Knight Transportation, Phoenix, saw revenue fall for the fourth quarter of 2008 but net income increase compared to the same period of 2007.


For the quarter, total revenue fell 6.3 percent, to $174.8 million from $186.5 million for the same quarter of 2007. Revenue before fuel surcharge decreased 5.5 percent, to $143.6 million from $151.9 million for the same quarter of 2007. Net income for the quarter increased 16.8 percent to $16.1 million from $13.8 million for the same period of 2007.

For the year, total revenue increased 7.5 percent, to $766.9 million from $713.6 million for the same period of 2007. Revenue before fuel surcharge fell 1 percent, to $595.6 million from $601.4 million for the same period of 2007. Net income for the year fell to $56.3 million from $63.1 million for the same period of 2007.

"The fourth quarter operating environment was challenging and reflected the broad-based economic weakness that is now widely known," said Chairman and CEO Kevin P. Knight. "Typical seasonal shipping patterns did not hold as volumes were uncharacteristically weaker in the quarter." This is the third consecutive year where a strong 'peak' shipping season did not materialize in the fourth quarter, he noted, and price competition remained intense.

"Despite these challenges and the resulting year-over-year decline in our revenue, we were able to grow operating income by 20.7% and diluted earnings per share by 20.2% in the quarter," Knight said. The company generated $48.8 million in cash flow from operations and finished the quarter debt-free with $53.9 million in cash and short-term investments. Profitability in the quarter was helped by falling diesel prices, ongoing internal initiatives to reduce costs, and the flexibility of the company's decentralized business model to adjust and adapt to market conditions.

"We were pleased that our refrigerated truckload business and our brokerage business (on highway and rail) continued to complement our core dry van truckload business, while standing on their own from the standpoint of profitability and returns," Knight said. "These businesses, established in 2004 and 2005, respectively, contributed meaningfully to our results and reflect our strategy to bring complementary services to our customers that also bring operational and economic benefits to Knight." The company continues to explore additional opportunities, including recent drayage activities at the Southern California ports.

On a consolidated basis, Knight Transportation produced an operating ratio (operating expenses, net of fuel surcharge, as a percentage of revenue, before fuel surcharge) of 81.2% in the fourth quarter of this year compared to 85.3% in the same period last year. Equipment productivity, as measured by average revenue per tractor in the quarter, was down 4.1% from the year-ago period.

The company operated 19 fewer tractors in the quarter as the same period a year ago. "Despite nearly three years of challenging freight conditions, we are confident that we made the right strategic decision not to dramatically reduce our fleet size," Knight said. "Many large carriers have substantially reduced their fleets for either tactical or strategic reasons. Further, a substantial number of small and mid-sized carriers have been forced into bankruptcy due to tight credit, high and volatile fuel prices and challenging industry pricing. We believe that this dynamic could eventually set the stage for tighter industry capacity and more favorable rates."

Last quarter Knight launched Squire Transportation, LLC, a wholly owned subsidiary that is a training company focused on developing skilled, productive, and safe drivers, with the first program located in Indianapolis. "At some point in the future we expect that industry supply and demand fundamentals will come back into balance," Knight said. "As they do, we can expect to see renewed pressure to recruit and retain qualified drivers. We believe that Squire will be very beneficial to us in this regard."