Attached files
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| 8-K - FORM 8-K (SECOND QUARTER 2016 EARNINGS RELEASE) - KNIGHT TRANSPORTATION INC | form8k.htm |
Exhibit 99
July 27, 2016
Phoenix, Arizona
Knight Transportation Reports Second Quarter 2016 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 ended June 30, 2016.
The following table reflects key financial highlights for the second quarter and first six months of 2016 and 2015. The second quarter of 2015 included $7.2 million of expense ($4.4 million after-tax) related to two class action lawsuits. 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.
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(dollars in thousands, except per share data)
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||||||||||||
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2016
|
2015
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Chg
|
2016
|
2015
|
Chg
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|||||||||||||||||||
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Total Revenue
|
$ | 276,318 | $ | 301,822 | -8.5 | % | $ | 548,406 | $ | 592,103 | -7.4 | % | ||||||||||||
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Revenue, excluding trucking fuel surcharge
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$ | 253,859 | $ | 268,623 | -5.5 | % | $ | 507,442 | $ | 525,837 | -3.5 | % | ||||||||||||
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Operating Income
|
$ | 38,081 | $ | 41,619 | -8.5 | % | $ | 76,808 | $ | 87,922 | -12.6 | % | ||||||||||||
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Adjusted Operating Income(1)
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$ | 38,081 | $ | 48,782 | -21.9 | % | $ | 76,808 | $ | 95,085 | -19.2 | % | ||||||||||||
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Net Income, attributable to Knight
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$ | 24,675 | $ | 27,638 | -10.7 | % | $ | 47,245 | $ | 57,200 | -17.4 | % | ||||||||||||
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Adjusted net income attributable to Knight(2)
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$ | 24,675 | $ | 32,033 | -23.0 | % | $ | 47,245 | $ | 61,595 | -23.3 | % | ||||||||||||
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Earnings per diluted share
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$ | 0.31 | $ | 0.33 | -8.4 | % | $ | 0.58 | $ | 0.69 | -15.4 | % | ||||||||||||
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Adjusted earnings per diluted share(2)
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$ | 0.31 | $ | 0.39 | -21.0 | % | $ | 0.58 | $ | 0.74 | -21.5 | % | ||||||||||||
The company previously announced a quarterly cash dividend of $0.06 per share to shareholders of record on June 3, 2016, which was paid on June 24, 2016.
Dave Jackson, President and Chief Executive Officer, commented on the quarter, “The freight environment in the second quarter of 2016 was less attractive than the same quarter a year ago. We attribute the change to excess trucking capacity in the markets we serve. Although a surplus of trucking capacity remains currently, significantly declining new truck orders, increased bankruptcies, reductions in the driver workforce, low returns on invested capital, and additional regulatory burdens expected to phase in over the coming quarters has and will continue to reduce available capacity. We believe this will begin to lead to an improvement in the supply/demand relationship in the coming quarters. During the second quarter, the more competitive freight environment and fewer non-contract opportunities continued to pressure our overall revenue per loaded mile.
“We continue to focus on improving the productivity of our assets in our trucking segment and expanding load volumes and margins in our logistics segment. During the second quarter, when compared to the same quarter last year, we improved our miles per tractor 1.7%, grew our brokerage load volumes 28.4%, and expanded our brokerage gross margin by 110 basis points.
“Our earnings per diluted share for the quarter were $0.31, compared to our adjusted earnings per diluted share of $0.39 in the same quarter last year. During the quarter, revenue per loaded mile, excluding fuel surcharge, decreased 2.4% and negatively impacted our results by approximately $0.04 per share when compared to the same period last year. Less gain on sale of revenue equipment, increased net fuel cost, and lower other income also negatively impacted our results by approximately $0.04 per share. Driver pay continues to be inflationary when compared to the same quarter last year, but was partially offset by our cost control efforts in operations and maintenance. The effective income tax rate for the quarter was 37.6% versus 36.3% for the second quarter of 2015.”
The following table reflects our consolidated financial performance and that of our trucking and our logistics segments for the second quarter and first six months of 2016 and 2015. The second quarter of 2015 included $7.2 million of expense related to two class action lawsuits. We have provided adjusted financial information that excludes these expenses from our results of operations. We believe the comparability of our results is improved by excluding these infrequent expenses that are unrelated to our core operations.
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(dollars in thousands)
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||||||||||||
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2016
|
2015
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Chg
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2016
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2015
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Chg
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|||||||||||||||||||
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Consolidated
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||||||||||||||||||||||||
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Revenue, excluding trucking fuel surcharge
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$ | 253,859 | $ | 268,623 | -5.5 | % | $ | 507,442 | $ | 525,837 | -3.5 | % | ||||||||||||
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Operating Income
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$ | 38,081 | $ | 41,619 | -8.5 | % | $ | 76,808 | $ | 87,922 | -12.6 | % | ||||||||||||
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Adjusted Operating Income(1)
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$ | 38,081 | $ | 48,782 | -21.9 | % | $ | 76,808 | $ | 95,085 | -19.2 | % | ||||||||||||
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Adjusted Operating Ratio(1)
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85.0 | % | 81.8 | % |
320 bps
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84.9 | % | 81.9 | % |
300 bps
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Trucking Segment
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Revenue, excluding trucking fuel surcharge
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$ | 203,930 | $ | 212,368 | -4.0 | % | $ | 403,343 | $ | 414,573 | -2.7 | % | ||||||||||||
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Operating Income
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$ | 35,286 | $ | 37,944 | -7.0 | % | $ | 71,208 | $ | 80,091 | -11.1 | % | ||||||||||||
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Adjusted Operating Income(3)
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$ | 35,286 | $ | 45,107 | -21.8 | % | $ | 71,208 | $ | 87,254 | -18.4 | % | ||||||||||||
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Adjusted Operating Ratio(3)
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82.7 | % | 78.8 | % |
390 bps
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82.3 | % | 79.0 | % |
330 bps
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Logistics Segment
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Revenue
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$ | 49,929 | $ | 56,255 | -11.2 | % | $ | 104,099 | $ | 111,264 | -6.4 | % | ||||||||||||
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Operating Income
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$ | 2,795 | $ | 3,675 | -23.9 | % | $ | 5,600 | $ | 7,831 | -28.5 | % | ||||||||||||
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Operating Ratio
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94.4 | % | 93.5 | % |
90 bps
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94.6 | % | 93.0 | % |
160 bps
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||||||||||||||
In the second quarter, the trucking segment achieved an adjusted operating ratio of 82.7% compared to 78.8% from the same quarter last year. Increased net fuel expense and less gain on sale of revenue equipment impacted the operating ratio by approximately 210 basis points. Revenue per tractor, excluding fuel surcharge, decreased 1.5%, year over year, attributable to a 2.4% decrease in average revenue per loaded mile, a 1.7% increase in average miles per tractor, and a 70 basis point increase in our non-paid empty mile percentage. We remain focused on improving the productivity of our assets, developing our freight network, and intensely controlling our costs.
During the second quarter of 2016, the logistics segment produced an operating ratio of 94.4% compared to 93.5% for the same quarter last year, with revenue declining 11.2%. Our logistics segment consists of brokerage, intermodal, and other logistics services. The year over year revenue decline in the second quarter was primarily a result of exiting our agriculture sourcing business in the first quarter of 2016. Compared to the same quarter last year, our brokerage business expanded gross margins 110 basis points and increased load volume by 28.4%, which resulted in operating income increasing 6.2%. Brokerage revenue increased 2.1% when compared to the same quarter last year as increased load volume was offset by a 20.4% decline in revenue per load as a result of lower fuel surcharge, a shorter length of haul, and lower non-contract pricing. We plan to continue to invest in our logistics service offerings, which should continue to improve our return on capital.
Attracting and retaining safe, high-quality driving associates remains a priority. Our driver development and training programs remain a focus area for our management team, and we feel well positioned to continue to make progress around the development of our driving associates in the coming quarters. However, while the freight market remains challenging we remain cost conscious in our approach of recruiting and training driving associates.
The used equipment market remained soft during the quarter and resulted in gain on sale of revenue equipment in the second quarter of 2016 of $2.7 million, compared to $5.2 million in the second quarter of 2015. Our tractor fleet remains one of the most modern fleets in the industry with an average age of 1.8 years. We anticipate the average age to increase as we extend the duration in which we operate our tractors as a result of the rate environment and weak used equipment market.
During the second quarter of 2016 we repurchased 372,094 shares of our common stock for $9.5 million. We currently have approximately 4.4 million shares available under our stock repurchase authorization. Over the last twelve months ended June 30, 2016, we have returned $71.3 million to our shareholders in the form of quarterly dividends and stock repurchases. We ended the quarter with $9.6 million of cash, $60.0 million of long-term debt, and $746.6 million of shareholders' equity. During the second quarter our net capital expenditures were $23.7 million, while our cash flow from operations was $65.5 million. We expect to continue to generate meaningful free cash flow as we do not plan to grow our tractor fleet until we see significant strength in customer demand combined with stronger non-contract and contract rate markets.
The company will hold a conference call on July 27, 2016, at 4:30 PM EDT, to further discuss its results of operations for the quarter ended June 30, 2016. 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 2016 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.
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INCOME STATEMENT DATA:
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Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||||
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2016
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2015
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2016
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2015
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|||||||||||||
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(Unaudited, in thousands, except per share amounts)
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REVENUE:
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Revenue, before fuel surcharge
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$ | 253,859 | $ | 268,623 | $ | 507,442 | $ | 525,837 | ||||||||
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Fuel surcharge
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22,459 | 33,199 | 40,964 | 66,266 | ||||||||||||
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TOTAL REVENUE
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276,318 | 301,822 | 548,406 | 592,103 | ||||||||||||
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OPERATING EXPENSES:
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Salaries, wages and benefits
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84,440 | 84,381 | 168,043 | 164,407 | ||||||||||||
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Fuel expense - gross
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33,429 | 42,362 | 60,200 | 80,451 | ||||||||||||
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Operations and maintenance
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19,094 | 21,547 | 37,104 | 41,675 | ||||||||||||
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Insurance and claims
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8,257 | 7,995 | 17,080 | 16,928 | ||||||||||||
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Operating taxes and licenses
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4,612 | 4,725 | 10,099 | 10,581 | ||||||||||||
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Communications
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1,043 | 1,077 | 2,248 | 2,217 | ||||||||||||
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Depreciation and amortization
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28,955 | 27,364 | 57,357 | 54,524 | ||||||||||||
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Purchased transportation
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53,918 | 60,619 | 111,703 | 120,164 | ||||||||||||
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Miscellaneous operating expenses
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4,489 | 10,133 | 7,764 | 13,234 | ||||||||||||
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Total operating expenses
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238,237 | 260,203 | 471,598 | 504,181 | ||||||||||||
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Income from operations
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38,081 | 41,619 | 76,808 | 87,922 | ||||||||||||
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Interest income
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82 | 104 | 176 | 236 | ||||||||||||
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Interest expense
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(258 | ) | (211 | ) | (559 | ) | (493 | ) | ||||||||
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Other income
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1,927 | 2,436 | 3,213 | 4,899 | ||||||||||||
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Income before income taxes
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39,832 | 43,948 | 79,638 | 92,564 | ||||||||||||
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INCOME TAXES
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14,861 | 15,759 | 31,645 | 34,434 | ||||||||||||
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Net income
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24,971 | 28,189 | 47,993 | 58,130 | ||||||||||||
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Net income attributable to noncontrolling interest
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(296 | ) | (551 | ) | (748 | ) | (930 | ) | ||||||||
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NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION
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$ | 24,675 | $ | 27,638 | $ | 47,245 | $ | 57,200 | ||||||||
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Basic Earnings Per Share
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$ | 0.31 | $ | 0.34 | $ | 0.59 | $ | 0.70 | ||||||||
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Diluted Earnings Per Share
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$ | 0.31 | $ | 0.33 | $ | 0.58 | $ | 0.69 | ||||||||
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Weighted Average Shares Outstanding - Basic
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80,105 | 81,894 | 80,407 | 81,959 | ||||||||||||
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Weighted Average Shares Outstanding - Diluted
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80,781 | 82,852 | 81,079 | 83,020 | ||||||||||||
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BALANCE SHEET DATA:
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06/30/16
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12/31/15
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ASSETS
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(Unaudited, in thousands)
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|||||||
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Cash and cash equivalents
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$ | 9,564 | $ | 8,691 | ||||
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Trade receivables, net of allowance for doubtful accounts
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134,753 | 131,945 | ||||||
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Notes receivable, net of allowance for doubtful accounts
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549 | 648 | ||||||
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Prepaid expenses
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11,894 | 17,320 | ||||||
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Assets held for sale
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21,091 | 29,327 | ||||||
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Other current assets
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9,171 | 14,215 | ||||||
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Income Tax Receivable
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17,923 | 41,967 | ||||||
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Total Current Assets
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204,945 | 244,113 | ||||||
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Property and equipment, net
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804,133 | 803,643 | ||||||
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Notes receivable, long-term
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3,435 | 3,419 | ||||||
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Goodwill
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47,040 | 47,050 | ||||||
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Intangible Assets, net
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2,825 | 3,075 | ||||||
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Other assets and restricted cash
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24,416 | 18,932 | ||||||
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Total Long-term Assets
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881,849 | 876,119 | ||||||
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Total Assets
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$ | 1,086,794 | $ | 1,120,232 | ||||
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable
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$ | 28,491 | $ | 14,818 | ||||
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Accrued payroll and purchased transportation
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21,567 | 23,776 | ||||||
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Accrued liabilities
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16,504 | 21,609 | ||||||
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Claims accrual - current portion
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20,315 | 19,471 | ||||||
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Dividend payable - current portion
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314 | 349 | ||||||
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Total Current Liabilities
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87,191 | 80,023 | ||||||
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Claims accrual - long-term portion
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12,192 | 11,508 | ||||||
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Long-term dividend payable and other liabilities
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1,888 | 2,164 | ||||||
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Deferred tax liabilities
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177,200 | 174,165 | ||||||
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Long-term debt
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60,000 | 112,000 | ||||||
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Total Long-term Liabilities
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251,280 | 299,837 | ||||||
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Total Liabilities
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338,471 | 379,860 | ||||||
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Common stock
|
800 | 810 | ||||||
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Additional paid-in capital
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216,022 | 205,648 | ||||||
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Accumulated other comprehensive income
|
733 | 2,573 | ||||||
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Retained earnings
|
529,017 | 529,367 | ||||||
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Total Knight Transportation Shareholders' Equity
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746,572 | 738,398 | ||||||
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Noncontrolling interest
|
1,751 | 1,974 | ||||||
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Total Shareholders' Equity
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748,323 | 740,372 | ||||||
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Total Liabilities and Shareholders' Equity
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$ | 1,086,794 | $ | 1,120,232 | ||||
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Three Months Ended June 30,
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Six Months Ended June 30, | ||||||||||||||||||||||
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2016
|
2015
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% Change
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2016
|
2015
|
% Change
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|||||||||||||||||||
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(Unaudited)
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(Unaudited)
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|||||||||||||||||||||||
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OPERATING STATISTICS
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Average Revenue Per Tractor*
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$ | 43,414 | $ | 44,087 | -1.5 | % | $ | 85,943 | $ | 86,532 | -0.7 | % | ||||||||||||
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Non-paid Empty Mile Percent
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12.3 | % | 11.6 | % | 6.0 | % | 12.5 | % | 11.6 | % | 7.8 | % | ||||||||||||
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Average Length of Haul
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505 | 510 | -1.0 | % | 500 | 505 | -1.0 | % | ||||||||||||||||
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Adjusted Operating Ratio (1)
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85.0 | % | 81.8 | % | 84.9 | % | 81.9 | % | ||||||||||||||||
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Average Tractors - Total
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4,697 | 4,817 | 4,693 | 4,791 | ||||||||||||||||||||
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Average Trailers - Total
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12,289 | 11,588 | 12,128 | 11,491 | ||||||||||||||||||||
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Net Capital Expenditures (in thousands)
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$ | 23,678 | $ | 33,852 | $ | 35,396 | $ | 39,610 | ||||||||||||||||
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Cash Flow From Operations (in thousands)
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$ | 65,537 | $ | 49,195 | $ | 133,126 | $ | 107,467 | ||||||||||||||||
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* Includes trucking segment revenue excluding fuel surcharge.
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GAAP to Non-GAAP Reconciliation Schedules:
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(1)
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|||||||
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Non-GAAP reconciliation
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||||||||||||||||
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Adjusted operating income, operating ratio, and adjusted operating ratio reconciliation (a)
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||||||||||||||||
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Three Months Ended June 30,
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Six Months Ended June 30,
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|||||||||||||||
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2016
|
2015
|
2016
|
2015
|
|||||||||||||
|
(Unaudited, in thousands, except per share amounts)
|
||||||||||||||||
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Total revenue
|
$ | 276,318 | $ | 301,822 | $ | 548,406 | $ | 592,103 | ||||||||
|
Less: Trucking fuel surcharge
|
22,459 | 33,199 | 40,964 | 66,266 | ||||||||||||
|
Revenue, excluding trucking fuel surcharge
|
$ | 253,859 | $ | 268,623 | $ | 507,442 | $ | 525,837 | ||||||||
|
Operating expense
|
238,237 | 260,203 | 471,598 | 504,181 | ||||||||||||
|
Adjusted for:
|
||||||||||||||||
|
Trucking fuel surcharge
|
(22,459 | ) | (33,199 | ) | (40,964 | ) | (66,266 | ) | ||||||||
|
Accrual for class action lawsuits (b)
|
- | (7,163 | ) | - | (7,163 | ) | ||||||||||
|
Adjusted operating expenses
|
215,778 | 219,841 | 430,634 | 430,752 | ||||||||||||
|
Adjusted operating income
|
$ | 38,081 | $ | 48,782 | $ | 76,808 | $ | 95,085 | ||||||||
|
Operating ratio
|
86.2 | % | 86.2 | % | 86.0 | % | 85.2 | % | ||||||||
|
Adjusted operating ratio (a)
|
85.0 | % | 81.8 | % | 84.9 | % | 81.9 | % | ||||||||
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(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,
|
|||||||||||||||
|
2016
|
2015
|
2016
|
2015
|
|||||||||||||
|
(Unaudited, in thousands, except per share amounts)
|
||||||||||||||||
|
Net Income attributable to Knight
|
$ | 24,675 | $ | 27,638 | $ | 47,245 | $ | 57,200 | ||||||||
|
Adjusted for:
|
||||||||||||||||
|
Accrual for class action lawsuits (net of tax)(b)
|
- | 4,395 | - | 4,395 | ||||||||||||
|
Adjusted net income attributable to Knight
|
$ | 24,675 | $ | 32,033 | $ | 47,245 | $ | 61,595 | ||||||||
|
Weighted Average Shares Outstanding - Diluted
|
80,781 | 82,852 | 81,079 | 83,020 | ||||||||||||
|
Earnings per diluted share
|
$ | 0.31 | $ | 0.33 | $ | 0.58 | $ | 0.69 | ||||||||
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Adjusted for:
|
||||||||||||||||
|
Accrual for class action lawsuits (b)
|
- | 0.05 | - | 0.05 | ||||||||||||
|
Adjusted earnings per diluted share
|
$ | 0.31 | $ | 0.39 | $ | 0.58 | $ | 0.74 | ||||||||
|
(3)
|
|
Non-GAAP reconciliation
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||||||||||||||||
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Operating ratio and adjusted operating ratio for trucking segment (a)
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||||||||||||||||
|
Three Months Ended June 30,
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Six Months Ended June 30,
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|
2016
|
2015
|
2016
|
2015
|
|||||||||||||
|
(Unaudited, in thousands, except per share amounts)
|
||||||||||||||||
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Trucking
|
||||||||||||||||
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Total revenue
|
$ | 226,389 | $ | 245,567 | $ | 444,307 | $ | 480,839 | ||||||||
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Less: Trucking fuel surcharge
|
22,459 | 33,199 | 40,964 | 66,266 | ||||||||||||
|
Revenue, excluding trucking fuel surcharge
|
$ | 203,930 | $ | 212,368 | $ | 403,343 | $ | 414,573 | ||||||||
|
Operating expense
|
191,103 | 207,623 | 373,099 | 400,748 | ||||||||||||
|
Adjusted for:
|
||||||||||||||||
|
Trucking fuel surcharge
|
(22,459 | ) | (33,199 | ) | (40,964 | ) | (66,266 | ) | ||||||||
|
Accrual for class action lawsuits (b)
|
- | (7,163 | ) | - | (7,163 | ) | ||||||||||
|
Adjusted operating expenses
|
168,644 | 167,261 | 332,135 | 327,319 | ||||||||||||
|
Adjusted operating income
|
$ | 35,286 | $ | 45,107 | $ | 71,208 | $ | 87,254 | ||||||||
|
Operating ratio
|
84.4 | % | 84.5 | % | 84.0 | % | 83.3 | % | ||||||||
|
Adjusted operating ratio (a)
|
82.7 | % | 78.8 | % | 82.3 | % | 79.0 | % | ||||||||
|
(a) Adjusted 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.
|
||||||
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(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.
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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 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