Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Inflation
and Fuel Cost
Most of the Company’s operating expenses are inflation-sensitive,
with inflation generally producing increased costs of operations. Historically, the Company has limited the effects of inflation on its
business through increases in freight rates and certain cost controls. The most relevant items impacted by inflation to the Company are
the cost to insure and maintain the fleet. Significant inflation has been experienced in insurance and claims costs related to health
insurance and claims as well as auto liability insurance and claims. Significant price increases in revenue equipment have impacted the
cost for the Company to acquire new equipment. The cost increases have also impacted the cost of parts for equipment repairs and maintenance,
inclusive of tires. Over the long term, general economic growth and industry supply and demand conditions have allowed increases in rates
charged to customers, although these rate increases have significantly lagged the increases in tractor prices and related depreciation
expense.
In
addition to inflation, significant fluctuations in fuel prices can adversely affect the Company’s operating results and profitability.
The Company has attempted to limit the effects of increases in fuel prices through certain cost control efforts and its fuel surcharge
program. The Company receives fuel surcharges on all Company Driver accounts. Although the Company historically has been able to pass
through most long-term increases in fuel prices and operating taxes to customers in the form of surcharges and higher rates, these arrangements
generally do not fully protect the Company from short-term fuel price increases or continued rising price environments like the Company
experienced throughout 2023 and 2024. These arrangements may also prevent the Company from receiving the full benefit of any fuel price
decreases. Additionally, the Company generally does not receive fuel surcharge on empty miles.
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