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Supply Chain News: LTL Carriers See Weak Volumes in Q4, but Somehow Rate Still Up Sharply


Even Old Dominion Slows a Bit in Q4, but Full 2015 Pretty Good Year for Troubled LTL Sector

Feb. 24, 2016
SCDigest Editorial Staff

Q4 was a somewhat tough one for US less-than-truckload (LTL) carriers, a volumes were universally reported as weak. Profits were down, but perhaps surprisingly given the environment, rates were up, often in the mid-single digits. For the full year 2015, results were pretty strong.

Supply Chain Digest Says...

Old Dominion has a 9.4 percentage point lead over even Saia in terms of operating ratio, meaning it brings an extra $94,000 to the bottom line for every $1 million in revenue - quite an advantage indeed

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We're back as usual every quarter with our review of the results and trends across freight modes, starting first with US truckload carriers (see US Truckload Carriers See Mixed Q4, Amid Sluggish Freight Environment), then last week with US rail carriers. (See Rail Carriers have Down Quarter in Q4, but Fundamentals Still Strong.)

This week, we wrap it up with a look at the LTL sector.

We're now down to just four publicly-traded LTL carriers in our group, after XPO Logistics acquired Conway Freight in mid- 2015.


As usual, we'll note our analysis  does not include two of the largest LTL providers - UPS and FedEx - because neither UPS nor FedEx breaks out their numbers in a way that allows the LTL portion to be isolated out from other freight business such as truckload carriage (FedEx) and supply chain services (UPS).


In addition, FedEx runs an unusual fiscal calendar - with its second quarter ending Nov. 30, for example - so that comparisons to standard quarters in terms of results for the other carriers doens't work.

Again, most carriers saw weak volumes in Q4. YRC Worldwide, ArcBest/ABF and Saia all saw tonnage declines in Q4. Old Dominion did see tonnage gains of 5.3%, but even that was below the near double digit gains the carrier usually sees.

ArcBest/ABF, for example, said its LTL division saw "reduced business levels resulting from a sluggish freight economy."


Usually weak volumes translate into lower rates for shippers, but that does not seem to be the case in Q4.


At YRC Worldwide, for example, revenue per hundredweight – seen as a proxy for rate changes - increased by 4.2% at its national Freight unit. For the full year, revenue per hundredweight was up a solid 6.1% over 2014.


Similarly, revenues per hundredweight excluding fuel surcharge at ABF Freight were up "in the mid-single digits" in Q4, the company said, with similar numbers at Old Dominion.


For the quarter, however profits for the group were down 37.5%, though much of that came from YRC Worldwide swinging to a $23 million loss in the quarter from a small profit n 2014. But profits at Old Dominion were up just 3.4%, well below the increases it usually puts up.


All that and more in the table below. We'll note that some of the weakness in revenues stemmed from a large drop in fuel surcharges in the quarter versus 2014.


Q4 2015 US LTL Carrier Operating Results



The unweighted average operating ratio, or operating expense divided by operating revenue - a key transport sector metric - rose just a bit for the group to 93.4% from 93.1% in 2014.

However, that OR performance was as usual led by Old Dominion, with an operating ratio of 84.5%, basically flat with 2014. Excluding Old Dominion, the average OR from the group was 97%, with the next closest carrier being Saia, which had an operating ratio of 93.1%.


That means Old Dominion has a 9.4 percentage point lead over even Saia in terms of operating ratio, meaning it brings an extra $94,000 to the bottom line  for every $1  million in revenue - quite an advantage indeed, and the main reason Old Dominion can continue to fund almost all of its capital investments out of cash flow, not using debt - another big advantage..


(See More Below)



Results for the LTL carriers were definitely better for the full year, with profits up a strong 36% year over year, and operating ratios down a point versus 2014. YRC Worldwide even managed a tiny profit versus a hefty loss in 2014.

Full Year 2015 US LTL Carrier Operating Results



As usual, we provide a few highlights from the earnings releases of each carrier.


YRC Worldwide

Had an operating loss of $15.3 million in Q4, though that included a pension settlement of $28 million. For the full year, YRC managed a small operating profit of $93 million, though it was basically breakeven on a full accounting basis.

The Regional unit as usual far outperformed the national Freight business. In Q4, the regional unit had an operating ratio of 97.7% - not good, but five percentage points better than the 102.9% turned on by YRC Freight.

Said it "Improved yield from continued pricing discipline," adding that "The company maintained its strategy of prioritizing freight mix, yield improvements and profitability over market share and tonnage growth."
That shows, as tonnage was down 3.1% in Q4, and 4.2% for the full year.

At YRC Freight, fourth quarter 2015 revenue per shipment excluding fuel surcharge increased 4.4% and revenue per hundredweight – seen as a proxy for rate changes - increased by 4.2%. For the full year, revenue per hundredweight was up a solid 6.1% over 2014.

Those numbers were similar but a bit lower the in Regional segment.

YRC is no longer bleeding cash. For the full-year 2015, cash provided by operating activities was $140.8 million as compared to cash provided by operating activities of $28.5 million in 2014, an improvement of $112.3 million.

ArcBest/ABF Freight

Fourth quarter 2015 ABF Freight revenue and operating margin were below 2014, due to "reduced business levels resulting from a sluggish freight economy and lower fuel surcharge revenue."

During the quarter, "ABF Freight's continued emphasis on customer service led to challenges in aligning costs with the lower business levels."

Old Dominion

Company said it "believes that we gained market share during the fourth quarter based on
increases in both shipments and tonnage."

Company reports it has 99% on-time delivery in Q4.

Revenues per hundredweight excluding fuel surcharge were up 6.1% in Q4 and 5.7% for the fuel year.

The company's net cash provided by operating activities was $553.9 million for 2015, an impressive increase of 41.4% over 2014.

Old Dominion expects capital expenditures for 2016 to total approximately $440 million, including planned expenditures of $180 million for real estate and service center expansion projects, $220 million for tractors and trailers and $40 million for technology and other assets.


Operating income decreased 14% to $17.6 million.

LTL revenue per hundredweight increased 2.1% despite the impact of lower year-over-year fuel surcharges.

Company CEO Rick O'Dell commented that "While it is somewhat satisfying to report our fourth consecutive year of record earnings per share, we enter 2016 with some uncertainty with regarding the health of the industrial economy."

Any reaction to these Q4 and full year results from the LTL carriers? Let us know your thoughts at the Feedback section below.


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