UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35007

Knight-Swift Transportation Holdings Inc.

(Exact name of registrant as specified in its charter)


Delaware						20-5589597
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~20002 North 19th Avenue~~2002 West Wahalla Lane

Phoenix, Arizona 85027

(Address of principal executive offices and zip code)

(602) 269-2000

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $0.01 Par Value

KNX

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~165,510,658~~165,957,149 shares of the registrant's common stock outstanding as of ~~April 28,~~October 27, 2021.

Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION			PAGE
Item 1. Financial Statements			45

Condensed Consolidated Balance Sheets (Unaudited) — ~~March 31,~~September 30, 2021 and December 31, ~~2020~~			4

~~Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Quarters Ended March 31, 2021 and~~ 2020			5

Condensed Consolidated Statements of ~~Cash Flows~~Comprehensive Income (Unaudited) — ~~Quarters Ended March 31,~~Quarter and Year-to-Date September 30, 2021 and 2020			6

Condensed Consolidated Statements of ~~Stockholders' Equity~~Cash Flows (Unaudited) — ~~Quarters Ended March 31,~~Quarter and Year-to-Date September 30, 2021 and 2020			87

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) — Quarter and Year-to-Date September 30, 2021 and 2020			9

Note 1 — Introduction and Basis of Presentation			911



Note 2 — Recently Issued Accounting Pronouncements			1012

Note 3 — Acquisitions			1012

Note 4 — Investments			1316

Note 5 — Assets Held for Sale			1317

Note 6 — Goodwill and Other Intangible Assets			1417

Note 7 — Income Taxes			1518



Note 8 — Accounts Receivable Securitization			1519

Note 9 — ~~Commitments~~			16

~~Note 10 — Contingencies~~Debt and ~~Legal Proceedings~~			17

~~Note 11 — Share Repurchase Plan~~			19

~~Note 12 — Weighted Average Shares Outstanding~~Financing			20

Note 1310 — ~~Related Party Transactions~~Defined Benefit Pension Plan			2022

Note 11 — Commitments			24

Note 12 — Contingencies and Legal Proceedings			25

Note 13 — Share Repurchase Plans			27

Note 14 — ~~Information by Segment and Geography~~Weighted Average Shares Outstanding			2228

Note 15 — Fair Value Measurement			2428

Note 16 — Related Party Transactions			33

Note 17 — Information by Segment and Geography			34

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2736

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5065

Item 4. Controls and Procedures			5066
PART II OTHER INFORMATION
Item 1. Legal Proceedings			5167

Item 1A. Risk Factors			5167

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5168

Item 3. Defaults Upon Senior Securities			5168

Item 4. Mine Safety Disclosures			5168

Item 5. Other Information			5168

Item 6. Exhibits			5269

Signatures			5370

Table of Contents

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


QUARTERLY REPORT ON FORM 10-Q




GLOSSARY OF TERMS
The following glossary defines certain acronyms and terms used in this Quarterly Report on Form 10-Q. These acronyms and terms are specific to our company, commonly used in our industry, or are otherwise frequently used throughout our document.

Term						Definition
Knight-Swift/the Company/Management/We/Us/Our						Unless otherwise indicated or the context otherwise requires, these terms represent Knight-Swift Transportation Holdings Inc. and its subsidiaries.

2017 Merger						The September 8, 2017 merger of Knight and Swift, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt Agreement						The Company's ~~Credit Agreement,~~unsecured credit agreement, entered into on September 29, 2017, as amended on October 2, 2020, consisting of the 2017 Revolver and 2017 Term Loan, which are defined below.
2017 Revolver						Revolving line of credit under the 2017 Debt Agreement
2017 Term Loan						The Company's term loan under the 2017 Debt Agreement
2018 RSA						Fourth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on July 11, 2018 by Swift Receivables Company II, LLC with unrelated financial entities.
2021 Debt Agreement						The Company's unsecured credit agreement, entered into on September 3, 2021, consisting of the 2021 Revolver and 2021 Term Loans, which are defined below
2021 Prudential Notes						Third amended and restated note purchase and private shelf agreement, entered into on September 3, 2021 by ACT with unrelated financial entities
2021 Revolver						Revolving line of credit under the 2021 Debt Agreement
2021 Term Loans						The Company's term loans under the 2021 Debt Agreement, collectively consisting of the 2021 Term Loan A-1, 2021 Term Loan A-2 and 2021 Term Loan A-3
2021 Term Loan A-1						The Company's term loan under the 2021 Debt Agreement, maturing on December 3, 2022
2021 Term Loan A-2						The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2024
2021 Term Loan A-3						The Company's term loan under the 2021 Debt Agreement, maturing on September 3, 2026
2021 RSA						Fifth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on April 23, 2021 by Swift Receivables Company II, LLC with unrelated financial entities.


July 2021 Term Loan						The Company's term loan entered into on July 6, 2021
ACT						AAA Cooper Transportation, and its affiliated entity
ACT Acquisition						The Company's acquisition of 100% of the securities of ACT on July 5, 2021
Annual Report						Annual Report on Form 10-K
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
Board						Knight-Swift's Board of Directors
BSBY						Bloomberg Short-Term Bank Yield Index
COVID-19						Viral strain of a coronavirus which led the World Health Organization to declare a global pandemic in March ~~2020.~~2020
DOE						United States Department of Energy
EPS						Earnings Per Share
Embark						Embark Trucks Inc. and its related entities
ESPP						Knight-Swift Transportation Holdings Inc. Amended and Restated 2012 Employee Stock Purchase Plan



GAAP						United States Generally Accepted Accounting Principles
Knight						Unless otherwise indicated or the context otherwise requires, this term represents Knight Transportation, Inc. and its subsidiaries ~~prior~~

Table of Contents

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.




GLOSSARY OF TERMS
The following glossary defines certain acronyms and terms used in this Quarterly Report on Form 10-Q. These acronyms and terms are specific to ~~the 2017 Merger.~~our company, commonly used in our industry, or are otherwise frequently used throughout our document.

Term						Definition
LIBOR						London InterBank Offered Rate


LTL						Less-than-truckload
Quarterly Report						Quarterly Report on Form 10-Q
QTD						Quarter-to-date
~~Revolver~~						~~Revolving line of credit under the 2017 Debt Agreement~~
RSU						Restricted Stock Unit
SEC						United States Securities and Exchange Commission
SPA						Stock Purchase Agreement
Swift						Unless otherwise indicated or the context otherwise requires, this term represents Swift Transportation Company and its subsidiaries ~~prior to the 2017 Merger.~~
~~Term Loan~~						~~The Company's term loan under the 2017 Debt Agreement~~
TRP						Transportation Resource Partners
US						The United States of America
UTXL						UTXL Enterprises, Inc.
YTD						Year-to-date

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

PART I FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets (Unaudited)


		March 31, 2021		December 31, 2020			September 30, 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	$	194,650	$	156,699	Cash and cash equivalents	$	269,694	$	156,699
Cash and cash equivalents – restricted	Cash and cash equivalents – restricted	47,867		39,328		Cash and cash equivalents – restricted	68,019		39,328
Restricted investments, held-to-maturity, amortized cost	Restricted investments, held-to-maturity, amortized cost	8,954		9,001		Restricted investments, held-to-maturity, amortized cost	7,140		9,001
Trade receivables, net of allowance for doubtful accounts of $21,797 and $22,093, respectively		584,011		578,479
Trade receivables, net of allowance for doubtful accounts of $21,811 and $22,093, respectively						Trade receivables, net of allowance for doubtful accounts of $21,811 and $22,093, respectively	830,402		578,479
Contract balance – revenue in transit	Contract balance – revenue in transit	20,104		14,560		Contract balance – revenue in transit	22,950		14,560
Prepaid expenses	Prepaid expenses	66,278		71,649		Prepaid expenses	76,697		71,649
Assets held for sale	Assets held for sale	20,835		29,756		Assets held for sale	20,330		29,756
Income tax receivable	Income tax receivable	31		2,903		Income tax receivable	46,899		2,903
Other current assets	Other current assets	21,015		20,988		Other current assets	62,334		20,988
Total current assets	Total current assets	963,745		923,363		Total current assets	1,404,465		923,363
Gross property and equipment	Gross property and equipment	4,286,833		4,223,348		Gross property and equipment	4,933,669		4,223,348
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(1,311,189)		(1,230,696)		Less: accumulated depreciation and amortization	(1,477,334)		(1,230,696)
Property and equipment, net	Property and equipment, net	2,975,644		2,992,652		Property and equipment, net	3,456,335		2,992,652
Operating lease right-of-use-assets	Operating lease right-of-use-assets	95,658		113,296		Operating lease right-of-use-assets	102,230		113,296
Goodwill	Goodwill	2,958,709		2,922,964		Goodwill	3,461,898		2,922,964
Intangible assets, net	Intangible assets, net	1,393,346		1,389,245		Intangible assets, net	1,793,924		1,389,245
Other long-term assets	Other long-term assets	132,373		126,482		Other long-term assets	136,130		126,482
Total assets	Total assets	$	8,519,475	$	8,468,002	Total assets	$	10,354,982	$	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	$	126,918	$	101,001	Accounts payable	$	177,634	$	101,001
Accrued payroll and purchased transportation	Accrued payroll and purchased transportation	182,106		160,888		Accrued payroll and purchased transportation	227,016		160,888
Accrued liabilities	Accrued liabilities	143,168		88,894		Accrued liabilities	134,002		88,894
Claims accruals – current portion	Claims accruals – current portion	174,678		174,928		Claims accruals – current portion	200,159		174,928

Finance lease liabilities and long-term debt – current portion	Finance lease liabilities and long-term debt – current portion	85,035		52,583		Finance lease liabilities and long-term debt – current portion	78,266		52,583
Operating lease liabilities – current portion	Operating lease liabilities – current portion	37,577		47,496		Operating lease liabilities – current portion	35,464		47,496
Accounts receivable securitization – current portion	Accounts receivable securitization – current portion	198,957		213,918		Accounts receivable securitization – current portion	—		213,918
Total current liabilities	Total current liabilities	948,439		839,708		Total current liabilities	852,541		839,708
Revolving line of credit	Revolving line of credit	115,000		210,000		Revolving line of credit	300,000		210,000
Long-term debt – less current portion	Long-term debt – less current portion	299,063		298,907		Long-term debt – less current portion	1,238,022		298,907
Finance lease liabilities – less current portion	Finance lease liabilities – less current portion	127,341		138,243		Finance lease liabilities – less current portion	208,556		138,243
Operating lease liabilities – less current portion	Operating lease liabilities – less current portion	62,549		69,852		Operating lease liabilities – less current portion	69,401		69,852

Accounts receivable securitization – less current portion						Accounts receivable securitization – less current portion	278,428		—
Claims accruals – less current portion	Claims accruals – less current portion	174,766		174,814		Claims accruals – less current portion	200,493		174,814
Deferred tax liabilities	Deferred tax liabilities	797,019		815,941		Deferred tax liabilities	856,926		815,941
Other long-term liabilities	Other long-term liabilities	45,960		48,497		Other long-term liabilities	45,175		48,497
Total liabilities	Total liabilities	2,570,137		2,595,962		Total liabilities	4,049,542		2,595,962
Commitments and contingencies (Notes 3, 9, and 10)		0		0
Commitments and contingencies (Notes 3, 10, 11, and 12)						Commitments and contingencies (Notes 3, 10, 11, and 12)	0		0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
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.		1,655		1,665
Preferred stock, par value $0.01 per share; 10,000 shares authorized; none issued						Preferred stock, par value $0.01 per share; 10,000 shares authorized; none issued	—		—
Common stock, par value $0.01 per share; 500,000 shares authorized; 166,003 and 166,553 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.						Common stock, par value $0.01 per share; 500,000 shares authorized; 166,003 and 166,553 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.	1,660		1,665

Additional paid-in capital	Additional paid-in capital	4,309,792		4,301,424		Additional paid-in capital	4,344,894		4,301,424
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(878)		—
Retained earnings	Retained earnings	1,625,397		1,566,759		Retained earnings	1,946,984		1,566,759
Total Knight-Swift stockholders' equity	Total Knight-Swift stockholders' equity	5,936,844		5,869,848		Total Knight-Swift stockholders' equity	6,292,660		5,869,848
Noncontrolling interest	Noncontrolling interest	12,494		2,192		Noncontrolling interest	12,780		2,192
Total stockholders’ equity	Total stockholders’ equity	5,949,338		5,872,040		Total stockholders’ equity	6,305,440		5,872,040
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	8,519,475	$	8,468,002	Total liabilities and stockholders’ equity	$	10,354,982	$	8,468,002

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

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~


~~Condensed Consolidated Statements of Comprehensive Income (Unaudited)~~

Quarter Ended March 31,
2021 2020
(In thousands, except per share data)
Revenue:
Revenue, excluding trucking fuel surcharge $ 1,133,105 $ 1,027,095
Trucking fuel surcharge 89,909 97,703
Total revenue 1,223,014 1,124,798
Operating expenses:
Salaries, wages, and benefits 370,370 354,833
Fuel 118,236 121,855
Operations and maintenance 68,070 68,404
Insurance and claims 55,643 54,280
Operating taxes and licenses 22,048 22,169
Communications 5,037 4,874
Depreciation and amortization of property and equipment 119,915 110,221
Amortization of intangibles 11,749 11,474
Rental expense 16,864 25,375
Purchased transportation 258,230 225,276
Impairments 0 902
Miscellaneous operating expenses 14,593 23,016
Total operating expenses 1,060,755 1,022,679
Operating income 162,259 102,119
Other (expenses) income:
Interest income 294 832
Interest expense (3,486) (6,107)
Other income (expenses), net 16,105 (6,507)
Total other (expenses) income, net 12,913 (11,782)
Income before income taxes 175,172 90,337
Income tax expense 45,329 24,554
Net income 129,843 65,783
Net income attributable to noncontrolling interest (53) (357)
Net income attributable to Knight-Swift $ 129,790 $ 65,426
Earnings per share:
Basic $ 0.77 $ 0.38
Diluted $ 0.77 $ 0.38
Dividends declared per share: $ 0.08 $ 0.08
Weighted average shares outstanding:
Basic 167,478 170,617
Diluted 168,374 171,282

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Comprehensive Income (Unaudited)


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
	(In thousands, except per share data)
Revenue:
Revenue, excluding truckload fuel surcharge	$	1,510,572	$	1,137,313	$	3,856,549	$	3,162,005
Truckload fuel surcharge	131,873		73,093		324,611		233,897
Total revenue	1,642,445		1,210,406		4,181,160		3,395,902
Operating expenses:
Salaries, wages, and benefits	500,673		376,923		1,248,656		1,097,067
Fuel	146,422		104,703		390,713		312,939
Operations and maintenance	86,951		69,964		226,334		204,435
Insurance and claims	73,757		45,186		188,176		144,768
Operating taxes and licenses	27,475		21,475		71,240		64,527
Communications	6,612		5,069		16,284		14,845
Depreciation and amortization of property and equipment	138,570		115,664		382,091		340,486
Amortization of intangibles	15,719		11,473		39,452		34,421
Rental expense	12,002		19,700		42,265		67,447
Purchased transportation	352,061		245,102		914,448		670,485
Impairments	—		—		—		1,255
Miscellaneous operating expenses	12,116		29,686		38,040		73,480

Total operating expenses	1,372,358		1,044,945		3,557,699		3,026,155
Operating income	270,087		165,461		623,461		369,747
Other (expenses) income:
Interest income	245		326		809		1,595
Interest expense	(7,179)		(3,232)		(13,972)		(13,360)
Other income, net	4,072		7,484		37,017		9,476
Total other (expenses) income, net	(2,862)		4,578		23,854		(2,289)
Income before income taxes	267,225		170,039		647,315		367,458
Income tax expense	61,059		47,835		158,171		99,204
Net income	206,166		122,204		489,144		268,254
Net income attributable to noncontrolling interest	12		(146)		(372)		(581)
Net income attributable to Knight-Swift	206,178		122,058		488,772		267,673
Other comprehensive loss	(878)		—		(878)		—
Comprehensive income	$	205,300	$	122,058	$	487,894	$	267,673

Earnings per share:
Basic	$	1.24	$	0.72	$	2.95	$	1.57
Diluted	$	1.23	$	0.71	$	2.93	$	1.57

Dividends declared per share:	$	0.10	$	0.08	$	0.28	$	0.24

Weighted average shares outstanding:
Basic	165,966		170,205		165,823		170,257
Diluted	167,106		171,028		166,936		171,035

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

Table of ContentsGlossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited)


		Quarter Ended March 31,					Year-to-Date September 30,
		2021		2020			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	$	129,843	$	65,783	Net income	$	489,144	$	268,254
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	131,664		121,695		Depreciation and amortization of property, equipment, and intangibles	421,543		374,907
Gain on sale of property and equipment	Gain on sale of property and equipment	(10,537)		(3,005)		Gain on sale of property and equipment	(47,700)		(6,468)

Impairments	Impairments	0		902		Impairments	—		1,255
Deferred income taxes	Deferred income taxes	(18,920)		15,330		Deferred income taxes	40,987		32,565
Non-cash lease expense	Non-cash lease expense	15,589		24,202		Non-cash lease expense	35,939		64,301
Non-cash adjustment to fair value of convertible note						Non-cash adjustment to fair value of convertible note	(12,631)		—
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	(6,522)		14,065		Other adjustments to reconcile net income to net cash provided by operating activities	17,372		24,513
Increase (decrease) 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	(11,586)		(5,268)		Trade receivables	(152,482)		(58,246)
Income tax receivable	Income tax receivable	2,872		4,380		Income tax receivable	(43,462)		8,668
Accounts payable	Accounts payable	12,534		31,084		Accounts payable	34,255		1,946
Accrued liabilities and claims accrual	Accrued liabilities and claims accrual	70,975		(93,193)		Accrued liabilities and claims accrual	57,157		(12,926)
Operating lease liabilities	Operating lease liabilities	(15,174)		(25,414)		Operating lease liabilities	(37,357)		(66,333)
Other assets and liabilities	Other assets and liabilities	5,375		4,782		Other assets and liabilities	14,759		22,583
Net cash provided by operating activities	Net cash provided by operating activities	306,113		155,343		Net cash provided by operating activities	817,524		655,019
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	500		4,350		Proceeds from maturities of held-to-maturity investments	8,380		9,400
Purchases of held-to-maturity investments	Purchases of held-to-maturity investments	(512)		(4,301)		Purchases of held-to-maturity investments	(6,683)		(12,644)
Proceeds from sale of property and equipment, including assets held for sale	Proceeds from sale of property and equipment, including assets held for sale	67,175		33,756		Proceeds from sale of property and equipment, including assets held for sale	192,454		102,550
Purchases of property and equipment	Purchases of property and equipment	(111,020)		(109,431)		Purchases of property and equipment	(388,518)		(378,694)
Expenditures on assets held for sale	Expenditures on assets held for sale	(401)		(352)		Expenditures on assets held for sale	(1,367)		(483)
Net cash, restricted cash, and equivalents invested in acquisitions	Net cash, restricted cash, and equivalents invested in acquisitions	(39,281)		(46,811)		Net cash, restricted cash, and equivalents invested in acquisitions	(1,342,042)		(46,811)
Investment in convertible note						Investment in convertible note	(25,000)		—
Other cash flows from investing activities	Other cash flows from investing activities	9,398		(2,793)		Other cash flows from investing activities	14,019		(8,920)
Net cash used in investing activities	Net cash used in investing activities	(74,141)		(125,582)		Net cash used in investing activities	(1,548,757)		(335,602)
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	(6,600)		(14,498)		Repayment of finance leases and long-term debt	(374,539)		(61,321)
Proceeds from long-term debt						Proceeds from long-term debt	1,200,000		—

(Repayments) borrowings on revolving lines of credit, net		(95,000)		15,000

Borrowings (repayments) on revolving lines of credit, net						Borrowings (repayments) on revolving lines of credit, net	90,000		(109,000)
Borrowings under accounts receivable securitization						Borrowings under accounts receivable securitization	80,000		49,000
Repayment of accounts receivable securitization	Repayment of accounts receivable securitization	(15,000)		(25,000)		Repayment of accounts receivable securitization	(15,000)		(52,000)

Proceeds from common stock issued	Proceeds from common stock issued	2,709		3,257		Proceeds from common stock issued	7,624		11,632
Repurchases of the Company's common stock	Repurchases of the Company's common stock	(53,661)		(34,630)		Repurchases of the Company's common stock	(53,661)		(34,630)
Dividends paid	Dividends paid	(13,624)		(13,964)		Dividends paid	(46,935)		(41,297)

Other cash flows from financing activities	Other cash flows from financing activities	(4,190)		(2,050)		Other cash flows from financing activities	(14,180)		(5,522)
Net cash used in financing activities		(185,366)		(71,885)
Net increase (decrease) in cash, restricted cash, and equivalents		46,606		(42,124)
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	873,309		(243,138)
Net increase in cash, restricted cash, and equivalents						Net increase in cash, restricted cash, and equivalents	142,076		76,279
Cash, restricted cash, and equivalents at beginning of period	Cash, restricted cash, and equivalents at beginning of period	197,277		202,228		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	$	243,883	$	160,104	Cash, restricted cash, and equivalents at end of period	$	339,353	$	278,507

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

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued


		Quarter Ended March 31,					Year-to-Date September 30,
		2021		2020			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	$	2,505	$	6,293	Interest	$	11,683	$	12,921
Income taxes	Income taxes	2,199		3,280		Income taxes	160,281		35,233
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Equipment acquired included in accounts payable	Equipment acquired included in accounts payable	$	13,860	$	44,084	Equipment acquired included in accounts payable	$	9,278	$	45,430

Financing provided to independent contractors for equipment sold	Financing provided to independent contractors for equipment sold	462		1,670		Financing provided to independent contractors for equipment sold	2,548		4,359
Transfer from property and equipment to assets held for sale		29,955		15,288
Transfers from property and equipment to assets held for sale						Transfers from property and equipment to assets held for sale	80,881		59,543
Noncontrolling interest associated with acquisition	Noncontrolling interest associated with acquisition	10,281		0		Noncontrolling interest associated with acquisition	10,281		—
Contingent consideration associated with acquisition	Contingent consideration associated with acquisition	0		18,654		Contingent consideration associated with acquisition	5,000		18,245
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		560		12,356

Value of common stock issued for acquisition						Value of common stock issued for acquisition	10,000		—
Right-of-use assets obtained in exchange for operating lease liabilities						Right-of-use assets obtained in exchange for operating lease liabilities	20,261		1,871
Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions						Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions	4,613		12,356
Property and equipment obtained in exchange for finance lease liabilities						Property and equipment obtained in exchange for finance lease liabilities	114,803		68,590
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		Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities	42,298		67,430


Reconciliation of Cash, Restricted Cash, and Equivalents:	Reconciliation of Cash, Restricted Cash, and Equivalents:	March 31, 2021		December 31, 2020		March 31, 2020		December 31, 2019		Reconciliation of Cash, Restricted Cash, and Equivalents:	September 30, 2021		December 31, 2020		September 30, 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	$	194,650	$	156,699	$	119,132	$	159,722	Cash and cash equivalents	$	269,694	$	156,699	$	240,236	$	159,722
Cash and cash equivalents – restricted 1	Cash and cash equivalents – restricted 1	47,867		39,328		39,812		41,331		Cash and cash equivalents – restricted 1	68,019		39,328		36,689		41,331
Other long-term assets 1	Other long-term assets 1	1,366		1,250		1,160		1,175		Other long-term assets 1	1,640		1,250		1,582		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	$	243,883	$	197,277	$	160,104	$	202,228	Cash, restricted cash, and equivalents	$	339,353	$	197,277	$	278,507	$	202,228

________

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

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

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


																						Common Stock						Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss				Total Knight-Swift Stockholders' Equity				Noncontrolling Interest				Total Stockholders’ Equity
																						Shares			Par Value
																						(In thousands, except per share data)

		Common Stock			Additional Paid-in Capital				Retained Earnings				Total Knight-Swift Stockholders' Equity			Noncontrolling Interest		Total Stockholders’ Equity
		Shares	Par Value												Total Stockholders’ Equity
		(In thousands, except per share data)
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		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	220	3		2,006								2,009					2,009		Common stock issued to employees		475			6			5,020										5,026								5,026

Common stock issued to the Board																				Common stock issued to the Board		12			—			575										575								575
Common stock issued with ACT acquisition																				Common stock issued with ACT acquisition		219			2			9,998										10,000								10,000
Common stock issued under ESPP	Common stock issued under ESPP	18	0		700								700					700		Common stock issued under ESPP		47			—			2,023										2,023								2,023
Company shares repurchased	Company shares repurchased	(1,303)	(13)						(53,648)				(53,661)					(53,661)		Company shares repurchased		(1,303)			(13)						(53,648)							(53,661)								(53,661)
Shares withheld – RSU settlement	Shares withheld – RSU settlement								(4,159)				(4,159)					(4,159)		Shares withheld – RSU settlement											(8,079)							(8,079)								(8,079)
Employee stock-based compensation expense	Employee stock-based compensation expense				5,662								5,662					5,662		Employee stock-based compensation expense								25,854										25,854								25,854
Cash dividends paid and dividends accrued ($0.08 per share)									(13,345)				(13,345)					(13,345)
Cash dividends paid and dividends accrued ($0.28 per share)																				Cash dividends paid and dividends accrued ($0.28 per share)											(46,820)							(46,820)								(46,820)
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift								129,790				129,790					129,790		Net income attributable to Knight-Swift											488,772							488,772								488,772

Other comprehensive loss																				Other comprehensive loss														(878)				(878)								(878)
Investment in noncontrolling interest	Investment in noncontrolling interest															10,281		10,281		Investment in noncontrolling interest																						10,281				10,281
Distribution to noncontrolling interest	Distribution to noncontrolling interest															(32)		(32)		Distribution to noncontrolling interest																						(65)				(65)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest															53		53		Net income attributable to noncontrolling interest																						372				372

Balances – March 31, 2021		165,488	$	1,655	$	4,309,792			$	1,625,397			$	5,936,844		$	12,494	$	5,949,338
Balances – September 30, 2021																				Balances – September 30, 2021		166,003			$	1,660		$	4,344,894		$	1,946,984		$	(878)			$	6,292,660			$	12,780			$	6,305,440


																						Common Stock						Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss				Total Knight-Swift Stockholders' Equity				Noncontrolling Interest				Total Stockholders’ Equity
																						Shares			Par Value
																						(In thousands, except per share data)

		Common Stock			Additional Paid-in Capital				Retained Earnings				Total Knight-Swift Stockholders' Equity			Noncontrolling Interest		Total Stockholders’ Equity
		Shares	Par Value												Total Stockholders’ Equity
		(In thousands, except per share data)
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		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	211	2		2,709								2,711					2,711		Common stock issued to employees		609			6			9,474										9,480								9,480
Common stock issued to the Board																				Common stock issued to the Board		13			—			515										515								515

Common stock issued under ESPP	Common stock issued under ESPP	16	0		546								546					546		Common stock issued under ESPP		47			—			1,637										1,637								1,637
Company shares repurchased	Company shares repurchased	(1,139)	(11)						(34,619)				(34,630)					(34,630)		Company shares repurchased		(1,139)			(11)						(34,619)							(34,630)								(34,630)
Shares withheld – RSU settlement	Shares withheld – RSU settlement								(1,971)				(1,971)					(1,971)		Shares withheld – RSU settlement											(4,508)							(4,508)								(4,508)
Employee stock-based compensation expense	Employee stock-based compensation expense				3,536								3,536					3,536		Employee stock-based compensation expense								13,835										13,835								13,835
Cash dividends paid and dividends accrued ($0.08 per share)									(13,774)				(13,774)					(13,774)
Cash dividends paid and dividends accrued ($0.24 per share)																				Cash dividends paid and dividends accrued ($0.24 per share)											(41,197)							(41,197)								(41,197)
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift								65,426				65,426					65,426		Net income attributable to Knight-Swift											267,673							267,673								267,673

Distribution to noncontrolling interest	Distribution to noncontrolling interest															(180)		(180)		Distribution to noncontrolling interest																						(441)				(441)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest															357		357		Net income attributable to noncontrolling interest																						581				581

Balances – March 31, 2020		169,776	$	1,698	$	4,275,834			$	1,410,527			$	5,688,059		$	2,265	$	5,690,324
Balances – September 30, 2020																				Balances – September 30, 2020		170,218			$	1,702		$	4,294,504		$	1,582,814		$	—			$	5,879,020			$	2,228			$	5,881,248

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

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


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Knight-Swift Stockholders' Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Par Value
	(In thousands, except per share data)
















Balances – June 30, 2021	165,711	$	1,657	$	4,325,915	$	1,757,689	$	—	$	6,085,261	$	12,792	$	6,098,053

Common stock issued to employees	57	1		1,629						1,630				1,630

Common stock issued with ACT acquisition	219	2		9,998						10,000				10,000
Common stock issued under ESPP	16	—		692						692				692

Shares withheld – RSU settlement						(132)				(132)				(132)
Employee stock-based compensation expense				6,660						6,660				6,660
Cash dividends paid and dividends accrued ($0.10 per share)						(16,751)				(16,751)				(16,751)
Net income attributable to Knight-Swift						206,178				206,178				206,178
Other comprehensive loss								(878)		(878)				(878)


Net income attributable to noncontrolling interest												(12)		(12)

Balances – September 30, 2021	166,003	$	1,660	$	4,344,894	$	1,946,984	$	(878)	$	6,292,660	$	12,780	$	6,305,440


	Common Stock			Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total Knight-Swift Stockholders' Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Par Value
	(In thousands, except per share data)
















Balances – June 30, 2020	170,162	$	1,701	$	4,287,293	$	1,474,466	$	—	$	5,763,460	$	2,129	$	5,765,589

Common stock issued to employees	42	1		1,165						1,166				1,166


Common stock issued under ESPP	14	—		574						574				574

Shares withheld – RSU settlement						(8)				(8)				(8)
Employee stock-based compensation expense				5,472						5,472				5,472
Cash dividends paid and dividends accrued ($0.08 per share)						(13,702)				(13,702)				(13,702)
Net income attributable to Knight-Swift						122,058				122,058				122,058


Distribution to noncontrolling interest												(47)		(47)
Net income attributable to noncontrolling interest												146		146

Balances – September 30, 2020	170,218	$	1,702	$	4,294,504	$	1,582,814	$	—	$	5,879,020	$	2,228	$	5,881,248

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

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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 ~~quarter~~year-to-date period ended ~~March 31,~~September 30, 2021, the Company operated an average of ~~18,224~~18,041 tractors (comprised of ~~16,305~~16,166 company tractors and ~~1,919~~1,875 independent contractor tractors) and ~~59,797~~60,396 trailers within the ~~Trucking~~Truckload segment. Additionally, the Company operated an average of ~~597~~605 tractors and ~~10,846~~10,843 containers in the Intermodal segment. ~~The~~As of September 30, 2021, the Company's 34 reportable segments ~~are Trucking,~~were Truckload, Logistics, Intermodal, and ~~Intermodal.~~LTL.

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 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.

Note regarding comparability — The reported results do not include ACT's operating results prior to its acquisition by the Company on July 5, 2021 in accordance with the accounting treatment applicable to the transaction. Accordingly, comparisons between the Company's third quarter 2021 results and prior periods may not be meaningful.

Change in Accounting Estimate

In September 2021, the Company increased the useful life for a certain group of its trailers, given recent trends in the used trailer market. Management prospectively accounted for this as a change in accounting estimate. This increased "Depreciation and amortization of property and equipment" in the condensed consolidated statements of comprehensive income by approximately $0.6 million for the quarter and year-to-date periods ended September 30, 2021, which immaterially affected basic and diluted earnings per share.

Seasonality

In the truckload 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 Truckload 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, as the Company continues to diversify its business through expansion into the LTL industry, warehousing, and other activities, seasonal volatility is becoming more tempered. Additionally, macroeconomic trends and cyclical changes

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

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

Impact of COVID-19

~~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, including its variants, and has taken additional precautions to ensure the safety of its employees, customers, vendors, and the communities in which it operates.

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.

Note 2 — Recently Issued Accounting Pronouncements

There have been no ASUs issued since the filing date of the 2020 Annual Report that may have a material impact on the Company.

Note 3 — Acquisitions

ACT

On July 5, 2021, the Company acquired 100% of Dothan, Alabama-based ACT. ACT is a leading LTL carrier that also offers dedicated contract carriage and ancillary services.

The total purchase price consideration of $1.31 billion included $1.30 billion in cash and $10.0 million in Knight-Swift shares issued to sellers at closing. Additionally, the Company assumed $36.5 million in debt, net of cash. Cash was funded from the July 2021 Term Loan, as well as existing Knight-Swift liquidity. ACT was an S corporation for tax purposes, and the transaction included an election under 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, and covenants.

The Company's condensed consolidated financial statements for the quarter and year-to-date periods ended September 30, 2021 include ACT's operating results beginning July 5, 2021 (closing of the acquisition) through September 30, 2021. During the quarter and year-to-date periods ended September 30, 2021, the Company's consolidated operating results included ACT's total revenue of $191.9 million and net income of $13.4 million. ACT's net income, during the quarter and year-to-date periods ended September 30, 2021, included $3.5 million related to the amortization of intangible assets acquired in the ACT Acquisition.

The goodwill recognized represents expected synergies from combining the operations of ACT 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Pro Forma Information — The following unaudited pro forma information combines the historical operations of the Company and ACT giving effect to the ACT Acquisition, and related transactions as if consummated on January 1, 2020, the beginning of the comparative period presented.

~~Note 2~~


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
	(in thousands, except per share data)				(in thousands, except per share data)
Total revenue	$	1,642,445	$	1,388,490	$	4,570,470	$	3,911,986
Net income attributable to Knight-Swift	202,883		129,295		507,168		284,095
Earnings per share – diluted	1.21		0.76		3.04		1.66

The unaudited pro forma condensed combined financial information has been presented for comparative purposes only and includes certain adjustments such as recognition of assets acquired at estimated fair values and related depreciation and amortization, elimination of transaction costs incurred by Knight-Swift and ACT during the periods presented that were directly related to the ACT Acquisition, and related income tax effects of these items. As a result of the ACT Acquisition, the Company incurred certain acquisition-related expenses totaling $2.4 million and $2.7 million during the quarter and year-to-date periods ended September 30, 2021, respectively. These expenses were eliminated in the presentation of the unaudited pro forma "Net income attributable to Knight-Swift" presented above.

The unaudited pro forma condensed combined financial information does not purport to represent the actual results of operations that Knight-Swift and ACT would have achieved had the companies been combined during the periods presented in the unaudited pro forma condensed combined financial statements and is not intended to project the future results of operations that the combined company may achieve after the identified transactions. The unaudited pro forma condensed combined financial information does not reflect any cost savings that may be realized as a result of the ACT Acquisition and also does not reflect any restructuring or integration-related costs to achieve those potential cost savings.

UTXL

On June 1, 2021, pursuant to an SPA the Company, through a wholly owned subsidiary, acquired 100.0% of the equity interests of UTXL, a premier third-party logistics company which specializes in over-the-road full truckload and multi-stop loads.

The total purchase price consideration of $37.2 million, including cash on hand and net working capital adjustments, consisted of $32.2 million in cash to the sellers at closing, which was funded through cash-on-hand and borrowing on the 2017 Revolver on the transaction date. At closing $2.25 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 two additional annual payments of up to $2.5 million each (or $5.0 million in total), representing the maximum possible annual deferred payments to the sellers based on operating ratio and revenue growth targets for each of the twelve-month periods ending May 31, 2022 and May 31, 2023. As of September 30, 2021, $2.5 million is included in "Accrued liabilities" and $2.5 million is included in "Other long-term liabilities" in the Company's condensed consolidated balance sheets, depending on the expected payment dates.

For income tax purposes, the sale of UTXL's equity interests to the Company is intended to be treated as a sale and purchase of assets. 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 UTXL 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — ~~Recently Issued Accounting Pronouncements~~CONTINUED

~~No material ASUs issued since the 2020 annual report.~~

~~Note 3 — Acquisitions~~

Eleos ~~Acquisition~~

On February 1, 2021, pursuant to a membership interest purchase agreement ("MIPA"), the Company, through a wholly owned subsidiary, acquired 79.44% of the issued and outstanding membership interests of Eleos Technologies, LLC ("Eleos"), a Greenville, South Carolina based software provider, specializing in mobile driving platforms, which complement the Company's suite of services. The total purchase price consideration, including cash on hand and net working capital adjustments, consisted of $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, $4.1 million of the cash consideration was placed in escrow to secure certain of the sellers' indemnification obligations and other items.

The MIPA included that both the buyer and sellers would file an election under the Internal Revenue Code Section 754 to adjust the tax basis of the Company's assets and liabilities, with respect to the buyer's purchase of the equity. The MIPA contains customary representations, warranties, covenants, and indemnification provisions for transactions of this nature.

The goodwill recognized represents expected synergies from combining the operations of 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Purchase Price Allocations

The purchase price ~~allocation~~allocations for the ~~acquisition is~~below acquisitions are preliminary and ~~has~~have been allocated based on estimated fair values of the assets acquired and liabilities assumed at the acquisition date, and among other things may be 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.~~items as applicable. As the Company obtains more information, the preliminary purchase price ~~allocation~~allocations disclosed below isare subject to change. Any future adjustments to the preliminary purchase price ~~allocation,~~allocations, 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,~~periods, which is not to exceed one year from the respective acquisition ~~date.~~dates.


	ACT		UTXL		Eleos
	July 5, 2021 Opening Balance Sheet as Reported at September 30, 2021		June 1, 2021 Opening Balance Sheet as Reported at September 30, 2021		February 1, 2021 Opening Balance Sheet as Reported at September 30, 2021

Fair value of the consideration transferred	$	1,306,214	$	37,230	$	41,518

Cash and cash equivalents	17,477		8,206		2,237

Trade receivables	104,220		9,451		545
Prepaid expenses	15,803		—		47
Other current assets	3,537		—		—
Property and equipment	427,722		54		—
Operating lease right-of-use assets	4,053		—		560
Identifiable intangible assets 1	406,160		22,121		15,850

Other noncurrent assets	1,739		—		—
Total assets	980,711		39,832		19,239

Accounts payable	(19,386)		(14,183)		(156)
Accrued payroll and payroll-related expenses	(33,411)		(247)		(605)
Accrued liabilities	(9,302)		(69)		(1,391)
Claims accruals – current and noncurrent portions	(40,958)		(418)		—
Operating lease liabilities – current and noncurrent portions	(4,052)		—		(560)
Long-term debt – current and noncurrent portions	(54,024)		—		—
Other long-term liabilities	(4,243)		—		(475)
Total liabilities	(165,376)		(14,917)		(3,187)

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

Goodwill	$	490,879	$	12,315	$	35,747

1 Includes $278.8 million in customer relationships, $1.2 million in noncompete agreements, $10.0 million in internally developed software, and $154.1 million in trade names.

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~~The following table summarizes~~Warehousing Co.

Information about the ~~fair value~~accounting treatment for the acquisition of Warehousing Co., including the details of the ~~consideration transferred as of the acquisition date:~~

~~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~~

~~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 valuedetermination of the total ~~contingent~~fair value consideration, ~~along with~~allocation of the ~~estimated net working capital adjustment, equaled $18.7 million as~~purchase price at the end 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~~are included 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.

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~~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~~Company’s Quarterly Report for the ~~calendar year December~~quarter ended March 31, ~~2020. Additionally, during the fourth quarter~~2021.

As 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,September 30, 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. As of September 30, 2021, the amounts are included in "Accrued liabilities" on the condensed consolidated balance sheets.

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.~~

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Note 4 — 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:


		March 31, 2021									September 30, 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	$	8,954	$	0	$	(4)	$	8,950	US corporate securities	$	7,140	$	—	$	(6)	$	7,134

Restricted investments, held-to-maturity	Restricted investments, held-to-maturity	$	8,954	$	0	$	(4)	$	8,950	Restricted investments, held-to-maturity	$	7,140	$	—	$	(6)	$	7,134


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


Restricted investments, held-to-maturity	$	9,001	$	2	$	(8)	$	8,995

As of ~~March 31,~~September 30, 2021, the contractual maturities of the restricted investments, held-to-maturity, were one year or less. There were 13 securities and 16 securities that were in an unrealized loss position for less than twelve months as of ~~March 31,~~September 30, 2021 and December 31, ~~2020.~~2020, respectively. The Company did 0tnot recognize any impairment losses related to its held-to-maturity investments during the ~~quarters~~quarter or year-to-date periods ended ~~March 31,~~September 30, 2021 or 2020.

~~Other Investments~~Embark Convertible Note

~~On April 16,~~During the second quarter of 2021, the Company ~~agreed to pay~~invested $25.0 million in ~~cash~~Embark 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~~Embark's common stock. The amount outstanding on the ~~promissory~~convertible note is automatically converted into a number of shares of ~~the borrower's~~Embark's common stock upon either the closing of a qualified financing or upon a public event, subject to discounted conversion pricing per share based on a valuation of Embark.

On June 22, 2021, Embark and Northern Genesis Acquisition Corp II (NYSE:"NGAB"), a publicly-traded special purpose acquisition company, entered into a definitive business combination agreement that would result in Embark becoming a publicly listed company. Completion of the ~~borrower.~~transaction is expected to occur in the fourth quarter of 2021 and is subject to approval of NGAB stockholders and the satisfaction or waiver of certain other customary closing conditions. Based on the valuation of this public event, the Company estimated that the fair value of this investment

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was $37.6 million and recognized a $12.6 million gain on the convertible note during the year-to-date period ended September 30, 2021. No gain was recognized during the quarter ended September 30, 2021.

Refer to Note 15 for additional information regarding fair value measurements of the Company's investments.

Note 5 — 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 ~~$20.8~~$16.7 million and $29.8 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. The Company had $3.6 million in land and facilities classified as held for sale as of September 30, 2021. No land and facilities were classified as held for sale as of December 31, 2020. 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 $10.5~~were:

•$22.1 million and ~~$3.0~~$1.7 million for the ~~quarters~~quarter-to-date periods ended ~~March 31,~~September 30, 2021 and 2020, respectively.

•$47.7 million and $6.5 million for the year-to-date periods ended September 30, 2021 and 2020, respectively.

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

The Company did 0tnot recognize impairment losses related to assets held for sale during the ~~quarter~~quarters ended ~~March 31,~~September 30, 2021 and 2020. The Company did not recognize impairment losses during the year-to-date period ended September 30, 2021, as compared to the same period of last year when the Company recognized impairment losses related to assets held for sale of ~~$0.1~~$0.4 million.

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Note 6 — Goodwill and Other Intangible Assets

Goodwill

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



	(In thousands)
Goodwill, balance at ~~beginning of period~~December 31, 2020	$	2,922,964
Adjustments relating to deferred tax assets	~~(2)~~(7)
~~Acquisition~~Acquisitions 1	~~35,747~~538,941

Goodwill, balance at ~~end of period~~September 30, 2021	$	~~2,958,709~~3,461,898

1The goodwill associated with the ACT, UTXL and Eleos ~~acquisition~~acquisitions referenced in Note 3 was allocated to the LTL, Logistics, and non-reportable ~~segment,~~segments, respectively, and is net of purchase price accounting adjustments.

The Company did 0tnot record any goodwill impairments during the ~~quarters~~quarter or year-to-date periods ended ~~March 31,~~September 30, 2021 or 2020.

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Other Intangible Assets

Other intangible asset balances were as follows:


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
		(In thousands)					(In thousands)
Definite-lived intangible assets 1	Definite-lived intangible assets 1					Definite-lived intangible assets 1
Gross carrying amount	Gross carrying amount	$	910,447	$	894,597	Gross carrying amount	$	1,187,970	$	894,597
Accumulated amortization	Accumulated amortization	(157,601)		(145,852)		Accumulated amortization	(185,304)		(145,852)
Definite-lived intangible assets, net	Definite-lived intangible assets, net	752,846		748,745		Definite-lived intangible assets, net	1,002,666		748,745
Indefinite-lived trade names:	Indefinite-lived trade names:					Indefinite-lived trade names:
Gross carrying amount	Gross carrying amount	640,500		640,500		Gross carrying amount	791,258		640,500
Intangible assets, net	Intangible assets, net	$	1,393,346	$	1,389,245	Intangible assets, net	$	1,793,924	$	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~~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 ~~March 31,~~September 30, 2021, management anticipates that the composition and amount of amortization associated with intangible assets will be ~~$35.7~~$15.9 million for the remainder of 2021, ~~$47.4~~$62.8 million in 2022, ~~$46.9~~$62.2 million for each of the years 2023 and 2024, and ~~$46.8~~$62.1 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.

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Note 7 — Income Taxes

Effective Tax Rate — The quarter-to-date ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 effective tax rates were ~~25.9%~~22.8% and ~~27.2%~~28.1%, respectively. The year-to-date September 30, 2021 and September 30, 2020 effective tax rates were 24.4% and 27.0%, respectively.

Valuation Allowance — The Company has 0tnot 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 likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

Unrecognized Tax Benefits — Management believes it is reasonably possible that a decrease of up to ~~$0.7~~$0.6 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 $~~0.4~~0.1 million and $0.3 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

Tax Examinations — Certain of the Company's subsidiaries are currently under examination by various state jurisdictions for tax years ranging from ~~2013~~2014 to 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 2015 remain subject to examination.

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Note 8 — Accounts Receivable Securitization

On April 23, 2021, the Company entered into the 2021 RSA which further amended the 2018 RSA. The ~~2018~~2021 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 ~~March 31,~~September 30, 2021, the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.

The ~~2018~~2021 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 ~~March 31,~~September 30, 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.

The following table summarizes the key terms of the 2021 RSA and 2018 RSA (dollars in thousands):



~~Effective date~~			~~July 11, 2018~~
~~Final maturity date~~ 1			~~July 9, 2021~~
~~Borrowing capacity~~			~~$325,000~~
~~Accordion option~~ 2			~~$175,000~~
~~Unused commitment fee rate~~ 3			~~20 to 40 basis points~~
~~Program fees on outstanding balances~~ 4			~~one-month LIBOR + 80 to 100 basis points~~


	2021 RSA	2018 RSA
Effective date	April 23, 2021	July 11, 2018
Final maturity date	April 23, 2024	July 9, 2021
Borrowing capacity	$400,000	$325,000
Accordion option 1	$100,000	$175,000
Unused commitment fee rate 2	20 to 40 basis points	20 to 40 basis points
Program fees on outstanding balances 3 4	one-month LIBOR + 82.5 basis points	one-month LIBOR + 80 to 100 basis points

1~~On 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.

32The 2021 RSA and 2018 RSA commitment ~~fee~~fees rate isare based on the percentage of the maximum borrowing capacity utilized.

43~~The~~Only the rate for the 2018 RSA program fee is ~~based on~~subject to the Company's consolidated total net leverage ratio.

4As identified within the ~~2018~~2021 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for LIBOR.

Availability under the 2021 RSA and 2018 RSA is calculated as follows:


	2021 RSA		2018 RSA
	September 30, 2021		December 31, 2020
	(In thousands)
Borrowing base, based on eligible receivables	$	400,000	$	302,700
Less: outstanding borrowings 1	(279,000)		(214,000)
Less: outstanding letters of credit, net	(65,300)		(67,281)
Availability under accounts receivable securitization facilities	$	55,700	$	21,419

1As of September 30, 2021, outstanding borrowings are included in "Accounts receivable securitization – less current portion" in the condensed consolidated balance sheets and are offset by $0.6 million of deferred loan costs. As of December 31, 2020, outstanding borrowings are included in "Accounts receivable securitization – current portion" in the condensed consolidated balance sheets and are offset by $0.1 million of deferred loan costs. Interest accrued on the aggregate principal balance at a rate of 0.9% and 1.0% as of September 30, 2021 and December 31, 2020, respectively.

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~~Availability under the 2018 RSA is calculated as follows:~~

March 31, 2021 December 31, 2020
(In thousands)
Borrowing base, based on eligible receivables $ 267,200 $ 302,700
Less: outstanding borrowings 1
(199,000) (214,000)
Less: outstanding letters of credit (65,281) (67,281)
Availability under accounts receivable securitization facilities $ 2,919 $ 21,419

1~~Outstanding borrowings are included in "Accounts receivable securitization – current portion" in the condensed consolidated balance sheets,offset by $43.0 thousand and~~ ~~$0.1 million~~ ~~of deferred loan costs as of March 31, 2021 and December 31, 2020, respectively. Interest accrued on the aggregate principal balance at a rate of 1.0% as of March 31, 2021 and December 31, 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~~$0.8 million and ~~$1.4~~$0.7 million during the ~~quarters ended March 31,~~quarter-to-date September 30, 2021 and 2020 periods, respectively. The Company incurred accounts receivable securitization program fees of $2.3 million and $2.8 million during the year-to-date September 30, 2021 and 2020 periods, respectively.

Refer to Note 15 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.~~2018 RSA.

Note 9 — Debt and Financing

Other than the Company's accounts receivable securitization as discussed in Note 8, the Company's long-term debt consisted of the following:


	September 30, 2021		December 31, 2020
	(In thousands)
2021 Term Loan A-1, due December 3, 2022, net 1 2	$	199,588	$	—
2021 Term Loan A-2, due September 3, 2024, net 1 2	199,571		—
2021 Term Loan A-3, due September 3, 2026, net 1 2	798,264		—

2017 Term Loan, due October 2022, net 1 3	—		298,907




2021 Prudential Notes, net	47,760		—
Other	5,567		—
Total long-term debt, including current portion	1,250,750		298,907
Less: current portion of long-term debt	(12,728)		—
Long-term debt, less current portion	$	1,238,022	$	298,907


	September 30, 2021		December 31, 2020
	(In thousands)
Total long-term debt, including current portion	$	1,250,750	$	298,907
2021 Revolver, due September 3, 2026 1 4	300,000		—
2017 Revolver, due October 2022 1 5	—		210,000
Long-term debt, including revolving line of credit	$	1,550,750	$	508,907

1Refer to Note 15 for information regarding the fair value of debt.

2The carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 arenet of $0.4 million, $0.4 million, and $1.7 million in deferred loan costs as of September 30, 2021, respectively.

3Net of $1.1 million deferred loan costs at December 31, 2020.

4The Company also had outstanding letters of credit of $63.8 million under the 2021 Revolver, primarily related to workers' compensation and self-insurance liabilities at September 30, 2021. Subsequent to September 30, 2021, we paid $95.0 million on the 2021 Revolver.

5The Company also had outstanding letters of credit of $29.3 million under the 2017 Revolver, primarily related to workers' compensation and self-insurance liabilities at December 31, 2020.

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Credit Agreements

2021 Debt Agreement —On September 3, 2021, the Company entered into the $2.3 billion 2021 Debt Agreement (an unsecured credit facility), with a group of banks, replacing the 2017 Debt Agreement and the July 2021 Term Loan (described below). The following table presents the key terms of the 2021 Debt Agreement:

2021 Term Loan A-1

2021 Term Loan A-2

2021 Term Loan A-3

2021 Revolver 2

2021 Debt Agreement Terms

(Dollars in thousands)

Maximum borrowing capacity

$200,000

$800,000

$1,100,000

Final maturity date

December 3, 2022

September 3, 2024

September 3, 2026

Interest rate minimum margin

BSBY

Interest rate minimum margin 1

0.75%

0.88%

Interest rate maximum margin 1

1.38%

1.50%

Minimum principal payment — amount

$—

$10,000

$—

Minimum principal payment — frequency

Once

Quarterly

Once

Minimum principal payment — commencement date

December 3, 2022

September 3, 2024

September 30, 2024

September 3, 2026

1The interest rate margin for the 2021 Term Loans and 2021 Revolver is based on the Company's consolidated leverage ratio. As of September 30, 2021, interest accrued at 1.1% on the 2021 Term Loans and 1.2% on the 2021 Revolver.

2The commitment fee for the unused portion of the 2021 Revolver is based on the Company's consolidated leverage ratio, and ranges from 0.1% to 0.2%. As of September 30, 2021, commitment fees on the unused portion of the 2021 Revolver accrued at 0.1% and outstanding letter of credit fees accrued at 1.1%.

Pursuant to the 2021 Debt Agreement, the 2021 Revolver and the 2021 Term Loans contain certain financial covenants with respect to a maximum net leverage ratio and a minimum consolidated interest coverage ratio. The 2021 Debt Agreement provides flexibility regarding the use of proceeds from asset sales, payment of dividends, stock repurchases, and equipment financing. In addition to the financial covenants, the 2021 Debt Agreement includes usual and customary events of default for a facility of this nature and provides that, upon the occurrence and continuation of an event of default, payment of all amounts payable under the 2021 Debt Agreement may be accelerated, and the lenders' commitments may be terminated. The 2021 Debt Agreement contains certain usual and customary restrictions and covenants relating to, among other things, dividends (which are restricted only if a default or event of default occurs and is continuing or would result therefrom), liens, affiliate transactions, and other indebtedness. As of September 30, 2021, the Company was in compliance with the covenants under the 2021 Debt Agreement.

Borrowings under the 2021 Debt Agreement, are made by Knight-Swift Transportation Holdings Inc., and are guaranteed by certain of the Company's domestic subsidiaries (other than its captive insurance subsidiaries, driving academy subsidiary, and bankruptcy-remote special purpose subsidiary).

July 2021 Term Loan — On July 6, 2021, Knight-Swift entered into a $1.2 billion term loan with Bank of America, N.A (the "July 2021 Term Loan"). The July 2021 Term Loan was incremental to, and was separate from, the 2017 Debt Agreement. The July 2021 Term Loan was fully funded on July 6, 2021 and there were no scheduled principal payments prior to its maturity in October 2022. The interest rate applicable to the July 2021 Term Loan was subject to a leverage-based grid and equaled the BSBY rate plus 1.000% at closing. The July 2021 Term Loan was paid off and terminated using the proceeds of the 2021 Term Loans, discussed above.

The July 2021 Term Loan contained similar terms to the 2017 Debt Agreement, including the financial covenants, usual and customary events of default for a facility of this nature, and certain usual and customary restrictions and covenants.

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ACT Credit Agreement

Prudential Notes —Through the acquisition of ACT, the Company assumed the Second Amended and Restated Note Purchase and Private Shelf Agreement with Prudential Capital Group ("2014 Prudential Notes"). On September 3, 2021, ACT entered into the 2021 Prudential Notes, replacing the 2014 Prudential Notes. The 2021 Prudential Notes have interest rates ranging from 4.05% to 4.40% and various maturity dates ranging from October 2023 through January 2028.

The 2021 Prudential Notes allow ACT to borrow up to $125 million, less amounts then currently outstanding with Prudential Capital Group, provided that certain financial ratios are maintained. The 2021 Prudential Notes are unsecured and contain usual and customary restrictions on, among other things, the ability to make certain payments to stockholders, similar to the provisions of the Company's 2021 Debt Agreement. As of September 30, 2021, ACT had $77.1 million available under the agreement.

See Note 15 for fair value disclosures regarding the Company's debt instruments.

Note 10 — Defined Benefit Pension Plan

Through the ACT Acquisition, the Company assumed a defined benefit pension plan covering ACT's drivers, drivers' helpers, warehousemen, warehousemen's helpers, mechanics, and mechanics' helpers. The plan provides normal retirement benefits based on years of credited service and applicable benefit units as defined by the plan. Provision is also made for early and defined retirements.

The pension plan was amended such that benefit accrual and plan participation for the plan were effectively frozen as of January 1, 1997, resulting in a curtailment on that date. The net pension liability recognized is as follows:


	September 30, 2021
	(In thousands)
Projected benefit obligation	$	71,263
Less: fair value of plan assets	69,400
Unfunded status	1,863
Accrued pension liability recognized 1	$	1,863

1The pension liability is included in "Other long-term liabilities" in the condensed consolidated balance sheets.

"Other comprehensive loss" in the condensed consolidated statements of comprehensive income included a $0.9 million loss from pension plan adjustments during the third quarter of 2021. The provisions of the plan do not require compensation levels to be considered in determining the plan’s benefit obligation. As such, the accumulated benefit obligation and projected benefit obligation are the same.

Other information concerning the defined benefit pension plan is summarized below:


	Quarter-to-Date September 30,
	2021
	(In thousands)
Net periodic pension income	$	596
Benefits paid	771

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Assumptions

A weighted-average discount rate of 2.53% was used to determine benefit obligations as of September 30, 2021.

The following weighted-average assumptions were used to determine net periodic pension cost:


	Quarter-to-Date September 30,
	2021
Discount rate	2.49	%
Expected long-term rate of return on pension plan assets	6.00	%

ACT's assumptions for the expected long-term rate of return on pension plan assets are based on a periodic review of the plan’s asset allocation over a long-term period. Expectations of returns for each asset class are based on comprehensive reviews of historical data and economic/financial market theory. The expected long-term rate of return on pension plan assets was selected from within the reasonable range of rates determined by (1) historical real returns, net of inflation, for the asset classes covered by the investment policy and (2) projections of inflation over the long-term period during which benefits are payable to plan participants.

The defined benefit pension plan weighted-average asset allocations, by asset category, are as follows:


	September 30, 2021
Asset category:
Equity securities	30	%
Debt securities	69	%
Cash and cash equivalents	1	%
Total	100	%

Pension plan assets

The target allocation by asset category, is as follows:


	September 30, 2021
Asset category:
Equity securities	30	%
Debt securities	70	%
Total	100	%

The investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefit payments. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation percentages (shown above) by major asset categories. The objectives of the target allocation percentages are to maintain investment portfolios that diversify risk through prudent asset allocation parameters and achieve asset returns that meet or exceed the plan’s actuarial assumptions.

Refer to Note 15 for additional information regarding fair value measurements of the Company's investments.

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Cash flows

ACT did not contribute to the pension plan in the quarter-to-date period ended September 30, 2021. ACT is not expecting to recognize any net loss in net other comprehensive losses during the remainder of 2021 or 2022.

The following benefit payments are expected to be paid in each of the fiscal years as follows:


	September 30, 2021
	(In thousands)
Remainder of 2021	$	874
2022	3,593
2023	3,707
2024	3,851
2025	3,953
2026	4,040
2027 through 2030	16,453
Total	$	36,471

Note 11 — Commitments

Purchase Commitments

As of ~~March 31,~~September 30, 2021, the Company had outstanding commitments to purchase revenue equipment of ~~$654.8~~$256.7 million in the remainder of 2021 ($~~419.2~~166.8 million of which were tractor commitments), $65.9 million in 2022 ($7.5 million of which were tractor commitments), and ~~0ne~~none 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,~~September 30, 2021, the Company had outstanding commitments to purchase facilities and non-revenue equipment of ~~$37.5~~$39.0 million in the remainder of 2021, ~~$2.1~~$4.9 million in the two-year period 2022 through 2023, ~~$0.5~~$0.8 million in the two-year period 2024 through 2025, and ~~0ne~~none thereafter. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

As of ~~March 31,~~September 30, 2021, the Company had outstanding commitments for fuel purchases of ~~$25.0~~$3.6 million in the remainder of 2021, and ~~0ne~~none 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~~increased its commitment to invest in TRP Capital Partners V, LP by $10.0 million to $30.0 million, with ~~$10.0~~$20.5 million outstanding as of ~~March 31,~~September 30, 2021. There were no other material changes related to the previously disclosed TRP commitments during the quarter ended ~~March 31,~~September 30, 2021.

Embark Commitment

On June 23, 2021, the Company entered into a stock subscription agreement with Embark to purchase $25.0 million of Embark's common stock, with $25.0 million outstanding as of September 30, 2021.

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Note 1012 — 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 ~~$21.8~~$18.4 million, relating to the Company's outstanding legal proceedings as of ~~March 31,~~September 30, 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.

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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. On August 6, 2021 a three-judge panel of the 8th Circuit Court of Appeals issued an opinion reversing the trial court’s decision. On October 4, 2021 the 8th Circuit Court of Appeals denied a petition for rehearing. The likelihood that a loss has been incurred is no longer probable, and ~~estimable, and~~ the ~~loss~~accrual for this lawsuit has accordingly been ~~accrued~~reversed as of ~~March 31,~~September 30, 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. 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 ~~March 31,~~September 30, 2021.

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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 1

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 ~~March 31,~~September 30, 2021, the Company has 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,~~September 30, 2021, the Company's estimate for its total legal liability for all such clean-up and remediation costs was approximately $0.4 million in the aggregate for all current and prior year claims.

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~~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

Swift and Knight

•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 had $130.0 million in excess ~~auto liability ("AL")~~AL coverage. For prior years, Swift and Knight separately maintained 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 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.

•Medical — Knight maintains primary and excess coverage for employee medical expenses, with a $0.4 million SIR per claimant. 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.

ACT — ACT maintains SIRs for claims on cargo losses, employee health and welfare, bodily injury and property, general liability and workers’ compensation. Losses under the employee health and welfare, BIPD, and workers’ compensation programs are typically limited on a per claim and aggregate basis through stop-loss and excess insurance policies. Risk retention amounts per occurrence are as follows:

•Workers' compensation - $1.0 million

•Bodily injury and property damage - $2.0 million (ACT maintains a $5.0 million annual corridor deductible subject to a $10.0 million three-year policy term aggregate cap.)

•Employee medical - $1.0 million

Note 1113 — Share Repurchase ~~Plan~~Plans

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

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Note 1214 — 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 Ended March 31,		Quarter-to-Date September 30,				Year-to-Date September 30,
			2021		2020		2021	2020	2021	2020
			(In thousands)				(In thousands)
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding		167,478		170,617	Basic weighted average common shares outstanding	165,966	170,205	165,823	170,257
Dilutive effect of equity awards	Dilutive effect of equity awards		896		665	Dilutive effect of equity awards	1,140	823	1,113	778
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding		168,374		171,282	Diluted weighted average common shares outstanding	167,106	171,028	166,936	171,035
Anti-dilutive shares excluded from diluted earnings per share 1	Anti-dilutive shares excluded from diluted earnings per share 1		6		256	Anti-dilutive shares excluded from diluted earnings per share 1	23	8	165	187

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.

~~Note 13 — Related Party Transactions~~

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

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.~~

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•~~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:~~

March 31, 2021 December 31, 2020
Receivable Payable Receivable Payable
(In thousands)
Central Freight Lines $ 0 $ 0 $ 133 $ 0
DPF Mobile 0 0 0 41
Other Affiliates 7 6 2 10
Total $ 7 $ 6 $ 135 $ 51

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~~Note 14 — 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-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 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 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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~~The following tables present the Company's financial information by segment:~~

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

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

Quarter Ended March 31,
2021 2020
Depreciation and amortization of property and equipment: (In thousands)
Trucking $ 101,885 $ 93,548
Logistics 208 207
Intermodal 3,818 3,488
Subtotal $ 105,911 $ 97,243
Non-reportable segments 14,004 12,978
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 quarters ended March 31, 2021 and 2020. Additionally, long-lived assets on the Company's foreign subsidiary balance sheets were less than 5.0% of consolidated total assets as of March 31, 2021 and December 31, 2020.

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Note 15 — 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 ~~March 31,~~September 30, 2021 and December 31, 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 4 for additional disclosures regarding restricted investments, held-to-maturity.

Convertible Notes — The estimated fair value of the Company's convertible note is based on probability weighted discounted cash flow analysis of the corresponding pay-off/redemption.

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Equity Method Investments — The estimated fair value of the Company's equity method investments are privately negotiated 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.

Pension Plan Assets — The estimated fair value of ACT's pension plan assets are based on quoted prices in active markets that are readily and regularly obtainable.

Debt Instruments and Leases — For notes payable under the 2017 Revolver, the 2017 Term Loan, the 2021 Revolver and the 2021 Term ~~Loan,~~Loans, fair value approximates the carrying value due to the variable interest rate. The carrying ~~value~~values of the 2021 RSA and 2018 RSA ~~approximates~~approximate 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~~sellers is calculated using ~~a Monte Carlo simulation model based on the acquiree's earnings before interest~~applicable models and ~~taxes.~~inputs for each acquiree.

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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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:

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


		September 30, 2021				December 31, 2020
	Condensed Consolidated Balance Sheets Caption	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
		(In thousands)
Financial Assets:
Restricted investments, held-to-maturity 1	Restricted investments, held-to-maturity, amortized cost	$	7,140	$	7,134	$	9,001	$	8,995
Equity method investments	Other long-term assets	82,883		82,883		77,562		77,562

Investments in equity securities	Other long-term assets	21,063		21,063		18,675		18,675
Convertible note	Other current assets	37,631		37,631		—		—

Financial Liabilities:
2017 Term Loan, due October 2022 2	Long-term debt – less current portion	$	—	$	—	$	298,907	$	300,000
2021 Term Loan A-1, due December 2022 3	Long-term debt – less current portion	199,588		200,000		—		—
2021 Term Loan A-2, due September, 2024 3	Long-term debt – less current portion	199,571		200,000		—		—
2021 Term Loan A-3, due September 2026 3	Long-term debt – less current portion	798,264		800,000		—		—

2018 RSA, due July 2021 4	Accounts receivable securitization – current portion	—		—		213,918		214,000
2021 RSA, due April 2024 5	Accounts receivable securitization – less current portion	278,428		279,000		—		—
2017 Revolver, due October 2022	Revolving line of credit	—		—		210,000		210,000
2021 Revolver, due September 2026	Revolving line of credit	300,000		300,000		—		—
2021 Prudential Notes 6	Finance lease liabilities and long-term debt – current portion, Long-term debt – less current portion	47,760		50,321		—		—

Contingent consideration, acquisitions	Accrued liabilities, Other long-term liabilities	21,200		21,200		16,200		16,200

1Refer to Note 4 for the differences between the carrying amounts and estimated fair values of the Company's restricted investments, held-to-maturity.

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

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

4The carrying amount of the 2017 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 ~~$0.9 million and~~ $1.1 million in deferred loan costs as of ~~March 31, 2021 and~~ December 31, ~~2020,~~2020.

3The carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 arenet of $0.4 million, $0.4 million, and $1.7 million in deferred loan costs as of September 30, 2021, respectively.

54The carrying amount of the 2018 RSA is ~~included in~~ "~~Accounts receivable securitization – current portion," on the condensed consolidated balance sheets and is~~ net of~~$43.0 thousand~~ ~~and~~ $0.1 million in deferred loan costs as of ~~March 31, 2021 and~~ December 31, 2020~~, respectively.~~.

5The carrying amount of the 2021 RSA is net of $0.6 million in deferred loan costs as of September 30, 2021.

6The carrying amount of the ~~contingent consideration associated with the acquisition~~2021 Prudential Notes is ~~included~~net of $0.1 million in ~~both the "Accrued liabilities"~~deferred loan costs and ~~"Other long-term liabilities" line items on the condensed consolidated balance sheets.~~$2.4 million in fair value adjustments as of September 30, 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

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 ~~March 31,~~September 30, 2021 and December 31, 2020:


				Fair Value Measurements at Reporting Date Using:											Fair Value Measurements at Reporting Date Using:
		Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain			Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Unrealized Gain Position
		(In thousands)											(In thousands)
As of March 31, 2021
Investments in equity securities 1		$	22,555	$	22,555	$	0	$	0	$	10,391
As of September 30, 2021												As of September 30, 2021
Convertible note 1												Convertible note 1	$	37,631	$	—	$	—	$	37,631	$	12,631
Investments in equity securities 2												Investments in equity securities 2	$	21,063	$	21,063	$	—	$	—	$	11,135

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

1The Company recognized ~~$10.4~~$12.6 million of unrealized gains on ~~these assets~~the convertible note for the ~~quarter-ended March 31, 2021. Additionally, the Company sold $6.4 million in equity investments during the quarter~~year-to-date period ended ~~March 31,~~September 30, 2021, ~~and realized a gain of $3.5 million. The activity for these investments~~which is included within "Other ~~(expense)~~ income, net" within the condensed consolidated statement of comprehensive ~~income for~~income. The fair value of the ~~quarter ended March 31, 2021.~~note was determined using a discounted cash flow analysis based on the probability of exit event options and exit event dates.

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

•During the quarter ended ~~March 31, 2020.~~

~~Table~~September 30, 2021, the Company recognized $4.0 million in gains on these investments in equity securities, consisting of ~~ContentsGlossary of Terms~~$3.0 million in unrealized gains and $1.0 million in realized gains.

•During the year-to-date period ended September 30, 2021, the Company recognized $12.8 million in gains on these investments in equity securities, consisting of $7.6 million in unrealized gains and $5.2 million in realized gains.

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~3Fair value activity from the investments in equity securities is recorded in "Other income, net" within the condensed consolidated statement of comprehensive income.

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED~~•During the quarter ended September 30, 2020, the Company recognized $4.4 million in unrealized gains on these investments in equity securities.

•During the year-to-date period ended September 30, 2020, the Company recognized $6.9 million in unrealized gains on these investments in equity securities.

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 ~~March 31,~~September 30, 2021 and December 31, 2020:


				Fair Value Measurements at Reporting Date Using:											Fair Value Measurements at Reporting Date Using:
		Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain (Loss)			Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Gain (Loss)
		(In thousands)											(In thousands)
As of March 31, 2021
Contingent consideration associated with acquisition 1		$	16,200	$	0	$	0	$	16,200	$	0
As of September 30, 2021												As of September 30, 2021
Contingent consideration associated with acquisitions 1												Contingent consideration associated with acquisitions 1	$	21,200	$	—	$	—	$	21,200	$	—

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

1The Company did 0tnot recognize any gains (losses) during the ~~quarter-ended March 31,~~quarter or year-to-date periods ended September 30, 2021 related to the revaluation of these liabilities.

2Refer to Note 3 for information regarding the ~~adjustments made to the contingent consideration associated with the acquisition.~~ components of these liabilities.

2During the ~~year-ended December 31,~~fourth quarter of 2020, the Company ~~recognized~~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 ~~losses related to~~“Miscellaneous operating expenses” in the ~~revaluation~~consolidated statement of ~~these liabilities.~~comprehensive income. The Company did 0tnot recognize any losses during the ~~quarter-ended March 31,~~quarter and year-to-date periods ended September 30, 2020.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Nonrecurring Fair Value Measurements (Assets) — As of ~~March 31,~~September 30, 2021, the Company had 0no major categories of assets estimated at fair value that were measured on a nonrecurring basis.

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 December 31, 2020:

Fair Value Measurements at Reporting Date Using:

Estimated
Fair Value

Level 1 Inputs

Level 2 Inputs

Level 3 Inputs

Total Loss

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)

Equipment 1

5,851

—

5,851

—

(5,335)

1 Reflects the non-cash impairment of certain alternative fuel technology (within the non-reportable segments) and certain revenue equipment held for sale (within the ~~Trucking~~Truckload segment). ~~During~~The Company did not recognize any impairments during the ~~year-ended December 31, 2020, the Company recognized $5.3 million of impairments related to these assets.~~quarter ended September 30, 2020. The Company recognized ~~$0.9~~$1.3 million of impairments during the ~~quarter-ended March 31,~~year-to-date period ended September 30, 2020.

Nonrecurring Fair Value Measurements (Liabilities) — As of ~~March 31,~~September 30, 2021 and December 31, 2020, the Company had 0no major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.

Fair Value of Pension Plan Assets — The following table sets forth by level the fair value hierarchy of ACT's pension plan financial assets accounted for at fair value on a recurring basis. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. ACT's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and their placement within the fair value hierarchy levels.


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(In thousands)
As of September 30, 2021
US equity funds	$	14,810	$	14,810	$	—	$	—
International equity funds	6,184		6,184		—		—
Fixed income funds	47,583		47,583		—		—
Cash and cash equivalents	823		823		—		—
Total pension plan assets	$	69,400	$	69,400	$	—	$	—

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 16 — 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 September 30,								Year-to-Date September 30,
	2021				2020				2021				2020
	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	$	—	$	—	$	—	$	7,837	$	—
SME Industries 1	—		—		28		—		—		—		56		—

Total	$	—	$	—	$	29	$	—	$	—	$	—	$	7,893	$	—
Facility and Equipment Leases:
Central Freight Lines 1	$	—	$	—	$	25	$	92	$	—	$	—	$	48	$	277
Other Affiliates 1	—		69		2		37		—		214		11		146
Total	$	—	$	69	$	27	$	129	$	—	$	214	$	59	$	423
Other Services:
Central Freight Lines 1	$	—	$	—	$	412	$	—	$	—	$	—	$	427	$	—



DPF Mobile 1	—		—		—		2		—		—		—		33
Other Affiliates 1	8		9		13		—		21		27		32		—
Total	$	8	$	9	$	425	$	2	$	21	$	27	$	459	$	33

1 Entities affiliated with former Board member Jerry Moyes include Central Freight Lines, SME Industries, 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.

•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 16 pertain to transactions that occurred prior to the date that the ownership percentage changed.

Receivables and payables pertaining to related party transactions were:


	September 30, 2021				December 31, 2020
	Receivable		Payable		Receivable		Payable
	(In thousands)
Central Freight Lines	$	—	$	—	$	133	$	—

DPF Mobile	—		—		—		41
Other Affiliates	6		44		2		10
Total	$	6	$	44	$	135	$	51

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 17 — Information by Segment and Geography

Segment Information

The Company has 4 reportable segments: Truckload, Logistics, Intermodal, and LTL, 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 ASC Topic 606, Revenue from Contracts with Customers.

The Company's NaN 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 four reportable segments discussed below based on similarities with both their qualitative and economic characteristics.

Truckload

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

Logistics

The Logistics reportable segment is comprised of six logistics operating segments that provide similar transportation services to the Company's 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 the Company's 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.

LTL

The LTL reportable segment is comprised of one operating segment and provides our customers with regional LTL transportation services through a network of over 70 service centers in the Company's geographical footprint. The Company's LTL service also includes national coverage to customers by utilizing partner carriers for areas outside of the Company's direct network.

Non-reportable

Intersegment Eliminations

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

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


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
Revenue:	(In thousands)
Truckload	$	1,041,332	$	975,881	$	2,990,137	$	2,774,311

Logistics	226,338		99,018		511,962		248,320
Intermodal	112,801		98,859		335,245		276,410
LTL	191,906		—		191,906		—
Subtotal	$	1,572,377	$	1,173,758	$	4,029,250	$	3,299,041
Non-reportable segments	89,393		56,610		206,857		148,141
Intersegment eliminations	(19,325)		(19,962)		(54,947)		(51,280)
Total revenue	$	1,642,445	$	1,210,406	$	4,181,160	$	3,395,902


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
Operating income (loss):	(In thousands)
Truckload	$	206,543	$	168,781	$	533,483	$	383,903

Logistics	27,128		2,478		49,061		9,235
Intermodal	9,544		250		18,813		(6,962)
LTL	17,469		$	—	17,469		$	—
Subtotal	$	260,684	$	171,509	$	618,826	$	386,176
Non-reportable segments	9,403		(6,048)		4,635		(16,429)
Operating income	$	270,087	$	165,461	$	623,461	$	369,747


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
Depreciation and amortization of property and equipment:	(In thousands)
Truckload	$	107,229	$	97,867	$	314,320	$	288,970

Logistics	355		214		852		628
Intermodal	3,942		3,564		11,700		10,658
LTL	11,950		$	—	11,950		$	—
Subtotal	$	123,476	$	101,645	$	338,822	$	300,256
Non-reportable segments	15,094		14,019		43,269		40,230
Depreciation and amortization of property and equipment	$	138,570	$	115,664	$	382,091	$	340,486

Geographical Information

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

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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 and the anticipated risks regarding our acquisition of ACT,

•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 (including containers in our Intermodal segment), 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 cost structure and our ability to control costs,

•future operating profitability and margin,

•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 and ability to comply with debt covenants,

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•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, coverage, coverage limits, 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," "feel," 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 II, Item 1A "Risk Factors" of this Quarterly Report, Part II, Item 1A "Risk Factors" in our Quarterly Report for the quarter-ended June 30, 2021, Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

All such forward-looking statements speak only as of the date of this Quarterly Report. 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 2020 Annual Report.

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Executive Summary

Company Overview

Knight-Swift Transportation Holdings Inc. is one of the largest and most diversified freight transportation companies, operating the largest full truckload fleet in North ~~America's largest truckload carrier~~America and ~~a provider of transportation solutions,~~is 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 full truckload and LTL 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~~four reportable segments are ~~Trucking,~~Truckload, Logistics, Intermodal, and ~~Intermodal.~~LTL. Additionally, we have various non-reportable segments. Refer to Note 1417 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.

ACT Acquisition — On July 5, 2021, we acquired 100% of ACT. Further details regarding this acquisition are included in Note 3 in Part I, Item 1 of this Quarterly Report.

Revenue

•Our ~~trucking~~truckload services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base. We primarily generate revenue by transporting freight for our customers through our ~~Trucking~~Truckload segment.

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

•Our LTL service provides our customers regional LTL transportation service through our network of over 70 service centers in our geographical footprint. Our LTL service also provides national coverage to our customers by utilizing partner carriers for areas outside of our direct network.

•Our non-reportable segments includeIron Truck Services, (which offers support services provided to our customers and independent contractors ~~(including~~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.~~Truckload and LTL segments.

Table of ContentsGlossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Expenses — Our most significant expenses vary with miles traveled and include fuel, driving associate-related expenses (such as wages and benefits), and services purchased from independent contractors and other transportation providers (such as railroads, drayage providers, and other trucking companies). 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 II, Item 1A "Risk Factors" of this Quarterly Report, Part II, Item 1A "Risk Factors" of our Quarterly Report for the quarter-ended June 30, 2021, Part I, Item 1A "Risk Factors" in our 2020 Annual Report, and various disclosures in our press releases, stockholder reports, and other filings with the SEC.

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Consolidated Key Financial Highlights and Operating Metrics


		Quarter Ended March 31,				Quarter-to-Date September 30,								Year-to-Date September 30,
			2021				2020				2021			2020			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		$	1,223,014			$	1,124,798		Total revenue	$	1,642,445		$	1,210,406		$	4,181,160		$	3,395,902
Revenue, excluding trucking fuel surcharge			$	1,133,105			$	1,027,095
Revenue, excluding truckload fuel surcharge										Revenue, excluding truckload fuel surcharge	$	1,510,572		$	1,137,313		$	3,856,549		$	3,162,005
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift		$	129,790			$	65,426		Net income attributable to Knight-Swift	$	206,178		$	122,058		$	488,772		$	267,673
Earnings per diluted share	Earnings per diluted share		$	0.77			$	0.38		Earnings per diluted share	$	1.23		$	0.71		$	2.93		$	1.57
Operating ratio	Operating ratio		86.7		%		90.9		%	Operating ratio	83.6		%	86.3		%	85.1		%	89.1		%

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		$	139,433			$	76,205		Adjusted Net Income Attributable to Knight-Swift 1	$	217,080		$	134,618		$	519,511		$	307,321
Adjusted EPS 1	Adjusted EPS 1		$	0.83			$	0.44		Adjusted EPS 1	$	1.30		$	0.79		$	3.11		$	1.80
Adjusted Operating Ratio 1	Adjusted Operating Ratio 1		84.5		%		88.6		%	Adjusted Operating Ratio 1	81.3		%	83.9		%	82.8		%	86.6		%

Revenue equipment:	Revenue equipment:									Revenue equipment:
Average tractors (Trucking segment only) 2			18,224				18,462
Average tractors (Truckload segment only) 2										Average tractors (Truckload segment only) 2	17,867			18,464			18,041			18,439
Average trailers 3	Average trailers 3		59,797				57,716			Average trailers 3	60,361			58,310			60,396			57,716
Average containers	Average containers		10,846				9,856			Average containers	10,842			10,852			10,843			10,522

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 ~~2.3~~2.4 years and ~~2.0~~2.1 years as of ~~March 31,~~September 30, 2021 and 2020, respectively.

3 The average age of our trailer fleet was ~~8.2~~8.3 years and ~~7.6~~7.7 years as of ~~March 31,~~September 30, 2021 and 2020, respectively.

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Market Trends and Company Performance

Trends and Outlook — ~~Our~~Each reportable segment grew revenue while improving margins, leading to consolidated revenue, excluding ~~trucking~~truckload fuel surcharge, ~~grew by 10.3% during~~growth of 22.0%, and an improvement of 68.6% in consolidated operating income to $623.5 million in the ~~first quarter of~~year-to-date period ended September 30, 2021, as ~~a result of revenue growth across all of our reportable segments. We generated consolidated Adjusted~~compared to the same period last year. Net Income Attributable to Knight-Swift ~~of $139.4 million, which represents an 83.0% increase from $76.2 million during~~increased by 82.6% to $488.8 million.

•Truckload—82.2% operating ratio for the ~~first quarter of 2020. Our Trucking segment overcame inclement weather conditions and driver sourcing challenges during~~year-to-date period ended September 30, 2021. The Adjusted Operating Ratio was 80.1% for the ~~quarter and improved average revenue per tractor by 7.7%, which resulted in~~year-to-date period ended September 30, 2021, a ~~470~~420 basis point improvement inas compared to this time last year.

•Logistics —90.4% operating ratio for the year-to-date period ended September 30, 2021. The Adjusted Operating Ratio was 90.1% for the year-to-date period ended September 30, 2021, a 610 basis point improvement as compared to ~~81.8%~~this time last year, supported by a 108.0% increase in Logistics revenue, excluding intersegment transactions, as load counts grew by 39.6%, while revenue per load increased 48.9%.

•Intermodal — The operating ratio and Adjusted Operating Ratio were 94.4% for the ~~first quarter~~year-to-date period ended September 30, 2021, an 810 basis point improvement as compared to this time last year. The improvement was supported by 21.3% year-over-year revenue growth.

•LTL —87.5% Adjusted Operating Ratio, which represents the results of ~~2021 from 86.5% in~~ACT. On an annualized basis, the ~~first quarter~~LTL segment represents approximately 12% of ~~2020. Our Logistics segment grew~~ revenue ~~by more than 50% and more than doubled operating income year-over-year. Despite weather and service disruptions during~~within the ~~first quarter of 2021, our Intermodal segment achieved year-over-year improvements in operating results, and we anticipate ongoing improvement in the coming quarters.~~four reportable segments.

The national unemployment rate was ~~6.0%~~4.8%1 as of ~~March 31, 2021, reflecting the continued resumption of economic activity that had been curtailed due to the pandemic.~~

~~During the first quarter of 2021, the~~September 30, 2021. The US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by ~~6.4%~~2.0%2 on a year-over-year basis, per preliminary third-party forecasts. ~~Third-party forecasts are predicting~~The deceleration, compared to previous periods of 2021, was driven by a ~~continued economic rebound~~slowdown in ~~2021. The first~~consumer spending. Early estimates of the third quarter 2021 US employment cost index ~~rose 2.6%~~indicate a year-over-year increase of 3.7%1 and ~~0.9%~~a sequential increase of 1.3%1 ~~on a year-over-year and sequential basis, respectively.~~.

From a freight market perspective, we are encouraged by the continued strength in freight demand; however, demand may be difficult to predict for the rest of 2021. The 2021 market outlook includes the following:

•~~over-the-road~~in addition to expecting unprecedented demand in the fourth quarter of 2021, we anticipate similar strength for truckload ~~demand has been strong and we expect this to continue~~services throughout ~~the remainder of the year and into~~ 2022,

•capacity expansion ~~may~~continues to be limited as ~~there has been some constraint~~new tractor and trailer builds are constrained 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,~~labor shortages,

•sourcing and retaining drivers ~~is likely to contribute~~will remain challenging and lead to additional driver wage inflation,

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

•~~there may be continuing non-contract freight~~inflationary pressure on equipment, maintenance, labor and other cost items.

The above factors should continue to support a favorable rate environment, likely resulting in double digit contract rate increases. In addition to the above, we are seeing strong demand for power-only opportunities ~~with more challenging year-over-year comparisons~~and strength in the ~~back half of the year.~~used equipment market.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue excluding ~~trucking~~truckload fuel surcharge, as we intend to purchase, rather than enter into operating leases, for a majority of our revenue equipment in 2021. With significant tightening in the insurance markets, we may also experience changes in premiums, retention limits, and excess coverage limits in 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 manage~~expect that our ~~leverage ratio relative to our targeted range~~acquisition of ACT will have a significant impact on future financial results, including an overall increase in operating revenues 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. expenses.

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

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Note: The reported results do not include ACT's operating results prior to its acquisition by the Company on July 5, 2021, in accordance with the accounting treatment applicable to the transaction. Accordingly, comparisons between the Company’s quarter and year-to-date September 30, 2021 results and prior periods may not be meaningful.

Comparison Between the Quarters Ended ~~March 31,~~September 30, 2021 and 2020 — The ~~$64.4~~$84.1 million increase in net income attributable to Knight-Swift to ~~$129.8~~$206.2 million during the third quarter ~~ended March 31,~~of 2021 from ~~$65.4~~$122.1 million during the same period last year includes the following:

•Contributor — $~~51.1~~37.8 million increase in operating income within our ~~Trucking segment. Average revenue per tractor increased by 7.7%,~~Truckload segment, driven by a ~~16.1%~~3.4% increase in revenue, ~~per loaded mile,~~ excluding fuel surcharge and intersegment transactions.

•Contributor — ~~$6.2~~$24.7 million increase in operating income within our Logistics segment. Revenue, excluding intersegment transactions, increased by 130.0%, as load volumes grew by 60.7% while revenue per load increased by 43.1%.

•Contributor — $9.3 million improvement in operating income ~~(loss)~~ within our Intermodal segment. Revenue per load increased ~~10.2%~~25.9%, as rail congestion and allocations reduced load counts ~~increased 2.6%~~by 9.3%.

•Contributor — ~~$22.6~~$17.5 million ~~improvement~~of operating income from our LTL segment in the third quarter of 2021.

•Offset — $3.4 million reduction in "Other income, ~~(expenses),~~ net," primarily ~~related to~~driven by lower gains recognized within our portfolio of ~~investments.~~investments, as well as a third quarter 2021 write-off of deferred debt issuance costs from replacing the 2017 Debt Agreement and July 2021 Term Loan with the 2021 Debt Agreement.

•Offset — ~~$20.8~~$13.2 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes, which was partially offset by ~~a reduction~~favorable discrete items associated with the ACT acquisition and other discrete items. During the third quarter of ~~the unfavorable~~2020, we recognized discrete items relating to negative impacts from ~~foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.~~certain tax-related items within our Mexico operations. All of these factors resulted in an effective tax rate of ~~25.9%~~22.8% for the ~~first~~third quarter of 2021 and ~~27.2%~~28.1% for the ~~first~~third quarter of 2020.

Comparison Between the Year-to-Date September 30, 2021 and 2020 — The $221.1 million increase in net income attributable to Knight-Swift to $488.8 million during the year-to-date September 30, 2021 period from $267.7 million during the same period last year includes the following:

•Contributor — $149.6 million increase in operating income within our Truckload segment, driven by a 5.9% increase in revenue, excluding fuel surcharge and intersegment transactions.

•Contributor — $39.8 million improvement in operating income within our Logistics segment. Revenue, excluding intersegment transactions, increased by 108.0%, as load volumes grew by 39.6% and revenue per load increased by 48.9%.

•Contributor — $25.8 million improvement in operating income (loss) within our Intermodal segment. Revenue per load increased 17.1% and load counts increased 3.6%.

•Contributor — $17.5 million of operating income from our LTL segment.

•Contributor — $27.5 million improvement in "Other income, net," primarily due to unrealized gains recognized from our investment in Embark and an increase in unrealized gains recognized from other investments within our portfolio.

•Offset — $59.0 millionincrease in consolidated income tax expense, primarily due to an increase in income before income taxes resulting in an effective tax rate of 24.4% for year-to-date September 30, 2021 and 27.0% for year-to-date September 30, 2020.

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

Liquidity and Capital — During ~~the quarter ended March 31,~~year-to-date September 30, 2021, we generated ~~$306.1~~$817.5 million in operating cash flows, reduced our operating lease liabilities by ~~$15.2~~$37.4 million, paid down our finance lease liabilities by $73.8 million, used ~~$43.8~~$196.1 million for capital expenditures (net of disposal proceeds), spent ~~$39.3 million~~$1.3 billion on three acquisitions, and returned ~~$67.3~~$53.7 million in share repurchases and $46.9 million in dividends to our ~~stockholders in the form~~stockholders.

Table of ~~quarterly dividends and repurchases~~ContentsGlossary of ~~our common stock.~~Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

We ended the quarter with ~~$194.7~~$269.7 million in unrestricted cash and cash equivalents, ~~$115.0~~$300.0 million outstanding on the 2021 Revolver, ~~$300.0 million~~$1.2 billion face value outstanding on the 2021 Term ~~Loan,~~Loans, and ~~$5.9~~$6.3 billion of stockholders' equity.

We continue to manage our leverage ratio relative to our targeted range and remain committed to a strong capital structure, which we believe will position us for long-term success and enable us to pursue further opportunities for organic growth, growth through acquisitions, and other capital allocation opportunities. We do not foresee material liquidity constraints or any issues with our ongoing ability to meet our debt covenants.

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


Results of Operations — Segment Review

The Company has ~~three~~four reportable segments: ~~Trucking,~~Truckload, Logistics, Intermodal and ~~Intermodal,~~LTL, as well as certain non-reportable segments. Refer to Note 1417 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,			Quarter-to-Date September 30,						Year-to-Date September 30,
			2021			2020			2021		2020		2021		2020
Revenue:	Revenue:		(In thousands)					Revenue:	(In thousands)
Trucking			$	962,947		$	919,061
Truckload								Truckload	$	1,041,332	$	975,881	$	2,990,137	$	2,774,311

Logistics	Logistics		118,887			79,198		Logistics	226,338		99,018		511,962		248,320
Intermodal	Intermodal		107,066			94,731		Intermodal	112,801		98,859		335,245		276,410
LTL								LTL	191,906		—		191,906		—
Subtotal	Subtotal		$	1,188,900		$	1,092,990	Subtotal	$	1,572,377	$	1,173,758	$	4,029,250	$	3,299,041
Non-reportable segments	Non-reportable segments		50,669			46,242		Non-reportable segments	89,393		56,610		206,857		148,141
Intersegment eliminations	Intersegment eliminations		(16,555)			(14,434)		Intersegment eliminations	(19,325)		(19,962)		(54,947)		(51,280)
Total revenue	Total revenue		$	1,223,014		$	1,124,798	Total revenue	$	1,642,445	$	1,210,406	$	4,181,160	$	3,395,902


	Quarter-to-Date September 30,				Year-to-Date September 30,
	2021		2020		2021		2020
Operating income (loss):	(In thousands)
Truckload	$	206,543	$	168,781	$	533,483	$	383,903

Logistics	27,128		2,478		49,061		9,235
Intermodal	9,544		250		18,813		(6,962)
LTL	17,469		—		17,469		—
Subtotal	$	260,684	$	171,509	$	618,826	$	386,176
Non-reportable segments	9,403		(6,048)		4,635		(16,429)
Operating income	$	270,087	$	165,461	$	623,461	$	369,747

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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~~Truckload

Measures productivity and represents revenue (excluding fuel surcharge and intersegment transactions) divided by average tractor count

Total Miles per Tractor

~~Trucking~~Truckload

Total miles (including loaded and empty miles) a tractor travels on average

Average Length of Haul

~~Trucking~~Truckload, LTL

Average miles traveled with loaded trailer cargo per ~~order~~order/shipment

Non-paid Empty Miles Percentage

~~Trucking~~Truckload

Percentage of miles without trailer cargo

Shipments per Day

LTL

Average number of shipments completed each business day

Weight per Shipment

LTL

Total weight (in pounds) divided by total shipments

Revenue per shipment

LTL

Total revenue divided by total shipments

Revenue xFSR per shipment

LTL

Total revenue, excluding fuel surcharge, divided by total shipments

Revenue per hundredweight

LTL

Measures yield and is calculates as total revenue divided by total weight (in pounds) times 100

Revenue xFSR per hundredweight

LTL

Total revenue, excluding fuel surcharge, divided by total weight (in pounds) times 100

Average Tractors

~~Trucking,~~Truckload, Intermodal, LTL

Average tractors in operation during the period including company tractors and tractors provided by independent contractors

Average Trailers

~~Trucking~~Truckload

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)~~

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

Average Containers

Intermodal

Average containers in operation during the period

GAAP Operating Ratio

~~Trucking,~~ Truckload,
Logistics, Intermodal, LTL

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,~~ Truckload,
Logistics, Intermodal, LTL

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~~Truckload Segment

We generate revenue in the ~~Trucking~~Truckload segment primarily through irregular route, dedicated, refrigerated, flatbed, expedited, and cross-border service offerings with ~~13,130~~12,937 irregular route tractors and ~~5,094~~4,930 dedicated route ~~tractors.~~tractors in use during the quarter-to-date period ended September 30, 2021. Generally, we are paid a predetermined rate per mile or per load for our ~~trucking~~truckload services. Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, and other specialized services, as well as through the collection of fuel surcharge revenue to mitigate the impact of increases in the cost of fuel. The main factors that affect the revenue generated by our ~~Trucking~~Truckload segment are rate per mile from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.

The most significant expenses in the ~~Trucking~~Truckload segment are primarily variable and include fuel and fuel taxes, driving associate-related expenses (such as wages, benefits, training, and recruitment), and costs associated with independent contractors primarily included in "Purchased transportation" in the 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~~Truckload segment are depreciation and rent expenses from leasing and acquiring revenue equipment and terminals, as well as compensating our non-driver employees.


									Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.			YTD 2021 vs.
															2021			2020			2021			2020			QTD 2020		YTD 2020
											(Dollars in thousands, except per tractor data)													Increase (Decrease)
		Quarter Ended March 31,								Increase (Decrease)
			2021			2020
			(Dollars in thousands, except per tractor data)
Total revenue	Total revenue		$	962,947		$	919,061					4.8	%	Total revenue	$	1,041,332		$	975,881		$	2,990,137		$	2,774,311		6.7	%	7.8	%
Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions		$	872,814		$	821,084					6.3	%	Revenue, excluding fuel surcharge and intersegment transactions	$	933,205		$	902,592		$	2,688,579		$	2,539,709		3.4	%	5.9	%
GAAP: Operating income	GAAP: Operating income		$	158,483		$	107,334					47.7	%	GAAP: Operating income	$	206,543		$	168,781		$	533,483		$	383,903		22.4	%	39.0	%
Non-GAAP: Adjusted Operating Income 1	Non-GAAP: Adjusted Operating Income 1		$	158,807		$	110,805					43.3	%	Non-GAAP: Adjusted Operating Income 1	$	206,866		$	169,105		$	534,454		$	398,076		22.3	%	34.3	%
Average revenue per tractor 2	Average revenue per tractor 2		$	47,894		$	44,474					7.7	%	Average revenue per tractor 2	$	52,231		$	48,884		$	149,026		$	137,736		6.8	%	8.2	%
GAAP: Operating ratio 2	GAAP: Operating ratio 2		83.5		%	88.3		%				(480	bps)	GAAP: Operating ratio 2	80.2		%	82.7		%	82.2		%	86.2		%	(250	bps)	(400	bps)
Non-GAAP: Adjusted Operating Ratio 1 2	Non-GAAP: Adjusted Operating Ratio 1 2		81.8		%	86.5		%				(470	bps)	Non-GAAP: Adjusted Operating Ratio 1 2	77.8		%	81.3		%	80.1		%	84.3		%	(350	bps)	(420	bps)
Non-paid empty miles percentage 2	Non-paid empty miles percentage 2		12.8		%	12.8		%				—	bps	Non-paid empty miles percentage 2	13.5		%	12.6		%	13.1		%	13.1		%	90	bps	—	bps
Average length of haul (miles) 2	Average length of haul (miles) 2		412			428						(3.7	%)	Average length of haul (miles) 2	398			436			407			427			(8.7	%)	(4.7	%)
Total miles per tractor 2	Total miles per tractor 2		20,928			22,568						(7.3	%)	Total miles per tractor 2	20,233			23,422			62,083			68,729			(13.6	%)	(9.7	%)
Average tractors 2 3	Average tractors 2 3		18,224			18,462						(1.3	%)	Average tractors 2 3	17,867			18,464			18,041			18,439			(3.2	%)	(2.2	%)
Average trailers 2	Average trailers 2		59,797			57,716						3.6	%	Average trailers 2	60,361			58,310			60,396			57,716			3.5	%	4.6	%

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

2 Defined under "Operating Statistics," above.

3 Includes ~~16,305~~16,048 and ~~16,339~~16,391 average company-owned tractors for the ~~first~~third quarter of 2021 and 2020, respectively.

~~Comparison Between~~Includes 16,166 and 16,347 average company-owned tractors for the ~~Quarters Ended March 31,~~year-to-date periods ended September 30, 2021 and 2020, respectively.— We grew revenue, excluding fuel surcharge and intersegment transactions, by 6.3% within the Trucking segment. Average revenue per tractor increased by 7.7%, driven by a 16.1% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions. The rate improvement was partially offset by an increase in driver-related sourcing and other expenses during the quarter and a 7.3% decline in miles per tractor due to inclement weather and an increase in unseated tractors.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

Comparison Between the Quarters Ended September 30, 2021 and 2020— The Adjusted Operating Ratio improved by 350 basis points to 77.8%, leading to a 22.3% improvement in Adjusted Operating Income. Year-over-year revenue, excluding fuel surcharge and intersegment transactions, grew by 3.4%. A 24.9% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 13.6% decrease in miles per tractor, contributed to a 6.8% increase in average revenue per tractor. Shipping demand remains strong throughout all markets. We have experienced more opportunities in shorter length of haul lanes, which have resulted in higher revenue per mile but fewer miles per tractor. These opportunities ultimately contributed to higher revenue per tractor and improved margins.

Comparison Between Year-to-Date September 30, 2021 and 2020— The Adjusted Operating Ratio improved by 420 basis points to 80.1%, leading to a 34.3% improvement in Adjusted Operating Income. Year-over-year revenue, excluding fuel surcharge and intersegment transactions, grew by 5.9%. A 19.8% increase in revenue per loaded mile, excluding fuel surcharge and intersegment transactions, partially offset by a 9.7% decrease in miles per tractor, contributed to an 8.2% increase in average revenue per tractor.

Logistics Segment

The Logistics segment is less asset-intensive than the ~~Trucking segment~~Truckload and LTL segments and is dependent upon capable non-driver employees, modern and effective information technology, and third-party capacity providers. Logistics revenue is generated by its brokerage operations. We generate additional revenue by offering specialized logistics solutions (including, but not limited to, trailing equipment, origin management, surge volume, disaster relief, special projects, and other logistic needs). Logistics revenue is mainly affected by the rates we obtain from customers, the freight volumes we ship through third-party capacity providers, and our ability to secure third-party capacity providers to transport customer freight.

The most significant expense in the Logistics segment is purchased transportation that we pay to third-party capacity providers, which is 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 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)


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands, except per load data)												Increase (Decrease)



Total revenue	$	226,338		$	99,018		$	511,962		$	248,320		128.6	%	106.2	%
Revenue, excluding intersegment transactions	$	221,374		$	96,237		$	499,263		$	240,060		130.0	%	108.0	%
GAAP: Operating income	$	27,128		$	2,478		$	49,061		$	9,235		994.8	%	431.3	%
Non-GAAP: Adjusted Operating Income 1	$	27,462		$	2,478		$	49,492		$	9,235		1,008.2	%	435.9	%
Revenue per load 2	$	2,513		$	1,756		$	2,261		$	1,518		43.1	%	48.9	%
Gross margin percentage 2	18.1		%	11.0		%	16.5		%	13.5		%	710	bps	300	bps
GAAP: Operating ratio 2	88.0		%	97.5		%	90.4		%	96.3		%	(950	bps)	(590	bps)
Non-GAAP: Adjusted Operating Ratio 1 2	87.6		%	97.4		%	90.1		%	96.2		%	(980	bps)	(610	bps)

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

2 Defined under "Operating Statistics," above.

2 Table of Contents~~Refer to "Non-GAAP Financial Measures" below.~~Glossary of Terms

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

Comparison Between the Quarters Ended ~~March 31,~~September 30, 2021 and 2020 — ~~Revenue,~~Demand for our logistics service offering continued to grow throughout the quarter, as we continue to leverage our fleet of over 60,000 trailers in our Power-only service offering. Logistics revenue, excluding intersegment transactions increased 130.0% as we grew load count by ~~50.8% within our Logistics segment, as brokerage~~60.7%, while increasing revenue per load ~~increased~~ by ~~43.0% and load volumes grew by 5.4%~~43.1%. The Adjusted Operating Ratio improved to 87.6%, resulting in a 1,008.2% increase in Adjusted Operating Income. Brokerage gross margin was ~~14.4%~~18.1% in the ~~first quarter of 2021 and 14.7% in the first quarter of 2020. The operating ratio improved by 170 basis points to 93.6% for the first~~third quarter of 2021, compared to ~~95.3% for~~11.0% in the ~~first~~third quarter of 2020.

Within our ~~power-only~~Power-only service offering, revenue grew by 333.9% as a result of an 84.1% increase in load volumes. Our Power-only service offering represented approximately 35% of brokerage load volumes ~~grew 56.2%, contributing to 161.6% revenue growth and representing over 25%~~during the third quarter of ~~our total first quarter 2021 brokerage load volumes. During 2020, we introduced~~2021. Through our Select platform, ~~which~~we digitally ~~matches shippers~~matched more than 4,500 carriers with available capacity ~~across our brands through frictionless transactions. During~~to available loads during the ~~first~~third quarter of 2021.

Comparison Between Year-to-Date September 30, 2021 ~~approximately 4,500 carriers were digitally matched with loads through our~~ ~~Select~~and 2020 ~~platform, representing~~— Logistics revenue, excluding intersegment transactions increased 108.0% as we grew load count by 39.6%, while increasing revenue per load by 48.9%. The Adjusted Operating Ratio improved to 90.1%, resulting in a 435.9% increase in Adjusted Operating Income. Brokerage gross margin was 16.5% for year-to-date September 30, 2021, compared to 13.5% for the same period last year.

Within our Power-only service offering, revenue grew by 308.1% as a result of a 90.2% increase in load volumes. Our Power-only service offering represented approximately ~~20%~~30% of ~~our~~ brokerage load ~~volume.~~

volumes for year-to-date September 30, 2021.

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Intermodal Segment

The Intermodal segment complements our regional operating model, allows us to better serve customers in longer haul lanes, and reduces our investment in fixed assets. 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 September 30,					Year-to-Date September 30,						QTD 2021 vs.			YTD 2021 vs.
														2021			2020			2021			2020			QTD 2020		YTD 2020
														(Dollars in thousands, except per load data)												Increase (Decrease)
		Quarter Ended March 31,								Increase (Decrease)
			2021			2020
			(Dollars in thousands, except per load data)
Total revenue	Total revenue		$	107,066		$	94,731				13.0	%	Total revenue	$	112,801		$	98,859		$	335,245		$	276,410		14.1	%	21.3	%
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions		$	106,971		$	94,622				13.1	%	Revenue, excluding intersegment transactions	$	112,754		$	98,808		$	335,019		$	276,129		14.1	%	21.3	%
GAAP: Operating income (loss)	GAAP: Operating income (loss)		$	3,457		$	(2,737)				226.3	%	GAAP: Operating income (loss)	$	9,544		$	250		$	18,813		$	(6,962)		3,717.6	%	370.2	%
Non-GAAP: Adjusted Operating Income (Loss) 1	Non-GAAP: Adjusted Operating Income (Loss) 1		$	3,457		$	(2,689)				228.6	%	Non-GAAP: Adjusted Operating Income (Loss) 1	$	9,544		$	250		$	18,813		$	(6,849)		3,717.6	%	374.7	%
Average revenue per load 2	Average revenue per load 2		$	2,549		$	2,314				10.2	%	Average revenue per load 2	$	2,902		$	2,305		$	2,682		$	2,291		25.9	%	17.1	%
GAAP: Operating ratio 2	GAAP: Operating ratio 2		96.8		%	102.9		%			(610	bps)	GAAP: Operating ratio 2	91.5		%	99.7		%	94.4		%	102.5		%	(820	bps)	(810	bps)
Non-GAAP: Adjusted Operating Ratio 1 2	Non-GAAP: Adjusted Operating Ratio 1 2		96.8		%	102.8		%			(600	bps)	Non-GAAP: Adjusted Operating Ratio 1 2	91.5		%	99.7		%	94.4		%	102.5		%	(820	bps)	(810	bps)
Load count	Load count		41,968			40,889					2.6	%	Load count	38,856			42,862			124,897			120,520			(9.3	%)	3.6	%
Average tractors 2 3	Average tractors 2 3		597			601					(0.7	%)	Average tractors 2 3	609			548			605			573			11.1	%	5.6	%
Average containers 2	Average containers 2		10,846			9,856					10.0	%	Average containers 2	10,842			10,852			10,843			10,522			(0.1	%)	3.1	%

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

2 Defined under "Operating Statistics," above.

3 Includes ~~542~~554 and ~~536~~494 company-owned tractors for the ~~first~~third quarter of 2021 and 2020,, respectively.

Includes 550 and 513 company-owned tractors for the year-to-date September 30, 2021 and 2020, respectively.

Comparison Between the Quarters Ended ~~March 31,~~September 30, 2021 and 2020 — Revenue ~~excluding intersegment transactions within our Intermodal segment increased 13.1%~~grew by 14.1% while the Adjusted Operating Ratio improved from 99.7% to 91.5%, asresulting in a $9.3 million increase in operating income. Continued rail congestion and rail allocations resulted in a reduction in load count, but contributed to a 25.9% increase in revenue per ~~load increased 10.2%~~load. Intermodal is exhibiting strong momentum, and load counts increased 2.6%. We improved the operating ratio within the Intermodal segment to 96.8%, compared to 102.9% during the first quarter of 2020, despite weather and service disruptions. Operating results within the Intermodal segment improved toward the end of the quarter. We anticipate sequentialwe expect operational improvements in ~~operating results~~cost structure and network design as we transition to a new western rail partner in the coming ~~quarters, as~~quarters. To position Intermodal for continued growth, we ~~focus on growing~~plan to add approximately 1,000 containers over the next two quarters.

Comparison Between Year-to-Date September 30, 2021 and 2020 — Revenue grew by 21.3% while the Adjusted Operating Ratio improved from 102.5% to 94.4%, resulting in a $25.8 million increase in operating income. Continued rail congestion and rail allocations resulted in a reduction in load ~~counts and improving~~count, but contributed to a 17.1% increase in revenue per load.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

LTL Segment

Our LTL segment is a regional motor carrier headquartered in Dothan, Alabama. We provide regional direct service and serve our customers' national transportation needs by utilizing key partner carriers for coverage areas outside of our network. We primarily generate revenue by transporting freight for our customers through our core LTL services.

Our revenues are impacted by shipment volume and tonnage levels that flow through our network. Additional revenues are generated through fuel surcharges and accessorial services provided during transit from shipment origin to destination. We focus on the following multiple revenue generation factors when reviewing revenue yield: revenue per hundredweight, revenue per shipment, weight per shipment, and length of haul. Fluctuation within each of these metrics is analyzed when determining the revenue quality of our customers' shipment density.

Our most significant expense is related to direct costs associated with the transportation of our freight moves including; direct salary, wage and benefit costs, fuel expense, and depreciation expense associated with revenue equipment costs. Other expenses associated with revenue generation that can fluctuate and impact operating results are insurance and claims expense as well as maintenance costs of our revenue equipment. These expenses can be influenced by multiple factors including our safety performance, equipment age, and other factors. A key component to lowering our operating costs is labor efficiency within our network. We continue to focus on technological advances to improve the customer experience and reduce our operating costs.


	Quarter and Year-to-Date September 30, 2021
	(Dollars in thousands, except per tractor data)
Total revenue	$	191,906
Revenue, excluding fuel surcharge	$	167,900
GAAP: Operating income	$	17,469
Non-GAAP: Adjusted Operating Income 1	$	20,967
GAAP: Operating ratio 2	90.9		%
Non-GAAP: Adjusted Operating Ratio 1 2	87.5		%

Shipments per day 2	16,430
Weight per shipment 2	1,111
Average length of haul (miles) 2	515
Revenue per shipment 2	$	157.55
Revenue xFSR per shipment 2	$	138.27
Revenue per hundredweight 2	$	14.18
Revenue xFSR per hundredweight 2	$	12.44
Average tractors 2	1,999

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

2Defined under "Operating Statistics," above.

Our LTL segment, which operates across approximately 70 facilities with a door count of over 3,400, generated $167.9 million in revenue, excluding fuel surcharge and an 87.5% Adjusted Operating Ratio during the third quarter of 2021. During the quarter, our LTL segment earned revenue per hundredweight of $12.44 and revenue per shipment, excluding fuel surcharge of $138.27.

We are pleased with the results of ACT and we are encouraged with the synergy opportunities the teams have identified and expect to improve the cost structure as well as capitalize on network and revenue opportunities. We feel confident we are on pace to achieve our goal of an 85% Adjusted Operating Ratio in the coming years.

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

Non-reportable Segments

The non-reportable segments include support services provided to our customers and independent contractors (including repair and maintenance shop services, equipment leasing, warranty services, and insurance), trailer parts manufacturing, warehousing, and certain driving academy activities, as well as certain corporate expenses (such as legal settlements and accruals, certain impairments, and ~~$11.4~~$11.6 million in quarterly amortization of intangibles related to the 2017 Merger and various acquisitions).


							Quarter-to-Date September 30,					Year-to-Date September 30,				QTD 2021 vs.		YTD 2021 vs.
												2021		2020		2021		2020		QTD 2020		YTD 2020
												(Dollars in thousands)								Increase (Decrease)
		Quarter Ended March 31,						Increase (Decrease)
			2021		2020
			(Dollars in thousands)
Total revenue	Total revenue		$	50,669	$	46,242			9.6	%	Total revenue	$	89,393	$	56,610	$	206,857	$	148,141	57.9	%	39.6	%
Operating loss			$	(7,258)	$	(6,197)			17.1	%
Operating income (loss)											Operating income (loss)	$	9,403	$	(6,048)	$	4,635	$	(16,429)	255.5	%	128.2	%

~~Comparison Between the Quarters Ended March 31, 2021~~Quarter-to-date and ~~2020~~— ~~A $1.2 million increase in legal expenses resulted in a year-over-year increase in operating loss~~year-to-date revenue growth and improved profitability within the non-reportable ~~segments.~~segments is related to revenue and margin improvement in our warehousing activities, expanded services to third-party carriers, (including Iron Truck Services), and increased demand for our equipment leasing services.

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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~~truckload fuel surcharge. ~~Trucking~~Truckload 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~~truckload fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.

Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Salaries, wages, and benefits $ 370,370 $ 354,833 4.4 %
% of total revenue 30.3 % 31.5 % (120 bps)
% of revenue, excluding fuel surcharge 32.7 % 34.5 % (180 bps)
Note: The reported results do not include ACT's operating results prior to its acquisition by the Company on July 5, 2021, in accordance with the accounting treatment applicable to the transaction. Accordingly, comparisons between the Company’s quarter and year-to-date September 30, 2021 results and prior periods may not be meaningful.


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Salaries, wages, and benefits	$	500,673		$	376,923		$	1,248,656		$	1,097,067		32.8	%	13.8	%
% of total revenue	30.5		%	31.1		%	29.9		%	32.3		%	(60	bps)	(240	bps)
% of revenue, excluding truckload fuel surcharge	33.1		%	33.1		%	32.4		%	34.7		%	—	bps	(230	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 our biggest headwind, although we continue to seek ways to attract and retain qualified driving associates, including heavily investing in our recruiting efforts, our driving academies, technology, and terminals that improve the experience of driving associates. We expect driving associate pay to remain inflationary, which we expect will result in additional driving associate pay increases in the future, thereby increasing our salaries, wages, and benefits expense.

~~The $15.5 million increase in consolidated~~•Comparison Between the Quarters Ended September 30, 2021 and 2020 — Consolidated salaries, wages, and benefits ~~was primarily due~~increased by $123.8 million for the third quarter of 2021, as compared to anthe third quarter of 2020. This increase inincludes $107.6 million from the results of ACT. The remaining increase pertained to driving associate pay rates and non-driver salaries and wages, partially offset by a 10.9% decrease in miles driven by company driving associates, excluding ACT.

•Comparison Between Year-to-Date September 30, 2021 and ~~lower medical insurance costs.~~2020 — Consolidated salaries, wages, and benefits increased by $151.6 million for the year-to-date period ended September 30, 2021, as compared to the same period last year. This increase includes $107.6 million from the results of ACT. The remaining increase pertained to driving associate pay rates and non-driver salaries and wages, partially offset by a 15.7% decrease in miles driven by company driving associates, excluding ACT.

Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Fuel $ 118,236 $ 121,855 (3.0 %)
% of total revenue 9.7 % 10.8 % (110 bps)
% of revenue, excluding trucking fuel surcharge 10.4 % 11.9 % (150 bps)

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Fuel	$	146,422		$	104,703		$	390,713		$	312,939		39.8	%	24.9	%
% of total revenue	8.9		%	8.7		%	9.3		%	9.2		%	20	bps	10	bps
% of revenue, excluding truckload fuel surcharge	9.7		%	9.2		%	10.1		%	9.9		%	50	bps	20	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~~Truckload segment. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue. Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our

~~Table of ContentsGlossary of Terms~~

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

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

•Comparison Between the Quarters Ended September 30, 2021 and 2020 — The ~~$3.6~~$41.7 million ~~decrease~~increase in consolidated fuel expense for the third quarter, includes $15.2 million of fuel expense from ACT's results. The remaining increase is ~~primarily due~~attributable to ~~a 7.7%~~higher average DOE fuel prices when compared to the same period last year. Average DOE fuel prices were $3.36 per gallon for the third quarter of 2021 and $2.43 per gallon for the third quarter of 2020. This was partially offset by the decrease in ~~the~~ total miles driven by company driving ~~associates.~~associates discussed above.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — The $77.8 million increase in consolidated fuel expense for the year-to-date period ended September 30, 2021, includes $15.2 million of fuel expense from ACT's results. The remaining increase is attributable to higher average DOE fuel prices when compared to the same period last year. Average DOE fuel prices were ~~$2.91~~$3.16 per gallon for ~~the first quarter of~~year-to-date September 30, 2021 and ~~$2.92~~$2.59 per gallon for year-to-date September 30, 2020. This was partially offset by the ~~first quarter~~decrease in total miles driven by company driving associates discussed above.


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Operations and maintenance	$	86,951		$	69,964		$	226,334		$	204,435		24.3	%	10.7	%
% of total revenue	5.3		%	5.8		%	5.4		%	6.0		%	(50	bps)	(60	bps)
% of revenue, excluding truckload fuel surcharge	5.8		%	6.2		%	5.9		%	6.5		%	(40	bps)	(60	bps)

Table of ~~2020.~~ContentsGlossary of Terms

Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Operations and maintenance $ 68,070 $ 68,404 (0.5 %)
% of total revenue 5.6 % 6.1 % (50 bps)
% of revenue, excluding trucking fuel surcharge 6.0 % 6.7 % (70 bps)
KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

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 and the miles driven. We expect the driver market to remain competitive throughout 2021 and into 2022, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense. We expect to continue refreshing our tractor and trailer fleet in the coming quarters to maintain or improve the average age of our equipment.

•Comparison Between the Quarters Ended September 30, 2021 and 2020 — The ~~first~~increase of $17.0 million for the third quarter ~~decrease~~ of ~~$0.3~~2021 includes $9.3 million in~~consolidated~~ operations and maintenance expense from ACT's results. The remaining increase was attributed to ~~reduced maintenance expense associated with refreshing our fleet with newer equipment~~higher driving associate hiring expenses and ~~the~~increased chassis expense. This was partially offset by a decrease in miles driven by company driving associates ~~noted~~discussed above.

Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Insurance and claims $ 55,643 $ 54,280 2.5 %
% of total revenue 4.5 % 4.8 % (30 bps)
% of revenue, excluding trucking fuel surcharge 4.9 % 5.3 % (40 bps)
•Comparison Between Year-to-Date September 30, 2021 and 2020 — The increase of $21.9 million for the year-to-date period ended September 30, 2021, as compared to the same period last year, includes $9.3 million in operations and maintenance expense from ACT's results. The remaining increase is attributed to higher driving associate hiring expenses and increased chassis expense. This was partially offset by a decrease in miles driven by company driving associates discussed above.


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Insurance and claims	$	73,757		$	45,186		$	188,176		$	144,768		63.2	%	30.0	%
% of total revenue	4.5		%	3.7		%	4.5		%	4.3		%	80	bps	20	bps
% of revenue, excluding truckload fuel surcharge	4.9		%	4.0		%	4.9		%	4.6		%	90	bps	30	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. In 2021, we expanded our insurance offerings to third-party carriers, earning additional premium revenues, which were partially offset by increased insurance reserves. Insurance and claims expense also varies based on the number of miles driven by company driving associates and independent contractors, the frequency and severity of accidents, trends in development factors used in actuarial accruals, and developments in large, prior-year claims. In future periods, our higher self-insured retention limits or lower excess coverage limits may cause increased volatility in our consolidated insurance and claims expense.

•Comparison Between the Quarters Ended September 30, 2021 and 2020 — Consolidated insurance and claims expense increased by ~~$1.4~~$28.6 million for the third quarter of 2021, as compared to the third quarter of 2020. This increase includes $7.7 million of insurance and claims expense from ACT's results. The remaining increase was primarily due to insurance reserves incurred through our third-party carrier insurance program.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — Consolidated insurance and claims expense increased by $43.4 million for the year-to-date period ended ~~March 31,~~September 30, 2021, as compared to the same period last year. This increase includes $7.7 million of insurance and claims expense from ACT's results. The remaining increase was primarily due to ~~negative development within certain prior year claims.~~insurance reserves incurred through our third-party carrier insurance program.

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									Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.			YTD 2021 vs.
															2021			2020			2021			2020			QTD 2020		YTD 2020
											(Dollars in thousands)													Increase (Decrease)
		Quarter Ended March 31,								Increase (Decrease)
			2021			2020
			(Dollars in thousands)
Operating taxes and licenses	Operating taxes and licenses		$	22,048		$	22,169					(0.5	%)	Operating taxes and licenses	$	27,475		$	21,475		$	71,240		$	64,527		27.9	%	10.4	%
% of total revenue	% of total revenue		1.8		%	2.0		%				(20	bps)	% of total revenue	1.7		%	1.8		%	1.7		%	1.9		%	(10	bps)	(20	bps)
% of revenue, excluding trucking fuel surcharge			1.9		%	2.2		%				(30	bps)
% of revenue, excluding truckload fuel surcharge														% of revenue, excluding truckload fuel surcharge	1.8		%	1.9		%	1.8		%	2.0		%	(10	bps)	(20	bps)

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

~~Operating~~The quarter over quarter increase of $6.0 million and year-to-date increase of $6.7 million are primarily composed of $6.3 million of operating taxes and licenses ~~decreased by $0.1 million for the quarter ended March 31, 2021 and remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge, as compared to the same periods last year.~~expense from ACT's results.


									Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.			YTD 2021 vs.
															2021			2020			2021			2020			QTD 2020		YTD 2020
											(Dollars in thousands)													Increase (Decrease)
		Quarter Ended March 31,								Increase (Decrease)
			2021			2020
			(Dollars in thousands)
Communications	Communications		$	5,037		$	4,874					3.3	%	Communications	$	6,612		$	5,069		$	16,284		$	14,845		30.4	%	9.7	%
% of total revenue	% of total revenue		0.4		%	0.4		%				—	bps	% of total revenue	0.4		%	0.4		%	0.4		%	0.4		%	—	bps	—	bps
% of revenue, excluding trucking fuel surcharge			0.4		%	0.5		%				(10	bps)
% of revenue, excluding truckload fuel surcharge														% of revenue, excluding truckload fuel surcharge	0.4		%	0.4		%	0.4		%	0.5		%	—	bps	(10	bps)

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

~~Consolidated~~The quarter over quarter increase of $1.5 million and year-to-date increase of $1.4 million are primarily composed of $1.0 million of communications expense ~~remained relatively flat as a percentage of revenue, excluding trucking fuel surcharge for the quarter ended March 31, 2021, as compared to the same period last year.~~from ACT's results.


									Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.			YTD 2021 vs.
															2021			2020			2021			2020			QTD 2020		YTD 2020
											(Dollars in thousands)													Increase (Decrease)
		Quarter Ended March 31,								Increase (Decrease)
			2021			2020
			(Dollars in thousands)
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment		$	119,915		$	110,221					8.8	%	Depreciation and amortization of property and equipment	$	138,570		$	115,664		$	382,091		$	340,486		19.8	%	12.2	%
% of total revenue	% of total revenue		9.8		%	9.8		%				—	bps	% of total revenue	8.4		%	9.6		%	9.1		%	10.0		%	(120	bps)	(90	bps)
% of revenue, excluding trucking fuel surcharge			10.6		%	10.7		%				(10	bps)
% of revenue, excluding truckload fuel surcharge														% of revenue, excluding truckload fuel surcharge	9.2		%	10.2		%	9.9		%	10.8		%	(100	bps)	(90	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 $9.7 million for the quarter ended March 31, 2021, when compared to the same period last year. The increase was primarily related to an increase in owned versus leased equipment.

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

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Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Amortization of intangibles $ 11,749 $ 11,474 2.4 %
% of total revenue 1.0 % 1.0 % — bps
% of revenue, excluding trucking fuel surcharge 1.0 % 1.1 % (10 bps)
•Comparison Between the Quarters Ended September 30, 2021 and 2020 — Consolidated depreciation and amortization of property and equipment increased by $22.9 million for the third quarter of 2021, as compared to the same period last year. This increase includes $12.0 million of expense from ACT's results. The remaining increase was primarily related to an increase in owned versus leased equipment.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — Consolidated depreciation and amortization of property and equipment increased by $41.6 million for the year-to-date period ended September 30, 2021, as compared to the same period last year. This increase included $12.0 million of expense from ACT's results. The remaining increase was primarily related to an increase in owned versus leased equipment.

We expect consolidated depreciation and amortization of property and equipment to increase in total, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Amortization of intangibles	$	15,719		$	11,473		$	39,452		$	34,421		37.0	%	14.6	%
% of total revenue	1.0		%	0.9		%	0.9		%	1.0		%	10	bps	(10	bps)
% of revenue, excluding truckload fuel surcharge	1.0		%	1.0		%	1.0		%	1.1		%	—	bps	(10	bps)

Amortization of intangibles relates to intangible assets identified with the 2017 Merger, ACT Acquisition 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)
The increases of $4.2 million and $5.0 million for the third quarter and year-to-date period ended September 30, 2021, as compared to the same periods last year, were attributed to the ACT, UTXL, and Eleos acquisitions during 2021.


	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Rental expense	$	12,002		$	19,700		$	42,265		$	67,447		(39.1	%)	(37.3	%)
% of total revenue	0.7		%	1.6		%	1.0		%	2.0		%	(90	bps)	(100	bps)
% of revenue, excluding truckload fuel surcharge	0.8		%	1.7		%	1.1		%	2.1		%	(90	bps)	(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 $8.5~~The quarter over quarter decrease of $7.7 million ~~for the quarter ended March 31, 2021, as compared to the same period last year. This~~and year-to-date decrease of $25.2 million was primarily due to ~~increasing~~an increase in 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~~truckload fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases in the remainder of 2021.

Quarter Ended March 31, Increase (Decrease)
2021 2020
(Dollars in thousands)
Purchased transportation $ 258,230 $ 225,276 14.6 %
% of total revenue 21.1 % 20.0 % 110 bps
% of revenue, excluding trucking fuel surcharge 22.8 % 21.9 % 90 bps

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	Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2021 vs.		YTD 2021 vs.
	2021			2020			2021			2020			QTD 2020		YTD 2020
	(Dollars in thousands)												Increase (Decrease)



Purchased transportation	$	352,061		$	245,102		$	914,448		$	670,485		43.6	%	36.4	%
% of total revenue	21.4		%	20.2		%	21.9		%	19.7		%	120	bps	220	bps
% of revenue, excluding truckload fuel surcharge	23.3		%	21.6		%	23.7		%	21.2		%	170	bps	250	bps

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

Consolidated purchased transportation expense increased by $107.0 million for the third quarter of 2021 and increased by $244.0 million for the year-to-date period ended September 30, 2021, as compared to the same periods last year. This increase includes $3.3 million of expense from ACT's results. The comparative period increases were primarily due to payments made to third-party carriers, partially offset by a decrease in miles driven by independent contractors of 17.7% for the third quarter of 2021 and 13.1% for the year-to-date period ended September 30, 2021.

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

~~Consolidated purchased transportation expense increased by $33.0 million~~


	Quarter-to-Date September 30,				Year-to-Date September 30,				QTD 2021 vs.		YTD 2021 vs.
	2021		2020		2021		2020		QTD 2020		YTD 2020
	(Dollars in thousands)								Increase (Decrease)



Impairments	$	—	$	—	$	—	$	1,255	—	%	(100.0	%)

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


	Quarter-to-Date September 30,				Year-to-Date September 30,				QTD 2021 vs.		YTD 2021 vs.
	2021		2020		2021		2020		QTD 2020		YTD 2020
	(Dollars in thousands)								Increase (Decrease)



Miscellaneous operating expenses	$	12,116	$	29,686	$	38,040	$	73,480	(59.2	%)	(48.2	%)

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 ~~quarter ended March 31,~~Quarters Ended September 30, 2021 ~~as compared to the same period last year. This increase was primarily due to~~and 2020 — The decrease in net consolidated miscellaneous operating expenses ~~related to third-party carriers and~~ was partially offset by $8.0 million in expenses from ACT's results and was favorably affected by a ~~12.9%~~$20.3 million increase in gain on sales of equipment, excluding ACT.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — The decrease in ~~miles driven~~net consolidated miscellaneous operating expenses was partially offset by ~~independent contractors for the quarter ended March 31, 2021.~~$8.0 million in expenses from ACT's results and was favorably affected by a $41.2 million increase in gain on sales of equipment, excluding ACT.

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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.~~

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

Consolidated Other Expenses, net


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

Interest expense	Interest expense		$	3,486	$	6,107				(42.9	%)	Interest expense	$	7,179	$	3,232	$	13,972	$	13,360	122.1	%	4.6	%
Other (income) expenses, net			(16,105)		6,507					(347.5	%)
Other (income), net												Other (income), net	(4,072)		(7,484)		(37,017)		(9,476)		(45.6	%)	290.6	%
Income tax expense	Income tax expense		45,329		24,554					84.6	%	Income tax expense	61,059		47,835		158,171		99,204		27.6	%	59.4	%

Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs. ~~The decrease in interest~~Interest expense ~~for~~increased during the third quarter ~~ended March 31,~~and year-to-date 2021 ~~was primarily~~ due to ~~lower overall interest rates, as well as lower~~higher overall debt ~~balances.~~balances from the 2021 Debt Agreement which was entered into on September 3, 2021 and replaced the July 2021 Term Loan and 2017 Debt Agreement. Additional details are discussed in Note 9 in Part I, Item 1 of this Quarterly Report.

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

•Comparison Between the Quarters Ended September 30, 2021 and 2020 — The ~~$22.6~~$3.4 million ~~favorable~~unfavorable change between the third quarter ~~ended March 31,~~of 2021 ~~compared to~~and the ~~same period last year~~third quarter of 2020 is primarily driven by lower gains recognized within our portfolio of ~~investments.~~investments, as well as a third quarter 2021 write-off of deferred debt issuance costs from replacing our previous term loan and credit facility with a new credit facility.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — The $27.5 million favorable change between the year-to-date of 2021 and the year-to-date of 2020 is primarily due to unrealized gains recognized from our investment in Embark and an increase in unrealized gains recognized for other investments within our portfolio.

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

~~The $20.8 million~~•Comparison Between the Quarters Ended September 30, 2021 and 2020 — The $13.2 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes which was partially offset by ~~a reduction~~favorable discrete items associated with the ACT Acquisition and other discrete items. During the third quarter of ~~the unfavorable~~2020, we recognized discrete items relating to negative impacts from ~~foreign currency fluctuations in the quarter ended March 31, 2021 compared to the same period last year.~~certain tax-related items within our Mexico operations. All of these factors ~~resulted~~result in an effective tax rate of ~~25.9%~~22.8% for the ~~first~~third quarter of 2021 and ~~27.2%~~28.1% for the ~~first~~third quarter of 2020.

•Comparison Between Year-to-Date September 30, 2021 and 2020 — The $59.0 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes resulting in an effective tax rate of 24.4% for year-to-date September 30, 2021 and 27.0% for year-to-date September 30, 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 Ended March 31,			Quarter-to-Date September 30,						Year-to-Date September 30,
			2021			2020			2021		2020		2021		2020
			(In thousands)						(In thousands)
GAAP: Net income attributable to Knight-Swift	GAAP: Net income attributable to Knight-Swift		$	129,790		$	65,426	GAAP: Net income attributable to Knight-Swift	$	206,178	$	122,058	$	488,772	$	267,673
Adjusted for:	Adjusted for:							Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift		45,329			24,554		Income tax expense attributable to Knight-Swift	61,059		47,835		158,171		99,204
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift		175,119			89,980		Income before income taxes attributable to Knight-Swift	267,237		169,893		646,943		366,877
Amortization of intangibles 1	Amortization of intangibles 1		11,749			11,474		Amortization of intangibles 1	15,719		11,473		39,452		34,421

Impairments 2	Impairments 2		—			902		Impairments 2	—		—		—		1,255
Legal accruals 3	Legal accruals 3		1,242			—		Legal accruals 3	(5,005)		6,160		(2,884)		6,160

COVID-19 incremental costs 4	COVID-19 incremental costs 4		—			2,293		COVID-19 incremental costs 4	—		—		—		12,259

Transaction fees 5								Transaction fees 5	2,307		—		2,966		—
Write-off of deferred debt issuance costs 6								Write-off of deferred debt issuance costs 6	1,024		—		1,024		—
Adjusted income before income taxes	Adjusted income before income taxes		188,110			104,649		Adjusted income before income taxes	281,282		187,526		687,501		420,972
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate		(48,677)			(28,444)		Provision for income tax expense at effective rate	(64,202)		(52,908)		(167,990)		(113,651)
Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift		$	139,433		$	76,205	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	$	217,080	$	134,618	$	519,511	$	307,321

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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 Ended March 31,			Quarter-to-Date September 30,						Year-to-Date September 30,
			2021			2020			2021		2020		2021		2020
GAAP: Earnings per diluted share	GAAP: Earnings per diluted share		$	0.77		$	0.38	GAAP: Earnings per diluted share	$	1.23	$	0.71	$	2.93	$	1.57
Adjusted for:	Adjusted for:							Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift		0.27			0.14		Income tax expense attributable to Knight-Swift	0.37		0.28		0.95		0.58
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift		1.04			0.53		Income before income taxes attributable to Knight-Swift	1.60		0.99		3.88		2.15
Amortization of intangibles 1	Amortization of intangibles 1		0.07			0.07		Amortization of intangibles 1	0.09		0.07		0.24		0.20

Impairments 2	Impairments 2		—			0.01		Impairments 2	—		—		—		0.01
Legal accruals 3	Legal accruals 3		0.01			—		Legal accruals 3	(0.03)		0.04		(0.02)		0.04

COVID-19 incremental costs 4	COVID-19 incremental costs 4		—			0.01		COVID-19 incremental costs 4	—		—		—		0.07

Transaction fees 5								Transaction fees 5	0.01		—		0.02		—
Write-off of deferred debt issuance costs 6								Write-off of deferred debt issuance costs 6	0.01		—		0.01		—
Adjusted income before income taxes	Adjusted income before income taxes		1.12			0.61		Adjusted income before income taxes	1.68		1.10		4.12		2.46
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate		(0.29)			(0.17)		Provision for income tax expense at effective rate	(0.38)		(0.31)		(1.01)		(0.66)
Non-GAAP: Adjusted EPS	Non-GAAP: Adjusted EPS		$	0.83		$	0.44	Non-GAAP: Adjusted EPS	$	1.30	$	0.79	$	3.11	$	1.80

1 "Amortization of intangibles" reflects the non-cash amortization expense relating to intangible assets identified in the 2017 Merger, the ACT Acquisition, and other acquisitions. Refer to Note 3 in Part I, Item 1 of this Quarterly Report for additional details regarding ~~the~~our acquisition.

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

3 "Legal accruals" are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income and reflect costs related to certain class action lawsuits arising from employee and contract related matters. During the third quarter of 2021, the Company reversed an accrued legal matter previously identified as probable in 2019. This was based on the recent decision of the appellate court, resulting in a change to a remote likelihood that a loss was incurred.

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 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.

5 "Transaction fees" represent certain acquisition related expenses associated with the UTXL and ACT acquisitions, consisting of legal and professional fees and are included in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.

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

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


		Quarter Ended March 31,				Quarter-to-Date September 30,								Year-to-Date September 30,
			2021				2020				2021			2020			2021			2020
GAAP Presentation	GAAP Presentation		(Dollars in thousands)							GAAP Presentation	(Dollars in thousands)
Total revenue	Total revenue		$	1,223,014			$	1,124,798		Total revenue	$	1,642,445		$	1,210,406		$	4,181,160		$	3,395,902
Total operating expenses	Total operating expenses		(1,060,755)				(1,022,679)			Total operating expenses	(1,372,358)			(1,044,945)			(3,557,699)			(3,026,155)
Operating income	Operating income		$	162,259			$	102,119		Operating income	$	270,087		$	165,461		$	623,461		$	369,747
Operating ratio	Operating ratio		86.7		%		90.9		%	Operating ratio	83.6		%	86.3		%	85.1		%	89.1		%

Non-GAAP Presentation	Non-GAAP Presentation									Non-GAAP Presentation
Total revenue	Total revenue		$	1,223,014			$	1,124,798		Total revenue	$	1,642,445		$	1,210,406		$	4,181,160		$	3,395,902
Trucking fuel surcharge			(89,909)				(97,703)
Revenue, excluding trucking fuel surcharge			1,133,105				1,027,095
Truckload fuel surcharge										Truckload fuel surcharge	(131,873)			(73,093)			(324,611)			(233,897)
Revenue, excluding truckload fuel surcharge										Revenue, excluding truckload fuel surcharge	1,510,572			1,137,313			3,856,549			3,162,005

Total operating expenses	Total operating expenses		1,060,755				1,022,679			Total operating expenses	1,372,358			1,044,945			3,557,699			3,026,155
Adjusted for:	Adjusted for:									Adjusted for:
Trucking fuel surcharge			(89,909)				(97,703)
Truckload fuel surcharge										Truckload fuel surcharge	(131,873)			(73,093)			(324,611)			(233,897)
Amortization of intangibles 1	Amortization of intangibles 1		(11,749)				(11,474)			Amortization of intangibles 1	(15,719)			(11,473)			(39,452)			(34,421)

Impairments 2	Impairments 2		—				(902)			Impairments 2	—			—			—			(1,255)
Legal accruals 3	Legal accruals 3		(1,242)				—			Legal accruals 3	5,005			(6,160)			2,884			(6,160)

COVID-19 incremental costs 4	COVID-19 incremental costs 4		—				(2,293)			COVID-19 incremental costs 4	—			—			—			(12,259)
Transaction fees 5										Transaction fees 5	(2,307)			—			(2,966)			—
Adjusted Operating Expenses	Adjusted Operating Expenses		957,855				910,307			Adjusted Operating Expenses	1,227,464			954,219			3,193,554			2,738,163
Adjusted Operating Income	Adjusted Operating Income		$	175,250			$	116,788		Adjusted Operating Income	$	283,108		$	183,094		$	662,995		$	423,842
Adjusted Operating Ratio	Adjusted Operating Ratio		84.5		%		88.6		%	Adjusted Operating Ratio	81.3		%	83.9		%	82.8		%	86.6		%

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.

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

5See Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift footnote 5.

4459

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

~~Trucking~~Truckload Segment


		Quarter Ended March 31,				Quarter-to-Date September 30,								Year-to-Date September 30,
			2021				2020				2021			2020			2021			2020
GAAP Presentation	GAAP Presentation		(Dollars in thousands)							GAAP Presentation	(Dollars in thousands)
Total revenue	Total revenue		$	962,947			$	919,061		Total revenue	$	1,041,332		$	975,881		$	2,990,137		$	2,774,311
Total operating expenses	Total operating expenses		(804,464)				(811,727)			Total operating expenses	(834,789)			(807,100)			(2,456,654)			(2,390,408)
Operating income	Operating income		$	158,483			$	107,334		Operating income	$	206,543		$	168,781		$	533,483		$	383,903
Operating ratio	Operating ratio		83.5		%		88.3		%	Operating ratio	80.2		%	82.7		%	82.2		%	86.2		%

Non-GAAP Presentation	Non-GAAP Presentation									Non-GAAP Presentation
Total revenue	Total revenue		$	962,947			$	919,061		Total revenue	$	1,041,332		$	975,881		$	2,990,137		$	2,774,311
Fuel surcharge	Fuel surcharge		(89,909)				(97,703)			Fuel surcharge	(107,867)			(73,093)			(300,605)			(233,897)
Intersegment transactions	Intersegment transactions		(224)				(274)			Intersegment transactions	(260)			(196)			(953)			(705)
Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions		872,814				821,084			Revenue, excluding fuel surcharge and intersegment transactions	933,205			902,592			2,688,579			2,539,709

Total operating expenses	Total operating expenses		804,464				811,727			Total operating expenses	834,789			807,100			2,456,654			2,390,408
Adjusted for:	Adjusted for:									Adjusted for:
Fuel surcharge	Fuel surcharge		(89,909)				(97,703)			Fuel surcharge	(107,867)			(73,093)			(300,605)			(233,897)
Intersegment transactions	Intersegment transactions		(224)				(274)			Intersegment transactions	(260)			(196)			(953)			(705)
Amortization of intangibles 1	Amortization of intangibles 1		(324)				(324)			Amortization of intangibles 1	(323)			(324)			(971)			(972)
Impairments 2	Impairments 2		—				(902)			Impairments 2	—			—			—			(1,055)

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

Adjusted Operating Expenses	Adjusted Operating Expenses		714,007				710,279			Adjusted Operating Expenses	726,339			733,487			2,154,125			2,141,633
Adjusted Operating Income	Adjusted Operating Income		$	158,807			$	110,805		Adjusted Operating Income	$	206,866		$	169,105		$	534,454		$	398,076
Adjusted Operating Ratio	Adjusted Operating Ratio		81.8		%		86.5		%	Adjusted Operating Ratio	77.8		%	81.3		%	80.1		%	84.3		%

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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Logistics Segment


		Quarter Ended March 31,				Quarter-to-Date September 30,								Year-to-Date September 30,
			2021				2020				2021			2020			2021			2020
GAAP Presentation	GAAP Presentation		(Dollars in thousands)							GAAP Presentation	(Dollars in thousands)
Total revenue	Total revenue		$	118,887			$	79,198		Total revenue	$	226,338		$	99,018		$	511,962		$	248,320
Total operating expenses	Total operating expenses		(111,310)				(75,479)			Total operating expenses	(199,210)			(96,540)			(462,901)			(239,085)
Operating income	Operating income		$	7,577			$	3,719		Operating income	$	27,128		$	2,478		$	49,061		$	9,235
Operating ratio	Operating ratio		93.6		%		95.3		%	Operating ratio	88.0		%	97.5		%	90.4		%	96.3		%

Non-GAAP Presentation	Non-GAAP Presentation									Non-GAAP Presentation
Total revenue	Total revenue		$	118,887			$	79,198		Total revenue	$	226,338		$	99,018		$	511,962		$	248,320

Intersegment transactions	Intersegment transactions		(3,165)				(2,441)			Intersegment transactions	(4,964)			(2,781)			(12,699)			(8,260)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions		115,722				76,757			Revenue, excluding intersegment transactions	221,374			96,237			499,263			240,060

Total operating expenses	Total operating expenses		111,310				75,479			Total operating expenses	199,210			96,540			462,901			239,085
Adjusted for:	Adjusted for:									Adjusted for:

Intersegment transactions	Intersegment transactions		(3,165)				(2,441)			Intersegment transactions	(4,964)			(2,781)			(12,699)			(8,260)

Amortization of intangibles 1										Amortization of intangibles 1	(334)			—			(431)			—

Adjusted Operating Expenses	Adjusted Operating Expenses		108,145				73,038			Adjusted Operating Expenses	193,912			93,759			449,771			230,825
Adjusted Operating Income	Adjusted Operating Income		$	7,577			$	3,719		Adjusted Operating Income	$	27,462		$	2,478		$	49,492		$	9,235
Adjusted Operating Ratio	Adjusted Operating Ratio		93.5		%		95.2		%	Adjusted Operating Ratio	87.6		%	97.4		%	90.1		%	96.2		%

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

Intermodal Segment


		Quarter Ended March 31,				Quarter-to-Date September 30,								Year-to-Date September 30,
			2021				2020				2021			2020			2021			2020
GAAP Presentation	GAAP Presentation		(Dollars in thousands)							GAAP Presentation	(Dollars in thousands)
Total revenue	Total revenue		$	107,066			$	94,731		Total revenue	$	112,801		$	98,859		$	335,245		$	276,410
Total operating expenses	Total operating expenses		(103,609)				(97,468)			Total operating expenses	(103,257)			(98,609)			(316,432)			(283,372)
Operating income (loss)	Operating income (loss)		$	3,457			$	(2,737)		Operating income (loss)	$	9,544		$	250		$	18,813		$	(6,962)
Operating ratio	Operating ratio		96.8		%		102.9		%	Operating ratio	91.5		%	99.7		%	94.4		%	102.5		%

Non-GAAP Presentation	Non-GAAP Presentation									Non-GAAP Presentation
Total revenue	Total revenue		$	107,066			$	94,731		Total revenue	$	112,801		$	98,859		$	335,245		$	276,410

Intersegment transactions	Intersegment transactions		(95)				(109)			Intersegment transactions	(47)			(51)			(226)			(281)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions		106,971				94,622			Revenue, excluding intersegment transactions	112,754			98,808			335,019			276,129

Total operating expenses	Total operating expenses		103,609				97,468			Total operating expenses	103,257			98,609			316,432			283,372
Adjusted for:	Adjusted for:									Adjusted for:

Intersegment transactions	Intersegment transactions		(95)				(109)			Intersegment transactions	(47)			(51)			(226)			(281)

COVID-19 incremental costs 1	COVID-19 incremental costs 1		—				(48)			COVID-19 incremental costs 1	—			—			—			(113)
Adjusted Operating Expenses	Adjusted Operating Expenses		103,514				97,311			Adjusted Operating Expenses	103,210			98,558			316,206			282,978
Adjusted Operating Income (Loss)	Adjusted Operating Income (Loss)		$	3,457			$	(2,689)		Adjusted Operating Income (Loss)	$	9,544		$	250		$	18,813		$	(6,849)
Adjusted Operating Ratio	Adjusted Operating Ratio		96.8		%		102.8		%	Adjusted Operating Ratio	91.5		%	99.7		%	94.4		%	102.5		%

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

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LTL Segment


	Quarter and Year-to-Date September 30, 2021
GAAP Presentation	(Dollars in thousands)
Total revenue	$	191,906
Total operating expenses	(174,437)
Operating income	$	17,469
Operating ratio	90.9		%

Non-GAAP Presentation
Total revenue	$	191,906
Fuel surcharge	(24,006)

Revenue, excluding fuel surcharge and intersegment transactions	167,900

Total operating expenses	174,437
Adjusted for:
Fuel surcharge	(24,006)

Amortization of intangibles 1	(3,498)





Adjusted Operating Expenses	146,933
Adjusted Operating Income	$	20,967
Adjusted Operating Ratio	87.5		%

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


Liquidity and Capital Resources

Sources of Liquidity

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


Source	~~March 31,~~September 30, 2021
	(In thousands)
Cash and cash equivalents, excluding restricted cash	$	~~194,650~~269,694
Availability under 2021 Revolver, due ~~October 2022~~September 2026 1	~~655,656~~736,192
Availability under ~~2018~~2021 RSA, due ~~July 2021~~April 2024 2	~~2,919~~55,700
Total unrestricted liquidity	$	~~853,225~~1,061,586
Cash and cash equivalents – restricted 3	~~49,233~~69,659
Restricted investments, held-to-maturity, amortized cost 3	~~8,954~~7,140
Total liquidity, including restricted cash and restricted investments	$	~~911,412~~1,138,385

1 As of ~~March 31,~~September 30, 2021, we had ~~$115.0~~$300.0 million in borrowings under our $~~800.0 million~~1.1 billion 2021 Revolver. We additionally had ~~$29.3~~$63.8 million in outstanding letters of credit (discussed below), leaving ~~$655.7~~$736.2 million available under the Revolver.

2 Based on eligible receivables at ~~March 31,~~September 30, 2021, our borrowing base for the ~~2018~~2021 RSA was ~~$267.2~~$400.0 million, while outstanding borrowings were ~~$199.0~~$279.0 million. We additionally had $65.3 million in outstanding letters of credit (discussed below), leaving ~~$2.9~~$55.7 million available under the ~~2018~~2021 RSA. Refer to Note 8 in Part I, Item 1 of this Quarterly Report for more information regarding the ~~2018~~2021 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 ~~$47.9~~$68.0 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~~$1.6 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.

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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 various service offerings. We expect ~~that~~ net cash capital expenditures, ~~from the aforementioned projects~~including net cash capital expenditures of ACT, will be in the range of $450.0 – ~~$500.0~~$470.0 million for ~~the~~ full-year 2021. ~~We believe~~This is an update from our previously-disclosed range of $500.0 – $550.0 million for full-year 2021, as we ~~have ample flexibility with our trade cycle and purchase agreements to alter our current plans if economic or other conditions warrant.~~received less revenue equipment than ordered during the year.

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 2021 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.

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~~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 our accounts receivable securitization, and availability under the 2021 Revolver will be sufficient to fund our expected capital expenditures for at least the next twelve months.

Principal and Interest Payments — As of ~~March 31,~~September 30, 2021, we had debt, accounts receivable securitization, and finance lease obligations of ~~$825.5 million,~~$2.1 billion, which are discussed under "Material Debt Agreements," below. Certain cash flows from operations are committed to minimum payments of principal and interest on our debt and lease obligations. Additionally, when our financial position allows, we periodically make voluntary prepayments on our outstanding debt balances. Subsequent to September 30, 2021, we paid $95.0 million on the 2021 Revolver.

Letters of Credit — Pursuant to the terms of the ~~2017~~2021 Debt Agreement and the ~~2018~~2021 RSA, our lenders may issue standby letters of credit on our behalf. When we have letters of credit outstanding, the availability under the 2021 Revolver or ~~2018~~2021 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 ~~March 31,~~September 30, 2021, the Company had $196.3 million remaining under the 2020 Knight-Swift Share Repurchase Plan. Additional details are discussed in Note 1113 in Part I, Item 1 of this Quarterly Report.

Working Capital

We had a working capital surplus of ~~$15.3~~$551.9 million as of ~~March 31,~~September 30, 2021 and $83.7 million as of December 31, 2020. ~~Our working capital surplus~~The favorable change was attributable to the refinance of our accounts receivable securitization in April 2021, as well as acquired receivables, cash and prepaids from the ACT Acquisition.

Table of ~~March 31, 2021 was negatively impacted by our 2018 RSA, which is included within current liabilities since it was scheduled to mature in July 2021.~~Contents ~~On April 23, 2021, we entered into the 2021 RSA, which amended the 2018 RSA extending the maturity to April 23, 2024. Additional details are discussed in Note 8 in Part I, Item 1~~Glossary of ~~this Quarterly Report.~~Terms

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Material Debt Agreements

As of ~~March 31,~~September 30, 2021, we had ~~$825.5 million~~$2.1 billion in material debt obligations at the following carrying values:

•$~~299.1~~199.6 million: 2021 Term Loan A-1, due ~~October~~December 2022, net of ~~$0.9~~$0.4 million in deferred loan costs

•$~~199.0~~199.6 million: ~~2018 RSA outstanding borrowings,~~ 2021 Term Loan A-2, due ~~July 2021~~September 2024, net of $0.4 million in deferred loan costs

•$~~212.4~~798.3 million: 2021 Term Loan A-3, due September 2026, net of $1.7 million in deferred loan costs

•$278.4 million: 2021 RSA outstanding borrowings, net of $0.6 million in deferred loan costs

•$274.1 million: Finance lease obligations

•$~~115.0~~300.0 million: 2021 Revolver, due ~~October 2022~~September 2026

•$53.3 million: Other, net of $0.1 million in deferred loan costs

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

•$298.9 million: 2017 Term Loan, due October 2022, net of $1.1 million in deferred loan costs

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

•$190.8 million: Finance lease obligations

•$210.0 million: 2017 Revolver, due October 2022.


Cash Flow Analysis


	Year-to-Date September 30,				Change
	2021		2020
	(In thousands)
Net cash provided by operating activities	$	817,524	$	655,019	$	162,505
Net cash used in investing activities	(1,548,757)		(335,602)		(1,213,155)
Net cash provided by (used in) financing activities	873,309		(243,138)		1,116,447

Net Cash Provided by Operating Activities

Comparison Between Year-to-Date September 30, 2021 and 2020 — The $162.5 million increase in net cash provided by operating activities was primarily due to a $253.7 million increase in operating income, due to the factors discussed in "Results of Operations — Consolidated Operating and Other Expenses" above. Additionally, in the first quarter of 2020, we paid a $93.4 million cash settlement associated with pre-2017 Merger legal matters that were previously accrued and disclosed. These items were partially offset by a $125.0 million increase in income tax payments. The remaining difference is attributed to various changes in working capital.

Net Cash Used in Investing Activities

Comparison Between Year-to-Date September 30, 2021 and 2020 — The $1.2 billion increase in net cash used in investing activities was primarily due to the $1.3 billion increase in net cash invested in acquisitions.

Net Cash Used in Financing Activities

Comparison Between Year-to-Date September 30, 2021 and 2020 — Net cash provided by financing activities increased by $1.1 billion, primarily due to $1.2 billion in proceeds from the 2021 Debt Agreement.

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~~Cash Flow Analysis~~

Quarter Ended March 31, Change
2021 2020
(In thousands)
Net cash provided by operating activities $ 306,113 $ 155,343 $ 150,770
Net cash used in investing activities (74,141) (125,582) 51,441
Net cash used in financing activities (185,366) (71,885) (113,481)

~~Net Cash Provided by Operating Activities~~

~~Comparison Between Quarter Ended March 31, 2021 and 2020 —~~ The $150.8 million increase in net cash provided by operating activities was primarily due to less cash paid for legal settlements in the first quarter of 2021, as compared to the first quarter of 2020, when we paid $93.4 million associated with pre-2017 Merger legal matters that were previously accrued and disclosed by Swift. Net cash provided by operating activities was also favorably impacted by a $60.1 million increase in our operating income.

~~Net Cash Used in Investing Activities~~

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

~~Net Cash Used in Financing Activities~~

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


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.

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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~~2021 Debt Agreement and ~~2018~~2021 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%~~1.2% as of ~~March 31,~~September 30, 2021) and fixed rate equipment lease financing. Assuming the level of borrowings as of ~~March 31,~~September 30, 2021, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by ~~$6.1~~$18.3 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~~increase to ~~$2.91~~$3.36 for the third quarter ~~ended March 31,~~of 2021 from an average of ~~$2.92~~$2.43 in the third quarter ~~ended March 31,~~of 2020. The weekly average diesel price per gallon in the US increased to $3.16 for year-to-date September 30, 2021 from an average of $2.59 for year-to-date September 30, 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.

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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~~Except as set forth below, 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 ~~March 31,~~September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended September 30, 2021, we completed the ACT Acquisition. We are in the process of evaluating the existing controls and procedures of ACT and integrating ACT into our internal controls over financial reporting. As permitted by SEC staff interpretative guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at September 30, 2021 does not include ACT.

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 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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PART II OTHER INFORMATION


ITEM 1.			LEGAL PROCEEDINGS

Information about our legal proceedings is included in Note 1012 of the notes to our condensed consolidated financial statements, included in Part I, Item 1, of this Quarterly Report for the period ended ~~March 31,~~September 30, 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 2020 Annual Report and our Quarterly Report for the quarterly period ended June 30, 2021, in the ~~section~~sections entitled "Item 1A. Risk Factors," ~~describes~~describe some of the risks and uncertainties associated with our business. In addition to the risk factors set forth in these documents, we believe the following additional risks and uncertainties should be considered in evaluating our business and growth outlook:

The proposed new rule concerning mandatory COVID-19 vaccination of employees could have a material adverse effect on our business, financial condition, and results of operations.

In September 2021, President Biden announced a proposed new rule requiring all employers with at least 100 employees to ensure that their employees are fully vaccinated or require any employees who remain unvaccinated to produce a negative COVID-19 test result on at least a weekly basis before coming to work. The Department of Labor’s Occupational Safety and Health Administration ("OSHA") is drafting an emergency rule to carry out this mandate (the "Emergency Rule"), which is expected to take effect in the coming weeks. It is currently unclear whether the Emergency Rule will include an exception for professional truck drivers. When the Emergency Rule is implemented, it could, among other things, (i) cause our unvaccinated employees to go to smaller employers, not subject to the Emergency Rule, or leave us or the trucking industry, especially our unvaccinated drivers, (ii) result in logistical issues, increased expenses, and operational issues from arranging for weekly tests of our unvaccinated employees, especially our unvaccinated drivers, (iii) result in increased costs for recruiting and retention of drivers, as well as the cost of weekly testing, and (iv) result in decreased revenue if we are unable to recruit and retain new drivers due to the Emergency Rule. It is expected that a vaccination mandate that applies to drivers would significantly reduce the pool of available drivers to us and our industry, which would further impact the extreme shortage of available drivers. Furthermore, the actions by certain states may conflict with the Emergency Rule, causing further issues with compliance. Accordingly, the Emergency Rule, when implemented, could have a material adverse effect on our business, financial condition, and results of operations.

Difficulty in obtaining materials, equipment, goods and services from our vendors and suppliers could adversely affect our business.

We are dependent upon our suppliers for certain products and materials, including our tractors, trailers and chassis. If we fail to maintain favorable relationships with our vendors and suppliers, or if our vendors and suppliers are unable to provide the products and materials we need or undergo financial hardship, we could experience difficulty in obtaining needed goods and services because of production interruptions, limited material availability or other reasons, or we may not be able to obtain favorable pricing or other terms. Currently, tractor and trailer manufacturers are experiencing significant shortages of semiconductor chips and other component parts and supplies, forcing many manufacturers to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.

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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
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


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








July 1, 2021 to July 31, 2021	—	$	—	—	$	196,338,538
August 1, 2021 to August 31, 2021	—	$	—	—	$	196,338,538
September 1, 2021 to September 30, 2021	—	$	—	—	$	196,338,538
Total	—	$	—	—	$	196,338,538

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

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ITEM 6.			EXHIBITS

Exhibit
Number

Description

Page or Method of Filing

2.1*

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.

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

2.2*

Stock Purchase Agreement, dated as of July 5, 2021, by and among AAA Cooper Transportation, the Stockholders of AAA Cooper Transportation, Knight-Swift Transportation Holdings Inc., and Reid B. Dove, in his capacity as Sellers’ Representative

Filed herewith

3.1

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

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

3.2

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

Incorporated by reference to Exhibit 3.2 of Form 10-Q for the quarter ended September 30, 2020

10.1*

Credit Agreement, dated as of July 6, 2021, by and among Knight-Swift Transportation Holdings Inc. and Bank of America, N.A.

Filed herewith

10.2*

Credit Agreement, dated as of September 3, 2021, by and among Knight-Swift Transportation Holdings Inc., the lenders thereto, Bank of America, N.A., as Administrative Agent, Swingline Lender and Issuing Lender, and Wells Fargo Bank, National Association and PNC Bank National Association, as Co-Syndication Agents

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 and similar attachments have been omitted pursuant to Item ~~601(b)(2)~~601(a)(5) 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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

Date:

~~May 5,~~November 3, 2021

/s/ David A. Jackson

David A. Jackson

Chief Executive Officer and President, in his capacity as

such and on behalf of the registrant

Date:

~~May 5,~~November 3, 2021

/s/ Adam W. Miller

Adam W. Miller

Chief Financial Officer, in his capacity as such and on

behalf of the registrant

5370


	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