ARCBEST CORP DE

Previous 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.

Current wording

Our consolidated revenues decreased 5.8% and 4.8% for the three and nine months ended, 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 primarily due to lower weight per shipment, compared to the prior-year period, despite an increase in demand for LTL-rated shipments following market disruption in 2023, as further discussed below. The year-over-year decrease in consolidated revenues for the three and nine months ended September 30, 2024 reflects decreases in our Asset-Based revenues of 4.2% and 3.1%, respectively, and decreases in Asset-Light revenues of 8.1% and 7.1%, respectively. The elimination of revenues reported in the “Other and eliminations” line of consolidated revenues decreased 0.7% for the three months ended and increased 4.1% for the nine months ended September 30, 2024, compared to the same periods of 2023, reflecting year-over-year changes in intersegment business levels among our operating segments.

Previous wording

Our Asset-Based revenue decline reflects a decrease in tonnage per day of 20.3% and 18.6% for the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, partially offset by an increase in billed revenue per hundredweight, including fuel surcharges, of 23.0% and 19.4%, respectively. The decrease in tonnage per day is a

Current wording

Our Asset-Based revenue decline reflects a decrease in tonnage per day for the three and nine months ended September 30, 2024, compared to the same periods of 2023, partially offset by an increase in billed revenue per hundredweight, including fuel surcharges. The decrease in tonnage per day is a result of a softer market environment driven in part by a weaker manufacturing sector, partially offset by an increase in demand during the first half of 2024 for

Previous 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.

Current wording

The decrease in revenues of our Asset-Light segment for the three and nine months ended September 30, 2024, compared to the same prior-year periods, was impacted by a decline in revenue per shipment associated with soft market conditions and changes in business mix, partially offset by an increase in shipments per day for the nine months ended September 30, 2024, compared to the same period of 2023, while shipments per day decreased slightly for the third quarter of 2024 versus the same prior-year period. Our Asset-Light segment generated approximately 35% and 36% of our total revenues before other revenues and intercompany eliminations for the three and nine months ended September 30, 2024, respectively, compared to 36% and 37%, respectively, for the same periods of 2023.

Previous 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.

Current wording

Consolidated operating income improved year-over-year reflecting the $91.9 million reduction in the contingent earnout consideration accrual during third quarter 2024 and 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 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.

Current wording

Innovative technology costs impacted our consolidated operating results for the three and nine months ended September 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 nine months ended September 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 $8.5 million (pre-tax), or $6.5 million (after-tax) and $0.27 per diluted share, for third quarter 2024, compared to $14.1 million (pre-tax), or $10.6 million (after-tax) and $0.43 per diluted share, for third quarter 2023. For the nine months ended September 30, 2024, these costs decreased consolidated results by a total of $26.5 million (pre-tax), or $20.3 million (after-tax) and $0.85 per diluted share, compared to $41.4 million (pre-tax), or $31.3 million (after-tax) and $1.26 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. 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.

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 third quarter of 2024, consolidated operating results increased by $91.9 million (pre-tax), or $69.1 million (after-tax) and $2.92 per diluted share, due to quarterly remeasurement which resulted in a lower liability of the contingent earnout consideration, and increased consolidated operating results by $17.8 million (pre-tax), or $13.4 million (after-tax) and $0.55 per diluted share for the third quarter of 2023. For the nine months ended September 30 2024, the quarterly remeasurement increased consolidated operating results by $80.7 million (pre-tax), or $60.7 million (after-tax) and $2.54 per diluted share, compared to an increase of $12.8 million (pre-tax), or $9.6 million (after-tax) and $0.39 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 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.

Current wording

For the nine months ended September 30, 2024, consolidated net income 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. We recorded an adjustment to the fair value of our equity investment in Phantom Auto based on an observable price change during second quarter 2023, which increased consolidated net income by $2.8 million (after-tax), or $0.11 per

Previous wording

We recorded an adjustment to the fair value of our equity investment in Phantom Auto based on an observable price change during second quarter 2023, which increased consolidated net income by $2.8 million (after-tax), or $0.11 per diluted share, for both the three- and six-month periods ended June 30, 2023. These charges were 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

diluted share, for the nine-month period ended September 30, 2023. These charges were 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.

Previous 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.

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 $1.3 million, or $0.06 per diluted share, and $3.0 million, or $0.13 per diluted share, for the three and nine months ended September 30, 2024, respectively, compared to $0.2 million, or $0.01 per diluted share, and $2.8 million, or $0.11 per diluted share, for the same respective prior-year periods. While a small amount of restricted stock units vested during the three months ended September 30, 2024 resulting in an immaterial tax benefit, the vesting of restricted stock units resulted in a tax benefit of $11.3 million, or $0.47 per diluted share, for the nine months ended September 30, 2024, compared to a tax benefit of $0.2 million, or $0.01 per diluted share, and $5.1 million, or $0.21 per diluted share, for the three and nine months ended September 30, 2023, respectively.

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, 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.

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, changes in the fair value of contingent earnout consideration and our equity investment, and lease impairment charges, which are significant expenses or gains 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

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.

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

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 and six months ended June 30, 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 nine months ended September 30, 2024 and 2023.

Previous wording

The key indicators necessary to understand the operating results of our Asset-Based segment, which are more fully described in the Asset-Based Segment Overview within the Asset-Based Operations section of Results of Operations in Item 7 (MD&A) of Part II of our 2023 Annual Report on Form 10-K, are outlined below. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Based segment. We quantify certain key indicators using key operating statistics, which are important measures in analyzing segment operating results from period to period. These statistics are defined within the key indicators below and referred to throughout the discussion of the results of our Asset-Based segment:

Current wording

The key indicators necessary to understand the operating results of our Asset-Based segment are described in the Asset-Based Segment Overview within the Asset-Based Operations section of Results of Operations in Item 7 (MD&A) of Part II of our 2023 Annual Report on Form 10-K. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Based segment. We quantify certain key indicators using key operating statistics, which are important measures in analyzing segment operating results from period to period.

Previous wording

The following table provides a comparison of key operating statistics for the Asset-Based segment, as previously defined in the Asset-Based Segment Overview:

Current wording

The following table provides a comparison of key operating statistics for the Asset-Based segment, as previously defined in the 2023 Form 10-K Asset-Based Segment Overview section:

Previous 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.

Current wording

Asset-Based segment revenues for the three and nine months ended September 30, 2024, totaled $709.7 million and $2,093.9 million, respectively, compared to $741.2 million and $2,161.0 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. Billed revenue decreased 4.8% and 3.5%, respectively, on a per-day basis for the three and nine months ended September 30, 2024, compared to the same periods of 2023, primarily reflecting a 11.3% and 16.4% decrease, respectively, in tonnage per day, partially offset by a 7.4% and 15.4% increase, respectively, in billed revenue per hundredweight, including fuel surcharges. The number of workdays was greater by one day in both the three and nine months ended September 30, 2024, versus the same respective periods of 2023.

Previous 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.

Current wording

The increases in total billed revenue per hundredweight, including fuel surcharges, for the three and nine months ended, compared to the same periods of 2023, were also driven by lower weight per shipment, which generally increases revenue per hundredweight, offset partially by lower fuel surcharge revenue associated with lower fuel prices, compared to the prior-year periods. The pricing environment for LTL shipments continues to be rational. Excluding the impact of fuel surcharges, the percentage increase in billed revenue per hundredweight on our traditional LTL-rated freight was in the high single-digits and low-double digits, respectively, for the three and nine months ended September 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 nine months ended September 30, 2024, increased approximately 4.6% and 5.0%, 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 September 9, 2024, although the rate changes vary by lane and shipment characteristics.

Previous 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.

Current wording

The Asset-Based segment’s average nominal fuel surcharge rate decreased by approximately 5 percentage points and 3 percentage points in the three- and nine-month periods ended September 30, 2024, compared to the same periods 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.

Previous 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.

Current wording

The Asset-Based segment generated operating income of $64.0 million and $190.3 million for the three and nine months ended September 30, 2024, respectively, compared to $74.8 million and $165.6 million, respectively, for the same periods of 2023. Compared to the prior-year periods, the Asset-Based segment’s operating ratio deteriorated by 1.1 percentage points for the three months ended September 30, 2024, primarily reflecting the decline in revenue, and improved 1.4 percentage points for the nine months ended September 30, 2024, primarily reflecting decreased operating expenses as a result of cost control efforts to reduce utilization of outside resources and optimize internal resources, and pausing the freight handling pilot test program at ABF Freight during third quarter 2023, as further discussed in the following paragraphs.

Previous 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.

Current wording

Labor costs, which are reported in operating expenses as salaries, wages, and benefits, amounted to 50.5% and 50.4% of Asset-Based segment revenues for the three- and nine-month periods ended September 30, 2024, respectively, compared to 48.2% and 48.0%, respectively, for the same periods of 2023. Salaries, wages, and benefits increased $0.9 million and $18.4 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods of 2023, due to contract rate increases under the 2023 ABF NMFA, as previously discussed in the Asset-Based Revenues section. On July 1, 2023, wage rates increased 13.1% and the health, welfare and benefits rate increased 4.0% on August 1, 2023, for a blended increase of 9.1% during the third quarter 2023. On July 1, 2024, wages increased another 2.5% and benefits increased 2.9% on August 1, 2024, for a blended increase of 2.7% in third quarter 2024. The increases in salaries, wages, and benefits from the union contract rates were offset in part, by improved productivity, as measured by shipments per DSY hour, a decrease in headcount to align with lower shipment levels, and by lower utilization of purchased transportation as discussed later in this section.

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 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.

Current wording

to City Route Optimization technology implemented in 2023, the separation of city operations from certain distribution centers in late 2023, and during the first nine months of 2024, and training and development at certain key locations, as the ABF Freight process compliance team continues to reinforce operational best practices throughout the Asset-Based network. For the three and nine months ended September 30, 2024, the year-over-year decrease in pounds per mile of 4.3% and 4.4%, respectively, reflects lower weight per shipment, partially offset by an improvement in linehaul productivity and an increase in the average length of haul.

Previous 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.

Current wording

Fuel, supplies, and expenses as a percentage of revenue decreased 1.2 percentage points during both the three and nine months ended September 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 20.3% and 11.3%, respectively, for the three and nine months ended September 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 three and nine months ended September 30, 2024, compared to the same periods of 2023.

Previous wording

Insurance as a percentage of revenue increased 0.6 percentage point and 0.5 percentage point during the three and six months ended June 30, 2024, respectively compared to the same periods of 2023, primarily due to an increase in the severity of third-party casualty claims, including an increase in the number of large claims in recent years.

Current wording

Insurance as a percentage of revenue increased 1.0 percentage point and 0.6 percentage point during the three and nine months ended September 30, 2024, respectively compared to the same periods of 2023, primarily due to an increase in the severity of third-party casualty claims, including an increase in the number of large claims in recent years.

Previous 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

Current wording

Rents and purchased transportation as a percentage of revenue decreased 0.3 percentage point and 2.6 percentage points for the three and nine months ended September 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 and a decrease in rail fuel surcharge cost per mile. Rail miles increased approximately 2% for the three months ended September 30, 2024, compared to the same prior-year period, while decreasing approximately 13%, respectively, for the nine months ended September 30, 2024, compared to the same period of 2023.

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 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.

Current wording

The hardware portion of the freight handling pilot test program 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- or nine-month period ended September 30, 2024, while these costs totaled $7.3 million and $21.7 million, respectively, during the three and nine months ended September 30, 2023, resulting in a decrease in expenses as a percentage of revenue of 1.0 percentage point for each period.

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 income (loss) for the three and six months ended June 30, 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 nine months ended September 30, 2024 and 2023.

Previous wording

The key indicators necessary to understand our Asset-Light segment operating results are outlined below. These key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Light segment. We quantify certain key indicators using key operating statistics which are important measures in analyzing segment operating results from period to period. These statistics are defined within the key indicators below and referred to throughout the discussion of the results of our Asset-Light segment:

Current wording

Key indicators are used by management to evaluate segment operating performance and measure the effectiveness of strategic initiatives in the results of our Asset-Light segment. The key indicators necessary to understand our Asset-Light segment operating results are outlined in the Asset-Light Segment Overview within the Asset-Light Operations section of Results of Operations in Item 7 (MD&A) of Part II of our 2023 Annual Report on Form 10-K. We quantify certain key indicators using key operating statistics which are important measures in analyzing segment operating results from period to period.

Previous wording

A comparison of key operating statistics for the Asset-Light segment, as previously defined in the Asset-Light Segment Overview section, is presented in the following table:

Current wording

The following table provides a comparison of key operating statistics for the Asset-Light segment, as previously defined in the 2023 Form 10-K Asset-Light Segment Overview section:

Previous 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.

Current wording

Asset-Light segment revenues decreased 8.1% to $385.3 million and decreased 7.1% to $1,177.5 million for the three and nine months ended September 30, 2024, respectively, compared to $419.3 million and $1,267.2 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 and, for the three months ended September 30, 2024, a slight decrease in average daily shipments. Excess capacity in the truckload market continues to impact spot market rates resulting in lower revenue per shipment and compressed margins. Despite an increase in average daily shipment levels for the nine months ending September 30, 2024, driven by growth in managed transportation service offerings, lower revenue per shipment levels resulted in an overall revenue decline compared to the same period in 2023.

Previous 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.

Current wording

Operating expenses decreased $122.5 million and $154.4 million during the three and nine months ended September 30, 2024, compared to the same prior-year periods, and decreased as a percentage of revenue by 22.9 percentage points and 5.5 percentage points in the same respective periods, due primarily to the change in fair value of the contingent consideration, the lease-related impairment charge taken in 2023, and the effect of lower revenues in the three and nine months ended September 30, 2024.

Previous 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.

Current wording

Purchased transportation costs as a percentage of revenue decreased by 1.2 percentage points for the three months ended September 30, 2024, compared to the same period of 2023, due to an increase in available truckload capacity, which resulted in a year-over-year decline in capacity pricing. Purchased transportation costs increased 1.1 percentage point for the nine months ended September 30, 2024, compared to the same prior-year period, reflecting lower revenue outpacing the reduction in purchased transportation costs of $64.0 million for the nine months ended September 30, 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.

Previous 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.

Current wording

Contingent earnout consideration, as previously described, decreased as a percentage of revenue by 19.6 percentage points and 5.9 percentage points for the three and nine months ended September 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), 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, changes in the fair value of contingent earnout consideration, and lease impairment charges, 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

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.

Current wording

Although inflation is easing, the manufacturing sector as measured by the Purchasing Managers’ Index (“PMI”) has been in contraction for 22 out of 23 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 and other economic conditions.

Previous 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.

Current wording

Although we implemented a general rate increase and secured increases on deferred pricing agreements and annually negotiated contracts during the three and nine months ended September 30, 2024, the Asset-Based segment has seen lower tonnage levels as a result of the soft market environment and lower shipment levels as a result of changes in the Asset-Based business mix. 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 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.

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 nine months of 2024, resulted in a year-over-year decline in market pricing for many of our Asset-Light services, as compared to the first nine months 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 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.

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 2.4%, before seasonal adjustment, year-over-year in September 2024 and increased 0.2% from August 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, 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; housing 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 fuel costs as they relate to our Asset-Based operations have historically been mostly offset through price increases and fuel surcharges. In periods of increasing fuel prices, the effect of higher associated fuel surcharges on the overall price to the customer influences our ability to obtain increases in base freight rates. In addition, certain nonstandard arrangements with some of our customers have limited the amount of fuel surcharge recovered. The timing and extent of base price increases on our Asset-Based revenues may not correspond with contractual increases in wage rates and other inflationary increases in cost elements and, as a result, could adversely impact our operating results. Our Asset-Based segment’s ability to fully offset inflationary and contractual cost increases can be challenging during periods of recessionary and uncertain economic conditions.

Current wording

Generally, inflationary increases in labor and fuel costs as they relate to our Asset-Based operations have historically been mostly offset through price increases and fuel surcharges. In periods of increasing fuel prices, the effect of higher associated fuel surcharges on the overall price to the customer influences our ability to obtain increases in base freight rates. In addition, certain nonstandard arrangements with some of our customers have limited the amount of fuel surcharge recovered. Our Asset-Based segment’s ability to fully offset inflationary and contractual cost increases can be challenging during periods of recessionary and uncertain economic conditions.

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 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

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 market forces. In addition to general effects of inflation, the motor carrier freight transportation industry faces rising costs related to insurance and compliance with government regulations on safety, equipment design and maintenance, driver utilization, emissions, and fuel economy.

Previous 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.

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. We continue our commitment to advance sustainability 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

Our consolidated statements of cash flows presented for the six months ended June 30, 2023, include cash flows from continuing operations and the discontinued operations of FleetNet, which sold February 28, 2023. Our discussions below segregate cash flows from continuing operations from those of discontinued operations for the six-month periods ended June 30, 2023.

Current wording

Our consolidated statements of cash flows presented for the nine months ended September 30, 2023, include cash flows from continuing operations and the discontinued operations of FleetNet, which sold February 28, 2023. Our discussions below segregate cash flows from continuing operations from those of discontinued operations for the nine-month periods ended September 30, 2023.