What changed in this filing

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Item 1A. Risk Factors

2023-02-17 compared with 2022-02-23 · 75 added, 46 removed, 158 unchanged (43% 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 Form 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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Economic recessions could have a significant, adverse impact on our business.

The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, interest rate fluctuations, currency fluctuations, and other economic factors beyond our control.

The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles of our customers, interest rate fluctuations, currency fluctuations, and other economic factors beyond our control.

Deterioration in the economic environment subjects our business to various risks, which may have a material and adverse impact on our operating results and cause us to not reach our long-term growth goals:

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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 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.

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

The market may be impacted by supply chain disruptions or overall economic conditions.

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

During 2022 and continuing in 2023, we have experienced a decline in volumes as shippers struggle with elevated inventory levels and consumer demand has been negatively impacted by inflation and macroeconomic uncertainty.

These volume declines have also driven declining freight rates in certain transportation modes and trade lanes.

• Credit risk and working capital:

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

Our adjusted gross profit and income from operations may decrease if we are unable to increase our pricing to our customers.

Our adjusted gross profits and income from operations may decrease if we are unable to increase our pricing to our customers.

Increased demand for over the road transportation services and changes in regulations may reduce available capacity and increase motor carrier pricing.

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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, fluctuating fuel prices may result in decreased adjusted gross profit margin.

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

In our truckload transportation business, fluctuating fuel prices may result in a 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.

In times of fluctuating fuel prices, our adjusted gross profit margin may also fluctuate.

Adjusted gross profit margin is a non-GAAP financial measure calculated as adjusted gross profit divided by total revenues.

Adjusted gross profit margin is a non-GAAP financial measure calculated as adjusted gross profits divided by total revenues.

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, which may prevent us from meeting our commitments to our customers.

These independent third parties may not fulfill their obligations to us, or our relationship with these parties may change, 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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• reduction or deterioration in rail service;

• the introduction of alternative means of transporting freight;

• unanticipated changes in freight markets.

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We often buy and sell transportation services from and to many of our competitors.

Increased competition could reduce our market opportunity and create downward pressure on freight rates, and continued rate pressure may adversely affect our adjusted gross profit and income from operations.

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.

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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.

The transportation industry may also be significantly impacted by disruptions such as port congestion and the availability of transportation equipment, as well as factors such as labor shortages, fuel prices, shifts in consumer demand toward more locally sourced products, and regulatory changes.

These disruptions may impact the growth rates within the global logistics industry and our ability to provide transportation services for our customers, each of which 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

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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.

We rely on our technology staff and third-party vendors to successfully implement changes to, and to 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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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.

The insurance 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.

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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We provide services within and between foreign countries on an increasing basis.

Our business outside of the United States is subject to various risks, including:

Our business outside of the U.S.

is subject to various risks, including:

• changes in tariffs, trade restrictions, trade agreements, and taxations;

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• different liability standards;

• intellectual property laws of countries that do not protect our rights in our intellectual property, including but not limited to, our proprietary information systems, to the same extent as the laws of the United States.

• issues related to non-compliance with laws, rules, and regulations in the countries in which we operate including the U.S.

Foreign Corrupt Practices Act and similar regulations.

Failure to comply could result in reputational harm, substantial penalties, and operational restrictions.

The occurrence or consequences of any of these factors may restrict our ability to operate in the affected region and/or decrease the profitability of our operations in that region.

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We have limited control over these risks, and if we do not correctly anticipate changes in international economic and political conditions, we may not alter our business practices in time to avoid adverse effects.

Our ability to appropriately staff and retain employees is important to our variable cost model.

Our continued success depends upon our ability to attract and retain a large group of motivated salespeople and other logistics professionals.

Our ability to appropriately staff and retain employees is important to our business model.

Our continued success depends upon our ability to attract and retain motivated logistics professionals.

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

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

In addition, macroeconomic factors impacting the labor market may result in higher costs to hire and retain qualified personnel.

Because of our comprehensive employee training program, our employees are attractive targets for new and existing competitors.

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

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 two percent of our consolidated total revenue.

We derive a significant portion of our total revenues and adjusted gross profits from our largest customers.

During 2022, our top 100 customers based on total revenue comprised approximately 35 percent of our consolidated total revenues and our top 100 customers based on adjusted gross profits comprised approximately 29 percent of consolidated adjusted gross profit.

Our largest customer comprised approximately two percent of our consolidated total revenues.

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

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We may be subject to the negative impacts of climate change, which could adversely impact our business and financial results.

The potential impacts of climate change may subject us to various risks, including:

• physical risks such as extreme weather conditions or other types of weather events, which could disrupt our operations;

• compliance costs and transition risks such as increased regulation on us and on our contracted transportation providers;

• reputational and strategic risks due to shifts in customer demands such as customers requiring more fuel efficient transportation, autonomous transportation modes, or increased transparency to carbon emissions in their supply chains.

Such impacts may disrupt our operations by adversely affecting our ability to procure services that meet regulatory or customer requirements and may negatively affect our results of operations, cash flows and financial condition.

We may have difficulties integrating acquired companies.

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Slower or less profitable growth or losses could adversely affect our stock price.

We are in the process of searching for a new Chief Executive Officer and need to retain key management personnel.

Our Board of Directors is conducting a search for a new Chief Executive Officer.

In January 2023, we announced that the Board of Directors was conducting a search for a successor for our Chief Executive Officer whose employment terminated January 1, 2023, and the Board appointed a member of the Board to serve as Interim Chief Executive Officer.

We must successfully identify and integrate a new Chief Executive Officer to achieve our strategic and operating objectives, and the timeline for completing this process is currently unknown.

Transitions in senior executive leadership can adversely affect relationships with our clients, suppliers, and employees;

make it difficult to attract and retain talent;

and pose challenges in planning for the future.

We must also retain other key management personnel to facilitate a smooth transition.

Failure to attract, retain and incentivize key management personnel could materially and adversely affect our operating results.

Our indebtedness could adversely impact our financial condition and results of operations.

Significant adverse economic and industry conditions could negatively affect our ability to pay principal and interest on our debt and limit our ability to fund working capital, capital expenditures, possible acquisitions, dividends, share repurchases, or other investments.

If we are unable to generate sufficient cash flows to satisfy our debt obligations or refinance these debt obligations with commercially acceptable terms, it may adversely impact our financial position and results of operations.

We may be unable to comply with the various restrictions and covenants under our indebtedness, which may result in default and our outstanding indebtedness may become immediately due and payable and adversely impact our financial position.

We may be adversely impacted by changing interest rates.

We are exposed to changes in interest rates, primarily on our short-term debt that carries floating interest rates.

Interest rates are highly sensitive to many factors, including governmental monetary policies, economic conditions, and other factors beyond our control.

A significant increase in interest rates could adversely impact our financial position and results of operations.

Governmental, regulatory, and legal risk factors

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We are subject to claims arising from our transportation operations.

We use the services of thousands of transportation companies in connection with our transportation operations.

From time to time, the drivers employed and engaged by the motor carriers we contract with are involved in accidents, which may result in serious personal injuries.

We use the services of thousands of third party transportation companies in connection with our transportation operations.

From time to time, the drivers employed and engaged by the motor carriers with which we contract are involved in accidents, which may result in serious personal injuries.

The resulting types and/or amounts of damages may be excluded by or exceed the amount of insurance coverage maintained by the contracted motor carrier.

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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.

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.

In addition, we are insured up to $2.5 million per incident within our automobile liability policy.

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

In addition, significant increases in insurance costs or the inability to purchase insurance as a result of these claims could reduce our profitability.

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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 $7.5 million.

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

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We may face claims for a variety of damages arising from the sale of produce, which may include potentially uninsured consequential damages.

While we are insured for up to $155 million for product liability claims subject to a $500,000 per incident deductible, settlement of class action claims is often costly, and we cannot guarantee that our coverage will be adequate and will continue to be available.

If we have to recall produce, we may be required to bear the cost of repurchasing, transporting, and destroying any allegedly contaminated product, as well as associated consequential damages.

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

Any material litigation related to the above types of claims or claims arising from our transportation operations may require significant management time and could cause us to incur substantial legal and related costs, which may include damages that could have a material adverse impact on our financial results.

Our business depends upon compliance with numerous government regulations.

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.

Our operations may be regulated and licensed by various federal, state, and local transportation agencies in the U.S.

and similar governmental agencies in foreign countries in which we operate.

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 NVOCC, and we maintain separate bonds and licenses for each.

For purposes of our Global Forwarding services, 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.

We provide customs brokerage services as a customs broker under a license issued by the U.S.

We provide customs brokerage services as a customs broker under a license issued by U.S.

Customs and Border Protection and other authoritative governmental agencies.

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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 be materially and adversely affected as a result.

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

Department of Homeland Security regulations applicable to our customers that 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.

We cannot predict what impact future regulations may have on our business.

We cannot predict the impact that future regulations may have on our business.

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 transitional risks relating to climate change, which could directly or indirectly have a material adverse effect on our business.

Our contracted transportation providers 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.

If we are unable to pass such costs along to our customers, our business could be materially and adversely affected.

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.

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We may also incur expenses as a result of regulators requiring additional climate-related disclosures regarding our contracted transportation providers that may be labor-intensive to report on.

Until the timing, scope, and extent of such possible regulation becomes known, we cannot predict its effect on our company, but if we are unable to pass such costs along to our customers, our business could be materially and adversely affected.

Even without any new legislation or regulation, increased public concern regarding greenhouse gas emissions 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.

General risk factors

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

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

We may be subject to negative impacts of catastrophic events.

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.

We are particularly vulnerable to these risks given the broad and global scope of our operations.

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 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.

Since the beginning of the pandemic we have experienced periods of significant changes including volatility in demand, declines in certain industries and regions, volatile pricing, and negative impacts to carrier capacity.

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 new COVID-19 variants, and the effectiveness of local, state, federal, and international actions that are being taken to contain and treat COVID-19.

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.

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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