What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-22 compared with 2023-02-23 · 275 added, 210 removed, 687 unchanged (41% of the section changed)

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

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

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

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

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

Additionally, we have various non-reportable segments.

Additionally, we have various other operating segments, included within our All Other Segments.

Key Financial Highlights

During 2022, consolidated total revenue was $7.4 billion, which is a 23.9% increase over 2021.

Consolidated operating income was $1.1 billion in 2022, reflecting an increase of 13.1% from 2021.

Consolidated net income attributable to Knight-Swift increased by 3.8% from 2021 to $771.3 million.

During 2023, consolidated total revenue was $7.1 billion, which is a 3.9% decrease over 2022.

Consolidated operating income was $338.2 million in 2023, reflecting a decrease of 69.0% from 2022.

Consolidated net income attributable to Knight-Swift decreased by 71.8% from 2022 to $217.1 million.

• Truckload — 93.7% operating ratio during 2023, with a 5.8% increase in revenue, excluding fuel surcharge and intersegment transactions, compared to 2022.

• LTL — 88.2% operating ratio during 2022 as a result of continued improvements in yields and efficiencies.

• LTL — 89.0% operating ratio during 2023 with a 5.5% increase in revenue, excluding fuel surcharge.

• Logistics — 92.5% operating ratio during 2023.

Operating income improved by 42.6%.

Load count grew by 24.0%, leading to a 14.0% increase in revenue, excluding intersegment transactions.

• Intermodal — 90.1% operating ratio during 2022, a 70 basis point improvement compared to 2021, leading to a 14.5% increase in operating income with revenue growth of 5.9%, excluding intersegment transactions.

• Non-reportable Segments — Revenue growth of 68.6% was supported by the activities within our operating segments of insurance, equipment maintenance, equipment leasing, and warehousing, leading to a 158.9% improvement in operating income to $36.5 million during 2022, compared to 2021.

• Embark — The value of our 2021 initial investment in Embark declined, resulting in an unrealized loss that negatively impacted earnings per diluted share and Adjusted EPS 1 by $0.25 during 2022.

Load count reduced by 17.5%, leading to a 36.6% decrease in revenue, excluding intersegment transactions.

• Intermodal — 102.6% operating ratio during 2023, a 15.5% decrease in revenue, excluding intersegment transactions leading to a 121.8% decrease in operating income.

• All Other Segments — Operating loss was $111.6 million during 2023 compared to operating income of $36.5 million in 2022 primarily due to the $125.5 million operating loss of our third-party insurance business.

Based on the recent results, including the continued unfavorable development of insurance reserves, the Company decided to initiate exiting this business during the fourth quarter of 2023 and expects to cease all third-party insurance operations and cancel any remaining policies by the end of the first quarter of 2024.

We do not expect this business to have a material impact to our results in 2024.

• Acquisition of U.S.

Xpress — Having closed on July 1, 2023, our synergy teams, composed of leaders from Knight, Swift, and U.S.

Xpress have been sharing information, best practices, and further defining opportunities for improvement and action plans to execute on those plans.

In the first two quarters of ownership, we have made significant cost improvement and even some rate improvement, leading to slight profitability in the fourth quarter of 2023.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

• Liquidity and Capital — During 2023, we generated $1.2 billion in operating cash flows.

Our Free Cash Flow 1 was $382.7 million.

We paid down $212.7 million in long-term debt, $62.1 million in finance lease liabilities, and $42.9 million in cash on our operating lease liabilities, and reduced the outstanding net balances on our revolving credit facilities by $77.0 million.

In 2022, we repurchased approximately $300 million worth of shares, and issued $78.3 million in dividends to our stockholders.

Gain on sale of revenue equipment increased to $92.9 million in 2022, compared to $74.8 million in 2021.

We ended 2022 with $196.8 million in unrestricted cash and cash equivalents, $43.0 million outstanding on the 2021 Revolver, $1.0 billion face value outstanding on the 2021 Term Loans, and $7.0 billion of stockholders' equity.

We paid down $59.3 million in long-term debt, $60.9 million in finance lease liabilities, and $120.6 million on our operating lease liabilities.

We obtained financing of $250.0 million in new long-term debt and $108.0 million from net borrowings on our accounts receivable securitization and assumed $337.9 million in debt and finance lease liabilities related to the U.S.

Xpress Acquisition.

In 2023, we issued $91.1 million in dividends to our stockholders.

Gain on sale of revenue equipment decreased to $64.7 million in 2023, compared to $92.9 million in 2022.

We ended 2023 with $168.5 million in unrestricted cash and cash equivalents, $67.0 million outstanding on the 2021 Revolver, $1.3 billion face value outstanding on the 2023 Term Loan and the 2021 Term Loans, and $7.1 billion of stockholders' equity.

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

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Key Financial Data and Operating Metrics

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2 Our tractor fleet within the Truckload segment had a weighted average age of 2.5 years and 2.7 years as of December 31, 2023 and 2022, respectively.

3 Note that average trailers includes 8,249 and 6,388 trailers within our non-reportable operating segments.

3 Note that average trailers includes 8,724 and 8,249 trailers within our All Other Segment.

Our trailer fleet within the Truckload segment had a weighted average age of 8.9 years and 9.9 years as of December 31, 2023 and 2022, respectively.

4 Our LTL tractor fleet had a weighted average age of 4.3 years as of December 31, 2022, and includes 711 and 667 tractors from ACT's and MME's dedicated and other businesses for 2022 and 2021, respectively.

5 Our LTL trailer fleet had a weighted average age of 8.1 years as of December 31, 2022, and includes 968 and 860 trailers from ACT's and MME's dedicated and other businesses for 2022 and 2021, respectively.

Table of Contents Glossary of Terms

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

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 2.1% 1 in 2022, as compared to a 5.7% 1 decrease in 2021.

The year-over-year improvement primarily reflects increases in consumer spending, exports, and inventory investment that were partly offset by a decrease in housing investment.

4 Our LTL tractor fleet had a weighted average age of 4.4 years and 4.3 years as of December 31, 2023 and 2022, respectively, and includes 611 and 711 tractors from ACT's and MME's dedicated and other businesses for 2023 and 2022, respectively.

5 Our LTL trailer fleet had a weighted average age of 8.6 years and 8.1 years as of December 31, 2023 and 2022, respectively, and includes 723 and 968 trailers from ACT's and MME's dedicated and other businesses for 2023 and 2022, respectively.

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 2.5% 1 in 2023, as compared to a 1.9% 1 increase in 2022.

The year-over-year improvement primarily reflects increases in consumer spending, nonresidential fixed investments, state and local government spending, exports, and federal government spending that were partly offset by decreases in residential fixed investment and inventory investment.

The national unemployment rate was 3.7% 2 as of December 31, 2023, as compared to 3.5% 2 as of December 31, 2022.

Early estimates of the full-year 2023 US employment cost index indicate a year-over-year increase of 0.9% 2 and a sequential increase of 0.7% 2 .

The freight market outlook for 2023 includes the following:

• Continued softness in freight demand with few non-contract opportunities through the first half of 2023 as shippers work through higher inventory levels;

• Freight volumes improve in the second half of the year with a more typical peak season;

• Spot pricing troughs in the first quarter of 2023 and builds throughout the year;

• Demand continues for trailer pools;

• Small carriers continue to exit as a result of lower spot rates and significantly higher operating costs;

• LTL demand pressured but remains more stable than truckload;

• LTL year-over-year improvement in revenue, excluding fuel surcharge, per hundredweight;

• Inflationary pressures ease in many cost areas but remain elevated on a year-over-year basis;

• Demand in the used equipment market weakens as small carriers struggle;

• We expect the driver market to remain competitive throughout 2023.

The freight market outlook for the first half of 2024 includes the following:

• LTL demand remains strong;

• LTL improvement in revenue (excluding fuel) per hundredweight year-over-year;

• Truckload freight demand softness anticipated to continue into the first quarter of 2024, with modest seasonality in the second quarter of 2024;

• Truckload - contract rate sequentially stable;

• Cost inflation continues to be a challenge, though pace eases;

• Labor alternatives in the general economy remain attractive, providing a headwind to retention and utilization until freight conditions improve;

• Demand in the used equipment market weakens further as small carriers struggle.

Table of Contents Glossary of Terms

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Operating Results:

2022 Compared to 2021 — The $27.9 million increase in net income attributable to Knight-Swift to $771.3 million in 2022 from $743.4 million in 2021, includes the following:

• Contributor — $95.4 million increase in operating income from our LTL segment representing ACT's and MME's full year 2022 results, compared to the portion of 2021 following the respective acquisition dates.

• Contributor — $40.0 million increase in operating income within our Logistics segment driven by a 24.0% increase in load count.

• Contributor — $6.1 million increase in operating income within our Intermodal segment driven by a 24.3% increase in revenue per load, partially offset by a 14.8% decrease in load count.

• Contributor — $22.4 million improvement in operating results within our non-reportable segments, driven by revenue growth of 68.6% related to our expanded services to third-party carriers.

• Offset — $37.9 million decrease in operating income within our Truckload segment as a result of a 6.3% decrease in total miles per tractor.

• Offset — $54.9 million decrease in "Other (expenses) income, net," primarily due to unrealized losses recognized from our investment in Embark, compared to a gain during 2021.

• Offset — $18.5 million increase in consolidated income tax expense, primarily due to an increase in income before income taxes.

2023 Compared to 2022 — The $554.2 million decrease in net income attributable to Knight-Swift to $217.1 million in 2023 from $771.3 million in 2022, includes the following:

• Contributor — $448.6 million decrease in operating income within our Truckload segment was primarily due to a 0.6% decrease in average revenue per tractor, which includes the results of U.S.

Excluding U.S.

Xpress, revenue, excluding fuel surcharge, per tractor decreased 10.2% year-over-year.

• Contributor — $90.5 million decrease in operating income within our Logistics segment driven by a 17.5% decrease in load count.

• Contributor — $58.7 million decrease in operating income within our Intermodal segment driven by a 19.9% decrease in revenue per load, partially offset by a 5.5% increase in load count.

• Contributor — $7.7 million decrease in operating income from our LTL segment as a result of a 1.9% decrease in weight per shipment and other costs related to expanding our service area and transitioning our operational systems on one network.

• Contributor — $148.1 million decrease in operating results within our All Other Segments, primarily due to the $125.5 million operating loss in the third-party insurance business, including additional costs incurred in the fourth quarter of 2023 as we prepare to exit the business in the first quarter of 2024.

• Contributor — $60.2 million increase in net interest expense primarily due to an increase in interest rates.

• Offset — $63.6 million increase in "Other income (expenses), net," primarily driven by an unrealized loss on our investment in Embark recorded in 2022.

• Offset — $194.6 million decrease in consolidated income tax expense, primarily due to a decrease in income before income taxes and a release of a valuation allowance in the third quarter of 2023.

This resulted in a 2023 effective tax rate of 20.3% and a 2022 effective tax rate of 24.4%.

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Results of Operations — Segment Review

The Company has four reportable segments:

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

Truckload, LTL, Logistics, and Intermodal, as well as certain other operating segments included within our All Other Segments.

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

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Subtotal $ 6,773,908 94.9 % $ 7,007,162 94.3 %

Non-reportable segments $ 516,735 7.0 % $ 306,414 5.1 %

All Other Segments $ 462,061 6.5 % $ 516,735 7.0 %

Intersegment eliminations $ (94,203) (1.4 %) $ (95,315) (1.3 %)

Total revenue $ 7,141,766 100.0 % $ 7,428,582 100.0 %

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Operating income (Dollars in thousands)

Operating income (loss):

(Dollars in thousands)

Truckload $ 297,977 88.1 % $ 746,581 68.4 %

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Subtotal $ 449,768 133.0 % $ 1,055,299 96.7 %

Non-reportable segments $ 36,529 3.3 % $ 14,112 1.5 %

All Other Segments $ (111,615) (33.0 %) $ 36,529 3.3 %

Operating income $ 338,153 100.0 % $ 1,091,828 100.0 %

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

• 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 with approximately 15,100 irregular route and 5,900 dedicated tractors.

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We continue to offer power-only services through our Logistics segment by leveraging our fleet of over 96,000 trailers as of December 31, 2023.

• Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.

Our non-reportable segments also include certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).

• All Other Segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.

All Other Segments also include 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 programs, which serve to recover a majority of our fuel costs.

This generally applies only to loaded miles for our Truckload and LTL segments and typically does not offset non-paid empty miles, idle time, and out-of-route miles driven.

This generally applies only to loaded miles for our Truckload and LTL segments and typically does not offset non-paid empty miles, idle time, nor out-of-route miles driven.

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

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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 xFSC 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

Revenue xFSC 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

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

Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, other specialized services, and 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 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.

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3 Includes 18,821 and 16,228 company-owned tractors for 2023 and 2022, respectively.

4 Average trailers includes 8,249 and 6,388 trailers from our non-reportable operating segments for 2022 and 2021, respectively.

2022 Compared to 2021 — The Truckload segment's Adjusted Operating Ratio increased by 170 basis points to 80.4% in 2022, as compared to 2021.

Revenue, excluding fuel surcharge and intersegment transactions was $3.8 billion, a year-over-year increase of 3.5%.

Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, increased 11.4% year-over-year, while total miles decreased 5.8%, reflecting softer freight demand.

These factors ultimately led to a 3.0% increase in average revenue per tractor.

We continue to add scale by increasing our trailer count, which has grown to approximately 79,000 trailers as of the end of 2022.

We believe this positions us to provide valuable capacity to our customers through our Truckload and Logistics segments.

We remain focused on managing costs and improving utilization, as we expect inflationary pressures in driver-related costs, equipment maintenance, and insurance to continue to affect the freight market in the first half of 2023.

4 Average trailers includes 8,724 and 8,249 trailers from our All Other Segments for 2023 and 2022, respectively.

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

2023 Compared to 2022 — The Truckload segment continues to experience an extremely difficult environment, operating with an Adjusted Operating Ratio of 92.2% in 2023, as compared to 80.4% in 2022.

The Adjusted Operating Ratio of the truckload business, excluding U.S.

Xpress that was acquired in the third quarter of 2023, was 90.3% in 2023.

The inclusion of U.S.

Xpress negatively impacted the Adjusted Operating Ratio by 190 basis points.

Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, decreased 10.9% year-over-year, while total miles increased 18.5% (before including the U.S.

Xpress business, total miles decreased 2.9%).

Miles per tractor increased 11.4% year-over-year (0.2% before including U.S.

Revenue, excluding fuel surcharge and intersegment transactions was $4.0 billion, an increase of 5.8% year-over-year, reflecting a 12.9% decline in the existing truckload business prior to the inclusion of U.S.

Excluding U.S.

Xpress, revenue, excluding fuel surcharge, per tractor decreased 10.2% year-over-year as the decline in rates outweighed the improvement in miles per tractor.

We believe our extensive trailer fleet, which has grown to approximately 96,000 trailers as of the end of 2023, positions us to provide valuable capacity, flexibility, and efficiency to our customers through our Truckload and Logistics segments.

Dothan, Alabama-based ACT and Bismarck, North Dakota-based MME, both acquired in 2021, comprise our LTL segment.

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Fluctuations within each of these metrics are 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.

Our most significant expenses are 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.

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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.

2023 2022 2023 vs.

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Total revenue $ 1,082,454 $ 1,069,554 1.2 %

Revenue, excluding fuel surcharge and intersegment transactions $ 867,292 $ 345,785 150.8 %

Revenue, excluding fuel surcharge $ 914,568 $ 867,292 5.5 %

Operating income $ 118,880 $ 126,609 (6.1) %

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$ 193.32 $ 188.03 2.8 %

LTL revenue xFSR per shipment 2

LTL revenue xFSC per shipment 2

$ 163.10 $ 152.15 7.2 %

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$ 18.44 $ 17.61 4.7 %

LTL revenue xFSR per hundredweight 2

LTL revenue xFSC per hundredweight 2

$ 15.56 $ 14.25 9.2 %

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

2 Defined under "Operating Statistics," above.

3 Includes 711 and 667 tractors from ACT's and MME's dedicated and other businesses for 2022 and 2021, respectively.

4 Includes 968 and 860 trailers from ACT's and MME's dedicated and other businesses for 2022 and 2021, respectively.

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 operates across approximately 110 facilities with a door count of over 4,400.

We generated $867 million in revenue, excluding fuel surcharge and an 83.6% Adjusted Operating Ratio during 2022 in the LTL segment.

Revenue, excluding fuel surcharge, per hundredweight was $14.25, while revenue per shipment, excluding fuel surcharge, was $152.15.

The ACT and MME teams continue to achieve both customer and cost synergies.

Also, during the fourth quarter, the operational systems were converted to allow freight movement through one connected network across both LTL brands.

While the system conversion impacted volumes at MME for a period of time, we believe we are well-positioned to leverage the freight opportunities across the connected network with existing and new customers.

2 Defined under "Operating Statistics," above.

3 Includes 611 and 711 tractors from ACT's and MME's dedicated and other businesses for 2023 and 2022, respectively.

4 Includes 723 and 968 trailers from ACT's and MME's dedicated and other businesses for 2023 and 2022, respectively.

2023 Compared to 2022 — Our LTL segment operates across approximately 120 facilities with a door count of over 4,550.

LTL operated well, producing an 85.3% Adjusted Operating Ratio during 2023, as revenue, excluding fuel surcharge, grew 5.5% but Adjusted Operating Income decreased 5.6% year-over-year.

Volumes were strong with shipments per day for the year increasing 1.4% year-over-year.

Revenue per hundredweight, excluding fuel surcharge, increased 9.2%, while revenue per shipment, excluding fuel surcharge, increased by 7.2%, reflecting a 1.9% decrease in weight per shipment.

We expect that our connected LTL network will provide additional opportunities for revenue growth.

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

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

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

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

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

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

2023 2022 2023 vs.

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2023 Compared to 2022 — Logistics Adjusted Operating Ratio was 92.2%, with a gross margin of 18.7% in 2023, compared to 21.9% in 2022.

Logistics load volumes increased by 24.0% as we continue to leverage our consolidated fleet of approximately 79,000 trailers as we build out our power-only service.

Our existing logistics load count declined by 28.0% year-over-year, prior to the addition of U.S.

Xpress logistics.

With the inclusion of U.S.

Xpress logistics volumes, the load count declined by 17.5% year-over-year.

Revenue per load decreased by 23.1% year-over-year.

We continue to innovate with technology designed to remove friction and allow seamless connectivity, leading to services that we expect will capture new opportunities for revenue growth.

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Intermodal Segment

The Intermodal segment complements our regional operating model, allows us to better serve customers in longer haul lanes, and reduces our investment in fixed assets.

The Intermodal segment complements our regional operating model, while also allowing us to better serve customers in longer haul lanes, and reduces our investment in fixed assets.

Through the Intermodal segment, we generate revenue by moving freight over the rail in our containers and other trailing equipment, combined with revenue for drayage to transport loads between railheads and customer locations.

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

While rail pricing is determined on an annual basis, purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs.

While rail pricing is primarily determined on an annual basis, 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 company tractors related to drayage, containers, and chassis, as well as non-driver employee compensation and benefits.

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Revenue, excluding intersegment transactions $ 410,549 $ 485,739 (15.5 %)

Operating income $ 48,167 $ 42,060 14.5 %

Operating (loss) income $ (10,507) $ 48,167 (121.8 %)

Average revenue per load 1

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3 Includes 577 and 544 c ompany-owned tractors for 2023 and 2022, respectively.

2022 Compared to 2021 — Revenue grew by 5.9% while the operating ratio improved from 90.8% in 2021 to 90.1% in 2022, resulting in a $6.1 million increase in operating income.

Intermodal experienced a 24.3% increase in revenue per load, which was partially offset by a decrease in load count due to softer freight demand and labor challenges across the rail industry.

As a result of our network and improved service offerings, we expect to continue to grow with new customers and expand with existing customers.

To position Intermodal for continued growth, we increased our average container count by approximately 1,600 in 2022.

2023 Compared to 2022 — Intermodal operated with a 102.6% operating ratio.

While load count increased year-over-year by 5.5%, total revenue decreased 15.5% year-over-year to $410.5 million as revenue per load declined 19.9%, resulting from soft demand and competitive truck capacity.

We remain focused on growing our load count and improving the efficiency of our assets as Intermodal continues to provide value to our customers and is complementary to the many services we offer.

Non-reportable Segments

Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.

Our non-reportable segments also include certain corporate expenses (such as legal settlements and accruals, certain impairments, and $46.4 million in annual amortization of intangibles related to the 2017 Merger and various acquisitions).

Results can be impacted by the cost of alternative truck capacity.

All Other Segments

Our All Other Segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services.

Our All Other Segments also include certain corporate expenses (such as legal settlements and accruals, certain impairments, and $47.3 million in annual amortization of intangibles related to the 2017 Merger and various acquisitions).

2023 2022 2023 vs.

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Total revenue $ 462,061 $ 516,735 (10.6 %)

Operating income $ 36,529 $ 14,112 158.9 %

2022 Compared to 2021 — Operating income improved by 158.9% as a result of a 68.6% increase in revenue.

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.

Operating (loss) income $ (111,615) $ 36,529 (405.6 %)

2023 Compared to 2022 — Revenue declined 10.6% year-over-year, largely as a result of our actions to address the challenges within our third-party insurance program, including significantly reducing exposures.

The $111.6 million operating loss within our All Other Segments is primarily driven by the $125.5 million operating loss in the third-party insurance business.

Based on recent results, including the continued unfavorable development of insurance reserves, the Company decided to initiate exiting this business during the fourth quarter of 2023 and expects to cease all third-party insurance operations and cancel any remaining policies by the end of the first quarter of 2024.

We do not expect this business to have a material impact to our results in 2024.

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

In accordance with the 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 2022 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.

2023 2022 2023 vs.

9 unchanged sentences

We expect labor costs (related to both driving associates and non-driver employees) to remain inflationary, which we expect will result in additional pay increases in the future, thereby increasing our salaries, wages, and benefits expense.

2022 Compared to 2021 — The increase in consolidated salaries, wages, and benefits includes a $309.6 million increase from the results of ACT and MME for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

The remaining increase pertained to driving associate pay rates, and an increase in non-driver headcount, resulting in higher non-driver salaries, wages, and benefits.

These increases were partially offset by a 6.2% reduction in miles driven by company driving associates, excluding ACT and MME.

2023 Compared to 2022 — The increase in consolidated salaries, wages, and benefits includes a $344.2 million increase from the results of U.S.

This was partially offset by decreases in non-driver salaries and wages and driving associate wages due to a 1.7% reduction in miles driven by company driving associates, excluding U.S.

2023 2022 2023 vs.

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The primary factors affecting our fuel expense are the cost of diesel fuel, the fuel economy of our equipment, and the miles driven by company driving associates.

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Our fuel surcharge programs help to offset increases in fuel prices, but generally apply only to loaded miles for our Truckload and LTL segments and typically do not offset non-paid empty miles, idle time, or out-of-route miles driven.

4 unchanged sentences

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

2022 Compared to 2021 — The increase in consolidated fuel expense includes a $71.8 million increase from the results of ACT for the full year 2022, compared to the portion of 2021 following the acquisition date.

The remaining difference is primarily due to an increase in the average DOE fuel price to $5.01 per gallon in 2022 from $3.29 per gallon in 2021, partially offset by a 6.2% reduction in the total miles driven by company driving associates, excluding ACT.

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2023 Compared to 2022 — The decrease in consolidated fuel expense includes $139.6 million from the results of U.S.

The inclusion of U.S.

Xpress's fuel expense was offset by lower average weekly DOE fuel prices of $4.20 per gallon in 2023 compared to $5.01 per gallon in 2022.

It was also offset by a 1.7% reduction in the total miles driven by company driving associates, excluding U.S.

2023 2022 2023 vs.

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We expect the driver market to remain competitive throughout 2023, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense.

We expect to continue refreshing our tractor fleet in the coming quarters, subject to availability of new revenue equipment, to maintain or improve the average age of our equipment.

2022 Compared to 2021 — The increase in consolidated operations and maintenance expense includes a $29.3 million increase from the results of ACT for the full year 2022, compared to the portion of 2021 following the acquisition date.

The remaining increase was attributed to higher maintenance expenses due to an increase in the average age of our fleet, higher port per diem expenses as we navigate a backlog of shipping containers at ports, and increased hiring expenses as we work to improve our seated truck count.

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We expect to continue refreshing our tractor fleet in the coming quarters, subject to availability of new revenue equipment, to maintain the average age of our equipment.

2023 Compar ed to 2022 — The increase in consolidated operations and maintenance expense includes a $79.5 million increase from the results of U.S.

Xpress, partially offset by lower hiring and labor expense, as well as lower road expense.

2023 2022 2023 vs.

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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.

In recent years, insurance carriers have raised premiums for many businesses, including transportation companies.

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 addition, our Iron Insurance line of business offers insurance products to third-party carriers, earning additional premium revenues, which are partially offset by increased insurance reserves, but does increase our exposure to claims and inability to collect premiums.

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

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

2022 Compared to 2021 — Consolidated insurance and claims expense increased partially due to the inclusion of $18.4 million of insurance and claims expense from the results of ACT for the full year 2022, compared to the portion of 2021 following the acquisition date.

The remaining increase was primarily due to insurance reserves incurred through our expanded third-party carrier insurance program in 2022.

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

2023 Compared to 2022 — Consolidated insurance and claims expense increased primarily due to increased frequency and unfavorable claim development during the periods within our Iron Insurance line of business.

This was included in the $125.5 million operating loss of our third-party insurance business in 2023.

The increase also includes unfavorable developments within our self-insured retention limits and $55.8 million of insurance and claims expense from the results of U.S.

Based on recent results, including the continued unfavorable development of insurance reserves, the Company decided to initiate exiting the third-party insurance business during the fourth quarter of 2023 and expects to cease all third-party insurance operations and cancel any remaining policies by the end of the first quarter of 2024.

We do not expect this business to have a material impact to our results in 2024.

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2023 2022 2023 vs.

5 unchanged sentences

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

2022 Compared to 2021 — The increase in consolidated operating taxes and licenses expense is primarily due to the inclusion of operating taxes and licenses expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

2023 Compared to 2022 — The increase in consolidated operating taxes and licenses expense is primarily due to the inclusion of operating taxes and licenses expense from the results of U.S Xpress during 2023.

2023 2022 2023 vs.

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

2022 Compared to 2021 — The increase in consolidated communications expense is primarily due to the inclusion of $2.2 million of communications expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

2023 Compared to 2022 — The increase in consolidated communications expense is primarily due to the inclusion of $6.3 million of communications expense from the results of U.S.

This increase was partially offset by the implementation of new technology on our revenue equipment.

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2023 2022 2023 vs.

4 unchanged sentences

Depreciation relates primarily to our owned tractors, trailers, buildings, electronic logging devices, 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.

Changes to this fixed cost are generally attributed to increases or decreases in company-owned equipment, the relative percentage of owned versus leased equipment, and fluctuations in new equipment purchase prices.

Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment.

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 practices.

2022 Compared to 2021 — The increase in consolidated depreciation and amortization of property and equipment includes a $34.7 million increase of expense from ACT's results for the full year 2022, compared to the portion of 2021 following the acquisition date.

2023 Compared to 2022 — The increase in consolidated depreciation and amortization of property and equipment includes a $41.2 million increase of expense from the results of U.S.

The remaining increase is primarily due to an increase in owned versus leased equipment and higher depreciation for capital improvements made to our terminals.

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, terminal improvements, or terminal expansions in 2023.

We anticipate that depreciation and amortization expense will increase, 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, terminal improvements, or terminal expansions in 2024.

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2023 2022 2023 vs.

3 unchanged sentences

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

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

Amortization of intangibles relates to intangible assets identified with the 2017 Merger, ACT Acquisition, U.S.

Xpress 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.

2022 Compared to 2021 — The increase in consolidated amortization of intangibles for 2022 is attributed to the ACT, MME, UTXL, and Eleos acquisitions in 2021.

2023 Compared to 2022 — The increase in consolidated amortization of intangibles for 2023 is primarily attributed to the U.S.

Xpress Acquisition.

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

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2023 2022 2023 vs.

3 unchanged sentences

% of revenue, excluding truckload and LTL fuel surcharge 2.1 % 0.9 % 120 bps

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

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

2022 Compa red to 2021 — The increase in consolidated rental expense was primarily due to a $4.7 million increase in expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

This increase was partially offset by 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 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 2023.

Rental expense consists primarily of payments for our terminals and other real estate leases and, to a lesser extent, payments for revenue equipment from operating leases.

The primary factors affecting the expense are the size and location of our leased properties.

2023 Compared to 2022 — The increase in consolidated rental expense is primarily related to the inclusion of $67.3 million from the results of U.S.

Additional increases relate to the incorporation of new facilities as we expand our network and were partially offset by a decrease in the rental expense for revenue equipment.

2023 2022 2023 vs.

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

2022 Compared to 2021 — The increase in consolidated purchased transportation expense is primarily due to increased load volumes within our logistics business and inflationary pressures related to services provided by our third party carriers.

Purchased transportation expense also includes a $14.0 million increase in expense from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

2023 Compared to 2022 — The decrease in consolidated purchased transportation expense is primarily due to decreased load volume within our logistics and intermodal businesses and lower miles driven by independent contractors, partially offset by $160.6 million of additional purchased transportation expense from the results of U.S.

We expect that 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.

2022 2021 2022 vs.

(Dollars in thousands) Increase (decrease)

Impairments $ 810 $ 299 170.9 %

2022 Compared to 2021 — In 2022, we incurred impairment charges associated with building improvements (within our non-reportable segments).

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

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(Dollars in thousands) Increase (decrease)

Impairments $ 2,236 $ 810 176.0 %

2023 Compared to 2022 — In 2023, we incurred impairment charges related to certain revenue equipment held for sale (within the Truckload segment) and terminated software projects (recorded within our All Other Segments, specifically related to our third-party insurance business).

In 2022, we incurred impairment charges associated with building improvements (within our All Other Segments).

2023 2022 2023 vs.

(Dollars in thousands) Increase (decrease)

Miscellaneous operating expenses $ 157,294 $ 91,148 72.6 %

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.

2022 Compared to 2021 — The increase in net consolidated miscellaneous operating expenses includes $20.7 million of additional expense in 2022 from ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

Net consolidated miscellaneous operating expenses also include a net increase in legal settlements expense of $3.3 million, and higher operating expense associated with increased travel time and return to work programs.

These increases were partially offset by an $18.1 million year-over-year increase in gain on sales of equipment, including a $2.3 million increase from ACT reflected in the net increase noted above.

2023 Compared to 2022 — The increase in net consolidated miscellaneous operating expenses is primarily due to a $28.2 million decrease in gain on sales of equipment, as well as the inclusion of $22.3 million from the results of U.S.

Xpress and $5.6 million in transaction fees related to the U.S.

Xpress Acquisition.

Consolidated Other Expenses, net

4 unchanged sentences

Interest expense $ 127,100 $ 50,803 150.2 %

Other expenses (income), net $ 25,958 $ (28,905) (189.8 %)

Income tax expense $ 249,388 $ 230,887 8.0 %

Other (income) expenses, net $ (37,659) $ 25,958 (245.1 %)

Income tax (benefit) expense $ 54,768 $ 249,388 (78.0 %)

Interest income — Interest income includes interest earned from financing revenue equipment to independent contractors, as well as interest earned from our investments.

1 unchanged sentence

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

2022 Compared to 2021 — Consolidated interest expense increased due to higher overall debt balances and an increase in interest rates during 2022.

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

2022 Compared to 2021 — The unfavorable change in consolidated other expenses (income), net is primarily due to unrealized losses recognized from our investment in Embark, compared to a gain during 2021.

2023 Compared to 2022 — Consolidated interest expense increased due to an increase in interest rates during 2023.

Additional details regarding our debt are discussed in Note 15 in Part II, Item 8 of this Annual Report.

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

2023 Compared to 2022 — The increased change in consolidated other (income) expenses, net is primarily due to unrealized losses recognized from our investment in Embark in 2022 and a net gain recorded within our portfolio of investments during 2023.

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.

2022 Compared to 2021 — The increase in consolidated income tax expense was primarily due to an increase in income before income taxes.

2023 Compared to 2022 — The decrease in consolidated income tax expense was primarily due to a decrease in income before income taxes and a release of a valuation allowance in the third quarter of 2023.

This resulted in a 2023 effective tax rate of 20.3% and a 2022 effective tax rate of 24.4%.

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Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2022 Annual Report filed with the SEC on February 23, 2023 .

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Non-GAAP Reconciliation:

8 unchanged sentences

Impairments 2

Legal accruals 3

Legal accruals and loss contingencies 3

Transaction fees 4

Write-off of deferred debt issuance costs 5

Other acquisition related expenses 5

Severance expense 6

Change in fair value of deferred earnout 7

Adjusted income before income taxes 368,342 1,086,781

Provision for income tax expense at effective rate 8

(89,603) (265,585)

Adjusted Net Income Attributable to Knight-Swift $ 278,739 $ 821,196

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

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

5 unchanged sentences

Impairments 2

Legal accruals 3

Legal accruals and loss contingencies 3

Transaction fees 4

Write-off of deferred debt issuance costs 5

Other acquisition related expenses 5

Severance expense 6

Change in fair value of deferred earnout 7

Adjusted income before income taxes 2.28 6.66

2 unchanged sentences

Adjusted EPS $ 1.72 $ 5.03

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.

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

• 2022 impairment of building improvements (within our non-reportable segments);

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

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

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the ACT Acquisition, the U.S.

Xpress Acquisition and other acquisitions.

2 "Impairments" reflects the non-cash impairments:

• 2023 impairments related to certain revenue equipment held for sale (within the Truckload segment) and terminated software projects (recorded within our All Other Segments, specifically related to our third-party insurance business).

• 2022 impairment of building improvements (within our All Other Segments).

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3 "Legal accruals and loss contingencies" are included in "Insurance and claims" and "Miscellaneous operating expenses" in the consolidated statements of comprehensive income and reflect the following:

• During the fourth quarter of 2023, the Company recorded estimated exposure for various legal matters.

Additionally, the Company identified a probable loss contingency related to our third-party carrier insurance business included within our All Other segments.

During the second and third quarters of 2023, legal expense reflects the increased estimated exposures for various accrued legal matters based on recent settlement agreements.

First quarter 2023 legal expense reflects a decrease in the estimated exposure related to an accrued legal matter previously identified as probable and estimable in prior periods based on a recent settlement agreement.

• During 2022, the Company decreased the estimated exposure related to certain accrued legal matters previously identified as probable and estimable in prior periods based on recent settlement agreements.

Additional 2022 legal costs relate to certain lawsuits arising from employee and contract related matters.

• 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.

4 "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.

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

4 "Transaction fees" consists of legal and professional fees associated with the July 1, 2023 acquisition of U.S.

The transaction fees are included within "Miscellaneous operating expenses" and "Salaries, Wages, and benefits" and with small amounts included in other line items in the consolidated statements of comprehensive income.

5 "Other acquisition related expenses" represents one-time expenses associated with the U.S.

Xpress acquisition, including certain severance expense, including the acceleration of stock compensation expense as well as other operating expenses.

These are primarily included within "Salaries, wages, and benefits" in the condensed statements of comprehensive income.

6 "Severance expense" is included within "Salaries, wages, and benefits" in the condensed statements of comprehensive income.

7 " Change in fair value of deferred earnout" reflects the benefit for the change in fair value of a deferred earnout related to various acquisitions, which is recorded in "Miscellaneous operating expenses."

8 For 2023, an effective tax rate of 24.3% was applied in our Adjusted EPS calculation.

The change in the effective tax rate was primarily impacted by the change in pre-tax income based on the adjustments presented in Adjusted Net Income Attributable to Knight-Swift.

Additionally, the effective tax rate was normalized to exclude the third quarter 2023 tax benefit from the partial release of the pre-acquisition allowance associated with the U.S.

Xpress net operating loss and tax credit carryforward benefits.

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Impairments 2

Legal accruals 3

(2,236) (810)

Legal accruals and loss contingencies 3

(7,694) (415)

Transaction fees 4

Other acquisition related expenses 5

Severance expense 6

Change in fair value of deferred earnout 7

Adjusted Operating Expenses 5,873,591 5,350,269

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

5 See Non-GAAP Reconciliation:

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.

7 See Non-GAAP Reconciliation:

Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 7 .

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Impairments 2

Other acquisition related expenses 3

Severance expense 4

Adjusted Operating Expenses 3,716,512 3,063,693

1 unchanged sentence

Adjusted Operating Ratio 92.2 % 80.4 %

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

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

Xpress Acquisition.

2 See Non-GAAP Reconciliation:

Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS footnote 2.

3 See Non-GAAP Reconciliation:

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

4 See Non-GAAP Reconciliation:

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

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Fuel surcharge (167,886) (202,262)

Revenue, excluding fuel surcharge and intersegment transactions 867,292 345,785

Revenue, excluding fuel surcharge 914,568 867,292

Total operating expenses 963,574 942,945

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Total operating expenses (421,056) (437,619)

Operating income $ 48,167 $ 42,060

Operating (loss) income $ (10,507) $ 48,167

Operating ratio 102.6 % 90.1 %

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Availability under 2021 Revolver, due September 2026 1

Availability under 2021 RSA, due April 2024 2

Availability under 2023 RSA, due October 2025 2

Total unrestricted liquidity $ 1,184,152

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

"Cash and cash equivalents – restricted" consists of $185.8 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.

"Cash and cash equivalents – restricted" consists of $297.3 million, which is included in "Cash and cash equivalents — restricted" in the consolidated balance sheets held by Mohave and Red Rock for claims payments.

The remaining $3.9 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.

2 unchanged sentences

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

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 and expand 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.

In connection with our business strategy, we regularly evaluate acquisition and strategic partnership opportunities.

We expect net cash capital expenditures, including net cash expenditures of our LTL segment, will be in the range of $625.0 to $675.0 million in 2024.

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.

This range excludes cash outlays for potential acquisitions.

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

Over the long-term, we will continue to have significant capital requirements, which may require us to seek additional borrowing, lease financing, or equity capital.

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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 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.

However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under our 2023 RSA, 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 contractual payment obligations related to purchase commitments.

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

Prior to the maturity of our 2022 RSA, 2021 Term Loans, 2021 Revolver, Prudential Notes, and other debt, we expect to be contractually obligated to make interest payments of approximately $58.8 million, $156.9 million, $8.5 million, $2.8 million, and $0.1 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.

Prior to the maturity of our 2023 RSA, 2023 Term Loan, 2021 Term Loans, 2021 Revolver, Prudential Notes, revenue equipment installment notes, and other debt, we expect to be contractually obligated to make interest payments of approximately $58.6 million, $46.8 million, $150.5 million, $12.2 million, $1.6 million, $20.9 million and $1.8 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 2023 RSA, 2023 Term Loan, 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 2021 Debt Agreement and the 2023 RSA, our lenders may issue standby letters of credit on our behalf.

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

When we have certain letters of credit outstanding, the availability under the 2021 Revolver or 2023 RSA is reduced accordingly.

As of December 31, 2023, we also had outstanding letters of credit of $264.3 million pursuant to a bilateral agreement which do not impact the availability of the 2021 Revolver and 2023 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.

Share Repurchases — From time to time, and depending on Free Cash Flow 1 availability, debt levels, common stock prices, general economic and market conditions, as well as internal approval requirements, we may repurchase shares of our outstanding common stock.

The 2022 Knight-Swift Repurchase Plan had $200.0 million available as of December 31, 2023.

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Working Capital

We had working capital surpluses of $599.6 million as of December 31, 2022 and $339.5 million as of December 31, 2021.

The $260.1 million increase was primarily due to the maturity and repayment of our 2021 Term Loan A-1 in December 2022.

We had working capital deficit of $116.3 million as of December 31, 2023 and a working capital surplus of $599.6 million as of December 31, 2022.

The $715.9 million decrease was primarily due to the assumption of liabilities from the U.S.

Xpress Acquisition as well as the 2021 Term Loan A-2 maturing September 2024.

1 Refer to "Non-GAAP Financial Measures."

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Material Debt Agreements

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• $249.1 million:

2023 Term Loan, due September 2026, net of $0.9 million in deferred loan costs

• $526.5 million:

2023 RSA outstanding borrowings, net of $0.5 million in deferred loan costs

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• $279.3 million:

Other, net of $0.1 million in deferred loan costs

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

Revenue equipment installment notes

• $33.6 million:

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

Other, net of approximately $22,000 in deferred loan costs

As of December 31, 2022, we had $1.9 billion in material debt obligations at the following carrying values:

• $199.8 million:

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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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Cash Flow Analysis

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Net cash used in investing activities (1,228,025) (646,184) (581,841)

Net cash (used in) provided by financing activities (754,347) 779,326 (1,533,673)

Net cash provided by (used in) financing activities 150,690 (754,347) 905,037

Net Cash Provided by Operating Activities

2022 Compared to 2021 — The $245.7 million increase in net cash provided by operating activities was primarily due to a $126.1 million increase in operating income and a non-cash increase in depreciation and amortization of property and equipment of $81.9 million.

These increases were related to the addition of ACT's and MME's results for the full year 2022, compared to the portion of 2021 following the respective acquisition dates.

The remaining increase is due to various changes in working capital and was partially offset by a $122.1 million increase in taxes paid.

2023 Compared to 2022 — The $274.2 million decrease in net cash provided by operating activities was primarily due to a $753.7 million decrease in operating income and a $69.2 million increase in cash paid for interest.

These were partially offset by a $248.8 million decrease in cash paid for taxes and various changes in working capital.

Factors affecting the increase in operating income are discussed in "Results of Operations — Consolidated Operating and Other Expenses."

Net Cash Used in Investing Activities

2022 Compared to 2021 — The $1.2 billion decrease in net cash used in investing activities was primarily due to a $1.5 billion decrease in net cash invested in acquisitions and was partially offset by a $335.1 million increase in net cash capital expenditures, including 2022 investing activities of ACT and MME.

Net Cash (Used in) Provided by Financing Activities

2022 Compared to 2021 — Net cash used in financing activities increased by $1.5 billion, primarily due to a $1.2 billion reduction in debt proceeds, a $267.0 million increase in net repayments on our 2021 Revolver, and a $242.8 million increase in repurchases of our common stock.

2023 Compared to 2022 — The $0.6 billion increase in net cash used in investing activities was primarily due to a $0.4 billion increase in net cash invested in acquisitions and a $161.8 million increase in net cash capital expenditures.

Net Cash Provided by (Used in) Financing Activities

2023 Compared to 2022 — Net cash provided by financing activities increased by $0.9 billion, primarily due to a $250.0 million increase in proceeds from long-term debt, a $154.6 million decrease in repayments on finance leases and long-term debt, a $241.0 million decrease in net repayments on our 2021 Revolver, and a $299.9 million decrease in repurchases of our common stock.

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

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Our critical accounting estimates include the following:

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Claims Accruals — Insurance and claims expense varies as a percentage of total revenue, based on the frequency and severity of claims incurred in a given period, as well as changes in claims development trends.

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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 various acquisitions as of June 30, 2022 and 2021.

Knight-Swift evaluated its goodwill associated with the 2017 Merger and various acquisitions as of December 31, 2023 and 2022.

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, 2022 and 2021.

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.

The determination of the fair value of the trade names requires management to

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make significant estimates and assumptions related to forecasts of future revenues, discount rates, and royalty rates.

Changes in these assumptions could materially affect the determination of the fair value of the trade names, the amount of any trade names impairment charge, or both.

M anagement evaluated trade names for impairment as of June 30, 2022 and 2021 noting that the fair value exceeded carrying value for the trade name.

M anagement evaluated trade names for impairment as of December 31, 2023 and 2022 noting that the fair value exceeded carrying value for the trade name.

Refer to Note 10, in Part II, Item 8 of this Annual Report for discussion about the changes in the goodwill and indefinite-lived intangible asset balances.

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Estimating fair value includes several significant assumptions, including future cash flow estimates, determination of appropriate discount rates, and other assumptions that management believed reasonable under the circumstances.

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Changes in these estimates and assumptions could materially affect the determination of fair value and/or impairment.

Refer to Note 23, in Part II, Item 8 of this Annual Report for discussion about the changes in long-lived assets and the impact on our results for 2023 and 2022.

Fair Value of Net Assets Acquired in Business Combinations — Management performs fair value assessments in determining the fair value of the identifiable assets and liabilities acquired through the business combination as of the acquisition date.

Management and third-party specialists use significant inputs and assumptions in the valuations of acquired net assets such as certain prospective information, discount rates, royalty rates, and market data.

Changes in these estimates and assumptions could materially affect the determination of fair value.

Refer to Note 4, in Part II, Item 8 of this Annual Report for discussion about the fair value of net assets acquired in business combinations and the impact on our results for 2023 and 2022.

Income Taxes — Significant management judgment is required in determining our provision for income taxes and in determining whether deferred tax assets will be realized in full or in part.

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It is possible that certain strategies might be disallowed, resulting in an increased liability for income taxes.

Significant management judgments are involved in assessing the likelihood of sustaining the strategies and determining the likely range of defense and settlement costs, in the event that tax strategies are challenged by taxing authorities.

Significant management judgments are involved in assessing the likelihood of sustaining the strategies and determining the likely range of

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defense and settlement costs, in the event that tax strategies are challenged by taxing authorities.

An ultimate result worse than our expectations could adversely affect our results of operations.

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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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis