Central Freight Lines: Retrospective
Central Freight Lines Inc (CFL), a regional American less-than-truckload (LTL) firm based in Waco, Texas, and catering to the Southeastern and Southwestern regions of the United States, held a significant presence as the largest and most enduring freight carrier in Texas throughout its history.
However, on December 11, 2021, during an unparalleled boom in the trucking industry marked by exceptional spot prices and unprecedented LTL rates, Central Freight Lines announced its decision to cease operations.
Founding and early years
Established in 1925 by a young 20-year-old named William W. "Woody" Callan, the company originated as the Central Forwarding Warehouse Company. Its early focus centered on local household goods moves, relying on a sole Ford Model-T truck. The company underwent incorporation in 1927, and by 1928, it had already established regular routes connecting Dallas, Fort Worth, and Austin.
However, the enactment of the Motor Carrier Law of 1929 by the Texas Legislature, which prohibited common carriers from transporting diverse classes of goods, compelled Central to segregate its household-goods activities, leading to the birth of Central Forwarding Inc. for these services, while the general freight operations were rebranded as Central Freight Lines (CFL). Although they operated independently, they shared leadership, facilities, and equipment. CFL's growth continued, and it expanded its coverage to include San Antonio and Houston in 1933. By 1938, the company boasted a workforce of 200 employees, along with 85 trucks and 25 trailers.
The divergence in growth between CFL and its counterpart became increasingly evident by 1951, prompting a formal split. The sibling company, eventually rebranded as Central Transportation Systems, was later acquired by Spectrum Relocation Group of El Paso, Texas in 2005, operating as a subsidiary within Spectrum's Appleton Moving Company division.By 1955, CFL had amassed a workforce of 1,100 individuals and operated a fleet of 900 trucks.
Deregulation
In 1979, Woody Callan, Jr., succeeded his father, Callan, as president of the company and navigated it through a challenging era.
Throughout the 1980s, CFL faced internal pressures stemming from unionization efforts and external obstacles due to the deregulation brought about by the Motor Carrier Act of 1980. Despite these hurdles, the company managed to continue its growth, especially extending its presence into west Texas.
In 1984, Central Freight Lines accomplished significant expansions by acquiring Curry Freight Lines and Perry Motor Freight, along with taking over more than 75 intrastate routes when Red Arrow Freight Lines ceased operations on its intrastate Texas routes. In that same year, Central was honored with the 1984 American Trucking Associations’ (ATA) President’s Trophy.
Tragically, in 1987, the company's founder, W.W. Callan, Sr., who had also served as Chairman of the Board, passed away.
Major Shift in the 90s
In 1991, Central obtained interstate operating authorization encompassing the continental United States. During the same year, the company embarked on expansion efforts into Oklahoma, followed by Arkansas, New Mexico, and Tennessee in the subsequent year.
Woody Callan, Jr. and his sister, Diana Callan Braswell, retired from their positions at CFL in 1992, opting to sell their shares to the company's profit-sharing and retirement plan. This shift led to the transformation of CFL into an employee-owned enterprise. At that juncture, CFL was responsible for transporting more than half of intrastate freight within Texas.
In 1993, CFL's management and its stakeholder base, which now included employee-owners, concurred to sell the company to Roadway Services Inc. (RSI), a parcel and freight logistics company based in Akron, Ohio. CFL became a subsidiary within RSI's Roadway Regional Group, focusing its operations on the Southwest.
Under RSI's umbrella, CFL initially continued its expansion, eventually extending its coverage to include the remainder of the south-Central US along with a significant portion of the Midwest.
Amidst mounting competitive pressures exacerbated by further federal trucking deregulation, the deregulation effectively curtailed the authority of the Texas Railway Commission, leading to intensified competition within the state.
Adding to this, RSI, the parent company of CFL, found itself grappling with internal conflicts. While RSI's regional carriers remained union-free, the workforce of Roadway Express, RSI’s nationwide LTL carrier, were organized under the Teamsters union. Over time, negotiations conducted by the Teamsters led to compensation and benefits packages for Roadway Express employees that were notably up to 30% higher than those provided to RSI's non-union staff.
Given the tight profit margins prevalent in the LTL industry, this discrepancy resulted in Roadway Express, despite contributing over 40% of RSI's annual revenue of $5 billion, being less profitable compared to its non-union counterparts. The culmination of this situation came in 1994, when a 24-day Teamsters strike resulted in a $68 million loss for Roadway Express in a single quarter.
In August 1995, RSI took the step to divest Roadway Express as an independent entity, announcing its intention to become a publicly traded company. Eight years down the line, in 2003, Roadway Express would be acquired by Yellow Corporation, ultimately forming Yellow Roadway Corporation.
Following the completion of the spin-off process, Roadway Services underwent a name change to Caliber System on December 14, 1995. Just four days later, it revealed its plan to consolidate its regional carriers—CFL, Coles, Spartan, and Viking—into a unified nationwide carrier known as Viking Freight Inc. This transformation led to CFL formally becoming the Southwest Division of Viking in the subsequent year. This marked the conclusion of individual operations for Central Freight Lines.
However, Caliber struggled to realize the anticipated efficiencies from this consolidation. As a result, by 1997, it actively sought a buyer and began disposing of assets, including its former Coles and Spartan operations on the east coast. The possibility of a complete shutdown prompted former CFL management, including former president Joe Hall, to initiate negotiations for the acquisition of the former carrier. In 1997, they succeeded in purchasing a significant portion of the former CFL operations from Caliber.
Jerry Moyes and his brother Ronald Moyes financed the investment group that revived CFL. The Moyes family had an extensive history in trucking, co-founding Swift Transportation with their father in 1966 and overseeing its evolution into one of the largest carriers in the US. When CFL was reestablished on June 30, 1997, with Joe Hall as president, Jerry Moyes emerged as the principal stockholder, and the Moyes family collectively held a substantial stake in the new company.
Caliber was acquired by FedEx in 1998, leading to Viking operating under FedEx as a West Coast LTL carrier. Following the acquisition of American Freightways by FedEx in 2001, it was renamed FedEx Freight East, and Viking was renamed FedEx Freight West. The integration of all LTL services under a single entity took shape after FedEx acquired Watkins Motor Lines in 2006, resulting in the formation of FedEx Freight.
In May 1999, CFL unveiled plans to carry out a public offering of 5 million shares through an IPO. However, after this announcement, the company acquired Arizona-based Jaguar Fast Freight, Vecta Transportation with a focus on California and Nevada, and Texas-based Aggie Express. These acquisitions led CFL to postpone its IPO to 2000, according to Moyes.
By January 2000, CFL reported robust financial health, projecting revenues surpassing $300 million by year-end. Later that year, Joe Hall, who played a key role in CFL's resurgence, stepped down as President due to personal reasons. He was temporarily replaced by board member Ronald Moyes.
21st Century
In 2002, CFL purchased Utah-based refrigerated trucking service provider Simon Transportation Services (and subsidiary Dick Simon Trucking) while under Chapter 11 bankruptcy protection. Renamed Central Refrigerated Service, it promptly forecasted profitability with approximately $200 million in annual revenues post-acquisition. The turnaround was largely attributed to the divestment of over 30% of Simon's tractors and trailers. Before 2002 concluded, Central Refrigerated Service was spun off as a separate entity fully owned by Jerry Moyes, who later sold it to Swift in 2013.
On December 1, 2003, after a three-year delay, Central Freight Lines finally went public on the Nasdaq stock exchange under the symbol CENF. This IPO raised $127.5 million. In 2006, the company reverted to private ownership under Jerry Moyes.
Moyes faced challenges, including being ousted as chairman and CEO of Swift in October 2005 amid an SEC investigation into insider trading allegations involving the Phoenix Coyotes NHL team. Around the same time, Moyes stepped down from CFL's board reportedly due to conflicts with the Teamsters Union, who claimed Moyes was rerouting freight from CFL to his other companies. Despite these changes, Moyes entities still owned 31.5% of CFL in January 2006, and he extended an offer to purchase the remaining shares.
As part of this arrangement, CFL absorbed one of Moyes' other carriers, North American Truck Lines. While Moyes initially planned to maintain CFL as a publicly traded entity, he later modified the agreement just before its completion to avoid financing requirements. This resulted in the complete privatization of the company. CFL's stock was delisted on November 27, 2006, and the ownership transition concluded on the 28th.
After this restructuring, CFL focused on growth through acquisitions, including the purchase of Circle Delivery Service of Tennessee in 2013, the LTL operations of Georgia-based Drug Transport Inc. (DTI) in 2014, and the acquisition of Wilson Trucking Corporation in 2017, expanding its presence in the Southeastern US. This expansion increased CFL's network to 80 terminals across the nation. In 2020, CFL acquired Volunteer Express, an LTL and FTL carrier headquartered in Nashville.
Closure
In December 2020, Moyes took on the role of interim CEO and president to address the company's financial difficulties, accompanied by significant changes to the executive team. In September 2021, CFL sold its Waco headquarters facility to local investors and continued to utilize the facility through December 2022.
On December 11, 2021, CFL's President, Bruce Kalem, confirmed that the company intended to wind down operations from December 13th due to prolonged operating losses, inability to service debt, and outstanding bills. The announcement revealed that CFL had around 2,100 employees, including 1,325 drivers. During the wind-down process, Estes Express Lines expressed interest in hiring many of CFL's drivers and extended offers for some of CFL's equipment.
CFL's closure marked the largest shutdown in the trucking industry since the closure of Celadon Group in 2019. According to Kalem, the challenges that led to CFL's closure began with the loss of a major customer in 2016 amid a debt-financed four-year fleet replacement that concluded in 2017.
CFL operated across 76 terminals in 16 states, including 20 in Texas.
Courtesy: Wiki, FreightWaves, UTA