What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-02-24 compared with 2021-02-25 · 331 added, 237 removed, 563 unchanged (50% of the section changed)

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Knight-Swift Transportation Holdings Inc.

is North America's largest truckload carrier and a provider of transportation solutions, headquartered in Phoenix, Arizona.

The Company provides multiple truckload transportation, intermodal, and logistics services using a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America.

In addition to its truckload services, Knight-Swift also contracts with third-party capacity providers to provide a broad range of shipping solutions to its customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors.

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

is one of North America's largest and most diversified freight transportation companies, providing multiple full truckload, LTL, intermodal, and logistics services.

Knight-Swift uses a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America.

In addition to operating one of the country's largest truckload fleets, Knight-Swift also contracts with third-party equipment providers to provide a broad range of transportation services to our customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors.

Our four reportable segments are Truckload, Logistics, LTL, and Intermodal.

Additionally, we have various non-reportable segments.

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Our objective is to operate our business with industry-leading margins and growth while providing safe, high-quality, cost-effective solutions for our customers.

2017 Merger — On September 8, 2017, we became Knight-Swift Transportation Holdings Inc.

upon the effectiveness of the 2017 Merger.

Immediately upon the consummation of the 2017 Merger, former Knight stockholders and former Swift stockholders owned approximately 46.0% and 54.0%, respectively, of the Company.

Upon closing of the 2017 Merger, the shares of Knight common stock that previously traded under the ticker symbol "KNX" ceased trading and were delisted from the NYSE.

Our shares of Class A common stock commenced trading on the NYSE on a post-reverse split basis under the ticker symbol "KNX" on September 11, 2017.

Acquisitions — On January 1, 2020, the Company acquired a warehousing company to complement its suite of services.

Please refer to Note 5 in Part II, Item 8 of this Annual Report.

• Our trucking services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base.

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

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

We continue to grow our company organically and through acquisitions.

Refer to Note 1 and Note 4 in Part II, Item 8 of this Annual Report for details regarding our recent acquisitions.

• Our truckload services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base.

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

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

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

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

• Our LTL business, established in 2021 through the ACT and MME acquisitions, provides our customers regional LTL transportation service through our network of approximately 100 service centers in our geographical footprint.

Our LTL service also provides national coverage to our customers by utilizing partner carriers for areas outside of our direct network.

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

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

This applies only to loaded miles and typically does not offset non-

This applies only to loaded miles and typically does not offset non-paid empty miles, idle time, and out-of-route miles driven.

Fuel surcharge programs involve a computation based on the change in national or regional fuel prices.

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue.

Table of Contents Glossary of Terms

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

paid empty miles, idle time, and out-of-route miles driven.

Fuel surcharge programs involve a computation based on the change in national or regional fuel prices.

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue.

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.

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 Truckload and LTL segments.

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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Total revenue $ 5,998,019 $ 4,673,863

Revenue, excluding trucking fuel surcharge $ 4,369,207 $ 4,395,332

Revenue, excluding truckload and LTL fuel surcharge $ 5,531,890 $ 4,369,207

Net income attributable to Knight-Swift $ 743,388 $ 410,002

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81.5 % 85.3 %

Revenue equipment:

Average tractors (Trucking segment only) 3

Revenue equipment statistics by segment:

Average tractors 3

18,019 18,448

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67,606 57,722

Average tractors 5

Average trailers 6

Average containers 10,847 10,604

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2 See "Results of Operations — Segment Review — Operating Statistics" in Part II, Item 7 of this Annual Report regarding definitions of these operating data.

3 Our tractor fleet had a weighted average age of 2.2 years and 1.9 years for 2020 and 2019, respectively.

Average tractors within our Trucking segment includes 16,379 and 16,432 company-owned tractors for 2020 and 2019, respectively.

4 Our trailer fleet had a weighted average age of 7.8 years and 7.5 years for 2020 and 2019, respectively.

3 Our Truckload tractor fleet had a weighted average age of 2.5 years and 2.2 years for 2021 and 2020, respectively.

Average tractors within our Truckload segment includes 16,166 and 16,379 company-owned tractors for 2021 and 2020, respectively.

Table of Contents Glossary of Terms

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

4 Note that average trailers includes 6,388 trailers related to leasing activities recorded within our non-reportable segments in 2021.

Our Truckload trailer fleet had a weighted average age of 8.4 years and 7.8 years for 2021 and 2020, respectively.

5 Our LTL tractor fleet had a weighted average age of 4.2 years for 2021.

6 Our LTL trailer fleet had a weighted average age of 7.9 years for 2021.

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 was 6.7% 1 as of December 31, 2020.

The impact of the COVID-19 pandemic and efforts to contain it continued to affect the labor market.

Economic activities that were once curtailed during the initial surge of the pandemic began to resume during the third quarter and into the fourth quarter of 2020.

Within our industry, social distancing measures continue to affect the population of available trained drivers across the nation.

Additionally, 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 fourth quarter of 2020, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased at an annual rate of 4.0% 3 per third-party estimates.

This reflects the US economy's continued recovery from the ongoing impact of the COVID-19 pandemic, which caused economic declines earlier in 2020.

This may result in an expected annualized growth rate of approximately 5.0% to 6.0% 3 for full-year 2021, as third-party forecasts are predicting additional fiscal stimulus that may support continued economic rebound.

The 2020 US employment cost index rose 2.5% 1 on a year-over-year basis.

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

We are encouraged by the continued strength in freight demand;

however, we expect demand will be difficult to predict for 2021.

Consolidated revenue, excluding trucking fuel surcharge, decreased by 0.6%, while operating income increased by 32.1% and Adjusted Operating Income increased by 25.7% in 2020, as compared to 2019.

Our business model continues to generate a meaningful amount of free cash flow (computed as net cash provided by operating activities, less net cash capital expenditures), which was $531.8 million in 2020.

Our Trucking segment improved its Adjusted Operating Income by 25.5%, resulting in a 350 basis point Adjusted Operating Ratio improvement to 83.0% in 2020 from 86.5% in 2019.

Our Logistics segment produced a 94.5% Adjusted Operating Ratio in 2020, as a result of an 18.5% improvement in its revenue per load, excluding intersegment transactions in 2020, as compared to 2019.

Our Intermodal segment generated a 100.2% Adjusted Operating Ratio in 2020, as load volumes were pressured, compared to the prior year.

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.

Impact of COVID-19 — Refer to Note 1 in Part II, Item 8 of this Annual Report for discussion around the impact of COVID-19 on our company.

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

3 kiplinger.com

Our Company Trends and Outlook — During 2021, each reportable segment grew revenue while improving margins, leading to consolidated revenue growth of 26.6%, excluding truckload and LTL fuel surcharge.

This contributed to a 71.1% improvement in consolidated operating income to $965.7 million in 2021, as compared to $564.4 million last year.

Net Income Attributable to Knight-Swift increased by 81.3% to $743.4 million.

• Truckload — 80.9% operating ratio within our Truckload segment for the year, a 380 basis point improvement, supported by continued year-over-year revenue growth, with six consecutive quarters of revenue growth year-over-year.

• Logistic s — 88.5% operating ratio within our Logistics segment this year.

Load count grew by 51.5% , leading to a 118.8 % increase in revenue, excluding intersegment transactions.

• LTL — 92.1% operating ratio, which includes the results of ACT, from July 5, 2021 through December 31, 2021, as well as the results of MME from December 6, 2021 through December 31, 2021.

On a proforma annualized basis, the LTL segment represents approximately 14% of consolidated revenue, excluding truckload and LTL fuel surcharge.

• Intermodal — 90.8% operating ratio within our Intermodal segment, a 940 basis point improvement with year-over-year revenue growth of 17.2%.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding truckload and LTL fuel surcharge, as we intend to purchase, rather than enter into operating leases, for a majority of our revenue equipment in 2022.

With significant tightening in the insurance markets, we may also experience changes in premiums, retention limits, and excess coverage limits in the remainder of 2022.

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

We expect that our acquisitions of ACT and MME will have a significant impact on future financial results, including an overall increase in operating revenues and expenses.

Market Trends and Outlook — On a year-over-year basis, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by 5.7% 1 in 2021, as compared to a 3.4% 1 decrease in 2020.

The year-over-year improvement was primarily driven by an increase in consumer spending, as the economic impacts of the pandemic began to subside and the economy showed signs of recovery.

The national unemployment rate was 3.9% 2 as of December 31, 2021, as compared to 6.7% 2 as of December 31, 2020.

Early estimates of the full-year 2021 US employment cost index indicate a year-over-year increase of 4.0% 2 and a sequential increase of 1.0% 2 .

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

however, demand may be difficult to predict for full-year 2022.

Our expectations for the 2022 market include the following:

• Within the full truckload and LTL markets, we expect strong demand and constrained capacity throughout the year.

• Industry capacity expansion continues to be limited by manufacturing constraints.

• Sourcing and retaining drivers will remain challenging and lead to additional driver wage inflation.

• Inflationary pressure on equipment, maintenance, labor and other cost items.

• The above factors should continue to support a favorable rate environment, which we expect will result in double-digit full truckload contract rate increases.

• Strong demand for power-only opportunities.

• Strong used equipment market.

Table of Contents Glossary of Terms

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

Note regarding presentation:

Notes regarding presentation:

A discussion of changes in our results of operations from 2019 to 2020 has been omitted from this Annual Report, but may be found in "Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2020 Annual Report filed with the SEC on February 25, 2021.

In accordance with accounting treatment applicable to each of our recent acquisitions, Knight-Swift's reported results do not include the operating results of the acquired entities prior to the respective acquisition dates.

Accordingly, comparisons between the Company's 2021 results and prior periods may not be meaningful.

Refer to Note 1 in Part II, Item 8 of this Annual Report for a list of our recent acquisitions.

Operating Results:

2021 Compared to 2020 — The $333.4 million increase in net income attributable to Knight-Swift to $743.4 million in 2021 from $410.0 million in 2020, includes the following:

• Contributor — $109.8 million increase in operating income within our Trucking segment driven by a 3.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 1.5% decrease in total miles per tractor .

• Contributor — $34.3 million improvement in operating results within the non-reportable segments.

Improved operating loss within the non-reportable segments was primarily due to a $29.5 million year-over-year reduction in recorded legal costs for increases in legal reserves in 2019 related to various pre-2017 Merger related legal matters, which were previously disclosed by Swift, as well as additional income earned from a warehousing company acquired in 2020.

These improvements were offset by a $6.7 million of expenses in 2020 for the change in fair value of the deferred earnout related to the acquisition of the recently acquired warehousing company and a $4.1 million impairment related to investments in certain alternative fuel technology.

• Offset — $45.9 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 recognized as a discrete item.

This was partially offset by stock compensation deductions and a partial release of our reserve for uncertain tax positions recognized as discrete items.

In 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions, which was partially offset by a decrease in foreign income tax deductions.

All of these factors resulted in a 2020 effective tax rate of 26.7% and a 2019 effective tax rate of 25.1%.

• Contributor — $205.9 million increase in operating income within our Truckload segment driven by a 21.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 10.3% decrease in total miles per tractor.

• Contributor — $73.7 million increase in operating income within our Logistics segment driven by a 51.5% increase in load counts, and a 44.4% increase in revenue per load.

• Contributor — $31.2 million of operating income through ACT and MME activities, recognized within our LTL segment in 2021.

• Contributor — $43.0 million increase in operating income within our Intermodal segment driven by a 21.8% increase in revenue per load, partially offset by a 3.7% decrease in load count.

• Contributor — $47.5 million improvement in operating results within our non-reportable segments, driven by revenue growth of 62.2% related to our expanded services to third-party carriers.

• Contributor — $17.7 million improvement in "Other income, net," primarily due to unrealized gains recognized from our investment in Embark and an increase in unrealized gains recognized from other investments within our portfolio.

• Offset — $81.2 million increase in consolidated income tax expense, primarily due to an increase in income before income taxes which was partially offset by a reduction in the state deferred tax liability due to our recent acquisitions and adjustments to state tax rates and apportionment.

All these factors resulted in a 2021 effective tax rate of 23.7% and a 2020 effective tax rate of 26.7%.

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

2020 Liquidity and Capital — During 2020, we generated $919.6 million in operating cash flows.

We invested $387.8 million in capital expenditures (net of equipment sales proceeds), reduced our operating lease liabilities by $83.7 million , repurchased $179.6 million of our common stock, and returned $54.6 million in quarterly dividends to our stockholders during the year.

We ended the year with $156.7 million in unrestricted cash and cash equivalents, $210.0 million outstanding on the Revolver, $300.0 million outstanding on the Term Loan, and $5.9 billion of stockholders' equity.

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

2021 Liquidity and Capital — During 2021, we generated $1.2 billion in operating cash flows, we paid down $48.2 million in cash on our operating lease liabilities (gross of $73.8 million of lease modifications and leases obtained through acquisitions), paid down our finance lease liabilities by $108.2 million, used $282.0 million for capital expenditures (net of equipment sales proceeds), spent $1.5 billion on four acquisitions (net of cash balances acquired), and returned $57.2 million in share repurchases and $63.5 million in dividends to our stockholders.

We ended the year with $261.0 million in unrestricted cash and cash equivalents, $260.0 million outstanding on the 2021 Revolver, $1.2 billion outstanding on the 2021 Term Loans, and $6.5 billion of stockholders' equity.

We remain committed to a strong capital structure.

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" for additional information.

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Results of Operations — Segment Review

During the first quarter of 2019, the Company reorganized its reportable segments.

Accordingly, the Company now has three reportable segments:

Trucking, Logistics, and Intermodal, as well as certain non-reportable segments.

The Company has four reportable segments:

Truckload, Logistics, LTL, and Intermodal, as well as certain non-reportable segments.

Refer to Note 25 in Part II, Item 8 of this Annual Report for descriptions of our segments.

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(Dollars in thousands)

Trucking $ 3,786,030 81.0 % $ 3,952,866 81.6 %

Truckload $ 4,098,005 68.3 % $ 3,786,030 81.0 %

Logistics $ 817,003 13.6 % $ 375,841 8.0 %

LTL $ 396,308 6.6 % $ — — %

Intermodal $ 458,867 7.7 % $ 391,462 8.4 %

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(Dollars in thousands)

Trucking $ 578,512 102.5 % $ 468,749 109.7 %

Truckload $ 784,436 81.2 % $ 578,512 102.5 %

Logistics $ 93,920 9.7 % $ 20,245 3.6 %

LTL $ 31,169 3.2 % $ — — %

Intermodal $ 42,060 4.4 % $ (943) (0.2 %)

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Operating Statistic Relevant Segment(s) Description

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

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

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

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

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

Average Trailers Trucking Average trailers in operation during the period

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

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

Average Length of Haul Truckload, LTL Average miles traveled with loaded trailer cargo per order

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

Shipments per Day LTL Average number of shipments completed each business day

Weight per Shipment LTL Total weight (in pounds) divided by total shipments

Revenue per shipment LTL Total revenue divided by total shipments

Revenue xFSR per shipment LTL Total revenue, excluding fuel surcharge, divided by total shipments

Revenue per hundredweight LTL Measures yield and is calculated as total revenue divided by total weight (in pounds) times 100

Revenue xFSR per hundredweight LTL Total revenue, excluding fuel surcharge, divided by total weight (in pounds) times 100

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

Average Trailers Truckload, LTL Average trailers in operation during the period

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

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

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

Average Containers Intermodal Average containers in operation during the period

GAAP Operating Ratio Trucking, Logistics, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.

GAAP Operating Ratio Truckload, Logistics, LTL, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.

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

Adjusted Operating Ratio Trucking, Logistics, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.

Adjusted Operating Ratio Truckload, Logistics, LTL, Intermodal Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses.

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

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Segment Review

Trucking Segment

We generate revenue in the Trucking segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings, with 13,386 irregular route tractors and 5,062 dedicated route tractors.

Truckload Segment

We generate revenue in the Truckload segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings, with 13,058 irregular route tractors and 4,961 dedicated route tractors in use during 2021.

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

Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, and other specialized services, as well as through the collection of fuel surcharge revenue to mitigate the impact of increases in the cost of fuel.

The main factors that affect the revenue generated by our Trucking segment are rate per mile from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.

The most significant expenses in the Trucking segment are primarily variable and include fuel and fuel taxes, driving associate-related expenses (such as wages, benefits, training, and recruitment), and costs associated with independent contractors primarily included in "Purchased transportation" in the consolidated statements of comprehensive income.

The main factors that affect the revenue generated by our Truckload segment are rate per mile from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.

The most significant expenses in the Truckload segment are primarily variable and include fuel and fuel taxes, driving associate-related expenses (such as wages, benefits, training, and recruitment), and costs associated with independent contractors primarily included in "Purchased transportation" in the consolidated statements of comprehensive income.

Maintenance expense (which includes costs for replacement tires for our revenue equipment) and insurance and claims expenses have both fixed and variable components.

These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency, and other factors.

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.

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

2021 2020 2021 vs.

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3 Includes 16,166 and 16,379 company-owned tractors for 2021 and 2020, respectively.

2020 Compared to 2019 — Operating ratio improved by 340 basis points to 84.7% in 2020 and Adjusted Operating Ratio improved by 350 basis points to 83.0% in 2020.

Average revenue per tractor increased by 1.6% driven by a 3.5% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, and was partially offset by a 1.5% decrease in total miles per tractor .

Our focus in our Trucking segment remains on developing our freight network, improving the productivity of our assets and controlling costs in areas where we have experienced higher than normal inflation, such as maintenance, driving associate pay, and professional fees.

4 Includes 6,388 trailers related to our leasing activities recognized within the non-reportable segments for 2021.

2021 Compared to 2020 — The Adjusted Operating Ratio improved by 430 basis points to 78.7% in 2021, leading to a 32.5% improvement in Adjusted Operating Income.

We grew revenue, excluding fuel surcharge and intersegment transactions by 5.8% in 2021.

Shipping demand remains strong, leading to more project business opportunities this year, which contributed to a 21.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

Total miles per tractor decreased by 10.3%, due in part to a 5.2% shorter length of haul.

Table of Contents Glossary of Terms

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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.

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

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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$ 94,685 $ 20,245 367.7 %

Revenue per load – Brokerage only 2

Revenue per load 2

$ 2,439 $ 1,689 44.4 %

Gross margin percentage – Brokerage only 2

Gross margin percentage 2

18.1 % 14.5 % 360 bps

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2 Defined under "Operating Statistics" above.

2020 Compared to 2019 — Operating ratio increased by 80 basis points and Adjusted Operating Ratio increased by 100 basis points year-over-year.

Brokerage gross margin decreased to 14.5% in 2020 from 15.9% in 2019.

An 18.5% increase in brokerage revenue per load, partially offset by an 8.3% decrease in brokerage load volumes, contributed to a 8.8% increase in brokerage revenue, excluding intersegment transactions.

Load volumes grew 67.0% year-over-year within our power-only service offering, contributing to 96.3% revenue growth within power-only and representing 24.3% of our total 2020 brokerage load volumes.

In the first half of 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions.

By the fourth quarter of 2020, over 5,000 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage load volume.

2021 Compared to 2020 — Demand for our logistics service offering continued to grow throughout the year, as we continue to leverage our fleet of approximately 70,000 trailers for our Power-only service offering.

Logistics revenue, excluding intersegment transactions increased 118.8% as we grew load count by 51.5%, while increasing revenue per load by 44.4%.

The Adjusted Operating Ratio improved to 88.1%, resulting in a 367.7% increase in Adjusted Operating Income.

Gross margin was 18.1% in 2021, compared to 14.5% in 2020.

Within our Power-only service offering, which excludes the operations of our intermodal, drayage, and port services, revenue grew by 314.3% as a result of a 104.2% increase in load volumes.

Our Power-only service offering represented approximately 32.8% of brokerage load volumes during 2021.

During 2021, through our Select platform, we digitally matched an average of approximately 5,500 carriers per quarter to available loads.

Table of Contents Glossary of Terms

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

Our LTL segment was established in 2021 by the ACT and MME acquisitions and consists of regional motor carriers headquartered in Dothan, Alabama and Bismarck, North Dakota.

We provide regional direct service and serve our customers' national transportation needs by utilizing key partner carriers for coverage areas outside of our network.

We primarily generate revenue by transporting freight for our customers through our core LTL services.

Our revenues are impacted by shipment volume and tonnage levels that flow through our network.

Additional revenues are generated through fuel surcharges and accessorial services provided during transit from shipment origin to destination.

We focus on the following multiple revenue generation factors when reviewing revenue yield:

revenue per hundredweight, revenue per shipment, weight per shipment, and length of haul.

Fluctuation within each of these metrics is analyzed when determining the revenue quality of our customers' shipment density.

Our most significant expense is related to direct costs associated with the transportation of our freight moves including;

direct salary, wage and benefit costs, fuel expense, and depreciation expense associated with revenue equipment costs.

Other expenses associated with revenue generation that can fluctuate and impact operating results are insurance and claims expense as well as maintenance costs of our revenue equipment.

These expenses can be influenced by multiple factors including our safety performance, equipment age, and other factors.

A key component to lowering our operating costs is labor efficiency within our network.

We continue to focus on technological advances to improve the customer experience and reduce our operating costs.

In accordance with the accounting treatment applicable to the ACT and MME acquisitions, the LTL segment's reported results do not include the operating results of the acquired entities prior to the respective acquisition dates.

(Dollars in thousands, except per shipment and per hundredweight data)

Total revenue $ 396,308

Revenue, excluding fuel surcharge $ 345,785

Operating income $ 31,169

Adjusted Operating Income 1

Operating ratio 2

Adjusted Operating Ratio 1 2

Shipments per day 2

Weight per shipment 2

Average length of haul (miles) 2

Revenue per shipment 2

Revenue xFSR per shipment 2

Revenue per hundredweight 2

Revenue xFSR per hundredweight 2

Average tractors 2 3

Average trailers 2 4

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

2 Defined under "Operating Statistics," above.

3 Includes 667 tractors from ACT's and MME's dedicated and other businesses for 2021.

4 Includes 860 trailers from ACT's and MME's dedicated and other businesses for 2021.

Our LTL segment operates across approximately 100 facilities with a door count of over 4,200.

We generated $345.8 million in revenue, excluding fuel surcharge and an 88.9% Adjusted Operating Ratio during 2021 within the LTL segment.

Revenue, excluding fuel surcharge, per hundredweight was $12.75, while revenue per shipment, excluding fuel surcharge, was $141.57.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Intermodal Segment

3 unchanged sentences

Purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs.

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

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.

2021 2020 2021 vs.

2 unchanged sentences

Revenue, excluding intersegment transactions $ 458,583 $ 391,098 17.3 %

Operating (loss) income $ (943) $ 4,501 (121.0 %)

Adjusted Operating (Loss) Income 1 2

Operating income (loss) $ 42,060 $ (943) 4,560.2 %

Adjusted Operating Income (Loss) 1 2

$ 42,060 $ (830) 5,167.5 %

13 unchanged sentences

3 Includes 543 and 518 c ompany-owned tractors for 2021 and 2020, respectively.

2020 Compared to 2019 — Our Intermodal se gment produced a 100.2% operating ratio during 2020, compared to 99.0% during 2019.

Total revenue decreased 14.1% due to a 10.8% decrease in load volumes and a decrease of 3.5% in average revenue per load.

We continue to work on initiatives to support our business, develop our network, and improve our cost structure within the Intermodal segment, and we expect to see improved results in 2021.

2021 Compared to 2020 — Revenue grew by 17.2% while the Adjusted Operating Ratio improved from 100.2% in 2020 to 90.8% in 2021, resulting in a $42.9 million increase in Adjusted Operating Income.

Continued rail congestion and rail allocations resulted in a reduction of load count, but contributed to a 21.8% increase in revenue per load.

We anticipate operational improvements in cost structure and network design as we continue to transition to a new western rail partner in the first quarter of 2022.

To position Intermodal for continued growth, we are in the process of growing our container count and plan to add approximately 2,000 containers during the year.

Our long-term structural improvements in the margins of our business are ultimately expected to lead to an Adjusted Operating Ratio in the high-80s to mid-90s.

We expect load volumes to increase in the back half of the year.

Table of Contents Glossary of Terms

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Total revenue $ 306,414 $ 188,882 62.2 %

Operating loss $ (33,376) $ (67,681) (50.7 %)

2020 Compared to 2019 — The increase in total revenue within our non-reportable segments is primarily attributed to revenues from the acquisition of a warehousing company made at the beginning of the year.

Operating income (loss) $ 14,112 $ (33,376) 142.3 %

2021 Compared to 2020 — Strong demand for the services within our non-reportable segments led to 62.2% revenue growth, which resulted in operating income improving by 142.3%.

The revenue growth was primarily related to expanded services to third-party carriers (including insurance through Iron Truck Services ), increased demand for our equipment leasing services, and revenue improvement within our warehousing activities.

In 2020, profitability was negatively impacted by the $6.7 million of expense associated with the change in fair value of a deferred earnout related to the 2020 acquisition of a warehousing company and a $4.0 million impairment of an investment related to alternative fuel technology.

Results of Operations — Consolidated Operating and Other Expenses

Consolidated Operating Expenses

The following tables present certain operating expenses from our consolidated statements of comprehensive income, including each operating expense as a percentage of total revenue and as a percentage of revenue, excluding trucking fuel surcharge.

Fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel, rather than operating expenses unrelated to fuel.

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

Truckload and LTL fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel, rather than operating expenses unrelated to fuel.

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

Accordingly, comparisons between the Company's 2021 results and prior periods may not be meaningful.

Refer to Note 1 in Part II, Item 8 of this Annual Report for a list of our recent acquisitions.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 29.5 % 31.7 % (220 bps)

% of revenue, excluding trucking fuel surcharge 33.9 % 33.5 % 40 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.

% of revenue, excluding truckload and LTL fuel surcharge 32.0 % 33.9 % (190 bps)

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

To a lesser extent, non-driver employee headcount, compensation, and benefits affect this expense.

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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 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, leading to additional driving associate pay increases.

Having a sufficient number of qualified driving associates is 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, our equipment, 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.

Table of Contents Glossary of Terms

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

2020 Compared to 2019 — The increase in consolidated salaries, wages, and benefits was primarily due to $9.0 million in incremental payroll premiums paid during the first half of 2020 to our company driving associates and shop technicians in response to the COVID-19 pandemic.

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

2021 Compared to 2020 — The increase in consolidated salaries, wages, and benefits includes $222.8 million from the results of ACT.

The remaining increase pertained to driving associate pay rates and non-driver salaries and wages, partially offset by an 11.6% decrease in miles driven by company driving associates, excluding ACT.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 9.1 % 8.9 % 20 bps

% of revenue, excluding trucking fuel surcharge 9.5 % 13.3 % (380 bps)

% of revenue, excluding truckload and LTL fuel surcharge 9.9 % 9.5 % 40 bps

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

2 unchanged sentences

Typical fuel surcharge programs involve a computation based on the change in national or regional fuel prices.

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our trucking segments.

These programs may update as often as weekly, but typically require a specified minimum change in fuel cost to prompt a change in fuel surcharge revenue for our Truckload segment.

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.

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

2020 Compared to 2019 — The decrease in consolidated fuel expense is primarily due to a decrease in the average DOE fuel price to $2.56 per gallon for 2020 from $3.06 per gallon for 2019, and a 0.8% reduction in the total miles driven by company driving associates.

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.

2021 Compared to 2020 — The increase in consolidated fuel expense includes $33.7 million of fuel expense from ACT's results.

The remaining difference is primarily due to an increase in the average DOE fuel price to $3.29 per gallon in 2021 from $2.56 per gallon in 2020, partially offset by an 11.6% reduction in the total miles driven by company driving associates, excluding ACT.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 5.2 % 5.9 % (70 bps)

% of revenue, excluding trucking fuel surcharge 6.3 % 7.3 % (100 bps)

% of revenue, excluding truckload and LTL fuel surcharge 5.7 % 6.3 % (60 bps)

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

Operations and maintenance expenses are affected by the age of our company-owned fleet of tractors and trailers, as well as total miles driven by company driving associates.

We expect the driver market to remain competitive into 2021, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense.

We expect to continue refreshing our fleet in the coming quarters to maintain our current fleet age and low maintenance costs.

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

We expect the driver market to remain competitive in 2022, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense.

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

2021 Compared to 2020 — The increase in consolidated operations and maintenance expense includes $18.8 million in operations and maintenance expense from ACT's results.

The remaining increase was attributed to higher driving associate hiring expenses and was partially offset by the decrease in miles driven by company driving associates discussed above.

Table of Contents Glossary of Terms

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

2020 Compared to 2019 — The decrease in consolidated operations and maintenance expense is attributed to the reduced maintenance expense associated with refreshing our fleet with newer equipment and the 0.8% reduction in total miles driven by company driving associates noted above.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 4.6 % 4.1 % 50 bps

% of revenue, excluding trucking fuel surcharge 4.4 % 4.4 % — bps

Insurance and claims expense consists of claims costs related to our self-insured limits for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as excess premium expense above these limits.

% of revenue, excluding truckload and LTL fuel surcharge 5.0 % 4.4 % 60 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, our level of self-insurance, and premium expense.

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

In 2021, we expanded our insurance offerings to third-party carriers, earning additional premium revenues, which were partially offset by increased insurance reserves.

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

2020 Compared to 2019 — Consolidated insurance and claims expense decreased, but remained flat as a percentage of revenue, excluding trucking fuel surcharge.

We expect insurance expense to stabilize as we begin to see the realization of our increased focus on improving our safety standards for our driving associates and independent contractors.

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.

2021 Compared to 2020 — Consolidated insurance and claims expense increased partially due to the inclusion of $15.8 million of insurance and claims expense from ACT's results.

The remaining increase was primarily due to insurance reserves incurred through our third-party carrier insurance program.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 1.6 % 1.9 % (30 bps)

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

Operating taxes and licenses include expenses such as state franchise taxes, federal highway use taxes, property taxes, vehicle license and registration fees, and fuel and mileage taxes.

% of revenue, excluding truckload and LTL fuel surcharge 1.8 % 2.0 % (20 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.

2021 Compared to 2020 — The increase in c onsolidated operating taxes and licenses expense is primarily due to the inclusion of $13.5 million of operating taxes and licenses expense from ACT's results.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 0.4 % 0.4 % — bps

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

% of revenue, excluding truckload and LTL fuel surcharge 0.4 % 0.4 % — bps

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

2021 Compared to 2020 — The increase in c onsolidated communications expense is primarily due to the inclusion of $2.0 million of communications expense from ACT's results.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 8.7 % 9.9 % (120 bps)

% of revenue, excluding trucking fuel surcharge 10.5 % 9.6 % 90 bps

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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

% of revenue, excluding truckload and LTL fuel surcharge 9.4 % 10.5 % (110 bps)

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

Changes to this fixed cost are generally attributed to increases or decreases to company-owned equipment, the relative percentage of owned versus leased equipment, and fluctuations in new equipment purchase prices, which have historically been precipitated in part by new or proposed federal and state regulations.

1 unchanged sentence

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.

2020 Compared to 2019 — The increase in consolidated depreciation and amortization of property and equipment is primarily due to an increase in owned versus leased equipment.

We expect consolidated depreciation and amortization of property and equipment to generally increase both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge , as we do not plan to use operating leases as a primary means of funding our equipment purchases in 2021.

2021 Compared to 2020 — The increase in consolidated depreciation and amortization of property and equipment includes $24.8 million of expense from ACT's results.

The remaining increase is primarily due 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 truckload and LTL fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in 2022.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 0.9 % 1.0 % (10 bps)

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

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

% of revenue, excluding truckload and LTL fuel surcharge 1.0 % 1.1 % (10 bps)

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

See Note 4 and Note 10 in Part II, Item 8, of this Annual Report for further details regarding the Company's intangible assets, historical amortization, and anticipated future amortization.

2020 Compared to 2019 — The increase in consolidated amortization of intangibles for 2020 is attributed to an acquisition completed on January 1, 2020.

See Note 5 in Part II, Item 8, of this Annual Report for more details regarding details of our acquisitions.

2021 Compared to 2020 — The increase in consolidated amortization of intangibles for 2021 is attributed to the ACT, MME, UTXL, and Eleos acquisitions in 2021.

See Note 4 in Part II, Item 8, of this Annual Report for more details regarding our acquisitions.

2021 2020 2021 vs.

2 unchanged sentences

% of total revenue 0.9 % 1.9 % (100 bps)

% of revenue, excluding trucking fuel surcharge 2.0 % 2.8 % (80 bps)

% of revenue, excluding truckload and LTL fuel surcharge 1.0 % 2.0 % (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 our revenue equipment fleet and the relative percentage of owned versus leased equipment.

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

2021 Compa red to 2020 — The decrease in consolidated rental expense 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 do not plan to use operating leases as a primary means of funding our equipment purchases in 2021.

We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding truckload and LTL fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in 2022.

Table of Contents Glossary of Terms

5 unchanged sentences

% of total revenue 22.0 % 20.0 % 200 bps

% of revenue, excluding trucking fuel surcharge 21.4 % 23.6 % (220 bps)

% of revenue, excluding truckload and LTL fuel surcharge 23.9 % 21.4 % 250 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.

Purchased transportation is generally affected by capacity in the market as well changes in fuel prices.

Purchased transportation is generally affected by capacity in the market as well as changes in fuel prices.

As capacity tightens, our payments to third-party capacity providers and to independent contractors tend to increase.

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

2020 Compared to 2019 — The decrease in consolidated purchased transportation expense is primarily due to a 17.5% decrease in miles driven by independent contractors, as well as lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.

We expect consolidated purchased transportation will increase as a percentage of revenue, excluding trucking fuel surcharge, if we grow our logistics and intermodal businesses at a faster rate than our trucking business.

2021 Compared to 2020 — The increase in consolidated purchased transportation expense is primarily due to payments made to third-party carriers, partially offset by a 14.0% decrease in miles driven by independent contractors.

We expect consolidated purchased transportation will increase as a percentage of revenue if we grow our logistics and intermodal businesses faster than our full truckload and LTL businesses.

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

2 unchanged sentences

Impairments $ 299 $ 5,335 (94.4 %)

2020 Compared to 2019 — During 2020, impairments were related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment).

During 2019, we incurred impairment charges related to certain revenue equipment technolog y, warehousing equipment no longer in use, leasehold improvements from the early termination of a lease of one of our operating properties, and certain Swift legacy trailer models as a result of a softer used equipment market.

The impairments were recorded across various segments, depending on the nature of the impairment.

2021 Compared to 2020 — In 2021, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Truckload and non-reportable segments).

During 2020, impairments were related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Truckload segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Truckload segment).

2021 2020 2021 vs.

2 unchanged sentences

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

2021 Compared to 2020 — Net consolidated miscellaneous operating expenses includes $16.9 million of additional expense in 2021 from ACT's operating results.

Excluding the results of ACT, the expense decreased by $66.5 million, primarily due to a year-over-year increase in gain on sales of equipment.

Table of Contents Glossary of Terms

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

2020 Compared to 2019 — The decrease in consolidated miscellaneous operating expenses is primarily due to a $29.5 million year-over-year reduction in recorded legal costs for increases in legal reserves in 2019 related to various pre-2017 Merger legal matters previously disclosed by Swift.

This was partially offset by a $23.2 million reduction in gain on sales of equipment due to a softer used truck market and the $6.7 million expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company.

Consolidated Other Expenses, net

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

2020 Compared to 2019 — Consolidated interest expense decreased when compared to 2019, primarily due to reduced interest rates.

2021 Compared to 2020 — Consolidated interest expense increased due to higher overall debt balances from the 2021 Debt Agreement which was entered into on September 3, 2021 and replaced the July 2021 Term Loan and 2017 Debt Agreement.

See Note 15 in Part II, Item 8 of this Annual Report for further information related to the 2021 Debt Agreement and related interest rates and deferred loan costs.

Other income, net — Other income, net is primarily comprised of income from unrealized gains (losses) from equity securities, realized gains (losses) from Knight's investments in Transportation Resource Partners ("TRP") 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.

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

See Note 6 in Part II, Item 8, of this Annual Report.

2020 Compared to 2019 — The unfavorable change in consolidated other income is primarily due to lower performance from our portfolio of investments when compared to 2019.

2021 Compared to 2020 — The increase in consolidated other income is primarily due to unrealized gains recognized from our investment in Embark and an increase in unrealized gains recognized from other investments within our portfolio.

Income tax expense — In addition to the discussion below, Note 13 in Part II, Item 8 of this Annual Report provides further analysis related to income taxes.

2020 Compared to 2019 — The 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 recognized as a discrete item.

This was partially offset by stock compensation deductions and a partial release of our reserve for uncertain tax positions recognized as discrete items.

In 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions which was partially offset by a decrease in foreign income tax deductions.

All of these factors resulted in a 2020 effective tax rate of 26.7% and a 2019 effective tax rate of 25.1%.

2021 Compared to 2020 — The increase in consolidated income tax expense was primarily due to an increase in income before income taxes which was partially offset by a reduction in the state deferred tax liability due to our recent acquisitions and adjustments to state tax rates and apportionment.

All these factors resulted in a 2021 effective tax rate of 23.7% and a 2020 effective tax rate of 26.7%.

Table of Contents Glossary of Terms

28 unchanged sentences

Legal accruals 4

(2,481) 6,160

COVID-19 incremental costs 5

Transaction fees 6

Write-off of deferred debt issuance costs 7

Adjusted income before income taxes 1,032,861 636,057

15 unchanged sentences

COVID-19 incremental costs 5

Transaction fees 6

Write-off of deferred debt issuance costs 7

Adjusted income before income taxes 6.18 3.73

2 unchanged sentences

Adjusted EPS $ 4.72 $ 2.73

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

2 "Change in fair value of deferred earnout" reflects the expense for the change in fair value of a deferred earnout related to the acquisition of a warehousing company, which is recorded in "Miscellaneous operating expenses." Refer to Note 5 in Part II Item 8 of this Annual Report for additional details.

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the July 5, 2021 ACT Acquisition, and other acquisitions.

3 "Impairments" reflects the following non-cash impairments:

• During 2020, impairments related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Trucking segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Trucking segment).

• During 2019, impairments related to certain revenue equipment technology, warehousing equipment no longer in use, certain Swift legacy trailer models as a result of a softer used equipment market, as well as $2.2 million related to certain leasehold improvements from an early termination of a lease of one of our operating properties.

The impairments were recorded across various segments, depending on the nature of the impairment.

• During 2021, impairments related to certain revenue equipment held for sale (within the non-reportable segments and the Truckload segment);

• During 2020, impairments related to investments in certain alternative fuel technology (within the non-reportable segments), certain tractors (within the Truckload segment), certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market, and trailer tracking equipment (within the Truckload segment).

4 "Legal accruals" are included in "Miscellaneous operating expenses" in the consolidated statements of comprehensive income and reflect the following:

• 2020 costs related to certain class action lawsuits involving certain pre-merger employment-related claims that were previously disclosed by Swift,

• 2019 legal costs reflecting revised estimates for various pre-2017 merger legal matters within the non-reportable segments, and costs associated with an issued jury verdict.

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

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

• During 2021, the reversal of an accrued legal matter previously identified as probable in 2019 was based on a recent decision of the appellate court, resulting in a change to a remote likelihood that a loss was incurred.

Additional 2021 legal costs relate to certain class action lawsuits arising from employee and contract related matters.

• During 2020, costs related to certain class action lawsuits arising from employee and contract related matters.

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

These include payroll premiums paid to our driving associates and shop mechanics, 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.

6 For 2019, an effective tax rate of 24.6% was applied in our 2019 Adjusted EPS calculation to normalize permanent differences pertaining to a Value Added Tax ("VAT") adjustment within Swift's Mexico operations.

The adjustment pertains to pre-2017 Merger VAT receivables from 2016 and prior years that have been deemed unrecoverable as of December 31, 2019.

6 "Transaction fees" consisted of legal and professional fees associated with the acquisitions of UTXL, ACT, and MME.

The transaction fees are included within "Miscellaneous operating expenses" in the consolidated statements of comprehensive income.

7 "Write-off of deferred debt issuance costs" was incurred from replacing the 2017 Debt Agreement with the 2021 Debt Agreement.

Table of Contents Glossary of Terms

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Total revenue $ 5,998,019 $ 4,673,863

Trucking fuel surcharge (304,656) (448,618)

Revenue, excluding trucking fuel surcharge 4,369,207 4,395,332

Truckload and LTL fuel surcharge (466,129) (304,656)

Revenue, excluding truckload and LTL fuel surcharge 5,531,890 4,369,207

Total operating expenses 5,032,322 4,109,425

Adjusted for:

Trucking fuel surcharge (304,656) (448,618)

Truckload and LTL fuel surcharge (466,129) (304,656)

Amortization of intangibles 1

6 unchanged sentences

COVID-19 incremental costs 5

Transaction fees 6

Adjusted Operating Expenses 4,508,631 3,728,390

11 unchanged sentences

Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 5.

6 See Non-GAAP Reconciliation:

Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 6 .

Table of Contents Glossary of Terms

3 unchanged sentences

Reportable Segment Adjusted Operating Income and Adjusted Operating Ratio

Trucking Segment

Truckload Segment

GAAP Presentation (Dollars in thousands)

15 unchanged sentences

Impairments 2

(1,131) (2,417)

COVID-19 incremental costs 3

23 unchanged sentences

Intersegment transactions (18,314) (10,742)

Impairments 1

Amortization of intangibles 1

Adjusted Operating Expenses 704,004 344,854

1 unchanged sentence

Adjusted Operating Ratio 88.1 % 94.5 %

1 See Non-GAAP Reconciliation:

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

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the UTXL acquisition.

GAAP Presentation (Dollars in thousands)

Total revenue $ 396,308

Total operating expenses (365,139)

Operating income $ 31,169

Operating ratio 92.1 %

Non-GAAP Presentation

Total revenue $ 396,308

Fuel surcharge (50,523)

Revenue, excluding fuel surcharge and intersegment transactions 345,785

Total operating expenses 365,139

Adjusted for:

Fuel surcharge (50,523)

Amortization of intangibles 1

Adjusted Operating Expenses 307,492

Adjusted Operating Income 38,293

Adjusted Operating Ratio 88.9 %

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified with the ACT Acquisition and MME Acquisition.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Intermodal Segment

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Total operating expenses (416,807) (392,405)

Operating (loss) income $ (943) $ 4,501

Operating income (loss) $ 42,060 $ (943)

Operating ratio 90.8 % 100.2 %

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Adjusted Operating Expenses 416,523 391,928

Adjusted Operating (Loss) Income $ (830) $ 4,501

Adjusted Operating Income (Loss) $ 42,060 $ (830)

Adjusted Operating Ratio 90.8 % 100.2 %

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Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 5.

Non-GAAP Reconciliation:

Free cash flow

Cash flows from operations $ 1,190,153

Adjusted for:

Proceeds from sale of property and equipment, including assets held for sale 252,080

Purchases of property and equipment (534,096)

Free cash flow $ 908,137

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Cash and cash equivalents, excluding restricted cash $ 261,001

Availability under Revolver, due October 2022 1

Availability under 2018 RSA, due July 2021 2

Availability under 2021 Revolver, due September 2026 1

Availability under 2021 RSA, due April 2024 2

Availability under 2021 Prudential Notes, issuance ending October 2023 3

Total unrestricted liquidity $ 1,172,670

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Total liquidity, including restricted cash and restricted investments $ 1,267,558

1 As of December 31, 2020, we had $210.0 million in borrowings under our $800.0 million Revolver.

1 As of December 31, 2021, we had $260.0 million in borrowings under our $1.1 billion 2021 Revolver.

We additionally had $64.0 million in outstanding letters of credit (discussed below), leaving $776.0 million available under the 2021 Revolver.

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We additionally had $65.3 million in outstanding letters of credit (discussed below), leaving $55.7 million available under the 2021 RSA.

The Company intends to refinance prior to the maturity date.

3 As of December 31, 2021, we had $45.0 million outstanding principal on our shelf notes issued under our $125.0 million 2021 Prudential Notes, leaving $80.0 million available for issuance under the 2021 Prudential Notes.

4 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments.

"Cash and cash equivalents – restricted" consists of $39.3 million, which is included in "Cash and cash equivalents — restricted" in the consolidated balance sheet and is held by Mohave and Red Rock for claims payments.

"Cash and cash equivalents – restricted" consists of $87.2 million, which is included in "Cash and cash equivalents — restricted" in the consolidated balance sheets and is held by Mohave and Red Rock for claims payments.

The remaining $1.8 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.

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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, maintain and improve our driving associate facing shop and office facilities, invest in technology, and fund replacement in our revenue equipment fleet.

We expect net cash capital expenditures to be in the range of $450.0 to $500.0 million in 2021, but intend to keep this range as flexible as possible to appropriately respond to pending business opportunities and the overall market environment.

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, expand our network of LTL service centers, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings.

We expect net cash capital expenditures, including net cash expenditures of our LTL segment, will be in the range of $550.0 to $600.0 million in 2022.

The range provided excludes cash outlays for potential acquisitions.

We believe we have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or other conditions warrant.

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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 capital 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.

Refer to Note 18 in Part II, Item 8 of this Annual Report for additional discussion of our short-term and long-term contractual payment obligations related to purchase commitments.

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 2021 Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

Refer to Note 18 in Part II, Item 8 of this Annual Report for additional discussion of our short-term and long-term

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

Principal and Interest Payments — As of December 31, 2020, we had material debt and finance lease obligations of $914.8 million (gross of deferred loan costs) which are discussed under "Material Debt Agreements," below.

A modest portion of our cash flows from operations are committed to minimum payments of principal and interest on our debt facilities and lease obligations.

contractual payment obligations related to purchase commitments.

Principal and Interest Payments — As of December 31, 2021, we had debt, accounts receivable securitization, and finance lease obligations of $2.1 billion, 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.

Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.

Following the 2017 Merger, the combined company carries substantially more debt than Knight has historically carried and the combined company has significantly higher interest expense and exposure to interest rate fluctuations than Knight historically had.

Prior to the maturity of our 2018 RSA, Term Loan, and Revolver, we expect to be contractually obligated to make interest payments of approximately $1.2 million, $7.4 million, and $4.3 million, respectively.

Prior to the maturity of our 2021 RSA, 2021 Term Loans, 2021 Revolver, Prudential Notes, and other debt, we expect to be contractually obligated to make interest payments of approximately $7.5 million, $46.7 million, $13.0 million, $4.5 million, and $0.2 million, respectively.

Refer to Notes 14 and 15 in Part II, Item 8 of this Annual Report for additional discussion of the principal payment obligations related to the 2021 RSA and 2021 Debt Agreement.

Refer to Note 16 in Part II, Item 8 of this Annual Report for additional discussion on our contractual principal and interest payment obligations for finance leases.

Letters of Credit — Pursuant to the terms of the 2017 Debt Agreement and our 2018 RSA, our lenders may issue standby letters of credit on our behalf.

When we have letters of credit outstanding, it reduces the availability under our $800.0 million Revolver or 2018 RSA.

Letters of Credit — Pursuant to the terms of the 2021 Debt Agreement and the 2021 RSA, our lenders may issue standby letters of credit on our behalf.

When we have letters of credit outstanding, it reduces the availability under our 2021 Revolver or 2021 RSA.

Standby letters of credit are typically issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to our automobile, workers' compensation, and general insurance liabilities.

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

In November 2020, the Board authorized $250.0 million in share repurchases, replacing the previous plan which had approximately $ 54.1 million of authorized purchases remaining.

The 2020 Knight-Swift Repurchase Plan had $192.8 million available as of December 31, 2021.

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Working Capital

As of December 31, 2020 and December 31, 2019, we had a working capital surplus of $83.7 million and a working capital deficit of $103.0 million, respectively.

The change was primarily due to reclassification of the Term Loan from "Finance lease liabilities and long-term debt – current portion" to "Long-term debt – less current portion" due to the 2020 amendment of the 2017 Debt agreement.

This was partially offset by the 2018 RSA maturing on July 9, 2021, resulting in a $213.9 million reclassification from "Accounts receivable securitization – less current portion" to "Accounts receivable securitization – current portion" on the consolidated balance sheet as of December 31, 2020.

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

We had working capital surpluses of $339.5 million as of December 31, 2021 and $83.7 million as of December 31, 2020, due to an increase in trade receivables, the April 2021 refinance of our accounts receivable securitization (resulting in a reclassification to a noncurrent liability), partially offset by the reclassification of our 2021 Term Loan A-1 to a current liability (due December 2022).

Material Debt Agreements

As of December 31, 2020, we had $913.6 million in material debt obligations at the following carrying values:

As of December 31, 2021, we had $2.1 billion in material debt obligations at the following carrying values:

• $199.7 million:

Term Loan, due October 2022, net of $1.1 million in deferred loan costs

2021 Term Loan A-1, due December 2022, net of $0.3 million in deferred loan costs

• $199.6 million:

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

2021 Term Loan A-2, due September 2024, net of $0.4 million in deferred loan costs

• $798.4 million:

2021 Term Loan A-3, due September 2026, net of $1.6 million in deferred loan costs

• $278.5 million:

2021 RSA outstanding borrowings, net of $0.5 million in deferred loan costs

• $306.2 million:

Finance lease obligations

• $260.0 million:

Revolver, due October 2022

2021 Revolver, due September 2026

• $52.3 million:

Other, net of $0.1 million in deferred loan costs

As of December 31, 2020, we had $913.6 million in material debt obligations at the following carrying values:

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2017 Revolver, due October 2022

Key terms and other details regarding our material debt and finance leases are discussed in Notes 15, 16, and 17 in Part II, Item 8 of this Annual Report, and is incorporated by reference herein.

Key terms and other details regarding our material debt obligations and finance leases are discussed in Notes 14, 15, and 16 in Part II, Item 8 of this Annual Report, and are incorporated by reference herein.

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Net cash used in investing activities (1,816,733) (480,712) (1,336,021)

Net cash used in financing activities (443,884) (184,636) (259,248)

Net cash provided by (used in) financing activities 779,326 (443,884) 1,223,210

Net Cash Provided by Operating Activities

2020 Compared to 2019 — The $80.1 million increase in net cash provided by operating activities was primarily due to a $137.0 million increase in operating income and an $11.5 million decrease in interest payments on our long-term debt and finance leases.

This was partially offset by a $93.4 million cash settlement paid during 2020, associated with a pre-2017 Merger legal matter that was previously accrued and disclosed by Swift.

2021 Compared to 2020 — The $270.5 million increase in net cash provided by operating activities was primarily due to $214.0 million in additional net cash provided by ACT's operating activities in 2021.

Net Cash Used in Investing Activities

2020 Compared to 2019 — The $103.0 million decrease in net cash used in investing activities was primarily due to a $182.0 million decrease in net cash capital expenditures, which was partially offset by a $44.9 million in crease in net cash used for acquisitions and a $40.9 million increase in cash invested in equity method investments, which included a $39.6 million investment in a transportation-related company .

Net Cash Used in Financing Activities

2020 Compared to 2019 — We used $259.2 million more cash for financing activities, primarily as a result of a $142.3 million net increase in repayments of our debt and finance lease obligations, increasing our repurchases of our common stock by $92.7 million, and increasing dividends paid by $13.2 million.

Inflation can have an impact on our operating costs.

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

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

2021 Compared to 2020 — Net cash used in investing activities increased by $1.3 billion, as we spent $1.5 billion on acquisitions in 2021, compared to $46.8 million in 2020.

Net Cash Provided By (Used in) Financing Activities

2021 Compared to 2020 — Net cash related to financing activities increased by $1.2 billion, primarily due to the $1.2 billion in proceeds from the 2021 Debt Agreement.

Most of our operating expenses are inflation-sensitive, with inflation generally leading to increased costs of operations.

Price increases in manufacturer revenue equipment has impacted the cost for us to acquire new equipment.

Cost increases have also impacted the cost of parts for equipment repairs and maintenance.

The qualified driver shortage experienced by the trucking industry overall has had the effect of increasing compensation paid to our driving associates.

We have also experienced inflation in insurance and claims cost related to health insurance and claims as well as auto liability insurance and claims.

Prolonged periods of inflation could cause interest rates, fuel, wages, and other costs to increase as well.

Any of these factors could adversely affect our results of operations unless freight rates correspondingly increase.

Critical Accounting Estimates

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Changes in these estimates and assumptions could materially affect the determination of fair value and/or goodwill impairment for each reporting unit.

Knight-Swift evaluated its goodwill associated with the 2017 Merger and other acquisitions as of June 30, 2020 and 2019.

The evaluations were completed using fair value measurement guidance prescribed in ASC Topic 350, Intangibles – Goodwill and Other.

Knight-Swift evaluated its goodwill associated with the 2017 Merger and various acquisitions as of June 30, 2021 and 2020.

The evaluations were completed using fair value measurement guidance prescribed in ASC 350, Intangibles – Goodwill and Other.

The fair value of the goodwill was established using an equal weighting of both the income and market approaches.

In evaluating this quantitative analysis, the Company determined that it was more likely than not that fair value exceeded carrying value for the Company's reporting units as of June 30, 2021 and 2020.

The test of indefinite-lived intangible assets consists of a comparison of the estimated fair value of the trade names to their carrying values.

The test of indefinite-lived intangible assets consists of a comparison of the estimated fair value of certain trade names to their carrying values.

The determination of the fair value of the trade names requires management to make significant estimates and assumptions related to forecasts of future revenues, discount rates, and royalty rates.

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Refer to Note 13, in Part II, Item 8 of this Annual Report for discussion about the changes in the balances of deferred taxes assets and related valuation allowances.

Leases — In accordance with ASC Topic 842, Leases , property and equipment held under operating leases are recorded as right-of-use assets, with a corresponding operating lease liability.

Additionally, property and equipment held under finance leases are recorded as property and equipment with corresponding finance lease liabilities.

All expenses related to operating leases are reflected in our consolidated statements of comprehensive income in "Rental expense." Expenses related to finance leases are reflected in our consolidated statements of comprehensive income in "Depreciation and amortization of property and equipment" and "Interest expense." At the inception of a lease, management judgment is involved in the determination of the discount rate, the determination of whether a contract contains a lease, classification of operating versus finance lease, assessment of useful lives, and estimation of residual values.

Leases — At the inception of a lease, management judgment is involved in the determination of the discount rate, the determination of whether a contract contains a lease, classification of operating versus finance lease, assessment of useful lives, and estimation of residual values.

Discounted future minimum lease payments are used in determining the lease classification represent the present value of minimum rental payments called for over the lease term, inclusive of residual value guarantees (if applicable) and amounts that would be required to be paid, if any, by the Company upon default for leases containing subjective acceleration or cross default clauses.

In connection with various operating leases, we issued residual value guarantees, which provide that if we do not purchase the leased equipment from the lessor at the end of the lease term, we are liable to the lessor for an amount equal to the shortage (if any) between the proceeds from the sale of the equipment and an agreed value.

To the extent we believe any manufacturer will refuse or be unable to meet its obligation, we recognize additional rental expense to the extent we believe the fair market value at the lease termination will be less than our obligation to the lessor.

We believe that proceeds from the sale of equipment under operating leases would exceed the payment obligation on substantially all operating leases.

Refer to Note 16, in Part II, Item 8 of this Annual Report for discussion about the changes in balance of operating leases.

Stock-based Compensation — We issue several types of stock-based compensation, including awards that vest, based on service and performance conditions or a combination of service and performance conditions.

Performance-based awards vest contingent upon meeting certain performance criteria established by our compensation committee.

All awards require future service and thus forfeitures are estimated based on historical forfeitures and the remaining term until the related award vests.

ASC Topic 718, Compensation – Stock Compensation , requires that all stock-based payments to employees, including grants of employee stock options, be recognized in the financial statements based upon a grant-date fair value of an award.

Stock-based Compensation — We issue several types of stock-based compensation, including awards that vest, based on service conditions, performance conditions, or a combination of service and performance conditions.

Determining the appropriate amount to expense in each period is based on likelihood and timing of achievement of the stated targets for performance-based awards, and requires judgment, including forecasting future financial results and market performance.

The estimates are revised periodically, based on the probability and timing of achieving the required performance targets, and adjustments are made as appropriate.

Awards that are only subject to time-vesting provisions are amortized using the straight-line method.

Awards subject to time-based vesting and performance conditions are amortized using the individual vesting tranches.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

There is also some judgement involved with estimating expected forfeiture rates as we have opted to net the benefit of expected forfeitures against our stock-based compensation expense.

Refer to Note 21, in Part II, Item 8 of this Annual Report for discussion about the assumptions related to these awards and the impact on our results for 2021 and 2020.

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Recently Issued Accounting Pronouncements

See Part II Item 8 of this Annual Report, which is incorporated herein by reference, for the impact of recently issued accounting pronouncements on the Company's consolidated financial statements, as follows:

• Note 3 for accounting pronouncements adopted during 2020.

• Note 4 for recently issued accounting pronouncements.

See Note 3 in Part II, Item 8 of this Annual Report, which is incorporated herein by reference, for recently issued accounting pronouncements that could have an impact on our consolidated financial statements.

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-K

Item 7. Management’s Discussion and Analysis