What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-08 · 108 added, 91 removed, 206 unchanged (49% of the section changed)

12 unchanged sentences

Universal Logistics Holdings, Inc.

is a holding company whose subsidiaries provide a variety of customized transportation and logistics solutions throughout the United States and in Mexico, Canada and Colombia.

Our operating subsidiaries provide customers a broad scope of services across their entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added services.

is a holding company that owns subsidiaries engaged in providing a variety of customized transportation and logistics solutions throughout the United States, and in Mexico, Canada and Colombia.

Our operating subsidiaries provide customers with a broad array of services across their entire supply chain, including value-added, dedicated, intermodal and trucking services.

Our operating subsidiaries provide a comprehensive suite of transportation and logistics solutions that allow our customers and clients to reduce costs and manage their global supply chains more efficiently.

We market our services through a direct sales and marketing network focused on selling our portfolio of services to large customers in specific industry sectors, through a network of agents who solicit freight business directly from shippers, and through company-managed facilities and full-service freight forwarding and customs house brokerage offices.

We market our services through a direct sales and marketing network focused on selling our portfolio of services to large customers in specific industry sectors through both our company-managed operations and through a network of agents who solicit freight business directly from shippers.

We believe our flexible business model is highly scalable and will continue to support our growth with comparatively modest capital expenditure requirements.

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We also derive revenue from fuel surcharges, where separately identifiable, loading and unloading activities, equipment detention, container management and storage and other related services.

Operations aggregated in our transportation segment are associated with individual freight shipments coordinated by our agents, company-managed terminals and specialized services operations.

In contrast, operations aggregated in our logistics segment deliver value-added services and transportation services to specific customers on a dedicated basis, generally pursuant to contract terms of one year or longer.

Our segments are distinguished by the amount of forward visibility we have in regard to pricing and volumes, and also by the extent to which we dedicate resources and Company-owned equipment.

Operations aggregated in our contract logistics segment deliver value-added and/or dedicated transportation services to support in-bound logistics to industrial customers and major retailers on a contractual basis, generally pursuant to terms of one year or longer.

Our intermodal segment is associated with local and regional drayage moves predominately coordinated by company-managed terminals using a mix of owner-operators, company equipment and third-party capacity providers (broker carriers).

Operations aggregated in our trucking segment are associated with individual freight shipments coordinated by our agents and company-managed terminals using a mix of owner-operators, company equipment and broker carriers.

The following discussion of the Company’s financial condition and results of operations should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and Consolidated Financial Statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 and the unaudited Consolidated Financial Statements and related notes contained in this Quarterly Report on Form 10-Q.

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Our truckload, brokerage and intermodal services are associated with individual freight shipments coordinated by our agents and company-managed terminals, while our dedicated and value-added services are specific to customers on a contractual basis, generally pursuant to contract terms of one year or longer.

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and twenty-six weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of total operating revenues:

The following table sets forth operating revenues resulting from each of these categories for the thirteen weeks and thirty-nine weeks ended September 28, 2024 and September 30, 2023, presented as a percentage of total operating revenues:

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Operating revenues:

6 unchanged sentences

Results of Operations

Thirteen Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of operating revenues:

Thirteen Weeks Ended September 28, 2024 Compared to Thirteen Weeks Ended September 30, 2023

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended September 28, 2024 and September 30, 2023:

Thirteen Weeks Ended

September 28,

September 30,

Percent Change in Dollar Amount

10 unchanged sentences

Depreciation and amortization

Impairment expense

Total operating expenses

Income from operations

Interest expense, net

Interest income (expense), net

Other non-operating income

5 unchanged sentences

The primary driver in our contract logistics segment was the recently awarded specialty development project.

Operating revenues included separately-identified fuel surcharges of $24.5 million in the second quarter 2024, compared to $28.6 million in the second quarter 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million one year earlier.

Operating revenues included separately-identified fuel surcharges of $21.9 million in the third quarter 2024, compared to $28.2 million in the third quarter 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.9 million during the third quarter 2024 compared to $9.9 million one year earlier.

Purchased transportation and equipment rent .

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The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services.

In the second quarter 2024, transactional transportation-related service revenues decreased 2.5% compared to the prior year.

In the third quarter 2024, transactional transportation-related service revenues decreased 14.8% compared to the prior year.

Direct personnel and related benefits .

Trends in direct personnel and benefit costs are generally correlated with changes in operating facilities and headcount requirements and, therefore, fluctuate correspondingly with the level of demand for our staffing needs in our contract logistics segment, which includes value-added services and dedicated transportation, as well as the use of employee drivers in certain of our intermodal operations.

The decrease in the second quarter 2024 was due to a decrease in headcount in our intermodal and value-added businesses.

