What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-03 · 111 added, 89 removed, 278 unchanged (42% of the section changed)

11 unchanged sentences

and any statements of belief and any statements of assumptions underlying any of the foregoing.

In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, upgrades, and age, availability of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our strategic plan and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, any future indemnification obligations related to the TFS Portfolio, the contingent consideration related to our purchase of AAT, LTST and Sims, and the future impact of our acquisition of LTST and Sims, among others, are forward-looking statements.

In this Form 10-Q, statements relating to future impact of accounting standards, future third-party transportation provider expenses, future tax rates, expenses, and deductions, expected freight demand, capacity, and volumes and trucking industry conditions, potential results of a default and testing of our fixed charge covenant under the Credit Facility or other debt agreements, expected sources, as well as adequacy, of working capital and liquidity (including our mix of debt, finance leases, and operating leases as means of financing revenue equipment), future inflation, future stock repurchases and dividends, if any, expected capital expenditures, allocations, and requirements, future customer relationships, future interest expense, future driver market conditions, including driver satisfaction, future use of independent contractors, expected cash flows, future investments in and growth of our reportable segments and services, future margins of our reportable segments, future rates and prices, future depreciation and amortization, future salaries, wages, and related expenses, including driver compensation, expected net fuel costs, strategies for managing fuel costs, the effectiveness and impact of, and cash flows relating to, our fuel surcharge programs, future fluctuations in operations and maintenance expenses, expected effects and mix of our solo and team operations, future fleet size, management, upgrades, and age, availability and usage of tractors and trailers, the market value of used equipment, the anticipated impact of our investment in TEL, the future impact of our business model, strategic plan and other strategic initiatives, changes to and deviations from our business model, strategic plan, and other strategic initiatives, anticipated levels of and fluctuations relating to insurance and claims expenses, including the erosion of available limits in our aggregate insurance policies, any future indemnification obligations related to the TFS Settlement, contingent consideration related to our purchase of AAT, LTST and Sims, and the future impact of our acquisition of LTST and Sims, among others, are forward-looking statements.

Forward-looking statements may be identified by the use of terms or phrases such as "believe," "may," "could," "would," "will," "expects," "estimates," "projects," "anticipates," "plans," " outlook," "focus," "seek," "potential," "continue," "goal," "target," "objective," "intends," derivations thereof, and similar terms and phrases.

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Executive Overview

We are pleased to report first quarter earnings of $0.29 per diluted share.

We were pleased with how our team navigated the environment by capitalizing on opportunities where available, allocating equipment investments toward more profitable operations, and controlling costs.

We believe that successfully executing two major startups in our Dedicated segment during the quarter will continue the momentum in future quarters as they fully ramp up.

Our results during the first quarter continued to demonstrate the power of our diversified logistics service offerings.

The first quarter's freight market, consisting of freight rates and volumes, remained soft and in many ways comparable to a year ago.

Adding to the general market headwinds, used equipment prices continued to decline and adverse weather conditions experienced in January created incremental cost and operational challenges.

Our asset-based segments contributed approximately 68% of total revenue and 64% of total freight revenue in the quarter.

Our Expedited segment grew revenue modestly, through modest growth in the average total tractor count and improved utilization, partially offset by lower rates.

Our combined truckload operations experienced diminished year over year margins due to the acquisition related contingent consideration expense in the current quarter.

Our asset-light segments contributed approximately 32% of total revenue and 36% of total freight revenue in the quarter.

Although year over year freight revenue growth was modest at 3.6%, operating income improved by approximately 217% due to the combination of improved cost efficiencies and rate increases in our Warehousing reportable segment and improved cargo related claims costs in our Managed Freight segment.

Additional items of note for the first quarter of 2024 include the following:

Total revenue of $278.8 million, an increase of 4.5% compared with the first quarter of 2023, and freight revenue (which excludes revenue from fuel surcharges) of $247.7 million, an increase of 6.1% compared with the first quarter of 2023;

Operating income of $4.3 million, compared with $17.6 million in the first quarter of 2023;

Net income of $4.0 million, or $0.29 per diluted share, compared with $16.6 million, or $1.20 per diluted share, in the first quarter of 2023.

Net income from continuing operations of $3.8 million, or $0.28 per diluted share, compared to $16.5 million or $1.19 per diluted share, in the first quarter of 2023.

Net income from discontinued operations of $0.2 million, or $0.01 per diluted share, compared to $0.2 million, or $0.01 per diluted share, in the first quarter of 2023;

38% of consolidated total revenue was in our Expedited reportable segment, as compared to 38% in the first quarter of 2023;

Our Managed Freight reportable segment’s total revenue increased to $62.9 million in the 2024 quarter from $60.9 million in the 2023 quarter and the reportable segment had an operating income of $2.3 million in the 2024 quarter compared to $1.2 million in the 2023 quarter;

Our equity investment in TEL provided $3.7 million of pre-tax earnings in the first quarter of 2024 compared to $5.9 million in the first quarter of 2023;

We are pleased to report second quarter earnings of $0.88 per diluted share.

