What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-04 · 201 added, 290 removed, 526 unchanged (48% of the section changed)

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• 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," "potential," "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," "mission," "continue," "outlook," and similar terms and phrases.

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

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

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

Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A "Risk Factors" in our 2020 Annual Report and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

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

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Executive Summary

Impact of COVID-19

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.

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

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

Company Overview

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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

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

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

Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Consolidated Key Financial Highlights and Operating Metrics

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

2020 2019 2020 2019

Quarter Ended March 31,

GAAP financial data:

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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 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 .

2 The average age of our company-owned tractor fleet was 2.3 years and 2.0 years as of March 31, 2021 and 2020, respectively.

3 The average age of our trailer fleet was 8.2 years and 7.6 years as of March 31, 2021 and 2020, respectively .

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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 market in 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 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.

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.

Trends and Outlook — Our consolidated revenue, excluding trucking fuel surcharge, grew by 10.3% during the first quarter of 2021, as a result of revenue growth across all of our reportable segments.

We generated consolidated Adjusted Net Income Attributable to Knight-Swift of $139.4 million, which represents an 83.0% increase from $76.2 million during the first quarter of 2020.

Our Trucking segment overcame inclement weather conditions and driver sourcing challenges during the quarter and improved average revenue per tractor by 7.7%, which resulted in a 470 basis point improvement in the Adjusted Operating Ratio to 81.8% in the first quarter of 2021 from 86.5% in the first quarter of 2020.

Our Logistics segment grew revenue by more than 50% and more than doubled operating income year-over-year.

Despite weather and service disruptions during the first quarter of 2021, our Intermodal segment achieved year-over-year improvements in operating results, and we anticipate ongoing improvement in the coming quarters.

The national unemployment rate was 6.0% 1 as of March 31, 2021, reflecting the continued resumption of economic activity that had been curtailed due to the pandemic.

During the first quarter of 2021, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 6.4% 2 per preliminary third-party forecasts.

Third-party forecasts are predicting a continued economic rebound in 2021.

The first quarter 2021 US employment cost index rose 2.6% 1 and 0.9% 1 on a year-over-year and sequential basis, respectively.

From a freight market perspective, we are encouraged by the continued strength in freight demand;

however, demand may be difficult to predict for the rest of 2021.

The 2021 market outlook includes the following:

• over-the-road truckload demand has been strong and we expect this to continue throughout the remainder of the year and into 2022,

• capacity expansion may be limited as there has been some constraint by parts availability with respect to new tractor builds,

• rates may continue to be favorable in the coming year, as a result of inventory restocking and strong demand,

• sourcing and retaining drivers is likely to contribute to additional driver wage inflation,

• there has been an increased demand for power-only services, and

• there may be continuing non-contract freight opportunities with more challenging year-over-year comparisons in the back half of the 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 2021.

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

tradingeconomics.com

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

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:

Comparison Between the Quarters Ended March 31, 2021 and 2020 — The $64.4 million increase in net income attributable to Knight-Swift to $129.8 million during the quarter ended March 31, 2021 from $65.4 million during the same period last year includes the following:

• Contributor — $51.1 million increase in operating income within our Trucking segment.

Average revenue per tractor increased by 7.7%, driven by a 16.1% 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 — $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.

• Contributor — $6.2 million improvement in operating income (loss) within our Intermodal segment.

Revenue per load increased 10.2% and load counts increased 2.6%.

• Contributor — $22.6 million improvement in "Other income (expenses), net," primarily related to gains recognized within our portfolio of investments.

• Offset — $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.

All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.

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

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).

Liquidity and Capital — During the quarter ended March 31, 2021, we generated $306.1 million in operating cash flows, reduced our operating lease liabilities by $15.2 million, used $43.8 million for capital expenditures (net of disposal proceeds), spent $39.3 million on acquisitions, and returned $67.3 million to our stockholders in the form of quarterly dividends and repurchases of our common stock.

We ended the quarter with $194.7 million in unrestricted cash and cash equivalents, $115.0 million outstanding on the Revolver, $300.0 million face value outstanding on the Term Loan, and $5.9 billion of stockholders' equity.

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.

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

See discussion under "Liquidity and Capital Resources" for additional information.

Results of Operations — Segment Review

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Consolidating Tables for Total Revenue and Operating Income (Loss)

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

2020 2019 2020 2019

Quarter Ended March 31,

(In thousands)

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Total revenue $ 1,223,014 $ 1,124,798

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

2020 2019 2020 2019

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 Ended March 31,

Operating income (loss):

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Operating income $ 162,259 $ 102,119

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Operating Statistics

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Average Revenue per Load Logistics, Intermodal Total revenue (excluding intersegment transactions) divided by load count

Gross Margin Percentage Logistics (Brokerage only) Brokerage gross margin (revenue, excluding intersegment transactions, less purchased transportation expense, excluding intersegment transactions) as a percentage of brokerage revenue, excluding intersegment transactions

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

Average Containers Intermodal Average containers in operation during the period

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per tractor data)

Total revenue $ 962,947 $ 919,061 4.8 %

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Adjusted Operating Income 1

$ 158,807 $ 110,805 43.3 %

Average revenue per tractor 2

Operating ratio ² 82.7 % 88.9 % 86.2 % 88.2 % (620 bps) (200 bps)

Adjusted Operating Ratio ¹ ² 81.3 % 87.5 % 84.3 % 86.6 % (620 bps) (230 bps)

Non-paid empty miles percentage ² 12.6 % 12.8 % 13.1 % 12.9 % (20 bps) 20 bps

$ 47,894 $ 44,474 7.7 %

Operating ratio 2

83.5 % 88.3 % (480 bps)

Adjusted Operating Ratio 1 2

81.8 % 86.5 % (470 bps)

Non-paid empty miles percentage 2

12.8 % 12.8 % — bps

Average length of haul (miles) 2

412 428 (3.7 %)

Total miles per tractor 2

20,928 22,568 (7.3 %)

Average tractors 2 3

18,224 18,462 (1.3 %)

Average trailers 2

59,797 57,716 3.6 %

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

2 Defined under "Operating Statistics," above.

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.

3 Includes 16,305 and 16,339 average company-owned tractors for the first quarter of 2021 and 2020, respectivel y.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — We grew revenue, excluding fuel surcharge and intersegment transactions, by 6.3% within the Trucking segment.

Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

The rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the quarter and a 7.3% decline in miles per tractor due to inclement weather and an increase in unseated tractors.

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

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

The Logistics segment is less asset-intensive than the Trucking segment and is dependent upon capable non-driver employees, modern and effective information technology, and third-party capacity providers.

Logistics revenue is primarily generated by its brokerage operations.

Logistics revenue is generated by its brokerage operations.

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).

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per load data)

Total revenue $ 118,887 $ 79,198 50.1 %

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Operating income $ 7,577 $ 3,719 103.7 %

Revenue per load – Brokerage only ¹ $ 1,756 $ 1,368 $ 1,518 $ 1,423 28.4 % 6.7 %

Gross margin percentage – Brokerage only ¹ 11.0 % 14.0 % 13.5 % 16.0 % (300 bps) (250 bps)

Operating ratio ¹ 97.5 % 95.7 % 96.3 % 93.8 % 180 bps 250 bps

Adjusted Operating Ratio ¹ ² 97.4 % 95.6 % 96.2 % 93.6 % 180 bps 260 bps

Revenue per load – Brokerage 1

$ 1,971 $ 1,378 43.0 %

Gross margin percentage – Brokerage 1

14.4 % 14.7 % (30 bps)

Operating ratio 1

93.6 % 95.3 % (170 bps)

Adjusted Operating Ratio 1 2

93.5 % 95.2 % (170 bps)

1 Defined under "Operating Statistics," above.

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

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.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — Revenue, excluding intersegment transactions, increased by 50.8% within our Logistics segment, as brokerage revenue per load increased by 43.0% and load volumes grew by 5.4%.

Brokerage gross margin was 14.4% in the first quarter of 2021 and 14.7% in the first quarter of 2020.

The operating ratio improved by 170 basis points to 93.6% for the first quarter of 2021, compared to 95.3% for the first quarter of 2020.

Within our power-only service offering, load volumes grew 56.2%, contributing to 161.6% revenue growth and representing over 25% of our total first quarter 2021 brokerage load volumes.

During 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions.

During the first quarter of 2021, approximately 4,500 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

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

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands, except per load data)

Total revenue $ 107,066 $ 94,731 13.0 %

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Operating ratio 2

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

96.8 % 102.9 % (610 bps)

Adjusted Operating Ratio 1 2

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

96.8 % 102.8 % (600 bps)

Load count 41,968 40,889 2.6 %

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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.

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

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.

3 Includes 542 and 536 company-owned tractors for the first quarter of 2021 and 2020 , respectively.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — Revenue, excluding intersegment transactions within our Intermodal segment increased 13.1%, as revenue per load increased 10.2% and load counts increased 2.6%.

We improved the operating ratio within the Intermodal segment to 96.8%, compared to 102.9% during the first quarter of 2020, despite weather and service disruptions.

Operating results within the Intermodal segment improved toward the end of the quarter.

We anticipate sequential improvements in operating results in the coming quarters, as we focus on growing load counts and improving revenue per load.

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 $11.4 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).

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)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Total revenue $ 50,669 $ 46,242 9.6 %

Operating loss $ (7,258) $ (6,197) 17.1 %

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.

Comparison Between the Quarters Ended March 31, 2021 and 2020 — A $1.2 million increase in legal expenses resulted in a year-over-year increase in operating loss within the non-reportable segments.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Salaries, wages, and benefits $ 370,370 $ 354,833 4.4 %

% of total revenue 31.1 % 31.3 % 32.3 % 30.7 % (20 bps) 160 bps

% of revenue, excluding trucking fuel surcharge 33.1 % 34.4 % 34.7 % 33.8 % (130 bps) 90 bps

% of total revenue 30.3 % 31.5 % (120 bps)

% of revenue, excluding fuel surcharge 32.7 % 34.5 % (180 bps)

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

2 unchanged sentences

Several ongoing market factors have reduced the pool of available driving associates, contributing to a challenging driver sourcing market, which we believe will continue.

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.

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

The $15.5 million increase in 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.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Fuel $ 118,236 $ 121,855 (3.0 %)

% of total revenue 8.7 % 12.4 % 9.2 % 12.0 % (370 bps) (280 bps)

% of revenue, excluding trucking fuel surcharge 9.2 % 13.6 % 9.9 % 13.2 % (440 bps) (330 bps)

% of total revenue 9.7 % 10.8 % (110 bps)

% of revenue, excluding trucking fuel surcharge 10.4 % 11.9 % (150 bps)

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

4 unchanged sentences

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

Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our operating income during periods of falling fuel costs.

Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

operating income during periods of falling fuel costs.

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 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

(Dollars in thousands) Increase (Decrease)

The $3.6 million decrease in consolidated fuel expense is primarily due to a 7.7% decrease in the total miles driven by company driving associates.

Average DOE fuel prices were $2.91 per gallon for the first quarter of 2021 and $2.92 per gallon for the first quarter of 2020.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Operations and maintenance $ 68,070 $ 68,404 (0.5 %)

% of total revenue 5.8 % 7.1 % 6.0 % 6.8 % (130 bps) (80 bps)

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

% of total revenue 5.6 % 6.1 % (50 bps)

% of revenue, excluding trucking fuel surcharge 6.0 % 6.7 % (70 bps)

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

2 unchanged sentences

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.

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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

(Dollars in thousands) Increase (Decrease)

The first quarter decrease of $0.3 million in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment and the decrease in miles driven by company driving associates noted above.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Insurance and claims $ 55,643 $ 54,280 2.5 %

% of total revenue 3.7 % 3.9 % 4.3 % 4.0 % (20 bps) 30 bps

% of revenue, excluding trucking fuel surcharge 4.0 % 4.3 % 4.6 % 4.4 % (30 bps) 20 bps

% of total revenue 4.5 % 4.8 % (30 bps)

% of revenue, excluding trucking fuel surcharge 4.9 % 5.3 % (40 bps)

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

1 unchanged sentence

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 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

(Dollars in thousands) Increase (Decrease)

Operating taxes and licenses $ 21,475 $ 20,970 $ 64,527 $ 64,333 2.4 % 0.3 %

% of total revenue 1.8 % 1.7 % 1.9 % 1.8 % 10 bps 10 bps

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

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

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

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.

In future periods, our higher self-insured retention limits or lower excess coverage limits may cause increased volatility in our consolidated insurance and claims expense.

Consolidated insurance and claims expense increased by $1.4 million for the quarter ended March 31, 2021, as compared to the same period last year.

This increase was primarily due to negative development within certain prior year claims.

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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

(Dollars in thousands) Increase (Decrease)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Operating taxes and licenses $ 22,048 $ 22,169 (0.5 %)

% of total revenue 1.8 % 2.0 % (20 bps)

% of revenue, excluding trucking fuel surcharge 1.9 % 2.2 % (30 bps)

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

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

Operating taxes and licenses decreased by $0.1 million for the quarter ended March 31, 2021 and remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge, as compared to the same periods last year.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Communications $ 5,037 $ 4,874 3.3 %

% of total revenue 0.4 % 0.4 % 0.4 % 0.4 % — bps — bps

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

% of total revenue 0.4 % 0.4 % — bps

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

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

Consolidated communications expense remained 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

(Dollars in thousands) Increase (Decrease)

Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the quarter ended March 31, 2021, as compared to the same period last year.

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Depreciation and amortization of property and equipment $ 119,915 $ 110,221 8.8 %

% of total revenue 9.6 % 8.9 % 10.0 % 8.5 % 70 bps 150 bps

% of revenue, excluding trucking fuel surcharge 10.2 % 9.8 % 10.8 % 9.4 % 40 bps 140 bps

% of total revenue 9.8 % 9.8 % — bps

% of revenue, excluding trucking fuel surcharge 10.6 % 10.7 % (10 bps)

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

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

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.

Consolidated depreciation and amortization of property and equipment increased by $9.7 million for the quarter ended March 31, 2021, when compared to the same period last year.

The increase was primarily related to an 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 2021.

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)

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

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Amortization of intangibles $ 11,749 $ 11,474 2.4 %

% of total revenue 0.9 % 0.9 % 1.0 % 0.9 % — bps 10 bps

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

% of total revenue 1.0 % 1.0 % — bps

% of revenue, excluding trucking fuel surcharge 1.0 % 1.1 % (10 bps)

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

See Note 6 in Part I, Item 1, of this Quarterly Report for further details regarding the Company's intangible assets.

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.

The increase of $0.3 million for the quarter ended March 31, 2021, when compared to the same period last year, was attributed to the Eleos acquisition completed on February 1, 2021.

See Note 3 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Rental expense $ 16,864 $ 25,375 (33.5 %)

% of total revenue 1.6 % 2.4 % 2.0 % 2.7 % (80 bps) (70 bps)

% of revenue, excluding trucking fuel surcharge 1.7 % 2.6 % 2.1 % 2.9 % (90 bps) (80 bps)

% of total revenue 1.4 % 2.3 % (90 bps)

% of revenue, excluding trucking fuel surcharge 1.5 % 2.5 % (100 bps)

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

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

Consolidated rental expense decreased by $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.

Consolidated rental expense decreased by $8.5 million for the quarter ended March 31, 2021, as compared to the same period 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 2021.

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)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Purchased transportation $ 258,230 $ 225,276 14.6 %

% of total revenue 20.2 % 20.9 % 19.7 % 21.4 % (70 bps) (170 bps)

% of revenue, excluding trucking fuel surcharge 21.6 % 23.1 % 21.2 % 23.6 % (150 bps) (240 bps)

% of total revenue 21.1 % 20.0 % 110 bps

% of revenue, excluding trucking fuel surcharge 22.8 % 21.9 % 90 bps

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

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

Consolidated purchased transportation expense decreased by $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.

Consolidated purchased transportation expense increased by $33.0 million for the quarter ended March 31, 2021, as compared to the same period last year.

This increase was primarily due to expenses related to third-party carriers and was partially offset by a 12.9% decrease in miles driven by independent contractors for the quarter ended March 31, 2021.

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

2020 2019 2020 2019 QTD 2019 YTD 2019

(Dollars in thousands) Increase (Decrease)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Impairments $ — $ 902 (100.0 %)

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)

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

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Miscellaneous operating expenses $ 14,593 $ 23,016 (36.6 %)

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 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.

The $8.4 million decrease in net consolidated miscellaneous operating expenses was primarily due to a $7.5 million increase in gain on sales of equipment.

Consolidated Other Expenses, net

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)

Quarter Ended March 31, Increase (Decrease)

(Dollars in thousands)

Interest expense $ 3,486 $ 6,107 (42.9 %)

Other (income), net (7,484) (3,335) (9,476) (12,575) 124.4 % (24.6 %)

Other (income) expenses, net (16,105) 6,507 (347.5 %)

Income tax expense 45,329 24,554 84.6 %

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, 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 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.

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

The decrease in interest expense for the quarter ended March 31, 2021 was primarily due to lower overall interest rates, as well as lower overall debt balances.

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

The $22.6 million favorable change between the quarter ended March 31, 2021 compared to the same period last year is primarily driven by gains recognized within our portfolio of investments.

Income tax expense — In addition to the discussion below, Note 7 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.

• 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.

The $20.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the unfavorable impacts from foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.

All of these factors resulted in an effective tax rate of 25.9% for the first quarter of 2021 and 27.2% for the first quarter of 2020.

Table of Contents Glossary of Terms

15 unchanged sentences

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

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

2020 2019 2020 2019

Quarter Ended March 31,

(In thousands)

6 unchanged sentences

Impairments 2

— — 1,255 2,182

Legal accruals 3

6,160 — 6,160 15,500

COVID-19 incremental costs 4

6 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 September 30, Year-to-Date September 30,

2020 2019 2020 2019

Quarter Ended March 31,

Earnings per diluted share $ 0.77 $ 0.38

3 unchanged sentences

Amortization of intangibles 1

0.07 0.06 0.20 0.19

Impairments 2

— — 0.01 0.01

Legal accruals 3

0.04 — 0.04 0.09

COVID-19 incremental costs 4

4 unchanged sentences

Refer to Note 3 in Part I, Item 1 of this Quarterly Report for additional details regarding the acquisition.

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

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

3 "Legal accruals" reflects costs incurred in the 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.

2 "Impairments" for the first quarter of 2020 reflect the impairment of trailer tracking equipment (within the Trucking segment).

3 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee related matters.

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.

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Consolidated Adjusted Operating Income and Adjusted Operating Ratio

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

2020 2019 2020 2019

Quarter Ended March 31,

GAAP Presentation (Dollars in thousands)

13 unchanged sentences

Impairments 2

— — (1,255) (2,182)

Legal accruals 3

(6,160) — (6,160) (15,500)

COVID-19 incremental costs 4

— — (12,259) —

Adjusted Operating Expenses 957,855 910,307

15 unchanged sentences

Trucking Segment

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

2020 2019 2020 2019

Quarter Ended March 31,

GAAP Presentation (Dollars in thousands)

13 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 714,007 710,279

10 unchanged sentences

Logistics Segment

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

2020 2019 2020 2019

Quarter Ended March 31,

GAAP Presentation (Dollars in thousands)

14 unchanged sentences

Intermodal Segment

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

2020 2019 2020 2019

Quarter Ended March 31,

GAAP Presentation (Dollars in thousands)

22 unchanged sentences

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

Source September 30, 2020

Source March 31, 2021

(In thousands)

6 unchanged sentences

Total liquidity, including restricted cash and restricted investments $ 911,412

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

1 As of March 31, 2021, we had $115.0 million in borrowings under our $800.0 million Revolver.

We additionally had $29.3 million in outstanding letters of credit (discussed below), leaving $655.7 million available under the Revolver.

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 .

2 Based on eligible receivables at March 31, 2021, our borrowing base for the 2018 RSA was $267.2 million, while outstanding borrowings were $ 199.0 million.

We additionally had $65.3 million in outstanding letters of credit (discussed below), leaving $2.9 million available under the 2018 RSA.

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We also use large amounts of cash and credit for the following activities:

Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet, fund replacement of our revenue equipment fleet, and, to a lesser extent, fund upgrades to our terminals and technology in our logistics service offerings.

We expect that net capital expenditures from the aforementioned projects will be in the range of $450.0 – $500.0 million for the full-year 2021.

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If such additional borrowing, lease financing, or equity capital is not available at the time we need it, then we may need to borrow more under the Revolver (if not then fully drawn), extend the maturity of then-outstanding debt, rely on alternative financing arrangements, engage in asset sales, limit our fleet size, or operate our revenue equipment for longer periods.

There can be no assurance that we will be able to obtain additional debt under our existing financial arrangements to satisfy our ongoing capital requirements.

However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under the 2018 RSA, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

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

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.

There can be no assurance that we will be able to obtain additional debt under our existing financial arrangements to satisfy our ongoing capital requirements.

However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under our accounts receivable securitization, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

Principal and Interest Payments — As of March 31, 2021, we had debt, accounts receivable securitization, and finance lease obligations of $825.5 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 September 30, 2020, the Company had $199.0 million remaining under the 2019 Knight-Swift Share Repurchase Plan .

As of March 31, 2021, the Company had $196.3 million remaining under the 2020 Knight-Swift Share Repurchase Plan .

Additional details are discussed in Note 11 in Part I, Item 1 of this Quarterly Report.

Working Capital

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.

We had a working capital surplus of $15.3 million as of March 31, 2021 and $83.7 million as of December 31, 2020.

Our working capital surplus as of March 31, 2021 was negatively impacted by our 2018 RSA, which is included within current liabilities since it was scheduled to mature in July 2021.

On April 23, 2021, we entered into the 2021 RSA, which amended the 2018 RSA extending the maturity to April 23, 2024.

Additional details are discussed in Note 8 in Part I, Item 1 of this Quarterly Report.

Material Debt Agreements

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

As of March 31, 2021, we had $825.5 million in material debt obligations at the following carrying values:

• $299.1 million:

Term Loan, due October 2020

Term Loan, due October 2022, net of $0.9 million in deferred loan costs

• $199.0 million:

2018 RSA outstanding borrowings, due July 2021, net of $0.1 million in deferred loan costs

2018 RSA outstanding borrowings, due July 2021

• $212.4 million:

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Cash Flow Analysis

Year-to-Date September 30, Change

Quarter Ended March 31, Change

(In thousands)

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Net Cash Provided by Operating Activities

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.

Comparison Between Quarter Ended March 31, 2021 and 2020 — The $150.8 million increase in net cash provided by operating activities was primarily due to less cash paid for legal settlements in the first quarter of 2021, as compared to the first quarter of 2020, when we paid $93.4 million associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift.

Net cash provided by operating activities was also favorably impacted by a $60.1 million increase in our operating income.

Net Cash Used in Investing Activities

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.

Comparison Between Quarter Ended March 31, 2021 and 2020 — The $51.4 million decrease in net cash used in investing activities was primarily due to a $31.8 million decrease in net cash capital expenditures.

Net Cash Used in Financing Activities

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 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.

Off Balance Sheet Arrangements

Information about our off balance sheet arrangements is included in Note 10 of the notes to our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report, which is incorporated by reference herein.

See also "Contractual Obligations," above.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Comparison Between Quarter Ended March 31, 2021 and 2020 — Net cash used in financing activities increased by $113.5 million, primarily due to a $110.0 million net increase in cash used for our Revolver, as we made net prepayments of $95.0 million during the first quarter of 2021, as compared to assuming net borrowings of $15.0 million during the first quarter of 2020.

Discussion regarding the impact of seasonality on our business is included in Note 1 in the notes to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report, incorporated by reference herein.

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Recently Issued Accounting Pronouncements

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

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

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

See Note 2 in 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.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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