What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-02-17 · 120 added, 134 removed, 313 unchanged (45% of the section changed)

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Recent Developments

On December 31, 2021, the Company completed the acquisition of MLS, a privately held truckload carrier based in Celina, OH.

MLS is a dedicated carrier that primarily serves the central U.S.

and complements our growing dedicated operations.

In 2022, MLS financial results are reported in dedicated operations as part of our Truckload segment.

On June 7, 2022 , the Company completed the acquisition of deBoer, which provided us the opportunity to expand our company driver capacity, as well as our tractor and trailer fleet primarily within our dedicated Truckload operations.

During the second half of 2022, the Company successfully transitioned equipment and employees from deBoer to Schneider, deBoer operations ceased, and equipment and drivers were deployed primarily within Truckload.

On August 1, 2023 , the Company completed the acquisition of M&M, a privately held truckload carrier based in West Bridgewater, Massachusetts.

M&M is a dedicated carrier that complements our growing dedicated operations.

The results of M&M are reported in dedicated operations as part of our Truckload segment beginning in the third quarter of 2023.

Refer to Note 2, Acquisitions, for additional details on our recent acquisitions.

Adverse Legal Judgment

On April 25, 2022, in connection with the litigation with the former owners of WSL, the Delaware Superior Court entered judgment in favor of the former owners, awarding $ 40.0 million in compensatory damages plus interest and attorneys’ fees.

A final settlement in the amount of $ 57.0 million was reached and recognized in our results of operations for the year ended December 31, 2022.

Refer to Note 13, Commitments and Contingencies , for additional details.

We seek to deliver a superior portfolio of services that enables our business to grow revenue, profitability, and shareholder returns and perform resiliently through economic and freight cycles.

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Leverage core strengths to drive organic growth and advance our market position

We intend to drive organic growth through leveraging our existing customer relationships, as well as expanding our customer base.

We intend to drive organic growth by leveraging our existing customer relationships, as well as expanding our customer base.

We believe our broad portfolio of services, with different asset intensities, and our North American footprint allow for supply chain alternatives, which enable new and existing customer growth.

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Expand capabilities in the specialty and dedicated freight markets and continue growing our asset-light and non-asset businesses

We believe that our capabilities position us to grow in the specialty and dedicated freight markets, which have higher barriers to entry, potentially higher margins, and lasting customer relationships.

We believe that our capabilities position us to grow in the specialty and dedicated freight markets, which have higher barriers to entry, greater stability through freight/market cycles, potentially more resilient margins, and lasting customer relationships.

The complexity and time-sensitivity of the loads often require increased collaboration with, and greater understanding of, our customers’ business needs and processes.

The transportation of specialty freight requires specially trained drivers with appropriate licenses and special hauling permits, as well as equipment that can handle items with unique requirements in terms of temperature, freight treatment, size, and shape.

The transportation of specialty freight requires specially trained drivers with appropriate licenses and certain hauling permits, as well as equipment that can handle items with unique requirements in terms of temperature, freight treatment, size, and shape.

As such, there are few carriers that have comparable scale and capabilities in the specialty and dedicated markets, which we believe will allow us to grow profitably.

We believe that opportunities identified within our intermodal product offering allow us to profitably grow our services and compete in the intermodal marketplace.

As an asset-based provider, we have more control over our equipment, perform most of our own drays, and retain strong contractual and differentiated rail relationships.

As an asset-based intermodal provider, we have more control over our equipment, perform most of our own drays, and retain strong contractual and differentiated rail relationships across the western, eastern, and southern/Mexico-based portions of our network.

We believe our integrated technology platform will enable us to experience certain benefits of complete end-to-end control, including increased pick-up and delivery predictability, better visibility, and the ability to source and retain capacity.

Freight brokerage, which is a significant part of our Logistics segment, is a business that is expected to be a driver of future growth.

As shippers increasingly consolidate their business with fewer freight brokers, we continue to be well-positioned due to our customer service, Schneider FreightPower® digital marketplace, an established, dense network of qualified third-party carriers, and access to our sizable trailer network.

Freight brokerage, which is a significant part of our Logistics segment, is a business that is expected to be a driver of continued growth.

We believe shippers see the value of working with providers like us that have scale, capacity, and lane density.

Brokerage serves as a non-asset innovation hub for Schneider, particularly in the areas of predictive analytics, process automation, and new customer relationship generation.

Continue to improve our operations and margins by leveraging benefits from investments in technology and business transformation

Brokerage serves as an asset-light innovation hub for Schneider, particularly in the areas of predictive analytics, process automation, and new customer relationship generation.

Improve our operations and margins by leveraging benefits from investments in technology and business transformation

We continue to benefit from our technology and business transformation by improving the effectiveness with which we use data to increase revenue and lower costs.

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We strive for a high-performance culture that seeks individuals who are passionate about our business and fit our culture, and that promotes diversity, equality, and inclusion through a collaborative environment.

We value the direct relationship we have with our associates, and we intend to continue working together to provide professional growth and a quality work environment without third-party representation.

We value the direct relationship we have with our associates, and we intend to continue working together to provide professional growth and a quality work environment.

Our compensation structure is performance-based and aligns with our strategic objectives.

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Our technology platform facilitates the application, screening, and onboarding of top talent.

As an industry leader with a respected “safety first and always” culture and underlying core value, we believe that we will continue to be the employer of choice for both driving and non-driving associates.

As an industry leader with both a respected “safety first and always” culture and underlying core value, we believe that we will continue to be the employer of choice for both driving and non-driving associates.

RESULTS OF OPERATIONS

A discussion regarding our financial condition and results of operations for fiscal 2023 compared to fiscal 2022 is presented below.

A discussion regarding our financial condition and results of operations for fiscal 2021 compared to fiscal 2020 can be found under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2021, which was filed with the SEC on February 18, 2022 and is available on the SEC’s website at www.sec.gov, as well as the “Investors” section of our website at www.schneider.com.

A discussion regarding our financial condition and results of operations for fiscal 2022 compared to fiscal 2021 can be found under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our Annual Report on the Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on February 17, 2023 and is available on the SEC’s website, www.sec.gov, as well as the “Investors” section of our website at www.schneider.com.

Non-GAAP Financial Measures

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You should not consider the non-GAAP measures in this report in isolation or as substitutes for, or alternatives to, analysis of our results as reported under GAAP.

The exclusion of unusual or infrequent items or other adjustments reflected in the non-GAAP measures should not be construed as an inference that our future results will not be affected by unusual or infrequent items or by other items similar to such adjustments.

Our management compensates for these limitations by relying primarily on our GAAP results in addition to using the non-GAAP measures.

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Acquisition-related costs (3)

Goodwill impairment (5)

Property gain—net (4)

Amortization of intangible assets (5)

Sale of business (6)

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Refer to Note 13, Commitments and Contingencies , for more information.

(2) Includes $5.2 million in charges related to an adverse audit assessment for prior period state sales tax on rolling stock equipment used within that state, for the year ended December 31, 2022.

(3) In 2021, we recorded a $13.5 million recovery of an adverse tax ruling from 2020 related to prior period federal excise taxes as a result of a favorable ruling in the U.S.

Court of Appeals.

(2) Includes $2.9 million and $5.2 million in charges related to an adverse audit assessment for prior period state sales tax on rolling stock equipment used within that state for the years ended December 31, 2023 and December 31, 2022, respectively.

(3) Advisory, legal, and accounting costs related to the Company’s acquisitions.

Refer to Note 2, Acquisitions , for additional details.

(5) Goodwill impairment charge recorded for our Asia reporting unit during the year ended December 31, 2021.

Refer to Note 6, Goodwill and Other Intangible Assets, for more information.

(6) Net gain on the sale of our Canadian facility due to a change in approach to servicing Canada.

(7) Loss from sale of our China-based logistics operations.

(4) Net gain on the sale of our Canadian facility due to a change in approach to servicing Canada for the year ended December 31, 2022.

(5) Amortization expense related to intangible assets acquired through recent business acquisitions.

Refer to Note 6, Goodwill and Other Intangible Assets , for additional details.

As we finalized our purchase accounting adjustments related to intangible assets, and to better reflect our ongoing operations, we made the decision to exclude the related amortization expense from non-GAAP income beginning in the fourth quarter of 2023.

Amortization expense for 2022 was $1.0 million and overall not material to the organization.

(6) Loss from the sale of our China-based logistics operations.

See Note 1, Summary of Significant Accounting Policies, for additional details.

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Acquisition-related costs (0.9) (0.3)

Goodwill impairment — (10.6)

Property gain—net — 50.9

Amortization of intangible assets (2.7) —

Sale of business — (5.0)

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Acquisition-related costs 0.9 0.3

Goodwill impairment — 10.6

Property gain—net — (50.9)

Amortization of intangible assets 2.7 —

Sale of business — 5.0

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Due to differences in the tax treatment of items excluded from non-GAAP income, as well as the methodology applied to our estimated annual tax rates as described above, our estimated tax rate on non-GAAP items may differ from our GAAP tax rate and from our actual tax liabilities.

There were no income tax effects related to the sale of business in 2022 or the goodwill impairment in 2021.

There were no income tax effects related to the sale of business in 2022.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022

Enterprise Results Summary

Enterprise net income increased $52.4 million, approximately 13%, in the year ended December 31, 2022 compared to 2021, primarily due to a $66.7 million increase in income from operations, partially offset by the corresponding increase in the provision for income taxes.

In addition, net income in 2022 and 2021 included pre-tax equity investment net gains of $13.7 million and $21.6 million, respectively.

Adjusted net income increased $64.3 million, approximately 16%.

Enterprise net income decreased $219.3 million, approximately 48%, in the year ended December 31, 2023 compared to 2022, primarily due to a $304.0 million decrease in income from operations, partially offset by the corresponding decrease in the provision for income taxes, and a $6.1 million favorable change in total other income—net primarily related to our equity investments.

