What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-19 · 52 added, 52 removed, 152 unchanged (41% of the section changed)

The following are material factors that could affect our financial performance and could cause actual results for future periods to differ materially from our anticipated results or other expectations, including those expressed in any forward-looking statements made in this 10-K.

We may also refer to this disclosure to identify factors that may cause actual results to differ from those expressed in other forward-looking statements, including those made in oral presentations such as telephone conferences and webcasts open to the public.

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• Decrease in volumes:

A reduction in overall freight volumes in the marketplace reduces our opportunities for growth.

A reduction in overall freight volumes in the marketplace may reduce our opportunities for growth.

A significant portion of our freight are transactional or spot market opportunities.

The transactional market may be more impacted than the contractual freight market by overall economic conditions.

The transactional market may be more impacted than the contractual freight market by supply chain disruptions or overall economic conditions.

In addition, if a downturn in our customers’ business cycles causes a reduction in the volume of freight shipped by those customers, particularly among certain national retailers or in the food, beverage, retail, manufacturing, paper, ecommerce, or printing industries, our operating results could be adversely affected.

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Some of our customers may face economic difficulties and may not be able to pay us, and some may go out of business.

In addition, some customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.

In addition, some customers may not pay us as quickly as they have in the past, which may cause our working capital needs to increase.

• Transportation provider failures:

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In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands.

In periods of rapid change, it is more difficult to match our staffing levels to our business needs.

In periods of rapid change, it may be more difficult to match our staffing levels to our business needs.

In addition, we have other expenses that are fixed for a period of time, and we may not be able to adequately adjust them in a period of rapid change in market demand.

Higher carrier prices may result in decreased adjusted gross profit margin.

Higher carrier prices may result in decreased adjusted gross profit margin and increases in working capital.

Carriers can be expected to charge higher prices if market conditions warrant or to cover higher operating expenses.

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In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a loss.

As our volumes increase or we increase freight rates charged to our customers, the resulting increase in revenues may increase our working capital needs due to our business model which generally has a higher length of days sales outstanding than days payables outstanding.

Changing fuel costs and interruptions of fuel supplies may have an impact on our adjusted gross profit margins.

In our truckload transportation business, which is the largest source of our adjusted gross profits, fluctuating fuel prices may result in decreased adjusted gross profit margin.

In our truckload transportation business, fluctuating fuel prices may result in decreased adjusted gross profit margin.

While our different pricing arrangements with customers and contracted motor carriers make it very difficult to measure the precise impact, we believe that fuel costs essentially act as a pass-through cost to our truckload business.

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For additional information, see Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Our dependence on third parties to provide equipment and services may impact the delivery and quality of our transportation and logistics services.

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We depend on independent third parties to provide truck, rail, ocean, and air services and to report certain events to us, including but not limited to, shipment status information and freight claims.

These independent third parties may not fulfill their obligations to us, preventing us from meeting our commitments to our customers.

These independent third parties may not fulfill their obligations to us, which may prevent us from meeting our commitments to our customers.

This reliance also could cause delays in reporting certain events, including recognizing claims.

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Many of these risks are beyond our control, including:

• equipment shortages in the transportation industry, particularly among contracted motor carriers;

• equipment and driver shortages in the transportation industry, particularly among contracted motor carriers;

• changes in regulations impacting transportation;

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Repayment of these advances is dependent upon the growers’ ability to grow and harvest marketable crops.

Our earnings may be affected by seasonal changes in the transportation industry.

Our earnings may be affected by seasonal changes or significant disruptions in the transportation industry.

Results of operations for our industry generally show a seasonal pattern as customers reduce shipments during and after the winter holiday season.

Historically, income from operations and earnings are lower in the first quarter than in the other three quarters.

We believe this historical pattern has been the result of, or influenced by, numerous factors, including national holidays, weather patterns, consumer demand, economic conditions, and other similar and subtle forces.

Although seasonal changes in the transportation industry have not had a significant impact on our cash flow or results of operations, we expect this trend to continue and we cannot guarantee that it will not adversely impact us in the future.

The transportation industry may also be significantly impacted by disruptions such as port congestion, the availability of transportation equipment, and labor shortages.

