What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-02-25 compared with 2020-02-27 · 127 added, 138 removed, 351 unchanged (43% of the section changed)

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During 2020, we covered 1.5 billion loaded miles for shippers throughout North America, contributing to consolidated total revenue of $4.7 billion and consolidated operating income of $564.4 million .

During 2019 , we operated an average of 16,432 company tractors, 2,445 independent contractor tractors, and 58,315 trailers within our Trucking segment.

Additionally, we operated an average 643 tractors and 9,862 intermodal containers within our Intermodal segment.

During 2020, the Trucking segment operated an average of 18,448 tractors (comprised of 16,379 company tractors and 2,069 independent contractor tractors) and 57,722 trailers.

Additionally, the Intermodal segment operated an average of 577 tractors and 10,604 intermodal containers.

Our three reportable segments are Trucking, Logistics, and Intermodal.

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We are committed to providing our customers with a wide range of truckload, intermodal, and logistics services and continuing to invest considerable resources toward developing a range of solutions for our customers across multiple service offerings and transportation modes.

Our overall objective is to provide truckload, intermodal, and logistics services that, when combined, lead the industry for margin and growth, while providing efficient and cost-effective solutions for our customers.

Our overall objective is to provide truckload, intermodal, and logistics services that, when combined, lead the industry in margin and growth, while providing efficient and cost-effective solutions for our customers.

Business Combinations and Investments

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Therefore, Knight’s historical results of operations replaced Swift’s historical results of operations for all periods prior to the 2017 Merger.

See Note 5 in Part II, Item 8 of this Annual Report for more details regarding the 2017 Merger.

Historical Acquisitions

Knight — Since 1999, Knight has acquired all of the outstanding stock of six short-to-medium haul truckload carriers, or has acquired substantially all of the trucking assets of such carriers, including Iowa-based Barr-Nunn (acquired in 2014), and Virginia-based Abilene (acquired in 2018).

Swift — Since 1966, Swift has completed fourteen acquisitions, including the 2013 acquisition of Central Refrigerated Transportation, LLC (formerly Central Refrigerated Transportation, Inc.).

On January 1, 2020 Swift acquired a small company to complement its suite of services.

Knight — Since 1999, Knight has acquired the outstanding stock of six short-to-medium haul truckload carriers, including Iowa-based Barr-Nunn (acquired in 2014), and Virginia-based Abilene (acquired in 2018).

On February 1, 2021, Knight acquired a majority ownership position in Eleos, a Greenville, South Carolina based software provider, specializing in mobile driving workflow platforms.

Swift — Since 1966, Swift has completed fifteen acquisitions, including the 2013 acquisition of Central Refrigerated Transportation, LLC (formerly Central Refrigerated Transportation, Inc.).

On January 1, 2020 Swift acquired a warehousing company to complement its suite of services.

Joint Ventures

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See Note 7 in Part II, Item 8 in this Annual Report, regarding Knight's partnership agreements with Transportation Resource Partners.

Partnerships and Other Investments

See Note 7 in Part II, Item 8 in this Annual Report, regarding Knight's partnership agreements with Transportation Resource Partners and Knight's October, 1 2020, investment in a transportation-related company.

Industry and Competition

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Our logistics businesses compete with other logistics companies for the services of third-party capacity providers and management employees.

Our industry has encountered the following major economic cycles since 2010:

Economic Cycle

moderate recovery, from prior years' recession.

The industry freight data began to show positive trends for both volume and pricing.

The slow, steady growth is a result of moderate increases in gross domestic product, coupled with a tighter supply of available tractors.

Trends in supply of available tractors were lower due to several years of below average truck builds, an increase in truckload fleet bankruptcies in 2009 and 2010, increasing equipment prices due to stringent EPA requirements, less available credit, and less driver availability.

return to pre-recession levels and relative stabilization.

In 2014, total spending on transportation, which fell during the 2007 – 2009 recession, returned to pre-recession levels.

Truck tonnage grew throughout 2014, followed by decelerating growth in 2015, and relative stabilization in 2016.

Capacity became looser in 2015 and 2016, as inventory levels were high and large volumes of tractor purchases created a supply/demand imbalance, putting pressure on pricing.

Fuel prices declined.

Our industry has encountered the following major economic cycles:

Period Economic Cycle

2017 — 2019 strong cycle, driven by a record pricing climate through 2018.

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Capacity increased in the second half of 2018 leading to an oversupply during 2019, lower spot market rates, and downward pressure on contract rates.

2020 the COVID-19 pandemic led to a new source of volatility throughout the global market in 2020.

Economic activities were significantly curtailed across the nation at the onset of 2020, but began to resume in the second half of the year.

Accordingly, demand in the freight market was weak in the beginning of the year and gradually strengthened in the second half of the year.

The 2020 freight environment was disrupted, with unpredictable shipping volumes, shifts in pricing, and continued challenges in driver sourcing throughout the year.

The principal means of competition in our industry are customer service, capacity, and price.

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Our Competitive Strengths

We believe that our principal competitive strengths are our regional presence, customer service (including our ability to provide multiple transportation solutions, and configuration of equipment that satisfies customers' needs), operating efficiency, cost control, and technological enhancements in our revenue equipment and supporting back-office functions.

As North America's largest truckload carrier, we believe that our principal competitive strengths are our regional presence, customer service (including our ability to provide multiple transportation solutions and configuration of equipment that satisfies customers' needs), operating efficiency, cost control, and technological enhancements in our revenue equipment and supporting back-office functions.

Regional Presence

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Operating Efficiency and Cost Control

We expect to increase operational efficiencies through the adoption of best practices and capabilities from each of Knight and Swift, as well as the overall size of our combined company.

We expect to increase operational efficiencies through the adoption of best practices and capabilities across our brands, as well as the overall size of our combined company.

We operate modern tractors and trailers in order to obtain operating efficiencies and attract and retain driving associates.

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Our mission is to operate truckload businesses that are industry leading in both margin and growth, while providing cost-effective solutions for our customers.

Our success depends on our ability to efficiently and effectively manage our resources in providing transportation and logistics solutions to our customers, as well as our ability to leverage efficiencies and best practices between Knight and Swift.

We evaluate growth opportunities based on customer demand and supply chain trends, availability of drivers and third-party capacity providers, expected returns on invested capital, expected net cash flows, and our company-specific capabilities.

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We have intermodal agreements with most major North American rail carriers.

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Growth Strategies

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We regularly evaluate potential opportunities for mergers, acquisitions, and other development and growth opportunities.

In addition to the merger between Knight and Swift in 2017, since 1999, Knight has acquired six short-to-medium haul truckload carriers, including the acquisitions of Barr-Nunn during 2014 and Abilene during 2018, and Swift has acquired fourteen companies since 1966.

On February 1, 2021, Knight acquired a majority ownership position in Eleos, a Greenville, South Carolina based software provider, specializing in mobile driving workflow platforms.

Expanding existing terminals

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We plan to continue to leverage our nationwide footprint and expertise to add value to our customers through our diversified service offerings.

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Customers and Marketing

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This affords us and our customers some flexibility to negotiate rates in response to changes in freight demand and industry-wide truck capacity.

Our dedicated services within the Trucking segment assign particular driving associates and revenue equipment to prescribed routes, pursuant to multi-year agreements.

Our dedicated services within the Trucking segment assign particular driving associates and revenue equipment to prescribed routes,

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pursuant to multi-year agreements.

This dedicated service provides individual customers with a guaranteed source of capacity, and allows our driving associates to have more predictable schedules and routes.

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We strive to maintain a diversified customer base.

Services provided to the Company's largest customer, Walmart, generated 13.3% , 14.6% , and 15.8% of total revenue in 2019 , 2018 , and 2017 , respectively.

Revenue generated by Walmart is reported in each of our reportable operating segments.

Services provided to our largest customer generated 16.8% and 13.3% of total revenue in 2020 and 2019, respectively.

Revenue generated by our largest customer is reported in each of our reportable operating segments.

No other customer accounted for 10% or more of total revenue in 2020 or 2019.

Our top 25 customers drive a substantial portion of our total revenue, as follows (amounts reflect only Swift's results prior to the 2017 Merger date, and Knight-Swift's results after the 2017 Merger date):

In 2019, our top 25, top 10, and top 5 customers accounted for 49.7% , 33.5% , and 25.5% of our total revenue, respectively.

Our top 25 customers drive a substantial portion of our total revenue, as follows:

• In 2020, our top 25, top 10, and top 5 customers accounted for 56.5%, 40.8%, and 30.7% of our total revenue, respectively.

• In 2019, our top 25, top 10, and top 5 customers accounted for 49.7%, 33.5%, and 25.5% of our total revenue, respectively.

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Revenue Equipment

We operate a modern fleet of company tractors to help attract and retain driving associates, promote safe operations, and reduce maintenance and repair costs.

In 2019 , we obtained all of our revenue equipment only through cash purchases, and in the future, we will continue to monitor leasing opportunities.

In 2020, we obtained the majority of our revenue equipment through cash purchases, and in the future, we will continue to monitor leasing opportunities.

We typically obtain tractors and trailers manufactured to our specifications in order to meet a wide variety of customer needs.

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We maintain strong relationships with our equipment vendors and have the financial flexibility to react as market conditions dictate.

Our current policy is to replace our tractors between 42 months and 60 months after purchase and to replace our trailers over a five- to ten-year period.

Our current approach is to replace our tractors between 36 months and 60 months after purchase and to replace our trailers over a seven- to fifteen-year period.

Changes in the current market for used tractors and trailers, regulatory changes, and difficult market conditions faced by tractor and trailer manufacturers, may result in price increases that may affect the period of time for which we operate our equipment.

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In 2021 and beyond, we will continue to monitor the appropriateness of this relatively short tractor trade-in cycle against the lower capital expenditure and financing costs of a longer tractor trade-in cycle, based on current and future business needs.

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Human Capital

The strength of our company is our people, working together with common goals.

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Company Driving Associates

We recognize that the recruitment, training, and retention of a professional driving associate workforce, which is one of our most valuable assets, are essential to our continued growth and meeting the service requirements of our customers.

We recognize that the recruitment, training, and retention of a professional driving associate workforce, which is one of our most valuable assets, is essential to our continued growth and meeting the service requirements of our customers.

In order to attract and retain safe driving associates who are committed to the highest levels of customer service and safety, we focus our operations for driving associates around a collaborative and supportive team environment.

We provide late model and comfortable equipment, direct communication with senior management, competitive wages and benefits, and other incentives designed to encourage driving associate safety, retention, and long-term employment.

We have established various driving academies across the US.

To help retain employees we provide late model and comfortable equipment, direct communication with senior management, competitive wages and benefits, and other incentives designed to encourage driving associate safety, retention, and long-term employment.

Some examples of these incentive programs include our Million Miler, military apprenticeship, and Drive for a Degree programs.

To help recruit drivers, we have established various driving academies across the US.

Our academies are strategically located in areas where external driver-training organizations were lacking.

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Terminal leaders are also responsible for serving existing customers in their areas.

Fleet leaders supervise driver leaders, who are responsible for the general operation of our trucks and their driving associates,

Fleet leaders supervise driver leaders, who are responsible for the general operation of our trucks and their driving associates, focusing on driving associate retention, productivity per truck, fuel consumption, fuel efficiency (with respect to driver-controllable idle time), safety, and scheduled maintenance.

Customer service representatives are assigned specific customers to ensure specialized, high-quality service, and frequent customer contact.

Diversity and Inclusion

We are committed to fostering a diverse workforce and an inclusive environment, which among other things, is supported by our hiring practices, employee training programs, formal and informal diversity and inclusion networks, as well as our employee resource group.

Our employee resource group, sponsored and supported by leadership, is integral to ensuring different voices and perspectives contribute to our strategy for long term profitable growth.

Succession Planning and Talent Management

We regularly review talent development and succession plans to identify and develop a pipeline of talent to maintain business operations.

We understand the potential costs and risks of bringing in an outside executive officer in today’s environment, and that businesses are often, but not always, more successful in promoting internal candidates.

Accordingly, the Board makes an effort to identify potential successors for those positions long in advance of any potential positional vacancies, perform skills gap analyses for those internal candidates, and provide training and exposure on those gap areas to those candidates in order to develop better potential successors.

The Board is primarily responsible for succession planning for the CEO, but also participates in succession planning discussions for other executive officer positions.

We believe that our culture, compensation structure, long-term

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focusing on driving associate retention, productivity per truck, fuel consumption, fuel efficiency (with respect to driver-controllable idle time), safety, and scheduled maintenance.

Customer service representatives are assigned specific customers to ensure specialized, high-quality service, and frequent customer contact.

equity program, and robust training and development program provide motivation for talented leaders to remain with the Company.

Independent Contractors

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We employ technology to assist us in managing risks associated with our business.

We have event recorders in all of our tractors, which are used daily by drivers and operations leaders to provide feedback and coaching in regard to driving behaviors.

In addition, we have an innovative recognition program for driver safety performance and emphasize safety through our equipment specifications and maintenance programs.

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

Freight volumes in the first quarter are typically lower due to less consumer demand, customers reducing shipments following the holiday season, and inclement weather.

At the same time, operating expenses generally increase, and tractor productivity of the Company's fleet, independent contractors, and third-party carriers decreases during the winter months due to decreased fuel efficiency, increased cold-weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather.

These factors typically lead to lower operating profitability, as compared to other parts of the year.

Additionally, beginning in the latter half of the third quarter and continuing into the fourth quarter, the Company typically experiences surges pertaining to holiday shopping trends toward delivery of gifts purchased over the Internet as well as the length of the holiday season (consumer shopping days between Thanksgiving and Christmas).

However, cyclical changes in the trucking industry, including imbalances in supply and demand, can override the seasonality faced in the industry.

See Note 1 in Part II, Item 8 in this Annual Report, regarding the impact of seasonality on our operations.

Environmental Regulation

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The regulation also contained certain emissions and registration standards for refrigerated trailers.

In December 2013, California's ARB approved regulations to align its GHG emission standards and test procedures, as well as its tractor-trailer GHG regulation, with the federal Phase 1 GHG regulation (see below).

In February 2018, California's ARB approved California Phase 2 standards that generally align with the federal Phase 2 standards, with some minor additional requirements, and which would stay in place even if the federal Phase 2 standards are affected by action from President Trump's administration.

In February 2019, the California Phase 2 standards became final.

In June 2020, ARB passed the Advanced Clean Trucks (“ACT”) regulation, requiring original equipment manufacturers to begin shifting towards greater production of zero-emission heavy duty tractors starting in 2024.

Under ACT, by 2045, every new tractor sold in California will need to be zero-emission.

While ACT does not apply to those simply operating tractors in California, it could affect the cost and/or supply of traditional diesel tractors and may lead to similar legislation in other states or at the federal level.

EPA and NHTSA — The EPA and the National Highway Traffic Safety Administration ("NHTSA") have begun taking coordinated steps in support of a new generation of clean vehicles and engines through reduced GHG emissions and improved fuel efficiency at a national level.

In September 2011, the EPA finalized the Phase 1 federal regulations for controlling GHG emissions, related to efficient engines, use of auxiliary power units, mass reduction, low-rolling resistance tires, improved aerodynamics, improved transmissions, and reduced accessory loads.

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Additionally, in February 2018, California's ARB approved California Phase 2 standards that generally align with the federal Phase 2 standards, with some minor additional requirements, and which would stay in place even if the federal Phase 2 standards are affected by action from President Trump's administration.

In February 2019, the California Phase 2 standards became final.

The ARB has also recently announced intentions to adopt regulations ensuring that 100.0% of tractors operating in California are operating with battery or fuel cell-electric engines in the future.

Whether these regulations will ultimately be adopted remains unclear.

EPA and NHTSA — The EPA and the National Highway Traffic Safety Administration ("NHTSA") began taking coordinated steps in support of a new generation of clean vehicles and engines through reduced GHG emissions and improved fuel efficiency at a national level.

Phase 1 — In September 2011, the EPA finalized federal regulations for controlling GHG emissions, beginning with model-year 2014 medium- and heavy-duty engines and vehicles and increasing in stringency through model-year 2018.

The federal regulations relate to efficient engines, use of auxiliary power units, mass reduction, low-rolling resistance tires, improved aerodynamics, improved transmissions, and reduced accessory loads.

Phase 2 — In June 2015, the EPA and NHTSA, working in concert with California's ARB, formally announced a proposed national program establishing Phase 2 of the GHG emissions and fuel efficiency standards for medium- and heavy-duty vehicles for model-year 2018 and beyond.

In August 2016, the EPA and NHTSA announced the final rule regarding Phase 2, which builds upon Phase 1, and would apply to certain trailer types beginning with model-year 2018 for EPA standards (voluntary for NHTSA standards through model-year 2020).

• Phase 2 — In August 2016, the EPA and NHTSA announced the final rule regarding Phase 2, which builds upon Phase 1, and would apply to certain trailer types beginning with model-year 2018 for EPA standards (voluntary for NHTSA standards through model-year 2020).

Tractors and certain trailer types would be subject to the Phase 2 standards beginning with model-year 2021, increasing in stringency through model-year 2024, and phasing in completely by model-year 2027.

This rule marks the first time federal mandates will be applied to trailers, with respect to aerodynamics and low-rolling resistance tires.

The final rule was effective December 27, 2016.

In October 2017, the EPA announced a proposal to repeal the Phase 2 standards as they relate to gliders (which mix refurbished older components, including transmissions and pre-emission-rule engines, with a new frame, cab, steer axle, wheels, and other standard equipment).

The outcome of such proposal is still undetermined as the EPA continues to consider congressionally requested investigations into the legality of the proposal and the merits of an anti-glider study that was published shortly after the proposal became official.

The final rule was effective in December 2016.

Additionally, implementation of the Phase 2 standards as they relate to trailers has been delayed due to a provisional stay granted in October 2017 by the US Court of Appeals for the District of Columbia, which is overseeing a case against the EPA by the Truck Trailer Manufacturers Association, Inc.

regarding the Phase 2 standards.

If the glider provisions are removed from the Phase 2 standards, there would be no direct effect on our results of operations.

If the glider provisions are removed from the Phase 2 standards as the EPA has proposed in the past, there would be no direct effect on our results of operations.

If the trailer provisions of the Phase 2 standards are permanently removed, we would still need to ensure the majority of our fleet is compliant with the California Phase 2 standards.

In January 2020, the EPA announced it is seeking input on reducing emissions of nitrogen oxides and other pollutants from heavy-duty trucks.

The EPA is aiming to release proposed standards for the new plan, commonly referred to as the “Cleaner Trucks Initiative,” later in 2020, and may take final action as soon as 2021.

The EPA is aiming to release proposed rulemaking for the new plan, commonly referred to as the “Cleaner Trucks Initiative,” in 2021.

The EPA is targeting 2027 for these new standards to take effect.

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These restrictions could force us to purchase on-board power units that do not require the engine to idle or to alter our driving associates' behavior, which could result in a decrease in productivity, or increase in driving associate turnover.

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Industry Regulation

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Additionally, in response to the bill, a final rule related to entry-level driver training was passed in 2016, as well as amendments to the Drug and Alcohol Clearinghouse rules.

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ELD — During 2012, the FMCSA published a Supplemental NPRM, announcing its plan to proceed with the ELDs and hours-of-service supporting documents rulemaking.

The ELD rule became final in December 2015, as published in the Federal Register, with an effective date of February 16, 2016.

The ELD rule phases in over a four-year period:

Phase 1 (February 16, 2016 through December 18, 2017):

Carriers and drivers subject to the rule may voluntarily use ELDs or use other forms of logging devices.

Phase 2 (December 18, 2017 through December 16, 2019):

Carriers and drivers subject to the rule can use Automatic On-board Recording Devices that were installed prior to December 18, 2017 or ELDs certified and registered after December 16, 2015.

Phase 3 (after December 16, 2019):

All drivers and carriers subject to the rule must use certified and registered ELDs that comply with the requirements of the ELD regulations.

Although the final ELD rule may have caused many carriers to experience at least a short-term drop in production and has had a significant impact on the industry as a whole, we have not experienced any adverse effects, as we had installed ELDs in our operational trucks well before the December 2017 compliance date in conjunction with our efforts to improve efficiency and communications with driving associates and independent contractors.

The ELD rule became final in December 2015, as published in the Federal Register, with an effective date in February 2016.

The ELD rule phased in over a four-year period, with all drivers and carriers subject to the rule being required to use certified and registered ELDs that comply with the requirements of the ELD regulations by December 16, 2019.

Although the final ELD rule may have caused many carriers to experience at least a short-term drop in production and has had a significant impact on the industry as a whole, we have not experienced any adverse effects, as we had installed ELDs in our operational trucks well before the requisite compliance dates in conjunction with our efforts to improve efficiency and communications with driving associates and independent contractors.

However, we believe that more effective hours-of-service enforcement under the ELD rule may improve our competitive position by causing all carriers to adhere more closely to hours-of-service requirements.

Commercial Driver's License Drug and Alcohol Clearinghouse — In December 2016, the FMCSA amended the Federal Motor Carrier Safety Regulations to establish requirements of the Commercial Driver's License Drug and Alcohol Clearinghouse, a database under its administration that will contain information about violations of the FMCSA's drug and alcohol testing program for holders of commercial driver's licenses.

In addition to requiring employers to check the database for driver applicant drug and alcohol test failures, the final rule requires employers to check the database to determine whether current employees have incurred a drug or alcohol violation that would prohibit them from performing safety-sensitive functions.

The final rule became effective on January 4, 2017, with a compliance date of January 6, 2020.

In December 2019, however, the FMCSA announced a final rule extending by three years the date for state driver’s licensing agencies to comply with certain Drug and Alcohol Clearinghouse requirements.

Commercial Driver's License Drug and Alcohol Clearinghouse — In December 2016, the FMCSA amended the Federal Motor Carrier Safety Regulations to establish requirements of the Commercial Driver's License Drug and Alcohol Clearinghouse, a database under its administration containing information about violations of the FMCSA's drug and alcohol testing program for holders of commercial driver's licenses.

The final rule became effective in January 2017, with a compliance date in January 2020.

In December 2019, however, the FMCSA announced a final rule extending by three years the date for state driver’s licensing agencies to comply with certain requirements.

The December 2016 commercial driver’s license rule required states to request information from the Clearinghouse about individuals prior to issuing, renewing, upgrading or transferring a commercial driver's license.

This new action will allow states’ compliance with the requirement, which was set to begin January 2020, to be delayed until January 2023.

That being said, the FMCSA has indicated it will allow states the option to voluntarily query Clearinghouse information beginning January 2020.

The compliance date of January 2020 remained in place for all other requirements set forth in the Clearinghouse final rule, however.

Upon implementation, the rule may reduce the number of available drivers in an already constrained driver market.

In September 2020, the Department of Health and Human Services (“DHHS”) announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.

However, the proposal also requires a second sample using either urine or an oral swab test if a hair test is positive, if a donor is unable to provide a sufficient amount of hair for faith-based or medical reasons, or due to an insufficient amount or length of hair.

DHHS indicated the two-test approach is intended to protect federal workers from issues that have been identified as limitations of hair testing, and related legal deficiencies identified in prior court cases.

The American Trucking Associations (“ATA”) has voiced concerns with the new guidelines, taking particular issue with the second sample requirement, which the ATA feels diminishes the value of hair testing.

It is unclear if and when a final rule may be put in place.

Any final rule may reduce the number of available drivers.

We currently perform hair follicle testing and will continue to monitor any developments in this area to ensure compliance.

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The final rule requires that behind-the-wheel proficiency of an entry-level truck driver be determined solely by the instructor's evaluation of how well the driver-trainee performs the fundamental vehicle controls skills and driving procedures set forth in the curricula, but does not have a minimum training hours requirement, as proposed by the FMCSA earlier in 2016.

The final rule went into effect on February 6, 2017, with an initial compliance date of February 7, 2020.

FMCSA officials have recently reported, however, that they are delaying implementation of the final rule by two years.

The final rule went into effect in February 2017, with an initial compliance date in February 2020.

However, in May 2020, the FMCSA approved an interim rule delaying implementation of the final rule by two years, extending the compliance date to February 2022.

Upon the compliance date, training schools will be required to register with the FMCSA's Training Provider Registry and certify that their program meets the classroom and driving standards.

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US Congressional representatives also proposed a bill in 2019 that would pave the way for commercial drivers younger than 21 to drive tractors across state lines.

This new bill, which would lower the age requirement of 21 to 18 for interstate commercial driving if certain requirements are met, received support from the ATA during a February 2020 Senate hearing.

This bill, which would lower the age requirement of 21 to 18 for interstate commercial driving if certain requirements are met, received support from the ATA during a February 2020 Senate hearing.

It is unclear how long the process of finalizing such a bill will take, however if one comes to fruition at all.

Meanwhile, the FMCSA announced in September 2020 that it is proposing and seeking public comments on a new pilot program to allow drivers aged 18, 19, and 20 to operate commercial motor vehicles in interstate commerce.

Hours-of-service

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It also would extend by two hours the duty time for drivers encountering adverse weather and extend the shorthaul exemption by lengthening the drivers’ maximum on-duty period from 12 hours to 14 hours.

It is unclear how long the process of finalizing a final rule will take, if one does come to fruition.

In June 2020 the FMCSA adopted a final rule substantially as proposed, which became effective September 2020.

Any future changes to hours-of-service regulations could materially and adversely affect our operations and profitability.

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Certain CSA scores were initially published and made available to the general public.

However, in December 2015, as part of the Fixing America's Surface Transportation ("FAST") Act, Congress mandated that the FMCSA remove all CSA scores from public view until a more comprehensive study regarding the effectiveness of CSA improving truck safety could be completed.

During this period of review by the FMCSA, we will continue to have access to our own scores and will still be subject to intervention by the FMCSA when such scores are above the intervention thresholds.

The study was conducted and delivered to the FMCSA in June 2017 with several recommendations to make the CSA program more fair, accurate, and reliable.

In late June 2018, the FMCSA provided a report to Congress outlining the

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changes it may make to the CSA program in response to the study.

Such changes include the testing and possible adoption of a revised risk modeling theory, potential collection and dissemination of additional carrier data and revised measures for intervention thresholds.

The adoption of such changes is contingent on the results of the new modeling theory and additional public feedback.

It is unclear if, when, and to what extent any such changes will occur.

truck safety could be completed.

Although the FMCSA has since provided a report to Congress outlining the changes it may make to the CSA program, it remains unclear if, when, and to what extent any such changes will occur.

However, any changes that increase the likelihood of us receiving unfavorable scores could adversely affect our results of operations and profitability.

In May 2020 the FMCSA announced that effective immediately it is making permanent a pilot program that will not count a crash in which a motor carrier was not at fault when calculating the carrier’s safety measurement profile, called the Crash Preventability Demonstration Program (“CPDP”).

The CPDP will expand the types of eligible crashes, modify the Safety Measurement System to exclude crashes with not preventable determinations from the prioritization algorithm and note the not preventable determinations in the Pre-Employment Screening Program.

CSA scores do not currently have a direct impact on a carrier's safety rating.

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The NPRM proposed new methodologies that would have determined when a motor carrier was not fit to operate a commercial motor vehicle.

Key proposed changes that were included in the NPRM are as follows:

There would be only one safety rating of "unfit," as compared to the current rules, which have three safety ratings (satisfactory, conditional, and unsatisfactory).

Carriers could be determined "unfit" by failing two or more BASICs, investigation results, or a combination of the two.

Stricter standards would be used for BASICs with a higher correlation to crash risk (Unsafe Driving and Hours-of-Service Compliance).

All investigation results would be used, not just results from comprehensive on-site reviews.

Violations of a revised list of "critical" and "acute" safety regulations would result in failing a BASIC.

Carriers would be assessed monthly.

Public comments on the proposed rule were due in June 2016 and several industry groups and lawmakers expressed their disagreement with the proposed rule, arguing that it violates the requirements of the FAST Act and that the FMCSA must first finalize its review of the CSA scoring system.

Based on this feedback and other concerns raised by industry stakeholders, in March 2017, the FMCSA withdrew the NPRM related to the new safety rating system.

Based on public feedback and other concerns raised by industry stakeholders, in March 2017, the FMCSA withdrew the NPRM related to the new safety rating system.

In its notice of withdrawal, the FMCSA noted that a new rulemaking related to a similar process may be initiated in the future.

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Speed Limiting Devices

In September 2016, the NHTSA and FMCSA proposed regulations that would require speed limiting devices on vehicles with a gross vehicle weight rating of more than 26,000 pounds for the service life of the vehicle.

The speed was expected to be limited to 62, 65, or 68, but ultimately would have been set by the final rule.

Based on the agencies' review of the available data, limiting the speed of these heavy vehicles would reduce the severity of crashes involving these vehicles and reduce the resulting injuries and fatalities.

Public comments on the proposed rule were due in November 2016, and in July 2017, the DOT announced that it would no longer pursue a speed limiter rule, but left open the possibility that it could resume such a pursuit in the future.

The effect of this rule, to the extent it became effective, could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations.

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In June 2019, legislation was introduced that would require all new commercial trucks with a gross weight of 26,001 pounds or more to be equipped with speed-limiting devices, which must be set to a maximum speed of 65 miles per hour and be used at all times while in operation.

The maximum speed requirement would also be extended to existing trucks that already have the technology installed.

Trucks without speed limiters would not be forced to retroactively install the technology.

Whether this legislation will ultimately become law is uncertain.

While we currently govern the speed of our tractors below these limits, such legislation could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations.

While we currently govern the speed of our company tractors below these limits, such legislation could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations.

For safety, we electronically govern the speed of substantially all of our company tractors.

Additionally, our independent contractor agreements include statements that independent contractors must comply with the Company's speed policy.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

Food Safety Modernization Act of 2011 ("FSMA")

In April 2016, the Food and Drug Administration published a final rule establishing requirements for shippers, loaders, carriers by motor vehicle and rail vehicle, and receivers engaged in the transportation of food, to use sanitary transportation practices to ensure the safety of the food they transport as part of the FSMA.

This rule sets forth requirements related to:

the design and maintenance of equipment used to transport food,

the measures taken during food transportation to ensure food safety,

the training of carrier personnel in sanitary food transportation practices, and

maintenance and retention of records of written procedures, agreements, and training related to the foregoing items.

In April 2016, the Food and Drug Administration ("FDA") published a final rule establishing requirements for shippers, loaders, carriers by motor vehicle and rail vehicle, and receivers engaged in the transportation of food, to use sanitary transportation practices to ensure the safety of the food they transport as part of the FSMA.

This rule sets forth requirements related to among other things, equipment used to transport food, measures taken during such transportation, personnel training, and record retention.

These requirements took effect for larger carriers such as us in April 2017 and are also applicable when we perform as a carrier or as a broker.

We believe we have been in compliance with these requirement since that time.

We believe we have been in compliance with these requirements since that time.

However, if we are found to be in violation of applicable laws or regulations related to the FSMA, or if we transport food or goods that are contaminated or are found to cause illness and/or death, we could be subject to substantial fines, lawsuits, penalties and/or criminal and civil liability, any of which could have a material adverse effect on our business, financial condition, and results of operations.

As the FDA continues its efforts to modernize food safety, it is likely additional food safety regulations will take effect in the future.

In July 2020, the FDA released its “New Era of Smarter Food Safety” blueprint, which creates a ten year roadmap to create a more digital, traceable and safer food system.

This blueprint builds on the work done under the FSMA, and while it is still unclear what, if any, changes to the current governing framework may ultimately take effect, further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward.

Legislation Regarding Independent Contractors

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In addition, carriers such as us that operate or have operated lease-purchase programs have been more susceptible to lawsuits seeking to reclassify independent contractors that have engaged in such programs.

If our independent contractors were determined to be our employees, we would incur additional exposure under federal and

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

state tax, workers' compensation, unemployment benefits, labor, employment, and tort laws, which could potentially include prior periods, as well as potential liability for employee benefits and tax withholdings.

If our independent contractors were determined to be our employees, we would incur additional exposure under federal and state tax, workers' compensation, unemployment benefits, labor, employment, and tort laws, which could potentially include prior periods, as well as potential liability for employee benefits and tax withholdings.

We currently observe and monitor our compliance with current related and applicable laws and regulations, but we cannot predict whether future laws and regulations, judicial decisions, or settlements regarding the classification of independent contractors will adversely affect our business or operations.

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AB5 provides that the three-pronged "ABC Test" must be used to determine worker classification in wage-order claims.

Under the ABC Test, a worker is presumed to be an employee and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all 3 of the following criteria:

Under the ABC Test, a worker is presumed to be an employee and the burden to demonstrate their independent contractor status is on the hiring company through satisfying all three of the following criteria:

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

• the worker is free from control and direction in the performance of services;

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How AB5 will be enforced is still to be determined.

In January 2021, however, the California Supreme Court ruled that the ABC Test could apply retroactively to all cases not yet final as of the date the original decision was rendered, April 30, 2018.

While it was set to go into effect in January 2020, a federal judge in California issued a preliminary injunction barring the enforcement of AB5 on the trucking industry while the California Trucking Association ("CTA") moves forward with its suit seeking to invalidate AB5.

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It is also possible AB5 will spur similar legislation in states other than California, which could adversely affect our results of operations and profitability.

In September 2020, the US Court of Appeals for the Ninth Circuit heard oral arguments in the case to decide whether the preliminary injunction prohibiting the state from enforcing the ABC Test against motor carriers should remain in effect.

A decision on the matter is expected soon.

Meanwhile, in November 2020, a California state appeals court ruled that the Federal Aviation Administration Authorization Act (“FAAAA”) does not preempt application of the ABC Test to truck drivers.

Because this opinion came from a California state court, however, it does not directly impact the Ninth Circuit decision discussed above.

State Wage and Hour Legislation

In March 2014, the Ninth Circuit Court of Appeals held that California state wage and hour laws are not preempted by federal law.

The case was appealed to the Supreme Court of the United States, which denied certiorari in May 2015, and accordingly, the Ninth Circuit Court of Appeals decision stood.

However, in December 2018, the FMCSA granted a petition filed by the American Trucking Associations and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws.

The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been filed in federal courts seeking to overturn the decision, and thus it’s uncertain whether it will stand.

In December 2018, the FMCSA granted a petition filed by the American Trucking Associations and in doing so determined that federal law does preempt California’s wage and hour laws, and interstate truck drivers are not subject to such laws.

The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been filed in federal courts seeking to overturn the decision, and while the Ninth Circuit Court of Appeals has since upheld the FMCSA’s decision, it still remains uncertain whether it will stand.

Other current and future state and local wage and hour laws, including laws related to employee meal breaks and rest periods, may also vary significantly from federal law.

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As a result, we are subject to an uneven patchwork of wage and hour laws throughout the US.

In the past, certain legislators have proposed federal legislation to preempt state and local wage and hour laws;

however, passage of such legislation is uncertain.

If federal legislation is not passed, we will either need to comply with the most restrictive state and local laws across our entire fleet, or revise our management systems to comply with varying state and local laws.

Either solution could result in increased compliance and labor costs, increased driver turnover, decreased efficiency, and amplified legal exposure.

If federal legislation is not passed preempting state and local wage and hour laws, we will either need to comply with the most restrictive state and local laws across our entire fleet, or revise our management systems to comply with varying state and local laws.

Either solution could result in increased compliance costs, increased driver turnover, decreased efficiency, and amplified legal exposure.

Other Regulation

Executive Order

The regulatory environment has changed under the administration of President Trump.

In January 2017, the President signed an executive order requiring federal agencies to repeal two regulations for each new one they propose and imposing a regulatory budget, which would limit the amount of new regulatory costs federal agencies can impose on individuals and businesses each year.

In December 2019, the DOT announced a final rule indicating it is codifying this directive on the regulatory process.

This rule and any other anti-regulatory action by the President and/or Congress, may inhibit future new regulations and/or lead to the repeal or delayed effectiveness of existing regulations.

Therefore, it is uncertain how we may be impacted in the future by existing, proposed, or repealed regulations.

It is still to be determined how President Biden’s leadership will impact our industry.

That being said, President Biden has indicated his intent to make a green infrastructure package a top priority for his administration.

Any measure in furtherance thereof could draw from the Moving Forward Act, a $1.5 trillion infrastructure bill that passed the US House of Representatives in June 2020, but is still waiting to be heard by the US Senate.

The Moving Forward Act incorporated and expanded upon the Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act, a nearly $500 billion bill intended to rebuild and reimagine US transportation and infrastructure that was passed out of the House Committee on Transportation and Infrastructure in June 2020.

It is unclear whether these legislative initiatives will be signed into law and what changes they may undergo prior thereto.

However, adoption and implementation of the same could negatively impact our business by increasing our compliance obligations and related expenses.

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The Tax Cuts and Jobs Act

On December 22, 2017, the US enacted significant changes to its tax law following the passage and signing of H.R.1, "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018" (previously known as "The Tax Cuts and Jobs Act").

The new tax law is complex and includes various changes which may impact the Company.

In December 2017, the US enacted significant changes to its tax law following the passage and signing of H.R.1, "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018" (previously known as "The Tax Cuts and Jobs Act").

The longevity of the Tax Cuts and Jobs Act remains unclear, however, with President Biden indicating an intention to make substantial changes to the current US tax structure during his administration, including changes to the way capital gains are treated.

Any changes to US tax laws may have an adverse impact on our business and profitability.

US-Mexico-Canada Agreement

The US-Mexico-Canada Agreement ("USMCA") has been ratified by the US and Mexico, but must be ratified by the Parliament of Canada before it enters into effect.

The US-Mexico-Canada Agreement ("USMCA") was entered into effect in July 2020.

The USMCA is designed to modernize food and agriculture trade, advance rules of origin for automobiles and trucks, and enhance intellectual property protections, among other matters, according to the Office of the US Trade Representative.

It is difficult to predict at this stage what could be the impact of the USMCA on the economy, including the transportation industry.

However, given the amount of North American trade that moves by truck, if the USMCA enters into effect, it could have a significant impact on supply and demand in the transportation industry, and could adversely impact the amount, movement, and patterns of freight we transport.

With the FAST Act scheduled to expire in September 2020, Congress has noted its intent to consider a multiyear highway measure that would update the FAST Act.

However, if Congress fails to reauthorize the FAST Act or pass updated replacement legislation by the September 2020 deadline and proceeds to manage transportation policy via short-term legislative directives, there will be uncertainty that could have a negative impact on our operations.

However, given the amount of North American trade that moves by truck, it could have a significant impact on supply and demand in the transportation industry, and could adversely impact the amount, movement, and patterns of freight we transport.

With the FAST Act originally scheduled to expire in September 2020, Congress had noted its intent to consider a multiyear highway measure that would update the FAST Act.

However, in September 2020 Congress approved a one year extension of the FAST Act, now set to expire in September 2021.

If Congress fails to reauthorize the FAST Act or pass updated replacement legislation by the September 2021 deadline and proceeds to manage transportation policy via short-term legislative directives, there will be uncertainty that could have a negative impact on our operations.

Given COVID-19’s considerable effect on the transportation industry in 2020, the FMCSA issued various temporary responsive measures throughout the year in order to combat the same, including, without limitation, those related to hours of service, commercial driver’s licenses, and medical certifications.

Although, to date, these measures have largely been enacted in order to assist industry participants in operating under adverse circumstances, any further responsive measures remain unclear and could have a negative impact on our operations.

Available Information

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Item 1. Business