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What changed in Old Dominion's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Old Dominion's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+184 added−183 removedSource: 10-K (2024-02-26) vs 10-K (2023-02-22)

Top changes in Old Dominion's 2023 10-K

184 paragraphs added · 183 removed · 156 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur management reviews the productivity and service performance of each service center on a daily basis to help ensure quality service and efficient operations. Our network includes major breakbulk facilities, as well as various other service centers that are used for additional limited breakbulk activity in order to serve our next-day markets.
Biggest changeOur network includes major breakbulk facilities, as well as various other service centers that are used for additional limited breakbulk activity in order to serve our next-day markets. Our service centers are strategically located throughout the country so that we can provide the highest quality service and minimize freight rehandling costs.
Harsh winter weather, hurricanes, tornadoes, floods and other natural disasters can also adversely impact our performance by reducing demand and increasing operating expenses. We believe seasonal trends will continue to impact our business. Technology Our technology is critical to the success and delivery of the premium service provided by our operations.
Harsh weather, hurricanes, tornadoes, floods and other natural disasters can also adversely impact our performance by reducing demand and increasing operating expenses. We believe seasonal trends will continue to impact our business. Technology Our technology is critical to the success and delivery of the premium service provided by our operations.
We adhere to established maintenance policies and procedures to help ensure our fleet is properly maintained. Tractors are routed to appropriate maintenance facilities or authorized repair vendors at designated mileage intervals or every 90 days, whichever occurs first. Trailers are also scheduled for preventive maintenance every 90 days.
We adhere to established maintenance policies and procedures to help ensure our fleet is properly maintained. Tractors are routed to appropriate maintenance facilities or authorized repair vendors generally at designated mileage intervals or every 90 days, whichever occurs first. Trailers are also generally scheduled for preventive maintenance every 90 days.
LTL motor carriers generally require a more expansive network of local pickup and delivery (“P&D”) service centers, as well as larger breakbulk, or hub, facilities. In contrast, truckload carriers generally dedicate an entire truck to one customer from origin to destination.
LTL motor carriers generally require a more expansive network of local pickup and delivery 1 (“P&D”) service centers, as well as larger breakbulk, or hub, facilities. In contrast, truckload carriers generally dedicate an entire truck to one customer from origin to destination.
LTL freight carriers typically pick up multiple shipments from multiple customers on a single truck. The LTL freight is then routed through a network of service centers where the freight may be transferred 1 to other trucks with similar destinations.
LTL freight carriers typically pick up multiple shipments from multiple customers on a single truck. The LTL freight is then routed through a network of service centers where the freight may be transferred to other trucks with similar destinations.
We may periodically utilize third-party transportation providers in our linehaul network to supplement our equipment or maintain older equipment that would have otherwise been replaced based on our normal equipment cycle, in order to support our equipment needs. The table below sets forth our capital expenditures for tractors and trailers for the years ended December 31, 2022 and 2021.
We may periodically utilize third-party transportation providers in our linehaul network to supplement our equipment or maintain older equipment that would have otherwise been replaced based on our normal equipment cycle, in order to support our equipment needs. The table below sets forth our capital expenditures for tractors and trailers for the years ended December 31, 2023 and 2022.
We do not believe that the cost of future compliance with current environmental laws or regulations will have a material adverse effect on our operations, financial condition, competitive position or capital expenditures for fiscal year 2023. However, future changes to laws or regulations may adversely affect our operations and could result in unforeseen costs to our business.
We do not believe that the cost of future compliance with current environmental laws or regulations will have a material adverse effect on our operations, financial condition, competitive position or capital expenditures for fiscal year 2024. However, future changes to laws or regulations may adversely affect our operations and could result in unforeseen costs to our business.
Since 1988, we have provided a no-cost opportunity for qualified employees to become drivers through the “Old Dominion Driver Training Program.” There are currently 3,789 active drivers who have successfully completed this training, which was approximately 31.4% of our driver workforce as of December 31, 2022.
Since 1988, we have provided a no-cost opportunity for qualified employees to become drivers through the “Old Dominion Driver Training Program.” There are currently 3,569 active drivers who have successfully completed this training, which was approximately 31.4% of our driver workforce as of December 31, 2023.
In addition, successful LTL motor carriers generally employ, and regularly update, a high level of technology-based systems and processes that provide information to customers and help reduce operating costs. In 2021, the LTL industry had revenue of approximately $46.8 billion based on information reported in Transport Topics.
In addition, successful LTL motor carriers generally employ, and regularly update, a high level of technology-based systems and processes that provide information to customers and help reduce operating costs. In 2022, the LTL industry had revenue of approximately $53.8 billion based on information reported in Transport Topics .
In fact, over 19% of our drivers have achieved one million safe driving miles or more. We believe our driver training and qualification programs have been important factors in improving our safety record and retaining qualified drivers.
We believe our driver training and qualification programs have been important factors in improving our safety record and retaining qualified drivers. Over 22% of our drivers have achieved one million safe driving miles or more.
The LTL industry is highly competitive on the basis of service and price and has consolidated significantly since the industry was deregulated in 1980. The largest 5 and 10 LTL motor carriers accounted for approximately 57% and 82%, respectively, of the domestic LTL market in 2021 according to information reported in Transport Topics.
The LTL industry is highly competitive on the basis of service and price and has consolidated significantly since the industry was deregulated in 1980. The largest 5 and 10 LTL motor carriers accounted for approximately 56% and 81%, respectively, of the domestic LTL market in 2022 according to information reported in Transport Topics .
Employee Development and Safety As of December 31, 2022, we employed 6,256 linehaul drivers and 5,824 P&D drivers on a full-time basis. We select our drivers based upon many factors, including driving records and experience. Among other requirements, our drivers must pass a drug test, have a current U.S.
Employee Development and Safety As of December 31, 2023, we employed 5,911 linehaul drivers and 5,453 P&D drivers on a full-time basis. We select our drivers based upon many factors, including driving records and experience. Among other requirements, our drivers must pass a drug test, have a current U.S.
The 10-year average turnover rate for our driver graduates is approximately 6.9%, which is below our 10-year average turnover rate for our Company-wide drivers of approximately 9.8%. Based on driving records, our drivers are eligible to be rewarded with annual safety bonuses of up to $3,000 per driver.
The 10-year average turnover rate for our driver graduates is approximately 7.4%, which is below our 10-year average turnover rate for our Company-wide drivers of approximately 10.1%. Based on driving records, our drivers are eligible to be rewarded with annual safety bonuses of up to $3,000 per driver.
Twin trailers and long-combination vehicles permit more freight to be transported behind a tractor than could otherwise be transported by one trailer. Tractors, Trailers and Maintenance At December 31, 2022, we owned 11,274 tractors.
Twin trailers and long-combination vehicles permit more freight to be transported behind a tractor than could otherwise be transported by one trailer. Tractors, Trailers and Maintenance At December 31, 2023, we owned 10,791 tractors.
These purchases are planned well in advance of anticipated delivery dates in order to accommodate manufacturers’ production schedules. We generally believe there is sufficient capacity among suppliers to help ensure an uninterrupted supply of equipment to support our operations. Recent supply chain challenges, however, have adversely impacted our equipment manufacturers.
These purchases are planned well in advance of anticipated delivery dates in order to accommodate manufacturers’ production schedules. We generally believe there is sufficient capacity among suppliers to help ensure an uninterrupted supply of equipment to support our operations.
We continually seek to upgrade and enhance our technological capabilities. We also provide access to our systems through multiple secure gateways that offer our customers and employees maximum flexibility and access to information.
We continually seek to upgrade and enhance our technological capabilities, including our use of cloud-based technology. We also provide access to our systems through multiple secure gateways that offer our customers and employees maximum flexibility and access to information.
Governmental Regulation We are regulated by the DOT and by various state and federal agencies. These regulatory authorities have broad powers over matters relating to authorized motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting.
These regulatory authorities have broad powers over matters relating to authorized motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting.
The table below reflects, as of December 31, 2022, the average age of our tractors and trailers: Type of Equipment Number of Units Average Age (In years) Tractors 11,274 5.4 Linehaul trailers 31,252 7.7 P&D trailers 14,315 7.7 We develop certain specifications for tractors and trailers and then negotiate the production and purchase of this equipment with several manufacturers.
The table below reflects, as of December 31, 2023, the average age of our tractors and trailers: Type of Equipment Number of Units Average Age (In years) Tractors 10,791 4.5 Linehaul trailers 31,233 7.0 P&D trailers 15,181 7.2 We develop certain specifications for tractors and trailers and then negotiate the production and purchase of this equipment with several manufacturers.
Year Ended December 31, In thousands 2022 2021 Tractors $ 148,719 $ 130,772 Trailers 216,697 140,595 Total $ 365,416 $ 271,367 At December 31, 2022, we operated 44 fleet maintenance centers at strategic service center locations throughout our network. These fleet maintenance centers are equipped to perform routine and preventive maintenance and repairs on our equipment.
Year Ended December 31, In thousands 2023 2022 Tractors $ 203,417 $ 148,719 Trailers 181,534 216,697 Total $ 384,951 $ 365,416 At December 31, 2023, we operated 46 fleet maintenance centers at strategic service center locations throughout our network. These fleet maintenance centers are equipped to perform routine and preventive maintenance and repairs on our equipment.
Our full-time employees work in the following roles: 4 Full-Time Employees Number of Employees Drivers 12,080 Platform 4,278 Fleet technicians 676 Sales, administrative and other 6,437 Total 23,471 Employee Engagement and Benefits Our Old Dominion Family of employees are a key factor in the success of our business.
Our full-time employees work in the following roles: Full-Time Employees Number of Employees Drivers 11,364 Platform 4,227 Fleet technicians 673 Sales, administrative and other 6,638 Total 22,902 Employee Engagement and Benefits Our Old Dominion Family of employees are a key factor in the success of our business.
Our safety bonuses paid to drivers totaled $5.3 million, $4.9 million and $4.7 million in 2022, 2021 and 2020, respectively. We also maintain a “Management Trainee Program” and a “Supervisor Development Program” that offer opportunities for our employees to be considered and prepared for sales and management opportunities. These programs support our philosophy of promoting from within our high-quality workforce.
Our safety bonuses paid to drivers totaled $5.5 million, $5.3 million and $4.9 million in 2023, 2022 and 2021, respectively. We also maintain a “Management Trainee Program,” "Sales Trainee Program," and “Supervisor Development Program” that offer opportunities for our employees to be considered and prepared for sales and management opportunities.
In addition, we provide greater geographic coverage than most of our regional competitors. Our diversified mix and scope of regional, inter-regional and national LTL service, combined with our value-added service offerings, enables us to provide our customers with a single source to meet their shipping and logistics needs.
Our diversified mix and scope of regional, inter-regional and national LTL service, combined with our value-added service offerings, enables us to provide our customers with a single source to meet their shipping and logistics needs. We believe the combination of these factors provides us with a distinct advantage over most of our competitors.
We believe our operations and financial condition are susceptible to the same diesel fuel price increases or shortages as those of our competitors. Our fuel surcharge programs are one of many components that we use to determine the overall price for our transportation services. Our fuel surcharges are generally indexed to fuel prices published by the U.S.
We believe our operations and financial condition are susceptible to the same diesel fuel price increases or shortages as those of our competitors. We have fuel surcharge programs that are designed to mitigate the financial statement impact of changes in the price of diesel fuel. Our fuel surcharges are generally indexed to fuel prices published by the U.S.
The trucking industry is also subject to regulatory and legislative changes from a variety of other governmental authorities, which address matters such as increasingly stringent environmental regulations, occupational safety and health regulations, limits on vehicle weight and size, ergonomics, port security, and driver hours of service.
The trucking industry is also subject to regulatory and legislative changes from a variety of other governmental authorities, which address matters such as increasingly stringent environmental regulations, occupational safety and health regulations, limits on vehicle weight and size, ergonomics, port security, and driver hours of service. 5 In addition, we are subject to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration (“TSA”) and Customs and Border Protection (“CBP”) within the U.S.
Customers Revenue is generated primarily from customers throughout the United States and North America. In 2022, our largest customer accounted for approximately 5.4% of our revenue and our largest 5, 10 and 20 customers accounted for 16.1%, 22.7% and 31.1% of our revenue, respectively.
Customers Revenue is generated primarily from customers throughout the United States and North America. In 2023, our largest customer accounted for approximately 5.2% of our revenue and our largest 5, 10 and 20 customers accounted for 15.0%, 21.6% and 30.6% of our revenue, respectively.
Some of our competitors may have a broader global network and a wider range of services than we do. Competition in our industry is based primarily on service, price, available capacity and business relationships. We believe we are able to gain market share by expanding our capacity in the United States and providing high-quality service at a fair price.
Some of our competitors may have a broader global network and a wider range of services than we do. Competition in our industry is based primarily on service, price, available capacity and business relationships.
Each night, our service centers load outbound freight for transport to our other service centers for delivery. All inbound freight received by the service center in the evening or during the night is generally scheduled for local delivery the next business day, unless a customer requests a different delivery schedule.
All inbound freight received by the service center in the evening or during the night is generally scheduled for local delivery the next business day, unless a customer requests a different delivery schedule. Our management reviews the productivity and service performance of each service center on a daily basis to help ensure quality service and efficient operations.
Department of Energy (the “DOE”) that reset each week. Human Capital Employee Profile As of December 31, 2022, we employed 23,471 active full-time employees, none of which were represented under a collective bargaining agreement.
Department of Energy (the “DOE”) that reset each week and are one of many components that we use to determine the overall price for our transportation services. 4 Human Capital Employee Profile As of December 31, 2023, we employed 22,902 active full-time employees, none of which were represented under a collective bargaining agreement.
In addition to numerous service center renovations, expansions, and existing service center relocations, we opened 4, 27 and 37 new service centers over the past one, five and ten years, respectively, for a total of 255 service centers at December 31, 2022.
Our infrastructure allows us to provide service through each of our regions covering the continental United States. In addition to numerous service center renovations, expansions, and existing service center relocations, we opened 2, 22 and 36 new service centers over the past one, five and ten years, respectively, for a total of 257 service centers at December 31, 2023.
Regulatory requirements, and changes in regulatory requirements or guidance, may affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services. 5 Driver Hours of Service The Federal Motor Carrier Safety Administration (the “FMCSA”) rules provide that a truck driver may work no more than a maximum number of 60 hours within seven consecutive days and 70 hours within eight consecutive days.
Driver Hours of Service The Federal Motor Carrier Safety Administration (the “FMCSA”) rules provide that a truck driver may work no more than a maximum number of 60 hours within seven consecutive days and 70 hours within eight consecutive days.
We believe the combination of these factors provides us with a distinct advantage over most of our competitors. We utilize flexible scheduling and train our employees to perform multiple tasks, which we believe allows us to achieve greater productivity and higher levels of customer service than our competitors.
We utilize flexible scheduling and train our employees to perform multiple tasks, which we believe allows us to achieve greater productivity and higher levels of customer service than our competitors. We believe our focus on employee communication, continued education, development and motivation strengthens the relationships and trust among our employees.
Throughout our organization, we continuously seek to improve customer service by, among other things, maximizing on-time performance and minimizing cargo claims. We believe our transit times are generally faster and more reliable than those of our principal national competitors, in part because of our more efficient service center network, use of team drivers and proprietary technology.
We believe our transit times are generally faster and more reliable than those of our principal national competitors, in part because of our more efficient service center network, use of team drivers and proprietary technology. In addition, we provide greater geographic coverage than most of our regional competitors.
We believe our focus on employee communication, continued education, development and motivation strengthens the relationships and trust among our employees. Service Center Operations At December 31, 2022, we operated 255 service center locations, of which we owned 231 and leased 24. Our service centers are responsible for the pickup and delivery ("P&D") of freight within their local service area.
Service Center Operations At December 31, 2023, we operated 257 service center locations, of which we owned 233 and leased 24. Our service centers are responsible for the pickup and delivery ("P&D") of freight within their local service area. Each night, our service centers load outbound freight for transport to our other service centers for delivery.
Removed
Our infrastructure allows us to provide next-day and second-day service through each of our regions covering the continental United States.
Added
We believe we are able to gain market share by providing high-quality service at a fair price and intend to expand the capacity of our network to accommodate future growth. Throughout our organization, we continuously seek to improve customer service by, among other things, maximizing on-time performance and minimizing cargo claims.
Removed
Our service centers are strategically located throughout the country so that we can provide the highest quality service and minimize freight rehandling costs.
Added
These programs support our philosophy of promoting from within our high-quality workforce. Governmental Regulation We are regulated by the DOT and by various state and federal agencies.
Removed
In addition, we are subject to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration (“TSA”) and Customs and Border Protection (“CBP”) within the U.S. Department of Homeland Security.
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Department of Homeland Security. Regulatory requirements, and changes in regulatory requirements or guidance, may affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are unable to access sufficient funding for potential acquisitions, we may not be able to complete transactions that we otherwise find advantageous. 9 Any subsequent acquisition will entail numerous risks, including: • we may not achieve anticipated levels of revenue, efficiency, cash flows and profitability; • we may experience difficulties managing businesses that are outside our historical core competency and markets; • we may underestimate the resources required to support acquisitions, which could disrupt our ongoing business and distract our management; • we may incur unanticipated costs to our infrastructure to support new business lines or separate legal entities; • we may be required to temporarily match existing customer pricing in the acquiree’s markets, which may be lower than the rates that we would typically charge for our services; • liabilities we assume could be greater than our original estimates or may not be disclosed to us at the time of acquisition; • we may incur additional indebtedness or we may issue additional equity to finance future acquisitions, which could be dilutive to our shareholders; • potential loss of key employees and customers of the acquired company; and • an inability to recognize projected cost savings and economies of scale.
Biggest changeAny acquisition will entail numerous risks, including: • we may not achieve anticipated levels of revenue, efficiency, cash flows and profitability; • we may experience difficulties managing businesses that are outside our historical core competency and markets; • we may underestimate the resources required to support acquisitions, which could disrupt our ongoing business and distract our management; • we may incur unanticipated costs to our infrastructure to support new business lines or separate legal entities; • we may be required to temporarily match existing customer pricing in the acquiree’s markets, which may be lower than the rates that we would typically charge for our services; • liabilities we assume could be greater than our original estimates or may not be disclosed to us at the time of acquisition; • we may incur additional indebtedness or we may issue additional equity to finance future acquisitions, which could be dilutive to our shareholders; • potential loss of key employees and customers of the acquired company; and • an inability to recognize projected cost savings and economies of scale. 9 In addition, we may have difficulty integrating any acquired business and its operations, services and personnel into our existing operations, and such integration may require a significant amount of time and effort by our management team.
Our growth strategy exposes us to a number of risks, including the following: • shortages of suitable real estate may limit our growth and could cause congestion in our service center network, which could result in increased operating expenses; • our projected freight volume growth may differ from actual results, and prior capital investments based on our projections may contribute to excess capacity that could negatively impact our profitability; • growth may strain our management, capital resources, information systems and customer service; • hiring new employees may increase training costs and may result in temporary inefficiencies until those employees become proficient in their jobs; 6 • competition for qualified employees could adversely affect our profitability; • we may find it more difficult to maintain our unique OD family culture, which we believe has been a key contributor to our success; • expanding our service offerings may require us to enter into new markets and encounter new competitive challenges; and • limited supply and increased costs of new equipment may adversely affect our profitability and cash flows.
Our growth strategy exposes us to a number of risks, including the following: • shortages of suitable real estate may limit our growth and could cause congestion in our service center network, which could result in increased operating expenses; 6 • our projected freight volume growth may differ from actual results, and prior capital investments based on our projections may contribute to excess capacity that could negatively impact our profitability; • growth may strain our management, capital resources, information systems and customer service; • hiring new employees may increase training costs and may result in temporary inefficiencies until those employees become proficient in their jobs; • competition for qualified employees could adversely affect our profitability; • we may find it more difficult to maintain our unique OD family culture, which we believe has been a key contributor to our success; • expanding our service offerings may require us to enter into new markets and encounter new competitive challenges; and • limited supply and increased costs of new equipment may adversely affect our profitability and cash flows.
These customers could experience a decrease in production due to a decrease in the demand for their products, as a result of a decline in the U.S economy or other global economic factors. They could also use other LTL providers and other modes of transportation, such as truckload and intermodal, in response to capacity, service and pricing issues.
These customers could experience a decrease in production due to a decrease in the demand for their products, as a result of a decline in the U.S economy or other global economic factors. They could also use other LTL providers or other modes of transportation, such as truckload and intermodal, in response to capacity, service and pricing issues.
We intend to pay a quarterly cash dividend to holders of our common stock for the foreseeable future; however, dividend payments are subject to approval by our Board of Directors, and are restricted by applicable state law limitations on distributions to shareholders as well as certain covenants under our revolving credit facility and our note purchase and private shelf agreement.
We intend to pay a quarterly cash dividend to holders of our common stock for the foreseeable future; however, dividend payments are subject to approval by our Board of Directors (the "Board"), and are restricted by applicable state law limitations on distributions to shareholders as well as certain covenants under our revolving credit facility and our note purchase and private shelf agreement.
These factors include, but are not limited to, the following: • we compete with other transportation service providers of varying sizes, some of which may have more equipment, a broader global network and brand recognition, a wider range of services, more fully developed information technology systems, greater capital resources or other competitive advantages; • some of our competitors may reduce their prices to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase prices or maintain revenue; • we may be unable to continue to collect fuel surcharges or our fuel surcharge program may become ineffective in mitigating the impact of the fluctuating costs of fuel and other petroleum-based products; 10 • many customers reduce the number of carriers they use by selecting “core carriers” as approved transportation service providers and we may not be selected; • many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress prices or result in the loss of some business to competitors; • some shippers may choose to acquire their own trucking fleet or may choose to increase the volume of freight they transport if they have an existing trucking fleet; • some customers may choose to consolidate certain LTL shipments through a different mode of transportation, such as truckload, intermodal or rail; • some customers may perceive our environmental, social and governance (“ESG”) profile to be less robust than that of our competitors, which could influence the selection of their carrier; • our customers may manage their inventory levels more closely to a “just-in-time” basis, which may increase our costs and adversely affect our ability to meet our customers’ needs; • consolidation in the ground transportation industry may create other large carriers with greater financial resources and other competitive advantages relating to their size; • advances in technology require increased investments to remain competitive, technological transitions may cause operational challenges and our customers may not be willing to accept higher prices to cover the cost of these investments; • large transportation and e-commerce companies are making significant investments in their capabilities to compete with us; • competition from non-asset-based logistics and freight brokerage companies may adversely affect our customer relationships and ability to maintain sufficient pricing; and • our existing or future competitors may adopt emerging or additional technologies that improve their operating effectiveness, which could negatively affect our ability to remain competitive.
