Us 1 Industries, Inc.

336 West US Highway 30, Suite 201
Valparaiso, Indiana 46385
U.S.A.
Telephone: (219) 476-1300
Fax: (219) 476-1385
Web site: http://www.usindustries.com

Public Company
Incorporated: 1981 as Transcon Inc.
Employees: 98
Sales: $191.0 million (2006)
Stock Exchanges: Over the Counter
Ticker Symbol: USOO
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload

POST–WORLD WAR II ORIGINS

IMPACT OF 1980 DEREGULATION

REBIRTH AS US 1 INDUSTRIES: 1993

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

FURTHER READING

US 1 Industries, Inc., is a non-asset Valparaiso, Indiana-based interstate trucking company that through its subsidiaries operates in the 48 contiguous states. US 1 works through independent sales agents who own their own terminals and independent truck owner-operators, paying them a percentage of the payment received from shipping customers. Rather than be involved in the high-risk business of long-haul trucking, US 1 focuses on niche areas, such as the hauling of intermodal shipping containers, local distribution and consolidation, refrigerated shipping, flatbed transportation, and oversize and overweight loads. By avoiding the high costs of operating terminals and fleets of trucks, the company has enjoyed steady growth since adopting its current business model in the mid-1990s. US 1 is a public company, its stock available for trading on an over-the-counter basis.

POST–WORLD WAR II ORIGINS

While US 1 as currently organized is a relatively young company, its roots reach back to 1946 when it was founded in California as Transcon Lines to operate as a local shipper in the Los Angeles area. As the economy boomed in the postwar years and the Interstate highway system took shape across the country, Transcon grew rapidly through acquisitions, beginning with the 1950 purchase of Kansas City-based Clark Transportation Co.

By the end of the decade, Transcon owned about 350 tractors and more than 500 trailers, and operated out of 26 terminals located in 13 states spread across the country. Other notable transactions during this time included the 1956 addition of operating routes into the San Francisco Bay area; the purchase of Keystone’s line, which took Transcon into Missouri and Arkansas; and the M. & D. Truck Lines purchase that brought Texas and Oklahoma routes. Transcon expanded into Birmingham, Alabama, and Atlanta, Georgia, in 1959 through the purchase of B. & M. Express, and in that same year entered the St. Louis market by obtaining the operating rights of Missouri-Oklahoma, Inc., to that city.

In 1960 Transcon was generating about $22 million in revenues. In that same year, Lee R. Sollenbarger joined the company as vice-president of operations. He would become president, chief executive officer, and chairman, and emerge as a major figure in the trucking industry. In 1975 he was named chairman of the

American Trucking Association, a powerful Washington lobbying group. Sollenbarger’s career in trucking was unintended. He was born on a small farm in Colorado in 1912 and after graduating from high school in 1930 spent the next several years drifting from one job to the next, including stints at a flour mill, chemical laboratory, a grocery store, and a candy factory where he met a sales representative from Denver-Chicago trucking who suggested he consider becoming a rate clerk. In 1937, after taking a correspondence course in transportation, he joined Denver-Chicago, one of the first true transcontinental carriers. He worked his way up through the ranks, eventually becoming executive vice-president in charge of traffic and gaining a seat on the company’s board of directors.

During Sollenbarger’s 23-year tenure Transcon enjoyed rapid growth, fueled in large measure by acquisitions. By 1965 the company was truly a transcontinental carrier. Increasing at a 20 percent clip each year, revenues reached $66.4 million in 1966. The company’s most significant acquisitions of the decade then followed: the $4.8 million purchase of Indianapolis-Kansas City Motor Express Co. in 1967, adding about $9 million in annual revenues, and a year later the $8 million purchase of Detroit-based Kramer-Consolidated Freight Lines, Inc., which increased revenues by another $25 million. As a result, Transcon was operating 41 terminals, 15 of which were company-owned. Also of note, in 1968 Transcon gained a coveted listing on the New York Stock Exchange.

The 1970s was a period of continued growth while making accommodations to the marketplace. Focused on transcontinental truckload hauls, Transcon began to turn its attention to more profitable less-than-truckload freight. In addition, the company had to adjust to the relocation of industry to outlying areas in major cities. Saddled with large terminals that were no longer ideally situated, Transcon sold several of these facilities in the early 1970s. Yet overall the number of terminals in the network grew to about 100, spread across 31 states, as Transcon expanded its operations into new parts of the country. It obtained the operating authority and assets of UN-Norwalk Truck Lines, adding routes to Milwaukee, Denver, Seattle, Spokane, and Portland, Oregon. Direct service to the major cities in Georgia and the Carolinas was added with the $3 million purchase of Central Motor Lines. Transcon also bought the operating rights of bankrupt Eastern Freightways, which brought routes to Massachusetts, Connecticut, and Rhode Island.

Because of these steps Transcon maintained its steady growth. Revenues increased to $143.3 million in 1974 and net income approached $4 million. The poor economy resulted in the company taking a step back in 1975, when revenues fell to $133.9 million and net income dipped to $2.4 million, but business picked up again in 1976. There were ominous signs of trouble on the horizon, however. A proposal had been made by the Ford administration to limit the control of the Interstate Commerce Commission over trucking, allowing companies to carry a wider range of goods and to serve new routes. In this way, the free market would replace the restrictions that had been in place since 1935, intended to protect the public interest. Trucking executives opposed deregulation, fearful of the results. Sollenbarger was one of the most outspoken. “I have built a career in transportation,” he said in a speech reported by the New York Times. “I’ll be damned if I am going to stand by quietly and watch a bunch of academic theorists who have never operated a truck, or even a fork lift, or made out a bill of lading, or arranged for a shipment of any kind, bring the whole thing tumbling down over my ears.”

IMPACT OF 1980 DEREGULATION

Although ATA and others in the trucking industry fought against it, deregulation had support from both Republicans and Democrats, and in 1980 the Carter administration enacted the Motor Carrier Act of 1980. Sollenbarger retired from Transcon and would not have to contend with the effects of the changing marketplace. While a success from many perspectives, deregulation led to the demise of a multitude of trucking companies in the 1980s, due to vicious rate wars and high fuel costs. Transcon Lines, now a subsidiary of Transcon Inc. (formed in California in 1981), also found it difficult to compete in the new environment. Moreover, it employed union drivers, unlike much of the new competition, which put the company at a severe competitive disadvantage.

COMPANY PERSPECTIVES

US 1 Industries is an administrative service provider partnering with independent business owners enabling them to successfully compete in the trucking, logistics and warehousing industries.

In order to survive, Transcon tried to merge with other carriers, but these efforts failed, and in 1988 the company lost $24 million on revenues of $322 million. The following year revenues plummeted to $226.5 million and the net loss increased to more than $30 million. Transcon was losing about $5 million a month in 1990 when it was sold to Growth Financial Corporation in April 1990 for a token $12. Less than three weeks later the company was out of business, and millions of dollars in assets had been siphoned off. The Los Angeles Times reported that Growth was controlled by Leonard A. Pelullo, a Miami businessman who had been accused of fraud in some of his past business dealings, and according to the New Jersey Commission on Investigation he was a “key organized crime associate,” part of Philadelphia’s Scarfo crime family. In Transcon’s bankruptcy proceedings, trustee Leonard L. Gumport maintained, “Within a few weeks of Growth’s acquisition of Lines, Lines became a shell.” He added, “Though the liabilities remain, virtually all Lines assets, other than accounts receivable, are gone.” The Los Angeles Times also reported, “Documents filed in court indicate that two days after a firm linked to Pelullo acquired Transcon Lines, the trucker’s bank accounts started to shrink.” Thus, Transcon appeared to be a victim of the “bustout” technique that mobsters employed to devastate many trucking firms in this post-deregulation period, removing all cash and assets and allowing them to collapse. The government eventually caught up to Pelullo, who was convicted in 1996 by a federal jury for looting a New Jersey printing company of $4 million just one year after Transcon suffered a similar fate. He was convicted and sentenced to 17 years in prison.

REBIRTH AS US 1 INDUSTRIES: 1993

In September 1993 a group of Indiana investors acquired a controlling interest in what was left of Transcon and three of them assumed day-to-day control of the business. They included CEO Michael E. Kibler, former president of Enterprise Truck Lines, Inc.; treasurer James C. Day, the controller of K & A, Inc., a support services company for Transcon and other trucking companies; and controller Richard Courtney, the former controller of Eastern Refrigerated Express, Inc. Transcon’s administrative offices were moved from California to Gary, Indiana. In December 1993 Transcon shareholders agreed to reincorporate the business in Indiana under the US 1 Industries, Inc., name, changes that were completed in the early months of 1994.

With a new management team in place under a new name in a new state, the company took steps in late 1994 to rebuild the business, almost from scratch, with employee drivers and leased vehicles. In January 1995 US 1 entered the less-than-truckload refrigerated truck transportation sector through the acquisition of Landair Services, Inc., but this move did not pan out. Management came to realize that its most valuable asset was not its trucks or terminals but its system, the way it was able to efficiently secure permits, bill for services, and collect payments. Thus, in 1996 US 1 began to focus on building up a roster of independent agents to which it could essentially outsource the terminal operations and actual hauling.

US 1 posted revenues of $15.4 million in 1996 and realized a $300,000 profit. Late in the year, the company formed a pair of Houston subsidiaries, Gulf Line Transportation and Gulf Line Brokerage, followed in 1997 by the creation of two Charleston, South Carolina-based subsidiaries: Carolina National Logistics and Carolina National Transportation. While revenues improved to $25.4 million in 1997, the expense of opening these new units led to a loss of $200,000 for the year. The success of Carolina National Transport was a key factor in US 1 enjoying steady growth through the rest of the 1990s, as the company sought to pay off debt and sustain profitable operations. Revenues reached $32.3 million in 1999 and net income topped $400,000.

KEY DATES

1946:

Transcon Lines is formed as a Los Angeles– area carrier.

1968:

New York Stock Exchange listing is obtained.

1990:

Transcon declares bankruptcy.

1994:

Name is changed to US 1 Industries, Inc.; company relocates to Indiana.

1997:

Carolina National Transportation is formed.

2001:

ERX, Inc., is acquired; Harbor Bridge Intermodal, Inc., is established.

2007:

Revenues increase to $191 million.

The pace began to pick up significantly at the start of the 21st century. Carolina National continued to grow, Keystone’s oversize-load business made a healthy contribution, as did a pair of start-up companies, CAM Transport, Inc., and Unity Logistics, Inc. As a result, revenues jumped more than 50 percent to $49.1 million and net income improved almost fourfold to $1.6 million. In 2001 US 1 also grew through external means with the acquisition of Transport Leasing Services, Inc., and Transport Logistics LLC—Ft. Smith, Arkansas, non-asset based companies that specialized in inter-modal drayage and brokerage transportation. In addition, US 1 acquired Kearny, New Jersey’s ERX, Inc., an agent/owner-operator trucking firm. These purchases reduced net income slightly but revenues continued to enjoy healthy growth, topping $72 million in 2001.

US 1 established Harbor Bridge Intermodal, Inc., in 2001, which helped to increase revenues beyond the $100 million mark in 2002, to $104.2 million, while net income remained in the $1.6 million range. Late in the year the company also formed Patriot Logistics, Inc., which relied on employees to monitor and coordinate shipments rather than independent agents. A similar operation was then added in 2002. Revenues increased to $143.3 million in 2004 but US 1 barely broke even on the year. The following year, the company netted more than $4.2 million on revenues that improved to $175.6 million, mostly due to the success of the new subsidiaries. The trend continued in 2006 when revenues reached $191 million and net income grew to $4.4 million.

Ed Dinger

PRINCIPAL SUBSIDIARIES

Blue & Grey Transport, Inc.; Carolina National Logistics, Inc.; Carolina National Transportation, Inc.; Keystone Logistics, Inc.; Gulf Line Transport, Inc.; Keystone Lines, Inc.; Harbor Bridge Intermodal, Inc.; Patriot Logistics, Inc.

PRINCIPAL COMPETITORS

J.B. Hunt Transport Services, Inc.; Landstar System, Inc.; Universal Truckload Services, Inc.

FURTHER READING

“Acquisitions Help Transcon Lines Rumble Toward New Operating Peak,” Barron’s National Business and Financial Weekly, January 22, 1968, p. 28.

Blumenthal, Ralph, “Those Truckers Love Their Chains,” New York Times, June 13, 1976.

Campanella, Frank W., “Transcon Lines En Route to Fresh Earnings Peak,” Barron’s National Business and Financial Weekly, December 6, 1976, p. 38.

Gellene, Denise, “The Death of Transcon,” Los Angeles Times, December 9, 1990, p. D1.

“Quickening Business Activity to Fuel Brisk Recovery for Transcon Lines,” Barron’s National Business and Financial Weekly, May 29, 1961, p. 28.

“Steady Expansion of Routes Fuels Operating Results of Transcon Lines,” Barron’s National Business and Financial Weekly, August 3, 1959, p. 26.

“Transcon Lines Highballs to Peaks in Profits for Fifth Year in Row,” Barron’s National Business and Financial Weekly, April 12, 1965, p. 27.