Pre-tax equity investment net gains were $19.7 million and $13.7 million for 2023 and 2022, respectively.

Adjusted net income decreased $228.1 million, approximately 48%.

Components of Enterprise Net Income

Enterprise Revenues

Enterprise operating revenues increased $995.7 million, approximately 18%, in the year ended December 31, 2022 compared to 2021.

Factors contributing to the increase were as follows:

• a $417.7 million increase in fuel surcharge revenues resulting from increased fuel prices in 2022 compared to 2021, as well as fuel surcharge revenues from the acquisition of MLS;

• a $301.7 million increase in Truckload segment revenues (excluding fuel surcharge) driven by the addition of revenues (excluding fuel surcharge) from the acquisition of MLS, improved revenue per truck per week, and increased dedicated volumes, partially offset by lower network volumes due to driver capacity constraints, reduced network productivity, and moderating market demand;

• a $147.5 million increase in Logistics segment revenues (excluding fuel surcharge) resulting from volume growth within our brokerage business (including our Power Only offering) and incremental port dray revenues from port congestion and supply chain constraints, partially offset by decreased revenue per order within our brokerage business;

• a $144.3 million increase in Intermodal segment revenues (excluding fuel surcharge) due to an increase in revenue per order.

Enterprise revenues (excluding fuel surcharge) increased $578.0 million, approximately 11%.

Enterprise operating revenues decreased $1,105.5 million, approximately 17%, in the year ended December 31, 2023 compared to 2022.

Factors contributing to the decrease were as follows:

• a $562.5 million decrease in Logistics segment revenues (excluding fuel surcharge) driven by decreased revenue per order due to a softer demand environment, a decline in brokerage volumes, and a reduction in port dray revenues;

• a $236.7 million decrease in Intermodal segment revenues (excluding fuel surcharge) due to a decrease in revenue per order and orders;

• a $178.2 million decrease in fuel surcharge revenues resulting from decreased fuel prices in 2023 compared to 2022;

• an $80.9 million decrease in Truckload segment revenues (excluding fuel surcharge) driven by a decline in revenue per truck per week within our network business, partially offset by an increase in dedicated volumes due to organic growth and the M&M acquisition and revenue per truck per week.

Enterprise revenues (excluding fuel surcharge) decreased $927.3 million, approximately 16%.

Enterprise Income from Operations and Operating Ratio

Enterprise income from operations increased $66.7 million, approximately 12%, in the year ended December 31, 2022 compared to 2021, primarily due to an increase in revenue per order in Intermodal, revenue per truck per week in Truckload, and net revenue per order in Logistics driven by strong freight market conditions in the first half of 2022, in addition to effective network and revenue management.

A net gain on sale of $50.9 million in connection with the sale of our Canadian facility due to a change in approach to servicing Canada also contributed to the increase.

Volumes grew in dedicated Truckload with the acquisition of MLS and new business start-ups, while our brokerage business experienced an 8% increase in order volume driven by leveraging our Schneider FreightPower® digital platform and the expansion of our Power Only offering.

The above factors were partially offset by an increase in driver-related costs resulting from pay increases, costs incurred to attract and retain an increased number of company drivers in 2022;

higher rail purchased transportation costs within Intermodal;

a $57.0 million adverse settlement related to a lawsuit with former owners of WSL;

fewer equipment sales resulting in lower gains;

and higher maintenance costs due to inflationary cost pressures.

Adjusted income from operations increased $84.3 million, approximately 16%.

Enterprise operating ratio (operating expenses as a percentage of operating revenues) increased on a GAAP basis but improved on an adjusted basis when compared to the same period in 2021.

Among other factors, our operating ratio can be negatively impacted by changes in portfolio mix when our higher operating ratio, less asset-focused Logistics segment grows faster than our lower operating ratio, capital-intensive Truckload segment.

Enterprise income from operations decreased $304.0 million, approximately 51%, in the year ended December 31, 2023 compared to 2022, primarily due to a decrease in net revenue per order in Logistics, revenue per order in Intermodal, and revenue per truck per week in our Truckload network business.

A net gain on sale of $50.9 million in 2022 in connection with the sale of our Canadian facility, the revenue impacts of volume declines within our brokerage business and Intermodal, and incremental equipment depreciation costs also contributed to the decrease.

These factors were partially offset by a $57.0 million adverse judgment related to a lawsuit with former owners of WSL in 2022 and an increase in Truckload volumes attributable to organic dedicated growth and the M&M acquisition in the third quarter of 2023, as well as revenue per truck per week within the Truckload dedicated business.

Lower rail and owner-operator purchased transportation costs, equipment rental expense, performance-based incentive compensation, and rail storage expense in 2023 also partially offset the decreases in income from operations discussed above.

Adjusted income from operations decreased $314.1 million, approximately 51%.

Enterprise operating ratio (operating expenses as a percentage of operating revenues) increased on both a GAAP and adjusted basis when compared to the same period in 2022.

Enterprise Operating Expenses

Key operating expense fluctuations are described below.