These factors include, but are not limited to, the following: • we compete with other transportation service providers of varying sizes, some of which may have more equipment, a broader global network and brand recognition, a wider range of services, more fully developed information technology systems, greater capital resources or other competitive advantages; • some of our competitors may reduce their prices to gain business, especially during times of reduced growth rates in the economy, which may limit our ability to maintain or increase prices or maintain revenue; • we may be unable to continue to collect fuel surcharges or our fuel surcharge program may become ineffective in mitigating the impact of the fluctuating costs of fuel and other petroleum-based products; • many customers reduce the number of carriers they use by selecting “core carriers” as approved transportation service providers and we may not be selected; • many customers periodically accept bids from multiple carriers for their shipping needs, and this process may depress prices or result in the loss of some business to competitors; • some shippers may choose to acquire their own trucking fleet or may choose to increase the volume of freight they transport if they have an existing trucking fleet; • some customers may choose to consolidate certain LTL shipments through a different mode of transportation, such as truckload, intermodal or rail; • some customers may perceive our environmental, social and governance (“ESG”) profile to be less robust than that of our competitors, which could influence the selection of their carrier; • our customers may manage their inventory levels more closely to a “just-in-time” basis, which may increase our costs and adversely affect our ability to meet our customers’ needs; • consolidation in the ground transportation industry may create other large carriers with greater financial resources to use in operations and other competitive advantages relating to their size; 10 • advances in technology require increased investments to remain competitive, technological transitions may cause operational challenges and our customers may not be willing to accept higher prices to cover the cost of these investments; • large transportation and e-commerce companies are making significant investments in their capabilities to compete with us; • competition from non-asset-based logistics and freight brokerage companies may adversely affect our customer relationships and ability to maintain sufficient pricing; and • our existing or future competitors may adopt emerging or additional technologies that improve their operating effectiveness, which could negatively affect our ability to remain competitive.
Diesel fuel prices and fuel availability can be impacted by factors beyond our control, such as natural or man-made disasters; adverse weather conditions; political events; disruption or failure of technology or information systems; price and supply decisions by oil producing countries and cartels; effect of any international conflicts; armed conflict; terrorist activities; world supply and demand imbalances; changes in refining capacity; changes in governmental policy concerning fuel production, transportation, taxes or marketing; tariffs; sanctions; public and investor 8 sentiment; and quotas or other changes to trade agreements.
Diesel fuel prices and fuel availability can be impacted by factors beyond our control, such as natural or man-made disasters; adverse weather conditions; political events; disruption or failure of technology or information systems; price and supply decisions by oil producing countries and cartels; effect of any international conflicts; armed conflict; terrorist activities; world supply and demand imbalances; changes in refining capacity; changes in governmental policy concerning fuel production, transportation, taxes or marketing; tariffs; sanctions; public and investor sentiment; and quotas or other changes to trade agreements.
Harsh winter weather or natural disasters, including but not limited to hurricanes, tornadoes, floods, fires, earthquakes and storms, can also adversely impact our performance by disrupting freight shipments or routes, destroying our assets, disrupting fuel supplies, increasing fuel costs, increasing maintenance costs, reducing demand and negatively impacting the business or financial condition of our customers, any of which could harm our results of operations or make our results of operations more volatile.
Harsh weather or natural disasters, including but not limited to hurricanes, tornadoes, floods, fires, earthquakes and storms, can also adversely impact our performance by disrupting freight shipments or routes, destroying our assets, disrupting fuel supplies, increasing fuel costs, increasing maintenance costs, reducing demand and negatively impacting the business or financial condition of our customers, any of which could harm our results of operations or make our results of operations more volatile.
Failure to keep pace with developments in technology, any disruption to our technology infrastructure, or failures of essential services upon which our technology platforms rely could cause us to incur costs or result in a loss of business, which may have a material adverse effect on our results of operations and financial condition. 13 We rely heavily on information technology systems.
Failure to keep pace with developments in technology, any disruption to our technology infrastructure, or failures of essential services upon which our technology platforms rely could cause us to incur costs or result in a loss of business, which may have a material adverse effect on our results of operations and financial condition. We rely heavily on information technology systems.
The sophistication of efforts by hackers, foreign governments, cyber-terrorists, and cyber-criminals, acting individually or in coordinated groups, to launch distributed denial of service attacks or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued to increase.
The sophistication of efforts by hackers, foreign 12 governments, cyber-terrorists, and cyber-criminals, acting individually or in coordinated groups, to launch distributed denial of service attacks or other coordinated attacks that may cause service outages, gain inappropriate or block legitimate access to systems or information, or result in other business interruptions has continued to increase.
We are subject to the risks of legal proceedings and claims, governmental inquiries, notices and investigations which could adversely affect our business. The nature of our business exposes us to the potential for various legal proceedings and claims related to labor and employment, personal injury, property damage, cargo claims, safety and contract compliance, environmental liability and other 15 matters.
We are subject to the risks of legal proceedings and claims, governmental inquiries, notices and investigations which could adversely affect our business. The nature of our business exposes us to the potential for various legal proceedings and claims related to labor and employment, personal injury, property damage, cargo claims, safety and contract compliance, environmental liability and other matters.
We may also use cash for investing in strategic assets or dividend payments, instead of share repurchases. The market value of our common stock has been and may in the future be volatile, and could be substantially affected by various factors. The price of our common stock on the Nasdaq Global Select Market changes constantly.
We may also use cash for investing in strategic assets or dividend payments, instead of share repurchases. 16 The market value of our common stock has been and may in the future be volatile, and could be substantially affected by various factors. The price of our common stock on the Nasdaq Global Select Market changes constantly.
These provisions: • limit who may call a special meeting of shareholders; • require shareholder action by written consent to be unanimous; • establish advance notice and other substantive and procedural requirements for nominations for election to our Board of Directors or for proposing matters that can be acted upon at shareholder meetings; • may make it difficult to merge with or otherwise absorb a Virginia corporation acquired in a tender offer for the three years after the acquisition; and • may make an unsolicited attempt to gain control of us more difficult by restricting the right of specified shareholders to vote newly acquired large blocks of stock.
These provisions: • limit who may call a special meeting of shareholders; • require shareholder action by written consent to be unanimous; • establish advance notice and other substantive and procedural requirements for nominations for election to our Board or for proposing matters that can be acted upon at shareholder meetings; • may make it difficult to merge with or otherwise absorb a Virginia corporation acquired in a tender offer for the three years after the acquisition; and • may make an unsolicited attempt to gain control of us more difficult by restricting the right of specified shareholders to vote newly acquired large blocks of stock. 17
Further, Congress or one or more states could approve legislation and/or the National Labor Relations Board could render decisions or implement rule changes that could significantly affect our business and our relationship with our employees, including actions that could substantially liberalize the procedures for union organization.
Further, Congress or one or more states could approve legislation and/or the National Labor Relations Board could render decisions or implement rule changes that could significantly affect 11 our business and our relationship with our employees, including actions that could substantially liberalize the procedures for union organization.
Economic conditions resulting in bankruptcies of a concentration of our customers could have a significant impact on our financial 11 position, results of operations or liquidity in a particular year or quarter.
Economic conditions resulting in bankruptcies of a concentration of our customers could have a significant impact on our financial position, results of operations or liquidity in a particular year or quarter.
In addition, we can offer no assurance that the Department of Labor will not adopt new regulations or interpret existing regulations in a manner that would favor the agenda of unions, or that our employees will not unionize in the future, particularly if regulatory changes occur that facilitate unionization.
In addition, we can offer no assurance that the Department of Labor will not adopt new regulations or interpret existing regulations in a manner that would favor the agenda of unions, or that our employees will not unionize in the future, particularly if continued regulatory changes facilitate unionization.
As a result, future dividend payments are not guaranteed and will depend upon various factors such as our overall financial condition, available liquidity, anticipated cash needs, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board of Directors.
As a result, future dividend payments are not guaranteed and will depend upon various factors such as our overall financial condition, available liquidity, anticipated cash needs, future prospects for earnings and cash flows, as well as other factors considered relevant by our Board.
ITEM 1A. RI SK FACTORS An investment in our common stock involves a variety of risks and uncertainties. The following describes some of the material risks that could adversely affect our business, financial condition, operating results or cash flows. We may also be adversely impacted by other risks not presently known to us or that we currently consider immaterial.
ITEM 1A. RISK FACTORS An investment in our common stock involves a variety of risks and uncertainties. The following describes some of the material risks that could adversely affect our business, financial condition, operating results or cash flows. We may also be adversely impacted by other risks not presently known to us or that we currently consider immaterial.
As further described in Part II, Item 7 of this Annual Report on Form 10-K, we generally finance our capital expenditures and planned growth with existing cash and short-term investments, cash flows from operations, issuance of debt (including pursuant to our note purchase and private shelf agreement) and through available borrowings under our existing senior unsecured credit agreement.
As further described in Part II, Item 7 of this Annual Report on Form 10-K, we generally finance our capital expenditures and planned growth with existing cash, cash flows from operations, issuance of debt (including pursuant to our note purchase and private shelf agreement) and through available borrowings under our existing senior unsecured credit agreement.
Risks Related to Owning our Common Stock The Congdon family controls a large portion of our outstanding common stock. David S. Congdon, John R. Congdon, Jr. and their affiliate family members beneficially own an aggregate of approximately 18% of the outstanding shares of our common stock.
Risks Related to Owning our Common Stock The Congdon family controls a large portion of our outstanding common stock. David S. Congdon, John R. Congdon, Jr. and their affiliate family members beneficially own an aggregate of approximately 12% of the outstanding shares of our common stock.
Adverse macroeconomic conditions, both in the U.S. and internationally, such as recent rising inflation, increasing interest rates and slower economic growth has, and may continue to, negatively affect our customers’ business levels, the amount of transportation services they need, their ability to pay for our services and overall freight levels, any of which might impair our asset utilization.
Adverse macroeconomic conditions, both in the U.S. and internationally, such as recent high inflation, continued high interest rates and slower economic growth has, and may continue to, negatively affect our customers’ business levels, the amount of transportation services they need, their ability to pay for our services and overall freight levels, any of which might impair our asset utilization.
In connection with our growth strategy, at various times, we have consistently expanded and upgraded service centers, purchased additional equipment and increased our sales and marketing efforts, and we expect to continue to do so.
In connection with our growth strategy, at various times, we have consistently expanded and upgraded our service center network, purchased additional equipment and increased our sales and marketing efforts, and we expect to continue to do so.
Our growth strategy includes increasing the volume of freight moving through our existing service center network and selectively expanding our capacity in the United States through market share gains.
Our growth strategy includes increasing the volume of freight moving through our existing service center network primarily by increasing our market share and selectively expanding our capacity in the United States.
These regulations, the limited equipment availability, and other supply chain factors have resulted and could continue to result in higher prices for new equipment, which could have a material adverse effect on our business, financial condition, and results of operations, particularly our maintenance expense, mileage productivity, and driver retention.
These regulations, the limited equipment availability, and other supply chain factors have resulted and could continue to result in higher prices for new equipment and related maintenance parts, which could have a material adverse effect on our business, financial 7 condition, and results of operations, particularly our maintenance expense, depreciation expense, capital expenditures, mileage productivity, and driver retention.
Our revenue and operating margins in the first and fourth quarters are typically lower than those during the second and third quarters due to reduced shipments, decreased fuel efficiency, increased cold-weather related maintenance costs of revenue equipment, and increased insurance and claims costs during the winter months.
Our operations are subject to seasonal trends common in our industry. Our revenue and operating margins in the first and fourth quarters are typically lower than those during the second and third quarters due to reduced shipments, decreased fuel efficiency, increased cold-weather related maintenance costs of revenue equipment, and increased insurance and claims costs during the winter months.
Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, including but not limited to storms, floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations and financial condition.
Disruptions due to transitional challenges in upgrading or enhancing our technology systems; failures in the services upon which our information technology platforms rely, including those that may arise from adverse weather conditions or natural calamities, including but not limited to storms, floods, hurricanes, earthquakes or tornadoes; illegal acts, including terrorist attacks; human error or systems modernization initiatives; and/or other disruptions, may adversely affect our business, which could increase our costs or result in a loss of customers that could have a material adverse effect on our results of operations and financial condition. 13 Any disruption in the operational and technical services provided to us by third parties could adversely affect our business and subject us to liability.
