Fleet Financials
Rates Increase As Capacity Tightens
During the quarter, I spent a significant amount of time meeting with customers all over the country," Randy Marten, chairman and president of Marten Transport recently told financial analysts. "Almost universally what I heard loudest was concern about capacity. Would we have enough trucks to allocate to their business?
Patricia Smith
Senior Editor
Their fears may be well-founded, at least for a while. Most publicly held trucking companies reported higher revenues than third quarter a year ago. Reasons cited included increased freight demand, higher rates and growing popularity of "premium" services. As we saw last quarter, many carriers are being selective about the customers — and either walking away from, or renegotiating unprofitable business.
High insurance and claims costs still plague many carriers. Another nagging problem — getting and keeping good drivers — has once again emerged.
"The once ever-present, but lately subdued, driver shortage began to reappear in the last six months," noted J.B. Hunt President and CEO Kirk Thompson. "Expansion of capacity in the truckload industry, already put on hold by a number of economic issues, seems all but impossible for the foreseeable future given the renewed difficulty of hiring additional truck drivers."
As Marten noted, customers haven't completely lost their focus on rates. But "if demand remains strong, we continue to expect slow, steady improvements in freight rates."
Arkansas Best
Arkansas Best's largest subsidiary, ABF Freight System, had third quarter revenues of $360.6 million versus $335.5 million for the same period a year ago. Its operating ratio went from 92.9% to 91.9% — one of the best third quarters in 25 years. Less-than-truckload revenue per hundredweight, excluding fuel surcharges, was $23.60, up 5.4% from third quarter last year. LTL tonnage per day was up 0.5%. The company said about one-half of the yield increase was due to changes in the freight profile since the closure of Consolidated Freightways a year ago September.
"We remain encouraged by the positive pricing environment currently experienced by our industry," said Robert Young III, Arkansas Best president and CEO. "ABFs increases on contracts and deferred pricing agreements continue to be favorable by historical standards, and retention of the July 14 general rate increase has been good."
Arkansas Best's Clipper intermodal marketing company had revenues of $34 million versus $32 million in third quarter 2002. Its operating ratio was 98.2% versus 97.7%. Young said significant increases in dry freight truckload revenues and margins were offset by revenue and profit declines in the temperature controlled division, caused by softness in the demand for produce moving off the West Coast. At the same time, competition from other truckload operators reduced margins per load.
CNF Inc.
CNF posted third quarter net income of $24.8 million compared with $33.5 million a year ago. Revenues were $1.3 billion versus $1.2 billion. Operating income was $57.1 million versus $43.5 million.
Operating income for Con-Way Transportation Services, CNF's regional LTL operation, was $56.6 million, up 36% from the third quarter 2002. Revenues were $574.6 million, up 9%. The company said Con-Way also saw improvement in its core regional operations and in its air freight, logistics and expedited delivery businesses.
Menlo Worldwide, CNF's logistics and freight forwarding operation, had operating income of $1.4 million versus $6 million a year ago. Results included a $6.5 million charge to Menlo Forwarding for the resolution of a hazardous materials violations case with the U.S. government. Segment revenues were $731.7 million versus $701.8 million.
Old Dominion Freight Line
Old Dominion reported operating revenues of $176.9 million, up 18% from third quarter 2002. Net income was $9.1 million, up 42.5%. Operating ratio was 90.5% versus 91.9%. Chairman and CEO Earl Congdon said disruptions caused by Hurricane Isabel and the power blackout in the Northeast and Midwest reduced third quarter operating profit by an estimated $400,000, but stronger economic activity and increased market share drove record revenues and earnings.
"One of the clear signals of heightened third quarter economic activity was the sequential monthly increase in our LTL weight per shipment," he noted. Although it was 1.9% below third quarter 2002, Congdon said it has increased every month since the low point in April 2003. Old Dominion's LTL shipments were up 13.9% from a year ago. LTL revenue per hundredweight, excluding fuel surcharges, was up approximately 4.1%.
Overnite
The spin-off from Union Pacific got off to an impressive start with Overnite stock topping the proposed price by more than 16%. The LTL carrier had third quarter revenues of $384.2 million, up 8% from last year, and operating income of $28.8 million, up 13%. Operating ratio was 92.5 versus 92.8.
Roadway Corp.
Charges related to its pending acquisition by Yellow Corp. put Roadway $3.4 million in the red, compared to a $6.94 million profit for third quarter 2002. Before acquisition charges (mostly for the vesting of restricted stock awards), consolidated net income was $13.5 million. Revenues for the quarter were $751.6 million, up 10% from a year earlier.
Roadway Express revenues were $700.7 million versus $631.2 million a year earlier. Operating income was $557,000 versus $11.7 million. Combined LTL and truckload tonnage was up 6.5%, revenue per ton was up 4.3%. Operating ratio was 99.9% versus 98.1%. The carrier implemented a 5.9% general freight rate increase on non-contract freight effective July 13.
New Penn, Roadway's next day ground carrier in the Northeast, had revenues of $50.9 million versus $50.5 million a year earlier. Operating income was $4.6 million versus $6.3. The carrier's rates were up 3.3% from a year earlier; tonnage was down 2.5%. Its operating ratio was 90.9% versus 87.5%.
The company said it has not experienced any meaningful diversion of freight or customer flight due to the planned Yellow/Roadway acquisition.
SCS Transportation
SCS's Saia and Jevic operations had consolidated revenues of $211.5 million, up 5.2% from third quarter 2002. Operating income was $11.2 million, up 37.8%. Net income was $5.1 million, up 28.1%.
Saia revenues were $134.3 million versus $127.6 million a year earlier. Revenue per day, excluding fuel surcharges, was up 3.9%. Operating income was $8.1 million, up 24.2%. Operating ratio was 94% versus 94.9%. LTL tonnage per day was up 4%. LTL revenue per hundredweight, excluding fuel surcharges, was down 0.3%.
Jevic's third quarter revenues were $77.2 million versus $73.6 million. Revenue per day, excluding fuel surcharge, was up 3.5%. Operating income was $3.8 million versus $1.9 million. Operating ratio was 95.1% versus 97.5% a year earlier.
USF Corp.
USF consolidated income from continuing operations was $13.1 million for the third quarter, compared to $13.4 million a year ago. Revenues were $584.7 million versus $578.5 million.
Operating income for the LTL group was $30.3 million versus $30.6 million a year earlier. LTL revenue generated by USF PremierPlus service grew 10.4% in the third quarter and now represents 12.8% of total LTL revenue, compared to 11.8% a year ago. LTL shipments were down 3.1% from third quarter 2002. Tonnage was down 2.7%. LTL revenue per shipment increased 4.8%, to $129.26, including fuel surcharges. Revenue per hundredweight was up 4.4%, to $11.42.
USF Red Star had revenues of $57.7 million, down 16.2% from a year ago. The decrease was due mainly to a decision to drop a large customer and close terminals in the Carolinas and Atlanta, the company said. Some of those revenue reductions were offset by the acquisition of Plymouth Rock, a small Northeast regional LTL carrier. Red Star's operating ratio was 101.8% versus 101.5% a year ago.
USF Holland, in the Midwest, had revenues of $249.2 million versus $245.8 million. Operating ratio was 93.3% versus 92.3%. Bestway in the Southwest had revenues of $41 million versus $39.6 million. Operating ratio was 93.1% versus 92.9%. Reddaway, which serves the West Coast and Northwest, had revenues of $78.1 million versus $72.1 million. Operating ratio was 86.8%, the same as a year ago. Dugan, serving the Great Plains and South, had revenues of $60.5 million versus $57 million; and an operating ratio of 97.3% versus 99.2%.
