Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Our 2022 Annual Report in the section entitled "Item 1A. Risk Factors," describes some of the risks and uncertainties associated with our business. In addition to the risk factors set forth in our Form 10-K, we believe the following additional risks and uncertainties should be considered in evaluating our business and growth outlook:
Our proposed acquisition of U.S. Xpress presents certain additional risks to our business and operations.
On March 20, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with U.S. Xpress and Liberty Merger Sub ("Merger Sub"). The Merger Agreement provides, among other things, and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into U.S. Xpress, with U.S. Xpress surviving as an indirect wholly owned subsidiary of Knight-Swift Transportation Holdings Inc. The proposed transaction with U.S. Xpress entails important risks, including, among others: the occurrence of any event, change or other circumstance that could give rise to the right of us or U.S. Xpress or both to terminate the Merger Agreement, including circumstances requiring U.S. Xpress to pay us a termination fee pursuant to the Merger Agreement; the failure to obtain applicable regulatory or U.S. Xpress stockholder approval in a timely manner or otherwise; the risk that the transaction may not close in the anticipated timeframe or at all due to one or more of the other closing conditions to the transaction not being satisfied or waived; the risk that there may be unexpected costs, charges or expenses resulting from the proposed transaction; risks related to the ability of us and U.S. Xpress to successfully integrate the businesses and achieve the expected synergies and operating efficiencies within the expected timeframes or at all and the possibility that such integration may be more difficult, time consuming or costly than expected; risks that the proposed transaction disrupts our or U.S. Xpress’ current plans and operations; the risk that certain restrictions during the pendency of the proposed transaction may impact our or U.S. Xpress’ ability to pursue certain business opportunities or strategic transactions; risks related to disruption of each company’s management’s time and attention from ongoing business operations due to the proposed transaction; continued and sufficient availability of capital and financing; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of our and/or U.S. Xpress’ common stock or operating results; the risk that the proposed transaction and its announcement could have an adverse effect on the ability of us and U.S. Xpress to retain and hire personnel and drivers, to retain customers and to maintain relationships with each of their respective business partners, suppliers and customers and on their respective operating results and businesses generally; and the risk of litigation that could be instituted against the parties to the
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Merger Agreement or their respective directors, affiliated persons or officers and/or regulatory actions related to the proposed transaction, including the effects of any outcomes related thereto.
In addition, material differences in results as compared with those expected from the acquisition could arise due to those risks and uncertainties described in our Form 10-K Risk Factors, including, among other things, business disruption, operational or technology problems, financial loss, financial reporting and internal controls integration, legal liability to third parties and similar risks, any of which could have a material adverse effect on our business, customer retention, financial condition, results of operations, or liquidity.
In addition, the risk factor from our Form 10-K entitled “Insurance and claims expenses could significantly reduce our earnings” is deleted and replaced in its entirety with the following:
Insurance and claims expenses could significantly reduce our earnings.
Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. We self-insure, or insure through our captive insurance companies, a significant portion of our claims exposure. For a detailed discussion of our self-insurance programs, including self-insurance retention limits, please refer to Note 12 to the consolidated financial statements, included in Part II, Item 8 of this Annual Report. Higher self-insured retention levels may increase the impact of auto liability occurrences on our results of operations. We reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience. Estimating the number and severity of claims, as well as related judgment or settlement amounts, is inherently difficult, and claims may ultimately prove to be more severe than our estimates. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates. Accordingly, ultimate results may differ materially from our estimates, which could result in losses over our reserved amounts and could materially adversely affect our financial condition and results of operations.
Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts. Furthermore, insurance carriers have raised premiums for many businesses, including transportation companies. Additionally, our Iron Insurance line of business offers insurance products to third-party carriers, which exposes us to insurance claims, underwriting risk, and the potential inability to collect premiums from such third-party carriers. Accordingly, this line of business may increase the volatility of our insurance and claims expense and could materially adversely impact our financial condition and results of operations.
In addition, rising healthcare costs could negatively impact financial results or force us to make changes to existing benefit programs, which could negatively impact our ability to attract and retain employees.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.