What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-21 compared with 2024-02-23 · 130 added, 113 removed, 320 unchanged (43% of the section changed)

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Recent Developments

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.

On December 2, 2024, the Company completed the acquisition of Cowan Systems, a privately held truckload carrier based in Baltimore, Maryland.

Cowan Systems provides mainly dedicated and logistics services for retail and manufacturing customers that complement our operations.

The operating results of Cowan Systems are reported in Dedicated and Logistics operations as part of our Truckload and Logistics segments beginning on the closing date of the acquisition.

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

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.

We believe our competitive strengths position us to pursue our strategy as follows:

We believe our competitive strengths position us to pursue

our strategy as follows:

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

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

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 via our Power Only offering.

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

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We are positioned to leverage our scalable platform and experienced operations team to acquire high-quality businesses that meet our disciplined selection criteria to enhance our service offerings and broaden our customer base.

Create a differentiated driver and associate experience that enables us to attract and retain top talent at all levels

Create differentiated driver and associate experiences that enable us to attract and retain top talent at all levels

Our people are our strongest assets, and we believe they are key to growing our customer base and driving our performance.

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attract, develop, engage, and retain the best talent in the industry.

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.

We strive for a high-performance culture that seeks individuals who are passionate about our business and commit to work together in an inclusive and collaborative environment.

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

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

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In this section of our report, we present the following non-GAAP financial measures:

(1) revenues (excluding fuel surcharge), (2) adjusted income from operations, (3) adjusted operating ratio, and (4) adjusted net income.

(1) revenues (excluding fuel surcharge), (2) adjusted income from operations, (3) adjusted total operating expenses, net of fuel surcharge revenues, (4) adjusted operating ratio, (5) adjusted net income, (6) adjusted EBITDA, and (7) free cash flow.

We also provide reconciliations of these measures to the most directly comparable financial measures calculated and presented in accordance with GAAP.

Management believes the use of each of these non-GAAP measures assists investors in understanding our business by (1) removing the impact of items from our operating results that, in our opinion, do not reflect our core operating performance, (2) providing investors with the same information our management uses internally to assess our core operating performance, and (3) presenting comparable financial results between periods.

In addition, in the case of revenues (excluding fuel surcharge), we believe the measure is useful to investors because it isolates volume, price, and cost changes directly related to industry demand and the way we operate our business from the external factor of fluctuating fuel prices and the programs we have in place to manage such fluctuations.

In addition, in the case of revenues (excluding fuel surcharge) and adjusted total operating expenses, net of fuel surcharge revenues, we believe these measures are useful to investors because they isolate volume, price, and cost changes directly related to industry demand and the way we operate our business from the external factor of fluctuating fuel prices and the programs we have in place to manage such fluctuations.

Fuel-related costs and their impact on our industry are important to our results of operations, but they are often independent of other, more relevant factors affecting our results of operations and our industry.

Free cash flow is used as a measure to assess overall liquidity and does not represent residual cash flow available for discretionary expenditures as it excludes certain mandatory expenditures such as repayment of maturing debt.

Although we believe these non-GAAP measures are useful to investors, they have limitations as analytical tools and may not be comparable to similar measures disclosed by other companies.

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Operating ratio 96.9 % 94.6 %

Adjusted total operating expenses, net of fuel surcharge revenues (3)

4,542.1 4,511.7

Adjusted operating ratio (4)

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Adjusted net income (5)

Adjusted EBITDA (6)

Cash flow from operations 686.1 680.0

Free cash flow (7)

(1) We define “revenues (excluding fuel surcharge)” as operating revenues less fuel surcharge revenues, which are excluded from revenues at the segment level.

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Excluded items for the periods shown are explained in the table and notes below.

(3) We define “adjusted operating ratio” as operating expenses, adjusted to exclude material items that do not reflect our core operating performance, divided by revenues (excluding fuel surcharge).

(3) We define “adjusted total operating expenses, net of fuel surcharge revenues” as total operating expenses, adjusted to exclude fuel surcharge revenues and certain expenses that do not reflect our core operating performance.

Excluded expenses for the periods shown are explained below under our explanation of “adjusted income from operations.”

(4) We define “adjusted operating ratio” as total operating expenses, adjusted to exclude material items that do not reflect our core operating performance, divided by revenues (excluding fuel surcharge).

Included below is a reconciliation of operating ratio, which is the most directly comparable GAAP measure, to adjusted operating ratio.

Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”

Excluded expenses for the periods shown are explained below under our explanation of “adjusted income from operations.”

(5) We define “adjusted net income” as net income, adjusted to exclude material items that do not reflect our core operating performance.

Included below is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted net income.

Excluded items for the periods shown are explained below under our explanation of “adjusted income from operations.”

Excluded expenses for the periods shown are explained below under our explanation of “adjusted income from operations.”

(6) We define “adjusted EBITDA” as net income, adjusted to exclude net interest expense, our provision for income taxes, depreciation and amortization, and certain items that do not reflect our core operating performance.

Included below is a reconciliation of net income, which is the most directly comparable GAAP measure, to adjusted EBITDA.

(7) We define “free cash flow” as net cash provided by operating activities less net cash used for capital expenditures.

Included below is a reconciliation of net cash provided by operating activities, which is the most directly comparable GAAP measure, to free cash flow.

Revenues (excluding fuel surcharge)

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Acquisition-related costs (2)

Property gain—net (4)

Amortization of intangible assets (3)

Sale of business (6)

Adjusted income from operations $ 172.2 $ 302.9

(1) Includes a $57.0 million charge for an adverse settlement related to a lawsuit with former owners of WSL, inclusive of prejudgment interest and the former owners’ attorneys’ fees, for the year ended December 31, 2022.

(1) Includes $2.9 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, 2023.

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

(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.

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

Refer to Note 2, Acquisitions , for additional details.

(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.

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

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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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(in millions, except ratios) 2024 2023

Total operating expenses $ 5,202.5 $ 6,004.0

GAAP Presentation

Operating revenues $ 5,290.5 $ 5,498.9

Total operating expenses 5,125.3 5,202.5

Income from operations $ 165.2 $ 296.4

Operating ratio (1)

96.9 % 94.6 %

Non-GAAP Presentation

Operating revenues $ 5,290.5 $ 5,498.9

Fuel surcharge revenues 576.2 684.3

Revenues (excluding fuel surcharge) $ 4,714.3 $ 4,814.6

Total operating expenses $ 5,125.3 $ 5,202.5

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Acquisition-related costs (2.0) (0.9)

Property gain—net — 50.9

Amortization of intangible assets (5.0) (2.7)

Sale of business — (5.0)

Adjusted total operating expenses $ 4,511.7 $ 5,124.9

Operating revenues $ 5,498.9 $ 6,604.4

Fuel surcharge revenues 684.3 862.5

Revenues (excluding fuel surcharge) $ 4,814.6 $ 5,741.9

Adjusted total operating expenses, net of fuel surcharge revenues (2)

$ 4,542.1 $ 4,511.7

Adjusted operating ratio (3)

96.3 % 93.7 %

(1) Calculated as total operating expenses divided by operating revenues.

(2) Adjusted total operating expenses, net of fuel surcharge revenues are defined as total operating expenses, adjusted to exclude fuel surcharge revenues and certain expenses that do not reflect our core operating performance.

(3) Calculated as adjusted total operating expenses, net of fuel surcharge revenues divided by revenues (excluding fuel surcharge).

Adjusted net income

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Acquisition-related costs 2.0 0.9

Property gain—net — (50.9)

Amortization of intangible assets 5.0 2.7

Sale of business — 5.0

Income tax effect of non-GAAP adjustments (1)

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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.

Adjusted EBITDA

(in millions) 2024 2023

Net income $ 117.0 $ 238.5

Interest expense, net 12.3 7.2

Provision for income taxes 35.2 67.6

Depreciation and amortization 413.7 382.5

Litigation and audit assessments — 2.9

Acquisition-related costs 2.0 0.9

Adjusted EBITDA $ 580.2 $ 699.6

Free cash flow

(in millions) 2024 2023

Net cash provided by operating activities $ 686.1 $ 680.0

Purchases of transportation equipment (414.0) (660.1)

Purchases of other property and equipment (65.1) (42.3)

Proceeds from sale of property and equipment 98.8 128.6

Net capital expenditures (380.3) (573.8)

Free cash flow $ 305.8 $ 106.2

Year Ended December 31, 2024 Compared to Year Ended December 31, 2023

Enterprise Results Summary

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.

Enterprise net income decreased $121.5 million, approximately 51%, for the year ended December 31, 2024 compared to 2023, driven by a $131.2 million decrease in income from operations and a $22.7 million unfavorable change in total other expense (income)—net primarily related to our equity investments, partially offset by the corresponding decrease in the provision for income taxes.

