What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-05 compared with 2020-05-06 · 295 added, 180 removed, 568 unchanged (46% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets (Unaudited)

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

(In thousands, except per share data)

4 unchanged sentences

Trade receivables, net of allowance for doubtful accounts of $ 20,568 and $ 18,178 , respectively

522,075 518,547

Contract balance – revenue in transit 14,679 12,696

8 unchanged sentences

Operating lease right-of-use assets 136,953 169,425

Goodwill 2,922,970 2,918,992

Intangible assets, net 1,412,192 1,379,459

Other long-term assets 82,843 73,108

Total assets $ 8,279,028 $ 8,281,732

LIABILITIES AND STOCKHOLDERS' EQUITY

21 unchanged sentences

500,000 shares authorized;

169,776 and 170,688 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively.

170,162 and 170,688 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.

Additional paid-in capital 4,287,293 4,269,043

8 unchanged sentences

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

(In thousands, except per share data)

4 unchanged sentences

Salaries, wages, and benefits 365,311 380,354 720,144 744,209

Fuel 86,381 151,309 208,236 289,748

Operations and maintenance 66,067 82,443 134,471 162,203

6 unchanged sentences

Purchased transportation 200,107 261,273 425,383 530,622

Impairments 353 2,182 1,255 2,182

Miscellaneous operating expenses 20,778 34,108 43,794 46,744

1 unchanged sentence

Operating income 102,167 108,593 204,286 224,892

Other (expenses) income:

Other income (expenses):

Interest income 437 977 1,269 1,993

Interest expense ( 4,021 ) ( 7,156 ) ( 10,128 ) ( 14,504 )

Other (expense) income, net

Total other (expenses) income, net

Other income, net 8,499 3,101 1,992 9,240

Total other income (expenses), net 4,915 ( 3,078 ) ( 6,867 ) ( 3,271 )

Income before income taxes 107,082 105,515 197,419 221,621

Income tax expense 26,815 26,076 51,369 53,999

Net income 80,267 79,439 146,050 167,622

Net income attributable to noncontrolling interest ( 78 ) ( 234 ) ( 435 ) ( 479 )

1 unchanged sentence

Earnings per share:

Basic $ 0.47 $ 0.46 $ 0.86 $ 0.97

Diluted $ 0.47 $ 0.46 $ 0.85 $ 0.97

Dividends declared per share:

$ 0.08 $ 0.06 $ 0.16 $ 0.12

Weighted average shares outstanding:

Basic 169,948 172,078 170,283 172,522

Diluted 170,624 172,724 170,958 173,162

See accompanying notes to the condensed consolidated financial statements (unaudited).

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited)

Quarter Ended March 31,

Year-to-Date June 30,

(In thousands)

Cash flows from operating activities:

Net income $ 146,050 $ 167,622

Adjustments to reconcile net income to net cash provided by operating activities:

1 unchanged sentence

Gain on sale of property and equipment ( 4,724 ) ( 19,267 )

Impairments 1,255 2,182

Deferred income taxes 23,112 9,519

1 unchanged sentence

Other adjustments to reconcile net income to net cash provided by operating activities 19,229 ( 2,282 )

Increase (decrease) in cash resulting from changes in:

(Decrease) increase in cash resulting from changes in:

Trade receivables ( 11,440 ) 50,495

16 unchanged sentences

Repayment of finance leases and long-term debt ( 31,893 ) ( 36,941 )

Borrowings (repayments) on revolving line of credit, net

(Repayments) borrowings on revolving line of credit, net ( 44,000 ) 75,000

Borrowings under accounts receivable securitization — 90,000

12 unchanged sentences

Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued

Quarter Ended March 31,

Year-to-Date June 30,

(In thousands)

Supplemental disclosures of cash flow information:

Cash paid (received) during the period for:

Cash paid during the period for:

Interest $ 10,455 $ 14,277

Income taxes 3,632 72,467

Non-cash investing and financing transactions:

Equipment acquired included in accounts payable $ 27,463 $ 50,091

Equipment sales receivables 3,388 5,677

Financing provided to independent contractors for equipment sold 2,553 3,204

5 unchanged sentences

Reconciliation of Cash, Restricted Cash, and Equivalents:

2020 December 31,

2019 June 30,

2019 December 31,

(In thousands)

10 unchanged sentences

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Paid-in Capital

Retained Earnings

Total Knight-Swift Stockholders' Equity

Noncontrolling

Common Stock Additional

Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling

Interest Total

Stockholders’ Equity

Shares Par Value

(In thousands, except per share data)

1 unchanged sentence

Common stock issued to employees 567 5 8,309 8,314 8,314

Common stock issued to the Board 13 — 515 515 515

Common stock issued under ESPP 33 — 1,063 1,063 1,063

6 unchanged sentences

Net income attributable to noncontrolling interest 435 435

Balances – March 31, 2020

Paid-in Capital

Retained Earnings

Total Knight-Swift Stockholders' Equity

Noncontrolling

Balances – June 30, 2020 170,162 $ 1,701 $ 4,287,293 $ 1,474,466 $ 5,763,460 $ 2,129 $ 5,765,589

Common Stock Additional

Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling

Interest Total

Stockholders’ Equity

Shares Par Value

(In thousands, except per share data)

1 unchanged sentence

Common stock issued to employees 347 3 3,700 3,703 3,703

Common stock issued to the Board 19 — 531 531 531

Common stock issued under ESPP 42 1 1,128 1,129 1,129

Company shares repurchased ( 2,874 ) ( 29 ) ( 86,863 ) ( 86,892 ) ( 86,892 )

Shares withheld – RSU settlement ( 2,304 ) ( 2,304 ) ( 2,304 )

4 unchanged sentences

Net income attributable to noncontrolling interest 479 479

Balances – June 30, 2019 170,378 $ 1,703 $ 4,254,297 $ 1,274,067 $ 5,530,067 $ 1,953 $ 5,532,020

See accompanying notes to condensed consolidated financial statements (unaudited).

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Continued

Common Stock Additional

Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling

Interest Total

Stockholders’ Equity

Shares Par Value

(In thousands, except per share data)

Balances – March 31, 2020 169,776 1,698 4,275,834 1,410,527 5,688,059 2,265 5,690,324

Common stock issued to employees 356 3 5,600 5,603 5,603

Common stock issued to the Board 13 — 515 515 515

Common stock issued under ESPP 17 — 517 517 517

Shares withheld – RSU settlement ( 2,529 ) ( 2,529 ) ( 2,529 )

Employee stock-based compensation expense 4,827 4,827 4,827

Cash dividends paid and dividends accrued ($0.08 per share) ( 13,721 ) ( 13,721 ) ( 13,721 )

Net income attributable to Knight-Swift 80,189 80,189 80,189

Distribution to noncontrolling interest ( 214 ) ( 214 )

Net income attributable to noncontrolling interest 78 78

Balances – June 30, 2020 170,162 1,701 4,287,293 1,474,466 5,763,460 2,129 5,765,589

Common Stock Additional

Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling

Interest Total

Stockholders’ Equity

Shares Par Value

(In thousands, except per share data)

Balances – March 31, 2019 173,066 $ 1,730 4,248,188 $ 1,292,838 $ 5,542,756 $ 1,867 $ 5,544,623

Common stock issued to employees 149 1 1,327 1,328 1,328

Common stock issued to the Board 19 — 531 531 531

Common stock issued under ESPP 18 1 562 563 563

Company shares repurchased ( 2,874 ) ( 29 ) ( 86,863 ) ( 86,892 ) ( 86,892 )

Shares withheld – RSU settlement ( 790 ) ( 790 ) ( 790 )

Employee stock-based compensation expense 3,689 3,689 3,689

Cash dividends paid and dividends accrued ($0.06 per share) ( 10,323 ) ( 10,323 ) ( 10,323 )

Net income attributable to Knight-Swift 79,205 79,205 79,205

Distribution to noncontrolling interest ( 148 ) ( 148 )

Net income attributable to noncontrolling interest 234 234

Balances – June 30, 2019 170,378 $ 1,703 $ 4,254,297 $ 1,274,067 $ 5,530,067 $ 1,953 $ 5,532,020

See accompanying notes to condensed consolidated financial statements (unaudited).

7 unchanged sentences

Knight-Swift is a transportation solutions provider, headquartered in Phoenix, Arizona.

During the quarter ended March 31, 2020 , the Company operated an average of 18,462 tractors (comprised of 16,339 company tractors and 2,123 independent contractor tractors) and 57,716 trailers within the Trucking segment.

During the first half of 2020, the Company operated an average of 18,428 tractors (comprised of 16,327 company tractors and 2,101 independent contractor tractors) and 57,456 trailers within the Trucking segment.

Additionally, the Company operated an average of 586 tractors and 10,355 containers in the Intermodal segment.

8 unchanged sentences

Changes in presentation associated with adopting accounting pronouncements are included in Note 2.

Beginning in the second quarter of 2019, the Company presents fuel surcharge revenue generated within only its Trucking segment within "Trucking fuel surcharge" in the condensed consolidated statements of comprehensive income.

Fuel surcharge revenue generated within the remaining segments is included in "Revenue, excluding trucking fuel surcharge." Prior period amounts have been reclassified to align with the current period presentation.

In the transportation industry, results of operations generally follow a seasonal pattern.

5 unchanged sentences

Impact of COVID-19

During the first quarter of 2020, COVID-19 became a global pandemic, which triggered a significant downturn in the global economy.

The Company continues to operate its business through the COVID-19 pandemic and has taken many additional precautions to ensure the safety of its employees, customers, vendors, and the communities in which it operates.

As part of the Company's efforts to safeguard its employees and promote business continuity, management has taken additional precautions to enhance the sanitization process of its equipment and properties, increase the social distancing of its employees by working remotely where possible, and provide driving associates with essential

During the first half of 2020, COVID-19 became a global pandemic, which triggered a significant downturn in the global economy.

The Company continues to operate its business through the COVID-19 pandemic and has taken additional precautions to ensure the safety of its employees, customers, vendors, and the communities in which it operates.

During the quarter and year-to-date periods ended June 30, 2020, the Company incurred $ 10.0 million and $ 12.3 million, respectively, of expenses directly attributable to the pandemic, which were incremental to those incurred prior to the outbreak.

These primarily pertained to payroll premiums paid to drivers and shop technicians, additional disinfectants and cleaning supplies, and various other pandemic-specific items.

The costs are clearly separable from normal business operations and are not expected to recur once the pandemic subsides.

Table of Contents Glossary of Terms

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

provisions and enhanced bonus opportunities while they are over the road delivering freight to Knight-Swift's customers.

During the first quarter of 2020, we incurred $ 2.3 million of incremental costs directly associated with COVID-19.

There are various uncertainties that have arisen from the COVID-19 pandemic.

1 unchanged sentence

This has caused some uncertainties around various accounting estimates.

Due to these uncertainties, our accounting estimates may change, as management's assessment of the impacts of the COVID-19 pandemic continues to evolve.

Due to these uncertainties, the Company's accounting estimates may change, as management's assessment of the impacts of the COVID-19 pandemic continues to evolve.

Refer to Part II, Item 1A "Risk Factors" in our Quarterly Report for the quarterly period ended March 31, 2020 for more discussion about potential risks and uncertainties surrounding the COVID-19 pandemic that may impact our business, results of operations, or financial condition.

Note 2 — Recently Adopted Accounting Pronouncements

6 unchanged sentences

The new CECL standard is also intended to reduce the complexity of GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments.

Further, the new CECL standard makes targeted changes to the impairment model for available-for-sale debt securities and moves the guidance from ASC Topic 320 to ASC Subtopic 326-30.

Further, the new CECL standard makes targeted changes to the impairment model for available-for-sale debt securities and moves the guidance from ASC Topic 320, Investments — Debt and Equity Securities, to ASC Subtopic 326-30.

For public business entities, the new standard was effective for annual and interim reporting periods beginning after December 15, 2019.

For most debt instruments, entities are required to adopt the new CECL standard using a modified retrospective approach, meaning that entities will record a cumulative-effect adjustment to equity as of the beginning of the first reporting period in which the guidance is effective.

For most debt instruments, entities are required to adopt the new CECL standard using a modified retrospective approach, meaning that entities should record a cumulative-effect adjustment to equity as of the beginning of the first reporting period in which the guidance is effective.

Practical Expedient — As permitted under ASU 2016-13 (and related ASUs), management elected to apply the collateral-dependent financial asset practical expedient which allows entities to measure the expected credit losses for the financial asset by comparing the amortized cost basis with the fair value of the collateral at the reporting date, rather than using the fair value of the financial asset.

3 unchanged sentences

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

Summary of the Standard — In August 2018, the FASB issued ASU 2018-15, which amends ASC Subtopic 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract ("Service CCA").

Summary of the Standard — In August 2018, the FASB issued ASU 2018-15, which amended ASC Subtopic 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract ("Service CCA").

The amendments in ASU 2018-15 align the accounting for costs incurred to implement a Service CCA with previously codified guidance on capitalizing costs associated with developing or obtaining internal-use software.

Specifically, the ASU amends ASC Subtopic 350-40 to include in its scope implementation costs incurred with a Service CCA.

This addition clarifies that a customer should apply the guidance from ASC Paragraph 350-40-25 to determine which stage the project is in before assessing whether implementation costs should be capitalized in a Service CCA that is considered a service contract.

These capitalized items should be recorded within the same balance sheet line item as a prepayment for any fees.

Table of Contents Glossary of Terms

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Specifically, the ASU amends ASC Subtopic 350-40 to include in its scope implementation costs incurred with a Service CCA.

These capitalized items should be recorded within the same balance sheet line item as a prepayment for any fees.

Any capitalized costs from the Service CCA should be expensed over the term of the hosting arrangement, which includes the noncancelable period and any options to extend that are reasonably certain to be exercised and recorded in the same line item as fees associated with the hosting element of the arrangement.

1 unchanged sentence

Current Period Impact of Adoption — The Company adopted the amendments in ASU 2018-15 on January 1, 2020 and elected to apply the amendments on a prospective basis to implementation costs incurred after the date of adoption.

Upon review of the Service CCA's entered into during the first quarter of 2020, management has determined that adoption of the amendments has not had a material impact on the Company's financial statements and related accounting policies.

Upon review of the Service CCA's entered into during year-to-date June 30, 2020, management has determined that adoption of the amendments has not had a material impact on the Company's financial statements and related accounting policies.

Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment

13 unchanged sentences

Management estimates the fair values of its reporting units using a combination of the income and market approaches.

If the carrying amount of a reporting unit exceeds the fair value, then management will recognize an impairment loss of the same amount.

If the carrying amount of a reporting unit exceeds the fair value, then management recognizes an impairment loss of the same amount.

This loss is only limited to the total amount of goodwill allocated to that reporting unit.

There were various other ASUs that became effective during the quarter ended March 31, 2020 , which did not have a material impact on the Company's results of operations, financial position, cash flows, or disclosures.

There were various other ASUs that became effective during year-to-date June 30, 2020, which did not have a material impact on the Company's results of operations, financial position, cash flows, or disclosures.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 3 — Recently Issued Accounting Pronouncements

Adoption Date and Method

Financial Statement Impact

Date Issued Reference Description Adoption Date and Method Financial Statement Impact

March 2020 2020-04:

Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting 1

The amendments in this Update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

The amendments in this ASU are effective for any interim period after March 12, 2020 and should be applied on a prospective basis.

No material impact 2

Codification Improvements Financial Instruments 1

March 2020 No material impact 2

March 2020 2020-03:

Codification Improvements to Financial Instruments 1

The amendments within this ASU updated several sections of the Codification and how various topics and subtopics interacted due to new guidance on financial instruments.

1 unchanged sentence

The amendments should be applied prospectively and have varying effective dates, which were all in effect for public business entities prior to issuance of the ASU.

March 2020, Adoption Prospective

No material impact

March 2020, Prospective No material impact

February 2020 2020-02:

Financial Instruments – Credit Losses (Topic 326), Leases – (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update SEC Section on Effective Date Related to Accounting Standards Update No.

Financial Instruments – Credit Losses (Topic 326) and Leases – (Topic 842) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016-02, Leases (Topic 842) 1

1 unchanged sentence

119 about expected implementation practices related to ASC Topic 326.

The amendments also codify SEC Staff announcement that it would not object to the FASB's update to effective dates for major updates which were amended within ASU 2019-10.

January 2021, Adoption method varies by amendment

Adopted January 1, 2020, no material impact

Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) – Clarifying the Interactions between Topic 321, Topic 323, and Topic 815

The amendments also codify the SEC Staff's announcement that it would not object to the FASB's update to effective dates for major updates, which were amended within ASU 2019-10.

January 2021, Adoption method varies by amendment Adopted January 1, 2020, no material impact

January 2020 2020-01:

The amendments clarify that an entity should consider observable transactions when determining to apply or discontinue the equity method for the purposes of applying the measurement alternative.

The amendments also clarify that an entity would not consider whether a purchased option would be accounted for under the equity method when applying ASC 815-10-15-141(a).

January 2021, Prospective

Currently under evaluation, but not expected to be material

January 2021, Prospective Currently under evaluation, but not expected to be material

1 Adopted during the first quarter of 2020.

6 unchanged sentences

On January 1, 2020 , pursuant to a stock purchase agreement (the "SPA") the Company acquired 100.0 % of the equity interests of a warehousing-related company (the "Warehousing Co.") with locations throughout the Central US.

The total purchase price consideration of $ 66.9 million consisted of approximately $ 48.2 million in cash to the sellers at closing, and contingent consideration consisting of three additional annual payments of up to $ 8.1 million each (or $ 24.3 million in total), representing the maximum possible annual deferred payments to the sellers based on Warehousing Co.'s earnings before interest and taxes ("EBIT") for each of the calendar years ending December 31, 2020, December 31, 2021, and the annualized six-month period ending June 30, 2022.

In order to estimate Warehousing Co.'s future performance, the Company utilized the Monte Carlo simulation method using certain inputs, including Warehousing Co.'s forecasted EBIT, discount rate, dividend yields, expected volatility, and expected stock returns during the above measurement periods.

Based on the above inputs, the present value of the total contingent consideration was estimated to equal $ 18.7 million as of January 1, 2020.

The Company funded the acquisition through cash-on-hand and borrowing on the Revolver on the date of the transaction.

The total purchase price consideration of $ 66.9 million included $ 48.2 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the Revolver on the transaction date.

At closing, $ 6.8 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations and remains subject to further adjustments.

The purchase price also included contingent consideration consisting of three additional annual payments of up to $ 8.1 million each (or $ 24.3 million in total), representing the maximum possible annual deferred payments to the sellers based on Warehousing Co.'s earnings before interest and taxes ("EBIT") for each of the calendar years ending December 31, 2020, December 31, 2021, and the annualized six-month period ending June 30, 2022.

Based on the above inputs, the present value of the total contingent consideration, along with the estimated net working capital adjustment equaled $ 18.7 million as of January 1, 2020.

During the second quarter of 2020, the net working capital adjustment, was reduced by $ 0.4 million based on the actual versus estimated net working capital adjustment as of the transaction date.

This adjustment resulted in the total estimated contingent consideration and net working capital adjustment decreasing to $ 18.3 million.

The total purchase price consideration, as if adjusted at the January 1, 2020 transaction date, is identified in the table below.

The SPA included an election under the Internal Revenue Code Section 338(h)(10).

4 unchanged sentences

The goodwill is expected to be deductible for tax purposes.

The purchase price allocation for the acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, assessment of lease agreements, assessment of certain liabilities, the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed, and assessment of other tax related items.

The purchase price allocation for the acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, assessment of lease agreements, assessment of certain liabilities, the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed, and assessment of other tax related items.

As the Company obtains more information, the preliminary purchase price allocation disclosed below is subject to change.

5 unchanged sentences

The following table summarizes the fair value of the consideration transferred as of the acquisition date:

January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020

January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020 Second Quarter 2020 Adjustments January 1, 2020 Opening Balance Sheet as Reported at June 30, 2020

(in thousands)

9 unchanged sentences

Other noncurrent assets 404 — 404

Total assets 75,808 — 75,808

Accounts payable ( 347 ) — ( 347 )

3 unchanged sentences

Total liabilities ( 13,347 ) — ( 13,347 )

Goodwill $ 4,393 $ ( 410 ) $ 3,983

1 Includes $ 53.8 million in customer relationships, $ 0.7 million in noncompete agreements, $ 0.6 million in internally developed software, and a $ 0.6 million trade name.

4 unchanged sentences

The following tables present the cost or amortized cost, gross unrealized gains and temporary losses, and estimated fair value of the Company's restricted investments, held-to-maturity:

March 31, 2020

June 30, 2020

Gross Unrealized

Cost or Amortized

Estimated Fair Value

Cost Gains Temporary

Losses Estimated Fair Value

(In thousands)

4 unchanged sentences

Cost or Amortized

Estimated Fair Value

Cost Gains Temporary

Losses Estimated Fair Value

(In thousands)

1 unchanged sentence

Restricted investments, held-to-maturity $ 8,912 $ 4 $ ( 1 ) $ 8,915

As of March 31, 2020 , the contractual maturities of the restricted investments, held-to-maturity, were one year or less.

There were 12 securities and 7 securities that were in an unrealized loss position for less than twelve months as of March 31, 2020 and December 31, 2019 , respectively.

The Company did not recognize any impairment losses related to its held-to-maturity investments during the quarters ended March 31, 2020 or 2019 , respectively.

As of June 30, 2020, the contractual maturities of the restricted investments, held-to-maturity, were one year or less.

There were three securities and seven securities that were in an unrealized loss position for less than twelve months as of June 30, 2020 and December 31, 2019, respectively.

The Company did no t recognize any impairment losses related to its held-to-maturity investments during the quarter or year-to-date periods ended June 30, 2020 or 2019, respectively.

Refer to Note 16 for additional information regarding fair value measurements of the Company's investments.

1 unchanged sentence

The Company expects to sell its assets held for sale, which primarily consist of revenue equipment, within the next twelve months .

Revenue equipment held for sale totaled $ 38.0 million and $ 41.8 million as of March 31, 2020 and December 31, 2019 , respectively.

Net gains on disposals, including disposals of property and equipment classified as assets held for sale, reported in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income, were $ 3.0 million and $ 11.8 million for the quarters ended March 31, 2020 and 2019 , respectively.

The Company recognized impairment losses related to assets held for sale of $ 0.1 million during the quarter ended March 31, 2020 .

The Company did not recognize any impairment losses related to assets held for sale during the quarter ended March 31, 2019 .

Revenue equipment held for sale totaled $ 39.6 million and $ 41.8 million as of June 30, 2020 and December 31, 2019, respectively.

• $ 1.7 million and $ 7.5 million for the quarter-to-date periods ended June 30, 2020 and 2019, respectively.

• $ 4.7 million and $ 19.2 million for the year-to-date periods ended June 30, 2020 and 2019, respectively.

The Company recognized impairment losses related to assets held for sale of approximately $ 0.4 million during the quarter and year-to-date periods ended June 30, 2020.

The Company did no t recognize any impairment losses related to assets held for sale during the quarter or year-to-date periods ended June 30, 2019.

Table of Contents Glossary of Terms

7 unchanged sentences

Acquisition ¹ 3,983

Goodwill, balance at March 31, 2020

The goodwill associated with the acquisition referenced in Note 4 was allocated to the non-reportable segment.

The Company did not record any goodwill impairments during the quarter ended March 31, 2020 or 2019 .

Goodwill, balance at June 30, 2020 $ 2,922,970

1 The goodwill associated with the acquisition referenced in Note 4 was allocated to the non-reportable segment, and is net of purchase price accounting adjustments.

The Company did no t record any goodwill impairments during the quarter or year-to-date periods ended June 30, 2020 or 2019.

Other Intangible Assets

Other intangible asset balances were as follows:

2020 December 31,

(In thousands)

9 unchanged sentences

The Company's customer relationship intangible assets related to the 2017 Merger are being amortized over a weighted average amortization period of 19.9 years.

As of March 31, 2020 , management anticipates that the composition and amount of amortization associated with intangible assets will be $ 34.4 million for the remainder of 2020, $ 45.9 million in 2021, $ 45.8 million in 2022, and $ 45.2 million for each of the years 2023 and 2024.

As of June 30, 2020, management anticipates that the composition and amount of amortization associated with intangible assets will be $ 22.9 million for the remainder of 2020, $ 45.9 million in 2021, $ 45.8 million in 2022, and $ 45.2 million for each of the years 2023 and 2024.

Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets, and other events.

3 unchanged sentences

Note 8 — Income Taxes

Effective Tax Rate — The effective tax rate was 27.2 % for the first quarter of 2020, compared to 24.0 % for the first quarter of 2019.

The Company recognized discrete items relating to foreign currency fluctuations and stock compensation deductions during the quarter ended March 31, 2020 .

Valuation Allowance — The Company has not established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required.

Effective Tax Rate — The quarter-to-date June 30, 2020 and June 30, 2019 effective tax rates were 25.0 % and 24.7 %, respectively.

The Company recognized a discrete item relating to stock compensation deductions during the quarter ended June 30, 2020.

The Company also recognized discrete items relating to stock compensation deductions as well as the partial release of its reserve for uncertain tax positions during the quarter ended June 30, 2019.

The year-to-date June 30, 2020 and June 30, 2019 effective tax rates were 26.0 % and 24.4 %, respectively.

The Company recognized discrete items relating to stock compensation deductions partially offset by unfavorable foreign currency fluctuations for the year-to-date June 30, 2020.

The Company also recognized discrete items relating to stock compensation deductions as well as a partial release of its reserve for uncertain tax positions during the year-to-date period ended June 30, 2019.

Valuation Allowance — The Company has no t established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required.

Management believes that it is more like ly than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

1 unchanged sentence

Unrecognized Tax Benefits — Management believes it is reasonably possible that a decrease of up to $ 1.0 million in unrecognized tax benefits relating to federal deductions may be necessary within the next twelve months.

Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits was approximately $ 0.4 million for the periods ended March 31, 2020 and December 31, 2019 .

Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits were approximately $ 0.5 million and $ 0.4 million as of June 30, 2020 and December 31, 2019, respectively.

Tax Examinations — The Company is currently under examination by the IRS for the 2012 tax year and management does not expect any adjustments that would have a material impact on the Company's effective tax rate.

6 unchanged sentences

The Company's eligible receivables are included in "Trade receivables, net of allowance for doubtful accounts" in the condensed consolidated balance sheets.

As of March 31, 2020 , the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.

As of June 30, 2020, the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.

The 2018 RSA is subject to fees, various affirmative and negative covenants, representations and warranties, and default and termination provisions customary for facilities of this type.

The Company was in compliance with these covenants as of March 31, 2020 .

The Company was in compliance with these covenants as of June 30, 2020.

Collections on the underlying receivables by the Company are held for the benefit of SRCII and the various purchasers and are unavailable to satisfy claims of the Company and its subsidiaries.

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The following table summarizes the key terms of the 2018 RSA (dollars in thousands):

Effective date

July 11, 2018

Final maturity date

Effective date July 11, 2018

Final maturity date July 9, 2021

Borrowing capacity $ 325,000

Accordion option ¹ $ 175,000

Unused commitment fee rate ²

20 to 40 basis points

Program fees on outstanding balances ³

one-month LIBOR + 80 to 100 basis points

Unused commitment fee rate ² 20 to 40 basis points

Program fees on outstanding balances ³ one-month LIBOR + 80 to 100 basis points

1 The accordion option increases the maximum borrowing capacity, subject to participation of the purchasers.

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Availability under the 2018 RSA is calculated as follows:

2020 December 31,

(In thousands)

3 unchanged sentences

Availability under accounts receivable securitization facilities $ 39,959 $ 23,259

Outstanding borrowings are included in "Accounts receivable securitization" in the condensed consolidated balance sheets, offset by $ 0.2 million of deferred loan costs as of March 31, 2020 and December 31, 2019 .

Interest accrued on the aggregate principal balance at a rate of 2.4 % and 2.6 % as of March 31, 2020 and December 31, 2019 , respectively.

1 Outstanding borrowings are included in "Accounts receivable securitization" in the condensed consolidated balance sheets, offset by $ 0.2 million of deferred loan costs as of June 30, 2020 and December 31, 2019 .

Interest accrued on the aggregate principal balance at a rate of 1.1 % and 2.6 % as of June 30, 2020 and December 31, 2019 , respectively.

Program fees and unused commitment fees are recorded in "Interest expense" in the condensed consolidated statements of comprehensive income.

The Company incurred accounts receivable securitization program fees of $ 1.4 million and $ 2.0 million during the quarters ended March 31, 2020 and 2019 , respectively.

The Company incurred accounts receivable securitization program fees of $ 0.7 million and $ 1.9 million during the quarter-to-date June 30, 2020 and 2019 periods, respectively.

The Company incurred accounts receivable securitization program fees of $ 2.1 million and $ 3.9 million during the year-to-date June 30, 2020 and 2019 periods, respectively.

Refer to Note 16 for information regarding the fair value of the 2018 RSA.

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Purchase Commitments

As of March 31, 2020 , the Company had outstanding commitments to purchase revenue equipment of $ 405.7 million in the remainder of 2020 ( $ 274.0 million of which were tractor commitments) and none thereafter.

As of June 30, 2020, the Company had outstanding commitments to purchase revenue equipment of $ 317.9 million in the remainder of 2020 ($ 224.0 million of which were tractor commitments) and none thereafter.

These purchases may be financed through any combination of operating leases, finance leases, debt, proceeds from sales of existing equipment, and cash flows from operations.

As of March 31, 2020 , the Company had outstanding commitments to purchase facilities and non-revenue equipment of $ 6.0 million in the remainder of 2020 , $ 1.2 million in the two-year period 2021 through 2022, $ 0.2 million in the two-year period 2023 through 2024, and none thereafter.

As of June 30, 2020, the Company had outstanding commitments to purchase facilities and non-revenue equipment of $ 19.2 million in the remainder of 2020, $ 1.8 million in the two-year period 2021 through 2022, $ 0.2 million in the two-year period 2023 through 2024, and none thereafter.

Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

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In these agreements, Knight committed to invest in return for an ownership percentage.

During the first quarter of 2020, Knight entered into a $ 20.0 million commitment to invest in the newly formed TRP Capital Partners V, LP with the entire commitment outstanding as of March 31, 2020 .

There were no other material changes related to the previously disclosed TRP commitments during the quarter ended March 31, 2020 .

During the first quarter of 2020, Knight entered into a $ 20.0 million commitment to invest in the newly formed TRP Capital Partners V, LP with $ 16.8 million outstanding as of June 30, 2020.

There were no other material changes related to the previously disclosed TRP commitments during the quarter ended June 30, 2020.

Note 11 — Contingencies and Legal Proceedings

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The Company has made accruals with respect to its legal matters where appropriate, which are included in "Accrued liabilities" in the condensed consolidated balance sheets.

The Company has recorded an aggregate accrual of approximately $ 27.7 million , relating to the Company's outstanding legal proceedings as of March 31, 2020 .

The Company has recorded an aggregate accrual of approximately $ 27.9 million, relating to the Company's outstanding legal proceedings as of June 30, 2020.

Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals.

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CRST Expedited

Plaintiff alleges tortious interference with contract and unjust enrichment related to non-competition agreements entered into with certain of its drivers.

Date instituted

Court or agency currently pending in

The plaintiff alleges tortious interference with contract and unjust enrichment related to non-competition agreements entered into with certain of its drivers.

Plaintiff(s) Defendant(s) Date instituted Court or agency currently pending in

CRST Expedited, Inc.

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In July 2019, a jury issued an adverse verdict in this lawsuit.

The Company is reviewing all options including post-trial motions seeking to overturn the jury verdict and if necessary, an appeal.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of March 31, 2020.

The court issued a decision granting in part and denying in part certain motions related to the jury’s verdict.

Both parties have appealed the court’s decision.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of June 30, 2020.

California Wage, Meal, and Rest Class Actions

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and 7) failed to provide accurate wage statements.

Date instituted

Court or agency currently pending in

Plaintiff(s) Defendant(s) Date instituted Court or agency currently pending in

John Burnell 1

Swift Transportation Co., Inc

March 22, 2010

Swift Transportation Co., Inc March 22, 2010

United States District Court for the Central District of California

Swift Transportation Co.

of Arizona, LLC and Swift Transportation Company

April 5, 2012

of Arizona, LLC and Swift Transportation Company April 5, 2012

United States District Court for the Central District of California

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In January 2020, the court granted final approval of the settlement.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of March 31, 2020.

The plaintiff appealed the court’s decision granting final approval of the settlement.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of June 30, 2020.

Arizona Minimum Wage Class Action

The plaintiffs generally allege one or more of the following:

1) failure to minimum wage for the first day of orientation;

1) failure to pay minimum wage for the first day of orientation;

2) failure to pay minimum wage for time spent studying;

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and 4) failure to pay minimum wage for the first eight hours of sleeper berth time.

Date instituted

Court or agency currently pending in

Plaintiff(s) Defendant(s) Date instituted Court or agency currently pending in

Pamela Julian ¹

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and Swift Transportation Co.

of Arizona LLC

December 29, 2015

United States District Court for the District of Arizona

of Arizona LLC December 29, 2015 United States District Court for the District of Arizona

Recent Developments and Current Status

In December 2019, the court awarded damages for failure to pay minimum wage for 16 hours per day.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of March 31, 2020.

The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of June 30, 2020.

1 Individually and on behalf of all others similarly situated.

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Ninth Circuit Independent Contractor Misclassification Class Action

The putative class alleges that Swift misclassified independent contractors as independent contractors, instead of employees, in violation of the FLSA and various state laws.

The putative class alleges that Swift misclassified independent contractors as independent contractors, instead of employees, in violation of the Fair Labor Standards Act and various state laws.

The lawsuit also raises certain related issues with respect to the lease agreements that certain independent contractors have entered into with Interstate Equipment Leasing, LLC.

The putative class seeks unpaid wages, liquidated damages, interest, other costs, and attorneys' fees.

Date instituted

Court or agency currently pending in

Plaintiff(s) Defendant(s) Date instituted Court or agency currently pending in

Joseph Sheer, Virginia Van Dusen, Jose Motolinia, Vickii Schwalm, Peter Wood ¹

Swift Transportation Co., Inc., Interstate Equipment Leasing, Inc., Jerry Moyes, and Chad Killebrew

December 22, 2009

Swift Transportation Co., Inc., Interstate Equipment Leasing, Inc., Jerry Moyes, and Chad Killebrew December 22, 2009

Unites States District Court of Arizona and Ninth Circuit Court of Appeals

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In March 2020, the Company paid the settlement amount approved by the court.

As of March 31, 2020, the Company has a reserve accrued for anticipated costs associated with finalizing this matter.

As of June 30, 2020, the Company has a reserve accrued for anticipated costs associated with finalizing this matter.

1 Individually and on behalf of all others similarly situated.

Self Insurance

Automobile Liability, General Liability, and Excess Liability — Effective November 1, 2019, the Company has $ 130.0 million excess auto liability ("AL") coverage.

Automobile Liability, General Liability, and Excess Liability — Effective November 1, 2019, the Company has $ 130.0 million in excess auto liability ("AL") coverage.

For prior years, Swift and Knight maintained separately varying excess AL and general liability limits.

During prior policy periods, Swift AL claims are subject to a $ 10.0 million self-insured retention ("SIR") per occurrence and Knight AL claims were subject to a $ 1.0 million to $ 3.0 million SIR per occurrence.

During prior policy periods, Swift AL claims were subject to a $ 10.0 million self-insured retention ("SIR") per occurrence and Knight AL claims were subject to a $ 1.0 million to $ 3.0 million SIR per occurrence.

Additionally, Knight carries a $ 2.5 million aggregate deductible for any loss or losses within the $ 5.0 million excess of $ 5.0 million layer of coverage.

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Cargo Damage and Loss — The Company is insured against cargo damage and loss with liability limits of $ 2.0 million per truck or trailer with a $ 10.0 million limit per occurrence.

This coverage also includes a $ 1.0 million limit for tobacco loads and a $ 250 thousand deductible.

Workers' Compensation and Employers' Liability — The Company is self-insured for workers' compensation coverage.

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Prior to March 1, 2019, the Knight SIR was $ 1.0 million per occurrence.

Medical — Knight maintains primary and excess coverage for employee medical expenses and hospitalization, with a $ 0.3 million self-insured retention per claimant.

Medical — Knight maintains primary and excess coverage for employee medical expenses, with a $ 0.3 million self-insured retention per claimant.

Through December 31, 2019, Swift was fully insured on its medical benefits (subject to contributed premiums).

Effective January 1, 2020, Swift provides primary and excess coverage for employee medical expenses and hospitalization, with self-insured retention of $ 0.5 million per claimant to all employees.

Effective January 1, 2020, Swift provides primary and excess coverage for employee medical expenses, with an SIR of $ 0.5 million per claimant to all employees.

Table of Contents Glossary of Terms

2 unchanged sentences

Note 12 — Share Repurchase Plan

On May 31, 2019, the Company announced that the Board approved the repurchase of up to $ 250.0 million worth of the Company's outstanding common stock (the "2019 Knight-Swift Share Repurchase Plan"), which replaced the previous share repurchase plan.

The following table presents the Company's repurchases of its common stock under the 2019 Knight-Swift Share Repurchase Plan, excluding advisory fees:

Share Repurchase Plan

Quarter Ended March 31, 2020

Board Approval Date

Authorized Amount

On May 31, 2019, the Company announced that the Board approved the repurchase of up to $ 250.0 million worth of the Company's outstanding common stock (the "2019 Knight-Swift Share Repurchase Plan").

With the adoption of the 2019 Knight-Swift Share Repurchase Plan, the Company terminated the $ 250.0 million repurchase plan previously approved by the Board in June 2018 (the "2018 Knight-Swift Share Repurchase Plan").

There was approximately $ 0.2 million remaining under the 2018 Knight-Swift Share Repurchase Plan upon termination.

The following table presents the Company's repurchases of its common stock under the respective share repurchase plans, excluding advisory fees:

Share Repurchase Plan Quarter-to-Date June 30, 2020 Year-to-Date June 30, 2020

Board Approval Date Authorized Amount Shares Amount Shares Amount

(in thousands)

May 30, 2019 ¹ $ 250,000 — $ — 1,139 $ 34,630

$ 199.0 million and $ 233.6 million remained available under the 2019 Knight-Swift Share Repurchase Plan as of March 31, 2020 and December 31, 2019 , respectively.

— $ — 1,139 $ 34,630

Share Repurchase Plan Quarter-to-Date June 30, 2019 Year-to-Date June 30, 2019

Board Approval Date Authorized Amount Shares Amount Shares Amount

(in thousands)

June 1, 2018 $ 250,000 2,315 $ 70,500 2,315 $ 70,500

May 30, 2019 ¹ $ 250,000 559 16,392 559 16,392

2,874 $ 86,892 2,874 $ 86,892

1 $ 199.0 million and $ 233.6 million remained available under the 2019 Knight-Swift Share Repurchase Plan as of June 30, 2020 and December 31, 2019 , respectively.

Note 13 — Weighted Average Shares Outstanding

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The following table reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

(In thousands)

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The following table presents Knight-Swift's transactions with companies controlled by and/or affiliated with its related parties:

Quarter Ended March 31,

Provided by Knight-Swift

Received by Knight-Swift

Provided by Knight-Swift

Received by Knight-Swift

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift

(In thousands)

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SME Industries ¹ 28 — 62 — 28 — 217 —

Total $ 1,048 $ — $ 3,905 $ — $ 7,864 $ — $ 7,176 $ —

Facility and Equipment Leases:

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Other Affiliates ¹ 4 36 5 — 9 109 9 —

Total $ 27 $ 129 $ 83 $ 92 $ 32 $ 294 $ 331 $ 185

Other Services:

Central Freight Lines ¹ $ — $ — $ 542 $ — $ 15 $ — $ 542 $ —

DPF Mobile ¹ — 19 — 54 $ — 31 — 98

Other Affiliates ¹ 10 — 12 614 19 — 22 1,232

Total $ 10 $ 19 $ 554 $ 668 $ 34 $ 31 $ 564 $ 1,330

1 Entities affiliated with former Board member Jerry Moyes include Central Freight Lines, SME Industries, Compensi Services, and DPF Mobile.

"Other affiliates" includes entities that are associated with various board members and executives and require approval by the Board prior to completing transactions.

Transactions with these entities include freight services, facility and equipment leases, equipment sales, and other services.

Transactions with these entities generally include freight services, facility and equipment leases, equipment sales, and other services.

• Freight Services Provided by Knight-Swift — The Company charges each of these companies for transportation services.

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Receivables and payables pertaining to related party transactions were:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Payable Receivable Payable

(In thousands)

1 unchanged sentence

SME Industries 22 — 17 —

DPF Mobile — — — 2

Other Affiliates 1 2 — —

Total $ 3,326 $ 2 $ 2,889 $ 2

Table of Contents Glossary of Terms

6 unchanged sentences

Based on how economic factors affect the nature, amount, timing, and uncertainty of revenue or cash flows, the Company disaggregates revenues by reportable segment for the purposes of applying the ASC Topic 606 guidance.

The Trucking segment is comprised of irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border operations.

The Logistics segment is primarily comprised of brokerage and other freight management services.

The Intermodal segment includes revenue generated by moving freight over the rail in the Company's containers and other trailing equipment, combined with the Company's revenue for drayage to transport loads between the railheads and customer locations.

The Company's twenty operating segments are structured around the types of transportation service offerings provided to our customers, as well as the equipment utilized.

In addition, the operating segments may be further distinguished by the Company’s respective brands.

The Company aggregated these various operating segments into the three reportable segments discussed below based on similarities with both their qualitative and economic characteristics.

The Trucking reportable segment is comprised of nine trucking operating segments that provide similar transportation services to our customers utilizing similar transportation equipment over both irregular (one-way movement) and/or dedicated routes.

The Trucking reportable segment consists of irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border operations.

The Logistics reportable segment is comprised of five logistics operating segments that provide similar transportation services to our customers and primarily consist of brokerage and other freight management services utilizing third-party transportation providers and their equipment.

The Intermodal reportable segment is comprised of two intermodal operating segments that provide similar transportation services to our customers.

These transportation services include arranging the movement of customers' freight through third-party intermodal rail services on the Company’s trailing equipment (trailers on flat cars and rail containers), as well as drayage services to transport loads between the railheads and customer locations.

Non-reportable

The non-reportable segments include support services provided to the Company's customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).

The non-reportable segments include four operating segments that consist of support services provided to the Company's customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).

Intersegment Eliminations

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Such intersegment revenues and expenses are eliminated in Knight-Swift's consolidated results.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The following tables present the Company's financial information by segment:

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

(In thousands)

Trucking $ 879,369 $ 1,020,027 $ 1,798,430 $ 1,993,272

Logistics 70,104 82,929 149,302 171,881

Intermodal 82,820 118,195 177,551 234,562

Subtotal $ 1,032,293 $ 1,221,151 $ 2,125,283 $ 2,399,715

Non-reportable segments 45,289 29,597 91,531 67,361

1 unchanged sentence

Total revenue $ 1,060,698 $ 1,242,083 $ 2,185,496 $ 2,446,618

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

Operating income (loss):

(In thousands)

Trucking $ 107,788 $ 125,772 $ 215,122 $ 240,947

Logistics 3,038 5,021 6,757 12,304

Intermodal ( 4,475 ) 4,192 ( 7,212 ) 6,553

Subtotal $ 106,351 $ 134,985 $ 214,667 $ 259,804

Non-reportable segments ( 4,184 ) ( 26,392 ) ( 10,381 ) ( 34,912 )

Operating income $ 102,167 $ 108,593 $ 204,286 $ 224,892

Quarter Ended March 31,

Quarter-to-Date June 30, Year-to-Date June 30,

2020 2019 2020 2019

Depreciation and amortization of property and equipment:

(In thousands)

Trucking $ 97,555 $ 86,842 $ 191,103 $ 171,352

Logistics 207 159 414 314

Intermodal 3,606 3,303 7,094 6,663

Subtotal $ 101,368 $ 90,304 $ 198,611 $ 178,329

Non-reportable segments 13,233 12,634 26,211 25,546

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Geographical Information

In the aggregate, total revenue from the Company's foreign operations was less than 5.0 % of consolidated total revenue for the quarters ended March 31, 2020 and 2019 .

Additionally, long-lived assets on the Company's foreign subsidiary balance sheets were less than 5.0 % of consolidated total assets as of March 31, 2020 and December 31, 2019 .

In the aggregate, total revenue from the Company's foreign operations was less than 5.0 % of consolidated total revenue for the quarter and year-to-date periods ended June 30, 2020 and 2019.

Additionally, long-lived assets on the Company's foreign subsidiary balance sheets were less than 5.0 % of consolidated total assets as of June 30, 2020 and December 31, 2019.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 16 — Fair Value Measurement

4 unchanged sentences

Changes in assumptions could significantly affect these estimates.

Because the fair value is estimated as of March 31, 2020 and December 31, 2019 , the amounts that will actually be realized or paid at settlement or maturity of the instruments in the future could be significantly different.

Because the fair value is estimated as of June 30, 2020 and December 31, 2019, the amounts that will actually be realized or paid at settlement or maturity of the instruments in the future could be significantly different.

The estimated fair values of the Company's financial instruments represent management's best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date.

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The following summary presents a description of the methods and assumptions used to estimate the fair value of each class of financial instrument.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Restricted Investments, Held-to-Maturity — The estimated fair value of the Company's restricted investments, held-to-maturity, is based on quoted prices in active markets that are readily and regularly obtainable.

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The carrying value of the 2018 RSA approximates fair value, as the underlying receivables are short-term in nature and only eligible receivables (such as those with high credit ratings) are qualified to secure the borrowed amounts.

For finance and operating leases, the carrying value approximates the fair value, as the Company's finance and operating leases are structured to amortize in a manner similar to the depreciation of the underlying assets.

For finance and operating lease liabilities, the carrying value approximates the fair value, as the Company's finance and operating lease liabilities are structured to amortize in a manner similar to the depreciation of the underlying assets.

Contingent Consideration — The estimated fair value of the Company's contingent consideration owed to Warehousing Co.'s seller is calculated using a Monte Carlo simulation model based on the acquiree's earnings before interest and taxes.

Other — Cash and cash equivalents, restricted cash, net accounts receivable, income tax refund receivable, and accounts payable represent financial instruments for which the carrying amount approximates fair value, as they are short-term in nature.

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All remaining balance sheet amounts excluded from the below are not considered financial instruments, subject to this disclosure.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The following table presents the carrying amounts and estimated fair values of the Company's major categories of financial assets and liabilities:

March 31, 2020

December 31, 2019

June 30, 2020 December 31, 2019

Value Estimated

Fair Value Carrying

Value Estimated

(In thousands)

6 unchanged sentences

2018 RSA, due July 2021 4

164,840 165,000 204,762 205,000

Revolver, due October 2022 235,000 235,000 279,000 279,000

Contingent consideration associated with acquisition 5

17,570 17,570 — —

1 Refer to Note 5 for the differences between the carrying amounts and estimated fair values of the Company's restricted investments, held-to-maturity.

2 The investments are carried at fair value and are included in "Other long-term assets" on the condensed consolidated balance sheets.

The carrying amount of the Term Loan is included in "Finance lease liabilities and long-term debt – current portion," on the condensed consolidated balance sheets and is net of $ 0.1 million and $ 0.2 million in deferred loan costs as of March 31, 2020 and December 31, 2019 , respectively.

The carrying amount of the 2018 RSA is included in "Accounts receivable securitization," on the condensed consolidated balance sheets and is net of $ 0.2 million in deferred loan costs as of March 31, 2020 and December 31, 2019 .

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Recurring Fair Value Measurements (Assets) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate fair value of assets measured on a recurring basis as of March 31, 2020 :

3 The carrying amount of the Term Loan is included in "Finance lease liabilities and long-term debt – current portion," on the condensed consolidated balance sheets and is net of $ 0.1 million and $ 0.2 million in deferred loan costs as of June 30, 2020 and December 31, 2019, respectively.

4 The carrying amount of the 2018 RSA is included in "Accounts receivable securitization," on the condensed consolidated balance sheets and is net of $ 0.2 million in deferred loan costs as of June 30, 2020 and December 31, 2019.

5 The carrying amount of the contingent consideration associated with the acquisition is included in both the "Accrued liabilities" and "Other long-term liabilities" line items on the condensed consolidated balance sheets.

Fair Value Measurements at Reporting Date Using:

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Gain (Loss)

(In thousands)

As of March 31, 2020

As of June 30, 2020

Investments in equity securities ¹ $ 17,436 $ 17,436 $ — $ — $ 2,314

1 unchanged sentence

Investments in equity securities ¹ $ 8,722 $ 8,722 $ — $ — $ ( 184 )

Total unrealized losses for these investments are included within "Other (expense) income, net" within the condensed consolidated statements of comprehensive income for the quarter ended March 31, 2020 .

The Company did not sell any equity investments during the quarters ended March 31, 2020 or 2019 and therefore did not realize any losses on these investments.

Recurring Fair Value Measurements (Liabilities) — As of March 31, 2020 and December 31, 2019 , there were no major categories of liabilities on the condensed consolidated balance sheets estimated at fair value that were measured on a recurring basis.

Nonrecurring Fair Value Measurements (Assets) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate fair value of assets measured on a nonrecurring basis as of March 31, 2020 and December 31, 2019 :

1 Total unrealized gains (losses) for these investments are included within "Other (expense) income, net" within the condensed consolidated statements of comprehensive income for the quarter and year-to-date periods ended June 30, 2020.

The Company did not sell any equity investments during the quarter and year-to-date periods ended June 30, 2020 or 2019 and therefore did not realize any losses on these investments.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Recurring Fair Value Measurements (Liabilities) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of liabilities measured on a recurring basis as of June 30, 2020:

Fair Value Measurements at Reporting Date Using:

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Gain (Loss)

(In thousands)

As of March 31, 2020

As of June 30, 2020

Contingent consideration associated with acquisition ¹ $ 17,570 $ — $ — $ 17,570 $ —

1 There were no material adjustments to the contingent consideration made during the quarter and year-to-date periods ended June 30, 2020 .

As of December 31, 2019, there were no major categories of liabilities on the condensed consolidated balance sheets estimated at fair value that were measured on a recurring basis.

Fair Value Measurements at Reporting Date Using:

Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Loss

(In thousands)

As of June 30, 2020

Equipment ¹ $ 5,099 $ — $ 5,099 $ — $ ( 1,255 )

As of December 31, 2019

Leasehold improvements ² $ — $ — $ — $ — $ ( 2,182 )

During the first quarter of 2020, the Company incurred impairment charges which were associated with revenue equipment held for sale and trailer tracking systems.

Equipment ³ 1,380 — 1,380 — ( 870 )

— — — — ( 434 )

1 Reflects the non-cash impairment of certain tractors (within the Trucking segment) and certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market during the second quarter of 2020, as well as impairment charges of trailer tracking equipment (within the Trucking segment) during the first quarter of 2020.

2 During the second quarter of 2019, the Company incurred an impairment of leasehold improvements related to the early termination of a lease on one of its operating properties.

4 unchanged sentences

These impairments were allocated between the Logistics and non-reportable segments based on each segment's use of the assets.

Nonrecurring Fair Value Measurements (Liabilities) — As of March 31, 2020 and December 31, 2019 , the Company had no major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.

Nonrecurring Fair Value Measurements (Liabilities) — As of June 30, 2020 and December 31, 2019, the Company had no major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.

Table of Contents Glossary of Terms

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements