TL Carriers: High hopes
Carriers are financially fit and management forecasts a healthy year. So what can go wrong?
By Jim Thomas -- Logistics Management, 7/1/1998
Analysts and carriers may argue over the future financial performance of the truckload sector, but they can agree on the present: Things look very good, with carriers across the sector showing strong first-quarter results."We wish there was a way to store these acorns," says John Lanigan, president, Transportation Sector, Schneider National.Jeff Crowe, chairman, president, and chief executive officer of Landstar System Inc., reports that his company, which includes Landstar Poole and Landstar Inway, has never been stronger from a financial standpoint. "We're glad to be involved in good old transportation, just moving goods between point A and point B," says Crowe. "We're focusing on the fundamentals and we are prospering."
On the revenue side, trucking has been bolstered by a healthy economy, which has allowed a number of carriers to increase rates, albeit modestly. "Rate increases are not what we hoped they would be," says Lanigan. "While the economy is strong, we have to keep prices down for our customers because they agreed not to raise prices for their customers."
On the other side of the balance sheet, low fuel costs have helped boost earnings. "Fuel prices are as low as they have been in 13 or 14 years," says Max Fuller, co-chairman of USXpress Enterprises Inc.
In trucking, however, you don't have to search too far to find a nay sayer. Wall Street analysts are concerned about capacity. According to Morgan Stanley Dean Witter, the "flood" of new trucks entering the market will take away the TL carriers' pricing power. "Should the economy slow from its current growth rate, truckload earnings have the potential to collapse in 1999," warns a recent report from the investment firm.
Carriers question the Wall Street view. "About 200,000 trucks a year is a normal replacement cycle today," says Fuller.
Carriers also argue that the driver shortage has kept capacity in check. "You can't put more trucks on the road if you don't have the drivers," says one industry executive.
In addition, observers and industry players are always concerned about economic conditions. Synowicki says carriers can protect themselves against the effects of economic uncertainty by ensuring that they don't become too dependent on one type of industry. "We look to diversify the products we haul, the geographic regions, and even the customer base," he says. "Plus, we keep a strong balance sheet with low debt, so we can weather a recession."
Bulking Up
The bulk carriers also benefited from a bustling economy and low fuel prices. In addition, some of these carriers benefited from the Union Pacific's woes. "We estimate a 5.0- to 10.0-percent increase in business in the Gulf market," says Scott Arves, vice president and general manager of Schneider National Bulk.
Arves says that though many of the over-the-road bulk shipments are shorter hauls, the international markets are a concern to bulk carriers that operate on the coasts. "Fortunately, effects of the Asian financial crisis have been negligible," he says.
Consolidation is another concern for the bulk market. In June, MTL Inc. (Montgomery Tank Lines) shareholders approved a merger with Sombrero Acquisition Corp., an affiliate of Apollo Management, L.P., a New York investment group. Apollo has expressed interest in purchasing two other bulk carriers--Matlack Systems and Chemical Leaman.
"Right now, no carrier controls more than 6.0 or 7.0 percent of the market," says Arves. "Apollo planned to purchase about 20.0 percent. To compete against a carrier that size, other bulk carriers would have to consolidate."
Vans on the Move
Consolidation is a trend that has swept through the van-line industry as well--albeit in this case, it's a major shipper that's doing the consolidating. The federal government, which represents about 18.0 percent of the domestic household-goods market, is scrutinizing its procurement practices and may pare down its carrier base. Government tests in this area should be completed by the year 2000.
In another consolidation trend, third-party specialists, such as Cendant and Century 21, have begun offering corporate customers a complete package of relocation services. Where corporations traditionally negotiated directly with the HHG carrier, they now negotiate with a third-party that negotiates with a carrier. This subcontractor status can eat into the profits of an industry that competes heavily on the lowest rates.
The major van lines have responded by expanding their domestic and international services. For example, Unigroup Inc., the owner of United Van Lines and Mayflower Transit, recently acquired Pinnacle Group Associates, a provider of relocation services for corporate clients. On a global scale, Allied International, a subsidiary of Allied Van Lines, offers representation in more than 130 countries. North American Van Lines provides services in Europe through its partner, UTS Europe, BV, a 76-member organization that offers relocation services throughout Europe.
The array of far-reaching services allows van lines a certain flexibility: When they are not competing against the relocation giants, they are cooperating with them in a subcontractor role. "The margins may not be as good as a subcontractor," says one source, "but it's always good to have all your bases covered."
