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What changed in Knight-Swift Transportation Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Knight-Swift Transportation Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+400 added−354 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in Knight-Swift Transportation Holdings Inc.'s 2023 10-K

400 paragraphs added · 354 removed · 289 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

89 edited+31 added−30 removed159 unchanged
Biggest changeBased on public feedback and other concerns raised by industry stakeholders, in March 2017, the FMCSA withdrew the NPRM related to the new safety rating system. In its notice of withdrawal, the FMCSA noted that a new rulemaking related to a similar process may be initiated in the future.
Biggest changeIn March 2017, the FMCSA withdrew the notice of proposed rulemaking, but noted that a similar process may be initiated in the future. In February 2023, the FMCSA published a notice of proposed changes to its SMS methodology, including the BASIC categories.
Company Overview Knight-Swift Transportation Holdings Inc. is one of North America's largest and most diversified freight transportation companies, providing multiple full truckload, LTL, intermodal, and other complementary services. Our objective is to operate our business with industry-leading margins and continued organic growth and growth through acquisitions while providing safe, high-quality, cost-effective solutions for our customers.
Company Overview Knight-Swift Transportation Holdings Inc. is one of North America's largest and most diversified freight transportation companies, providing multiple full truckload, LTL, intermodal, and other complementary services. Our objective is to operate our business with industry-leading margins, continued organic growth and growth through acquisitions while providing safe, high-quality, cost-effective solutions for our customers.
In February 2018, California's ARB approved California Phase 2 standards that generally align with the federal Phase 2 standards, (discussed in further detail below), with some minor additional requirements, and which would stay in place even if the federal Phase 2 standards are affected.
In February 2018, California's ARB approved California Phase 2 Standards that generally align with the federal Phase 2 Standards ( the "Phase 2 Standards," discussed in further detail below), with some minor additional requirements, and which would stay in place even if the Phase 2 Standards are affected.
Certain industry groups have challenged these rules in court, and while the FMCSA's final rule has been upheld, it remains unclear if industry or other groups will bring additional challenges against the FMCSA's final rule. Any future changes to hours-of-service regulations could materially and adversely affect our operations and profitability.
Certain industry groups have challenged these hours-of-service rules in court, and while the FMCSA's final rule has been upheld, it remains unclear if industry or other groups will bring additional challenges against the FMCSA's final rule. Any future changes to hours-of-service regulations could materially and adversely affect our operations and profitability.
In February 2023, the FMCSA issued a supplemental Notice of Proposed Rulemaking requesting additional information on automated driving systems (“ADS”) and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped commercial motor vehicles.
In February 2023, the FMCSA issued a supplemental notice of proposed rulemaking requesting additional information on automated driving systems ("ADS") and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped commercial motor vehicles.
The CPDP will expand the types of eligible crashes, modify the Safety Measurement System to exclude crashes with not preventable determinations from the prioritization algorithm and note the not preventable determinations in the Pre-Employment Screening Program. Currently, CSA scores generally do not have a direct impact on a carrier's safety rating.
The CPDP will expand the types of eligible crashes, modify the Safety Measurement System ("SMS") to exclude crashes with not preventable determinations from the prioritization algorithm and note the not preventable determinations in the Pre-Employment Screening Program. Currently, CSA scores generally do not have a direct impact on a carrier's safety rating.
Brokerage Liability In June 2022, the US Supreme Court declined to review a Ninth Circuit Court of Appeals decision involving a personal injury suit alleging that a freight broker had liability for an accident because it breached its duty to select a competent contractor to transport the load in question.
In June 2022, the US Supreme Court declined to review a Ninth Circuit Court of Appeals decision involving a personal injury suit alleging that a freight broker had liability for an accident because it breached its duty to select a competent contractor to transport the load in question.
This program, known as the Safe Driver Apprenticeship Pilot Program, is open to 18 to 20-year-old drivers who already hold intrastate commercial driver’s licenses and sets a strict training regimen for participating drivers and carriers to comply with.
This program, known as the Safe Driver Apprenticeship Pilot Program ("SDAP"), is open to 18 to 20-year-old drivers who already hold intrastate commercial driver’s licenses and sets a strict training regimen for participating drivers and carriers to comply with.
State Wage and Hour Legislation In December 2018, the FMCSA granted a petition filed by the American Trucking Associations and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws.
Wage and Hour Legislation In December 2018, the FMCSA granted a petition filed by the American Trucking Associations and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws.
The trucking industry faces the following primary challenges, which we believe we are well-positioned to address, as discussed under "Our Competitive Strengths" and "Our Mission and Company Strategy," below: • tightening industry capacity; • cumulative impacts of regulatory initiatives, such as ELDs, hours-of-service limitations for drivers, and others; • uncertainty in the economic environment, including inflation, rising interest rates, and changing supply chain and consumer spending patterns; • driver shortages; • increased insurance costs as significant verdicts and settlement amounts for accident claims impact the industry; • significant and rapid fluctuations in fuel prices and availability, including in connection with the conflict in Ukraine; and 7 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. • increased prices for and constrained availability of new revenue equipment, design changes of new engines, advancements in technology of revenue equipment, and volatility in the used equipment sales market.
The trucking industry faces the following primary challenges, which we believe we are well-positioned to address, as discussed under "Our Competitive Strengths" and "Our Mission and Company Strategy," below: • tightening industry capacity; • cumulative impacts of regulatory initiatives, such as ELDs, hours-of-service limitations for drivers, and others; • uncertainty in the economic environment, including inflation, rising interest rates, and changing supply chain and consumer spending patterns; • driver shortages; • increased insurance costs as significant verdicts and settlement amounts for accident claims impact the industry; • significant and rapid fluctuations in fuel prices and availability, including in connection with the conflicts in Ukraine and the Middle East; and 7 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. • increased prices for and constrained availability of new revenue equipment, design changes of new engines, advancements in technology of revenue equipment, and volatility in the used equipment sales market and insurance market.
Since 1966, we have continuously expanded our nationwide network and our service offerings through organic growth, as well as through the acquisition of twenty-two companies. See Note 1 and Note 4 in Part II, Item 8 in this Annual Report, for more information regarding the 2017 Merger and our recent acquisitions.
Since 1966, we have continuously expanded our nationwide network and our service offerings through organic growth, as well as through the acquisition of twenty-four companies. See Note 1 and Note 4 in Part II, Item 8 in this Annual Report, for more information regarding the 2017 Merger and our recent acquisitions.
In 2023 and beyond, we will continue to monitor the appropriateness of this relatively short tractor trade-in cycle against the lower capital expenditure and financing costs of a longer tractor trade-in cycle, based on current and future business needs. 11 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
In 2024 and beyond, we will continue to monitor the appropriateness of this relatively short tractor trade-in cycle against the lower capital expenditure and financing costs of a longer tractor trade-in cycle, based on current and future business needs. 11 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Now that the rule is effective, training schools and other programs (including ours) are required to implement the prescribed curriculum and register with the FMCSA's Training Provider Registry to certify that their program meets the classroom and driving standards. We will also be required to comply with this rule in the course of operating our driving schools.
Now that the rule is effective, training schools and other programs (including ours) are required to implement the prescribed curriculum and register with the FMCSA's Training Provider Registry to certify that their program meets the classroom and driving standards. We are also required to comply with this rule in the course of operating our driving schools.
The diverse and premium services we offer provide a comprehensive approach to supply chain solutions for our customers. At December 31, 2022, we had a sales staff of approximately 200 individuals across the US and Mexico, who work closely with management to establish and expand accounts.
The diverse and premium services we offer provide a comprehensive approach to supply chain solutions for our customers. At December 31, 2023, we had a sales staff of approximately 200 individuals across the US and Mexico, who work closely with management to establish and expand accounts.
The Company’s new tractor purchases in 2022 complied with the emission and fuel consumption reductions required by the Phase 2 Standards. Even though the trailer provisions of the Phase 2 standards have been removed, we will still need to ensure the majority of our fleet is compliant with the California Phase 2 standards.
The Company’s new tractor purchases in 2023 complied with the emission and fuel consumption reductions required by the Phase 2 Standards. Even though the trailer provisions of the Phase 2 Standards have been removed, we will still need to ensure the majority of our fleet is compliant with the California Phase 2 Standards.
Infrastructure Investment and Jobs Act ("IIJA"); Brokerage Operations Among other things, the Infrastructure Investment and Jobs Act ("IIJA"), signed into law by President Biden in November 2021, created an apprenticeship program for drivers ages 18 to 20 years old to eventually qualify to drive commercial trucks in interstate commerce.
Infrastructure Investment and Jobs Act Among other things, the Infrastructure Investment and Jobs Act ("IIJA"), signed into law by President Biden in November 2021, created an apprenticeship program for drivers ages 18 to 20 years old to eventually qualify to drive commercial trucks in interstate commerce.
The COVID-19 pandemic continued to be a source of volatility throughout the global market in 2021 creating supply chain disruptions, increased demand for many products, tight transportation capacity and congestion at ocean ports and rail terminals. 2022 some momentum from 2021 continued into the first quarter of 2022, but much of the year was characterized by uncertainty in the broader economy based on continuing responses to the COVID-19 pandemic abroad, conflicts overseas, waning consumer confidence, and significant inflationary pressures on equipment, fuel, maintenance, labor, and other cost items.
The COVID-19 pandemic continued to be a source of volatility throughout the global market in 2021 creating supply chain disruptions, increased demand for many products, tight transportation capacity and congestion at ocean ports and rail terminals. 2022 — 2023 some momentum from 2021 continued into the first quarter of 2022, but the remainder of 2022 and 2023 was characterized by uncertainty in the broader economy based on continuing responses to the COVID-19 pandemic abroad, conflicts overseas, waning consumer confidence, and significant inflationary pressures on equipment, fuel, maintenance, labor, and other cost items.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . 23 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . 24 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Overall consumer demand moderated and shippers worked through inventory overhangs as we experienced ongoing congestion at ports and labor challenges in the rail industry. Capacity, particularly smaller carriers, exited the market rapidly, primarily due to diminished non-contract opportunities and meaningfully higher operating costs, leading to a declining used equipment market.
Overall consumer demand moderated and shippers worked through inventory overhangs as we experienced ongoing congestion at ports and labor challenges in the rail industry. Capacity, particularly smaller carriers, exited the market, primarily due to diminished non-contract opportunities and meaningfully higher operating costs, leading to a declining used equipment market and a volatile insurance market.
By operating safely and productively, independent contractors can improve their own profitability and ours. Independent contractors are responsible for most costs incurred for owning and operating their tractors. In 2022, independent contractors comprised 8.6% of our total fleet, as measured by average tractor count. Safety and Insurance Safety We are committed to safe and secure operations.
By operating safely and productively, independent contractors can improve their own profitability and ours. Independent contractors are responsible for most costs incurred for owning and operating their tractors. In 2023, independent contractors comprised 8.8% of our total fleet, as measured by average tractor count. Safety and Insurance Safety We are committed to safe and secure operations.
Our sales and marketing leaders are members of our senior management team, who are assisted by other sales professionals in each segment. Our sales team emphasizes our industry-leading service, environmental leadership, and our ability to accommodate a variety of customer needs, provide consistent capacity, and financial strength and stability.
Our sales and marketing leaders are members of our senior management team, who are assisted by other sales professionals in each segment. Our sales team emphasizes our industry-leading service, environmental leadership, and ability to accommodate a variety of customer needs, while providing consistent capacity and financial strength and stability.
The effect of these rules could result in a decrease in fleet production and driver availability or an increase in the time and expense required to operate or expand our driving academies and driver training programs (or both), any of which could adversely affect our business, operations or profitability.
The effects of these rules may result in a decrease in fleet production and driver availability or an increase in the time and expense required to operate or expand our driving academies and driver training programs (or both), any of which could adversely affect our business, operations or profitability.
Tax changes in the Inflation Reduction Act, together with changes to any other U.S. tax laws may have an adverse impact on our business and profitability. It is unclear what other legislative initiatives will be signed into law and what changes they may undergo.
Tax changes in the Inflation Reduction Act, together with changes to any other US tax laws may have an adverse impact on our business and profitability. It is unclear what other legislative initiatives will be signed into law and what changes they may undergo.
Motor carriers interested in participating must complete an application for participation and submit monthly data on an apprentice’s driver activity, safety outcomes, and additional supporting information. The Safe Driver Apprenticeship Pilot Program is limited to 3,000 driver-apprentices at any given time, with new driver-apprentices allowed into the program to replace those that leave or age out.
Motor carriers interested in participating must complete an application for participation and submit monthly data on an apprentice’s driver activity, safety outcomes, and additional supporting information. The SDAP is limited to 3,000 driver-apprentices at any given time, with new driver-apprentices allowed into the program to replace those that leave or age out.
These factors culminated in a muted peak season with fewer spot and project opportunities. The principal means of competition in our industry are customer service and relationships, capacity, and price. In times of strong freight demand, customer service and capacity become increasingly important, and in times of weak freight demand, pricing becomes increasingly important.
These factors culminated in muted peak seasons with fewer spot and project opportunities. The principal means of competition in our industry are customer service and relationships, capacity, and price. In times of strong freight demand, customer service and capacity become increasingly important, and in times of weak freight demand, pricing becomes increasingly important.
With our acquisitions of ACT and MME we have created a super-regional LTL footprint and continue to seek opportunities to expand our door count.
With our acquisitions of ACT and MME we have created a super-regional LTL footprint and continue to seek opportunities to expand our door count and expand network coverage.
In its petition to the US Supreme Court, the broker unsuccessfully argued that the Ninth Circuit’s decision improperly disallowed federal pre-emption, and would expose freight brokers to a patchwork of state regulations across the United States.
In its petition to the US Supreme Court, the broker unsuccessfully argued that the Ninth Circuit’s decision improperly disallowed federal preemption and would expose freight brokers to a patchwork of state regulations across the United States.
In 2022, we purchased 21.4% of our fuel in bulk at our locations across the US and Mexico. We purchased substantially all of the remainder through a network of retail truck stops with which we have negotiated volume purchasing discounts. The volumes we purchase at terminals and through the fuel network vary based on procurement costs and other factors.
In 2023, we purchased 18.4% of our fuel in bulk at our locations across the US and Mexico. We purchased substantially all of the remainder through a network of retail truck stops with which we have negotiated volume purchasing discounts. The volumes we purchase at terminals and through the fuel network vary based on procurement costs and other factors.
For high priority fleets who meet the applicable thresholds, compliance can be achieved by either (i) ensuring that all new vehicles added to the fleet be zero emission, and removing older vehicles once their statutory useful life is reached, or (ii) meeting certain fleet composition requirements (e.g., percentage of zero emission vehicles in the fleet) by certain dates, with the percentage of zero emission vehicles increasing over time, and resulting in 100% zero emission fleets by 2042 (or earlier for certain classes of vehicles).
For high priority fleets who meet the applicable thresholds, compliance can be achieved by either (a) ensuring that all new vehicles added to the fleet be zero emission, and commencing in 2025, removing older vehicles once their statutory useful life is reached, or (b) meeting certain fleet composition requirements (e.g., percentage of zero emission vehicles in the fleet) by certain dates, with the percentage of zero emission vehicles increasing over time, and resulting in 100% zero emission fleets by 2042 (or earlier for certain classes of vehicles).
Our current approach is to replace our tractors between three years and nine years after purchase and to replace our trailers every seven or more years.
Our current approach is to replace our tractors between four and nine years after purchase and to replace our trailers every seven or more years.
Among other changes, the proposal would allow brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
Among other changes, the rule allows brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
Safety Fitness Determination — In January 2016, the FMCSA published a Notice of Proposed Rulemaking ("NPRM") in the Federal Register, regarding carrier safety fitness determination. The NPRM proposed new methodologies that would have determined when a motor carrier was not fit to operate a commercial motor vehicle.
Safety Fitness Determination — In January 2016, the FMCSA published a notice of proposed rulemaking regarding carrier safety fitness determination, which proposed new methodologies that would have determined when a motor carrier was not fit to operate a commercial motor vehicle.
Whether this legislation will ultimately become law is uncertain. Furthermore, in April 2022, the FMCSA issued a notice of intent announcing its intention to propose a rule during 2023 which will require certain commercial vehicles to be equipped with speed limiters.
Whether this legislation will ultimately become law is uncertain. Furthermore, in April 2022, the FMCSA issued a notice of intent announcing its intention to propose a rule during 2023 which will require certain commercial vehicles to be equipped with speed limiters; however, no final rule was proposed.
We continue to update our fleet with more fuel-efficient post-2014 US EPA emission compliant engines, install aerodynamic devices on our tractors, and equip our trailers with trailer blades, which have led to meaningful improvements in fuel efficiency.
We continue to update our fleet with more fuel-efficient and emission compliant engines, install aerodynamic devices on our tractors, and equip our trailers with trailer blades, which have led to meaningful improvements in fuel efficiency.
Public comment on the supplemental notice will remain open until March 2023, and it remains to be seen, what, if any, final rules will stem therefrom. The FMCSA, in conjunction with the NHTSA, have announced their intention to propose a rule for performance standards and maintenance requirements for automatic emergency braking on heavy trucks.
Public comment closed in March 2023, and it remains to be seen, what, if any, final rules will stem therefrom. The FMCSA, in conjunction with the NHTSA, have announced their intention to propose a rule for performance standards and maintenance requirements for automatic emergency braking on heavy trucks.
The proposed ACF regulations, generally set to begin in January 2024, apply to three categories of fleet operators: (1) high priority fleets who meet certain thresholds of trucks or revenue (including fleets that operate 50 or more trucks, or generate $50 million or more in gross annual revenue), (2) drayage fleets, and (3) state and local government public fleets.
The ACF regulations apply to three categories of fleet operators: (1) high priority fleets who meet certain thresholds of trucks or revenue (including fleets that operate 50 or more trucks, or generate $50 million or more in gross annual revenue), (2) drayage fleets, and (3) state and local government public fleets.
Commercial Driver's License Drug and Alcohol Clearinghouse — In December 2016, the FMCSA amended the Federal Motor Carrier Safety Regulations to establish requirements of the Commercial Driver's License Drug and Alcohol Clearinghouse, a database under its administration containing information about violations of the FMCSA's drug and alcohol testing program for holders of commercial driver's licenses.
Moving Ahead for Progress in the 21st Century Bill Commercial Driver's License Drug and Alcohol Clearinghouse — In December 2016, the FMCSA amended the Federal Motor Carrier Safety Regulations to establish requirements of the Commercial Driver's License Drug and Alcohol Clearinghouse, a database under its administration containing information about violations of the FMCSA's drug and alcohol testing program for holders of commercial driver's licenses.
Services provided to our largest customer generated 13.1% and 16.1% of total revenue in 2022 and 2021, respectively. Revenue generated by our largest customer is reported in each of our reportable operating segments. No other customer accounted for 10% or more of total revenue in 2022 or 2021.
Services provided to our largest customer generated 11.2% and 13.1% of total revenue in 2023 and 2022, respectively. Revenue generated by our largest customer is reported in each of our reportable operating segments. No other customer accounted for 10% or more of total revenue in 2023 or 2022.
Additionally, our diversity and inclusion networks demonstrate that when diverse voices and perspectives are heard, unique, powerful, and creative solutions are the result. It is with this commitment in mind that we build upon our Employee Resource Groups ("ERG"s) now and in the immediate future.
These efforts are evidenced in our hiring practices and employee training programs. Additionally, our diversity and inclusion networks demonstrate that when diverse voices and perspectives are heard, unique, powerful, and creative solutions are the result. It is with this commitment in mind that we build upon our Employee Resource Groups ("ERG"s) now and in the immediate future.
Under the ABC Test, a worker is presumed to be an employee and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: • the worker is free from control and direction in the performance of services; • the worker is performing work outside the usual course of the business of the hiring company; • the worker is customarily engaged in an independently established trade, occupation, or business.
Under the ABC Test, a worker is presumed to be an employee and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria: • the worker is free from control and direction in the performance of services; • the worker is performing work outside the usual course of the business of the hiring company; • the worker is customarily engaged in an independently established trade, occupation, or business. 21 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
In December 2022, the EPA adopted a final rule that reflected a compromise of the options previously proposed, with new emissions standards of nitrogen oxides for heavy-duty motor vehicles beginning with model year 2027 being more than 80% stronger than current emission standards, with the intent to reduce heavy-duty emissions by almost 50% from today’s levels by 2045.
In December 2022, the EPA adopted a final rule that reflected a compromise of the options previously proposed, with new emissions standards of nitrogen oxides for heavy-duty motor vehicles beginning with model year 2027 being 15 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. more than 80% stronger than current emission standards, with the intent to reduce heavy-duty emissions by almost 50% from today’s levels by 2045.
Regional Truckload and LTL Presence We believe that regional truckload operations, which expanded with the 2017 Merger and our recent acquisitions of ACT, MME, and other companies, offer several advantages, including: • obtaining greater freight volumes, • achieving higher revenue per mile by focusing on high-density freight lanes to minimize non-revenue miles, • enhancing our ability to recruit and train qualified driving associates, • enhancing safety and driver development and retention, • enhancing our ability to provide a high level of service and consistent capacity to our customers, • enhancing accountability for performance and growth, • furthering our full truckload capabilities to provide various shipping solutions to our customers, • expanding into the LTL space, • furthering our logistics capabilities to contract with more third-party capacity providers, and • extending our transportation infrastructure, knowledge and scale to strengthen our relationships with third party providers.
Xpress, and other companies, combined with our entrance into the LTL industry through our acquisitions of ACT and MME, offer several advantages, including: • obtaining greater freight volumes, • achieving higher revenue per mile by focusing on high-density freight lanes to minimize non-revenue miles, • enhancing our ability to recruit and train qualified driving associates, • enhancing safety and driving associate development and retention, • enhancing our ability to provide a high level of service and consistent capacity to our customers, • enhancing accountability for performance and growth, • furthering our full truckload capabilities to provide various shipping solutions to our customers, • expanding into the LTL space, • furthering our logistics capabilities to contract with more third-party capacity providers, and • extending our transportation infrastructure, knowledge and scale to strengthen our relationships with third party providers.
There were approximately 28,100 full-time employees in our total headcount of approximately 28,500 employees as of December 31, 2022, which was comprised of: Company driving associates (including driver trainees) 19,500 Technicians and other equipment maintenance personnel 1,600 Corporate and terminal leadership and support personnel 7,400 Total 28,500 As of December 31, 2022, we had approximately 1,500 Trans-Mex driving associates in Mexico that were represented by a union.
There were approximately 34,300 full-time employees in our total headcount of approximately 34,800 employees as of December 31, 2023, which was comprised of: Company driving associates (including driver trainees) 25,100 Technicians and other equipment maintenance personnel 1,300 Corporate and terminal leadership and support personnel 8,400 Total 34,800 As of December 31, 2023, we had approximately 1,500 Trans-Mex driving associates in Mexico that were represented by a union.
However, in December 2015, as part of the Fixing America's Surface Transportation ("FAST") Act, Congress mandated that the FMCSA remove all CSA scores from public view until a more comprehensive study regarding the effectiveness of CSA improving truck safety could be completed.
Certain CSA scores were initially published and made available to the general public. However, in December 2015, as part of the Fixing America's Surface Transportation ("FAST") Act, Congress mandated that the FMCSA remove all CSA scores from public view until a more comprehensive study regarding the effectiveness of CSA improving truck safety could be completed.
It has also led to similar legislation in other states, with Oregon, Washington, New York, New Jersey, and Massachusetts already adopting ACT, and a number of other states either considering adoption of ACT or affirmatively conducting a preliminary rulemaking process to that effect.
It has also led to similar legislation in other states, with several already adopting ACT, and a number of other states either considering adoption of ACT or affirmatively conducting a preliminary rulemaking process to that effect.
These border requirements, as well as any future vaccination, testing or mask mandates that are allowed to go into effect, could, among other things, (i) cause our unvaccinated employees (particularly our unvaccinated driving associates) to go to smaller employers, if such employers are not subject to future mandates, or leave the trucking industry, (ii) result in logistical issues, increased expenses, and operational issues from arranging for weekly tests of our unvaccinated employees, especially our unvaccinated driving associates, (iii) result in increased costs for recruitment and retention of driving associates, including the cost of weekly testing, and (iv) result in decreased revenue if we are unable to recruit and retain driving associates.
Any similar future outbreak, border restrictions, or vaccination, testing or mask mandates that are allowed to go into effect, could, among other things, (1) cause our unvaccinated employees (particularly our unvaccinated driving associates) to go to smaller employers, if such employers are not subject to future mandates, or leave the trucking industry, (2) result in logistical issues, increased expenses, and operational issues from arranging for weekly tests of our unvaccinated employees, especially our unvaccinated driving associates, (3) result in increased costs for recruitment and retention of driving associates, including the cost of weekly testing, and (4) result in decreased revenue if we are unable to recruit and retain driving associates.
Changes in the current market for used tractors and trailers, regulatory changes, and difficult market conditions faced by tractor and trailer manufacturers, which have recently resulted in constrained availability of revenue equipment, may result in price increases that may affect the period of time for which we operate our equipment.
Changes in the current market for used tractors and trailers, regulatory changes, and difficult market and supply chain conditions faced by tractor and trailer manufacturers may result in price increases that may affect the period of time for which we operate our equipment.
This blueprint builds on the work done under the FSMA, and while it is still unclear what, if any, changes to the current governing framework may ultimately take effect, further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward.
This blueprint builds on the work done under the FSMA, and while it is still unclear what, if any, changes to the current governing framework may ultimately take effect, further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward. 20 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
ARB is also in the process of considering and finalizing what is known as the Advanced Clean Fleets (“ACF”) regulation, also aimed at transitioning to zero emission vehicles beginning in 2024. ACF is a purchase requirement for medium and heavy-duty fleets to adopt an increasing percentage of zero emission trucks, designed to complement the sell-side obligations of ACT.
In 2023, ARB finalized what is known as the Advanced Clean Fleets ("ACF") regulation, also aimed at transitioning to zero emission vehicles which became effective in January 2024. ACF is a purchase requirement for medium and heavy-duty fleets to adopt an increasing percentage of zero emission trucks, designed to complement the sell-side obligations of ACT.
We became Knight-Swift Transportation Holdings Inc. on September 8, 2017 through the 2017 Merger transaction. Since 1966, we have continuously expanded our nationwide network and our service offerings through organic growth, as well as through the acquisition of twenty-two companies.
We became Knight-Swift Transportation Holdings Inc. on September 8, 2017 through the 2017 Merger transaction. Since 1966, we have expanded our nationwide network and our service offerings through organic growth, as well as through the acquisition of twenty-four companies including our most recent U.S. Xpress Acquisition.
Hours-of-service From time to time, the FMCSA proposes and implements changes to regulations impacting hours-of-service. Such changes can negatively impact our productivity and affect our operations and profitability by reducing the number of hours per day or week our driving associates and independent contractors may operate and/or disrupting our network. No such changes are currently proposed.
Such changes can negatively impact our productivity and affect our operations and profitability by reducing the number of hours per day or week our driving associates and independent contractors may operate and/or disrupting our network. No such changes are currently proposed.
Our logistics and intermodal services include brokerage, intermodal, and certain logistics, freight management, and non-trucking services, which provide various shipping alternatives and transportation modes for customers by leveraging our extensive trailer fleet and utilizing our expansive network of third-party capacity providers and rail partners.
Our logistics and intermodal services include brokerage, intermodal, and certain logistics, freight management, and non-trucking services, which provide various shipping alternatives and transportation modes for customers by leveraging our extensive trailer fleet, enabling us to provide "power only" services that offer our customers additional flexibility and efficiency, and utilizing our expansive network of third-party capacity providers and rail partners.
Our LTL segment operated an average of 3,176 tractors and 8,431 trailers. Additionally, the Intermodal segment operated an average of 613 tractors and 11,786 intermodal containers. Our four reportable segments are Truckload, LTL, Logistics, and Intermodal. We have historically grown through a combination of organic growth, and through mergers and acquisitions (discussed below).
Our LTL segment operated an average of 3,201 tractors and 8,482 trailers. Additionally, the Intermodal segment operated an average of 639 tractors and 12,730 intermodal containers. Our four reportable segments are Truckload, LTL, Logistics, and Intermodal. We have historically grown through a combination of organic growth, and through mergers and acquisitions (discussed below).
However, the proposal also requires a second sample using either urine or an oral fluid test if a hair test is positive, if a donor is unable to provide a sufficient amount of hair for faith-based or medical reasons, or due to an insufficient amount or length of hair.
However, the proposal also requires a second sample using either urine or an oral fluid test if a hair test is positive, if a donor is unable to provide a sufficient amount of hair for faith-based or medical 16 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. reasons, or due to an insufficient amount or length of hair.
Additionally, our independent contractor agreements include statements that independent contractors must comply with the Company's speed policy. In September 2022, the FMCSA issued an advance Notice of Proposed Rulemaking that would require fleets and independent contractors to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
In September 2022, the FMCSA issued an advance notice of proposed rulemaking that would require fleets and independent contractors to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
In September 2020, the Department of Health and Human Services ("DHHS") announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.
It is expected that the rule may exacerbate the already existing shortage of drivers. In September 2020, the Department of Health and Human Services ("DHHS") announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.
However, adoption and implementation could negatively impact our business by increasing our compliance obligations and related expenses. Truck Parking In November 2022, Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States.
However, adoption and implementation could negatively impact our business by increasing our compliance obligations and related expenses. 22 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. Infrastructure Spending In November 2022, Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States.
Certain of the Company’s subsidiaries currently hold FMCSA brokerage authority, so while the impact of this guidance remains to be seen, the Company does not currently anticipate an adverse impact on its operations.
Certain of the Company’s subsidiaries currently hold FMCSA brokerage authority, so while the impact of this guidance remains to be seen, the Company does not currently anticipate an adverse impact on its operations. Hours-of-service From time to time, the FMCSA proposes and implements changes to regulations impacting hours-of-service.
Tractors and certain trailer types would be subject to the Phase 2 standards beginning with model-year 2021, increasing in stringency through model-year 2024, and phasing in completely by model-year 2027. This rule marks the first time federal mandates will be applied to trailers, with respect to aerodynamics and low-rolling resistance tires.
Originally, the rule was written so that tractors and certain trailer types would be subject to the Phase 2 Standards beginning with model-years 2018 and 2021 respectively, increasing in and phasing in completely by model-year 2027. This rule would have marked the first time federal mandates would have been applied to trailers, with respect to aerodynamics and low-rolling resistance tires.
Some states have adopted initiatives to increase their revenues from items such as unemployment, workers' compensation, and income taxes, and we believe a reclassification of independent contractors as employees would help states with this initiative.
Some states have adopted initiatives to increase their revenues from items such as unemployment, workers' compensation, and income taxes, and we believe a reclassification of independent contractors as employees would help states with this initiative. Federal and state taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status.
Fleet leaders supervise driver leaders, who are responsible for the general operation of our trucks and their driving associates, focusing on driving associate retention, productivity per truck, fuel consumption, fuel efficiency (with respect to driver-controllable idle time), safety, and scheduled maintenance. Customer service representatives are assigned specific customers to ensure specialized, high-quality service, and frequent customer contact.
Terminal leaders are also responsible for serving existing customers in their areas. Fleet leaders supervise driver leaders, who are responsible for the general operation of our trucks and their driving associates, focusing on driving associate retention, productivity per truck, fuel consumption, fuel efficiency (with respect to driver-controllable idle time), safety, and scheduled maintenance.
Our top 25 customers drive a substantial portion of our total revenue, as follows: • In 2022, our top 25, top 10, and top 5 customers accounted for 48.5%, 36.1%, and 26.8% of our total revenue, respectively. • In 2021, our top 25, top 10, and top 5 customers accounted for 54.9%, 40.9%, and 29.4% of our total revenue, respectively.
Our top 25 customers drive a substantial portion of our total revenue, as follows: • In 2023, our top 25, top 10, and top 5 customers accounted for 45.3%, 31.5%, and 22.7% of our total revenue, respectively. • In 2022, our top 25, top 10, and top 5 customers accounted for 48.5%, 36.1%, and 26.8% of our total revenue, respectively.
Revenue Equipment We operate a modern fleet of company tractors to help attract and retain driving associates, promote safe operations, and reduce maintenance and repair costs. In 2022, we obtained the majority of our revenue equipment through cash purchases, and in the future, we will continue to monitor leasing opportunities.
Revenue Equipment We operate a modern fleet of company tractors intended to help attract and retain driving associates, promote safe operations, and reduce maintenance and repair costs. In 2023, we obtained our revenue equipment through a combination of cash purchases and finance leases.
Pursuant to a new rule finalized by the FMCSA, beginning in November 2024 states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver’s license and must revoke a driver’s commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations. 16 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Commencing in November 2024, states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver’s license and must revoke a driver’s commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
The proposal also stipulates that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. Adoption of these changes could negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
The rule also stipulates that "available financial security" falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund. Implementation and compliance with these changes may negatively impact our business by increasing our compliance obligations, operating costs, and related expenses. 17 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Carriers are grouped by category with other carriers that have a similar number of safety events (i.e. crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile or score to prioritize them for interventions if they are above a certain threshold. Certain CSA scores were initially published and made available to the general public.
Carriers are grouped by category with other carriers that have a similar number of safety events (i.e., crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile or score to prioritize them for interventions if they are above a certain threshold. 18 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
During 2022, we covered 1.4 billion loaded miles for shippers throughout North America, contributing to consolidated total revenue of $7.4 billion and consolidated operating income of $1.1 billion. During 2022, the Truckload segment operated an average of 18,110 tractors (comprised of 16,228 company tractors and 1,882 independent contractor tractors) and 74,779 trailers.
During 2023, we covered 1.6 billion loaded miles for shippers throughout North America, contributing to consolidated total revenue of $7.1 billion and consolidated operating income of $0.3 billion. During 2023, the Truckload segment operated an average of 20,948 tractors (comprised of 18,821 company tractors and 2,127 independent contractor tractors) and 87,865 trailers.
Additionally, implementation of the Phase 2 Standards as they relate to trailers has been challenged in the US Court of Appeals for the District of Columbia.
The final rule was effective in December 2016, but has since been subject to challenges and delays. Additionally, implementation of the Phase 2 Standards as they relate to trailers was challenged in the US Court of Appeals for the District of Columbia.
Additionally, in a January 2023 Notice of Proposed Rulemaking, the FMCSA proposed more oversight of truck brokers, freight forwarders, and the surety bond and trust companies that back them.
Brokerage Operations — In a November 2023 final rule, the FMCSA implemented more oversight of truck brokers, freight forwarders, and the surety bond and trust companies that back them.
While we electronically govern the speed of substantially all of our company tractors, such legislation could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations. For safety, we electronically govern the speed of substantially all of our company tractors.
While we electronically govern the speed of substantially all of our company tractors and require our independent contractors to comply with the Company's speed policy, such legislation could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations. 19 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
In August 2022, the Inflation Reduction Act of 2022 was signed into law by President Biden. Among other considerations, the Inflation Reduction Act contains provisions relating to energy, climate change, and tax reform.
Among other considerations, the Inflation Reduction Act contains provisions relating to energy, climate change, and tax reform.
Diversity, Equity, and Inclusion Diversity, equity, and inclusion are pillars supporting our innovative culture. We are committed to fostering a diverse workforce and an inclusive environment, which we believe allows us to leverage the effects of diversity to achieve a competitive business advantage. These efforts are evidenced in our hiring practices and employee training programs.
Customer service representatives are assigned specific customers to ensure specialized, high-quality service, and frequent customer contact. Diversity, Equity, and Inclusion Diversity, equity, and inclusion are pillars supporting our innovative culture. We are committed to fostering a diverse workforce and an inclusive environment, which we believe allows us to leverage the effects of diversity to achieve a competitive business advantage.
Industry groups are generally in favor of the bill, as a lack of available parking has negatively impacted the industry as a whole, including the Company and its subsidiaries.
Industry groups are generally in favor of the bill, as a lack of available parking has negatively impacted the industry as a whole, including the Company and its subsidiaries. Brokerage Liability Recently, federal courts have reached different decisions on the issue of whether preemption applies to broker liability.
Most recently, the Protecting the Rights to Organize ("PRO") Act was passed by the US House of Representatives and received by the US Senate in March 2021, and remains with the Senate’s Committee on Health, Education, Labor, and Pensions. The PRO Act proposes to apply the "ABC Test" for classifying workers under Federal Fair Labor Standards Act claims.
The Protecting the Rights to Organize ("PRO") Act was passed by the US House of Representatives and received by the US Senate in March 2021, which was further sent to the Senate's Committee on Health, Education, Labor, and Pensions.
Our terminal leaders work with driver leaders, customer service representatives, and other operations personnel to coordinate the needs of both our customers and our driving associates. Terminal leaders are also responsible for serving existing customers in their areas.
Terminal Staff Most of our large terminals are staffed with terminal leaders, fleet leaders, driver leaders, planners, safety coordinators, shop leaders, technicians, and customer service representatives. Our terminal leaders work with driver leaders, customer service representatives, and other operations personnel to coordinate the needs of both our customers and our driving associates.
The petition was generally disfavored by transportation industry participants, citing, among other things, the petition’s failure to address privacy and data security risks. It remains to be seen what rules, if any, may stem from this notice. 19 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
The petition was generally disfavored by transportation industry participants, citing, among other things, the petition’s failure to address privacy and data security risks. It remains to be seen what rules, if any, may stem from this notice. However, in February 2023 the FMCSA announced a new operational test for monitoring and enforcing driver and motor carrier safety compliance standards.
It remains unclear whether any regulatory changes will stem from the apprenticeship program. 17 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
It remains unclear whether any regulatory changes will stem from the apprenticeship program.
If we were to receive a conditional or unsatisfactory DOT safety rating, it could adversely affect our business, as some of our existing customer contracts require a satisfactory DOT safety rating. 18 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Our motor carriers currently have a satisfactory DOT safety rating, which is the best available rating under the current safety rating scale. If we were to receive a conditional or unsatisfactory DOT safety rating, it could adversely affect our business, as some of our existing customer contracts require a satisfactory DOT safety rating.
The Notice of Proposed Rulemaking considers regulatory modifications in five areas: (i) assets readily available, (ii) immediate suspension of broker/freight forwarder operating authority, (iii) surety or trust responsibilities, (iv) enforcement authority, and (v) entities eligible to serve as BMC-85 trustees.
The final rule, which became effective in January 2024, modified regulations in five areas: (1) assets readily available, (2) immediate suspension of broker/freight forwarder operating authority, (3) surety or trust responsibilities, (4) enforcement authority, and (5) entities eligible to serve as BMC-85 trustees.
If the proposal is accepted, DHHS expects to add fentanyl to the testing panel as early as the first quarter of 2023.
If the proposal is accepted, DHHS expects to add fentanyl to the testing panel at some point in 2024.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, acquisitions involve numerous risks, any of which could have a materially adverse effect on our business and results of operations, including: • the acquired company may not achieve anticipated revenue, earnings, or cash flow; • we may assume liabilities beyond our estimates or what was disclosed to us; • we may be unable to successfully assimilate or integrate the acquired company's operations or assets into our business and realize the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; • transaction costs and acquisition-related integration costs could adversely affect our results of operations in the period in which such costs are recorded; • diverting our management's attention from other business concerns; • risks of entering into new markets or business offerings in which we have had no or only limited prior experience; and • the potential loss of customers, key employees, or driving associates of the acquired company. 26 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Biggest changeXpress) involve numerous risks, any of which could have a materially adverse effect on our business and results of operations, including: • the acquired company may not achieve anticipated revenue, earnings, or cash flow; • we may assume liabilities beyond our estimates or what was disclosed to us; • we may be unable to successfully assimilate or integrate the acquired company's operations or assets into our business and realize the anticipated economic, operational, and other benefits in a timely manner, which could result in substantial costs and delays or other operational, technical, or financial problems; • transaction costs and acquisition-related integration costs could adversely affect our results of operations in the period in which such costs are recorded; • the potential for deficiencies in internal controls at the acquired business, as well as implementing our own management information systems, operating systems and internal controls for the acquired operations; • the timing and impact of purchase accounting adjustments; 27 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. • diverting our management's attention from other business concerns; • risks of entering into new markets or business offerings in which we have had no or only limited prior experience; and • the potential loss of customers, key employees, or driving associates of the acquired company.
The following factors could limit our growth opportunities and have a materially adverse effect on our results of operations: • many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates or maintain or grow profitability of our business; • some of our customers operate their own private trucking fleets and they may decide to transport more of their own freight; • competition from non-asset-based and other logistics and freight brokerage companies may adversely affect our customer relationships and freight rates; • advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments; and • our brand names are valuable assets that are subject to the risk of adverse publicity (whether or not justified), which could result in the loss of value attributable to our brand and reduced demand for our services. 24 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
The following factors could limit our growth opportunities and have a materially adverse effect on our results of operations: • many of our competitors periodically reduce their freight rates to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase freight rates or maintain or grow profitability of our business; • some of our customers operate their own private trucking fleets and they may decide to transport more of their own freight; • competition from non-asset-based and other logistics and freight brokerage companies may adversely affect our customer relationships and freight rates; 25 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. • advances in technology may require us to increase investments in order to remain competitive, and our customers may not be willing to accept higher freight rates to cover the cost of these investments; and • our brand names are valuable assets that are subject to the risk of adverse publicity (whether or not justified), which could result in the loss of value attributable to our brand and reduced demand for our services.
If we were unable to repay those amounts, the lenders could use the collateral granted to satisfy all or part of the debt owed to them. If the lenders accelerated our debt repayments, we might not have sufficient assets to repay all amounts borrowed. In addition, we have other financing that includes certain affirmative and negative covenants and cross-default provisions.
If we were unable to repay those amounts, the lenders could use any collateral granted to satisfy all or part of the debt owed to them. If the lenders accelerated our debt repayments, we might not have sufficient assets to repay all amounts borrowed. In addition, we have other financing that includes certain affirmative and negative covenants and cross-default provisions.
Increased regulation has increased the cost of our new tractors and could impair equipment productivity, in some cases, resulting in lower fuel mileage, and increasing our operating expenses. Future use of autonomous tractors could increase the price of new tractors and decrease the value of used, non-autonomous tractors .
Increased regulation has increased the cost of our new tractors and could impair equipment productivity, in some cases, resulting in lower fuel mileage, and increasing our operating expenses. Future use of autonomous and alternative fuel tractors could increase the price of new tractors and decrease the value of used, non-autonomous tractors .
Aside from our dedicated operations, we generally do not have long-term contractual relationships, rate agreements, or minimum volume guarantees with our customers. There is no assurance any of our customers will continue to utilize our services, renew our existing contracts, continue at the same volume levels, or not seek to modify terms of existing contracts.
Aside from our dedicated operations, we generally do not have long-term contractual relationships, rate agreements, or minimum volume guarantees with our customers. There is no assurance any of our customers will continue to utilize our services, renew our existing contracts, continue at the same volume levels, or not seek to modify terms of existing contracts, including rates.
If we received a conditional or unsatisfactory DOT safety rating or an unfavorable ranking under the CSA program, it could lead to increased risk of liability, increased insurance, maintenance and equipment costs, and potential loss of customers, which could materially adversely affect our business, financial condition, and results of operations.
If we, or one of our subsidiaries, received a conditional or unsatisfactory DOT safety rating or an unfavorable ranking under the CSA program, it could lead to increased risk of liability, increased insurance, maintenance and equipment costs, and potential loss of customers, which could materially adversely affect our business, financial condition, and results of operations.
Declines in consumer confidence, decreases in domestic spending, economic contractions, rating agency actions, and other trends in the credit market may impair our future ability to secure financing on satisfactory terms, or at all. 33 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Declines in consumer confidence, decreases in domestic spending, economic contractions, rating agency actions, and other trends in the credit market may impair our future ability to secure financing on satisfactory terms, or at all. 35 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We expect to continue to pay increased prices for equipment and incur additional expenses for the foreseeable future. Furthermore, a decrease in vendor output may have a materially adverse effect on our ability to purchase a quantity of new revenue equipment that is sufficient to sustain our desired growth rate and to maintain a late-model fleet.
We expect to continue to pay increased prices for equipment and incur additional expenses for the foreseeable future. Furthermore, a decrease in vendor output may have a materially adverse effect on our ability to purchase or take possession of a quantity of new revenue equipment that is sufficient to sustain our desired growth rate and to maintain a late-model fleet.
Our intermodal operations use railroads and some third-party drayage carriers to transport freight for our customers, and intermodal dependence on railroads could increase as intermodal services expand. In certain markets, rail service is limited to a few railroads or even a single railroad. Intermodal providers have experienced poor service from providers of rail-based services in the past.
Our intermodal operations use railroads and some third-party drayage carriers to transport freight for our customers, and intermodal dependence on railroads could increase if we expand our intermodal services. In certain markets, rail service is limited to a few railroads or even a single railroad. Intermodal providers have experienced poor service from providers of rail-based services in the past.
"Industry Regulation" in Part I, Item 1 of this Annual Report, discusses in detail industry regulations that could materially impact our business, financial condition, and operations. Receipt of an unfavorable DOT safety rating or an unfavorable ranking under the CSA program could have a material adverse effect on our profitability and operations.
"Industry Regulation" and "Other Regulation" in Part I, Item 1 of this Annual Report, discusses in detail regulations related to our business that could materially impact our business, financial condition, and operations. Receipt of an unfavorable DOT safety rating or an unfavorable ranking under the CSA program could have a material adverse effect on our profitability and operations.
Furthermore, capacity at driving schools may be limited by future outbreaks of COVID-19 or other similar outbreaks and any governmental imposed lockdown or other attempts to reduce the spread of such an outbreak may reduce the pool of potential drivers available to us. Regulatory requirements could further reduce the number of eligible driving associates.
Furthermore, capacity at driving schools may be limited by future outbreaks of COVID-19 or other contagious diseases and any governmental imposed lockdown or other attempts to reduce the spread of such an outbreak may reduce the pool of potential drivers available to us. Regulatory requirements could further reduce the number of eligible driving associates.
Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price. We recently published our Sustainability Report. This report reflects our current initiatives and is not a guarantee that we will be able to achieve them.
Unfavorable ESG ratings may lead to negative investor sentiment toward the Company, which could have a negative impact on our stock price. Our Sustainability Report reflects our current initiatives and is not a guarantee that we will be able to achieve them.
Although our only collective bargaining agreement exists at our Mexican subsidiary, Trans-Mex, we always face the risk that our employees will try to unionize.
Although our only collective bargaining agreement exists at our Mexican subsidiary, we always face the risk that our employees will try to unionize.
Tractor and trailer manufacturers are still experiencing periodic shortages of certain components and supplies, including semiconductor chips, forcing some manufacturers to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.
Tractor and trailer manufacturers have recently experienced periodic shortages of certain components and supplies, including semiconductor chips, forcing some manufacturers to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.
Although we do not have any direct operations in Russia, Belarus, or Ukraine, we may be affected by the broader consequences of the Russia and Ukraine conflict or expansion of such conflict to other areas or countries or similar conflicts elsewhere, such as, increased inflation, supply chain issues, including access to parts for our revenue equipment, embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
Although we do not have any direct operations in the current areas of conflict, we may be affected by the broader consequences of such conflicts or their expansion to other areas or countries or similar conflicts elsewhere, such as increased inflation, supply chain issues, including shortages of new revenue equipment, access to parts for our revenue equipment, embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.
Our risks are grouped into the following risk categories: Strategic Operational Compliance Financial *Industry and Competition *Company Growth *Trucking Industry Regulation *Capital Requirements *Market Changes *Employees *Environmental Regulation *Debt *Macroeconomic Changes *Independent Contractors *Insurance Regulation *Investments *Mergers and Acquisitions *Vendors and Suppliers *ESG *Goodwill and Intangibles *International Operations *Customers *Information Systems *Public Health Strategic Risk Our business is subject to economic, credit, business, and regulatory factors that are largely beyond our control, any of which could have a materially adverse effect on our results of operations.
Our risks are grouped into the following risk categories: Strategic Operational Compliance Financial *Industry and Competition *Company Growth *Trucking Industry Regulation *Capital Requirements *Market Changes *Customers *Internal Controls *Debt *Macroeconomic Changes *Vendors and Suppliers *Environmental Regulation *Goodwill and Intangibles *International Operations *Insurance *Labor Regulation *Investments *Mergers and Acquisitions *Employees *ESG *Taxation *Independent Contractors *Climate Change *Systems and Cybersecurity *Public Health Strategic Risk Our business is subject to economic, credit, business, and regulatory factors that are largely beyond our control, any of which could have a materially adverse effect on our results of operations.
We are dependent on management information and communications systems and other information technology assets (including the data contained therein), and a significant systems disruption or failure in the foregoing, including those caused by cybersecurity breaches, could adversely affect our business.
We are dependent on management information and communications systems and other information technology assets (including the data contained therein), and a significant systems disruption or failure in the foregoing, including those caused by cybersecurity breaches, whether internally or with third parties, could adversely affect our business.
Our business is subject to the risk of litigation. Recently, trucking companies, including us, have been subject to lawsuits, including class action lawsuits, alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal breaks, rest periods, overtime eligibility, and failure to pay for all hours worked.
Recently, trucking companies, including us, have been subject to lawsuits, including class action lawsuits, alleging violations of various federal and state wage and hour laws regarding, among other things, employee meal breaks, rest periods, overtime eligibility, and failure to pay for all hours worked.
If an increase in the corporate tax rate is passed by Congress and signed into law, it could have a materially adverse effect on our financial results and financial position. At December 31, 2022, the Company has a deferred tax liability of $907.9 million.
If an increase in the corporate tax rate is passed by Congress and signed into law, it could have a materially adverse effect on our financial results and financial position. At December 31, 2023, the Company has a deferred tax liability of $951.7 million.
We have instituted programs to monitor and control environmental risks and promote compliance with applicable environmental laws and regulations; however, in the event of any of the following, we could be subject to clean-up costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and results of operations: • we are involved in a spill or other accident involving hazardous substances; • there are releases of hazardous substances we transport; • soil or groundwater contamination is found at our facilities or results from our operations; and • we are found to be in violation of or fail to comply with applicable environmental laws or regulations, then we fail to comply with such laws and regulations.
We have instituted programs to monitor and control environmental risks and promote compliance with applicable environmental laws and regulations; however, in the event of any of the following, we could be subject to clean-up costs and liabilities, including substantial fines or 32 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and results of operations: • we are involved in a spill or other accident involving hazardous substances; • there are releases of hazardous substances we transport; • soil or groundwater contamination is found at our facilities or results from our operations; and • we are found to be in violation of or fail to comply with applicable environmental laws or regulations.
This could have negative consequences that include: • increased vulnerability to adverse economic, industry, or competitive developments; • cash flows from operations that are committed to payment of principal and interest, thereby reducing our ability to use cash for our operations, capital expenditures, and future business opportunities; • increased interest rates that would affect our variable rate debt; • potential noncompliance with financial covenants, borrowing conditions, and other debt obligations (where applicable); • lack of financing for working capital, capital expenditures, product development, debt service requirements, and general corporate or other purposes; and • limits on our flexibility to plan for, or react to, changes in our business, market conditions, or in the economy.
This could have negative consequences that include: • increased vulnerability to adverse economic, industry, or competitive developments; • cash flows from operations that are committed to payment of principal and interest, thereby reducing our ability to use cash for our operations, capital expenditures, and future business opportunities; • increased interest rates that would affect our variable rate debt or our ability to utilize appropriate leverage in general; • potential noncompliance with financial covenants, borrowing conditions, and other debt obligations (where applicable); • lack of financing for working capital, capital expenditures, product development, debt service requirements, and general corporate or other purposes; • limits on our flexibility to plan for, or react to, changes in our business, market conditions, or in the economy; and • undertaking cost-saving measures that adversely impact on our ability to grow and our long-term financial position.
We have growing operations in Mexico, through our wholly-owned subsidiary, Trans-Mex, which subjects us to general international business risks, including: • foreign currency fluctuation; • changes in Mexico's economic strength; • difficulties in enforcing contractual obligations and intellectual property rights; • burdens of complying with a wide variety of international and US export, import, business procurement, transparency, and corruption laws, including the US Foreign Corrupt Practices Act; • changes in trade agreements and US-Mexico relations; • theft or vandalism of our revenue equipment; and • social, political, and economic instability.
We have growing operations in Mexico, which subjects us to general international business risks, including: • foreign currency fluctuation; • changes in Mexico's economic strength; • disruptions related to port of entry restrictions; • difficulties in enforcing contractual obligations and intellectual property rights; • burdens of complying with a wide variety of international and US export, import, business procurement, transparency, and corruption laws, including the US Foreign Corrupt Practices Act; • changes in trade agreements and US-Mexico relations; • theft or vandalism of our revenue equipment; and • social, political, and economic instability.
If we do not make any future acquisitions, our growth rate could be materially and adversely affected. Any future acquisitions we undertake could involve issuing dilutive equity securities or incurring indebtedness, the terms of which may be less favorable to us than anticipated.
If we do not make any future acquisitions, our growth rate could be materially and adversely affected. Any future acquisitions we undertake could involve issuing dilutive equity securities or incurring indebtedness, the terms of which may be less favorable to us than anticipated. In addition, acquisitions (including our recent acquisition of U.S.
For example, an increase in the tax rate from 21% to 26% would result in the immediate increase in our net deferred tax liability of approximately $180.9 million, with a corresponding increase to income tax expense in the year of enactment to reflect the revaluation.
For example, an increase in the tax rate from 21% to 28% would result in the immediate increase in our net deferred tax liability of approximately $273.4 million, with a corresponding increase to income tax expense in the year of enactment to reflect the revaluation.
Declines in demand for the used equipment we sell could result in diminished sales volumes or lower used equipment sales prices, either of which could negatively affect our gains on sales of assets. We have seen a softening of the used equipment market recently.
Declines in demand for the used equipment we sell could result in diminished sales volumes or lower used equipment sales prices, either of which could negatively affect our gains on sales of assets. We have seen a softening of the used equipment market recently, which has led to lower gain on sale in recent quarters.
Railroads could reduce their services in the future for various reasons, which may include work stoppages insufficient network capacity, adverse weather conditions, accidents, or other factors, which could increase the cost of the rail-based services we provide, create cargo claims and could reduce the reliability, timeliness, efficiency, and overall attractiveness of our rail-based intermodal services.
Railroads could reduce their services in the future for various reasons, which may include work stoppages insufficient network capacity, adverse weather conditions, accidents, or other factors, which could increase the cost of the rail-based services we provide, 28 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. could create cargo claims, and could reduce the reliability, timeliness, efficiency, and overall attractiveness of our rail-based intermodal services.
"Environmental Regulation" in Part I, Item 1 of this Annual Report, provides a discussion of the environmental laws and regulations applicable to our business and operations. 31 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. Developments in labor and employment law and any unionizing efforts by employees could have a materially adverse effect on our results of operations.
"Environmental Regulation" in Part I, Item 1 of this Annual Report, provides a discussion of the environmental laws and regulations applicable to our business and operations. Developments in labor and employment law and any unionizing efforts by employees could have a materially adverse effect on our results of operations.
Our full truckload and LTL operations are dependent upon diesel fuel, and accordingly, significant increases in diesel fuel costs or decreases in availability of fuel could materially and adversely affect our results of operations and financial condition if we are unable to pass increased costs on to customers through rate increases or fuel surcharges.
Our full truckload and LTL operations are dependent upon diesel fuel, and accordingly, significant increases in diesel fuel costs or decreases in availability of fuel could materially and adversely affect our results of operations 26 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. and financial condition if we are unable to pass increased costs on to customers through rate increases or fuel surcharges.
To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in future premiums, the resulting expenses could have a materially adverse effect on our business, results of operations, financial condition, or cash flows.
To the extent we experience claims that are uninsured, exceed our coverage limits, involve significant aggregate use of our self-insured retention amounts, or cause increases in future premiums, the resulting expenses could have a materially adverse effect on our business, results of operations, financial condition, or cash flows, and our involvement in legal proceedings could negatively impact our business reputation and our relationship with our customers, suppliers, and employees.
We, our drivers, and our equipment are regulated by the DOT, the EPA, the DHS, and other state and federal agencies in the states, provinces, and countries in which we operate.
We, our drivers, and our equipment are regulated by various federal and state agencies in the states, provinces, and countries in which we operate.
In addition, we may not be able to negotiate additional contracts with railroads to expand our capacity, add additional routes, obtain multiple providers, or obtain railroad services at current cost levels, any of which could limit our ability to provide this service. Our logistics operations are dependent upon the services of third-party capacity providers, including other truckload capacity providers.
In addition, we may not be able to negotiate additional contracts with railroads to expand our capacity, add additional routes, obtain multiple providers, or obtain railroad services at current cost levels, any of which could limit our ability to provide this service.
In the future, we may continue to insure our automobile liability risk through our captive insurance subsidiaries, which will cause increases in the required amount of our restricted cash or other collateral, such as letters of credit. Significant increases in the amount of collateral required by third-party insurance carriers and regulators would reduce our liquidity.
In the future, we may continue to insure our automobile liability risk through our captive insurance subsidiaries, which will cause increases in the required amount of our restricted cash or other collateral, such as letters of credit.
Failure to comply with these covenants and provisions may jeopardize our ability to continue to sell receivables under the facility and could negatively impact our liquidity. Our debt agreements contain variable rate debt that could affect the Company’s financial results should interest rates continue to rise.
Failure to comply with these covenants and provisions may jeopardize our ability to continue to sell receivables under the facility and could negatively impact our liquidity. 36 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. Our debt agreements contain variable rate debt that could affect our financial results should interest rates rise.
A significant disruption of our information technology systems, unauthorized access to or loss of confidential information, or legal claims resulting from our violation of privacy laws could each have a material adverse effect on our business.
A significant disruption of our information technology systems, unauthorized access to or loss of confidential information, or legal claims resulting from our violation of privacy laws could each have a material adverse effect on our business. 31 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We currently do not have employment agreements with our key employees, and the loss of any of their services or inadequate succession planning could negatively impact our operations and future profitability. 28 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We currently do not have employment agreements with our key employees, and the loss of any of their services or inadequate succession planning could negatively impact our operations and future profitability.
If our ESG initiatives fail to satisfy our stakeholders, then our reputation, our ability to attract or retain employees, and our attractiveness as an investment and business partner could be negatively impacted.
If our ESG initiatives fail to satisfy our stakeholders, then our reputation, our ability to attract 34 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. or retain employees, and our attractiveness as an investment and business partner could be negatively impacted.
We are subject to exposure from variable interest rates, as described in Item 7A of this Annual Report. 34 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. We could determine that our goodwill and other indefinite-lived intangibles are impaired, thus recognizing a related impairment loss. We have goodwill and indefinite-lived intangible assets on our balance sheet.
We are subject to exposure from variable interest rates, as described in Item 7A of this Annual Report. We could determine that our goodwill and other indefinite-lived intangibles are impaired, thus recognizing a related impairment loss. We have goodwill and indefinite-lived intangible assets on our balance sheet, which has increased since our U.S. Xpress acquisition.
Although labor challenges in the rail industry appear to have softened, any heightened threat of a work stoppage or actual strike among rail employees could significantly reduce or even halt operating capacity of our intermodal operations, which could have a materially adverse effect on 27 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. our business, financial condition, and results of operations.
Although labor challenges in the rail industry have softened, the future threat or occurrence of a work stoppage or strike among rail employees could significantly reduce or even halt operating capacity of our intermodal operations, which could have a materially adverse effect on our business, financial condition, and results of operations.
If we are unable to recruit, develop, and retain our key employees, our business, financial condition, and results of operations could be adversely affected. We are highly dependent upon the services of certain key employees and we believe their valuable knowledge about the trucking industry and relationships with our key customers and vendors would be difficult to replicate.
We are highly dependent upon the services of certain key employees and we believe their valuable knowledge about the trucking industry and relationships with our key customers and vendors would be difficult to replicate.
If these independent contractors default or experience a lease termination in conjunction with these agreements and we cannot replace them, we may incur losses on amounts owed to us. Also, if liquidity constraints or other restrictions prevent us from providing financing to the independent contractors we contract with in the future, then we could experience a shortage of independent contractors.
Our financing subsidiaries offer financing to some of the independent contractors we contract with to purchase or lease tractors from us. If these independent contractors default or experience a lease termination in conjunction with these agreements and we cannot replace them, we may incur losses on amounts owed to us.
Compliance Risk We operate in a highly regulated industry, and changes in existing regulations or violat i ons of existing or future regulations could have a materially adverse effect on our operations and profitability.
If any of these were to occur, our operations, financial condition, liquidity, results of operations, and cash flows could be adversely impacted. Compliance Risk We operate in a highly regulated industry, and changes in existing regulations or violat i ons of existing or future regulations could have a materially adverse effect on our operations and profitability.
These third-party providers may seek other freight opportunities and may require increased compensation in times of improved freight demand or tight full truckload and LTL capacity. Most of our third-party capacity provider transportation services contracts are cancelable on 30 days' notice or less.
Our logistics operations are dependent upon the services of third-party capacity providers, including other truckload and LTL capacity providers. These third-party providers may seek other freight opportunities and may require increased compensation in times of improved freight demand or tight full truckload and LTL capacity.
Further, our driving associate compensation and independent contractor expenses are subject to market conditions and we may find it necessary to increase driving associate and independent contractor contracted rates in future periods. In addition, we suffer from a high turnover rate of driving associates and independent contractors.
Further, our driving associate compensation and independent contractor expenses are subject to market conditions and we may find it necessary to increase driving associate and independent contractor contracted rates in future periods. Our arrangements with independent contractors expose us to risks that we do not face with our company driving associates.
We could be subjected to similar lawsuits and decisions in the future, which if determined adversely to us, could have an adverse effect on our financial condition.
In the past, we have been the subject of lawsuits, alleging violations of lease agreements or failure to follow the contractual terms, some of which resulted in adverse decisions against the Company. We could be subjected to similar lawsuits and decisions in the future, which if determined adversely to us, could have an adverse effect on our financial condition.
"Industry Regulation" in Part I, Item 1 of this Annual Report, provides discussion of the DOT safety rating system and the CSA program. Compliance with various environmental laws and regulations to which our operations are subject may increase our costs of operations, and non-compliance with such laws and regulations could result in substantial fines or penalties.
Compliance with various environmental laws and regulations to which our operations are subject may increase our costs of operations, and non-compliance with such laws and regulations could result in substantial fines or penalties. We are subject to various environmental laws and regulations.
Any widespread or long-term shortage or rationing of diesel fuel, could materially and adversely affect our results of operations. The conflict between Russia and Ukraine, expansion of such conflict to other areas or countries or similar conflicts could adversely impact our business and financial results.
The conflicts in Ukraine and the Middle East, expansion of such conflicts to other areas or countries, or similar conflicts could adversely impact our business and financial results.
The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute.
Because of the potential expenses and uncertainties associated with litigation, we may from time to time settle disputes, even where we believe we have a meritorious position. Further, not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute.
Beginning in the third quarter of 2022, our intermodal operations have been negatively impacted by threats of labor strikes across the rail industry.
Our intermodal operations were negatively impacted by labor difficulties in the rail industry in 2022.
Our results of operations would be negatively affected and more volatile to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel surcharge program. In 2022, certain isolated 25 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. regions of the US experienced short-term shortages of diesel fuel.
Our results of operations would be negatively affected and more volatile to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel surcharge program. Any widespread or long-term shortage or rationing of diesel fuel could materially and adversely affect our results of operations.
Despite our implementation of safeguards, our information and communication systems are vulnerable to disruption, unauthorized access and viewing, misappropriation, altering, or deleting of information. A security breach could damage our business operations and reputation and could cause us to incur costs associated with repairing our systems, increased security, customer notifications, lost operating revenue, litigation, regulatory action, and reputational damage.
A security breach could damage our business operations and reputation and could cause us to incur costs associated with repairing our systems, increased security, customer notifications, lost operating revenue, litigation, regulatory action, and reputational damage. In addition, the adoption of artificial intelligence ("AI") and other emerging technologies may become significant to operating results in the future.
In addition, there is no guarantee such an attack will fall within the coverage limits of our insurance. 29 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. We receive and transmit confidential data in the normal course of business.
In addition, there is no guarantee such an attack will fall within the coverage limits of our insurance.
Carriers such as us that operate or have operated lease-purchase programs have been more susceptible to lawsuits seeking to reclassify independent contractors that have engaged in such programs.
Carriers such as us that operate or have operated lease-purchase programs have been more susceptible to lawsuits seeking to reclassify independent contractors that have engaged in such programs. We have been subject to litigation relating 33 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. to such matters in the past and continue to be at risk moving forward.
This high turnover rate requires us to spend significant resources on recruiting and retention. Our arrangements with independent contractors expose us to risks that we do not face with our company driving associates. Our financing subsidiaries offer financing to some of the independent contractors we contract with to purchase or lease tractors from us.
In addition, we suffer from a high turnover rate of driving associates and independent contractors. This high turnover rate requires us to spend significant resources on recruiting and retention.
Our lease contracts with independent contractors are governed by federal leasing regulations, which impose specific requirements on us and the independent contractors. In the past, we have been the subject of lawsuits, alleging violations of lease agreements or failure to follow the contractual terms, some of which resulted in adverse decisions against the Company.
Also, if liquidity constraints or other restrictions prevent us from providing financing to the independent contractors we contract with in the future, then we could experience a shortage of independent contractors. Our lease contracts with independent contractors are governed by federal leasing regulations, which impose specific requirements on us and the independent contractors.
In addition, we may be subject, and have been subject in the past, to litigation resulting from trucking accidents. The number and severity of litigation claims may be worsened by distracted driving by both truck drivers and other motorists.
The number and severity of litigation claims may be worsened by various factors, including, among others, weather and distracted driving by both truck drivers and other motorists. These legal proceedings have resulted, and may result in the future, in the payment of substantial settlements or damages and increases in our insurance costs.
Removed
Our business and results of operations have been and will be, and our financial condition may be, impacted by the outbreak of COVID-19 or other similar outbreaks, and such impact could be materially adverse, during the pandemic or after the pandemic subsides.
Added
In the pursuit of our goal of building a nationwide LTL network, there can be no assurance that we will be able to successfully add new markets or terminals, or whether such markets and terminals will be profitable.
Removed
The global spread of COVID-19, including its variants, has created, and any other outbreaks of similar contagious diseases or other adverse public health developments could create, significant volatility, uncertainty and economic disruption. Our operations, particularly in areas of increased COVID-19 infections or similar outbreaks, could be disrupted.
Added
Expansion of our LTL network could disrupt our existing operations, distract management as they seek to improve operations from the expansion, incur additional costs as we work to make new locations operational, and increase the risks associated with our LTL operations if such expansion is detrimental to our profitability, service levels, or operations.
Removed
Furthermore, government vaccine, testing, and mask mandates, or other responses to COVID-19 or similar outbreaks, could increase our turnover and make recruiting more difficult, particularly among our driver personnel.
Added
Unfavorable market and economic conditions such as weakened freight demand and inflation have had a materially adverse impact on our results of operations in the past, and the occurrence or continuance thereof could have similar impacts in the future.
Removed
Negative financial results, operational disruptions, driver and non-driver absences, uncertainties in the market, and a tightening of credit markets, caused by COVID-19 or other similar outbreaks, or a recession that results from such an outbreak, could have a material adverse effect on our liquidity, reduce credit options available to us, and adversely impact our ability to effectively meet our short- and long-term obligations.
Added
Most of our third-party capacity provider transportation services contracts are cancelable on 30 days' notice or less.
Removed
The COVID-19 outbreak has caused, and other similar outbreaks could cause, uncertainty in the economy.
Added
Significant increases in the amount of collateral required by third-party insurance carriers and regulators would reduce our liquidity. 29 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. If we are unable to recruit, develop, and retain our key employees, our business, financial condition, and results of operations could be adversely affected.
Removed
Risks related to an economic slowdown or recession are described in our risk factor titled "Our business is subject to economic, credit, business, and regulatory factors that are largely beyond our control, any of which could have a materially adverse effect on our results of operations." Developments related to COVID-19 have been unpredictable and the extent to which further developments related to COVID-19 or similar outbreaks could impact our operations, financial condition, liquidity, results of operations, and cash flows is highly uncertain.
Added
"Other Regulation" in Part I, Item 1 of this Annual Report, discusses how we could be affected by changes in law or regulations regarding our leasing arrangements with independent contractors. We have operations and business lines in ancillary areas that may increase risk or impair our financial position.
Removed
Such developments may include the duration of the outbreak, the distribution and availability of vaccines and treatments for the disease, the severity of the disease, and the actions that may be taken by various governmental authorities and other third parties in response to an outbreak. 30 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Added
We have from time to time expanded our business lines into ancillary areas, such as support services provided to our customers and third-party carriers, including insurance coverage, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.
Removed
We are subject to various environmental laws and regulations.
Added
We may incur significant costs in the development and refinement of these business lines, some of which may be outside of our core competency.
Removed
These lawsuits have resulted, and may result in the future, in the payment of substantial settlements or damages and increases of our insurance costs. 32 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Added
In addition, the development and expansion of these areas may result in us incurring unanticipated costs to effectively support the new business lines, the potential for disruption to our core business, the distraction of management, the inability to effectively compete with competitors in the areas of our new lines of business, and the potential that we may need to discontinue operations or business lines and incur significant related costs.
Added
We cannot guarantee that these businesses or strategies will be successful and any of these businesses or strategies may not achieve the 30 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC. anticipated financial results and could have an adverse effect on volatility, our business, financial condition and operating results.
Added
Any such failure, inability to upgrade or update, disruption, or security breach (including cyberattacks) related to our systems and technological assets may also impact third-parties upon which we rely in our business, and could hinder our services or such third-parties, which could have a materially adverse effect on our business.
Added
We receive and transmit confidential data in the normal course of business. Despite our implementation of safeguards, our information and communication systems are vulnerable to disruption, unauthorized access and viewing, misappropriation, altering, or deleting of information.
Added
While AI and other technologies may offer substantial benefits, they may also introduce additional risk. If we are unable to successfully implement and utilize such emerging technologies as effectively as competitors, our results of operation may be negatively affected.
Added
The effects of a widespread outbreak of an illness or disease, or any other public health crisis, as well as regulatory measures implemented in response to such events, could negatively impact the health and safety of our workforce and/or adversely impact our business, results of operations, financial condition, and cash flows.
Added
We face a wide variety of risks related to public health crises, epidemics, pandemics or similar events, such as COVID-19.
Added
If a new health epidemic or outbreak were to occur, we could experience broad and varied impacts similar to the impact of COVID-19, including adverse impacts to our workforce, our operations, and financial impacts, such as increased costs, tightening of credit markets, market volatility and a weakened freight environment.

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Item 2. Properties

Properties — owned and leased real estate

5 edited+2 added−0 removed4 unchanged
Biggest changeOwned/Leased Location Brand Owned Leased Total Alabama 6 6 Arizona 6 4 10 Arkansas 2 1 3 California 10 4 14 Colorado 2 1 3 Florida 15 1 16 Georgia 11 2 13 Idaho 2 2 4 Illinois 5 2 7 Indiana 2 1 3 Iowa 1 1 Kansas 2 1 3 Kentucky 2 1 3 Louisiana 6 6 Massachusetts 1 1 Mexico 4 4 8 Michigan 1 1 Minnesota 1 1 2 Mississippi 6 6 Missouri 3 3 Montana 1 1 Nevada 4 1 5 New Jersey 1 1 New Mexico 1 1 New York 2 2 North Carolina 9 1 10 North Dakota 5 5 Ohio 3 1 4 Oklahoma 4 4 Oregon 2 2 Pennsylvania 2 2 4 South Carolina 6 3 9 South Dakota 1 1 Tennessee 10 10 Texas 20 13 33 Utah 3 3 Virginia 2 2 Washington 2 2 West Virginia 1 1 Wisconsin 1 1 2 Wyoming 1 1 Total Properties 161 55 216 37 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Biggest changeOwned/Leased Location Brand Owned Leased Total Alabama 7 2 9 Arizona 6 6 12 Arkansas 5 1 6 California 9 6 15 Colorado 2 1 3 Florida 15 4 19 Georgia 12 7 19 Idaho 2 2 4 Illinois 6 4 10 Indiana 7 2 9 Iowa 3 3 6 Kansas 3 1 4 Kentucky 2 1 3 Louisiana 6 6 Mexico 5 4 9 Michigan 2 2 Minnesota 1 2 3 Mississippi 7 1 8 Missouri 4 1 5 Montana 2 4 6 Nebraska 2 2 Nevada 5 1 6 New Jersey 1 1 New Mexico 1 1 New York 2 1 3 North Carolina 10 2 12 North Dakota 1 8 9 Ohio 5 5 Oklahoma 4 1 5 Oregon 2 1 3 Pennsylvania 3 2 5 South Carolina 7 5 12 South Dakota 4 4 Tennessee 13 1 14 Texas 23 14 37 Utah 3 3 Virginia 2 2 Washington 2 2 4 West Virginia 1 1 Wisconsin 1 4 5 Wyoming 1 5 6 Total Properties 193 105 298 42 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We have over 210 locations in the US and Mexico, including our headquarters, terminals, driving academies, and certain other locations, which are included in the table below. Our terminals may include customer service, marketing, fuel, and/or repair facilities.
We have over 250 locations in the US and Mexico, including our headquarters, terminals, driving academies, and certain other locations, which are included in the table below. Our terminals may include customer service, marketing, fuel, and/or repair facilities.
We also own or lease parcels of vacant land, drop yards, and space for temporary trailer storage for ourselves and other carriers, as well as several non-operating facilities, which are excluded from the table below. As of December 31, 2022, our aggregate monthly rent for all leased properties was approximately $2.9 million with varying terms expiring through December 2053.
We also own or lease parcels of vacant land, drop yards, and space for temporary trailer storage for ourselves and other carriers, as well as several non-operating facilities, which are excluded from the table below. As of December 31, 2023, our aggregate monthly rent for all leased properties was approximately $4.5 million with varying terms expiring through December 2039.
Given the fluidity of our operations, and to promote operational efficiency, our terminal properties are used by each of our Truckload, LTL, Logistics, Intermodal, and non-reportable segments.
Given the fluidity of our operations, and to promote operational efficiency, our terminal properties are used by each of our Truckload, LTL, Logistics, Intermodal, and All Other Segments.
The following listing shows our logos with our corresponding company descriptions, as the logos are used to depict brand representation by location in the accompanying table: Logo Brand Reportable Segment(s) Knight Truckload, Logistics Swift Truckload, Logistics, Intermodal ACT LTL MME LTL Barr-Nunn Transportation LLC Truckload Abilene Motor Express, LLC Truckload 36 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
The following listing shows our logos with our corresponding company descriptions, as the logos are used to depict brand representation by location in the accompanying table: Logo Brand Reportable Segment(s) Knight Truckload, Logistics Swift Truckload, Logistics, Intermodal U.S.
Added
Our U.S. Xpress headquarters located in Chattanooga, Tennessee, covers approximately 29.4 acres of land consisting of about 100,000 square feet of office space.
Added
Xpress Truckload, Logistics ACT LTL MME LTL Barr-Nunn Transportation LLC Truckload Abilene Motor Express, LLC Truckload 41 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeHowever, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.
Biggest changeHowever, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+1 added−1 removed1 unchanged
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total 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 October 1, 2022 to October 31, 2022 — $ — — $ 200,041 November 1, 2022 to November 30, 2022 — $ — — $ 200,041 December 1, 2022 to December 31, 2022 — $ — — $ 200,041 Total as of 12/31 — $ — — $ 200,041 1 On April 25, 2022, we announced that the Board approved the $350.0 million 2022 Knight-Swift Share Repurchase Plan, replacing the 2020 Knight-Swift Share Repurchase Plan.
Biggest changePeriod Total Number of Shares Purchased Average Price Paid per Share Total 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 October 1, 2023 to October 31, 2023 — $ — — $ 200,041 November 1, 2023 to November 30, 2023 — $ — — $ 200,041 December 1, 2023 to December 31, 2023 — $ — — $ 200,041 Total as of December 31, 2023 — $ — — $ 200,041 1 On April 25, 2022, we announced that the Board approved the $350.0 million 2022 Knight-Swift Share Repurchase Plan, replacing the 2020 Knight-Swift Share Repurchase Plan.
See "Equity Plan Information" under Part III, Item 12 of this Annual Report for certain information concerning shares of our common stock authorized for issuance under our equity compensation plans. Dividend Policy We have paid a quarterly cash dividend as Knight-Swift since December 27, 2017.
See "Equity Plan Information" under Part III, Item 12 of this Annual Report for certain information concerning shares of our common stock authorized for issuance under our equity compensation plans. Dividend Policy We have paid a quarterly cash dividend as Knight-Swift since December of 2017.
Future payment of cash dividends, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, tax treatment, and certain corporate law requirements, as well as other factors deemed relevant by our Board.
Future payment of cash dividends, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, tax treatment, contractual restrictions, and certain corporate law requirements, as well as other factors deemed relevant by our Board.
There is no expiration date associated with this share repurchase authorization. See Note 20 in Part II, Item 8 of this Annual Report. 38 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
There is no expiration date associated with this share repurchase authorization. See Note 20 in Part II, Item 8 of this Annual Report. 43 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table shows our purchases of our common stock and the remaining amounts we are authorized to repurchase for each monthly period in the fourth quarter of 2022.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table shows our purchases of our common stock and the remaining amounts we are authorized to repurchase for each monthly period in the fourth quarter of 2023.
The graph assumes that the value of the investment in Knight-Swift's common stock and in each of the indexes (including reinvestment of dividends) was $100 on December 31, 2017, and tracks it through December 31, 2022. The stock price performance included in this graph is not necessarily indicative of Knight-Swift's future stock price performance.
The graph assumes that the value of the investment in Knight-Swift's common stock and in each of the indexes (including reinvestment of dividends) was $100 on December 31, 2018, and tracks it through December 31, 2023. The stock price performance included in this graph is not necessarily indicative of Knight-Swift's future stock price performance.
Stockholders Return Performance Graph The following graph compares the cumulative annual total return of stockholders from December 31, 2017 to December 31, 2022 of our stock relative to the cumulative total returns of the NYSE Composite index and an index of other companies within the trucking industry ( NASDAQ Trucking & Transportation ) over the same period.
Stockholders Return Performance Graph The following graph compares the cumulative annual total return of stockholders from December 31, 2018 to December 31, 2023 of our stock relative to the cumulative total returns of the NYSE Composite index and an index of other companies within the trucking industry ( NASDAQ Trucking & Transportation ) over the same period.
Our most recent dividend was declared in February of 2023 for $0.14 per share of common stock and is scheduled to be paid in March of 2023. We currently expect to continue to pay comparable quarterly cash dividends in the future.
Our most recent dividend was declared in February of 2024 for $0.16 per share of common stock and is scheduled to be paid in March of 2024. We currently expect to continue to pay comparable quarterly cash dividends in the future.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the NYSE under the symbol "KNX". As of December 31, 2022, we had 160,705,569 shares of common stock outstanding. On February 14, 2023, there were 36 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock trades on the NYSE under the symbol "KNX". As of December 31, 2023, we had 161,384,768 shares of common stock outstanding. On February 19, 2024, there were 37 holders of record of our common stock.
Removed
December 31, 2017 2018 2019 2020 2021 2022 Knight-Swift Transportation Holdings Inc. $ 100.00 $ 57.70 $ 83.10 $ 97.75 $ 143.52 $ 124.57 NYSE Composite 100.00 91.05 114.28 122.26 147.54 133.75 NASDAQ Trucking & Transportation 100.00 84.30 103.87 110.40 125.06 101.32
Added
December 31, 2018 2019 2020 2021 2022 2023 Knight-Swift Transportation Holdings Inc. $ 100.00 $ 144.01 $ 169.41 $ 248.73 $ 215.90 $ 239.87 NYSE Composite 100.00 125.51 134.28 162.04 146.89 167.12 NASDAQ Trucking & Transportation 100.00 123.21 130.96 148.36 120.19 161.24

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Note: Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding. 2022 2021 GAAP: Earnings per diluted share $ 4.73 $ 4.45 Adjusted for: Income tax expense attributable to Knight-Swift 1.53 1.38 Income before income taxes attributable to Knight-Swift 6.25 5.83 Amortization of intangibles 1 0.40 0.33 Impairments 2 — — Legal accruals 3 — (0.01) Transaction fees 4 — 0.03 Write-off of deferred debt issuance costs 5 — 0.01 Adjusted income before income taxes 6.66 6.18 Provision for income tax expense at effective rate (1.63) (1.46) Non-GAAP: Adjusted EPS $ 5.03 $ 4.72 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the July 5, 2021 ACT Acquisition, and other acquisitions. 2 "Impairments" reflects the following non-cash impairments: • 2022 impairment of building improvements (within our non-reportable segments); • 2021 impairments related to certain revenue equipment held for sale (within the non-reportable segments and the Truckload segment). 3 "Legal accruals" are included in "Miscellaneous operating expenses" in the consolidated statements of comprehensive income and reflect the following: • During 2022, the Company decreased the estimated exposure related to certain accrued legal matters previously identified as probable and estimable in prior periods based on recent settlement agreements.
Biggest changeMANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS 2023 2022 (Dollars in thousands) GAAP: Net income attributable to Knight-Swift $ 217,149 $ 771,325 Adjusted for: Income tax expense attributable to Knight-Swift 54,768 249,388 Income before income taxes attributable to Knight-Swift 271,917 1,020,713 Amortization of intangibles 1 70,138 64,843 Impairments 2 2,236 810 Legal accruals and loss contingencies 3 7,694 415 Transaction fees 4 6,868 — Other acquisition related expenses 5 7,697 — Severance expense 6 5,151 — Change in fair value of deferred earnout 7 (3,359) — Adjusted income before income taxes 368,342 1,086,781 Provision for income tax expense at effective rate 8 (89,603) (265,585) Non-GAAP: Adjusted Net Income Attributable to Knight-Swift $ 278,739 $ 821,196 Note: Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding. 2023 2022 GAAP: Earnings per diluted share $ 1.34 $ 4.73 Adjusted for: Income tax expense attributable to Knight-Swift 0.34 1.53 Income before income taxes attributable to Knight-Swift 1.68 6.25 Amortization of intangibles 1 0.43 0.40 Impairments 2 0.01 — Legal accruals and loss contingencies 3 0.05 — Transaction fees 4 0.04 — Other acquisition related expenses 5 0.05 — Severance expense 6 0.03 — Change in fair value of deferred earnout 7 (0.02) — Adjusted income before income taxes 2.28 6.66 Provision for income tax expense at effective rate 8 (0.55) (1.63) Non-GAAP: Adjusted EPS $ 1.72 $ 5.03 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the ACT Acquisition, the U.S.
Our objective is to operate our business with industry-leading margins and continued organic growth and growth through acquisitions while providing safe, high-quality, cost-effective solutions for our customers. Knight-Swift uses a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America.
Our objective is to operate our business with industry-leading margins, continued organic growth, and growth through acquisitions while providing safe, high-quality, and cost-effective solutions for our customers. Knight-Swift uses a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America.
The most significant expense in the Logistics segment is purchased transportation that we pay to third-party capacity providers, which is a primarily variable cost, and is included in "Purchased transportation" in the consolidated statements of comprehensive income.
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 consolidated statements of comprehensive income.
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.
In recent years, insurance carriers have raised premiums for many businesses, including transportation companies. 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.
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. Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment.
Changes to this fixed cost are generally attributed to increases or decreases in company-owned equipment, the relative percentage of owned versus leased equipment, and fluctuations in new equipment purchase prices. Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment.
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, expand our network of LTL service centers, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings.
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 and expand our trailer fleet, expand our network of LTL service centers, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings.
This generally applies only to loaded miles for our Truckload and LTL segments 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.
This generally applies only to loaded miles for our Truckload and LTL segments and typically does not offset non-paid empty miles, idle time, nor out-of-route miles driven. Fuel surcharge programs involve a computation based on the change in national or regional fuel prices.
Non-paid Empty Miles Percentage Truckload Percentage of miles without trailer cargo Shipments per Day LTL Average number of shipments completed each business day Weight per Shipment LTL Total weight (in pounds) divided by total shipments Revenue per shipment LTL Total revenue divided by total shipments Revenue xFSR per shipment LTL Total revenue, excluding fuel surcharge, divided by total shipments Revenue per hundredweight LTL Measures yield and is calculated as total revenue divided by total weight (in pounds) times 100 Revenue xFSR per hundredweight LTL Total revenue, excluding fuel surcharge, divided by total weight (in pounds) times 100 Average Tractors Truckload, LTL, Intermodal Average tractors in operation during the period, including company tractors and tractors provided by independent contractors Average Trailers Truckload, LTL Average trailers in operation during the period Average Revenue per Load Logistics, Intermodal Total revenue (excluding intersegment transactions) divided by load count Gross Margin Percentage Logistics Logistics gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of logistics revenue, excluding intersegment transactions Average Containers Intermodal Average containers in operation during the period GAAP Operating Ratio Truckload, LTL, Logistics, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.
Non-paid Empty Miles Percentage Truckload Percentage of miles without trailer cargo Shipments per Day LTL Average number of shipments completed each business day Weight per Shipment LTL Total weight (in pounds) divided by total shipments Revenue per shipment LTL Total revenue divided by total shipments Revenue xFSC per shipment LTL Total revenue, excluding fuel surcharge, divided by total shipments Revenue per hundredweight LTL Measures yield and is calculated as total revenue divided by total weight (in pounds) times 100 Revenue xFSC per hundredweight LTL Total revenue, excluding fuel surcharge, divided by total weight (in pounds) times 100 Average Tractors Truckload, LTL, Intermodal Average tractors in operation during the period, including company tractors and tractors provided by independent contractors Average Trailers Truckload, LTL Average trailers in operation during the period Average Revenue per Load Logistics, Intermodal Total revenue (excluding intersegment transactions) divided by load count Gross Margin Percentage Logistics Logistics gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of logistics revenue, excluding intersegment transactions Average Containers Intermodal Average containers in operation during the period GAAP Operating Ratio Truckload, LTL, Logistics, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.
Refer to Note 10, in Part II, Item 8 of this Annual Report for discussion about the impact of the amortization of definite-lived intangibles on our results for 2022 and 2021. Impairments of Long-lived Assets — Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as necessary.
Refer to Note 10, in Part II, Item 8 of this Annual Report for discussion about the impact of the amortization of definite-lived intangibles on our results for 2023 and 2022. Impairments of Long-lived Assets — Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values, and third-party independent appraisals, as necessary.
There is also some judgement involved with estimating expected forfeiture rates as we have opted to net the benefit of expected forfeitures against our stock-based compensation expense. Refer to Note 21, in Part II, Item 8 of this Annual Report for discussion about the assumptions related to these awards and the impact on our results for 2022 and 2021.
There is also some judgement involved with estimating expected forfeiture rates as we have opted to net the benefit of expected forfeitures against our stock-based compensation expense. Refer to Note 21, in Part II, Item 8 of this Annual Report for discussion about the assumptions related to these awards and the impact on our results for 2023 and 2022.
While rail pricing is determined on an annual basis, purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs.
While rail pricing is primarily determined on an annual basis, purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs.
The remaining increase is primarily due to an increase in owned versus leased equipment and higher depreciation for capital improvements made to our terminals.
Xpress. The remaining increase is primarily due to an increase in owned versus leased equipment and higher depreciation for capital improvements made to our terminals.
Generally, we are paid a predetermined rate per mile or per load for our truckload 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.
Generally, we are paid a predetermined rate per mile or per load for our truckload services. Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, other specialized services, and through the collection of fuel surcharge revenue to mitigate the impact of increases in the cost of fuel.
Refer to Note 18 in Part II, Item 8 of this Annual Report for additional discussion of our short-term and long-term contractual payment obligations related to purchase commitments. 62 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Refer to Note 18 in Part II, Item 8 of this Annual Report for additional discussion of our short-term and long-term contractual payment obligations related to purchase commitments. 68 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We continue to innovate with technology designed to remove friction and allow seamless connectivity, leading to services that we expect will capture new opportunities for revenue growth. 48 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We continue to innovate with technology designed to remove friction and allow seamless connectivity, leading to services that we expect will capture new opportunities for revenue growth. 54 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Results of Operations — Summary Notes regarding presentation: A discussion of changes in our results of operations from 2020 to 2021 has been omitted from this Annual Report, but may be found in "Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Results of Operations — Summary Notes regarding presentation: A discussion of changes in our results of operations from 2021 to 2022 has been omitted from this Annual Report, but may be found in "Item 7.
Our non-reportable segments also include 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 programs, which serve to recover a majority of our fuel costs.
All Other Segments also include 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 programs, which serve to recover a majority of our fuel costs.
Accordingly, comparisons between the Company's 2022 results and prior periods may not be meaningful. Refer to Note 1 in Part II, Item 8 of this Annual Report for a list of our recent acquisitions.
Accordingly, comparisons between the Company's 2023 results and prior periods may not be meaningful. Refer to Note 1 in Part II, Item 8 of this Annual Report for a list of our recent acquisitions.
Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, non-driver employee compensation, amortization of intangible assets, and interest expenses. 44 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, non-driver employee compensation, amortization of intangible assets, and interest expenses. 50 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Consolidated and segment Adjusted Operating Ratios are reconciled to their corresponding GAAP operating ratios under "Non-GAAP Financial Measures," below 45 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Consolidated and segment Adjusted Operating Ratios are reconciled to their corresponding GAAP operating ratios under "Non-GAAP Financial Measures," below 51 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Annual Report filed with the SEC on February 24, 2022. In accordance with accounting treatment applicable to each of our recent acquisitions, Knight-Swift's reported results do not include the operating results of the acquired entities prior to the respective acquisition dates.
Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Annual Report filed with the SEC on February 23, 2023. In accordance with accounting treatment applicable to each of our recent acquisitions, Knight-Swift's reported results do not include the operating results of the acquired entities prior to the respective acquisition dates.
Our LTL segment operates approximately 3,200 tractors and approximately 8,400 trailers, including equipment used for ACT's and MME's dedicated and other businesses.
Our LTL segment operates approximately 3,200 tractors and approximately 8,500 trailers, including equipment used for ACT's and MME's dedicated and other businesses.
Share Repurchases — From time to time, and depending on free cash flow availability, debt levels, stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock. The 2022 Knight-Swift Repurchase Plan had $200.0 million available as of December 31, 2022.
Share Repurchases — From time to time, and depending on Free Cash Flow 1 availability, debt levels, common stock prices, general economic and market conditions, as well as internal approval requirements, we may repurchase shares of our outstanding common stock. The 2022 Knight-Swift Repurchase Plan had $200.0 million available as of December 31, 2023.
During 2022, we increased our door count by over 180 and we expect door capacity to continue to grow in 2023. We remain encouraged by the strong performance within our LTL segment, and we continue to look for both organic and inorganic opportunities to geographically expand our footprint within the LTL market.
During 2023, we increased our door count by over 260 and we expect door capacity to continue to grow in 2024. We remain encouraged by the strong performance within our LTL segment, and we continue to look for both organic and inorganic opportunities to geographically expand our footprint within the LTL market.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Intermodal Segment The Intermodal segment complements our regional operating model, allows us to better serve customers in longer haul lanes, and reduces our investment in fixed assets.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Intermodal Segment The Intermodal segment complements our regional operating model, while also allowing us to better serve customers in longer haul lanes, and reduces our investment in fixed assets.
Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. Knight-Swift evaluated its goodwill associated with the 2017 Merger and various acquisitions as of June 30, 2022 and 2021. The evaluations were completed using fair value measurement guidance prescribed in ASC 350, Intangibles – Goodwill and Other.
Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit. Knight-Swift evaluated its goodwill associated with the 2017 Merger and various acquisitions as of December 31, 2023 and 2022. The evaluations were completed using fair value measurement guidance prescribed in ASC 350, Intangibles – Goodwill and Other.
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 2021 Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.
However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under our 2023 RSA, and availability under the 2021 Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.
If claims development factors that are based upon historical experience had increased by 10%, our claims accrual as of December 31, 2022 would have potentially increased by $70.1 million. Refer to Note 12, in Part II, Item 8 of this Annual Report for discussion about the changes in the claims accrual balance.
If claims development factors that are based upon historical experience had increased by 10%, our claims accrual as of December 31, 2023 would have potentially increased by $61.5 million. Refer to Note 12, in Part II, Item 8 of this Annual Report for discussion about the changes in the claims accrual balance.
Other expenses (income), net — Other expenses (income), net is primarily comprised of losses and (gains) from our various equity investments, including our investment in Embark, as well as certain other non-operating income and expense items that may arise outside of the normal course of business. 2022 Compared to 2021 — The unfavorable change in consolidated other expenses (income), net is primarily due to unrealized losses recognized from our investment in Embark, compared to a gain during 2021.
Other (income) expenses, net — Other (income) expenses, net is primarily comprised of (gains) and losses from our various equity investments, including our investment in Embark, as well as certain other non-operating income and expense items that may arise outside of the normal course of business. 2023 Compared to 2022 — The increased change in consolidated other (income) expenses, net is primarily due to unrealized losses recognized from our investment in Embark in 2022 and a net gain recorded within our portfolio of investments during 2023.
The fair value of the goodwill was established using an equal weighting of both the income and market approaches. In evaluating this quantitative analysis, the Company determined that it was more likely than not that fair value exceeded carrying value for the Company's reporting units as of June 30, 2022 and 2021.
The fair value of the goodwill was established using an equal weighting of both the income and market approaches. In evaluating this quantitative analysis, the Company determined that it was more likely than not that fair value exceeded carrying value for the Company's reporting units as of December 31, 2023 and 2022.
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 Our tractor fleet within the Truckload segment had a weighted average age of 2.7 years and 2.5 years as of December 31, 2022 and 2021, respectively. 3 Note that average trailers includes 8,249 and 6,388 trailers within our non-reportable operating segments.
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 Our tractor fleet within the Truckload segment had a weighted average age of 2.5 years and 2.7 years as of December 31, 2023 and 2022, respectively. 3 Note that average trailers includes 8,724 and 8,249 trailers within our All Other Segment.
"Cash and cash equivalents – restricted" consists of $185.8 million, which is included in "Cash and cash equivalents — restricted" in the consolidated balance sheets and is held by Mohave and Red Rock for claims payments. The remaining $2.8 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.
"Cash and cash equivalents – restricted" consists of $297.3 million, which is included in "Cash and cash equivalents — restricted" in the consolidated balance sheets held by Mohave and Red Rock for claims payments. The remaining $3.9 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.
Non-reportable Segments Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.
All Other Segments Our All Other Segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Principal and Interest Payments — As of December 31, 2022, we had debt, accounts receivable securitization, and finance lease obligations of $1.9 billion, which are discussed under "Material Debt Agreements," below.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Principal and Interest Payments — As of December 31, 2023, we had debt, accounts receivable securitization, and finance lease obligations of $2.7 billion, which are discussed under "Material Debt Agreements," below.
We continue to offer power-only services through our Logistics segment by leveraging our fleet of over 79,000 trailers as of December 31, 2022. • Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.
We continue to offer power-only services through our Logistics segment by leveraging our fleet of over 96,000 trailers as of December 31, 2023. • All Other Segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.
Inflation Most of our operating expenses are inflation-sensitive, with inflation generally leading to increased costs of operations. Price increases in manufacturer revenue equipment has impacted the cost for us to acquire new equipment. Cost increases have also impacted the cost of parts for equipment repairs and maintenance.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Inflation Most of our operating expenses are inflation-sensitive, with inflation generally leading to increased costs of operations. Price increases in manufacturer revenue equipment has impacted the cost for us to acquire new equipment. Cost increases have also impacted the cost of parts for equipment repairs and maintenance.
We additionally had $15.8 million in outstanding letters of credit (discussed below) issued under the 2021 Revolver, leaving $1.0 billion available under the 2021 Revolver. 2 Based on eligible receivables at December 31, 2022, our borrowing base for the 2021 RSA was $456.4 million, while outstanding borrowings were $419.0 million, leaving $37.4 million available under the 2021 RSA. 3 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments.
We additionally had $18.0 million in outstanding letters of credit (discussed below) issued under the 2021 Revolver, leaving $1.0 billion available under the 2021 Revolver. 2 Based on eligible receivables at December 31, 2023, our borrowing base for the 2023 RSA was $527.6 million, while outstanding borrowings were $527.0 million, leaving $0.6 million available under the 2023 RSA. 3 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Segment Review Truckload Segment We generate revenue in the Truckload segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings, with approximately 13,400 irregular route tractors and approximately 4,700 dedicated route tractors in use during 2022.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Segment Review Truckload Segment We generate revenue in the Truckload segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings, with approximately 15,100 irregular route tractors and approximately 5,900 dedicated route tractors in use during 2023.
See further details regarding our share repurchases under Note 20 in Part II, Item 8 of this Annual Report. Working Capital We had working capital surpluses of $599.6 million as of December 31, 2022 and $339.5 million as of December 31, 2021.
See further details regarding our share repurchases under Note 20 in Part II, Item 8 of this Annual Report. Working Capital We had working capital deficit of $116.3 million as of December 31, 2023 and a working capital surplus of $599.6 million as of December 31, 2022.
Early estimates of the full-year 2022 US employment cost index indicate a year-over-year increase of 5.1% 2 and a sequential increase of 1.0% 2 .
Early estimates of the full-year 2023 US employment cost index indicate a year-over-year increase of 0.9% 2 and a sequential increase of 0.7% 2 .
See Note 4 and Note 10 in Part II, Item 8, of this Annual Report for further details regarding the Company's intangible assets, historical amortization, and anticipated future amortization. 2022 Compared to 2021 — The increase in consolidated amortization of intangibles for 2022 is attributed to the ACT, MME, UTXL, and Eleos acquisitions in 2021.
Xpress Acquisition, and other acquisitions. See Note 4 and Note 10 in Part II, Item 8, of this Annual Report for further details regarding the Company's intangible assets, historical amortization, and anticipated future amortization. 2023 Compared to 2022 — The increase in consolidated amortization of intangibles for 2023 is primarily attributed to the U.S. Xpress Acquisition.
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 practices. 2022 Compared to 2021 — The increase in consolidated depreciation and amortization of property and equipment includes a $34.7 million increase of expense from ACT's results for the full year 2022, compared to the portion of 2021 following the acquisition date.
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 practices. 2023 Compared to 2022 — The increase in consolidated depreciation and amortization of property and equipment includes a $41.2 million increase of expense from the results of U.S.
The following discussion should be read in conjunction with Note 2, as it presents uncertainties involved in applying the accounting policies, and provides insight into the quality of management's estimates and variability in the amounts recorded for these critical accounting estimates. Our critical accounting estimates include the following: 64 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
The following discussion should be read in conjunction with Note 2, as it presents uncertainties involved in applying the accounting policies, and provides insight into the quality of management's estimates and variability in the amounts recorded for these critical accounting estimates.
The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities. 2022 Compared to 2021 — The increase in consolidated operating taxes and licenses expense is primarily due to the inclusion of operating taxes and licenses expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates. 2022 2021 2022 vs. 2021 (Dollars in thousands) Increase (decrease) Communications $ 23,656 $ 22,486 5.2 % % of total revenue 0.3 % 0.4 % (10 bps) % of revenue, excluding truckload and LTL fuel surcharge 0.4 % 0.4 % — bps Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems. 2022 Compared to 2021 — The increase in consolidated communications expense is primarily due to the inclusion of $2.2 million of communications expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.
The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities. 2023 Compared to 2022 — The increase in consolidated operating taxes and licenses expense is primarily due to the inclusion of operating taxes and licenses expense from the results of U.S Xpress during 2023. 2023 2022 2023 vs. 2022 (Dollars in thousands) Increase (decrease) Communications $ 29,661 $ 23,656 25.4 % % of total revenue 0.4 % 0.3 % 10 bps % of revenue, excluding truckload and LTL fuel surcharge 0.5 % 0.4 % 10 bps Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems. 2023 Compared to 2022 — The increase in consolidated communications expense is primarily due to the inclusion of $6.3 million of communications expense from the results of U.S.
Consolidated Other Expenses, net The following table summarizes fluctuations in certain non-operating expenses included in our consolidated statements of comprehensive income: 2022 2021 2022 vs. 2021 (Dollars in thousands) Increase (decrease) Interest income $ (5,439) $ (1,173) 363.7 % Interest expense $ 50,803 $ 21,140 140.3 % Other expenses (income), net $ 25,958 $ (28,905) (189.8 %) Income tax expense $ 249,388 $ 230,887 8.0 % Interest income — Interest income includes interest earned from financing revenue equipment to independent contractors, as well as interest earned from our investments. 2022 Compared to 2021 — The increase in consolidated interest income is primarily due to the higher balances in our interest yielding cash accounts, coupled with an increase in interest rates during 2022.
Consolidated Other Expenses, net The following table summarizes fluctuations in certain non-operating expenses included in our consolidated statements of comprehensive income: 2023 2022 2023 vs. 2022 (Dollars in thousands) Increase (decrease) Interest income $ (21,577) $ (5,439) 296.7 % Interest expense $ 127,100 $ 50,803 150.2 % Other (income) expenses, net $ (37,659) $ 25,958 (245.1 %) Income tax (benefit) expense $ 54,768 $ 249,388 (78.0 %) Interest income — Interest income includes interest earned from financing revenue equipment to independent contractors, as well as interest earned from our investments. 2023 Compared to 2022 — The increase in consolidated interest income is primarily due to the higher balances in our interest yielding cash accounts, coupled with an increase in interest rates during 2023.
This resulted in a 2022 effective tax rate of 24.4% and a 2021 effective tax rate of 23.7%. 55 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
This resulted in a 2023 effective tax rate of 20.3% and a 2022 effective tax rate of 24.4%. 60 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Income tax expense — In addition to the discussion below, Note 13 in Part II, Item 8 of this Annual Report provides further analysis related to income taxes. 2022 Compared to 2021 — The increase in consolidated income tax expense was primarily due to an increase in income before income taxes.
Income tax expense — In addition to the discussion below, Note 13 in Part II, Item 8 of this Annual Report provides further analysis related to income taxes. 2023 Compared to 2022 — The decrease in consolidated income tax expense was primarily due to a decrease in income before income taxes and a release of a valuation allowance in the third quarter of 2023.
Prior to the maturity of our 2022 RSA, 2021 Term Loans, 2021 Revolver, Prudential Notes, and other debt, we expect to be contractually obligated to make interest payments of approximately $58.8 million, $156.9 million, $8.5 million, $2.8 million, and $0.1 million, respectively.
Prior to the maturity of our 2023 RSA, 2023 Term Loan, 2021 Term Loans, 2021 Revolver, Prudential Notes, revenue equipment installment notes, and other debt, we expect to be contractually obligated to make interest payments of approximately $58.6 million, $46.8 million, $150.5 million, $12.2 million, $1.6 million, $20.9 million and $1.8 million, respectively.
Refer to Notes 14 and 15 in Part II, Item 8 of this Annual Report for additional discussion of the principal payment obligations related to the 2021 RSA and 2021 Debt Agreement. Refer to Note 16 in Part II, Item 8 of this Annual Report for additional discussion on our contractual principal and interest payment obligations for finance leases.
Refer to Notes 14 and 15 in Part II, Item 8 of this Annual Report for additional discussion of the principal payment obligations related to the 2023 RSA, 2023 Term Loan, and 2021 Debt Agreement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Market Trends and Outlook — On a year-over-year basis, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 2.1% 1 in 2022, as compared to a 5.7% 1 decrease in 2021.
Market Trends and Outlook — On a year-over-year basis, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 2.5% 1 in 2023, as compared to a 1.9% 1 increase in 2022.
Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits" and depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the consolidated statements of comprehensive income. 2022 2021 2022 vs. 2021 (Dollars in thousands, except per load data) Increase (decrease) Total revenue $ 920,707 $ 817,003 12.7 % Revenue, excluding intersegment transactions $ 910,609 $ 798,689 14.0 % GAAP: Operating income $ 133,942 $ 93,920 42.6 % Non-GAAP: Adjusted Operating Income 1 2 $ 135,278 $ 94,685 42.9 % Revenue per load 2 $ 2,242 $ 2,439 (8.1 %) Gross margin percentage 2 21.9 % 18.1 % 380 bps GAAP: Operating ratio 2 85.5 % 88.5 % (300 bps) Non-GAAP: Adjusted Operating Ratio 1 2 85.1 % 88.1 % (300 bps) 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined under "Operating Statistics" above. 2022 Compared to 2021 — Logistics Adjusted Operating Ratio was 85.1%, with a gross margin of 21.9% in 2022, compared to 18.1% in 2021.
Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits," as well as depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the consolidated statements of comprehensive income. 2023 2022 2023 vs. 2022 (Dollars in thousands, except per load data) Increase (decrease) Total revenue $ 582,250 $ 920,707 (36.8 %) Revenue, excluding intersegment transactions $ 577,695 $ 910,609 (36.6 %) GAAP: Operating income $ 43,418 $ 133,942 (67.6 %) Non-GAAP: Adjusted Operating Income 1 2 $ 45,031 $ 135,278 (66.7 %) Revenue per load 2 $ 1,724 $ 2,242 (23.1 %) Gross margin percentage 2 18.7 % 21.9 % (320 bps) GAAP: Operating ratio 2 92.5 % 85.5 % 700 bps Non-GAAP: Adjusted Operating Ratio 1 2 92.2 % 85.1 % 710 bps 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined under "Operating Statistics" above. 2023 Compared to 2022 — Logistics Adjusted Operating Ratio was 92.2%, with a gross margin of 18.7% in 2023, compared to 21.9% in 2022.
Material Debt Agreements As of December 31, 2022, we had $1.9 billion in material debt obligations at the following carrying values: • $199.8 million: 2021 Term Loan A-2, due September 2024, net of $0.2 million in deferred loan costs • $798.7 million: 2021 Term Loan A-3, due September 2026, net of $1.3 million in deferred loan costs • $418.6 million: 2022 RSA outstanding borrowings, net of $0.4 million in deferred loan costs • $403.0 million: Finance lease obligations • $43.0 million: 2021 Revolver, due September 2026 • $39.0 million: Other, net of $0.1 million in deferred loan costs As of December 31, 2021, we had $2.1 billion in material debt obligations at the following carrying values: • $199.7 million: 2021 Term Loan A-1, due December 2022, net of $0.3 million in deferred loan costs • $199.6 million: 2021 Term Loan A-2, due September 2024, net of $0.4 million in deferred loan costs • $798.4 million: 2021 Term Loan A-3, due September 2026, net of $1.6 million in deferred loan costs • $278.5 million: 2021 RSA outstanding borrowings, due April 2024, net of $0.5 million in deferred loan costs • $306.2 million: Finance lease obligations • $260.0 million: 2021 Revolver, due September 2026 • $52.3 million: Other, net of $0.1 million in deferred loan costs Key terms and other details regarding our material debt obligations and finance leases are discussed in Notes 14, 15, and 16 in Part II, Item 8 of this Annual Report, and are incorporated by reference herein. 63 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Material Debt Agreements As of December 31, 2023, we had $2.7 billion in material debt obligations at the following carrying values: • $199.9 million: 2021 Term Loan A-2, due September 2024, net of $0.1 million in deferred loan costs • $799.1 million: 2021 Term Loan A-3, due September 2026, net of $0.9 million in deferred loan costs • $249.1 million: 2023 Term Loan, due September 2026, net of $0.9 million in deferred loan costs • $526.5 million: 2023 RSA outstanding borrowings, net of $0.5 million in deferred loan costs • $528.9 million: Finance lease obligations • $67.0 million: 2021 Revolver, due September 2026 • $279.3 million: Revenue equipment installment notes • $33.6 million: Other, net of approximately $22,000 in deferred loan costs As of December 31, 2022, we had $1.9 billion in material debt obligations at the following carrying values: • $199.8 million: 2021 Term Loan A-2, due September 2024, net of $0.2 million in deferred loan costs • $798.7 million: 2021 Term Loan A-3, due September 2026, net of $1.3 million in deferred loan costs • $418.6 million: 2022 RSA outstanding borrowings, due April 2024, net of $0.4 million in deferred loan costs • $403.0 million: Finance lease obligations • $43.0 million: 2021 Revolver, due September 2026 • $39.0 million: Other, net of $0.1 million in deferred loan costs Key terms and other details regarding our material debt obligations and finance leases are discussed in Notes 14, 15, and 16 in Part II, Item 8 of this Annual Report, and are incorporated by reference herein.
Recently Issued Accounting Pronouncements See Note 3 in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for recently issued accounting pronouncements that could have an impact on our consolidated financial statements. 66 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Legal Settlements and Reserves — See Note 19 in Part II Item 8 of this Annual Report. Recently Issued Accounting Pronouncements See Note 3 in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for recently issued accounting pronouncements that could have an impact on our consolidated financial statements.
An ultimate result worse than our expectations could adversely affect our results of operations. Refer to Note 13, in Part II, Item 8 of this Annual Report for discussion about the changes in the balances of deferred taxes assets and related valuation allowances.
Refer to Note 13, in Part II, Item 8 of this Annual Report for discussion about the changes in the balances of deferred taxes assets and related valuation allowances.
We expect labor costs (related to both driving associates and non-driver employees) to remain inflationary, which we expect will result in additional pay increases in the future, thereby increasing our salaries, wages, and benefits expense. 2022 Compared to 2021 — The increase in consolidated salaries, wages, and benefits includes a $309.6 million increase from the results of ACT and MME for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.
We expect labor costs (related to both driving associates and non-driver employees) to remain inflationary, which we expect will result in additional pay increases in the future, thereby increasing our salaries, wages, and benefits expense. 2023 Compared to 2022 — The increase in consolidated salaries, wages, and benefits includes a $344.2 million increase from the results of U.S. Xpress.
The year-over-year improvement primarily reflects increases in consumer spending, exports, and inventory investment that were partly offset by a decrease in housing investment. The national unemployment rate was 3.5% 2 as of December 31, 2022, as compared to 3.9% 2 as of December 31, 2021.
The year-over-year improvement primarily reflects increases in consumer spending, nonresidential fixed investments, state and local government spending, exports, and federal government spending that were partly offset by decreases in residential fixed investment and inventory investment. The national unemployment rate was 3.7% 2 as of December 31, 2023, as compared to 3.5% 2 as of December 31, 2022.
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. 50 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
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.
Note: Factors affecting the increase in operating income are discussed in "Results of Operations — Consolidated Operating and Other Expenses." Net Cash Used in Investing Activities 2022 Compared to 2021 — The $1.2 billion decrease in net cash used in investing activities was primarily due to a $1.5 billion decrease in net cash invested in acquisitions and was partially offset by a $335.1 million increase in net cash capital expenditures, including 2022 investing activities of ACT and MME.
Note: Factors affecting the increase in operating income are discussed in "Results of Operations — Consolidated Operating and Other Expenses." Net Cash Used in Investing Activities 2023 Compared to 2022 — The $0.6 billion increase in net cash used in investing activities was primarily due to a $0.4 billion increase in net cash invested in acquisitions and a $161.8 million increase in net cash capital expenditures.
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. 2022 2021 2022 vs. 2021 (Dollars in thousands, except per load data) Increase (decrease) Total revenue $ 485,786 $ 458,867 5.9 % Revenue, excluding intersegment transactions $ 485,739 $ 458,583 5.9 % GAAP: Operating income $ 48,167 $ 42,060 14.5 % Average revenue per load 1 $ 3,546 $ 2,852 24.3 % GAAP: Operating ratio 1 90.1 % 90.8 % (70 bps) Load count 136,967 160,774 (14.8 %) Average tractors 2 3 613 597 2.7 % Average containers 2 11,786 10,847 8.7 % 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined within "Operating Statistics" above. 3 Includes 544 and 543 c ompany-owned tractors for 2022 and 2021, respectively. 2022 Compared to 2021 — Revenue grew by 5.9% while the operating ratio improved from 90.8% in 2021 to 90.1% in 2022, resulting in a $6.1 million increase in operating income.
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. 2023 2022 2023 vs. 2022 (Dollars in thousands, except per load data) Increase (decrease) Total revenue $ 410,549 $ 485,786 (15.5 %) Revenue, excluding intersegment transactions $ 410,549 $ 485,739 (15.5 %) GAAP: Operating (loss) income $ (10,507) $ 48,167 (121.8 %) Average revenue per load 1 $ 2,842 $ 3,546 (19.9 %) GAAP: Operating ratio 1 102.6 % 90.1 % 1,250 bps Load count 144,471 136,967 5.5 % Average tractors 2 3 639 613 4.2 % Average containers 2 12,730 11,786 8.0 % 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined within "Operating Statistics" above. 3 Includes 577 and 544 c ompany-owned tractors for 2023 and 2022, respectively. 2023 Compared to 2022 — Intermodal operated with a 102.6% operating ratio.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Our fuel surcharge programs help to offset increases in fuel prices, but generally apply only to loaded miles for our Truckload and LTL segments and typically do not offset non-paid empty miles, idle time, or out-of-route miles driven.
Our fuel surcharge programs help to offset increases in fuel prices, but generally apply only to loaded miles for our Truckload and LTL segments 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Claims Accruals — Insurance and claims expense varies as a percentage of total revenue, based on the frequency and severity of claims incurred in a given period, as well as changes in claims development trends.
Our critical accounting estimates include the following: Claims Accruals — Insurance and claims expense varies as a percentage of total revenue, based on the frequency and severity of claims incurred in a given period, as well as changes in claims development trends.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Intermodal Segment 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 485,786 $ 458,867 Total operating expenses (437,619) (416,807) Operating income $ 48,167 $ 42,060 Operating ratio 90.1 % 90.8 % Non-GAAP Presentation Total revenue $ 485,786 $ 458,867 Intersegment transactions (47) (284) Revenue, excluding intersegment transactions 485,739 458,583 Total operating expenses 437,619 416,807 Adjusted for: Intersegment transactions (47) (284) Adjusted Operating Expenses 437,572 416,523 Adjusted Operating Income $ 48,167 $ 42,060 Adjusted Operating Ratio 90.1 % 90.8 % Non-GAAP Reconciliation: Free cash flow 2022 GAAP: Cash flows from operations $ 1,435,853 Adjusted for: Proceeds from sale of property and equipment, including assets held for sale 183,421 Purchases of property and equipment (800,563) Non-GAAP: Free Cash Flow $ 818,711 61 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Intermodal Segment 2023 2022 GAAP Presentation (Dollars in thousands) Total revenue $ 410,549 $ 485,786 Total operating expenses (421,056) (437,619) Operating (loss) income $ (10,507) $ 48,167 Operating ratio 102.6 % 90.1 % Non-GAAP Presentation Total revenue $ 410,549 $ 485,786 Intersegment transactions — (47) Revenue, excluding intersegment transactions 410,549 485,739 Total operating expenses 421,056 437,619 Adjusted for: Intersegment transactions — (47) Adjusted Operating Expenses 421,056 437,572 Adjusted Operating Income $ (10,507) $ 48,167 Adjusted Operating Ratio 102.6 % 90.1 % Non-GAAP Reconciliation: Free cash flow 2023 GAAP: Cash flows from operations $ 1,161,676 Adjusted for: Proceeds from sale of property and equipment, including assets held for sale 292,627 Purchases of property and equipment (1,071,611) Non-GAAP: Free Cash Flow $ 382,692 67 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Logistics Segment 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 920,707 $ 817,003 Total operating expenses (786,765) (723,083) Operating income $ 133,942 $ 93,920 Operating ratio 85.5 % 88.5 % Non-GAAP Presentation Total revenue $ 920,707 $ 817,003 Intersegment transactions (10,098) (18,314) Revenue, excluding intersegment transactions 910,609 798,689 Total operating expenses 786,765 723,083 Adjusted for: Intersegment transactions (10,098) (18,314) Amortization of intangibles 1 (1,336) (765) Adjusted Operating Expenses 775,331 704,004 Adjusted Operating Income $ 135,278 $ 94,685 Adjusted Operating Ratio 85.1 % 88.1 % 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition. 60 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Logistics Segment 2023 2022 GAAP Presentation (Dollars in thousands) Total revenue $ 582,250 $ 920,707 Total operating expenses (538,832) (786,765) Operating income $ 43,418 $ 133,942 Operating ratio 92.5 % 85.5 % Non-GAAP Presentation Total revenue $ 582,250 $ 920,707 Intersegment transactions (4,555) (10,098) Revenue, excluding intersegment transactions 577,695 910,609 Total operating expenses 538,832 786,765 Adjusted for: Intersegment transactions (4,555) (10,098) Amortization of intangibles 1 (1,613) (1,336) Adjusted Operating Expenses 532,664 775,331 Adjusted Operating Income $ 45,031 $ 135,278 Adjusted Operating Ratio 92.2 % 85.1 % 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition. 66 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Key Financial Data and Operating Metrics 2022 2021 GAAP financial data: (Dollars in thousands, except per share data) Total revenue $ 7,428,582 $ 5,998,019 Revenue, excluding truckload and LTL fuel surcharge $ 6,508,165 $ 5,531,890 Net income attributable to Knight-Swift $ 771,325 $ 743,388 Earnings per diluted share $ 4.73 $ 4.45 Operating ratio 85.3 % 83.9 % Non-GAAP financial data: Adjusted Net Income Attributable to Knight-Swift 1 $ 821,196 $ 788,181 Adjusted EPS 1 $ 5.03 $ 4.72 Adjusted Operating Ratio 1 82.2 % 81.5 % Revenue equipment statistics by segment: Truckload Average tractors 2 18,110 18,019 Average trailers 3 74,779 67,606 LTL Average tractors 4 3,176 2,735 Average trailers 5 8,431 7,413 Intermodal Average tractors 613 597 Average containers 11,786 10,847 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.
Key Financial Data and Operating Metrics 2023 2022 GAAP financial data: (Dollars in thousands, except per share data) Total revenue $ 7,141,766 $ 7,428,582 Revenue, excluding truckload and LTL fuel surcharge $ 6,308,169 $ 6,508,165 Net income attributable to Knight-Swift $ 217,149 $ 771,325 Earnings per diluted share $ 1.34 $ 4.73 Operating ratio 95.3 % 85.3 % Non-GAAP financial data: Adjusted Net Income Attributable to Knight-Swift 1 $ 278,739 $ 821,196 Adjusted EPS 1 $ 1.72 $ 5.03 Adjusted Operating Ratio 1 93.1 % 82.2 % Revenue equipment statistics by segment: Truckload Average tractors 2 20,948 18,110 Average trailers 3 87,865 74,779 LTL Average tractors 4 3,201 3,176 Average trailers 5 8,482 8,431 Intermodal Average tractors 639 613 Average containers 12,730 11,786 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.
Note regarding presentation: A discussion of changes in our results of operations from 2020 to 2021 has been omitted from this Annual Report, but may be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Annual Report filed with the SEC on February 24, 2022 .
Note regarding presentation: A discussion of changes in our results of operations from 2022 to 2023 has been omitted from this Annual Report, but may be found in "Item 7.
Truckload and LTL 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 truckload and LTL fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.
Truckload and LTL fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel, rather than operating expenses unrelated to fuel.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Liquidity and Capital Resources Sources of Liquidity The following table presents our available sources of liquidity as of December 31, 2022: Source: Amount (In thousands) Cash and cash equivalents, excluding restricted cash $ 196,770 Availability under 2021 Revolver, due September 2026 1 1,041,186 Availability under 2021 RSA, due April 2024 2 37,400 Total unrestricted liquidity $ 1,275,356 Cash and cash equivalents – restricted 3 188,575 Restricted investments, held-to-maturity, amortized cost 3 7,175 Total liquidity, including restricted cash and restricted investments $ 1,471,106 1 As of December 31, 2022, we had $43.0 million in borrowings under our $1.1 billion 2021 Revolver.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Liquidity and Capital Resources Sources of Liquidity The following table presents our available sources of liquidity as of December 31, 2023: Source: Amount (In thousands) Cash and cash equivalents, excluding restricted cash $ 168,545 Availability under 2021 Revolver, due September 2026 1 1,015,007 Availability under 2023 RSA, due October 2025 2 600 Total unrestricted liquidity $ 1,184,152 Cash and cash equivalents – restricted 3 301,141 Restricted investments, held-to-maturity, amortized cost 3 530 Total liquidity, including restricted cash and restricted investments $ 1,485,823 1 As of December 31, 2023, we had $67.0 million in borrowings under our $1.1 billion 2021 Revolver.
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 operating income during periods of falling fuel costs.
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 operating income during periods of falling fuel costs.
It is possible that certain strategies might be disallowed, resulting in an increased liability for income taxes. Significant management judgments are involved in assessing the likelihood of sustaining the strategies and determining the likely range of defense and settlement costs, in the event that tax strategies are challenged by taxing authorities.
It is possible that certain strategies might be disallowed, resulting in an increased liability for income taxes. Significant management judgments are involved in assessing the likelihood of sustaining the strategies and determining the likely range of 72 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED LTL Segment 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 1,069,554 $ 396,308 Total operating expenses (942,945) (365,139) Operating income $ 126,609 $ 31,169 Operating ratio 88.2 % 92.1 % Non-GAAP Presentation Total revenue $ 1,069,554 $ 396,308 Fuel surcharge (202,262) (50,523) Revenue, excluding fuel surcharge and intersegment transactions 867,292 345,785 Total operating expenses 942,945 365,139 Adjusted for: Fuel surcharge (202,262) (50,523) Amortization of intangibles 1 (15,930) (7,124) Adjusted Operating Expenses 724,753 307,492 Adjusted Operating Income 142,539 38,293 Adjusted Operating Ratio 83.6 % 88.9 % 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified with the ACT Acquisition and MME Acquisition.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED LTL Segment 2023 2022 GAAP Presentation (Dollars in thousands) Total revenue $ 1,082,454 $ 1,069,554 Total operating expenses (963,574) (942,945) Operating income $ 118,880 $ 126,609 Operating ratio 89.0 % 88.2 % Non-GAAP Presentation Total revenue $ 1,082,454 $ 1,069,554 Fuel surcharge (167,886) (202,262) Revenue, excluding fuel surcharge 914,568 867,292 Total operating expenses 963,574 942,945 Adjusted for: Fuel surcharge (167,886) (202,262) Amortization of intangibles 1 (15,680) (15,930) Adjusted Operating Expenses 780,008 724,753 Adjusted Operating Income 134,560 142,539 Adjusted Operating Ratio 85.3 % 83.6 % 1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified with the ACT Acquisition and MME Acquisition.
Our most significant expense is related to direct costs associated with the transportation of our freight moves including; direct salary, wage and benefit costs, fuel expense, and depreciation expense associated with revenue equipment costs.
Fluctuations within each of these metrics are analyzed when determining the revenue quality of our customers' shipment density. Our most significant expenses are related to direct costs associated with the transportation of our freight moves including direct salary, wage and benefit costs, fuel expense, and depreciation expense associated with revenue equipment costs.
We expect to continue refreshing our tractor fleet in the coming quarters, subject to availability of new revenue equipment, to maintain or improve the average age of our equipment. 2022 Compared to 2021 — The increase in consolidated operations and maintenance expense includes a $29.3 million increase from the results of ACT for the full year 2022, compared to the portion of 2021 following the acquisition date.
We expect to continue refreshing our tractor fleet in the coming quarters, subject to availability of new revenue equipment, to maintain the average age of our equipment. 2023 Compar ed to 2022 — The increase in consolidated operations and maintenance expense includes a $79.5 million increase from the results of U.S.
Refer to Note 10, in Part II, Item 8 of this Annual Report for discussion about the changes in the goodwill and indefinite-lived intangible asset balances. Depreciation and Amortization — Selecting the appropriate accounting method requires management judgment, as there are multiple acceptable methods that are in accordance with GAAP, including straight-line, declining-balance, and sum-of-the-years' digits.
Depreciation and Amortization — Selecting the appropriate accounting method requires management judgment, as there are multiple acceptable methods that are in accordance with GAAP, including straight-line, declining-balance, and sum-of-the-years' digits.
Estimating fair value includes several significant assumptions, including future cash flow estimates, determination of appropriate discount rates, and other assumptions that management believed reasonable under the circumstances. 65 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
Estimating fair value includes several significant assumptions, including future cash flow estimates, determination of appropriate discount rates, and other assumptions that management believed reasonable under the circumstances. Changes in these estimates and assumptions could materially affect the determination of fair value and/or impairment.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Non-GAAP Reconciliation: Consolidated Adjusted Operating Income and Adjusted Operating Ratio 2022 2021 GAAP Presentation (Dollars in thousands) Total revenue $ 7,428,582 $ 5,998,019 Total operating expenses (6,336,754) (5,032,322) Operating income $ 1,091,828 $ 965,697 Operating ratio 85.3 % 83.9 % Non-GAAP Presentation Total revenue $ 7,428,582 $ 5,998,019 Truckload and LTL fuel surcharge (920,417) (466,129) Revenue, excluding truckload and LTL fuel surcharge 6,508,165 5,531,890 Total operating expenses 6,336,754 5,032,322 Adjusted for: Truckload and LTL fuel surcharge (920,417) (466,129) Amortization of intangibles 1 (64,843) (55,299) Impairments 2 (810) (299) Legal accruals 3 (415) 2,481 Transaction fees 4 — (4,445) Adjusted Operating Expenses 5,350,269 4,508,631 Adjusted Operating Income $ 1,157,896 $ 1,023,259 Adjusted Operating Ratio 82.2 % 81.5 % 1 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 1. 2 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 2. 3 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 3. 4 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 4. 58 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Non-GAAP Reconciliation: Consolidated Adjusted Operating Income and Adjusted Operating Ratio 2023 2022 GAAP Presentation (Dollars in thousands) Total revenue $ 7,141,766 $ 7,428,582 Total operating expenses (6,803,613) (6,336,754) Operating income $ 338,153 $ 1,091,828 Operating ratio 95.3 % 85.3 % Non-GAAP Presentation Total revenue $ 7,141,766 $ 7,428,582 Truckload and LTL fuel surcharge (833,597) (920,417) Revenue, excluding truckload and LTL fuel surcharge 6,308,169 6,508,165 Total operating expenses 6,803,613 6,336,754 Adjusted for: Truckload and LTL fuel surcharge (833,597) (920,417) Amortization of intangibles 1 (70,138) (64,843) Impairments 2 (2,236) (810) Legal accruals and loss contingencies 3 (7,694) (415) Transaction fees 4 (6,868) — Other acquisition related expenses 5 (7,697) — Severance expense 6 (5,151) — Change in fair value of deferred earnout 7 3,359 — Adjusted Operating Expenses 5,873,591 5,350,269 Adjusted Operating Income $ 434,578 $ 1,157,896 Adjusted Operating Ratio 93.1 % 82.2 % 1 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 1. 2 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 2. 3 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 3. 4 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 4. 5 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 5 . 6 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 6. 7 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 7 . 64 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED Changes in these estimates and assumptions could materially affect the determination of fair value and/or impairment. Refer to Note 23, in Part II, Item 8 of this Annual Report for discussion about the changes in long-lived assets and the impact on our results for 2022 and 2021.
Refer to Note 23, in Part II, Item 8 of this Annual Report for discussion about the changes in long-lived assets and the impact on our results for 2023 and 2022.
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 Truckload and LTL segments.
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 Truckload and LTL segments. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue.
Refer to Note 1 in Part II, Item 8 of this Annual Report for a list of our recent acquisitions. 2022 2021 2022 vs. 2021 (Dollars in thousands) Increase (decrease) Salaries, wages, and benefits $ 2,173,933 $ 1,771,772 22.7 % % of total revenue 29.3 % 29.5 % (20 bps) % of revenue, excluding truckload and LTL fuel surcharge 33.4 % 32.0 % 140 bps Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by and rates we pay to our company driving associates, and employee benefits including healthcare, workers' compensation, and other benefits.
Therefore, we believe that revenue, excluding truckload and LTL fuel surcharge is a better measure for analyzing many of our expenses and operating metrics. 2023 2022 2023 vs. 2022 (Dollars in thousands) Increase (decrease) Salaries, wages, and benefits $ 2,479,759 $ 2,173,933 14.1 % % of total revenue 34.7 % 29.3 % 540 bps % of revenue, excluding truckload and LTL fuel surcharge 39.3 % 33.4 % 590 bps Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by and rates we pay to our company driving associates, and employee benefits including healthcare, workers' compensation, and other benefits.
The main fixed costs in the Truckload segment are depreciation and rent expenses from tractors, trailers, and terminals, as well as compensating our non-driver employees. 2022 2021 2022 vs. 2021 (Dollars in thousands, except per tractor data) Increase (decrease) Total revenue $ 4,531,115 $ 4,098,005 10.6 % Revenue, excluding fuel surcharge and intersegment transactions $ 3,811,599 $ 3,681,271 3.5 % GAAP: Operating income $ 746,581 $ 784,436 (4.8 %) Non-GAAP: Adjusted Operating Income 1 $ 747,906 $ 785,772 (4.8 %) Average revenue per tractor 2 $ 210,469 $ 204,299 3.0 % GAAP: Operating ratio 2 83.5 % 80.9 % 260 bps Non-GAAP: Adjusted Operating Ratio 1 2 80.4 % 78.7 % 170 bps Non-paid empty miles percentage 2 14.6 % 13.4 % 120 bps Average length of haul (miles) 2 395 403 (2.0 %) Total miles per tractor 2 76,502 81,629 (6.3 %) Average tractors 2 3 18,110 18,019 0.5 % Average trailers 2 4 74,779 67,606 10.6 % 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined within "Operating Statistics" above. 3 Includes 16,228 and 16,166 company-owned tractors for 2022 and 2021, respectively. 4 Average trailers includes 8,249 and 6,388 trailers from our non-reportable operating segments for 2022 and 2021, respectively. 2022 Compared to 2021 — The Truckload segment's Adjusted Operating Ratio increased by 170 basis points to 80.4% in 2022, as compared to 2021.
The main fixed costs in the Truckload segment are depreciation and rent expenses from tractors, trailers, and terminals, as well as compensating our non-driver employees. 2023 2022 2023 vs. 2022 (Dollars in thousands, except per tractor data) Increase (decrease) Total revenue $ 4,698,655 $ 4,531,115 3.7 % Revenue, excluding fuel surcharge and intersegment transactions $ 4,031,054 $ 3,811,599 5.8 % GAAP: Operating income $ 297,977 $ 746,581 (60.1 %) Non-GAAP: Adjusted Operating Income 1 $ 314,542 $ 747,906 (57.9 %) Average revenue per tractor 2 $ 209,258 $ 210,469 (0.6 %) GAAP: Operating ratio 2 93.7 % 83.5 % 1,020 bps Non-GAAP: Adjusted Operating Ratio 1 2 92.2 % 80.4 % 1,180 bps Non-paid empty miles percentage 2 14.3 % 14.6 % (30 bps) Average length of haul (miles) 2 393 395 (0.5 %) Total miles per tractor 2 85,233 76,502 11.4 % Average tractors 2 3 20,948 18,110 15.7 % Average trailers 2 4 87,865 74,779 17.5 % 1 Refer to "Non-GAAP Financial Measures" below. 2 Defined within "Operating Statistics" above. 3 Includes 18,821 and 16,228 company-owned tractors for 2023 and 2022, respectively. 4 Average trailers includes 8,724 and 8,249 trailers from our All Other Segments for 2023 and 2022, respectively. 52 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED 2022 2021 2022 vs. 2021 (Dollars in thousands) Increase (decrease) Insurance and claims $ 455,918 $ 275,378 65.6 % % of total revenue 6.1 % 4.6 % 150 bps % of revenue, excluding truckload and LTL fuel surcharge 7.0 % 5.0 % 200 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, our level of self-insurance, and premium expense.
Xpress, partially offset by lower hiring and labor expense, as well as lower road expense. 2023 2022 2023 vs. 2022 (Dollars in thousands) Increase (decrease) Insurance and claims $ 609,536 $ 455,918 33.7 % % of total revenue 8.5 % 6.1 % 240 bps % of revenue, excluding truckload and LTL fuel surcharge 9.7 % 7.0 % 270 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, our level of self-insurance, and premium expense.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We have exposure from variable interest rates, primarily related to our 2021 Debt Agreement and 2022 RSA. These variable interest rates are impacted by changes in short-term interest rates.
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk We have exposure from variable interest rates, primarily related to our 2021 Debt Agreement, 2023 Term Loan, and 2023 RSA. These variable interest rates are impacted by changes in short-term interest rates.
We generally have not used derivative financial instruments to hedge our fuel price exposure in the past, but continue to evaluate this possibility. 67 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We generally have not used derivative financial instruments to hedge our fuel price exposure in the past, but continue to evaluate this possibility. 73 Table of Contents Glossary of Terms KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.
We primarily manage interest rate exposure through a mix of variable rate debt (weighted average rate of 5.2% as of December 31, 2022) and fixed rate equipment lease financing. Assuming the level of borrowings as of December 31, 2022, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by $14.4 million.
We primarily manage interest rate exposure through a mix of variable rate debt (weighted average rate of 6.0% as of December 31, 2023) and fixed rate equipment lease financing. Assuming the level of borrowings as of December 31, 2023, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by $21.6 million.
The weekly average diesel price per gallon in the US increased to an average of $5.01 per gallon for 2022 from an average of $3.29 per gallon for 2021.
The weekly average diesel price per gallon in the US decreased to an average of $4.20 per gallon for 2023 from an average of $5.01 per gallon for 2022.

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