What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-01 · 204 added, 506 removed, 175 unchanged (80% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of this Form 10-K generally discusses our results of operations and financial condition for the year ended December 31, 2021.

For a discussion of similar topics for the years ended December 31, 2020 and December 31, 2019, please refer to “Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K, filed on March 1, 2021, which is incorporated herein by reference.

Overview and Executive Summary

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Expedited Freight and Intermodal.

In the fourth quarter of 2019, we changed our reportable segments to reflect how the chief operating decision maker allocates resources and evaluates performance.

We have recast our financial information and disclosures for the prior periods as if the current presentation had been in effect throughout all periods presented.

Through the Expedited Freight segment, we operate a comprehensive national network to provide expedited regional, inter-regional and national LTL services.

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Synergistic opportunities include the ability to share resources, particularly our fleet resources.

In analyzing the components of our revenue, we monitor changes and trends in our LTL volumes and LTL revenue per hundredweight.

While LTL revenue per hundredweight is a yield measurement, it is also a commonly-used indicator for general pricing trends in the LTL industry.

This yield metric is not a true measure of price;

however, as it can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul.

As a result, changes in revenue per

hundredweight do not necessarily indicate actual changes in underlying base rates.

LTL revenue per hundredweight and the key factors that can impact this metric are described in more detail below:

• LTL Revenue Per Hundredweight - Our LTL transportation services are generally priced based on weight, commodity, and distance.

This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives.

Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc.

Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight.

Fuel surcharges and accessorial charges are included in this measurement.

• LTL Weight Per Shipment - Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment.

Generally, increases in weight per shipment indicate higher demand for our customers’ products and overall increased economic activity.

Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload, in response to capacity, service and pricing issues.

Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.

• LTL Revenue Per Shipment - This measurement is primarily determined by the two metrics listed above as well as average length of haul and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue.

Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing network.

Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different

functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, door pounds handled per hour and door shipments per hour.

In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology.

We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges.

The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S.

Trends and Developments

Ransomware Incident

In December 2020, we detected the Ransomware Incident which impacted our operational and information technology systems.

The Ransomware Incident caused service delays for many of our customers.

Promptly upon detecting the Ransomware Incident, we initiated our response protocols, launched an investigation and engaged the services of cybersecurity and forensic professionals.

We also engaged with the appropriate law enforcement authorities.

We contained the incident and recovered from it, resuming normal operations with our customers within several days of the incident.

However, operations were adversely affected by the inefficiencies caused by the Ransomware Incident and fourth quarter 2020 revenue was also adversely affected as we were unable to fulfill a portion of customer demand during the quarter.

In addition, we incurred $1.6 million of expense in the fourth quarter of 2020 associated with the Ransomware Incident consisting primarily of payments to third-party service providers and consultants, including investigation and legal fees, all of which were expensed as incurred.

We expect to incur additional costs related to the Ransomware Incident in 2021, but these are not expected to be significant.

Expedited Freight Acquisitions

As part of the Company’s strategy to expand final mile pickup and delivery operations:

• In October 2020, the Company acquired substantially all of the assets of CLW Delivery, Inc.

(“CLW”) for $5.5 million.

CLW specializes in last mile logistics and in-home installation services for national retailers and manufacturers.

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• In January 2020, the Company acquired certain assets and liabilities of Linn Star Holdings, Inc., Linn Star Transfer, Inc.

and Linn Star Logistics, LLC (collectively, “Linn Star”) for $57.2 million.

This acquisition increased the Company’s Final Mile capabilities with an additional 20 locations.

• In April 2019, we acquired certain assets of FSA for $27.0 million in cash and additional contingent consideration (“earn-out”) based upon future revenue generation.

The earn-out opportunity is $15.0 million and had a fair value of $6.9 million as of December 31, 2020.

This acquisition provides an opportunity for our Expedited Freight segment to expand its final mile service offering into additional geographic markets, form relationships with new customers, and add volumes to our existing locations.

The assets, liabilities, and operating results of this acquisition have been included in the Company's consolidated financial statements from the date of acquisition and have been assigned to the Expedited Freight reportable segment.

Intermodal Acquisitions

As part of our strategy to expand our Intermodal operations, in July 2018, we acquired certain assets of Multi-Modal Transport Inc.

(“MMT”) for $3.7 million, in October 2018 we acquired certain assets of Southwest Freight Distributors, Inc.

(“Southwest”) for $16.3 million and in July 2019 we acquired certain assets and liabilities of O.S.T.

for $12.0 million.

is a drayage company and provides the Intermodal segment with an expanded footprint on the East Coast, with locations in the Pennsylvania, Maryland, Virginia, South Carolina and Georgia markets.

In October 2020, we purchased Value Logistics for $2.0 million.

These transactions were funded using cash flows from operations and provide an opportunity for our Intermodal segment to expand into additional geographic markets and add volumes to our existing locations.

The assets, liabilities, and operating results of these acquisitions have been included in our consolidated financial statements from the date of acquisition and have been assigned to the Intermodal reportable segment.

See Note 3, Acquisitions, Goodwill and Other Long-Lived Assets , to our Consolidated Financial Statements for more information about our acquisitions.

On February 12, 2021, we sold the Pool segment to Ten Oaks Group for an estimated total consideration of $20 million, consisting of $8 million upfront cash payment and up to a $12 million earnout based on 2021 EBITDA attainment.

On April 23, 2020, the Board approved a strategy to divest Pool Distribution (“Pool”) within the next year.

Pool provides high-frequency handling and distribution of time sensitive product to numerous destinations within a specific geographic region.

Pool offers this service throughout the Mid-Atlantic, Southeast, Midwest and Southwest United States.

Accordingly, Pool has been classified as assets held for sale as of December 31, 2020 and for all prior periods presented.

Pool assets and liabilities are reflected as “Assets and liabilities held for sale” on the Consolidated Balance Sheets in this Form 10-K.

Our business is highly susceptible to changes in economic conditions.

As part of the inorganic growth strategy, in February 2021, we acquired certain assets and liabilities of Proficient Transport Incorporated and Proficient Trucking, Inc.

(together “Proficient Transport ” ) for $16,339 and a potential earn-out up to $2,000.

The estimated fair value of the earn-out liability on the date of acquisition was $829.

The fair value was based on the estimated one-year performance of the acquired customer revenue and was calculated using the option pricing method.

Proficient Transport is an intermodal drayage company headquartered in Chicago, Illinois.

The acquisition of Proficient Transport will expand our intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and will introduce a new location in Ohio.

The acquisition was funded using cash flows from operations.

The results of Proficient Transport have been included in our consolidated financial statements as of and from the date of acquisition.

In November 2021, we acquired certain assets and liabilities of BarOle Trucking, Inc.

( “BarOle”) for $35,436.

BarOle is an intermodal drayage company headquartered in Roseville, Minnesota.

The acquisition of BarOle provides additional capacity and resources to meet customer demands in the intermodal market, and extends the service footprint to the Minneapolis-Saint Paul, Minnesota area.

In addition, BarOle has a larger terminal location, which allows for further expansion in the future.

The acquisition was financed by cash flows from operations.

The results of BarOle have been included in our consolidated financial statements as of and from the date of acquisition.

Expedited Freight Acquisition

As part of the inorganic growth strategy, in May 2021, we acquired certain assets and liabilities of J&P Hall Express Delivery (“J&P”) for $7,670.

J&P is headquartered in Atlanta, Georgia with a second terminal in Albany, Georgia.

The acquisition of J&P supports our strategic growth plan by expanding pickup and delivery, less-than-truckload, truckload, less than container load, container freight station warehousing, and airport transfer services across the Southeastern United States.

The acquisition was funded using cash flow from operations.

The results of J&P have been included in our consolidated financial statements as of and from the date of acquisition.

See Note 3, Acquisitions , to our Consolidated Financial Statements for more information about our acquisitions.

On February 12, 2021, we sold Pool for an $8,000 cash payment and up to a $12,000 earn-out based on 2021 earnings before interest, taxes, depreciation and amortization attainment, beginning February 1, 2021.

The estimated fair value of the earn-out on the date of sale was $6,967, and was calculated based on the estimated performance of Pool using a Monte Carlo simulation model.

A loss on the sale of Pool in the amount of $2,860 was recorded in 2021 in discontinued operation.

The financial performance of the Pool business significantly deteriorated during third quarter of 2021.

As a result, an evaluation of the earn-out asset for impairment was completed, which included a review of the revised forecasts.

The revised forecasts indicated an impairment of the entire earn-out asset was necessary.

In 2021, a non-cash charge of $6,967 was recorded as an “Impairment charge” in discontinued operation.

Our business is highly susceptible to changes in the economic conditions.

Our products and services are directly tied to the production and sale of goods and, more generally, to the North American economy.

The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to financial markets.

The COVID-19 pandemic has adversely impacted economic activity and conditions worldwide and created significant volatility and disruption to the financial markets.

Efforts to control the spread of COVID-19 led governments and other authorities to impose restrictions which resulted in business closures and disrupted supply chains worldwide.

As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services.

In 2020, we saw deterioration in volumes across all of our segments and implemented cost reduction and efficiency improvement measures to mitigate the decline in volumes.

Notwithstanding our efforts, extended stay at home orders and closures had a material negative impact on our revenues and earnings during the early part of the pandemic with volumes returning to normalized levels by the third quarter of 2020.

Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 remains fluid and may be further impacted by the policies of President Biden’s administration and the availability and success of a vaccine.

The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition in 2021 will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and

operating conditions can resume.

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Although our business and operations have returned to pre-COVID levels, the situation surrounding COVID-19 and its variants remains fluid and may be further impacted by the policies of President Biden’s administration, the availability and success of a vaccine and vaccination rates.

The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition during 2022 will depend on future developments, which are highly uncertain and cannot be predicted by, including, but not limited to the duration, spread, severity and impact of the COVID-19 outbreak, including the new variants, the effects of the outbreak on our customers and suppliers and the remedial actions and stimulus measures adopted by local and federal governments, and to what extent normal economic and operating conditions can resume.

