Truckload carrier Knight Transportation is generating enough profit to update its fleet but sees few current possibilities for growth through acquisition, the company’s chief financial officer said.
Knight’s second quarter net profit jumped 26 percent to $415.8 million as revenue rose 14 percent to $185.4 million. Operating expenses as a percentage of revenue improved to 83.3 from an operating ratio of 86.8 in the first quarter.
With no debt, the company has been buying back stock. The improved results, among the best in the industry, justify investment in growth and Knight is looking for opportunities, CFO David A. Jackson told Dahlman Rose & Co.’s annual global transportation conference.
By The Numbers: U.S. IMC Highway Yield.
“When we get an operating ratio in the low 80s, we will gladly invest in the fleet,” he said. Now that Knight’s ratio is in that range, the company is updating its fleet by purchasing 100 to 150 tractors in the second half of this year.
Jackson said the company is interested in acquisitions, but the numbers generally don’t work.
Many debt-laden trucking companies owe more on their fleets than the vehicles are worth, and those that aren’t “upside-down” are interested in a sale only if they can receive a multiple of earnings before interest, taxes, depreciation and amortization, Jackson said.
“On the rare occasion we find a truckload company that has a little equity in their fleet and possibly had a good quarter, they want to start talking about multiples of EBITDA,” he said. “Unfortunately, a truckload carrier that has lost money the last two or three years and has old equipment and needs a tremendous amount of capital to refresh it (is not) a business where you talk about multiples of EBITDA.”
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