Glen Moore, USF's truckload carrier, had revenues of $33.7 million, up 13.6% from a year ago. Income from operations was $1.8 million versus $1.6 million. Operating ratio was unchanged at 94.7%.
Revenues from USF's logistics group were $67.7 million, about the same as last year. Income from operations was $2.9 million, also unchanged from last year. Contract fleet revenue declined with the bankruptcy of a major customer but was offset by increases in other areas, especially domestic drayage and container shipping.
Yellow Corp.
Yellow Transportation reported its most profitable third quarter in 15 years with operating income of $42.8 million versus $23 million third quarter last year. Revenues were $738 million, up 11.5%. Operating ratio was 94.2%, down 2.3 points from a year ago.
LTL revenue per day was up 12.1%, due mainly to a 7.3% increase in LTL tonnage per day and a 4.5% improvement in LTL revenue per hundred weight (3.7% excluding fuel surcharges.) The company said third quarter business volumes benefited from an improving economy, the Consolidated Freightways closure and the continued growth of premium services such as its Exact Express and Definite Delivery.
Yellow's Meridian IQ transportation management company had revenues of $33 million, up 56% from a year ago. Operating income was $600,000 or $200,000 including costs related to the acquisition of GPS Logistics assets. In third quarter 2002, Meridian IQ broke even. The company said approximately half of the revenue improvement came from growth at existing service offerings. The remainder was from the GPS acquisition.
Yellow Corp. consolidated revenues were $771 million, up 12.9% from a year earlier. Operating income was $37.8 million, almost triple third quarter 2002. Net income was $17.4 million versus $7.3 million. The company said its acquisition of Roadway is moving forward and could close this month.
Boyd Bros. Transportation
Additional reserves associated with two major accidents plus provisions for losses on owner-operator leases pushed Boyd into the red for the third quarter. President and CEO Gail Cooper said the accidents are still under investigation but, since the flatbed carrier is largely self-insured, they considered it prudent to strengthen the insurance reserves. And because of high turnover among owner-operators, they added some $460,000 to provisions for potential losses on owner-operator sales-type leases.
The result was a $421,516 net loss versus $495,074 net income for third quarter 2002. Revenues for the period, including fuel surcharges, were $34.1 million versus $33.5 million. The company said its WTI owner-operator division accounted for most of the revenue growth and offset declines in its Boyd division, which is primarily company drivers and equipment. Logistics revenues were $2.3 million versus $2 million a year ago.
Celadon Group
Celadon reported a $5.5 million net loss for its first fiscal quarter, which ended Sept. 30. Results included a $6.9 million non-cash impairment charge on some 1,600 48-foot trailers which the company is replacing with 53-foot trailers. It also included a $550,000 charge associated with debt refinancing. Before one-time charges Celadon had a $1.3 million profit this quarter, compared to a $1.4 million profit for the same period a year ago. Operating revenues were $95.7 million versus $93.6 million.
Average revenue per tractor per week was $2,634, up 2% from a year ago. Average revenue per loaded mile, excluding fuel surcharges, was $1.292, up 4 cents. Non-revenue miles were 7.7% of total miles, down from 8.2%. Average miles per tractor were down 2% for the quarter but the September average was 2% higher than September 2002 — the first year-over-year increase in more than a year.
Celadon has reduced its concentration of automotive freight to about 10% of revenue. Freight added through the acquisition of Highway Express assets in August helped offset planned reductions in automotive freight. During the quarter the company also filled several backhaul areas and took further steps to diversify its customer base.
TruckersB2B, an Internet-based buying co-op, had operating income of $400,000 on revenues of $2.5 million versus $300,000 on $1.9 million for the same period last year.
Covenant Transport
Convenant third quarter revenues rose 3.7% over third quarter 2002, to $146.5 million. Excluding fuel surcharges, the increase was 2.2%. Net income was up 12.1%, to $4.1 million.
