SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Commission File No. 0-24946
KNIGHT TRANSPORTATION, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0649974
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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.
Yes X No
----------- -----------
The number of shares outstanding of registrant's Common Stock, par value $0.01
per share, as of November 12, 1997 was 9,946,615 shares.
<PAGE>
KNIGHT TRANSPORTATION, INC.
INDEX
PART I - FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997 and 1
December 31, 1996
Consolidated Statements of Income for the Three Months 3
and Nine Months Ended September 30, 1997 and
September 30, 1996
Consolidated Statements of Cash Flows for the Nine Months 4
Ended September 30, 1997 and September 30, 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition 6
and Results of Operations
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 10
Item 3 Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6 Exhibits and Reports on Form 8-K 10
Signatures 11
Index to Exhibits 13
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
as of September 30, 1997 and December 31, 1996
September 30, 1997 December 31, 1996
------------------ -----------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 94,482 $ 1,244,745
Accounts receivable, net 11,403,122 10,414,133
Inventories and supplies 561,059 328,825
Prepaid expenses 1,303,245 509,085
Deferred tax asset 1,570,100 1,319,400
------------ ------------
Total current assets 14,932,008 13,816,188
------------ ------------
PROPERTY AND EQUIPMENT:
Land and improvements 4,297,837 4,297,837
Buildings and improvements 970,963 970,963
Furniture and fixtures 2,037,339 1,837,844
Shop and service equipment 998,178 859,592
Revenue equipment 69,390,483 55,172,272
Leasehold improvements 668,179 575,015
------------ ------------
78,362,979 63,713,523
Less: Accumulated depreciation (17,625,697) (14,186,781)
------------ ------------
PROPERTY AND EQUIPMENT, net 60,737,282 49,526,742
OTHER ASSETS 1,299,109 775,526
------------ ------------
$ 76,968,399 $ 64,118,456
============ ============
The accompanying notes are an integral part of these consolidated balance
sheets.
1
<PAGE>
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
as of September 30, 1997 and December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY September 30, 1997 December 31, 1996
------------------ -----------------
CURRENT LIABILITIES:
Accounts payable $ 4,143,071 $ 3,954,286
Accrued liabilities 3,115,714 2,286,099
Claims accrual 3,361,805 3,040,672
Current portion of long-term debt 60,625 394,191
Line of credit 1,500,000 --
----------- -----------
Total current liabilities 12,181,215 9,675,248
LONG TERM DEBT, less current portion -- 53,491
DEFERRED INCOME TAXES 11,231,620 8,426,558
----------- -----------
Total liabilities 23,412,835 18,155,297
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value;
authorized 50,000,000 shares,
none issued and outstanding -- --
Common Stock, $0.01 par value;
authorized 100,000,000 shares; issued
and outstanding 9,919,896 and 9,904,500
shares respectively 99,199 99,045
Additional paid-in capital 23,681,301 23,474,531
Retained earnings 29,775,064 22,389,583
----------- -----------
Total shareholders' equity 53,555,564 45,963,159
----------- -----------
$76,968,399 $64,118,456
=========== ===========
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUE $ 25,682,179 $ 20,331,352 $ 71,245,395 $ 55,881,971
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Salaries, wages and benefits 7,138,729 5,800,110 19,803,606 15,889,720
Fuel 2,586,702 2,124,898 7,268,926 5,876,038
Operations and maintenance 1,551,171 1,059,920 3,987,488 2,808,272
Insurance and claims 573,281 689,975 1,771,962 2,100,056
Operating taxes and licenses 1,041,106 769,019 2,919,419 2,127,926
Communications 152,522 132,836 409,117 367,616
Depreciation and amortization 2,430,082 1,986,244 6,822,965 5,403,368
Purchased transportation 5,015,100 3,874,059 14,040,383 10,411,172
Miscellaneous operating expenses 552,916 515,425 1,654,876 1,428,531
------------ ------------ ------------ ------------
21,041,609 16,952,486 58,678,742 46,412,699
------------ ------------ ------------ ------------
Income from operations 4,640,570 3,378,866 12,566,653 9,469,272
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 2,937 30,314 48,116 33,989
Interest expense (17,781) (113,260) (39,288) (384,641)
Income before taxes 4,625,726 3,295,920 12,575,481 9,118,620
INCOME TAXES (1,910,000) (1,350,000) (5,190,000) (3,784,000)
------------ ------------ ------------ ------------
Net Income $ 2,715,726 $ 1,945,920 $ 7,385,481 $ 5,334,620
============ ============ ============ ============
Net income per common share and common share
equivalent: Primary $ 0.27 $ 0.20 $ 0.73 $ 0.57
============ ============ ============ ============
Fully diluted $ 0.27 $ 0.20 $ 0.73 $ 0.56
============ ============ ============ ============
Weighted average number of common share
and common share equivalents outstanding:
Primary 10,107,725 9,892,956 10,089,113 9,429,034
============ ============ ============ ============
Fully diluted 10,128,815 9,915,879 10,127,936 9,447,436
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended
September 30,
-----------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 7,385,481 $ 5,334,620
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,901,367 5,628,368
Allowance for doubtful accounts 95,245 (197,745)
Deferred income taxes 2,554,362 977,809
Changes in assets and liabilities:
Increase in receivables (1,084,234) (2,533,383)
Increase in inventories and supplies (232,234) 15,369
(Increase) decrease in prepaid expenses (794,160) 901,484
Increase in other assets (549,378) (519,462)
Increase in accounts payable 970,567 (320,943)
Increase in accrued liabilities and
claims accrual 1,150,748 1,194,121
------------ ------------
Net cash provided by operating
activities 16,397,764 10,480,238
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (15,938,094) (18,540,705)
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
Nine Months Ended
September 30,
----------------------------
1997 1996
---- ----
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowing of debt 1,500,000 --
Payments of debt (387,057) (3,783,048)
Decrease in accounts payable - equipment (2,929,800) (1,927,726)
Proceeds from exercise of stock options 206,924 --
Proceeds from issuance of common stock -- 13,690,809
------------ ------------
Net cash provided by (used in)
financing activities (1,609,933) 7,980,035
------------ ------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (1,150,263) (80,432)
CASH AND CASH EQUIVALENTS,
beginning of period 1,244,745 623,656
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 94,482 $ 543,224
============ ============
SUPPLEMENTAL DISCLOSURES:
Noncash investing and financing transactions:
Equipment acquired by
accounts payable $ 2,148,018 $ 894,836
Insurance premium financed -- 1,101,200
Cash Flow Information:
Income taxes paid $ 2,984,637 $ 2,454,144
Interest paid 40,926 392,173
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
KNIGHT TRANSPORTATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Financial Information
The accompanying consolidated financial statements include the parent company
Knight Transportation, Inc., and its wholly owned subsidiaries, Quad-K Leasing,
Inc.; KTTE Holdings, Inc., QKTE Holdings, Inc., and Knight Dedicated Services
Limited Partnership which is comprised of KTTE Holdings, Inc. as general partner
and QKTE Holdings, Inc. as sole limited partner (hereinafter collectively called
the "Company"). All material intercompany items and transactions have been
eliminated in consolidation.
The consolidated financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
The statements presented do not include all information and footnotes required
to be in conformity with generally accepted accounting principles for complete
financial statements. In the opinion of management, 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 consolidated financial statements
and notes thereto should be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the year ended December 31, 1996. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities as well as disclosure of
contingent assets and liabilities at the date of the accompanying consolidated
financial statements, and the reported amounts of the revenues and expenses
during the reporting periods. Actual results could differ from those estimates.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
The operating revenue of the Company for the nine months ended September 30,
1997, increased by 27.4% to $71.2 million from $55.9 million over the same
period in 1996. For the three months ended September 30, 1997, operating revenue
increased by 26.6% to $25.7 million from $20.3 million over the same period in
1996. The increase in operating revenue resulted from expansion of the Company's
customer base and increased volume from existing customers, and was facilitated
by the continued expansion of the Company's fleet, including an increase in the
Company's independent contractor fleet. The Company's fleet increased by 36.3%
to 732 tractors (including 191 owned by independent contractors) as of September
30, 1997, from 537 tractors (including 147 owned by independent contractors) as
of September 30, 1996. Despite increases in revenue, the Company's revenue per
mile declined to $1.21 per mile for the nine months ended September 30, 1997,
from $1.24 per mile for the same period in 1996 due to competitive conditions in
the transportation industry.
