Shawn- thanks for info. We have done a lot on retail credit effort and should probably have a meeting to update everyone. I'll try to set something up. Rick

 -----Original Message-----
From: 	Cumberland, Shawn  
Sent:	Friday, April 06, 2001 8:53 AM
To:	Buy, Rick
Subject:	FW: fyi - more on truck s/d

Rick:

Did you get the articles that I sent to you on the fleet card business?  If you have some time, I'd like to discuss the meeting that we had with Comdata (which has a 60% market share of the fleet card business).  They have some live data that potentially could be very interesting (see following article).

Comdata is a quasi-credit card company as well as payment and services company.  In their normal course of business, they extend various credit lines to companies that operate fleets and they provide factoring services as well.  Comdata processes about 350 million transactions per year, of which about half represent diesel sales of about $15 billion annually.  They are also one of the largest issuers of stored value cards (GAP, etc.)

Are you making any progress on the credit side?

Take care.

Shawn



What a Mess!(Statistical Data Included)
JOHN D. SCHULZ
03/26/2001 
Traffic World 
Page 25 
Copyright 2001 Gale Group Inc. All rights reserved. COPYRIGHT 2001 Journal of Commerce, Inc. 
Truckers still waiting for signs of pent-up freight demand; earnings shortfalls, layoffs loom 
If you are waiting for trucking to kick-start the nation's economic recovery, pull up a chair and wait awhile. Trucking CEOs say they haven't seen this slow a first quarter in a decade. 
"Perhaps the weakest first quarter for freight demand since Swift became a public company in 1990," Phoenix-based Swift Transportation Chairman and CEO Jerry Moyes said. 
The first-quarter trucking mantra historically has been this: everybody loses money in January, hopes for a break-even February and earns whatever profit there is in the quarter in March. That formula may not hold this year. 
Gregory L. Quesnel, president and CEO of Con-Way Transportation Services and Emery Worldwide parent CNF Inc., said the current slowdown was first detected late in the third quarter last year and has become "more pronounced in each successive quarter." March, he said, has been "as disappointing as the first two months this year." 
Layoffs already are occurring at the major LTL carriers. Yellow Freight System has idled as many as 1,000 Teamsters and hundreds of white-collar back-office workers. Most large carriers are warning of profit shortfalls that will cause them to miss analysts' first-quarter estimates. But there are deeper fears, too. Marginal players may be forced into bankruptcy. Small, family-owned carriers may be unable to exit the industry on their own terms because of the shocking decline in the value of used trucks that is causing some companies to be valued at less than half their worth of just two years ago. 
Swift's volume drop-off began with shipments originating on the West Coast in January and February and it is continuing in March, Moyes said. Coupled with reduced demand from the Southwest, Moyes said Swift will not meet analysts' first-quarter earnings expectations. Swift is not alone. 
"We hauled less freight in February than February a year ago," said Bob Hammel, executive vice president of Pittsburgh-based Pitt Ohio Express, a leading privately held Eastern regional LTL carrier. "The slowdown in manufacturing began in the middle of last year and it was precipitous. Nobody anticipated the speed in which manufacturing demand fell off." 
Even Con-Way, the most profitable LTL operation in the past five years, said it would have a decline in first-quarter operating income compared with the year-ago period. Con-Way's tonnage declines were estimated in the "mid-single-digit" percentage range. 
Roadway Express estimated that its current tonnage levels are running 10 to 11 percent below those a year ago, which will result in an approximately one-half of 1 percent (0.5 percent) decline in its operating ratio. (see sidebar) 
Pat Hanley, Overnite Transportation's senior vice president and chief financial officer, said freight figures were flat in February year over year but rose slightly in March. Overnite is the exception to the LTL industry with as many as 24 new terminals scheduled to be opened this year. 
"January was pretty good to us, but February was flat. It's coming back in March. We're probably up in low single digits, 3 to 4 percent. We're picking back up. The economy has hurt us. If you had asked us at the start of the year, we'd have said we'd be up double-digits," Hanley said. 
The national economic picture is "a big concern," Hanley said. "We're not seeing pressure on prices, at least not so far. We're seeing customers ship 10 pallets a day instead of 20. The shipment size is coming down. Certainly we're concerned. We'll do O.K., but not as great as we'd like." 
Forget consumer confidence surveys or the producer pricing index or whatever stars align in Federal Reserve Board Chairman Alan Greenspan's world. The genuine leading indicator of any national economic trend is trucking, which is always a first-in, first-out industry in any economic slowdown. 
