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 March 31, 2010
|
|
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 April 30, 2010 was 83,491,636 shares.
KNIGHT
TRANSPORTATION, INC.
PART
I – FINANCIAL INFORMATION
|
Page
Number
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
Condensed
Consolidated Unaudited Balance Sheets as of March 31, 2010 and December
31, 2009
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Income for the three months ended
March 31, 2010 and 2009
|
|
|
|
|
|
Condensed
Consolidated Unaudited Statements of Cash Flows for the three months ended
March 31, 2010 and 2009
|
|
|
|
|
|
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.
|
Removed
and Reserved
|
|
|
|
|
Item
5.
|
Other
Information
|
|
|
|
|
Item
6.
|
Exhibits
|
|
|
|
|
Signatures
|
|
|
PART
I - FINANCIAL INFORMATION
Item
1. Financial
Statements
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
As
of March 31, 2010 and December 31, 2009
(In
thousands)
|
|
|
|
|
|
March
31,
2010
|
|
|
December
31,
2009
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$ |
11,108 |
|
|
$ |
30,812 |
|
Short-term
investments
|
|
|
103,748 |
|
|
|
66,942 |
|
Accounts receivable, net of
allowance for doubtful accounts
|
|
|
75,673 |
|
|
|
73,327 |
|
Notes receivable, net of
allowance for doubtful accounts
|
|
|
974 |
|
|
|
520 |
|
Related party notes and interest
receivable
|
|
|
4,127 |
|
|
|
3,944 |
|
Prepaid expenses
|
|
|
8,253 |
|
|
|
7,323 |
|
Assets held for
sale
|
|
|
10,610 |
|
|
|
12,258 |
|
Other current
assets
|
|
|
3,690 |
|
|
|
3,571 |
|
Current deferred tax
asset
|
|
|
5,622 |
|
|
|
5,755 |
|
Total current
assets
|
|
|
223,805 |
|
|
|
204,452 |
|
|
|
|
|
|
|
|
|
|
Property
and Equipment:
|
|
|
|
|
|
|
|
|
Land and land
improvements
|
|
|
31,565 |
|
|
|
31,918 |
|
Buildings and
improvements
|
|
|
71,743 |
|
|
|
69,321 |
|
Furniture and
fixtures
|
|
|
7,630 |
|
|
|
7,562 |
|
Shop and service
equipment
|
|
|
6,054 |
|
|
|
5,977 |
|
Revenue equipment
|
|
|
544,260 |
|
|
|
548,477 |
|
Leasehold
improvements
|
|
|
1,877 |
|
|
|
1,875 |
|
|
|
|
663,129 |
|
|
|
665,130 |
|
Less: Accumulated
depreciation and amortization
|
|
|
(213,770 |
) |
|
|
(204,091 |
) |
Property
and equipment, net
|
|
|
449,359 |
|
|
|
461,039 |
|
Notes
receivable – long-term
|
|
|
2,238 |
|
|
|
2,906 |
|
Goodwill
|
|
|
10,328 |
|
|
|
10,333 |
|
Intangible
assets, net
|
|
|
98 |
|
|
|
114 |
|
Other
long-term assets and restricted cash
|
|
|
7,794 |
|
|
|
7,629 |
|
Total assets
|
|
$ |
693,622 |
|
|
$ |
686,473 |
|
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 March 31, 2010 and December 31, 2009
(In
thousands, except par values)
|
|
|
|
|
|
|
|
|
|
|
March
31,
2010
|
|
|
December
31,
2009
|
|
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
6,393 |
|
|
$ |
14,022 |
|
Accrued payroll and purchased
transportation
|
|
|
8,272 |
|
|
|
6,170 |
|
Accrued
liabilities
|
|
|
17,747 |
|
|
|
11,199 |
|
Claims accrual – current
portion
|
|
|
13,757 |
|
|
|
14,298 |
|
Dividend
Payable
|
|
|
140 |
|
|
|
70 |
|
Total current
liabilities
|
|
|
46,309 |
|
|
|
45,759 |
|
|
|
|
|
|
|
|
|
|
Long-term
Liabilities:
|
|
|
|
|
|
|
|
|
Claims accrual – long-term
portion
|
|
|
11,833 |
|
|
|
12,421 |
|
Deferred tax
liabilities
|
|
|
104,357 |
|
|
|
108,135 |
|
Total long-term
liabilities
|
|
|
116,190 |
|
|
|
120,556 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
162,499 |
|
|
|
166,315 |
|
|
|
|
|
|
|
|
|
|
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; 83,450
and 83,302 shares issued and outstanding at
March 31, 2010 and December 31,
2009, respectively
|
|
|
834 |
|
|
|
833 |
|
Additional paid-in
capital
|
|
|
118,209 |
|
|
|
115,348 |
|
Retained
earnings
|
|
|
412,080 |
|
|
|
403,977 |
|
Total shareholders'
equity
|
|
|
531,123 |
|
|
|
520,158 |
|
Total liabilities and
shareholders' equity
|
|
$ |
693,622 |
|
|
$ |
686,473 |
|
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
(In
thousands, except per share data)
|
|
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
REVENUE:
|
|
|
|
|
|
|
Revenue, before fuel
surcharge
|
|
$ |
140,316 |
|
|
$ |
133,129 |
|
Fuel surcharge
|
|
|
25,375 |
|
|
|
15,590 |
|
Total revenue
|
|
|
165,691 |
|
|
|
148,719 |
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
Salaries, wages and
benefits
|
|
|
47,783 |
|
|
|
48,304 |
|
Fuel
|
|
|
40,235 |
|
|
|
28,879 |
|
Operations and
maintenance
|
|
|
11,048 |
|
|
|
9,988 |
|
Insurance and
claims
|
|
|
5,759 |
|
|
|
5,316 |
|
Operating taxes and
licenses
|
|
|
3,051 |
|
|
|
3,561 |
|
Communications
|
|
|
1,326 |
|
|
|
1,472 |
|
Depreciation and
amortization
|
|
|
17,965 |
|
|
|
17,701 |
|
Purchased
transportation
|
|
|
16,786 |
|
|
|
10,695 |
|
Miscellaneous operating
expenses
|
|
|
3,158 |
|
|
|
3,354 |
|
Total operating
expenses
|
|
|
147,111 |
|
|
|
129,270 |
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
|
18,580 |
|
|
|
19,449 |
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
434 |
|
|
|
306 |
|
Other
income/(expense)
|
|
|
817 |
|
|
|
(21 |
) |
Income before income
taxes
|
|
|
19,831 |
|
|
|
19,734 |
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
7,487 |
|
|
|
7,990 |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
12,344 |
|
|
$ |
11,744 |
|
|
|
|
|
|
|
|
|
|
Earnings
per common share and common share equivalent:
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.15 |
|
|
$ |
0.14 |
|
Diluted
|
|
$ |
0.15 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares and common share equivalents
outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
83,354 |
|
|
|
83,335 |
|
Diluted
|
|
|
84,117 |
|
|
|
83,611 |
|
The
accompanying notes are an integral part of these condensed consolidated
unaudited financial statements.
