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From SCDigest's On-Target E-Magazine

- Feb. 19, 2014 -

Logistics News: Lackluster Q4 Ends Decent 2013 for US Truckload Carriers

Despite Record ATA Tonnage Numbers, Most Saw 2013 Freight as Soft; Keeping Capacity Low

SCDigest Editorial Staff

In an volume environment that appears to have been modest at best, US public truckload carriers posted lukewarm results in Q4, but saw full year 2013 performance finish on a decent but not great note.

SCDigest Says:

JB Hunt's transformation away from straight truckload carriage continues. For the full year, its truckload business contributed just 7% of total company revenue, versus, 10% in 212, and just 1% of profits versus 4% previously.

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As always, SCDigest is here this week with a review of Q4 and full year 2013 results from our group of seven publicly traded carriers (note: giant Schneider National continues to be a private company).

That includes both summary tables of financial and operating results as well as any noteworthy commentary from the various Q4 earnings releases. Both should be of interest to shippers.

Over the next couple of weeks, we will do the same for major US rail and LTL carriers.

It is frankly difficult to really get a handle on recent US truck volumes. The for-hire tonnage freight tonnage index from the American Trucking Associations has been hitting record highs throughout the year, ending December with its highest level ever of 131.7. The ATA says overall tonnage was up more than 6% in 2013, the biggest single year jump since 1990.

That 131.7 index level means freight volumes in December were 31.7% higher than the baseline year of 2000. (See graphic below)

But carrier results and comments certainly didn't indicate booming freight volume throughout the year and for Q4. Most of the carriers in our group kept truck capacity flat or down a bit, and those the increased capacity did so through acquisition, not by buying new trucks, meaning not net capacity was added to the industry. Celadon is one exception.

Werner did say it saw "more favorable freight market" in Q4, noting that " freight demand (as measured by the daily morning ratio of loads to trucks in our One-Way Truckload network) showed normal seasonal improvement in October and November, with some further demand strengthening during this quarter's compressed retail selling period between Thanksgiving and Christmas compared to the same holiday period a year ago."

That was positive commentary, but certainly didn't sound like Werner experienced record volumes.

On a less positive note, Swift said "For the full year 2014, we expect an improving freight environment compared to what we experienced in 2013."

One possible explanation for some of these differing data points is that in the strong ATA numbers, traditional dry load van volumes have been slower to rise than overall tonnage volumes, in part as more and more oil from US fracking operations is moving via truck to refiners.

The impact of new Hours of Service Rules, which went into effect on July 1 at the very start of Q3, received some but not extraordinary attention. Werner said that "As expected, the company believes that these Hours of Service changes negatively impacted miles per truck by 2 to 3%." That is material, but certainly at the low end of many of the projections.

Swift added that it expects "the new Hours of Service rules to be a headwind to our loaded miles per truck per week through the first half of the year," but not so much that it can't improve that measure in 2014.

With that introduction, below are the Q4 results from our truckload carrier group (a link to a larger image is below the table).

We'll note Heartland and Celadon big jumps in revenue for the quarter were each primarily driven by acquistions, though Celadon also added a number of trucks on its own. Note Werner and Swift saw basically flat truckload growth for the quarter, while JB Hunt was down big again.

Werner and Hunt again saw strong growth in services such as dedicated and intermodal, something Swift was not able to produce.

US Truckload Results, Q4 2013

See Larger Image

All told, net income for the group as a whole was down almost 2% in the quarter, with unweighted average operating ratios (for truckload carriage only, not services) increasing by more than two percentage points to 90.6%.

(Transportation Management Article Continued Below)

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Results were better for the full year 2013, as shown in the table below. Profits were up more than 6% versus 2012, and the full year operating ratios for truckload were just a bit above previous year levels.

US Truckload Results for Full Year 2013

See Full Size Image

As usual, we also share some of the more noteworthy management comments from the carriers from their Q4 earnings releases.

Werner

Noted that "Freight trends thus far in 2014 have been better than the same period in 2013."

Average revenues per total mile, net of fuel surcharge, rose 3.1% in fourth quarter 2013 compared to fourth quarter 2012 due partially to higher seasonal capacity surcharges in the One-Way Truckload fleet.

Noted that "The driver recruiting and retention market became even more challenging during fourth quarter 2013. Significant factors included a declining number of, and increased competition for, driver training school graduates, a gradually declining national unemployment rate, and increased job competition from the strengthening housing construction and hydraulic fracturing markets."

Werner ended the year with 7,162 trucks, down from 7,225 in 2012.

JB Hunt

The transformation away from straight truckload carriage continues. For the full year, its truckload business contributed just 7% of total company revenue, versus, 10% in 212, and just 1% of profits versus 4% previously.

The trucking segment lost money in Q4 on a decrease in the number of trucks it operated. The tractor count was 1,857 compared to 2,093 in the fourth quarter 2012, primarily from a reduction in independent contractor capacity.

But business was good in other segments. Load growth of 13% in intermodal helped drive an 11% increase in segment revenue. Dedicated cntract services segment revenue increased by 17%, primarily from the addition of new customer accounts. Integrated capacity solutions segment revenue increased by 13%, mostly from a higher load count and an increase in revenue per load.

All told for the year, profits were up a healthy 10.3%.

Heartland Express

The big jump in Q4 revenue came mostly from the inclusing for the first time its previous acquisition of Gordon Trucking.

The company said "There has not been any significant change to GTI's legacy driver base as a result of the acquisition," and indeed, some have said companies such as Heartland are using acquisitions as the easiest way to add drivers.

Knight

Company said "Our revenue per tractor improved 3.2%, year over year, as a result of a 3.4% improvement in revenue per total mile with a 1.3% decrease in our length of haul. Miles per tractor were down 0.2%, as we were able to mitigate much of the impact from the new industry-wide regulations governing hours of service that went into effect in July 2013."

It too saw capacity shrink a bit in 2013, with a tractor count at the end of the year at 4,017 versus 4,096 at the end of 2012.

Marten

Company saw net income improve 10.6% to a record $30.1 million for the full year. However, profits were down in Q4, falling $7.3 million from $7.7 million in 2012.

The company said "These results were earned in a challenging rate environment with significant industry headwinds including higher equipment and maintenance costs, pay inflation to drivers within a contracting driver market and revised hours of service regulations."

Swift

Noted that "Despite a 1.4% reduction in our average operational truck count. we migrated approximately 250 trucks from our truckload segment to our dedicated segment to support the start up of several new customer accounts."

Truckload revenue net of fuel surcharges increased 2.3% during 2013, while average operational truck count decreased slightly to 10,833. The company achieve a 2.1% increase in revenue net of fuel surcharge per loaded mile.

Celadon

One of the few carriert to be actively adding capacity, the company said that it saw an increase in average seated tractor count of 720, or 26.7%, to 3,418 in the December 2013 quarter compared with 2,698 in the December 2012 quarter. Said this "was a significant operating metric improvement that resulted in increased revenue for the quarter. "

It added that "This increase was a result of expanding our recruiting efforts at terminal locations, having established a driving school as well as our previously announced acquisitions over the past year. In addition, we completed an acquisition of Osborn Transportation, Inc. based in Rainbow City, AL, during the December 2013 quarter, which operates approximately 190 tractors "

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