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Knight Transportation, Inc. Business Information, Profile, and History

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5601 West Buckeye Road
Phoenix, Arizona 85043
U.S.A.

Company Perspectives:

Our operating strategy is to achieve a high level of asset utilization within a highly disciplined operating system while maintaining strict controls over our cost structure. To achieve these goals, we operate primarily in high-density, predictable traffic lanes in select geographic regions, and attempt to develop and expand our customer base around each of our terminal facilities. This operating strategy allows us to take advantage of the large amount of freight traffic transported in regional markets, realize the operating efficiencies associated with regional hauls, and offer more flexible service to our customers than rail, intermodal, and smaller regional competitors. In addition, shorter hauls provide an attractive alternative to drivers in the truckload sector by reducing the amount of time spent away from home. We believe this improves driver retention, decreases recruitment and training costs, and reduces insurance claims and other costs. We operate a modern fleet to accelerate revenue growth and enhance our operating efficiencies. We employ technology in a cost-effective manner where it assists us in controlling operating costs and enhancing revenue. Our goal is to increase our market presence significantly, both in existing operating regions and in other areas where we believe the freight environment meets our operating strategy, while seeking to achieve industry-leading operating margins and returns on investment.

History of Knight Transportation, Inc.

Knight Transportation, Inc., is a trucking company focused on short-to-medium lengths of transporting freight. The average length of a Knight Transportation haul is 532 miles. The company operates regional terminals that serve as hubs for freight routes within 750 miles of the facility. The company maintains terminals in Phoenix, Arizona; Salt Lake City, Utah; Portland, Oregon; Denver, Colorado; Kansas City, Kansas; Katy, Texas; Indianapolis, Indiana; Charlotte, North Carolina; Gulfport, Mississippi; Memphis, Tennessee; Atlanta, Georgia; and Las Vegas, Nevada. The company hauls general commodities, including consumer goods, packaged foods, paper products, and beverage containers, as well as import and export products. Knight Transportation is praised for the loyalty of its drivers and its efficient operation. The company ranks as one of the fastest growing companies in its industry.

Origins

Knight Transportation, from its conception to its widely hailed success as one of the fastest-growing corporations in the United States, was led, and majority-owned, by four members of the Knight family. The central figures in the family-run business that drew excited praise from the business press were brothers Randy Knight and Gary Knight and their cousins, also brothers, Keith Knight and Kevin Knight. The four Knights cemented their kinship early in their lives, choosing the same profession and the same employer. After completing high school, Randy, Gary, Keith, and Kevin joined a trucking company named Swift Transportation Co., a firm that factored as a major player in the industry during Knight Transportation's celebrated rise.

All of the four Knight family members were groomed as future executives of Swift Transportation, a company managed by the Moyes family. Randy Knight, who figured as the impetus for Knight Transportation's formation, rose to the rank of vice-president at Swift Transportation, spending 16 years at the company before leaving in 1985. Randy Knight's departure was prompted by his perception that his professional progression at Swift Transportation was limited. He was not a member of the Moyes family, which, according to his thinking, barred his advancement beyond the position of vice-president. Randy Knight left Swift Transportation in 1985 and started a company named Total Warehousing Inc., but his entrepreneurial talents would find their greatest expression with the formation of Knight Transportation. Randy Knight was forced to wait for his destiny, however. The eldest member of the founding Knight Transportation contingent, Randy Knight was bound by a five-year noncompete agreement he signed with Swift Transportation. When he left in 1985, the clock started ticking toward the end of his noncompete agreement, when he was legally able to start his own trucking enterprise.

Randy Knight acted as swiftly as he could after he left the Moyes-run company. He incorporated Knight Transportation in 1989, an event that served as a prelude to the actual operation of the company as a commercial enterprise. With him at the inception of the company were Gary Knight, appointed Knight Transportation's president, Kevin Knight, named chief executive officer, and Keith Knight, an executive vice-president who managed the company's sales operation in Los Angeles. Each of the four Knights contributed $50,000 to get the company up and running, an investment that was coupled with a $10 million line of credit from Mercedes-Benz of North America. On July 19, 1990, Knight Transportation officially became operational, hauling its first three loads from Phoenix, Arizona, to Los Angeles and back. By the end of its first week in business, Knight Transportation had hauled 15 loads.

Combined, the four Knight family members had more than 80 years of experience in the trucking industry when they started Knight Transportation. They intended to use their experience to make the company one of the major competitors in the industry. The Knights cast their company as a regional trucking concern focused on offering short- to medium-length hauls, the largest segment of the trucking market; approximately 75 percent of all truckload freight moved less than 500 miles. To succeed, the Knights emphasized fostering driver loyalty and they placed a premium on the efficient execution of coordinating the movement of their customers' freight. Every trucking operator claimed to strive for efficient operation, but the Knights made good on their claim, excelling at managing the movement of freight. "Face it," an analyst remarked in a March 26, 2001 interview with Investor's Business Daily, "these are asset-intensive businesses, so the key to success or failure is asset utilization. Knight [Transportation] doesn't let a tractor sit under a trailer to be loaded or unloaded for any period of time."

The four Knight family members gradually expanded their business during the early 1990s. The company was able to recruit drivers by paying them well and by offering what few other trucking employers offered their drivers: frequent opportunities to spend time with family. Thanks to the company's ability to neatly choreograph the complex web of routes that sustained its operations, its drivers typically spent three nights a week at home, while drivers for other short-haul trucking concerns typically spent two nights a week at home or less. (The industry average for all types of trucking firms was one night every two to three weeks.) Drivers were eager to work for the family-owned and -managed firm, enabling the company to record impressive financial growth during its first years in operation. In 1991, its first full year in operation, Knight Transportation generated $13.4 million in revenue. Within the next two years, Knight Transportation's sales volume nearly doubled, reaching $26.4 million in 1993, when the company's fleet consisted of more than 200 trucks.

Expansion After 1994 Public Offering

The company's success during its first three years in operation was based on its development of markets in Arizona and California. The Knight family's objective from the outset, however, was to make Knight Transportation one of the leading companies in the industry, a goal to be achieved only if the company expanded beyond its core markets. To facilitate the company's maturation into a national force, the Knights took the company public in 1994, filing with Securities and Exchange Commission for a $22 million initial public offering (IPO) of stock. The company completed its IPO in October 1994, enabling it to develop ambitious expansion plans. Looking ahead, Randy Knight wanted to expand into Nevada, Utah, Colorado, New Mexico, Texas, and the Pacific Northwest. To support this geographic march, he placed orders in 1994 to increase the size of the company's fleet by 40 percent, including the purchase of 83 tractors and 225 trailers by the end of 1995.

Aside from the financial advantages of becoming a publicly traded company, Knight Transportation also strengthened its bond with its drivers through the IPO. The company initiated a stock-option program concurrent with its conversion to public ownership, which made Knight Transportation one of only two trucking companies in the country to offer its drivers stock options. The allegiance of the company's drivers, which had been remarkably strong before the implementation of the program, became legendary throughout the industry after stock options were granted as perquisites for driving a Knight Transportation truck. The loyalty of the company's drivers had a salubrious effect on all aspects of the company's operations, figuring as one of the chief reasons the company earned praise from critics and peers. In 1996, Forbes magazine placed Knight Transportation on its annual list of the "200 Best Small Companies in the United States." Typically, annual driver turnover in the trucking industry neared 100 percent, but at Knight Transportation the turnover rate averaged 50 percent. The company, by this point, ranked as the fastest growing and most profitable publicly traded trucking firm in the country. Between 1991 and 1996, the company's revenue increased at an annual compound rate of 43 percent, a growth rate eclipsed by its increases in profits. During the same five-year period, Knight Transportation's earnings grew at an annual compound rate of 61 percent.

The physical expansion aided by the company's IPO in late 1994 began to chart its progress as Forbes and other onlookers took note of its success. Knight Transportation's geographic reach was extended by establishing regional terminals that served as hubs to support the company's expanding fleet of trucks and trailers. In February 1996, the company opened a terminal in Katy, Texas, which was followed two months later by the establishment of a terminal in Indianapolis, Indiana, its first terminal east of the Mississippi River. By mid-1996, the company maintained a fleet of 500 trucks, more than twice the number in operation three years earlier. In addition to these vehicles, the company was supported by trucks owned by its drivers, who contracted with Knight Transportation as independent contractors. The company began contracting with owner-operators in 1994, when it initiated its independent contractor program. By the end of 1996, when sales totaled $77.5 million, the company relied on 158 trucks that were owned and operated by independent contractors.

The company's expansion in the late 1990s was fueled by opening additional regional terminals and by taking advantage of a new mode of expansion--acquiring other trucking companies. By pursuing both avenues of expansion, the company's financial stature swelled during the late 1990s and, particularly, in the first years of the 21st century. In 1998, after generating $99.4 million in revenue the previous year, Knight Transportation eclipsed a financial milestone, recording $125 million in revenue, the same year it eclipsed another milestone by employing more than 1,000 workers for the first time in its history. In 1999, the company set out to increase these totals substantially, initiating an expansion program that added new regional terminals and the assets of other trucking concerns to its fold. The company established a terminal in Charlotte, North Carolina, and a terminal in Salt Lake City, Utah. On the acquisition front, the company completed its first major deal, purchasing Action Delivery Service Inc. and its affiliated company, Action Warehouse Services Inc. Based in Corsicana, Texas, Action operated as a privately held carrier serving customers in Texas and the south-central United States. The company maintained a fleet of 50 tractors and 130 trailers, registering $5.6 million in revenue in 1998.

Knight Transportation pressed ahead with its growth plans as the company entered a new decade with a change in leadership. In July 1999, Randy Knight retired as chairman of the board. Kevin Knight took on the responsibilities of chairman while holding on to his post as chief executive officer. Under Kevin Knight's stewardship, the company struck again on the acquisition front in 2000, purchasing the trucking operation of Gulfport, Mississippi-based John Fayard Fast Freight Inc., which operated as Fastway Systems.

Rapid Growth in the 21st Century

During the first years of the 21st century, Knight Transportation focused on increasing its physical presence. The company opened a number of new terminals, transforming it into a genuine, national competitor. A new terminal in Kansas City, Kansas was opened in 2001, fleshing out the company's presence in the Midwest. For the seventh consecutive year, Forbes magazine selected Knight Transportation as one of the "200 Best Small Companies in the United States" in 2001, a year in which the company's trucks logged more than 240 million miles. In 2002, after recording 11 consecutive years of revenue growth ranging between 20 percent and 30 percent, Knight Transportation added two new terminals to its growing list of regional hubs. In March, the company entered the Pacific Northwest for the first time, establishing a terminal in Portland, Oregon. In July, Knight Transportation opened a terminal in Memphis, Tennessee.

As Knight Transportation neared its 15th anniversary, the company exuded enviable vitality. It ranked as the fastest growing trucking company in the nation, boasting an impressive record of financial growth. In 2003, the company posted $35.5 million in net income, nearly three times the total recorded five years earlier. Revenues, which stood at $125 million in 1998, had swelled to $340 million, making Knight Transportation, as its founders had envisioned, one of the industry's major competitors. As the company prepared for the future, there were few observers who doubted the ability of the Knight family to continue its record of success. To maintain its electric rate of growth, the company pressed forward with expansion, opening terminals in Atlanta, Georgia, and Denver, Colorado, in 2003. In February 2004, the company established a regional hub in Las Vegas, Nevada, with plans calling for the opening of two additional terminals by the end of the year. With a national network of regional terminals in place, Knight Transportation promised to figure prominently in the trucking industry's future.

Principal Subsidiaries: Knight Management Services, Inc.,; Knight Transportation South Central, L.P.; KTTE Holdings, Inc.; QKTE Holdings, Inc.; Quad K Leasing, Inc.

Principal Competitors: Heartland Express, Inc.; Schneider National, Inc.; Swift Transportation Co., Inc.

Chronology

  • Key Dates:
  • 1990: Knight Transportation hauls its first load of freight in July.
  • 1994: Knight Transportation completes its initial public offering of stock.
  • 1996: Knight Transportation opens new terminals in Katy, Texas, and Indianapolis, Indiana.
  • 1999: Action Delivery Service Inc. is acquired.
  • 2000: Knight Transportation purchases John Fayard Fast Freight Inc.
  • 2001: A new terminal in Kansas City, Kansas, is opened.
  • 2002: New terminals in Portland, Oregon, and Memphis, Tennessee, are opened.
  • 2003: New terminals in Atlanta, Georgia, and Denver, Colorado, are opened.
  • 2004: Knight Transportation opens its 12th terminal, establishing a facility in Las Vegas, Nevada.
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