Knight Transportation Reports Revenue and Net Income for the Third Quarter Ended September 30, 2009

October 21, 2009 4:01 PM EDT

PHOENIX--(BUSINESS WIRE)-- Knight Transportation (NYSE: KNX), one of North America's largest truckload carriers, reported revenue and earnings for the third quarter ended September 30, 2009. Highlights included:

    --  Revenue before fuel surcharge of $150.2 million, a decrease of 3.6%
        compared with the third quarter of 2008.
    --  Diluted earnings per share decreased 15.6% to $0.16 from $0.19 in the
        third quarter of 2008.
    --  Net income of $13.1 million, a decrease of 18.1% compared with the third
        quarter of 2008.

For the quarter, revenue before fuel surcharge decreased 3.6%, to $150.2 million from $155.9 million in the third quarter of 2008. Primarily due to decreased fuel surcharge revenue, total revenue decreased 17.4%, to $173.1 million from $209.7 million for the same quarter of 2008. The U.S. average cost of diesel fuel during the third quarter was $2.60 compared to $4.34 in the third quarter of 2008. Operating income in the quarter of $20.7 million represented a 21.0% decrease from the $26.2 million reported in the third quarter 2008. Net income decreased 18.1% to $13.1 million from $16.0 million for the same period of 2008. Net income per diluted share for the quarter was $0.16, compared to $0.19 for the same period of 2008.

Year-to-date, revenue before fuel surcharge decreased 5.4%, to $427.6 million from $452.0 million for the same period of 2008. Operating income decreased 7.2% to $61.0 million from $65.7 for the same period of 2008. Net income decreased 6.7% to $37.4 million from $40.1 million in the same period of 2008. Net income per diluted share was $0.45 compared to $0.46 for the same period of 2008.

The company previously announced a quarterly cash dividend of $0.05 per share to shareholders of record on September 4, 2009, which was paid on September 25, 2009.

On October 14, 2009, the company was named to Forbes Magazine's list of the "200 Best Small Companies in America" for the fifteenth consecutive year.

On October 6, 2009, the company received an Environmental Excellence Award from the U.S. Environmental Protection Agency (EPA) SmartWay Transport Partnership. The company was one of 37 companies from the Partnership's more than 2100 partners to be awarded the Excellence Award for reducing emissions and improving the environment.

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

"Despite the continued challenging truckload freight environment, we grew our total loads hauled in the quarter by 10.2% when compared to the same period last year. We have experienced a steady, albeit modest, sequential increase in load volumes as the year has progressed.

"In the third quarter, equipment productivity, as measured by average revenue before fuel surcharge per tractor in the quarter, was down 4.5% from the year-ago period. This compared favorably to an 8.1% year over year decrease in revenue before fuel surcharge per tractor in the second quarter 2009. Our non-paid empty mile percentage decreased to 11.8% from 11.9% in the year-ago period. Our average length of haul decreased 10.7% to 465 miles from 521 miles in the same period last year. The drayage activities in our intermodal business had a modestly negative effect on our average length of haul.

"On a consolidated basis, Knight Transportation produced an operating ratio (operating expenses, net of fuel surcharge, as a percentage of revenue before fuel surcharge) of 86.2% in the third quarter of this year compared to 83.2% in the same period last year. Knight Dry Van generated an operating ratio of 85.6%. Knight Refrigerated generated an operating ratio of 86.7%. Knight Brokerage generated an operating ratio of 93.3%. We have made the decision to maintain our fleet size for longer term strategy rather than short term benefit that would have likely improved our near-term operating ratio.

"Revenue per total mile before fuel surcharge decreased 3.1% from the same period a year ago when revenue per total mile before fuel surcharge peaked for our company. Miles per tractor decreased 1.4% when compared to the same period a year ago, an improvement compared with the 4.5% decrease in the second quarter of 2009. Although we have experienced sequential improvement in freight demand, it is not at a level to significantly influence higher rates.

"There continues to be evidence that many, if not most, truckload carriers are plagued with weak balance sheets, aging fleets and shrinking revenues. We expect the challenging truckload market to yield opportunities to continue to capture market share over time. We believe we are well positioned to navigate the challenges of the current environment and thrive as the market improves when truckload capacity decreases and/or freight demand modestly increases.

"We are executing our plan in the current economic environment by refining our operating model to create additional efficiencies, offering customers a high level of service through our network of service centers and branches, and preparing to capitalize on growth opportunities that will enhance the returns for our shareholders over time. We continue to actively evaluate strategic opportunities that can create value for our stakeholders without undue risk. We have significant financial flexibility and a strong balance sheet, with $509.7 million of stockholders' equity, $72.5 million in cash and short term investments, and zero debt at September 30, 2009.

"During the quarter, we saw benefits from continued improvement in insurance and claims expense. We believe our training program and other management efforts have been instrumental factors in reducing the severity and frequency of accidents.

"In the quarter, our gain on the sale of equipment increased to $833,000, from $367,000 for the same period last year. We continue to operate a relatively young fleet of late-model equipment, with more than half of our tractors equipped with 2007 U.S. EPA emission compliant engines. Our service center network allows us to efficiently maintain this equipment. Looking ahead, we plan to continue a similar trade cycle and adopt the even cleaner burning engines which will be available in 2010."

The company will hold a conference call on October 21, 4:10PM EDT, to further discuss its results of operations for the quarter ended September 30, 2009. The dial in number for this conference call is 1-866-793-1299. 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/presentations, "Third Quarter 2009 Conference Call Presentation."

Knight Transportation, Inc. is a truckload carrier offering dry van, refrigerated, intermodal and brokerage services to customers through a network of service centers and branches located throughout the United States serving North America. As "Your Hometown National Carrier," Knight strives to offer customers and drivers personal service and attention through each service center, while offering integrated freight transportation nationwide and beyond through the scale of one of North America's largest trucking companies. The principal types of freight we transport include consumer staples, retail, paper products, packaging/plastics, manufacturing, and import/export commodities.

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

                       (Unaudited, in thousands, except per share amounts)

                       2009       2008               2009       2008

REVENUE:

Revenue, before fuel   $ 150,190  $ 155,851          $ 427,580  $ 451,987
surcharge

Fuel surcharge           22,942     53,806             56,351     140,188

TOTAL REVENUE            173,132    209,657            483,931    592,175

OPERATING EXPENSES:

Salaries, wages and      52,042     54,554             150,344    158,461
benefits

Fuel expense - gross     38,962     70,844             101,421    197,130

Operations and           11,219     11,495             31,944     31,443
maintenance

Insurance and claims     5,424      6,170              16,132     20,948

Operating taxes and      3,765      3,799              10,760     11,303
licenses

Communications           1,331      1,481              4,153      4,368

Depreciation and         18,204     17,663             53,524     51,734
amortization

Lease expense -          -          -                  -          90
revenue equipment

Purchased                18,147     13,297             44,120     40,788
transportation

Miscellaneous            3,304      4,115              10,564     10,221
operating expenses

                         152,398    183,418            422,962    526,486

Income From              20,734     26,239             60,969     65,689
Operations

Interest income          424        332                1,079      776

Other income/            386        (19     )          365        206
(expense)

Income Before Income     21,544     26,552             62,413     66,671
Taxes

INCOME TAXES             8,436      10,539             24,994     26,549

NET INCOME             $ 13,108   $ 16,013           $ 37,419   $ 40,122

Net Income Per Share

- Basic                $ 0.16     $ 0.19             $ 0.45     $ 0.47

- Diluted              $ 0.16     $ 0.19             $ 0.45     $ 0.46

Weighted Average
Shares Outstanding

- Basic                  83,197     85,633             83,216     85,759

- Diluted                83,630     86,268             83,584     86,332

BALANCE SHEET DATA:

                                              09/30/09   12/31/08

ASSETS                                        (Unaudited, in thousands)

Cash and cash equivalents                     $ 3,099    $ 22,027

Short term investments                          69,362     31,877

Accounts receivable, net                        72,460     70,810

Notes receivable, net                           1,633      159

Other current assets                            17,819     13,258

Prepaid expenses                                11,213     7,108

Income tax receivable                           2,140      774

Current deferred tax asset                      5,232      6,480

Total Current Assets                            182,958    152,493

Property and equipment, net                     467,659    472,228

Notes receivable, long-term                     2,095      674

Goodwill                                        10,338     10,353

Intangible assets, net                          129        176

Long-term deferred tax assets                   -          5,877

Other assets and restricted cash                7,591      5,139

Total Assets                                  $ 670,770  $ 646,940

LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable                              $ 6,516    $ 6,195

Accrued payroll and purchased transportation    9,293      7,432

Accrued liabilities                             11,259     6,273

Claims accrual - current portion                13,235     15,239

Total Current Liabilities                       40,303     35,139

Claims accrual - long-term portion              13,044     15,236

Deferred income taxes                           107,675    112,661

Total Long-term Liabilities                     120,719    127,897

Total Liabilities                               161,022    163,036

Common stock                                    832        834

Additional paid-in capital                      113,849    108,885

Retained earnings                               395,067    374,185

Total Shareholders' Equity                      509,748    483,904

Total Liabilities and Shareholders' Equity    $ 670,770  $ 646,940

              Three Months Ended Sept            Nine Months Ended Sept
              30,                                30,

              2009         2008                  2009         2008

              (Unaudited)  (Unaudited)           (Unaudited)  (Unaudited)

OPERATING                               %                                  %
STATISTICS

                                        Change                             Change

Average
Revenue Per   $ 37,248     $ 38,990     -4.5  %  $ 107,589    $ 114,555    -6.1 %
Tractor*

Non-paid
Empty Mile      11.8   %     11.9   %   -0.8  %    12.0    %    11.7    %  2.6  %
Percent

Average
Length of       465          521        -10.7 %    473          524        -9.7 %
Haul

Operating       86.2   %     83.2   %              85.7    %    85.5    %
Ratio**

Average
Tractors -      3,768        3,809      -1.1  %    3,741        3,755      -0.4 %
Total

Tractors -
End of
Quarter:

Company         3,435        3,655                 3,435        3,655

Owner -         317          145                   317          145
Operator

                3,752        3,800                 3,752        3,800

Trailers -
End of          8,686        9,130                 8,686        9,130
Quarter

Net Capital
Expenditures  $ 27,878     $ 18,799              $ 55,746     $ 49,316
(in
thousands)

Adjusted
Cash Flow
From
Operations
Excluding
Change in     $ 25,101     $ 55,897              $ 91,091     $ 113,045
Short-term
Investments
(in
thousands)
***

* Includes dry van and refrigerated revenue excluding fuel surcharge,
brokerage 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. 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.

*** Adjusted cash flow from operations of $25,101 for the quarter ended Sept
30, 2009 does not include $12,809 increase in short-term investments, and
adjusted cash flow from operations of $55,897 for the comparative quarter
ended Sept 30, 2008 does not include $16,324 increase in short-term
investments. These are the reconciling items needed to tie back to cashflow
from operations.

*** Adjusted cash flow from operations of $91,091 for the nine month period
ended Sept 30, 2009 does not include $37,486 increase in short-term
investments, and adjusted cash flow from operations of $113,045 for the
comparative nine month period ended Sept 30, 2008 does not include $20,406
increase in short-term investments. These are the reconciling items needed to
tie back to cashflow from operations.

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.

    Source: Knight Transportation, Inc.

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