Pre-tax equity investment net gains were $2.3 million and $19.7 million for 2024 and 2023, respectively.

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

Adjusted net income decreased $121.1 million, approximately 50%, for the same reasons discussed above.

Components of Enterprise Net Income

Enterprise Revenues

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

Enterprise operating revenues decreased $208.4 million, approximately 4%, for the year ended December 31, 2024 compared to 2023.

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 $112.4 million decrease in Logistics segment revenues (excluding fuel surcharge) driven by decreased revenue per order and a decline in brokerage volumes related to freight market conditions, partially offset by revenues recorded from the Cowan Systems acquisition;

• a $108.1 million decrease in fuel surcharge revenues resulting from decreased fuel prices in 2024 compared to 2023;

• 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%.

• a $15.0 million decrease in Truckload segment revenues (excluding fuel surcharge) driven by declines within our Network business mainly from decreases in Network trucks, partially offset by Dedicated growth, including the M&M and Cowan Systems acquisitions, and increases in Dedicated revenue per truck per week;

• a $9.5 million decrease in Intermodal segment revenues (excluding fuel surcharge) related to a decrease in revenue per order, partially offset by an increase in volume.

Enterprise revenues (excluding fuel surcharge) decreased $100.3 million, approximately 2% for the same reasons discussed above, excluding fuel surcharge.

Enterprise Income from Operations and Operating Ratio

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.

Enterprise income from operations decreased $131.2 million, approximately 44%, for the year ended December 31, 2024 compared to 2023, primarily due to a decrease in net revenue per order in Logistics, rate per loaded mile and volume within Network, revenue per order in Intermodal, and volume declines within our brokerage business.

Other factors were an increase in cost of goods sold in our leasing business, increased insurance premiums and claims reserves, increased depreciation due to higher revenue equipment counts and cost per unit, and reduced gains on revenue equipment sales.

These decreases were partially offset by an increase in Dedicated volumes from organic and acquisitive growth, inclusive of the M&M and Cowan Systems acquisitions, increased rate per total mile in Dedicated, increased volumes within Intermodal, reduced purchased transportation costs, and lower other general expenses driven by improvements in bad debt experience and professional fee spend.

Adjusted income from operations decreased $130.7 million, approximately 43%.

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Key operating expense fluctuations are described below.

• 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.

• Purchased transportation decreased $193.2 million, or 9%, 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 a decline in owner-operator purchased transportation costs from a reduction in owner-operator capacity within Truckload.

• Salaries, wages, and benefits increased $50.6 million, or 4%, year over year.

Apart from the effects of the M&M and Cowan Systems acquisitions, salaries, wages, and benefits were comparable to the prior year as incentives and healthcare increases were partially offset by lower wages.

• Fuel and fuel taxes for company trucks decreased $39.2 million, or 9%, year over year, driven by a decrease in cost per gallon, partially offset by an increase in company driver miles within Dedicated.

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

• 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.

• Depreciation and amortization increased $31.2 million, or 8%, year over year, mainly due to additional depreciation expense resulting from trailer and tractor growth within Dedicated (inclusive of Cowan and M&M), ongoing impacts from the increased cost of equipment, and incremental depreciation and amortization expense related to the M&M and Cowan Systems acquisitions.

• Operating supplies and expenses—net increased $60.5 million, or 11%, year over year, driven by higher cost of goods sold in our leasing business due to an increase in lease adds and a reduction in gains on equipment sales due to a decrease in average sales price per unit.

These factors were partially offset by lower rail storage expense and a decrease in equipment rental expense as a result of improved port fluidity.

• Insurance and related expenses increased $37.2 million, or 33%, year over year, primarily due to an increase in auto liability insurance costs related to an increase in premiums and claims development arising from prior claim periods.

• Other general expenses decreased $24.3 million, or 16%, year over year, largely related to improvements in bad debt experience and a decrease in professional services.

Total Other Expenses (Income)

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.

Total other income decreased $22.7 million for the year ended December 31, 2024 compared to 2023, driven by pre-tax net gains on our equity investments of $2.3 million in 2024 compared to $19.7 million in 2023.

Interest income decreased $2.7 million in 2024 compared to 2023 primarily due to lower rates and less excess cash invested in marketable securities, and interest expense increased $2.4 million due to increased borrowings.

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

Income Tax Expense

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.

