What changed in this filing

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Item 1A. Risk Factors

2023-03-01 compared with 2022-03-01 · 151 added, 135 removed, 187 unchanged (60% of the section changed)

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We are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand and industry truck capacity.

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

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

Changes in U.S.

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Such a reduction may materially and adversely affect our business.

Deterioration in the economic environment subjects our business to various risks, including the following that may have a material and adverse impact on our operating results and cause us not to maintain profitability or achieve growth:

• A reduction in overall freight volumes reduces our revenues and opportunities for growth.

In addition, a decline in the volume of freight shipped due to a downturn in customers’ business cycles or other factors (including our ability to assess dimensional-based weight increases) generally results in decreases in freight pricing and decreases in average revenue per pound of freight, as carriers compete for loads to maintain truck productivity.

In addition, a decline in the volume of freight shipped due to a downturn in customers’ business cycles or other factors (including our ability to assess dimensional and weight-based charges) generally results in decreases in freight pricing and decreases in revenue derived from various surcharges and accessorial charges.

In our LTL business, these decreases typically reduce the average revenue per pound of freight, as carriers use price concession to compete for loads to maintain truck productivity.

• Our base transportation rates are determined based on numerous factors such as length of haul, weight per shipment and freight class.

During economic downturns, we may also have to lower our base transportation rates based on competitive pricing pressures and market factors.

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

During economic downturns and periods of low freight volume, we may also have to lower our base transportation rates based on competitive pricing pressures and market factors.

• Some of our customers may face economic difficulties that affect their ability to pay us, and some may go out of business.

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

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• We may not be able to appropriately adjust our expenses to changing market demands.

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

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

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

• If the domestic freight forwarder, Expedited Freight’s primary customer type, is disintermediated, and we are not able to transition effectively into servicing other customers, like third-party logistics companies and beneficial cargo owners, our business and financial results could be materially adversely affected.

Our profitability could be negatively impacted if our pricing structure proves to be inaccurate.

The price we charge our customers for the services we provide is based on our calculations of, among other things, the costs of providing those services.

The Company’s assessment of its costs and resulting pricing structure is subject to effectively identifying and measuring the impact of a number of key operational variables including, but not limited to volumes, operational efficiencies, length of haul, the mix of fixed versus variable costs, productivity and other factors.

If we are incorrect in our assumptions and do not accurately calculate or predict the costs to us to provide our services, we could experience lower margins than anticipated, loss of business, or be unable to offer competitive products and services.

Inflation may increase our operating expenses and lower profitability

The COVID-19 pandemic caused a global recession, and the sustainability of the economic recovery observed in 2022 remains unclear.

The COVID-19 pandemic has also significantly increased economic and demand uncertainty, has led to inflationary pressure in the U.S.

and elsewhere, and has led to disruption and volatility in demand for our services, our suppliers' ability to fill orders and global capital markets.

Most of our operating expenses are sensitive to increases in inflation, including equipment prices, real property rental costs, fuel costs, insurance costs, employee wages and purchased transportation.

Furthermore, inflation may generally increase costs for materials, supplies and services and capital.

With increasing costs, we may have to increase our prices to maintain the same level of profitability.

If we are unable to increase our prices sufficiently to offset increasing expenses, then inflation could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.

We may have difficulty effectively managing our growth, which could adversely affect our business, results of operations and financial condition.

Our growth strategy includes increasing freight volume from new and existing customers, expanding our service offerings and pursing strategic transactions.

Our growth strategy includes increasing freight volume from new and existing customers, improving our freight characteristics, implementing best practices and operational efficiencies, expanding our service offerings and pursuing strategic transactions.

Our growth plans will place significant demands on our management and operating personnel.

If we fail to successfully integrate, develop, and motivate new employees, it could harm our culture.

Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, maintain our performance, or

execute on our growth strategy.

To manage our current and anticipated future growth effectively, we must also continue to maintain, and may need to enhance, our operating and management information systems and information technology infrastructure, which will place additional demands on our resources and operations.

To manage our current and anticipated future growth effectively, we must continue to maintain, and may need to enhance, our operating and management information systems and information technology infrastructure, which will place additional demands on our resources and operations.

Failure to manage our growth effectively could lead us to over-invest or under-invest in technology and operations;

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limit our ability to respond to competitive pressures;

and result in loss of employees and reduced productivity of remaining employees.

or result in loss of employees and reduced productivity of remaining employees.

If our management is unable to effectively manage our growth, our expenses may increase more than expected, our revenue could decline or may grow more slowly than expected, and we may be unable to implement our growth strategy.

Volatility in fuel prices, shortages of fuel or the ineffectiveness of our fuel surcharge program could have a material adverse effect on our results of operations and profitability.

We are subject to risks associated with the availability and price of fuel.

Fuel prices have fluctuated dramatically over recent years.

Future fluctuations in the availability and price of fuel could adversely affect our results of operations.

Fuel availability and prices can be impacted by factors beyond our control, such as natural or man-made disasters, adverse weather conditions, political events, economic sanctions imposed against oil-producing countries or specific industry participants, disruption or failure of technology or information systems, price and supply decisions by oil producing countries and cartels, terrorist activities, armed conflict, tariffs, sanctions, other changes to trade agreements and world supply and demand imbalance.

Over time we have been able to mitigate the impact of the fluctuations through fuel surcharge programs.

Our fuel surcharge rates are set weekly based on the national average for fuel prices as published by the U.S.

Department of Energy and our fuel surcharge table.

Our fuel surcharge revenue is the result of our fuel surcharge rates and the tonnage transiting our networks.

