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OFFON

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

(KNX)
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KNIGHT SWIFT TRANSPORTATION : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/04/2021 | 12:58pm EDT

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



This Quarterly Report contains certain statements that may be considered
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and Section 27A of the
Securities Act of 1933, as amended. 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 or guidance regarding earnings, earnings per share,
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 statements of assumptions underlying any of
the foregoing.
In this Quarterly Report, forward-looking statements include, but are not
limited to, statements we make concerning:
•the ability of our infrastructure to support future growth, whether we grow
organically or through potential acquisitions,
•the impacts of the COVID-19 global pandemic,
•the future impact of acquisitions, including achievement of anticipated
synergies and the anticipated risks regarding our acquisition of ACT,
•the flexibility of our model to adapt to market conditions,
•our ability to recruit and retain qualified driving associates,
•future safety performance,
•future performance of our segments or businesses,
•our ability to gain market share,
•the ability, desire, and effects of expanding our logistics, brokerage, and
intermodal operations,
•future equipment prices, our equipment purchasing or leasing plans, and our
equipment turnover (including expected tractor trade-ins),
•our ability to sublease equipment to independent contractors,
•the impact of pending legal proceedings,
•the expected freight environment, including freight demand and volumes,
•economic conditions and growth, including future inflation, consumer spending,
supply chain conditions, and US Gross Domestic Product ("GDP") changes,
•future pricing terms from vendors and suppliers,
•expected liquidity and methods for achieving sufficient liquidity,
•future fuel prices and the expected impact of fuel efficiency initiatives,
•future expenses and our ability to control costs,
•future operating profitability,
•future third-party service provider relationships and availability,
•future contracted pay rates with independent contractors and compensation
arrangements with driving associates,
•our expected need or desire to incur indebtedness,
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                             OPERATIONS - CONTINUED


•future capital expenditures and expected sources of liquidity, capital
allocation, capital structure, capital requirements, and growth strategies and
opportunities,
•expected capital expenditures,
•future mix of owned versus leased revenue equipment,
•future asset utilization,
•future return on capital,
•future share repurchases and dividends,
•future tax rates,
•future trucking industry capacity and balance between industry demand and
capacity,
•future rates,
•future depreciation and amortization,
•expected tractor and trailer fleet age,
•future investment in and deployment of new or updated technology,
•political conditions and regulations, including trade regulation, quotas,
duties, or tariffs, and any future changes to the foregoing,
•future insurance claims, premiums, and retention limits,
•future purchased transportation expense, and
•others.
Such statements may be identified by their use of terms or phrases such as
"believe," "may," "could," "will," "would," "should," "expects," "estimates,"
"designed," "likely," "foresee," "goals," "seek," "target," "forecast,"
"projects," "anticipates," "plans," "intends," "hopes," "strategy," "potential,"
"objective," "mission," "continue," "outlook," and similar terms and phrases.
Forward-looking statements are based on currently available operating,
financial, and competitive information.  Forward-looking statements are
inherently subject to risks and uncertainties, some of which cannot be predicted
or quantified, which could cause future events and actual results to materially
differ from those set forth in, contemplated by, or underlying the
forward-looking statements.  Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in Part II, Item 1A
"Risk Factors" of this Quarterly Report, Part I, Item 1A "Risk Factors" in our
2020 Annual Report, and various disclosures in our press releases, stockholder
reports, and other filings with the SEC.
All such forward-looking statements speak only as of the date of this Quarterly
Report.  You are cautioned not to place undue reliance on such forward-looking
statements.  We expressly disclaim any obligation or undertaking to publicly
release any updates or revisions to any forward-looking statements contained
herein, to reflect any change in our expectations with regard thereto, or any
change in the events, conditions, or circumstances on which any such statement
is based.
Reference to Glossary of Terms


Certain acronyms and terms used throughout this Quarterly Report are specific to
our company, commonly used in our industry, or are otherwise frequently used
throughout our document. Definitions for these acronyms and terms are provided
in the "Glossary of Terms," available in the front of this document.
Reference to Annual Report


The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements (unaudited) and footnotes included in this Quarterly
Report, as well as the consolidated financial statements and footnotes included
in our 2020 Annual Report.
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   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                             OPERATIONS - CONTINUED


Executive Summary


Company Overview
Knight-Swift Transportation Holdings Inc. is North America's largest truckload
carrier and a provider of transportation solutions, headquartered in Phoenix,
Arizona. The Company provides multiple truckload transportation, intermodal, and
logistics services using a nationwide network of business units and terminals in
the US and Mexico to serve customers throughout North America. In addition to
its truckload services, Knight-Swift also contracts with third-party capacity
providers to provide a broad range of shipping solutions to its customers while
creating quality driving jobs for our driving associates and successful business
opportunities for independent contractors. Our three reportable segments are
Trucking, Logistics, and Intermodal. Additionally, we have various
non-reportable segments. Refer to Note 14 in Part I, Item 1 of this Quarterly
Report for descriptions of our segments.
Our objective is to operate our business with industry-leading margins and
growth while providing safe, high-quality, cost-effective solutions for our
customers.
ACT Acquisition - On July 5, 2021, we acquired 100% of ACT. ACT is a leading
less-than-truckload ("LTL") carrier that also offers dedicated contract carriage
and ancillary services. Further details regarding this acquisition are included
in Note 3 in Part I, Item 1 of this Quarterly Report.
Revenue
•Our trucking services include irregular route and dedicated, refrigerated,
expedited, flatbed, and cross-border transportation of various products, goods,
and materials for our diverse customer base. We primarily generate revenue by
transporting freight for our customers through our Trucking segment.
•Our logistics and intermodal operations provide a multitude of shipping
solutions, including additional sources of truckload capacity and alternative
transportation modes, by utilizing our vast network of third-party capacity
providers and rail providers, as well as certain logistics and freight
management services. Revenue in our logistics and intermodal operations is
generated through our Logistics and Intermodal segments.
•Our non-reportable segments include support services provided to our customers
and independent contractors (including repair and maintenance shop services,
equipment leasing, warranty services, and insurance), trailer parts
manufacturing, warehousing, and certain driving academy activities, as well as
certain corporate expenses (such as legal settlements and accruals, certain
impairments, and amortization of intangibles related to the 2017 Merger and
various acquisitions).
•In addition to the revenues earned from our customers for the trucking and
non-trucking services discussed above, we also earn fuel surcharge revenue from
our customers through our fuel surcharge program, which serves to recover a
majority of our fuel costs. This applies only to loaded miles and typically does
not offset non-paid empty miles, idle time, and out-of-route miles driven. Fuel
surcharge programs involve a computation based on the change in national or
regional fuel prices. These programs may update as often as weekly, but
typically require a specified minimum change in fuel cost to prompt a change in
fuel surcharge revenue. Therefore, many of these programs have a time lag
between when fuel costs change and when the change is reflected in fuel
surcharge revenue for our Trucking segment.
Expenses - Our most significant expenses vary with miles traveled and include
fuel, driving associate-related expenses (such as wages and benefits), and
services purchased from independent contractors and other transportation
providers (such as railroads, drayage providers, and other trucking companies).
Maintenance and tire expenses, as well as the cost of insurance and claims
generally vary with the miles we travel, but also have a controllable component
based on safety improvements, fleet age, efficiency, and other factors. Our
primary fixed costs are depreciation and lease expense for revenue equipment and
terminals, amortization of intangible assets, interest expense, and non-driver
employee compensation.
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                             OPERATIONS - CONTINUED


Operating Statistics - We measure our consolidated and segment results through
certain operating statistics, which are discussed under "Results of Operations -
Segment Review - Operating Statistics," below. Our results are affected by
various economic, industry, operational, regulatory, and other factors, which
are set forth in Part I, Item 1A "Risk Factors" in our 2020 Annual Report,
supplemented in Part II, Item 1A "Risk Factors" of this Quarterly Report, and
various disclosures in our press releases, stockholder reports, and other
filings with the SEC.
Consolidated Key Financial Highlights and Operating Metrics
                                                   Quarter-to-Date June 30,                    Year-to-Date June 30,
                                                   2021                 2020                 2021                 2020
GAAP financial data:                                          (Dollars in thousands, except per share data)
Total revenue                                 $ 1,315,701$ 1,060,698$ 2,538,715$ 2,185,496
Revenue, excluding trucking fuel surcharge    $ 1,212,872$   997,597$ 2,345,977$ 2,024,692
Net income attributable to Knight-Swift       $   152,804$    80,189$   282,594$   145,615
Earnings per diluted share                    $      0.92$      0.47$      1.69$      0.85
Operating ratio                                      85.5  %              90.4  %              86.1  %              90.7  %

Non-GAAP financial data:
Adjusted Net Income Attributable to           $   162,998$    96,498$   302,431$   172,703
Knight-Swift 1
Adjusted EPS 1                                $      0.98$      0.57$      1.81$      1.01
Adjusted Operating Ratio 1                           83.1  %              87.6  %              83.8  %              88.1  %

Revenue equipment:
Average tractors (Trucking segment only) 2         18,034               18,393               18,129               18,428
Average trailers 3                                 60,858               57,269               60,382               57,456
Average containers                                 10,842               10,853               10,844               10,355


1  Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted
Operating Ratio are non-GAAP financial measures and should not be considered
alternatives, or superior to, the most directly comparable GAAP financial
measures. However, management believes that presentation of these non-GAAP
financial measures provides useful information to investors regarding the
Company's results of operations. Adjusted Net Income Attributable to
Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are reconciled to the
most directly comparable GAAP financial measures under "Non-GAAP Financial
Measures," below.
2  The average age of our company-owned tractor fleet was 2.4 years and 2.1
years as of June 30, 2021 and 2020, respectively.
3  The average age of our trailer fleet was 8.3 years and 7.6 years as of
June 30, 2021 and 2020, respectively.
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                             OPERATIONS - CONTINUED


Market Trends and Company Performance
Trends and Outlook - Our consolidated revenue, excluding trucking fuel
surcharge, grew by 15.9% during the first half of 2021, reflecting meaningful
growth across all reportable segments. We generated consolidated Adjusted Net
Income Attributable to Knight-Swift of $302.4 million, which represents a 75.1%
increase from $172.7 million during the first half of 2020. Revenue per tractor
was up 9.0% despite lower fleet utilization as a result of the difficult driver
sourcing environment. Our Trucking segment increased revenue, excluding fuel
surcharge and intersegment transactions, by 7.2%, resulting in a 470 basis point
improvement in the Adjusted Operating Ratio to 81.3% in the first half of 2021
from 86.0% in the first half of 2020. Our Logistics segment increased revenue,
excluding intersegment transactions by 93.2%. Our Intermodal segment grew
revenue 25.3% and improved its Adjusted Operating Ratio by 820 basis points to
95.8% in the first half of 2021, compared to the same period last year. We
anticipate ongoing improvement within the Intermodal segment in the coming
quarters.
The national unemployment rate was 5.9%1 as of June 30, 2021. The US gross
domestic product, which is the broadest measure of goods and services produced
across the economy, increased by 6.5%2 and 1.6%2 on a year-over-year and
sequential basis, per preliminary third-party forecasts. Third-party forecasts
are predicting a continued economic rebound in the second half of 2021, but
perhaps at a slower pace. The first half 2021 US employment cost index rose
2.9%1 and 0.7%1 on a year-over-year and sequential basis, respectively.
From a freight market perspective, we are encouraged by the continued strength
in freight demand; however, demand may be difficult to predict for the rest of
2021. The 2021 market outlook includes the following:
•we expect the unprecedented demand for over-the-road truckload capacity to
continue throughout 2022,
•capacity expansion continues to be limited as new tractor builds are
constrained by parts availability, and
•sourcing and retaining drivers will remain challenging and lead to additional
driver wage inflation.
The above factors should continue to support a favorable rate environment.
In addition to the above market factors, demand for power-only opportunities
continues.
We anticipate that depreciation and amortization expense will increase and
rental expense will correspondingly decrease, as a percentage of revenue
excluding trucking fuel surcharge, as we intend to purchase, rather than enter
into operating leases, for a majority of our revenue equipment in 2021. With
significant tightening in the insurance markets, we may also experience changes
in premiums, retention limits, and excess coverage limits in the remainder of
2021. While fuel expense is generally offset by fuel surcharge revenue, our fuel
expense, net of fuel surcharge revenue may increase in the future.
We expect that our acquisition of ACT will have a significant impact on future
financial results, including an overall increase to operating revenues and
expenses. However, we are still in the preliminary stages of this transaction
and the assessment of the impact on our operations, policies or financial
results.
We continue to manage our leverage ratio relative to our targeted range and
remain committed to a strong capital structure, which we believe will position
us for long-term success and enable us to pursue further opportunities for
organic growth, growth through acquisitions, and other capital allocation
opportunities. We do not foresee material liquidity constraints or any issues
with our ongoing ability to meet our debt covenants.
________
1Source: bls.gov
2Source: bea.gov
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                             OPERATIONS - CONTINUED


Comparison Between the Quarters Ended June 30, 2021 and 2020 - The $72.6 million
increase in net income attributable to Knight-Swift to $152.8 million during the
second quarter of 2021 from $80.2 million during the same period last year
includes the following:
•Contributor - $60.7 million increase in operating income within our Trucking
segment. Average revenue per tractor increased by 10.3%, driven by a 18.8%
increase in revenue per loaded mile, excluding fuel surcharge and intersegment
transactions.
•Contributor - $11.3 million increase in operating income within our Logistics
segment. Revenue, excluding intersegment transactions, increased by 141.8%
within our Logistics segment, as brokerage load volumes grew by 55.3% and
brokerage revenue per load increased by 55.8% (including the results of UTXL
beginning June 1, 2021).
•Contributor - $10.3 million improvement in operating income (loss) within our
Intermodal segment. Revenue per load increased 16.3 % and load counts increased
19.9%.
•Contributor - $8.3 million improvement in "Other income (expenses), net,"
primarily related to unrealized gains recognized from our investment in Embark,
partially offset by a reduction in unrealized gains recognized for other
investments within our portfolio.
•Offset - $25.0 million increase in consolidated income tax expense, primarily
due to an increase in income before income taxes resulting in an effective tax
rate of 25.3% for the second quarter of 2021 and 25.0% for the second quarter of
2020.
Comparison Between the Year-to-Date June 30, 2021 and 2020 - The $137.0 million
increase in net income attributable to Knight-Swift to $282.6 million during the
first half of 2021 from $145.6 million during the same period last year includes
the following:
•Contributor - $111.8 million increase in operating income within our Trucking
segment. Average revenue per tractor increased by 9.0%, driven by a 17.5%
increase in revenue per loaded mile, excluding fuel surcharge and intersegment
transactions.
•Contributor - $15.2 million improvement in operating income within our
Logistics segment. Revenue, excluding intersegment transactions, increased by
93.2% within our Logistics segment, as brokerage load volumes grew by 28.4% and
brokerage revenue per load increased by 50.4%
•Contributor - $16.5 million improvement in operating income (loss) within our
Intermodal segment. Revenue per load increased 13.1% and load counts increased
10.8%.
•Contributor - $31.0 million improvement in "Other income (expenses), net,"
primarily due to the Embark gain discussed above and an increase in unrealized
gains recognized for other investments within our portfolio.
•Offset - $45.7 million increase in consolidated income tax expense, primarily
due to an increase in income before income taxes resulting in an effective tax
rate of 25.5% for the first half of 2021 and 26.0% for the first half of 2020.
See additional discussion of our operating results within "Results of Operations
- Consolidated Operating and Other Expenses" below.
Liquidity and Capital - During year-to-date June 30, 2021, we generated $459.5
million in operating cash flows, reduced our operating lease liabilities by
$28.3 million, used $120.5 million for capital expenditures (net of disposal
proceeds), spent $63.3 million on acquisitions, and returned $53.7 million in
share repurchases and $30.3 million in dividends to our stockholders.
We ended the quarter with $179.0 million in unrestricted cash and cash
equivalents, $55.0 million outstanding on the Revolver, $300.0 million face
value outstanding on the 2017 Term Loan, and $6.1 billion of stockholders'
equity.
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                             OPERATIONS - CONTINUED


We continue to manage our leverage ratio relative to our targeted range and
remain committed to a strong capital structure, which we believe will position
us for long-term success and enable us to pursue further opportunities for
organic growth, growth through acquisitions, and other capital allocation
opportunities. We do not foresee material liquidity constraints or any issues
with our ongoing ability to meet our debt covenants.
See discussion under "Liquidity and Capital Resources" for additional
information.
Results of Operations - Segment Review


The Company has three reportable segments: Trucking, Logistics, and Intermodal,
as well as certain non-reportable segments. Refer to Note 14 to the condensed
consolidated financial statements, included in Part I, Item 1 of this Quarterly
Report for descriptions of the operations of these reportable segments.
Consolidating Tables for Total Revenue and Operating Income (Loss)
                                    Quarter-to-Date June 30,            Year-to-Date June 30,
                                     2021              2020             2021             2020
    Revenue:                                              (In thousands)
    Trucking                    $     985,858$   879,369$ 1,948,805$ 1,798,430
    Logistics                         166,737           70,104          285,624          149,302
    Intermodal                        115,378           82,820          222,444          177,551
    Subtotal                    $   1,267,973$ 1,032,293$ 2,456,873$ 2,125,283
    Non-reportable segments            66,795           45,289          117,464           91,531
    Intersegment eliminations         (19,067)         (16,884)         (35,622)         (31,318)
    Total revenue               $   1,315,701$ 1,060,698$ 2,538,715$ 2,185,496


                                    Quarter-to-Date June 30,              Year-to-Date June 30,
                                      2021                2020             2021            2020
   Operating income (loss):                              (In thousands)
   Trucking                   $     168,457$ 107,788$    326,940$ 215,122
   Logistics                         14,356                3,038            21,933          6,757
   Intermodal                         5,812               (4,475)            9,269         (7,212)
   Subtotal                   $     188,625$ 106,351$    358,142$ 214,667
   Non-reportable segments            2,490               (4,184)           (4,768)       (10,381)
   Operating income           $     191,115$ 102,167$    353,374$ 204,286


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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

                             OPERATIONS - CONTINUED


Operating Statistics
Our chief operating decision makers monitor the GAAP results of our reportable
segments, as supplemented by certain non-GAAP information. Refer to "Non-GAAP
Financial Measures" below for more details. Additionally, we use a number of
primary indicators to monitor our revenue and expense performance and
efficiency.
Operating Statistic                  Relevant Segment(s)         

Description

Average Revenue per Tractor          Trucking                    Measures 

productivity and represents revenue

                                                                 (excluding 

fuel surcharge and intersegment

                                                                 transactions) divided by average tractor count
Total Miles per Tractor              Trucking                    Total 

miles (including loaded and empty miles) a

                                                                 tractor travels on average
Average Length of Haul               Trucking                    Average 

miles traveled with loaded trailer cargo

                                                                 per order
Non-paid Empty Miles                 Trucking                    Percentage of miles without trailer cargo
Percentage
Average Tractors                     Trucking, Intermodal        Average 

tractors in operation during the period

                                                                 including 

company tractors and tractors provided

                                                                 by independent contractors
Average Trailers                     Trucking                    Average trailers in operation during the period
Average Revenue per Load             Logistics, Intermodal       Total 

revenue (excluding intersegment

                                                                 transactions) divided by load count
Gross Margin Percentage              Logistics                   Logistics 

gross margin (revenue, excluding

intersegment transactions, less purchased

transportation expense, excluding intersegment

transactions) as a percentage of logistics

                                                                 revenue, excluding intersegment transactions
Average Containers                   Intermodal                  Average containers in operation during the period
GAAP Operating Ratio                 Trucking, Logistics,        Measures 

operating efficiency and is widely used

                                     Intermodal                  in our 

industry as an assessment of management's

effectiveness in controlling all categories of

                                                                 operating 

expenses. Calculated as operating

                                                                 expenses 

as a percentage of total revenue, or the

                                                                 inverse of operating margin.
Non-GAAP Adjusted Operating          Trucking, Logistics,        Measures operating efficiency and is widely used
Ratio                                Intermodal                  in our 

industry as an assessment of management's

effectiveness in controlling all categories of

                                                                 operating 

expenses. Consolidated and segment

                                                                 Adjusted 

Operating Ratios are reconciled to their

corresponding GAAP operating ratios under

                                                                 "Non-GAAP Financial Measures," below.


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   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                             OPERATIONS - CONTINUED


Segment Review
Trucking Segment
We generate revenue in the Trucking segment primarily through irregular route,
dedicated, refrigerated, flatbed, expedited, and cross-border service offerings
with 12,967 irregular route tractors and 5,067 dedicated route tractors in use
during the quarter-to-date period ended June 30, 2021. Generally, we are paid a
predetermined rate per mile or per load for our trucking services. Additional
revenues are generated by charging for tractor and trailer detention, loading
and unloading activities, dedicated services, and other specialized services, as
well as through the collection of fuel surcharge revenue to mitigate the impact
of increases in the cost of fuel. The main factors that affect the revenue
generated by our Trucking segment are rate per mile from our customers, the
percentage of miles for which we are compensated, and the number of loaded miles
we generate with our equipment.
The most significant expenses in the Trucking segment are primarily variable and
include fuel and fuel taxes, driving associate-related expenses (such as wages,
benefits, training, and recruitment), and costs associated with independent
contractors primarily included in "Purchased transportation" in the condensed
consolidated statements of comprehensive income. Maintenance expense (which
includes costs for replacement tires for our revenue equipment) and insurance
and claims expenses have both fixed and variable components. These expenses
generally vary with the miles we travel, but also have a controllable component
based on safety, fleet age, efficiency, and other factors. The main fixed costs
in the Trucking segment are depreciation and rent expenses from leasing and
acquiring revenue equipment and terminals, as well as compensating our
non-driver employees.
                                     Quarter-to-Date June 30,                    Year-to-Date June 30,                  QTD 2021 vs.                YTD 2021 vs.
                                      2021                 2020                2021                 2020                  QTD 2020                    YTD 2020
                                               (Dollars in thousands, except per tractor data)                                     Increase (Decrease)

Total revenue                   $    985,858$ 879,369$ 1,948,805$ 1,798,430                    12.1   %                     8.4   %
Revenue, excluding fuel
surcharge and intersegment      $    882,560$ 816,033$ 1,755,374$ 1,637,117                     8.2   %                     7.2   %
transactions
GAAP: Operating income          $    168,457$ 107,788$   326,940$   215,122                    56.3   %                    52.0   %
Non-GAAP: Adjusted Operating    $    168,781$ 118,166$   327,588$   228,971                    42.8   %                    43.1   %
Income 1
Average revenue per tractor 2   $     48,939$  44,366$    96,827$    88,839                    10.3   %                     9.0   %
GAAP: Operating ratio 2                 82.9   %            87.7  %              83.2  %              88.0  %                 (480   bps)                 (480   bps)
Non-GAAP: Adjusted Operating            80.9   %            85.5  %              81.3  %              86.0  %                 (460   bps)                 (470   bps)
Ratio 1 2
Non-paid empty miles percentage         13.0   %            13.8  %              12.9  %              13.3  %                  (80   bps)                  (40   bps)
2
Average length of haul (miles)           408                 420                  410                  424                    (2.9   %)                   (3.3   %)
2
Total miles per tractor 2             20,913              22,741               41,841               45,307                    (8.0   %)                   (7.7   %)
Average tractors 2 3                  18,034              18,393               18,129               18,428                    (2.0   %)                   (1.6   %)
Average trailers 2                    60,858              57,269               60,382               57,456                     6.3   %                     5.1   %


1  Refer to "Non-GAAP Financial Measures" below.
2  Defined under "Operating Statistics," above.
3  Includes 16,144 and 16,315 average company-owned tractors for the second
quarter of 2021 and 2020, respectively.
Includes 16,225 and 16,327 average company-owned tractors for the year-to-date
June 30, 2021 and 2020, respectively.
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                             OPERATIONS - CONTINUED


Comparison Between the Quarters Ended June 30, 2021 and 2020 - Operating income
grew by 56.3% within the Trucking segment, overcoming inflationary pressures
related to sourcing and retaining drivers. Revenue, excluding fuel surcharge and
intersegment transactions, grew by 8.2%. Average revenue per tractor increased
by 10.3%, driven by an 18.8% increase in revenue per loaded mile, excluding fuel
surcharge and intersegment transactions. Consumer demand remained strong, while
capacity remained constrained across our industry, which is driving up sourcing
costs and corresponding rates. Our year-over-year rate improvement was partially
offset by driver-related sourcing expenses, as well as an 8.0% decline in miles
per tractor due to an increase in unseated tractors. On a sequential basis,
miles per tractor remained relatively flat.
Comparison Between Year-to-Date June 30, 2021 and 2020 - Operating income grew
by 52.0% within the Trucking segment. Revenue, excluding fuel surcharge and
intersegment transactions, grew by 7.2%. Average revenue per tractor increased
by 9.0%, driven by a 17.5% increase in revenue per loaded mile, excluding fuel
surcharge and intersegment transactions. Our year-over-year rate improvement was
partially offset by an increase in driver-related sourcing and other expenses
during the first half of 2021, as well as a 7.7% decline in miles per tractor
due to inclement weather and an increase in unseated tractors.
Logistics Segment
The Logistics segment is less asset-intensive than the Trucking segment and is
dependent upon capable non-driver employees, modern and effective information
technology, and third-party capacity providers. Logistics revenue is generated
by its brokerage operations. We generate additional revenue by offering
specialized logistics solutions (including, but not limited to, trailing
equipment, origin management, surge volume, disaster relief, special projects,
and other logistic needs). Logistics revenue is mainly affected by the rates we
obtain from customers, the freight volumes we ship through third-party capacity
providers, and our ability to secure third-party capacity providers to transport
customer freight.
The most significant expense in the Logistics segment is purchased
transportation that we pay to third-party capacity providers, which is primarily
a variable cost and is included in "Purchased transportation" in the condensed
consolidated statements of comprehensive income. Variability in this expense
depends on truckload capacity, availability of third-party capacity providers,
rates charged to customers, current freight demand, and customer shipping needs.
Fixed Logistics operating expenses primarily include non-driver employee
compensation and benefits recorded in "Salaries, wages, and benefits" and
depreciation and amortization expense recorded in "Depreciation and amortization
of property and equipment" in the condensed consolidated statements of
comprehensive income.
                                Quarter-to-Date June 30,                  Year-to-Date June 30,                 QTD 2021 vs.                YTD 2021 vs.
                                 2021                 2020               2021                2020                 QTD 2020                    YTD 2020
                                          (Dollars in thousands, except per load data)                                     Increase (Decrease)

Total revenue              $     166,737$ 70,104$  285,624$ 149,302                   137.8   %                    91.3   %
Revenue, excluding         $     162,167$ 67,066$  277,889$ 143,823                   141.8   %                    93.2   %
intersegment transactions
GAAP: Operating income     $      14,356$  3,038$   21,933$   6,757                   372.5   %                   224.6   %
Non-GAAP: Adjusted         $      14,453$  3,038$   22,030$   6,757                   375.7   %                   226.0   %
Operating Income 1
Revenue per load 2         $       2,193$  1,408$    2,094$   1,392                    55.8   %                    50.4   %
Gross margin percentage 2           15.7   %           15.7  %             15.2  %            15.1  %                    -   bps                    10 

bps

GAAP: Operating ratio 2             91.4   %           95.7  %             92.3  %            95.5  %                 (430   bps)                 (320 

bps)

Non-GAAP: Adjusted                  91.1   %           95.5  %             92.1  %            95.3  %                 (440   bps)                 (320 

bps)

Operating Ratio 1 2


1  Refer to "Non-GAAP Financial Measures" below.
2  Defined under "Operating Statistics," above.

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Comparison Between the Quarters Ended June 30, 2021 and 2020 - Revenue,
excluding intersegment transactions, increased by 141.8% within our Logistics
segment, as brokerage load volumes grew by 55.3% and brokerage revenue per load
increased by 55.8% (including the results of UTXL beginning June 1, 2021).
Excluding the results of UTXL, brokerage load volumes grew by 49.6% and revenue
per load increased by 47.5%. Logistics gross margin was 15.7% in the second
quarters of 2021 and 2020, while Adjusted Operating Ratio improved by 440 basis
points to 91.1% for the second quarter of 2021, from 95.5% for the second
quarter of 2020.
Within our power-only service offering, revenue grew 410.5%, as a result of a
141.5% increase in load volumes. Power-only represented 26.9% of brokerage
revenue and over 25% of our total second quarter 2021 brokerage load volumes.
During 2020, we introduced our Select platform, which digitally matches shippers
with available capacity across our brands through frictionless transactions.
During the second quarter of 2021, more than 4,500 carriers were digitally
matched with loads through our Select platform, achieving an 18.2% sequential
increase in Select platform load volumes.
Comparison Between Year-to-Date June 30, 2021 and 2020 - Revenue, excluding
intersegment transactions, increased by 93.2% within our Logistics segment, as
brokerage load volumes grew by 28.4% and revenue per load increased by 50.4%.
Logistics gross margin was 15.2% in the first half of 2021 and 15.1% in the
first half of 2020. Adjusted Operating Ratio improved by 320 basis points to
92.1% in the first half of 2021, compared to 95.3% in the first half of 2020.
Within our power-only service offering, load volumes grew 284.5%, representing
24.5% of brokerage revenue and over 25.0% of our brokerage load volumes in the
first half of 2021.
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                             OPERATIONS - CONTINUED


Intermodal Segment
The Intermodal segment complements our regional operating model, allows us to
better serve customers in longer haul lanes, and reduces our investment in fixed
assets. Through the Intermodal segment, we generate revenue by moving freight
over the rail in our containers and other trailing equipment, combined with
revenue for drayage to transport loads between railheads and customer locations.
The most significant expense in the Intermodal segment is the cost of purchased
transportation that we pay to third-party capacity providers (including rail
providers), which is primarily variable and included in "Purchased
transportation" in the condensed consolidated statements of comprehensive
income. Purchased transportation varies as it relates to rail capacity, freight
demand, and customer shipping needs. The main fixed costs in the Intermodal
segment are depreciation of our company tractors related to drayage, containers,
and chassis, as well as non-driver employee compensation and benefits.
                                Quarter-to-Date June 30,                  Year-to-Date June 30,                 QTD 2021 vs.                YTD 2021 vs.
                                 2021                 2020               2021                2020                 QTD 2020                    YTD 2020
                                          (Dollars in thousands, except per load data)                                     Increase (Decrease)

Total revenue              $     115,378$ 82,820$  222,444$ 177,551                    39.3   %                    25.3   %
Revenue, excluding         $     115,294$ 82,699$  222,265$ 177,321                    39.4   %                    25.3   %
intersegment transactions
GAAP: Operating income     $       5,812$ (4,475)$    9,269$  (7,212)                 (229.9   %)                  228.5   %
(loss)
Non-GAAP: Adjusted         $       5,812$ (4,410)$    9,269$  (7,099)                 (231.8   %)                  230.6   %
Operating Income (Loss) 1
Average revenue per load 2 $       2,616$  2,249$    2,583$   2,283                    16.3   %                    13.1   %
GAAP: Operating ratio 2             95.0   %          105.4  %             95.8  %           104.1  %               (1,040   bps)                 (830   bps)
Non-GAAP: Adjusted                  95.0   %          105.3  %             95.8  %           104.0  %               (1,030   bps)                 (820   bps)
Operating Ratio 1 2
Load count                        44,073             36,769              86,041             77,658                    19.9   %                    10.8   %
Average tractors 2 3                 611                571                 605                586                     7.0   %                     3.2   %
Average containers 2              10,842             10,853              10,844             10,355                    (0.1   %)                    4.7   %


1  Refer to "Non-GAAP Financial Measures" below.
2  Defined under "Operating Statistics," above.
3  Includes 555 and 510 company-owned tractors for the second quarter of 2021
and 2020, respectively.
Includes 549 and 523 company-owned tractors for the year-to-date June 30, 2021
and 2020, respectively.
Comparison Between the Quarters Ended June 30, 2021 and 2020 - Intermodal
revenue, excluding intersegment transactions increased 39.4% year-over-year, as
load counts increased 19.9% and revenue per load increased 16.3%. The Adjusted
Operating Ratio improved to 95.0% in the second quarter of 2021, from 105.3% in
the second quarter of 2020. Intermodal is exhibiting solid momentum, and we
expect operational improvements in cost structure and network design in the
coming quarters to lead to continued improvement.
Comparison Between Year-to-Date June 30, 2021 and 2020 - Intermodal revenue,
excluding intersegment transactions increased 25.3%, as load counts increased
10.8% and revenue per load increased 13.1%. Adjusted Operating Ratio within the
Intermodal segment improved to 95.8%, compared to 104.0% during the first half
of 2020, despite weather and service disruptions in the beginning of the year.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

                             OPERATIONS - CONTINUED


Non-reportable Segments
The non-reportable segments include support services provided to our customers
and independent contractors (including repair and maintenance shop services,
equipment leasing, warranty services, and insurance), trailer parts
manufacturing, warehousing, and certain driving academy activities, as well as
certain corporate expenses (such as legal settlements and accruals, certain
impairments, and $11.6 million in quarterly amortization of intangibles related
to the 2017 Merger and various acquisitions).
                                        Quarter-to-Date June 30,                  Year-to-Date June 30,               QTD 2021 vs.             YTD 2021
vs.
                                         2021                2020                2021                 2020              QTD 2020                 YTD 2020
                                                             (Dollars in thousands)                                              Increase (Decrease)

Total revenue                      $      66,795$ 45,289$    117,464$  91,531                 47.5   %                    28.3   %
Operating income (loss)            $       2,490$ (4,184)$     (4,768)$ (10,381)               159.5   %                    

54.1 %



Quarter-to-date and year-to-date revenue growth and improved profitability
within the non-reportable segments is related to revenue and margin improvement
in our warehousing activities, expanded services to third-party carriers, and
increased demand for our equipment leasing services. This was partially offset
by an increase in legal accruals.

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