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Average price of gallon of diesel drops another 3.5 cents to $3.013



The average on highway price for a gallon of diesel is now only 1.7 cents a gallon higher than one year ago. (The Trucker file photo)

WASHINGTON — The average on-highway price of a gallon of diesel dropped another 3.5 cents to $3.013 for the week ending January 7, according to the Energy Information Administration of the Department of Energy.

It is the 12th consecutive week of a decline.

If the price next week goes down an amount similar the past weeks, the price would dip below the $3 mark for the first time since the week ending March 19 when the price was $2.972 a gallon.

The price for the week ending January 7 is only 1.7 cents a gallon higher than the comparable week in 2018.

As in the most recent weeks, all regions of the country showed a decline led by a 6.6 cent a gallon decline on the West Coast minus California and a 4.5 cent a gallon decline in the Rocky Mountain states.

Both the Central Atlantic and Lower Atlantic states posted declines of 4.4 cents a gallon.

For a complete list of prices by region for the past three weeks, click here.


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U.S. Xpress to dispose of investment in U.S.-Mexico operations



U.S. Xpress President and CEO said his company concluded that the Mexico perations required a comparatively high level of fixed investment per unit of revenue and created lane inefficiency in the U.S., because serving freight to and from the border did not maximize revenue per mile or meet our other network planning priorities. (Courtesy: U.S. XPRESS)

CHATTANOOGA, Tenn. — U.S. Xpress Enterprises says it is planning to exit its U.S.- Mexico cross border investment as part of its ongoing capital allocation and profit improvement initiatives.

When fully implemented, the plan is expected to reduce current and planned invested capital by approximately $40.million, improve the company’s consolidated operating margin, and offer customers continued access to cross border service through a variable cost alternative, according to Eric Fuller, president and CEO.

In connection with this plan, as well as the disposition of its remaining 10 percent equity investment in a former subsidiary, the company expects to record an approximate $12.3 million non-cash, pre-tax loss on equity investments for the fourth quarter of 2018.

These changes mark the latest step in the company’s continued execution of its strategic overhaul designed to drive operational improvement as U.S. Xpress strives to deliver its third consecutive year of margin improvement in 2019, Fuller said, adding that the plan will be executed in stages over the next several months.

“As part of our ongoing initiatives to improve profitability and enhance shareholder returns, we evaluated our aggregate investment in our U.S.-Mexico operations, including investments south of the border, in Laredo, Texas, and in U.S. assets and personnel required to service this business,” Fuller said. “We concluded that these operations required a comparatively high level of fixed investment per unit of revenue and created lane inefficiency in the U.S., because serving freight to and from the border did not maximize revenue per mile or meet our other network planning priorities. During 2018, the combined Mexico and allocated U.S. operations failed to keep pace with improvements in the Company’s U.S. OTR and Dedicated truckload operations. As a result, the decision to exit this operation was identified as a relatively high return, simple execution initiative. This strategic decision reflects the latest step in the company’s transformation as we methodically evaluate our capital allocation, improve our operational execution, and target industry-leading profitability.”

The company’s cross border business consists of 95 percent equity ownership in Xpress Internacional, S.A. de C.V.

In addition, to serve the business the company maintains fixed investments in the United States consisting of a trucking terminal in Laredo, Texas, approximately 700 incremental dry van trailers, and tractor capacity allocated toward serving freight to and from the border. Including the allocated cost of the U.S. investments and personnel, the cross-border business generated approximately $50 million in revenue but insignificant operating income in 2018.

Fuller said as part of U.S. Xpress’s ongoing transformation, the carrier made the decision to exit its fixed cost investment in the cross border business and sold its investment in the Mexican entity to the existing managers.

The operational transition is expected to be complete during the second quarter of 2019.

The exit involves the following components, which will be executed over the next several months:

  • Sale of the company’s 95 percent equity ownership of Xpress Internacional S.A de C.V., for an estimated $4.5 million in cash and an additional $8.5 million in cash to be received over 8.5 years. The equity sale has been completed.
  • Closing and sale of the company’s trucking terminal in Laredo, Texas, and disposition of approximately 700 dry van trailers allocated toward the Mexico business as these trailers complete the transition phase. The terminal is valued at an estimated $7 million, and the trailers had been slated for replacement over the next two years at an estimated cost of $20.0 million. This operational transition is anticipated to be completed during 2019.
  • Repositioning approximately 300 domestic tractors from loads to and from the border to more profitable loads through network optimization over a transition period, while continuing to offer customers ongoing access to cross-border service on a variable cost basis through relationships with our former partners, anticipated to be completed in the first half of 2019.

Fuller said U.S. Xpress expects to record a non-cash, pre-tax charge of approximately $12.3 million in the fourth quarter of 2018 to reflect the write down of the total investment in Xpress Internacional, which U.S. Xpress had operated since 2007. In addition, the company expects to incur one-time expenses during the first quarter of 2019 related to the transition plan to shut down its domestic infrastructure that supported the cross-border business, this expense is not expected to exceed $4.0 million on a pre-tax basis.

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Daseke names Chris Easter as chief operating officer



Chris Easter brings more than 30 years of operational leadership experience to Daseke. (Courtesy: DASEKE)

ADDISON, Texas — Daseke, a flatbed and specialized transportation and logistics provider in North America, has named Chris Easter as the company’s chief operating officer.

Easter brings Daseke more than 30 years of operational leadership serving in key transportation and logistics roles with the United States Army, Walmart and Schneider National.

