Profits for less-than-truckload (LTL) carriers generally remained healthy in the third quarter, despite the impact of Hurricanes Katrina and Rita on freight demand along the Gulf Coast and high fuel prices nationwide.
In fact, a number of carriers lauded a record quarter— an indication that tight capacity more than made up for the sticker shock at the pumps that followed the Gulf hurricanes.
“Even though our results included the effects of Hurricanes Katrina and Rita, which reduced earnings by approximately four cents per share, simply put, Old Dominion had a record-breaking third quarter,” said Earl Congdon, chairman & CEO of Thomasville, NC-based Old Dominion Freight Line.
He said net income jumped 30.5% to over $15.9 million as revenue increased 27.9% to over $275 million compared to the third quarter of 2004. For the first nine months of 2005, Old Dominion’s net income climbed 38.1% to over $39.1 million as revenue from operations rose 29.4% to over $776.1 million.
“In addition to the growth in revenue, our net income and earnings per share [reached] new records and our operating ratio of 89.5% for the third quarter [is] the best level we have produced in our 14 years as a public company,” Congdon said. “As a result, our third-quarter net profit margin of 5.8% is the highest [we] achieved in the last 14 years.”
LTL giant Yellow Roadway Corp., after a spate of buyouts, posted third-quarter earnings of $85.3 million—a 20% jump over the same period last year. Operating revenue soared 41% to $2.5 billion. “Synergies from the Roadway acquisition remain on track while synergy initiatives from the USF acquisition are underway,” said Bill Zollars, Yellow Roadway chairman, president & CEO.
Positive LTL results occurred north of the border as well, as Canadian LTL and truckload carrier Vitran Corp. said it posted all-time records for third-quarter net income of $5.4 million on revenues of $116.2 million, compared to net income of $4.5 million on revenue of $97 million compared to the same period in 2004.
For the first nine months of 2005, Vitran said net income reached $12.9 million on revenue of $315.2 million, compared to net income of $10.6 million on revenue of $278.1 million over the same period in 2004.
“Although our third quarter results were an all-time record, [they] would have been even better had it not been for the negative impact of both a prolonged strike at the Port of Vancouver that was eventually resolved in mid-August and two third quarter accidents that took place in our truckload segment,” said Rick Gaetz, Vitran’s president & CEO.
Gaetz noted that income from operations at Vitran’s LTL segment rose 31% during the third quarter to $7.7 million, led by a 27% revenue increase at the U.S. LTL business unit He also said yields continued to show improvement at both the U.S. and Canadian LTL units, with Vitran’s U.S. LTL business unit achieving an 8% increase in revenue per shipment and a 10% quarter over prior year quarter improvement in revenue per hundredweight.
Ann Arbor, MI-based Con-Way Transportation Services, the LTL arm of Palo Alto, CA-based transportation conglomerate CNF, also reported gains in income and revenue, though it noted yields would have dropped if not buoyed by fuel surcharges. Con-Way’s operating income for the third quarter climbed 34% to $94.4 million on 11% higher revenues of $741.4 million compared to the third quarter of 2004. Regional-carrier yield increased 4% over the third quarter last year yet would have fallen 1% without the positive gains from fuel surcharges.
“We achieved solid growth in both our trucking and supply chain management operations at a faster rate of growth than the overall economy,” said Douglas Stotlar, CNF’s president & CEO. “We have good cost controls in place and we are an efficient yet flexible company -- that served us well during the recent Katrina and Rita hurricanes, where the financial impact was negligible because of our ability to quickly reroute our services and limit disruption of operations.”
Duluth, GA-based Saia Inc. – the LTL arm of Kansas City, MO-based SCS Transportation – took a direct hit on its service territory from both Katrina and Rita, losing nearly $1 million in revenue from a three-day shutdown of its Houston operations due to Rita alone.
Yet Saia still managed to post strong results for the third quarter: its operating income rose 27% to $13.4 million on 15% higher revenues of $198.8 million compared to the third quarter of 2004, as LTL tonnage in the third quarter of 2005 increased 7%.
“Saia’s momentum in growth and profitability improvement continued despite significant impact from Hurricanes Katrina and Rita,” noted Bert Trucksess, chairman, president & CEO of SCS, Saia’s parent company.
Still, he stressed that neither Saia nor SCS totally dodged major impact from the hurricanes. “[They] caused property damage and disrupted operations, which adversely impacted third-quarter consolidated results,” said Trucksess. “We haven’t completed a total assessment of business interruption impact, so third-quarter results do not include an estimate of insurance recovery. We anticipate that in a future period.”
Chris Brady, president of Commercial Motor Vehicle Consulting, told FleetOwner that the record earnings that some of the LTLs are posting confirms that energy prices—not tonnage—was the real blow dealt to businesses by the hurricanes. On a national level, strength in freight volumes mitigated the fuel impact to LTLs.
“It doesn’t look like Katrina or Rita had significant impact on freight volumes,” Brady said. “With tight capacity they were able to raise rates to cover costs on items such as fuel. Higher freight levels allowed [LTLs] to leverage their distribution networks— it kept costs down and improved profitability.”
“[The Gulf Coast] is not a huge population center of the U.S.,” Brady continued. “The impact of the hurricanes on the economy is the fuel. A lot of carriers didn’t report a significant impact to their operations, which implies the [Gulf Coast was] not a significant portion of their business. The amount of freight being hauled into the region and shipped out is relatively small in terms of the U.S.”
The Bureau of Economic Analysis said that the state of Louisiana accounts for about 1.2% of U.S. gross domestic product— the most comprehensive benchmark of the overall economy. Louisiana ranks first in the U.S. in terms of specialization in water transportation and third in specialization in oil and gas extraction. Mississippi accounts for 0.7% of U.S. GDP.
