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 ~~September 30, 2022~~March 31, 2023

☐ 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.)

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 approximately ~~160,696,000~~161,030,000 shares of the registrant's common stock outstanding as of ~~October~~April 26, ~~2022~~.2023.

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			4

Condensed Consolidated Balance Sheets (Unaudited) — ~~September~~March 31, 2023 ~~30, 2022~~ and December 31, ~~2021~~20 2 2			4

Condensed Consolidated Statements of Comprehensive Income (Unaudited) — Quarter s ended March 31 , 202 3 and ~~Year-to-Date~~202 ~~September~~ ~~30, 2022 and 2021~~2			5

Condensed Consolidated Statements of Cash Flows (Unaudited) — ~~Quarter~~Quarters ended March 31, 2023 and ~~Year-to-Date~~ ~~September~~ ~~30,~~ 2022 ~~and 2021~~			6

Condensed Consolidated Statements of Stockholders' Equity (Unaudited) —~~Quarter and~~ ~~Year-to-DateSeptember~~ ~~30, 2022~~Quarters ended March 31, 2023 and ~~2021~~2022			8

Note 1 — Introduction and Basis of Presentation			109



Note 2 — Recently Issued Accounting Pronouncements			1110

Note 3 — Acquisitions			1110







Note 4 — Income Taxes			1310



Note 5 — Accounts Receivable Securitization			1411

Note 6 — Debt and Financing			1512

Note 7 — Defined Benefit Pension Plan			1714

Note 8 — Purchase Commitments			1714

Note 9 — Contingencies and Legal Proceedings			1714

Note 10 — Share Repurchase Plans			1915

Note 11 — Weighted Average Shares Outstanding			1916

Note 12 — Fair Value Measurement			2016

Note 13 — Related Party Transactions			2319

Note 14 — Financial Information by Segment and Geography			2419

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2521

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5850

Item 4. Controls and Procedures			5950
PART II OTHER INFORMATION
Item 1. Legal Proceedings			6051

Item 1A. Risk Factors			6051

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6052

Item 3. Defaults Upon Senior Securities			6052

Item 4. Mine Safety Disclosures			6053

Item 5. Other Information			6053

Item 6. Exhibits			6154

Signatures			6255

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 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 Transportation, Inc. and its subsidiaries and Swift Transportation Company and its subsidiaries, pursuant to which we became Knight-Swift Transportation Holdings Inc.
2017 Debt Agreement			The Company's unsecured credit agreement, entered into on September 29, 2017, as amended on October 2, 2020



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~~which matured 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.
2022 RSA			Sixth Amendment to the Amended and Restated Receivables Sales Agreement, entered into on October 3, 2022 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

DOE			United States Department of Energy
EPS			Earnings Per Share
Embark			Embark Technology 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

~~LIBOR~~			~~London InterBank Offered Rate~~


NYSE			New York Stock Exchange
LTL			Less-than-truckload
MME			RAC MME Holdings, LLC. and its subsidiaries, MME, Inc., and Midwest Motor ~~Express, Inc., and Midnite~~ Express, Inc.
Quarterly Report			Quarterly Report on Form 10-Q

RSU			Restricted Stock Unit
SEC			United States Securities and Exchange Commission
SOFR			Secured overnight financing rate as administered by the Federal Reserve Bank of New York



US			The United States of America
U.S. Xpress			U.S. Xpress Enterprises, Inc.
UTXL			UTXL Enterprises, Inc.

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

PART I FINANCIAL INFORMATION


ITEM 1.			FINANCIAL STATEMENTS


Condensed Consolidated Balance Sheets (Unaudited)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(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	$	194,082	$	261,001	Cash and cash equivalents	$	191,245	$	196,770
Cash and cash equivalents – restricted	Cash and cash equivalents – restricted	144,960		87,241		Cash and cash equivalents – restricted	204,348		185,792
Restricted investments, held-to-maturity, amortized cost	Restricted investments, held-to-maturity, amortized cost	7,827		5,866		Restricted investments, held-to-maturity, amortized cost	4,076		7,175
Trade receivables, net of allowance for doubtful accounts of $22,210 and $21,663, respectively		944,060		911,336
Trade receivables, net of allowance for doubtful accounts of $27,836 and $22,980, respectively						Trade receivables, net of allowance for doubtful accounts of $27,836 and $22,980, respectively	800,415		842,294
Contract balance – revenue in transit	Contract balance – revenue in transit	19,605		22,936		Contract balance – revenue in transit	15,097		15,859
Prepaid expenses	Prepaid expenses	93,292		90,507		Prepaid expenses	105,429		108,081
Assets held for sale	Assets held for sale	16,318		8,166		Assets held for sale	48,259		40,602
Income tax receivable	Income tax receivable	15,100		909		Income tax receivable	30,221		58,974
Other current assets	Other current assets	39,103		26,318		Other current assets	43,546		38,025
Total current assets	Total current assets	1,474,347		1,414,280		Total current assets	1,442,636		1,493,572
Gross property and equipment	Gross property and equipment	5,543,221		5,118,897		Gross property and equipment	5,840,683		5,740,383
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(1,867,896)		(1,563,533)		Less: accumulated depreciation and amortization	(1,960,593)		(1,905,340)
Property and equipment, net	Property and equipment, net	3,675,325		3,555,364		Property and equipment, net	3,880,090		3,835,043
Operating lease right-of-use-assets	Operating lease right-of-use-assets	160,920		147,540		Operating lease right-of-use-assets	197,950		192,358
Goodwill	Goodwill	3,518,589		3,515,135		Goodwill	3,519,339		3,519,339
Intangible assets, net	Intangible assets, net	1,782,452		1,831,049		Intangible assets, net	1,760,561		1,776,569
Other long-term assets	Other long-term assets	135,734		192,132		Other long-term assets	142,428		134,785
Total assets	Total assets	$	10,747,367	$	10,655,500	Total assets	$	10,943,004	$	10,951,666
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	229,555	$	224,844	Accounts payable	$	214,574	$	220,849
Accrued payroll and purchased transportation	Accrued payroll and purchased transportation	200,871		217,084		Accrued payroll and purchased transportation	154,471		171,381
Accrued liabilities	Accrued liabilities	98,513		128,536		Accrued liabilities	81,952		81,528
Claims accruals – current portion	Claims accruals – current portion	271,111		206,607		Claims accruals – current portion	342,530		311,822

Finance lease liabilities and long-term debt – current portion	Finance lease liabilities and long-term debt – current portion	76,684		262,423		Finance lease liabilities and long-term debt – current portion	72,875		71,466
Operating lease liabilities – current portion	Operating lease liabilities – current portion	35,618		35,322		Operating lease liabilities – current portion	39,409		36,961

Total current liabilities	Total current liabilities	912,352		1,074,816		Total current liabilities	905,811		894,007
Revolving line of credit	Revolving line of credit	146,000		260,000		Revolving line of credit	—		43,000
Long-term debt – less current portion	Long-term debt – less current portion	1,028,014		1,037,552		Long-term debt – less current portion	1,016,261		1,024,668
Finance lease liabilities – less current portion	Finance lease liabilities – less current portion	348,594		256,166		Finance lease liabilities – less current portion	335,582		344,377
Operating lease liabilities – less current portion	Operating lease liabilities – less current portion	121,028		107,614		Operating lease liabilities – less current portion	153,336		149,992
Accounts receivable securitization	Accounts receivable securitization	278,649		278,483		Accounts receivable securitization	383,601		418,561
Claims accruals – less current portion	Claims accruals – less current portion	208,055		210,714		Claims accruals – less current portion	196,045		201,838
Deferred tax liabilities	Deferred tax liabilities	878,167		874,877		Deferred tax liabilities	906,577		907,893
Other long-term liabilities	Other long-term liabilities	9,895		11,828		Other long-term liabilities	10,197		12,049
Total liabilities	Total liabilities	3,930,754		4,112,050		Total liabilities	3,907,410		3,996,385
Commitments and contingencies (Notes 3, 7, 8, and 9)	Commitments and contingencies (Notes 3, 7, 8, and 9)					Commitments and contingencies (Notes 3, 7, 8, and 9)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
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	—		—		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; 160,670 and 165,980 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		1,607		1,660

Common stock, par value $0.01 per share; 500,000 shares authorized; 161,009 and 160,706 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.						Common stock, par value $0.01 per share; 500,000 shares authorized; 161,009 and 160,706 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.	1,610		1,607
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(2,554)		(563)		Accumulated other comprehensive loss	(1,346)		(2,436)
Additional paid-in capital	Additional paid-in capital	4,382,895		4,350,913		Additional paid-in capital	4,401,276		4,392,266
Retained earnings	Retained earnings	2,424,469		2,181,142		Retained earnings	2,623,373		2,553,567
Total Knight-Swift stockholders' equity	Total Knight-Swift stockholders' equity	6,806,417		6,533,152		Total Knight-Swift stockholders' equity	7,024,913		6,945,004
Noncontrolling interest	Noncontrolling interest	10,196		10,298		Noncontrolling interest	10,681		10,277
Total stockholders’ equity	Total stockholders’ equity	6,816,613		6,543,450		Total stockholders’ equity	7,035,594		6,955,281
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,747,367	$	10,655,500	Total liabilities and stockholders’ equity	$	10,943,004	$	10,951,666

See accompanying notes to 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,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
		(In thousands, except per share data)										(In thousands, except per share data)
Revenue:	Revenue:									Revenue:
Revenue, excluding truckload and LTL fuel surcharge	Revenue, excluding truckload and LTL fuel surcharge	$	1,649,982	$	1,510,572	$	4,992,391	$	3,856,549	Revenue, excluding truckload and LTL fuel surcharge		$	1,450,293	$	1,647,878
Truckload and LTL fuel surcharge	Truckload and LTL fuel surcharge	246,857		131,873		692,568		324,611		Truckload and LTL fuel surcharge		186,639		179,111
Total revenue	Total revenue	1,896,839		1,642,445		5,684,959		4,181,160		Total revenue		1,636,932		1,826,989
Operating expenses:	Operating expenses:									Operating expenses:
Salaries, wages, and benefits	Salaries, wages, and benefits	559,849		500,673		1,645,861		1,248,656		Salaries, wages, and benefits		536,742		536,056
Fuel	Fuel	231,128		146,422		678,763		390,713		Fuel		187,759		190,489
Operations and maintenance	Operations and maintenance	115,918		86,951		318,525		226,334		Operations and maintenance		99,311		95,883
Insurance and claims	Insurance and claims	116,493		73,757		316,769		188,176		Insurance and claims		138,039		98,192
Operating taxes and licenses	Operating taxes and licenses	26,628		27,475		85,869		71,240		Operating taxes and licenses		25,890		29,037
Communications	Communications	5,095		6,612		16,709		16,284		Communications		5,749		5,870
Depreciation and amortization of property and equipment	Depreciation and amortization of property and equipment	150,363		138,570		442,889		382,091		Depreciation and amortization of property and equipment		155,966		145,044
Amortization of intangibles	Amortization of intangibles	16,254		15,719		48,635		39,452		Amortization of intangibles		16,183		16,166
Rental expense	Rental expense	15,216		12,002		42,109		42,265		Rental expense		15,068		13,401
Purchased transportation	Purchased transportation	364,394		352,061		1,135,750		914,448		Purchased transportation		280,729		386,446
Impairments	Impairments	—		—		810		—		Impairments		—		810
Miscellaneous operating expenses	Miscellaneous operating expenses	30,060		12,116		62,965		38,040		Miscellaneous operating expenses		30,709		11,509

Total operating expenses	Total operating expenses	1,631,398		1,372,358		4,795,654		3,557,699		Total operating expenses		1,492,145		1,528,903
Operating income	Operating income	265,441		270,087		889,305		623,461		Operating income		144,787		298,086
Other (expenses) income:	Other (expenses) income:									Other (expenses) income:
Interest income	Interest income	1,221		245		2,357		809		Interest income		5,049		461
Interest expense	Interest expense	(14,679)		(7,179)		(30,704)		(13,972)		Interest expense		(23,091)		(6,680)
Other income (expenses), net	Other income (expenses), net	8,488		4,072		(31,493)		37,017		Other income (expenses), net		9,703		(14,405)
Total other (expenses) income, net	Total other (expenses) income, net	(4,970)		(2,862)		(59,840)		23,854		Total other (expenses) income, net		(8,339)		(20,624)
Income before income taxes	Income before income taxes	260,471		267,225		829,465		647,315		Income before income taxes		136,448		277,462
Income tax expense	Income tax expense	65,679		61,059		206,943		158,171		Income tax expense		32,735		69,174
Net income	Net income	194,792		206,166		622,522		489,144		Net income		103,713		208,288
Net loss (income) attributable to noncontrolling interest		3		12		102		(372)
Net loss attributable to noncontrolling interest										Net loss attributable to noncontrolling interest		571		49
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift	194,795		206,178		622,624		488,772		Net income attributable to Knight-Swift		104,284		208,337
Other comprehensive income (loss)	Other comprehensive income (loss)	243		(878)		(1,991)		(878)		Other comprehensive income (loss)		1,090		(372)
Comprehensive income	Comprehensive income	$	195,038	$	205,300	$	620,633	$	487,894	Comprehensive income		$	105,374	$	207,965

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	1.21	$	1.24	$	3.82	$	2.95	Basic		$	0.65	$	1.26
Diluted	Diluted	$	1.21	$	1.23	$	3.80	$	2.93	Diluted		$	0.64	$	1.25

Dividends declared per share:	Dividends declared per share:	$	0.12	$	0.10	$	0.36	$	0.28	Dividends declared per share:		$	0.14	$	0.12

Weighted average shares outstanding:	Weighted average shares outstanding:									Weighted average shares outstanding:
Basic	Basic	160,665		165,966		162,785		165,823		Basic		160,915		165,377
Diluted	Diluted	161,572		167,106		163,720		166,936		Diluted		161,900		166,499

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 Cash Flows (Unaudited)


		Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021			2023		2022
		(In thousands)					(In thousands)
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	622,522	$	489,144	Net income	$	103,713	$	208,288
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	491,524		421,543		Depreciation and amortization of property, equipment, and intangibles	172,149		161,210
Gain on sale of property and equipment	Gain on sale of property and equipment	(73,373)		(47,700)		Gain on sale of property and equipment	(20,879)		(34,801)

Impairments	Impairments	810		—		Impairments	—		810
Deferred income taxes	Deferred income taxes	1,126		40,987		Deferred income taxes	(1,316)		4,246
Non-cash lease expense	Non-cash lease expense	30,973		35,939		Non-cash lease expense	10,651		9,490
Loss (gain) on equity securities		51,033		(12,839)
Non-cash adjustment to fair value of convertible note		—		(12,631)
(Gain) loss on equity securities						(Gain) loss on equity securities	(1,364)		20,849

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	32,545		30,211		Other adjustments to reconcile net income to net cash provided by operating activities	14,777		11,380
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	(44,043)		(152,482)		Trade receivables	35,614		(28,007)
Income tax receivable	Income tax receivable	(14,191)		(43,462)		Income tax receivable	28,753		692
Accounts payable	Accounts payable	14,259		34,255		Accounts payable	11,960		22,074
Accrued liabilities and claims accrual	Accrued liabilities and claims accrual	19,207		57,157		Accrued liabilities and claims accrual	8,194		89,289
Operating lease liabilities	Operating lease liabilities	(30,755)		(37,357)		Operating lease liabilities	(10,489)		(9,267)
Other assets and liabilities	Other assets and liabilities	(2,442)		14,759		Other assets and liabilities	(6,604)		607
Net cash provided by operating activities	Net cash provided by operating activities	1,099,195		817,524		Net cash provided by operating activities	345,159		456,860
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	7,506		8,380		Proceeds from maturities of held-to-maturity investments	3,620		1,881
Purchases of held-to-maturity investments	Purchases of held-to-maturity investments	(9,594)		(6,683)		Purchases of held-to-maturity investments	(525)		(4,372)
Proceeds from sale of property and equipment, including assets held for sale	Proceeds from sale of property and equipment, including assets held for sale	139,545		192,454		Proceeds from sale of property and equipment, including assets held for sale	59,345		60,532
Purchases of property and equipment	Purchases of property and equipment	(496,237)		(388,518)		Purchases of property and equipment	(260,339)		(164,974)
Expenditures on assets held for sale	Expenditures on assets held for sale	(499)		(1,367)		Expenditures on assets held for sale	(360)		(43)
Net cash, restricted cash, and equivalents invested in acquisitions	Net cash, restricted cash, and equivalents invested in acquisitions	(1,291)		(1,342,042)		Net cash, restricted cash, and equivalents invested in acquisitions	(275)		(1,291)
Investment in convertible note		—		(25,000)

Other cash flows from investing activities	Other cash flows from investing activities	1,944		14,019		Other cash flows from investing activities	1,229		(1,920)
Net cash used in investing activities	Net cash used in investing activities	(358,626)		(1,548,757)		Net cash used in investing activities	(197,305)		(110,187)
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	(250,884)		(374,539)		Repayment of finance leases and long-term debt	(22,946)		(48,843)
Proceeds from long-term debt		—		1,200,000

Repayments on revolving lines of credit, net	Repayments on revolving lines of credit, net	(114,000)		90,000		Repayments on revolving lines of credit, net	(43,000)		(95,000)
Borrowings under accounts receivable securitization		—		80,000

Repayment of accounts receivable securitization	Repayment of accounts receivable securitization	—		(15,000)		Repayment of accounts receivable securitization	(35,000)		—

Proceeds from common stock issued	Proceeds from common stock issued	6,111		7,624		Proceeds from common stock issued	1,086		1,220
Repurchases of the Company's common stock	Repurchases of the Company's common stock	(299,941)		(53,661)		Repurchases of the Company's common stock	—		(144,881)
Dividends paid	Dividends paid	(59,011)		(46,935)		Dividends paid	(22,983)		(20,137)

Other cash flows from financing activities	Other cash flows from financing activities	(31,104)		(14,180)		Other cash flows from financing activities	(11,748)		(15,608)
Net cash (used in) provided by financing activities		(748,829)		873,309
Net (decrease) increase in cash, restricted cash, and equivalents		(8,260)		142,076
Net cash used in financing activities						Net cash used in financing activities	(134,591)		(323,249)
Net increase in cash, restricted cash, and equivalents						Net increase in cash, restricted cash, and equivalents	13,263		23,424
Cash, restricted cash, and equivalents at beginning of period	Cash, restricted cash, and equivalents at beginning of period	350,023		197,277		Cash, restricted cash, and equivalents at beginning of period	385,345		350,023
Cash, restricted cash, and equivalents at end of period	Cash, restricted cash, and equivalents at end of period	$	341,763	$	339,353	Cash, restricted cash, and equivalents at end of period	$	398,608	$	373,447

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

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.