Like many other businesses affected by current macroeconomic conditions, we are experiencing a labor shortage relating to our employee drivers, terminal and dock workers and otherwise throughout our business and operations.

We are also operating in an environment where competition is intense for independent fleet owner-operators, creating shortages in the marketplace.

These factors have adversely affected our operations, by increasing our operational costs for labor and purchased transportation.

The steps we have taken to address these shortages include paying sign-on bonuses, and offering enhanced wages in select competitive markets.

These measures have increased costs in certain areas of our business.

We will continue to mitigate the effects of the labor shortages and other inflationary conditions through similar actions.

In addition, although we believe we have sufficient capital and liquidity to manage our business over the short- and long-term, our liquidity may be materially affected if conditions in the credit and financial markets deteriorate as a result of COVID-19 including failure by us or our customers to secure any necessary financing in a timely manner.

We periodically evaluate factors including, but not limited to, macroeconomic conditions, changes in our industry and the markets in which we operate and our market capitalization, as well as our reporting units’ expected future financial performance for purposes of evaluating asset impairments, including goodwill.

We believe that the impact of COVID-19 may negatively affect certain key assumptions used in our analysis;

however, we will need to assess the severity and nature of the long-term impacts to determine if we may be required to record charges for asset impairments in the future.

Results from Fixed Asset Useful Life and Salvage Value Study

We periodically evaluate the reasonableness of the useful lives and salvage values of our equipment.

During the third quarter of 2019, we identified indicators that the useful lives of our owned tractors and trailers extended beyond initial estimates.

As a result, we changed the useful life of our trailers from seven to ten years and tractors from five to ten years.

In addition, we reduced the salvage value of our tractors from 25% to 10%.

The change in estimate was made on a prospective basis beginning July 1, 2019, and the impact of the change was a $2.6 million reduction in depreciation for the year ended December 31, 2019.

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Results from Operations

The following table sets forth our consolidated historical financial data for the years ended December 31, 2020 and 2019 (in millions):

Year ended December 31,

2020 2019 Change Percent Change

(As Adjusted)

The following table sets forth our consolidated financial data for the years ended December 31, 2021 and 2020 (in thousands):

December 31, 2021 December 31, 2020 Change Percent Change

Operating revenue:

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Interest expense, net $ (4,338) $ (4,561) $ 223 4.9

Other, net $ — $ (3) $ 3 100.0

Total other expense $ (4,338) $ (4,564) $ 226 (5.0)

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Net income from continuing operations $ 116,091 $ 52,767 $ 63,324 120.0

(Loss) income from discontinued operation, net of tax (29.1) 4.8 (33.9) (706.3)

Loss from discontinued operation, net of tax $ (10,232) $ (29,034) $ 18,802 (64.8)

Net income and comprehensive income $ 105,859 $ 23,733 $ 82,126 346.0 %

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During the year ended December 31, 2020, revenue increased 4.5% compared to the year ended December 31, 2019.

The revenue increase was primarily driven by increased revenue from our Expedited Freight segment of $71.4 million, partially offset by the decreased revenue from our Intermodal segment of $18.1 million.

The increase in the Expedited Freight segment was driven by the final mile revenue resulting from the acquisition of FSA in April 2019 and Linn Star in January 2020.

Both the Expedited Freight segment and the Intermodal segment were impacted by decreased volumes due to the impacts of COVID-19.

The results for our two reportable segments are discussed in detail in the following sections.

Operating revenues increased $392,854, or 30.9% to $1,662,427 for the year ended December 31, 2021 compared to $1,269,573 for the year ended December 31, 2020.

The revenue increase was primarily driven by increased revenue from our Expedited Freight segment of $301,969 due to increased Network, Truckload and Final Mile revenue.

Operating Expenses

Operating expenses increased $92.9 million primarily driven by purchased transportation increases of $64.6 million;

other operating expenses of $17.6 million and salaries, wages and employee benefits increases of $12.8 million.

Operating expenses increased $307,477 primarily driven by an increase in purchased transportation of $182,411, other operating expenses of $43,562 and salaries, wages and employee benefits of $57,029.

Purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and employee benefits.

Purchased transportation expense increased due to the utilization of more third-party carriers as it relates to the Expedited Freight segment.

Other operating expenses increased primarily due to additional expenses related to vehicle liability claims, severance, litigation reserves and the ransomware incident.

Salaries, wages and employee benefits increased primarily due to additional salaries resulting from acquisitions.

Other operating expenses increased primarily due to an increase in rail storage expenses, demurrage fees and professional fees.

Salaries, wages and employee benefits increased primarily due the additional employees hired in response to the increase in volumes in 2021, increased reserve for incentive compensation and higher group health insurance premiums.

Income from Continuing Operations and Segment Operations

Income from continuing operations decreased $38.5 million, or 34.3%, from the year ended December 31, 2019 to $73.9 million for the year ended December 31, 2020.

The decrease was primarily driven by decreases at our Expedited Freight segment and Intermodal segment of $32.3 million and $7.3 million, respectively.

Income from continuing operations increased $85,377, or 115.5%, from the year ended December 31, 2020 to $159,301 for the year ended December 31, 2021.

The increase was primarily driven by Expedited Freight segment and Intermodal segment of $68,055 and $13,726, respectively.

The results for our two reportable segments are discussed in detail in the following sections.

Interest Expense, net

Interest expense, net was $4.5 million for the year ended December 31, 2020 compared to $2.7 million for the same period in 2019.

The increase in interest expense, net was primarily attributable to additional borrowings on our revolving credit facility and to a lesser extent an interest rate increase associated with the April 2020 amendment to our revolving credit facility.

Interest expense, net was $4,338 for the year ended December 31, 2021 compared to $4,561 for the same period in 2020.

The decrease in interest expense, net was primarily driven by a lower interest rate during the year ended December 31, 2021, partially offset by additional borrowings in 2021 under our revolving credit facility.

The interest rate on outstanding borrowings under our revolving credit facility was 1.43% and 3.25% as of December 31, 2021 and 2020, respectively.

Income Taxes on a Continuing Basis

The combined federal and state effective tax rate for the year ended December 31, 2021 was 25.1% compared to a rate of 23.9% for the same period in 2020.

The lower effective tax rate for the year ended December 31, 2020 was primarily the result of an increased benefit from the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act as well as lower Net Operating Loss utilization in 2020.

(Loss) Income from Discontinued Operation, net of tax

(Loss) income from discontinued operation, net of tax decreased $33.9 million to a $29.1 million loss for the year ended December 31, 2020 from $4.8 million of income for the year ended December 31, 2019.

(Loss) income from discontinued operations includes the Company's Pool business and, as discussed above, Pool's operations were negatively impacted by COVID-19 as many of its customers were affected by retail mall closures.

In addition, during the fourth quarter of 2020, a non-cash impairment charge of $28.4 million was recorded to reflect the net assets held for sale at fair value less costs to sell.

As a result of the foregoing factors, net income decreased by $ 63.4 million , or 72.8%, to $ 23.7 million for the year ended December 31, 2020 compared to $ 87.1 million for the same period in 2019.

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The higher effective tax rate for the year ended December 31, 2021 was primarily due a return to provision expense adjustment recorded in 2021 compared to a return to provision benefit adjustment recorded in 2020, partially offset by increased excess tax benefits realized on share-based awards in 2021 compared to the same period in 2020.

During the year ended December 31, 2020, a refund for Tennessee tax credits was received.

A similar refund was not received during the year ended December 31, 2021.

Loss from Discontinued Operation, net of tax

Loss from discontinued operation, net of tax decreased $18,802 to a $10,232 loss for the year ended December 31, 2021 from $29,034 loss for the year ended December 31, 2020.

Loss from discontinued operation includes our Pool business and, as discussed above, the Pool business was sold on February 12, 2021.

An evaluation of the earn-out asset indicated an impairment was necessary and as a result, for the year ended December 31, 2021, a non-cash impairment charge was recorded.

For the year ended December 31, 2020, our Pool business was adversely impacted by COVID-19 as many of our customers were affected by retail mall closure in response to stay-at-home orders beginning in March 2020.

In addition, during 2020, a non-cash impairment charge of $28,384 was recorded to reflect the net assets held for sale at fair value less costs to sell.

As a result of the foregoing factors, net income increased by $82,126, or 346.0%, to $105,859 for the year ended December 31, 2021 compared to $23,733 for the same period in 2020.

Expedited Freight - Year Ended December 31, 2021 compared to Year Ended December 31, 2020

The following table sets forth our historical financial data of the Expedited Freight segment for the years ended December 31, 2020 and 2019 (in millions):

Expedited Freight Segment Information

(In millions)

December 31, Percent of December 31, Percent of Percent

Revenue 2019 Revenue Change Change

(As Adjusted)

The following table sets forth our financial data of the Expedited Freight segment for the years ended December 31, 2021 and 2020 (unaudited and in thousands):

December 31, 2021 Percent of Revenue December 31, 2020 Percent of Revenue Change Percent Change

Operating revenue:

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Income from operations $ 139,321 10.1 % $ 71,266 6.6 % $ 68 95.5 %

1 Includes revenues and operating expenses from the acquisition of FSA and Linn Star, which were acquired in April 2019 and January 2020, respectively.

FSA results are partially included in the prior period.

Linn Star results are not included in the prior period.

1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, Truckload and Final Mile revenue.

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Expedited Freight Operating Statistics

December 31, December 31, Percent

2020 2019 Change

(As Adjusted)

December 31, 2021 December 31, 2020 Percent Change

Business days 254 256 (0.8) %

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47.8 % 48.0 % (0.4)

Network gross margin 5

50.8 % 55.0 % (7.6) %

1 In thousands

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4 Door-to-door shipments include all shipments with a pickup and/or delivery

5 Network revenue less Network purchased transportation as a percentage of Network revenue

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Expedited Freight operating revenue increased $71.4 million, or 7.1%, to $1,072.3 million for the year ended December 31, 2020 from $1,000.9 million for the same period of 2019.

The change was primarily due to the increase in the final mile revenue of $123.9 million, partially offset by the decreases in network and truckload revenue.

Final mile revenue increased due to the acquisitions of FSA in April 2019 and Linn Star in January 2020.

Network revenue decreased $49.7 million due lower tonnage and shipments as a result of the impacts of COVID-19 as well as the Ransomware Incident.

For the network revenue, total shipments declined 1.8% as compared to the prior year, tonnage declined 4.4% as compared to the prior year and revenue per hundredweight declined 1.7% as compared to the prior year.

In addition, fuel surcharge revenue decreased $21.4 million, or 20.4%, because of lower fuel prices and decreased tonnage.

Truckload revenue decreased $3.1 million primarily due to a decline in rates driven by both the spot market and contract rate customers, and lower tonnage resulting from the adverse impact of COVID-19.

Expedited Freight operating revenue increased $301,969, or 28.2%, to $1,374,270 for the year ended December 31, 2021 from $1,072,301 for the same period of 2020.

The increase was driven by increased Network, Truckload and Final Mile revenue.

Network revenue increased due to a 18.7% increase in tonnage and a 8.0% increase in revenue per hundredweight partially offset by a 1.6% decrease in shipments as compared to the prior year.

The increase in tonnage was primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations in 2020.

Strategic pricing initiatives and freight rationalization actions contributed to the increase in the revenue per hundredweight.

Fuel surcharge revenue increased $53,860, or 64.2% as a result of the rise in fuel prices and increased tonnage.

Truckload revenue increased $28,968 primarily driven by the economic recovery from COVID-19, which adversely impacted the results of operations for 2020.

Final Mile revenue increased $50,726 due to the combination of organic growth and the acquisition of CLW in October 2020.

Other revenue, which includes warehousing and terminal handling, increased $7,363 due to the higher linehaul tonnage.

Purchased Transportation

Expedited Freight purchased transportation increased by $72.0 million, or 14.1%, to $583.5 million for the year ended December 31, 2020 from $511.5 million for the year ended December 31, 2019.

Expedited Freight purchased transportation increased by $159,866, or 27.4%, to $743,418 for the year ended December 31, 2021 from $583,552 for the same period of 2020.

As a percentage of segment operating revenue, Expedited Freight purchased transportation was 54.2% during the year ended December 31, 2021 compared to 54.4% for the same period of 2020.

Expedited Freight purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and benefits.

The increase in purchased transportation as a percentage of segment operating revenue was mostly due to an increase in our cost per mile as a result of increased utilization of third-party carriers, which are typically more costly than Leased Capacity Providers.

Also, due to the acquisitions of FSA and Linn Star, the final mile purchased transportation increased over the same period of 2019.

The decrease in purchased transportation as a percentage of segment operating revenue was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers for Network and Truckload services.

For the year ended December 31, 2021, 62.3%, 34.0% and 3.7% of our freight capacity was filled by Leased Capacity Providers, third party carriers and Company-employed drivers, respectively.

This compares to 68.0%, 27.7% and 4.3% in the sam e period in 2020.

Salaries, Wages, and Benefits

Expedited Freight salaries, wages and employee benefits increased by $17.7 million, or 8.8%, to $218.4 million for the year ended December 31, 2020 from $200.7 million in the same period of 2019.

Salaries, wages and employee benefits were 20.4% of Expedited Freight’s operating revenue for the year e nded December 31, 2020 compared to 20.1% for the same period of 2019.

The increase was primarily due to the acquisitions of FSA and Linn Star, which accounted for $19.3 m illion of the increase, and a credit for group health insurance premiums received in the prior year in the amount of $5.1 million.

These increases were partially offset by cost-control measures enacted in response to COVID-19.

Expedited Freight salaries, wages and employee benefits increased by $42,984, or 19.7%, to $261,405 for the year ended December 31, 2021 from $218,421 for the same period of 2020.

Salaries, wages and employee benefits were 19.0% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 20.4% for the same period of 2020.

The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in tonnage in 2021, increased reserve for incentive compensation and higher group health insurance premiums.

Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.

Operating Leases

Expedited Freight operating leases increased $7.1 million, or 15.2%, to $53.7 million for the year ended December 31, 2020 from $46.6 million for the year ended December 31, 2019.

Operating leases were 5.0% of Expedited Freight’s operating revenue for the year ended December 31, 2020 compared to 4.7% for the year ended December 31, 2019.

The increase was primarily due to additional facility leases related to the acquisitions of FSA and Linn Star in the amount of $6.2 million and in new tractor rentals in the amount of $1.3 million.

Expedited Freight operating leases increased $3,629, or 6.8%, to $57,309 for the year ended December 31, 2021 from $53,680 for the same period of 2020.

Operating leases were 4.2% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 5.0% for the same period of 2020.

The increase in operating leases expense was primarily due to higher facility expense in 2021, partially due to facility leases assumed in connection with the CLW and J&P acquisitions.

Depreciation and Amortization

Expedited Freight depreciation and amortization decreased $0.4 million, or 1.5%, to $27.0 million for the year ended December 31, 2020 from $27.4 million for the year ended December 31, 2019.

Depreciation and amortization expense as a percentage of Expedited Freight operating revenue was 2.5% in the year ended December 31, 2020 compared to 2.7% for the year ended December 31, 2019.

Expedited Freight depreciation and amortization increased $1,839, or 6.8%, to $28,842 for the year ended December 31, 2021 from $27,003 for the same period of 2020.

Depreciation and amortization expense as a percentage of Expedited Freight operating revenue was 2.1% in the year ended December 31, 2021 compared to 2.5% for the same period of 2020.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation and additional amortization expense resulting from intangible assets recorded in connection with the CLW and J&P acquisitions.

Insurance and Claims

Expedited Freight insurance and claims expense increased $0.4 million, or 1.7%, to $24.0 million for the year ended December 31, 2020 from $23.6 million for the year ended December 31, 2019.

Insurance and claims as a percentage of Expedited Freight’s operating revenue was 2.2% for the year ended December 31, 2020 compared to 2.4% for the year ended December 31, 2019.

The increase in expense was primarily attributable to an increase in vehicle insurance premiums, partially offset by favorable claims.

Expedited Freight insurance and claims expense increased $8,222, or 34.2%, to $32,243 for the year ended December 31, 2021 from $24,021 for the same period of 2020.

Insurance and claims as a percentage of Expedited Freight’s operating revenue was 2.3% for the year ended December 31, 2021 compared to 2.2% for the same period of 2020.

The increase in expense was primarily due to an increase in vehicle insurance premiums, and additional vehicle liability and cargo claims.

See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other Operations” section below.

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Expedited Freight fuel expense decreased $3.4 million, or 33.3%, to $6.8 million for the year ended December 31, 2020 from $10.2 million in the year ended December 31, 2019.

Fuel expense was 0.6% of Expedited Freight’s operating revenue for the years ended December 31, 2020 and 1.0% for 2019.

Expedited Freight fuel expenses decreased due to lower fuel prices.

Expedited Freight fuel expense increased $1,959, or 28.8%, to $8,752 for the year ended December 31, 2021 from $6,793 for the same period of 2020.

Fuel expense was 0.6% of Expedited Freight’s operating revenue for the year ended December 31, 2021 compared to 0.6% for the same period of 2020.

Expedited Freight fuel expense increased due to the rise in the average price of fuel in 2021.

Other Operating Expenses

Expedited Freight other operating expenses increased $10.3 million, or 13.3%, to $87.6 million for the year ended December 31, 2020 from $77.3 million for the year ended December 31, 2019.

Expedited Freight other operating expenses were 8.2% of operating revenue for the year ended December 31, 2020 compared to 7.7% for the year ended December 31, 2019.

Expedited Freight other operating expenses increased $15,415, or 17.6%, to $102,980 for the year ended December 31, 2021 from $87,565 for the same period of 2020.

Expedited Freight other operating expenses were 7.5% of operating revenue for the year ended December 31, 2021 compared to 8.2% for the same period of 2020.

Other operating expenses include equipment maintenance, facility expenses, legal and professional fees and other over-the-road costs.

The increase was primarily attributable to a $8.1 million increase in parts costs related to final mile installations, $5.4 million increase in facility expenses due to the acquisitions of FSA and Linn Star and a $0.5 million increase in the fair value of the earn-out liability from the FSA acquisition due to higher than anticipated revenues.

The increase in other operating expenses was driven by an increase in equipment maintenance costs, terminal and office expenses, legal and professional fees, other over-the-road costs and parts for final mile installatio ns.

Income from Operations

Expedited Freight income from operations decreased by $32.3 million, or 31.2%, to $71.3 million for the year ended December 31, 2020 compared to $103.6 million for the year ended December 31, 2019.

Expedited Freight’s income from operations was 6.6% of operating revenue for the year ended December 31, 2020 compared to 10.4% for the year ended December 31, 2019.

The decrease in income from operations was primarily due to lower tonnage, shipments and revenue per hundredweight due to the adverse impacts of COVID-19 and the Ransomware Incident.

To a lesser extent, additional costs from the acquisitions of FSA and Linn Star contributed to the decrease through continued integration efforts into the Expedited Freight segment.

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Expedited Freight income from operations increased by $68,055, or 95.5%, to $139,321 for the year ended December 31, 2021 compared to $71,266 for the same period of 2020.

Expedited Freight’s income from operations was 10.1% of operating revenue for the year ended December 31, 2021 compared to 6.6% for the same period of 2020.

The increase in income from operations as a percentage of operating revenues was driven by increased revenue per hundredweight combined with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Intermodal - Year Ended December 31, 2021 compared to Year Ended December 31, 2020

The following table sets forth our historical financial data of the Intermodal segment for the years ended December 31, 2020 and 2019 (in millions):

Intermodal Segment Information

(In millions)

December 31, Percent of December 31, Percent of Percent

2020 Revenue 2019 Revenue Change Change

The following table sets forth our financial data of the Intermodal segment for the years ended December 31, 2021 and 2020 (unaudited and in thousands):

December 31, 2021 Percent of Revenue December 31, 2020 Percent of Revenue Change Percent Change

Operating revenue $ 289,214 100.0 % $ 199,603 100.0 % $ 89,611 44.9 %

9 unchanged sentences

Income from operations $ 30,117 10.4 % $ 16,391 8.2 % $ 13,726 83.7 %

1 Includes revenues and operating expenses from the acquisition of OST, which was acquired in July 2019 and is partially included in the prior period

Intermodal Operating Statistics

December 31, December 31, Percent

2020 2019 Change

December 31, 2021 December 31, 2020 Percent Change

Drayage shipments 369,601 301,454 22.6 %

1 unchanged sentence

Number of locations 29 24 20.8 %

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Intermodal operating revenue decreased $18.1 million, or 8.3%, to $199.6 million for the year ended December 31, 2020 from $217.7 million for the same period in 2019.

The decrease in Intermodal operating revenue was primarily attributable to a 6.0% decrease in drayage revenue per shipment from prior year, decreased fuel surcharge reve nue because of lower fuel prices and a decline in linehaul shipments, partially offset by an increase in per diem revenue.

Intermodal operating revenue increased $89,611, or 44.9%, to $289,214 for the year ended December 31, 2021 from $199,603 for the same period of 2020.

The increase in operating revenues was primarily attributable to a 22.6% increase in drayage shipments over the same period in 2020 and an increase in accessorial revenues.

The increase in drayage shipments was driven by the combination of the economic recovery from COVID-19, which adversely impacted the results of operations for the year ended December 31, 2020, and the Proficient Transport acquisition in February 2021.

Purchased Transportation

Intermodal purchased transportation decreased $8.2 million, or 10.7%, to $68.7 million for the year ended December 31, 2020 from $76.9 million for the same period in 2019.

Intermodal purchased transportation increased $21,870, or 31.8%, to $90,575 for the year ended December 31, 2021 from $68,705 for the same period of 2020.

Intermodal purchased transportation as a percentage of revenue was 31.2% for the year ended December 31, 2021 compared to 34.4% for the year ended December 31, 2020.

Intermodal purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and benefits.

The decrease in Intermodal purchased transportation as a percentage of revenue was due to operating efficiencies.

Intermodal purchased transportation includes Leased Capacity Providers and third party carriers, while Company-employed drivers are included in salaries, wages and employee benefits.

The decrease in purchased transportation as a percentage of revenues was primarily due to the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Salaries, Wages, and Benefits

Intermodal salaries, wages and employee benefits decreased $4.2 million, or 7.9%, to $48.7 million for the year ended December 31, 2020 from $52.9 million for the year ended December 31, 2019.

As a percentage of Intermodal operating revenue, salaries, wages and benefits remained essentially flat at 24.4% for the year ended December 31, 2020 compared to 24.3% for the same period in 2019.

Intermodal salaries, wages and employee benefits increased $16,901, or 34.7%, to $65,599 for the year ended December 31, 2021 from $48,698 for the same period of 2020.

Salaries, wages and employee benefits were 22.7% of Intermodal operating revenues for the year ended December 31, 2021 compared to 24.4% for the same period of 2020.

The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increase in drayage shipments for the year ended December 31, 2021, an increased reserve for incentive compensation and higher group health insurance premiums.

Cost-control measures implemented in the prior year contributed to the decrease in salaries, wages and employee benefits expense as a percentage of operating revenues.

Operating Leases

Intermodal operating leases remained relatively flat only decreasing by $0.1 million, or 0.6% to $16.3 million for the year ended December 31, 2020 from $16.4 million for the same period in 2019.

Intermodal operating leases increased $5,893, or 36.1% to $22,218 for the year ended December 31, 2021 from $16,325 for the same period of 2020.

Operating leases were 7.7% of Intermodal operating revenue for the year ended December 31, 2021 compared to 8.2% in the same period of 2020.

The increase in operating leases expense was primarily due to new equipment and property leases in 2021.

Depreciation and Amortization

Intermodal depreciation and amortization increased $1.0 million, or 11.2%, to $9.9 million for the year ended December 31, 2020 from $8.9 million for the same period in 2019.

Intermodal depreciation and amortization increased $670, or 6.7%, to $10,647 for the year ended December 31, 2021 from $9,977 for the same period of 2020.

Intermodal depreciation and amortization expense as a percentage of Intermodal operating revenue was 3.7% for the year ended December 31, 2021 compared to 5.0% for the same period of 2020.

Depreciation and amortization increased due to the equipment acquired from OST as well as the acquired intangibles as part of the acquisition of OST.

Insurance and Claims

Intermodal insurance and claims expense increased $1.2 million, or 17.9%, to $7.9 million for the year ended December 31, 2020 from $6.7 million for the year ended December 31, 2019.

Intermodal insurance and claims were 4.0% of operating revenue for the year ended December 31, 2020 compared to 3.1% for the same period in 2019.

The increase in Intermodal insurance and claims was primarily attributable to an increase in vehicle insurance premiums.

See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other operations” section below.

Intermodal fuel expense decreased $2.2 million, or 28.9%, to $5.4 million for the year ended December 31, 2020 from $7.6 million in the same period of 2019.

Fuel expenses were 2.7% of Intermodal operating revenue for the year ended December 31, 2020 compared to 3.5% in the same period of 2019.

Intermodal fuel expense decreased because of lower fuel prices.

Other Operating Expenses

Intermodal other operating expenses increased $1.7 million, or 6.9%, to $26.3 million for the year ended December 31, 2020 from $24.6 million for the same period of 2019.

Intermodal other operating expenses as a percentage of revenue for the year ended December 31, 2020 were 13.2% compared to 11.3% for the same period of 2019.

The increase in Intermodal other

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operating expense was primarily because of an increase in non recoverable per diem and rail storage expenses incurred as a result of the Ransomware Incident.

Income from Operations

Intermodal’s income from operations decreased by $7.3 million, or 30.8%, to $16.4 million for the year ended December 31, 2020 compared to $23.7 million for the same period in 2019.

Income from operations as a percentage of Intermodal operating revenue was 8.2% for the year ended December 31, 2020 compared to 10.9% in the same period of 2019.

The deterioration in operating income was primarily attributable to losing leverage on fixed costs such as salaries, wages and benefits, operating leases, depreciation and amortization and insurance due to the impact of COVID-19.

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Other operations - Year Ended December 31, 2020 compared to Year Ended December 31, 2019

Other operating activity decreased from a $14.9 million operating loss during the year ended December 31, 2019 to a $13.8 million operating loss during the year ended December 31, 2020.

The year ended December 31, 2020 included self-insurance reserves for vehicle claims of $4.9 million which were related to an increase to our loss development factors for claims.

The remaining loss was primarily attributable to a $3.1 million litigation reserve, $1.6 million related to th e Ransomware Incident for professional fees, severance of $1.0 million and $3.4 million of corporate costs previously allocated to the Pool segment that are not part of the discontinued operation.

These costs represent corporate costs that will remain with the Company after the Pool business is divested.

The $14.9 million operating loss included in other operations and corporate activities for the year ended December 31, 2019 included $6.5 million in vehicular reserves for unfavorable development of second quarter 2019 claims and increases to our loss development factors for vehicle and workers' compensation claims of $2.8 million and $0.3 million, respectively.

The loss was also attributed to $3.6 million in costs related to the CEO transition, and $1.1 million of corporate costs previously allocated to the Pool segment that are not part of the discontinued operation.

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Results of Operations

The following table sets forth our historical financial data for the years ended December 31, 2019 and 2018 (in millions):

Year ended December 31,

2019 2018 Change Percent Change

(As Adjusted) (As Adjusted)

Operating revenue:

Expedited Freight $ 1,000.9 $ 941.9 $ 59.0 6.3 %

Intermodal 217.7 201.0 16.7 8.3

Eliminations and other operations (3.4) (5.3) 1.9 35.8

Operating revenue 1,215.2 1,137.6 77.6 6.8

Operating expenses:

Purchased transportation 586.1 564.3 21.8 3.9

Salaries, wages, and employee benefits 258.0 229.6 28.4 12.4

Operating leases 63.1 58.2 4.9 8.4

Depreciation and amortization 36.4 35.8 0.6 1.7

Insurance and claims 38.7 29.6 9.1 30.7

Fuel expense 17.8 16.2 1.6 9.9

Other operating expenses 102.7 86.7 16.0 18.5

Total operating expenses 1,102.8 1,020.4 82.4 8.1

Income (loss) from continuing operations:

Expedited Freight 103.6 103.7 (0.1) (0.1)

Intermodal 23.7 23.3 0.4 1.7

Other operations (14.9) (9.8) (5.1) (52.0)

Income from continuing operations 112.4 117.2 (4.8) (4.1)

Other expense:

Interest expense, net (2.7) (1.8) (0.9) 50.0

Total other expense (2.7) (1.8) (0.9) 50.0

Income from continuing operations before income taxes 109.7 115.4 (5.7) (4.9)

Income tax expense 27.4 26.8 0.6 2.2

Net income from continuing operations 82.3 88.6 (6.3) (7.1)

Income from discontinued operation, net of tax 4.8 3.5 1.3 37.1

Net income and comprehensive income $ 87.1 $ 92.1 $ (5.0) (5.4) %

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During the year ended December 31, 2019, revenue increased 6.8% compared to the year ended December 31, 2018.

The revenue increase was primarily driven by increased revenue from our Expedited Freight segment of $59.0 million driven by increased final mile revenue primarily from the acquisition of FSA in April 2019.

The Company’s other segments also had revenue growth over prior year.

Intermodal revenue increased 8.3%, primarily due to the acquisition of OST.

Operating Expenses

Operating expenses increased $82.4 million primarily driven by purchased transportation increases of $21.8 million and salaries, wages and employee benefits increases of $28.4 million.

Company-employed drivers are included in salaries, wages and benefits, while purchased transportation includes Leased Capacity Providers and third-party carriers.

Purchased transportation increased primarily due to increased volumes, but decreased as a percentage of revenue due to increased utilization of Leased Capacity Providers and Company-employed drivers, which are typically less costly than third-party transportation providers.

Salaries, wages and employee benefits increased primarily due to additional headcount from acquisitions, increased Company-employed driver utilization and increased personnel needs to support the additional volumes.

Income from Continuing Operations and Segment Operations

Income from continuing operations decreased $4.8 million, or 4.1%, from the year ended December 31, 2018 to $112.4 million for the year ended December 31, 2019 primarily driven by a $0.1 million decrease from our Expedited Freight segment and a $0.4 million increase from our Intermodal segment, offset by a $5.1 million decrease in other operations due to a $6.5 million vehicle claims reserve recorded in 2019 for pending vehicular claims.

Our Expedited Freight segment operating income decreased $0.4 million due to lower tonnage, higher insurance premiums and a large vehicle claim reserve, mostly offset by improvements in purchased transportation on increased utilization of Leased Capacity Providers and Company-employed drivers and contributions from FSA.

Our Intermodal segment saw a slight increase.

The results for our two reportable segments are discussed in detail in the following sections.

Interest Expense, net

Interest expense, net was $2.7 million for the year ended December 31, 2019 compared to $1.8 million for the same period in 2018.

The increase in interest expense, net was attributable to additional borrowings on our revolving credit facility.

Income Taxes on a Continuing Basis

The combined federal and state effective tax rate for the year ended December 31, 2019 was 24.9% compared to a rate of 23.2% for the same period in 2018.

The higher effective tax rate for the year ended December 31, 2019 was primarily the result of increased executive compensation in the current year, which was not deductible for income tax purposes.

This was partly offset by a reduction in taxable income resulting from the reinstatement of the Alternative Fuel Credit by the Internal Revenue Service on December 20, 2019 and the result of increased share-based compensation vesting when compared to the same period in 2018, which was impacted by forfeited performance shares.

Income from Discontinued Operation, net of tax

Income from discontinued operation, net of tax increased $1.3 million to $4.8 million for the year ended December 31, 2019 from $3.5 million for the year ended December 31, 2018.

Income from discontinued operation includes the Company’s Pool business.

As a result of the foregoing factors, net income decreased by $5.0 million, or 5.4%, to $87.1 million for the year ended December 31, 2019 compared to $92.1 million for the same period in 2018.

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Expedited Freight - Year Ended December 31, 2019 compared to Year Ended December 31, 2018

The following table sets forth our historical financial data of the Expedited Freight segment for the years ended December 31, 2019 and 2018 (in millions):

Expedited Freight Segment Information

(In millions)

December 31, Percent of December 31, Percent of Percent

2019 Revenue 2018 Revenue Change Change

(As Adjusted) (As Adjusted)

Operating revenue:

$ 675.2 67.5 % $ 677.4 71.9 % $ (2.2) (0.3) %

Truckload 196.9 19.7 196.9 20.9 — —

Final Mile 100.6 10.1 39.4 4.2 61.2 155.3

Other 28.2 2.8 28.2 3.0 — —

Total operating revenue 1,000.9 100.0 941.9 100.0 59.0 6.3

Operating expenses:

Purchased transportation 511.5 51.0 491.2 52.1 20.3 4.1

Salaries, wages and employee benefits 200.7 20.1 183.0 19.4 17.7 9.7

Operating leases 46.6 4.7 42.1 4.5 4.5 10.7

Depreciation and amortization 27.4 2.7 29.2 3.1 (1.8) (6.2)

Insurance and claims 23.6 2.4 18.6 2.0 5.0 26.9

Fuel expense 10.2 1.0 9.5 1.0 0.7 7.4

Other operating expenses 77.3 7.7 64.6 6.9 12.7 19.7

Total operating expenses 897.3 89.6 838.2 89.0 59.1 7.1

Income from operations $ 103.6 10.4 % $ 103.7 11.0 % $ (0.1) (0.1) %

1 Network revenue is comprised of all revenue, including linehaul, pickup and/or delivery, and fuel surcharge revenue, excluding accessorial, truckload and final mile revenue

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Expedited Freight Operating Statistics

December 31, December 31, Percent

2019 2018 Change

(As Adjusted) (As Adjusted)

Business days 255 255 — %

Total pounds 2,479,291 2,562,205 (3.2)

Pounds per day 9,723 10,048 (3.2)

Shipments 1,2

Total shipments 3,990 4,173 (4.4)

Shipments per day 15.6 16.4 (4.9)

Weight per shipment 621 614 1.1

Revenue per hundredweight 3

$ 27.21 $ 26.15 4.1

Revenue per hundredweight, excluding fuel 3

$ 22.90 $ 22.09 3.7

Revenue per shipment 3

$ 171 $ 163 4.9

Revenue per shipment, excluding fuel 3

$ 144 $ 138 4.3 %

Network revenue from door-to-door shipments as a percentage of network revenue 3,4

40.0 % 35.3 % 13.3

Network gross margin 5

55.0 % 52.0 % 5.8

1 In thousands

2 Excludes accessorial, full truckload and final mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

4 Door-to-door shipments include all shipments with a pickup and/or delivery

5 Network revenue less Network purchased transportation as a percentage of Network revenue

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Expedited Freight operating revenue increased $59.0 million, or 6.3% , to $1,000.9 million for the year ended December 31, 2019 from $941.9 million for the same period of 2018.

The increase was due to increased final mile revenue of $ 61.2 million .

Network revenue also had a modest decrease compared to the prior year.

Final mile revenue increased primarily due to the acquisition of FSA in April 2019.

Network revenue decreased $ 2.2 million due to a 4.4% decrease in shipments and a 3.2% decrease in tonnage partly

offset by a 4.1% increase in revenue per hundredweight over prior year.

The decrease in shipments and tonnage was due to a

decrease in legacy airport-to-airport shipments.

The increase in revenue per hundredweight was due to increased shipment size

and revenue per shipment.

Purchased Transportation

Expedited Freight purchased transportation increased by $20.3 million, or 4.1%, to $511.5 million for the year ended December 31, 2019 from $491.2 million for the year ended December 31, 2018.

As a percentage of segment operating revenue, Expedited Freight purchased transportation was 51.0% during the year ended December 31, 2019 compared to 52.1% for the same period of 2018.

Expedited Freight purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and benefits.

Purchased transportation decreased as a percentage of revenue primarily due to a 300 basis point decrease in Network purchased transportation as a percentage of revenue as linehaul cost per mile decreased on increased utilization of Leased Capacity Providers and Company-employed drivers over more costly third-party transportation providers.

This decrease was offset primarily by an increase in final mile purchased transportation due to the acquisition of FSA and deteriorating truckload purchased transportation due to the previously mentioned revenue rate pressures.

Salaries, Wages, and Benefits

Expedited Freight salaries, wages and employee benefits increased by $17.7 million, or 9.7%, to $200.7 million for the year ended December 31, 2019 from $183.0 million in the same period of 2018.

Salaries, wages and employee benefits were 20.1% of Expedited Freight’s operating revenue for the year ended December 31, 2019 and 19.4% for the year ended December 31, 2018.

The increase in total dollars and as a percentage of revenue was primarily due to $14.7 million for additional headcount and employee wages, of which $12.1 million was due to the acquisition of FSA.

An additional $6.2 million increase was due to increased utilization of Company-employed drivers to fulfill linehaul and local pickup and delivery services.

These increases were partly offset by a $3.9 million decrease of employee incentives.

Operating Leases

Expedited Freight operating leases increased $4.5 million, or 10.7%, to $46.6 million for the year ended December 31, 2019 from $42.1 million for the year ended December 31, 2018.

Operating leases were 4.7% of Expedited Freight’s operating revenue for the year ended December 31, 2019 compared to 4.5% for the year ended December 31, 2018.

The increase in cost was primarily due to a $2.8 million increase in facility leases mostly from additional facilities acquired from FSA and a $2.9 million increase in tractor rentals and leases to correspond with the increase in Company-employed driver usage mentioned above.

These increases were partly offset by a $1.1 million decrease in trailer rentals and leases, as old leases were replaced with purchased trailers.

Depreciation and Amortization

Expedited Freight depreciation and amortization decreased $1.8 million, or 6.2%, to $27.4 million for the year ended December 31, 2019 from $29.2 million for the year ended December 31, 2018.

Depreciation and amortization expense as a percentage of Expedited Freight operating revenue was 2.7% in the year ended December 31, 2019 compared to 3.1% for the year ended December 31, 2018.

The decrease in total dollars was primarily due to a $1.9 million decrease in trailer depreciation for the year ended December 31, 2019 compared to the same period in 2018 primarily related to extending the useful lives of its trailers from seven to ten years as discussed above.

Tractor depreciation decreased $0.6 million for the year ended December 31, 2019 compared to the same period in 2018 primarily due to decreasing the salvage value of tractors from 25% to 10% as discussed above, partly offset by a decrease in tractor depreciation, as older units were replaced with tractor leases mentioned above.

The net decrease of trailer and tractor depreciation of $2.5 million was partly offset by a $0.8 million of increased amortization of acquired intangibles from FSA.

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Insurance and Claims

Expedited Freight insurance and claims expense increased $5.0 million, or 26.9%, to $23.6 million for the year ended December 31, 2019 from $18.6 million for the year ended December 31, 2018.

Insurance and claims as a percentage of Expedited Freight’s operating revenue was 2.4% for the year ended December 31, 2019 compared to 2.0% for the year ended December 31, 2018.

The increase was attributable to a $1.0 million vehicle claim reserve recorded in the second quarter of 2019 for pending vehicular claims and a $1.8 million increase in vehicle insurance premiums.

The increase was also attributable to higher accident related vehicle damage repairs, cargo claims and claims related fees.

See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other Operations” section below.

Expedited Freight fuel expense increased $0.7 million, or 7.4%, to $10.2 million for the year ended December 31, 2019 from $9.5 million in the year ended December 31, 2018.

Fuel expense was 1.0% of Expedited Freight’s operating revenue for the year ended December 31, 2019 and December 31, 2018.

Expedited Freight fuel expenses increased due to higher Company-employed driver miles.

Other Operating Expenses

Expedited Freight other operating expenses increased $12.7 million, or 19.7%, to $77.3 million for the year ended December 31, 2019 from $64.6 million for the year ended December 31, 2018.

Expedited Freight other operating expenses were 7.7% of operating revenue for the year ended December 31, 2019 compared to 6.9% for the year ended December 31, 2018.

The increase in total dollars and as a percentage of revenue was primarily attributable to a $2.8 million increase in parts costs for final mile installations due to the acquisition of FSA and a $1.5 million increase in loss on operating assets due to reserves for and sales of tractors.

See additional discussion regarding the fixed asset useful life study above.

The increase was also attributable to a $1.3 million increase in legal and professional fees and $1.2 million in higher travel-related expenses.

Additionally, receivables allowance increased $0.8 million due to the third quarter of 2018 including a recovery of a previously reserved receivable.

The remaining increase was due to increased terminal and office expenses and other over-the-road costs, including tolls.

Income from Operations

Expedited Freight income from operations decreased by $0.1 million, or 0.1%, to $103.6 million for the year ended December 31, 2019 compared to $103.7 million for the year ended December 31, 2018.

Expedited Freight’s income from operations was 10.4% of operating revenue for the year ended December 31, 2019 compared to 11.0% for the year ended December 31, 2018.

The decrease in income from operations was due to lower tonnage, higher insurance premiums and a large vehicle claim reserve, mostly offset by improvements in Network gross margin on increased utilization of Leased Capacity Providers and Company-employed drivers and contributions from FSA.

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Intermodal - Year Ended December 31, 2019 compared to Year Ended December 31, 2018

The following table sets forth our historical financial data of the Intermodal segment for the years ended December 31, 2019 and 2018 (in millions):

Intermodal Segment Information

(In millions)

December 31, Percent of December 31, Percent of Percent

2019 Revenue 2018 Revenue Change Change

Operating revenue $ 217.7 100.0 % $ 201.0 100.0 % $ 16.7 8.3 %

Operating expenses:

Purchased transportation 76.9 35.3 77.1 38.4 (0.2) (0.3)

Salaries, wages and employee benefits 52.9 24.3 43.9 21.8 9.0 20.5

Operating leases 16.4 7.5 15.9 7.9 0.5 3.1

Depreciation and amortization 8.9 4.1 6.3 3.8 2.6 41.3

Insurance and claims 6.7 3.1 5.8 2.9 0.9 15.5

Fuel expense 7.6 3.5 6.6 3.3 1.0 15.2

Other operating expenses 24.6 11.3 22.1 11.0 2.5 11.3

Total operating expenses 194.0 89.1 177.7 88.4 16.3 9.2

Income from operations $ 23.7 10.9 % $ 23.3 11.6 % $ 0.4 1.7 %

Intermodal Operating Statistics

December 31, December 31, Percent

2019 2018 Change

Drayage shipments 313,817 305,239 2.8 %

Drayage revenue per Shipment $ 599 $ 567 5.6

Number of Locations 21 20 5.0 %

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Intermodal operating revenue increased $16.7 million, or 8.3%, to $217.7 million for the year ended December 31, 2019 from $201.0 million for the same period in 2018.

The increase was primarily attributable to the increase in drayage shipments from the acquisition of O.S.T.

that occurred in July 2019 and the acquisition of Southwest that occurred in November 2018.

The increase was also attributable to revenue rate increases and fuel surcharge revenue on higher drayage shipments and higher fuel surcharge rates.

Purchased Transportation

Intermodal purchased transportation decreased $0.2 million, or 0.3%, to $76.9 million for the year ended December 31, 2019 from $77.1 million for the same period in 2018.

Intermodal purchased transportation as a percentage of revenue was 35.3% for the year ended December 31, 2019 compared to 38.4% for the year ended December 31, 2018.

Intermodal purchased transportation includes Leased Capacity Providers and third-party carriers, while Company-employed drivers are included in salaries, wages and benefits.

The decrease in Intermodal purchased transportation as a percentage of revenue was attributable to increased utilization of Company-employed drivers compared to the same period in 2018 and operating efficiencies.

Salaries, Wages, and Benefits

Intermodal salaries, wages and employee benefits increased $9.0 million, or 20.5%, to $52.9 million for the year ended December 31, 2019 compared to $43.9 million for the year ended December 31, 2018.

As a percentage of Intermodal operating revenue, salaries, wages and benefits decreased to 24.3% for the year ended December 31, 2019 compared to 21.8% for the same period in 2018.

The 2.5% increase in salaries, wages and employee benefits as a percentage of revenue was attributable to a 1.3% increase from utilization of Company-employed drivers and a 1.3% increase from higher administrative salaries, wages and benefits as a percentage of revenue.

The increase as a percentage of revenue was also attributable to a 0.4% increase in group health insurance and workers compensation as a percentage of revenue.

These increases were partly offset by a 0.3% decrease as a percentage of revenue in incentive and share based compensation to employees and a 0.2% improvement in dock pay as a percentage of revenue.

The increase in administrative salaries, wages and benefits as a percentage of revenue was due to additional headcount from the acquisitions of O.S.T., Southwest and MMT.

Operating Leases

Intermodal operating leases increased $0.5 million, or 3.1% to $16.4 million for the year ended December 31, 2019 from $15.9 million for the same period in 2018.

Operating leases were 7.5% of Intermodal operating revenue for the year ended December 31, 2019 compared to 7.9% in the same period of 2018.

The decrease as a percentage of revenue was attributable to a 0.7% decrease in trailer rental charges as a percentage of revenue.

This decrease as a percentage of revenue was partly offset by increases in facility rent from acquired companies and tractor rentals and leases to correspond with the increase in Company-employed driver usage mentioned above.

Depreciation and Amortization

Intermodal depreciation and amortization increased $2.6 million, or 41.3%, to $8.9 million for the year ended December 31, 2019 from $6.3 million for the same period in 2018.

Depreciation and amortization expense as a percentage of Intermodal operating revenue was 4.1% for the year ended December 31, 2019 compared to 3.8% for the same period of 2018.

The increase was due to $1.2 million increase in amortization of acquired intangibles.

The increase in depreciation and amortization was also attributable to a $1.4 million increase in depreciation of equipment partly due to the equipment acquired from O.S.T..

The increase in depreciation and amortization expense was primarily due to amortization expense resulting from intangible assets recorded in connection with the Proficient Transport acquisition, partially offset by a decrease in equipment depreciation.

Insurance and Claims

Intermodal insurance and claims expense increased $0.9 million, or 15.5%, to $6.7 million for the year ended December 31, 2019 from $5.8 million for the year ended December 31, 2018.

Intermodal insurance and claims were 3.1% of operating revenue for the year ended December 31, 2019 compared to 2.9% for the same period in 2018.

The increase in Intermodal insurance and claims was primarily attributable to an increase in vehicle insurance premiums.

Intermodal insurance and claims expense increased $1,978, or 25.1%, to $9,850 for the year ended December 31, 2021 from $7,872 for the same period of 2020.

Intermodal insurance and claims were 3.4% of operating revenue for the year ended December 31, 2021 compared to 3.9% for the same period of 2020.

The increase in Intermodal insurance and claims was primarily due to an increase in vehicle insurance premiums.

See additional discussion over the consolidated increase in self-insurance reserves related to vehicle claims in the “Other operations” section below.

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Intermodal fuel expense increased $1.0 million, or 15.2%, to $7.6 million for the year ended December 31, 2019 from $6.6 million in the same period of 2018.

Fuel expenses were 3.5% of Intermodal operating revenue for the year ended December 31, 2019 compared to 3.3% in the same period of 2018.

Intermodal fuel expenses increased due to increased Company-employed driver usage mentioned above.

Intermodal fuel expense increased $2,902, or 54.0%, to $8,275 for the year ended December 31, 2021 from $5,373 for the same period of 2020.

Fuel expenses were 2.9% of Intermodal operating revenue for the year ended December 31, 2021 compared to 2.7% for the same period of 2020.

Intermodal fuel expense increased due to the rise in the average price of fuel in 2021.

Other Operating Expenses

Intermodal other operating expenses increased $2.5 million, or 11.3%, to $24.6 million for the year ended December 31, 2019 compared to $22.1 million for the same period of 2018.

Intermodal other operating expenses increased $25,671, or 97.7%, to $51,933 for the year ended December 31, 2021 from $26,262 for the same period of 2020.

Intermodal other operating expenses as a percentage of revenue for the year ended December 31, 2021 were 18.0% compared to 13.2% for the same period of 2020.

The increase in Intermodal other operating expense was due mostly to a $1.0 million increase in container related rental and storage charges and a $0.6 million increase in acquisition related legal and professional fees.

In 2018, a $0.5 million reduction in the earn-out liability for the Atlantic acquisition was recorded.

A similar benefit in the earn-out liability was not recorded in 2019.

The remaining increase was due to increased terminal and office expenses and other over-the-road costs, including tolls.

The increase in Intermodal other operating expenses was driven by additional expenses incurred to support the increased accessorial revenues noted above, increase in bad debt expense and higher equipment maintenance costs.

Income from Operations

Intermodal’s income from operations increased by $0.4 million, or 1.7%, to $23.7 million for the year ended December 31, 2019 compared to $23.3 million for the same period in 2018.

Intermodal’s income from operations increased by $13,726, or 83.7%, to $30,117 for the year ended December 31, 2021 compared to $16,391 for the same period in 2020.

Income from operations as a percentage of Intermodal operating revenue was 10.4% for the year ended December 31, 2021 compared to 8.2% in the same period of 2020.

The increase in operating income in total dollars was primarily attributable to the acquisitions of O.S.T., Southwest and MMT.

These increases were partly offset by higher amortization and professional fees related to acquisitions and the prior period including a $0.5 million benefit from the reduction of an earn-out liability, which led to the deterioration in income from operations as a percentage of revenue.

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The increase in income from operations as a percentage of operating revenues was due to increase in drayage revenue per shipment combined with cost-control measures and operational efficiencies, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Other operations - Year Ended December 31, 2021 compared to Year Ended December 31, 2020

Other operating activity declined from a $9.8 million operating loss during the year ended December 31, 2018 to an $14.9 million operating loss during the year ended December 31, 2019.

The year ended December 31, 2019 included $6.5 million in vehicular reserves for unfavorable development of second quarter 2019 claims and increases to our loss development factors for vehicle and workers’ compensation claims of $2.8 million and $0.3 million, respectively.

The loss was also attributed to $3.6 million in costs related to the CEO transition.

The $9.8 million operating loss for the year ending December 31, 2018 included a $6.0 million increase in self-insurance reserves related to existing vehicular claims and $0.8 million in self- insurance reserves resulting from workers' compensation claims.

The loss was also attributable to $1.1 million in costs related to the CEO transition, comprised of recruiting fees and retention share awards.

Discussion of Critical Accounting Policies

Other operating activity was a $10,137 operating loss for the year ended December 31, 2021 compared to $13,733 for the same period in 2020.

The change in the operating loss was driven by increased professional fees related to cybersecurity and shareholder engagement activities and an increased reserve for an incentive program established for employees in 2021, partially offset by decreased self-insurance reserves for vehicle liability, workers’ compensation and group health insurance claims.

The decrease in self-insurance reserves for vehicle liability and workers’ compensation claims was due to the favorable loss development factor of historical claims attributable to the safety measures in place.

For the year ended December 31, 2020, severance costs in the amount of $997 were recorded in accordance with severance agreements for former employees and a reserve in the amount of $2,300 was recorded for a litigated contract dispute.

Similar costs were not recorded for the year ended December 31, 2021.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”).

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However, actual results may differ from estimates under different conditions, sometimes materially.

The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 of our Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data.”

The significant accounting policies followed in the preparation of the financial statements are detailed in Note 1 of our Consolidated Financial Statements included in this Form 10-K.

Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results and require management’s most subjective judgments.

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We provide for the estimated costs of vehicle liability and workers’ compensation claims both reported and for claims incurred but not reported.

The amount of self-insurance loss reserves and loss adjustment expenses is determined based on an estimation process that uses information obtained from both our-specific and industry data, as well as general economic information.

The amount of self-insurance loss reserves and loss adjustment expenses is determined based on an estimation process that requires us to make significant judgments and use information obtained from both our-specific and industry data, as well as general economic information.

We estimate our self-insurance loss exposure by evaluating the merits and circumstances surrounding individual known claims and through actuarial analysis to determine an estimate of probable losses on claims incurred but not reported.

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Historically, we have experienced both favorable and unfavorable development of claim estimates.

The estimation process for self-insurance loss exposure requires management to continuously monitor and evaluate the life cycle of claims.

The estimation process for self-insurance loss exposure requires management to make significant judgments and continuously monitor and evaluate the life cycle of claims.

Using data obtained from this monitoring and our assumptions about the emerging trends, management develops an estimate of ultimate claims based on its historical experience and other available market information.

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We utilize quarterly actuarial analyses to evaluate open claims and estimate the ongoing development exposure.

As of December 31, 2020 and 2019, we recorded insurance reserves of $72.7 million and $66.2 million, respectively, inclusive of reserves in excess of the self-insured retention limit that are expected to be reimbursed from insurance carriers.

Additionally, we recognized a receivable for insurance proceeds and a corresponding claims payable for vehicle liability and workers’ compensation claims in excess of the self-insured retention limit in the amount of $36.7 million and $34.1 million as of December 31, 2020 and 2019, respectively.

The actual cost to settle our self-funded claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim.

As of December 31, 2021 and 2020, we recorded insurance reserves of $65,649 and $68,647, respectively, inclusive of reserves in excess of the self-insured retention limit that are expected to be reimbursed from insurance carriers.

Additionally, we recognized a receivable for insurance proceeds and a corresponding claims payable for vehicle liability and workers’ compensation claims in excess of the self-insured retention limit in the amount of $28,667 and $35,088 as of December 31, 2021 and 2020, respectively.

Business Combinations and Goodwill

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Upon the acquisition of a business, the fair value of the assets acquired and liabilities assumed must be estimated.

This requires judgments regarding the identification of acquired assets and

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liabilities assumed, some of which may not have been previously recorded by the acquired business, as well as judgments regarding the valuation of all identified acquired assets and assumed liabilities.

This requires judgments regarding the identification of acquired assets and liabilities assumed, some of which may not have been previously recorded by the acquired business, as well as judgments regarding the valuation of all identified acquired assets and assumed liabilities.

The assets acquired and liabilities assumed are determined by reviewing the operations, interviewing management and reviewing the financial and contractual information of the acquired business.

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Intangible assets are amortized over their useful lives.

Assets Classified as Held for Sale

We evaluate our assets held for sale upon meeting the criteria for held for sale classification and in each subsequent reporting period to determine whether the fair value, less costs to sell, exceeds the net carrying value.

The fair value is estimated based on a combination of an income approach using a discounted cash flow model, and a market approach, which considers comparable companies.

Estimates of future cash flows are based on various factors, including current operating results, expected market trends and competitive influences.

We make various assumptions regarding future cash flows, market multiples, growth rates and discount rates in our estimate of the fair value of assets held for sale.

These assumptions require significant judgments and the conclusions reached could vary significantly based upon these judgments.

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Liquidity and Capital Resources

We have historically financed our working capital needs, including capital expenditures, with cash flows from operations and borrowings under our revolving credit facility.

We believe that borrowings under our revolving credit facility, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future.

We use LIBOR as a reference rate in our revolving credit facility to calculate interest due to our lender.

In the event the LIBOR is no longer published, we have amended our revolving credit facility to include provisions to address establishing a replacement benchmark rate.

In April 2020, we entered into an amendment to the revolving credit facility, which increased the maximum aggregate principal amount to $225.0 million.

The senior credit facility may be increased by up to $25.0 million to a maximum aggregate principal amount of $250.0 million pursuant to the terms of the amended credit agreement, subject to the lenders’ agreement to increase their commitments or the addition of new lenders extending such commitments.

Such increases may be in the form of additional revolving credit loans, term loans or a combination thereof, and are contingent upon there being no events of default.

We are in compliance with the financial covenants contained in the senior credit facility and expect to continue to maintain such compliance.

Should we ever encounter difficulties, our historical relationship with our lenders has been strong and we anticipate their continued support of our business.

Refer to Note 4 to the Consolidated Financial Statements contained in Item 8, “Financial Statements and Supplementary Data,” for additional information regarding our revolving credit facility.

Year Ended December 31, 2020 Cash Flows compared to December 31, 2019 Cash Flows

Continuing Operations

Net cash provided by operating activities of continuing operations totaled approximately $96.1 million for the year ended December 31, 2020 compared to approximately $145.5 million for the year ended December 31, 2019.

The $49.4 million decrease in cash provided by operating activities of continuing operations is mainly attributab le to a $34.9 million de crease in net earnings after consideration of non-ca sh items and a $14.5 million decrease in cash from operating assets and liabilities.

Net cash used in investing activities of continuing operations was approximately $81.5 million for the year ended December 31, 2020 compared with approximately $58.3 million during the year ended December 31, 2019.

Continuing investing activities during the year ended December 31, 2020 included the acquisition of Linn Star for $55.9 million.

Investing activities of continuing operations during the year ended December 31, 2019 included the acquisitions of FSA for $27.0 million and O.S.T.

for $12.0 million.

In addition, the year ended December 31, 2020 included net capital expenditures of $20.3 million, of which approximately $9.8 million related to an organic investment to expand the capacity of the Company's national hub in Columbus, Ohio (“CMH”), which the Company announced on July 27, 2020.

The year ended December 31, 2019 included net capital expenditures of $22.0 million primarily for new trailers, information technology and facility equipment.

The proceeds from disposal of property and equipment during the years ended December 31, 2020 and 2019 were primarily from sales of older trailers.

Net cash used in financing activities of continuing operations totaled approximately $39.1 million for the year ended December 31, 2020 compared with net cash used in financing activities of continuing operations of $48.1 million for the year ended December 31, 2019.

The $8.2 million decrease in cash used in continuing financing activities was attributable to a $45.0 million increase in net borrowings on the revolving credit facility and a $11.0 million decrease in the repurchase of common stock.

These decreases in cash used were partially offset by a $20.0 million repayment on the revolving credit facility, a $20.5 million increase in distributions to a subsidiary held for sale (Pool) and a $5.3 million payment on the FSA earn-out.

Discontinued Operation

Net cash used in discontinued operating activities was approximately $11.4 million for the year ended December 31, 2020 compared to net cash provided by discontinued operating activities was approximately $13.5 million for the year ended December 31, 2019.

The $24.9 million decrease in cash provided by discontinued operating activities was primarily attributable to a decrease in discontinued net earnings after consideration of non-cash items.

The non-cash items for the year ended December 31, 2020 included an impairment charge of $28.4 million to impair Pool's goodwill balance of $5.4 million and the establishment of a valuation allowance of $23.0 million against Pool's assets held for sale.

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Net cash used in discontinued investing activities was approximately $1.2 million for the year ended December 31, 2020 compared to approximately $5.5 million during the year ended December 31, 2019.

The $4.3 million decrease in cash used in discontinued operations was due to changes in net capital expenditures primarily for trailers and facility equipment.

Proceeds from disposal of property and equipment during the year ended December 31, 2020 and 2019 were primarily from sales of older tractors and trailers.

Net cash provided by financing activities was approximately $12.6 million for the year ended December 31, 2020 compared to net cash used in discontinued financing activities of $7.9 million for the year ended December 31, 2019.

The $20.5 million increase in cash provided by discontinued financing activities was attributable to contributions from the parent as discussed above.

We have historically financed our working capital needs, including capital expenditures, with available cash, cash flows from operations and borrowings under our credit facility.

We believe that borrowings under our credit facility, together with available cash and internally generated funds, will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future.

During 2021, we deferred a portion of our equipment purchases in order to increase our available cash in response to the disruption and uncertainty resulting from the COVID-19 pandemic.

We also frequently utilize operating leases to acquire revenue equipment.

In 2021, we completed multiple business acquisitions.

See Note 3, Acquisitions , in the Notes to Consolidated Financial Statements for further discussion on this topic.

We used existing cash and credit facility to finance these transactions and to provide any necessary liquidity for current and future operations.

To further support liquidity and capital resources, in July 2021, we entered into a second amendment to our credit facility, which extended the maturity date to July 20, 2026 and changed the interest rate options available.

In connection with the second amendment, we have replaced the London Interbank Offered Rate with the Bloomberg Short-Term Bank Yield Index rate as the reference rate in our credit facility to calculate interest due to our lender.

In December 2021, we entered into a third amendment to our credit facility, which increased the amount available for borrowing to $450,000, consisting of a $300,000 revolving line of credit and a term loan of $150,000.

The amendment resets the $75,000 limit on incremental loan facilities that may be incurred under the credit facility and establishes annual mandatory repayment of the principal amount of the term loan at:

1.0% per annum in 2022 and 2023;

2.5% per annum in 2024 and 2025;

5.0% per annum in 2026;

with the remaining unpaid principal being due on July 20, 2026.

As of December 31, 2021, we were in compliance with our financial covenants contained in the credit facility and expect to maintain such compliance.

In the event that we encounter difficulties, our historical relationships with our lenders has been strong and we anticipate their continued long-term support of our business.

Refer to Note 4, Indebtedness, to our Consolidated Financial Statements for additional information regarding our credit facility.

Year Ended December 31, 2021 Cash Flows compared to December 31, 2020 Cash Flows

Continuing Operations

Net cash provided by operating activities of continuing operations totaled approximately $145.5 million for the year ended December 31, 2019 compared to approximately $142.4 million for the year ended December 31, 2018.

The $3.1 million increase in cash provided by operating activities of continuing operations was mainly attributable to an improvement in the collection of receivables and a decrease in estimated income tax payments.

This increase was partly offset by a decrease in accounts payable and accrued expenses, an increase in prepaid expenses due to the purchase of cloud-based software and a decrease in net earnings after consideration of non-cash items.

Net cash used in investing activities of continuing operations was approximately $58.3 million for the year ended December 31, 2019 compared with approximately $52.2 million during the year ended December 31, 2018.

Investing activities during the year ended December 31, 2019 consisted primarily of FSA for $27.0 million, O.S.T.

for $12.0 million and net capital expenditures of $22.0 million primarily for new trailers, information technology and facility equipment.

Investing activities during the year ended December 31, 2018 consisted primarily of net capital expenditures of $39.6 million primarily for new trailers, information technology and sorting equipment and $20.0 million used to acquire Southwest and MMT.

The proceeds from disposal of property and equipment during the year ended December 31, 2019 and 2018 were primarily from sales of older trailers.

Net cash used in financing activities of continuing operations totaled approximately $48.1 million for the year ended December 31, 2019 compared with net cash used in financing activities of $68.4 million for the year ended December 31, 2018.

The $20.3 million decrease was attributable to a $13.0 million increase in net borrowings from our revolving credit facility.

The year ended December 31, 2019 also included $56.2 million used to repurchase shares of our common stock, which was a $9.9 million decrease from the $66.1 million used to repurchase shares of common stock for the same period of 2018.

These were partly offset by a $2.0 million increase in payments of cash dividends due to an increase in dividend per share from $0.63 per share in the year ended December 31, 2018 to $0.72 per share in the year ended December 31, 2019, partly offset by a decrease in the outstanding share count during the year ended December 31, 2019 compared to the same period in 2018.

Additionally, there was a $0.9 million decrease in cash from employee stock transactions and related tax benefits and a $0.7 million increase in payments of debt and finance lease obligations as well as a $1.0 million increase in contributions from a subsidiary held for sale (Pool).

Net cash provided by operating activities of continuing operations was $124,896 for the year ended December 31, 2021 compared to $96,105 for the year ended December 31, 2020.

The increase in net cash provided by operating activities of continuing operations was primarily due to the increase in net income from continuing operations, partially offset by an increase in accounts receivable and other receivable balances.

The accounts receivable balance changed due to the increase in operating revenues in 2021.

The other receivables balance changed as a result of the Transition Services Agreement entered into with the buyer of the Pool business.

Under the Transition Services Agreement, we remitted payments to outside vendors on behalf of the buyer for expenses incurred by the Pool business, up to a limit of $18,000, and we are reimbursed by the buyer within 60 days from the end of the month in which the payment is remitted.

Net cash used in investing activities of continuing operations was $96,332 for the year ended December 31, 2021 compared to $81,506 during the year ended December 31, 2020.

Capital expenditures for 2021 were $39,109, which primarily related to an organic investment to expand the capacity of our national hub in Columbus, Ohio and the purchase of new trailers.

Capital expenditures for 2020 were $20,268, which primarily related to the organic investment to expand the capacity of our national hub in Columbus, Ohio.

Continuing investing activities for 2021 included the acquisition of Proficient Transport for $16,339, J&P for $7,669 and BarOle for $35,436 while continuing investing activities for 2020 included the acquisition of Linn Star Holdings, Inc., Linn Star Transfer, Inc.

and Linn Star Logistics, LLC for $55,931 and CLW Delivery, Inc.

Net cash used in financing activities of continuing operations was $31,502 for the year ended December 31, 2021 compared to $39,094 for the year ended December 31, 2020.

The change in the net cash used in financing activities of continuing operations was primarily due to increased contributions from a subsidiary held for sale, partially offset by increased payment of dividends and increased repurchases and retirement of common stock.

Discontinued Operation

Net cash provided by discontinued operating activities was approximately $13.5 million for the year ended December 31, 2019 compared to net cash provided by discontinued operating activities of approximately $10.2 million for the year ended December 31, 2018.

The $3.3 million increase in cash provided by discontinued operating activities was primarily attributable to an increase in discontinued net earnings after consideration of non-cash items.

Net cash used in discontinued investing activities was approximately $5.5 million for the year ended December 31, 2019 compared to approximately $3.2 million during the year ended December 31, 2018.

The $2.3 million increase in cash used in discontinued operation was due to changes in net capital expenditures primarily for trailers and facility equipment.

Proceeds from disposal of property and equipment during the years ended December 31, 2020 and 2019 were primarily from sales of older tractors and trailers.

Net cash used in discontinued financing activities was approximately $7.9 million for the year ended December 31, 2019 compared to net cash used in discontinued financing activities of $6.9 million for the year ended December 31, 2018.

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$1.0 million increase in cash used in discontinued financing activities was attributable to distributions to the parent as discussed above.

Net cash used in discontinued operating activities was $4,635 for the year ended December 31, 2021 compared to $11,439 for the year ended December 31, 2020.

The change in net cash provided by discontinued operating activities was primarily related to a decrease in discontinued net income after consideration of non-cash items.

Net cash provided by discontinued investing activities was $8,020 for the year ended December 31, 2021 compared to net cash used in discontinued investing activities was $1,201 during the year ended December 31, 2020.

The change in net cash provided by discontinued investing activities was due to the proceeds received from the sale of the Pool business in 2021.

Net cash used in discontinued financing activities was $3,385 for the year ended December 31, 2021 compared to net cash provided by discontinued financing activities was $12,640 for the year ended December 31, 2020.

The change in net cash used in discontinued financing activities was due to decreased contributions from the parent.

Share Repurchase Program

During 2020 and 2019, we repurchased 0.8 million and 0.9 million shares of our common stock, respectively, for approximately $45.2 million and $56.2 million, respectively, through open market transactions.

All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to “Retained Earnings” within our Consolidated Balance Sheets.

Contractual Obligations

The future payments required under our significant contractual obligations as of December 31, 2020 are as follows:

Payments Due Period (in millions)

Total 2021 2022-2023 2024-2025 Thereafter

Senior credit facility $ 112.5 $ — $ 112.5 $ — $ —

Operating lease obligations 149.4 48.7 62.5 28.7 9.5

Finance lease obligations 7.2 2.0 3.4 1.8 —

Unconditional purchase obligations 2.6 2.6 — — —

Other short-term and long-term obligations 0.5 0.3 0.1 0.1 —

Total contractual cash obligations $ 272.2 $ 53.6 $ 178.5 $ 30.6 $ 9.5

Off-Balance Sheet Arrangements

At December 31, 2020, we had letters of credit outstanding from banks totaling $18.3 million required primarily by our workers’ compensation and vehicle liability insurance providers.

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During the year ended December 31, 2021 and 2020, we repurcha sed 535 and 787 shares of our common stock, respectively, for approximately $48,989 and $45,248, respectively, through open market transactions.

All shares received were retired upon receipt, and the excess of the purchase price over par value per share was recorded to “Retained Earnings” in our Consolidated Balance Sheets.

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 7. Management’s Discussion and Analysis