22 unchanged sentences
Our shares of Class A common stock commenced trading on the NYSE on a post-reverse split basis under the ticker symbol "KNX" on September 11, 2017.
−Removed: We accounted for the 2017 Merger using the acquisition method of accounting in accordance with GAAP.
−Removed: GAAP requires that either Knight or Swift is designated as the acquirer for accounting and financial reporting purposes ("Accounting Acquirer").
−Removed: Based on the evidence available, Knight was designated as the Accounting Acquirer while Swift was the acquirer for legal purposes.
−Removed: Therefore, Knight’s historical results of operations replaced Swift’s historical results of operations for all periods prior to the 2017 Merger.
−Removed: More specifically, for periods prior to the 2017 Merger, the consolidated financial statements in Part II, Item 8 of this Annual Report are those of Knight and its subsidiaries and do not include Swift, and for periods subsequent to the 2017 Merger, also include Swift.
−Removed: Accordingly, comparisons between our 2017 results and prior periods may not be meaningful.
−Removed: Abilene Acquisition — On March 16, 2018, the Company acquired all of the issued and outstanding equity interests of Abilene.
−Removed: Please refer to Note 5 in Part II, Item 8 of this Annual Report for more information about the Abilene Acquisition.
−Removed: Other Acquisition — On January 1, 2020, the Company acquired a small company to complement its suite of services.
+Added: Acquisitions — On January 1, 2020, the Company acquired a warehousing company to complement its suite of services.
Please refer to Note 5 in Part II, Item 8 of this Annual Report.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
• 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.
2 unchanged sentences
Revenue in our brokerage and intermodal operations is generated through our Logistics and Intermodal segments.
−Removed: 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, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and certain acquisitions).
+Added: • 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 certain 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.
−Removed: This applies only to loaded miles and typically does not offset non-paid empty miles, idle time, and out-of-route miles driven.
+Added: This applies only to loaded miles and typically does not offset non-
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
+Added: 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.
7 unchanged sentences
Risk Factors," as well as in various disclosures in our press releases, stockholder reports, and other filings with the SEC.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Key Financial Highlights and Operating Metrics
4 unchanged sentences
Net income attributable to Knight-Swift $ 410,002 $ 309,206
+Added: Diluted EPS $ 2.40 $ 1.80
Operating ratio 87.9 % 91.2 %
1 unchanged sentence
Adjusted Net Income Attributable to Knight-Swift 1
+Added: $ 466,147 $ 373,082
Adjusted EPS 1
−Removed: Adjusted Operating Ratio (2017 and 2018 Recast) ¹
+Added: $ 2.73 $ 2.17
+Added: Adjusted Operating Ratio 1
+Added: 85.3 % 88.4 %
Revenue equipment:
Average tractors (Trucking segment only) 3
+Added: 18,448 18,877
Average trailers 4
+Added: 57,722 58,315
Average containers 10,604 9,862
2 unchanged sentences
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 .
−Removed: The Adjusted Operating Ratio for 2018 and 2017 is recast to adjust "Total revenue" and "Total operating expenses" by fuel surcharges generated within the Trucking segment only.
2 See "Results of Operations — Segment Review — Operating Statistics" in Part II, Item 7 of this Annual Report regarding definitions of these operating data.
−Removed: Our tractor fleet had a weighted average age of 1.9 years, 2.2 years, and 2.5 years for 2019, 2018, and 2017, respectively.
−Removed: Average tractors within our Trucking segment includes 16,432 , 15,743 and 15,916 company-owned tractors for 2019.
−Removed: 2018, and 2017, respectively.
−Removed: Our trailer fleet had a weighted average age of 7.5 years, 7.2 years, and 7.6 years for 2019, 2018, and 2017, respectively.
+Added: 3 Our tractor fleet had a weighted average age of 2.2 years and 1.9 years for 2020 and 2019, respectively.
+Added: Average tractors within our Trucking segment includes 16,379 and 16,432 company-owned tractors for 2020 and 2019, respectively.
+Added: 4 Our trailer fleet had a weighted average age of 7.8 years and 7.5 years for 2020 and 2019, respectively.
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Market Trends and Company Performance
−Removed: Trends and Outlook — As a result of strong market fundamentals in 2018, capacity increased in the market as tractor orders were at record levels and trucking employment began to grow.
−Removed: This resulted in an oversupply of capacity in the market, which led to lower spot market rates and downward pressure on contract rates in 2019.
−Removed: While the truckload freight environment remains competitive, evidence of capacity rationalization is mounting, including impacts from trucking company business failures, lower Class 8 new truck orders, further weakening of Class 8 used tractor values, growing Class 8 used inventories, and contraction in trucking employment.
−Removed: Capacity rationalization may further accelerate given the mild freight seasonality that is typical in the first quarter, significant insurance cost inflation, and the new regulatory introduction of the commercial driver's license Drug and Alcohol Clearinghouse, which we believe will foster a more favorable freight environment in the second half of 2020.
−Removed: Driver sourcing continues to be a headwind for the trucking industry, as among other market factors, the national unemployment rate remained low, ending the fourth quarter of 2019 at 3.5%.
−Removed: Additionally, increased competition for driving academy graduates and experienced hires, as well as increased safety regulations, continued to hamper driver sourcing efforts throughout the industry.
−Removed: The unemployment rate in 2020 is expected to remain below 4.0%.
−Removed: The US economy grew at a moderate pace throughout the year, with an expected annualized growth rate of 2.3% in 2019.
−Removed: Third-party forecasts indicate that this trend will continue, resulting in an expected annualized growth rate of 2.2% in 2020.
−Removed: The fourth quarter 2019 US employment cost index rose 2.7% and 0.7% on a year-over-year and
+Added: Trends and Outlook — Our operational discipline, agility, and cost-control culture enabled us to execute through the unprecedented challenges presented by the COVID-19 pandemic, which introduced a new source of volatility throughout the global market in 2020.
+Added: Our diversified customer base, networks, and unique brands positioned us to navigate a disrupted freight environment of unpredictable shipping volumes, shifts in pricing, and continued challenges in driver sourcing.
+Added: The national unemployment rate was 6.7% 1 as of December 31, 2020.
+Added: The impact of the COVID-19 pandemic and efforts to contain it continued to affect the labor market.
+Added: Economic activities that were once curtailed during the initial surge of the pandemic began to resume during the third quarter and into the fourth quarter of 2020.
+Added: Within our industry, social distancing measures continue to affect the population of available trained drivers across the nation.
+Added: Additionally, ongoing competition for experienced hires, increased safety regulations, and various alternative sources of income to potential drivers continue to hamper driver sourcing efforts throughout the industry.
+Added: During the fourth quarter of 2020, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased at an annual rate of 4.0% 3 per third-party estimates.
+Added: This reflects the US economy's continued recovery from the ongoing impact of the COVID-19 pandemic, which caused economic declines earlier in 2020.
+Added: This may result in an expected annualized growth rate of approximately 5.0% to 6.0% 3 for full-year 2021, as third-party forecasts are predicting additional fiscal stimulus that may support continued economic rebound.
+Added: The 2020 US employment cost index rose 2.5% 1 on a year-over-year basis.
+Added: From a freight market perspective, demand toward the beginning of the year was weak, but gradually strengthened throughout 2020.
+Added: We are encouraged by the continued strength in freight demand;
+Added: however, we expect demand will be difficult to predict for 2021.
+Added: Consolidated revenue, excluding trucking fuel surcharge, decreased by 0.6%, while operating income increased by 32.1% and Adjusted Operating Income increased by 25.7% in 2020, as compared to 2019.
+Added: Our business model continues to generate a meaningful amount of free cash flow (computed as net cash provided by operating activities, less net cash capital expenditures), which was $531.8 million in 2020.
+Added: Our Trucking segment improved its Adjusted Operating Income by 25.5%, resulting in a 350 basis point Adjusted Operating Ratio improvement to 83.0% in 2020 from 86.5% in 2019.
+Added: Our Logistics segment produced a 94.5% Adjusted Operating Ratio in 2020, as a result of an 18.5% improvement in its revenue per load, excluding intersegment transactions in 2020, as compared to 2019.
+Added: Our Intermodal segment generated a 100.2% Adjusted Operating Ratio in 2020, as load volumes were pressured, compared to the prior year.
+Added: 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.
+Added: We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.
+Added: Impact of COVID-19 — Refer to Note 1 in Part II, Item 8 of this Annual Report for discussion around the impact of COVID-19 on our company.
+Added: Refer to Part 1, Item 1A "Risk Factors" of this Annual Report for discussion about trends, potential risks, and uncertainties surrounding the COVID-19 pandemic that may impact our business, results of operations, or financial condition.
+Added: 3 kiplinger.com
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: sequential basis, respectively.
−Removed: The tight US labor market is expected to continue to remain inflationary, likely prompting employers to continue raising employee pay rates and improving benefits.
−Removed: We continue generating meaningful free cash flow, further reducing debt and lease obligations, focusing on the fundamentals of our business, and identifying strategic opportunities to propel our company forward into the coming y ears.
−Removed: While our consolidated operations showed progress and resilience in the first half of 2019, continued market pressures negatively affected our consolidated results in the second half of the year.
−Removed: Despite the soft freight market in 2019, revenue per loaded mile, excluding fuel surcharge and intersegment transactions increased by 0.9%, as compared to last year.
−Removed: We continued to experience increased competition in the intermodal market, which led to an 8.3% reduction in volume and 0.5% less revenue per load year-over-year.
−Removed: Operating ratio within the Logistics segment increased by 110 basis points and Adjusted Operating Ratio increased by 120 basis points year-over-year, despite a 19.0% decrease in total revenue.
−Removed: These factors resulted in a 24.9% decrease in consolidated operating income, compared to last year.
