What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-09 · 170 added, 439 removed, 183 unchanged (77% of the section changed)

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

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

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.

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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, 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.

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 greenfield start-ups where no suitable acquisition is available.

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

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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 execute synergies across our services, particularly with services offered in the Expedited Freight reportable segment.

We continue to focus on creating 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.

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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:

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

Tonnage - Total weight of shipments in pounds.

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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.

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.

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Fuel surcharges and accessorial charges are included in this measurement.

On April 23, 2020, our Board of Directors (the “Board ”) approved a strategy to divest of the Pool Distribution business (“Pool ” ), and the sale of Pool was completed on February 12, 2021.

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

As a result of the strategy to divest of Pool, the results of operations for Pool were presented as a discontinued operation in our Condensed Consolidated Statements of Comprehensive Income for the prior period.

Unless otherwise noted, amounts, percentages and discussion for the prior period reflect the results of operations, financial condition and cash flows from our continuing operations.

Refer to Note 3, Discontinued Operation , to our Condensed Consolidated Financial Statements for further discussion.

Trends and Developments

Our business is highly susceptible to changes in economic conditions.

Expedited Freight Acquisition

In January 2023, we acquired certain assets of Land Air Express, Inc.

(“Land Air”) for $56,567.

Land Air, headquartered in Bowling Green, Kentucky, offers a variety of less-than-truckload services including guaranteed, standard, exclusive, same day, hot shot and pickup and delivery, and operates in over 25 terminals across the United States.

The acquisition of Land Air will accelerate the expansion of our national terminal footprint, particularly in the middle part of the United States, and it will strategically position us to better meet the current and future needs of customers.The acquisition was funded using cash flow from operations and proceeds from our credit facility.

The results of Land Air have been included in our Condensed Consolidated Financial Statements as of and from the date of acquisition.

The associated goodwill has been included in our Expedited Freight reportable segment.

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

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

The COVID-19 pandemic 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 in 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.

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.

Labor Shortages

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 our efforts to mitigate the effects of the labor shortages and other inflationary conditions through similar actions.

The COVID-19 pandemic has 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.

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.

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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 17.7% for the three months ended September 30, 2022 compared to 11.6% for the three months ended September 30, 2021, as a result of the changes in fuel prices.

Environmental Protection and Community Support

We embrace a comprehensive definition of sustainability that addresses Environmental, Social, and Governance factors (“ESG”).

To our employees, our communities, our customers, our suppliers, and our investors, each impact area matters.

The following are the ten ESG topic priority areas we identified relevant to our business and the foundation for our sustainability approach:

• Roadway Health and Safety;

Workplace Health and Safety;

Independent Contractor Practices;

Diversity and Inclusion Practices;

Community Impact and Partnerships;

Measure and Disclose;

Information Security;

Responsible Supplier Practices;

Green House Gas (“GHG”) Emissions Reduction Practices;

and Air Quality Practices

We are committed to supporting and giving back to the communities where we live and work, particularly through the support of our employee Veterans, and to the community of Veterans in North America.

We continue to support our Veterans through our charitable organization, Operation:

Forward Freedom, a manifestation of our ongoing commitment to Veteran-related causes.

Operation Forward Freedom’s largest fundraising event was The Inaugural Drive for Hope Golf tournament.

The Drive For Hope Golf Tournament which took place on May 19, 2022 was a huge success, raising $375,000 for injured service members and veterans.

In addition, we partner with non-profit organizations that positively impact our communities and our industry.

Through our partnership with Truckers Against Trafficking, we have conducted training for over-the-road drivers to educate and equip them with the tools needed to combat human trafficking.

We also partner with Women in Trucking to encourage and promote the employment of women within our industry.

Our team of drivers is currently comprised of 15% women, roughly twice the U.S.

industry average, and we continue to seek opportunities to improve upon that percentage.

We are committed to promoting a healthier natural environment by striving for continuous environmental improvements in all aspects of our business.

We are currently reducing emissions and energy consumption through several ongoing programs and are committed to tracking and reducing our GHG emissions and improving energy efficiency.

We are also aligning with industry certifications, continuing to be a SmartWay certified company.

SmartWay is a certification from the U.S.

Environmental Protection Agency (“EPA”) verifying company compliance with EPA regulations, including fuel efficiency ranges and emission standards.

In 2021, we published our first ESG Report outlining our commitments and associated focus areas.

Since publication, we have been focused on data aggregation.

In our future reporting, we will incorporate data requirements identified by widely accepted sustainability frameworks and set measurable targets and goals for our priority areas.

We are committed to making our results count across the country and will continue to update our future disclosures accordingly.

Fuel surcharge revenue as a percentage of operating revenues increased to 15.8% for the quarter ended March 31, 2023 compared to 14.7% for the quarter ended March 31, 2022 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 approximately flat in the first quarter of 2023 compared to the first quarter of 2022.

The balance of supply and demand in the United States transportation market continued to shift toward a market with excess carrier capacity in the first quarter of 2023.

Transportation rates continue to decline as shippers in the United States manage through elevated inventory levels amidst slowing economic growth.

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 drove a decline in the volume of freight shipped by our customers in the first quarter of 2023 and is expected to continue into the second quarter of 2023.

Results from Operations

The following table sets forth our consolidated financial data for the three months ended September 30, 2022 and 2021 (unaudited and in thousands):

The following table sets forth our consolidated financial data for the three months ended March 31, 2023 and 2022 (unaudited and in thousands):

Three Months Ended

September 30,

2022 September 30,

2023 March 31,

2022 Change Percent Change

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Total operating expenses 376,557 409,610 (33,053) (8.1)

Income (loss) from continuing operations:

Income (loss) from operations:

Expedited Freight 32,998 47,680 (14,682) (30.8)

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Other Operations 6,308 (1,475) 7,783 (527.7)

Income from continuing operations 71,665 42,476 29,189 68.7

Income from operations 50,509 57,351 (6,842) (11.9)

Other expense:

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Total other expense (2,355) (784) (1,571) 200.4

Income from continuing operations before income taxes 70,121 41,503 28,618 69.0

Income from operations before income taxes 48,154 56,567 (8,413) (14.9)

Income tax expense 11,786 13,881 (2,095) (15.1)

Net income from continuing operations 52,133 30,503 21,630 70.9

Loss from discontinued operation, net of tax — (6,967) 6,967 —

Net income and comprehensive income $ 36,368 $ 42,686 $ (6,318) (14.8) %

Operating Revenues

Operating revenues increased $90,398, or 21.5%, to $510,023 for the three months ended September 30, 2022 compared to $419,625 for the three months ended September 30, 2021.

The increase was primarily due to an increase in our Expedited Freight segment of $54,078 driven by Network, Truckload and Final Mile revenue, and in our Intermodal segment of $36,248, driven by increased drayage and accessorial revenues.

Operating revenues decreased $39,895, or 8.5%, to $427,066 for the three months ended March 31, 2023 compared to $466,961 for the three months ended March 31, 2022.

The decrease was driven primarily by decreased revenue from our Expedited Freight segment of $37,657 due to decreased Network and Truckload revenue, and from our Intermodal segment of $2,271 driven by decreased drayage shipments.

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

Operating Expenses

Operating expenses increased $61,209, or 16.2%, to $438,358 for the three months ended September 30, 2022 compared to $377,149 for the three months ended September 30, 2021.

The increase was primarily due to an increase in purchased transportation expense of $23,852, salaries, wages and employee benefits of $6,345 and other operating expenses of $19,306 in both our Expedited Freight and Intermodal segments.

Purchased transportation expense includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carrier (“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 higher Leased Capacity Provider and third party carrier costs, partially offset by the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Salaries, wages and employee benefits increased primarily due to the additional employees hired in response to the increase in volumes for the third quarter of 2022, and an increase in the reserve for incentive compensation.

Other operating expenses increased due to higher travel expenses, maintenance costs, and terminal and office expenses.

Other operating expenses also increased due to additional expenses incurred in support of the higher accessorial revenues as noted above for the Intermodal segment.

Income from Continuing Operations and Segment Operations

Income from continuing operations increased $29,189, or 68.7%, to $71,665 for the three months ended September 30, 2022 compared to $42,476 for the three months ended September 30, 2021.

The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $21,668 and $7,898, respectively.

The results of our two reportable segments are discussed below in more detail.

Operating expenses decreased $33,053, or 8.1%, to $376,557 for the three months ended March 31, 2023 compared to $409,610 for the three months ended March 31, 2022.

The decrease was primarily driven by a decrease in purchased transportation expense of $39,615 and salaries, wages and employee benefits of $6,561 offset by an increase in operating leases of $4,575 and other operating expenses of $4,310 in both our Expedited Freight and Intermodal segments.

Purchased transportation expense includes our independent contractor fleet owners and owner-operators, who lease their equipment to our motor carrier (“Leased Capacity Providers ”), third-party motor carriers and capacity secured by transportation intermediaries, while Company-employed drivers are included in salaries, wages and employee benefits.

Purchased transportation expense decreased due to the utilization of less third-party motor carriers over the same period in the prior year combined with a lower third-party motor carrier cost per mile.

Salaries, wages and employee benefits decreased primarily due to a decrease in the accrual for an incentive plan established for certain employees in 2021.

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

Other operating expenses increased due to higher contract labor, travel and entertainment, software l icense fees and professional fees, partially offset by lower expenses incurred to support the decreased container rental revenues in our Intermodal segment.

Income from Operations and Segment Operations

Income from continuing operations decreased $6,842, or 11.9%, to $50,509 for the three months ended March 31, 2023 compared to $57,351 for the three months ended March 31, 2022.

The decrease was primarily driven by a decrease in income from operations in our Expedited Freight segment of $14,682, partially offset by an increase in our Intermodal segment of $57 and Other Operations of $7,783.

Interest Expense

Interest expense was $1,544 for the three months ended September 30, 2022 compared to $973 for the three months ended September 30, 2021.

The increase in interest expense was due to a higher variable interest rate during the third quarter of 2022 as compared to the same period in the prior year.

The weighted-average interest rate on the outstanding borrowings under our credit facility was 3.33% and 1.35% during the three months ended September 30, 2022 and 2021, respectively.

Income Taxes on a Continuing Basis

The effective tax rate on a continuing basis for the three months ended September 30, 2022 was 25.7% compared to 26.5% for the three months ended September 30, 2021.

The lower effective tax rate for the three months ended September 30, 2022 was primarily due to a return to provision expense adjustment recorded in the third quarter of 2021.

A similar adjustment was not recorded in the third quarter of 2022.

As a result of the foregoing factors, net income increased $28,597, or 121.5%, to $52,133 for the three months ended September 30, 2022 compared to $23,536 for the three months ended September 30, 2021.

Expedited Freight - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

The following table sets forth the financial data of our Expedited Freight segment for the three months ended September 30, 2022 and 2021 (unaudited and in thousands):

Interest expense was $2,355 for the three months ended March 31, 2023 compared to $784 for the three months ended March 31, 2022.

The increase in interest expense was due to a higher variable interest rate during the first quarter of 2023.

The interest rate on the outstanding borrowings under our credit facility was 5.96% and 1.44% during the three months ended March 31, 2023 and 2022, respectively.

The effective tax rate on a continuing basis for both the three months ended March 31, 2023 and 2022 was 24.5%.

As a result of the foregoing factors, net income decreased $6,318, or 14.8%, to $36,368 for the three months ended March 31, 2023 compared to $42,686 for the three months ended March 31, 2022.

Expedited Freight - Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

The following table sets forth the financial data of our Expedited Freight segment for the three months ended March 31, 2023 and 2022 (unaudited and in thousands):

Three Months Ended

September 30,

2022 Percent of Revenue September 30,

2023 Percent of Revenue March 31,

2022 Percent of Revenue Change Percent Change

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Three Months Ended

September 30,

2022 September 30,

2023 March 31,

2022 Percent Change

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Operating Revenues

Expedited Freight operating revenues increased $54,078, or 15.8%, to $395,635 for the three months ended September 30, 2022 from $341,557 for the three months ended September 30, 2021.

The increase was attributable to higher Network, Truckload and Final Mile revenue.

Network revenue increased due to a 1.5% increase in tonnage and a 7.0% increase in revenue per hundredweight ex fuel as compared to the same period in the prior year.

The increase in tonnage reflects a decrease in weight per shipment of 6.4% on 8.4% higher number of shipments.

The decrease in the weight per shipment was the result of a change in the mix of freight in our network.

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

Network fuel surcharge revenue increased $26,195, or 76.6% as a result of the rise in the average price of fuel and an increase in tonnage.

Truckload and Final Mile revenue increased $1,956 and $5,467, respectively, primarily due to continued strong demand for our services.

Other revenue, which includes warehousing and terminal handling, increased $5,533 due to the higher number of shipments and pricing initiatives.

Expedited Freight operating revenues decreased $37,657, or 10.0%, to $338,934 for the three months ended March 31, 2023 from $376,591 for the three months ended March 31, 2022.

The decrease was attributable to decreased Network and Truckload revenue, offset by increased Final Mile revenue.

Network revenue decreased due to a 12.3% decrease in tonnage and 0.7% decrease in revenue per hundredweight ex fuel as compared to the same period in the prior year.

The decrease in tonnage reflects a decrease in weight per shipment of 4.2% on 8.4% fewer number of shipments.

The decreased tonnage is due to softer demand for our services driven by the weak freight environment while the decrease in weight per shipment was the result of less dense freight in our network driven by fewer pieces per a shipment.

Fuel surcharge revenue decreased $1,756, or 3.5% as a result of lower tonnage in the Network, partially offset by the rise in diesel fuel prices.

Truckload revenue decreased $14,164 primarily due to softer demand for our services driven by the weak freight environment and Final Mile revenue increased $3,599 primarily due to new locations with existing and new customers.

