KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

PART I FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets (Unaudited)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands, except per share data)							(In thousands, except per share data)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	117,760	$	159,722	Cash and cash equivalents	$	194,650	$	156,699
Cash and cash equivalents – restricted	Cash and cash equivalents – restricted	39,583		41,331		Cash and cash equivalents – restricted	47,867		39,328
Restricted investments, held-to-maturity, amortized cost	Restricted investments, held-to-maturity, amortized cost	8,272		8,912		Restricted investments, held-to-maturity, amortized cost	8,954		9,001
Trade receivables, net of allowance for doubtful accounts of $20,568 and $18,178, respectively		522,075		518,547
Trade receivables, net of allowance for doubtful accounts of $21,797 and $22,093, respectively						Trade receivables, net of allowance for doubtful accounts of $21,797 and $22,093, respectively	584,011		578,479
Contract balance – revenue in transit	Contract balance – revenue in transit	14,679		12,696		Contract balance – revenue in transit	20,104		14,560
Prepaid expenses	Prepaid expenses	54,515		62,160		Prepaid expenses	66,278		71,649
Assets held for sale	Assets held for sale	39,641		41,786		Assets held for sale	20,835		29,756
Income tax receivable	Income tax receivable	5,902		17,026		Income tax receivable	31		2,903
Other current assets	Other current assets	27,073		27,848		Other current assets	21,015		20,988
Total current assets	Total current assets	829,500		890,028		Total current assets	963,745		923,363
Gross property and equipment	Gross property and equipment	3,947,597		3,742,739		Gross property and equipment	4,286,833		4,223,348
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(1,053,027)		(892,019)		Less: accumulated depreciation and amortization	(1,311,189)		(1,230,696)
Property and equipment, net	Property and equipment, net	2,894,570		2,850,720		Property and equipment, net	2,975,644		2,992,652
Operating lease right-of-use assets		136,953		169,425
Operating lease right-of-use-assets						Operating lease right-of-use-assets	95,658		113,296
Goodwill	Goodwill	2,922,970		2,918,992		Goodwill	2,958,709		2,922,964
Intangible assets, net	Intangible assets, net	1,412,192		1,379,459		Intangible assets, net	1,393,346		1,389,245
Other long-term assets	Other long-term assets	82,843		73,108		Other long-term assets	132,373		126,482
Total assets	Total assets	$	8,279,028	$	8,281,732	Total assets	$	8,519,475	$	8,468,002
LIABILITIES AND STOCKHOLDERS' EQUITY	LIABILITIES AND STOCKHOLDERS' EQUITY					LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	128,731	$	99,194	Accounts payable	$	126,918	$	101,001
Accrued payroll and purchased transportation	Accrued payroll and purchased transportation	109,398		110,065		Accrued payroll and purchased transportation	182,106		160,888
Accrued liabilities	Accrued liabilities	95,863		175,222		Accrued liabilities	143,168		88,894
Claims accruals – current portion	Claims accruals – current portion	168,012		150,805		Claims accruals – current portion	174,678		174,928

Finance lease liabilities and long-term debt – current portion	Finance lease liabilities and long-term debt – current portion	403,738		377,651		Finance lease liabilities and long-term debt – current portion	85,035		52,583
Operating lease liabilities – current portion	Operating lease liabilities – current portion	65,741		80,101		Operating lease liabilities – current portion	37,577		47,496
Accounts receivable securitization – current portion						Accounts receivable securitization – current portion	198,957		213,918
Total current liabilities	Total current liabilities	971,483		993,038		Total current liabilities	948,439		839,708
Revolving line of credit	Revolving line of credit	235,000		279,000		Revolving line of credit	115,000		210,000

Long-term debt – less current portion						Long-term debt – less current portion	299,063		298,907
Finance lease liabilities – less current portion	Finance lease liabilities – less current portion	48,179		57,383		Finance lease liabilities – less current portion	127,341		138,243
Operating lease liabilities – less current portion	Operating lease liabilities – less current portion	76,266		96,160		Operating lease liabilities – less current portion	62,549		69,852
Accounts receivable securitization		164,840		204,762

Claims accruals – less current portion	Claims accruals – less current portion	186,317		196,912		Claims accruals – less current portion	174,766		174,814
Deferred tax liabilities	Deferred tax liabilities	792,839		771,719		Deferred tax liabilities	797,019		815,941
Other long-term liabilities	Other long-term liabilities	38,515		14,455		Other long-term liabilities	45,960		48,497
Total liabilities	Total liabilities	2,513,439		2,613,429		Total liabilities	2,570,137		2,595,962
Commitments and contingencies (Notes 4, 10, and 11)
Commitments and contingencies (Notes 3, 9, and 10)						Commitments and contingencies (Notes 3, 9, and 10)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, par value $0.01 per share; 10,000 shares authorized; NaN issued		—		—
Common stock, par value $0.01 per share; 500,000 shares authorized; 170,162 and 170,688 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively.		1,701		1,707
Preferred stock, par value 0.01 per share; 10,000 shares authorized; 0ne issued						Preferred stock, par value 0.01 per share; 10,000 shares authorized; 0ne issued	0		0
Common stock, par value $0.01 per share; 500,000 shares authorized; 165,488 and 166,553 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.						Common stock, par value $0.01 per share; 500,000 shares authorized; 165,488 and 166,553 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively.	1,655		1,665

Additional paid-in capital	Additional paid-in capital	4,287,293		4,269,043		Additional paid-in capital	4,309,792		4,301,424
Retained earnings	Retained earnings	1,474,466		1,395,465		Retained earnings	1,625,397		1,566,759
Total Knight-Swift stockholders' equity	Total Knight-Swift stockholders' equity	5,763,460		5,666,215		Total Knight-Swift stockholders' equity	5,936,844		5,869,848
Noncontrolling interest	Noncontrolling interest	2,129		2,088		Noncontrolling interest	12,494		2,192
Total stockholders’ equity	Total stockholders’ equity	5,765,589		5,668,303		Total stockholders’ equity	5,949,338		5,872,040
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,279,028	$	8,281,732	Total liabilities and stockholders’ equity	$	8,519,475	$	8,468,002

See accompanying notes to condensed consolidated financial statements (unaudited).

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


		Quarter-to-Date June 30,						Year-to-Date June 30,					Quarter Ended March 31,
		2020		2019		2020		2019			2021		2020
		(In thousands, except per share data)													(In thousands, except per share data)
Revenue:	Revenue:									Revenue:
Revenue, excluding trucking fuel surcharge	Revenue, excluding trucking fuel surcharge	$	997,597	$	1,122,754	$	2,024,692	$	2,219,710	Revenue, excluding trucking fuel surcharge	$	1,133,105	$	1,027,095
Trucking fuel surcharge	Trucking fuel surcharge	63,101		119,329		160,804		226,908		Trucking fuel surcharge	89,909		97,703
Total revenue	Total revenue	1,060,698		1,242,083		2,185,496		2,446,618		Total revenue	1,223,014		1,124,798
Operating expenses:	Operating expenses:									Operating expenses:
Salaries, wages, and benefits	Salaries, wages, and benefits	365,311		380,354		720,144		744,209		Salaries, wages, and benefits	370,370		354,833
Fuel	Fuel	86,381		151,309		208,236		289,748		Fuel	118,236		121,855
Operations and maintenance	Operations and maintenance	66,067		82,443		134,471		162,203		Operations and maintenance	68,070		68,404
Insurance and claims	Insurance and claims	45,302		48,796		99,582		98,932		Insurance and claims	55,643		54,280
Operating taxes and licenses	Operating taxes and licenses	20,883		21,560		43,052		43,363		Operating taxes and licenses	22,048		22,169
Communications	Communications	4,902		4,960		9,776		10,043		Communications	5,037		4,874
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	114,601		102,938		224,822		203,875		Depreciation and amortization of property and equipment	119,915		110,221
Amortization of intangibles	Amortization of intangibles	11,474		10,692		22,948		21,385		Amortization of intangibles	11,749		11,474
Rental expense	Rental expense	22,372		32,875		47,747		68,420		Rental expense	16,864		25,375
Purchased transportation	Purchased transportation	200,107		261,273		425,383		530,622		Purchased transportation	258,230		225,276
Impairments	Impairments	353		2,182		1,255		2,182		Impairments	0		902
Miscellaneous operating expenses	Miscellaneous operating expenses	20,778		34,108		43,794		46,744		Miscellaneous operating expenses	14,593		23,016

Total operating expenses	Total operating expenses	958,531		1,133,490		1,981,210		2,221,726		Total operating expenses	1,060,755		1,022,679
Operating income	Operating income	102,167		108,593		204,286		224,892		Operating income	162,259		102,119
Other income (expenses):
Other (expenses) income:										Other (expenses) income:
Interest income	Interest income	437		977		1,269		1,993		Interest income	294		832
Interest expense	Interest expense	(4,021)		(7,156)		(10,128)		(14,504)		Interest expense	(3,486)		(6,107)
Other income, net		8,499		3,101		1,992		9,240
Total other income (expenses), net		4,915		(3,078)		(6,867)		(3,271)
Other income (expenses), net										Other income (expenses), net	16,105		(6,507)
Total other (expenses) income, net										Total other (expenses) income, net	12,913		(11,782)
Income before income taxes	Income before income taxes	107,082		105,515		197,419		221,621		Income before income taxes	175,172		90,337
Income tax expense	Income tax expense	26,815		26,076		51,369		53,999		Income tax expense	45,329		24,554
Net income	Net income	80,267		79,439		146,050		167,622		Net income	129,843		65,783
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest	(78)		(234)		(435)		(479)		Net income attributable to noncontrolling interest	(53)		(357)
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift	$	80,189	$	79,205	$	145,615	$	167,143	Net income attributable to Knight-Swift	$	129,790	$	65,426

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	0.47	$	0.46	$	0.86	$	0.97	Basic	$	0.77	$	0.38
Diluted	Diluted	$	0.47	$	0.46	$	0.85	$	0.97	Diluted	$	0.77	$	0.38

Dividends declared per share:	Dividends declared per share:	$	0.08	$	0.06	$	0.16	$	0.12	Dividends declared per share:	$	0.08	$	0.08

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	169,948		172,078		170,283		172,522		Basic	167,478		170,617
Diluted	Diluted	170,624		172,724		170,958		173,162		Diluted	168,374		171,282

See accompanying notes to the condensed consolidated financial statements (unaudited).

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited)


		Year-to-Date June 30,							Quarter Ended March 31,
		2020		2019			2021		2020
		(In thousands)							(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	146,050	$	167,622	Net income	$	129,843	$	65,783
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, equipment, and intangibles	Depreciation and amortization of property, equipment, and intangibles	247,770		225,260		Depreciation and amortization of property, equipment, and intangibles	131,664		121,695
Gain on sale of property and equipment	Gain on sale of property and equipment	(4,724)		(19,267)		Gain on sale of property and equipment	(10,537)		(3,005)

Impairments	Impairments	1,255		2,182		Impairments	0		902
Deferred income taxes	Deferred income taxes	23,112		9,519		Deferred income taxes	(18,920)		15,330
Non-cash lease expense	Non-cash lease expense	46,493		59,501		Non-cash lease expense	15,589		24,202
Other adjustments to reconcile net income to net cash provided by operating activities	Other adjustments to reconcile net income to net cash provided by operating activities	19,229		(2,282)		Other adjustments to reconcile net income to net cash provided by operating activities	(6,522)		14,065
(Decrease) increase in cash resulting from changes in:
Increase (decrease) in cash resulting from changes in:						Increase (decrease) in cash resulting from changes in:
Trade receivables	Trade receivables	(11,440)		50,495		Trade receivables	(11,586)		(5,268)
Income tax receivable	Income tax receivable	11,124		(28,494)		Income tax receivable	2,872		4,380
Accounts payable	Accounts payable	8,417		(25,165)		Accounts payable	12,534		31,084
Accrued liabilities and claims accrual	Accrued liabilities and claims accrual	(75,069)		(16,910)		Accrued liabilities and claims accrual	70,975		(93,193)
Operating lease liabilities	Operating lease liabilities	(48,243)		(59,745)		Operating lease liabilities	(15,174)		(25,414)
Other assets and liabilities	Other assets and liabilities	19,386		96		Other assets and liabilities	5,375		4,782
Net cash provided by operating activities	Net cash provided by operating activities	383,360		362,812		Net cash provided by operating activities	306,113		155,343
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Proceeds from maturities of held-to-maturity investments	Proceeds from maturities of held-to-maturity investments	6,950		12,945		Proceeds from maturities of held-to-maturity investments	500		4,350
Purchases of held-to-maturity investments	Purchases of held-to-maturity investments	(7,852)		(5,847)		Purchases of held-to-maturity investments	(512)		(4,301)
Proceeds from sale of property and equipment, including assets held for sale	Proceeds from sale of property and equipment, including assets held for sale	64,463		103,818		Proceeds from sale of property and equipment, including assets held for sale	67,175		33,756
Purchases of property and equipment	Purchases of property and equipment	(259,641)		(323,722)		Purchases of property and equipment	(111,020)		(109,431)
Expenditures on assets held for sale	Expenditures on assets held for sale	(418)		(7,961)		Expenditures on assets held for sale	(401)		(352)
Net cash and equivalents invested in acquisitions		(46,811)		—
Net cash, restricted cash, and equivalents invested in acquisitions						Net cash, restricted cash, and equivalents invested in acquisitions	(39,281)		(46,811)
Other cash flows from investing activities	Other cash flows from investing activities	(9,757)		(3,115)		Other cash flows from investing activities	9,398		(2,793)
Net cash used in investing activities	Net cash used in investing activities	(253,066)		(223,882)		Net cash used in investing activities	(74,141)		(125,582)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayment of finance leases and long-term debt	Repayment of finance leases and long-term debt	(31,893)		(36,941)		Repayment of finance leases and long-term debt	(6,600)		(14,498)

(Repayments) borrowings on revolving line of credit, net		(44,000)		75,000
Borrowings under accounts receivable securitization		—		90,000
(Repayments) borrowings on revolving lines of credit, net						(Repayments) borrowings on revolving lines of credit, net	(95,000)		15,000

Repayment of accounts receivable securitization	Repayment of accounts receivable securitization	(40,000)		(185,000)		Repayment of accounts receivable securitization	(15,000)		(25,000)

Proceeds from common stock issued	Proceeds from common stock issued	9,892		5,363		Proceeds from common stock issued	2,709		3,257
Repurchases of the Company's common stock	Repurchases of the Company's common stock	(34,630)		(86,892)		Repurchases of the Company's common stock	(53,661)		(34,630)
Dividends paid	Dividends paid	(27,673)		(20,952)		Dividends paid	(13,624)		(13,964)

Other cash flows from financing activities	Other cash flows from financing activities	(5,467)		(2,600)		Other cash flows from financing activities	(4,190)		(2,050)
Net cash used in financing activities	Net cash used in financing activities	(173,771)		(162,022)		Net cash used in financing activities	(185,366)		(71,885)
Net decrease in cash, restricted cash, and equivalents		(43,477)		(23,092)
Net increase (decrease) in cash, restricted cash, and equivalents						Net increase (decrease) in cash, restricted cash, and equivalents	46,606		(42,124)
Cash, restricted cash, and equivalents at beginning of period	Cash, restricted cash, and equivalents at beginning of period	202,228		130,976		Cash, restricted cash, and equivalents at beginning of period	197,277		202,228
Cash, restricted cash, and equivalents at end of period	Cash, restricted cash, and equivalents at end of period	$	158,751	$	107,884	Cash, restricted cash, and equivalents at end of period	$	243,883	$	160,104

See accompanying notes to condensed consolidated financial statements (unaudited).

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued


		Year-to-Date June 30,							Quarter Ended March 31,
		2020		2019			2021		2020
		(In thousands)							(In thousands)
Supplemental disclosures of cash flow information:	Supplemental disclosures of cash flow information:					Supplemental disclosures of cash flow information:
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	10,455	$	14,277	Interest	$	2,505	$	6,293
Income taxes	Income taxes	3,632		72,467		Income taxes	2,199		3,280
Non-cash investing and financing transactions:
Non-cash investing and financing activities:						Non-cash investing and financing activities:
Equipment acquired included in accounts payable	Equipment acquired included in accounts payable	$	27,463	$	50,091	Equipment acquired included in accounts payable	$	13,860	$	44,084

Equipment sales receivables		3,388		5,677
Financing provided to independent contractors for equipment sold	Financing provided to independent contractors for equipment sold	2,553		3,204		Financing provided to independent contractors for equipment sold	462		1,670
Transfers from property and equipment to assets held for sale		37,779		65,264
Transfer from property and equipment to assets held for sale						Transfer from property and equipment to assets held for sale	29,955		15,288
Noncontrolling interest associated with acquisition						Noncontrolling interest associated with acquisition	10,281		0
Contingent consideration associated with acquisition	Contingent consideration associated with acquisition	18,245		—		Contingent consideration associated with acquisition	0		18,654
Right-of-use assets obtained in exchange for new operating lease liabilities		1,633		8,643
Right-of-use assets (forfeited) obtained in exchange for operating lease liabilities						Right-of-use assets (forfeited) obtained in exchange for operating lease liabilities	(2,608)		1,704
Right-of-use assets obtained in exchange for new operating lease liabilities through acquisitions	Right-of-use assets obtained in exchange for new operating lease liabilities through acquisitions	12,356		—		Right-of-use assets obtained in exchange for new operating lease liabilities through acquisitions	560		12,356
Property and equipment obtained in exchange for financing lease liabilities reclassified from operating lease liabilities		48,659		32,153

Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities						Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities	28,149		12,286


Reconciliation of Cash, Restricted Cash, and Equivalents:	Reconciliation of Cash, Restricted Cash, and Equivalents:	June 30, 2020		December 31, 2019		June 30, 2019		December 31, 2018		Reconciliation of Cash, Restricted Cash, and Equivalents:	March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019
		(In thousands)															(In thousands)
Condensed Consolidated Balance Sheets	Condensed Consolidated Balance Sheets									Condensed Consolidated Balance Sheets
Cash and cash equivalents	Cash and cash equivalents	$	117,760	$	159,722	$	55,063	$	82,486	Cash and cash equivalents	$	194,650	$	156,699	$	119,132	$	159,722
Cash and cash equivalents – restricted ¹		39,583		41,331		51,602		46,888
Other long-term assets ¹		1,408		1,175		1,219		1,602
Cash and cash equivalents – restricted 1										Cash and cash equivalents – restricted 1	47,867		39,328		39,812		41,331
Other long-term assets 1										Other long-term assets 1	1,366		1,250		1,160		1,175
Condensed Consolidated Statements of Cash Flows	Condensed Consolidated Statements of Cash Flows									Condensed Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents	Cash, restricted cash, and equivalents	$	158,751	$	202,228	$	107,884	$	130,976	Cash, restricted cash, and equivalents	$	243,883	$	197,277	$	160,104	$	202,228

________

1 Reflects cash and cash equivalents that are primarily restricted for claims payments.

See accompanying notes to condensed consolidated financial statements (unaudited).

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


		Common Stock					Additional Paid-in Capital		Retained Earnings			Total Knight-Swift Stockholders' Equity		Noncontrolling Interest				Total Stockholders’ Equity	Common Stock					Additional Paid-in Capital			Retained Earnings					Total Knight-Swift Stockholders' Equity			Noncontrolling Interest			Total Stockholders’ Equity
		Shares	Par Value																		Shares		Par Value			Additional Paid-in Capital		Retained Earnings						Total Knight-Swift Stockholders' Equity			Noncontrolling Interest			Total Stockholders’ Equity
		(In thousands, except per share data)																												(In thousands, except per share data)
Balances – December 31, 2019		170,688	$	1,707	$	4,269,043	$	1,395,465		$	5,666,215	$	2,088	$	5,668,303
Balances – December 31, 2020																Balances – December 31, 2020	166,553		$	1,665	$	4,301,424		$	1,566,759					$	5,869,848				$	2,192		$	5,872,040

Common stock issued to employees	Common stock issued to employees	567	5		8,309					8,314				8,314		Common stock issued to employees	220		3		2,006							2,009							2,009
Common stock issued to the Board		13	—		515					515				515

Common stock issued under ESPP	Common stock issued under ESPP	33	—		1,063					1,063				1,063		Common stock issued under ESPP	18		0		700							700							700
Company shares repurchased	Company shares repurchased	(1,139)	(11)				(34,619)			(34,630)				(34,630)		Company shares repurchased	(1,303)		(13)					(53,648)				(53,661)							(53,661)
Shares withheld – RSU settlement	Shares withheld – RSU settlement						(4,500)			(4,500)				(4,500)		Shares withheld – RSU settlement								(4,159)				(4,159)							(4,159)
Employee stock-based compensation expense	Employee stock-based compensation expense				8,363					8,363				8,363		Employee stock-based compensation expense					5,662							5,662							5,662
Cash dividends paid and dividends accrued ($0.08 per share)	Cash dividends paid and dividends accrued ($0.08 per share)						(27,495)			(27,495)				(27,495)		Cash dividends paid and dividends accrued ($0.08 per share)								(13,345)				(13,345)							(13,345)
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift						145,615			145,615				145,615		Net income attributable to Knight-Swift								129,790				129,790							129,790

Investment in noncontrolling interest																Investment in noncontrolling interest																10,281			10,281
Distribution to noncontrolling interest	Distribution to noncontrolling interest											(394)		(394)		Distribution to noncontrolling interest																(32)			(32)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest											435		435		Net income attributable to noncontrolling interest																53			53

Balances – June 30, 2020		170,162	$	1,701	$	4,287,293	$	1,474,466		$	5,763,460	$	2,129	$	5,765,589
Balances – March 31, 2021																Balances – March 31, 2021	165,488		$	1,655	$	4,309,792		$	1,625,397			$	5,936,844			$	12,494		$	5,949,338


		Common Stock					Additional Paid-in Capital		Retained Earnings			Total Knight-Swift Stockholders' Equity		Noncontrolling Interest				Total Stockholders’ Equity	Common Stock					Additional Paid-in Capital			Retained Earnings					Total Knight-Swift Stockholders' Equity			Noncontrolling Interest			Total Stockholders’ Equity
		Shares	Par Value																		Shares		Par Value			Additional Paid-in Capital		Retained Earnings						Total Knight-Swift Stockholders' Equity			Noncontrolling Interest			Total Stockholders’ Equity
		(In thousands, except per share data)																												(In thousands, except per share data)
Balances – December 31, 2018		172,844	$	1,728	$	4,242,369	$	1,216,852		$	5,460,949	$	1,770	$	5,462,719
Balances – December 31, 2019																Balances – December 31, 2019	170,688		$	1,707	$	4,269,043		$	1,395,465					$	5,666,215				$	2,088		$	5,668,303

Common stock issued to employees	Common stock issued to employees	347	3		3,700					3,703				3,703		Common stock issued to employees	211		2		2,709							2,711							2,711
Common stock issued to the Board		19	—		531					531				531

Common stock issued under ESPP	Common stock issued under ESPP	42	1		1,128					1,129				1,129		Common stock issued under ESPP	16		0		546							546							546
Company shares repurchased	Company shares repurchased	(2,874)	(29)				(86,863)			(86,892)				(86,892)		Company shares repurchased	(1,139)		(11)					(34,619)				(34,630)							(34,630)
Shares withheld – RSU settlement	Shares withheld – RSU settlement						(2,304)			(2,304)				(2,304)		Shares withheld – RSU settlement								(1,971)				(1,971)							(1,971)
Employee stock-based compensation expense	Employee stock-based compensation expense				6,569					6,569				6,569		Employee stock-based compensation expense					3,536							3,536							3,536
Cash dividends paid and dividends accrued ($0.06 per share)							(20,761)			(20,761)				(20,761)
Cash dividends paid and dividends accrued ($0.08 per share)																Cash dividends paid and dividends accrued ($0.08 per share)								(13,774)				(13,774)							(13,774)
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift						167,143			167,143				167,143		Net income attributable to Knight-Swift								65,426				65,426							65,426

Distribution to noncontrolling interest	Distribution to noncontrolling interest											(296)		(296)		Distribution to noncontrolling interest																(180)			(180)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest											479		479		Net income attributable to noncontrolling interest																357			357

Balances – June 30, 2019		170,378	$	1,703	$	4,254,297	$	1,274,067		$	5,530,067	$	1,953	$	5,532,020
Balances – March 31, 2020																Balances – March 31, 2020	169,776		$	1,698	$	4,275,834		$	1,410,527			$	5,688,059			$	2,265		$	5,690,324

See accompanying notes to condensed consolidated financial statements (unaudited).

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~


~~Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Continued~~

Common Stock Additional
Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling
Interest Total
Stockholders’ Equity
Shares Par Value
(In thousands, except per share data)
Balances – March 31, 2020 169,776 1,698 4,275,834 1,410,527 5,688,059 2,265 5,690,324
Common stock issued to employees 356 3 5,600 5,603 5,603
Common stock issued to the Board 13 — 515 515 515
Common stock issued under ESPP 17 — 517 517 517
Shares withheld – RSU settlement (2,529) (2,529) (2,529)
Employee stock-based compensation expense 4,827 4,827 4,827
Cash dividends paid and dividends accrued ($0.08 per share) (13,721) (13,721) (13,721)
Net income attributable to Knight-Swift 80,189 80,189 80,189
Distribution to noncontrolling interest (214) (214)
Net income attributable to noncontrolling interest 78 78
Balances – June 30, 2020 170,162 1,701 4,287,293 1,474,466 5,763,460 2,129 5,765,589

Common Stock Additional
Paid-in Capital Retained Earnings Total Knight-Swift Stockholders' Equity Noncontrolling
Interest Total
Stockholders’ Equity
Shares Par Value
(In thousands, except per share data)
Balances – March 31, 2019 173,066 $ 1,730 4,248,188 $ 1,292,838 $ 5,542,756 $ 1,867 $ 5,544,623
Common stock issued to employees 149 1 1,327 1,328 1,328
Common stock issued to the Board 19 — 531 531 531
Common stock issued under ESPP 18 1 562 563 563
Company shares repurchased (2,874) (29) (86,863) (86,892) (86,892)
Shares withheld – RSU settlement (790) (790) (790)
Employee stock-based compensation expense 3,689 3,689 3,689
Cash dividends paid and dividends accrued ($0.06 per share) (10,323) (10,323) (10,323)
Net income attributable to Knight-Swift 79,205 79,205 79,205
Distribution to noncontrolling interest (148) (148)
Net income attributable to noncontrolling interest 234 234
Balances – June 30, 2019 170,378 $ 1,703 $ 4,254,297 $ 1,274,067 $ 5,530,067 $ 1,953 $ 5,532,020

~~See accompanying notes to condensed consolidated financial statements (unaudited).~~

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 — Introduction and Basis of Presentation

Certain acronyms and terms used throughout this Quarterly Report are specific to the Company, commonly used in the trucking industry, or are otherwise frequently used throughout this document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.

Description of Business

Knight-Swift is a transportation solutions provider, headquartered in Phoenix, Arizona. During the ~~first half of 2020,~~quarter ended March 31, 2021, the Company operated an average of ~~18,428~~18,224 tractors (comprised of ~~16,327~~16,305 company tractors and ~~2,101~~1,919 independent contractor tractors) and ~~57,456~~59,797 trailers within the Trucking segment. Additionally, the Company operated an average of ~~586~~597 tractors and ~~10,355~~10,846 containers in the Intermodal segment. The Company's 3 reportable segments are Trucking, Logistics, and Intermodal.

Basis of Presentation

The condensed consolidated financial statements and footnotes included in this Quarterly Report include the accounts of Knight-Swift Transportation Holdings Inc. and its subsidiaries and should be read in conjunction with the consolidated financial statements and footnotes included in Knight-Swift's ~~2019~~2020 Annual Report. In management's opinion, these condensed consolidated financial statements were prepared in accordance with GAAP and include all adjustments necessary (consisting of normal recurring adjustments) for the fair statement of the periods presented.

With respect to transactional/durational data, references to years pertain to calendar years. Similarly, references to quarters pertain to calendar quarters.

~~Changes in Presentation~~

~~Changes in presentation associated with adopting accounting pronouncements are included in Note 2.~~

Seasonality

In the transportation industry, results of operations generally follow a seasonal pattern. Freight volumes in the first quarter are typically lower due to less consumer demand, customers reducing shipments following the holiday season, and inclement weather. At the same time, operating expenses generally increase, and tractor productivity of the Company's fleet, independent contractors, and third-party carriers decreases during the winter months due to decreased fuel efficiency, increased cold weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather. These factors typically lead to lower operating profitability, as compared to other parts of the year. Additionally, beginning in the latter half of the third quarter and continuing into the fourth quarter, the Company typically experiences surges pertaining to holiday shopping trends toward delivery of gifts purchased over the Internet, as well as the length of the holiday season (consumer shopping days between Thanksgiving and Christmas). However, cyclical changes in the trucking industry, including imbalances in supply and demand, can override the seasonality faced in the industry.

Impact of COVID-19

~~During the first half of 2020,~~ COVID-19 became a global pandemic in 2020, which triggered a significant downturn in the global economy. The Company continues to operate its business through the COVID-19 pandemic and has taken additional precautions to ensure the safety of its employees, customers, vendors, and the communities in which it operates.During the quarter and year-to-date periods ended June 30, 2020, the Company incurred $10.0 million and $12.3 million, respectively, of expenses directly attributable to the pandemic, which were incremental to those incurred prior to the outbreak. These primarily pertained to payroll premiums paid to drivers and shop technicians, additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from normal business operations and are not expected to recur once the pandemic subsides.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

There are various uncertainties that have arisen from the COVID-19 pandemic. While management is continuing to monitor the impact of the pandemic on Knight-Swift, including its employees, customers, independent contractors, stockholders, and other business partners and stakeholders, it is difficult to predict the impact that the pandemic will have on future results of its operations, financial position, and liquidity. This has caused some uncertainties around various accounting estimates. Due to these uncertainties, the Company's accounting estimates may change, as management's assessment of the impacts of the COVID-19 pandemic continues to evolve.

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

~~Note 2 — Recently Adopted Accounting Pronouncements~~

~~ASU 2016-13: Financial Instruments – Credit Losses (Topic 326) — Measurements of Credit Losses on Financial Instruments~~

~~Summary of the Standard~~ — ~~In June 2016, the FASB issued ASU 2016-13, which, in addition to several clarifying ASUs, established the new ASC Topic 326,~~ ~~Financial Instruments — Credit Losses~~ ("CECL"). The new CECL standard amends the FASB's guidance on the impairment of financial instruments. Specifically, it adds the CECL impairment model to GAAP which is based on expected losses rather than incurred losses. This is intended to result in more timely recognition of such losses. Under the new CECL standard, an entity recognizes as an allowance its estimate of lifetime expected credit losses. The new CECL standard is also intended to reduce the complexity of GAAP by decreasing the number of credit impairment models that entities use to account for debt instruments. Further, the new CECL standard makes targeted changes to the impairment model for available-for-sale debt securities and moves the guidance from ASC Topic 320, ~~Investments — Debt and Equity Securities,~~ to ASC Subtopic 326-30. For public business entities, the new standard was effective for annual and interim reporting periods beginning after December 15, 2019. For most debt instruments, entities are required to adopt the new CECL standard using a modified retrospective approach, meaning that entities should record a cumulative-effect adjustment to equity as of the beginning of the first reporting period in which the guidance is effective.

~~Practical Expedient~~ — As permitted under ASU 2016-13 (and related ASUs), management elected to apply the collateral-dependent financial asset practical expedient which allows entities to measure the expected credit losses for the financial asset by comparing the amortized cost basis with the fair value of the collateral at the reporting date, rather than using the fair value of the financial asset.

~~Current Period Impact of Adoption —~~The Company adopted ASC Topic 326 on January 1, 2020 using the modified retrospective approach. Upon adoption of the standard management assessed the potential impact of the CECL model on each type of the Company's financial assets and determined that there was no material impact on the Company's financial statements or accounting policies.

ASU 2018-15: Intangibles – Goodwill and Other – Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract

~~Summary of the Standard~~ — In August 2018, the FASB issued ASU 2018-15, which amended ASC Subtopic 350-40 to address a customer’s accounting for implementation costs incurred in a cloud computing arrangement that is a service contract ("Service CCA"). The amendments in ASU 2018-15 align the accounting for costs incurred to implement a Service CCA with previously codified guidance on capitalizing costs associated with developing or obtaining internal-use software.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

Specifically, the ASU amends ASC Subtopic 350-40 to include in its scope implementation costs incurred with a Service CCA. This addition clarifies that a customer should apply the guidance from ASC Paragraph 350-40-25 to determine which stage the project is in before assessing whether implementation costs should be capitalized in a Service CCA that is considered a service contract. These capitalized items should be recorded within the same balance sheet line item as a prepayment for any fees.

Any capitalized costs from the Service CCA should be expensed over the term of the hosting arrangement, which includes the noncancelable period and any options to extend that are reasonably certain to be exercised and recorded in the same line item as fees associated with the hosting element of the arrangement. The amendments in this ASU were effective for public business entities for fiscal years beginning after December 15, 2019 and could be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption.

~~Current Period Impact of Adoption —~~ The Company adopted the amendments in ASU 2018-15 on January 1, 2020 and elected to apply the amendments on a prospective basis to implementation costs incurred after the date of adoption. Upon review of the Service CCA's entered into during year-to-date June 30, 2020, management has determined that adoption of the amendments has not had a material impact on the Company's financial statements and related accounting policies.

~~ASU 2017-04: Intangibles – Goodwill and Other (Topic 350) – Simplifying the Test for Goodwill Impairment~~

~~Summary of the Standard~~ — In January 2017, the FASB issued ASU 2017-04, which amends ASC Topic 350 by simplifying the goodwill impairment test. The amendments in this ASU are intended to simplify subsequent measurement of goodwill. The key amendment in the ASU eliminates Step 2 from the goodwill impairment test, in which entities measured a goodwill impairment loss by comparing the implied fair value to the carrying amount of a reporting unit's goodwill. Instead, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value with the carrying amount of a reporting unit and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. The amendments also require companies to disclose the amounts of goodwill allocated to each reporting unit with a zero or negative carrying amount of assets. The amendments were effective for public business entities for fiscal years beginning after December 15, 2019 and should be applied on a prospective basis.

~~Current Period Impact of Adoption —~~ The Company adopted the amendments in ASU 2017-14 on January 1, 2020 on a prospective basis. Management has updated the Company's accounting policy to incorporate the amendments in the ASU and has included the revised disclosure requirements below.

~~Refer to Note 7 for disclosures about the Company's goodwill balances.~~

~~Accounting Policy Update~~

~~Goodwill —Management evaluates goodwill on an annual basis as of June 30~~^th, or more frequently if indicators of impairment exist. The Company assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount. If the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company conducts a quantitative goodwill impairment test. Management estimates the fair values of its reporting units using a combination of the income and market approaches. If the carrying amount of a reporting unit exceeds the fair value, then management recognizes an impairment loss of the same amount. This loss is only limited to the total amount of goodwill allocated to that reporting unit.

~~Other ASUs~~

There were various other ASUs that became effective during year-to-date June 30, 2020, which did not have a material impact on the Company's results of operations, financial position, cash flows, or disclosures.

129

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 32 — Recently Issued Accounting Pronouncements

~~Date Issued~~

~~Reference~~

~~Description~~

~~Adoption Date and Method~~

~~Financial Statement Impact~~

~~March 2020~~

~~2020-04: Reference Rate Reform (Topic 848) –~~ ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ ¹

The amendments in this Update provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The amendments in this ASU are effective for any interim period after March 12, 2020 and should be applied on a prospective basis.

~~March 2020~~

~~No material impact~~ ²

~~March 2020~~

~~2020-03: Codification Improvements to Financial Instruments~~ ¹

The amendments within this ASU updated several sections of the Codification and how various topics and subtopics interacted due to new guidance on financial instruments. This includes addressing issues related to fair value option disclosures, line-of-credit or revolving-debt arrangements and leases among others. The amendments should be applied prospectively and have varying effective dates, which were all in effect for public business entities prior to issuance of the ASU.

~~March 2020, Prospective~~

~~No material impact~~

~~February 2020~~

~~2020-02: Financial Instruments – Credit Losses (Topic 326) and Leases – (Topic 842) –~~ ~~Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842)~~ ¹

The amendments in this ASU incorporate discussion from SEC Staff Accounting Bulletin No. 119 about expected implementation practices related to ASC Topic 326. The amendments also codify the SEC Staff's announcement that it would not object to the FASB's update to effective dates for major updates, which were amended within ASU 2019-10.

~~January 2021, Adoption method varies by amendment~~

~~Adopted January 1, 2020, no material impact~~

~~January 2020~~

~~2020-01: Investments – Equity Securities (Topic 321), Investments – Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) –~~ ~~Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the FASB Emerging Issues Task Force)~~

The amendments clarify that an entity should consider observable transactions when determining to apply or discontinue the equity method for the purposes of applying the measurement alternative. The amendments also clarify that an entity would not consider whether a purchased option would be accounted for under the equity method when applying ASC 815-10-15-141(a).

~~January 2021, Prospective~~

~~Currently under evaluation, but not expected to be material~~

No material ASUs issued since the 2020 annual report.

~~1 Adopted during the first quarter of 2020.~~

2 As identified within the 2018 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for LIBOR. The Company's Term Loan also references LIBOR and management is currently underway with refinancing, as the Term Loan matures in October of 2020.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

Note 43 — Acquisitions

Eleos Acquisition

On ~~January~~February 1, ~~2020,~~2021, pursuant to a ~~stock~~membership interest purchase agreement ~~(the "SPA"~~("MIPA"), the Company, through a wholly owned subsidiary, acquired ~~100.0%~~79.44% of the ~~equity~~issued and outstanding membership interests of Eleos Technologies, LLC ("Eleos"), a ~~warehousing-related company (the "Warehousing Co.") with locations throughout~~Greenville, South Carolina based software provider, specializing in mobile driving platforms, which complement the ~~Central US.~~

Company's suite of services. The total purchase price consideration, including cash on hand and net working capital adjustments, consisted of ~~$66.9 million included $48.2~~$41.5 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the Revolver on the transaction date. At closing, ~~$6.8~~$4.1 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations and remains subject to further adjustments. The purchase price also included contingent consideration consisting of three additional annual payments of up to $8.1 million each (or $24.3 million in total), representing the maximum possible annual deferred payments to the sellers based on Warehousing Co.'s earnings before interest and taxes ("EBIT") for each of the calendar years ending December 31, 2020, December 31, 2021, and the annualized six-month period ending June 30, 2022. In order to estimate Warehousing Co.'s future performance, the Company utilized the Monte Carlo simulation method using certain inputs, including Warehousing Co.'s forecasted EBIT, discount rate, dividend yields, expected volatility, and expected stock returns during the above measurement periods. Based on the above inputs, the present value of the total contingent consideration, along with the estimated net working capital adjustment equaled $18.7 million as of January 1, 2020. During the second quarter of 2020, the net working capital adjustment, was reduced by $0.4 million based on the actual versus estimated net working capital adjustment as of the transaction date. This adjustment resulted in the total estimated contingent consideration and net working capital adjustment decreasing to $18.3 million. The total purchase price consideration, as if adjusted at the January 1, 2020 transaction date, is identified in the table below.other items.

The ~~SPA~~MIPA included that both the buyer and sellers would file an election under the Internal Revenue Code Section ~~338(h)(10). Accordingly,~~754 to adjust the ~~book and~~ tax basis of the ~~acquired~~Company's assets and liabilities, ~~are~~with respect to the ~~same as~~buyer's purchase of the ~~purchase date.~~equity. The ~~SPA~~MIPA contains customary representations, warranties, covenants, and indemnification ~~provisions.~~provisions for transactions of this nature.

The goodwill recognized represents expected synergies from combining the operations of ~~Warehousing Co.~~Eleos with the Company, including enhanced service offerings, as well as other intangible assets that did not meet the criteria for separate recognition. The goodwill is expected to be deductible for tax purposes.

The purchase price allocation for the acquisition is preliminary and has been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, pending the completion of the valuation of acquired tangible assets, an independent valuation of certain acquired intangible assets, assessment of lease agreements, assessment of certain liabilities, the calculation of deferred taxes based upon the underlying tax basis of assets acquired and liabilities assumed, and assessment of other tax related items. As the Company obtains more information, the preliminary purchase price allocation disclosed below is subject to change. Any future adjustments to the preliminary purchase price allocation, including changes within identifiable intangible assets or estimation uncertainty impacted by market conditions, may impact future net earnings. The purchase price allocation adjustments can be made through the end of the measurement period, which is not to exceed one year from the acquisition date.

1410

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The following table summarizes the fair value of the consideration transferred as of the acquisition date:

January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020 Second Quarter 2020 Adjustments January 1, 2020 Opening Balance Sheet as Reported at June 30, 2020
(in thousands)
Fair value of the consideration transferred $ 66,854 $ (410) $ 66,444
Cash and cash equivalents 1,388 — 1,388
Trade and other receivables 3,301 — 3,301
Prepaid expenses 608 — 608
Other current assets 78 — 78
Property and equipment 1,938 — 1,938
Operating lease right-of-use assets 12,356 — 12,356
Identifiable intangible assets ¹ 55,681 — 55,681
Deferred tax assets 54 — 54
Other noncurrent assets 404 — 404
Total assets 75,808 — 75,808
Accounts payable (347) — (347)
Accrued liabilities (644) — (644)
Operating lease liabilities – current portion (4,451) — (4,451)
Operating lease liabilities – less current portion (7,905) — (7,905)
Total liabilities (13,347) — (13,347)
Goodwill $ 4,393 $ (410) $ 3,983


	February 1, 2021 Opening Balance Sheet as Reported at March 31, 2021

Fair value of the consideration transferred	$	41,518

Cash and cash equivalents	2,237

Trade and other receivables	545
Prepaid expenses and other assets	47


Operating lease right-of-use assets	560
Identifiable intangible assets 1	15,850


Total assets	19,239

Accounts payable	(156)
Accrued payroll and payroll-related expenses	(605)
Accrued liabilities	(1,391)
Operating lease liabilities – current and noncurrent portions	(560)
Other long-term liabilities	(475)
Total liabilities	(3,187)

Noncontrolling interest	(10,281)
Total stockholders' equity	(10,281)

Goodwill	$	35,747

1 Includes $8.8 million in customer relationships, $0.2 million in noncompete agreements, $3.5 million in internally-developed software, and a $3.4 million trade name.

Warehousing Co. Acquisition

On January 1, 2020, pursuant to a stock purchase agreement (the "SPA") the Company, through a wholly owned subsidiary, acquired 100.0% of the equity interests of a warehousing-related company (the "Warehousing Co.") with locations throughout the Central US.

The total purchase price consideration of $66.9 million included $48.2 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the Revolver on the transaction date. At closing, $6.8 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations. During the third quarter of 2020, the escrow proceeds were released to the sellers pursuant to the SPA. The purchase price also included contingent consideration consisting of three additional annual payments of up to $8.1 million each (or $24.3 million in total), representing the maximum possible annual deferred payments to the sellers based on Warehousing Co.'s earnings before interest and taxes ("EBIT") for each of the calendar years ending December 31, 2020, December 31, 2021, and the annualized six-month period ending June 30, 2022. In order to estimate Warehousing Co.'s future performance, the Company utilized the Monte Carlo simulation method using certain inputs, including Warehousing Co.'s forecasted EBIT, discount rate, dividend yields, expected volatility, and expected stock returns during the above measurement periods. Based on the above inputs, the present value of the total contingent consideration, along with the estimated net working capital adjustment, equaled $18.7 million as of January 1, 2020. During the measurement period, the net working capital adjustment was reduced by $0.4 million based on the actual versus estimated net working capital adjustment as of the transaction date. This adjustment resulted in the total estimated contingent consideration and net working capital adjustment decreasing to $18.3 million. The total purchase price consideration, as if adjusted at the January 1, 2020 transaction date, is identified in the table below.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

During the fourth quarter of 2020, the Company paid the first annual payment of $8.1 million as a result of the achievement of Warehousing Co.’s EBIT performance target for the calendar year December 31, 2020. Additionally, during the fourth quarter of 2020, the Company increased the estimated fair value of the remaining contingent consideration representing the final two annual payments, resulting in a $6.7 million fair value adjustment of the deferred earnout, which was recorded in “Miscellaneous operating expenses” in the consolidated statement of comprehensive income. As such, as of March 31, 2021 and December 31, 2020, the remaining estimated contingent consideration was $16.2 million representing the fair value of the remaining annual deferred payments for the calendar year ending December 31, 2021 and the annualized six-month period ending June 30, 2022.

The SPA included an election under the Internal Revenue Code Section 338(h)(10). Accordingly, the book and tax basis of the acquired assets and liabilities are the same as of the purchase date. The SPA contains customary representations, warranties, covenants, and indemnification provisions.

The goodwill recognized represents expected synergies from combining the operations of Warehousing Co. with the Company, including enhanced service offerings, as well as other intangible assets that did not meet the criteria for separate recognition. The goodwill is expected to be deductible for tax purposes.

The purchase price was allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date. The purchase price allocation was open for adjustments through the end of the measurement period, which closed one year from the January 1, 2020 acquisition date.

The following table summarizes the fair value of the consideration transferred as of the acquisition date:


	January 1, 2020 Opening Balance Sheet as Reported at March 31, 2020		Adjustments		January 1, 2020 Opening Balance Sheet as Reported at March 31, 2021

Fair value of the consideration transferred	$	66,854	$	(410)	$	66,444

Cash and cash equivalents	1,388		0		1,388

Trade and other receivables	3,301		0		3,301
Prepaid expenses	608		0		608
Other current assets	78		0		78
Property and equipment	1,938		0		1,938
Operating lease right-of-use assets	12,356		0		12,356
Identifiable intangible assets 1	55,681		0		55,681
Deferred tax assets	54		0		54
Other noncurrent assets	404		0		404
Total assets	75,808		0		75,808

Accounts payable	(347)		0		(347)
Accrued liabilities	(644)		0		(644)
Operating lease liabilities – current portion	(4,451)		0		(4,451)
Operating lease liabilities – less current portion	(7,905)		0		(7,905)


Total liabilities	(13,347)		0		(13,347)

Goodwill	$	4,393	$	(410)	$	3,983

1 Includes $53.8 million in customer relationships, $0.7 million in noncompete agreements, $0.6 million in internally developed software, and a $0.6 million trade name.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 54 — Investments

Restricted Investments, Held-to-Maturity

The following tables present the cost or amortized cost, gross unrealized gains and temporary losses, and estimated fair value of the Company's restricted investments, held-to-maturity:


		June 30, 2020															March 31, 2021
				Gross Unrealized											Gross Unrealized
		Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value			Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value
		(In thousands)															(In thousands)
US corporate securities	US corporate securities	$	8,272	$	27	$	(3)	$	8,296	US corporate securities	$	8,954	$	0	$	(4)	$	8,950

Restricted investments, held-to-maturity	Restricted investments, held-to-maturity	$	8,272	$	27	$	(3)	$	8,296	Restricted investments, held-to-maturity	$	8,954	$	0	$	(4)	$	8,950


		December 31, 2019															December 31, 2020
				Gross Unrealized											Gross Unrealized
		Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value			Cost or Amortized Cost		Gains		Temporary Losses		Estimated Fair Value
		(In thousands)															(In thousands)
US corporate securities	US corporate securities	$	8,912	$	4	$	(1)	$	8,915	US corporate securities	$	9,001	$	2	$	(8)	$	8,995

Restricted investments, held-to-maturity	Restricted investments, held-to-maturity	$	8,912	$	4	$	(1)	$	8,915	Restricted investments, held-to-maturity	$	9,001	$	2	$	(8)	$	8,995

As of ~~June 30, 2020,~~March 31, 2021, the contractual maturities of the restricted investments, held-to-maturity, were one year or less. There were ~~3 securities and 7~~16 securities that were in an unrealized loss position for less than twelve months as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020. The Company did 0t recognize any impairment losses related to its held-to-maturity investments during the ~~quarter~~quarters ended March 31, 2021 or ~~year-to-date periods ended June 30, 2020~~2020.

Other Investments

On April 16, 2021, the Company agreed to pay $25.0 million in cash in exchange for a convertible promissory note. The cash was paid on May 4, 2021. The convertible promissory note accrues simple interest on the unpaid principal balance at a rate of 10.0% and is payable on demand any time after April 16, 2022, unless earlier converted into shares of the borrower's common stock. The amount outstanding on the promissory note is automatically converted into a number of shares of the borrower's common stock upon either the closing of a qualified financing or ~~2019, respectively.~~upon a public event, subject to discounted conversion pricing per share based on a valuation of the borrower.

Refer to Note 1615 for additional information regarding fair value measurements of the Company's investments.

Note 65 — Assets Held for Sale

The Company expects to sell its assets held for sale, which primarily consist of revenue equipment, within the next twelve months. Revenue equipment held for sale totaled ~~$39.6~~$20.8 million and ~~$41.8~~$29.8 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Net gains on disposals, including disposals of property and equipment classified as assets held for sale, reported in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income, ~~were:~~

•~~$1.7~~were $10.5 million and ~~$7.5~~$3.0 million for the ~~quarter-to-date periods~~quarters ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

•~~$4.7 million and $19.2 million~~ The increase in net gains on disposals was primarily due to a stronger market for used revenue equipment during the ~~year-to-date periods~~quarter ended ~~June 30, 2020 and 2019, respectively.~~March 31, 2021, as compared to the same period in 2020.

The Company did 0t recognize impairment losses related to assets held for sale during the quarter ended March 31, 2021, as compared to the same period last year when the Company recognized impairment losses related to assets held for sale of ~~approximately $0.4 million during~~$0.1 million.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 6 — Goodwill and Other Intangible Assets

Goodwill

The changes in the ~~quarter~~carrying amount of goodwill were as follows:



	(In thousands)
Goodwill at beginning of period	$	2,922,964
Adjustments relating to deferred tax assets	(2)
Acquisition 1	35,747

Goodwill at end of period	$	2,958,709

1The goodwill associated with the Eleos acquisition referenced in Note 3 was allocated to the non-reportable segment, and ~~year-to-date periods ended June 30, 2020.~~ is net of purchase price accounting adjustments.

The Company did 0t ~~recognize~~record any ~~impairment losses~~goodwill impairments during the quarters ended March 31, 2021 or 2020.

Other Intangible Assets

Other intangible asset balances were as follows:


	March 31, 2021		December 31, 2020
	(In thousands)
Definite-lived intangible assets 1
Gross carrying amount	$	910,447	$	894,597
Accumulated amortization	(157,601)		(145,852)
Definite-lived intangible assets, net	752,846		748,745
Indefinite-lived trade names:
Gross carrying amount	640,500		640,500
Intangible assets, net	$	1,393,346	$	1,389,245

1The major categories of the Company's definite-lived intangible assets include customer relationships, non-compete agreements, internally-developed software, trade names, and others.

Identifiable intangible assets subject to amortization have been recorded at fair value. Intangible assets related to acquisitions other than the 2017 Merger are amortized over a weighted-average amortization period of 18.1 years. The Company's customer relationship intangible assets ~~held~~related to the 2017 Merger are being amortized over a weighted average amortization period of 19.9 years.

As of March 31, 2021, management anticipates that the composition and amount of amortization associated with intangible assets will be $35.7 million for ~~sale during~~ the ~~quarter or year-to-date periods ended June 30, 2019.~~remainder of 2021, $47.4 million in 2022, $46.9 million for each of the years 2023 and 2024, and $46.8 million in 2025. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets, and other events.

1614

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 7 — ~~Goodwill and Other Intangible Assets~~

~~Goodwill~~

~~The changes in the carrying amount of goodwill were as follows:~~


	~~(In thousands)~~
~~Goodwill, balance at December 31, 2019~~	$	~~2,918,992~~
~~Adjustments relating to deferred tax assets~~	~~(5)~~
~~Acquisition ¹~~	~~3,983~~

~~Goodwill, balance at June 30, 2020~~	$	~~2,922,970~~

1~~The goodwill associated with the acquisition referenced in Note 4 was allocated to the non-reportable segment, and is net of purchase price accounting adjustments.~~

~~The Company did 0trecord any~~ ~~goodwill impairments during the quarter or year-to-date periods ended June 30, 2020 or 2019.~~

~~Other Intangible Assets~~

~~Other intangible asset balances were as follows:~~

June 30,
2020 December 31,
2019
(In thousands)
Definite-lived intangible assets ¹
Gross carrying amount $ 894,597 $ 839,516
Accumulated amortization (122,905) (99,957)
Definite-lived intangible assets, net 771,692 739,559
Trade names:
Gross carrying amount 640,500 639,900
Intangible assets, net $ 1,412,192 $ 1,379,459

1~~The major categories of the Company's definite-lived intangible assets include customer relationships, non-compete agreements, internally-developed software, and others.~~

Identifiable intangible assets subject to amortization have been recorded at fair value. Intangible assets related to acquisitions other than the 2017 Merger are amortized over a weighted-average amortization period of 18.9 years. The Company's customer relationship intangible assets related to the 2017 Merger are being amortized over a weighted average amortization period of 19.9 years.

As of June 30, 2020, management anticipates that the composition and amount of amortization associated with intangible assets will be $22.9 million for the remainder of 2020, $45.9 million in 2021, $45.8 million in 2022, and $45.2 million for each of the years 2023 and 2024. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets, and other events.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

~~Note 8 —~~ Income Taxes

Effective Tax Rate — The quarter-to-date ~~June 30,~~March 31, 2021 and March 31, 2020 ~~and June 30, 2019~~ effective tax rates were ~~25.0%~~25.9% and ~~24.7%~~27.2%, respectively. The Company recognized a discrete item relating to stock compensation deductions during the quarter ended June 30, 2020. The Company also recognized discrete items relating to stock compensation deductions as well as the partial release of its reserve for uncertain tax positions during the quarter ended June 30, 2019.

The year-to-date June 30, 2020 and June 30, 2019 effective tax rates were 26.0% and 24.4%, respectively. The Company recognized discrete items relating to stock compensation deductions partially offset by unfavorable foreign currency fluctuations for the year-to-date June 30, 2020. The Company also recognized discrete items relating to stock compensation deductions as well as a partial release of its reserve for uncertain tax positions during the year-to-date period ended June 30, 2019.

Valuation Allowance —The Company has 0t established a valuation allowance as it has been determined that, based upon available evidence, a valuation allowance is not required.Management believes that it is more ~~like~~lylikely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.~~All other deferred tax assets are expected to be realized and utilized by continued profitability in future periods.~~

Unrecognized Tax Benefits — Management believes it is reasonably possible that a decrease of up to ~~$1.0~~$0.7 million in unrecognized tax benefits relating to federal deductions may be necessary within the next twelve months.

Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits were approximately ~~$0.5~~$0.4 million and ~~$0.4~~$0.3 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

Tax Examinations — ~~The Company is currently under examination by the IRS for the 2012 tax year and management does not expect any adjustments that would have a material impact on the Company's effective tax rate.~~ Certain of the Company's subsidiaries are ~~also~~ currently under examination by various state jurisdictions for tax years ranging from 2013 to ~~2018~~2019. At the completion of these examinations, management does not expect any adjustments that would have a material impact on the Company's effective tax rate. Years subsequent to ~~2014~~2015 remain subject to examination.

Note 98 — Accounts Receivable Securitization

The 2018 RSA is a secured borrowing that is collateralized by the Company's eligible receivables, for which the Company is the servicing agent. The Company's receivable originator subsidiaries sell, on a revolving basis, undivided interests in all of their eligible accounts receivable to Swift Receivables Company II, LLC ("SRCII") who in turn sells a variable percentage ownership in those receivables to the various purchasers. The Company's eligible receivables are included in "Trade receivables, net of allowance for doubtful accounts" in the condensed consolidated balance sheets. As of ~~June 30, 2020,~~March 31, 2021, the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.

The 2018 RSA is subject to fees, various affirmative and negative covenants, representations and warranties, and default and termination provisions customary for facilities of this type. The Company was in compliance with these covenants as of ~~June 30, 2020.~~March 31, 2021. Collections on the underlying receivables by the Company are held for the benefit of SRCII and the various purchasers and are unavailable to satisfy claims of the Company and its subsidiaries.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

The following table summarizes the key terms of the 2018 RSA (dollars in thousands):



Effective date			July 11, 2018
Final maturity date1			July 9, 2021
Borrowing capacity			$325,000
Accordion option ¹2			$175,000
Unused commitment fee rate ²3			20 to 40 basis points
Program fees on outstanding balances ³4			one-month LIBOR + 80 to 100 basis points

1On April 23, 2021, the Company entered into a new accounts receivable securitization agreement which extends the maturity date to April 23, 2024. See below for more details.

2The accordion option increases the maximum borrowing capacity, subject to participation of the purchasers.

23The 2018 RSA commitment fee rate is based on the percentage of the maximum borrowing capacity utilized.

34The 2018 RSA program fee is based on the Company's consolidated total net leverage ratio. As identified within the 2018 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for LIBOR.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Availability under the 2018 RSA is calculated as follows:


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(In thousands)							(In thousands)
Borrowing base, based on eligible receivables	Borrowing base, based on eligible receivables	$	273,800	$	299,100	Borrowing base, based on eligible receivables	$	267,200	$	302,700
Less: outstanding borrowings ¹		(165,000)		(205,000)
Less: outstanding borrowings 1						Less: outstanding borrowings 1	(199,000)		(214,000)
Less: outstanding letters of credit	Less: outstanding letters of credit	(68,841)		(70,841)		Less: outstanding letters of credit	(65,281)		(67,281)
Availability under accounts receivable securitization facilities	Availability under accounts receivable securitization facilities	$	39,959	$	23,259	Availability under accounts receivable securitization facilities	$	2,919	$	21,419

1Outstanding borrowings are included in "Accounts receivable ~~securitization"~~securitization – current portion" in the condensed consolidated balance sheets,offset by ~~$0.2~~$43.0 thousand and $0.1 million of deferred loan costs as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020, respectively. Interest accrued on the aggregate principal balance at a rate of ~~1.1% and 2.6%~~1.0% as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, respectively.~~2020.

Program fees and unused commitment fees are recorded in "Interest expense" in the condensed consolidated statements of comprehensive income. The Company incurred accounts receivable securitization program fees of $0.7 million and ~~$1.9~~$1.4 million during the ~~quarter-to-date June 30,~~quarters ended March 31, 2021 and 2020, ~~and 2019 periods, respectively. The Company incurred accounts receivable securitization program fees of $2.1 million and $3.9 million during the year-to-date June 30, 2020 and 2019 periods,~~ respectively.

Refer to Note 1615 for information regarding the fair value of the 2018 RSA.

Subsequent Event

On April 23, 2021, the Company entered into the Fifth Amendment to the Amended and Restated Receivables Sales Agreement ("2021 RSA"). The 2021 RSA, among other things, extends the maturity date to April 23, 2024, increases the maximum borrowing capacity to $400.0 million, decreases the accordion option to $100.0 million, and changes the program fee to one-month LIBOR plus 82.5 basis points.

Note 9 — Commitments

Purchase Commitments

As of March 31, 2021, the Company had outstanding commitments to purchase revenue equipment of $654.8 million in the remainder of 2021 ($419.2 million of which were tractor commitments) and 0ne thereafter. These purchases may be financed through any combination of operating leases, finance leases, debt, proceeds from sales of existing equipment, and cash flows from operations.

As of March 31, 2021, the Company had outstanding commitments to purchase facilities and non-revenue equipment of $37.5 million in the remainder of 2021, $2.1 million in the two-year period 2022 through 2023, $0.5 million in the two-year period 2024 through 2025, and 0ne thereafter. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

As of March 31, 2021, the Company had outstanding commitments for fuel purchases of $25.0 million in the remainder of 2021, and 0ne thereafter.

TRP Commitments

Since 2003, Knight has entered into partnership agreements with entities that make privately-negotiated equity investments. In these agreements, Knight committed to invest in return for an ownership percentage. During the first quarter of 2021, Knight entered into a $10.0 million commitment to invest in TRP Capital Partners V, LP with $10.0 million outstanding as of March 31, 2021. There were no other material changes related to the previously disclosed TRP commitments during the quarter ended March 31, 2021.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 10 ~~— Commitments~~

~~Purchase Commitments~~

~~As of June 30, 2020, the Company had outstanding commitments to purchase revenue equipment of~~ ~~$317.9 million~~ in the remainder of 2020 ($224.0 million of which were tractor commitments) and NaN thereafter. These purchases may be financed through any combination of operating leases, finance leases, debt, proceeds from sales of existing equipment, and cash flows from operations.

As of June 30, 2020, the Company had outstanding commitments to purchase facilities and non-revenue equipment of $19.2 million in the remainder of 2020, $1.8 million in the two-year period 2021 through 2022, $0.2 million in the two-year period 2023 through 2024, and NaN thereafter. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

~~TRP Commitments~~

Since 2003, Knight has entered into partnership agreements with entities that make privately-negotiated equity investments. In these agreements, Knight committed to invest in return for an ownership percentage. During the first quarter of 2020, Knight entered into a $20.0 million commitment to invest in the newly formed TRP Capital Partners V, LP with $16.8 million outstanding as of June 30, 2020. There were no other material changes related to the previously disclosed TRP commitments during the quarter ended June 30, 2020.

~~Note 11~~ — Contingencies and Legal Proceedings

Legal Proceedings

Information is provided below regarding the nature, status, and contingent loss amounts, if any, associated with the Company's pending legal matters. There are inherent uncertainties in these legal matters, some of which are beyond management's control, making the ultimate outcomes difficult to predict. Moreover, management's views and estimates related to these matters may change in the future, as new events and circumstances arise and the matters continue to develop.

The Company has made accruals with respect to its legal matters where appropriate, which are included in "Accrued liabilities" in the condensed consolidated balance sheets. The Company has recorded an aggregate accrual of approximately ~~$27.9~~$21.8 million, relating to the Company's outstanding legal proceedings as of ~~June 30, 2020.~~March 31, 2021.

Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.

2017

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

EMPLOYEE COMPENSATION AND PAY PRACTICES MATTERS

CRST Expedited

The plaintiff alleges tortious interference with contract and unjust enrichment related to non-competition agreements entered into with certain of its drivers.

Plaintiff(s)

Defendant(s)

Date instituted

Court or agency currently pending in

CRST Expedited, Inc.

Swift Transportation Co. of Arizona LLC.

March 20, 2017

United States District Court for the Northern District of Iowa

Recent Developments and Current Status

In July 2019, a jury issued an adverse verdict in this lawsuit. The court issued a decision granting in part and denying in part certain motions related to the jury’s verdict. Both parties have appealed the court’s decision. The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of ~~June 30, 2020.~~

March 31, 2021.

California Wage, Meal, and Rest Class Actions

The plaintiffs generally allege one or more of the following: that the Company 1) failed to pay the California minimum wage; 2) failed to provide proper meal and rest periods; 3) failed to timely pay wages upon separation from employment; 4) failed to pay for all hours worked; 5) failed to pay overtime; 6) failed to properly reimburse work-related expenses; and 7) failed to provide accurate wage statements.

Plaintiff(s)

Defendant(s)

Date instituted

Court or agency currently pending in

John Burnell ¹

Swift Transportation Co., Inc

March 22, 2010

United States District Court for the Central District of California

James R. Rudsell ¹

Swift Transportation Co. of Arizona, LLC and Swift Transportation Company

April 5, 2012

United States District Court for the Central District of California

Recent Developments and Current Status

In April 2019, the parties reached settlement of this matter. In January 2020, the court granted final approval of the settlement. ~~The plaintiff~~Two objectors appealed the court’s decision granting final approval of the settlement. The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of ~~June 30, 2020.~~

~~Arizona Minimum Wage Class Action~~

The plaintiffs generally allege one or more of the following: 1) failure to pay minimum wage for the first day of orientation; 2) failure to pay minimum wage for time spent studying; 3) failure to pay minimum wage for 16 hours per day; and 4) failure to pay minimum wage for the first eight hours of sleeper berth time.

~~Plaintiff(s)~~

~~Defendant(s)~~

~~Date instituted~~

~~Court or agency currently pending in~~

~~Pamela Julian ¹~~

~~Swift Transportation Co., Inc. and Swift Transportation Co. of Arizona LLC~~

~~December 29, 2015~~

~~United States District Court for the District of Arizona~~

~~Recent Developments and Current Status~~

In December 2019, the court awarded damages for failure to pay minimum wage for 16 hours per day. The likelihood that a loss has been incurred is probable and estimable, and the loss has accordingly been accrued as of June 30, 2020.

~~1 Individually and on behalf of all others similarly situated.~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

March 31, 2021.

INDEPENDENT CONTRACTOR MATTERS

Ninth Circuit Independent Contractor Misclassification Class Action

The putative class alleges that Swift misclassified independent contractors as independent contractors, instead of employees, in violation of the Fair Labor Standards Act and various state laws. The lawsuit also raises certain related issues with respect to the lease agreements that certain independent contractors have entered into with Interstate Equipment Leasing, LLC. The putative class seeks unpaid wages, liquidated damages, interest, other costs, and attorneys' fees.

Plaintiff(s)

Defendant(s)

Date instituted

Court or agency currently pending in

Joseph Sheer, Virginia Van Dusen, Jose Motolinia, Vickii Schwalm, Peter Wood ¹1

Swift Transportation Co., Inc., Interstate Equipment Leasing, Inc., Jerry Moyes, and Chad Killebrew

December 22, 2009

Unites States District Court of Arizona and Ninth Circuit Court of Appeals

Recent Developments and Current Status

In January 2020, the court granted final approval of the settlement in this matter. In March 2020, the Company paid the settlement amount approved by the court. As of ~~June 30, 2020,~~March 31, 2021, the Company has ~~a reserve~~ accrued for anticipated costs associated with finalizing this matter.

1 Individually and on behalf of all others similarly situated.

Other Environmental

The Company's tractors and trailers are involved in motor vehicle accidents, experience damage, mechanical failures and cargo issues as an incidental part of its normal ordinary course of operations. From time to time, these matters result in the discharge of diesel fuel, motor oil or other hazardous materials into the environment. Depending on local regulations and who is determined to be at fault, the Company is sometimes responsible for the clean-up costs associated with these discharges. As of March 31, 2021, the Company's estimate for its total legal

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

liability for all such clean-up and remediation costs was approximately $0.7 million in the aggregate for all current and prior year claims.

Self Insurance

Automobile Liability, General Liability, and Excess Liability — Effective November 1, 2020, the Company has $100.0 million in excess auto liability ("AL") coverage. Effective November 1, 2019, the Company ~~has~~had $130.0 million in excess auto liability ("AL") coverage. For prior years, Swift and Knight separately maintained ~~separately~~ varying excess AL and general liability limits. During prior policy periods, Swift AL claims were subject to a $10.0 million self-insured retention ("SIR") per occurrence and Knight AL claims were subject to a $1.0 million to $3.0 million SIR per occurrence. Additionally, Knight ~~carries~~carried a $2.5 million aggregate deductible for any loss or losses within the $5.0 million excess of $5.0 million layer of coverage. Effective March 1, 2020, Knight and Swift retain the same $10.0 million SIR per occurrence.

Cargo Damage and Loss — The Company is insured against cargo damage and loss with liability limits of $2.0 million per truck or trailer with a $10.0 million limit per occurrence.

Workers' Compensation and Employers' Liability — The Company is self-insured for workers' compensation coverage. Swift maintains statutory coverage limits, subject to a $5.0 million SIR for each accident or disease. Effective March 1, 2019, Knight maintains statutory coverage limits, subject to a $2.0 million SIR for each accident or disease. ~~Prior to March 1, 2019, the Knight SIR was $1.0 million per occurrence.~~

Medical — Knight maintains primary and excess coverage for employee medical expenses, with a ~~$0.3~~$0.4 million ~~self-insured retention~~SIR per claimant. ~~Through December 31, 2019, Swift was fully insured on its medical benefits (subject to contributed premiums).~~ Effective January 1, 2020, Swift provides primary and excess coverage for employee medical expenses, with an SIR of $0.5 million per claimant to all employees.

Note 11 — Share Repurchase Plan

On November 30, 2020, the Company announced that the Board approved the repurchase of up to $250.0 million worth of the Company's outstanding common stock (the "2020 Knight-Swift Share Repurchase Plan"). With the adoption of the 2020 Knight-Swift Share Repurchase Plan, the Company terminated the previous share repurchase plan, which had approximately $54.1 million of authorized purchases remaining upon termination.

The following table presents the Company's repurchases of its common stock under the respective share repurchase plans, excluding advisory fees:


Share Repurchase Plan		Quarter-to-Date March 31, 2021			Quarter-to-Date March 31, 2020
Board Approval Date	Authorized Amount	Shares	Amount		Shares	Amount
	(in thousands)
May 30, 2019	$250,000	0	$	—	1,139	$	34,630
November 24, 2020 1	$250,000	1,303	$	53,661	0	$	0
		1,303	$	53,661	1,139	$	34,630

1$196.3 million and $250.0 million remained available under the 2020 Knight-Swift Share Repurchase Plan as of March 31, 2021 and December 31, 2020, respectively.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 12 ~~— Share Repurchase Plan~~

On May 31, 2019, the Company announced that the Board approved the repurchase of up to $250.0 million worth of the Company's outstanding common stock (the "2019 Knight-Swift Share Repurchase Plan"). With the adoption of the 2019 Knight-Swift Share Repurchase Plan, the Company terminated the $250.0 million repurchase plan previously approved by the Board in June 2018 (the "2018 Knight-Swift Share Repurchase Plan"). There was approximately $0.2 million remaining under the 2018 Knight-Swift Share Repurchase Plan upon termination.

~~The following table presents the Company's repurchases of its common stock under the respective share repurchase plans, excluding advisory fees:~~

Share Repurchase Plan Quarter-to-Date June 30, 2020 Year-to-Date June 30, 2020
Board Approval Date Authorized Amount Shares Amount Shares Amount
(in thousands)
May 30, 2019 ¹ $250,000 — $ — 1,139 $ 34,630
— $ — 1,139 $ 34,630

Share Repurchase Plan Quarter-to-Date June 30, 2019 Year-to-Date June 30, 2019
Board Approval Date Authorized Amount Shares Amount Shares Amount
(in thousands)
June 1, 2018 $250,000 2,315 $ 70,500 2,315 $ 70,500
May 30, 2019 ¹ $250,000 559 16,392 559 16,392
2,874 $ 86,892 2,874 $ 86,892

1 ~~$199.0 million and $233.6 million remained available under the 2019 Knight-Swift Share Repurchase Plan as of June 30, 2020 and~~ ~~December 31, 2019, respectively.~~

~~Note 13~~ — Weighted Average Shares Outstanding

Earnings per share, basic and diluted, as presented in the condensed consolidated statements of comprehensive income, are calculated by dividing net income attributable to Knight-Swift by the respective weighted average common shares outstanding during the period.

The following table reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:


		Quarter-to-Date June 30,			Year-to-Date June 30,			Quarter Ended March 31,
		2020	2019	2020	2019		2021	2020
		(In thousands)							(In thousands)
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	169,948	172,078	170,283	172,522	Basic weighted average common shares outstanding	167,478	170,617
Dilutive effect of equity awards	Dilutive effect of equity awards	676	646	675	640	Dilutive effect of equity awards	896	665
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	170,624	172,724	170,958	173,162	Diluted weighted average common shares outstanding	168,374	171,282
Anti-dilutive shares excluded from diluted earnings per share ¹		365	916	329	933
Anti-dilutive shares excluded from diluted earnings per share 1						Anti-dilutive shares excluded from diluted earnings per share 1	6	256

1 Shares were excluded from the dilutive-effect calculation because the outstanding awards' exercise prices were greater than the average market price of the Company's common stock for the periods presented.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~

Note 1413 — Related Party Transactions

The following table presents Knight-Swift's transactions with companies controlled by and/or affiliated with its related parties:

Quarter-to-Date June 30, Year-to-Date June 30,
2020 2019 2020 2019
Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift Provided by Knight-Swift Received by Knight-Swift
(In thousands)
Freight Services:
Central Freight Lines ¹ $ 1,020 $ — $ 3,843 $ — $ 7,836 $ — $ 6,959 $ —
SME Industries ¹ 28 — 62 — 28 — 217 —
Total $ 1,048 $ — $ 3,905 $ — $ 7,864 $ — $ 7,176 $ —
Facility and Equipment Leases:
Central Freight Lines ¹ $ 23 $ 93 $ 78 $ 92 $ 23 $ 185 $ 322 $ 185
Other Affiliates ¹ 4 36 5 — 9 109 9 —
Total $ 27 $ 129 $ 83 $ 92 $ 32 $ 294 $ 331 $ 185
Other Services:
Central Freight Lines ¹ $ — $ — $ 542 $ — $ 15 $ — $ 542 $ —
DPF Mobile ¹ — 19 — 54 $ — 31 — 98
Other Affiliates ¹ 10 — 12 614 19 — 22 1,232
Total $ 10 $ 19 $ 554 $ 668 $ 34 $ 31 $ 564 $ 1,330


	Quarter Ended March 31,
		2021	2020
			Provided by Knight-Swift		Received by Knight-Swift		Provided by Knight-Swift		Received by Knight-Swift
			(In thousands)
Freight Services:
Central Freight Lines 1			$	0	$	0	$	6,816	$	0


Total			$	0	$	0	$	6,816	$	0
Facility and Equipment Leases:
Central Freight Lines 1			$	0	$	0	$	0	$	92
Other Affiliates 1			0		57		5		73
Total			$	0	$	57	$	5	$	165
Other Services:
Central Freight Lines 1			$	0	$	0	$	15	$	0



DPF Mobile 1			0		0		0		12
Other Affiliates 1			6		9		9		0
Total			$	6	$	9	$	24	$	12

1 Entities affiliated with former Board member Jerry Moyes include Central Freight Lines, SME Industries, Compensi Services, and DPF Mobile. "Other affiliates" includes entities that are associated with various board members and executives and require approval by the Board prior to completing transactions. Transactions with these entities generally include freight services, facility and equipment leases, equipment sales, and other services.

•Freight Services Provided by Knight-Swift — The Company charges each of these companies for transportation services.

•Freight Services Received by Knight-Swift — Transportation services received from Central Freight Lines represent less-than-truckload freight services rendered to haul parts and equipment to Company shop locations.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

•Other Services Provided by Knight-Swift — Other services provided by the Company to the identified related parties include equipment sales and miscellaneous services.

•Other Services Received by Knight-Swift — Consulting fees, diesel particulate filter cleaning, sales of various parts and tractor accessories, and certain third-party payroll and employee benefits administration services from the identified related parties are included in other services received by the Company.

During the quarter ended September 30, 2020, the ownership percentage of Jerry Moyes and related affiliates fell below the threshold requiring related party disclosure. The amounts included in this Note 13 pertain to transactions that occurred prior to the date that the ownership percentage changed.

Receivables and payables pertaining to related party transactions were:


		June 30, 2020						December 31, 2019							March 31, 2021				December 31, 2020
		Receivable		Payable		Receivable		Payable			Receivable		Payable		Receivable		Payable
		(In thousands)															(In thousands)
Central Freight Lines	Central Freight Lines	$	3,303	$	—	$	2,872	$	—	Central Freight Lines	$	0	$	0	$	133	$	0
SME Industries		22		—		17		—

DPF Mobile	DPF Mobile	—		—		—		2		DPF Mobile	0		0		0		41
Other Affiliates	Other Affiliates	1		2		—		—		Other Affiliates	7		6		2		10
Total	Total	$	3,326	$	2	$	2,889	$	2	Total	$	7	$	6	$	135	$	51

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 1514 — Information by Segment and Geography

Segment Information

The Company has 3 reportable segments: Trucking, Logistics, and Intermodal, as well as the non-reportable segments, discussed below. Based on how economic factors affect the nature, amount, timing, and uncertainty of revenue or cash flows, the Company disaggregates revenues by reportable segment for the purposes of applying the ASC Topic 606 guidance.

The Company's ~~twenty~~twenty-one operating segments are structured around the types of transportation service offerings provided to our customers, as well as the equipment utilized. In addition, the operating segments may be further distinguished by the Company’s respective brands. The Company aggregated these various operating segments into the three reportable segments discussed below based on similarities with both their qualitative and economic characteristics.

Trucking

The Trucking reportable segment is comprised of nine trucking operating segments that provide similar transportation services to our customers utilizing similar transportation equipment over both irregular (one-way movement) and/or dedicated routes. The Trucking reportable segment consists of irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border operations.

Logistics

The Logistics reportable segment is comprised of five logistics operating segments that provide similar transportation services to our customers and primarily consist of brokerage and other freight management services utilizing third-party transportation providers and their equipment.

Intermodal

The Intermodal reportable segment is comprised of two intermodal operating segments that provide similar transportation services to our customers. These transportation services include arranging the movement of customers' freight through third-party intermodal rail services on the Company’s trailing equipment (trailers on flat cars and rail containers), as well as drayage services to transport loads between the railheads and customer locations.

Non-reportable

The non-reportable segments include ~~four~~five operating segments that consist of support services provided to the Company's 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).

Intersegment Eliminations

Certain operating segments provide transportation and related services for other affiliates outside of their ~~reportable~~ segments. For certain operating segments, such services are billed at cost, and no profit is earned. For the other operating segments, revenues for such services are based on negotiated rates, and are reflected as revenues of the billing segment. These rates are adjusted from time to time, based on market conditions. Such intersegment revenues and expenses are eliminated in Knight-Swift's consolidated results.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The following tables present the Company's financial information by segment:


		Quarter-to-Date June 30,						Year-to-Date June 30,						Quarter Ended March 31,
		2020		2019		2020		2019			2021			2020
Revenue:	Revenue:	(In thousands)											Revenue:			(In thousands)
Trucking	Trucking	$	879,369	$	1,020,027	$	1,798,430	$	1,993,272	Trucking	$	962,947		$	919,061
Logistics	Logistics	70,104		82,929		149,302		171,881		Logistics	118,887			79,198
Intermodal	Intermodal	82,820		118,195		177,551		234,562		Intermodal	107,066			94,731
Subtotal	Subtotal	$	1,032,293	$	1,221,151	$	2,125,283	$	2,399,715	Subtotal	$	1,188,900		$	1,092,990
Non-reportable segments	Non-reportable segments	45,289		29,597		91,531		67,361		Non-reportable segments	50,669			46,242
Intersegment eliminations	Intersegment eliminations	(16,884)		(8,665)		(31,318)		(20,458)		Intersegment eliminations	(16,555)			(14,434)
Total revenue	Total revenue	$	1,060,698	$	1,242,083	$	2,185,496	$	2,446,618	Total revenue	$	1,223,014		$	1,124,798


		Quarter-to-Date June 30,						Year-to-Date June 30,						Quarter Ended March 31,
		2020		2019		2020		2019			2021			2020
Operating income (loss):	Operating income (loss):	(In thousands)											Operating income (loss):			(In thousands)
Trucking	Trucking	$	107,788	$	125,772	$	215,122	$	240,947	Trucking	$	158,483		$	107,334
Logistics	Logistics	3,038		5,021		6,757		12,304		Logistics	7,577			3,719
Intermodal	Intermodal	(4,475)		4,192		(7,212)		6,553		Intermodal	3,457			(2,737)
Subtotal	Subtotal	$	106,351	$	134,985	$	214,667	$	259,804	Subtotal	$	169,517		$	108,316
Non-reportable segments	Non-reportable segments	(4,184)		(26,392)		(10,381)		(34,912)		Non-reportable segments	(7,258)			(6,197)
Operating income	Operating income	$	102,167	$	108,593	$	204,286	$	224,892	Operating income	$	162,259		$	102,119


		Quarter-to-Date June 30,						Year-to-Date June 30,						Quarter Ended March 31,
		2020		2019		2020		2019			2021			2020
Depreciation and amortization of property and equipment:	Depreciation and amortization of property and equipment:	(In thousands)											Depreciation and amortization of property and equipment:			(In thousands)
Trucking	Trucking	$	97,555	$	86,842	$	191,103	$	171,352	Trucking	$	101,885		$	93,548
Logistics	Logistics	207		159		414		314		Logistics	208			207
Intermodal	Intermodal	3,606		3,303		7,094		6,663		Intermodal	3,818			3,488
Subtotal	Subtotal	$	101,368	$	90,304	$	198,611	$	178,329	Subtotal	$	105,911		$	97,243
Non-reportable segments	Non-reportable segments	13,233		12,634		26,211		25,546		Non-reportable segments	14,004			12,978
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	$	114,601	$	102,938	$	224,822	$	203,875	Depreciation and amortization of property and equipment	$	119,915		$	110,221

Geographical Information

In the aggregate, total revenue from the Company's foreign operations was less than 5.0% of consolidated total revenue for the ~~quarter~~quarters ended March 31, 2021 and ~~year-to-date periods ended June 30, 2020 and 2019.~~2020. Additionally, long-lived assets on the Company's foreign subsidiary balance sheets were less than 5.0% of consolidated total assets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 1615 — Fair Value Measurement

ASC Topic 820, Fair Value Measurements and Disclosures, requires that the Company disclose estimated fair values for its financial instruments. The estimated fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market for the asset or liability. Fair value estimates are made at a specific point in time and are based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Changes in assumptions could significantly affect these estimates. Because the fair value is estimated as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the amounts that will actually be realized or paid at settlement or maturity of the instruments in the future could be significantly different.

The estimated fair values of the Company's financial instruments represent management's best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction between market participants at that date. The estimated fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability at the measurement date, the estimated fair value measurement reflects management's own judgments about the assumptions that market participants would use in pricing the asset or liability. These judgments are developed by the Company based on the best information available under the circumstances.

The following summary presents a description of the methods and assumptions used to estimate the fair value of each class of financial instrument.

Restricted Investments, Held-to-Maturity — The estimated fair value of the Company's restricted investments, held-to-maturity, is based on quoted prices in active markets that are readily and regularly obtainable. See Note 54 for additional disclosures regarding restricted investments, held-to-maturity.

~~Transportation Resource Partners~~Equity Method Investments — The estimated fair value of the Company's equity method investments ~~with Transportation Resource Partners~~ are privately negotiated ~~equity~~ investments. The carrying amount of these investments approximates the fair value.

Equity Securities — The estimated fair value of the Company's investments in equity securities is based on quoted prices in active markets that are readily and regularly obtainable.

Debt Instruments and Leases — For notes payable under the Revolver and the Term Loan, fair value approximates the carrying value due to the variable interest rate. The carrying value of the 2018 RSA approximates fair value, as the underlying receivables are short-term in nature and only eligible receivables (such as those with high credit ratings) are qualified to secure the borrowed amounts. For finance and operating lease liabilities, the carrying value approximates the fair value, as the Company's finance and operating lease liabilities are structured to amortize in a manner similar to the depreciation of the underlying assets.

Contingent Consideration — The estimated fair value of the Company's contingent consideration owed to Warehousing Co.'s seller is calculated using a Monte Carlo simulation model based on the acquiree's earnings before interest and taxes.

Other — Cash and cash equivalents, restricted cash, net accounts receivable, income tax refund receivable, and accounts payable represent financial instruments for which the carrying amount approximates fair value, as they are short-term in nature. These instruments are accordingly excluded from the disclosures below. All remaining balance sheet amounts excluded from the below are not considered financial instruments, subject to this disclosure.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

The following table presents the carrying amounts and estimated fair values of the Company's major categories of financial assets and liabilities:

June 30, 2020 December 31, 2019
Carrying
Value Estimated
Fair Value Carrying
Value Estimated
Fair Value
(In thousands)
Financial Assets:
Restricted investments, held-to-maturity ¹ $ 8,272 $ 8,296 $ 8,912 $ 8,915
TRP Investments 36,018 36,018 30,878 30,878
Investments in equity securities ² 17,436 17,436 8,722 8,722
Financial Liabilities:
Term Loan, due October 2020 ³ $ 364,942 $ 365,000 $ 364,825 $ 365,000
2018 RSA, due July 2021 ⁴
164,840 165,000 204,762 205,000
Revolver, due October 2022 235,000 235,000 279,000 279,000
Contingent consideration associated with acquisition ⁵
17,570 17,570 — —


	March 31, 2021				December 31, 2020
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
	(In thousands)
Financial Assets:
Restricted investments, held-to-maturity 1	$	8,954	$	8,950	$	9,001	$	8,995
Equity method investments 2	80,891		80,891		77,562		77,562

Investments in equity securities 3	22,555		22,555		18,675		18,675

Financial Liabilities:
Term Loan, due October 2022 4	$	299,063	$	300,000	$	298,907	$	300,000
2018 RSA, due July 2021 5	198,957		199,000		213,918		214,000
Revolver, due October 2022	115,000		115,000		210,000		210,000
Contingent consideration associated with acquisition 6	16,200		16,200		16,200		16,200

1Refer to Note 54 for the differences between the carrying amounts and estimated fair values of the Company's restricted investments, held-to-maturity.

2Net equity method investment balances included in "Other long-term assets" in the condensed consolidated balance sheets.

3The investments are carried at fair value and are included in "Other long-term assets" on the condensed consolidated balance sheets.

34The carrying amount of the Term Loan is included in "Finance lease liabilities and long-term debt – less current portion," on the condensed consolidated balance sheets and is net of ~~$0.1~~$0.9 million and ~~$0.2~~$1.1 million in deferred loan costs as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

45The carrying amount of the 2018 RSA is included in ~~"Accounts~~"Accounts receivable securitization – current portion," on the condensed consolidated balance sheets and is net of ~~$0.2~~$43.0 thousand and $0.1 million in deferred loan costs as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020, respectively.

56The carrying amount of the contingent consideration associated with the acquisition is included in both the "Accrued liabilities" and "Other long-term liabilities" line items on the condensed consolidated balance sheets.

Recurring Fair Value Measurements (Assets) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of assets measured on a recurring basis as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Gain (Loss)
(In thousands)
As of June 30, 2020
Investments in equity securities ¹ $ 17,436 $ 17,436 $ — $ — $ 2,314
As of December 31, 2019
Investments in equity securities ¹ $ 8,722 $ 8,722 $ — $ — $ (184)


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain
	(In thousands)
As of March 31, 2021
Investments in equity securities 1	$	22,555	$	22,555	$	0	$	0	$	10,391

As of December 31, 2020
Investments in equity securities 2	$	18,675	$	18,675	$	0	$	0	$	3,553

1~~Total~~The Company recognized $10.4 million of unrealized gains ~~(losses)~~on these assets for the quarter-ended March 31, 2021. Additionally, the Company sold $6.4 million in equity investments during the quarter ended March 31, 2021 and realized a gain of $3.5 million. The activity for these investments ~~are~~is included within "Other (expense) income, net" within the condensed consolidated ~~statements~~statement of comprehensive income for the quarter ~~and year-to-date periods~~ ended ~~June 30,~~March 31, 2021.

2The Company recognized $3.6 million of unrealized gains during the year-ended December 31, 2020. The Company recognized $5.3 million in unrealized losses during the quarter-ended March 31, 2020. The Company did not sell any equity investments during the quarter ~~and year-to-date periods~~ ended ~~June 30,~~March 31, 2020 ~~or 2019~~ and therefore did ~~not~~0t realize any ~~losses~~gains (losses) on these investments. The activity for these investments is included within "Other (expense) income, net" within the condensed consolidated statement of comprehensive income for the quarter ended March 31, 2020.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Recurring Fair Value Measurements (Liabilities) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of liabilities measured on a recurring basis as of ~~June 30,~~March 31, 2021 and December 31, 2020:

Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Gain (Loss)
(In thousands)
As of June 30, 2020
Contingent consideration associated with acquisition ¹ $ 17,570 $ — $ — $ 17,570 $ —


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain (Loss)
	(In thousands)
As of March 31, 2021
Contingent consideration associated with acquisition 1	$	16,200	$	0	$	0	$	16,200	$	0

As of December 31, 2020
Contingent consideration associated with acquisition 2	$	16,200	$	0	$	0	$	16,200	$	(6,730)

1~~There were no material~~The Company did 0t recognize any gains (losses) during the quarter-ended March 31, 2021 related to the revaluation of these liabilities.

2Refer to Note 3 for information regarding the adjustments made to the contingent consideration ~~made~~associated with the acquisition. During the year-ended December 31, 2020, the Company recognized $6.7 million in losses related to the revaluation of these liabilities. The Company did 0t recognize any losses during the ~~quarter and year-to-date periods ended June 30,~~quarter-ended March 31, 2020.

Nonrecurring Fair Value Measurements (Assets) — As of ~~December~~March 31, ~~2019, there were~~2021, the Company had 0 major categories of ~~liabilities on the condensed consolidated balance sheets~~assets estimated at fair value that were measured on a ~~recurring~~nonrecurring basis.

~~Nonrecurring Fair Value Measurements (Assets)~~ — The following table depicts the level in the fair value hierarchy of the inputs used to estimate fair value of assets measured on a nonrecurring basis as of ~~June 30, 2020 and~~ December 31, ~~2019:~~2020:

Fair Value Measurements at Reporting Date Using:
Estimated
Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Loss
(In thousands)
As of June 30, 2020
Equipment ¹ $ 5,099 $ — $ 5,099 $ — $ (1,255)
As of December 31, 2019
Leasehold improvements ² $ — $ — $ — $ — $ (2,182)
Equipment ³ 1,380 — 1,380 — (870)
Software ⁴
— — — — (434)

Fair Value Measurements at Reporting Date Using:

Estimated
Fair Value

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Total Loss

(In thousands)

As of December 31, 2020

Equipment 1

5,851

(5,335)

1 Reflects the non-cash impairment of certain ~~tractors~~alternative fuel technology (within the non-reportable segments) and certain revenue equipment held for sale (within the Trucking segment) ~~and certain legacy trailers (within~~. During the ~~non-reportable segments) as a result~~year-ended December 31, 2020, the Company recognized $5.3 million of ~~a softer used equipment market~~impairments related to these assets. The Company recognized $0.9 million of impairments during the ~~second quarter of 2020, as well as impairment charges of trailer tracking equipment (within the Trucking segment) during the first quarter of~~quarter-ended March 31, 2020.

2 During the second quarter of 2019, the Company incurred an impairment of leasehold improvements related to the early termination of a lease on one of its operating properties. This impairment was recorded in the Trucking segment.

3 During the fourth quarter of 2019, the Company incurred impairment charges which were associated with certain revenue equipment technology, warehousing equipment no longer in use, and certain Swift legacy trailer models as a result of a softer used equipment market. These impairments were allocated between the Logistics and non-reportable segments based on each segment’s use of the assets.

4 During the fourth quarter of 2019, the Company incurred impairment charges related to discontinued use of software systems. These impairments were allocated between the Logistics and non-reportable segments based on each segment's use of the assets.

Nonrecurring Fair Value Measurements (Liabilities) — As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had 0 major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


ITEM 2.			MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains certain statements that may be considered "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Section 27A of the Securities Act of 1933, as amended. All statements, other than statements of historical or current fact, are statements that could be deemed forward-looking statements, including without limitation:

•any projections of or guidance regarding earnings, earnings per share, revenues, cash flows, dividends, capital expenditures, or other financial items,

•any statement of plans, strategies, and objectives of management for future operations,

•any statements concerning proposed acquisition plans, new services, or developments,

•any statements regarding future economic conditions or performance, and

•any statements of belief and any statements of assumptions underlying any of the foregoing.

In this Quarterly Report, forward-looking statements include, but are not limited to, statements we make concerning:

•the ability of our infrastructure to support future growth, whether we grow organically or through potential acquisitions,

•the impacts of the COVID-19 global pandemic,

•the future impact of acquisitions, including achievement of anticipated synergies,

•the flexibility of our model to adapt to market conditions,

•our ability to recruit and retain qualified driving associates,

•future safety performance,

•future performance of our segments or businesses,

•our ability to gain market share,

•the ability, desire, and effects of expanding our logistics, brokerage, and intermodal operations,

•future equipment prices, our equipment purchasing or leasing plans, and our equipment turnover (including expected tractor trade-ins),

•our ability to sublease equipment to independent contractors,

•the impact of pending legal proceedings,

•the expected freight environment, including freight demand and volumes,

•economic conditions and growth, including future inflation, consumer spending, supply chain conditions, and US Gross Domestic Product ("GDP") changes,

•future pricing terms from vendors and suppliers,

•expected liquidity and methods for achieving sufficient liquidity,

•future fuel prices and the expected impact of fuel efficiency initiatives,

•future expenses and our ability to control costs,

•future operating profitability,

•future third-party service provider relationships and availability,

•future contracted pay rates with independent contractors and compensation arrangements with driving associates,

•our expected need or desire to incur indebtedness,

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

•future capital expenditures and expected sources of liquidity, capital allocation, capital structure, capital requirements, and growth strategies and opportunities,

•expected capital expenditures,

•future mix of owned versus leased revenue equipment,

•future asset utilization,

•future return on capital,

•future share repurchases and dividends,

•future tax rates,

•future trucking industry capacity and balance between industry demand and capacity,

•future rates,

•future depreciation and amortization,

•expected tractor and trailer fleet age,

•future investment in and deployment of new or updated technology,

•political conditions and regulations, including trade regulation, quotas, duties, or tariffs, and any future changes to the foregoing,

•future insurance claims, premiums, and retention limits,

•future purchased transportation expense, and

•others.

Such statements may be identified by their use of terms or phrases such as "believe," "may," "could," "will," "would," "should," "expects," "estimates," "designed," "likely," "foresee," "goals," "seek," "target," "forecast," "projects," "anticipates," "plans," "intends," "hopes," "strategy," "potential," "objective," "mission," "continue," "outlook," and similar terms and phrases. Forward-looking statements are based on currently available operating, financial, and competitive information. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, which could cause future events and actual results to materially differ from those set forth in, contemplated by, or underlying the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in Part I, Item 1A "Risk Factors" in our ~~2019~~2020 Annual Report ~~Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,~~ and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

All such forward-looking statements speak only as of the date of this Quarterly Report. You are cautioned not to place undue reliance on such forward-looking statements. We expressly disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein, to reflect any change in our expectations with regard thereto, or any change in the events, conditions, or circumstances on which any such statement is based.


Reference to Glossary of Terms

Certain acronyms and terms used throughout this Quarterly Report are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document. Definitions for these acronyms and terms are provided in the "Glossary of Terms," available in the front of this document.


Reference to Annual Report

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements (unaudited) and footnotes included in this Quarterly Report, as well as the consolidated financial statements and footnotes included in our ~~2019~~2020 Annual Report.

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Executive Summary

~~Impact of COVID-19~~

During the second quarter and first half of 2020, we incurred approximately $10.0 million and $12.3 million, respectively, of expenses directly attributable to the pandemic, which were incremental to those incurred prior to the outbreak. These primarily pertained to payroll premiums paid to our drivers and shop technicians, as well as additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

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

Company Overview

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. Additionally, we have various non-reportable segments. Refer to Note 1514 in Part I, Item 1 of this Quarterly Report for descriptions of our segments.

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

Revenue

•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 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 logistics 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 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-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.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Expenses — Our most significant expenses vary with miles traveled and include fuel, driving associate-related expenses (such as wages and benefits), and services purchased from independent contractors and other transportation providers (such as railroads, drayage providers, and other trucking companies). Maintenance and tire expenses, as well as the cost of insurance and claims generally vary with the miles we travel, but also have a controllable component based on safety improvements, fleet age, efficiency, and other factors. Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, amortization of intangible assets, interest expense, and non-driver employee compensation.

Operating Statistics — We measure our consolidated and segment results through certain operating statistics, which are discussed under "Results of Operations — Segment Review — Operating Statistics," below. Our results are affected by various economic, industry, operational, regulatory, and other factors, which are set forth in Part I, Item 1A "Risk Factors" in our ~~2019~~2020 Annual Report, ~~Part II, Item 1A "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,~~ and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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Consolidated Key Financial Highlights and Operating Metrics


		Quarter-to-Date June 30,									Year-to-Date June 30,								Quarter Ended March 31,
		2020			2019			2020			2019				2021				2020
GAAP financial data:	GAAP financial data:	(Dollars in thousands, except per share data)																GAAP financial data:				(Dollars in thousands, except per share data)
Total revenue	Total revenue	$	1,060,698		$	1,242,083		$	2,185,496		$	2,446,618		Total revenue	$	1,223,014			$	1,124,798
Revenue, excluding trucking fuel surcharge	Revenue, excluding trucking fuel surcharge	$	997,597		$	1,122,754		$	2,024,692		$	2,219,710		Revenue, excluding trucking fuel surcharge	$	1,133,105			$	1,027,095
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift	$	80,189		$	79,205		$	145,615		$	167,143		Net income attributable to Knight-Swift	$	129,790			$	65,426
Earnings per diluted share	Earnings per diluted share	$	0.47		$	0.46		$	0.85		$	0.97		Earnings per diluted share	$	0.77			$	0.38
Operating ratio	Operating ratio	90.4		%	91.3		%	90.7		%	90.8		%	Operating ratio	86.7		%		90.9		%

Non-GAAP financial data:	Non-GAAP financial data:													Non-GAAP financial data:
Adjusted Net Income Attributable to Knight-Swift ¹	Adjusted Net Income Attributable to Knight-Swift ¹	$	96,498		$	100,627		$	172,703		$	196,808		Adjusted Net Income Attributable to Knight-Swift 1	$	139,433			$	76,205
Adjusted EPS ¹	Adjusted EPS ¹	$	0.57		$	0.58		$	1.01		$	1.14		Adjusted EPS 1	$	0.83			$	0.44
Adjusted Operating Ratio ¹	Adjusted Operating Ratio ¹	87.6		%	87.8		%	88.1		%	88.1		%	Adjusted Operating Ratio 1	84.5		%		88.6		%

Revenue equipment:	Revenue equipment:													Revenue equipment:
Average tractors (Trucking segment only) ²	Average tractors (Trucking segment only) ²	18,393			18,985			18,428			18,959			Average tractors (Trucking segment only) 2	18,224				18,462
Average trailers ³	Average trailers ³	57,269			58,263			57,456			56,902			Average trailers 3	59,797				57,716
Average containers	Average containers	10,853			9,863			10,355			9,864			Average containers	10,846				9,856

1 Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are non-GAAP financial measures and should not be considered alternatives, or superior to, the most directly comparable GAAP financial measures. However, management believes that presentation of these non-GAAP financial measures provides useful information to investors regarding the Company's results of operations. Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, and Adjusted Operating Ratio are reconciled to the most directly comparable GAAP financial measures under "Non-GAAP Financial Measures," below.

2 The average age of our company-owned tractor fleet was ~~2.1~~2.3 years and 2.0 years as of ~~June 30,~~March 31, 2021 and 2020, ~~and 2019.~~respectively.

3 The average age of our trailer fleet was ~~7.6~~8.2 years and ~~7.3~~7.6 years as of ~~June 30, 2020~~March 31, 2021 and ~~2019,~~2020, respectively.

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Market Trends and Company Performance

Trends and Outlook — Our ~~operational discipline, agility, and cost-control culture enabled us to execute through the unprecedented challenges presented~~consolidated revenue, excluding trucking fuel surcharge, grew by ~~the COVID-19 pandemic, which introduced a new source of volatility throughout the global markets~~10.3% during the first ~~half~~quarter of 2021, as a result of revenue growth across all of our reportable segments. We generated consolidated Adjusted Net Income Attributable to Knight-Swift of $139.4 million, which represents an 83.0% increase from $76.2 million during the first quarter of 2020. Our ~~diversified customer base, networks,~~Trucking segment overcame inclement weather conditions and ~~unique brands positioned us~~driver sourcing challenges during the quarter and improved average revenue per tractor by 7.7%, which resulted in a 470 basis point improvement in the Adjusted Operating Ratio to ~~navigate a disrupted freight environment~~81.8% in the first quarter of ~~unpredictable shipping volumes, shifts~~2021 from 86.5% in ~~pricing,~~the first quarter of 2020. Our Logistics segment grew revenue by more than 50% and ~~continued challenges~~more than doubled operating income year-over-year. Despite weather and service disruptions during the first quarter of 2021, our Intermodal segment achieved year-over-year improvements in ~~driver sourcing.~~operating results, and we anticipate ongoing improvement in the coming quarters.

The national unemployment rate was ~~11.1%~~6.0%¹ as of ~~June 30, 2020 after~~March 31, 2021, reflecting the ~~COVID-19 pandemic resulted in higher unemployment rates in the beginning~~continued resumption of ~~the quarter, which began to decline in May and June as~~ economic ~~activities resumed. A more pronounced reduction in trained drivers (primarily~~activity that had been curtailed due to ~~social distancing measures across~~ the nation), ongoing competition for experienced hires, increased safety regulations, and various alternative sources of income to potential drivers are all hampering driver sourcing efforts throughout the industry.pandemic.

During the ~~second~~first quarter of ~~2020,~~2021, the US gross domestic product, which is the broadest measure of goods and services produced across the economy, ~~decreased~~increased by ~~32.9%~~6.4%², per preliminary third-party forecasts. ~~This may result in an expected annualized growth rate of approximately -5.0% to -6.0%~~³ ~~for full-year 2020, as third-party~~Third-party forecasts are predicting ana continued economic rebound in ~~the latter half of this year.~~2021. The ~~second~~first quarter ~~2020~~2021 US employment cost index rose ~~2.7%~~2.6%¹and ~~0.5%~~0.9%¹ on a year-over-year and sequential basis, respectively.

From a freight market perspective, ~~demand in April was weak, but gradually strengthened throughout the quarter, and remained strong in July. We~~we are encouraged by the continued strength in freight ~~demand in July;~~demand; however, demand may be difficult to predict for the rest of 2021. The 2021 market outlook includes the following:

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

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

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

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

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

•there may be continuing non-contract freight opportunities with more challenging year-over-year comparisons in the back half of the year. ~~We believe supply has and will continue to exit the market as evidenced by significantly lower class 8 truck orders, a weak used equipment market, and lower transportation employment levels.~~

Looking across our portfolio of brands and freight networks, some of our operating segments performed consistently throughout the quarter, while others experienced more volatility in results. Our Trucking segment improved its Adjusted Operating Ratio to 85.5% in the second quarter of 2020, as strong cost controls and lower fuel prices overcame a 6.5% decrease in average revenue per tractor and a $5.8 million (or $0.03 of earnings per diluted share, after taxes) decline in gain on sales of used equipment. Our Logistics segment produced an Adjusted Operating Ratio of 95.5% in the second quarter of 2020, primarily driven by a gross margin of 15.7% within our brokerage business. Consistent with port industry trends, load volumes within our Intermodal segment continued to be pressured and decreased by 23.9% in the second quarter of 2020, as compared to the same quarter last year, while margins worsened.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding trucking fuel surcharge, as we intend to purchase, rather than ~~lease,~~enter into operating leases, for a majority of our revenue equipment in ~~2020.~~2021. With significant tightening in the insurance markets, we may also experience changes in premiums, ~~and~~ retention limits, and excess coverage limits in ~~2020.~~the remainder of 2021. While fuel expense is generally offset by fuel surcharge revenue, our fuel expense, net of fuel surcharge revenue may increase in the future.

We continue to ~~maintain~~manage our leverage ratio ~~within~~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.

________

1Source: bls.gov

2Source: bea.gov

3~~Source: kiplinger.com~~

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Comparison Between the Quarters Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ — The ~~$1.0~~$64.4 million increase in net income attributable to Knight-Swift to ~~$80.2~~$129.8 million during the quarter ended ~~June 30, 2020~~March 31, 2021 from ~~$79.2 million during the same period last year includes the following:~~

•~~Contributor —~~ ~~$22.2 million~~ decrease in operating loss from our non-reportable segments. Operating results within the non-reportable segments improved in the second quarter of 2020, which included additional income earned from warehousing activities, as compared to the second quarter of 2019, when we incurred $15.5 million in costs associated with a jury verdict.

•~~Contributor —~~ ~~$5.4 million~~ ~~increase in "Other income, net" primarily related to an increase in gains recognized within our portfolio of investments.~~

•~~Offset —~~ ~~$18.0 million~~ ~~decrease in operating income~~ ~~within our Trucking Segment, which was primarily due to~~ ~~a 6.5% decrease in average revenue per tractor and~~ a ~~$5.8 millionreduction in gain on sales of revenue equipment, as well as $9.9 million in incremental expenses related to the COVID-19 pandemic.~~

•~~Offset —$8.7 million~~ change from operating income in the second quarter of 2019 to operating loss in the second quarter of 2020 in our Intermodal Segment due to continued market pressures, including the impact of the COVID-19 pandemic on port volumes.

~~Comparison Between Year-to-Date June 30, 2020 and 2019 —~~ ~~The $21.5 million decrease in net income attributable to Knight-Swift to $145.6 million during year-to-date June 30, 2020 from $167.1~~$65.4 million during the same period last year includes the following:

•Contributor — $~~25.8~~51.1 million ~~decrease~~increase in operating income within our Trucking ~~Segment, which was primarily due to a $14.5 million~~ ~~reduction in gain on sales of revenue equipment, a 4.6% decrease in average~~segment. Average revenue per tractor ~~as well as $12.1 million~~increased by 7.7%, driven by a 16.1% increase in ~~COVID-19 related incremental expenses.~~revenue per loaded mile, excluding fuel surcharge and intersegment transactions.

•Contributor — ~~$13.8~~$6.2 million ~~change from~~improvement in operating income ~~in the first half of 2019 to operating loss in the first half of 2020 in~~(loss) within our Intermodal ~~Segment due to continued market pressures, including the impact of the COVID-19 pandemic on port volumes.~~segment. Revenue per load increased 10.2% and load counts increased 2.6%.

•Contributor — ~~$5.5~~$22.6 million ~~decrease~~improvement in ~~operating~~"Other income (expenses), net," primarily related to gains recognized within our ~~Logistics Segment which was primarily due to a 4.1% decrease in revenue per load.~~portfolio of investments.

•Offset — ~~$24.5~~$20.8 million~~decrease~~increase in ~~operating loss from our non-reportable segments~~consolidated income tax expense was primarily due to an increase in income before income taxes, partially offset by a reduction of the ~~$15.5 million jury verdict recognized~~unfavorable impacts from foreign currency fluctuations in the ~~first half~~quarter ended March 31, 2021 compared to the same period last year. All of ~~2019 and additional income earned from warehousing activities~~these factors resulted in an effective tax rate of 25.9% for the first ~~half~~quarter of 2021 and 27.2% for the first quarter of 2020.

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

Liquidity and Capital — During the ~~first half of the year,~~quarter ended March 31, 2021, we generated ~~$383.4~~$306.1 million in operating cash flows, reduced our operating lease liabilities by ~~$48.2~~$15.2 million, used ~~$195.2~~$43.8 million for capital expenditures (net of ~~equipment sales~~disposal proceeds), spent $39.3 million on acquisitions, and returned ~~$27.7~~$67.3 million to our stockholders in the form of quarterly ~~dividends. We also repurchased $34.6 million worth~~dividends and repurchases of our common ~~stock at an average price of $30.41 per share (all within the first quarter of 2020).~~stock.

We ended the quarter with ~~$117.8~~$194.7 million in unrestricted cash and cash equivalents, ~~$235.0~~$115.0 million outstanding on the Revolver, ~~$365.0~~$300.0 million face value outstanding on the Term Loan, and ~~$5.8~~$5.9 billion of stockholders' equity.

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


Results of Operations — Segment Review

The Company has three reportable segments: Trucking, Logistics, and Intermodal, as well as certain non-reportable segments. Refer to Note 14 to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report for descriptions of the operations of these reportable segments.

Consolidating Tables for Total Revenue and Operating Income (Loss)


	Quarter Ended March 31,
		2021		2020
Revenue:		(In thousands)
Trucking		$	962,947	$	919,061
Logistics		118,887		79,198
Intermodal		107,066		94,731
Subtotal		$	1,188,900	$	1,092,990
Non-reportable segments		50,669		46,242
Intersegment eliminations		(16,555)		(14,434)
Total revenue		$	1,223,014	$	1,124,798

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~~Results of Operations — Segment Review~~

The Company has three reportable segments: Trucking, Logistics, and Intermodal, as well as certain non-reportable segments. Refer to Note 15 to the condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report for descriptions of the operations of these reportable segments.

~~Consolidating Tables for Total Revenue and Operating Income (Loss)~~

Quarter-to-Date June 30, Year-to-Date June 30,
2020 2019 2020 2019
Revenue: (In thousands)
Trucking $ 879,369 $ 1,020,027 $ 1,798,430 $ 1,993,272
Logistics 70,104 82,929 149,302 171,881
Intermodal 82,820 118,195 177,551 234,562
Subtotal $ 1,032,293 $ 1,221,151 $ 2,125,283 $ 2,399,715
Non-reportable segments 45,289 29,597 91,531 67,361
Intersegment eliminations (16,884) (8,665) (31,318) (20,458)
Total revenue $ 1,060,698 $ 1,242,083 $ 2,185,496 $ 2,446,618

Quarter-to-Date June 30, Year-to-Date June 30,
2020 2019 2020 2019
Operating income (loss): (In thousands)
Trucking $ 107,788 $ 125,772 $ 215,122 $ 240,947
Logistics 3,038 5,021 6,757 12,304
Intermodal (4,475) 4,192 (7,212) 6,553
Subtotal $ 106,351 $ 134,985 $ 214,667 $ 259,804
Non-reportable segments (4,184) (26,392) (10,381) (34,912)
Operating income $ 102,167 $ 108,593 $ 204,286 $ 224,892

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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


	Quarter Ended March 31,
		2021		2020
Operating income (loss):		(In thousands)
Trucking		$	158,483	$	107,334
Logistics		7,577		3,719
Intermodal		3,457		(2,737)
Subtotal		$	169,517	$	108,316
Non-reportable segments		(7,258)		(6,197)
Operating income		$	162,259	$	102,119

Operating Statistics

Our chief operating decision makers monitor the GAAP results of our reportable segments, as supplemented by certain non-GAAP information. Refer to "Non-GAAP Financial Measures" below for more details. Additionally, we use a number of primary indicators to monitor our revenue and expense performance and efficiency.

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 Load

Logistics, Intermodal

Total revenue (excluding intersegment transactions) divided by load count

Gross Margin Percentage

Logistics ~~(Brokerage only)~~(Brokerage)

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

Average Containers

Intermodal

Average containers in operation during the period

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

Non-GAAP 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. 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.~~offerings with 13,130 irregular route tractors and 5,094 dedicated route tractors. 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 condensed 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.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands, except per tractor data) Increase (Decrease)
Total revenue $ 879,369 $ 1,020,027 $ 1,798,430 $ 1,993,272 (13.8 %) (9.8   %)
Revenue, excluding fuel surcharge and intersegment transactions $ 816,033 $ 900,648 $ 1,637,117 $ 1,766,278 (9.4 %) (7.3   %)
GAAP: Operating income $ 107,788 $ 125,772 $ 215,122 $ 240,947 (14.3 %) (10.7   %)
Non-GAAP: Adjusted Operating Income ¹ $ 118,166 $ 128,303 $ 228,971 $ 243,827 (7.9 %) (6.1   %)
Average revenue per tractor ² $ 44,366 $ 47,440 $ 88,839 $ 93,163 (6.5 %) (4.6   %)
GAAP: Operating ratio ² 87.7 % 87.7 % 88.0 % 87.9 % — bps 10 bps
Non-GAAP: Adjusted Operating Ratio ¹ ² 85.5 % 85.8 % 86.0 % 86.2 % (30 bps) (20 bps)
Non-paid empty miles percentage ² 13.8 % 12.9 % 13.3 % 12.9 % 90 bps 40 bps
Average length of haul (miles) ² 420 429 424 429 (2.1 %) (1.2   %)
Total miles per tractor ² 22,741 23,656 45,307 46,181 (3.9 %) (1.9   %)
Average tractors ² ³ 18,393 18,985 18,428 18,959 (3.1 %) (2.8   %)
Average trailers ² 57,269 58,263 57,456 56,902 (1.7 %) 1.0   %





	Quarter Ended March 31,							Increase (Decrease)
		2021			2020
		(Dollars in thousands, except per tractor data)
Total revenue		$	962,947		$	919,061			4.8	%
Revenue, excluding fuel surcharge and intersegment transactions		$	872,814		$	821,084			6.3	%
GAAP: Operating income		$	158,483		$	107,334			47.7	%
Non-GAAP: Adjusted Operating Income 1		$	158,807		$	110,805			43.3	%
Average revenue per tractor 2		$	47,894		$	44,474			7.7	%
GAAP: Operating ratio 2		83.5		%	88.3		%		(480	bps)
Non-GAAP: Adjusted Operating Ratio 1 2		81.8		%	86.5		%		(470	bps)
Non-paid empty miles percentage 2		12.8		%	12.8		%		—	bps
Average length of haul (miles) 2		412			428				(3.7	%)
Total miles per tractor 2		20,928			22,568				(7.3	%)
Average tractors 2 3		18,224			18,462				(1.3	%)
Average trailers 2		59,797			57,716				3.6	%

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

2 Defined under "Operating Statistics," above.

3 Includes ~~16,315~~16,305 and ~~16,491~~16,339 average company-owned tractors for the ~~second~~first quarter of ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Includes 16,327~~Comparison Between the Quarters Ended March 31, 2021 and 2020 — We grew revenue, excluding fuel surcharge and ~~16,352 average company-owned tractors~~ ~~for~~intersegment transactions, by 6.3% within the ~~year-to-date June 30, 2020~~Trucking segment. Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and ~~2019 periods, respectively.~~intersegment transactions. The rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the quarter and a 7.3% decline in miles per tractor due to inclement weather and an increase in unseated tractors.

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~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~ — Operating Ratio was 87.7% in the second quarters of 2020 and 2019. We improved the Adjusted Operating Ratio within this segment to 85.5% in the second quarter of 2020 from 85.8% in the second quarter of 2019, despite a $5.8 million reduction in gain on sales of revenue equipment. We continued to see improvement in our dedicated and refrigerated operating segments during the quarter. Average revenue per tractor decreased by 6.5%, driven by a 3.9% decrease in miles per tractor. Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, was flat sequentially and decreased 1.7% year-over-year. We expect rate per mile to inflect positively year-over-year in the third quarter.

~~Comparison Between Year-to-Date June 30, 2020 and 2019~~ — Operating Ratio was 88.0% in the first half of 2020 compared to 87.9% in the first half of 2019. We improved the Adjusted Operating Ratio within this segment to 86.0% in the first half of 2020 from 86.2% in the first half 2019, despite a $14.5 million reduction in gain on sales of revenue equipment. Average revenue per tractor decreased by 4.6%, driven by a 1.9% decrease in miles per tractor. Revenue per loaded mile, excluding fuel surcharge and intersegment transactions, decreased 2.4% when comparing the first halves of 2020 and 2019.

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. We generate additional revenue by offering specialized logistics solutions (including, but not limited to, trailing equipment, origin management, surge volume, disaster relief, special projects, and other logistic needs). Logistics revenue is mainly affected by the rates we obtain from customers, the freight volumes we ship through third-party capacity providers, and our ability to secure third-party capacity providers to transport customer freight.

The most significant expense in the Logistics segment is ~~the (primarily) variable cost of~~ purchased transportation that we pay to third-party capacity providers, which is primarily a variable cost and is included in "Purchased transportation" in the condensed consolidated statements of comprehensive income. Variability in this expense depends on truckload capacity, availability of third-party capacity providers, rates charged to customers, current freight demand, and customer shipping needs. Fixed Logistics operating expenses primarily include non-driver employee compensation and benefits recorded in "Salaries, wages, and benefits" and depreciation and amortization expense recorded in "Depreciation and amortization of property and equipment" in the condensed consolidated statements of comprehensive income.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands, except per load data) Increase (Decrease)
Total revenue $ 70,104 $ 82,929 $ 149,302 $ 171,881 (15.5 %) (13.1   %)
Revenue, excluding intersegment transactions $ 67,066 $ 80,304 $ 143,823 $ 167,495 (16.5 %) (14.1   %)
Operating income $ 3,038 $ 5,021 $ 6,757 $ 12,304 (39.5 %) (45.1   %)
Revenue per load – Brokerage only ¹ $ 1,408 $ 1,475 $ 1,392 $ 1,452 (4.5 %) (4.1   %)
Gross margin percentage – Brokerage only ¹ 15.7 % 16.2 % 15.1 % 17.0 % (50 bps) (190 bps)
GAAP: Operating ratio ¹ 95.7 % 93.9 % 95.5 % 92.8 % 180 bps 270 bps
Non-GAAP: Adjusted Operating Ratio ¹ ² 95.5 % 93.7 % 95.3 % 92.7 % 180 bps 260 bps





	Quarter Ended March 31,							Increase (Decrease)
		2021			2020
		(Dollars in thousands, except per load data)
Total revenue		$	118,887		$	79,198			50.1	%
Revenue, excluding intersegment transactions		$	115,722		$	76,757			50.8	%
Operating income		$	7,577		$	3,719			103.7	%
Revenue per load – Brokerage 1		$	1,971		$	1,378			43.0	%
Gross margin percentage – Brokerage 1		14.4		%	14.7		%		(30	bps)
GAAP: Operating ratio 1		93.6		%	95.3		%		(170	bps)
Non-GAAP: Adjusted Operating Ratio 1 2		93.5		%	95.2		%		(170	bps)

1 Defined under "Operating Statistics," above.

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

Comparison Between the Quarters Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ — ~~Operating Ratio~~Revenue, excluding intersegment transactions, increased by 50.8% within our Logistics segment, as brokerage revenue per load increased by 43.0% and load volumes grew by 5.4%. Brokerage gross margin was ~~95.7%~~14.4% in the ~~second~~first quarter of ~~2020~~2021 and 14.7% in the first quarter of 2020. The operating ratio improved by 170 basis points to 93.6% for the first quarter of 2021, compared to ~~93.9% in~~95.3% for the ~~second~~first quarter of ~~2019. Adjusted Operating Ratio in~~2020. Within our power-only service offering, load volumes grew 56.2%, contributing to 161.6% revenue growth and representing over 25% of our total first quarter 2021 brokerage load volumes. During 2020, we introduced our Select platform, which digitally matches shippers with available capacity across our brands through frictionless transactions. During the ~~Logistics segment (which primarily consists~~first quarter of 2021, approximately 4,500 carriers were digitally matched with loads through our Select platform, representing approximately 20% of our brokerage ~~services) increased to 95.5% in the second quarter of 2020 from 93.7% in the second quarter of 2019.~~load volume.

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~~Brokerage-only~~ — With recent tightening of capacity, brokerage gross margin decreased to 15.7% in the second quarter of 2020 from 16.2% in the second quarter of 2019. Margins were strong to begin the quarter and subsequently compressed, as the truckload market improved throughout the second quarter of 2020. A 10.1% decrease in brokerage load volumes and a 4.5% decrease in brokerage revenue per load resulted in a 14.2% decrease in brokerage revenue, excluding intersegment transactions. Our power-only service offering experienced 73.8% year-over-year growth in load volumes and represented 17.3% of our total brokerage load volumes in the second quarter of 2020.

~~Comparison Between Year-to-Date June 30, 2020 and 2019~~ — Operating Ratio was 95.5% in the first half of 2020 compared to 92.8% in the first half of 2019. Adjusted Operating Ratio in the Logistics segment (which primarily consists of our brokerage services) increased to 95.3% in the first half of 2020 from 92.7% in the first half of 2019.

~~Brokerage-only~~ — Brokerage gross margin decreased to 15.1% in the first half of 2020 from 17.0% in the first half of 2019. An 8.2% decrease in brokerage load volumes and a 4.1% decrease in brokerage revenue per load resulted in a 12.0% decrease in brokerage revenue, excluding intersegment transactions.

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. 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 condensed consolidated statements of comprehensive income. 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.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands, except per load data) Increase (Decrease)
Total revenue $ 82,820 $ 118,195 $ 177,551 $ 234,562 (29.9   %) (24.3   %)
Revenue, excluding intersegment transactions $ 82,699 $ 117,727 $ 177,321 $ 233,404 (29.8   %) (24.0   %)
GAAP: Operating (loss) income $ (4,475) $ 4,192 $ (7,212) $ 6,553 (206.8   %) (210.1   %)
Non-GAAP: Adjusted Operating (Loss) Income $ (4,410) $ 4,192 $ (7,099) $ 6,553 (205.2   %) (208.3   %)
Average revenue per load ¹ $ 2,249 $ 2,438 $ 2,283 $ 2,447 (7.8   %) (6.7   %)
GAAP: Operating ratio ¹ 105.4 % 96.5 % 104.1 % 97.2 % 890 bps 690 bps
Non-GAAP: Adjusted Operating Ratio ^{1 2}
105.3 % 96.4 % 104.0 % 97.2 % 890 bps 680 bps
Load count 36,769 48,290 77,658 95,399 (23.9   %) (18.6   %)
Average tractors ¹ ³ 571 651 586 672 (12.3   %) (12.8   %)
Average containers ¹ 10,853 9,863 10,355 9,864 10.0   % 5.0   %





	Quarter Ended March 31,							Increase (Decrease)
		2021			2020
		(Dollars in thousands, except per load data)
Total revenue		$	107,066		$	94,731			13.0	%
Revenue, excluding intersegment transactions		$	106,971		$	94,622			13.1	%
GAAP: Operating income (loss)		$	3,457		$	(2,737)			226.3	%
Non-GAAP: Adjusted Operating Income (Loss) 1		$	3,457		$	(2,689)			228.6	%
Average revenue per load 2		$	2,549		$	2,314			10.2	%
GAAP: Operating ratio 2		96.8		%	102.9		%		(610	bps)
Non-GAAP: Adjusted Operating Ratio 1 2		96.8		%	102.8		%		(600	bps)
Load count		41,968			40,889				2.6	%
Average tractors 2 3		597			601				(0.7	%)
Average containers 2		10,846			9,856				10.0	%

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

2 Defined under "Operating Statistics," above.

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

3 Includes 542~~510~~ and ~~572~~536 company-owned tractors for the ~~second~~first quarter of ~~2020~~2021 and ~~2019,~~2020, respectively.

~~Includes~~ ~~523 and 592~~ ~~company-owned tractors~~ ~~for the year-to-date June 30, 2020 and 2019 periods, respectively.~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Comparison Between the Quarters Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ — ~~Operating Ratio was 105.4% in~~Revenue, excluding intersegment transactions within our Intermodal segment increased 13.1%, as revenue per load increased 10.2% and load counts increased 2.6%. We improved the ~~second~~operating ratio within the Intermodal segment to 96.8%, compared to 102.9% during the first quarter of 2020, ~~compared to 96.5% in~~despite weather and service disruptions. Operating results within the ~~second quarter of 2019. During the second quarter of 2020, our~~ Intermodal segment ~~produced an Adjusted Operating Ratio of 105.3%, compared to 96.4% during~~improved toward the ~~second quarter of 2019. Continued market pressures, including the impact~~end of the ~~COVID-19 pandemic on port volumes, contributed to a 29.8% decrease~~quarter. We anticipate sequential improvements in revenue, excluding intersegment transactions, as load counts decreased 23.9% and revenue per load decreased 7.8%. We continue to develop our Intermodal network and cost structure and expect to see improvedoperating results in the ~~back half of the year.~~

~~Comparison Between~~ ~~Year-to-Date June 30, 2020 and 2019~~ — Operating Ratio was 104.1% in the first half of 2020 compared to 97.2% in the first half of 2019. During the first half of 2020, our Intermodal segment produced an Adjusted Operating Ratio of 104.0%, compared to 97.2% during the first half of 2019. Continued market pressures, including the impact of the COVID-19 pandemiccoming quarters, as we focus on ~~port volumes, contributed to a 24.0% decrease in revenue, excluding intersegment transactions, as~~growing load counts ~~decreased 18.6%~~ and improving revenue per ~~load decreased 6.7%.~~load.

Non-reportable Segments

The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and ~~$11.2~~$11.4 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).


		Quarter-to-Date June 30,						Year-to-Date June 30,							QTD 2020 vs.	YTD 2020 vs.			Quarter Ended March 31,					Increase (Decrease)
		2020		2019		2020		2019		QTD 2019		YTD 2019					2021		2020		Increase (Decrease)
		(Dollars in thousands)														Increase (Decrease)									(Dollars in thousands)	Increase (Decrease)
Total revenue	Total revenue	$	45,289	$	29,597	$	91,531	$	67,361	53.0	%	35.9	%	Total revenue			$	50,669	$	46,242		9.6	%
Operating loss	Operating loss	$	(4,184)	$	(26,392)	$	(10,381)	$	(34,912)	(84.1	%)	(70.3	%)	Operating loss			$	(7,258)	$	(6,197)		17.1	%

Comparison Between the Quarters Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ — ~~Operating results~~A $1.2 million increase in legal expenses resulted in a year-over-year increase in operating loss within the non-reportable segments improved in the second quarter of 2020, which included additional income earned from warehousing activities, as compared to the second quarter of 2019, when we incurred $15.5 million in costs associated with a jury verdict.

~~Comparison Between Year-to-Date June 30, 2020 and 2019~~ — Operating results within the non-reportable segments improved in the first half of 2020, which included additional income earned from warehousing activities, as compared to the first half of 2019, when we incurred $15.5 million in costs associated with a jury verdict.segments.

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Results of Operations — Consolidated Operating and Other Expenses

Consolidated Operating Expenses

The following tables present certain operating expenses from our condensed 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. Trucking 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.


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Salaries, wages, and benefits	Salaries, wages, and benefits	$	365,311		$	380,354		$	720,144		$	744,209		(4.0	%)	(3.2	%)	Salaries, wages, and benefits			$	370,370		$	354,833			4.4	%
% of total revenue	% of total revenue	34.4		%	30.6		%	33.0		%	30.4		%	380 bps		260 bps		% of total revenue			30.3		%	31.5		%		(120	bps)
% of revenue, excluding trucking fuel surcharge		36.6		%	33.9		%	35.6		%	33.5		%	270 bps		210 bps
% of revenue, excluding fuel surcharge																		% of revenue, excluding fuel surcharge			32.7		%	34.5		%		(180	bps)

Salaries, wages, and benefits expense is primarily affected by the total number of miles driven by company driving associates, the rate per mile we pay our company driving associates, and employee benefits, including healthcare, workers' compensation, and other benefits. To a lesser extent, non-driver employee headcount, compensation, and benefits affect this expense. Driving associate wages represent the largest component of salaries, wages, and benefits expense.

Several ongoing market factors have reduced the pool of available driving associates, contributing to a challenging driver sourcing market, which we believe will continue. Having a sufficient number of qualified driving associates is a ~~significant~~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, ~~and~~ technology, and terminals that improve the experience of driving associates. We expect driving associate pay to remain inflationary, which ~~could~~we expect will result in additional driving associate pay increases in the ~~future.~~future, thereby increasing our salaries, wages, and benefits expense.

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—The ~~$15.0~~$15.5 million ~~decrease within~~increase in consolidated salaries, wages and benefits was primarily ~~attributed~~due to an increase in driving associate pay rates, partially offset by a decrease in miles driven by company ~~drivers, favorable developments within workers' compensation expense, as well as~~driving associates and lower medical insurance costs. These decreases were partially offset by $7.8 million in incremental payroll premiums paid to our company driving associates and shop technicians in response to the COVID-19 pandemic. The COVID-19 expenses were clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~—The $24.1 million decrease within consolidated salaries, wages and benefits was primarily attributed to a decrease in miles driven by company drivers, favorable developments within workers' compensation expense, as well as lower medical insurance costs. These decreases were partially offset by $9.0 million in incremental payroll premiums paid to our company driving associates and shop technicians in response to the COVID-19 pandemic. The COVID-19 expenses were clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Fuel	Fuel	$	86,381		$	151,309		$	208,236		$	289,748		(42.9	%)	(28.1	%)	Fuel			$	118,236		$	121,855			(3.0	%)
% of total revenue	% of total revenue	8.1		%	12.2		%	9.5		%	11.8		%	(410 bps)		(230 bps)		% of total revenue			9.7		%	10.8		%		(110	bps)
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	8.7		%	13.5		%	10.3		%	13.1		%	(480 bps)		(280 bps)		% of revenue, excluding trucking fuel surcharge			10.4		%	11.9		%		(150	bps)

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

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

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—The ~~$64.9~~$3.6 million decrease in consolidated fuel expense is primarily due to a ~~decrease in average DOE fuel prices to $2.44 per gallon for the second quarter of 2020 from $3.12 per gallon for the second quarter of 2019 and a 3.3%~~7.7% decrease in the total miles driven by company driving associates.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~—~~The~~ ~~$81.5 million~~ ~~decrease in consolidated fuel expense is primarily due to a decrease in average~~ Average DOE fuel prices ~~to $2.67~~were $2.91 per gallon for ~~year-to-date June 30, 2020 from $3.07~~the first quarter of 2021 and $2.92 per gallon for ~~year-to-date June 30, 2019 and a 0.4% decrease in miles driven by company driving associates.~~the first quarter of 2020.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Operations and maintenance	Operations and maintenance	$	66,067		$	82,443		$	134,471		$	162,203		(19.9	%)	(17.1	%)	Operations and maintenance			$	68,070		$	68,404			(0.5	%)
% of total revenue	% of total revenue	6.2		%	6.6		%	6.2		%	6.6		%	(40 bps)		(40 bps)		% of total revenue			5.6		%	6.1		%		(50	bps)
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	6.6		%	7.3		%	6.6		%	7.3		%	(70 bps)		(70 bps)		% of revenue, excluding trucking fuel surcharge			6.0		%	6.7		%		(70	bps)

Operations and maintenance expense consists of direct operating expenses, such as driving associate hiring and recruiting expenses, equipment maintenance, and tire expense. Operations and maintenance expenses are primarily affected by the age of our company-owned fleet of tractors and ~~trailers.~~trailers and the miles driven. We expect the driver market to remain competitive throughout ~~2020,~~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 tractor and trailer fleet in the coming quarters ~~and anticipate that maintenance costs will gradually decrease as we reduce~~to maintain or improve the average age of our ~~fleet.~~equipment.

The ~~second~~first quarter decrease of $0.3 million ~~$16.4 million~~ ~~and~~ ~~year-to-date~~ ~~decrease of~~ ~~$27.7 million~~ in consolidated operations and maintenance expense was attributed to reduced maintenance expense associated with refreshing our fleet with newer equipment and the ~~decreases~~decrease in miles driven by company driving associates noted above.


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Insurance and claims	Insurance and claims	$	45,302		$	48,796		$	99,582		$	98,932		(7.2	%)	0.7	%	Insurance and claims			$	55,643		$	54,280			2.5	%
% of total revenue	% of total revenue	4.3		%	3.9		%	4.6		%	4.0		%	40 bps		60 bps		% of total revenue			4.5		%	4.8		%		(30	bps)
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	4.5		%	4.3		%	4.9		%	4.5		%	20 bps		40 bps		% of revenue, excluding trucking fuel surcharge			4.9		%	5.3		%		(40	bps)

Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, as well as our level of self-insurance, and premium expense. 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. Insurance and claims expense also varies based on the number of miles driven by company driving associates and independent contractors, the frequency and severity of accidents, trends in development factors used in actuarial accruals, and developments in large, prior-year claims. In future periods, our higher self-insured retention limits ~~as well as a tightening of~~or lower excess ~~insurance markets,~~coverage limits may cause increased volatility in our consolidated insurance and claims ~~expense to fluctuate more.~~expense.

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—Consolidated insurance and claims expense decreased by $3.5 million for the second quarter of 2020, as compared to the same period last year. This decrease was primarily due to a decrease in total miles driven year-over-year, improvements within our current year experience as a result of lower frequency and severity of claims, and positive development with certain prior year losses.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~— Consolidated insurance and claims expense increased by ~~$0.7~~$1.4 million for ~~year-to-date June 30, 2020,~~the quarter ended March 31, 2021, as compared to the same period last year. This increase was primarily due to negative development within certain prior year losses recognized during the first quarter which were partially offset by improvements within our current year experience as a result of lower frequency and severity in claims, as well as a decrease in total miles driven year-over-year.claims.

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		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Operating taxes and licenses	Operating taxes and licenses	$	20,883		$	21,560		$	43,052		$	43,363		(3.1	%)	(0.7	%)	Operating taxes and licenses			$	22,048		$	22,169			(0.5	%)
% of total revenue	% of total revenue	2.0		%	1.7		%	2.0		%	1.8		%	30 bps		20 bps		% of total revenue			1.8		%	2.0		%		(20	bps)
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	2.1		%	1.9		%	2.1		%	2.0		%	20 bps		10 bps		% of revenue, excluding trucking fuel surcharge			1.9		%	2.2		%		(30	bps)

Operating taxes and licenses include state franchise taxes, state and federal highway use taxes, property taxes, vehicle license and registration fees, fuel and mileage taxes, among others. The expense is impacted by changes in the tax rates and registration fees associated with our tractor fleet and regional operating facilities.

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—Consolidated operating taxes and licenses decreased by $0.7 million for the second quarter of 2020 as compared to the same period last year. The decrease was primarily due to a decrease in total company miles driven.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~— Operating taxes and licenses decreased by ~~$0.3~~$0.1 million ~~but~~for the quarter ended March 31, 2021 and remained relatively flat as a percentage of revenue, excluding trucking fuel ~~surcharge.~~surcharge, as compared to the same periods last year.


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Communications	Communications	$	4,902		$	4,960		$	9,776		$	10,043		(1.2	%)	(2.7	%)	Communications			$	5,037		$	4,874			3.3	%
% of total revenue	% of total revenue	0.5		%	0.4		%	0.4		%	0.4		%	10 bps		— bps		% of total revenue			0.4		%	0.4		%		—	bps
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	0.5		%	0.4		%	0.5		%	0.5		%	10 bps		— bps		% of revenue, excluding trucking fuel surcharge			0.4		%	0.5		%		(10	bps)

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

Consolidated communications expense remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the ~~second~~ quarter ~~of 2020 and first half of 2020,~~ended March 31, 2021, as compared to the same ~~periods~~period last year.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	$	114,601		$	102,938		$	224,822		$	203,875		11.3	%	10.3	%	Depreciation and amortization of property and equipment			$	119,915		$	110,221			8.8	%
% of total revenue	% of total revenue	10.8		%	8.3		%	10.3		%	8.3		%	250 bps		200 bps		% of total revenue			9.8		%	9.8		%		—	bps
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	11.5		%	9.2		%	11.1		%	9.2		%	230 bps		190 bps		% of revenue, excluding trucking fuel surcharge			10.6		%	10.7		%		(10	bps)

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

Consolidated depreciation and amortization of property and equipment increased by ~~$11.7~~$9.7 million in for the ~~second~~ quarter ~~of 2020 and $20.9 million in the first half of 2020,~~ended March 31, 2021, when compared to the same ~~periods~~period last year. ~~These increases were~~The increase was primarily related to ~~the~~an increase in owned versus leased equipment.

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

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands) Increase (Decrease)
Amortization of intangibles $ 11,474 $ 10,692 $ 22,948 $ 21,385 7.3 % 7.3 %
% of total revenue 1.1 % 0.9 % 1.1 % 0.9 % 20 bps 20 bps
% of revenue, excluding trucking fuel surcharge 1.2 % 1.0 % 1.1 % 1.0 % 20 bps 10 bps

~~Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions. See~~ ~~Note 7 in Part I, Item 1, of this Quarterly Report~~ ~~for further details regarding the Company's intangible assets. The increases of~~ ~~$0.8 million~~ for the second quarter and $1.6 million for the first half of 2020, when compared to the same periods last year, were attributed to an acquisition completed on January 1, 2020. See Note 4 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.2021.

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		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.		YTD 2020 vs.
		2020			2019			2020			2019			QTD 2019		YTD 2019
		(Dollars in thousands)																			Increase (Decrease)
Rental expense		$	22,372		$	32,875		$	47,747		$	68,420		(31.9	%)	(30.2	%)
																				Quarter Ended March 31,								Increase (Decrease)
																						2021			2020
																						(Dollars in thousands)
Amortization of intangibles																		Amortization of intangibles				$	11,749		$	11,474			2.4	%
% of total revenue	% of total revenue	2.1		%	2.6		%	2.2		%	2.8		%	(50 bps)		(60 bps)		% of total revenue				1.0		%	1.0		%		—	bps
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	2.2		%	2.9		%	2.4		%	3.1		%	(70 bps)		(70 bps)		% of revenue, excluding trucking fuel surcharge				1.0		%	1.1		%		(10	bps)

Amortization of intangibles relates to intangible assets identified with the 2017 Merger and other acquisitions. See Note 6 in Part I, Item 1, of this Quarterly Report for further details regarding the Company's intangible assets. The increase of $0.3 million for the quarter ended March 31, 2021, when compared to the same period last year, was attributed to the Eleos acquisition completed on February 1, 2021. See Note 3 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.





	Quarter Ended March 31,							Increase (Decrease)
		2021			2020
		(Dollars in thousands)
Rental expense		$	16,864		$	25,375			(33.5	%)
% of total revenue		1.4		%	2.3		%		(90	bps)
% of revenue, excluding trucking fuel surcharge		1.5		%	2.5		%		(100	bps)

Rental expense consists primarily of payments for tractors and trailers financed with operating leases. The primary factors affecting the expense are the size of our revenue equipment fleet and the relative percentage of owned versus leased equipment.

Consolidated rental expense decreased by ~~$10.5 million~~ ~~and $20.7~~$8.5 million for the ~~second~~ quarter ~~and first half of 2020,~~ended March 31, 2021, as compared to the same ~~periods~~period last year. This was primarily due to increasing our ratio of owned versus leased equipment.

We expect consolidated rental expense to continue to decrease both in total and as a percentage of consolidated revenue, excluding trucking fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of ~~2020.~~2021.


		Quarter-to-Date June 30,									Year-to-Date June 30,								QTD 2020 vs.	YTD 2020 vs.				Quarter Ended March 31,						Increase (Decrease)
		2020			2019			2020			2019			QTD 2019		YTD 2019					2021			2020			Increase (Decrease)
		(Dollars in thousands)																		Increase (Decrease)											(Dollars in thousands)	Increase (Decrease)
Purchased transportation	Purchased transportation	$	200,107		$	261,273		$	425,383		$	530,622		(23.4	%)	(19.8	%)	Purchased transportation			$	258,230		$	225,276			14.6	%
% of total revenue	% of total revenue	18.9		%	21.0		%	19.5		%	21.7		%	(210 bps)		(220 bps)		% of total revenue			21.1		%	20.0		%		110	bps
% of revenue, excluding trucking fuel surcharge	% of revenue, excluding trucking fuel surcharge	20.1		%	23.3		%	21.0		%	23.9		%	(320 bps)		(290 bps)		% of revenue, excluding trucking fuel surcharge			22.8		%	21.9		%		90	bps

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

We expect purchased transportation will increase as a percentage of revenue if we grow our logistics and intermodal ~~businesses.~~businesses faster than our trucking business. The increase could be partially offset if independent contractors exit the market due to regulatory changes.

Consolidated purchased transportation expense ~~decreased~~increased by ~~$61.2 million~~ ~~for the second quarter of 2020 and $105.2~~$33.0 million for the ~~first half of 2020,~~quarter ended March 31, 2021, as compared to the same ~~periods~~period last year. This increase was primarily due to expenses related to third-party carriers and was partially offset by a 12.9% decrease in miles driven by independent contractors ~~of 23.0% and 22.7%~~ for the ~~second~~ quarter and first half of 2020, respectively and lower fuel reimbursement expenses to independent contractors due to fewer miles and the lower fuel prices discussed above. In addition, experienced lower purchased transportation expense from third-party carrier activities in our Logistics and Intermodal segments.

Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands) Increase (Decrease)
Impairments $ 353 $ 2,182 $ 1,255 $ 2,182 (83.8 %) (42.5 %)

In 2020, we incurred impairment charges associated with revenue equipment held for sale and trailer tracking systems (within our Trucking and non-reportable segments). In 2019, we incurred impairment charges of leasehold improvements (within the Trucking segment) from the early termination of a lease of one of our operating properties.ended March 31, 2021.

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Quarter-to-Date June 30, Year-to-Date June 30, QTD 2020 vs. YTD 2020 vs.
2020 2019 2020 2019 QTD 2019 YTD 2019
(Dollars in thousands) Increase (Decrease)
Miscellaneous operating expenses $ 20,778 $ 34,108 $ 43,794 $ 46,744 (39.1 %) (6.3 %)





	Quarter Ended March 31,						Increase (Decrease)
			2021		2020
		(Dollars in thousands)
Impairments			$	—	$	902		(100.0	%)

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





	Quarter Ended March 31,					Increase (Decrease)
		2021		2020
		(Dollars in thousands)
Miscellaneous operating expenses		$	14,593	$	23,016		(36.6	%)

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

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—The ~~$13.3~~$8.4 million decrease in net consolidated miscellaneous operating expenses was primarily due to a ~~decrease in legal expenses as we incurred $15.5~~$7.5 million ~~in incremental costs associated with an unfavorable verdict in the second quarter of 2019, which were partially offset by a~~ ~~$5.8 million~~ ~~reduction~~increase in gain on sales of equipment.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~—~~The~~ ~~$3.0 million~~ ~~decrease in net consolidated miscellaneous operating expenses is primarily due to the decrease in legal expenses noted above, which were partially offset by a~~ ~~$14.5 million~~ ~~reduction in gain on sales of equipment.~~

Consolidated Other Expenses, net


		Quarter-to-Date June 30,						Year-to-Date June 30,							QTD 2020 vs.	YTD 2020 vs.			Quarter Ended March 31,						Increase (Decrease)
		2020		2019		2020		2019		QTD 2019		YTD 2019					2021		2020		Increase (Decrease)
		(Dollars in thousands)														Increase (Decrease)										(Dollars in thousands)	Increase (Decrease)

Interest expense	Interest expense	$	4,021	$	7,156	$	10,128	$	14,504	(43.8	%)	(30.2	%)	Interest expense			$	3,486	$	6,107			(42.9	%)
Other (income), net		(8,499)		(3,101)		(1,992)		(9,240)		174.1	%	(78.4	%)
Other (income) expenses, net														Other (income) expenses, net			(16,105)		6,507			(347.5	%)
Income tax expense	Income tax expense	26,815		26,076		51,369		53,999		2.8	%	(4.9	%)	Income tax expense			45,329		24,554			84.6	%

Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs. The ~~quarter and year-to-date decreases~~decrease in interest expense ~~were~~for the quarter ended March 31, 2021 was primarily due to lower overall interest ~~rates.~~rates, as well as lower overall debt balances.

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

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—The ~~$5.4~~$22.6 million favorable change between the ~~second~~ quarter ~~of 2020 and 2019~~ended March 31, 2021 compared to the same period last year is primarily ~~attributed to unrealized~~driven by gains ~~from~~recognized within our ~~various equity~~portfolio of investments.

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~—~~The $7.2 million unfavorable change between the first half of 2020 and the first half of 2019 is primarily attributed to unrealized losses from our investments in TRP.~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Income tax expense — In addition to the discussion below, Note 87 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.

•~~Comparison Between the Quarters Ended June 30, 2020 and 2019~~—The ~~$0.7~~$20.8 million increase in consolidated income tax expense was primarily due to an increase in ~~pre-tax earnings,~~income before income taxes, partially offset by ~~an increase in stock compensation deductions recognized as~~ a ~~discrete item~~reduction of the unfavorable impacts from foreign currency fluctuations in the ~~second~~ quarter ~~of 2020, as~~ended March 31, 2021 compared to the second quarter of 2019. During the second quarter of 2019, we recognized discrete items related to a partial release of our reserve for uncertain tax positions and a decrease in stock compensation deductions.same period last year. All of these factors resulted in an effective tax rate of ~~25.0% for the second quarter of 2020 and 24.7% for the second quarter of 2019.~~

•~~Comparison Between Year-to-Date June 30, 2020 and 2019~~— ~~The~~ ~~$2.6 million~~ decrease in consolidated income tax expense was primarily due to a decrease in pre-tax earnings, an increase in stock compensation deductions, and an increase in unfavorable foreign currency fluctuations recognized as discrete items. During the first half of 2019, we also recognized discrete items related to a reduction in our reserve for uncertain tax positions and a decrease in stock compensation deductions. All of these factors resulted in an effective tax rate of ~~26.0%~~25.9% for the first ~~half~~quarter of ~~2020~~2021 and ~~24.4%~~27.2% for the first ~~half~~quarter of ~~2019.~~2020.

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Non-GAAP Financial Measures

The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted EPS," "Adjusted Operating Income," and "Adjusted Operating Ratio," as we define them, are not presented in accordance with GAAP. These financial measures supplement our GAAP results in evaluating certain aspects of our business. We believe that using these measures improves comparability in analyzing our performance because they remove the impact of items from our operating results that, in our opinion, do not reflect our core operating performance. Management and the Board focus on Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, and Adjusted Operating Ratio as key measures of our performance, all of which are reconciled to the most comparable GAAP financial measures and further discussed below. We believe our presentation of these non-GAAP financial measures is useful because it provides investors and securities analysts the same information that we use internally for purposes of assessing our core operating performance.

Adjusted Net Income Attributable to Knight-Swift, Adjusted EPS, Adjusted Operating Income, and Adjusted Operating Ratio are not substitutes for their comparable GAAP financial measures, such as net income, cash flows from operating activities, operating income, or other measures prescribed by GAAP. There are limitations to using non-GAAP financial measures. Although we believe that they improve comparability in analyzing our period to period performance, they could limit comparability to other companies in our industry if those companies define these measures differently. Because of these limitations, our non-GAAP financial measures should not be considered measures of income generated by our business or discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by primarily relying on GAAP results and using non-GAAP financial measures on a supplemental basis.

Pursuant to the requirements of Regulation G, the following tables reconcile GAAP consolidated net income attributable to Knight-Swift to non-GAAP consolidated Adjusted Net Income attributable to Knight-Swift, GAAP consolidated earnings per diluted share to non-GAAP consolidated Adjusted EPS, GAAP consolidated operating ratio to non-GAAP consolidated Adjusted Operating Ratio, GAAP reportable segment operating income to non-GAAP reportable segment Adjusted Operating Income, and GAAP reportable segment operating ratio to non-GAAP reportable segment Adjusted Operating Ratio.

Non-GAAP Reconciliation:

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


		Quarter-to-Date June 30,						Year-to-Date June 30,					Quarter Ended March 31,
		2020		2019		2020		2019			2021		2020
		(In thousands)													(In thousands)
GAAP: Net income attributable to Knight-Swift	GAAP: Net income attributable to Knight-Swift	$	80,189	$	79,205	$	145,615	$	167,143	GAAP: Net income attributable to Knight-Swift	$	129,790	$	65,426
Adjusted for:	Adjusted for:									Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift	26,815		26,076		51,369		53,999		Income tax expense attributable to Knight-Swift	45,329		24,554
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift	107,004		105,281		196,984		221,142		Income before income taxes attributable to Knight-Swift	175,119		89,980
Amortization of intangibles 1										Amortization of intangibles 1	11,749		11,474

Impairments 2										Impairments 2	—		902
Legal accruals 3										Legal accruals 3	1,242		—

Amortization of intangibles ¹		11,474		10,692		22,948		21,385
Impairments ²		353		2,182		1,255		2,182

Legal accruals ³		—		15,500		—		15,500
COVID-19 incremental costs ⁴	COVID-19 incremental costs ⁴	9,966		—		12,259		—		COVID-19 incremental costs 4	—		2,293

Adjusted income before income taxes	Adjusted income before income taxes	128,797		133,655		233,446		260,209		Adjusted income before income taxes	188,110		104,649
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate	(32,299)		(33,028)		(60,743)		(63,401)		Provision for income tax expense at effective rate	(48,677)		(28,444)
Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	$	96,498	$	100,627	$	172,703	$	196,808	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	$	139,433	$	76,205

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


		Quarter-to-Date June 30,						Year-to-Date June 30,					Quarter Ended March 31,
		2020		2019		2020		2019			2021		2020
GAAP: Earnings per diluted share	GAAP: Earnings per diluted share	$	0.47	$	0.46	$	0.85	$	0.97	GAAP: Earnings per diluted share	$	0.77	$	0.38
Adjusted for:	Adjusted for:									Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift	0.16		0.15		0.30		0.31		Income tax expense attributable to Knight-Swift	0.27		0.14
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift	0.63		0.61		1.15		1.28		Income before income taxes attributable to Knight-Swift	1.04		0.53
Amortization of intangibles 1										Amortization of intangibles 1	0.07		0.07

Impairments 2										Impairments 2	—		0.01
Legal accruals 3										Legal accruals 3	0.01		—

Amortization of intangibles ¹		0.07		0.06		0.13		0.12
Impairments ²		—		0.01		0.01		0.01

Legal accruals ³		—		0.09		—		0.09
COVID-19 incremental costs ⁴	COVID-19 incremental costs ⁴	0.06		—		0.07		—		COVID-19 incremental costs 4	—		0.01

Adjusted income before income taxes	Adjusted income before income taxes	0.75		0.77		1.37		1.50		Adjusted income before income taxes	1.12		0.61
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate	(0.19)		(0.19)		(0.36)		(0.37)		Provision for income tax expense at effective rate	(0.29)		(0.17)
Non-GAAP: Adjusted EPS	Non-GAAP: Adjusted EPS	$	0.57	$	0.58	$	1.01	$	1.14	Non-GAAP: Adjusted EPS	$	0.83	$	0.44

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger and other acquisitions. Refer to Note 43 in Part I, Item 1 of this Quarterly Report for additional details regarding the acquisition.

2 "Impairments" ~~reflects~~ for the ~~non-cash impairment of certain tractors (within the Trucking segment) and certain legacy trailers (within the non-reportable segments) as a result of a softer used equipment market during the second~~first quarter of 2020 ~~as well as~~ reflect the impairment ~~charges~~ of trailer tracking equipment (within the Trucking segment) during the first quarter of 2020. In the second quarter of 2019, we incurred a non-cash impairment of leasehold improvements (within the Trucking segment) which were incurred during the early termination of a lease related to one of our operating properties..

3 ~~"Legal~~"Legal accruals" ~~reflects costs incurred in the second quarter of 2019 associated with a jury verdict issued, which is~~are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive ~~income.~~income and reflect costs related to certain class action lawsuits arising from employee related matters.

4 "COVID-19 incremental costs" reflects costs incurred during 2020 that were directly attributable to the pandemic and were incremental to those incurred prior to the outbreak. These include payroll premiums paid to our ~~drivers~~driving associates and shop technicians, additional disinfectants and cleaning supplies, and various other pandemic-specific items. The costs are clearly separable from our normal business operations and are not expected to recur once the pandemic subsides.

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Non-GAAP Reconciliation: Consolidated Adjusted Operating Income and Adjusted Operating Ratio


		Quarter-to-Date June 30,									Year-to-Date June 30,								Quarter Ended March 31,
		2020			2019			2020			2019				2021				2020
GAAP Presentation	GAAP Presentation	(Dollars in thousands)																GAAP Presentation				(Dollars in thousands)
Total revenue	Total revenue	$	1,060,698		$	1,242,083		$	2,185,496		$	2,446,618		Total revenue	$	1,223,014			$	1,124,798
Total operating expenses	Total operating expenses	(958,531)			(1,133,490)			(1,981,210)			(2,221,726)			Total operating expenses	(1,060,755)				(1,022,679)
Operating income	Operating income	$	102,167		$	108,593		$	204,286		$	224,892		Operating income	$	162,259			$	102,119
Operating ratio	Operating ratio	90.4		%	91.3		%	90.7		%	90.8		%	Operating ratio	86.7		%		90.9		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	1,060,698		$	1,242,083		$	2,185,496		$	2,446,618		Total revenue	$	1,223,014			$	1,124,798
Trucking fuel surcharge	Trucking fuel surcharge	(63,101)			(119,329)			(160,804)			(226,908)			Trucking fuel surcharge	(89,909)				(97,703)
Revenue, excluding trucking fuel surcharge	Revenue, excluding trucking fuel surcharge	997,597			1,122,754			2,024,692			2,219,710			Revenue, excluding trucking fuel surcharge	1,133,105				1,027,095

Total operating expenses	Total operating expenses	958,531			1,133,490			1,981,210			2,221,726			Total operating expenses	1,060,755				1,022,679
Adjusted for:	Adjusted for:													Adjusted for:
Trucking fuel surcharge	Trucking fuel surcharge	(63,101)			(119,329)			(160,804)			(226,908)			Trucking fuel surcharge	(89,909)				(97,703)
Amortization of intangibles ¹		(11,474)			(10,692)			(22,948)			(21,385)
Impairments ²		(353)			(2,182)			(1,255)			(2,182)
Legal accruals ³		—			(15,500)			—			(15,500)
Amortization of intangibles 1														Amortization of intangibles 1	(11,749)				(11,474)

Impairments 2														Impairments 2	—				(902)
Legal accruals 3														Legal accruals 3	(1,242)				—

COVID-19 incremental costs ⁴	COVID-19 incremental costs ⁴	(9,966)			—			(12,259)			—			COVID-19 incremental costs 4	—				(2,293)

Adjusted Operating Expenses	Adjusted Operating Expenses	873,637			985,787			1,783,944			1,955,751			Adjusted Operating Expenses	957,855				910,307
Adjusted Operating Income	Adjusted Operating Income	$	123,960		$	136,967		$	240,748		$	263,959		Adjusted Operating Income	$	175,250			$	116,788
Adjusted Operating Ratio	Adjusted Operating Ratio	87.6		%	87.8		%	88.1		%	88.1		%	Adjusted Operating Ratio	84.5		%		88.6		%

1 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 1.

2 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 2.

3 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 3.3.

4 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

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

Non-GAAP Reconciliation: Reportable Segment Adjusted Operating Income and Adjusted Operating Ratio

Trucking Segment


		Quarter-to-Date June 30,									Year-to-Date June 30,								Quarter Ended March 31,
		2020			2019			2020			2019				2021				2020
GAAP Presentation	GAAP Presentation	(Dollars in thousands)																GAAP Presentation				(Dollars in thousands)
Total revenue	Total revenue	$	879,369		$	1,020,027		$	1,798,430		$	1,993,272		Total revenue	$	962,947			$	919,061
Total operating expenses	Total operating expenses	(771,581)			(894,255)			(1,583,308)			(1,752,325)			Total operating expenses	(804,464)				(811,727)
Operating income	Operating income	$	107,788		$	125,772		$	215,122		$	240,947		Operating income	$	158,483			$	107,334
Operating ratio	Operating ratio	87.7		%	87.7		%	88.0		%	87.9		%	Operating ratio	83.5		%		88.3		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	879,369		$	1,020,027		$	1,798,430		$	1,993,272		Total revenue	$	962,947			$	919,061
Fuel surcharge	Fuel surcharge	(63,101)			(119,329)			(160,804)			(226,908)			Fuel surcharge	(89,909)				(97,703)
Intersegment transactions	Intersegment transactions	(235)			(50)			(509)			(86)			Intersegment transactions	(224)				(274)
Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions	816,033			900,648			1,637,117			1,766,278			Revenue, excluding fuel surcharge and intersegment transactions	872,814				821,084

Total operating expenses	Total operating expenses	771,581			894,255			1,583,308			1,752,325			Total operating expenses	804,464				811,727
Adjusted for:	Adjusted for:													Adjusted for:
Fuel surcharge	Fuel surcharge	(63,101)			(119,329)			(160,804)			(226,908)			Fuel surcharge	(89,909)				(97,703)
Intersegment transactions	Intersegment transactions	(235)			(50)			(509)			(86)			Intersegment transactions	(224)				(274)
Amortization of intangibles 1														Amortization of intangibles 1	(324)				(324)
Impairments 2														Impairments 2	—				(902)

Amortization of intangibles ¹		(324)			(349)			(648)			(698)
Impairments ²		(153)			(2,182)			(1,055)			(2,182)

COVID-19 incremental costs ³		(9,901)			—			(12,146)			—
COVID-19 incremental costs 3														COVID-19 incremental costs 3	—				(2,245)

Adjusted Operating Expenses	Adjusted Operating Expenses	697,867			772,345			1,408,146			1,522,451			Adjusted Operating Expenses	714,007				710,279
Adjusted Operating Income	Adjusted Operating Income	$	118,166		$	128,303		$	228,971		$	243,827		Adjusted Operating Income	$	158,807			$	110,805
Adjusted Operating Ratio	Adjusted Operating Ratio	85.5		%	85.8		%	86.0		%	86.2		%	Adjusted Operating Ratio	81.8		%		86.5		%

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

2 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 2.

3 See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

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

Logistics Segment


		Quarter-to-Date June 30,									Year-to-Date June 30,								Quarter Ended March 31,
		2020			2019			2020			2019				2021				2020
GAAP Presentation	GAAP Presentation	(Dollars in thousands)																GAAP Presentation				(Dollars in thousands)
Total revenue	Total revenue	$	70,104		$	82,929		$	149,302		$	171,881		Total revenue	$	118,887			$	79,198
Total operating expenses	Total operating expenses	(67,066)			(77,908)			(142,545)			(159,577)			Total operating expenses	(111,310)				(75,479)
Operating income	Operating income	$	3,038		$	5,021		$	6,757		$	12,304		Operating income	$	7,577			$	3,719
Operating ratio	Operating ratio	95.7		%	93.9		%	95.5		%	92.8		%	Operating ratio	93.6		%		95.3		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	70,104		$	82,929		$	149,302		$	171,881		Total revenue	$	118,887			$	79,198

Intersegment transactions	Intersegment transactions	(3,038)			(2,625)			(5,479)			(4,386)			Intersegment transactions	(3,165)				(2,441)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	67,066			80,304			143,823			167,495			Revenue, excluding intersegment transactions	115,722				76,757

Total operating expenses	Total operating expenses	67,066			77,908			142,545			159,577			Total operating expenses	111,310				75,479
Adjusted for:	Adjusted for:													Adjusted for:

Intersegment transactions	Intersegment transactions	(3,038)			(2,625)			(5,479)			(4,386)			Intersegment transactions	(3,165)				(2,441)

Adjusted Operating Expenses	Adjusted Operating Expenses	64,028			75,283			137,066			155,191			Adjusted Operating Expenses	108,145				73,038
Adjusted Operating Income	Adjusted Operating Income	$	3,038		$	5,021		$	6,757		$	12,304		Adjusted Operating Income	$	7,577			$	3,719
Adjusted Operating Ratio	Adjusted Operating Ratio	95.5		%	93.7		%	95.3		%	92.7		%	Adjusted Operating Ratio	93.5		%		95.2		%

Intermodal Segment


		Quarter-to-Date June 30,									Year-to-Date June 30,								Quarter Ended March 31,
		2020			2019			2020			2019				2021				2020
GAAP Presentation	GAAP Presentation	(Dollars in thousands)																GAAP Presentation				(Dollars in thousands)
Total revenue	Total revenue	$	82,820		$	118,195		$	177,551		$	234,562		Total revenue	$	107,066			$	94,731
Total operating expenses	Total operating expenses	(87,295)			(114,003)			(184,763)			(228,009)			Total operating expenses	(103,609)				(97,468)
Operating (loss) income		$	(4,475)		$	4,192		$	(7,212)		$	6,553
Operating income (loss)														Operating income (loss)	$	3,457			$	(2,737)
Operating ratio	Operating ratio	105.4		%	96.5		%	104.1		%	97.2		%	Operating ratio	96.8		%		102.9		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	82,820		$	118,195		$	177,551		$	234,562		Total revenue	$	107,066			$	94,731

Intersegment transactions	Intersegment transactions	(121)			(468)			(230)			(1,158)			Intersegment transactions	(95)				(109)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	82,699			117,727			177,321			233,404			Revenue, excluding intersegment transactions	106,971				94,622

Total operating expenses	Total operating expenses	87,295			114,003			184,763			228,009			Total operating expenses	103,609				97,468
Adjusted for:	Adjusted for:													Adjusted for:

Intersegment transactions	Intersegment transactions	(121)			(468)			(230)			(1,158)			Intersegment transactions	(95)				(109)

COVID-19 incremental costs ¹		(65)			—			(113)			—
COVID-19 incremental costs 1														COVID-19 incremental costs 1	—				(48)
Adjusted Operating Expenses	Adjusted Operating Expenses	87,109			113,535			184,420			226,851			Adjusted Operating Expenses	103,514				97,311
Adjusted Operating (Loss) Income		$	(4,410)		$	4,192		$	(7,099)		$	6,553
Adjusted Operating Income (Loss)														Adjusted Operating Income (Loss)	$	3,457			$	(2,689)
Adjusted Operating Ratio	Adjusted Operating Ratio	105.3		%	96.4		%	104.0		%	97.2		%	Adjusted Operating Ratio	96.8		%		102.8		%

1See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 4.

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


Liquidity and Capital Resources

Sources of Liquidity

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


Source	~~June 30, 2020~~March 31, 2021
	(In thousands)
Cash and cash equivalents, excluding restricted cash	$	~~117,760~~194,650
Availability under Revolver, due October 2022 ¹1	~~533,906~~655,656
Availability under 2018 RSA, due July 2021 ²2	~~39,959~~2,919
Total unrestricted liquidity	$	~~691,625~~853,225
Cash and cash equivalents – restricted ³3	~~40,991~~49,233
Restricted investments, held-to-maturity, amortized cost ³3	~~8,272~~8,954
Total liquidity, including restricted cash and restricted investments	$	~~740,888~~911,412

1 As of ~~June 30, 2020,~~March 31, 2021, we had ~~$235.0~~$115.0 million in borrowings under our ~~$800.0~~$800.0 million Revolver. We additionally had ~~$31.1~~$29.3 million in outstanding letters of credit (discussed below), leaving ~~$533.9~~$655.7 million available under the Revolver.

2 Based on eligible receivables at ~~June 30, 2020,~~March 31, 2021, our borrowing base for the 2018 RSA was ~~$273.8~~$267.2 million,, while outstanding borrowings were ~~$165.0 million~~.$199.0 million. We additionally had ~~$68.8~~$65.3 million in outstanding letters of credit (discussed below), leaving ~~$40.0~~$2.9 million available under the 2018 RSA. Refer to Note 98 in Part I, Item 1 of this Quarterly Report for more information regarding the 2018 RSA.

3 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments. "Cash and cash equivalents – restricted" consists of ~~$39.6~~$47.9 million,, included in "Cash and cash equivalents — restricted" in the condensed consolidated balance sheet and held by Mohave and Red Rock for claims payments. The remaining ~~$1.4~~$1.4 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.

Uses of Liquidity

Our business requires substantial amounts of cash for operating activities, including salaries and wages paid to our employees, contract payments to independent contractors, insurance and claims payments, tax payments, and others. We also use large amounts of cash and credit for the following activities:

Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh our trailer fleet, fund replacement of our revenue equipment fleet, and, to a lesser extent, fund upgrades to our terminals and technology in our ~~logistics~~various service offerings. We expect that net capital expenditures from the aforementioned projects will be in the range of ~~$500.0~~$450.0 – ~~$525.0~~$500.0 million for the full-year ~~2020.~~2021. We believe we have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or 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. The availability of financing or equity capital will depend upon our financial condition and results of operations as well as prevailing market conditions. If such additional borrowing, lease financing, or equity capital is not available at the time we need it, then we may need to borrow more under the Revolver (if not then fully drawn), extend the maturity of then-outstanding debt, rely on alternative financing arrangements, engage in asset sales, limit our fleet size, or operate our revenue equipment for longer periods.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

There can be no assurance that we will be able to obtain additional debt under our existing financial arrangements to satisfy our ongoing capital requirements. However, we believe the combination of our expected cash flows, financing available through operating and finance leases, available funds under ~~the 2018 RSA,~~our accounts receivable securitization, and availability under the Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Principal and Interest Payments — As of ~~June 30, 2020,~~March 31, 2021, we had debt, accounts receivable securitization, and finance lease obligations of ~~$851.8~~$825.5 million,, which are discussed under "Material Debt Agreements," below. Certain cash flows from operations are committed to minimum payments of principal and interest on our debt and lease obligations. Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances.

Letters of Credit — Pursuant to the terms of the 2017 Debt Agreement and the 2018 RSA, our lenders may issue standby letters of credit on our behalf. When we have letters of credit outstanding, the availability under the Revolver or 2018 RSA is reduced accordingly. 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, common stock prices, general economic and market conditions, as well as Board approval, we may repurchase shares of our outstanding common stock. As of ~~June 30, 2020,~~March 31, 2021, the Company had ~~$199.0~~$196.3 million remaining under the ~~2019~~2020 Knight-Swift Share Repurchase Plan. Additional details are discussed in Note 1211 in Part I, Item 1 of this Quarterly Report.

Working Capital

AsWe had a working capital surplus of ~~June 30, 2020~~$15.3 million as of March 31, 2021 and $83.7 million as of December 31, ~~2019, we had~~2020. Our working capital ~~deficits~~surplus as of ~~$142.0 million and $103.0 million, respectively. The deficits were primarily due~~March 31, 2021 was negatively impacted by our 2018 RSA, which is included within current liabilities since it was scheduled to mature in July 2021.On April 23, 2021, we entered into the ~~Term Loan maturing on October 2, 2020. We intend~~2021 RSA, which amended the 2018 RSA extending the maturity to ~~refinance the Term Loan prior to its maturity.~~April 23, 2024. Additional details are discussed in Note 8 in Part I, Item 1 of this Quarterly Report.

Material Debt Agreements

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

•$299.1 million: Term Loan, due October 2022, net of $0.9 million in deferred loan costs

•$199.0 million: 2018 RSA outstanding borrowings, due July 2021

•$212.4 million: Finance lease obligations

•$115.0 million: Revolver, due October 2022

As of ~~June 30,~~December 31, 2020, we had $~~851.8~~913.6 million in material debt obligations at the following carrying values:

•$~~364.9~~298.9 million: Term Loan, due October ~~2020,~~2022, net of $~~0.1~~1.1 million in deferred loan costs

•$~~164.8~~213.9 million: 2018 RSA outstanding borrowings, due July 2021, net of~~$0.2~~ $0.1 million in deferred loan costs

•$~~87.1 million:~~190.8 million: Finance lease obligations

•$~~235.0~~210.0 million: ~~Revolver, due October 2022~~

~~As of December 31, 2019, we had $918.8 million in material debt obligations at the following carrying values:~~

•~~$364.8 million: Term Loan,~~ ~~due October 2020,~~ ~~net of $0.2 million in deferred loan costs~~

•~~$204.8 million: 2018 RSA outstanding borrowings, due July 2021, net of $0.2 million in deferred loan costs~~

•~~$70.2 million: Finance lease obligations~~

•~~$279.0 million:~~ Revolver, due October 2022.

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


Cash Flow Analysis


		Year-to-Date June 30,								Change			Quarter Ended March 31,					Change
		2020		2019				Change				2021			2020		Change
		(In thousands)											(In thousands)			Change
Net cash provided by operating activities	Net cash provided by operating activities	$	383,360	$	362,812	$	20,548			306,113			$	155,343				$	150,770
Net cash used in investing activities	Net cash used in investing activities	(253,066)		(223,882)		(29,184)				Net cash used in investing activities	(74,141)				(125,582)			51,441
Net cash used in financing activities	Net cash used in financing activities	(173,771)		(162,022)		(11,749)		Net cash used in financing activities	(185,366)				(71,885)			(113,481)

Net Cash Provided by Operating Activities

Comparison Between ~~Year-to-Date June 30,~~Quarter Ended March 31, 2021 and 2020 ~~and 2019~~ — T~~he $20.5~~The $150.8 million increase in net cash provided by operating activities was primarily due to a ~~$68.8 million~~ ~~decrease in~~less cash paid for ~~income taxes, net of refunds, and various changes within our working capital. This was all partially offset by a $93.4 million~~ ~~cash settlement paid during~~legal settlements in the first quarter of 2021, as compared to the first quarter of 2020, when we paid $93.4 million associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift. Net cash provided by operating activities was also favorably impacted by a $60.1 million increase in our operating income.

Net Cash Used in Investing Activities

Comparison Between ~~Year-to-Date June 30,~~Quarter Ended March 31, 2021 and 2020 ~~and 2019~~ — The ~~$29.2~~$51.4 million ~~increase~~ decrease in net cash used in investing activities was primarily due to a ~~$46.8 million increase in net cash used for acquisitions and was partially offset by a $24.7~~$31.8 million decrease in net cash capital expenditures.

Net Cash Used in Financing Activities

Comparison Between ~~Year-to-Date June 30,~~Quarter Ended March 31, 2021 and 2020 ~~and 2019~~ — Net cash used in financing activities increased by ~~$11.7~~$113.5 million, primarily due to a ~~$59.0~~$110.0 million ~~decrease in~~ net ~~repayments of our debt obligations. This was partially offset by a~~ ~~$52.3 million~~ ~~decrease~~increase in cash used ~~to repurchase shares~~for our Revolver, as we made net prepayments of ~~our common stock.~~


~~Contractual Obligations~~

~~"Liquidity and Capital Resources," above, includes details regarding changes in our contractual obligations table~~$95.0 million during the ~~year-to-date June 30, 2020 period. Aside from these items, there were no material changes~~first quarter of 2021, as compared to assuming net borrowings of $15.0 million during the ~~contractual obligations table, which was included in our 2019 Annual Report.~~


~~Off Balance Sheet Arrangements~~

~~Information about our off balance sheet arrangements is included in Note 10~~first quarter of ~~the notes to our condensed consolidated financial statements, included in Part I, Item 1 of this Quarterly Report, which is incorporated by reference herein. See also "Contractual Obligations," above.~~

~~Table of ContentsGlossary of Terms~~2020.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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


Seasonality

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


Inflation

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 continue to experience inflationary pressures with respect to driver wages, as compared to prior years.


Recently Issued Accounting Pronouncements

See Note 2 in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference, for the impact of recently issued accounting pronouncements on the Company's condensed consolidated financial ~~statements, as follows:~~

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

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

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ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have exposure from variable interest rates, primarily related to our 2017 Debt Agreement and 2018 RSA. These variable interest rates are impacted by changes in short-term interest rates. We primarily manage interest rate exposure through a mix of variable rate debt (weighted average rate of 1.1% as of ~~June 30, 2020)~~March 31, 2021) and fixed rate equipment lease financing. Assuming the level of borrowings as of ~~June 30, 2020,~~March 31, 2021, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by ~~$7.7~~$6.1 million.

Commodity Price Risk

We have commodity exposure with respect to fuel used in company-owned tractors. Increases in fuel prices would continue to raise our operating costs, even after applying fuel surcharge revenue. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. The weekly average of diesel price per gallon in the US decreased to ~~$2.44~~$2.91 for the ~~second~~ quarter ~~of 2020~~ended March 31, 2021 from an average of ~~$3.12~~$2.92 in the ~~second~~ quarter ~~of 2019. The weekly average diesel price per gallon in the US decreased to an average of $2.67 for year-to-date June 30, 2020 from an average of $3.07 for year-to-date June 30, 2019.~~ended March 31, 2020. We cannot predict the extent or speed of potential changes in fuel price levels in the future, the degree to which the lag effect of our fuel surcharge programs will impact us as a result of the timing and magnitude of such changes, or the extent to which effective fuel surcharges can be maintained and collected to offset such increases. We generally have not used derivative financial instruments to hedge our fuel price exposure in the past, but continue to evaluate this possibility. To mitigate the impact of rising fuel costs, we contract with some of our fuel suppliers to buy fuel at a fixed price or within banded pricing for a specified period, usually not exceeding twelve months. However, these purchase commitments only cover a small portion of our fuel consumption. Accordingly, fuel price fluctuations may still negatively impact us.


ITEM 4.			CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure that material information relating to us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to other members of senior management and the Board. Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures. Based on this evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (2) accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~June 30, 2020~~,March 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We base our internal control over financial reporting on the criteria set forth in the 2013 COSO Internal Control: Integrated Framework.

We have confidence in our disclosure controls and procedures and internal control over financial reporting. Nevertheless, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors, misstatements, or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

PART II OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

Information about our legal proceedings is included in Note 1110 of the notes to our condensed consolidated financial statements, included in Part I, Item 1, of this Quarterly Report for the period ended ~~June 30, 2020,~~March 31, 2021, and is incorporated by reference herein. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's overall financial position, operating results, or cash flows after taking into account any existing accruals. However, actual outcomes could be material to the Company's financial position, operating results, or cash flows for any particular period.


ITEM 1A.			RISK FACTORS

While we attempt to identify, manage, and mitigate risks and uncertainties associated with our business, some level of risk and uncertainty will always be present. Our ~~2019~~2020 Annual Report ~~and our Quarterly Report for the quarterly period ended March 31, 2020,~~ in the section entitled "Item 1A. Risk Factors," describes some of the risks and uncertainties associated with our business.


ITEM 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Period~~

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share~~

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs~~

~~Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs ¹~~

~~April 1, 2020 to April 30, 2020~~

—

~~198,977,224~~

~~May 1, 2020 to May 31, 2020~~

—

~~198,977,224~~

~~June 1, 2020 to June 30, 2020~~

—

~~198,977,224~~

~~Total~~

—

~~198,977,224~~


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value that May Yet be Purchased Under the Plans or Programs 1
January 1, 2021 to January 31, 2021	—	$	—	—	$	250,000,000
February 1, 2021 to February 28, 2021	1,265,923	$	41.12	1,265,923	$	197,951,108
March 1, 2021 to March 31, 2021	37,530	$	42.97	37,530	$	196,338,538
Total	1,303,453	$	41.17	1,303,453	$	196,338,538

1On ~~May 31, 2019,~~November 30, 2020, the Company announced that the Board approved the $250.0 million ~~2019~~2020 Knight-Swift Share Repurchase Plan. There is no expiration date associated with the ~~2019~~2020 Knight-Swift Share Repurchase Plan.


ITEM 3.			DEFAULTS UPON SENIOR SECURITIES

Not applicable.


ITEM 4.			MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.			OTHER INFORMATION

None.

6151

Agreement and Plan of Merger, dated as of April 9, 2017, by and among Swift Transportation Company, Bishop Merger Sub, Inc., and Knight Transportation, Inc.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


ITEM 6.			EXHIBITS

Exhibit Number

Description

Page or Method of Filing

2.1*

Incorporated by reference to Exhibit 2.1 of Form 8-K filed on April 13, 2017

3.1

Fourth Amended and Restated Certificate of Incorporation of Knight-Swift Transportation Holdings Inc.

~~Filed herewith~~Incorporated by reference to Exhibit 3.1 of Form 10-Q for the quarter ended June 30, 2020

3.2

~~Second~~Third Amended and Restated By-laws of Knight-Swift Transportation Holdings Inc.

Incorporated by reference to Exhibit 3.2 of Form ~~8-K filed on November 15, 2018~~10-Q for the quarter ended September 30, 2020

10.1**

~~Form of RSU Award Notice~~

~~Filed herewith~~

31.1

Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by David A. Jackson, the Company's Chief Executive Officer (principal executive officer).

Filed herewith

31.2

Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Adam W. Miller, the Company's Chief Financial Officer (principal financial officer).

Filed herewith

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by David A. Jackson, the Company's Chief Executive Officer.

Furnished herewith

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Adam W. Miller, the Company's Chief Financial Officer.

Furnished herewith

101.INS

Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

XBRL Taxonomy Calculation Linkbase Document

Filed herewith

101.LAB

XBRL Taxonomy Label Linkbase Document

Filed herewith

101.PRE

XBRL Taxonomy Presentation Linkbase Document

Filed herewith

101.DEF

XBRL Taxonomy Extension Definition Document

Filed herewith

104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)

Filed herewith

* Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to supplementally furnish to the SEC a copy of any omitted schedule upon request by the SEC.

** Management contract or compensatory plan, contract, or arrangement.

6252