These factors include, among others: • actual or anticipated variations in earnings, financial or operating performance or liquidity; • changes in analysts’ recommendations or projections; • failure to meet analysts’ projections; • general political, social, economic and capital market conditions; • announcements of developments related to our business; 16 • operating and stock performance of other companies deemed to be peers; • actions by government regulators; • changes in key personnel; • investor sentiment with respect to our policies or efforts on ESG matters; • fluctuations in trading volume, including substantial increases or decreases in reported holdings by significant shareholders; • expectations regarding our capital deployment program, including any existing or potential future share repurchase programs and any future dividend payments that may be declared by our Board of Directors, or any determination to cease repurchasing stock or paying dividends; and • news reports of trends, concerns and other issues related to us or our industry, including changes in regulations.
These factors include, among others: • actual or anticipated variations in earnings, financial or operating performance or liquidity; • changes in analysts’ recommendations or projections; • failure to meet analysts’ projections; • general political, social, economic and capital market conditions; • announcements of developments related to our business; • operating and stock performance of other companies deemed to be peers; • actions by government regulators; • changes in key personnel; • potential costs and liabilities associated with cyber incidents; • investor sentiment with respect to our policies or efforts on ESG matters; • widespread outbreak of an illness or any other communicable disease or public health crisis; • fluctuations in trading volume, including substantial increases or decreases in reported holdings by significant shareholders; • expectations regarding our capital deployment program, including any existing or potential future share repurchase programs and any future dividend payments that may be declared by our Board, or any determination to cease repurchasing stock or paying dividends; • news reports of trends, concerns and other issues related to us or our industry, including changes in regulations; and • other factors described in this “Risk Factors” section.
In order to maintain adequate capacity to support our customers’ demand for our services we may, from time to time, utilize third-party transportation services to supplement our workforce and equipment needs.
In order to maintain adequate capacity to support our customers’ demand for our services we may, from time to time, utilize third-party transportation services to supplement the capacity of our workforce and fleet.
Tractor and trailer manufacturers continue to experience significant shortages of various component parts and supplies, forcing many manufacturers to reduce or suspend their production, which has led to a lower supply of tractors, trailers, and other equipment, higher prices, and lengthened trade cycles.
Tractor and trailer manufacturers have previously experienced shortages of various component parts and supplies, forcing many manufacturers to reduce or suspend their production, which led to a lower supply of tractors, trailers, and other equipment, higher prices, and lengthened trade cycles.
We are regulated by the DOT and by various state and federal agencies. These regulatory authorities have broad powers over matters relating to authorized motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting.
These regulatory authorities have broad powers over matters relating to authorized motor carrier operations, as well as motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, transportation of hazardous materials, certain mergers and acquisitions and periodic financial reporting.
We do, however, have a number of customers whose demand for our services is tied to U.S. industrial production, or the broader domestic economy, that could, collectively, drive business and revenue growth.
We do, however, have a number of customers whose demand for our services is tied to the broader domestic economy that could, collectively, impact our business and potential revenue growth.
We regularly monitor the components of our pricing, including fuel surcharges, and address individual account profitability issues with our customers when necessary; however, there can be no assurance that fuel surcharges can be maintained indefinitely or will be sufficiently effective in offsetting increases in diesel fuel prices.
We regularly monitor the components of our pricing, including fuel surcharges, and address individual account profitability issues with our customers when necessary; however, there can be no assurance that fuel surcharges can be maintained indefinitely or will be sufficiently effective in offsetting increases in diesel fuel prices. 8 Our results of operations may be affected by seasonal factors, harsh weather conditions and disasters.
In addition, the availability and price of our equipment may also be adversely affected in the future by regulations on newly manufactured equipment and engines. We are subject to regulations issued by the U.S.
In addition, the availability and price of our equipment may also be adversely affected in the future by regulations on newly manufactured equipment and engines.
If we are unable to attract and retain a sufficient number of qualified drivers and technicians, or address general labor market challenges, we could be required to adjust our compensation and benefits packages, amend our hiring standards, or operate with fewer trucks and face difficulty meeting customer demands, any of which could adversely affect our growth and profitability. 12 If we are unable to retain our key employees, or if we do not continue to effectively execute our succession plan, our business, results of operations and financial position could be adversely affected.
If we are unable to attract and retain a sufficient number of qualified drivers and technicians, or address general labor market challenges, we could be required to adjust our compensation and benefits packages, amend our hiring standards, or operate with fewer trucks and face difficulty meeting customer demands, any of which could adversely affect our growth and profitability.
We utilize third-party service providers who have access to our systems and certain sensitive data, which exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection.
The rapid evolution and increased adoption of artificial intelligence technologies may also intensify our cybersecurity risks. We utilize third-party service providers who have access to our systems and certain sensitive data, which exposes us to additional security risks, particularly given the complex and evolving laws and regulations regarding privacy and data protection.
The LTL and transportation industry may be impacted by rapid changes in technologies. Our competitors may implement new technology that could improve their service, price, available capacity or business relationships and increase their market share. If we do not appropriately adapt our operations to these new technologies, our business, financial condition, and results of operations may suffer.
Our competitors may implement new technology, including artificial intelligence applications, that could improve their service, price, available capacity or business relationships and increase their market share. If we do not appropriately adapt our operations to these new technologies, our business, financial condition, and results of operations may suffer.
Department of Homeland Security. Regulatory requirements and changes in regulatory requirements or guidance, together with the growing compliance risks presented by increased differences between applicable federal and state regulations, may affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services.
Regulatory requirements and changes in regulatory requirements or guidance, together with the growing compliance risks presented by increased differences between applicable federal and state regulations, may affect our business or the economics of the industry by requiring changes in operating practices that could influence the demand for and increase the costs of providing transportation services. 14 We are subject to various environmental laws and regulations, and costs of compliance with, liabilities under, or violations of, existing or future environmental laws or regulations could adversely affect our business.
We have experienced higher costs to purchase, lease and/or build or renovate service centers as a result of inflation, supply chain issues, increased raw material and labor costs, and higher demand for and reduced supply of such service centers.
Our business model is dependent on the cost and availability of service centers in key strategic areas. We have experienced higher costs to purchase, lease and/or build or renovate service centers as a result of inflation, supply chain issues, increased raw material and labor costs, and higher demand for and reduced supply of such service centers.
We cannot ensure that we will have sufficient cash to consummate an acquisition or otherwise be able to obtain financing under acceptable terms - or obtain financing at all - for an acquisition.
We cannot ensure that we will have sufficient cash to consummate an acquisition or otherwise be able to obtain financing under acceptable terms - or obtain financing at all - for an acquisition. If we are unable to access sufficient funding for potential acquisitions, we may not be able to complete transactions that we otherwise find advantageous.
Any disruption in the operational and technical services provided to us by third parties could adversely affect our business and subject us to liability. We rely on third parties to provide us with operational and technical services, such as hosting of our cloud computing and storage needs.
We rely on third parties to provide us with operational and technical services, such as hosting of our cloud computing and storage needs.
In addition, insurance companies generally require us to collateralize our self-insured retention or deductible levels. If these collateralization requirements increase, our borrowing capacity could be adversely affected.
In addition, insurance companies generally require us to collateralize our self-insured retention or deductible levels. If these collateralization requirements increase, our borrowing capacity could be adversely affected. Reductions in the available supply or increases in the cost of equipment and parts may adversely impact our profitability and cash flows.
We may be adversely affected by legal, regulatory, or market responses to climate change concerns. Increased concern over climate change and the potential impact of global warming has led to an increase in the consideration of greenhouse gas emissions regulation.
We may be adversely affected by legal, regulatory, or market responses to climate change concerns. Increased concern over climate change and the potential impact of global warming has led to an increase in current and proposed regulation from federal, state and local governments related to our carbon footprint, including with respect to vehicle engine and facility emissions.
Costs and operational risks associated with future climate change concerns or environmental laws and regulations, sustainability requirements and related investor expectations could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows. Healthcare legislation and other mandated benefits-related coverage may increase our costs for employee healthcare and benefits and reduce our future profitability.
This focus may result in additional legislation or customer requirements, such as limits on vehicle weight and size or energy source. Costs and operational risks associated with future climate change concerns or environmental laws and regulations, sustainability requirements and related investor expectations could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.
Additionally, uncertainty and instability in the global economy may lead to fewer goods being transported and could have a material adverse effect on our business, financial condition and results of operations.
Additionally, uncertainty and instability in the global economy or widespread outbreak of an illness or any other communicable disease or public health crisis, as we saw with the COVID-19 pandemic, may lead to fewer goods being transported and could have a material adverse effect on our business, financial condition and results of operations.
In addition, a shortage of qualified drivers could increase driver turnover, decrease asset utilization, limit growth and adversely impact our results of operations. 14 We operate in a highly regulated industry, and increased costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business.
We operate in a highly regulated industry, and increased costs of compliance with, or liability for violation of, existing or future regulations could have a material adverse effect on our business. We are regulated by the DOT and by various state and federal agencies.
Reductions in the available supply or increases in the cost of equipment and parts may adversely impact our profitability and cash flows. 7 We have recently experienced difficulties in purchasing equipment and related maintenance parts due to decreased supply and increased costs, and may continue to experience such difficulties in the future.
We have previously experienced difficulties in purchasing equipment and parts for repair due to decreased supply and increased costs, and may experience such difficulties in the future.
Due to increased consideration, there could be an increase in regulation from federal, state and local governments related to our carbon footprint, including with respect to vehicle engine and facility emissions. This increase in regulation could result in increased direct costs, such as taxes, fees, fuel, or capital costs, or changes to our operations in order to comply.
This increase in regulation could result in increased direct costs, such as taxes, fees, fuel, or capital costs, or changes to our operations in order to comply. There is also a focus from regulators and our customers on sustainability matters.
Various economic factors such as recessions, inflation and downturns in the domestic economy could adversely impact our profitability and cash flows. Inflation in the United States climbed to its highest level in 40 years during 2022 and the Federal Reserve increased interest rates as a result.
Various economic factors such as inflationary pressures or downturns in the domestic economy could adversely impact our profitability and cash flows. Inflationary pressures have been significant in the United States in recent years.
As a result, the costs to attract, train and retain qualified drivers could increase.
As a result, the costs to attract, train and retain qualified drivers could increase. In addition, a shortage of qualified drivers could increase driver turnover, decrease asset utilization, limit growth and adversely impact our results of operations.
Our success will continue to depend upon the experience and leadership of our key employees and executive officers.
If we are unable to retain our key employees, or if we do not continue to effectively execute our succession plan, our business, results of operations and financial position could be adversely affected. Our success will continue to depend upon the experience and leadership of our key employees and executive officers.
Furthermore, while we maintain insurance intended to address costs associated with aspects of cyber incidents, network failures and data privacy-related concerns, our coverage may not sufficiently cover all types of losses or claims that may arise. If we do not adapt to new technologies implemented by our competitors in the LTL and transportation industry, our business could suffer.
Furthermore, while we maintain insurance intended to address costs associated with aspects of cyber incidents, network failures and data privacy-related concerns, we cannot be certain that we will continue to be able to obtain excess insurance coverage in amounts we deem sufficient, our insurance carriers will pay on our insurance claims, or we will not experience a claim for which coverage is not provided.
If we are unable to sufficiently increase our rates to offset the ongoing increase in our costs, our profitability and cash flows could be materially affected. Higher costs for or limited availability of suitable real estate may adversely affect our business operations. Our business model is dependent on the cost and availability of service centers in key strategic areas.
Inflation impacts the cost to operate our business by putting upward pressure on wages, benefits, real estate, equipment, fuel, parts and repairs, insurance, and other general and miscellaneous expenses. If we are unable to sufficiently increase our customer rates to offset the increase in our costs, our profitability and cash flows could be materially affected.
Removed
We face various risks related to health epidemics, pandemics and similar outbreaks that have had, and may continue to have, adverse effects on our business, results of operations and financial condition. Health epidemics, pandemics and similar outbreaks can have significant and widespread impacts.
Added
In 2023, we experienced lower freight volumes due to continued softness in the domestic economy. Decreased demand for LTL freight services can negatively impact shipment volume and lower weight per shipment, which in turn can negatively impact freight density in our network.
Removed
As we saw during the peaks of the COVID-19 pandemic, outbreaks of disease, and the governmental/social responses thereto and the related changes in the economic and political conditions in markets in which we operate can have adverse impacts on our business, results of operations, financial condition and cost and access to capital, and on those of our customers and suppliers, and these adverse impacts may continue.
Added
Reduced freight density in our network can have a deleveraging impact on fixed costs, including depreciation and other indirect costs as a percent of revenue, which can adversely impact our profitability and cash flows. Higher costs for or limited availability of suitable real estate may adversely affect our business operations.
Removed
These impacts and potential impacts include, among other things, significant reductions or volatility in demand for our services, inability of our customers to timely pay for our services, and failure of our suppliers or third-party service providers to meet their obligations to us.
Added
If we do not adapt to new technologies implemented by our competitors in the LTL and transportation industry, our business could suffer. The LTL and transportation industry may be impacted by rapid changes in technologies.
Removed
Other risks to which we are subject, including those related to economic downturns, customer/supplier/vendor operations, labor issues, inflationary pressures, supply chain disruptions, changes in political and regulatory conditions, liquidity, and industry pricing environment stability, as described in further detail in other risk factors, could be exacerbated during a health epidemic, pandemic, or similar outbreak.
Added
The engines in our newer tractors are subject to emissions-control regulations that could substantially increase operating expenses and future regulations concerning emissions or fuel-efficiency may have a material adverse impact on our business. In December 2022, the U.S.
Removed
Despite our efforts to manage our exposure to these risks, the ultimate impact of health epidemics, pandemics and similar outbreaks depends on factors beyond our knowledge or control, including the duration and severity of any outbreak and governmental/social actions taken to contain its spread and mitigate its public health impact.
Added
Environmental Protection Agency (“EPA”) finalized new stringent emission standards to reduce nitrogen oxides and establish new standards for greenhouse gas emissions from heavy-duty engines under the Clean Trucks Plan. In December 2021, the California Air Resources Board (“CARB”) adopted more stringent standards to reduce nitrogen oxide emissions from heavy-duty trucks.
Removed
Environmental Protection Agency (the “EPA”) as well as regulations issued by state and local agencies, including the California Air Resources Board (“CARB”) and the South Coast Air Quality Management District (“SCAQMD”). CARB and SCAQMD have required progressive reductions in exhaust emissions through the Advanced Clean Fleets regulation and the Warehouse Indirect Source Rule, respectively.
Added
Future strengthening of EPA, CARB or other federal or state regulatory requirements regarding fuel-efficiency or engine emissions of tractors could also result in increases in the cost of capital equipment and maintenance. The CARB’s Advanced Clean Fleets (“ACF”) rule requires fleets to adopt an increasing percentage of zero emission trucks, complementing CARB’s Advanced Clean Trucks (“ACT”) rule.
Removed
We may become subject to new or more restrictive regulations, or differing interpretations of existing regulations, which may increase the cost of providing transportation services or adversely affect our results of operations. We are also unable to predict how any future changes in government policy will affect EPA, CARB and SCAQMD regulation and enforcement.
Added
The ACF rule applies to high-priority fleets of 50 or more trucks, aiming to accelerate the transition to zero emission vehicles (“ZEVs”). The ACF rule offers the ZEV Milestones Option or the Model Year Schedule.
Removed
The domestic economy has slowed, impacting industry volumes, while transportation carriers have also faced an increase in the cost of doing business. Our business has generally experienced cost increases for labor, benefits, real estate, equipment, fuel, parts and repairs, operating taxes, insurance, purchased transportation, interest expense and other miscellaneous expenses.
Added
We have elected the ZEV Milestones Option, which allows fleets to phase in ZEVs between 2025 and 2042, depending on the type of vehicle and its usage. Fleet owners choosing this option must continuously meet or exceed certain scheduled ZEV Fleet Milestone percentage requirements. The ZEV Milestones Option ultimately requires 100% ZEVs by 2035.
Removed
Several of these factors combined to constrain fuel supply and increase prices in 2022, and we expect such conditions to continue to be present for the remainder of 2023.
Added
While CARB’s ACF and ACT regulations may permit companies to seek exemptions or relief, there are no assurances that relief from either regulation will be obtained. At this point, there are virtually no ZEVs widely available that are suitable replacements for current technology used in LTL operations.
Removed
Our results of operations may be affected by seasonal factors, harsh weather conditions and disasters. Our operations are subject to seasonal trends common in our industry.
Added
In addition, there does not appear to be sufficient infrastructure in place to support an electric vehicle fleet operation throughout our current terminal network. If ZEVs are not available or not commercially viable for the LTL market, we may be required to modify or curtail our operations in California.
Removed
In addition, we may have difficulty integrating any acquired business and its operations, services and personnel into our existing operations, and such integration may require a significant amount of time and effort by our management team.
Added
During any transition to zero-emission trucks, due to the mandates on manufacturers limiting diesel engine sales, we may be forced to continue using older model diesel trucks that may require higher maintenance costs or be less reliable. The transition to utilizing ZEVs could have a material adverse effect on our financial condition, results of operations, liquidity and cash flows.
Removed
We are subject to various environmental laws and regulations, and costs of compliance with, liabilities under, or violations of, existing or future environmental laws or regulations could adversely affect our business.
Added
Expectations relating to ESG considerations and related reporting obligations expose us to potential liabilities, increased costs, reputational harm, and other adverse effects on our business. Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on ESG considerations relating to businesses, including climate change and greenhouse gas emissions, human and civil rights, and diversity, equity and inclusion.
Removed
There is also a focus from regulators and our customers on sustainability issues. This focus may result in new legislation or customer requirements, such as limits on vehicle weight and size or energy source.
Added
In addition, we may make statements about our goals and initiatives through our various non-financial reports, information provided on our website, press statements and other communications.
Removed
Finally, given the increasing focus on ESG matters by the investor community, if shareholders were to express dissatisfaction with our policies or efforts with respect to climate change, sustainability or similar matters, there could be a negative impact on our stock price, and we could also suffer reputational harm.
Added
Responding to these ESG considerations and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and depends in part on third-party performance or data that is outside our control. 15 Healthcare and other mandated benefits-related coverage may increase our costs for employee benefits and reduce our future profitability.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. P ROPERTIES We own our principal executive office located in Thomasville, North Carolina, and 231 of the 255 service centers we operated as of December 31, 2022. Our facilities are strategically dispersed over the states in which we operate.
Biggest changeITEM 2. P ROPERTIES We own our principal executive office located in Thomasville, North Carolina, and 233 of the 257 service centers we operated as of December 31, 2023. Our facilities are strategically dispersed over the states in which we operate.
We believe that all of our properties are in good repair and are capable of providing the level of service required by current business levels and customer demands. In addition, we believe we have sufficient capacity in our service center network to accommodate increased demand for our services. 17
We believe that all of our properties are in good repair and are capable of providing the level of service required by current business levels and customer demands. In addition, we believe we have sufficient capacity in our service center network to accommodate increased demand for our services.
Our owned service centers include most of our larger facilities and account for approximately 95% of the total door capacity in our network. At December 31, 2022, the terms of our leased properties ranged from month-to-month to a lease that expires in 2039.
Our owned service centers include most of our larger facilities and account for approximately 95% of the total door capacity in our network. At December 31, 2023, the terms of our leased properties ranged from month-to-month to a lease that expires in 2035.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeConsistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental legal proceedings with a governmental authority if management reasonably believes that the proceedings may involve potential monetary sanctions of $1.0 million or more. Applying this threshold, there are no such unresolved proceedings to disclose as of December 31, 2022.
Biggest changeConsistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental legal proceedings with a governmental authority if management reasonably believes that the proceedings may involve potential monetary sanctions of $1.0 million or more. Applying this threshold, there are no such unresolved proceedings to disclose as of December 31, 2023.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”).
Biggest changeOn July 28, 2021, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”). The 2021 Repurchase Program, which does not have an expiration date, began after the completion of our prior repurchase program in January 2022.
Shares of our common stock repurchased under our 2021 Repurchase Program are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock. 19 Performance Graph The following graph compares the total shareholder cumulative returns, assuming the reinvestment of all dividends, of $100 invested on December 31, 2017, in (i) our common stock, (ii) the S&P 500 Total Return Index, and (iii) the Dow Jones Transportation Average, for the five-year period ended December 31, 2022.
Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock. 20 Performance Graph The following graph compares the total shareholder cumulative returns, assuming the reinvestment of all dividends, of $100 invested on December 31, 2018, in (i) our common stock, (ii) the S&P 500 Total Return Index, and (iii) the Dow Jones Transportation Average, for the five-year period ended December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information Our common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol ODFL. At February 16, 2023, there were 377,120 holders of our common stock, including 76 shareholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Information Our common stock is traded on the Nasdaq Global Select Market (“Nasdaq”) under the symbol ODFL. At February 16, 2024, there were 423,775 holders of our common stock, including 73 shareholders of record.
The following table provides information regarding our repurchases of our common stock during the fourth quarter of 2022: ISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs October 1-31, 2022 434,311 $ 264.79 434,238 $ 763,985,373 November 1-30, 2022 295,748 $ 287.26 295,675 $ 679,050,187 December 1-31, 2022 70 $ 302.61 - $ 679,050,187 Total 730,129 729,913 (1) Total number of shares purchased during the quarter includes 216 shares of our common stock surrendered by a participant to satisfy tax withholding obligations in connection with the vesting of equity awards issued under our 2016 Stock Incentive Plan.
The following table provides information regarding our repurchases of our common stock during the fourth quarter of 2023: ISSUER PURCHASES OF EQUITY SECURITIES Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs October 1-31, 2023 58,925 $ 400.08 58,296 $ 287,637,586 November 1-30, 2023 55,005 $ 392.18 54,376 $ 266,302,847 December 1-31, 2023 105,434 $ 389.92 104,805 $ 225,437,013 Total 219,364 217,477 (1) Total number of shares purchased during the quarter includes 1,887 shares of our common stock surrendered by a participant to satisfy tax withholding obligations in connection with the vesting of equity awards issued under our 2016 Stock Incentive Plan.
Cumulative Total Return 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Old Dominion Freight Line, Inc. $ 100 $ 94 $ 145 $ 225 $ 415 $ 330 S&P 500 Total Return Index $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 Dow Jones Transportation Average $ 100 $ 88 $ 106 $ 123 $ 164 $ 136
Cumulative Total Return 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Old Dominion Freight Line, Inc. $ 100 $ 154 $ 239 $ 440 $ 350 $ 502 S&P 500 Total Return Index $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 Dow Jones Transportation Average $ 100 $ 121 $ 141 $ 188 $ 155 $ 186
The 2021 Repurchase Program, which does not have an expiration date, began after the completion of our prior repurchase program in January 2022. Under our 2021 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.
At December 31, 2023, our 2021 Repurchase Program had $225.4 million remaining authorized. Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.
Added
On July 26, 2023, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock. The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2021 Repurchase Program.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+10 added−10 removed35 unchanged
Biggest changeResults of Operations The following table sets forth, for the years indicated, expenses and other items as a percentage of revenue from operations: 2022 2021 Revenue from operations 100.0 % 100.0 % Operating expenses: Salaries, wages and benefits 43.4 47.0 Operating supplies and expenses 13.6 10.8 General supplies and expenses 2.6 2.6 Operating taxes and licenses 2.3 2.5 Insurance and claims 0.9 1.0 Communication and utilities 0.6 0.7 Depreciation and amortization 4.5 4.9 Purchased transportation 2.5 3.5 Miscellaneous expenses, net 0.2 0.5 Total operating expenses 70.6 73.5 Operating income 29.4 26.5 Interest (income) expense, net (0.1 ) 0.0 Other expense, net 0.1 0.1 Income before income taxes 29.4 26.4 Provision for income taxes 7.4 6.7 Net income 22.0 % 19.7 % 22 Key financial and operating metrics for 2022 and 2021 are presented below: 2022 2021 Change % Change Work days 253 252 1 0.4 Revenue (in thousands) $ 6,260,077 $ 5,256,328 $ 1,003,749 19.1 Operating ratio 70.6 % 73.5 % Net income (in thousands) $ 1,377,159 $ 1,034,375 $ 342,784 33.1 Diluted earnings per share $ 12.18 $ 8.89 $ 3.29 37.0 LTL tons (in thousands) 10,211 10,119 92 0.9 LTL tonnage per day 40,359 40,153 206 0.5 LTL shipments (in thousands) 12,989 12,880 109 0.8 LTL shipments per day 51,341 51,111 230 0.5 LTL weight per shipment (lbs.) 1,572 1,571 1 0.1 LTL revenue per hundredweight $ 30.24 $ 25.59 $ 4.65 18.2 LTL revenue per shipment $ 475.45 $ 402.01 $ 73.44 18.3 LTL revenue per intercity mile $ 8.28 $ 7.32 $ 0.96 13.1 LTL intercity miles (in thousands) 746,028 707,611 38,417 5.4 Average length of haul (miles) 934 935 (1 ) (0.1 ) Our financial results for 2022 included double-digit growth in our revenue, net income and earnings per diluted share.
Biggest changeResults of Operations The following table sets forth, for the years indicated, expenses and other items as a percentage of revenue from operations: 2023 2022 Revenue from operations 100.0 % 100.0 % Operating expenses: Salaries, wages and benefits 44.8 43.4 Operating supplies and expenses 12.2 13.6 General supplies and expenses 2.8 2.6 Operating taxes and licenses 2.5 2.3 Insurance and claims 1.3 0.9 Communication and utilities 0.7 0.6 Depreciation and amortization 5.5 4.5 Purchased transportation 2.1 2.5 Miscellaneous expenses, net 0.1 0.2 Total operating expenses 72.0 70.6 Operating income 28.0 29.4 Interest (income) expense, net (0.2 ) (0.1 ) Other expense, net 0.1 0.1 Income before income taxes 28.1 29.4 Provision for income taxes 7.0 7.4 Net income 21.1 % 22.0 % 23 Key financial and operating metrics for 2023 and 2022 are presented below: 2023 2022 Change % Change Work days 252 253 (1 ) (0.4 ) Revenue (in thousands) $ 5,866,152 $ 6,260,077 $ (393,925 ) (6.3 ) Operating ratio 72.0 % 70.6 % Net income (in thousands) $ 1,239,502 $ 1,377,159 $ (137,657 ) (10.0 ) Diluted earnings per share $ 11.26 $ 12.18 $ (0.92 ) (7.6 ) LTL tons (in thousands) 9,260 10,211 (951 ) (9.3 ) LTL tonnage per day 36,745 40,359 (3,614 ) (9.0 ) LTL shipments (in thousands) 12,176 12,989 (813 ) (6.3 ) LTL shipments per day 48,317 51,341 (3,024 ) (5.9 ) LTL weight per shipment (lbs.) 1,521 1,572 (51 ) (3.2 ) LTL revenue per hundredweight $ 31.31 $ 30.24 $ 1.07 3.5 LTL revenue per shipment $ 476.25 $ 475.45 $ 0.80 0.2 LTL revenue per intercity mile $ 8.38 $ 8.28 $ 0.10 1.2 LTL intercity miles (in thousands) 691,632 746,028 (54,396 ) (7.3 ) Average length of haul (miles) 925 934 (9 ) (1.0 ) Our financial results for 2023 reflect continued softness in the domestic economy that contributed to the decline in our revenue.
A hypothetical change of 10% in our percentage of completion estimate would not have a material effect on our recorded revenue. Property and Equipment Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated economic lives. We use historical experience, certain assumptions and estimates in determining the economic life of each asset.
A hypothetical change of 10% in our percentage of completion estimate would not have a material effect on our recorded revenue. 28 Property and Equipment Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated economic lives. We use historical experience, certain assumptions and estimates in determining the economic life of each asset.
Although we intend to pay a quarterly cash dividend on our common stock for the foreseeable future, the declaration and amount of any future dividend is subject to approval by our Board of Directors, and is restricted by applicable state law limitations on distributions to 25 shareholders as well as certain covenants under our Credit Agreement and Note Agreement.
Although we intend to pay a quarterly cash dividend on our common stock for the foreseeable future, the declaration and amount of any future dividend is subject to approval by our Board of Directors, and is restricted by applicable state law limitations on distributions to shareholders as well as certain covenants under our Credit Agreement and Note Agreement.
A hypothetical change of 1% in the estimated useful lives of all depreciable assets would not have a material impact on our financial results. 27 Claims and Insurance Accruals Claims and insurance accruals reflect the estimated cost of various claims, including those related to bodily injury/property damage (“BIPD”) and workers’ compensation.
A hypothetical change of 1% in the estimated useful lives of all depreciable assets would not have a material impact on our financial results. Claims and Insurance Accruals Claims and insurance accruals reflect the estimated cost of various claims, including those related to bodily injury/property damage (“BIPD”) and workers’ compensation.
On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”).
Stock Repurchase Program On July 28, 2021, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”).
Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight. • LTL Revenue Per Shipment - This measurement is primarily determined by the three metrics listed above and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue. 21 Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure.
Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight. • LTL Revenue Per Shipment - This measurement is primarily determined by the three metrics listed above and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue. 22 Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure.
The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our Credit Agreement or other senior promissory notes issued pursuant to the Note Agreement.
The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under the Credit Agreement or other senior promissory notes issued pursuant to the Note Agreement.
We expect to fund these capital expenditures primarily through cash flows from operations, our existing cash and cash equivalents, short-term investments and, if needed, borrowings available under our Credit Agreement or Note Agreement. We believe our current sources of liquidity will be sufficient to satisfy our expected capital expenditures for the next twelve months and in the longer term.
We expect to fund these capital expenditures primarily through cash flows from operations, our existing cash and cash equivalents and, if needed, borrowings available under the Credit Agreement or Note Agreement. We believe our current sources of liquidity will be sufficient to satisfy our expected capital expenditures for the next twelve months and in the longer term.
Audit Committee Approval The Audit Committee of our Board of Directors reviews and approves all related person transactions in accordance with our Related Person Transactions Policy.
Audit Committee Approval The Audit Committee of our Board of Directors reviews and approves all related person transactions in accordance with our Related Person Transactions Policy. 29
Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour.
Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, P&D stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour.
Discussions of our 2020 results and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which was filed with the Securities and Exchange Commission on February 23, 2022.
Discussions of our 2021 results and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the Securities and Exchange Commission on February 22, 2023.
We do not anticipate financial performance that would cause us to violate any such covenants in the future, and we believe the combination of our existing Credit Agreement and Note Agreement along with our additional borrowing capacity will be sufficient to meet foreseeable seasonal and long-term capital needs. 26 The interest rate is fixed on the Note Agreement.
We do not anticipate financial performance that would cause us to violate any such covenants in the future, and we believe the combination of our existing Credit Agreement and Note Agreement along with our additional borrowing capacity will be sufficient to meet foreseeable seasonal and long-term capital needs. The interest rate is fixed on the Series B Notes.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses our 2022 and 2021 results and year-to-year comparisons between 2022 and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations generally discusses our 2023 and 2022 results and year-to-year comparisons between 2023 and 2022.
We anticipate that any future quarterly cash dividends will be funded through cash flows from operations, our existing cash and cash equivalents, short-term investments, and, if needed, borrowings under our Credit Agreement or Note Agreement.
We anticipate that any future quarterly cash dividends will be funded through cash flows from operations, our existing cash and cash equivalents, and, if needed, borrowings under our Credit Agreement or Note Agreement.
We were in compliance with all covenants in our outstanding debt instruments for the period ended December 31, 2022.
We were in compliance with all covenants in our outstanding debt instruments for the period ended December 31, 2023.
The amounts outstanding and available borrowing capacity under the Credit Agreement are presented below: December 31, (In thousands) 2022 2021 Facility limit $ 250,000 $ 250,000 Line of credit borrowings — — Outstanding letters of credit (38,653 ) (39,169 ) Available borrowing capacity $ 211,347 $ 210,831 General Debt Provisions The Credit Agreement and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio.
The amounts outstanding and available borrowing capacity under the Credit Agreement are presented below: December 31, (In thousands) 2023 2022 Facility limit $ 250,000 $ 250,000 Line of credit borrowings — — Outstanding letters of credit (39,966 ) (38,653 ) Available borrowing capacity $ 210,034 $ 211,347 27 General Debt Provisions The Credit Agreement and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio.
LTL tons per day decreased 7.8%, due to a 5.9% decrease in LTL shipments per day and a 2.0% decrease in LTL weight per shipment. LTL revenue per hundredweight increased 13.1% as compared to the same month last year. LTL revenue per hundredweight, excluding fuel surcharges, increased 8.6% as compared to the same month last year.
LTL tons per day decreased 5.0%, due primarily to a 2.3% decrease in LTL shipments per day and a 2.8% decrease in LTL weight per shipment. LTL revenue per hundredweight increased 2.7% as compared to the same month last year. LTL revenue per hundredweight, excluding fuel surcharges, increased 6.7% as compared to the same month last year.
Our accrued liability for insurance, BIPD claims, and workers’ compensation claims totaled $129.6 million and $126.4 million at December 31, 2022 and 2021, respectively. Claims and insurance accruals are discussed further in Note 1 of the Notes to the Financial Statements included in Item 8 of this report.
Our accrued liability for insurance, BIPD claims, and workers’ compensation claims totaled $127.0 million and $129.6 million at December 31, 2023 and 2022, respectively. Claims and insurance accruals are discussed further in Note 1 of the Notes to the Financial Statements included in Item 8 of this report.
Commitment fees ranging from 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement. For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.
Commitment fees ranging from 0.090% to 0.175% (based upon our consolidated debt to consolidated total capitalization ratio) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement. For periods covered under the Credit Agreement, the applicable margin on SOFR loans and letter of credit fees were 1.000% and commitment fees were 0.090%.
Approximately $300 million is allocated for the purchase of service center facilities, construction of new service center facilities or expansion of existing service center facilities, subject to the availability of suitable real estate and the timing of construction projects; approximately $400 million is allocated for the purchase of tractors and trailers; and approximately $100 million is allocated for investments in technology and other assets.
Approximately $350 million is allocated for the purchase of service center facilities, construction of new service center facilities or expansion of existing service center facilities, subject to the availability of suitable real estate and the timing of construction projects; approximately $325 million is allocated for the purchase of tractors and trailers; and approximately $75 million is allocated for investments in technology and other assets.
The use of different assumptions, estimates or significant changes in the resale market for our equipment could result in material changes in the carrying value and related depreciation of our assets. Depreciation expense in 2022 totaled $275.6 million.
The use of different assumptions, estimates or significant changes in the resale market for our equipment could result in material changes in the carrying value and related depreciation of our assets. Depreciation expense in 2023 totaled $324.0 million.
We believe our yield management process focused on individual account profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to produce profitable growth.
We believe our yield management process appropriately focuses on individual account profitability, and ongoing improvements in operating efficiencies, as key components of our ability to produce profitable growth.
We currently estimate capital expenditures will be approximately $800 million for the year ending December 31, 2023.
We currently estimate capital expenditures will be approximately $750 million for the year ending December 31, 2024.
Dividends to Shareholders Our Board of Directors declared a cash dividend of $0.30 per share for each quarter of 2022 and declared a cash dividend of $0.20 per share for each quarter of 2021. On February 1, 2023, we announced that our Board of Directors had declared a cash dividend of $0.40 per share of our common stock.
Dividends to Shareholders Our Board of Directors declared a cash dividend of $0.40 per share for each quarter of 2023 and declared a cash dividend of $0.30 per share for each quarter of 2022. 26 On January 31, 2024, we announced that our Board of Directors had declared a cash dividend of $0.52 per share of our common stock.
While our investments in real estate, equipment, and technology can increase our costs in the short-term, we believe these investments are necessary to support our continued long-term growth and strategic initiatives. Purchased transportation expense decreased $27.7 million, or 14.9%, in 2022 as compared to 2021.
While our investments in real estate, equipment, and technology can increase our short-term costs, we believe these investments are necessary to support our continued long-term growth and strategic initiatives. Purchased transportation expense decreased $36.6 million, or 23.1%, in 2023 as compared to 2022.
The increases in depreciation and amortization costs were due primarily to the assets acquired as part of our 2021 and 2022 capital expenditure programs. We believe depreciation costs will increase in future periods based on our 2023 capital expenditure plan.
Depreciation and amortization increased $48.4 million, or 17.5%, in 2023 as compared to 2022. The increases in depreciation and amortization costs were due primarily to the assets acquired as part of our 2022 and 2023 capital expenditure programs. We believe depreciation costs will continue to increase in future periods based on our 2024 capital expenditure plan.
Financing Agreements Note Agreement The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through May 4, 2023.
Financing Agreements Note Agreement The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through March 22, 2026. On May 4, 2020, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”).
Our diesel fuel costs, excluding fuel taxes, represent the largest component of operating supplies and expenses, and can vary based on both the average price per gallon and consumption. Our average cost per gallon of diesel fuel increased 68.2% in 2022 as compared to 2021.
The cost of diesel fuel, excluding fuel taxes, represents the largest component of operating supplies and expenses, and can vary based on both the average price per gallon and consumption. Our average cost per gallon of diesel fuel decreased 19.8% in 2023 as compared to 2022.
Capital Expenditures The table below sets forth our net capital expenditures for property and equipment, including those obtained through noncash transactions, for the years ended December 31, 2022 and 2021: Year Ended December 31, (In thousands) 2022 2021 Land and structures $ 299,529 $ 252,155 Tractors 148,719 130,772 Trailers 216,697 140,595 Technology 33,783 17,139 Other equipment and assets 68,920 25,450 Less: Proceeds from sales (22,096 ) (19,548 ) Total $ 745,552 $ 546,563 Our capital expenditures vary based upon the projected increase in the number and size of our service center facilities necessary to support our plan for long-term growth, our planned tractor and trailer replacement cycle, and forecasted tonnage and shipment growth.
Capital Expenditures The table below sets forth our net capital expenditures for property and equipment, including those obtained through noncash transactions, for the years ended December 31, 2023 and 2022: Year Ended December 31, (In thousands) 2023 2022 Land and structures $ 291,070 $ 299,529 Tractors 203,417 148,719 Trailers 181,534 216,697 Technology 44,358 33,783 Other equipment and assets 36,930 68,920 Less: Proceeds from sales (48,637 ) (22,096 ) Total $ 708,672 $ 745,552 Our capital expenditures vary based upon the projected increase in the number and size of our service center facilities necessary to support our plan for long-term growth, our planned tractor and trailer replacement cycle, and forecasted tonnage and shipment growth.
(“Prudential”) and certain affiliates and managed accounts of Prudential, which we entered into on May 4, 2020 (the “Note Agreement”). Our Credit Agreement and Note Agreement are described in more detail below under “Financing Arrangements.” We believe we also have sufficient access to debt and equity markets to provide other sources of liquidity, if needed.
(“Prudential”) and certain affiliates and managed accounts of Prudential, as amended by the First Amendment dated March 22, 2023 (as amended, the “Note Agreement”). The Credit Agreement and the Note Agreement are described in more detail below under “Financing Arrangements.” We believe we also have sufficient access to debt and equity markets to provide other sources of liquidity, if needed.
The dividend is payable on March 15, 2023 to shareholders of record at the close of business on March 1, 2023.
The dividend is payable on March 20, 2024 to shareholders of record at the close of business on March 6, 2024.
Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter.
The applicable margin for each of the foregoing options is dependent upon our consolidated debt to consolidated total capitalization ratio. Letter of credit fees equal to the applicable margin for SOFR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter.
Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock. As of December 31, 2022, we had $679.1 million remaining authorized under the 2021 Repurchase Program.
Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.
However, we do not believe inflation has had a material adverse effect on our results of operations for any of the past three years. Related Party Transactions Family Relationships In August 2022, we entered into an agreement with David S. Congdon, Executive Chairman of our Board of Directors, to terminate the employment agreement between the Company and Mr. Congdon.
However, we do not believe inflation has had a material adverse effect on our results of operations for any of the past three years. Related Party Transactions Family Relationships John R. Congdon, Jr., a member of our Board of Directors, is the cousin of David S. Congdon, Executive Chairman of our Board of Directors.
At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%.
At our option, borrowings under the Credit Agreement bear interest at either: (i) the Secured Overnight Financing Rate (SOFR) plus the Term SOFR Adjustment, as defined in the Credit Agreement, equal to 0.100%, plus an applicable margin that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin that ranges from 0.000% to 0.375%.
The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program in January 2022. Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.
The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2021 Repurchase Program. At December 31, 2023, our 2021 Repurchase Program had $225.4 million remaining authorized. Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions.
Liquidity and Capital Resources A summary of our cash flows is presented below: (In thousands) 2022 2021 Cash and cash equivalents at beginning of year $ 462,564 $ 401,430 Cash flows provided by (used in): Operating activities 1,691,582 1,212,606 Investing activities (547,472 ) (455,288 ) Financing activities (1,420,362 ) (696,184 ) (Decrease) increase in cash and cash equivalents (276,252 ) 61,134 Cash and cash equivalents at end of year $ 186,312 $ 462,564 The increase in our cash flows provided by operating activities during 2022 as compared to 2021 was primarily due to an increase in our income before income taxes of $452.9 million and fluctuations in certain working capital accounts.
Liquidity and Capital Resources A summary of our cash flows is presented below: (In thousands) 2023 2022 Cash and cash equivalents at beginning of year $ 186,312 $ 462,564 Cash flows provided by (used in): Operating activities 1,569,135 1,691,582 Investing activities (659,820 ) (547,472 ) Financing activities (661,828 ) (1,420,362 ) Increase (decrease) in cash and cash equivalents 247,487 (276,252 ) Cash and cash equivalents at end of year $ 433,799 $ 186,312 The change in our cash flows provided by operating activities during 2023 as compared to 2022 was due to the $137.7 million decrease in net income as well as the $33.2 million decrease in certain other working capital accounts.
Changes in our capital expenditure plans are more fully described below under “ Capital Expenditures ”. The increase in our cash flows used in financing activities during 2022 as compared to 2021 was due primarily to higher repurchases of our common stock, as well as an increase in dividend payments to our shareholders.
Changes in our capital expenditures are more fully described below in “Capital Expenditures.” The change in our cash flows used in financing activities during 2023 as compared to 2022 was primarily due to the $823.6 million decrease in funds used for repurchases of our common stock.
The increase in our cash flows used in investing activities during 2022 as compared to 2021 was primarily due to increases in property and equipment purchases under our capital expenditure plan, which was partially offset by the timing of purchases and maturities of short-term investments.
These decreases were partially offset by a $48.4 million increase in depreciation and amortization expense. The change in our cash flows used in investing activities during 2023 as compared to 2022 was primarily due to the timing of purchases and maturities of short-term investments, which was partially offset by a net reduction in capital expenditures.
Operating Costs and Other Expenses Salaries, wages, and benefits increased $248.9 million, or 10.1%, in 2022 as compared to 2021, due to a $188.5 million increase in the costs attributable to salaries and wages and a $60.4 million increase in employee benefit costs.
Operating Costs and Other Expenses Salaries, wages, and benefits decreased $87.2 million, or 3.2%, in 2023 as compared to 2022, due to an $83.1 million decrease in the costs attributable to salaries and wages and a $4.1 million decrease in employee benefit costs.
Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”) on May 4, 2020. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.
Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement. The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid.
Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2022: Payments due by period Contractual Obligations (1) Less than More than (In thousands) Total 1 year 1-3 years 3-5 years 5 years Series B Notes $ 107,254 $ 22,691 $ 43,522 $ 41,041 $ — Operating lease obligations (2) 120,300 21,243 29,234 25,262 44,561 Purchase obligations and Other 186,680 160,776 22,151 3,753 Total $ 414,234 $ 204,710 $ 94,907 $ 70,056 $ 44,561 (1) Contractual obligations include principal and interest on our Series B Notes; leases consisting primarily of real estate and automotive leases; and purchase obligations relating to non-cancellable purchase orders for (i) equipment scheduled for delivery in 2023, and (ii) information technology agreements.
Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2023: Payments due by period Contractual Obligations (1) Less than More than (In thousands) Total 1 year 1-3 years 3-5 years 5 years Series B Notes $ 84,564 $ 22,072 $ 42,281 $ 20,211 $ — Operating lease obligations (2) 151,273 21,598 37,261 34,670 57,744 Purchase obligations and Other 38,056 25,266 12,790 — — Total $ 273,893 $ 68,936 $ 92,332 $ 54,881 $ 57,744 (1) Contractual obligations include principal and interest on our Series B Notes; leases consisting primarily of real estate and automotive leases; and purchase obligations relating to non-cancellable purchase orders for (i) equipment scheduled for delivery in 2024, and (ii) information technology agreements.
We have five primary sources of available liquidity: cash flows from operations, our existing cash and cash equivalents, short-term investments, available borrowings under our second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders, which we entered into on November 21, 2019 (the “Credit Agreement”), 24 and our Note Purchase and Private Shelf Agreement with PGIM, Inc.
Our return of capital to shareholders is more fully described below under “Stock Repurchase Program” and “Dividends to Shareholders.” Our long-term debt agreement is more fully described below under "Financing Arrangements." 25 We have four primary sources of available liquidity: cash flows from operations, our existing cash and cash equivalents, available borrowings under our third amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders, dated March 22, 2023 (the “Credit Agreement”), and our Note Purchase and Private Shelf Agreement with PGIM, Inc.
In addition, our gallons consumed increased 4.1% in 2022 as compared to 2021 year due to an increase in miles driven. We do not use diesel fuel hedging instruments; therefore, our costs are subject to market price fluctuations.
In addition, our gallons consumed decreased 8.5% in 2023 as compared to 2022 due to a decrease in our miles driven. We do not use diesel fuel hedging instruments; therefore, our costs are subject to market price fluctuations. Our other operating supplies and expenses as a percent of revenue were generally consistent in 2023 as compared to 2022.
We recognize revenue for our performance obligations under our customer contracts over time, as our customers receive the benefits of our services in accordance with Accounting Standards Update (“ASU”) 2014-09. With respect to services not completed at the end of a reporting period, we use a percentage of completion method to allocate the appropriate revenue to each separate reporting period.
With respect to services not completed at the end of a reporting period, we use a percentage of completion method to allocate the appropriate revenue to each separate reporting period.
The increase in salaries and wages was due primarily to increases in the average number of active full-time employees during the year.
The decrease in salaries and wages was due primarily to decreases in the average number of active full-time employees during the year, as we balanced our workforce to align with our customers' shipping trends. Salaries and wages also decreased as a result of lower performance-based and discretionary bonus compensation.
Our productive labor costs, which include wages for drivers, platform employees, and fleet technicians, improved as a percent of revenue to 22.9% in 2022 compared to 25.1% in 2021. The improvements in our productive labor costs, as a percentage of revenue, reflect the leveraging effect of increases in our yield as well as our ongoing commitment to operating efficiently.
These decreases were partially offset by the annual wage increase provided to our employees at the beginning of both September 2022 and 2023. Our productive labor costs, which include wages for drivers, platform employees, and fleet technicians, increased as a percent of revenue to 23.6% in 2023 from to 22.9% in 2022.
As a result, net income and earnings per diluted share increased by 33.1% and 37.0%, respectively, in 2022 as compared to 2021. Revenue Revenue increased $1.0 billion, or 19.1%, in 2022 compared to 2021, due to an increase in LTL revenue per hundredweight and a slight increase in LTL tonnage.
As a result, our depreciation costs increased as a percent of revenue and contributed to the slight increase in our operating ratio to 72.0% for 2023. In addition, our net income and diluted earnings per share decreased by 10.0% and 7.6%, respectively, as compared to 2022. Revenue Revenue decreased $393.9 million, or 6.3%, in 2023 compared to 2022.
Stock Repurchase Program On May 1, 2020, we announced that our Board of Directors had approved a two-year stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020.
The 2021 Repurchase Program, which does not have an expiration date, began after completion of our prior repurchase program in January 2022. On July 26, 2023, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock.
Our other salaries and wages as a percent of revenue also decreased to 9.0% in 2022 as compared to 9.3% in 2021. 23 The increase in the costs attributable to employee benefits of $60.4 million, or 9.1%, includes the impact of the increase in the number of full-time employees eligible for our benefits and increases in certain higher retirement benefits costs directly linked to our net income.
Our other salaries and wages as a percent of revenue remained consistent between the comparable periods. 24 The cost attributable to employee benefits decreased $4.1 million, or 0.6%, in 2023 compared to 2022. Our employee benefit costs increased as a percent of salaries and wages to 37.5% in 2023 from 36.2% in 2022.
Our LTL revenue per hundredweight increased 18.2% in 2022 compared to 2021. This increase reflects the impact of higher fuel surcharges associated with the significant increase in diesel fuel prices as well as the ongoing commitment to our long-term yield management strategy. Excluding fuel surcharges, LTL revenue per hundredweight increased 8.5% in 2022 as compared to 2021.
Our LTL revenue per hundredweight includes the impact of lower fuel surcharges resulting from a decline in the average price of diesel fuel for the comparable periods. Excluding fuel surcharges, LTL revenue per hundredweight increased 8.3% in 2023 as compared to 2022.
The Series B Notes bear an annual interest rate of 3.10% and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027.
Our first principal payment of $20.0 million was paid on May 4, 2023. The remaining $80.0 million will be paid in four equal annual installments of $20.0 million through May 4, 2027.
Operating supplies and expenses increased $285.3 million, or 50.3%, in 2022 as compared to 2021, due primarily to an increase in our costs for diesel fuel used in our vehicles, as well as other petroleum-based products.
This increase in employee benefit costs as a percent of salaries and wages was partially offset by lower retirement benefit plan costs directly linked to our net income. Operating supplies and expenses decreased $134.6 million, or 15.8%, in 2023 as compared to 2022, due primarily to decreases in our costs for diesel fuel used in our vehicles.
We believe our focus on obtaining an appropriate yield is necessary to offset rising operating costs and also allows us to invest in opportunities that can improve the quality of our service and provide capacity for future growth. January 2023 Update Revenue per day increased 4.2% in January 2023 compared to the same month last year.
We believe the increase in our LTL revenue-per-hundredweight metrics was driven by the ongoing execution of our yield management strategy, which is focused on obtaining price increases necessary to offset our cost inflation and support our continued investments in capacity and technology. January 2024 Update Revenue per day decreased 2.7% in January 2024 compared to the same month last year.
Removed
The 19.1% increase in revenue to $6.3 billion was due primarily to the increase in LTL revenue per hundredweight as LTL tons increased 0.9%. The increase in revenue and our disciplined control of our operating costs contributed to a 290 basis-point improvement in our operating ratio to 70.6% for 2022 as compared to 73.5% for 2021.
Added
Despite the decrease in our LTL tons, we maintained a commitment to providing superior customer service to support the continued improvement in our yield. We continued to focus on controlling our costs in the low volume environment, but we continued to invest in new capacity in anticipation of long-term growth in our market share.
Removed
Our average number of active full-time employees increased 2,291, or 10.4%, during 2022 as compared to 2021 as we hired additional employees primarily during the first half of the year to balance our workforce with our customers' shipment trends and reduce our reliance on third-party purchased transportation.
Added
This decrease resulted from a 9.0% decrease in LTL tonnage per day, which was primarily due to decreases in LTL shipments per day and LTL weight per shipment. This decrease in revenue was partially offset by a 3.5% increase in our LTL revenue per hundredweight.
Removed
Salaries and wages also increased as a result of annual wage increases provided to our employees at the beginning of both September 2021 and 2022, as well as higher performance-based bonus compensation.
Added
While our platform and P&D shipments per hour and P&D stops per hour improved during 2023 as compared to 2022, our linehaul laden load average declined due to the decreased operating density associated with the decrease in our LTL tons.
Removed
Our productive labor costs as a percentage of revenue were also impacted by declines in our P&D shipments per hour and linehaul laden load average as we trained our new employees.
Added
The increase in employee benefit costs as a percent of salaries and wages was primarily due to an increase in our employee group health benefit costs that resulted from higher costs per claim.
Removed
In addition, our benefit costs were positively impacted by a reduction in accrued benefits expense attributable to the termination of an employment agreement during the third quarter of 2022. Our employee benefit costs as a percent of salaries and wages decreased to 36.2% in 2022 from 36.6% in 2021.
Added
We primarily utilize purchased transportation services to support our LTL services to and from Canada as well as our truckload brokerage operations. We also periodically utilize purchased transportation for our domestic LTL service when we need to supplement the capacity of our workforce or fleet, which most frequently occurs during periods with significant growth.
Removed
Our other operating supplies and expenses as a percent of revenue increased in 2022 as compared to the same periods of 2021, due to increases in equipment repair and maintenance costs. Depreciation and amortization increased $16.2 million, or 6.2%, in 2022 as compared to 2021.
Added
We used third-party transportation providers in our domestic linehaul network during the first half of 2022, but our utilization was normalized during the second half of 2022 when the capacity of our team was closely balanced with our volumes. Our effective tax rate in 2023 was 24.8% as compared to 25.2% in 2022.
Removed
We utilize purchased transportation services from third-party transportation providers in our domestic linehaul network to supplement our equipment and our workforce when needed to support our growth initiatives and to maximize the efficient movement of LTL freight within our service center network.
Added
This decrease in cash was partially offset by higher dividend payments to our shareholders and a scheduled principal payment under our long-term debt agreement.
Removed
Our significant investments in workforce and equipment enabled us to reduce our use of purchased transportation beginning in the second quarter of 2022. Our effective tax rate in 2022 was 25.2% as compared to 25.5% in 2021.
Added
On February 16, 2024, we announced that our Board of Directors approved a two-for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024. The additional shares will be distributed by our transfer agent, Computershare Trust Company, N.A., on March 27, 2024.
Removed
Our return of capital to shareholders is more fully described below under “ Stock Repurchase Program ” and “ Dividends to Shareholders ”.
Added
The Credit Agreement replaced our previous five-year, $250.0 million senior unsecured revolving credit agreement dated as of November 21, 2019 (the “Prior Credit Agreement”). For periods in 2023 and 2022 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000% and commitment fees were 0.100%.
Removed
Following termination of the employment agreement, Mr. Congdon remained an executive officer of the Company and continued to serve as Executive Chairman of our Board of Directors. John R. Congdon, Jr., a member of our Board of Directors, is the cousin of David S. Congdon.
Added
We recognize revenue for our performance obligations under our customer contracts over time, as our customers receive the benefits of our services in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers ("ASC Topic 606").

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeTo provide a meaningful assessment of the market risk for investments relating to Company-owned life insurance contracts, we performed a sensitivity analysis using a 10% change in market value in those investments. A 10% change in market value would have caused a $4.6 million and a $6.0 million impact on our pre-tax income in 2022 and 2021, respectively.
Biggest changeTo provide a meaningful assessment of the market risk for investments relating to Company-owned life insurance contracts, we performed a sensitivity analysis using a 10% change in market value in those investments as of December 31, 2023 and 2022.
A hypothetical 100 basis point change in market interest rates would have had an immaterial impact on the fair value of these investments at December 31, 2022 and 2021. We are exposed to market risk for investments relating to certain assets held within the Company-owned life insurance contracts on certain current and former employees.
A hypothetical 100 basis point change in market interest rates would have had an immaterial impact on the fair value of these investments at December 31, 2022 and no impact at December 31, 2023. We are exposed to market risk for investments relating to certain assets held within the Company-owned life insurance contracts on certain current and former employees.
For further discussion related to these risks, see Notes 1, 2 and 9 of the Notes to the Financial Statements included in Item 8, “Financial Statements and Supplementary Data” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 29
For further discussion related to these risks, see Notes 1, 2 and 9 of the Notes to the Financial Statements included in Item 8, “Financial Statements and Supplementary Data” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 30
We are exposed to interest rate risk directly related to loans, if any, under our Credit Agreement, which have variable interest rates. A 100 basis point increase in the average interest rate on this agreement would have no material effect on our operating results.
We are exposed to interest rate risk directly related to loans, if any, under our Credit Agreement, which have variable interest rates. A 100 basis point increase in the average interest rate on this agreement would have no material effect on our operating results at December 31, 2023 and 2022.
The cash surrender value in life insurance contracts included on our Balance Sheets at December 31, 2022 and 2021 was $63.5 million and $75.2 million, respectively. The portion of underlying investments with exposure to market fluctuations was $45.9 million and $59.9 million at December 31, 2022 and 2021, respectively.
The cash surrender value in life insurance contracts included on our Balance Sheets at December 31, 2023 and 2022 was $74.4 million and $63.5 million, respectively. The portion of underlying investments with exposure to market fluctuations was $56.2 million and $45.9 million at December 31, 2023 and 2022, respectively.
We have established policies and procedures to manage exposure to market risks and use major institutions that we believe are creditworthy to minimize credit risk. We are also exposed to interest rate risk on our short-term investments. We maintain an investment portfolio principally composed of certificates of deposit and commercial paper.
We have established policies and procedures to manage exposure to market risks and use major institutions that we believe are creditworthy to minimize credit risk. From time to time, we are exposed to interest rate risk on certain short-term investments. We maintained a short-term investment portfolio, principally composed of commercial paper, totaling $49.4 million at December 31, 2022.
These investments totaled $49.4 million and $254.4 million at December 31, 2022 and 2021, respectively. These fixed rate securities are subject to interest rate risk, as sharp increases in market interest rates 28 could have an adverse impact on their fair value.
We held no short-term investments as of December 31, 2023. These fixed rate securities are subject to interest rate risk, as sharp increases in market interest rates could have an adverse impact on their fair value.
We are also exposed to commodity price risk related to diesel fuel prices, and we manage our exposure to that risk primarily through the application of fuel surcharges to our customers.
A 10% change in market value would have caused a $5.6 million and a $4.6 million impact on our pre-tax income in 2023 and 2022, respectively. We are also exposed to commodity price risk related to diesel fuel prices, and we manage our exposure to that risk primarily through the application of fuel surcharges to our customers.

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