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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________________________________________________________________________________________________________
FORM 10-Q
_________________________________________________________________________________________________________________________________________________________
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-35007
_________________________________________________________________________________________________________________________________________________________
knx-20220331_g1.jpg
___________________________________________________________________________________________________________________________________
 Knight-Swift Transportation Holdings Inc.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________________
Delaware 20-5589597
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2002 West Wahalla Lane
Phoenix, Arizona 85027
(Address of principal executive offices and zip code)
(602269-2000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock $0.01 Par ValueKNXNew York Stock Exchange
_________________________________________________________________________________________________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  Accelerated Filer
Non-accelerated Filer  Smaller Reporting Company
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.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No   
There were 163,568,435 shares of the registrant's common stock outstanding as of April 27, 2022.



KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATIONPAGE
PART II OTHER INFORMATION
2


KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
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.
TermDefinition
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 MergerThe September 8, 2017 merger of Knight Transportation, Inc. and its subsidiaries and Swift Transportation Company and its subsidiaries, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt AgreementThe Company's unsecured credit agreement, entered into on September 29, 2017, as amended on October 2, 2020
2021 Debt AgreementThe Company's unsecured credit agreement, entered into on September 3, 2021, consisting of the 2021 Revolver and 2021 Term Loans, which are defined below
2021 Prudential NotesThird amended and restated note purchase and private shelf agreement, entered into on September 3, 2021 by ACT with unrelated financial entities
2021 RevolverRevolving line of credit under the 2021 Debt Agreement
2021 Term LoansThe Company's term loans under the 2021 Debt Agreement, collectively consisting of the 2021 Term Loan A-1, 2021 Term Loan A-2 and 2021 Term Loan A-3
2021 Term Loan A-1The Company's term loan under the 2021 Debt Agreement, maturing on December 3, 2022
2021 Term Loan A-2The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2024
2021 Term Loan A-3The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2026
2021 RSAFifth 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.
July 2021 Term LoanThe Company's term loan entered into on July 6, 2021
ACT
AAA Cooper Transportation, and its affiliated entity
ACT AcquisitionThe Company's acquisition of 100% of the securities of ACT on July 5, 2021
Annual ReportAnnual Report on Form 10-K
ASCAccounting Standards Codification
ASUAccounting Standards Update
BoardKnight-Swift's Board of Directors
BSBYBloomberg Short-Term Bank Yield Index
DOEUnited States Department of Energy
EPSEarnings Per Share
EmbarkEmbark Trucks Inc. and its related entities
ESPPKnight-Swift Transportation Holdings Inc. Amended and Restated 2012 Employee Stock Purchase Plan
GAAPUnited States Generally Accepted Accounting Principles
LIBORLondon InterBank Offered Rate
NYSENew York Stock Exchange
LTLLess-than-truckload
MMERAC MME Holdings, LLC. and its subsidiaries, MME, Inc., Midwest Motor Express, Inc., and Midnite Express Inc.
Quarterly ReportQuarterly Report on Form 10-Q
RSURestricted Stock Unit
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
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.
TermDefinition
SECUnited States Securities and Exchange Commission
TRPTransportation Resource Partners
USThe United States of America
UTXL
UTXL Enterprises, Inc.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
PART I FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 2022December 31, 2021
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents$242,860 $261,001 
Cash and cash equivalents – restricted128,774 87,241 
Restricted investments, held-to-maturity, amortized cost8,302 5,866 
Trade receivables, net of allowance for doubtful accounts of $19,883 and $21,663, respectively
939,704 911,336 
Contract balance – revenue in transit21,185 22,936 
Prepaid expenses86,742 90,507 
Assets held for sale11,421 8,166 
Income tax receivable217 909 
Other current assets27,064 26,318 
Total current assets1,466,269 1,414,280 
Gross property and equipment5,235,593 5,118,897 
Less: accumulated depreciation and amortization(1,655,908)(1,563,533)
Property and equipment, net3,579,685 3,555,364 
Operating lease right-of-use-assets141,363 147,540 
Goodwill3,518,589 3,515,135 
Intangible assets, net1,814,883 1,831,049 
Other long-term assets175,017 192,132 
Total assets$10,695,806 $10,655,500 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$248,762 $224,844 
Accrued payroll and purchased transportation237,909 217,084 
Accrued liabilities188,008 128,536 
Claims accruals – current portion223,382 206,607 
Finance lease liabilities and long-term debt – current portion234,146 262,423 
Operating lease liabilities – current portion33,822 35,322 
Total current liabilities1,166,029 1,074,816 
Revolving line of credit165,000 260,000 
Long-term debt – less current portion1,029,159 1,037,552 
Finance lease liabilities – less current portion277,839 256,166 
Operating lease liabilities – less current portion103,161 107,614 
Accounts receivable securitization – less current portion278,539 278,483 
Claims accruals – less current portion202,737 210,714 
Deferred tax liabilities881,287 874,877 
Other long-term liabilities11,112 11,828 
Total liabilities4,114,863 4,112,050 
Commitments and contingencies (Notes 3, 7, 8, and 9)
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; 163,635 and 165,980 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.
1,636 1,660 
Accumulated other comprehensive loss(935)(563)
Additional paid-in capital4,360,889 4,350,913 
Retained earnings2,209,104 2,181,142 
Total Knight-Swift stockholders' equity6,570,694 6,533,152 
Noncontrolling interest10,249 10,298 
Total stockholders’ equity6,580,943 6,543,450 
Total liabilities and stockholders’ equity$10,695,806 $10,655,500 
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Quarter Ended March 31,
 20222021
(In thousands, except per share data)
Revenue:
Revenue, excluding truckload and LTL fuel surcharge$1,647,878 $1,133,105 
Truckload and LTL fuel surcharge179,111 89,909 
Total revenue1,826,989 1,223,014 
Operating expenses:
Salaries, wages, and benefits536,056 370,370 
Fuel190,489 118,236 
Operations and maintenance95,883 68,070 
Insurance and claims98,192 55,643 
Operating taxes and licenses29,037 22,048 
Communications5,870 5,037 
Depreciation and amortization of property and equipment145,044 119,915 
Amortization of intangibles16,166 11,749 
Rental expense13,401 16,864 
Purchased transportation386,446 258,230 
Impairments810  
Miscellaneous operating expenses11,509 14,593 
Total operating expenses1,528,903 1,060,755 
Operating income298,086 162,259 
Other (expenses) income:
Interest income461 294 
Interest expense(6,680)(3,486)
Other (expense) income, net(14,405)16,105 
Total other (expenses) income, net(20,624)12,913 
Income before income taxes277,462 175,172 
Income tax expense69,174 45,329 
Net income208,288 129,843 
Net loss (income) attributable to noncontrolling interest49 (53)
Net income attributable to Knight-Swift208,337 129,790 
Other comprehensive loss(372) 
Comprehensive income$207,965 $129,790 
Earnings per share:
Basic$1.26 $0.77 
Diluted$1.25 $0.77 
Dividends declared per share:$0.12 $0.08 
Weighted average shares outstanding:
Basic165,377 167,478 
Diluted166,499 168,374 
See accompanying notes to the condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Quarter Ended March 31,
 20222021
(In thousands)
Cash flows from operating activities:
Net income$208,288 $129,843 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment, and intangibles161,210 131,664 
Gain on sale of property and equipment(34,801)(10,537)
Impairments810  
Deferred income taxes4,246 (18,920)
Non-cash lease expense9,490 15,589 
Other adjustments to reconcile net income to net cash provided by operating activities32,229 (6,522)
Increase (decrease) in cash resulting from changes in:
Trade receivables(28,007)(11,586)
Income tax receivable692 2,872 
Accounts payable22,074 12,534 
Accrued liabilities and claims accrual89,289 70,975 
Operating lease liabilities(9,267)(15,174)
Other assets and liabilities607 5,375 
Net cash provided by operating activities456,860 306,113 
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity investments1,881 500 
Purchases of held-to-maturity investments(4,372)(512)
Proceeds from sale of property and equipment, including assets held for sale60,532 67,175 
Purchases of property and equipment(164,974)(111,020)
Expenditures on assets held for sale(43)(401)
Net cash, restricted cash, and equivalents invested in acquisitions(1,291)(39,281)
Other cash flows from investing activities(1,920)9,398 
Net cash used in investing activities(110,187)(74,141)
Cash flows from financing activities:
Repayment of finance leases and long-term debt(48,843)(6,600)
Repayments on revolving lines of credit, net(95,000)(95,000)
Repayment of accounts receivable securitization (15,000)
Proceeds from common stock issued1,220 2,709 
Repurchases of the Company's common stock(144,881)(53,661)
Dividends paid(20,137)(13,624)
Other cash flows from financing activities(15,608)(4,190)
Net cash used in financing activities(323,249)(185,366)
Net increase in cash, restricted cash, and equivalents23,424 46,606 
Cash, restricted cash, and equivalents at beginning of period350,023 197,277 
Cash, restricted cash, and equivalents at end of period$373,447 $243,883 
See accompanying notes to condensed consolidated financial statements (unaudited).


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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued
 Quarter Ended March 31,
 20222021
(In thousands)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$5,928 $2,505 
Income taxes1,778 2,199 
Non-cash investing and financing activities:
Equipment acquired included in accounts payable$11,643 $13,860 
Financing provided to independent contractors for equipment sold1,536 462 
Transfers from property and equipment to assets held for sale16,986 29,955 
Noncontrolling interest associated with acquisition 10,281 
Purchase price adjustment on acquisition2,163  
Right-of-use assets obtained (forfeited) in exchange for operating lease liabilities3,314 (2,608)
Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions 560 
Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities 28,149 
Reconciliation of Cash, Restricted Cash, and Equivalents:March 31,
2022
December 31,
2021
March 31,
2021
December 31,
2020
(In thousands)
Condensed Consolidated Balance Sheets
Cash and cash equivalents$242,860 $261,001 $194,650 $156,699 
Cash and cash equivalents – restricted 1
128,774 87,241 47,867 39,328 
Other long-term assets 1
1,813 1,781 1,366 1,250 
Condensed Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents$373,447 $350,023 $243,883 $197,277 
________
1    Reflects cash and cash equivalents that are primarily restricted for claims payments.
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Total Knight-Swift Stockholders' EquityNoncontrolling
 Interest
Total
Stockholders’ Equity
 SharesPar Value
(In thousands, except per share data)
Balances – December 31, 2021165,980 $1,660 $4,350,913 $2,181,142 $(563)$6,533,152 $10,298 $6,543,450 
Common stock issued to employees364 3 408 411 411 
Common stock issued under ESPP14  809 809 809 
Company shares repurchased(2,723)(27)(144,854)(144,881)(144,881)
Shares withheld – RSU settlement(15,608)(15,608)(15,608)
Employee stock-based compensation expense8,759 8,759 8,759 
Cash dividends paid and dividends accrued ($0.12 per share)
(19,913)(19,913)(19,913)
Net income attributable to Knight-Swift208,337 208,337 208,337 
Other comprehensive loss(372)(372)(372)
Net income attributable to noncontrolling interest(49)(49)
Balances – March 31, 2022163,635 $1,636 $4,360,889 $2,209,104 $(935)$6,570,694 $10,249 $6,580,943 
 Common StockAdditional
Paid-in Capital
Retained EarningsAccumulated
Other
Comprehensive Loss
Total Knight-Swift Stockholders' EquityNoncontrolling InterestTotal
Stockholders’ Equity
 SharesPar Value
(In thousands, except per share data)
Balances – December 31, 2020166,553 $1,665 $4,301,424 $1,566,759 $ $5,869,848 $2,192 $5,872,040 
Common stock issued to employees220 3 2,006 2,009 2,009 
Common stock issued under ESPP18  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 expense5,662 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-Swift129,790 129,790 129,790 
Investment in noncontrolling interest10,281 10,281 
Distribution to noncontrolling interest(32)(32)
Net income attributable to noncontrolling interest53 53 
Balances – March 31, 2021165,488 $1,655 $4,309,792 $1,625,397 $ $5,936,844 $12,494 $5,949,338 
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 — Introduction and Basis of Presentation
Certain acronyms and terms used throughout this Quarterly Report are specific to the Company, commonly used in the trucking industry, or are otherwise frequently used throughout this document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.
Description of Business
Knight-Swift is a transportation solutions provider, headquartered in Phoenix, Arizona. During the first quarter of 2022, the Company operated an average of 17,965 tractors (comprised of 16,159 company tractors and 1,806 independent contractor tractors) and 71,310 trailers within the Truckload segment and leasing activities within the non-reportable segments. The LTL segment operated an average of 3,091 tractors and 8,302 trailers. Additionally, the Intermodal segment operated an average of 584 tractors and 11,027 intermodal containers. As of March 31, 2022, the Company's four reportable segments were Truckload, Logistics, LTL, and Intermodal.
Basis of Presentation
The condensed consolidated financial statements and footnotes included in this Quarterly Report include the accounts of Knight-Swift Transportation Holdings Inc. and its subsidiaries and should be read in conjunction with the consolidated financial statements and footnotes included in Knight-Swift's 2021 Annual Report. In management's opinion, these condensed consolidated financial statements were prepared in accordance with GAAP and include all adjustments necessary (consisting of normal recurring adjustments) for the fair statement of the periods presented.
With respect to transactional/durational data, references to years pertain to calendar years. Similarly, references to quarters pertain to calendar quarters.
2021 Acquisitions
The Company recently acquired the following entities:
100.0% of MME on December 6, 2021. The results are included within the LTL segment.
100.0% of ACT on July 5, 2021. The results are included within the LTL segment.
100.0% of UTXL on June 1, 2021. The results are included within the Logistics segment.
79.44% of Eleos on February 1, 2021. The results are included within the non-reportable segments. The noncontrolling interest is presented as a separate component of the condensed consolidated financial statements.
Note regarding comparability: In accordance with the accounting treatment applicable to the transactions, the Company's consolidated results, as reported, do not include the operating results of its ownership interest in the acquired entities prior to the respective acquisition dates. Accordingly, comparisons between the Company's current and prior period results may not be meaningful.
Additional information regarding the Company's recent acquisitions is included in Note 3.
Seasonality
In the truckload transportation industry, results of operations generally follow a seasonal pattern. Freight volumes in the first quarter are typically lower due to less consumer demand, customers reducing shipments following the holiday season, and inclement weather, while operating expenses generally increase. Tractor productivity of the Company's Truckload fleet, third-party carriers, and independent contractors decreases during the winter months due to decreased fuel efficiency, increased cold weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather. These factors typically lead to lower operating profitability, as compared to other parts of the year. Additionally, beginning in the latter half of the
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
third quarter and continuing into the fourth quarter, the Company typically experiences surges pertaining to holiday shopping trends toward delivery of gifts purchased over the Internet, as well as the length of the holiday season (consumer shopping days between Thanksgiving and Christmas). However, as the Company continues to diversify its business through expansion into the LTL industry, warehousing, and other activities, seasonal volatility is becoming more tempered. Additionally, macroeconomic trends and cyclical changes in the trucking industry, including imbalances in supply and demand, can override the seasonality faced in the industry.
Note 2 — Recently Issued Accounting Pronouncements
Date IssuedReferenceDescriptionExpected Adoption Date and MethodFinancial Statement Impact
March 2022
ASU No. 2022-02: Financial Instruments – Credit Losses (ASC 326), Troubled Debt Restructurings and Vintage Disclosures
The amendments in this ASU require that a creditor incorporates troubled debt restructurings into the allowance for credit losses and disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases.January 2023, ProspectiveCurrently under evaluation, but not expected to be material
Note 3 — Acquisitions
First quarter 2022 developments related to the Company's recent acquisitions are discussed below.
MME
On December 6, 2021, the Company, through a wholly owned subsidiary, acquired 100.0% of Bismarck, North Dakota-based MME. MME provides LTL, full truckload, and specialized and other logistics transportation services to a diverse customer base in its service territory in the upper Midwestern and great Northwestern regions of the US.
During the measurement period, the net working capital adjustment increased by $1.3 million based on the actual versus estimated net working capital adjustment as of the transaction date. This adjustment resulted in increasing the total purchase price consideration to $165.7 million. The Company reduced the deferred tax liabilities on MME's opening balance sheet by $2.2 million based on valuation of the Company's intangible assets. These measurement period adjustments resulted a $3.5 million increase in goodwill related to the MME acquisition.
ACT
On July 5, 2021, the Company acquired 100% of Dothan, Alabama-based ACT. ACT is a leading LTL carrier that also offers dedicated contract carriage and ancillary services.
During the quarter ended March 31, 2022, the Company's condensed consolidated operating results included ACT's total revenue of $217.7 million and net income of $16.1 million. ACT's net income during the quarter ended March 31, 2022 included $3.5 million related to the amortization of intangible assets acquired in the ACT Acquisition.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Pro Forma Information (Unaudited)The following unaudited pro forma information combines the historical operations of the Company and ACT giving effect to the ACT Acquisition, and related transactions as if consummated on January 1, 2020.
Quarter Ended March 31,
2021
(in thousands, except per share data)
Total revenue$1,412,232 
Net income attributable to Knight-Swift139,189 
Earnings per share – diluted0.83 
The unaudited pro forma condensed combined financial information has been presented for comparative purposes only and includes certain adjustments such as recognition of assets acquired at estimated fair values and related depreciation and amortization, elimination of transaction costs incurred by Knight-Swift and ACT during the periods presented that were directly related to the ACT Acquisition, and related income tax effects of these items.
The unaudited pro forma condensed combined financial information does not purport to represent the actual results of operations that Knight-Swift and ACT would have achieved had the companies been combined during the periods presented in the unaudited pro forma condensed combined financial statements and is not intended to project the future results of operations that the combined company may achieve after the identified transactions. The unaudited pro forma condensed combined financial information does not reflect any cost savings that may be realized as a result of the ACT Acquisition and also does not reflect any restructuring or integration-related costs to achieve those potential cost savings.
UTXL
On June 1, 2021, pursuant to a stock purchase agreement, the Company, through a wholly owned subsidiary, acquired 100.0% of the equity interests of UTXL, a premier third-party logistics company which specializes in over-the-road full truckload and multi-stop loads.
As of March 31, 2022, contingent consideration associated with the transaction was $2.5 million included in "Accrued liabilities" and $2.5 million included in "Other long-term liabilities" in the Company's condensed consolidated balance sheets, depending on the expected payment dates.
Eleos
On February 1, 2021, pursuant to a membership interest purchase agreement ("MIPA"), the Company, through a wholly owned subsidiary, acquired 79.44% of the issued and outstanding membership interests of Eleos Technologies, LLC ("Eleos"), a Greenville, South Carolina-based software provider, specializing in mobile driving platforms, which complement the Company's suite of services. The purchase price was allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The purchase price allocation was open for adjustments through the end of the measurement period, which closed one year from the February 1, 2021 acquisition date.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Purchase Price Allocations
Unless otherwise stated, the purchase price allocations for the above acquisitions are preliminary and have been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, and among other things may be pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, assessment of lease agreements, assessment of certain liabilities, the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed, and assessment of other tax related items as applicable. As the Company obtains more information, the preliminary purchase price allocations disclosed below are subject to change. Any future adjustments to the preliminary purchase price allocations, including changes within identifiable intangible assets or estimation uncertainty impacted by market conditions, may impact future net earnings. The purchase price allocation adjustments can be made through the end of the measurement periods, which is not to exceed one year from the respective acquisition dates.
Note 4 — Income Taxes
Effective Tax Rate — The quarter-to-date March 31, 2022 and March 31, 2021 effective tax rates were 24.9% and 25.9%, respectively.
Valuation Allowance — The Company has not established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.
Unrecognized Tax Benefits — Management believes it is reasonably possible that a decrease of up to $0.3 million in unrecognized tax benefits relating to federal deductions may be necessary within the next twelve months.
Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits were approximately $0.1 million as of March 31, 2022 and December 31, 2021.
Tax ExaminationsCertain of the Company's subsidiaries are currently under examination by Federal and various state jurisdictions for tax years ranging from 2014 to 2020. At the completion of these examinations, management does not expect any adjustments that would have a material impact on the Company's effective tax rate. Years subsequent to 2017 remain subject to examination.
Note 5 — Accounts Receivable Securitization
As of March 31, 2022, the Company's eligible receivables related to the 2021 RSA generally have high credit quality, as determined by the obligor's corporate credit rating.
The 2021 RSA is subject to fees, various affirmative and negative covenants, representations and warranties, and default and termination provisions customary for facilities of this type. The Company was in compliance with these covenants as of March 31, 2022. Collections on the underlying receivables by the Company are held for the benefit of SRCII and the various purchasers and are unavailable to satisfy claims of the Company and its subsidiaries.
The following table summarizes the key terms of the 2021 RSA (dollars in thousands):
Effective dateApril 23, 2021
Final maturity dateApril 23, 2024
Borrowing capacity$400,000 
Accordion option 1
$100,000 
Unused commitment fee rate 2
20 to 40 basis points
Program fees on outstanding balances 3
one-month LIBOR + 82.5 basis points
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
1The accordion option increases the maximum borrowing capacity, subject to participation of the purchasers.
2The 2021 RSA commitment fees rate are based on the percentage of the maximum borrowing capacity utilized.
3As identified within the 2021 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for LIBOR.
Availability under the 2021 RSA is calculated as follows:
March 31, 2022December 31, 2021
(In thousands)
Borrowing base, based on eligible receivables$400,000 $400,000 
Less: outstanding borrowings 1
(279,000)(279,000)
Less: outstanding letters of credit, net(65,300)(65,300)
Availability under accounts receivable securitization facilities$55,700 $55,700 
1As of March 31, 2022 and December 31, 2021, outstanding borrowings are included in "Accounts receivable securitization – less current portion" in the condensed consolidated balance sheets and are offset by $0.5 million of deferred loan costs. Interest accrued on the aggregate principal balance at a rate of 1.1% and 0.9% as of March 31, 2022 and December 31, 2021, respectively.
Refer to Note 12 for information regarding the fair value of the 2021 RSA.
Note 6 — Debt and Financing
Other than the Company's accounts receivable securitization as discussed in Note 5, the Company's long-term debt consisted of the following:
March 31, 2022December 31, 2021
(In thousands)
2021 Term Loan A-1, due December 3, 2022, net 1 2
$169,765 $199,676 
2021 Term Loan A-2, due September 3, 2024, net 1 2
199,645 199,607 
2021 Term Loan A-3, due September 3, 2026, net 1 2
798,440 798,352 
2021 Prudential Notes, net 1
39,261 47,265 
Other4,567 5,069 
Total long-term debt, including current portion1,211,678 1,249,969 
Less: current portion of long-term debt(182,519)(212,417)
Long-term debt, less current portion$1,029,159 $1,037,552 
March 31, 2022December 31, 2021
(In thousands)
Total long-term debt, including current portion$1,211,678 $1,249,969 
2021 Revolver, due September 3, 2026 1 3
165,000 260,000 
Long-term debt, including revolving line of credit$1,376,678 $1,509,969 
1Refer to Note 12 for information regarding the fair value of debt.
2The carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 are net of $0.2 million, $0.4 million, and $1.6 million in deferred loan costs as of March 31, 2022, respectively. The carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 are net of $0.3 million, $0.4 million, and $1.6 million in deferred loan costs as of December 31, 2021, respectively.
3The Company also had outstanding letters of credit of $64.4 million and $64.0 million under the 2021 Revolver, primarily related to workers' compensation and self-insurance liabilities at March 31, 2022 and December 31, 2021, respectively.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Credit Agreements
2021 Debt Agreement — On September 3, 2021, the Company entered into the $2.3 billion 2021 Debt Agreement (an unsecured credit facility), with a group of banks, replacing the 2017 Debt Agreement and the July 2021 Term Loan. The following table presents the key terms of the 2021 Debt Agreement:
2021 Term Loan A-12021 Term Loan A-22021 Term Loan A-3
2021 Revolver 2
2021 Debt Agreement Terms(Dollars in thousands)
Maximum borrowing capacity$200,000$200,000$800,000$1,100,000
Final maturity dateDecember 3, 2022September 3, 2024September 3, 2026September 3, 2026
Interest rate minimum marginBSBYBSBYBSBYBSBY
Interest rate minimum margin 1
0.75%0.75%0.88%0.88%
Interest rate maximum margin 1
1.38%1.38%1.50%1.50%
Minimum principal payment — amount$$$10,000$
Minimum principal payment — frequencyOnceOnceQuarterlyOnce
Minimum principal payment — commencement dateDecember 3, 2022September 3, 2024September 30, 2024September 3, 2026
1The interest rate margin for the 2021 Term Loans and 2021 Revolver is based on the Company's consolidated leverage ratio. As of March 31, 2022, interest accrued at 1.08% on the 2021 Term Loans and 1.13% on the 2021 Revolver.
2The commitment fee for the unused portion of the 2021 Revolver is based on the Company's consolidated leverage ratio, and ranges from 0.1% to 0.2%. As of March 31, 2022, commitment fees on the unused portion of the 2021 Revolver accrued at 0.1% and outstanding letter of credit fees accrued at 1.0%.
Pursuant to the 2021 Debt Agreement, the 2021 Revolver and the 2021 Term Loans contain certain financial covenants with respect to a maximum net leverage ratio and a minimum consolidated interest coverage ratio. The 2021 Debt Agreement provides flexibility regarding the use of proceeds from asset sales, payment of dividends, stock repurchases, and equipment financing. In addition to the financial covenants, the 2021 Debt Agreement includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the 2021 Debt Agreement may be accelerated, and the lenders' commitments may be terminated. The 2021 Debt Agreement contains certain usual and customary restrictions and covenants relating to, among other things, dividends (which are restricted only if a default or event of default occurs and is continuing or would result therefrom), liens, affiliate transactions, and other indebtedness. As of March 31, 2022, the Company was in compliance with the covenants under the 2021 Debt Agreement.
Borrowings under the 2021 Debt Agreement, are made by Knight-Swift Transportation Holdings Inc., and are guaranteed by certain of the Company's domestic subsidiaries (other than its captive insurance subsidiaries, driving academy subsidiary, and bankruptcy-remote special purpose subsidiary).
ACT Credit Agreement
Prudential Notes — The 2021 Prudential Notes allow ACT to borrow up to $125.0 million, less amounts then currently outstanding with Prudential Capital Group, provided that certain financial ratios are maintained. The 2021 Prudential Notes have interest rates ranging from 4.05% to 4.40% and various maturity dates ranging from October 2023 through January 2028. The 2021 Prudential Notes are unsecured and contain usual and customary restrictions on, among other things, the ability to make certain payments to stockholders, similar to the provisions of the Company's 2021 Debt Agreement. As of March 31, 2022, ACT had $87.9 million available under the agreement.
See Note 12 for fair value disclosures regarding the Company's debt instruments.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Note 7 — Defined Benefit Pension Plan
Net periodic pension income and benefits paid during the first quarter of 2022 were immaterial.
Assumptions
A weighted-average discount rate of 3.38% was used to determine benefit obligations as of March 31, 2022.
The following weighted-average assumptions were used to determine net periodic pension cost:
Quarter Ended March 31,
2022
Discount rate2.55 %
Expected long-term rate of return on pension plan assets6.00 %
Refer to Note 12 for additional information regarding fair value measurements of the Company's investments.
Note 8 — Commitments
Purchase Commitments
As of March 31, 2022, the Company had outstanding commitments to purchase revenue equipment of $682.2 million in the remainder of 2022 ($479.3 million of which were tractor commitments), $58.6 million in 2023 ($50.4 million of which were tractor commitments), and none thereafter. These purchases may be financed through any combination of finance leases, operat