ARCBEST CORP DE

Previous wording

Our consolidated revenues, which totaled $1,036.4 million for the three months ended March 31, 2024, decreased 6.3% compared to the same prior-year period. The revenue decline is primarily attributable to lower market rates for our Asset-Light shipping and logistics services in a softer market environment, and a decrease in our Asset-Based daily tonnage levels. The lower tonnage levels are due to fewer daily shipments and lower weight per shipment experienced within the network, compared to the prior-year period, despite an increase in demand for our core, published LTL business during the first quarter of 2024 following market disruption, as further discussed below. The year-over-year decrease in consolidated revenues for the three months ended March 31, 2024 reflects a decrease in our Asset-Based revenues of 3.8%, and a decrease in Asset-Light revenues of 9.5%. The increased elimination of revenues reported in the “Other and eliminations” line of consolidated revenues for the three months ended March 31, 2024, compared to the same period of 2023, includes the impact of increased intersegment business levels among our operating segments.

Current wording

Our consolidated revenues, which totaled $1,077.8 million and $2,114.3 million for the three and six months ended June 30, 2024, respectively, decreased 2.3% and 4.3%, respectively, compared to the same prior-year periods. The revenue decline is primarily attributable to lower market rates for our Asset-Light shipping and logistics services in a soft market environment, and a decrease in our Asset-Based daily tonnage levels. The lower tonnage levels are due to fewer daily shipments and lower weight per shipment experienced within the network, compared to the prior-year period, despite an increase in demand for our core, published LTL business during the first half of 2024 following market disruption, as further discussed below. The year-over-year decrease in consolidated revenues for the three and six months ended June 30, 2024 reflects decreases in our Asset-Based revenues of 1.3% and 2.5%, respectively, and decreases in Asset-Light revenues of 3.4% and 6.6%, respectively. The increased elimination of revenues reported in the “Other and eliminations” line of consolidated revenues for the three and six months ended June 30, 2024, compared to the same periods of 2023, includes the impact of increased intersegment business levels among our operating segments.

Previous wording

The decrease in revenues of our Asset-Light segment for the three months ended March 31, 2024, compared to the same prior-year period, was impacted by a 19.7% decline in revenue per shipment associated with softer market conditions and changes in business mix, partially offset by a 13.6% increase in shipments per day. Our Asset-Light segment generated approximately 37% and 39% of our total revenues before other revenues and intercompany eliminations for the three months ended March 31, 2024 and 2023, respectively.

Current wording

The decrease in revenues of our Asset-Light segment for the three and six months ended June 30, 2024, compared to the same prior-year periods, was impacted by a 14.9% and 17.4% decline in revenue per shipment, respectively, associated with soft market conditions and changes in business mix, partially offset by a 12.6% and 13.1% increase in shipments per day, respectively. Our Asset-Light segment generated approximately 36% of our total revenues before other revenues and intercompany eliminations for both the three and six months ended June 30, 2024, respectively, compared to 36% and 37%, respectively, for the same periods of 2023.

Previous wording

Consolidated operating income totaled $22.4 million for the three months ended March 31, 2024, compared to $21.2 million for the same period of 2023. The year-over-year improvement in operating income reflects a decrease in operating expenses due to lower purchased transportation costs in both of our operating segments and lower employee costs in the Asset-Light segment from continued alignment of costs to business levels, offset partially by higher employee costs in the Asset-Based segment due to union wage and benefit rate increases. Segment operating expenses are further described in the Asset-Based Segment Results and Asset-Light Segment Results sections of Results of Operations. In addition to the results of our operating segments, the year-over-year comparison of consolidated operating income was also impacted by items described in the following paragraphs.

Current wording

Consolidated operating income totaled $48.8 million and $71.3 million for the three and six months ended June 30, 2024, respectively, compared to $42.1 million and $63.3 million, respectively, for the same period of 2023. The year-over-year improvement in operating income reflects a decrease in operating expenses due to lower purchased transportation costs in both of our operating segments and lower employee costs in the Asset-Light segment from continued alignment of costs to business levels, offset partially by higher employee costs in the Asset-Based segment due to union wage and benefit rate increases. Segment operating expenses are further described in the Asset-Based Segment Results and Asset-Light Segment Results sections of Results of Operations. In addition to the results of our operating segments, the year-over-year comparison of consolidated operating income was also impacted by items described in the following paragraphs.

Previous wording

Innovative technology costs impacted our consolidated operating results for the three months ended March 31, 2024 and our consolidated and Asset-Based segment results for the same period of 2023. In March 2023, we publicly launched our customer offering of Vaux™ – the innovative suite of hardware and software which modernizes and transforms how freight is loaded, unloaded, and transferred in warehouse and dock operations. In February 2024, we announced the next step in our Vaux suite – Vaux Smart Autonomy™, which combines autonomous mobile robot forklifts and reach trucks, intelligent software, and remote teleoperation capability to autonomously handle materials movement within warehouses, distribution centers, and manufacturing facilities, while being monitored by humans. Certain costs related to our growing number of Vaux pilot programs in customer test locations and other initiatives to optimize our performance through technological innovation are reported in the “Other and eliminations” line of consolidated operating income. For the three months ended March 31, 2023, innovative technology costs also included our freight handling pilot test program at ABF Freight, as further discussed in the Asset-Based Segment Results section. Our combined innovative technology costs impacted consolidated operating results by a total of $9.7 million (pre-tax), or $7.4 million (after-tax) and $0.31 per diluted share, for first quarter 2024, compared to $12.5 million (pre-tax), or $9.5 million (after-tax) and $0.38 per diluted share, for first quarter 2023.

Current wording

Innovative technology costs impacted our consolidated operating results for the three and six months ended June 30, 2024 and our consolidated and Asset-Based segment results for the same periods of 2023. In March 2023, we publicly launched our customer offering of Vaux™ – the innovative suite of hardware and software which modernizes and transforms how freight is loaded, unloaded, and transferred in warehouse and dock operations. In February 2024, we announced the next step in our Vaux suite – Vaux Smart Autonomy™, which combines autonomous mobile robot forklifts and reach trucks, intelligent software, and remote teleoperation capability to autonomously handle materials movement within warehouses, distribution centers, and manufacturing facilities, while being monitored by humans. Certain costs related to our growing number of Vaux pilot programs in customer test locations and other initiatives to optimize our performance through technological innovation are reported in the “Other and eliminations” line of consolidated operating income. For the three and six months ended June 30, 2023, innovative technology costs also included our freight handling pilot test program at ABF Freight, as further discussed in the Asset-Based Segment Results section. Our combined innovative technology costs decreased consolidated operating results by a total of $8.3 million (pre-tax), or $6.4 million (after-tax) and $0.27 per diluted share, for second quarter 2024, compared to $14.8 million (pre-tax), or $11.2 million (after-tax) and $0.45 per diluted share, for second quarter 2023. For the six months ended June 30, 2024, these costs decreased consolidated results by a total of $18.0 million (pre-tax), or $13.8 million (after-tax) and $0.58 per diluted share, compared to $27.3 million (pre-tax), or $20.7 million (after-tax) and $0.83 per diluted share, for the same period of 2023.

Previous wording

The liability for contingent earnout consideration recorded for the MoLo® acquisition is remeasured at each quarterly reporting date, and any change in fair value as a result of the recurring assessments is recognized in operating income. Consolidated operating results decreased by $7.3 million (pre-tax), or $5.5 million (after-tax) and $0.23 per diluted share, due to quarterly remeasurement which resulted in a higher liability of the contingent earnout consideration for the three months ended March 31, 2024. For the three months ended March 31, 2023, the quarterly remeasurement decreased consolidated operating results by $15.0 million (pre-tax), or $11.3 million (after-tax) and $0.45 per diluted share. Remeasurement of the contingent earnout consideration is further described within Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

The liability for contingent earnout consideration recorded for the MoLo® acquisition is remeasured at each quarterly reporting date, and any change in fair value as a result of the recurring assessments is recognized in operating income. For the second quarter of 2024, consolidated operating results decreased by $3.9 million (pre-tax), or $2.9 million (after-tax) and $0.12 per diluted share, due to quarterly remeasurement which resulted in a higher liability of the contingent earnout consideration, compared to an increase of $10.0 million (pre-tax), or $7.5 million (after-tax) and $0.30 per diluted share for the second quarter of 2023. For the six months ended June 30 2024, the quarterly remeasurement decreased consolidated operating results by $11.2 million (pre-tax), or $8.4 million (after-tax) and $0.35 per diluted share, compared to a decrease of $5.0 million (pre-tax), or $3.8 million (after-tax) and $0.15 per diluted share for the same period of 2023. Remeasurement of the contingent earnout consideration is further described within Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

For the three months ended March 31, 2024, consolidated net loss and earnings per share were impacted by a one-time, noncash impairment charge of $21.6 million (after-tax), or $0.90 per diluted share, to write off our equity investment in Phantom Auto, a provider of human-centered remote operation software, which ceased operations during the first quarter of 2024. This charge was recognized in “Other, net” within “Other income (costs).” The write-off of our equity investment is further described within Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

For the six months ended June 30, 2024, consolidated net loss and earnings per share were impacted by a one-time, noncash impairment charge of $21.6 million (after-tax), or $0.90 per diluted share, to write off our equity investment in Phantom Auto, a provider of human-centered remote operation software, which ceased operations during the first quarter of 2024.

Previous wording

compensation awards, and other changes in the effective tax rate as described within the Income Taxes section of MD&A. A portion of our variable life insurance policies have investments, through separate accounts, in equity and fixed income securities and, therefore, are subject to market volatility. Changes in the cash surrender value of life insurance policies, which are reported below the operating income line in the consolidated statements of operations, increased consolidated net income by $1.2 million, or $0.05 per diluted share, for the three months ended March 31, 2024, compared to $1.5 million, or $0.06 per diluted share, for the same prior-year period. The vesting of restricted stock units resulted in a tax benefit of $0.5 million, or $0.02 per diluted share, for the three months ended March 31, 2024, compared to $1.1 million, or $0.04 per diluted share, for the same prior-year period.

Current wording

In addition to the above items, the year-over-year changes in consolidated net income and earnings per share were impacted by changes in the cash surrender value of variable life insurance policies, tax benefits from the vesting of share-based compensation awards, and other changes in the effective tax rate as described within the Income Taxes section of MD&A. A portion of our variable life insurance policies have investments, through separate accounts, in equity and fixed income securities and, therefore, are subject to market volatility. Changes in the cash surrender value of life insurance policies, which are reported below the operating income line in the consolidated statements of operations, increased consolidated net income by $0.4 million, or $0.02 per diluted share, and $1.7 million, or $0.07 per diluted share, for the three and six months ended June 30, 2024, respectively, compared to $1.1 million, or $0.04 per diluted share, and $2.6 million, or $0.10 per diluted share, for the same respective prior-year periods. The vesting of restricted stock units resulted in a tax benefit of $10.8 million, or $0.45 per diluted share, and $11.3 million, or $0.47 per diluted share, for the three and six months ended June 30, 2024, respectively, compared to a tax benefit of $3.9 million, or $0.16 per diluted share, and $4.9 million, or $0.20 per diluted share, for the same periods of 2023.

Previous wording

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance. These measures provide meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of our operating performance, because it excludes amortization of acquired intangibles and software of the Asset-Light segment and changes in the fair value of contingent earnout consideration and our equity investment, which are significant expenses resulting from strategic decisions or other factors rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Fourth Amended and Restated Credit Agreement (see Note G to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q). Other companies may calculate Adjusted EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Adjusted EBITDA should not be construed as a better measurement than operating income, operating cash flow, net income (loss), or earnings per share, as determined under GAAP. The following table presents a reconciliation of Adjusted EBITDA to our net income (loss) from continuing operations, which is the most directly comparable GAAP measure for the periods presented.

Current wording

We report our financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, such as Adjusted EBITDA, utilized for internal analysis provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance. These measures provide meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Accordingly, using these measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Adjusted EBITDA as a key measure of performance and for business planning. The measure is particularly meaningful for analysis of our operating performance, because it excludes amortization of acquired intangibles and software of the Asset-Light segment and changes in the fair value of contingent earnout consideration and our equity investment, which are significant expenses resulting from strategic decisions or other factors rather than core daily operations. Additionally, Adjusted EBITDA is a primary component of the financial covenants contained in our Fourth Amended and Restated Credit Agreement (see Note G to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q). Other companies may calculate Adjusted EBITDA differently; therefore, our calculation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Adjusted EBITDA should not be construed as a better measurement than operating income, net income (loss), or earnings per share, as determined under GAAP. The following table presents a reconciliation of Adjusted EBITDA to our net income from continuing operations, which is the most directly comparable GAAP measure for the periods presented.

Previous wording

America’s largest less-than-truckload (“LTL”) carriers. Our customers trust the LTL solutions ABF Freight has provided for over a century and rely on our unwavering commitment to quality, safety, and customer service to solve their transportation challenges through market disruptions and rapidly changing economic conditions. We are strategically investing in our Asset-Based operations and leveraging technology to drive efficiency and productivity. We are also committed to deepening our customer relationships as we help customers navigate current and future challenges.

Current wording

The Asset-Based segment consists of ABF Freight System, Inc., a wholly owned subsidiary of ArcBest Corporation, and certain other subsidiaries. Our Asset-Based segment provides freight transportation services through one of North America’s largest less-than-truckload (“LTL”) carriers. Our customers trust the LTL solutions ABF Freight has provided for over a century and rely on our unwavering commitment to quality, safety, and customer service to solve their transportation challenges through market disruptions and rapidly changing economic conditions. We are strategically investing in our Asset-Based operations and leveraging technology to drive efficiency and productivity. We are also committed to deepening our customer relationships as we help customers navigate current and future challenges.

Previous wording

Our Asset-Based operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2023 Annual Report on Form 10-K. See Note J to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of the Asset-Based segment and additional segment information, including revenues, operating expenses, and operating income for the three months ended March 31, 2024 and 2023.

Current wording

Our Asset-Based operations are affected by general economic conditions, as well as a number of other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2023 Annual Report on Form 10-K. See Note J to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of the Asset-Based segment and additional segment information, including revenues, operating expenses, and operating income for the three and six months ended June 30, 2024 and 2023.

Previous wording

Pounds per shipment (weight per shipment) – total weight of shipments processed during the period in U.S. pounds divided by the number of shipments during the period.

Current wording

Weight per shipment – total weight of shipments processed during the period in U.S. pounds divided by the number of shipments during the period.

Previous wording

Other companies within our industry may present different key performance indicators or operating statistics, or they may calculate their measures differently; therefore, our key performance indicators or operating statistics may not be comparable to similarly titled measures of other companies. Key performance indicators or operating statistics should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators or operating statistics should not be construed as better measurements of our results than operating income, operating cash flow, net income, or earnings per share, as determined under GAAP.

Current wording

Other companies within our industry may present different key performance indicators or operating statistics, or they may calculate their measures differently; therefore, our key performance indicators or operating statistics may not be comparable to similarly titled measures of other companies. Key performance indicators or operating statistics should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators or operating statistics should not be construed as better measurements of our results than operating income, net income, or earnings per share, as determined under GAAP.

Previous wording

As of March 2024, approximately 82% of our Asset-Based segment’s employees were covered under the ABF National Master Freight Agreement (the “2023 ABF NMFA”), the collective bargaining agreement with the International Brotherhood of Teamsters (the “IBT”), which will remain in effect through June 30, 2028. The terms of the 2023 ABF NMFA continue to provide some of the best wages and benefits in the industry to our contractual employees. The combined contractual wage and benefits top hourly rate is estimated to increase approximately 4.2% on a compounded annual basis through the end of the agreement, with potential profit-sharing bonuses representing additional costs under the 2023 ABF NMFA.

Current wording

As of June 2024, approximately 81% of our Asset-Based segment’s employees were covered under the ABF National Master Freight Agreement (the “2023 ABF NMFA”), the collective bargaining agreement with the International Brotherhood of Teamsters (the “IBT”), which will remain in effect through June 30, 2028. The terms of the 2023 ABF NMFA continue to provide some of the best wages and benefits in the industry to our contractual employees. The combined contractual wage and benefits top hourly rate is estimated to increase approximately 4.2% on a compounded annual basis through the end of the agreement, with potential profit-sharing bonuses representing additional costs under the 2023 ABF NMFA. The contractual wage rate under the 2023 ABF NMFA increased effective July 1, 2024, and the health, welfare, and pension benefit contribution rate increased effective primarily on August 1, 2024, resulting in a combined contractual wage and benefits top hourly rate increase of approximately 2.7%.

Previous wording

Asset-Based segment revenues for the three months ended March 31, 2024, totaled $671.5 million, compared to $697.8 million for the same period of 2023. The decrease in revenues, compared to the prior-year period, primarily reflects a decrease in tonnage per day related to a softer market environment, partially offset by changes in the Asset-Based business mix in response to market conditions. Billed revenue (as described in the Asset-Based Segment Overview) decreased 3.8% on a per-day basis for the three months ended March 31, 2024, compared to the same period of 2023, primarily reflecting a 16.8% decrease in tonnage per day, partially offset by a 15.6% increase in billed revenue per hundredweight, including fuel surcharges for first quarter 2024. The decrease in revenues, compared to the prior-year period, also reflects the decrease in fuel surcharge revenue associated with lower fuel prices. The number of workdays was fewer by half of a day in the first quarter of 2024, versus the first quarter of 2023.

Current wording

Asset-Based segment revenues for the three and six months ended June 30, 2024, totaled $712.7 million and $1,384.2 million, respectively, compared to $722.0 million and $1,419.8 million, respectively, for the same periods of 2023. The decrease in revenues, compared to the prior-year periods, primarily reflects a decrease in tonnage per day related to a strategic decision to decrease transactional LTL-rated shipments and the soft market environment, partially offset by an increase in core, published LTL-rated shipments, in response to market conditions. Billed revenue (as described in the Asset-Based Segment Overview) decreased 1.9% and 2.8%, respectively, on a per-day basis for the three and six months ended June 30, 2024, compared to the same periods of 2023, primarily reflecting a 20.3% and 18.6% decrease, respectively, in tonnage per day, partially offset by a 23.0% and 19.4% increase, respectively, in billed revenue per hundredweight, including fuel surcharges. The number of workdays was greater by half of a day in the second quarter of 2024, versus the second quarter of 2023, and was the same for the first half of 2024, compared to 2023.

Previous wording

The 16.8% decrease in tonnage per day for the three months ended March 31, 2024, compared to the same prior-year period, reflects lower daily shipment levels and a decrease in average weight per shipment on both LTL-rated and truckload-rated shipments, primarily related to changes in Asset-Based business mix and smaller shipment sizes for our core customers. We have strategically decreased our transactional LTL-rated shipments allowing us to focus on our core published LTL-rated business as demand improved during the current-year period primarily due to the market disruption related to the shutdown of a large LTL carrier at the end of July 2023.

Current wording

The 20.3% and 18.6% decrease in tonnage per day for the three and six months ended June 30, 2024, respectively, compared to the same prior-year periods, reflects lower daily shipment levels and a decrease in average weight per shipment on both LTL-rated and truckload-rated shipments, primarily related to changes in Asset-Based business mix and smaller shipment sizes for our core customers. We have strategically decreased our transactional LTL-rated shipments allowing us to focus on our core, published LTL-rated business as demand continued to improve following the market disruption related to the shutdown of a large LTL carrier at the end of July 2023.

Previous wording

The 15.6% increase in total billed revenue per hundredweight, including fuel surcharges, for first quarter 2024, compared to first quarter 2023, was driven by improved pricing on fewer dynamic LTL-rated and truckload-rated shipments and the positive impact of changes in mix, as core, published LTL-rated tonnage represented a higher proportion of Asset-Based business in first quarter 2024. The increase in total billed revenue per hundredweight was also impacted by lower weight per shipment due to the changes in business mix. The percentage change in billed revenue per hundredweight, including fuel surcharges, on LTL-rated freight was a low-double digit increase for the three months ended March 31, 2024, compared to the same period of 2023. Lower fuel surcharge revenue associated with decreased fuel prices, compared to the prior-year period, negatively impacted the billed revenue per hundredweight measure during the three months ended March 31, 2024. The pricing environment for LTL shipments continues to be rational. Pricing on core, published LTL-rated business, excluding fuel surcharges, increased by a percentage in the low-single digits for the three months ended March 31, 2024, compared to the same period of 2023. Prices on accounts subject to deferred pricing agreements and annually negotiated contracts which were renewed during the three months ended March 31, 2024, increased approximately 5.3%, compared to the same period of 2023. The Asset-Based segment implemented general rate increases on its LTL base rate tariffs of 5.9% effective on both October 2, 2023 and November 7, 2022, although the rate changes vary by lane and shipment characteristics.

Current wording

The 23.0% and 19.4% increase in total billed revenue per hundredweight, including fuel surcharges, for the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, was driven by improved pricing on fewer dynamic LTL-rated and truckload-rated shipments and the positive impact of changes in mix, as core, published LTL-rated tonnage represented a larger proportion of Asset-Based business with higher pricing in the three and six months ended June 30, 2024. The increase in total billed revenue per hundredweight was also impacted by lower weight per shipment due to the changes in business mix. Higher fuel surcharge revenue associated with the change in business mix, offset partially by lower fuel prices, compared to the prior-year periods, positively impacted the billed revenue per hundredweight measure during the three and six months ended June 30, 2024. The pricing environment for LTL shipments continues to be rational. Pricing on core, published LTL-rated business, excluding fuel surcharges, increased by a percentage in the low-single digits for the three and six months ended June 30, 2024, compared to the same periods of 2023. Prices on accounts subject to deferred pricing agreements and annually negotiated contracts which were renewed during the three and six months ended June 30, 2024, increased approximately 5.1% and 5.2%, respectively, compared to the same periods of 2023. The Asset-Based segment implemented a general rate increase on its LTL base rate tariffs of 5.9% effective on October 2, 2023, although the rate changes vary by lane and shipment characteristics.

Previous wording

The Asset-Based segment’s average nominal fuel surcharge rate decreased by approximately 5 percentage points in the three-month period ended March 31, 2024, compared to the same period of 2023. During periods of changing diesel fuel prices, the fuel surcharge and associated direct diesel fuel costs also vary by differing degrees. Depending upon the rates of these changes and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. Whether fuel prices fluctuate or remain constant, operating results may be adversely affected if competitive pressures limit our ability to recover fuel surcharges. In periods of declining fuel prices, fuel surcharge percentages also decrease, which negatively impacts the total billed revenue per hundredweight measure and, consequently, revenues. The revenue decline may be disproportionate to the change in our fuel costs. The segment’s operating results will continue to be impacted by further changes in fuel prices and related fuel surcharges.

Current wording

and the impact on costs in other fuel- and energy-related areas, operating margins could be impacted. Whether fuel prices fluctuate or remain constant, operating results may be adversely affected if competitive pressures limit our ability to recover fuel surcharges. In periods of declining fuel prices, fuel surcharge percentages also decrease, which negatively impacts the total billed revenue per hundredweight measure and, consequently, revenues. The revenue decline may be disproportionate to the change in our fuel costs. The segment’s operating results will continue to be impacted by further changes in fuel prices and related fuel surcharges.

Previous wording

The Asset-Based segment generated operating income of $53.5 million for the three months ended March 31, 2024, compared to $47.5 million for the same period of 2023. The Asset-Based segment’s operating ratio improved by 1.2 percentage points for the three months ended March 31, 2024, compared to the same prior-year period, primarily reflecting decreased operating expenses and cost control efforts to reduce utilization of outside resources, as further discussed in the following paragraphs.

Current wording

The Asset-Based segment generated operating income of $72.8 million and $126.2 million for the three and six months ended June 30, 2024, respectively, compared to $43.3 million and $90.8 million, respectively, for the same periods of 2023. The Asset-Based segment’s operating ratio improved by 4.2 percentage points and 2.7 percentage points, respectively, for the three and six months ended June 30, 2024, compared to the same prior-year periods, primarily reflecting decreased operating expenses and cost control efforts to reduce utilization of outside resources and to optimize internal resources and total cost per mile to serve the business, as further discussed in the following paragraphs.

Previous wording

Labor costs, which are reported in operating expenses as salaries, wages, and benefits, amounted to 51.4% of Asset-Based segment revenues for the three-month period ended March 31, 2024, compared to 48.1% for the same period of 2023. The increase in salaries, wages, and benefits as a percentage of revenue for the three months ended March 31, 2024, compared to the same prior-year period, was more than offset by lower utilization of purchased transportation as discussed later in this section. The increase in salaries, wages, and benefits as a percentage of revenue was also influenced by the effect of lower revenues. Salaries, wages, and benefits increased $9.4 million for the three months ended March 31, 2024, compared to the same period of 2023, primarily due to a 13% increase in union wages related to the wage and mileage rate increases effective July 1, 2023 under the 2023 ABF NMFA, as previously discussed in the Assed-Based Revenues section, partially offset by a decrease in headcount to align with lower shipment levels. The increases in labor costs also reflect year-over-year increases in contractual benefit contribution rates under the labor agreements with the IBT. The average health, welfare, and pension benefit contribution rate increased approximately 3.6% and 2.5%, effective primarily on August 1, 2023 and 2022, respectively.

Current wording

Labor costs, which are reported in operating expenses as salaries, wages, and benefits, amounted to 49.5% and 50.4% of Asset-Based segment revenues for the three- and six-month periods ended June 30, 2024, respectively, compared to 47.7% and 47.9%, respectively, for the same periods of 2023. The increase in salaries, wages, and benefits as a percentage of revenue for the three and six months ended June 30, 2024, compared to the same prior-year periods, was more than offset by lower utilization of purchased transportation as discussed later in this section. Salaries, wages, and benefits increased $8.1 million and $17.5 million for the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily due to a 13% increase in union wages related to the wage and mileage rate increases effective July 1, 2023 under the 2023 ABF NMFA, as previously discussed in the Assed-Based Revenues section, partially offset by improved productivity as measured by shipments per DSY hour and a decrease in headcount to align with lower shipment levels. The increases in labor costs also reflect year-over-year increases in contractual benefit contribution rates under the labor agreements with the IBT. The average health, welfare, and pension benefit contribution rate increased approximately 3.7% effective primarily on August 1, 2023.

Previous wording

The Asset-Based segment manages costs with shipment levels; however, a number of factors impact DSY productivity, including the effect of freight profile and mix changes, utilization of local delivery agents, and personnel efficiency. Shipments per DSY hour increased 2.6% for the three months ended March 31, 2024, compared to the same period of 2023, primarily due to a decrease in dynamic LTL-price-quoted shipments, which typically require a higher number of stops, during the first quarter of 2024. For the three months ended March 31, 2024, the year-over-year decrease in pounds per mile of 4.6% reflects lower weight per shipment, partially offset by an improvement in linehaul productivity and an increase in the average length of haul.

Current wording

The Asset-Based segment manages costs with shipment levels; however, a number of factors impact DSY productivity, including the effect of freight profile and mix changes, utilization of local delivery agents, and efficiency of personnel. Shipments per DSY hour improved 7.4% and 5.0% for the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily due to a decrease in dynamic LTL-price-quoted shipments, which typically require a higher number of stops, during the three and six months ended June 30, 2024. The improvement in shipments per DSY hour is also partially attributable to the separation of city operations from certain distribution centers in late 2023 and during the first half of 2024 and training and development at certain key locations, as the process compliance team continues to implement operational best practices throughout the Asset-Based network. For the three and six months ended June 30, 2024, the year-over-year decrease in pounds per mile of 4.2% and 4.4%, respectively, reflects lower weight per shipment, partially offset by an increase in the average length of haul.

Previous wording

Fuel, supplies, and expenses as a percentage of revenue decreased 1.4 percentage points during the three months ended March 31, 2024, compared to the same period of 2023. Fuel expense decreased during the 2024 period, as the Asset-Based segment’s average fuel price per gallon (excluding taxes) decreased 10.7% for the three months ended March 31, 2024, compared to the same period of 2023. Lower city tractor age contributed to the decrease in costs to repair and maintain revenue equipment units during first quarter 2024, compared to first quarter 2023.

Current wording

Fuel, supplies, and expenses as a percentage of revenue decreased 1.0 percentage point and 1.3 percentage points during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Fuel expense decreased during the 2024 periods, as the Asset-Based segment’s average fuel price per gallon (excluding taxes) decreased 1.9% and 6.6%, respectively, for the three and six months ended June 30, 2024, compared to the same period of 2023. Lower city tractor age contributed to the decrease in costs to repair and maintain revenue equipment units during the first half of 2024, compared to the first half of 2023.

Previous wording

Rents and purchased transportation as a percentage of revenue decreased 3.2 percentage points for the three months ended March 31, 2024, compared to the same period of 2023, primarily due to focused reduction in the utilization of local delivery agents and linehaul purchased transportation. Rail miles decreased approximately 16% for the three months ended March 31, 2024, compared to the same period of 2023.

Current wording

Rents and purchased transportation as a percentage of revenue decreased 4.2 percentage points and 3.8 percentage points for the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily due to focused reduction in the utilization of local delivery agents and linehaul purchased transportation. Rail miles decreased

Previous wording

The hardware portion of the freight handling pilot test program (the “pilot”) at certain ABF Freight distribution centers was paused during third quarter 2023. The Asset-Based segment did not incur innovative technology costs related to the pilot in first quarter 2024, while these costs totaled $6.1 million in first quarter 2023, resulting in a decrease of 0.9 percentage point as a percentage of revenue for the three months ended March 31, 2024, compared to the same period of 2023.

Current wording

The hardware portion of the freight handling pilot test program (the “pilot”) at certain ABF Freight distribution centers was paused during third quarter 2023. The Asset-Based segment did not incur innovative technology costs related to the pilot in either the three- and six-month period ended June 30, 2024, while these costs totaled $8.3 million and $14.4 million, respectively, during the three and six months ended June 30, 2023, resulting in a decrease as a percentage of revenue of 1.1 percentage points and 1.0 percentage point, respectively.

Previous wording

Our Asset-Light operations are affected by general economic conditions, as well as several other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2023 Annual Report on Form 10-K. See Note J to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for descriptions of the Asset-Light segment and additional segment information, including revenues, operating expenses, and operating loss for the three months ended March 31, 2024 and 2023.

Current wording

Our Asset-Light operations are affected by general economic conditions, as well as several other competitive factors that are more fully described in Item 1 (Business) and in Item 1A (Risk Factors) of Part I of our 2023 Annual Report on Form 10-K. See Note J to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for descriptions of the Asset-Light segment and additional segment information, including revenues, operating expenses, and operating income (loss) for the three and six months ended June 30, 2024 and 2023.

Previous wording

Other companies within our industry may present different key performance indicators or they may calculate their key performance indicators differently; therefore, our key performance indicators may not be comparable to similarly titled measures of other companies. Key performance indicators should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators should not be construed as better measurements of our results than operating income, operating cash flow, net income, or earnings per share, as determined under GAAP.

Current wording

Other companies within our industry may present different key performance indicators or they may calculate their key performance indicators differently; therefore, our key performance indicators may not be comparable to similarly titled measures of other companies. Key performance indicators should be viewed in addition to, and not as an alternative for, our reported results. Our key performance indicators should not be construed as better measurements of our results than operating income, net income, or earnings per share, as determined under GAAP.

Previous wording

Asset-Light segment revenues decreased 9.5% to $396.4 million for the three months ended March 31, 2024, compared to $438.1 million for the same respective period of 2023. Current year results have been impacted by lower average revenue per shipment associated with a softer market environment and changes in business mix. Excess capacity in the truckload market continues to impact spot market rates resulting in lower revenue per shipment and compressed margins. Although average daily shipment levels increased due to growth in managed transportation service offerings despite weak market demand, lower revenue per shipment drove the reduction in revenue compared to the prior-year period.

Current wording

Asset-Light segment revenues decreased 3.4% to $395.8 million and decreased 6.6% to $792.2 million for the three and six months ended June 30, 2024, respectively, compared to $409.8 million and $847.9 million for the same respective periods of 2023. Current year results have been impacted by lower average revenue per shipment associated with a soft market environment and changes in business mix. Excess capacity in the truckload market continues to impact spot market rates resulting in lower revenue per shipment and compressed margins. While average daily shipment levels increased from growth in managed transportation service offerings despite weak market demand, lower revenue per shipment drove the reduction in revenue compared to the prior-year period.

Previous wording

March 31, 2024 and $15.0 million for the same period of 2023. The year-over-year decline in operating results reflects the lower revenues along with changes in operating expenses discussed in the following paragraphs.

Current wording

The Asset-Light segment generated an operating loss of $9.5 million and $24.8 million for the three and six months ended June 30, 2024, respectively, compared to operating income of $13.2 million for the three months ended June 30, 2023 and an operating loss of $0.9 million for the six months ended June 30, 2023. The year-over-year decline in operating results reflects the lower revenues along with changes in fair value of contingent earnout consideration related to the MoLo acquisition and operating expenses discussed in the paragraphs below. Changes in the fair value of contingent consideration increased expenses by $3.9 million and $11.2 million for the three and six months ended June 30, 2024. These changes in fair value reduced expenses by $10.0 million in the second quarter of 2023 and increased expenses by $5.0 million for the first half of 2023.

Previous wording

Operating expenses decreased $40.6 million for the three months ended March 31, 2024, compared to the same prior-year period, but increased as a percentage of revenue by 0.6 percentage point, due to lower revenues in the first quarter of 2024.

Current wording

Operating expenses increased $8.7 million for the three months ended June 30, 2024 and decreased $31.9 million during the first half of 2024, compared to the same prior-year periods, but increased as a percentage of revenue by 5.6 percentage points and 3.0 percentage points in the same respective periods, influenced by the effect of lower revenues in the three and six months ended June 30, 2024.

Previous wording

Purchased transportation buy rates have declined in the softer market environment. Although the purchased transportation cost was $26.0 million lower, as a percentage of revenue, it increased by 2.3 percentage points for the three months ended March 31, 2024, compared to the same period of 2023. This increase as a percentage of revenue was due, in part, to weather events in January 2024. Changes in market capacity impact the cost of purchased transportation and may not correspond to the timing of revisions to customer pricing and revenue per shipment. There can be no assurance that we will be able to secure prices from our customers that will allow us to maintain or improve our margins on the cost of sourcing carrier capacity.

Current wording

Purchased transportation costs increased as a percentage of revenue by 2.0 percentage points and 2.2 percentage points for the three and six months ended June 30, 2024, respectively, compared to the same respective periods of 2023, due to the impact of lower revenues. However, these costs were $3.9 million and $29.9 million lower than the prior-year period for the three and six months ended June 30, 2024, respectively as purchased transportation buy rates have declined in the soft market environment. Changes in market capacity impact the cost of purchased transportation and may not correspond to the timing of revisions to customer pricing and revenue per shipment. There can be no assurance that we will be able to secure prices from our customers that will allow us to maintain or improve our margins on the cost of sourcing carrier capacity.

Previous wording

Salaries, wages and benefits, decreased $4.6 million and as a percentage of revenue decreased by 0.4 percentage point, for the three months ended March 31, 2024, compared to the same prior-year period, as the segment continued its efforts to align resources with business levels.

Current wording

Salaries, wages and benefits, decreased as a percentage of revenue by 0.1 percentage point and 0.3 percentage point, or $1.4 million and $6.2 million, for the three and six months ended June 30, 2024, respectively, compared to the same prior-year periods, as the segment continued to align resources with business levels.

Previous wording

Contingent earnout consideration, as previously described, decreased as a percentage of revenue by 1.6 percentage points for the three months ended March 31, 2024, compared to the same prior-year period. The contingent earnout consideration is discussed further in Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Current wording

Contingent earnout consideration, as previously described, increased as a percentage of revenue by 3.4 percentage points and 0.8 percentage point for the three and six months ended June 30, 2024, respectively, compared to the same prior-year periods. The contingent earnout consideration is discussed further in Note B to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Previous wording

We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP performance measures and ratios, such as Asset-Light Adjusted EBITDA, which is utilized for internal analysis, provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance. These measures provide meaningful comparisons between current and prior period results, as well as important information regarding performance trends. The use of certain non-GAAP measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Asset-Light Adjusted EBITDA as a key measure of performance and for business planning. This measure is particularly meaningful for analysis of our Asset-Light segment, because it excludes amortization of acquired intangibles and software and changes in the fair value of contingent earnout consideration, which are significant expenses or gains resulting from strategic decisions or other factors rather than core daily operations. Management also believes Asset-Light Adjusted EBITDA to be relevant and useful information, as EBITDA is a standard measure commonly reported and widely used by analysts, investors, and others to measure financial performance of asset-light businesses and the ability to service debt obligations. Other companies may calculate adjusted EBITDA differently; therefore, our calculation of Asset-Light Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Asset-Light Adjusted EBITDA should not be construed as a better measurement than operating income (loss), operating cash flow, net income, or earnings per share, as determined under GAAP.

Current wording

We report our financial results in accordance with GAAP. However, management believes that certain non-GAAP performance measures and ratios, such as Asset-Light Adjusted EBITDA, which is utilized for internal analysis, provide analysts, investors, and others the same information that we use internally for purposes of assessing our core operating performance. These measures provide meaningful comparisons between current and prior period results, as well as important information regarding performance trends. The use of certain non-GAAP measures improves comparability in analyzing our performance because it removes the impact of items from operating results that, in management’s opinion, do not reflect our core operating performance. Management uses Asset-Light Adjusted EBITDA as a key measure of performance and for business planning. This measure is particularly meaningful for analysis of our Asset-Light segment, because it excludes amortization of acquired intangibles and software and changes in the fair value of contingent earnout consideration, which are significant expenses or gains resulting from strategic decisions or other factors rather than core daily operations. Management also believes Asset-Light Adjusted EBITDA to be relevant and useful information, as EBITDA is a standard measure commonly reported and widely used by analysts, investors, and others to measure financial performance of asset-light businesses and the ability to service debt obligations. Other companies may calculate adjusted EBITDA differently; therefore, our calculation of Asset-Light Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our reported results. Asset-Light Adjusted EBITDA should not be construed as a better measurement than operating income (loss), net income, or earnings per share, as determined under GAAP.

Previous wording

Economic conditions continue to be challenged by higher interest rates; supply chain volatility, including the impact of geopolitical conflicts; and a tight labor market. Although inflation has declined and the manufacturing sector as measured by the Purchasing Managers’ Index (“PMI”) showed expansion in March 2024 for the first time since October 2022, recession risk still exists, as the housing market continues to face affordability constraints of high home prices and elevated interest rates through the first quarter of 2024. Economic growth is gradually decelerating without causing a recessionary downturn as measured by U.S. real gross domestic product (“real GDP”), primarily driven by a declining growth rate of consumer spending, driven in part by increasing levels of consumer debt.

Current wording

Although inflation is easing, the manufacturing sector as measured by the Purchasing Managers’ Index (“PMI”) has been in contraction for 19 out of 20 months since November 2022, which has been a factor in declining freight volumes. Economic growth is gradually decelerating without causing a recessionary downturn as measured by U.S. real gross domestic product (“real GDP”), primarily driven by a declining growth rate of consumer spending, driven in part by increasing levels of consumer debt. Companies continue to demonstrate an unwillingness to invest in capital and inventory due to current monetary policy.

Previous wording

Analysis on April 25, 2024, real GDP increased at an annual rate of 1.6% for first quarter 2024. PMI, which is a leading indicator for demand in the freight transportation and logistics industry, crossed into economic growth territory in March 2024 following sixteen consecutive months of economic contraction in the manufacturing sector. PMI was slightly lower for April 2024 at 49.2%, compared to 47.1% in April 2023. The Industrial Production Index issued by the Federal Reserve decreased at an annual rate of 1.8% for first quarter 2024. Our business has been impacted by the economic conditions indicated by these statistics related to the softer economic environment, which resulted in decelerating customer demand trends for transportation and logistics services in this extended freight recession. The spike in shipment volume caused by the shutdown of a large LTL competitor at the end of July 2023 has moderated, although we retained our general rate increases and secured increases on deferred pricing agreements and annually negotiated contracts during the first quarter of 2024. There can be no assurance that the economic environment, including the impact of interest rates on consumer demand, will be favorable for our freight services in future periods and that the impact of recent market disruptions will continue to positively impact demand for our Asset-Based and Asset-Light services.

Current wording

The increase in shipment volume caused by the shutdown of a large LTL competitor at the end of July 2023 has moderated, although we retained our general rate increases and secured increases on deferred pricing agreements and annually negotiated contracts during the three and six months ended June 30, 2024. There can be no assurance that the economic environment, including the impact of interest rates on consumer demand, will be favorable for our freight services in future periods and that the impact of recent market disruptions will continue to positively impact demand for our Asset-Based and Asset-Light services.

Previous wording

Given the uncertainties of current economic conditions, there can be no assurance that our estimates and assumptions regarding the pricing environment and economic conditions, which are made for purposes of impairment tests related to operating assets and deferred tax assets, will prove to be accurate. Extended periods of economic disruption and resulting declines in industrial production and manufacturing and consumer spending could negatively impact demand for our services and have an adverse effect on our results of operations, financial condition, and cash flows. The softer freight environment, which we continued to experience during the first quarter of 2024, resulted in a year-over-year decline in market pricing for many of our services, as compared to the first quarter of 2023. There can be no assurance that we will be able to secure adequate prices from new business or from our existing customers to maintain or improve our operating results. Significant declines in our business levels or other changes in cash flow assumptions or other factors that negatively impact the fair value of the operations of our reporting units could result in impairment and a resulting noncash write-off of a significant portion of the goodwill and intangible assets of our Asset-Light segment, which would have an adverse effect on our financial condition and operating results.

Current wording

Given the uncertainties of current economic conditions, there can be no assurance that our estimates and assumptions regarding the pricing environment and economic conditions, which are made for purposes of impairment tests related to operating assets and deferred tax assets, will prove to be accurate. Extended periods of economic disruption and resulting declines in industrial production and manufacturing and consumer spending could negatively impact demand for our services and have an adverse effect on our results of operations, financial condition, and cash flows. The soft freight environment, which we continued to experience during the first half of 2024, resulted in a year-over-year decline in market pricing for many of our Asset-Light services, as compared to the first half of 2023. There can be no assurance that we will be able to secure adequate prices from new business or from our existing customers to maintain or improve our operating results. Significant declines in our business levels or other changes in cash flow assumptions or other factors that negatively impact the fair value of the operations of our reporting units could result in impairment in the near term and a resulting noncash write-off of a significant portion of the goodwill and intangible assets of our Asset-Light segment, which would have an adverse effect on our financial condition and operating results.

Previous wording

Inflation remains above normal levels. Global supply chain volatility and labor and energy shortages, in addition to the impact of federal programs and monetary policy, have elevated costs higher across a broad array of consumer goods. The consumer price index (“CPI”) increased 3.5%, before seasonal adjustment, year-over-year in March 2024 and 0.4% from February 2024. While CPI has declined from the level reached in June 2022 due to market response to the Federal Reserve’s tighter monetary policy implemented in March 2022, the last several months of increases in CPI indicate an ongoing challenge in achieving the Federal Reserve’s target inflation of 2%. Inflation is impacted by energy prices, including petroleum products; shelter prices; and food prices, which have moderated in recent months while remaining elevated. Most of our expenses are affected by inflation, which generally results in increased operating costs. As such, there can be no assurances of the potential impact of inflationary conditions on our business, including demand for our transportation services.

Current wording

Inflation remains above the Federal Reserve’s long-term target inflation rate of 2%. Global supply chain volatility and labor and energy shortages, in addition to the impact of federal programs and monetary policy, have elevated costs higher across a broad array of consumer goods. The consumer price index (“CPI”) increased 3.0%, before seasonal adjustment, year-over-year in June 2024 and declined 0.1% from May 2024, the first monthly rate decrease since May 2020. While CPI has declined from the level reached in June 2022 due to market response to the Federal Reserve’s tighter monetary policy implemented in March 2022, recent CPI readings continue to indicate an ongoing challenge in achieving the Federal Reserve’s target inflation rate. Inflation is impacted by energy prices, including petroleum products; shelter prices; and insurance services, which have moderated in recent months while remaining elevated. Most of our expenses are affected by inflation, which generally results in increased operating costs. As such, there can be no assurances of the potential impact of inflationary conditions on our business, including demand for our transportation services.

Previous wording

Generally, inflationary increases in labor and operating costs related to our Asset-Light operations have historically been offset through price increases. The pricing environment, however, generally becomes more competitive during economic downturns, which may, as it has in the past, affect the ability to obtain price increases from customers both during and following such periods. The pricing environment continues to be rational, and we believe that Asset-Light pricing has stabilized at the bottom of the truckload market cycle and should improve as 2024 progresses.

Current wording

Generally, inflationary increases in labor and operating costs related to our Asset-Light operations have historically been offset through price increases. The pricing environment, however, generally becomes more competitive during economic downturns, which may, as it has in the past, affect the ability to obtain price increases from customers both during and following such periods. The pricing environment remains competitive, and we believe that Asset-Light pricing has stabilized at the bottom of the truckload market cycle.

Previous wording

The impact of supply chain disruptions and component shortages has limited the availability and production of certain revenue equipment and certain other equipment used in our business operations. Consequently, the prices for these items have also increased. Partly as a result of inflationary pressures, our revenue equipment (tractors and trailers) has been and will very likely continue to be replaced at higher per-unit costs, which could result in higher depreciation charges on a per-unit basis. We consider these costs in setting our pricing policies, although the overall freight rate structure is governed by market forces. In addition to general effects of inflation, the motor carrier freight transportation industry faces rising costs related to compliance with government regulations on safety, equipment design and maintenance, driver utilization, emissions, and fuel economy.

Current wording

The impact of supply chain disruptions and component shortages has limited the availability and production of certain revenue equipment and certain other equipment used in our business operations. Consequently, the prices for these items have also increased. Partly as a result of inflationary pressures, our revenue equipment (tractors and trailers) has been and very likely will continue to be replaced at higher per-unit costs, which could result in higher depreciation charges on a per-unit basis. We consider these costs in setting our pricing policies, although the overall freight rate structure is governed by

Previous wording

Physical effects from climate change, including more severe weather events, have the potential to adversely impact our business levels and employee working conditions, cause shipping delays or disrupt our operations, increase our operating costs, and cause damage to our property and equipment. Due to the uncertainty of these matters, we cannot estimate the impact of climate-related developments on our operations or financial condition at this time. These and other matters related to climate change and the related risks to our business are further discussed in Part I, Item 1 (Business) and Part I, Item 1A (Risk Factors) of our 2023 Annual Report on Form 10-K. In addition to our focus on sustainability of our equipment and facilities, we continue our commitment to advance environmental and social issues that are critical to our business and our customers’ businesses by investing in innovative technologies, developing our employees, and enhancing our capabilities and services for customers.

Current wording

Physical effects from climate change, including more frequent and severe weather events, have the potential to adversely impact our business levels and employee working conditions, cause shipping delays or disruption to our operations, increase our operating costs, and cause damage to our property and equipment. Due to the uncertainty of these matters, we cannot estimate the impact of climate-related developments on our operations or financial condition at this time. These and other matters related to climate change and the related risks to our business are further discussed in Part I, Item 1 (Business) and Part I, Item 1A (Risk Factors) of our 2023 Annual Report on Form 10-K. In addition to our focus on sustainability of our equipment and facilities, we continue our commitment to advance environmental and social issues that are critical to our business and our customers’ businesses by investing in innovative technologies, developing our employees, and enhancing our capabilities and services for customers.

Previous wording

In January 2023, we and MoLo were named as defendants in lawsuits related to an auto accident involving one of MoLo’s contract carriers, which occurred prior to our acquisition of MoLo. Although we cannot estimate a range of reasonably possible losses for this matter at this time, it is reasonably possible that such amounts could be material to our financial condition, results of operations, or cash flows. See Note K to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of the legal matters in which we are currently involved.

Current wording

In January 2023, we and MoLo were named as defendants in lawsuits related to an auto accident involving one of MoLo’s contract carriers, which occurred prior to our acquisition of MoLo. During second quarter 2024, we were released from the case, leaving MoLo as a named defendant with a trial date set for early 2025. Although we cannot estimate a range of reasonably possible losses for this matter at this time, it is reasonably possible that such amounts could be material to our financial condition, results of operations, or cash flows. See Note K to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussion of the legal matters in which we are currently involved.