What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-11-04 compared with 2020-08-05 · 191 added, 179 removed, 625 unchanged (37% of the section changed)

49 unchanged sentences

• future purchased transportation expense, and

Such statements may be identified by their use of terms or phrases such as "believe," "may," "could," "will," "would," "should," "expects," "estimates," "designed," "likely," "foresee," "goals," "seek," "target," "forecast," "projects," "anticipates," "plans," "intends," "hopes," "strategy," "objective," "continue," "outlook," and similar terms and phrases.

Such statements may be identified by their use of terms or phrases such as "believe," "may," "could," "will," "would," "should," "expects," "estimates," "designed," "likely," "foresee," "goals," "seek," "target," "forecast," "projects," "anticipates," "plans," "intends," "hopes," "strategy," "potential," "objective," "continue," "outlook," and similar terms and phrases.

Forward-looking statements are based on currently available operating, financial, and competitive information.

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Impact of COVID-19

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.

During year-to-date September 30, 2020, we incurred approximately $12.3 million of expenses (all within the first half of the year) directly attributable to the pandemic, which were incremental to those incurred prior to the outbreak.

These primarily pertained to payroll premiums paid to our driving associates 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.

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Consolidated Key Financial Highlights and Operating Metrics

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

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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.

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 .

2 The average age of our company-owned tractor fleet was 2.1 years and 2.0 years as of September 30, 2020 and 2019, respectively.

3 The average age of our trailer fleet was 7.7 years and 7.4 years as of September 30, 2020 and 2019, respectively .

Table of Contents Glossary of Terms

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Market Trends and Company Performance

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.

The national unemployment rate declined to 7.9% 1 as of September 30, 2020, after the COVID-19 pandemic and efforts to contain it caused a significant rise in unemployment during the first half of the year.

Economic activities that were once curtailed during the initial surge of the pandemic began to resume during the third quarter of 2020, leading to an improved labor market.

Despite the improved labor market, a 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 continue to hamper driver sourcing efforts throughout the industry.

During the third quarter of 2020, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 33.1% 2 per preliminary third-party forecasts.

This may result in an expected annualized growth rate of approximately 3.0% to 4.0% for full-year 2020, as third-party forecasts are predicting a continued economic rebound in the last quarter of this year.

The third quarter 2020 US employment cost index rose 2.4% 1 and 0.5% 1 on a year-over-year and sequential basis, respectively.

From a freight market perspective, demand toward the beginning of the year was weak, but gradually strengthened throughout the second and third quarters of 2020.

We are encouraged by the continued strength in freight demand;

however, demand may be difficult to predict for the last quarter 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.

Our consolidated operating income increa sed by 60.7% on a year-over-year basis for the third quarter of 2020 as a result of a 4.3% increase in consolidated revenue, excluding trucking fuel surcharge and our focus on cost control.

Both the strength in freight demand and constrained capacity led to earlier peak volumes, which we expect will continue into the fourth quarter.

Our Trucking segment improved its Adjusted Operating Income by 54.1%, resulting in a 620 basis point Adjusted Operating Ratio improvement to 81.3% in the third quarter of 2020 from 87.5% in the third quarter of 2019.

Our Logistics segment produced an Adjusted Operating Ratio of 97.4% in the third quarter of 2020.

Load volumes within our Intermodal segment increased by 16.6% sequentially and decreased by 5.7% year-over-year, contributing to an Adjusted Operating Ratio of 99.7% in the third quarter of 2020, as compared 102.4% in the third quarter of last year.

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

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

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.

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

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

kiplinger.com

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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 — 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.

Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $47.4 million increase in net income attributable to Knight-Swift to $122.1 million during the quarter ended September 30, 2020 from $74.6 million during the same period last year includes the following:

• Contributor — $59.4 million increase in operating income within our Trucking segment.

Average revenue per tractor increased by 5.4%, driven by a 5.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

• Contributor — $4.6 million decrease in interest expense from lower overall interest rates, as well as lower overall debt balances.

• Contributor — $4.2 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.

• Offset — $6.2 million charge incurred within the other non-reportable segments associated with certain class action lawsuits involving pre-merger employment-related claims that were previously disclosed by Swift.

• Offset — $23.3 million increase in consolidated income tax expense, primarily due to an increase in pre-tax earnings and negative impacts from certain tax-related items within our Mexico operations in the third quarter of 2020, as compared to the third quarter of 2019.

All of these factors resulted in an effective tax rate of 28.1% for the third quarter of 2020 and 24.6% for the third quarter of 2019.

Comparison Between Year-to-Date September 30, 2020 and 2019 — The $25.9 million increase in net income attributable to Knight-Swift to $267.7 million during year-to-date September 30, 2020 from $241.8 million during the same period last year includes the following:

• Contributor — $33.5 million increase in operating income within our Trucking segment.

Improved operating margins offset a $103.0 million decrease in revenue, excluding fuel surcharge and intersegment transactions.

• Contributor — $9.3 million reduction in incurred legal costs within the non-reportable segments related to pre-merger legal matters previously disclosed by Swift.

• Offset — $20.7 million increase in consolidated income tax expense, primarily due to an increase in pre-tax earnings, negative impacts from certain tax-related items within our Mexico operations, and an unfavorable foreign currency fluctuation adjustment, which were partially offset by an increase in stock compensation deductions recognized as discrete items.

During year-to-date September 30, 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 27.0% for year-to-date September 30, 2020 and 24.5% for year-to-date September 30, 2019.

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

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.

Liquidity and Capital — During year-to-date September 30, 2020, we generated $655.0 million in operating cash flows, reduced our operating lease liabilities by $66.3 million, used $276.1 million for capital expenditures (net of equipment sales proceeds), and returned $41.3 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).

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Consolidating Tables for Total Revenue and Operating Income (Loss)

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

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Total revenue $ 1,210,406 $ 1,200,522 $ 3,395,902 $ 3,647,140

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

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Trucking Segment

We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings.

We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings with 13,446 irregular route tractors and 5,018 dedicated route tractors.

Generally, we are paid a predetermined rate per mile or per load for our trucking services.

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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2 Defined under "Operating Statistics," above.

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.

3 Includes 16,391 and 16,564 average company-owned tractors for the third quarter of 2020 and 2019, respectivel y.

Includes 16,347 and 16,420 average company-owned tractors for year-to-date September 30, 2020 and 2019, 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.

Comparison Between the Quarters Ended September 30, 2020 and 2019 — We saw year-over-year improvement across our trucking operating segments during the third quarter.

Operating ratio improved to 82.7% for the third quarter of 2020 from 88.9% for the third quarter of 2019 .

We improved the Adjusted Operating Ratio within this segment to 81.3% in the third quarter of 2020 from 87.5% in the third quarter of 2019.

Average revenue per tractor increased by 5.4%, driven by a 5.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

We expect rate per mile to continue to improve in the coming quarters.

Comparison Between Year-to-Date September 30, 2020 and 2019 — Although revenue, excluding fuel surcharge and intersegment transactions decreased by $103.0 million, operating ratio improved by 200 basis points to 86.2% from 88.2% and Adjusted Operating Ratio improved by 230 basis points to 84.3% from 86.6%.

The decrease in revenue was offset by improvements in margins, ultimately leading to a 9.6% increase in operating income and a 12.6% increase in Adjusted Operating Income on a year-to-date basis.

Average revenue per tractor decreased by 1.3%, driven by a 1.2% decrease in miles per tractor, which was partially offset by a 0.2% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

Logistics Segment

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Logistics revenue is primarily generated by its brokerage operations.

We generate additional revenue by offering specialized logistics solutions (including, but not limited to, origin management, surge volume, disaster relief, special projects, and other logistic needs).

We generate additional revenue by offering specialized logistics solutions (including, but not limited to, trailing equipment, origin management, surge volume, disaster relief, special projects, and other logistic needs).

Logistics revenue is mainly affected by the rates we obtain from customers, the freight volumes we ship through third-party capacity providers, and our ability to secure third-party capacity providers to transport customer freight.

The most significant expense in the Logistics segment is the (primarily) variable cost of purchased transportation that we pay to third-party capacity providers, included in "Purchased transportation" in the condensed consolidated statements of comprehensive income.

The most significant expense in the Logistics segment is purchased transportation that we pay to third-party capacity providers, which is primarily a variable cost and is included in "Purchased transportation" in the condensed consolidated statements of comprehensive income.

Variability in this expense depends on truckload capacity, availability of third-party capacity providers, rates charged to customers, current freight demand, and customer shipping needs.

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

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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

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.

Comparison Between the Quarters Ended September 30, 2020 and 2019 — Operating ratio was 97.5% for the third quarter of 2020 compared to 95.7% for the third quarter of 2019.

Adjusted Operating Ratio in the Logistics segment increased to 97.4% in the third quarter of 2020 from 95.6% in the third 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.

Brokerage-only — With recent tightening of capacity, brokerage gross margin decreased to 11.0% for the third quarter of 2020 from 14.0% for the third quarter of 2019.

Margins began to stabilize and subsequently improved throughout the third quarter of 2020.

A 28.4% increase in brokerage revenue per load, partially offset by a 7.9% decrease in brokerage load volume contributed to an 18.2% increase in brokerage revenue, excluding intersegment transactions.

Load volumes grew 87.2% year-over-year within our power-only service offering, contributing to 109.6% revenue growth within power-only and representing 30.1% of our total third quarter 2020 brokerage load volumes.

Comparison Between Year-to-Date September 30, 2020 and 2019 — Operating ratio was 96.3% for year-to-date September 30, 2020 compared to 93.8% for year-to-date September 30, 2019.

Adjusted Operating Ratio in the Logistics segment increased to 96.2% for year-to-date September 30, 2020 from 93.6% for year-to-date September 30, 2019.

Brokerage-only — Brokerage gross margin decreased to 13.5% for year-to-date September 30, 2020 from 16.0% for year-to-date September 30, 2019.

An 8.1% decrease in brokerage load volumes, partially offset by a 6.7% increase in brokerage revenue per load resulted in a 2.0% 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-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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Revenue, excluding intersegment transactions $ 98,808 $ 108,758 $ 276,129 $ 342,162 (9.1 %) (19.3 %)

Operating (loss) income $ (4,475) $ 4,192 $ (7,212) $ 6,553 (206.8 %) (210.1 %)

Adjusted Operating (Loss) Income $ (4,410) $ 4,192 $ (7,099) $ 6,553 (205.2 %) (208.3 %)

Operating income (loss) $ 250 $ (2,652) $ (6,962) $ 3,901 (109.4 %) (278.5 %)

Adjusted Operating Income (Loss) 1

$ 250 $ (2,652) $ (6,849) $ 3,901 (109.4 %) (275.6 %)

Average revenue per load 2

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

$ 2,305 $ 2,393 $ 2,291 $ 2,429 (3.7 %) (5.7 %)

Operating ratio 2

99.7 % 102.4 % 102.5 % 98.9 % (270 bps) 360 bps

Adjusted Operating Ratio 1 2

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Average tractors 2 3

548 625 573 656 (12.3 %) (12.7 %)

Average containers 2

1 Defined under "Operating Statistics," above.

10,852 9,861 10,522 9,863 10.0 % 6.7 %

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

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.

2 Defined under "Operating Statistics," above.

3 Includes 494 and 553 company-owned tractors for the third quarter of 2020 and 2019, respectively.

Includes 513 and 579 company-owned tractors for year-to-date September 30, 2020 and 2019, 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 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%.

Comparison Between the Quarters Ended September 30, 2020 and 2019 — During the third quarter of 2020, o perating ratio was 99.7%, compared to 102.4% during the third quarter of 2019 .

Continued market pressures contributed to a 9.1% decrease in revenue, excluding intersegment transactions, as load counts decreased 5.7% and revenue per load decreased 3.7%.

Excluding the impact of fuel, revenue per load increased 2.5% year-over-year.

On a sequential basis, a 16.6% increase in load volumes contributed to a 560 basis point improvement in operating ratio for the third quarter of 2020, compared to the second quarter of 2020.

We continue to develop our Intermodal network and cost structure and expect to continue to see improved results in the fourth quarter .

Comparison Between Year-to-Date September 30, 2020 and 2019 — Operating ratio was 102.5% for year-to-date September 30, 2020 compared to 98.9% for year-to-date September 30, 2019.

Continued market pressures, including the impact of the COVID-19 pandemic on port volumes, especially in the first half of the year, contributed to a 19.3% decrease in revenue, excluding intersegment transactions, as load counts decreased 14.4% and revenue per load decreased 5.7% for year-to-date September 30, 2020 compared to the same period last year.

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

2 unchanged sentences

Operating loss $ (6,048) $ (7,496) $ (16,429) $ (42,408) (19.3 %) (61.3 %)

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.

Comparison Between the Quarters Ended September 30, 2020 and 2019 — Operating results within the non-reportable segments improved in the third quarter of 2020, which included additional income earned from warehousing activities, partially offset by a $6.2 million charge associated with certain class action lawsuits involving pre-merger employment-related claims that were previously disclosed by Swift.

Comparison Between Year-to-Date September 30, 2020 and 2019 — Operating results within the non-reportable segments improved for year-to-date September 30, 2020, which included additional income earned from warehousing activities, partially offset by a $6.2 million charge associated with certain class action lawsuits involving pre-merger employment-related claims that were previously disclosed by Swift.

During year-to-date September 30, 2019, 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-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

8 unchanged sentences

Having a sufficient number of qualified driving associates is a significant headwind, although we continue to seek ways to attract and retain qualified driving associates, including heavily investing in our recruiting efforts, our driving academies, and technology and terminals that improve the experience of driving associates.

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

• 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.

We expect driving associate pay to remain inflationary, which we expect will result in additional driving associate pay increases in the future, thereby increasing our salaries, wages, and benefits expense.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $1.4 million increase within consolidated salaries, wages and benefits was primarily due to an increase in driving associate pay rates, partially offset by a decrease in miles driven by company driving associates and lower medical insurance costs.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — The $22.6 million decrease within consolidated salaries, wages and benefits was primarily attributed to a decrease in miles driven by company driving associates, favorable development 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 during the first half of 2020.

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

11 unchanged sentences

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 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.

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.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $44.0 million decrease in consolidated fuel expense is primarily due to a decrease in average DOE fuel prices to $2.43 per gallon for the third quarter of 2020 from $3.02 per gallon for the third quarter of 2019 and a 0.4% decrease in the total miles driven by company driving associates.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — The $125.5 million decrease in consolidated fuel expense is primarily due to a decrease in average DOE fuel prices to $2.59 per gallon for year-to-date September 30, 2020 from $3.05 per gallon for year-to-date September 30, 2019 and a 0.5% decrease in miles driven by company driving associates.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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% of revenue, excluding trucking fuel surcharge 6.2 % 7.8 % 6.5 % 7.5 % (160 bps) (100 bps)

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

Operations and maintenance expenses are affected by the age of our company-owned fleet of tractors and trailers.

Operations and maintenance expense consists of direct operating expenses, such as driving associate hiring and recruiting expenses, equipment maintenance, and tire expense.

Operations and maintenance expenses are primarily affected by the age of our company-owned fleet of tractors and trailers and the miles driven.

We expect the driver market to remain competitive throughout 2020, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense.

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

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.

We expect to continue refreshing our tractor and trailer fleet in the coming quarters to maintain or improve the average age of our equipment.

The third quarter decrease of $15.1 million and year-to-date decrease of $42.9 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment, reduced driving associate hiring expenses, and the decreases in miles driven by company driving associates noted above.

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 September 30, Year-to-Date September 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

4 unchanged sentences

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

In recent years, insurance carriers have raised premiums for many businesses, including transportation companies, and as a result, our insurance and claims expense could increase in the future, or we could raise our self-insured retention limits when our policies are renewed or replaced.

Insurance and claims expense also varies based on the number of miles driven by company driving associates and independent contractors, the frequency and severity of accidents, trends in development factors used in actuarial accruals, and developments in large, prior-year claims.

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

• 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.

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.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — Consolidated insurance and claims expense decreased by $1.6 million for the third quarter of 2020, as compared to the same period last year.

This decrease was primarily due to a 2.3% 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 within certain prior year losses.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — Consolidated insurance and claims expense decreased by $1.0 million for year-to-date September 30, 2020, as compared to the same period last year.

This decrease was primarily due to a 3.7% 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 within certain prior year losses.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

5 unchanged sentences

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

• 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.

Operating taxes and licenses increased by $0.5 million for the third quarter of 2020 and $0.2 million for year-to-date September 30, 2020, but remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge, as compared to the same periods last year.

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 September 30, Year-to-Date September 30, QTD 2020 vs.

2020 2019 2020 2019 QTD 2019 YTD 2019

4 unchanged sentences

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 second quarter of 2020 and first half of 2020, as compared to the same periods last year.

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.

Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the third quarter of 2020 and year-to-date September 30, 2020, as compared to the same periods last year.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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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.

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.

Consolidated depreciation and amortization of property and equipment increased by $8.8 million for the third quarter of 2020 and $29.7 million for year-to-date September 30, 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-to-Date June 30, Year-to-Date June 30, QTD 2020 vs.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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

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.

The increases of $0.7 million for the third quarter and $2.3 million for year-to-date September 30, 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.

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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.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

5 unchanged sentences

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

Consolidated rental expense decreased by $9.0 million and $29.7 million for the third quarter and year-to-date September 30, 2020, as compared to the same periods last year.

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

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

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

7 unchanged sentences

Additionally, as fuel prices increase, payments to third-party capacity providers and independent contractors increase.

We expect purchased transportation will increase as a percentage of revenue if we grow our logistics and intermodal businesses.

We expect purchased transportation will increase as a percentage of revenue if we grow our logistics and intermodal businesses faster than our trucking business.

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

Consolidated purchased transportation expense 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.

Consolidated purchased transportation expense decreased by $6.2 million for the third quarter of 2020 and $111.5 million for year-to-date September 30, 2020, as compared to the same periods last year.

This was primarily due to decreases in miles driven by independent contractors of 11.8% and 19.3% for the third quarter and year-to-date September 30, 2020 periods, respectively, and lower fuel reimbursement expenses to independent contractors due to fewer miles and the lower fuel prices discussed above.

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

Table of Contents Glossary of Terms

1 unchanged sentence

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.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Impairments $ — $ — $ 1,255 $ 2,182 — % (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), all within the first half of the year.

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, all within the first half of the year.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Miscellaneous operating expenses $ 29,686 $ 17,890 $ 73,480 $ 64,634 65.9 % 13.7 %

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.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $11.8 million increase in net consolidated miscellaneous operating expenses was primarily due to an increase in legal expenses as we incurred $6.2 million in incremental costs related to certain class actions lawsuits involving employment-related claims that were previously disclosed by Swift and a $6.9 million reduction in gain on sales of equipment.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — The $8.8 million increase in net consolidated miscellaneous operating expenses is primarily due to a $21.4 million reduction in gain on sales of equipment and was partially offset by a $9.3 million reduction in incurred legal costs related to pre-merger legal matters previously disclosed by Swift.

Consolidated Other Expenses, net

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

4 unchanged sentences

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

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

The quarter and year-to-date decreases in interest expense were primarily due to lower overall interest rates, as well as lower overall debt balances.

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.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $4.2 million favorable change between the third quarter of 2020 and 2019 is primarily driven by gains recognized within our portfolio of investments.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — The $3.1 million unfavorable change between year-to-date September 30, 2020 and 2019 is primarily driven by losses recognized within our portfolio of investments.

Table of Contents Glossary of Terms

2 unchanged sentences

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 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.

• Comparison Between the Quarters Ended September 30, 2020 and 2019 — The $23.3 million increase in consolidated income tax expense was primarily due to an increase in pre-tax earnings and negative impacts from certain tax-related items within our Mexico operations in the third quarter of 2020, as compared to the third quarter of 2019.

All of these factors resulted in an effective tax rate of 28.1% for the third quarter of 2020 and 24.6% for the third quarter of 2019.

• Comparison Between Year-to-Date September 30, 2020 and 2019 — The $20.7 million increase in consolidated income tax expense was primarily due to an increase in pre-tax earnings, negative impacts from certain tax-related items within our Mexico operations, and an unfavorable foreign currency fluctuation adjustment, which were partially offset by an increase in stock compensation deductions recognized as discrete items.

During year-to-date September 30, 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 27.0% for year-to-date September 30, 2020 and 24.5% for year-to-date September 30, 2019.

Table of Contents Glossary of Terms

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

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

5 unchanged sentences

Amortization of intangibles 1

11,473 10,759 34,421 32,144

Impairments 2

— — 1,255 2,182

Legal accruals 3

COVID-19 incremental costs 4

6,160 — 6,160 15,500

COVID-19 incremental costs 4

Adjusted income before income taxes 187,526 109,902 420,972 370,111

5 unchanged sentences

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

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

4 unchanged sentences

Amortization of intangibles 1

0.07 0.06 0.20 0.19

Impairments 2

— — 0.01 0.01

Legal accruals 3

COVID-19 incremental costs 4

0.04 — 0.04 0.09

COVID-19 incremental costs 4

Adjusted income before income taxes 1.10 0.64 2.46 2.15

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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.

3 "Legal accruals" reflects costs incurred in the third quarter of 2020 related to certain class actions lawsuits involving employment-related claims that were previously disclosed by Swift, and in the second quarter of 2019 costs incurred with an issued jury verdict.

These costs are 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.

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

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

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Consolidated Adjusted Operating Income and Adjusted Operating Ratio

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

12 unchanged sentences

Amortization of intangibles 1

(11,473) (10,759) (34,421) (32,144)

Impairments 2

— — (1,255) (2,182)

Legal accruals 3

(6,160) — (6,160) (15,500)

COVID-19 incremental costs 4

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Trucking Segment

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

14 unchanged sentences

Amortization of intangibles 1

(324) (349) (972) (1,047)

Impairments 2

— — (1,055) (2,182)

COVID-19 incremental costs 3

— — (12,146) —

Adjusted Operating Expenses 733,487 766,627 2,141,633 2,289,078

10 unchanged sentences

Logistics Segment

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

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Intermodal Segment

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

Quarter-to-Date September 30, Year-to-Date September 30,

2020 2019 2020 2019

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Total operating expenses (98,609) (111,589) (283,372) (339,598)

Operating (loss) income $ (4,475) $ 4,192 $ (7,212) $ 6,553

Operating income (loss) $ 250 $ (2,652) $ (6,962) $ 3,901

Operating ratio 99.7 % 102.4 % 102.5 % 98.9 %

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Adjusted Operating Expenses 98,558 111,410 282,978 338,261

Adjusted Operating (Loss) Income $ (4,410) $ 4,192 $ (7,099) $ 6,553

Adjusted Operating Income (Loss) $ 250 $ (2,652) $ (6,849) $ 3,901

Adjusted Operating Ratio 99.7 % 102.4 % 102.5 % 98.9 %

7 unchanged sentences

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

Source June 30, 2020

Source September 30, 2020

(In thousands)

6 unchanged sentences

Total liquidity, including restricted cash and restricted investments $ 902,184

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

1 As of September 30, 2020, we had $170.0 million in borrowings under our $800.0 million Revolver.

We additionally had $31.1 million in outstanding letters of credit (discussed below), leaving $598.9 million available under the Revolver.

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 .

2 Based on eligible receivables at September 30, 2020, our borrowing base for the 2018 RSA was $285.0 million , while outstanding borrowings were $202.0 million .

We additionally had $67.3 million in outstanding letters of credit (discussed below), leaving $15.7 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 June 30, 2020, we had debt and finance lease obligations of $851.8 million , which are discussed under "Material Debt Agreements," below.

Principal and Interest Payments — As of September 30, 2020, we had debt and finance lease obligations of $881.8 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 June 30, 2020, the Company had $199.0 million remaining under the 2019 Knight-Swift Share Repurchase Plan .

As of September 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 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.

We intend to refinance the Term Loan prior to its maturity.

As of September 30, 2020, we had a working capital deficit of $263.6 million, which was primarily due to the classification of both the Term Loan, scheduled to mature on October 2, 2020, and the 2018 RSA, scheduled to mature on July 9, 2021 as current liabilities.

As of December 31, 2019, we had a working capital deficit of $103.0 million, which was primarily due to the classification of the Term Loan as a current liability.

On October 2, 2020, the 2017 Debt Agreement was amended to extend the maturity date of the Term Loan to October 3, 2022, incorporate language regarding the transition away from LIBOR, and update other regulatory and technical provisions customary for facilities of this type.

Just prior to this extension, we paid $65.0 million on the outstanding balance of the Term Loan, leaving $300.0 million face value outstanding.

We intend to refinance the 2018 RSA prior to its maturity date.

Material Debt Agreements

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

As of September 30, 2020, we had $881.8 million in material debt obligations at the following carrying values:

• $365.0 million :

Term Loan, due October 2020, net of $0.1 million in deferred loan costs

Term Loan, due October 2020

• $201.9 million :

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Cash Flow Analysis

Year-to-Date June 30, Change

Year-to-Date September 30, Change

(In thousands)

3 unchanged sentences

Net Cash Provided by Operating Activities

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.

Comparison Between Year-to-Date September 30, 2020 and 2019 — T he $42.6 million increase in net cash provided by operating activities was primarily due to a $42.2 million decrease in cash paid for income taxes, net of refunds, a $41.9 million increase in our operating income, and various changes within our working capital.

This was 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 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.

Comparison Between Year-to-Date September 30, 2020 and 2019 — The $132.8 million decrease in net cash used in investing activities was due to a $181.7 million decrease in net capital expenditures partially offset by a $44.9 million increase in net cash used for acquisitions.

Net Cash Used in Financing Activities

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.

Comparison Between Year-to-Date September 30, 2020 and 2019 — Net cash used in financing activities increased by $104.0 million , primarily due to a $144.4 million increase 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 year-to-date June 30, 2020 period.

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

11 unchanged sentences

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 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

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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

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