Minding your Ps and 10-Qs

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Kenneth Dewitt is a CPA and certified financial planner who serves as a part-time chief financial officer for a variety of businesses, including trucking companies. E-mail [email protected].

Looking for more points of view on developing financial and operational strategies? Take advantage of the free and online examples available to you on the Web.

Public companies – including trucking firms – must report intimate details of their financial and operational statistics frequently to the Securities & Exchange Commission. And these are available for your inspection at your closest computer terminal. SEC documents are available directly from the SEC’s Edgar database or through third-party sites, like the Yahoo! Finance Research Center.

Perhaps the most useful document is the quarterly report (SEC Form 10-Q). For an example of a 10-Q for a trucking company – in this case, Landair Corp. – visit this site.

Two sections make up the heart of the quarterly report. The first is a table of Profit & Loss statistics presented as percentages of revenue. The second is a detailed written discussion explaining the results of operations through reference to internal and external operating statistics and trends.

What can you glean from such a report? From our sample for Landair, an 800-tractor truckload carrier, we can see a “Common Size” P&L, which tells what the company’s expenses were for the quarter and year to date. Rather than dollars, it is presented as percentages of operating revenues so it can be compared more easily to other companies.

In this particular quarter, Landair’s “Salaries, Wages, Benefits” represented 33.2 percent of revenues. “Purchased Transportation” – read, owner-operators – was 24.8 percent. “Fuel & Taxes” was 10.8 percent. “Depreciation” was 8.7 percent, and “Insurance & Claims” was 2.5 percent. The operating ratio is revealed to be 91.2 for the quarter.

That information alone might be interesting, but for additional insight into Landair’s operations see the 2,500-word description of the results of operations as provided by the company’s chief financial officer. In this example, we note that the company had 767 average tractors in service during the quarter. Further, each tractor had $2,531 average revenue per week compared to $2,437 in the same quarter a year ago – an increase of 3.8 percent.

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Additional detail is listed for balance sheet financing sources, including the average interest rate the company pays on its line of credit and equipment notes and how it finances its equipment and working capital. Most statistics in a 10-Q are “key performance indicators” that can easily be monitored for smaller carriers.

Multex Investor is a particularly good online information source. Once you select a public company, you can delve into the “Ratio Comparison,” which provides valuable company as well as industry data to help target your own company’s plans.

Continuing our Landair example, we can find that the company’s accounts receivable collection rate is 33.1 days, against a trucking industry average of 50.8 days, and that the company generates $135,200 in revenue per employee, versus a trucking industry average of $100,800.
Other key numbers available include company valuation ratios, revenue growth rates and critical financial ratios. And most reports list compensation for the key company officers.

Public companies are rarely pure benchmarks for privately held companies. But at a minimum, you should find it useful to adopt similar reporting of key financial and operational numbers and then benchmark against your own prior results and future goals.

Some sources for financial and operational information on privately held carriers include the Blue Book of Trucking Companies, published by Transportation Technical Services, and Twenty from the Top, published by the American Trucking Associations.