To hear trucking industry leaders tell it, get comfortable with beans and franks for dinner. It's going to be awhile before it's filet mignon time again. 
Shippers see what's happening as well but say it's still too early in the year for carriers to start cutting rates to fill empty trucks. 
"All the carriers we talk with report flat or slightly declining business levels -- definitely slower than early last year," said Bill Huie, assistant vice president of corporate transportation for NCH Corp., Irving, Texas. "With a couple of exceptions, carriers we talk with have no plans for expansion in the next few months. We are getting feelers about some possible lane adjustments to boost revenue. But generally it appears a little early in the economic downturn for much price movement." 
The national LTL carriers are seeing the same things. "Our business is down pretty substantially for the first quarter," said Roger Dick, spokesman for Yellow Corp., parent of Yellow Freight System and two large regional LTL carriers, Jevic Transportation, Delanco, N.J., and Saia Motor Freight, Duluth, Ga. 
USFreightways Corp., citing what it called the nation's "serious economic slowdown," said it expects first-quarter earnings to fall "very substantially below" current Wall Street consensus. 
Extreme weather conditions also contributed to the already weakened operating environment, USF Chairman, President and CEO Samuel K. Skinner added. 
"Traditionally, the first quarter builds momentum slowly, with March being the strongest month of the period," Skinner said in a statement. "This year, the economic slowdown of the fourth quarter of 2000 accelerated in January and February, softening even the normal modest expectations for those two months." 
It's not just the LTL industry that's hurting. The Morgan Stanley Dean Witter truckload freight index continues to show the worst demand-supply relationship since analyst James J. Valentine began tracking the data in April 1994. Two events can cause weakness in the index, according to Valentine. They are either an abundance of excess trucks on the road or weak freight demand. 
"So far in 2001, we have seen the confluence of both factors, but the fall-off in demand has far outpaced the increase in supply," Valentine wrote in his most recent "Trucking Snapshot" for early March. 
Year-to-date measurement for truckload demand is down 25 percent year over year, according to Valentine's index, while supply is up only 7 percent. That would indicate the over capacity was a significant issue last year but was "masked by the strong economy," Valentine says. 
In a more ominous note, Valentine believes overcapacity will continue to plague the truckload industry for the next one to two years. Only a reaccelerating national economy can bring the demand-supply back in balance for the truckload sector in the near term, Valentine predicts. 
The overproduction of new Class 8 trucks from early 1998 through early last year has put too many trucks on the roads and caused supply to back up at manufacturers, wholesalers and other retailers. Used trucks have lost on average more than 30 percent of their value over the past 18 months. Anecdotally, one used truck dealer, Music City Truck & Equipment, in LaVergne, Tenn., is holding a "two-for-one" sale on three- to five-year-old Class 8 Freightliners. You can buy two for around $30,000, less than a brand new Chevy Suburban SUV. 
What that means is a trucker who bought a 1998 Class 8 truck for $70,000 and depreciated half the value over three years has a piece of equipment on the books this year at $35,000. But assuming it has lost 30 percent of that value, it may only be worth $24,500 in actuality. For a carrier with a 100-truck fleet, that equates to a loss of more than $1 million on assets. 
The glut may last for a while, according to Valentine's analysis. Assuming a three-year trade-in cycle, most of the Class 8 tractors in the truckload sector are just now rolling over to the used-truck market. That means that overcapacity will plague the truckload industry for at least the next year. That will result in some of the marginal carriers exiting the business, as did nearly 1,900 carriers last year that either closed or declared bankruptcy. 
"We can see from indexes, surveys and other information available to us that it is unlikely there will be any significant improvement in March and freight demands will continue to be soft throughout the month. Based on all of these factors, we expect USFreightways' profits for the first quarter to be very substantially less than published analysts' forecasts," Skinner said. 
In addition, severe weather conditions including an earthquake in Seattle, rainstorms in California and blizzards in the Northeast have added cost and decreased efficiencies, Skinner added. 
