July 25, 2018
Phoenix, Arizona
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| Knight-Swift Transportation Holdings Inc. Reports Second Quarter 2018 Revenue and Earnings |
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| | Quarter-to-Date June 30, (1) |
| | 2018 | | 2017 | | Change |
| | (Dollars in thousands, except per share data) |
| Total revenue | $ | 1,331,683 |
| | $ | 273,243 |
| | 387.4 | % |
| Revenue, excluding fuel surcharge | $ | 1,169,748 |
| | $ | 247,022 |
| | 373.5 | % |
| Operating income | $ | 124,242 |
| | $ | 28,410 |
| | 337.3 | % |
Adjusted Operating Income (2) | $ | 134,929 |
| | $ | 32,588 |
| | 314.0 | % |
| Net income attributable to Knight-Swift | $ | 91,323 |
| | $ | 17,970 |
| | 408.2 | % |
Adjusted Net Income Attributable to Knight-Swift (2) | $ | 99,632 |
| | $ | 20,577 |
| | 384.2 | % |
| Earnings per diluted share | $ | 0.51 |
| | $ | 0.22 |
| | 131.8 | % |
Adjusted EPS (2) | $ | 0.56 |
| | $ | 0.25 |
| | 124.0 | % |
_________________
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| (1) | For information regarding comparability of the reported results due to mergers and acquisitions, refer to footnote (1) of the Condensed Consolidated Income Statements (Unaudited), in the schedules following this release. |
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| (2) | See GAAP to non-GAAP reconciliation in the schedules following this release. |
Knight-Swift Transportation Holdings Inc. (NYSE: KNX) ("Knight-Swift"), North America's largest truckload transportation company, today reported second quarter 2018 net income attributable to Knight-Swift of $91.3 million and Adjusted Net Income Attributable to Knight-Swift of $99.6 million. Our earnings per diluted share were $0.51 for the second quarter of 2018 and $0.22 for the second quarter of 2017. Our Adjusted EPS was $0.56 for the second quarter of 2018 and $0.25 for the second quarter of 2017. The second quarter effective tax rate decreased to 22.9% in 2018, compared to 37.6% in 2017, primarily as a result of the Tax Cuts and Jobs Act of 2017, and increased sequentially from 21.2% in the first quarter of 2018.
Total revenue increased 387.4% to $1.3 billion for the second quarter of 2018 from $273.2 million for the second quarter of 2017. Revenue, excluding fuel surcharge, increased 373.5% to $1.2 billion for the second quarter of 2018 from $247.0 million for the second quarter of 2017. Increases in revenue, excluding fuel surcharge, of 31.5% and 44.7% in our Knight Trucking and Knight Logistics segments, respectively, as well as the merger between Knight and Swift and our acquisition of Abilene Motor Express, Inc. ("Abilene") contributed to an increase in revenue compared to the prior year.
Operating income increased 337.3% to $124.2 million for the second quarter of 2018 from $28.4 million for the second quarter of 2017. Adjusted Operating Income increased 314.0% to $134.9 million for the second quarter of 2018 from $32.6 million for the second quarter of 2017. Improvements in Adjusted Operating Income of 90.1% and 55.1% in our Knight Trucking and Knight Logistics segments, respectively, as well as Swift's second quarter 2018 Adjusted Operating Income, including non-reportable segments, of $73.9 million, and Abilene's continuous improvement in operating margins since the acquisition date, led to the earnings growth.
Knight Trucking, Swift Truckload, and Swift Dedicated comprised approximately 80% (or 15,300 tractors) of our asset-based trucking business and are performing well, operating on a combined basis at an 83.8% Adjusted Operating Ratio during the second quarter of 2018. Swift Intermodal continues to show sequential and year-over-year improvements since the merger between Knight and Swift. Additionally, Knight Logistics continues to grow load count as well as operating income. We have a team working on identified opportunities to improve profitability within our Swift Refrigerated segment, and we expect to make progress in the second half of 2018.
The company previously announced a quarterly cash dividend of $0.06 per share to stockholders of record on June 1, 2018, which was paid on June 27, 2018.
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| Segment Financial Performance |
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Knight Transportation (1) | Quarter-to-Date June 30, |
| | 2018 | | 2017 | | Change |
| | (Dollars in thousands) |
| Knight Trucking: | | | | | |
| Revenue, excluding fuel surcharge and intersegment transactions | $ | 255,224 |
| | $ | 194,049 |
| | 31.5 | % |
| Operating income | $ | 56,582 |
| | $ | 25,762 |
| | 119.6 | % |
Adjusted Operating Income (2) | $ | 56,925 |
| | $ | 29,940 |
| | 90.1 | % |
| Operating ratio | 80.8 | % | | 88.3 | % | | (750 | bps) |
Adjusted Operating Ratio (2) | 77.7 | % | | 84.6 | % | | (690 | bps) |
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| Knight Logistics: | | | | | |
| Revenue, excluding intersegment transactions | $ | 76,639 |
| | $ | 52,973 |
| | 44.7 | % |
| Operating income | $ | 4,108 |
| | $ | 2,648 |
| | 55.1 | % |
| Operating ratio | 94.8 | % | | 95.2 | % | | (40 | bps) |
Adjusted Operating Ratio (2) | 94.6 | % | | 95.0 | % | | (40 | bps) |
_________________
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| (1) | For information regarding comparability of the reported results due to mergers and acquisitions, refer to footnote (1) of the Condensed Consolidated Income Statements (Unaudited), in the schedules following this release. |
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| (2) | See GAAP to non-GAAP reconciliation in the schedules following this release. |
Knight Trucking Segment — During the second quarter of 2018, the Knight Trucking segment produced an Adjusted Operating Ratio of 77.7% compared to 84.6% for the same quarter last year, resulting in a 90.1% improvement in Adjusted Operating Income. The strong freight market and tight capacity supported increases in both contract and non-contract rates throughout the quarter. Average revenue per tractor increased 24.1% as a result of a 20.9% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, and a 3.9% improvement in miles per tractor, compared to the prior year quarter. As a result of these improvements and a 6.0% increase in average tractor count, revenue, excluding fuel surcharge and intersegment transactions, increased 31.5%. The 2018 results include the results of Abilene.
Knight Logistics Segment — Our Knight Logistics segment consists of brokerage, intermodal, and other logistics services. Adjusted Operating Ratio in the Knight Logistics segment improved to 94.6% in the second quarter of 2018 from 95.0% in the second quarter of 2017. The Knight Logistics segment's revenue, excluding intersegment transactions, increased by 44.7%, contributing to a 55.1% improvement in operating income. Brokerage revenue increased by 45.4% in the second quarter of 2018 when compared to the same quarter in 2017, as revenue per load increased 26.6% and load volumes increased by 14.8%. Brokerage gross margin percentage for the quarter was slightly down year-over-year, as the revenue per load increase was offset by an increase in purchased transportation costs.
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Swift Transportation (1) | Quarter-to-Date June 30, 2018 |
| | Swift Truckload | | Swift Dedicated | | Swift Refrigerated | | Swift Intermodal |
| Revenue, excluding fuel surcharge | $ | 363,066 |
| | $ | 141,993 |
| | $ | 180,834 |
| | $ | 94,730 |
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| Operating income | $ | 45,787 |
| | $ | 20,691 |
| | $ | 3,597 |
| | $ | 4,166 |
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| Operating ratio | 89.1 | % | | 87.1 | % | | 98.2 | % | | 96.3 | % |
Adjusted Operating Ratio (2) | 87.4 | % | | 85.4 | % | | 98.0 | % | | 95.6 | % |
_________________
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| (1) | For information regarding comparability of the reported results due to mergers and acquisitions, refer to footnote (1) of the Condensed Consolidated Income Statements (Unaudited), in the schedules following this release. |
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| (2) | See GAAP to non-GAAP reconciliation in the schedules following this release. |
During the second quarter of 2018, our two largest segments (based on average tractor count), Swift Truckload and Swift Dedicated, achieved an Adjusted Operating Ratio of 87.4% and 85.4%, respectively, which is a notable improvement from historical performance within these segments. Additionally, we continue to see meaningful improvement in our operating profitability within our Swift Truckload, Swift Dedicated, and Swift Intermodal segments, as a result of our focus on expanding our margins by improving our revenue per tractor and revenue per container while executing on cost control. We have made progress in certain areas of our Swift Refrigerated segment, however, this segment is underperforming. We believe that we have identified the issues within this segment and we have a team working on identified opportunities that we believe will support improved results beginning in the second half of 2018.
Improving safety has been a high priority, and we believe that the initiatives we have implemented are leading to positive trends in our safety metrics. The challenging driver-sourcing market remains the biggest headwind faced by our industry; however, we believe our efforts to address the associated pressures from this headwind have not compromised our priority of improving safety.
Average tractor count decreased sequentially by 658 units across the Swift fleet during the second quarter, as a result of the difficult driver sourcing environment and exiting several underperforming refrigerated and dedicated accounts. The Swift fleet ended the quarter with approximately 14,700 operational tractors, and we believe we are close to stabilizing the tractor count for the back half of the year.
Swift Truckload Segment — Our average revenue per tractor increased 8.8% in our Swift Truckload segment compared to the same quarter of 2017. This increase was primarily driven by a 14.7% increase in revenue, excluding fuel surcharge, per loaded mile as a result of year-over-year improvements in both our contract and non-contract rates, partially offset by a 3.8% decrease in miles per tractor. Over the last several quarters we have emphasized our focus on improving revenue per tractor, which has led to a change in our freight mix, a shorter length of haul, and fewer miles per tractor. The Swift Truckload segment's Adjusted Operating Ratio was 87.4% for the second quarter of 2018, which represents a meaningful year-over-year improvement in both Adjusted Operating Ratio and Adjusted Operating Income.
Swift Dedicated Segment — Our average revenue per tractor within our Swift Dedicated segment increased 3.5% in the second quarter of 2018, compared to the same quarter of 2017. This increase was predominately related to the 4.4% increase in our contract rates, partially offset by a slight decrease in miles per tractor year over year. The Swift Dedicated segment's Adjusted Operating Ratio was 85.4% in the second quarter of 2018.
Swift Refrigerated Segment — Our average revenue per tractor within our Swift Refrigerated segment decreased 6.7% in the second quarter of 2018, compared to the same quarter of 2017. Our revenue, excluding fuel surcharge, per loaded mile increased 3.7%, but was offset by a 10.8% decrease in miles per tractor, as a result of an increase in unmanned trucks. As noted above, we have identified opportunities for improvement and have a team working on solutions that we believe will support improved results beginning in the second half of 2018.
Swift Intermodal Segment — Our second quarter Adjusted Operating Ratio was 95.6% for the Swift Intermodal segment, reflecting meaningful year-over-year improvement in this segment. These results were largely driven by our improved container turns and a 16.6% year-over-year increase in revenue, excluding fuel surcharge, per container in the second quarter of 2018. Load count increased 11.7% while average revenue per load increased 4.3%.
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| Consolidated Liquidity and Capital Resources |
Cash Flow Sources (Uses) (1)
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| | | | | | | | | | | |
| | Year-to-Date June 30, | | Change |
| | 2018 | | 2017 | |
| | (In thousands) | | |
| Net cash provided by operating activities | $ | 375,912 |
| | $ | 120,914 |
| | $ | 254,998 |
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| Net cash used in investing activities | (232,564 | ) | | (16,345 | ) | | (216,219 | ) |
| Net cash used in financing activities | (126,769 | ) | | (23,795 | ) | | (102,974 | ) |
Net increase in cash, restricted cash, and equivalents(2) | $ | 16,579 |
| | $ | 80,774 |
| | $ | (64,195 | ) |
| Net capital expenditures | $ | (121,386 | ) | | $ | (22,587 | ) | | $ | (98,799 | ) |
_________________
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| (1) | For information regarding comparability of the reported results due to mergers and acquisitions, refer to footnote (1) of the Condensed Consolidated Income Statements (Unaudited), in the schedules following this release. |
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| (2) | "Net 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 consolidated balance sheets. |
Liquidity and Capitalization — As of June 30, 2018, we had $770.2 million of unrestricted cash and available liquidity and $5.4 billion of stockholders' equity. Since December 31, 2017, we have decreased the face value of our net debt by $151.2 million to $743.7 million as of June 30, 2018, even while acquiring Abilene in 2018. We remain committed to reducing leverage and further strengthening our balance sheet, which we believe will position the company for success in a changing environment and to be able to pursue further opportunities for organic growth and growth through acquisition. Also, over the the last twelve months ended June 30, 2018, we returned $37.2 million in quarterly dividends to our stockholders.
During the second quarter, our board of directors authorized a share repurchase program of up to $250.0 million. We plan to monitor the price of our stock relative to our expectations and historical valuation levels and will be active where we see opportunities. We will manage any repurchase activity in light of leverage levels and growth opportunities for organic growth and growth through acquisition. We believe our current balance sheet positions us to have the flexibility to be opportunistic buyers of our stock while continuing to invest in future growth opportunities.
Equipment and Capital Expenditures — Gain on sale of revenue equipment was $9.1 million in the second quarter of 2018, compared to $0.8 million in the same quarter of 2017, which does not include the $3.4 million gain reported by Swift in the second quarter of 2017. A year-over-year increase in trailer sales contributed to the improvement in our gain on sale of revenue equipment, as we focused on right-sizing our trailer-to-tractor ratio. Capital expenditures, net of disposal proceeds, were $114.3 million in the second quarter of 2018, while the average ages of the Knight and Swift tractor fleets were 2.6 years and 2.5 years, respectively.
We expect that net capital expenditures will be in the range of $525.0 – $575.0 million in 2018, primarily representing replacements of existing tractors and trailers. As noted in the previous quarter, this range reflects a change in the composition of capital expenditure funding from Swift's historical practices. We plan to fund more purchases with cash and on-balance-sheet financing through our revolver and to use less off-balance-sheet leasing compared to Swift's past practice. While this may cause the reported cash expenditures to be significantly higher, the aggregate purchases of equipment and their related life cycles are not expected to change meaningfully.
Knight-Swift Transportation Holdings Inc. is a provider of multiple truckload transportation and logistics services using a nationwide network of business units and terminals in the United States to serve customers throughout North America. In addition to operating the country's largest tractor fleet, Knight-Swift also contracts with third-party equipment providers to provide a broad range of truckload services to its customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors.
The company will hold a conference call on July 25, 2018, at 4:30 PM EDT, to further discuss its results of operations for the quarter ended June 30, 2018. The dial-in number for this conference call is 1-855-733-9163. Slides to accompany this call will be posted on the company's website and will be available to download prior to the scheduled conference time. To view the presentation, please visit http://investor.knight-swift.com/events, "Second Quarter 2018 Conference Call Presentation."
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| 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," "will," 'is," "could," "should," "may," "continue," or similar expressions, which speak only as of the date the statement was made. Such forward-looking statements are made pursuant to the safe harbor provisions of 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 earnings, revenues, cash flows, dividends, 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 conditions or performance; 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:
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| • | any projections of earnings, revenues, cash flows, dividends, capital expenditures, or other financial items, |
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| • | any statement of plans, strategies, and objectives of management for future operations, |
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| • | any statements concerning proposed acquisition plans, new services or developments, |
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| • | any statements regarding future economic or industry conditions or performance, and |
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| • | any statements of belief and any statements of assumptions underlying any of the foregoing. |
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, 2017, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, and various disclosures in our press releases, stockholder reports, and other filings with the SEC. The following factors, among others, could cause actual results to differ materially from those in forward-looking statements:
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| • | the ability of our infrastructure to support future growth, whether we grow organically or through potential acquisitions, |
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| • | the future impact of the 2017 Merger, including achievement of anticipated synergies, |
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| • | the flexibility of our model to adapt to market conditions, |
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| • | our ability to recruit and retain qualified driving associates, |
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| • | future safety performance, |
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| • | future dedicated and refrigerated performance, |
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| • | our ability to gain market share, |
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| • | our ability and desire to expand our brokerage and intermodal operations, |
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| • | future equipment prices, our equipment purchasing plans, and our equipment turnover (including expected tractor trade-ins), |
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| • | our ability to sublease equipment to independent contractors, |
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| • | the impact of pending legal proceedings, |
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| • | the expected freight environment, including freight demand and volumes, |
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| • | economic conditions, including future inflation and consumer spending, |
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| • | our ability to obtain favorable pricing terms from vendors and suppliers, |
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| • | expected liquidity and methods for achieving sufficient liquidity, |
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| • | future expenses and our ability to control costs, |
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| • | future third-party service provider relationships and availability, |
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| • | future contracted pay rates with independent contractors and compensation arrangements with driving associates, |
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| • | our expected need or desire to incur indebtedness, |
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| • | expected sources of liquidity for capital expenditures and allocation of capital, |
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| • | expected capital expenditures, |
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| • | future mix of owned versus leased revenue equipment, |
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| • | future asset utilization, |
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| • | future capital requirements, |
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| • | future return on capital, |
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| • | our intention to pay dividends in the future, |
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| • | future share repurchases, |
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| • | future trucking industry capacity, |
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| • | future depreciation and amortization, |
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| • | expected tractor and trailer fleet age, |
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| • | political conditions and regulations, including future changes thereto, |
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| • | future purchased transportation expense, and |
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| Investor Relations Contact Information |
David A. Jackson, President and Chief Executive Officer, or Adam W. Miller, Chief Financial Officer: (602) 606-6349
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Condensed Consolidated Income Statements (Unaudited) (1) |
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| | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| | (In thousands, except per share data) |
| Revenue: | | | | | | | |
| Revenue, excluding fuel surcharge | $ | 1,169,748 |
| | $ | 247,022 |
| | $ | 2,293,920 |
| | $ | 492,002 |
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| Fuel surcharge | 161,935 |
| | 26,221 |
| | 308,895 |
| | 52,423 |
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| Total revenue | 1,331,683 |
| | 273,243 |
| | 2,602,815 |
| | 544,425 |
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| Operating expenses: | | | | | | | |
| Salaries, wages, and benefits | 371,405 |
| | 79,944 |
| | 733,078 |
| | 162,454 |
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| Fuel | 162,969 |
| | 33,719 |
| | 307,785 |
| | 68,952 |
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| Operations and maintenance | 88,278 |
| | 20,596 |
| | 173,298 |
| | 41,249 |
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| Insurance and claims | 53,126 |
| | 8,294 |
| | 112,274 |
| | 16,865 |
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| Operating taxes and licenses | 22,671 |
| | 4,615 |
| | 45,821 |
| | 9,046 |
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| Communications | 5,450 |
| | 1,018 |
| | 10,742 |
| | 2,204 |
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| Depreciation and amortization of property and equipment | 95,748 |
| | 29,246 |
| | 189,611 |
| | 58,803 |
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| Amortization of intangibles | 10,687 |
| | 125 |
| | 21,196 |
| | 250 |
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| Rental expense | 47,703 |
| | 1,228 |
| | 100,578 |
| | 2,551 |
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| Purchased transportation | 335,712 |
| | 58,299 |
| | 659,995 |
| | 116,924 |
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| Miscellaneous operating expenses | 13,692 |
| | 3,571 |
| | 30,451 |
| | 9,901 |
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| Merger-related costs | — |
| | 4,178 |
| | — |
| | 4,178 |
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| Total operating expenses | 1,207,441 |
| | 244,833 |
| | 2,384,829 |
| | 493,377 |
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| Operating income | 124,242 |
| | 28,410 |
| | 217,986 |
| | 51,048 |
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| Interest income | 730 |
| | 130 |
| | 1,302 |
| | 189 |
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| Interest expense | (7,132 | ) | | (54 | ) | | (13,896 | ) | | (136 | ) |
| Other income, net | 1,005 |
| | 601 |
| | 3,160 |
| | 1,322 |
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| Other (expense) income, net | (5,397 | ) | | 677 |
| | (9,434 | ) | | 1,375 |
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| Income before income taxes | 118,845 |
| | 29,087 |
| | 208,552 |
| | 52,423 |
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| Income tax expense | 27,217 |
| | 10,828 |
| | 46,192 |
| | 19,058 |
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| Net income | 91,628 |
| | 18,259 |
| | 162,360 |
| | 33,365 |
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| Net income attributable to noncontrolling interest | (305 | ) | | (289 | ) | | (673 | ) | | (518 | ) |
| Net income attributable to Knight-Swift | $ | 91,323 |
| | $ | 17,970 |
| | $ | 161,687 |
| | $ | 32,847 |
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| | | | | | | | |
| Earnings per share: | | | | | | | |
| Basic | $ | 0.51 |
| | $ | 0.22 |
| | $ | 0.91 |
| | $ | 0.41 |
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| Diluted | $ | 0.51 |
| | $ | 0.22 |
| | $ | 0.90 |
| | $ | 0.40 |
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| | | | | | | | |
| Dividends declared per share: | $ | 0.06 |
| | $ | 0.06 |
| | $ | 0.12 |
| | $ | 0.12 |
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| | | | | | | | |
| Weighted average shares outstanding: | | | | | | | |
| Basic | 178,451 |
| | 80,520 |
| | 178,307 |
| | 80,416 |
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| Diluted | 179,398 |
| | 81,349 |
| | 179,321 |
| | 81,276 |
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_________________
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| (1) | The reported results do not include the results of operations of Swift and its subsidiaries on and prior to the merger with Knight on September 8, 2017 in accordance with the accounting treatment applicable to the transaction. The reported results do not include the results of operations of Abilene and its subsidiaries on and prior to its acquisition by Knight on March 16, 2018 in accordance with the accounting treatment applicable to the transaction. |
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Condensed Consolidated Balance Sheets (Unaudited) (1) |
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| | | | | | | |
| | June 30,
2018 | | December 31,
2017 |
| | (In thousands) |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 115,494 |
| | $ | 76,649 |
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| Cash and cash equivalents – restricted | 50,714 |
| | 73,657 |
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| Restricted investments, held to maturity, amortized cost | 21,498 |
| | 22,232 |
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| Trade receivables, net of allowance for doubtful accounts of $13,430 and $14,829, respectively | 598,850 |
| | 574,265 |
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| Prepaid expenses | 58,438 |
| | 58,525 |
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| Assets held for sale | 36,274 |
| | 25,153 |
|
| Income tax receivable | 30,036 |
| | 55,114 |
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| Other current assets | 30,028 |
| | 37,612 |
|
| Total current assets | 941,332 |
| | 923,207 |
|
| Property and equipment, net | 2,403,491 |
| | 2,384,221 |
|
| Goodwill | 2,917,584 |
| | 2,887,867 |
|
| Intangible assets, net | 1,442,707 |
| | 1,440,903 |
|
| Other long-term assets | 48,627 |
| | 47,244 |
|
| Total assets | $ | 7,753,741 |
| | $ | 7,683,442 |
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| | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable | $ | 141,465 |
| | $ | 119,867 |
|
| Accrued payroll and purchased transportation | 126,388 |
| | 107,017 |
|
| Accrued liabilities | 155,249 |
| | 186,379 |
|
| Claims accruals – current portion | 152,243 |
| | 147,285 |
|
| Capital lease obligations and long-term debt – current portion | 65,876 |
| | 49,002 |
|
| Total current liabilities | 641,221 |
| | 609,550 |
|
| Revolving line of credit | 120,000 |
| | 125,000 |
|
| Long-term debt – less current portion | 364,473 |
| | 364,771 |
|
| Capital lease obligations – less current portion | 93,302 |
| | 127,132 |
|
| Accounts receivable securitization | 215,000 |
| | 305,000 |
|
| Claims accruals – less current portion | 213,101 |
| | 206,144 |
|
| Deferred tax liabilities | 684,595 |
| | 679,077 |
|
| Other long-term liabilities | 25,665 |
| | 26,398 |
|
| Total liabilities | 2,357,357 |
| | 2,443,072 |
|
| Stockholders’ equity: | | | |
| Common stock | 1,786 |
| | 1,780 |
|
| Additional paid-in capital | 4,232,672 |
| | 4,219,214 |
|
| Retained earnings | 1,159,687 |
| | 1,016,738 |
|
| Total Knight-Swift stockholders' equity | 5,394,145 |
| | 5,237,732 |
|
| Noncontrolling interest | 2,239 |
| | 2,638 |
|
| Total stockholders’ equity | 5,396,384 |
| | 5,240,370 |
|
| Total liabilities and stockholders’ equity | $ | 7,753,741 |
| | $ | 7,683,442 |
|
_________________
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| (1) | The reported balances include the balances of Abilene as of June 30, 2018. |
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| Segment Operating Statistics (Unaudited) |
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| | | | | | | | | | | | | | | | | | | | | |
| | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| | 2018 | | 2017 | | Change | | 2018 | | 2017 | | Change |
Knight Trucking (4) | | | | | | | | | | | |
Average revenue per tractor (1) | $ | 52,353 |
| | $ | 42,176 |
| | 24.1 | % | | $ | 100,824 |
| | $ | 83,335 |
| | 21.0 | % |
| Non-paid empty miles percentage | 13.5 | % | | 12.5 | % | | 100 | bps | | 13.3 | % | | 12.5 | % | | 80 | bps |
| Average length of haul (miles) | 498 |
| | 488 |
| | 2.0 | % | | 496 |
| | 493 |
| | 0.6 | % |
| Average tractors | 4,875 |
| | 4,601 |
| | 6.0 | % | | 4,730 |
| | 4,638 |
| | 2.0 | % |
| Average trailers | 13,758 |
| | 12,310 |
| | 11.8 | % | | 13,156 |
| | 12,377 |
| | 6.3 | % |
| | | | | | | | | | | | |
Knight Logistics (4) | | | | | | | | | | | |
Revenue per load – Brokerage only (2) | $ | 1,627 |
| | $ | 1,285 |
| | 26.6 | % | | $ | 1,601 |
| | $ | 1,254 |
| | 27.7 | % |
| Gross margin – Brokerage only | 13.7 | % | | 14.3 | % | | (60 | bps) | | 14.1 | % | | 14.2 | % | | (10 | bps) |
| | | | | | | | | | | | |
| Swift Truckload | | | | | | | | | | | |
Average revenue per tractor (3) | $ | 48,584 |
| | $ | 44,674 |
| | 8.8 | % | | $ | 93,627 |
| | $ | 87,594 |
| | 6.9 | % |
| Non-paid empty miles percentage | 12.8 | % | | 11.4 | % | | 140 | bps | | 12.6 | % | | 11.5 | % | | 110 | bps |
| Average length of haul (miles) | 578 |
| | 598 |
| | (3.3 | %) | | 585 |
| | 601 |
| | (2.7 | %) |
| Average tractors | 7,473 |
| | 9,844 |
| | (24.1 | %) | | 7,844 |
| | 9,925 |
| | (21.0 | %) |
| Average trailers | 30,594 |
| | 35,470 |
| | (13.7 | %) | | 31,860 |
| | 35,736 |
| | (10.8 | %) |
| | | | | | | | | | | | |
| Swift Dedicated | | | | | | | | | | | |
Average revenue per tractor (3) | $ | 47,729 |
| | $ | 46,136 |
| | 3.5 | % | | $ | 92,249 |
| | $ | 90,655 |
| | 1.8 | % |
| Non-paid empty miles percentage | 19.4 | % | | 18.5 | % | | 90 | bps | | 18.8 | % | | 18.6 | % | | 20 | bps |
| Average length of haul (miles) | 183 |
| | 179 |
| | 2.2 | % | | 186 |
| | 180 |
| | 3.3 | % |
| Average tractors | 2,975 |
| | 3,106 |
| | (4.2 | %) | | 3,006 |
| | 3,090 |
| | (2.7 | %) |
| Average trailers | 14,787 |
| | 14,920 |
| | (0.9 | %) | | 15,000 |
| | 14,844 |
| | 1.1 | % |
| | | | | | | | | | | | |
| Swift Refrigerated | | | | | | | | | | | |
Average revenue per tractor (3) | $ | 46,061 |
| | $ | 49,368 |
| | (6.7 | %) | | $ | 93,293 |
| | $ | 96,812 |
| | (3.6 | %) |
| Non-paid empty miles percentage | 6.8 | % | | 7.5 | % | | (70 | bps) | | 7.0 | % | | 7.5 | % | | (50 | bps) |
| Average length of haul (miles) | 398 |
| | 406 |
| | (2.0 | %) | | 394 |
| | 411 |
| | (4.1 | %) |
| Average tractors | 3,926 |
| | 3,399 |
| | 15.5 | % | | 3,867 |
| | 3,405 |
| | 13.6 | % |
| Average trailers | 3,683 |
| | 4,362 |
| | (15.6 | %) | | 3,895 |
| | 4,429 |
| | (12.1 | %) |
| | | | | | | | | | | | |
| Swift Intermodal | | | | | | | | | | | |
Average revenue per load (3) | $ | 1,922 |
| | $ | 1,843 |
| | 4.3 | % | | $ | 1,895 |
| | $ | 1,856 |
| | 2.1 | % |
| Load count | 49,277 |
| | 44,135 |
| | 11.7 | % | | 96,653 |
| | 84,801 |
| | 14.0 | % |
| Average tractors | 621 |
| | 503 |
| | 23.5 | % | | 600 |
| | 500 |
| | 20.0 | % |
| Average containers | 9,119 |
| | 9,130 |
| | (0.1 | %) | | 9,120 |
| | 9,130 |
| | (0.1 | %) |
____________
| |
| (1) | Computed with revenue, excluding fuel surcharge and intersegment transactions |
| |
| (2) | Computed with revenue, excluding intersegment transactions |
| |
| (3) | Computed with revenue, excluding fuel surcharge |
| |
| (4) | The reported results do not include the results of operations of Abilene and its subsidiaries on and prior to its acquisition by Knight on March 16, 2018 in accordance with the accounting treatment applicable to the transaction. |
|
|
| Non-GAAP Financial Measures and Reconciliations |
The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted EPS," and "Adjusted Operating Ratio," 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, and Adjusted Operating Ratio as key measures of our performance, all of which are reconciled to the most comparable GAAP financial measures and further discussed below. 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 EPS, and Adjusted Operating Ratio 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.
|
|
| Non-GAAP Reconciliation (Unaudited): |
Adjusted Operating Income and Adjusted Operating Ratio (1) (2) |
|
| | | | | | | | | | | | | | | |
| | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| GAAP Presentation | (Dollars in thousands) |
| Total revenue | $ | 1,331,683 |
| | $ | 273,243 |
| | $ | 2,602,815 |
| | $ | 544,425 |
|
| Total operating expenses | (1,207,441 | ) | | (244,833 | ) | | (2,384,829 | ) | | (493,377 | ) |
| Operating income | $ | 124,242 |
| | $ | 28,410 |
| | $ | 217,986 |
| | $ | 51,048 |
|
| Operating ratio | 90.7 | % | | 89.6 | % | | 91.6 | % | | 90.6 | % |
| | | | | | | | |
| Non-GAAP Presentation | | | | | | | |
| Total revenue | $ | 1,331,683 |
| | $ | 273,243 |
| | $ | 2,602,815 |
| | $ | 544,425 |
|
| Fuel surcharge | (161,935 | ) | | (26,221 | ) | | (308,895 | ) | | (52,423 | ) |
| Revenue, excluding fuel surcharge | 1,169,748 |
| | 247,022 |
| | 2,293,920 |
| | 492,002 |
|
| | | | | | | | |
| Total operating expenses | 1,207,441 |
| | 244,833 |
| | 2,384,829 |
| | 493,377 |
|
| Adjusted for: | | | | | | | |
| Fuel surcharge | (161,935 | ) | | (26,221 | ) | | (308,895 | ) | | (52,423 | ) |
Amortization of intangibles (3) | (10,687 | ) | | — |
| | (21,196 | ) | | — |
|
Merger-related costs (4) | — |
| | (4,178 | ) | | — |
| | (4,178 | ) |
| Adjusted Operating Expenses | 1,034,819 |
| | 214,434 |
| | 2,054,738 |
| | 436,776 |
|
| Adjusted Operating Income | $ | 134,929 |
| | $ | 32,588 |
| | $ | 239,182 |
| | $ | 55,226 |
|
| Adjusted Operating Ratio | 88.5 | % | | 86.8 | % | | 89.6 | % | | 88.8 | % |
____________
| |
(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 Swift and its subsidiaries on and prior to the merger with Knight on September 8, 2017 in accordance with the accounting treatment applicable to the transaction. The reported results do not include the results of operations of Abilene and its subsidiaries on and prior to its acquisition by Knight on March 16, 2018 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 and historical Knight acquisitions. Certain data necessary to complete the purchase price allocation for the 2017 Merger and Abilene Acquisition is open for adjustments during the measurement periods, and includes, but is not limited to, finalization of certain contingent liabilities and the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed and assessment of other tax-related items. We believe the estimates used are reasonable but are subject to change as additional information becomes available. |
| |
| (4) | During the second quarter of 2017, Knight incurred certain merger-related expenses associated with the 2017 Merger, consisting of legal and professional fees. |
|
|
| Non-GAAP Reconciliation (Unaudited): |
Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS (1) (2) |
|
| | | | | | | | | | | | | | | |
| | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| | (Dollars In thousands) |
| GAAP: Net income attributable to Knight-Swift | $ | 91,323 |
| | $ | 17,970 |
| | $ | 161,687 |
| | $ | 32,847 |
|
| Adjusted for: | | | | | | | |
| Income tax expense attributable to Knight-Swift | 27,217 |
| | 10,828 |
| | 46,192 |
| | 19,058 |
|
| Income before income taxes attributable to Knight-Swift | 118,540 |
| | 28,798 |
| | 207,879 |
| | 51,905 |
|
Amortization of intangibles (3) | 10,687 |
| | — |
| | 21,196 |
| | — |
|
Merger-related costs (4) | — |
| | 4,178 |
| | — |
| | 4,178 |
|
| Adjusted income before income taxes | 129,227 |
| | 32,976 |
| | 229,075 |
| | 56,083 |
|
| Provision for income tax expense at effective rate | (29,595 | ) | | (12,399 | ) | | (50,738 | ) | | (20,629 | ) |
| Non-GAAP: Adjusted Net Income Attributable to Knight-Swift | $ | 99,632 |
| | $ | 20,577 |
| | $ | 178,337 |
| | $ | 35,454 |
|
Note: Because the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.
|
| | | | | | | | | | | | | | | |
| | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| | 2018 | | 2017 | | 2018 | | 2017 |
| GAAP: Earnings per diluted share | $ | 0.51 |
| | $ | 0.22 |
| | $ | 0.90 |
| | $ | 0.40 |
|
| Adjusted for: | | | | | | | |
| Income tax expense attributable to Knight-Swift | 0.15 |
| | 0.13 |
| | 0.26 |
| | 0.23 |
|
| Income before income taxes attributable to Knight-Swift | 0.66 |
| | 0.35 |
| | 1.16 |
| | 0.64 |
|
Amortization of intangibles (3) | 0.06 |
| | — |
| | 0.12 |
| | — |
|
Merger-related costs (4) | — |
| | 0.05 |
| | — |
| | 0.05 |
|
| Adjusted income before income taxes | 0.72 |
| | 0.41 |
| | 1.28 |
| | 0.69 |
|
| Provision for income tax expense at effective rate | (0.16 | ) | | (0.15 | ) | | (0.28 | ) | | (0.25 | ) |
| Non-GAAP: Adjusted EPS | $ | 0.56 |
| | $ | 0.25 |
| | $ | 0.99 |
| | $ | 0.44 |
|
____________
| |
| (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 and 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). |
|
|
| Non-GAAP Reconciliation (Unaudited): |
Segment Adjusted Operating Income and Adjusted Operating Ratio (1) (2) |
|
| | | | | | | | | | | | | | | |
| Knight Trucking Segment | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
| GAAP Presentation | (Dollars in thousands) |
| Total revenue | $ | 294,699 |
| | $ | 220,323 |
| | $ | 549,667 |
| | $ | 439,013 |
|
| Total operating expenses | (238,117 | ) | | (194,561 | ) | | (452,287 | ) | | (392,991 | ) |
| Operating income | $ | 56,582 |
| | $ | 25,762 |
| | $ | 97,380 |
| | $ | 46,022 |
|
| Operating ratio | 80.8 | % | | 88.3 | % | | 82.3 | % | | 89.5 | % |
| Non-GAAP Presentation | |
| Total revenue | $ | 294,699 |
| | $ | 220,323 |
| | $ | 549,667 |
| | $ | 439,013 |
|
| Fuel surcharge | (39,421 | ) | | (26,221 | ) | | (72,695 | ) | | (52,423 | ) |
| Intersegment transactions | (54 | ) | | (53 | ) | | (73 | ) | | (81 | ) |
| Revenue, excluding fuel surcharge and intersegment transactions | 255,224 |
| | 194,049 |
| | 476,899 |
| | 386,509 |
|
| | | | | | | | |
| Total operating expenses | 238,117 |
| | 194,561 |
| | 452,287 |
| | 392,991 |
|
| Adjusted for: | | | | | | | |
| Fuel surcharge | (39,421 | ) | | (26,221 | ) | | (72,695 | ) | | (52,423 | ) |
| Intersegment transactions | (54 | ) | | (53 | ) | | (73 | ) | | (81 | ) |
Amortization of intangibles (3) | (343 | ) | | — |
| | (508 | ) | | — |
|
Merger-related costs (4) | — |
| | (4,178 | ) | | — |
| | (4,178 | ) |
| Adjusted Operating Expenses | 198,299 |
| | 164,109 |
| | 379,011 |
| | 336,309 |
|
| Adjusted Operating Income | $ | 56,925 |
| | $ | 29,940 |
| | $ | 97,888 |
| | $ | 50,200 |
|
| Adjusted Operating Ratio | 77.7 | % | | 84.6 | % | | 79.5 | % | | 87.0 | % |
|
| | | | | | | | | | | | | | | |
| Knight Logistics Segment | Quarter-to-Date June 30, | | Year-to-Date June 30, |
| 2018 | | 2017 | | 2018 | | 2017 |
| GAAP Presentation | (Dollars in thousands) |
| Total revenue | $ | 78,434 |
| | $ | 54,867 |
| | $ | 145,611 |
| | $ | 109,055 |
|
| Total operating expenses | (74,326 | ) | | (52,219 | ) | | (137,921 | ) | | (104,029 | ) |
| Operating income | $ | 4,108 |
| | $ | 2,648 |
| | $ | 7,690 |
| | $ | 5,026 |
|
| Operating ratio | 94.8 | % | | 95.2 | % | | 94.7 | % | | 95.4 | % |
| Non-GAAP Presentation |
|
| Total revenue | $ | 78,434 |
| | $ | 54,867 |
| | $ | 145,611 |
| | $ | 109,055 |
|
| Intersegment transactions | (1,795 | ) | | (1,894 | ) | | (3,175 | ) | | (3,562 | ) |
| Revenue, excluding intersegment transactions | 76,639 |
| | 52,973 |
| | 142,436 |
| | 105,493 |
|
| | | | | | | | |
| Total operating expenses | 74,326 |
| | 52,219 |
| | 137,921 |
| | 104,029 |
|
| Adjusted for: | | | | | | | |
| Intersegment transactions | (1,795 | ) | | (1,894 | ) | | (3,175 | ) | | (3,562 | ) |
| Adjusted Operating Expenses | 72,531 |
| | 50,325 |
| | 134,746 |
| | 100,467 |
|
| Adjusted Operating Income | $ | 4,108 |
| | $ | 2,648 |
| | $ | 7,690 |
| | $ | 5,026 |
|
| Adjusted Operating Ratio | 94.6 | % | | 95.0 | % | | 94.6 | % | | 95.2 | % |
____________
| |
| (1) | Pursuant to the requirements of Regulation G, these tables reconcile segment GAAP operating ratio to segment non-GAAP Adjusted Operating Ratio. |
| |
| (2) | The reported results do not include the results of operations of Abilene and its subsidiaries on and prior to the Abilene Acquisition, 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 historical Knight acquisitions. |
| |
| (4) | During the second quarter of 2017, Knight incurred certain merger-related expenses associated with the 2017 Merger, consisting of legal and professional fees. |
|
|
| Non-GAAP Reconciliation (Unaudited): |
Segment Adjusted Operating Income and Adjusted Operating Ratio — Continued (1) |
|
| | | | | | | | | | | | | | | |
| Swift Transportation | Quarter-to-Date June 30, 2018 |
| | Swift Truckload | | Swift Dedicated | | Swift Refrigerated | | Swift Intermodal |
| GAAP Presentation | (Dollars in thousands) |
| Total revenue | $ | 421,921 |
| | $ | 160,874 |
| | $ | 204,338 |
| | $ | 112,662 |
|
| Total operating expenses | (376,134 | ) | | (140,183 | ) | | (200,741 | ) | | (108,496 | ) |
| Operating Income | $ | 45,787 |
| | $ | 20,691 |
| | $ | 3,597 |
| | $ | 4,166 |
|
| Operating Ratio | 89.1 | % | | 87.1 | % | | 98.2 | % | | 96.3 | % |
| Non-GAAP Presentation | |
| Total revenue | $ | 421,921 |
| | $ | 160,874 |
| | $ | 204,338 |
| | $ | 112,662 |
|
| Fuel surcharge | (58,855 | ) | | (18,881 | ) | | (23,504 | ) | | (17,932 | ) |
| Revenue, excluding fuel surcharge | 363,066 |
| | 141,993 |
| | 180,834 |
| | 94,730 |
|
| | | | | | | | |
| Total operating expenses | 376,134 |
| | 140,183 |
| | 200,741 |
| | 108,496 |
|
| Adjusted for: | | | | | | | |
| Fuel surcharge | (58,855 | ) | | (18,881 | ) | | (23,504 | ) | | (17,932 | ) |
| Adjusted Operating Expenses | 317,279 |
| | 121,302 |
| | 177,237 |
| | 90,564 |
|
| Adjusted Operating Income | $ | 45,787 |
| | $ | 20,691 |
| | $ | 3,597 |
| | $ | 4,166 |
|
| Adjusted Operating Ratio | 87.4 | % | | 85.4 | % | | 98.0 | % | | 95.6 | % |
|
| | | | | | | | | | | | | | | |
| | Year-to-Date June 30, 2018 |
| | Swift Truckload | | Swift Dedicated | | Swift Refrigerated | | Swift Intermodal |
| GAAP Presentation | (Dollars in thousands) |
| Total revenue | $ | 851,177 |
| | $ | 313,190 |
| | $ | 405,162 |
| | $ | 216,776 |
|
| Total operating expenses | (770,581 | ) | | (277,297 | ) | | (392,123 | ) | | (208,774 | ) |
| Operating Income | $ | 80,596 |
| | $ | 35,893 |
| | $ | 13,039 |
| | $ | 8,002 |
|
| Operating Ratio | 90.5 | % | | 88.5 | % | | 96.8 | % | | 96.3 | % |
| | |
| Non-GAAP Presentation | | | | | | | |
| Total revenue | $ | 851,177 |
| | $ | 313,190 |
| | $ | 405,162 |
| | $ | 216,776 |
|
| Fuel surcharge | (116,767 | ) | | (35,891 | ) | | (44,399 | ) | | (33,575 | ) |
| Revenue, excluding fuel surcharge | 734,410 |
| | 277,299 |
| | 360,763 |
| | 183,201 |
|
| | | | | | | | |
| Total operating expenses | 770,581 |
| | 277,297 |
| | 392,123 |
| | 208,774 |
|
| Adjusted for: | | | | | | | |
| Fuel surcharge | (116,767 | ) | | (35,891 | ) | | (44,399 | ) | | (33,575 | ) |
| Adjusted Operating Expenses | 653,814 |
| | 241,406 |
| | 347,724 |
| | 175,199 |
|
| Adjusted Operating Income | $ | 80,596 |
| | $ | 35,893 |
| | $ | 13,039 |
| | $ | 8,002 |
|
| Adjusted Operating Ratio | 89.0 | % | | 87.1 | % | | 96.4 | % | | 95.6 | % |
____________
| |
| (1) | Pursuant to the requirements of Regulation G, these tables reconcile segment GAAP operating ratio to segment non-GAAP Adjusted Operating Ratio. |
