form10q.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
[X]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
For
the quarterly period ended September 30, 2009
|
|
or
|
|
|
[ ]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
For
the transition period
from to
|
Commission
File Number: 0-24946
KNIGHT
TRANSPORTATION, INC.
(Exact
name of registrant as specified in its charter)
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
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x Yes o No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
o Yes o No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definition of "large accelerated filer," "accelerated
filer," and "smaller reporting company" in Rule 12b-2 of the Exchange
Act:
Large
accelerated filer x
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
o Yes x No
The
number of shares outstanding of registrant's Common Stock, par value $0.01 per
share, as of October 31, 2009 was 83,263,855 shares.
KNIGHT
TRANSPORTATION, INC.
TABLE
OF CONTENTS
PART
I – FINANCIAL INFORMATION
|
Page
Number
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
Condensed
Consolidated Unaudited Balance Sheets as of September 30, 2009 and
December 31, 2008
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Income for the three and nine months
ended September 30, 2009 and 2008
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Cash Flows for the nine months ended
September 30, 2009 and 2008
|
|
|
|
|
|
Notes
to Condensed Consolidated Unaudited Financial Statements
|
|
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and
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
|
|
|
PART
I - FINANCIAL INFORMATION
Item
1. Financial
Statements
Condensed
Consolidated Unaudited Balance Sheets
As
of September 30, 2009 and December 31, 2008
(In
thousands)
|
|
|
|
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
3,099 |
|
|
$ |
22,027 |
|
Short-term
investments
|
|
|
69,362 |
|
|
|
31,877 |
|
Accounts receivable,
net
|
|
|
71,016 |
|
|
|
70,810 |
|
Notes receivable,
net
|
|
|
2,898 |
|
|
|
159 |
|
Prepaid expenses
|
|
|
11,213 |
|
|
|
7,108 |
|
Other current assets and assets
held for sale
|
|
|
17,819 |
|
|
|
13,258 |
|
Income tax
receivable
|
|
|
2,140 |
|
|
|
774 |
|
Current deferred tax
asset
|
|
|
5,232 |
|
|
|
6,480 |
|
Total current
assets
|
|
|
182,779 |
|
|
|
152,493 |
|
|
|
|
|
|
|
|
|
|
Property
and Equipment:
|
|
|
|
|
|
|
|
|
Land and land
improvements
|
|
|
31,908 |
|
|
|
28,556 |
|
Buildings and
improvements
|
|
|
67,908 |
|
|
|
58,365 |
|
Furniture and
fixtures
|
|
|
7,087 |
|
|
|
7,472 |
|
Shop and service
equipment
|
|
|
6,091 |
|
|
|
4,970 |
|
Revenue equipment
|
|
|
550,133 |
|
|
|
558,561 |
|
Leasehold
improvements
|
|
|
1,851 |
|
|
|
1,185 |
|
|
|
|
664,978 |
|
|
|
659,109 |
|
Less: Accumulated
depreciation and amortization
|
|
|
(197,319 |
) |
|
|
(186,881 |
) |
Property
and equipment, net
|
|
|
467,659 |
|
|
|
472,228 |
|
Notes
receivable – long-term
|
|
|
2,274 |
|
|
|
674 |
|
Goodwill
|
|
|
10,338 |
|
|
|
10,353 |
|
Intangible
assets, net
|
|
|
129 |
|
|
|
176 |
|
Long-term
deferred tax assets
|
|
|
- |
|
|
|
5,877 |
|
Other
long-term assets & restricted cash
|
|
|
7,591 |
|
|
|
5,139 |
|
Total assets
|
|
$ |
670,770 |
|
|
$ |
646,940 |
|
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Condensed
Consolidated Unaudited Balance Sheets (continued)
As
of September 30, 2009 and December 31, 2008
(In
thousands, except par values)
|
|
|
|
|
|
|
|
|
|
|
September
30,
2009
|
|
|
December
31,
2008
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
Long-term
Liabilities:
|
|
|
|
|
|
|
|
|
Claims accrual – long-term
portion
|
|
|
13,044 |
|
|
|
15,236 |
|
Deferred tax
liabilities
|
|
|
107,675 |
|
|
|
112,661 |
|
Total long-term
liabilities
|
|
|
120,719 |
|
|
|
127,897 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
161,022 |
|
|
|
163,036 |
|
|
|
|
|
|
|
|
|
|
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; 83,244
and 83,383 shares issued and outstanding at
September 30, 2009 and December
31, 2008, respectively
|
|
|
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 |
|
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
Condensed
Consolidated Statements of Income (unaudited)
(In
thousands, except per share data)
|
|
|
|
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue, before fuel
surcharge
|
|
$ |
150,190 |
|
|
$ |
155,851 |
|
|
$ |
427,580 |
|
|
$ |
451,987 |
|
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
benefits
|
|
|
52,042 |
|
|
|
54,554 |
|
|
|
150,344 |
|
|
|
158,461 |
|
Fuel
|
|
|
38,962 |
|
|
|
70,844 |
|
|
|
101,421 |
|
|
|
197,130 |
|
Operations and
maintenance
|
|
|
11,219 |
|
|
|
11,495 |
|
|
|
31,944 |
|
|
|
31,443 |
|
Insurance and
claims
|
|
|
5,424 |
|
|
|
6,170 |
|
|
|
16,132 |
|
|
|
20,948 |
|
Operating taxes and
licenses
|
|
|
3,765 |
|
|
|
3,799 |
|
|
|
10,760 |
|
|
|
11,303 |
|
Communications
|
|
|
1,331 |
|
|
|
1,481 |
|
|
|
4,153 |
|
|
|
4,368 |
|
Depreciation and
amortization
|
|
|
18,204 |
|
|
|
17,663 |
|
|
|
53,524 |
|
|
|
51,734 |
|
Lease expense – revenue
equipment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
90 |
|
Purchased
transportation
|
|
|
18,147 |
|
|
|
13,297 |
|
|
|
44,120 |
|
|
|
40,788 |
|
Miscellaneous operating
expenses
|
|
|
3,304 |
|
|
|
4,115 |
|
|
|
10,564 |
|
|
|
10,221 |
|
Total operating
expenses
|
|
|
152,398 |
|
|
|
183,418 |
|
|
|
422,962 |
|
|
|
526,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
20,734 |
|
|
|
26,239 |
|
|
|
60,969 |
|
|
|
65,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
424 |
|
|
|
332 |
|
|
|
1,079 |
|
|
|
776 |
|
Other
income (expense)
|
|
|
386 |
|
|
|
(19 |
) |
|
|
365 |
|
|
|
206 |
|
Income before income
taxes
|
|
|
21,544 |
|
|
|
26,552 |
|
|
|
62,413 |
|
|
|
66,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
8,436 |
|
|
|
10,539 |
|
|
|
24,994 |
|
|
|
26,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
13,108 |
|
|
$ |
16,013 |
|
|
$ |
37,419 |
|
|
$ |
40,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.45 |
|
|
$ |
0.47 |
|
Diluted
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.45 |
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
83,197 |
|
|
|
85,633 |
|
|
|
83,216 |
|
|
|
85,759 |
|
Diluted
|
|
|
83,630 |
|
|
|
86,268 |
|
|
|
83,584 |
|
|
|
86,332 |
|
The accompanying notes are an integral
part of these condensed consolidated unaudited financial statements
Condensed
Consolidated Unaudited Statements of Cash Flows
(In
thousands)
|
|
|
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
37,419 |
|
|
$ |
40,122 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
53,524 |
|
|
|
51,734 |
|
Gain on sales of
equipment
|
|
|
(2,109 |
) |
|
|
(1,512 |
) |
Earn-out on sold
investment
|
|
|
- |
|
|
|
(225 |
) |
Gain from insurance claim
settlement
|
|
|
(388 |
) |
|
|
- |
|
Non-cash compensation expense
for issuance of stock
to certain members of board of directors
|
|
|
112 |
|
|
|
135 |
|
Provision for allowance for
doubtful accounts
|
|
|
2,458 |
|
|
|
1,002 |
|
Excess tax benefits related to
stock-based compensation
|
|
|
(370 |
) |
|
|
(502 |
) |
Stock option
expense
|
|
|
2,453 |
|
|
|
2,480 |
|
Deferred income
taxes
|
|
|
2,140 |
|
|
|
10,053 |
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in short-term
investments
|
|
|
(37,486 |
) |
|
|
(20,406 |
) |
Increase in trade
receivables
|
|
|
(1,881 |
) |
|
|
(3,868 |
) |
Increase in other current
assets
|
|
|
(278 |
) |
|
|
(184 |
) |
(Increase) decrease in prepaid
expenses
|
|
|
(4,104 |
) |
|
|
493 |
|
(Increase) decrease in income
tax receivable
|
|
|
(1,366 |
) |
|
|
3,558 |
|
Decrease (increase) in other
assets
|
|
|
68 |
|
|
|
(67 |
) |
Increase in accounts
payable
|
|
|
349 |
|
|
|
4,111 |
|
Increase in accrued liabilities
and claims accrual
|
|
|
3,065 |
|
|
|
5,714 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
53,606 |
|
|
|
92,638 |
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and
equipment
|
|
|
(83,498 |
) |
|
|
(79,418 |
) |
Proceeds from sales of
equipment
|
|
|
27,752 |
|
|
|
30,102 |
|
Proceeds from insurance claim
settlement
|
|
|
699 |
|
|
|
- |
|
(Increase) decrease in notes
receivable
|
|
|
(799 |
) |
|
|
348 |
|
(Increase) decrease in
restricted cash
|
|
|
(2,242 |
) |
|
|
25 |
|
Proceeds/earn-out from sale of
investment in Concentrek, Inc.
|
|
|
- |
|
|
|
225 |
|
Investments in Transportation
Resource Partners
|
|
|
(306 |
) |
|
|
- |
|
Return of investment in
Transportation Resource Partners
|
|
|
43 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
|
|
(58,351 |
) |
|
|
(48,708 |
) |
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Condensed
Consolidated Unaudited Statements of Cash Flows (continued)
(In
thousands)
|
|
|
|
|
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
Flow From Financing Activities:
|
|
|
|
|
|
|
Dividends paid
|
|
|
(11,641 |
) |
|
|
(9,429 |
) |
Payments to acquire treasury
stock
|
|
|
(4,900 |
) |
|
|
(21,543 |
) |
Excess tax benefits related to
stock-based compensation
|
|
|
370 |
|
|
|
502 |
|
Proceeds from exercise of
stock options
|
|
|
1,988 |
|
|
|
2,286 |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
(14,183 |
) |
|
|
(28,184 |
) |
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(18,928 |
) |
|
|
15,746 |
|
Cash
and cash equivalents, beginning of period
|
|
|
22,027 |
|
|
|
23,688 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
3,099 |
|
|
$ |
39,434 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures:
|
|
|
|
|
|
|
|
|
Non-cash investing and
financing transactions:
|
|
|
|
|
|
|
|
|
Equipment acquired in accounts
payable
|
|
$ |
14 |
|
|
$ |
5,315 |
|
Retirement of treasury
stock
|
|
$ |
4,900 |
|
|
$ |
21,543 |
|
Transfer from property and
equipment to assets
held for sale
|
|
$ |
23,126 |
|
|
$ |
9,167 |
|
Financing provided to
independent contractors
for equipment sold
|
|
$ |
4,322 |
|
|
$ |
679 |
|
|
|
|
|
|
|
|
|
|
Cash Flow
Information:
|
|
|
|
|
|
|
|
|
Income taxes
paid
|
|
$ |
23,792 |
|
|
$ |
12,077 |
|
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
Note
1. Financial
Information
References
in this Report on Form 10-Q to "we," "us," "our," "Knight," or the "Company" or
similar terms refer to Knight Transportation, Inc. and its consolidated
subsidiaries. All material inter-company balances and transactions have been
eliminated in consolidation.
The
accompanying condensed consolidated unaudited financial statements of Knight
Transportation, Inc. and its subsidiaries have been prepared in accordance with
accounting principles generally accepted in the United States of America and
Regulation S-X, instructions to Form 10-Q, and other relevant rules and
regulations of the Securities and Exchange Commission (the "SEC"), as applicable
to the preparation and presentation of interim financial information. Certain
information and footnote disclosures have been omitted or condensed pursuant to
such rules and regulations. We believe all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have
been included. Results of operations in interim periods are not
necessarily indicative of results for a full year. These condensed
consolidated unaudited financial statements and notes thereto should be read in
conjunction with our consolidated financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended December 31,
2008.
Note
2. Stock-Based
Compensation
We have
one stock-based employee compensation plan known as the Knight Transportation,
Inc. Amended and Restated 2003 Stock Option and Equity Compensation Plan, as
amended and restated in May 2009 (the "2003 Plan"). Stock based
compensation cost for the three months and nine months ended September 30, 2009
and 2008, respectively, are as follows:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
(in
thousands)
|
|
|
(in
thousands)
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Gross
stock compensation expense, net of forfeitures
|
|
$ |
871 |
|
|
$ |
926 |
|
|
$ |
2,453 |
|
|
$ |
2,480 |
|
Income
tax
|
|
$ |
(341 |
) |
|
$ |
(368 |
) |
|
$ |
(982 |
) |
|
$ |
(988 |
) |
Net
stock compensation expense after tax
|
|
$ |
530 |
|
|
$ |
558 |
|
|
$ |
1,471 |
|
|
$ |
1,492 |
|
We
received approximately $1.1 million and $2.0 million in cash from the exercise
of stock options during the three months and nine months ended September 30,
2009, respectively, compared to $1.0 million and $2.3 million for the same
periods in 2008.
As of
September 30, 2009, there was $12.8 million of unrecognized compensation cost
related to unvested share-based compensation awards granted under the 2003
Plan. This cost is expected to be recognized over a weighted-average
period of 2.4 years and a total period of 6.5 years.
The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
following table (no grants were issued in the three months ended September 30,
2009):
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Dividend
yield (1)
|
|
|
N/A |
|
|
|
.85 |
% |
|
|
1.20 |
% |
|
|
.84 |
% |
Expected
volatility (2)
|
|
|
N/A |
|
|
|
34.36 |
% |
|
|
38.20 |
% |
|
|
33.62 |
% |
Risk-free
interest rate (3)
|
|
|
N/A |
|
|
|
3.60 |
% |
|
|
2.01 |
% |
|
|
3.10 |
% |
Expected
terms (4)
|
|
|
N/A |
|
|
5.99
years
|
|
|
5.18
years
|
|
|
6.18
years
|
|
Weighted
average fair value of options granted
|
|
|
N/A |
|
|
$ |
6.88 |
|
|
$ |
4.37 |
|
|
$ |
5.53 |
|
(1) |
The
dividend yield is based on our historical experience and future
expectation of dividend payouts. We increased our quarterly cash dividend
paid to common stock shareholders from $0.04 per share to $0.05 per share
in the second quarter 2009. The dividend yield for the three-month period
ended September 30, 2009 would have increased accordingly had we granted
options during the period.
|
(2) |
We
analyzed the volatility of our stock using historical data from January 1,
2003 through the end of the most recent period to estimate the expected
volatility.
|
(3) |
The
risk-free interest rate assumption is based on U.S. Treasury securities at
a constant maturity with a maturity period that most closely resembles the
expected term of the stock option award.
|
(4) |
The
expected terms of employee stock options represents the weighted-average
period the stock options are expected to remain outstanding and has been
determined based on an analysis of historical exercise behavior from
January 1, 2003 through the end of the most recent
period.