Chairman, President and CEO David Parker said that strong freight demand, which continued to build though the quarter, helped boost Covenant's revenue per tractor per week to $2,927, up 3.8% from a year ago. A "more favorable relationship between demand and truck capacity" contributed to a 1.9% increase in average revenue per loaded mile, which went from $1.218 to $1.241.
Parker told investment analysts that improving rates is a No. 1 goal. Among other things, Covenant will closely track "in-between" freight, which accounts for about one-fourth of its loads. "Tweener" freight can tie up a tractor and driver for more than a day but often doesn't compensate for the lost productivity, he said. "We are examining each in-between movement and are negotiating with customers to raise rates, obtain more favorable loads, or cease hauling the in-between loads."
Frozen Food Express
FFE reported revenues from freight operations of $101.7 million for third quarter, compared with $88.3 million for third quarter 2002. Operating income from freight operations was $3.95 million versus $1.04 million. Operating ratio was 96.1% versus 98.8% a year ago. Net income was $1.7 million versus $3.3 million. The 2002 third quarter included a $4 million tax-related gain.
"We are definitely seeing better demand for our freight services across the board," said Stoney (Mit) Stubbs Jr., chairman and CEO. "The increased demand has enabled us to use our fleet more efficiently, but it has not yet allowed us to get meaningful increases in our full-truckload freight rates." The increased operating profit, he added, was due to improved fleet utilization and increased refrigerated LTL business.
Heartland Express
Heartland posted its 10th consecutive quarter of year-over-year revenue and income growth. Third quarter revenues were $104.5 million, up 14.6% from the same period a year ago. Net income was $14.5 million, up 30.9%. Operating ratio was 79.4% versus 82.2%.
J.B. Hunt
J.B. Hunt posted record third quarter earnings of $32.7 million compared with $16.8 million for the same period in 2002. Operating revenues totaled $622 million versus $583 million.
Truck segment revenues were $214 million versus $215 million a year ago. Operating ratio was 91.6% versus 95.3% a year ago. Average rate per loaded mile, excluding fuel surcharges, was up 5.6%, which the company attributed to yield management initiatives and price increases. The segment's empty mile factor was 10.2% versus 9% a year ago, although some customers paid for empty miles necessary to meet their repositioning requests. The average number of trucks in the fleet was 5,607 for the quarter, down slightly from a year ago. The company said it won't add capacity until satisfactory margins are received.
Intermodal segment revenues were $241 million versus $207 million a year ago. Operating ratio was 89.6%, Intermodal's first sub-90% ratio since it was separated from the Truck segment in 2000. The company said much of the improvement came with maintenance cost reductions and better asset utilization. Hunt replaced one-third of its container fleet last year and continues to invest in new tractors and trailers. Dray costs per load were down 9% from a year ago. Revenue per loaded mile was up 2%.
Dedicated (DCS) segment revenues were $170 million, up 4% from third quarter 2002. Operating ratio was 91.4% versus 97.5%. Concentration on asset utilization efficiency brought a 7% increase in tractor utilization, an 8% increase in loaded miles, close to a 1% decrease in empty miles and a 6% increase in backhaul volume. Revenue per tractor per workday, excluding fuel surcharges, was up 8%. The average number of trucks in DCS service was 4,474 versus 4,759 a year ago.
Knight Transportation
Knight had third quarter revenues, excluding fuel surcharges, of $84.5 million, up 16% from a year ago. Net income was $9.5 million, up 27.2%. Operating ratio was 81.3% versus 82.8%. Average revenue per loaded mile was $1.437, up from $1.405 third quarter 2002. The carrier's empty mile factor was 10.8%, the same as a year ago.
At the end of the quarter, Knight had 2,101 company tractors and 229 owner-operator tractors in its fleet, up from 1,859 company and 193 owner-operator tractors a year earlier. Average miles per tractor was down 1.7% from last year. Chairman and CEO Kevin Knight said they expect to add 75 new units by the end of 2003.
