What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-01 · 218 added, 195 removed, 184 unchanged (69% of the section changed)

2 unchanged sentences

For a discussion of similar topics for the years ended December 31, 2021 and December 31, 2020, 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, 2022, which is incorporated herein by reference.

Overview and Executive Summary

We have two reportable segments:

We are a leading asset-light freight provider of transportation services, including LTL, truckload, final mile and intermodal drayage services across the United States and in Canada and Mexico.

We offer premium services that typically require precision execution, such as expedited transit, delivery during tight time windows and special handling.

We utilize an asset-light strategy to minimize our investments in equipment and facilities and to reduce our capital expenditures.

Our services are classified into two reportable segments:

Expedited Freight and Intermodal.

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

Expedited Freight offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as acquisitions.

During the year ended December 31, 2021, Expedited Freight accounted for 82.6% of our consolidated revenue.

Our Expedited Freight segment provides expedited regional, inter-regional and national LTL services.

Expedited Freight also offers customers local pick-up and delivery and other services including final mile, truckload, shipment consolidation and deconsolidation, warehousing, customs brokerage and other handling.

We plan to grow our LTL and final mile geographic footprints through greenfield start-ups as well as through acquisitions.

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

Intermodal also offers dedicated contract and container freight station (“CFS”) warehouse and handling services.

Today, Intermodal operates primarily in the Midwest and Southeast, with smaller operational presence in Southwest and Mid-Atlantic United States.

We plan to grow Intermodal’s geographic footprint through acquisitions as well as greenfield start-ups where we do not have an acceptable acquisition target.

During the year ended December 31, 2021, Intermodal accounted for 17.4% of our consolidated revenue.

Intermodal also offers dedicated contract and CFS warehouse and handling services, and in select locations, linehaul and LTL services.

We plan to grow our Intermodal geographic footprint through acquisitions as well as through greenfield start-ups where no suitable acquisition is available.

Our operations, particularly our network of hubs and terminals, represent substantial fixed costs.

Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound for the freight shipped through our networks and to grow other services, such as LTL pickup and delivery, final mile solutions and intermodal services, which will allow us to maintain revenue growth in challenging shipping environments.

In addition, we are continuing to execute synergies across our services, particularly with service offerings in the Expedited Freight segment.

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.

Consequently, our ability to increase our earnings depends in significant part on our ability to increase the amount of freight and the revenue per pound or shipment for the freight shipped or moved through our network.

Additionally, our earnings depend on the growth of other services, such as LTL pickup and delivery, which will allow us to maintain revenue growth in a challenging freight environment.

We continue to create synergies across our services, particularly with services offered in our Expedited Freight reportable segment.

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

We monitor and analyze a number of key operating statistics in order to manage our business and evaluate our financial and operating performance.

These key operating statistics are defined below and are referred to throughout the discussion of the financial results of our Expedited Freight and Intermodal reportable segments.

Our key operating statistics should not be interpreted as better measurements of our results than income from operations as determined under U.S.

generally accepted accounting principles.

Within our Expedited Freight reportable segment, our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing LTL 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 and door pounds handled 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.

Revenue per hundredweight is also a commonly-used indicator for general pricing trends in the LTL industry and can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul.

Therefore, changes in revenue per hundredweight may not necessarily indicate actual changes in underlying base rates.

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.

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

Department of Energy.

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 the load factor achieved by our operation.

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.

We believe our yield management process focused on account level profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to grow profitably.

The key operating statistics necessary to understand the operating results of our Expedited Fright reportable segment are described below in more detail:

Tonnage - Total weight of shipments in pounds.

The level of freight tonnage is affected by economic cycles and conditions, customers’ business cycles, changes in customers’ business practices and capacity in the truckload market.

Weight Per Shipment - Total pounds divided by the number of shipments.

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 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.

Revenue Per Hundredweight - Network revenue per every 100 pounds of shipment weight.

Our LTL transportation services are generally priced based on weight, commodity, and distance.

Our pricing policies are reflective of the services we provide, and can be influenced by competitive market conditions.

Changes in the freight profile factors such as average shipment size, average length of haul, freight density, and customer and geographic mix can impact the revenue per hundredweight.

Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement.

Revenue Per Shipment - Network revenue divided by the number of shipments.

Fuel surcharges and intercompany revenue between Network and Truckload are included in this measurement.

Average Length of Haul - Total miles between origin and destination service centers for all shipments, with miles based on the size of shipments.

Length of haul is used to analyze our tonnage and pricing trends for shipments with similar characteristics.

Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight.

Within our Intermodal reportable segment, our primary revenue focus is to increase the number of shipments.

The key operating statistic necessary to understand the operating results of our Intermodal reportable segment is described below in more detail:

Drayage Revenue Per Shipment - Intermodal revenue divided by the number of drayage shipments.

Revenue derived from container freight station warehouse and handling, and linehaul and LTL services is excluded from this measurement.

Fuel surcharges and accessorial charges are included in this measurement.

Trends and Developments

Intermodal Acquisitions

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

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.

In 2022, the earn-out period ended and the Company paid $91 based on the terms of the purchase agreement.

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 of Proficient Transport expands our intermodal footprint in Georgia, Illinois, North Carolina, and Texas, and introduces a new location in Ohio.

The acquisition was funded using cash flows from operations.

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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 acquisition was funded using cash flows from operations.

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

In May 2022, we acquired certain assets and liabilities of Edgmon Trucking, LLC (“Edgmon”) for $40,993 and a potential earn-out of up to $5,000, based on the achievement of certain profit contribution milestones over a nineteen month period, beginning May 31, 2022.

Edgmon, headquartered in Kent, Washington, operates a terminal in Kent and a yard in Seattle, servicing both the Port of Seattle and the Port of Tacoma.

The acquisition of Edgmon marks our first Intermodal location on the West Coast, a key area of expansion in the Intermodal strategic growth plan.

The acquisition was funded using cash flows from operations.

The results of Edgmon 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.

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 acquisition was funded using cash flows 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 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 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.

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.

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

Although our 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.

We depend heavily upon the availability of adequate diesel fuel supplies, and recently, fuel availability and prices have fluctuated significantly.

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, disruptions 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.

Through our fuel surcharge programs, we have been able to mitigate the impact of fluctuations in fuel prices.

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.

In periods of changing fuel prices, our fuel surcharges vary by different degrees and may not fully offset fuel price fluctuations or may result in higher than expected increases in revenue.

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

Fuel surcharge revenue as a percentage of operating revenues increased to 17.1% for the year ended December 31, 2022 compared to 11.5% for the year ended December 31, 2021, as a result of changes in fuel prices.

Participants in the transportation industry have historically experienced cyclical fluctuations in financial results due to economic recessions, downturns in the business cycles of customers, volatility in the prices charged by third-party carriers, interest rate fluctuations and other U.S.

and global macroeconomic developments.

During economic downturns, reductions in overall demand for transportation services will likely reduce demand for our services and exert downward pressures on our rates and margins.

In periods of strong economic growth, overall demand may exceed the available supply of transportation resources.

While this may present an opportunity to increase economies of scale in our network and enhanced pricing and margins, these benefits may be lessened by increased network congestion and operating inefficiencies.

Like other providers of freight transportation services, our business has been impacted by the macroeconomic conditions of the past year.

Industry freight volumes as measured by the Cass Freight Index were flat in 2022 compared to the prior year.

As global demand slowed, the peak shipping season that generally drives higher volumes in the second half of the year was atypically soft.

Shippers in the United States continue to struggle with elevated inventory levels as consumer demand has been negatively impacted by inflation and macroeconomic uncertainty.

In response to this slowing demand, steamship lines continue to rationalize services by reducing capacity where possible, which has allowed port congestion to ease.

The slowdown of consumer demand has also had a significant impact on the air freight market.

Air freight volumes have significantly declined, also as a consequence of higher inventory levels and declining consumer demand.

These trends, in combination with elevated volume growth in our network in the first half of 2022, drove a decline in the volume of freight shipped by our customers in the second half of 2022.

These trends have continued through the early months of 2023.

Results from Operations

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Net income and comprehensive income $ 193,191 $ 105,859 $ 87,332 82.5 %

Operating Revenues

Operating revenues increased $310,976, or 18.7% to $1,973,403 for the year ended December 31, 2022 compared to $1,662,427 for the year ended December 31, 2021.

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.

