Knight Transportation Reports Revenue and Net Income for the Third Quarter Ended September 30, 2012

Wednesday, October 24, 2012 2:00 pm MDT

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PHOENIX
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Public Company Information:

NYSE:
KNX

PHOENIX--(BUSINESS WIRE)--Knight Transportation, Inc. (NYSE: KNX), one of North America’s largest and most diversified truckload transportation companies, today reported revenue and net income for the third quarter ended September 30, 2012.

For the quarter, total revenue increased 4.8% to $237.9 million from $227.1 million in the third quarter of 2011. Revenue before fuel surcharge increased 5.0% to $192.6 million compared to $183.4 million in the same period of 2011. Net income for the quarter was $16.6 million, or $0.21 per diluted share, compared to $16.6 million, or $0.21 per diluted share, in the third quarter of 2011.

Key financial results for the third quarter were as follows:

   

Three Months Ended September 30,
(dollars in thousands, except per share data)

   
2012 2011 % Change
Total revenue $ 237,933 $ 227,143 4.8 %
Revenue, excluding trucking fuel surcharge $ 192,550 $ 183,436 5.0 %
Income from operations $ 27,767 $ 27,705 0.2 %
Net income $ 16,584 $ 16,563 0.1 %
Earnings per diluted share $ 0.21 $ 0.21 0.4 %

Year-to-date, total revenue increased 8.0% to $693.7 million from $642.1 million for the nine-month period in 2011. Revenue before fuel surcharge increased 7.9% to $557.0 million compared to $516.3 million in the same period of 2011. Net income increased to $46.4 million, or $0.58 per diluted share, from $42.8 million, or $0.52 per diluted share, in the 2011 nine-month period. The first quarter of 2012 included a $4.0 million pretax non-cash stock compensation charge ($3.9 million after tax) relating to the accelerated vesting of certain stock options that had been issued prior to 2009. Excluding the non-cash charge, year-to-date net income would have increased 17.6% to $50.3 million, or $0.63 per diluted share, a 21.4% increase, when compared to the same period in 2011.

The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on September 7, 2012, paid on September 28, 2012.

Chairman and Chief Executive Officer, Kevin P. Knight, offered the following comments:

''The third quarter of 2012 proved to be more challenging than expected due primarily to eleven consecutive weeks of escalating fuel prices and a slowing economy that yielded seasonally weak freight demand. Despite the difficult environment, we continued to grow our top line revenue. Our average revenue per total mile (excluding fuel surcharges) increased 0.9% in the third quarter, when compared to the same period last year, while our length of haul increased by 0.8%. Our average revenue per tractor (excluding fuel surcharges) declined 2.5% due to lower utilization, which was a result of lower demand and additional tractor count.''

The following chart reflects the year-over-year operating ratio comparison and revenue growth (excluding trucking fuel surcharge revenue) for each of our businesses for the third quarter of 2012 and 2011.

    Operating ratios(1)  

Revenue growth
(excluding trucking
fuel surcharge)

2012   2011  
 
Dry van 82.7 % 82.4 % 4.0 %
Refrigerated 88.6 % 85.4 % -2.3 %
Port and Rail Services 87.3 % 89.7 % 14.7 %
Asset based operations 84.1 % 83.4 % 3.5 %
 
Brokerage 92.9 % 94.4 % 1.1 %
Intermodal 96.4 % 103.5 % 46.3 %
Other 96.9 % 89.9 % 34.0 %
Non-asset based operations 94.5 % 94.9 % 14.8 %
 
Consolidated 85.6 % 84.9 % 5.0 %
 

(1) Operating ratio is defined as total operating expenses, net of trucking fuel surcharge, as a percentage of revenue before trucking fuel surcharge.

Kevin Knight further commented, ''Given the challenging environment, we are generally pleased with the efforts in our asset-based businesses. Most notably, our dry van business continued to produce a low 80’s operating ratio while growing revenue and our port and rail services business continued to improve their operating ratio also while growing revenue on a year over year basis. The results of our refrigerated business, however, came in below our expectations for the quarter. Our operational discipline enabled us to maintain our non-paid empty mile percent at 10.7% from a year ago despite the challenging freight market.

''Operating income in our brokerage business increased by 29.7% as a result of improved margins and operational efficiencies. We continue to be pleased with the growth we have seen in our intermodal service offering, which again operated profitably for the quarter while growing revenue at a rate of 46.3% compared to last year.

''The DOE national average diesel fuel price increased $0.40 from the start of the third quarter to the end of the third quarter and was up 2.5% when compared to the same period last year. Particularly challenging was that this significant increase came following twelve consecutive weeks of decreasing fuel prices in the second quarter of 2012. This type of rapid increase in fuel prices has an immediate negative impact on earnings. We continue to work through our initiatives to improve our fuel efficiency, such as, improving the driving behavior of our driving associates, updating our fleet with more fuel efficient post-2010 EPA emission compliant engines, installing aerodynamic devices on our tractors, and equipping our trailers with trailer blades.

''The driver market remains tight and attracting and retaining a sufficient number of qualified driving associates continues to be a concern for the industry. In such an environment we continue to benefit by leveraging our decentralized model and the advantages it provides us with driving associates. As a result, our driver turnover has been trending favorably and is well below what we understand to be the industry average.

''Our combined fleet finished the quarter with 4,194 tractors compared to 3,939 last year, an increase of 255 tractors or 6.5%. This includes owner-operators, which grew 10.8% from 454 tractors to 503 tractors in the third quarter this year. We invested $29.4 million of net capital expenditures in the third quarter, as our tractor fleet remains one of the most modern fleets in the industry with an average age of 1.8 years. Our gain on sale increased to $2.1 million in the third quarter of 2012 from $1.8 million in the third quarter of 2011.

''We have returned $178.4 million to our shareholders in the form of quarterly dividends and stock repurchases over the twenty-four-month period ending September 30, 2012. We did not repurchase any shares in the third quarter of 2012. We ended the quarter with $8.2 million of cash, $45.0 million of borrowing under our unsecured revolving credit agreement, and $517.1 million of shareholders' equity.

''Acquisitions and investments continue to be part of our growth strategy, and we continue to evaluate strategic opportunities to enhance the returns for our shareholders over time.

''On September 12, 2012 Knight Transportation and Knight Refrigerated were recognized by the American Trucking Association at the 2012 Safety & Human Resources National Conference for their safety achievements. Knight Transportation received the second place award for Industrial Safety in the Over 1000 Employee category. This is the second consecutive year that Knight Transportation has been recognized for excellence in the Industrial Safety category. The employees of Knight Refrigerated were recognized for their safety achievements, winning 1st place for Fleet Safety in the 50 - 100 Million Mile Fleet category. This was also the second consecutive year that Knight Refrigerated was awarded first place in the Fleet Safety category. Knight is grateful for the safety contributions of all employees and particularly to the commitment of our driving associates to safe driving. Knight Transportation was also recently awarded the 2012 SmartWay Excellence Award for achievements in moving freight more efficiently while reducing carbon dioxide and other emissions. Knight Transportation remains committed to reducing freight transportation emissions through technological innovation.''

The company will hold a conference call on October 24, 2012, at 4:30 PM EDT, to further discuss its results of operations for the quarter ended September 30, 2012. The dial in number for this conference call is 1-855-733-9163. Slides to accompany this call will be posted on the company’s website and will be available to download prior to the scheduled conference time. To view the presentation, please visit http://investors.knighttrans.com/events, ''Third Quarter 2012 Conference Call Presentation.''

Knight Transportation, Inc. is a provider of multiple truckload transportation services using a nationwide network of service centers in the U.S. to serve customers throughout North America. In addition to operating one of the country’s largest tractor fleets, Knight also partners with third-party equipment providers to provide a broad range of truckload services to its customers while creating quality driving jobs for our driving associates and successful business opportunities for owner-operators.

INCOME STATEMENT DATA:    

Three Months Ended September 30,

   

Nine Months Ended September 30,

(Unaudited, in thousands, except per share amounts)
   
2012 2011 2012 2011
REVENUE:
Revenue, before fuel surcharge $ 192,550 $ 183,436 $ 556,987 $ 516,285
Fuel surcharge   45,383     43,707     136,746     125,814  
TOTAL REVENUE   237,933     227,143     693,733     642,099  
 
OPERATING EXPENSES:
Salaries, wages and benefits 58,175 55,428 178,220 162,219
Fuel expense - gross 59,474 59,726 173,398 169,503
Operations and maintenance 16,107 13,725 44,921 40,312
Insurance and claims 7,783 8,012 23,709 23,027
Operating taxes and licenses 3,929 3,634 12,004 11,239
Communications 1,206 1,376 3,873 4,097
Depreciation and amortization 21,825 19,115 63,130 55,941
Purchased transportation 39,090 35,304 107,014 95,544
Miscellaneous operating expenses   2,577     3,118     7,761     9,430  
  210,166     199,438     614,030     571,312  
Income From Operations   27,767     27,705     79,703     70,787  
 
Interest income 96 130 317 937
Interest expense (115 ) (49 ) (357 ) (49 )
Other income   36     (1 )   430     7  
Income before income taxes 27,784 27,785 80,093 71,682
INCOME TAXES   11,114     11,115     33,394     28,680  
Net Income 16,670 16,670 46,699 43,002
Net income attributable to noncontrolling interest   (86 )   (107 )   (281 )   (224 )
NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION $ 16,584   $ 16,563   $ 46,418   $ 42,778  
Net Income Per Share
- Basic $ 0.21 $ 0.21 $ 0.58 $ 0.52
- Diluted $ 0.21 $ 0.21 $ 0.58 $ 0.52
Weighted Average Shares Outstanding
- Basic 79,726 79,895 79,648 82,136
- Diluted 79,970 80,212 80,015 82,621
BALANCE SHEET DATA:        
09/30/12 12/31/11
ASSETS (Unaudited, in thousands)
Cash and cash equivalents $ 8,231 $ 9,584
Accounts receivable, net 107,082 101,319
Notes receivable, net 894 1,034
Related party notes and interest receivable 2,814 2,868
Prepaid expenses 19,670 10,131
Assets held for sale 17,860 19,416
Other current assets 12,809 9,605
Income tax receivable - 3,821
Current deferred tax asset   2,361     2,319  
Total Current Assets 171,721 160,097
 
Property and equipment, net 576,074 547,033
Notes receivable, long-term 3,532 3,987
Goodwill 10,281 10,295
Other assets and restricted cash   18,330     16,171  
Total Assets $ 779,938   $ 737,583  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 18,360 $ 14,322
Accrued payroll and purchased transportation 11,702 9,096
Accrued liabilities 18,727 13,645
Claims accrual - current portion 14,700 12,875
Dividend payable - current portion   96     77  
Total Current Liabilities 63,585 50,015
 
Claims accrual - long-term portion 9,112 8,693
Long-term dividend payable & other liabilities 2,250 1,457
Deferred income taxes 142,601 145,668
Long-term debt   45,000     55,000  
Total Long-term Liabilities 198,963 210,818
 
Total Liabilities   262,548     260,833  
 
 
 
Common stock 797 794
Additional paid-in capital 142,078 132,723

Accumulated other comprehensive loss

(277 ) (448 )
Retained earnings   374,550     343,290  
Total Knight Transportation Shareholders' Equity 517,148 476,359
Noncontrolling interest   242     391  
Total Shareholders' Equity   517,390     476,750  
Total Liabilities and Shareholders' Equity $ 779,938   $ 737,583  
    Three Months Ended September 30,     Nine Months Ended September 30,
2012   2011  

%
Change

2012   2011  

%
Change

(Unaudited)

 

(Unaudited)

 

 
OPERATING STATISTICS

 

 

 

 

Average Revenue Per Tractor*

$ 39,811 $ 40,823 -2.5 % $ 119,331 $ 117,079 1.9 %
 
Non-paid Empty Mile Percent 10.7 % 10.7 % 0.0 % 10.5 % 10.6 % -0.9 %
 
Average Length of Haul 484 480 0.8 % 483 490 -1.4 %
 
Operating Ratio** 85.6 % 84.9 % 85.0 % 86.3 %
 
Average Tractors - Total 4,158 3,919 4,069 3,890
 
Tractors - End of Quarter:
Company 3,691 3,485 3,691 3,485
Owner - Operator   503     454     503     454  
4,194 3,939 4,194 3,939
 
Trailers - End of Quarter 9,379 8,951 9,379 8,951
 
Net Capital Expenditures (in thousands) $ 29,428 $ 64,107 $ 85,902 $ 97,981
 
Adjusted Cash Flow From Operations Excluding Change in Short-term Investments (in thousands) *** $ 44,268 $ 32,501 $ 106,678 $ 97,977
 
* Includes dry van, refrigerated, and port services revenue excluding fuel surcharge, brokerage revenue, intermodal revenue, and other revenue.
 
** Operating ratio as reported in this press release is based upon total operating expenses, net of fuel surcharge, as a percentage of revenue before fuel surcharge. Operating ratio reported for the nine months ending September 30, 2012 is based upon total operating expenses, excluding the first quarter 2012 one time non-cash stock compensation charge of $4 million related to the accelerated vesting of certain stock options issued prior to 2009, and net of fuel surcharge, as a percentage of revenue before fuel surcharge. We measure our revenue, before fuel surcharge, and our operating expenses, net of fuel surcharge, because we believe that eliminating this sometimes volatile source of revenue affords a more consistent basis for comparing our results of operations from period to period.
 
*** No adjustment was made to the nine-month period ended September 30, 2012 adjusted cash flow from operations of $106,678 as there was no change in short-term trading investments. Adjusted cash flow from operations of $97,977 for the prior year nine-month period ended September 30, 2011 does not include $24,379 decrease in short-term trading investments. This reconciling item is needed to tie back to cash flow from operations.

In the press release, we provided adjusted cash flow from operations excluding changes in short-term investments. The exclusion of the change in short-term investments is not in accordance with generally accepted accounting principles in the United States (''GAAP''). This non-GAAP financial measure is intended to supplement, but not substitute for, the most directly comparable GAAP measure. We believe that the non-GAAP financial measure provides meaningful information to assist investors and analysts in understanding our financial results because it excludes an item that may not be indicative or is unrelated to our core operating results. However, because non-GAAP financial measures are not standardized, investors are strongly encouraged to review our financial statements and publicly filed reports in their entirety and not rely on any single financial measure. A reconciliation to the most closely-related GAAP measure is provided in the preceding paragraph.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements generally may be identified by their use of terms or phrases such as ''expects,'' ''estimates,'' ''anticipates,'' ''projects,'' ''believes,'' ''plans,'' ''intends,'' ''may,'' ''will,'' ''should,'' ''could,'' ''potential,'' ''continue,'' ''future,'' and terms or phrases of similar substance. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Accordingly, actual results may differ from those set forth in the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by the Company in its press releases, stockholder reports, Annual Report on Form 10-K, and other filings with the Securities and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

Contact:

Knight Transportation, Inc.
Dave Jackson, 602-269-2000
President

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