HOUSEHOLD GOODS CARRIERS - 1997 vs. 1996
[Thousands of Dollars]
1997 1996 % 1997 1996 % 1996 1997
Carrier Revenue Revenue Change Net Inc. Net Inc. Change O.R. O.R. Change
United Van Lines $730,261 $682,612 7.0% $7,062 $8,040 -12.2% 98.2 98.3 -0.1
North American Van 642,052 668,993 -4.0% 20,214 17,530 15.3% 95.5 95.8 -0.3
Allied Van Lines 486,222 449,603 8.1% 2,136 4,984 -57.1% 98.6 98.6 0.0
Atlas Van Lines 348,410 284,698 22.4% 5,242 4,637 13.0% 97.1 95.5 1.6
Mayflower Transit 337,273 329,619 2.3% -9,510 -4,801 N.A. 98.9 97.2 1.7
Bekins Van Lines 207,839 191,584 8.5% 5,848 4,249 37.6% 95.0 95.4 -0.4
Global Van Lines 75,367 82,081 -8.2% 420 -672 N.A. 98.1 99.6 -1.5
Wheaton Worldwide 73,883 55,586 32.9% 191 558 -65.8% 98.8 97.5 1.3
New World Van Lines 66,172 55,482 19.3% 4,188 3,480 20.3% 93.1 93.0 0.1
National Van 50,638 46,572 8.7% 409 760 -46.2% 97.4 96.4 1.0
TOTAL $3,018,117 $2,846,830 6.0% $36,200 $38,765 -6.6% 97.3 97.0 0.3
N.R. means not reported; N.A. means not applicable Source: Transportation Technical Services
TRUCKLOAD CARRIERS - 1997 vs. 1996
[Thousands of Dollars]
1997 1996 % 1997 1996 % 1996 1997
Carrier Revenue Revenue Change Net Inc. Net Inc. Change O.R. O.R. Change>
Schneider National $2,512,100 $2,155,900 16.5% N.R. N.R. N.A. N.R. N.R. N.A.
J B Hunt 1,351,007 1,282,670 5.3% -$18,361 -$13,848 N.A. 97.3 96.2 1.1
Ryder Integrated 1,298,408 1,073,416 21.0% 17,325 -12,596 N.A. 97.6 101.3 -3.7
Werner 772,095 643,274 20.0% 48,378 40,555 19.3% 89.9 89.7 0.2
Swift Transportation 713,638 562,259 26.9% 41,644 27,422 51.9% 89.6 90.5 -0.9
Landstar Ranger 456,322 374,157 22.0% 12,198 12,939 -5.7% 95.6 94.3 1.3
MS Carriers 415,933 340,236 22.2% 18,962 12,439 52.4% N.R. 93.0 N.A.
Landstar Inway 386,940 316,579 22.2% 4,016 8,531 -52.9% 97.8 96.2 1.6
US Xpress 371,030 362,819 2.3% 12,311 4,989 146.8% 93.7 94.6 -0.9
Prime 345,423 305,557 13.0% 39,323 32,300 21.7% 86.9 87.5 -0.6
CR England 315,555 258,651 22.0% 7,325 11,740 -37.6% 94.1 93.0 1.1
Trism Inc 309,880 310,033 0.0% -5,605 -6,598 N.A. 97.8 98.4 -0.6
Rocor 303,000 247,708 22.3% N.R. N.R. N.A. N.R. N.R. N.A.
Crete Carrier Corp. 298,519 266,647 12.0% 36,597 34,557 5.9% 87.6 86.9 0.7
Customized Trptn. 296,172 255,160 16.1% 11,132 6,814 63.4% 95.1 95.0 0.1
Ameritruck Distribution 291,552 224,257 30.0% -10,899 -2,462 N.A. 98.6 93.4 5.2
Builders Transport 288,100 288,567 -0.2% -50,500 -15,233 N.A. N.R. 100.9 N.A.
Covenant Transport 286,560 236,267 21.3% 13,508 8,978 50.5% 90.5 91.5 -1.0
Dart Transit 279,492 285,755 -2.2% 3,547 N.A. N.A. 97.3 N.A. N.A.
Contract Freighters 247,605 233,750 5.9% 22,942 13,311 72.4% 88.0 90.8 -2.8
Heartland Express 246,110 228,892 7.5% 8,227 4,846 69.8% 94.8 96.7 -1.9
FFE Transportation 241,173 243,557 -1.0% 8,657 7,661 13.0% 94.7 94.7 0.0
KLLM 240,766 246,222 -2.2% -14,720 766 N.A. 106.5 97.3 9.2
Ruan Transport 240,000 N.R. N.A. N.R. N.R. N.A. N.R. N.R. N.A.
Penske 238,725 156,041 53.0% 6,374 2,927 117.8% 96.1 96.1 0.0
Landstar Ligon 230,025 201,380 14.2% 3,071 7,300 -57.9% 96.9 95.0 1.9
Burlington Motor Carriers 201,118 237,956 -15.5% N.R. N.R. N.A. 96.5 N.R. N.A.
Landair Transport 190,402 157,098 21.2% 8,594 3,979 116.0% 91.2 94.1 -2.9
CRST 187,700 175,000 7.3% N.R. N.R. N.A. 96.5 96.0 0.5
Transport America Merchants Home Dlvy 166,775 173,507 -3.9% 3,637 4,465 -18.5% 95.6 93.4 2.2
Anderson Trucking 165,812 126,500 31.1% 2,505 4,084 -38.7% 97.0 99.7 -2.7
Mercer Transportation 164,206 150,203 9.3% 8,822 7,934 11.2% 94.6 94.7 -0.1
Celadon Trucking 161,952 143,227 13.1% 9,504 2,201 331.8% 91.9 97.0 -5.1
Simon Transportation 155,296 101,090 53.6% 7,779 949 719.7% 92.4 90.9 1.5
Arnold 153,700 151,900 1.2% N.R. N.R. N.A. 96.1 95.7 0.4
R&L Transfer 150,253 122,534 22.6% 8,601 4,253 102.2% 90.5 89.1 1.4
PST Vans 143,737 147,419 -2.5% -4,315 -4,315 N.A. 100.0 100.7 -0.7
Stevens Transport 143,442 130,412 10.0% 13,128 14,345 -8.5% 90.4 88.2 2.2
TOTAL * $15,079,327 $13,227,417 14.0% $283,219 $233,157 21.5% 94.5 94.6 -0.1
N.R. means not reported; N.A. means not applicable
* Total revenue excludes Ruan; Net income excludes Schneider, Rocor, Dart, Ruan, Burlington, CRST & Arnold; Operating ratio
excludes Schneider, MS Carriers, Rocor, Builders, Dart, Ruan, Burlington & Marten.
Source: Transportation Technical Services Note: Chart numbers are derived from carrier reports to the Department of Transportation and other sources and may vary from figures in reports to shareholders.
TANK TRUCK CARRIERS - 1997 vs. 1996
[Thousands of Dollars]
1997 1996 % 1997 1996 % 1996 1997
Carrier Revenue Revenue Change Net Inc. Net Inc. Change O.R. O.R. Change
MTL Inc. $252,943 $212,508 19.0% $10,225 $8,670 17.9% 92.1 91.8 0.3
Chemical Leaman 241,884 251,687 -3.9% -232 8,310 N.A. 95.4 94.3 1.1
Matlack 231,709 224,866 3.0% 1,886 -1,477 N.A. 97.0 99.5 -2.5
DSI Transports 159,212 163,918 -2.9% 6,932 1,082 540.7% 94.2 98.3 -4.1
Superior Carriers 129,787 90,402 43.6% 2,529 1,915 32.1% 93.2 94.2 -1.0
Groendyke 118,289 104,553 13.1% 5,108 1,451 252.0% 94.4 96.9 -2.5
Bulkmatic Transport 113,335 103,116 9.9% 4,706 3,645 29.1% 92.5 93.0 -0.5
Trimac 110,178 103,093 6.9% 3,600 5,700 -36.8% 95.4 92.8 2.6
Miller Transporters 101,107 97,034 4.2% 2,450 2,513 -2.5% 95.5 95.2 0.3
Transport Service Co. 78,263 75,609 3.5% N.R. 2,654 N.A. 92.5 92.8 -0.3
Koch Service 66,544 76,504 -13.0% 6,245 9,268 -32.6% 90.1 87.9 2.2
Central Transport 35,712 60,876 -41.3% 551 5,250 -89.5% 90.8 92.0 -1.2
TOTAL $1,638,963 $1,564,166 4.8% $44,000 $48,981 -10.2% 94.1 94.7 -0.6
N.R. means not reported; N.A. means not applicable Source: Transportation Technical Services
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