With three new service centers opening in the past year and three more on the way, it may seem that LTL carrier A. Duie Pyle (ADP) is on the verge of a massive expansion beyond its largely Northeastern footprint.
Not so, according to John Luciani, chief operating officer for the company’s LTL operations, which are about 70% of the total business.
“Virginia and West Virginia will be the end of our geographic expansion,” Luciani said in an interview with FreightWaves at the ADP Carteret, New Jersey, facility, one of the five largest in the company. He was referring to already-opened facilities in Richmond and Roanoke, Virginia, and plans to add an LTL service center in Charleston, West Virginia.
The added service centers from last year were all in Virginia: Richmond, Roanoke and Manassas. The three that are scheduled to open this year are in Charleston, W. Va. (hence Luciani’s reference to that state), Maspeth, in the New York City borough of Queens, and Pittsfield, Maine.
Luciani said in order to serve the needs of customers who want to go outside that region, ADP can connect to the rest of the nation through existing relationships with other LTL carriers. Specifically, freight can be loaded into the LTL network of Dayton Freight Lines and Southeastern Freight Lines, which can take in ADP-generated freight in such gateways as Dallas/Fort Worth, and Jacksonville, Florida.
Those relationships go back 20 years or more and “we exchange freight seamlessly to their service areas,” the Midwest for Dayton and the Southeast for Southeastern. There also is a relationship with Oak Harbor Freight for West Coast shipments, Luciani said.
A service center in Streetsboro, Ohio, near Cleveland, is the farthest west in the company’s network. With the relationship with Dayton Freight, there is no need to expand farther than that, Luciani said.
Banking on more business at the Norfolk port
With the Northeast remaining the core of ADP’s activities, and with the new service centers in Virginia, Luciani said ADP is planning for expanded East Coast port business. The new Virginia facilities are part of that strategy, he said, and there are plans for a 200,000-square-foot transloading facility outside Norfolk.That facility could take in expanded imports into Norfolk — some of them possibly diverted from a West Coast port system that is under pressure on several fronts — and inject that freight into the ADP network from that new location.
During the interview, Luciani talked frequently about the company’s centennial celebration set for next year. The same family has owned it since it was founded in 1924 by Alexander Duie Pyle, and the current CEO, Peter Latta, is part of that family tree.
The finances of privately owned Pyle are not disclosed, though it has long had a reputation as one of the better-run LTL carriers.
Luciani talked about some of the key metrics at the ADP. He joined the company in 2010 and said revenue across the entire company — including the 30% that is not under his management — was between $200 million and $225 million at that time. There was no dedicated LTL service offering, and the warehouse space under management was about 2 million square feet. ADP operated 13 service centers.
ADP’s operating ratio when he joined, Luciani said, was in the “low 90s.”
“Fast forward to where we are today,” he said. There are now 27 service centers in the Northeast and employment has risen to about 4,000 employees from 2,300 workers in 2020.
Recent OR at ADP: low 80’s
Revenue is now about $800 million, Luciani said, and the company’s operating ratio in the most recent quarter was the low 80s. That warehouse business that had $2 million in revenue is now taking in about $40 million per year, he said.
How does that OR stand up against its peers? The gold standard in LTL is Old Dominion Freight Line (NASDAQ: ODFL), which for the first quarter reported companywide OR of 73.4%. Northeast competitor Saia (NASDAQ: SAIA) posted an 85% OR in the second quarter. ArcBest (NASDAQ: ARCB) was at 95.3% for the three months ended March 31.
Pricing this year has been “stable,” Luciani said. “We’re starting to see customers testing the market, putting their request for quotes in.” The LTL sector continues to show “pricing discipline,” Luciani said. “We were successful in the first quarter,” he said of the company’s negotiations. Increases have been in the mid-single digits.
Luciani said 81% of ADP’s customers have contractual arrangements, and the other 19% are on the company’s general rate increase.
He said for the ongoing quarter, ADP’s LTL business will be down “low single digits” from a year ago.
Public LTL companies aren’t required to disclose interim quarterly results, but they do, usually at the start of the third month of the quarter. It is also with a great level of specificity, expressed as a percentage of volume changes out to one decimal point.
So far, for the LTL sector as a whole, the interim reports have been mixed. ArcBest reported an 11% drop in revenue in April and a 10% drop in revenue per hundredweight, the all-important yield figure. Old Dominion saw a 13.5% decline in revenue but a 1.4% increase in yield. Saia’s revenue was down just 1% and its shipments were down 5.7%. It did not report a yield figure.
Financially, Luciani said Pyle’s balance sheet “is strong. We have no long-term debt.” He also ticked off other statistics about ADP: Its average linehaul is 230 miles; its on-time rate for the first four months of the year was 98.8%; and its claims ratio is 0.26, meaning for every $100 it moves in freight, it gets hit with a claim of 26 cents. Luciani said the industry average is about 1%.
Asked how long it takes for a service center expansion to be implemented, Luciani said it could be as short as 18 months but could stretch to three years, “depending on the geographic location.” A new facility targeted for northeast Maryland is now going through the approval process,” he said.
A facility that sees hundreds of truck trips a day in and out is not always welcomed as a neighbor. Luiciani said ADP “goes into the local communities, we talk about how we’re a family-owned business and how we bring jobs to the local community.” One talking point: The average Pyle driver can make between $85,000 and $115,000 “pretty easily.”
Although the dedicated unit at ADP is not under Luciani’s management, he discussed its operations at length. He cited “fleet supplementation” as a major activity of ADP’s dedicated division, citing its work with supermarket chain Wegmans as an example. Wegmans has its own fleet, Luciani said, but about 50 drivers provide additional capacity as needed.
But as Luciani described it, ADP’s activities within Wegmans are so ingrained that it is almost as if they were employees. “We do unattended night deliveries,” he said. “We have the keys to the building. We have the alarm codes. We know where there is a spot for boxes painted on the floor.”
That level of cooperation raises an age-old question for a company with transportation needs: What proportion of those needs should be serviced by an in-house fleet? If it isn’t 100%, should it be 0? If it’s somewhere in between, what is the optimal level?
Not surprisingly, Luciani comes at the issue from the perspective of a company that could provide those services for customers that would be moving toward zero. “It allows those customers to focus on their core business and their core competencies,” he said. “The risk is change in our environment, with nuclear verdicts and liability and insurance markets.” He also cited the often-complex rules surrounding fuel tax reporting.
Or when the relationship is more sweeping and thorough, Luciani said, “we’ve taken over some fleets where maintenance of the company’s owned or leased equipment becomes problematic. We’ll buy their equipment or the operating leases.”
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