What changed in this filing

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Item 1A. Risk Factors

2024-03-15 compared with 2023-03-01 · 322 added, 118 removed, 220 unchanged (67% of the section changed)

8 unchanged sentences

Such a reduction may materially and adversely affect our business.

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

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

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• A significant number of our transportation providers may go out of business and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers.

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

• We may not be able to appropriately adjust our expenses to changing market demands as we have certain fixed expenses that we may not be able to adjust in a period of rapid change in market demand.

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

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Inflation may increase our operating expenses and lower profitability.

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

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

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

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

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

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

2 unchanged sentences

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

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

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

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

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

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

result in weaknesses in our infrastructure, systems, or controls;

give rise to operational mistakes, losses, or loss of productivity or business opportunities;

reduce customer satisfaction;

limit our ability to respond to competitive pressures;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Each acquisition has numerous risks including:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, the topic of the classification of individuals as employees or independent contractors has gained increased attention among the plaintiffs’ bar and certain states have recently seen numerous class action lawsuits filed against transportation companies that engage independent contractors, some of which have resulted in significant damage awards and/or monetary settlements for workers who have been allegedly misclassified as independent contractors.

The legal and other costs associated with any of these matters can be substantial and could have a material adverse effect on our results of operations and our financial condition.

Because a portion of our network costs are fixed, any factors that result in a decrease in the volume or revenue per pound of freight shipped through our networks will adversely affect our results of operations.

10 unchanged sentences

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

In some instances where we have entered into contract freight rates with customers, in the event market conditions change and those contracted rates are below market rates, we may be required to provide our services at a loss.

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

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

industry trends related to e-commerce that may apply downward pricing pressures on the rates our customers can charge;

the seasonality associated with the fourth quarter holiday season;

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

and any disruptions to our customers’ businesses.

(i) industry trends related to e-commerce that may apply downward pricing pressures on the rates our customers can charge;

(ii) the seasonality associated with the fourth quarter holiday season;

(iii) business combinations and the overall growth of a customer’s underlying business;

and (iv) any disruptions to our customers’ businesses.

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

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

Our future performance depends, in significant part, upon the continued service of our senior management team and other key employees.

Our future performance depends, in significant part, upon the continued service of our senior management team and other key employees as well as our ability to develop and implement an effective succession plan.

We cannot be certain that we can retain these employees.

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

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

Our business is subject to seasonal trends.

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

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

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

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

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

Our products and services are directly tied to the production and sale of goods.

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

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

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

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

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

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

An overall labor shortage, lack of skilled labor, increased turnover or labor inflation could have a material adverse impact on the company’s operations, results of operations, liquidity or cash flows.

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

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

Labor shortages and increased turnover or increases in employee and employee-related costs could adversely affect our ability to attract and retain qualified employees.

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

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

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

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

Our business could also be adversely affected by strikes and labor negotiations or by a work stoppage at one or more of our or our subcontractors’ facilities.

Shutdowns and similar disruptions to major points in national or international transportation networks, most of which are beyond our control, could result in terminal embargoes, disrupt equipment and freight flows, depress volumes and revenues, increase costs and have other negative effects on our operations and financial results.

In addition, labor disputes involving our customers could affect our operations.

If our customers experience slowdowns or closures because they are unable to negotiate labor contracts, our revenue and profitability could be negatively impacted.

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

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

We have $134,789 of net definite-lived intangible assets on our consolidated balance sheet at December 31, 2023, which we expect will increase significantly as a result of the Omni Acquisition.

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

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

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

We also have $278,706 of goodwill on our consolidated balance sheet at December 31, 2023 and will have significantly more goodwill on our balance sheet as a result of the Omni Acquisition.

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

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

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

Many of our competitors periodically reduce their rates to gain business, especially during times of economic decline, which may limit our ability to maintain or increase or profit margins.

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

5 unchanged sentences

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

Difficulty in forecasting timing or volumes of customer shipments could adversely impact our margins and operating results and lead to difficulties in predicting liquidity.

Customer satisfaction depends upon our ability to meet short-term customer requirements that can be difficult to predict and prepare for.

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

Accordingly, the demand from our customers may fluctuate from time to time, which makes it difficult for us to project future demands from our customers.

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

Our success depends on receiving continuous orders from our customers.

Personnel costs, one of our largest expense items, is highly variable as we must staff to meet uncertain short-term demand that may not align with long-term trends.

As a result, short-term operating results could be disproportionately affected due to uncertainties with our customer requirements and the challenges of staffing appropriately.

A significant portion of the combined company’s revenues will be derived from customers in industries, such as retail and technology, that exhibit shipping patterns that are tied closely to consumer demand and from customers in industries in which shipping patterns are dependent upon just-in-time production schedules.

Therefore, the timing of the combined company’s revenues will be impacted by factors out of the combined company’s control, such as a sudden change in consumer demand for retail goods, changes in trade tariffs, product launches and/or manufacturing production delays.

Additionally, many customers ship a significant portion of their goods at or near the end of a fiscal quarter and, therefore, we may not learn of decreases in revenues until late in a quarter.

As a result, the combined company’s liquidity, cash flows and results of operations may be difficult to predict.

Higher prices by Leased Capacity Providers and other third-party transportation capacity providers could adversely impact the combined company’s margins and operating results.

The combined company will be largely reliant on Leased Capacity Providers that lease their equipment to the combined company and third-party transportation capacity providers to perform its freight transportation and other operations.

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

Our profitability and income from operations may be impacted if we are unable to pass on such provider price increases to our customers.

Increased demand for over the road transportation services and changes in regulations may reduce available capacity and increase pricing for both Leased Capacity Providers and third-party transportation providers.

In some instances we will have entered into fixed contract freight rates with customers and, in the event market conditions change and those contracted rates are below market rates, we may be required to provide transportation services at a loss.

As a result of the Omni Acquisition, the combined company’s international operations subject us to operational and financial risks.

As a result of the Omni Acquisition, the combined company will provide services within and between foreign countries on an increasing basis.

Business outside of the U.S.

is subject to various risks, including:

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

• compliance with the laws of numerous taxing jurisdictions where we conduct business, potential double taxation of our international earnings and potentially adverse tax consequences due to U.S.

and foreign tax laws as they relate to our international business;

• difficulties in managing or overseeing foreign operations and agents;

• economic and political instabilities in some countries;

• new and different sources of competition and laws and business practices favoring local competitors;

• limitations on the repatriation of funds because of foreign exchange controls;

• different liability standards;

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

• compliance with multiple, conflicting, ambiguous or evolving governmental laws and regulations, including employment, tax, privacy, anti-corruption, import/export, customs, anti-boycott, sanctions and embargoes, antitrust, data transfer, storage and protection, ESG and industry-specific laws and regulations, and our ability to identify and respond timely to compliance issues when they occur;

• the impact of uncertainties regarding the United Kingdom’s exit from the European Union (the “EU”) on regulations, current, taxes and operations, including possible disruptions to the sale of our services or the movement of our people between the United Kingdom, the EU and other locations.

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

As we continue to expand our business internationally, we expose the combined company to increased risk of loss from foreign currency fluctuations, as well as longer accounts receivable payment cycles.

Foreign currency fluctuations could result in currency exchange gains or losses or could affect the book value of our assets and liabilities.

Furthermore, we may experience unanticipated changes to our income tax liabilities resulting from changes in geographical income mix and changing international tax legislation.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

result in weaknesses in our infrastructure, systems, or controls;

give rise to operational mistakes, losses, or loss of productivity or business opportunities;

reduce customer satisfaction;

limit our ability to respond to competitive pressures;

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

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

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