PART I FINANCIAL INFORMATION Financial Statements This section presents Knight-Swift Transportation Holdings Inc.'s unaudited condensed consolidated financial statements for the periods ended September 30, 2022, along with explanatory notes Condensed Consolidated Balance Sheets As of September 30, 2022, total assets increased to $10.75 billion, total liabilities decreased to $3.93 billion, and stockholders' equity rose to $6.82 billion Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | Sep 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $1,474,347 | $1,414,280 | | Property and equipment, net | $3,675,325 | $3,555,364 | | Goodwill | $3,518,589 | $3,515,135 | | Total Assets | $10,747,367 | $10,655,500 | | Total Current Liabilities | $912,352 | $1,074,816 | | Total Liabilities | $3,930,754 | $4,112,050 | | Total Stockholders' Equity | $6,816,613 | $6,543,450 | Condensed Consolidated Statements of Comprehensive Income Q3 2022 saw total revenue increase to $1.90 billion while net income decreased, whereas year-to-date total revenue grew to $5.68 billion with increased net income Q3 2022 vs Q3 2021 Performance (Unaudited) | Metric | Q3 2022 (in thousands) | Q3 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $1,896,839 | $1,642,445 | +15.5% | | Operating Income | $265,441 | $270,087 | -1.7% | | Net Income Attributable to Knight-Swift | $194,795 | $206,178 | -5.5% | | Diluted EPS | $1.21 | $1.23 | -1.6% | YTD 2022 vs YTD 2021 Performance (Unaudited) | Metric | YTD Sep 30, 2022 (in thousands) | YTD Sep 30, 2021 (in thousands) | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $5,684,959 | $4,181,160 | +36.0% | | Operating Income | $889,305 | $623,461 | +42.6% | | Net Income Attributable to Knight-Swift | $622,624 | $488,772 | +27.4% | | Diluted EPS | $3.80 | $2.93 | +29.7% | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash from operating activities increased to $1.10 billion, while investing activities used less cash and financing activities reversed to a net outflow YTD Cash Flow Summary (Unaudited) | Cash Flow Activity | YTD Sep 30, 2022 (in thousands) | YTD Sep 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,099,195 | $817,524 | | Net cash used in investing activities | ($358,626) | ($1,548,757) | | Net cash (used in) provided by financing activities | ($748,829) | $873,309 | | Net (decrease) increase in cash | ($8,260) | $142,076 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations for the financial statements, covering business segments, acquisitions, debt, legal contingencies, and share repurchase plans - The company operates four reportable segments: Truckload, LTL, Logistics, and Intermodal. As of September 30, 2022, the company operated an average of 18,072 tractors in its Truckload segment and 3,147 tractors in its LTL segment22 - In 2021, the company made several acquisitions, including MME and ACT (LTL segment), UTXL (Logistics segment), and Eleos (non-reportable), impacting year-over-year comparability27 - On October 3, 2022, the company entered into an asset purchase agreement for $30.0 million to acquire revenue equipment and certain intangibles46 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance for Q3 and YTD September 30, 2022, covering market trends, segment results, operating expenses, liquidity, and non-GAAP measures Executive Summary and Key Highlights For the nine months ended September 30, 2022, consolidated revenue grew 29.5% and operating income improved 42.6% to $889.3 million, with strong operating cash flow and shareholder returns - YTD consolidated revenue growth was 29.5% (excluding fuel surcharge), with a 42.6% improvement in consolidated operating income to $889.3 million112 - The LTL segment achieved an 83.0% Adjusted Operating Ratio, benefiting from strong yield and synergy capture114 - The Logistics segment's operating income improved 125.9% with a 44.6% growth in load count114 - During the YTD period, the company generated $1.1 billion in operating cash flows, repurchased $299.9 million of its shares, and paid $59.0 million in dividends114 Market Trends and Outlook The Q4 2022 outlook anticipates a moderating freight market, stable LTL demand, continued inflationary pressures, and projected net cash capital expenditures of $525-$575 million - The freight market outlook for Q4 2022 includes moderating consumer demand, a muted peak season, and stable LTL demand122 - Company outlook for Q4 2022 includes rates inflecting negatively YoY, stable truck count, and year-over-year increases in LTL revenue and margin122 - Expected net cash capital expenditures for the full year 2022 are in the range of $525 – $575 million, excluding potential acquisitions122 Segment Review This section details the performance of the four reportable segments, highlighting varied results with strong improvements in LTL and Logistics, and mixed outcomes for Truckload and Intermodal Truckload Segment Performance - Q3 2022 vs Q3 2021 | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue (ex. fuel, intersegment) | $967.8M | $933.2M | +3.7% | | Adjusted Operating Income | $176.1M | $206.9M | -14.9% | | Adjusted Operating Ratio | 81.8% | 77.8% | +400 bps | | Total miles per tractor | 19,391 | 20,233 | -4.2% | LTL Segment Performance - Q3 2022 vs Q3 2021 | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Adjusted Operating Income | $34.9M | $21.0M | +66.4% | | Adjusted Operating Ratio | 84.5% | 87.5% | -300 bps | | LTL revenue xFSR per hundredweight | $14.37 | $12.44 | +15.5% | Logistics Segment Performance - Q3 2022 vs Q3 2021 | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Adjusted Operating Income | $27.8M | $27.5M | +1.2% | | Gross margin percentage | 20.9% | 18.1% | +280 bps | | Revenue per load | $1,985 | $2,513 | -21.0% | Intermodal Segment Performance - Q3 2022 vs Q3 2021 | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Operating income | $12.8M | $9.5M | +34.5% | | Operating ratio | 90.2% | 91.5% | -130 bps | | Average revenue per load | $3,699 | $2,902 | +27.5% | | Load count | 35,354 | 38,856 | -9.0% | Liquidity and Capital Resources As of September 30, 2022, the company maintained $1.26 billion in total unrestricted liquidity, with expected full-year net cash capital expenditures of $525-$575 million Sources of Liquidity as of Sep 30, 2022 | Source | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $194,082 | | Availability under 2021 Revolver | $924,754 | | Availability under 2021 RSA | $55,700 | | Total unrestricted liquidity | $1,262,393 | - Net cash capital expenditures are expected to be in the range of $525.0 – $575.0 million for the full-year 2022, excluding potential acquisitions240 - As of September 30, 2022, the company had $200.0 million remaining under its 2022 Share Repurchase Plan246 Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from variable interest rates and diesel fuel price fluctuations, with a 1% interest rate increase potentially raising annual interest expense by $14.7 million - The company has exposure to variable interest rates. A hypothetical 1% increase in interest rates would increase annual interest expense by $14.7 million, assuming borrowing levels as of September 30, 2022258 - The company has commodity price risk related to diesel fuel. The weekly average diesel price increased to $5.09/gallon in Q3 2022 from $3.36/gallon in Q3 2021. While fuel surcharges mitigate this, the company is not fully hedged against price fluctuations259 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report260 - There were no changes in the company's internal control over financial reporting during the quarter ended September 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls261 PART II OTHER INFORMATION Legal Proceedings Information on legal proceedings is incorporated from Note 9, with management assessing no material adverse effect on the company's financial position or operations - Details on legal proceedings are provided in Note 9 of the financial statements. Management believes that loss contingencies from these matters are unlikely to have a material adverse effect on the company's overall financial position266 Issuer Purchases of Equity Securities During Q3 2022, the company did not repurchase common stock, with $200.0 million remaining available under the 2022 Share Repurchase Plan Share Repurchases - Q3 2022 | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | July 2022 | — | $ — | | August 2022 | — | $ — | | September 2022 | — | $ — | | Total | — | $ — | - As of September 30, 2022, approximately $200.0 million remained available for purchase under the 2022 Knight-Swift Share Repurchase Plan268 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files272
Knight-Swift Transportation (KNX) - 2022 Q3 - Quarterly Report