Knight Transportation Reports Third Quarter 2015 Revenue and Earnings

PHOENIX--()--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 and nine months ended September 30, 2015.

Key financial highlights for the third quarter and first nine months of 2015 and 2014 were as follows:

(dollars in thousands, except per share data)   Three Months Ended September 30,   Nine Months Ended September 30,
2015   2014   % Chg 2015   2014   % Chg
Total revenue $ 300,122 $ 271,547 10.5 % $ 892,225 $ 784,865 13.7 %
Revenue, excluding trucking fuel surcharge $ 269,930 $ 227,829 18.5 % $ 795,767 $ 652,333 22.0 %
 
Operating income $ 46,426 $ 39,791 16.7 % $ 134,348 $ 109,940 22.2 %
Adjusted operating income(1) NA NA NA $ 141,511 $ 109,940 28.7 %
 
Net income, attributable to Knight $ 30,283 $ 25,100 20.6 % $ 87,484 $ 69,924 25.1 %
Adjusted net income, attributable to Knight(2) NA NA NA $ 91,879 $ 69,924 31.4 %
 
Earnings per diluted share $ 0.37 $ 0.31 20.8 % $ 1.06 $ 0.86 23.7 %
Adjusted earnings per diluted share(2) NA NA NA $ 1.11 $ 0.86 29.9 %
 

The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on September 4, 2015, which was paid on September 25, 2015.

Dave Jackson, President and Chief Executive Officer, commented on the quarter, "During the third quarter we grew our consolidated revenue, excluding trucking fuel surcharge, by 18.5% while improving our operating income by 16.7%, despite a lukewarm freight environment. Our diluted earnings per share increased to $0.37, and benefited from a lower effective tax rate which was primarily offset by less gain on sale. Both our trucking and logistics segments continue to contribute to our growth as we continue to enhance our logistics capabilities to meet the supply chain needs of our customers."

The following chart reflects our consolidated financial performance and that of our trucking and our logistics segments for the third quarter and first nine months of 2015 and 2014.

   
(dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30,
2015   2014   Chg 2015   2014   Chg
Consolidated
Revenue, excluding trucking fuel surcharge $ 269,930 $ 227,829 18.5 % $ 795,767 $ 652,333 22.0 %
Adjusted operating income(1) $ 46,426 $ 39,791 16.7 % $ 141,511 $ 109,940 28.7 %
Adjusted operating ratio(1) 82.8 % 82.5 % 30 bps 82.2 % 83.1 % -90 bps
Trucking
Revenue, excluding trucking fuel surcharge $ 211,816 $ 174,126 21.6 % $ 626,389 $ 506,974 23.6. %
Adjusted operating income(3) $ 42,710 $ 35,514 20.3 % $ 129,963 $ 100,491 29.3 %
Adjusted operating ratio(3) 79.8 % 79.6 % 20 bps 79.3 % 80.2 % -90 bps
Logistics
Revenue $ 58,114 $ 53,703 8.2 % $ 169,378 $ 145,359 16.5 %
Operating income $ 3,716 $ 4,277 -13.1 % $ 11,548 $ 9,449 22.2 %
Operating ratio 93.6 % 92.0 % 160 bps 93.2 % 93.5 % -30 bps
 

In the third quarter, the trucking segment achieved an adjusted operating ratio of 79.8% compared to 79.6% from the same quarter last year. The trucking segment experienced revenue growth, excluding trucking fuel surcharge, of 21.6% while improving operating income by 20.3%. Despite a less robust freight environment, we continue to experience positive results from our efforts to improve yield. Revenue per tractor, excluding fuel surcharge, increased 1.8%, year over year, attributable to a 4.6% improvement in revenue per loaded mile, a 2.6% increase in length of haul, off-set by a 0.2% decrease in average miles per tractor, and an increase in our non-paid empty mile percentage. Our improvements in our revenue per tractor were partially offset by increased salaries and wages, increased driver recruiting and hiring costs, and rising equipment prices.

Our brokerage business, which is the largest component of our logistics segment, increased load volume by 64.8%, however, due to lower fuel surcharge and a shorter length of haul, revenue increased 11.7% while operating income improved by 8.8%, when compared to the same quarter last year. Gross margins expanded 70 basis points compared to the third quarter last year. Revenue in our intermodal business increased year over year 3.6%, while operating income improved 20.5%, when compared to the same quarter last year. We continue to invest in our logistics capabilities in order to provide more solutions to our customers, while improving our return on capital. In the third quarter, the logistics segment produced an operating ratio of 93.6% compared to 92.0% for the same quarter last year. During the quarter, operating income was negatively impacted by approximately $700,000 as a result of lower commodity prices that negatively impacted our sourcing business as well as costs associated with the startup of our expanded logistics and transportation management offering.

Attracting and retaining high quality driving associates remains a significant industry challenge. The current shortage of qualified driving associates has been and will continue to be a headwind for adding additional capacity. Our driver development and training programs remain a primary focus area for our management team.

Our tractor fleet remains one of the most modern fleets in the industry with an average age of 1.7 years. The used equipment market softened during the quarter and resulted in gain on sale of revenue equipment in the third quarter of 2015 of $2.3 million, compared to $4.3 million in the third quarter of 2014.

During the third quarter of 2015 we purchased 564,016 shares of our common stock for $15.0 million. We currently have approximately 5.8 million shares available under our stock repurchase authorization. Over the last twelve months ended September 30, 2015 we have returned $65.3 million to our shareholders in the form of quarterly dividends and stock repurchases. We ended the quarter with $12.7 million of cash, $120.0 million of long term debt, and $712.6 million of shareholders' equity. For the first nine months of the year our net capital expenditures were $108.9 million, while our cash flow from operations was $156.6 million.

The company will hold a conference call on October 21, 2015, at 4:30 PM EDT, to further discuss its results of operations for the quarter ended September 30, 2015. 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://investor.knighttrans.com/events, “Third Quarter 2015 Conference Call Presentation.”

Adjusted operating income, adjusted operating ratio, adjusted net income attributable to Knight, and adjusted earnings per diluted share (EPS) are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. These non-GAAP financial measures supplement our GAAP results in evaluating certain parts of our business. We believe that using these measures affords a more consistent basis for comparing our results of operations from period to period. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables at the end of this press release.

Knight Transportation, Inc. is a provider of multiple truckload transportation and logistics services using a nationwide network of business units and 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 contracts 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 independent contractors.

         
INCOME STATEMENT DATA:
 
Three Months Ended September 30, Nine Months Ended September 30,

2015

2014

2015

2014

(Unaudited, in thousands, except per share amounts)
REVENUE:
Revenue, before fuel surcharge $ 269,930 $ 227,829 $ 795,767 $ 652,333
Fuel surcharge   30,192       43,718     96,458       132,532  
TOTAL REVENUE   300,122       271,547     892,225       784,865  
 
OPERATING EXPENSES:
Salaries, wages and benefits 85,514 65,296 249,921 190,779
Fuel expense - gross 39,795 51,221 120,247 155,422
Operations and maintenance 20,390 17,305 62,065 51,481
Insurance and claims 8,149 7,530 25,076 22,414
Operating taxes and licenses 3,373 4,338 13,954 12,265
Communications 849 1,164 3,066 3,621
Depreciation and amortization 28,204 22,684 82,728 66,422
Purchased transportation 62,115 60,017 182,279 168,305
Miscellaneous operating expenses   5,307       2,201     18,541       4,216  
Total operating expenses   253,696       231,756     757,877       674,925  
           
Income from operations   46,426       39,791     134,348       109,940  
 
 
Interest income 140 104 377 326
Interest expense (220 ) (135 ) (714 ) (339 )
Other income   2,335       2,399     7,234       5,856  
Income before income taxes 48,681 42,159 141,245 115,783
INCOME TAXES   17,946       16,786     52,379       45,062  
Net income 30,735 25,373 88,866 70,721
Net income attributable to noncontrolling interest   (452 )     (273 )   (1,382 )     (797 )
NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION $ 30,283     $ 25,100   $ 87,484     $ 69,924  
 
Basic Earnings Per Share $ 0.37 $ 0.31 $ 1.07 $ 0.87
Diluted Earnings Per Share $ 0.37 $ 0.31 $ 1.06 $ 0.86
 
Weighted Average Shares Outstanding - Basic 81,127 81,035 81,678 80,802
Weighted Average Shares Outstanding - Diluted 82,005 82,097 82,714 81,776
 
   
BALANCE SHEET DATA:

09/30/15

12/31/14

ASSETS (Unaudited, in thousands)
Cash and cash equivalents $ 12,703 $ 17,066
Trade receivables, net of allowance for doubtful accounts 134,985 143,531
Notes receivable, net of allowance for doubtful accounts 731 1,020
Prepaid expenses 23,472 17,423
Assets held for sale 18,005 23,248
Other current assets 14,251 13,345
Income Tax Receivable 9,713 19,432
Current deferred tax assets   3,785     3,187
Total Current Assets   217,645     238,252
 
Property and equipment, net 804,224 752,046
Notes receivable, long-term 3,459 4,065
Goodwill 47,055 47,067
Intangible Assets, net 3,200 3,575
Other assets and restricted cash   22,339     37,280
Total Long-term Assets 880,277 844,033
 
Total Assets $ 1,097,922   $ 1,082,285
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 24,941 $ 19,122
Accrued payroll and purchased transportation 27,961 34,127
Accrued liabilities 32,518 20,604
Claims accrual - current portion 18,747 18,532
Dividend payable - current portion   306     200
Total Current Liabilities 104,473 92,585
 
Claims accrual - long-term portion 11,681 11,505
Long-term dividend payable and other liabilities 2,196 2,513
Deferred tax liabilities 144,724 162,007
Long-term debt   120,000     134,400
Total Long-term Liabilities 278,601 310,425
 
Total Liabilities   383,074     403,010
 
Common stock 809 818
Additional paid-in capital 203,073 185,184
Accumulated other comprehensive income 3,506 12,231
Retained earnings   505,165     479,527
Total Knight Transportation Shareholders' Equity 712,553 677,760
Noncontrolling interest   2,295     1,515
Total Shareholders' Equity   714,848     679,275
Total Liabilities and Shareholders' Equity $ 1,097,922   $ 1,082,285
 
       
Three Months Ended September 30, Nine Months Ended September 30,

2015

 

2014

% Change

2015

 

2014

% Change

(Unaudited) (Unaudited)
OPERATING STATISTICS
 
Average Revenue Per Tractor* $ 43,863 $ 43,100 1.8 % $ 130,398 $ 126,648 3.0 %
 
Non-paid Empty Mile Percent 12.1 % 9.8 % 23.5 % 11.7 % 9.6 % 21.9 %
 
Average Length of Haul 505 492 2.6 % 505 497 1.6 %
 
Adjusted Operating Ratio (1) 82.8 % 82.5 % 82.2 % 83.1 %
 
Average Tractors - Total 4,829 4,040 4,804 4,003
 
Average Trailers - Total 12,021 9,381 11,668 9,163
 
Net Capital Expenditures (in thousands) $ 69,242 $ 59,950 $ 108,852 $ 121,308
 
Cash Flow From Operations (in thousands) $ 49,172 $ 39,215 $ 156,639 $ 117,067
 
* Includes trucking segment revenue excluding fuel surcharge.
 
GAAP to Non-GAAP Reconciliation Schedules:
(1)
Non-GAAP reconciliation
Adjusted operating income, operating ratio, and adjusted operating ratio reconciliation (a)
         
Three Months Ended September 30, Nine Months Ended September 30,
2015   2014 2015   2014

(Unaudited, in thousands)

 
Total revenue 300,122 271,547 892,225 784,865
Less: Trucking fuel surcharge   30,192       43,718     96,458       132,532  
Revenue, excluding trucking fuel surcharge   269,930       227,829     795,767       652,333  
Operating expense 253,696 231,756 757,877 674,925
Adjusted for:
Trucking fuel surcharge (30,192 ) (43,718 ) (96,458 ) (132,532 )
Accrual for class action lawsuits (b)   -       -     (7,163 )     -  
Adjusted operating expenses   223,504       188,038     654,256       542,393  
Adjusted operating income   46,426       39,791     141,511       109,940  
Operating ratio 84.5 % 85.3 % 84.9 % 86.0 %
Adjusted operating ratio 82.8 % 82.5 % 82.2 % 83.1 %
 
 
(2)
Non-GAAP reconciliation
Adjusted net income attributable to Knight and adjusted earnings per diluted share reconciliation:
 
Three Months Ended September 30, Nine Months Ended September 30,
2015   2014 2015   2014
(Unaudited, in thousands, except per share amounts)
 
Net Income attributable to Knight $ 30,283 $ 25,100 $ 87,484 $ 69,924
Adjusted for:
Accrual for class action lawsuits (net of tax)(b)   -       -   $ 4,395       -  
Adjusted net income attributable to Knight $ 30,283     $ 25,100   $ 91,879     $ 69,924  
 
Weighted Average Shares Outstanding - Diluted 82,005 82,097 82,714 81,776
 
Earnings per diluted share $ 0.37 $ 0.31 $ 1.06 $ 0.86
Adjusted for:
Accrual for class action lawsuits (b) $ 0.00     $ 0.00   $ 0.05     $ 0.00  
Adjusted earnings per diluted share $ 0.37     $ 0.31   $ 1.11     $ 0.86  
 
 
(3)
Non-GAAP reconciliation
Operating ratio and adjusted operating ratio for trucking segment (a)
 
Three Months Ended September 30, Nine Months Ended September 30,
2015   2014 2015   2014

(Unaudited, in thousands)

Trucking
Total revenue 242,008 217,844 722,847 639,506
Less: Trucking fuel surcharge   30,192       43,718     96,458       132,532  
Revenue, excluding trucking fuel surcharge   211,816       174,126     626,389       506,974  
Operating expense 199,298 182,330 600,047 539,015
Adjusted for:
Trucking fuel surcharge (30,192 ) (43,718 ) (96,458 ) (132,532 )
Accrual for class action lawsuits (b)   -       -     (7,163 )     -  
Adjusted operating expenses   169,106       138,612     496,426       406,483  
Adjusted operating income   42,710       35,514     129,963       100,491  
Operating ratio 82.4 % 83.7 % 83.0 % 84.3 %
Adjusted operating ratio 79.8 % 79.6 % 79.3 % 80.2 %
(a) 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. 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.
 
(b) During the second quarter of 2015 we accrued $7.2 million of expense ($4.4 million after-tax) related to two class action lawsuits involving employment related claims.

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.

Contacts

Knight Transportation, Inc.
David A. Jackson, President and CEO
or
Adam W. Miller, CFO
602-606-6315

Contacts

Knight Transportation, Inc.
David A. Jackson, President and CEO
or
Adam W. Miller, CFO
602-606-6315