Transport Corporation of America, Inc.
Transport Corporation of America, Inc.
Sales: $290.6 million (2000)
Stock Exchanges: NASDAQ
Ticker Symbol: TCAM
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload; 484110 General Freight Trucking, Local; 484122 General Freight Trucking, Long-Distance, Less Than Truckload; 541614 Process, Physical Distribution, and Logistics Consulting Services
Transport America, legally named Transport Corporation of America, Inc., is a trucking firm headquartered in Eagan, Minnesota, with a fleet of some 2,200 cabs, or “tractors,” pulling nearly 6,000 trailers throughout the United States and Canada. Transport America’s trucking routes are primarily in the Midwest, East, and Southeast. Transport America offers customers a wide range of transportation services for cargo requiring various shipment distances. The company has a strong commitment to customer service, providing detailed and customized “logistics” services to help clients manage their inventory traffic. Transport America has the capability of offering “time-definite” pick-up and delivery to support a growing industry trend of “just-in-time” delivery, designed to reduce warehouse and inventory management. Transport America has regional and local operations that offer line haul (from point A to point B), loading and unloading capabilities and multiple stops, temperature-controlled trailers, trailers to support decking, satellite monitored transport, electronic data interchange, load optimization, and information technology services. The company can even coordinate transportation details with third-party transportation providers. Transport America primarily moves freight in retailing, manufacturing, consumer goods, and recreational products. The company’s primary customers include Sears, General Mills, Dupont, S.C. Johnson and Sons, Target, 3M, Federal Express, and Ford Motor Company.
1980s: Founding and Early Growth
Founder James Aronson founded Transport Corporation of America in 1984. Aronson had been a driver and held management positions with Overland Express, Inc. The company espoused a strong commitment to high-quality customer service. Aronson was a hands-on manager, focusing on marketing and operations. He was known for his excellent rapport with customers and commitment to timely deliveries. In Transport America’s first full year of operation in 1985, it recorded $15 million in revenues.
Early on, Transport America was seen as a technological leader in the industry. By the late 1980s the company was testing the use of technology to maximize efficiency and reliability in the trucking industry. For Aronson, use of technology offered one more avenue for enhancing customer service. In 1988, the company implemented an automated interactive voice-response system that interfaced with the computer to allow drivers to communicate locations by phone. Soon after, Transport America was using satellite tracking to trace freight movement and share information with drivers via two-way information exchange. The company gradually expanded the size of its fleet and service centers and established small service centers in various locations. By 1993 Transport America’s expanding fleet pushed the company to purchase a new, larger headquarters building in Eagan.
1994–98: Going Public and Financial Growth
In 1994 Transport America went public as the Transport Corporation of America, Inc. The company’s initial public offering raised $14.5 million. The infusion of revenue helped the company keep abreast of the competition in an industry that relied heavily on capital resources to routinely replace $150,000 trucks every 46-60 months.
The first quarter of 1995 showed Transport America with noticeably improved earnings. The most impressive statistic was the ratio of operating expenses to operating revenue from 96.9 percent in the previous year’s first quarter to 93.4 percent the current first quarter. While many competitors had experienced lower demand in the transportation business, Transport America credited their gains to increased freight activity from current customers. By June 1995, the company’s operating revenue grew some 12.5 percent, gains due again to growing business from existing customers. The company’s operating efficiency (the ratio of expenses to revenue) had improved from 5.1 percent to 7.4 percent in one year.
In the first quarter of 1996 the company recorded double-digit growth in revenue. This good news was dampened by other factors that hurt profit margins: Winter storms and very low temperatures caused reduced utilization of equipment. Rising fuel costs also contributed to increased costs of truck operations. Second quarter growth was even more promising—an 18 percent rise in operating revenue. Growth continued in the remaining two quarters that year. Transport America continued to resist declining business trends in the transportation industry through 1996. Another promising statistic was that the ratio of operating expenses to revenue for the year was down from previous years—91.2 percent, compared with 92.3 percent in 1994. The company reported revenues of $164.7 million and a net income of $6.3 million.
By 1997 the fleet had grown to 1,350 tractors and 3,500 trailers, operating out of ten service centers. In January the Transport America board of directors approved a stock repurchase program allowing repurchase of up to 350,000 shares of common stock. In addition, the board initiated a shareholder rights plan to ensure fair and equal treatment for all shareholders in case of a bid by another party or shareholder to take over the company. At the time there was no indication that anyone was considering taking control of the company.
Transport America also created Transport International Express (TIE), as a new wholly owned subsidiary. TIE was designed to transport goods between major cities by land that had previously most often been shipped by air even though they did not require next-day delivery. TIE would coordinate expedited and time-specific service for moving products that did not have to constitute an entire truckload. Companies could spend a fraction of the cost to have cargo hauled by truck and would enlist the customized logistics services of Transport America to coordinate with the airlines and other freight companies to meet their needs.
The company continued to grow along with the economy. CEO Aronson led concerted efforts to improve driver retention and use of company assets. Aronson became chairman of the board, and Robert Meyers stepped up as president and chief operating officer. Meyers had been executive vice-president since 1994 and chief financial officer since 1993. With a background in technology and accounting, Meyers was credited with implementing the company’s state-of-the-art information system.
1997: Local and National Recognition
In August 1997 CEO James Aronson was recognized by Twin Cities Business Monthly magazine as one of a small number of Minnesota entrepreneurs of the year. He was recognized in the area of service. The magazine commended Aronson’s leadership of the company and his commitment to cutting-edge technology in the transportation industry with global positioning systems installed in his entire fleet, at a price tag of more than $4,000 per vehicle. The computerized tracking system, or global positioning system, enabled customers to determine the locations of their shipments at any given time, within 25 yards anywhere in the country. Transport’s trucking technology made it possible to transfer information about driving routes and freight details from company headquarters directly to drivers on the road. In addition, the truck’s computer system could diagnose mechanical problems and inform the driver and headquarters.
The magazine also noted the transportation software Transport America had created and tailored specifically for its business to help coordinate schedules and assure timeliness of services. Aronson’s successful practice of being very knowledgeable about the business of his customers was also applauded. The company’s intimate knowledge of its customers’ businesses assisted it in managing supply chains, specifically to better implement “just-in-time delivery” to simplify inventory coordination and reduce warehousing costs. At the time, Transport America recorded an on-time arrival rate of more than 98 percent, an important indicator of company success given the growing popularity of “just-in-time” deliveries.
Aronson was credited with “putting a new face on an old industry” through new transportation technologies. The magazine quoted Aronson as saying, “The thing we’ve got to realize is trucks are only there to support business and industry. We don’t just drive around. When you go to the grocery store or anywhere else and buy something, there’s no doubt that a truck brought it there.”
[Our mission is to] become the most successful provider of the highest quality transportation and logistic services in North America. Our success will be measured by our ability to make all of our customers successful.
For those who trust us with their products, we will supply services that surpass their expectations and those of their customers.
For those who perform the work, we will provide a work environment that exceeds their needs and those of their families.
For those who invest their future in us, we will maintain a superior level of financial performance and strength.
Aronson moved Transport America beyond the typical realm of trucking business by implementing the “Trucker Buddy Program” to educate young people about the business. Transport America drivers from several areas of the country partnered with elementary school classes and visited frequently to update young schoolchildren about their profession. The program also included field trips to service centers so kids could learn about the trucks firsthand. The company also had a comprehensive training and certification program for drivers that helped increase the number of company-owned tractors at a time when the industry had a driver shortage.
Transport America gained additional recognition, this time nationally, in November 1997 when it made Forbes magazine’s list of the 200 Best Small Companies in the United States. The magazine ranked Transport America number 170, based on a 16.2 percent five-year average return on equity.
By 1998 Transport America’s fleet had grown to 2,000 tractors and 5,000 trailers. In February of that year Transport America acquired a local, privately held company called North Star Transport Inc. The purchase was for a cash and stock combination valued at approximately $34 million. The acquisition was a good fit because North Star was an operation similar to that of Transport America, focusing on using experienced and highly qualified drivers. North Star had a fleet of 625 owner-operated vehicles, employed about 100, and posted annual revenues of $75 million. Company leaders said North Star would help them better serve the needs of a greater variety of clients and become more competitive in the industry.
The company’s major customer, Sears, named Transport America a Sears Partners in Progress Award winner for 1998. In addition, strong business and the purchase of North Star helped Transport America achieve high growth and record profits in 1998. Late that year the company announced plans to develop a new 123,000-square-foot corporate headquarters at a nearby Eagan location. Because of plans for further growth and because the acquisition of North Star added some 30 percent to the operation, Transport America wanted to consolidate its business sites to one location.
1999–2001: A Weaker Market
In January 1999 Transport America sold Transport International Express because the subsidiary had not met company performance expectations. Transport America sold the assets and operations of TIE to Express America Inc. and maintained some ownership interest, but was not a controlling shareholder.
Later that year Transport America expanded its fleet further with the purchase of privately held Robert Hansen Trucking Inc., a $24 million operation based in Delavan, Wisconsin. The deal to acquire, through cash, stock, and assumption of debt, was completed in May. Robert Hansen Trucking had 200 company trucks, primarily serving the eastern market. Transport America reportedly acquired the firm for approximately $2.2 million in cash, 350,000 shares of Transport America stock, and a $16 million debt assumption.
Unlike recent years, Transport America experienced some financial difficulties in 1999, with earnings falling below expectations in the last quarter. Sadly, late that year Transport America founder James Aronson died of cancer at the age of 61. Robert Meyers was elected chief executive officer.
Around the same time, Transport America formed a wholly owned subsidiary, Transport America Logistics, or TA Logistics. TA Logistics was designed to provide transportation procurement and logistics services, basically assuming management of all the details of a customer’s shipping traffic needs. Operations of the company began in 2000. The subsidiary was selected to partner in the development and operation of a Logistics Management Center for Polaris Industries.
Early in 2000 Transport America began discussions about a merger agreement with a wholly owned subsidiary of USFreightways Corporation. It would be a stock-for-stock transaction with a value of $149 million. CEO Meyers described the marriage of the two companies as a positive one, noting Transport America’s leadership in services and dedicated truckload transportation, and Freightways’ leadership in the areas of logistics, supply-chain coordination, and less-than-truckload regional operations. In February, however, by mutual agreement of both companies’ boards, the deal between Freight-ways and Transport was dissolved. The purchase would have resulted in Freightways’ trucking arm becoming one of the top ten publicly traded truckload carriers.
When the deal collapsed, Transport America’s stock price fell. Soon after, the company announced plans to repurchase stock under the existing share repurchase plan. The company faced additional challenges in 2000 with driver retention and rising fuel costs. Profits also were impacted because a key customer temporarily decreased operations. Despite these problems, tractor productivity increased from the previous quarter and year, and the number of empty miles that were nonrevenue-producing was reduced.
In 2001 Transport America experienced declining revenues due to continuing weak economic conditions and a reduced number of shipments by primary customers in manufacturing, automotive, industrial, and retail. The company also was affected by less cargo movement in general in its primary geographic service areas. Reports for 2001 reflected a softer demand for freight movement, more empty miles, and fewer fuel surcharge dollars.
- Transport Corporation of America begins Operations.
- Satellite tracing is implemented.
- The initial public offering raises $14.5 million.
- Transport International Express is established; the company is ranked 179 on Forbes magazine’s list of the top 200 small U.S. businesses; CEO James Aronson is recognized as a local “Entrepreneur of the Year”; Aronson becomes chairman of the board and Robert Meyers becomes president.
- Company purchases North Star Transport Inc.
- Company acquires Robert Hansen Trucking; founder James Aronson dies of cancer at age 61.
- Company agrees to be acquired by USFreightways, but the deal is canceled.
- Michael Paxton is named president and CEO; Robert Meyers heads offshoot Techgistics.
Transport America’s third quarter operating ratio in 2001 was 96.3 percent, compared with 93.1 percent for the same quarter the previous year. Third quarter net earnings were $478,000 (0.7 percent of operating revenues), compared with $1.6 million (2.2 percent of operating revenues) for the same quarter in 2000. A sluggish economy reduced demand for Transport America’s services by its primary customers.
2001: New Leadership and Technology Offshoot
Late in 2001 Transport America announced changes in its management team, naming Michael Paxton as president and chief executive officer. Paxton had served on the Transport America Board for more than six years. He was also president and CEO of Sunbeam Health and Safety Company. Robert Meyers was appointed president and CEO of a Transport America offshoot, Techgistics, a separate technology arm through which the company intended to pursue advancements in transportation technology. The company planned to enhance and market its internally designed and customized trucking software package through Techgistics.
Transport America’s 2,200 tractors and nearly 6,000 trailers operated out of the Minnesota headquarters as well as service centers and terminals in Indiana, Wisconsin, Ohio, Iowa, Missouri, Texas, South Carolina, Georgia, and Pennsylvania. Its customer list in the early 21st century included many who relied on pickup and delivery of goods carried out in a narrow time frame. Its clients included Hon Company, P.P.G. Industries, Polaris Industries, Toys-R-Us, Wal-Mart, Sears, General Mills, Dupont, S.C. Johnson, Target, 3M, Federal Express, and Ford Motor Company.
A big part of the company’s success continued to derive from its reputation for providing 100 percent on-time pickup and delivery within narrowly defined time frames, using minimal transit time, and conscientiously handling freight traffic details for customers. Transport America’s biggest challenge in the early 21st century appeared to be maintaining its competitive edge against companies with greater financial resources, more equipment, and more hauling capability, not only other trucking firms, but also rail and air freight rivals.
TA Logistics; Techgistics.
Covenant Transport; U.S. Xpress; Werner.
Elmstrom, Dave, “Entrepreneurs of the Year: James Aronson Transport Corporation of America, Inc.,” Twin Cities Business Monthly, August 1997, p. 44.
Gaw, Jonathan, “Transportation Technology; Satellite Communications Help Dispatchers, Semitrailer Truck Drivers Keep on Trucking,” Minneapolis Star Tribune, August 11, 1996, p. 1D.
“Hansen Trucking Sold to Minnesota Firm,” Milwaukee Journal Sentinel, April 14, 1999, p. 2.
Roberts, Richado, “Cratered Deals—New Buyer Should Drive Up for Transport: Down the Road, Trucking Co. Will Likely Hook Up with Another Partner,” Mergers & Acquisitions Report, February 28, 2000.
“Transport America’s James Aronson Dies,” Journal of Commerce, December 17, 1999, p. 6.
“Transport Sells Units to Express America,” Journal of Commerce, January 15, 1999, p. 12A.
“Trucking Companies Merge in $149 Million Stock Deal,” New York Times, January 19, 2000, p. C4.
“Trucking Company’s Stock Falls with Buyout Deal Off,” New York Times, February 10, 2000, p. C4.
“Transport Corp. Plans to Repurchase Stock,” Journal of Commerce, April 10, 2000, p. 5.
“Transport Corporation Bucks Earnings Trend,” Journal of Commerce, February 14, 1996, p. 2B.
“Transportation Briefs: At Transport Corp.,” Journal of Commerce, April 26, 1995, p. 2B.
Weintraub, Adam, “Transport Corp. of America Projects Fast Growth: Trucking Firm Building New Eagan Headquarters,” Minneapolis-St. Paul City Business, December 18, 1998, p. 6.
Wolf, Liz, “Eagan Trucking Company Plans New Local HQ,” Minnesota Real Estate Journal, December 14, 1998, p. 10.