Knight Transportation Reports Second Quarter 2014 Revenue and Earnings

PHOENIX–(BUSINESS WIRE)–Knight Transportation, Inc. (NYSE: KNX), one of North America’s
largest and most diversified truckload transportation companies, today
reported revenue and net income for the second quarter ended June 30,
2014.

Key financial highlights for the second quarter and first half of 2014
and 2013 were as follows:

(dollars in thousands, except per share data)				Three Months Ended June 30,										Six Months Ended June 30,
				2014			2013			% Diff				2014			2013			% Diff
Total revenue				$264,155			$244,783			7.9%				$513,318			$480,183			6.9%
Revenue, excluding trucking fuel surcharge				$218,908			$200,104			9.4%				$424,504			$389,704			8.9%
Operating income				$38,899			$31,925			21.8%				$70,149			$57,469			22.1%
Net income				$25,761			$18,939			36.0%				$44,824			$34,122			31.4%
Earnings per diluted share				$0.31			$0.24			33.5%				$0.55			$0.43			29.1%

The company previously announced a quarterly cash dividend of $0.06 per
share to shareholders of record on June 6, 2014, which was paid on June
27, 2014.

Kevin Knight, Chairman and Chief Executive Officer, commented on the
quarter, ”We are pleased with our positive results as we continued to
grow our revenue and improve our operating margin. During the second
quarter, overall demand remained strong while capacity appeared to
tighten. Both our trucking and logistics segments increased revenue and
operating income meaningfully, when compared to the same quarter last
year. In our trucking business, revenue per tractor increased 6.0%, year
over year, with a 5.6% improvement in revenue per loaded mile, a 3.1%
increase in our length of haul, a 140 basis point improvement in our
non-paid empty mile percentage, and a 1.1% decrease in miles per
tractor. In our logistics business, revenue growth was strong and gross
margin percentage improved. We are encouraged by the positive momentum
from our results over the past several quarters and feel well positioned
for future growth and success by providing capacity to our customers,
quality careers to our driving associates, and superior returns to our
shareholders.”

The following chart reflects the financial performance of our trucking
(asset based) and our logistics (non-asset based) businesses for the
second quarter of 2014 and 2013.

(dollars in thousands, except operating ratio)				Three Months Ended June 30,										Six Months Ended June 30,
				2014			2013			Diff				2014			2013			Diff
Trucking (Asset based)
Revenue, excluding trucking fuel surcharge				$171,021			$160,956			6.3%				$332,848			$318,659			4.5%
Operating Income				$35,856			$29,403			21.9%				$64,977			$52,637			23.4%
Operating Ratio(1)				79.0%			81.7%			-270 bps				80.5%			83.5%			-300 bps
Logistics (Non-asset based)
Revenue				$47,887			$39,148			22.3%				$91,656			$71,045			29.0%
Operating Income				$3,043			$2,522			20.7%				$5,172			$4,832			7.0%
Operating Ratio(1)				93.6%			93.6%			Flat				94.4%			93.2%			120 bps
Consolidated
Revenue, excluding trucking fuel surcharge				$218,908			$200,104			9.4%				$424,504			$389,704			8.9%
Operating Income				$38,899			$31,925			21.8%				$70,149			$57,469			22.1%
Operating Ratio(1)				82.2%			84.0%			-180 bps				83.5%			85.3%			-180 bps
(1)Operating ratio is defined in our trucking segment as total operating expenses, net of trucking fuel surcharge, as a percentage of revenue before trucking fuel surcharge. Operating ratio is defined in our Logistics segment as total operating expenses as a percentage of total revenue.

In the second quarter, the operating ratio of our trucking segment
improved to 79.0% from 81.7% in the same quarter last year. In the
second quarter, operating income in our trucking segment improved 21.9%
while our revenue, excluding trucking fuel surcharge, grew 6.3%. We
continue to see positive results from our efforts to improve yield and
drive operational efficiencies. Our dedicated business has also
experienced meaningful revenue and earnings growth as we have seen an
increase in opportunities to expand our dedicated fleet over the last
several quarters. The used equipment market also remained strong and has
led to an improved gain on sale of revenue equipment. Although the
relationship between customer demand and industry wide supply of
available trucks was favorable to the truckload carriers, the industry
continues to be faced with multiple challenges that have led to higher
costs, including rising driver pay, increased regulation, additional
maintenance cost associated with the 2010 EPA emission engines, and
rising equipment cost. We continue to intensify our cost control efforts
in order to manage these inflationary pressures.

Our brokerage business increased revenue 64.1%, increased gross margin
69.5%, and increased operating income 53.1%, when compared to the same
quarter last year. Our brokerage business continues to show meaningful
growth as we continue to add additional headcount to enable us to source
more capacity and to offer more solutions to our customers. Our
intermodal business improved its operating ratio 470 basis points
sequentially from the first quarter of 2014 and has now returned to
operating profitably.

Developing and retaining high quality driving associates remains a
significant challenge to the industry. Despite a strong freight
environment, the current driver supply situation has been a headwind for
adding additional capacity. Our driver development and training programs
remain a primary focus area for our management team, and we feel well
positioned to continue to make progress in the coming quarters.

The DOE national average diesel fuel price increased 1.6% when compared
to the second quarter last year. Fuel remains a major cost focus for us
as we continue our work towards cost effective, industry leading fuel
economy while at the same time reducing the environmental impact of our
operations.

Our tractor fleet remains one of the most modern fleets in the industry
with an average age of 1.8 years. The used equipment market remained
strong during the quarter and resulted in gain on sale of revenue
equipment in the second quarter of 2014 of $4.6 million, compared to
$1.6 million in the second quarter of 2013.

We have returned $78.8 million to our shareholders in the form of
quarterly dividends over the two years ended June 30, 2014. We ended the
quarter with $15.4 million of long term debt, and $605.0 million of
shareholders’ equity. Our year-to-date 2014 net capital expenditures
were $61.3 million while our cash flow from operations was $77.9 million.

In the second quarter of 2014 Knight Transportation formed a new entity,
Kold Trans, LLC (Kold Trans). Kold Trans is a full truckload
temperature-controlled transportation company created to be attractive
to professional drivers while providing high quality consistent service
to our customers. We hired a former CEO of a large
temperature-controlled truckload transportation company to lead and grow
this business. Kold Trans will be marketed and operated separately from
our Knight Refrigerated business. Through Kold Trans, we plan to provide
additional refrigerated capacity to the market through a fleet of new
trucks as well as our network of third-party carriers through our
truckload brokerage.

Kevin Knight, Chairman and Chief Executive Officer, commented, ”We are
excited about the growth opportunities we have with the creation of Kold
Trans. We feel that the recent strength in the North American freight
market, the tightening capacity, and our experienced leadership team
will enable us to provide much needed capacity for our customers and
generate meaningful returns for our stakeholders.”

The company will hold a conference call on July 23, 2014, at 4:30 PM
EDT, to further discuss its results of operations for the quarter ended
June 30, 2014. The dial in number for this conference call is
1-855-733-9163. Slides to accompany this call will be posted on the
company’s website and will be available to download prior to the
scheduled conference time. To view the presentation, please visit http://investor.knighttrans.com/events,
”Second Quarter 2014 Conference Call Presentation.”

Knight Transportation, Inc. is a provider of multiple truckload
transportation and logistics services using a nationwide network of
service centers in the U.S. to serve customers throughout North America.
In addition to operating one of the country’s largest tractor fleets,
Knight also contracts with third-party equipment providers to provide a
broad range of truckload services to its customers while creating
quality driving jobs for our driving associates and successful business
opportunities for owner-operators.

INCOME STATEMENT DATA:				Three Months Ended June 30,											Six Months Ended June 30,
				(Unaudited, in thousands, except per share amounts)
				2014					2013						2014					2013
REVENUE:
Revenue, before fuel surcharge				$	218,908				$	200,104					$	424,504				$	389,704
Fuel surcharge					45,247					44,679						88,814					90,479
TOTAL REVENUE					264,155					244,783						513,318					480,183
OPERATING EXPENSES:
Salaries, wages and benefits					64,750					56,807						125,483					114,461
Fuel expense – gross					52,192					52,739						104,201					108,432
Operations and maintenance					17,156					15,919						34,176					31,828
Insurance and claims					7,462					7,295						14,885					14,450
Operating taxes and licenses					3,861					3,985						7,926					7,893
Communications					1,178					1,200						2,457					2,372
Depreciation and amortization					21,951					21,089						43,738					42,597
Purchased transportation					56,319					49,883						108,288					92,675
Miscellaneous operating expenses					387					3,941						2,015					8,006
					225,256					212,858						443,169					422,714
Income From Operations					38,899					31,925						70,149					57,469
Interest income					109					96						222					205
Interest expense					(87	)				(77	)					(204	)				(219	)
Other income (expense)					2,591					(168	)					3,457					53
Income before income taxes					41,512					31,776						73,624					57,508
INCOME TAXES					15,496					12,712						28,276					23,010
Net Income					26,016					19,064						45,348					34,498
Net income attributable to noncontrolling interest					(255	)				(125	)					(524	)				(376	)
NET INCOME ATTRIBUTABLE TO KNIGHT TRANSPORTATION				$	25,761				$	18,939					$	44,824				$	34,122
Basic Earnings Per Share				$	0.32				$	0.24					$	0.56				$	0.43
Diluted Earnings Per Share				$	0.31				$	0.24					$	0.55				$	0.43
Weighted Average Shares Outstanding – Basic					80,864					79,954						80,684					79,898
Weighted Average Shares Outstanding – Diluted					81,835					80,296						81,596					80,209
BALANCE SHEET DATA:
															06/30/14					12/31/13
ASSETS															(Unaudited, in thousands)
Cash and cash equivalents															$	103				$	992
Trade receivables, net of allowance for doubtful accounts																121,903					116,391
Notes receivable, net of allowance for doubtful accounts																775					774
Related party notes and interest receivable																0					748
Prepaid expenses																13,750					15,026
Assets held for sale																10,500					16,476
Other current assets																11,611					11,066
Current deferred tax assets																3,942					3,359
Total Current Assets																162,584					164,832
Property and equipment, net																621,367					591,791
Notes receivable, long-term																3,991					4,047
Goodwill																10,247					10,257
Other assets and restricted cash																40,593					36,194
Total Long-term Assets																676,198					642,289
Total Assets															$	838,782				$	807,121
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable															$	19,394				$	14,354
Accrued payroll and purchased transportation																17,156					13,864
Accrued liabilities																18,140					19,062
Claims accrual – current portion																16,888					15,616
Dividend payable – current portion																181					168
Total Current Liabilities																71,759					63,064
Claims accrual – long-term portion																9,668					8,889
Long-term dividend payable and other liabilities																2,407					2,486
Deferred tax liabilities																133,472					140,149
Long-term debt																15,362					38,000
Total Long-term Liabilities																160,909					189,524
Total Liabilities																232,668					252,588
Common stock																810					802
Additional paid-in capital																164,485					150,858
Accumulated other comprehensive income																8,118					4,582
Retained earnings																431,573					397,346
Total Knight Transportation Shareholders’ Equity																604,986					553,588
Noncontrolling interest																1,128					945
Total Shareholders’ Equity																606,114					554,533
Total Liabilities and Shareholders’ Equity															$	838,782				$	807,121

				Three Months Ended June 30,										Six Months Ended June 30,
				2014			2013							2014			2013
				(Unaudited)										(Unaudited)
OPERATING STATISTICS										%										%
										Change										Change
Average Revenue Per Tractor*				$42,938			$40,523			6.0%				$83,546			$79,069			5.7%
Non-paid Empty Mile Percent				9.4%			10.8%			-13.0%				9.5%			10.9%			-12.8%
Average Length of Haul				497			482			3.1%				499			481			3.7%
Operating Ratio**				82.2%			84.0%							83.5%			85.3%
Average Tractors – Total				3,983			3,963							3,984			4,020
Average Trailers – Total				9,046			9,393							9,054			9,439
Net Capital Expenditures (in thousands)				$55,632			$19,580							$61,358			$17,822
Cash Flow From Operations (in thousands)				$41,365			$31,935							$77,852			$72,257
* Includes asset segment revenue excluding 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. 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 and Exchange Commission. We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

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