The stark numbers

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The lingering freight recession, now estimated to be in the third year, is the longest and deepest in modern transportation history.” –Kirk Thompson, president and CEO of J. B. Hunt Transport Services

We all know it’s been a brutal time to be in the trucking industry. Now, though, we’re beginning to see the numbers to prove it.

Lowell, AR-based J. B. Hunt Transport Services released its first quarter 2009 earnings report this week, and though they are doing a LOT better than most – posting $30.8 million in net profits, not too far off from the $36.4 million in net profits in the first quarter of 2008 – they are still getting hammered.

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Total operating revenue for the this first quarter dropped 18% to $723 million in comparison to the first quarter of 2008 – a decrease Hunt largely attributes to lower fuel surcharge revenues, reflecting significantly lower fuel costs in the first quarter this year.

Hunt reported its operating income in the first quarter this year declined to $57.0 million vs. $72.1 million for the first quarter in 2008 primarily due to a drop in its intermodal operating income and an operating loss from its truckload segment. “The operating income decline in both segments reflects lower demand brought about by the current economic recession,” noted Kirk Thompson, the carrier’s president and CEO.

It’s important to note that Hunt is very different today in terms of the mix of trucking services it offers, compared to its truckload roots as its two biggest business segments today are intermodal and dedicated contract services (DCS), which make up 79% of its total revenues. “Despite a weak economy and lower demand, both Intermodal and DCS have shown great resilience in profitability in the face of serious negative macroeconomic conditions,” Thompson pointed out.

Yet the numbers show that “resilience,” as Thompson describes it, is being tested pretty harshly. The length of haul in Hunt’s intermodal business shrunk by 4% and is now at levels equivalent to those we had in 2000-2001, the company noted. The swings in demand Hunt reported for intermodal capacity are interesting, too: Hunt’s eastern network load growth increased 38% while overall load growth only expanded 5%., as transcontinental business contracted 4% primarily as a result of reduced west coast imports.

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Hunt’s DCS segment watched revenue decline 13%, matching a 373 unit decrease in its DCS truck fleet. “The decline in truck count primarily relates to continued, proactive reductions in some existing fleets as customers continue to adjust to current lower business demand levels,” said Thompson. “We believe that while this fleet contraction may persist throughout the current economic recession, we will be able to equalize the demand contraction with new business development.”

Then there’s the truckload segment – where the going is really tough tight now. Hunt said its truckload revenue declined 45%, compared with the first quarter of 2008; which translates into a 39% drop once fuel surcharge revenue is taken out. The company reduced its TL fleet by 948 tractors, or some 23% compared to the size of its fleet at the end of the first quarter last year.

The other indicators are equally grim: Hunt’s truckload length of haul decreased 7.5%; revenue per load, excluding fuel surcharges, decreased 8.1%; Rates per loaded mile, excluding fuel surcharges, decreased 2.4%.

Then there are the equipment maintenance expenses, which shot up from 7.9% of operating revenues in the first quarter of 2008 to 11.3% in the first quarter this year mainly due to an aging tractor fleet that the carrier is not replacing given the lack of reasonable financial returns.

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Those numbers flesh out what we pretty much already know – that trucking is in a world of hurt at the moment and struggling to get through what’s become probably one of the worst (if not THE worst) business downturns its ever endured.

Looking at the data gathered by the 2009 Broker Benchmark Survey from Transcore fills in the rest of this gloomy picture: a 12.5% year-over-year freight tonnage decline from 2007 through December 2008; over 3,065 trucking company failures since last year; over 137,650 trucks either sidelined or taken out of service; the ratio of freight loads to available trucks dropping to 0.82 to 1 through January of this year.

The numbers tell a tale of utmost difficulty to be sure. So now it’s up to the kind of stuff numbers can never, ever quantify – courage, hard work, and determination – to see the industry through to better days.

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Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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