Note 1 — Introduction and Basis of Presentation

Certain acronyms and terms used throughout this Quarterly Report on Form 10-Q 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.

Merger

On September 8, 2017, pursuant to the Agreement and Plan of Merger, dated as of April 9, 2017, by Swift Transportation Company, Bishop Merger Sub, Inc., a direct wholly owned subsidiary of Swift (“Merger Sub”), and Knight Transportation, Inc., Merger Sub merged with and into Knight, with Knight surviving as a direct wholly owned subsidiary of Swift (the “2017 Merger”). Immediately prior to the effective time of the 2017 Merger (the “Effective Time”), the certificate of incorporation of the Company was amended and restated (the “Amended Company Charter”) to reflect, among other things, that:

(i) the Company’s corporate name changed from “Swift Transportation Company” to “Knight-Swift Transportation Holdings Inc.”; and

(ii) each issued and outstanding share of Class B common stock, par value $0.01 per share, of Swift (the "Swift Class B Common Stock”) was converted (the “Class B Conversion”) into one share of Class A common stock, par value $0.01 per share, of Swift (the "Swift Class A Common Stock”) and immediately thereafter, each issued and outstanding share of Swift Class A Common Stock (including each share of Swift Class A Common Stock into which the shares Swift Class B Common Stock was converted pursuant to the Class B Conversion) was, by means of a reverse stock split (the “Reverse Split”), consolidated into 0.72 of a share of Class A Common Stock of the Company (the "Class A Common Stock"). No fractional shares of Class A Common Stock were issued in the Reverse Split, and, in connection with the Reverse Split, holders of Class A Common Stock became entitled to receive cash in lieu of any fractional shares in accordance with the Amended Company Charter.

At the Effective Time, each share of common stock, par value $0.01 per share, of Knight (“Knight Common Stock”) issued and outstanding immediately prior to the Effective Time (other than shares held in the treasury of Knight or owned or held, directly or indirectly, by Swift or any wholly owned subsidiary of Swift or Knight, in each case not held in a fiduciary capacity on behalf of a third-party) was converted into the right to receive one share of Class A Common Stock.

Upon the closing of the 2017 Merger, the shares of Knight Common Stock that previously traded under the ticker symbol “KNX” on the New York Stock Exchange (the “NYSE”) ceased trading on, and were delisted from, the NYSE. Shares of Class A Common Stock commenced trading on the NYSE, on a post-Reverse Split basis, under the ticker symbol “KNX” on September 11, 2017.

For the year-to-date period ended September 30, 2017 , we recorded $16.5 million of direct and incremental costs associated with 2017 Merger-related activities, primarily incurred for legal and professional fees, which were recorded in the ”Merger-related costs” line in the accompanying condensed consolidated statements of income. In association with the 2017 Merger, we incurred merger-related bonuses and accelerated stock compensation expense totaling $5.6 million , which is recorded in the "Salaries, wages and benefits" line in the accompanying condensed consolidated statements of income. Additionally, we incurred $0.9 million in merger-related statutory filing fees and $0.1 million in driver-retention expenses recorded within the "Miscellaneous operating expenses" and "Purchased transportation" lines in the accompanying condensed consolidated statements of income.

Description of Business

Knight-Swift is a transportation solutions provider, headquartered in Phoenix, Arizona. As of September 30, 2017 , the Company's fleet of revenue equipment included 23,107 tractors (comprised of 18,099 company tractors and 5,008 independent contractor tractors), 75,715 trailers, and 9,122 intermodal containers. The Company’s six reportable segments are Knight Trucking, Knight Logistics, Swift Truckload, Swift Dedicated, Swift Refrigerated, and Swift Intermodal.

Seasonality

In the transportation industry, results of operations generally follow a seasonal pattern. Freight volumes in the first quarter are typically lower due to less consumer demand, customers reducing shipments following the holiday season, and inclement weather impeding operations. At the same time, operating expenses generally increase, and tractor productivity of our fleet, independent contractors, and third-party carriers decreases during the winter months due to decreased fuel efficiency, increased cold-weather-related equipment maintenance and repairs, and increased insurance claims and costs attributed to higher accident frequency from harsh weather. During this period, the profitability of our operations is generally lower than during other parts of the year. Additionally, we have seen surges between Thanksgiving and Christmas resulting from holiday shopping trends toward delivery of gifts purchased over the Internet, as well as the impact of shorter holiday seasons.

Basis of Presentation

We accounted for the 2017 Merger using the acquisition method of accounting in accordance with Topic 805, Business Combinations . GAAP requires that either Knight or Swift is designated as the acquirer for accounting and financial reporting purposes (“Accounting Acquirer”). Based on the evidence available, Knight was designated as the Accounting Acquirer. In identifying Knight as the Accounting Acquirer, we took into account the structure of the 2017 Merger, the composition of the combined company’s board of directors and the designation of certain senior management positions of the combined company, among other factors. Accordingly, the historical financial statements of Knight are the historical financial statements of the combined company. As such, information included within our condensed consolidated (unaudited) statements of income, comprehensive income and cash flows and their respective footnotes include the results of Swift from and after September 8, 2017 (the date of the closing of the 2017 Merger) to September 30, 2017. See Note 5 for the description of the purchase price allocation.

The condensed consolidated financial statements (unaudited) and footnotes included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and footnotes included in Knight's Annual Report on Form 10-K for the year ended December 31, 2016 . The condensed consolidated financial statements (unaudited) include the accounts of Knight-Swift Transportation Holdings Inc. and its subsidiaries. In management's opinion, these condensed consolidated financial statements (unaudited) were prepared in accordance with GAAP and include all adjustments necessary (consisting of normal recurring adjustments) for the fair presentation of the periods presented.

Changes in Presentation

Recently Adopted Accounting Pronouncement — During the fourth quarter of 2016, Knight early adopted Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting (ASU 2016-09).  The standard  requires us to reflect any adoption adjustments as of the beginning of the annual period that includes the interim period of adoption. As such, our condensed consolidated statements of income, statements of comprehensive income and statements of cash flows for the quarter ended and year-to-date September 30, 2016 , have been recast to include the impact of ASU 2016-09 adoption. See "Note 1-Significant Accounting Policies" in the notes to Knight's consolidated financial statements in Knight's Annual Report on Form 10-K for the fiscal year ended December 31, 2016 for detailed adoption information.

Other Presentation Changes — Beginning in 2017 , we made the following changes in presentation:

Summary of Significant Accounting Policies

In association with the 2017 Merger, we have the following additional significant accounting policies not previously disclosed within Knight's consolidated financial statements and footnotes included in Knight's Annual Report on Form 10-K for the year ended December 31, 2016 .

Restricted Cash — Our wholly-owned captive insurance companies, Red Rock and Mohave, maintain certain operating bank accounts, working trust accounts, and investment accounts. The cash and short-term investments within the accounts are restricted by insurance regulations to fund the insurance claim losses to be paid by the captive insurance companies. Therefore, these cash and short-term investments are classified as "Cash and cash equivalents - restricted" in the condensed consolidated balance sheets.

Restricted Investments -— Our investments are restricted by insurance regulations to fund the insurance claim losses to be paid by the captive insurance companies. The Company accounts for its investments in accordance with ASC 320, Investments - Debt and Equity Securities . Management determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates the determination on a quarterly basis. As of September 30, 2017, all of our investments in fixed-maturity securities were classified as held-to-maturity, as we have the positive intent and ability to hold these securities to maturity. Held-to-maturity securities are carried at amortized cost. The amortized cost of debt securities is adjusted using the effective interest rate

method for amortization of premiums and accretion of discounts. Amortization and accretion are reported in "Other income, net" in the condensed consolidated statement of income (unaudited).

Management periodically evaluates restricted investments for impairment. The assessment of whether impairments have occurred is based on management's case-by-case evaluation of the underlying reasons for the decline in estimated fair value. Management accounts for other-than-temporary impairments of debt securities in accordance with ASC 320, Investments - Debt and Equity Securities . This guidance requires the Company to evaluate whether it intends to sell an impaired debt security or whether it is more likely than not that it will be required to sell an impaired debt security before recovery of the amortized cost basis. If either of these criteria are met, an impairment loss equal to the difference between the debt security's amortized cost and its estimated fair value is recognized in earnings. For impaired debt securities that do not meet these criteria, we determine if a credit loss exists with respect to the impaired security. If a credit loss exists, the credit loss component of the impairment (i.e., the difference between the security's amortized cost and the present value of projected future cash flows expected to be collected) is recognized in earnings and the remaining portion of the impairment is recognized as a component of accumulated other comprehensive income.

Operating Leases — In accordance with ASC 840, Leases , property and equipment held under operating leases, and liabilities related thereto, are off-balance sheet. All expenses related to operating leases are reflected in our condensed consolidated statements of income (unaudited) in "Rental expense." At the inception of a lease, management judgment is involved in classification as an operating or capital lease, as well as determination of useful lives and estimation of residual values of the related equipment. Future minimum lease payments used in determining lease classification represent the minimum rental payments called for over the lease term, inclusive of residual value guarantees (if applicable) and amounts that would be required to be paid, if any, by the Company upon default for leases containing subjective acceleration or cross default clauses.

We do not currently guarantee residual values under our operating lease agreements for revenue equipment. To the extent we believe any manufacturer will refuse or be unable to meet its obligation, we recognize additional rental expense to the extent we believe the fair market value at the lease termination will be less than our obligation to the lessor. We believe that proceeds from the sale of equipment under operating leases would exceed the payment obligation on substantially all operating leases.

KNIGHT-SWIFT TRANSPORTATION HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — CONTINUED

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We expect that there will also be changes in sales, contracting, accounting, reporting, tax, debt covenants, and other business processes, policies, and controls, as a result of implementing the standard. The 2017 Merger is also affecting the timing and other components of the implementation process.

Based on the information currently available from the diagnostic phase, we cannot yet determine the quantitative impact on the financial statements. We expect changes related to the timing of revenue recognition between reportable periods, as well as changes in the requirements for accounting policy and other new disclosures. As the diagnostic phase is being finalized, we are proceeding to design and develop solutions in preparation for the implementation phase of the standard. Since we are continuing to evaluate the impact of the standard, disclosures around these preliminary assessments are subject to change.