Drivers

Fleets Put the Good, Bad and Ugly Behind Them After 4Q Results Come Out

January 29, 2010

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It's that time again-time for fleets to reveal their financial performance for the last three months and provide investors with an idea of their financial health.
Werner, like other carriers, is optimistic about the year ahead.
Werner, like other carriers, is optimistic about the year ahead.
For the fourth quarter of 2009, there appears to be good news and bad news.

The year 2009 brought with it one of the worst freight environments, characterized by weak demand for freight, pricing pressures, lower fuel surcharges and losses on the balance sheets of both truckload and less-than-truckload fleets. It's not a surprise that fleets are glad the year is behind them, and many look to 2010 with a hopeful perspective, as they indicated in their financial statements.

THE FIGURES

While some carriers posted losses in the second and third quarters of 2009, the fourth quarter marked the return to profitability for many. However, most of the numbers still lag behind the fourth quarter of 2008, a sign that the freight market has been stabilizing but is not anywhere near normal levels.

For example, truckload carrier Marten Transport saw some improvement over the third quarter of 2009, but its fourth quarter income was down 29.6 percent from the year-ago quarter. Net income was $4.3 million, compared with $3.5 million for the third quarter, and $5.8 million for the fourth quarter of 2008.

Phoenix-based Knight Transportation brought in net income of $13.1 million in the fourth quarter, a drop of 18.6 percent from the year-ago's $16.1 million.

For Old Dominion Freight Line, net income was $9.7 million versus $11 million for the fourth quarter of 2008.

Other carriers were still in the red in the fourth quarter.

Dry van truckload carrier USA Truck incurred a net loss of $2.5 million, or 24 cents per share, during the fourth quarter, a wider loss than the third quarter of 2009. This compares to a net income of $0.6 million during the same quarter of 2008.

Arkansas Best posted a net loss of $88.7 million, or $3.54 a share, versus a net loss of about $10.97 million for the year-ago period.

"Arkansas Best's fourth quarter results illustrate the impact of an extremely weak and uncertain freight environment that has continued now for forty months," said Judy McReynolds, Arkansas Best president and CEO. "This economic recession has been unprecedented in its length and depth. Its impact on the LTL industry has accelerated the level of price competition throughout 2009, and the fourth quarter was no exception."


STRONG BALANCE SHEETS

Despite the downward numbers, carriers seemed to maintain strong balance sheets overall, with little to no debt in the fourth quarter.

"Old Dominion completed 2009 with a strong balance sheet," said Earl Congdon, executive chairman of less-than-truckload carrier Old Dominion Freight Line. "Our long-term debt to total capitalization ratio was 34.0 percent at year end, and we had available borrowing capacity of $109.7 million on our revolving credit facility."

Iowa-based Heartland Express, which saw a 44.8 percent drop in income from the 2008 quarter, said its balance sheet is debt-free.

Kevin Knight, chairman and CEO of truckload carrier Knight Transportation, also pointed to the company's strong balance sheet:

"We continue to actively evaluate strategic opportunities that can create value for our stakeholders without undue risk," he said. "We have significant financial flexibility and a strong balance sheet, with $520.0 million of stockholders' equity, $97.8 million in cash and short-term investments, and zero debt at December 31, 2009."

"Our balance sheet remains strong," echoed USA Truck's Clifton R. Beckham, president and CEO. "Our debt to total capitalization ratio is at 42.1 percent, we produced positive free cash flow (net cash flow from operations less net cash used in investing activities) during 2009 and we have kept the age of our tractor fleet relatively young at 2.25 years."

LOOKING AHEAD

Despite the poor results brought on by the fourth quarter, carriers seemed to take it in stride, preferring instead to be hopeful in looking ahead to 2010.

Werner Enterprises put it this way: "The company is planning for a better relative freight pricing market and more freight opportunities in 2010 compared to what transpired in the first half of 2009. Management is cautiously optimistic that the company will experience gradual improvement in the freight market during 2010."

"We believe industry conditions have bottomed," said USA Truck's Beckham. "However, we also believe the imbalance between industry tractor capacity and freight demand will gradually improve throughout 2010 as businesses begin restocking inventories and as unsustainably low freight pricing and rising fuel prices begin thinning industry capacity."

"We believe that this transformation of our services along with our competitive position, cost control emphasis, modern fleet and strong balance sheet position us well for growth," said Randolph L. Marten, chairman and CEO of Marten Transport.

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