Smithway Motor Xpress Corporation
Smithway Motor Xpress Corporation
Incorporated: 1972 as Smithway Motor Xpress, Inc.
Sales: $199 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: SMXC
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload
Smithway Motor Xpress Corporation is a truckload motor carrier that operates throughout the United States and Canada. It ranks as one of the Midwest’s three largest carriers and one of the country’s top 100 carriers. In addition to its Fort Dodge, Iowa headquarters, Smithway operates 24 terminals and three sales offices in Iowa, Minnesota, Ohio, Colorado, California, Alabama, Illinois, Kansas, Michigan, Missouri, Nebraska, Oklahoma, South Dakota, Wisconsin, and Texas. Although it has mostly flatbed trailers, it offers a full-service diversified fleet with a growing number of van and single-drop trailers. It manages a mixed tractor fleet that is about half company owned and half owned by independent operators. It transports steel, construction materials, dry van items, heavy machinery, and a variety of other products. Smithway grew rapidly in the 1990s, becoming a public corporation in 1996 and acquiring eight companies between 1995 and 1998. Based on several awards from the Truckload Carriers Association and other groups, Smithway is considered one of the nation’s safest and best managed trucking firms. It is still a family-owned firm, with most of its stock owned by the Smith family, who founded the company in 1958.
Origins and Early Years
Smithway began in 1958 when Harold C. Smith and his son William G. Smith purchased Acme Transfer, Inc., an Iowa corporation. In their early years, the new owners operated the company as a local carrier in and around Fort Dodge.
The small company began expanding in the summer of 1972 when it gained a contract to transport wallboard for Fort Dodge’s gypsum mills. In November 1972 the company’s name was changed to Smithway Motor Xpress, Inc. At about the same time, it acquired Park Transportation Company, a failed St. Louis-based steel carrier that added to Smithway’s flatbed fleet and its geographic range.
By the mid-1970s Smithway had routes in 11 states and ran terminals in Fort Dodge and Granite City. Jack Thiessen wrote that in the 1970s Smithway “became the largest noncontract gypsum carrier based in Fort Dodge.” With additional terminals in Minneapolis; Chicago; Joplin, Missouri; and Hennepin, Illinois, Smithway passed the $10 million annual revenue mark at the end of the decade.
In 1980 Smithway moved into new offices in Fort Dodge. It spent $100,000 to destroy its old one-story office and then build a new two-story headquarters that housed administrative offices, accounting, and room to add computers in the future. This project doubled the company’s office space by adding 2,000 square feet.
By 1982 Smithway transported goods in 27 states and operated 20 terminals. It employed 310 people, who received an annual payroll of $6.9 million. In 1984 William G. Smith became the firm’s new president, while Harold C. Smith remained as board chairman as the firm continued to grow. Annual sales reached $28 million in 1984.
In the 1980s Smithway Transportation Brokerage, Inc. (STB), an affiliated firm, was started to use the services of other carriers. By 1998 more than 5,000 carriers helped Smithway meet its customers’ needs. Each broker carrier had to meet certain standards set by STB.
In the 1970s and early 1980s Smithway specialized in moving building and construction materials. In 1984 William G. Smith, as Smithway’s new president, began to serve new kinds of customers with different freight needs. He also began to organize what the company called the Smithway Network of offices and other facilities in different communities, usually near customers’ plants. This expansion and diversification allowed Smithway in the mid-1980s to gain contracts as the core carrier for some large corporations.
The trucking industry changed considerably after Congress deregulated it in 1980. Trucking companies began to consolidate in the more competitive atmosphere. By 1990 Smithway operated a fleet of more than 400 modern tractors and approximately 500 flatbed trailers from its 25 terminals. By September 1990 it had remodeled its Fort Dodge offices, added a new computer system, and constructed a new terminal in Oklahoma City, Oklahoma. Although the company had grown considerably as the nation’s economy expanded in the 1980s, its major growth was still ahead.
Business in the 1990s and Beyond
Smithway in 1991 had $49.8 million in total revenue and $502,000 in net income. The company reached $59.9 million total revenue and $1.1 million net income in 1993 and then $69.2 million total revenue and $3.1 million net income for 1994.
In the 1990s Smithway added three high-tech systems as part of its overall strategy. In July 1993 it started using Spectrum software to improve its freight selection and loading process. Later it added the Qualcomm communication and tracking system to its own tractors and offered it for leasing to its independent drivers. This satellite-based system allowed the company to know exactly where its trucks were at all times and also made it unnecessary to stop and find a telephone in order to contact headquarters. Third, it used Electronic Data Interchange technology to link its headquarters to its customers, providing them instant information on truck positions and expected arrival times.
On January 17,1995 the Smithway Motor Xpress Corporation was incorporated under Nevada law. It was formed as a holding company to acquire the stock of three companies: Smithway Motor Xpress, Inc.; Smithway Transportation Brokerage, Inc.; Wilmar Truck Leasing, Inc.; and also Smith Leasing’s net assets. This was a preliminary step in planning for the initial public offering (IPO) on the NASDAQ on June 27, 1996.
From the IPO stock price of $8.50 a share, in January 1997 Smithway’s stock sold at about $9 per share. James Peltz in the Los Angeles Times wrote that Wall Street seemed to be ignoring Smithway’s sound financial performance, while many other trucking companies did poorly in 1996. He pointed out that Smithway had one of the trucking industry’s highest pretax profit margins, almost nine cents per sales dollar, according to a study of 57 trucking companies by Market Guide Inc. Yet at the same time, Smithway had the lowest stock price-to-earnings multiple, just 9.5, on its previous 12 months’ performance. Smithway had $93.7 million total revenue and $3.9 million net income in 1996.
Smithway in the second half of the 1990s acquired eight companies. First, in June 1995 it acquired Pittsburgh, Kansas-based Van Tassel, Inc., which emphasized flatbed services for the most part. In January 1996 Smithway acquired McPherson, Kansas-based Smith Trucking Company, a dry van carrier. It acquired Marquardt Transportation, Inc., another flatbed carrier, in October 1996. With headquarters in Yankton, South Dakota and a small Stockton, California facility, Marquardt added to Smithway’s ability to haul heavy machinery and manufactured products. A fourth acquisition occurred in February 1997 when Smithway acquired a small Fort Dodge, Iowa flatbed carrier called Pirie Motor Freight, Inc. Royal Transport, Ltd., a flatbed trucking company based in Grand Rapids, Michigan, was acquired in September 1997. That gave Smithway “a regional niche specializing in heavy loads hauled primarily on multiple axle trailers,” according to the firm’s 1997 10-K Annual Report. At the end of 1997 Smithway, through internal growth and its acquisitions, employed 519 drivers and 234 others and worked with 447 independent drivers.
Smithway acquired East West Motor Express, Inc. of Black Hawk, South Dakota in 1998. A regional flatbed and dry van carrier, East West added 225 trucks to the Smithway fleet. George K. Baum rated Smithway stock a “buy” following that deal. In the April 13, 1998 Barron’s, Baum said the East West acquisition “increases Smithway’s customer and geographic diversification and provides operating synergies. It has consistently demonstrated an ability to achieve revenue gains from acquisitions.”
In August 1998 Smithway completed its acquisition of Enid, Oklahoma-based TP Transportation, which had $4 million in annual revenue from owning 34 tractors pulling only flatbed trailers. The following month Smithway completed acquisition of JHT, Inc. of Cohasset, Minnesota. JHT used 185 tractors, half company owned and half driver owned, which served only the dry van market. Its 1997 annual revenue was more than $24 million. The acquisitions of JHT and TP Transportation brought Smithway’s total fleet to more than 1,450 power units or tractors.
In the late 1990s, Smithway’s average haul length gradually increased, according to its 10-K Annual Reports. It went from an average haul length of 568 miles in 1996 to 609 miles in 1997, 659 miles in 1998, and 678 miles in 1999. At the end of 1999 Smithway operated 2,783 trailers, 844 company-owned tractors, and 689 tractors owned by independent contractors.
Smithway’s mission is to develop long-term partnerships with our shippers by providing innovative, responsive, high quality transportation services, while providing our employees the opportunity to realize the full potential of their careers and creating maximum value for our shareholders.
In 1999 Smithway began a lease purchase program that gave its drivers the option to purchase a new Peterbilt 379 tractor after a 42-month period. “We found that many drivers want to have their own truck, but do not have the means to buy one,” said Smithway’s Director of Maintenance Andy Nesler in a press release December 8, 1999. “Drivers are the backbone of the industry. We want to keep them happy.” In addition, Smithway sold used tractors such as 1996 and 1997 Peterbilts, Kenworths, Volvos, and Freightliners.
Smithway won several awards in the 1990s. For example, the Iowa Motor Truck Association (IMTA) honored Smithway in 1993 as the safest motor carrier of its size in the state. Smithway President William Smith served as a board member and chairman of the IMTA, which had been started in 1942 to promote lobbying, safety issues, and public relations for the state’s trucking industry. The American Trucking Association in 1997 honored Smithway as one of the nation’s top ten best-managed for-hire truckload companies in the flatbed category, which led to a feature article about Smithway in the January 1998 issue of The Trucker. The nonprofit Iowa-Illinois Safety Council in 2000 honored Smithway with an award for its 1999 accident prevention program, which reduced the number of injured employees recorded by the U.S. Occupational Safety and Health Administration (OSHA). The award came at a time when many were concerned about highway accidents caused by truck drivers, whether from lack of sleep or other causes.
After its expansion through eight acquisitions, Smithway in 1999 announced plans to build a new corporate headquarters in the Industrial Park just north of its existing offices in Fort Dodge, Iowa. The company reported on its web site that the $3 million facility of at least 40,000 square feet would double the size of its office space. “We want to maintain our corporate headquarters in Fort Dodge,” said William G. Smith, the company’s president, CEO, and chairman, in the April 16, 1999 Fort Dodge Messenger. “This is where we started. This is where the base of our people live now. We have offices across the country, but we’ve elected to stay home.”
Smithway’s 1999 operating revenue increased more than 20 percent for the third straight year. From 1997 operating revenue of $120 million, it increased to $161.4 million in 1998 and then $196.9 million in 1999. Its 1999 net earnings, however, were $3.9 million, a 30.8 percent decrease from 1997 net earnings of $5.7 million.
Smithway’s 2000 operating revenue increased to $199.0 million, but it posted a net loss of $1.99 million, the first loss in its history. “The trucking industry, Smithway included, operated in a very difficult business environment in 2000,” said Smithway President, CEO, and Chairman William G. Smith in a February 6, 2001 PR Newswire. “For the entire year, we faced high fuel prices, a depressed used truck market, a declining number of owner-operators, and slowing freight demand.” In addition, three important Smithway customers declared bankruptcy.
Smithway’s stock value peaked in 1998 at about $17.50 per share but then declined in 1999 and 2000. For example, on August 4, 2000 it was sold at $2.875 per share. As of February 8, 2001, Smithway’s stock sold for just $1.875 per share.
At the start of the new millennium, Smithway shipped a variety of freight, including construction materials such as wallboard, lumber, structural steel items, and roofing materials. It also transported packaged foods, commercial air conditioners, irrigation components, locomotive engines and parts, manufacturing and container steel, oversized tires, and construction and other heavy equipment. In 1999 its three largest freight categories were dry van (34 percent), steel (27 percent), and building materials (16 percent).
Smithway benefited from a generally healthy American economy in the 1990s. In addition, some manufacturers with their own trucks decided to have firms like Smithway take care of their transportation needs and thus save about 25 percent on shipping costs, according to a study by the American Trucking Associations Foundation. The most efficient carriers, of course, were the biggest trucking companies, which offered savings due to economies of scale and more capital for improved equipment and better drivers. The small trucking companies simply could not afford to compete with the major players.
All trucking companies in early 2001 faced some major challenges, including higher fuel costs, serious driver shortages, and the general economic slowdown. Smithway, with its modern fleet and seasoned management, seemed well prepared for the rough road ahead, but whether or not it would return to profitability remained to be seen.
Smithway Motor Xpress, Inc.; East West Motor Express, Inc.; SMSD Acquisition Corp.; New Horizons Leasing, Inc.
Intrenet; J.B. Hunt Transport Services Inc.; Werner Enterprises, Inc.
- Harold Smith and William G. Smith purchase Acme Transfer.
- Smithway Motor Xpress, Inc. is formed.
- William Smith becomes Smithway’s new president.
- William Smith becomes the company’s CEO; Smithway Motor Xpress Corporation is incorporated as a holding company.
- Company goes public.
- Pirie Motor Freight and Royal Transport are acquired.
- Smithway purchases East West Motor Express, Inc. of Black Hawk, South Dakota; TP Transportation of Enid, Oklahoma; JHT, Inc. of Cohasset, Minnesota.
Arndt, Michael, “Transportation,” Business Week, January 8, 2001, p. 130.
Burkhart-Patrick, Michele, “Smithway Will Build $3 Million Office in FD,” Fort Dodge Messenger, April 16, 1999.
Felton, John Richard, and Dale G. Anderson, editors, Regulation and Deregulation of the Motor Carrier Industry, Ames, Iowa: Iowa State University Press, 1989.
Hughes, Barbara Wallace, “Truck Association Offers a Unified Voice for Members,” Fort Dodge Messenger, May 16, 1994.
“New Offices at Smithway Are Completed,” Fort Dodge Messenger, June 14, 1980.
Peltz, James F., “Wall Street, California; Not Even Semi-Attractive; A Few Trucking Stocks Show Promise, Analysts Say, But Most Can’t Be Expected to Deliver. And for the Longer Term, the Industry’s Outlook Is Mixed,” Los Angeles Times, January 28, 1997, p. D5.
“Research Reports,” Barron’s, April 13, 1998, pp. 57–59.
Schulz, John D., “1 Down, 1 to Go,” Traffic World, October 12, 1998, p. 24.
“Smith President,” Fort Dodge Messenger, December 16, 1984.
“Smithway Continues Growth in U.S.,” Fort Dodge Messenger, September 25, 1990.
“Smithway Motor Has 60 Percent Growth in Year,” Fort Dodge Messenger, September 30, 1982.
“Smithway Moves Construction Industry,” Fort Dodge Messenger, September 29, 1984.
Thiessen, Jack, “Smithway Motor Xpress, Inc.,” in A Tribute to Trucking, Windsor Publications, 1990.
—David M. Waiden