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USFreightways acquisition
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January 18, 2000: 9:09 a.m. ET
Trucking firm buys Transport Corp. of America for $1.5B; posts record profit
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NEW YORK (CNNfn) - USFreightways Corp. agreed to buy Transport Corporation of America Inc. (TCA) Tuesday in a stock deal worth about $1.5 billion.
USFreightways also reported record fourth-quarter and annual results, beating estimates by 10 cents a share. The company said it was helped by the closure of some competitors during 1999.
Under the acquisition, USFreightways will issue 0.412 share of stock for each share of TCA, resulting in the issuance of 3.4 million shares.
USFreightways stock closed Friday at 43-5/8, down 1-3/16. Based on that price, each TCA share is valued at $17.97; TCA stock closed Friday at 13-1/4, up 9/16.
The purchase represents an expansion into a different sector of trucking for Rosemont, Ill.-based USFreightways. The company's main business is consolidating pallet-sized shipments of freight through a series of terminals, a sector known as less-than-truckload, or LTL.
TCA (TCAM) is a truckload carrier, which means it handles trailer-sized shipments directly from shipper to destination. Truckload is generally a more profitable sector and is overwhelmingly nonunion.
But TCA has about half the profit margin of some other carriers in its sector.
USFreightways (USFC) is primarily a collection of regional LTL carriers, and most of its revenue comes from unionized carriers. Its largest carrier, USF Holland, is among the nation's most profitable unionized carriers.
USFreightways started its own truckload operation in 1995 and has been trying to grow that and other freight businesses. But 80 percent of its revenue still comes from LTL operations.
"The acquisition of Transport is consistent with our overall strategy of expanding our presence in the truckload market through growth-oriented acquisitions," said Cam Carruth, chairman and chief executive of USFreightways.
Eagan, Minn., based TCA has more than 1,250 company tractors, 820 independent contractor tractors and over 6,500 trailers. In the nine months ended Sept. 30, it had revenue of $214.2 million, up 21 percent from the same period a year earlier.
Net income totaled $9 million, or $1.06 a diluted share, up 20 percent from the $7.5 million in the year-earlier period, but only a slight gain in earnings per share from $1.03 due to a jump in shares outstanding.
Its ratio of operating expenses to revenue, a key measure of a carrier's financial performance, was 90.5 percent for the most recent nine-month period, but operating ratios in the 80 percent range are not uncommon for truckload carriers.
Carruth said TCA would operate as a stand-alone operation under the direction of Robert Meyers, president and chief executive of TCA.
For the fourth quarter, USFreightways had net income of $30.7 million, or $1.11 a share, up 52 percent from $20.2 million, or 76 cents a share, a year earlier. Analysts surveyed by First Call had forecast $1.01 a share in the quarter.
Revenue for the quarter was up 24 percent to $588.4 million.
For the year, net income rose 46 percent to $104.2 million, or $3.79 a diluted share, from $71.4 million, or $2.70 a diluted share, in 1998. Revenue was up 21 percent to $2.2 billion from $1.8 billion. Its operating ratio for the year for its LTL operations was 88.8 percent, an improvement from 91.1 percent in 1998.
"All of our business units have achieved improved operating revenue and profit margins and continue to outperform the majority of our competitors," Carruth said. He said the closure earlier in 1999 of two unionized LTL carriers, Preston Trucking Co. and NationsWay Transport, helped USFreightways results. 
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USFreightways Corp.
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