Schneider National, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Schneider National, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Schneider National, Inc. and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, cash flows, and shareholders' equity, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (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 as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. We have also 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, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 17, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Claims Accruals — Refer to Note 1 to the financial statements Critical Audit Matter Description The Company is self-insured for various claims, which primarily relate to accident-related claims for personal injury, collision, and comprehensive compensation, along with workers' compensation. Claims accruals represent accruals for pending claims, including adverse development of known claims, as well as incurred but not reported claims. The claims accruals are based on estimated or expected losses for claims considering the nature and severity of each claim, historical trends, advice from third-party administrators and insurers, consultation with actuarial experts, the specific facts of individual cases, the jurisdictions involved for each case, estimates of future claims development, and the legal and other costs to settle or defend the claims. At December 31, 2022 and 2021, the Company had an accrual of $164.9 million and $158.3 million, respectively, for estimated claims net of reinsurance receivables. The subjectivity of estimating the claims accruals for pending claims and incurred but not reported claims, requires a high degree of auditor judgement and an increased extent of effort. This includes the need to involve our actuarial specialists when performing audit procedures to evaluate whether claims accruals are appropriately stated as of December 31, 2022. 36 Table of Contents How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the claims accruals included the following, among others: • We tested the effectiveness of internal controls related to claims accruals, including those over the projected development of known claims and incurred but not reported claims. • We evaluated the methods and assumptions used by management to estimate claims accruals by: ◦ Testing the underlying data that served as the basis for the actuarial analysis, including reconciling the claims data to the Company’s actuarial analysis, testing the annual exposure data, and testing current year claims and payment data. ◦ Comparing management’s selected claims accrual estimates to the range provided by their third-party actuary and to historical trends. ◦ With the assistance of our actuarial specialists, we developed an independent range of estimates of the claims accruals, utilizing loss development factors from the Company’s historical data and industry claim development factors, and compared our estimated range to management’s recorded reserve. Goodwill Valuation – Midwest Logistics Systems Reporting Unit — Refer to Note 6 to the financial statements Critical Audit Matter Description The Company’s evaluation of goodwill for potential impairment involves comparing the fair value of each reporting unit to its carrying value. The Company determines the fair value of its reporting units using a combination of (1) an income approach based on the present value of estimated future cash flows and (2) market approaches based on Earnings Before Interest, Taxes, Depreciation & Amortization (“EBITDA”) valuation multiples of comparable companies and transactions. Determining fair value requires significant estimates and assumptions based on an evaluation of a number of factors, such as marketplace participants, history, future expansion and profitability expectations, amount and timing of future cash flows, and the discount rate applied to the cash flows. Changes in these estimates, assumptions or judgments could have significant impacts in determining the fair value of reporting units, the amount of any goodwill impairment charge, or both. The goodwill balance was $228.2 million as of December 31, 2022, of which $104.3 million related to the Midwest Logistics Systems (“MLS”) reporting unit. As of October 31, 2022 (the date for the Company’s annual quantitative test for goodwill impairment), the fair value of MLS exceeded its carrying value by less than 5% and, therefore, no impairment was recognized. The subjectivity of management’s estimates and assumptions related to the discount rate, forecasts of future revenues and profitability, and EBITDA valuation multiples requires a high degree of auditor judgement and an increased extent of effort. This includes the need to involve our fair value specialists when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the selection of the discount rate, forecasts of future revenues and profitability, and EBITDA valuation multiples for the MLS reporting unit included the following, among others: • We tested the effectiveness of internal controls over management’s goodwill impairment evaluation, including those over the selection of the discount rate, forecasts of future revenues and profitability and EBITDA valuation multiples. • We evaluated the reasonableness of management’s forecasts for both revenue and profitability by comparing the forecasts to (1) historical results, (2) internal communications to the Board of Directors, (3) forecasted information in industry reports, and evaluated the reasonableness of near-term revenue growth by obtaining signed customer contracts. • With the assistance of our fair value specialists, we evaluated the reasonableness of the discount rate by (1) testing the source information underlying the determination of the discount rate, (2) testing the mathematical accuracy of the calculations, and (3) developing a range of independent estimates and comparing those to the discount rate selected by management. • With the assistance of our fair value specialists, we evaluated the reasonableness of the EBITDA valuation multiples selected by management, which included assessing the appropriateness of the guideline companies and transactions. /s/ Deloitte & Touche LLP Milwaukee, Wisconsin February 17, 2023 We have served as the Company’s auditor since 2002. 37 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the Board of Directors of Schneider National, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Schneider National, Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in I nternal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 17, 2023, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP Milwaukee, Wisconsin February 17, 2023 38 Table of Contents SCHNEIDER NATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions, except per share data) Year Ended December 31, 2022 2021 2020 Operating revenues $ 6,604.4 $ 5,608.7 $ 4,552.8 Operating expenses: Purchased transportation 2,902.9 2,657.7 1,997.8 Salaries, wages, and benefits 1,376.0 1,149.5 1,046.5 Fuel and fuel taxes 521.0 281.4 204.4 Depreciation and amortization 350.0 296.2 290.5 Operating supplies and expenses—net 534.0 462.4 533.0 Insurance and related expenses 103.0 82.4 86.1 Other general expenses 217.1 134.8 106.8 Goodwill impairment charge — 10.6 — Restructuring—net — — 1.0 Total operating expenses 6,004.0 5,075.0 4,266.1 Income from operations 600.4 533.7 286.7 Other expenses (income): Interest income ( 2.9 ) ( 2.1 ) ( 3.3 ) Interest expense 9.6 12.5 13.6 Other income—net ( 10.3 ) ( 18.7 ) ( 6.5 ) Total other expenses (income)—net ( 3.6 ) ( 8.3 ) 3.8 Income before income taxes 604.0 542.0 282.9 Provision for income taxes 146.2 136.6 71.2 Net income 457.8 405.4 211.7 Other comprehensive income (loss): Foreign currency translation adjustment—net ( 1.5 ) 0.1 0.6 Net unrealized gains (losses) on marketable securities—net of tax ( 3.5 ) ( 0.9 ) 0.1 Total other comprehensive income (loss)—net ( 5.0 ) ( 0.8 ) 0.7 Comprehensive income $ 452.8 $ 404.6 $ 212.4 Weighted average shares outstanding 177.9 177.6 177.3 Basic earnings per share $ 2.57 $ 2.28 $ 1.19 Weighted average diluted shares outstanding 178.8 178.1 177.6 Diluted earnings per share $ 2.56 $ 2.28 $ 1.19 Dividends per share of common stock $ 0.32 $ 0.28 $ 2.26 See notes to consolidated financial statements. 39 Table of Contents SCHNEIDER NATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in millions, except share data) December 31, 2022 December 31, 2021 Assets Current Assets: Cash and cash equivalents $ 385.7 $ 244.8 Marketable securities 45.9 49.3 Trade accounts receivable—net of allowance of $ 13.7 million and $ 5.2 million, respectively 643.7 705.4 Other receivables 21.3 35.9 Current portion of lease receivables—net of allowance of $ 1.3 million and $ 1.1 million, respectively 111.2 110.6 Inventories 53.0 27.4 Prepaid expenses and other current assets 89.5 75.1 Total current assets 1,350.3 1,248.5 Noncurrent Assets: Property and equipment: Transportation equipment 3,410.7 3,056.2 Land, buildings, and improvements 219.0 215.7 Other property and equipment 174.1 175.1 Total property and equipment 3,803.8 3,447.0 Less accumulated depreciation 1,523.8 1,396.0 Net property and equipment 2,280.0 2,051.0 Lease receivables 163.1 160.1 Internal use software and other noncurrent assets 296.6 237.2 Goodwill 228.2 240.5 Total noncurrent assets 2,967.9 2,688.8 Total Assets $ 4,318.2 $ 3,937.3 Liabilities and Shareholders’ Equity Current Liabilities: Trade accounts payable $ 276.7 $ 331.7 Accrued salaries, wages, and benefits 97.8 104.5 Claims accruals—current 75.5 83.9 Current maturities of debt and finance lease obligations 73.3 61.4 Other current liabilities 113.6 108.7 Total current liabilities 636.9 690.2 Noncurrent Liabilities: Long-term debt and finance lease obligations 141.8 208.9 Claims accruals—noncurrent 95.2 88.5 Deferred income taxes 538.2 451.0 Other noncurrent liabilities 68.9 74.9 Total noncurrent liabilities 844.1 823.3 Total Liabilities 1,481.0 1,513.5 Commitments and Contingencies (Note 13) Shareholders’ Equity: Preferred shares, no par value, 50,000,000 shares authorized, no shares issued or outstanding — — Class A common shares, no par value, 250,000,000 shares authorized, 83,029,500 shares issued and outstanding — — Class B common shares, no par value, 750,000,000 shares authorized, 95,655,907 and 95,701,868 shares issued, and 94,993,144 and 94,626,740 shares outstanding, respectively — — Additional paid-in capital 1,584.4 1,566.0 Retained earnings 1,257.8 857.8 Accumulated other comprehensive loss ( 5.0 ) — Total Shareholders’ Equity 2,837.2 2,423.8 Total Liabilities and Shareholders’ Equity $ 4,318.2 $ 3,937.3 See notes to consolidated financial statements. 