The impact of fuel on our results of operations depends on the relationship between the applicable surcharge, the fuel efficiency of our Company drivers, and load factor achieved by our operations.

Fluctuations in fuel prices in either direction could have a positive or negative impact on our margins, particularly in our LTL business where the weight of a shipment subject to the fuel surcharge on a given trailer can vary materially.

There can be no assurance that our fuel surcharge revenue programs will be effective in mitigating the full impact of future increases in fuel prices.

Conversely, decreases in fuel prices reduce the amount of revenue derived from our fuel surcharge programs and accordingly, could reduce our consolidated revenues and may reduce margins for certain businesses.

In addition to changing fuel prices, fluctuations in volumes and related load factors may subject us to volatility in our fuel surcharge revenue.

Fuel shortages, changes in fuel prices and the potential volatility in fuel surcharge revenue may adversely impact our results of operations and overall profitability.

If we have difficulty attracting and retaining Leased Capacity Providers, other third-party transportation capacity providers, or freight handlers, our profitability and results of operations could be adversely affected.

We depend on third-party transportation capacity providers for most of our transportation capacity needs.

We depend on Leased Capacity Providers, third-party contracted motor carriers, and other intermediaries like freight brokers for most of our transportation capacity needs.

In 2022, 47.5% of our purchased transportation capacity was provided by Leased Capacity Providers.

Competition for Leased Capacity Providers is intense, and sometimes there are shortages in the marketplace.

Competition for Leased Capacity Provider s is intense, and sometimes there are shortages in the marketplace.

In addition, a decline in the availability of trucks, tractors and trailers for purchase or use by Leased Capacity Providers may negatively affect our ability to obtain the needed transportation capacity.

We also need a large number of employee freight handlers to operate our business efficiently.

We also require a large number of employee freight handlers to operate our business efficiently.

During periods of low unemployment in the areas where our terminals are located, we may have difficulty hiring and retaining a sufficient number of freight handlers.

If we have difficulty attracting and retaining enough qualified freight handlers or Leased Capacity Providers, we may be forced to increase wages and benefits for our employees or to increase the cost at which we contract with our Leased Capacity Providers, either of which would increase our operating costs.

This difficulty may also impede our ability to maintain our delivery schedules, which could make our service less competitive and force us to curtail our planned growth.

A capacity deficit may lead to a loss of customers and a decline in the volume of freight we receive from customers.

To augment the transportation capacity provided by Leased Capacity Providers, we purchase transportation from other third-party motor carriers at a higher cost.

As with Leased Capacity Providers, competition for third-party carriers is intense, and sometimes there are shortages of available third-party carriers.

If we cannot secure a sufficient number of Leased Capacity Providers and have to purchase transportation from third-party carriers, our operating costs will increase.

If we have difficulty attracting and retaining enough qualified freight handlers or Leased Capacity Providers, we may need to increase wages and benefits for our employees or to increase the cost at which we contract with our Leased Capacity Providers, either of which would increase our operating costs.

This difficulty may also impede our ability to maintain our delivery schedules, which could make our service less competitive and curtailing our planned growth.

A capacity deficit may lead to a decline in the volume of freight we receive from customers or a loss of customers.

To augment the transportation capacity provided by Leased Capacity Providers, we purchase transportation from other third-party motor carriers, typically at a higher cost.

As with Leased Capacity Providers, competition for third-party motor carriers is intense, and sometimes there are shortages of available third-party motor carriers.

If we cannot secure a sufficient number of Leased Capacity Providers and have to purchase transportation from third-party carriers, our operating costs will

If our labor and operating costs increase, we may be unable to offset the increased costs by increasing rates without adversely affecting our business.

As a result, our profitability and results of operations could be adversely affected.

Our inability to complete acquisitions on acceptable terms could negatively impact our growth rate and financial performance.

We may not make future acquisitions or, if we do, we may not realize the anticipated benefits of future acquisitions and integration of these acquisitions may disrupt our business and occupy management.

We have grown through acquisitions, and we intend to pursue opportunities to expand our business by acquiring other companies in the future.

Our ability to grow revenues, earnings and cash flow depends in part upon our ability to identify and successfully acquire and integrate businesses at appropriate prices and realize anticipated synergies and business performance.

Appropriate targets for acquisition are difficult to identify and complete for a variety of reasons, including but not limited to, limited due diligence, high valuations, business and intellectual property evaluations, other interested parties, negotiations of the definitive documentation, satisfaction of closing conditions, the need to obtain antitrust or other regulatory approvals on acceptable terms, and availability of funding.

The inability to close appropriate acquisitions on acceptable terms could adversely impact our growth rate, revenue, and financial performance.

The Company may encounter difficulties with acquisitions.

Acquisitions involve risks.

Although the Company conducts due diligence reviews of potential acquisition candidates, it may not be able to identify all material liabilities or risks related to potential acquisition candidates.

There can be no assurance that the Company will be able to locate and acquire any business, retain key personnel and customers of an acquired business or integrate any acquired business successfully.

Additionally, there can be no assurance that financing for any acquisition, if necessary, will be available on acceptable terms, if at all, or that the Company will be able to accomplish its strategic objectives in connection with any acquisition.

Future acquisitions may be difficult to integrate into our existing operations, may disrupt our business, dilute shareholder value, divert management’s attention, or negatively affect our operating results.

We have acquired multiple businesses since our inception, including four in fiscal 2021.

Future acquisitions could involve substantial investment of funds or financings by issuance of debt or equity securities and could result in one-time charges and expenses and have the potential to either dilute the interests of existing shareholders or result in the issuance or assumption of debt.

Any such acquisition may not be successful in generating revenues, income or other returns to us, and the resources committed to such activities will not be available to us for other purposes.

Moreover, if we are unable to access capital markets on acceptable terms or at all, we may not be able to consummate acquisitions, or may have to do so based upon less than optimal capital structure.

Our inability to take advantage of growth opportunities for our business or to address risks associated with acquisitions or investments in businesses may negatively affect our operating results.

Additionally, any impairment of goodwill or other intangible assets acquired in an acquisition or in an investment, or charges to earnings associated with any acquisition or investment activity, may materially reduce our earnings which, in turn, may have an adverse material effect on the price of our common stock.

A determination by regulators that our Leased Capacity Providers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, and related litigation can subject us to substantial costs, which could have a material adverse effect on our results of operations and our financial condition.

At times, the Internal Revenue Service, the Department of Labor and state authorities have asserted that independent contractor transportation capacity providers like our Leased Capacity Providers are “employees,” rather than “independent contractors.” Additionally, we are aware of certain judicial decisions and recently enacted state laws that could bring about major reforms in the classification of workers, including the California legislature’s passage of California Assembly Bill 5 (“California AB 5”).

Appropriate targets for acquisition are difficult to identify and transactions are difficult to complete for a variety of reasons, including but not limited to, limited due diligence, high valuations, other interested parties, negotiations of the definitive documentation, satisfaction of closing conditions, the need to obtain antitrust or other regulatory approvals on acceptable terms, and availability of funding.

There is no assurance that we will be successful in identifying, negotiating, consummating or integrating any future acquisitions.

Additionally, we may not realize the anticipated benefits of any future acquisitions.

Each acquisition has numerous risks including:

• difficulty in integrating the operations and personnel of the acquired company;

• unanticipated costs to support new business lines or separate legal entities;

• disruption of our ongoing business, distraction of our management and employees from other opportunities and responsibilities due to integration issues;

• additional indebtedness or the issuance of additional equity to finance future acquisitions, which could be dilutive to our shareholders;

• inability to access capital markets on acceptable terms or at all;

• potential loss of key customers or employees of acquired companies along with the risk of unionization of employees;

• pricing pressure resulting from differing customer pricing practices of the acquired company or varying pricing dynamics in the acquired company's market;

• inability to achieve the financial and strategic goals for the acquired and combined businesses;

• potential impairment of tangible and intangible assets and goodwill acquired as a result of acquisitions;

• potential failure of the due diligence processes to identify significant issues with legal and financial liabilities and contingencies, among other things.

In the event that we do not realize the anticipated benefits of an acquisition or if the acquired business is not successfully integrated, there could be a material adverse effect on our financial condition, results of operations, liquidity and cash flows.

A determination by regulators that our Leased Capacity Providers or third-party motor carriers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, and related litigation could subject us to substantial costs, which could have a material adverse effect on our results of operations and our financial condition.

At times, the Internal Revenue Service, the Department of Labor and state authorities have asserted that independent contractor transportation capacity providers like our Leased Capacity Providers and third-party motor carriers are “employees,” rather than “independent contractors.” Additionally, we are aware of certain judicial decisions and state laws that could bring about major reforms in the classification of workers, including the California Assembly Bill 5 (“California AB5”).

California AB5 purports to codify a new test for determining worker classification that is broadly viewed as expanding the scope of employee relationships and narrowing the scope of independent contractor relationships.

Given the passage of California AB 5 and ongoing litigation regarding its applicability to motor carriers regulated by the U.S.

Department of Transportation, there is a significant degree of uncertainty regarding its application.

Although no enforcement actions under California AB5 have been asserted against the Company, if the State of California seeks to re-classify our use of our Leased Capacity Providers or ISPs as employees, that result could materially increase our exposure under a variety of federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, as well as our potential liability for employee benefits.

In addition, such changes may be applied retroactively, and if so, we may be required to pay additional amounts to compensate for prior periods.

Any of the above increased costs would adversely affect our business and operating results.

In addition, California AB5 has been the subject of widespread national discussion and it is possible that other jurisdictions may enact similar laws.

A determination by regulators that our Leased Capacity Providers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, including but not limited to, employment-related expenses such as workers’ compensation insurance coverage and reimbursement of work-related expenses.

A determination by regulators that some or all of our Leased Capacity Providers or third-party motor carriers are employees rather than independent contractors could expose us to various liabilities and additional ongoing expenses, including but not limited to, the cost of assets to be operated by employee drivers, employment-related expenses such as workers’ compensation insurance coverage and reimbursement of work-related expenses.

Our exposure could include prior period compensation, as well as potential liability for employee benefits and tax withholdings.

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In addition, volumes shipped through our network may be negatively impacted by lack of customer contractual obligations or cancellations of existing customer contracts.

Typically, we do not enter into long-term contracts with our customers.

Rather, our customer contracts typically allow for cancellation within 30 to 60 days.

Generally, we do not enter into long-term contracts with our customers.

Rather, our customer contracts generally allow for cancellation within 30 to 60 days.

As a result, we cannot guarantee that our current customers will continue to utilize our services or that they will continue at the same levels.

The timing of our capital investments, pricing models and service availability are generally based on our existing and anticipated customer contracts.

Any change in one of the foregoing factors that results in a decrease in the volume or revenue per pound of freight shipped will adversely affect our results of operations.

The timing of our capital investments, pricing models and service availability is generally based on our existing and anticipated customer contracts and freight volumes.

Our profitability could be negatively impacted if our pricing structure proves to be inaccurate or off-market.

The price we charge our customers for the services we provide is based on our calculations of, among other things, the costs of providing those services.

The Company’s assessment of its costs and resulting pricing structure relies on the effective identification and measurement of the impact of a number of key operational variables including, but not limited to volumes, operational efficiencies, length of haul, the mix of fixed versus variable costs, productivity and other factors.

If we are incorrect in our assumptions and do not accurately calculate or predict the costs to us to provide our services, we could experience lower margins than anticipated, loss of business, or an inability to offer competitive products and services.

We derive a significant portion of our revenue from a few major customers, the loss of one or more of which could have a material adverse effect on our business.

For the calendar year ended December 31, 2021, our top ten customers, based on revenue, accounted for approximately 35% of our revenue.

No customer accounted for more than 10% of consolidated revenues.

While no customer accounted for more than 10% of consolidated revenues for the calendar year ended December 31, 2022, our top ten customers, based on revenue, accounted for approximately 31% of our revenue.

These customers can impact our revenues and profitability based on factors such as:

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business combinations and the overall growth of a customer's underlying business;

and any disruptions to our customer’s businesses.

and any disruptions to our customers’ businesses.

These customers could choose to divert all or a portion of their business with us to one of our competitors, demand pricing concessions for our services, require us to provide enhanced services that increase our costs, or develop their own shipping and distribution capabilities.

Our Expedited Freight and Intermodal segments typically do not have long-term contracts with their customers.

Our Expedited Freight and Intermodal segments generally do not have long-term contracts with their customers.

A reduction in, or termination of, our services by one or more of our major customers could have a material adverse effect on our business and operating results.

In addition, any increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that may compete more directly with our customers, could adversely affect our expenses, pricing, third-party relationships and revenues, particularly if it affects any of these key customers.

In addition, any increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that may be perceived as competing more directly with our customers, could adversely affect our expenses, pricing, third-party relationships and revenues, particularly if such actions affect any of these key customers.

We are dependent on our senior management team and other key employees, and the loss of any such personnel could materially and adversely affect our business, operating results and financial condition.

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We cannot be certain that we can retain these employees.

The loss of the services of one or more of these or other key personnel could have a material adverse effect on our business, operating results and financial condition if we are unable to secure replacement personnel internally or through our recruitment programs and initiatives that have sufficient experience in our industry or in the management of our business.

If we fail to develop, compensate, and retain a core group of senior management and other key employees and address issues of succession planning, it could hinder our ability to execute on our business strategies and maintain our level of service.

The loss of the services of one or more of these or other key personnel could have a material adverse effect on our business, operating results and financial condition if we are unable to timely secure replacement personnel who have sufficient experience in our industry or in the management of our business.

If we fail to develop, compensate, and retain a core group of senior management and other key employees and maintain an adequate succession plan, it could hinder our ability to execute on our business strategies and maintain our level of service.

Our business is subject to seasonal trends.

Historically, our operating results have been subject to seasonal trends when measured on a quarterly basis.

Our first and second quarters have traditionally been the weakest compared to our third and fourth quarters.

Generally, our operating results have been subject to seasonal trends when measured on a quarterly basis with the first and second quarters generally weaker compared to our third and fourth quarters.

This trend is dependent on numerous factors including economic conditions, customer demand and weather.

Because revenue is directly related to the available working days of shippers, national holidays and the number of business days during a given period may also create seasonal impact on our results of operations.

After the winter holiday season and during the remaining winter months, our freight volumes are typically lower because some customers reduce shipment levels.

Revenue is directly related to the available working days of shippers, national holidays and the number of business days during a given period, which may also create seasonal variability on our results of operations.

During the remaining winter months after the winter holiday season, our freight volumes are generally lower because some customers reduce shipment levels.

In addition, a substantial portion of our revenue is derived from customers in industries whose shipping patterns are tied closely to consumer demand, which can sometimes be difficult to predict, or are based on just-in-time production schedules.

Therefore, our revenue is, to a large degree, affected by factors that are outside of our control.

There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or forecast many of these factors.

There can be no assurance that our historic operating patterns will continue in future periods as we cannot influence or reliably forecast many of these factors.

Our ability to predict and adapt to future seasonality in our business will affect our operations and financial results.

Our results of operations may be affected by harsh weather conditions, disasters and pandemics.

Certain weather-related conditions such as ice and snow can disrupt our operations.

Our operating expenses have historically been higher in the winter months because of cold temperatures and other adverse winter weather conditions, which result in decreased fuel efficiency, increased cold weather-related maintenance costs of revenue equipment and increased insurance and claims costs.

Harsh weather could also reduce our ability to transport freight, which could result in decreased revenues.

Disasters, including severe weather and public health issues, such as pandemics, occurring in the United States or abroad, could result in the temporary lack of an adequate work force and the temporary disruption in the transport of goods to or from overseas which could prevent, delay or reduce freight volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues.

Our operating expenses have historically been higher in the winter months because of cold temperatures and other adverse winter weather conditions, which generally result in decreased fuel efficiency, increased cold weather-related maintenance costs of equipment and increased insurance and claims costs.

Harsh weather can temporarily halt deliveries, which could result in decreased revenues and operational challenges resulting from the interruption.

Disasters, including severe weather, such as hurricanes or blizzards, and public health issues, such as pandemics, including the COVID-19 pandemic, occurring in the United States or abroad, could result in the temporary lack of an adequate work force and the temporary disruption in the transport of goods to or from overseas which could prevent, delay or reduce freight volumes and could have an adverse impact on consumer spending and confidence levels, all of which could result in decreased revenues.

Our business may continue to be adversely affected by the COVID-19 pandemic.

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

As a result, transportation and supply chain companies such as ours experienced slowdowns and reduced demand for our services as a result of the COVID-19 pandemic.

The spread of COVID-19 had a material economic effect on our business due to government-imposed restrictions on travel and shelter-in-place orders, increased teleworking, a reduction in business travel and disrupted supply chains worldwide.

Although our business and operations have returned to pre-COVID levels, should we experience another COVID-19-like virus outbreak in the future with similar restrictions, we would anticipate a similar impact on our business.

Labor shortages and increased turnover or increases in employee and employee-related costs could have adverse effects on our profitability.

We have recently experienced labor shortages at some of our locations.

A number of factors may adversely affect the labor force available to us, including high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, immigration, and federal vaccine mandates.

A number of factors may adversely affect the labor force available to us, including high employment levels, federal unemployment subsidies, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, immigration, and federal vaccine mandates.

A labor shortage or increased turnover rates within our employee base could lead to increased costs, such as increased overtime to meet demand and increased wage rates to attract and retain employees and could negatively affect our ability to efficiently operate our business or otherwise operate at full capacity.

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Changes to our compensation and benefits could adversely affect our ability to attract and retain qualified employees.

The compensation we offer our employees is subject to market conditions that may require increases in employee compensation, which becomes more likely as economic conditions improve.

The compensation we offer our employees is subject to market conditions that may require increases in employee compensation, which become more likely as economic conditions improve or as inflation increases.

If we are unable to attract and retain a sufficient number of qualified employees, we could be required to increase our compensation and benefits packages, or reduce our operations and face difficulty meeting customer demands, any of which could adversely affect our financial condition, results of operations, liquidity and cash flows.

We could be required to record a material non-cash charge to income if our recorded intangible assets or goodwill are determined to be impaired.

We have $154,717 of recorded net definite-lived intangible assets on our consolidated balance sheet at December 31, 2021.

We have $154,801 of net definite-lived intangible assets on our consolidated balance sheet at December 31, 2022.

Our definite-lived intangible assets primarily represent the value of customer relationships and non-compete agreements that were recorded in conjunction with our various acquisitions.

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If such measurement indicates impairment, we would be required to record a non-cash impairment charge to our consolidated statement of comprehensive income in the amount that the carrying value of these assets exceeds the estimated fair value of the assets.

We also have recorded goodwill of $266,752 on our consolidated balance sheet at December 31, 2021.

We also have $306,184 of goodwill on our consolidated balance sheet at December 31, 2022.

Goodwill is assessed for impairment annually (or more frequently if circumstances indicate possible impairment) for each of our reporting units.

This assessment includes comparing the fair value of each reporting unit to the carrying value of the assets assigned to each reporting unit.

If the carrying value of the reporting unit was to exceed our estimated fair value of the reporting unit, we would then be required to estimate the fair value of the individual assets and liabilities within the reporting unit to ascertain the amount of fair value of goodwill and any potential impairment.

If we determine that our fair value of goodwill is less than the related book value, we could be required to record a non-cash impairment charge to our consolidated statement of comprehensive income, which could have a material adverse effect on our earnings.

This assessment includes comparing the estimated fair value of each reporting unit to the carrying value of the net assets assigned to the respective reporting unit.

If the carrying value of the reporting unit exceeded the estimated fair value of the reporting unit, we would be required to record a non-cash impairment charge calculated as the amount by which the carrying value exceeds the reporting units estimated fair value.

A non-cash impairment charge to our consolidated statement of comprehensive income could have a material adverse effect on our financial results.

We operate in highly competitive and fragmented segments of our industry, and our business will suffer if we are unable to adequately address downward pricing pressures and other factors that may adversely affect our results of operations, growth prospects and profitability.

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We also face competition from freight forwarders who decide to establish their own networks to transport expedited ground freight, as well as from logistics companies, Internet matching services and Internet and third-party freight brokers, and new entrants to the market.

In addition, customers can bring in-house some of the services we provide to them.

We believe competition is based primarily on quality service, available capacity, on-time delivery, flexibility, reliability and security, transportation rates as well as the ability to acquire and maintain terminal facilities in desirable locations at reasonable rates.

In addition, customers can bring in-house some of the services we provide.

We believe competition is based primarily on quality service, price, available capacity, damage-free handling, on-time delivery, flexibility, reliability and security and transportation rates as well as the ability to acquire and maintain terminal facilities in desirable locations at reasonable rates.

Many of our competitors periodically reduce their rates to gain business, especially during times of economic decline.

In an effort to reduce costs, we have seen our customers solicit bids from multiple transportation providers and decide to develop or expand internal capabilities for some of the services that we provide.

In an effort to reduce costs, we have seen our customers solicit bids from multiple transportation providers and develop or expand internal capabilities for some of the services that we provide.

In addition, competitors may pursue other strategies to gain a competitive advantage such as developing superior information technology systems or establishing cooperative relationships to increase their ability to address customer needs.

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Furthermore, the transportation industry continues to consolidate.

As a result of consolidation, our competitors may increase their market share and improve their financial capacity, and may strengthen their competitive positions.

As a result of consolidation, our competitors may increase their market share and improve their financial capacity, and may strengthen their competitive positions relative to ours.

Business combinations could also result in competitors providing a wider variety of services at competitive prices, which could adversely affect our financial performance.

These competitive pressures may cause a decrease in our volume of freight, require us to lower the prices we charge for our services and adversely affect our results of operations, growth prospects and profitability.

The ongoing coronavirus outbreak, and measures taken in response thereto, has and could continue to have a material adverse effect on our business, results of operations and financial condition.

Our business is highly susceptible to changes in 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.

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.

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 the vaccines and vaccination rates and longer-term economic and market impacts including labor shortages and inflation.

The extent to which outbreaks of COVID-19 and its variants impacts our business, results of operations and financial condition during the balance of 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.

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.

Volatility in fuel prices, shortages of fuel or the ineffectiveness of our fuel surcharge program can have a material adverse effect on our results of operations and profitability.

We are subject to risks associated with the availability and price of fuel.

Fuel prices have fluctuated dramatically over recent years.

Future fluctuations in the availability and price of fuel could adversely affect our results of operations.

Over time we have been able to mitigate the impact of the fluctuations through our fuel surcharge programs.

Our fuel surcharge rates are set weekly based on the national average for fuel prices as published by the U.S.

Department of Energy and our fuel surcharge table.

Our fuel surcharge revenue is the result of our fuel surcharge rates and the tonnage transiting our networks.

There can be no assurance that our fuel surcharge revenue programs will be effective in the future as the fuel surcharge may not capture the entire amount of the increase in fuel prices.

Additionally, decreases in fuel prices reduce the cost of transportation services and accordingly, could reduce our revenues and may reduce margins for certain lines of business.

In addition to changing fuel prices, fluctuations in volumes and related load factors may subject us to volatility in our fuel surcharge revenue.

Fuel shortages, changes in fuel prices and the potential volatility in fuel surcharge revenue may adversely impact our results of operations and overall profitability.

Our increased direct sales efforts to direct shippers and beneficial cargo owners could be viewed as a competitive threat by our current domestic forwarder customers.

We are increasing our sales to direct shippers and beneficial cargo owners, which are the primary customers of freight forwarders, 3PLs and other transportation intermediaries.

These companies are significant customers of our business in the United States.

Our activities related to our increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that compete with our customers, may result in the disruption of our business, which could harm relationships with our current customers, employees or suppliers, and could adversely affect our expenses, pricing, third‑party relationships and revenues.

We are increasing our sales to direct shippers and beneficial cargo owners, which as a group are the primary customers of freight forwarders, 3PLs and other transportation intermediaries.

These intermediaries are significant customers of our business in the United States.

Our activities related to our increased direct sales efforts to direct shippers and beneficial cargo owners, as well as the potential acquisition of other businesses that may be perceived as competing with our customers, could harm relationships with our current customers, employees or suppliers, and could adversely affect our expenses, pricing, third‑party relationships and revenues.

Further, a loss of a significant customer could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Reductions in the available supply or increases in the cost of new equipment may adversely impact our profitability and cash flows.

We and our Leased Capacity Providers and ISPs may face difficulty in purchasing new equipment due to decreased supply or increased costs.

Investment in new equipment is a significant part of our annual capital expenditures and we require an available supply of tractors, trailers, and other freight handling equipment from manufacturers to operate and grow our business.

We may also be subject to shortages in raw materials that are required for the production of critical operating equipment and supplies, such as shortages in rubber or steel.

Currently, tractor and trailer manufacturers are experiencing significant shortages of various component parts and supplies, forcing many manufacturers to reduce or suspend their production, which has led to a lower supply of tractors, trailers, and other equipment, higher prices, and lengthened trade cycles.

In addition, the availability and price of our equipment may also be adversely affected in the future by regulations on newly manufactured equipment and engines.

We are subject to regulations issued by the EPA and various state agencies, particularly the California Air Resources Board (“CARB”), that have required progressive reductions in exhaust emissions.

We may become subject to new or more restrictive regulations, or differing interpretations of existing regulations, which may increase the cost of providing transportation services or adversely affect our results of operations.

We are also unable to predict how any future changes in United States government policy will affect EPA and CARB regulation and enforcement.

These regulations, the limited equipment availability, and other supply chain factors have resulted and could continue to result in higher prices for new equipment, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense, mileage productivity, and driver retention.

Risks Relating to Information Technology and Systems

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We rely heavily on our information technology systems to efficiently run our business, and they are a key component of our growth strategy and competitive advantage.

We, our customers and third parties increasingly store and transmit data by

means of connected information technology systems.

We, our customers and third parties increasingly store and transmit data by means of connected information technology systems.

We expect our customers to continue to demand more sophisticated, fully integrated information systems from their transportation providers.

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Our business is subject to cybersecurity risks.

On December 15, 2020, we detected a Ransomware Incident impacting our operational and information technology systems, which caused service delays for our customers.

We incurred unexpected costs and impacts from the Ransomware Incident, and may in the future, incur costs in connection with this Ransomware Incident and any future cybersecurity incidents, including infrastructure investments, remediation efforts and legal claims resulting from the above.

For more information regarding this Ransomware Incident, see Item 1, Business and Item 7 , Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.

On December 15, 2020, we detected a ransomware incident (the “Ransomware Incident”) impacting our operational and information technology systems, which caused service delays for our customers.

We suffered unexpected costs and impacts from the Ransomware Incident, and may in the future incur costs in connection with any future cybersecurity incidents, including infrastructure investments, remediation efforts and legal claims resulting from the above.

Our operations depend on effective and secure information technology systems.

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• Enable the theft or misappropriation of funds;

• Cause the loss, corruption or misappropriation of proprietary or confidential information, expose us to litigation and

• Cause the loss, corruption or misappropriation of proprietary or confidential information, expose us to litigation;

• Result in injury to our reputation, downtime, loss of revenue, and increased costs to prevent, respond to or mitigate cybersecurity events.

If another cybersecurity event occurs, such as the Ransomware Incident on December 15, 2020, it could harm our business and reputation and could result in a loss of customers.

If another cybersecurity event occurs, such as the Ransomware Incident, it could harm our business and reputation and could result in a loss of customers.

Likewise, data privacy breaches by employees and others who access our systems may pose a risk that sensitive customer or vendor data may be exposed to unauthorized persons or to the public, adversely impacting our customer service, employee relationships and our reputation.

Furthermore, any failure to

comply with data privacy, security or other laws and regulations, such as the California Consumer Privacy Act, which took effect in January 2020, could result in claims, legal or regulatory proceedings, inquires or investigations.

While we continue to make efforts to evaluate and improve our systems and particularly the effectiveness of our security program, procedures and systems, it is possible that our business, financial and other systems could be compromised, which could go unnoticed for a prolonged period of time, and there can be no assurance that the actions and controls that we implement, or which we cause third-party service providers to implement, will be sufficient to protect our systems, information or other property.

Additionally, customers or third parties upon whom we rely face similar threats, which could directly or indirectly impact our business and operations.

Furthermore, any failure to comply with data privacy, security or other laws and regulations, such as the California Privacy Rights Act, which took effect as the California Consumer Privacy Act in January 2020 and was amended effective January 1, 2023, could result in claims, legal or regulatory proceedings, inquires or investigations.

While we continue to make efforts to evaluate and improve our systems and particularly the effectiveness of our security program, procedures and systems, it is possible that our business, financial and other systems could be compromised, which could go unnoticed for a prolonged period of time, and there can be no assurance that the actions and controls that we implement, or we cause third-party service providers to implement, will be sufficient to protect our systems, information or other property.

Additionally, customers or third parties upon whom we rely on face similar threats, which could directly or indirectly impact our business and operations.

The occurrence of a cyber-incident or attack could have a material adverse effect on our business, financial condition and results of operations.

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For vehicle liability, we retain a portion of the risk.

Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us through $10,000 (in thousands):

Below is a summary of our risk retention on vehicle liability insurance coverage maintained by us up to $10,000 (in thousands):

Risk Retention Frequency Layer Policy Term

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Truckload business $ 2,000 Occurrence/Accident² $0 to $2,000 10/1/2022 to 10/1/2023

LTL business $ 6,000 Policy Term Aggregate³ $3,000 to $5,000 10/1/2021 to 10/1/2022

LTL, Truckload and Intermodal businesses $ 5,000 Policy Term Aggregate³ $5,000 to $10,000 10/1/2022 to 10/1/2023

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¹ Excluding the Final Mile business, which is primarily a brokered service.

² For each and every accident, we are responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident.

³ During the Policy Term, we are responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Risk Retention before insurance will respond.

Also, from time to time, when brokering freight, we may face claims for the “negligent selection” of outside, contracted carriers that are involved in accidents, and we maintain third-party liability insurance coverage with a $100 deductible per occurrence for most of our brokered services.

² For each and every accident/incident, we are responsible for damages and defense up to these amounts, regardless of the number of claims associated with any accident/incident.

³ During the Policy Term, we are responsible for damages and defense within the stated Layer up to the stated, aggregate amount of Risk Retention before insurance will contribute.

Additionally, we maintain workers’ compensation insurance with a self-insured retention of $500 per occurrence.

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These risks include incidents that can cause personal injury or loss of life, damage to or destruction of property, equipment or the environment, or the suspension of our operations.

Our residential final mile delivery service exposes us to risks associated with delivering to residential customers.

We contract with third-party motor carriers to provide our final mile delivery services that include in-home installation of appliances and other over-the-threshold services.

The operation of these trucks and drivers in residential environments exposes such third-party motor carriers (and potentially us) to the risk of property damage, personal injury, loss of life and other claims.

If any of these third-party motor carriers do not reliably and safely perform their obligations, they and we could be exposed to liability or reputational harm.

We face risks related to self-insurance and third-party insurance that can be volatile to our earnings.

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There can be no assurance that the ongoing transition from NAFTA to the USMCA will not adversely impact our business or disrupt our operations.

If we fail to comply with any applicable regulations, our licenses may be revoked, or we could be subject to substantial fines or penalties and to civil and criminal liability.

If we are found to be out of compliance with any applicable regulations, our licenses may be revoked, or we could be subject to substantial fines or penalties and to civil and criminal liability.

The transportation industry is subject to legislative and regulatory changes that can affect the economics of our business by requiring changes in operating practices or influencing the demand for, and the cost of providing, transportation services.

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Carriers’ safety and fitness ratings under CSA include the on-road safety performance of the carriers’ drivers.

The FMCSA has also implemented changes to the HOS regulations which govern the work hours of commercial drivers and adopted a rule that requires commercial drivers who use paper log books to maintain hours-of-service records with electronic logging devices (“ELDs”) and required commercial drivers who use automatic on-board recording devices (“AOBRDs”) to record HOS to use ELDs by December 2019.

As of December 2019, our fleets were updated to meet the ELD requirements.

At any given time, there are also other proposals for safety-related standards that are pending legislative or administrative approval or adoption.

The FMCSA has also implemented changes to the hours of service (“HOS”) regulations which govern the work hours of commercial drivers and adopted a rule that requires commercial drivers to maintain hours-of-service records with electronic logging devices (“EL Ds ”) .

A t any given time, there are also other proposals for safety-related standards that are pending legislative or administrative approval or adoption.

If additional or more stringent standards are adopted, such may result in a reduction of the pool of qualified drivers available to us and to other motor carriers in our industry.

If we experience safety and fitness violations, our safety and fitness scores could be adversely impacted, and our fleets could be ranked poorly as

compared to our peers.

If we experience safety and fitness violations, our safety and fitness scores could be adversely impacted, and our fleets could be ranked poorly as compared to our peers.

A reduction in our safety and fitness scores or those of our contracted drivers could also reduce our competitiveness in relation to other companies that have higher scores.

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This could have an adverse effect on our results of operations.

We are subject to various environmental laws and regulations including legislative and regulatory responses to climate change, and costs of compliance with, or liabilities for violations of, existing or future laws and regulations could significantly increase our costs of doing business.

We are subject to various environmental laws and regulations, including legislative and regulatory responses to climate change;

and costs of compliance with, or liabilities for violations of, existing or future laws and regulations could significantly increase our costs of doing business.

Our operations are subject to environmental laws and regulations dealing with, among other things, the handling of hazardous materials, discharge and retention of storm water, and emissions from our vehicles.

We operate in industrial areas, where truck terminals and other industrial activities are located, and where groundwater or other forms of environmental contamination may have occurred.

Our operations involve the risks of fuel spillage, environmental damage, and hazardous waste disposal, among others.

Our operations involve the risks of fuel spillage, environmental damage, and hazardous

waste disposal, among others.

If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of applicable environmental laws or regulations, it could significantly increase our cost of doing business.

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If we fail to comply with applicable environmental laws and regulations, we could be subject to substantial fines or penalties and to civil and criminal liability.

In addition, as global warming issues become more prevalent, federal and local governments and our customers are beginning to respond to these issues.

This increased focus on sustainability may result in new regulations and customer requirements that could negatively affect us.

In addition, as societal concerns regarding climate change and carbon emissions become more prevalent, federal and local governments and our customers are taking action in response.

This increased focus on sustainability may result in new regulations and customer requirements that could negatively affect our financial results.

This could cause us to incur additional direct costs or to make changes to our operations in order to comply with any new regulations and customer requirements, as well as increased indirect costs or loss of revenue resulting from, among other things, our customers incurring additional compliance costs that affect our costs and revenues.

We could also lose revenue if our customers divert business from us because we have not complied with their sustainability requirements.

We could also lose revenue if our customers divert business from us because we have not complied with their sustainability requirements or accommodated related requests.

These costs, changes and loss of revenue could have a material adverse effect on our business, financial condition and results of operations.

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

The FMCSA’s CSA initiative could adversely impact our ability to hire qualified drivers or contract with qualified Leased Capacity Providers or third-party carriers, meet our growth projections and maintain our customer relationships, each of which could adversely impact our results of operations.

The FMCSA’s CSA and SMS initiatives could adversely impact our ability to hire qualified drivers or contract with qualified Leased Capacity Providers or third-party motor carriers, meet our growth projections and maintain our customer relationships, each of which could adversely impact our results of operations.

The FMCSA’s CSA is an enforcement and compliance program designed to monitor and improve commercial motor vehicle safety by measuring the safety record of both the motor carrier and the driver.

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CSA scores are dependent upon safety and compliance experience, which could change at any time.

In addition, the safety standards prescribed in CSA could change and our ability as well as our independent contractors’ ability to maintain an acceptable score could be adversely impacted.

In addition, the safety standards prescribed in CSA could change and our ability as well as third-party motor carriers’ ability to maintain an acceptable score could be adversely impacted.

Public disclosure of certain CSA scores was restricted through the enactment of the Fixing America’s Surface Transportation Act of 2015 (the “FAST Act”) on December 4, 2015;

however, the FAST Act does not restrict public disclosure of all data collected by the FMCSA.

If we receive unacceptable CSA scores, and this data is made available to the public, our relationships with our customers could be damaged, which could result in a loss of business.

The requirements of CSA could also shrink the industry’s pool of drivers as those with unfavorable scores could leave the industry.

The FMCSA is currently reviewing CSA methodology to address deficiencies identified by the National Academy of Sciences, including the possibility of weak or negative correlation between current safety improvement categories and vehicle crash risk.

Nevertheless, if we receive unacceptable CSA scores, and this data is made available to the public, our relationships with our customers could be damaged, which could result in a loss of business.

Likewise, the requirements of SMS could also shrink the industry’s pool of drivers as those with unfavorable scores could leave the industry.

As a result, the costs to attract, train and retain qualified drivers, Leased Capacity Providers or third-party carriers could increase.

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Our charter and bylaws and provisions of Tennessee law may discourage transactions that otherwise could provide for the payment of a premium over prevailing market prices for our Common Stock and also could limit the price that investors are willing to pay in the future for shares of our Common Stock.

Because our Intermodal business depends heavily on freight transiting seaports and railheads, our operating results and financial condition are likely to be adversely affected by any reduction or deterioration in service at seaports or railheads.

Our Intermodal business provides first- and last-mile high value container drayage services to and from seaports and railheads.

Consequently, our ability to continue to expand our Intermodal transportation business is dependent upon the seaports and railheads’ capacity to handle Intermodal freight.

Our business has, at times, been adversely affected by situations impacting one or more railheads or seaports, including congestion, labor shortages, slowdowns or stoppages, adverse weather conditions, changes to rail operations, or other factors that hinder the railheads and seaports to efficiently handle freight transiting their operations, and these situations may occur again in the future, which could have a material adverse effect on our results of operations and financial condition .

Unresolved Staff Comments

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

What changed 10-K

Item 1A. Risk Factors