Condensed Consolidated Statements of Cash Flows (Unaudited) — Continued


		Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021			2023		2022
		(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	$	29,342	$	11,683	Interest	$	21,920	$	5,928
Income taxes	Income taxes	234,260		160,281		Income taxes	1,295		1,778
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	$	4,264	$	9,278	Equipment acquired included in accounts payable	$	15,232	$	11,643
Financing provided to independent contractors for equipment sold						Financing provided to independent contractors for equipment sold	2,349		1,536
Transfers from property and equipment to assets held for sale						Transfers from property and equipment to assets held for sale	40,666		16,986

Purchase price adjustment on acquisition						Purchase price adjustment on acquisition	—		2,163

Transfers from property and equipment to assets held for sale		45,618		80,881
Noncontrolling interest associated with acquisition		—		10,281
Purchase price adjustment on acquisition		2,164		—
Contingent consideration associated with acquisitions and investments		1,717		5,000
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	44,465		20,261		Right-of-use assets obtained in exchange for operating lease liabilities	16,281		3,314
Right-of-use assets obtained in exchange for operating lease liabilities through acquisitions		—		4,613

Property and equipment obtained in exchange for finance lease liabilities	Property and equipment obtained in exchange for finance lease liabilities	141,374		114,803		Property and equipment obtained in exchange for finance lease liabilities	7,174		—
Property and equipment obtained in exchange for finance lease liabilities reclassified from operating lease liabilities		6,462		42,298


Reconciliation of Cash, Restricted Cash, and Equivalents:	Reconciliation of Cash, Restricted Cash, and Equivalents:	September 30, 2022		December 31, 2021		September 30, 2021		December 31, 2020		Reconciliation of Cash, Restricted Cash, and Equivalents:	March 31, 2023		December 31, 2022		March 31, 2022		December 31, 2021
		(In thousands)									(In thousands)
Consolidated Balance Sheets	Consolidated Balance Sheets									Consolidated Balance Sheets
Cash and cash equivalents	Cash and cash equivalents	$	194,082	$	261,001	$	269,694	$	156,699	Cash and cash equivalents	$	191,245	$	196,770	$	242,860	$	261,001
Cash and cash equivalents – restricted 1	Cash and cash equivalents – restricted 1	144,960		87,241		68,019		39,328		Cash and cash equivalents – restricted 1	204,348		185,792		128,774		87,241
Other long-term assets 1	Other long-term assets 1	2,721		1,781		1,640		1,250		Other long-term assets 1	3,015		2,783		1,813		1,781
Consolidated Statements of Cash Flows	Consolidated Statements of Cash Flows									Consolidated Statements of Cash Flows
Cash, restricted cash, and equivalents	Cash, restricted cash, and equivalents	$	341,763	$	350,023	$	339,353	$	197,277	Cash, restricted cash, and equivalents	$	398,608	$	385,345	$	373,447	$	350,023

________

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)
Balances – December 31, 2021 165,980 $ 1,660 $ 4,350,913 $ 2,181,142 $ (563) $ 6,533,152 $ 10,298 $ 6,543,450
Common stock issued to employees 614 6 2,369 2,375 2,375
Common stock issued to the Board 18 — 873 873 873
Common stock issued under ESPP 59 1 2,862 2,863 2,863
Company shares repurchased (6,001) (60) (299,881) (299,941) (299,941)
Shares withheld – RSU settlement (20,504) (20,504) (20,504)
Employee stock-based compensation expense 25,878 25,878 25,878
Cash dividends paid and dividends accrued ($0.36 per share) (58,912) (58,912) (58,912)
Net income attributable to Knight-Swift 622,624 622,624 622,624
Other comprehensive loss (1,991) (1,991) (1,991)
Net income attributable to noncontrolling interest (102) (102)
Balances – September 30, 2022 160,670 $ 1,607 $ 4,382,895 $ 2,424,469 $ (2,554) $ 6,806,417 $ 10,196 $ 6,816,613
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 – 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 475 6 5,020 5,026 5,026
Common stock issued to the Board 12 — 575 575 575
Common stock issued with ACT acquisition 219 2 9,998 10,000 10,000
Common stock issued under ESPP 47 — 2,023 2,023 2,023
Company shares repurchased (1,303) (13) (53,648) (53,661) (53,661)
Shares withheld – RSU settlement (8,079) (8,079) (8,079)
Employee stock-based compensation expense 25,854 25,854 25,854
Cash dividends paid and dividends accrued ($0.28 per share) (46,820) (46,820) (46,820)
Net income attributable to Knight-Swift 488,772 488,772 488,772
Other comprehensive income (878) (878) (878)
Investment in noncontrolling interest 10,281 10,281
Distribution to noncontrolling interest (65) (65)
Net income attributable to noncontrolling interest 372 372
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 – December 31, 2022	160,706	$	1,607	$	4,392,266	$	2,553,567	$	(2,436)	$	6,945,004	$	10,277	$	6,955,281

Common stock issued to employees	282	3		43						46				46


Common stock issued under ESPP	21	—		1,040						1,040				1,040

Shares withheld – RSU settlement						(11,748)				(11,748)				(11,748)
Employee stock-based compensation expense				7,927						7,927				7,927
Cash dividends paid and dividends accrued ($0.14 per share)						(22,730)				(22,730)				(22,730)
Net income						104,284				104,284		(571)		103,713
Other comprehensive income								1,090		1,090				1,090
Investment in noncontrolling interest												975		975



Balances – March 31, 2023	161,009	$	1,610	$	4,401,276	$	2,623,373	$	(1,346)	$	7,024,913	$	10,681	$	7,035,594


	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 – December 31, 2021	165,980	$	1,660	$	4,350,913	$	2,181,142	$	(563)	$	6,533,152	$	10,298	$	6,543,450

Common stock issued to employees	364	3		408						411				411


Common stock issued under ESPP	14	—		809						809				809
Company shares repurchased	(2,723)	(27)				(144,854)				(144,881)				(144,881)
Shares withheld – RSU settlement						(15,608)				(15,608)				(15,608)
Employee stock-based compensation expense				8,759						8,759				8,759
Cash dividends paid and dividends accrued ($0.12 per share)						(19,913)				(19,913)				(19,913)
Net income						208,337				208,337		(49)		208,288
Other comprehensive loss								(372)		(372)				(372)




Balances – March 31, 2022	163,635	$	1,636	$	4,360,889	$	2,209,104	$	(935)	$	6,570,694	$	10,249	$	6,580,943

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

~~Table of Contents~~
~~Glossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~


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

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

Table of Contents Glossary of Terms

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 ~~year-to-date period~~quarter ended ~~September 30, 2022,~~March 31, 2023, the Company operated an average of ~~18,072~~18,152 tractors (comprised of ~~16,205~~16,262 company tractors and ~~1,867~~1,890 independent contractor tractors) and ~~73,476~~79,490 trailers within the Truckload segment and leasing activities within the non-reportable segments. The LTL segment operated an average of ~~3,147~~3,163 tractors and ~~8,392~~8,387 trailers. Additionally, the Intermodal segment operated an average of ~~612~~607 tractors and ~~11,552~~12,829 intermodal containers. As of ~~September 30, 2022,~~March 31, 2023, the Company's four reportable segments were Truckload, LTL, Logistics, and Intermodal.

Basis of Presentation

The condensed consolidated financial statements and footnotes included in this Quarterly Report include the accounts of Knight-Swift Transportation Holdings Inc. and its subsidiaries and should be read in conjunction with the consolidated financial statements and footnotes included in Knight-Swift's ~~2021~~2022 Annual Report. In management's opinion, these condensed consolidated financial statements were prepared in accordance with GAAP and include all adjustments necessary (consisting of normal recurring adjustments) for the fair statement of the periods presented.

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

Changes in Presentation

Beginning in the second quarter of 2022, the Company separately disclosed ~~"Loss (gain)~~"(Gain) loss on equity securities" in the condensed consolidated statement of cash flows. Accordingly, the amounts presented in the Company's year-to-date ~~September 30, 2021~~March 31, 2022 condensed consolidated statement of cash flows were reclassified from "Other adjustments to reconcile net income to net cash provided by operating activities" to ~~"Loss (gain)~~"(Gain) loss on equity securities" to align with the current year presentation.

~~2021 Acquisitions~~

~~The Company acquired the following entities in 2021:~~

•~~100.0% of MME on December 6, 2021. The results are included within the LTL segment.~~

•~~100.0% of ACT on July 5, 2021. The results are included within the LTL segment.~~

•~~100.0% of UTXL on June 1, 2021. The results are included within the Logistics segment.~~

•79.44% of Eleos on February 1, 2021. The results are included within the non-reportable segments. The noncontrolling interest is presented as a separate component of the condensed consolidated financial statements.

~~Note regarding comparability:~~ In accordance with the accounting treatment applicable to the transactions, the Company's consolidated results, as reported, do not include the operating results of its ownership interest in the acquired entities prior to the respective acquisition dates. Accordingly, comparisons between the Company's current and prior period results may not be meaningful.

~~Additional information regarding the Company's recent acquisitions is included in Note 3.~~

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Seasonality

In the full 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, while~~weather. At the same time, operating expenses generally ~~increase. Tractor~~increase, and tractor productivity of the Company's Truckload fleet, independent contractors and third-party carriers ~~and independent contractors~~ 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 in the trucking industry, including imbalances in supply and demand, can override the seasonality faced in the industry.

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 2 — Recently Issued Accounting Pronouncements

Date Issued

Reference

Description

Expected Adoption Date and Method

Financial Statement Impact

March ~~2022~~2023

ASU No. ~~2022-02: Financial Instruments – Credit Losses~~2023-01: Leases (ASC ~~326)~~842), ~~Troubled Debt Restructurings and Vintage Disclosures~~Common Control Arrangements

The amendments in this ASU require that leasehold improvements associated with common control leases be amortized by the lessee over the useful life of the leasehold improvements and that leasehold improvements associated with common control leases be accounted for as a ~~creditor incorporates troubled debt restructurings into~~transfer between entities under common control through an adjustment to equity if the ~~allowance for credit losses and disclose current-period gross write-offs by year~~lessee no longer controls the use of ~~origination for financing receivables and net investments in leases.~~the asset.

January ~~2023,~~2024, Prospective or retrospective

Currently under evaluation, but not expected to be material

~~June 2022~~

~~ASU No. 2022-03: Fair Value Measurements (ASC 820),~~ ~~Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions~~

The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security, and not considered in measuring fair value.

~~January 2024, Prospective~~

~~No material impact~~

Note 3 — Acquisitions

~~Developments during the nine months ended September 30, 2022 related to the Company's 2021 acquisitions are discussed below.~~

~~MME~~U.S. Xpress

On ~~December 6, 2021,~~March 21, 2023, the Company ~~through~~announced an agreement under which Knight-Swift will acquire U.S. Xpress for a ~~wholly owned subsidiary, acquired 100.0%~~total enterprise value of ~~Bismarck, North Dakota-based MME. MME provides LTL, full truckload,~~approximately $808 million, excluding transaction costs. The transaction has been unanimously approved by the Board and ~~specialized and other logistics transportation services to~~ a ~~diverse customer base in its service territory in the upper Midwestern and great Northwestern regions~~special committee of the ~~US.~~

~~During the measurement period, the net working capital adjustment increased by $1.3 million based on the actual versus estimated net working capital adjustment as~~independent directors of the ~~transaction date. This adjustment resulted in increasing the total purchase price consideration~~U.S. Xpress board of directors. Work continues to ~~$165.7 million.~~ complete this process, with closing now anticipated to occur early third quarter of 2023, subject to customary closing conditions.

The Company also reduced the deferred tax liabilities on MME's opening balance sheet by $2.2 million based on valuation of the Company's intangible assets. These measurement period adjustments resulted in a $3.5 million increase in goodwill related to the MME acquisition during the first quarter of 2022.

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

~~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 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 July 5, 2021 acquisition date.

~~During the quarter ended September 30, 2022, the Company's condensed consolidated operating results included ACT's total revenue of $236.5 million and net income of $20.4 million. ACT's net income~~did not complete any other material acquisitions during the quarter ended ~~September 30, 2022 included $3.5 million related to the amortization of intangible assets acquired in the ACT Acquisition.~~

During the year-to-date period ended September 30, 2022, the Company's condensed consolidated operating results included ACT's total revenue of $699.4 million and net income of $63.1 million. ACT's net income during the year-to-date period ended September 30, 2022 included $10.5 million related to the amortization of intangible assets acquired in the ACT Acquisition.

~~Pro Forma Information (Unaudited)~~ — 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.

Quarter-to-Date September 30, Year-to-Date September 30,
2021 2021
(in thousands, except per share data)
Total revenue $ 1,642,445 $ 4,570,470
Net income attributable to Knight-Swift 202,883 507,168
Earnings per share – diluted 1.21 3.04

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.

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 a stock purchase agreement, 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.

As of September 30, 2022, contingent consideration of $2.5 million associated with the transaction was included in "Accrued liabilities" in the Company's condensed consolidated balance sheets. 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 June 1, 2021 acquisition date.

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

~~Eleos~~

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 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 February 1, 2021 acquisition date.

~~Purchase Price Allocations~~

Unless otherwise stated, the purchase price allocations for the above acquisitions are preliminary and 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 as applicable. As the Company obtains more information, the preliminary purchase price allocations disclosed above are subject to change. Any future adjustments to the preliminary purchase price 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 periods, which is not to exceed one year from the respective acquisition dates.

~~Asset Purchase Agreement~~

~~On October 3, 2022, the Company entered into an asset purchase agreement with a total purchase consideration of $30.0 million for the purchase of revenue equipment and certain intangibles.~~March 31, 2023.

Note 4 — Income Taxes

Effective Tax Rate — The ~~quarter-to-date September 30,~~quarter ended March 31, 2023 and March 31, 2022 ~~and September 30, 2021~~ effective tax rates were ~~25.2%~~24.0% and ~~22.8%, respectively. The year-to-date September 30, 2022 and September 30, 2021 effective tax rates were~~ 24.9% ~~and 24.4%~~, respectively.

Valuation Allowance — The Company has not 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~~$1.7 million in unrecognized tax benefits relating to federal deductions may be necessary within the next twelve months.

Interest and Penalties — Accrued interest and penalties related to unrecognized tax benefits were approximately $0.2 million ~~and $0.1 million~~as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively.~~2022.

Tax Examinations — Certain of the Company's subsidiaries are currently under examination by Federal and various state jurisdictions for tax years ranging from 2014 to ~~2018~~2021. 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 2017 remain subject to examination.

1310

Table of Contents Glossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 5 — Accounts Receivable Securitization

~~As of September 30,~~On October 3, 2022, the Company entered into the 2022 RSA, which further amended the 2021 RSA. The 2022 RSA is a secured borrowing that is collateralized by the Company's eligible receivables, ~~related~~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 ~~2021 RSA~~various purchasers. The Company's eligible receivables are included in "Trade receivables, net of allowance for doubtful accounts" in the consolidated balance sheets. As of March 31, 2023, the Company's eligible receivables generally have high credit quality, as determined by the obligor's corporate credit rating.

The ~~2021~~2022 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 ~~September 30, 2022.~~March 31, 2023. 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~~2022 RSA (dollars in thousands):


			2022 RSA

			(Dollars in thousands)
Effective date			~~April 23, 2021~~October 3, 2022
Final maturity date			~~April 23, 2024~~October 1, 2025
Borrowing capacity			$~~400,000~~475,000
Accordion option 1			$100,000
Unused commitment fee rate 2			20 to 40 basis points
Program fees on outstanding balances 3			one month ~~LIBOR~~SOFR + credit adjustment spread 10 basis points + 82.5 basis points

1The accordion option increases the maximum borrowing capacity, subject to participation of the purchasers.

2The ~~2021~~2022 RSA commitment fees rate are based on the percentage of the maximum borrowing capacity utilized.

3As identified within the ~~2021~~2022 RSA, the lender can trigger an amendment by identifying and deciding upon a replacement for ~~LIBOR.~~SOFR.

Availability under the ~~2021~~2022 RSA is calculated as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(In thousands)					(In thousands)
Borrowing base, based on eligible receivables	Borrowing base, based on eligible receivables	$	400,000	$	400,000	Borrowing base, based on eligible receivables	$	396,700	$	456,400
Less: outstanding borrowings 1	Less: outstanding borrowings 1	(279,000)		(279,000)		Less: outstanding borrowings 1	(384,000)		(419,000)
Less: outstanding letters of credit		(65,300)		(65,300)

Availability under accounts receivable securitization facilities	Availability under accounts receivable securitization facilities	$	55,700	$	55,700	Availability under accounts receivable securitization facilities	$	12,700	$	37,400

1Outstanding borrowings are included in "Accounts receivable securitization" in the condensed consolidated balance sheets and are offset by deferred loan costs of $0.4 million as of ~~September 30, 2022~~March 31, 2023 and ~~$0.5 million as of~~ December 31, ~~2021.~~2022. Interest accrued on the aggregate principal balance at a rate of ~~3.4%~~5.6% and ~~0.9%~~5.1% as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Refer to Note 12 for information regarding the fair value of the ~~2021~~2022 RSA.

~~2022 RSA~~

On October 3, 2022, the Company entered into the Sixth Amendment to the Amended and Restated Receivables Sales Agreement ("2022 RSA"). The 2022 RSA, among other things, extends the maturity date to October 1, 2025, increases the maximum borrowing capacity to $475.0 million, and replaces LIBOR with SOFR.

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Note 6 — Debt and Financing

Other than the Company's accounts receivable securitization as discussed in Note 5, the Company's long-term debt consisted of the following:


		September 30, 2022		December 31, 2021
		(In thousands)
2021 Term Loan A-1, due December 3, 2022, net 1 2		$	—	$	199,676
2021 Term Loan A-2, due September 3, 2024, net 1 2		199,659		199,607
2021 Term Loan A-3, due September 3, 2026, net 1 2		798,617		798,352

							March 31, 2023		December 31, 2022
							(In thousands)

2021 Term Loan A-2, due September 3, 2024, net 1 2						2021 Term Loan A-2, due September 3, 2024, net 1 2	199,792		199,755
2021 Term Loan A-3, due September 3, 2026, net 1 2						2021 Term Loan A-3, due September 3, 2026, net 1 2	798,793		798,705
Prudential Notes, net 1	Prudential Notes, net 1	38,964		47,265		Prudential Notes, net 1	27,955		35,960
Other	Other	3,554		5,069		Other	2,527		3,042
Total long-term debt, including current portion	Total long-term debt, including current portion	1,040,794		1,249,969		Total long-term debt, including current portion	1,029,067		1,037,462
Less: current portion of long-term debt	Less: current portion of long-term debt	(12,780)		(212,417)		Less: current portion of long-term debt	(12,806)		(12,794)
Long-term debt, less current portion	Long-term debt, less current portion	$	1,028,014	$	1,037,552	Long-term debt, less current portion	$	1,016,261	$	1,024,668


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
		(In thousands)					(In thousands)
Total long-term debt, including current portion	Total long-term debt, including current portion	$	1,040,794	$	1,249,969	Total long-term debt, including current portion	$	1,029,067	$	1,037,462
2021 Revolver, due September 3, 2026 1 3	2021 Revolver, due September 3, 2026 1 3	146,000		260,000		2021 Revolver, due September 3, 2026 1 3	—		43,000

Long-term debt, including revolving line of credit	Long-term debt, including revolving line of credit	$	1,186,794	$	1,509,969	Long-term debt, including revolving line of credit	$	1,029,067	$	1,080,462

1Refer to Note 12 for information regarding the fair value of debt.

2As of ~~September 30,~~March 31, 2023, the carrying amounts of the 2021 Term Loan A-2 and 2021 Term Loan A-3 were net of $0.2 million and $1.2 million in deferred loan costs, respectively. As of December 31, 2022, the carrying amounts of the 2021 Term Loan A-2 and 2021 Term Loan A-3 werenet of ~~$0.3~~$0.2 million and ~~$1.4 million in deferred loan costs, respectively. As of December 31, 2021, the carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 werenet of $0.3 million, $0.4 million, and $1.6~~$1.3 million in deferred loan costs, respectively.

3The Company also had outstanding letters of credit of ~~$29.2~~$11.4 million and ~~$64.0~~$15.8 million under the 2021 Revolver, primarily related to workers' compensation and self-insurance liabilities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively. ~~As of September 30, 2022, the~~The Company also had outstanding letters of credit of ~~$94.8~~$177.9 million and $173.1 million under a separate bilateral agreement which do not impact the availability of the 2021 ~~Revolver.~~Revolver as of March 31, 2023 and December 31, 2022, respectively.

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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. 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 Term Loan A-2

2021 Term Loan A-3

2021 Revolver 2

2021 Debt Agreement Terms

(Dollars in thousands)

2021 Debt Agreement Terms

(Dollars in thousands)

Maximum borrowing capacity

$200,000

$800,000

$1,100,000

Maximum borrowing capacity

$200,000

$800,000

$1,100,000

Final maturity date

December 3, 2022

September 3, 2024

September 3, 2026

Final maturity date

September 3, 2024

September 3, 2026

Interest rate margin reference rate

BSBY

Interest rate margin reference rate

BSBY

Interest rate minimum margin 1

0.75%

0.88%

Interest rate minimum margin 1

0.75%

0.88%

Interest rate maximum margin 1

1.38%

1.50%

Interest rate maximum margin 1

1.38%

1.50%

Minimum principal payment — amount

$—

$10,000

$—

Minimum principal payment — amount

$—

$10,000

$—

Minimum principal payment — frequency

Once

Quarterly

Once

Minimum principal payment — frequency

Once

Quarterly

Once

Minimum principal payment — commencement date

December 3, 2022

September 3, 2024

September 30, 2024

September 3, 2026

Minimum principal payment — commencement date

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, 2022,~~March 31, 2023, interest accrued at ~~3.37%~~5.46% on the 2021 Term ~~Loans~~Loan A-2 and ~~3.40%~~5.59% on the 2021 Term Loan A-3 and 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, 2022,~~March 31, 2023, commitment fees on the unused portion of the 2021 Revolver accrued at 0.1% and outstanding letter of credit fees accrued at 1.0%.

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, 2022,~~March 31, 2023, 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 material domestic subsidiaries (other than its captive insurance subsidiaries, driving academy subsidiary, and bankruptcy-remote special purpose subsidiary).

ACT's Prudential Notes — The 2021 Prudential Notes allow ACT to borrow up to $125.0 million, less amounts currently outstanding with Prudential Capital Group, provided that certain financial ratios are maintained. 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 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, 2022,~~March 31, 2023, ACT had ~~$87.9~~$98.6 million available for issuance under the agreement.

Fair Value Measurement — See Note 12 for fair value disclosures regarding the Company's debt instruments.

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Note 7 — Defined Benefit Pension Plan

Net periodic pension income and benefits paid during the ~~quarter-to-date~~quarters ended March 31, 2023 and ~~year-to-date periods ended September 30,~~ 2022 were immaterial.

Assumptions

A weighted-average discount rate of ~~5.11%~~4.65% was used to determine benefit obligations as of ~~September 30, 2022.~~March 31, 2023.

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


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
Discount rate	Discount rate	4.33	%	2.49	%	3.13	%	2.49	%	Discount rate		4.92	%	2.55	%
Expected long-term rate of return on pension plan assets	Expected long-term rate of return on pension plan assets	6.00	%	6.00	%	6.00	%	6.00	%	Expected long-term rate of return on pension plan assets		6.00	%	6.00	%

Refer to Note 12 for additional information regarding fair value measurements of the Company's investments.

Note 8 — Purchase Commitments

As of ~~September 30, 2022,~~March 31, 2023, the Company had outstanding commitments to purchase revenue equipment of ~~$199.2~~$912.9 million in the remainder of ~~2022 ($158.2 million of which were tractor commitments), $297.4 million in~~ 2023 ($~~236.1~~622.1 million of which were tractor commitments), and none thereafter. These purchases may be financed through any combination of finance leases, operating leases, debt, proceeds from sales of existing equipment, and cash flows from operations.

As of ~~September 30, 2022,~~March 31, 2023, the Company had outstanding commitments to purchase facilities and non-revenue equipment of $40.0 million in the remainder of ~~2022, $21.4~~2023, $14.7 million from ~~2023~~2024 through ~~2024, $1.8~~2025, $0.9 million from ~~2025~~2026 through ~~2026,~~2027, and none thereafter. Factors such as costs and opportunities for future terminal expansions may change the amount of such expenditures.

Note 9 — Contingencies and Legal Proceedings

Legal Proceedings

The Company is party to certain legal proceedings incidental to its business. The majority of these claims relate to bodily injury, property damage, cargo and workers' compensation incurred in the transportation of freight, as well as certain class action litigation related to personnel and employment matters. We record a liability when we believe that it is probable that a loss has been incurred and the amount can be reasonably estimated.

Information is provided below regarding the nature, status, and contingent loss amounts, if any, associated with ~~the Company's~~ pending legal ~~matters.~~matters that may be material to the Company. 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. Cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies.

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 ~~$13.2~~$9.6 million, relating to the Company's outstanding legal proceedings as of ~~September 30, 2022.~~

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.March 31, 2023.

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EMPLOYEE COMPENSATION AND PAY PRACTICES MATTERS

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 ~~September 30, 2022.~~March 31, 2023.

~~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~~

~~United 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 September 30, 2022, the Company has an accrual for anticipated costs associated with finalizing this matter.

1 Individually and on behalf of all others similarly situated.

~~Self Insurance~~

Effective March 1, 2022, ACT retains a $10.0 million self-insured retention per occurrence, as compared to the previous policy period, which included $2.0 million per occurrence with a $5.0 million annual corridor deductible subject to a $10.0 million three-year policy term aggregate cap. This was the only material change related to our self insurance policies during the year-to-date period ended September 30, 2022.

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

Note 10 — Share Repurchase 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").

On April 25, 2022, the Company announced that the Board approved the repurchase of up to $350.0 million of the Company's outstanding common stock (the "2022 Knight-Swift Share Repurchase Plan"). With the adoption of the 2022 Knight-Swift Share Repurchase Plan, the Company terminated the 2020 Knight-Swift Share Repurchase Plan, which had approximately $42.8 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 September 30, 2022			Year-to-Date September 30, 2022			Share Repurchase Plan		Quarter Ended March 31, 2023
Board Approval Date	Board Approval Date	Authorized Amount	Shares	Amount		Shares	Amount		Board Approval Date	Authorized Amount		Shares	Amount
			(shares and dollars in thousands)									(shares and dollars in thousands)
November 24, 2020 1		$250,000	—	$	—	2,821	$	149,982

April 19, 2022 1	April 19, 2022 1	$350,000	—	$	—	3,180	$	149,959	April 19, 2022 1	$350,000		—	$	—
			—	$	—	6,001	$	299,941
			Quarter-to-Date September 30, 2021			Year-to-Date September 30, 2021					Quarter Ended March 31, 2022
Board Approval Date									Board Approval Date	Authorized Amount		Shares	Amount
												(shares and dollars in thousands)
November 24, 2020 1		$250,000	—	$	—	1,303	$	53,661
November 24, 2020									November 24, 2020	$250,000		2,723	$	144,881

1 $200.0 million remained available under the 2022 Knight-Swift Repurchase Plan as of ~~September 30, 2022. $192.8 million remained available under the 2020 Knight-Swift Share Repurchase Plan as of~~March 31, 2023 and December 31, ~~2021.~~2022.

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Note 11 — Weighted Average Shares Outstanding

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

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


		Quarter-to-Date September 30,		Year-to-Date September 30,			Quarter Ended March 31,
		2022	2021	2022	2021			2023	2022
		(In thousands)						(In thousands)
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	160,665	165,966	162,785	165,823	Basic weighted average common shares outstanding		160,915	165,377
Dilutive effect of equity awards	Dilutive effect of equity awards	907	1,140	935	1,113	Dilutive effect of equity awards		985	1,122
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	161,572	167,106	163,720	166,936	Diluted weighted average common shares outstanding		161,900	166,499
Anti-dilutive shares excluded from diluted earnings per share 1		132	23	321	165
Anti-dilutive shares excluded from earnings per diluted share 1						Anti-dilutive shares excluded from earnings per diluted share 1		7	239

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.

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Note 12 — Fair Value Measurement

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


			September 30, 2022				December 31, 2021						March 31, 2023				December 31, 2022
		Condensed Consolidated Balance Sheets Caption	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value			Condensed Consolidated Balance Sheets Caption	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
			(In thousands)										(In thousands)
Financial Assets:	Financial Assets:										Financial Assets:

Equity method investments	Equity method investments	Other long-term assets	$	103,950	$	103,950	$	75,769	$	75,769	Equity method investments	Other long-term assets	$	104,300	$	104,300	$	103,517	$	103,517

Investments in equity securities	Investments in equity securities	Other long-term assets	3,195		3,195		74,201		74,201		Investments in equity securities	Other long-term assets	2,968		2,968		1,668		1,668
Convertible note	Convertible note	Other current assets	11,039		11,039		10,141		10,141		Convertible note	Other current assets	11,637		11,637		11,341		11,341

Financial Liabilities:	Financial Liabilities:										Financial Liabilities:

2021 Term Loan A-1, due December 2022 1		Finance lease liabilities and long-term debt – current portion, Long-term debt – less current portion	$	—	$	—	$	199,676	$	200,000
2021 Term Loan A-2, due September, 2024 1	2021 Term Loan A-2, due September, 2024 1	Long-term debt – less current portion	199,659		200,000		199,607		200,000		2021 Term Loan A-2, due September, 2024 1	Long-term debt – less current portion	199,792		200,000		199,755		200,000
2021 Term Loan A-3, due September 2026 1	2021 Term Loan A-3, due September 2026 1	Long-term debt – less current portion	798,617		800,000		798,352		800,000		2021 Term Loan A-3, due September 2026 1	Long-term debt – less current portion	798,793		800,000		798,705		800,000
2021 Revolver, due September 2026	2021 Revolver, due September 2026	Revolving line of credit	146,000		146,000		260,000		260,000		2021 Revolver, due September 2026	Revolving line of credit	—		—		43,000		43,000
2021 Prudential Notes 2	2021 Prudential Notes 2	Finance lease liabilities and long-term debt – current portion, Long-term debt – less current portion	38,964		39,027		47,265		47,354		2021 Prudential Notes 2	Finance lease liabilities and long-term debt – current portion, Long-term debt – less current portion	27,955		28,000		35,960		36,014

2021 RSA, due April 2024 3		Accounts receivable securitization	278,649		279,000		278,483		279,000
2022 RSA, due October 2025 3											2022 RSA, due October 2025 3	Accounts receivable securitization	383,601		384,000		418,561		419,000
Contingent consideration	Contingent consideration	Accrued liabilities, Other long-term liabilities	4,217		4,217		13,100		13,100		Contingent consideration	Accrued liabilities, Other long-term liabilities	4,217		4,217		4,217		4,217

1As of ~~September 30,~~March 31, 2023, the carrying amounts of the 2021 Term Loan A-2 and 2021 Term Loan A-3 werenet of $0.2 million and $1.2 million in deferred loan costs, respectively. As of December 31, 2022, the carrying amounts of the 2021 Term Loan A-2 and 2021 Term Loan A-3 were net of ~~$0.3~~$0.2 million and ~~$1.4 million in deferred loan costs, respectively. As of December 31, 2021, the carrying amounts of the 2021 Term Loan A-1, 2021 Term Loan A-2, and 2021 Term Loan A-3 werenet of $0.3 million, $0.4 million, and $1.6~~$1.3 million in deferred loan costs, respectively.

2As of ~~September 30,~~March 31, 2023, the carrying amount of the 2021 Prudential Notes was net of approximately $45,000 in deferred loan costs and included $1.6 millionin fair value adjustments. As of December 31, 2022, the carrying amount of the 2021 Prudential Notes was net of~~$0.1 million in deferred loan costs and included~~ ~~$1.9 million in fair value adjustments. As of December 31, 2021, the carrying amount of the 2021 Prudential Notes was~~ ~~net of~~ ~~$0.1~~ $0.1 million in deferred loan costs and included $~~2.4~~1.7 million in fair value adjustments.

3The carrying amount of the ~~2021~~2022 RSA was net of $0.4 million ~~and~~ ~~$0.5 million~~ in deferred loan costs as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021, respectively~~.2022, respectively.

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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 ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


				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		Unrealized Gain (Loss) Position			Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Unrealized Gain (Loss) Position
		(In thousands)											(In thousands)
As of September 30, 2022
As of March 31, 2023												As of March 31, 2023
Convertible notes 1	Convertible notes 1	$	11,039	$	—	$	—	$	11,039	$	1,039	Convertible notes 1	$	11,637	$	—	$	—	$	11,637	$	1,637
Investments in equity securities 2	Investments in equity securities 2	3,195		3,195		—		—		(49,391)		Investments in equity securities 2	2,968		2,968		—		—		(49,618)

As of December 31, 2021
As of December 31, 2022												As of December 31, 2022
Convertible notes 1	Convertible notes 1	$	10,141	$	—	$	—	$	10,141	$	141	Convertible notes 1	$	11,341	$	—	$	—	$	11,341	$	1,341
Investments in equity securities 2	Investments in equity securities 2	74,201		74,201		—		—		14,456		Investments in equity securities 2	1,668		1,668		—		—		(50,918)

1Convertible notes — The condensed consolidated statements of comprehensive income include the fair value activities from the Company's convertible notes within "Other income (expenses) ~~income,~~, net". The estimated fair value is based on probability-weighted discounted cash flow analysis of the corresponding pay-off/redemption.

•~~Quarter-to-date Gain (Loss) Activities:~~ ~~During the quarter ended September 30, 2022, the~~ The Company recognized unrealized gains of $0.3 million ~~of unrealized gains associated with a $10.0 million face value convertible note entered into in November of 2021. During~~during the ~~quarter~~quarters ended ~~September 30, 2021, the Company recognized no gain on its convertible note with Embark. The Embark convertible note balance is excluded from the September 30, 2022~~March 31, 2023 and ~~December 31, 2021 convertible notes balances in the table above, as it was converted to an equity security in November of 2021.~~

•~~Year-to-date Gain (Loss) Activities:~~ During the year-to-date period ended September 30, 2022, the Company recognized $0.9 million of unrealized gains associated with the $10.0 million face value convertible note, discussed above. During the year-to-date period ended September 30, 2021, the Company recognized an unrealized gain on its convertible note with Embark of $12.6 million.2022.

2Investments in equity securities — The condensed consolidated statements of comprehensive income include the fair value activities from the Company's investments in equity securities within "Other income (expenses) ~~income,~~, net". The estimated fair value is based on quoted prices in active markets that are readily and regularly obtainable.

•~~Quarter-to-date Gain (Loss) Activities:~~ During the quarter ended ~~September 30, 2022,~~March 31, 2023, the Company recognized ~~a gain~~unrealized gains of ~~$0.5~~$1.3 million ~~consisting of $7.0 million in realized gains~~ from the Company's ~~other~~various investments in equity securities. ~~This was partially offset by $6.5 million in unrealized losses, primarily from mark-to-market adjustments of the Company's equity investment in Embark.During~~During the quarter ended September 30, 2021, the Company recognized a gain of $4.0 million from its other investments in equity securities, which consisted of $3.0 million in unrealized gains and $1.0 million in realized gains.

•~~Year-to-date Gain (Loss) Activities:~~ ~~During the year-to-date period ended September 30,~~March 31, 2022, the Company recognized a loss of ~~$51.0~~$20.8 million which consisted of $62.4 million in unrealized losses, primarily from mark-to-market adjustments of the Company's investment in Embark. This was partially offset by $11.4 million in realized gains from the Company's other investments in equity securities. During the year-to-date period ended September 30, 2021, the Company recognized an $12.8 million gain from its investments in equity securities, which consisted of ~~$7.6~~$20.8 million in unrealized ~~gains~~losses and ~~$5.2 million in~~no realized ~~gains from its other equity investments.~~gains.

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

Recurring Fair Value Measurements (Liabilities) — The following table depicts the level in the fair value hierarchy of the inputs used to estimate the fair value of liabilities measured on a recurring basis as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021:~~2022:


				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 September 30, 2022
As of March 31, 2023												As of March 31, 2023
Contingent consideration 1												Contingent consideration 1	$	4,217	$	—	$	—	$	4,217	$	—
As of December 31, 2022												As of December 31, 2022
Contingent consideration 1	Contingent consideration 1	$	4,217	$	—	$	—	$	4,217	$	—	Contingent consideration 1	$	4,217	$	—	$	—	$	4,217	$	—

As of December 31, 2021
Contingent consideration 1		$	13,100	$	—	$	—	$	13,100	$	—

1Contingent consideration is associated with acquisitions and investments. The Company did not recognize any gains (losses) during the ~~quarter or year-to-date periods~~quarters ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ related to the revaluation of these liabilities. Refer to Note 3 for information regarding material components of these liabilities.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Nonrecurring Fair Value Measurements (Assets) — As of March 31, 2023, the Company had no 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 ~~September 30, 2022 and~~ December 31, ~~2021:~~2022:


			Fair Value Measurements at Reporting Date Using
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs		Total Loss
	(In thousands)



As of ~~September 30,~~December 31, 2022
Buildings 1	$	—	$	—	$	—	$	—	$	(810)

~~As of December 31, 2021~~

~~Equipment~~ 2	$	—	$	—	$	—	$	—	$	~~(299)~~

1 Reflects the non-cash impairment of building improvements (within the non-reportable segments).

~~2 Reflects the non-cash impairment of certain revenue equipment held for sale (within the non-reportable segments and the Truckload segment).~~

Nonrecurring Fair Value Measurements (Liabilities) — As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had no major categories of liabilities estimated at fair value that were measured on a nonrecurring basis.

Gain on Sale of Revenue Equipment — Net gains on disposals, including disposals of property and equipment classified as assets held for sale, ~~are~~ reported in "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive ~~income. The Company recorded net gains on disposals of:~~

•~~$15.6~~income, were $20.9 million and ~~$22.1~~$34.8 million for the ~~quarter-to-date periods~~quarters ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

•~~$73.4 million and $47.7 million for the year-to-date periods ended September 30, 2022 and 2021, respectively.~~

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

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, 2022
US equity funds $ 11,234 $ 11,234 $ — $ —
International equity funds 4,675 4,675 — —
Fixed income funds 34,047 34,047 — —
Cash and cash equivalents 1,031 1,031 — —
Total pension plan assets $ 50,987 $ 50,987 $ — $ —
As of December 31, 2021
US equity funds $ 14,877 $ 14,877 $ — $ —
International equity funds 6,304 6,304 — —
Fixed income funds 47,873 47,873 — —
Cash and cash equivalents 1,413 1,413 — —
Total pension plan assets $ 70,467 $ 70,467 $ — $ —

~~Note 13 — Related Party Transactions~~

Quarter-to-Date September 30, Year-to-Date September 30,
2022 2021 2022 2021
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)
Facility and Equipment Leases:
Certain affiliates 1
$ — $ 78 $ — $ 69 $ — $ 263 $ — $ 214
Other Services:
Certain affiliates 1
$ 20 $ 9 $ 8 $ 9 $ 58 $ 27 $ 21 $ 27

September 30, 2022 December 31, 2021
Receivable Payable Receivable Payable
(In thousands)
Certain affiliates 1
$ 11 $ 60 $ 14 $ 44

1"Certain 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.


			Fair Value Measurements at Reporting Date Using:
	Estimated Fair Value		Level 1 Inputs		Level 2 Inputs		Level 3 Inputs
	(In thousands)
As of March 31, 2023
US equity funds	$	6,901	$	6,901	$	—	$	—
International equity funds	3,588		3,588		—		—
Fixed income funds	43,564		43,564		—		—
Cash and cash equivalents	898		898		—		—
Total pension plan assets	$	54,951	$	54,951	$	—	$	—

As of December 31, 2022
US equity funds	$	10,901	$	10,901	$	—	$	—
International equity funds	4,828		4,828		—		—
Fixed income funds	34,728		34,728		—		—
Cash and cash equivalents	2,078		2,078		—		—
Total pension plan assets	$	52,535	$	52,535	$	—	$	—

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

Note 13 — Related Party Transactions


	Quarter Ended March 31,
		2023	2022
			Provided by Knight-Swift		Received by Knight-Swift		Provided by Knight-Swift		Received by Knight-Swift
			(In thousands)







Facility and Equipment Leases			$	—	$	25	$	—	$	78







Other Services			$	27	$	134	$	5	$	9


	March 31, 2023				December 31, 2022
	Receivable		Payable		Receivable		Payable
	(In thousands)



Certain affiliates 1	$	23	$	46	$	24	$	39

1"Certain affiliates" includes entities that are associated with various board members and executives and require approval by the Audit Committee of the Board prior to completing transactions. Transactions with these entities generally include facility and equipment leases, equipment sales, and other services.

Note 14 — Financial Information by Segment and Geography

Segment Information


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
Revenue:	Revenue:	(In thousands)								Revenue:		(In thousands)
Truckload	Truckload	$	1,160,735	$	1,041,332	$	3,430,075	$	2,990,137	Truckload		$	1,012,245	$	1,080,531
LTL	LTL	278,615		191,906		817,587		191,906		LTL		255,304		255,125
Logistics	Logistics	210,673		226,338		741,374		511,962		Logistics		138,283		282,039
Intermodal	Intermodal	130,777		112,801		372,870		335,245		Intermodal		110,572		109,222
Subtotal	Subtotal	$	1,780,800	$	1,572,377	$	5,361,906	$	4,029,250	Subtotal		$	1,516,404	$	1,726,917
Non-reportable segments	Non-reportable segments	139,435		89,393		385,186		206,857		Non-reportable segments		141,986		117,639
Intersegment eliminations	Intersegment eliminations	(23,396)		(19,325)		(62,133)		(54,947)		Intersegment eliminations		(21,458)		(17,567)
Total revenue	Total revenue	$	1,896,839	$	1,642,445	$	5,684,959	$	4,181,160	Total revenue		$	1,636,932	$	1,826,989

Quarter-to-Date September 30, Year-to-Date September 30,
2022 2021 2022 2021
Operating income: (In thousands)
Truckload $ 175,802 $ 206,543 $ 587,215 $ 533,483
LTL 30,859 17,469 101,003 17,469
Logistics 27,459 27,128 110,809 49,061
Intermodal 12,834 9,544 42,176 18,813
Subtotal $ 246,954 $ 260,684 $ 841,203 $ 618,826
Non-reportable segments 18,487 9,403 48,102 4,635
Operating income $ 265,441 $ 270,087 $ 889,305 $ 623,461
Quarter-to-Date September 30, Year-to-Date September 30,
2022 2021 2022 2021
Depreciation and amortization of property and equipment: (In thousands)
Truckload $ 114,946 $ 107,229 $ 338,014 $ 314,320
LTL 15,699 11,950 46,280 11,950
Logistics 566 355 1,708 852
Intermodal 4,324 3,942 12,424 11,700
Subtotal $ 135,535 $ 123,476 $ 398,426 $ 338,822
Non-reportable segments 14,828 15,094 44,463 43,269
Depreciation and amortization of property and equipment $ 150,363 $ 138,570 $ 442,889 $ 382,091


	Quarter Ended March 31,
		2023		2022
Operating income (loss):		(In thousands)
Truckload		$	115,899	$	205,117
LTL		26,582		26,377
Logistics		12,820		39,601
Intermodal		5,102		15,170
Subtotal		$	160,403	$	286,265
Non-reportable segments		(15,616)		11,821
Operating income		$	144,787	$	298,086

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED


	Quarter Ended March 31,
		2023		2022
Depreciation and amortization of property and equipment:		(In thousands)
Truckload		$	116,802	$	110,349
LTL		16,188		15,260
Logistics		1,043		596
Intermodal		4,432		3,864
Subtotal		$	138,465	$	130,069
Non-reportable segments		17,501		14,975
Depreciation and amortization of property and equipment		$	155,966	$	145,044

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~~quarters ended March 31, 2023 and ~~year-to-date periods ended September 30, 2022 and 2021.~~2022. 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, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

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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:

•our ability to gain market share and adapt to market conditions, the ability of our infrastructure to support future growth, and the ability, desire, and effects of expanding our service offerings, whether we grow organically or through potential acquisitions,

•~~the future impact of acquisitions, including achievement of anticipated synergies and the anticipated risks regarding our acquisitions of ACT and MME,~~

•~~the future performance of our LTL business, including revenue and margins,~~

•~~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, LTL, and intermodal operations, whether organically or inorganically,~~

•future capital expenditures, equipment prices and availability, our equipment purchasing or leasing plans (including containers in our Intermodal segment), and mix of our owned versus leased revenue equipment, and our equipment turnover, ~~(including expected tractor trade-ins),~~

•~~our ability to sublease equipment to independent contractors,~~

•the impact of pending legal proceedings,

•future insurance claims, coverage, coverage limits, premiums, and retention limits,

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

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

•~~future pricing terms from vendors and suppliers,~~

•expected liquidity and methods for achieving sufficient liquidity, including our expected need or desire to incur indebtedness and our ability to comply with debt covenants,

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

•future expenses, including depreciation and amortizations, interest rates, ~~and~~ cost structure, and our ability to control costs,

•future rates, operating profitability and margin, asset utilization, and return on capital,

•future third-party service provider relationships and availability, including pricing terms,

•future contracted pay rates with independent contractors, ability to lease equipment to independent contractors, and compensation arrangements with driving associates,

•future capital allocation, capital structure, capital requirements, and growth strategies and opportunities,

•future share repurchases and dividends,

•future tax rates,

•expected tractor and trailer fleet age, fleet size, and demand for trailer fleet,

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

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•~~our expected need or desire to incur indebtedness and our ability to comply with debt covenants,~~

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

•~~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, fleet size, and demand for trailer fleet,~~

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

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

•future purchased transportation expense

•the proposed U.S. Xpress transaction, including the expected timing and closing of the transaction, integration efforts, and any future effects of the acquisition, 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 I, Item 1A "Risk Factors" in our ~~2021~~2022 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 ~~2021~~2022 Annual Report.

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Executive Summary

Company Overview

Knight-Swift Transportation Holdings Inc. is one of North America's largest and most diversified freight transportation companies, providing multiple full truckload, LTL, intermodal, and other complementary services. Our objective is to operate our business with industry-leading margins and continued organic growth and growth through acquisitions while providing safe, high-quality, cost-effective solutions for our customers. Knight-Swift uses a nationwide network of business units and terminals in the US and Mexico to serve customers throughout North America. In addition to operating the country's largest truckload fleet, Knight-Swift also contracts with third-party equipment providers to provide a broad range of transportation services to our customers while creating quality driving jobs for our driving associates and successful business opportunities for independent contractors. Our four reportable segments are Truckload, LTL, Logistics, and Intermodal. Additionally, we have various non-reportable segments.

Key Financial Highlights — Year-to-Date ~~September 30, 2022~~March 31, 2023

During the year-to-date period ended September 30, 2022, margins improved across all of our reportable segments, supported by consolidated revenue growth of 29.5%, excluding truckload and LTL fuel surcharge. Consolidated operating income ~~improved 42.6%~~decreased 51.4% to ~~$889.3~~$144.8 million in the ~~year-to-date period~~quarter ended ~~September 30, 2022,~~March 31, 2023, as compared to the same period last year. Net income attributable to Knight-Swift ~~increased 27.4%~~decreased 49.9% to ~~$622.6~~$104.3 million.

•Truckload — ~~82.9%~~88.6% operating ratio during ~~year-to-date September 30, 2022.~~the quarter ended March 31, 2023. The Adjusted Operating Ratio1 ~~improved by 40 basis points to 79.7% for year-to-date September 30, 2022, supported by a 7.5% increase~~was 86.6%, with an 8.0% quarter-over-quarter decrease in revenue, excluding fuel surcharge and intersegment ~~transactions, compared~~transactions. These results were impacted by negative developments on certain large prior year insurance claims totaling $8.5 million pre-tax (or $0.04 per diluted share), primarily related to an unfavorable jury verdict during the ~~same period last year.~~first quarter of 2023.

•LTL — ~~87.6%~~89.6% operating ratio during ~~year-to-date September 30, 2022. Yield remains strong and we continue to capture both revenue and cost synergies, leading to an 83.0%~~the quarter ended March 31, 2023. The Adjusted Operating Ratio1. was 85.7%, a 20 basis point improvement quarter-over-quarter, as a result of continued improvements in yields and efficiencies.

•Logistics — ~~85.1%~~90.7% operating ratio during ~~year-to-date September 30, 2022.~~the quarter ended March 31, 2023. The Adjusted Operating Ratio1 was ~~84.8%~~90.4%, ~~with operating income improvement of~~ ~~125.9%. Load~~while load count ~~grew by~~ ~~44.6%, leading to a~~ ~~47.7%~~ ~~increase in revenue, excluding intersegment transactions.~~decreased 23.2%.

•Intermodal — ~~88.7%~~95.4% operating ratio during ~~year-to-date September 30, 2022, a 570 basis point improvement compared to this time last year, leading to a 124.2% increase in operating income~~the quarter ended March 31, 2023, with ~~revenue growth of~~ ~~11.3%, excluding intersegment transactions.~~load count up 8.5% quarter-over-quarter.

•Non-reportable Segments — ~~Strong demand for our insurance offering, equipment maintenance, equipment leasing, and warehousing services led~~Revenue grew 20.7% quarter-over-quarter, though operating income fell to a ~~937.8% improvement~~loss of $15.6 million driven by a $22.8 million operating loss (or $0.11 per diluted share) in ~~operating income~~our third-party insurance business primarily as a result of increased frequency and ~~revenue growth of 86.2%.~~unfavorable claim development during the quarter and premium collection issues associated with small carriers.

•~~Embark~~Acquisition of U.S. Xpress —~~The~~ On March 21, 2023, we announced an agreement under which Knight-Swift will acquire U.S. Xpress for a total enterprise value of ~~our 2021 initial investment~~approximately $808 million, excluding transaction costs. The transaction has been unanimously approved by the board of directors of Knight-Swift and a special committee of the independent directors of the U.S. Xpress board of directors. Work continues to complete this process, with closing now anticipated to occur early third quarter of 2023, subject to customary closing conditions. We expect to apply a similar approach to integration as we used successfully in ~~Embark declined, resulting~~the Knight-Swift merger, using cross-functional teams composed of leaders from Knight, Swift, and U.S. Xpress, and we remain encouraged given the positive outcome of the Knight-Swift merger and certain similarities in ~~an unrealized loss that negatively impacted earnings per diluted share and Adjusted EPS~~1 ~~by $0.24 during year-to-date September 30, 2022.~~this transaction.

•Liquidity and Capital — During the ~~year-to-date period~~quarter ended ~~September 30, 2022,~~March 31, 2023, we generated ~~$1.1 billion~~$345.2 million in operating cash flows. Our Free Cash Flow1 was ~~$742.5~~$144.2 million. We paid down ~~$209.4~~$8.4 million in long-term debt, ~~$114.0~~$43.0 million on our revolving line of credit, ~~$41.5~~$14.6 million in finance lease liabilities, and ~~$30.8~~$10.5 million in cash on our operating lease liabilities. We also ~~repurchased $299.9 million worth of our shares and~~ issued ~~$59.0~~$23.0 million in dividends to our stockholders. Gain on sale of revenue equipment ~~increased~~decreased to ~~$73.4~~$20.9 million in the ~~year-to-date period~~quarter ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$47.7~~$34.8 million this time last year.

As of ~~September 30, 2022~~March 31, 2023, we had a balance of ~~$194.1~~$191.2 million in unrestricted cash and cash equivalents, ~~$146.0 million outstanding on the 2021 Revolver,~~ $1.0 billion face value outstanding on the 2021 Term Loans, and ~~$6.8~~$7.0 billion of stockholders' equity. We do not foresee

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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.

________

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

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

Key Financial Data and Operating Metrics


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
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	$	1,896,839		$	1,642,445		$	5,684,959		$	4,181,160		Total revenue		$	1,636,932		$	1,826,989
Revenue, excluding truckload and LTL fuel surcharge	Revenue, excluding truckload and LTL fuel surcharge	$	1,649,982		$	1,510,572		$	4,992,391		$	3,856,549		Revenue, excluding truckload and LTL fuel surcharge		$	1,450,293		$	1,647,878
Net income attributable to Knight-Swift	Net income attributable to Knight-Swift	$	194,795		$	206,178		$	622,624		$	488,772		Net income attributable to Knight-Swift		$	104,284		$	208,337
Earnings per diluted share	Earnings per diluted share	$	1.21		$	1.23		$	3.80		$	2.93		Earnings per diluted share		$	0.64		$	1.25
Operating ratio	Operating ratio	86.0		%	83.6		%	84.4		%	85.1		%	Operating ratio		91.2		%	83.7		%

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	$	204,967		$	217,080		$	660,019		$	519,511		Adjusted Net Income Attributable to Knight-Swift 1		$	118,491		$	224,863
Adjusted EPS 1	Adjusted EPS 1	$	1.27		$	1.30		$	4.03		$	3.11		Adjusted EPS 1		$	0.73		$	1.35
Adjusted Operating Ratio 1	Adjusted Operating Ratio 1	83.1		%	81.3		%	81.2		%	82.8		%	Adjusted Operating Ratio 1		88.7		%	80.6		%

Revenue equipment statistics by segment:	Revenue equipment statistics by segment:													Revenue equipment statistics by segment:
Truckload	Truckload													Truckload
Average tractors 2	Average tractors 2	18,196			17,867			18,072			18,041			Average tractors 2		18,152			17,965
Average trailers 3	Average trailers 3	75,432			60,361			73,476			60,396			Average trailers 3		79,490			71,310
LTL	LTL													LTL
Average tractors 4	Average tractors 4	3,223			2,546			3,147			2,546			Average tractors 4		3,163			3,091
Average trailers 5	Average trailers 5	8,472			7,202			8,392			7,202			Average trailers 5		8,387			8,302
Intermodal	Intermodal													Intermodal
Average tractors	Average tractors	628			609			612			605			Average tractors		607			584
Average containers	Average containers	12,138			10,842			11,552			10,843			Average containers		12,829			11,027

1Adjusted 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.

2Our tractor fleet within the Truckload segment had a weighted average age of ~~2.8~~2.7 years and ~~2.4~~2.6 years as of ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

3~~Third quarter 2022~~Our average trailers includes ~~7,952~~8,988 and 7,561 trailers related to leasing activities recorded within our non-reportable ~~operating segments. Third quarter 2021 does not include 6,682 trailers related to leasing activities recorded within our non-reportable operating segments.~~ segments for the quarters ended March 31, 2023 and 2022, respectively. Our trailer fleet within the Truckload segment had a weighted average age of ~~9.5~~10.2 years and ~~8.3~~8.4 years as of ~~September 30, 2022~~March 31, 2023 and ~~2021,~~2022, respectively.

The year-to-date period ending September 30, 2022 includes 7,282 trailers related to leasing activities recorded within our non-reportable operating segments. The year-to-date period ending September 30, 2021 does not include 5,886 trailers related to leasing activities recorded within our non-reportable operating segments.

4Our LTL tractor fleet had a weighted average age of ~~4.3~~4.2 years and ~~4.0~~4.5 years as of ~~September 30, 2022~~March 31, 2023 and ~~2021,~~2022, respectively. Our LTL tractor fleet includes ~~720~~619 and ~~547~~695 tractors from ACT's and MME's dedicated and other businesses for the quarters ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively. Our LTL tractor fleet~~ ~~includes~~ ~~705 and 547 tractors from ACT's and MME's dedicated and other businesses for the year-to-date periods ended~~ ~~September 30,~~ 2022, ~~and~~ ~~2021, respectively.~~

5~~Our LTL trailer fleet had a weighted average age of~~ ~~8.0 years~~ ~~and 7.8 years as of September 30, 2022 and~~ ~~2021, respectively. Our LTL trailer fleet~~ ~~includes~~ ~~999 and 621 trailers from ACT's and MME's dedicated and other businesses for the quarters ended~~ ~~September 30, 2022 and~~ ~~2021, respectively. Our LTL trailer fleet~~ i~~ncludes 956 and 621 trailers from ACT's and MME's dedicated and other businesses for the year-to-date periods ended September 30, 2022 and 2021,~~ respectively.

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5Our LTL trailer fleet had a weighted average age of 8.3 years and 8.0 years as of March 31, 2023 and 2022, respectively. Our LTL trailer fleet includes 778 and 907 trailers from ACT's and MME's dedicated and other businesses for the quarters ended March 31, 2023 and 2022, respectively.

Market Trends and Outlook

The national unemployment rate was 3.5%1 as of ~~September 30, 2022,~~March 31, 2023, as compared to ~~4.8%~~3.6%1 as of ~~September 30, 2021.~~March 31, 2022. The US gross domestic product, which is the broadest measure of goods and services produced across the economy, increased by ~~2.6%~~1.1%2 on a ~~year-over-year~~quarter-over-quarter basis, per preliminary third-party forecasts. The increase, compared to the ~~second~~fourth quarter ~~decrease~~increase of ~~0.9%~~2.6%, reflected a downturn in private inventory investment and a slowdown in nonresidential fixed investment. These movements were partly offset by an acceleration in consumer spending, an upturn in exports, and a smaller decrease in ~~private inventory investment, an upturn in government spending, and an acceleration in nonresidential fixed investment that were partly offset by a larger decrease in~~ residential fixed ~~investment and a deceleration in consumer spending.~~investment. Early estimates of the ~~third~~first quarter ~~2022~~2023 US employment cost index indicate a ~~year-over-year~~quarter-over-quarter increase of ~~5.0%~~4.8%1 and a sequential increase of 1.2%1.

The freight market outlook for the ~~fourth quarter~~remainder of ~~2022~~2023 includes the following:

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

•~~Minimal non-contract opportunities~~Capacity continues to exit at an accelerating rate;

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

•~~Strong~~The combinations of demand ~~continues for trailer pools~~recovery and supply reduction should lead to improving freight market conditions by the end of the third quarter;

•~~Small carriers~~Spot pricing bottoms out in the second quarter and begins recovering in the second half of 2023;

•Expect trailer pool service to continue to ~~exit as~~be a ~~result of lower spot rates and significantly higher operating costs~~differentiator when demand recovers;

•LTL demand pressured but remains more stable ~~with continued increases in revenue per hundredweight year-over-year~~than truckload;

•~~Labor availability improves for stronger carriers~~LTL year-over-year improvement in revenue, excluding fuel surcharge per hundredweight;

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

•Insurance and claims remain volatile;

•Equipment and labor availability continues to improve, particularly for ~~equipment, maintenance, labor~~large carriers; and ~~other cost items~~

•Demand for used ~~equipment market weakens as small carriers struggle~~tractors remains steady given production limitations that are impacting the refresh rate.

Based on the above market factors, our Company outlook for the ~~fourth quarter~~remainder of ~~2022~~2023 includes the ~~following:~~following and does not reflect the inclusion of U.S. Xpress pending the close of the acquisition:

•~~Rates inflect negatively~~Truckload rates continue to be pressured, with a year-over-year asdecrease in overall revenue per mile of high single digits for the ~~moderating spot market yields less non-contract opportunities~~year;

•~~Stable truck~~Truckload tractor count stable with ~~typical sequential declines in~~ miles per tractor improving on a year-over-year basis in the second half of the year;

•~~Year-over-year increase in~~ LTL revenue, excluding fuel surcharge increases modestly year-over-year with relatively stable margin profile and ~~margin, but~~ typical ~~sequential declines~~seasonality;

•~~Stable~~ Logistics ~~load volumes with reduced~~volume and revenue per load remains under pressure into the second quarter before improving in the back half of the year, with an operating ratio inof approximately 90 for the ~~mid-to-high 80s~~year;

•Intermodal ~~margins to remain~~operating ratio in the ~~high single digits~~mid 90's for the full year with volumes ~~improving year-over-year~~up year over year;

•~~Continued~~Non-reportable segments to have modest revenue growth ~~in revenue~~for the year and quarterly operating income ~~within~~run rate in the ~~non-reportable segments~~low to mid teens for the balance of year;

•~~Inflationary pressure~~Reflecting reduced exposure to third party insurance risk, easing trailer lease demand from lower inventory overhang and muted freight conditions, and continued revenue and margin growth in ~~most cost areas including driver pay, maintenance, equipment, and non-driving labor~~warehousing;

•Equipment gains to be ~~approximately $10 –~~in the range of $15 million to $20 million quarterly;

•~~Sequential~~Expect modest increase in interest expense ~~due to higher rates~~from the first quarter of 2023, assuming Fed hiking cycle is nearly complete;

•Net cash capital expenditures ~~expected range of $525 – $575 million~~ for the full year ~~2022, excluding potential acquisitions~~2023 expected range of $640 – $690 million;

•Approximate tax rate of 25% for the full year ~~2022~~2023.

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In addition to the above, we expect the Truckload segment will remain resilient and continue to operate efficiently and the Logistics segment will continue to provide value to our customers through our power-only and traditional brokerage service offerings. Our ACT and MME teams are working together to further build out a super-regional network that we expect will provide additional yield and revenue opportunities. As of the fourth quarter of 2022, ACT and MME are on the same platform. We experienced some challenges in the integration, but believe the material challenges were addressed during the first quarter of 2023. The Intermodal segment continues to build out its network that aligns with our new rail partners. Our non-reportable segments are further expanding to complement our other service ~~offerings.~~offerings even as we work to improve the underwriting profitability of our insurance program as well as reduce our exposure to small carrier risk in the current market.

We anticipate that depreciation and amortization expense will increase and rental expense will correspondingly decrease, as a percentage of revenue, excluding truckload and LTL fuel surcharge, as we intend to purchase, rather than enter into operating leases, for a majority of our revenue equipment, terminal improvements, or terminal expansions in the remainder of ~~2022.~~2023. With significant tightening in the insurance markets, we may also experience changes in premiums, retention limits, and excess coverage limits in the remainder of ~~2022.~~2023. While fuel expense is generally offset by fuel surcharge revenue, our fuel expense, net of truckload and LTL fuel surcharge revenue, may increase in the future, particularly during periods of sharply rising fuel prices. Overall, we remain committed to long-term profitability as we continue to leverage opportunities across the Knight-Swift brands, and efficiently deploy our assets, while maintaining a relentless focus on cost control. This includes seeking acquisition opportunities to improve earnings, gain customers, and reach more professional drivers, as illustrated by the planned acquisition of U.S. Xpress and our intention to expand the geographic footprint of our LTL network.

________

1Source: bls.gov

2Source: bea.gov

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


Results of Operations — Summary

~~Note:~~ In accordance with the accounting treatment applicable to each of our 2021 acquisitions, Knight-Swift's reported results do not include the operating results of the acquired entities prior to the respective acquisition dates. Accordingly, comparisons between the Company's quarter and year-to-date September 30, 2022 results and prior periods may not be meaningful.

Operating Results: ~~Third~~First Quarter ~~2022~~2023 Compared to ~~Third~~First Quarter ~~2021~~2022

The ~~$11.4~~$104.1 million decrease in net income attributable to Knight-Swift to ~~$194.8~~$104.3 million during the ~~third~~first quarter of ~~2022~~2023 from ~~$206.2~~$208.3 million during the same period last year includes the following:

•Contributor — $~~30.7~~89.2 million decrease in operating income within our Truckload segment. ~~Year-over-year~~Quarter-over-quarter miles per tractor decreased ~~4.2%~~2.7% during the ~~third~~first quarter of ~~2022, which is an improvement from the year-over-year decrease of 6.6% during the second quarter of 2022.~~

•~~Offset —~~ ~~$13.4 million increase in operating income from our LTL segment, driven by a 15.5% increase in~~2023, and revenue, excluding fuel surcharge and intersegment transactions declined by 8.0%. These results include $8.5 million pre-tax ($0.04 per ~~hundredweight.~~diluted share) insurance and claims expense for development on large losses from claim years 2018-2020, primarily related to an unfavorable jury verdict during the first quarter of 2023.

•~~Offset~~Contributor — ~~$0.3~~$26.8 million ~~increase~~decrease in operating income within our Logistics segment due to ~~a 280 basis point improvement~~23.2% decline in ~~gross margin.~~load count.

•~~Offset~~Contributor — ~~$3.3~~$10.1 million ~~improvement~~decrease in operating income within our Intermodal segment, ~~supported~~driven by a 6.7% decrease in revenue ~~excluding intersegment transactions growth of 16.0%.~~per load.

•~~Offset~~Contributor — ~~$9.1~~$27.4 million ~~increase~~decrease in operating income within the non-reportable segments, ~~supported by revenue growth~~primarily due to a $22.8 million operating loss from our Iron Insurance line of ~~$50.0 million from the insurance, equipment maintenance, equipment leasing, and warehousing operating segments.~~business.

•Contributor — $~~7.5~~16.4 million increase in consolidated interest expense primarily driven by higher interest ~~rates and overall debt balances.~~rates.

•Offset — $~~4.4~~24.1 million increase in "Other income (expenses), net," primarily driven by ~~gains from our portfolio of investments.~~

•~~Contributor~~—~~$4.6~~a $14.4 million increase in consolidated income tax expense primarily due to a year over year reduction of favorable discrete items primarily associated with the ACT acquisition in the third quarter of 2021. The effective tax rate of 25.2% for the third quarter of 2022, an increase from 22.8% for the third quarter of 2021, was due to the discrete items from the third quarter of 2021 mentioned above.

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~~Operating Results: Year-to-Date September 30, 2022 Compared to Year-to-Date September 30, 2021~~

~~The $133.8 million increase in net income attributable to Knight-Swift to $622.6 million during year-to-date of 2022 from $488.8 million during the same period last year includes the following:~~

•~~Contributor~~ — ~~$53.7 million increase in operating income within our Truckload segment, driven by a~~ ~~7.5%~~ ~~increase in revenue, excluding fuel surcharge and intersegment transactions.~~

•~~Contributor —~~ ~~$83.5 million increase in operating income from our LTL segment for year-to-date September 30, 2022.~~

•~~Contributor —$61.7 million increase in operating income within our Logistics segment. Revenue, excluding intersegment transactions, increased by~~ ~~47.7%, as load volumes grew by~~ ~~44.6%~~ ~~while revenue per load increased by~~ ~~2.2%~~.

•~~Contributor —~~ $23.4 million improvement in operating income within our Intermodal segment, supported by revenue growth, as revenue per load increased 34.5%, offset by a 17.3% decrease in load count due to rail congestion and allocations.

•~~Contributor —~~ $43.5 million increase in operating income within the non-reportable segments, supported by revenue growth of $178.3 million from the insurance, equipment maintenance, equipment leasing, and warehousing operating segments.

•~~Offset —$16.7 million increase in consolidated interest expense primarily driven by higher interest rates and overall debt balances.~~

•~~Offset —~~ ~~$68.5 million reduction in "Other income (expenses), net," primarily driven by an~~ unrealized loss ~~from the mark-to-market adjustment of~~on our investment in Embark ~~compared to a gain~~recorded in the ~~year-to-date period ended September 30, 2021.~~first quarter of 2022 and a net gain recorded within our portfolio of investments during the first quarter of 2023.

•Offset — ~~$48.8~~$36.4 million ~~increase~~decrease in consolidated income tax expense was primarily due to ~~an increase in income before income taxes. This resulted~~a reduction of pre-tax income. The results in an effective tax rate of 24.0% for the first quarter of 2023, and 24.9% for ~~year-to-date September 30, 2022 and 24.4% for year-to-date September 30, 2021.~~

~~Our results are further discussed in "Results~~the first quarter of ~~Operations — Consolidated Operating and Other Expenses".~~2022.

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Results of Operations — Segment Review

The Company has four reportable segments: Truckload, LTL, Logistics, and Intermodal, as well as certain non-reportable segments.

Consolidating Tables for Total Revenue and Operating Income (Loss)


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
Revenue:	Revenue:	(In thousands)								Revenue:		(In thousands)
Truckload	Truckload	$	1,160,735	$	1,041,332	$	3,430,075	$	2,990,137	Truckload		$	1,012,245	$	1,080,531
LTL	LTL	278,615		191,906		817,587		191,906		LTL		255,304		255,125
Logistics	Logistics	210,673		226,338		741,374		511,962		Logistics		138,283		282,039
Intermodal	Intermodal	130,777		112,801		372,870		335,245		Intermodal		110,572		109,222
Subtotal	Subtotal	$	1,780,800	$	1,572,377	$	5,361,906	$	4,029,250	Subtotal		$	1,516,404	$	1,726,917
Non-reportable segments	Non-reportable segments	139,435		89,393		385,186		206,857		Non-reportable segments		141,986		117,639
Intersegment eliminations	Intersegment eliminations	(23,396)		(19,325)		(62,133)		(54,947)		Intersegment eliminations		(21,458)		(17,567)
Total revenue	Total revenue	$	1,896,839	$	1,642,445	$	5,684,959	$	4,181,160	Total revenue		$	1,636,932	$	1,826,989


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
Operating income:		(In thousands)
Operating income (loss)										Operating income (loss)		(In thousands)
Truckload	Truckload	$	175,802	$	206,543	$	587,215	$	533,483	Truckload		$	115,899	$	205,117
LTL	LTL	30,859		17,469		101,003		17,469		LTL		26,582		26,377
Logistics	Logistics	27,459		27,128		110,809		49,061		Logistics		12,820		39,601
Intermodal	Intermodal	12,834		9,544		42,176		18,813		Intermodal		5,102		15,170
Subtotal	Subtotal	$	246,954	$	260,684	$	841,203	$	618,826	Subtotal		$	160,403	$	286,265
Non-reportable segments	Non-reportable segments	18,487		9,403		48,102		4,635		Non-reportable segments		(15,616)		11,821
Operating income	Operating income	$	265,441	$	270,087	$	889,305	$	623,461	Operating income		$	144,787	$	298,086

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Revenue

•Our truckload services include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border transportation of various products, goods, and materials for our diverse customer base with approximately ~~13,500~~13,600 irregular route and ~~4,700~~4,600 dedicated tractors.

•Our LTL business, which was initially established in 2021 through the ACT acquisition and later the MME acquisition, provides our customers with regional LTL transportation service through our growing network of approximately 110 facilities and a door count of approximately 4,400. Our LTL segment operates approximately 3,200 tractors and approximately ~~8,500~~8,400 trailers and also provides national coverage to our customers by utilizing partner carriers for areas outside of our direct network.

•Our Logistics and Intermodal segments provide a multitude of shipping solutions, including additional sources of truckload capacity and alternative transportation modes, by utilizing our vast network of third-party capacity providers and rail providers, as well as certain logistics and freight management services. We continue to offer power-only services through our Logistics segment leveraging our fleet of over ~~75,000~~79,000 trailers.

•Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services. Our non-reportable segments also include certain corporate expenses (such as legal settlements and accruals, certain impairments, and amortization of intangibles related to the 2017 Merger and various acquisitions).

•In addition to the revenues earned from our customers for the trucking and non-trucking services discussed above, we also earn fuel surcharge revenue from our customers through our fuel surcharge programs, which serve to recover a majority of our fuel costs. This generally applies only to loaded miles for our Truckload ~~segment~~and LTL segments 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 Truckload and LTL segments.

Expenses

Our most significant expenses typically vary with miles traveled and include fuel, driving associate-related expenses (such as wages and benefits), and services purchased from third-party service providers (including other trucking companies, railroad and drayage providers, and independent contractors). 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 performance, fleet age, operating efficiency, and other factors. Our primary fixed costs are depreciation and lease expense for revenue equipment and terminals, non-driver employee compensation, amortization of intangible assets, and interest expenses.

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Operating Statistics

We measure our consolidated and segment results through the operating statistics listed in the table below. Our chief operating decision makers monitor the GAAP results of our reportable segments, supplemented by certain non-GAAP information. Refer to "Non-GAAP Financial Measures" 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

Truckload

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

Total Miles per Tractor

Truckload

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

Average Length of Haul

Truckload, LTL

~~Average~~For our Truckload segment this is calculated as average miles traveled with loaded trailer cargo per ~~order/shipment~~order.
For our LTL segment this is calculated as average miles traveled from the origin service center to the destination service center.

Non-paid Empty Miles Percentage

Truckload

Percentage of miles without trailer cargo

Shipments per Day

LTL

Average number of shipments completed each business day

Weight per Shipment

LTL

Total weight (in pounds) divided by total shipments

Revenue per shipment

LTL

Total revenue divided by total shipments

Revenue ~~xFSR~~xFSC per shipment

LTL

Total revenue, excluding fuel surcharge, divided by total shipments

Revenue per hundredweight

LTL

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

Revenue ~~xFSR~~xFSC per hundredweight

LTL

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

Average Tractors

Truckload, LTL, Intermodal

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

Average Trailers

Truckload, LTL

Average trailers in operation during the period

Average Revenue per Load

Logistics, Intermodal

Total revenue (excluding intersegment transactions) divided by load count

Gross Margin Percentage

Logistics

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

Average Containers

Intermodal

Average containers in operation during the period

GAAP Operating Ratio

Truckload,
LTL, Logistics, Intermodal

Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses. Calculated as operating expenses as a percentage of total revenue, or the inverse of operating margin.

Non-GAAP Adjusted Operating Ratio

Truckload,
LTL, Logistics, Intermodal

Measures operating efficiency and is widely used in our industry as an assessment of management's effectiveness in controlling all categories of operating expenses. Consolidated and segment Adjusted Operating Ratios are reconciled to their corresponding GAAP operating ratios under "Non-GAAP Financial Measures," below.

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Segment Review

Truckload Segment

We generate revenue in the Truckload segment primarily through irregular route, dedicated, refrigerated, expedited, flatbed, and cross-border service operations across our brands. We operated approximately ~~13,500~~13,600 irregular route tractors and approximately ~~4,700~~4,600 dedicated route tractors in use during the ~~quarter-to-date period~~quarter ended ~~September 30, 2022.~~March 31, 2023. Generally, we are paid a predetermined rate per mile or per load for our truckload services. Additional revenues are generated by charging for tractor and trailer detention, loading and unloading activities, dedicated services, and other specialized services, as well as through the collection of fuel surcharge revenue to mitigate the impact of increases in the cost of fuel. The main factors that affect the revenue generated by our Truckload segment are rate per mile from our customers, the percentage of miles for which we are compensated, and the number of loaded miles we generate with our equipment.

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


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands, except per tractor data)												Increase (Decrease)
																Quarter Ended March 31,						Increase (Decrease)
																					2023				2022				Increase (Decrease)
																				(Dollars in thousands, except per tractor data)					Increase (Decrease)
Total revenue	Total revenue	$	1,160,735		$	1,041,332		$	3,430,075		$	2,990,137		11.5	%		14.7	%	Total revenue			$	1,012,245			$	1,080,531			(6.3	%)
Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions	$	967,769		$	933,205		$	2,890,782		$	2,688,579		3.7	%		7.5	%	Revenue, excluding fuel surcharge and intersegment transactions			$	865,980			$	941,534			(8.0	%)
GAAP: Operating income	GAAP: Operating income	$	175,802		$	206,543		$	587,215		$	533,483		(14.9	%)		10.1	%	GAAP: Operating income			$	115,899			$	205,117			(43.5	%)
Non-GAAP: Adjusted Operating Income 1	Non-GAAP: Adjusted Operating Income 1	$	176,126		$	206,866		$	588,186		$	534,454		(14.9	%)		10.1	%	Non-GAAP: Adjusted Operating Income 1			$	116,242			$	205,441			(43.4	%)
Average revenue per tractor 2	Average revenue per tractor 2	$	53,186		$	52,231		$	159,959		$	149,026		1.8	%		7.3	%	Average revenue per tractor 2			$	47,707			$	52,409			(9.0	%)
GAAP: Operating ratio 2	GAAP: Operating ratio 2	84.9		%	80.2		%	82.9		%	82.2		%	470	bps		70	bps	GAAP: Operating ratio 2			88.6		%		81.0		%		760	bps
Non-GAAP: Adjusted Operating Ratio 1 2	Non-GAAP: Adjusted Operating Ratio 1 2	81.8		%	77.8		%	79.7		%	80.1		%	400	bps		(40	bps)	Non-GAAP: Adjusted Operating Ratio 1 2			86.6		%		78.2		%		840	bps
Non-paid empty miles percentage 2	Non-paid empty miles percentage 2	14.8		%	13.5		%	14.5		%	13.1		%	130	bps		140	bps	Non-paid empty miles percentage 2			15.0		%		14.1		%		90	bps
Average length of haul (miles) 2	Average length of haul (miles) 2	398			398			395			407			—	%		(2.9	%)	Average length of haul (miles) 2			391				394				(0.8	%)
Total miles per tractor 2	Total miles per tractor 2	19,391			20,233			57,853			62,083			(4.2	%)		(6.8	%)	Total miles per tractor 2			18,405				18,916				(2.7	%)
Average tractors 2 3	Average tractors 2 3	18,196			17,867			18,072			18,041			1.8	%		0.2	%	Average tractors 2 3			18,152				17,965				1.0	%
Average trailers 2 4	Average trailers 2 4	75,432			60,361			73,476			60,396			25.0	%		21.7	%	Average trailers 2 4			79,490				71,310				11.5	%

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

2 Defined under "Operating Statistics," above.

3 Includes ~~16,283~~16,262 and ~~16,048~~16,159 average company-owned tractors for the ~~third~~first quarter of ~~2022~~2023 and ~~2021,~~2022, respectively.

~~Includes~~4 ~~16,205~~Our average trailers includes 8,988 and ~~16,166~~ ~~average company-owned tractors for year-to-date periods ended September 30, 2022 and~~ ~~2021, respectively.~~

~~4 Third quarter~~ ~~2022~~ ~~includes~~ ~~7,952~~7,561 trailers related to leasing activities recorded within our non-reportable ~~operating segments. Third quarter 2021 does not include~~segments for the quarters ended March 31, 2023 and ~~6,682 trailers related to leasing activities recorded within our non-reportable operating segments.~~

~~The year-to-date period ending September 30,~~ 2022, ~~includes~~ respectively~~7,282~~ ~~trailers related to leasing activities recorded within our non-reportable operating segments. The year-to-date period ending September 30, 2021 does not include~~ ~~5,886 trailers related to leasing activities recorded within our non-reportable operating segments.~~.

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Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — The Truckload segment ~~grew revenue,~~performed well in an extremely difficult environment, operating with an 86.6% Adjusted Operating Ratio. These results include $8.5 million pre-tax ($0.04 per diluted share) insurance and claims expense for development on large losses from claim years 2018-2020, primarily related to an unfavorable jury verdict during the first quarter of 2023. Revenue, excluding fuel surcharge and intersegment transactions, was $866.0 million, a decrease of 8.0% quarter-over-quarter. Miles per tractor decreased by ~~3.7%~~2.7%, while ~~operating with an 81.8% Adjusted Operating Ratio. Revenue~~revenue per loaded mile, excluding fuel surcharge and intersegment transactions, ~~increased 8.1% year-over-year. Miles per tractor decreased by 4.2%, which is an improvement from~~was pressured throughout the ~~year-over-year decrease of 6.6% during the second~~ quarter, ~~of 2022.~~posting a 5.3% average decline quarter-over-quarter. These factors ultimately led to a 1.8% year-over-year increase in average revenue per tractor. We continue to experience inflationary pressures in driver related costs, maintenance, and insurance that offset the improvements in revenue per tractor. This resulted in a 14.9% reduction in Adjusted Operating Income.

We continue to add scale by increasing our trailer count which has grown to approximately 75,000 trailers as of the third quarter of 2022. We believe our vast and growing trailer fleet positions us to provide valuable capacity to our customers through our Truckload and Logistics segments.

~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— Our Truckload segment operated at a 79.7% Adjusted Operating Ratio, which improved by 40 basis points when compared to year-to-date September 30, 2021. This, along with 7.5% growth in revenue, excluding fuel surcharge and intersegment transactions, led to a 10.1% improvement in Adjusted Operating Income.

~~Revenue per loaded mile, excluding fuel surcharge and intersegment transactions increased 17.0% while miles per tractor decreased by 6.8%. These factors ultimately led to a 7.3%~~9.0% quarter-over-quarter increase in average revenue per tractor ~~and improved margins.~~as the improving revenue per tractor in our dedicated division was more than offset by declines in the over-the-road business.

LTL Segment

Dothan, Alabama-based ACT and Bismarck, North Dakota-based MME, both acquired in 2021, comprise our LTL segment. 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~~Fluctuations within each of these metrics isare 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 expenses, 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 of 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 Ended March 31,							Increase (Decrease)
		2023			2022
		(Dollars in thousands, except per tractor data)
Total revenue		$	255,304		$	255,125			0.1	%
Revenue, excluding fuel surcharge and intersegment transactions		$	213,929		$	214,675			(0.3	%)
GAAP: Operating income		$	26,582		$	26,377			0.8	%
Non-GAAP: Adjusted Operating Income 1		$	30,502		$	30,322			0.6	%
GAAP: Operating ratio 2		89.6		%	89.7		%		(10	bps)
Non-GAAP: Adjusted Operating Ratio 1 2		85.7		%	85.9		%		(20	bps)

LTL shipments per day 2		17,717			18,783				(5.7	%)
LTL weight per shipment 2		1,061			1,098				(3.4	%)
LTL average length of haul (miles) 2		535			522				2.5	%
LTL revenue per shipment 2		$	189.31		$	178.43			6.1	%
LTL revenue xFSC per shipment 2		$	158.45		$	150.70			5.1	%
LTL revenue per hundredweight 2		$	17.84		$	16.25			9.8	%
LTL revenue xFSC per hundredweight 2		$	14.93		$	13.73			8.7	%
LTL average tractors 2 3		3,163			3,091				2.3	%
LTL average trailers 2 4		8,387			8,302				1.0	%

Table of Contents Glossary of Terms

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

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

Quarter-to-Date September 30, Year-to-Date September 30, QTD 2022 vs. YTD 2022 vs.
2022 2021 2022 2021 QTD 2021 YTD 2021
(Dollars in thousands, except per tractor data) Increase (Decrease)
Total revenue $ 278,615 $ 191,906 $ 817,587 $ 191,906 45.2 % 326.0 %
Revenue, excluding fuel surcharge and intersegment transactions $ 224,443 $ 167,900 $ 663,296 $ 167,900 33.7 % 295.1 %
GAAP: Operating income $ 30,859 $ 17,469 $ 101,003 $ 17,469 76.7 % 478.2 %
Non-GAAP: Adjusted Operating Income 1
$ 34,891 $ 20,967 $ 112,975 $ 20,967 66.4 % 438.8 %
GAAP: Operating ratio 2
88.9 % 90.9 % 87.6 % 90.9 % (200 bps) (330 bps)
Non-GAAP: Adjusted Operating Ratio 1 2
84.5 % 87.5 % 83.0 % 87.5 % (300 bps) (450 bps)
LTL shipments per day 2
18,809 16,430 19,083 16,430 14.5 % 16.1 %
LTL weight per shipment 2
1,052 1,111 1,072 1,111 (5.3 %) (3.5 %)
LTL average length of haul (miles) 2
512 515 519 515 (0.6 %) 0.8 %
LTL revenue per shipment 2
$ 188.18 $ 157.55 $ 186.05 $ 157.55 19.4 % 18.1 %
LTL revenue xFSR per shipment 2
$ 151.07 $ 138.27 $ 151.14 $ 138.27 9.3 % 9.3 %
LTL revenue per hundredweight 2
$ 17.89 $ 14.18 $ 17.35 $ 14.18 26.2 % 22.4 %
LTL revenue xFSR per hundredweight 2
$ 14.37 $ 12.44 $ 14.09 $ 12.44 15.5 % 13.3 %
LTL average tractors 2 3
3,223 2,546 3,147 2,546 26.6 % 23.6 %
LTL average trailers 2 4
8,472 7,202 8,392 7,202 17.6 % 16.5 %

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

2Defined under "Operating Statistics," above.

3Our LTL tractor fleet includes ~~720~~619 and ~~547~~695 tractors from ACT's and MME's dedicated and other businesses for the ~~quarters ended~~ first quarter of 2023~~September 30, 2022~~ and ~~2021, respectively. Our LTL tractor fleet~~ ~~includes~~ ~~705 and 547 tractors from ACT's and MME's dedicated and other businesses for the year-to-date periods ended~~ ~~September 30,~~ 2022, ~~and~~ ~~2021,~~ respectively.

4Our LTL trailer fleet includes ~~999~~778 and ~~621~~907 trailers from ACT's and MME's dedicated and other businesses for the ~~quarters ended~~ first quarter of 2023~~September 30, 2022~~ and ~~2021, respectively. Our LTL trailers fleet~~ ~~includes~~ ~~956 and 621 trailers from ACT's and MME's dedicated and other businesses for the year-to-date periods ended~~ ~~September 30,~~ 2022, ~~and~~ ~~2021,~~ respectively.

Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Our LTL segment ~~continues to make strides to grow revenue and improve margins and is ahead of the performance targets established at the time of acquisition. Our LTL segment~~ operated atwell, producing an ~~84.5%~~85.7% Adjusted Operating Ratio during the ~~third~~first quarter of ~~2022,~~2023, a ~~300 basis-point~~20 basis point improvement over the ~~third~~first quarter of ~~2021.~~2022. Shipment counts decreased 5.7% quarter-over-quarter with softer demand. Revenue ~~excluding fuel surcharge,~~ per hundredweight increased ~~15.5%,~~8.7% excluding fuel surcharge, while revenue per shipment increased by 5.1%, excluding fuel surcharge, ~~increased by 9.3%.~~

~~The ACT~~reflecting a 3.4% decrease in weight per shipment. We expect our connected LTL network and ~~MME teams continue to achieve both customer and cost synergies and their systems are expected to be fully connected during~~ the ~~fourth quarter~~expanded use of ~~this year. We believe this~~shipment dimensioning technology will ~~allow~~provide additional opportunities for ~~additional freight opportunities across the network with existing and new customers.~~revenue growth. During the ~~fourth~~first quarter, ~~of this year,~~we increased our door count by 50, and we expect door capacity ~~will~~to continue to grow by ~~125 doors across 4 new or expanded locations.~~an additional 150 through the remainder of 2023. We remain encouraged by the strong performance within our LTL segment, and we continue to look for both organic and inorganic opportunities to geographically expand our footprint within the LTL market.

~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— Our LTL segment operated at an 83.0% Adjusted Operating Ratio during year-to-date September 30, 2022. Revenue, excluding fuel surcharge, per hundredweight was $14.09, while revenue per shipment, excluding fuel surcharge was $151.14.

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

Logistics Segment

The Logistics segment is less asset-intensive than the Truckload and LTL segments and is dependent upon capable non-driver employees, modern and effective information technology, and third-party capacity providers. Logistics revenue is generated by its brokerage operations. We generate additional revenue by offering specialized logistics solutions (including, but not limited to, trailing equipment, origin management, surge volume, disaster relief, special projects, and other logistic needs). 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-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands, except per load data)												Increase (Decrease)
																Quarter Ended March 31,							Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands, except per load data)					Increase (Decrease)
Total revenue	Total revenue	$	210,673		$	226,338		$	741,374		$	511,962		(6.9	%)		44.8	%	Total revenue		$	138,283				$	282,039					(51.0	%)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	$	209,964		$	221,374		$	737,454		$	499,263		(5.2	%)		47.7	%	Revenue, excluding intersegment transactions		$	136,777				$	280,171							(51.2	%)
GAAP: Operating income	GAAP: Operating income	$	27,459		$	27,128		$	110,809		$	49,061		1.2	%		125.9	%	GAAP: Operating income				$	12,820				$	39,601					(67.6	%)
Non-GAAP: Adjusted Operating Income 1 2	Non-GAAP: Adjusted Operating Income 1 2	$	27,794		$	27,462		$	111,812		$	49,492		1.2	%		125.9	%	Non-GAAP: Adjusted Operating Income 1 2				$	13,154				$	39,935					(67.1	%)
Revenue per load 2	Revenue per load 2	$	1,985		$	2,513		$	2,310		$	2,261		(21.0	%)		2.2	%	Revenue per load 2				$	1,715				$	2,697					(36.4	%)
Gross margin percentage 2	Gross margin percentage 2	20.9		%	18.1		%	21.8		%	16.5		%	280	bps		530	bps	Gross margin percentage 2				19.8		%			20.2		%				(40	bps)
GAAP: Operating ratio 2	GAAP: Operating ratio 2	87.0		%	88.0		%	85.1		%	90.4		%	(100	bps)		(530	bps)	GAAP: Operating ratio 2				90.7		%			86.0		%				470	bps
Non-GAAP: Adjusted Operating Ratio 1 2	Non-GAAP: Adjusted Operating Ratio 1 2	86.8		%	87.6		%	84.8		%	90.1		%	(80	bps)		(530	bps)	Non-GAAP: Adjusted Operating Ratio 1 2				90.4		%			85.7		%				470	bps

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

2 Defined under "Operating Statistics," above.

~~Comparison Between the Quarters Ended September 30, 2022 and 2021~~— ~~Demand for our logistics service offering remained strong during the third quarter, resulting in year-over-year load count growth of~~ ~~20.1%~~. We continue to leverage our consolidated fleet of approximately 75,000 trailers to support our power-only service offering. The Adjusted Operating Ratio improved 80 basis points year-over-year to 86.8%, resulting in a 1.2% increase in Adjusted Operating Income. Logistics ~~gross margin improved to 20.9% in the third quarter of 2022, compared to 18.1% in the third quarter of 2021, despite a 21.0% decrease in revenue per load.~~ ~~We remain committed to utilizing the scale of our trailer fleet and continuing to innovate with technology and services that we expect will allow us to capture new opportunities for revenue growth.~~

~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— Logistics revenue, excluding intersegment transactions, increased 47.7% as we grew load count by 44.6% while increasing revenue per load by 2.2%. The Adjusted Operating Ratio improved to 84.8%, resulting in a 125.9% increase in Adjusted Operating Income. Logistics ~~gross margin was~~ ~~21.8%~~ ~~in year-to-date September 30, 2022, compared to~~ ~~16.5%~~ ~~in year-to-date September 30, 2021.~~

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Comparison Between the Quarters Ended March 31, 2023 and 2022 — The Logistics segment Adjusted Operating Ratio was 90.4%, with a gross margin of 19.8% in the first quarter of 2023, down slightly from 20.2% in the first quarter of 2022. The brokerage space continues to be pressured by soft demand, causing our load count to decline by 23.2% quarter-over-quarter. This lack of demand resulted in revenue per load decreasing by 36.4% quarter-over-quarter. Despite the difficult environment, the Logistics business remained nimble and produced near double-digit margin for the quarter. We continue to leverage our consolidated fleet of approximately 79,000 trailers as we build out our power-only service. We continue to innovate with technology intended to remove friction and allow seamless connectivity, leading to services that we expect will capture new opportunities for revenue growth.

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. While rail pricing is determined on an annual basis, purchased transportation varies as it relates to rail capacity, freight demand, and customer shipping needs. The main fixed costs in the Intermodal segment are depreciation of our company tractors related to drayage, containers, and chassis, as well as non-driver employee compensation and benefits.


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands, except per load data)												Increase (Decrease)
																Quarter Ended March 31,							Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands, except per load data)					Increase (Decrease)
Total revenue	Total revenue	$	130,777		$	112,801		$	372,870		$	335,245		15.9	%		11.2	%	Total revenue		$	110,572				$	109,222					1.2	%
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	$	130,777		$	112,754		$	372,823		$	335,019		16.0	%		11.3	%	Revenue, excluding intersegment transactions		$	110,572				$	109,192							1.3	%
GAAP: Operating income	GAAP: Operating income	$	12,834		$	9,544		$	42,176		$	18,813		34.5	%		124.2	%	GAAP: Operating income				$	5,102				$	15,170					(66.4	%)

Average revenue per load 1	Average revenue per load 1	$	3,699		$	2,902		$	3,608		$	2,682		27.5	%		34.5	%	Average revenue per load 1				$	3,234				$	3,465					(6.7	%)
GAAP: Operating ratio 1	GAAP: Operating ratio 1	90.2		%	91.5		%	88.7		%	94.4		%	(130	bps)		(570	bps)	GAAP: Operating ratio 1				95.4		%			86.1		%				930	bps

Load count	Load count	35,354			38,856			103,343			124,897			(9.0	%)		(17.3	%)	Load count				34,193					31,515						8.5	%
Average tractors 1 2		628			609			612			605			3.1	%		1.2	%
Average containers 1		12,138			10,842			11,552			10,843			12.0	%		6.5	%
Average tractors 2																			Average tractors 2				607					584						3.9	%
Average containers 2																			Average containers 2				12,829					11,027						16.3	%

1 Defined under "Operating Statistics," above.

2 Includes 542 and ~~554~~533 company-owned tractors for the ~~third~~first quarter of ~~2022~~2023 and ~~2021, respectively.~~

~~Includes 544 and 550 company-owned tractors for the year-to-date periods ended September 30,~~ 2022, ~~and 2021,~~ respectively.

Comparison Between the Quarters Ended ~~September 30, 2022~~March 31, 2023 and ~~2021~~2022 — The Intermodal segment ~~grew~~operated with a 95.4% operating ratio while revenue excluding intersegment transactions ~~16.0% while operating income~~ increased ~~34.5%, as the operating ratio improved from 91.5%~~1.3% to ~~90.2%. While~~$110.6 million. We are pleased that load count ~~was negatively impacted~~increased quarter-over-quarter by ~~threats of labor strikes across~~8.5%, reflecting the first quarter-over-quarter increase in load count since transitioning western rail ~~industry during~~partners in January 2022. With rail service continuing to make progress and bid activity yielding promising new volume awards, we are encouraged for the ~~last two weeks of the quarter, revenue per load remained strong and increased 27.5% year-over-year. Labor challenges within the rail network appear~~near term opportunities for volumes to ~~be softening as we enter the fourth quarter, leading to improved transit times,~~improve in this business. There is still opportunity for more consistent ~~notification times,~~rail service to allow for improved equipment utilization and ~~more predictability for our customers, although network fluidity continues to be a rail market challenge.~~

As a result of our new network and improved service offering, we expect load volumes to inflect positive year-over-year in the fourth quarter as we grow with new customers and expand with existing customers. To position Intermodal for continued growth, we increased our container count by approximately 700 during the first three quarters of the year and we anticipate further growth in the fourth quarter. Intermodal continues to provide value to our customers and is complementary to the many services we offer.

~~Comparison Between Year-to-Date September 30, 2022 and 2021~~ — The Intermodal segment grew revenue, excluding intersegment transactions, 11.3% while operating income increased 124.2%, as the operating ratio improved from 94.4% to 88.7%. While load count was negatively impacted by threats of labor strikes across the rail industry during the last two weeks of the quarter, revenue per load remained strong and increased 34.5% year-over-year.additional freight opportunities.

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We expect to continue to grow with new customers and expand with existing customers. Our average container count increased by over 300 units sequentially as we have taken delivery of nearly all containers on order as of the end of the quarter. With our container fleet count now approximately 13,000, we do not expect to order additional containers until we achieve meaningful improvement in our turns per container. Our capex strategy is shifting to chassis moving forward as we work to better optimize our operation and reduce equipment costs. We remain focused on growing our load count and improving the efficiency of our assets as Intermodal continues to provide value to our customers and is complementary to the many services we offer.

Non-reportable Segments

Our non-reportable segments include support services provided to our customers and third-party carriers including insurance, equipment maintenance, equipment leasing, warehousing, trailer parts manufacturing, and warranty services. Our non-reportable segments also include certain corporate expenses (such as legal settlements and accruals, certain impairments, and $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 2022 vs.			YTD 2022 vs.
		2022		2021		2022		2021		QTD 2021			YTD 2021
		(Dollars in thousands)								Increase (Decrease)
												Quarter Ended March 31,							Increase (Decrease)
																	2023				2022				Increase (Decrease)
											(Dollars in thousands)					Increase (Decrease)
Total revenue	Total revenue	$	139,435	$	89,393	$	385,186	$	206,857	56.0	%		86.2	%	Total revenue		$	141,986			$	117,639				20.7	%
Operating income (loss)		$	18,487	$	9,403	$	48,102	$	4,635	96.6	%		937.8	%
Operating (loss) income															Operating (loss) income				$	(15,616)			$	11,821				(232.1	%)

~~Strong demand~~Revenue growth of 20.7% was offset by challenges within our third-party insurance program, resulting in a $15.6 million operating loss within our non-reportable segments. Overall, our Iron Insurance line of business produced a $22.8 million operating loss (or $0.11 per diluted share) during the first quarter of 2023, primarily due to increased frequency and unfavorable claim development during the quarter as well as insurance premium collection issues associated with small carriers who are struggling given the soft freight market conditions. We are continuing to execute our plan to improve the underwriting profitability of the insurance program, and we have decided to reduce our exposure to small carrier risk in the current market as we believe the extreme pressure small carriers are under is producing undesirable risk characteristics. This decision will be a headwind to growth in the near term, but we believe it is the prudent move for our ~~insurance, equipment maintenance, equipment leasing,~~business at this point in the cycle. We have applied rate increases to various lines of coverage, which will improve underwriting results on the risk that we elect to retain.

It will take some time for this pivot to materialize in the results, but we expect sequential income growth and ~~warehousing services led to year-over-year operating income improvements~~a positive contribution for these segments by the middle of ~~96.6% for~~ the ~~third quarter and 937.8% in year-to-date September 30, 2022. This was~~year, supported by ~~year-over-year~~continued revenue growth ~~of 56.0% for~~from the ~~third quarter and 86.2% for year-to-date September 30, 2022. We expect continued growth and income improvement from these~~other activities within our non-reportable segments moving forward.

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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 truckload and LTL fuel surcharge. Truckload and LTL fuel surcharge revenue can be volatile and is primarily dependent upon the cost of fuel, rather than operating expenses unrelated to fuel. Therefore, we believe that revenue, excluding truckload and LTL fuel surcharge is a better measure for analyzing many of our expenses and operating metrics.

~~Note:~~ In accordance with the accounting treatment applicable to each of our recent acquisitions, Knight-Swift's reported results do not include the comparative operating results of the acquired entities prior to the respective acquisition date. Accordingly, comparisons between the quarter and year-to-date September 30, 2022 results and prior periods may not be meaningful.


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Salaries, wages, and benefits	Salaries, wages, and benefits	$	559,849		$	500,673		$	1,645,861		$	1,248,656		11.8	%		31.8	%	Salaries, wages, and benefits		$	536,742				$	536,056					0.1	%
% of total revenue	% of total revenue	29.5		%	30.5		%	29.0		%	29.9		%	(100	bps)		(90	bps)	% of total revenue		32.8		%			29.3		%						350	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	33.9		%	33.1		%	33.0		%	32.4		%	80	bps		60	bps	% of revenue, excluding truckload and LTL fuel surcharge					37.0	%				32.5	%				450	bps

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

Several ongoing market factors have reduced the pool of available driving associates, contributing to a challenging driver sourcing market, which we believe will continue. Having a sufficient number of qualified driving associates is a significant headwind, although we continue to seek ways to attract and retain qualified driving associates, including heavily investing in our recruiting efforts, our driving academies, technology, our equipment, and our terminals that improve the experience of driving associates. We expect labor costs (related to both driving associates and non-driver employees) to remain inflationary, which we expect will result in additional pay increases in the future, thereby increasing our salaries, wages, and benefits expense.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Consolidated salaries, wages, and benefits increased by ~~$59.2~~$0.7 million for the ~~third~~first quarter of ~~2022,~~2023, as compared to the ~~third~~first quarter of ~~2021.~~2022. This ~~increase includes $18.0 million from the third quarter 2022 results of MME. The remaining~~ increase pertained to driving associate pay rates and non-driver salaries and wages, partially offset by a ~~3.2%~~2.5% decrease in miles driven by company driving ~~associates, excluding ACT and MME.~~associates.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— Consolidated salaries, wages, and benefits increased by $397.2 million for year-to-date September 30, 2022, as compared to year-to-date September 30, 2021. This increase includes $308.6 million from year-to-date September 30, 2022 results of ACT and MME. The remaining increase pertained to driving associate pay rates, non-driver salaries and wages, higher benefit costs, partially offset by a 5.8% decrease in miles driven by company driving associates, excluding ACT and MME.

~~Table of ContentsGlossary of Terms~~

~~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 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Fuel	Fuel	$	231,128		$	146,422		$	678,763		$	390,713		57.9	%		73.7	%	Fuel		$	187,759				$	190,489					(1.4	%)
% of total revenue	% of total revenue	12.2		%	8.9		%	11.9		%	9.3		%	330	bps		260	bps	% of total revenue		11.5		%			10.4		%						110	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	14.0		%	9.7		%	13.6		%	10.1		%	430	bps		350	bps	% of revenue, excluding truckload and LTL fuel surcharge					12.9	%				11.6	%				130	bps

Fuel expense consists primarily of diesel fuel expense for our company-owned tractors. The primary factors affecting our fuel expense are the cost of diesel fuel, the fuel economy of our equipment, and the miles driven by company driving associates.

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

Our fuel surcharge programs help to offset increases in fuel prices, but generally apply only to loaded miles for our Truckload and LTL segments and typically do not offset non-paid empty miles, idle time, or out-of-route miles driven. 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 Truckload and LTL segments. Therefore, many of these programs have a time lag between when fuel costs change and when the change is reflected in fuel surcharge revenue. Due to this time lag, our fuel expense, net of fuel surcharge, negatively impacts our operating income during periods of sharply rising fuel costs and positively impacts our operating income during periods of falling fuel costs. We continue to utilize our fuel efficiency initiatives such as trailer blades, idle-control, 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 Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — — The ~~$84.7~~$2.7 million ~~increase~~decrease in consolidated fuel expense for the ~~third~~first quarter is ~~attributable~~due to ~~higher average DOE fuel prices and partially offset by~~ a decrease in total miles driven by company driving associates ~~excluding ACT~~ and ~~MME.~~was partially offset by higher average DOE fuel prices for the first quarter of 2023 as compared to the first quarter of 2022. Average DOE fuel prices were ~~$5.09~~$4.40 per gallon for the ~~third~~first quarter of ~~2022~~2023 and ~~$3.36~~$4.36 per gallon for the ~~third~~first quarter of ~~2021.~~2022.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— The $288.1 million increase in consolidated fuel expense for year-to-date September 30, 2022, includes $79.8 million of fuel expense from ACT's and MME's year-to-date September 30, 2022 results. The remaining year-over-year increase is attributable to higher average DOE fuel prices, partially offset by a decrease in total miles driven by company driving associates, excluding ACT and MME, discussed above. Average DOE fuel prices were $4.99 per gallon for year-to-date September 30, 2022 and $3.16 per gallon for year-to-date September 30, 2021.

~~Table of ContentsGlossary of Terms~~

~~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 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Operations and maintenance	Operations and maintenance	$	115,918		$	86,951		$	318,525		$	226,334		33.3	%		40.7	%	Operations and maintenance		$	99,311				$	95,883					3.6	%
% of total revenue	% of total revenue	6.1		%	5.3		%	5.6		%	5.4		%	80	bps		20	bps	% of total revenue		6.1		%			5.2		%						90	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	7.0		%	5.8		%	6.4		%	5.9		%	120	bps		50	bps	% of revenue, excluding truckload and LTL fuel surcharge					6.8	%				5.8	%				100	bps

Operations and maintenance expense consists of direct operating expenses, such as driving associate hiring and recruiting expenses, equipment maintenance, and tire expense. Operations and maintenance expenses are ~~primarily~~typically 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 ~~2022,~~2023, which could increase future driving associate development and recruiting costs and negatively affect our operations and maintenance expense. We expect to continue refreshing our tractor and trailer fleet in the coming quarters, subject to availability of new revenue equipment, to maintain ~~or improve~~ the average age of our equipment.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — The increase of ~~$29.0~~$3.4 million for the ~~third~~first quarter of ~~2022~~2023 was attributed to higher maintenance expenses due to inflation ~~higher port per diem expenses as we navigate a backlog~~and was partially offset by lower chassis expense and road expense due to the decrease in total miles discussed above.

Table of ~~shipping containers at ports, and increased hiring expenses as we work to improve our seated truck count.~~ContentsGlossary of Terms

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

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

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~ — The increase of $92.2 million for year-to-date September 30, 2022 includes $29.8 million in operations and maintenance expense from ACT's and MME's year-to-date September 30, 2022 results. The remaining increase was attributed to the factors listed above.


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Insurance and claims	Insurance and claims	$	116,493		$	73,757		$	316,769		$	188,176		57.9	%		68.3	%	Insurance and claims		$	138,039				$	98,192					40.6	%
% of total revenue	% of total revenue	6.1		%	4.5		%	5.6		%	4.5		%	160	bps		110	bps	% of total revenue		8.4		%			5.4		%						300	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	7.1		%	4.9		%	6.3		%	4.9		%	220	bps		140	bps	% of revenue, excluding truckload and LTL fuel surcharge					9.5	%				6.0	%				350	bps

Insurance and claims expense consists of premiums for liability, physical damage, and cargo, and will vary based upon the frequency and severity of claims, our level of self-insurance, and premium expense. In recent years, insurance carriers have raised premiums for many businesses, including transportation companies, and as a result, our insurance and claims expense could increase in the future, or we could raise our self-insured retention limits or reduce excess coverage limits when our policies are renewed or replaced. In ~~2021, we expanded~~addition, our Iron Insurance line of business offers insurance ~~offerings~~products to third-party carriers, earning additional premium revenues, which ~~were~~are partially offset by increased insurance ~~reserves.~~reserves, but does increase our exposure to claims and inability to collect premiums. Insurance and claims expense also varies based on the number of miles driven by company driving associates and independent contractors, the frequency and severity of accidents, trends in development factors used in actuarial accruals, and developments in large, prior-year claims. In future periods, our higher self-insured retention limits, or lower excess coverage limits, and exposure through Iron Insurance may cause increased volatility in our consolidated insurance and claims expense.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Consolidated insurance and claims expense increased by ~~$42.7~~$39.8 million for the ~~third~~first quarter of ~~2022,~~2023, as compared to the ~~third~~first quarter of ~~2021.~~2022. The increase was ~~primarily~~predominately due to ~~an increase~~increased frequency and unfavorable claim development during the quarter within our Iron Insurance line of business as well as negative developments within our self-insured retention limits on certain large prior year insurance ~~reserves incurred through our third-party carrier insurance program.~~

~~Table of ContentsGlossary of Terms~~

~~KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.~~

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

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~Consolidated insurance and~~ claims ~~expense increased by $128.6~~totaling $8.5 million ~~for year-to-date September 30, 2022, as compared to the same period last year. The increase was~~pre-tax, primarily ~~due~~related to an ~~increase~~unfavorable jury verdict during the first quarter of insurance reserves incurred through our third-party carrier insurance program. The remaining increase is primarily due to the inclusion of $18.2 million of insurance and claims expense from ACT's and MME's year-to-date September 30, 2022 results.2023.


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Operating taxes and licenses	Operating taxes and licenses	$	26,628		$	27,475		$	85,869		$	71,240		(3.1	%)		20.5	%	Operating taxes and licenses		$	25,890				$	29,037					(10.8	%)
% of total revenue	% of total revenue	1.4		%	1.7		%	1.5		%	1.7		%	(30	bps)		(20	bps)	% of total revenue		1.6		%			1.6		%						—	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	1.6		%	1.8		%	1.7		%	1.8		%	(20	bps)		(10	bps)	% of revenue, excluding truckload and LTL fuel surcharge					1.8	%				1.8	%				—	bps

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

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Operating taxes and licenses expenses decreased by ~~$0.8~~$3.1 million, but remained ~~relatively~~ flat as a percentage of revenue, excluding truckload and LTL fuel surcharge.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~The year-over-year increase in operating taxes and licenses expenses of $14.6 million for year-to-date September 30, 2022 was primarily composed of ACT's and MME's 2022 results.~~

Quarter-to-Date September 30, Year-to-Date September 30, QTD 2022 vs. YTD 2022 vs.
2022 2021 2022 2021 QTD 2021 YTD 2021
(Dollars in thousands) Increase (Decrease)
Communications $ 5,095 $ 6,612 $ 16,709 $ 16,284 (22.9 %) 2.6 %
% of total revenue 0.3 % 0.4 % 0.3 % 0.4 % (10 bps) (10 bps)
% of revenue, excluding truckload and LTL fuel surcharge 0.3 % 0.4 % 0.3 % 0.4 % (10 bps) (10 bps)

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

•~~Comparison Between the Quarters Ended September 30, 2022 and 2021~~— ~~The year-over-year decrease in communications expense of $1.5 million for the third quarter of 2022 was primarily due to the implementation of new technology on our revenue equipment.~~

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~The year-over-year increase in communications expense $0.4 million for year-to-date September 30, 2022 was primarily composed of ACT's and MME's 2022 results.~~

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		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,							Increase (Decrease)
																					2023				2022				Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Depreciation and amortization of property and equipment		$	150,363		$	138,570		$	442,889		$	382,091		8.5	%		15.9	%
Communications																			Communications		$	5,749			$	5,870				(2.1	%)
% of total revenue	% of total revenue	7.9		%	8.4		%	7.8		%	9.1		%	(50	bps)		(130	bps)	% of total revenue				0.4	%			0.3	%		10	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	9.1		%	9.2		%	8.9		%	9.9		%	(10	bps)		(100	bps)	% of revenue, excluding truckload and LTL fuel surcharge				0.4	%			0.4	%		—	bps

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

Comparison Between the Quarters Ended March 31, 2023 and 2022 — Communications expense decreased $0.1 million, but remained flat as a percentage of revenue, excluding truckload and LTL fuel surcharge.





	Quarter Ended March 31,							Increase (Decrease)
		2023			2022
		(Dollars in thousands)
Depreciation and amortization of property and equipment		$	155,966		$	145,044			7.5	%
% of total revenue		9.5		%	7.9		%		160	bps
% of revenue, excluding truckload and LTL fuel surcharge		10.8		%	8.8		%		200	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. Depreciation can also be affected by the cost of used equipment that we sell or trade and the replacement of older used equipment. Management periodically reviews the condition, average age, and reasonableness of estimated useful lives and salvage values of our equipment and considers such factors in light of our experience with similar assets, used equipment market conditions, and prevailing industry practices.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Consolidated depreciation and amortization of property and equipment increased by ~~$11.8~~$10.9 million for the ~~third~~first quarter of ~~2022,~~2023, as compared to the same period last year. This ~~increase includes MME's results of $2.1 million from the third quarter of 2022. The remaining~~ increase was related to an increase in owned versus leased equipment and higher ~~deprecation~~depreciation for capital improvements made to our terminals.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— Consolidated depreciation and amortization of property and equipment increased by $60.8 million for year-to-date September 30, 2022, as compared to the same period last year. These increases include ACT's and MME's results of $34.3 million for year-to-date September 30, 2022. 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 and as a percentage of consolidated revenue, excluding truckload and LTL fuel surcharge, as we currently do not plan to use operating leases as a primary means of funding our equipment purchases, terminal improvements, or terminal expansions in the remainder of ~~2022.~~2023.


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Amortization of intangibles	Amortization of intangibles	$	16,254		$	15,719		$	48,635		$	39,452		3.4	%		23.3	%	Amortization of intangibles		$	16,183				$	16,166					0.1	%
% of total revenue	% of total revenue	0.9		%	1.0		%	0.9		%	0.9		%	(10	bps)		—	bps	% of total revenue		1.0		%			0.9		%						10	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	1.0		%	1.0		%	1.0		%	1.0		%	—	bps		—	bps	% of revenue, excluding truckload and LTL fuel surcharge					1.1	%				1.0	%				10	bps

Amortization of intangibles relates to intangible assets identified with the 2017 Merger and various acquisitions. See Note 3 in Part I, Item 1, of this Quarterly Report for more details regarding details of our acquisitions.

The increases of $0.5 million for the third quarter of 2022 and $9.2 million for year-to-date September 30, 2022, as compared to the same periods last year, were attributed to the ACT, MME, UTXL, and Eleos acquisitions during 2021.

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		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Rental expense	Rental expense	$	15,216		$	12,002		$	42,109		$	42,265		26.8	%		(0.4	%)	Rental expense		$	15,068				$	13,401					12.4	%
% of total revenue	% of total revenue	0.8		%	0.7		%	0.7		%	1.0		%	10	bps		(30	bps)	% of total revenue		0.9		%			0.7		%						20	bps
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	0.9		%	0.8		%	0.8		%	1.1		%	10	bps		(30	bps)	% of revenue, excluding truckload and LTL fuel surcharge					1.0	%				0.8	%				20	bps

Rental expense consists primarily of payments for ~~tractors~~our terminals and ~~trailers financed with~~other real estate leases and, to a lesser extent, payments for revenue equipment from expiring operating leases. The primary factors affecting the expense are the size and location of our ~~revenue equipment fleet and the relative percentage of owned versus~~ leased ~~equipment.~~properties.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — The ~~quarter over quarter~~quarter-over-quarter increase of ~~$3.2~~$1.7 million ~~includes $1.2 million of additional expense in 2022 from MME's operating results and additional expense~~is primarily related to the incorporation of new facilities as we expand our network.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— The $0.2 million decrease in consolidated rental expenses for year-to-date of September 30, 2022, compared to year-to-date September 30, 2021, is primarily due to an increase in our owned versus leased equipment. This was partially offset by $4.6 million of additional expense from ACT's and MME's operating results included during year-to-date September 30, 2022.

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


		Quarter-to-Date September 30,						Year-to-Date September 30,						QTD 2022 vs.			YTD 2022 vs.
		2022			2021			2022			2021			QTD 2021			YTD 2021
		(Dollars in thousands)												Increase (Decrease)
																Quarter Ended March 31,								Increase (Decrease)
																					2023					2022					Increase (Decrease)
															(Dollars in thousands)					Increase (Decrease)
Purchased transportation	Purchased transportation	$	364,394		$	352,061		$	1,135,750		$	914,448		3.5	%		24.2	%	Purchased transportation		$	280,729				$	386,446					(27.4	%)
% of total revenue	% of total revenue	19.2		%	21.4		%	20.0		%	21.9		%	(220	bps)		(190	bps)	% of total revenue		17.1		%			21.2		%						(410	bps)
% of revenue, excluding truckload and LTL fuel surcharge	% of revenue, excluding truckload and LTL fuel surcharge	22.1		%	23.3		%	22.7		%	23.7		%	(120	bps)		(100	bps)	% of revenue, excluding truckload and LTL fuel surcharge					19.4	%				23.5	%				(410	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.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — Consolidated purchased transportation expense ~~increased~~decreased by ~~$12.3~~$105.7 million for the ~~third~~first quarter of ~~2022,~~2023, as compared to the same period last year, primarily due to ~~inflationary pressures within our intermodal rail network.~~

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~Consolidated purchased transportation expense increased by $221.3 million for year-to-date September 30, 2022, as compared to the same period last year, primarily due to increased~~decreased load ~~volumes~~volume within our logistics ~~business. Purchased transportation expense also includes ACT's and MME's results of $12.8 million for year-to-date September 30, 2022.~~business, partially offset by increased intermodal load volume.

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





	Quarter Ended March 31,					Increase (Decrease)
		2023		2022
		(Dollars in thousands)
Impairments		$	—	$	810		(100.0	%)

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

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Quarter-to-Date September 30, Year-to-Date September 30, QTD 2022 vs. YTD 2022 vs.
2022 2021 2022 2021 QTD 2021 YTD 2021
(Dollars in thousands) Increase (Decrease)
Impairments $ — $ — $ 810 $ — — % 100.0 %

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

Quarter-to-Date September 30, Year-to-Date September 30, QTD 2022 vs. YTD 2022 vs.
2022 2021 2022 2021 QTD 2021 YTD 2021
(Dollars in thousands) Increase (Decrease)
Miscellaneous operating expenses $ 30,060 $ 12,116 $ 62,965 $ 38,040 148.1 % 65.5 %





	Quarter Ended March 31,					Increase (Decrease)
		2023		2022
		(Dollars in thousands)
Miscellaneous operating expenses		$	30,709	$	11,509		166.8	%

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

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — The ~~$17.9~~$19.2 million increase in net consolidated miscellaneous operating expenses is ~~comprised of~~primarily due to a ~~$6.8~~$13.9 million decrease in gain on sales of equipment ~~excluding ACT~~ and ~~MME, a net increase of $2.4~~$1.5 million in ~~legal settlements expense, and higher operating expenses associated with increased travel time and return~~transaction fees related to ~~work programs.~~

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~The $24.9 million increase in net consolidated miscellaneous operating expenses includes $24.6 million~~the planned acquisition of additional expense from ACT's and MME's operating results for year-to-date September 30, 2022, a net increase in legal settlements expense of $3.3 million, and higher operating expenses associated with increased travel time and return to work programs. This was offset by a $24.0 million increase in gain on sales of equipment, excluding ACT and MME.U.S. Xpress.

Consolidated Other Expenses (Income)


		Quarter-to-Date September 30,				Year-to-Date September 30,				QTD 2022 vs.			YTD 2022 vs.
		2022		2021		2022		2021		QTD 2021			YTD 2021
		(Dollars in thousands)								Increase (Decrease)
												Quarter Ended March 31,							Increase (Decrease)
																	2023			2022			Increase (Decrease)
											(Dollars in thousands)					Increase (Decrease)

Interest expense	Interest expense	$	14,679	$	7,179	$	30,704	$	13,972	104.5	%		119.8	%	Interest expense		$	23,091		$	6,680			245.7	%
Other (income) expenses, net	Other (income) expenses, net	(8,488)		(4,072)		31,493		(37,017)		108.4	%		(185.1	%)	Other (income) expenses, net				(9,703)			14,405		(167.4	%)
Income tax expense	Income tax expense	65,679		61,059		206,943		158,171		7.6	%		30.8	%	Income tax expense				32,735			69,174		(52.7	%)

Interest expense — Interest expense is comprised of debt and finance lease interest expense as well as amortization of deferred loan costs. ~~Interest~~The increase in interest expense ~~increased~~ during the ~~third~~ quarter ~~and year-to-date of 2022~~ended March 31, 2023 was primarily due to ~~both~~ higher interest ~~rates and higher overall debt balances from the 2021 Debt Agreement which was entered into on September 3, 2021 and replaced the July 2021 Term Loan and 2017 Debt Agreement.~~rates. Additional details regarding our debt are discussed in Note 6 in Part I, Item 1 of this Quarterly Report.

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

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

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — — The ~~$4.4~~$24.1 million increase in other (income) expenses, net is primarily driven by ~~gains from~~a $14.4 million unrealized loss on our investment in Embark recorded in the first quarter of 2022 and a net gain recorded within our portfolio of investments induring the ~~third quarter. The third~~first quarter of ~~2021 included the 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, 2022 and 2021~~— The $68.5 million unfavorable change in other (income) expenses, net is primarily driven by unrealized losses from the mark-to-market adjustment of our investment in Embark for year-to-date September 30, 2022 compared to gains for year-to-date September 30, 2021.2023.

Income tax expense — In addition to the discussion below, Note 4 in Part I, Item 1 of this Quarterly Report provides further analysis related to income taxes.

•Comparison Between the Quarters Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ — The ~~$4.6~~$36.4 million ~~increase~~decrease in consolidated income tax expense was primarily due to ~~the year over year~~a reduction of favorable discrete items primarily associated with the ACT acquisition in the third quarter of 2021. The effective tax rate of 25.2% for the third quarter of 2022, an increase from 22.8% for the third quarter of 2021, was due to the discrete items from the third quarter of 2021 mentioned above.

•~~Comparison Between Year-to-Date September 30, 2022 and 2021~~— ~~The $48.8 million increase in consolidated income tax expense was primarily due to an increase in income before income taxes.~~pre-tax income. This resulted in an effective tax rate of 24.0% for the first quarter of 2023, and 24.9% for ~~year-to-date September 30, 2022 compared to 24.4% for year-to-date September 30, 2021.~~the first quarter of 2022.

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Non-GAAP Financial Measures

The terms "Adjusted Net Income Attributable to Knight-Swift," "Adjusted EPS," "Adjusted Operating Income," "Adjusted Operating Ratio," and "Free Cash Flow," 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. Management and the Board use Free Cash Flow as a key measure of our liquidity. Free Cash Flow does not represent residual cash flow available for discretionary expenditures. 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, Adjusted Operating Ratio, and Free Cash Flow 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, GAAP reportable segment operating ratio to non-GAAP reportable segment Adjusted Operating Ratio, and GAAP cash flow from operations to non-GAAP Free Cash Flow.

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Non-GAAP Reconciliation: Consolidated Adjusted Net Income Attributable to Knight-Swift and Adjusted EPS


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
		(In thousands)										(In thousands)
GAAP: Net income attributable to Knight-Swift	GAAP: Net income attributable to Knight-Swift	$	194,795	$	206,178	$	622,624	$	488,772	GAAP: Net income attributable to Knight-Swift		$	104,284	$	208,337
Adjusted for:	Adjusted for:									Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift	65,679		61,059		206,943		158,171		Income tax expense attributable to Knight-Swift		32,735		69,174
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift	260,474		267,237		829,567		646,943		Income before income taxes attributable to Knight-Swift		137,019		277,511
Amortization of intangibles 1	Amortization of intangibles 1	16,254		15,719		48,635		39,452		Amortization of intangibles 1		16,183		16,166

Impairments 2	Impairments 2	—		—		810		—		Impairments 2		—		810
Legal accruals 3	Legal accruals 3	(2,640)		(5,005)		415		(2,884)		Legal accruals 3		(300)		5,055
Transaction fees 4										Transaction fees 4		1,536		—
Severance expense 5										Severance expense 5		1,452		—

Transaction fees 4		—		2,307		—		2,966

Write-off of deferred debt issuance costs 5		—		1,024		—		1,024
Adjusted income before income taxes	Adjusted income before income taxes	274,088		281,282		879,427		687,501		Adjusted income before income taxes		155,890		299,542
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate	(69,121)		(64,202)		(219,408)		(167,990)		Provision for income tax expense at effective rate		(37,399)		(74,679)
Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift	$	204,967	$	217,080	$	660,019	$	519,511	Non-GAAP: Adjusted Net Income Attributable to Knight-Swift		$	118,491	$	224,863

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


		Quarter-to-Date September 30,				Year-to-Date September 30,					Quarter Ended March 31,
		2022		2021		2022		2021				2023		2022
GAAP: Earnings per diluted share	GAAP: Earnings per diluted share	$	1.21	$	1.23	$	3.80	$	2.93	GAAP: Earnings per diluted share		$	0.64	$	1.25
Adjusted for:	Adjusted for:									Adjusted for:
Income tax expense attributable to Knight-Swift	Income tax expense attributable to Knight-Swift	0.41		0.37		1.26		0.95		Income tax expense attributable to Knight-Swift		0.20		0.42
Income before income taxes attributable to Knight-Swift	Income before income taxes attributable to Knight-Swift	1.61		1.60		5.07		3.88		Income before income taxes attributable to Knight-Swift		0.85		1.67
Amortization of intangibles 1	Amortization of intangibles 1	0.10		0.09		0.30		0.24		Amortization of intangibles 1		0.10		0.10

Impairments 2	Impairments 2	—		—		—		—		Impairments 2		—		—
Legal accruals 3	Legal accruals 3	(0.02)		(0.03)		—		(0.02)		Legal accruals 3		—		0.03
Transaction fees 4										Transaction fees 4		0.01		—
Severance expense 5										Severance expense 5		0.01		—

Transaction fees 4		—		0.01		—		0.02

Write-off of deferred debt issuance costs 5		—		0.01		—		0.01
Adjusted income before income taxes	Adjusted income before income taxes	1.70		1.68		5.37		4.12		Adjusted income before income taxes		0.96		1.80
Provision for income tax expense at effective rate	Provision for income tax expense at effective rate	(0.43)		(0.38)		(1.34)		(1.01)		Provision for income tax expense at effective rate		(0.23)		(0.45)
Non-GAAP: Adjusted EPS	Non-GAAP: Adjusted EPS	$	1.27	$	1.30	$	4.03	$	3.11	Non-GAAP: Adjusted EPS		$	0.73	$	1.35

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 our acquisitions.

2 "Impairments" reflects the non-cash impairment of building improvements (within our non-reportable segments).

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

•~~During the second and third quarters of 2022, the Company decreased~~First quarter 2023 legal expense reflects a decrease in the estimated exposure related to ~~certain~~an accrued legal ~~matters~~matter previously identified as probable and estimable in prior periods based on a recent settlement ~~agreements. Additional 2022 legal costs relate to certain lawsuits arising from employee and contract related matters.~~agreement.

•~~Third~~First quarter ~~2021 reversal~~2022 legal expense reflects costs related to 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. Additional 2021 legal costs relate to certain settlements and class action lawsuits arising from employee and contract related matters.

4 "Transaction fees" reflects consisted of legal and professional fees associated with the planned acquisition of U.S. Xpress. The transaction fees are included within "Miscellaneous operating expenses" in the condensed statements of comprehensive income.

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

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4 "Transaction fees" consisted of legal and professional fees associated with the acquisitions of UTXL and ACT. The transaction fees are included within "Miscellaneous operating expenses" in the condensed consolidated statements of comprehensive income.

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

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


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
GAAP Presentation	GAAP Presentation	(Dollars in thousands)												GAAP Presentation		(Dollars in thousands)
Total revenue	Total revenue	$	1,896,839		$	1,642,445		$	5,684,959		$	4,181,160		Total revenue		$	1,636,932		$	1,826,989
Total operating expenses	Total operating expenses	(1,631,398)			(1,372,358)			(4,795,654)			(3,557,699)			Total operating expenses		(1,492,145)			(1,528,903)
Operating income	Operating income	$	265,441		$	270,087		$	889,305		$	623,461		Operating income		$	144,787		$	298,086
Operating ratio	Operating ratio	86.0		%	83.6		%	84.4		%	85.1		%	Operating ratio		91.2		%	83.7		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	1,896,839		$	1,642,445		$	5,684,959		$	4,181,160		Total revenue		$	1,636,932		$	1,826,989
Truckload and LTL fuel surcharge	Truckload and LTL fuel surcharge	(246,857)			(131,873)			(692,568)			(324,611)			Truckload and LTL fuel surcharge		(186,639)			(179,111)
Revenue, excluding truckload and LTL fuel surcharge	Revenue, excluding truckload and LTL fuel surcharge	1,649,982			1,510,572			4,992,391			3,856,549			Revenue, excluding truckload and LTL fuel surcharge		1,450,293			1,647,878

Total operating expenses	Total operating expenses	1,631,398			1,372,358			4,795,654			3,557,699			Total operating expenses		1,492,145			1,528,903
Adjusted for:	Adjusted for:													Adjusted for:
Truckload and LTL fuel surcharge	Truckload and LTL fuel surcharge	(246,857)			(131,873)			(692,568)			(324,611)			Truckload and LTL fuel surcharge		(186,639)			(179,111)
Amortization of intangibles 1	Amortization of intangibles 1	(16,254)			(15,719)			(48,635)			(39,452)			Amortization of intangibles 1		(16,183)			(16,166)

Impairments 2	Impairments 2	—			—			(810)			—			Impairments 2		—			(810)
Legal accruals 3	Legal accruals 3	2,640			5,005			(415)			2,884			Legal accruals 3		300			(5,055)

Transaction fees 4	Transaction fees 4	—			(2,307)			—			(2,966)			Transaction fees 4		(1,536)			—
Severance expense 5														Severance expense 5		(1,452)			—
Adjusted Operating Expenses	Adjusted Operating Expenses	1,370,927			1,227,464			4,053,226			3,193,554			Adjusted Operating Expenses		1,286,635			1,327,761
Adjusted Operating Income	Adjusted Operating Income	$	279,055		$	283,108		$	939,165		$	662,995		Adjusted Operating Income		$	163,658		$	320,117
Adjusted Operating Ratio	Adjusted Operating Ratio	83.1		%	81.3		%	81.2		%	82.8		%	Adjusted Operating Ratio		88.7		%	80.6		%

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

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

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

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

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

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

Truckload Segment


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
GAAP Presentation	GAAP Presentation	(Dollars in thousands)												GAAP Presentation		(Dollars in thousands)
Total revenue	Total revenue	$	1,160,735		$	1,041,332		$	3,430,075		$	2,990,137		Total revenue		$	1,012,245		$	1,080,531
Total operating expenses	Total operating expenses	(984,933)			(834,789)			(2,842,860)			(2,456,654)			Total operating expenses		(896,346)			(875,414)
Operating income	Operating income	$	175,802		$	206,543		$	587,215		$	533,483		Operating income		$	115,899		$	205,117
Operating ratio	Operating ratio	84.9		%	80.2		%	82.9		%	82.2		%	Operating ratio		88.6		%	81.0		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	1,160,735		$	1,041,332		$	3,430,075		$	2,990,137		Total revenue		$	1,012,245		$	1,080,531
Fuel surcharge	Fuel surcharge	(192,685)			(107,867)			(538,277)			(300,605)			Fuel surcharge		(145,264)			(138,661)
Intersegment transactions	Intersegment transactions	(281)			(260)			(1,016)			(953)			Intersegment transactions		(1,001)			(336)
Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions	967,769			933,205			2,890,782			2,688,579			Revenue, excluding fuel surcharge and intersegment transactions		865,980			941,534

Total operating expenses	Total operating expenses	984,933			834,789			2,842,860			2,456,654			Total operating expenses		896,346			875,414
Adjusted for:	Adjusted for:													Adjusted for:
Fuel surcharge	Fuel surcharge	(192,685)			(107,867)			(538,277)			(300,605)			Fuel surcharge		(145,264)			(138,661)
Intersegment transactions	Intersegment transactions	(281)			(260)			(1,016)			(953)			Intersegment transactions		(1,001)			(336)
Amortization of intangibles 1	Amortization of intangibles 1	(324)			(323)			(971)			(971)			Amortization of intangibles 1		(343)			(324)

Adjusted Operating Expenses	Adjusted Operating Expenses	791,643			726,339			2,302,596			2,154,125			Adjusted Operating Expenses		749,738			736,093
Adjusted Operating Income	Adjusted Operating Income	$	176,126		$	206,866		$	588,186		$	534,454		Adjusted Operating Income		$	116,242		$	205,441
Adjusted Operating Ratio	Adjusted Operating Ratio	81.8		%	77.8		%	79.7		%	80.1		%	Adjusted Operating Ratio		86.6		%	78.2		%

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

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LTL Segment


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
GAAP Presentation	GAAP Presentation	(Dollars in thousands)												GAAP Presentation		(Dollars in thousands)
Total revenue	Total revenue	$	278,615		$	191,906		$	817,587		$	191,906		Total revenue		$	255,304		$	255,125
Total operating expenses	Total operating expenses	(247,756)			(174,437)			(716,584)			(174,437)			Total operating expenses		(228,722)			(228,748)
Operating income	Operating income	$	30,859		$	17,469		$	101,003		$	17,469		Operating income		$	26,582		$	26,377
Operating ratio	Operating ratio	88.9		%	90.9		%	87.6		%	90.9		%	Operating ratio		89.6		%	89.7		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	278,615		$	191,906		$	817,587		$	191,906		Total revenue		$	255,304		$	255,125
Fuel surcharge	Fuel surcharge	(54,172)			(24,006)			(154,291)			(24,006)			Fuel surcharge		(41,375)			(40,450)

Revenue, excluding fuel surcharge and intersegment transactions	Revenue, excluding fuel surcharge and intersegment transactions	224,443			167,900			663,296			167,900			Revenue, excluding fuel surcharge and intersegment transactions		213,929			214,675

Total operating expenses	Total operating expenses	247,756			174,437			716,584			174,437			Total operating expenses		228,722			228,748
Adjusted for:	Adjusted for:													Adjusted for:
Fuel surcharge	Fuel surcharge	(54,172)			(24,006)			(154,291)			(24,006)			Fuel surcharge		(41,375)			(40,450)

Amortization of intangibles 1	Amortization of intangibles 1	(4,032)			(3,498)			(11,972)			(3,498)			Amortization of intangibles 1		(3,920)			(3,945)

Adjusted Operating Expenses	Adjusted Operating Expenses	189,552			146,933			550,321			146,933			Adjusted Operating Expenses		183,427			184,353
Adjusted Operating Income	Adjusted Operating Income	$	34,891		$	20,967		$	112,975		$	20,967		Adjusted Operating Income		$	30,502		$	30,322
Adjusted Operating Ratio	Adjusted Operating Ratio	84.5		%	87.5		%	83.0		%	87.5		%	Adjusted Operating Ratio		85.7		%	85.9		%

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

Logistics Segment


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
GAAP Presentation	GAAP Presentation	(Dollars in thousands)												GAAP Presentation		(Dollars in thousands)
Total revenue	Total revenue	$	210,673		$	226,338		$	741,374		$	511,962		Total revenue		$	138,283		$	282,039
Total operating expenses	Total operating expenses	(183,214)			(199,210)			(630,565)			(462,901)			Total operating expenses		(125,463)			(242,438)
Operating income	Operating income	$	27,459		$	27,128		$	110,809		$	49,061		Operating income		$	12,820		$	39,601
Operating ratio	Operating ratio	87.0		%	88.0		%	85.1		%	90.4		%	Operating ratio		90.7		%	86.0		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	210,673		$	226,338		$	741,374		$	511,962		Total revenue		$	138,283		$	282,039

Intersegment transactions	Intersegment transactions	(709)			(4,964)			(3,920)			(12,699)			Intersegment transactions		(1,506)			(1,868)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	209,964			221,374			737,454			499,263			Revenue, excluding intersegment transactions		136,777			280,171

Total operating expenses	Total operating expenses	183,214			199,210			630,565			462,901			Total operating expenses		125,463			242,438
Adjusted for:	Adjusted for:													Adjusted for:

Intersegment transactions	Intersegment transactions	(709)			(4,964)			(3,920)			(12,699)			Intersegment transactions		(1,506)			(1,868)
Amortization of intangibles 1	Amortization of intangibles 1	(335)			(334)			(1,003)			(431)			Amortization of intangibles 1		(334)			(334)

Adjusted Operating Expenses	Adjusted Operating Expenses	182,170			193,912			625,642			449,771			Adjusted Operating Expenses		123,623			240,236
Adjusted Operating Income	Adjusted Operating Income	$	27,794		$	27,462		$	111,812		$	49,492		Adjusted Operating Income		$	13,154		$	39,935
Adjusted Operating Ratio	Adjusted Operating Ratio	86.8		%	87.6		%	84.8		%	90.1		%	Adjusted Operating Ratio		90.4		%	85.7		%

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

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Intermodal Segment


		Quarter-to-Date September 30,						Year-to-Date September 30,							Quarter Ended March 31,
		2022			2021			2022			2021					2023			2022
GAAP Presentation	GAAP Presentation	(Dollars in thousands)												GAAP Presentation		(Dollars in thousands)
Total revenue	Total revenue	$	130,777		$	112,801		$	372,870		$	335,245		Total revenue		$	110,572		$	109,222
Total operating expenses	Total operating expenses	(117,943)			(103,257)			(330,694)			(316,432)			Total operating expenses		(105,470)			(94,052)
Operating income	Operating income	$	12,834		$	9,544		$	42,176		$	18,813		Operating income		$	5,102		$	15,170
Operating ratio	Operating ratio	90.2		%	91.5		%	88.7		%	94.4		%	Operating ratio		95.4		%	86.1		%

Non-GAAP Presentation	Non-GAAP Presentation													Non-GAAP Presentation
Total revenue	Total revenue	$	130,777		$	112,801		$	372,870		$	335,245		Total revenue		$	110,572		$	109,222

Intersegment transactions	Intersegment transactions	—			(47)			(47)			(226)			Intersegment transactions		—			(30)
Revenue, excluding intersegment transactions	Revenue, excluding intersegment transactions	130,777			112,754			372,823			335,019			Revenue, excluding intersegment transactions		110,572			109,192

Total operating expenses	Total operating expenses	117,943			103,257			330,694			316,432			Total operating expenses		105,470			94,052
Adjusted for:	Adjusted for:													Adjusted for:

Intersegment transactions	Intersegment transactions	—			(47)			(47)			(226)			Intersegment transactions		—			(30)

Adjusted Operating Expenses	Adjusted Operating Expenses	117,943			103,210			330,647			316,206			Adjusted Operating Expenses		105,470			94,022
Adjusted Operating Income	Adjusted Operating Income	$	12,834		$	9,544		$	42,176		$	18,813		Adjusted Operating Income		$	5,102		$	15,170
Adjusted Operating Ratio	Adjusted Operating Ratio	90.2		%	91.5		%	88.7		%	94.4		%	Adjusted Operating Ratio		95.4		%	86.1		%

Non-GAAP Reconciliation: Free Cash Flow


	~~Year-to-Date September 30, 2022~~Quarter Ended March 31, 2023

GAAP: Cash flows from operations	$	~~1,099,195~~345,159
Adjusted for:
Proceeds from sale of property and equipment, including assets held for sale	~~139,545~~59,345
Purchases of property and equipment	~~(496,237)~~(260,339)
Non-GAAP: Free Cash Flow	$	~~742,503~~144,165

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


Liquidity and Capital Resources

Sources of Liquidity

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


Source	~~September 30, 2022~~March 31, 2023
	(In thousands)
Cash and cash equivalents, excluding restricted cash	$	~~194,082~~191,245
Availability under 2021 Revolver, due September 2026 1	~~924,754~~1,088,615
Availability under ~~2021~~2022 RSA, due April 2024 2	~~55,700~~12,700
~~Availability under 2021 Prudential Notes, issuance ending October 2023~~ 3	~~87,857~~
Total unrestricted liquidity	$	~~1,262,393~~1,292,560
Cash and cash equivalents – restricted 43	~~147,681~~207,363
Restricted investments, held-to-maturity, amortized cost 43	~~7,827~~4,076
Total liquidity, including restricted cash and restricted investments	$	~~1,417,901~~1,503,999

1 As of ~~September 30, 2022,~~March 31, 2023, we had ~~$146.0 million in~~no borrowings under our $1.1 billion 2021 Revolver. We additionally had ~~$29.2~~$11.4 million in outstanding letters of credit (discussed below) issued under the 2021 Revolver, leaving ~~$924.8 million~~$1.1 billion available under 2021 the Revolver.

2 Based on eligible receivables at ~~September 30, 2022,~~March 31, 2023, our borrowing base for the ~~2021~~2022 RSA was ~~$400.0~~$396.7 million, while outstanding borrowings were ~~$279.0 million. We additionally had $65.3~~$384.0 million, ~~in outstanding letters of credit (discussed below),~~ leaving ~~$55.7~~$12.7 million available under the ~~2021~~2022 RSA. Refer to Note 5 in Part I, Item 1 of this Quarterly Report for more information regarding the ~~2021~~2022 RSA.

3 As of September 30, 2022, we had $37.1 million outstanding principal on our shelf notes issued under our $125.0 million 2021 Prudential Notes, leaving $87.9 million available for issuance under the 2021 Prudential Notes.

4 Restricted cash and restricted investments are primarily held by our captive insurance companies for claims payments. "Cash and cash equivalents – restricted" consists of ~~$145.0~~$204.3 million, included in "Cash and cash equivalents – restricted" on the condensed consolidated balance sheet and held by Mohave and Red Rock for claims payments. The remaining ~~$2.7~~$3.0 million is included in "Other long-term assets" and is held in escrow accounts to meet statutory requirements.

Uses of Liquidity

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

Capital Expenditures — When justified by customer demand, as well as our liquidity and our ability to generate acceptable returns, we make substantial cash capital expenditures to maintain a modern company tractor fleet, refresh and expand our trailer fleet, expand our network of LTL service centers, and, to a lesser extent, fund upgrades to our terminals and technology in our various service offerings. In connection with our business strategy, we regularly evaluate acquisition and strategic partnership opportunities. We expect net cash capital expenditures, will be in the range of ~~$525.0~~$640.0 – ~~$575.0~~$690.0 million for full-year ~~2022.~~2023. This range excludes cash outlays for potential acquisitions. We believe we have ample flexibility in our trade cycle and purchase agreements to alter our current plans if economic and other conditions warrant.

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

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 ~~September 30, 2022,~~March 31, 2023, we had debt, accounts receivable securitization, and finance lease obligations of ~~$1.9~~$1.8 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.

Letters of Credit — Pursuant to the terms of the 2021 Debt Agreement and the ~~2021~~2022 RSA, our lenders may issue standby letters of credit on our behalf. When we have certain letters of credit outstanding, the availability under the 2021 Revolver or ~~2021~~2022 RSA is reduced accordingly. As of ~~September 30, 2022,~~March 31, 2023, we also had outstanding letters of credit of ~~$94.8~~$177.9 million pursuant to a bilateral agreement which do not impact the availability of the 2021 Revolver and ~~2021~~2022 RSA. Standby letters of credit are typically issued for the benefit of regulatory authorities, insurance companies and state departments of insurance for the purpose of satisfying certain collateral requirements, primarily related to our automobile, workers' compensation, and general insurance liabilities.

Share Repurchases — From time to time, and depending on Free Cash Flow1 availability, debt levels, common stock prices, general economic and market conditions, as well as internal approval requirements, we may repurchase shares of our outstanding common stock. As of ~~September 30, 2022,~~March 31, 2023, the Company had $200.0 million remaining under the 2022 Knight-Swift Share Repurchase Plan. Additional details regarding our share repurchase plans are discussed in Note 10 in Part I, Item 1 of this Quarterly Report.

Working Capital

We had a working capital surplus of ~~$562.0~~$536.8 million as of ~~September 30, 2022~~March 31, 2023 and ~~$339.5~~$599.6 million as of December 31, ~~2021.~~2022.

Material Debt Agreements

As of March 31, 2023, we had $1.8 billion in material debt obligations at the following carrying values:

•$199.8 million: 2021 Term Loan A-2, due September 2024, net of $0.2 million in deferred loan costs

•$798.8 million: 2021 Term Loan A-3, due September 2026, net of $1.2 million in deferred loan costs

•$383.6 million: 2022 RSA outstanding borrowings, net of $0.4 million in deferred loan costs

•$395.7 million: Finance lease obligations

•$30.5 million: Other, net of approximately $45,000 in deferred loan costs

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

•$199.8 million: 2021 Term Loan A-2, due September 2024, net of $0.2 million in deferred loan costs

•$798.7 million: 2021 Term Loan A-3, due September 2026, net of $1.3 million in deferred loan costs

•$418.6 million: 2022 RSA outstanding borrowings, net of $0.4 million in deferred loan costs

•$403.0 million: Finance lease obligations

•$43.0 million: 2021 Revolver, due September 2026

•$39.0 million: Other, net of $0.1 million in deferred loan costs

________

1Refer to "Non-GAAP Financial Measures."

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~~Material Debt Agreements~~

~~As of September 30, 2022, we had $1.9 billion in material debt obligations at the following carrying values:~~

•~~$199.7 million: 2021 Term Loan A-2,~~ ~~due September 2024, net of $0.3 million in deferred loan costs~~

•~~$798.6 million: 2021 Term Loan A-3,~~ ~~due~~ ~~September 2026, net of $1.4 million in deferred loan costs~~

•~~$278.6 million: 2021 RSA outstanding borrowings, net of $0.4 million in deferred loan costs~~

•~~$412.5 million: Finance lease obligations~~

•~~$146.0 million: 2021 Revolver, due September 2026~~

•~~$42.5 million: Other, net of $0.1 million in deferred loan costs~~

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

•~~$199.7 million: 2021 Term Loan A-1,~~ ~~due December 2022, net of $0.3 million in deferred loan costs~~

•~~$199.6 million: 2021 Term Loan A-2,~~ ~~due~~ ~~September 2024, net of $0.4 million in deferred loan costs~~

•~~$798.4 million: 2021 Term Loan A-3,~~ ~~due~~ ~~September 2026, net of $1.6 million in deferred loan costs~~

•~~$278.5 million: 2021 RSA outstanding borrowings, net of $0.5 million in deferred loan costs~~

•~~$306.2 million: Finance lease obligations~~

•~~$260.0 million: 2021 Revolver, due September 2026~~

•~~$52.3 million: Other, net of $0.1 million in deferred loan costs~~


Cash Flow Analysis


		Year-to-Date September 30,				Change			Quarter Ended March 31,				Change
		2022		2021					2023		2022
		(In thousands)							(In thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	1,099,195	$	817,524	$	281,671	Net cash provided by operating activities	$	345,159	$	456,860	$	(111,701)
Net cash used in investing activities	Net cash used in investing activities	(358,626)		(1,548,757)		1,190,131		Net cash used in investing activities	(197,305)		(110,187)		(87,118)
Net cash (used in) provided by financing activities		(748,829)		873,309		(1,622,138)
Net cash used in financing activities								Net cash used in financing activities	(134,591)		(323,249)		188,658

Net Cash Provided by Operating Activities

Comparison Between ~~Year-to-Date September 30,~~Quarter Ended March 31, 2023 and 2022 ~~and 2021~~ — The ~~$281.7~~$111.7 million ~~increase~~decrease in net cash provided by operating activities was primarily due to a ~~$265.8~~$153.3 million decrease in operating income for quarter ended March 31, 2023, and a $16.0 million increase in ~~operating income, including the operating results of ACT and MME~~cash paid for ~~year-to-date September 30, 2022. The remaining difference is attributed to various changes in working capital.~~interest. Note: Factors affecting the increase in operating income are discussed in "Results of Operations — Consolidated Operating and Other Expenses."

Net Cash Used in Investing Activities

Comparison Between ~~Year-to-Date September 30,~~Quarter Ended March 31, 2023 and 2022 ~~and 2021~~ — The ~~$1.2 billion decrease~~$87.1 million increase in net cash used in investing activities was primarily due to a ~~$1.3 billion decrease in net cash invested in acquisitions and was partially offset by a $160.6~~$96.6 million increase in net cash capital ~~expenditures, including year-to-date September 30, 2022 investing activities of ACT and MME.~~expenditures.

Net Cash ~~(Used in) Provided by~~Used in Financing Activities

Comparison Between ~~Year-to-Date September 30,~~Quarter Ended March 31, 2023 and 2022 ~~and 2021~~ — Net cash used in financing activities ~~increased~~decreased by ~~$1.6 billion,~~$188.7 million, primarily due to ~~the $1.2 billion reduction in debt proceeds,~~ a ~~$246.3~~$144.9 million ~~increase~~decrease in repurchases of our common stock and a ~~$204.0~~$52.0 million ~~increase~~decrease in net repayments on our 2021 Revolver.

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


Seasonality

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


Inflation

Most of our operating expenses are inflation-sensitive, with inflation generally leading to increased costs of operations. Price increases in manufacturer revenue equipment ~~have~~has impacted the cost for us to acquire new equipment. Cost increases have also impacted the cost of parts for equipment repairs and maintenance. The qualified driver shortage experienced by the trucking industry overall has had the effect of increasing compensation paid to our driving associates. We have also experienced inflation in insurance and claims cost related to health insurance and claims as well as auto liability insurance and claims. Prolonged periods of inflation have recently and could continue to cause interest rates, fuel, wages, and other costs to increase as well. Any of these factors could adversely affect our results of operations unless freight rates correspondingly increase.


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 2021 Debt Agreement and ~~2021~~2022 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 ~~4.0%~~5.7% as of ~~September 30, 2022)~~March 31, 2023) and fixed rate equipment lease financing. Assuming the level of borrowings as of ~~September 30, 2022,~~March 31, 2023, a hypothetical one percentage point increase in interest rates would increase our annual interest expense by ~~$14.7~~$14.1 million.

Commodity Price Risk

We have commodity exposure with respect to fuel used in company-owned tractors. Increases in fuel prices would continue to raise our operating costs, even after applying fuel surcharge revenue. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. The weekly average diesel price per gallon in the US increased to ~~$5.09~~$4.40 for the ~~third~~first quarter of ~~2022~~2023 from an average of ~~$3.36~~$4.36 in the ~~third~~first quarter of ~~2021. The weekly average diesel price per gallon in the US increased to $4.99 for the year-to-date period ended September 30, 2022 from an average of $3.16 for year-to-date September 30, 2021.~~2022. 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 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 ~~September 30, 2022,~~March 31, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We base our internal control over financial reporting on the criteria set forth in the 2013 COSO Internal Control: Integrated Framework.

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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 9 of the notes to our condensed consolidated financial statements, included in Part I, Item 1, of this Quarterly Report for the period ended ~~September 30, 2022,~~March 31, 2023, 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 ~~2021~~2022 Annual Report in the section entitled "Item 1A. Risk Factors," describes some of the risks and uncertainties associated with our business. In addition to the risk factors set forth in our Form 10-K, we believe the following additional risks and uncertainties should be considered in evaluating our business and growth outlook:

Our proposed acquisition of U.S. Xpress presents certain additional risks to our business and operations.

On March 20, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with U.S. Xpress and Liberty Merger Sub ("Merger Sub"). The Merger Agreement provides, among other things, and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into U.S. Xpress, with U.S. Xpress surviving as an indirect wholly owned subsidiary of Knight-Swift Transportation Holdings Inc. The proposed transaction with U.S. Xpress entails important risks, including, among others: the occurrence of any event, change or other circumstance that could give rise to the right of us or U.S. Xpress or both to terminate the Merger Agreement, including circumstances requiring U.S. Xpress to pay us a termination fee pursuant to the Merger Agreement; the failure to obtain applicable regulatory or U.S. Xpress stockholder approval in a timely manner or otherwise; the risk that the transaction may not close in the anticipated timeframe or at all due to one or more of the other closing conditions to the transaction not being satisfied or waived; the risk that there may be unexpected costs, charges or expenses resulting from the proposed transaction; risks related to the ability of us and U.S. Xpress to successfully integrate the businesses and achieve the expected synergies and operating efficiencies within the expected timeframes or at all and the possibility that such integration may be more difficult, time consuming or costly than expected; risks that the proposed transaction disrupts our or U.S. Xpress’ current plans and operations; the risk that certain restrictions during the pendency of the proposed transaction may impact our or U.S. Xpress’ ability to pursue certain business opportunities or strategic transactions; risks related to disruption of each company’s management’s time and attention from ongoing business operations due to the proposed transaction; continued and sufficient availability of capital and financing; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of our and/or U.S. Xpress’ common stock or operating results; the risk that the proposed transaction and its announcement could have an adverse effect on the ability of us and U.S. Xpress to retain and hire personnel and drivers, to retain customers and to maintain relationships with each of their respective business partners, suppliers and customers and on their respective operating results and businesses generally; and the risk of litigation that could be instituted against the parties to the

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KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

Merger Agreement or their respective directors, affiliated persons or officers and/or regulatory actions related to the proposed transaction, including the effects of any outcomes related thereto.

In addition, material differences in results as compared with those expected from the acquisition could arise due to those risks and uncertainties described in our Form 10-K Risk Factors, including, among other things, business disruption, operational or technology problems, financial loss, financial reporting and internal controls integration, legal liability to third parties and similar risks, any of which could have a material adverse effect on our business, customer retention, financial condition, results of operations, or liquidity.

In addition, the risk factor from our Form 10-K entitled “Insurance and claims expenses could significantly reduce our earnings” is deleted and replaced in its entirety with the following:

Insurance and claims expenses could significantly reduce our earnings.

Our future insurance and claims expense might exceed historical levels, which could reduce our earnings. We self-insure, or insure through our captive insurance companies, a significant portion of our claims exposure. For a detailed discussion of our self-insurance programs, including self-insurance retention limits, please refer to Note 12 to the consolidated financial statements, included in Part II, Item 8 of this Annual Report. Higher self-insured retention levels may increase the impact of auto liability occurrences on our results of operations. We reserve for anticipated losses and expenses and periodically evaluate and adjust our claims reserves to reflect our experience. Estimating the number and severity of claims, as well as related judgment or settlement amounts, is inherently difficult, and claims may ultimately prove to be more severe than our estimates. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual self-insurance costs and our reserve estimates. Accordingly, ultimate results may differ materially from our estimates, which could result in losses over our reserved amounts and could materially adversely affect our financial condition and results of operations.

Although we believe our aggregate insurance limits should be sufficient to cover reasonably expected claims, it is possible that the amount of one or more claims could exceed our aggregate coverage limits. If any claim were to exceed our coverage, we would bear the excess, in addition to our other self-insured amounts. Furthermore, insurance carriers have raised premiums for many businesses, including transportation companies. Additionally, our Iron Insurance line of business offers insurance products to third-party carriers, which exposes us to insurance claims, underwriting risk, and the potential inability to collect premiums from such third-party carriers. Accordingly, this line of business may increase the volatility of our insurance and claims expense and could materially adversely impact our financial condition and results of operations.

In addition, rising healthcare costs could negatively impact financial results or force us to make changes to existing benefit programs, which could negatively impact our ability to attract and retain employees.


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
	(in thousands, except per share data)
January 1, 2023 to January 31, 2023	—	$	—	—	$	200,041
February 1, 2023 to February 28, 2023	—	$	—	—	$	200,041
March 1, 2023 to March 31, 2023	—	$	—	—	$	200,041
Total	—	$	—	—	$	200,041








~~July 1, 2022 to July 31, 2022~~	—	$	—	—	$	~~200,041~~
~~August 1, 2022 to August 31, 2022~~	—	$	—	—	$	~~200,041~~
~~September 1, 2022 to September 30, 2022~~	—	$	—	—	$	~~200,041~~
~~Total~~	—	$	—	—	$	~~200,041~~

1On April 25, 2022, we announced that the Board had approved the $350.0 million 2022 Knight-Swift Share Repurchase Plan, replacing the 2020 Knight-Swift Share Repurchase Plan. There is no expiration date associated with the 2022 Knight-Swift Share Repurchase Plan. See Note 10 in Part I, Item 1 of this Quarterly Report regarding our share repurchase plans.


ITEM 3.			DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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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 March 20, 2023, by and among Knight-Swift Transportation Holdings Inc., U.S. Xpress Enterprises, Inc, and Liberty Merger Sub Inc.*

Incorporated by reference to Exhibit 2.1 of Form 8-K filed on March 21, 2023

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

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

Incorporated by reference to Exhibit 3.1 of Form 8-K filed on February 9, 2022

10.1

Rollover Agreement, dated March 20, 2023, by and among Knight-Swift Transportation Holdings Inc., Liberty Holdings Topco LLC, Max L. Fuller, William Eric Fuller, and each of the other Stockholders set forth on Schedule A thereto

Incorporated by reference to Exhibit 99.1 of the Form 8-K filed on March 21, 2023

10.2

Form of Amended and Restated Limited Liability Company Agreement of Liberty Holdings Topco LLC

Incorporated by reference to Exhibit 99.2 of the Form 8-K filed on March 21, 2023

10.3

Irrevocable Proxy and Agreement, dated March 20, 2023, by and among each Stockholder of U.S. Xpress Enterprises, Inc. set forth on Schedule A thereto and U.S. Xpress Enterprises, Inc.

Incorporated by reference to Exhibit 99.3 of the Form 8-K filed on March 21, 2023

31.1

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

Filed herewith

31.2

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

Filed herewith

32.1

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

Furnished herewith

32.2

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

Furnished herewith

101.INS

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

101.SCH

XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

XBRL Taxonomy Calculation Linkbase Document

Filed herewith

101.LAB

XBRL Taxonomy Label Linkbase Document

Filed herewith

101.PRE

XBRL Taxonomy Presentation Linkbase Document

Filed herewith

101.DEF

XBRL Taxonomy Extension Definition Document

Filed herewith

104

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

Filed herewith

* Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.

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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:

~~November 2, 2022~~May 3, 2023

/s/ David A. Jackson

David A. Jackson

Chief Executive Officer and President, in his capacity as

such and on behalf of the registrant

Date:

~~November 2, 2022~~May 3, 2023

/s/ Adam W. Miller

Adam W. Miller

Chief Financial Officer, in his capacity as such and on

behalf of the registrant

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