Knight-Swift Transportation Holdings Inc 8-K, filed Jul 20, 2022
Knight-Swift Transportation Holdings Inc. (KNX)
8-K
2022-07-20
For: 2022-07-20
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Added on
April 08, 2026
About this 8-K
Knight-Swift Transportation Holdings Inc filed this 8-K on July 20, 2022.
Items reported
- Item 2.02: Financial results
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________________________________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 2022
___________________________________________________________________________________________________________________________________
___________________________________________________________________________________________________________________________________
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________________________________
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | |||||||||||||||
(Address of principal executive offices and zip code)
(602 ) 269-2000
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||||||||||||||
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||||||||||||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||||||||||||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||||||||||||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||||||||||||||
| Securities registered pursuant to Section 12(b) of the Act: | |||||||||||||||||
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| ITEM 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION | ||||
On July 20, 2022 , Knight-Swift Transportation Holdings Inc. (the "Company") issued a press release (the "Press Release") announcing its financial results for the quarter ended June 30, 2022. 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 | ||||
(d) Exhibits
| Exhibit | Description | |||||||
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: | /s/ Adam W. Miller | ||||||||||||||||
| Adam W. Miller | |||||||||||||||||
| Chief Financial Officer | |||||||||||||||||
| Exhibit 99.1 | ||||||||
July 20, 2022
Phoenix, Arizona
Knight-Swift Transportation Holdings Inc. Reports Second Quarter 2022 Revenue and Earnings | ||
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 second quarter 2022 net income attributable to Knight-Swift of $219.5 million and Adjusted Net Income Attributable 1 to Knight-Swift of $230.2 million. GAAP earnings per diluted share for the second quarter of 2022 were $1.35, compared to $0.92 for the second quarter of 2021. The Adjusted EPS was $1.41 for the second quarter of 2022, compared to $0.98 for the second quarter of 2021.
| Key Financial Highlights | ||
Each reportable segment achieved double-digit revenue growth while improving margins, leading to consolidated revenue growth of 39.7%, excluding truckload and less-than-truckload ("LTL") fuel surcharge. Consolidated operating income improved 70.5% to $325.8 million in the second quarter of 2022, as compared to the same quarter last year. Net Income Attributable to Knight-Swift increased by 43.6% to $219.5 million.
•Truckload — 78.9% Adjusted Operating Ratio, a 200 basis point improvement, supported by an 11.2% year-over-year increase in revenue, excluding fuel surcharge and intersegment transactions.
•LTL — 78.7% Adjusted Operating Ratio, a 720 basis point sequential improvement, as yield remains strong and we continue to capture both revenue and cost synergies.
•Logistics — 82.2% Adjusted Operating Ratio, year-over-year operating income improvement of 204.7%. Load count grew by 48.2%, leading to a 52.5% increase in revenue, excluding intersegment transactions.
•Intermodal — 89.3% operating ratio, a 570 basis point improvement year-over-year, leading to a 143.8% increase in operating income with year-over-year revenue growth of 15.2%.
•Non-reportable Segments — Operating income improvement of 614.6%, supported by revenue growth of 91.8%, from the activities within our operating segments of insurance, equipment maintenance, equipment leasing, and warehousing.
•Free Cash Flow 1 — $528.7 million of free cash flow during the first half of 2022.
•Return on Net Tangible Assets 1 — Return on net tangible assets of 24.8% during the last 12 months, generated through internal growth, acquisitions, and investments.
•Embark Technology Inc. ("Embark") — 2021 initial investment in Embark declined, resulting in an unrealized loss that negatively impacted earnings per diluted share and Adjusted EPS by $0.16 during the second quarter of 2022.
Quarter Ended June 30, 2 | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||
| Total revenue | $ | 1,961,131 | $ | 1,315,701 | 49.1 | % | |||||||||||
| Revenue, excluding truckload and LTL fuel surcharge | $ | 1,694,531 | $ | 1,212,872 | 39.7 | % | |||||||||||
| Operating income | $ | 325,778 | $ | 191,115 | 70.5 | % | |||||||||||
Adjusted Operating Income 1 | $ | 339,993 | $ | 204,637 | 66.1 | % | |||||||||||
| Net income attributable to Knight-Swift | $ | 219,492 | $ | 152,804 | 43.6 | % | |||||||||||
Adjusted Net Income Attributable to Knight-Swift 1 | $ | 230,189 | $ | 162,998 | 41.2 | % | |||||||||||
| Earnings per diluted share | $ | 1.35 | $ | 0.92 | 46.7 | % | |||||||||||
Adjusted EPS 1 | $ | 1.41 | $ | 0.98 | 43.9 | % | |||||||||||
1See GAAP to non-GAAP reconciliation in the schedules following this release.
2For 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.
David Jackson, CEO of Knight-Swift, commented, "We achieved double-digit revenue growth and expanded margins in each of our reportable segments during the quarter. Although the spot market softened during the quarter, the Truckload segment operated with a sub-80% Adjusted Operating Ratio, while our Logistics segment grew load count 48.2% and continues to provide significant value to our customers through our power-only and traditional brokerage service offerings. The LTL segment produced a 78.7% Adjusted Operating Ratio during the quarter, as the ACT and MME teams work together to build out a connected super-regional network that will provide additional yield and revenue opportunities. We are encouraged by the LTL yield improvement, the magnitude of the synergies being realized, and the market share growth opportunities. The Intermodal segment continues to build out a freight network that aligns with our new rail partners, while continuing to operate with double-digit margins. Demand continues to strengthen for our non-truckload services, and we believe will lead to further revenue and earnings growth. We believe that our ability to pivot to more contract opportunities, provide scale and flexibility to shippers with excess trailers, along with our diverse customer base and expanding geographical footprint, positions us well to navigate a changing environment in the near term."
Other (Expense) Income, net — We incurred $25.6 million of expense within "Other (expense) income, net" in the condensed consolidated statement of comprehensive income in the second quarter of 2022, primarily due to unrealized losses on our investment in Embark. The unrealized losses on our investment in Embark negatively impacted earnings per diluted share and Adjusted EPS by $0.16 for the second quarter of 2022.
Income Taxes — The effective tax rate was 24.7% for the second quarter of 2022, compared to 25.3% for the second quarter of 2021. We expect the full-year 2022 effective tax rate to be approximately 25%.
Dividend and Share Repurchases — On April 19, 2022, our board of directors declared a quarterly cash dividend of $0.12 per share of common stock. The dividend was payable to the Company's stockholders of record as of June 10, 2022 and was paid on June 27, 2022. During the second quarter of 2022, we spent $150 million on share repurchases, bringing the year-to-date total repurchases to approximately $300 million.
| Segment Financial Performance | ||
Truckload Segment
| Quarter Ended June 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | $ | 981,479 | $ | 882,560 | 11.2 | % | |||||||||||
| Operating income | $ | 206,296 | $ | 168,457 | 22.5 | % | |||||||||||
Adjusted Operating Income 1 | $ | 206,619 | $ | 168,781 | 22.4 | % | |||||||||||
| Operating ratio | 82.6 | % | 82.9 | % | (30 | bps) | |||||||||||
Adjusted Operating Ratio 1 | 78.9 | % | 80.9 | % | (200 | 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 13,342 irregular route tractors and 4,713 dedicated tractors. Our Truckload segment operated at a 78.9% Adjusted Operating Ratio, which improved by 200 basis points year-over-year. This, along with 11.2% growth in revenue, excluding fuel surcharge and intersegment transactions, led to a 22.4% improvement in Adjusted Operating Income.
Revenue per loaded mile, excluding fuel surcharge and intersegment transactions increased 21.2%. Miles per tractor decreased by 6.6%, which is an improvement from the year-over-year decrease of 9.6% for the first quarter of 2022. These factors ultimately led to an 11.1% increase in average revenue per tractor and improved margins.
We are making modest progress with seating our tractors, leading to improved utilization. We continue to add scale by increasing our trailer count which has grown to approximately 73,000 trailers as of the second quarter of 2022.
| 2 | |||||||
LTL Segment 1
| Quarter Ended June 30, | |||||||||||||||||
| 2022 | |||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding fuel surcharge | $ | 224,178 | |||||||||||||||
| Operating income | $ | 43,767 | |||||||||||||||
Adjusted Operating Income 2 | $ | 47,762 | |||||||||||||||
| Operating ratio | 84.6 | % | |||||||||||||||
Adjusted Operating Ratio 2 | 78.7 | % | |||||||||||||||
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 made significant strides in improving margins, operating at a 78.7% Adjusted Operating Ratio during the second quarter of 2022. Revenue, excluding fuel surcharge, per hundredweight was $14.20, while revenue per shipment, excluding fuel surcharge was $151.64. The ACT and MME teams continue to achieve both customer and cost synergies as they connect their network of approximately 100 facilities and door count of 4,300, leading to more freight opportunities and a longer length of haul. During the back half of this year we expect door capacity will grow by 300 doors across 9 new or expanded locations. We continue to look for both organic and inorganic opportunities to geographically expand our footprint within the LTL market.
Logistics Segment
| Quarter Ended June 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding intersegment transactions | $ | 247,319 | $ | 162,167 | 52.5 | % | |||||||||||
| Operating income | $ | 43,749 | $ | 14,356 | 204.7 | % | |||||||||||
Adjusted Operating Income 1 | $ | 44,083 | $ | 14,453 | 205.0 | % | |||||||||||
| Operating ratio | 82.4 | % | 91.4 | % | (900 | bps) | |||||||||||
Adjusted Operating Ratio 1 | 82.2 | % | 91.1 | % | (890 | bps) | |||||||||||
1See GAAP to non-GAAP reconciliation in the schedules following this release.
Demand for our logistics service offering remains strong. We continue to leverage our consolidated fleet of approximately 73,000 trailers to support our power-only service offering. Logistics revenue, excluding intersegment transactions, increased 52.5% as we grew load count by 48.2% while increasing revenue per load by 2.9%. The Adjusted Operating Ratio improved to 82.2%, resulting in a 205.0% increase in Adjusted Operating Income. Logistics gross margin was 24.4% in the second quarter of 2022, compared to 15.7% in the second quarter of 2021.
| 3 | |||||||
Intermodal Segment
| Quarter Ended June 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Revenue, excluding intersegment transactions | $ | 132,854 | $ | 115,294 | 15.2 | % | |||||||||||
| Operating income | $ | 14,172 | $ | 5,812 | 143.8 | % | |||||||||||
| Operating ratio | 89.3 | % | 95.0 | % | (570 | bps) | |||||||||||
Operating income increased by 143.8%, as operating ratio improved from 95.0% to 89.3%. We saw meaningful improvements in street and rail velocity in many corridors after volumes in the beginning of the quarter were negatively impacted by longer container and chassis dwell times, as well as inconsistent rail network speeds. These factors contributed to a 39.2% increase in revenue per load, partially offset by a 17.2% decrease in load count. Labor challenges within the rail network appear to be softening, leading to improved notification times and more consistency for our customers.
Network fluidity continues to be a rail market challenge. As a result of our new network and improved service offering, we expect load volumes to inflect positive year-over-year beginning in the third quarter as we grow with new customers and expand with existing customers. To position Intermodal for continued growth, we increased our container count by over 600 during the first half of the year and we anticipate further growth during the second half. Intermodal continues to provide value to our customers and is complementary to the many services we offer.
Non-reportable Segments
| Quarter Ended June 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||
| Total revenue | $ | 128,112 | $ | 66,795 | 91.8 | % | |||||||||||
| Operating income | $ | 17,794 | $ | 2,490 | 614.6 | % | |||||||||||
The non-reportable segments include support services provided to our customers and third-party carriers, including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services. Our non-reportable segments also include certain corporate expenses (such as legal settlements and accruals, as well as $11.6 million in quarterly amortization of intangibles related to the 2017 merger between Knight and Swift and certain acquisitions). Strong demand for our insurance, equipment maintenance, equipment leasing, and warehousing services led to a 614.6% improvement in operating income, supported by 91.8% revenue growth within our non-reportable segments. We expect continued growth and income improvement from these segments moving forward.
| 4 | |||||||
| Consolidated Liquidity, Capital Resources, and Earnings Guidance | ||
Cash Flow Sources (Uses) 1
| Year-to-Date June 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Net cash provided by operating activities | $ | 719,984 | $ | 459,504 | $ | 260,480 | |||||||||||
| Net cash used in investing activities | (204,306) | (196,916) | (7,390) | ||||||||||||||
| Net cash used in financing activities | (552,361) | (227,798) | (324,563) | ||||||||||||||
Net (decrease) increase in cash, restricted cash, and equivalents 2 | $ | (36,683) | $ | 34,790 | $ | (71,473) | |||||||||||
| Net capital expenditures | $ | (191,283) | $ | (120,481) | $ | (70,802) | |||||||||||
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 (decrease) 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 June 30, 2022, we had a balance of $1.2 billion of unrestricted cash and available liquidity and $6.6 billion of stockholders' equity. The face value of our debt, net of unrestricted cash ("Net Debt") was $1.8 billion as of June 30, 2022. Free Cash Flow1 for the first half of 2022 was $528.7 million. During the first half of 2022, we generated $720.0 million in operating cash flows and paid down $38.8 million in long-term debt, $27.6 million in finance lease liabilities, and $19.8 million on our operating lease liabilities. We also repurchased approximately $300 million worth of our shares, and issued $39.7 million in dividends to our stockholders.
Equipment and Capital Expenditures — Gain on sale of revenue equipment increased to $23.0 million in the second quarter of 2022, compared to $15.1 million in the same quarter of 2021. The average age of the tractor fleet within our Truckload segment was 2.7 years in the second quarter of 2022, compared to 2.4 years in the same quarter of 2021. The average age of the tractor fleet within our LTL segment was 4.6 years in the second quarter of 2022. Cash capital expenditures, net of disposal proceeds, were $191.3 million in the first half of 2022. We expect net cash capital expenditures will be in the range of $550 – $600 million for full-year 2022. Our net cash capital expenditures primarily represent replacements of existing tractors and trailers, as well as investments in our terminal network, driver amenities, and technology.
Guidance — We expect that Adjusted EPS1 for full-year 2022 will range from $5.30 to $5.45, which is an update from our previous expectation of $5.20 to $5.40. Our expected Adjusted EPS1 range is based on the current truckload, LTL, and general market conditions, recent trends, and the current beliefs, assumptions, and expectations of management, as follows:
•Rates inflect negatively year-over-year late in the third quarter and into the fourth quarter as the moderating spot market yields less non-contract opportunities
•Stable truck count with a modest sequential improvement in miles per tractor
•Year-over-year increases in LTL revenue with improved margins
•Increased Logistics load volumes offset by a reduced revenue per load with an operation ratio in the high 80s
•Intermodal margins to remain in the double digits with volumes improving year-over-year
•Continued growth in revenue and operating income in non-reportable
•Inflationary pressure in most cost areas including, maintenance, equipment, and non-driving labor
•Equipment gains to be approximately $20 - $25 million in total for the rest of the year
| 5 | |||||||
•Increased interest rates expected to negatively impact second half 2022 EPS by $0.05 - $0.07 from our previous forecast
•Net cash capital expenditures expected range of $550 - $600 million for the full year 2022
•Approximate tax rate of 25% for the full year 2022
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 EPS1 guidance.
________
1See GAAP to non-GAAP reconciliations in the schedules following this release.
2Our 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 $0.30 for full-year 2022), as well as noncash impairments and certain other unusual items, if any.
| Conference Call | ||
Knight-Swift will host a live conference call with analysts and investors to discuss the earnings release, the results of operations, and other matters following its earnings press release on Wednesday, July 20, 2022, at 4:30 p.m. EDT. The conference dial in information is +1 (888) 886-7786 (Conference ID: 46652829). Please note that since the call is expected to begin promptly as scheduled, you will need to join a few minutes before that time. Slides to accompany this call will be posted on the Company’s website and will be available to download just before the scheduled conference call. To view the presentation, please visit https://investor.knight-swift.com/, "Second Quarter 2022 Conference Call Presentation."
| 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 full truckload, LTL, intermodal, and logistics services. 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 one of the country's largest tractor fleet, Knight-Swift also contracts with third-party equipment providers to provide a broad range of transportation 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
| 6 | |||||||
| 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," "feel", "goal," "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, 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, share repurchases, capital expenditures, or other financial items,
•future dividends,
•future effective tax rates,
•future performance of our reportable segments, including network design, cost structure, container count, margin, and volumes within our Intermodal segment, and the expected network, margin, and volumes 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, 2021, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.
| 7 | |||||||
| Financial Statements | ||
Condensed Consolidated Statements of Comprehensive Income (Unaudited) 1 | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In thousands, except per share data) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Revenue, excluding truckload and LTL fuel surcharge | $ | 1,694,531 | $ | 1,212,872 | $ | 3,342,409 | $ | 2,345,977 | |||||||||||||||
| Truckload and LTL fuel surcharge | 266,600 | 102,829 | 445,711 | 192,738 | |||||||||||||||||||
| Total revenue | 1,961,131 | 1,315,701 | 3,788,120 | 2,538,715 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Salaries, wages, and benefits | 549,956 | 377,613 | 1,086,012 | 747,983 | |||||||||||||||||||
| Fuel | 257,146 | 126,055 | 447,635 | 244,291 | |||||||||||||||||||
| Operations and maintenance | 106,724 | 71,313 | 202,607 | 139,383 | |||||||||||||||||||
| Insurance and claims | 102,084 | 58,776 | 200,276 | 114,419 | |||||||||||||||||||
| Operating taxes and licenses | 30,204 | 21,717 | 59,241 | 43,765 | |||||||||||||||||||
| Communications | 5,744 | 4,635 | 11,614 | 9,672 | |||||||||||||||||||
| Depreciation and amortization of property and equipment | 147,482 | 123,606 | 292,526 | 243,521 | |||||||||||||||||||
| Amortization of intangibles | 16,215 | 11,984 | 32,381 | 23,733 | |||||||||||||||||||
| Rental expense | 13,492 | 13,399 | 26,893 | 30,263 | |||||||||||||||||||
| Purchased transportation | 384,910 | 304,157 | 771,356 | 562,387 | |||||||||||||||||||
| Impairments | — | — | 810 | — | |||||||||||||||||||
| Miscellaneous operating expenses | 21,396 | 11,331 | 32,905 | 25,924 | |||||||||||||||||||
| Total operating expenses | 1,635,353 | 1,124,586 | 3,164,256 | 2,185,341 | |||||||||||||||||||
| Operating income | 325,778 | 191,115 | 623,864 | 353,374 | |||||||||||||||||||
| Other (expenses) income: | |||||||||||||||||||||||
| Interest income | 675 | 270 | 1,136 | 564 | |||||||||||||||||||
| Interest expense | (9,345) | (3,307) | (16,025) | (6,793) | |||||||||||||||||||
| Other (expense) income, net | (25,576) | 16,840 | (39,981) | 32,945 | |||||||||||||||||||
| Total other (expenses) income, net | (34,246) | 13,803 | (54,870) | 26,716 | |||||||||||||||||||
| Income before income taxes | 291,532 | 204,918 | 568,994 | 380,090 | |||||||||||||||||||
| Income tax expense | 72,090 | 51,783 | 141,264 | 97,112 | |||||||||||||||||||
| Net income | 219,442 | 153,135 | 427,730 | 282,978 | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling interest | 50 | (331) | 99 | (384) | |||||||||||||||||||
| Net income attributable to Knight-Swift | $ | 219,492 | $ | 152,804 | $ | 427,829 | $ | 282,594 | |||||||||||||||
| Other comprehensive loss | (1,862) | — | (2,234) | — | |||||||||||||||||||
| Comprehensive income | $ | 217,630 | $ | 152,804 | $ | 425,595 | $ | 282,594 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||||||
| Basic | $ | 1.35 | $ | 0.92 | $ | 2.61 | $ | 1.70 | |||||||||||||||
| Diluted | $ | 1.35 | $ | 0.92 | $ | 2.60 | $ | 1.69 | |||||||||||||||
| Dividends declared per share: | $ | 0.12 | $ | 0.10 | $ | 0.24 | $ | 0.18 | |||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 162,365 | 165,577 | 163,863 | 165,751 | |||||||||||||||||||
| Diluted | 163,166 | 166,585 | 164,801 | 166,750 | |||||||||||||||||||
________
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. The reported results do not include the results of operations of MME and its subsidiaries prior to its acquisition by Knight-Swift on December 6, 2021 in accordance with the accounting treatment applicable to the transaction.
| 8 | |||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||
| June 30, 2022 | December 31, 2021 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 198,021 | $ | 261,001 | |||||||
| Cash and cash equivalents – restricted | 111,449 | 87,241 | |||||||||
| Restricted investments, held-to-maturity, amortized cost | 7,856 | 5,866 | |||||||||
Trade receivables, net of allowance for doubtful accounts of $22,124 and $21,663, respectively | 1,010,768 | 911,336 | |||||||||
| Contract balance – revenue in transit | 20,422 | 22,936 | |||||||||
| Prepaid expenses | 79,405 | 90,507 | |||||||||
| Assets held for sale | 11,195 | 8,166 | |||||||||
| Income tax receivable | 6,880 | 909 | |||||||||
| Other current assets | 27,421 | 26,318 | |||||||||
| Total current assets | 1,473,417 | 1,414,280 | |||||||||
| Property and equipment, net | 3,601,189 | 3,555,364 | |||||||||
| Operating lease right-of-use assets | 165,643 | 147,540 | |||||||||
| Goodwill | 3,518,589 | 3,515,135 | |||||||||
| Intangible assets, net | 1,798,668 | 1,831,049 | |||||||||
| Other long-term assets | 157,372 | 192,132 | |||||||||
| Total assets | $ | 10,714,878 | $ | 10,655,500 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 220,469 | $ | 224,844 | |||||||
| Accrued payroll and purchased transportation | 245,679 | 217,084 | |||||||||
| Accrued liabilities | 124,072 | 128,536 | |||||||||
| Claims accruals – current portion | 240,021 | 206,607 | |||||||||
Finance lease liabilities and long-term debt – current portion | 235,775 | 262,423 | |||||||||
| Operating lease liabilities – current portion | 37,787 | 35,322 | |||||||||
| Total current liabilities | 1,103,803 | 1,074,816 | |||||||||
| Revolving line of credit | 129,000 | 260,000 | |||||||||
Long-term debt – less current portion | 1,028,617 | 1,037,552 | |||||||||
| Finance lease liabilities – less current portion | 327,320 | 256,166 | |||||||||
| Operating lease liabilities – less current portion | 123,274 | 107,614 | |||||||||
| Accounts receivable securitization | 278,594 | 278,483 | |||||||||
| Claims accruals – less current portion | 206,418 | 210,714 | |||||||||
| Deferred tax liabilities | 874,601 | 874,877 | |||||||||
| Other long-term liabilities | 11,994 | 11,828 | |||||||||
| Total liabilities | 4,083,621 | 4,112,050 | |||||||||
| Stockholders’ equity: | |||||||||||
| Common stock | 1,606 | 1,660 | |||||||||
| Additional paid-in capital | 4,372,916 | 4,350,913 | |||||||||
| Accumulated other comprehensive loss | (2,797) | (563) | |||||||||
| Retained earnings | 2,249,333 | 2,181,142 | |||||||||
| Total Knight-Swift stockholders' equity | 6,621,058 | 6,533,152 | |||||||||
| Noncontrolling interest | 10,199 | 10,298 | |||||||||
| Total stockholders’ equity | 6,631,257 | 6,543,450 | |||||||||
| Total liabilities and stockholders’ equity | $ | 10,714,878 | $ | 10,655,500 | |||||||
| 9 | |||||||
| Segment Operating Statistics (Unaudited) | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||||||||||||||
| 2022 | 2021 | Change | 2022 | 2021 | Change | ||||||||||||||||||||||||||||||
| Truckload | |||||||||||||||||||||||||||||||||||
Average revenue per tractor 1 | $ | 54,361 | $ | 48,939 | 11.1 | % | $ | 106,775 | $ | 96,827 | 10.3 | % | |||||||||||||||||||||||
| Non-paid empty miles percentage | 14.6 | % | 13.0 | % | 160 | bps | 14.4 | % | 12.9 | % | 150 | bps | |||||||||||||||||||||||
| Average length of haul (miles) | 392 | 408 | (3.9 | %) | 393 | 410 | (4.1 | %) | |||||||||||||||||||||||||||
| Miles per tractor | 19,542 | 20,913 | (6.6 | %) | 38,460 | 41,841 | (8.1 | %) | |||||||||||||||||||||||||||
| Average tractors | 18,055 | 18,034 | 0.1 | % | 18,010 | 18,129 | (0.7 | %) | |||||||||||||||||||||||||||
Average trailers 2 | 73,010 | 60,858 | 20.0 | % | 72,111 | 60,382 | 19.4 | % | |||||||||||||||||||||||||||
LTL 3 4 | |||||||||||||||||||||||||||||||||||
| Shipments per day | 19,657 | N/A | N/A | 19,220 | N/A | N/A | |||||||||||||||||||||||||||||
| Weight per shipment (pounds) | 1,068 | N/A | N/A | 1,083 | N/A | N/A | |||||||||||||||||||||||||||||
| Average length of haul (miles) | 522 | N/A | N/A | 522 | N/A | N/A | |||||||||||||||||||||||||||||
| Revenue per shipment | $ | 191.30 | N/A | N/A | $ | 185.01 | N/A | N/A | |||||||||||||||||||||||||||
| Revenue xFSR per shipment | $ | 151.64 | N/A | N/A | $ | 151.18 | N/A | N/A | |||||||||||||||||||||||||||
| Revenue per hundredweight | $ 17.91 | N/A | N/A | $ 17.09 | N/A | N/A | |||||||||||||||||||||||||||||
| Revenue xFSR per hundredweight | $ 14.20 | N/A | N/A | $ 13.97 | N/A | N/A | |||||||||||||||||||||||||||||
Average tractors 5 | 3,129 | N/A | N/A | 3,110 | N/A | N/A | |||||||||||||||||||||||||||||
Average trailers 6 | 8,402 | N/A | N/A | 8,352 | N/A | N/A | |||||||||||||||||||||||||||||
| Logistics | |||||||||||||||||||||||||||||||||||
Revenue per load 7 | $ | 2,257 | $ | 2,193 | 2.9 | % | $ | 2,471 | $ | 2,094 | 18.0 | % | |||||||||||||||||||||||
| Gross margin | 24.4 | % | 15.7 | % | 870 | bps | 22.2 | % | 15.2 | % | 700 | bps | |||||||||||||||||||||||
| Intermodal | |||||||||||||||||||||||||||||||||||
Average revenue per load 7 | $ | 3,642 | $ | 2,616 | 39.2 | % | $ | 3,560 | $ | 2,583 | 37.8 | % | |||||||||||||||||||||||
| Load count | 36,474 | 44,073 | (17.2 | %) | 67,989 | 86,041 | (21.0 | %) | |||||||||||||||||||||||||||
| Average tractors | 623 | 611 | 2.0 | % | 603 | 605 | (0.3 | %) | |||||||||||||||||||||||||||
| Average containers | 11,491 | 10,842 | 6.0 | % | 11,259 | 10,844 | 3.8 | % | |||||||||||||||||||||||||||
1Computed with revenue, excluding fuel surcharge and intersegment transactions
2Second quarter 2022 includes 6,014 trailers related to leasing activities recorded within our non-reportable operating segments. Second quarter 2021 does not include 5,201 trailers related to leasing activities recorded within our non-reportable operating segments.
The year-to-date period ending June 30, 2022 includes 6,783 trailers related to leasing activities recorded within our non-reportable operating segments. The year-to-date period ending June 30, 2021 does not include 5,481 trailers related to leasing activities recorded within our non-reportable operating segments.
3Operating statistics within the LTL segment exclude dedicated and other businesses.
4Refer to Condensed Consolidated Statements of Comprehensive Income — footnote 1.
5Includes 700 and 698 tractors from ACT's and MME's dedicated and other businesses for quarter and year-to-date periods ended June 30, 2022.
6Includes 962 and 935 trailers from ACT's and MME's dedicated and other businesses for quarter and year-to-date periods ended June 30, 2022.
7Computed with revenue, excluding intersegment transactions.
| 10 | |||||||
| Non-GAAP Financial Measures and Reconciliations | ||
The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted Operating Income," "Adjusted EPS," "Adjusted Operating Ratio," "Free Cash Flow," and "Return on Net Tangible Assets," 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, Adjusted Operating Ratio, and Return on Net Tangible Assets 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. 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, Free Cash Flow, and Return on Net Tangible Assets, 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.
| 11 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Adjusted Operating Income and Adjusted Operating Ratio 1 2 | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 1,961,131 | $ | 1,315,701 | $ | 3,788,120 | $ | 2,538,715 | |||||||||||||||
| Total operating expenses | (1,635,353) | (1,124,586) | (3,164,256) | (2,185,341) | |||||||||||||||||||
| Operating income | $ | 325,778 | $ | 191,115 | $ | 623,864 | $ | 353,374 | |||||||||||||||
| Operating ratio | 83.4 | % | 85.5 | % | 83.5 | % | 86.1 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 1,961,131 | $ | 1,315,701 | $ | 3,788,120 | $ | 2,538,715 | |||||||||||||||
| Truckload and LTL fuel surcharge | (266,600) | (102,829) | (445,711) | (192,738) | |||||||||||||||||||
| Revenue, excluding truckload and LTL fuel surcharge | 1,694,531 | 1,212,872 | 3,342,409 | 2,345,977 | |||||||||||||||||||
| Total operating expenses | 1,635,353 | 1,124,586 | 3,164,256 | 2,185,341 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Truckload and LTL fuel surcharge | (266,600) | (102,829) | (445,711) | (192,738) | |||||||||||||||||||
Amortization of intangibles 3 | (16,215) | (11,984) | (32,381) | (23,733) | |||||||||||||||||||
Impairments 4 | — | — | (810) | — | |||||||||||||||||||
Legal accruals 5 | 2,000 | (879) | (3,055) | (2,121) | |||||||||||||||||||
Transaction fees 6 | — | (659) | — | (659) | |||||||||||||||||||
| Adjusted Operating Expenses | 1,354,538 | 1,008,235 | 2,682,299 | 1,966,090 | |||||||||||||||||||
| Adjusted Operating Income | $ | 339,993 | $ | 204,637 | $ | 660,110 | $ | 379,887 | |||||||||||||||
| Adjusted Operating Ratio | 79.9 | % | 83.1 | % | 80.3 | % | 83.8 | % | |||||||||||||||
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 building improvements (within our non-reportable segments).
5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following:
•During the second quarter of 2022, the Company decreased the estimated exposure related to an accrued legal matter previously identified as probable and estimable in prior periods based on a recent settlement agreement.
•2021 legal expense reflects costs related to certain class action lawsuits arising from employee and contract related matters.
6 "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 statements of comprehensive income.
| 12 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (Dollars in thousands, except per share data) | |||||||||||||||||||||||
| GAAP: Net income attributable to Knight-Swift | $ | 219,492 | $ | 152,804 | $ | 427,829 | $ | 282,594 | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Income tax expense attributable to Knight-Swift | 72,090 | 51,783 | 141,264 | 97,112 | |||||||||||||||||||
| Income before income taxes attributable to Knight-Swift | 291,582 | 204,587 | 569,093 | 379,706 | |||||||||||||||||||
Amortization of intangibles 3 | 16,215 | 11,984 | 32,381 | 23,733 | |||||||||||||||||||
Impairments 4 | — | — | 810 | — | |||||||||||||||||||
Legal accruals 5 | (2,000) | 879 | 3,055 | 2,121 | |||||||||||||||||||
Transaction fees 6 | — | 659 | — | 659 | |||||||||||||||||||
| Adjusted income before income taxes | 305,797 | 218,109 | 605,339 | 406,219 | |||||||||||||||||||
| Provision for income tax expense at effective rate | (75,608) | (55,111) | (150,287) | (103,788) | |||||||||||||||||||
| Non-GAAP: Adjusted Net Income Attributable to Knight-Swift | $ | 230,189 | $ | 162,998 | $ | 455,052 | $ | 302,431 | |||||||||||||||
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 June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| GAAP: Earnings per diluted share | $ | 1.35 | $ | 0.92 | $ | 2.60 | $ | 1.69 | |||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Income tax expense attributable to Knight-Swift | 0.44 | 0.31 | 0.86 | 0.58 | |||||||||||||||||||
| Income before income taxes attributable to Knight-Swift | 1.79 | 1.23 | 3.45 | 2.28 | |||||||||||||||||||
Amortization of intangibles 3 | 0.10 | 0.07 | 0.20 | 0.14 | |||||||||||||||||||
Impairments 4 | — | — | — | — | |||||||||||||||||||
Legal accruals 5 | (0.01) | 0.01 | 0.02 | 0.01 | |||||||||||||||||||
Transaction fees 6 | — | — | — | — | |||||||||||||||||||
| Adjusted income before income taxes | 1.87 | 1.31 | 3.67 | 2.44 | |||||||||||||||||||
| Provision for income tax expense at effective rate | (0.46) | (0.33) | (0.91) | (0.62) | |||||||||||||||||||
| Non-GAAP: Adjusted EPS | $ | 1.41 | $ | 0.98 | $ | 2.76 | $ | 1.81 | |||||||||||||||
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.
| 13 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Segment Adjusted Operating Income and Adjusted Operating Ratio 1 | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| Truckload Segment | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 1,188,809 | $ | 985,858 | $ | 2,269,340 | $ | 1,948,805 | |||||||||||||||
| Total operating expenses | (982,513) | (817,401) | (1,857,927) | (1,621,865) | |||||||||||||||||||
| Operating income | $ | 206,296 | $ | 168,457 | $ | 411,413 | $ | 326,940 | |||||||||||||||
| Operating ratio | 82.6 | % | 82.9 | % | 81.9 | % | 83.2 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 1,188,809 | $ | 985,858 | $ | 2,269,340 | $ | 1,948,805 | |||||||||||||||
| Fuel surcharge | (206,931) | (102,829) | (345,592) | (192,738) | |||||||||||||||||||
| Intersegment transactions | (399) | (469) | (735) | (693) | |||||||||||||||||||
| Revenue, excluding fuel surcharge and intersegment transactions | 981,479 | 882,560 | 1,923,013 | 1,755,374 | |||||||||||||||||||
| Total operating expenses | 982,513 | 817,401 | 1,857,927 | 1,621,865 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Fuel surcharge | (206,931) | (102,829) | (345,592) | (192,738) | |||||||||||||||||||
| Intersegment transactions | (399) | (469) | (735) | (693) | |||||||||||||||||||
Amortization of intangibles 2 | (323) | (324) | (647) | (648) | |||||||||||||||||||
| Adjusted Operating Expenses | 774,860 | 713,779 | 1,510,953 | 1,427,786 | |||||||||||||||||||
| Adjusted Operating Income | $ | 206,619 | $ | 168,781 | $ | 412,060 | $ | 327,588 | |||||||||||||||
| Adjusted Operating Ratio | 78.9 | % | 80.9 | % | 78.6 | % | 81.3 | % | |||||||||||||||
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.
| 14 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Segment Adjusted Operating Income and Adjusted Operating Ratio 1 — (Continued) | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
LTL Segment 2 | 2022 | 2022 | |||||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 283,847 | $ | 538,972 | |||||||||||||||||||
| Total operating expenses | (240,080) | (468,828) | |||||||||||||||||||||
| Operating income | $ | 43,767 | $ | 70,144 | |||||||||||||||||||
| Operating ratio | 84.6 | % | 87.0 | % | |||||||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 283,847 | $ | 538,972 | |||||||||||||||||||
| Fuel surcharge | (59,669) | (100,119) | |||||||||||||||||||||
| Revenue, excluding fuel surcharge | 224,178 | 438,853 | |||||||||||||||||||||
| Total operating expenses | 240,080 | 468,828 | |||||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Fuel surcharge | (59,669) | (100,119) | |||||||||||||||||||||
Amortization of intangibles 3 | (3,995) | (7,940) | |||||||||||||||||||||
| Adjusted Operating Expenses | 176,416 | 360,769 | |||||||||||||||||||||
| Adjusted Operating Income | $ | 47,762 | $ | 78,084 | |||||||||||||||||||
| Adjusted Operating Ratio | 78.7 | % | 82.2 | % | |||||||||||||||||||
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 and MME acquisitions.
| 15 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Segment Adjusted Operating Income and Adjusted Operating Ratio 1 — (Continued) | ||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| Logistics Segment | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 248,662 | $ | 166,737 | $ | 530,701 | $ | 285,624 | |||||||||||||||
| Total operating expenses | (204,913) | (152,381) | (447,351) | (263,691) | |||||||||||||||||||
| Operating income | $ | 43,749 | $ | 14,356 | $ | 83,350 | $ | 21,933 | |||||||||||||||
| Operating ratio | 82.4 | % | 91.4 | % | 84.3 | % | 92.3 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 248,662 | $ | 166,737 | $ | 530,701 | $ | 285,624 | |||||||||||||||
| Intersegment transactions | (1,343) | (4,570) | (3,211) | (7,735) | |||||||||||||||||||
| Revenue, excluding intersegment transactions | 247,319 | 162,167 | 527,490 | 277,889 | |||||||||||||||||||
| Total operating expenses | 204,913 | 152,381 | 447,351 | 263,691 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Intersegment transactions | (1,343) | (4,570) | (3,211) | (7,735) | |||||||||||||||||||
Amortization of intangibles 2 | (334) | (97) | (668) | (97) | |||||||||||||||||||
| Adjusted Operating Expenses | 203,236 | 147,714 | 443,472 | 255,859 | |||||||||||||||||||
| Adjusted Operating Income | $ | 44,083 | $ | 14,453 | $ | 84,018 | $ | 22,030 | |||||||||||||||
| Adjusted Operating Ratio | 82.2 | % | 91.1 | % | 84.1 | % | 92.1 | % | |||||||||||||||
| Quarter Ended June 30, | Year-to-Date June 30, | ||||||||||||||||||||||
| Intermodal Segment | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
| GAAP Presentation | (Dollars in thousands) | ||||||||||||||||||||||
| Total revenue | $ | 132,871 | $ | 115,378 | $ | 242,093 | $ | 222,444 | |||||||||||||||
| Total operating expenses | (118,699) | (109,566) | (212,751) | (213,175) | |||||||||||||||||||
| Operating income | $ | 14,172 | $ | 5,812 | $ | 29,342 | $ | 9,269 | |||||||||||||||
| Operating ratio | 89.3 | % | 95.0 | % | 87.9 | % | 95.8 | % | |||||||||||||||
| Non-GAAP Presentation | |||||||||||||||||||||||
| Total revenue | $ | 132,871 | $ | 115,378 | $ | 242,093 | $ | 222,444 | |||||||||||||||
| Intersegment transactions | (17) | (84) | (47) | (179) | |||||||||||||||||||
| Revenue, excluding intersegment transactions | 132,854 | 115,294 | 242,046 | 222,265 | |||||||||||||||||||
| Total operating expenses | 118,699 | 109,566 | 212,751 | 213,175 | |||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Intersegment transactions | (17) | (84) | (47) | (179) | |||||||||||||||||||
| Adjusted Operating Expenses | 118,682 | 109,482 | 212,704 | 212,996 | |||||||||||||||||||
| Adjusted Operating Income | $ | 14,172 | $ | 5,812 | $ | 29,342 | $ | 9,269 | |||||||||||||||
| Adjusted Operating Ratio | 89.3 | % | 95.0 | % | 87.9 | % | 95.8 | % | |||||||||||||||
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.
| 16 | |||||||
Non-GAAP Reconciliation (Unaudited): | ||
Free Cash Flow 1 | ||
| Year-to-Date June 30, 2022 | |||||
| GAAP: Cash flows from operations | $ | 719,984 | |||
| Adjusted for: | |||||
| Proceeds from sale of property and equipment, including assets held for sale | 104,239 | ||||
| Purchases of property and equipment | (295,522) | ||||
| Non-GAAP: Free cash flow | $ | 528,701 | |||
Non-GAAP Reconciliation (Unaudited): | ||
Return on Net Tangible Assets 2 | ||
| June 30, | |||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||
| Total Assets | $ | 10,714,878 | $ | 8,682,459 | |||||||||||||||||||||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||||||||||||||||||||
| Intangible assets, net | (1,798,668) | (1,403,483) | |||||||||||||||||||||||||||||||||||||||
| Goodwill | (3,518,589) | (2,971,023) | |||||||||||||||||||||||||||||||||||||||
| Tangible Assets | $ | 5,397,621 | $ | 4,307,953 | |||||||||||||||||||||||||||||||||||||
| Total Liabilities | $ | 4,083,621 | $ | 2,584,406 | |||||||||||||||||||||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||||||||||||||||||||
| Revolving line of credit, finance lease obligations, and long-term debt | (1,720,712) | (592,286) | |||||||||||||||||||||||||||||||||||||||
| Accounts receivable securitization | (278,594) | (278,372) | |||||||||||||||||||||||||||||||||||||||
| Deferred income tax liabilities | (874,601) | (806,398) | |||||||||||||||||||||||||||||||||||||||
| Non-Interest Bearing Liabilities, excluding deferred income tax liabilities | $ | 1,209,714 | $ | 907,350 | |||||||||||||||||||||||||||||||||||||
| Net Tangible Assets | $ | 4,187,907 | $ | 3,400,603 | |||||||||||||||||||||||||||||||||||||
| Average Net Tangible Assets | $ | 3,794,255 | |||||||||||||||||||||||||||||||||||||||
| Adjusted Net Income - TTM June 30, 2022 | $ | 940,802 | |||||||||||||||||||||||||||||||||||||||
| Return on Net Tangible Assets | 24.8 | % | |||||||||||||||||||||||||||||||||||||||
1Pursuant to the requirements of Regulation G, this table reconciles GAAP cash flows from operations to non-GAAP Free Cash Flow.
2Pursuant to the requirements of Regulation G, this table reconciles Total Assets and Total Liabilities to Average Net Tangible Assets.
| 17 | |||||||
| Non-GAAP Reconciliation (Unaudited): | ||
Adjusted Net Income - Trailing Twelve Months 1 2 | ||
| Year-to-Date June 30, 2022 | Year-to-Date December 31, 2021 | Year-to-Date June 30, 2021 | TTM June 30, 2022 | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||
| GAAP: Net income attributable to Knight-Swift | $ | 427,829 | 743,388 | 282,594 | 888,623 | ||||||||||||||||||
| Adjusted for: | |||||||||||||||||||||||
| Income tax expense attributable to Knight-Swift | 141,264 | 230,887 | 97,112 | 275,039 | |||||||||||||||||||
| Income before income taxes attributable to Knight-Swift | 569,093 | 974,275 | 379,706 | 1,163,662 | |||||||||||||||||||
Amortization of intangibles 3 | 32,381 | 55,299 | 23,733 | 63,947 | |||||||||||||||||||
Impairments 4 | 810 | 299 | — | 1,109 | |||||||||||||||||||
Legal accruals 5 | 3,055 | (2,481) | 2,121 | (1,547) | |||||||||||||||||||
Transaction fees 6 | — | 4,445 | 659 | 3,786 | |||||||||||||||||||
Write-off of deferred debt issuance costs 7 | — | 1,024 | — | 1,024 | |||||||||||||||||||
| Adjusted income before income taxes | 605,339 | 1,032,861 | 406,219 | 1,231,981 | |||||||||||||||||||
| Provision for income tax expense at effective rate | (150,287) | (244,680) | (103,788) | (291,179) | |||||||||||||||||||
| Non-GAAP Adjusted Net Income Attributable to Knight Swift | $ | 455,052 | $ | 788,181 | $ | 302,431 | $ | 940,802 | |||||||||||||||
1Pursuant 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.
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 2017 Merger, the July 5, 2021 ACT acquisition, and other acquisitions.
4"Impairments" reflects the following non-cash impairments:
•First quarter 2022 impairment reflects the non-cash impairment of building improvements (within our non-reportable segments).
•2021 impairments related to certain revenue equipment held for sale (within the non-reportable segments and the Truckload segment).
5"Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following:
•During the second quarter of 2022, the Company decreased the estimated exposure related to an accrued legal matter previously identified as probable and estimable in prior periods based on a recent settlement agreement.
•Third quarter 2021 reversal related to 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. Additional 2021 legal costs relate to certain class action lawsuits arising from employee and contract related matters.
6"Transaction fees consist of legal and professional fees associated with the acquisitions of UTXL, ACT, and MME. The transaction fees are included within "Miscellaneous operating expense" in the condensed consolidated statements of comprehensive income.
7"Write-off of deferred debt issuance costs" is included within "Other income, net" in the condensed consolidated statements of comprehensive income for 2021. The loss was incurred as a result of replacing the 2017 Debt Agreement with the 2021 Debt Agreement in September.
| 18 | |||||||
Exhibit 99.2
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, adjusted earnings per share, adjusted income before taxes, adjusted operating expenses, return on net tangible assets, 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 and LTL segment fuel surcharges from revenue and nets these surcharges against fuel expense.
3 Adjustments • $16.2M in Q2 2022 and $12.0M in Q2 2021 of amortization expense from mergers and acquisitions • ($2.0)M in Q2 2022 and $0.9M in Q2 2021 of legal accrual expense • $0.7M in Q2 2021 of transaction fees related to UTXL and ACT 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation KNX Q2 2022 Comparative Results 2 Q2 2022 results include the $33.8M pre-tax (or $0.16 after-tax GAAP and Adjusted EPS) impact from unrealized mark-to-market losses in our investment in Embark Technology 1,316 1,961 2Q21 2Q22 Total Revenue + 49.1% 1,213 1,695 2Q21 2Q22 Revenue xFSC + 39.7% 191 326 2Q21 2Q22 Operating Income + 70.5% 205 340 2Q21 2Q22 Adj. Operating Inc. 1 + 66.1% 153 219 2Q21 2Q22 Net Income 2 + 43.6% 163 230 2Q21 2Q22 Adj. Net Income 1 2 + 41.2% $0.92 $1.35 2Q21 2Q22 Earnings Per Share 2 + 46.7% $0.98 $1.41 2Q21 2Q22 Adj. EPS 1 2 + 43.9% In m ill io ns Continued strong performance despite changing freight market In m ill io ns In m ill io ns
4 Truckload 981.5 57.3 % LTL 224.2 13.1 % Logistics 247.3 14.4 % Intermodal 132.9 7.8 % Other 128.1 7.5 % 1714 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation 2 Excludes intersegment transactions 3 Includes 6,014 trailers related to leasing activities recorded within our non-reportable operating segments for the second quarter of 2022 Truckload Q2 2022 YTD 2022 Revenue xFSR 2 $ 981.5 M $ 1,923.0 M Adjusted Op Income 1 $ 206.6 M $ 412.1 M Adjusted OR 1 78.9 % 78.6 % ~ 13,342 irregular and 4,713 dedicated tractors ~ 73,000 trailers 3 Intermodal Q2 2022 YTD 2022 Revenue 2 $ 132.9 M $ 242.0 M Adjusted Op Income 1 $ 14.2 M $ 29.3 M Adjusted OR 1 89.3 % 87.9 % ~ 600 tractors, 11,500 containers Logistics Q2 2022 YTD 2022 Revenue 2 $ 247.3 M $ 527.5 M Adjusted Op Income 1 $ 44.1 M $ 84.0 M Adjusted OR 1 82.2 % 84.1 % Less-than-Truckload Q2 2022 YTD 2022 Revenue xFSR $ 224.2 M $ 438.9 M Adjusted Op Income 1 $ 47.8 M $ 78.1 M Adjusted OR 1 78.7 % 82.2 % ~ Approximately 100 Service Centers ~ Terminal door count over 4,300 Q2 2022 Revenue Diversification Truckload 57% LTL 13% Logistics 14% Other 8% Intermodal 8% Segment Overview Revenue and income growth in all segments
5 • 22.4% year-over-year improvement in Adjusted Operating Income1 • 78.9% Adjusted Operating Ratio1 in Q2 2022 compared to 80.9% the previous year • Largest truckload trailer fleet continues to grow and now exceeds 73K • Improving miles per tractor; Q2 2022 decreased 6.6% compared to a decrease of 9.6% in Q1 2022 • 18,055 average tractors compared to 17,965 in Q1 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Truckload Operating Statistics Q2 2022 Q2 2021 Change Average revenue per tractor $54,361 $48,939 11.1 % Average tractors 18,055 18,034 0.1 % Average trailers 73,010 60,858 20.0 % Miles per tractor 19,542 20,913 (6.6 %) Truckload Financial Metrics Q2 2022 Q2 2021 Change (Dollars in thousands) Revenue xFSC $981,479 $882,560 11.2 % Operating income $206,296 $168,457 22.5 % Adjusted Operating Income 1 $206,619 $168,781 22.4 % Operating ratio 82.6% 82.9% (30 bps) Adjusted Operating Ratio 1 78.9% 80.9% (200 bps) Operating Performance - Truckload Fourth consecutive quarter with an Adjusted Operating Ratio1 in the 70's
6 • 78.7% Adjusted Operating Ratio1 in Q2 2022 • $47.8M of Adjusted Operating Income1 • 10.5% increase in LTL Revenue xFSC per shipment compared to proforma Q2 2021 • 13.6% increase in revenue xFSR per hundredweight compared to proforma Q2 2021 • Expect to grow door count by 300 across 9 new or expanded locations • Preserve the brands while connecting the networks LTL Operating Statistics Q2 2022 LTL shipments per day 19,657 LTL weight per shipment 1,068 LTL revenue xFSR per hundredweight $14.20 LTL revenue xFSR per shipment $151.64 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. LTL Financial Metrics Q2 2022 (Dollars in thousands) Revenue xFSC $224,178 Operating income $43,767 Adjusted Operating Income 1 $47,762 Operating ratio 84.6% Adjusted Operating Ratio 1 78.7% Operating Performance - LTL Both revenue and cost synergies ahead of plan
7 • 205.0% increase in Adjusted Operating Income1 to $44.1M with minimal capital investment • 48.2% increase in load count despite a softening spot market • Power-only services remain in high demand with load volumes increasing 96.7% year-over-year • 82.2% Adjusted Operating Ratio1 during the quarter, a 890 basis point improvement from the prior year • 24.4% Gross margin for Q2 representing a 870 basis point improvement from the prior year 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Operating Statistics Q2 2022 Q2 2021 Change Revenue per load $2,257 $2,193 2.9 % Gross margin 24.4% 15.7% 870 bps Logistics Financial Metrics Q2 2022 Q2 2021 Change (Dollars in thousands) Revenue ex intersegment $247,319 $162,167 52.5 % Operating income $43,749 $14,356 204.7 % Adjusted Operating Income 1 $44,083 $14,453 205.0 % Operating ratio 82.4% 91.4% (900 bps) Adjusted Operating Ratio 1 82.2% 91.1% (890 bps) Operating Performance - Logistics Continued load count growth with high demand for power-only services
8 • 143.8% year-over-year improvement in Operating Income • 89.3% operating ratio during Q2 2022 compared with 95.0% the prior year • 39.2% year-over-year increase in average revenue per load • 17.2% reduction in load volumes as a result of network fluidity within the rail and a shift in network alignment with our new rail provider • Load volumes expected to increase sequentially leading to year-over-year increases in the back half of 2022 Intermodal Operating Statistics Q2 2022 Q2 2021 Change Average revenue per load $3,642 $2,616 39.2 % Load count 36,474 44,073 (17.2 %) Average tractors 623 611 2.0 % Average containers 11,491 10,842 6.0 % Intermodal Financial Metrics Q2 2022 Q2 2021 Change (Dollars in thousands) Revenue ex intersegment $132,854 $115,294 15.2 % Operating income $14,172 $5,812 143.8 % Operating ratio 89.3% 95.0% (570 bps) Operating Performance - Intermodal Positioned for load volume growth in back half of 2022
9 Q2 Non-Reportable Performance: • 91.8% increase in revenue to $128.1M • 614.6% Increase in operating income to $17.8M Since 2019: • Developed Iron Insurance to provide insurance to third party carriers • Developed a more robust equipment leasing program • Expanded warehousing services by acquiring Hayes Warehousing • Developed Iron Maintenance to provide shop services to third party carriers • Acquired Eleos to provide in-cab solutions to third party carriers Tapping into New Growth Verticals while Diversifying Revenue is on pace to nearly quadruple since 2019 Actual Projected Op Income (1) 2019 2020 2021 2022 $0M $120M $240M $360M $480M $600M $(90)M $(60)M $(30)M $0M $30M $60M (1) 2022 Operating Income includes Q3 and Q4 projections Non Reportable Revenue and Operating Income Trends
10 Trucking Intermodal Logistics LTL Non-Reportable 2017 2018 2019 2020 2021 Q1 2022 Q2 2022 0% 20% 40% 60% 80% 100% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 $0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 Percent of Adjusted Operating Income 1 Rolling 4 Quarter Adjusted EPS 1 2017 Pro forma historical information includes the results of Swift prior to the 2017 merger. This information has not been prepared in accordance with the rules of the Securities and Exchange Commission, including Article 11 of Regulation S-X, and it therefore does not reflect any of the pro forma adjustments that would be required by Article 11 of Regulation S-X Diversification Leading to Consistent Performance Building a durable company as we improve core Truckload business while expanding less asset intensive services and growing an LTL network
11 TTM Free Cash Flow 2018 - Q2 2022 2018 Q4 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 $0M $250M $500M $750M $1,000M $1,250M Year-to-Date 2022: • Generated Free Cash Flow1 of $528.7M and $1,097.8M TTM • Increased dividend 20% to $0.12 generating a total return to shareholders of $39.7M • Repurchased $300M of shares • Paid down $86.2M in long-term debt and leases ◦ $38.8M in long-term debt ◦ $27.6M in finance lease liabilities ◦ $19.8M operating lease liabilities 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. 1 Capital Allocation Strong free cash flow provides flexibility in capital deployment
12 • Growing less asset intensive business ◦ Power Only ◦ Logistics ◦ Iron Services ◦ Warehousing ◦ • Acquiring businesses and improving results ◦ Swift 2017 ◦ Abilene 2018 ◦ Hayes 2020 ◦ UTXL 2021 ◦ • Expanding existing business ◦ Improving core Truckload business ◦ Building nationwide LTL network ◦ Equipment Leasing 1 See GAAP to non-GAAP reconciliation in the schedules following this presentation. Net Income RONTA FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Q1 2022 TTM Q2 2022 TTM 5% 10% 15% 20% 25% 30% $0 $200 $400 $600 $800 $1,000 KNX Creating Value for Shareholders Internal investments and acquisitions have driven a 2Q Return on Net Tangible Assets 1 of 24.8% ◦ AAA Cooper 2021 ◦ MME 2021 ◦ Eleos 2021
13 • Overall consumer demand moderates • Continued decline in non-contract opportunities • Less visibility on peak season surge • Strong demand for trailer pools continue • Depressed spot rates combined with higher fuel, maintenance and equipment costs disincentivize new entrants and pressure highly leveraged carriers • LTL demand remains strong with increases in revenue per hundredweight remaining in the double digits year-over-year • Sourcing and retaining drivers improves but remains challenging • Inflationary pressure on equipment, maintenance, labor and other cost items continue • Used equipment market normalizes as the year progresses Market Outlook 2nd Half 2022
14 Expected Adjusted EPS for the full year 2022 now $5.30 - $5.45, an increase from $5.20 - $5.40 last quarter Full Year Guidance Assumptions • Rates inflect negatively year over year late in the third quarter and into the fourth quarter as the moderating spot market yields less non-contract opportunities • Stable truck count with a modest sequential improvement in miles per tractor • Year-over-year increases in LTL revenue with improved margins • Increased Logistics load volumes offset by a reduced revenue per load with an operating ratio in the high 80's • Intermodal margins to remain in the double digits with volumes improving year-over-year • Continued growth in revenue and operating income in non-reportable • Inflationary pressure in most cost areas including driver pay, maintenance, equipment, and non-driving labor • Equipment gains to be approximately $20M - $25M in total for the rest of the year • Increased interest rates expected to negatively impact 2nd half EPS by $0.05 - $0.07 from our previous forecast • Net Cash Capex for the full year 2022 expected range of $550M - $600M • Approximate tax rate of 25.0% for the full year 2022 2022 Guidance Raising EPS Outlook; Focus on long-standing excellence in execution
Appendix
Non-GAAP Reconciliation Adjusted Operating Income and Adjusted Operating Ratio 1 2 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, 2022 2021 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 1,961,131 $ 1,315,701 $ 3,788,120 $ 2,538,715 Total operating expenses (1,635,353) (1,124,586) (3,164,256) (2,185,341) Operating income $ 325,778 $ 191,115 $ 623,864 $ 353,374 Operating ratio 83.4 % 85.5 % 83.5 % 86.1 % Non-GAAP Presentation Total revenue $ 1,961,131 $ 1,315,701 $ 3,788,120 $ 2,538,715 Truckload fuel surcharge (266,600) (102,829) (445,711) (192,738) Revenue, excluding truckload fuel surcharge 1,694,531 1,212,872 3,342,409 2,345,977 Total operating expenses 1,635,353 1,124,586 3,164,256 2,185,341 Adjusted for: Truckload fuel surcharge (266,600) (102,829) (445,711) (192,738) Amortization of intangibles 3 (16,215) (11,984) (32,381) (23,733) Impairments 4 — — (810) — Legal accruals 5 2,000 (879) (3,055) (2,121) Transaction fees 6 — (659) — (659) Adjusted Operating Expenses 1,354,538 1,008,235 2,682,299 1,966,090 Adjusted Operating Income $ 339,993 $ 204,637 $ 660,110 $ 379,887 Adjusted Operating Ratio 79.9 % 83.1 % 80.3 % 83.8 %
Non-GAAP Reconciliation Adjusted Operating Income and Adjusted Operating Ratio (Unaudited) 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. The reported results do not include the results of operations of MME and its subsidiaries prior to its acquisition by Knight-Swift on December 6, 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 building improvements (within our non-reportable segments). 5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following: • During the second quarter of 2022, the Company decreased the estimated exposure related to an accrued legal matter previously identified as probable and estimable in prior periods based on a recent settlement agreement. • 2021 legal expense reflects costs related to certain class action lawsuits arising from employee and contract related matters. 6 "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 statements of comprehensive income.
Non-GAAP Reconciliation Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, 2022 2021 2022 2021 (Dollars in thousands, except per share data) GAAP: Net income attributable to Knight-Swift $ 219,492 $ 152,804 $ 427,829 $ 282,594 Adjusted for: Income tax expense attributable to Knight-Swift 72,090 51,783 141,264 97,112 Income before income taxes attributable to Knight-Swift 291,582 204,587 569,093 379,706 Amortization of intangibles 3 16,215 11,984 32,381 23,733 Impairments 4 — — 810 — Legal accruals 5 (2,000) 879 3,055 2,121 Transaction fees 6 — 659 — 659 Adjusted income before income taxes 305,797 218,109 605,339 406,219 Provision for income tax expense at effective rate (75,608) (55,111) (150,287) (103,788) Non-GAAP: Adjusted Net Income Attributable to Knight-Swift $ 230,189 $ 162,998 $ 455,052 $ 302,431 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.
Non-GAAP Reconciliation Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 1 2 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, 2022 2021 2022 2021 GAAP: Earnings per diluted share $ 1.35 $ 0.92 $ 2.60 $ 1.69 Adjusted for: Income tax expense attributable to Knight-Swift 0.44 0.31 0.86 0.58 Income before income taxes attributable to Knight-Swift 1.79 1.23 3.45 2.28 Amortization of intangibles 3 0.10 0.07 0.20 0.14 Impairments 4 — — — — Legal accruals 5 (0.01) 0.01 0.02 0.01 Transaction fees 6 — — — — Adjusted income before income taxes 1.87 1.31 3.67 2.44 Provision for income tax expense at effective rate (0.46) (0.33) (0.91) (0.62) Non-GAAP: Adjusted EPS $ 1.41 $ 0.98 $ 2.76 $ 1.81 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.
Non-GAAP Reconciliation Segment Adjusted Operating Income and Adjusted Operating Ratio 1 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, Truckload Segment 2022 2021 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 1,188,809 $ 985,858 $ 2,269,340 $ 1,948,805 Total operating expenses (982,513) (817,401) (1,857,927) (1,621,865) Operating income $ 206,296 $ 168,457 $ 411,413 $ 326,940 Operating ratio 82.6 % 82.9 % 81.9 % 83.2 % Non-GAAP Presentation Total revenue $ 1,188,809 $ 985,858 $ 2,269,340 $ 1,948,805 Fuel surcharge (206,931) (102,829) (345,592) (192,738) Intersegment transactions (399) (469) (735) (693) Revenue, excluding fuel surcharge and intersegment transactions 981,479 882,560 1,923,013 1,755,374 Total operating expenses 982,513 817,401 1,857,927 1,621,865 Adjusted for: Fuel surcharge (206,931) (102,829) (345,592) (192,738) Intersegment transactions (399) (469) (735) (693) Amortization of intangibles 2 (323) (324) (647) (648) Adjusted Operating Expenses 774,860 713,779 1,510,953 1,427,786 Adjusted Operating Income $ 206,619 $ 168,781 $ 412,060 $ 327,588 Adjusted Operating Ratio 78.9 % 80.9 % 78.6 % 81.3 % 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.
Non-GAAP Reconciliation Segment Adjusted Operating Income and Adjusted Operating Ratio 1 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, LTL Segment 2 2022 2022 GAAP Presentation (Dollars in thousands) Total revenue $ 283,847 $ 538,972 Total operating expenses (240,080) (468,828) Operating income $ 43,767 $ 70,144 Operating ratio 84.6 % 87.0 % Non-GAAP Presentation Total revenue $ 283,847 $ 538,972 Fuel surcharge (59,669) (100,119) Revenue, excluding fuel surcharge 224,178 438,853 Total operating expenses 240,080 468,828 Adjusted for: Fuel surcharge (59,669) (100,119) Amortization of intangibles 3 (3,995) (7,940) Adjusted Operating Expenses 176,416 360,769 Adjusted Operating Income $ 47,762 $ 78,084 Adjusted Operating Ratio 78.7 % 82.2 % 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 and MME acquisitions.
Non-GAAP Reconciliation Quarter-to-Date June 30, Year-to-Date June 30, Logistics Segment 2022 2021 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 248,662 $ 166,737 $ 530,701 $ 285,624 Total operating expenses (204,913) (152,381) (447,351) (263,691) Operating income $ 43,749 $ 14,356 $ 83,350 $ 21,933 Operating ratio 82.4 % 91.4 % 84.3 % 92.3 % Non-GAAP Presentation Total revenue $ 248,662 $ 166,737 $ 530,701 $ 285,624 Intersegment transactions (1,343) (4,570) (3,211) (7,735) Revenue, excluding intersegment transactions 247,319 162,167 527,490 277,889 Total operating expenses 204,913 152,381 447,351 263,691 Adjusted for: Intersegment transactions (1,343) (4,570) (3,211) (7,735) Amortization of intangibles 2 (334) (97) (668) (97) Adjusted Operating Expenses 203,236 147,714 443,472 255,859 Adjusted Operating Income $ 44,083 $ 14,453 $ 84,018 $ 22,030 Adjusted Operating Ratio 82.2 % 91.1 % 84.1 % 92.1 % Segment Adjusted Operating Income and Adjusted Operating Ratio 1 (Unaudited) 1 Pursuant to the requirements of Regulation G, this table reconciles GAAP cash flows from operations to non-GAAP Free Cash Flow. 2 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition.
Non-GAAP Reconciliation Segment Adjusted Operating Income and Adjusted Operating Ratio 1 (Unaudited) Quarter-to-Date June 30, Year-to-Date June 30, Intermodal Segment 2022 2021 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 132,871 $ 115,378 $ 242,093 $ 222,444 Total operating expenses (118,699) (109,566) (212,751) (213,175) Operating income $ 14,172 $ 5,812 $ 29,342 $ 9,269 Operating ratio 89.3 % 95.0 % 87.9 % 95.8 % Non-GAAP Presentation Total revenue $ 132,871 $ 115,378 $ 242,093 $ 222,444 Intersegment transactions (17) (84) (47) (179) Revenue, excluding intersegment transactions 132,854 115,294 242,046 222,265 Total operating expenses 118,699 109,566 212,751 213,175 Adjusted for: Intersegment transactions (17) (84) (47) (179) Adjusted Operating Expenses 118,682 109,482 212,704 212,996 Adjusted Operating Income $ 14,172 $ 5,812 $ 29,342 $ 9,269 Adjusted Operating Ratio 89.3 % 95.0 % 87.9 % 95.8 % 1 Pursuant to the requirements of Regulation G, this table reconciles GAAP cash flows from operations to non-GAAP Free Cash Flow.
Non-GAAP Reconciliation Return on Net Tangible Assets 1 (Unaudited) June 30, 2022 2021 (Dollars in thousands) Total Assets $ 10,714,878 $ 8,682,459 Adjusted for: Intangible assets, net (1,798,668) (1,403,483) Goodwill (3,518,589) (2,971,023) Tangible Assets $ 5,397,621 $ 4,307,953 Total Liabilities $ 4,083,621 $ 2,584,406 Adjusted for: Revolving line of credit, finance lease obligations, and long-term debt (1,720,712) (592,286) Accounts receivable securitization (278,594) (278,372) Deferred income tax liabilities (874,601) (806,398) Non-Interest Bearing Liabilities, excluding deferred income tax liabilities $ 1,209,714 $ 907,350 Net Tangible Assets $ 4,187,907 $ 3,400,603 Average Net Tangible Assets $ 3,794,255 Adjusted Net Income - TTM June 30, 2022 $ 940,802 Return on Net Tangible Assets 24.8 % 1 Pursuant to the requirements of Regulation G, this table reconciles Total Assets and Total Liabilities to Average Net Tangible Assets.
Non-GAAP Reconciliation Adjusted Income Before Income Taxes and Adjusted Net Income 1 2 (Unaudited) Year-to-Date June 30, 2022 Year-to-Date December 31, 2021 Year-to-Date June 30, 2021 TTM June 30, 2022 (Dollars in thousands) GAAP: Net income attributable to Knight-Swift $ 427,829 743,388 282,594 888,623 Adjusted for: Income tax expense attributable to Knight-Swift 141,264 230,887 97,112 275,039 Income before income taxes attributable to Knight-Swift 569,093 974,275 379,706 1,163,662 Amortization of intangibles 3 32,381 55,299 23,733 63,947 Impairments 4 810 299 — 1,109 Legal accruals 5 3,055 (2,481) 2,121 (1,547) Transaction fees 6 — 4,445 659 3,786 Write-off of deferred debt issuance costs 7 — 1,024 — 1,024 Adjusted income before income taxes 605,339 1,032,861 406,219 1,231,981 Provision for income tax expense at effective rate (150,287) (244,680) (103,788) (291,179) Non-GAAP Adjusted Net Income Attributable to Knight Swift $ 455,052 $ 788,181 $ 302,431 $ 940,802 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. The reported results do not include the results of operations of MME and its subsidiaries prior to its acquisition by Knight-Swift on December 6, 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 following non-cash impairments: • First quarter 2022 impairment reflects the non-cash impairment of building improvements (within our non-reportable segments). • 2021 impairments related to certain revenue equipment held for sale (within the non-reportable segments and the Truckload segment). 5 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect the following: • During the second quarter of 2022, the Company decreased the estimated exposure related to an accrued legal matter previously identified as probable and estimable in prior periods based on a recent settlement agreement. • Third quarter 2021 reversal related to 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. Additional 2021 legal costs relate to certain class action lawsuits arising from employee and contract related matters. 6 "Transaction fees consist of legal and professional fees associated with the acquisitions of UTXL, ACT, and MME. The transaction fees are included within "Miscellaneous operating expense" in the condensed consolidated statements of comprehensive income. 7 "Write-off of deferred debt issuance costs" is included within "Other income, net" in the condensed consolidated statements of comprehensive income for 2021. The loss was incurred as a result of replacing the 2017 Debt Agreement with the 2021 Debt Agreement in September.
Non-GAAP Reconciliation Free Cash Flow 1 (Unaudited) Year-to-Date June 30, 2022 Year-to-Date December 31, 2021 Year-to-Date June 30, 2021 TTM June 30, 2022 GAAP: Cash flows from operations $ 719,984 $ 1,190,153 $ 459,504 $ 1,450,633 Adjusted for: Proceeds from sale of property and equipment, including assets held for sale 104,239 252,080 127,068 229,251 Purchases of property and equipment (295,522) (534,096) (247,549) (582,069) Non-GAAP: Free cash flow $ 528,701 $ 908,137 $ 339,023 $ 1,097,815 1 Pursuant to the requirements of Regulation G, this table reconciles cash flows from operations to Free Cash Flow.