing Division to rival Bennett Truck Transport. The unit, Morgan executives said, had experienced repeated losses due to a weakness in the manufacturing housing industry coupled with dramatic increases in the cost of liability insurance.
