LTLs Cite Better Operations for Their Improved Profits

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

Less-than-truckload carriers said business improved during the second quarter, but several fleets that reported higher earnings credited the results to increased operational efficiencies, rather than a significant increase in freight demand.

Old Dominion Freight Line and Saia Inc. reported particularly strong growth, while Con-way Inc. and its LTL unit improved incrementally over what was a strong 2012 second quarter. In addition, Roadrunner Transportation Systems reported higher results, but Vitran Corp. saw its net loss accelerate.

Old Dominion CEO David Congdon described the LTL market as being in “a period of generally slow economic growth,” but with “an improving pricing environment for the industry.”

His Thomasville, N.C., carrier earned $58.3 million, or 68 cents a share, on quarterly revenue of $590.2 million. In last year’s quarter, the result was $47.8 million, or 56 cents, on revenue of $546.5 million. Operating ratio — expenses as a percentage of revenue — improved to 83.5 from 84.9.

Saia’s quarterly LTL freight hauled declined to 955,000 tons from 970,000 tons, but the Johns Creek, Ga., fleet boosted its net income to $13.5 million, or 54 cents, from $11.9 million, or 48 cents. Quarterly revenue in-creased to $292.6 million from $287.5 million.

CEO Rick O’Dell described freight volumes as “relatively soft, in line with the general economy,” but the company did better because of “investments in our people, technology and equipment” that have led to improvements in operational efficiency.

A. Duie Pyle Cos., a privately held Northeast regional carrier, said it probably is headed toward profit improvement this year over 2012, but President Steve O’Kane said that is more a matter of careful management rather than a flood of freight.

“Volumes did not drive our 2012 success. That was because of operational improvement. Neither volumes nor yield [pricing] are rising enough now,” O’Kane said.

ODFL, Saia and Pyle are ranked on the Transport Topics Top 100 list of for-hire carriers at Nos. 11, 22 and 85, respectively.

“The [LTL] industry backdrop remains favorable for continued rate increases and margin expansion, as long as freight volumes remain in positive territory,” stock analyst David Ross wrote to clients of Stifel, Nicolaus & Co. on July 31. His quarterly overview said LTL stocks have done well this year, outpacing the market as a whole.

Con-way Freight generated $54.7 million in operating income, on quarterly revenue of $892.3 million, the division’s most profitable quarter since 2008. The 2012 second quarter was Con-way’s best of that year, with a profit of $53.4 million and revenue of $878.5 million.

Con-way’s logistics and truckload divisions experienced declines in operating income and revenue, but net income as a whole improved because of the LTL results. The corporation earned $42.9 million, or 75 cents, up from $41.8 million, or 74 cents. Total revenue declined to $1.38 billion from $1.45 billion. Con-way ranks No. 3 on the TT100.

“Improved yield and network efficiencies overcame a slight decline in tonnage to deliver increased operating income in the quarter,” Con-way CEO Douglas Stotlar said.

Meanwhile, problems for Vitran continued, as the Toronto-based carrier lost $17 million, or $1.03 a share, on quarterly revenue of $165.4 million. In last year’s period, the company lost $4.16 million, or 25 cents a share, on revenue of $183.8 million.

Interim CEO William Deluce said the company’s Canadian business is doing well, but that is being overshadowed by problems with the U.S. division. Deluce succeeded Rick Gaetz as CEO in April.

The Vitran report said shipments hauled declined 11.2% to 1.03 million, and total quarterly weight decreased 11.8% to 1.5 billion pounds. However, revenue per hundredweight did increase by 2.4% to $10.99. Vitran is No. 40 on the TT100.

Roadrunner uses an asset-light business model for its LTL work and two other business lines — truckload services and transportation management.

The company earned $14 million, or 37 cents, on quarterly revenue of $331.9 million. In last year’s second quarter, the Cudahy, Wis., carrier earned $10.2 million, or 32 cents, on revenue of $262.5 million.

Roadrunner’s LTL operating ratio remained at 91.9 for both quarters, but tonnage hauled grew 19.5% year-over-year to 404,300 from 338,200. During that time, Roadrunner also has been an aggressive buyer on the acquisition market, most recently buying Marisol International (see story, p. 6).

YRC Worldwide is scheduled to report quarterly earnings on Aug. 7. Arkansas Best Corp., the parent of ABF Freight System, is expected to issue its results on Aug. 9.

UPS Freight and FedEx Freight, the LTL arms of the two parcel carriers, previously reported they remained profitable but at lower levels than a year ago.

UPS’ quarterly LTL revenue improved to $635 million from $597 million as shipments handled increased by 5.2%, year-over-year.

At FedEx, the LTL unit earned $38 million on revenue of $1.39 billion for the three months ended May 31. In the same period a year earlier, profit was $81 million on revenue of $1.4 billion.