[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended September 30, 2008
|
|
or
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period
from to
|
Arizona
|
86-0649974
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
No.)
|
|
5601
West Buckeye Road
Phoenix,
Arizona
85043
(Address
of Principal Executive Offices)
(Zip
Code)
|
||
Registrant's
telephone number, including area code:
|
602-269-2000
|
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
PART
I – FINANCIAL INFORMATION
|
Page
Number
|
|
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Unaudited Balance Sheets as of September 30, 2008 and
December 31, 2007
|
||
Condensed
Consolidated Unaudited Statements of Income for the three and nine months
ended September 30, 2008 and 2007
|
||
Condensed
Consolidated Unaudited Statements of Cash Flows for the nine months
ended September 30, 2008 and 2007
|
||
Notes
to Condensed Consolidated Unaudited Financial Statements
|
||
Item
2.
|
Management's
Discussion and Analysis of Financial Conditionand
Results of Operations
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
Item
4.
|
Controls
and Procedures
|
|
Part
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
|
Item
1A.
|
Risk
Factors
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
|
Item
5.
|
Other
Information
|
|
Item
6.
|
Exhibits
|
|
Signatures
|
|
Condensed
Consolidated Unaudited Balance Sheets
As
of September 30, 2008 and December 31, 2007
(In
thousands)
|
||||||||
September
30,
2008
|
December
31,
2007
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash and cash
equivalents
|
$ | 39,434 | $ | 23,688 | ||||
Short term
investment
|
28,026 | 7,620 | ||||||
Accounts receivable,
net
|
91,386 | 88,535 | ||||||
Notes receivable,
net
|
164 | 19 | ||||||
Prepaid expenses
|
8,283 | 8,776 | ||||||
Other current
assets
|
11,340 | 24,994 | ||||||
Income tax
receivable
|
- | 3,558 | ||||||
Deferred tax
asset
|
11,824 | 10,157 | ||||||
Total current
assets
|
190,457 | 167,347 | ||||||
Property
and Equipment:
|
||||||||
Land and
improvements
|
28,513 | 26,878 | ||||||
Buildings and
improvements
|
55,116 | 46,685 | ||||||
Furniture and
fixtures
|
7,311 | 6,910 | ||||||
Shop and service
equipment
|
4,951 | 3,935 | ||||||
Revenue equipment
|
551,056 | 521,085 | ||||||
Leasehold
improvements
|
1,164 | 776 | ||||||
648,111 | 606,269 | |||||||
Less: Accumulated
depreciation and amortization
|
(180,694 | ) | (146,721 | ) | ||||
Property
and equipment, net
|
467,417 | 459,548 | ||||||
Notes
receivable – long-term
|
410 | 887 | ||||||
Goodwill
|
10,358 | 10,372 | ||||||
Intangible
assets, net
|
191 | 238 | ||||||
Other
assets & restricted cash
|
5,018 | 4,972 | ||||||
Total
assets
|
$ | 673,851 | $ | 643,364 |
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Condensed
Consolidated Unaudited Balance Sheets (continued)
As
of September 30, 2008 and December 31, 2007
(In
thousands, except par values)
|
||||||||
September
30,
2008
|
December
31,
2007
|
|||||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
payable
|
$ | 16,746 | $ | 17,744 | ||||
Accrued payroll and purchased
transportation
|
9,359 | 7,992 | ||||||
Accrued
liabilities
|
8,899 | 8,048 | ||||||
Claims accrual – current
portion
|
16,918 | 28,662 | ||||||
Total current
liabilities
|
51,922 | 62,446 | ||||||
Long-term
Liabilities:
|
||||||||
Claims accrual – long-term
portion
|
14,667 | - | ||||||
Deferred tax
liabilities
|
105,088 | 93,368 | ||||||
Total long-term
liabilities
|
119,755 | 93,368 | ||||||
Total
liabilities
|
171,677 | 155,814 | ||||||
Commitments
and Contingencies
|
||||||||
Shareholders'
Equity:
|
||||||||
Preferred stock, $0.01 par
value; 50,000 shares authorized;
none issued and
outstanding
|
- | - | ||||||
Common stock, $0.01 par value;
300,000 shares authorized;
85,538 and 86,697 shares issued
and outstanding at
September
30, 2008 and December 31, 2007, respectively
|
855 | 867 | ||||||
Additional paid-in
capital
|
107,922 | 102,450 | ||||||
Retained
earnings
|
393,397 | 384,233 | ||||||
Total shareholders'
equity
|
502,174 | 487,550 | ||||||
Total liabilities and
shareholders' equity
|
$ | 673,851 | $ | 643,364 |
Condensed
Consolidated Statements of Income (unaudited)
(In
thousands, except per share data)
|
||||||||||||||||
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
REVENUE:
|
||||||||||||||||
Revenue, before fuel
surcharge
|
$ | 155,851 | $ | 151,661 | $ | 451,987 | $ | 449,498 | ||||||||
Fuel surcharge
|
53,806 | 28,664 | 140,188 | 77,547 | ||||||||||||
Total revenue
|
209,657 | 180,325 | 592,175 | 527,045 | ||||||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Salaries, wages and
benefits
|
54,554 | 51,642 | 158,461 | 151,973 | ||||||||||||
Fuel
|
70,844 | 48,601 | 197,130 | 134,756 | ||||||||||||
Operations and
maintenance
|
11,495 | 10,390 | 31,443 | 29,722 | ||||||||||||
Insurance and
claims
|
6,170 | 7,785 | 20,948 | 21,912 | ||||||||||||
Operating taxes and
licenses
|
3,799 | 3,748 | 11,303 | 11,022 | ||||||||||||
Communications
|
1,481 | 1,416 | 4,368 | 3,986 | ||||||||||||
Depreciation and
amortization
|
17,663 | 16,596 | 51,734 | 48,814 | ||||||||||||
Lease expense – revenue
equipment
|
- | 85 | 90 | 296 | ||||||||||||
Purchased
transportation
|
13,297 | 13,948 | 40,788 | 37,985 | ||||||||||||
Miscellaneous operating
expenses
|
4,115 | 2,591 | 10,221 | 6,484 | ||||||||||||
Total operating
expenses
|
183,418 | 156,802 | 526,486 | 446,950 | ||||||||||||
Income from
operations
|
26,239 | 23,523 | 65,689 | 80,095 | ||||||||||||
Interest
income
|
332 | 436 | 776 | 959 | ||||||||||||
Other
income/(expense)
|
(19 | ) | - | 206 | 668 | |||||||||||
Income before income
taxes
|
26,552 | 23,959 | 66,671 | 81,722 | ||||||||||||
Income
taxes
|
(10,539 | ) | (9,450 | ) | (26,549 | ) | (32,416 | ) | ||||||||
Net income
|
$ | 16,013 | $ | 14,509 | $ | 40,122 | $ | 49,306 | ||||||||
Earnings
per common share and common share equivalent:
|
||||||||||||||||
Basic
|
$ | 0.19 | $ | 0.17 | $ | 0.47 | $ | 0.57 | ||||||||
Diluted
|
$ | 0.19 | $ | 0.17 | $ | 0.46 | $ | 0.57 | ||||||||
Weighted
average number of common shares and common
share equivalents outstanding:
|
||||||||||||||||
Basic
|
85,633 | 86,479 | 85,759 | 86,318 | ||||||||||||
Diluted
|
86,268 | 87,300 | 86,332 | 87,249 |
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Condensed
Consolidated Unaudited Statements of Cash Flows
(In
thousands)
|
||||||||
Nine
Months Ended
September
30,
|
||||||||
2008
|
2007
|
|||||||
Cash
Flows From Operating Activities:
|
||||||||
Net
income
|
$ | 40,122 | $ | 49,306 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation and
amortization
|
51,734 | 48,814 | ||||||
Gain on sales of
equipment
|
(1,512 | ) | (3,947 | ) | ||||
Building impairment due to
fire
|
- | 166 | ||||||
Earn-out on sold
investment
|
(225 | ) | (188 | ) | ||||
Non-cash compensation expense
for stock issuance to board of
directors
|
135 | 174 | ||||||
Provision for allowance for
doubtful accounts
|
1,002 | 66 | ||||||
Excess tax benefits related to
stock-based compensation
|
(502 | ) | (1,293 | ) | ||||
Stock option
expense
|
2,480 | 2,147 | ||||||
Deferred income
taxes
|
10,053 | 4,196 | ||||||
Changes
in assets and liabilities:
|
||||||||
Increase in short-term
investments
|
(20,406 | ) | (5,884 | ) | ||||
Increase in trade
receivables
|
(3,868 | ) | (3,178 | ) | ||||
Increase in other current
assets
|
(184 | ) | (363 | ) | ||||
Decrease in prepaid
expenses
|
493 | 1,118 | ||||||
Decrease (increase) in income
tax receivable
|
3,558 | (4,075 | ) | |||||
Increase in other assets and
restricted cash
|
(67 | ) | (531 | ) | ||||
Increase in accounts
payable
|
4,111 | 4,154 | ||||||
Increase (decrease) in accrued
liabilities, claims accrual and other
|
5,714 | (4,489 | ) | |||||
Net cash provided by operating
activities
|
92,638 | 86,193 | ||||||
Cash
Flow From Investing Activities:
|
||||||||
Purchase of property and
equipment
|
(79,418 | ) | (89,641 | ) | ||||
Proceeds from sales of
equipment
|
30,102 | 33,002 | ||||||
Decrease in notes
receivable
|
348 | 156 | ||||||
Acquisition-related contingent
payment
|
- | (156 | ) | |||||
Decrease in restricted
cash
|
25 | - | ||||||
Proceeds from investment
earn-out
|
225 | 188 | ||||||
Return of investment in
Transportation Resource Partners
|
10 | 216 | ||||||
Net cash used in investing
activities
|
(48,708 | ) | (56,235 | ) |
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Condensed
Consolidated Unaudited Statements of Cash Flows (continued)
(In
thousands)
|
||||||||
Nine
Months Ended
September
30,
|
||||||||
2008
|
2007
|
|||||||
Cash
Flow From Financing Activities:
|
||||||||
Dividends paid
|
$ | (9,429 | ) | $ | (6,911 | ) | ||
Payments to acquire treasury
stock
|
(21,543 | ) | - | |||||
Excess tax benefits related to
stock-based compensation
|
502 | 1,293 | ||||||
Proceeds from exercise of
stock options
|
2,286 | 3,104 | ||||||
Net cash used in financing
activities
|
(28,184 | ) | (2,514 | ) | ||||
Net
increase in cash and cash equivalents
|
15,746 | 27,444 | ||||||
Cash
and cash equivalents, beginning of period
|
23,688 | 1,582 | ||||||
Cash
and cash equivalents, end of period
|
$ | 39,434 | $ | 29,026 | ||||
Supplemental
Disclosures:
|
||||||||
Non-cash investing and
financing transactions:
|
||||||||
Equipment acquired in accounts
payable
|
$ | 5,315 | $ | 89 | ||||
FIN 48 adoption tax
liability
|
- | 394 | ||||||
Retirement of treasury
stock
|
21,543 | - | ||||||
Transfer from property and
equipment to assets held for sale
|
9,167 | 10,064 | ||||||
Cash Flow
Information:
|
||||||||
Income taxes
paid
|
$ | 12,077 | $ | 35,555 |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
(in
thousands)
|
(in
thousands)
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Gross
stock compensation expense, net of forfeitures
|
$ | 926 | $ | 676 | $ | 2,480 | $ | 2,147 | ||||||||
Income
tax
|
$ | (368 | ) | $ | (267 | ) | $ | (988 | ) | $ | (852 | ) | ||||
Net
stock compensation expense after tax
|
$ | 558 | $ | 409 | $ | 1,492 | $ | 1,295 |
Three
Months Ended
September
30,
|
|||
2008
|
2007
|
||
Dividend
yield (1)
|
.85%
|
.70%
|
|
Expected
volatility (2)
|
34.36%
|
32.24%
|
|
Risk-free
interest rate (3)
|
3.60%
|
4.33%
|
|
Expected
terms (4)
|
5.99
years
|
7.17
years
|
|
Weighted
average fair value of options granted
|
$6.88
|
$7.41
|
(1)
|
The
dividend yield is based on our historical experience and future
expectation of dividend payouts.
|
(2)
|
We
analyzed the volatility of our stock using historical data from January 1,
2003 through the end of the most recent stock option issuance period to
estimate the expected volatility.
|
(3)
|
The
risk-free interest rate assumption is based on U.S. Treasury securities at
a constant maturity with a maturity period that most closely resembles the
expected term of the stock option award.
|
(4)
|
The
expected terms of employee stock options represents the weighted-average
period the stock options are expected to remain outstanding and has been
determined based on an analysis of historical exercise behavior from
January 1, 2003 through the end of the most recent stock option issuance
period.
|
Option
Totals
|
Weighted
Average Exercise
Price
Per Share ($)
|
|||||||
Outstanding
12/31/2007
|
4,182,780 |
14.06
|
||||||
Granted
|
1,390,902 |
15.64
|
||||||
Exercised
|
(256,930 | ) |
8.90
|
|||||
Forfeited
|
(259,509 | ) |
15.54
|
|||||
Outstanding
as of 09/30/2008
|
5,057,243 |
14.68
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Weighted
average common shares outstanding – basic
|
85,633 | 86,479 | 85,759 | 86,318 | ||||||||||||
Effect
of stock options
|
635 | 821 | 573 | 931 | ||||||||||||
Weighted
average common share and common share equivalents
outstanding – diluted
|
86,268 | 87,300 | 86,332 | 87,249 | ||||||||||||
Net
income
|
$ | 16,013 | $ | 14,509 | $ | 40,122 | $ | 49,306 | ||||||||
Earnings
per common share and common share equivalent
|
||||||||||||||||
Basic
|
$ | 0.19 | $ | 0.17 | $ | 0.47 | $ | 0.57 | ||||||||
Diluted
|
$ | 0.19 | $ | 0.17 | $ | 0.46 | $ | 0.57 |
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||
2008
|
2007
|
2008
|
2007
|
||||
Number
of anti-dilutive shares
|
422,600
|
738,350
|
1,215,210
|
512,000
|
Goodwill:
|
In
Thousands
|
|||
Balance
at December 31, 2007
|
$ | 10,372 | ||
Amortization
relating to deferred excess tax goodwill
|
(14 | ) | ||
Balance
at September 30, 2008
|
$ | 10,358 |
Intangible
Assets:
|
In
Thousands
|
|||
Balance
at December 31, 2007
|
$ | 238 | ||
Amortization
|
(47 | ) | ||
Balance
at September 30, 2008
|
$ | 191 |
Balance
at
September 30,
2008
|
Level
1
|
Level
2
|
Level
3
|
||||||||||
Assets:
|
|||||||||||||
Short
Term Investments (see Note 13)
|
$
|
28,025,647
|
$
|
-
|
$
|
28,025,647
|
$
|
-
|
o
|
Revenue,
before fuel surcharge, increased 2.8%, to $155.9 million from $151.7
million;
|
o
|
Net
income increased 10.4% to $16.0 million, compared to $14.5 million;
and
|
o
|
Net
income per diluted share increased to $0.19, compared to
$0.17.
|
(A)
(Fuel
surcharge included in revenue)
Three-Month
Period
Ended
September
30,
|
(B)
(Fuel
surcharge excluded from revenue and netted to fuel expense)
Three-Month
Period
Ended
September
30,
|
(C)
(Fuel
surcharge included in revenue)
Nine-Month
Period
Ended
September
30,
|
(D)
(Fuel
surcharge excluded from revenue and netted to fuel
expense)
Nine-Month
Period
Ended
September
30,
|
|||||||||||||||||||||||||||||
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
2008
|
2007
|
|||||||||||||||||||||||||
Revenue
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||
Operating
expenses: *
|
||||||||||||||||||||||||||||||||
Salaries,
wages and benefits
|
26.0 | 28.6 | 35.0 | 34.1 | 26.8 | 28.8 | 35.1 | 33.8 | ||||||||||||||||||||||||
Fuel
|
33.8 | 27.0 | 10.9 | 13.1 | 33.3 | 25.6 | 12.6 | 12.7 | ||||||||||||||||||||||||
Operations
and maintenance
|
5.5 | 5.8 | 7.4 | 6.9 | 5.3 | 5.6 | 7.0 | 6.6 | ||||||||||||||||||||||||
Insurance
and claims
|
2.9 | 4.3 | 4.0 | 5.1 | 3.5 | 4.2 | 4.6 | 4.9 | ||||||||||||||||||||||||
Operating
taxes and licenses
|
1.8 | 2.1 | 2.4 | 2.5 | 1.9 | 2.1 | 2.5 | 2.5 | ||||||||||||||||||||||||
Communications
|
0.7 | 0.8 | 1.0 | 0.9 | 0.7 | 0.8 | 1.0 | 0.9 | ||||||||||||||||||||||||
Depreciation
and amortization
|
8.4 | 9.2 | 11.3 | 10.9 | 8.7 | 9.3 | 11.4 | 10.9 | ||||||||||||||||||||||||
Lease
expense – revenue equipment
|
- | 0.1 | - | 0.1 | - | 0.1 | - | 0.1 | ||||||||||||||||||||||||
Purchased
transportation
|
6.3 | 7.7 | 8.5 | 9.2 | 6.9 | 7.2 | 9.0 | 8.5 | ||||||||||||||||||||||||
Miscellaneous
operating expenses
|
2.1 | 1.4 | 2.7 | 1.7 | 1.8 | 1.1 | 2.3 | 1.3 | ||||||||||||||||||||||||
Total
operating expenses
|
87.5 | 87.0 | 83.2 | 84.5 | 88.9 | 84.8 | 85.5 | 82.2 | ||||||||||||||||||||||||
Income
from operations
|
12.5 | 13.0 | 16.8 | 15.5 | 11.1 | 15.2 | 14.5 | 17.8 | ||||||||||||||||||||||||
Net
interest income
|
0.1 | 0.2 | 0.2 | 0.3 | 0.2 | 0.2 | 0.3 | 0.3 | ||||||||||||||||||||||||
Other
income
|
- | - | - | - | - | 0.1 | - | 0.1 | ||||||||||||||||||||||||
Income
before income taxes
|
12.6 | 13.2 | 17.0 | 15.8 | 11.3 | 15.5 | 14.8 | 18.2 | ||||||||||||||||||||||||
Income
taxes
|
5.0 | 5.2 | 6.7 | 6.2 | 4.5 | 6.1 | 5.9 | 7.2 | ||||||||||||||||||||||||
Net
income
|
7.6 | % | 8.0 | % | 10.3 | % | 9.6 | % | 6.8 | % | 9.4 | % | 8.9 | % | 11.0 | % | ||||||||||||||||
* There are minor rounding differences in the table. |
Period
|
Total
Number of
Shares
Purchased
|
Average
Price
Paid
per
Share
|
Total
Number of Shares
Purchased
as Part of Publicly
Announced
Program
|
Maximum
Number of Shares
that
May Yet Be Purchased
Under
the Program
|
||||
7/1/08
- 7/31/08
|
-
|
-
|
-
|
1,781,500
|
||||
8/1/08
- 8/31/08
|
-
|
-
|
-
|
1,781,500
|
||||
9/1/08
- 9/30/08
|
205,000
|
$16.87
|
205,000
|
1,576,500
|
||||
Total
|
205,000
|
$16.87
|
205,000
|
1,576,500
|
Exhibit No.
|
Description
|
|
Exhibit
3
|
Articles
of Incorporation and Bylaws
|
|
(3.1)
|
Second
Amended and Restated Articles of Incorporation of the Company.
(Incorporated by reference to Appendix A to the Company's Definitive Proxy
Statement on Schedule 14A filed April 20, 2007.)
|
|
(3.2)
|
Sixth
Amended and Restated Bylaws of the Company. (Incorporated by reference to
Exhibit 3 to the Company's Report on Form 8-K dated December 18, 2007 and
filed on December 19, 2007.)
|
|
Exhibit
4
|
Instruments
defining the rights of security holders, including
indentures
|
|
(4.1)
|
Articles
4, 10, and 11 of the Second Amended and Restated Articles of Incorporation
of the Company. (Incorporated by reference to Exhibit 3.1 to
this Report on Form 10-Q.)
|
|
(4.2)
|
Sections
2 and 5 of the Sixth Amended and Restated Bylaws of the
Company. (Incorporated by reference to Exhibit 3.2 to this
Report on Form 10-Q.)
|
|
(4.3)
|
Knight
Transportation, Inc. Amended and Restated 2003 Stock Option Plan.
(Incorporated by reference to the Company's Definitive Proxy Statement on
Schedule 14A filed December 1, 2005.)
|
|
Exhibit
31
|
Section
302 Certifications
|
|
(31.1)*
|
Certification
pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, by Kevin P. Knight, the
Company's Chief Executive Officer.
|
|
(31.2)*
|
Certification
pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, by David A. Jackson, the
Company's Chief Financial Officer.
|
|
Exhibit
32
|
Section
906 Certifications
|
|
(32.1)*
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, by Kevin P. Knight, the Company's Chief
Executive Officer.
|
|
(32.2)*
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002, by David A. Jackson, the Company's Chief
Financial Officer.
|
|
*Filed
herewith.
|
KNIGHT
TRANSPORTATION, INC.
|
||
Date:
November 10, 2008
|
By:
|
/s/
Kevin P. Knight
|
Kevin
P. Knight
|
||
Chief
Executive Officer, in his capacity as such and on behalf of the
registrant
|
||
Date:
November 10, 2008
|
By:
|
/s/
David A. Jackson
|
David
A. Jackson
|
||
Chief
Financial Officer, in his capacity as such and on behalf of the
registrant
|