Knight Transportation Inc. reported profits plummeted 24% in the fourth quarter, blaming the results on low gas prices, a poor used-truck market and two class-action lawsuits.
The trucking company generated $22.5 million in profits for the quarter, or 27 cents per share, down from $29.2 million, or 36 cents, during the same period in 2015. For the calendar year, earnings fell 20% to $93.9 million, or $1.17.
Knight Transportation reported revenue dropped only 0.6% to $289 million in the fourth quarter but fell 5.5% to $1.1 billion for the year. Removing fuel surcharges, revenue dropped 0.6% to $264.5 million in the quarter and 3.2% to $1 billion for the full year.
CEO Dave Jackson took a positive outlook despite the lackluster results.
“The freight environment continues to show signs of improvement as we experienced more noncontract opportunities during the fourth quarter of 2016 when compared to the same quarter last year," he said. “This resulted in continued year-over-year improvements in average miles per tractor and brokerage load count.”
Jackson also cited class-action lawsuits in California and Washington that added $2.5 million in expenses to the bottom line, which he called “infrequent expenses that are unrelated to our core operations.”
The consolidated segment reported operating income, or the amount remaining after operating expenses are deducted from revenues, dropped 20% to $34.7 million. For the year, operating income dropped 17% to $148.5 million. The operating ratio, or expenses as a percentage of revenue, also deteriorated on a quarterly and annual basis. The fourth-quarter ratio worsened 230 basis points to 85.9% and for the year, 270 basis points to 85.3%.
The trucking segment suffered a similar drop during the quarter and full year. Operating income fell 22% to $30.6 million in the quarter and 17% to $135.2 million for the year. The operating ratio deteriorated 300 basis points to 83.7% in the quarter and 340 basis points to 83% for the year.
Revenue per loaded mile, excluding fuel surcharge, decreased 1.2%. Average revenue per tractor dropped 0.4%, and the average length of haul dropped 1.2%.
Knight Transportation slashed net capital expenditures in the trucking segment to $12.9 million in the fourth quarter compared with $40.6 million in the same period last year. Full-year net capital expenditures in trucking dropped to $89 million from $149.4 million. The company blamed the difficult freight environment during the full year for the drop in capital expenditures on trucks, which average 2.2 years in age.
The logistics segment also showed year-over-year declines in both periods. Operating income fell 3.6% to $4.2 million for the quarter and 16% to $13.3 million for the year. The operating ratio deteriorated 30 basis points to 93.3% in the quarter and 80 basis points to 93.9% for the year.
On a conference call with investors, Chief Financial Oficer Adam Miller also blamed lower fuel prices and the weak used-truck market for the outcome.
Knight Transportation, which ranks No. 29 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, fell 3 cents short on earnings in the quarter, 2 cents behind on annual earnings, according to a survey of analysts by Bloomberg News.