KNIGHT
TRANSPORTATION, INC. AND SUBSIDIARIES
(In
thousands)
|
|
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
12,344 |
|
|
$ |
11,744 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
17,965 |
|
|
|
17,701 |
|
Gain on sales of
equipment
|
|
|
(584 |
) |
|
|
(839 |
) |
Impairment loss from
fire
|
|
|
- |
|
|
|
25 |
|
Gain from insurance claim
settlement
|
|
|
(100 |
) |
|
|
- |
|
Gain from Concentrek
earn-out
|
|
|
(718 |
) |
|
|
- |
|
Provision for doubtful accounts
and notes receivable
|
|
|
463 |
|
|
|
848 |
|
Excess tax benefits related to
stock-based compensation
|
|
|
(221 |
) |
|
|
(124 |
) |
Stock based compensation
expense
|
|
|
983 |
|
|
|
754 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase in short-term
investments
|
|
|
(36,806 |
) |
|
|
(14,786 |
) |
(Increase) decrease in trade
receivables
|
|
|
(1,808 |
) |
|
|
4,245 |
|
Increase in related party notes
and interest receivable
|
|
|
(20 |
) |
|
|
- |
|
(Increase) decrease in other
current assets
|
|
|
(119 |
) |
|
|
106 |
|
(Increase) in prepaid
expenses
|
|
|
(930 |
) |
|
|
(372 |
) |
Decrease in income tax
receivable
|
|
|
- |
|
|
|
774 |
|
(Decrease) increase in deferred
income taxes
|
|
|
(3,646 |
) |
|
|
1,673 |
|
Decrease in other long-term
assets
|
|
|
6 |
|
|
|
5 |
|
Increase in accounts
payable
|
|
|
787 |
|
|
|
3,190 |
|
Increase in accrued liabilities
and claims accrual
|
|
|
7,781 |
|
|
|
8,120 |
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by
operating activities
|
|
|
(4,623 |
) |
|
|
33,064 |
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and
equipment
|
|
|
(21,200 |
) |
|
|
(19,615 |
) |
Proceeds from sales of
equipment
|
|
|
7,988 |
|
|
|
8,735 |
|
Cash proceeds from notes
receivable
|
|
|
990 |
|
|
|
- |
|
Cash payment for notes
receivable
|
|
|
(201 |
) |
|
|
(5 |
) |
Cash payment for related party
notes receivable
|
|
|
(163 |
) |
|
|
- |
|
Investments in Transportation
Resource Partners
|
|
|
(159 |
) |
|
|
(150 |
) |
Return of investment in
Transportation Resource Partners
|
|
|
- |
|
|
|
43 |
|
Increase in restricted
cash
|
|
|
(5 |
) |
|
|
- |
|
Net cash used in investing
activities
|
|
|
(12,750 |
) |
|
|
(10,992 |
) |
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)
|
|
|
|
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
Flow From Financing Activities:
|
|
|
|
|
|
|
Dividends paid
|
|
$ |
(4,170 |
) |
|
$ |
(3,323 |
) |
Payments to acquire treasury
stock
|
|
|
- |
|
|
|
(4,900 |
) |
Excess tax benefits related to
stock-based compensation
|
|
|
221 |
|
|
|
124 |
|
Proceeds from exercise of
stock options
|
|
|
1,618 |
|
|
|
340 |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities
|
|
|
(2,331 |
) |
|
|
(7,759 |
) |
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(19,704 |
) |
|
|
14,313 |
|
Cash
and cash equivalents, beginning of period
|
|
|
30,812 |
|
|
|
22,027 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of period
|
|
$ |
11,108 |
|
|
$ |
36,340 |
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures:
|
|
|
|
|
|
|
|
|
Non-cash investing and
financing transactions:
|
|
|
|
|
|
|
|
|
Equipment acquired in accounts
payable
|
|
|
272 |
|
|
|
1,892 |
|
Retirement of treasury
stock
|
|
|
- |
|
|
|
4,900 |
|
Transfer from property and
equipment to assets
held for sale
|
|
|
4,397 |
|
|
|
6,573 |
|
Financing provided to
independent contractors
for equipment sold
|
|
|
758 |
|
|
|
1,654 |
|
Dividend accrued for restricted
stock units
|
|
|
70 |
|
|
|
- |
|
Cash Flow
Information:
|
|
|
|
|
|
|
|
|
Income taxes
paid
|
|
|
5,157 |
|
|
$ |
1,216 |
|
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 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,
2009.
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"). The 2003 Plan is
administered by the Compensation Committee of the Board of Directors (the
"Compensation Committee"). Pursuant to the 2003 Plan, the Compensation Committee
may award incentive stock options, non-qualified stock options, restricted stock
unit grants, and stock appreciation rights to employees and officers. Stock
based compensation cost for the three months ended March 31, 2010 and 2009,
respectively, are as follows:
|
|
Three
Months Ended
March
31,
|
|
|
|
(in
thousands)
|
|
|
|
2010
|
|
|
2009
|
|
Stock
compensation expense for options, net of forfeitures
|
|
$ |
770 |
|
|
$ |
754 |
|
Stock
compensation expense for restricted stock units, net of
forfeitures
|
|
|
213 |
|
|
|
- |
|
Combined
stock compensation expense
|
|
|
983 |
|
|
|
754 |
|
Income
tax
|
|
|
(371 |
) |
|
|
(305 |
) |
Net
stock compensation expense after tax
|
|
$ |
612 |
|
|
$ |
449 |
|
We
received approximately $1.6 million in cash from the exercise of stock options
during the three months ended March 31, 2010, compared to $340,000 for the same
period in 2009.
As of
March 31, 2010, we have approximately $10.7 million of unrecognized compensation
cost related to unvested options granted under the 2003
Plan. This cost is expected to be recognized over a weighted-average
period of 2.1 years and a total period of 5.5 years. We also have
approximately $20.9 million of unrecognized compensation expense related to
restricted stock unit awards, which will be recognized over a weighted average
period of 7.8 years and a total period of 13.0 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 March 31,
2010):
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Dividend
yield (1)
|
|
|
N/A |
|
|
|
1.20 |
% |
Expected
volatility (2)
|
|
|
N/A |
|
|
|
38.20 |
% |
Risk-free
interest rate (3)
|
|
|
N/A |
|
|
|
2.01 |
% |
Expected
terms (4)
|
|
|
N/A |
|
|
5.18
years
|
|
Weighted
average fair value of options granted
|
|
|
N/A |
|
|
$ |
4.37 |
|
(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 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 option award activity under the 2003 Plan as of March 31, 2010, and
changes during the three-month period is presented below:
|
|
Option
Totals
|
|
|
Weighted
Average Exercise
Price
Per Share ($)
|
|
Outstanding
12/31/2009
|
|
|
4,383,643 |
|
|
|
15.05 |
|
Granted
|
|
|
- |
|
|
|
- |
|
Exercised
|
|
|
(148,149 |
) |
|
|
10.88 |
|
Forfeited
|
|
|
(13,984 |
) |
|
|
16.34 |
|
Outstanding
as of 03/31/2010
|
|
|
4,221,510 |
|
|
|
15.19 |
|
A summary
of the restricted stock unit award activity under the 2003 Plan as of March 31,
2010, and changes during the three-month period is presented below:
|
|
Number
of Restricted Stock Unit Awards
|
|
|
Weighted
Average Grant Date Fair
Value
|
|
Unvested
12/31/2009
|
|
|
1,409,500 |
|
|
|
16.08 |
|
Granted
|
|
|
- |
|
|
|
- |
|
Vested
|
|
|
- |
|
|
|
- |
|
Forfeited
|
|
|
(4,000 |
) |
|
|
16.28 |
|
Outstanding
as of 03/31/2010
|
|
|
1,405,500 |
|
|
|
16.08 |
|
The fair
value of each restricted stock unit is based on the closing market price on the
date of grant.
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 months ended March 31, 2010 and 2009, respectively, is as
follows:
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Weighted
average common shares outstanding – basic
|
|
|
83,354 |
|
|
|
83,335 |
|
Dilutive
effect of stock options and unvested restricted stock
units
|
|
|
763 |
|
|
|
276 |
|
Weighted
average common shares outstanding – diluted
|
|
|
84,117 |
|
|
|
83,611 |
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
12,344 |
|
|
$ |
11,744 |
|
Earnings
per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
0.15 |
|
|
$ |
0.14 |
|
Diluted
|
|
$ |
0.15 |
|
|
$ |
0.14 |
|
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
March
31,
|
|
2010
|
|
2009
|
Number
of anti-dilutive shares
|
32,000
|
|
3,664,373
|
Note
4. Segment
Information
We have
two reportable segments comprised of an asset-based segment and a
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,
Segment 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. However, because its results of operations are not
material to our consolidated financial statements as a whole, we have not
presented separate financial information for this segment. For the three months
ended March 31, 2010, our brokerage segment, including intercompany transactions
and fuel surcharge, accounted for 5.3% of our consolidated revenue, 2.3% of our
consolidated net income, and 1.2% of our consolidated assets.
Brokerage
revenue including intercompany transactions and fuel surcharge for the
three-months ended March 31, 2010 was $8.7 million, compared to $7.5 million for
the same period a year ago. Net income for our brokerage segment was
approximately $0.3 million for three-months ended March 31, 2010, compared to
$0.2 million a year ago, and our brokerage segment had assets of $8.3 million at
March 31, 2010, compared to $6.5 million a year ago.
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
February 10, 2010, we declared a cash dividend of $0.05 per share of our common
stock. The dividend was payable to shareholders of record on March 5,
2010, and was paid on March 26, 2010. 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 three months ended
March 31, 2010 follow:
Goodwill:
|
|
In
Thousands
|
|
Balance
at December 31, 2009
|
|
$ |
10,333 |
|
Amortization
relating to deferred tax assets
|
|
|
(5 |
) |
Balance
at March 31, 2010
|
|
$ |
10,328 |
|
Intangible
Assets:
|
|
In
Thousands
|
|
Balance
at December 31, 2009
|
|
$ |
114 |
|
Amortization
|
|
|
(16 |
) |
Balance
at March 31, 2010
|
|
$ |
98 |
|
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
fiscal year 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 March 31, 2010, 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 March 31, 2010, we had contributed $585,000 to TRP III and our outstanding
commitment to TRP III was approximately $14.4 million.
Note
9. Assets
Held for Sale
Revenue
equipment that is not utilized in continuing operations and is held for sale is
classified as “assets held for sale” on the balance sheet. Assets
held for sale at March 31, 2010 totaled $10.6 million, compared to $12.3 million
as of December 31, 2009. 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 March 31, 2010.
Estimated
interest and penalties related to unrecognized tax benefits are recognized as a
component of income tax expense. Accrued interest was $82,000 and $78,000 at
March 31, 2010 and December 31, 2009, respectively. Accrued penalties were
$49,000 at both March 31, 2010 and December 31, 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 (including
federal income tax effects of $69,000) as of March 31, 2010, as the related
uncertain tax positions are permanent in nature. However, if amounts accrued are
less than amounts ultimately assessed by the taxing authorities, we would record
additional income tax expense. To the extent that the Company has favorable tax
settlements, or determines that accrued amounts are no longer needed due to a
lapse in the applicable statute of limitations or other reasons, such
liabilities would be reversed as a reduction of income tax expense (net of
federal tax effects, if applicable) in the period such a determination is made.
We do not believe the unrecognized tax benefits will change significantly over
the next 12 months.
We file
U.S. and state income tax returns with varying statutes of
limitations. The 2006 through 2009 tax years generally remain subject
to examination by federal authority, and the 2005 through 2009 tax years
generally remain subject to examination by state tax authorities.
Note
11. Company
Share Repurchase Programs
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 is intended to afford us 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. Under our share repurchase program, repurchased shares
are constructively retired and returned to unissued status.
In the
first quarter of 2009, we purchased 389,000 shares of our common stock in the
open market for approximately $4.9 million. The purchases were made in
accordance with Securities and Exchange Commission Rule 10b-18, which limits the
amount and timing of repurchases. The shares acquired have been retired and are
available for future issuance.
We did
not purchase any shares in the quarter ended March 31, 2010. As of March 31,
2010, there were 2,020,956 shares remaining for future purchases under our
repurchase program. The repurchase authorization will remain in effect until the
share limit is reached or the program is terminated.
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 and original maturities of three months or
less.
Our
short-term investments are held for trading and comprised of debt securities
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 March 31, 2010, our short term investments consisted of primarily municipal
securities. Our short-term investments did not experience any significant
unrealized gain or loss for the period or at March 31, 2010.
Note
13. Fair
Value Measurements
Effective
January 1, 2009, we adopted ASC 820-10 Fair Value Measurements and Disclosure
for non-recurring fair value measurements of 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 are 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 March 31, 2010 and December 31,
2009.
|
|
|
|
|
|
|
|
Level
One
|
|
|
Level
Two
|
|
|
Level
Three
|
|
|
|
Balance
at
March
31, 2010
|
|
|
Balance
at
December
31, 2009
|
|
|
Balance
at
March
31, 2010
|
|
|
Balance
at
December
31, 2009
|
|
|
Balance
at
March
31, 2010
|
|
|
Balance
at
December
31, 2009
|
|
|
Balance
at
March
31, 2010
|
|
|
Balance
at
December
31, 2009
|
|
|
|
(In
thousands)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money
market funds
|
|
$ |
6,361 |
|
|
$ |
26,895 |
|
|
$ |
6,361 |
|
|
$ |
26,895 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Short-term
investments
|
|
$ |
103,748 |
|
|
$ |
66,942 |
|
|
|
- |
|
|
|
- |
|
|
$ |
103,748 |
|
|
$ |
66,942 |
|
|
|
- |
|
|
|
- |
|
Restricted
cash – money market funds
|
|
$ |
747 |
|
|
$ |
731 |
|
|
$ |
747 |
|
|
$ |
731 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Restricted
long-term investments
|
|
$ |
2,079 |
|
|
$ |
2,090 |
|
|
|
- |
|
|
|
- |
|
|
$ |
2,079 |
|
|
$ |
2,090 |
|
|
|
- |
|
|
|
- |
|
Note
14. Notes
Receivable
We
provide financing to independent contractors and third parties on equipment sold
or leased under our equipment sale program. Most of the notes are collateralized
by revenue equipment and are due in weekly installments, including principal and
interest payments generally ranging from 9% to 14%, over periods generally from
six months to three years. We had 140 and 185 loans outstanding from independent
contractors and third parties as of March 31, 2010 and December 31, 2009,
respectively.
The notes
receivable balances are classified separately between current and long-term in
the balance sheet. The current and long-term balance of our notes
receivable at March 31, 2010 and December 31, 2009 are as follows:
|
|
March
31,
2010
|
|
|
December
31, 2009
|
|
|
|
(In
thousands)
|
|
Notes
receivable from independent contractors
|
|
$ |
1,601 |
|
|
$ |
1,808 |
|
Notes
receivable from third parties
|
|
|
1,734 |
|
|
|
1,637 |
|
Net
investment in sales-type leases
|
|
|
157 |
|
|
|
279 |
|
Gross
notes receivable
|
|
|
3,492 |
|
|
|
3,724 |
|
Allowance
for doubtful notes receivable
|
|
|
(280 |
) |
|
|
(298 |
) |
Total
notes receivable net of allowance
|
|
|
3,212 |
|
|
|
3,426 |
|
|
|
|
|
|
|
|
|
|
Current
portion (net of allowance)
|
|
|
974 |
|
|
|
520 |
|
Long-term
portion
|
|
$ |
2,238 |
|
|
$ |
2,906 |
|
The
following lists the components of the net investment in sales-type leases as of
March 31, 2010 and December 31, 2009:
|
|
March
31,
2010
|
|
|
December
31, 2009
|
|
|
|
(In
thousands)
|
|
Total
minimum lease payments to be received
|
|
$ |
172 |
|
|
$ |
302 |
|
Less:
unearned income
|
|
|
(15 |
) |
|
|
(23 |
) |
Net
investment in sales-type leases
|
|
$ |
157 |
|
|
$ |
279 |
|
The
current and long-term portions of the Company's net investment in sales-type
leases are included in notes receivable in the accompanying consolidated balance
sheets. The interest method is used to amortize unearned income, which
amortizes unearned income to income over the lease term so as to produce a
constant periodic rate of return on the net investment in each lease. The
amortization of unearned income is included in interest income and other in the
accompanying consolidated statements of operations.
Note
15. Related
Party Transactions
We have
provided general business loans to US West Agriculture Exporters, LLC, a company
that transacts business with our drayage operations, and in which Larry Knight
is a 33% stockholder. Larry Knight is an employee of the Company and the brother
of Kevin Knight and Keith Knight, our Chief Executive Officer and Chief
Operating Officer, respectively. The loan balance and interest due from US West
Agriculture Exporters, LLC at March 31, 2010 was approximately $4,003,000 and
$124,000, respectively. On April 29, 2010 we entered into an agreement with US
West Agriculture Exporters, LLC to consolidate the business loan and interest
into one single promissory note. The new agreement extends the repayment term
until September 2012, with installments due quarterly. The related party notes
and interest receivable have been reported separately for 2009 to conform to the
current presentation in the condensed consolidated balance sheet. The principal
loan and interest balance is recorded in “Related party notes and interest
receivable” line of our consolidated balance sheets.
We also
provided transportation services to US West Agriculture Exporters, LLC. Total
freight revenue for this entity was approximately $531,000 for the three month
period ended March 31, 2010. As of March 31, 2010, the receivables balance for
transportation services provided to US West Agriculture Exporters, LLC was
approximately $631,000, which is included within the "Accounts receivables, net
of allowance for doubtful accounts" line of the our consolidated balance
sheets.
Note
16. Recent
Accounting Pronouncements
On
January 21, 2010, FASB issued ASU 2010-06, which amends ASC 820 to add new
requirements for disclosures about transfers into and out of Levels 1 and 2 and
separate disclosures about purchases, sales, issuances, and settlements relating
to Level 3 measurements. The ASU also clarifies existing fair value disclosures
about the level of disaggregation and about inputs and valuation techniques used
to measure fair value. Further, the ASU amends guidance on employers'
disclosures about post-retirement benefit plan assets under ASC 715 to require
that disclosures be provided by classes of assets instead of by major categories
of assets. The ASU is effective for the first reporting period (including
interim periods) beginning after December 15, 2009, except for the requirement
to provide the Level 3 activity of purchases, sales, issuances, and settlements
on a gross basis, which will be effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. The
partial adoption of this ASU has no material impact on our fair value
measurement disclosures as of March 31, 2010. We do not believe that the full
adoption of ASU 2010-06, with respect to the Level 3 rollforward, will have a
material impact on our fair value measurement
disclosures.
In
December 2009, FASB issued ASU 2009-17. This Accounting Standards Update amends
FASB Accounting Standards Codification (ASC810-10) of FASB Statement No. 167,
Amendments to FASB Interpretation No. 46(R) issued June 2009.The amendments in
this Accounting Standards Update replace the quantitative-based risks and
rewards calculation for determining which reporting entity, if any, has a
controlling financial interest in a variable interest entity with an approach
focused on identifying which reporting entity has the power to direct the
activities of a variable interest entity that most significantly impact the
entity's economic performance and (1) the obligation to absorb losses of the
entity or (2) the right to receive benefits from the entity. An approach that is
expected to be primarily qualitative will be more effective for identifying
which reporting entity has a controlling financial interest in a variable
interest entity. The amendments in this Update also require additional
disclosures about a reporting entity's involvement in variable interest
entities, which will enhance the information provided to readers of financial
statements. We adopted ASC810-10 on January 1, 2010. The adoption of this ASC
has no material impact on our consolidated financial statements.
Note
17.
Subsequent Events
We
evaluated subsequent events through the time of filing this Quarterly Report on
Form 10-Q. We are not aware of any significant events that occurred subsequent
to the balance sheet date but prior to the filing of this report that would have
a material impact on our condensed consolidated financial statements, other than
as disclosed herein.
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,
2009, along with any supplements 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
transportation services provider 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 between ocean ports or rail ramps and shipping docks, 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 can
arrange for the transportation of, general commodities for customers throughout
the United States. We generally focus our dry van operations on
regional short-to-medium lengths of haul. Our temperature-controlled centers
operate in larger geographic areas with longer lengths of haul as compared to
our dry van operations. Our brokerage services enable us to expand our customer
service offerings by providing the non-asset-based capability of arranging with
other carriers to haul our customers' freight when the shipments do not fit our
asset-based model.
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, LLC and Knight Brokerage, LLC, our
refrigerated and brokerage subsidiaries 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, LLC 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
March 31, 2010, we operated 35 asset-based service centers offering dry van,
temperature-controlled, and intermodal transportation services. We also solicit
freight to be handled through our brokerage business at all of our asset-based
service centers. 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 first quarter of 2010 and, therefore, a detailed
discussion of the financial results of these operations will not be separately
presented.
Outlook
Due to
economic downturn that started in 2006, numerous industry competitors have
closed down or downsized their fleets over the last two to three years. During
the last part of 2009, we experienced gradual improvements with freight demands.
We believe that we are firmly in a recovering truckload freight market as the
operating environment grew increasingly positive during the first quarter of
2010. Evidence of the recovery includes our 3.8% improvement in
average miles per tractor for the quarter versus the first quarter in
2009. This improvement marks the second consecutive quarter with
increased year over year average miles per tractor following the 2.1% increase
in the fourth quarter of 2009. Market share growth continued in the
first quarter as we hauled 10.8% more loads than the first quarter of 2009. We
expect the upward trend to continue in the coming quarters.
While we
are optimistic about the economic recovery, our industry generally suffers from
limited liquidity and over-leveraged balance sheets. We believe that many
competitors do not appear to be in a financial position to make the requisite
investment to capitalize on the improving freight market. In
contrast, we intend to invest more heavily as demand for truckload services
improves. We believe we have significant financial flexibility and a strong
balance sheet, with $114.9 million in cash and short term investments, and zero
debt at March 31, 2010. We believe we are well-positioned to grow our business
as the recovery continues to develop.
We
believe that we are still in the early stage of the recovery. We will continue
to utilize the flexibility of our decentralized model to react and adapt to
market conditions. We expect to optimize our model and refine our execution in
reaction to, or in anticipation of, the truckload market dynamics. We will
continue to evaluate acquisition candidates and other opportunities that create
value for our shareholders and further advance our long-term
strategy.
We
believe that our level of profitability, fleet renewal strategy, and use of
independent contractors 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 believe we have the competitive position and 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 depreciation 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
Our
results of operations for the quarter ended March 31, 2010 in comparison to the
same period in 2009 are:
o
|
Revenue,
before fuel surcharge, increased 5.4%, to $140.3 million from $133.1
million;
|
|
|
o
|
Net
income increased 5.1% to $12.3 million, compared to $11.7 million;
and
|
|
|
o
|
Net
income per diluted share increased 4.5%, to $0.15 from
$0.14.
|
In the
first quarter of 2010, our load count grew by 17,331 loads when compared to the
same period last year. Our 10.8% load growth in the first quarter was also
slightly better than last quarter. We believe that these sequential
trends further demonstrate that an economic recovery is underway.
Equipment
productivity, as measured by miles per tractor and average revenue before fuel
surcharge per tractor, both increased 3.8% in the first quarter of 2010 as
compared to the same period last year. In this strengthening freight
market we were able to decrease our non-paid empty miles to 10.9% in the first
quarter of 2010, compared to 12.5% for the same period a year ago, an
improvement of 12.8%. The improvement in non-paid empty miles offset a 1.9%
decline in average freight revenue per loaded mile as average freight revenue
per total mile was flat, year over year. Our average length of haul
decreased 3.5% to 464 miles from 481 miles in the same period last year, while
increasing sequentially 1.3% from the fourth quarter of 2009.
Our fleet
size increased approximately 1% in the first quarter to an average of 3,759
tractors for the quarter ended March 31, 2010. We ended the quarter with 3,765
tractors as of March 31, 2010, compared to 3,689 tractors a year ago. The net
increase of 76 units is comprised of a 89 unit increase in independent
contractor tractors, off-set by a 13 unit decrease in company
tractors.
Our
consolidated operating ratio, net of fuel surcharge (operating expenses, net of
fuel surcharge, expressed as a percentage of revenue, before fuel surcharge),
was 86.8% for the quarter ended March 31, 2010, compared to 85.4% for the same
period a year ago. The higher operating ratio is mainly due to rising fuel cost
in the first quarter of 2010. The U.S. average cost of diesel fuel per gallon
during the first quarter increased approximately 31% compared to the same period
a year ago.
For the
quarter, we spent $13.2 million in net capital expenditures. At March
31, 2010, our balance sheet remained debt free, our cash and cash equivalents
and short term investments totaled $114.9 million, and our shareholders' equity
was $531.1 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 revenue, before fuel
surcharge (Columns B), for the three months ended March 31, 2010 and 2009,
respectively. Fuel expense as a percentage of revenue, before fuel
surcharge, is calculated using fuel expense, net of fuel surcharge. We believe
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
Months Ended
March
31,
|
|
|
|
|
(B)
(Fuel
surcharge
excluded
from
revenue
and netted
from
fuel expense)
Three
Months Ended
March
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue, including fuel
surcharge
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
Revenue, before fuel
surcharge
|
|
|
100.0 |
% |
|
|
100.0 |
% |
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Salaries, wages and
benefits
|
|
|
28.8 |
|
|
|
32.5 |
|
|
Salaries, wages and
benefits
|
|
|
34.1 |
|
|
|
36.3 |
|
Fuel (1)
|
|
|
24.3 |
|
|
|
19.4 |
|
|
Fuel (2)
|
|
|
10.6 |
|
|
|
10.0 |
|
Operations and
maintenance
|
|
|
6.7 |
|
|
|
6.7 |
|
|
Operations and
maintenance
|
|
|
7.9 |
|
|
|
7.5 |
|
Insurance and
claims
|
|
|
3.5 |
|
|
|
3.6 |
|
|
Insurance and
claims
|
|
|
4.1 |
|
|
|
4.0 |
|
Operating taxes and
licenses
|
|
|
1.8 |
|
|
|
2.4 |
|
|
Operating taxes and
licenses
|
|
|
2.2 |
|
|
|
2.7 |
|
Communications
|
|
|
0.8 |
|
|
|
1.0 |
|
|
Communications
|
|
|
0.9 |
|
|
|
1.1 |
|
Depreciation and
amortization
|
|
|
10.8 |
|
|
|
11.9 |
|
|
Depreciation and
amortization
|
|
|
12.8 |
|
|
|
13.3 |
|
Purchased
transportation
|
|
|
10.1 |
|
|
|
7.2 |
|
|
Purchased
transportation
|
|
|
12.0 |
|
|
|
8.0 |
|
Miscellaneous operating
expenses
|
|
|
2.0 |
|
|
|
2.2 |
|
|
Miscellaneous operating
expenses
|
|
|
2.2 |
|
|
|
2.5 |
|
Total
operating expenses
|
|
|
88.8 |
|
|
|
86.9 |
|
|
Total
operating expenses
|
|
|
86.8 |
|
|
|
85.4 |
|
Income
from operations
|
|
|
11.2 |
|
|
|
13.1 |
|
|
Income
from operations
|
|
|
13.2 |
|
|
|
14.6 |
|
Net
interest and other income
|
|
|
0.8 |
|
|
|
0.2 |
|
|
Net
interest and other income
|
|
|
0.9 |
|
|
|
0.2 |
|
Income
before income taxes
|
|
|
12.0 |
|
|
|
13.3 |
|
|
Income
before income taxes
|
|
|
14.1 |
|
|
|
14.8 |
|
Income
taxes
|
|
|
4.5 |
|
|
|
5.4 |
|
|
Income
taxes
|
|
|
5.3 |
|
|
|
6.0 |
|
Net
Income
|
|
|
7.5 |
% |
|
|
7.9 |
% |
|
Net
Income
|
|
|
8.8 |
% |
|
|
8.8 |
% |
(1)
|
Gross
fuel expense without fuel surcharge revenue netted from
expense.
|
(2)
|
Net
fuel expense less fuel surcharge revenue.
|
*
|
There
are minor rounding differences in the
table.
|
A
discussion of our results of operations for the three months ended March 31,
2010 and March 31, 2009 is set forth below.
Comparison
of Three Months Ended March 31, 2010 to Three Months Ended March 31,
2009
Total
revenue for the quarter ended March 31, 2010, increased 11.4% to $165.7 million,
from $148.7 million for the same period in 2009. Total revenue for the 2010
period included $25.4 million of fuel surcharge revenue, compared to $15.6
million in the 2009 period. In discussing our results of operations, we use
revenue, before fuel surcharge, and fuel expense, net of fuel surcharge, because
we believe 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, increased 5.4% to $140.3 million for the quarter ended
March 31, 2010, from $133.1 million for the same period in 2009. During the
first quarter we experienced favorable trends in a recovering truckload freight
market. Equipment utilization, or average miles per tractor, improved 3.8%,
while average revenue per total mile remained constant. We believe that miles
per tractor is the first operating fundamental that improves in a recovering
market, to be followed by revenue per mile improvements. As of March 31, 2010,
we operated 76 more trucks compared to the same period a year
ago. Our average length of haul decreased 3.5% to 464 miles. Non-paid
miles improved to 10.9% in the quarter ended March 31, 2010, compared to 12.5%
during the same period a year ago.
Salaries,
wages and benefits expense as a percentage of revenue, before fuel surcharge,
decreased to 34.1% for the quarter ended March 31, 2010, from 36.3% for the same
period in 2009. The decrease is due to the combination of higher revenue and a
decrease in the percentage of our company fleet being operated by company
drivers, as opposed to independent contractors. As of March 31, 2010, 91.1% of
our fleet was operated by company drivers, compared to 93.3% at March 31, 2009.
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. Our
workers’ compensation costs increased slightly in the first quarter of 2010
versus the same period in 2009, which partially off-set the overall decrease in
our salary and benefits expense.
Fuel
expense, net of fuel surcharge, as a percentage of revenue before fuel
surcharge, increased to 10.6% for the three months ended March 31, 2010, from
10.0% for the same period in 2009. The U.S. average cost of diesel fuel per
gallon increased approximately 31% in the first quarter versus the 2009 period.
We continued to manage and control rising fuel prices through internal
initiatives to improve fuel efficiency, reduce idle time, and improve fuel
purchasing. We maintain a fuel surcharge program to assist us in recovering a
portion of our fuel expense. Fuel surcharge revenue was $25.4 million for the
three months ended March 31, 2010, compared to $15.6 million for the same period
in 2009.
Operations
and maintenance expense, as a percentage of revenue, before fuel surcharge,
increased to 7.9% for the three months ended March 31, 2010, compared to 7.5%
for the same period in 2009. Operations and maintenance
expense as a percentage of revenue increased primarily because of a modest
increase in fleet age and an increase in operating expenses incurred on the
road. 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, remained
relatively constant at 4.1% for the three months ended March 31, 2010, compared
to 4.0% for the same period in 2009.
Operating
taxes and licenses expense as a percentage of revenue, before fuel surcharge,
decreased to 2.2% for the three months ended March 31, 2010, compared to 2.7%
for the same period in 2009. The decrease is primarily due to higher revenue and
an increase in the percentage of our company fleet being operated by independent
contractors, who pay for their own licenses, taxes, and fees.
Communications
expense as a percentage of revenue, before fuel surcharge, decreased 0.9% for
the three months ended March 31, 2010, compared to 1.1% for the same period in
2009. The decrease is mainly due to increased revenue that covers certain fixed
components of the communication costs.
Depreciation
and amortization expense as a percentage of revenue, before fuel surcharge,
decreased to 12.8% for the three months ended March 31, 2010, compared to 13.3%
for the same period in 2009. The decrease in depreciation and amortization
expense is primarily due to the combination of improved equipment utilization
and an increase in the percentage of our tractor fleet being operated by
independent contractors, who own their own tractors. As of March 31, 2010, 91.1%
of our fleet was company owned and subject to depreciation, compared to 93.3% at
March 31, 2009. Most
of our fleet is late-model equipment that consists primarily of tractors
equipped with 2007 U.S. EPA emission compliant engines. Given higher
prices for the 2010 EPA-compliant engines, we expect this category may increase
going forward, although an improvement in revenue per tractor in a better
freight environment or an increased percentage of our fleet comprised of
independent contractors could cause this category to increase by a smaller
amount, or even decrease, as a percentage of revenue.
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. Purchased
transportation expense as a percentage of revenue, before fuel surcharge,
increased to 12.0% for the three months ended March 31, 2010, from 8.0%
for the same period in 2009. The increase is due to the combination of an
increase in the percentage of our fleet being operated by independent
contractors and a $1.2 million increase in payments to outside carriers for
transportation services arranged by our brokerage division. At March 31, 2010,
8.9% of our fleet was operated by independent contractors, compared to 6.7% at
March 31, 2009. The increase in our independent contractor fleet is primarily
from the expansion of our drayage operations.
Miscellaneous
operating expenses as a percentage of revenue, before fuel surcharge, decreased
to 2.2% for the three months ended March 31, 2010, compared to 2.5% for the same
period in 2009. The decrease is primarily due to increased revenue that covers
certain fixed components of our miscellaneous operating expenses. Gains from the
sale of used equipment are included in miscellaneous operating expenses. Gains
from sale of equipment decreased to $583,800 in the first quarter of 2010,
compared to $839,300 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), was 86.8% for the three months ended March 31,
2010, compared to 85.4% for the same period in 2009.
Net
interest income and other income as a percentage of revenue, before fuel
surcharge, increased to 0.9% for the three months ended March 31, 2010, compared
to 0.2% for same period a year ago. Other income in the current year includes a
$718,000 earn-out from our investment in Concentrek, which we sold in 2005. Our
interest income also increased approximately $130,000 in the first quarter. We
had no outstanding debt at March 31, 2010 or 2009.
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 decreased to 37.8% for
the quarter ended March 31, 2009, compared to 40.5% for the same period a year
ago. The decrease in our tax rate is mainly due to certain federal tax credits
associated with solar panel installations.
As a
result of the preceding changes, our net income, as a percentage of revenue
before fuel surcharge, remained constant at 8.8% for the three months ended
March 31, 2010 and 2009.
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
from operating activities was a $4.6 million decrease to cash for the three
months ended March 31, 2010, compared to a $33.1 million increase to cash for
the same period in 2009. The decrease in cashflow from operating activities in
the first quarter of 2010 is primarily due to investing more cash in short-term
investments, along with an increase in accounts receivables and a decrease in
deferred income taxes resulting from certain book to tax timing differences.
Excluding the increase in our short-term investments, our net cash provided by
operating activities would have been $32.2 million for the three months ended
March 31, 2010, compared to $47.9 million for the same period a year ago. Our
cash, cash equivalents, and short-term trading investments grew $17.1 million
during the three month period ended March 31, 2010, after spending $4.2 million
for dividends.
Net cash
used in investing activities was $12.8 million for the three months ended March
31, 2010, compared to $11.0 million for the same period in 2009. Capital
expenditures for the purchase of revenue equipment, office equipment, land and
leasehold improvements, net of equipment sales, increased $2.3 million, to $13.2
million for the three months ended March 31, 2010, compared to $10.9 million for
the same period in 2009. We currently anticipate total capital expenditures, net
of equipment sales, to be in the $70
to $85 million range for the year. We intend that these capital expenditures
will be used primarily to acquire new revenue equipment.
Net cash
used in financing activities was approximately $2.3 million for the three months
ended March 31, 2010, compared to $7.8 million for the same period in
2009. The decrease in cash used in financing activities is primarily
due to a reduction in cash payments to acquire treasury stock. We did not
acquire any treasury stock in the three month period ended March 31, 2010,
compared to $4.9 million spent on treasury stock in the same period a year ago.
Cash proceeds from exercises of stock options increased to $1.6 million for the
three month period ended March 31, 2010, compared to $0.3 million for the same
period a year ago. Cash dividends paid in the first quarter of 2010 also
increased approximately $0.8 million, due to an increase in dividends paid to
common stock shareholders from $0.04 per share to $0.05 per share that became
effective 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 March 31, 2010, the utilized
portion of the line of credit consisted solely of issued but unused letters of
credit totaling $36.3 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 March 31,
2010.
As of
March 31, 2010, our balance sheet continued to be debt-free while our cash, cash
equivalents, and short-term investments balance grew to $114.9 million.
Historically, we have self-funded our growth by purchasing equipment with the
cash generated from our operations. Our growth has slowed in the last two years
due to the difficult economic environment. We are encouraged by the recent
demand trends, and expect to find opportunities to grow each of our businesses
as we put more capital to work. We will continue to evaluate strategic
opportunities that can create value for our shareholders without undue risk,
including return of capital in the form of cash dividends and stock
repurchases.
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. Vehicles held under
operating leases were not carried on our balance sheet. We did not have any
tractors or trailers held under operating leases as of March 31,
2010.
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, allowance for doubtful accounts, 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
three months ended March 31, 2010, compared to those disclosed in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation," included in our 2009 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 March 31, 2010, and therefore had no market
risk related to debt.
Commodity
Price Risk
We 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 March 31, 2010, we did not
have any derivative financial instruments to reduce our exposure to fuel price
fluctuations.
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 March
31, 2010, 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
Item
1.
Legal Proceedings
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.
Item
1A.
Risk Factors
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, 2009, 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.
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 first
quarter of 2010. See Note 11 for additional information with respect to our
share repurchase programs.
Item
3.
Defaults Upon Senior Securities
Not
Applicable
Item
4.
Removed and Reserved
Item
5.
Other Information
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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2010
Amended and Restated Bylaws of the Company. (Incorporated by reference to
Exhibit 3 to the Company's Report on Form 8-K dated March 15, 2010 and
filed on March 17, 2010.)
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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 2010 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: May
10, 2010
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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: May
10, 2010
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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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