During the period the company increased its driver pay scale by a penny per mile and says it will make an addition one cent per mile available for its higher performing drivers by the end of first quarter 2004.
Landstar System
Landstar posted record third quarter revenues of $406.8 million, up from $385.7 million in third quarter 2002. Net income was $11.8 million versus $13.9 million. During the quarter, Landstar's multimodal segment had some $3.2 million in costs to defend and settle a contract dispute. These costs, net of tax benefits, reduced net income by some $2 million.
The carrier group generated $307.8 million revenues compared with $298.9 million a year earlier. Operating income was $23.5 million versus $22.5 million. Revenues generated through business capacity owners (independent contractors leased to Landstar) totaled $265.8 million versus $262.4 million a year ago. Revenue generated through other third party truck capacity providers totaled $41.9 million versus $36.5 million. Carrier group revenue per loaded mile was $1.70 versus $1.68.
The multimodal segment had revenues of $91.9 million versus $80 million. Revenues generated by business capacity owners totaled $14.9 million versus $14.8 million a year ago. Revenues generated by other truck capacity providers totaled $50.4 million versus $38.1 million. Multimodal revenues generated through rail and air carriers totaled $26.6 million versus $27 million. After the contract settlement, the segment had an operating loss of $235,000 compared to operating income of $2.2 million a year ago. Revenue per load was $1,348 versus $1,133.
Marten Transport
Marten's operating revenues for the third quarter were $85.9 million including $3.1 million in fuel charges, Revenues for the same period a year ago were $74.7 million, including $1.5 million in fuel surcharges. Excluding fuel surcharges, revenues were up 13.1%. Net income was $3.4 million, up 84.3% from last year.
Average operating revenue per tractor per week increased 6.6%, to $2,993. Average freight revenue per tractor per week was up 4.8%, to $2,886. Marten's operating ratio was 93.1 versus 95.3 a year ago.
Swift Transportation
Swift's third quarter revenues increased 16.2%, to $623.9 million including $21.3 million in fuel surcharges. Approximately 6% of the revenue growth was due to the addition of Merit Distribution Services. Excluding surcharges, the increase was 14.5%. Net earnings, including one-time charges, were $24.6 million versus $16.3 million. Operating income was $42.1 million versus $33.6 million. Average revenue per loaded mile was $1.4547, up from $1.4095 a year ago. Deadhead percentage was 13.37% versus 13.68%. Swift Chairman and CEO Jerry Moyes said that price and deadhead improvements more than offset a 65% increase in insurance and claims costs.
At the end of the quarter Swift's fleet included 13,593 company-owned tractors and 3,678 owner-operator tractors. That compares with 12,928 company tractors and 3,223 owner-operator tractors at the end of the same period in 2002.
Ryder System
Ryder reported consolidated third quarter revenues of $1.19 billion versus $1.21 billion a year earlier. Earnings before one-time accounting changes were $40.5 million, up 20% from a year earlier. Net earnings after the one-time charges were $37.5 million.
The company's Fleet Management Solutions segment, which includes commercial vehicle lease and rental services, had revenues of $809.3 million, about the same as third quarter 2002. Dry revenues (excluding fuel) were $655.3 million, down 1%. Fuel revenue was up 4%.
Full service lease and programmed maintenance revenues were down 1%. Commercial rental revenues were up 7%, which the company said was due to better pricing and a slightly larger rental fleet. The segment's earnings before taxes were $55 million versus $58.5 million.
The Supply Chain Solutions logistics segment had revenues of $331 million, down 5% from a year ago. Operating revenues were $236.6 million, down 4%. Earnings before taxes were $12.2 million versus a $700,000 loss a year ago.
Ryder's Dedicated Contract Carriage business revenues totaled $127 million, down 3%. Operating revenue was $125.9 million, down 3%. Pre-tax earnings were $7.2 million versus $9.9 million.