Expectations at each of USF's operating companies have been affected, some more than others. The LTL, logistics, reverse logistics and freight-forwarding units are all showing decreased revenue and volume over a similar period last year, Skinner said. 
Further job cuts at USF Worldwide, its freight forwarder, would be in the offing as cost controls at the unit would be "accelerated" in the wake of the softening economy, Skinner said. Late last year, Skinner said the rebuilding process at USF Worldwide would be a two-year process. But the worsening economy has made that rebuilding job harder, he said. 
"We are seeing evidence that the slowing economy is, in fact, further impeding progress in this area," Skinner said. "During the fourth quarter of 2000 and continuing into the first quarter of 2001, the company has taken steps to increase cost efficiencies. Among these actions are a substantial cutback in capital spending and significant reductions in the labor force. These cost-control efforts will be accelerated to partially counterbalance the damaging impact of the current economic and weather conditions." 
In the 2000 first quarter, USF posted $22.3 million net income, a 27 percent rise from the $17.5 million earnings in the 1999 first quarter. At the time, that was USF's 15th straight quarter-over-quarter earnings increase. It came on $608.2 million revenue, an 18.5 percent rise in from the $513.2 million revenue in the 1999 first quarter. Analysts had been estimating USF to earn about $3.50 a share earnings for 2001, compared with actual $3.61 earnings per share for all of last year. In the fourth quarter last year, USF earned $23.7 million, or 91 cents a share. 
                          Trucking in a Snapshot
Market             What's Going On
MSDW [*] truckload Remains in record-low territory, indicating
freight index      the worst demand-supply relationship since MSDW
                   began tracking the date in April 1994.
Diesel prices      Diesel prices in the first quarter of 2001
                   have come down 6% sequentially from 4Q00. However,
                   the average price for the quarter remains 6%
                   above that of 1Q00.
WTI oil            OPEC recently agreed to reduce supply by 5% and
                   has stated a price objective of $25 per barrel.
Capacity           Retail sales of Class 8 tractors (new trucks
                   entering the market) came down in January, but
                   inventory (trucks that will enter the market at some 
                   point) to sales ratio hit a new high of 3.4 months
GDP                4Q00 GDP increased 1.1% and economists see U.S.
                   recession in 2001 with +0.5% and -1.4% GDP forecast 
                   for 1Q01 and 2Q01, respectively.
Retail sales       Retail sales rose 0.7% in January. While this
                   was better than forecast, the upside was likely
                   the result of excessive clearance sales after a
                   disappointing holiday season.
Consumer           The Conference Board's measure of consumer
confidence         confidence fell again (nine points) in February
                   after registering the largest one-month decline
                   in 10 years in January (14 points).
NAPM               The February NAPM rose slightly to 41.9.
                   However, it still indicates a contracting
                   manufacturing sector.
Leading            The index of leading economic indicators
economic           rose 0.8% in January, while
indicator          MSDW had forecast a 0.6% increase. This
                   represents the first rise in four months.
Stock              After a recent pullback, trucking stocks remain
perfonnance        up year-to-date with TL stocks up 5%, regional
                   LTL stocks up 9% and national LTL stocks up 13%.
Investor           For the week ended February 28, mutual fund
                   outflows totaled $309 million, compared with
                   inflows of $2 billion in the prior week.
Market             Implications
MSDW [*] truckload Negative for all TL carriers.
freight index
Diesel prices      The downward trend is Positive for all
                   carriers, especially TL carriers, which have
                   greater exposure to fuel than LTL carriers.
WTI oil            Negative for all carriers, as $25 per
                   barrel is still 25% higher than the $20 per
                   barrel average since 1990.
Capacity           Negative for TL carriers, not a major
                   concern for LTL carriers, which measure
                   capacity by the number of terminals.
GDP                Negative for all carriers.
Retail sales       Negative for both TI and LTL carriers.
Consumer           Negative for all carriers
confidence
NAPM               Negative for all carriers.
Leading            Positive for all carriers.
economic
indicator
Stock              Positive, however, stocks could pull
perfonnance        back further in the short term as
                   fundamentals catch up.
Investor           Negative.
Source: Morgan Stanley Dean Witter Research