|
A summary
of the award activity under the 2003 Plan as of September 30, 2009, and changes
during the nine-month period is presented below:
|
|
Option
Totals
|
|
|
Weighted
Average Exercise
Price
Per Share ($)
|
|
Outstanding
12/31/2008
|
|
|
4,993,691 |
|
|
|
14.69 |
|
Granted
|
|
|
12,500 |
|
|
|
13.31 |
|
Exercised
|
|
|
(243,837 |
) |
|
|
8.15 |
|
Forfeited
|
|
|
(181,395 |
) |
|
|
14.78 |
|
Outstanding
as of 09/30/2009
|
|
|
4,580,959 |
|
|
|
14.99 |
|
Note
3. Earnings
Per Share (in thousands, except per share data)
A
reconciliation of the basic and diluted earnings per share computations for the
three and nine months ended September 30, 2009 and 2008, respectively, is as
follows:
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Weighted
average common shares outstanding – basic
|
|
|
83,197 |
|
|
|
85,633 |
|
|
|
83,216 |
|
|
|
85,759 |
|
Effect
of stock options
|
|
|
433 |
|
|
|
635 |
|
|
|
368 |
|
|
|
573 |
|
Weighted
average common shares outstanding – diluted
|
|
|
83,630 |
|
|
|
86,268 |
|
|
|
83,584 |
|
|
|
86,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
13,108 |
|
|
$ |
16,013 |
|
|
$ |
37,419 |
|
|
$ |
40,122 |
|
Earnings
per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.45 |
|
|
$ |
0.47 |
|
Diluted
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.45 |
|
|
$ |
0.46 |
|
Certain
potentially-dilutive shares of common stock were excluded from the computation
of diluted earnings per share because the options' exercise prices were greater
than the average market price of the common shares, and therefore, the effect
would be anti-dilutive. A summary of those options
follows:
|
Three
Months Ended
September
30,
|
|
Nine
Months Ended
September
30,
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
Number
of anti-dilutive shares
|
1,511,535
|
|
422,600
|
|
1,599,835
|
|
1,215,210
|
Note
4. Segment
Information
Our
reportable segments consist of our asset-based segment and our non-asset-based
segment. Our asset-based segment includes our dry van, temperature
controlled, and drayage operations, which are geographically diversified but
have similar economic and other relevant characteristics, as they all provide
truckload carrier services of general commodities to a similar class of
customers. As a result, we have determined that it is appropriate to aggregate
these operating segments into one reportable segment consistent with the
guidance in Accounting Standards Codification ("ASC") Sub-Topic 280-10,
Segmental Reporting. Our non-asset-based segment consists of our brokerage
operations, which we have determined qualifies as a reportable segment under
ASC-280-10 Segment Reporting. The accompanying interim financial statements are
reflective of the operating results of our combined reportable
segments. The results of operations of our non-asset-based reportable
segment are not material to our consolidated financial statements as a
whole. Therefore, we have not presented separate financial
information for our reportable segments. For the three months ended September
30, 2009, our brokerage segment, including intercompany transactions and fuel
surcharge, accounted for 6.4% of our consolidated revenue, 2.7% of our
consolidated net income, and 1.2% of our consolidated assets. For the nine
months ended September 30, 2009, our brokerage segment, including intercompany
transactions and fuel surcharge, accounted for 5.8% of our consolidated revenue
and 2.4% of our consolidated net income.
Brokerage
revenue, including intercompany transactions and fuel surcharge, for the
three-month and nine-month periods ended September 30, 2009 was $11.1 million
and $27.9 million, respectively, compared to $11.5 million and $32.8 million,
respectively, for the same periods a year ago. Net income for our brokerage
operations was approximately $0.4 million and $0.9 million, respectively, for
the three-month and nine-month periods ended September 30, 2009, compared to
$0.3 million and $0.9 million, respectively, for the same periods a year ago.
Brokerage assets at September 30, 2009 were $8.2 million, compared to $6.4
million as of December 31, 2008.
Note
5. Commitments
and Contingencies
We are
involved in certain legal proceedings arising in the normal course of
business. In the opinion of management, our potential exposure under
any currently pending or threatened legal proceedings will not have a material
adverse effect upon our financial position or results of
operations.
Note
6. Dividends
On August
14, 2009, we declared a cash dividend of $0.05 per share of our common
stock. The dividend was payable to shareholders of record on
September 4, 2009, and was paid on September 25, 2009. We currently
expect to continue to pay quarterly cash dividends in the future. Future payment
of cash dividends, and the amount of any such dividends, will depend upon our
financial condition, results of operations, cash requirements, tax treatment,
and certain corporate law requirements, as well as other factors deemed relevant
by our Board of Directors.
Note
7. Goodwill
& Intangible Assets
Goodwill
represents the excess of the purchase price of our acquisitions over the fair
value of the net assets acquired. The tax benefit from the recognition on the
tax return of the amortization of the excess tax goodwill over book goodwill is
treated as a reduction in the book basis of goodwill. The changes in
the carrying amount of goodwill and intangible assets for the nine months ended
September 30, 2009 follow:
Goodwill:
|
|
In
Thousands
|
|
Balance
at December 31, 2008
|
|
$ |
10,353 |
|
Amortization
relating to deferred tax assets
|
|
|
(15 |
) |
Balance
at September 30, 2009
|
|
$ |
10,338 |
|
Intangible
Assets:
|
|
In
Thousands
|
|
Balance
at December 31, 2008
|
|
$ |
176 |
|
Amortization
|
|
|
(47 |
) |
Balance
at September 30, 2009
|
|
$ |
129 |
|
Intangible
assets are being amortized on a straight-line method over a five year
period. Annual amortization expense is expected to be $62,000 for
each of the fiscal years 2009 to 2010 and $52,000 for fiscal year
2011.
Note
8. Investment
Commitments
In 2003,
we signed a partnership agreement with Transportation Resource Partners, LP
("TRP"), who makes privately negotiated equity investments. Per the
original partnership agreement, we were committed to invest $5.0 million out of
approximately $260.0 million total. In early 2006, we increased the commitment
amount to $5.5 million. Our investment in TRP is accounted for using
the cost method as our level of influence over the operations of TRP is
minor. At September 30, 2009, the carrying book balance of our
investment in TRP was $3.7 million, and our ownership interest was approximately
2.3%.
In the
fourth quarter of 2008, we formed Knight Capital Growth, LLC and committed to
invest $15.0 million in a new partnership managed and operated by the managers
and principals of TRP. The new partnership, Transportation Resource Partners
III, LP ("TRP III"), is focused on the same investment opportunities as TRP. As
of September 30, 2009, we had contributed $426,000 to TRP III and our
outstanding commitment to TRP III was approximately $14.6 million.
Note
9. Assets
Held for Sale
Included
in "Other current assets and assets held for sale" on the Balance Sheet at
September 30, 2009 and December 31, 2008 is $14.3 million and $10.0 million,
respectively, of revenue equipment that will not be utilized in continuing
operations and is being held for sale. Assets held for sale are no longer
subject to depreciation, and are recorded at the lower of depreciated value or
fair market value less selling costs. We periodically review the carrying value
of these assets for possible impairment. We expect to sell these assets and
replace them with new assets within twelve months.
Note
10. Income
Taxes
We
account for income taxes under the asset and liability method, which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements.
For interim reporting purposes, our income tax provisions are recorded based on
the estimated annual effective tax rate. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial
statements and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse. The effect of a change in tax
rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date.
We record
net deferred tax assets to the extent we believe these assets will more likely
than not be realized. In making such determination, we consider all available
positive and negative evidence, including scheduled reversals of deferred tax
liabilities, projected future taxable income, tax planning strategies, and
recent financial operations. A valuation allowance for deferred tax
assets has not been deemed necessary due to our profitable
operations.
We
recognize a tax benefit from an uncertain tax position when it is more likely
than not that the position will be sustained upon examination, including
resolutions of any related appeals or litigation processes, based on the
technical merits.
During
2007, we resolved certain tax positions, leaving unrecognized tax benefits of
approximately $195,000 as of December 31, 2007. The balance has not
changed since then and remained at $195,000 at September 30, 2009.
The total
amount of unrecognized tax benefits that, if recognized, would favorably affect
the effective tax rate in future periods was approximately $126,000 as of
September 30, 2009.
Estimated
interest and penalties related to unrecognized tax benefits are recognized as a
component of income tax expense. Accrued interest was $74,000 at September 30,
2009, and $62,000 at December 31, 2008. Accrued penalties was $49,000 at
September 30, 2009 and at December 31, 2008.
We file
U.S. and state income tax returns with varying statutes of
limitations. The 2005 through 2008 tax years generally remain subject
to examination by federal authority, and the 2004 through 2008 tax years
generally remain subject to examination by state tax authorities. We do not
believe the unrecognized tax benefits will change significantly over the next 12
months.
Note
11. Company
Share Repurchase Programs
On
November 8, 2007, our Board of Directors unanimously authorized the repurchase
of up to 3.0 million shares of the Company's Common Stock. The
repurchase authorization was to remain in effect until the share limit was
reached or the program was terminated. This authorization has expired
as the full 3.0 million shares were purchased in 2008. Under the Company's share
repurchase program, repurchased shares are constructively retired and returned
to unissued status.
On
November 13, 2008, our Board of Directors unanimously authorized an additional
repurchase of up to 3.0 million shares of the Company's Common
Stock. The repurchase authorization will remain in effect until the
share limit is reached or the program is terminated. The repurchase
authorization is intended to afford the Company the flexibility to acquire
shares opportunistically in future periods and does not indicate an intention to
repurchase any particular number of shares within a definite
timeframe. Any repurchases would be effected based upon share price
and market conditions.
In 2008,
we repurchased a total of 3,590,044 shares under both authorizations for
approximately $53.6 million. In the first quarter of 2009, we purchased 389,000
shares of our common stock in the open market for approximately $4.9 million. We
did not purchase any shares during the quarters ended September 30, 2009 and
June 30, 2009. The shares acquired have been retired and are available for
future issuance. The purchases were made in accordance with Security and
Exchange Commission Rule 10b-18, which limits the amount and timing of
repurchases. As of September 30, 2009, there were 2,020,956 shares remaining for
future purchases under our repurchase program.
Note
12. Cash
& Cash Equivalents and Short-Term Investments
Our cash
and cash equivalents are comprised of short-term, highly liquid instruments with
insignificant interest rate risk.
Our
short-term investments are held for trading and comprised of marketable debt
securities (which includes municipal securities) and variable rate demand notes
with effective maturities of greater than three months and represent an
investment of cash that is available for current operations. These
debt securities are recorded at fair value with realized and unrealized gains
and losses included in interest income on our consolidated statements of income.
At September 30, 2009, our short term investments consisted of municipal
securities only. Our short-term investments did not experience any significant
unrealized gain or loss for the three-month and nine-month period ended
September 30, 2009.
Note
13. Fair
Value Measurements
Effective
January 1, 2009, we adopted ASC 820-10 Fair Value Measurements for
non-recurring fair value measurements of our non-financial assets and
liabilities. This standard defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosures about fair value measurements. This standard establishes a
three-level hierarchy for fair value measurements based upon the significant
inputs used to determine fair value. Observable inputs are those which are
obtained from market participants external to the company while unobservable
inputs are generally developed internally, utilizing management's estimates,
assumptions, and specific knowledge of the nature of the assets or liabilities
and related markets. The three levels are defined as follows:
Level 1 –
Inputs are quoted prices (unadjusted) in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date.
An active market is defined as a market in which transactions for the assets or
liabilities occur with sufficient frequency and volume to provide pricing
information on an ongoing basis.
Level 2 –
Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets
that are not active (markets with few transactions), inputs other than quoted
prices that are observable for the asset or liability (i.e., interest rates,
yield curves, etc.), and inputs that derived principally from or corroborated by
observable market data correlation or other means (market corroborated
inputs).
Level 3 –
Unobservable inputs, only used to the extent that observable inputs are not
available, reflect the Company's assumptions about the pricing of an asset or
liability.
In
accordance with the fair value hierarchy described above, the following table
shows the fair value of the Company's financial assets and liabilities that are
required to be measured at fair value as of September 30,
2009.
|
|
Balance
at
September
30,
2009
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
|
(In
thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$ |
3,099 |
|
|
$ |
3,099 |
|
|
|
- |
|
|
|
- |
|
Short-term
investments
|
|
$ |
69,362 |
|
|
|
- |
|
|
$ |
69,362 |
|
|
|
- |
|
Restricted
cash – money market funds
|
|
$ |
726 |
|
|
$ |
726 |
|
|
|
- |
|
|
|
- |
|
Restricted
long-term investments
|
|
$ |
2,086 |
|
|
|
- |
|
|
$ |
2,086 |
|
|
|
|
|
Note
14. Recent
Accounting Pronouncements
In August
2009, the FASB issued Accounting Standards Update (ASU) 2009-05 to provide
guidance on measuring the fair value of liabilities under ASC Subtopic 820-10,
Fair Value Measurement and Disclosure. This guidance is effective for
fiscal years and interim periods beginning after issuance. We do not
expect the adoption of ASU 2009-05 to have a material impact on our consolidated
financial statements.
In June
2009, the FASB issued ASC Subtopic 105-10, Generally Accepted Accounting
Principles (ASC 105-10). This Statement establishes FASB Accounting
Standards Codification as the source of authoritative accounting principles to
be applied by all non-governmental entities. ASC 105-10 is effective
for interim and annual periods ending after September 15, 2009. The
adoption of this statement did not have a material impact on our financial
statements and only resulted in modifications in accounting references in our
footnotes and disclosures.
In May
2009, the FASB issued ASC Subtopic 810-10, Consolidation (ASC
810-10). This Statement amends prior guidance and revises accounting
and reporting requirements for entities’ involvement with variable interest
entities. The provisions of ASC 810-10 are effective for financial statements
issued for fiscal years and interim periods beginning after November 15,
2009. We are currently evaluating what impact, if any, the adoption
of the Statement will have on our consolidated financial
statements.
In May
2009, the FASB issued ASC Subtopic 860-10, Transfers and Servicing (ASC
860-10). This Statement amends prior guidance and revises accounting
and reporting requirements for the transfers of financial assets, the
transferor’s continuing involvement (if any) in the transferred financial assets
and how such transfers affect the transferor’s financial position, financial
performance and cash flows. The provisions of ASC 860-10 are
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2009. We do not believe the adoption of
ASC 860-10 will have a material impact on our consolidated financial
statements.
In May
2009, the FASB issued ASC Subtopic 855-10, Subsequent Events (ASC 855-10), to
establish general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. The new disclosure requirement is effective for
interim reporting periods ending after June 15, 2009. The adoption of
this staff position resulted in additional quarterly disclosures
only.
In April
2009, the FASB issued ASC Subtopic 825-10-50, Financial Instruments (ASC
825-10-50) to require disclosures about the fair value of financial instruments
during interim reporting periods. The new disclosure requirements are effective
for interim reporting periods ending after June 15, 2009. The
adoption of this staff position resulted in additional quarterly disclosures
only.
In April
2009, the FASB issued ASC Subtopic 820-10, Fair Value Measurement and
Disclosures (ASC 820-10), which provides further clarification for prior
guidance regarding measurement of fair values of assets and liabilities when the
market activity has significantly decreased and in identifying transactions that
are not orderly. ASC 820-10 is effective for interim and annual
reporting periods ending after June 15, 2009. The adoption of this staff
position did not have a material impact on our financial results.
In
December 2007, the FASB issued ASC Subtopic 810-10, Consolidation (ASC
810-10). This statement amends prior guidance and revises accounting
and reporting requirements for noncontrolling interests (formerly minority
interests) in a subsidiary and for the deconsolidation of a
subsidiary. Upon its adoption, noncontrolling interests will be
classified as equity, and income attributed to the noncontrolling interest will
be included in the Company’s income. The provisions of this standard
are applied retrospectively upon adoption. We adopted this
pronouncement on January 1, 2009, and it did not have a material impact on our
consolidated results.
In
December 2007, the FASB issued ASC Subtopic 805-10, Business Combinations (ASC
805-10). ASC 805-10 clarifies and amends the accounting guidance for
how an acquirer in a business combination recognizes and measures the assets
acquired, liabilities assumed, and any noncontrolling interest in the
acquiree. The provisions of ASC 805-10 are effective for us for any
business combinations occurring on or after January 1, 2009, and the adoption
did not have a material impact on our financial statements.
Note
15. Subsequent
Events
On
October 30, 2009, we granted 1,349,500 shares in the aggregate of restricted
stock to our employees. These restricted shares are valued at $16.04 per share,
based on the closing price of our stock on the grant date. These shares will
vest gradually over a 13 year period, beginning January 31, 2011.
We
evaluated all events or transactions that occurred after September 30, 2009 and
through November 9, 2009, the date we issued these consolidated financial
statements by filing this Quarterly Report on Form 10-Q.
Item
2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Cautionary
Note Regarding Forward-Looking Statements
Except
for certain historical information contained herein, this report contains
certain statements that may be considered "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Section 27A of the Securities Act of 1933, as amended,
and such statements are subject to the safe harbor created by those
sections. All statements, other than statements of historical fact,
are statements that could be deemed forward-looking statements, including
without limitation: any projections of revenues, earnings, cash flows, capital
expenditures, or other financial items; any statement of plans, strategies, and
objectives of management for future operations; any statements concerning
proposed acquisition plans, new services, or developments; any statements
regarding future economic conditions or performance; and any statements of
belief and any statement of assumptions underlying any of the
foregoing. Words such as "believe," "may," "could," "expects,"
"hopes," "estimates," "projects," "intends," "anticipates," and "likely," and
variations of these words, or similar expressions, terms, or phrases, are
intended to identify such forward-looking statements. Forward-looking statements
are inherently subject to risks, assumptions, 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. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the section
entitled "Item 1A.
