Knight-Swift Transportation Holdings Inc 10-Q for FY2020 Q3

Knight-Swift Transportation Holdings Inc. (KNX)

10-Q 2020-11-04 For: 2020-09-30

Added on April 08, 2026

About this 10-Q

Knight-Swift Transportation Holdings Inc filed this 10-Q on November 4, 2020, covering the quarter ended September 30, 2020 (FY2020 Q3).

Headline figures

Quarter ended September 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.21B; up 0.8% from $1.2B a year earlier
Net income: $122.06M; up 63.6% from net income of $74.62M a year earlier
Diluted EPS: $0.71; up 61.4% from $0.44 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →


Delaware						20-5589597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION			PAGE
Item 1. Financial Statements			4

Condensed Consolidated Balance Sheets (Unaudited) — Septe m ber 30, 2020 and December 31, 2019			4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Quarter and Year-to-Date September 30, 2020 and 2019			5

Condensed Consolidated Statements of Cash Flows (Unaudited) — Year-to-Date September 30, 2020 and 2019			6

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Quarter and Year-to-Date September 30, 2020 and 2019			8

Note 1 — Introduction and Basis of Presentation			10

Note 2 — Recently Adopted Accounting Pronouncements			11

Note 3 — Recently Issued Accounting Pronouncements			13

Note 4 — Acquisitions			14

Note 5 — Restricted Investments, Held-to-Maturity			16

Note 6 — Assets Held for Sale			16

Note 7 — Goodwill and Other Intangible Assets			17

Note 8 — Income Taxes			18



Note 9 — Accounts Receivable Securitization			18

Note 10 — Commitments			20

Note 11 — Contingencies and Legal Proceedings			20

Note 12 — Share Repurchase Plan			23

Note 13 — Weighted Average Shares Outstanding			23

Note 14 — Related Party Transactions			24

Note 15 — Information by Segment and Geography			25

Note 16 — Fair Value Measurement			27

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			30

Item 3. Quantitative and Qualitative Disclosures About Market Risk			57

Item 4. Controls and Procedures			58
PART II OTHER INFORMATION
Item 1. Legal Proceedings			59

Item 1A. Risk Factors			59

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			59

Item 3. Defaults Upon Senior Securities			59

Item 4. Mine Safety Disclosures			59

Item 5. Other Information			59

Item 6. Exhibits			60

Signatures			61


QUARTERLY REPORT ON FORM 10-Q

GLOSSARY OF TERMS
The following glossary defines certain acronyms and terms used in this Quarterly Report on Form 10-Q. These acronyms and terms are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document.

Term						Definition
Knight-Swift/the Company/Management/We/Us/Our						Unless otherwise indicated or the context otherwise requires, these terms represent Knight-Swift Transportation Holdings Inc. and its subsidiaries.

2017 Merger						The September 8, 2017 merger of Knight and Swift, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt Agreement						The Company's Credit Agreement, entered into on September 29, 2017, as amended on October 2, 2020, consisting of the Revolver and Term Loan, which are defined below.
2018 RSA						Fourth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on July 11, 2018 by Swift Receivables Company II, LLC with unrelated financial entities.


Annual Report						Annual Report on Form 10-K
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
Board						Knight-Swift's Board of Directors
COVID-19						Viral strain of a coronavirus which led the World Health Organization to declare a global pandemic in March 2020.
DOE						United States Department of Energy
EPS						Earnings Per Share
ESPP						Knight-Swift Transportation Holdings Inc. Amended and Restated 2012 Employee Stock Purchase Plan
FASB						Financial Accounting Standards Board


GAAP						United States Generally Accepted Accounting Principles
Knight						Unless otherwise indicated or the context otherwise requires, this term represents Knight Transportation, Inc. and its subsidiaries prior to the 2017 Merger.
LIBOR						London InterBank Offered Rate


Quarterly Report						Quarterly Report on Form 10-Q
QTD						Quarter-to-date
Revolver						Revolving line of credit under the 2017 Debt Agreement
RSU						Restricted Stock Unit
SEC						United States Securities and Exchange Commission
Swift						Unless otherwise indicated or the context otherwise requires, this term represents Swift Transportation Company and its subsidiaries prior to the 2017 Merger.
Term Loan						The Company's term loan under the 2017 Debt Agreement
TRP						Transportation Resource Partners
US						The United States of America
YTD						Year-to-date


	September 30, 2020		December 31, 2019
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	240,236	$	159,722
Cash and cash equivalents – restricted	36,689		41,331
Restricted investments, held-to-maturity, amortized cost	9,052		8,912
Trade receivables, net of allowance for doubtful accounts of $20,846 and $18,178, respectively	559,657		518,547
Contract balance – revenue in transit	20,233		12,696
Prepaid expenses	61,686		62,160
Assets held for sale	38,098		41,786
Income tax receivable	8,358		17,026
Other current assets	24,544		27,848
Total current assets	998,553		890,028
Gross property and equipment	4,112,703		3,742,739
Less: accumulated depreciation and amortization	(1,142,138)		(892,019)
Property and equipment, net	2,970,565		2,850,720
Operating lease right-of-use assets	119,350		169,425
Goodwill	2,922,967		2,918,992
Intangible assets, net	1,400,719		1,379,459
Other long-term assets	89,207		73,108
Total assets	$	8,501,361	$	8,281,732
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	140,228	$	99,194
Accrued payroll and purchased transportation	154,025		110,065
Accrued liabilities	112,189		175,222
Claims accruals – current portion	174,136		150,805

Finance lease liabilities and long-term debt – current portion	422,655		377,651
Operating lease liabilities – current portion	57,088		80,101
Accounts receivable securitization – current portion	201,878		—
Total current liabilities	1,262,199		993,038
Revolving line of credit	170,000		279,000

Finance lease liabilities – less current portion	87,253		57,383
Operating lease liabilities – less current portion	67,067		96,160
Accounts receivable securitization – less current portion	—		204,762
Claims accruals – less current portion	175,915		196,912
Deferred tax liabilities	802,292		771,719
Other long-term liabilities	55,387		14,455
Total liabilities	2,620,113		2,613,429
Commitments and contingencies (Notes 4, 10, and 11)
Stockholders’ equity:
Preferred stock, par value $0.01 per share; 10,000 shares authorized; none issued	—		—
Common stock, par value $0.01 per share; 500,000 shares authorized; 170,218 and 170,688 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively.	1,702		1,707

Additional paid-in capital	4,294,504		4,269,043
Retained earnings	1,582,814		1,395,465
Total Knight-Swift stockholders' equity	5,879,020		5,666,215
Noncontrolling interest	2,228		2,088
Total stockholders’ equity	5,881,248		5,668,303
Total liabilities and stockholders’ equity	$	8,501,361	$	8,281,732


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2020		2019		2020		2019
	(In thousands, except per share data)
Revenue:
Revenue, excluding trucking fuel surcharge	$	1,137,313	$	1,090,210	$	3,162,005	$	3,309,920
Trucking fuel surcharge	73,093		110,312		233,897		337,220
Total revenue	1,210,406		1,200,522		3,395,902		3,647,140
Operating expenses:
Salaries, wages, and benefits	376,923		375,491		1,097,067		1,119,700
Fuel	104,703		148,699		312,939		438,447
Operations and maintenance	69,964		85,108		204,435		247,311
Insurance and claims	45,186		46,792		144,768		145,724
Operating taxes and licenses	21,475		20,970		64,527		64,333
Communications	5,069		4,913		14,845		14,956
Depreciation and amortization of property and equipment	115,664		106,884		340,486		310,759
Amortization of intangibles	11,473		10,759		34,421		32,144
Rental expense	19,700		28,726		67,447		97,146
Purchased transportation	245,102		251,337		670,485		781,959
Impairments	—		—		1,255		2,182
Miscellaneous operating expenses	29,686		17,890		73,480		64,634

Total operating expenses	1,044,945		1,097,569		3,026,155		3,319,295
Operating income	165,461		102,953		369,747		327,845
Other income (expenses):
Interest income	326		1,007		1,595		3,000
Interest expense	(3,232)		(7,790)		(13,360)		(22,294)
Other income, net	7,484		3,335		9,476		12,575
Total other income (expenses), net	4,578		(3,448)		(2,289)		(6,719)
Income before income taxes	170,039		99,505		367,458		321,126
Income tax expense	47,835		24,524		99,204		78,523
Net income	122,204		74,981		268,254		242,603
Net income attributable to noncontrolling interest	(146)		(362)		(581)		(841)
Net income attributable to Knight-Swift	$	122,058	$	74,619	$	267,673	$	241,762

Earnings per share:
Basic	$	0.72	$	0.44	$	1.57	$	1.41
Diluted	$	0.71	$	0.44	$	1.57	$	1.40

Dividends declared per share:	$	0.08	$	0.06	$	0.24	$	0.18

Weighted average shares outstanding:
Basic	170,205		170,504		170,257		171,841
Diluted	171,028		171,290		171,035		172,524


Reconciliation of Cash, Restricted Cash, and Equivalents:	September 30, 2020		December 31, 2019		September 30, 2019		December 31, 2018
	(In thousands)
Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	240,236	$	159,722	$	93,996	$	82,486
Cash and cash equivalents – restricted 1	36,689		41,331		40,831		46,888
Other long-term assets 1	1,582		1,175		985		1,602
Condensed Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents	$	278,507	$	202,228	$	135,812	$	130,976


	Common Stock			Additional Paid-in Capital		Retained Earnings		Total Knight-Swift Stockholders' Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Par Value
	(In thousands, except per share data)
Balances – December 31, 2019	170,688	$	1,707	$	4,269,043	$	1,395,465	$	5,666,215	$	2,088	$	5,668,303

Common stock issued to employees	609	6		9,474				9,480				9,480
Common stock issued to the Board	13	—		515				515				515
Common stock issued under ESPP	47	—		1,637				1,637				1,637
Company shares repurchased	(1,139)	(11)				(34,619)		(34,630)				(34,630)
Shares withheld – RSU settlement						(4,508)		(4,508)				(4,508)
Employee stock-based compensation expense				13,835				13,835				13,835
Cash dividends paid and dividends accrued ($0.08 per share)						(41,197)		(41,197)				(41,197)
Net income attributable to Knight-Swift						267,673		267,673				267,673

Distribution to noncontrolling interest										(441)		(441)
Net income attributable to noncontrolling interest										581		581


Balances – September 30, 2020	170,218	$	1,702	$	4,294,504	$	1,582,814	$	5,879,020	$	2,228	$	5,881,248


Notes to Condensed Consolidated Financial Statements (Unaudited)


	January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020		Adjustments		January 1, 2020 Opening Balance Sheet as Reported at September 30, 2020
	(in thousands)
Fair value of the consideration transferred	$	66,854	$	(410)	$	66,444

Cash and cash equivalents	1,388		—		1,388

Trade and other receivables	3,301		—		3,301
Prepaid expenses	608		—		608
Other current assets	78		—		78
Property and equipment	1,938		—		1,938
Operating lease right-of-use assets	12,356		—		12,356
Identifiable intangible assets 1	55,681		—		55,681
Deferred tax assets	54		—		54
Other noncurrent assets	404		—		404
Total assets	75,808		—		75,808

Accounts payable	(347)		—		(347)
Accrued liabilities	(644)		—		(644)
Operating lease liabilities – current portion	(4,451)		—		(4,451)
Operating lease liabilities – less current portion	(7,905)		—		(7,905)


Total liabilities	(13,347)		—		(13,347)

Goodwill	$	4,393	$	(410)	$	3,983


	September 30, 2020
			Gross Unrealized
	Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value
	(In thousands)
US corporate securities	$	9,052	$	10	$	(5)	$	9,057


Restricted investments, held-to-maturity	$	9,052	$	10	$	(5)	$	9,057


	(In thousands)
Goodwill, balance at December 31, 2019	$	2,918,992
Adjustments relating to deferred tax assets	(8)
Acquisition 1	3,983

Goodwill, balance at September 30, 2020	$	2,922,967



Effective date			July 11, 2018
Final maturity date 1			July 9, 2021
Borrowing capacity			$325,000
Accordion option 2			$175,000
Unused commitment fee rate 3			20 to 40 basis points
Program fees on outstanding balances 4			one-month LIBOR + 80 to 100 basis points


Share Repurchase Plan		Quarter-to-Date September 30, 2020			Year-to-Date September 30, 2020
Board Approval Date	Authorized Amount	Shares	Amount		Shares	Amount
	(in thousands)

May 30, 2019 1	$250,000	—	$	—	1,139	$	34,630
		—	$	—	1,139	$	34,630


Share Repurchase Plan		Quarter-to-Date September 30, 2019			Year-to-Date September 30, 2019
Board Approval Date	Authorized Amount	Shares	Amount		Shares	Amount
	(in thousands)
June 1, 2018	$250,000	—	$	—	2,315	$	70,500
May 30, 2019 1	$250,000	—	—		559	16,392
		—	$	—	2,874	$	86,892


	September 30, 2020				December 31, 2019
	Receivable		Payable		Receivable		Payable
	(In thousands)
Central Freight Lines	$	233	$	—	$	2,872	$	—
SME Industries	2		—		17		—
DPF Mobile	—		—		—		2
Other Affiliates	1		—		—		—
Total	$	236	$	—	$	2,889	$	2


ITEM 1.			FINANCIAL STATEMENTS


	September 30, 2020				December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(In thousands)
Financial Assets:
Restricted investments, held-to-maturity 1	$	9,052	$	9,057	$	8,912	$	8,915


TRP Investments 2	37,547		37,547		30,878		30,878
Investments in equity securities 2	21,859		21,859		8,722		8,722

Financial Liabilities:
Term Loan, due October 2020 3	$	365,000	$	365,000	$	364,825	$	365,000
2018 RSA, due July 2021 4	201,878		202,000		204,762		205,000

Revolver, due October 2022	170,000		170,000		279,000		279,000
Contingent consideration associated with acquisition 5	17,570		17,570		—		—


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain (Loss)
	(In thousands)
As of September 30, 2020
Investments in equity securities 1	$	21,859	$	21,859	$	—	$	—	$	6,737


As of December 31, 2019
Investments in equity securities 1	$	8,722	$	8,722	$	—	$	—	$	(184)


ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2020 vs.		YTD 2020 vs.
	2020			2019			2020			2019			QTD 2019		YTD 2019
	(Dollars in thousands, except per tractor data)												Increase (Decrease)
Total revenue	$	975,881		$	986,768		$	2,774,311		$	2,980,040		(1.1	%)	(6.9	%)
Revenue, excluding fuel surcharge and intersegment transactions	$	902,592		$	876,385		$	2,539,709		$	2,642,663		3.0	%	(3.9	%)
GAAP: Operating income	$	168,781		$	109,409		$	383,903		$	350,356		54.3	%	9.6	%
Non-GAAP: Adjusted Operating Income ¹	$	169,105		$	109,758		$	398,076		$	353,585		54.1	%	12.6	%
Average revenue per tractor ²	$	48,884		$	46,372		$	137,736		$	139,536		5.4	%	(1.3	%)
GAAP: Operating ratio ²	82.7		%	88.9		%	86.2		%	88.2		%	(620 bps)		(200 bps)
Non-GAAP: Adjusted Operating Ratio ¹ ²	81.3		%	87.5		%	84.3		%	86.6		%	(620 bps)		(230 bps)
Non-paid empty miles percentage ²	12.6		%	12.8		%	13.1		%	12.9		%	(20 bps)		20 bps
Average length of haul (miles) ²	436			431			427			429			1.2	%	(0.5	%)
Total miles per tractor ²	23,422			23,397			68,729			69,578			0.1	%	(1.2	%)
Average tractors ² ³	18,464			18,899			18,439			18,939			(2.3	%)	(2.6	%)
Average trailers ²	58,310			57,889			57,716			58,394			0.7	%	(1.2	%)


Results of Operations — Consolidated Operating and Other Expenses


Source	September 30, 2020
	(In thousands)
Cash and cash equivalents, excluding restricted cash	$	240,236
Availability under Revolver, due October 2022 1	598,906
Availability under 2018 RSA, due July 2021 2	15,719
Total unrestricted liquidity	$	854,861
Cash and cash equivalents – restricted 3	38,271
Restricted investments, held-to-maturity, amortized cost 3	9,052
Total liquidity, including restricted cash and restricted investments	$	902,184


	Year-to-Date September 30,				Change
	2020		2019
	(In thousands)
Net cash provided by operating activities	$	655,019	$	612,412	$	42,607
Net cash used in investing activities	(335,602)		(468,420)		132,818
Net cash used in financing activities	(243,138)		(139,156)		(103,982)


ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs 1








July 1, 2020 to July 31, 2020	—	$	—	—	$	198,977,224
August 1, 2020 to August 31, 2020	—	$	—	—	$	198,977,224
September 1, 2020 to September 30, 2020	—	$	—	—	$	198,977,224
Total	—	$	—	—	$	198,977,224