What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-26 · 208 added, 160 removed, 628 unchanged (37% of the section changed)

18 unchanged sentences

Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight.

Fuel surcharges, accessorial charges, revenue adjustments and revenue for undelivered freight are included in this measurement.

Fuel surcharges, accessorial charges, revenue adjustments and revenue for undelivered freight are included in this measurement, and we regularly monitor the components that impact our pricing.

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

Department of Energy, which reset each week.

Revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy;

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Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure.

Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, P&D stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour.

In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology.

We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges.

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

Department of Energy, which reset each week.

We believe our yield management process appropriately focuses on individual account profitability, and ongoing improvements in operating efficiencies, as key components of our ability to produce profitable growth.

Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour.

In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle.

We focus on the profitability of each customer account and generally seek to obtain an appropriate yield to offset our cost inflation and support our ongoing investments in capacity and technology.

We believe the continued execution of this yield-management philosophy, continued increases in density, and ongoing improvements in operating efficiencies are the key components of our ability to further improve our operating ratio and long-term profitable growth.

Our primary cost elements are direct wages and benefits associated with the movement of freight, operating supplies and expenses, which include diesel fuel, and depreciation of our equipment fleet and service center facilities.

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Operating income

Interest (income) expense, net

Interest income, net

Other expense, net

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LTL revenue per shipment

LTL revenue per intercity mile

LTL intercity miles (in thousands)

Average length of haul (miles)

All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect the two-for-one stock split effected in March 2024.

Our financial results for 2024 reflect continued softness in the domestic economy that contributed to the decline in our revenue.

Despite the decrease in our LTL tons, we maintained a commitment to providing superior customer service to support the continued improvement in our yield.

We continued to focus on controlling our costs in the low volume environment, but we continued to invest in new capacity in anticipation of long-term growth in our market share.

As a result, our depreciation costs increased as a percent of revenue and contributed to the slight increase in our operating ratio to 72.0% for 2023.

In addition, our net income and diluted earnings per share decreased by 10.0% and 7.6%, respectively, as compared to 2022.

Revenue decreased $393.9 million, or 6.3%, in 2023 compared to 2022.

This decrease resulted from a 9.0% decrease in LTL tonnage per day, which was primarily due to decreases in LTL shipments per day and LTL weight per shipment.

This decrease in revenue was partially offset by a 3.5% increase in our LTL revenue per hundredweight.

Our LTL revenue per hundredweight includes the impact of lower fuel surcharges resulting from a decline in the average price of diesel fuel for the comparable periods.

Despite the decrease in our LTL tons, we maintained a commitment to providing superior customer service to support the continued improvement in our yield as we provided our customers with 99% on-time service and a cargo claims ratio of 0.1% during the year.

We maintained our focus on operating efficiently and controlling discretionary spending during the year, but the increase in costs and the deleveraging effect from the decrease in revenue led to an increase in our operating ratio.

As a result, our net income and diluted earnings per share decreased by 4.3% and 2.7%, respectively, as compared to 2023.

Revenue decreased $51.3 million, or 0.9%, in 2024 compared to 2023 due to a decrease in volumes that was partially offset by an increase in LTL revenue per hundredweight.

LTL tonnage per day decreased 3.6% primarily due to decreases in LTL shipments per day and LTL weight per shipment.

This decrease in our volumes was partially offset by a 2.4% increase in our LTL revenue per hundredweight.

Our LTL revenue per hundredweight includes the impact of lower fuel surcharges resulting from a decline in the average price of diesel fuel from the comparable period.

Excluding fuel surcharges, LTL revenue per hundredweight increased 5.0% in 2024 as compared to 2023.

We believe the increase in our LTL revenue-per-hundredweight metrics was driven by the ongoing execution of our yield management strategy, which is focused on obtaining price increases necessary to offset our cost inflation and support our continued investments in capacity and technology.

We believe the increase in our LTL revenue-per-hundredweight metrics was driven by the ongoing execution of our yield management strategy.

Our consistent, cost-based approach to pricing focuses on offsetting our cost inflation while also supporting additional investments into our business to expand capacity and enhance our technology.

January 2025 Update

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Operating Costs and Other Expenses

Salaries, wages, and benefits decreased $87.2 million, or 3.2%, in 2023 as compared to 2022, due to an $83.1 million decrease in the costs attributable to salaries and wages and a $4.1 million decrease in employee benefit costs.

The decrease in salaries and wages was due primarily to decreases in the average number of active full-time employees during the year, as we balanced our workforce to align with our customers' shipping trends.

Salaries and wages also decreased as a result of lower performance-based and discretionary bonus compensation.

These decreases were partially offset by the annual wage increase provided to our employees at the beginning of both September 2022 and 2023.

Our productive labor costs, which include wages for drivers, platform employees, and fleet technicians, increased as a percent of revenue to 23.6% in 2023 from to 22.9% in 2022.

While our platform and P&D shipments per hour and P&D stops per hour improved during 2023 as compared to 2022, our linehaul laden load average declined due to the decreased operating density associated with the decrease in our LTL tons.

Our other salaries and wages as a percent of revenue remained consistent between the comparable periods.

The cost attributable to employee benefits decreased $4.1 million, or 0.6%, in 2023 compared to 2022.

Our employee benefit costs increased as a percent of salaries and wages to 37.5% in 2023 from 36.2% in 2022.

The increase in employee benefit costs as a percent of salaries and wages was primarily due to an increase in our employee group health benefit costs that resulted from higher costs per claim.

This increase in employee benefit costs as a percent of salaries and wages was partially offset by lower retirement benefit plan costs directly linked to our net income.

Operating supplies and expenses decreased $134.6 million, or 15.8%, in 2023 as compared to 2022, due primarily to decreases in our costs for diesel fuel used in our vehicles.

Salaries, wages, and benefits increased $59.6 million, or 2.3%, in 2024 as compared to 2023, due to a $46.1 million increase in salaries and wages and a $13.5 million increase in employee benefit costs.

The increase in salaries and wages was due primarily to the annual wage increase provided to our employees at the beginning of both September 2023 and 2024.

Our productive labor costs, which include wages for drivers, platform employees, and fleet technicians, increased as a percent of revenue to 24.1% in 2024 from 23.6% in 2023.

We continued to operate efficiently in 2024, despite the decrease in network density that generally results from the decline in volumes.

Our P&D shipments and stops per hour both improved in 2024 as compared to 2023, which helped offset the reduction in our linehaul laden load factor.

Our other salaries and wages as a percent of revenue also increased to 9.5% in 2024 as compared to 9.0% in 2023.

The cost attributable to employee benefits increased $13.5 million, or 1.9%, in 2024 compared to 2023 due primarily to the annual wage increase as well as an increase in costs associated with our group health and dental plans.

This increase in employee benefit costs was partially offset by lower retirement benefit plan costs directly linked to our net income.

Our employee benefit costs as a percent of salaries and wages remained relatively consistent at 37.3% in 2024 compared to 37.5% in 2023.

Operating supplies and expenses decreased $83.0 million, or 11.6%, in 2024 as compared to 2023, due primarily to decreases in our costs for diesel fuel used in our vehicles and lower maintenance and repair costs.

The cost of diesel fuel, excluding fuel taxes, represents the largest component of operating supplies and expenses, and can vary based on both the average price per gallon and consumption.

Our average cost per gallon of diesel fuel decreased 14.6% in 2024 as compared to 2023.

In addition, our gallons consumed decreased 8.5% in 2023 as compared to 2022 due to a decrease in our miles driven.

We do not use diesel fuel hedging instruments;

therefore, our costs are subject to market price fluctuations.

Our other operating supplies and expenses as a percent of revenue were generally consistent in 2023 as compared to 2022.

Our gallons consumed also decreased 3.5% in 2024 as compared to 2023 due primarily to a decrease in our miles driven.

Our other operating supplies and expenses as a percent of revenue decreased in 2024 as compared to 2023 due primarily to lower maintenance and repair costs, as we improved the average age of our fleet by consistently executing on our capital expenditure programs.

Depreciation and amortization increased $20.1 million, or 6.2%, in 2024 as compared to 2023.

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While our investments in real estate, equipment, and technology can increase our short-term costs, we believe these investments are necessary to support our continued long-term growth and strategic initiatives.

Purchased transportation expense decreased $36.6 million, or 23.1%, in 2023 as compared to 2022.

We primarily utilize purchased transportation services to support our LTL services to and from Canada as well as our truckload brokerage operations.

We also periodically utilize purchased transportation for our domestic LTL service when we need to supplement the capacity of our workforce or fleet, which most frequently occurs during periods with significant growth.

We used third-party transportation providers in our domestic linehaul network during the first half of 2022, but our utilization was normalized during the second half of 2022 when the capacity of our team was closely balanced with our volumes.

Our effective tax rate in 2024 was 23.9% as compared to 24.8% in 2023.

Our effective tax rate generally exceeds the federal statutory rate due to the impact of state taxes and, to a lesser extent, certain other non-deductible items.

In 2024, our effective tax rate was favorably impacted by the purchase of federal tax credits and other discrete tax adjustments.

Liquidity and Capital Resources

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Financing activities

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at end of year

The change in our cash flows provided by operating activities during 2023 as compared to 2022 was due to the $137.7 million decrease in net income as well as the $33.2 million decrease in certain other working capital accounts.

These decreases were partially offset by a $48.4 million increase in depreciation and amortization expense.

The change in our cash flows used in investing activities during 2023 as compared to 2022 was primarily due to the timing of purchases and maturities of short-term investments, which was partially offset by a net reduction in capital expenditures.

The change in our cash flows provided by operating activities during 2024 as compared to 2023 was due primarily to the $139.5 million increase in certain other working capital accounts partially offset by the $53.4 million decrease in net income.

The change in our cash flows used in investing activities during 2024 as compared to 2023 was primarily due to the timing of purchases and maturities of short-term investments and an increase in expenditures under our 2024 capital expenditure program.

Additionally, we had lower proceeds from the sale of property and equipment in 2024 as compared to 2023.

Changes in our capital expenditures are more fully described below in “Capital Expenditures.”

The change in our cash flows used in financing activities during 2023 as compared to 2022 was primarily due to the $823.6 million decrease in funds used for repurchases of our common stock.

This decrease in cash was partially offset by higher dividend payments to our shareholders and a scheduled principal payment under our long-term debt agreement.

The change in our cash flows used in financing activities during 2024 as compared to 2023 was primarily due to higher repurchases of our common stock, as well as an increase in dividend payments to our shareholders during 2024.

Our return of capital to shareholders is more fully described below under “Stock Repurchase Program” and “Dividends to Shareholders.” Our long-term debt agreement is more fully described below under “Financing Arrangements.”

We have four primary sources of available liquidity:

cash flows from operations, our existing cash and cash equivalents, available borrowings under our third amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders, dated March 22, 2023 (the “Credit Agreement”), and our Note Purchase and Private Shelf Agreement with PGIM, Inc.

(“Prudential”) and certain affiliates and managed accounts of Prudential, as amended by the First Amendment dated March 22, 2023 (as amended, the “Note Agreement”).

cash flows from operations, our existing cash and cash equivalents, available borrowings under our third amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders, dated March 22, 2023 (as subsequently amended, the “Credit Agreement”), and our Note Purchase and Private Shelf Agreement with PGIM, Inc.

(“Prudential”) and certain affiliates and managed accounts of Prudential (as subsequently amended, the “Note Agreement”).

The Credit Agreement and the Note Agreement are described in more detail below under “Financing Arrangements.” We believe we also have sufficient access to debt and equity markets to provide other sources of liquidity, if needed.

Capital Expenditures

The table below sets forth our net capital expenditures for property and equipment, including those obtained through noncash transactions, for the years ended December 31, 2023 and 2022:

The table below sets forth our net capital expenditures for property and equipment for the years ended December 31, 2024 and 2023:

Year Ended December 31,

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Expenditures for land and structures can be dependent upon the availability of land in the geographic areas where we are looking to expand.

We historically spend 10% to 15% of our revenue on capital expenditures each year.

We expect to continue to maintain a high level of capital expenditures in order to support our long-term plan for market share growth.

We historically spend 10% to 15% of our revenue on capital expenditures each year, and we generally expect to continue to maintain a level of capital expenditures in order to support our long-term plan for market share growth.

There could be years, however, where our annual capital expenditures plan is above or below this range as we balance the size of our service center network and operating fleet with anticipated growth.

We currently estimate capital expenditures will be approximately $575 million for the year ending December 31, 2025.

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On July 28, 2021, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”).

The 2021 Repurchase Program, which does not have an expiration date, began after completion of our prior repurchase program in January 2022.

On July 26, 2023, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock.

The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2021 Repurchase Program.

At December 31, 2023, our 2021 Repurchase Program had $225.4 million remaining authorized.

The 2021 Repurchase Program began after completion of our prior repurchase program in January 2022 and was completed in May 2024.

On July 26, 2023, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock (the “2023 Repurchase Program”).

The 2023 Repurchase Program, which does not have an expiration date, began after the completion of the 2021 Repurchase Program in May 2024.

Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.

Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.

On May 28, 2024, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution.

The ASR Agreement was accounted for as a settled treasury stock purchase and a forward stock purchase contract.

The par value of the initial shares received was recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings.

The forward stock purchase contract was accounted for as a contract indexed to our own stock and is classified within capital in excess of par value on our Balance Sheets.

The ASR Agreement was settled with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount.

Under the ASR Agreement, we paid the third-party financial institution $200.0 million and received an initial delivery of 923,201 shares of our common stock for $160.0 million, representing approximately 80% of the total value of shares to be received by us under the ASR Agreement, and the remaining balance of $40.0 million was settled in November 2024.

We repurchased a total of 1,056,213 shares for $200.0 million under the ASR Agreement.

At December 31, 2024, we had $2.26 billion remaining authorized under the 2023 Repurchase Program.

Dividends to Shareholders

Our Board of Directors declared a cash dividend of $0.40 per share for each quarter of 2023 and declared a cash dividend of $0.30 per share for each quarter of 2022.

On January 31, 2024, we announced that our Board of Directors had declared a cash dividend of $0.52 per share of our common stock.

On February 16, 2024, we announced that our Board of Directors approved a two-for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024.

On March 27, 2024, those shareholders received one additional share of common stock for every share owned.

All references in this report to dividend amounts have been restated retroactively to reflect this stock split.

Split-adjusted per-share metrics may not recalculate precisely due to rounding.

Our Board of Directors declared a cash dividend of $0.26 per share for each quarter of 2024, declared a cash dividend of $0.20 per share for each quarter of 2023 and declared a cash dividend of $0.15 per share for each quarter of 2022.

On February 5, 2025, we announced that our Board of Directors had declared a cash dividend of $0.28 per share of our common stock.

The dividend is payable on March 19, 2025 to shareholders of record at the close of business on March 5, 2025.

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We anticipate that any future quarterly cash dividends will be funded through cash flows from operations, our existing cash and cash equivalents, and, if needed, borrowings under our Credit Agreement or Note Agreement.

The additional shares will be distributed by our transfer agent, Computershare Trust Company, N.A., on March 27, 2024.

Financing Agreements

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The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid.

Our first principal payment of $20.0 million was paid on May 4, 2023.

The remaining $80.0 million will be paid in four equal annual installments of $20.0 million through May 4, 2027.

The first two principal payments of $20.0 million each were paid on May 4, 2023 and 2024, respectively.

The remaining $60.0 million will be paid in three equal annual installments of $20.0 million through May 4, 2027.

The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under the Credit Agreement or other senior promissory notes issued pursuant to the Note Agreement.

Credit Agreement

The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million.

The Credit Agreement, which matures in May 2028, provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million.

Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.

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The Credit Agreement replaced our previous five-year, $250.0 million senior unsecured revolving credit agreement dated as of November 21, 2019 (the “Prior Credit Agreement”).

For periods in 2023 and 2022 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000% and commitment fees were 0.100%.

For periods in 2023 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000% and commitment fees were 0.100%.

The amounts outstanding and available borrowing capacity under the Credit Agreement are presented below:

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leases consisting primarily of real estate and automotive leases;

and purchase obligations relating to non-cancellable purchase orders for (i) equipment scheduled for delivery in 2024, and (ii) information technology agreements.

and purchase obligations relating to (i) non-cancellable purchase orders for equipment scheduled for delivery in 2025, (ii) non-cancellable purchase orders for information technology agreements, and (iii) federal tax credits.

(2) Lease payments include lease extensions that are reasonably certain to be exercised.

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We recognize revenue for our performance obligations under our customer contracts over time, as our customers receive the benefits of our services in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”).

With respect to services not completed at the end of a reporting period, we use a percentage of completion method to allocate the appropriate revenue to each separate reporting period.

With respect to services not completed at the end of a reporting period, we use a percentage of completion method to allocate

the appropriate revenue to each separate reporting period.

Under this method, we develop a factor for each uncompleted shipment by dividing the actual number of days in transit at the end of a reporting period by that shipment’s standard delivery time schedule.

This factor is applied to the total revenue for that shipment and revenue is allocated between reporting periods accordingly.

A hypothetical change of 10% in our percentage of completion estimate would not have a material effect on our recorded revenue.

Changes in economic conditions, customer creditworthiness, pricing arrangements and other factors may significantly impact revenue recognition estimates.

Property and Equipment

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Depreciation expense in 2024 totaled $344.5 million.

A hypothetical change of 1% in the estimated useful lives of all depreciable assets would not have a material impact on our financial results.

There have been no material effects to estimates related to depreciation expense for the year ended December 31, 2024.

Claims and Insurance Accruals

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however, any changes in the severity or number of reported claims, significant changes in medical costs and regulatory changes affecting the administration of our plans could significantly impact the determination of appropriate reserves in future periods.

Our accrued liability for insurance, BIPD claims, and workers’ compensation claims totaled $127.0 million and $129.6 million at December 31, 2023 and 2022, respectively.

Our accrued liability for BIPD and workers’ compensation claims totaled $137.3 million and $127.0 million at December 31, 2024 and 2023, respectively.

Claims and insurance accruals are discussed further in Note 1 of the Notes to the Financial Statements included in Item 8 of this report.

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We are exposed to interest rate risk directly related to loans, if any, under our Credit Agreement, which have variable interest rates.

A 100 basis point increase in the average interest rate on this agreement would have no material effect on our operating results at December 31, 2023 and 2022.

A 100 basis point increase in the average interest rate on this agreement would have no effect on our operating results as we had no outstanding borrowings under our Credit Agreement at December 31, 2024 or 2023.

We have established policies and procedures to manage exposure to market risks and use major institutions that we believe are creditworthy to minimize credit risk.

From time to time, we are exposed to interest rate risk on certain short-term investments.

We maintained a short-term investment portfolio, principally composed of commercial paper, totaling $49.4 million at December 31, 2022.

We held no short-term investments as of December 31, 2023.

From time to time, we are exposed to interest rate risk on certain short-term investments as a result of investing in commercial paper and certificates of deposits.

These fixed rate securities are subject to interest rate risk, as sharp increases in market interest rates could have an adverse impact on their fair value.

Although the fair values of these instruments can fluctuate, we believe that the short-term, highly liquid nature of these debt securities, and our ability to hold these instruments to maturity, reduces our risk for potential material losses.

A hypothetical 100 basis point change in market interest rates would have had an immaterial impact on the fair value of these investments at December 31, 2022 and no impact at December 31, 2023.

We held no short-term investments as of December 31, 2024 or 2023.

We are exposed to market risk for investments relating to certain assets held within the Company-owned life insurance contracts on certain current and former employees.

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Cash and cash equivalents

Short-term investments

Customer receivables, less allowances of $ 9,272 and $ 10,405 , respectively

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Year Ended December 31,

(In thousands, except share and per share data)

(In thousands, except per share data)

Revenue from operations

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Other expense, net

Total non-operating (income) expense

Total non-operating income

Income before income taxes

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Balance as of December 31, 2021

Share repurchases, including settlements under accelerated

share repurchase programs

Share repurchases, including settlements under

accelerated share repurchase programs

Cash dividends declared ($ 0.60 per share)

Forward contract for 2021 accelerated share repurchases

Share-based compensation and share issuances, net of

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Balance as of December 31, 2022

Share repurchases, including settlements under accelerated

share repurchase programs

Share repurchases, including transaction costs

Cash dividends declared ($ 0.80 per share)

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Balance as of December 31, 2023

Share repurchases, including transaction costs

Share repurchases, including transaction costs and

settlements under accelerated share repurchase

Cash dividends declared ($ 1.04 per share)

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Proceeds from maturities of short-term investments

Other investing activities, net

Net cash used in investing activities

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Payments for share repurchases

Forward contract for accelerated share repurchases

Dividends paid

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Net cash used in financing activities

Increase (decrease) in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Income taxes paid

Income taxes paid (includes payments of $ 177.5 million for purchased

federal tax credits in 2024 to offset estimated tax payments)

Interest paid

Capitalized interest

Supplemental disclosure of noncash investing and financing activities:

Noncash purchases of property

The accompanying notes are an integral part of these financial statements.

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In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting.

We have one operating segment and no single customer exceeds 6% of our revenue.

The composition of our revenue is summarized below:

Year Ended December 31,

(In thousands)

Other services

Total revenue

Basis of Presentation

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Unless the context requires otherwise, references in these Notes to “Old Dominion,” the “Company,” “we,” “us” and “our” refer to Old Dominion Freight Line, Inc.

Common Stock Split

On February 16, 2024, we announced that our Board of Directors approved a two -for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024.

On March 27, 2024, those shareholders received one additional share of common stock for every share owned.

Revenue and Expense Recognition

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Generally, our performance obligations begin when we receive a BOL from a customer and are satisfied when we complete the delivery of a shipment and related services.

We recognize revenue for our performance obligations under our customer contracts over time, as our customers receive the benefits of our services in accordance with ASC Topic 606.

With respect to services not completed at the end of a reporting period, we use a percentage of completion method to allocate the appropriate revenue to each separate reporting period.

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Expenses are recognized when incurred.

The composition of our revenue is summarized below:

Year Ended December 31,

(In thousands)

Other services

Total revenue

Allowances for Uncollectible Accounts and Revenue Adjustments

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We estimate this allowance by analyzing the aging of our customer receivables, our historical loss experience and other trends and factors affecting the credit risk of our customers, including anticipated changes to future performance.

Write-offs occur when we determine an account to be uncollectible and could differ from our allowance estimate as a result of factors such as changes in the overall economic environment or risks surrounding our customers.

Additional allowances may be required if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments.

We periodically

Write-offs occur when we determine an account to be uncollectible and could differ from our allowance estimate as a result of factors such as

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

review the underlying assumptions in our estimate of the allowance for uncollectible accounts to ensure that the allowance reflects the most recent trends and factors.

changes in the overall economic environment or risks surrounding our customers.

Additional allowances may be required if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments.

We periodically review the underlying assumptions in our estimate of the allowance for uncollectible accounts to ensure that the allowance reflects the most recent trends and factors.

We also maintain an allowance for estimated revenue adjustments resulting from future billing corrections, customer allowances, money-back service guarantees and other miscellaneous revenue adjustments.

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We use historical experience, trends and current information to update and evaluate these estimates.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of customer receivables.

Financial instruments that potentially subject us to concentrations of credit risk consist principally of customer receivables and, when held, short-term investments.

We perform initial and ongoing credit evaluations of our customers to minimize credit risk.

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Credit risk is generally diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographic regions.

When held, we generally expect our short-term investments will be diversified over various high-quality issuers.

We generally expect our short-term investments will be diversified over various high-quality issuers.

Such short-term investments may also subject us to concentrations of credit risk.

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Short-term Investments

The Company’s investments in commercial paper with an original maturity of greater than three months have been classified and accounted for as trading securities, and are reported in “Short-term investments” on our Balance Sheets.

These investments are measured at fair value each reporting period, with gains or losses recorded in “Non-operating (income) expense” on our Statements of Operations.

From time to time, the Company invests in commercial paper and certificates of deposits with an original maturity of greater than three months, which are classified and accounted for as trading securities and are reported in “Short-term investments” on our Balance Sheets.

These investments are measured at fair value on a recurring basis each reporting period, with gains or losses recorded in “Non-operating (income) expense” on our Statements of Operations.

As of December 31, 2024 and 2023, we held no short-term investments.

Property and Equipment

Property and equipment are stated at cost.

Property and equipment are recorded at cost.

Major additions and improvements are capitalized, while maintenance and repairs that do not improve or extend the lives of the respective assets are charged to expense as incurred.

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We carry a significant amount of insurance with third-party insurance carriers that provides various levels of protection for our risk exposure, including protection in the areas of property, casualty, cyber, management, and group health, with coverage limits and retention and deductible levels that we believe are reasonable given historical claim activity and severity.

We believe that our policy of maintaining self-insured retentions or deductibles under these various insurance programs for a portion of our risks, supported by our safety, claims management and loss prevention programs, is an effective means of managing insurance costs.

We periodically review our risk exposure and insurance coverage applicable to those risks and believe that we maintain sufficient insurance coverage.

We believe that our policy of maintaining self-insured retentions or deductibles under these various insurance programs for a portion of our risks, supported by

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Claims and insurance accruals reflect the Company’s estimated cost of claims for cargo loss and damage, BIPD, workers’ compensation, group health and group dental.

our safety, claims management and loss prevention programs, is an effective means of managing insurance costs.

We periodically review our risk exposure and insurance coverage applicable to those risks and believe that we maintain sufficient insurance coverage.

Claims and insurance accruals reflect the Company’s estimated cost of claims for cargo loss and damage, bodily injury/property damage (“BIPD”), workers’ compensation, group health and group dental.

These accruals include amounts for future claims development and claims incurred but not reported, which are primarily based on historical claims development experience.

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Our liability for claims and insurance totaled $ 164.2 million and $ 153.8 million at December 31, 2024 and 2023, respectively.

The long-term portions of those reserves were $ 90.4 million and $ 92.7 million for 2023 and 2022, respectively, which were included in “Other non-current liabilities” on our Balance Sheets.

The long-term portions of those reserves were $ 91.4 million and $ 90.4 million at December 31, 2024 and 2023, respectively, which were included in “Other non-current liabilities” on our Balance Sheets.

Share-Based Compensation

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The total tax benefit recognized related to these awards was $ 6.9 million, $ 3.3 million and $ 3.3 million during 2024, 2023, and 2022, respectively.

Awards of restricted stock, modified phantom stock and performance-based restricted stock units are accounted for as equity under ASC Topic 718.

We recognize compensation cost, net of estimated forfeitures, for restricted stock awards and modified phantom stock awards on a straight-line basis over the requisite service period of each award.

Awards of restricted stock, phantom stock and performance-based restricted stock units are accounted for as equity under ASC Topic 718.

We recognize compensation cost, net of estimated forfeitures, for restricted stock awards and phantom stock awards on a straight-line basis over the requisite service period of each award.

Compensation cost for performance-based restricted stock unit awards is recognized using the accelerated attribution method over the requisite service period of each award.

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Level 3 — Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

Our short-term investments are measured at fair value on a recurring basis.

Our long-term debt, including current maturities, are measured at fair value.

Both of these instruments are further described in Note 9.

Our long-term debt, including current maturities, is measured at fair value and further described in Note 9.

Our other financial securities in current assets and current liabilities approximate their fair value due to the short-term maturities of these instruments.

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Stock Repurchase Program

On May 1, 2020, we announced that our Board of Directors had approved a two-year stock repurchase program authorizing us to repurchase up to an aggregate of $ 700.0 million of our outstanding common stock (the “2020 Repurchase Program”).

The 2020 Repurchase Program became effective on May 29, 2020.

On July 28, 2021, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $ 2.0 billion of our outstanding common stock (the “2021 Repurchase Program”).

The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program in January 2022.

At December 31, 2023, we had $ 225.4 million remaining authorized under the 2021 Repurchase Program.

On July 26, 2023, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $ 3.0 billion of our outstanding common stock.

The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2021 Repurchase Program.

The 2021 Repurchase Program began in January 2022 and was completed in May 2024.

The 2023 Repurchase Program, which does not have an expiration date, began after the completion of the 2021 Repurchase Program in May 2024.

Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.

Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.

We entered into accelerated share repurchase agreements with a third-party financial institution on each of August 26, 2021 and February 24, 2022.

The Company’s accelerated share repurchase agreements are each accounted for as a settled treasury stock purchase and a forward stock purchase contract.

The par value of the initial shares received is recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings.

The forward stock purchase contract is accounted for as a contract indexed to our own stock and is classified within capital in excess of par value on our Balance Sheets.

The Company's accelerated share repurchase agreements are each settled with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount.

The table below summarizes our accelerated share repurchase activity for 2022 and 2021.

There was no accelerated share repurchase activity for the year ended December 31, 2023.

We entered into accelerated share repurchase agreements with a third-party financial institution on each of August 26, 2021, February 24, 2022 and May 28, 2024.

The Company’s accelerated share repurchase agreements were each accounted for as a settled treasury stock purchase and a forward stock purchase contract.

The par value of the initial shares received was recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings.

The forward stock purchase contract was accounted for as a contract indexed to our own stock and was classified within capital in excess of par value on our Balance Sheets.

The Company's accelerated share repurchase agreements were each settled with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount.

The table below summarizes our accelerated share repurchase activity settled in 2024 and 2022.

We did not enter into any accelerated share repurchase agreements during 2023.

Initial Shares

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February 2022

November 2024

At December 31, 2024, we had $ 2.26 billion remaining authorized under the 2023 Repurchase Program.

Dividends to Shareholders

Our Board of Directors declared a cash dividend of $ 0.26 per share for each quarter of 2024, declared a cash dividend of $ 0.20 per share for each quarter of 2023 and declared a cash dividend of $ 0.15 per share for each quarter of 2022.

On February 5, 2025, we announced that our Board of Directors had declared a cash dividend of $ 0.28 per share of our common stock.

The dividend is payable on March 19, 2025 to shareholders of record at the close of business on March 5, 2025.

Although we intend to pay a quarterly cash dividend on our common stock for the foreseeable future, the declaration and amount of any future dividend is subject to approval by our Board of Directors, and is restricted by applicable state law limitations on distributions to shareholders as well as certain covenants under our Credit Agreement and Note Agreement.

Comprehensive Income

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Accordingly, net income equals comprehensive income for all periods presented in this report.

Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC topic 280 on an interim and annual basis.

We adopted ASU 2023-07 effective December 31, 2024 on a retrospective basis.

While the new accounting rules did not have any impact on our financial condition, results of operations or cash flows, the adoption of the new accounting rules resulted in additional disclosures, which are included in Note 11.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

While the new accounting rules will not have any impact on our financial condition, results of operations or cash flows, the adoption of the new accounting rules will result in additional disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date.

ASU 2024-03 requires public entities to disclose additional disclosure of the nature of expenses included on the statement of operations as well as disclosures about specific types of expenses included in the expense captions presented on the statement of operations in the notes to the financial statements on an interim and annual basis.

ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted.

Long-term Debt

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Total maturities due after one year

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Note Agreement

On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc.

(“Prudential”) and certain affiliates and managed accounts of Prudential (as subsequently amended on March 22, 2023, the “Note Agreement”).

(“Prudential”) and certain affiliates and managed accounts of Prudential (as subsequently amended on March 22, 2023 and August 28, 2024, the “Note Agreement”).

The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $ 350.0 million through March 22, 2026.

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The Series B Notes bear interest at 3.10 % per annum and mature on May 4, 2027, unless prepaid.

The first principal payment of $ 20.0 million was paid on May 4, 2023.

The remaining $ 80.0 million will be paid in four equal annual installments of $ 20.0 million through May 4, 2027 .

The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our third amended and restated credit agreement, dated March 22, 2023, with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”) or other senior promissory notes issued pursuant to the Note Agreement.

The first two principal payments of $ 20.0 million each were paid on May 4, 2023 and 2024, respectively.

The remaining $ 60.0 million will be paid in three equal annual installments of $ 20.0 million through May 4, 2027 .

The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our third amended and restated credit agreement, dated March 22, 2023, with Wells Fargo Bank, National Association serving as administrative agent for the lenders ( as subsequently amended on August 28, 2024, the “Credit Agreement”) or other senior promissory notes issued pursuant to the Note Agreement.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Credit Agreement

The Credit Agreement provides for a five-year, $ 250.0 million senior unsecured revolving line of credit and a $ 150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $ 400.0 million.

The Credit Agreement, which matures in May 2028, provides for a five-year, $ 250.0 million senior unsecured revolving line of credit and a $ 150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $ 400.0 million.

Of the $ 250.0 million line of credit commitments under the Credit Agreement, up to $ 100.0 million may be used for letters of credit.

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The Credit Agreement replaced our previous five-year, $ 250.0 million senior unsecured revolving credit agreement dated as of November 21, 2019 (the “Prior Credit Agreement”).

For periods in 2023 and 2022 covered under the Prior Cr edit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000 % and commitment fees were 0.100 %.

For periods in 2023 covered under the Prior Cr edit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000 % and commitment fees were 0.100 %.

There were $ 37.7 million and $ 40.0 million of outstanding letters of credit at December 31, 2024 and 2023, respectively.

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therefore, we have no corresponding liability recorded on our Balance Sheets.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

The right-of-use assets and corresponding lease liabilities on our Balance Sheets represent payments over the lease term, which includes renewal options for certain real estate leases that we are likely to exercise.

These renewal options begin in 2024 and continue through 2035 , and range from one to ten years in length.

These renewal options begin in 2025 and continue through 2035 , and range from one month to ten years in length.

Short-term leases, which have an initial term of 12 months or less, are not included in our right-of-use assets or corresponding lease liabilities.

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Our right-of-use assets totaled $ 104.2 million and $ 116.4 million and are presented within “ Other assets ,” which is classified as long-term, on our Balance Sheets as of December 31, 2024 and 2023, respectively.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Future lease payments for assets under operating leases, as well as a reconciliation to our total lease liabilities as of December 31, 2024, are as follows:

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The discount rate used in the calculation of our right-of-use assets and corresponding lease liabilities was determined based on the stated rate within each contract when available, or our collateralized borrowing rate from lending institutions.

The weighted average discount rate for our operating leases was 4.9 % and 3.8 % as of December 31, 2023 and 2022, respectively.

The weighted average discount rate for our operating leases was 4.9 % as of December 31, 2024 and 2023.

Cash paid for amounts included in the measurement of our lease liabilities was $ 21.3 million and $ 22.6 million for the years ended December 31, 2024 and 2023, respectively.

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Total provision for income taxes

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

The following is a reconciliation of income tax expense calculated using the U.S.

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Total provision for income taxes

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Deferred tax assets and liabilities, which are included in “Other assets” and “Deferred income taxes” on our Balance Sheets, consist of the following:

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The Company’s liability for unrecognized tax benefits was immaterial as of December 31, 2024 and 2023.

Interest and penalties related to uncertain tax positions, which are immaterial, are recorded in our “Provision for income taxes” on our Statements of Operations.

Interest and penalties related to uncertain tax positions, which were immaterial in 2024, 2023 and 2022, are recorded in “Provision for income taxes” on our Statements of Operations.

Changes in our liability for unrecognized tax benefits could affect our effective tax rate, if recognized, but we do not expect any material changes within the next twelve months.

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Our employer contributions, net of forfeitures, for 2024, 2023 and 2022 were $ 112.9 million, $ 119.5 million and $ 135.2 million, respectively.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Deferred Compensation Plan

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The amounts owed to the participants totaled $ 109.4 million and $ 101.4 million at December 31, 2024 and 2023, respectively, of which $ 100.4 million and $ 91.2 million were included in “Other non-current liabilities” on our Balance Sheets as of December 31, 2024 and 2023, respectively.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Earnings Per Share

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In both cases, the restricted stock awards are subject to accelerated vesting due to death, total disability, or change in control of the Company.

Subject to the foregoing, unvested restricted stock awards are generally forfeited upon termination of employment, unless otherwise approved by the Board of Directors or its Compensation Committee.

Subject to the foregoing, unvested restricted stock awards are generally forfeited upon termination of employment, unless otherwise approved by the Board of Directors or the Talent and Compensation Committee.

The restricted stock awards accrue dividends while the award is unvested and only carry rights to receive the accrued dividends once vested.

Compensation cost for restricted stock awards is measured at the grant date based on the fair market value per share of our common stock.

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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

Compensation cost for restricted stock awards is measured at the grant date based on the fair market value per share of our common stock.

The following table summarizes our restricted stock award activity for employees and non-employee directors:

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PBRSUs granted for the 2024 performance period were not earned as the performance metrics were not met.

At December 31, 2023, the Company had $ 0.6 million of unrecognized stock-based compensation cost, net of estimated forfeitures, related to unvested PBRSUs that are expected to be recognized over a weighted average period of 1.0 years.

At December 31, 2024, the Company had less than $ 0.1 million of unrecognized stock-based compensation cost, net of estimated forfeitures, related to unvested PBRSUs that are expected to be recognized over a weighted average period of less than 0.1 years.

OLD DOMINION FREIGHT LINE, INC.

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Balance of shares outstanding at December 31, 2024

Of these outstanding awards, 1,722 phantom shares remain unvested with a weighted average grant date fair value per share of $ 114.76 .

The outstanding phantom stock awards will be settled in shares of our common stock equal to the number of vested shares of phantom stock on the applicable settlement date.

During 2024, 3,444 phantom shares vested with a weighted average grant date fair value per share of $ 57.38 , and all outstanding phantom stock awards were vested at December 31, 2024.

The outstanding stock awards will be settled in shares of our common stock equal to the number of vested shares of phantom stock on the applicable settlement date.

The shares of common stock will generally be distributed in twenty-four substantially equal monthly installments commencing on the first day of the sixth calendar month following such settlement date.

Fair Value Measurements

Short-term investments

We held no short-term investments as of December 31, 2023.

A summary of the fair value of our short-term investments as of December 31, 2022 is shown in the table below.

(In thousands)

December 31, 2022

Commercial paper

Our commercial paper is valued using broker quotes that utilize observable market inputs.

Long-term debt

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We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.

Subsequent Event

On February 16, 2024, we announced that our Board of Directors approved a two -for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024.

The additional shares will be distributed by our transfer agent, Computershare Trust Company, N.A., on March 27, 2024.

Segment Information

We have one operating and reportable segment that provides regional, inter-regional and national LTL services through a single integrated, union-free organization.

We derive revenue primarily in North America and manage our business activities on a Company-wide basis.

For the last three fiscal years, more than 95 % of our revenue was derived from services performed in the United States and less than 5 % of our revenue was generated from services performed internationally.

Additionally, no single customer exceeds 6% of our revenue.

The accounting policies of our reportable segment are the same as those described in Note 1.

Our chief operating decision maker (“CODM”) , who is our President and Chief Executive Officer, reviews Company-wide financial information.

The CODM uses “Net income” on our Statements of Operations to make capital allocation and spending decisions, which is initially performed as part of our annual strategic planning process.

As part of our strategic planning process, we develop an annual budget for capital expenditures to support our forecasted tonnage and shipment growth.

This annual capital expenditure plan, and any other spending decisions that the CODM believes will help prepare our Company for future growth, are generally considered our first priorities for allocating capital.

Once those decisions are made, other capital considerations may include share repurchases, dividends, and acquisitions.

The CODM monitors actual results against forecast throughout the year and evaluates necessary changes in operating activities or capital allocation.

Segment assets are reported as “Total assets” on our Balance Sheets but “Total assets” are not used to measure segment performance or allocate resources.

OLD DOMINION FREIGHT LINE, INC.

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

The following table presents financial information with respect to our segment for the years ended December 31, 2024, 2023 and 2022:

Year Ended December 31,

(In thousands)

Revenue from operations

Less significant expenses:

Salaries and wages

Employee benefit costs

Operating supplies and expenses

General supplies and expenses

Operating taxes and licenses

Insurance and claims

Communications and utilities

Depreciation and amortization

Purchased transportation

Miscellaneous expenses, net

Total non-operating income

Provision for income taxes

Segment net income

See the Company’s financial statements for other financial information regarding our segment as there are no reconciling items or adjustments between segment and total Company.

Long-lived assets, which consist primarily of property and equipment, net, are all located in the United States.

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying balance sheets of Old Dominion Freight Line, Inc.

(the Company) as of December 31, 2023 and 2022, the related statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes, as well as the financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”).

(the Company) as of December 31, 2024 and 2023, the related statements of operations, changes in shareholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 26, 2024 expressed an unqualified opinion.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 25, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

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The Company uses historical claims experience, known trends and third-party actuarial estimates to determine the liabilities for each of the BIPD and workers’ compensation reserves.

These analyses are complex and require significant judgment as the models utilize multiple valuation methods and reflect subjective assumptions, including 1) the

weighting of such methods, 2) the loss ratio, 3) the loss trend factor, and 4) the loss development factor, among other assumptions.

These analyses are complex and require significant judgment as the models utilize multiple valuation methods and reflect subjective assumptions, including 1) the weighting of

such methods, 2) the loss ratio, 3) the loss trend factor, and 4) the loss development factor, among other assumptions.

How We Addressed the Matter in Our Audit

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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 7. Management’s Discussion and Analysis