What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-02-23 compared with 2023-02-17 · 152 added, 73 removed, 214 unchanged (51% of the section changed)

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This Annual Report on Form 10-K contains certain statements regarding business strategies, market potential, future financial performance, future action, results, and any other statements that do not directly relate to any historical or current fact which are “forward-looking” statements within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), the Exchange Act, and the Private Securities Litigation Reform Act of 1995.

The words “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made.

The words “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target,” among others, generally identify forward-looking statements, which speak only as of the date the statements were made.

In particular, information included under the sections entitled “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements.

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Our business and results of operations are sensitive to changes in overall economic conditions that impact customer shipping volumes, industry freight demand, industry truck capacity, inflation, and our operating costs.

Regarding our operating costs, inflationary pressures persist but are generally expected to decline in the U.S.

in the near-term due to easing of supply chain constraints.

Regarding our operating costs, inflationary pressures persist but are generally expected to decline or stabilize in the U.S.

in the near-term due to the stabilization of the recent imbalance between supply and demand for goods and services in the economy.

We cannot predict future economic conditions, fuel price fluctuations, transportation equipment resale values, or how consumer confidence could be affected by such conditions.

Economic conditions that decrease shipping demand, including but not limited to public health crises, outbreaks of infectious diseases, or increases in truck capacity in the North American transportation and logistics industry, can exert downward pressure on rates and equipment utilization.

In general, significant decreases in shipping volumes within the industry or increases in available truck capacity result in more aggressive freight pricing as carriers compete for loads and to maintain truck productivity.

Economic conditions that decrease shipping demand, including but not limited to public health crises, outbreaks of infectious diseases, or excess capacity in the North American transportation and logistics industry, can exert

downward pressure on rates and equipment utilization.

Likewise, we are also subject to cost increases outside our control that could materially reduce our profitability if we are unable to offset such increases through rate increases or cost reductions.

Such cost increases include, but are not limited to, driver wages, third-party carrier costs, fuel and energy prices, taxes and interest rates, tolls, license and registration fees, insurance premiums, regulations, transportation equipment and related maintenance costs, and healthcare and other employee benefit costs.

We cannot predict whether, or in what form, any such cost increases could occur.

Such cost increases include, but are not limited to, driver wages, third-party carrier costs, fuel and energy prices, taxes and interest rates, tolls, license and registration fees, insurance premiums, regulatory compliance costs, transportation equipment and related maintenance costs, and healthcare and other employee benefit costs.

We cannot predict whether, or in what form, or at what rate any such cost increases could occur.

Any such cost increase or event could adversely affect our results of operations or cash flows.

We operate in a highly competitive and fragmented industry that is characterized by intense price competition which could have a materially adverse effect on our results of operations.

Our operating segments compete with many other truckload carriers, logistics, brokerage, and transportation service providers of varying sizes, and to a lesser extent, LTL carriers, railroads, and other transportation or logistics companies, some of which have a larger fleet, greater access to equipment, preferential customer contracts, greater capital resources, or other competitive advantages.

Our operating segments compete with many other truckload carriers, logistics, brokerage, and transportation service providers of varying sizes, and to a lesser extent, LTL carriers, railroads, and other transportation or logistics companies, some of which have larger fleets, greater access to equipment, preferential customer contracts, greater capital resources, or other competitive advantages.

Competition for the freight we transport or manage is based primarily on service, efficiency, available capacity, and to some degree, on freight rates alone.

Our competitors periodically reduce their freight rates to gain business, especially when economic conditions are present which negatively impact customer shipping volumes, truck capacities, or operating costs.

Our competitors periodically reduce their freight rates to gain business, especially when economic conditions negatively impact customer shipping volumes, truck capacities, or operating costs.

Moreover, to limit the number of approved carriers to a manageable number, some of our customers select “core carriers” as approved transportation service providers, and in some instances, we may not be selected.

Other of our customers periodically accept bids from multiple carriers for their shipping needs, which also periodically results in the loss of business to competitors.

Some of our customers have, and others may in the future, used or expanded their own private fleets rather than outsourcing loads to us.

Some of our customers have, and others may in the future, used or expanded their own private fleets rather than outsource loads to us.

Further, our industry has experienced market entrance by well-resourced, non-traditional firms or startups who, in some cases, have undercut market prices to capture market share.

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

We strive to maintain a diverse customer base however, a significant portion of our operating revenues is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on our business.

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

We strive to maintain a diverse customer base;

however, a significant portion of our operating revenues is generated from a number of major customers, the loss of one or more of which could have a material adverse effect on our business.

Aside from our dedicated operations and customer relationships where we manage such customers’ supply chains, we generally do not have long-term contractual relationships, rate agreements, or minimum volume guarantees with our customers.

Furthermore, certain of the long-term contracts in our dedicated operations are subject to cancellation.

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Difficulties attracting and retaining qualified drivers could materially, adversely affect our profitability and ability to maintain or grow our fleet.

The trucking industry continues to experience difficulty in attracting and retaining sufficient numbers of qualified drivers, both new and experienced, including owner-operators, and such shortages have and could continue to require us to significantly increase driver compensation, rely more on higher-cost third-party carriers, idle transportation equipment, or dispose of the equipment altogether, any of which could adversely affect our growth and profitability.