These disruptions may impact our ability to provide transportation services for our customers and may adversely impact our results of operations and operating cash flows.

We may be unable to identify or complete suitable acquisitions and investments.

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The issuance of any equity securities could be dilutive to our stockholders.

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Company risk factors

We rely on technology to operate our business.

We have internally developed the majority of our operating systems.

We have internally developed the majority of our operating systems and also rely on technology provided by third parties.

Our continued success is dependent on our systems continuing to operate and to meet the changing needs of our customers and users.

We rely on our technology staff and vendors to successfully implement changes to and maintain our operating systems in an efficient manner.

The continued automation of existing processes and usage of third-party technology and cloud network capacity will require adaptation and adjustments that may increase our exposure to cybersecurity risks and system availability reliance.

We rely on our technology staff and third-party vendors to successfully implement changes to and maintain our operating systems in an efficient manner.

If we fail to maintain, protect, and enhance our operating systems, we may be at a competitive disadvantage and lose customers.

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As demonstrated by recent material and high-profile data security breaches, computer malware, viruses, computer hacking, and phishing attacks have become more prevalent, have occurred on our operating systems in the past, and may occur on our operating systems in the future.

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Furthermore, given the interconnected nature of the supply chain and our significant presence in the industry, we believe that we may be an attractive target for such attacks.

We maintain a cyber liability insurance policy with coverage of $10 million to help protect us against losses that may result from a cyber-related security breach or similar event.

The policy has a retention of $1 million per incident.

A loss for which we are not adequately insured could materially affect our financial results.

The coverage we currently have in place may not apply to a particular loss or it may not be sufficient to cover all liabilities to which we may be subject.

Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, a significant impact on the performance, reliability, security, and availability of our operating systems and technical infrastructure to the satisfaction of our users may harm our reputation, impair our ability to retain existing customers or attract new customers, and expose us to legal claims and government action, each of which could have a material adverse impact on our financial condition, results of operations, and growth prospects.

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In order to maintain high variability in our business model, it is necessary to adjust staffing levels to changing market demands.

In periods of rapid change, it is more difficult to match our staffing level to our business needs.

In periods of rapid change, it may be more difficult to match our staffing level to our business needs.

We cannot guarantee that we will be able to continue to hire and retain a sufficient number of qualified personnel.

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Continued success depends in large part on our ability to develop successful employees into managers.

Our operations may be materially adversely affected by inconsistent management practices.

We manage our business through a network of offices throughout North America, Europe, Asia, Oceania, and South America, supported by executives and shared and centralized services, with local management responsible for day-to-day operations, personnel decisions, and adherence to applicable local laws.

Inconsistent management practices could materially and adversely affect our overall profitability and expose us to litigation.

We derive a significant portion of our total revenue and adjusted gross profit from our largest customers.

Our top 100 customers comprise approximately 33 percent of our consolidated total revenue and 26 percent of consolidated adjusted gross profit.

Our largest customer comprises approximately one percent of our consolidated total revenue.

Our largest customer comprises approximately two percent of our consolidated total revenue.

The sudden loss of major customers could materially and adversely affect our operating results.

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We may have difficulties integrating acquired companies.

For acquisitions, success depends upon efficiently integrating the acquired business into our existing operations.

These risks could be heightened if we complete a large acquisition or multiple acquisitions within a short period of time.

If we complete a large acquisition or multiple acquisitions within a short period of time, we may experience heightened difficulties in integrating the acquired companies.

We are required to integrate these businesses into our internal control environment, which may present challenges that are different than those presented by organic growth and that may be difficult to manage.

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Our growth and profitability may not continue, which may result in a decrease in our stock price.

Our long-term growth objective is to grow earnings per share by 10 percent annually.

Long-term growth targets represent an over time perspective and do not necessarily represent an expected annual growth rate.

There can be no assurance that our long-term growth objective will be achieved or that we will be able to effectively adapt our management, administrative, and operational systems to respond to any future growth.

There can be no assurance that our long-term growth targets will be achieved or that we will be able to effectively adapt our management, administrative, and operational systems to respond to any future growth.

Future changes in and expansion of our business, or changes in economic or political conditions, could adversely affect our operating margins.

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Governmental, regulatory, and legal risk factors

Changes to income tax regulations in the U.S.

and other jurisdictions where we operate may increase our tax liability.

We are subject to income taxes in the U.S.

and other jurisdictions where we operate.

Changes to income tax laws and regulations in any of the jurisdictions where we operate could significantly increase our effective tax rate and reduce our operating cash flows.

We are subject to claims arising from our transportation operations.

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Railroads, which are generally self-insured, provide limited common carrier cargo loss or damage liability protection, generally up to $250,000 per shipme nt.

Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for motor carriers, from time to time, claims may be asserted against us for their actions, or for our actions in retaining them.

Although these drivers are not our employees and all of these drivers are employees, owner-operators, or independent contractors working for the contracted motor carriers, from time to time, claims may be asserted against us for their actions or for our actions in retaining them.

Cl aims against us may exceed the amount of our insurance coverage or may not be covered by insurance at all.

In addition, our automobile liability policy has a primary retention of $5 million per incident and also retention between $85 million and $90 million per incident.

In addition, our automobile liability policy has a primary retention of $5 million per incident.

A material increase in the frequency or severity of accidents, liability claims or workers’ compensation claims, or unfavorable resolutions of claims could materially and adversely affect our operating results.

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We maintain a broad cargo liability insurance policy to help protect us against catastrophic losses that may not be recovered from the responsible contracted carrier.

We also carry various liability insurance policies, including automobile and general liability, with a $155 million umbrella where we carry retentions between $2 million and $5 million and $85 million and $90 million per incident.

We also carry various liability insurance policies, including automobile and general liability, with a $155 million umbrella where we carry retentions between $0.5 million and $5 million.

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Buying and reselling fresh produce exposes us to possible product liability.

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We carry product recall and contamination insurance coverage of $30 million.

A loss for which we are not adequately insured could materially affect our financial results.

The coverage we currently have in place may not apply to a particular loss, or it may not be sufficient to cover all liabilities to which we may be subject.

This policy has a retention of $3.5 million per incident.

Any recall or allegation of contamination could affect our reputation, particularly of our proprietary and/or licensed branded produce programs.

Any recall or allegation of contamination could affect our reputation, particularly of our proprietary and/or licensed branded produce programs, which could materially and adversely affect our operating results.

Loss due to spoilage (including the need for disposal) is also a routine part of the sourcing business.

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Our operations may be regulated and licensed by various federal, state, and local transportation agencies in the United States and similar governmental agencies in foreign countries in which we operate.

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We are subject to licensing and regulation as a property freight broker and are licensed by the DOT to arrange for the transportation of property by motor vehicle.

The DOT prescribes qualifications for acting in this capacity, including certain surety bonding requirements.

We are also subject to regulation by the FMC as an ocean freight forwarder and a NVOCC, and we maintain separate bonds and licenses for each.

We are also subject to regulation by the FMC as an ocean freight forwarder and NVOCC, and we maintain separate bonds and licenses for each.

We operate as a Department of Homeland Security certified IAC, providing air freight services, subject to commercial standards set forth by the IATA and federal regulations issued by the TSA.

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Our operations at these facilities include both warehousing and distribution services, and we are subject to various federal, state, and international environmental, work safety, and hazardous materials regulations.

We may experience an increase in operating costs, such as security costs, as a result of governmental regulations that have been and will be adopted in response to terrorist activities and potential terrorist activities.

No assurances can be given that we will be able to pass these increased costs on to our customers in the form of rate increases or surcharges, and our operations and profitability may suffer as a result.

Department of Homeland Security regulations applicable to our customers who import goods into the United States and our contracted ocean carriers can impact our ability to provide and/or receive services with and from these parties.

We may experience an increase in operating costs, such as security costs, as a result of governmental regulations that have been or will be adopted in response to terrorist activities and potential terrorist activities.

Department of Homeland Security regulations applicable to our customers who import goods into the U.S.

and our contracted ocean carriers can impact our ability to provide and/or receive services with and from these parties.

Enforcement measures related to violations of these regulations can slow and/or prevent the delivery of shipments, which may negatively impact our operations.

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Our failure to maintain required permits or licenses, or to comply with applicable regulations, could result in substantial fines or revocation of our operating permits and licenses.

Our contracted motor carriers are subject to increasingly stringent laws protecting the environment, including those relating to climate change, which could directly or indirectly have a material adverse effect on our business.

Future and existing environmental regulatory requirements in the U.S.

Our contracted motor carriers are subject to increasingly stringent laws protecting the environment, including transitional risks relating to climate change, which could directly or indirectly have a material adverse effect on our business.

Future and existing environmental regulatory requirements, including evolving transportation technology, in the U.S.

and abroad could adversely affect operations and increase operating expenses, which in turn could increase our purchased transportation costs.

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Even without any new legislation or regulation, increased public concern regarding greenhouse gases emitted by transportation carriers could harm the reputations of companies operating in the transportation logistics industries and shift consumer demand toward more locally sourced products and away from our services.

Changes in the method for determining LIBOR and the potential replacement of the LIBOR benchmark interest rate could increase our borrowing costs.

We are also subject to risks related to uncertainty regarding LIBOR.

A portion of our borrowing capacity bears interest at variable interest rates, primarily based on LIBOR.

As of December 31, 2020, we had no LIBOR-based borrowings outstanding.

LIBOR is the subject of recent national, international, and other regulatory guidance and proposals for reform, and the use of LIBOR is expected to be discontinued after 2021.

While we expect that reasonable alternatives to LIBOR will be implemented prior to its discontinuation, or that the target date for discontinuation may be extended, we cannot predict the consequences and timing of these developments, and they could include an increase in our interest expense.

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General risk factors

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• wars, civil unrest, acts of terrorism, and other conflicts.

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We may be subject to negative impacts of catastrophic events .

We may be subject to negative impacts of catastrophic events, including the physical impacts of climate change .

A disruption or failure of our systems or operations in the event of a major earthquake, weather event, cyber-attack, heightened security measures, actual or threatened terrorist attack, strike, civil unrest, pandemic, or other catastrophic event could cause delays in providing services or performing other critical functions.

A catastrophic event that results in the destruction or disruption of any of our critical business or information systems could harm our ability to conduct normal business operations and adversely impact our operating results.

In addition, the company is monitoring the ongoing COVID-19 pandemic, which has already caused a significant disruption to global financial markets and supply chains and has resulted in increased travel restrictions and extended shutdown of certain businesses across the globe.

We have already experienced changes in demand, including declines in certain industries and regions, along with volatile pricing.

The significance of the operational and financial impact to our business will likely depend on how long and widespread this outbreak proves to be.

The extent to which COVID-19 impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the outbreak and the international actions that are being taken to contain and treat it.

While we currently expect this business disruption to be temporary, there is uncertainty around the duration and its broader impact on the economy, and therefore the effects it will have on our operations and financial results.

If economic or market conditions in key global markets deteriorate further, we expect to continue experiencing material adverse effects on our business and results of operations and may experience material adverse effects on our financial positions.

In addition, the company is continuously monitoring the ongoing impact of the COVID-19 pandemic, which has already caused a significant disruption to global financial markets and supply chains and has resulted in numerous travel restrictions and the shutdown of certain businesses across the globe.

We have experienced changes and volatility in demand, including declines in certain industries and regions, along with volatile pricing.

In response to the COVID-19 pandemic, we have adopted work-from-home arrangements, and many of our employees are working remotely while executing their duties and responsibilities.

The extent to which the ongoing COVID-19 pandemic impacts our operating results will depend on future developments, which remain highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of outbreaks, the emergence of COVID-19 variants, and the effectiveness of local, state, federal, and international actions that are being taken to contain and treat it.

There continues to be uncertainty around the duration of the COVID-19 pandemic and its broader impact on the economy, and therefore, the effects it will have on our operations and financial results remain uncertain.

If economic or market conditions in key global markets deteriorate, it may have a material adverse impact on our business and results of operations, and we may experience material adverse effects on our financial positions.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors