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Knight, Covenant Report Higher Profits

July 22, 2015

By Evan Lockridge

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Two primarily truckload carriers, Knight and Covenant, saw higher profits in the second quarter, but lawsuit-related expenses kept Knight from reporting more.

Knight Transportation

The truckload and logistics services provider Knight Transportation Inc. (KNX) saw its second quarter profit move slightly higher to $27.6 million.

This compares to $25.8 million a year earlier, or an improvement of 33 cents per diluted share from 31 cents a year earlier.

Total revenue during the period improved to $302 million compared to $264.2 million last year.

“We grew our consolidated revenue, excluding trucking fuel surcharge, by 22.7% while improving our adjusted operating income by 25.4%,” said Dave Jackson, president and CEO. Both the trucking and logistics segments contributed to the company's growth, he said.

During the second quarter Knight accrued $7.2 million of expense, $4.4 million after-tax, related to expected settlement costs for two class action lawsuits involving employment-related claims in California and Oregon.

The trucking segment's adjusted operating ratio during the quarter improved to 78.8% from 79%. Its revenue growth, excluding trucking fuel surcharge, was 24.2%, while improving adjusted operating income by 25.8%.

“Despite less transactional customer demand, we continue to experience positive results from our efforts to improve yield,” Knight said in a statement.

Revenue per tractor, excluding fuel surcharge, increased 2.7%, year over year, due to a 6.7% improvement in revenue per loaded mile and a 2.6% increase in length of haul. If was offset by a 1.4% decrease in average miles per tractor, and an increase in the company's non-paid empty mile percentage.

The logistics segment’s operating ratio in the second quarter improved to 93.5% from 93.6% for the same quarter last year. Revenue increased 17.5%, operating income by 20.8%. The brokerage business, the largest component of Knight's logistics segment, increased revenue 31.3%, with a 38.4% improvement in operating income, when compared to the same quarter last year. Load volume in the brokerage business increased 64.3%, while revenue per load was driven down by lower fuel surcharges and a shorter length of haul.

Revenue in the intermodal business fell year over year by 16.1%. However, Knight said it achieved an 89.5% operating ratio as compared to 99% the same quarter last year.

More information is on the Knight Transportation website.

Covenant Transportation Group

The Tennessee-based parent to Covenant Transportation and other trucking companies saw its profit more than double in the second quarter of the year.

Covenant Transportation Group Inc. (CVTI) reported income of $11 million, or $0.60 per diluted share, compared with net income of $3.8 million, or 25 cents per diluted share a year earlier.

Part of this was due to a 21.3% increase in weighted average diluted shares, resulting primarily from the company’s public stock offering of 3,036,000 common shares completed in November, according to CTG.

Total revenue amounted to $175.5 million, an increase of 1% compared with the second quarter of 2014, while freight revenue of $152.1 million (excluding revenue from fuel surcharges) increased 10.6%.

“While the pace of domestic economic growth remains uncertain, we believe the trucking economy’s freight demand and capacity remain closely in balance as the driver market remains tight."

“The financial results of the second quarter of 2015 marked the best second quarter in our history,” said Chairman, President, and CEO David Parker. “While the pace of domestic economic growth remains uncertain, we believe the trucking economy’s freight demand and capacity remain closely in balance as the driver market remains tight."

For the quarter, total revenue in CTG’s asset-based operations increased to $162.8 million, $2.5 million higher than compared with the second quarter of 2014. This consisted of higher freight revenue of $15.2 million, partially offset by lower fuel surcharge revenue of $12.8 million.

The $15.2 million increase in freight revenue related to a 6.1% increase in average freight revenue per tractor per week, a 129-truck, or 5%, increase in its average tractor fleet, and a $1.2 million increase of freight revenue from CTG’s refrigerated intermodal service offering.

Team-driven trucks increased to an average of 951 in the second quarter of 2015, an increase of approximately 18.9% over the second quarter of 2014, as well as a 2.5% increase over the first quarter of this year.

Average freight revenue per tractor per week increased to $3,886 during the 2015 quarter from $3,664 a year earlier. Average freight revenue per loaded mile increased by 8.6 cents per mile, or 5%, on an approximately 6.5% increase in average length of haul.

The company’s non-asset based subsidiary, Covenant Transport Solutions, saw total revenue decrease 5%, to $12.7 million.

Operating income was approximately $581,000 for an operating ratio of 95.4%, compared with approximately $565,000 and an operating ratio of 95.8% in the second quarter of 2014.

You can find more details on the Covenant Transportation Group website.

 

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