News Details

Knight Transportation, Inc. (NYSE: KNX), one of North America’s largest and most diversified truckload transportation companies, today reported revenue and net income for the fourth quarter ended December 31, 2016.

The following table reflects key financial highlights for the fourth quarter and full year of 2016 and 2015.

The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on December 2, 2016, which was paid on December 27, 2016.

Dave Jackson, President and Chief Executive Officer, commented on the quarter, “The freight environment continues to show signs of improvement as we experienced more non-contract opportunities during the fourth quarter of 2016 when compared to the same quarter last year. This resulted in continued year over year improvements in average miles per tractor and brokerage load count. Although our revenue per total mile continued to be down year over year, we experienced stronger sequential revenue per total mile growth from third quarter to fourth quarter this year when compared to the same period last year. With declining new truck orders, a weak used equipment market, and additional regulatory burdens expected to phase in during 2017, we expect continued improvement in the supply/demand relationship in the coming quarters.

“Our adjusted earnings per diluted share for the quarter were $0.29, compared to our adjusted earnings per diluted share of $0.36 in the same quarter last year. During the quarter, revenue per loaded mile, excluding fuel surcharge, decreased 1.2%, which negatively impacted our results by approximately $0.02 per share when compared to the same period last year. Less gain on sale of revenue equipment, increased net fuel cost, and lower other income also negatively impacted our results by approximately $0.05 per share. Driver pay continues to be inflationary when compared to the same quarter last year, which resulted in a $0.01 per share impact during the quarter. The effective income tax rate for the quarter was 36.1% versus 34.9% for the fourth quarter of 2015, which negatively impacted our results by approximately $0.01 per share. These negative items were partially offset by cost control efforts that resulted in combined savings of approximately $0.02 per share across several administrative departments.

"During the fourth quarter of 2016 we accrued $2.5 million of expense ($1.5 million after-tax) related to expected settlement costs for two class action lawsuits involving employment-related claims in California and Washington. We have provided adjusted financial information that excludes these expenses from our results of operations. We believe the comparability of our results is improved by excluding these infrequent expenses that are unrelated to our core operations."

The following table reflects our consolidated financial performance and that of our trucking and our logistics segments for the fourth quarter and full year of 2016 and 2015.

In the fourth quarter, the trucking segment achieved an adjusted operating ratio of 83.7% compared to 80.7% from the same quarter last year. We continue to improve the utilization of the fleet, as average miles per tractor improved 0.7% on a year over year basis. Revenue per tractor, excluding fuel surcharge, decreased 0.4%, year over year, as lower average revenue, excluding fuel surcharge, per loaded mile offset the improvement in average miles per tractor. Higher net fuel expense, less gain on sale of revenue equipment, and higher driver related expenses were the main factors negatively impacting our operating results when compared to the same period last year. We remain focused on improving the productivity of our assets, developing our freight network, and intensely controlling our costs.

During the fourth quarter of 2016, the logistics segment produced an operating ratio of 93.3% compared to 93.0% for the same quarter last year. Our logistics segment consists of brokerage, intermodal, and other logistics services. Revenue was essentially flat despite exiting our agriculture sourcing business in the first quarter of 2016. Compared to the same quarter last year, load volumes in our brokerage business increased 8.2% while gross margin percentage contracted 50 basis points. Brokerage revenue increased 6.3% when compared to the same quarter last year as increased load volume was offset by a 1.7% decline in revenue per load. We plan to continue to invest in and grow our logistics service offerings, which require comparatively little capital investment, as we seek to continue to improve our consolidated return on capital.

The used equipment market remained soft during the quarter and resulted in gain on sale of revenue equipment in the fourth quarter of 2016 of $0.7 million, compared to $3.2 million in the fourth quarter of 2015. The average age of our tractor fleet is 2.2 years, which has increased from 1.8 years from the second quarter of 2016. With rising new equipment prices and a weak used equipment market, we have extended the expected trade cycle of our tractors. We have been proactive in managing our preventative maintenance program with a goal of mitigating the additional maintenance cost associated with a slightly older fleet.

Over the last twelve months ended December 31, 2016, we have returned $59.5 million to our shareholders in the form of quarterly dividends and stock repurchases. We ended the quarter with $8.0 million of cash, $18.0 million of long-term debt, and $786.5 million of shareholders' equity. Our net capital expenditures during 2016 were $89.0 million, while our cash flow from operations was $243.4 million. We expect our net capital expenditures in 2017 to be within a range of $95.0 to $110.0 million, which will primarily be used to replace existing tractors and trailers that will reach our current trade cycle during the year. We do not plan to grow our asset-based tractor fleet internally until we see significant strength in customer demand combined with stronger non-contract and contract rate markets.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting. The objective of this update is to simplify several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for us beginning January 1, 2017, with early adoption permitted.

During the fourth quarter of 2016, we elected to early adopt the new guidance. The primary impact of adoption was the recognition of excess tax benefits as a reduction to income tax expense rather than paid-in capital, for all periods in 2016. The early adoption requires a recast of consolidated financial statements previously issued during 2016, the year of adoption. Therefore, our three months ended March 31, 2016, June 30, 2016, and September 30, 2016 now reflect an excess tax benefit, recorded as a reduction to income tax expense instead of additional paid-in capital, of $446,640, $243,433, and $416,697, respectively.

The company will hold a conference call on January 25, 2017, at 4:30 PM ET, to further discuss its results of operations for the quarter ended December 31, 2016. The dial in number for this conference call is 1-855-733-9163. Slides to accompany this call will be posted on the company’s website and will be available to download prior to the scheduled conference time. To view the presentation, please visit http://investor.knighttrans.com/events, “Fourth Quarter 2016 Conference Call Presentation.”

Adjusted operating income, adjusted operating ratio, adjusted net income attributable to Knight, adjusted earnings per diluted share (EPS), and free cash flow are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. These non-GAAP financial measures supplement our GAAP results in evaluating certain parts of our business. We believe that using these measures affords a more consistent basis for comparing our results of operations from period to period. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables at the end of this press release.

Knight Transportation, Inc. is a provider of multiple truckload transportation and logistics services using a nationwide network of business units and service centers in the U.S. to serve customers throughout North America. In addition to operating one of the country’s largest tractor fleets, Knight also contracts with third-party equipment providers to provide a broad range of truckload services to its customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors.