Knight-Swift Transportation Holdings Inc 10-Q for FY2021 Q1

Knight-Swift Transportation Holdings Inc. (KNX)

10-Q 2021-05-05 For: 2021-03-31

Added on April 08, 2026

About this 10-Q

Knight-Swift Transportation Holdings Inc filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.22B; up 8.7% from $1.12B a year earlier
Net income: $129.79M; up 98.4% from net income of $65.43M a year earlier
Diluted EPS: $0.77; up 102.6% from $0.38 a year earlier

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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) — March 31, 2021 and December 31, 2020			4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Quarters Ended March 31, 2021 and 2020			5

Condensed Consolidated Statements of Cash Flows (Unaudited) — Quarters Ended March 31, 2021 and 2020			6

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Quarters Ended March 31, 2021 and 2020			8

Note 1 — Introduction and Basis of Presentation			9



Note 2 — Recently Issued Accounting Pronouncements			10

Note 3 — Acquisitions			10

Note 4 — Investments			13

Note 5 — Assets Held for Sale			13

Note 6 — Goodwill and Other Intangible Assets			14

Note 7 — Income Taxes			15



Note 8 — Accounts Receivable Securitization			15

Note 9 — Commitments			16

Note 10 — Contingencies and Legal Proceedings			17

Note 11 — Share Repurchase Plan			19

Note 12 — Weighted Average Shares Outstanding			20

Note 13 — Related Party Transactions			20

Note 14 — Information by Segment and Geography			22

Note 15 — Fair Value Measurement			24

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			27

Item 3. Quantitative and Qualitative Disclosures About Market Risk			50

Item 4. Controls and Procedures			50
PART II OTHER INFORMATION
Item 1. Legal Proceedings			51

Item 1A. Risk Factors			51

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51

Item 3. Defaults Upon Senior Securities			51

Item 4. Mine Safety Disclosures			51

Item 5. Other Information			51

Item 6. Exhibits			52

Signatures			53


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.
2021 RSA						Fifth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on April 23, 2021 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



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


	March 31, 2021		December 31, 2020
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	194,650	$	156,699
Cash and cash equivalents – restricted	47,867		39,328
Restricted investments, held-to-maturity, amortized cost	8,954		9,001
Trade receivables, net of allowance for doubtful accounts of $21,797 and $22,093, respectively	584,011		578,479
Contract balance – revenue in transit	20,104		14,560
Prepaid expenses	66,278		71,649
Assets held for sale	20,835		29,756
Income tax receivable	31		2,903
Other current assets	21,015		20,988
Total current assets	963,745		923,363
Gross property and equipment	4,286,833		4,223,348
Less: accumulated depreciation and amortization	(1,311,189)		(1,230,696)
Property and equipment, net	2,975,644		2,992,652
Operating lease right-of-use-assets	95,658		113,296
Goodwill	2,958,709		2,922,964
Intangible assets, net	1,393,346		1,389,245
Other long-term assets	132,373		126,482
Total assets	$	8,519,475	$	8,468,002
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	126,918	$	101,001
Accrued payroll and purchased transportation	182,106		160,888
Accrued liabilities	143,168		88,894
Claims accruals – current portion	174,678		174,928

Finance lease liabilities and long-term debt – current portion	85,035		52,583
Operating lease liabilities – current portion	37,577		47,496
Accounts receivable securitization – current portion	198,957		213,918
Total current liabilities	948,439		839,708
Revolving line of credit	115,000		210,000
Long-term debt – less current portion	299,063		298,907
Finance lease liabilities – less current portion	127,341		138,243
Operating lease liabilities – less current portion	62,549		69,852

Claims accruals – less current portion	174,766		174,814
Deferred tax liabilities	797,019		815,941
Other long-term liabilities	45,960		48,497
Total liabilities	2,570,137		2,595,962
Commitments and contingencies (Notes 3, 9, and 10)
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; 165,488 and 166,553 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.	1,655		1,665

Additional paid-in capital	4,309,792		4,301,424
Retained earnings	1,625,397		1,566,759
Total Knight-Swift stockholders' equity	5,936,844		5,869,848
Noncontrolling interest	12,494		2,192
Total stockholders’ equity	5,949,338		5,872,040
Total liabilities and stockholders’ equity	$	8,519,475	$	8,468,002


	Quarter Ended March 31,
		2021		2020
		(In thousands, except per share data)
Revenue:
Revenue, excluding trucking fuel surcharge		$	1,133,105	$	1,027,095
Trucking fuel surcharge		89,909		97,703
Total revenue		1,223,014		1,124,798
Operating expenses:
Salaries, wages, and benefits		370,370		354,833
Fuel		118,236		121,855
Operations and maintenance		68,070		68,404
Insurance and claims		55,643		54,280
Operating taxes and licenses		22,048		22,169
Communications		5,037		4,874
Depreciation and amortization of property and equipment		119,915		110,221
Amortization of intangibles		11,749		11,474
Rental expense		16,864		25,375
Purchased transportation		258,230		225,276
Impairments		—		902
Miscellaneous operating expenses		14,593		23,016

Total operating expenses		1,060,755		1,022,679
Operating income		162,259		102,119
Other (expenses) income:
Interest income		294		832
Interest expense		(3,486)		(6,107)
Other income (expenses), net		16,105		(6,507)
Total other (expenses) income, net		12,913		(11,782)
Income before income taxes		175,172		90,337
Income tax expense		45,329		24,554
Net income		129,843		65,783
Net income attributable to noncontrolling interest		(53)		(357)
Net income attributable to Knight-Swift		$	129,790	$	65,426

Earnings per share:
Basic		$	0.77	$	0.38
Diluted		$	0.77	$	0.38

Dividends declared per share:		$	0.08	$	0.08

Weighted average shares outstanding:
Basic		167,478		170,617
Diluted		168,374		171,282


Reconciliation of Cash, Restricted Cash, and Equivalents:	March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019
	(In thousands)
Condensed Consolidated Balance Sheets
Cash and cash equivalents	$	194,650	$	156,699	$	119,132	$	159,722
Cash and cash equivalents – restricted 1	47,867		39,328		39,812		41,331
Other long-term assets 1	1,366		1,250		1,160		1,175
Condensed Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents	$	243,883	$	197,277	$	160,104	$	202,228


	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, 2020	166,553	$	1,665	$	4,301,424	$	1,566,759	$	5,869,848	$	2,192	$	5,872,040

Common stock issued to employees	220	3		2,006				2,009				2,009

Common stock issued under ESPP	18	—		700				700				700
Company shares repurchased	(1,303)	(13)				(53,648)		(53,661)				(53,661)
Shares withheld – RSU settlement						(4,159)		(4,159)				(4,159)
Employee stock-based compensation expense				5,662				5,662				5,662
Cash dividends paid and dividends accrued ($0.08 per share)						(13,345)		(13,345)				(13,345)
Net income attributable to Knight-Swift						129,790		129,790				129,790

Investment in noncontrolling interest										10,281		10,281
Distribution to noncontrolling interest										(32)		(32)
Net income attributable to noncontrolling interest										53		53

Balances – March 31, 2021	165,488	$	1,655	$	4,309,792	$	1,625,397	$	5,936,844	$	12,494	$	5,949,338


Notes to Condensed Consolidated Financial Statements (Unaudited)


	February 1, 2021 Opening Balance Sheet as Reported at March 31, 2021

Fair value of the consideration transferred	$	41,518

Cash and cash equivalents	2,237

Trade and other receivables	545
Prepaid expenses and other assets	47


Operating lease right-of-use assets	560
Identifiable intangible assets 1	15,850


Total assets	19,239

Accounts payable	(156)
Accrued payroll and payroll-related expenses	(605)
Accrued liabilities	(1,391)
Operating lease liabilities – current and noncurrent portions	(560)
Other long-term liabilities	(475)
Total liabilities	(3,187)

Noncontrolling interest	(10,281)
Total stockholders' equity	(10,281)

Goodwill	$	35,747


	January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020		Adjustments		January 1, 2020 Opening Balance Sheet as Reported at March 31, 2021

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


	March 31, 2021
			Gross Unrealized
	Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value
	(In thousands)
US corporate securities	$	8,954	$	—	$	(4)	$	8,950


Restricted investments, held-to-maturity	$	8,954	$	—	$	(4)	$	8,950



	(In thousands)
Goodwill at beginning of period	$	2,922,964
Adjustments relating to deferred tax assets	(2)
Acquisition 1	35,747

Goodwill at end of period	$	2,958,709



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 March 31, 2021			Quarter-to-Date March 31, 2020
Board Approval Date	Authorized Amount	Shares	Amount		Shares	Amount
	(in thousands)
May 30, 2019	$250,000	—	$	—	1,139	$	34,630
November 24, 2020 1	$250,000	1,303	$	53,661	—	$	—
		1,303	$	53,661	1,139	$	34,630


	March 31, 2021				December 31, 2020
	Receivable		Payable		Receivable		Payable
	(In thousands)
Central Freight Lines	$	—	$	—	$	133	$	—

DPF Mobile	—		—		—		41
Other Affiliates	7		6		2		10
Total	$	7	$	6	$	135	$	51


ITEM 1.			FINANCIAL STATEMENTS


	March 31, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(In thousands)
Financial Assets:
Restricted investments, held-to-maturity 1	$	8,954	$	8,950	$	9,001	$	8,995
Equity method investments 2	80,891		80,891		77,562		77,562

Investments in equity securities 3	22,555		22,555		18,675		18,675

Financial Liabilities:
Term Loan, due October 2022 4	$	299,063	$	300,000	$	298,907	$	300,000
2018 RSA, due July 2021 5	198,957		199,000		213,918		214,000
Revolver, due October 2022	115,000		115,000		210,000		210,000
Contingent consideration associated with acquisition 6	16,200		16,200		16,200		16,200


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain
	(In thousands)
As of March 31, 2021
Investments in equity securities 1	$	22,555	$	22,555	$	—	$	—	$	10,391

As of December 31, 2020
Investments in equity securities 2	$	18,675	$	18,675	$	—	$	—	$	3,553


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





	Quarter Ended March 31,							Increase (Decrease)
		2021			2020
		(Dollars in thousands, except per tractor data)
Total revenue		$	962,947		$	919,061			4.8	%
Revenue, excluding fuel surcharge and intersegment transactions		$	872,814		$	821,084			6.3	%
GAAP: Operating income		$	158,483		$	107,334			47.7	%
Non-GAAP: Adjusted Operating Income 1		$	158,807		$	110,805			43.3	%
Average revenue per tractor 2		$	47,894		$	44,474			7.7	%
GAAP: Operating ratio 2		83.5		%	88.3		%		(480	bps)
Non-GAAP: Adjusted Operating Ratio 1 2		81.8		%	86.5		%		(470	bps)
Non-paid empty miles percentage 2		12.8		%	12.8		%		—	bps
Average length of haul (miles) 2		412			428				(3.7	%)
Total miles per tractor 2		20,928			22,568				(7.3	%)
Average tractors 2 3		18,224			18,462				(1.3	%)
Average trailers 2		59,797			57,716				3.6	%


Results of Operations — Consolidated Operating and Other Expenses


Source	March 31, 2021
	(In thousands)
Cash and cash equivalents, excluding restricted cash	$	194,650
Availability under Revolver, due October 2022 1	655,656
Availability under 2018 RSA, due July 2021 2	2,919
Total unrestricted liquidity	$	853,225
Cash and cash equivalents – restricted 3	49,233
Restricted investments, held-to-maturity, amortized cost 3	8,954
Total liquidity, including restricted cash and restricted investments	$	911,412


	Quarter Ended March 31,				Change
	2021		2020
	(In thousands)
Net cash provided by operating activities	$	306,113	$	155,343	$	150,770
Net cash used in investing activities	(74,141)		(125,582)		51,441
Net cash used in financing activities	(185,366)		(71,885)		(113,481)


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
January 1, 2021 to January 31, 2021	—	$	—	—	$	250,000,000
February 1, 2021 to February 28, 2021	1,265,923	$	41.12	1,265,923	$	197,951,108
March 1, 2021 to March 31, 2021	37,530	$	42.97	37,530	$	196,338,538
Total	1,303,453	$	41.17	1,303,453	$	196,338,538