By Mary Ellen Biery – research specialist, Sageworks
Privately held U.S. trucking companies posted their fourth year of higher sales, and profitability also improved in 2013, according to data from Sageworks, a financial information company.
A financial statement analysis shows that private companies in the general-freight trucking industry, on average, increased sales by about 7 percent. Industry sales growth slowed from 2012, although not quite as much as sales slowed among private companies of all types in Sageworks’ database.
Sageworks analyst Peter Brown said the trucking industry is a good indicator of the U.S. economy because it shows what’s going on domestically with shipments, as opposed to other forms of freight transport that are more heavily influenced by international shipments.
“What’s also true about the trucking industry is that it seems to parallel other measures of economic activity like manufacturing and consumer spending, which have risen in the last year as well,” Brown said.
Brown said it’s unclear whether volume, pricing, or a combination of the two was behind private trucking companies’ 2013 sales increases reported in Sageworks’ data. Other industry groups, however, have reported truckers generally have been hauling heavier loads, even if rates and the number of shipments haven’t improved materially.
Private trucking companies historically have thin profit margins relative to other industries, according to Sageworks’ data. But profitability improved in 2013, according to preliminary estimates. Net profit margin, on average, was about 6 percent, compared with average margins in the 3 percent to 4 percent range the previous three years.
Sageworks’ financial statement data indicate trucking companies may have been paying down debt rather than buying new equipment in 2013, Brown said. Preliminary 2013 data indicate expenses related to both overhead and cost of goods sold increased, relative to sales. Meanwhile, depreciation, a non-cash expense, declined relative to sales, and liabilities relative to assets decreased. These trends, coupled with a few other metrics, signal that trucking companies may be paying down loans.
Through its cooperative data model, Sageworks collects financial statements for private companies from accounting firms, banks and credit unions, and aggregates the data at an approximate rate of 1,000 statements a day. Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries. These adjustments are commonly made to private company financials in order to provide a more accurate picture of the companies’ operational performance.
Trucking dominates the freight transportation industry, accounting for more than two-thirds of tonnage, according to the American Trucking Associations. And while there are many large publicly traded trucking companies, including UPS and J.B. Hunt Transport Services, nearly half of the top 50 trucking companies are private, according to S.J. Consulting Group Inc. Furthermore, Census data indicate nearly a quarter of all 2007 revenue in the general freight trucking industry was made by businesses with no paid employees, i.e., mostly self-employed people operating non-incorporated businesses.
The American Trucking Associations last month reported the best year for truck tonnage since 1998. But Cass Information Systems, which processes freight transactions, has called the climate for North American freight “mediocre,” given fewer shipments and largely unchanged rates. January shipments declined from a year earlier, though expenditures were slightly higher, according to Cass. Industry consulting and research firm FTR expects freight growth in 2014 to weaken even as capacity utilization remains high, according to a published report.