LTL Carriers Report Mixed Results in 3Q; Con-way, ABF Slide, While Saia Gains

This story appears in the Nov. 5 print edition of Transport Topics.

Third-quarter earnings statements of less-than-truckload carriers issued last week generally followed an industrywide pattern of mixed results, with some seeing solid gains in profitability but others reporting significant earnings drop-offs.

Earnings fell 13% at Con-way Inc. and 47% at Arkansas Best Corp., two of the largest LTL carriers, while smaller fleet Saia Inc. nearly doubled profits and Roadrunner Transportation Systems Inc. posted a 41% gain.

Con-way’s net income of $25.3 million was hurt by lower profit at its LTL and logistics businesses. Operating income at Con-way Freight, which excludes interest and taxes, was $34.4 million, 15% below last year’s third quarter. The drop was attributed to higher health-care and technology costs. Revenue rose 1.8% to $858.3 million on improved pricing.

Operating income at Con-way’s Menlo Worldwide Logistics unit fell 13% to $11 million due to higher warehouse and employee-related costs. Its revenue rose 2.6% to $427.8 million.

Arkansas Best Corp. said its earnings slipped to $6.5 million, despite 13% revenue growth to $577.5 million.

“Arkansas Best’s results reflect weakness in the economy that contributed to reduced customer business levels,” said CEO Judy McReynolds. “We are encouraged by the continuation of strong revenue and improving profitability trends in the midst of a tenuous economy.”

Its ABF Freight System unit’s operating income was sliced in half to $8.4 million as revenue slipped 1%. However, profit rose 15% at the non-asset businesses to $3.8 million, where revenue more than doubled to $130.3 million, reflecting the acquisition of Panther Expedited.

Saia Inc.’s net income reached $9.3 million, relying on higher rates and cost controls. Revenue rose 3.6% to $278 million. LTL tonnage fell 3.1%, but revenue per 100 pounds of freight improved 6.6%.

CEO Rick O’Dell said “continued effective execution across a number of key initiatives” drove the results.

Roadrunner Transportation Systems posted net income to $18 million, aided by a 54% rise in operating income in LTL that accounts for about half of the company’s total revenue. Roadrunner’s logistics operating income rose 13% to $2.7 million.

Con-way and Roadrunner gave diverging pictures of the fourth quarter.

“We expect the fourth quarter of 2012 to be challenging,” Con-way CEO Douglas Stotlar said in a statement. October LTL volume dropped 3% from the year-earlier, excluding any possible effects from Hurricane Sandy.

Peter Armbruster, chief financial officer at Roadrunner, said net income measured in cents per share could be as much as 41% higher than the 2011 quarter, with revenue growth possibly reaching 22%.

Both companies also reported third-quarter improvements at their truckload businesses.

Con-way Truckload improved operating income 43% to $11.3 million, with aid from higher rates and lower insurance costs. Revenue rose 0.9% to $160.1 million.

Truckload operating income rose 30% at Roadrunner to $7.3 million. Revenue from the unit rose 57% to $124.2 million, reflecting five acquisitions over the prior 12 months.

Elsewhere in the truckload sector, Universal Truckload Services Inc. raised net income less than 1% to $5.5 million, but revenue fell 2% to $183.3 million.

Covenant Transportation Group’s net income improved to $1 million, compared with a year-earlier period loss of $11.2 million resulting primarily from a one-time asset valuation charge. That third-quarter 2011 charge accounted for $9.4 million of the loss. Revenue rose 4.3% to $168.4 million.

“Our financial and operating performance was encouraging in light of a seasonally weak freight market,” an Oct. 30 statement from Covenant CEO David Parker said.

He attributed the improvement to better rates, a higher count of seated trucks and greater use of team drivers.

USA Truck lost $6.1 million, more than the $4.3 million loss in the year-earlier period. Revenue dropped 4% to $124.4 million.

“We did not experience the level of freight volume increases in the quarter that we normally expect,” USA Truck CEO Cliff Beckham said in a statement.

In Canada, Trimac Transportation Ltd. improved net income to C$5 million ($5.02 million), as revenue rose 7.6% to C$95.3 million, helped by increased bulk and tank truck revenue.

From an operating ratio standpoint, Roadrunner improved by 2.4 percentage points to 92.4, and Saia was 2.3 percentage points better at 94.1.

Con-way Freight slipped to 96 from 95.2, and Arkansas Best recorded a 98.1 third-quarter 2011 operating ratio, compared with 96.1 a year before.