The revenue increase was primarily driven by increased revenue from our Expedited Freight segment of $179,620 due to increased Network and Final Mile revenue, and from our Intermodal segment of $130,504 driven by increased drayage and accessorial revenues.

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

Operating Expenses

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 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.

Operating expenses increased $204,301, or 13.6%, to $1,707,427 for the year ended December 31, 2022 compared to $1,503,126 for the same period in 2021.

The increase was primarily driven by an increase in purchased transportation of $73,474, other operating expenses of $67,247, salaries, wages and employee benefits of $20,156, and operating leases of $17,461.

Purchased transportation expense includes our Leased Capacity Providers, third-party motor carriers and capacity secured by transportation intermediaries, while expenses for Company-employed drivers are included in salaries, wages and employee benefits.

Purchased transportation expense increased due to higher rates for Leased Capacity Providers, third-party motor carriers, and transportation intermediaries.

Other operating expenses increased due to contract labor, professional fees, software license fees, recruiting costs, travel and entertainment expenses and accessorial storage costs incurred in support of the increased accessorial revenues.

Salaries, wages and employee benefits increased primarily due to the additional employees hired in 2022, higher salaries and wages, and an increase in the reserve for incentive compensation.

Operating leases increased primarily due to higher facility and equipment lease expense.

Income from Continuing Operations and Segment Operations

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.

Income from continuing operations increased $106,675, or 67.0%, to $265,976 for the year ended December 31, 2022, compared to $159,301 for the same period in 2021.

The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $71,647 and $26,757, respectively.

Interest Expense, net

Interest expense, net was $5,138 for the year ended December 31, 2022 compared to $4,338 for the same period in 2021.

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.

The increase in interest expense was primarily due to a higher weighted-average interest rate during the year ended December 31, 2022.

The weighted-average interest rate on the outstanding borrowings under our credit facility were 2.77% and 1.43% during the years ended December 31, 2022 and 2021, 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 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.

The effective tax rate on a continuing basis for the year ended December 31, 2022 was 25.9%, compared to a rate of 25.1% for the same period in 2021.

The higher effective tax rate for the year ended December 31, 2022 was primarily due to an increase in the non-deductible compensation in 2022 compared to the same period in 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.

There was no loss from discontinued operation, net of tax for the year ended December 31, 2022 compared to a loss from discontinued operation, net of tax of $10,232 for the year ended December 31, 2021.

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

As a result of the foregoing factors, net income increased by $87,332, or 82.5%, to $193,191 for the year ended December 31, 2022 compared to $105,859 for the same period in 2021.

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$ 34.23 $ 28.96 18.2

Revenue per hundredweight, excluding fuel 3

Revenue per hundredweight, ex fuel 3

$ 25.98 $ 24.06 8.0

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$ 261.68 $ 211.19 23.9

Revenue per shipment, excluding fuel 3

$ 182 $ 138 32.0

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

Revenue per shipment, ex fuel 3

$ 198.62 $ 175.48 13.2

1 In thousands

2 Excludes accessorial, full Truckload and Final Mile products

2 Excludes accessorial, 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

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.

Operating Revenues

Expedited Freight operating revenue increased $179,620, or 13.1%, to $1,553,890 for the year ended December 31, 2022 from $1,374,270 for the same period in 2021.

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

Network revenue increased due to an 8.0% increase revenue per hundredweight, partially offset by a 0.7% decrease in tonnage as compared to the prior year.

Revenue per hundredweight excluding fuel increased to $25.98 in 2022 as compared to $24.06 in 2021.

The increase in the revenue per hundredweight excluding fuel was driven by the execution of our revenue growth strategies, measured pricing initiatives, including our general rate increase, and strong demand for our services in the first half of 2022 .

The slight decrease in tonnage reflects an increase in weight per shipment of 4.8% on 5.2% fewer number of shipments.

The increase in the weight per shipment was the result of more dense freight in our network primarily driven by our freight rationalization actions in the second half of 2021 to capture higher quality freight.

Network fuel surcharge revenue increased $92,744, or 67.3%, as a result of the rise in the average price of fuel.

Final Mile revenue increased $18,568 primarily due to strong demand for our services and new market expansions , while Truckload decreased $1,047 due to softening in the spot market in the second half of 2022.

Other revenue, which includes warehousing and terminal handling, increased $19,297 due to targeted pricing initiatives, partially offset by the fewer number of shipments.

Purchased Transportation

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 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.

Expedited Freight purchased transportation expense increased by $57,713, or 7.8%, to $801,131 for the year ended December 31, 2022 from $743,418 for the same period in 2021.

As a percentage of segment operating revenue, Expedited Freight purchased transportation was 51.7% during the year ended December 31, 2022 compared to 54.1% for the same period in 2021.Expedited Freight purchased transportation includes Leased Capacity Providers, third-party motor carriers and transportation intermediaries, while expenses for Company-employed drivers are included in salaries, wages and employee benefits.

The increase in purchased transportation expense was primarily due to higher rates for purchased miles in 2022 from Leased Capacity Providers, third-party motor carriers, and transportation intermediaries, partially offset by the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers, and transportation intermediaries for Network and Truckload.

For the year ended December 31, 2022, 67.2%, 29.3% and 3.4% of o ur freight capacity was purchased from Leased Capacity Providers, third-party motor carriers, transportation intermediaries and Company-employed drivers, respectively for Network and Truckload.

This compares to 62.3%, 34.0% and 3.7% in the sam e period in 2021.

Salaries, Wages, and Benefits

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.

Salaries, Wages, and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased by $17,682, or 6.8%, to $279,087 for the year ended December 31, 2022 from $261,405 for the same period in 2021.

Salaries, wages and employee benefits were 18.0% of Expedited Freight operating revenue for the year ended December 31, 2022 compared to 19.0% for the same period in 2021.

The increase in salaries, wages and employee benefits expense was primarily due to the additional employees hired in response to the increased volumes in the first half of 2022, higher salaries and wages, and an increase in the reserve for incentive compensation as compared to the same period in 2021.

Operating Leases

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.

Expedited Freight operating leases increased $7,834, or 13.7%, to $65,143 for the year ended December 31, 2022 from $57,309 for the same period in 2021.

Operating leases were 4.2% of Expedited Freight operating revenue for both years ended December 31, 2022 and 2021.

The increase in operating lease expense was primarily due to higher facility expense for the year ended December 31, 2022 as compared to the same period in 2021.

Depreciation and Amortization

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.

Expedited Freight depreciation and amortization increased $3,050, or 10.6%, to $31,892 for the year ended December 31, 2022 from $28,842 for the same period in 2021.

Depreciation and amortization expense as a percentage of Expedited Freight operating revenue was 2.1% for both the year ended December 31, 2022 and 2021.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation for the year ended December 31, 2022 as compared to the same period in 2021.

Insurance and 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.

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.

Expedited Freight insurance and claims expense increased $3,962, or 12.3%, to $36,205 for the year ended December 31, 2022 from $32,243 for the same period in 2021.

Insurance and claims as a percentage of Expedited Freight operating revenue was 2.3% for both years ended December 31, 2022 and 2021.

The increase in insurance and claims expense was primarily due to an increase in insurance premiums, vehicle liability claims and equipment repairs, partially offset by a decrease in cargo claims for the year ended December 31, 2022 as compared to the same period in 2021.

See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below.

Expedited Freight fuel expense increased $2,837, or 32.4%, to $11,589 for the year ended December 31, 2022 from $8,752 for the same period in 2021.

Fuel expense was 0.7% of Expedited Freight operating revenue for the year ended December 31, 2022 compared to 0.6% for the same period in 2021.

Expedited Freight fuel expense increased primarily due to the rise in the average price of fuel during the year ended December 31, 2022.

Other Operating Expenses

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.

Expedited Freight other operating expenses increased $14,895, or 14.5%, to $117,875 for the year ended December 31, 2022 from $102,980 for the same period in 2021.

Other operating expenses were 7.6% of Expedited Freight operating revenue for the year ended December 31, 2022 compared to 7.5% for the same period in 2021.

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

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.

The increase in other operating expenses was primarily due to an increase in contract labor, professional fees, software license fees, recruiting costs, and travel and entertainment expenses for the year ended December 31, 2022 as compared to the same period in 2021 .

Income from Operations

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.

Expedited Freight income from operations increased by $71,647, or 51.4%, to $210,968 for the year ended December 31, 2022 compared to $139,321 for the same period in 2021.

Expedited Freight income from operations was 13.6% of operating revenue for the year ended December 31, 2022, compared to 10.1% for the same period in 2021.

The increase in income from operations as a percentage of operating revenue was driven by increased revenue per hundredweight excluding fuel combined with higher fuel surcharge revenue, partially offset by higher rates for purchased miles in 2022 from Leased Capacity Providers, third-party motor carriers, and transportation intermediaries for Network and Truckload.

Intermodal - Year Ended December 31, 2022 compared to Year Ended December 31, 2021

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Drayage revenue per shipment $ 1,064 $ 667 59.5 %

Number of locations 29 24 20.8 %

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.

Operating Revenues

Intermodal operating revenue increased $130,504, or 45.1%, to $419,718 for the year ended December 31, 2022, from $289,214 for the same period in 2021.

The increase in operating revenues was primarily attributable to a 59.5% increase in drayage revenue per shipment over the same period in 2021 and an increase in accessorial revenues, partially offset by a 6.1% decrease in drayage shipments as compared to the prior year.

The increase in drayage revenue per shipment was driven by execution of our revenue growth strategies, measured pricing initiatives, and the contribution from the BarOle acquisition in November 2021 and the Edgmon acquisition in May 2022.

Our accessorial revenue was elevated in 2022 as compared to the same period in 2021 in support of our customers and continued strong demand for our services.

Fuel surcharge revenue increased $26,335 or 97.1%, as a result of the rise in the average price of fuel.

Purchased Transportation

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 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 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.

Intermodal purchased transportation increased $15,081, or 16.7%, to $105,656 for the year ended December 31, 2022 from $90,575 for the same period in 2021.

As a percentage of segment operating revenue, Intermodal purchased transportation was 25.1% for the year ended December 31, 2022, compared to 31.3% for the same period in 2021.

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

The increase in purchased transportation expense was primarily due to higher rates in 2022 for Leased Capacity Providers, third-party motor carriers, and transportation intermediaries, partially offset by the change in the mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers, transportation intermediaries and Company-employed drivers.

Salaries, Wages, and Employee Benefits

Intermodal salaries, wages and employee benefits increased $7,807, or 11.9%, to $73,406 for the year ended December 31, 2022 from $65,599 for the same period in 2021.

Salaries, wages and employee benefits were 17.5% of Intermodal operating revenue for the year ended December 31, 2022 compared to 22.7% for the same period in 2021.

The increase in salaries, wages and employee benefits expense was primarily due to additional employees hired in connection with the BarOle and Edgmon acquisitions, higher salaries and wages, and an increase in the reserve for incentive compensation as compared to the same period in 2021.

Operating Leases

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.

Intermodal operating leases increased $9,732, or 43.8%, to $31,950 for the year ended December 31, 2022, from $22,218 for the same period in 2021.

Operating leases were 7.6% of Intermodal operating revenue for the year ended December 31, 2022, compared to 7.7% in the same period in 2021.

The increase in operating leases expense was due to higher facility and equipment lease expense during the year ended December 31, 2022 as compared to the same period in 2021.

Depreciation and Amortization

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.

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.

Intermodal depreciation and amortization increased $4,746, or 44.6%, to $15,393 for the year ended December 31, 2022, from $10,647 for the same period in 2021.

Depreciation and amortization expense as a percentage of Intermodal operating revenue was 3.7% for the year ended December 31, 2022, compared to 3.7% for the same period in 2021.

The increase in depreciation and amortization expense was primarily due to the equipment and intangible assets acquired in connection with the BarOle and Edgmon acquisitions for year ended December 31, 2022 as compared to the same period in 2021.

Insurance and Claims

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.

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.

Intermodal insurance and claims expense decreased $763, or 7.7%, to $9,087 for the year ended December 31, 2022 from $9,850 for the same period in 2021.

Insurance and claims were 2.2% of Intermodal operating revenue for the year ended December 31, 2022, compared to 3.4% for the same period in 2021.

The decrease in insurance and claims expense was primarily due to the decrease in insurance premiums for the year ended December 31, 2022, as compared to the same period in 2021.

See additional discussion over the consolidated change in self-insurance reserves in the “Other Operations ” section below.

Intermodal fuel expense increased $7,718, or 93.3%, to $15,993 for the year ended December 31, 2022, from $8,275 for the same period in 2021.

Fuel expense was 3.8% of Intermodal operating revenue for the year ended December 31, 2022, compared to 2.9% for the same period in 2021.

Intermodal fuel expense increased due to the additional Company-employed drivers and the rise in the average price of fuel during the year ended December 31, 2022.

Other Operating Expenses

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 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.

Intermodal other operating expenses increased $59,426, or 114.4%, to $111,359 for the year ended December 31, 2022, from $51,933 for the same period in 2021.

Other operating expenses as a percentage of Intermodal revenue for the year ended December 31, 2022 were 26.5%, compared to 18.0% for the same period in 2021.

Other operating expense include equipment maintenance, facility expenses, legal and professional fees, and accessorial storage costs.

The increase in other operating expenses was primarily due to contract labor and accessorial storage costs incurred in support of the increased accessorial revenues for the year ended December 31, 2022 as compared to the same period in 2021.

Income from Operations

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 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.

Intermodal income from operations increased by $26,757, or 88.8%, to $56,874 for the year ended December 31, 2022, compared to $30,117 for the same period in 2021.

Income from operations as a percentage of Intermodal operating revenue was 13.6% for the year ended December 31, 2022, compared to 10.4% in the same period in 2021.

The increase in income from operations as a percentage of operating revenue was primarily due to increased drayage revenue per shipment and accessorial revenues, partially offset by higher rates in 2022 for Leased Capacity Providers, third-party motor carriers, and transportation intermediaries.

Other operations - Year Ended December 31, 2022 compared to Year Ended December 31, 2021

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.

Other operating activity included a $1,866 operating loss for the year ended December 31, 2022 compared to a $10,137 operating loss for the same period in 2021.

The change in the operating loss was primarily due to a decrease in the reserves for group health insurance claims and professional fees, offset by an increase in self-insurance reserves for vehicle liability claims, a legal reserve, and a reserve for an incentive program established for certain employees in 2021.

The increase in the self-insurance reserves for vehicle liability claims was due to the unfavorable loss development factor of historical claims.

Professional fees related to cybersecurity and shareholder engagement activities in the amount of $6,955 were incurred during the year ended December 31, 2021.

Similar professional fees were not incurred during the year ended December 31, 2022.

Critical Accounting Policies and Estimates

9 unchanged sentences

Self-Insurance Loss Reserves

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

We provide for the estimated costs of self-insurance loss reserves, which includes vehicle liability, and workers’ compensation claims;

for 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 requires us to make significant judgments and use information obtained from both our specific and industry data, as well as general economic information.

7 unchanged sentences

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.

As of December 31, 2022 and 2021, we recorded self-insurance loss reserves of $68,654 and $65,649, 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 $29,087 and $28,667 as of December 31, 2022 and 2021, respectively.

1 unchanged sentence

Acquisitions are accounted for using the purchase method.

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

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

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.

Consideration is typically paid in the form of cash paid upon closing or contingent consideration paid upon satisfaction of a future obligation.

If contingent consideration is included in the purchase price, we value that consideration as of the acquisition date and it is recorded to goodwill.

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

Consideration is typically paid in the form of cash paid at closing while contingent consideration is paid upon the satisfaction of a future obligation.

If contingent consideration is included in the purchase price, then the consideration is valued as of the acquisition date.

Once the acquired assets and assumed liabilities are identified, the fair value of the assets and liabilities are estimated using a variety of approaches that require significant judgments.

For example, intangible assets are typically valued using a discounted cash flow (“DCF”) analysis, which requires estimates of the future cash flows that are attributable to the intangible asset.

A DCF analysis also requires significant judgments regarding the selection of discount rates that are intended to reflect the risks that are inherent in the projected cash flows, the determination of terminal growth rates, and judgments about the useful life and pattern of use of the underlying intangible asset.

The valuation of acquired property, plant and equipment requires judgments about current market values, replacement costs, the physical and functional obsolescence of the assets and their remaining useful lives.

For example, intangible assets are typically valued using a discounted cash flow (“DCF”) analysis, which requires estimates of the future cash flows attributable to the intangible asset.

A DCF analysis also requires judgments regarding the selection of discount rates to reflect the risks inherent in the projected cash flows, the determination of terminal growth rates, and the useful life and pattern of use of the underlying intangible asset.

The valuation of acquired property, and equipment requires judgments about current market values, replacement costs, the physical and functional obsolescence of the assets and their remaining useful lives.

A failure to appropriately assign a fair value to acquired assets and assumed liabilities could significantly impact the amount and timing of future depreciation and amortization expense, as well as significantly overstate or understate assets or liabilities.

Goodwill is recorded at cost based on the excess of purchase price over the fair value of net assets acquired.

Goodwill and intangible assets with indefinite lives are not amortized but rather we conduct an annual, or more frequently if circumstances indicate possible impairment, impairment test of goodwill for each reporting unit at June 30 of each year.

Examples of such events or circumstances could include a significant change in business climate or a loss of significant customers.

Intangible assets are amortized over their useful lives.

Goodwill is recorded at cost based on the excess of purchase price over the estimated fair value of net assets acquired.

Goodwill is not amortized but rather evaluated annually or more frequently if circumstances indicate possible impairment, as of June 30 for impairment using a qualitative assessment or quantitative one-step assessment.

Examples of such events or circumstance that could indicate a possible impairment may include a significant change in business climate or a loss of significant customers.

Intangible assets are amortized over their estimated useful lives.

Liquidity and Capital Resources

For discussion of our Liquidity and Capital Resources for the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020, refer to Part I, Item 7 of our annual report on form 10-K filed with SEC on March 1,2022.

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 2022, 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:

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

In addition, we frequently utilize operating leases to acquire revenue equipment.

To further support liquidity and cash reserves, 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 establishes annual mandatory repayment of the principal amount of the term loan of:

1.0% per annum in 2022 and 2023;

8 unchanged sentences

Net cash provided by operating activities of continuing operations was $259,090 for the year ended December 31, 2022 compared to $124,896 for the year ended December 31, 2021.

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.

The increase in net cash provided by operating activities of continuing operations was primarily due to the increase in net income from continuing operations after consideration of non-cash items, and the change in accounts receivable.

The accounts receivable balance changed due to the increase in operating revenues in 2022, partially offset by a higher amount of cash collected in 2022.

Net cash used in investing activities of continuing operations was $104,462 for the year ended December 31, 2022 compared to $96,332 during the year ended December 31, 2021.

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.

Capital expenditures for the year ended December 31, 2022 were $40,729, which primarily related to the purchase of technology and operating equipment, and the investment in the expansion of our national hub in Columbus, Ohio.

Capital expenditures for the year ended December 31, 2021 were $39,109, which primarily related to the investment in the expansion of our national hub in Columbus, Ohio and the purchase of equipment.

Investing activities of continuing operations for the year ended December 31, 2022 included the acquisition of Edgmon for a preliminary purchase price of $40,433 and Chickasaw Container Services, Inc.

for a preliminary purchase price of $25,733, while investing activities for the year ended December 31, 2021 included the acquisition of Proficient Transport for $16,339, J&P for $7,669 and BarOle for $35,436.

Net cash used in financing activities of continuing operations was $146,122 for the year ended December 31, 2022 compared to $31,502 for the year ended December 31, 2021.

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.

The change in the net cash used in financing activities of continuing operations was primarily due to the net proceeds received from credit facility in 2021 and the payments made on the credit facility in 2022.

For the year ended December 31, 2021, net proceeds from the credit facility were $45,000 as compared to the year ended December 31, 2022 payments on the credit facility of $49,000 .

In addition, the change in the net cash used in financing activities of operations was due to increased repurchases and retirement of common stock.

Discontinued Operation

Net cash used in discontinued operating activities was $— for the year ended December 31, 2022 compared to $4,635 for the year ended December 31, 2021.

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.

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

The sale of Pool was completed on February 12, 2021.

Net cash provided by discontinued investing activities was $— for the year ended December 31, 2022 compared to net cash used in discontinued investing activities was $8,020 during the year ended December 31, 2021.

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.

The sale of Pool was completed on February 12, 2021.

Net cash used in financing activities of discontinued operation was $— for the year ended December 31, 2022 compared to $3,385 for the year ended December 31, 2021.

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

The sale of Pool was completed on February 12, 2021.

Share Repurchase Program

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.

During the year ended December 31, 2022 and 2021, we repurchased 600 and 535 shares of our common stock, respectively, for approximately $62,771 and $48,989, 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