Overnite Grows, Yellow Strong, Roadway and USF Rebuilding

Feb. 1, 2004
In announcing the 2003 financial results for the recently combined Yellow Transportation and Roadway Express, Bill Zollars, Yellow-Roadway CEO, said he

In announcing the 2003 financial results for the recently combined Yellow Transportation and Roadway Express, Bill Zollars, Yellow-Roadway CEO, said he had two very different stories to tell. As a standalone company, Yellow Transportation had a good quarter, Roadway Express did not.

Excluding the impact of the Roadway Express acquisition, Zollars said, you'd have to go back to 1990 to find a year with comparable profitability.

Yellow Transportation saw slight increases in LTL tonnage in the fourth quarter, a mere 1.5% compared with "hefty increases" in the prior year fourth quarter due to the Consolidated Freightways bankruptcy.

Yellow Transportation reported fourth quarter net income of $34.2 billion, up from $25.5 million for the same period in 2002. For the year, it reported net income of $117.4 million, up 112% from $55.3 million the prior year.

Roadway Express, including Reimer and New Penn, reported fourth quarter income of $21.4 million vs. $14.8 million for the same period a year earlier. Total net income for 2003 was $67.8 million, up from $29.2 million in 2002.

Analysts questioned Roadway Express President Jim Staley repeatedly about the 11% drop in revenues in the fourth quarter. He admitted that the acquisition by Yellow had proven to be a distraction and, coupled with a sales reorganization, contributed to the 11.8% decline in revenues at Roadway during the final 16-week reporting period. New Penn, on the other hand, saw only a slight drop in revenues of 0.4%. Zollars pointed out that Roadway's group of carriers had been the bigger beneficiary or "rescue freight" from the CF bankruptcy and it's longer reporting period made the 2003 comparison difficult because it included all of the CF windfall in the single reporting period where Yellow Transportation reported some of that freight in the third quarter.

Staley admitted to analysts that the quarter had shaped up well with good operating results through October - at an operating ratio of 96. But, he said, they hit the wall in November and December with an operating ratio of 103. With fewer working days in the 2003 period, he said they probably should have switched some fixed costs into the first quarter of 2004. Zollars pointed out that sequential tonnage trends showed improvement every month through the fourth quarter.

Staley added that 10 corporate accounts accounted for 4.6% out of the 7% drop in Roadway's daily revenue figures for the quarter.

Looking to 2004, Staley said Roadway was prepared to contribute. Zollars looked ahead saying the group was closing in on 2000 levels and that was an as-good-as-it-gets kind of year for freight volumes.

Overnite Transportation CEO Leo Suggs started his earnings announcement stating that Overnite is now "100% union free." With that, he noted that long-haul was the fastest growing segment of Overnite's business. When asked if he was seeing any migration of freight as a result of Yellow's acquisition of Roadway, he said, " I do not characterize it as a result of what's going on with Yellow and Roadway but what's going on with Overnite." Suggs pointed out that Overnite has its "national footprint" in place.

Overnite, which broke away from its parent Union Pacific and launched as a publicly traded company on Nov. 5, 2003, reported net income for the fourth quarter rose to $10.4 million from $8.6 million on comparable operations in 2002. Annual income was $41.3 million, up from $35 in 2002.

USF CEO Richard P. DiStasio characterized the company's performance saying, "Progress is being made, but we're not there yet." That said, the company posted net income from continuing operations of $18.7 million in the fourth quarter, up from $13.6 million the previous year. Total income for the year was $44 million, up from $33 million in 2002.

DiStasio took the helm at USF late last year and expressed optimism after having toured the company's operations and meeting with many of its customers. He set a goal of operating more like a one-company unit than as individual companies. That will allow the carrier to take advantage of lane opportunities between its LTL units. To that end, it is developing a system for single USF pro numbers vs. the separate pro numbers issued by each LTL carrier.

Among the steps USF has taken to recover are its exit from the Carolinas and changes in its New York operations (including sale of Redstar's Newark terminal. It has also exited customer business where margins were low or non compensatory.

USF is developing a new strategic plan which will be the subject of a company-wide meeting in February and will be announced in late April or early May.

Company 4Q03 income 4Q02 income 03 income 02 income % chg yr
ABF Freight $22.8 $27.1 $77.8 $68.8 13%
ConWay Transportation $58.0 $36.7 $195.3 $147.2 33%
Covenant $4.1 $3.2 $12.2 $8.3 47%
Heartland Express $19.0 $11.1 $57.2 $42.8 34%
JB Hunt $26.5 $14.7 $95.5 $51.8 84%
Knight Transportation $9.9 $8.2 $35.5 $27.9 27%
Landstar $15.1 $14.1 $50.7 $49.2 3%
Marten Transport $3.5 $0.6 $11.8 $6.0 97%
Old Dominion $7.7 $5.4 $27.6 $18.5 49%
Overnite* $10.4 $8.6 $41.3 $35.0 18%
PAM Transport
Roadway** $21.4 $14.8 $67.8 $29.2 132%
SCS Transport $4.6 $3.0 $14.9 $12.1 23%
Swift $26.7 $16.2 $79.4 $59.6 33%
USF $18.7 $13.6 $44.0 $33.0 33%
US Xpress
Werner $21.5 $17.6 $73.7 $61.6 20%
Yellow Transportation $34.2 $25.5 $117.4 $55.3 112%
Group Total $304.1 $220.4 $1,002.1 $706.3 42%
% change 38% 42%
*Overnite IPO 5 Nov 03 - pro forma results
**Roadway adjusted for 11 Dec 03 acquisition by Yellow
Yellow-Roadway $6.70 $88.60