EX-99 2 exhibit99.htm EXHIBIT 99 (PRESS RELEASE) Exhibit 99 (Press Release)

For Immediate Release
Phoenix, Arizona - January 24, 2007
Contact:
David Jackson, CFO
(602) 269-2000

Knight Transportation Posts Record Revenue and Net Income for the Fourth Quarter and Year of 2006

Knight Transportation, Inc. (NYSE: KNX) announced today its financial results for the quarter and year ended December 31, 2006.

For the quarter, total revenue increased 6.3%, to $174.9 million from $164.6 million for the same quarter of 2005. Revenue, before fuel surcharge, increased 8.1%, to $152.1 million from $140.8 million for the same quarter of 2005. Net income increased 8.7%, to $20.1 million from $18.5 million for the same period of 2005. Net income per diluted share increased to $0.23 from $0.21 for the same period of 2005. Excluding equity-based compensation expense for the fourth quarter 2006, net income increased 10.0%, to $20.4 million from $18.5 million for the same period of 2005, when equity-based compensation was not required to be expensed.

For the year, total revenue increased 17.2%, to $664.4 million from $566.8 million for the same period of 2005. Revenue, before fuel surcharge, increased 13.9%, to $568.4 million from $499.0 million for the same period of 2005. Net income increased 18.2%, to $73.0 million from $61.7 million for the same period of 2005. Net income per diluted share increased to $0.84 from $0.71 for the same period of 2005. Excluding equity-based compensation expense for 2006, net income increased 21.2%, to $74.8 million from $61.7 million for the same period of 2005, when equity-based compensation was not required to be expensed.

Fourth quarter results include a $712,500 pre-tax impairment charge in the carrying value of the Company’s investment with Transportation Resource Partners (TRP) to more closely reflect the fair value of the portfolio. In 2003, the Company committed $5.0 million to TRP, a private equity limited partnership that invests in transportation-related companies. This impairment charge negatively impacted our earnings by approximately half a cent per share.

The company previously announced a cash dividend of $.02 per share to shareholders of record on December 8, 2006, which was paid on December 29, 2006.

Chairman and Chief Executive Officer, Kevin P. Knight, said, “During 2006 we continued to execute our disciplined operating model founded on the twin pillars of growth and profitability. The fourth quarter represented the 48th consecutive quarter, since going public, that Knight Transportation generated higher year-over-year operating income. Our net income, as a percentage of revenue before fuel surcharge, for the year of 2006 was 12.8%, a 50 basis point improvement over 2005, as well as our sixth year of consecutive improvement in this ratio and our highest annual net income percentage in our history as a public company. Our operating ratio for the year of 2006 was 79.0%, a 60 basis point improvement over 2005, as well as our sixth year of consecutive improvement in this ratio. Our team achieved these results despite 50 basis points of negative impact on the operating ratio from non-cash expensing of equity compensation during the year.


“Our revenue growth was impressive as well, fueled by a combination of fleet expansion, increased revenue per mile, and our asset purchase of Roads West Transportation, during the fourth quarter of 2006. In addition to the Roads West purchase, we opened seven new service centers, four dry van, two brokerage, and one refrigerated. Overall our average tractors increased to 3,446 for 2006, an increase of 14.3% from 2005.

"For the quarter, average revenue per loaded mile, before fuel surcharges, increased 3.7%, while non-revenue miles increased by 2.4 percentage points with a 46 mile shorter average length of haul. Average miles per tractor decreased 7.7% as compared to the same period of 2005. The decrease in utilization is attributed to a less robust freight environment, more stringent hours of service regulations, and a shortened length of haul.

"Continued positive results in fuel surcharge recovery, safety, and used equipment sales, as well as our constant focus on cost controls, more than overcame expense increases relating to recording equity based compensation expense, increased driver compensation, prices of revenue equipment, and declining fuel efficiency due to emissions control regulations.

“The 2006 periods include our initial adoption of the accounting standard which requires expensing of equity based compensation such as stock options. At Knight Transportation we have a broad based stock option program in which approximately one-third of our total employees participate. The twelve months of 2006 included approximately $3.0 million of non-cash equity-based compensation expense recorded, while such expense was not recorded in 2005.

“For the quarter, we invested $39.6 million in net capital expenditures. At December 31, 2006, our balance sheet reflected $1.6 million in cash and short-term investments, zero debt, and $426.1 million in shareholders’ equity.

"Our service center growth continues in 2007 with the recent addition of two new service centers. Our fourth refrigerated service center has begun operations in Memphis, Tennessee. Our fifth brokerage service center is now open for business, also in Memphis, Tennessee. In addition to the existing 24 dry van service centers, our combined network is now 33 service centers strong. Going forward, we intend to continue to execute our business model. This will not be easy in the current environment, particularly if freight demand remains soft in the first half of the year. We also plan to continue to evaluate the market for acquisition opportunities that make sense within our disciplined operating framework. Our base expectation for the medium to longer term is to grow our fleet between 10% and 15% annually and continue to grow our brokerage business. We will evaluate that base goal and may adjust it up or down periodically based on factors such as freight demand, driver availability, and acquisitions.”

The Company will hold a conference call on January 25, 4PM ET, to further discuss its results of operations for the quarter ended December 31, 2006. The dial in number for this conference call is 1-866-261-3331, conference ID 1030253.

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

INCOME STATEMENT DATA:
  
Three Months Ended December 31,
  
Twelve Months Ended December 31,
  
   
(Unaudited, in thousands, except per share amounts)
  
                   
   
2006
  
2005
  
2006
  
2005
  
REVENUE:
                  
Revenue, before fuel surcharge
  
$
152,142
  
$
140,755
  
$
568,408
  
$
498,996
  
Fuel surcharge
    
22,774
   
23,821
   
95,999
   
67,817
 
TOTAL REVENUE
    
174,916
   
164,576
   
664,407
   
566,813
 
                           
OPERATING EXPENSES:
                          
Salaries, wages and benefits
    
51,020
   
44,731
   
191,550
   
162,778
 
Fuel expense - gross
    
40,820
   
40,385
   
165,594
   
133,469
 
Operations and maintenance
    
8,890
   
9,580
   
35,881
   
34,449
 
Insurance and claims
    
7,398
   
7,939
   
26,189
   
25,159
 
Operating taxes and licenses
    
3,492
   
3,406
   
13,507
   
12,412
 
Communications
    
1,515
   
1,330
   
5,649
   
4,267
 
Depreciation and amortization
    
15,345
   
14,180
   
60,387
   
52,603
 
Lease expense - revenue equipment
    
107
   
115
   
431
   
183
 
Purchased transportation
    
11,328
   
9,591
   
39,937
   
31,787
 
Miscellaneous operating expenses
    
2,144
   
2,597
   
5,790
   
8,011
 
     
142,059
   
133,854
   
544,915
   
465,118
 
Income From Operations
    
32,857
   
30,722
   
119,492
   
101,695
 
                           
Other income (expense)
    
(713
)
  
(189
)
  
(713
)
  
361
 
Interest income
    
189
   
216
   
1,067
   
658
 
Interest (expense)
    
(1
)
  
-
   
(1
)
  
-
 
     
(525
)
  
27
   
353
   
1,019
 
                           
Income Before Income Taxes
    
32,332
   
30,749
   
119,845
   
102,714
 
INCOME TAXES
    
12,169
   
12,200
   
46,879
   
41,000
 
                           
NET INCOME
  
$
20,163
  
$
18,549
  
$
72,966
  
$
61,714
  
Net Income Per Share
                          
- Basic
  
$
0.23
  
$
0.22
  
$
0.85
  
$
0.72
  
- Diluted
  
$
0.23
  
$
0.21
  
$
0.84
  
$
0.71
  
Weighted Average Shares Outstanding
                          
- Basic
    
86,041
   
85,567
   
85,802
   
85,302
 
- Diluted
    
87,052
   
87,110
   
87,040
   
86,647
 

BALANCE SHEET DATA:
  
12/31/2006
  
12/31/2005
  
ASSETS
  
(Unaudited, in thousands)
  
Cash and cash equivalents
  
$
1,582
  
$
18,809
  
Short term investment
    
-
   
2,278
 
Restricted cash
    
-
   
211
 
Accounts receivable, net
    
85,350
   
79,848
 
Notes receivable, net
    
341
   
241
 
Other current assets
    
16,613
   
3,355
 
Prepaid expenses
    
8,342
   
7,156
 
Deferred tax asset
    
8,759
   
8,533
 
Total Current Assets
    
120,987
   
120,431
 
               
Property and equipment, net
    
433,828
   
352,339
 
Notes receivable, long-term
    
348
   
344
 
Goodwill
    
10,556
   
8,119
 
Other assets and restricted cash
    
4,500
   
2,594
 
               
Total Assets
  
$
570,219
  
$
483,827
  
               
LIABILITIES AND SHAREHOLDERS' EQUITY
              
Accounts payable
  
$
13,077
  
$
7,464
  
Accrued payroll
    
7,411
   
5,452
 
Accrued liabilities
    
15,184
   
13,307
 
Dividends payable
    
-
   
1,713
 
Other current liabilities
    
-
   
211
 
Claims accrual
    
25,926
   
26,155
 
Total Current Liabilities
    
61,598
   
54,302
 
               
Deferred Income Taxes
    
82,526
   
76,597
 
               
Total Liabilities
    
144,124
   
130,899
 
               
Common stock
    
861
   
857
 
Additional paid-in capital
    
94,220
   
87,148
 
Retained earnings
    
331,014
   
264,923
 
Total Shareholders' Equity
    
426,095
   
352,928
 
               
Total Liabilities and Shareholders' Equity
  
$
570,219
  
$
483,827
  

   
Three Months Ended
December 31,
      
Twelve Months Ended
December 31,
      
                           
   
2006
  
2005
      
2006
  
2005
      
   
(Unaudited)
  
(Unaudited)
      
(Unaudited)
  
(Unaudited)
      
                           
OPERATING STATISTICS
          
%
Change
          
%
Change
  
Average Revenue Per Loaded Mile*
  
$
1.773
  
$
1.709
    
3.7%      
 
$
1.728
  
$
1.654
    
4.5%        
 
                                       
Average Revenue Per Total Mile*
  
$
1.532
  
$
1.518
    
0.9%      
 
$
1.511
  
$
1.461
    
3.4%        
 
                                       
Empty Mile Factor
    
13.6
%
  
11.2
%
  
21.4%      
 
  
12.6
%
  
11.7%
 
  
7.7%        
 
                                       
Average Miles Per Tractor
    
26,228
    
28,421
    
-7.7%     
 
  
106,485
    
112,382
    
-5.2%        
 
                                       
Average Length of Haul
    
563
    
609
    
-7.6%     
 
  
561
    
580
    
-3.3%        
 
                                       
Operating Ratio**
    
78.4
%
  
78.2
%
        
79.0
%
  
79.6%
 
      
                                       
Average Tractors - Total
    
3,671
    
3,227
    
13.8%    
 
  
3,446
    
3,016
    
14.3%        
 
                                       
Tractors - End of Quarter:
                                      
Company
    
3,412
    
3,034
          
3,412
    
3,034
        
Owner - Operator
    
249
    
237
          
249
    
237
        
     
3,661
    
3,271
          
3,661
    
3,271
        
                                       
Trailers - End of Quarter
    
8,761
   
7,885
         
8,761
   
7,885
       
                                       
Net Capital Expenditures (in thousands)
  
$
39,627
  
$
37,535
        
$
127,725
  
$
103,583
        
                                       
Cash Flow From Operations (in thousands)
  
$
46,663
  
$
45,447
        
$
133,030
  
$
107,764
        

*
Excludes fuel surcharge.
**
Operating ratio as reported in this press release is based upon total operating expenses, net of fuel surcharge, as a percentage of revenue, before fuel surcharge. Revenue from fuel surcharge is available on the accompanying statements of income. We measure our revenue, before fuel surcharge, and our operating expenses, net of fuel surcharge, because we believe that eliminating this sometimes volatile source of revenue affords a more consistent basis for comparing our results of operations from period to period.
 
 
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. These statements generally may be identified by their use of terms or phrases such as "expects," "estimates," "anticipates," "projects," "believes," "plans," "intends," "may," "will," "should," "could," "potential," "continue," "future," and terms or phrases of similar substance. Forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to differ materially from those set forth in, contemplated by, or underlying the forward-looking statements. Accordingly, actual results may differ from those set forth in the forward-looking statements. Readers should review and consider the factors that may affect future results and other disclosures by the Company in its press releases, stockholder reports, Annual Report on Form 10-K, and other filings with the Securities Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.
 
Contact: Dave Jackson, CFO, at (602) 269-2000