Other revenue, which includes warehousing and terminal handling, increased $677.

Purchased Transportation

Expedited Freight purchased transportation increased $18,187, or 10.0%, to $200,783 for the three months ended September 30, 2022 from $182,596 for the three months ended September 30, 2021.

Purchased transportation was 50.7% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 53.5% for the same period in 2021.

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

The increase in purchased transportation expense was primarily due to higher Leased Capacity Provider and third party carrier costs, partially offset by 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.

In the third quarter of 2022, we purchased 68.3%, 28.1% and 3.6% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively.

This c ompares to 66.0%, 30.2% and 3.8% in the same period in 2021.

Expedited Freight purchased transportation decreased $34,794, or 17.4%, to $165,240 for the three months ended March 31, 2023 from $200,034 for the three months ended March 31, 2022.

Purchased transportation was 48.8% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 53.1% for the same period in 2022.

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

The decrease in purchased transportation was primarily due to lower volumes in Network and Truckload and the change in mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries, and Company-employed drivers for Network and Truckload services.

In the first quarter of 2023, we purchased 71.1%, 24.8% and 4.1% of our freight capacity from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers, respectively.

This compares to 62.5%, 34.0% and 3.5% in the same period in 2022.

Salaries, Wages and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased $5,645, or 8.6%, to $71,543 for the three months ended September 30, 2022 from $65,898 for the three months ended September 30, 2021.

Salaries, wages and employee benefits were 18.1% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 19.3% for the same period in 2021.

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

Expedited Freight salaries, wages and employee benefits increased $571, or 0.8%, to $68,791 for the three months ended March 31, 2023 from $68,220 for the three months ended March 31, 2022.

Salaries, wages and employee benefits were 20.3% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 18.1% for the same period in 2022.

The increase in salaries, wages and employee benefits expense was due to additional employees from the Land Air Express, LLC acquisition and an increase in salaries and wages in the first quarter of 2023 as compared to the same period in 2022.

Operating Leases

Expedited Freight operating leases increased $1,132, or 7.7%, to $15,819 for the three months ended September 30, 2022 from $14,687 for the three months ended September 30, 2021.

Operating leases were 4.0% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 4.3% for the same period in 2021.

The increase in operating leases expense was primarily due to higher facility expense in the third quarter of 2022 as compared to the same period in 2021.

Expedited Freight operating leases increased $3,182, or 20.2%, to $18,913 for the three months ended March 31, 2023 from $15,731 for the three months ended March 31, 2022.

Operating leases were 5.6% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 4.2% for the same period in 2022.

The increase in operating leases expense was primarily due to higher facility expense in the first quarter of 2023 as compared to the same period in 2022 .

Depreciation and Amortization

Expedited Freight depreciation and amortization increased $1,356, or 20.0%, to $8,140 for the three months ended September 30, 2022 from $6,784 for the three months ended September 30, 2021.

Depreciation and amortization was 2.1% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 2.0% for the same period in 2021.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation in the third quarter of 2022 as compared to the same period in 2021 .

Expedited Freight depreciation and amortization increased $1,408, or 18.8%, to $8,889 for the three months ended March 31, 2023 from $7,481 for the three months ended March 31, 2022.

Depreciation and amortization was 2.6% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 2.0% for the same period in 2022.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation in the first quarter of 2023 as compared to the same period in 2022 .

Insurance and Claims

Expedited Freight insurance and claims increased $1,122, or 13.9%, to $9,196 for the three months ended September 30, 2022 from $8,074 for the three months ended September 30, 2021.

Insurance and claims was 2.3% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 2.4% for the same period in 2021.

The increase in insurance and claims expense was primarily due to an increase in insurance premiums and vehicle repairs offset by a decrease in cargo claims in the third quarter of 2022 as compared to the same period in 2021 .

Expedited Freight insurance and claims increased $992, or 11.3%, to $9,743 for the three months ended March 31, 2023 from $8,751 for the three months ended March 31, 2022.

Insurance and claims was 2.9% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 2.3% for the same period in 2022.

The increase in insurance and claims expense was primarily due to an increase in vehicle liability claims and equipment repairs in the first quarter of 2023 as compared to the same period in 2022 .

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

Expedited Freight fuel expense increased $648, or 29.1%, to $2,873 for the three months ended September 30, 2022 from $2,225 for the three months ended September 30, 2021.

Fuel expense was 0.7% of Expedited Freight operating revenues for both the three months ended September 30, 2022 and 2021.

Fuel expense increased primarily due to a rise in the average price of fuel in the third quarter of 2022 as compared to the same period in 2021.

Expedited Freight fuel expense decreased $39, or 1.5%, to $2,611 for the three months ended March 31, 2023 from $2,650 for the three months ended March 31, 2022.

Fuel expense was 0.8% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 0.7% and for the same period in 2022.

Expedited Freight fuel expense decreased due to fewer miles driven by Company-employed drivers in the first quarter of 2023 offset by an increase in the average price of fuel as compared to the same period in 2022.

Other Operating Expenses

Expedited Freight other operating expenses increased $4,320, or 16.2%, to $30,977 for the three months ended September 30, 2022 from $26,657 for the three months ended September 30, 2021.

Other operating expenses were 7.8% of Expedited Freight operating revenues for both the three months ended September 30, 2022 and 2021.

Expedited Freight other operating expenses increased $5,705, or 21.9%, to $31,749 for the three months ended March 31, 2023 from $26,044 for the three months ended March 31, 2022.

Other operating expenses were 9.4% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 6.9% for the same period in 2022.

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 primarily due to an increase in maintenance costs, terminal and office expenses, and travel expenses in the third quarter of 2022 as compared to the same period in 2021.

The increase in other operating expenses was primarily driven by an increase in contract labor, software license fees, professional fees and bad debts in the first quarter of 2023 as compared to the same period in 2022.

Income from Operations

Expedited Freight income from operations increased $21,668, or 62.6%, to $56,304 for the three months ended September 30, 2022 compared to $34,636 for the three months ended September 30, 2021.

Income from operations was 14.2% of Expedited Freight operating revenues for the three months ended September 30, 2022 compared to 10.1% for the same period in 2021.

Intermodal - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

The following table sets forth the financial data of our Intermodal segment for the three months ended September 30, 2022 and 2021 (unaudited and in thousands):

Expedited Freight income from operations decreased $14,682, or 30.8%, to $32,998 for the three months ended March 31, 2023 compared to $47,680 for the three months ended March 31, 2022.

Income from operations was 9.7% of Expedited Freight operating revenues for the three months ended March 31, 2023 compared to 12.7% for the same period in 2022.

The decrease in income from operations as a percentage of operating revenues was driven by decreased tonnage in the Network as well as a decline in the revenue per hundredweight ex fuel, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and transportation intermediaries and Company-employed drivers for Network and Truckload.

Intermodal - Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

The following table sets forth the financial data of our Intermodal segment for the three months ended March 31, 2023 and 2022 (unaudited and in thousands):

Three Months Ended

September 30,

2022 Percent of Revenue September 30,

2023 Percent of Revenue March 31,

2022 Percent of Revenue Change Percent Change

12 unchanged sentences

Three Months Ended

September 30,

2022 September 30,

2021 Percent Change

Drayage shipments 89,236 91,774 (2.8) %

Drayage revenue per shipment 1

$ 1,203 $ 742 62.1

1 Excludes revenue derived from container freight station warehouse and handling, and linehaul and LTL services.

Operating Revenues

Intermodal operating revenues increased $36,248, or 46.4%, to $114,421 for the three months ended September 30, 2022 from $78,173 for the three months ended September 30, 2021.

The increase in operating revenue was primarily due to a 62.1% increase in drayage revenue per shipment as compared to the same period in 2021.

The increase in drayage revenue per shipment was driven by the execution of our pricing initiatives, the acquisitions of BarOle in November 2021 and Edgmon in May 2022, higher accessorial revenue in support of our customers and continued strong dem and for our services.

In addition, fuel surcharge revenue increas ed $8,317, or 114.3% as a re sult of the rise in the average price of fue l.

Purchased Transportation

Intermodal purchased transportation increased $5,626, or 24.5%, to $28,610 for the three months ended September 30, 2022 from $22,984 for the three months ended September 30, 2021.

Purchased transportation was 25.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 29.4% for the same period in 2021.

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

The increase in purchased transportation costs was primarily due to higher Leased Capacity Provider and third party carrier costs, and the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

Salaries, Wages and Employee Benefits

Intermodal salaries, wages and employee benefits increased $349, or 2.0%, to $17,945 for the three months ended September 30, 2022 compared to $17,596 for the three months ended September 30, 2021.

Salaries, wages and employee benefits were 15.7% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 22.5% for the same period in 2021.

The increase in salaries, wages and employee benefits expense was primarily due to additional employees hired in the third quarter of 2022 and higher salaries and wages as compared to the same period in 2021.

Operating Leases

Intermodal operating leases increased $3,290, or 56.2%, to $9,146 for the three months ended September 30, 2022 compared to $5,856 for the three months ended September 30, 2021.

Operating leases were 8.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 7.5% for the same period in 2021.

The increase in operating leases expense was due to higher facility expense and additional equipment leases in the third quarter of 2022 as compared to the same period in 2021.

Depreciation and Amortization

Intermodal depreciation and amortization increased $1,513, or 57.8%, to $4,129 for the three months ended September 30, 2022 from $2,616 for the three months ended September 30, 2021.

Depreciation and amortization was 3.6% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 3.3% 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 acquisitions completed in the fourth quarter of 2021 and the second quarter of 2022.

Insurance and Claims

Intermodal insurance and claims decreased $467, or 17.2%, to $2,241 for the three months ended September 30, 2022 from $2,708 for the three months ended September 30, 2021.

Insurance and claims were 2.0% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 3.5% for the same period in 2021.

The decrease in insurance and claims expense was primarily due to the decrease in insurance premiums and vehicle liability claims, offset by an increase in vehicle repairs during the third quarter of 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 $1,668, or 74.8%, to $3,899 for the three months ended September 30, 2022 from $2,231 for the three months ended September 30, 2021.

Fuel expense was 3.4% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 2.9% for the same period in 2021.

Intermodal fuel expense increased primarily due to the rise in the average price of fuel in the third quarter of 2022 as compared to the same period in 2021.

Other Operating Expenses

Intermodal other operating expenses increased $16,371, or 105.8%, to $31,841 for the three months ended September 30, 2022 from $15,470 for the three months ended September 30, 2021.

Other operating expenses were 27.8% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 19.8% for the same period in 2021.

The increase in Intermodal other operating expenses was primarily due to additional expenses incurred in support of the increased accessorial revenues, and maintenance costs in the third quarter of 2022 as compared to the same period in 2021.

Income from Operations

Intermodal income from operations increased $7,898, or 90.7%, to $16,610 for the three months ended September 30, 2022 compared to $8,712 for the three months ended September 30, 2021.

Income from operations was 14.5% of Intermodal operating revenues for the three months ended September 30, 2022 compared to 11.1% for the same period in 2021.

The increase in income from operations as a percentage of operating revenues was primarily due to increased drayage revenue per shipment, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers and higher Leased Capacity Provider and third party carrier costs.

Other Operations - Three Months Ended September 30, 2022 compared to Three Months Ended September 30, 2021

Other operations included a $1,249 operating loss during the three months ended September 30, 2022 compared to an $872 operating loss during the three months ended September 30, 2021.

The change in the operating loss was primarily due to an increase in self-insurance reserves for vehicle liability claims, partially offset by a decrease in the reserves for group health insurance claims and the recovery of bad debt related to other receivables.

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

Results from Operations

The following table sets forth our consolidated financial data for the nine months ended September 30, 2022 and 2021 (unaudited and in thousands):

Nine Months Ended

September 30,

2022 September 30,

2021 Change Percent Change

Operating revenues:

Expedited Freight $ 1,181,083 $ 997,478 $ 183,605 18.4 %

Intermodal 311,272 205,820 105,452 51.2

Eliminations and other operations (152) (800) 648 (81.0)

Operating revenues 1,492,203 1,202,498 289,705 24.1

Operating expenses:

Purchased transportation 693,648 605,299 88,349 14.6

Salaries, wages, and employee benefits 263,194 243,948 19,246 7.9

Operating leases 71,097 60,073 11,024 18.4

Depreciation and amortization 34,994 28,067 6,927 24.7

Insurance and claims 37,257 30,616 6,641 21.7

Fuel expense 20,951 12,218 8,733 71.5

Other operating expenses 166,501 114,953 51,548 44.8

Total operating expenses 1,287,642 1,095,174 192,468 17.6

Income (loss) from continuing operations:

Expedited Freight 167,091 93,854 73,237 78.0

Intermodal 43,005 21,607 21,398 99.0

Other Operations (5,535) (8,137) 2,602 (32.0)

Income from continuing operations 204,561 107,324 97,237 90.6

Other expense:

Interest expense (3,521) (3,461) (60) 1.7

Total other expense (3,521) (3,461) (60) 1.7

Income from continuing operations before income taxes 201,040 103,863 97,177 93.6

Income tax expense 50,791 25,969 24,822 95.6

Net income from continuing operations 150,249 77,894 72,355 92.9

Loss from discontinued operation, net of tax — (12,500) 12,500 (100.0)

Net income and comprehensive income $ 150,249 $ 65,394 $ 84,855 129.8 %

Operating Revenues

Operating revenues increased $289,705, or 24.1% to $1,492,203 for the nine months ended September 30, 2022 compared to $1,202,498 for the nine months ended September 30, 2021.

The increase was primarily due to an increase in our Expedited Freight segment of $183,605, driven by increased Network, Truckload and Final Mile revenue, and in our Intermodal segment of $105,452 driven by increased drayage and accessorial revenues.

Operating Expenses

Operating expenses increased $192,468, or 17.6%, to $1,287,642 for the nine months ended September 30, 2022 compared to $1,095,174 for the nine months ended September 30, 2021.

The increase was primarily due to an increase in purchased transportation expense of $88,349, salaries, wages and employee benefits of $19,246 and other operating expenses of $51,548 in both our Expedited Freight and Intermodal segments.

Purchased transportation expense 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 higher Lease Capacity Provider and third party carrier costs, and the change in the mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers.

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

Other operating expenses increased due to maintenance costs, travel expenses, recruiting costs, and terminal and office expenses, partially offset by lower professional fees.

Other operating expenses also increased due to additional expenses incurred in support of the increased accessorial revenues as noted above for the Intermodal segment.

Income from Continuing Operations and Segment Operations

Income from continuing operations increased $97,237, or 90.6%, to $204,561 for the nine months ended September 30, 2022 compared to $107,324 for the nine months ended September 30, 2021.

The increase was primarily driven by an increase in income from continuing operations in our Expedited Freight segment and Intermodal segment of $73,237 and $21,398, respectively.

The results of our two reportable segments are discussed below in more detail.

Interest Expense

Interest expense was $3,521 for the nine months ended September 30, 2022 compared to $3,461 for the nine months ended September 30, 2021.

The increase in interest expense was due to a higher borrowings outstanding under our credit facility during the nine months ended September 30, 2022 partially offset by a lower weighted-average interest rate during the nine months ended September 30, 2022.

The weighted-average interest rate on the outstanding borrowings under our credit facility was 2.27% and 2.51% during the nine months ended September 30, 2022 and 2021, respectively.

Income Taxes on a Continuing Basis

The effective tax rate on a continuing basis for the nine months ended September 30, 2022 was 25.3% compared to a rate of 25.0% for the nine months ended September 30, 2021.

The higher effective tax rate for the nine months ended September 30, 2022 was primarily due to lower excess tax benefits realized on share-based awards in 2022 compared to the same period in 2021.

Loss from Discontinued Operation, net of tax

There was no loss from discontinued operation, net of tax for the nine months ended September 30, 2022 compared to a loss from discontinued operation, net of tax of $12,500 for the nine months ended September 30, 2021.

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

As a result of the foregoing factors, net income increased by $84,855, or 129.8%, to $150,249 for the nine months ended September 30, 2022 compared to $65,394 for the nine months ended September 30, 2021.

Expedited Freight - Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

The following table sets forth the financial data of our Expedited Freight segment for the nine months ended September 30, 2022 and 2021 (unaudited and in thousands):

Nine Months Ended

September 30,

2022 Percent of Revenue September 30,

2021 Percent of Revenue Change Percent Change

Operating revenues:

$ 726,054 61.5 % $ 579,373 58.1 % $ 146,681 25.3 %

Truckload 171,659 14.5 162,999 16.3 8,660 5.3

Final Mile 215,608 18.3 203,494 20.4 12,114 6.0

Other 67,762 5.7 51,612 5.2 16,150 31.3

Total operating revenues 1,181,083 100.0 997,478 100.0 183,605 18.4

Operating expenses:

Purchased transportation 613,392 51.9 538,608 54.0 74,784 13.9

Salaries, wages and employee benefits 209,259 17.7 195,145 19.6 14,114 7.2

Operating leases 47,483 4.0 43,773 4.4 3,710 8.5

Depreciation and amortization 23,438 2.0 20,361 2.0 3,077 15.1

Insurance and claims 26,258 2.2 24,070 2.4 2,188 9.1

Fuel expense 8,752 0.7 6,365 0.6 2,387 37.5

Other operating expenses 85,410 7.2 75,302 7.5 10,108 13.4

Total operating expenses 1,013,992 85.9 903,624 90.6 110,368 12.2

Income from operations $ 167,091 14.1 % $ 93,854 9.4 % $ 73,237 78.0 %

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

Expedited Freight Operating Statistics

Nine Months Ended

September 30,

2022 September 30,

2021 Percent Change

Business days 192 191 0.5 %

Total pounds 2,145,744 2,067,346 3.8

Pounds per day 11,176 10,824 3.3

Shipments 1,2

Total shipments 2,769 2,967 (6.7)

Shipments per day 14.4 15.5 (7.1)

Weight per shipment 775 697 11.2

Revenue per hundredweight 3

$ 34.09 $ 28.35 20.2

Revenue per hundredweight, ex fuel 3

$ 25.95 $ 23.68 9.6

Revenue per shipment 3

$ 264.19 $ 197.52 33.8

Revenue per shipment, ex fuel 3

$ 201.10 $ 165.02 21.9

1 In thousands

2 Excludes accessorial, Truckload and Final Mile products

3 Includes intercompany revenue between the Network and Truckload revenue streams

Operating Revenues

Expedited Freight operating revenues increased $183,605, or 18.4%, to $1,181,083 for the nine months ended September 30, 2022 from $997,478 for the nine months ended September 30, 2021.

The increase was attributable to higher Network, Truckload and Final Mile revenue.

Network revenue increased due to a 3.8% increase in tonnage and a 9.6% increase in revenue per hundredweight ex fuel as compared to the same period in the prior year.

The increase in tonnage reflects an increase in weight per shipment of 11.2% on 6.7% 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 to capture higher quality freight.

Network fuel surcharge revenue increased $78,265, or 81.2% as a result of the rise in the average price of fuel and an increase in tonnage.

Truckload and Final Mile revenue increased $8,660 and $12,114, respectively, primarily due to continued strong demand for our services.

Other revenue, which includes warehousing and terminal handling, increased $16,150 due to the pricing initiatives, partially offset by the lower number of shipments.

Purchased Transportation

Expedited Freight purchased transportation increased $74,784, or 13.9%, to $613,392 for the nine months ended September 30, 2022 from $538,608 for the nine months ended September 30, 2021.

Purchased transportation was 51.9% of Expedited Freight operating revenue for the nine months ended September 30, 2022 compared to 54.0% for the same period in 2021.

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

The increase in purchased transportation expense was primarily due to higher Leased Capacity Provider and third party carrier costs, and 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 nine months ended September 30, 2022, we purchased 65.7%, 30.9% and 3.4% of our freight capacity from Leased Capacity Providers, third party carriers and Company-employed drivers, respectively.

This compares to 66.7%, 29.7% and 3.6% in the same period in 2021.

Salaries, Wages, and Employee Benefits

Expedited Freight salaries, wages and employee benefits increased $14,114, or 7.2%, to $209,259 for the nine months ended September 30, 2022 from $195,145 for the nine months ended September 30, 2021.

Salaries, wages and employee benefits were 17.7% of Expedited Freight operating revenues for the nine months ended September 30, 2022 compared to 19.6% for the same period in 2021.

The increase in salaries, wages and employee benefits expense was primarily due to additional employees hired in response to the increased volumes in 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 $3,710, or 8.5%, to $47,483 for the nine months ended September 30, 2022 from $43,773 for the nine months ended September 30, 2021.

Operating leases were 4.0% of Expedited Freight operating revenues for the nine months ended September 30, 2022 compared to 4.4% for the same period in 2021.

The increase in operating leases expense was primarily due to higher facility expense, partially offset by fewer equipment leases for the nine months ended September 30, 2022 as compared to the same period in 2021.

Depreciation and Amortization

Expedited Freight depreciation and amortization increased $3,077, or 15.1%, to $23,438 for the nine months ended September 30, 2022 from $20,361 for the nine months ended September 30, 2021.

Depreciation and amortization was 2.0% of Expedited Freight operating revenues for both the nine months ended September 30, 2022 and 2021.

The increase in depreciation and amortization expense was primarily due to an increase in equipment depreciation for the nine months ended September 30, 2022 as compared to the same period in 2021 .

Insurance and Claims

Expedited Freight insurance and claims increased $2,188, or 9.1%, to $26,258 for the nine months ended September 30, 2022 from $24,070 for the nine months ended September 30, 2021.

Insurance and claims were 2.2% of Expedited Freight operating revenues for the nine months ended September 30, 2022 compared to 2.4% for the same period in 2021.

The increase in insurance and claims expense was primarily due to an increase in insurance premiums and vehicle repairs, partially offset by a decrease in cargo claims and vehicle liability claims for the nine months ended September 30, 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 $2,387, or 37.5%, to $8,752 for the nine months ended September 30, 2022 from $6,365 for the nine months ended September 30, 2021.

Fuel expense was 0.7% of Expedited Freight operating revenues for the nine months ended September 30, 2022 compared to 0.6% for the same period in 2021.

Fuel expense increased primarily due to the rise in the average price of fuel during the nine months ended September 30, 2022.

Other Operating Expenses

Expedited Freight other operating expenses increased $10,108, or 13.4%, to $85,410 for the nine months ended September 30, 2022 from $75,302 for the nine months ended September 30, 2021.

Other operating expenses were 7.2% of Expedited Freight operating revenues for the nine months ended September 30, 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 primarily due to an increase in maintenance costs, terminal and office expenses, recruiting costs, and travel expenses for the nine months ended September 30, 2022 as compared to the same period in 2021 .

Income from Operations

Expedited Freight income from operations increased $73,237, or 78.0%, to $167,091 for the nine months ended September 30, 2022 compared to $93,854 for the nine months ended September 30, 2021.

Income from operations was 14.1% of Expedited Freight operating revenues in the nine months ended September 30, 2022 compared to 9.4% for the same period in 2021.

The increase in income from operations as a percentage of operating revenues was primarily due to increased tonnage and revenue per hundredweight ex fuel combined with higher fuel surcharge revenue, partially offset by the change in mix of freight capacity purchased from Leased Capacity Providers, third party carriers and Company-employed drivers, and higher Leased Capacity Provider and third party carrier costs.

Intermodal - Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

The following table sets forth the financial data of our Intermodal segment for the nine months ended September 30, 2022 and 2021 (unaudited and in thousands):

Nine Months Ended

September 30,

2022 Percent of Revenue September 30,

2021 Percent of Revenue Change Percent Change

Operating revenues $ 311,272 100.0 % $ 205,820 100.0 % $ 105,452 51.2 %

Operating expenses:

Purchased transportation 80,441 25.8 67,354 32.7 13,087 19.4

Salaries, wages and employee benefits 54,711 17.6 47,889 23.3 6,822 14.2

Operating leases 23,613 7.6 16,193 7.9 7,420 45.8

Depreciation and amortization 11,455 3.7 7,664 3.7 3,791 49.5

Insurance and claims 6,639 2.1 7,465 3.6 (826) (11.1)

Fuel expense 12,198 3.9 5,853 2.8 6,345 108.4

Other operating expenses 79,210 25.4 31,795 15.4 47,415 149.1

Total operating expenses 268,267 86.2 184,213 89.5 84,054 45.6

Income from operations $ 43,005 13.8 % $ 21,607 10.5 % $ 21,398 99.0 %

Intermodal Operating Statistics

Nine Months Ended

September 30,

2022 September 30,

2023 March 31,

2022 Percent Change

1 unchanged sentence

Drayage revenue per shipment $ 1,100 $ 890 23.6 %

$ 1,003 $ 632 58.7

1 Excludes revenue derived from container freight station warehouse and handling, and linehaul and LTL services.

Operating Revenues

Intermodal operating revenues increased $105,452, or 51.2%, to $311,272 for the nine months ended September 30, 2022 from $205,820 for the nine months ended September 30, 2021.

The increase in operating revenue was primarily attributable to a 58.7% increase in drayage revenue per shipment as compared to the same period in 2021.

The increase in drayage revenue per shipment was driven by execution of our pricing initiatives, the acquisitions of BarOle in November 2021 and Edgmon in May 2022, higher accessorial revenue in support of our customers and continued strong demand for our services.

In addition, fuel surcharge revenue increased $19,978, or 101.5% as a result of the rise in the average price of fuel.

Intermodal operating revenues decreased $2,271, or 2.5%, to $88,169 for the three months ended March 31, 2023 from $90,440 for the three months ended March 31, 2022.

The decrease in operating revenues was primarily attributable to a 17.9% decrease in drayage shipments, partially offset by an increase in drayage revenue per shipment of 23.6% over the same period in 2022.

The increase in drayage revenue per shipment was driven by execution of our pricing initiatives, the acquisitions completed in 2022 and higher accessorial revenue to support our customers.

Purchased Transportation

Intermodal purchased transportation increased $13,087, or 19.4%, to $80,441 for the nine months ended September 30, 2022 from $67,354 for the nine months ended September 30, 2021.

Purchased transportation was 25.8% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 32.7% for the same period in 2021.

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

Intermodal purchased transportation decreased $4,854, or 19.5%, to $20,014 for the three months ended March 31, 2023 from $24,868 for the three months ended March 31, 2022.

Purchased transportation was 22.7% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 27.5% for the same period in 2022.

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

The decrease in purchased transportation costs was primarily due to fewer drayage shipments and the change in mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and Company-employed drivers.

Salaries, Wages and Employee Benefits

Intermodal salaries, wages and employee benefits increased $6,822, or 14.2%, to $54,711 for the nine months ended September 30, 2022 compared to $47,889 for the nine months ended September 30, 2021.

Salaries, wages and employee benefits were 17.6% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 23.3% for the same period in 2021.

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

Intermodal salaries, wages and employee benefits increased $979, or 5.5%, to $18,914 for the three months ended March 31, 2023 compared to $17,935 for the three months ended March 31, 2022.

Salaries, wages and employee benefits were 21.5% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 19.8% for the same period in 2022.

The increase in salaries, wages and employee benefits expense was primarily due to additional employees from the acquisitions completed in 2022 and higher salaries and wages as compared to the same period in 2022.

Operating Leases

Intermodal operating leases increased $7,420, or 45.8%, to $23,613 for the nine months ended September 30, 2022 from $16,193 for the nine months ended September 30, 2021.

Operating leases were 7.6% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 7.9% for the same period in 2021.

The increase in operating leases expense was due to higher facility expense and additional equipment leases for the nine months ended September 30, 2022 as compared to the same period in 2021.

Intermodal operating leases increased $1,394, or 20.1%, to $8,335 for the three months ended March 31, 2023 compared to $6,941 for the three months ended March 31, 2022.

Operating leases were 9.5% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 7.7% for the same period in 2022.

The increase in operating leases expense was primarily due to higher facility expense in the first quarter of 2023 as compared to the same period in 2022.

Depreciation and Amortization

Intermodal depreciation and amortization increased $3,791, or 49.5%, to $11,455 for the nine months ended September 30, 2022 from $7,664 for the nine months ended September 30, 2021.

Depreciation and amortization was 3.7% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 3.7% for the same period in 2021 .

Intermodal depreciation and amortization increased $1,136, or 31.5%, to $4,746 for the three months ended March 31, 2023 from $3,610 for the three months ended March 31, 2022.

Depreciation and amortization was 5.4% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 4.0% for the same period in 2022 .

The increase in depreciation and amortization expense was primarily due to the additional depreciation and amortization expense as result of the equipment and intangible assets acquired in connection with the acquisitions completed in 2022.

Insurance and Claims

Intermodal insurance and claims decreased $826, or 11.1%, to $6,639 for the nine months ended September 30, 2022 from $7,465 for the nine months ended September 30, 2021.

Insurance and claims were 2.1% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 3.6% for the same period in 2021.

The decrease in insurance and claims expense was primarily due to the decrease in insurance premiums and vehicle liability claims, partially offset by an increase in vehicle repairs during the nine months ended September 30, 2022 as compared to the same period in 2021.

Intermodal insurance and claims increased $289, or 14.0%, to $2,349 for the three months ended March 31, 2023 from $2,060 for the three months ended March 31, 2022.

Insurance and claims were 2.7% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 2.3% for the same period in 2022.

The increase in insurance and claims expense was primarily due to an increase in vehicle liability claims and equipment repairs during the first quarter of 2023 as compared to the same period in 2022.

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

Intermodal fuel expense increased $6,345, or 108.4%, to $12,198 for the nine months ended September 30, 2022 from $5,853 for the nine months ended September 30, 2021.

Fuel expense was 3.9% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 2.8% for the same period in 2021.

Intermodal fuel expense increased primarily due to the rise in the average price of fuel for the nine months ended September 30, 2022 as compared to the same period in 2021.

Intermodal fuel expense decreased $42, or 1.3%, to $3,173 for the three months ended March 31, 2023 from $3,215 for the three months ended March 31, 2022.

Fuel expense was 3.6% of Intermodal operating revenues for both the three months ended March 31, 2023 and 2022.

Intermodal fuel expense decreased due to fewer miles driven by Company-employed drivers in the first quarter of 2023 offset by an increase in the average price of fuel as compared to the same period in 2022.

Other Operating Expenses

Intermodal other operating expenses increased $47,415, or 149.1%, to $79,210 for the nine months ended September 30, 2022 compared to $31,795 for the nine months ended September 30, 2021.

Other operating expenses were 25.4% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 15.4% for the same period in 2021.

The increase in Intermodal other operating expenses was primarily due to additional expenses incurred in support of the increased accessorial revenues, maintenance costs, bad debt expense, terminal and office expenses and legal and professional fees for the nine months ended September 30, 2022 as compared to the same period in 2021.

Intermodal other operating expenses decreased $1,230, or 6.0%, to $19,435 for the three months ended March 31, 2023 from $20,665 for the three months ended March 31, 2022.

Other operating expenses were 22.0% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 22.8% for the same period in 2022.

The decrease in Intermodal other operating expenses was driven by lower expenses incurred to support the decreased container rental revenues, partially offset by higher contract labor in the first quarter of 2023 as compared to the same period in 2022.

Income from Operations

Intermodal income from operations increased by $21,398, or 99.0%, to $43,005 for the nine months ended September 30, 2022 compared to $21,607 for the nine months ended September 30, 2021.

Income from operations was 13.8% of Intermodal operating revenues for the nine months ended September 30, 2022 compared to 10.5% for the same period in 2021.

Other Operations - Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021

Other operating included an $5,535 operating loss during the nine months ended September 30, 2022 compared to a $8,137 operating loss during the nine months ended September 30, 2021.

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

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 nine months ended September 30, 2021.

Similar professional fees were not incurred during the nine months ended September 30, 2022.

Intermodal income from operations increased $57, or 0.5%, to $11,203 for the three months ended March 31, 2023 compared to $11,146 for the three months ended March 31, 2022.

Income from operations was 12.7% of Intermodal operating revenues for the three months ended March 31, 2023 compared to 12.3% for the same period in 2022.

The increase in income from operations as a percentage of operating revenues was driven by increased drayage revenue per shipment on fewer drayage shipments and a change in mix of freight capacity purchased from Leased Capacity Providers, third-party motor carriers and Company-employed drivers.

Other Operations - Three Months Ended March 31, 2023 compared to Three Months Ended March 31, 2022

Other operations included $6,308 operating income during the three months ended March 31, 2023 compared to an $1,475 operating loss during the three months ended March 31, 2022.

The change in the operating income was driven by the reversal of an accrual for an incentive program established for certain employees in 2021, partially offset by an increase in the reserves for group health insurance claims and vehicle liability claims.

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

Critical Accounting Policies

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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.

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.

In the first quarter of 2023, we completed a business acquisition.

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

We used cash from operations and our credit facility to finance this transaction 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 $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:

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

As of September 30, 2022, we were in compliance with our financial covenants contained in the credit facility and expect to maintain such compliance.

As of March 31, 2023, we were in compliance with our financial convents contained in the credit facility and expect to maintain such compliance.

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

Refer to Note 6, Indebtedness, to our Condensed Consolidated Financial Statements for additional information regarding our credit facility.

Continuing Operations

Net cash provided by operating activities of continuing operations was $196,814 for the nine months ended September 30, 2022 compared to $82,752 for the nine months ended September 30, 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 after consideration of non-cash items and a decrease in other receivables.

Other receivables changed due to the completion of the services rendered under the Transition Services Agreement with the buyer of the Pool business in October 2021.

Net cash used in investing activities of continuing operations was $64,411 for the nine months ended September 30, 2022 compared to $43,729 for the nine months ended September 30, 2021.

Capital expenditures for the first nine months of 2022 were $25,401, 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 first nine months of 2021 were $23,015, which primarily related to the investment in the expansion of our national hub in Columbus, Ohio.

Investing activities of continuing operations for the first nine months of 2022 included the acquisition of Edgmon Trucking, LLC for a preliminary purchase price of $40,433 while investing activities for the first nine months of 2021 included the acquisition of Proficient Transport for $15,510 and J&P Hall Express Delivery for $7,543.

Net cash used in financing activities of continuing operations was $122,873 for the nine months ended September 30, 2022 compared to $27,347 for the nine months ended September 30, 2021.

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

During the first nine months of 2021, proceeds from the credit facility were $45,000 as compared to during the first nine months of 2022 payments on the credit facility were $48,625 .

Discontinued Operation

Net cash used in operating activities of discontinued operation was $— for the nine months ended September 30, 2022 compared to $6,902 for the nine months ended September 30, 2021.

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 investing activities of discontinued operation was $— for the nine months ended September 30, 2022 compared to $8,020 for the nine months ended September 30, 2021.

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

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

Net cash used in financing activities of discontinued operation was $— for the nine months ended September 30, 2022 compared to $1,118 for the nine months ended September 30, 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.

Net cash provided by operating activities was $65,993 for the three months ended March 31, 2023 compared to $62,486 for the three months ended March 31, 2022.

The increase in net cash provided by operating activities was primarily due to the decrease in accounts receivable, partially offset by the decrease in accounts payable and accrued expenses and net income from operations after consideration of non-cash items.

Net cash used in investing activities was $61,541 for the three months ended March 31, 2023 compared to $9,397 for the three months ended March 31, 2022.

Capital expenditures for the first three months of 2023 were $6,789, which primarily related to the purchase of equipment.

Capital expenditures for the first three months of 2022 were $9,908, which primarily related to the organic investment in the expansion of our national hub in Columbus, Ohio and for the purchase of equipment.

Investing activities for the first three months of 2023 included the acquisition of Land Air Express, Inc.

for a preliminary purchase price of $56,567.

Net cash used in financing activities was $18,246 for the three months ended March 31, 2023 compared to $28,775 for the three months ended March 31, 2022.

The change in the net cash used in financing activities was primarily due to proceeds from the revolving credit facility, partially offset by the increase in repurchases and retirement of common stock for the first three months of 2023 as compared to the same period in 2022.

Share Repurchase Program

During the nine months ended September 30, 2022 and 2021, we repurchased 466 and 535 shares of our common stock, respectively, for approximately $47,774 and $48,989, respectively, through open market transactions.

During the three months ended March 31, 2023 and 2022, we repurchased 474 and 176 shares of our common stock, respectively, for approximately $50,491 and $17,780, respectively, through open market transactions.

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

Forward-Looking Statements

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

This report contains “forward-looking statements,” as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements are statements other than historical information or statements of current condition and relate to future events or our future financial performance.

Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding (i) the impact of the COVID-19 pandemic on our business or our liquidity;

(ii) results of operations and financial condition;

(iii) any projections of earnings, revenues, dividends, or other financial items or methods of interpretation or measurement;

(iv) plans, strategies, and objectives of management for future operations;

(v) growing our less-than-truckload, final mile geographic footprint and Intermodal geographic footprint through greenfield start-ups as well as acquisitions;

(vi) future and pending insurance, claims and litigation and any associated estimates or reserves;

(vii) yield management;

(viii) intentions to promote a healthier natural environment;

(ix) proposed or intended new services, or developments, and related integration costs;

(x) expected expansion and potential performance based on our business strategy, including acquisitions;

(xi) future macroeconomic conditions, including but not limited to, labor shortages and other inflationary conditions and our ability to successfully address such conditions;

(xii) the sufficiency of our credit facility;

(xiii) our ESG and sustainability initiatives and operations;

(xiv) plans to incorporate data requirements identified by widely accepted sustainability frameworks and set measurable targets and goals for our priority areas;

and (xv) certain tax and accounting matters, including the impact on our financial statements;

and any belief and any assumptions underlying any of the foregoing.

Some forward-looking statements may be identified by use of such terms as “believes,” “anticipates,” “intends,” “plans,” “estimates,” “projects” or “expects.” In this Form 10-Q, forward-looking statements include, but are not limited to, any statements regarding any projections of earnings, revenues, other financial items or related accounting treatment, or cost reduction measures;

any statements regarding future performance;

any statements regarding the availability of cash;

any statements regarding our ability to maintain compliance with the covenants of our credit facility;

any statements of plans, strategies, and objectives of management for future operations;

any statements regarding our yield management process and any improvements in operating efficiencies;

any statements regarding fuel shortages, changes in fuel prices and volatility in fuel surcharge revenue, and the impact on our business;

any statements regarding consumer demand and inventory levels, and the impact on air freight volumes;

any statements regarding future insurance, claims and litigation and any associated estimates or projections;

any statements regarding an increase in the cost of new equipment;

any statements concerning proposed or intended, new services, developments or integration measures;

any statements regarding our technology and information systems, including the effectiveness of each;

any statements regarding competition, including our specific advantages, the capabilities of our segments, including the integration of services and our geographic location;

any statement regarding our properties;

any statements regarding intended expansion through acquisition or greenfield startups;

any statements regarding future business, economic conditions or performance;

any statement regarding certain tax and accounting matters, including the impact on our financial statements;

any statement regarding the impact and implementation of disclosure control systems;

and any statements of belief and any statements of assumptions underlying any of the foregoing.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

The following is a list of factors, among others, that could cause actual results to differ materially from those contemplated by the forward-looking statements:

economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, the impact of the COVID-19 pandemic on our business, results of operations and financial condition, the creditworthiness of our customers and their ability to pay for services rendered, more limited liquidity than expected which limits our ability to make key investments, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party carriers needed to serve our customers’ transportation needs, the inability of our information systems to handle an increased volume of freight moving through our network, changes in fuel prices, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, loss of a major customer, increasing competition and pricing pressure, our ability to secure terminal facilities in desirable locations at reasonable rates, our inability to successfully integrate acquisitions, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental and tax matters, insurance matters, the handling of hazardous materials, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2021.

economic factors such as recessions, inflation, higher interest rates and downturns in customer business cycles, our ability to manage our growth and ability to grow, in part, through acquisitions, while being able to successfully integrate such acquisitions, our ability to secure terminal facilities in desirable locations at reasonable rates, more limited liquidity than expected which limits our ability to make key investments, the creditworthiness of our customers and their ability to pay for services rendered, our inability to maintain our historical growth rate because of a decreased volume of freight or decreased average revenue per pound of freight moving through our network, the availability and compensation of qualified Leased Capacity Providers and freight handlers as well as contracted, third-party motor carriers needed to serve our customers’ transportation needs, our inability to manage our information systems and inability of our information systems to handle an increased volume of freight moving through our network, the occurrence of cybersecurity risks and events, market acceptance of our service offerings, claims for property damage, personal injuries or workers’ compensation, enforcement of and changes in governmental regulations, environmental, tax, insurance and accounting matters, the handling of hazardous materials, changes in fuel prices, loss of a major customer, increasing competition and pricing pressure, our dependence on our senior management team and the potential effects of changes in employee status, seasonal trends, the occurrence of certain weather events, restrictions in our charter and bylaws, the cost of new equipment, the impact and efficacy of our disclosure controls and procedures, and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2022.

As a result of the foregoing, no assurance can be given as to future financial condition, cash flows or results of operations.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis