Friday, November 24, 2006

CH Robinson/Landstar

Trucker C.H. Robinson's Strategy of Not Owning Its Trucks Pays Off

William Trent submits: Yahoo! Finance reports:

C.H. Robinson Worldwide Inc., (CHRW) which provides transportation and logistics services, said Tuesday third-quarter earnings grew 30 percent as gross profit grew across all segments. Revenue rose 15 percent to $1.71 billion, from $1.49 billion last year.

Like Landstar (LSTR), C.H. Robinson is a trucking company that doesn’t own trucks. Instead, it relies on independent truck owners to carry the loads it sources. And like Landstar, it was able to turn a nice revenue increase into an equally nice earnings increase (for Landstar we are talking about revenues excluding their hurricane relief efforts last year). This contrasts with traditional truckers like Arkansas Best (ABFS) which increased revenue by 11% but had its shares beaten up when the company reported that volume was slowing.

CH Robinson noted in its press release:

Our growth in truck net revenues slowed as the quarter progressed. While gross profit margins were consistent throughout the quarter, volume growth slowed. A significant amount of the volume in the second half of 2005 was driven by a robust spot market. In the third quarter and through the first three weeks of October 2006, we have not seen the same level of spot market demand.

The thing is, trucks are expensive. When they sit idle, the owner still has to make payments on them (even if only in the form of non-cash depreciation expense.) Maintenance costs also don’t entirely go away, though they are reduced some. When revenue slows down or drops, the fixed portion of maintaining a vehicle fleet weighs on earnings.

For the non-asset based transportation providers like Landstar or C.H. Robinson, these expenses fall to the independent contractors. So while there may be less profit due to less revenue, there will still be more profit than there would have been if they had a fleet of trucks to maintain.

CHRW-LSTR-ABFS 1-yr comparison chart:

CHRWABFSLSTR 1-yr chart

Monday, March 6, 2006

driver shortage

type=comktNews&storyID=urn:newsml:reuters.com:20060305:MTFH57878_2006-03-05_19-29-50_N05193894&pageNumber=0&imageid=&cap=&sz=13

Wednesday, February 1, 2006

Congestion Costs

ATA Says Highway Bottlenecks Cost Truckers Millions of Lost Hours in 2004
Wednesday February 1, 9:51 am ET Study Places Cost of Lost Time at Nearly Eight Billion Dollars

ALEXANDRIA, Va.--(BUSINESS WIRE)--Feb. 1, 2006--Bottlenecks on highways throughout the nation idled trucks for more than 243 million hours in 2004, costing U.S. trucking companies $7.8 billion, according to a study prepared for the Federal Highway Administration.

The study by Cambridge Systematics, Inc. in association with the Battelle Memorial Institute is an initial effort to identify and quantify highway bottlenecks that delay trucks and increase costs to businesses and consumers. It found the worst bottlenecks in Los Angeles, New York, Chicago, Atlanta, Dallas-Fort Worth, Denver, Columbus, and Portland, Ore.

The study estimates a direct user delay cost of $32.15 per hour based on four major types of truck-related delays along freight corridors, including constraints at interchanges, signalized intersections, hold ups caused by steep grades, and lane reductions. When truck deliveries are delayed by congestion, freight transportation costs increase due to unnecessary fuel consumption, lost driver time and productivity, and disruption of pick-up and delivery schedules, particularly with critical just-in-time freight.

Overall, bottlenecks account for 40 percent of vehicle delays, with the balance caused by construction work zones, crashes, breakdowns, bad weather and poor signal timing.

"Ultimately, it is the consumer who will pay the price when increasing congestion forces the cost of goods on store shelves go up," said Bill Graves, President and CEO of the American Trucking Associations. "This should encourage all Americans to insist on highway projects that improve the mobility and reliability of freight. The Congress now has a roadmap to follow when making critical decisions about how to invest scarce transportation resources."

"Bottlenecks that harm truckers hurt other highway users and the public at-large," said Greg Cohen, President and CEO of the American Highway Users Alliance. "Unfortunately, all levels of government are failing to focus their resources on the efficient movement of goods. Yet the societal benefits of a national plan to fix the worst freight chokepoints would be astounding: Not only money, time, and hundreds of millions of gallons in diesel fuel would be saved, but roads would be safer, air pollution and greenhouse gas emissions would decrease dramatically."

Nearly 40 percent of the approximately $40 billion in annual revenue collected into the federal Highway Trust Fund comes from fuel taxes paid by trucks, highway use taxes, sales taxes and tire taxes. Billions more in state diesel and truck registration fees are collected. However, a significant amount of this revenue is diverted to projects that have little or no benefit to the truckers paying the taxes.

Increased congestion is hitting the trucking industry at a time when the economy is relying on trucks to haul more goods. Trucking is projected to haul 13 billion tons of freight by 2016, compared with 9.8 billion tons in 2004. By 2016, ATA projects 3.7 million "18 wheelers" will be operating on the nation's highways, up from 2.7 million in 2004. Yet most state transportation plans do not anticipate breaking with the current trend of limiting highway capacity expansion which has caused the current congestion problems.

The study authors concluded that these bottlenecks are a federal concern because "they are a significant national problem for trucking and the efficient operation of the national freight transportation system." The report recommends, therefore, that federal resources should focus on improving highway bottlenecks.

For its part, the trucking industry, through a partnership between the FHWA and the American Transportation Research Institute, is developing a "Freight Performance Measures" initiative that will promote future highway efficiency tactics and strategies through a freight-focused lens. The joint effort will use practical travel time averages, reliability indices, and truck position data along freight-significant corridors.

Of note, the report indicates the majority of bottlenecks occur on the nation's Interstate Highway System. Last week in Washington, DC, an alliance of interstate highways users kicked off a year long commemoration of the 50th anniversary of the system with "The Interstate of the Future" as its theme.

The American Trucking Associations is the largest national trade and safety advocacy association for the trucking industry. Through a federation of trucking groups, industry-related conferences, and its 50 affiliated state trucking associations, ATA represents more than 37,000 members covering every type of motor carrier in the United States.

The American Highway Users Alliance represents motorists, RV enthusiasts, truckers, bus companies, motorcyclists and a broad cross-section of businesses that depend on safe and efficient highways to transport their families, customers, employees, and products. Highway users pay the taxes that finance the federal highway program and advocate public policies that dedicate those taxes to improved highway safety and mobility.

Note: List of top 20 highway bottlenecks, link to FHWA study available on Truckline.com