Our challenge with attracting and retaining qualified drivers is driven by several factors including intense market competition for a limited pool of qualified drivers, inconsistent driver pay, the preference among drivers to work closer to home and be home most nights, and our highly selective hiring standards.

Our turnover rate requires us to continually recruit a substantial number of company and owner-operator drivers in order to meet customer demand.

Owner-operator availability is generally affected by operating cost increases (which the owner-operator is responsible for) and generally favorable economic conditions, which drive overall increases in customer demand and heightened competition for owner-operators from other carriers.

When shortages of owner-operators occur, we may be forced to increase the settlement rates paid to them and increase company driver pay rates to attract and retain a sufficient number of drivers.

The trucking industry historically has and may continue to experience difficulty attracting and retaining sufficient numbers of qualified drivers, both new and experienced, including owner-operators, and such shortages have and could continue to require us to significantly increase driver compensation, rely more on higher-cost third-party carriers, idle transportation equipment, or dispose of the equipment altogether, any of which could adversely affect our growth and profitability.

The challenge with attracting and retaining qualified drivers is driven by several factors including intense market competition for a limited pool of qualified drivers, driver compensation, the preference among drivers to work closer to home and be home most nights, and our highly selective hiring standards.

Our turnover rate requires us to continually recruit a substantial number of company and owner-operator drivers to support our operations.

Owner-operator availability is generally affected by operating cost increases (which the owner-operator is responsible for) and economic conditions, which drive overall increases in customer demand, and heightened competition for owner-operators from other carriers.

When shortages of owner-operators occur, we may have to increase settlement rates paid to them and increase company driver pay rates to attract and retain a sufficient number of drivers.

These increases could negatively affect our results of operations to the extent that we would be unable to obtain corresponding freight rate increases.

We recently completed the deployment of a new ERP system, and challenges with the system may adversely impact our business and operations.

In May 2023, we began the implementation of a new ERP system, which was completed in December, to support and streamline our core financial systems.

This implementation required the integration of the new system with multiple new and existing information systems and business processes.

The new ERP system is designed to increase the efficiency and accuracy of data by streamlining data sources, simplifying complex processes, and reducing manual processes.

Any remaining open disruptions, deficiencies, or other problems associated with the implementation of our ERP system, such as quality issues, programming errors, or any cost increases could adversely affect our ability to operate our business, produce timely and accurate financial statements, or comply with applicable regulations.

This could result in negative impacts on our business, operations, and stock price or could subject us to potential liability or investigation by regulatory authorities.

Additionally, the new ERP system involves greater utilization of third-party cloud computing services in connection with our business operations.

Problems faced by us or our third-party providers, including technological or business-related disruptions and cybersecurity threats, could adversely impact our business, results of operations, and financial condition for future periods.

Any failures identified within our internal controls as a result of this implementation, even if quickly remediated, or remaining difficulties encountered, may adversely impact our operating results or hinder our ability to report our financial results in a timely and accurate basis.

We face risks associated with unionization.

Although we believe that our relations with our associates are good and the number of our associates who are currently represented by a labor union is not significant, we face risks associated with the potential unionization of certain of our associates.

We have recently been the subject of isolated unionization efforts involving a relatively small number of associates, which efforts were defeated.

If a significant number of our associates opt to be represented by a labor union, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition, and liquidity.

Although the number of our associates who are currently represented by a labor union is not significant, we face ongoing risks associated with the potential unionization of certain of our associates.

Over the last several years we have been the subject of isolated unionization efforts involving a relatively small number of associates, which efforts were, in each case, unsuccessful.

Overall, we believe our relations with our associates are good;

however, should a significant number of our associates opt to be represented by a labor union, we could experience a significant disruption of, or inefficiencies in, our operations or incur higher labor costs, which could have a material adverse effect on our business, results of operations, financial condition, and liquidity.

Additionally, our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results.

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The success of our businesses depends on our strong reputation and ability to maintain the Schneider brand value.

Because the services that we market and sell under the Schneider brand generate essentially all of the Company’s revenues, the Schneider brand name is our most valuable sales and marketing tool.

Press coverage, lawsuits, regulatory investigations, or other adverse publicity that assert some form of wrongdoing or that depict the Company or any of our executives, associates, contractors, or agents in a negative light, regardless of the factual basis of the assertions being made, could tarnish our reputation and result in a loss of brand equity.

Because the transportation and logistics services we offer are primarily marketed under the Schneider brand, the Schneider brand name is our most valuable sales and marketing tool.

Press coverage, lawsuits, regulatory investigations, or other adverse publicity that assert some form of wrongdoing or that depict the Company or any of our executives, associates, contractors, or agents in a negative light, regardless of the factual basis of the assertions being made, could negatively impact public or customer perceptions of the Company resulting in a loss of brand equity.

If we do not maintain and protect our brand image and reputation, demand for our services could wane and thus have an adverse effect on our financial condition, liquidity, and results of operations, as well as require additional resources to rebuild our reputation and restore the value of our brand.

If fuel prices rise or fall significantly, our results of operations could be adversely affected.

Our truckload operations are largely dependent on diesel fuel, and accordingly, significant increases in diesel fuel costs could materially and adversely affect our truckload operations, and if we are unable to pass increased costs on to customers through rate increases or fuel surcharges or if shippers opt for intermodal rail over trucking their freight, our results of operations and financial condition could be adversely affected.

financial condition could be adversely affected.

Likewise, if diesel fuel prices decrease significantly, the results of our intermodal operations could be adversely affected as shippers shift intermodal freight to over-the-road trucking.

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The majority of these services are provided pursuant to contracts with our service partners which are subject to periodic renewal.

While we have had agreements with all of the Class I railroads, our primary contracts for railroad transportation in support of our intermodal operations are currently with CSX Transportation and the Union Pacific Railroad Company.

In certain areas of the U.S., rail service is limited to a few railroads, or even a single railroad due to the lack of competition.

Our ability to provide intermodal services in certain traffic lanes is, therefore, likely to be adversely affected if any of the Class I railroads were to discontinue service in certain lanes, or if either of our rail partners experience service interruptions, or if the overall quality of their rail service were to deteriorate.

Our ability to provide intermodal services in certain traffic lanes is, therefore, likely to be adversely affected if any of the Class I railroads were to discontinue service in certain lanes, or if any of our rail partners experience service interruptions, or if the overall quality of their rail service were to deteriorate.

In addition, our intermodal business may be adversely affected by declines in service and volume levels provided by the railroads.

All of the Class I railroads in the U.S., including our current rail partners, are unionized and have a history of disruption due to labor disputes and collective action, including strikes.

For example, a national rail strike that could have paralyzed much of the U.S.

economy appears to have been averted in December 2022 after the U.S.

Congress intervened to bind the railroads and rail workers to a proposed settlement that was reached earlier in the year between the railroads and union leaders.

There can be no guarantee that rail workers who disagree with the proposed settlement will not take actions that disrupt rail service on a wide scale.

As a result, we cannot predict whether or when a rail strike or labor dispute involving our rail partners could occur.

All of the Class I railroads in the U.S., including our current rail partners, are unionized and have a recent history of disruption due to labor disputes and collective action, including strikes.

While there is currently a contract in place between the Class I Railroads and the unions representing rail workers, underlying labor issues remain including, most prominently, precision-scheduled railroading, the business model adopted in recent years by Class I rail carriers which has been blamed by railroad unions as the reason for a dramatic reduction in the freight rail workforce, increased supply-chain congestion, and deteriorating railroad safety.

As a result, we cannot predict whether or when a labor dispute involving our rail partners could occur, the duration of such dispute, and the impact, if any, on our results of operations.

Any strike or labor related disruption at any of the Class I railroads can be expected to have an adverse impact on the results of operations of our Intermodal or Truckload segments.

In addition, a portion of the freight we deliver through both our Intermodal and Truckload segments is imported to the U.S.

through ports of call where workers are represented by the ILWU, a labor union which primarily represents dock workers on the west coast of the U.S., or the International Longshoremen’s Association, a labor union representing longshore workers along the east coast of the U.S.

The ILWU’s current coast wide contract with west coast port owners expired on July 1, 2022.

As of the date of this Annual Report on Form 10-K, the ILWU and Pacific Maritime Assocation, which represents west coast port owners, had not entered into a new contract.

In the previous four contract negotiations between the ILWU and port owners dating back to the late 1990s, negotiations went past the expiration of the contract and work slowdowns or employer lockouts ensued.

Although, as of the date of this Annual Report on Form 10-K, there have been no reports or signs of work stoppages or strikes, there can be no guarantee that work stoppages or other disruptions at any of the west coast ports will not occur.

through ports of call where workers are represented by the ILWU, a labor union which primarily represents a significant number of longshore workers at 29 ports across the West Coast, or the International Longshoremen’s Association, the largest union of maritime workers in North America, which represents a larger number of longshoremen on the Atlantic and Gulf Coasts, Great Lakes, major U.S.

rivers, Puerto Rico, and Eastern Canada.

The west and east coast ports have long been the primary gateways for cargo coming into and leaving the U.S.

and have a long history of labor and other port disputes, protracted collective bargaining and contract negotiations which, in the past, have involved port disputes and closures, as well as threats of a strike that would have disrupted domestic supply chains.

Although, as of the date of this Annual Report on Form 10-K, there have been no reports or signs of labor strife at the ports on either coast, there can be no guarantee that work stoppages or other disruptions at the west or east coast ports will not occur.

We are making strategic investments in new offerings and technologies and expect to continue to make such investments in the future.

These ventures are inherently risky, and we may never realize any expected benefits from them which could have a material adverse effect on our business and financial results.

We engage in strategic transactions and make strategic investments including investments in autonomous vehicle technology, cloud-based TMS software platforms, telematics, and mobile software applications which are focused on establishing a competitive advantage in the transportation and logistics services offered by the Company or exploiting new market opportunities.

Refer to Note 5 , Investments, to our consolidated financial statements for information on our strategic investments.

These ventures are inherently risky and subject to volatility, and we may never realize any expected benefits from them which could have a material adverse effect on our business and financial results.

We engage in strategic transactions and continue to make strategic investments including investments in new technologies and potentially disruptive startup companies which are focused on establishing a competitive advantage in the transportation and logistics services offered by the Company or exploiting new market opportunities including autonomous vehicle technologies, TMS software platforms, telematics, and mobile software applications.

Such strategic investments naturally entail risks and uncertainties, some of which are beyond our control.

For example, we may not be able to derive value from strategic investments or we may incur higher than expected costs in realizing a return on such investments or overestimate the benefits that we receive or realize from such investments.

For example, we may not be able to derive value from strategic

investments, or we may incur higher than expected costs in realizing a return on such investments or overestimate the benefits that we receive or realize from such investments.

Therefore, we cannot provide assurance that any of our strategic investments will generate anticipated financial returns.

If our strategic investments fail to meet our expectations, our business and results of operations may be adversely impacted.

The valuation of the Company’s investments is subject to volatility.

The market valuation of our strategic investments in various public and private companies may experience substantial price volatility which, when accounted for under GAAP, could have a material adverse effect on the Company’s financial condition and results of operations.

The market valuation of our strategic investments may experience substantial price volatility which, when accounted for under GAAP, could have a material adverse effect on the Company’s financial condition and results of operations.

Refer to Note 5, Investments , to our consolidated financial statements for information on our strategic investments.

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As a result, future fluctuations in their value could result in significant losses and have a material adverse impact on the Company’s financial condition and results of operations.

We depend on third-party capacity providers, and issues of performance, availability, or pricing with these transportation providers could increase our operating costs, reduce our ability to offer intermodal and brokerage services, and limit growth in our brokerage and logistics operations, which could adversely affect our revenue, results of operations, and customer relationships.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our Receivables Purchase Agreement and our revolving credit facility are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same.

Our net income and cash flows, including our cash available for servicing our indebtedness, will correspondingly decrease.

We depend on third-party capacity providers, and issues of performance, availability, or pricing with these transportation providers could increase our operating costs, reduce our ability to offer intermodal and logistics services, and limit growth in our brokerage and logistics operations, which could adversely affect our revenue, results of operations, and customer relationships.

Our Logistics segment is highly dependent on the services of third-party capacity providers, such as other truckload carriers, LTL carriers, railroads, ocean carriers, and airlines.

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Our goodwill, other intangible assets, internal use software, or long-lived assets may become impaired, which could result in a significant charge to earnings.

We hold significant amounts of goodwill and long-lived assets, and the balances of these assets could increase in the future if we acquire other businesses.

We hold significant amounts of goodwill and long-lived assets, and the balances of these categories of assets could increase in the future if we acquire other businesses.

At December 31, 2023, the balance of our goodwill, other intangible assets, internal use software, and long-lived assets was $3.1 billion, and the total market value of the Company’s outstanding shares was $4.5 billion.

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In addition, we test goodwill for impairment annually.

Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, other intangible assets, internal use software, and long-lived assets may not be recoverable include, but are not limited to, a sustained decline in stock price and market capitalization, significant negative variances between actual and expected financial results, reduced future cash flow estimates, adverse changes in applicable laws or regulations or legal proceedings, failure to realize anticipated synergies from acquisitions, and slower growth rates in our industry.

Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill, other intangible assets, internal use software, and long-lived assets may not be recoverable include, but are not limited to, a sustained decline in stock price and market capitalization, an increase in interest rates, significant negative variances between actual and expected financial results, reduced future cash flow estimates, adverse changes in applicable laws or regulations or legal proceedings, changes to technology, failure to realize anticipated synergies from acquisitions, and slower growth rates in our industry.

We may be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill, other intangible assets, internal use software, and long-lived assets is determined to exist, negatively impacting our results of operations.

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The amount and timing of such capital expenditures depend on various factors, including anticipated freight demand and the price and availability of new or used tractors.

Recently, the amount and timing of capital expenditures also has been affected by delayed truck deliveries by original equipment manufacturers due to semiconductor and other component shortages.

If anticipated freight volume differs materially from our forecasts or customer demand, our truckload operations may have too many or too few assets.

During periods of decreased customer demand, our asset utilization is challenged, and we may be forced to sell equipment on the open market in order to rightsize our fleet.

During periods of decreased customer demand, our asset utilization is challenged, and we may be forced to sell equipment on the open market in order to right-size our fleet.

This could cause us to incur losses on such sales, particularly during times of a softer used equipment market, either of which could have a materially adverse effect on our profitability.

Our leasing business could also be at risk of inventory impairment if truck deliveries are not aligned with owner-operator demand, which could also have a materially adverse effect on our profitability.

Should demand for freight shipments weaken or our margins suffer due to increased competition or general economic conditions, we may have to limit our fleet size or operate our transportation equipment for longer periods, either of which could have a materially adverse effect on our operations and profitability.

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We cannot give any assurance as to the stability or predictability of our effective tax rate in the future because of, among other things, uncertainty regarding the tax laws and policies of the countries where we operate.

For example, the Organisation for Economic Co-operation and Development (“OECD”) agreed to enact Pillar Two, which introduces a global minimum effective tax rate whereby certain multinational groups are subject to a 15% minimum tax which will be effective in some countries as early as 2024.

While we do not believe Pillar Two will have a material impact on the Company, we continue to monitor the developments to evaluate the impact it could have on our effective tax rate, if any.

Further, our tax returns are subject to periodic reviews or audits by domestic and international authorities, and these audits may result in adjustments to our provision for taxes or allocations of income or deductions that result in tax assessments different from amounts that we have estimated.

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As a result of these arrangements, the Voting Trust controls the outcome of major corporate transactions that require or may be accomplished by shareholder approval, and our Class B shareholders would be unable to affect the outcome of such transactions should any be proposed.

We are a “controlled company” within the meaning of the rules of the NYSE and, as a result, qualify for, and intend to rely on, exemptions from certain corporate governance requirements relating to our Corporate Governance Committee.

Our shareholders will not have the same protections afforded to shareholders of other companies that are subject to such requirements.

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As a result, we qualify as a “controlled company” under the corporate governance rules for NYSE-listed companies.

As a controlled company, certain exemptions under the NYSE listing standards exempt us from the obligation to comply with certain NYSE corporate governance requirements, including the requirement that we have a Corporate Governance Committee that is composed entirely of independent directors.

As a controlled company, certain exemptions under the NYSE listing standards exempt us from the obligation to comply with certain NYSE corporate governance requirements, including the requirement that we have a Compensation Committee and a Corporate Governance Committee that are composed entirely of independent directors.

We have elected to take advantage of this “controlled company” exemption, and therefore, the holders of our Class B common stock may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance rules for NYSE-listed companies.

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Our Class B common stock price has experienced volatility in the past and may remain volatile in the future.

competitors, our customers, or our vendors or other key partners may make regarding their operating results and other factors which are beyond our control such as market conditions in our industry, new market entrants, technological innovations, and economic and political conditions or events.

Volatility in our stock price can be driven by many factors including divergence between our actual or anticipated financial results and published expectations of analysts or the expectations of the market, the gain or loss of customers, announcements that we, our competitors, our customers, or our vendors or other key partners may make regarding their operating results and other factors which are beyond our control such as market conditions in our industry, new market entrants, technological innovations, and economic and political conditions or events.

These and other factors may cause the market price and demand for our Class B common stock to fluctuate substantially.

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Some state and federal authorities have enacted, or are considering, new laws to make it harder to classify workers as independent contractors and easier for tax and other authorities to reclassify independent contractors as employees.

Most recently, in October 2022, the U.S.

DOL published a Notice of Proposed Rulemaking and request for comments on its proposal to revise its interpretation of independent contractor status under the FLSA.

The FLSA establishes minimum wage, overtime pay, recordkeeping, and other employment standards affecting employees and independent contractors in the private sector and in federal, state, and local governments.

The DOL’s proposal would rescind the independent contractor regulation adopted by the prior administration in January 2021 and would shift the current analysis of whether a worker is an employee of a business for purposes of the FLSA from a more streamlined “economic reality” test to a more complex “totality-of-the-circumstances” standard which is widely expected to make it more difficult for workers to be classified as independent contractors under the FLSA.

While the final rule may differ from the current proposal, we believe that if the DOL’s current proposal is adopted, it could dramatically limit the circumstances under which we may classify our current independent contractor “owner-operators” as independent contractors under FLSA.

Any federal legislation or regulation which significantly limits our ability to classify owner-operators as independent contractors could result in driver shortages or adversely impact our freight capacity which, in turn, could adversely impact our results of operations.

On January 9, 2024, the DOL released its final rule addressing when employers can classify workers as independent contractors under federal labor law.

The new rule replaces the existing standard that was enacted under the Trump Administration.

The rule, set to take effect March 11, 2024, directs employers to consider six criteria and employ a “totality of the circumstances” analysis to determine whether a worker is an employee or a contractor, without predetermining whether one criteria outweighs the other.

The six factors, which are non-exhaustive, include a worker's opportunity for profit or loss;

investments made by the worker and the potential employer;

the degree of permanence of the work relationship;

and the degree of control an employer has over the work.

The factors also include the extent to which work performed is integral to the employer's business, and the use of a worker's skill and initiative.

We believe that the final rule, as compared with its Trump Administration predecessor, is a less predictable framework that increases the likelihood of an employee determination and could dramatically limit the circumstances under which we may classify our current independent contractor owner-operators as independent contractors under FLSA.

Because the final DOL independent contractor rule has not yet gone into effect, or been tested, we do not have any internal projections of the potential financial or operational impact of the final ruling.

Any legislation or regulation, however, which limits our ability to classify owner-operators as independent contractors could result in driver shortages or adversely impact our freight capacity which, in turn, could adversely impact our results of operations.

Additionally, courts in certain jurisdictions have issued decisions that could result in a greater likelihood that independent contractors will be judicially classified as employees.

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Our failure to comply with any applicable laws, rules, or regulations to which we are subject, whether actual or alleged, could expose us to fines, penalties, or potential litigation liabilities, including costs, settlements, and judgments.

Further, these agencies or

governments could institute new laws, rules or regulations, or issue interpretation changes to existing regulations at any time.

Further, these agencies or governments could institute new laws, rules or regulations, or issue interpretation changes to existing regulations at any time.

The short and long-term impacts of changes in legislation or regulations are difficult to predict and could materially and adversely affect our earnings and results of operations.

The EPA and the NHTSA have begun taking coordinated steps in support of a new generation of clean vehicles and engines to reduce GHG emissions.

Complying with these and any future GHG regulations enacted by the CARB, EPA, NHTSA, and/or any other state or federal governing body has increased, and will likely continue to increase, the cost of our new tractors, may increase the cost of new trailers, may require us to retrofit certain of our trailers, may increase our maintenance costs, and could impair equipment productivity and increase our operating costs, particularly if such costs are not offset by potential fuel savings.

These adverse effects, combined with the uncertainty as to the reliability of the newly designed diesel engines and the

residual values of our equipment, could materially increase our costs or otherwise adversely affect our business or operations.

However, we cannot predict the extent to which our operations and productivity will be impacted.

We will continue monitoring our compliance with federal and state GHG regulations.

Federal and state lawmakers are considering a variety of other climate-change proposals related to carbon and GHG emissions.

The proposals could potentially limit carbon emissions within certain states and municipalities, which would restrict the location and amount of time that diesel-powered tractors may idle.

Such proposals could result in decreased productivity or increased driver turnover.

Regulatory requirements and changes in regulatory requirements may affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services.

If current regulatory requirements become more stringent or new environmental laws and regulations regarding climate change are introduced, we could be required to make significant capital expenditures or discontinue certain activities.

Refer to Item 1.

Business , for additional details on recent climate-related regulation and laws that impact our operations.

Our operations are subject to various environmental laws and regulations, the violation of which could result in substantial fines or penalties.

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If a spill or other accident involving hazardous substances occurs, if there are releases of hazardous substances we transport, if soil or groundwater contamination is found at our facilities or results from our operations, or if we are found to be in violation of applicable laws or regulations, we could be liable for cleanup costs, other damages, fines, or penalties, any of which could be in material amounts or have a materially adverse effect on our business and operating results.

Additionally, in 2023, CARB passed ACF, a groundbreaking regulation designed to phase out the sales of medium and heavy-duty internal combustion engine trucks in California.

The act aligns with the state’s long-term vision of transitioning the state’s transport system to zero-emissions vehicles by 2045.

Other states have followed suit and enacted similar legislation.

Despite successfully adding BEVs to our ntermodal fleet in California, the emission targets and timelines established by the ACF will make it more challenging for us to continue our current truckload and other operations in California and we believe will result in increased operating costs for us in California.

We are subject to various regulations which are aimed at reducing GHG emissions and mandating GHG emissions disclosures, which could adversely impact our results of operations.

Currently the long-haul trucking industry in North America is diesel fuel-based, and long-haul trucking operations powered by electricity, natural gas, or hydrogen-based powertrains rather than diesel are not commercially feasible at scale in North America.

Significant challenges remain with respect to the economic feasibility of these trucks, and further development of this technology is necessary considering power, torque, range, efficiency and other performance requirements of long-haul trucking operations.

Moreover, the extensive nationwide charging/fueling infrastructure and maintenance network that would be necessary to support such operations does not exist.

Nevertheless, federal, state, and local governmental agencies continue to engage in efforts to support legislation and regulations mandating the transition of diesel fuel-based commercial motor vehicles, such as Class 8 tractors operated by the Company’s independent owner operators and third-party brokerage carriers, to ZEVs.

In 2022, the SEC proposed the SEC Climate Disclosure Rule that would require dramatic changes in the nature and extent of disclosures by public companies regarding their climate risks, progress on their climate goals and information on their Scope 1, Scope 2 and, as proposed, Scope 3 emissions.

According to the SEC, the newly proposed rule would require SEC-registered companies to include detailed climate-related information in registration statements and periodic reports such as 10-K annual reports including:

their climate-related risks and actual or likely material impacts on their business, strategy, and outlook;

Scope 1 and Scope 2 greenhouse gas emissions, which would require attestation reports for accelerated filers;

Scope 3 emissions if either of two conditions are present:

1) if Scope 3 emissions are material to the company or 2) if the company has set an emissions target or goal that includes Scope 3 emissions;

and certain climate-related financial statement metrics and related disclosures in a note to audited consolidated financial statements.

The proposed SEC Climate Disclosure Rule includes footnote disclosure, which would be subject to the financial statement audit and management’s internal control over financial reporting, as well as disclosures outside the financial statements, including a scope 1 and scope 2 greenhouse gas attestation requirements for accelerated and large accelerated filers.

If adopted generally as proposed, we expect that we would need to expand our disclosures, even as the reporting timeline is accelerated.

Should the Company fail to implement appropriate policies and procedures to accurately track or report all of the information required under the proposed SEC Climate Disclosure Rule, it could be determined that the Company has weaknesses in its internal controls, the Company would not be able to obtain the

required third-party attestation report or file them timely and could lose customers.

Should any of those events occur, the Company would face fines and disciplinary actions by the SEC and the Company’s share price could be negatively impacted.

At the state level, the CARB has adopted new regulations that would mandate the transition of commercial trucking operations in California to ZEVs over time.

To the extent that the ACF regulation survives legal challenges and becomes effective, we expect that the ACT will impact the cost and/or supply of traditional diesel tractors.

Moreover, despite our limited deployment of BEVs in our intermodal fleet and making adjustments to our operations to comply with the ACT, no assurances can be given with respect to the extent that the Company, its independent owner-operators, or third-party capacity providers will choose to become CARB-compliant by purchasing a ZEV.

Accordingly, unless, in addition to its intermodal operations in California, the Company opts to become CARB-compliant in its truckload operations, the Company may not be permitted to haul loads that would require travel within California, which could negatively affect the ability of the Company to service customer freight needs for freight originating from, delivering to, or traveling through California.

Furthermore, mandates requiring the transition to ZEVs would create substantial costs for the Company’s third-party capacity providers and, in turn, increase the cost of purchased transportation to the Company.

An increase in the costs to purchase, lease, or maintain tractor equipment or in purchased transportation cost caused by existing or new regulations, without a corresponding increase in price to the customer, could adversely affect our results of operations and financial condition.

Due primarily to the uncertainty of the timing of availability of compliant tractors from OEMs and the timing of the effectiveness of such laws and regulations, we are not currently able to forecast whether such impact will be material.

We, and others, currently do not expect that long-haul trucking operations powered by electricity, natural gas, or hydrogen-based powertrains rather than diesel, will become commercially viable at scale throughout North America in the next five years.

However, as various technology alternatives continue to develop and mature and investment in infrastructure continues, local or regional service in certain geographic areas utilizing Class 8 tractors powered by electricity, natural gas, or hydrogen-based powertrains may become commercially viable in such time frame.

We continue to actively monitor, evaluate, and test developments in the trucking industry related to the design, manufacture, operation, and support of heavy-duty trucks powered by electricity, natural gas, or hydrogen-based powertrains in order to consider the implementation of initiatives involving those technologies, as those technologies and the related infrastructure needed to support them may mature in the future.

An increase in costs to implement these initiatives without a corresponding increase in price to the customer could adversely affect our results of operations and financial condition.

In 2023, California also passed three climate reporting laws, which apply to companies that do business in California, which require such companies to make mandated climate-related disclosures, SB 253 and SB 261.

We are monitoring the pending legal challenges to SB 253 and SB 261 and do not currently have internal projections of the potential financial or operational impact these laws or proposed regulations may have on our operations however, an increase in our operating costs to comply with these laws and make the required disclosures without a corresponding increase in our fuel savings or pricing could adversely affect our results of operations and financial condition.

In 2023, in a significant step toward implementing transparency in voluntary carbon markets, California also enacted the VCMDA which requires companies which operate in California and market or sell voluntary carbon offsets, or which make claims regarding the achievement of net zero emissions, carbon neutral status, or significant carbon emissions reductions to publicly disclose information documenting how the claim was determined to be accurate or accomplished and the measurement of interim progress.

The VCMDA authorizes California to bring civil actions against subject companies and seek civil penalties for misstatements or other violations of these laws, with a maximum fine of $500,000.

From time to time, in conjunction with delivering freight transportation services to certain of its customers, the Company purchases carbon credits or offsets to enable or assist such customers with achieving their carbon reduction targets.

Should the Company either fail to achieve its GHG emission reduction goals or California subsequently determines that any of its related green marketing claims are unachievable, inaccurate, or overstated, the Company could be found to be in violation of the VCDMA and be subject to statutory fines or penalties under the VCMDA, which could adversely affect our financial condition or results of operations.

Refer to Item 1.

Business , for additional details on the ACT and ACF Regulations, the SEC Climate Disclosure Rule, California SB 253 and SB 261, and the VCMDA.

General Risk Factors

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and achieve operating efficiencies and growth.

Such data and information remain vulnerable to cyber-attacks, cybersecurity breaches, ransomware attacks, hackers, theft, or other unauthorized disclosure which, if successful, could result in the disclosure of confidential customer or commercial data, loss of valuable intellectual property, or system disruptions and subject us to civil liability and fines or penalties, damage our brand and reputation, or otherwise harm our business, any of which could be material.

Such data and information remain vulnerable to cyber-attacks, cybersecurity breaches, ransomware attacks, hackers, theft, or other unauthorized disclosure.

Like other companies in the transportation industry, we have identified, and expect to continue to identify, attempted cyberattacks and cyber security incidents, but none of

the attempted cyberattacks or cybersecurity incidents identified as of the filing date of this Annual Report on Form 10-K has had a material impact on us, except as the continued presence of cybersecurity threats has resulted, and is expected to continue to result, in significant investments in cybersecurity risk management programs, processes, and tools.

If a cyberattack, cybersecurity breach, ransomware, or other similar attack on us is successful, this could result in the disclosure of confidential customer or commercial data, loss of valuable intellectual property, or system disruptions, and subject us to civil liability and fines or penalties, damage our brand and reputation, or otherwise harm our business, any of which could be material.

In addition, delayed sales, lower margins, or lost customers resulting from security breaches or network disruptions could materially reduce our revenues, materially increase our expenses, damage our reputation, and have a material adverse effect on our stock price.

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While this disruption resulted in lost revenue and operating profit, it did not have a material impact on our annual results of operations.

However, a significant disruption or failure in our computer networks or applications could have a material adverse effect on our business, including operational disruptions, loss of confidential information, external reporting delays or errors, legal claims, or damage to our business reputation.

However, despite our ability to potentially utilize manual processes, a significant disruption or failure in our computer networks or applications, of any duration, could have a material adverse effect on our business, including operational disruptions, loss of confidential information, external reporting delays or errors, legal claims, or damage to our business reputation.

Our success depends on our ability to attract and retain key employees, and if we are unable to attract and retain such qualified employees, our business and our ability to execute our business strategies may be materially impaired.

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While we purchase insurance coverage at levels we deem adequate, future litigation may exceed our insurance coverage or may not be covered by insurance.

In addition, adverse publicity surrounding an allegation or claim that results in litigation may cause significant reputational harm that could have a significant adverse effect on our financial condition or results.

Our long-term sustainability and GHG reduction goals are predicated on large scale customer adoption of intermodal, the operational feasibility and reliability of heavy-duty ZEVs, and the corresponding build out of a national support infrastructure to reasonably and efficiently manufacture, distribute, or store electricity or alternative fuels for ZEVs, none of which can be assured.

Although priority and focus vary, like many public companies, we are under pressure from certain stakeholders, including investors and customers, to establish goals focused on sustainability and, in particular, decarbonization.

The Company is also subject to certain federal and state environmental laws and regulations, including those of the U.S.

EPA and state environmental agencies which are aggressively focused on the reduction of GHG emissions.

Most notably, the CARB is currently developing a medium and heavy-duty zero-emission fleet regulation with the goal of achieving a zero-emission truck and bus California fleet by 2045 everywhere feasible and significantly earlier for certain market segments such as last mile delivery and drayage applications.

Other states have signed a multi-state agreement to require 100% sales of zero-emission trucks by 2050.

In response, we set the ambitious goal to reduce our per-mile CO2 emissions by 7.5% by 2025, and by 2035, we are aiming to reduce our per-mile CO 2 emissions by 60%.

A critical component of our multi-pronged plan to reduce our carbon emissions and comply with California’s and other states’ emissions requirements is the deployment of ZEVs in significant numbers in these states together with leveraging our intermodal capability.

Increasing scrutiny from investors and other stakeholders regarding ESG related matters may have a negative impact on our business.

Companies across all industries are facing increasing scrutiny from investors and other stakeholders related to ESG matters, including practices and disclosures related to environmental stewardship, social responsibility, and diversity and inclusion.

Organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters.

Such ratings are used by some investors to inform their investment and voting decisions.

Unfavorable ESG ratings may lead to negative investor sentiment toward us, which could have a negative impact on our stock price and our access to and costs of capital.

We have developed certain initiatives and goals relating to ESG matters.

Our ability to successfully execute these initiatives and accurately report our progress presents

numerous operational, financial, legal, reputational, and other risks, many of which are outside our control, and all of which could have a material negative impact on our business.

Additionally, the implementation of these initiatives imposes additional costs on us.

If our ESG initiatives and goals do not meet the expectations of our investors or other stakeholders, which continue to evolve, then our reputation, our attractiveness as an investment and business partner, and our ability to attract or retain employees could be negatively impacted.

Similarly, our failure, or perceived failure, to pursue or fulfill our goals, targets, and objectives or to satisfy various reporting standards in a timely manner, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.

Our long-term sustainability and GHG reduction goals are predicated on large scale customer adoption of intermodal services, the operational feasibility and reliability of heavy-duty ZEVs, and the corresponding build out of a national support infrastructure to reasonably and efficiently manufacture, distribute, or store electricity or alternative fuels for ZEVs, none of which can be assured.

A critical component of our multi-pronged plan to reduce our carbon emissions and comply with California’s and other states’ zero or reduced emission requirements is the deployment of ZEVs in significant numbers in these states together with leveraging our intermodal capability.

As an early adopter of ZEVs, there can be no assurance that we will be successful deploying ZEVs in our operations in significant numbers, that we will be successful converting more over-the-road freight to intermodal, that the national support infrastructure, including the nation’s electricity grid, for heavy-duty ZEVs will be built-out as expected.

Should any of those things fail to occur, we may fail to meet our published sustainability goals, which could result in losing the support of our investors, customers, and other stakeholders;

become subject to regulatory enforcement actions;

or suffer reputational harm which, in any case, may increase the cost of providing transportation services or adversely affect our financial condition, results of operations, and liquidity.

UNRESOLVED STAFF COMMENTS

our becoming subject to regulatory enforcement actions;

or suffering reputational harm which, in any case, may increase the cost of providing transportation services or adversely affect our financial condition, results of operations, and liquidity.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors