What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-08-05 compared with 2020-05-06 · 304 added, 250 removed, 500 unchanged (53% of the section changed)

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• our expected need or desire to incur indebtedness,

future capital expenditures and expected sources of liquidity, capital allocation, capital structure, capital requirements, and growth strategies and opportunities,

Table of Contents Glossary of Terms

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

• future capital expenditures and expected sources of liquidity, capital allocation, capital structure, capital requirements, and growth strategies and opportunities,

• expected capital expenditures,

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• political conditions and regulations, including trade regulation, quotas, duties, or tariffs, and any future changes to the foregoing,

• future insurance claims, premiums, and retention limits,

• future purchased transportation expense, and

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Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to materially differ from those set forth in, contemplated by, or underlying the forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part II, Item 1A "Risk Factors" of this Quarterly Report, Part I, Item 1A "Risk Factors" in our 2019 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A "Risk Factors" in our 2019 Annual Report, Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

All such forward-looking statements speak only as of the date of this Quarterly Report.

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Impact of COVID-19

We continue to operate our business through the COVID-19 pandemic and have taken many additional precautions to ensure the safety of our employees, customers, vendors, and the communities in which we operate.

Our diverse customer base has permitted us to balance our truckload capacity between customers with significant declines in volumes and those experiencing surges in demand for essential consumer products.

We believe we are well-prepared for the sustainability of our business from a balance sheet perspective with a very conservative debt balance and a meaningful level of available liquidity, coupled with a conservative, cost-minded culture.

We are fortunate that our multiple brands and diverse operating model have enabled us to rapidly adapt to the ever-changing economic environment.

We believe we are well-positioned to navigate through these unprecedented times, while continuing to support our customers and ultimately the greater economy.

The COVID-19 pandemic, and efforts to contain it, has significantly affected the economy and the everyday lives of people around the world.

Trucking has always been an essential service, which has become increasingly apparent as we partner with our customers to deliver vital goods to consumers throughout North America during these trying times.

As part of our efforts to safeguard our employees and promote business continuity, we have taken many additional precautions to enhance the sanitization process of our equipment and properties, increase the social distancing of our employees by working remotely where possible, and provide our driving associates with essential provisions and enhanced bonus opportunities while they are over the road delivering freight for our customers.

During the first quarter of 2020, we invested approximately $2.3 million of incremental expenses associated with our drivers and terminal employees to ensure safety and that communities received essential products.

We expect to incur costs of a similar nature in the second quarter of 2020.

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

During the second quarter and first half of 2020, we incurred approximately $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 our drivers and shop technicians, as well as additional disinfectants and cleaning supplies, and various other pandemic-specific items.

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

Refer to Note 1 in Part I, Item 1 of this Quarterly Report for further discussion around the impact of COVID-19 on our company.

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.

Company Overview

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We primarily generate revenue by transporting freight for our customers through our Trucking segment.

Our brokerage and intermodal operations provide a multitude of shipping solutions, including additional sources of truckload capacity and alternative transportation modes, by utilizing our vast network of third-party capacity providers and rail providers, as well as certain logistics and freight management services.

Revenue in our brokerage and intermodal operations is generated through our Logistics and Intermodal segments.

Our non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

(such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).

• Our logistics and intermodal operations provide a multitude of shipping solutions, including additional sources of truckload capacity and alternative transportation modes, by utilizing our vast network of third-party capacity providers and rail providers, as well as certain logistics and freight management services.

Revenue in our logistics and intermodal operations is generated through our Logistics and Intermodal segments.

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

• In addition to the revenues earned from our customers for the trucking and non-trucking services discussed above, we also earn fuel surcharge revenue from our customers through our fuel surcharge program, which serves to recover a majority of our fuel costs.

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Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue for our Trucking segment.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Expenses — Our most significant expenses vary with miles traveled and include fuel, driving associate-related expenses (such as wages and benefits), and services purchased from independent contractors and other transportation providers (such as railroads, drayage providers, and other trucking companies).

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Operating Statistics — We measure our consolidated and segment results through certain operating statistics, which are discussed under "Results of Operations — Segment Review — Operating Statistics," below.

Our results are affected by various economic, industry, operational, regulatory, and other factors, which are discussed in detail in "Part I, Item 1A.

Risk Factors," in our 2019 Annual Report, and supplemented in Part II, Item 1A of this Quarterly Report, as well as in various disclosures in our press releases, stockholder reports, and other filings with the SEC.

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 Highlights and Operating Metrics

Quarter Ended March 31,

Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our 2019 Annual Report, Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Consolidated Key Financial Highlights and Operating Metrics

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

2020 2019 2020 2019

GAAP financial data:

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Net income attributable to Knight-Swift $ 80,189 $ 79,205 $ 145,615 $ 167,143

Earnings per diluted share $ 0.47 $ 0.46 $ 0.85 $ 0.97

Operating ratio 90.4 % 91.3 % 90.7 % 90.8 %

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Adjusted Net Income Attributable to Knight-Swift 1

$ 96,498 $ 100,627 $ 172,703 $ 196,808

Adjusted EPS 1

$ 0.57 $ 0.58 $ 1.01 $ 1.14

Adjusted Operating Ratio 1

87.6 % 87.8 % 88.1 % 88.1 %

Revenue equipment:

Average tractors (Trucking segment only) 2

18,393 18,985 18,428 18,959

Average trailers 3

57,269 58,263 57,456 56,902

Average containers 10,853 9,863 10,355 9,864

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.

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.

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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.

The average age of our company-owned tractor fleet was 2.0 years in the first quarter of 2020 , as compared to 2.1 years in the first quarter of 2019 .

The average age of our trailer fleet was 7.6 years in the first quarter of 2020 , as compared to 7.2 years in the first quarter of 2019 .

2 The average age of our company-owned tractor fleet was 2.1 years as of June 30, 2020 and 2019.

3 The average age of our trailer fleet was 7.6 years and 7.3 years as of June 30, 2020 and 2019, respectively .

Table of Contents Glossary of Terms

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Market Trends and Company Performance

Trends and Outlook — The truckload freight environment remains competitive, amongst the impacts of the COVID-19 global pandemic.

Evidence of capacity rationalization is mounting in the truckload industry, including impacts from trucking company business failures, lower Class 8 new truck orders, further weakening of Class 8 used tractor values, growing Class 8 used inventories, and contraction in trucking employment.

Capacity rationalization has continued to accelerate, causing lower gains on sale of used revenue equipment in the trucking industry, which we have experienced as well.

We expect that the uncertainty around the freight environment will continue throughout a large portion of the year.

As a result of the COVID-19 pandemic, the national unemployment rate began to rise, ending the first quarter of 2020 at 4.4%.

The unemployment rate is expected to steadily rise throughout the majority of 2020.

Driver sourcing generally continues to be a headwind for the trucking industry.

Ongoing competition for driving academy graduates and experienced hires, as well as increased safety regulations, tend to hamper driver sourcing efforts throughout the industry.

Given the overall uncertainties in the freight market, we anticipate that drivers may prefer to seek employment from larger trucking companies that are more financially secure than others.

This may positively position our company in the driver sourcing environment in the remainder of 2020.

During the first quarter of 2020, the US economy contracted at its fastest pace, ending the longest US economic expansion on record.

US gross domestic product, which is the broadest measure of goods and services produced across the economy, shrank by 4.8% 1 , per preliminary third-party forecasts.

This trend is expected to continue, resulting in an expected annualized growth rate of approximately -4.0% to -5.0% 2 for full-year 2020.

The first quarter 2020 US employment cost index rose 2.8% and 0.8% on a year-over-year and sequential basis, respectively.

Despite declining rates over the past year amidst a challenging freight environment, which was further challenged by the effects of the COVID-19 pandemic, our Trucking segment showed resilience, generating an Adjusted Operating Ratio of 86.5% in the first quarter of 2020, which represents a 20 basis point improvement from the same quarter last year.

Total miles per tractor increased by 0.2% in a volatile environment.

Our Logistics segment produced an Adjusted Operating Ratio of 95.2% in the first quarter of 2020, primarily driven by a gross margin of 14.7% within our brokerage business.

While rates and volumes across our reportable segments were pressured during the quarter, our focus on cost management contributed to operating efficiencies that helped mitigate some of the impacts from the uncertain economy, including a weaker used equipment market that negatively affected gain on sales of revenue equipment by $8.8 million (or $0.04 of earnings per diluted share, after taxes) on a year-over-year basis.

Trends and Outlook — Our operational discipline, agility, and cost-control culture enabled us to execute through the unprecedented challenges presented by the COVID-19 pandemic, which introduced a new source of volatility throughout the global markets during the first half of 2020.

Our diversified customer base, networks, and unique brands positioned us to navigate a disrupted freight environment of unpredictable shipping volumes, shifts in pricing, and continued challenges in driver sourcing.

The national unemployment rate was 11.1% 1 as of June 30, 2020 after the COVID-19 pandemic resulted in higher unemployment rates in the beginning of the quarter, which began to decline in May and June as economic activities resumed.

A more pronounced reduction in trained drivers (primarily due to social distancing measures across the nation), ongoing competition for experienced hires, increased safety regulations, and various alternative sources of income to potential drivers are all hampering driver sourcing efforts throughout the industry.

During the second quarter of 2020, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, decreased by 32.9% 2 , per preliminary third-party forecasts.

This may result in an expected annualized growth rate of approximately -5.0% to -6.0% 3 for full-year 2020, as third-party forecasts are predicting an economic rebound in the latter half of this year.

The second quarter 2020 US employment cost index rose 2.7% 1 and 0.5% 1 on a year-over-year and sequential basis, respectively.

From a freight market perspective, demand in April was weak, but gradually strengthened throughout the quarter, and remained strong in July.

We are encouraged by the continued strength in freight demand in July;

however, demand may be difficult to predict for the back half of the year.

We believe supply has and will continue to exit the market as evidenced by significantly lower class 8 truck orders, a weak used equipment market, and lower transportation employment levels.

Looking across our portfolio of brands and freight networks, some of our operating segments performed consistently throughout the quarter, while others experienced more volatility in results.

Our Trucking segment improved its Adjusted Operating Ratio to 85.5% in the second quarter of 2020, as strong cost controls and lower fuel prices overcame a 6.5% decrease in average revenue per tractor and a $5.8 million (or $0.03 of earnings per diluted share, after taxes) decline in gain on sales of used equipment.

Our Logistics segment produced an Adjusted Operating Ratio of 95.5% in the second quarter of 2020, primarily driven by a gross margin of 15.7% within our brokerage business.

Consistent with port industry trends, load volumes within our Intermodal segment continued to be pressured and decreased by 23.9% in the second quarter of 2020, as compared to the same quarter last year, while margins worsened.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding trucking fuel surcharge, as we intend to purchase, rather than lease, a majority of our revenue equipment in 2020.

With significant tightening in the insurance markets, we may also experience changes in premiums and retention limits in 2020.

We expect that our future fuel expenses will decrease as a result of the recently and rapidly deflating fuel prices.

However, we believe any benefits experienced from lower fuel prices may be offset by reduced fuel surcharge revenues.

While fuel expense is generally offset by fuel surcharge revenue, our fuel expense, net of fuel surcharge revenue may increase in the future.

We continue to maintain our leverage ratio within our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended March 31, 2020 and 2019 — The $22.5 million decrease in net income attributable to Knight-Swift to $65.4 million during the quarter ended March 31, 2020 from $87.9 million during the same period last year includes the following:

Contributor — $7.8 million decrease in operating income within our Trucking Segment was primarily due to an $8.8 million reduction in gain on sales of revenue equipment, which was partially offset by a 3.2% decrease in operating expenses per total mile driven.

Contributor — $5.1 million change from operating income to operating loss in our Intermodal Segment due to continued market pressures, including the impact of the COVID-19 pandemic.

Contributor — $11.6 million unfavorable change in "Total other (expense) income, net," primarily attributed to unrealized losses in the first quarter of 2020 from our various equity investments, including our investments in TRP, as well as a $2.5 million unfavorable change associated with foreign currency fluctuations within our Mexico operations.

Offset — $3.4 million decrease in consolidated income tax expense was primarily due to a decrease in earnings.

During the first quarter of 2020, we recognized discrete items related to an increase in unfavorable foreign currency fluctuations, which was partially offset by an increase in stock compensation deductions.

During the first quarter of 2019, we recognized discrete items related to a reduction in our reserve for uncertain tax positions and stock compensation deductions.

All of these factors resulted in an effective tax rate of 27.2% for the first quarter of 2020 and 24.0% for the first quarter of 2019.

Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $1.0 million increase in net income attributable to Knight-Swift to $80.2 million during the quarter ended June 30, 2020 from $79.2 million during the same period last year includes the following:

• Contributor — $22.2 million decrease in operating loss from our non-reportable segments.

Operating results within the non-reportable segments improved in the second quarter of 2020, which included additional income earned from warehousing activities, as compared to the second quarter of 2019, when we incurred $15.5 million in costs associated with a jury verdict.

• Contributor — $5.4 million increase in "Other income, net" primarily related to an increase in gains recognized within our portfolio of investments.

• Offset — $18.0 million decrease in operating income within our Trucking Segment, which was primarily due to a 6.5% decrease in average revenue per tractor and a $5.8 million reduction in gain on sales of revenue equipment, as well as $9.9 million in incremental expenses related to the COVID-19 pandemic.

• Offset — $8.7 million change from operating income in the second quarter of 2019 to operating loss in the second quarter of 2020 in our Intermodal Segment due to continued market pressures, including the impact of the COVID-19 pandemic on port volumes.

Comparison Between Year-to-Date June 30, 2020 and 2019 — The $21.5 million decrease in net income attributable to Knight-Swift to $145.6 million during year-to-date June 30, 2020 from $167.1 million during the same period last year includes the following:

• Contributor — $25.8 million decrease in operating income within our Trucking Segment, which was primarily due to a $14.5 million reduction in gain on sales of revenue equipment, a 4.6% decrease in average revenue per tractor, as well as $12.1 million in COVID-19 related incremental expenses.

• Contributor — $13.8 million change from operating income in the first half of 2019 to operating loss in the first half of 2020 in our Intermodal Segment due to continued market pressures, including the impact of the COVID-19 pandemic on port volumes.

• Contributor — $5.5 million decrease in operating income within our Logistics Segment which was primarily due to a 4.1% decrease in revenue per load.

• Offset — $24.5 million decrease in operating loss from our non-reportable segments primarily due to the $15.5 million jury verdict recognized in the first half of 2019 and additional income earned from warehousing activities in the first half of 2020.

See additional discussion of our operating results within "Results of Operations — Consolidated Operating and Other Expenses" below.

Liquidity and Capital — During the quarter ended March 31, 2020 , we generated $155.3 million in cash flows from operations, used $75.7 million for capital expenditures (net of equipment sales proceeds), reduced our operating lease liabilities by $11.4 million , repurchased $34.6 million worth of our common stock, and returned $14.0 million to our stockholders in the form of quarterly dividends.

Liquidity and Capital — During the first half of the year, we generated $383.4 million in operating cash flows, reduced our operating lease liabilities by $48.2 million, used $195.2 million for capital expenditures (net of equipment sales proceeds), and returned $27.7 million to our stockholders in the form of quarterly dividends.

We also repurchased $34.6 million worth of our common stock at an average price of $30.41 per share (all within the first quarter of 2020).

We ended the quarter with $117.8 million in unrestricted cash and cash equivalents, $235.0 million outstanding on the Revolver, $365.0 million face value outstanding on the Term Loan, and $5.8 billion of stockholders' equity.

We remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth and growth through acquisition.

We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.

See discussion under "Liquidity and Capital Resources" and "Off-Balance Sheet Arrangements" for additional information.

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Consolidating Tables for Total Revenue and Operating Income (Loss)

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

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

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)

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Additionally, we use a number of primary indicators to monitor our revenue and expense performance and efficiency.

Operating Statistic

Relevant Segment(s)

Average Revenue per Tractor

Measures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count

Total Miles per Tractor

Total miles (including loaded and empty miles) a tractor travels on average

Average Length of Haul

Average miles traveled with loaded trailer cargo per order

Non-paid Empty Miles Percentage

Percentage of miles without trailer cargo

Average Tractors

Trucking, Intermodal

Average tractors in operation during the period including company tractors and tractors provided by independent contractors

Average Trailers

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 (Brokerage only)

Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions

Average Containers

Average containers in operation during the period

GAAP Operating Ratio

Trucking, 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.

Operating Statistic Relevant Segment(s) Description

Average Revenue per Tractor Trucking Measures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count

Total Miles per Tractor Trucking Total miles (including loaded and empty miles) a tractor travels on average

Average Length of Haul Trucking Average miles traveled with loaded trailer cargo per order

Non-paid Empty Miles Percentage Trucking Percentage of miles without trailer cargo

Average Tractors Trucking, Intermodal Average tractors in operation during the period including company tractors and tractors provided by independent contractors

Average Trailers Trucking 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 (Brokerage only) Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions

Average Containers Intermodal Average containers in operation during the period

GAAP Operating Ratio Trucking, 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.

Calculated as operating expenses as a percentage of total revenue, or the inverse of operating margin.

Non-GAAP Adjusted Operating Ratio

Trucking, 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-GAAP Adjusted Operating Ratio Trucking, 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.

Consolidated and segment Adjusted Operating Ratios are reconciled to their corresponding GAAP operating ratios under "Non-GAAP Financial Measures," below.

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The main fixed costs in the Trucking segment are depreciation and rent expenses from leasing and acquiring revenue equipment and terminals, as well as compensating our non-driver employees.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands, except per tractor data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands, except per tractor data) Increase (Decrease)

Total revenue $ 879,369 $ 1,020,027 $ 1,798,430 $ 1,993,272 (13.8 %) (9.8 %)

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Average revenue per tractor ² $ 44,366 $ 47,440 $ 88,839 $ 93,163 (6.5 %) (4.6 %)

Operating ratio ²

Adjusted Operating Ratio ¹ ²

Non-paid empty miles percentage ²

Operating ratio ² 87.7 % 87.7 % 88.0 % 87.9 % — bps 10 bps

Adjusted Operating Ratio ¹ ² 85.5 % 85.8 % 86.0 % 86.2 % (30 bps) (20 bps)

Non-paid empty miles percentage ² 13.8 % 12.9 % 13.3 % 12.9 % 90 bps 40 bps

Average length of haul (miles) ² 420 429 424 429 (2.1 %) (1.2 %)

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2 Defined under "Operating Statistics," above.

Includes 16,339 and 16,208 average company-owned tractors for the quarter ended March 31, 2020 and 2019 , respectively.

Comparison Between the Quarters Ended March 31, 2020 and 2019 — Operating Ratio was 88.3% in the first quarter of 2020 compared to 88.2% in the first quarter of 2019.

We improved the Adjusted Operating Ratio within this segment to 86.5% in the first quarter of 2020 from 86.7% in the first quarter of 2019, despite an $8.8 million reduction in gain on sales of revenue equipment.

Our cost control efforts contributed to a 3.2% decrease in operating expenses per total miles driven.

Average revenue per tractor decreased by 2.7% , primarily as a result of a 3.1% decrease in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

3 Includes 16,315 and 16,491 average company-owned tractors for the second quarter of 2020 and 2019, respectivel y.

Includes 16,327 and 16,352 average company-owned tractors for the year-to-date June 30, 2020 and 2019 periods, respectively.

Table of Contents Glossary of Terms

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended June 30, 2020 and 2019 — Operating Ratio was 87.7% in the second quarters of 2020 and 2019.

We improved the Adjusted Operating Ratio within this segment to 85.5% in the second quarter of 2020 from 85.8% in the second quarter of 2019, despite a $5.8 million reduction in gain on sales of revenue equipment.

We continued to see improvement in our dedicated and refrigerated operating segments during the quarter.

Average revenue per tractor decreased by 6.5%, driven by a 3.9% decrease in miles per tractor.

Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, was flat sequentially and decreased 1.7% year-over-year.

We expect rate per mile to inflect positively year-over-year in the third quarter.

Comparison Between Year-to-Date June 30, 2020 and 2019 — Operating Ratio was 88.0% in the first half of 2020 compared to 87.9% in the first half of 2019.

We improved the Adjusted Operating Ratio within this segment to 86.0% in the first half of 2020 from 86.2% in the first half 2019, despite a $14.5 million reduction in gain on sales of revenue equipment.

Average revenue per tractor decreased by 4.6%, driven by a 1.9% decrease in miles per tractor.

Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, decreased 2.4% when comparing the first halves of 2020 and 2019.

Logistics Segment

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Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits" and depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the condensed consolidated statements of comprehensive income.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands, except per load data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands, except per load data) Increase (Decrease)

Total revenue $ 70,104 $ 82,929 $ 149,302 $ 171,881 (15.5 %) (13.1 %)

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Revenue per load – Brokerage only ¹ $ 1,408 $ 1,475 $ 1,392 $ 1,452 (4.5 %) (4.1 %)

Gross margin percentage – Brokerage only ¹

Operating ratio ¹

Adjusted Operating Ratio ¹ ²

Gross margin percentage – Brokerage only ¹ 15.7 % 16.2 % 15.1 % 17.0 % (50 bps) (190 bps)

Operating ratio ¹ 95.7 % 93.9 % 95.5 % 92.8 % 180 bps 270 bps

Adjusted Operating Ratio ¹ ² 95.5 % 93.7 % 95.3 % 92.7 % 180 bps 260 bps

1 Defined under "Operating Statistics," above.

2 Refer to "Non-GAAP Financial Measures" below.

Comparison Between the Quarters Ended March 31, 2020 and 2019 — Operating Ratio was 95.3% in the first quarter of 2020 compared to 91.8% in the first quarter of 2019.

Adjusted Operating Ratio in the Logistics segment (which primarily consists of our brokerage services) increased to 95.2% in the first quarter of 2020 from 91.6% in the first quarter of 2019 .

Brokerage-only — Brokerage gross margin decreased to 14.7% in the first quarter of 2020 from 17.8% in the first quarter of 2019 .

A 6.5% decrease in brokerage load volumes and a 3.8% decrease in brokerage revenue per load resulted in a 10.0% decrease in brokerage revenue, excluding intersegment transactions.

Comparison Between the Quarters Ended June 30, 2020 and 2019 — Operating Ratio was 95.7% in the second quarter of 2020 compared to 93.9% in the second quarter of 2019.

Adjusted Operating Ratio in the Logistics segment (which primarily consists of our brokerage services) increased to 95.5% in the second quarter of 2020 from 93.7% in the second quarter of 2019.

Table of Contents Glossary of Terms

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Brokerage-only — With recent tightening of capacity, brokerage gross margin decreased to 15.7% in the second quarter of 2020 from 16.2% in the second quarter of 2019.

Margins were strong to begin the quarter and subsequently compressed, as the truckload market improved throughout the second quarter of 2020.

A 10.1% decrease in brokerage load volumes and a 4.5% decrease in brokerage revenue per load resulted in a 14.2% decrease in brokerage revenue, excluding intersegment transactions.

Our power-only service offering experienced 73.8% year-over-year growth in load volumes and represented 17.3% of our total brokerage load volumes in the second quarter of 2020.

Comparison Between Year-to-Date June 30, 2020 and 2019 — Operating Ratio was 95.5% in the first half of 2020 compared to 92.8% in the first half of 2019.

Adjusted Operating Ratio in the Logistics segment (which primarily consists of our brokerage services) increased to 95.3% in the first half of 2020 from 92.7% in the first half of 2019.

Brokerage-only — Brokerage gross margin decreased to 15.1% in the first half of 2020 from 17.0% in the first half of 2019.

An 8.2% decrease in brokerage load volumes and a 4.1% decrease in brokerage revenue per load resulted in a 12.0% decrease in brokerage revenue, excluding intersegment transactions.

Intermodal Segment

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The main fixed costs in the Intermodal segment are depreciation of our company tractors related to drayage, containers, and chassis, as well as non-driver employee compensation and benefits.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands, except per load data)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands, except per load data) Increase (Decrease)

Total revenue $ 82,820 $ 118,195 $ 177,551 $ 234,562 (29.9 %) (24.3 %)

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Average revenue per load ¹ $ 2,249 $ 2,438 $ 2,283 $ 2,447 (7.8 %) (6.7 %)

Operating ratio ¹

Operating ratio ¹ 105.4 % 96.5 % 104.1 % 97.2 % 890 bps 690 bps

Adjusted Operating Ratio 1 2

105.3 % 96.4 % 104.0 % 97.2 % 890 bps 680 bps

Load count 36,769 48,290 77,658 95,399 (23.9 %) (18.6 %)

Average tractors ¹ ³ 571 651 586 672 (12.3 %) (12.8 %)

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2 Refer to "Non-GAAP Financial Measures" below.

Includes 536 and 613 company-owned tractors for the quarters ended March 31, 2020 and 2019 , respectively.

Comparison Between the Quarters Ended March 31, 2020 and 2019 — Operating Ratio was 102.9% in the first quarter of 2020 compared to 98.0% in the first quarter of 2019.

During the first quarter of 2020 , our Intermodal segment produced an Adjusted Operating Ratio of 102.8% , compared to 98.0% during the first quarter of 2019 .

Continued market pressures, including the impact of the COVID-19 pandemic, contributed to an 18.2% decrease in revenue, excluding intersegment transactions, as load counts decreased 13.2% and revenue per load decreased 5.8% .

3 Includes 510 and 572 company-owned tractors for the second quarter of 2020 and 2019, respectively.

Includes 523 and 592 company-owned tractors for the year-to-date June 30, 2020 and 2019 periods, respectively.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Comparison Between the Quarters Ended June 30, 2020 and 2019 — Operating Ratio was 105.4% in the second quarter of 2020 compared to 96.5% in the second quarter of 2019.

During the second quarter of 2020, our Intermodal segment produced an Adjusted Operating Ratio of 105.3%, compared to 96.4% during the second quarter of 2019.

Continued market pressures, including the impact of the COVID-19 pandemic on port volumes, contributed to a 29.8% decrease in revenue, excluding intersegment transactions, as load counts decreased 23.9% and revenue per load decreased 7.8%.

We continue to develop our Intermodal network and cost structure and expect to see improved results in the back half of the year.

Comparison Between Year-to-Date June 30, 2020 and 2019 — Operating Ratio was 104.1% in the first half of 2020 compared to 97.2% in the first half of 2019.

During the first half of 2020, our Intermodal segment produced an Adjusted Operating Ratio of 104.0%, compared to 97.2% during the first half of 2019.

Continued market pressures, including the impact of the COVID-19 pandemic on port volumes, contributed to a 24.0% decrease in revenue, excluding intersegment transactions, as load counts decreased 18.6% and revenue per load decreased 6.7%.

Non-reportable Segments

The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and $11.2 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Total revenue $ 45,289 $ 29,597 $ 91,531 $ 67,361 53.0 % 35.9 %

Operating loss $ (4,184) $ (26,392) $ (10,381) $ (34,912) (84.1 %) (70.3 %)

Comparison Between the Quarters Ended March 31, 2020 and 2019 — The decrease in operating loss within the non-reportable segments was driven by additional operating income earned from warehousing activities in the first quarter of 2020, which was partially offset by losses from less revenue generated from support services provided to our independent contractors.

Comparison Between the Quarters Ended June 30, 2020 and 2019 — Operating results within the non-reportable segments improved in the second quarter of 2020, which included additional income earned from warehousing activities, as compared to the second quarter of 2019, when we incurred $15.5 million in costs associated with a jury verdict.

Comparison Between Year-to-Date June 30, 2020 and 2019 — Operating results within the non-reportable segments improved in the first half of 2020, which included additional income earned from warehousing activities, as compared to the first half of 2019, when we incurred $15.5 million in costs associated with a jury verdict.

Table of Contents Glossary of Terms

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Therefore, we believe that revenue, excluding trucking fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Salaries, wages, and benefits $ 365,311 $ 380,354 $ 720,144 $ 744,209 (4.0 %) (3.2 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 34.4 % 30.6 % 33.0 % 30.4 % 380 bps 260 bps

% of revenue, excluding trucking fuel surcharge 36.6 % 33.9 % 35.6 % 33.5 % 270 bps 210 bps

Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by company driving associates, the rate per mile we pay our company driving associates, and employee benefits, including healthcare, workers' compensation, and other benefits.

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We expect driving associate pay to remain inflationary, which could result in additional driving associate pay increases in the future.

Comparison Between Quarters Ended March 31, 2020 and 2019 — The $9.0 million decrease within consolidated salaries, wages and benefits was primarily attributed to decreases in company driving associate wages based on the mix of company miles driven, favorable developments within workers' compensation expense, as well as lower medical insurance costs.

These decreases were partially offset by incremental payroll premiums paid to our company driving associates and shop technicians in response to the COVID-19 pandemic.

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $15.0 million decrease within consolidated salaries, wages and benefits was primarily attributed to a decrease in miles driven by company drivers, favorable developments within workers' compensation expense, as well as lower medical insurance costs.

These decreases were partially offset by $7.8 million in incremental payroll premiums paid to our company driving associates and shop technicians in response to the COVID-19 pandemic.

The COVID-19 expenses were clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — The $24.1 million decrease within consolidated salaries, wages and benefits was primarily attributed to a decrease in miles driven by company drivers, favorable developments within workers' compensation expense, as well as lower medical insurance costs.

These decreases were partially offset by $9.0 million in incremental payroll premiums paid to our company driving associates and shop technicians in response to the COVID-19 pandemic.

The COVID-19 expenses were clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

% of total revenue

% of revenue, excluding trucking fuel surcharge

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Fuel $ 86,381 $ 151,309 $ 208,236 $ 289,748 (42.9 %) (28.1 %)

% of total revenue 8.1 % 12.2 % 9.5 % 11.8 % (410 bps) (230 bps)

% of revenue, excluding trucking fuel surcharge 8.7 % 13.5 % 10.3 % 13.1 % (480 bps) (280 bps)

Fuel expense consists primarily of diesel fuel expense for our company-owned tractors and fuel taxes.

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We continue to utilize our fuel efficiency initiatives such as trailer blades, idle-control, management of tractor speeds, fleet updates for more fuel-efficient engines, management of fuel procurement, and driving associate training programs that we believe contribute to controlling our fuel expense.

Comparison Between Quarters Ended March 31, 2020 and 2019 — The $16.6 million decrease in consolidated fuel expense is primarily due to a decrease in average DOE fuel prices to $2.92 per gallon for the quarter ended March 31, 2020 from $3.02 per gallon for the quarter ended March 31, 2019 , which was partially offset by a 2.8% increase in the total miles driven by company driving associates.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $64.9 million decrease in consolidated fuel expense is primarily due to a decrease in average DOE fuel prices to $2.44 per gallon for the second quarter of 2020 from $3.12 per gallon for the second quarter of 2019 and a 3.3% decrease in the total miles driven by company driving associates.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — The $81.5 million decrease in consolidated fuel expense is primarily due to a decrease in average DOE fuel prices to $2.67 per gallon for year-to-date June 30, 2020 from $3.07 per gallon for year-to-date June 30, 2019 and a 0.4% decrease in miles driven by company driving associates.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Operations and maintenance $ 66,067 $ 82,443 $ 134,471 $ 162,203 (19.9 %) (17.1 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 6.2 % 6.6 % 6.2 % 6.6 % (40 bps) (40 bps)

% of revenue, excluding trucking fuel surcharge 6.6 % 7.3 % 6.6 % 7.3 % (70 bps) (70 bps)

Operations and maintenance expense consists of direct operating expenses, equipment maintenance, and tire expense.

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We expect to continue refreshing our tractor fleet in the coming quarters, and anticipate that maintenance costs will gradually decrease as we reduce the average age of our fleet.

The decrease of $11.4 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment, partially offset by the 2.8% increase in miles driven by company driving associates noted above.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

The second quarter decrease of $16.4 million and year-to-date decrease of $27.7 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment and the decreases in miles driven by company driving associates noted above.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Insurance and claims $ 45,302 $ 48,796 $ 99,582 $ 98,932 (7.2 %) 0.7 %

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 4.3 % 3.9 % 4.6 % 4.0 % 40 bps 60 bps

% of revenue, excluding trucking fuel surcharge 4.5 % 4.3 % 4.9 % 4.5 % 20 bps 40 bps

Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as our level of self-insurance, and premium expense.

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In future periods, our higher self-insured retention limits, as well as a tightening of excess insurance markets, may cause our consolidated insurance and claims expense to fluctuate more.

Consolidated insurance and claims expense increased by $4.1 million for the quarter ended March 31, 2020 , as compared to the same period last year.

This increase was primarily due to negative development within certain prior year losses partially offset by improvements within our current year experience as a result of lower frequency and severity in claims, as well as a decrease in total miles driven year over year.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — Consolidated insurance and claims expense decreased by $3.5 million for the second quarter of 2020, as compared to the same period last year.

This decrease was primarily due to a decrease in total miles driven year-over-year, improvements within our current year experience as a result of lower frequency and severity of claims, and positive development with certain prior year losses.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — Consolidated insurance and claims expense increased by $0.7 million for year-to-date June 30, 2020, as compared to the same period last year.

This increase was primarily due to negative development within certain prior year losses recognized during the first quarter which were partially offset by improvements within our current year experience as a result of lower frequency and severity in claims, as well as a decrease in total miles driven year-over-year.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Operating taxes and licenses $ 20,883 $ 21,560 $ 43,052 $ 43,363 (3.1 %) (0.7 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

Operating taxes and licenses include state franchise taxes, federal highway use taxes, property taxes, vehicle license and registration fees, fuel and mileage taxes, among others.

% of total revenue 2.0 % 1.7 % 2.0 % 1.8 % 30 bps 20 bps

% of revenue, excluding trucking fuel surcharge 2.1 % 1.9 % 2.1 % 2.0 % 20 bps 10 bps

Operating taxes and licenses include state franchise taxes, state and federal highway use taxes, property taxes, vehicle license and registration fees, fuel and mileage taxes, among others.

The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities.

Consolidated operating taxes and licenses increased by $0.4 million for the quarter ended March 31, 2020 , as compared to the same period last year, but remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — Consolidated operating taxes and licenses decreased by $0.7 million for the second quarter of 2020 as compared to the same period last year.

The decrease was primarily due to a decrease in total company miles driven.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — Operating taxes and licenses decreased by $0.3 million, but remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Communications $ 4,902 $ 4,960 $ 9,776 $ 10,043 (1.2 %) (2.7 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 0.5 % 0.4 % 0.4 % 0.4 % 10 bps — bps

% of revenue, excluding trucking fuel surcharge 0.5 % 0.4 % 0.5 % 0.5 % 10 bps — bps

Communications expense is comprised of costs associated with our tractor and trailer tracking systems, information technology systems, and phone systems.

Consolidated communications expense remained flat as a percentage of revenue, excluding trucking fuel surcharge for the quarter ended March 31, 2020 , as compared to the same period last year.

Consolidated communications expense remained flat as a percentage of revenue, excluding trucking fuel surcharge for the second quarter of 2020 and first half of 2020, as compared to the same periods last year.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Depreciation and amortization of property and equipment $ 114,601 $ 102,938 $ 224,822 $ 203,875 11.3 % 10.3 %

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 10.8 % 8.3 % 10.3 % 8.3 % 250 bps 200 bps

% of revenue, excluding trucking fuel surcharge 11.5 % 9.2 % 11.1 % 9.2 % 230 bps 190 bps

Depreciation relates primarily to our owned tractors, trailers, buildings, electronic logging devices, other communication units, and other similar assets.

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Management periodically reviews the condition, average age, and reasonableness of estimated useful lives and salvage values of our equipment and considers such factors in light of our experience with similar assets, used equipment market conditions, and prevailing industry practice.

Comparison Between Quarters Ended March 31, 2020 and 2019 — The $9.3 million increase in consolidated depreciation and amortization of property and equipment is primarily due to an increase in owned versus leased equipment.

Consolidated depreciation and amortization of property and equipment increased by $11.7 million in the second quarter of 2020 and $20.9 million in the first half of 2020, when compared to the same periods last year.

These increases were primarily related to the increase in owned versus leased equipment.

We expect consolidated depreciation and amortization of property and equipment to increase both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge , as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2020.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Amortization of intangibles $ 11,474 $ 10,692 $ 22,948 $ 21,385 7.3 % 7.3 %

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 1.1 % 0.9 % 1.1 % 0.9 % 20 bps 20 bps

% of revenue, excluding trucking fuel surcharge 1.2 % 1.0 % 1.1 % 1.0 % 20 bps 10 bps

Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions.

See Note 7 in Part I, Item 1, of this Quarterly Report for further details regarding the Company's intangible assets.

The $0.8 million quarter over quarter increase in amortization of intangibles was attributed to an acquisition completed on January 1, 2020.

The increases of $0.8 million for the second quarter and $1.6 million for the first half of 2020, when compared to the same periods last year, were attributed to an acquisition completed on January 1, 2020.

See Note 4 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Rental expense $ 22,372 $ 32,875 $ 47,747 $ 68,420 (31.9 %) (30.2 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 2.1 % 2.6 % 2.2 % 2.8 % (50 bps) (60 bps)

% of revenue, excluding trucking fuel surcharge 2.2 % 2.9 % 2.4 % 3.1 % (70 bps) (70 bps)

Rental expense consists primarily of payments for tractors and trailers financed with operating leases.

The primary factors affecting the expense are the size of our revenue equipment fleet and the relative percentage of owned versus leased equipment.

Consolidated rental expense decreased by $10.2 million for the quarter ended March 31, 2020 , as compared to the same period last year.

Consolidated rental expense decreased by $10.5 million and $20.7 million for the second quarter and first half of 2020, as compared to the same periods last year.

This was primarily due to increasing our ratio of owned versus leased equipment.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2020.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Purchased transportation $ 200,107 $ 261,273 $ 425,383 $ 530,622 (23.4 %) (19.8 %)

% of total revenue

% of revenue, excluding trucking fuel surcharge

% of total revenue 18.9 % 21.0 % 19.5 % 21.7 % (210 bps) (220 bps)

% of revenue, excluding trucking fuel surcharge 20.1 % 23.3 % 21.0 % 23.9 % (320 bps) (290 bps)

Purchased transportation expense is comprised of payments to independent contractors in our trucking operations, as well as payments to third-party capacity providers related to logistics, freight management, and non-trucking services in our logistics and intermodal businesses.

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The increase could be partially offset if independent contractors exit the market due to regulatory changes.

Consolidated purchased transportation expense decreased by $44.1 million for the quarter ended March 31, 2020 , as compared to the same period last year.

This was primarily due to a decrease in miles driven by independent contractors of 22.5% and lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Comparison Between Quarters Ended March 31, 2020 and 2019 — We incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems.

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Miscellaneous operating expenses

Miscellaneous operating expenses primarily consist of legal and professional services fees, general and administrative expenses, other costs, as well as net gain on sales of equipment.

Comparison Between Quarters Ended March 31, 2020 and 2019 — T he $10.4 million increase in net consolidated miscellaneous operating expenses is primarily due to an $8.8 million decrease in gain on sales of equipment.

Consolidated purchased transportation expense decreased by $61.2 million for the second quarter of 2020 and $105.2 million for the first half of 2020, as compared to the same periods last year.

This was primarily due to a decrease in miles driven by independent contractors of 23.0% and 22.7% for the second quarter and first half of 2020, respectively and lower fuel reimbursement expenses to independent contractors due to fewer miles and the lower fuel prices discussed above.

In addition, experienced lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Impairments $ 353 $ 2,182 $ 1,255 $ 2,182 (83.8 %) (42.5 %)

In 2020, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Trucking and non-reportable segments).

In 2019, we incurred impairment charges of leasehold improvements (within the Trucking segment) from the early termination of a lease of one of our operating properties.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Miscellaneous operating expenses $ 20,778 $ 34,108 $ 43,794 $ 46,744 (39.1 %) (6.3 %)

Miscellaneous operating expenses primarily consist of legal and professional services fees, general and administrative expenses, other costs, as well as net gain on sales of equipment.

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $13.3 million decrease in net consolidated miscellaneous operating expenses was primarily due to a decrease in legal expenses as we incurred $15.5 million in incremental costs associated with an unfavorable verdict in the second quarter of 2019, which were partially offset by a $5.8 million reduction in gain on sales of equipment.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — The $3.0 million decrease in net consolidated miscellaneous operating expenses is primarily due to the decrease in legal expenses noted above, which were partially offset by a $14.5 million reduction in gain on sales of equipment.

Consolidated Other Expenses, net

Quarter Ended March 31,

Increase (Decrease)

(Dollars in thousands)

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Interest expense $ 4,021 $ 7,156 $ 10,128 $ 14,504 (43.8 %) (30.2 %)

Other expense (income), net

Other (income), net (8,499) (3,101) (1,992) (9,240) 174.1 % (78.4 %)

Income tax expense 26,815 26,076 51,369 53,999 2.8 % (4.9 %)

Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs.

The decrease in interest expense is primarily due to lower overall interest rates, partially offset by higher overall debt balances.

Other expense (income), net — Other expense (income), net is primarily comprised of unrealized (gains) and losses from our various equity investments, including our TRP investments accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.

The $12.6 million unfavorable change is primarily attributed to unrealized losses in the first quarter of 2020 from our various equity investments, including our investments in TRP, as well as a $2.5 million unfavorable change associated with foreign currency fluctuations within our Mexico operations.

The quarter and year-to-date decreases in interest expense were primarily due to lower overall interest rates.

Other (income), net — Other (income), net is primarily comprised of unrealized (gains) and losses from our various equity investments, including our TRP investments accounted for under the equity method, as well as certain other non-operating income and expense items that may arise outside of the normal course of business.

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $5.4 million favorable change between the second quarter of 2020 and 2019 is primarily attributed to unrealized gains from our various equity investments.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — The $7.2 million unfavorable change between the first half of 2020 and the first half of 2019 is primarily attributed to unrealized losses from our investments in TRP.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Income tax expense — In addition to the discussion below, Note 8 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.

Comparison Between Quarters Ended March 31, 2020 and 2019 — The $3.4 million decrease in consolidated income tax expense was primarily due to a decrease in earnings.

During the first quarter of 2019, we recognized discrete items related to a reduction in our reserve for uncertain tax positions and stock compensation deductions.

All of these factors resulted in an effective tax rate of 27.2% for the first quarter of 2020 and 24.0% for the first quarter of 2019.

• Comparison Between the Quarters Ended June 30, 2020 and 2019 — The $0.7 million increase in consolidated income tax expense was primarily due to an increase in pre-tax earnings, partially offset by an increase in stock compensation deductions recognized as a discrete item in the second quarter of 2020, as compared to the second quarter of 2019.

During the second quarter of 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions and a decrease in stock compensation deductions.

All of these factors resulted in an effective tax rate of 25.0% for the second quarter of 2020 and 24.7% for the second quarter of 2019.

• Comparison Between Year-to-Date June 30, 2020 and 2019 — The $2.6 million decrease in consolidated income tax expense was primarily due to a decrease in pre-tax earnings, an increase in stock compensation deductions, and an increase in unfavorable foreign currency fluctuations recognized as discrete items.

During the first half of 2019, we also recognized discrete items related to a reduction in our reserve for uncertain tax positions and a decrease in stock compensation deductions.

All of these factors resulted in an effective tax rate of 26.0% for the first half of 2020 and 24.4% for the first half of 2019.

Table of Contents Glossary of Terms

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Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS

Quarter Ended March 31,

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

2020 2019 2020 2019

(In thousands)

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Impairments ² 353 2,182 1,255 2,182

Legal accruals ³ — 15,500 — 15,500

COVID-19 incremental costs 4

9,966 — 12,259 —

Adjusted income before income taxes 128,797 133,655 233,446 260,209

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Since the numbers reflected in the table below are calculated on a per share basis, they may not foot due to rounding.

Quarter Ended March 31,

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

2020 2019 2020 2019

Earnings per diluted share $ 0.47 $ 0.46 $ 0.85 $ 0.97

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Impairments ² — 0.01 0.01 0.01

Legal accruals ³ — 0.09 — 0.09

COVID-19 incremental costs 4

0.06 — 0.07 —

Adjusted income before income taxes 0.75 0.77 1.37 1.50

Provision for income tax expense at effective rate (0.19) (0.19) (0.36) (0.37)

"Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and various acquisitions.

Adjusted EPS $ 0.57 $ 0.58 $ 1.01 $ 1.14

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions.

Refer to Note 4 in Part I, Item 1 of this Quarterly Report for additional details regarding the acquisition.

"Impairments" primarily reflects the non-cash impairment of trailer tracking equipment.

"COVID-19 incremental costs" reflects costs incurred during the first quarter of 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak.

These include payroll premiums paid to our drivers and shop mechanics, additional disinfectants and cleaning supplies, and various other pandemic-specific items.

2 "Impairments" 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.

In the second quarter of 2019, we incurred a non-cash impairment of leasehold improvements (within the Trucking segment) which were incurred during the early termination of a lease related to one of our operating properties.

3 "Legal accruals" reflects costs incurred in the second quarter of 2019 associated with a jury verdict issued, which is included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.

4 "COVID-19 incremental costs" reflects costs incurred during 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak.

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

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

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

Quarter Ended March 31,

GAAP Presentation

(Dollars in thousands)

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

2020 2019 2020 2019

GAAP Presentation (Dollars in thousands)

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

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Impairments ² (353) (2,182) (1,255) (2,182)

Legal accruals ³ — (15,500) — (15,500)

COVID-19 incremental costs 4

(9,966) — (12,259) —

Adjusted Operating Expenses 873,637 985,787 1,783,944 1,955,751

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Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 3.

4 See Non-GAAP Reconciliation:

Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

Table of Contents Glossary of Terms

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Trucking Segment

Quarter Ended March 31,

GAAP Presentation

(Dollars in thousands)

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

2020 2019 2020 2019

GAAP Presentation (Dollars in thousands)

Total revenue $ 879,369 $ 1,020,027 $ 1,798,430 $ 1,993,272

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Adjusted Operating Ratio 85.5 % 85.8 % 86.0 % 86.2 %

"Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the Abilene Acquisition and historical Knight acquisitions.

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in historical Knight acquisitions.

2 See Non-GAAP Reconciliation:

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Logistics Segment

Quarter Ended March 31,

GAAP Presentation

(Dollars in thousands)

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

2020 2019 2020 2019

GAAP Presentation (Dollars in thousands)

Total revenue $ 70,104 $ 82,929 $ 149,302 $ 171,881

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Intermodal Segment

Quarter Ended March 31,

GAAP Presentation

(Dollars in thousands)

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

2020 2019 2020 2019

GAAP Presentation (Dollars in thousands)

Total revenue $ 82,820 $ 118,195 $ 177,551 $ 234,562

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Our primary sources of liquidity are funds provided by operations and the following:

March 31, 2020

Source June 30, 2020

(In thousands)

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Total liquidity, including restricted cash and restricted investments $ 740,888

As of March 31, 2020 , we had $294.0 million in borrowings under our $800.0 million Revolver.

1 As of June 30, 2020, we had $235.0 million in borrowings under our $800.0 million Revolver.

We additionally had $31.1 million in outstanding letters of credit (discussed below), leaving $533.9 million available under the Revolver.

Based on eligible receivables at March 31, 2020 , our borrowing base for the 2018 RSA was $276.5 million , while outstanding borrowings were $180.0 million .

2 Based on eligible receivables at June 30, 2020, our borrowing base for the 2018 RSA was $273.8 million , while outstanding borrowings were $165.0 million .

We additionally had $68.8 million in outstanding letters of credit (discussed below), leaving $40.0 million available under the 2018 RSA.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — CONTINUED

Principal and Interest Payments — As of March 31, 2020 , we had debt and finance lease obligations of $906.7 million , which are discussed under "Material Debt Agreements," below.

Principal and Interest Payments — As of June 30, 2020, we had debt and finance lease obligations of $851.8 million , which are discussed under "Material Debt Agreements," below.

Certain cash flows from operations are committed to minimum payments of principal and interest on our debt and lease obligations.

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Share Repurchases — From time to time, and depending on free cash flow availability, debt levels, common stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock.

As of March 31, 2020 , the Company had $199.0 million remaining under the 2019 Knight-Swift Share Repurchase Plan .

As of June 30, 2020, the Company had $199.0 million remaining under the 2019 Knight-Swift Share Repurchase Plan .

Additional details are discussed in Note 12 in Part I, Item 1 of this Quarterly Report.

Working Capital

As of March 31, 2020 and December 31, 2019 , we had working capital deficits of $140.8 million and $103.0 million , respectively.

As of June 30, 2020 and December 31, 2019, we had working capital deficits of $142.0 million and $103.0 million, respectively.

The deficits were primarily due to the Term Loan maturing on October 2, 2020.

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Material Debt Agreements

As of March 31, 2020 , we had $906.7 million in material debt obligations at the following carrying values:

As of June 30, 2020, we had $851.8 million in material debt obligations at the following carrying values:

• $364.9 million :

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Cash Flow Analysis

Quarter Ended March 31,

Year-to-Date June 30, Change

(In thousands)

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Net Cash Provided by Operating Activities

Comparison Between Quarters Ended March 31, 2020 and 2019 — T he $88.1 million decrease in net cash provided by operating activities was primarily due to a $93.4 million cash settlement paid during the first quarter of 2020, associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift.

Comparison Between Year-to-Date June 30, 2020 and 2019 — T he $20.5 million increase in net cash provided by operating activities was primarily due to a $68.8 million decrease in cash paid for income taxes, net of refunds, and various changes within our working capital.

This was all partially offset by a $93.4 million cash settlement paid during the first quarter of 2020, associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift.

Net Cash Used in Investing Activities

Comparison Between Quarters Ended March 31, 2020 and 2019 — The $80.9 million increase in net cash used in investing activities was due to a $46.8 million increase in net cash used for acquisitions and a $26.6 million increase in capital expenditures.

Comparison Between Year-to-Date June 30, 2020 and 2019 — The $29.2 million increase in net cash used in investing activities was due to a $46.8 million increase in net cash used for acquisitions and was partially offset by a $24.7 million decrease in net capital expenditures.

Net Cash Used in Financing Activities

Comparison Between Quarters Ended March 31, 2020 and 2019 — Net cash used in financing activities decreased by $145.9 million , which was primarily due to a $150.0 million increase in net borrowings on the Revolver.

Comparison Between Year-to-Date June 30, 2020 and 2019 — Net cash used in financing activities increased by $11.7 million, primarily due to a $59.0 million decrease in net repayments of our debt obligations.

This was partially offset by a $52.3 million decrease in cash used to repurchase shares of our common stock.

Contractual Obligations

"Liquidity and Capital Resources," above, includes details regarding changes in our contractual obligations table during the quarter ended March 31, 2020 period.

"Liquidity and Capital Resources," above, includes details regarding changes in our contractual obligations table during the year-to-date June 30, 2020 period.

Aside from these items, there were no material changes to the contractual obligations table, which was included in our 2019 Annual Report.

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A prolonged period of inflation could cause interest rates, fuel, wages, and other costs to increase, which would adversely affect our results of operations unless freight rates correspondingly increased.

Consistent with trends in the trucking industry overall, we have recently experienced inflationary pressures with respect to driver wages, as compared to prior years.

Consistent with trends in the trucking industry overall, we continue to experience inflationary pressures with respect to driver wages, as compared to prior years.

Recently Issued Accounting Pronouncements

See Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference, for the impact of recently issued accounting pronouncements on the Company's condensed consolidated financial statements, as follows:

Note 2 for accounting pronouncements adopted during quarter ended March 31, 2020 .

Note 3 for accounting pronouncements issued during quarter ended March 31, 2020 .

• Note 2 for accounting pronouncements adopted during year-to-date June 30, 2020.

• Note 3 for accounting pronouncements issued during year-to-date June 30, 2020.

Table of Contents Glossary of Terms

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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 2. Management’s Discussion and Analysis