Carriers report strong profits

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Federal Motor Carrier Safety Administration plans to propose a rule in 2006 to link a truck driver’s medical certificate to the commercial driver’s license data system. Indiana and Arizona already have similar rules. FMCSA plans to establish a national registry of certified medical examiners by 2009. Only examinations conducted by someone on the registry would be accepted as proof of driving fitness by FMCSA.

National Truck Driver Appreciation Week is Aug. 21-27. For details, visit this site.

As of July 5, the name carriers display on their trucks must be the same as the legal name or single trade name of the business that owns or controls the motor carrier operation. The same name also must appear on the carrier’s Form MCS-150. The requirement was included in a rule published in the June 2, 2000, Federal Register. For more information, visit this site and search Docket No. 3947.

International Brotherhood of Teamsters announced July 25 its decision to withdraw its membership in the AFL-CIO, citing major differences over the direction of the labor movement.

Schneider National Inc. is encouraging all its 21,900 employees to participate in Highway Watch, the national safety and security program administered by the American Trucking Associations under an agreement with the Department of Homeland Security. Training sessions at Schneider facilities nationwide began last month and will continue through September.

Freight Transportation Services Index for April was 112.6, a 0.1 percent increase over March, according to the Department of Transportation’s Bureau of Transportation Statistics. The April 2005 level is 1.6 percent higher than the April 2004 level of 110.9. The base year for the index is 2000.

Ontario Trucking Association has endorsed mandatory speed limiters on trucks and will finalize the details for ratification this fall. OTA will meet with truck drivers to discuss the devices, which are used in the European Union.

U.S. Customs and Border Protection (CBP) has accredited MSR eCustoms to provide Automated Commercial Environment (ACE) e-Manifest services for U.S. border crossings. ACE e-Manifest is a Web-based service that enables businesses to comply with mandatory advance electronic notification regulations, which are 30 minutes before the truck reaches a border checkpoint for FAST carriers and one hour for all others.

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Navistar International Corp. announced July 5 that its operating company, International Truck and Engine Corp., has entered into an agreement to acquire Workhorse Custom Chassis, a manufacturer of chassis for motor homes and commercial step-van vehicles. Terms of the all-cash deal were not disclosed.

Trucking Company Earnings Second Quarter 2005 (in thousands)
Operating Revenues % change over 2004
ABF Freight System* $417,500 6.80%
Celadon Group** $116,967 10.00%
Con-Way Transportation* $713,900 11.40%
Covenant Transport $156,813 4.60%
FedEx Freight* $843 11.20%
FedEx Ground* $1,233 16.50%
Frozen Food Express $126,680 7.20%
Heartland Express $128,851 13.50%
J.B. Hunt Transport $759,206 11.80%
Knight Transportation $133,900 25.00%
Landstar System $1,041,316 15.30%
Marten Transport $112,800 22.70%
Old Dominion Freight Lines $264,346 30.80%
Overnite Transportation $470,582 12.40%
SCS Transportation $271,886 9.50%
Smithway Motor Xpress $55,356 18.60%
Swift Transportation $798,255 15.50%
Transport America $62,828 -3.70%
Universal Truckload Service $127,516 62.00%
U.S. Xpress $279,884 3.50%
Werner Enterprises $485,789 18.20%
TOTAL $6,526,451 13.80%
Operating Expenses % change over 2004
ABF Freight System* $417,919 6.50%
Celadon Group** $109,472 8.10%
Con-Way Transportation* $618,600 7.20%
Covenant Transport $153,771 9.00%
FedEx Freight* $748 10.30%
FedEx Ground* $1,060 17.90%
Frozen Food Express $120,587 6.60%
Heartland Express $103,570 15.10%
J.B. Hunt Transport $666,201 11.10%
Knight Transportation $109,053 23.60%
Landstar System $973,401 13.10%
Marten Transport $101,553 20.90%
Old Dominion Freight Lines $239,081 30.50%
Overnite Transportation $431,310 10.80%
SCS Transportation $259,645 9.60%
Smithway Motor Xpress $44,948 -14.60%
Swift Transportation $741,734 17.40%
Transport America $61,285 -2.90%
Universal Truckload Service $120,595 62.80%
U.S. Xpress $277,610 6.80%
Werner Enterprises $443,661 18.00%
TOTAL $5,995,804 12.80%
Operating Profit % change over 2004
ABF Freight System* $38,100 16.20%
Celadon Group** $7,495 49.30%
Con-Way Transportation* $95,300 49.10%
Covenant Transport $3,042 -65.10%
FedEx Freight* $95 18.80%
FedEx Ground* $173 8.80%
Frozen Food Express $6,093 21.40%
Heartland Express $25,281 7.60%
J.B. Hunt Transport $93,005 17.50%
Knight Transportation $24,814 31.10%
Landstar System $69,150 60.20%
Marten Transport $11,247 42.70%
Old Dominion Freight Lines $25,265 33.70%
Overnite Transportation $39,272 34.40%
SCS Transportation $12,241 7.50%
Smithway Motor Xpress $2,726 57.50%
Swift Transportation $56,521 -5.00%
Transport America $1,543 -27.20%
Universal Truckload Service $6,921 49.70%
U.S. Xpress $2,274 -77.90%
Werner Enterprises $42,128 20.40%
TOTAL $562,686 22.00%
Net Profit % change over 2004
ABF Freight System* $23,407 21.30%
Celadon Group** $4,313 82.10%
Con-Way Transportation* $71,107 89.60%
Covenant Transport $652 -85.10%
FedEx Freight* $448 8.70%
FedEx Ground* $448 8.70%
Frozen Food Express $5,799 66.10%
Heartland Express $17,630 12.30%
J.B. Hunt Transport $54,631 19.70%
Knight Transportation $14,957 31.00%
Landstar System $41,371 61.00%
Marten Transport $6,763 40.50%
Old Dominion Freight Lines $13,916 33.00%
Overnite Transportation $23,107 37.40%
SCS Transportation $5,790 5.80%
Smithway Motor Xpress $1,355 103.80%
Swift Transportation $29,781 -13.90%
Transport America $514 -35.30%
Universal Truckload Service $4,384 52.00%
U.S. Xpress $482 -88.60%
Werner Enterprises $25,295 17.00%
TOTAL $346,150 28.80%

