Knight-Swift Transportation Holdings Inc. [KNX] Filings

10-Q 1 knx-20220930.htm 10-Q knx-20220930

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 September 30, 2022

☐ 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

_________________________________________________________________________________________________________________________________________________________

___________________________________________________________________________________________________________________________________

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)

(602) 269-2000

(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 class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $0.01 Par Value

KNX

New York Stock Exchange

_________________________________________________________________________________________________________________________________________________________

Indicate by check mark whether the registrant: (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 approximately 160,696,000 shares of the registrant's common stock outstanding as of October 26, 2022.

Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


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

Condensed Consolidated Balance Sheets (Unaudited) — September 30, 2022 and December 31, 2021			4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Quarter and Year-to-Date September 30, 2022 and 2021			5

Condensed Consolidated Statements of Cash Flows (Unaudited) — Quarter and Year-to-Date September 30, 2022 and 2021			6

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) —Quarter and Year-to-Date September 30, 2022 and 2021			8

Note 1 — Introduction and Basis of Presentation			10



Note 2 — Recently Issued Accounting Pronouncements			11

Note 3 — Acquisitions			11







Note 4 — Income Taxes			13



Note 5 — Accounts Receivable Securitization			14

Note 6 — Debt and Financing			15

Note 7 — Defined Benefit Pension Plan			17

Note 8 — Purchase Commitments			17

Note 9 — Contingencies and Legal Proceedings			17

Note 10 — Share Repurchase Plans			19

Note 11 — Weighted Average Shares Outstanding			19

Note 12 — Fair Value Measurement			20

Note 13 — Related Party Transactions			23

Note 14 — Financial Information by Segment and Geography			24

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			25

Item 3. Quantitative and Qualitative Disclosures About Market Risk			58

Item 4. Controls and Procedures			59
PART II OTHER INFORMATION
Item 1. Legal Proceedings			60

Item 1A. Risk Factors			60

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			60

Item 3. Defaults Upon Senior Securities			60

Item 4. Mine Safety Disclosures			60

Item 5. Other Information			60

Item 6. Exhibits			61

Signatures			62

Table of Contents

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.
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 Transportation, Inc. and its subsidiaries and Swift Transportation Company and its subsidiaries, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt Agreement			The Company's unsecured credit agreement, entered into on September 29, 2017, as amended on October 2, 2020



2021 Debt Agreement			The 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 Notes			Third amended and restated note purchase and private shelf agreement, entered into on September 3, 2021 by ACT with unrelated financial entities
2021 Revolver			Revolving line of credit under the 2021 Debt Agreement
2021 Term Loans			The 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-1			The Company's term loan under the 2021 Debt Agreement, maturing on December 3, 2022
2021 Term Loan A-2			The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2024
2021 Term Loan A-3			The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2026
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.


July 2021 Term Loan			The Company's term loan entered into on July 6, 2021
ACT			AAA Cooper Transportation, and its affiliated entity
ACT Acquisition			The Company's acquisition of 100% of the securities of ACT on July 5, 2021
Annual Report			Annual Report on Form 10-K
ASC			Accounting Standards Codification
ASU			Accounting Standards Update
Board			Knight-Swift's Board of Directors
BSBY			Bloomberg Short-Term Bank Yield Index

DOE			United States Department of Energy
EPS			Earnings Per Share
Embark			Embark Technology Inc. and its related entities
ESPP			Knight-Swift Transportation Holdings Inc. Amended and Restated 2012 Employee Stock Purchase Plan



GAAP			United States Generally Accepted Accounting Principles

LIBOR			London InterBank Offered Rate


NYSE			New York Stock Exchange
LTL			Less-than-truckload
MME			RAC MME Holdings, LLC. and its subsidiaries, MME, Inc., Midwest Motor Express, Inc., and Midnite Express Inc.
Quarterly Report			Quarterly Report on Form 10-Q

RSU			Restricted Stock Unit
SEC			United States Securities and Exchange Commission
SOFR			Secured overnight financing rate as administered by the Federal Reserve Bank of New York



US			The United States of America
UTXL			UTXL Enterprises, Inc.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

PART I FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets (Unaudited)


	September 30, 2022		December 31, 2021
	(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents	$	194,082	$	261,001
Cash and cash equivalents – restricted	144,960		87,241
Restricted investments, held-to-maturity, amortized cost	7,827		5,866
Trade receivables, net of allowance for doubtful accounts of $22,210 and $21,663, respectively	944,060		911,336
Contract balance – revenue in transit	19,605		22,936
Prepaid expenses	93,292		90,507
Assets held for sale	16,318		8,166
Income tax receivable	15,100		909
Other current assets	39,103		26,318
Total current assets	1,474,347		1,414,280
Gross property and equipment	5,543,221		5,118,897
Less: accumulated depreciation and amortization	(1,867,896)		(1,563,533)
Property and equipment, net	3,675,325		3,555,364
Operating lease right-of-use-assets	160,920		147,540
Goodwill	3,518,589		3,515,135
Intangible assets, net	1,782,452		1,831,049
Other long-term assets	135,734		192,132
Total assets	$	10,747,367	$	10,655,500
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	229,555	$	224,844
Accrued payroll and purchased transportation	200,871		217,084
Accrued liabilities	98,513		128,536
Claims accruals – current portion	271,111		206,607

Finance lease liabilities and long-term debt – current portion	76,684		262,423
Operating lease liabilities – current portion	35,618		35,322

Total current liabilities	912,352		1,074,816
Revolving line of credit	146,000		260,000
Long-term debt – less current portion	1,028,014		1,037,552
Finance lease liabilities – less current portion	348,594		256,166
Operating lease liabilities – less current portion	121,028		107,614
Accounts receivable securitization	278,649		278,483
Claims accruals – less current portion	208,055		210,714
Deferred tax liabilities	878,167		874,877
Other long-term liabilities	9,895		11,828
Total liabilities	3,930,754		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; 160,670 and 165,980 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.	1,607		1,660

Accumulated other comprehensive loss	(2,554)		(563)
Additional paid-in capital	4,382,895		4,350,913
Retained earnings	2,424,469		2,181,142
Total Knight-Swift stockholders' equity	6,806,417		6,533,152
Noncontrolling interest	10,196		10,298
Total stockholders’ equity	6,816,613		6,543,450
Total liabilities and stockholders’ equity	$	10,747,367	$	10,655,500

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2022		2021		2022		2021
	(In thousands, except per share data)
Revenue:
Revenue, excluding truckload and LTL fuel surcharge	$	1,649,982	$	1,510,572	$	4,992,391	$	3,856,549
Truckload and LTL fuel surcharge	246,857		131,873		692,568		324,611
Total revenue	1,896,839		1,642,445		5,684,959		4,181,160
Operating expenses:
Salaries, wages, and benefits	559,849		500,673		1,645,861		1,248,656
Fuel	231,128		146,422		678,763		390,713
Operations and maintenance	115,918		86,951		318,525		226,334
Insurance and claims	116,493		73,757		316,769		188,176
Operating taxes and licenses	26,628		27,475		85,869		71,240
Communications	5,095		6,612		16,709		16,284
Depreciation and amortization of property and equipment	150,363		138,570		442,889		382,091
Amortization of intangibles	16,254		15,719		48,635		39,452
Rental expense	15,216		12,002		42,109		42,265
Purchased transportation	364,394		352,061		1,135,750		914,448
Impairments	—		—		810		—
Miscellaneous operating expenses	30,060		12,116		62,965		38,040

Total operating expenses	1,631,398		1,372,358		4,795,654		3,557,699
Operating income	265,441		270,087		889,305		623,461
Other (expenses) income:
Interest income	1,221		245		2,357		809
Interest expense	(14,679)		(7,179)		(30,704)		(13,972)
Other income (expenses), net	8,488		4,072		(31,493)		37,017
Total other (expenses) income, net	(4,970)		(2,862)		(59,840)		23,854
Income before income taxes	260,471		267,225		829,465		647,315
Income tax expense	65,679		61,059		206,943		158,171
Net income	194,792		206,166		622,522		489,144
Net loss (income) attributable to noncontrolling interest	3		12		102		(372)
Net income attributable to Knight-Swift	194,795		206,178		622,624		488,772
Other comprehensive income (loss)	243		(878)		(1,991)		(878)
Comprehensive income	$	195,038	$	205,300	$	620,633	$	487,894

Earnings per share:
Basic	$	1.21	$	1.24	$	3.82	$	2.95
Diluted	$	1.21	$	1.23	$	3.80	$	2.93

Dividends declared per share:	$	0.12	$	0.10	$	0.36	$	0.28

Weighted average shares outstanding:
Basic	160,665		165,966		162,785		165,823
Diluted	161,572		167,106		163,720		166,936

See accompanying notes to the condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited)


	Year-to-Date September 30,
	2022		2021
	(In thousands)
Cash flows from operating activities:
Net income	$	622,522	$	489,144
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment, and intangibles	491,524		421,543
Gain on sale of property and equipment	(73,373)		(47,700)

Impairments	810		—
Deferred income taxes	1,126		40,987
Non-cash lease expense	30,973		35,939
Loss (gain) on equity securities	51,033		(12,839)
Non-cash adjustment to fair value of convertible note	—		(12,631)
Other adjustments to reconcile net income to net cash provided by operating activities	32,545		30,211
Increase (decrease) in cash resulting from changes in:
Trade receivables	(44,043)		(152,482)
Income tax receivable	(14,191)		(43,462)
Accounts payable	14,259		34,255
Accrued liabilities and claims accrual	19,207		57,157
Operating lease liabilities	(30,755)		(37,357)
Other assets and liabilities	(2,442)		14,759
Net cash provided by operating activities	1,099,195		817,524
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity investments	7,506		8,380
Purchases of held-to-maturity investments	(9,594)		(6,683)
Proceeds from sale of property and equipment, including assets held for sale	139,545		192,454
Purchases of property and equipment	(496,237)		(388,518)
Expenditures on assets held for sale	(499)		(1,367)
Net cash, restricted cash, and equivalents invested in acquisitions	(1,291)		(1,342,042)
Investment in convertible note	—		(25,000)
Other cash flows from investing activities	1,944		14,019
Net cash used in investing activities	(358,626)		(1,548,757)
Cash flows from financing activities:
Repayment of finance leases and long-term debt	(250,884)		(374,539)
Proceeds from long-term debt	—		1,200,000

Repayments on revolving lines of credit, net	(114,000)		90,000
Borrowings under accounts receivable securitization	—		80,000
Repayment of accounts receivable securitization	—		(15,000)

Proceeds from common stock issued	6,111		7,624
Repurchases of the Company's common stock	(299,941)		(53,661)
Dividends paid	(59,011)		(46,935)

Other cash flows from financing activities	(31,104)		(14,180)
Net cash (used in) provided by financing activities	(748,829)		873,309
Net (decrease) increase in cash, restricted cash, and equivalents	(8,260)		142,076
Cash, restricted cash, and equivalents at beginning of period	350,023		197,277
Cash, restricted cash, and equivalents at end of period	$	341,763	$	339,353

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued


	Year-to-Date September 30,
	2022		2021
	(In thousands)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	29,342	$	11,683
Income taxes	234,260		160,281
Non-cash investing and financing activities:
Equipment acquired included in accounts payable	$	4,264	$	9,278


Transfers from property and equipment to assets held for sale	45,618		80,881
Noncontrolling interest associated with acquisition	—		10,281
Purchase price adjustment on acquisition	2,164		—
Contingent consideration associated with acquisitions and investments	1,717		5,000
Value of common stock issued for acquisition	—		10,000
Right-of-use assets obtained in exchange for operating lease liabilities	44,465		20,261
Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions	—		4,613
Property and equipment obtained in exchange for finance lease liabilities	141,374		114,803
Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities	6,462		42,298


Reconciliation of Cash, Restricted Cash, and Equivalents:	September 30, 2022		December 31, 2021		September 30, 2021		December 31, 2020
	(In thousands)
Consolidated Balance Sheets
Cash and cash equivalents	$	194,082	$	261,001	$	269,694	$	156,699
Cash and cash equivalents – restricted 1	144,960		87,241		68,019		39,328
Other long-term assets 1	2,721		1,781		1,640		1,250
Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents	$	341,763	$	350,023	$	339,353	$	197,277

________

1 Reflects cash and cash equivalents that are primarily restricted for claims payments.

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Knight-Swift Stockholders' Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Par Value
	(In thousands, except per share data)


































Balances – December 31, 2021	165,980	$	1,660	$	4,350,913	$	2,181,142	$	(563)	$	6,533,152	$	10,298	$	6,543,450

Common stock issued to employees	614	6		2,369						2,375				2,375
Common stock issued to the Board	18	—		873						873				873

Common stock issued under ESPP	59	1		2,862						2,863				2,863
Company shares repurchased	(6,001)	(60)				(299,881)				(299,941)				(299,941)
Shares withheld – RSU settlement						(20,504)				(20,504)				(20,504)
Employee stock-based compensation expense				25,878						25,878				25,878
Cash dividends paid and dividends accrued ($0.36 per share)						(58,912)				(58,912)				(58,912)
Net income attributable to Knight-Swift						622,624				622,624				622,624
Other comprehensive loss								(1,991)		(1,991)				(1,991)


Net income attributable to noncontrolling interest												(102)		(102)

Balances – September 30, 2022	160,670	$	1,607	$	4,382,895	$	2,424,469	$	(2,554)	$	6,806,417	$	10,196	$	6,816,613


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		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	475	6		5,020						5,026				5,026
Common stock issued to the Board	12	—		575						575				575
Common stock issued with ACT acquisition	219	2		9,998						10,000				10,000
Common stock issued under ESPP	47	—		2,023						2,023				2,023
Company shares repurchased	(1,303)	(13)				(53,648)				(53,661)				(53,661)
Shares withheld – RSU settlement						(8,079)				(8,079)				(8,079)
Employee stock-based compensation expense				25,854						25,854				25,854
Cash dividends paid and dividends accrued ($0.28 per share)						(46,820)				(46,820)				(46,820)
Net income attributable to Knight-Swift						488,772				488,772				488,772
Other comprehensive income								(878)		(878)				(878)
Investment in noncontrolling interest												10,281		10,281
Distribution to noncontrolling interest												(65)		(65)
Net income attributable to noncontrolling interest												372		372

Balances – September 30, 2021	166,003	$	1,660	$	4,344,894	$	1,946,984	$	(878)	$	6,292,660	$	12,780	$	6,305,440

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Continued


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Knight-Swift Stockholders' Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Par Value
	(In thousands, except per share data)
















Balances – June 30, 2022	160,639	$	1,606	$	4,372,916	$	2,249,333	$	(2,797)	$	6,621,058	$	10,199	$	6,631,257

Common stock issued to employees	7	—		—						—				—


Common stock issued under ESPP	24	1		1,053						1,054				1,054

Shares withheld – RSU settlement						(188)				(188)				(188)
Employee stock-based compensation expense				8,926						8,926				8,926
Cash dividends paid and dividends accrued ($0.12 per share)						(19,471)				(19,471)				(19,471)
Net income attributable to Knight-Swift						194,795				194,795				194,795
Other comprehensive loss								243		243				243


Net income attributable to noncontrolling interest												(3)		(3)

Balances – September 30, 2022	160,670	$	1,607	$	4,382,895	$	2,424,469	$	(2,554)	$	6,806,417	$	10,196	$	6,816,613

Common Stock

Additional
Paid-in Capital

Retained Earnings

Accumulated
Other
Comprehensive Loss

Total Knight-Swift Stockholders' Equity

Noncontrolling Interest

Total
Stockholders’ Equity

Par Value

(In thousands, except per share data)