Risk Factors," set forth in our form 10-K for the year ended December 31,
2008, as supplemented in Part II below.
All
such forward-looking statements speak only as of the date of this Form
10-Q. You are cautioned not to place undue reliance on such
forward-looking statements. The Company expressly disclaims any
obligation or undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in the
Company's expectations with regard thereto or any change in the events,
conditions, or circumstances on which any such statement is based.
Introduction
Business
Overview
We are a
truckload carrier headquartered in Phoenix, Arizona. The transportation services
we provide are asset-based dry van truckload carrier services, temperature
controlled truckload carrier services, and drayage activities at the ports,
along with non-asset-based brokerage services, both on highway and
rail. Through our asset-based and non-asset-based capabilities we are
able to transport, or arrange for the transportation of, general commodities for
customers throughout the United States.
Historically,
the primary source of our revenue growth has been our ability to open and
develop new regional service centers and brokerage branches in selected
geographic areas. Much of this growth prior to 2007 occurred in our core dry van
business. Knight Refrigerated and Knight Brokerage, established in
2004 and 2005, respectively, reflect our strategy to bring complementary
services to our customers that also bring operational and economic benefits to
Knight. In 2008, we further enhanced our services with our drayage activities
through Knight Intermodal at the Southern California ports, where we believe our
familiarity with the markets, ability to offer intermodal shippers multiple
services, and superior technology afford us a competitive advantage over many
drayage operations. As part of our growth strategy, we also evaluate
acquisition opportunities that meet our financial and operating
criteria.
As of
September 30, 2009, we operated 35 asset-based service centers (consisting of 29
dry van and six temperature controlled service centers) and 12 non-asset-based
brokerage branches. The main factors that affect our results of
operation are the number of tractors we operate, our revenue per tractor (which
includes primarily our revenue per total mile and our number of miles per
tractor), and our ability to control our costs. The results of our brokerage
activities were relatively insignificant for the third quarter of 2009, and
therefore, a detailed discussion of the financial results of these operations
will not be separately presented.
Outlook
Our
industry continues to face significant challenges due to weak demand and pricing
pressure. Our ability to respond to these challenges is rooted in the following
three key attributes: (1) an intense focus on cost control; (2) a strong balance
sheet, and (3) diversified service offerings.
During
2008 and continuing into and throughout 2009, numerous industry competitors have
closed down, and many that remained in business have downsized their fleets in
response to economic weakness, rising costs, and tight credit conditions.
Intense competition has also led to rate reductions in the first half of 2009.
In the third quarter, we experienced sequential improvement in freight demand,
but it is not at a level to significantly influence higher rates. It
appears to us that sometime between June and July, freight volumes bottomed out
and then made gradual improvement as compared to a year ago. However,
we are not expecting robust demand in the near-term.
Our plan
during this environment is to refine our operating model to create additional
efficiencies, to provide high levels of localized service through our network of
service centers and branches, to ratchet up our already intense focus on
controlling costs, and to evaluate strategic opportunities that can create value
for our shareholders without undue risk. We believe this plan will
prepare us to capitalize on growth opportunities that will enhance the returns
for our shareholders over time.
While we
are cautiously optimistic about modest seasonal recovery in business activity,
it is not within our means to foresee when industry supply and demand
fundamentals will come back into balance. However, we are confident
in our competitive position and our ability to execute our model. We
believe we are in a strong financial position and that our strategy for growth
is sound. We believe that our level of profitability, fleet renewal
strategy, and use of owner-operators should enable us to internally finance
attractive levels of fleet growth when demand conditions are right. Based on our
growing network, a history of low cost operation and solid execution, and access
to substantial capital resources, we are very optimistic about our competitive
position and our ability to perpetuate our model based on leading growth and
profitability.
Revenue
and Expenses
We
primarily generate revenue by transporting freight for our
customers. Generally, we are paid a predetermined rate per mile or
per load for our services. We enhance our revenue by charging for
tractor and trailer detention, loading and unloading activities, brokerage
operations, and other specialized services, as well as through the collection of
fuel surcharges to mitigate the impact of increases in the cost of
fuel. The main factors that affect our revenue are the revenue per
mile we receive from our customers, the percentage of miles for which we are
compensated, and the number of miles we generate with our
equipment. These factors relate to, among other things, the general
level of economic activity in the United States, inventory levels, specific
customer demand, the level of capacity in the trucking industry, and driver
availability.
The main
factors that impact our profitability in terms of expenses are the variable
costs of transporting freight for our customers. These costs include fuel
expense, driver-related expenses, such as wages, benefits, training and
recruitment, and independent contractor and third party carrier costs, which are
recorded on the "Purchased Transportation" line of our consolidated statements
of income. Expenses that have both fixed and variable components include
maintenance and tire expense and our total cost of insurance and claims. These
expenses generally vary with the miles we travel, but also have a controllable
component based on safety, fleet age, efficiency, and other factors. Our main
fixed costs are the acquisition and financing of long-term assets, such as
revenue equipment and service centers and the compensation of non-driver
personnel. Effectively controlling our expenses and managing our net cost of
revenue equipment acquisition and disposition, including any related gains or
losses, are important elements of assuring our profitability. The primary
measure we use to evaluate our profitability is operating ratio, excluding the
impact of fuel surcharge revenue (operating expenses, net of fuel surcharge,
expressed as a percentage of revenue, before fuel surcharge).
Recent
Results of Operations and Quarter-End Financial Condition
For the
quarter ended September 30, 2009, our results of operations changed as follows
versus the same period in 2008:
o |
Revenue,
before fuel surcharge, decreased 3.6%, to $150.2 million from $155.9
million;
|
|
|
o |
Net
income decreased 18.1% to $13.1 million, compared to $16.0 million;
and
|
|
|
o |
Net
income per diluted share decreased 15.6%, to $0.16, from
$0.19.
|
Despite
significant challenges due to weak demand for transportation and pricing
competition, our year-over-year consolidated load count increased by 10.2% in
the third quarter. Refrigerated load count increased 43% after posting more than
30% growth in the first and second quarters of this year. Brokerage, which
experienced a decline in shipments in the first quarter, turned positive again
in the second and third quarters of this year.
In the
third quarter, equipment productivity, as measured by average revenue, before
fuel surcharge, per tractor, decreased 4.5% to $37,248, compared to $38,990 in
the same quarter a year ago. The 4.5% decrease in equipment productivity in the
third quarter compared favorably to an 8.1% year-over-year decrease in the
second quarter 2009. 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. 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.
Our
tractor count decreased to 3,752 tractors as of September 30, 2009, compared to
3,800 tractors a year ago. The net decrease of 48 units is comprised of a 220
unit decrease in company owned tractors, off-set by a 172 unit increase in owner
operator tractors. While our tractor count has decreased slightly
year-over-year, our fleet size has remained relatively constant from the second
to third quarter this year. With freight demand seemingly have bottomed, we
decided to maintain our fleet size and prepare for the opportunity for growth
rather than reduce the fleet size, which might have improved our operating ratio
in the third quarter. Our consolidated operating ratio, net of fuel surcharge
(operating expenses, net of fuel surcharge, expressed as a percentage of
revenue, before fuel surcharge), was 86.2% for the quarter ended September 30,
2009, compared to 83.2% for the same period a year ago.
For the
quarter, we spent $27.9 million in net capital expenditures. At
September 30, 2009, our balance sheet remained debt free, our cash and cash
equivalents and short term investments totaled $72.5 million, and our
shareholders' equity was $509.7 million.
Results
of Operations
The
following table sets forth the percentage relationships of our expense items to
total revenue, including fuel surcharge (Columns A and C), and revenue, before
fuel surcharge (Columns B and D), for the three-month and nine-month periods
ended September 30, 2009 and 2008, respectively. Fuel expense as a
percentage of revenue, before fuel surcharge, is calculated using fuel expense,
net of fuel surcharge. Management believes that eliminating the
impact of this sometimes volatile source of revenue affords a more consistent
basis for comparing our results of operations from period to
period.
|
|
(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,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries,
wages and benefits
|
|
|
30.1 |
|
|
|
26.0 |
|
|
|
34.7 |
|
|
|
35.0 |
|
|
|
31.1 |
|
|
|
26.8 |
|
|
|
35.2 |
|
|
|
35.1 |
|
Fuel
|
|
|
22.5 |
|
|
|
33.8 |
|
|
|
10.7 |
|
|
|
10.9 |
|
|
|
21.0 |
|
|
|
33.3 |
|
|
|
10.5 |
|
|
|
12.6 |
|
Operations
and maintenance
|
|
|
6.5 |
|
|
|
5.5 |
|
|
|
7.5 |
|
|
|
7.4 |
|
|
|
6.6 |
|
|
|
5.3 |
|
|
|
7.5 |
|
|
|
7.0 |
|
Insurance
and claims
|
|
|
3.1 |
|
|
|
2.9 |
|
|
|
3.6 |
|
|
|
4.0 |
|
|
|
3.3 |
|
|
|
3.5 |
|
|
|
3.8 |
|
|
|
4.6 |
|
Operating
taxes and licenses
|
|
|
2.2 |
|
|
|
1.8 |
|
|
|
2.5 |
|
|
|
2.4 |
|
|
|
2.2 |
|
|
|
1.9 |
|
|
|
2.5 |
|
|
|
2.5 |
|
Communications
|
|
|
0.8 |
|
|
|
0.7 |
|
|
|
0.9 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
|
1.0 |
|
|
|
1.0 |
|
Depreciation
and amortization
|
|
|
10.5 |
|
|
|
8.4 |
|
|
|
12.1 |
|
|
|
11.3 |
|
|
|
11.1 |
|
|
|
8.7 |
|
|
|
12.5 |
|
|
|
11.4 |
|
Lease
expense – revenue equipment
|
|
|
0.0 |
|
|
|
- |
|
|
|
0.0 |
|
|
|
- |
|
|
|
0.0 |
|
|
|
- |
|
|
|
0.0 |
|
|
|
- |
|
Purchased
transportation
|
|
|
10.5 |
|
|
|
6.3 |
|
|
|
12.1 |
|
|
|
8.5 |
|
|
|
9.1 |
|
|
|
6.9 |
|
|
|
10.3 |
|
|
|
9.0 |
|
Miscellaneous
operating expenses
|
|
|
1.8 |
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
2.7 |
|
|
|
2.1 |
|
|
|
1.8 |
|
|
|
2.4 |
|
|
|
2.3 |
|
Total
operating expenses
|
|
|
88.0 |
|
|
|
87.5 |
|
|
|
86.2 |
|
|
|
83.2 |
|
|
|
87.4 |
|
|
|
88.9 |
|
|
|
85.7 |
|
|
|
85.5 |
|
Income
from operations
|
|
|
12.0 |
|
|
|
12.5 |
|
|
|
13.8 |
|
|
|
16.8 |
|
|
|
12.6 |
|
|
|
11.1 |
|
|
|
14.3 |
|
|
|
14.5 |
|
Net
interest income
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.3 |
|
Other
income
|
|
|
0.2 |
|
|
|
- |
|
|
|
0.2 |
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
Income
before income taxes
|
|
|
12.4 |
|
|
|
12.6 |
|
|
|
14.3 |
|
|
|
17.0 |
|
|
|
12.9 |
|
|
|
11.3 |
|
|
|
14.6 |
|
|
|
14.8 |
|
Income
taxes
|
|
|
4.8 |
|
|
|
5.0 |
|
|
|
5.6 |
|
|
|
6.7 |
|
|
|
5.2 |
|
|
|
4.5 |
|
|
|
5.8 |
|
|
|
5.9 |
|
Net
income
|
|
|
7.6 |
% |
|
|
7.6 |
% |
|
|
8.7 |
% |
|
|
10.3 |
% |
|
|
7.7 |
% |
|
|
6.8 |
% |
|
|
8.8 |
% |
|
|
8.9 |
% |
*
|
There
are minor rounding differences in the
table.
|
A
discussion of our results of operations for the nine and three months ended
September 30, 2009 and September 30, 2008 is set forth below.
Comparison
of Nine Months and Three Months Ended September 30, 2009 to Nine Months and
Three Months Ended September 30, 2008.
Total
revenue for the nine months ended September 30, 2009 decreased 18.3% to $483.9
million from $592.2 million for the same period in 2008. Total revenue included
$56.4 million of fuel surcharge revenue in the 2009 period compared to $140.2
million in the 2008 period. Total revenue for the quarter ended
September 30, 2009 decreased 17.4% to $173.1 million, from $209.7 million for
the same period in 2008. Total revenue for the quarter included $22.9 million of
fuel surcharge revenue in the 2009 period, compared to $53.8 million in the 2008
period. In discussing our results of operations, we use revenue, before fuel
surcharge, and fuel expense, net of fuel surcharge, because management believes
that eliminating the impact of this sometimes volatile source of revenue affords
a more consistent basis for comparing our results of operations from period to
period. We also discuss the changes in our expenses as a percentage
of revenue, before fuel surcharge, rather than absolute dollar
changes. We do this because we believe the high variable cost nature
of our business makes a comparison of changes in expenses as a percentage of
revenue, before fuel surcharge, more meaningful than absolute dollar
changes.
Revenue,
before fuel surcharge, decreased 5.4% to $427.6 million for the nine months
ended September 30, 2009 from $452.0 million for the same period in 2008.
Revenue, before fuel surcharge, decreased 3.6% to $150.2 million for the quarter
ended September 30, 2009, from $155.9 million for the same period in 2008. The
industry wide supply of truckload equipment continued to outpace demand in the
third quarter, resulting in a 4.5% decrease in equipment utilization. This is an
improvement from second quarter, when equipment utilization was down 8.1%
compared to a year ago. At the end of September we operated 48 fewer trucks
compared to year ago, although year-to-date we have increased truck count by 53
units. Our non-paid empty mile percentage remained relatively constant at 11.8%
for the quarter ended September 30, 2009, compared to 11.9% in the year ago
period. For the nine months ended September 30, 2009, our average
length of haul decreased to 473 miles from 524 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 during the 2009
period.
Salaries,
wages and benefits expense as a percentage of revenue, before fuel surcharge,
remained relatively constant at 35.2% for the nine months ended September 30,
2009, compared to 35.1% for the same period in 2008. Salaries, wages and
benefits expense as a percentage of revenue, before fuel surcharge, decreased to
34.7% for the quarter ended September 30, 2009, compared to 35.0% for the same
period in 2008. The third quarter decrease is primarily due to a decrease in the
percentage of our company fleet being operated by company drivers, as opposed to
independent contractors. At September 30, 2009, 91.6% of our fleet was operated
by company drivers, compared to 96.2% at September 30, 2008. For our employees,
we record accruals for workers' compensation benefits as a component of our
claims reserve, and the related expense is reflected in salaries, wages and
benefits in our consolidated statements of income.
Fuel
expense, net of fuel surcharge, as a percentage of revenue before fuel
surcharge, decreased to 10.5% for the nine months ended September 30, 2009, from
12.6% for the same period in 2008. For the quarter ended September 30, 2009,
fuel expense, net of fuel surcharge, as a percentage of revenue before fuel
surcharge, decreased to 10.7% from 10.9% for the same period in 2008. The
decrease in fuel expense is mainly due to lower diesel fuel prices, along with
internal initiatives to improve fuel efficiency and an increase of independent
contractors in the fleet. Independent contractors purchase their own fuel. We
maintain a fuel surcharge program to assist us in recovering a portion of our
fuel expense. Fuel surcharge revenue was $56.4 million for the nine months ended
September 30, 2009, compared to $140.2 million for the same period in 2008. For
the quarter ended September 30, 2009, fuel surcharge revenue was $22.9 million
compared to $53.8 million for the same quarter in 2008. Declining fuel prices
have led to significant decreases in fuel expense and fuel surcharge revenue
this year.
Operations
and maintenance expense as a percentage of revenue, before fuel surcharge,
increased to 7.5% for the nine months ended September 30, 2009, compared to 7.0%
for the same period in 2008. For the quarter ended September 30, 2009,
operations and maintenance expense as a percentage of revenue, before fuel
surcharge, increased slightly to 7.5% compared to 7.4% for the same quarter in
2008. Operations and maintenance expense as a percentage of revenue increased
primarily because of a modest increase in fleet age and a decrease in revenue
per tractor that less efficiently covered the fixed portion of these
costs. These items more than offset an increase in the percentage of
our fleet provided by independent contractors, who pay for the maintenance of
their own vehicles.
Insurance
and claims expense as a percentage of revenue, before fuel surcharge, decreased
to 3.8% for the nine months ended September 30, 2009, compared to 4.6% for the
same period in 2008. For the quarter ended September 30, 2009, insurance and
claims expense, expressed as a percentage of revenue before fuel surcharge,
decreased to 3.6% compared to 4.0% for the same quarter in 2008. During the
quarter, we continued to benefit from improvements in insurance and claims
expense. We have implemented the Smith System training throughout our service
center network. We believe this training program and other management efforts
have been instrumental in reducing the severity and frequency of accidents. As
of September 30, 2009, our claims reserve decreased approximately $4.2 million
from year-end December 31, 2008. This decrease is primarily due to the
settlement of two previously-accrued catastrophic claims in the aggregate of
$3.5 million from a prior year, combined with a reduction in insurance accruals
resulting from a decrease in the frequency and severity of claims.
Operating
taxes and licenses expense as a percentage of revenue, before fuel surcharge,
remained constant at 2.5% for the nine-month periods ended September 30, 2009
and 2008. For the quarter ended September 30, 2009, operating taxes and licenses
expense remained relatively constant at 2.5%, compared to 2.4% for the same
period in 2008.
Communications
expense as a percentage of revenue, before fuel surcharge, remained constant at
1.0% for the nine-month periods ended September 30, 2009 and 2008. For the
quarter ended September 30, 2009, communication expense remained relatively
constant at 0.9%, compared to 1.0% for the same period in 2008.
Depreciation
and amortization expense as a percentage of revenue, before fuel surcharge,
increased to 12.5% for the nine-month period ended September 30, 2009, compared
to 11.4% for the same period in 2008. This increase is primarily due to a
decrease in revenue and lower equipment utilization in the current year. For the
quarter ended September 30, 2009, depreciation and amortization expense as a
percentage of revenue, before fuel surcharge, increased to 12.1% compared to
11.3% for the same quarter in 2008. In the third quarter of 2009, the
percentage of our tractor fleet operated by independent contractors increased to
8.4% from 3.8% in the third quarter of 2008, which offset a small portion of the
increase in depreciation and amortization expense for the current
quarter.
Purchased
transportation represents the amount that independent contractors, as well as
contracted carriers for our brokerage division, are paid to haul freight for us
on a mutually agreed upon per-mile or per-shipment basis. Demand for brokerage
freight started out rather weak in the beginning of the year but picked up in
the second and third quarter. Purchased transportation expense as a percentage
of revenue, before fuel surcharge, increased to 10.3% for the nine months ended
September 30, 2009, from 9.0% for the same period in 2008. For the quarter ended
September 30, 2009, purchased transportation expense as a percentage of revenue,
before fuel surcharge, increased to 12.1% compared to 8.5% for the same quarter
in 2008. The increase in this category is mainly due to an increase in the
number of independent contractors we are using in our truckload operations. The
number of independent contractors at September 30, 2009 increased to 317,
compared to 145 a year ago. As of September 30, 2009, 8.4% of our fleet was
comprised of independent contractors, compared to 3.8% a year ago.
Miscellaneous
operating expenses as a percentage of revenue, before fuel surcharge, remained
relatively constant at 2.4% for the nine-month period ended September 30, 2009,
compared to 2.3% for the same period in 2008. For the quarter ended
September 30, 2009, miscellaneous operating expenses as a percentage of revenue,
before fuel surcharge, decreased to 2.1% compared to 2.7% for the same quarter
in 2008. The decrease in the current quarter is due to the combination of
internal initiatives to control costs and an increase in our gains from sale of
equipment, which is included in the miscellaneous operating expense line. Gains
from sale of equipment increased to $833,000 in the third quarter of 2009,
compared to $367,000 for the same period a year ago.
As a
result of the above factors, our operating ratio, net of fuel surcharge
(operating expenses, net of fuel surcharge, expressed as a percentage of
revenue, before fuel surcharge), increased to 85.7% for the nine months ended
September 30, 2009, from 85.5% for the same period in 2008. For the
quarter ended September 30, 2009, our operating ratio increased to 86.2% from
83.2% for the same quarter in 2008.
Net
interest income and other income as a percentage of revenue, before fuel
surcharge, remained constant at 0.3% for the nine months ended September 30,
2009 and 2008. For the quarter ended September 30, 2009, net interest income and
other income as a percentage of revenue, before fuel surcharge, increased to
0.5%, from 0.2% for the same period in 2008. Other income in the current quarter
is comprised of an insurance settlement for damage from a fire to one of our
buildings. We had no outstanding debt at September 30, 2009 or
2008.
Income
taxes have been provided for at the statutory federal and state rates, adjusted
for certain permanent differences between financial statement income and income
for tax reporting. Our effective income tax rates increased slightly to 40.0%
for the nine-month period ended September 30, 2009, compared to 39.8% for the
same period a year ago. For quarter ended September 30, 2009, our effective
income tax rates decreased to 39.2%, from 39.7% for the same period in
2008.
As a
result of the preceding changes, our net income, as a percentage of revenue
before fuel surcharge, remained essentially constant at 8.8% for the nine-month
period ended September 30, 2009, compared to 8.9% for the same period a year
ago. For the quarter ended September 30, 2009, our net income, as a percentage
of revenue before fuel surcharge, decreased to 8.7%, from 10.3% for the same
period in 2008.
Liquidity
and Capital Resources
The
growth of our business has required, and will continue to require, a significant
investment in new revenue equipment. Our primary source of liquidity
has been funds provided by operations.
Net cash
provided by operating activities was $53.6 million for the nine months ended
September 30, 2009, compared to $92.6 million for the same period in 2008.
Excluding the increase in our short-term investments due to investing more cash,
our net cash provided by operating activities would have been $91.1 million for
the nine months ended September 30, 2009, compared to $113.0 million for the
same period a year ago. Our cash, cash equivalents, and short-term investments
grew by $18.6 million since December 31, 2008, after spending $16.5 million
during the nine months ended September 30, 2009 for dividends and stock
re-purchases.
Net cash
used in investing activities was $58.4 million for the nine months ended
September 30, 2009, compared to $48.7 million for the 2008 period. Capital
expenditures for the purchase of revenue equipment, office equipment, land and
leasehold improvements, net of equipment sales, increased $6.4 million, to $55.7
million for the nine months ended September 30, 2009, compared to $49.3 million
for the 2008 period. In the current year , we also set aside $2.2 million in
restricted cash to meet statutory requirements relating to our self-insurance
program. We currently anticipate total capital expenditures, net of equipment
sales, of approximately $75.0 million for the year. This will be used primarily
to acquire new revenue equipment.
Net cash
used in financing activities was approximately $14.2 million for the nine months
ended September 30, 2009, compared to $28.2 million for the same period in
2008. The decrease in cash used in financing activities is primarily
due to a reduction in cash payments to acquire treasury stock. For the
nine-month period ended September 30, 2009, we spent $4.9 million to repurchase
389,000 shares of our common stock, compared to $21.5 million to repurchase
1,423,500 shares of our common stock in the same period a year ago. Cash
dividends paid in the current year also increased approximately $2.2 million,
due to an increase in dividends paid to common stock shareholders. We
increased our quarterly cash dividend from $0.04 per share to $0.05 per share in
the second quarter of 2009. We currently expect to continue to pay quarterly
cash dividends in the future. Future payment of cash dividends, and the amount
of any such dividends, will depend upon our financial condition, results of
operations, cash requirements, tax treatment, and certain corporate law
requirements, as well as other factors deemed relevant by our Board of
Directors.
We
currently maintain a line of credit that permits revolving borrowings and
letters of credit totaling $50.0 million. At September 30, 2009, the utilized
portion of the line of credit consisted solely of issued but unused letters of
credit totaling $35.3 million. These letters of credit are issued to various
regulatory authorities in connection with our self-insured retention. We are
obligated to comply with certain financial covenants under our line of credit
agreement, and we were in compliance with these covenants at September 30,
2009.
As of
September 30, 2009, our balance sheet continued to be debt-free while our cash
and short-term investment balance grew to $72.5 million. During encouraging
freight markets, we have historically self-funded our growth by purchasing
equipment with the cash generated from our operations. Recently,
during the less-encouraging freight market, we continued to generate a
significant amount of cash which allowed us to repurchase shares, return capital
to shareholders as a dividend, and be in a position to fund possible strategic
acquisitions.
We
believe that we will be able to finance our near term needs for working capital
over the next twelve months, as well as acquisitions of revenue equipment during
such period, with cash balances, cash flows from operations, and borrowings, if
any, available under our existing line of credit or other credit facilities we
believe would be available to us. We will continue to have significant capital
requirements over the long-term, which may require us to incur debt or seek
additional equity capital. The availability of additional capital will depend
upon prevailing market conditions, the market price of our common stock, and
several other factors over which we have limited control, as well as our
financial condition and results of operations. Nevertheless, based on our recent
operating results, current cash position, anticipated future cash flows, and
sources of financing that we expect will be available to us, we do not expect
that we will experience any significant liquidity constraints in the foreseeable
future.
Off-Balance
Sheet Transactions
Our
liquidity is not materially affected by off-balance sheet transactions. Like
many other trucking companies, we have periodically utilized operating leases to
finance our revenue equipment purchases. We did not have any tractors
held under operating leases as of September 30, 2009. A year ago we had a few
tractors remaining under operating leases during the year. Those operating
leases expired in 2008, and we have not had any leased tractors in 2009.
Vehicles held under operating leases were not carried on our balance sheet, and
lease payments in respect of such vehicles are reflected in our income
statements in the line item "Lease expense – revenue equipment".
Critical
Accounting Policies and Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires that management make
a number of assumptions and estimates that affect the reported amounts of
assets, liabilities, revenue, and expenses in our consolidated financial
statements and accompanying notes. Management bases its estimates on
historical experience and various other assumptions believed to be
reasonable. Although these estimates are based on management's best
knowledge of current events and actions that may impact us in the future, actual
results may differ from these estimates and assumptions. Our critical
accounting policies are those that affect, or could affect our financial
statements materially and involve a significant level of judgment by management.
The accounting policies we deem most critical to us include, revenue
recognition, depreciation, claims accrual, accounting for income taxes and share
based payments. There have been no significant changes to our critical
accounting policies and estimates during the nine months ended September 30,
2009, compared to those disclosed in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operation," included in our 2008
Annual Report on Form 10-K.
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
We are
exposed to market risk changes in interest rate on debt and from changes in
commodity prices.
Under
Financial Accounting Reporting Release Number 48 and SEC rules and regulations,
we are required to disclose information concerning market risk with respect to
foreign exchange rates, interest rates, and commodity prices. We have elected to
make such disclosures, to the extent applicable, using a sensitivity analysis
approach, based on hypothetical changes in interest rates and commodity
prices.
We
currently do not use derivative financial instruments for risk management
purposes and do not use them for either speculation or trading. Because our
operations are mostly confined to the United States, we are not subject to a
material amount of foreign currency risk.
Interest
Rate Risk
We are
subject to interest rate risk to the extent we borrow against our line of credit
or incur debt in the acquisition of revenue equipment or otherwise. We attempt
to manage our interest rate risk by managing the amount of debt we carry. We did
not have any debt outstanding at September 30, 2009, and therefore had no market
risk related to debt.
Commodity
Price Risk
We also
are subject to commodity price risk with respect to purchases of fuel. The price
and availability of diesel fuel can fluctuate due to market factors that are
beyond our control. We believe fuel surcharges are effective at
mitigating most, but not all, of the risk of high fuel prices because we do not
recover the full amount of fuel price increases. As of September 30,
2009, we did not have any derivative financial instruments to reduce our
exposure to fuel price fluctuations.
Item
4. Controls
and Procedures
We have
established disclosure controls and procedures (as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended) to ensure
that material information relating to us, including our consolidated
subsidiaries, is made known to the officers who certify our financial reports
and to other members of senior management and the Board of
Directors. Our management, with the participation of our principal
executive officer and principal financial officer, conducted an evaluation of
the effectiveness of our disclosure controls and procedures. Based on
this evaluation, as of the end of the period covered by this Quarterly Report on
Form 10-Q, our principal executive officer and principal financial officer have
concluded that our disclosure controls and procedures are effective to ensure
that the information required to be disclosed by us in the reports that we file
or submit under the Exchange Act is (i) recorded, processed, summarized, and
reported within the time periods specified in the SEC rules and forms, and (ii)
accumulated and communicated to management, including our principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
September 30, 2009, that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
We have
confidence in our disclosure controls and procedures and internal control over
financial reporting. Nevertheless, our management, including our
principal executive officer and principal financial officer, does not expect
that our disclosure controls and procedures and internal control over financial
reporting will prevent all errors, misstatements, or fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have
been detected.
PART
II - OTHER INFORMATION
We are a
party to ordinary, routine litigation and administrative proceedings incidental
to our business. These proceedings primarily involve claims for
personal injury or property damage incurred in the transportation of freight and
for personnel matters.
While we
attempt to identify, manage, and mitigate risks and uncertainties associated
with our business, some level of risk and uncertainty will always be
present. Our Annual Report on Form 10-K for the year ended December
31, 2008, in the section entitled "Item 1A. Risk
Factors," describes some of the risks and uncertainties associated with
our business. These risks and uncertainties have the potential to
materially affect our business, financial condition, results of operations, cash
flows, projected results, and future prospects. In addition to the
risk factors set forth on our Form 10-K for the year ended December 31, 2008, we
believe that the following additional issues, uncertainties, and risks, should
be considered in evaluating our business and growth outlook:
Our
business is subject to certain credit factors that affect the global economy,
that are largely out of our control, and that could have a material adverse
effect on our operating results.
There
continues to be some concern over the instability of the credit markets and the
economy. If the economy and credit markets weaken further, our business,
financial results, and results of operations could be materially and adversely
affected, especially if consumer confidence declines and domestic spending
decreases. Although we think it is unlikely given our current cash
position, we may need to incur indebtedness or issue debt or equity securities
in the future to fund working capital requirements, make investments, or for
general corporate purposes. If the credit and equity markets erode further, our
ability to do so may be constrained. Although some stability has
returned to the equity markets, there still exists enough economic uncertainty
that could cause the market price of our securities to be volatile.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds
On
November 13, 2008, our Board of Directors unanimously authorized the repurchase
of up to 3.0 million shares of our Common Stock. The repurchase
authorization will remain in effect until the share limit is reached or the
program is terminated. No shares were repurchased in the third
quarter of 2009. See Note 11 for additional information with respect to our
share repurchase programs.
Item
3. Defaults
Upon Senior Securities
Not
Applicable
Item
4. Submission
of Matters to a Vote of Security Holders
Not
Applicable
Not
Applicable
Exhibits
required by Item 601 of Regulation S-K
Exhibit No.
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Description
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Exhibit
3
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Articles
of Incorporation and Bylaws
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(3.1)
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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.)
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(3.2)
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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.)
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Exhibit
4
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Instruments
defining the rights of security holders, including
indentures
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(4.1)
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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.)
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(4.2)
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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.)
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(4.3)
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Knight
Transportation, Inc. Amended and Restated 2003 Stock Option and Equity
Compensation Plan. (Incorporated by reference to the Company's Definitive
Proxy Statement on Schedule 14A filed April 10, 2009.)
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(4.4)
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Knight
Transportation, Inc. Employee Stock Purchase Plan. (Incorporated by
reference to the Company's Definitive Proxy Statement on Schedule 14A
filed April 10, 2009.)
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Exhibit
31
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Section
302 Certifications
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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.
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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.
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Exhibit
32
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Section
906 Certifications
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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.
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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.
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*Filed
herewith.
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Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
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KNIGHT
TRANSPORTATION, INC.
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Date:
November 9, 2009
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By:
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/s/
Kevin P. Knight
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Kevin
P. Knight
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Chief
Executive Officer, in his capacity as such and on behalf of the
registrant
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Date:
November 9, 2009
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By:
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/s/
David A. Jackson
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David
A. Jackson
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Chief
Financial Officer, in his capacity as such and on behalf of the
registrant
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