Good afternoon, my name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Knight Transportation Fourth Quarter 2015 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. The speakers for today's call will be Dave Jackson, President and CEO; and Adam Miller, CFO. Mr. Miller, the meeting is now yours.

Thank you, Julie. And thank you for everyone who has joined the call today. We have slides to accompany this call posted on our website at investor.knighttrans.com/events. As usual, our call is scheduled to go until 5:30 p.m. Eastern Time. Following our commentary, we hope to answer as many questions as time will allow. If we're not able to get to your questions due to time restrictions, you may call 602-606-6315 following the call and we will return your call. Again that number is 602-606-6315. The rules for questions remain the same as in the past, one question per participant. And if we don't clearly answer the question, a follow-up question may be asked. More often than not we end up with people in the queue that are not able to ask a question, so we ask again that we keep it to one question per participant. So to begin, I'll first refer you to the disclosure on page two 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 1 of the company's Annual Report on Form 10-K filed with the United States 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 fourth quarter results starting with slide three. For the fourth quarter of 2015, we earned $0.36 per diluted share versus $0.40 in the same quarter last year. Net income decreased 11.2% year-over-year to $29.2 million while our operating income decreased 17.3% year-over-year to $43.7…

All right, thank you, Adam and good afternoon, good evening, everybody. I will start on slide eight. In the fourth quarter, our asset-based trucking businesses operated at an 80.7% operating ratio, which includes our dry van businesses, our refrigerated businesses, our drayage business and our dedicated business. Contributing factors to the 320-basis-point change year-over-year include lower revenue per mile for the reasons Adam discussed two slides previously. Despite lower absolute fuel prices this fourth quarter, the fuel expense net of fuel surcharge was up in the fourth quarter of 2015 versus the prior year and driver pay continues to be up on a year-over-year basis. Our asset-based businesses remain focused on developing the type of freight in the specific lanes we desire at appropriate prices through the bid process that is currently underway with many customers. Several cost reduction and efficiency improvement efforts are underway, and every business and every service center is focused on closing the year-over-year operating ratio gap. Although our operating ratio is industry-leading, we and our people are focused on improving our results on a year-over-year basis. Our non-asset based logistics business saw revenues decline 5%. Our brokerage business, which is the largest component of our logistics segment, saw revenues including fuel surcharge decrease 5.5% despite a 49.7% increase in load volumes. Brokerage expanded gross margins by 90 basis points. However, revenue per load has been negatively impacted as a result of the lower fuel surcharge, shorter length of haul and less non-contract opportunities year-over-year. We're encouraged by the pace of the volume growth and believe that the growth momentum will continue and eventually yield growth in all three categories at the same time: revenue growth, volume growth and margin dollar growth. We're pleased with the development of our people, the newly-implemented software and the increasing…

Thanks, Dave. Slide 15 is our final slide and where we will discuss guidance. Based on the current truckload market as well as recent trends, we're reducing our previously-announced first quarter 2016 guidance range of $0.32 to $0.35 per diluted share to $0.28 to $0.31 per diluted share. Our expected range for the second quarter of 2016 is $0.32 to $0.35 per diluted share. Our guidance is conservative with regards to fuel, as we do not expect to experience the same benefits of declining fuel prices we experienced in the first quarter of 2015. We remind you last year in the first quarter we estimated about a $0.03 per share benefit from rapidly-falling fuel prices. In the second quarter, we expect fuel to normalize and provide maybe a slight benefit on a year-over-year basis. Some additional assumptions made by management would include, as Dave mentioned, minimal organic growth from our current tractor count. We expect total rate per mile for the next two quarters to be relatively flat from the previous year. Now in terms of contract rates, we expect to see a 2% to 3% increase during the year. However, during the first quarter and part of the second quarter of 2015, we still had non-contract opportunities above normal contract rates, which we don't expect to have this time this year. Therefore, we expect to begin to see rates in the aggregate turn positive in the back half of the year. We also expect miles per tractor to be positive approximately 1%, and long term we expect to continue to grow our logistics segment in that 25%-plus range while operating with a low-to-mid 90%s operating ratio. In the first half of 2016, we expect load count to continue to outpace at 25% growth target as we've seen in the…

Our first question comes from the line of – from company, Scott Group. Please state your first and last name. Your line is open.

It's Scott Group from Wolfe Research. Hey, afternoon, guys.

Hi, Scott.