For the past six years, he served as CEO of Keen Transport, a specialized transportation, warehouse, and logistics company focused on serving the industrial equipment market.

During more than a decade with Walmart, he was responsible for overseeing the transportation of goods from around the world.

Easter graduated from the United States Military Academy at West Point; he then served in the U.S. Army, where he was a leader in heavy machinery logistics.

Easter was awarded the Bronze Star during Operation Desert Storm.

Believing in giving back to the industry, he serves the industry on the Board of Directors for the Specialized Carriers and Rigging Association (SC&RA).

As COO, Easter will be responsible for overseeing the industry-leading scale that Daseke has built over the last decade-plus, according to Don Daseke, chairman and CEO.

His efforts will be geared towards driving organic revenue growth, expanding EBITDA margins and maximizing free cash flow, Daseke said.

“Chris Easter’s in-depth knowledge of flatbed and specialized transportation, broad background in large- scale logistics, and proven ability to build and lead teams gives me great confidence in the bright future for both Chris and Daseke,” Daseke said “He has gained my respect, as we have built our relationship over the past several years. Daseke has the deepest management talent bench in flatbed and specialized transportation. Chris is the right person to lead our operations and develop our people’s talent as we fully leverage the scale we have built.”

“I’ve watched Don and the Daseke team build an exceptional organization focused on flatbed and specialized transportation and logistics, to where Daseke is uniquely positioned and respected in the marketplace,” Easter said. “I am excited to work with the entire team to enhance our growth while continuing to deliver superior customer service.”  8

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Cass Index: Despite December declines, transportation shows strong economy



With all of 2018 in the record books, it is clear that 2018 was an extraordinarily strong year for transportation and the economy, Cass Information Systems said in its December report. ©2019 Fotosearch

ST. LOUIS — December was a month of growing uncertainty and severe declines in the U.S. financial markets as equity valuations fell (the Dow Jones fell from 25,826 on December 3 to as low as 21,792 on December 24), most commodity prices continued to be weak (oil, copper, lumber, etc.), and interest rates declined (after peaking at 3.24 percent on November 8, the 10-year Treasury yield fell from 3.01 percent on November 30 to 2.56 percent on January 3).

Large multi-national companies lowered guidance and blamed slowing rates of activity in Europe and — to a lesser extent — Asia. Trade talks with China continued without resolution, and indications that the Chinese economy is beginning to suffer began to leak out.

But despite all the “hand-wringing” on Wall Street, the transportation economy continues to signal economic expansion, according to the December Cass Information Systems Freight Index Report prepared by Donald Broughton, founder and managing partner of Broughton Capital, a deep data-driven quantimental economic and equity research firm.

“The uninfluenced-by-human-emotion hard data of physical goods flow confirms that people are still making things, shipping things and buying/consuming things, perhaps not at the scorching pace attained earlier this year, but still at an above-average pace,” Broughton wrote.

The report said industry stakeholders were not yet alarmed about the volume of shipments going negative for the first time in 24 months (-0.8 percent in the month of December), in part because December 2017 was an all-time high for the month, and in part because of the stabilizing patterns seen in almost all of the underlying freight flows.

“However, we would be negligent if we did not acknowledge as we did in last month’s report two storm clouds on the economic horizon,” Broughton said.

Those are:

  • The tariffs and threats of even higher tariffs with China, the world’s second-largest economy (even though the latest headlines and tweets suggest that there may be a resolution). Tariffs have throttled volumes in some areas of the U.S. economy, most notably agriculture exports and other select raw materials.
  • The decline in WTI crude in December to as low as $42.50 a barrel. “This did not fall below the marginal cost of production for fracked crude in almost all areas of the U.S., but it made it less profitable and significantly lowered the incentive to drill ever more holes, effectively slowing the rate of growth in the industrial economy,” Broughton said, noting that crude’s recent rally (above $52 in mid-January) gives transportation a momentary sigh of relief. “Continued strength in the price of crude makes us more confident in our positive outlook for the U.S. industrial economy and less worried about global demand,” Broughton said.

“With all of 2018 ‘in the record books,’ it is clear that 2018 was an extraordinarily strong year for transportation and the economy,” Broughton said. “Every month from March to October exceeded all levels attained in all months in 2014 (a very strong year), while February was roughly equal to the peak month in 2014 (June 2014 – 1.201 vs February 2018 – 1.198), which is extraordinary.”

The Cass Expenditures Index is signaling continued overall pricing power for those in the marketplace who move freight.

Demand is exceeding capacity in most modes of transportation by a material amount. In turn, pricing power has erupted in those modes to levels that spark overall inflationary concerns in the broader economy.

With the Expenditures Index up 10.0 percent in December, Broughton said, Cass understood the concerns about inflation, but are comforted by four factors:

  1. Almost all modes of transportation are using the current environment of pricing power to create capacity, which will first dampen and eventually kill pricing power
  2. Spot pricing (not including fuel surcharges) in all three modes of truckload freight (dry van, reefer, and flatbed) has already been falling for six months
  3. The cost of fuel (and resulting fuel surcharges) is included in the Expenditures Index, and the cost of diesel was up 6.6 percent in December (but has been steadily falling in recent weeks, suggesting lower fuel surcharges in coming weeks), and
  4. Whether driven by capacity addition/creation or lower fuel surcharges — or a combination of both (our best guess) — the Expenditures Index was sequentially declining, before sequentially improving slightly (up 1.9 percent in December). The November Index was already down 4.9 percent from its peak in September, and down 2.4 percent from October.

To view the full report, click here.






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