Knight-Swift Transportation Holdings Inc 8-K, filed Jan 27, 2021
Knight-Swift Transportation Holdings Inc. (KNX)
8-K
2021-01-27
For: 2021-01-27
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April 08, 2026
About this 8-K
Knight-Swift Transportation Holdings Inc filed this 8-K on January 27, 2021.
Items reported
- Item 2.02: Financial results
- Item 7.01: Regulation FD disclosure
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 27, 2021
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________________________________
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||||||||
(Address of principal executive offices and zip code)
(602 ) 269-2000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||||||||||||||
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||||||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||||||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||||||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||||||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | |||||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION | ||||
On January 27, 2021, Knight-Swift Transportation Holdings Inc. (the "Company") issued a press release (the "Press Release") announcing its financial results for the quarter ended December 31, 2020. A copy of the Press Release is attached to this Current Report on Form 8-K ("Current Report") as Exhibit 99.1 and is incorporated herein by reference.
The information contained in Item 7.01 of this Current Report is incorporated herein by reference.
| ITEM 7.01 | REGULATION FD DISCLOSURE | ||||
The information in this Current Report that is furnished under Items 2.02 and 7.01, including the exhibits hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability of that section, or incorporated by reference in any filing under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On September 8, 2017, pursuant to the Agreement and Plan of Merger, dated as of April 9, 2017, by Swift Transportation Company ("Swift"), Bishop Merger Sub, Inc., a direct wholly-owned subsidiary of Swift, ("Merger Sub"), and Knight Transportation, Inc. ("Knight"), Merger Sub merged with and into Knight, with Knight surviving as a direct wholly-owned subsidiary of Swift (the "2017 Merger"). Knight was the accounting acquirer and Swift was the legal acquirer in the 2017 Merger.
In accordance with the accounting treatment applicable to the 2017 Merger, throughout Exhibit 99.2, the reported results do not include the results of operations of Swift and its subsidiaries on and prior to the 2017 Merger date of September 8, 2017 (the "2017 Merger Date"). However, where indicated, certain unaudited historical information of Swift and its subsidiaries on and prior to the 2017 Merger Date, including their results of operations and certain operating statistics (collectively, the "Swift Historical Information"), has been provided in Exhibit 99.2. Management believes that presentation of the Swift Historical Information will be useful to investors. The Swift Historical Information has not been prepared in accordance with the rules of the Securities and Exchange Commission, including Article 11 of Regulation S-X, and it therefore does not reflect any of the pro forma adjustments that would be required by Article 11 of Regulation S-X. The Swift Historical Information does not purport to indicate the results that would have been obtained had the Swift and Knight businesses been operated together during the periods presented, or which may be realized in the future.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS | ||||
(d) Exhibits
| Exhibit | Description | |||||||
Exhibit 104 | Cover Page Interactive Data File | |||||||
The information in Items 2.02, 7.01, and 9.01 of this report and the exhibits hereto may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995, as amended. Such statements are made based on the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties. Actual results or events may differ from those anticipated by the forward-looking statements. Please refer to the paragraphs at the end of the attached press release and at the beginning of the attached earnings presentation, as well as various disclosures by the Company in its press releases, stockholder reports, and filings with the Securities and Exchange Commission for information concerning risks, uncertainties, and other factors that may affect future results.
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 hereunto duly authorized.
| Knight-Swift Transportation Holdings Inc. | |||||||||||||||||
| (Registrant) | |||||||||||||||||
| Date: | January 27, 2021 | /s/ Adam W. Miller | |||||||||||||||
| Adam W. Miller | |||||||||||||||||
| Chief Financial Officer | |||||||||||||||||
| Exhibit 99.1 | ||||||||
January 27, 2021
Phoenix, Arizona
Knight-Swift Transportation Holdings Inc. Reports Fourth Quarter 2020 Revenue and Earnings | ||
Knight-Swift Transportation Holdings Inc. (NYSE: KNX) ("Knight-Swift" or "the Company"), North America's largest truckload transportation company, today reported fourth quarter 2020 net income attributable to Knight-Swift of $142.3 million and Adjusted Net Income Attributable to Knight-Swift of $158.8 million. We reported GAAP earnings per diluted share of $0.84 for the fourth quarter of 2020, compared to $0.39 for the fourth quarter of 2019. Our Adjusted EPS was $0.94 for the fourth quarter of 2020, compared to $0.55 for the fourth quarter of 2019.
| Key Financial Highlights | ||
Consolidated revenue, excluding trucking fuel surcharge, increased by 11.2%, while operating income increased by 95.5% and Adjusted Operating Income increased by 64.4% for the fourth quarter of 2020, as compared to the fourth quarter of 2019. Our business model continues to generate a meaningful amount of free cash flow1 (computed as net cash provided by operating activities, less net cash capital expenditures), which was $531.8 million in 2020.
We grew revenue and operating income in all of our reportable segments during the fourth quarter of 2020. Our Trucking segment improved its Adjusted Operating Income by 63.9%, resulting in a 690 basis point Adjusted Operating Ratio improvement to 79.3% in the fourth quarter of 2020 from 86.2% in the fourth quarter of 2019. Our Logistics segment produced an Adjusted Operating Ratio of 91.2% in the fourth quarter of 2020, which was a 180 basis point improvement from 93.0% in the fourth quarter of 2019. Load volumes within our Intermodal segment increased by 8.4% sequentially, contributing to an Adjusted Operating Ratio of 94.8% in the fourth quarter of 2020, an improvement of 490 basis points from the third quarter of 2020.
Knight-Swift Consolidated Results
| Quarter Ended December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||
| Total revenue | $ | 1,277,961 | $ | 1,196,810 | 6.8 | % | |||||||||||
| Revenue, excluding trucking fuel surcharge | $ | 1,207,202 | $ | 1,085,412 | 11.2 | % | |||||||||||
| Operating income | $ | 194,691 | $ | 99,593 | 95.5 | % | |||||||||||
Adjusted Operating Income 2 | $ | 216,975 | $ | 131,969 | 64.4 | % | |||||||||||
| Net income attributable to Knight-Swift | $ | 142,329 | $ | 67,444 | 111.0 | % | |||||||||||
Adjusted Net Income Attributable to Knight-Swift 2 | $ | 158,826 | $ | 93,472 | 69.9 | % | |||||||||||
| Earnings per diluted share | $ | 0.84 | $ | 0.39 | 115.4 | % | |||||||||||
Adjusted EPS 2 | $ | 0.94 | $ | 0.55 | 70.9 | % | |||||||||||
1Free cash flow is a non-GAAP measure.
2See GAAP to non-GAAP reconciliation in the schedules following this release.
Income Taxes — The effective tax rate was 26.2% for the fourth quarter of 2020, compared to 27.2% for the fourth quarter of 2019. We expect the 2021 effective tax rate to be in the range of 25.5% to 27.0% before discrete items.
Dividend — The Company previously announced a quarterly cash dividend of $0.08 per share to stockholders of record on December 4, 2020, which was paid on December 28, 2020.
Share Repurchases — We repurchased $179.6 million worth of our common stock at an average price of $37.10 per share during 2020, $145.0 million of which was purchased during the fourth quarter of 2020 at an average price of $39.15 per share.
On November 24, 2020, the Board of Directors (the "Board") of Knight-Swift approved the repurchase of up to $250.0 million of the Company's outstanding common stock (the "2020 Knight-Swift Repurchase Plan"). With the adoption of the 2020 Knight-Swift Repurchase Plan, the Company terminated the $250.0 million repurchase plan previously approved by the Board in May 2019, which had less than $54.1 million in purchase authorization remaining at that time.
| Segment Financial Performance | ||
Trucking Segment
| Quarter Ended December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | $ | 940,912 | $ | 861,428 | 9.2 | % | |||||||||||
| Operating income | $ | 194,609 | $ | 118,393 | 64.4 | % | |||||||||||
Adjusted Operating Income 1 | $ | 195,009 | $ | 118,952 | 63.9 | % | |||||||||||
| Operating ratio | 80.8 | % | 87.8 | % | (700 | bps) | |||||||||||
Adjusted Operating Ratio 1 | 79.3 | % | 86.2 | % | (690 | bps) | |||||||||||
1See GAAP to non-GAAP reconciliation in the schedules following this release.
Our Trucking segment includes our irregular route, dedicated, refrigerated, expedited, flatbed, and cross-border operations across our brands with 13,374 irregular route tractors and 5,099 dedicated route tractors. We improved the Adjusted Operating Ratio within this segment to 79.3% in the fourth quarter of 2020 from 86.2% in the fourth quarter of 2019. Average revenue per tractor increased by 10.5%, driven by a 13.8% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions. The rate improvement was partially offset by an increase in driver-related expenses during the quarter. In the fourth quarter of 2020, the Swift truckload operating segment generated an Adjusted Operating Ratio of 74.1%, while the Knight trucking operating segment generated an Adjusted Operating Ratio of 78.9%. During the year ended December 31, 2020, the two operating segments continued to achieve parity, with Knight trucking producing an 81.5% Adjusted Operating Ratio and Swift truckload operating within approximately 80 basis points of Knight at an 80.7% Adjusted Operating Ratio.
Logistics Segment
| Quarter Ended December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding intersegment transactions | $ | 125,039 | $ | 92,757 | 34.8 | % | |||||||||||
| Operating income | $ | 11,010 | $ | 5,873 | 87.5 | % | |||||||||||
Adjusted Operating Income 1 | $ | 11,010 | $ | 6,494 | 69.5 | % | |||||||||||
| Operating ratio | 91.4 | % | 93.8 | % | (240 | bps) | |||||||||||
Adjusted Operating Ratio 1 | 91.2 | % | 93.0 | % | (180 | bps) | |||||||||||
1See GAAP to non-GAAP reconciliation in the schedules following this release.
| 2 | |||||||
Adjusted Operating Ratio in the Logistics segment (which primarily consists of our Knight and Swift brokerage services) improved by 180 basis points to 91.2% in the fourth quarter of 2020 from 93.0% in the fourth quarter of 2019.
Brokerage gross margin increased to 16.4% in the fourth quarter of 2020 from 15.5% in the fourth quarter of 2019. A 50.8% increase in brokerage revenue per load, partially offset by an 8.7% decrease in brokerage load volumes contributed to a 37.7% increase in brokerage revenue, excluding intersegment transactions. Load volumes grew 35.8% year-over-year within our power-only service offering, contributing to 143.5% revenue growth within power-only and representing 31.0% of our total fourth quarter 2020 brokerage load volumes. In the first half of 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions. During the fourth quarter of 2020, over 5,000 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.
Intermodal Segment
| Quarter Ended December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding intersegment transactions | $ | 114,969 | $ | 111,816 | 2.8 | % | |||||||||||
| Operating income | $ | 6,019 | $ | 600 | 903.2 | % | |||||||||||
| Operating ratio | 94.8 | % | 99.5 | % | (470 | bps) | |||||||||||
We improved operating ratio within the Intermodal segment to 94.8% in the fourth quarter of 2020, from 99.5% in the fourth quarter of 2019. Revenue, excluding intersegment transactions increased 2.8%, as revenue per load increased 2.4% and load counts increased 0.4%. On a sequential basis, an 8.4% increase in load volumes contributed to a 490 basis point improvement in operating ratio for the fourth quarter of 2020, compared to the third quarter of 2020. We continue to work on initiatives to support our business, develop our network, and improve our cost structure within the Intermodal segment, and we expect to continue to see improved results in 2021.
Non-reportable Segments
| Quarter Ended December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Total revenue | $ | 40,741 | $ | 32,824 | 24.1 | % | |||||||||||
| Operating loss | $ | (16,947) | $ | (25,273) | (32.9 | %) | |||||||||||
The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, certain warehousing activities, as well as certain corporate expenses (such as legal settlements and accruals and $10.3 million in quarterly amortization of intangibles related to the 2017 merger). Operating income (loss) within the non-reportable segments improved by $8.3 million in the fourth quarter of 2020, as compared to the fourth quarter of 2019. Operating loss in the fourth quarter of 2020 includes the expense for the change in fair value of a deferred earnout related to the 2020 acquisition of a warehousing company and an impairment of an investment related to alternative fuel. Operating loss in the fourth quarter of 2019 included $20.3 million in legal costs, reflecting revised estimates for various pre-2017 merger legal matters which were previously disclosed by Swift.
| 3 | |||||||
| Consolidated Liquidity, Capital Resources, and Earnings Guidance | ||
Cash Flow Sources (Uses)
| Year-to-Date December 31, | |||||||||||||||||
| 2020 | 2019 | Change | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 919,645 | $ | 839,594 | $ | 80,051 | |||||||||||
| Net cash used in investing activities | (480,712) | (583,706) | 102,994 | ||||||||||||||
| Net cash used in financing activities | (443,884) | (184,636) | (259,248) | ||||||||||||||
Net (decrease) increase in cash, restricted cash, and equivalents 1 | $ | (4,951) | $ | 71,252 | $ | (76,203) | |||||||||||
| Net capital expenditures | $ | (387,837) | $ | (569,837) | $ | 182,000 | |||||||||||
1"Net increase in cash, restricted cash, and equivalents" is derived from changes within "Cash and cash equivalents," "Cash and cash equivalents – restricted," and the long-term portion of restricted cash included in "Other long-term assets" in the condensed consolidated balance sheets.
Liquidity and Capitalization — As of December 31, 2020, we had a balance of $738.8 million of unrestricted cash and available liquidity and $5.9 billion of stockholders' equity. The face value of our debt, net of unrestricted cash ("Net Debt") was $758.1 million as of December 31, 2020, which is a $1.4 million decrease from December 31, 2019. Our cash provided by operating activities and change in Net Debt balances were negatively affected by a $93.4 million cash settlement paid in March 2020 associated with pre-2017 merger legal matters that were previously accrued and disclosed. During 2020, we generated $919.6 million in operating cash flows, reduced our operating lease liabilities by $83.7 million, spent $46.8 million on acquisitions, and returned $233.8 million to our stockholders in the form of quarterly dividends and share repurchases. We continue to manage our leverage ratio relative to our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities.
Equipment and Capital Expenditures — Gain on sale of revenue equipment decreased to $3.2 million in the fourth quarter of 2020, compared to $5.0 million in the same quarter of 2019. The average age of our tractor fleet was 2.2 years in the fourth quarter of 2020, compared to 1.9 years in the same quarter of 2019. Capital expenditures, net of disposal proceeds, were $387.8 million for 2020. We expect net cash capital expenditures will be in the range of $450.0 million – $500.0 million for full-year 2021. Our net cash capital expenditures primarily represent replacements of existing tractors and trailers, as well as investment in our terminal network and driver amenities.
Guidance — We expect that Adjusted EPS1 for full-year 2021 will range from $3.20 to $3.40. Our expected Adjusted EPS1 range is based on the current truckload market, recent trends, and the current beliefs, assumptions, and expectations of management (including those referenced in the fourth quarter 2020 earnings presentation posted on our website).
The factors described under "Forward-Looking Statements," among others, could cause actual results to materially vary from this guidance. Further, we cannot estimate on a forward-looking basis, the impact of certain income and expense items on our earnings per share, because these items, which could be significant, may be infrequent, are difficult to predict, and may be highly variable. As a result, we do not provide a corresponding GAAP measure for, or reconciliation to, our Adjusted EPS guidance.
________
1Our calculation of Adjusted EPS starts with GAAP diluted earnings per share and adds back the after-tax impact of intangible asset amortization (which is expected to be approximately $0.20 for full-year 2021), as well as noncash impairments and certain other unusual noncash items, if any.
| 4 | |||||||
| Other Information | ||
| About Knight-Swift | ||
Knight-Swift Transportation Holdings Inc. is a provider of multiple truckload transportation and logistics services using a nationwide network of business units and terminals in the United States and Mexico to serve customers throughout North America. In addition to operating the country's largest tractor fleet, Knight-Swift 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 independent contractors.
| Investor Relations Contact Information | ||
David A. Jackson, President and Chief Executive Officer, or Adam W. Miller, Chief Financial Officer: (602) 606-6349
| Forward-Looking Statements | ||
This press release contains statements that may constitute forward-looking statements, which are based on information currently available, usually identified by words such as "anticipates," "believes," "estimates," "plans,'' "projects," "expects," "hopes," "intends," "strategy," ''focus," "outlook," "foresee," "will," "could," "should," "may," "continue," or similar expressions, which speak only as of the date the statement was made. Such statements are forward-looking statements and are 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, and such statements are subject to the safe harbor created by those sections and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation: any projections of or guidance regarding earnings, earnings per share, revenues, cash flows, dividends, 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, industry, or Company conditions or performance; and any statements of belief and any statement of assumptions underlying any of the foregoing. In this press release, such statements include, but are not limited to, statements concerning:
•any projections of or guidance regarding earnings, earnings per share, Adjusted EPS, revenues, cash flows, dividends, capital expenditures, or other financial items,
•expectations regarding future supply or demand, volume, truckload capacity, and the overall freight and economic environment,
•the impacts of the COVID-19 global pandemic,
•future dividends,
•intentions regarding refinancing the Company's accounts receivable securitization, including the timing thereof,
•future effective tax rates,
•future performance of our reportable segments, including rate per mile within our Trucking segment, as well as cost structure, network, and load volumes within our Intermodal segment,
•future capital structure, capital allocation, and growth strategies and opportunities, liquidity, and
•future capital expenditures, including funding of capital expenditures.
Such forward-looking statements are inherently uncertain, and are based upon the current beliefs, assumptions, and expectations of management and current market conditions, which are subject to significant risks and uncertainties as set forth in the Risk Factors section of Knight-Swift's Annual Report on Form 10-K for the year ended December 31, 2019, Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.
| 5 | |||||||
| Financial Statements | ||
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Revenue, excluding trucking fuel surcharge | $ | 1,207,202 | $ | 1,085,412 | $ | 4,369,207 | $ | 4,395,332 | |||||||||||||||
| Trucking fuel surcharge | 70,759 | 111,398 | 304,656 | 448,618 | |||||||||||||||||||
| Total revenue | 1,277,961 | 1,196,810 | 4,673,863 | 4,843,950 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Salaries, wages, and benefits | 386,121 | 354,373 | 1,483,188 | 1,474,073 | |||||||||||||||||||
| Fuel | 103,368 | 144,676 | 416,307 | 583,123 | |||||||||||||||||||
| Operations and maintenance | 70,855 | 74,877 | 275,290 | 322,188 | |||||||||||||||||||
| Insurance and claims | 48,072 | 48,612 | 192,840 | 194,336 | |||||||||||||||||||
| Operating taxes and licenses | 22,895 | 24,148 | 87,422 | 88,481 | |||||||||||||||||||
| Communications | 4,751 | 4,564 | 19,596 | 19,520 | |||||||||||||||||||
| Depreciation and amortization of property and equipment | 120,289 | 109,323 | 460,775 | 420,082 | |||||||||||||||||||
| Amortization of intangibles | 11,474 | 10,732 | 45,895 | 42,876 | |||||||||||||||||||
| Rental expense | 19,193 | 25,592 | 86,640 | 122,738 | |||||||||||||||||||
| Purchased transportation | 266,164 | 254,010 | 936,649 | 1,035,969 | |||||||||||||||||||
| Impairments | 4,080 | 1,304 | 5,335 | 3,486 | |||||||||||||||||||
Miscellaneous operating expenses 1 | 26,008 | 45,006 | 99,488 | 109,640 | |||||||||||||||||||
| Total operating expenses | 1,083,270 | 1,097,217 | 4,109,425 | 4,416,512 | |||||||||||||||||||
| Operating income | 194,691 | 99,593 | 564,438 | 427,438 | |||||||||||||||||||
| Other (expenses) income: | |||||||||||||||||||||||
| Interest income | 333 | 834 | 1,928 | 3,834 | |||||||||||||||||||
| Interest expense | (3,949) | (7,139) | (17,309) | (29,433) | |||||||||||||||||||
| Other income (expenses), net | 1,778 | (438) | 11,254 | 12,137 | |||||||||||||||||||
| Total other (expenses) income, net | (1,838) | (6,743) | (4,127) | (13,462) | |||||||||||||||||||
| Income before income taxes | 192,853 | 92,850 | 560,311 | 413,976 | |||||||||||||||||||
| Income tax expense | 50,472 | 25,275 | 149,676 | 103,798 | |||||||||||||||||||
| Net income | 142,381 | 67,575 | 410,635 | 310,178 | |||||||||||||||||||
| Net income attributable to noncontrolling interest | (52) | (131) | (633) | (972) | |||||||||||||||||||
| Net income attributable to Knight-Swift | $ | 142,329 | $ | 67,444 | $ | 410,002 | $ | 309,206 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | 0.85 | $ | 0.40 | $ | 2.42 | $ | 1.80 | |||||||||||||||
| Diluted | $ | 0.84 | $ | 0.39 | $ | 2.40 | $ | 1.80 | |||||||||||||||
| Dividends declared per share: | $ | 0.08 | $ | 0.06 | $ | 0.32 | $ | 0.24 | |||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 168,086 | 170,645 | 169,711 | 171,541 | |||||||||||||||||||
| Diluted | 168,979 | 171,387 | 170,549 | 172,142 | |||||||||||||||||||
1 "Miscellaneous operating expenses" includes the expense associated with a change in fair value of a deferred earnout related to the 2020 acquisition of a warehousing company that was incurred in the fourth quarter of 2020.
| 6 | |||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||
| December 31, 2020 | December 31, 2019 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 156,699 | $ | 159,722 | |||||||
| Cash and cash equivalents – restricted | 39,328 | 41,331 | |||||||||
| Restricted investments, held-to-maturity, amortized cost | 9,001 | 8,912 | |||||||||
Trade receivables, net of allowance for doubtful accounts of $22,093 and $18,178, respectively | 578,479 | 518,547 | |||||||||
| Contract balance – revenue in transit | 14,560 | 12,696 | |||||||||
| Prepaid expenses | 71,649 | 62,160 | |||||||||
| Assets held for sale | 29,756 | 41,786 | |||||||||
| Income tax receivable | 2,903 | 17,026 | |||||||||
| Other current assets | 20,988 | 27,848 | |||||||||
| Total current assets | 923,363 | 890,028 | |||||||||
| Property and equipment, net | 2,992,652 | 2,850,720 | |||||||||
| Operating lease right-of-use assets | 113,296 | 169,425 | |||||||||
| Goodwill | 2,922,964 | 2,918,992 | |||||||||
| Intangible assets, net | 1,389,245 | 1,379,459 | |||||||||
| Other long-term assets | 126,482 | 73,108 | |||||||||
| Total assets | $ | 8,468,002 | $ | 8,281,732 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 101,001 | $ | 99,194 | |||||||
| Accrued payroll and purchased transportation | 160,888 | 110,065 | |||||||||
| Accrued liabilities | 88,894 | 175,222 | |||||||||
| Claims accruals – current portion | 174,928 | 150,805 | |||||||||
Finance lease liabilities and long-term debt – current portion 1 | 52,583 | 377,651 | |||||||||
| Operating lease liabilities – current portion | 47,496 | 80,101 | |||||||||
Accounts receivable securitization – current portion 2 | 213,918 | — | |||||||||
| Total current liabilities | 839,708 | 993,038 | |||||||||
| Revolving line of credit | 210,000 | 279,000 | |||||||||
Long-term debt – less current portion 1 | 298,907 | — | |||||||||
| Finance lease liabilities – less current portion | 138,243 | 57,383 | |||||||||
| Operating lease liabilities – less current portion | 69,852 | 96,160 | |||||||||
Accounts receivable securitization – less current portion 2 | — | 204,762 | |||||||||
| Claims accruals – less current portion | 174,814 | 196,912 | |||||||||
| Deferred tax liabilities | 815,941 | 771,719 | |||||||||
| Other long-term liabilities | 48,497 | 14,455 | |||||||||
| Total liabilities | 2,595,962 | 2,613,429 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 1,665 | 1,707 | |||||||||
| Additional paid-in capital | 4,301,424 | 4,269,043 | |||||||||
| Retained earnings | 1,566,759 | 1,395,465 | |||||||||
| Total Knight-Swift stockholders' equity | 5,869,848 | 5,666,215 | |||||||||
| Noncontrolling interest | 2,192 | 2,088 | |||||||||
| Total stockholders’ equity | 5,872,040 | 5,668,303 | |||||||||
| Total liabilities and stockholders’ equity | $ | 8,468,002 | $ | 8,281,732 | |||||||
1 On October 2, 2020, the Company amended its debt agreement to extend the maturity date of its term loan to October 3, 2022, incorporate language regarding the transition away from LIBOR, and update other regulatory and technical language customary for facilities of this type. Just prior to the extension, the Company paid $65.0 million on the outstanding balance of its term loan, leaving $300.0 million face value outstanding as of the transaction date.
2 As of December 31, 2020, the $214.0 million outstanding balance of the accounts receivable securitization, gross of deferred loan costs, is due within twelve months, and is included in "Accounts receivable securitization – current portion." The Company intends to refinance prior to the July 9, 2021 due date.
| 7 | |||||||
| Segment Operating Statistics (Unaudited) | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||||||||||||||
| 2020 | 2019 | Change | 2020 | 2019 | Change | ||||||||||||||||||||||||||||||
| Trucking | |||||||||||||||||||||||||||||||||||
Average revenue per tractor 1 | $ | 50,934 | $ | 46,078 | 10.5 | % | $ | 188,672 | $ | 185,628 | 1.6 | % | |||||||||||||||||||||||
| Non-paid empty miles percentage | 13.3 | % | 12.7 | % | 60 | bps | 13.1 | % | 12.8 | % | 30 | bps | |||||||||||||||||||||||
| Average length of haul (miles) | 426 | 432 | (1.4 | %) | 425 | 430 | (1.2 | %) | |||||||||||||||||||||||||||
| Miles per tractor | 22,268 | 22,776 | (2.2 | %) | 90,993 | 92,363 | (1.5 | %) | |||||||||||||||||||||||||||
| Average tractors | 18,473 | 18,695 | (1.2 | %) | 18,448 | 18,877 | (2.3 | %) | |||||||||||||||||||||||||||
| Average trailers | 57,644 | 57,857 | (0.4 | %) | 57,722 | 58,315 | (1.0 | %) | |||||||||||||||||||||||||||
| Logistics | |||||||||||||||||||||||||||||||||||
Revenue per load – Brokerage only 2 | $ | 2,155 | $ | 1,429 | 50.8 | % | $ | 1,689 | $ | 1,425 | 18.5 | % | |||||||||||||||||||||||
| Gross margin – Brokerage only | 16.4 | % | 15.5 | % | 90 | bps | 14.5 | % | 15.9 | % | (140 | bps) | |||||||||||||||||||||||
| Intermodal | |||||||||||||||||||||||||||||||||||
Average revenue per load 2 | $ | 2,475 | $ | 2,416 | 2.4 | % | $ | 2,342 | $ | 2,426 | (3.5 | %) | |||||||||||||||||||||||
| Load count | 46,457 | 46,287 | 0.4 | % | 166,977 | 187,131 | (10.8 | %) | |||||||||||||||||||||||||||
| Average tractors | 587 | 605 | (3.0 | %) | 577 | 643 | (10.3 | %) | |||||||||||||||||||||||||||
| Average containers | 10,848 | 9,858 | 10.0 | % | 10,604 | 9,862 | 7.5 | % | |||||||||||||||||||||||||||
1Computed with revenue, excluding fuel surcharge and intersegment transactions
2Computed with revenue, excluding intersegment transactions
| 8 | |||||||
| Non-GAAP Financial Measures and Reconciliations | ||
The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted Operating Income," "Adjusted EPS," "Adjusted Operating Ratio," and "Free Cash Flow," as we define them, are not presented in accordance with GAAP. These financial measures supplement our GAAP results in evaluating certain aspects of our business. We believe that using these measures improves comparability in analyzing our performance because they remove the impact of items from our operating results that, in our opinion, do not reflect our core operating performance. Management and the board of directors focus on Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, and Adjusted Operating Ratio as key measures of our performance, all of which are reconciled to the most comparable GAAP financial measures and further discussed below. Management and the board of directors use Free Cash Flow as a key measure of our liquidity, which is defined under "Liquidity and Capitalization" above. Free Cash Flow does not represent residual cash flow available for discretionary expenditures. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance.
Adjusted Net Income Attributable to Knight-Swift, Adjusted Operating Income, Adjusted EPS, Adjusted Operating Ratio, and Free Cash Flow are not substitutes for their comparable GAAP financial measures, such as net income, cash flows from operating activities, operating margin, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.
Non-GAAP Reconciliation (Unaudited): | ||
Adjusted Operating Income and Adjusted Operating Ratio 1 | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 1,277,961 | $ | 1,196,810 | $ | 4,673,863 | $ | 4,843,950 | |||||||||||||||
| Total operating expenses | (1,083,270) | (1,097,217) | (4,109,425) | (4,416,512) | |||||||||||||||||||
| Operating income | $ | 194,691 | $ | 99,593 | $ | 564,438 | $ | 427,438 | |||||||||||||||
| Operating ratio | 84.8 | % | 91.7 | % | 87.9 | % | 91.2 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 1,277,961 | $ | 1,196,810 | $ | 4,673,863 | $ | 4,843,950 | |||||||||||||||
| Trucking fuel surcharge | (70,759) | (111,398) | (304,656) | (448,618) | |||||||||||||||||||
| Revenue, excluding trucking fuel surcharge | 1,207,202 | 1,085,412 | 4,369,207 | 4,395,332 | |||||||||||||||||||
| Total operating expenses | 1,083,270 | 1,097,217 | 4,109,425 | 4,416,512 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Trucking fuel surcharge | (70,759) | (111,398) | (304,656) | (448,618) | |||||||||||||||||||
Amortization of intangibles 2 | (11,474) | (10,732) | (45,895) | (42,876) | |||||||||||||||||||
Change in fair value of deferred earnout 3 | (6,730) | — | (6,730) | — | |||||||||||||||||||
Impairments 4 | (4,080) | (1,304) | (5,335) | (3,486) | |||||||||||||||||||
Legal accruals 5 | — | (20,340) | (6,160) | (35,840) | |||||||||||||||||||
COVID-19 incremental costs 6 | — | — | (12,259) | — | |||||||||||||||||||
| Adjusted Operating Expenses | 990,227 | 953,443 | 3,728,390 | 3,885,692 | |||||||||||||||||||
| Adjusted Operating Income | $ | 216,975 | $ | 131,969 | $ | 640,817 | $ | 509,640 | |||||||||||||||
| Adjusted Operating Ratio | 82.0 | % | 87.8 | % | 85.3 | % | 88.4 | % | |||||||||||||||
| 9 | |||||||
1 Pursuant to the requirements of Regulation G, this table reconciles consolidated GAAP operating ratio to consolidated non-GAAP Adjusted Operating Ratio.
2 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions
3 "Change in fair value of deferred earnout" reflects the expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company, which is recorded in "Miscellaneous operating expenses."
4 "Impairments" reflects the following non-cash impairments:
•Fourth quarter 2020 impairments related to investments in certain alternative fuel technology (within the non-reportable segments) and certain revenue equipment held for sale (within the Trucking segment);
•Full-year 2020 also includes impairments of certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment);
•Fourth quarter 2019 impairments related to certain revenue equipment technology, warehousing equipment no longer in use, and certain Swift legacy trailer models as a result of a softer used equipment market. The impairments were recorded across various segments, depending on the nature of the impairment; and
•Full-year 2019 also includes impairment charges of $2.2 million to certain leasehold improvements from an early termination of a lease of one of our operating properties.
5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following:
•Third quarter 2020 costs related to certain class action lawsuits involving certain pre-merger employment-related claims that were previously disclosed by Swift,
•Fourth quarter 2019 additional legal costs, reflecting revised estimates for various pre-2017 merger legal matters within the nonreportable segments, and
•Second quarter 2019 costs associated with an issued jury verdict.
6 "COVID-19 incremental costs" reflects costs incurred during the first half of 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak. These include payroll premiums paid to our drivers and shop mechanics, additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.
| 10 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| GAAP: Net income attributable to Knight-Swift | $ | 142,329 | $ | 67,444 | $ | 410,002 | $ | 309,206 | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Income tax expense attributable to Knight-Swift | 50,472 | 25,275 | 149,676 | 103,798 | |||||||||||||||||||
| Income before income taxes attributable to Knight-Swift | 192,801 | 92,719 | 559,678 | 413,004 | |||||||||||||||||||
Amortization of intangibles 2 | 11,474 | 10,732 | 45,895 | 42,876 | |||||||||||||||||||
Change in fair value of deferred earnout 3 | 6,730 | — | 6,730 | — | |||||||||||||||||||
Impairments 4 | 4,080 | 1,304 | 5,335 | 3,486 | |||||||||||||||||||
Legal accruals 5 | — | 20,340 | 6,160 | 35,840 | |||||||||||||||||||
COVID-19 incremental costs 6 | — | — | 12,259 | — | |||||||||||||||||||
| Adjusted income before income taxes | 215,085 | 125,095 | 636,057 | 495,206 | |||||||||||||||||||
Provision for income tax expense at effective rate 7 | (56,259) | (31,623) | (169,910) | (122,124) | |||||||||||||||||||
| Non-GAAP: Adjusted Net Income Attributable to Knight-Swift | $ | 158,826 | $ | 93,472 | $ | 466,147 | $ | 373,082 | |||||||||||||||
Note: Because the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| GAAP: Earnings per diluted share | $ | 0.84 | $ | 0.39 | $ | 2.40 | $ | 1.80 | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Income tax expense attributable to Knight-Swift | 0.30 | 0.15 | 0.88 | 0.60 | |||||||||||||||||||
| Income before income taxes attributable to Knight-Swift | 1.14 | 0.54 | 3.28 | 2.40 | |||||||||||||||||||
Amortization of intangibles 2 | 0.07 | 0.06 | 0.27 | 0.25 | |||||||||||||||||||
Change in fair value of deferred earnout 3 | 0.04 | — | 0.04 | — | |||||||||||||||||||
Impairments 4 | 0.02 | 0.01 | 0.03 | 0.02 | |||||||||||||||||||
Legal accruals 5 | — | 0.12 | 0.04 | 0.21 | |||||||||||||||||||
COVID-19 incremental costs 6 | — | — | 0.07 | — | |||||||||||||||||||
| Adjusted income before income taxes | 1.27 | 0.73 | 3.73 | 2.88 | |||||||||||||||||||
Provision for income tax expense at effective rate 7 | (0.33) | (0.18) | (1.00) | (0.71) | |||||||||||||||||||
| Non-GAAP: Adjusted EPS | $ | 0.94 | $ | 0.55 | $ | 2.73 | $ | 2.17 | |||||||||||||||
1Pursuant to the requirements of Regulation G, these tables reconcile consolidated GAAP net income attributable to Knight-Swift to non-GAAP consolidated Adjusted Net Income Attributable to Knight-Swift and consolidated GAAP diluted earnings per share to non-GAAP consolidated Adjusted EPS.
2Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 2.
3Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 3.
4Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4.
5Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 5.
6Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
7An effective tax rate of 25.3% was applied in our fourth quarter 2019 Adjusted EPS calculation to normalize permanent difference pertaining to a Value Added Tax ("VAT") adjustment within Swift's Mexico operations. The adjustment was the result of regulatory changes in Mexico and pertains to pre-2017 merger VAT receivables from 2016 and prior yeas that were deemed unrecoverable as of December 31, 2019.
| 11 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Segment Adjusted Operating Income and Adjusted Operating Ratio 1 | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| Trucking Segment | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 1,011,719 | $ | 972,826 | $ | 3,786,030 | $ | 3,952,866 | |||||||||||||||
| Total operating expenses | (817,110) | (854,433) | (3,207,518) | (3,484,117) | |||||||||||||||||||
| Operating income | $ | 194,609 | $ | 118,393 | $ | 578,512 | $ | 468,749 | |||||||||||||||
| Operating ratio | 80.8 | % | 87.8 | % | 84.7 | % | 88.1 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 1,011,719 | $ | 972,826 | $ | 3,786,030 | $ | 3,952,866 | |||||||||||||||
| Fuel surcharge | (70,759) | (111,398) | (304,656) | (448,618) | |||||||||||||||||||
| Intersegment transactions | (48) | — | (753) | (157) | |||||||||||||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | 940,912 | 861,428 | 3,480,621 | 3,504,091 | |||||||||||||||||||
| Total operating expenses | 817,110 | 854,433 | 3,207,518 | 3,484,117 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Fuel surcharge | (70,759) | (111,398) | (304,656) | (448,618) | |||||||||||||||||||
| Intersegment transactions | (48) | — | (753) | (157) | |||||||||||||||||||
Amortization of intangibles 2 | (324) | (324) | (1,296) | (1,371) | |||||||||||||||||||
Impairments 3 | (76) | (235) | (1,131) | (2,417) | |||||||||||||||||||
COVID-19 incremental costs 4 | — | — | (12,146) | — | |||||||||||||||||||
| Adjusted Operating Expenses | 745,903 | 742,476 | 2,887,536 | 3,031,554 | |||||||||||||||||||
| Adjusted Operating Income | $ | 195,009 | $ | 118,952 | $ | 593,085 | $ | 472,537 | |||||||||||||||
| Adjusted Operating Ratio | 79.3 | % | 86.2 | % | 83.0 | % | 86.5 | % | |||||||||||||||
1 Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio.
2"Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in historical Knight acquisitions.
3Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4.
4Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
| 12 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Segment Adjusted Operating Income and Adjusted Operating Ratio — Continued 1 | ||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| Logistics Segment | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 127,521 | $ | 94,894 | $ | 375,841 | $ | 352,988 | |||||||||||||||
| Total operating expenses | (116,511) | (89,021) | (355,596) | (331,119) | |||||||||||||||||||
| Operating income | $ | 11,010 | $ | 5,873 | $ | 20,245 | $ | 21,869 | |||||||||||||||
| Operating ratio | 91.4 | % | 93.8 | % | 94.6 | % | 93.8 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 127,521 | $ | 94,894 | $ | 375,841 | $ | 352,988 | |||||||||||||||
| Intersegment transactions | (2,482) | (2,137) | (10,742) | (9,105) | |||||||||||||||||||
| Revenue, excluding intersegment transactions | 125,039 | 92,757 | 365,099 | 343,883 | |||||||||||||||||||
| Total operating expenses | 116,511 | 89,021 | 355,596 | 331,119 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Intersegment transactions | (2,482) | (2,137) | (10,742) | (9,105) | |||||||||||||||||||
Impairments 2 | — | (621) | — | (621) | |||||||||||||||||||
| Adjusted Operating Expenses | 114,029 | 86,263 | 344,854 | 321,393 | |||||||||||||||||||
| Adjusted Operating Income | $ | 11,010 | $ | 6,494 | $ | 20,245 | $ | 22,490 | |||||||||||||||
| Adjusted Operating Ratio | 91.2 | % | 93.0 | % | 94.5 | % | 93.5 | % | |||||||||||||||
| Quarter Ended December 31, | Year-to-Date December 31, | ||||||||||||||||||||||
| Intermodal Segment | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 115,052 | $ | 111,967 | $ | 391,462 | $ | 455,466 | |||||||||||||||
| Total operating expenses | (109,033) | (111,367) | (392,405) | (450,965) | |||||||||||||||||||
| Operating income (loss) | $ | 6,019 | $ | 600 | $ | (943) | $ | 4,501 | |||||||||||||||
| Operating ratio | 94.8 | % | 99.5 | % | 100.2 | % | 99.0 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 115,052 | $ | 111,967 | $ | 391,462 | $ | 455,466 | |||||||||||||||
| Intersegment transactions | (83) | (151) | (364) | (1,488) | |||||||||||||||||||
| Revenue, excluding intersegment transactions | 114,969 | 111,816 | 391,098 | 453,978 | |||||||||||||||||||
| Total operating expenses | 109,033 | 111,367 | 392,405 | 450,965 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Intersegment transactions | (83) | (151) | (364) | (1,488) | |||||||||||||||||||
COVID-19 incremental costs 3 | — | — | (113) | — | |||||||||||||||||||
| Adjusted Operating Expenses | 108,950 | 111,216 | 391,928 | 449,477 | |||||||||||||||||||
| Adjusted Operating Income (Loss) | $ | 6,019 | $ | 600 | $ | (830) | $ | 4,501 | |||||||||||||||
| Adjusted Operating Ratio | 94.8 | % | 99.5 | % | 100.2 | % | 99.0 | % | |||||||||||||||
1Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio.
2Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4.
3Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
| 13 | |||||||
Exhibit 99.2 KNX 4Q20 Earnings Presentation
2 Disclosure This presentation, including documents incorporated herein by reference, will contain 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. Such forward- looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Please review our disclosures in filings with the United States Securities and Exchange Commission. Non-GAAP Financial Data This presentation includes the use of adjusted operating income, operating ratio, adjusted operating ratio, net income, adjusted earnings per share, adjusted pre-tax income, return on net tangible assets, adjusted leverage ratio, available liquidity, and free cash flow, which are financial measures that are not in accordance with United States generally accepted accounting principles (“GAAP”). Each such measure is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors and lenders. While management believes such measures are useful for investors, they should not be used as a replacement for financial measures that are in accordance with GAAP. In addition, our use of these non-GAAP measures should not be interpreted as indicating that these or similar items could not occur in future periods. In addition, adjusted operating ratio excludes trucking segment fuel surcharges from revenue and nets these surcharges against fuel expense.
3 Disclosure On September 8, 2017, pursuant to the Agreement and Plan of Merger, dated as of April 9, 2017, by Swift Transportation Company (“Swift”), Bishop Merger Sub, Inc., a direct wholly owned subsidiary of Swift, (“Merger Sub”), and Knight Transportation, Inc. (“Knight”), Merger Sub merged with and into Knight, with Knight surviving as a direct wholly owned subsidiary of Swift (the “2017 Merger”). Knight was the accounting acquirer and Swift was the legal acquirer in the 2017 Merger. In accordance with the accounting treatment applicable to the 2017 Merger, throughout this presentation, the reported results do not include the results of operations of Swift and its subsidiaries on and prior to the 2017 Merger date of September 8, 2017 (the “2017 Merger Date”). However, where indicated, certain historical information of Swift and its subsidiaries on and prior to the 2017 Merger Date, including their results of operations and certain operational statistics (collectively, the “Swift Historical Information”), has been provided. Management believes that presentation of the Swift Historical Information will be useful to investors. The Swift Historical Information has not been prepared in accordance with the rules of the Securities and Exchange Commission, including Article 11 of Regulation S-X, and it therefore does not reflect any of the pro forma adjustments that would be required by Article 11 of Regulation S-X. The Swift Historical Information does not purport to indicate the results that would have been obtained had the Swift and Knight businesses been operated together during the periods presented, or which may be realized in the future.
4 KNX Overview Trucking Q4 '20 FY 2020 Revenue (ex. fuel surcharge and intersegment transactions) $ 940.9 M $ 3,480.6 M Adjusted Operating Ratio 1 79.3 % 83.0 % • 13,374 irregular route tractors, 5,099 dedicated tractors, and 57,644 combined trailers • Dry Van, Refrigerated, Dedicated, Flatbed, Drayage, and Expedited service offerings Intermodal Q4 '20 FY 2020 Revenue (ex intersegment transactions) $ 115.0 M $ 391.1 M Adjusted Operating Ratio 1 94.8 % 100.2 % • 587 tractors and 10,848 containers Logistics Q4 '20 FY 2020 Revenue (ex intersegment transactions) $ 125.0 M $ 365.1 M Adjusted Operating Ratio 1 91.2 % 94.5 % Shareholder Value FY 2020 • Free Cash Flow of $532M 2 3 • TTM Return on Net Tangible Assets of 14.7% 1 • Leverage Ratio of 0.69 1 • Repurchased $180M of our common stock • $55M paid out in Dividends 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation 2 Free Cash Flow is a non-GAAP measure defined as net cash provided by operating activities, less net cash capital expenditures. 3 Includes $93M for a legal settlement during the first quarter associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift
5 Fourth Quarter 2020 Comparative Results Adjustments • $11.5M in Q4 2020 and $10.7M in Q4 2019 of amortization expense from mergers and acquisitions • $6.7M in Q4 2020 related to a change in fair value of deferred earnout related to the acquisition of a warehousing company • $4.1M in Q4 2020 and $1.3M in Q4 2019 of impairments • $20.3M of legal accruals in Q4 2019 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation Knight-Swift Consolidated Q4 '20 Q4 '19 Change (Dollars in thousands, except per share data) Total revenue $ 1,277,961 $ 1,196,810 6.8 % Revenue xFSC $ 1,207,202 $ 1,085,412 11.2 % Operating income $ 194,691 $ 99,593 95.5 % Adj. Operating Income 1 $ 216,975 $ 131,969 64.4 % Net income attributable to Knight-Swift $ 142,329 $ 67,444 111.0 % Adj. Net income Attributable to Knight Swift 1 $ 158,826 $ 93,472 69.9 % Earnings per diluted share $ 0.84 $ 0.39 115.4 % Adj. EPS 1 $ 0.94 $ 0.55 70.9 %
6 Operating Performance – Trucking • 9.2% growth in Revenue xFSC • 79.3% Adjusted Operating Ratio in Q4 2020 compared to 86.2% the previous year • 63.9% year-over-year improvement in Adjusted Operating Income • 74.1% Swift Truckload Adjusted Operating Ratio • 78.9% Knight Trucking Adjusted Operating Ratio • 10.5% increase in Average revenue per tractor • 1.2% decrease in average tractors 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Trucking Operating Statistics Q4 '20 Q4 '19 Change Average revenue per tractor $50,934 $46,078 10.5 % Average tractors 18,473 18,695 (1.2 %) Average trailers 57,644 57,857 (0.4 %) Miles per tractor 22,268 22,776 (2.2 %) Trucking Financial Metrics Q4 '20 Q4 '19 Change (Dollars in thousands) Revenue xFSC $940,912 $861,428 9.2 % Operating income $194,609 $118,393 64.4 % Adjusted Operating Income 1 $195,009 $118,952 63.9 % Operating ratio 80.8% 87.8% (700 bps) Adjusted Operating Ratio 1 79.3% 86.2% (690 bps)
7 Rolling 4 Qtr Total % D iff er en ce = S w ift A dj O R - K ni gh t A dj O R Rolling 4 Qtr Difference in Knight Trucking and Swift Truckload Adjusted Operating Ratios 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 (2.0)% —% 2.0% 4.0% 6.0% 8.0% 10.0% Adjusted Operating Ratio Parity Historical information prior to the Swift merger in September 2017 has not been prepared in accordance with the rules of the United States Securities and Exchange Commission, including Article 11 of Regulation S-X, and it therefore does not reflect any of the pro forma adjustments that would be required by Article 11 of Regulation S-X. The Swift Historical Information does not purport to indicate the results that would have been obtained had the Swift and Knight businesses been operated together during the period presented, or which may be realized in the future. Swift Truckload Adjusted Operating Ratio is on par with Knight moving from 700 bps higher pre-merger to 80 bps lower in total over the past 4 quarters 1 1
8 Operating Performance – Logistics • 34.8% increase in Revenue • 87.5% increase in Operating income • 91.2% Adjusted Operating Ratio during Q4 2020 compared to 93.0% during the prior year • 16.4% Brokerage Gross Margin during the quarter compared with 15.5% the prior year • 50.8% increase in Brokerage revenue per load • 8.7% decrease in Brokerage load counts • Power only loads increased 35.8% from the prior year and now account for 31.0% of total Q4 volume 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Brokerage Only Operating Statistics Q4 '20 Q4 '19 Change Revenue per load $2,155 $1,429 50.8 % Gross margin 16.4% 15.5% 90 bps Logistics Financial Metrics Q4 '20 Q4 '19 Change (Dollars in thousands) Revenue ex intersegment $125,039 $92,757 34.8 % Operating income $11,010 $5,873 87.5 % Operating ratio 91.4% 93.8% (240 bps) Adjusted Operating Ratio 1 91.2% 93.0% (180 bps)
9 Digital Freight Platform • 3rd party carrier platform went live Spring of 2020 • 20% of Q4 2020 Logistics volume executed using Select • Over 5,000 carriers were digitally matched with loads in Q4 2020 • Provides shippers with the ability to fully leverage available capacity across our asset and asset-light brand • Instant quotes backed by guaranteed capacity • API rating and load tendering available for direct integration from customers' TMS • Live shipment tracking 24/7 carrier.knxselect.com
10 Operating Performance – Intermodal • 2.8% increase in Revenue • 94.8% Operating Ratio during Q4 2020 compared with 99.5% the prior year • 2.4% year-over-year increase in average revenue per load. • 0.4% increase in load counts from Q4 2019 • Sequentially, load counts increased 8.4% and Operating Ratio improved 490 basis points Intermodal Operating Statistics Q4 '20 Q4 '19 Change Average revenue per load $2,475 $2,416 2.4 % Load count 46,457 46,287 0.4 % Average tractors 587 605 (3.0 %) Average containers 10,848 9,858 10.0 % Intermodal Financial Metrics Q4 '20 Q4 '19 Change (Dollars in thousands) Revenue ex intersegment $114,969 $111,816 2.8 % Operating income $6,019 $600 903.2 % Operating ratio 94.8% 99.5% (470 bps)
11 Focus on Sustainability
12 Market Outlook FY 2021 • We expect the strong freight conditions to continue into 2021 • Inventory restocking and strong demand will support a favorable environment into 2021 • Low double digit contract rate increases in 2021 • The challenge of sourcing and retaining drivers will continue and lead to additional driver wage inflation
13 2021 Guidance Expected Adjusted EPS for the full year 2021 of $3.20 - $3.40 Guidance Assumptions • Contract rate improvements in the low double digits in 2021 • Miles per truck will be flat to slightly negative year-over-year • Stable tractor count • Double digit revenue growth in Logistics • Double digit revenue growth with margin improvement in Intermodal • Inflationary pressure on driver wages, recruiting and hiring expenses • Tax rate of 25.5% - 27.0% before discrete items for 2021 • Net Cash Capex for the full year 2021 expected range of $450M - $500M
14 Appendix
15 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter-to-Date December 31, Year-to-Date December 31, 2020 2019 2020 2019 GAAP Presentation (Dollars in thousands) Total revenue $ 1,277,961 $ 1,196,810 $ 4,673,863 $ 4,843,950 Total operating expenses (1,083,270) (1,097,217) (4,109,425) (4,416,512) Operating income $ 194,691 $ 99,593 $ 564,438 $ 427,438 Operating ratio 84.8 % 91.7 % 87.9 % 91.2 % Non-GAAP Presentation Total revenue $ 1,277,961 $ 1,196,810 $ 4,673,863 $ 4,843,950 Trucking fuel surcharge (70,759) (111,398) (304,656) (448,618) Revenue, excluding trucking fuel surcharge 1,207,202 1,085,412 4,369,207 4,395,332 Total operating expenses 1,083,270 1,097,217 4,109,425 4,416,512 Adjusted for: Trucking fuel surcharge (70,759) (111,398) (304,656) (448,618) Amortization of intangibles 2 (11,474) (10,732) (45,895) (42,876) Change in fair value of deferred earnout 3 (6,730) — (6,730) — Impairments 4 (4,080) (1,304) (5,335) (3,486) Legal accruals 5 — (20,340) (6,160) (35,840) COVID-19 incremental costs 6 — — (12,259) — Adjusted Operating Expenses 990,227 953,443 3,728,390 3,885,692 Adjusted Operating Income $ 216,975 $ 131,969 $ 640,817 $ 509,640 Adjusted Operating Ratio 82.0 % 87.8 % 85.3 % 88.4 % Please see footnotes for this schedule on the next slide.
16 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio 1 1 Pursuant to the requirements of Regulation G, this table reconciles consolidated GAAP operating ratio to consolidated non-GAAP Adjusted Operating Ratio. 2 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions 3 "Change in fair value of deferred earnout" reflects the expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company, which is recorded in "Miscellaneous operating expenses." 4 "Impairments" reflects the following non-cash impairments: • Fourth quarter 2020 impairments related to investments in certain alternative fuel technology (within the non-reportable segments) and certain revenue equipment held for sale (within the Trucking segment); • Full-year 2020 also includes impairments of certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment); • Fourth quarter 2019 impairments related to certain revenue equipment technology, warehousing equipment no longer in use, and certain Swift legacy trailer models as a result of a softer used equipment market. The impairments were recorded across various segments, depending on the nature of the impairment; and • Full-year 2019 also includes impairment charges of $2.2 million to certain leasehold improvements from an early termination of a lease of one of our operating properties. 5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following: • Third quarter 2020 costs related to certain class action lawsuits involving certain pre-merger employment-related claims that were previously disclosed by Swift, • Fourth quarter 2019 additional legal costs, reflecting revised estimates for various pre-2017 merger legal matters within the nonreportable segments, and • Second quarter 2019 costs associated with an issued jury verdict. 6 "COVID-19 incremental costs" reflects costs incurred during the first half of 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak. These include payroll premiums paid to our drivers and shop mechanics, additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.
17 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 Quarter-to-Date December 31, Year-to-Date December 31, 2020 2019 2020 2019 (Dollars in thousands, except per share data) GAAP: Net income attributable to Knight-Swift $ 142,329 $ 67,444 $ 410,002 $ 309,206 Adjusted for: Income tax expense attributable to Knight-Swift 50,472 25,275 149,676 103,798 Income before income taxes attributable to Knight-Swift 192,801 92,719 559,678 413,004 Amortization of intangibles 2 11,474 10,732 45,895 42,876 Change in fair value of deferred earnout 3 6,730 — 6,730 — Impairments 4 4,080 1,304 5,335 3,486 Legal accruals 5 — 20,340 6,160 35,840 COVID-19 incremental costs 6 — — 12,259 — Adjusted income before income taxes 215,085 125,095 636,057 495,206 Provision for income tax expense at effective rate 7 (56,259) (31,623) (169,910) (122,124) Non-GAAP: Adjusted Net Income Attributable to Knight-Swift $ 158,826 $ 93,472 $ 466,147 $ 373,082 1 Pursuant to the requirements of Regulation G, these tables reconcile consolidated GAAP net income attributable to Knight-Swift to non-GAAP consolidated Adjusted Net Income Attributable to Knight-Swift. 2 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 2. 3 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 3. 4 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4. 5 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 5. 6 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6. 7 An effective tax rate of 25.3% was applied in our fourth quarter 2019 Adjusted EPS calculation to normalize permanent difference pertaining to a Value Added Tax ("VAT") adjustment within Swift's Mexico operations. The adjustment was the result of regulatory changes in Mexico and pertains to pre-2017 merger VAT receivables from 2016 and prior yeas that were deemed unrecoverable as of December 31, 2019.
18 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 Quarter-to-Date December 31, Year-to-Date December 31, 2020 2019 2020 2019 GAAP: Earnings per diluted share $ 0.84 $ 0.39 $ 2.40 $ 1.80 Adjusted for: Income tax expense attributable to Knight-Swift 0.30 0.15 0.88 0.60 Income before income taxes attributable to Knight-Swift 1.14 0.54 3.28 2.40 Amortization of intangibles 2 0.07 0.06 0.27 0.25 Change in fair value of deferred earnout 3 0.04 — 0.04 — Impairments 4 0.02 0.01 0.03 0.02 Legal accruals 5 — 0.12 0.04 0.21 COVID-19 incremental costs 6 — — 0.07 — Adjusted income before income taxes 1.27 0.73 3.73 2.88 Provision for income tax expense at effective rate 7 (0.33) (0.18) (1.00) (0.71) Non-GAAP: Adjusted EPS $ 0.94 $ 0.55 $ 2.73 $ 2.17 Note: Because the numbers reflected in the table above are calculated on a per share basis, they may not foot due to rounding. 1 Pursuant to the requirements of Regulation G, these tables reconcile consolidated GAAP diluted earnings per share to non-GAAP consolidated Adjusted EPS. 2 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 2. 3 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 3. 4 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4. 5 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 5. 6 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6. 7 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift – footnote 7.
19 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter-to-Date December 31, Year-to-Date December 31, Trucking Segment 2020 2019 2020 2019 GAAP Presentation (Dollars in thousands) Total revenue $ 1,011,719 $ 972,826 $ 3,786,030 $ 3,952,866 Total operating expenses (817,110) (854,433) (3,207,518) (3,484,117) Operating income $ 194,609 $ 118,393 $ 578,512 $ 468,749 Operating ratio 80.8 % 87.8 % 84.7 % 88.1 % Non-GAAP Presentation Total revenue $ 1,011,719 $ 972,826 $ 3,786,030 $ 3,952,866 Fuel surcharge (70,759) (111,398) (304,656) (448,618) Intersegment transactions (48) — (753) (157) Revenue, excluding fuel surcharge and intersegment transactions 940,912 861,428 3,480,621 3,504,091 Total operating expenses 817,110 854,433 3,207,518 3,484,117 Adjusted for: Fuel surcharge (70,759) (111,398) (304,656) (448,618) Intersegment transactions (48) — (753) (157) Amortization of intangibles 2 (324) (324) (1,296) (1,371) Impairments 3 (76) (235) (1,131) (2,417) COVID-19 incremental costs 4 — — (12,146) — Adjusted Operating Expenses 745,903 742,476 2,887,536 3,031,554 Adjusted Operating Income $ 195,009 $ 118,952 $ 593,085 $ 472,537 Adjusted Operating Ratio 79.3 % 86.2 % 83.0 % 86.5 % 1 Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio. 2 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in historical Knight acquisitions. 3 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4. 4 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
20 Non-GAAP Reconciliation Quarter-to-Date December 31, Year-to-Date December 31, Logistics Segment 2020 2019 2020 2019 GAAP Presentation (Dollars in thousands) Total revenue $ 127,521 $ 94,894 $ 375,841 $ 352,988 Total operating expenses (116,511) (89,021) (355,596) (331,119) Operating income $ 11,010 $ 5,873 $ 20,245 $ 21,869 Operating ratio 91.4 % 93.8 % 94.6 % 93.8 % Non-GAAP Presentation Total revenue $ 127,521 $ 94,894 $ 375,841 $ 352,988 Intersegment transactions (2,482) (2,137) (10,742) (9,105) Revenue, excluding intersegment transactions 125,039 92,757 365,099 343,883 Total operating expenses 116,511 89,021 355,596 331,119 Adjusted for: Intersegment transactions (2,482) (2,137) (10,742) (9,105) Impairments 2 — (621) — (621) Adjusted Operating Expenses 114,029 86,263 344,854 321,393 Adjusted Operating Income $ 11,010 $ 6,494 $ 20,245 $ 22,490 Adjusted Operating Ratio 91.2 % 93.0 % 94.5 % 93.5 % Non-GAAP Reconciliation (Unaudited): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 1 Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio. 2 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 4.
21 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter-to-Date December 31, Year-to-Date December 31, Intermodal Segment 2020 2019 2020 2019 GAAP Presentation (Dollars in thousands) Total revenue $ 115,052 $ 111,967 $ 391,462 $ 455,466 Total operating expenses (109,033) (111,367) (392,405) (450,965) Operating income (loss) $ 6,019 $ 600 $ (943) $ 4,501 Operating ratio 94.8 % 99.5 % 100.2 % 99.0 % Non-GAAP Presentation Total revenue $ 115,052 $ 111,967 $ 391,462 $ 455,466 Intersegment transactions (83) (151) (364) (1,488) Revenue, excluding intersegment transactions 114,969 111,816 391,098 453,978 Total operating expenses 109,033 111,367 392,405 450,965 Adjusted for: Intersegment transactions (83) (151) (364) (1,488) COVID-19 incremental costs 2 — — (113) — Adjusted Operating Expenses 108,950 111,216 391,928 449,477 Adjusted Operating Income (Loss) $ 6,019 $ 600 $ (830) $ 4,501 Adjusted Operating Ratio 94.8 % 99.5 % 100.2 % 99.0 % 1 Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio. 2 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
22 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Return on Net Tangible Assets 1 December 31, 2020 2019 (Dollars in thousands) Total Assets $ 8,468,002 $ 8,281,732 Adjusted for: Intangible assets, net (1,389,245) (1,379,459) Goodwill (2,922,964) (2,918,992) Tangible Assets $ 4,155,793 $ 3,983,281 Total Liabilities $ 2,595,962 $ 2,613,429 Adjusted for: Revolving line of credit, finance lease obligations, long-term debt and fair value of interest rate swaps (699,733) (714,034) Accounts receivable securitization (213,918) (204,762) Deferred income tax liabilities (815,941) (771,719) Non-Interest Bearing Liabilities, excluding deferred income tax liabilities $ 866,370 $ 922,914 Net Tangible Assets $ 3,289,423 $ 3,060,367 Average Net Tangible Assets $ 3,174,895 Adjusted Net Income $ 466,147 Return on Net Tangible Assets 14.7 % 1 Pursuant to the requirements of Regulation G, this table reconciles Total Assets and Total Liabilities to Average Net Tangible Assets.
23 Non-GAAP Reconciliation (Unaudited): Net Leverage and Leverage Ratio 1 2 Non-GAAP Reconciliation December 31, 2020 (Dollars in thousands) Term loan $ 300,000 Revolving line of credit 210,000 Accounts receivable securitization 214,000 Other secured debt and finance leases 190,826 Total face value of debt 914,826 Unrestricted cash and cash equivalents (156,699) Non-GAAP: Net Leverage $ 758,127 Non-GAAP: Adjusted EBITDA December 31, 2020 $ 1,102,620 Non-GAAP: Leverage Ratio 0.69 1 Pursuant to the requirements of Regulation G, these tables reconcile consolidated GAAP net income attributable to Knight-Swift to non-GAAP consolidated EBITDA, Adjusted EBITDA, Net Leverage, and Leverage Ratio 2 Leverage Ratio is calculated in accordance with the provisions of Knight-Swift's senior credit facility.
24 1 Pursuant to the requirements of Regulation G, this table reconciles consolidated GAAP net income to consolidated non-GAAP EBITDA and Adjusted EBITDA. 2 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Income Before Income Taxes and Adjusted Net Income – footnote 4. 3 "Other non-cash gains, net" includes unrealized positions on equity securities, and other various items. Non-GAAP Reconciliation (Unaudited): Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted EBITDA 1 Non-GAAP Reconciliation December 31, 2020 (Dollars in thousands) GAAP: Net income $ 410,002 Adjusted for: Depreciation and amortization of property and equipment 460,775 Amortization of intangibles 45,895 Interest expense 17,309 Interest income (1,928) Income tax expense 149,676 Non-GAAP: EBITDA 1,081,729 Impairments 2 5,335 Stock compensation expense 19,639 Other non-cash gains, net 3 (4,083) Non-GAAP: Adjusted EBITDA $ 1,102,620