40 Table of Contents SCHNEIDER NATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2022 2021 2020 Operating Activities: Net income $ 457.8 $ 405.4 $ 211.7 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 350.0 296.2 290.5 Goodwill impairment — 10.6 — (Gains) losses on sales of property and equipment—net ( 85.7 ) ( 63.9 ) 6.2 Proceeds from lease receipts 83.5 75.8 69.0 Loss on sale of business 5.0 — — Deferred income taxes 83.0 2.0 1.7 Long-term incentive and share-based compensation expense 16.5 14.4 8.9 Gains on investments in equity securities—net ( 13.7 ) ( 21.6 ) ( 8.8 ) Noncash restructuring—net — — 1.1 Other noncash items—net ( 15.2 ) ( 4.4 ) 7.4 Changes in operating assets and liabilities: Receivables 51.6 ( 162.0 ) ( 65.4 ) Other assets ( 43.4 ) ( 46.0 ) ( 15.3 ) Payables ( 42.2 ) 70.2 56.5 Claims reserves and other receivables—net 8.5 6.8 3.8 Other liabilities 0.7 ( 17.4 ) 50.9 Net cash provided by operating activities 856.4 566.1 618.2 Investing Activities: Purchases of transportation equipment ( 535.1 ) ( 399.4 ) ( 274.8 ) Purchases of other property and equipment ( 52.9 ) ( 49.5 ) ( 49.7 ) Proceeds from sale of property and equipment 126.3 177.8 87.4 Proceeds from sale of off-lease inventory 25.8 17.0 22.7 Purchases of lease equipment ( 105.6 ) ( 91.7 ) ( 94.5 ) Proceeds from marketable securities 6.2 14.6 24.2 Purchases of marketable securities ( 7.6 ) ( 18.7 ) ( 23.6 ) Investments in equity securities ( 24.2 ) ( 5.2 ) ( 10.4 ) Acquisitions and sale of business, net of cash acquired ( 31.7 ) ( 271.3 ) — Net cash used in investing activities ( 598.8 ) ( 626.4 ) ( 318.7 ) Financing Activities: Payments of debt and finance lease obligations ( 62.0 ) ( 40.8 ) ( 55.6 ) Dividends paid ( 55.7 ) ( 49.6 ) ( 400.0 ) Other financing activities 1.0 — — Net cash used in financing activities ( 116.7 ) ( 90.4 ) ( 455.6 ) Net increase (decrease) in cash and cash equivalents 140.9 ( 150.7 ) ( 156.1 ) Cash and Cash Equivalents: Beginning of period 244.8 395.5 551.6 End of period $ 385.7 $ 244.8 $ 395.5 Additional Cash Flow Information: Noncash investing and financing activity: Transportation and lease equipment purchases in accounts payable $ 13.0 $ 14.6 $ 0.6 Dividends declared but not yet paid 16.2 14.1 13.6 Sale of assets in exchange for notes receivable 2.3 — — Cash paid during the period for: Interest 9.3 11.6 12.8 Income taxes—net of refunds 52.8 145.9 61.6 See notes to consolidated financial statements. 41 Table of Contents SCHNEIDER NATIONAL, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (in millions, except per share data) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Total Balance—December 31, 2019 $ — $ 1,542.7 $ 693.6 $ 0.1 $ 2,236.4 Net income — — 211.7 — 211.7 Other comprehensive income — — — 0.7 0.7 Share-based compensation expense — 8.6 — — 8.6 Dividends declared at $ 2.26 per share of Class A and B common shares — — ( 402.8 ) — ( 402.8 ) Share issuances — 0.2 — — 0.2 Exercise of employee stock options — 1.6 — — 1.6 Shares withheld for employee taxes — ( 0.9 ) — — ( 0.9 ) Balance—December 31, 2020 — 1,552.2 502.5 0.8 2,055.5 Net income — — 405.4 — 405.4 Other comprehensive loss — — — ( 0.8 ) ( 0.8 ) Share-based compensation expense — 14.6 — — 14.6 Dividends declared at $ 0.28 per share of Class A and Class B common shares — — ( 50.1 ) — ( 50.1 ) Share issuances — 0.9 — — 0.9 Exercise of employee stock options — 0.7 — — 0.7 Shares withheld for employee taxes — ( 2.4 ) — — ( 2.4 ) Balance—December 31, 2021 — 1,566.0 857.8 — 2,423.8 Net income — — 457.8 — 457.8 Other comprehensive loss — — — ( 5.0 ) ( 5.0 ) Share-based compensation expense — 17.2 — — 17.2 Dividends declared at $ 0.32 per share of Class A and Class B common shares — — ( 57.8 ) — ( 57.8 ) Share issuances — 0.2 — — 0.2 Exercise of employee stock options — 3.4 — — 3.4 Shares withheld for employee taxes — ( 2.4 ) — — ( 2.4 ) Balance—December 31, 2022 $ — $ 1,584.4 $ 1,257.8 $ ( 5.0 ) $ 2,837.2 See notes to consolidated financial statements. 42 Table of Contents SCHNEIDER NATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations We are one of the largest providers of surface transportation and logistics solutions in North America that, through our wholly owned subsidiaries, provides safe, reliable, and innovative truckload, intermodal, and logistics services to a diverse group of customers throughout the continental U.S., Canada, and Mexico. Principles of Consolidation and Basis of Presentation Our consolidated financial statements have been prepared in conformity with GAAP and include all of our wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. Use of Estimates We make estimates and assumptions that affect assets, liabilities, the disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. Cash and Cash Equivalents Cash in excess of current operating requirements is invested in short-term, highly liquid investments. We consider all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. Receivables and Allowance Our trade accounts receivable is recorded net of an allowance for doubtful accounts and revenue adjustments. The allowance is based on an aging analysis using historical experience, as well as any current and forecasted trends or uncertainties related to customer billing and account collectability. The adequacy of our allowance is reviewed at least quarterly, and reserves for receivables not expected to be collected are established. In circumstances where we are aware of a customer’s inability to meet its financial obligations, a specific reserve is recorded to reduce the net receivable to the amount we reasonably expect to collect. Bad debt expense is included in other general expenses in the consolidated statements of comprehensive income. We record our lease receivables net of an allowance for doubtful accounts based on an aging analysis to reserve amounts expected to be uncollectible. The terms of the lease agreements generally give us the ability to take possession of the underlying asset in the event of default. We may incur credit losses in excess of recorded allowances if the full amount of anticipated proceeds from the sale or re-lease of the asset supporting the third-party’s financial obligation, which can be impacted by economic conditions, is not realized. Inventory Our inventories consist of tractors and trailing equipment owned by our equipment leasing company to be sold or leased to owner-operators, as well as parts, tires, supplies, and fuel for use in our Company operations. These inventories are valued at the lower of cost or net realizable value using specific identification or average cost. The following table shows the components of our inventory balances as of the dates shown. (in millions) December 31, 2022 December 31, 2021 Tractors and trailing equipment for sale or lease $ 35.8 $ 13.3 Replacement parts 15.7 13.2 Tires and other 1.5 0.9 Total $ 53.0 $ 27.4 Investments in Marketable Securities Our marketable securities are classified as available-for-sale and carried at fair value in current assets on the consolidated balance sheets. While our intent is to hold our securities to maturity, sudden changes in the market or to our liquidity needs may cause us to sell certain securities in advance of their maturity date. 43 Table of Contents We adopted ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments , which is codified in ASC 326, as of January 1, 2020. Under this guidance, credit losses are recorded through an allowance for credit losses rather than as a direct write-down to the security, and unrealized gains and losses, net of tax, are included as a component of accumulated other comprehensive income on the consolidated balance sheets, unless we determine that the amortized cost basis is not recoverable. If we determine that the amortized cost basis of the impaired security is not recoverable, we recognize the credit loss by increasing the allowance for those losses. We did no t have an allowance for credit losses on our marketable securities as of December 31, 2022 and 2021. Cost basis is determined using the specific identification method. When adopting this standard, we elected to continue to present the accrued interest receivable balance associated with our investments in marketable securities separate from the marketable securities line in the consolidated balance sheets. In addition, we elected the practical expedient provided under the guidance to exclude the applicable accrued interest from the amortized cost basis disclosure of our marketable securities. We have also elected not to measure an allowance for credit losses on our accrued interest receivable and to write off accrued interest receivable by reversing interest income when it is not considered collectible. Fair Value Fair value is the estimated price that would be received to sell an asset or paid to transfer a liability. Inputs to valuation techniques used to measure fair value fall into three broad levels (Levels 1, 2, and 3) as follows: Level 1 —Observable inputs that reflect quoted prices for identical assets or liabilities in active markets that we have the ability to access at the measurement date. Level 2 —Observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Level 3 —Unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Property and Equipment Property and equipment are recorded at cost. Depreciation is calculated using the straight-line method based on the estimated useful lives and residual values. Generally, the estimated useful lives are as follows: 2022 Tractors 3 - 8 years Trailing equipment 6 - 20 years Other transportation equipment 4 - 5 years Buildings and improvements 5 - 25 years Other property 3 - 10 years Salvage values, when applicable, generally range from 5 % - 30 % or 0 % - 25 % of the original cost for tractors and trailing equipment, respectively, and reflect any agreements with tractor suppliers for residual or trade-in values for certain new equipment. Long-lived assets require an impairment review when events or circumstances indicate that the carrying amount may not be recoverable. We base our evaluation of other long-lived assets on the presence of impairment indicators such as the future economic benefit of the assets, any historical or future profitability measurements, and other external market conditions or factors. The carrying amount of tangible long-lived assets held and used is considered not recoverable if the carrying amount exceeds the undiscounted sum of cash flows expected to result from the use and eventual disposition of the asset. If the carrying amount is not recoverable, the impairment loss is measured as the excess of the asset’s carrying amount over its fair value. Gains and losses on the sale or other disposition of equipment are based on the difference between the proceeds received less costs to sell and the net book value of the assets disposed. Gains and losses are recognized at the time of sale or disposition and are classified in operating supplies and expenses—net in the consolidated statements of comprehensive income. For the years ended December 31, 2022, 2021, and 2020, we recognized $ 85.7 million of net gains, $ 63.9 million of net gains, and $ 6.7 million of net losses on the sale of property and equipment, respectively. Net gains for 2022 were primarily related to the sale of the Company’s Canadian facility. Included in losses on the sale of property and equipment for the year ended December 31, 2020 was a net loss of $ 0.5 million related to the shutdown of our FTFM service offering. 44 Table of Contents Assets Held for Sale Assets held for sale consist of transportation equipment and are included in prepaid expenses and other current assets in the consolidated balance sheets. Reclassification to assets held for sale occurs when the required criteria, as defined by ASC 360, Property, Plant and Equipment , are satisfied. Assets held for sale are evaluated for impairment when transferred to held for sale status or when impairment indicators are present. The carrying amount of assets held for sale is not recoverable if the carrying amount exceeds the fair value less estimated costs to sell the asset. An impairment loss is recorded for the excess of the asset’s carrying amount over the fair value less estimated costs to sell. Impairment losses are recorded in operating supplies and expenses—net in the consolidated statements of comprehensive income. We recorded no significant impairment losses for the years ended December 31, 2022, or 2021, and $ 4.7 million in losses for the year ended December 31, 2020. Assets held for sale by segment as of December 31, 2022 and 2021 were as follows: (in millions) 2022 2021 Truckload $ 21.0 $ 0.5 Intermodal 0.8 0.2 Total $ 21.8 $ 0.7 Internal Use Software and Cloud Computing Arrangements We capitalize certain costs incurred to acquire, develop, or modify software to meet the Company’s internal needs. Only costs incurred during the application development stage are capitalized once the preliminary project stage is complete and management has committed to funding the project. Internal use software costs are amortized on a straight-line basis primarily over five years, or the expected useful life if different, with amortization expense recorded within depreciation and amortization on the consolidated statements of comprehensive income. We recorded $ 24.5 million, $ 20.2 million, and $ 15.4 million of amortization expense related to internal use software during the years ended December 31, 2022, 2021, and 2020, respectively. Additionally, with the adoption of ASU 2018-15 on January 1, 2020, we capitalize certain implementation costs for internal use software incurred in a CCA that is a service contract. CCA implementation costs are amortized on a straight-line basis over the term of the related hosting agreement, taking into consideration renewal options, if any. The renewal period is included in the amortization period if determined that the option is reasonably certain to be exercised. Amortization expense is recorded within operating supplies and expenses—net on the consolidated statements of comprehensive income, similar to the related hosting fees. We recorded $ 1.3 million and $ 1.0 million of amortization expense related to CCA implementation costs during the years ended December 31, 2022, and 2021, respectively. There was no amortization expense related to CCA implementation during the year ended December 31, 2020. Capitalized computer costs are evaluated for impairment on an ongoing basis. If events or changes in circumstances (such as the manner in which the hosting arrangement is expected to be used) indicate that the carrying value may not be recoverable, the Company will evaluate the asset for impairment. If impairment is identified, it is recorded in operating supplies and expenses—net in the consolidated statements of comprehensive income. The following table provides information related to our internal use software and CCA implementation costs as of the dates shown. (in millions) December 31, 2022 December 31, 2021 Internal use software $ 341.3 $ 319.4 Less accumulated amortization 249.5 225.5 Net internal use software $ 91.8 $ 93.9 CCA implementation costs $ 27.2 $ 10.3 Less accumulated amortization 2.3 1.0 Net CCA implementation costs (1) $ 24.9 $ 9.3 (1) On the consolidated balance sheets, the current portion of CCA implementation costs are included within prepaid expenses and other current assets and amounted to $ 1.3 million and $ 1.2 million for the years ended December 31, 2022 and 2021, respectively, and the noncurrent portion is included in internal use software and other noncurrent assets and amounted to $ 23.5 million and $ 8.1 million for the years ended December 31, 2022 and 2021, respectively. 45 Table of Contents Goodwill Goodwill is tested for impairment annually in October, or more frequently if impairment indicators exist. The carrying amount of a reporting unit’s goodwill is considered not recoverable, and an impairment loss is recorded if the carrying amount of the reporting unit exceeds the reporting unit’s fair value, as determined based on the combination of income and market approaches. See Note 6, Goodwill and Other Intangible Assets , for more information on our goodwill. Revenue Recognition We recognize revenue during the delivery period based on relative transit time in each reporting period, in accordance with ASC 606, with expenses recognized as incurred. Accordingly, a portion of the total revenue that will be billed to the customer once a load is delivered is recognized in each reporting period based on the percentage of the freight delivery service that has been completed at the end of the reporting period. When we use third-party carriers, we generally record revenues on the gross basis at amounts charged to our customers because we are the primary obligor, we are a principal in the transaction, we invoice our customers and retain all credit risks, and we maintain discretion over pricing. Additionally, we are responsible for selection of third-party transportation providers to the extent they are used to satisfy customer freight requirements. We record revenues net of pass-through taxes in our consolidated statements of comprehensive income. For the years ended December 31, 2022, 2021, and 2020, no customer accounted for more than 10% of our consolidated revenues. Income Taxes Income taxes are accounted for under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. We record valuation allowances for deferred tax assets to the extent we do not believe these assets are more likely than not to be realized through the reversal of existing taxable temporary differences, projected future taxable income, or tax-planning strategies. We record a liability for unrecognized tax benefits when the benefits of tax positions taken on a tax return are not more likely than not to be sustained upon audit. Interest and penalties related to uncertain tax positions are classified as income tax expense in the consolidated statements of comprehensive income. Earnings Per Share We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if holders of unvested restricted and performance share units or options were to exercise or convert their holdings into common stock. Awards that would have an anti-dilutive impact are excluded from the calculation. Share-based Compensation We have share-based compensation plans covering certain employees, including officers and directors. We account for share-based compensation using the fair value recognition provisions of current accounting standards for share-based payments. These awards have historically consisted of restricted shares, RSUs, performance-based restricted shares, PSUs, and non-qualified stock options. We recognize compensation expense over the requisite service periods within each award. See Note 12, Share-Based Compensation , for more information about our plans. Claims Accruals We are self-insured for loss of and damage to our owned and leased transportation equipment. We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have excess policies to limit our exposure to catastrophic claim costs. The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to 46 Table of Contents derive an estimate of our ultimate claim liability. This process involves the use of loss-development factors based on our historical claims experience and includes a contractual premium adjustment factor, if applicable. In doing so, the recorded liability considers future claims growth and provides an allowance for incurred but not reported claims. We do not discount our estimated losses. At December 31, 2022 and 2021, we had an accrual of $ 164.9 million and $ 158.3 million, respectively, for estimated claims net of reinsurance receivables. In addition, we are required to pay certain advanced deposits and monthly premiums. At December 31, 2022 and 2021, we had an aggregate prepaid insurance asset of $ 9.2 million and $ 11.0 million, respectively, which represented prefunded premiums and deposits. Sale of Business On November 30, 2022, the Company entered into a management buyout agreement to sell 100% of its China-based logistics operations to certain members of Asia’s management team, ceasing Schneider’s Asia operations. The sale resulted in the recognition of a $ 5.0 million loss, which was recorded within operating supplies and expenses—net in the consolidated statements of comprehensive income, and operating results through the date of sale are included within Other. In conjunction with the management buyout agreement, a $ 4.1 million payment was made and is included within acquisitions and sale of business, net of cash acquired on the consolidated statements of cash flows. Accounting Standards Recently Adopted We adopted ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance , which increases the transparency of government assistance. This standard requires businesses to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy (for example, International Financial Reporting Standards guidance in International Accounting Standard 20 or guidance on contributions for not-for-profit entities in ASC 958-605), including information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction. The adoption of this standard did not have a material impact on our consolidated financial statements or related disclosures. 47 Table of Contents 2. ACQUISITIONS deBoer Transportation, Inc. We entered into a Securities Purchase Agreement, dated June 7, 2022 , to acquire 100 % of the outstanding equity of deBoer, a regional, dedicated carrier headquartered in Blenker, WI. The acquisition provided Schneider the opportunity to expand our tractor and trailer fleet primarily within our dedicated Truckload operations, as well as our company driver capacity. During the second half of 2022, the Company successfully transitioned equipment and employees from deBoer to Schneider, deBoer operations ceased, and drivers and equipment were deployed primarily within our Truckload segment. The aggregate purchase price of the acquisition was approximately $ 34.6 million inclusive of certain cash and net working capital adjustments, and the assets acquired consisted primarily of rolling stock. The acquisition was accounted for under the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized on the consolidated balance sheets at their fair values as of the acquisition date. The fair values of net assets acquired were determined using Level 3 inputs, and the excess of the purchase price over the estimated fair value of the net assets resulted in $ 7.7 million of goodwill being recorded within the Truckload reportable segment at the time of acquisition. Following the acquisition, $ 1.6 million of purchase price adjustments were made relating to deferred taxes and certain working capital amounts resulting in an adjusted goodwill balance of $ 6.1 million as of December 31, 2022. Acquisition-related costs, which consisted of fees incurred for advisory, legal, and accounting services, were $ 0.3 million and were included in other general expenses in the Company’s consolidated statements of comprehensive income for the period ended December 31, 2022. Operating results for deBoer are included in our consolidated results of operations from the acquisition date. Pro forma information for this acquisition is not provided as it did not have a material impact on the Company’s consolidated operating results. Midwest Logistics Systems, Ltd. We entered into a Securities Purchase Agreement, dated December 31, 2021 , to acquire 100 % of the outstanding equity of MLS, a dedicated trucking company based in Celina, OH, and certain affiliated entities holding assets comprising substantially all of MLS’s business. MLS is a premier dedicated carrier in the central U.S. that we believe complements our growing dedicated operations. The aggregate purchase price of the acquisition was approximately $ 268.8 million inclusive of $ 5.7 million in net working capital and other post-acquisition adjustments received in 2022 and a deferred payment of $ 3.2 million made in January 2022. Proceeds from the total purchase consideration were used to settle $ 26.9 million of MLS’s outstanding debt as of the acquisition date. The acquisition of MLS was accounted for under the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized on the consolidated balance sheets at their fair values as of the acquisition date. These inputs represent Level 3 measurements in the fair value hierarchy and required significant judgments and estimates at the time of valuation. Fair value estimates of acquired property and equipment were based on an independent appraisal, giving consideration to the highest and best use of the assets. Key assumptions used in the transportation equipment appraisals were based on the market approach, while key assumptions used in the land, buildings and improvements, and other property and equipment appraisals were based on a combination of the income (direct capitalization) and sales comparison approaches, as appropriate. The excess of the purchase price over the estimated fair values of assets acquired and liabilities assumed was recorded as goodwill within the Truckload reportable segment. The goodwill is attributable to expected synergies and growth opportunities within our dedicated business and is expected to be deductible for tax purposes. Acquisition-related costs, which consisted of fees incurred for advisory, legal, and accounting services, were $ 1.9 million and were included in other general expenses in the Company’s consolidated statements of comprehensive income for the period ended December 31, 2021. 48 Table of Contents The following table summarizes the purchase price allocation for MLS, including any adjustments during the measurement period. Recognized amounts of identifiable assets acquired and liabilities assumed (in millions) December 31, 2021 Opening Balance Sheet Adjustments Adjusted December 31, 2021 Opening Balance Sheet Cash and cash equivalents $ — $ 1.8 $ 1.8 Trade accounts receivable—net of allowance 18.6 ( 6.7 ) 11.9 Other receivables 0.9 1.5 2.4 Prepaid expenses and other current assets 1.6 — 1.6 Net property and equipment 148.9 ( 0.8 ) 148.1 Internal use software and other noncurrent assets — 11.7 11.7 Goodwill 122.7 ( 18.4 ) 104.3 Total assets acquired 292.7 ( 10.9 ) 281.8 Trade accounts payable 1.8 1.6 3.4 Accrued salaries, wages, and benefits 1.7 0.9 2.6 Claims accruals—current 7.5 ( 3.0 ) 4.5 Other current liabilities 7.2 ( 3.9 ) 3.3 Deferred income taxes — ( 1.1 ) ( 1.1 ) Other noncurrent liabilities — 0.3 0.3 Total liabilities assumed 18.2 ( 5.2 ) 13.0 Net assets acquired $ 274.5 $ ( 5.7 ) $ 268.8 The above adjustments made during the measurement period ended December 31, 2022 were primarily related to working capital, property and equipment, leases, claims accruals, deferred taxes, and intangible assets. The fair values of identifiable intangible assets, including customer relationships and trademarks, were based on valuations using income-based approaches and Level 3 inputs. No material statement of comprehensive income effects were identified with these adjustments. Combined unaudited pro forma operating revenues of the Company and MLS would have been approximately $ 5,816.0 million and $ 4,748.0 million for the years ended December 31, 2021 and 2020, respectively, and our earnings for the same periods would not have been materially different. 3. REVENUE RECOGNITION Disaggregated Revenues The majority of our revenues are related to transportation and have similar characteristics. MLS and deBoer revenues since the acquisition dates are included within Transportation revenues, consistent with the remainder of our Truckload segment. The following table summarizes our revenues by type of service, which are explained in greater detail below. Year Ended December 31, Disaggregated Revenues ( in millions ) 2022 2021 2020 Transportation $ 6,119.9 $ 5,166.7 $ 4,170.0 Logistics Management 274.2 219.0 149.7 Other 210.3 223.0 233.1 Total operating revenues $ 6,604.4 $ 5,608.7 $ 4,552.8 49 Table of Contents Transportation Transportation revenues are generated from our Truckload and Intermodal segments, as well as from our brokerage business, which is included in the Logistics segment. In the Transportation portfolio, our service obligation to customers is satisfied over time. We do not believe there is a significant impact on the nature, amount, timing, and uncertainty of revenue or cash flows based on the mode of transportation. The economic factors that impact our transportation revenue are generally consistent across these modes given the relatively short-term nature of each contract. For the majority of our transportation business, the “contract with a customer” is identified as an individual order under a negotiated agreement. Some consideration is variable in that a final transaction price is uncertain and is susceptible to factors outside of the Company’s influence, such as the weather or the accumulation of accessorial charges. Pricing information is supplied by rate schedules that accompany negotiated contracts. Occasionally we provide freight movements to customers in exchange for non-monetary services. The fair value of non-monetary consideration on these freight movements is included in operating revenues on the consolidated statements of comprehensive income and consists primarily of transportation equipment. The amount of operating revenues recorded for these services was $ 16.0 million and $ 6.3 million in 2022 and 2021, respectively. There was no revenue recorded in 2020 for freight movements in exchange for non-monetary consideration. Transportation orders are short-term in nature generally having terms of significantly less than one year. They do not include significant financing components. A small portion of revenues in our transportation business relate to fixed payments in our Truckload segment. These payments are due regardless of volumes, and in these arrangements, the master agreement rather than the individual order may be considered the “contract.” Refer to the Remaining Performance Obligations table below for more information on these fixed payments. Under ASC 606, we recognize revenue over the period transportation services are provided to the customer, including service performed as of the end of the reporting period for loads currently in transit, in order to recognize the value transferred to a customer over the course of the transportation service. We determine revenue in transit using the input method, under which revenue is recognized based on time lapsed from the departure date to the arrival date. Measurement of revenue in transit requires the application of significant judgment. We calculate the estimated percentage of an order’s transit time that is complete at period end, and we apply that percentage of completion to the order’s estimated revenue. In certain transportation arrangements, an unrelated party contributes a specified service to our customer. For example, we contract with third-party carriers to perform transportation services on behalf of our customers in our brokerage business, and we use third-party rail carriers in our Intermodal segment. In situations that include the contributions of third parties, we act as principal in the arrangement, and accordingly, we recognize gross revenues from these transactions. Logistics Management Logistics Management revenues relate to our SCDM operating segment, which is included in our Logistics segment. Within this portfolio, the key service we provide to customers is management of freight shipping and/or storage. The “contracts” in our Logistics Management portfolio are negotiated agreements, which contain both fixed and variable components. The variability of revenues is driven by volumes and transactions, which are known as of an invoice date. Refer to the Remaining Performance Obligations table below for additional information. SCDM contracts typically have terms that extend beyond one year and do not include financing components. Under ASC 606, we have elected to use the right to invoice practical expedient, which reflects the fact that a customer obtains the benefit associated with logistics services as they are provided (output method), and therefore, we recognize revenue under these contracts over time. In our supply chain management business, we subcontract third parties to perform a portion of the services. We are responsible for ensuring the services are performed and are acceptable to the customer; therefore, we are considered the principal in these arrangements. Other Other revenues relate to activities that are out of scope for purposes of ASC 606, including our leasing and captive insurance businesses. 50 Table of Contents Quantitative Disclosure The following table provides information related to transactions and expected timing of revenue recognition for performance obligations that are fixed in nature and relate to contracts with terms greater than one year as of the date shown. Remaining Performance Obligations (in millions) December 31, 2022 Expected to be recognized within one year Transportation $ 17.2 Logistics Management 10.2 Expected to be recognized after one year Transportation 24.8 Logistics Management 8.5 Total $ 60.7 This disclosure does not include revenue related to performance obligations that are part of a contract with an original expected duration of one year or less, nor does it include expected consideration related to performance obligations for which the Company elects to recognize revenue in the amount it has a right to invoice (e.g., usage-based pricing terms). The following table provides information related to contract balances associated with our contracts with customers as of the dates shown. Contract Balances ( in millions ) December 31, 2022 December 31, 2021 December 31, 2020 Other current assets—Contract assets $ 27.0 $ 33.8 $ 21.5 Other current liabilities—Contract liabilities 2.6 3.2 0.7 We generally receive payment within 40 days of completion of performance obligations. Contract assets in the table above relate to revenue in transit at the end of the reporting period. Contract liabilities relate to amounts that customers paid in advance of the associated service. Practical Expedients We elected to use the following practical expedients under ASC 606: (1) not to adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised service to a customer and when the customer pays for that service will be one year or less; (2) to apply ASC 606 to a portfolio of contracts (or performance obligations) with similar characteristics, as we reasonably expect that the effects on the consolidated financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts (or performance obligations) within that portfolio; and (3) to recognize revenue in the Logistics Management portfolio as the amount of consideration to which we have a right to invoice, that corresponds directly with the value to the customer of the service completed to date. 4. FAIR VALUE The table below sets forth the Company’s financial assets that are measured at fair value on a recurring, monthly basis in accordance with ASC 820. Fair Value at (in millions) Level in Fair Value Hierarchy December 31, 2022 December 31, 2021 Equity investment in TuSimple (1) 1 $ 0.6 $ 12.7 Marketable securities (2) 2 45.9 49.3 (1) Our equity investment in TuSimple is classified as Level 1 in the fair value hierarchy as shares of TuSimple’s Class A common stock are traded on the NASDAQ. See Note 5, Investments, for additional information . (2) Marketable securities are classified as Level 2 in the fair value hierarchy as they are valued based on quoted prices for similar assets in active markets or quoted prices for identical or similar assets in markets that are not active. See Note 5, Investments , for additional information. The fair value of the Company’s debt was $ 199.1 million and $ 276.7 million as of December 31, 2022 and 2021, respectively. The carrying value of the Company’s debt was $ 205.0 million and $ 265.0 million as of December 31, 2022 and 2021, 51 Table of Contents respectively. The fair value of our debt was calculated using a fixed rate debt portfolio with similar terms and maturities, which is based on the borrowing rates available to us in the applicable year. This valuation used Level 2 inputs. The recorded value of cash, trade accounts receivable, lease receivables, and trade accounts payable approximates fair value. We measure non-financial assets, such as assets held for sale and other long-lived assets, at fair value when there is an indicator of impairment and only when we recognize an impairment loss. The table below sets forth the Company’s non-financial assets that were measured at fair value on a non-recurring basis during 2022. During 2021 we did not measure any non-financial assets at fair value. (in millions) Level in Fair Value Hierarchy Fair Value at December 31, 2022 Assets held for sale (1) 2 $ 0.5 (1) Our held for sale transportation equipment is evaluated for impairment using market data upon classification as held for sale or as impairment indicators are present. If the carrying value of the assets held for sale exceeds the fair value, an impairment is recorded. All of the assets held for sale at December 31, 2022 were recorded at fair value. Refer to Note 1, Summary of Significant Accounting Policies, for further details on impairment charges. As part of the MLS and deBoer acquisitions, certain assets acquired and liabilities assumed were recorded at their fair values as of the acquisition date. Refer to Note 2, Acquisitions, for further details. 5. INVESTMENTS Marketable Securities The following table presents the maturities and values of our marketable securities as of the dates shown. December 31, 2022 December 31, 2021 (in millions, except maturities in months) Maturities Amortized Cost Fair Value Amortized Cost Fair Value U.S. treasury and government agencies 4 to 98 $ 21.9 $ 19.3 $ 19.9 $ 19.6 Corporate debt securities 3 to 57 16.0 14.9 20.3 20.4 State and municipal bonds 1 to 154 12.4 11.7 9.1 9.3 Total marketable securities $ 50.3 $ 45.9 $ 49.3 $ 49.3 Equity Investments without Readily Determinable Fair Values The Company’s primary strategic equity investments without readily determinable fair values include Platform Science, Inc., a provider of telematics and fleet management tools, MLSI, a transportation technology development company, and ChemDirect, a business to business digital marketplace for the chemical industry. These investments are being accounted for under ASC 321, Investments - Equity Securities, using the measurement alternative, and their combined values as of December 31, 2022 and 2021 were $ 86.0 million and $ 36.2 million, respectively. If the Company identifies observable price changes for identical or similar securities of the same issuer, the equity security is measured at fair value as of the date the observable transaction occurred using Level 3 inputs. The following table summarizes the activity related to these equity investments during the periods presented. Year Ended December 31, (in millions) 2022 2021 2020 Investment in equity securities $ 24.0 $ — $ 10.0 Upward adjustments (1) 25.8 13.9 8.8 Cumulative upward adjustments 52.0 (1) Our updated investment values were determined using the backsolve method, a valuation approach that primarily uses an option pricing model to value shares based on the price paid for recently issued shares. 52 Table of Contents Equity Investments with Readily Determinable Fair Values On January 12, 2021, the Company purchased a $ 5.0 million non-controlling interest in TuSimple, a global self-driving technology company. Upon completion of its IPO in April 2021, our investment in TuSimple was converted into Class A common shares and is now being accounted for under ASC 321, Investments - Equity Securities . In the years ended December 31, 2022 and 2021, the Company recognized a pre-tax net loss of $ 12.1 million and a pre-tax net gain of $ 7.7 million, respectively, on its investment in TuSimple. See Note 4, Fair Value , for additional information on the fair value of our investment in TuSimple. All of our equity investments are included in other noncurrent assets on the consolidated balance sheets with subsequent gains or losses recognized within other expense (income)—net on the consolidated statements of comprehensive income. 6. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill represents the excess of the purchase price of acquisitions over the fair value of the identifiable net assets acquired. The following table shows changes to our goodwill balances by segment during the years ended December 31, 2022 and 2021. (in millions) Truckload Logistics Other Total Balance at December 31, 2020 $ 103.6 $ 14.2 $ 10.3 $ 128.1 Acquisition (see Note 2) 122.7 — — 122.7 Goodwill impairment charge — — ( 10.6 ) ( 10.6 ) Foreign currency translation adjustment — — 0.3 0.3 Balance at December 31, 2021 226.3 14.2 — 240.5 Acquisition (see Note 2) 7.7 — — 7.7 Acquisition adjustments (see Note 2) ( 20.0 ) — — ( 20.0 ) Balance at December 31, 2022 $ 214.0 $ 14.2 $ — $ 228.2 During the year ended December 31, 2022, we recorded goodwill in conjunction with the acquisition of deBoer and made measurement period adjustments related to the acquisitions of deBoer and MLS, both of which were recorded within the Truckload segment. Goodwill recorded as a result of the Company’s acquisition of MLS represents its own reporting unit, while goodwill recorded as a result of the deBoer acquisition is included in our VTL/Dedicated Services reporting unit as drivers and assets were deployed within this business, and deBoer operations ceased. Refer to Note 2, Acquisitions, for further details. At December 31, 2022 and 2021, we had accumulated goodwill impairment charges of $ 53.2 million, which consisted of $ 34.6 million and $ 18.6 million in our Truckload reporting segment and Other, respectively. Goodwill is tested for impairment at least annually using the discounted cash flow, guideline public company, and guideline transaction methods to calculate the fair values of our reporting units. Key inputs used in the discounted cash flow approach include growth rates for sales and operating profit, perpetuity growth assumptions, and discount rates. Key inputs used in the guideline public company and guideline transaction methods include EBITDA valuation multiples of comparable companies and transactions. If interest rates rise or EBITDA valuation multiples of comparable companies and transactions decline, the calculated fair values of our reporting units will decrease, which could impact the results of our goodwill impairment tests. During the fourth quarter of 2022 and 2021, annual impairment tests were performed on all three of our reporting units with goodwill as of October 31, our assessment date. No impairments resulted as part of the 2022 annual impairment tests. An impairment loss of $ 10.6 million was recorded for our Asia reporting unit in 2021 as the discounted cash flows expected to be generated by the reporting unit were not sufficient to recover its carrying value. This represented all of the remaining goodwill related to the Asia reporting unit. No impairments resulted for our remaining reporting units as part of the 2021 annual impairment tests. The identifiable finite lived intangible assets other than goodwill listed below are included in internal use software and other noncurrent assets on the consolidated balance sheets and relate to the acquisition of MLS. Our customer relationships and trademarks are amortized over a weighted-average amortization period of ten years . Refer to Note 2, Acquisitions, for further details. 53 Table of Contents December 31, 2022 (in millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 3.2 $ 0.3 $ 2.9 Trademarks 6.8 0.7 6.1 Total intangible assets $ 10.0 $ 1.0 $ 9.0 Amortization expense for intangible assets was $ 1.0 million for the year ended December 31, 2022. Estimated future amortization expense related to intangible assets is as follows: (in millions) December 31, 2022 2023 $ 1.0 2024 1.0 2025 1.0 2026 1.0 2027 1.0 2028 and thereafter 4.0 Total $ 9.0 7. DEBT AND CREDIT FACILITIES As of December 31, 2022 and 2021, debt included the following: (in millions) December 31, 2022 December 31, 2021 Unsecured senior notes: principal payable at maturities ranging from 2023 through 2025 ; interest payable in semiannual installments through the same timeframe; weighted-average interest rate of 3.93 % and 3.61 % for 2022 and 2021, respectively $ 205.0 $ 265.0 Current maturities ( 70.0 ) ( 60.0 ) Long-term debt $ 135.0 $ 205.0 Scheduled future debt principal payments are as follows: (in millions) December 31, 2022 2023 $ 70.0 2024 40.0 2025 95.0 Total $ 205.0 On November 4, 2022, we entered into a new agreement (the “2022 Credit Facility”) which replaces our previous agreement (the “2018 Credit Facility”). The 2022 Credit Facility provides borrowing capacity of $ 250.0 million and allows us to request an additional increase in total commitment by up to $ 150.0 million, for a total potential commitment of $ 400.0 million through November 2027. The 2022 agreement also provides a sublimit of $ 100.0 million to be used for the issuance of letters of credit. We had no outstanding borrowings under either of these agreements as of December 31, 2022 or 2021. Standby letters of credit under these agreements amounted to $ 0.1 million and $ 3.9 million on December 31, 2022 and 2021, respectively, and were primarily related to the requirements of certain of our real estate leases. On July 30, 2021, we entered into Amendment No. 3 to our Amended and Restated Receivables Purchase Agreement (the “2021 Receivables Purchase Agreement”), which allows us to borrow funds against qualifying trade receivables at rates based on one-month LIBOR up to $ 150.0 million and provides for the issuance of standby letters of credit through July 2024. We had no outstanding borrowings under this facility at December 31, 2022 or 2021. At December 31, 2022 and 2021, standby letters of credit under this agreement amounted to $ 77.1 million and $ 70.3 million and were primarily related to the requirements of certain of our insurance obligations. 54 Table of Contents The credit agreements contain various financial and other covenants, including required minimum consolidated net worth, consolidated net debt, limitations on indebtedness, transactions with affiliates, shareholder debt, and restricted payments. The credit agreements and senior notes contain change of control provisions pursuant to which a change of control is defined to mean the Schneider family no longer owns more than 50 % of the combined voting power of our capital shares. A change of control event causes an immediate termination of unused commitments under the credit agreements and requires repayment of all outstanding borrowings plus accrued interest and fees. The senior notes require us to provide notice to the note holders offering prepayment of the outstanding principal along with interest accrued to the date of prepayment. The prepayment date is required to be within 20 to 60 days from the date of notice. At December 31, 2022, the Company was in compliance with all financial covenants. 8. LEASES As Lessee We lease real estate and equipment under operating and finance leases. Our real estate operating leases include operating centers, distribution warehouses, offices, and drop yards. Our non-real estate operating leases and finance leases include transportation, office, yard, and warehouse equipment, in addition to truck washes. The majority of our leases include an option to extend the lease, and a small number include an option to terminate the lease early, which may include a termination payment. If we are reasonably certain to exercise an option to extend a lease, the extension period is included as part of the right-of-use asset and lease liability. For our real estate leases, we have elected to apply the recognition requirement to leases of twelve months or less; therefore, a lease right-of-use asset and liability will be recognized for all of these leases. For our equipment leases, we have elected to not apply the recognition requirements to leases of twelve months or less. These leases will be expensed on a straight-line basis, and no operating lease right-of-use asset or liability will be recorded. We have also elected to not separate the different components within the contract for our leases; therefore, all fixed costs associated with the lease are included in the right-of-use asset and lease liability. This often relates to the requirement for us to pay a proportionate share of real estate taxes, insurance, common area maintenance, and other operating costs in addition to a base or fixed rent. Some of our leases have variable payment amounts, and the variable portions of those payments are excluded from the right-of-use asset and lease liability. At the inception of our contracts, we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. None of our leases contain restrictions or covenants that restrict us from incurring other financial obligations. Right-of-use lease assets and liabilities are recognized based on the present value of the future lease payments over the term. Our incremental borrowing rates are used as the discount rates for leases and are determined based on U.S. Treasury rates plus an applicable margin. Schneider uses multiple discount rates based on lease terms. The following table presents our net lease costs for the years ended December 31, 2022, 2021, and 2020. Financial Statement Classification Year Ended December 31, (in millions) 2022 2021 2020 Operating lease cost Operating lease cost Operating supplies and expenses—net $ 32.9 $ 31.3 $ 29.5 Short-term lease cost (1) Operating supplies and expenses—net 6.3 3.0 3.1 Finance lease cost Amortization of right-of-use assets Depreciation and amortization 2.2 0.8 0.5 Interest on lease liabilities Interest expense 0.2 0.1 0.1 Variable lease cost Operating supplies and expenses—net 2.9 0.9 2.2 Sublease income Operating supplies and expenses—net ( 3.0 ) ( 4.5 ) ( 4.5 ) Total net lease cost $ 41.5 $ 31.6 $ 30.9 (1) Includes short-term lease costs for leases twelve months or less, including those with a duration of one month or less. 55 Table of Contents As of December 31, 2022 and 2021, remaining lease terms and discount rates under operating and finance leases were as follows: December 31, 2022 December 31, 2021 Weighted-average remaining lease term Operating leases 3.2 years 3.6 years Finance leases 3.2 years 3.8 years Weighted-average discount rate (1) Operating leases 3.7 % 3.3 % Finance leases 4.3 % 2.5 % (1) Determined based on a portfolio approach. Additional information related to our leases is as follows: Year Ended December 31, (in millions) 2022 2021 2020 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows for operating leases $ 33.3 $ 31.4 $ 34.7 Operating cash flows for finance leases 0.2 0.1 0.1 Financing cash flows for finance leases 2.0 0.8 0.6 Right-of-use assets obtained in exchange for new lease liabilities Operating leases $ 23.7 $ 28.7 $ 23.7 Finance leases 6.8 4.1 0.8 Operating lease right-of-use assets, current operating lease liabilities, and noncurrent operating lease liabilities are included in internal use software and other noncurrent assets, other current liabilities, and other noncurrent liabilities, respectively, in the consolidated balance sheets. Operating lease right-of-use assets were $ 63.5 million and $ 68.6 million as of December 31, 2022 and 2021, respectively. We recorded a $ 0.1 million impairment loss on our operating lease right-of-use assets for the year ended December 31, 2022, no impairment losses for 2021, and $ 0.8 million in losses for 2020. For the year ended December 31, 2020, $ 0.3 million related to the shutdown of our FTFM service offering. At December 31, 2022, future lease payments under operating and finance leases were as follows: (in millions) Operating Leases Finance Leases 2023 $ 29.3 $ 3.6 2024 19.6 3.5 2025 12.6 2.5 2026 6.7 1.1 2027 2.9 0.1 2028 and thereafter 1.9 — Total 73.0 10.8 Amount representing interest ( 4.1 ) ( 0.7 ) Present value of lease payments 68.9 10.1 Current maturities ( 27.4 ) ( 3.3 ) Long-term lease obligations $ 41.5 $ 6.8 For certain of our real estate leases, there are options contained within the lease agreement to extend beyond the initial lease term. The Company recognizes options as right-of-use assets and lease liabilities when deemed reasonably certain to be exercised. Future operating lease payments at December 31, 2022 include $ 1.0 million related to options to extend lease terms that we are reasonably certain to exercise. 56 Table of Contents As of December 31, 2022, we had several leases that were signed but had not yet commenced totaling $ 24.1 million over their lease terms. These leases will commence in 2023 and have lease terms of three to seven years . The consolidated balance sheets include right-of-use assets acquired under finance leases as components of property and equipment as of December 31, 2022 and 2021. Real and other property under finance leases are being amortized to a zero net book value over the initial lease term. (in millions) December 31, 2022 December 31, 2021 Transportation equipment $ 3.1 $ 1.2 Real property 1.0 0.7 Other property 8.9 5.5 Accumulated amortization ( 3.3 ) ( 2.3 ) Total $ 9.7 $ 5.1 As Lessor We finance various types of transportation-related equipment for independent third parties under lease contracts which are generally for one to three years and accounted for as sales-type leases with fully guaranteed residual values. At the inception of the contracts, we determine if the contract is or contains a lease. A contract is or contains a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Our leases contain an option for the lessee to return, extend, or purchase the equipment at the end of the lease term for the guaranteed contract residual amount. This contract residual amount is estimated to approximate the fair value of the equipment. Lease payments primarily include base rentals and guaranteed residual values. In addition, we also collect one-time administrative fees and heavy vehicle use tax on our leases. We have elected to not separate the different components within the contract as the administrative fees were not material for the years ended December 31, 2022, 2021, and 2020. We have also elected to exclude all taxes assessed by a governmental authority from the consideration (e.g., heavy vehicle use tax). All of our leases require fixed payments, therefore we have no variable payment provisions. As of December 31, 2022 and 2021, investments in lease receivables were as follows: (in millions) December 31, 2022 December 31, 2021 Future minimum payments to be received on leases $ 198.4 $ 193.9 Guaranteed residual lease values 126.1 123.3 Total minimum lease payments to be received 324.5 317.2 Unearned income ( 50.2 ) ( 46.5 ) Net investment in leases $ 274.3 $ 270.7 The amounts to be received on lease receivables as of December 31, 2022 were as follows: (in millions) December 31, 2022 2023 $ 141.0 2024 109.2 2025 73.2 2026 1.1 Total undiscounted lease cash flows 324.5 Amount representing interest ( 50.2 ) Present value of lease receivables 274.3 Current lease receivables—net of allowance ( 111.2 ) Long-term lease receivable $ 163.1 Prior to entering a lease contract, we assess the credit quality of the potential lessee using credit checks and other relevant factors, ensuring that the inherent credit risk is consistent with our existing lease portfolio. Given our leases have fully guaranteed residual values and we can take possession of the transportation-related equipment in the event of default, we do not categorize net investment in leases by different credit quality indicators upon origination. We monitor our lease portfolio weekly by tracking amounts past due, days past due, and outstanding maintenance account balances, including performing 57 Table of Contents subsequent credit checks as needed. Our net investment in leases with any portion past due as of December 31, 2022 was $ 64.6 million, which includes both current and future lease payments. Lease payments on our lease receivables are generally due on a weekly basis and are classified as past due when the weekly payment is not received by its due date. As of December 31, 2022, our lease payments past due were $ 4.1 million. Leases are generally placed on nonaccrual status (nonaccrual of interest and other fees) when a payment becomes 90 days past due or upon notification of bankruptcy, death, or other instances management concludes collectability is not reasonably assured. The accrual of interest and other fees resumes when all payments are less than 60 days past due. The table below provides additional information on our sales-type leases. Revenue and cost of goods sold are recorded in operating revenues and operating supplies and expenses—net in the consolidated statements of comprehensive income, respectively. Year Ended December 31, (in millions) 2022 2021 2020 Revenue $ 195.0 $ 206.1 $ 206.3 Cost of goods sold ( 161.8 ) ( 177.6 ) ( 185.6 ) Operating profit $ 33.2 $ 28.5 $ 20.7 Interest income on lease receivable $ 37.0 $ 32.4 $ 26.5 9. INCOME TAXES The components of the provision for income taxes for the years ended December 31, 2022, 2021, and 2020 were as follows: (in millions) 2022 2021 2020 Current: Federal $ 28.1 $ 112.5 $ 60.4 Foreign 15.8 — — State 19.3 22.1 9.1 63.2 134.6 69.5 Deferred: Federal 82.8 0.8 ( 1.4 ) State and other 0.2 1.2 3.1 83.0 2.0 1.7 Total provision for income taxes $ 146.2 $ 136.6 $ 71.2 For the year ended December 31, 2022, the foreign provision for income taxes is primarily related to the sale of our Canadian facility; for the years ended December 31, 2021 and 2020, the foreign provision is insignificant in relation to our overall provision. The provision for income taxes for the years ended December 31, 2022, 2021, and 2020 differed from the amounts computed using the federal statutory rate in effect as follows: 2022 2021 2020 (in millions, except percentages) Dollar Impact Rate Dollar Impact Rate Dollar Impact Rate Income tax at federal statutory rate $ 126.8 21.0 % $ 113.8 21.0 % $ 59.4 21.0 % State tax—net of federal effect 15.4 2.6 18.9 3.5 9.7 3.4 Change in valuation allowance 10.7 1.8 — — — — Other—net ( 6.7 ) ( 1.2 ) 3.9 0.7 2.1 0.8 Total provision for income taxes $ 146.2 24.2 % $ 136.6 25.2 % $ 71.2 25.2 % 58 Table of Contents The components of the net deferred tax liability included in deferred income taxes in the consolidated balance sheets as of December 31, 2022 and 2021 were as follows: (in millions) 2022 2021 Deferred tax assets: Compensation and employee benefits $ 7.8 $ 10.1 Operating lease liabilities 16.4 17.8 State net operating losses and credit carryforwards 9.4 9.3 Foreign capital loss carryforward 10.7 — Other 14.9 10.5 Total gross deferred tax assets 59.2 47.7 Valuation allowance ( 12.8 ) ( 2.5 ) Total deferred tax assets—net of valuation allowance 46.4 45.2 Deferred tax liabilities: Property and equipment 548.0 456.5 Prepaid expenses 5.6 5.5 Intangible assets 2.4 7.9 Operating lease right-of-use assets 15.2 16.5 Other 13.4 9.8 Total gross deferred tax liabilities 584.6 496.2 Net deferred tax liability $ 538.2 $ 451.0 Unrecognized Tax Benefits Our unrecognized tax benefits as of December 31, 2022 would reduce the provision for income taxes if subsequently recognized. Potential interest and penalties related to unrecognized tax benefits are recorded in income tax expense. Accrued interest and penalties for such unrecognized tax benefits as of December 31, 2022 and 2021 were $ 3.1 million and $ 2.7 million, respectively. We expect no significant increases or decreases for unrecognized tax benefits during the twelve months immediately following the December 31, 2022 reporting date. As of December 31, 2022, 2021, and 2020, a reconciliation of the beginning and ending unrecognized tax benefits, which is recorded as other noncurrent liabilities in the consolidated balance sheets, is as follows: (in millions) 2022 2021 2020 Gross unrecognized tax benefits—beginning of year $ 5.2 $ 4.3 $ 4.3 Gross increases—tax positions related to current year 1.0 0.9 0.3 Gross decreases—tax positions taken in prior years ( 0.2 ) — ( 0.3 ) Gross unrecognized tax benefits—end of year $ 6.0 $ 5.2 $ 4.3 Tax Examinations We file a U.S. federal income tax return, as well as income tax returns in a majority of state tax jurisdictions. We also file returns in foreign jurisdictions. The years 2019 , 2020 , and 2021 are open for examination by the IRS, and various years are open for examination by state and foreign tax authorities. In October 2022, the statute for 2018 expired. State and foreign jurisdictional statutes of limitations generally range from three to four years. Carryforwards As of December 31, 2022, we had $ 148.5 million of state net operating loss carryforwards which are subject to expiration from 2023 to 2043, and $ 51.5 million in capital loss carryforwards which are subject to expiration from 2023 to 2027. The deferred tax assets related to carryforwards at December 31, 2022 were $ 9.4 million for state net operating loss carryforwards and $ 10.8 million for the capital loss carryforwards. Carryforwards are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax-planning strategies, and projections of future taxable income. At December 31, 2022, we carried a total valuation allowance of $ 12.8 million, which represented $ 10.7 million against capital loss carryforwards and $ 2.1 million against state deferred tax assets. 59 Table of Contents 10. COMMON EQUITY Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2022, 2021, and 2020. Year Ended December 31, (in millions, except per share data) 2022 2021 2020 Numerator: Net income available to common shareholders $ 457.8 $ 405.4 $ 211.7 Denominator: Weighted average common shares outstanding 177.9 177.6 177.3 Dilutive effect of share-based awards and options outstanding 0.9 0.5 0.3 Weighted average diluted common shares outstanding 178.8 178.1 177.6 Basic earnings per common share $ 2.57 $ 2.28 $ 1.19 Diluted earnings per common share 2.56 2.28 1.19 The calculation of diluted earnings per share excluded 0.3 million, 0.8 million, and 0.6 million share-based awards and options that had an anti-dilutive effect for the years ended December 31, 2022, 2021, and 2020, respectively. Capital Stock and Rights Our common equity consists of 750.0 million authorized shares of Class B common stock, entitled to one vote per share, and 250.0 million authorized shares of Class A common stock, entitled to 10 votes per share. Our Class B common stock has traded on the NYSE under the symbol “SNDR” since our IPO in April 2017. Our Class A common stock is held by the Voting Trust for the benefit of members of the Schneider family. Each share of Class A common stock is convertible into one share of Class B common stock. Our Class B common stock is not convertible into any other shares of our capital stock. There is no public trading market for our Class A common stock. Our Amended and Restated Articles of Incorporation provide that holders of our Class A and Class B common stock will be treated equally and ratably on a per share basis with respect to dividends, unless disparate treatment is approved in advance by the vote of the holders of a majority of the outstanding shares of our Class A and Class B common stock, each voting as a separate group. In the event of a dissolution, liquidation, or winding up of the company, the holders of Class A and Class B common stock are entitled to share ratably in all assets and funds remaining after payment of liabilities, subject to prior distribution rights of preferred stock, if any, then outstanding, unless disparate treatment is approved in advance by the vote of the holders of a majority of the outstanding shares of our Class A and Class B common stock, each voting as a separate group. Additionally, a total of 50.0 million shares of preferred stock is authorized, none of which is currently outstanding. The Company has no present plans to issue any preferred stock. Dividends Declared During 2022, 2021, and 2020, the Company declared cash dividends totaling $ 0.32 , $ 0.28 , and $ 2.26 per share, respectively. Included in the 2020 amount was a special cash dividend of $ 2.00 per share, totaling $ 354.7 million. Subsequent Event - Dividends Declared and Stock Repurchase Program In January 2023, our Board declared a quarterly cash dividend for the first fiscal quarter of 2023 in the amount of $ 0.09 per share to holders of our Class A and Class B common stock. The dividend is payable to shareholders of record at the close of business on March 10, 2023 and is expected to be paid on April 10, 2023 . In January 2023, our Board also announced and approved a share repurchase program under which the Company is authorized to repurchase up to $ 150.0 million of its Class A and/or Class B common stock. The program does not obligate the Company to repurchase a minimum number of shares and is intended to help offset the dilutive effect of equity grants to employees over time. Under this program, the Company may repurchase shares in privately negotiated and/or open market transactions. 60 Table of Contents 11. EMPLOYEE BENEFIT PLANS We sponsor defined contribution plans for certain eligible employees. Under these plans, annual contribution levels, as defined in the plan agreements, are based upon years of service. Expense under these plans totaled $ 12.1 million, $ 11.3 million, and $ 10.7 million in 2022, 2021, and 2020, respectively, and is classified in salaries, wages, and benefits in the consolidated statements of comprehensive income. We also have a savings plan, organized pursuant to Section 401(k) of the Internal Revenue Code, to provide employees with additional income upon retirement. Under the terms of the plan, substantially all employees may contribute a percentage of their annual compensation, as defined, to the plan. We make contributions to the plan, up to a maximum amount per employee, based on a percentage of employee contributions. Our net expense under this plan was $ 14.2 million, $ 12.9 million, and $ 11.3 million in 2022, 2021, and 2020, respectively. 12. SHARE-BASED COMPENSATION We grant various equity-based awards relating to Class B common stock to employees under our 2017 Omnibus Incentive Plan (“the Plan”). These awards have historically consisted of restricted shares, RSUs, performance-based restricted shares (“performance shares”), PSUs, and non-qualified stock options. Performance shares and PSUs granted prior to 2021 are earned based on attainment of threshold performance of earnings and return on capital targets. Beginning with grants in 2021, in addition to achievement of earnings and return on capital targets, a multiplier is applied to performance share and PSU achievement based on rTSR against peers over the performance period. We account for our restricted shares, RSUs, performance shares, PSUs, and non-qualified stock options granted as equity awards in accordance with the applicable accounting standards for these types of share-based payments. These standards require that the cost of the awards be recognized in our consolidated financial statements based on the grant date fair value of those awards. This cost is recognized over the period for which an employee is required to provide service in exchange for the award, subject to the attainment of performance metrics established for performance shares and PSUs. Share-based compensation expense is recorded in salaries, wages, and benefits in our consolidated statements of comprehensive income, along with other compensation expenses to employees. The following table summarizes the components of our employee share-based compensation expense. Year Ended December 31, (in millions) 2022 2021 2020 Restricted shares and RSUs $ 5.7 $ 5.8 $ 4.5 Performance shares and PSUs 8.7 6.1 1.9 Non-qualified stock options 1.4 1.4 0.9 Share-based compensation expense $ 15.8 $ 13.3 $ 7.3 Related tax benefit $ 3.8 $ 3.3 $ 1.8 As of December 31, 2022, we had $ 21.4 million of pre-tax unrecognized compensation cost related to outstanding share-based compensation awards expected to be recognized over a weighted average period of 1.9 years. 61 Table of Contents Restricted Shares and RSUs Under the Plan, the majority of the restricted shares and RSUs granted vest ratably over a period of four years beginning approximately one year after the date of grant and are subject to continued employment through the vesting date or retirement eligibility. Dividend equivalents, equal to dividends paid on our common shares during the vesting period, are tracked and accumulated for each restricted share and RSU. The dividend equivalents are forfeitable and are distributed to participants in cash consistent with the date the awards vest. Restricted Shares and RSUs Number of Awards Weighted Average Grant Date Fair Value Unvested at December 31, 2019 484,808 $ 23.34 Granted 259,992 22.04 Vested ( 141,556 ) 22.56 Forfeited ( 13,657 ) 23.00 Unvested at December 31, 2020 589,587 22.96 Granted 341,508 22.61 Vested ( 229,226 ) 22.82 Forfeited ( 22,610 ) 22.77 Unvested at December 31, 2021 679,259 22.84 Granted (1) 322,316 25.85 Vested ( 256,779 ) 23.49 Forfeited ( 49,329 ) 23.91 Unvested at December 31, 2022 695,467 $ 23.92 (1) No restricted shares were granted during 2022. The grant date fair value of restricted shares and RSUs is determined using the closing share price of the Company on the date of grant. Performance Shares and PSUs Performance shares and PSUs include a performance period of three years with vesting based on attainment of threshold performance of earnings and return on capital targets. These awards cliff-vest after a performance period of three years , subject to continued employment through the vesting date or retirement eligibility, with payout ranging from 0 % - 200 % of the target number of shares for both PSUs and performance shares. The 2021 and 2022 awards include an additional rTSR component that allows for payout ranging from 0 % - 250 % of the target number of shares. Dividend equivalents equal to dividends paid on our common shares during the vesting period are tracked and accumulated for each award. The dividend equivalents are forfeitable consistent with the date the awards vest and are distributed to participants in cash at the same time as the underlying shares. 62 Table of Contents Performance Shares and PSUs Number of Awards Weighted Average Grant Date Fair Value Unvested at December 31, 2019 519,721 $ 24.11 Granted 350,525 22.04 Vested ( 44,802 ) 26.80 Forfeited ( 170,422 ) 26.68 Unvested at December 31, 2020 655,022 22.15 Granted 439,620 24.44 Vested — — Forfeited ( 313,362 ) 22.27 Unvested at December 31, 2021 781,280 23.39 Granted (1) 224,455 28.32 Vested ( 304,794 ) 22.04 Forfeited ( 97,942 ) 24.23 Unvested at December 31, 2022 602,999 $ 25.77 (1) No performance shares were granted during 2022. We estimated the grant date fair value of performance shares and PSUs containing a rTSR component using a Monte Carlo simulation which requires assumptions for expected term, volatility, dividend yield, and risk-free interest rate. We used the historical volatility of peers to derive the expected volatility of the stock. The risk-free interest rate was based on the U.S. Treasury yield curve in effect at the time of grant taking into consideration the expected term of the awards. No expected dividend yield was used as the award agreement assumes dividends distributed during the performance period are reinvested. Assumptions used in the Monte Carlo simulation for awards granted in 2022 and 2021 were as follows: 2022 2021 Weighted-average Monte Carlo value $ 28.32 $ 24.44 Monte Carlo assumptions: Expected term 2.87 years 2.87 years Expected volatility 45.3 % 45.8 % Risk-free interest rate 1.8 0.2 Non-qualified Stock Options The options granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and vest ratably over a period of four years , with the first 25 % of the grant becoming exercisable approximately one year after the date of grant. The options expire ten years from the date of grant. 63 Table of Contents Non-qualified Stock Options Outstanding Number of Awards Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) (in thousands) Outstanding at December 31, 2019 537,248 $ 22.28 8.3 $ 641 Granted 233,636 22.04 Exercised (2) ( 84,984 ) 19.00 440 Forfeited — — Outstanding at December 31, 2020 (3) 685,900 20.60 7.1 735 Granted 305,668 22.63 Exercised (2) ( 42,904 ) 17.00 243 Forfeited — — Outstanding at December 31, 2021 948,664 21.42 7.3 5,208 Granted 311,501 25.58 Exercised (2) ( 150,692 ) 22.65 467 Forfeited ( 70,830 ) 22.92 Outstanding at December 31, 2022 1,038,643 $ 22.39 7.6 $ 1,794 Exercisable as of: December 31, 2020 179,893 $ 21.18 5.8 $ 244 December 31, 2021 329,711 21.15 5.7 1,898 December 31, 2022 402,945 20.89 6.4 1,098 (1) The aggregate intrinsic value was computed using the closing share price on December 30, 2022 of $ 23.40 , December 31, 2021 of $ 26.91 , and December 31, 2020 of $ 20.70 , as applicable. (2) Cash received upon exercise of stock options was $ 3.4 million in 2022, $ 0.7 million in 2021, and $ 1.6 million in 2020. (3) In November 2020, the exercise price of all outstanding options was adjusted downward by $2.00 to equitably adjust for the special dividend paid by the Company on November 19, 2020. Unvested Non-qualified Stock Options Number of Awards Weighted Average Grant Date Fair Value Unvested at December 31, 2019 406,685 $ 7.34 Granted 233,636 6.34 Vested ( 134,314 ) 7.30 Forfeited — — Unvested at December 31, 2020 506,007 6.89 Granted 305,668 5.86 Vested ( 192,722 ) 7.01 Forfeited — — Unvested at December 31, 2021 618,953 6.34 Granted 311,501 7.32 Vested ( 223,926 ) 6.75 Forfeited ( 70,830 ) 6.55 Unvested at December 31, 2022 635,698 $ 6.65 We estimated the grant date fair value of option awards using the Black-Scholes option pricing model which uses assumptions over the expected term of the options. We used volatility analysis of comparable companies to determine the expected volatility of the stock and market data to estimate option exercise and employee termination within the valuation model. The expected term of options granted was based on the average of the contractual term and the weighted average of the vesting term, and it represents the average period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. 64 Table of Contents Assumptions used in calculating the Black-Scholes value of options granted during 2022, 2021, and 2020 were as follows: 2022 2021 2020 Weighted-average Black-Scholes value $ 7.32 $ 5.86 $ 6.34 Black-Scholes assumptions: Expected term 6.25 years 6.25 years 6.25 years Expected volatility 30.0 % 30.0 % 31.0 % Expected dividend yield 1.2 1.2 1.2 Risk-free interest rate 2.1 0.7 1.6 Director Share Awards and Deferred Stock Units Equity awards are granted to each director annually on the date of our annual shareholder meeting and accounted for as equity based in accordance with applicable accounting standards for these types of share-based payments. Expense related to our director equity based awards was $ 1.4 million in 2022, $ 1.3 million in 2021, and $ 1.3 million in 2020. We also grant equity retainer awards, or shares in lieu of cash, on a quarterly basis to our non-employee directors. These awards consist of fully vested shares of our Class B common stock or DSUs. We account for the quarterly director share awards and DSUs as liability based in accordance with the applicable accounting standards for these types of share-based payments and remeasure the DSUs at the end of each reporting period through settlement. Expense related to our director liability based awards was $ 0.9 million in 2022, $ 1.2 million in 2021, and $ 0.9 million in 2020. 13. COMMITMENTS AND CONTINGENCIES In the ordinary course of conducting our business, we become involved in certain legal matters and investigations including liability claims, taxes other than income taxes, contract disputes, employment, and other litigation matters. We accrue for anticipated costs to resolve matters that are probable and estimable. We believe the outcomes of these matters will not have a material impact on our business or our consolidated financial statements. We record liabilities for claims against the Company based on our best estimate of expected losses. The primary claims arising for the Company through its trucking, intermodal, and logistics operations consist of accident-related claims for personal injury, collision, and comprehensive compensation, in addition to workers’ compensation, property damage, cargo, and wage and benefit claims. We maintain excess liability insurance with licensed insurance carriers for liability in excess of amounts we self-insure, which serves to largely offset the Company’s liability associated with these claims, with the exception of wage and benefit claims for which we self-insure. We review our accruals periodically to ensure that the aggregate amounts of our accruals are appropriate at any period after consideration of available insurance coverage. Although we expect that our claims accruals will continue to vary based on future developments, assuming that we are able to continue to obtain and maintain excess liability insurance coverage for such claims, we do not anticipate that such accruals will, in any period, materially impact our operating results. At December 31, 2022, our firm commitments to purchase transportation equipment totaled $ 448.0 million. During the first quarter of 2022, the Company recorded a $ 5.2 million charge as a result of an adverse audit assessment by a state jurisdiction over the applicability of sales tax for prior periods on rolling stock equipment used within that state. The charge is included within operating supplies and expenses—net on the consolidated statements of comprehensive income for the year ended December 31, 2022. The Company filed a request for appeal of the audit assessment with the state jurisdiction. A representative of the former owners of WSL filed a lawsuit alleging that we did not fulfill certain obligations under the purchase and sale agreement and claiming that the former owners of WSL were entitled to damages including an additional payment of $ 40.0 million under an earn-out arrangement. On April 25, 2022, the Delaware Superior Court entered judgment in favor of the former owners of WSL, awarding $ 40.0 million in compensatory damages, plus prejudgment interest and the former owners’ attorneys’ fees. The Company settled with the former owners of WSL for a total of $ 57.0 million, which is included within other general expenses on the consolidated statements of comprehensive income for the year ended December 31, 2022. 65 Table of Contents 14. SEGMENT REPORTING We have three reportable segments – Truckload, Intermodal, and Logistics – which are based primarily on the services each segment provides. As of December 31, 2020, our operating segments within the Truckload reportable segment were VTL and Bulk. Beginning in 2022, the operating results of MLS, a standalone operating segment, were aggregated into the Truckload reportable segment, resulting in a total of three operating segments. The operating results of deBoer are also included within the Truckload reportable segment from the date of acquisition through when their operations ceased in July and their assets were deployed throughout the business. The three operating segments are aggregated because they have similar economic characteristics with our other Truckload operating segments and meet the other aggregation criteria described in ASC 280. VTL delivers truckload quantities over irregular routes using dry van trailers. Bulk transports key inputs to manufacturing processes, such as specialty chemicals, using specialty trailers. MLS provides dedicated truckload services focusing primarily on freight with consistent routes. The Intermodal reportable segment provides rail intermodal and drayage services to our customers. Company-owned containers, chassis, and dray tractors are used to provide these transportation services. As of December 31, 2020, our operating segments within the Logistics reportable segment were Brokerage, Supply Chain Management, and Import/Export Services. During 2021, the Company combined the Supply Chain Management and Import/Export Services operating segments into one operating segment. As of December 31, 2022 and 2021, there are only two remaining operating segments, Brokerage and SCDM, that are aggregated because they have similar economic characteristics and meet the other aggregation criteria described in the accounting guidance for segment reporting. In the Logistics segment, we provide additional sources of truck capacity, manage transportation-systems analysis requirements for individual customers, and provide transloading and warehousing services. We generate other revenues from our leasing and captive insurance businesses which are operated by wholly owned subsidiaries. Through November of 2022 and prior to executing a management buyout agreement to sell that business, the Company had operations in Asia that met the definition of an operating segment. None of these operations meet the quantitative reporting thresholds, and a result, are grouped in “Other” in the tables below. Also included in “Other” are revenues and expenses that are incidental to our operations and not attributable to any of the reportable segments. The CODM reviews revenues for each segment without the inclusion of fuel surcharge revenue. For segment purposes, any fuel surcharge revenues earned are recorded as a reduction of the segment’s fuel expenses. Income from operations at the segment level reflects the measure presented to the CODM for each segment. Separate balance sheets are not prepared by segment, and as a result, assets are not separately identifiable by segment. All transactions between reportable segments are eliminated in consolidation. Substantially all of our revenues and assets were generated or located within the U.S. The following tables summarize our segment information. Inter-segment revenues were immaterial for all segments, with the exception of Other, which included revenues from insurance premiums charged to other segments for workers’ compensation, auto, and other types of insurance. Inter-segment revenues included in Other revenues below were $ 73.5 million, $ 62.4 million, and $ 62.6 million for the years ended December 31, 2022, 2021, and 2020, respectively. Revenues by Segment Year Ended December 31, (in millions) 2022 2021 2020 Truckload $ 2,236.6 $ 1,934.9 $ 1,851.0 Intermodal 1,287.4 1,143.1 974.7 Logistics 1,956.2 1,808.7 1,129.3 Other 364.0 365.3 359.0 Fuel surcharge 862.5 444.8 318.3 Inter-segment eliminations ( 102.3 ) ( 88.1 ) ( 79.5 ) Operating revenues $ 6,604.4 $ 5,608.7 $ 4,552.8 66 Table of Contents Income (Loss) from Operations by Segment Year Ended December 31, (in millions) 2022 2021 2020 Truckload $ 352.2 $ 284.7 $ 187.8 Intermodal 165.1 155.2 75.0 Logistics 141.2 92.4 43.1 Other ( 58.1 ) 1.4 ( 19.2 ) Income from operations $ 600.4 $ 533.7 $ 286.7 Depreciation and Amortization by Segment Year Ended December 31, (in millions) 2022 2021 2020 Truckload $ 249.3 $ 210.2 $ 210.7 Intermodal 57.2 48.4 46.3 Logistics 0.1 0.2 0.1 Other 43.4 37.4 33.4 Depreciation and amortization $ 350.0 $ 296.2 $ 290.5 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with accountants on accounting or financial disclosure matters.