Knight-Swift Transportation - Q3 2014
October 22, 2014
Transcript
Operator (participant)
Good afternoon. My name is Pete, and I will be your conference operator today. At this time, I would like to welcome everyone to the Knight Transportation third quarter 2014 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Speakers for today's call will be Kevin Knight, Chairman and CEO, Dave Jackson, the President, and Adam Miller, CFO. Mr. Miller, the meeting is now yours.
Adam Miller (CFO)
Thank you, Pete, and good afternoon to everyone, and thank you for those who have joined the call today. We have slides to accompany this call posted on our website at investor.knighttrans.com/events, so hopefully you've had a chance to download those. Our call is scheduled to go until 5:30 P.M. Eastern Time. Following our commentary, we would hope to answer as many questions as time will allow. If we're not able to get to your question due to time restrictions, you may call 602-606-6349 following the call, and we will return your call. Again, that number is 602-606-6349. The rules for the questions remain the same as in the past. One question per participant, and if we do not clearly answer the question, a follow-up question may be asked.
To begin, I'll first refer you to the disclosure on page 2 of the presentation. I'll also read the following: This conference call and presentation may contain forward-looking statements made by the company that involve risks, assumptions, and uncertainties that are difficult to predict. Investors are directed to the information contained in Item 1A, Risk Factors, or Part One of the company's Annual Report on Form 10-K, filed with the U.S. SEC for a discussion of the risks that may affect the company's future operating results. Actual results may differ. Now I'll begin by covering some of the numbers in detail, including a brief recap of the third quarter results, starting with slide 3. For the third quarter of 2014, we earned $0.31 per diluted share versus $0.19 from the previous year.
Net income increased to 66.7% year-over-year to just over $25 million, while our operating income increased 63.9% year-over-year, just under $40 million. Revenue, excluding trucking fuel surcharge, increased 16.3% year-over-year to $227.8 million, and our total revenue increased 13.5% year-over-year to $271.5 million. Now moving on to slide 4. We ended the third quarter with over $626 million of stockholders' equity and have returned just under $80 million to shareholders through dividends over the last two years.
We continue to refresh our fleet and have an average tractor age of 1.7 years, and as of the end of the quarter, we had $37 million of borrowings under our $300 million unsecured line of credit. Subsequent to the quarter, on October 1, we borrowed just over $112 million under our unsecured line of credit to fund the acquisition of Barr-Nunn Transportation. After the transaction and factoring in letters of credit, we currently have approximately $122 million available under our line of credit, which we believe provides us the flexibility to pursue additional growth opportunities, including acquisitions and organic growth. Now moving on to Slide 5. We are pleased with the continued improvement we have seen in our return on invested capital.
Our internal initiatives, centered around increasing our revenue per tractor, growing our logistics segment profitably, and optimizing our network for efficiency, has resulted in a 210 basis point improvement in our trailing twelve-month return on invested capital since the third quarter of 2013. Dave will now provide some additional insight to our third quarter results.
Dave Jackson (President)
Thanks, Adam, and good afternoon, everyone. I'll start with Slide 6. During the third quarter, we continued to experience strong demand for our truckload services. The flexibility and responsiveness of our service center, network, and operations enabled us to provide needed capacity to our customers. In addition to our nationwide fleet, we also were able to provide meaningful capacity through our non-asset logistics businesses. We grew our revenue, excluding trucking fuel surcharges, by 16.3% compared to the third quarter of last year. In our trucking segment, we were able to improve our revenue per tractor by 7.2% by increasing our length of haul, operating with a lower empty mile percentage, and increasing our loaded rate per mile.
This also marks the 19th consecutive quarter of year-over-year revenue growth since coming out of the downturn in 2009, without any growth coming from acquisitions. On to Slide 7. Our financial performance is a result of focused execution of our plan to provide irregular route capacity in the markets we serve. We do this in an integrated way with our own capacity and the capacity provided by our third-party carrier and rail partners. We increased net income 66.7% when compared to the same quarter of last year....Since coming out of the downturn in 2009, we've averaged 14% year-over-year growth in net income over the last 19 quarters, again, without any growth coming from acquisitions.
With a combination of the improved trucking environment and our internal initiatives, our team produced a very solid quarter, and we're optimistic about continued positive results. Now to Slide 8. In the third quarter, our asset-based trucking businesses operated at a 79.6% operating ratio. We continue to see positive results from tightening capacity, improved market demand, and our internal initiatives centered around improving yield, increasing productivity, and managing our cost per mile. Our non-asset-based logistics businesses, again, experienced significant revenue growth year over year during the quarter. Our logistics segment operated at 92% operating ratio. Our brokerage business continues to develop opportunities to grow with new customers, as well as our existing customer base, as evidenced by increased revenue growth of 91.1% and increased operating income growth of 311.3%.
Although intermodal did not grow revenue year-over-year, we did see meaningful operating income improvement, as intermodal operated with a 93.7% operating ratio for the third quarter. Our model is one of industry-leading efficiency. On the asset-based trucking side, we operate with low 80s-upper 70s operating ratios, yielding a high return on invested capital. Likewise, in our logistics business, we operate with an operating ratio in the low 90s, with an even higher return on invested capital, and the income growth often outpaces the aggressive organic top-line growth. We believe this integrated model brings efficiencies to the marketplace and represents a significant growth opportunity for our company. It provides valuable capacity to our customers and solid returns to our shareholders that enable us to invest in growth, which creates opportunities for our employees. Now to Slide 9.
Our revenue per tractor continues to improve on a year-over-year basis, as our efforts and focus on improved asset productivity have been effective. We've leveraged technology, our understanding of regional freight markets and customer needs, with a strengthening trade environment to achieve these results. Now on to Slide 10. Non-asset logistics has grown to become a meaningful contributor to operating income. For the third quarter, logistics had operating income of $4.3 million, which represents 11% of the consolidated operating income for our company. As Slide 10 demonstrates, this is up from 4% in the same quarter last year. Our profitable logistics operations, which are not capital-intensive, lead to a very attractive return on invested capital for a rapidly growing portion of our business. Now to Slide 11. Our team remains focused on executing at the highest level in each of our businesses, departments, and service centers.
We have plans in place that we expect to continue to lead to improving results. Hiring and retaining quality driving associates remains the most significant challenge and represents a significant opportunity for our company. We've significantly improved our driver pay and performance bonus for our driving associates, and we remain committed to further improving the job and pay for our driving associates. We have invested in smartphone apps and in-cab communication technologies with the goal of improving the driver experience. We continue to be one of the only fleets in the country that has a daily pay option for our drivers and an extensive network of facilities where our driving associates can have face-to-face conversations with the office staff they work with. The overall trucking environment has remained strong since the fourth quarter of last year.
We expect to see continued demand improvement for our services in the coming quarters. I'll now turn it over to Kevin.
Kevin Knight (CEO)
Thanks, Dave, and good afternoon, everyone, and we appreciate you being on the call. And if you could, please turn to slide 12 now. As you know, on October first of this year, we acquired 100% of the stock of Barr-Nunn Transportation for $112.4 million, before a potential earn-out of up to $3.5 million. Barr-Nunn is a dry van truckload carrier headquartered near Des Moines, Iowa, and operates approximately 550 trucks and generates approximately $120 million in annual revenue. This is a business who has a good track record of success and operates at a high level of profitability. They have a late-model fleet and a culture of service, safety, accountability, integrity, and high expectations.
Barr-Nunn's operations have been extremely stable since the acquisition, with seated tractors being the same today as they were at the date of close. Barr-Nunn has a professional management team that will remain in place and will continue to operate the business under the Barr-Nunn name and with Barr-Nunn personnel, policies, and culture. We expect driving associates, non-driving associates, and customers to notice little change. Given the profitable nature of Barr-Nunn, along with an effective management team already in place, Knight is well positioned with resources and available capital to continue to seek out additional acquisition opportunities. Now, if we could move to Slide 13 and discuss growth. As for growth in the trucking segment, we have increased driver pay meaningfully over the last four quarters, which has increased our cost but has enabled us to operate a few more trucks.
More importantly, we believe we are positioned for additional organic fleet growth. After growing the fleet by 100 tractors from the end of the second quarter to the end of the third quarter, we plan to add an additional 100 tractors in the fourth quarter. Initially, we had hoped for this growth to be in addition to Kool Trans growth, but it will most likely include our Kool Trans growth. Kool Trans has had a successful start. We're excited about the business and feel well-positioned to continue to generate profitable growth from Kool Trans. Our logistics segment continues to grow rapidly and has become a meaningful complement to our trucking segment. We expect additional growth opportunities to continue as we demonstrate our ability to source capacity for our customers.
The last thing I would like to highlight before turning it back to Dave is falling oil prices and how that can have a positive effect on our truckload markets. For our customers, freight spend is made up of two primary components: rate per mile and fuel surcharge. Rate per mile is increasing. However, fuel surcharge is adjusting down. This is highly positive for truckload markets. Also, freight in the 650-900-mile length of haul that might move intermodally today may stay on the highway, especially with the service issues prevalent in intermodal today. I will now turn it over to Dave to discuss guidance.
Dave Jackson (President)
Thank you. I will move to Slide 14. This is our final slide. Based on the strengthening market and our recent acquisition of Barr-Nunn, we are updating our previously announced fourth quarter 2014 guidance from $0.26-$0.29 per diluted share to $0.30-$0.32 per diluted share. Our expected range for the first quarter of 2015 is $0.26-$0.29 per diluted share. For reference, we earned a first quarter record $0.23 per diluted share in the first quarter of 2014. For the full year of 2015, we are expecting to earn between $1.32 and $1.36 per diluted share.
Some of the assumptions made by management include rates to continue to be positive year-over-year, and for miles per tractor to be relatively in line with the year-ago period, and for the used equipment market to remain strong. It also includes consideration for our recent acquisition of Barr-Nunn Transportation. These estimates represent management's best estimates based on current information available. Actual results may differ materially from these estimates. We would refer you to the Risk Factors sections of the company's annual report for a discussion of the risks that may affect results. This concludes our prepared remarks. We would like to remind you that this call will end at 5:30 P.M. Eastern. We will answer as many questions as time allows. Please keep it to one question.
If we're not able to get to your question due to time constraints, please call 602-606-6349. One more time, that's 602-606-6349, and we will do our best to follow up promptly. Pete, we'll now entertain questions, please.
Operator (participant)
At this time, I would like to remind everyone, in order to ask a question, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Chris Wetherbee of Citi. Your line is now open.
Christian F. Wetherbee (Analyst)
Great. Thanks, guys, and good afternoon.
Dave Jackson (President)
Good afternoon.
Christian F. Wetherbee (Analyst)
You know, I guess if you could give us a bit of an update of where you think the market is currently in the fourth quarter. Would love to just get a rough sense of kind of how you think about sort of the rate environment in the fourth quarter, and particularly business activity. Just want to get a rough sense if we can see these trends carrying over from the third quarter into the fourth quarter.
Kevin Knight (CEO)
Yes, Chris, I'll take that. This is Kevin. And yes, we are seeing the same trends that started in the fourth quarter of last year. They're continuing this year. We have the same issues prevalent, a slightly improving economy, intermodal service issues, the continued difficulty in recruiting quality driving associates, the continued effects of regulation. And as a result of that, we don't see significant additional capacity moving into the market to address the freight that is currently available to haul. And so, you know, we're still working hard out there to continue to develop expanded relationships with our customers.
And, if we hope to continue to grow our fleet, but the way our business is set up now, whether we're able to move it on our truck or whether we move it on a different capacity provider, it still allows us the opportunity to grow. I think probably one of the highlights for us this quarter, Chris, was you know, 16% revenue growth before fuel, and that's certainly a high for us for quite some time. And it's also prior to the Barr-Nunn acquisition, and so we continue to see a favorable market environment, and especially with what's happened to oil prices in the last 30-60 days.
We've all got to remember that, you know, many years ago, when fuel prices escalated, it really hurt our space and really helped the intermodal space. Well, today, I think, we're probably looking at future oil prices in the $75-$85 dollar range, especially with all the development of oil in our country. And so we think that's going to shape up very favorably. We feel like, you know, there is freight, what I would call being on the margin, and that's the stuff that could move a little less expensively intermodally, but probably fairly difficult to execute intermodally.
And so we believe that with the falling fuel prices, much of that freight is going to stay on the highway or even move back to highway, especially with the intensifying cost of the dray move. So we're really excited, Chris, about where the market is, and we believe that it's going to continue to be good. It's going to continue to work good for us.
Christian F. Wetherbee (Analyst)
Just one point of clarification. When you think about that, that outlook, I'm guessing that's to... it pertains to, to both the yield side as well as the demand side. I just want to make sure the yield side is also captured in those comments.
Kevin Knight (CEO)
Yeah, we feel that way, you know, we should continue to see good opportunities in on both sides of the ledger.
Christian F. Wetherbee (Analyst)
Okay. Thank you very much for the time. Appreciate it.
Kevin Knight (CEO)
Thank you.
Operator (participant)
Your next question comes from Brad Delco of Stephens Inc. Your line is now open.
Brad Delco (Analyst)
Thanks for taking my call.
Kevin Knight (CEO)
Thanks, Brad.
Brad Delco (Analyst)
Kevin, I wanted to kind of ask you a big picture question. Obviously, you guys are seeing a tremendous amount of growth in the brokerage business and taking advantage of the tightness in the market there. But if you think about some regulatory changes that could come, maybe we see an electronic log rule early next year. How do you think that over time would impact your asset-based business as well as your brokerage business? And what kind of exposure do you think you would have or your capacity providers in your brokerage business at all, in terms of the effect that may have on their utilization and their profitability?
Kevin Knight (CEO)
Well, Brad, that's a good question. First off, as you know, we've adapted ELDs at all of our asset-based businesses, including Kool Trans and Barr-Nunn. So basically, I believe that, you know, ELDs continue to constrain capacity, but we're also big proponents of making sure that everybody has an ELD in the cab of their truck, because, you know, from an industry perspective, we need that. We need to do that. You know, regulations are meant to be kept, and we need to make sure, as an industry, that we're doing all the right things in order to do the things that we need to do.
I would say, you know, on the brokerage side, you're probably referring more to our third-party carriers. And we're continuing to see more and more and more of those guys adapt to ELDs. And, you know, over time, I think we're going to be able to have visibility of their activity almost to a similar degree as to what we have visibility of our own activity. Now that's a ways down the road, and so I don't mean to say that today, but I really believe that those ELDs are going to become a standard in our industry within the next couple of years.
I, you know, I believe that for the people that do things right and for the people that, you know, it's important to follow regulations. I think it's a positive. I think it's a positive thing. You know, I don't think it specifically hurts truckload in any way because, you know, all industries are dealing with more regulation today than we were just a few years ago. So, you know, I think all in all, Brad, it's a positive. I'm glad we've adapted to them. You know, from our perspective, it gives us very valuable real-time information that we're trying to leverage and utilize to help us be more effective at running our business.
But it is a good question. It is something to think about. We don't know exactly what the eventual outcome will be, but I do think overall it would continue to keep more tightness in the market.
Dave Jackson (President)
... Hey, Brad, maybe, Dave here, I'll just add a thought on that. When you-- particularly, when we think about how, you know, we've got a very large carrier group that we've developed, and we've come to rely on more and more, and I think your question was heading in a direction of, you know, could there be a negative if they adopt ELDs? And, you know, what we've noticed with that group, that small carrier group, is that they are relatively efficient at moving the price. And so if you and moving their rate. So if you look at the purchased transportation expense, particularly from maybe the larger non-asset broker types, and I think the asset-based brokers, or blended approaches like ours, we've had similar experiences.
You know, we've seen certainly double digits and then well into the teens in terms of purchased transportation costs that are up. And so, given the nature of much of that type of freight that gets handled through a brokerage, it typically does have the ability to be a little more fluid and move with where the market needs to be. So I would suspect that, you know, as we see further adoption of ELDs, that has the effect of restricting some of the existing capacity that's out there, just given that not as many hours can be driven.
We may see in those small carriers some efficiency in how the pass-through kind of happens between pricing and a small carrier needing to get just a little bit more to offset for being able to run less miles, for what it's worth.
Brad Delco (Analyst)
No, that, that makes a lot of sense. And maybe just a quick follow-up. Do you guys have any update on what's going on with Washington on the Collins Amendment, which I guess is trying to repeal portions of the Hours of Service rule? And, and maybe what, what sort of update on timing you have for when the DOT is expected to potentially release the final rule on the ELD, on ELDs?
Kevin Knight (CEO)
Yeah, we really don't, Brad.
Brad Delco (Analyst)
Okay. Well, no, no worries. I appreciate the time, as always, and, congrats on a good quarter.
Kevin Knight (CEO)
Okay, thanks so much.
Operator (participant)
Your next question comes from Scott Group of Wolfe Research. Your line is open.
Kevin Knight (CEO)
Scott?
Scott H. Group (Analyst)
Hey, thanks. Afternoon, guys.
Kevin Knight (CEO)
Good afternoon.
Scott H. Group (Analyst)
Can we just drill into some of the assumptions for next year? I think you mentioned flattish utilization, but maybe what are you assuming for pricing, 3%-4%, 4%-5%? Just some color on what you're assuming on pricing and what kind of fleet growth you're assuming, and what you think for driver pay increases next year.
Dave Jackson (President)
Okay. Hey, Scott, I'll take that. This is Adam. On the rate side, we'd expect to see that to continue to improve, somewhat similar to what we've seen this year, but maybe, maybe not the same degree, probably close to that 4%-5% range, in terms of rate per mile. Utilization, like we said, would be relatively flat. Driver pay, certainly, we think driver pay needs to continue to increase. We've seen that up as much as 10%, some of the quarters, probably closer to 5%, this quarter. But again, we think that that pay has to go up 10-15 cents over the next 3-5 years. And we would continue to pass along a percentage of our revenue improvements over to our drivers.
So we would expect that to continue to increase. What was-
Kevin Knight (CEO)
Truck growth.
Dave Jackson (President)
Truck growth, yeah.
Kevin Knight (CEO)
Probably 2-3.
Dave Jackson (President)
Yeah, 200-300 trucks, and then certainly you'd have the growth from the acquisition that would play into that as well.
Kevin Knight (CEO)
Plus possible others.
Dave Jackson (President)
Yeah. And then certainly, we—like, we've, we've been very vocal about, you know, being acquisitive and looking for additional opportunities on the acquisition side, and so certainly that would play into our strategy as well. But obviously, that's not baked into the guidance.
Scott H. Group (Analyst)
Okay.
Kevin Knight (CEO)
And then I would say, Scott, continued, you know, continued growth in our, logistics business. You know, we've always said to the street, 25% plus. This year has been especially rapid. But we hope that it'll stay that way, but certainly, it may or it may not. So, you know, we're expecting to continue to grow that business rapidly, so.
Scott H. Group (Analyst)
Okay. That, that's really helpful. Just want to clarify one thing on your, your pricing commentary, maybe not up as much next year as, as this year. Is that just a function of your view on, on spot pricing and your exposure to spot, or, or do you think contractual pricing also decelerates a little bit next year, too?
Kevin Knight (CEO)
Well, Scott, I would just say, you know, the year before this year, 2013, our pricing was up, maybe, gosh, one or-
Dave Jackson (President)
Just over 1%.
Kevin Knight (CEO)
Just over 1%. And so from that perspective, there's probably been some catch up in our rates. That's how I'm viewing it. You know, it would be difficult for me to predict more than 4%-5% price improvement. And, you know, this year, we're certainly going to demonstrate that. And, you know, we have a nice mix of contractual business and non-contractual business, especially with the growth in our logistics business, and so it would just be hard for us to predict that, you know, we were going to do more than 4%-5%. So I think it's maybe just, you know, our view of the world and our history over the last 30 or 40 years of, you know, how this market works.
But you know, I think that's our best guess for now, for us, for our company.
Scott H. Group (Analyst)
Yeah. No, that makes a lot of sense. All right. Thank you, Kevin. Thanks, guys.
Kevin Knight (CEO)
Thanks, Scott.
Operator (participant)
...Your next question comes from Todd Fowler from KeyBanc Capital Markets. Your line is open.
Todd Fowler (Analyst)
Great, thanks.
Kevin Knight (CEO)
Hey, Todd.
Todd Fowler (Analyst)
Hey, Kevin. Good afternoon, and congratulations on the good results.
Kevin Knight (CEO)
Thank you.
Todd Fowler (Analyst)
I was hoping you could talk a little bit more about acquisitions. And, you know, to me, Barr-Nunn makes a lot of sense, given how you run the business with a decentralized model, and it's a nice kind of tuck in with your existing footprint. But I mean, is that the template that we should expect going forward, or are there other types of acquisitions that you're looking at? And if you could also give us a sense for, you know, size and potential timing, and I know the timing piece is difficult, but are there things that are, you know, sooner rather than later? Or how can we think about acquisitions going forward?
Kevin Knight (CEO)
Yeah. I would say, Todd, this, you know, we're always extremely open-minded when it comes to our acquisition activity. And you know, when you find a company like Barr-Nunn that is operating effectively and has a good management team and a good culture, you know, we look at it as though, gosh, we can maybe improve their results by a couple of points in terms of economies of scale.
And so if they're sitting at an 84, an 85 OR, 83 OR, whatever it is, if we can get a couple of economies of scale points, then, you know, that puts us right, you know, in our target range, and also reduces the risk of changes that typically might come from an acquisition. You know, Barr-Nunn also has a higher empty mile percentage than we do. So from our perspective, we might be able to help them based on our overall freight network, we may be able to help them even a point or two there. And so all of a sudden, we're looking at it like, gee whiz, why would we, why would we miss that opportunity, why would we miss that opportunity up?
So in Barr-Nunn's case, we, if we found another company, Barr-Nunn like, let's say, then it would be hard for us to take a different approach. I will say, though, that you know, you're not gonna find a lot of companies, like Barr-Nunn.
Todd Fowler (Analyst)
Mm-hmm.
Kevin Knight (CEO)
And so when we find a company that is underperforming significantly, then basically our strategy would more than likely be to integrate those operations into our network. You know, so it really, a lot of this develops, Todd, for us through the due diligence process. So basically, as we're doing due diligence, it gives us an opportunity to really harden our strategy on what is going to work the best for the company we're acquiring, for their employees, for their customers, for our shareholders, and for all of our stakeholders.
So I would just say, Todd, we try not to build a box around any of our acquisitions, and we try to really take what it will give us in the realm in the least amount of risk, to maintain the most capacity and to improve, you know, the operations, either ever so slightly or significantly. And you know, so that's really how we look at it. I would say from a size perspective, you know, it's probably hard for us to do something below $40 million or $50 million. I wouldn't say that we wouldn't.
We've got a good team here that did an excellent job on Barr-Nunn and are very capable, and so we could do something in that space. But we would hope that the opportunities for us would be Barr-Nunn-like or larger. And you know, you can't predict the timing, but I do know that in, like in Barr-Nunn's case, with the improving economy, it led to improved results, and it was, it really positioned the owners to where they were in a position to sell the company and do well on their investment and their hard work.
Basically, I do believe that with the improving environment, people that are considering selling and with their improved results, because of the economy, I think it creates more opportunity for consolidation. So, you know, that's a long-winded answer to just a simple question, but I hope it answered your question, Todd.
Todd Fowler (Analyst)
Doesn't leave me much of a chance to ask a follow-up, because you did cover all of everything that I was looking for. But just to be clear on the timing piece, there are more acquisitions now, or the sense is that there's more acquisition opportunity now because results are getting better, and sellers are-
Kevin Knight (CEO)
Yeah
Todd Fowler (Analyst)
... are happier to sell with what they're able to show you from a financial perspective?
Kevin Knight (CEO)
Yeah, because it improves their financial exit. And so, yes, I, I think, I think we're, we're in a good environment right now.
Todd Fowler (Analyst)
Okay. Thanks a lot for the time, and congratulations again.
Kevin Knight (CEO)
Thanks, Todd.
Operator (participant)
Your next question comes from Jason Seidl, from Cowen and Company. Your line is now open.
Jason H. Seidl (Analyst)
... team. You know, Kevin, just to clarify something you said, I think you talked about driver pay going up another 10%-15%. That was over a period of time. That wasn't for next year, correct?
Kevin Knight (CEO)
No, what Adam was talking about is, you know, our goal is to pay our drivers another 10-15 cents a mile over the next few years. And so-
Jason H. Seidl (Analyst)
Ah, gotcha.
Kevin Knight (CEO)
Basically, our driver pay this year has averaged being up anywhere between 5%-10%, depending on, you know, which quarter we're finishing up. And it's our view that we're gonna continue to improve driver pay. I know we're doing a little something here in the upcoming quarter, and it's our view that we need to continue to do that as much as we can. As we're able to continue to improve our revenue per mile, then you know, it puts us in an opportunity to do more from a driver pay perspective.
So, you know, our view is that, you know, let's say driver pay is up, let's just say 9 or 10% this year, and it would be our goal that it could be up, you know, somewhere between 6%-10% next year. So, but, you know, we have to get we have to be successful with the rates in order to do that, and we believe that we'll be in an environment where we can, Jason.
Jason H. Seidl (Analyst)
So that 4%-5% best guess on the rate next year is gonna more than cover you guys for that, call it 6%-10% rate hike in driver pay?
Kevin Knight (CEO)
Yeah, no, no, no question, Jason.
Jason H. Seidl (Analyst)
Okay. I think that's my two, guys. Thanks a lot for the time. I appreciate it.
Kevin Knight (CEO)
Okay, thank you.
Operator (participant)
Your next question comes from Bill Greene, from Morgan Stanley. Your line is open.
Bill Greene (Analyst)
Yeah. Hi there.
Operator (participant)
Good afternoon.
Bill Greene (Analyst)
Good afternoon. Hey, Kevin, I wanted to get a little bit more thoughts from you on some of this supply. You mentioned that you didn't feel like supply was growing, I think, in some earlier remarks, but what do you make of some of these orders that we're getting? They're pretty big, and of course, the market's responding with higher wages for drivers. So you'd assume over time, some of the tightness in drivers will get addressed a little bit. Do you feel like industry supply is kind of starting to show some signs of picking up, or do you feel like this is all just replacement?
Kevin Knight (CEO)
Well, it sure feels like, Bill, most of it's replacement. I wish I could tell you I had the answer. I don't honestly know. But, you know, ATA shows job growth, and that involves all modes of carriers, from LTL to small carriers to large carriers, and it has been absolutely anemic in our space all year and continues to be. So really, that isn't every trucking company in the world, but it is a big number of trucking companies, and most all of them would compete with us in some form or fashion, as far as the group of those that are truckload, and most of those are truckload.
So, basically, we just don't see that happening, especially as the economy improves in other sectors, as far as industry is concerned, manufacturing is concerned, housing is concerned, the services industry is taking more and more employees. And so it's... I think that's gonna keep a cap on it, Bill, and you know, I think today, we are seeing significant improvements in the efficiency of the truck and significant technology improvements. We're also seeing fuel economy improvements. We're seeing improvements that improve the job from a driver's perspective, in terms of manual, automated transmissions and so forth.
You know, I just really believe that there's been real pent-up demand that has basically been reserved for a time when you're paying more for a truck, but you're just not getting clean air out of it. You're actually getting increased efficiency. Up through, like, 2010, 2011, I mean, we were paying much more for trucks, but actually, the efficiency, the cost to maintain, the fuel economy, it was all headed the wrong direction. And so I believe that there's just been an awakening by our truckload community that, "Hey, I know I'm gonna have to pay more for the truck, but it is gonna help me be more efficient." So that's what I would say today.
Bill Greene (Analyst)
Do you think length of haul affects this at all? Like, in other words, we obviously had a decline in length of haul as fuel prices went up. Are you seeing a meaningful increase of length of haul with the fuel prices coming down? It's probably too soon, but that could also utilize the trucks in a way that we might need more than we've needed in the past.
Kevin Knight (CEO)
Well, yes, it could, and I would say, Bill, we're not seeing meaningful length of haul changes, but any improvement is good, and for years it's been headed the wrong direction. And, you know, for the last year, it's not only stabilized for us, but it's been up just a tad, you know?
Bill Greene (Analyst)
Yep.
Kevin Knight (CEO)
You know, that could, but really, I don't think that has a significant impact. I do believe that, you know, the freight that's on the margin in that 650-900 mile length of haul, where you have significant increases in drayage costs and you also have fuel prices coming down, I do think that's the space where, you know, Truckload is in a good position with long-term lower oil prices to benefit.
Brandon Oglenski (Analyst)
Yeah. Okay, great. Thanks for the time.
Kevin Knight (CEO)
Thank you.
Operator (participant)
Your next question comes from Ken Hoexter from Bank of America. Your line is open.
Kenneth Scott Hoexter (Analyst)
Great. Good, good, good afternoon. Dave, Adam, or Kevin, when you think about the expansion or growth, you're looking at adding 100 tractors now, 100 tractors in the fourth quarter, how do you differentiate between where they go, whether it's Knight, Kool Trans, Barr-Nunn? And I guess, to kind of follow on the Barr-Nunn discussion, the future acquisitions, do they stay in separate? Do you keep adding them on separate like that, or does it... Were you saying before, it depends on the type of acquisition? But I guess I'm focused on how you then differentiate your CapEx dollars and where you see the growth going.
Dave Jackson (President)
Okay, Ken. Dave here, I'll take that. I'll take all three of those questions. The first one, if I, and stop me if I miss something here, Ken, but I—when it comes to the 100 trucks, where do the 100 trucks go? It's pretty simple. They go where we have drivers, and Kool Trans is off to a very good start. And it's approaching 50 tractors. We feel comfortable with the guidance that we've given, that to end the year in that 50-75 tractor range. So clearly, they've been effective at finding drivers.
Our business in the third quarter, when I say our, the Knight Transportation dry van and refrigerated business, has been effective at finding more drivers in the third quarter than what we had seen in the previous quarter so far this year. And so the push really is for drivers. We clearly have the kind of production levels on a per truck basis that would justify adding the equipment. We can get our hands on equipment, fairly, fairly well and fairly timely, also. And there are plenty of loads, so it's all about the driver.
Now, as it relates to the acquisition, I don't think any two acquisitions are alike, but the Barr-Nunn, with the Barr-Nunn acquisition, you know, they're running the same number of trucks today that they were running at the time of the close. And their ability to attract and retain drivers will also determine to what degree Barr-Nunn grows. We've chosen, as we've, I think maybe well-publicized in the press release and the announcement, that that's a business that runs independent and for the reasons that have been stated, because of their level of performance today.
And so, maybe different than what has been the norm in the space, you know, there are massive diseconomies of scale that come with size, and oftentimes we see two acquisitions, two companies come together, and the net effect is less trucks, just down a few months down the road than what the sum of the parts were before the acquisition. And so, we're bound and determined for that not to be the case. And so Barr-Nunn is a little bit different than perhaps how an integrated acquisition that where it would be fully integrated or at least partially integrated into our existing network and operations.
Kevin Knight (CEO)
Yeah, and I would, I would just add, Dave, Ken, this is Kevin. You know, it's we like having the opportunity to look at Knight Transportation. As you know, we have that business operating under four units. We have Knight Refrigerated, we have Barr-Nunn, we have Kool Trans, and we have Port and Rail Services. And it's really. And each one of those has more than one service center, by the way, with the exception of Kool Trans. And so it really gives us multiple opportunities to really reward the management teams that are able to grow their driver base with additional equipment and opportunities to grow.
All of our folks in our company, they do better, of course, if their fleet is profitable, and they do especially better if they demonstrate profitable growth. So I believe... And then I might also add that they also do better if the non-asset-based portion of their business that comes out of their markets does better. Kool Trans is a classic example. I mean, it's the first startup we've had, and you know, from a logistics perspective, they're doing more today via logistics in terms of revenues than they are in terms of trucks.
So you know, we just, we've tried to establish a good culture, to for each one of our businesses to really be engaged in growing their markets, growing their truck count, growing their driver base. And you know, then we look at the returns on invested capital, and if they're good, and if they've got high-quality driving associates, then by dang, we're gonna support the growth.
Kenneth Scott Hoexter (Analyst)
Wonderful. I truly appreciate that insight, and appreciate the time.
Dave Jackson (President)
Thanks, Ken.
Operator (participant)
Your next question comes from Brandon Oglenski from Barclays. Your line is open.
Brandon Oglenski (Analyst)
Good afternoon, gentlemen. Thanks for taking the question here. I don't know if this is for Dave or, or for Kevin, but I'm just looking at your guidance here, and I'm trying to add up the numbers, because... And, Dave, correct me if I'm wrong, but I think Barr-Nunn is going to be accretive to your earnings next year by anywhere from 5%-7%. And so it looks like you're guiding to something like 10%, you know, non-Barr-Nunn growth. And yet, this year, you're getting closer to 30%-35%. Now, granted, you have easier comps from, you know, more challenging 2013.
But when I hear you growing the tractor fleet, you know, a couple hundred units, getting pricing of 4%-5%, you know, are we missing something on the cost side or the margin side that would suggest maybe margins aren't going to be quite as robust in 2015?
Dave Jackson (President)
Well, I think, when you look at next year, you want to look at Barr-Nunn in that $0.11-$0.12 range,
Brandon Oglenski (Analyst)
Mm-hmm.
Dave Jackson (President)
from an EPS perspective. You know, when we talked about, when Adam kind of walked through where we're seeing things, we're looking at a little bit more conservative pricing than what we saw this year. Hope to be surprised to the upside, but based on what we've done, what we've raised it this year, that 4-5 is where we're targeting that. You're looking at about another 5%, give or take, fleet growth by adding the 200-300 trucks. And then you've got this very fast-growing non-asset business that spun off a 92 OR in this quarter, and so it's meaningful operating income as well that's dropping down to the bottom line from that.
That might be a piece that maybe hasn't been modeled, and frankly, we've just talked about it in terms of 25%+ revenue growth, but that's a business that has far exceeded that, and seems to have been accelerating in its growth of both revenue and income. And so we have aggressive growth targets for that business next year as well.
Brandon Oglenski (Analyst)
Okay. So it sounds like it could be a bit conservative if the market holds pretty positive for you guys.
Dave Jackson (President)
It could be, and I think, you know, we've now... Last year, first quarter was a very strong earnings growth quarter for us that we're comparing against, and so that might look a little conservative right now. But, you know, if you start from there and you piece, and you back into the number, you know, we've got, I mean, that's meaningful double-digit earnings growth for us, for our business throughout the year, and very healthy performance on top of the $0.11 or $0.12 that we hope and expect to get out of the Barr-Nunn transaction.
Brandon Oglenski (Analyst)
Okay. Well, listen, I appreciate it.
Dave Jackson (President)
You bet, Brandon.
Operator (participant)
Your next question comes from Rob Salmon from Deutsche Bank. Your line is open.
Rob Salmon (Analyst)
Hey, good afternoon, guys.
Dave Jackson (President)
Hi, Rob.
Rob Salmon (Analyst)
Hey, you know, Dave, as a follow-up to Brandon's question, could you give us a little bit more color in terms of what your expectations are for the logistics growth looking out to next year, as well as the gains on sales that you're modeling in?
Dave Jackson (President)
Well, you know, they're big numbers, and, you know, I'm not sure how comfortable we are sitting right now talking about that. What I'll tell you is, when we look at both of our, the main components of the logistics, of course, being brokerage and intermodal. When we look at that from a run rate, we're very quickly on a run rate now of close to $200 million with those, both of those businesses. When we look at other non-asset-based businesses, several of which are private, and you look at their growth trajectory, and once they hit a certain size and scale, they seem to grow at very rapid paces, at a very rapid pace when they hit our level. We're hoping for something like that.
You know, if that were to hold true, that would, that would mean somewhere in the neighborhood of $75 million plus next year, in 2015, of growth, in addition to, where we're, where the run rate is today. So, that's aggressive. Not quite ready to start quoting a percentage of growth there, but, but we like what we see. We think there's a lot of opportunity, there. So that's, that's probably the best I could guide you at this point, Rob.
Kevin Knight (CEO)
Yeah, and I would just add, Rob, this is, this is Kevin. I mean, you know, that, that logistics space, we're, we're a trucker, and so we've, we've always been on the asset side of things. And but I will tell you, it, it is what Dave says, many of these guys that have been very successful in that space, it's, it's like once you hit a certain amount of doing that, it, it seems like more and more and more just comes, and it comes very rapidly. And I would say we're staffing the business to prepare for that. But because we have such limited experience at these growth levels, you know, it's hard for us to forecast that-
Rob Salmon (Analyst)
Yeah. Well said.
Kevin Knight (CEO)
Is how I would describe it, Rob.
Rob Salmon (Analyst)
That's very fair. I guess, for a little bit more color on the Barr-Nunn,
Dave Jackson (President)
Yeah.
Rob Salmon (Analyst)
You guys called out, they've got a big exposure to kind of the expedite segment.
Dave Jackson (President)
Uh-huh.
Rob Salmon (Analyst)
This morning, one of the small parcel players was calling about, for about 9% volume growth across their network during the peak season. Can you talk a little bit about the seasonality to Barr-Nunn's business, given that exposure? I would imagine it's more fourth quarter weighted, but you know, any color you can provide would be helpful.
Kevin Knight (CEO)
... Yeah. Well, I would just say, you know, Barr-Nunn would be, they would feel a lot of pressure in the fourth quarter to provide as much good service as they can. But I will tell you, they felt a lot of pressure in the first, second, and third quarter. Now, in the first quarter, they were probably stuck in the snow like everybody else, in the Midwest and Northeast. But yes, with their customer base, they do, you know, they do experience stronger demand in the fourth quarter. But, you know, I got to tell you, truckload has been a big benefactor of what I would call, you know, e-commerce, bigger than anybody predicted.
It seems like all of us have those e-commerce opportunities that present themselves now in the fourth quarter on top of already the retail demands that we have. So, that's how I would answer it, Rob.
John Larkin (Analyst)
Helpful. Appreciate it.
Kevin Knight (CEO)
Thank you.
John Larkin (Analyst)
Thanks.
Operator (participant)
Your next question comes from Allison Landry from Credit Suisse. Your line is open.
Allison Landry (Analyst)
Thanks. Good afternoon. So, I want to spend a little bit more time on the non-asset-based business. Specifically, how well do you think that the operating ratio here can go? I mean, you're already at 8% margins, which is pretty high for this sector. And thinking about the fact that the segment's growing significantly faster than truckload, how do we think about consolidated operating margins over the longer term? And in other words, you know, how do you think about balancing operating margins and returns?
Dave Jackson (President)
Yeah, Allison, we, we really target that business in the low 90s. So 90, 92-93 operating ratio with the type of top line growth that we're pushing, we feel very comfortable with that. It's largely a variable-based business, so our belief is that if you can't be profitable today, then it may be very difficult to be profitable in the future. So we've been a little slow in starting and figuring out the right approach. Frankly, the longest piece probably was really integrating the market efforts that we have with our existing asset-based business and really tapping into that, leveraging that. We're not fully there yet, but we're there in enough places and with a very small number of the real potential customers we could be there with.
And so, that's a business where I would say our growth there is more limited by finding quality candidates, quality employees, to help us continue the business to grow.
Kevin Knight (CEO)
And Allison, I would maybe add, Dave, if I could. Structurally, we have our model and the way we have set up and designed that business. We believe that we have it set up and designed to out-OR any of the other players in that space.
And so, you know, the way we have integrated both our logistics business and our trucking business into the sales and marketing and operations of our business is very unique, and we've done it in a way that we believe will sustain higher margins in our trucking business, but also eventually, as we become more efficient and larger, actually put us in a position where we should be, you know, a couple of points better than really any of our competitors.
Now, it's hard to say that because we're one of the new, newer and smaller guys to the space, but we have gone to great lengths in terms of how we've built that business and structured that business for that to be the eventual outcome. And so, you know, what you saw in the third quarter was we, you know, we hit on all cylinders in that space for the most part. But what you hear Dave saying is we're still in the early stages of tapping the opportunities that we think we can yet tap, Allison.
Allison Landry (Analyst)
Okay, perfect. As a follow-up question, what are your views on rail consolidation? I'm totally kidding. It's just a question that's been asked.
Kevin Knight (CEO)
You know, we really have none. I was just going to ask, how do you go from a monopoly to a monopoly? I don't know. Does that help answer your question, Allison?
Allison Landry (Analyst)
It does perfectly.
Kevin Knight (CEO)
Okay.
Allison Landry (Analyst)
Thank you so much.
Kevin Knight (CEO)
Thank you. We're going to keep going. We've got Pete, we'll, we've got four names in the queue. We know all of the names, and we want to finish, so we're going to continue here. So Pete, let's just keep going, if that's okay.
Operator (participant)
Okay. Your next question comes from John Larkin from Stifel. Your line is open.
John Larkin (Analyst)
Thanks, Kevin, for extending the call.
Kevin Knight (CEO)
You're very welcome.
John Larkin (Analyst)
My, my question relates to the revenue productivity of the tractors, which has been a real priority for the company. It looks to me like the big progress that's been made in getting the revenue per loaded mile up and also getting the empty mile ratio down. But the so-called utilization, the number of miles each truck runs per unit time, has been pretty stable. In your view, has that maxed out, or is there still room for improvement on the utilization front?
Dave Jackson (President)
John, this is Dave. I'll take that. I think you're being generous, frankly, by saying that it's been stable or the word that you used. There definitely is opportunity, we feel, for us to continue to improve on that utilization front. And so that, you can imagine, is a big focus for us, similar to how revenue per tractor has been a large focus. We think the way that we're structured, organized, and how we view markets and pricing and understanding the economics, helps us to maybe outpace some of our competitors when it comes to improving the yield that we're getting on a truck. But on a mileage basis, there's more we can do.
In fact, there's some technology that, as well as, we are beginning to leverage and continue to leverage. So that is a priority for us.
Kevin Knight (CEO)
You know, and John, I would, I would just add, this is Kevin, you know, one of the best things that, for me, that's come out of the earnings season quarter was what Werner did in terms of improving their utilization. And they, they may be saying on the other end, one of the best things that came out of the earnings season was how Knight has improved their rates. And so, as you know, John, you go back to the beginning with us. We, we were late to come to the party. We didn't start our company till 1990, so there were a lot of your good friends that we had to copy all over the place. So, so, you know, we're, we're gonna continue, we're gonna continue to try to improve that number.
The other thing I would say, John, that I think sometimes goes unnoticed, is anytime you're raising your rates, maybe as aggressively as we have, it does create network disruption. And so there's a trade-off. In other words, if I'm willing to take a lower yield, then that means I'm probably gonna have less network disruption. The problem is, though, when you get to higher rates like we have, it tends to create a little more network disruption, and so your people don't have the opportunity to take, like, this load that you've had for the last year and match it up with a better load, because that load you had last year just changed. And so, you know, we've built our model around all this activity that happens through these bids and so forth.
We consider ourselves to be very good at adapting to change in terms of our network. But I will say that if our rates would have been, say, 3% or 4% or 5% instead of where they've ended up, I would bet that we would have seen a corresponding increase in our you know, in our rates. And you know, John, as I mentioned earlier, we didn't get much rate last year. We got more rate this year. We've talked 4%-5% rate increase this year, and I know that probably disappoints some people on the phone, but we would like to not have to do so much network repair this next year and really be able to focus on improving you know, improving our miles.
So I know that was a long answer to a simple question, but I just wanted to share with you, you know, some of the trade-offs in terms of rate versus utilization.
John Larkin (Analyst)
Thanks for that detailed color. And then I know intermodal is still a small piece of the puzzle at Knight, but as the railroads have had more and more service issues, how on earth did you improve your operating ratio so dramatically?
Kevin Knight (CEO)
Well, John, I would say for us, you know, we don't own any of the assets in that business, and so we're able to be a little bit more flexible. And we really look at our intermodal business probably more like a C.H. Robinson would look at their intermodal business. Now I know they own a few containers, but more in terms of, okay, here's a load. Does it make more sense to move it on one of our trucks? Does it make more sense to move it on a third-party carrier, or does it make more sense to move it intermodally? And so we had gone down the path of trying to really get involved in these heavy bids and so forth, as far as intermodal.
We ended up letting business in the door that just... it had no hope of being good. We've, you know, we kind of hit bottom in that business a year ago, in the third quarter. We just posted what I would call terrible results. And so, we've pretty much, John, restructured that whole way we look at intermodal. And probably the trade-off for us, John, is we're you're probably never gonna see us doing $300 million-$400 million worth of intermodal. But our long-term goal is that we're a meaningful partner with each of the railroads, but it's probably gonna take us five or 10 years in order to accomplish that.
John Larkin (Analyst)
Thanks for that detailed answer.
Kevin Knight (CEO)
Thanks. Thanks, John.
Dave Jackson (President)
Your next question comes from Casey Deak from Wells Fargo. Your line is now open.
Casey Deak (Analyst)
All right. Thanks, guys. Just wanted to get a sense where you've been most successful in recruiting drivers. Is it, is it the lateral, more experienced drivers or new entrants into the driver schools? And along those lines, have you seen former Knight drivers come back to the company, to a large extent following your pay increases?
Dave Jackson (President)
... Yeah, Casey, I'll maybe try and give you a prompt response here since we're over time as well.
Kevin Knight (CEO)
Yeah.
Dave Jackson (President)
You know, we've been successful in sourcing a larger percentage of drivers than in previous years, through our modified our training program. We still, the predominant number of our drivers are experienced over-the-road drivers that come to us. So, but we've had a bit of a broader approach and cast maybe a wider net when it comes to the types of drivers that could qualify. And, and we have a, what we think is a pretty solid training program, to bring folks in that don't have experience, and in some cases, folks that don't even have a CDL, and work them through that.
In terms of rehires, as we call them, for a former Knight driver, we have a number of drivers that once they discover the grass maybe isn't as green as once thought, they come back. We view our driving associates as almost as family in our service centers, and so the relationship typically will continue with the driver, even after they've left. And so that is a big piece of what we do on the driver front.
Kevin Knight (CEO)
All right. Thanks, Dave.
Dave Jackson (President)
You bet.
Tom Albrecht (Analyst)
Thanks, Casey.
Operator (participant)
Your next call comes from Tom Albrecht from BB&T Capital Markets. Your line is now open.
Art Hatfield (Analyst)
Hey, guys.
Dave Jackson (President)
Hey, Tom.
Art Hatfield (Analyst)
A quick clarification. Dave, when you were asked about the assumptions behind your guidance, you made a comment about the used equipment market. I can't remember if you said that you expect gains next year to be similar to this year or just a steady used equipment market, and in particular, how would that relate to the fourth quarter?
Dave Jackson (President)
We said that we expected the used equipment market to remain strong, and so it's been. I would say steadily strong, but yet increasing. We were one of the few folks, I think, buying equipment as regularly as we have over the years, and so we've seen good gain. We would expect fourth quarter to probably continue with the trend that you've seen in the third quarter. Not sure that that trend continues all of next year in 2015. If we could still define the market, the used equipment market, as strong, being maybe somewhere between the 2013 year and the 2014 year, as you've seen that.
You know, and Tom, I would add to that. You know, we've been a little bit surprised in the strength of that used equipment market. And, you know, I feel a little bit like rates when it comes to the used equipment market. It's like we did better from a rate perspective than we had expected this year, and I hope it would stay the same, but, you know, it's hard to predict that. And my feelings would be the same in the fourth quarter. I will tell you, we're off to a good start as far as continuing to sell equipment.
Kevin Knight (CEO)
And, so we haven't seen anything yet that makes us feel like, you know, the fourth quarter is going to be a, a dud compared to, compared to what we've seen, thus far, in the year. Now, now, next year, it would... You know, it's hard for us to predict that that won't be down a bit, but, but, you know, we, we may be in new territory, too. In, in other words, there, there haven't been that many trucks bought during the period that we're trading trucks and selling trucks currently. And, and so, gosh, I don't know. It's, it's just, it's just hard to predict. If I was predicting for next year, I would say that our gain on sale wouldn't be quite as strong. But, you know, I didn't expect this year to be nearly as strong as it, as it has been.
Art Hatfield (Analyst)
Right. That's helpful. And then the real core question I wanted to ask was about freight. You know, Kevin, I think in general, we're all hearing good things, but there have been a couple of, I don't know, modest pockets where, you know, people have said it's decelerated a little bit, slowed down in October. And there's so many different business models. Just could you talk a little bit about the month of October and broader supply chain changes, and how you think that impacts maybe November and December becoming busier?
Kevin Knight (CEO)
Yeah. I would say, Tom, that we've actually seen pockets of slowness in July and in August and in September and in October. But generally speaking, there's always somebody that is stronger than we expected. And so it really feels to me very much the same as what we maybe experienced in the third quarter. Now, I will tell you, it does seem like, you know, we're going to finish the year fairly busy. I mean, in all of our customer meetings, you know, everybody seems to be very concerned about capacity. The e-tailers are certainly gearing up for, you know, for much activity.
And so I think the fourth quarter is going to finish, you know, more of the same for us. And you know, the first quarter is going to be really interesting. I mean, it wasn't a good quarter for most everybody, but it was a good quarter for us. And you know, we were a little bit less affected by the weather, and you know, our operations are probably a little more diverse than most. And so you know, I don't really know what to expect in the first quarter. But overall, Tom, I would say it does seem like things are more balanced these days.
It really seems to me like we, for the last four quarters at least, we've had, and it seems like it's extending into the fifth quarter, which is the fourth quarter of this year, just seems like you know, things just seem more balanced throughout the year.
Art Hatfield (Analyst)
Okay, that's helpful. I'm going to have to root for the Royals over your Giants, but that's a separate topic.
Kevin Knight (CEO)
Well, hey, I wasn't going to bring it up, Tom. I'm really sorry about that, but hey, there's only two teams in the World Series, and if it wasn't going to be the Giants, I mean, I'd have been dang proud to be represented by the Cardinals, so.
Art Hatfield (Analyst)
Okay, I appreciate that. Thanks.
Kevin Knight (CEO)
Thanks, Tom.
Operator (participant)
Your next question comes from Art Hatfield from Raymond James. Your line is open.
Dave Jackson (President)
Hi, Art.
Tom Albrecht (Analyst)
Hi. Hey, afternoon, Kevin, David, and Adam. I may bring it up the rear, but I think we're done. All my questions have been answered. Thanks, guys.
Kevin Knight (CEO)
Yeah.
Dave Jackson (President)
Well, Art, you are there, so, you know, you're our last caller, so hey, and we appreciate you hanging in there with us, Art. Are you sure? Did you have anything else?
Tom Albrecht (Analyst)
No, definitely, I'm good. I am good. Thank you.
Dave Jackson (President)
Okay.
Tom Albrecht (Analyst)
Thanks for hanging on.
Dave Jackson (President)
Art, who are you rooting for?
Tom Albrecht (Analyst)
I've been rooting for the Cubs for 100 years, and I don't know when it's going to happen.
Kevin Knight (CEO)
Okay, well, that's enough, Art. This call is officially over—and we appreciate everybody calling in. Thanks. Pete, that's it.
Operator (participant)
This concludes today's conference call. You may now disconnect.