8-K
Knight-Swift Transportation Holdings Inc. (KNX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): October 20, 2021
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Knight-Swift Transportation Holdings Inc.
(Exact name of registrant as specified in its charter)
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| Delaware | 001-35007 | 20-5589597 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2002 West Wahalla Lane
Phoenix, Arizona 85027
(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 | |||
| Common Stock $0.01 Par Value | KNX | New York Stock Exchange |
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 |
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On October 20, 2021, Knight-Swift Transportation Holdings Inc. (the "Company") issued a press release (the "Press Release") announcing its financial results for the quarter ended September 30, 2021. 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 in this Current Report that is furnished under Item 2.02, 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.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS |
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(d) Exhibits
| Exhibit | Description |
|---|---|
| Exhibit 99.1 | Knight-Swift Transportation Holdings Inc. Press Release Announcing Financial Results for the Quarter EndedSeptemberexhibit99109302021.htm30, 2021 |
| Exhibit 99.2 | Knight-Swift Transportation Holdings Inc.ThirdQuarter 2021 Earnings Presentation |
| Exhibit 104 | Cover Page Interactive Data File |
The information in Items 2.02 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: | October 20, 2021 | /s/ Adam W. Miller |
| Adam W. Miller | ||
| Chief Financial Officer |
Document
| Exhibit 99.1 |
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October 20, 2021
Phoenix, Arizona
| Knight-Swift Transportation Holdings Inc. Reports Third Quarter 2021 Revenue and Earnings |
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Knight-Swift Transportation Holdings Inc. (NYSE: KNX) ("Knight-Swift" or "the Company"), one of the largest and most diversified freight transportation companies, operating the largest full truckload fleet in North America, today reported third quarter 2021 net income attributable to Knight-Swift of $206.2 million and Adjusted Net Income Attributable to Knight-Swift of $217.1 million. GAAP earnings per diluted share for the third quarter of 2021 were $1.23, compared to $0.71 for the third quarter of 2020. The Adjusted EPS was $1.30 for the third quarter of 2021, compared to $0.79 for the third quarter of 2020.
| Key Financial Highlights |
|---|
Each reportable segment grew revenue while improving margins, leading to consolidated revenue growth of 32.8%, excluding truckload fuel surcharge, and an improvement of 63.2% in consolidated operating income to $270.1 million in the third quarter of 2021, as compared to the same quarter last year. Net Income Attributable to Knight-Swift increased by 68.9% to $206.2 million.
•Truckload — 77.8% Adjusted Operating Ratio within our Truckload segment, a 350 basis point improvement as compared to the same quarter last year
•Logistics — 87.6% Adjusted Operating Ratio within our Logistics segment, a 980 basis point improvement, supported by a 130.0% increase in Logistics revenue, excluding intersegment transactions, as load counts grew by 60.7%, while revenue per load increased 43.1%.
•Intermodal — 91.5% Adjusted Operating Ratio within our Intermodal segment, an 820 basis point improvement, supported by 14.1% year-over-year revenue growth
•Less-than-Truckload ("LTL") — 87.5% Adjusted Operating Ratio, which represents the results of AAA Cooper Transportation ("ACT"). See discussion under "Recent Acquisition" below. On an annualized basis, the LTL segment represents approximately 12% of revenue within the four reportable segments.
| Quarter Ended September 30, 1 | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||
| (Dollars in thousands, except per share data) | ||||||
| Total revenue | $ | 1,642,445 | $ | 1,210,406 | 35.7 | % |
| Revenue, excluding truckload fuel surcharge | $ | 1,510,572 | $ | 1,137,313 | 32.8 | % |
| Operating income | $ | 270,087 | $ | 165,461 | 63.2 | % |
| Adjusted Operating Income 2 | $ | 283,108 | $ | 183,094 | 54.6 | % |
| Net income attributable to Knight-Swift | $ | 206,178 | $ | 122,058 | 68.9 | % |
| Adjusted Net Income Attributable to Knight-Swift 2 | $ | 217,080 | $ | 134,618 | 61.3 | % |
| Earnings per diluted share | $ | 1.23 | $ | 0.71 | 73.2 | % |
| Adjusted EPS 2 | $ | 1.30 | $ | 0.79 | 64.6 | % |
1For information regarding comparability of the reported results due to acquisitions, refer to footnote 1 of the Condensed Consolidated Statements of Comprehensive Income in the schedules following this release.
2See GAAP to non-GAAP reconciliation in the schedules following this release.
Dave Jackson, CEO of Knight-Swift, commented, "We continue to invest in the diversification of our business through our Truckload, Logistics, Intermodal, LTL, and other developing businesses, including our warehousing activities and expanded services to third-party carriers. This diversification has allowed us to grow revenue and earnings across multiple segments and we expect will lead to earnings growth in 2022. We continue to generate meaningful free cash flow that we plan to invest in both organic and inorganic growth into the future that will support our expansion into LTL as well as third-party carrier services. We are appreciative of our drivers and supporting team members across all of our brands, who are the foundation of our company and continuously work together to safely move goods throughout the supply chain."
Recent Acquisition — On July 5, 2021, we acquired Dothan, Alabama-based ACT, a leading LTL carrier that also offers dedicated contract carriage and ancillary services. The results of ACT beginning July 5, 2021 are included within the LTL segment in our consolidated results.
Other Income, net — We earned $4.1 million of income within "Other income, net" in the condensed consolidated statements of comprehensive income in the third quarter of 2021, representing a $3.4 million decrease compared to $7.5 million in the third quarter of 2020. The year-over-year change was driven by lower gains recognized within our portfolio of investments, as well as a third quarter 2021 write-off of deferred debt issuance costs from replacing our previous term loan and credit facility with a new credit facility (discussed under "Liquidity and Capitalization" below).
Income Taxes — The effective tax rate was 22.8% for the third quarter of 2021, compared to 28.1% for the third quarter of 2020. The current quarter effective tax rate was favorably impacted by a reduction in state deferred taxes due to the ACT acquisition. We expect the full-year 2021 effective tax rate to be approximately 25%.
Dividend — On July 29, 2021 our board of directors declared a quarterly cash dividend of $0.10 per share of common stock. The dividend was payable to the Company's stockholders of record as of September 3, 2021 and was paid on September 27, 2021.
| Segment Financial Performance |
|---|
Truckload Segment
| Quarter Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||||
| (Dollars in thousands) | ||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | $ | 933,205 | $ | 902,592 | 3.4 | % | ||
| Operating income | $ | 206,543 | $ | 168,781 | 22.4 | % | ||
| Adjusted Operating Income 1 | $ | 206,866 | $ | 169,105 | 22.3 | % | ||
| Operating ratio | 80.2 | % | 82.7 | % | (250 | bps) | ||
| Adjusted Operating Ratio 1 | 77.8 | % | 81.3 | % | (350 | bps) |
1See GAAP to non-GAAP reconciliation in the schedules following this release.
Our Truckload segment includes our irregular route, dedicated, refrigerated, expedited, flatbed, and cross-border operations across our brands with 12,937 irregular route tractors and 4,930 dedicated tractors. The Adjusted Operating Ratio improved by 350 basis points to 77.8%, leading to a 22.3% improvement in Adjusted Operating Income. Year-over-year revenue, excluding fuel surcharge and intersegment transactions, grew by 3.4% in the third quarter. A 24.9% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 13.6% decrease in miles per tractor, contributed to a 6.8% increase in average revenue per tractor. Shipping demand remains strong throughout all markets. We have experienced more opportunities in shorter length of haul lanes, which have resulted in higher revenue per mile but fewer miles per tractor. These opportunities ultimately contributed to higher revenue per tractor and improved margins.
Logistics Segment
| Quarter Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||||
| (Dollars in thousands) | ||||||||
| Revenue, excluding intersegment transactions | $ | 221,374 | $ | 96,237 | 130.0 | % | ||
| Operating income | $ | 27,128 | $ | 2,478 | 994.8 | % | ||
| Adjusted Operating Income 1 | $ | 27,462 | $ | 2,478 | 1,008.2 | % | ||
| Operating ratio | 88.0 | % | 97.5 | % | (950 | bps) | ||
| Adjusted Operating Ratio 1 | 87.6 | % | 97.4 | % | (980 | bps) |
1See GAAP to non-GAAP reconciliation in the schedules following this release.
Demand for our logistics service offering continued to grow throughout the quarter, as we continue to leverage our fleet of over 60,000 trailers in our Power-only service offering. Logistics revenue increased 130.0% as we grew load count by 60.7%, while increasing revenue per load by 43.1%. The Adjusted Operating Ratio improved to 87.6%, resulting in a 1,008.2% increase in Adjusted Operating Income. Brokerage gross margin was 18.1% in the third quarter of 2021, compared to 11.0% in the third quarter of 2020.
Within our Power-only service offering, revenue grew by 333.9% as a result of an 84.1% increase in load volumes. Our Power-only service offering represented approximately 35% of brokerage load volumes during the third quarter of 2021. Through our Select platform, we digitally matched more than 4,500 carriers with available capacity to available loads during the third quarter of 2021.
Intermodal Segment
| Quarter Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||||
| (Dollars in thousands) | ||||||||
| Revenue, excluding intersegment transactions | $ | 112,754 | $ | 98,808 | 14.1 | % | ||
| Operating income | $ | 9,544 | $ | 250 | 3,717.6 | % | ||
| Adjusted Operating Income 1 | $ | 9,544 | $ | 250 | 3,717.6 | % | ||
| Operating ratio | 91.5 | % | 99.7 | % | (820 | bps) | ||
| Adjusted Operating Ratio 1 | 91.5 | % | 99.7 | % | (820 | bps) |
1See GAAP to non-GAAP reconciliation in the schedules following this release.
Revenue grew by 14.1% while the Adjusted Operating Ratio improved from 99.7% to 91.5%, resulting in a $9.3 million increase in operating income. Continued rail congestion and rail allocations resulted in a reduction in load count, but contributed to a 25.9% increase in revenue per load. Intermodal is exhibiting strong momentum, and we expect operational improvements in cost structure and network design as we transition to a new western rail partner in the coming quarters. To position Intermodal for continued growth, we plan to add approximately 1,000 containers over the next two quarters.
LTL Segment 1
| Quarter Ended September 30, | |||
|---|---|---|---|
| 2021 | |||
| (Dollars in thousands) | |||
| Revenue, excluding fuel surcharge | $ | 167,900 | |
| Operating income | $ | 17,469 | |
| Adjusted Operating Income 2 | $ | 20,967 | |
| Operating ratio | 90.9 | % | |
| Adjusted Operating Ratio 2 | 87.5 | % |
1For information regarding comparability of the reported results due to acquisitions, refer to footnote 1 of the Condensed Consolidated Statements of Comprehensive Income in the schedules following this release.
2See GAAP to non-GAAP reconciliation in the schedules following this release.
Our LTL segment, which operates across approximately 70 facilities with a door count of over 3,400, generated $167.9 million in revenue, excluding fuel surcharge and an 87.5% Adjusted Operating Ratio during the third quarter of 2021. During the quarter, our LTL segment earned revenue per hundredweight of $12.44, a 6.9% increase over the third quarter of 2020, while revenue per shipment, excluding fuel surcharge increased 7.9% to $138.27.
We are pleased with the results of ACT and we are encouraged with the synergy opportunities the teams have identified and expect to improve the cost structure as well as capitalize on network and revenue opportunities. We feel confident we are on pace to achieve our goal of an 85% Adjusted Operating Ratio in the coming years.
Non-reportable Segments
| Quarter Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||
| (Dollars in thousands) | ||||||
| Total revenue | $ | 89,393 | $ | 56,610 | 57.9 | % |
| Operating income (loss) | $ | 9,403 | $ | (6,048) | 255.5 | % |
The non-reportable segments include support services provided to our customers, independent contractors, and third party carriers (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). Revenue growth and improved profitability within the non-reportable segments is related to revenue and margin improvement in our warehousing activities, expanded services to third-party carriers, (including Iron Truck Services), and increased demand for our equipment leasing services.
| Consolidated Liquidity, Capital Resources, and Earnings Guidance |
|---|
Cash Flow Sources (Uses) 1
| Year-to-Date September 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | Change | ||||
| (In thousands) | ||||||
| Net cash provided by operating activities | $ | 817,524 | $ | 655,019 | $ | 162,505 |
| Net cash used in investing activities | (1,548,757) | (335,602) | (1,213,155) | |||
| Net cash provided by (used in) financing activities | 873,309 | (243,138) | 1,116,447 | |||
| Net increase in cash, restricted cash, and equivalents 2 | $ | 142,076 | $ | 76,279 | $ | 65,797 |
| Net capital expenditures | $ | (196,064) | $ | (276,144) | $ | 80,080 |
1For information regarding comparability of the reported results due to acquisitions, refer to footnote 1 of the Condensed Consolidated Statements of Comprehensive Income in the schedules following this release.
2"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 September 30, 2021, we had a balance of $1.1 billion of unrestricted cash and available liquidity and $6.3 billion of stockholders' equity. The face value of our debt, net of unrestricted cash ("Net Debt") was $1.8 billion as of September 30, 2021, which is a $1.1 billion increase from December 31, 2020. On July 5, 2021, we acquired ACT and borrowed $1.2 billion to finance the transaction (the "2021 Term Loan"). The 2021 Term Loan, as well as our previous $1.1 billion unsecured credit facility, was replaced in September 2021 in connection with entry into our $2.3 billion unsecured credit facility. Free cash flow3 for the year-to-date period ended September 30, 2021 was $621.5 million (computed as net cash provided by operating activities, less net capital expenditures). During the year-to-date period ended September 30, 2021, we generated $817.5 million in operating cash flows, reduced our operating lease liabilities by $37.4 million, paid down our finance lease liabilities by $73.8 million, spent $1.3 billion on three acquisitions, and returned $53.7 million in share repurchases and $46.9 million in dividends to our stockholders.
Equipment and Capital Expenditures — Gain on sale of revenue equipment increased to $22.1 million in the third quarter of 2021, compared to $1.7 million in the same quarter of 2020. The average age of the tractor fleet within our Truckload Segment was 2.4 years in the third quarter of 2021, compared to 2.1 years in the same quarter of 2020. The average age of the tractor fleet within our LTL segment was 4.0 years in the third quarter of 2021. Capital expenditures, net of disposal proceeds, were $196.1 million for year-to-date September 30, 2021. We expect net cash capital expenditures, including net cash capital expenditures of ACT, will be in the range of $450.0 – $470.0 million for full-year 2021. This is an update from our previously-disclosed range of $500.0 – $550.0 million, as we received less revenue equipment than ordered during the year. Our net cash capital expenditures primarily represent replacements of existing tractors and trailers, as well as investment in our terminal network, driver amenities, and technology.
Guidance — We expect that Adjusted EPS4 for full-year 2021 will range from $4.50 to $4.55, which is an update from our previously-disclosed range of $3.90 to $4.05. Our expected Adjusted EPS4 range considers the expected future earnings of ACT and UTXL and is also based on the current truckload, LTL, and general market conditions, recent trends, and the current beliefs, assumptions, and expectations of management (including those referenced in the third quarter 2021 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 EPS4 guidance.
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3Free cash flow is a non-GAAP measure.
4Our 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 $0.25 for full-year 2021), as well as noncash impairments and certain other unusual items, if any.
| Other Information | | --- || About Knight-Swift | | --- |
Knight-Swift Transportation Holdings Inc. is one of North America's largest and most diversified freight transportation companies, providing multiple truckload transportation and logistics services, as well as LTL services through ACT (beginning in July 2021). Knight-Swift uses 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 our 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, share repurchases, leverage ratio, 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, including, without limitation, expectations regarding future supply or demand, volume, or truckload capacity, or any impacts of the COVID-19 global pandemic or other similar outbreaks; 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,
•future dividends,
•future effective tax rates,
•future performance of our reportable segments, including network design and cost structure within our Intermodal segment and expected Adjusted Operating Ratio within our LTL segment,
•future capital structure, capital allocation, growth strategies and opportunities, and liquidity, and
•future capital expenditures, including nature and 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, 2020, Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.
| Financial Statements | | --- || Condensed Consolidated Statements of Comprehensive Income (Unaudited) 1 | | --- || | Quarter Ended September 30, | | | | Year-to-Date September 30, | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | 2020 | | 2021 | | 2020 | | | | (In thousands, except per share data) | | | | | | | | | Revenue: | | | | | | | | | | Revenue, excluding truckload fuel surcharge | $ | 1,510,572 | $ | 1,137,313 | $ | 3,856,549 | $ | 3,162,005 | | Truckload fuel surcharge | 131,873 | | 73,093 | | 324,611 | | 233,897 | | | Total revenue | 1,642,445 | | 1,210,406 | | 4,181,160 | | 3,395,902 | | | Operating expenses: | | | | | | | | | | Salaries, wages, and benefits | 500,673 | | 376,923 | | 1,248,656 | | 1,097,067 | | | Fuel | 146,422 | | 104,703 | | 390,713 | | 312,939 | | | Operations and maintenance | 86,951 | | 69,964 | | 226,334 | | 204,435 | | | Insurance and claims | 73,757 | | 45,186 | | 188,176 | | 144,768 | | | Operating taxes and licenses | 27,475 | | 21,475 | | 71,240 | | 64,527 | | | Communications | 6,612 | | 5,069 | | 16,284 | | 14,845 | | | Depreciation and amortization of property and equipment | 138,570 | | 115,664 | | 382,091 | | 340,486 | | | Amortization of intangibles | 15,719 | | 11,473 | | 39,452 | | 34,421 | | | Rental expense | 12,002 | | 19,700 | | 42,265 | | 67,447 | | | Purchased transportation | 352,061 | | 245,102 | | 914,448 | | 670,485 | | | Impairments | — | | — | | — | | 1,255 | | | Miscellaneous operating expenses | 12,116 | | 29,686 | | 38,040 | | 73,480 | | | Total operating expenses | 1,372,358 | | 1,044,945 | | 3,557,699 | | 3,026,155 | | | Operating income | 270,087 | | 165,461 | | 623,461 | | 369,747 | | | Other (expenses) income: | | | | | | | | | | Interest income | 245 | | 326 | | 809 | | 1,595 | | | Interest expense | (7,179) | | (3,232) | | (13,972) | | (13,360) | | | Other income, net | 4,072 | | 7,484 | | 37,017 | | 9,476 | | | Total other (expenses) income, net | (2,862) | | 4,578 | | 23,854 | | (2,289) | | | Income before income taxes | 267,225 | | 170,039 | | 647,315 | | 367,458 | | | Income tax expense | 61,059 | | 47,835 | | 158,171 | | 99,204 | | | Net income | 206,166 | | 122,204 | | 489,144 | | 268,254 | | | Net income (loss) attributable to noncontrolling interest | 12 | | (146) | | (372) | | (581) | | | Net income attributable to Knight-Swift | $ | 206,178 | $ | 122,058 | $ | 488,772 | $ | 267,673 | | Other comprehensive loss | (878) | | — | | (878) | | — | | | Comprehensive income | $ | 205,300 | $ | 122,058 | $ | 487,894 | $ | 267,673 | | Earnings per share: | | | | | | | | | | Basic | $ | 1.24 | $ | 0.72 | $ | 2.95 | $ | 1.57 | | Diluted | $ | 1.23 | $ | 0.71 | $ | 2.93 | $ | 1.57 | | Dividends declared per share: | $ | 0.10 | $ | 0.08 | $ | 0.28 | $ | 0.24 | | Weighted average shares outstanding: | | | | | | | | | | Basic | 165,966 | | 170,205 | | 165,823 | | 170,257 | | | Diluted | 167,106 | | 171,028 | | 166,936 | | 171,035 | |
________
1The reported results do not include the results of operations of ACT and its subsidiary prior to its acquisition by Knight-Swift on July 5, 2021 in accordance with the accounting treatment applicable to the transaction.
| Condensed Consolidated Balance Sheets (Unaudited)1 | | --- || | September 30, 2021 | | December 31,<br>2020 | | | --- | --- | --- | --- | --- | | | (In thousands) | | | | | ASSETS | | | | | | Current assets: | | | | | | Cash and cash equivalents | $ | 269,694 | $ | 156,699 | | Cash and cash equivalents – restricted | 68,019 | | 39,328 | | | Restricted investments, held-to-maturity, amortized cost | 7,140 | | 9,001 | | | Trade receivables, net of allowance for doubtful accounts of $21,811 and $22,093, respectively | 830,402 | | 578,479 | | | Contract balance – revenue in transit | 22,950 | | 14,560 | | | Prepaid expenses | 76,697 | | 71,649 | | | Assets held for sale | 20,330 | | 29,756 | | | Income tax receivable | 46,899 | | 2,903 | | | Other current assets | 62,334 | | 20,988 | | | Total current assets | 1,404,465 | | 923,363 | | | Property and equipment, net | 3,456,335 | | 2,992,652 | | | Operating lease right-of-use assets | 102,230 | | 113,296 | | | Goodwill | 3,461,898 | | 2,922,964 | | | Intangible assets, net | 1,793,924 | | 1,389,245 | | | Other long-term assets | 136,130 | | 126,482 | | | Total assets | $ | 10,354,982 | $ | 8,468,002 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | Current liabilities: | | | | | | Accounts payable | $ | 177,634 | $ | 101,001 | | Accrued payroll and purchased transportation | 227,016 | | 160,888 | | | Accrued liabilities | 134,002 | | 88,894 | | | Claims accruals – current portion | 200,159 | | 174,928 | | | Finance lease liabilities – current portion | 78,266 | | 52,583 | | | Operating lease liabilities – current portion | 35,464 | | 47,496 | | | Accounts receivable securitization – current portion | — | | 213,918 | | | Total current liabilities | 852,541 | | 839,708 | | | Revolving line of credit | 300,000 | | 210,000 | | | Long-term debt – less current portion | 1,238,022 | | 298,907 | | | Finance lease liabilities – less current portion | 208,556 | | 138,243 | | | Operating lease liabilities – less current portion | 69,401 | | 69,852 | | | Accounts receivable securitization – less current portion | 278,428 | | — | | | Claims accruals – less current portion | 200,493 | | 174,814 | | | Deferred tax liabilities | 856,926 | | 815,941 | | | Other long-term liabilities | 45,175 | | 48,497 | | | Total liabilities | 4,049,542 | | 2,595,962 | | | Stockholders’ equity: | | | | | | Common stock | 1,660 | | 1,665 | | | Additional paid-in capital | 4,344,894 | | 4,301,424 | | | Accumulated other comprehensive loss | (878) | | — | | | Retained earnings | 1,946,984 | | 1,566,759 | | | Total Knight-Swift stockholders' equity | 6,292,660 | | 5,869,848 | | | Noncontrolling interest | 12,780 | | 2,192 | | | Total stockholders’ equity | 6,305,440 | | 5,872,040 | | | Total liabilities and stockholders’ equity | $ | 10,354,982 | $ | 8,468,002 |
________
1The reported balances include ACT as of September 30, 2021
| Segment Operating Statistics (Unaudited) | | --- || | Quarter Ended September 30, | | | | | | | | Year-to-Date September 30, | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 2021 | | | 2020 | | | Change | | 2021 | | | 2020 | | | Change | | | Truckload | | | | | | | | | | | | | | | | | | Average revenue per tractor 1 | $ | 52,231 | | $ | 48,884 | | 6.8 | % | $ | 149,026 | | $ | 137,736 | | 8.2 | % | | Non-paid empty miles percentage | 13.5 | | % | 12.6 | | % | 90 | bps | 13.1 | | % | 13.1 | | % | — | bps | | Average length of haul (miles) | 398 | | | 436 | | | (8.7 | %) | 407 | | | 427 | | | (4.7 | %) | | Miles per tractor | 20,233 | | | 23,422 | | | (13.6 | %) | 62,083 | | | 68,729 | | | (9.7 | %) | | Average tractors | 17,867 | | | 18,464 | | | (3.2 | %) | 18,041 | | | 18,439 | | | (2.2 | %) | | Average trailers | 60,361 | | | 58,310 | | | 3.5 | % | 60,396 | | | 57,716 | | | 4.6 | % | | Logistics | | | | | | | | | | | | | | | | | | Revenue per load 2 | $ | 2,513 | | $ | 1,756 | | 43.1 | % | $ | 2,261 | | $ | 1,518 | | 48.9 | % | | Gross margin | 18.1 | | % | 11.0 | | % | 710 | bps | 16.5 | | % | 13.5 | | % | 300 | bps | | Intermodal | | | | | | | | | | | | | | | | | | Average revenue per load 2 | $ | 2,902 | | $ | 2,305 | | 25.9 | % | $ | 2,682 | | $ | 2,291 | | 17.1 | % | | Load count | 38,856 | | | 42,862 | | | (9.3 | %) | 124,897 | | | 120,520 | | | 3.6 | % | | Average tractors | 609 | | | 548 | | | 11.1 | % | 605 | | | 573 | | | 5.6 | % | | Average containers | 10,842 | | | 10,852 | | | (0.1 | %) | 10,843 | | | 10,522 | | | 3.1 | % | | LTL 3 4 | | | | | | | | | | | | | | | | | | Shipments per day | 16,430 | | | N/A | | | N/A | | 16,430 | | | N/A | | | N/A | | | Weight per shipment (pounds) | 1,111 | | | N/A | | | N/A | | 1,111 | | | N/A | | | N/A | | | Average length of haul (miles) | 515 | | | N/A | | | N/A | | 515 | | | N/A | | | N/A | | | Revenue per shipment | $ | 157.55 | | N/A | | | N/A | | $ | 157.55 | | N/A | | | N/A | | | Revenue xFSR per shipment | $ | 138.27 | | N/A | | | N/A | | $ | 138.27 | | N/A | | | N/A | | | Revenue per hundredweight | $ | 14.18 | | N/A | | | N/A | | $ | 14.18 | | N/A | | | N/A | | | Revenue xFSR per hundredweight | $ | 12.44 | | N/A | | | N/A | | $ | 12.44 | | N/A | | | N/A | | | Average tractors | 1,999 | | | N/A | | | N/A | | 1,999 | | | N/A | | | N/A | |
1Computed with revenue, excluding fuel surcharge and intersegment transactions
2Computed with revenue, excluding intersegment transactions
3Operating statistics within the LTL segment exclude dedicated and other businesses
4Refer to Condensed Consolidated Statements of Comprehensive Income — footnote 1.
| 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 2 | Quarter Ended September 30, | Year-to-Date September 30, | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2021 | 2020 | 2021 | 2020 | |||||||||||
| GAAP Presentation | (Dollars in thousands) | |||||||||||||
| Total revenue | $ | 1,642,445 | $ | 1,210,406 | $ | 4,181,160 | $ | 3,395,902 | ||||||
| Total operating expenses | (1,372,358) | (1,044,945) | (3,557,699) | (3,026,155) | ||||||||||
| Operating income | $ | 270,087 | $ | 165,461 | $ | 623,461 | $ | 369,747 | ||||||
| Operating ratio | 83.6 | % | 86.3 | % | 85.1 | % | 89.1 | % | ||||||
| Non-GAAP Presentation | ||||||||||||||
| Total revenue | $ | 1,642,445 | $ | 1,210,406 | $ | 4,181,160 | $ | 3,395,902 | ||||||
| Truckload fuel surcharge | (131,873) | (73,093) | (324,611) | (233,897) | ||||||||||
| Revenue, excluding truckload fuel surcharge | 1,510,572 | 1,137,313 | 3,856,549 | 3,162,005 | ||||||||||
| Total operating expenses | 1,372,358 | 1,044,945 | 3,557,699 | 3,026,155 | ||||||||||
| Adjusted for: | ||||||||||||||
| Truckload fuel surcharge | (131,873) | (73,093) | (324,611) | (233,897) | ||||||||||
| Amortization of intangibles 3 | (15,719) | (11,473) | (39,452) | (34,421) | ||||||||||
| Impairments 4 | — | — | — | (1,255) | ||||||||||
| Legal accruals 5 | 5,005 | (6,160) | 2,884 | (6,160) | ||||||||||
| COVID-19 incremental costs 6 | — | — | — | (12,259) | ||||||||||
| Transaction fees 7 | (2,307) | — | (2,966) | — | ||||||||||
| Adjusted Operating Expenses | 1,227,464 | 954,219 | 3,193,554 | 2,738,163 | ||||||||||
| Adjusted Operating Income | $ | 283,108 | $ | 183,094 | $ | 662,995 | $ | 423,842 | ||||||
| Adjusted Operating Ratio | 81.3 | % | 83.9 | % | 82.8 | % | 86.6 | % |
1 Pursuant to the requirements of Regulation G, this table reconciles consolidated GAAP operating ratio to consolidated non-GAAP Adjusted Operating Ratio.
2 Refer to Condensed Consolidated Statements of Comprehensive Income — footnote 1.
3 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the July 5, 2021 ACT acquisition, and other acquisitions.
4 "Impairments" reflects the non-cash impairment of certain tractors (within the Truckload segment) and certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market during the second quarter of 2020, as well as impairment charges of trailer tracking equipment (within the Truckload segment) during the first quarter of 2020.
5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee and contract related matters. During the third quarter of 2021, the Company reversed an accrued legal matter previously identified as probable in 2019. This was based on the recent decision of the appellate court, resulting in a change to a remote likelihood that a loss was incurred.
6 "COVID-19 incremental costs" reflects costs incurred during 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.
7 "Transaction fees" consisted of legal and professional fees associated with the acquisitions of UTXL and ACT. The transaction fees are included within "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.
| Non-GAAP Reconciliation (Unaudited): | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 | Quarter Ended September 30, | Year-to-Date September 30, | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||
| 2021 | 2020 | 2021 | 2020 | |||||||
| (Dollars in thousands, except per share data) | ||||||||||
| GAAP: Net income attributable to Knight-Swift | $ | 206,178 | $ | 122,058 | $ | 488,772 | $ | 267,673 | ||
| Adjusted for: | ||||||||||
| Income tax expense attributable to Knight-Swift | 61,059 | 47,835 | 158,171 | 99,204 | ||||||
| Income before income taxes attributable to Knight-Swift | 267,237 | 169,893 | 646,943 | 366,877 | ||||||
| Amortization of intangibles 3 | 15,719 | 11,473 | 39,452 | 34,421 | ||||||
| Impairments 4 | — | — | — | 1,255 | ||||||
| Legal accruals 5 | (5,005) | 6,160 | (2,884) | 6,160 | ||||||
| COVID-19 incremental costs 6 | — | — | — | 12,259 | ||||||
| Transaction fees 7 | 2,307 | — | 2,966 | — | ||||||
| Write-off of deferred debt issuance costs 8 | 1,024 | — | 1,024 | — | ||||||
| Adjusted income before income taxes | 281,282 | 187,526 | 687,501 | 420,972 | ||||||
| Provision for income tax expense at effective rate | (64,202) | (52,908) | (167,990) | (113,651) | ||||||
| Non-GAAP: Adjusted Net Income Attributable to Knight-Swift | $ | 217,080 | $ | 134,618 | $ | 519,511 | $ | 307,321 |
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 September 30, | Year-to-Date September 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||
| GAAP: Earnings per diluted share | $ | 1.23 | $ | 0.71 | $ | 2.93 | $ | 1.57 |
| Adjusted for: | ||||||||
| Income tax expense attributable to Knight-Swift | 0.37 | 0.28 | 0.95 | 0.58 | ||||
| Income before income taxes attributable to Knight-Swift | 1.60 | 0.99 | 3.88 | 2.15 | ||||
| Amortization of intangibles 3 | 0.09 | 0.07 | 0.24 | 0.20 | ||||
| Impairments 4 | — | — | — | 0.01 | ||||
| Legal accruals 5 | (0.03) | 0.04 | (0.02) | 0.04 | ||||
| COVID-19 incremental costs 6 | — | — | — | 0.07 | ||||
| Transaction fees 7 | 0.01 | — | 0.02 | — | ||||
| Write-off of deferred debt issuance costs 8 | 0.01 | — | 0.01 | — | ||||
| Adjusted income before income taxes | 1.68 | 1.10 | 4.12 | 2.46 | ||||
| Provision for income tax expense at effective rate | (0.38) | (0.31) | (1.01) | (0.66) | ||||
| Non-GAAP: Adjusted EPS | $ | 1.30 | $ | 0.79 | $ | 3.11 | $ | 1.80 |
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 Condensed Consolidated Statements of Comprehensive Income — footnote 1.
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.
7Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 7.
8"Write-off of deferred debt issuance costs" is included within "Other income, net" in the condensed consolidated statement of comprehensive income for the third quarter of 2021. The loss was incurred as a result of replacing the 2017 Debt Agreement with the 2021 Debt Agreement in September 2021.
| Non-GAAP Reconciliation (Unaudited): | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Adjusted Operating Income and Adjusted Operating Ratio 1 | ||||||||||||
| Quarter Ended September 30, | Year-to-Date September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Truckload Segment | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP Presentation | (Dollars in thousands) | |||||||||||
| Total revenue | $ | 1,041,332 | $ | 975,881 | $ | 2,990,137 | $ | 2,774,311 | ||||
| Total operating expenses | (834,789) | (807,100) | (2,456,654) | (2,390,408) | ||||||||
| Operating income | $ | 206,543 | $ | 168,781 | $ | 533,483 | $ | 383,903 | ||||
| Operating ratio | 80.2 | % | 82.7 | % | 82.2 | % | 86.2 | % | ||||
| Non-GAAP Presentation | ||||||||||||
| Total revenue | $ | 1,041,332 | $ | 975,881 | $ | 2,990,137 | $ | 2,774,311 | ||||
| Fuel surcharge | (107,867) | (73,093) | (300,605) | (233,897) | ||||||||
| Intersegment transactions | (260) | (196) | (953) | (705) | ||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | 933,205 | 902,592 | 2,688,579 | 2,539,709 | ||||||||
| Total operating expenses | 834,789 | 807,100 | 2,456,654 | 2,390,408 | ||||||||
| Adjusted for: | ||||||||||||
| Fuel surcharge | (107,867) | (73,093) | (300,605) | (233,897) | ||||||||
| Intersegment transactions | (260) | (196) | (953) | (705) | ||||||||
| Amortization of intangibles 2 | (323) | (324) | (971) | (972) | ||||||||
| Impairments 3 | — | — | — | (1,055) | ||||||||
| COVID-19 incremental costs 4 | — | — | — | (12,146) | ||||||||
| Adjusted Operating Expenses | 726,339 | 733,487 | 2,154,125 | 2,141,633 | ||||||||
| Adjusted Operating Income | $ | 206,866 | $ | 169,105 | $ | 534,454 | $ | 398,076 | ||||
| Adjusted Operating Ratio | 77.8 | % | 81.3 | % | 80.1 | % | 84.3 | % |
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.
| Non-GAAP Reconciliation (Unaudited): | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Segment Adjusted Operating Income and Adjusted Operating Ratio — Continued 1 | ||||||||||||
| Quarter Ended September 30, | Year-to-Date September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Logistics Segment | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP Presentation | (Dollars in thousands) | |||||||||||
| Total revenue | $ | 226,338 | $ | 99,018 | $ | 511,962 | $ | 248,320 | ||||
| Total operating expenses | (199,210) | (96,540) | (462,901) | (239,085) | ||||||||
| Operating income | $ | 27,128 | $ | 2,478 | $ | 49,061 | $ | 9,235 | ||||
| Operating ratio | 88.0 | % | 97.5 | % | 90.4 | % | 96.3 | % | ||||
| Non-GAAP Presentation | ||||||||||||
| Total revenue | $ | 226,338 | $ | 99,018 | $ | 511,962 | $ | 248,320 | ||||
| Intersegment transactions | (4,964) | (2,781) | (12,699) | (8,260) | ||||||||
| Revenue, excluding intersegment transactions | 221,374 | 96,237 | 499,263 | 240,060 | ||||||||
| Total operating expenses | 199,210 | 96,540 | 462,901 | 239,085 | ||||||||
| Adjusted for: | ||||||||||||
| Intersegment transactions | (4,964) | (2,781) | (12,699) | (8,260) | ||||||||
| Amortization of intangibles 2 | (334) | — | (431) | — | ||||||||
| Adjusted Operating Expenses | 193,912 | 93,759 | 449,771 | 230,825 | ||||||||
| Adjusted Operating Income | $ | 27,462 | $ | 2,478 | $ | 49,492 | $ | 9,235 | ||||
| Adjusted Operating Ratio | 87.6 | % | 97.4 | % | 90.1 | % | 96.2 | % | ||||
| Quarter Ended September 30, | Year-to-Date September 30, | |||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Intermodal Segment | 2021 | 2020 | 2021 | 2020 | ||||||||
| GAAP Presentation | (Dollars in thousands) | |||||||||||
| Total revenue | $ | 112,801 | $ | 98,859 | $ | 335,245 | $ | 276,410 | ||||
| Total operating expenses | (103,257) | (98,609) | (316,432) | (283,372) | ||||||||
| Operating income (loss) | $ | 9,544 | $ | 250 | $ | 18,813 | $ | (6,962) | ||||
| Operating ratio | 91.5 | % | 99.7 | % | 94.4 | % | 102.5 | % | ||||
| Non-GAAP Presentation | ||||||||||||
| Total revenue | $ | 112,801 | $ | 98,859 | $ | 335,245 | $ | 276,410 | ||||
| Intersegment transactions | (47) | (51) | (226) | (281) | ||||||||
| Revenue, excluding intersegment transactions | 112,754 | 98,808 | 335,019 | 276,129 | ||||||||
| Total operating expenses | 103,257 | 98,609 | 316,432 | 283,372 | ||||||||
| Adjusted for: | ||||||||||||
| Intersegment transactions | (47) | (51) | (226) | (281) | ||||||||
| COVID-19 incremental costs 3 | — | — | — | (113) | ||||||||
| Adjusted Operating Expenses | 103,210 | 98,558 | 316,206 | 282,978 | ||||||||
| Adjusted Operating Income (Loss) | $ | 9,544 | $ | 250 | $ | 18,813 | $ | (6,849) | ||||
| Adjusted Operating Ratio | 91.5 | % | 99.7 | % | 94.4 | % | 102.5 | % |
1Pursuant 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 the UTXL acquisition.
3Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6.
| Non-GAAP Reconciliation (Unaudited): | |||
|---|---|---|---|
| Segment Adjusted Operating Income and Adjusted Operating Ratio — Continued 1 | |||
| LTL Segment 2 | Quarter and Year-to-Date September 30, 2021 | ||
| --- | --- | --- | --- |
| GAAP Presentation | (Dollars in thousands) | ||
| Total revenue | $ | 191,906 | |
| Total operating expenses | (174,437) | ||
| Operating income | $ | 17,469 | |
| Operating ratio | 90.9 | % | |
| Non-GAAP Presentation | |||
| Total revenue | $ | 191,906 | |
| Fuel surcharge | (24,006) | ||
| Revenue, excluding fuel surcharge | 167,900 | ||
| Total operating expenses | 174,437 | ||
| Adjusted for: | |||
| Fuel surcharge | (24,006) | ||
| Amortization of intangibles 3 | (3,498) | ||
| Adjusted Operating Expenses | 146,933 | ||
| Adjusted Operating Income | $ | 20,967 | |
| Adjusted Operating Ratio | 87.5 | % |
1Pursuant to the requirements of Regulation G, this table reconciles GAAP operating ratio to non-GAAP Adjusted Operating Ratio.
2Refer to Condensed Consolidated Statements of Comprehensive Income — footnote 1.
3"Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the ACT acquisition.
| 15 |
|---|
exhibit99209302021
Exhibit 99.2 KNX 3Q21 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, 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 truckload segment fuel surcharges from revenue and nets these surcharges against fuel expense.
3 KNX Overview (1) LTL YTD Revenue includes proforma results of ACT prior to the July 5th acquisition (2) Excludes intersegment transactions
4 Growing Shareholder Value (1) Defined as YTD Free Cash Flow / YTD Adjusted Net Income (2) See GAAP to non-GAAP reconciliation in the schedules following this presentation.
5 Third Quarter 2021 Comparative Results Adjustments • $15.7M in Q3 2021 and $11.5M in Q3 2020 of amortization expense from mergers and acquisitions • $(5.0)M in Q3 2021 and $6.2 in Q3 2020 of legal accruals • $2.3M in Q3 2021 of transaction fees • $1.0M in Q3 2021 of write-off of deferred debt issuance costs 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation Knight-Swift Consolidated Q3 '21 Q3 '20 Change (Dollars in thousands, except per share data) Total revenue $ 1,642,445 $ 1,210,406 35.7 % Revenue xFSC $ 1,510,572 $ 1,137,313 32.8 % Operating income $ 270,087 $ 165,461 63.2 % Adj. Operating Income 1 $ 283,108 $ 183,094 54.6 % Net income attributable to Knight-Swift $ 206,178 $ 122,058 68.9 % Adj. Net income Attributable to Knight Swift 1 $ 217,080 $ 134,618 61.3 % Earnings per diluted share $ 1.23 $ 0.71 73.2 % Adj. EPS 1 $ 1.30 $ 0.79 64.6 %
6 Operating Performance – Truckload • 22.3% year-over-year improvement in Adjusted Operating Income • 77.8% Adjusted Operating Ratio in Q3 2021 compared to 81.3% the previous year • Shorter length of haul opportunities partially contributing to a 24.9% increase in revenue per loaded mile and a 13.6% decrease in miles per tractor 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Truckload Operating Statistics Q3 '21 Q3 '20 Change Average revenue per tractor $52,231 $48,884 6.8 % Average tractors 17,867 18,464 (3.2 %) Average trailers 60,361 58,310 3.5 % Miles per tractor 20,233 23,422 (13.6 %) Truckload Financial Metrics Q3 '21 Q3 '20 Change (Dollars in thousands) Revenue xFSC $933,205 $902,592 3.4 % Operating income $206,543 $168,781 22.4 % Adjusted Operating Income 1 $206,866 $169,105 22.3 % Operating ratio 80.2% 82.7% (250 bps) Adjusted Operating Ratio 1 77.8% 81.3% (350 bps)
7 Operating Performance – Logistics • $27.5M in Adjusted Operating Income with minimal capital investment • Power-only revenue more than tripled leading to a 130.0% increase in revenue with continued opportunity to leverage our 60k+ trailer fleet • 87.6% Adjusted Operating Ratio during the quarter, a 980 bps improvement from the prior year • 1,008.2% increase in Adjusted Operating income • 60.7% increase in load counts • 18.1% Gross margin for Q3 representing a 710 basis point improvement from the prior year 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Operating Statistics Q3 '21 Q3 '20 Change Revenue per load $2,513 $1,756 43.1 % Gross margin 18.1% 11.0% 710 bps Logistics Financial Metrics Q3 '21 Q3 '20 Change (Dollars in thousands) Revenue ex intersegment $221,374 $96,237 130.0 % Operating income $27,128 $2,478 994.8 % Adjusted Operating Income 1 $27,462 $2,478 1,008.2 % Operating ratio 88.0% 97.5% (950 bps) Adjusted Operating Ratio 1 87.6% 97.4% (980 bps)
8 Operating Performance – Intermodal • 14.1% increase in Revenue • $9.3M year-over-year improvement in Operating Income • 91.5% Operating Ratio during Q3 2021 compared with 99.7% the prior year • Rail congestion and allocations contributing to 25.9% year- over-year increase in average revenue per load and a 9.3% decrease in load counts from Q3 2020 Intermodal Operating Statistics Q3 '21 Q3 '20 Change Average revenue per load $2,902 $2,305 25.9 % Load count 38,856 42,862 (9.3 %) Average tractors 609 548 11.1 % Average containers 10,842 10,852 (0.1 %) Intermodal Financial Metrics Q3 '21 Q3 '20 Change (Dollars in thousands) Revenue ex intersegment $112,754 $98,808 14.1 % Operating income $9,544 $250 3,717.6 % Adjusted Operating Income 1 $9,544 $250 3,717.6 % Operating ratio 91.5% 99.7% (820 bps) Adjusted Operating Ratio 1 91.5% 99.7% (820 bps) 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation.
9 Operating Performance – LTL • $21M of Adjusted Operating Income • 87.5% Adjusted Operating Ratio in Q3 2021 • 7.9% increase in LTL Revenue xFSC per shipment compared to proforma Q3 2020 • 6.9% increase in revenue xFSR per hundredweight compared to proforma Q3 2020 • Discovering and exploring multiple synergy opportunities LTL Operating Statistics Q3 '21 LTL shipments per day 16,430 LTL weight per shipment 1,111 LTL revenue xFSR per hundredweight 1 $12.44 LTL revenue xFSR per shipment 1 $138.27 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. LTL Financial Metrics Q3 '21 (Dollars in thousands) Revenue xFSC $167,900 Operating income $17,469 Adjusted Operating Income 1 $20,967 Operating ratio 90.9% Adjusted Operating Ratio 1 87.5%
10 Operating Performance – Non-Reportable • 57.9% increase in Revenue driven by additional equipment leasing, warehousing activities, and expanded services provided to 3rd party carriers • $15.5M year-over-year improvement in Operating Income • Expect continued yoy growth in revenue and operating income in Q4 Non-Reportable Financial Metrics Q3 '21 Q3 '20 Change (Dollars in thousands) Revenue $89,393 $56,610 57.9 % Operating income (loss) $9,403 $(6,048) 255.5 %
11 Formally Launched Iron Truck Services Extending our transportation infrastructure, knowledge, and scale, while creating valuable 3rd party carrier relationships. irontruckservices.com
12 Market Outlook Q4 2021 and FY 2022 • In addition to expecting unprecedented demand in Q4, we anticipate similar strength for truckload services throughout 2022 • Capacity expansion continues to be limited as new tractor and trailer builds are constrained by parts availability and labor shortages • Sourcing and retaining drivers will remain challenging and lead to additional driver wage inflation • Inflationary pressure on equipment, maintenance, labor and other cost items • The above factors should continue to support a favorable rate environment, resulting in double digit contract rate increases • Strong demand for power-only opportunities • Strong used equipment market
13 2021 Guidance Increasing expected Adjusted EPS for the full year 2021 to $4.50 - $4.55 from $3.90 - $4.05 previously Q4 Guidance Assumptions • Recent rate trends to continue • Strong opportunities for project business • Miles per truck will remain pressured by the driver shortage and a network shift to take advantage of shorter length of haul opportunities • Modest pressure on tractor count as sourcing drivers remains challenging • Continued strength in Logistics revenue growth • Improved Intermodal margins • Inflationary pressure on driver related expenses • Approximate tax rate of 25.0% for the full year 2021 • Gains on sale will moderate sequentially • Net Cash Capex for the full year 2021 expected range of $450M - $470M
14 Appendix
15 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio 1 2 Quarter-to-Date September 30, Year-to-Date September 30, 2021 2020 2021 2020 GAAP Presentation (Dollars in thousands) Total revenue $ 1,642,445 $ 1,210,406 $ 4,181,160 $ 3,395,902 Total operating expenses (1,372,358) (1,044,945) (3,557,699) (3,026,155) Operating income $ 270,087 $ 165,461 $ 623,461 $ 369,747 Operating ratio 83.6 % 86.3 % 85.1 % 89.1 % Non-GAAP Presentation Total revenue $ 1,642,445 $ 1,210,406 $ 4,181,160 $ 3,395,902 Truckload fuel surcharge (131,873) (73,093) (324,611) (233,897) Revenue, excluding truckload fuel surcharge 1,510,572 1,137,313 3,856,549 3,162,005 Total operating expenses 1,372,358 1,044,945 3,557,699 3,026,155 Adjusted for: Truckload fuel surcharge (131,873) (73,093) (324,611) (233,897) Amortization of intangibles 3 (15,719) (11,473) (39,452) (34,421) Impairments 4 — — — (1,255) Legal accruals 5 5,005 (6,160) 2,884 (6,160) COVID-19 incremental costs 6 — — — (12,259) Transaction fees 7 (2,307) — (2,966) — Adjusted Operating Expenses 1,227,464 954,219 3,193,554 2,738,163 Adjusted Operating Income $ 283,108 $ 183,094 $ 662,995 $ 423,842 Adjusted Operating Ratio 81.3 % 83.9 % 82.8 % 86.6 %
16 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio 1 Pursuant to the requirements of Regulation G, this table reconciles consolidated GAAP operating ratio to consolidated non-GAAP Adjusted Operating Ratio. 2 The reported results do not include the results of operations of ACT and its subsidiary prior to its acquisition by Knight-Swift on July 5, 2021 in accordance with the accounting treatment applicable to the transaction. 3 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the July 5, 2021 ACT acquisition, and other acquisitions. 4 "Impairments" reflects the non-cash impairment of certain tractors (within the Truckload segment) and certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market during the second quarter of 2020, as well as impairment charges of trailer tracking equipment (within the Truckload segment) during the first quarter of 2020. 5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee and contract related matters. During the third quarter of 2021, the Company reversed an accrued legal matter previously identified as probable in 2019. This was based on the recent decision of the appellate court, resulting in a change to a remote likelihood that a loss was incurred. 6 "COVID-19 incremental costs" reflects costs incurred during 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. 7 "Transaction fees" consisted of legal and professional fees associated with the acquisitions of UTXL and ACT. The transaction fees are included within "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.
17 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 Quarter-to-Date September 30, Year-to-Date September 30, 2021 2020 2021 2020 (Dollars in thousands, except per share data) GAAP: Net income attributable to Knight-Swift $ 206,178 $ 122,058 $ 488,772 $ 267,673 Adjusted for: Income tax expense attributable to Knight-Swift 61,059 47,835 158,171 99,204 Income before income taxes attributable to Knight-Swift 267,237 169,893 646,943 366,877 Amortization of intangibles 3 15,719 11,473 39,452 34,421 Impairments 4 — — — 1,255 Legal accruals 5 (5,005) 6,160 (2,884) 6,160 COVID-19 incremental costs 6 — — — 12,259 Transaction fees 7 2,307 — 2,966 — Write-off of deferred debt issuance costs 8 1,024 — 1,024 — Adjusted income before income taxes 281,282 187,526 687,501 420,972 Provision for income tax expense at effective rate (64,202) (52,908) (167,990) (113,651) Non-GAAP: Adjusted Net Income Attributable to Knight-Swift $ 217,080 $ 134,618 $ 519,511 $ 307,321 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 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 7. 8 "Write-off of deferred debt issuance costs" is included within "Other income, net" in the condensed consolidated statement of comprehensive income for the third quarter of 2021. The loss was incurred as a result of replacing the 2017 Debt Agreement with the 2021 Debt Agreement in September 2021.
18 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 Quarter-to-Date September 30, Year-to-Date September 30, 2021 2020 2021 2020 GAAP: Earnings per diluted share $ 1.23 $ 0.71 $ 2.93 $ 1.57 Adjusted for: Income tax expense attributable to Knight-Swift 0.37 0.28 0.95 0.58 Income before income taxes attributable to Knight-Swift 1.60 0.99 3.88 2.15 Amortization of intangibles 3 0.09 0.07 0.24 0.20 Impairments 4 — — — 0.01 Legal accruals 5 (0.03) 0.04 (0.02) 0.04 COVID-19 incremental costs 6 — — — 0.07 Transaction fees 7 0.01 — 0.02 — Write-off of deferred debt issuance costs 8 0.01 — 0.01 — Adjusted income before income taxes 1.68 1.10 4.12 2.46 Provision for income tax expense at effective rate (0.38) (0.31) (1.01) (0.66) Non-GAAP: Adjusted EPS $ 1.30 $ 0.79 $ 3.11 $ 1.80 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 Operating Income and Adjusted Operating Ratio – footnote 7. 8 "Write-off of deferred debt issuance costs" is included within "Other income, net" in the condensed consolidated statement of comprehensive income for the third quarter of 2021. The loss was incurred as a result of replacing the 2017 Debt Agreement with the 2021 Debt Agreement in September 2021.
19 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter-to-Date September 30, Year-to-Date September 30, Truckload Segment 2021 2020 2021 2020 GAAP Presentation (Dollars in thousands) Total revenue $ 1,041,332 $ 975,881 $ 2,990,137 $ 2,774,311 Total operating expenses (834,789) (807,100) (2,456,654) (2,390,408) Operating income $ 206,543 $ 168,781 $ 533,483 $ 383,903 Operating ratio 80.2 % 82.7 % 82.2 % 86.2 % Non-GAAP Presentation Total revenue $ 1,041,332 $ 975,881 $ 2,990,137 $ 2,774,311 Fuel surcharge (107,867) (73,093) (300,605) (233,897) Intersegment transactions (260) (196) (953) (705) Revenue, excluding fuel surcharge and intersegment transactions 933,205 902,592 2,688,579 2,539,709 Total operating expenses 834,789 807,100 2,456,654 2,390,408 Adjusted for: Fuel surcharge (107,867) (73,093) (300,605) (233,897) Intersegment transactions (260) (196) (953) (705) Amortization of intangibles 2 (323) (324) (971) (972) Impairments 3 — — — (1,055) COVID-19 incremental costs 4 — — — (12,146) Adjusted Operating Expenses 726,339 733,487 2,154,125 2,141,633 Adjusted Operating Income $ 206,866 $ 169,105 $ 534,454 $ 398,076 Adjusted Operating Ratio 77.8 % 81.3 % 80.1 % 84.3 % 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 September 30, Year-to-Date September 30, Logistics Segment 2021 2020 2021 2020 GAAP Presentation (Dollars in thousands) Total revenue $ 226,338 $ 99,018 $ 511,962 $ 248,320 Total operating expenses (199,210) (96,540) (462,901) (239,085) Operating income $ 27,128 $ 2,478 $ 49,061 $ 9,235 Operating ratio 88.0 % 97.5 % 90.4 % 96.3 % Non-GAAP Presentation Total revenue $ 226,338 $ 99,018 $ 511,962 $ 248,320 Intersegment transactions (4,964) (2,781) (12,699) (8,260) Revenue, excluding intersegment transactions 221,374 96,237 499,263 240,060 Total operating expenses 199,210 96,540 462,901 239,085 Adjusted for: Intersegment transactions (4,964) (2,781) (12,699) (8,260) Amortization of intangibles 2 (334) — (431) — Adjusted Operating Expenses 193,912 93,759 449,771 230,825 Adjusted Operating Income $ 27,462 $ 2,478 $ 49,492 $ 9,235 Adjusted Operating Ratio 87.6 % 97.4 % 90.1 % 96.2 % 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 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition.
21 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter-to-Date September 30, Year-to-Date September 30, Intermodal Segment 2021 2020 2021 2020 GAAP Presentation (Dollars in thousands) Total revenue $ 112,801 $ 98,859 $ 335,245 $ 276,410 Total operating expenses (103,257) (98,609) (316,432) (283,372) Operating income (loss) $ 9,544 $ 250 $ 18,813 $ (6,962) Operating ratio 91.5 % 99.7 % 94.4 % 102.5 % Non-GAAP Presentation Total revenue $ 112,801 $ 98,859 $ 335,245 $ 276,410 Intersegment transactions (47) (51) (226) (281) Revenue, excluding intersegment transactions 112,754 98,808 335,019 276,129 Total operating expenses 103,257 98,609 316,432 283,372 Adjusted for: Intersegment transactions (47) (51) (226) (281) COVID-19 incremental costs 2 — — — (113) Adjusted Operating Expenses 103,210 98,558 316,206 282,978 Adjusted Operating Income (Loss) $ 9,544 $ 250 $ 18,813 $ (6,849) Adjusted Operating Ratio 91.5 % 99.7 % 94.4 % 102.5 % 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): Segment Adjusted Operating Income and Adjusted Operating Ratio 1 Quarter and Year-to-Date September 30, 2021LTL Segment 2 GAAP Presentation (Dollars in thousands) Total revenue $ 191,906 Total operating expenses (174,437) Operating income $ 17,469 Operating ratio 90.9 % Non-GAAP Presentation Total revenue $ 191,906 Fuel surcharge (24,006) Revenue, excluding fuel surcharge 167,900 Total operating expenses 174,437 Adjusted for: Fuel surcharge (24,006) Amortization of intangibles 3 (3,498) Adjusted Operating Expenses 146,933 Adjusted Operating Income $ 20,967 Adjusted Operating Ratio 87.5 % 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 2. 3 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the ACT acquisition.
23 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Return on Net Tangible Assets 1 September 30, 2021 2020 (Dollars in thousands) Total Assets $ 10,354,982 $ 8,501,361 Adjusted for: Intangible assets, net (1,793,924) (1,400,719) Goodwill (3,461,898) (2,922,967) Tangible Assets $ 5,099,160 $ 4,177,675 Total Liabilities $ 4,049,542 $ 2,620,113 Adjusted for: Revolving line of credit, finance lease obligations, and long-term debt (1,824,844) (679,908) Accounts receivable securitization (278,428) (201,878) Deferred income tax liabilities (856,926) (802,292) Non-Interest Bearing Liabilities, excluding deferred income tax liabilities $ 1,089,344 $ 936,035 Net Tangible Assets $ 4,009,816 $ 3,241,640 Average Net Tangible Assets $ 3,625,728 Adjusted Net Income $ 678,337 Return on Net Tangible Assets 18.7 % 1 Pursuant to the requirements of Regulation G, this table reconciles Total Assets and Total Liabilities to Average Net Tangible Assets.
24 Non-GAAP Reconciliation Non-GAAP Reconciliation (Unaudited): Adjusted Income Before Income Taxes and Adjusted Net Income 1 2 Year-to-Date September 30, 2021 Year-to-Date December 31, 2020 Year-to-Date September 30, 2020 TTM September 30, 2021 (Dollars in thousands) GAAP: Net income attributable to Knight-Swift $ 488,772 410,002 267,673 631,101 Adjusted for: Income tax expense attributable to Knight-Swift 158,171 149,676 99,204 208,643 Income before income taxes attributable to Knight-Swift 646,943 559,678 366,877 839,744 Amortization of intangibles 3 39,452 45,895 34,421 50,926 Change in fair value of deferred earnout 4 — 6,730 — 6,730 Impairments 5 — 5,335 1,255 4,080 Legal accruals 6 (2,884) 6,160 6,160 (2,884) COVID-19 incremental costs 7 — 12,259 12,259 — Transaction fees 8 2,966 — — 2,966 Write-off of deferred debt issuance costs 9 1,024 — — 1,024 Adjusted income before income taxes 687,501 636,057 420,972 902,586 Provision for income tax expense at effective rate (167,990) (169,910) (113,651) (224,249) Non-GAAP Adjusted Net Income Attributable to Knight Swift $ 519,511 $ 466,147 $ 307,321 $ 678,337 1 Pursuant to the requirements of Regulation G, this table reconciles Knight-Swift's GAAP Income before income taxes to Knight-Swift's non-GAAP Adjusted Income before Income Taxes and Adjusted Net Income. 2 The reported results do not include the results of operations of ACT and its subsidiary prior to its acquisition by Knight-Swift on July 5, 2021 in accordance with the accounting treatment applicable to the transaction. 3 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the July 5, 2021 ACT acquisition, and other acquisitions. 4 "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." 5 "Impairments" reflects the non-cash impairments: • Year-to-date 2020 includes impairments related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Truckload segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Truckload segment). 6 "Legal accruals" reflects costs incurred in the first quarter of 2021 and the third quarter of 2020 related to certain class action lawsuits involving pre-merger employment-related claims that were previously disclosed by Swift. During the third quarter of 2021, the Company reversed an accrued legal matter previously identified as probable in 2019. This was based on the recent decision of the appellate court, resulting in a change to a remote likelihood that a loss was incurred. 7 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 6. 8 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Operating Income and Adjusted Operating Ratio – footnote 7. 9 Refer to Non-GAAP Reconciliation (Unaudited): Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS – footnote 8.