So, I wanted to just follow-up on the pricing a little bit, and maybe if you can help us, so we've got pricing that was down 1.5% in the fourth quarter and I know you're talking about contractual pricing of 2% to 3% but kind of all-in pricing that's going to stay negative. So maybe just like, how much of the business was spot in the first half last year? And maybe like how much above the contractual market was that business priced? And then kind of just separately on that 2% to 3% contractual pricing, I know Swift earlier this week talked about starting to see some pricing flatten out. How do you get comfort in that 2% to 3% given the kind of capacity environment we're in right now?

Yeah. Well, there's a lot of moving parts at the moment, as you can imagine, and there's several things where we priced and we haven't received the award. There is others that haven't even started the bid. But from what we've seen in the bid season, I would say started maybe even as early as late October. The end results have been in that flat-to-slightly-positive range. So, it's still early to know, but our best guess from what we've seen and how we're approaching the bids would be that 2% to 3%. So, it's very hard for us to calculate what percentage of the bids have we gone through versus where we were a year ago. The best we could maybe define it for you would be that non-contract business that we had a lot of last year in the back half of the year, particularly in the fourth quarter, didn't exist. It existed also for us in the first quarter of last year, first quarter of 2015, and it's not in existence today and we don't expect it to be in the first quarter of this year. So that's what puts a lot of pressure on the year-over-year for us. I think as we look at where we feel freight volumes to be today and we made a comment about this in the press release, that the January volumes are positive for us. So, we're seeing more miles on a per-truck basis right now so far in January as compared to January of last year. So, we're not in a situation where there's maybe a feeling of desperation, if you will. The increases we've paid to drivers are obviously very real, and I think all carriers have done the same. And we realize the challenges we have this year, next year and for years to come to find the number of driving associates that we'll need to meet our customers' needs and demands and so, I don't think that this is a time where carriers are taking big discounts. And so we don't sense that changing, and I think there's a bigger macro-tone to that decision making and it's not so much based on exactly how we feel in the here-and-now moment.

Thanks. And just so I make sure I understand. So you're saying that most recently you've been seeing flat to slightly up, but you still think 2% to 3% is where contractual pricing can be for the year. So is that view on that acceleration is that ELD starting to have an impact? Is it maybe the guys that bid earlier were more aggressive about trying to get flat rates or what drives that relative improvement from flat to up slightly to 2% to 3%?

I think our feeling is, if we're flat to slightly positive, I mean that's not too far from 2% to 3% already, and our feeling is the first two quarters of this year – of 2016 – are going to be the most challenging, and if that plays out, we think that you're going to have less capacity available come the back half of the year. So I think if we're flat to slightly up now, there's a chance that as other bids and other opportunities, many bids that happen throughout the year, as those things come about and take place, the pricing has a chance of being better as we move throughout the year. Now, are ELDs a factor to that? I imagine that that's in the back of the mind. I think that we'll – we would certainly expect that to be a factor in 2017, but it might be a factor, maybe not directly but even indirectly as carriers are kind of deciding what to do with underperforming assets that have been underperforming so far, almost for going on almost a year for those that brought on capacity. So if it's zero to up slightly now, we like our chances of that maybe of it not getting worse, maybe even a little better. So that sounds like 2% to 3% for us.

Okay, perfect. Thanks a lot, guys.

Thanks, Scott.

Your next question comes from the line of Kelly Dougherty from Macquarie. Your line is now open.

Hi, Kelly.

Hello.

Kelly, are you there? Julie, it sounds like we have a connection problem with Kelly.

All right. So we'll move on. Your next question comes from the line of Allison Landry from Credit Suisse. Your line is now open. Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker) Thanks for taking my question. Good afternoon. So just following up on the comments you made about capacity, I was wondering just in terms of how you're positioning for going after contractual versus spot opportunities this year. If you plan to do more on the contractual side based on what you were saying in terms of the first half not having as many non-contract opportunities? Or do you think that we will sort of reach a bottom in the spot market as we progress throughout the year? So any color that you could provide on how you're approaching, that would be helpful. Thanks.

Sure, Allison. So for us, we always want to be able to help a customer. And so it's hard for us just to be a high-quality service provider and to think that we would commit up all of our capacity at a year at a time or a year in advance. And then when our customers undoubtedly, invariably call us throughout the year, especially in times of seasonal peakness or their seasons, and ask for extra help, we want to be able to help them. And the alternative is we send them down the road to some very large non-asset-based brokers who then do their best to take very good care of them. And so we want to be there, we want to be able to provide that kind of service. Obviously in certain environments, helping out, that kind of service pays a premium. In other times, there's not as much of it or it doesn't pay to the same degree. And so when we look at this year, we're probably likely to commit a little bit more of our business, but we'll still and probably always will maintain a decent amount of capacity available to be able to deal with the changing needs and surges of our customers. Allison M. Landry - Credit Suisse Securities (USA) LLC (Broker) Okay. Thank you.

Thanks, Allison.

Your next question comes from the line of Kelly Dougherty from Macquarie. Your line is now open. Kelly A. Dougherty - Macquarie Capital (USA), Inc. Hi, guys. Sorry about that. Can you hear me now?

No. We got you. Thanks, Kelly. Kelly A. Dougherty - Macquarie Capital (USA), Inc. All right. Good. Thanks. Listen, I just wanted to see if I could get some thoughts as you look at M&A and what you might be most interested at acquiring and kind of weigh that against the opportunity to acquire your own stock at a pretty attractive valuation. So get some thoughts on maybe why that wasn't in the fourth quarter, how you're thinking about it, particularly as you think about allocating capital between buybacks and M&A and maybe it doesn't have to be one or the other.

Yes, those were all good questions. I'll try and answer them all. So in terms of the acquisition world, I would say that we have a pipeline and there's a big difference between having a pipeline and getting something across the finish line at the right price with the right arrangement that works for both parties. So we're in that and remain active there. I would say that the concept that you bring up about investing in our own company or buying back our own shares, I would say that there are probably some deals out there that otherwise might have looked more attractive, but when you weigh the risk and current stock price and forecast of future EPS, and you look at it from an accretion perspective, there's kind of a hurdle now that we have to get over to not just buy back our shares in what we would view as a much less risky transaction or investment than even to buy maybe a carrier of decent size that might come with a healthy amount of risk, even though it might look like a very fair valuation. So it's a long way of saying that sometimes the best acquisition in the short term might be buying back our shares. Now in the fourth quarter as you saw, and I think what your question alludes to, is the fact that we did not repurchase shares as we had in the second and in the third. And I think in the fourth quarter there was certainly a fair amount of market uncertainty when we saw the collapse in commodity prices, oil prices, some of the global concerns. And so as we saw that, coupled with the fact that we're optimistic about being able to find an opportunity to buy another company, we took a brief pause. And the nature of being a public company, you have times where we black ourselves out and don't buy shares. And so that ends up impacting a fairly large window of the quarter as well. So that the actual time we have to buy back shares in a quarter is much smaller than you might think. So we took a pause and we didn't do that in the fourth quarter. Clearly we reserve the right to reevaluate that and relook at that here again in the first quarter. Did I answer all of the components of the question, Kelly? Kelly A. Dougherty - Macquarie Capital (USA), Inc. You did. Thanks, guys. I'll jump back and let somebody else get in the line.

Okay, thanks. Kelly A. Dougherty - Macquarie Capital (USA), Inc. Thanks.

Our next question comes from the line of Ken Hoexter from Bank of America. Ken, your line is now open.

Great. Thanks. Hey.

Is that Ken Hoexter?

Yes, Dave Knight (33:48). Thank you.

(33:50).

Dave, Adam, maybe just you talked about drivers not being an issue. As the market raise pay enough (33:58), along with economic fear that they're returning to the trucks? Or are you chasing away non-compliant carriers? I guess I want to phase that into the ultimate question of what's driving the average miles per tractor targets you've accelerated down, but you said they're going to go up? So I want to understand the driver along with the mileage component of that. Thanks.

Okay. So I want to be clear in understanding your question, Ken. You're wondering what's driving maybe us in January being able to haul more miles?

Yes, because you said it's going up now, right, but you've accelerated down. So what's making that shift? Because it sounds like you weren't having trouble getting drivers anymore. So how are you...

Yes. Well, I'm not sure I would ever say we're not having trouble getting drivers. There's a lot of effort, a lot of work, and frankly a lot of expense and investment that goes into that. And I think what we are experiencing is fewer unseated tractors, which would help. The way we measure our miles per truck is we include all trucks, whether they're open or not. And it brings full accountability into our business. And so that would be a part. But the improvement we're seeing is a little bit beyond just having more trucks. And so I think it speaks to an environment and the diversification, the effort of our folks to get out there and find opportunities. I think my main point in talking about such early or premature data is just that the world's not falling apart. And we think there's a chance that we see some strengthening happen, mainly because of continued challenges in the supply side. For example, you have Don Broughton's good research who goes into great detail, and I won't steal his thunder. But bottom line, you've seen failures continue to grow in the fourth quarter. And that's despite the fourth quarter being typically the highest volume quarter. You might understand it a little bit more in a first quarter. But you have that coupled with the fact that you had consistent, precipitously falling fuel prices that still weren't enough to offset that. So I think that there's a lot of fresh capacity, if you will. The most recent capacity to come into the space that come April will hit the anniversary mark of a full year of going from what was a double-digit premium in that load board, non-contract market to what's now become, for almost a solid year, a…

Great. I truly appreciate the time, Dave and Adam. Thank you.

Okay. Thanks, Ken.

Thanks, Ken.

Our next question comes from the line of Jason Seidl from Cowen & Co. Jason, your line is now open.

Thank you, operator. Hey, guys.

Hi, Jason.

Hi. You mentioned about driver pay and that you would expect it to go up a little bit based on some of the increases that you pushed through last year. Once you lap those increases, where do you think driver pay is going to go maybe in the back-half of the year for it?

Well, Jason, I'll speak to that a little bit and Dave can add any color if I missed something. Based on what we're seeing today with our ability to find drivers, again, it's not easy, but we're able to reduce our open tractor count. We've done quite a bit on the driver pay side in terms of their bonus and their base pay. We've done more in the last two years than we've done in the history of our company. I think our peers have done it as well. We don't feel inclined on what we see today that we have to do much on driver pay. That could always change. That's something that we're constantly monitoring. We're looking at that every month. But at least for the first half we feel fairly good about where we stand from the driver pay perspective. We feel we're pretty competitive. Back half, it's to be seen and we'll see what the market bears.

Okay, guys. That was great color. I appreciate it. That's my one. I'll get to the back of the line.

All right. Thanks, Jason.

Your next question comes from the line of Ben Hartford. Ben, please state your company name or, sorry, company affiliation. Your line is now open.

Ben Hartford with Baird. Thanks for taking the question.

Hi, Ben.

Dave, when you think about this first half of the year with not a lot of non-contract business, you made the comment about gross margins in the brokerage business expanding in the fourth quarter, obviously, in Texas spot capacity. Are you seeing anything unusual in the bid environment on the brokerage side here in the front half of the year? And how quickly would you expect some of the tailwinds experienced on the brokerage side during 2015 to unwind and shippers benefit from what appears to be a very active bid environment?

Well, our brokerage business is – they're impacted as we've noted on the decline in revenue per load. They're largely associated with that non-contract side. And so we feel like that's a very good place for a non-asset-based business to be, to be able to flex up and down. So we're not inclined to go overly commit that. I would say that in prior periods, going back to 2011, 2012, 2013, I think we saw the third party or the non-asset brokerages maybe get more aggressive and we would feel that on our asset-based fleet. I don't think that we're experiencing or feeling that to the same degree like in previous years. I'm not sure if that was part of what you were alluding to in your question, but we don't see the disruption there in the bid process from the brokers. But am I approaching or answering your question, the right question? Or did you...

Yes, yes, that's helpful and I guess just some perspective on the intensity. Are you seeing more intensity in terms of the bids on the non-asset based broker, kind of pure brokerage type bids relative to some of the more traditional asset-based contractual business? Is there more intensity in kind of one-mode versus the other?

Not really. Not really. And there aren't very many customers that I'm aware of that want to just talk exclusively brokerage, and so we have a lot who entertain brokerage as a complement, but not just brokerage exclusively. As I think we've mentioned before on other calls, maybe belabored the point that the ability to own a fleet of trailers is pretty valuable and can create a lot of efficiency in their business. And now they have the surges and the seasonality where sometimes they can't always do that. But there's typically an underlying decent chunk of their business where they like to do it at the most optimal level, and that usually requires some kind of a commitment from an asset-based player. So at least for our company, we don't have a lot of exposure to those brokerage-exclusive type customers.

Okay. That's helpful. Thanks.

Thanks, Ben.

Your next question comes from the line of Todd Fowler from KeyBanc Securities. Todd, your line is now open.

Great, thanks. Good afternoon. Dave, just on the guidance...

Hi, Todd.

Hi, Dave. Just on the guidance for the first half, it really sounds like that the fleet's going to be relatively consistent. It doesn't sound like utilization's that bad and that the revenue per mile is going to be at least flattish. But the earnings guidance at the midpoint kind of implies a mid-to-high teens drop. And I get that there's the challenge on the equipment gains and the fuel, but is there something else I mean, that – is it the driver pay increases? I guess I'm surprised at the magnitude of the fall-off in earnings. And then just as far as growing earnings, again, is it that you really need that spot market to re-accelerate or the levers? I know you talked about some things on the cost side, but just how do you think about the ability to grow earnings, absent maybe a tighter spot market?

Hey, Todd, this is Adam. Maybe I'll talk a little bit about the guidance to start with, on the first part of your question. And I tried to touch on it a little bit when I gave the guidance, some of the areas where we feel that there's going to be some pressure on earnings. I alluded to tax, and our tax rate in 2015 was lower than it normally was, and we did some things with some amended returns and different positions that helped that. But we wouldn't expect to see that in 2016. So if you look at the first quarter of last year as well as the second quarter, we had a much lower tax rate. So that will be one headwind, particularly in the second quarter we'll have to face. Certainly we alluded to fuel in the first quarter. It'll certainly be a headwind. But we feel like that will no longer be a challenge when we get into the second quarter. Other income is another line item. That isn't core to our business but certainly it'll provide a little bit of a headwind from an earnings perspective as well. And then as you alluded to, gain on sale. We had some really solid quarters in the first quarter and second quarter of last year. And as Dave spoke to, we see pricing's down, inventory's not moving, which we feel is a good sign from a capacity standpoint but had some short-term impact from an earnings standpoint when it comes to the gain on sale that you recognize. And then driver pay. Until we lap the driver pay increases and which is the last – the last increase we did was mid-fourth quarter in certain areas of the country. Until we lap that, that's going to continue to be a headwind. And so with rates, call rates flattish, those are just challenges that we'll have to try to overcome.

And, Todd, maybe I'll take the last part of your question which was – if I understood it right – had to do with hey, do we really need non-contract to come back to grow earnings again? And I would just point out the fact – go ahead, you can clarify before I...

Yeah, Dave, I wasn't trying to simplify it and say that, that's the only piece. But I mean, I guess as I just think about the ability to grow earnings, kind of what are some of the things that we should be thinking about? So I wasn't trying to narrow it down just to one bucket, but go ahead.

Yeah. I was just going to point out that we reacted very quickly in a strengthening environment. One of the slides we showed there was that adjusted net income over a two-year period was up 75%. And so if you look at or you just look year-over-year in the fourth quarter up 63.9%, and it feels like we gave back 11% of that in the fourth quarter – and that was with no non-contract. So yeah, with the kind of growth that we've had over the last two years and how efficient we were in that non-contract space, having it go to virtually 0% puts a little short-term pressure. We don't expect it to stay at 0% for the long-term. And as we look out just a couple of quarters, starting with the back half of the year and then moving into 2017, I mean, I think we'll find ourselves in an environment that on top of the kind of contractual improvement we're seeing, even in this kind of an environment where we should be able to manage our cost at a level that we see year-over-year improvement in growth and earnings and in the very not-too-distant future. And so this concept of giving up a little bit here for a quarter or two of tough time after really getting a lot over two years, we don't expect that to be a long-term trend, so.

Okay. Yeah. That helps us. Last year shows what a difference a year can make. So thanks for the time, guys.

Yep. Thanks, Todd.

Your next question comes from the line of Matt Brooklier from Longbow Research. Matt, your line is now open.

Hey. Thanks. Good afternoon.

Hi Matt.

So my question – how are you doing? At the end of fourth quarter, can you provide us, and you have in the past, with what percentage of your total truckload businesses you would classify as spot centric? I think we talked about a 25% number in 2015 and maybe it was a little bit bigger than that in 2014, but I'm just trying to get a sense for where do you stand today in terms of your exposure to spot business? And then how should we think about that number as we progress through the year if the first half is a little bit weaker and hopefully things pick up and tighten up into the second half?

Yeah. Well, Matt, I would say that the number would be down a little bit, but not dramatically. And it becomes a subtle measurement for us because the spot loads, we don't have just purely spot customers and contractual customers, we have customers. And there are times where we accept more loads than what our commitment was and to us those would represent non-contract loads. And so it's sometimes a blurry line and so we've worked very closely with our customers to get additional loads and where we needed lanes. And so the truth is those loads typically come to us at whatever the contractual rate would be. And so the reason for the tough comparison is last year those loads would come to us usually at the customer's request and with a willingness to pay a premium as they were really in need. In some cases, because we had already accepted more than we normally would have under the contractual agreement and we were going to find a way to give them even more capacity. So my best guess would be that it's less than a year ago and somewhere in that probably 18% to 20%, if I had to make a best guess. That would be non-contract in the fourth quarter.

Got you. Okay. Very helpful.

Your next question comes from the line of Tom Wadewitz from UBS. Tom, your line is now open.

Yes. Good afternoon. Thanks, Dave. Thanks, Adam.

Hi, Tom.

Hey, Tom.

Let's see. So I want to go back. You were talking a little bit earlier, Dave, about I think a more constructive view on maybe a tighter market in the second half, and some of that being related to rationalization of capacity. Can you give some more thoughts on how you think that may play out? I mean it seems to me that once the equipment is around, even if a carrier is not being that profitable with it, that the new equipment doesn't necessarily go away that quickly. So what do you need to see in terms of – I don't know if it's monthly Class A orders that at a certain level, you'd have more conviction that this market tightens up in six months. Or what would you really look forward to say, okay, this capacity rationalization is happening. And I've got confidence that it's going to take place in six months as opposed to being a year or two years or whatever?

Yeah. Well, the number I've heard is and believe is that somewhere around 20,000 trucks a month just decide to give up the ghost. And so to the degree that we don't have new Class A builds in excess of 20,000, you're not keeping up with the normal attrition. I think different than virtually every other mode of transportation, our trucks are not very long-lived assets. The asset values just – they'd obviously don't compare to a plane or a barge. And even the LTL guys rebuild things a few times I think before they're done. And so the life span of a truckload truck is really not that long. And so when you look at the average age still being north of six years old and the efficiencies, the fuel efficiencies that are there with the newer equipment, I'm not saying the newest, that obviously has the best. But some of the really old equipment that's out there is really inefficient, even with these low fuel prices. And so a used four-year-old truck is a huge trade-up in many cases. And so the challenge with trying to time or guess that based on just orders and builds, I think is very, very difficult. Because once a carrier pulls a truck out of service, it's very easy for that truck to become a parts collection vehicle to get other trucks up-and-running, and then pretty quick things change. So I guess my bottom line is I think that that has a way of happening faster than you might think. I think that if the normal trend continues through call it May timeframe, where we hit a full year of the market that I believe most of that small capacity came into the space for and has largely been hauling, when they…

Good. I mean, are you actually seeing some where you're taking some loads away from Intermodal? Do you think that you're seeing that directly?

We think we're seeing a little bit of that. But fuel has really dropped off. I mean we talk about how the Intermodal length of haul has risen significantly in the last two quarters. I mean that's not including what we've seen happen to fuel prices in the last 30 days. So I think it may be just beginning. The fuel coupled with the fact that the Intermodal pricing has continued to go up at a pretty healthy clip faster, it's outpaced truckload, even though truckload did well in 2014 and 2015. And so I think we've seen some, I think we're poised maybe to see more of that. So we'll have to stay tuned.

Right. Okay. Thanks for all the perspective. Appreciate it.

Okay. Thanks, Tom. Looks like we have time for one more quick question. Probably a quick answer, not a quick question. That's where the problem is.

Our last question comes from the line of Chris Wetherbee from Citi. Chris, your line is now open.

Hey. Great. Thanks for squeezing me end of the wire here. Wanted to ask just quickly about sort of the sequential cadence I guess of the guidance. I want to sort of understand, it seems a little flatter first quarter to second quarter than were typically seen in previous years. I think you've explained some of those reasons behind it but I want to make sure I'm sort of not missing anything about that cadence. And then when you think about sort of maybe 2Q to 3Q and into 4Q, if sort of historical changes would still hold or maybe it's a little bit more of a higher inflection given sort of your view on maybe a softer first half and better second half. So just kind of thoughts around the cadence of the guidance would be helpful. Thank you.

Yeah. So, Chris, I'll take that. We see the guidance is up sequentially about $0.04 from first to second, which, well, if you look at it historically isn't that unusual. Second quarter, sometimes that bears a decent spot market, in other times it may not depending on what happens with the produce and the weather; as it heats up, sometimes water moves at a pretty rapid pace. So second quarter can sometimes be a much stronger quarter and other times maybe not as robust. And so we took very conservative approach in our guidance and we see the normal uptick from what we feel is a reasonable uptick from first to second. But, again, if you look historically at the way we give guidance, we're always fairly conservative.

And no sort of implication of how maybe 2Q to 3Q would then trend as a result of that?

No. I wouldn't read into anything there.

Okay, great. Thanks for the time, guys. Appreciate it.

Okay. Well, that will conclude our call. We appreciate everybody joining us. Be safe.

And that concludes today's conference call. You may now disconnect.