6
<PAGE>
Salaries, wages and benefits decreased as a percentage of operating revenue to
27.8% for the nine months ended September 30, 1997, from 28.4% for the same
period in 1996. For the three months ended September 30, 1997, salaries, wages
and benefits decreased to 27.8% from 28.5% for the same period in 1996. These
decreases were primarily the result of the increase in the ratio of tractors to
non-driving employees.
Fuel expense decreased as a percentage of operating revenue to 10.2% for the
nine months ended September 30, 1997, from 10.5% for the same period in 1996.
For the three months ended September 30, 1997, fuel expenses as a percentage of
revenue decreased to 10.1% from 10.5% for the same period in 1996. These
decreases were the result of lower fuel costs and an increase in the Company
fleet's miles per gallon.
Operations and maintenance expense increased as a percentage of operating
revenue to 5.6% for the nine months ended September 30, 1997, from 5.0% for the
corresponding period in 1996. For the three months ended September 30, 1997,
operation and maintenance expense as a percentage of revenue increased to 6.0%
from 5.2% for the same period in 1996. These increases were the result of
slightly higher maintenance costs related to the age of the Company's fleet and
as a result of the decrease in the revenue per mile.
Insurance and claims expense decreased as a percentage of operating revenue to
2.5% for the nine months ended September 30, 1997, from 3.8% for the same period
in 1996. For the three months ended September 30, 1997, insurance and claims
expense decreased to 2.2% from 3.4% for the same period in 1996. These decreases
were due to a reduction in insurance premium costs and a reduced amount of
claims incurred during the period.
Operating taxes and licenses increased as a percentage of revenue to 4.1% for
the nine months ended September 30, 1997, from 3.8% for the same period in 1996.
For the three months ended September 30, 1997, operating taxes and licenses
increased to 4.0% from 3.8% for the same period in 1996. These increases were
due to higher trailer licensing costs in the state of California and as a result
of the decrease in the revenue per mile.
Communications and miscellaneous operating expenses as a percentage of revenues
for both the nine months and three months ended September 30, 1997, were
slightly lower than for the same periods in 1996.
Depreciation and amortization expense decreased as a percentage of revenue to
9.6% for the nine month periods ended September 30, 1997, from 9.7% for the same
period in 1996. For the three months ended September 30, 1997, depreciation and
amortization expense decreased as a percentage of operating revenue to 9.5% from
9.8% for the same period in 1996. These decreases were due to increased
utilization during the period of the Company's fixed overhead.
Purchased transportation increased as a percentage of operating revenue to 19.7%
for the nine months ended September 30, 1997, from 18.6% for the same period in
1996. For the three months ended September 30, 1997, purchased transportation
increased to 19.5% from 19.1% for the same period in 1996. These increases were
due to the reduction in revenue per mile. Independent contractors are
compensated on a mileage basis.
7
<PAGE>
As a result of the above, the Company's operating ratio (operating expenses as a
percentage of operating revenue) for the nine months ended September 30, 1997,
decreased to 82.4% from 83.1% for the same period in 1996. The Company's
operating ratio for the three months ended September 30, 1997, decreased to
81.9% from 83.4% for the same period in 1996.
For both the nine months and three months ended September 30, 1997, net other
income (expense) decreased as a percentage of revenue compared to the same
periods in 1996. These decreases were primarily the result of the application of
proceeds from the Company's secondary stock offering in July 1996 to reduce
debt.
Income taxes have been provided at the statutory federal and state rates,
adjusted for certain permanent differences between financial statement and
income tax reporting.
As a result of the preceding changes, the Company's net income as a percentage
of operating revenue was 10.4% for the nine months ended September 30, 1997,
compared to 9.5% for the same period in 1996 and 10.6% for the three months
ended September 30, 1997, compared to 9.6% for the same period in 1996.
Liquidity and Capital Resources
The growth of the Company's business has required a significant investment in
new revenue equipment. The Company's primary source of liquidity has been funds
provided by operations and the Company's line of credit. Net cash provided by
operating activities was approximately $16.4 million for the first nine months
of 1997, compared to $10.5 million for the corresponding period in 1996.
Capital expenditures for the purchase of revenue equipment, net of trade-ins,
office equipment and leasehold improvements totaled $18.1 million for the first
nine months of 1997 compared to $19.4 million for the same period in 1996.
Net cash used in financing activities and direct financing was approximately
$1.6 million for the first nine months of 1997 compared to net cash provided by
financing activities of $8.0 million for the same period in 1996. Net cash used
in financing activities during the first nine months of 1997 resulted from the
Company funding the expansion of its equipment fleet from internally generated
funds rather than using external financing as the Company did for the same
period in 1996.
The Company has a $10 million line of credit from its lender and uses that line
to finance the acquisition of revenue equipment and other corporate purposes to
the extent the cost of such acquisitions are not provided by funds from
operations. Under the Company's line of credit, the Company is obligated to
comply with certain financial covenants. The rate of interest on borrowings
against the line of credit will vary depending upon the interest rate elected by
the Company; the Company may elect a rate based on London Interbank Offered Rate
(LIBOR) or the prime rate. At September 30, 1997, the Company had $1.5 million
borrowed under the revolving line of credit.
Management believes the Company has adequate liquidity to meet its current
needs. The Company will continue to have significant capital requirements over
the long term, which may require the Company to incur debt or seek additional
equity capital. The availability of this capital will depend upon prevailing
8
<PAGE>
market conditions, the market price of the Company's common stock and other
factors over which the Company has no control, as well as the Company's
financial condition and results of operations.
Seasonality
To date, the Company's revenues have not shown any significant seasonal pattern.
Because the Company has operated primarily in Arizona, California and the
western United States, winter weather has not adversely affected the Company's
business. Expansion of the Company's operations into Texas and Louisiana, as
well as in the Midwest and on the East Coast, could expose the Company to
greater operating variances due to seasonal weather.
Inflation
Many of the Company's operating expenses, including fuel costs and fuel taxes,
are sensitive to the effects of inflation, which could result in higher
operating costs. The effects of inflation on the Company's business during the
nine months ended September 30, 1997, were not significant.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 128, (SFAS No. 128) Earnings Per Share. The standard is
effective for fiscal year ended December 31, 1997. When adopted, SFAS No. 128
will require restatement of prior years' earnings per share. Pro forma SFAS No.
128 earnings per share are as follows:
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
Basic EPS .27 .20 .74 .57
Diluted EPS .27 .20 .73 .57
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is party to ordinary, routine litigation and administrative
proceedings incidental to its business. These proceedings primarily involving
personnel matters, including EEOC claims, and claims for personal injury or
property damage incurred in the transportation of freight. The Company maintains
insurance to cover liabilities arising from the transportation of freight in
amounts in excess of self-insured retentions. It is the Company's policy to
comply with applicable equal employment opportunity laws and the Company
periodically reviews its policies and practices for equal employment opportunity
compliance.
9
<PAGE>
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
No. Description
--- -----------
Exhibit 4 Instruments defining the rights of security
holders, including indentures
(a) Articles 4, 10 and 11 of the Restated Articles
of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.1 to the Company's
Report on Form 10-K for the fiscal year ended
December 31, 1994.)
(b) Sections 2 and 5 of the Amended and Restated
By-laws of the Company. (Incorporated by
reference to Exhibit 3.2 to the Company's
Report on Form 10-K for the fiscal year ended
December 31, 1995.)
Exhibit 10.4.1 Modification agreement by Wells Fargo Bank,
N.A., as successor by merger to First
Interstate Bank, N.A., and Knight
Transportation, Inc., and Quad K Leasing, Inc.
Exhibit 11 Schedule of Computation of Net Income Per
Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three
month period ended September 30, 1997.
10
<PAGE>
Signatures
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.
KNIGHT TRANSPORTATION, INC.
Date: November 12, 1997 By: /s/ Kevin P. Knight
---------------------------------------
Kevin P. Knight
Chief Executive Officer
Date: November 12, 1997 By: /s/ Clark Jenkins
---------------------------------------
Clark Jenkins
Chief Financial Officer and
Principal Financial Officer
11
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File No. 0-24946
12
<PAGE>
KNIGHT TRANSPORTATION, INC.
INDEX TO EXHIBITS TO FORM 10-Q
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Pages(1)
- ---------- ----------- -----------------
<S> <C>
Exhibit 4 Instruments defining the rights of security
holders, including indentures
(a) Articles 4, 10 and 11 of the Restated Articles
of Incorporation of the Company. (Incorporated
by reference to Exhibit 3.1 to the Company's
Report on Form 10-K for the fiscal year ended
December 31, 1994.)
(b) Sections 2 and 5 of the Amended and Restated
By-laws of the Company. (Incorporated by
reference to Exhibit 3.2 to the Company's
Report on Form 10-K for the fiscal year ended
December 31, 1995.)
Exhibit 10.4.1 Modification agreement by Wells Fargo Bank,
N.A., as successor by merger to First
Interstate Bank, N.A., and Knight
Transportation, Inc., and Quad K Leasing, Inc.
Exhibit 11 Schedule of Computation of Net Income Per
Share
Exhibit 27 Financial Data Schedule
</TABLE>
(1) The page numbers where exhibits (other than those incorporated by reference)
may be found are indicated only on the manually signed report.
13
MODIFICATION AGREEMENT
BY THIS MODIFICATION AGREEMENT (the "Agreement"), made and entered into as
of the 15th day of May, 1997, WELLS FARGO BANK, N.A., as successor by merger to
FIRST INTERSTATE BANK OF ARIZONA, N.A. (hereinafter called "Lender"), and KNIGHT
TRANSPORTATION, INC., an Arizona corporation (hereinafter called "Company") and
QUAD K LEASING, INC., an Arizona corporation (with the Company, the "Borrower"),
a wholly owned subsidiary of the Company, in consideration of the mutual
convenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, hereby confirm and
agree as follows:
SECTION 1. RECITALS.
1.1 Borrower and Lender entered into a Loan Agreement dated April 1, 1996
(the "Loan Agreement"), which provided for, among other things, a revolving line
of credit (the "RLC") in the amount of $15,000,000.00, evidenced by a Revolving
Promissory Note dated April 1, 1996 executed by the Borrower (the "RLC Note"),
all upon the terms and conditions contained therein. All undefined capitalized
terms used herein shall have the meaning given them in the Loan Agreement. The
Loan Agreement, the RLC Note and all other agreements, documents and instruments
relating to the RLC are referred to as the Loan Documents.
1.2 As of the date hereof, prior to the effect of the modifications
contained herein, the outstanding principal balance of the RLC is $0.
1.3 Borrower and Lender desire to modify the Loan Documents as set forth
herein.
SECTION 2. LOAN AGREEMENT.
2.1 The following definitions in Section 2.1 of the Loan Agreement are
hereby amended to read as follows:
"LIBOR Rate" means:
(a) As to a LIBOR Rate RLC Advance, an interest rate per annum equal
to sixty-two and one-half basis points (62.5 b.p.) in excess of the LIBOR
Base Rate, rounded upward, if necessary, to the nearest 1/16 of 1%, or
(b) As to a LIBOR Rate Term Loan, an interest rate per annum equal to
seventy-five basis points (75.0 b.p.) in excess of the LIBOR Base Rate,
rounded upward, if necessary, to the nearest 1/16 of 1%.
"RLC Commitment Amount" means $10,000,000.00.
Exhibit 10.4.1
<PAGE>
"RLC Maturity Date" means May 15, 1998.
"RLC Unused Fee" means one-sixteenth of one percent (1/16%).
2.2 The RLC Note is hereby amended to evidence the decreased loan amount
from $15,000,000.00 to an amount equal to the RLC Commitment Amount as hereby
amended.
SECTION 3. OTHER MODIFICATIONS, RATIFICATIONS AND AGREEMENTS.
3.1 All references to the Loan Agreement in the Loan Documents are hereby
amended to refer to the Loan Agreement as hereby amended.
3.2 Borrower acknowledges that the indebtedness evidenced by the RLC Note
is just and owing, that the balance thereof is correctly shown in the records of
Lender as of the date hereof, and Borrower agrees to pay the indebtedness
evidenced by the RLC Note according to the terms thereof, as herein modified.
3.3 Borrower hereby reaffirms to Lender each of the representations,
warranties, covenants and agreements of Borrower set forth in the RLC Note and
the Loan Agreement, with the same force and effect as if each were separately
stated herein and made as of the date hereof.
3.4 Borrower hereby ratifies, reaffirms, acknowledges, and agrees that the
RLC Note and the Loan Agreement, represent valid, enforceable and collectible
obligations of Borrower, and that there are no existing claims, defenses,
personal or otherwise, or rights of setoff whatsoever with respect to any of
these documents or instruments. In addition, Borrower hereby expressly waives,
releases and absolutely and forever discharges Lender and its present and former
shareholders, directors, officers, employees and agents, and their separate and
respective heirs, personal representatives, successors and assigns, from any and
all liabilities, claims, demands, damages, action and causes of action, whether
known or unknown and whether contingent or matured, that Borrower may now have,
or has had prior to the date hereof, or that may hereafter arise with respect to
acts, omissions or events occurring prior to the date hereof and, without
limiting the generality of the foregoing, from any and all liabilities, claims,
demands, damages, actions and causes of action, known or unknown, contingent or
matured, arising out of, or in any way connected with, the RLC. Borrower further
acknowledges and represents that no event has occurred and no condition exists
that, after notice or lapse of time, or both, would constitute a default under
this Agreement, the RLC Note or the Loan Agreement.
3.5 All terms, conditions and provisions of the RLC Note and the Loan
Agreement are continued in full force and effect and shall remain unaffected and
unchanged except as specifically amended hereby. The RLC Note and the Loan
Agreement, as amended hereby, are hereby ratified and reaffirmed by Borrower,
and Borrower specifically acknowledges the validity and enforceability thereof.
-2-
<PAGE>
SECTION 4. GENERAL.
4.1 This Agreement in no way acts as a release or relinquishment of those
rights securing payment of the RLC. Such rights are hereby ratified, confirmed,
renewed and extended by Borrower in all respects.
4.2 The modifications contained herein shall not be binding upon Lender
until Lender shall have received all of the following:
(a) An original of this Agreement fully executed by the Borrower.
(b) Such resolutions or authorizations and such other documents as
lender may require relating to the existence and good standing of the
Borrower and the authority of any person executing this Agreement or other
documents on behalf of the Borrower.
4.3 Borrower shall execute and deliver such additional documents and do
such other acts as Lender may reasonably require to fully implement the intent
of this Agreement.
4.4 Borrower shall pay all costs and expenses, including, but not limited
to, reasonable attorneys' fees incurred by Lender in connection herewith,
whether or not all of the conditions described in Paragraph 4.2 above are
satisfied. Lender, at its option, but without any obligation to do so, may
advance funds to pay any such costs and expenses that are the obligation of the
Borrower, and all such funds advanced shall bear interest at the highest rate
provided in the RLC Note and shall be due and payable upon demand.
4.5 Notwithstanding anything to the contrary contained herein or in any
other instrument executed by Borrower or Lender, or in any other action or
conduct undertaken by Borrower or Lender on or before the date hereof, the
agreements, covenants and provisions contained herein shall constitute the only
evidence of Lender's consent to modify the terms and provisions of the Loan
Agreement. Accordingly, no express or implied consent to any further
modifications involving any of the matters set forth in this agreement or
otherwise shall be inferred or implied by Lender's execution of this Agreement.
Further, Lender's execution of this Agreement shall not constitute a waiver
(either express of implied) of the requirement that any further modification of
the RLC or of the RLC Note or the Loan Agreement, shall require the express
written approval of Lender; no such approval (either express or implied) has
been given as of the date hereof.
4.6 Time is hereby declared to be of the essence hereof of the RLC, of the
RLC Note and of the Loan Agreement, and Lender requires, and Borrower agrees to,
strict performance of each and every covenant, condition, provision and
agreement hereof, of the RLC Note and the Loan Agreement.
-3-
<PAGE>
4.7 This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their heirs, personal representatives, successors and
assigns.
4.8 This Agreement is made for the sole protection and benefit of the
parties hereto, and no other person or entity shall have any right of action
hereon.
4.9 This Agreement shall be governed by and construed according to the laws
of the State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
KNIGHT TRANSPORATION, INC., an Arizona
corporation
By: /s/ Randy Knight
------------------------------------
Name: Randy Knight
------------------------------------
Its: Chairman
------------------------------------
QUAD K LEASING, INC., an Arizona
corporation
By: /s/ Kevin P Knight
------------------------------------
Name: Kevin P. Knight
------------------------------------
Its: President
------------------------------------
BORROWER
WELLS FARGO BANK, N.A., as successor by
merger to FIRST INTERSTATE BANK OF
ARIZONA, N.A.
By:
------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
LENDER
-4-
KNIGHT TRANSPORTATION, INC.
AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common shares outstanding
beginning of period 9,919,500 9,102,000 9,904,500 9,102,000
Common share equivalents:
Employee stock options
outstanding & canceled (1)
Primary 187,829 130,086 179,095 105,136
Fully diluted 208,919 153,009 217,918 153,538
Employee stock options
exercised (1)
Primary
Fully diluted -- -- 5,385 --
-- -- 5,385 --
---------- ---------- ---------- ----------
Issuance of 800,000 shares of
Common Stock (2)
Primary -- 660,870 -- 221,898
Fully diluted -- 660,870 -- 221,898
Issuance of shares of common
stock (3)
Primary 396 -- 133 --
Fully diluted 396 -- 133 --
The weighted average number of
common share and common
share equivalents outstanding
Primary 10,107,725 9,892,956 10,089,113 9,429,034
========== ========== ========== ==========
Fully diluted 10,128,815 9,915,879 10,127,936 9,477,436
========== ========== ========== ==========
Net Income 2,715,726 1,945,920 7,385,481 5,334,620
Net income per common share and
common share equivalent
Primary $ .27 $ .20 $ .73 $ .57
========== ========== ========== ==========
Fully diluted $ .27 $ .20 $ .73 $ .56
========== ========== ========== ==========
</TABLE>
Notes: (1) Amount calculated using the treasury stock method
(2) Incremental weighted outstanding shares from 7/18/96 to the end
of the period
(3) Incremental weighted outstanding shares for shares issued to
independent directors from 7/1/97 to the end of the period
EXHIBIT 11
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Company's
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 94,482
<SECURITIES> 0
<RECEIVABLES> 11,816,445
<ALLOWANCES> 413,323
<INVENTORY> 561,059
<CURRENT-ASSETS> 14,932,008
<PP&E> 78,362,979
<DEPRECIATION> (17,625,697)
<TOTAL-ASSETS> 76,968,399
<CURRENT-LIABILITIES> 12,181,215
<BONDS> 0
0
0
<COMMON> 99,199
<OTHER-SE> 53,456,365
<TOTAL-LIABILITY-AND-EQUITY> 76,968,399
<SALES> 0
<TOTAL-REVENUES> 71,245,395
<CGS> 0
<TOTAL-COSTS> 58,678,742
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,828
<INCOME-PRETAX> 12,575,481
<INCOME-TAX> 5,190,000
<INCOME-CONTINUING> 7,385,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,385,481
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>
