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KNX Knight-Swift Transportation

Filed: 5 May 21, 12:12pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________________________________________________________________________
FORM 10-Q
___________________________________________________________________________________________________________________
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission File Number: 001-35007
_________________________________________________________________________________________________________________________________________________________
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___________________________________________________________________________________________________________________________________
 Knight-Swift Transportation Holdings Inc.
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________________________________________
Delaware 20-5589597
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
20002 North 19th Avenue
Phoenix, Arizona 85027
(Address of principal executive offices and zip code)
(602) 269-2000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock $0.01 Par ValueKNXNew York Stock Exchange
_________________________________________________________________________________________________________________________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  Accelerated Filer
Non-accelerated Filer  Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No   
There were 165,510,658 shares of the registrant's common stock outstanding as of April 28, 2021.



KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATIONPAGE
PART II OTHER INFORMATION
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
QUARTERLY REPORT ON FORM 10-Q
GLOSSARY OF TERMS
The following glossary defines certain acronyms and terms used in this Quarterly Report on Form 10-Q. These acronyms and terms are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document.
TermDefinition
Knight-Swift/the Company/Management/We/Us/OurUnless otherwise indicated or the context otherwise requires, these terms represent Knight-Swift Transportation Holdings Inc. and its subsidiaries.
2017 MergerThe September 8, 2017 merger of Knight and Swift, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt AgreementThe Company's Credit Agreement, entered into on September 29, 2017, as amended on October 2, 2020, consisting of the Revolver and Term Loan, which are defined below.
2018 RSAFourth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on July 11, 2018 by Swift Receivables Company II, LLC with unrelated financial entities.
2021 RSAFifth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on April 23, 2021 by Swift Receivables Company II, LLC with unrelated financial entities.
Annual ReportAnnual Report on Form 10-K
ASCAccounting Standards Codification
ASUAccounting Standards Update
BoardKnight-Swift's Board of Directors
COVID-19Viral strain of a coronavirus which led the World Health Organization to declare a global pandemic in March 2020.
DOEUnited States Department of Energy
EPSEarnings Per Share
ESPPKnight-Swift Transportation Holdings Inc. Amended and Restated 2012 Employee Stock Purchase Plan
GAAPUnited States Generally Accepted Accounting Principles
KnightUnless otherwise indicated or the context otherwise requires, this term represents Knight Transportation, Inc. and its subsidiaries prior to the 2017 Merger.
LIBORLondon InterBank Offered Rate
Quarterly ReportQuarterly Report on Form 10-Q
QTDQuarter-to-date
RevolverRevolving line of credit under the 2017 Debt Agreement
RSURestricted Stock Unit
SECUnited States Securities and Exchange Commission
SwiftUnless otherwise indicated or the context otherwise requires, this term represents Swift Transportation Company and its subsidiaries prior to the 2017 Merger.
Term LoanThe Company's term loan under the 2017 Debt Agreement
TRPTransportation Resource Partners
USThe United States of America
YTDYear-to-date

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
PART I FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 2021December 31, 2020
(In thousands, except per share data)
ASSETS
Current assets:
Cash and cash equivalents$194,650 $156,699 
Cash and cash equivalents – restricted47,867 39,328 
Restricted investments, held-to-maturity, amortized cost8,954 9,001 
Trade receivables, net of allowance for doubtful accounts of $21,797 and $22,093, respectively584,011 578,479 
Contract balance – revenue in transit20,104 14,560 
Prepaid expenses66,278 71,649 
Assets held for sale20,835 29,756 
Income tax receivable31 2,903 
Other current assets21,015 20,988 
Total current assets963,745 923,363 
Gross property and equipment4,286,833 4,223,348 
Less: accumulated depreciation and amortization(1,311,189)(1,230,696)
Property and equipment, net2,975,644 2,992,652 
Operating lease right-of-use-assets95,658 113,296 
Goodwill2,958,709 2,922,964 
Intangible assets, net1,393,346 1,389,245 
Other long-term assets132,373 126,482 
Total assets$8,519,475 $8,468,002 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$126,918 $101,001 
Accrued payroll and purchased transportation182,106 160,888 
Accrued liabilities143,168 88,894 
Claims accruals – current portion174,678 174,928 
Finance lease liabilities and long-term debt – current portion85,035 52,583 
Operating lease liabilities – current portion37,577 47,496 
Accounts receivable securitization – current portion198,957 213,918 
Total current liabilities948,439 839,708 
Revolving line of credit115,000 210,000 
Long-term debt – less current portion299,063 298,907 
Finance lease liabilities – less current portion127,341 138,243 
Operating lease liabilities – less current portion62,549 69,852 
Claims accruals – less current portion174,766 174,814 
Deferred tax liabilities797,019 815,941 
Other long-term liabilities45,960 48,497 
Total liabilities2,570,137 2,595,962 
Commitments and contingencies (Notes 3, 9, and 10)00
Stockholders’ equity:
Preferred stock, par value 0.01 per share; 10,000 shares authorized; 0ne issued
Common stock, par value $0.01 per share; 500,000 shares authorized; 165,488 and 166,553 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.1,655 1,665 
Additional paid-in capital4,309,792 4,301,424 
Retained earnings1,625,397 1,566,759 
Total Knight-Swift stockholders' equity5,936,844 5,869,848 
Noncontrolling interest12,494 2,192 
Total stockholders’ equity5,949,338 5,872,040 
Total liabilities and stockholders’ equity$8,519,475 $8,468,002 
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 Quarter Ended March 31,
 20212020
(In thousands, except per share data)
Revenue:
Revenue, excluding trucking fuel surcharge$1,133,105 $1,027,095 
Trucking fuel surcharge89,909 97,703 
Total revenue1,223,014 1,124,798 
Operating expenses:
Salaries, wages, and benefits370,370 354,833 
Fuel118,236 121,855 
Operations and maintenance68,070 68,404 
Insurance and claims55,643 54,280 
Operating taxes and licenses22,048 22,169 
Communications5,037 4,874 
Depreciation and amortization of property and equipment119,915 110,221 
Amortization of intangibles11,749 11,474 
Rental expense16,864 25,375 
Purchased transportation258,230 225,276 
Impairments902 
Miscellaneous operating expenses14,593 23,016 
Total operating expenses1,060,755 1,022,679 
Operating income162,259 102,119 
Other (expenses) income:
Interest income294 832 
Interest expense(3,486)(6,107)
Other income (expenses), net16,105 (6,507)
Total other (expenses) income, net12,913 (11,782)
Income before income taxes175,172 90,337 
Income tax expense45,329 24,554 
Net income129,843 65,783 
Net income attributable to noncontrolling interest(53)(357)
Net income attributable to Knight-Swift$129,790 $65,426 
Earnings per share:
Basic$0.77 $0.38 
Diluted$0.77 $0.38 
Dividends declared per share:$0.08 $0.08 
Weighted average shares outstanding:
Basic167,478 170,617 
Diluted168,374 171,282 
See accompanying notes to the condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
 Quarter Ended March 31,
 20212020
(In thousands)
Cash flows from operating activities:
Net income$129,843 $65,783 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment, and intangibles131,664 121,695 
Gain on sale of property and equipment(10,537)(3,005)
Impairments902 
Deferred income taxes(18,920)15,330 
Non-cash lease expense15,589 24,202 
Other adjustments to reconcile net income to net cash provided by operating activities(6,522)14,065 
Increase (decrease) in cash resulting from changes in:
Trade receivables(11,586)(5,268)
Income tax receivable2,872 4,380 
Accounts payable12,534 31,084 
Accrued liabilities and claims accrual70,975 (93,193)
Operating lease liabilities(15,174)(25,414)
Other assets and liabilities5,375 4,782 
Net cash provided by operating activities306,113 155,343 
Cash flows from investing activities:
Proceeds from maturities of held-to-maturity investments500 4,350 
Purchases of held-to-maturity investments(512)(4,301)
Proceeds from sale of property and equipment, including assets held for sale67,175 33,756 
Purchases of property and equipment(111,020)(109,431)
Expenditures on assets held for sale(401)(352)
Net cash, restricted cash, and equivalents invested in acquisitions(39,281)(46,811)
Other cash flows from investing activities9,398 (2,793)
Net cash used in investing activities(74,141)(125,582)
Cash flows from financing activities:
Repayment of finance leases and long-term debt(6,600)(14,498)
(Repayments) borrowings on revolving lines of credit, net(95,000)15,000 
Repayment of accounts receivable securitization(15,000)(25,000)
Proceeds from common stock issued2,709 3,257 
Repurchases of the Company's common stock(53,661)(34,630)
Dividends paid(13,624)(13,964)
Other cash flows from financing activities(4,190)(2,050)
Net cash used in financing activities(185,366)(71,885)
Net increase (decrease) in cash, restricted cash, and equivalents46,606 (42,124)
Cash, restricted cash, and equivalents at beginning of period197,277 202,228 
Cash, restricted cash, and equivalents at end of period$243,883 $160,104 
See accompanying notes to condensed consolidated financial statements (unaudited).

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued
 Quarter Ended March 31,
 20212020
(In thousands)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest$2,505 $6,293 
Income taxes2,199 3,280 
Non-cash investing and financing activities:
Equipment acquired included in accounts payable$13,860 $44,084 
Financing provided to independent contractors for equipment sold462 1,670 
Transfer from property and equipment to assets held for sale29,955 15,288 
Noncontrolling interest associated with acquisition10,281 
Contingent consideration associated with acquisition18,654 
Right-of-use assets (forfeited) obtained in exchange for operating lease liabilities(2,608)1,704 
Right-of-use assets obtained in exchange for new operating lease liabilities through acquisitions560 12,356 
Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities28,149 12,286 
Reconciliation of Cash, Restricted Cash, and Equivalents:March 31,
2021
December 31,
2020
March 31,
2020
December 31,
2019
(In thousands)
Condensed Consolidated Balance Sheets
Cash and cash equivalents$194,650 $156,699 $119,132 $159,722 
Cash and cash equivalents – restricted 1
47,867 39,328 39,812 41,331 
Other long-term assets 1
1,366 1,250 1,160 1,175 
Condensed Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents$243,883 $197,277 $160,104 $202,228 
________
1    Reflects cash and cash equivalents that are primarily restricted for claims payments.
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
 Common StockAdditional
Paid-in Capital
Retained EarningsTotal Knight-Swift Stockholders' EquityNoncontrolling
 Interest
Total
Stockholders’ Equity
 SharesPar Value
(In thousands, except per share data)
Balances – December 31, 2020166,553 $1,665 $4,301,424 $1,566,759 $5,869,848 $2,192 $5,872,040 
Common stock issued to employees220 2,006 2,009 2,009 
Common stock issued under ESPP18 700 700 700 
Company shares repurchased(1,303)(13)(53,648)(53,661)(53,661)
Shares withheld – RSU settlement(4,159)(4,159)(4,159)
Employee stock-based compensation expense5,662 5,662 5,662 
Cash dividends paid and dividends accrued ($0.08 per share)(13,345)(13,345)(13,345)
Net income attributable to Knight-Swift129,790 129,790 129,790 
Investment in noncontrolling interest10,281 10,281 
Distribution to noncontrolling interest(32)(32)
Net income attributable to noncontrolling interest53 53 
Balances – March 31, 2021165,488 $1,655 $4,309,792 $1,625,397 $5,936,844 $12,494 $5,949,338 

 Common StockAdditional
Paid-in Capital
Retained EarningsTotal Knight-Swift Stockholders' EquityNoncontrolling
 Interest
Total
Stockholders’ Equity
 SharesPar Value
(In thousands, except per share data)
Balances – December 31, 2019170,688 $1,707 $4,269,043 $1,395,465 $5,666,215 $2,088 $5,668,303 
Common stock issued to employees211 2,709 2,711 2,711 
Common stock issued under ESPP16 546 546 546 
Company shares repurchased(1,139)(11)(34,619)(34,630)(34,630)
Shares withheld – RSU settlement(1,971)(1,971)(1,971)
Employee stock-based compensation expense3,536 3,536 3,536 
Cash dividends paid and dividends accrued ($0.08 per share)(13,774)(13,774)(13,774)
Net income attributable to Knight-Swift65,426 65,426 65,426 
Distribution to noncontrolling interest(180)(180)
Net income attributable to noncontrolling interest357 357 
Balances – March 31, 2020169,776 $1,698 $4,275,834 $1,410,527 $5,688,059 $2,265 $5,690,324 
See accompanying notes to condensed consolidated financial statements (unaudited).
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 — Introduction and Basis of Presentation
Certain acronyms and terms used throughout this Quarterly Report are specific to the Company, commonly used in the trucking industry, or are otherwise frequently used throughout this document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.
Description of Business
Knight-Swift is a transportation solutions provider, headquartered in Phoenix, Arizona. During the quarter ended March 31, 2021, the Company operated an average of 18,224 tractors (comprised of 16,305 company tractors and 1,919 independent contractor tractors) and 59,797 trailers within the Trucking segment. Additionally, the Company operated an average of 597 tractors and 10,846 containers in the Intermodal segment. The Company's 3 reportable segments are Trucking, Logistics, and Intermodal.
Basis of Presentation
The condensed consolidated financial statements and footnotes included in this Quarterly Report include the accounts of Knight-Swift Transportation Holdings Inc. and its subsidiaries and should be read in conjunction with the consolidated financial statements and footnotes included in Knight-Swift's 2020 Annual Report. In management's opinion, these condensed consolidated financial statements were prepared in accordance with GAAP and include all adjustments necessary (consisting of normal recurring adjustments) for the fair statement of the periods presented.
With respect to transactional/durational data, references to years pertain to calendar years. Similarly, references to quarters pertain to calendar quarters.
Seasonality
In the transportation industry, results of operations generally follow a seasonal pattern. Freight volumes in the first quarter are typically lower due to less consumer demand, customers reducing shipments following the holiday season, and inclement weather. At the same time, operating expenses generally increase, and tractor productivity of the Company's fleet, independent contractors, and third-party carriers decreases during the winter months due to decreased fuel efficiency, increased cold weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather. These factors typically lead to lower operating profitability, as compared to other parts of the year. Additionally, beginning in the latter half of the third quarter and continuing into the fourth quarter, the Company typically experiences surges pertaining to holiday shopping trends toward delivery of gifts purchased over the Internet, as well as the length of the holiday season (consumer shopping days between Thanksgiving and Christmas). However, cyclical changes in the trucking industry, including imbalances in supply and demand, can override the seasonality faced in the industry.
Impact of COVID-19
COVID-19 became a global pandemic in 2020, which triggered a significant downturn in the global economy. The Company continues to operate its business through the COVID-19 pandemic and has taken additional precautions to ensure the safety of its employees, customers, vendors, and the communities in which it operates.
There are various uncertainties that have arisen from the COVID-19 pandemic. While management is continuing to monitor the impact of the pandemic on Knight-Swift, including its employees, customers, independent contractors, stockholders, and other business partners and stakeholders, it is difficult to predict the impact that the pandemic will have on future results of its operations, financial position, and liquidity. This has caused some uncertainties around various accounting estimates. Due to these uncertainties, the Company's accounting estimates may change, as management's assessment of the impacts of the COVID-19 pandemic continues to evolve.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Note 2 — Recently Issued Accounting Pronouncements
No material ASUs issued since the 2020 annual report.
Note 3 — Acquisitions
Eleos Acquisition
On February 1, 2021, pursuant to a membership interest purchase agreement ("MIPA"), the Company, through a wholly owned subsidiary, acquired 79.44% of the issued and outstanding membership interests of Eleos Technologies, LLC ("Eleos"), a Greenville, South Carolina based software provider, specializing in mobile driving platforms, which complement the Company's suite of services. The total purchase price consideration, including cash on hand and net working capital adjustments, consisted of $41.5 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the Revolver on the transaction date. At closing, $4.1 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations and other items.
The MIPA included that both the buyer and sellers would file an election under the Internal Revenue Code Section 754 to adjust the tax basis of the Company's assets and liabilities, with respect to the buyer's purchase of the equity. The MIPA contains customary representations, warranties, covenants, and indemnification provisions for transactions of this nature.
The goodwill recognized represents expected synergies from combining the operations of Eleos with the Company, including enhanced service offerings, as well as other intangible assets that did not meet the criteria for separate recognition. The goodwill is expected to be deductible for tax purposes.
The purchase price allocation for the acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, assessment of lease agreements, assessment of certain liabilities, the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed, and assessment of other tax related items. As the Company obtains more information, the preliminary purchase price allocation disclosed below is subject to change. Any future adjustments to the preliminary purchase price allocation, including changes within identifiable intangible assets or estimation uncertainty impacted by market conditions, may impact future net earnings. The purchase price allocation adjustments can be made through the end of the measurement period, which is not to exceed one year from the acquisition date.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
The following table summarizes the fair value of the consideration transferred as of the acquisition date:
February 1, 2021 Opening Balance Sheet as Reported at March 31, 2021
Fair value of the consideration transferred$41,518 
Cash and cash equivalents2,237 
Trade and other receivables545 
Prepaid expenses and other assets47 
Operating lease right-of-use assets560 
Identifiable intangible assets 1
15,850 
Total assets19,239 
Accounts payable(156)
Accrued payroll and payroll-related expenses(605)
Accrued liabilities(1,391)
Operating lease liabilities – current and noncurrent portions(560)
Other long-term liabilities(475)
Total liabilities(3,187)
Noncontrolling interest(10,281)
Total stockholders' equity(10,281)
Goodwill$35,747 
1    Includes $8.8 million in customer relationships, $0.2 million in noncompete agreements, $3.5 million in internally-developed software, and a $3.4 million trade name.
Warehousing Co. Acquisition
On January 1, 2020, pursuant to a stock purchase agreement (the "SPA") the Company, through a wholly owned subsidiary, acquired 100.0% of the equity interests of a warehousing-related company (the "Warehousing Co.") with locations throughout the Central US.
The total purchase price consideration of $66.9 million included $48.2 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the Revolver on the transaction date. At closing, $6.8 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations. During the third quarter of 2020, the escrow proceeds were released to the sellers pursuant to the SPA. The purchase price also included contingent consideration consisting of three additional annual payments of up to $8.1 million each (or $24.3 million in total), representing the maximum possible annual deferred payments to the sellers based on Warehousing Co.'s earnings before interest and taxes ("EBIT") for each of the calendar years ending December 31, 2020, December 31, 2021, and the annualized six-month period ending June 30, 2022. In order to estimate Warehousing Co.'s future performance, the Company utilized the Monte Carlo simulation method using certain inputs, including Warehousing Co.'s forecasted EBIT, discount rate, dividend yields, expected volatility, and expected stock returns during the above measurement periods. Based on the above inputs, the present value of the total contingent consideration, along with the estimated net working capital adjustment, equaled $18.7 million as of January 1, 2020. During the measurement period, the net working capital adjustment was reduced by $0.4 million based on the actual versus estimated net working capital adjustment as of the transaction date. This adjustment resulted in the total estimated contingent consideration and net working capital adjustment decreasing to $18.3 million. The total purchase price consideration, as if adjusted at the January 1, 2020 transaction date, is identified in the table below.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
During the fourth quarter of 2020, the Company paid the first annual payment of $8.1 million as a result of the achievement of Warehousing Co.’s EBIT performance target for the calendar year December 31, 2020. Additionally, during the fourth quarter of 2020, the Company increased the estimated fair value of the remaining contingent consideration representing the final two annual payments, resulting in a $6.7 million fair value adjustment of the deferred earnout, which was recorded in “Miscellaneous operating expenses” in the consolidated statement of comprehensive income. As such, as of March 31, 2021 and December 31, 2020, the remaining estimated contingent consideration was $16.2 million representing the fair value of the remaining annual deferred payments for the calendar year ending December 31, 2021 and the annualized six-month period ending June 30, 2022.
The SPA included an election under the Internal Revenue Code Section 338(h)(10). Accordingly, the book and tax basis of the acquired assets and liabilities are the same as of the purchase date. The SPA contains customary representations, warranties, covenants, and indemnification provisions.
The goodwill recognized represents expected synergies from combining the operations of Warehousing Co. with the Company, including enhanced service offerings, as well as other intangible assets that did not meet the criteria for separate recognition. The goodwill is expected to be deductible for tax purposes.
The purchase price was allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The purchase price allocation was open for adjustments through the end of the measurement period, which closed one year from the January 1, 2020 acquisition date.
The following table summarizes the fair value of the consideration transferred as of the acquisition date:
January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020AdjustmentsJanuary 1, 2020 Opening Balance Sheet as Reported at March 31, 2021
Fair value of the consideration transferred$66,854 $(410)$66,444 
Cash and cash equivalents1,388 1,388 
Trade and other receivables3,301 3,301 
Prepaid expenses608 608 
Other current assets78 78 
Property and equipment1,938 1,938 
Operating lease right-of-use assets12,356 12,356 
Identifiable intangible assets 1
55,681 55,681 
Deferred tax assets54 54 
Other noncurrent assets404 404 
Total assets75,808 75,808 
Accounts payable(347)(347)
Accrued liabilities(644)(644)
Operating lease liabilities – current portion(4,451)(4,451)
Operating lease liabilities – less current portion(7,905)(7,905)
Total liabilities(13,347)(13,347)
Goodwill$4,393 $(410)$3,983 
1    Includes $53.8 million in customer relationships, $0.7 million in noncompete agreements, $0.6 million in internally developed software, and a $0.6 million trade name.


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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Note 4 — Investments
Restricted Investments, Held-to-Maturity
The following tables present the cost or amortized cost, gross unrealized gains and temporary losses, and estimated fair value of the Company's restricted investments, held-to-maturity:
March 31, 2021
Gross Unrealized
Cost or Amortized
Cost
GainsTemporary
Losses
Estimated Fair Value
(In thousands)
US corporate securities$8,954 $$(4)$8,950 
Restricted investments, held-to-maturity$8,954 $$(4)$8,950 
December 31, 2020
Gross Unrealized
Cost or Amortized
Cost
GainsTemporary
Losses
Estimated Fair Value
(In thousands)
US corporate securities$9,001 $$(8)$8,995 
Restricted investments, held-to-maturity$9,001 $$(8)$8,995 
As of March 31, 2021, the contractual maturities of the restricted investments, held-to-maturity, were one year or less. There were 16 securities that were in an unrealized loss position for less than twelve months as of March 31, 2021 and December 31, 2020. The Company did 0t recognize any impairment losses related to its held-to-maturity investments during the quarters ended March 31, 2021 or 2020.
Other Investments
On April 16, 2021, the Company agreed to pay $25.0 million in cash in exchange for a convertible promissory note. The cash was paid on May 4, 2021. The convertible promissory note accrues simple interest on the unpaid principal balance at a rate of 10.0% and is payable on demand any time after April 16, 2022, unless earlier converted into shares of the borrower's common stock. The amount outstanding on the promissory note is automatically converted into a number of shares of the borrower's common stock upon either the closing of a qualified financing or upon a public event, subject to discounted conversion pricing per share based on a valuation of the borrower.
Refer to Note 15 for additional information regarding fair value measurements of the Company's investments.
Note 5 — Assets Held for Sale
The Company expects to sell its assets held for sale, which primarily consist of revenue equipment, within the next twelve months. Revenue equipment held for sale totaled $20.8 million and $29.8 million as of March 31, 2021 and December 31, 2020, respectively. Net gains on disposals, including disposals of property and equipment classified as assets held for sale, reported in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income, were $10.5 million and $3.0 million for the quarters ended March 31, 2021 and 2020, respectively. The increase in net gains on disposals was primarily due to a stronger market for used revenue equipment during the quarter ended March 31, 2021, as compared to the same period in 2020.
The Company did 0t recognize impairment losses related to assets held for sale during the quarter ended March 31, 2021, as compared to the same period last year when the Company recognized impairment losses related to assets held for sale of $0.1 million.
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Note 6 — Goodwill and Other Intangible Assets
Goodwill
The changes in the carrying amount of goodwill were as follows:
(In thousands)
Goodwill at beginning of period$2,922,964 
Adjustments relating to deferred tax assets(2)
Acquisition 1
35,747 
Goodwill at end of period$2,958,709 
1The goodwill associated with the Eleos acquisition referenced in Note 3 was allocated to the non-reportable segment, and is net of purchase price accounting adjustments.
The Company did 0t record any goodwill impairments during the quarters ended March 31, 2021 or 2020.
Other Intangible Assets
Other intangible asset balances were as follows:
March 31, 2021December 31,
2020
(In thousands)
Definite-lived intangible assets 1
Gross carrying amount$910,447 $894,597 
Accumulated amortization(157,601)(145,852)
Definite-lived intangible assets, net752,846 748,745 
Indefinite-lived trade names:
Gross carrying amount640,500 640,500 
Intangible assets, net$1,393,346 $1,389,245 
1The major categories of the Company's definite-lived intangible assets include customer relationships, non-compete agreements, internally-developed software, trade names, and others.
Identifiable intangible assets subject to amortization have been recorded at fair value. Intangible assets related to acquisitions other than the 2017 Merger are amortized over a weighted-average amortization period of 18.1 years. The Company's customer relationship intangible assets related to the 2017 Merger are being amortized over a weighted average amortization period of 19.9 years.
As of March 31, 2021, management anticipates that the composition and amount of amortization associated with intangible assets will be $35.7 million for the remainder of 2021, $47.4 million in 2022, $46.9 million for each of the years 2023 and 2024, and $46.8 million in 2025. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets, and other events.
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Note 7 — Income Taxes
Effective Tax Rate — The quarter-to-date March 31, 2021 and March 31, 2020 effective tax rates were 25.9% and 27.2%, respectively.
Valuation Allowance — The Company has 0t established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required. Management believes that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.
Unrecognized Tax Benefits — Management believes it is reasonably possible that a decrease of up to $0.7 million in unrecognized tax benefits relating to federal deductions may be necessary within the next twelve months.
Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits were approximately $0.4 million and $0.3 million as of March 31, 2021 and December 31, 2020, respectively.
Tax ExaminationsCertain of the Company's subsidiaries are currently under examination by various state jurisdictions for tax years ranging from 2013 to 2019. At the completion of these examinations, management does not expect any adjustments that would have a material impact on the Company's effective tax rate. Years subsequent to 2015 remain subject to examination.
Note 8 — Accounts Receivable Securitization
The 2018 RSA is a secured borrowing that is collateralized by the Company's eligible receivables, for which the Company is the servicing agent. The Company's receivable originator subsidiaries sell, on a revolving basis, undivided interests in all of their eligible accounts receivable to Swift Receivables Company II, LLC ("SRCII") who in turn sells a variable percentage ownership in those receivables to the various purchasers. The Company's eligible receivables are included in "Trade receivables, net of allowance for doubtful accounts" in the condensed consolidated balance sheets. As of March 31, 2021, the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.
The 2018 RSA is subject to fees, various affirmative and negative covenants, representations and warranties, and default and termination provisions customary for facilities of this type. The Company was in compliance with these covenants as of March 31, 2021. Collections on the underlying receivables by the Company are held for the benefit of SRCII and the various purchasers and are unavailable to satisfy claims of the Company and its subsidiaries.
The following table summarizes the key terms of the 2018 RSA (dollars in thousands):
Effective dateJuly 11, 2018
Final maturity date 1
July 9, 2021
Borrowing capacity$325,000 
Accordion option 2
$175,000 
Unused commitment fee rate 3
20 to 40 basis points
Program fees on outstanding balances 4
one-month LIBOR + 80 to 100 basis points
1On April 23, 2021, the Company entered into a new accounts receivable securitization agreement which extends the maturity date to April 23, 2024. See below for more details.
2The accordion option increases the maximum borrowing capacity, subject to participation of the purchasers.
3The 2018 RSA commitment fee rate is based on the percentage of the maximum borrowing capacity utilized.
4The 2018 RSA program fee is based on the Company's consolidated total net leverage ratio. As identified within the 2018 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for LIBOR.
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Availability under the 2018 RSA is calculated as follows:
March 31, 2021December 31, 2020
(In thousands)
Borrowing base, based on eligible receivables$267,200 $302,700 
Less: outstanding borrowings 1
(199,000)(214,000)
Less: outstanding letters of credit(65,281)(67,281)
Availability under accounts receivable securitization facilities$2,919 $21,419 
1Outstanding borrowings are included in "Accounts receivable securitization – current portion" in the condensed consolidated balance sheets, offset by $43.0 thousand and $0.1 million of deferred loan costs as of March 31, 2021 and December 31, 2020, respectively. Interest accrued on the aggregate principal balance at a rate of 1.0% as of March 31, 2021 and December 31, 2020.
Program fees and unused commitment fees are recorded in "Interest expense" in the condensed consolidated statements of comprehensive income. The Company incurred accounts receivable securitization program fees of $0.7 million and $1.4 million during the quarters ended March 31, 2021 and 2020, respectively.
Refer to Note 15 for information regarding the fair value of the 2018 RSA.
Subsequent Event
On April 23, 2021, the Company entered into the Fifth Amendment to the Amended and Restated Receivables Sales Agreement ("2021 RSA"). The 2021 RSA, among other things, extends the maturity date to April 23, 2024, increases the maximum borrowing capacity to $400.0 million, decreases the accordion option to $100.0 million, and changes the program fee to one-month LIBOR plus 82.5 basis points.
Note 9 — Commitments
Purchase Commitments
As of March 31, 2021, the Company had outstanding commitments to purchase revenue equipment of $654.8 million in the remainder of 2021 ($419.2 million of which were tractor commitments) and 0ne thereafter. These purchases may be financed through any combination of operating leases, finance leases, debt, proceeds from sales of existing equipment, and cash flows from operations.
As of March 31, 2021, the Company had outstanding commitments to purchase facilities and non-revenue equipment of $37.5 million in the remainder of 2021, $2.1 million in the two-year period 2022 through 2023, $0.5 million in the two-year period 2024 through 2025, and 0ne thereafter. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.
As of March 31, 2021, the Company had outstanding commitments for fuel purchases of $25.0 million in the remainder of 2021, and 0ne thereafter.
TRP Commitments
Since 2003, Knight has entered into partnership agreements with entities that make privately-negotiated equity investments. In these agreements, Knight committed to invest in return for an ownership percentage. During the first quarter of 2021, Knight entered into a $10.0 million commitment to invest in TRP Capital Partners V, LP with $10.0 million outstanding as of March 31, 2021. There were no other material changes related to the previously disclosed TRP commitments during the quarter ended March 31, 2021.
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Note 10 — Contingencies and Legal Proceedings
Legal Proceedings
Information is provided below regarding the nature, status, and contingent loss amounts, if any, associated with the Company's pending legal matters. There are inherent uncertainties in these legal matters, some of which are beyond management's control, making the ultimate outcomes difficult to predict. Moreover, management's views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop.
The Company has made accruals with respect to its legal matters where appropriate, which are included in "Accrued liabilities" in the condensed consolidated balance sheets. The Company has recorded an aggregate accrual of approximately $21.8 million, relating     to the Company's outstanding legal proceedings as of March 31, 2021.
Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.
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EMPLOYEE COMPENSATION AND PAY PRACTICES MATTERS
CRST Expedited
The plaintiff alleges tortious interference with contract and unjust enrichment related to non-competition agreements entered into with certain of its drivers.
Plaintiff(s)Defendant(s)Date institutedCourt or agency currently pending in
CRST Expedited, Inc.Swift Transportation Co. of Arizona LLC.March 20, 2017United States District Court for the Northern District of Iowa
Recent Developments and Current Status
In July 2019, a jury issued an adverse verdict in this lawsuit. The court issued a decision granting in part and denying in part certain motions related to the jury’s verdict. Both parties have appealed the court’s decision. The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of March 31, 2021.
California Wage, Meal, and Rest Class Actions
The plaintiffs generally allege one or more of the following: that the Company 1) failed to pay the California minimum wage; 2) failed to provide proper meal and rest periods; 3) failed to timely pay wages upon separation from employment; 4) failed to pay for all hours worked; 5) failed to pay overtime; 6) failed to properly reimburse work-related expenses; and 7) failed to provide accurate wage statements.
Plaintiff(s)Defendant(s)Date institutedCourt or agency currently pending in
John Burnell 1
Swift Transportation Co., IncMarch 22, 2010United States District Court for the Central District of California
James R. Rudsell 1
Swift Transportation Co. of Arizona, LLC and Swift Transportation CompanyApril 5, 2012United States District Court for the Central District of California
Recent Developments and Current Status
In April 2019, the parties reached settlement of this matter. In January 2020, the court granted final approval of the settlement. Two objectors appealed the court’s decision granting final approval of the settlement. The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of March 31, 2021.
INDEPENDENT CONTRACTOR MATTERS
Ninth Circuit Independent Contractor Misclassification Class Action
The putative class alleges that Swift misclassified independent contractors as independent contractors, instead of employees, in violation of the Fair Labor Standards Act and various state laws. The lawsuit also raises certain related issues with respect to the lease agreements that certain independent contractors have entered into with Interstate Equipment Leasing, LLC. The putative class seeks unpaid wages, liquidated damages, interest, other costs, and attorneys' fees.
Plaintiff(s)Defendant(s)Date institutedCourt or agency currently pending in
Joseph Sheer, Virginia Van Dusen, Jose Motolinia, Vickii Schwalm, Peter Wood 1
Swift Transportation Co., Inc., Interstate Equipment Leasing, Inc., Jerry Moyes, and Chad KillebrewDecember 22, 2009Unites States District Court of Arizona and Ninth Circuit Court of Appeals
Recent Developments and Current Status
In January 2020, the court granted final approval of the settlement in this matter. In March 2020, the Company paid the settlement amount approved by the court. As of March 31, 2021, the Company has accrued for anticipated costs associated with finalizing this matter.
1    Individually and on behalf of all others similarly situated.
Other Environmental
The Company's tractors and trailers are involved in motor vehicle accidents, experience damage, mechanical failures and cargo issues as an incidental part of its normal ordinary course of operations. From time to time, these matters result in the discharge of diesel fuel, motor oil or other hazardous materials into the environment. Depending on local regulations and who is determined to be at fault, the Company is sometimes responsible for the clean-up costs associated with these discharges. As of March 31, 2021, the Company's estimate for its total legal
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
liability for all such clean-up and remediation costs was approximately $0.7 million in the aggregate for all current and prior year claims.
Self Insurance
Automobile Liability, General Liability, and Excess Liability — Effective November 1, 2020, the Company has $100.0 million in excess auto liability ("AL") coverage. Effective November 1, 2019, the Company had $130.0 million in excess auto liability ("AL") coverage. For prior years, Swift and Knight separately maintained varying excess AL and general liability limits. During prior policy periods, Swift AL claims were subject to a $10.0 million self-insured retention ("SIR") per occurrence and Knight AL claims were subject to a $1.0 million to $3.0 million SIR per occurrence.  Additionally, Knight carried a $2.5 million aggregate deductible for any loss or losses within the $5.0 million excess of $5.0 million layer of coverage. Effective March 1, 2020, Knight and Swift retain the same $10.0 million SIR per occurrence.
Cargo Damage and Loss — The Company is insured against cargo damage and loss with liability limits of $2.0 million per truck or trailer with a $10.0 million limit per occurrence.
Workers' Compensation and Employers' Liability — The Company is self-insured for workers' compensation coverage. Swift maintains statutory coverage limits, subject to a $5.0 million SIR for each accident or disease. Effective March 1, 2019, Knight maintains statutory coverage limits, subject to a $2.0 million SIR for each accident or disease.
Medical — Knight maintains primary and excess coverage for employee medical expenses, with a $0.4 million SIR per claimant. Effective January 1, 2020, Swift provides primary and excess coverage for employee medical expenses, with an SIR of $0.5 million per claimant to all employees.

Note 11 — Share Repurchase Plan
On November 30, 2020, the Company announced that the Board approved the repurchase of up to $250.0 million worth of the Company's outstanding common stock (the "2020 Knight-Swift Share Repurchase Plan"). With the adoption of the 2020 Knight-Swift Share Repurchase Plan, the Company terminated the previous share repurchase plan, which had approximately $54.1 million of authorized purchases remaining upon termination.
The following table presents the Company's repurchases of its common stock under the respective share repurchase plans, excluding advisory fees:
Share Repurchase PlanQuarter-to-Date March 31, 2021Quarter-to-Date March 31, 2020
Board Approval DateAuthorized AmountSharesAmountSharesAmount
(in thousands)
May 30, 2019$250,000$— 1,139 $34,630 
November 24, 2020 1
$250,0001,303 $53,661 $
1,303 $53,661 1,139 $34,630 
1$196.3 million and $250.0 million remained available under the 2020 Knight-Swift Share Repurchase Plan as of March 31, 2021 and December 31, 2020, respectively.
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Note 12 — Weighted Average Shares Outstanding
Earnings per share, basic and diluted, as presented in the condensed consolidated statements of comprehensive income, are calculated by dividing net income attributable to Knight-Swift by the respective weighted average common shares outstanding during the period.
The following table reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:
Quarter Ended March 31,
 20212020
(In thousands)
Basic weighted average common shares outstanding167,478 170,617 
Dilutive effect of equity awards896 665 
Diluted weighted average common shares outstanding168,374 171,282 
Anti-dilutive shares excluded from diluted earnings per share 1
256 
1    Shares were excluded from the dilutive-effect calculation because the outstanding awards' exercise prices were greater than the average market price of the Company's common stock for the periods presented.

Note 13 — Related Party Transactions
The following table presents Knight-Swift's transactions with companies controlled by and/or affiliated with its related parties:
Quarter Ended March 31,
20212020
Provided by Knight-SwiftReceived by Knight-SwiftProvided by Knight-SwiftReceived by Knight-Swift
(In thousands)
Freight Services:
Central Freight Lines 1
$$$6,816 $
Total$$$6,816 $
Facility and Equipment Leases:
Central Freight Lines 1
$$$$92 
Other Affiliates 1
57 73 
Total$$57 $$165 
Other Services:
Central Freight Lines 1
$$$15 $
DPF Mobile 1
12 
Other Affiliates 1
Total$$$24 $12 
1    Entities affiliated with former Board member Jerry Moyes include Central Freight Lines, SME Industries, Compensi Services, and DPF Mobile. "Other affiliates" includes entities that are associated with various board members and executives and require approval by the Board prior to completing transactions. Transactions with these entities generally include freight services, facility and equipment leases, equipment sales, and other services.
Freight Services Provided by Knight-Swift The Company charges each of these companies for transportation services.
Freight Services Received by Knight-Swift Transportation services received from Central Freight Lines represent less-than-truckload freight services rendered to haul parts and equipment to Company shop locations.
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Other Services Provided by Knight-Swift Other services provided by the Company to the identified related parties include equipment sales and miscellaneous services.
Other Services Received by Knight-SwiftConsulting fees, diesel particulate filter cleaning, sales of various parts and tractor accessories, and certain third-party payroll and employee benefits administration services from the identified related parties are included in other services received by the Company.
During the quarter ended September 30, 2020, the ownership percentage of Jerry Moyes and related affiliates fell below the threshold requiring related party disclosure. The amounts included in this Note 13 pertain to transactions that occurred prior to the date that the ownership percentage changed.
Receivables and payables pertaining to related party transactions were:
March 31, 2021December 31, 2020
ReceivablePayableReceivablePayable
(In thousands)
Central Freight Lines$$$133 $
DPF Mobile41 
Other Affiliates10 
Total$$$135 $51 
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Note 14 — Information by Segment and Geography
Segment Information
The Company has 3 reportable segments: Trucking, Logistics, and Intermodal, as well as the non-reportable segments, discussed below. Based on how economic factors affect the nature, amount, timing, and uncertainty of revenue or cash flows, the Company disaggregates revenues by reportable segment for the purposes of applying the ASC Topic 606 guidance.
The Company's twenty-one operating segments are structured around the types of transportation service offerings provided to our customers, as well as the equipment utilized. In addition, the operating segments may be further distinguished by the Company’s respective brands. The Company aggregated these various operating segments into the three reportable segments discussed below based on similarities with both their qualitative and economic characteristics.
Trucking
The Trucking reportable segment is comprised of nine trucking operating segments that provide similar transportation services to our customers utilizing similar transportation equipment over both irregular (one-way movement) and/or dedicated routes. The Trucking reportable segment consists of irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border operations.
Logistics
The Logistics reportable segment is comprised of five logistics operating segments that provide similar transportation services to our customers and primarily consist of brokerage and other freight management services utilizing third-party transportation providers and their equipment.
Intermodal
The Intermodal reportable segment is comprised of two intermodal operating segments that provide similar transportation services to our customers. These transportation services include arranging the movement of customers' freight through third-party intermodal rail services on the Company’s trailing equipment (trailers on flat cars and rail containers), as well as drayage services to transport loads between the railheads and customer locations.
Non-reportable
The non-reportable segments include five operating segments that consist of support services provided to the Company's customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).
Intersegment Eliminations
Certain operating segments provide transportation and related services for other affiliates outside of their segments. For certain operating segments, such services are billed at cost, and no profit is earned. For the other operating segments, revenues for such services are based on negotiated rates, and are reflected as revenues of the billing segment. These rates are adjusted from time to time, based on market conditions. Such intersegment revenues and expenses are eliminated in Knight-Swift's consolidated results.
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The following tables present the Company's financial information by segment:
Quarter Ended March 31,
20212020
Revenue:(In thousands)
Trucking$962,947 $919,061 
Logistics118,887 79,198 
Intermodal107,066 94,731 
Subtotal$1,188,900 $1,092,990 
Non-reportable segments50,669 46,242 
Intersegment eliminations(16,555)(14,434)
Total revenue$1,223,014 $1,124,798 
 Quarter Ended March 31,
20212020
Operating income (loss):(In thousands)
Trucking$158,483 $107,334 
Logistics7,577 3,719 
Intermodal3,457 (2,737)
Subtotal$169,517 $108,316 
Non-reportable segments(7,258)(6,197)
Operating income$162,259 $102,119 
 Quarter Ended March 31,
20212020
Depreciation and amortization of property and equipment:(In thousands)
Trucking$101,885 $93,548 
Logistics208 207 
Intermodal3,818 3,488 
Subtotal$105,911 $97,243 
Non-reportable segments14,004 12,978 
Depreciation and amortization of property and equipment$119,915 $110,221 
Geographical Information
In the aggregate, total revenue from the Company's foreign operations was less than 5.0% of consolidated total revenue for the quarters ended March 31, 2021 and 2020. Additionally, long-lived assets on the Company's foreign subsidiary balance sheets were less than 5.0% of consolidated total assets as of March 31, 2021 and December 31, 2020.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Note 15 — Fair Value Measurement
ASC Topic 820, Fair Value Measurements and Disclosures, requires that the Company disclose estimated fair values for its financial instruments. The estimated fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for the asset or liability. Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Changes in assumptions could significantly affect these estimates. Because the fair value is estimated as of March 31, 2021 and December 31, 2020, the amounts that will actually be realized or paid at settlement or maturity of the instruments in the future could be significantly different.
The estimated fair values of the Company's financial instruments represent management's best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. The estimated fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the estimated fair value measurement reflects management's own judgments about the assumptions that market participants would use in pricing the asset or liability. These judgments are developed by the Company based on the best information available under the circumstances.
The following summary presents a description of the methods and assumptions used to estimate the fair value of each class of financial instrument.
Restricted Investments, Held-to-Maturity — The estimated fair value of the Company's restricted investments, held-to-maturity, is based on quoted prices in active markets that are readily and regularly obtainable. See Note 4 for additional disclosures regarding restricted investments, held-to-maturity.
Equity Method Investments — The estimated fair value of the Company's equity method investments are privately negotiated investments. The carrying amount of these investments approximates the fair value.
Equity Securities — The estimated fair value of the Company's investments in equity securities is based on quoted prices in active markets that are readily and regularly obtainable.
Debt Instruments and Leases — For notes payable under the Revolver and the Term Loan, fair value approximates the carrying value due to the variable interest rate. The carrying value of the 2018 RSA approximates fair value, as the underlying receivables are short-term in nature and only eligible receivables (such as those with high credit ratings) are qualified to secure the borrowed amounts. For finance and operating lease liabilities, the carrying value approximates the fair value, as the Company's finance and operating lease liabilities are structured to amortize in a manner similar to the depreciation of the underlying assets.
Contingent Consideration — The estimated fair value of the Company's contingent consideration owed to Warehousing Co.'s seller is calculated using a Monte Carlo simulation model based on the acquiree's earnings before interest and taxes.
Other — Cash and cash equivalents, restricted cash, net accounts receivable, income tax refund receivable, and accounts payable represent financial instruments for which the carrying amount approximates fair value, as they are short-term in nature. These instruments are accordingly excluded from the disclosures below. All remaining balance sheet amounts excluded from the below are not considered financial instruments, subject to this disclosure.
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The following table presents the carrying amounts and estimated fair values of the Company's major categories of financial assets and liabilities: 
 March 31, 2021December 31, 2020
Carrying
Value
Estimated
Fair Value
Carrying
Value
Estimated
Fair Value
(In thousands)
Financial Assets:
Restricted investments, held-to-maturity 1
$8,954 $8,950 $9,001 $8,995 
Equity method investments 2
80,891 80,891 77,562 77,562 
Investments in equity securities 3
22,555 22,555 18,675 18,675 
Financial Liabilities:
Term Loan, due October 2022 4
$299,063 $300,000 $298,907 $300,000 
2018 RSA, due July 2021 5
198,957 199,000 213,918 214,000 
Revolver, due October 2022115,000 115,000 210,000 210,000 
Contingent consideration associated with acquisition 6
16,200 16,200 16,200 16,200 
1Refer to Note 4 for the differences between the carrying amounts and estimated fair values of the Company's restricted investments, held-to-maturity.
2Net equity method investment balances included in "Other long-term assets" in the condensed consolidated balance sheets.
3The investments are carried at fair value and are included in "Other long-term assets" on the condensed consolidated balance sheets.
4The carrying amount of the Term Loan is included in "Finance lease liabilities and long-term debt – less current portion," on the condensed consolidated balance sheets and is net of $0.9 million and $1.1 million in deferred loan costs as of March 31, 2021 and December 31, 2020, respectively.
5The carrying amount of the 2018 RSA is included in "Accounts receivable securitization – current portion," on the condensed consolidated balance sheets and is net of $43.0 thousand and $0.1 million in deferred loan costs as of March 31, 2021 and December 31, 2020, respectively.
6The carrying amount of the contingent consideration associated with the acquisition is included in both the "Accrued liabilities" and "Other long-term liabilities" line items on the condensed consolidated balance sheets.
Recurring Fair Value Measurements (Assets) The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of assets measured on a recurring basis as of March 31, 2021 and December 31, 2020:
 Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value
Level 1 InputsLevel 2 InputsLevel 3 InputsTotal Gain
(In thousands)
As of March 31, 2021
Investments in equity securities 1
$22,555 $22,555 $$$10,391 
As of December 31, 2020
Investments in equity securities 2
$18,675 $18,675 $$$3,553 
1The Company recognized $10.4 million of unrealized gains on these assets for the quarter-ended March 31, 2021. Additionally, the Company sold $6.4 million in equity investments during the quarter ended March 31, 2021 and realized a gain of $3.5 million. The activity for these investments is included within "Other (expense) income, net" within the condensed consolidated statement of comprehensive income for the quarter ended March 31, 2021.
2The Company recognized $3.6 million of unrealized gains during the year-ended December 31, 2020. The Company recognized $5.3 million in unrealized losses during the quarter-ended March 31, 2020. The Company did not sell any equity investments during the quarter ended March 31, 2020 and therefore did 0t realize any gains (losses) on these investments. The activity for these investments is included within "Other (expense) income, net" within the condensed consolidated statement of comprehensive income for the quarter ended March 31, 2020.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED
Recurring Fair Value Measurements (Liabilities) The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of liabilities measured on a recurring basis as of March 31, 2021 and December 31, 2020:
 Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value
Level 1 InputsLevel 2 InputsLevel 3 InputsTotal Gain (Loss)
(In thousands)
As of March 31, 2021
Contingent consideration associated with acquisition 1
$16,200 $$$16,200 $
As of December 31, 2020
Contingent consideration associated with acquisition 2
$16,200 $$$16,200 $(6,730)
1The Company did 0t recognize any gains (losses) during the quarter-ended March 31, 2021 related to the revaluation of these liabilities.
2Refer to Note 3 for information regarding the adjustments made to the contingent consideration associated with the acquisition. During the year-ended December 31, 2020, the Company recognized $6.7 million in losses related to the revaluation of these liabilities. The Company did 0t recognize any losses during the quarter-ended March 31, 2020.
Nonrecurring Fair Value Measurements (Assets) As of March 31, 2021, the Company had 0 major categories of assets estimated at fair value that were measured on a nonrecurring basis.
The following table depicts the level in the fair value hierarchy of the inputs used to estimate fair value of assets measured on a nonrecurring basis as of December 31, 2020:
 Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value
Level 1 InputsLevel 2 InputsLevel 3 InputsTotal Loss
(In thousands)
As of December 31, 2020
Equipment 1
5,851 5,851 (5,335)
1    Reflects the non-cash impairment of certain alternative fuel technology (within the non-reportable segments) and certain revenue equipment held for sale (within the Trucking segment). During the year-ended December 31, 2020, the Company recognized $5.3 million of impairments related to these assets. The Company recognized $0.9 million of impairments during the quarter-ended March 31, 2020.
Nonrecurring Fair Value Measurements (Liabilities) As of March 31, 2021 and December 31, 2020, the Company had 0 major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report contains certain statements that may be considered "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Section 27A of the Securities Act of 1933, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation:
any projections of or guidance regarding earnings, earnings per share, revenues, cash flows, dividends, capital expenditures, or other financial items,
any statement of plans, strategies, and objectives of management for future operations,
any statements concerning proposed acquisition plans, new services, or developments,
any statements regarding future economic conditions or performance, and
any statements of belief and any statements of assumptions underlying any of the foregoing. 
In this Quarterly Report, forward-looking statements include, but are not limited to, statements we make concerning:
the ability of our infrastructure to support future growth, whether we grow organically or through potential acquisitions,
the impacts of the COVID-19 global pandemic,
the future impact of acquisitions, including achievement of anticipated synergies,
the flexibility of our model to adapt to market conditions,
our ability to recruit and retain qualified driving associates,
future safety performance,
future performance of our segments or businesses,
our ability to gain market share,
the ability, desire, and effects of expanding our logistics, brokerage, and intermodal operations,
future equipment prices, our equipment purchasing or leasing plans, and our equipment turnover (including expected tractor trade-ins),
our ability to sublease equipment to independent contractors,
the impact of pending legal proceedings,
the expected freight environment, including freight demand and volumes,
economic conditions and growth, including future inflation, consumer spending, supply chain conditions, and US Gross Domestic Product ("GDP") changes,
future pricing terms from vendors and suppliers,
expected liquidity and methods for achieving sufficient liquidity,
future fuel prices and the expected impact of fuel efficiency initiatives,
future expenses and our ability to control costs,
future operating profitability,
future third-party service provider relationships and availability,
future contracted pay rates with independent contractors and compensation arrangements with driving associates,
our expected need or desire to incur indebtedness,
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED


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


Executive Summary
Company Overview
Knight-Swift Transportation Holdings Inc. is North America's largest truckload carrier and a provider of transportation solutions, headquartered in Phoenix, Arizona. The Company provides multiple truckload transportation, intermodal, and logistics services using a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America. In addition to its truckload services, Knight-Swift also contracts with third-party capacity providers to provide a broad range of shipping solutions to its customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors. Our three reportable segments are Trucking, Logistics, and Intermodal. Additionally, we have various non-reportable segments. Refer to Note 14 in Part I, Item 1 of this Quarterly Report for descriptions of our segments.
Our objective is to operate our business with industry-leading margins and growth while providing safe, high-quality, cost-effective solutions for our customers.
Revenue
Our trucking services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base. We primarily generate revenue by transporting freight for our customers through our Trucking segment.
Our logistics and intermodal operations provide a multitude of shipping solutions, including additional sources of truckload capacity and alternative transportation modes, by utilizing our vast network of third-party capacity providers and rail providers, as well as certain logistics and freight management services. Revenue in our logistics and intermodal operations is generated through our Logistics and Intermodal segments.
Our non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).
In addition to the revenues earned from our customers for the trucking and non-trucking services discussed above, we also earn fuel surcharge revenue from our customers through our fuel surcharge program, which serves to recover a majority of our fuel costs. This applies only to loaded miles and typically does not offset non-paid empty miles, idle time, and out-of-route miles driven. Fuel surcharge programs involve a computation based on the change in national or regional fuel prices. These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue for our Trucking segment.
Expenses — Our most significant expenses vary with miles traveled and include fuel, driving associate-related expenses (such as wages and benefits), and services purchased from independent contractors and other transportation providers (such as railroads, drayage providers, and other trucking companies). Maintenance and tire expenses, as well as the cost of insurance and claims generally vary with the miles we travel, but also have a controllable component based on safety improvements, fleet age, efficiency, and other factors. Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, amortization of intangible assets, interest expense, and non-driver employee compensation.
Operating Statistics — We measure our consolidated and segment results through certain operating statistics, which are discussed under "Results of Operations — Segment Review — Operating Statistics," below. Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.
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Consolidated Key Financial Highlights and Operating Metrics
 Quarter Ended March 31,
 20212020
GAAP financial data:(Dollars in thousands, except per share data)
Total revenue$1,223,014 $1,124,798 
Revenue, excluding trucking fuel surcharge$1,133,105 $1,027,095 
Net income attributable to Knight-Swift$129,790 $65,426 
Earnings per diluted share$0.77 $0.38 
Operating ratio86.7 %90.9 %
Non-GAAP financial data:
Adjusted Net Income Attributable to Knight-Swift 1
$139,433 $76,205 
Adjusted EPS 1
$0.83 $0.44 
Adjusted Operating Ratio 1
84.5 %88.6 %
Revenue equipment:
Average tractors (Trucking segment only) 2
18,224 18,462 
Average trailers 3
59,797 57,716 
Average containers10,846 9,856 
1    Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are non-GAAP financial measures and should not be considered alternatives, or superior to, the most directly comparable GAAP financial measures. However, management believes that presentation of these non-GAAP financial measures provides useful information to investors regarding the Company's results of operations. Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are reconciled to the most directly comparable GAAP financial measures under "Non-GAAP Financial Measures," below.
2    The average age of our company-owned tractor fleet was 2.3 years and 2.0 years as of March 31, 2021 and 2020, respectively.
3    The average age of our trailer fleet was 8.2 years and 7.6 years as of March 31, 2021 and 2020, respectively.

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Market Trends and Company Performance
Trends and Outlook — Our consolidated revenue, excluding trucking fuel surcharge, grew by 10.3% during the first quarter of 2021, as a result of revenue growth across all of our reportable segments. We generated consolidated Adjusted Net Income Attributable to Knight-Swift of $139.4 million, which represents an 83.0% increase from $76.2 million during the first quarter of 2020. Our Trucking segment overcame inclement weather conditions and driver sourcing challenges during the quarter and improved average revenue per tractor by 7.7%, which resulted in a 470 basis point improvement in the Adjusted Operating Ratio to 81.8% in the first quarter of 2021 from 86.5% in the first quarter of 2020. Our Logistics segment grew revenue by more than 50% and more than doubled operating income year-over-year. Despite weather and service disruptions during the first quarter of 2021, our Intermodal segment achieved year-over-year improvements in operating results, and we anticipate ongoing improvement in the coming quarters.
The national unemployment rate was 6.0%1 as of March 31, 2021, reflecting the continued resumption of economic activity that had been curtailed due to the pandemic.
During the first quarter of 2021, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 6.4%2 per preliminary third-party forecasts. Third-party forecasts are predicting a continued economic rebound in 2021. The first quarter 2021 US employment cost index rose 2.6%1 and 0.9%1 on a year-over-year and sequential basis, respectively.
From a freight market perspective, we are encouraged by the continued strength in freight demand; however, demand may be difficult to predict for the rest of 2021. The 2021 market outlook includes the following:
over-the-road truckload demand has been strong and we expect this to continue throughout the remainder of the year and into 2022,
capacity expansion may be limited as there has been some constraint by parts availability with respect to new tractor builds,
rates may continue to be favorable in the coming year, as a result of inventory restocking and strong demand,
sourcing and retaining drivers is likely to contribute to additional driver wage inflation,
there has been an increased demand for power-only services, and
there may be continuing non-contract freight opportunities with more challenging year-over-year comparisons in the back half of the year.
We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding trucking fuel surcharge, as we intend to purchase, rather than enter into operating leases, for a majority of our revenue equipment in 2021. With significant tightening in the insurance markets, we may also experience changes in premiums, retention limits, and excess coverage limits in the remainder of 2021. While fuel expense is generally offset by fuel surcharge revenue, our fuel expense, net of fuel surcharge revenue may increase in the future.
We continue to manage our leverage ratio relative to our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities. We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.
________
1Source: bls.gov
2Source: bea.gov
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Comparison Between the Quarters Ended March 31, 2021 and 2020 — The $64.4 million increase in net income attributable to Knight-Swift to $129.8 million during the quarter ended March 31, 2021 from $65.4 million during the same period last year includes the following:
Contributor — $51.1 million increase in operating income within our Trucking segment. Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.
Contributor — $6.2 million improvement in operating income (loss) within our Intermodal segment. Revenue per load increased 10.2% and load counts increased 2.6%.
Contributor — $22.6 million improvement in "Other income (expenses), net," primarily related to gains recognized within our portfolio of investments.
Offset — $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year. All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.
See additional discussion of our operating results within "Results of Operations — Consolidated Operating and Other Expenses" below.
Liquidity and Capital — During the quarter ended March 31, 2021, we generated $306.1 million in operating cash flows, reduced our operating lease liabilities by $15.2 million, used $43.8 million for capital expenditures (net of disposal proceeds), spent $39.3 million on acquisitions, and returned $67.3 million to our stockholders in the form of quarterly dividends and repurchases of our common stock.
We ended the quarter with $194.7 million in unrestricted cash and cash equivalents, $115.0 million outstanding on the Revolver, $300.0 million face value outstanding on the Term Loan, and $5.9 billion of stockholders' equity.
We continue to manage our leverage ratio relative to our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities. We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.
See discussion under "Liquidity and Capital Resources" for additional information.
Results of Operations — Segment Review
The Company has three reportable segments: Trucking, Logistics, and Intermodal, as well as certain non-reportable segments. Refer to Note 14 to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report for descriptions of the operations of these reportable segments.
Consolidating Tables for Total Revenue and Operating Income (Loss)
Quarter Ended March 31,
20212020
Revenue:(In thousands)
Trucking$962,947 $919,061 
Logistics118,887 79,198 
Intermodal107,066 94,731 
Subtotal$1,188,900 $1,092,990 
Non-reportable segments50,669 46,242 
Intersegment eliminations(16,555)(14,434)
Total revenue$1,223,014 $1,124,798 
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Quarter Ended March 31,
20212020
Operating income (loss):(In thousands)
Trucking$158,483 $107,334 
Logistics7,577 3,719 
Intermodal3,457 (2,737)
Subtotal$169,517 $108,316 
Non-reportable segments(7,258)(6,197)
Operating income$162,259 $102,119 
Operating Statistics
Our chief operating decision makers monitor the GAAP results of our reportable segments, as supplemented by certain non-GAAP information. Refer to "Non-GAAP Financial Measures" below for more details. Additionally, we use a number of primary indicators to monitor our revenue and expense performance and efficiency.
Operating StatisticRelevant Segment(s)Description
Average Revenue per TractorTruckingMeasures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count
Total Miles per TractorTruckingTotal miles (including loaded and empty miles) a tractor travels on average
Average Length of HaulTruckingAverage miles traveled with loaded trailer cargo per order
Non-paid Empty Miles PercentageTruckingPercentage of miles without trailer cargo
Average TractorsTrucking, IntermodalAverage tractors in operation during the period including company tractors and tractors provided by independent contractors
Average TrailersTruckingAverage trailers in operation during the period
Average Revenue per LoadLogistics, IntermodalTotal revenue (excluding intersegment transactions) divided by load count
Gross Margin PercentageLogistics (Brokerage)Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions
Average ContainersIntermodalAverage containers in operation during the period
GAAP Operating RatioTrucking, Logistics, IntermodalMeasures 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.
Non-GAAP Adjusted Operating RatioTrucking, Logistics, IntermodalMeasures 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.
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Segment Review
Trucking Segment
We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings with 13,130 irregular route tractors and 5,094 dedicated route tractors. Generally, we are paid a predetermined rate per mile or per load for our trucking services. Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, and other specialized services, as well as through the collection of fuel surcharge revenue to mitigate the impact of increases in the cost of fuel. The main factors that affect the revenue generated by our Trucking segment are rate per mile from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.
The most significant expenses in the Trucking segment are primarily variable and include fuel and fuel taxes, driving associate-related expenses (such as wages, benefits, training, and recruitment), and costs associated with independent contractors primarily included in "Purchased transportation" in the condensed consolidated statements of comprehensive income. Maintenance expense (which includes costs for replacement tires for our revenue equipment) and insurance and claims expenses have both fixed and variable components. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency, and other factors. The main fixed costs in the Trucking segment are depreciation and rent expenses from leasing and acquiring revenue equipment and terminals, as well as compensating our non-driver employees.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands, except per tractor data)
Total revenue$962,947 $919,061 4.8  %
Revenue, excluding fuel surcharge and intersegment transactions$872,814 $821,084 6.3  %
GAAP: Operating income$158,483 $107,334 47.7  %
Non-GAAP: Adjusted Operating Income 1
$158,807 $110,805 43.3  %
Average revenue per tractor 2
$47,894 $44,474 7.7  %
GAAP: Operating ratio 2
83.5 %88.3 %(480  bps)
Non-GAAP: Adjusted Operating Ratio 1 2
81.8 %86.5 %(470  bps)
Non-paid empty miles percentage 2
12.8 %12.8 %—  bps
Average length of haul (miles) 2
412 428 (3.7  %)
Total miles per tractor 2
20,928 22,568 (7.3  %)
Average tractors 2 3
18,224 18,462 (1.3  %)
Average trailers 2
59,797 57,716 3.6  %
1    Refer to "Non-GAAP Financial Measures" below.
2    Defined under "Operating Statistics," above.
3    Includes 16,305 and 16,339 average company-owned tractors for the first quarter of 2021 and 2020, respectively.
Comparison Between the Quarters Ended March 31, 2021 and 2020 We grew revenue, excluding fuel surcharge and intersegment transactions, by 6.3% within the Trucking segment. Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions. The rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the quarter and a 7.3% decline in miles per tractor due to inclement weather and an increase in unseated tractors.
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Logistics Segment
The Logistics segment is less asset-intensive than the Trucking segment and is dependent upon capable non-driver employees, modern and effective information technology, and third-party capacity providers. Logistics revenue is generated by its brokerage operations. We generate additional revenue by offering specialized logistics solutions (including, but not limited to, trailing equipment, origin management, surge volume, disaster relief, special projects, and other logistic needs). Logistics revenue is mainly affected by the rates we obtain from customers, the freight volumes we ship through third-party capacity providers, and our ability to secure third-party capacity providers to transport customer freight.
The most significant expense in the Logistics segment is purchased transportation that we pay to third-party capacity providers, which is primarily a variable cost and is included in "Purchased transportation" in the condensed consolidated statements of comprehensive income. Variability in this expense depends on truckload capacity, availability of third-party capacity providers, rates charged to customers, current freight demand, and customer shipping needs. Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits" and depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the condensed consolidated statements of comprehensive income.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands, except per load data)
Total revenue$118,887 $79,198 50.1  %
Revenue, excluding intersegment transactions$115,722 $76,757 50.8  %
Operating income$7,577 $3,719 103.7  %
Revenue per load – Brokerage 1
$1,971 $1,378 43.0  %
Gross margin percentage – Brokerage 1
14.4 %14.7 %(30  bps)
GAAP: Operating ratio 1
93.6 %95.3 %(170  bps)
Non-GAAP: Adjusted Operating Ratio 1 2
93.5 %95.2 %(170  bps)
1    Defined under "Operating Statistics," above.
2    Refer to "Non-GAAP Financial Measures" below.
Comparison Between the Quarters Ended March 31, 2021 and 2020 Revenue, excluding intersegment transactions, increased by 50.8% within our Logistics segment, as brokerage revenue per load increased by 43.0% and load volumes grew by 5.4%. Brokerage gross margin was 14.4% in the first quarter of 2021 and 14.7% in the first quarter of 2020. The operating ratio improved by 170 basis points to 93.6% for the first quarter of 2021, compared to 95.3% for the first quarter of 2020. Within our power-only service offering, load volumes grew 56.2%, contributing to 161.6% revenue growth and representing over 25% of our total first quarter 2021 brokerage load volumes. During 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions. During the first quarter of 2021, approximately 4,500 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.

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Intermodal Segment
The Intermodal segment complements our regional operating model, allows us to better serve customers in longer haul lanes, and reduces our investment in fixed assets. Through the Intermodal segment, we generate revenue by moving freight over the rail in our containers and other trailing equipment, combined with revenue for drayage to transport loads between railheads and customer locations. The most significant expense in the Intermodal segment is the cost of purchased transportation that we pay to third-party capacity providers (including rail providers), which is primarily variable and included in "Purchased transportation" in the condensed consolidated statements of comprehensive income. Purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs. The main fixed costs in the Intermodal segment are depreciation of our company tractors related to drayage, containers, and chassis, as well as non-driver employee compensation and benefits.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands, except per load data)
Total revenue$107,066 $94,731 13.0  %
Revenue, excluding intersegment transactions$106,971 $94,622 13.1  %
GAAP: Operating income (loss)$3,457 $(2,737)226.3  %
Non-GAAP: Adjusted Operating Income (Loss) 1
$3,457 $(2,689)228.6  %
Average revenue per load 2
$2,549 $2,314 10.2  %
GAAP: Operating ratio 2
96.8 %102.9 %(610  bps)
Non-GAAP: Adjusted Operating Ratio 1 2
96.8 %102.8 %(600  bps)
Load count41,968 40,889 2.6  %
Average tractors 2 3
597 601 (0.7  %)
Average containers 2
10,846 9,856 10.0  %
1    Refer to "Non-GAAP Financial Measures" below.
2    Defined under "Operating Statistics," above.
3    Includes 542 and 536 company-owned tractors for the first quarter of 2021 and 2020, respectively.
Comparison Between the Quarters Ended March 31, 2021 and 2020Revenue, excluding intersegment transactions within our Intermodal segment increased 13.1%, as revenue per load increased 10.2% and load counts increased 2.6%. We improved the operating ratio within the Intermodal segment to 96.8%, compared to 102.9% during the first quarter of 2020, despite weather and service disruptions. Operating results within the Intermodal segment improved toward the end of the quarter. We anticipate sequential improvements in operating results in the coming quarters, as we focus on growing load counts and improving revenue per load.
Non-reportable Segments
The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and $11.4 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Total revenue$50,669 $46,242 9.6  %
Operating loss$(7,258)$(6,197)17.1  %
Comparison Between the Quarters Ended March 31, 2021 and 2020 A $1.2 million increase in legal expenses resulted in a year-over-year increase in operating loss within the non-reportable segments.
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Results of Operations — Consolidated Operating and Other Expenses
Consolidated Operating Expenses
The following tables present certain operating expenses from our condensed consolidated statements of comprehensive income, including each operating expense as a percentage of total revenue and as a percentage of revenue, excluding trucking fuel surcharge. Trucking fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel, rather than operating expenses unrelated to fuel. Therefore, we believe that revenue, excluding trucking fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Salaries, wages, and benefits$370,370 $354,833 4.4  %
% of total revenue30.3 %31.5 %(120  bps)
% of revenue, excluding fuel surcharge32.7 %34.5 %(180  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. To a lesser extent, non-driver employee headcount, compensation, and benefits affect this expense. Driving associate wages represent the largest component of salaries, wages, and benefits expense.
Several ongoing market factors have reduced the pool of available driving associates, contributing to a challenging driver sourcing market, which we believe will continue. Having a sufficient number of qualified driving associates is a 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. We expect driving associate pay to remain inflationary, which we expect will result in additional driving associate pay increases in the future, thereby increasing our salaries, wages, and benefits expense.
The $15.5 million increase in consolidated salaries, wages and benefits was primarily due to an increase in driving associate pay rates, partially offset by a decrease in miles driven by company driving associates and lower medical insurance costs.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Fuel$118,236 $121,855 (3.0  %)
% of total revenue9.7 %10.8 %(110  bps)
% of revenue, excluding trucking fuel surcharge10.4 %11.9 %(150  bps)
Fuel expense consists primarily of diesel fuel expense for our company-owned tractors and fuel taxes. The primary factors affecting our fuel expense are the cost of diesel fuel, the fuel economy of our equipment, and the miles driven by company driving associates.
Our fuel surcharge programs help to offset increases in fuel prices, but apply only to loaded miles and typically do not offset non-paid empty miles, idle time, or out-of-route miles driven. Typical fuel surcharge programs involve a computation based on the change in national or regional fuel prices. These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our Trucking segment. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue. Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our
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operating income during periods of falling fuel costs. We continue to utilize our fuel efficiency initiatives such as trailer blades, idle-control, management of tractor speeds, fleet updates for more fuel-efficient engines, management of fuel procurement, and driving associate training programs that we believe contribute to controlling our fuel expense.
The $3.6 million decrease in consolidated fuel expense is primarily due to a 7.7% decrease in the total miles driven by company driving associates. Average DOE fuel prices were $2.91 per gallon for the first quarter of 2021 and $2.92 per gallon for the first quarter of 2020.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Operations and maintenance$68,070 $68,404 (0.5  %)
% of total revenue5.6 %6.1 %(50  bps)
% of revenue, excluding trucking fuel surcharge6.0 %6.7 %(70  bps)
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 primarily affected by the age of our company-owned fleet of tractors and trailers and the miles driven. We expect the driver market to remain competitive throughout 2021, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense. We expect to continue refreshing our tractor and trailer fleet in the coming quarters to maintain or improve the average age of our equipment.
The first quarter decrease of $0.3 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment and the decrease in miles driven by company driving associates noted above.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Insurance and claims$55,643 $54,280 2.5  %
% of total revenue4.5 %4.8 %(30  bps)
% of revenue, excluding trucking fuel surcharge4.9 %5.3 %(40  bps)
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. 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. In future periods, our higher self-insured retention limits or lower excess coverage limits may cause increased volatility in our consolidated insurance and claims expense.
Consolidated insurance and claims expense increased by $1.4 million for the quarter ended March 31, 2021, as compared to the same period last year. This increase was primarily due to negative development within certain prior year claims.
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Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Operating taxes and licenses$22,048 $22,169 (0.5  %)
% of total revenue1.8 %2.0 %(20  bps)
% of revenue, excluding trucking fuel surcharge1.9 %2.2 %(30  bps)
Operating taxes and licenses include state franchise taxes, state and federal highway use taxes, property taxes, vehicle license and registration fees, fuel and mileage taxes, among others. The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities.
Operating taxes and licenses decreased by $0.1 million for the quarter ended March 31, 2021 and remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge, as compared to the same periods last year.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Communications$5,037 $4,874 3.3  %
% of total revenue0.4 %0.4 %—  bps
% of revenue, excluding trucking fuel surcharge0.4 %0.5 %(10  bps)
Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems.
Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the quarter ended March 31, 2021, as compared to the same period last year.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Depreciation and amortization of property and equipment$119,915 $110,221 8.8  %
% of total revenue9.8 %9.8 %—  bps
% of revenue, excluding trucking fuel surcharge10.6 %10.7 %(10  bps)
Depreciation relates primarily to our owned tractors, trailers, buildings, electronic logging devices, other communication units, and other similar assets. 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.
Consolidated depreciation and amortization of property and equipment increased by $9.7 million for the quarter ended March 31, 2021, when compared to the same period last year. The increase was primarily related to an increase in owned versus leased equipment.
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 currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.
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Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Amortization of intangibles$11,749 $11,474 2.4  %
% of total revenue1.0 %1.0 %—  bps
% of revenue, excluding trucking fuel surcharge1.0 %1.1 %(10  bps)
Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions. See Note 6 in Part I, Item 1, of this Quarterly Report for further details regarding the Company's intangible assets. The increase of $0.3 million for the quarter ended March 31, 2021, when compared to the same period last year, was attributed to the Eleos acquisition completed on February 1, 2021. See Note 3 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Rental expense$16,864 $25,375 (33.5  %)
% of total revenue1.4 %2.3 %(90  bps)
% of revenue, excluding trucking fuel surcharge1.5 %2.5 %(100  bps)
Rental expense consists primarily of payments for tractors and trailers financed with operating leases. The primary factors affecting the expense are the size of our revenue equipment fleet and the relative percentage of owned versus leased equipment.
Consolidated rental expense decreased by $8.5 million for the quarter ended March 31, 2021, as compared to the same period last year. This was primarily due to increasing our ratio of owned versus leased equipment.
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 currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Purchased transportation$258,230 $225,276 14.6  %
% of total revenue21.1 %20.0 %110  bps
% of revenue, excluding trucking fuel surcharge22.8 %21.9 %90  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.  Purchased transportation is generally affected by capacity in the market as well as changes in fuel prices. As capacity tightens, our payments to third-party capacity providers and to independent contractors tend to increase. Additionally, as fuel prices increase, payments to third-party capacity providers and independent contractors increase.
We expect purchased transportation will increase as a percentage of revenue if we grow our logistics and intermodal businesses faster than our trucking business. The increase could be partially offset if independent contractors exit the market due to regulatory changes.
Consolidated purchased transportation expense increased by $33.0 million for the quarter ended March 31, 2021, as compared to the same period last year. This increase was primarily due to expenses related to third-party carriers and was partially offset by a 12.9% decrease in miles driven by independent contractors for the quarter ended March 31, 2021.
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Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Impairments$— $902 (100.0  %)
In 2020, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Trucking and non-reportable segments).
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Miscellaneous operating expenses$14,593 $23,016 (36.6  %)
Miscellaneous operating expenses primarily consist of legal and professional services fees, general and administrative expenses, other costs, as well as net gain on sales of equipment.
The $8.4 million decrease in net consolidated miscellaneous operating expenses was primarily due to a $7.5 million increase in gain on sales of equipment.
Consolidated Other Expenses, net
Quarter Ended March 31,Increase (Decrease)
20212020
(Dollars in thousands)
Interest expense$3,486 $6,107 (42.9 %)
Other (income) expenses, net(16,105)6,507 (347.5 %)
Income tax expense45,329 24,554 84.6 %
Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs. The decrease in interest expense for the quarter ended March 31, 2021 was primarily due to lower overall interest rates, as well as lower overall debt balances.
Other (income) expenses, net — Other (income) expenses, net is primarily comprised of (gains) and losses from our various equity investments, including our TRP investments 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.
The $22.6 million favorable change between the quarter ended March 31, 2021 compared to the same period last year is primarily driven by gains recognized within our portfolio of investments.
Income tax expense — In addition to the discussion below, Note 7 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.
The $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year. All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.

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Non-GAAP Financial Measures
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. These financial measures supplement our GAAP results in evaluating certain aspects of our business. We believe that using these measures improves comparability in analyzing our performance because they remove the impact of items from our operating results that, in our opinion, do not reflect our core operating performance. Management and the Board 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. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance.
Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, 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, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.
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 EPS, 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.
Non-GAAP Reconciliation:
Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS
Quarter Ended March 31,
20212020
(In thousands)
GAAP: Net income attributable to Knight-Swift$129,790 $65,426 
Adjusted for:
Income tax expense attributable to Knight-Swift45,329 24,554 
Income before income taxes attributable to Knight-Swift175,119 89,980 
Amortization of intangibles 1
11,749 11,474 
Impairments 2
— 902 
Legal accruals 3
1,242 — 
COVID-19 incremental costs 4
— 2,293 
Adjusted income before income taxes188,110 104,649 
Provision for income tax expense at effective rate(48,677)(28,444)
Non-GAAP: Adjusted Net Income Attributable to Knight-Swift$139,433 $76,205 
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Note: Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.
Quarter Ended March 31,
20212020
GAAP: Earnings per diluted share$0.77 $0.38 
Adjusted for:
Income tax expense attributable to Knight-Swift0.27 0.14 
Income before income taxes attributable to Knight-Swift1.04 0.53 
Amortization of intangibles 1
0.07 0.07 
Impairments 2
— 0.01 
Legal accruals 3
0.01 — 
COVID-19 incremental costs 4
— 0.01 
Adjusted income before income taxes1.12 0.61 
Provision for income tax expense at effective rate(0.29)(0.17)
Non-GAAP: Adjusted EPS$0.83 $0.44 
1    "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions. Refer to Note 3 in Part I, Item 1 of this Quarterly Report for additional details regarding the acquisition.
2    "Impairments" for the first quarter of 2020 reflect the impairment of trailer tracking equipment (within the Trucking segment).
3    "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee related matters.
4    "COVID-19 incremental costs" reflects costs incurred during 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak. These include payroll premiums paid to our driving associates and shop technicians, additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.
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Non-GAAP Reconciliation: Consolidated Adjusted Operating Income and Adjusted Operating Ratio
Quarter Ended March 31,
20212020
GAAP Presentation(Dollars in thousands)
Total revenue$1,223,014 $1,124,798 
Total operating expenses(1,060,755)(1,022,679)
Operating income$162,259 $102,119 
Operating ratio86.7 %90.9 %
Non-GAAP Presentation
Total revenue$1,223,014 $1,124,798 
Trucking fuel surcharge(89,909)(97,703)
Revenue, excluding trucking fuel surcharge1,133,105 1,027,095 
Total operating expenses1,060,755 1,022,679 
Adjusted for:
Trucking fuel surcharge(89,909)(97,703)
Amortization of intangibles 1
(11,749)(11,474)
Impairments 2
— (902)
Legal accruals 3
(1,242)— 
COVID-19 incremental costs 4
— (2,293)
Adjusted Operating Expenses957,855 910,307 
Adjusted Operating Income$175,250 $116,788 
Adjusted Operating Ratio84.5 %88.6 %
1    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 1.
2    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 2.
3    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 3.
4    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

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Non-GAAP Reconciliation: Reportable Segment Adjusted Operating Income and Adjusted Operating Ratio
Trucking Segment
Quarter Ended March 31,
20212020
GAAP Presentation(Dollars in thousands)
Total revenue$962,947 $919,061 
Total operating expenses(804,464)(811,727)
Operating income$158,483 $107,334 
Operating ratio83.5 %88.3 %
Non-GAAP Presentation
Total revenue$962,947 $919,061 
Fuel surcharge(89,909)(97,703)
Intersegment transactions(224)(274)
Revenue, excluding fuel surcharge and intersegment transactions872,814 821,084 
Total operating expenses804,464 811,727 
Adjusted for:
Fuel surcharge(89,909)(97,703)
Intersegment transactions(224)(274)
Amortization of intangibles 1
(324)(324)
Impairments 2
— (902)
COVID-19 incremental costs 3
— (2,245)
Adjusted Operating Expenses714,007 710,279 
Adjusted Operating Income$158,807 $110,805 
Adjusted Operating Ratio81.8 %86.5 %
1    "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in historical Knight acquisitions.
2    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 2.
3    See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.
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Logistics Segment
Quarter Ended March 31,
20212020
GAAP Presentation(Dollars in thousands)
Total revenue$118,887 $79,198 
Total operating expenses(111,310)(75,479)
Operating income$7,577 $3,719 
Operating ratio93.6 %95.3 %
Non-GAAP Presentation
Total revenue$118,887 $79,198 
Intersegment transactions(3,165)(2,441)
Revenue, excluding intersegment transactions115,722 76,757 
Total operating expenses111,310 75,479 
Adjusted for:
Intersegment transactions(3,165)(2,441)
Adjusted Operating Expenses108,145 73,038 
Adjusted Operating Income$7,577 $3,719 
Adjusted Operating Ratio93.5 %95.2 %
Intermodal Segment
Quarter Ended March 31,
20212020
GAAP Presentation(Dollars in thousands)
Total revenue$107,066 $94,731 
Total operating expenses(103,609)(97,468)
Operating income (loss)$3,457 $(2,737)
Operating ratio96.8 %102.9 %
Non-GAAP Presentation
Total revenue$107,066 $94,731 
Intersegment transactions(95)(109)
Revenue, excluding intersegment transactions106,971 94,622 
Total operating expenses103,609 97,468 
Adjusted for:
Intersegment transactions(95)(109)
COVID-19 incremental costs 1
— (48)
Adjusted Operating Expenses103,514 97,311 
Adjusted Operating Income (Loss)$3,457 $(2,689)
Adjusted Operating Ratio96.8 %102.8 %
1See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.
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Liquidity and Capital Resources
Sources of Liquidity
Our primary sources of liquidity are funds provided by operations and the following:
SourceMarch 31, 2021
(In thousands)
Cash and cash equivalents, excluding restricted cash$194,650 
Availability under Revolver, due October 2022 1
655,656 
Availability under 2018 RSA, due July 2021 2
2,919 
Total unrestricted liquidity$853,225 
Cash and cash equivalents – restricted 3
49,233 
Restricted investments, held-to-maturity, amortized cost 3
8,954 
Total liquidity, including restricted cash and restricted investments$911,412 
1    As of March 31, 2021, we had $115.0 million in borrowings under our $800.0 million Revolver. We additionally had $29.3 million in outstanding letters of credit (discussed below), leaving $655.7 million available under the Revolver.
2    Based on eligible receivables at March 31, 2021, our borrowing base for the 2018 RSA was $267.2 million, while outstanding borrowings were $199.0 million. We additionally had $65.3 million in outstanding letters of credit (discussed below), leaving $2.9 million available under the 2018 RSA. Refer to Note 8 in Part I, Item 1 of this Quarterly Report for more information regarding the 2018 RSA.
3    Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments. "Cash and cash equivalents – restricted" consists of $47.9 million, included in "Cash and cash equivalents — restricted" in the condensed consolidated balance sheet and held by Mohave and Red Rock for claims payments. The remaining $1.4 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.
Uses of Liquidity
Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, contract payments to independent contractors, insurance and claims payments, tax payments, and others. We also use large amounts of cash and credit for the following activities:
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, fund replacement of our revenue equipment fleet, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings. We expect that net capital expenditures from the aforementioned projects will be in the range of $450.0 – $500.0 million for the full-year 2021. We believe we have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or other conditions warrant.
Over the long-term, we will continue to have significant capital requirements, which may require us to seek additional borrowing, lease financing, or equity capital. The availability of financing or equity capital will depend upon our financial condition and results of operations as well as prevailing market conditions. If such additional borrowing, lease financing, or equity capital is not available at the time we need it, then we may need to borrow more under the Revolver (if not then fully drawn), extend the maturity of then-outstanding debt, rely on alternative financing arrangements, engage in asset sales, limit our fleet size, or operate our revenue equipment for longer periods.
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There can be no assurance that we will be able to obtain additional debt under our existing financial arrangements to satisfy our ongoing capital requirements. However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under our accounts receivable securitization, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.
Principal and Interest Payments — As of March 31, 2021, we had debt, accounts receivable securitization, and finance lease obligations of $825.5 million, which are discussed under "Material Debt Agreements," below. Certain cash flows from operations are committed to minimum payments of principal and interest on our debt and lease obligations. Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.
Letters of Credit — Pursuant to the terms of the 2017 Debt Agreement and the 2018 RSA, our lenders may issue standby letters of credit on our behalf. When we have letters of credit outstanding, the availability under the Revolver or 2018 RSA is reduced accordingly. Standby letters of credit are typically issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to our automobile, workers' compensation, and general insurance liabilities.
Share Repurchases — From time to time, and depending on free cash flow availability, debt levels, common stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock. As of March 31, 2021, the Company had $196.3 million remaining under the 2020 Knight-Swift Share Repurchase Plan. Additional details are discussed in Note 11 in Part I, Item 1 of this Quarterly Report.
Working Capital
We had a working capital surplus of $15.3 million as of March 31, 2021 and $83.7 million as of December 31, 2020. Our working capital surplus as of March 31, 2021 was negatively impacted by our 2018 RSA, which is included within current liabilities since it was scheduled to mature in July 2021. On April 23, 2021, we entered into the 2021 RSA, which amended the 2018 RSA extending the maturity to April 23, 2024. Additional details are discussed in Note 8 in Part I, Item 1 of this Quarterly Report.
Material Debt Agreements
As of March 31, 2021, we had $825.5 million in material debt obligations at the following carrying values:
$299.1 million: Term Loan, due October 2022, net of $0.9 million in deferred loan costs
$199.0 million: 2018 RSA outstanding borrowings, due July 2021
$212.4 million: Finance lease obligations
$115.0 million: Revolver, due October 2022
As of December 31, 2020, we had $913.6 million in material debt obligations at the following carrying values:
$298.9 million: Term Loan, due October 2022, net of $1.1 million in deferred loan costs
$213.9 million: 2018 RSA outstanding borrowings, due July 2021, net of $0.1 million in deferred loan costs
$190.8 million: Finance lease obligations
$210.0 million: Revolver, due October 2022.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED


Cash Flow Analysis
Quarter Ended March 31,Change
 20212020
(In thousands)
Net cash provided by operating activities$306,113 $155,343 $150,770 
Net cash used in investing activities(74,141)(125,582)51,441 
Net cash used in financing activities(185,366)(71,885)(113,481)
Net Cash Provided by Operating Activities
Comparison Between Quarter Ended March 31, 2021 and 2020 — The $150.8 million increase in net cash provided by operating activities was primarily due to less cash paid for legal settlements in the first quarter of 2021, as compared to the first quarter of 2020, when we paid $93.4 million associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift. Net cash provided by operating activities was also favorably impacted by a $60.1 million increase in our operating income.
Net Cash Used in Investing Activities
Comparison Between Quarter Ended March 31, 2021 and 2020 — The $51.4 million decrease in net cash used in investing activities was primarily due to a $31.8 million decrease in net cash capital expenditures.
Net Cash Used in Financing Activities
Comparison Between Quarter Ended March 31, 2021 and 2020 — Net cash used in financing activities increased by $113.5 million, primarily due to a $110.0 million net increase in cash used for our Revolver, as we made net prepayments of $95.0 million during the first quarter of 2021, as compared to assuming net borrowings of $15.0 million during the first quarter of 2020.
Seasonality
Discussion regarding the impact of seasonality on our business is included in Note 1 in the notes to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report, incorporated by reference herein.
Inflation
Inflation can have an impact on our operating costs. A prolonged period of inflation could cause interest rates, fuel, wages, and other costs to increase, which would adversely affect our results of operations unless freight rates correspondingly increased. Consistent with trends in the trucking industry overall, we continue to experience inflationary pressures with respect to driver wages, as compared to prior years.
Recently Issued Accounting Pronouncements
See Note 2 in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference, for the impact of recently issued accounting pronouncements on the Company's condensed consolidated financial statements.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure from variable interest rates, primarily related to our 2017 Debt Agreement and 2018 RSA. These variable interest rates are impacted by changes in short-term interest rates. We primarily manage interest rate exposure through a mix of variable rate debt (weighted average rate of 1.1% as of March 31, 2021) and fixed rate equipment lease financing. Assuming the level of borrowings as of March 31, 2021, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by $6.1 million.
Commodity Price Risk
We have commodity exposure with respect to fuel used in company-owned tractors. Increases in fuel prices would continue to raise our operating costs, even after applying fuel surcharge revenue. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. The weekly average of diesel price per gallon in the US decreased to $2.91 for the quarter ended March 31, 2021 from an average of $2.92 in the quarter ended March 31, 2020. We cannot predict the extent or speed of potential changes in fuel price levels in the future, the degree to which the lag effect of our fuel surcharge programs will impact us as a result of the timing and magnitude of such changes, or the extent to which effective fuel surcharges can be maintained and collected to offset such increases. We generally have not used derivative financial instruments to hedge our fuel price exposure in the past, but continue to evaluate this possibility. To mitigate the impact of rising fuel costs, we contract with some of our fuel suppliers to buy fuel at a fixed price or within banded pricing for a specified period, usually not exceeding twelve months. However, these purchase commitments only cover a small portion of our fuel consumption. Accordingly, fuel price fluctuations may still negatively impact us.

ITEM 4.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board. Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We base our internal control over financial reporting on the criteria set forth in the 2013 COSO Internal Control: Integrated Framework.
We have confidence in our disclosure controls and procedures and internal control over financial reporting. Nevertheless, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors, misstatements, or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
PART II OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
Information about our legal proceedings is included in Note 10 of the notes to our condensed consolidated financial statements, included in Part I, Item 1, of this Quarterly Report for the period ended March 31, 2021, and is incorporated by reference herein. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.
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 2020 Annual Report in the section entitled "Item 1A. Risk Factors," describes some of the risks and uncertainties associated with our business.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs 1
January 1, 2021 to January 31, 2021— $— — $250,000,000 
February 1, 2021 to February 28, 20211,265,923 $41.12 1,265,923 $197,951,108 
March 1, 2021 to March 31, 202137,530 $42.97 37,530 $196,338,538 
Total1,303,453 $41.17 1,303,453 $196,338,538 
1On November 30, 2020, the Company announced that the Board approved the $250.0 million 2020 Knight-Swift Share Repurchase Plan. There is no expiration date associated with the 2020 Knight-Swift Share Repurchase Plan.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.OTHER INFORMATION
None.
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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
ITEM 6.EXHIBITS
Exhibit NumberDescriptionPage or Method of Filing
101.INSInstance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema DocumentFiled herewith
101.CALXBRL Taxonomy Calculation Linkbase DocumentFiled herewith
101.LABXBRL Taxonomy Label Linkbase DocumentFiled herewith
101.PREXBRL Taxonomy Presentation Linkbase DocumentFiled herewith
101.DEFXBRL Taxonomy Extension Definition DocumentFiled herewith
104Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)Filed herewith
*    Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to supplementally furnish to the SEC a copy of any omitted schedule upon request by the SEC.
**     Management contract or compensatory plan, contract, or arrangement.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Date: May 5, 2021 /s/ David A. Jackson
 David A. Jackson
 Chief Executive Officer and President, in his capacity as
 such and on behalf of the registrant
Date: May 5, 2021 /s/ Adam W. Miller
 Adam W. Miller
 Chief Financial Officer, in his capacity as such and on
 behalf of the registrant
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