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Earnings Watch: Knight-Swift Affected by Merger Costs, Driver Shortage

Truckload and logistics provider Knight-Swift Transportation Holdings Inc. released third quarter earnings on Monday that showed a big drop in profit compared to a year ago, but the numbers do not paint an entirely accurate picture following the merger of the two truckload companies.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
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November 6, 2017
Earnings Watch: Knight-Swift Affected by Merger Costs, Driver Shortage

 

3 min to read


Truckload and logistics provider Knight-Swift Transportation Holdings Inc. released third quarter earnings on Monday that showed a big drop in profit compared to a year ago, but officials said the numbers do not paint an entirely accurate picture following Knight Transportation's acquisition of Swift Transportation, which closed in September.

Net income totaled $4.2 million, or 4 cents per share, compared to $24.1 billion, or 29 cents per share, a year earlier for Knight Transportation alone.

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Total revenue nearly doubled to $521.6 million from $280.5 million in the third quarter of 2016.

The reported results include the results of Swift Transportation only for 22 days after the Sept. 8 merger date, as well as significant merger-related costs, meaning comparisons to prior periods are not meaningful, according to the company.

“Our diluted earnings per share for the third quarter were 4 cents, which includes $12.3 million of legal and professional fees related to the merger with Swift, $6.6 million of other one-time operating expenses associated with the merger, $16.7 million of impairment of software assets identified after the merger and $2.5 million of amortization expense related to the $817.2 million of amortizable intangible assets recorded as a result of the merger,” said Dave Jackson, president and CEO.

Excluding these items, the company’s adjusted diluted earnings per share for the third quarter were 25 cents compared to 29 cents a year earlier.

"The freight environment has strengthened throughout the third quarter and into October,” Jackson said. “The non-contract market improved each month sequentially, leading to a 4.6% year over year increase in Knight’s revenue per loaded mile, excluding fuel surcharges, for the quarter.”

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According to Jackson, strong freight demand is beginning to impact both the contract market and customer expectations for the 2018 bid season.

The company was able to report full quarterly numbers for Knight Transportation, which showed revenue in its trucking segment, excluding fuel surcharge, fell 4.2% to $195.8 million.

It was driven by a 3.9% decrease in operational truck count and a 3.9% decrease in miles per truck. That was partially offset by a 4.6% increase in revenue per loaded mile during the period compared to the prior year quarter, according to the company.

Knight’s logistics segment revenue increased revenue 8.8% to $56.6 million.

While the company reported numbers for Swift Transportation’s different segments, it did not provide comparisons for a year earlier, since Knight-Swift has been an entitly only  Sept. 9-30 of the third quarter. However, in a statement, the company highlighting the more significant factors influencing the different segments.

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“The challenging driver market continues to be the biggest headwind faced by the Swift Truckload, Swift Dedicated, and Swift Refrigerated segments, which is pressuring our recruiting, driver wage and safety-related expenses as well as our operational truck count and utilization,” the company said. “We granted a wage increase to drivers in our Swift Truckload segment effective upon the close of the merger, which essentially made permanent the 1 cent per mile loyalty incentive we instituted when we announced the planned merger in April.”

The soft used equipment market and increasing maintenance expenses are also drags on performance, the company said.

“A strengthening freight market is developing which is supportive of yield and utilization improvement across the asset-based business units,” the company said. “Our focus is on sourcing and retaining drivers and on improving yield, safety, return on investment, efficiency and cost control.”

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