• Purchased transportation increased $245.2 million, or 9%, year over year, mainly related to higher rail purchased transportation resulting from an increase in rail costs in Intermodal.

Third-party carrier costs also increased due to volume growth and purchased transportation costs recorded related to the acquisition of MLS, partially offset by lower purchased transportation costs per order within Logistics.

• Salaries, wages, and benefits increased $226.5 million, or 20%, year over year, largely due to higher driver pay within Truckload and Intermodal resulting from pay increases and actions taken to address driver capacity constraints, in addition to an increase in company drivers.

The acquisition of MLS, an increase in headcount across the organization, and incremental healthcare costs contributed to the remaining increase year over year.

• Fuel and fuel taxes for company trucks increased $239.6 million, or 85%, year over year, driven by an increase in cost per gallon and additional fuel expense recorded related to the acquisition of MLS.

• Purchased transportation decreased $718.4 million, or 25%, year over year, primarily resulting from decreased third-party carrier costs within Logistics due to lower purchased transportation costs per order and brokerage volumes, as well as lower rail purchased transportation resulting from a decrease in both rail cost per mile and orders in Intermodal.

Owner-operator purchased transportation costs also declined due to lower pay per mile and a reduction in owner-operator capacity within Truckload.

• Salaries, wages, and benefits decreased $16.9 million, or 1%, year over year, largely due to a decrease in performance-based incentive compensation, office salaries and wages driven by lower headcount, and healthcare costs as a result of claims favorability and lower plan utilization.

These factors were partially offset by higher driver salaries, wages, and benefits as a result of the M&M acquisition and organic dedicated growth.

• Fuel and fuel taxes for company trucks decreased $83.6 million, or 16%, year over year, driven by a decrease in cost per gallon, partially offset by an increase in company driver miles within Truckload.

A significant portion of fuel costs are recovered through our fuel surcharge programs.

• Depreciation and amortization increased $53.8 million, or 18%, year over year, largely due to the acquisition of MLS, which accounted for nearly half of the increase.

The remaining increase was driven by additional depreciation expense resulting from truck and trailer growth within Truckload and container growth within Intermodal.

• Operating supplies and expenses—net increased $71.6 million, or 15%, year over year, driven by lower gains from equipment sales period over period, higher maintenance costs due to inflationary cost pressures and the MLS acquisition, an increase in equipment rental expense largely due to port congestion , an increase in operating taxes resulting from the $13.5 million recovery of prior period federal excise taxes in 2021 and the $5.2 million in expense in 2022 related to an adverse audit assessment over the applicability of state sales tax, as well as additional rail storage expenses caused by network fluidity challenges.

These factors were partially offset by the gain relating to the sale of the Company’s Canadian facility in the first quarter of 2022 and lower cost of goods sold in our leasing business due to a reduction in lease activity.

• Insurance and related expenses increased $20.6 million, or 25%, year over year, primarily due to increases in auto liability insurance costs relating to favorable claims frequency and severity in 2021 compared to 2022, as well as the additional insurance premium costs for MLS in 2022.

• Other general expenses increased $82.3 million, or 61%, year over year, primarily due to a $57.0 million adverse settlement related to a lawsuit with former owners of WSL.

The remaining increase is attributable to increased professional services expense, higher driver onboarding costs resulting from increased costs to attract and retain drivers, and the hiring of company drivers in 2022.

• Goodwill impairment charges decreased $10.6 million year over year, due to the full impairment recorded for our Asia reporting unit in 2021.

• Depreciation and amortization increased $32.5 million, or 9%, year over year, mainly due to additional depreciation expense resulting from trailer growth within Truckload, inflationary unit cost increases for new equipment, a reduction in tractor age of fleet, and incremental depreciation and amortization expense related to the M&M acquisition.

• Operating supplies and expenses—net increased $42.0 million, or 8%, year over year, driven by a $50.9 million net gain in 2022 related to the sale of the Company’s Canadian facility and higher cost of goods sold in our leasing business due to lease mix and an increase in lease activity in 2023.

These factors were partially offset by a decrease in equipment rental expense as a result of improved port fluidity, lower port dray volumes, and an increase in the percentage of dray moves performed by company drivers in 2023;

lower rail storage expense due to improved yard fluidity;

and an increase in gains on sales of equipment due to a higher quantity of units sold.

• Insurance and related expenses increased $11.3 million, or 11%, year over year, primarily due to an increase in auto liability insurance costs relating to unfavorable claims severity largely related to two recent claims, as well as higher cargo and collision losses in 2023 compared to 2022.

• Other general expenses decreased $68.4 million, or 32%, year over year, primarily due to a $57.0 million adverse settlement related to a lawsuit with former owners of WSL in 2022, lower professional service fees, and a decrease in driver onboarding costs due to lower cost per hire and fewer driver hires due to market conditions.

These items were partially offset by an increase in bad debt expense.

