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Show me the money! Studying financial reports provides an overview of the health of the trucking industry

Show me the money! Studying financial reports provides an overview of the health of the trucking industry
The latest rounds of quarterly filings from the Securities and Exchange Commission (SEC) showing results for the fourth quarter and full-year 2021 are mostly positive, filled with terms like “all-time record” and “best ever.”

All the signs pointed to a strong year for trucking in 2021. Spot rates set new records — and then set higher ones. Contract rates followed as new agreements followed the rise in spot rates. Carriers that couldn’t buy enough trucks (and couldn’t find enough drivers for them anyway) still made money.

There are, of course, many business differences between large carrier corporations and small, independent owner-operators, but similarities exist, too. Publicly held carriers, those that issue stock that allows investors to become part owner, are required by the Securities and Exchange Commission (SEC) to file quarterly and annual financial reports. These reports are often provided to the public in press releases that also contain statements from company leadership.

While these reports aren’t exactly an apples-to-apples comparison with small trucking businesses, they can serve as a barometer of the trucking industry. And, because they’re essentially profit-loss statements from some of the largest carriers, they offer a useful comparison with other, smaller businesses. For example, if publicly held corporations are all making large profits and your one-truck business isn’t, the business environment is probably not the reason. They may be doing something you aren’t.

The latest round of SEC filings, for the fourth quarter and the full-year 2021, are mostly positive, filled with terms like “all-time record” and “best ever.”

Schneider National, for example, had a good year. Schneider CEO and President Mark Rourke said this in the company’s release: “Our enterprise achieved record earnings of over $530 million in 2021.” The company’s operating ratio (the percentage of revenue the company spends to fund operations) dropped 3.2% to 90.5% in 2021 from 93.7% in 2020.

For perspective, if your business brings in $150,000 per year, a 3.2% improvement in your operating ratio would amount to an additional $4,800 in profit.

Covenant Logistics also had a good year. The company initiated a cash dividend for its investors. After losing $14 million in the last quarter of 2020, Covenant reported operating income of $67.2 million in the same quarter of 2021.

“For 2021, we generated over $1 billion in revenue, the highest annual earnings per share in our history, and a 13% return on average invested capital,” said David R. Parker, chairman and CEO of Covenant.

Heartland Express reported operating income of $105.4 million and net income of $73.9 million, an all-time high for the company.

“In our 36th year as a public company, we delivered our best annual earnings per share results of $1.00 per share,” said Mike Gerdin, CEO of Heartland. The company also repurchased $32 million of its own common stock in 2021.

U.S. Xpress was an outlier for 2021. Although the company’s operating revenue grew by 14.3% in the fourth quarter over the same quarter a year earlier, the company took a $5.1 million operating loss in 2021 compared to operating income of $15.1 million in 2020.

Eric Fuller, the company’s president and CEO blamed “operational challenges” at the company’s Variant segment for loss and noted that the dedicated division generated record revenue per tractor.

Things were better at USA Truck, where the company’s president and CEO James Reed noted, “The company transformation that we have discussed over the last several years has yielded our sixth straight quarter of record adjusted earnings per share. The fourth quarter and full year 2021 represent our highest total revenue and adjusted earnings per share in the Company’s history.”

Operating income at USA Truck grew by 143.2% in 2021 compared to the previous year.

Total revenues at Werner Enterprises rose 23% in the fourth quarter of 2021, compared to the same quarter in 2020. Operating income rose by 21%.

Daseke, parent company of Boyd Brothers, Lone Star, Roadmaster, Tri-State, Hornady and other carriers, claims to be the largest flatbed and specialized carrier in North America. The company reported record net income for the year 2021.

“We are pleased to report seasonally strong results for the fourth quarter, as a capstone to a record-breaking year, marked by decisive execution in the backdrop of a strong freight environment,” said CEO Jonathan Shepko, Daseke.

TFI, another owner of multiple carriers including CFI, Laidlaw, Papineau, SGT, Coastal Transport, TST and others, reported total revenue increased by 91% in 2021 compared to 2020.

“It is gratifying to see all our business segments delivering year-over-year growth in revenues and operating income, on the tremendous efforts of our thousands of talented team members,” said Alain Chairman, the company’s president and CEO.

Only publicly traded companies are required to file with the SEC. Many privately held carriers guard their financial information carefully, so information about them will be much harder to find.

To review a company’s SEC filings, go to sec.gov/edgar/searchedgar/companysearch.html and enter the name of the company in the search box. When the results come up, click on the box that says, “10-K (annual reports) and 10-Q (quarterly reports).”

Another way to review reports is to perform an internet search for the company name, followed by the words “investor relations.” The results usually bring up the company’s latest press release with financial results for the most recent year or quarter.

When reviewing the reports, here are a few key items to look for:

Total revenue: This is the amount of cash taken in. Sometimes will be reported as total, operating or adjusted revenue and including (or not including) fuel surcharges.

Operating income: This is what’s left over after subtracting operating costs such as fuel, driver wages, etc.

Operating ratio: This refers to the percentage of revenue spent on operations. What’s left over is the operating income. If it isn’t listed, you can calculate it by subtracting the operating income from total revenue and then dividing the answer by the total revenue.

Net income: This is what’s left after subtracting operating and other costs, such interest and taxes. Net income is the “bottom line” of the financial statement. Items such as a write-off of debt or settlement of a legal case can impact net income and it isn’t uncommon for a company to report a positive operating income and net loss.

Not all financial reports follow the exact same formula, but the basics are similar enough to compare. So, ask yourself: Is your business doing as well?

Cliff Abbott

Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.

Avatar for Cliff Abbott
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
For over 30 years, the objective of The Trucker editorial team has been to produce content focused on truck drivers that is relevant, objective and engaging. After reading this article, feel free to leave a comment about this article or the topics covered in this article for the author or the other readers to enjoy. Let them know what you think! We always enjoy hearing from our readers.

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