The quarter ended June 30, 2005, was very good for the trucking industry. As a group, publicly traded carriers reporting results by July 27 enjoyed a 22 percent increase in operating profits and a 28.8 percent increase in net profits over the same 2004 quarter. Operating revenues were up a solid 13.8 percent, but growth in expenses wasn’t far behind at 12.8 percent.

None of the 21 reporting carriers reported an operating or net loss, although several saw major declines in profitability. U.S. Xpress, which was hit with a one-time pre-tax charge of $2.8 million related to the sale and exit of its airport-to-airport business, suffered the largest drops in operating and net profit – 77.9 percent and 88.6 percent, respectively. Covenant Transport – which, like U.S. Xpress, is based in the Chattanooga, Tenn., area – also experienced large drops in operating and net profits – 65.1 percent and 85.1 percent, respectively.

“Although truckload freight demand in the second quarter was lower relative to the strong demand experienced in 2004, we experienced strengthening demand late in the quarter,” said U.S. Xpress Co-Chairman Pat Quinn. “Looking forward, we anticipate improving freight demand for the remainder of 2005 in the face of constrained supply of seated tractor capacity within the industry.”

Covenant Chairman David Parker said that other than a brief period of increased demand in late April and early May, “Our customer demand did not improve to the seasonal level we expected or needed. Based on numerous meetings between our senior management and customers during the quarter, we expect to add incremental desirable freight during the second half of the year and to obtain sequential rate increases, although not at the level of last year’s increases.” Parker said Covenant expects the gradual increase in freight volumes and rates to continue over time.

Minneapolis-based Transport America was the only carrier to report a decline in operating revenues over 2004, contributing to drops in operating and net profits of 27.2 percent and 35.3 percent, respectively. “The challenging driver market continued to hamper our ability to grow core truckload revenues,” said Transport America Chairman Michael Paxton. “We were able to increase our company driver and owner-operator hiring numbers in the second quarter, which reduced the rate of decline in capacity from recent quarter’s levels.” Transport America was fortunate to be one of only two carriers that reported drops in their operating expenses compared to 2004.

Fuel surcharges were critical to the strong revenue growth posted by many carriers. In fact, without surcharges, both U.S. Xpress and Covenant would have reported slight declines in operating revenue. On the other side of the ledger, fuel costs led the way in the sizable increases in operating expenses posted by most carriers. Among the carriers that itemized fuel costs within operating expenses, the average increase was 41.5 percent; most saw increases of 30 to 50 percent compared with the same 2004 quarter.

The cost of wages and benefits grew at an average of 6.6 percent. Heartland Express and Smithway Motor Xpress each reported increases in its wage and benefit costs of 11.1 percent. Knight Transportation saw the number rise 21.2 percent. And Mondovi, Wis.-based Marten Transport led the pack with a 24 percent increase in its wage/benefit expense. “In view of the competitive driver market, I was especially pleased with our ability to find drivers to expand our company-owned fleet and enhance revenue growth,” said Chairman Randy Marten.

Profits galore
With only three exceptions, all the carriers posting increases in net profit reported double-digit jumps, and Smithway’s net income more than doubled. “During the past two years, we have successfully planned for and implemented strategies to turn around the profitability of Smithway,” said Smithway CEO Larry Owens.

J.B. Hunt posted the largest operating and net profits, which were records for the company. The Lowell, Ark.-based carrier’s operating ratio of 87.7 percent was its best in 16 years.
Surprisingly, J.B. Hunt’s truckload division saw a decline in operating profits, but strong gains in dedicated carriage and intermodal offset the decrease in truckload profitability.

Discussing the truckload segment, J.B. Hunt CEO Kirk Thompson said, “Demand has slowed from 2004, but there is no credible evidence that capacity, significant enough to materially impact the market, is entering the truckload industry. On the contrary, we see a shrinking supply of independent contractors, which we believe is a significant proxy for the plight of thousands of smaller and struggling motor carriers.”

Thompson argued that rising fuel prices and driver pay will hurt marginally profitable truckload carriers. “For those of us close to the situation on a daily basis, it is inaccurate to even suggest that hundreds of new trucks are being added to our industry on a monthly basis. It simply is not happening.”
–Avery Vise

Congress rejects surcharges, HOS rules protection
Congress has agreed to legislation (H.R. 3) to reauthorize highway safety and development programs, reaching agreement on a compromise that does not adopt mandatory fuel surcharges for truckload operations.

The conference report (House Report 109-203) also does not adopt the codification of the current hours-of-service rules that had been sought by the Department of Transportation and many in the trucking industry.

The decision not to write the hours rules into law indicates that the Federal Motor Carrier Safety Administration probably will need to move forward with issuing a revised regulation as required by a federal appeals court. FMCSA’s temporary reprieve from the court order runs out Sept. 30.

Some other provisions of the legislation include:

  • Setting standards for a unified carrier registration system.
  • Mandating regulations to ensure that intermodal equipment used to transport intermodal containers is safe and systematically maintained.
  • Terminating the registration requirement for freight forwarders and brokers, but giving DOT the authority to require registration at the department’s discretion.
  • Allowing DOT to shut carriers down if an officer has engaged in a pattern or practice of avoiding compliance or concealing noncompliance.
  • Expanding access by preemployment screening services to driver safety information in FMCSA’s Motor Carrier Management Information System, including accident and violation reports.

The House of Representatives passed H.R. 3 on July 29 by a vote of 412 to 8. As CCJ went to press, the Senate was expected to approve the legislation and send it to President Bush before leaving Washington for a monthlong recess.

Although the bill earlier faced a veto threat, congressional leaders and the White House reportedly have compromised on the spending levels, so final enactment is a virtual certainty.

For a copy of the final legislation, visit this site and search H.R. 3.

Pilot program yields higher seat belt usage
A national pilot program conducted in Virginia on Interstate 95 between Petersburg and Fredericksburg increased safety belt use among truckers by 11.5 percentage points in less than one month.

Before the three-week program funded by the Federal Motor Carrier Safety Administration, a survey showed that fewer than 59 percent of truckers were wearing their safety belts; a post-campaign survey indicated that 70 percent were buckling up.

Federal guidelines require that truckers wear their safety belts, and Virginia State Police enforce this guideline.

Diesel prices hit high in July
The U.S. average retail price for on-highway diesel hit a record $2.408 a gallon for the week ended July 11 before moderating somewhat by the end of July. The average price was 66.8 cents higher than a year earlier. During the week diesel hit its record, four regions – New England, Central Atlantic, West Coast and California – saw average diesel prices higher than $2.50.

Tonnage index slips in June, up for half
Preliminary numbers showed that the American Trucking Associations’ advanced seasonally adjusted for-hire Truck Tonnage Index for June was 114.8, a drop of 0.2 percent from the May index number. According to ATA, the drop reflects “recent soft patches in the production of some commodities, especially steel.” Although the index slipped slightly compared to May, it was 0.3 percent higher than June 2004.

For the first six months of the year, the index was 2.7 percent higher than the same period in 2004. ATA, however, had forecast 3.0 percent to 3.5 percent growth for 2005, so the growth remains behind expectations.

The June index decline was unexpected because most economic indicators rose during the four-week period, ATA Chief Economist Bob Costello said. Truckload carriers suffered the bulk of the freight softness, he said.

ATA calculates the tonnage index based on surveys from its membership.

More Schneider drivers take home-time option
Schneider National says that 250 of its 15,500 drivers now participate in its “Home Run program,” which gives drivers the opportunity for 17 weeks at home per year. The Green Bay, Wis.-based carrier expects up to 500 drivers to be operating under the alternative work arrangement by year’s end. Schneider began offering the Home Run program in February as part of the largest compensation and work-life improvement package in its history.

The program consists of “pods” of three drivers or driving teams that live near each other and share two tractors. A driver or team gets one week at home while the other two run. Drivers switch in and out of service on Wednesdays. Each driver receives a personal calendar in advance that identifies weeks at home for one year.

The tradeoff for a major increase in home time is lower income. Annual earnings typically are 15 percent less than system drivers, Schneider says.

EPA offers incentive for early ULSD
The U.S. Environmental Protection Agency is proposing an incentive to diesel refiners and importers to deliver ultra-low-sulfur highway diesel earlier than required. The new rule would allow refiners and importers to claim credit for all ultra-low-sulfur diesel delivered into the distribution system before June 1, 2006, rather than just what is sold by that date. The proposed rule was published in the July 15 Federal Register. For more information, visit this site.

CARB mandates onboard diagnostics by 2010
The California Air Resources Board has adopted a rule that requires heavy-duty engine makers to install systems that diagnose failing emission control components.

“We expect this rule to lead to lower emissions due to more durable equipment on big rigs and faster repairs on damaged or broken emission control equipment,” said Cindy Tuck, CARB chair. “Easier diagnosis will also cut costs for vehicle owners.”

CARB estimates the regulation will reduce nitrogen oxide emissions from on-road heavy-duty trucks and buses by nearly 110 tons per day by 2020. The rule is set for introduction in 2010, with full compliance by 2016. It requires equipment that will monitor 120 engine locations that can leak emissions as they age. It also requires manufacturers of heavy-duty diesel- and gasoline-powered trucks and buses to equip those vehicles with a system of sensors that can monitor the performance of engine parts that may affect emissions.

The monitors are designed to alert vehicle operators, via a dashboard indicator light, that part of the pollution control system is failing. An access port under the dash allows a mechanic with a handheld computer to obtain detailed information about the vehicle’s performance and the malfunctioning component.

The program is similar to one in operation on light- and medium-duty vehicles since 1996 in California. More than 120 million cars, SUVs and light and medium trucks nationwide are equipped with onboard diagnostic equipment.

CARB is a department of the California Environmental Protection Agency.

Texas loosens idling restrictions
Texas Gov. Rick Perry has signed into law a bill to allow idling during rest periods. The legislation, supported by the Texas Motor Transportation Association, allows truckers to idle to power a heater or air conditioner when complying with hours-of-service mandated rest periods. The new law supersedes the Texas Environmental Quality Commission’s regulation that would have allowed cities to limit idling to five minutes.

The new legislation, however, prohibits drivers, even while using the vehicle’s sleeper berth, from idling in a school zone or within 1,000 feet of a public school during school hours. It sets a maximum fine of $500 for violations. The law expires September 2007, when stricter emission standards begin.

The Texas Natural Resources Conservation Commission repealed a rule Dec. 1 that affected the eight-county Houston/Galveston region. That rule prohibited trucks weighing more than 14,000 pounds from idling more than five minutes April 1 to Oct. 31 each year.

Industry seeks flexibility on CDLs
Truckload Carriers Association and the American Trucking Associations have asked the Federal Motor Carrier Safety Administration to allow states to issue commercial driver’s licenses to any qualified applicant with established citizenship in the United States or one of its territories.

The Motor Carrier Safety Improvement Act of 1999 prohibits a state from issuing CDLs to individuals who do not reside in that state. According to TCA, some states with truck driving schools issue CDLs to nonresidents despite the federal rule. Effective Sept. 30, states not in compliance with MCSIA by October 2006 may lose federal highway funds. TCA expects states to comply, possibly discouraging potential drivers who attend out-of-state driving schools.

CCJ takes 3 editorial awards
Commercial Carrier Journal received three editorial honors in the Midwest-South Region competition of the American Society of Business Publication Editors’ Awards of Excellence. The magazine was judged against other trade magazines with circulations of greater than 80,000 and covered issues published in 2004. CCJ’s awards were:

Gold in the Publication Redesign category. Art Director Tony Breland led CCJ’s redesign, which took effect with the January 2004 issue.

Gold in the Feature Series category. Paul Richards wrote the three articles on failure analysis that took top honors.

Silver in the News Analysis category. CCJ was recognized for its coverage of the implementation of the hours-of-service rules and of the subsequent court ruling that overturned the rules. Writers were Avery Vise, Sean Kelley, Aaron Huff, John Baxter and John Latta.

GATS forum addresses top issues
From recruiting and driver pay to onboard recorders and safety regulation, the GATS Fleet Forum will tackle issues central to fleet management. Presented Aug. 25-26 in conjunction with the Great American Trucking Show, the GATS Fleet Forum features sessions on:

  • Safety Rules for the Next Decade
  • Trends in Driver Compensation
  • Future of Electronic Onboard Recorders
  • Proactive Leadership
  • Finding Tomorrow’s Drivers Today
  • Hours of Service Update

The keynote speaker for the GATS Fleet Forum will be Hall of Fame quarterback Bart Starr, who helped the Green Bay Packers win five NFL Championships and the first two Super Bowls.

The forum is presented by GATS and the Texas Motor Transportation Association and sponsored by Commercial Carrier Journal, Bridgestone, Peterbilt, Cummins, Midnight Trucking Radio, MultiMedia Advertising, Peterbilt, Shell Rotella and TripPak Services.

For more information, visit this site.

September ’04 ’03 ’02
Illinois 1 1 1
Ohio 2 2 2
Texas 3 7 9
Indiana 4 3 6
Tennessee 5 5 3
California 6 13 7
Wisconsin 7 6 5
Missouri 8 4 4
New York 9 10 10
Michigan 10 12 14
N Carolina 11 8 8
New Jersey 12 19 18
Georgia 13 11 13
Kentucky 14 9 11
Minnesota 15 14 12
September ’04 ’03 ’02
Texas 1 1 2
Alabama 2 6 5
Ohio 3 2 1
Illinois 4 3 3
Georgia 5 7 8
Arkansas 6 4 4
Indiana 7 5 6
Louisiana 8 10 13
Tennessee 9 9 9
S Carolina 10 14 11
N Carolina 11 11 7
Mississippi 12 8 10
Kentucky 13 13 12
California 14 19 16
W Virginia 15 15 19
September ’04 ’03 ’02
Illinois 1 1 2
Wisconsin 2 3 5
California 3 4 1
Ohio 4 2 3
Missouri 5 5 4
New York 6 6 8
Minnesota 7 8 9
Texas 8 10 6
Georgia 9 7 12
Arkansas 10 11 15
Washington 11 18 7
Colorado 12 15 16
Iowa 13 12 11
New Jersey 14 17 17
Michigan 15 13 14

CCJ Equipment Demand Index: Illinois tops for vans, reefers
As in August, expect Illinois to be a rich source of spot-market freight in September for both dry van and refrigerated freight. According to the CCJ Equipment Demand Index, Illinois led all states in van searches in September 2004, and the state consistently has exhibited strong van demand in the prior two years as well. Ohio placed second in van searches last year.

Illinois also led in reefer searches in September 2004. With 23 percent fewer searches than Illinois, Wisconsin improved to the second position, replacing Ohio, which held the position in 2003. For flatbed demand, Texas remained in the top position for the sixth consecutive month. Alabama took the second position with 30 percent fewer flatbed searches than Texas.

The index, based on equipment searches performed by TransCore customers, shows the top 15 states in terms of demand for trucks in the spot market in the three most common equipment types: dry vans, flatbeds and refrigerated units. The index is intended to help fleet operators identify the most promising opportunities for backhaul and other spot-market freight in the month after its publication.