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of Iowa, Heartland Express Services, Inc., Heartland Express Maintenance Services, Inc.
−Removed: ("Heartland Express"), and Midwest Holding Group, LLC and Millis Transfer, LLC ("Millis Transfer"), and Smith Transport, Inc., Smith Trucking, Inc., and Franklin Logistics, Inc.
−Removed: ("Smith Transport"), and Transportation Resources, Inc.
+Added: ("Heartland Express"), and Midwest Holding Group, LLC and Millis Transfer, LLC ("Millis Transfer"), and Smith Transport, LLC and Franklin Logistics, LLC ("Smith Transport"), and CFI entities, Transportation Resources, Inc.
and Contract Freighters, Inc.
(collectively with certain Mexican entities, "CFI").
+Added: Effective December 31, 2023, Smith Trucking, Inc.
+Added: was merged into Smith Transport, Inc.
+Added: Further, effective December 31, 2023 Smith Transport, Inc.
+Added: Franklin Logistics, Inc.
+Added: were converted to Smith Transport, LLC and Franklin Logistics, LLC, respectively.
On May 31, 2022, Heartland Express, Inc.
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of Iowa acquired CFI's non-dedicated U.S.
−Removed: dry van and temperature-controlled truckload business located in Joplin, Missouri, and certain Mexican entities (collectively, "CFI
−Removed: Logistica") operations located in Mexico.
+Added: dry van and temperature-controlled truckload business located in Joplin, Missouri, and certain Mexican entities (collectively "CFI Logistica") operations located in Mexico.
We, together with our subsidiaries, are a short, medium, and long-haul truckload carrier and transportation services provider.
We primarily provide nationwide asset-based dry van truckload service for major shippers across the United States, along with cross-border freight and other transportation services offered through third party partnerships in Mexico.
−Removed: We, together with our subsidiaries, historically have been a short-to-medium haul truckload carrier with approximately 99.9% of our operating revenue was derived from shipments within the United States with the remainder being Canada and no operations in Mexico.
+Added: We, together with our subsidiaries, historically have been a short-to-medium haul truckload carrier and approximately 99.9% of our operating revenue was derived from shipments within the United States with the remainder being Canada and no operations in Mexico.
With the acquisition of CFI on August 31, 2022, we significantly expanded our scale and our transportation services.
We continue to provide nationwide asset-based dry van truckload service for major shippers from across the U.S.
−Removed: and now including cross border freight to and from Mexico and our consolidated average length of haul has increased to approximately 500 miles.
+Added: and now including cross border freight to and from Mexico and our consolidated average length of haul is approximately 400 miles.
We continue to focus on providing high quality service to targeted customers with a high density of freight in our regional operating areas.
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We believe that our service standards, safety record, and equipment accessibility have made us a core carrier to many of our major customers, as well as allowed us to build solid, long-term relationships with customers and brand ourselves as an industry leader for on-time service.
−Removed: Our headquarters is located in North Liberty, Iowa, in a lower-cost environment with ready access to a skilled, educated, and industrious workforce.
+Added: Our corporate headquarters is located in North Liberty, Iowa, in a lower-cost environment with ready access to a skilled, educated, and industrious workforce.
Our other terminals are located near major shipping corridors nationwide, affording proximity to customer locations, driver domiciles, and distribution centers.
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Gerdin in 1978 and became publicly traded in November 1986.
−Removed: Over the thirty-six years from 1986 to 2022, we have grown our revenues to $968.0 million from $21.6 million and our net income has increased to $133.6 million from $3.0 million.
−Removed: For the five year period 2018 through 2022 we had the highest net income, $429.3 million, and highest revenue, $3.4 billion, of any previous five year period.
+Added: Over the thirty-seven years from 1986 to 2023, we have grown our revenues to $1.2 billion from $21.6 million.
+Added: For the five year period 2019 through 2023 we had the second highest net income, $371.4 million ($429.3 million in 2018 through 2022), and highest revenue, $4.0 billion, of any previous five year period.
Much of our growth has been attributable to expanding service for existing customers, acquiring new customers, and continued expansion of our operating regions through new and existing customers as well as strategic acquisitions.
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In addition, we continue to evaluate and explore different driving options and offerings for our existing and potential new drivers across our unique mix of driver offerings across Heartland Express, Millis Transfer, Smith Transport, and CFI.
−Removed: In addition to past organic growth through the development of our regional operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition within the last nine years, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022.
−Removed: These ten acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, expand service offerings to address longer length of haul needs from customers, pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets.
+Added: In addition to past organic growth through the development of our regional operating areas, we have completed ten acquisitions since 1986 with the most recent and our fifth acquisition since 2013, CFI, occurring on August 31, 2022 following the acquisition of Smith Transport on May 31, 2022.
+Added: These ten acquisitions have enabled us to solidify our position within existing regions, expand into new operating regions, expand service offerings to address longer length of haul needs from customers, and pursue new customer relationships in new markets, as well as expand business relationships with current customers in new markets.
We are highly selective about acquisitions, with our main criteria being (i) safe operations, (ii) high quality professional truck drivers, (iii) fleet profile that is compatible with our philosophy or can be replaced economically, and (iv) freight profile that will allow a path to a low-80s operating ratio upon full integration, application of our cost structure, and freight optimization, including exiting certain business that fails to meet our operating profile.
−Removed: We have historically been a debt free organization, with the acquisition of CFI we now have a significant amount of debt.
−Removed: We expect to continue to evaluate
−Removed: acquisition candidates presented to us, however, we do not expect to make any significant acquisitions while we are paying down debt.
+Added: We have historically been a debt
+Added: free organization although with the acquisition of CFI we now have a significant amount of debt.
+Added: We have also significantly lowered our debt balance from 2022 to 2023.
+Added: We expect to continue to evaluate acquisition candidates presented to us, however, we do not expect to make any significant acquisitions while we are paying down debt.
We believe future growth depends upon several factors including the level of economic growth and the related customer demand, the available capacity in the trucking industry, our ability to identify and consummate future acquisitions, our ability to integrate operations of acquired companies to realize efficiencies, and our ability to attract and retain experienced drivers that meet our hiring standards.
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with immaterial revenue derived from Mexico and Canada.
−Removed: We operate thirty-three terminal facilities throughout the contiguous U.S.
−Removed: and one in Mexico, without driver fueling and maintenance facilities, following the CFI acquisition, in addition to our terminal and corporate headquarters in North Liberty, Iowa.
+Added: We operate thirty-one terminal facilities throughout the contiguous U.S.
+Added: and one in Mexico following the CFI acquisition, in addition to our terminal and corporate headquarters in North Liberty, Iowa.
These terminal locations are strategically located to concentrate on regional freight movements generally within a 500-mile radius of the terminals.
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We target customers with multiple, time-sensitive shipments, including those utilizing “just-in-time” manufacturing and inventory management.
−Removed: In seeking these customers, we have positioned our business as a provider of premium service at
−Removed: compensatory rates, rather than competing solely on the basis of price.
+Added: In seeking these customers, we have positioned our business as a provider of premium service at compensatory rates, rather than competing solely on the basis of price.
We believe our reputation for quality service, reliable equipment, and equipment availability makes us a core carrier for many of our customers.
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These awards include:
−Removed: • FedEx Express Core Carrier of the Year (12 years in a row)
−Removed: • FedEx Express Platinum Service Level Award (99.98% On-Time Delivery)
−Removed: • Home Depot Carrier of the Year (CFI)
−Removed: • United Sugars Carrier of the Year
−Removed: • Schneider Logistics Carrier of the Year
−Removed: • Transplace National Truckload Carrier of the Year
−Removed: • DHL Truckload Carrier of the Year
+Added: • FedEx Express National Carrier of the Year (12 years in a row)
+Added: • FedEx Express Platinum Award (99.98% On-Time Delivery)
+Added: • Lowe’s One-Way Outbound Carrier of the Year
+Added: • United Sugar Producers & Refiners Carrier of the Year
+Added: • Mark Anthony Carrier of the Year
+Added: • PepsiCo Transportation WHD West Division Carrier of the Year
+Added: • PepsiCo Transportation WHD Central Region Carrier of the Year - Foods
+Added: • DHL/Tempur Pedic Carrier of the Year
+Added: • Uber Freight Carrier of the Year
+Added: • Henkel Carrier Base Logistics Award – Asset Excellence
During 2023, we were also recognized with the following environmental, operational, safety, and community service awards:
−Removed: • Newsweek's "America's Most Trustworthy Companies" (#18-Transport, Logistics, and Packaging)
−Removed: • Top Company for Women to Work for in Transportation (CFI)
−Removed: • Logistics Management Quest for Quality Award (18 out of the last 20 years)
−Removed: • Commercial Carrier Journal Top 250 Award
−Removed: • Wreaths Across America Honor Fleet
+Added: • Smartway – High Performer Award
+Added: • Logistics Management Quest for Quality Award (our 19th award in 21 years)
+Added: • CFI Driver Zach Yeakley TCA’s Highway Angel of the Year
+Added: • CFI Driver Endrea Davisson – Women in Trucking Association – 2023 Top Women to Watch in Transportation
+Added: • Wreaths Across America Honor Fleet (our 9th year)
+Added: • Pepsi Co “Rolling Remembrance” Participant
These awards are hard-earned and are a direct reflection upon our outstanding group of employees and our focus on excellence in all areas of our business.
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During 2022, our 25, 10, and 5 largest customers were approximately 61%, 41%, and 27%, of our operating revenues respectively.
−Removed: Our broad capacity network and customer base has allowed us to remain appropriately diversified as no customer accounted for more than 10% of our operating revenues in 2022.
−Removed: One customer accounted for more than 10% of our operating revenues in 2021 at 10.0%, while no customer accounted for more than 10% of our 2020 operating revenues.
+Added: Our broad capacity network and customer base has allowed us to remain appropriately diversified as no customer accounted for more than 10% of our operating revenues in 2023 or 2022, while one customer accounted for 10% of our operating revenues in 2021.
Environmental and Sustainability
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Heartland's sustainability efforts are endorsed and overseen by senior management throughout the Company.
−Removed: Our efforts have been recognized by the US EPA SmartWay Excellence Award in seven of the last nine years of award consideration.
+Added: Our efforts have been recognized by the U.S.
+Added: EPA SmartWay Excellence Award in seven of the last nine years of award consideration.
+Added: Furthermore, we have been recognized as a SmartWay High Performer seven times.
We have adopted a "Human Rights Mission".
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Our tractor productivity decreases during the winter season because inclement weather impedes operations, and some shippers reduce their shipments after the winter holiday season.
−Removed: Revenue can also be affected by bad weather, holidays, and the number of business days that occur during a given period, since revenue is directly related to available working days of shippers.
+Added: Revenue can also be affected by bad weather, holidays, and the number of business
+Added: days that occur during a given period, since revenue is directly related to available working days of shippers.
At the same time, operating expenses increase and fuel efficiency declines because of engine idling in extreme weather conditions, while harsh weather creates higher accident frequency, increased claims, and more equipment repairs.
In addition, many of our customers, particularly those in the retail industry where we have a large presence, demand additional capacity during the fourth quarter, which limits our ability to take advantage of more attractive market rates that generally exist during such periods.
−Removed: Recently, the duration of this increased period of demand in the fourth quarter has shortened, with certain customers requiring the same
−Removed: volume of shipments over a more condensed timeframe, resulting in increased stress and demand on our network, people, and systems.
−Removed: If this trend continues, it could make satisfying our customers and maintaining the quality of our service during the fourth quarter increasingly difficult.
+Added: Demand during the fourth quarter may be muted during soft freight environments, like we experienced in the last two years.
We may also suffer from natural disasters and weather-related events, such as tornadoes, hurricanes, blizzards, ice storms, floods, and fires, which may increase in frequency and severity due to climate change, as well as other man-made disasters.
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As of the end of February 2024 we employed approximately 6,040 employees.
−Removed: The increase in employees as of December 31, 2022 was predominantly due to the acquisitions of Smith Transport and CFI in May and August, respectively.
+Added: The increase in average employees during the year ended December 31, 2023 was predominantly due to the acquisitions of Smith Transport and CFI in May and August 2022, respectively.
We also contracted with independent contractors to provide and operate tractors which provides us additional revenue equipment capacity, although not material to our operations.
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Competition for qualified drivers continued to be challenging in 2023 and is expected to be a challenge going forward due to the decreasing numbers of qualified drivers in our industry.
−Removed: However, driver availability began to change late in 2022 and to date in 2023, as a result of the changing freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers and from independent contractors to company drivers.
−Removed: Although there has been some increased movement of drivers between companies in our industry, the issue of decreasing amount of qualified CDL drivers in our industry continues.
+Added: However, driver availability began to change late in 2022 and into 2023, as a result of the declining freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers and from independent contractors to company drivers.
+Added: Although there has been some increased movement of drivers between companies in our industry, the issue of a decreasing amount of qualified CDL drivers in our industry continues.
We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands.
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In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide.
−Removed: We have increased wages and enhanced the compensation for our drivers multiple times in the last three years.
−Removed: Further, we have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers.
+Added: We have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers.
Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance.
Certain driver pay packages include minimum pay protection provisions, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues.
+Added: As a result of the freight environment during 2023, we paid more through these programs, resulting in an increase of driver pay per mile and as a percentage of revenue.
+Added: This has allowed us to maintain driver turnover rates lower than the industry average.
We believe that our driver compensation and benefits package is consistently among the best in the industry.
We are committed to investing in our drivers and compensating them for safety as both are key to our operational and financial performance.
+Added: Currently over 10% of our driver employees, individually, have achieved 1.0 million safe miles.
In response to the driver shortage in our industry, the Company continues to evaluate and pursue the expansion of driver training schools.
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Our comprehensive driver compensation program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance.
−Removed: Our driver pay package generally includes weekly base pay minimums for mileage based drivers, future pay increases based on years of continued service with us, increased rates for
−Removed: accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time.
−Removed: In addition to the scheduled pay increases based on years of continued service, we have increased the base pay package and enhanced the compensation for our drivers multiple times during the last three years.
+Added: Our driver pay package generally includes weekly base pay minimums for mileage based drivers, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time.
We believe that our driver compensation package, compared to others in our industry, is consistently among the best in the industry.
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We also invest a significant amount of capital in our terminal facilities as we strive to offer our driver employees up to date and convenient amenities throughout our terminal network across the country while they are away from home.
+Added: Over the last three years we have invested $106.5 million in terminal properties while also divesting of four of our properties for a combined $98.8 million gain.
Revenue Equipment
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Environmental Protection Agency SmartWay Excellence Award in seven of the last nine years of award consideration.
+Added: Furthermore, we have been recognized as a SmartWay High Performer seven times.
We have historically owned our tractors and trailers and do not lease revenue equipment, other than when we have acquired companies that have utilized leases.
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At December 31, 2023, all of our operating tractor fleet was equipped with event recorders and accident avoidance technology.
−Removed: All over-the-road tractors are equipped with mobile communication systems that comply with the latest ELD regulations.
+Added: All over-the-road tractors are equipped with mobile communication systems that comply with the latest electronic log device regulations.
These units are the base communication with our drivers.
−Removed: This technology allows for efficient communication with our drivers regarding freight and safety (e.g.
+Added: This technology allows for efficient real-time communication with our drivers regarding freight and safety (e.g.
weather shutdowns), as well as fueling decisions, and provides the ability to manage the needs of our customers based on real-time information on load status.
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The average age of our trailer fleet was 6.4 years at December 31, 2023 compared to 6.3 years at December 31, 2022.
−Removed: The average age of our tractor and trailer fleets was impacted by the inclusion of the Smith Transport and CFI equipment obtained through our 2022 acquisitions.
+Added: The average age of our tractor and trailer fleets was impacted by the inclusion of the Smith Transport and CFI equipment obtained through our 2022 acquisitions in comparison to our average age before those acquisitions.
We obtain a small portion of our tractor capacity through the use of independent contractors who own their own tractor equipment, although our use of independent contractors is not material to our overall operations, the portion of independent contractors has increased as a result of the CFI acquisition.
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at which we have negotiated price discounts.
−Removed: In addition, bulk fuel sites are maintained at twenty-five of our terminal locations.
+Added: In addition, bulk fuel sites are maintained at twenty-four of our terminal locations.
We strategically manage fuel purchase decisions based on pricing of over-the-road fuel prices, bulk fuel prices, and the routing of equipment.
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For the years ended December 31, 2023 and 2022, fuel surcharge revenues were $173.8 million and $169.2 million, respectively.
−Removed: Department of Energy (“DOE”) average price of fuel increased 51.8% in 2022 compared to 2021, which had a corresponding negative impact on our net fuel cost, before the impacts of improved fleet efficiency, for the year ended December 31, 2022 compared to 2021.
+Added: Department of Energy (“DOE”) average price of fuel decreased 15.5% in 2023 compared to 2022, which had a corresponding positive impact on our net fuel cost, before the impacts of improved fleet efficiency, for the year ended December 31, 2023 compared to 2022.
Fuel consumed by empty and out-of-route miles and by truck engine idling time is not recoverable and therefore any increases or decreases in fuel costs related to empty and out-of-route miles and idling time will directly impact our operating results.
−Removed: During March 2022 DOE average fuel prices increased to over $5.00 per gallon.
−Removed: The DOE average fuel cost remained above this elevated threshold for the period from March through December 31, 2022, although the DOE weekly average for the last four weeks of December fell below $5.00 per gallon.
−Removed: The average DOE price was $4.99 for 2022, which is the highest annual average on record since tracking began in 1994.
−Removed: The trend of fuel prices below the $5.00 per gallon threshold has continued through the first eight weeks of 2023.
−Removed: While this is an improvement compared to the majority of 2022, the latest DOE diesel fuel price in February 2023 is up 6.0% compared to the same week of 2022.
+Added: Even though average fuel prices declined in 2023 compared to 2022, empty route miles were significantly higher in 2023 due to soft freight demand.
Competition and Industry
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In early 2022, freight demand was initially strong, following an extended period of freight demand at peak levels that began in mid 2020 and continued throughout 2021 and into 2022.
−Removed: Freight demand began to soften in the back half of 2022.
−Removed: While the current levels are down compared against those unprecedented levels experienced during 2021, overall we continue to have more opportunities to haul freight than we are able to cover with our existing fleet and available drivers.
−Removed: We expect freight demand to remain challenged at lower demand levels in at least the first half of 2023 based upon the freight demand experienced in January and February of 2023 and expected normal seasonal trends.
−Removed: However, continued supply chain issues for tractors, trailers and related parts, general consumer product output and inventory volatility, consumer demand, and disruption in oil and diesel markets all could create additional volatility regarding freight demand during 2023.
+Added: Freight demand began to soften in the back half of 2022 and continued to degrade throughout all of 2023.
+Added: We expect freight demand to remain challenged at lower demand levels in at least the first half of 2024 based upon the freight demand experienced in January and February of 2024.
+Added: We expect the strategic changes that we have implemented during 2023 will improve our operational readiness ahead of future expected freight demand growth, which could happen as soon as mid to late 2024.
+Added: However, continued supply chain issues for tractors, trailers and related parts, general consumer product output and inventory volatility, consumer demand, the political landscape, foreign wars, and disruption in oil and diesel markets all could create additional volatility regarding freight demand during 2024.
We continue to focus on providing quality service to targeted customers with a high density of freight in our regional operating areas.
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In addition, we continue to evaluate and explore different driving options and offerings for our existing and potential new drivers across our unique mix of driver offerings at Heartland Express, Millis Transfer, Smith Transport, and CFI.
−Removed: The trucking industry has been faced with a qualified driver shortage.
−Removed: During 2021, increased freight demand, combined with lingering effects of the COVID-19 pandemic, intensified an already challenging qualified driver market.
−Removed: Competition for qualified drivers continued to be challenging in the first half of 2022 as freight demand remained strong.
−Removed: However, driver availability began to change late in 2022 and to date in 2023, as a result of the changing freight and economic environments and we believe certain drivers have moved from smaller less financially stable carriers to more financially stable carriers.
−Removed: Although we expect driver availability and hiring to be a challenge going forward due to the decreasing numbers of qualified drivers in our industry.
−Removed: We continually explore new strategies to attract and retain qualified drivers with changes in market conditions and demands.
−Removed: We hire the majority of our drivers with at least three to six months of over-the-road experience and safe driving records.
−Removed: The Company's driver training program provides an additional source of future potential professional drivers.
−Removed: In order to attract and retain experienced drivers who understand the importance of customer service, we have sought to solidify our position as an industry leader in driver compensation in our operating markets and for the services we provide.
−Removed: increased wages and enhanced the compensation for our drivers multiple times in the last three years.
−Removed: Further, we have continued to get more creative in providing better pay, benefits, equipment, and facilities for our drivers.
−Removed: Our comprehensive driver compensation and benefits program rewards drivers for years of service and safe operating mileage benchmarks, which are critical to our operational and financial performance.
−Removed: Certain driver pay packages include minimum pay protection provisions, future pay increases based on years of continued service with us, increased rates for accident-free miles of operation, detention pay, and other pay programs to assist drivers with unproductive time associated with circumstances outside of their control, such as inclement weather, equipment breakdowns, and customer issues.
−Removed: We believe that our driver compensation and benefits package is consistently among the best in the industry.
−Removed: We are committed to investing in our drivers and compensating them for safety as both are key to our operational and financial performance.
+Added: The trucking industry also faces a shortage of qualified drivers, as discussed above under the heading “Drivers, Independent Contractors, and Other Employees.”
Safety and Risk Management
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We act as a self-insurer for auto liability, defined as including property damage, personal injury, or cargo.
−Removed: For Heartland Express, Millis Transfer and CFI insurance coverage has retention of $2.0 million for any individual claim based on the insured party, accident date, and circumstances of the loss event.
−Removed: There is an additional $1.0 million aggregate self-insurance corridor for claims between $2.0 million and $3.0 million.
−Removed: Liabilities in excess of these deductibles are covered by insurance up to $60.0 million including retention of 50% of exposure from $5.0 million to $10.0 million.
+Added: Under the April 2023 renewal, our auto liability retention limit across all operating entities was increased to $3.0 million for any individual claim based on the insured party, accident date, and circumstances of the loss event subject to a $3.5 million corridor for any one accident or combination of accidents that exceed $3.0 million.
+Added: Prior to the April 2023 renewal, Heartland Express, Millis Transfer, and CFI had a retention limit of $2.0 million and Smith Transport had a retention limit of $0.5 million.
+Added: In addition to the $2.0 million base retention limit, Heartland Express, Millis Transfer, and CFI were subject to a $1.0 million corridor for any one accident or combination of accidents that exceeded $2.0 million.
+Added: For the April 2023 renewal, liabilities in excess of the $3.0 million deductible and $3.5 million corridor are covered by insurance up to $80.0 million.
We retain any liability in excess of $80.0 million.
−Removed: Smith Transport has the same insurance coverage except with a lower retention of $0.5 million for any individual claim.
+Added: Prior to the April 2023 renewal, our excess limit was $60.0 million, including retention of 50% of exposure from $5.0 million to $10.0 million.
+Added: Furthermore, under the April 2023 renewal, our premiums are subject to upward or downward adjustments based on claims experience in the $3.0 million to $10.0 million policy during the three year program.
+Added: The elevated retention limit and the premium adjustment feature could lead to increased volatility in our insurance and claims expense, depending on the frequency and magnitude of claims.
We act as a self-insurer for workers’ compensation based on defined insurance retention of $1.0 million.
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The DOT generally governs matters such as safety requirements, registration to engage in motor carrier operations, insurance requirements, and periodic financial reporting.
−Removed: Our Company drivers and independent contractors also must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and HOS.
+Added: Our Company drivers and independent contractor drivers also must comply with the safety and fitness regulations of the DOT, including those relating to drug and alcohol testing and HOS.
Such matters as weight and equipment dimensions are also subject to U.S.
3 unchanged sentences
Changes to such HOS rules can negatively impact our productivity and affect our operations and profitability by reducing the number of hours per day or week our drivers may operate and/or disrupting our network.
−Removed: However, in August 2019, the FMCSA issued a proposal to make changes to its hours-of-service rules that would allow truck drivers more flexibility with their 30-minute rest break and with dividing their time in the sleeper berth.
−Removed: It also would extend by two hours the duty time for drivers encountering adverse weather and extend the shorthaul exemption by lengthening the drivers’ maximum on-duty period from 12 hours to 14 hours.
−Removed: In June 2020, the FMCSA adopted a final rule substantially as proposed, which became effective in September 2020.
+Added: The FMCSA has made changes to the HOS rules in recent years that include greater flexibility to truck drivers regarding their 30-minute rest breaks, an extension of the shorthaul exemption by an additional two hours, and an extension of duty time for drivers encountering adverse weather by up to two hours.
Certain industry groups have challenged these rules in court, and while the FMCSA's final rule has been upheld, it remains unclear if industry or other groups will bring additional challenges against the FMCSA's final rule.
−Removed: Since that time, we have seen a slight increase in the productivity of our drivers.
Any future changes to HOS rules could materially and adversely affect our operations and profitability.
1 unchanged sentence
The first method is the application of a safety rating that is based on an onsite investigation and affects a carrier’s ability to operate in interstate commerce.
−Removed: We currently have a
−Removed: satisfactory DOT safety rating under this method, for each of our respective DOT authorities, which is the highest available rating under the current safety rating scale.
+Added: We currently have a satisfactory DOT safety rating under this method, for each of our respective DOT authorities, which is the highest available rating under the current safety rating scale.
If we received a conditional or unsatisfactory DOT safety rating, it could adversely affect our business, as some of our existing customer contracts require a satisfactory DOT safety rating.
−Removed: In January 2016, the FMCSA published a Notice of Proposed Rulemaking outlining a revised safety rating measurement system which would replace the current methodology.
−Removed: Under the proposed rule, the current three safety ratings of "satisfactory," "conditional," and "unsatisfactory" would be replaced with a single safety rating of "unfit." Thus, a carrier with no rating would be deemed fit.
−Removed: Moreover, data from roadside inspections and the results of all investigations would be used to determine a carrier’s fitness on an ongoing basis.
−Removed: This would replace the current methodology of determining a carrier’s fitness based solely on infrequent comprehensive onsite reviews.
−Removed: The proposed rule underwent a public comment period that ended in June 2016 and several industry groups and lawmakers expressed their disagreement with the proposed rule, arguing that it violates the requirements of the Fixing America's Surface Transportation Act (“FAST Act”) and that the FMCSA must first finalize its review of the Compliance Safety Accountability program (“CSA”) scoring system, described in further detail below.
−Removed: Based on this feedback and other concerns raised by industry stakeholders, in March 2017, the FMCSA withdrew the Notice of Proposed Rulemaking related to the new safety rating system.
−Removed: In its notice of withdrawal, the FMCSA noted that a new rulemaking related to a similar process may be initiated in the future.
−Removed: Therefore, it is uncertain if, when, or under what form any such rule could be implemented.
−Removed: Additionally, the FMCSA is conducting a study on the causation of large-truck crashes, which is expected to gather data through 2024.
−Removed: Although it remains unclear whether such study will ultimately be completed, the results of such study could spur further proposed and/or final rules in regards to safety and fitness.
−Removed: In addition to the safety rating system, the FMCSA has adopted the CSA program as an additional safety enforcement and compliance model that evaluates and ranks fleets on certain safety-related standards.
+Added: In January 2016, the
+Added: FMCSA published a notice of proposed rulemaking outlining a revised safety rating measurement system which would replace the current methodology of whether carriers are fit to operate commercial motor vehicles (“CMV”).
+Added: Based on feedback and other concerns raised by industry stakeholders during the public comment period in March 2017, the FMCSA withdrew the notice of proposed rulemaking related to the new safety rating system.
+Added: In its notice of withdrawal, the FMCSA noted that a similar process may be initiated in the future.
+Added: In addition to the safety rating system, the FMCSA has adopted the Compliance Safety Accountability (“CSA”) program as an additional safety enforcement and compliance model that evaluates and ranks fleets on certain safety-related standards.
The CSA program analyzes data from roadside inspections, moving violations, crash reports from the last two years, and investigation results.
−Removed: The data is organized into seven categories.
+Added: The data is organized into seven categories (such categories are known as the “BASICs”).
Carriers are grouped by category with other carriers that have a similar number of safety events (e.g., crashes, inspections, or violations) and carriers are ranked and assigned a rating percentile to prioritize them for interventions if they are above a certain threshold.
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However, the occurrence of unfavorable scores in one or more categories may (i) affect driver recruiting and retention by causing high-quality drivers to seek employment with other carriers, (ii) cause our customers to direct their business away from us and to carriers with higher fleet rankings, (iii) subject us to an increase in compliance reviews and roadside inspections, (iv) cause us to incur greater than expected expenses in our attempts to improve unfavorable scores or (v) increase our insurance costs, any of which could adversely affect our results of operations and profitability.
−Removed: Under CSA, these scores were initially made available to the public in five of the seven categories.
−Removed: However, pursuant to the FAST Act which was signed into law in December 2015, the FMCSA was required to remove from public view the previously available CSA scores while it reviews the reliability of the scoring system.
+Added: Under the CSA, these scores were initially made available to the public in five of the seven categories.
+Added: However, pursuant to the Fixing America's Surface Transportation Act (the "FAST Act"), which was signed into law in December 2015, the FMCSA was required to remove from public view the previously available CSA scores while it reviews the reliability of the scoring system.
During this period of review by the FMCSA, we will continue to have access to our own scores and will still be subject to intervention by the FMCSA when such scores are above the intervention thresholds.
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Therefore, it is unclear if, when and to what extent such changes to the CSA program will occur.
−Removed: However, any changes that increase the likelihood of us receiving unfavorable scores could adversely affect our results of operations and profitability.
+Added: In February 2023, the FMCSA published a notice of proposed changes to its Safety Measurement System (“SMS”) methodology, including the BASIC categories.
+Added: In August 2023, the FMCSA announced in an advanced notice of proposed rulemaking and request for comments that it was interested in developing a new methodology to determine whether a carrier is fit to operate CMVs.
+Added: Additionally, the U.S.
+Added: Government Accountability Office made a suggestion in 2023 to the FMCSA to make complaint data public.
+Added: Currently, it is uncertain what changes, if any, the FMCA will make to the CSA rating system or the SMS methodology;
+Added: however, any change which would result in the Company or its subsidiaries receiving less favorable scores, or an increased visibility of less favorable scores or of complaints against the Company may have an adverse effect on our operations and financial position.
+Added: Moreover, in September 2023, the FMCSA announced a proposal that would allow carriers to undergo an appeal process for requests of data review, which are in relation to such requests through the agency’s DataQs system.
+Added: The proposal, if adopted, may provide an opportunity for the Company to appeal in certain scenarios which could result in more favorable outcomes.
+Added: Another source of potential changes may be from the FMCSA’s study on the causation of crashes, known as the Crash Causal Factors Program (“CCFP”) which builds upon the FMCSA’s previous Large Truck Crash Causation Study.
+Added: Phase 1 of the CCFP is designed to study crashes of heavy-duty trucks and a report from Phase 1 of the CCFP is expected in 2029.
+Added: Any changes that increase the likelihood of us receiving unfavorable scores could adversely affect our results of operations and profitability.
In May 2020 the FMCSA announced that effective immediately it is making permanent a pilot program that will not count a crash in which a motor carrier was not at fault when calculating the carrier’s safety measurement profile, called the Crash Preventability Demonstration Program (“CPDP”).
−Removed: The CPDP expands the types of eligible crashes, modify the Safety Measurement System to exclude crashes with not preventable determinations from the prioritization algorithm and note the not preventable determinations in the Pre-Employment Screening Program.
+Added: The CPDP expands the types of eligible crashes, modify the SMS to exclude crashes with not preventable determinations from the prioritization algorithm, and note the not preventable determinations in the Pre-Employment Screening Program.
Under the program, carriers with eligible crashes that occurred on or after August 2019, may submit a Request for Data Review with the required police accident report and other supporting documents, photos or videos through the FMCSA’s DataQs website.
−Removed: If the FMCSA determines the crash was not preventable, it will be listed on the Safety Measurement System but not included when calculating a carrier’s Crash Indicator Behavior Analysis and Safety Improvement Category measure in SMS.
−Removed: Additionally, any determinations of not preventable crashes will be noted on a driver’s Pre-Employment Screening Program report.
−Removed: The FMCSA published a final rule in December 2015 that required the use of ELDs or automatic onboard recording devices (“AOBRs”) by nearly all carriers by December 2017 (the "2015 ELD Rule").
−Removed: The use of AOBRs was permitted until December 2019, at which time the use of ELDs was required.
−Removed: We were compliant with both aspects of the 2015 ELD Rule within the
−Removed: requisite deadlines.
−Removed: We believe that more effective HOS enforcement under the 2015 ELD Rule may improve our competitive position by causing all carriers to adhere more closely to HOS requirements and may further reduce industry capacity.
−Removed: In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug and alcohol testing requirements.
−Removed: Motor carriers are required to query the clearinghouse to ensure drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating commercial motor vehicles.
−Removed: The final rule became effective in January 2017, with a compliance date in January 2020.
−Removed: In December 2019, however, the FMCSA announced a final rule extending by three years the date for state driver’s licensing agencies to comply with certain Drug and Alcohol Clearinghouse requirements.
−Removed: The December 2016 commercial driver’s license rule required states to request information from the Clearinghouse about individuals prior to issuing, renewing, upgrading, or transferring to a CDL.
−Removed: This new action allowed states’ compliance with the requirement, which was set to begin January 2020, to be delayed until January 2023.
−Removed: That being said, the FMCSA indicated it would allow states the option to voluntarily query Clearinghouse information beginning January 2020.
−Removed: The compliance date of January 2020 remained in place for all other requirements set forth in the Clearinghouse final rule, however.
−Removed: Upon implementation, the rule may reduce the number of available drivers in an already constrained driver market.
−Removed: Pursuant to a new rule finalized by the FMCSA, beginning in November 2024, states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver's license and must revoke a driver's commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
+Added: If the FMCSA determines the crash was not preventable, it will be listed on the SMS but not included when calculating a carrier’s BASICs measure for the crash indicator category in SMS.
+Added: In December 2016, the FMCSA issued a final rule establishing a national clearinghouse for drug and alcohol testing results and requiring motor carriers and medical review officers to provide records of violations by commercial drivers of FMCSA drug
+Added: and alcohol testing requirements.
+Added: Motor carriers are required to query the clearinghouse to ensure drivers and driver applicants do not have violations of federal drug and alcohol testing regulations that prohibit them from operating CMVs.
+Added: The final rule became effective in 2017, with an initial compliance date of January 2020 and certain compliance dates extended until January 2023.
+Added: Currently, the Company is required to (i) report drug and alcohol violations to the clearinghouse based upon DOT requirements;
+Added: (ii) query the clearinghouse regarding drug and alcohol violations for current and prospective employees prior to permitting such employees to operate a CMV;
+Added: and (iii) query the clearinghouse for each currently employed driver annually.
+Added: Beginning November 2024, states will be required to query the Clearinghouse when issuing, renewing, transferring, or upgrading a commercial driver's license and must revoke a driver's commercial driving privileges if such driver is prohibited from driving a motor vehicle for one or more drug or alcohol violations.
+Added: It is expected that the effects from the rule may further impair the pool of available drivers.
In September 2020, the Department of Health and Human Services (“DHHS”) announced proposed mandatory guidelines to allow employers to drug test truck drivers and other federal workers for pre-employment and random testing using hair specimens.
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Additionally, in February 2022 the DOT issued a notice of proposed rulemaking that would include oral fluid testing as an alternative to urine testing for purposes of the DOT’s drug testing program, with a goal of improving the integrity and effectiveness of the drug testing program, along with potential cost savings to regulated parties.
−Removed: Public comment on the proposed rule closed in April 2022, with industry participants generally being in favor.
−Removed: It is unclear if, and when, a final rule may be put in place, however.
+Added: In May 2023, a final rule was published amending DOT’s drug testing program to include oral fluid testing, and became effective June 2023;
+Added: however, implementation cannot take effect until DHHS approves at least two laboratories to conduct oral fluid testing.
+Added: Currently, DHHS has not approved any laboratories.
Any final rule may reduce the number of available drivers.
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Finally, federal drug regulators have announced a proposal to add fentanyl to a drug testing panel that would detect the use of such drug among safety-sensitive federal employees, which would include truck drivers if adopted by the DOT.
−Removed: If the proposal is accepted, DHHS expects to add fentanyl to the testing panel as early as the first quarter of 2023.
−Removed: Other rules have been recently proposed or made final by the FMCSA, including:
−Removed: (i) a rule requiring the use of speed limiting devices on heavy duty tractors to restrict maximum speeds, which was proposed in 2016, and (ii) a rule setting forth minimum driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers upgrading their licenses or seeking certain endorsements, including a hazardous materials endorsement, known as the Entry-Level Driver Training regulations (the "ELDT Regulations"), which was made final in December 2016, with an initial compliance date in February 2020.
+Added: If the proposal is accepted, DHHS expects to add fentanyl to the testing panel at some point in 2024.
+Added: Other rules have been proposed or made final by the FMCSA, including a rule setting forth minimum driver training standards for new drivers applying for commercial driver’s licenses for the first time and to experienced drivers upgrading their licenses or seeking certain endorsements, including a hazardous materials endorsement, known as the Entry-Level Driver Training regulations (the "ELDT Regulations"), which was made final in December 2016, with an initial compliance date in February 2020.
However, in May 2020, the FMCSA approved an interim rule delaying implementation of the ELDT Regulations by two years, which extended the compliance date until February 2022.
−Removed: The ELDT Regulations, among other things, unify driver training curriculum nationwide by mandating certain theory and behind-the-wheel training standards prior to taking the skills test, and require commercial driving schools and other training programs (including ours) to implement such curriculum and register with the FMCSA’s Training Provider Registry, certifying that their curriculum meets the new standards.
−Removed: The rules generally do not apply retroactively, however, so current holders of commercial driver’s licenses will largely be unaffected.
−Removed: That being said, these rules could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations.
−Removed: They may also result in an increase in the time and expense required to operate or expand our driver training schools and programs, which could adversely affect our results and profitability.
−Removed: In February 2023, the FMCSA issued a supplemental Notice of Proposed Rulemaking requesting additional information on automated driving systems (“ADS”) and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped commercial motor vehicles.
−Removed: Public comment on the supplemental notice will remain open until March 2023, and it remains to be seen, what, if any, final rules will stem therefrom.
−Removed: Additionally, the FMCSA in conjunction with the National Highway Traffic Safety
−Removed: Administration ("NHTSA"), have announced their intention to propose a rule for performance standards and maintenance requirements for automatic emergency braking on heavy trucks.
−Removed: Such proposal is anticipated as early as March 2023, but it remains uncertain what exactly it may require, and whether a final rule will ultimately be put into place.
−Removed: Our industry is also subject to a number of recently proposed rules which mandate the use of speed-limiting devices in certain commercial motor vehicles.
+Added: Now that the ELDT Regulations are in effect, training schools and other programs (including ours) are required to implement the prescribed curriculum and register with the FMCSA's Training Provider Registry to certify that their program meets the classroom and driving standards.
+Added: We are also required to comply with this rule in the course of operating our driving schools.
+Added: The effects of these rules may result in a decrease in fleet production and driver availability or an increase in the time and expense required to operate or expand our driving academies and driver training programs (or both), any of which could adversely affect our business, operations or profitability.
+Added: In February 2023, the FMCSA issued a supplemental notice of proposed rulemaking requesting additional information on automated driving systems (“ADS”) and seeking comment on regulatory approaches that would enable it to obtain relevant safety information and the current and anticipated size of the population of carriers operating ADS-equipped CMVs.
+Added: Public comment on the supplemental notice closed in March 2023, and it remains to be seen what, if any, final rules will stem therefrom.
+Added: In June 2023, the FMCSA and the National Highway Traffic Safety Administration ("NHTSA") issued a joint proposed rule that would require automated emergency braking on all new heavy-duty trucks.
+Added: Additionally, in April 2023, NHTSA issued an advance notice of proposed rulemaking that would require side underride guards to be installed on all new heavy-duty trucks.
+Added: It remains to be seen what, if any, final rules will stem from such proposals.
+Added: Our industry is also subject to a number of recently proposed rules which mandate the use of speed-limiting devices in certain CMVs.
In July 2017, the DOT announced that it would no longer pursue a speed limiter rule but left open the possibility that it could resume such a pursuit in the future.
In May 2021, however, the Cullum Owings Large Truck Safe Operating Speed Act was reintroduced into the U.S.
−Removed: House of Representatives and would require commercial motor vehicles with a gross weight of more than 26,000 pounds to be equipped with a speed limiter that would limit the vehicle’s speed to no more than 65 M.P.H.
−Removed: Furthermore, in April 2022, the FMCSA issued a notice of intent to propose a rule during 2023 that will require certain commercial vehicles to be equipped with speed limiters.
+Added: House of Representatives and would require CMVs with a gross weight of more than 26,000 pounds to be equipped with a speed limiter that would limit the vehicle’s speed to no more than 65 M.P.H.
+Added: Furthermore, in April 2022, the FMCSA issued a notice of intent to propose a rule during 2023 that will require certain commercial vehicles to
+Added: be equipped with speed limiters;
+Added: however, no final rule was proposed.
+Added: It is now expected that the DOT will issue a rule regarding speed-limiting devices in 2024.
The effect of these rules, to the extent they become effective, could result in a decrease in fleet production and driver availability, either of which could adversely affect our business or operations.
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The FMCSA announced the establishment of this apprenticeship program in January 2022 in an effort to begin to help the industry’s ongoing driver shortage.
−Removed: This program, known as the Safe Driver Apprenticeship Pilot Program, is open to 18 to 20-year-old drivers who already hold intrastate commercial driver's licenses and sets a strict training regimen for participating drivers and carriers to comply with.
+Added: This program, known as the Safe Driver Apprenticeship Pilot Program (“SDAP”), is open to 18 to 20-year-old drivers who already hold intrastate commercial driver's licenses and sets a strict training regimen for participating drivers and carriers to comply with.
Motor carriers interested in participating must complete an application for participation and submit monthly data on an apprentice’s driver activity, safety outcomes, and additional supporting information.
−Removed: The Safe Driver Pilot Apprenticeship Program is limited to 3,000 driver-apprentices at any given time, with new driver-apprentices allowed into the program to replace those that leave or age out.
+Added: The SDAP is limited to 3,000 driver-apprentices at any given time, with new driver-apprentices allowed into the program to replace those that leave or age out.
+Added: In May 2023, the DRIVE Safe Integrity Act of 2023 was introduced, which supports participation in the SDAP and would permit 18- to 20-year-olds to operate across state lines if data from the SDAP does not indicate such drivers are less safe than current CMV drivers.
+Added: Whether this legislation will ultimately become law is uncertain.
It remains unclear whether any regulatory changes will stem from the apprenticeship program.
−Removed: The IIJA also required that the FMCSA clarify the differences between brokers, bona fide agents, and dispatch services, and to further specify its interpretation of the definitions of “broker” and “bona fide agents.” As such, and in an attempt to rein in companies engaging in brokerage services without proper FMCSA authority, the FMCSA issued interim guidelines in November 2022, which, among other things, (i) contained a multitude of factors relevant to determining whether a dispatch service actually requires brokerage authority, (ii) clarified that operating as an unauthorized broker carries civil penalties of up to $10,000 per violation, and (iii) clarified that the handling of funds in shipper-motor carrier transactions is an important consideration (pointing towards a broker designation) in the determination of whether someone is a broker or simply an agent.
−Removed: The FMCSA also clarified, however, that any determination will be highly fact specific and will entail determining whether the person or company is engaged in the allocation of traffic between motor carriers.
+Added: The IIJA also required that the FMCSA clarify the differences between brokers, bona fide agents, and dispatch services, and to further specify its interpretation of the definitions of “broker” and “bona fide agents.” Final guidance was later issued by the FMCSA in June 2023, setting forth that the distinction between the two largely hinges upon control and whether the person or company is engaged in the allocation of traffic between motor carriers.
Several of the Company’s subsidiaries currently hold FMCSA brokerage authority, so while the impact of this guidance remains to be seen, the Company does not currently anticipate an adverse impact on its operations.
−Removed: Additionally, in a January 2023 Notice of Proposed Rulemaking, the FMCSA proposed more oversight of truck brokers, freight forwarders, and the surety bond and trust companies that back them.
−Removed: The Notice of Proposed Rulemaking considers regulatory modifications in five areas:
+Added: Additionally, in a November 2023 final rule, the FMCSA implemented more oversight of truck brokers, freight forwarders, and the surety bond and trust companies that back them.
+Added: The final rule, which became effective in January 2024, modified regulations in five areas:
(i) assets readily available, (ii) immediate suspension of broker/freight forwarder operating authority, (iii) surety or trust responsibilities, (iv) enforcement authority, and (v) entities eligible to serve as BMC-85 trustees.
−Removed: Among other changes, the proposal would allow brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
−Removed: The proposal also stipulates that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund.
−Removed: Adoption of these changes could negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
+Added: Among other changes, the rule allows brokers or freight forwarders to meet regulatory requirements to have “assets readily available” by maintaining trusts that meet certain criteria, including that they can be liquidated within seven calendar days of an event that triggers a payment from the trust.
+Added: The rule also stipulates that “available financial security” falls below $75,000 when there is a drawdown on the broker or freight forwarder’s surety bond or trust fund.
+Added: Implementation and compliance with these changes may negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
+Added: Recently, federal courts have reached different decisions on the issue of whether preemption applies to broker liability.
In June 2022, the United States Supreme Court (the “Supreme Court”) declined to review a Ninth Circuit Court of Appeals decision involving a personal injury suit alleging that a freight broker had liability for an accident because it breached its duty to select a competent contractor to transport the load in question.
−Removed: In its petition to the Supreme Court, the broker unsuccessfully argued that the Ninth Circuit’s decision improperly disallowed federal pre-emption, and would expose freight brokers to a patchwork of state regulations across the United States.
−Removed: This development potentially calls into question freight brokers’ ability to rely on federal agency standards in selecting motor carriers, given the carrier involved in the accident was allegedly in good standing with the FMCSA when it was chosen to transport the load.
+Added: In its petition to the Supreme Court, the broker unsuccessfully argued that the Ninth Circuit’s decision improperly disallowed federal preemption and would expose freight brokers to a patchwork of state regulations across the United States.
+Added: In April 2023, the Eleventh Circuit Court held that the Federal Aviation Administration Authorization Act (“FAAAA”) expressly preempted such personal liability claims against a broker.
+Added: Additionally, in July 2023, the Seventh Circuit Court of Appeals affirmed the holding of a lower court that the FAAAA’s preemption provision applied and that a certain safety exception within the FAAAA did not save the plaintiff’s claim from preemption.
+Added: In January 2024, the U.S.
+Added: Supreme Court declined to review the case from the Seventh Circuit Court of Appeals.
+Added: It is uncertain how long the current circuit split will continue and whether the U.S.
+Added: Supreme Court will decide to review similar cases in the future.
+Added: If additional circuit courts, or the U.S.
+Added: Supreme Court, adopt the Ninth Circuit view, freight brokers’ ability to rely on federal agency standards in selecting motor carriers would be called into question.
It could also lead to primary (as opposed to contingent) liability being imposed upon freight brokers, and increased insurance premiums for brokerage operations generally.
Although we are committed to selecting safe and secure motor carriers in carrying out our brokerage activities, if we are found to be negligent in the motor carrier selection process it could lead to significant liabilities in the event of an accident, which could have a materially adverse effect on our business and operating results.
−Removed: In September 2022, the FMCSA issued an advance Notice of Proposed Rulemaking that would require fleets and owner-operators to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
+Added: In September 2022, the FMCSA issued an advance notice of proposed rulemaking that would require fleets and independent contractors to equip their trucks with unique electronic identification systems designed to streamline roadside inspections and provide transparency and accountability in day-to-day trucking operations.
The petition was generally disfavored by transportation industry participants, citing, among other things, the petition’s failure to address privacy and data security risks.
It remains to be seen what rules, if any, may stem from this notice.
+Added: However, in February 2023, the FMCSA announced a new operational test for monitoring and enforcing driver and motor carrier safety compliance standards.
In November 2022 Senate lawmakers introduced legislation that would set aside grant funds over four years to expand truck parking across the United States.
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The FMCSA’s decision has been appealed by labor groups and multiple lawsuits have been filed in federal courts seeking to overturn the decision.
−Removed: In January 2021, the Ninth Circuit Court of Appeals upheld the FMCSA's determination that federal law does preempt California's meal and rest break laws, as applied to drivers of property-carrying commercial motor vehicles.
+Added: In January 2021, the Ninth Circuit Court of Appeals upheld the FMCSA's determination that federal law does preempt California's meal and rest break laws, as applied to drivers of property-carrying CMVs.
Other current and future state and local laws, including laws related to employee meal breaks and rest periods, may also vary significantly from federal law.
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Either solution could result in increased compliance and labor costs, driver turnover, decreased efficiency, and amplified legal exposure.
+Added: In a 2023 case involving the Fair Labor Standards Act, the First Circuit Court of Appeals affirmed a decision that would require additional payment to team drivers to be paid while in their sleeper berth.
+Added: It is unclear if other jurisdictions will adopt this view, or if any legislation will result from this holding.
+Added: If so, this could have an adverse effect on the results of operations for our teams.
+Added: In November 2023, a bill was introduced to Congress that would eliminate an exclusion of truck drivers from receiving overtime pay.
+Added: If enacted, this could have a material adverse effect on our business, financial condition, and results of operations.
Tax and other regulatory authorities, as well as independent contractors themselves, have increasingly asserted that independent contractor drivers in the trucking industry are employees rather than independent contractors, for a variety of purposes, including income tax withholding, workers' compensation, wage and hour compensation, unemployment, and other issues.
Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractor drivers as employees, including legislation to increase the recordkeeping requirements for those that engage independent contractor drivers and to heighten the penalties of companies who misclassify their employees and are found to have violated employees' overtime and/or wage requirements.
−Removed: The most recent example being the Protecting the Rights to Organize ("PRO") Act, which was passed by the U.S.
−Removed: House of Representatives and received by the Senate in March 2021 and remains with the Senate's Committee on Health, Education, Labor, and Pensions.
−Removed: The PRO Act proposes to apply the "ABC Test" for classifying workers under Federal Fair Labor Standards Act claims.
−Removed: Additionally, in October 2022, the Department of Labor proposed a new rule regarding independent contractor classification, which if adopted, would evaluate an employer's relationship with workers under six categories to determine whether such worker should be classified as an independent contractor based on a totality of the circumstances and the economic realities of such relationship.
−Removed: It is unknown whether any of the proposed legislation will become law or whether any industry-based exemptions from any resulting law will be granted.
+Added: The Protecting the Rights to Organize ("PRO") Act was passed by the U.S.
+Added: House of Representatives and received by the Senate in March 2021, which was further sent to the Senate's Committee on Health, Education, Labor, and Pensions.
+Added: In 2023, a substantially similar bill was introduced to the U.S.
+Added: House of Representatives and referred to the House Committee on Education and Workforce.
+Added: These bills propose to apply the "ABC Test" for classifying workers under Federal Fair Labor Standards Act claims.
+Added: In January 2024, the Department of Labor published a final rule regarding independent contractor classification, which is set to take effect on March 11, 2024.
+Added: The final rule rescinded the Independent Contractor Status Under the Fair Labor Standards Act.
+Added: Under the 2024 rule, workers’ relationship with a principal will be classified under six factors, including:
+Added: (i) opportunity for profit and loss depending on managerial skill;
+Added: (ii) investments by the worker and the principal;
+Added: (iii) degree of permanence of the relationship;
+Added: (iv) nature and degree of control;
+Added: (v) extent to which worker in integral to the principal’s business;
+Added: and (vi) skill and initiative, together with a provision for unspecified other factors, to determine if such worker should be classified as an independent contractor.
Additionally, federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a long-standing, recognized practice, extend the Fair Labor Standards Act to independent contractors, and impose notice requirements based upon employment or independent contractor status and fines for failure to comply.
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As a result, the injunction was lifted and retroactively placed AB5 into law as of January 2020.
−Removed: While the stay of the AB5 mandate provided temporary relief to the enforcement of AB5, the CTA and other industry groups are continuing to bring challenges against AB5 and it remains unclear whether the CTA or other industry groups will ultimately be successful in receiving future injunctions or in invalidating the law.
+Added: Litigation surrounding the matter continues, and the Ninth Circuit is currently scheduled to hear arguments on a case concerning AB5 in March 2024;
+Added: however, it remains unclear whether such challenges will be successful in invalidating the law.
It is also possible AB5 will spur similar legislation in states other than California, which could adversely affect our results of operations and profitability.
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Additionally, increasing efforts to control emissions of greenhouse gases may have an adverse effect on us.
−Removed: We maintain a young fleet age of tractors to ensure we are using the most up-to-date technology deployed by manufacturers to reduce emissions.
+Added: We aim to maintain a young fleet age of tractors to ensure we are utilizing technological advancements deployed by manufacturers to reduce emissions.
Although we have instituted programs to monitor and control environmental risks and promote compliance with applicable environmental laws and regulations, if we are involved in a spill or other accident involving hazardous substances, if there are releases of hazardous substances we transport, if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable laws or regulations, we could be subject to cleanup costs and liabilities, including substantial fines or penalties or civil and criminal liability, any of which could have a materially adverse effect on our business and operating results.
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The Phase 1 Standards apply to tractor model years 2014 to 2018 and require the achievement of an approximate 20 percent reduction in fuel consumption by the 2018 model year, which equates to approximately four gallons of fuel for every 100 miles traveled.
−Removed: In addition, in February 2014, President Obama announced that his administration would begin developing the next phase of tighter fuel efficiency and greenhouse gas standards for medium-and heavy-duty tractors and trailers (the "Phase 2 Standards").
+Added: addition, in February 2014, President Obama announced that his administration would begin developing the next phase of tighter fuel efficiency and greenhouse gas standards for medium-and heavy-duty tractors and trailers (the "Phase 2 Standards").
In October 2016, the EPA and NHTSA published the final rule mandating that the Phase 2 Standards will apply to trailers beginning with model year 2018 and tractors beginning with model year 2021.
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The final rule was effective in December 2016, but has since faced challenges and delays.
−Removed: In October 2017, the EPA announced a proposal to repeal the Phase 2 Standards as they relate to gliders (which mix refurbished older components, including transmissions and
−Removed: pre-emission-rule engines, with a new frame, cab, steer axle, wheels, and other standard equipment).
−Removed: The outcome of such proposal is still undetermined.
Additionally, implementation of the Phase 2 Standards as they relate to trailers has been challenged in the U.S.
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In December 2022, the EPA adopted a final rule that reflected a compromise of the options previously proposed, with new emissions standards of nitrogen oxides for heavy-duty motor vehicles beginning with model year 2027 being more than 80% stronger than current emission standards, with the intent to reduce heavy-duty emissions by almost 50% from today’s levels by 2045.
−Removed: The EPA has indicated that the December 2022 rule is the first part of a multi part plan focusing on greenhouse gas emissions, which is commonly referred to as the “Cleaner Trucks Initiative,” or the “Clean Trucks Plan.” The EPA has indicated that it plans to release proposals for the remaining steps in the Clean Trucks Plan by the end of March 2023 and is targeting 2027 for these new standards to take effect.
−Removed: The EPA has also previously indicated it is working on enacting additional, more stringent, greenhouse gas emission standards (beginning with model year 2030 vehicles) by the end of 2024.
+Added: The EPA has indicated that the December 2022 rule is the first part of a three-part plan focusing on greenhouse gas emissions, which is commonly referred to as the “Cleaner Trucks Initiative,” or the “Clean Trucks Plan.” In April 2023, the EPA released the second and third parts to the Clean Trucks Plan, including a proposed rule relating to greenhouse gas (“GHG”) standards for heavy-duty vehicles known as “Phase 3” to the EPA’s GHG program.
+Added: A final rule with respect to these regulations is expected by the end of 2024.
Compliance with these regulations could increase the cost of new tractors and trailers, impair equipment productivity, and increase operating expenses.
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In February 2019, the California Phase 2 standards became final.
−Removed: Thus, even though the trailer provisions of the Phase 2 Standards were removed, we will still need to ensure the majority of our fleet is compliant with the California Phase 2 standards, which may result in increased equipment costs and could adversely affect our operating results and profitability.
−Removed: CARB has also recently announced intentions to adopt regulations ensuring that 100% of tractors operating in California are operating with battery or fuel cell-electric engines in the future.
+Added: Thus, even though the trailer provisions of the Phase 2 Standards were removed, we must still ensure the majority of our fleet is compliant with the California Phase 2 standards, which may adversely affect our operating results and profitability.
+Added: CARB has also recently announced its intentions to adopt regulations ensuring that 100% of tractors operating in California are operating with battery or fuel cell-electric engines in the future.
Whether these regulations will ultimately be adopted remains unclear.
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Among other impacts, ACT could affect the cost and/or supply of traditional diesel tractors.
−Removed: It has also led to similar legislation in other states, with Oregon, Washington, New York, New Jersey, and Massachusetts already adopting ACT, and a number of other states either considering adoption of ACT or affirmatively conducting a preliminary rulemaking process to that effect.
−Removed: CARB is also in the process of considering and finalizing what is known as the Advanced Clean Fleets (“ACF”) regulation, also aimed at transitioning to zero emission vehicles beginning in 2024.
+Added: It has also led to similar legislation in several states and a number of other states either considering adoption of ACT or affirmatively conducting a preliminary rulemaking process to that effect.
+Added: In 2023, CARB finalized what is known as the Advanced Clean Fleets (“ACF”) regulation, also aimed at transitioning to zero emission vehicles, which became effective in January 2024.
ACF is a purchase requirement for medium and heavy-duty fleets to adopt an increasing percentage of zero emission trucks, designed to complement the sell-side obligations of ACT.
−Removed: The proposed ACF regulations, generally set to begin in January 2024, apply to three categories of fleet operators:
−Removed: (1) high priority fleets who meet certain thresholds of trucks or revenue (including fleets that operate 50 or more trucks, or generate $50 million or more in gross annual revenue), (2) drayage fleets, and (3) state and local government public fleets.
−Removed: For high priority fleets who meet the applicable thresholds, compliance can be achieved by either (i) ensuring that all new vehicles added to the fleet be zero emission, and removing older vehicles once their statutory useful life is reached, or (ii) meeting certain fleet composition requirements (e.g., percentage of zero
−Removed: emission vehicles in the fleet) by certain dates, with the percentage of zero emission vehicles increasing over time, and resulting in 100% zero emission fleets by 2042 (or earlier for certain classes of vehicles).
+Added: The ACF regulations apply to three categories of fleet operators:
+Added: (i) high priority fleets who meet certain thresholds of trucks or revenue (including fleets that operate 50 or more trucks, or generate $50 million or more in gross annual revenue), (ii) drayage fleets, and (iii) state and local government public fleets.
+Added: For high priority fleets who meet the applicable thresholds, compliance
+Added: can be achieved by either (a) ensuring that all new vehicles added to the fleet be zero emission, and commencing in 2025, removing older vehicles once their statutory useful life is reached, or (b) meeting certain fleet composition requirements (e.g., percentage of zero emission vehicles in the fleet) by certain dates, with the percentage of zero emission vehicles increasing over time, and resulting in 100% zero emission fleets by 2042 (or earlier for certain classes of vehicles).
As with ACT, adoption and implementation of ACF could materially and negatively impact our business by increasing our compliance obligations, operating costs, and related expenses.
−Removed: In order to reduce exhaust emissions, some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors may idle.
+Added: The periodic testing portion of California’s Clean Truck Check (as a part of CARB’s Clean Truck program), known as Phase 3 of the Clean Truck Check, is set to begin in July 2024.
+Added: Once Phase 3 commences, heavy duty vehicles will be subject to periodic emissions testing.
+Added: Additionally, in October 2023, the California State Senate and State Assembly approved two bills, Senate Bill 253 (“SB 253”) and Senate Bill 261 (“SB 261”), that could require thousands of companies doing business in California to disclose greenhouse gas emissions and climate-related financial risks, with reporting beginning in 2026.
+Added: If signed into law, SB 253 would require CARB to adopt regulations before January 2025 requiring public and private companies that exceed $1 billion in annual revenue and that do business in California to begin publicly disclosing their GHG emissions, and SB 261 would require companies doing business in California and earning revenue exceeding $500 million to report on their climate-related financial risks and measures taken to mitigate such risks on or before January 2026.
+Added: In order to reduce exhaust emissions, lawmakers, including federal and some states and municipalities have begun to restrict the locations and amount of time where diesel-powered tractors may idle.
These restrictions could force us to purchase on-board power units that do not require the engine to idle or to alter our drivers' behavior, which could result in a decrease in productivity or increase in driver turnover.
+Added: Complying with these environmental regulations and any future GHG regulations enacted by CARB, the EPA, the NHTSA and/or any other state or federal governing body has increased and will likely continue to increase the cost of our new tractors, may increase the cost of new trailers, may require us to retrofit certain of our trailers, may increase our maintenance costs, and could impair equipment productivity and increase our operating costs, particularly if such costs are not offset by potential fuel savings.
+Added: These adverse effects, combined with the uncertainty as to the reliability of the newly designed diesel engines and the residual values of our equipment, could materially increase our costs or otherwise adversely affect our business or operations.
+Added: We cannot predict, however, the extent to which our operations and productivity will be impacted.
+Added: We will continue monitoring our compliance with federal and state GHG and other material environmental regulations.
In April 2016, the Food and Drug Administration (“FDA”) published a final rule establishing requirements for shippers, loaders, carriers by motor vehicle and rail vehicle, and receivers engaged in the transportation of food, to use sanitary transportation practices to ensure the safety of the food they transport as part of the Food Safety Modernization Act of 2011 (the "FSMA").
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In July 2020, the FDA released its “New Era of Smarter Food Safety” blueprint, which creates a ten year roadmap to create a more digital, traceable and safer food system.
+Added: The Food Traceability Rule is one aspect of the blueprint and has a compliance date for all parties subject to its recordkeeping requirements of January 20, 2026.
+Added: In the event the Company becomes subject to any such recordkeeping requirements, compliance costs may increase.
This blueprint builds on the work done under the FSMA, and while it is still unclear what, if any, changes to the current governing framework may ultimately take effect, further regulation in this area could negatively affect our business by increasing our compliance obligations and related expenses going forward.
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Amongst other considerations, the Inflation Reduction Act contains provisions relating to energy, climate change, and tax reform.
−Removed: In particular, the Inflation Reduction Act shifts timing for certain tax payments, imposes an excise tax on certain corporate stock buybacks, and creates a 15% corporate alternative minimum tax, which is generally applicable to corporations that reported over $1 billion in profits in each of the three proceeding tax years.
+Added: In particular, the Inflation Reduction Act shifts timing for certain tax payments, imposes an excise tax on certain corporate stock buybacks, and creates a
+Added: 15% corporate alternative minimum tax, which is generally applicable to corporations that reported over $1 billion in profits in each of the three proceeding tax years.
Tax changes in the Inflation Reduction Act, together with changes to any other U.S.
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However, adoption and implementation could negatively impact our business by increasing our compliance obligations and related expenses.
−Removed: The United States Mexico Canada Agreement (“USMCA”) was entered into effect in July 2020.
−Removed: The USMCA is designed to modernize food and agriculture trade, advance rules of origin for automobiles and trucks, and enhance intellectual property protections, among other matters, according to the Office of U.S.
−Removed: Trade Representative.
−Removed: It is difficult to predict at this stage what could be the impact of the USMCA on the economy, including the transportation industry.
−Removed: However, given the amount of North American trade that moves by truck, it could have a significant impact on supply and demand in the transportation industry, and could adversely impact the amount, movement, and patterns of freight we transport.
+Added: In February 2023, the Secretary of Transportation announced the creation of the Truck Leasing Task Force (“TLTF”).
+Added: The TLTF is a committee tasked with evaluating lease agreements in the industry and their effects on industry participants, including independent contractor drivers.
+Added: Any future laws or regulations stemming from the TLTF could disrupt the Company’s leasing practices and cause materially adverse effects on our operations and financial position.
The IIJA was signed into law by President Biden in November 2021.
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Provisions in the law specific to trucking are discussed above.
−Removed: It otherwise remains unclear how the IIJA will be implemented into and effect our industry in the long-term.
+Added: It otherwise remains unclear how the IIJA will be implemented into and affect our industry in the long-term.
The IIJA may result in increased compliance and implementation related expenses, which could have a negative impact on our operations.
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It remains unclear whether the SHIP IT Act will ultimately become law, however, and what changes it may undergo prior finalization.
−Removed: Given COVID-19’s considerable effect on our nation and industry, the FMCSA previously issued and/or extended various temporary responsive measures in response to COVID-19 pandemic.
−Removed: However, as additional tools, protective equipment, policies, practices, and medicines have been developed in response to COVID-19, in October 2022, the FMCSA ended the hours of service waiver previously issued with respect to certain types of shipments, such as, livestock, medical supplies, vaccines, groceries, and diesel fuel.
+Added: Given COVID-19’s considerable effect on our nation and industry, the FMCSA previously issued and/or extended various temporary measures in response to the COVID-19 pandemic.
+Added: However, as additional tools, protective equipment, policies, practices, and medicines have been developed in response to COVID-19, in October 2022, the FMCSA ended the HOS waiver previously issued with respect to certain types of shipments, such as, livestock, medical supplies, vaccines, groceries, and diesel fuel.
Although to date these response measures have largely been enacted in order to assist industry participants in operating under adverse circumstances, any further responsive measures or the lapsing of temporary measures previously enacted, remain unclear and could have a negative impact on our operations.
−Removed: In November 2021 the U.S.
−Removed: Department of Labor’s Occupational Safety and Health Administration (“OSHA”) published an emergency temporary standard (the “Emergency Rule”) requiring all employers with at least 100 employees to ensure that their employees are fully vaccinated or require any employees who remain unvaccinated to produce a negative COVID-19 test result on at least a weekly basis before coming to work.
−Removed: The Emergency Rule has been blocked by the Supreme Court.
−Removed: This Emergency Rule was subsequently withdrawn by OSHA in January 2022.
−Removed: However, any future vaccination, testing or mask mandates that are allowed to go into effect, could, among other things, (i) cause our unvaccinated employees to go to smaller employers, if such employers are not subject to future mandates, or leave us or the trucking industry, especially our unvaccinated drivers, (ii) result in logistical issues, increased expenses, and operational issues from arranging for weekly tests of our unvaccinated employees, especially our unvaccinated drivers, (iii) result in increased costs for recruiting and retention of drivers, as well as the cost of weekly testing, and (iv) result in decreased revenue if we are unable to recruit and retain drivers.
+Added: Any similar future outbreak or vaccination, testing or mask mandates that are allowed to go into effect, could, among other things, (i) cause our unvaccinated employees to go to smaller employers, if such employers are not subject to future mandates, or leave us or the trucking industry, especially our unvaccinated drivers, (ii) result in logistical issues, increased expenses, and operational issues from arranging for weekly tests of our unvaccinated employees, especially our unvaccinated drivers, (iii) result in increased costs for recruitment and retention of drivers, as well as the cost of weekly testing, and (iv) result in decreased revenue if we are unable to recruit and retain drivers.
Any future vaccination, testing or mask mandates that apply to drivers would significantly reduce the pool of drivers available to us and our industry, which could further impact the ongoing extreme shortage of available drivers.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.