Our provision for income taxes decreased $32.4 million, approximately 48%, for the year ended December 31, 2024 compared to 2023 due to lower taxable income, partially offset by a higher effective income tax rate.

Our effective income tax rate was 23.1% for the year ended December 31, 2024 compared to 22.1% in 2023.

While we anticipate that our ongoing effective tax rate will be 23.0% - 24.0%, 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 2.0 0.9

Property gain—net — (50.9)

Amortization of intangible assets 5.0 2.7

Sale of business — 5.0

Adjusted income from operations $ 172.2 $ 302.9

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• Network - Transportation services of one-way shipments.

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

Cowan Systems’ dedicated operations and M&M impacts are included in Dedicated beginning in the fourth quarter of 2024 and third quarter of 2023, respectively.

Year Ended December 31,

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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.

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.

T ruckload revenues (excluding fuel surcharge) increased $15.0 million , approximately 1%, for the year ended December 31, 2024 compared to 2023.

Dedicated volume increased 6% due to organic new business growth and the acquisitions of M&M and Cowan Systems, offset by a reduction in Network volume and rate per loaded mile related to market conditions.

Truckload income from operations decreased $81.6 million, approximately 48%, for the year ended December 31, 2024 compared to 2023.

Factors contributing to the decrease include the revenue impacts of Network listed above and increases in depreciation expense as a result of growth within Dedicated (including the M&M and Cowan Systems acquisitions), insurance premium expense and additional reserves from claims developments arising from prior claims periods, and a decrease in gains on equipment sales.

These decreases were partially offset by an increase in Dedicated revenue per truck per week, reduced purchased transportation costs arising from a reduction in owner-operator capacity, and lower other general expenses related to professional fees and bad debts.

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) 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.

Intermodal revenues (excluding fuel surcharge) decreased $9.5 million, approximately 1%, for the year ended December 31, 2024 compared to 2023.

This was driven by market conditions which led to a decrease in revenue per order of $56, or 2%, partially offset by an increase in volume.

Intermodal income from operations decreased $16.5 million, approximately 23%, for the year ended December 31, 2024 compared to 2023 mainly resulting from the decreased revenue per order, partially offset by improved dray productivity.

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

Cowan Systems’ logistics operations are included in Logistics beginning in December 2024.

Year Ended December 31,

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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) 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.

Logistics revenues (excluding fuel surcharge) decreased $112.4 million, approximately 8%, for the year ended December 31, 2024 compared to 2023.

This was mainly the result of decreases in revenue per order and volume within our brokerage business, as well as reduced port dray revenues, partially offset by revenues recorded for the logistics operations for Cowan Systems.

Logistics income from operations decreased $13.2 million, approximately 29%, for the year ended December 31, 2024 compared to 2023 primarily due to reductions in net revenue per order and volume, partially offset by the Cowan acquisition.

Other income from operations decreased $19.9 million for the year ended December 31, 2024 compared to the same period in 2023 driven by a decrease in earnings within our leasing business, partially offset by $2.9 million of additional interest and penalties related to the sales tax audit assessment recorded in the second quarter of 2023.

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

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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 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.

In addition, we have a $250.0 million revolving credit facility maturing in November 2027 and a $200.0 million receivables purchase agreement maturing in May 2027, for which our combined available capacity as of December 31, 2024 was $281.8 million.

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

We also have a $400.0 million delayed-draw term loan facility with available capacity of $100.0 million as of December 31, 2024 and available to be drawn through August 2025.

We anticipate that cash generated from operations, together with amounts available under our credit and receivables purchase agreements and delayed-draw term loan facility, 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.

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Credit agreement — 45.0

Delayed-draw term loan facility 300.0 —

Finance leases 8.4 12.1

Total debt and finance lease obligations $ 523.4 $ 302.1

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

On December 31, 2024, we were in compliance with all financial covenants under our credit agreements and the agreements governing our senior notes.

See Note 7, Debt and Credit Facilities , for information about our financing arrangements.

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Net cash used in investing activities (791.5) (907.6)

Net cash used in financing activities (55.7) (116.7)

Net cash provided by (used in) financing activities 120.6 (55.7)

Operating Activities

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.

Net cash provided by operating activities increased $6.1 million, approximately 1%, during 2024 compared to 2023.

The increase resulted from of an increase in cash provided by working capital, mostly offset by a decrease in net income adjusted for various noncash charges.

Working capital changes were driven by increases in cash provided by other liabilities related to timing of payments for accrued wages and incentive compensation;

receivables primarily from tax receivables offset partially by changes to trade receivables and bad debt adjustments;

claims reserves from higher auto insurance accruals;

and other assets.

Investing Activities

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 cash used in investing activities decreased $116.1 million, approximately 13%, during 2024 compared to 2023.

The decrease was primarily driven by a decrease in net capital expenditures and purchases of lease equipment, partially offset by an increase in cash used for acquisitions related to the 2024 acquisition of Cowan Systems compared to 2023 acquisition of M&M.

Net Capital Expenditures

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Net capital expenditures $ 380.3 $ 573.8

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

Net capital expenditures decreased $193.5 million in 2024 compared to 2023.

The decrease was driven by a $246.1 million decrease in purchases of transportation equipment mainly due to higher spend on growth and replacement equipment in 2023, partially offset by $31.1 million of real estate purchases related to Cowan Systems in 2024.

Proceeds from sale of property and equipment decreased year over year primarily due to lower proceeds per sale.

We currently anticipate 2025 net capital expenditures to be $400.0 - $450.0 million.

Financing Activities

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.

Net cash provided by financing activities increased $176.3 million, approximately 317%, during 2024 compared to 2023 primarily due to an increase of $250.0 million in proceeds from long-term debt used to partially fund the acquisition of Cowan Systems, a $37.3 million decrease in treasury stock repurchases, and a $30.0 million decrease in payments on our senior notes, partially offset by a $121.0 million decrease in proceeds from our revolving credit agreements and a $19.0 million increase in payments on our revolving credit agreements.

Off-Balance Sheet Arrangements

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We are substantially self-insured for loss of and damage to our owned and leased equipment.

The current claims settlement environment within the industry has resulted in excess insurance carriers decreasing coverage and increasing premiums.

As a result of this trend, we may experience increases in our insurance and claims expense.

The current claims litigation and settlement environment within the industry has resulted in increases in our insurance premiums and claims expense, as well as excess insurance carriers decreasing coverage.

Our reserves represent accruals for the estimated self-insured and reinsured portions of pending claims, including adverse development of known claims, as well as incurred but not reported claims.

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The actual cost to settle our self-insured claim liabilities can differ from our reserve estimates because of a number of uncertainties, including the inherent difficulty in estimating the severity of a claim and the potential amount to defend and settle a claim.

At December 31, 2023 and 2022, we had an accrual of $178.4 million and $164.9 million, respectively, for estimated claims net of reinsurance receivables.

As of December 31, 2024 and 2023, we had net accruals of $236.6 million and $178.4 million, respectively, for estimated claims inclusive of $54.2 million and $3.5 million of reinsurance receivables.

We have significant exposure to fluctuations in the number and severity of claims.

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Our insurance and claims personnel work directly with representatives from the insurance companies to provide updated estimates of the potential loss associated with each tendered claim.

The ultimate cost of a claim is developed over time as additional information regarding the nature, timing, and extent of damages claimed becomes available.

To expand our business offerings, we have, on occasion, acquired other companies.

The ultimate cost of a claim is developed over time as additional information regarding the nature, timing, and extent of damages claimed becomes

To expand our business offerings, we have, acquired other companies.

In a business combination, the consideration is first assigned to identifiable assets and liabilities based on estimated fair values, with any excess recorded as goodwill.

Determining fair value requires significant estimates and assumptions based on an evaluation of a number of factors, such as marketplace participants, history, future expansion and profitability expectations, amount and timing of future cash flows, and the discount rate applied to the cash flows.

rate applied to the cash flows.

Goodwill is not amortized but is assessed for impairment at least annually and more frequently if a triggering event indicates that impairment may exist.

Our goodwill balance at December 31, 2023 and 2022 was $331.7 million and $228.2 million, respectively.

Our goodwill balance as of December 31, 2024 and 2023 was $377.9 million and $331.7 million, respectively.

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.

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

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.

The Company acquired Cowan Systems on December 2, 2024 and M&M on August 1, 2023.

As a result of these acquisitions, we recorded additions to goodwill of $46.2 million and $103.5 million, respectively, within the Dedicated reporting unit.

The amount for Cowan Systems is preliminary and may be adjusted as we finalize our purchase price allocations.

We completed the required annual goodwill impairment assessment for our two reporting units with goodwill as of October 31, 2024 using quantitative assessments.

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

There were no triggering events identified from the date of our assessment through December 31, 2024 that would require updates to our annual impairment test.

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.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis