Knight-swift Transportation Holdings Inc. · NYSE:KNX
Knight-swift Transportation — Swift Transportation — Investor Day (May 2014)
70 slides from Knight-swift Transportation's investor day presentation, May 2, 2014
Slide 1: Investor Day
Investor Day May 2, 2014 1
Slide 2: Forward Looking Statement Disclaimer
Forward Looking Statement Disclaimer This presentation, including documents which are incorporated by reference and accompanying comments, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but a
Slide 3: Agenda
Agenda • Introduction Jerry Moyes • Swift & the Transportation Industry Richard Stocking • Delivering A Better Life… • …To our Employees Richard Stocking • …To our Community Richard Stocking • …To our Customers SM Richard Stocking • Dedicated Dry Deryl Smoak • Dedicated Refrigerated Randy Savoy • …T
Slide 4: Swift's Long-Term Financial Goals
Swift’s Long-Term Financial Goals* Increase our RONA by 1% annual CAGR for each of the next 5 years Targeting EPS Growth Reduce our leverage of 20% for 2012 and ratio to roughly 1.5X 15% CAGR from by 2017 2013-2017 Creating Shareholder Value *Goals shared in our May 2012 Investor/Analyst Day Alignin
Slide 5: Swift & the Transportation Industry
SWIFT & THE TRANSPORTATION INDUSTRY Swift Confidential and Proprietary 5
Slide 6: Swift Transportation at a Glance
Swift Transportation at a Glance • Multi-faceted $4.1 billion transportation solution provider in a fragmented industry prime for consolidation • Capacity solution with the largest fleet of truckload equipment in North America 18,000+ tractors, 58,000+ trailers, 8,700+ intermodal containers • 40+ ma
Slide 7: U.S. Freight Transportation Market
U.S. Freight Transportation Market 1 “Truckload will remain the most efficient mode of transportation” - American Trucking Association Notes: 1. Based on 2012 domestic revenue data published by the American Trucking Association 2. * Excluding Swift U.S. truckload market is highly fragmented: Opportu
Slide 8: Swift Transportation at a Glance: North America's Largest Full Truckload Carrier
Swift Transportation at a Glance North America’s Largest Full Truckload Carrier 8
Slide 9: Terminal Map
SEATTLE ~ PORTLAND LEWISTON SPARKS SALT LAKE CITY SS ae LATHROP JURUPA VALLEY OTAY MESA is oe PHOENIX TIJUANA MEXICALI NOGALES f ROCHELLE MANTENO DENVER EDWARDSVILLE B& ALBUQUERQUE EL PASO DALLAS Wm JUAREZ CHIHUAHUA TERMINALMAP US. / MEXICO / CANAD, HOUSTON LAREDO | NUEVO LAREDO <_REYNOSA —~/ MONTER
Slide 10: Extensive Transportation Service Offerings
Extensive Transportation Service Offerings • Demonstrated ability to provide total transportation solutions with a comprehensive suite of services and equipment offerings as exemplified in the fact that: • 100% of Swift’s Top 20 customers and 75% of top 50 utilize multiple service offerings Transpor
Slide 11: Long History of Profitable Growth
Long History of Profitable Growth The Evolutionary The Growth Period The Transformation The Results Period Period 1991-2006 Period 2012-2017 1966-1990 2007-2011 (and beyond) • Founded • Privatization - Debt • Profitable Revenue Growth • 1990 IPO • Flatbed • Recession • Improved Asset Utilization • 2
Slide 12: Total Revenue and Operating Income
Total Revenue and Operating Income Total Revenue (1) Adjusted Operating Income (5) Note: Acquisitions recorded with pooling of interests or similar accounting treatment reflected for full year in year of acquisition; MS Carriers - 2001, IEL – 2007, and Central Refrigerated – 2013 (1) Operating Incom
Slide 13: Delivering a Better Life
DELIVERING A BETTER LIFE Swift Confidential and Proprietary 13
Slide 14: Greatness
GREAT- NESS. Greatness is not a function of cir tance. Greatness, a is laraely a matte MSCOUS Choigawand nN Jim Collins 14
Slide 15: Lengthening Our Stride…
Lengthening Our Stride… 15
Slide 16: The Flywheel
The Flywheel Working to build momentum 16
Slide 17: Our Purpose
Our Purpose SM Delivering a better life by creating value through revenue growth, cost control, process improvement and utilization 17
Slide 18: …to our Employees
Delivering a Better Life… …to our Employees 18
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Slide 21: Employee Focused
Employee Focused • By investing in our people through: • Leadership • Training • Growth opportunities • Voice through NPS • They see the vision & their ideas drive: • Growth • Process improvements • Efficiencies • Value For focused employees 21
Slide 22: Driver Success
Driver Success • Swift is only as successful as its Drivers • Delivering a better life to our Drivers is the key to our success • 3 Strategic Focus Teams on Driver Success • Recruiting • Operations • Network • Department goals centered on improving the drivers’ experience • Home time • Social media
Slide 23: …to the Community
Delivering a Better Life… …to the Community 23
Slide 24: …to our Customers
Delivering a Better Life… …to our CUSTOMERS 24
Slide 25: Delivering a Better Life to Our Customers
Delivering a Better Life to Our Customers • Relationships • Innovation / Optimization • Professional drivers that deliver • Solutions • Full suite of services By delivering value through solutions 25
Slide 26: Truckload Segment
TRUCKLOAD SEGMENT 26
Slide 27: Truckload Segment
Truckload Segment • Demand for irregular route is increasing; capacity remains tight • Contractual rate increases expected to gain momentum • Driver hiring and retention is key • Cross-border operations (both Mexico and Canada) have experienced double digit growth YOY • Mexico - Near-sourcing contin
Slide 28: Truckload Segment 2011-2013
Truckload Segment 2011- 2013 Non-GAAP reconciliations included in 2013 10-K Market conditions and internal initiatives to drive margin 28
Slide 29: Central Refrigerated Segment
CENTRAL REFRIGERATED SEGMENT 29
Slide 30: Central Refrigerated Segment (CRS)
Central Refrigerated Segment (CRS) • Refrigerated market remains robust • Many of Swift’s current customers expanding in refrigerated • Acquisition of Central allows us to service this need • Strong YOY rate increases experienced in 2013 and expected to continue in 2014 • CRS fully integrated onto S
Slide 31: Central Refrigerated Segment 2011-2013
Central Refrigerated Segment 2011 - 2013 Reconciliations included in appendix Continuing historical trends in robust market with synergy opportunities 31
Slide 32: Intermodal Segment
INTERMODAL SEGMENT 32
Slide 33: Intermodal Segment
Intermodal Segment • Intermodal growth rate accelerating • New business wins • 8,700 container fleet with 500 unit delivery in Q3 2014 • Container utilization increasing • Dray efficiencies increasing • Additional trucks and drivers added • 2014 goal of 80% drays performed with Swift power • Rail co
Slide 34: Intermodal Segment 2011-2013
Intermodal Segment 2011 - 2013 Reconciliations included in appendix Growth opportunities and operating efficiencies to drive further OR improvement 34
Slide 35: Logistics Line of Business
LOGISTICS LINE OF BUSINESS 35
Slide 36: Swift Logistics
Swift Logistics Swift Logistics’ Vision: To be recognized as the industry-leading Asset-Based 3PL and Brokerage provider Customer Value: • Experienced leadership team • Industry leading transportation and carrier management software • Full suite of transportation services and capacity solutions Cust
Slide 37: Dedicated Segment
DEDICATED SEGMENT 37
Slide 38: Dedicated Dry Line of Business
DEDICATED DRY LINE OF BUSINESS 38
Slide 39: "Dedicated" to Our Customers: Where We Are Today
“Dedicated” to Our Customers Where We Are Today • Dedicated services provide value-added benefits for our customers • Division currently at 2,600 trucks • 90 fleet locations with 2,700 drivers and 210 Support Leaders • Customer fleets by location range from Striving to be Best In Class 1 truck to 15
Slide 40: Dedicated Dry Fleet Locations
Dedicated Dry Fleet Locations Currently 90 Dedicated on-site locations 40
Slide 41: "Dedicated" to Our Customers: Where We Are Going
“Dedicated” to Our Customers Where We Are Going • Market demand for Dedicated is very strong and looks to sustain • Continued integration of additional Swift services at current and future sites • New GA customer example: Yard, Dedicated, Van / Refrigerated with Linehaul, Regional, Intermodal, Port
Slide 42: Dedicated Refrigerated
DEDICATED REFRIGERATED 42
Slide 43: "Dedicated" to Our Customers: Where We Are Today
“Dedicated” to Our Customers Where We Are Today • Nationwide presence • Currently operating in 20 facilities • Division currently at 1,500 trucks, 1,900 drivers, 300 Swift owned reefer trailers • Customer fleets by location range from 35 to 120 trucks • On-time service requirements of 99.5% • Abilit
Slide 44: Dedicated Wet Fleet Locations
Dedicated Wet Fleet Locations Currently 20 Dedicated on-site locations 44
Slide 45: "Dedicated" to Our Customers: Where We Are Going
“Dedicated” to Our Customers Where We Are Going • Capacity remains strong • Adding four new locations in first two quarters of 2014 • Working closely with customers to increase efficiencies (theirs and ours) • Slip Seat program continually improving • Backhaul program improved and growing • Aligned
Slide 46: Creating Value for Swift
Creating Value for Swift Top line growth Top line growth through retention through increase of direct in customer base customer relationships Bottom line Bottom line growth through growth through improved asset Creating backhaul revenue utility programs Shareholder Value Aligned with our company’s g
Slide 47: Dedicated Segment
Dedicated Segment • Dedicated segment composed of two lines of business (LOB) • CRS also has dedicated business, but managed separately • Operational efficiencies exist between Swift’s dedicated refrigerated (DC to store) and CRS’s capacity • Both LOB’s experiencing strong demand for capacity • Over
Slide 48: Dedicated Segment 2011-2013
Dedicated Segment 2011 - 2013 Non-GAAP reconciliations included in 2013 10-K Growth reaccelerating in 2014 48
Slide 49: Multiple Opportunities Driving Top Line Growth
Multiple Opportunities Driving Top Line Growth Revenue Growth • Opportunities for continued growth in each of our lines of business • Expansion into new markets • Mexico, Canada, OTR Refrigerated • Strategic focus team initiatives • New revenue streams for several LOB’s • Increase the effectiveness
Slide 50: …to our Shareholders
Delivering a Better Life… …to our SHAREHOLDERS 50
Slide 51: Stock Price from 12/16/2010 thru 12/31/2012
Stock Price from 12/16/2010 thru 12/31/2012 12/16/10 7/1/11 1/1/12 7/1/12 12/31/12 * Peers include Knight, Werner, Marten, Celadon, Covenant, Heartland and Landstar Trust Tax 51
Slide 52: Speed of Trust
Speed of Trust Nothing is faster than the speed of trust 52
Slide 53: Swift's Long-Term Financial Goals
Swift’s Long-Term Financial Goals* Increase our RONA by 1% annual CAGR for each of the next 5 years Targeting EPS growth Reduce our leverage of 20% for 2012 and ratio to roughly 1.5X 15% CAGR from by 2017 2013-2017 Creating Shareholder Value *Goals shared in our May 2012 Investor/Analyst Day Creatin
Slide 54: The Three Pillars of Value Creation
The Three Pillars of Value Creation Profitable Revenue Growth Improved Asset Utilization Continuous Improvement (Cost Control & Process Improvement) Strengthen and grow core Maximize use of drivers Four Disciplines of Execution customer relationships by cross available hours (Plus 1) (4DX) selling s
Slide 55: 2014 Strategic Focus Teams
2014 Strategic Focus Teams Renewed focus to propel our flywheel 55
Slide 56: Swift's Integrated Flywheel
Swift’s Integrated Flywheel Delivering a better life by creating value through revenue growth, cost control, process improvement and utilization 56
Slide 57: EPS Growth Targets
EPS Growth Targets AOP (1) (1) (2) (1) 2011 & 2012 represent Swift only as reported in 2012 10-K (2) 2013 includes CRS as reported in 2013 10-K Create transparency and get better 57
Slide 58: RONA Targets
RONA Targets (1) (1) (2) (1) 2011 & 2012 represent Swift only as reported in 2012 10-K (2) 2013 includes CRS as reported in 2013 10-K Calculations included on Swift investor relations website at www.investor.swifttrans.com Practice accountability 58
Slide 59: Leverage Ratio Targets
Leverage Ratio Targets (1) (1) (2) (1) 2011 & 2012 represent Swift only as reported in 2012 10-K (2) 2013 includes CRS as reported in 2013 10-K Deliver results 59
Slide 60: Stock Price Appreciation in 2013
Stock Price Appreciation in 2013 1/1/13 7/1/13 12/31/13 * Peers include Knight, Werner, Marten, Celadon, Covenant, Heartland and Landstar Converting the trust tax to a trust dividend 60
Slide 61: Industry 2015 Price to Earnings Ratio
Industry 2015 Price to Earnings Ratio Per fact set on 4/25/14 based on consensus 2015 estimates We still have work to do 61
Slide 62: 2nd Half 2014 Opportunities
2nd Half 2014 Opportunities 1st Half 2nd Half Central Integration Expenses Central Synergies 1st Half HOS 2nd Half HOS Lapped 1st Quarter Capacity Crunch 2nd Half Rate Non-Stop Arctic Blasts Sunny Skies Dedicated Contract Start Ups Dedicated Revenue Dedicated Start Ups Dedicated Execution Truckload
Slide 63: Debt Summary and Refinance Opportunity
Debt Summary and Refinance Opportunity Face Value Face Value* Funded Facility 12/31/13 3/31/14 Maturity Rate A/R Securitization ($325MM) $264,000 $259,000 Jul-16 CP/L+95 Revolver ($400MM) 17,000 - Sep-16 L+325 Term Loan B-1 229,000 229,000 Dec-16 L+275 L+300 (100bps Term Loan B-2 410,000 400,000 Dec
Slide 64: Our Purpose
Our Purpose SM Delivering a better life by creating value through revenue growth, cost control, process improvement and utilization 64
Slide 65: Swift's Integrated Flywheel
Swift’s Integrated Flywheel Delivering a better life by creating value through revenue growth, cost control, process improvement and utilization 65
Slide 66: Strong Operating Leverage Built into the Model
Strong Operating Leverage Built into the Model Achievable operating improvements result in significant increases to the bottom line Loaded Miles Per Tractor Per Week (1) Rate Per Mile (1) Deadhead Miles Percentage (1) ($ Millions) ($ Millions) ($ Millions) (Incremental Operating Income) (Incremental
Slide 67: Swift's Long-Term Financial Goals
Swift’s Long-Term Financial Goals* Increase our RONA by 1% annual CAGR for each of the next 5 years Targeting EPS growth Reduce our leverage of 20% for 2012 and ratio to roughly 1.5X 15% CAGR from by 2017 2013-2017 Creating Shareholder Value *Goals shared in our May 2012 Investor/Analyst Day Committ
Slide 68: Questions?
QUESTIONS? Swift Confidential and Proprietary 68
Slide 69: Appendix
APPENDIX Swift Confidential and Proprietary 69
Slide 70: Adjusted Operating Ratio Reconciliation - Central Refrigerated and Intermodal Segments
Adjusted Operating Ratio Reconciliation - Central Refrigerated and Intermodal Segments FOR THE YEARS ENDED DECEMBER 31, 2011, 2012 AND 2013 ($'s Millions) Central Refrigerated (a) Intermodal (a) 2011 2012 2013 2011 2012 2013 Operating revenue $ 388.8 415.7 452.5 $ 255.3 355.5 376.1 Less: Fuel surcha