Total Other Expenses (Income)

Total other income decreased $4.7 million in the year ended December 31, 2022 compared to 2021, primarily due to a $7.9 million decrease in pre-tax equity investment net gains as we recorded $13.7 million in pre-tax net gains in 2022 compared to $21.6 million in 2021.

Total other income increased $6.1 million in the year ended December 31, 2023 compared to 2022, driven primarily by pre-tax net gains on our equity investments of $19.7 million in 2023 compared to $13.7 million in 2022 and an increase in interest income of $4.1 million due to higher interest rates.

These factors were partially offset by an increase in interest expense of $4.6 million due to higher debt balances in 2023 compared to 2022.

See Note 5, Investments , for more information on our equity investments.

Income Tax Expense

Our provision for income taxes increased $9.6 million, approximately 7%, in the year ended December 31, 2022 compared to 2021 due to higher taxable income.

Our effective income tax rate was 24.2% for the year ended December 31, 2022 and 25.2% in 2021.

Our provision for income taxes decreased $78.6 million, approximately 54%, in the year ended December 31, 2023 compared to 2022 due to lower taxable income and a lower effective income tax rate.

Our effective income tax rate was 22.1% for the year ended December 31, 2023 compared to 24.2% in 2022 with the decrease driven by valuation allowance changes and increases in tax credits for new electric vehicles and qualified research and development costs.

While we anticipate that our ongoing effective tax rate will be 24.0% - 25.0%, our provision for income taxes may fluctuate in future periods to the extent there are changes to tax laws and regulations.

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Acquisition-related costs 0.9 0.3

Goodwill impairment — 10.6

Property gain—net — (50.9)

Amortization of intangible assets 2.7 —

Sale of business — 5.0

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• Network - Transportation services of one-way shipments.

MLS and deBoer impacts are included within dedicated operations beginning in the first and third quarters of 2022, respectively.

The Truckload KPIs for the year ended December 31, 2021, do not contemplate the impacts of our acquisition of MLS on December 31, 2021.

As of December 31, 2021, MLS operated approximately 900 tractors and 3,600 trailers.

M&M and deBoer impacts are included within dedicated operations beginning in the third quarters of 2023 and 2022, respectively.

Year Ended December 31,

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Average trucks (2) (3)

10,607 10,449

Revenue per truck per week (4)

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(7) Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Truckload revenues (excluding fuel surcharge) increased $301.7 million, approximately 16%, in the year ended December 31, 2022 compared to 2021 due to an 8% increase in rate per loaded mile realized in response to the impacts of inflation on operating costs and challenges at customer locations resulting in longer dwell times, partially offset by reduced network productivity, and a 7% increase in volume driven by the acquisition of MLS and new business start-ups within dedicated, partially offset by lower network volume mainly due to driver capacity constraints and moderating market demand.

Truckload income from operations increased $67.5 million, approximately 24%, in the year ended December 31, 2022 compared to 2021.

Factors contributing to the increase in income from operations include favorable pricing conditions, a $50.9 million net gain related to the sale of the Company’s Canadian facility, and additional dedicated volumes inclusive of the MLS acquisition.

These items were partially offset by lower volumes within network;

an increase in driver-related costs resulting from pay increases, actions taken to attract and retain drivers, and an increase in company drivers within dedicated;

lower gains from equipment sales;

higher maintenance costs due to inflationary cost pressures;

and additional depreciation expense incurred as a result of truck and trailer growth.

T ruckload revenues (excluding fuel surcharge) decreased $80.9 million , approximately 4%, for the year ended December 31, 2023 compared to 2022.

Rate per loaded mile decreased 7% due to market conditions, which was partially offset by a 3% increase in volume largely driven by increased volume within dedicated due to organic and acquisitive growth.

Truckload income from operations decreased $181.5 million, approximately 52%, in the year ended December 31, 2023 compared to 2022.

Factors contributing to the decrease in income from operations included a $50.9 million net gain related to the sale of the Company’s Canadian facility in 2022, higher driver pay due to additional drivers in dedicated as a result of new business growth and the M&M acquisition, and incremental depreciation due to business growth, inflationary cost pressures on equipment, and M&M.

Additional bad debt expense and higher claims costs due to an increase in severity also contributed to the decrease.

These items were partially offset by lower owner-operator and third-party carrier costs and higher gains on equipment sales, primarily due to an increase in the number of units sold.

The following table presents the KPIs for our Intermodal segment for the periods indicated.

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(4) Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Intermodal revenues (excluding fuel surcharge) increased $144.3 million, approximately 13%, in the year ended December 31, 2022 compared to 2021.

Revenue per order increased $319, or 13%, and orders increased 1% driven primarily by strong but moderating market conditions during 2022.

This was partially offset by shorter length of haul due to growth in the East which typically has a lower length of haul and revenue per order.

Intermodal income from operations increased $9.9 million, approximately 6%, in the year ended December 31, 2022 compared to 2021 mainly due to factors impacting revenues discussed above, partially offset by higher rail-related costs largely related to the impact of network fluidity issues, increased fuel expenses, and increased driver-related costs to attract and retain drivers.

Intermodal revenues (excluding fuel surcharge) decreased $236.7 million, approximately 18%, in the year ended December 31, 2023 compared to 2022.

This was driven by a decrease in revenue per order of $315, or 11%, primarily due to a decrease in price and a change in mix.

Additionally, orders decreased 8% driven by market conditions.

Intermodal income from operations decreased $94.1 million, approximately 57%, in the year ended December 31, 2023 compared to 2022 mainly due to factors impacting revenues discussed above, partially offset by lower rail-related costs and dray execution costs resulting from the mix of company driver drays.

The following table presents the KPI for our Logistics segment for the periods indicated.

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(1) Calculated as segment operating expenses divided by segment revenues (excluding fuel surcharge) including revenue in transit and related expenses at the operating segment level.

Logistics revenues (excluding fuel surcharge) increased $147.5 million, approximately 8%, in the year ended December 31, 2022 compared to 2021.

This increase was mainly the result of 8% volume growth within our brokerage business driven by supportive market conditions during the first half of 2022, expansion of our Power Only offering and Schneider FreightPower® digital platform, and additional port dray revenues in the first half of 2022.

This was partially offset by a decrease in revenue per order.

Logistics income from operations increased $48.8 million, approximately 53%, in the year ended December 31, 2022 compared to 2021, primarily due to net revenue per order improvements within our brokerage business and volume growth, as cited above.

Included in Other was a loss from operations of $58.1 million in the year ended December 31, 2022 compared to income of $1.4 million in 2021.

The change was primarily due to a $57.0 million adverse settlement related to a lawsuit with former owners of WSL, a $5.2 million expense related to an adverse audit assessment over the applicability of state sales tax, and a $5.0 million loss related to the sale of the Asia business in 2022.

In 2021, we received a refund of $13.5 million for excise taxes paid in a 2020 audit assessment that was subsequently overturned, partially offset by a $10.6 million goodwill impairment recorded for our Asia reporting unit.

Logistics revenues (excluding fuel surcharge) decreased $562.5 million, approximately 29%, in the year ended December 31, 2023 compared to 2022.

This was mainly the result of a decrease in revenue per order and volume within our brokerage business.

Port dray revenues decreased as well due to reduced freight volume and improved port fluidity in 2023.

Logistics income from operations decreased $95.3 million, approximately 67%, in the year ended December 31, 2023 compared to 2022.

Net revenue per order decreased primarily due to the factors related to revenue discussed above, partially offset by a decrease in third-party transportation costs as both volume and per order costs decreased.

Included in Other was income from operations of $8.8 million in the year ended December 31, 2023 compared to a loss of $58.1 million in 2022.

The change was primarily due to a $57.0 million adverse settlement related to a lawsuit with former owners of WSL in 2022, a decrease in performance-based incentive compensation expense, $5.2 million of expense related to an adverse audit assessment over the applicability of state sales tax in 2022, and a $5.0 million loss related to the sale of the Asia business in 2022.

This was partially offset by lower income from operations in our leasing business and $2.9 million of additional interest and penalties related to the sales tax audit assessment.

See Note 13, Commitments and Contingencies , for more information.

LIQUIDITY AND CAPITAL RESOURCES

Our primary uses of cash are working capital requirements, capital expenditures, dividend payments, and debt service requirements.

Our primary uses of cash are working capital requirements, capital expenditures, dividend payments, share repurchases, and debt service requirements.

Additionally, we may use cash for acquisitions and other investing and financing activities.

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Historically, our primary source of liquidity has been cash flow from operations.

In addition, we have a $250.0 million revolving credit facility and a $150.0 million accounts receivable facility, for which our combined available capacity as of December 31, 2022 was $322.8 million.

We anticipate that cash generated from operations, together with amounts available under our credit facilities, will be sufficient to meet our requirements for the foreseeable future.

In addition, we have a $250.0 million revolving credit facility maturing in November 2027 and a $150.0 million receivables purchase agreement maturing in July 2024, for which our combined available capacity as of December 31, 2023 was $213.2 million.

Our revolving credit facility also allows us to request an additional increase in total commitment by up to $150.0 million.

We had maximum borrowings under the facilities of $141.0 million during the year ended December 31, 2023.

We anticipate that cash generated from operations, together with amounts available under our credit and receivables purchase agreement, will be sufficient to meet our requirements for the foreseeable future.

To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that we will obtain these funds through additional borrowings, equity offerings, or a combination of these potential sources of liquidity.

Our ability to fund future operating expenses and capital expenditures, as well as our ability to meet future debt service obligations or refinance our indebtedness, will depend on our future operating performance, which will be affected by general economic, financial, and other factors beyond our control.

The following table presents our cash and cash equivalents, marketable securities, and outstanding debt as of the dates shown.

The following table presents our cash and cash equivalents, marketable securities, and outstanding debt and finance lease obligations as of the dates shown.

(in millions) December 31, 2023 December 31, 2022

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Senior notes $ 185.0 $ 205.0

Receivables purchase agreement 60.0 —

Credit agreement 45.0 —

Finance leases 12.1 10.1

Total debt $ 215.1 $ 270.3

Total debt and finance lease obligations $ 302.1 $ 215.1

At December 31, 2023, we were in compliance with all financial covenants under our credit agreements and the agreements governing our senior notes.

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Operating Activities

Net cash provided by operating activities increased $290.3 million, approximately 51%, during 2022 compared to 2021.

The increase was a result of an increase in net income adjusted for various noncash charges and a decrease in cash used for working capital.

Working capital changes were driven by an increase in cash provided by trade accounts receivable, primarily resulting from a decrease in trade accounts receivable during 2022 compared to an increase in 2021, as well as prior year’s $30.7 million payment of payroll taxes deferred under the CARES Act, partially offset by a decrease in accounts payable.

Net cash provided by operating activities decreased $176.4 million, approximately 21%, during 2023 compared to 2022.

The decrease was a result of a decrease in net income adjusted for various noncash charges and an increase in cash used for working capital.

Working capital changes were driven by an increase in cash used for other liabilities largely related to the decrease in accrued performance-based incentive compensation along with a decrease in cash provided by other receivables, partially offset by a decrease in cash used for other assets and payables and an increase in cash provided by trade accounts receivable which corresponds with the decrease in revenues.

Investing Activities

Net cash used in investing activities decreased $27.6 million, approximately 4%, during 2022 compared to 2021.

The decrease in cash used relates primarily to a $239.6 million decrease in amounts used for acquisitions and sale of business, net of cash, partially offset by an increase in net capital expenditures and additional investments in equity securities in 2022.

Net cash used in investing activities increased $308.8 million, approximately 52%, during 2023 compared to 2022.

The increase was primarily driven by an increase in cash used for acquisitions related to the 2023 acquisition of M&M and an increase in net capital expenditures.

Net Capital Expenditures

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Net capital expenditures increased $112.1 million in 2023 compared to 2022.

The increase was driven by a $135.7 million increase in purchases of transportation equipment mainly due to growth capital and higher costs for new equipment and a $51.5 million decrease in proceeds from the sale of property and equipment.

The decrease in proceeds is primarily due to fewer equipment sales, partially offset by the sale of our Canadian facility in the first quarter of 2022.

The increase was driven by a $125.0 million increase in purchases of transportation equipment driven by replacement equipment reducing tractor age of fleet, growth capital, and higher costs for new equipment.

Proceeds from the sale of property and equipment were comparable year over year as 2023 had more proceeds from equipment sales compared to 2022 which included the proceeds from the sale of the Canada property.

The year over year increase in proceeds from equipment sales was largely due to the increased quantity of units sold.

We currently anticipate 2024 net capital expenditures to be $400.0 - $450.0 million.

Financing Activities

Net cash used in financing activities increased $26.3 million, approximately 29%, during 2022 compared to 2021.The main driver of the increase in net cash used was a $60.0 million repayment of a private placement note in 2022 compared to 2021’s $40.0 million repayment of a private placement note.

Other Considerations That Could Affect Our Results, Liquidity, and Capital Resources

Net cash used in financing activities decreased $61.0 million, approximately 52%, during 2023 compared to 2022 primarily due to $105.0 million of net proceeds from our revolving credit agreements and $50.0 million of proceeds from long-term debt in 2023, partially offset by $66.9 million of treasury stock repurchases, $10.0 million of additional private placement note repayments in 2023, and an additional $7.9 million of dividend payments.

Off-Balance Sheet Arrangements

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Contractual Obligations

As of December 31, 2022, we had contractual obligations related to our long-term debt of $205.0 million and $14.2 million for principal borrowings and interest, respectively, which become due through 2025.

As of December 31, 2023, we had contractual obligations related to our long-term debt, inclusive of our credit and receivables purchase agreement, of $290.0 million and $20.8 million for principal borrowings and interest, respectively, which become due through 2027.

See Note 7, Debt and Credit Facilities , for additional information regarding our debt obligations.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of our consolidated financial statements in accordance with GAAP requires that management make estimates and assumptions that impact the amounts reported in our consolidated financial statements and accompanying notes.

The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that impact the amounts reported in our consolidated financial statements and accompanying notes.

Therefore, these estimates and assumptions affect reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent liabilities.

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The primary claims arising for the Company 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 self-insurance levels for these various areas

of risk and have established reserves to cover self-insured liabilities.

We maintain self-insurance levels for these various areas of risk and have established reserves to cover self-insured liabilities.

The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, policy exhaustion, and claim type.

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Goodwill is evaluated for impairment annually at the reporting unit level, or more frequently if events or circumstances indicate the carrying value is not recoverable.

A reporting unit can be a segment or business within a segment.

A reporting unit can be a segment or business within a segment, and reporting units can be aggregated to the extent they share similar economic characteristics.

When reviewing goodwill for impairment, we consider the amount of excess fair value over the carrying value of each reporting unit, the period of time since a reporting unit’s last quantitative test, the extent a reorganization or disposition changes the composition of one or more of our reporting units, and other factors to determine whether or not to first perform a qualitative test.

When performing a qualitative test, we assess numerous factors to determine whether it is more likely than not that the fair value of our reporting units is less than their respective carrying values.

When performing a qualitative test, we assess numerous factors to determine whether it is more likely than not that the fair values of our reporting units are less than their respective carrying values.

Examples of qualitative factors that are assessed include our share price, financial performance, market and competitive factors in our industry, and other events specific to our reporting units.

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These assumptions could be adversely impacted by certain risks discussed earlier in this document.

The Company acquired MLS on December 31, 2021 and deBoer on June 7, 2022.

As a result of these acquisitions, the Company recorded additions to our goodwill of $104.3 million and $6.1 million, respectively.

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.

We completed the required annual goodwill impairment assessment for our three reporting units with goodwill as of October 31, 2022 using quantitative assessments.

The fair values of our VTL/Dedicated Services and Import/Export reporting units were substantially in excess of their respective carrying value.

The fair value of our MLS reporting unit exceeded its carrying value by less than 5%.

The determination of fair value of MLS was based on the discounted cash flow, guideline public company, and guideline transaction methods using key assumptions included in the table below.

An increase in the discount rate, decrease in the long-term growth rate or projected profitability if future financial performance doesn't meet management's expectations, or reduction in market multiples for comparable companies may result in the carrying value of this reporting unit exceeding its fair value which would result in an impairment of goodwill recorded for the MLS reporting unit.

MLS’s operating performance has exceeded expectations since acquisition, and recent new business wins have made a positive impact on future projections.

MLS Goodwill Key Assumptions October 31, 2022

Discount rate (1)

Long-term revenue growth rate (2)

Valuation multiples (3)

(1) The discount rate is based on the Company’s Weighted Average Cost of Capital.

(2) The long-term revenue growth rate applied to the terminal period in our discounted cash flow was 3.0%.

In the forecasted periods leading up to the terminal period, the revenue growth rates ranged from approximately 3.0% to 17.0% based on our current estimates for growth in those periods.

Securing a significant new customer in early 2023 resulted in forecasted revenue growth of 17% for 2023.

(3) The EBITDA valuation multiples were selected considering the size, profitability, and growth of comparative public companies.

The Company acquired M&M in 2023 and deBoer in 2022.

As a result of these acquisitions, we recorded additions to our goodwill of $103.5 million and $6.1 million, respectively, within the VTL-Dedicated reporting unit.

Prior to the fourth quarter of 2023, the Company had three reporting units with goodwill subject to impairment testing:

MLS, VTL-Dedicated, and Import/Export.

Quantitative goodwill impairment tests were performed for all three reporting units as of October 31, 2023, and their fair values were substantially in excess of their respective carrying values.

With the expansion of our dedicated business through recent acquisition, we reorganized the operating segments within Truckload into Dedicated;

and Bulk during the fourth quarter of 2023.

As a result of this segment reorganization, we aggregated the MLS and VTL-Dedicated components, as they share similar economic characteristics, and tested the goodwill at the Dedicated operating segment level.

The fair value of the Dedicated operating segment goodwill was also substantially in excess of its carrying value.

Going forward, our goodwill impairment test will be performed at the Dedicated operating segment level.

There were no triggering events identified from the date of our assessment through December 31, 2023 that would require an update to our annual impairment test.

If future operating performance of our VTL/Dedicated Services, MLS, or Import/Export reporting units is below our expectations, or there are changes to forecasted growth rates or our cost of capital, a decline in the fair value of the reporting units could result, and we may be required to record a goodwill impairment charge.

If future operating performance of our Dedicated or Import/Export reporting units is below our expectations, or there are changes to forecasted growth rates or our cost of capital, a decline in the fair value of the reporting units could result, and we may be required to record a goodwill impairment charge.

See Note 6, Goodwill and Other Intangible Assets, for more information.

Business Combinations

We record assets acquired and liabilities assumed in a business combination under the purchase method of accounting where consideration is first assigned to identifiable assets and liabilities based on estimated fair values, with any excess recorded as goodwill.

We record assets acquired and liabilities assumed in a business combination under the acquisition method of accounting where consideration is first assigned to identifiable assets and liabilities based on estimated fair values, with any excess recorded as goodwill.

During the measurement period, which is up to one year from the acquisition date, we may adjust provisional amounts that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date.

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Significant estimates and assumptions, including recent sales prices of similar equipment, asset condition, and current and anticipated market trends, were used in determining the fair values of these assets.

The assistance of an independent third-party valuation firm was used to determine the estimated fair values and useful lives of finite-lived intangible assets including customer relationships and trademarks.

Valuation methods used were based on income-based approaches including the multi-period excess earnings method and relief from royalty method for customer relationships and trademarks, respectively.

Non-compete agreements were recorded based on amounts paid at closing.

Assumptions used in the intangible valuations include forecasted revenue growth rates, future cash flows, useful lives of intangible assets acquired, and our cost of capital.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis