What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-23 compared with 2022-02-24 · 53 added, 39 removed, 293 unchanged (24% of the section changed)

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*Information Systems

*Public Health

Strategic Risk

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We are subject to risk with respect to higher prices for new equipment for our full truckload and LTL operations.

We have experienced an increase in prices for new tractors over the past few years, a significant increase in costs in recent quarters, and the resale value of the tractors has not increased to the same extent.

We have experienced an increase in prices for new tractors and trailers over the past few years, a significant increase in costs in recent quarters, and the resale value of the tractors and trailers has not increased to the same extent.

Increased regulation has increased the cost of our new tractors and could impair equipment productivity, in some cases, resulting in lower fuel mileage, and increasing our operating expenses.

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Tractor and trailer vendors may reduce their manufacturing output in response to lower demand for their products in economic downturns or shortages of component parts.

Currently, tractor and trailer manufacturers are experiencing significant shortages of semiconductor chips and other component parts and supplies, including steel, forcing many manufacturers to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.

Tractor and trailer manufacturers are still experiencing periodic shortages of certain components and supplies, including semiconductor chips, forcing some manufacturers to curtail or suspend their production, which has led to a lower supply of tractors and trailers, higher prices, and lengthened trade cycles, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense and driver retention.

We have certain revenue equipment leases and financing arrangements with balloon payments at the end of the lease term equal to the residual value we are contracted to receive from certain equipment manufacturers upon sale or trade back to the manufacturers.

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We are sensitive to the used equipment market and fluctuations in prices and demand for tractors and trailers.

The market for used equipment is affected by several factors, including the demand for freight, the supply of new and used equipment, the availability of financing, the presence of buyers for export to foreign countries, and commodity prices for scrap metal.

The market for used equipment is affected by several factors, including the demand for freight, the supply of new and used equipment, the availability and terms of financing, the presence of buyers for export to foreign countries, and commodity prices for scrap metal.

Declines in demand for the used equipment we sell could result in diminished sales volumes or lower used equipment sales prices, either of which could negatively affect our gains on sales of assets.

If fuel prices increase significantly, our results of operations could be adversely affected.

Our full truckload and LTL operations are dependent upon diesel fuel, and accordingly, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition if we are unable to pass increased costs on to customers through rate increases or fuel surcharges.

We have seen a softening of the used equipment market recently.

If fuel prices increase significantly or fuel availability becomes scarce, our results of operations could be adversely affected.

Our full truckload and LTL operations are dependent upon diesel fuel, and accordingly, significant increases in diesel fuel costs or decreases in availability of fuel could materially and adversely affect our results of operations and financial condition if we are unable to pass increased costs on to customers through rate increases or fuel surcharges.

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, global politics, and other market factors.

Fuel is subject to regional pricing differences and often costs more on the West Coast and in the Northeast, where we have significant operations.

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Because our fuel surcharge recovery lags behind changes in fuel prices, our fuel surcharge recovery may not capture the increased costs we pay for fuel, especially when prices are rising.

Our results of operations would be negatively affected and more volatile to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel

Our results of operations would be negatively affected and more volatile to the extent we cannot recover higher fuel costs or fail to improve our fuel price protection through our fuel surcharge program.

In 2022, certain isolated

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surcharge program.

Additionally, a shortage or rationing of diesel fuel, could materially and adversely affect our results of operations.

regions of the US experienced short-term shortages of diesel fuel.

Any widespread or long-term shortage or rationing of diesel fuel, could materially and adversely affect our results of operations.

The conflict between Russia and Ukraine, expansion of such conflict to other areas or countries or similar conflicts could adversely impact our business and financial results.

Although we do not have any direct operations in Russia, Belarus, or Ukraine, we may be affected by the broader consequences of the Russia and Ukraine conflict or expansion of such conflict to other areas or countries or similar conflicts elsewhere, such as, increased inflation, supply chain issues, including access to parts for our revenue equipment, embargoes, geopolitical shift, access to diesel fuel, higher energy prices, potential retaliatory action by the Russian or other governments, including cyber-attacks, and the extent of the conflict’s effect on the global economy.

The magnitude of these risks cannot be predicted, including the extent to which the conflict may heighten other risks disclosed herein.

Ultimately, these or other factors could materially and adversely affect our results of operations.

We are subject to certain risks arising from doing business in Mexico.

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If we do not make any future acquisitions, our growth rate could be materially and adversely affected.

Any future acquisitions we undertake could involve issuing dilutive equity securities or incurring indebtedness.

Any future acquisitions we undertake could involve issuing dilutive equity securities or incurring indebtedness, the terms of which may be less favorable to us than anticipated.

In addition, acquisitions involve numerous risks, any of which could have a materially adverse effect on our business and results of operations, including:

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• the potential loss of customers, key employees, or driving associates of the acquired company.

Our acquisition of ACT presents certain additional risks to our business and operations.

On July 5, 2021, we acquired ACT, a leading LTL carrier that also offers dedicated contract carriage and ancillary services.

The acquisition presents certain additional risks to our business and operations, including, among other things:

• prior to the acquisition of ACT, our management team had limited experience with LTL operations and therefore may be challenged in managing the LTL operations, particularly if there were a loss of the ACT management team;

• LTL operations are more capital intensive than full truckload operations, including the need for additional terminals and types of equipment;

• LTL operations require more human capital than full truckload operations, including the need for dock employees and maintenance technicians, both of which are difficult to recruit and retain given the tight labor market;

• potential adverse reactions or changes to business relationships resulting from the completion of the acquisition, including potential breakdown of alliances between ACT and its capacity providers that are needed to meet customer requirements;

• increased workers' compensation incidence rates generally associated with LTL operations.

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• initial unfamiliarity with pricing, service, operational, and liability issues;

• customer relationships may be difficult to obtain or we may have to reduce rates to gain and develop customer relationships;

• the potential need for additional capital, including for terminals and equipment;

• customer relationships may be difficult to obtain or retain, or we may have to reduce rates to gain and develop customer relationships;

• specialized equipment and information and management systems technology may not be adequately utilized;

• insurance and claims may exceed our past experience or estimations;

• we may be unable to recruit and retain qualified personnel and management with requisite experience or knowledge of our logistics services, and other developing service offerings.

• we may be unable to recruit and retain qualified personnel and management with requisite experience or knowledge of our logistics services, LTL operations, and other developing service offerings.

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

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Refer to Part I, Item 1, "Business" for information regarding our customer concentrations.

Aside from our dedicated operations, we generally do not have long-term contractual relationships or rate agreements or minimum volume guarantees with our customers.

Aside from our dedicated operations, we generally do not have long-term contractual relationships, rate agreements, or minimum volume guarantees with our customers.

There is no assurance any of our customers will continue to utilize our services, renew our existing contracts, continue at the same volume levels, or not seek to modify terms of existing contracts.

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Our ability to provide intermodal services in certain traffic lanes would be reduced or eliminated if the railroads' services became unstable.

Railroads could reduce their services in the future, which could increase the cost of the rail-based services we provide and could reduce the reliability, timeliness, efficiency, and overall attractiveness of our rail-based intermodal services.

Furthermore, price increases could result in higher costs to us, which we may be unable to pass on to our customers and could result in the reduction or elimination of our ability to offer intermodal services.

In addition, we may not be able to negotiate additional contracts with railroads to expand our capacity, add additional routes, obtain multiple providers, or obtain railroad services at current cost levels, any of which could limit our ability to provide this service.

Railroads could reduce their services in the future for various reasons, which may include work stoppages insufficient network capacity, adverse weather conditions, accidents, or other factors, which could increase the cost of the rail-based services we provide, create cargo claims and could reduce the reliability, timeliness, efficiency, and overall attractiveness of our rail-based intermodal services.

Beginning in the third quarter of 2022, our intermodal operations have been negatively impacted by threats of labor strikes across the rail industry.

Although labor challenges in the rail industry appear to have softened, any heightened threat of a work stoppage or actual strike among rail employees could significantly reduce or even halt operating capacity of our intermodal operations, which could have a materially adverse effect on

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our business, financial condition, and results of operations.

Our logistics operations are dependent upon the services of third-party capacity providers, including other truckload capacity providers.

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Such shortage is exacerbated during periods of economic expansion, in which there may be alternative employment opportunities, or during periods of economic downturns, in which unemployment benefits might be extended and financing is limited for independent contractors who seek to purchase equipment or for students who seek financial aid for driving school.

Furthermore, capacity at driving schools may be limited by COVID-19-related social distancing requirements.

Vaccination, testing, and mask mandates may reduce the pool of potential drivers.

Furthermore, capacity at driving schools may be limited by future outbreaks of COVID-19 or other similar outbreaks and any governmental imposed lockdown or other attempts to reduce the spread of such an outbreak may reduce the pool of potential drivers available to us.

Regulatory requirements could further reduce the number of eligible driving associates.

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Our business and operations could be adversely affected in the event of a system failure, disruption, or security breach that causes a delay, interruption, or impairment of our services and operations.

Although we carry insurance to help protect us from losses due to an interruption of our systems, the risk of a system failure, especially due to a cyber-attack, has increased since the commencement of the war between Russia and Ukraine.

However, we are unable to quantify the degree which the risk has increased due to the conflict.

In addition, there is no guarantee such an attack will fall within the coverage limits of our insurance.

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We receive and transmit confidential data in the normal course of business.

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A security breach could damage our business operations and reputation and could cause us to incur costs associated with repairing our systems, increased security, customer notifications, lost operating revenue, litigation, regulatory action, and reputational damage.

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Some of our employees work remotely, which may increase the cybersecurity risks to our business, including an increased demand for information technology resources, increased risk of phishing, and other cybersecurity attacks.

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The global spread of COVID-19, including its variants, has created, and any other outbreaks of similar contagious diseases or other adverse public health developments could create, significant volatility, uncertainty and economic disruption.

We have experienced an increase in absences among our driver and non-driver personnel due to the outbreak of COVID-19.

Our operations, particularly in areas of increased COVID-19 infections could be disrupted.

Furthermore, government vaccine, testing, and mask mandates could increase our turnover and make recruiting more difficult, particularly among our driver personnel.

"Other Regulation" in Part I, Item 1 of this Annual Report, discusses in detail COVID-19 vaccination, testing, and mask mandates.

Negative financial results, operational disruptions, driver and non-driver absences, uncertainties in the market, and a tightening of credit markets, caused by COVID-19, other similar outbreaks, or a recession, could have a material adverse effect on our liquidity, reduce credit options available to us, and adversely impact our ability to effectively meet our short- and long-term obligations.

The COVID-19 outbreak has caused uncertainty in the economy.

Our operations, particularly in areas of increased COVID-19 infections or similar outbreaks, could be disrupted.

Furthermore, government vaccine, testing, and mask mandates, or other responses to COVID-19 or similar outbreaks, could increase our turnover and make recruiting more difficult, particularly among our driver personnel.

Negative financial results, operational disruptions, driver and non-driver absences, uncertainties in the market, and a tightening of credit markets, caused by COVID-19 or other similar outbreaks, or a recession that results from such an outbreak, could have a material adverse effect on our liquidity, reduce credit options available to us, and adversely impact our ability to effectively meet our short- and long-term obligations.

The COVID-19 outbreak has caused, and other similar outbreaks could cause, uncertainty in the economy.

Risks related to an economic slowdown or recession are described in our risk factor titled "Our business is subject to economic, credit, business, and regulatory factors that are largely beyond our control, any of which could have a materially adverse effect on our results of operations."

Developments related to COVID-19 have been unpredictable and the extent to which further developments could impact our operations, financial condition, liquidity, results of operations, and cash flows is highly uncertain.

Such developments may include the duration of the virus, the distribution and availability of vaccines, vaccine hesitancy, the severity of the disease, and the actions that may be taken by various governmental authorities and other third parties in response to the pandemic.

Developments related to COVID-19 have been unpredictable and the extent to which further developments related to COVID-19 or similar outbreaks could impact our operations, financial condition, liquidity, results of operations, and cash flows is highly uncertain.

Such developments may include the duration of the outbreak, the distribution and availability of vaccines and treatments for the disease, the severity of the disease, and the actions that may be taken by various governmental authorities and other third parties in response to an outbreak.

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In addition, tractors and trailers used in our full truckload and LTL operations are affected by laws and regulations related to air emissions and fuel efficiency.

Governmental agencies continue to enact more stringent laws and regulations to reduce engine emissions.

These laws and regulations are applicable to engines used in our revenue equipment.

We have incurred and continue to incur costs related to the implementation of these more rigorous laws and regulations.

Additionally, in certain locations governments have banned or may in the future ban internal combustion engines for some types of vehicles.

To the extent these bans affect our revenue equipment, we may be forced to incur substantial expense to retrofit existing engines or make capital expenditures to update our fleet.

As a result, our business, results of operations, and financial condition could be negatively affected.

"Environmental Regulation" in Part I, Item 1 of this Annual Report, provides a discussion of the environmental laws and regulations applicable to our business and operations.

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If anticipated demand differs materially from actual usage, our capital intensive full truckload and LTL operations may have too many or too few assets.

The expansion of our operations to LTL has increased and will continue to increase our capital requirements for real estate associated with LTL operations.

The recent expansion of our operations to LTL has increased and will continue to increase our capital requirements for real estate associated with LTL operations.

During periods of decreased customer demand, our asset utilization may suffer, and we may be forced to sell equipment on the open market or turn in equipment under certain equipment leases in order to right-size our fleet.

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In the event that we are unable to generate sufficient cash from operations, maintain compliance with financial and other covenants in our financing agreements, or obtain equity capital or financing on favorable terms in the future, we may have to limit our fleet size, enter into less favorable financing, or operate our revenue equipment for longer periods, any of which could have a materially adverse effect on our operations and profitability.

Credit markets may weaken at some point in the future, which would make it difficult for us to access our current sources of credit and difficult for our lenders to find the capital to fund us.

If credit markets weaken, it may be difficult for us to access our current sources of credit and may be difficult for our lenders to find the capital to fund us.

We may need to incur additional debt, or issue debt or equity securities in the future, to refinance existing debt, fund working capital requirements, make investments, or support other business activities.

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Failure to comply with these covenants and provisions may jeopardize our ability to continue to sell receivables under the facility and could negatively impact our liquidity.

Our debt agreements contain variable rate debt that could affect the Company’s financial results should interest rates continue to rise.

We are subject to exposure from variable interest rates, as described in Item 7A of this Annual Report.

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We could determine that our goodwill and other indefinite-lived intangibles are impaired, thus recognizing a related impairment loss.

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If these events occur, our profitability and financial condition will suffer.

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If our investments in entities are not successful or decrease in market value, we may be required to write off or lose the value of a portion or all of our investments, which could have a materially adverse effect on our results of operations.

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UNRESOLVED STAFF COMMENTS

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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.

What changed 10-K

Item 1A. Risk Factors