Knight Transportation Reports Second 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 second quarter and six months ended June 30, 2015.

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

       
(dollars in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,
2015   2014 % Chg 2015   2014 % Chg
Total revenue $ 301,822 $ 264,155 14.3 % $ 592,103 $ 513,318 15.3 %
Revenue, excluding trucking fuel surcharge $ 268,623 $ 218,908 22.7 % $ 525,837 $ 424,504 23.9 %
 
Operating income $ 41,619 $ 38,899 7.0 % $ 87,922 $ 70,149 25.3 %
Adjusted operating income(1) $ 48,782 $ 38,899 25.4 % $ 95,085 $ 70,149 35.5 %
 
Net income, attributable to Knight $ 27,638 $ 25,761 7.3 % $ 57,200 $ 44,824 27.6 %
Adjusted net income, attributable to Knight(2) $ 32,033 $ 25,761 24.3 % $ 61,595 $ 44,824 37.4 %
 
Earnings per diluted share $ 0.33 $ 0.31 6.0 % $ 0.69 $ 0.55 25.4 %
Adjusted earnings per diluted share(2) $ 0.39 $ 0.31 22.8 % $ 0.74 $ 0.55 35.1 %
 

The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on June 5, 2015, which was paid on June 26, 2015.

Dave Jackson, President and Chief Executive Officer, commented on the quarter, “During the second quarter we continued to successfully execute our internal initiatives to grow our business, improve margins, and drive operational efficiencies. We grew our consolidated revenue, excluding trucking fuel surcharge, by 22.7% while improving our adjusted operating income by 25.4%. Both our trucking and logistics segments contributed to our growth as we continue to expand our service offerings to meet the ever-changing supply chain needs of our customers.”

During the second quarter of 2015 we accrued $7.2 million of expense ($4.4 million after-tax) related to expected settlement costs for two class action lawsuits involving employment-related claims in California and Oregon. We have provided adjusted financial information that excludes these expenses from our results of operations. We believe the comparability of our results is improved by excluding these infrequent expenses that are unrelated to our core operations.

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

   
(dollars in thousands) Three Months Ended June 30, Six Months Ended June 30,
2015   2014   Chg 2015   2014   Chg
Consolidated
Revenue, excluding trucking fuel surcharge $ 268,623 $ 218,908 22.7 % $ 525,837 $ 424,504 23.9 %
Adjusted operating income(1) $ 48,782 $ 38,899 25.4 % $ 95,085 $ 70,149 35.5 %
Adjusted operating ratio(1) 81.8 % 82.2 % -40 bps 81.9 % 83.5 % -160 bps
Trucking
Revenue, excluding trucking fuel surcharge $ 212,368 $ 171,021 24.2 % $ 414,573 $ 332,848 24.6 %
Adjusted operating income(3) $ 45,107 $ 35,856 25.8 % $ 87,254 $ 64,977 34.3 %
Adjusted operating ratio(3) 78.8 % 79.0 % -20 bps 79.0 % 80.5 % -150 bps
Logistics
Revenue $ 56,255 $ 47,887 17.5 % $ 111,264 $ 91,656 21.4 %
Operating income $ 3,675 $ 3,043 20.8 % $ 7,831 $ 5,172 51.4 %
Operating ratio 93.5 % 93.6 % -10 bps 93.0 % 94.4 % -140 bps
 

In the second quarter, the trucking segment adjusted operating ratio improved to 78.8% from 79.0% for the same quarter last year. The trucking segment experienced revenue growth, excluding trucking fuel surcharge, of 24.2% while improving adjusted operating income by 25.8%. Despite less transactional customer demand, we continue to experience positive results from our efforts to improve yield. Revenue per tractor, excluding fuel surcharge, increased 2.7%, year over year, attributable to a 6.7% improvement in revenue per loaded mile, a 2.6% increase in length of haul, off-set by a 1.4% 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.

In the second quarter, the logistics segment operating ratio improved to 93.5% from 93.6% for the same quarter last year. We continued to grow profitably by increasing revenue 17.5% while improving operating income by 20.8%. Our brokerage business, which is the largest component of our logistics segment, increased revenue 31.3% with a 38.4% improvement in operating income, when compared to the same quarter last year. Load volume in the brokerage business increased 64.3% while revenue per load was negatively impacted primarily as a result of lower fuel surcharge and a shorter length of haul. Revenue in our intermodal business declined year over year 16.1%, however, we achieved an 89.5% operating ratio as compared to 99.0% 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.

Attracting and retaining high quality driving associates remains a significant 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 remained strong during the quarter and resulted in gain on sale of revenue equipment in the second quarter of 2015 of $5.2 million, compared to $4.6 million in the second quarter of 2014.

Our reported effective tax rate for the quarter was 36.3%, compared with 37.6% in the second quarter last year. The difference in tax rate year over year amounted to an increase of approximately $0.01 to our diluted earnings per share.

During the second quarter of 2015 we purchased approximately 1.0 million shares of our common stock for $30.3 million. We currently have approximately 6.4 million shares available under our stock repurchase authorization. Over the last twelve months ended June 30, 2015 we have returned $50.3 million to our shareholders in the form of quarterly dividends and stock repurchases. We ended the quarter with $10.9 million of cash, $85.0 million of long term debt, and $700.2 million of shareholders' equity. Our net capital expenditures for the quarter were $33.9 million, while our cash flow from operations was $49.4 million.

The company will hold a conference call on July 22, 2015, at 4:30 PM EDT, to further discuss its results of operations for the quarter ended June 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, ''Second 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 June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(Unaudited, in thousands, except per share amounts)
REVENUE:
Revenue, before fuel surcharge $ 268,623 $ 218,908 $ 525,837 $ 424,504
Fuel surcharge   33,199       45,247     66,266       88,814  
TOTAL REVENUE   301,822       264,155     592,103       513,318  
 
OPERATING EXPENSES:
Salaries, wages and benefits 84,381 64,750 164,407 125,483
Fuel expense - gross 42,362 52,192 80,451 104,201
Operations and maintenance 21,547 17,156 41,675 34,176
Insurance and claims 7,995 7,462 16,928 14,885
Operating taxes and licenses 4,725 3,861 10,581 7,926
Communications 1,077 1,178 2,217 2,457
Depreciation and amortization 27,364 21,951 54,524 43,738
Purchased transportation 60,619 56,319 120,164 108,288
Miscellaneous operating expenses   10,133       387     13,234       2,015  
Total operating expenses   260,203       225,256     504,181       443,169  
           
Income from operations   41,619       38,899     87,922       70,149  
 
 
Interest income 104 109 236 222
Interest expense (211 ) (87 ) (493 ) (204 )

Other income

  2,436       2,591     4,899       3,457  
Income before income taxes 43,948 41,512 92,564 73,624
INCOME TAXES   15,759       15,496     34,434       28,276  
Net income 28,189 26,016 58,130 45,348
Net income attributable to noncontrolling interest   (551 )     (255 )   (930 )     (524 )
NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION $ 27,638     $ 25,761   $ 57,200     $ 44,824  
 
Basic Earnings Per Share $ 0.34 $ 0.32 $ 0.70 $ 0.56
Diluted Earnings Per Share $ 0.33 $ 0.31 $ 0.69 $ 0.55
 
Weighted Average Shares Outstanding - Basic 81,894 80,864 81,959 80,684
Weighted Average Shares Outstanding - Diluted 82,852 81,835 83,020 81,596
 
       
BALANCE SHEET DATA:

06/30/15

12/31/14

ASSETS (Unaudited, in thousands)
Cash and cash equivalents $ 10,930 $ 17,066
Trade receivables, net of allowance for doubtful accounts 134,960 143,531
Notes receivable, net of allowance for doubtful accounts 804 1,020
Prepaid expenses 16,044 17,423
Assets held for sale 12,159 23,248
Other current assets 13,297 13,345
Income Tax Receivable 6,733 19,432
Current deferred tax assets   5,094     3,187
Total Current Assets   200,021     238,252
 
Property and equipment, net 771,754 752,046
Notes receivable, long-term 3,827 4,065
Goodwill 47,058 47,067
Intangible Assets, net 3,325 3,575
Other assets and restricted cash   27,749     37,280
Total Long-term Assets 853,713 844,033
 
Total Assets $ 1,053,734   $ 1,082,285
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 28,074 $ 19,122
Accrued payroll and purchased transportation 24,581 34,127
Accrued liabilities 29,287 20,604
Claims accrual - current portion 19,325 18,532
Dividend payable - current portion   303     200
Total Current Liabilities 101,570 92,585
 
Claims accrual - long-term portion 12,066 11,505
Long-term dividend payable and other liabilities 2,168 2,513
Deferred tax liabilities 150,872 162,007
Long-term debt   85,000     134,400
Total Long-term Liabilities 250,106 310,425
 
Total Liabilities   351,676

 

  403,010
 
Common stock 813 818
Additional paid-in capital 198,369 185,184
Accumulated other comprehensive income 6,178 12,231
Retained earnings   494,855     479,527
Total Knight Transportation Shareholders' Equity 700,215 677,760
Noncontrolling interest   1,843     1,515
Total Shareholders' Equity   702,058     679,275
Total Liabilities and Shareholders' Equity $ 1,053,734   $ 1,082,285
 
     
Three Months Ended June 30, Six Months Ended June 30,

2015

 

2014

% Change

2015

 

2014

% Change
(Unaudited) (Unaudited)
OPERATING STATISTICS
 
Average Revenue Per Tractor* $ 44,087 $ 42,938 2.7 % $ 86,532 $ 83,546 3.6 %
 
Non-paid Empty Mile Percent 11.6 % 9.4 % 23.4 % 11.6 % 9.5 % 22.1 %
 
Average Length of Haul 510 497 2.6 % 505 499 1.2 %
 
Adjusted Operating Ratio (1) 81.8 % 82.2 % 81.9 % 83.5 %
 
Average Tractors - Total 4,817 3,983 4,791 3,984
 
Average Trailers - Total 11,588 9,046 11,491 9,054
 
Net Capital Expenditures (in thousands) $ 33,852 $ 55,632 $ 39,610 $ 61,358
 
Cash Flow From Operations (in thousands) $ 49,439 $ 41,365 $ 107,711 $ 77,852
 
* 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 June 30, Six Months Ended June 30,
2015   2014 2015   2014
(Unaudited, in thousands, except per share amounts)
 
Total revenue 301,822 264,155 592,103 513,318
Less: Trucking fuel surcharge   33,199       45,247     66,266       88,814  
Revenue, excluding trucking fuel surcharge   268,623       218,908     525,837       424,504  
Operating expense 260,203 225,256 504,181 443,169
Adjusted for:
Trucking fuel surcharge (33,199 ) (45,247 ) (66,266 ) (88,814 )
Accrual for class action lawsuits (b)   (7,163 )     -     (7,163 )     -  
Adjusted operating expenses   219,841       180,009     430,752       354,355  
Adjusted operating income   48,782       38,899     95,085       70,149  
Operating ratio 86.2 % 85.3 % 85.2 % 86.3 %
Adjusted operating ratio 81.8 % 82.2 % 81.9 % 83.5 %
                   
 
(2)  
Non-GAAP reconciliation

Adjusted net income attributable to Knight and adjusted earnings per diluted share reconciliation:

 
Three Months Ended June 30, Six Months Ended June 30,
2015   2014 2015   2014
(Unaudited, in thousands, except per share amounts)
 
Net Income attributable to Knight $ 27,638 $ 25,761 $ 57,200 $ 44,824
Adjusted for:

Accrual for class action lawsuits (net of tax)(b)

$ 4,395       -   $ 4,395       -  

Adjusted net income attributable to Knight

$ 32,033     $ 25,761   $ 61,595     $ 44,824  
 
Weighted Average Shares Outstanding - Diluted 82,852 81,835 83,020 81,596
 
Earnings per diluted share $ 0.334 $ 0.315 $ 0.689 $ 0.549
Adjusted for:
Accrual for class action lawsuits (b) $ 0.053     $ 0.000   $ 0.053     $ 0.000  
Adjusted earnings per diluted share $ 0.387     $ 0.315   $ 0.742     $ 0.549  
                   
 
(3)  
Non-GAAP reconciliation
Operating ratio and adjusted operating ratio for trucking segment (a)
 
Three Months Ended June 30, Six Months Ended June 30,
2015   2014 2015   2014
(Unaudited, in thousands, except per share amounts)
Trucking
Total revenue 245,567 216,268 480,839 421,662
Less: Trucking fuel surcharge   33,199       45,247     66,266       88,814  
Revenue, excluding trucking fuel surcharge   212,368       171,021     414,573       332,848  
Operating expense 207,623 180,412 400,748 356,685
Adjusted for:
Trucking fuel surcharge (33,199 ) (45,247 ) (66,266 ) (88,814 )
Accrual for class action lawsuits (b)   (7,163 )     -     (7,163 )     -  
Adjusted operating expenses   167,261       135,165     327,319       267,871  
Adjusted operating income   45,107       35,856     87,254       64,977  
Operating ratio 84.5 % 83.4 % 83.3 % 84.6 %
Adjusted operating ratio 78.8 % 79.0 % 79.0 % 80.5 %
 
(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

Release Summary

Knight Transportation Reports Second Quarter 2015 Revenue and Earnings

Contacts

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