Our second quarter’s results further demonstrate the value proposition of our diversified logistics services in the midst of a freight environment that has remained challenged with general market headwinds.

Our team has worked hard to navigate through the prolonged down cycle by capitalizing on new value-added commercial opportunities where available, allocating equipment investments toward more profitable operations, and controlling costs.

Our asset-based segments, consisting of Expedited and Dedicated, contributed approximately 70% of total revenue and 67% of total freight revenue in the quarter.

Our combined truckload operations experienced improved year over year margins primarily related to operating 9.1% more average tractors combined with improved freight revenue per total mile, partially offset by a reduction in utilization and higher costs compared to the prior year quarter.

Our asset-light segments, consisting of Managed Freight and Warehousing, contributed approximately 30% of total revenue and 33% of total freight revenue in the quarter.

Although year over year freight revenue declined 3.1%, operating income improved by approximately 96.7% due to the combination of improved cost efficiencies and rate increases in our Warehousing reportable segment as well as improved purchased transportation costs, cargo related claims costs, and the year over year impact of the higher-margin Sims acquisition in our Managed Freight segment.

Additional items of note for the second quarter of 2024 include the following:

Total revenue of $287.5 million, an increase of 4.9% compared with the second quarter of 2023, and freight revenue (which excludes revenue from fuel surcharges) of $256.5 million, an increase of 5.3% compared with the second quarter of 2023;

Operating income of $15.6 million, compared with $11.8 million in the second quarter of 2023;

Net income of $12.2 million, or $0.88 per diluted share, compared with $12.3 million, or $0.91 per diluted share, in the second quarter of 2023.

Net income from continuing operations of $12.0 million, or $0.87 per diluted share, compared to $12.1 million or $0.90 per diluted share, in the second quarter of 2023.

Net income from discontinued operations of $0.2 million, or $0.01 per diluted share, compared to $0.2 million, or $0.01 per diluted share, in the second quarter of 2023;

Our equity investment in TEL provided $4.1 million of pre-tax earnings in the second quarter of 2024 compared to $5.4 million in the second quarter of 2023;

We distributed a total of $1.4 million to stockholders through dividends;

Since December 31, 2023, total indebtedness, comprised of total debt and finance leases, net of cash, increased by $25.0 million to $273.3 million, primarily due to the final post-acquisition earnout payment of $10.0 million related to AAT’s operational performance and approximately $50.3 million of net capital expenditures for revenue equipment, offset by cash flows from operations.

With available borrowing capacity of $89.0 million under our Credit Facility at March 31, 2024 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

Leverage ratio (ending total indebtedness, comprised of debt and finance leases, net of cash, divided by the sum of operating income, depreciation and amortization, gain on disposition of property and equipment, net, and impairment of long lived property and equipment) as of March 31, 2024 was 2.10;

Stockholders' equity at March 31, 2024, was $407.2 million;

Tangible book value at March 31, 2024, was $229.7 million.

We are once again pleased with our quarterly results, which were achieved during a very difficult operating environment.

Although we believe freight market fundamentals are slowly improving, the second quarter has provided little evidence of a 2024 recovery.

Regardless of the operating environment, we remain focused on our strategic plan and the tactical steps it takes to make us better every day.

We will continue to execute on opportunities to dive deeper into the supply chain, add value for our customers, and create efficiencies across our enterprise, which we believe will allow us to become a stronger, more profitable, and more predictable business.

With available borrowing capacity of $88.8 million under our Credit Facility at June 30, 2024 we do not expect to be required to test our fixed charge covenant in the foreseeable future;

Stockholders' equity at June 30, 2024, was $419.3 million;

Tangible book value at June 30, 2024, was $245.6 million.

Our consistently strong financial performance over the duration of a very weak general freight market is encouraging and reflects the benefits of the significant structural changes made to our business model over the last four years as part of our strategic plan.

We remain committed to continued improvement to our business model and are actively working to take the Company to the next level of performance.

While we believe freight market fundamentals have continued to slowly improve and macroeconomic indicators are beginning to positively reveal themselves, absent an outside catalyst, we believe a material improvement in the freight market will take time.

Regardless of the operating environment, our focus and commitment remains unchanged as we execute our strategic plan through tactical step by step execution that will continue to allow us to capitalize on opportunities that drive us deeper into the supply chain, add value for our customers, and create efficiencies across our enterprise, which we believe will allow us to become a stronger, more profitable, and more predictable business.

Non-GAAP Reconciliation

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Operating Ratio

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

GAAP Operating Ratio:

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Contingent consideration liability adjustment

Transaction and executive retirement

Adjusted operating expenses

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Revenue Equipment

At March 31, 2024, we operated 2,234 tractors and 5,997 trailers.

At June 30, 2024, we operated 2,314 tractors and 6,314 trailers.

Of such tractors, 2,160 were owned, 22 were financed under finance or operating leases, and 132 tractors were provided by independent contractors, who own and drive their own tractors.

Of such trailers, 5,833 were owned and 481 were held under finance or operating leases.

At March 31, 2024, our fleet had an average tractor age of 1.7 years and an average trailer age of 6.0 years.

At June 30, 2024, our fleet had an average tractor age of 1.7 years and an average trailer age of 5.7 years.

Independent contractors provide a tractor and a driver and are responsible for all operating expenses in exchange for a fixed payment per mile.

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RESULTS OF CONSOLIDATED OPERATIONS

COMPARISON OF three months ended March 31, 2024 TO three months ended March 31, 2023

COMPARISON OF three and six months ended June 30, 2024 TO three and six months ended June 30, 2023

The following tables set forth the percentage relationship of certain items to total revenue and freight revenue (total revenue less fuel surcharge revenue) for the periods indicated, where applicable (dollars in thousands):

Three Months Ended

Six Months Ended

Freight revenue

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Total revenue

The increase in total revenue primarily resulted from a $6.2 million, $4.9 million, $2.0 million, and $1.0 million increase in Dedicated, Expedited, Managed Freight and Warehousing freight revenue, respectively, for the three months ended March 31, 2024.

The increases in total revenue primarily resulted from a $12.6 million, $2.9 million, and $0.2 million increase in Dedicated, Expedited, and Warehousing freight revenue, respectively, partially offset by a $2.9 million decrease in Managed Freight for the three months ended June 30, 2024 and an $18.8 million, $7.9 million, and $1.2 million increase in Dedicated, Expedited, and Warehousing freight revenue, respectively, partially offset by a $0.9 million decrease in Managed Freight freight revenue for the six months ended June 30, 2024.

See results of reportable segment operations section for discussion of fluctuations.

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Three Months Ended

Six Months Ended

Salaries, wages, and related expenses

1 unchanged sentence

% of freight revenue

Salaries, wages, and related expenses for the three months ended March 31, 2024, increased, on a dollars basis primarily as a result of averaging more drivers and tractors, resulting in higher driver salaries, wages, and benefits.

As a percentage of total revenue and freight revenue, salaries, wages, and related expenses for the three months ended March 31, 2024, decreased primarily due to improved tractor utilization that more efficiently covered fixed compensation expense and lower overall driver cost based on the hiring and retention market.

Salaries, wages, and related expenses for the three and six months ended June 30, 2024, increased on a dollars basis primarily as a result of averaging more drivers and tractors primarily due to growth in our Dedicated reportable segment, resulting in higher driver salaries, wages, and benefits.

As a percentage of total revenue and freight revenue, salaries, wages, and related expenses for the three and six months ended June 30, 2024 , decreased slightly primarily due to improved tractor utilization that more efficiently covered fixed compensation expense and lower overall driver cost based on the hiring and retention market.

We believe salaries, wages, and related expenses will continue to increase as the result of wage inflation, higher healthcare costs, and, in certain periods, increased incentive compensation due to better performance.

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Three Months Ended

Six Months Ended

% of total revenue

% of freight revenue

The decreases in total fuel expense are primarily related to lower fuel prices in 2024 partially offset by a 9.0% increase in total miles.

The decreases in total fuel expense are primarily related to lower fuel prices in the 2024 periods partially offset by a 7.3% and 8.1% increase in total miles compared to the same 2023 periods, respectively.

We receive a fuel surcharge on our loaded miles from most shippers;

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In periods of declining prices, the opposite is true.

Fuel prices as measured by the DOE wer e $0.41 per g allon, or 9.3%, lower for the quarter ended March 31, 2024 compared with the same quarter in 2023.

Fuel prices as measured by the DOE wer e $0.07 per g allon, or 1.8%, lower for the quarter ended June 30, 2024 compared with the same quarter in 2023.

To measure the effectiveness of our fuel surcharge program, we subtract fuel surcharge revenue (other than the fuel surcharge revenue we reimburse to independent contractors and other third parties which is included in purchased transportation) from our fuel expense.

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Three Months Ended

Six Months Ended

Total fuel surcharge

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Three Months Ended

Six Months Ended

Operations and maintenance

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% of freight revenue

The decreases in operations and maintenance for the three months ended March 31, 2024 were primarily related to a decrease in the average age of our fleet and the improvement in both availability and cost of tires and maintenance related parts compared to the prior year period.

The decreases in operations and maintenance for the three and six months ended June 30, 2024 were primarily related to a decrease in the average age of our fleet and the improvement in both availability and cost of tires and maintenance related parts compared to the prior year period.

Going forward, we believe this category will fluctuate based on several factors, including the condition of the driver market and our ability to hire and retain drivers, our continued ability to maintain a relatively young fleet, accident severity and frequency, weather, the reliability of new and untested revenue equipment models, and the global disruption of the supply chain.

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Three Months Ended

Six Months Ended

Revenue equipment rentals and purchased transportation

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% of freight revenue

The changes in revenue equipment rentals and purchased transportation for the three months ended March 31, 2024 were primarily the result of an increase in purchased transportation costs due to additional business in the Managed Freight reportable segment.

Additionally, total miles run by independent contractors increased from 6.9% for the three months ended March 31, 2023 to 8.4% for the same 2024 period.

The decreases in revenue equipment rentals and purchased transportation for the three and six months ended June 30, 2024 were primarily the result of a decrease in purchased transportation costs due to the decline in the spot market primarily affecting the Managed Freight reportable segment.

These decreases were partially offset as total miles run by independent contractors increased from 7.4% and 7.2% for the three and six months ended June 30, 2023, respectively, to 8.3% and 8.4% for the same 2024 periods.

We expect purchased transportation to fluctuate as volumes in our Managed Freight reportable segment may be volatile.

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Three Months Ended

Six Months Ended

Operating taxes and licenses

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Three Months Ended

Six Months Ended

Insurance and claims

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% of freight revenue

Insurance and claims per mile cost increased to 22.8 cents per mile for the three months ended March 31, 2024 compared to 20.5 cents per mile for the same 2023 period.

The increase for the three months ended March 31, 2024 is primarily the result of current period claims expense and the development of prior period claims, as well as increased insurance premiums compared to the same 2023 period.

Insurance and claims per mile cost increased to 23.9 cents per mile and 23.4 cents per mile for the three and six months ended June 30, 2024, respectively, compared to 16.5 cents per mile and 18.4 cents per mile, respectively, for the same 2023 periods.

The increases for the three and six months ended June 30, 2024 are primarily the result of current period claims expense and the development of prior period claims compared to the same 2023 period.

Our insurance program includes multi-year policies with specific insurance limits that may be eroded over the course of the policy term.

If that occurs, we will be operating with less liability coverage insurance at various levels of our insurance tower.

For the policy period that ran from April 1, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded based on claims expense accruals.

For the policy period that ran from April 1, 2018 to March 31, 2021, the aggregate limits available in the coverage layer $9.0 million in excess of $1.0 million were fully eroded.

We replaced our $9.0 million in excess of $1.0 million layer with a new $7.0 million in excess of $3.0 million policy that we continue to maintain.

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Three Months Ended

Six Months Ended

Communications and utilities

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% of freight revenue

For the periods presented, the change in communications and utilities was insignificant both as a percentage of total revenue and freight revenue.

For the periods presented, the change in communications and utilities were insignificant both as a percentage of total revenue and freight revenue.

General supplies and expenses

Three Months Ended

Six Months Ended

General supplies and expenses

1 unchanged sentence

% of freight revenue

The increases in general supplies and expenses for the three months ended March 31, 2024 were primarily the result of the increase in the contingent consideration liability since the 2023 period.

The increase in general supplies and expenses for the three months ended June 30, 2024 was insignificant both as a percentage of total revenue and freight revenue.

The increase in general supplies and expenses for the six months ended June 30, 2024 was primarily the result of the increase in the contingent consideration liability since the 2023 period partially offset by acquisition costs recognized during the 2023 period with no similar costs during the same 2024 period.

Depreciation and amortization

Three Months Ended

Six Months Ended

Depreciation and amortization

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Depreciation and amortization consists primarily of depreciation of tractors, trailers, and other capital assets, as well as amortization of intangible assets.

Depreciation expense increased $5.3 million to $18.7 million for the three months ended March 31, 2024 compared to $13.5 million in the same 2023 period as a result of increased costs on new equipment and an increase in our average total tractor count.

Amortization of intangible assets was $2.4 million for three months ended March 31, 2024 , compared to $1.1 million for the same 2023 period.

The increase for the three months ended March 31, 2024 is due to the amortization of the intangible assets related to the LTST and Sims acquisitions.

Depreciation expense increased $2.6 million and $7.9 million to $19.7 million and $38.5 million for the three and six months ended June 30, 2024 , respectively, compared to $17.1 million and $30.6 million in the same 2023 periods, as a result of increased costs on new equipment and an increase in our average total tractor count.

Amortization of intangible assets was $2.4 million and $4.7 million for three and six months ended June 30, 2024 , respectively, compared to $1.8 million and $2.9 million for the same 2023 periods.

The increase for the three and six months ended June 30, 2024 is due to the amortization of the intangible assets related to the LTST and Sims acquisitions.

We expect depreciation and amortization to increase going forward as the cost of new equipment increases and we see the full year effect of our 2023 equipment replacement plan.

3 unchanged sentences

Three Months Ended

Six Months Ended

Loss (gain) on disposition of property and equipment, net

1 unchanged sentence

% of freight revenue

The loss on disposition of property and equipment, net for the three-months ended March 31, 2024, compared to a gain on disposition of property and equipment, net for the prior period, was primarily the result of the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023, with no such sales in the same 2024 period, as well as reductions in the gain on disposition of equipment due to the soft used equipment market.

The loss on disposition of property and equipment, net for the three and six months ended June 30, 2024, compared to a gain on disposition of property and equipment, net for the prior periods, was primarily the result of reductions in the gain on disposition of equipment due to the soft used equipment market.

Additionally, the six months ended 2023 includes the $7.6 million gain on sale of a Tennessee terminal in the first quarter of 2023, with no such sales in the same 2024 period.

Interest expense, net

Three Months Ended

Six Months Ended

Interest expense, net

1 unchanged sentence

% of freight revenue

For the periods presented, the increases in interest expense were primarily the result of an increase in revenue equipment installment notes as a result of additional equipment added during 2023 as a result of our revenue equipment replacement plan, as well as increased interest rates since the 2023 period.

For the periods presented, the increases in interest expense were primarily the result of an increase in revenue equipment installment notes as a result of additional equipment added during 2023 and 2024 as a result of our revenue equipment replacement plan, as well as increased interest rates since the 2023 periods.

This line item will fluctuate based on our decision with respect to purchasing revenue equipment with balance sheet debt versus operating leases, our revenue equipment replacement plan, and changing interest rates.

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Three Months Ended

Six Months Ended

Income from equity method investment

We have accounted for our investment in TEL using the equity method of accounting and thus our financial results include our proportionate share of TEL's net income or loss.

The decrease in TEL's contribution to our results for the three months ended March 31, 2024 were primarily the result of a reduction on gain on sale of revenue equipment compared to the 2023 period.

The decrease in TEL's contribution to our results for the three and six months ended June 30, 2024 were primarily the result of a deterioration in the equipment market, suppressing gains on sale of used equipment, and increased interest expense associated with higher interest rates on equipment related debt compared to the 2023 periods.

Due to TEL's business model, gains and losses on sale of equipment is a normal part of the business and can cause earnings to fluctuate from period to period and therefore our income from investment to similarly fluctuate.

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Three Months Ended

Six Months Ended

Income tax expense

1 unchanged sentence

% of freight revenue

The decreases in income tax expense were primarily related to the $18.1 million decrease in pre-tax income in the three months ended March 31, 2024, compared to the same 2023 period resulting from the aforementioned decreases in operating income and earnings on investment in TEL.

The increase in income tax expense for the three months ended June 30, 2024 was the result of the rate impact of executive compensation disallowance as well as a $0.8 million increase in pre-tax income compared to the same 2023 period.

The decrease in income tax expense for the six months ended June 30, 2024, were primarily related to the $17.3 million decrease in pre-tax income in the six months ended June 30, 2024, compared to the same 2023 period.

The decreases in pre-tax income resulted from the aforementioned changes in operating income and earnings on investment in TEL.

The effective tax rate is different from the expected combined tax rate due primarily to state tax expense and permanent differences.

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We have four reportable segments, Expedited, Dedicated, Managed Freight, and Warehousing, each as described above.

COMPARISON O F three months ended March 31, 2024 TO three months ended March 31, 2023

COMPARISON O F three and six months ended June 30, 2024 TO three and six months ended June 30, 2023

The following table summarizes revenue and operating income data by reportable segment:

1 unchanged sentence

Three Months Ended

Six Months Ended

Managed Freight

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Total operating income

The increase in Expedited revenue for the three months ended March 31, 2024 relates to a 44 (or 5.1%) average tractor increase, partially offset by a $0.4 million decrease in fuel surcharge revenue and a decrease in average freight revenue per tractor per week of 0.2%, compared to the 2023 quarter.

The decrease in average freight revenue per tractor per week for the quarter ended March 31, 2024 is the result of a 12.0 cents per mile (or 5.4%) decrease in average rate per total mile partially offset by a 6.6% increase in average miles per unit compared to the 2023 quarter.

Expedited team-driven tractors averaged 844 and 783 tractors in the first quarter of 2024 and 2023, respectively.

The increase in Dedicated revenue for the three months ended March 31, 2024 relates to a 28, or 2.3% average tractor increase as a result of the LTST acquisition including growth since acquisition and an increase in average freight revenue per tractor per week of 5.8% compared to the 2023 quarter partially offset by a $2.0 million decrease in fuel surcharge revenue.

The increase in average freight revenue per tractor per week was the result of a 12.8 cents per mile (or 4.8%) increase in average rate per total mile and a 2.1% increase in average miles per unit compared to the 2023 quarter.

For the three months ended March 31, 2024, Managed Freight total revenue increased primarily as a result of increased volumes of high-margin overflow freight from both Expedited and Dedicated truckload operations as well as the Sims acquisition.

For the three months ended March 31, 2024, Warehousing total revenue increased as a result of period-over-period new customer business as well as customer rate increases that went into effect during the third quarter of 2023.

The decrease in operating income for the three months ended March 31, 2024, was the result of a $16.1 million, $9.1 million, and $1.0 million increase in Dedicated, Expedited, and Managed Freight operating expenses partially offset by a $0.9 million decrease in Warehousing operating expenses, partially offset by the increase in total revenue described above.

The decrease in Expedited operating income for the three months ended March 31, 2024 was primarily the result of an increase in Expedited operating expenses partially offset by the aforementioned increase in revenue.

The increase in Expedited operating expenses for the three months ended March 31, 2024 was primarily the result of increases in depreciation expense as a result of our equipment trade cycle and increased equipment costs since the 2023 period partially offset by the prior period increase in the contingent consideration liability.

The decrease in Dedicated operating income for the three months ended March 31, 2024 was primarily the result of an increase in Dedicated operating expenses partially offset by the aforementioned increase in revenue.

The increase in Dedicated operating expenses for the three months ended March 31, 2024 , was primarily the result of the increase in the contingent consideration liability, as well as increased depreciation expense as a result of our equipment trade cycle and increased equipment costs since the 2023 period.

The increase in operating income for Managed Freight for the three months ended March 31, 2024 was primarily the result of the aforementioned increase in revenue partially offset by an increase in Managed Freight operating expenses.

The increase in Managed Freight operating expenses was primarily the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation.

This increase was partially offset by a decrease in claims.

The increase in operating income for Warehousing for the three months ended March 31, 2024 was primarily the result of the aforementioned increase in revenue and a decrease in Warehousing operating expenses.

The decrease in Warehousing operating expenses for the three months ended March 31, 2024 , was a result of a reduction in outsourced labor since the 2023 period.

The increase in Expedited revenue for the three months ended June 30, 2024 relates to an increase of 55 (or 6.4%) average tractors and a $1.0 million increase in fuel surcharge revenue partially offset by a decrease in average freight revenue per tractor per week of 2.8%, compared to the 2023 quarter.

The decrease in average freight revenue per tractor per week for the quarter ended June 30, 2024 is the result of a 4.0 cents per mile (or 1.9%) decrease in average rate per total mile and a 0.9% decrease in average miles per unit compared to the 2023 quarter.

Expedited team-driven tractors averaged 845 and 789 tractors in the second quarter of 2024 and 2023, respectively.

For the six months ended June 30, 2024 , the increase in Expedited revenue relates to a 50 (or 5.9%) average tractor increase partially offset by an decrease in average freight revenue per tractor per week of 1.7% compared to the same 2023 period.

The decrease in average freight revenue per tractor per week for the six months ended June 30, 2024 is the result of a 7.0 cents per mile (or 3.3%) decrease in average rate per total mile partially offset by a 2.6% increase in average miles per unit compared to the same 2023 period.

Expedited team-driven tractors averaged 844 and 786 for the six months ended June 30, 2024 and 2023, respectively.

The increase in Dedicated revenue for the three months ended June 30, 2024 relates to a 136, or 10.9% average tractor increase and an increase in average freight revenue per tractor per week of 6.6% compared to the 2023 quarter.

The increase in average freight revenue per tractor per week was the result of a 19.0 cents per mile (or 7.1%) increase in average rate per total mile partially offset by a 0.5% decrease in average miles per unit compared to the 2023 quarter.

For the six months ended June 30, 2024 , the increase in Dedicated revenue relates to a 82 (or 6.6%) average tractor increase and an increase in average freight revenue per tractor per week of 6.3% compared to the same 2023 period.

The increase in average freight revenue per tractor per week for the six months ended June 30, 2024 is the result of a 16.0 cents per mile (or 6.0%) increase in average rate per total mile and a 0.8% increase in average miles per unit compared to the same 2023 period.

For the three and six months ended June 30, 2024, Managed Freight total revenue decreased primarily as a result of a degraded spot market, partially offset by the third quarter 2023 Sims acquisition.

For the three and six months ended June 30, 2024, Warehousing total revenue increased as a result of customer rate increases since the same 2023 periods.

The increase in operating income for the three months ended June 30, 2024, was the result of the increase in total revenue described above and a $4.3 million and $1.1 million decrease in Managed Freight and Warehousing operating expenses, respectively, partially offset by a $10.1 million and $5.0 million increase in Dedicated and Expedited operating expenses, respectively.

The decrease in operating income for the six months ended June 30, 2024 , was the result of a $26.2 million and $14.1 million increase in Dedicated and Expedited operating expenses, respectively, partially offset by a $3.3 million and $2.0 million decrease in Managed Freight and Warehousing operating expenses, respectively as well as the aforementioned changes in total revenue.

The decrease in Expedited operating income for the three and six months ended June 30, 2024 was primarily the result of an increase in Expedited operating expenses partially offset by the aforementioned increase in revenue.

The increase in Expedited operating expenses for the three and six months ended June 30, 2024 was primarily the result of increases in insurance and claims expense, and depreciation expense as a result of increased equipment costs since the 2023 period partially offset by the prior period increases in the contingent consideration liability.

The increase in Dedicated operating income for the three months ended June 30, 2024 was primarily the result of the aforementioned increase in revenue, partially offset by an increase in Dedicated operating expenses.

The decrease in Dedicated operating income for the six months ended June 30, 2024 was primarily the result of an increase in Dedicated operating expenses partially offset by the aforementioned increase in revenue.

The increase in Dedicated operating expenses for the three and six months ended June 30, 2024 , was primarily the result of increased salaries, wages, and benefits for our professional drivers as the result of growth, increased depreciation expense as a result of increased equipment costs, and the increase in the contingent consideration liability since the 2023 period.

Additionally, during the six months ended June 30, 2023 , we sold a Tennessee terminal resulting in a $7.6 million gain which is included in gain on disposition of property and equipment, net in the condensed consolidated statements of operations with no similar gain in the same 2024 period.

The increase in operating income for Managed Freight for the three and six months ended June 30, 2024 was primarily the result of a decrease in Managed Freight operating expenses partially offset by the aforementioned decreases in revenue.

The decrease in Managed Freight operating expenses for the three months ended June 30, 2024 was primarily the result of the changes in revenue driving changes in variable expenses, primarily purchased transportation, while the decrease in operating expenses for the six months ended June 30, 2024 was primarily due to a small number of prior period claims recognized in the same 2023 period with no similar 2024 activity.

Additionally, operating income improved for both periods as a result of the impact of the higher-margin Sims acquisition since the same 2023 periods.

The increase in operating income for Warehousing for the three and six months ended June 30, 2024 was primarily the result of the aforementioned increase in revenue and a decrease in Warehousing operating expenses.

The decrease in Warehousing operating expenses for the three and six months ended June 30, 2024 , was a result of a reduction in outsourced labor since the 2023 periods.

In our asset-light reportable segments, we are prioritizing long-term growth, focusing on talent acquisition, and technology enhancements.

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Further, we expect to increase our capital allocation toward our Dedicated, Managed Freight, and Warehousing reportable segments to become the go-to partner for our customers’ most critical transportation and logistics needs.

We had working capital (total current assets less total current liabilities) of $7.0 million and $15.7 million at March 31, 2024 and December 31, 2023, respectively.

We had working capital (total current assets less total current liabilities) of $14.1 million and $15.7 million at June 30, 2024 and December 31, 2023, respectively.

Our working capital on any particular day can vary significantly due to the timing of collections and cash disbursements.

Based on our expected financial condition, net capital expenditures, results of operations, related net cash flows, installment notes, and other sources of financing, we believe our working capital and sources of liquidity will be adequate to meet our current and projected needs, and we do not expect to experience material liquidity constraints in the foreseeable future.

With an average fleet tractor fleet age of 1.7 years at March 31, 2024, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

With an average fleet tractor fleet age of 1.7 years at June 30, 2024, we believe we have flexibility to manage our fleet, and we plan to regularly evaluate our tractor replacement cycle, new tractor purchase requirements, and purchase options.

If we were to grow our independent contractor fleet, our capital requirements would be reduced.

As of March 31, 2024 and December 31, 2023 we had $291.4 million and $293.5 million in debt and lease obligations, respectively, consisting of the following:

As of June 30, 2024 and December 31, 2023 we had $317.3 million and $293.5 million in debt and lease obligations, respectively, consisting of the following:

No and $11.6 million outstanding borrowings under the Credit Facility;

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The increase in revenue equipment installment notes is primarily due to replacing our older equipment with new equipment.

The decrease in the operating lease obligations was primarily due to replacing revenue equipment held under operating leases with owned equipment, as well as the amortization of the lease liability.

As of March 31, 2024, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $21.0 million, and available borrowing capacity of $89.0 million under the Credit Facility.

As of June 30, 2024, we had no borrowings outstanding, undrawn letters of credit outstanding of approximately $20.8 million, and available borrowing capacity of $88.8 million under the Credit Facility.

Additionally, we had $45.0 million of remaining availability of a $45.0 million Draw Note from Triumph which is available solely to fund any indemnification owed to Triumph in relation to the TFS Settlement.

Fluctuations in the outstanding balance and related availability under our Credit Facility are driven primarily by cash flows from operations and the timing and nature of property and equipment additions that are not funded through notes payable, as well as the nature and timing of collection of accounts receivable, payments of accrued expenses, and receipt of proceeds from disposals of property and equipment.

Our net capital expenditures for the three months ended March 31, 2024 totaled $12.0 million of expenditures, as compared to $8.2 million of proceeds for the prior year period.

During the three months ended March 31, 2024, we took delivery of approximately 244 new tractors and 189 new trailers, while disposing of approximately 167 used tractors and 44 used trailers.

Our net capital expenditures for the six months ended June 30, 2024 totaled $54.8 million of expenditures, as compared to $111.9 million of expenditures for the prior year period.

During the six months ended June 30, 2024, we took delivery of approximately 220 new tractors and 345 new trailers, while disposing of approximately 211 used tractors and 160 used trailers.

Our current fleet plan for the remainder of 2024 includes the delivery of an additional 332 new company replacement tractors and 312 additional new trailer deliveries.

Net gains on disposal of equipment and real estate in the three months ended March 31, 2024 were $12.4 million compared to $39.3 million in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period and the aforementioned disposal of revenue equipment as part of our trade cycle.

Net losses on disposal of equipment and real estate in the six months ended June 30, 2024 were $1.5 million compared to $11.8 million net gains in the same prior year period primarily due to the $7.6 million gain on a Tennessee terminal during the 2023 period and the aforementioned disposal of revenue equipment as part of our trade cycle.

For the balance of 2024, our baseline expectation for net capital expenditures is $30.0 million to $40.0 million.

Our capital investment plan reflects our priorities growing Dedicated with new poultry related business, maintaining the average of our equipment to optimize operational uptime and related operating costs, and offering a fleet of equipment that our professional drivers are proud to operate.

We distributed a total of $1.4 million to stockholders in the first three months of 2024 through dividends.

We distributed a total of $2.9 million to stockholders in the first six months of 2024 through dividends.

We believe we have sufficient liquidity to satisfy our cash needs, and we will continue to evaluate the nature and extent of potential short-term and long-term impacts to our business.

Despite a year over year reduction in net income of $12.7 million, net cash flows provided by operating activities increased to $21.7 million for the three months ended March 31, 2024, compared to $7.2 million for the same 2023 period, primarily due to increases in non-cash expenses such as depreciation and amortization and reductions to non-cash gains on sale of property, plant, and equipment in the current period.

Changes in operating assets and liabilities such as receivables and driver advances, accounts payable and accrued expenses, and insurance and claims accruals provided improved cash flow for the three months ended March 31, 2024, compared to the 2023 period.

Net cash flows used by investing activities were $43.5 million for the three months ended March 31, 2024, compared to $7.1 million provided in the same 2023 period.

The change in net cash flows used by investing activities was primarily due to the timing of our trade cycle whereby we took delivery of approximately 244 new tractors and 189 new trailers, while disposing of approximately 167 used tractors and 44 used trailers during the 2024 period compared to delivery of 150 new tractors and 64 new trailers, while disposing of approximately 162 used tractors and 123 used trailers in the same 2023 period.

Net cash flows used by investing activities also included a $4.6 million payment related to the acquisition of LTST and our Section 338(h)10 election.

Despite a year over year reduction in net income of $12.8 million, net cash flows provided by operating activities increased to $44.1 million for the six months ended June 30, 2024, compared to $12.3 million for the same 2023 period, primarily due to increases in non-cash expenses such as depreciation and amortization and reductions to non-cash gains on sale of property and equipment in the current period.

Changes in operating assets and liabilities such as receivables and driver advances, accounts payable and accrued expenses, and insurance and claims accruals provided improved cash flow for the six months ended June 30, 2024, compared to the 2023 period.

Net cash flows used by investing activities were $86.5 million for the six months ended June 30, 2024, compared to $113.3 million used in the same 2023 period.

The decrease in net cash flows used by investing activities was primarily due to the April 2023 acquisition of LTST for $99.9 million, net of cash acquired, partially offset by the $4.6 million payment related to the acquisition of LTST and our Section 338(h)(10) election during the 2024 period, and the timing of our trade cycle whereby we took delivery of approximately 220 new tractors and 345 new trailers, while disposing of approximately 211 used tractors and 160 used trailers during the 2024 period compared to delivery of 234 new tractors and 262 new trailers, while disposing of approximately 321 used tractors and 175 used trailers in the same 2023 period.

Additionally, the 2023 period provided $12.5 million of proceeds related to the sale of a Tennessee terminal.

Net cash flows provided by financing activities were approximately $22.4 million for the three months ended March 31, 2024, compared to $28.4 million used in the same 2023 period.

The change in net cash flows provided by financing activities was primarily a function of net proceeds relating to notes payable of $30.1 million in the 2024 period compared to net proceeds of $7.9 million in the 2023 period and the repurchase of $0.0 million of shares of our Class A common stock during the 2024 period compared to $20.8 million during the same 2023 period.

Net cash flows provided by financing activities were approximately $41.4 million for the six months ended June 30, 2024, compared to $40.1 million provided in the same 2023 period.

The increase in net cash flows provided by financing activities was primarily a function of no repurchases of shares of our Class A common stock during the 2024 period compared to $25.4 million during the same 2023 period, partially offset by net borrowings of notes payable and our Credit Facility of $49.4 million in the 2024 period compared to $76.9 million in the 2023 period.

Net cash flows provided by operating activities and provided by financing activities in the 2024 period also included payment of $3.0 million and $7.0 million, respectively, of contingent consideration liabilities related to the acquisition of AAT.

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Between May 2022 and April 2023, we repurchased a total of 2.7 million shares of our Class A common stock.

The program expired January 31, 2024.

The program expired on January 31, 2024.

Our cash flows may fluctuate depending on capital expenditures, future stock repurchases, dividends, strategic investments or divestitures, any indemnification calls related to the TFS Settlement, and the extent of future income tax obligations and refunds.

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Accordingly, actual results could differ from those anticipated.

There have been no material changes to our most critical accounting policies and estimates during the three months ended March 31, 2024, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2023.

There have been no material changes to our most critical accounting policies and estimates during the three and six months ended June 30, 2024, compared to those disclosed in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our Form 10-K for the year ended December 31, 2023.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis