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| 8-K - FORM 8-K (KNIGHT TRANSPORTATION, INC. 1ST QUARTER EARNINGS RELEASE) - KNIGHT TRANSPORTATION INC | form8k.htm |
Exhibit 99
Knight Transportation Reports Revenue and Net Income for the First Quarter Ended March 31, 2011
Knight Transportation (NYSE: KNX), one of North America’s largest truckload transportation companies, reported revenue and earnings for the first quarter ended March 31, 2011.
For the quarter, total revenue increased 12.5% to $186.5 million from $165.7 million for the same quarter of 2010. Revenue before fuel surcharge increased 7.3% to $150.5 million compared to $140.3 million in the first quarter of 2010. Net income decreased to $9.9 million in the first quarter from $12.3 million for the same quarter of 2010 and net income per diluted share was $0.12, compared to $0.15 for the same quarter of 2010.
The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on March 4, 2011, paid on March 25, 2011.
Chairman and Chief Executive Officer, Kevin P. Knight, offered the following comments:
“The first quarter of 2011 was negatively affected by several factors. Most notably was the dramatic increase for the cost of diesel fuel, our single biggest expense. In addition, softer than typical freight demand in the West, recently adopted electronic on-board recorders (EOBR), and severe weather across the country created significant challenges leading to a shortfall in miles per truck this quarter of 3% compared to last year. Fuel negatively impacted the quarter by $0.02 per share and the 3% reduction in miles per truck negatively impacted the quarter by $0.01 per share, compared with first quarter 2010.
“On a consolidated basis, we produced an operating ratio (operating expenses, net of fuel surcharge, as a percentage of revenue before fuel surcharge) of 89.4% compared to 86.8% for the same quarter last year. Our dry van business produced an operating ratio of 89.8% compared to 86.9% for the same quarter last year on essentially flat revenue, excluding fuel surcharge. Our refrigerated business produced an operating ratio of 86.3% compared to 83.0% for the same quarter last year on 17% revenue growth, excluding fuel surcharge. Our port services business produced an operating ratio of 87.9% compared to 91.3% for the same quarter last year on 31% revenue growth, excluding fuel surcharge. Our brokerage business produced an operating ratio of 93.9% compared to 92.8% for the same quarter last year on 69% revenue growth, excluding fuel surcharge.
“Our combined fleet finished the quarter with 3,878 tractors compared to 3,765 last year. This includes owner operators which grew from 335 tractors to 464 tractors in the first quarter this year, an increase of 39%.
“We recently initiated rail intermodal services with access to 57,000 containers provided by our rail partners. Those revenues were not meaningful in the quarter. Our earnings in the quarter were negatively affected as we ramp this business up and expect profit from this business during the second half of the year.
“Fuel expense per company truck increased sharply. The U.S. National Average Diesel Fuel price per gallon for the first quarter increased 27% to $3.63 from $2.85 for the same period of 2010. Additionally, during the month of March the West Coast Average Diesel Fuel price per gallon was almost $.20 higher than the National Average, which increased our fuel exposure in the Western region. The sharp increases have continued into the second quarter as the U.S. National Average Diesel Fuel price per gallon is currently $4.11 and the West Coast Average is currently $4.32. Our fuel surcharge recovery applies only to loaded miles and typically does not offset empty miles, idle time, and out of route miles driven. In periods of significantly rising fuel prices, typical fuel surcharge programs are inadequate. We continue to work with customers to adjust fuel surcharges or make modifications to the base rate to account for the increased fuel prices. We continue to update our fleet with more fuel efficient 2010 US EPA emission engines and to install aerodynamic devices on our tractors and trailers which lead to meaningful fuel efficiency improvements.
“We also experienced an increase in the salaries, wages, and benefits expense line during the first quarter. This increase is attributed to a rise in benefit costs and the cost associated with the development of our businesses. For example, our intermodal, brokerage, and port services businesses experienced the most rapid growth rates. These businesses depend on qualified personnel though require little capital investment. Thus, wages may increase faster than in our asset intensive businesses but the capital investment is much less. We believe the investment in our businesses positions us well going forward for the expected strengthening freight environment.
“We invested $2.8 million of net capital expenditures in the first quarter. We estimate net capital expenditures to be in the range of $110 million for the year as we continue to refresh our fleet and add additional capacity. The used equipment market continues to remain strong and gain on sale has increased over last year. We increased our cash and short term investment balance by $19.1 million from the fourth quarter to $71.5 million. We have returned $87.0 million to our shareholders in the form of the quarterly and special cash dividends in 2010 and the first quarter of 2011 while remaining debt free with $514.5 million of shareholders' equity.
“Demand for our services improved in the Eastern half of the U.S. during mid-February and has continued to improve. Demand for our services in the West started to improve over the last four weeks. In April, miles per tractor are up thus far approximately 3% when compared to last year. We expect for these trends to continue throughout the second quarter as supply and demand trends continue to improve. We continue to expand our driver development capabilities through our Squire subsidiary which enables us to source additional driving associates and develop them into Knight company drivers. Our driver development for experienced drivers is performing ahead of last year and we continue career development by reinforcing our principles of safety, customer service, communication, productivity, and equipment operations through our five-tool driver program. Overall, we are better positioned today than last year to source and develop high quality driving associates.
“We expect that we will grow our revenue before fuel surcharge over the remaining three quarters of this year by a double-digit average as we see demand building for each of our services. We expect this revenue growth to be driven by rate increases, productivity improvement, and additional capacity provided to our customers.
“Despite the difficult trucking environment in recent years we have maintained our dry van fleet and have deployed additional assets into our refrigerated and port services businesses. Going forward, we expect industry capacity to remain tight. Barriers to entry continue to grow with the rise in commodity and equipment prices, the growing complexity of technology, increased regulation, and the difficulties in obtaining financing. In this environment we feel well-positioned to capitalize on strategic opportunities to grow each of our businesses.”
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 solutions to its customers while creating quality driving jobs for our driving associates and successful business opportunities for owner operators.
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INCOME STATEMENT DATA:
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Three Months Ended March 31, | |||||||
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2011
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2010
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REVENUE:
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Revenue, before fuel surcharge
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$ | 150,499 | $ | 140,316 | ||||
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Fuel surcharge
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35,974 | 25,375 | ||||||
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TOTAL REVENUE
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186,473 | 165,691 | ||||||
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OPERATING EXPENSES:
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Salaries, wages and benefits
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50,936 | 47,783 | ||||||
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Fuel expense - gross
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49,699 | 40,235 | ||||||
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Operations and maintenance
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11,728 | 11,048 | ||||||
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Insurance and claims
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6,221 | 5,759 | ||||||
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Operating taxes and licenses
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3,711 | 3,051 | ||||||
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Communications
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1,325 | 1,326 | ||||||
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Depreciation and amortization
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18,474 | 17,965 | ||||||
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Purchased transportation
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25,439 | 16,786 | ||||||
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Miscellaneous operating expenses
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2,992 | 3,158 | ||||||
| 170,525 | 147,111 | |||||||
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Income From Operations
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15,948 | 18,580 | ||||||
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Interest income
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345 | 434 | ||||||
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Other income
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8 | 817 | ||||||
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Income Before Income Taxes
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16,301 | 19,831 | ||||||
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INCOME TAXES
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6,445 | 7,487 | ||||||
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Net Income
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9,856 | 12,344 | ||||||
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Net loss attributable to noncontrolling interest
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- | - | ||||||
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NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION
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$ | 9,856 | $ | 12,344 | ||||
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Net Income Per Share
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- Basic
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$ | 0.12 | $ | 0.15 | ||||
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- Diluted
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$ | 0.12 | $ | 0.15 | ||||
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Weighted Average Shares Outstanding
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- Basic
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83,770 | 83,354 | ||||||
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- Diluted
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84,503 | 84,117 | ||||||
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BALANCE SHEET DATA:
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03/31/11
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12/31/10
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ASSETS
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(Unaudited, in thousands)
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Cash and cash equivalents
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$ | 12,778 | $ | 28,013 | ||||
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Short term investments
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58,757 | 24,379 | ||||||
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Accounts receivable, net
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83,344 | 78,479 | ||||||
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Notes receivable, net
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1,535 | 1,391 | ||||||
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Related party notes and interest receivable
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3,088 | 3,038 | ||||||
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Prepaid expenses
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9,832 | 8,514 | ||||||
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Assets held for sale
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2,534 | 4,132 | ||||||
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Other current assets
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5,378 | 4,717 | ||||||
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Income tax receivable
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6,458 | 6,914 | ||||||
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Current deferred tax asset
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4,493 | 5,671 | ||||||
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Total Current Assets
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188,197 | 165,248 | ||||||
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Property and equipment, net
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469,344 | 483,709 | ||||||
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Notes receivable, long-term
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4,380 | 4,246 | ||||||
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Goodwill
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10,309 | 10,313 | ||||||
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Intangible assets, net
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36 | 52 | ||||||
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Other assets and restricted cash
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14,142 | 13,419 | ||||||
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Total Assets
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$ | 686,408 | $ | 676,987 | ||||
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable
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$ | 7,835 | $ | 7,571 | ||||
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Accrued payroll and purchased transportation
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8,306 | 6,547 | ||||||
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Accrued liabilities
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10,496 | 11,075 | ||||||
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Claims accrual - current portion
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12,472 | 13,843 | ||||||
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Dividend Payable
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1,385 | 1,433 | ||||||
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Total Current Liabilities
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40,494 | 40,469 | ||||||
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Claims accrual - long-term portion
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9,114 | 10,168 | ||||||
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Deferred income taxes
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122,322 | 118,886 | ||||||
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Total Long-term Liabilities
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131,436 | 129,054 | ||||||
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Total Liabilities
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171,930 | 169,523 | ||||||
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Commitments and Contingencies
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Common stock
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838 | 837 | ||||||
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Additional paid-in capital
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128,975 | 126,975 | ||||||
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Accumulated other comprehensive income
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260 | 7 | ||||||
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Retained earnings
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384,475 | 379,714 | ||||||
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Total Knight Transportation Shareholders' Equity
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514,548 | 507,533 | ||||||
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Noncontrolling interest
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(70 | ) | (69 | ) | ||||
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Total Shareholders' Equity
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514,478 | 507,464 | ||||||
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Total Liabilities and Shareholders' Equity
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$ | 686,408 | $ | 676,987 | ||||
| Three Months Ended March 31, | ||||||||||||
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(Unaudited)
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(Unaudited)
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OPERATING STATISTICS
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%
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Change
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Average Revenue Per Tractor*
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$ | 35,393 | $ | 35,258 | 0.4 | % | ||||||
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Non-paid Empty Mile Percent
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10.4 | % | 10.9 | % | -4.6 | % | ||||||
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Average Length of Haul
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467 | 464 | 0.6 | % | ||||||||
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Operating Ratio**
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89.4 | % | 86.8 | % | ||||||||
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Average Tractors - Total
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3,880 | 3,759 | ||||||||||
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Tractors - End of Quarter:
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Company
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3,414 | 3,430 | ||||||||||
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Owner - Operator
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464 | 335 | ||||||||||
| 3,878 | 3,765 | |||||||||||
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Trailers - End of Quarter
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8,836 | 8,396 | ||||||||||
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Net Capital Expenditures (in thousands)
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$ | 2,758 | $ | 13,212 | ||||||||
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Adjusted Cash Flow From Operations Excluding Change in Short-term Investments (in thousands) ***
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$ | 25,555 | $ | 32,183 | ||||||||
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* Includes dry van, refrigerated, and port services revenue excluding fuel surcharge, brokerage revenue, intermodal revenue, and other revenue.
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** 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. Revenue from fuel surcharge is available on the accompanying statements of income. 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.
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*** Adjusted cash flow from operations of $25,555,000 for the quarter ended March 31, 2011 does not include $34,378,000 increase in short-term trading investments, and adjusted cash flow from operations of $32,183,000 for the comparative quarter ended March 31, 2010 does not include $36,806,000 increase in short-term trading investments. These are the reconciling items needed to tie back to cashflow from operations.
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In the press release, we provided adjusted cash flow from operations excluding change 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.
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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 andactual 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.
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Contact: Dave Jackson, President and CFO, at (602) 269-2000
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