July 22, 2015
Phoenix, Arizona
Knight Transportation Reports Second Quarter 2015 Revenue and Earnings
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 | |
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: David A. Jackson, President and CEO, or Adam W. Miller, CFO at (602) 606-6315 |