−Removed: 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 lease, a majority of our revenue equipment in 2020.
−Removed: Additionally, we would expect purchased transportation expense to increase as a percentage of revenue excluding trucking fuel surcharge in the coming year, if we are successful in growing our logistics and intermodal businesses.
−Removed: With significant tightening in the insurance markets, we may also experience changes in premiums and retention limits in 2020.
−Removed: Overall, we remain committed to further improving long-term profitability as we continue to leverage opportunities across the Knight-Swift brands, efficiently deploy our assets, invest in innovation, and advance our enterprise-wide efforts in safety and the driver experience, while maintaining a relentless focus on cost control.
−Removed: In this environment, we will continue to monitor the markets in order to evaluate acquisition candidates, share repurchase opportunities, and other opportunities that create value for our stockholders and further advance our long-term strategies.
Note regarding presentation:
−Removed: With the exception of items which were recast in association with our segment reorganization, a discussion in changes in our results of operations from 2017 to 2018 has been omitted from this Annual Report, but may be found in "Item 7.
+Added: A discussion of changes in our results of operations from 2018 to 2019 has been omitted from this Annual Report, but may be found in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2019 Annual Report filed with the SEC on February 27, 2020.
−Removed: Note regarding comparability:
−Removed: The reported results do not include the results of operations of Swift and its subsidiaries on and prior to the 2017 Merger, in accordance with the accounting treatment applicable to the transaction.
−Removed: Additionally, the reported results do not include the results of operations of Abilene on and prior to its acquisition by the Company on March 16, 2018 in accordance with the accounting treatment applicable to the transaction.
−Removed: Accordingly, comparisons between the Company's 2019 results and the prior periods presented may not be meaningful.
Operating Results:
−Removed: 2019 Compared to 2018 — The $110.1 million decrease in net income attributable to Knight-Swift to $309.2 million in 2019 from $419.3 million in 2018, includes the following:
−Removed: Contributor — $82.1 million decrease in operating income within our Trucking segment due to an oversupply of truckload capacity in the 2019 freight market.
−Removed: This resulted in fewer miles per tractor and a pressured rate per loaded mile which was unable to keep pace with inflationary costs.
−Removed: We also incurred incremental expenses associated with exiting several underperforming refrigerated and dry dedicated accounts in 2019.
−Removed: Contribu tor — $26.8 million decrease in operating income within our Intermodal segment due to a reduction in volume from continued market pressures and relatively worse inclement weather at the onset of 2019, compared to 2018.
−Removed: Contributor — $22.6 million increase in operating loss within the non-reportable segments in 2019.
−Removed: This was primarily due to the recognition of $35.8 million in 2019, in revised estimates for litigation related to various pre-2017 Merger legal matters which were previously disclosed by Swift.
−Removed: These costs were recorded in "Miscellaneous operating expenses" in the consolidated statements of comprehensive income.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: Offset — $27.6 million decrease in consolidated income tax expense primarily due to a decrease in pretax earnings and a partial release of our reserve for uncertain tax positions recognized as a discrete item.
−Removed: This was partially offset by a decrease in foreign income tax deductions recognized as a discrete item.
−Removed: In 2018, we recognized discrete items related to stock compensation deductions and a favorable audit settlement of nondeductible penalties.
+Added: 2020 Compared to 2019 — The $100.8 million increase in net income attributable to Knight-Swift to $410.0 million in 2020 from $309.2 million in 2019, includes the following:
+Added: • Contributor — $109.8 million increase in operating income within our Trucking segment driven by a 3.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 1.5% decrease in total miles per tractor .
+Added: • Contributor — $34.3 million improvement in operating results within the non-reportable segments.
+Added: Improved operating loss within the non-reportable segments was primarily due to a $29.5 million year-over-year reduction in recorded legal costs for increases in legal reserves in 2019 related to various pre-2017 Merger related legal matters, which were previously disclosed by Swift, as well as additional income earned from a warehousing company acquired in 2020.
+Added: These improvements were offset by a $6.7 million of expenses in 2020 for the change in fair value of the deferred earnout related to the acquisition of the recently acquired warehousing company and a $4.1 million impairment related to investments in certain alternative fuel technology.
+Added: • Offset — $45.9 million increase in consolidated income tax expense was primarily due to an increase in pre-tax earnings and negative impacts from certain tax-related items within our Mexico operations recognized as a discrete item.
+Added: This was partially offset by stock compensation deductions and a partial release of our reserve for uncertain tax positions recognized as discrete items.
+Added: In 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions, which was partially offset by a decrease in foreign income tax deductions.
All of these factors resulted in a 2020 effective tax rate of 26.7% and a 2019 effective tax rate of 25.1%.
4 unchanged sentences
We 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 and growth through acquisition.
−Removed: See discussion under "Liquidity and Capital Resources" and "Off-Balance Sheet Transactions" for additional information.
+Added: See discussion under "Liquidity and Capital Resources" for additional information.
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Results of Operations — Segment Review
5 unchanged sentences
Consolidating Tables for Total Revenue and Operating Income (Loss)
−Removed: 2018 (recast)
−Removed: 2017 (recast)
(Dollars in thousands)
+Added: Trucking $ 3,786,030 81.0 % $ 3,952,866 81.6 %
+Added: Logistics $ 375,841 8.0 % $ 352,988 7.3 %
+Added: Intermodal $ 391,462 8.4 % $ 455,466 9.4 %
+Added: Subtotal $ 4,553,333 97.4 % $ 4,761,320 98.3 %
Non-reportable segments $ 188,882 4.0 % $ 130,782 2.7 %
1 unchanged sentence
Total revenue $ 4,673,863 100.0 % $ 4,843,950 100.0 %
−Removed: 2018 (recast)
−Removed: 2017 (recast)
Operating income (loss):
(Dollars in thousands)
+Added: Trucking $ 578,512 102.5 % $ 468,749 109.7 %
+Added: Logistics $ 20,245 3.6 % $ 21,869 5.1 %
+Added: Intermodal $ (943) (0.2 %) $ 4,501 1.1 %
+Added: Subtotal $ 597,814 105.9 % $ 495,119 115.9 %
Non-reportable segments $ (33,376) (5.9 %) $ (67,681) (15.9 %)
Operating income $ 564,438 100.0 % $ 427,438 100.0 %
−Removed: 2017 operating income for the Trucking segment includes $23.1 million in 2017 Merger-related costs.
Table of Contents Glossary of Terms
5 unchanged sentences
Additionally, we use a number of primary indicators to monitor our revenue and expense performance and efficiency.
−Removed: Operating Statistic
−Removed: Relevant Segment(s)
−Removed: Average Revenue per Tractor
−Removed: Measures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count
−Removed: Total Miles per Tractor
−Removed: Total miles (including loaded and empty miles) a tractor travels on average
−Removed: Average Length of Haul
−Removed: Average of miles traveled with loaded trailer cargo, based on order counts
−Removed: Non-paid Empty Miles Percentage
−Removed: Percentage of miles without trailer cargo
−Removed: Average Tractors
−Removed: Trucking, Intermodal
−Removed: Average tractors in operation during the period, including company tractors and tractors provided by independent contractors.
−Removed: Average Trailers
−Removed: Average trailers in operation during the period
−Removed: Average Revenue per Load
−Removed: Logistics, Intermodal
−Removed: Total revenue (excluding intersegment transactions) divided by load count
−Removed: Gross Margin Percentage
−Removed: Logistics (Brokerage only)
−Removed: Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions
−Removed: Average Containers
−Removed: Average containers in operation during the period
−Removed: GAAP Operating Ratio
−Removed: Trucking, Logistics, Intermodal
−Removed: Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.
+Added: Operating Statistic Relevant Segment(s) Description
+Added: Average Revenue per Tractor Trucking Measures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count
+Added: Total Miles per Tractor Trucking Total miles (including loaded and empty miles) a tractor travels on average
+Added: Average Length of Haul Trucking Average miles traveled with loaded trailer cargo per order
+Added: Non-paid Empty Miles Percentage Trucking Percentage of miles without trailer cargo
+Added: Average Tractors Trucking, Intermodal Average tractors in operation during the period, including company tractors and tractors provided by independent contractors
+Added: Average Trailers Trucking Average trailers in operation during the period
+Added: Average Revenue per Load Logistics, Intermodal Total revenue (excluding intersegment transactions) divided by load count
+Added: Gross Margin Percentage Logistics (Brokerage only) Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions
+Added: Average Containers Intermodal Average containers in operation during the period
+Added: GAAP Operating Ratio Trucking, Logistics, Intermodal Measures operating efficiency and is widely used 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
−Removed: Adjusted Operating Ratio
−Removed: Trucking, Logistics, Intermodal
−Removed: Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.
+Added: Adjusted Operating Ratio Trucking, Logistics, Intermodal Measures operating efficiency and is widely used 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
4 unchanged sentences
Trucking Segment
−Removed: We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings.
+Added: We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings, with 13,386 irregular route tractors and 5,062 dedicated route tractors.
Generally, we are paid a predetermined rate per mile or per load for our trucking services.
5 unchanged sentences
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.
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: (Dollars in thousands, except per tractor data)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands, except per tractor data) Increase (decrease)
Total revenue $ 3,786,030 $ 3,952,866 (4.2 %)
2 unchanged sentences
Adjusted Operating Income 1
+Added: $ 593,085 $ 472,537 25.5 %
Average revenue per tractor 2
+Added: $ 188,672 $ 185,628 1.6 %
Operating ratio 2
+Added: 84.7 % 88.1 % (340 bps)
Adjusted Operating Ratio 1 2
+Added: 83.0 % 86.5 % (350 bps)
Non-paid empty miles percentage 2
+Added: 13.1 % 12.8 % 30 bps
Average length of haul (miles) 2
+Added: 425 430 (1.2 %)
Total miles per tractor 2
+Added: 90,993 92,363 (1.5 %)
Average tractors 2 3
+Added: 18,448 18,877 (2.3 %)
Average trailers 2
+Added: 57,722 58,315 (1.0 %)
1 Refer to "Non-GAAP Financial Measures" below.
2 Defined within "Operating Statistics" above.
−Removed: In order to improve comparability, average tractors of 9,433 is used as the denominator in the average revenue per tractor and total miles per tractor calculations for 2017, reflecting the pro-rata portion of the year for which Swift's results of operations were reported following the close of the 2017 Merger.
3 Includes 16,379 and 16,432 company-owned tractors for 2020 and 2019, respectively.
−Removed: 2019 Compared to 2018 — Operating ratio increased by 90 basis points to 88.1% in 2019 and Adjusted Operating Ratio increased by 120 basis points to 86.5% in 2019, with a 7.9% decrease in total revenue.
−Removed: Average revenue per tractor decreased 5.3% as a result of a 6.2% decrease in total miles per tractor which was partially offset by a 0.9% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.
−Removed: In the second half of 2019, we incurred incremental expenses associated with exiting several underperforming refrigerated and dry dedicated accounts.
−Removed: We expect less volatility in the dedicated operating segment in 2020.
+Added: 2020 Compared to 2019 — Operating ratio improved by 340 basis points to 84.7% in 2020 and Adjusted Operating Ratio improved by 350 basis points to 83.0% in 2020.
+Added: Average revenue per tractor increased by 1.6% driven by a 3.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, and was partially offset by a 1.5% decrease in total miles per tractor .
Our focus in our Trucking segment remains on developing our freight network, improving the productivity of our assets and controlling costs in areas where we have experienced higher than normal inflation, such as maintenance, driving associate pay, and professional fees.
−Removed: 2018 Compared to 2017 — The Trucking segment's total revenue increased $2.3 billion and operating income increased by $347.6 million .
−Removed: These increases were primarily driven by reporting results for Swift businesses within this segment for the full year of 2018, compared to reporting results only from the portion of 2017 following the 2017 Merger.
−Removed: The comparison of the reported results between 2018 and 2017 may not be meaningful as the period following the 2017
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: Merger consisted primarily of results from what is traditionally our strongest quarter.
−Removed: Due to this seasonality, many of the 2017 operating statistics reported are not representative of the activity we expect from a full year of operations.
−Removed: With these limitations in mind, we saw improvements of 250 basis points in our operating ratio and 160 basis points in our Adjusted Operating Ratio.
−Removed: This was due to an increase of 6.0% in average revenue per tractor, partially offset by a 2.3% decrease in total miles per tractor.
Logistics Segment
1 unchanged sentence
Logistics revenue is primarily generated by its brokerage operations.
−Removed: We generate additional revenue by offering specialized logistics solutions (including, but not limited to, origin management, surge volume, disaster relief, special projects, and other logistic needs).
+Added: 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.
−Removed: The most significant expense in the Logistics segment is the primarily variable cost of purchased transportation that we pay to third-party capacity providers, included in "Purchased transportation" in the consolidated statements of comprehensive income.
+Added: The most significant expense in the Logistics segment is purchased transportation that we pay to third-party capacity providers, which is a primarily variable cost, and is included in "Purchased transportation" in the 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 consolidated statements of comprehensive income.
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: (Dollars in thousands, except per load data)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands, except per load data) Increase (decrease)
Total revenue $ 375,841 $ 352,988 6.5 %
2 unchanged sentences
Adjusted Operating Income 1 2
+Added: $ 20,245 $ 22,490 (10.0 %)
Revenue per load – Brokerage only 2
+Added: $ 1,689 $ 1,425 18.5 %
Gross margin percentage – Brokerage only 2
+Added: 14.5 % 15.9 % (140 bps)
Operating ratio 2
+Added: 94.6 % 93.8 % 80 bps
Adjusted Operating Ratio 1 2
+Added: 94.5 % 93.5 % 100 bps
1 Refer to "Non-GAAP Financial Measures" below.
2 Defined under "Operating Statistics" above.
−Removed: 2019 Compared to 2018 — Operating ratio increased by 110 basis points and Adjusted Operating Ratio increased by 120 basis points year-over-year, with a 19.0% decrease in total revenue.
−Removed: Brokerage-only — The gross margin in our brokerage business increased slightly to 15.9% in 2019 from 15.8% in 2018 .
−Removed: Brokerage revenue, excluding intersegment transactions decreased 18.3% as a result of a 9.7% decrease in brokerage revenue per load and a 9.4% decrease in load counts.
−Removed: 2018 Compared to 2017 — The Logistics segment reported increases in total revenue of $200.1 million , and operating income of $16.8 million .
−Removed: These increases were primarily driven by reporting results for Swift businesses within this segment for the full year of 2018, compared to reporting results only from the portion of 2017 following the 2017 Merger.
−Removed: The comparison of the reported results between 2018 and 2017 may not be meaningful as the period following the 2017 Merger consisted primarily of results from what is traditionally our strongest quarter.
−Removed: Due to this seasonality, many of the 2017 operating statistics reported are not representative of the activity we expect from a full year of operations.
−Removed: With these limitations in mind, we saw meaningful improvement in our operating profitability within our Logistics segment during 2018.
−Removed: Brokerage gross margin percentage for the year improved by 30 basis points on a year-over-year basis to 15.8% , primarily due to the increase in revenue per load, which was partially offset by a corresponding increase in purchased transportation costs.
−Removed: The segment's operating ratio and Adjusted Operating Ratio improved by 90 basis points and 110 basis points, respectively, primarily due to the increase in average revenue per load.
+Added: 2020 Compared to 2019 — Operating ratio increased by 80 basis points and Adjusted Operating Ratio increased by 100 basis points year-over-year.
+Added: Brokerage gross margin decreased to 14.5% in 2020 from 15.9% in 2019.
+Added: An 18.5% increase in brokerage revenue per load, partially offset by an 8.3% decrease in brokerage load volumes, contributed to a 8.8% increase in brokerage revenue, excluding intersegment transactions.
+Added: Load volumes grew 67.0% year-over-year within our power-only service offering, contributing to 96.3% revenue growth within power-only and representing 24.3% of our total 2020 brokerage load volumes.
+Added: In the first half of 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions.
+Added: By the fourth quarter of 2020, over 5,000 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.
Table of Contents Glossary of Terms
7 unchanged sentences
The main fixed costs in the Intermodal segment are depreciation of our containers and chassis, as well as non-driver employee compensation and benefits.
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: (Dollars in thousands, except per load data)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands, except per load data) Increase (decrease)
Total revenue $ 391,462 $ 455,466 (14.1 %)
Revenue, excluding intersegment transactions $ 391,098 $ 453,978 (13.9 %)
−Removed: Operating income
−Removed: Adjusted Operating Income ¹ ²
+Added: Operating (loss) income $ (943) $ 4,501 (121.0 %)
+Added: Adjusted Operating (Loss) Income 1 2
+Added: $ (830) $ 4,501 (118.4 %)
Average revenue per load 2
+Added: $ 2,342 $ 2,426 (3.5 %)
Operating ratio 2
+Added: 100.2 % 99.0 % 120 bps
Adjusted Operating Ratio 1 2
+Added: 100.2 % 99.0 % 120 bps
+Added: Load count 166,977 187,131 (10.8 %)
Average tractors 2 3
+Added: 577 643 (10.3 %)
Average containers 2
+Added: 10,604 9,862 7.5 %
1 Refer to "Non-GAAP Financial Measures" below.
1 unchanged sentence
3 Includes 518 and 568 c ompany-owned tractors for 2020 and 2019, respectively.
−Removed: 2019 Compared to 2018 — Our Intermodal segment produced a 99.0% operating ratio during 2019 , compared to 93.7% during 2018.
−Removed: Total revenue decreased 8.7% due to an 8.3% decrease in load volumes and a slight decrease of 0.5% in average revenue per load.
−Removed: Our results were negatively affected by inclement weather impacting rail lanes and slower rail transit times at the onset of 2019, followed by increased market pressures continuing throughout the year.
−Removed: Additionally, we added container capacity to facilitate our growth plan within this segment, which increased our fixed costs.
−Removed: We are focused on increasing load volumes with a diversified customer base, while improving our cost structure through reduced rail and drayage expenses.
−Removed: 2018 Compared to 2017 — The Intermodal segment reported increases in total revenue of $348.5 million and operating income of $24.2 million .
−Removed: These increases were primarily driven by reporting Swift's Intermodal results within this segment for the full year of 2018, compared to reporting results only from the portion of 2017 following the 2017 Merger.
−Removed: The comparison of the reported results between 2018 and 2017 may not be meaningful as the period following the 2017 Merger consisted primarily of results from what is traditionally our strongest quarter.
−Removed: Due to this seasonality, many of the 2017 operating statistics reported are not representative of the activity we expect from a full year of operations.
−Removed: With these limitations in mind, we saw meaningful improvement in our operating profitability within our Intermodal segment during 2018.
−Removed: As a result of our focus on improving our revenue per load and executing on cost control, our Intermodal segment's operating ratio and Adjusted Operating Ratio each improved by 160 basis points.
+Added: 2020 Compared to 2019 — Our Intermodal se gment produced a 100.2% operating ratio during 2020, compared to 99.0% during 2019.
+Added: Total revenue decreased 14.1% due to a 10.8% decrease in load volumes and a decrease of 3.5% in average revenue per load.
+Added: We continue to work on initiatives to support our business, develop our network, and improve our cost structure within the Intermodal segment, and we expect to see improved results in 2021.
Table of Contents Glossary of Terms
2 unchanged sentences
Non-reportable Segments
−Removed: 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, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and $10.3 million in quarterly amortization of intangibles related to the 2017 Merger).
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 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 $45.9 million in annual amortization of intangibles related to the 2017 Merger and various acquisitions).
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Total revenue $ 188,882 $ 130,782 44.4 %
Operating loss $ (33,376) $ (67,681) (50.7 %)
−Removed: 2019 Compared to 2018 — The decrease in total revenue within our non-reportable segments is primarily attributed to a decrease in leasing and insurance activities with independent contractors.
−Removed: This was accompanied by a corresponding decrease in the operating expenses associated with these activities.
−Removed: Further, operating loss increased year-over-year, primarily due to the recognition of $35.8 million in 2019 in revised estimates for litigation related to various pre-2017 Merger legal matters which were previously disclosed by Swift.
−Removed: 2018 Compared to 2017 — The increases in total revenue and operating loss within our non-reportable segments are primarily driven by reporting results for the full year of 2018, compared to reporting results only from the portion of 2017 following the 2017 Merger.
−Removed: The comparison of the reported results between 2018 and 2017 may not be meaningful as the period following the 2017 Merger consisted primarily of results from what is traditionally our strongest quarter.
+Added: 2020 Compared to 2019 — The increase in total revenue within our non-reportable segments is primarily attributed to revenues from the acquisition of a warehousing company made at the beginning of the year.
+Added: Improved operating loss within the non-reportable segments was primarily due to a $29.5 million year-over-year reduction in recorded legal costs for increases in legal reserves in 2019 related to various pre-2017 Merger related legal matters, which were previously disclosed by Swift, as well as additional income earned from a warehousing company acquired in 2020.
+Added: These improvements were offset by a $6.7 million of expenses in 2020 for the change in fair value of the deferred earnout related to the acquisition of the recently acquired warehousing company and a $4.1 million impairment related to investments in certain alternative fuel technology.
Results of Operations — Consolidated Operating and Other Expenses
3 unchanged sentences
Therefore, we believe that revenue, excluding trucking fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.
−Removed: The reported results do not include the results of operations of Abilene on and prior to its acquisition by the Company on March 16, 2018 in accordance with the accounting treatment applicable to the transaction.
−Removed: Accordingly, comparisons between the Company's 2019 results and prior periods may not be meaningful.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Salaries, wages, and benefits $ 1,483,188 $ 1,474,073 0.6 %
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: % of total revenue 31.7 % 30.4 % 130 bps
+Added: % of revenue, excluding trucking fuel surcharge 33.9 % 33.5 % 40 bps
Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by company driving associates, the rate per mile we pay our company driving associates, and employee benefits, including healthcare, workers' compensation and other benefits.
2 unchanged sentences
Several ongoing market factors have reduced the pool of available driving associates, contributing to a challenging driver sourcing market, which we believe will continue.
−Removed: Having a sufficient number of qualified driving associates is our biggest headwind, although we continue to seek ways to attract and retain qualified driving associates, including heavily investing in our recruiting efforts, our driving academies, and technology and terminals that improve the experience of driving associates.
−Removed: As a result of the tight market for qualified driving associates, we granted pay increases to our driving associates throughout 2018, as supported by increases in customer rates.
−Removed: These increases were reflected during the full year of 2019 compared with the partial period impact after the increases in 2018.
−Removed: We expect driving associate pay to remain inflationary, which could result in additional driving associate pay increases in the future.
+Added: Having a sufficient number of qualified driving associates is our biggest headwind, although we continue to seek ways to attract and retain qualified driving associates, including heavily investing in our recruiting efforts, our driving academies, technology, and terminals that improve the experience of driving associates.
+Added: We expect driving associate pay to remain inflationary, leading to additional driving associate pay increases.
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: 2019 Compared to 2018 — The $21.1 million decrease in consolidated salaries, wages, and benefits was primarily due to a decrease in non-driver salaries and wages, lower workers' compensation expense, and a 0.6% decrease in miles driven by company driving associates.
−Removed: This was partially offset by a $6.6 million increase from Abilene's results for all of 2019 compared to the portion of 2018 following the Abilene Acquisition on March 16, 2018, and the full-year impact of the driving associate pay increases discussed above.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: 2020 Compared to 2019 — The increase in consolidated salaries, wages, and benefits was primarily due to $9.0 million in incremental payroll premiums paid during the first half of 2020 to our company driving associates and shop technicians in response to the COVID-19 pandemic.
+Added: The COVID-19 expenses were clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
+Added: Fuel $ 416,307 $ 583,123 (28.6 %)
+Added: % of total revenue 8.9 % 12.0 % (310 bps)
+Added: % of revenue, excluding trucking fuel surcharge 9.5 % 13.3 % (380 bps)
Fuel expense consists primarily of diesel fuel expense for our company-owned tractors and fuel taxes.
6 unchanged sentences
We continue to utilize our fuel efficiency initiatives such as trailer blades, idle-control, managing tractor speeds, updating our fleet with more fuel-efficient engines, managing fuel procurement, and driving associate training programs that we believe contribute to controlling our fuel expense.
−Removed: 2019 Compared to 2018 — The $38.9 million decrease in consolidated fuel expense is primarily due to a decrease in the average DOE fuel price to $3.06 per gallon for 2019 from $3.18 per gallon for 2018, and a 0.6% reduction in the total miles driven by company driving associates.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 Compared to 2019 — The decrease in consolidated fuel expense is primarily due to a decrease in the average DOE fuel price to $2.56 per gallon for 2020 from $3.06 per gallon for 2019, and a 0.8% reduction in the total miles driven by company driving associates.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Operations and maintenance $ 275,290 $ 322,188 (14.6 %)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
−Removed: Operations and maintenance expense consists of direct operating expenses, driving associate development and recruiting expenses, equipment maintenance, and tire expense.
+Added: % of total revenue 5.9 % 6.7 % (80 bps)
+Added: % of revenue, excluding trucking fuel surcharge 6.3 % 7.3 % (100 bps)
+Added: Operations and maintenance expense consists of direct operating expenses, such as driving associate hiring and recruiting expenses, equipment maintenance, and tire expense.
Operations and maintenance expenses are affected by the age of our company-owned fleet of tractors and trailers, as well as total miles driven by company driving associates.
We expect the driver market to remain competitive into 2021, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense.
−Removed: We expect to continue refreshing our fleet in the coming quarters, and anticipate that maintenance costs will gradually decrease as we reduce the average age of our fleets.
−Removed: 2019 Compared to 2018 — The $18.4 million decrease in consolidated operations and maintenance expense is attributed to the reduced maintenance expense associated with refreshing our fleet with newer equipment and the 0.6% reduction in total miles driven by company driving associates.
−Removed: As a percentage of revenue, excluding trucking fuel surcharge, the expense increased slightly.
+Added: We expect to continue refreshing our fleet in the coming quarters to maintain our current fleet age and low maintenance costs.
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 Compared to 2019 — The decrease in consolidated operations and maintenance expense is attributed to the reduced maintenance expense associated with refreshing our fleet with newer equipment and the 0.8% reduction in total miles driven by company driving associates noted above.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Insurance and claims $ 192,840 $ 194,336 (0.8 %)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
−Removed: Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as our level of self-insurance, and premium expense.
−Removed: In recent years, insurance carriers have raised premiums for many businesses, including transportation companies, and as a result, our insurance and claims expense could increase in the future, or we could raise our self-insured retention when our policies are renewed or replaced.
+Added: % of total revenue 4.1 % 4.0 % 10 bps
+Added: % of revenue, excluding trucking fuel surcharge 4.4 % 4.4 % — bps
+Added: Insurance and claims expense consists of claims costs related to our self-insured limits for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as excess premium expense above these limits.
+Added: In recent years, insurance carriers have raised premiums for many businesses, including transportation companies, and as a result, our insurance and claims expense could increase in the future, or we could raise our self-insured retention limits or reduce excess coverage limits when our policies are renewed or replaced.
Insurance and claims expense also varies based on the number of miles driven by company driving associates and independent contractors, the frequency and severity of accidents, trends in development factors used in actuarial accruals, and developments in large, prior-year claims.
−Removed: In future periods, our higher self-retention limits may cause increased volatility in our consolidated insurance and claims expense.
−Removed: 2019 Compared to 2018 — The $21.0 million decrease in consolidated insurance and claims expense was primarily due to overall improvements in the frequency and severity of our claims experience, as a result of fewer miles traveled and our increased focus on improving our safety standards for our driving associates and independent contractors.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: In future periods, higher self-retention limits or lower excess coverage limits may cause increased volatility in our consolidated insurance and claims expense.
+Added: 2020 Compared to 2019 — Consolidated insurance and claims expense decreased, but remained flat as a percentage of revenue, excluding trucking fuel surcharge.
+Added: We expect insurance expense to stabilize as we begin to see the realization of our increased focus on improving our safety standards for our driving associates and independent contractors.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Operating taxes and licenses $ 87,422 $ 88,481 (1.2 %)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: % of total revenue 1.9 % 1.8 % 10 bps
+Added: % of revenue, excluding trucking fuel surcharge 2.0 % 2.0 % — bps
Operating taxes and licenses include expenses such as state franchise taxes, federal highway use taxes, property taxes, vehicle license and registration fees, and fuel and mileage taxes.
The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities.
−Removed: 2019 Compared to 2018 — Consolidated operating taxes and licenses for 2019 decreased by $2.3 million compared to 2018, but remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Communications $ 19,596 $ 19,520 0.4 %
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: % of total revenue 0.4 % 0.4 % — bps
+Added: % of revenue, excluding trucking fuel surcharge 0.4 % 0.4 % — bps
Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems.
−Removed: 2019 Compared to 2018 — Consolidated communications expense remained flat as a percentage of revenue, excluding trucking fuel surcharge for 2019 as compared to 2018.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
+Added: Depreciation and amortization of property and equipment $ 460,775 $ 420,082 9.7 %
+Added: % of total revenue 9.9 % 8.7 % 120 bps
+Added: % of revenue, excluding trucking fuel surcharge 10.5 % 9.6 % 90 bps
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
−Removed: Depreciation and amortization of property and equipment
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
Depreciation relates primarily to our owned tractors, trailers, buildings, ELDs and other communication units, and other similar assets.
−Removed: Changes to this fixed cost are generally attributed to increases or decreases to company-owned equipment, the relative percentage of owned versus leased equipment, and fluctuations in new equipment purchase prices, which have historically been precipitated in part by new or proposed federal and state regulations (such as the EPA engine emissions requirements relating to post-2014 model tractors and the California trailer efficiency requirements).
+Added: Changes to this fixed cost are generally attributed to increases or decreases to company-owned equipment, the relative percentage of owned versus leased equipment, and fluctuations in new equipment purchase prices, which have historically been precipitated in part by new or proposed federal and state regulations.
Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment.
Management periodically reviews the condition, average age, and reasonableness of estimated useful lives and salvage values of our equipment and considers such factors in light of our experience with similar assets, used equipment market conditions, and prevailing industry practice.
−Removed: 2019 Compared to 2018 — The $32.6 million increase in consolidated depreciation and amortization of property and equipment includes a $2.1 million increase in expense from Abilene's results for 2019, compared to the portion of 2018 following the Abilene Acquisition on March 16, 2018.
−Removed: The 150 basis point increase in the expense as a percentage of revenue, excluding trucking fuel surcharge, is due to an increase in owned versus leased equipment.
−Removed: We expect consolidated depreciation and amortization of property and equipment to increase both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge , as we plan to purchase, rather than lease, the majority of our new equipment during 2020.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 Compared to 2019 — The increase in consolidated depreciation and amortization of property and equipment is primarily due to an increase in owned versus leased equipment.
+Added: We expect consolidated depreciation and amortization of property and equipment to generally increase both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge , as we do not plan to use operating leases as a primary means of funding our equipment purchases in 2021.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Amortization of intangibles $ 45,895 $ 42,876 7.0 %
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
−Removed: Amortization of intangibles primarily relates to intangible assets identified with the 2017 Merger.
+Added: % of total revenue 1.0 % 0.9 % 10 bps
+Added: % of revenue, excluding trucking fuel surcharge 1.1 % 1.0 % 10 bps
+Added: Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions.
See Note 5 and Note 11 in Part II, Item 8, of this Annual Report for further details regarding the Company's intangible assets, historical amortization, and anticipated future amortization.
−Removed: 2019 Compared to 2018 — The $0.3 million increase in consolidated amortization of intangibles for 2019 is comprised of $0.2 million from the Abilene Acquisition on March 31, 2018, and $0.1 million from a small acquisition which occurred during 2019.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 Compared to 2019 — The increase in consolidated amortization of intangibles for 2020 is attributed to an acquisition completed on January 1, 2020.
+Added: See Note 5 in Part II, Item 8, of this Annual Report for more details regarding details of our acquisitions.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Rental expense $ 86,640 $ 122,738 (29.4 %)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: % of total revenue 1.9 % 2.5 % (60 bps)
+Added: % of revenue, excluding trucking fuel surcharge 2.0 % 2.8 % (80 bps)
Rental expense consists primarily of payments for tractors and trailers financed with operating leases.
The primary factors affecting the expense are the size our revenue equipment fleet and the relative percentage of owned versus leased equipment.
−Removed: 2019 Compa red to 2018 — The $54.7 million decrease in consolidated rental expense was primarily due to increasing our ratio of owned versus leased equipment.
−Removed: We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge, as we plan to purchase, rather than lease, the majority of our new equipment during 2020.
+Added: 2020 Compa red to 2019 — The decrease in consolidated rental expense was primarily due to increasing our ratio of owned versus leased equipment.
+Added: We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge, as we do not plan to use operating leases as a primary means of funding our equipment purchases in 2021.
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Purchased transportation $ 936,649 $ 1,035,969 (9.6 %)
−Removed: % of total revenue
−Removed: % of revenue, excluding trucking fuel surcharge
+Added: % of total revenue 20.0 % 21.4 % (140 bps)
+Added: % of revenue, excluding trucking fuel surcharge 21.4 % 23.6 % (220 bps)
Purchased transportation expense is comprised of payments to independent contractors in our trucking operations, as well as payments to third-party capacity providers related to logistics, freight management, and non-trucking services in our logistics and intermodal businesses.
2 unchanged sentences
Additionally, as fuel prices increase, payments to third-party capacity providers and independent contractors increase.
−Removed: 2019 Compared to 2018 — The $282.3 million decrease in consolidated purchased transportation expense is primarily due to a 30.7% decrease in miles driven by independent contractors, as well as lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.
−Removed: We expect consolidated purchased transportation will increase as a percentage of revenue, excluding trucking fuel surcharge, if we grow our logistics and intermodal businesses.
+Added: 2020 Compared to 2019 — The decrease in consolidated purchased transportation expense is primarily due to a 17.5% decrease in miles driven by independent contractors, as well as lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.
+Added: We expect consolidated purchased transportation will increase as a percentage of revenue, excluding trucking fuel surcharge, if we grow our logistics and intermodal businesses at a faster rate than our trucking business.
The increase could be partially offset if independent contractors exit the market due to regulatory changes.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
−Removed: 2019 Compared to 2018 — During 2019, we incurred impairment charges related to certain revenue equipment technology, warehousing equipment no longer in use, leasehold improvements from the early termination of a lease of one of our operating properties, and certain Swift legacy trailer models as a result of a softer used equipment market.
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
+Added: Impairments $ 5,335 $ 3,486 53.0 %
+Added: 2020 Compared to 2019 — During 2020, impairments were related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment).
+Added: During 2019, we incurred impairment charges related to certain revenue equipment technolog y, warehousing equipment no longer in use, leasehold improvements from the early termination of a lease of one of our operating properties, and certain Swift legacy trailer models as a result of a softer used equipment market.
The impairments were recorded across various segments, depending on the nature of the impairment.
−Removed: During 2018, we incurred impairment charges related to the Company airplane of $2.2 million and incurred impairment charges related to replaced software systems of $0.6 million.
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Miscellaneous operating expenses $ 99,488 $ 109,640 (9.3 %)
−Removed: Miscellaneous operating expenses primarily consists of legal and professional services fees, general and administrative expenses, other costs, net of gain on sales of equipment.
−Removed: 2019 Compared to 2018 — The $48.0 million increase in consolidated miscellaneous operating expenses is primarily due to the recognition of $35.8 million in 2019 in revised estimates for litigation from various pre-2017 Merger legal matters which were previously disclosed by Swift, a $4.4 million increase due to pre-2017 Merger Value Added Tax receivables from 2016 and prior years that have been deemed unrecoverable as of December 31, 2019, and a $3.3 million decrease in gain on sales of equipment due to a softer used truck market.
+Added: Miscellaneous operating expenses primarily consists of legal and professional services fees, general and administrative expenses, and other costs, net of gain on sales of equipment.
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
+Added: 2020 Compared to 2019 — The decrease in consolidated miscellaneous operating expenses is primarily due to a $29.5 million year-over-year reduction in recorded legal costs for increases in legal reserves in 2019 related to various pre-2017 Merger legal matters previously disclosed by Swift.
+Added: This was partially offset by a $23.2 million reduction in gain on sales of equipment due to a softer used truck market and the $6.7 million expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company.
Consolidated Other Expenses, net
The following table summarizes fluctuations in certain non-operating expenses, included in our consolidated statements of comprehensive income:
−Removed: (Dollars in thousands)
−Removed: Increase (decrease)
+Added: 2020 2019 2020 vs.
+Added: (Dollars in thousands) Increase (decrease)
Interest income $ (1,928) $ (3,834) (49.7 %)
3 unchanged sentences
Interest income — Interest income includes interest earned from financing revenue equipment to independent contractors, as well as interest earned from our investments.
−Removed: 2019 Compared to 2018 — Consolidated interest income remained relatively flat when compared to 2018.
+Added: 2020 Compared to 2019 — The decrease in consolidated interest income is primarily due to the rebalancing of our portfolio to cash and cash equivalents investments, due to lower yields from other types of short-term investments during 2020.
Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs.
−Removed: 2019 Compared to 2018 — Consolidated interest expense slightly decreased when compared to 2018.
+Added: 2020 Compared to 2019 — Consolidated interest expense decreased when compared to 2019, primarily due to reduced interest rates.
See Note 16 in Part II, Item 8 of this Annual Report for further information related to the 2017 Debt Agreement and related interest rates and deferred loan costs.
−Removed: Other income, net — Other income, net is primarily comprised of income (expense) from realized losses from equity securities, unrealized gains from Knight's investments in Transportation Resource Partners ("TRP") accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.
−Removed: 2 019 Compared to 2018 — The $2.2 million increase in consolidated other income is primarily related to an increase in gains on TRP investments to $7.4 million in 2019 from $4.5 million in 2018.
+Added: Other income, net — Other income, net is primarily comprised of income from unrealized gains (losses) from equity securities, realized gains (losses) from Knight's investments in Transportation Resource Partners ("TRP") accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.
+Added: See Note 7 in Part II, Item 8, of this Annual Report.
+Added: 2020 Compared to 2019 — The unfavorable change in consolidated other income is primarily due to lower performance from our portfolio of investments when compared to 2019.
Income tax expense — In addition to the discussion below, Note 14 in Part II, Item 8 of this Annual Report provides further analysis related to income taxes.
−Removed: 2019 Compared to 2018 — The $27.6 million decrease in consolidated income tax expense was primarily due to a decrease in pretax earnings and a partial release of our reserve for uncertain tax positions recognized as a discrete item.
−Removed: This was partially offset by a decrease in foreign income tax deductions recognized as a discrete item.
−Removed: In 2018, we recognized discrete items related to stock compensation deductions and a favorable audit settlement of nondeductible penalties.
+Added: 2020 Compared to 2019 — The increase in consolidated income tax expense was primarily due to an increase in pre-tax earnings and negative impacts from certain tax-related items within our Mexico operations recognized as a discrete item.
+Added: This was partially offset by stock compensation deductions and a partial release of our reserve for uncertain tax positions recognized as discrete items.
+Added: In 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions which was partially offset by a decrease in foreign income tax deductions.
All of these factors resulted in a 2020 effective tax rate of 26.7% and a 2019 effective tax rate of 25.1%.
3 unchanged sentences
Non-GAAP Financial Measures
−Removed: The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted EPS," "Adjusted Operating Income," and "Adjusted Operating Ratio", as we define them, are not presented in accordance with GAAP.
+Added: The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted EPS," "Adjusted Operating Income," "Adjusted Operating Ratio", and "Free Cash Flows," 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.
−Removed: Management and the Board focus on Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, 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.
+Added: Management and the Board focus on Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, Adjusted Operating Ratio, and Free Cash Flows 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.
−Removed: Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, and Adjusted Operating Ratio are not substitutes for their comparable GAAP financial measures, such as net income, cash flows from operating activities, operating income, operating margin, or other measures prescribed by GAAP.
+Added: Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, Adjusted Operating Ratio, and Free Cash Flows are not substitutes for their comparable GAAP financial measures, such as net income, cash flows from operating activities, operating income, operating margin, or other measures prescribed by GAAP.
There are limitations to using non-GAAP financial measures.
3 unchanged sentences
Pursuant to the requirements of Regulation G, the following tables reconcile GAAP consolidated net income attributable to Knight-Swift to non-GAAP consolidated Adjusted Net Income attributable to Knight-Swift, GAAP consolidated earnings per diluted share to non-GAAP consolidated Adjusted Earnings per Diluted Share, GAAP consolidated operating ratio to non-GAAP consolidated Adjusted Operating Ratio, GAAP reportable segment operating income to non-GAAP reportable segment Adjusted Operating Income, and GAAP reportable segment operating ratio to non-GAAP reportable segment Adjusted Operating Ratio.
−Removed: In the consolidated GAAP to non-GAAP reconciliations below, 2016 and 2015 are included to support the five-year presentation in "Selected Financial Data" in Part II, Item 6 of this Annual Report.
−Removed: The reported results do not include the results of operations of Swift and its subsidiaries on and prior to the 2017 Merger, in accordance with the accounting treatment applicable to the transaction.
−Removed: Additionally, the reported results do not include the results of operations of Abilene on and prior to its acquisition by the Company on March 16, 2018 in accordance with the accounting treatment applicable to the transaction.
−Removed: Accordingly, comparisons between the Company's 2019 results and prior periods may not be meaningful.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
+Added: Note regarding presentation:
+Added: A discussion in changes in our results of operations from 2018 to 2019 has been omitted from this Annual Report, but may be found in "Item 7.
+Added: Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2019 Annual Report filed with the SEC on February 27, 2020.
Non-GAAP Reconciliation:
3 unchanged sentences
Adjusted for:
−Removed: Income tax expense (benefit) attributable to Knight-Swift
+Added: Income tax expense attributable to Knight-Swift 149,676 103,798
Income before income taxes attributable to Knight-Swift 559,678 413,004
Amortization of intangibles 1
+Added: 45,895 42,876
+Added: Change in fair value of deferred earnout 2
Impairments 3
Legal accruals 4
−Removed: Other merger-related operating expenses 4
−Removed: Merger-related costs 5
−Removed: Severance expense 6
+Added: COVID-19 incremental costs 5
Adjusted income before income taxes 636,057 495,206
Provision for income tax expense at effective rate 6
+Added: (169,910) (122,124)
Adjusted Net Income Attributable to Knight-Swift $ 466,147 $ 373,082
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.
1 unchanged sentence
Adjusted for:
−Removed: Income tax expense (benefit) attributable to Knight-Swift
+Added: Income tax expense attributable to Knight-Swift 0.88 0.60
Income before income taxes attributable to Knight-Swift 3.28 2.40
Amortization of intangibles 1
+Added: Change in fair value of deferred earnout 2
Impairments 3
Legal accruals 4
−Removed: Other merger-related operating expenses 4
−Removed: Merger-related costs 5
−Removed: Severance expense 6
+Added: COVID-19 incremental costs 5
Adjusted income before income taxes 3.73 2.88
Provision for income tax expense at effective rate 6
−Removed: "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, Abilene Acquisition, and other acquisitions.
−Removed: Refer to Note 5 in Part II Item 8 of this Annual Report for additional details.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: We incurred $1.3 million of impairment charges in the fourth quarter of 2019, which was associated with certain revenue equipment technology, warehousing equipment no longer in use, and certain Swift legacy trailer models as a result of a softer used equipment market.
+Added: (1.00) (0.71)
+Added: Adjusted EPS $ 2.73 $ 2.17
+Added: 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, and other acquisitions.
+Added: 2 "Change in fair value of deferred earnout" reflects the expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company, which is recorded in "Miscellaneous operating expenses." Refer to Note 5 in Part II Item 8 of this Annual Report for additional details.
+Added: 3 "Impairments" reflects the following non-cash impairments:
+Added: • During 2020, impairments related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment).
+Added: • During 2019, impairments related to certain revenue equipment technology, warehousing equipment no longer in use, certain Swift legacy trailer models as a result of a softer used equipment market, as well as $2.2 million related to certain leasehold improvements from an early termination of a lease of one of our operating properties.
The impairments were recorded across various segments, depending on the nature of the impairment.
−Removed: In addition to these fourth quarter 2019 impairment charges, full-year 2019 includes $2.2 million of impaired leasehold improvements from an early termination of a lease of one of our operating properties.
−Removed: During the fourth quarter of 2018, the Company incurred impairment charges related to the Company airplane of $2.2 million and incurred impairment charges related to replaced software systems of $0.6 million.
−Removed: During 2017, i mpairments related to the termination of Swift's implementation of a new ERP system during the quarter ended September 30, 2017.
−Removed: Additionally, during the quarter ended December 31, 2017, management reassessed the fair value of certain tractors within the Company's leasing subsidiary, Interstate Equipment Leasing, LLC, determining that there was an impairment loss.
−Removed: "Legal accruals" in the fourth quarter of 2019 include additional legal costs within the non-reportable segments, reflecting revised estimates for various pre-2017 Merger legal matters which were previously disclosed by Swift.
−Removed: During the fourth quarter of 2018 we incurred expenses related to certain class action lawsuits involving employment-related claims.
−Removed: The amounts are included in "Miscellaneous operating expenses" in the consolidated statements of comprehensive income.
−Removed: "Other merger-related operating expenses" represent one-time expenses associated with the 2017 Merger, including acceleration of stock compensation expense, bonuses, and other operating expenses.
−Removed: Knight-Swift incurred certain merger-related expenses associated with the 2017 Merger, consisting of legal and professional fees.
−Removed: Severance expenses were incurred during the third and fourth quarters of 2018 in relation to certain organizational changes at Swift.
+Added: 4 "Legal accruals" are included in "Miscellaneous operating expenses" in the consolidated statements of comprehensive income and reflect the following:
+Added: • 2020 costs related to certain class action lawsuits involving certain pre-merger employment-related claims that were previously disclosed by Swift,
+Added: • 2019 legal costs reflecting revised estimates for various pre-2017 merger legal matters within the non-reportable segments, and costs associated with an issued jury verdict.
+Added: 5 "COVID-19 incremental costs" reflects costs incurred during the first half of 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak.
+Added: These include payroll premiums paid to our driving associates and shop technicians, additional disinfectants and cleaning supplies, and various other pandemic-specific items.
+Added: The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.
6 For 2019, an effective tax rate of 24.6% was applied in our 2019 Adjusted EPS calculation to normalize permanent differences pertaining to a Value Added Tax ("VAT") adjustment within Swift's Mexico operations.
The adjustment pertains to pre-2017 Merger VAT receivables from 2016 and prior years that have been deemed unrecoverable as of December 31, 2019.
−Removed: For 2017, a normalized effective tax rate of 37.5% was utilized to calculate "Provision for income tax expense at effective rate," as the actual effective tax rate for the year includes a significant income tax benefit representing management's estimate of the net impact of the Tax Cuts and Jobs Act passed during the fourth quarter of 2017.
Table of Contents Glossary of Terms
3 unchanged sentences
Consolidated Adjusted Operating Income and Adjusted Operating Ratio
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: GAAP Presentation
−Removed: (Dollars in thousands)
+Added: GAAP Presentation (Dollars in thousands)
Total revenue $ 4,673,863 $ 4,843,950
10 unchanged sentences
Amortization of intangibles 1
+Added: (45,895) (42,876)
+Added: Change in fair value of deferred earnout 2
Impairments 3
+Added: (5,335) (3,486)
Legal accruals 4
−Removed: Other merger-related operating expenses 4
−Removed: Merger-related costs 5
−Removed: Severance expense 6
+Added: (6,160) (35,840)
+Added: COVID-19 incremental costs 5
Adjusted Operating Expenses 3,728,390 3,885,692
11 unchanged sentences
Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 5.
−Removed: See Non-GAAP Reconciliation:
−Removed: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 6 .
Table of Contents Glossary of Terms
4 unchanged sentences
Trucking Segment
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: GAAP Presentation
−Removed: (Dollars in thousands)
+Added: GAAP Presentation (Dollars in thousands)
Total revenue $ 3,786,030 $ 3,952,866
12 unchanged sentences
Amortization of intangibles 1
+Added: (1,296) (1,371)
Impairments 2
−Removed: Legal accruals ³
−Removed: Other merger-related operating expenses 4
−Removed: Merger-related costs 5
+Added: (1,131) (2,417)
+Added: COVID-19 incremental costs 3
Adjusted Operating Expenses 2,887,536 3,031,554
1 unchanged sentence
Adjusted Operating Ratio 83.0 % 86.5 %
−Removed: "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the Abilene Acquisition and historical Knight acquisitions.
−Removed: See Non-GAAP Reconciliation:
−Removed: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 2.
−Removed: See Non-GAAP Reconciliation:
−Removed: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 3.
+Added: 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in historical Knight acquisitions.
2 See Non-GAAP Reconciliation:
6 unchanged sentences
Logistics Segment
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: GAAP Presentation
−Removed: (Dollars in thousands)
+Added: GAAP Presentation (Dollars in thousands)
Total revenue $ 375,841 $ 352,988
16 unchanged sentences
Intermodal Segment
−Removed: 2018 (recast)
−Removed: 2017 (recast)
−Removed: GAAP Presentation
−Removed: (Dollars in thousands)
+Added: GAAP Presentation (Dollars in thousands)
Total revenue $ 391,462 $ 455,466
Total operating expenses (392,405) (450,965)
−Removed: Operating income
+Added: Operating (loss) income $ (943) $ 4,501
Operating ratio 100.2 % 99.0 %
6 unchanged sentences
Intersegment transactions (364) (1,488)
−Removed: Impairments ¹
+Added: COVID-19 incremental costs 1
Adjusted Operating Expenses 391,928 449,477
−Removed: Adjusted Operating Income
+Added: Adjusted Operating (Loss) Income $ (830) $ 4,501
Adjusted Operating Ratio 100.2 % 99.0 %
19 unchanged sentences
We additionally had $67.3 million in outstanding letters of credit (discussed below), leaving $21.4 million available under the 2018 RSA.
+Added: The Company intends to refinance prior to the maturity date.
3 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments.
4 unchanged sentences
We also use large amounts of cash and credit for the following activities:
−Removed: Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet, and fund replacement and/or growth in our revenue equipment fleet.
−Removed: We expect the net cash capital expenditures required to maintain our current fleet to be in the range of $550.0 million to $575.0 million in 2020 , but intend to keep this range as flexible as possible to appropriately respond to pending business opportunities and the overall market environment.
+Added: Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet, maintain and improve our driving associate facing shop and office facilities, invest in technology, and fund replacement in our revenue equipment fleet.
+Added: We expect net cash capital expenditures to be in the range of $450.0 to $500.0 million in 2021, but intend to keep this range as flexible as possible to appropriately respond to pending business opportunities and the overall market environment.
We believe we have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or other conditions warrant.
4 unchanged sentences
However, we believe the combination of our expected cash flows, financing available through operating and capital leases, available funds under the 2018 RSA, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.
−Removed: Principal and Interest Payments — As of December 31, 2019 , we had material debt and finance lease obligations of $919.2 million (gross of deferred loan costs) which are discussed under "Material Debt Agreements," below.
−Removed: A significant amount of our cash flows from operations are committed to minimum payments of principal and interest on our debt facilities and lease obligations.
−Removed: Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.
−Removed: Following the 2017 Merger, the combined company carries substantially
+Added: Refer to Note 18 in Part II, Item 8 of this Annual Report for additional discussion of our short-term and long-term contractual payment obligations related to purchase commitments.
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: more debt than Knight has historically carried and the combined company has significantly higher interest expense and exposure to interest rate fluctuations than Knight historically had.
+Added: Principal and Interest Payments — As of December 31, 2020, we had material debt and finance lease obligations of $914.8 million (gross of deferred loan costs) which are discussed under "Material Debt Agreements," below.
+Added: A modest portion of our cash flows from operations are committed to minimum payments of principal and interest on our debt facilities and lease obligations.
+Added: Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.
+Added: Following the 2017 Merger, the combined company carries substantially more debt than Knight has historically carried and the combined company has significantly higher interest expense and exposure to interest rate fluctuations than Knight historically had.
+Added: Prior to the maturity of our 2018 RSA, Term Loan, and Revolver, we expect to be contractually obligated to make interest payments of approximately $1.2 million, $7.4 million, and $4.3 million, respectively.
+Added: Refer to Notes 15 and 16 in Part II, Item 8 of this Annual Report for additional discussion of the principal payment obligations related to the 2018 RSA and 2017 Debt Agreement.
+Added: Refer to Note 17 in Part II, Item 8 of this Annual Report for additional discussion on our contractual principal and interest payment obligations for finance leases.
Letters of Credit — Pursuant to the terms of the 2017 Debt Agreement and our 2018 RSA, our lenders may issue standby letters of credit on our behalf.
2 unchanged sentences
Share Repurchases — From time to time, and depending on free cash flow availability, debt levels, stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock.
−Removed: In May 2019, the Board authorized $250.0 million in share repurchases.
+Added: In November 2020, the Board authorized $250.0 million in share repurchases, replacing the previous plan which had approximately $ 54.1 million of authorized purchases remaining.
The 2020 Knight-Swift Repurchase Plan had $250.0 million available as of December 31, 2020.
−Removed: See further details regarding our share repurchases under Note 20 in Part II, Item 8 in this Annual Report.
+Added: See further details regarding our share repurchases under Note 20 in Part II, Item 8 of this Annual Report.
Working Capital
−Removed: As of December 31, 2019 and December 31, 2018 , we had a working capital deficit of $103.0 million and a working capital surplus of $292.7 million , respectively.
−Removed: The change was primarily due to the Term Loan maturing on October 2, 2020, resulting in a $364.8 million reclassification from "Long term debt – less current portion" to "Finance lease liabilities and long-term debt – current portion" on the consolidated balance sheet as of December 31, 2019 .
−Removed: We intend to refinance the Term Loan prior to its maturity.
+Added: As of December 31, 2020 and December 31, 2019, we had a working capital surplus of $83.7 million and a working capital deficit of $103.0 million, respectively.
+Added: The change was primarily due to reclassification of the Term Loan from "Finance lease liabilities and long-term debt – current portion" to "Long-term debt – less current portion" due to the 2020 amendment of the 2017 Debt agreement.
+Added: This was partially offset by the 2018 RSA maturing on July 9, 2021, resulting in a $213.9 million reclassification from "Accounts receivable securitization – less current portion" to "Accounts receivable securitization – current portion" on the consolidated balance sheet as of December 31, 2020.
+Added: We intend to refinance the 2018 RSA prior to its maturity.
Material Debt Agreements
8 unchanged sentences
Revolver, due October 2022
−Removed: $0.0 million :
As of December 31, 2019, we had $918.8 million in material debt obligations at the following carrying values:
4 unchanged sentences
• $70.2 million:
−Removed: Capital lease obligations
+Added: Finance lease obligations
• $279.0 million:
Revolver, due October 2022
−Removed: $0.4 million :
−Removed: Key terms and other details regarding our material debt and finance leases are discussed in Notes 15 , 16 , and 17 in Part II, Item 8 in this Annual Report, and is incorporated by reference herein.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: Contractual Obligations
−Removed: The table below summarizes our contractual obligations as of December 31, 2019 , excluding deferred taxes and claims accruals:
−Removed: Payments Due By Period
−Removed: 1 Year or Less
−Removed: (In thousands)
−Removed: Long-term debt obligations 1a
−Removed: Revolving line of credit ¹
−Removed: Finance lease obligations ²
−Removed: Interest obligations ³
−Removed: Operating lease obligations 4
−Removed: Purchase obligations 5
−Removed: Investment commitments 6
−Removed: ERP obligation 7
−Removed: Dividend payable
−Removed: Total contractual obligations
−Removed: Represents borrowings owed at December 31, 2019 .
−Removed: Interest rates vary.
−Removed: Our Term Loan is scheduled to mature on October 2, 2020.
−Removed: The Company intends to refinance prior to maturity.
−Removed: Represents principal payments owed at December 31, 2019 .
−Removed: The borrowing consists of finance leases with finance companies, fixed borrowing amounts, and fixed interest rates, as set forth on each applicable lease schedule.
−Removed: Accordingly, interest on each lease varies between schedules.
−Removed: The Company's finance leases are typically structured with balloon payments at the end of the lease term equal to the residual value the Company is contracted to receive from certain equipment manufacturers upon sale or trade back to the manufacturers.
−Removed: Represents interest obligations on long-term debt, the 2018 RSA, and finance lease obligations.
−Removed: For variable rate debt, the interest rate in effect as of December 31, 2019 was utilized.
−Removed: The table assumes long-term debt and the 2018 RSA are held to maturity.
−Removed: Represents future monthly rental payment obligations, which include an interest element, under operating leases for tractors, trailers, chassis, and facilities.
−Removed: Substantially all lease agreements for revenue equipment have fixed payment terms based on the passage of time.
−Removed: The tractor lease agreements generally stipulate maximum miles and may provide for mileage penalties for excess miles.
−Removed: These leases generally run for a period of three to five years for tractors and five to seven years for trailers.
−Removed: Represents purchase obligations for revenue equipment, facilities, and non-revenue equipment, of which a significant portion is expected to be purchased with cash, to the extent available, as well as borrowings under the Revolver.
−Removed: Refer to Note 18 in Part II, Item 8 of this Annual Report for additional information regarding our purchase commitments.
−Removed: Investment commitments consist of contractual obligations to investments in various Transportation Resource Partnerships, which are subject to capital calls.
−Removed: The expected timing of the capital calls is presented above.
−Removed: ERP obligation consists of outstanding commitments related to terminating the implementation of the Swift ERP system.
−Removed: Off Balance Sheet Arrangements
−Removed: Information about our off balance sheet arrangements is included in Note 18 in Part II, Item 8 of this Annual Report and is incorporated by reference herein.
−Removed: See also "Contractual Obligations," above.
+Added: Key terms and other details regarding our material debt and finance leases are discussed in Notes 15, 16, and 17 in Part II, Item 8 of this Annual Report, and is incorporated by reference herein.
Table of Contents Glossary of Terms
2 unchanged sentences
Cash Flow Analysis
+Added: 2020 2019 Change
(In thousands)
3 unchanged sentences
Net Cash Provided by Operating Activities
−Removed: 2019 Compared to 2018 — The $42.4 million decrease in net cash provided by operating activities was primarily due to a $62.6 million increase in federal and state income tax payments, partially offset by various individually insignificant activities within our working capital.
+Added: 2020 Compared to 2019 — The $80.1 million increase in net cash provided by operating activities was primarily due to a $137.0 million increase in operating income and an $11.5 million decrease in interest payments on our long-term debt and finance leases.
+Added: This was partially offset by a $93.4 million cash settlement paid during 2020, associated with a pre-2017 Merger legal matter that was previously accrued and disclosed by Swift.
Net Cash Used in Investing Activities
−Removed: 2019 Compared to 2018 — The $63.6 million decrease in net cash used in investing activities was primarily due to the $99.8 million decrease in net cash used for acquisitions and was offset by a $39.7 million increase in net cash capital expenditures.
+Added: 2020 Compared to 2019 — The $103.0 million decrease in net cash used in investing activities was primarily due to a $182.0 million decrease in net cash capital expenditures, which was partially offset by a $44.9 million in crease in net cash used for acquisitions and a $40.9 million increase in cash invested in equity method investments, which included a $39.6 million investment in a transportation-related company .
Net Cash Used in Financing Activities
−Removed: 2019 Compared to 2018 — We used $70.8 million less cash for financing activities, primarily as a result of decreasing our repurchases of our common stock by $92.4 million .
−Removed: This was partially offset by a $25.0 million net increase in repayments of our debt obligations.
+Added: 2020 Compared to 2019 — We used $259.2 million more cash for financing activities, primarily as a result of a $142.3 million net increase in repayments of our debt and finance lease obligations, increasing our repurchases of our common stock by $92.7 million, and increasing dividends paid by $13.2 million.
Inflation can have an impact on our operating costs.
12 unchanged sentences
The actual cost to settle our self-insured claim liabilities may differ from our reserve estimates due to legal costs, claims that have been incurred but not reported, and various other uncertainties, including the inherent difficulty in estimating the severity of the claim and the potential judgment or settlement amount to dispose of the claim.
−Removed: If claims development factors that
Table of Contents Glossary of Terms
1 unchanged sentence
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: are based upon historical experience had increased by 10%, our claims accrual as of December 31, 2019 would have potentially increased by $16.4 million .
+Added: claims development factors that are based upon historical experience had increased by 10%, our claims accrual as of December 31, 2020 would have potentially increased by $20.4 million.
+Added: Refer to Note 13, in Part II, Item 8 of this Annual Report for discussion about the changes in the claims accrual balance.
Goodwill and Indefinite-lived Intangible Assets — The test of goodwill requires judgment, including the identification of reporting units, assigning assets (including goodwill) and liabilities to reporting units and determining the fair value of each reporting unit.
2 unchanged sentences
Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.
−Removed: Knight-Swift evaluated its goodwill associated with the 2017 Merger, the Abilene Acquisition, the Barr-Nunn acquisition and Knight's other historical acquisitions as of June 30, 2019 and 2018.
−Removed: The evaluations were completed using the qualitative factors prescribed in ASC Topic 350, Intangibles – Goodwill and Other, to determine whether to perform the two-step quantitative goodwill impairment test.
−Removed: The assessment of qualitative factors requires judgment, including identification of reporting units, evaluation of macroeconomic conditions, analysis of industry and market conditions, measurement of cost factors, and identification of entity-specific events (such as financial performance and changes within our share price).
−Removed: In evaluating these qualitative factors, the Company determined that it was more likely than not that fair value exceeded carrying value for the Company's reporting units as of June 30, 2019 and 2018.
−Removed: As such, it was not necessary to perform the two-step quantitative goodwill impairment test.
+Added: Knight-Swift evaluated its goodwill associated with the 2017 Merger and other acquisitions as of June 30, 2020 and 2019.
+Added: The evaluations were completed using fair value measurement guidance prescribed in ASC Topic 350, Intangibles – Goodwill and Other.
+Added: The fair value of the goodwill was established using an equal weighting of both the income and market approaches.
+Added: In evaluating this quantitative analysis, the Company determined that it was more likely than not that fair value exceeded carrying value for the Company's reporting units as of June 30, 2020 and 2019.
The test of indefinite-lived intangible assets consists of a comparison of the estimated fair value of the trade names to their carrying values.
2 unchanged sentences
M anagement evaluated trade names for impairment as of June 30, 2020, and 2019 noting that the fair value exceeded carrying value for the trade name.
+Added: Refer to Note 11, in Part II, Item 8 of this Annual Report for discussion about the changes in the goodwill and indefinite-lived intangible asset balances.
Depreciation and Amortization — Selecting the appropriate accounting method requires management judgment, as there are multiple acceptable methods that are in accordance with GAAP, including straight-line, declining-balance, and sum-of-the-years' digits.
5 unchanged sentences
Factors affecting estimated useful lives of long-lived intangible assets may include legal, contractual, or other provisions that limit useful lives, historical experience with similar assets, future expectations of customer relationships, among others.
+Added: Refer to Note 11, in Part II, Item 8 of this Annual Report for discussion about the impact of the amortization of definite-lived intangibles on our results for 2020 and 2019.
Impairments of Long-lived Assets — Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as necessary.
1 unchanged sentence
Changes in these estimates and assumptions could materially affect the determination of fair value and/or impairment.
+Added: Refer to Note 23, in Part II, Item 8 of this Annual Report for discussion about the changes in long-lived assets and the impact on our results for 2020 and 2019.
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
Income Taxes — Significant management judgment is required in determining our provision for income taxes and in determining whether deferred tax assets will be realized in full or in part.
2 unchanged sentences
Management judgment is necessary in determining the frequency at which we assess the need for a valuation allowance, the accounting period in which to establish the valuation allowance, as well as the amount of the valuation allowance.
−Removed: We believe that we have adequately provided for our future tax consequences based upon current facts and
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
−Removed: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
−Removed: circumstances and current tax law.
+Added: We believe that we have adequately provided for our future tax consequences based upon current facts and circumstances and current tax law.
However, should our tax positions be challenged, different outcomes could result and have a significant impact on the amounts reported in our consolidated statements of comprehensive income.
4 unchanged sentences
An ultimate result worse than our expectations could adversely affect our results of operations.
−Removed: Operating Leases — In accordance with ASC Topic 842, Leases , property and equipment held under operating leases are recorded as right-of-use assets, with a corresponding liability.
−Removed: All expenses related to operating leases are reflected in our consolidated statements of comprehensive income in "Rental expense." At the inception of a lease, management judgment is involved in the determination of the discount rate, the determination of whether a contract contains a lease, classification of operating versus finance lease, assessment of useful lives, and estimation of residual values.
+Added: Refer to Note 14, in Part II, Item 8 of this Annual Report for discussion about the changes in the balances of deferred taxes assets and related valuation allowances.
+Added: Leases — In accordance with ASC Topic 842, Leases , property and equipment held under operating leases are recorded as right-of-use assets, with a corresponding operating lease liability.
+Added: Additionally, property and equipment held under finance leases are recorded as property and equipment with corresponding finance lease liabilities.
+Added: All expenses related to operating leases are reflected in our consolidated statements of comprehensive income in "Rental expense." Expenses related to finance leases are reflected in our consolidated statements of comprehensive income in "Depreciation and amortization of property and equipment" and "Interest expense." At the inception of a lease, management judgment is involved in the determination of the discount rate, the determination of whether a contract contains a lease, classification of operating versus finance lease, assessment of useful lives, and estimation of residual values.
Discounted future minimum lease payments are used in determining the lease classification represent the present value of minimum rental payments called for over the lease term, inclusive of residual value guarantees (if applicable) and amounts that would be required to be paid, if any, by the Company upon default for leases containing subjective acceleration or cross default clauses.
2 unchanged sentences
We believe that proceeds from the sale of equipment under operating leases would exceed the payment obligation on substantially all operating leases.
+Added: Refer to Note 17, in Part II, Item 8 of this Annual Report for discussion about the changes in balance of operating leases.
Stock-based Compensation — We issue several types of stock-based compensation, including awards that vest, based on service and performance conditions or a combination of service and performance conditions.
6 unchanged sentences
Awards subject to time-based vesting and performance conditions are amortized using the individual vesting tranches.
+Added: Table of Contents Glossary of Terms
+Added: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
+Added: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED
+Added: Refer to Note 21, in Part II, Item 8 of this Annual Report for discussion about the assumptions related to these awards and the impact on our results for 2020 and 2019.
Legal Settlements and Reserves — See Note 19 in Part II Item 8 of this Annual Report.
3 unchanged sentences
• Note 4 for recently issued accounting pronouncements.
−Removed: Table of Contents Glossary of Terms
−Removed: KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.