Third-Quarter Earnings Drop at Truckload Carriers P.A.M. and Knight
TT File PhotosTwo truckload carriers suffered significant declines in profits for the third quarter as compared to one year ago as the sector struggles to turn around a tepid market.
P.A.M. Transportation Services Inc. reported profits plummeted 40% and Knight Transportation Inc. experienced a 23% drop year-over-year.
Net income at Knight Transportation was $22.3 million, 29 cents per share. One year ago, net income was $30.2 million, or 37 cents.
Revenue also declined both before and after adding fuel surcharges to the equation. Without the surcharge, revenue fell 5.1% to $256.2 million, and with the surcharge, revenue dropped 6.5% to $280.5 million.
“The freight environment remained moderate in the third quarter of 2016 when compared to the same quarter last year,” said Knight CEO Dave Jackson. “We continued to see improvement in our asset utilization and experienced more favorable supply/demand dynamics as the third quarter progressed. We are beginning to see more non-contract opportunities in the first few weeks of October.”
The truckload and logistics units had difficult third quarters. Truckload represents about 80% of the company’s revenue and the logistics and brokerage division represents the other 20%.
In the truckload unit, revenue per tractor, excluding the fuel surcharge, decreased 0.8%, year-over-year. Revenue per loaded mile decreased 2.1%, even though the average tractor miles went up 1.6% year-over-year because rates are lower than one year ago. Operating income after subtracting expenses was $34.4 million, a 19% drop from the year prior.
The logistics division fared even worse with Knight Transportation pulling out of its agriculture business earlier this year, according to Jackson. Revenue dropped 11% to $51.9 million. Operating income after expenses were subtracted fell 33% to $2.5 million.
The operating ratio deteriorated 280 basis points to 85.6% from one year ago.
Knight Transportation reported earnings a penny higher than the consensus of analysts, as compiled by Bloomberg News.
The company ranks No. 29 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, reported earnings a penny higher than the Bloomberg News analyst consensus.
P.A.M. Transportation had a more difficult quarter with a net income of $3.5 million, or 53 cents per share, compared to $5.8 million or 80 cents one year ago.
The company acknowledged that 2016 has been a challenging year, but that they don’t regret expanding their fleet when most other truckload carriers have downsized or held steady as a cost control measure.
Revenue, on the other hand, climbed 2.1% to $109.4 million and when fuel surcharges were removed from the equation, the number climbed 4.2% to $95.9 million.
“Our situation can be summarized as the inability to increase freight rates to cover increasingly higher operating costs. As the economy remained somewhat sluggish and overcapacity existed throughout the quarter, our freight rates continued to be pressured lower,” said P.A.M. Transportation president Daniel Cushman. “This trend of declining rates is the polar opposite to that of operating costs, which continue to rise. Operating costs related to equipment, insurance and employee wages and benefits have continued on an upward trend,” he added.
P.A.M. Transportation’s expenses increased 7.4%, more than offsetting the gains in revenue and resulted in a 48% drop in earnings before interest and taxes.
Cushman partially blamed higher health care costs throughout 2016 for the results. He said rates have climbed 53% or $2.1 million higher than the costs during the first nine months of 2015.
Freight shipments within the truckload division were positive across the board. Revenue per truck per workday increased to $708 from $684 year-over-year. Revenue per week was up to $3,540 from $3,420. Total loads climbed 1.4% to 81,006 while empty miles remain relatively flat.
Operating ratio deteriorated to 93.9% compared to 87.4% one year ago. The ratio in the smaller logistics division rose to 99% from 98.5% year-over-year.
P.A.M. Transportation ranks No. 64 on the for-hire TT100.