The decrease in the third quarter 2024 was due to a decrease in headcount in our intermodal business.

While generalizations about the impact of personnel and related benefits costs are difficult, we manage compensation and staffing levels, including the use of contract labor, to maintain target economics based on near-term projections of demand for our services.

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Commission expense .

Commission expense increased due to increased revenue in our agency-based truckload business.

Commission expense decreased due to decreased revenue in our agency-based truckload business.

Occupancy expense .

The decrease in occupancy expense was attributable to a decrease in building rents.

This was partially offset by an increase in property taxes.

The increase in occupancy expense was attributable to an increase in building rents and property taxes.

General and administrative .

The increase in general and administrative expense was primarily due to an increase in salaries, wages, and benefits as well as professional fees.

The decrease in general and administrative expense was primarily due to a decrease in salaries, wages, and benefits as well as professional fees.

Insurance and claims .

The increase in insurance and claims expense was primarily due to an increase in auto liability premiums as well as an increase in cargo claims expense.

The decrease in insurance and claims expense was primarily due to a decrease in cargo claims expense.

Depreciation and amortization .

The increase in depreciation and amortization expense resulted from a $9.3 million increase in depreciation expense and a $1.6 million increase in amortization expense.

During the second quarter 2024, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $11.3 million during the period.

Impairment expense .

The increase in impairment expense primarily relates to the goodwill impairment charges resulting from the closure of our company-managed brokerage operations.

Interest expense, net .

The increase in net interest expense reflects an increase in our outstanding borrowings.

As of June 29, 2024, our outstanding borrowings were $487.8 million compared to $382.0 million at July 1, 2023.

As of September 28, 2024, our outstanding borrowings were $561.2 million compared to $392.0 million at September 30, 2023.

Other non-operating income .

Other non-operating income increased by $0.6 million in second quarter 2024 and includes a $0.8 million favorable legal settlement.

Other non-operating income decreased by $0.6 million in third quarter 2024.

Income tax expense .

Our effective income tax rate was 25.3% in both the second quarter 2024 and 2023.

Our effective income tax rate was 24.6% in the third quarter 2024 compared to 25.3% in the third quarter 2023.

The increase in income taxes is primarily the result of an increase in taxable income.

Twenty-six Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

The following table sets forth items derived from our consolidated statements of income for the twenty-six weeks ended June 29, 2024 and July 1, 2023, presented as a percentage of operating revenues:

Twenty-six Weeks Ended

Thirty-nine Weeks Ended September 28, 2024 Compared to Thirty-nine Weeks Ended September 30, 2023

The following table sets forth items derived from our consolidated statements of income for the thirty-nine weeks ended September 28, 2024 and September 30, 2023:

Thirty-nine Weeks Ended

September 28,

September 30,

Percent Change in Dollar Amount

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Depreciation and amortization

Impairment expense

Total operating expenses

Income from operations

Interest expense, net

Interest income (expense), net

Other non-operating income

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The primary driver in our contract logistics segment was the recently awarded specialty development project.

Operating revenues included separately-identified fuel surcharges of $49.3 million in the first half 2024, compared to $62.6 million in the first half 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $16.6 million during the first half 2024 compared to $39.4 million one year earlier.

Operating revenues included separately-identified fuel surcharges of $71.1 million in the thirty-nine weeks ended September 28, 2024, compared to $90.7 million in the thirty-nine weeks ended September 30, 2023.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $23.3 million during the thirty-nine weeks ended September 28, 2024, compared to $47.5 million one year earlier.

Purchased transportation and equipment rent .

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The absolute decrease in purchased transportation and equipment rental costs was primarily the result of an overall decrease in transactional transportation-related services.

In the first half 2024, transactional transportation-related service revenues decreased 12.3% compared to the prior year.

In the thirty-nine weeks ended September 28, 2024, transactional transportation-related service revenues decreased 13.1% compared to the prior year.

Direct personnel and related benefits .

The decrease in the first half 2024 was due to a decrease in headcount in our value-added business.

The decrease in the thirty-nine weeks ended September 28, 2024, was due to a decrease in headcount in our intermodal and value-added businesses.

10 unchanged sentences

Insurance and claims .

The increase in insurance and claims expense was primarily due to an increase in auto liability premiums as well as an increase in cargo claims expense.

This was partially offset by a decrease in auto liability claims expense.

The decrease in insurance and claims expense was primarily due to an increase in auto liability claims expense.

Depreciation and amortization .

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During the first half 2024, Universal revised the estimated useful life and salvage value of certain equipment, and these adjustments resulted in additional depreciation expense of $11.3 million during the period.

Impairment expense .

The increase in impairment expense primarily relates to the goodwill impairment charges resulting from the closure of our company-managed brokerage operations.

Interest expense, net .

The increase in net interest expense reflects an increase in our outstanding borrowings.

As of June 29, 2024, our outstanding borrowings were $487.8 million compared to $382.0 million at July 1, 2023.

As of September 28, 2024, our outstanding borrowings were $561.2 million compared to $392.0 million at September 30, 2023.

Other non-operating income .

Other non-operating income increased by $1.7 million in first half 2024 and includes a $0.8 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income and a $0.8 million favorable legal settlement.

Other non-operating income increased by $1.1 million in the thirty-nine weeks ended September 28, 2024 and includes a $0.9 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income.

Income tax expense .

Our effective income tax rate was 25.2% in both the first half 2024 and 2023.

Our effective income tax rate was 25.1% in thirty-nine weeks ended September 28, 2024, compared to 25.3% in the thirty-nine weeks ended September 30, 2023.

The increase in income taxes is primarily the result of an increase in taxable income.

Segment Financial Results

We report our financial results in four distinct reportable segments:

contract logistics, intermodal, trucking, and company-managed brokerage, which are based primarily on the services each segment provides.

We report our financial results in three distinct reportable segments:

contract logistics, intermodal and trucking, which are based primarily on the services each segment provides.

This presentation reflects the manner in which management evaluates our operating segments, including an evaluation of economic characteristics and applicable aggregation criteria.

The following tables summarize information about our reportable segments for the thirteen week and twenty-six week periods ended June 29, 2024 and July 1, 2023 (in thousands):

The following tables summarize information about our reportable segments for the thirteen week and thirty-nine week periods ended September 28, 2024 and September 30, 2023 (in thousands):

Operating Revenues

Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Contract logistics

Company-managed brokerage

Total operating revenues

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Thirteen Weeks Ended

Twenty-six Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Contract logistics

Company-managed brokerage

Total income from operations

Thirteen Weeks Ended June 29, 2024 Compared to Thirteen Weeks Ended July 1, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 26.2%.The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the second quarter 2024, we managed 68 value-added programs, unchanged from the second quarter 2023.

Included in contract logistics segment revenues for the thirteen weeks ended June 29, 2024, were $8.0 million in separately identified fuel surcharges from dedicated transportation services, compared to $8.6 million in the same period last year.

Income from operations increased $20.1 million and operating margin, as a percentage of revenue was 20.1% for the second quarter 2024, compared to 15.7% in the second quarter 2023.

Operating revenues in the intermodal segment decreased 14.8% primarily due to a decrease in the average operating revenue per load and the number of loads hauled.

Included in intermodal segment revenues for the second quarter 2024 were $10.9 million in separately identified fuel surcharges, compared to $13.6 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.1 million during the second quarter 2024 compared to $13.4 million in the second quarter 2023.

Load volumes declined 4.1%, while the average operating revenue per load, excluding fuel surcharges, fell 5.9% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the second quarter 2024 was (10.6)%, compared to (0.3)% one year earlier.

In the trucking segment, operating revenues increased 12.6% primarily due to an increase in the average revenue per load, excluding fuel surcharges.

Second quarter 2024 trucking segment revenues included $25.5 million of brokerage services compared to $30.7 million during the same period last year.

Also included in our trucking segment revenues were $5.7 million in separately identified fuel surcharges during the second quarter 2024 compared to $6.4 million in fuel surcharges in the second quarter 2023.

Thirteen Weeks Ended September 28, 2024 Compared to Thirteen Weeks Ended September 30, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 17.8%.

The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the third quarter 2024, we managed 70 value-added programs compared to 73 in the third quarter 2023.

Included in contract logistics segment revenues for the thirteen weeks ended September 28, 2024, were $7.0 million in separately identified fuel surcharges from dedicated transportation services, compared to $9.1 million in the same period last year.

Income from operations increased $10.5 million and operating margin, as a percentage of revenue was 18.6% for the third quarter 2024, compared to 16.9% in the third quarter 2023.

Operating revenues in the intermodal segment decreased 11.8% primarily due to a decrease in the number of loads hauled.

Included in intermodal segment revenues for the third quarter 2024 were $10.0 million in separately identified fuel surcharges, compared to $12.7 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.9 million during the third quarter 2024 compared to $9.9 million in the third quarter 2023.

Load volumes declined 13.2%, while the average operating revenue per load, excluding fuel surcharges, increased 1.8% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the third quarter 2024 was (1.5)%, compared to (5.1)% one year earlier.

In the trucking segment, operating revenues decreased 10.3% primarily due to a decrease in the number of loads hauled.

Third quarter 2024 trucking segment revenues included $24.3 million of brokerage services compared to $28.8 million during the same period last year.

Also included in our trucking segment revenues were $4.8 million in separately identified fuel surcharges during the third quarter 2024 compared to $6.3 million in fuel surcharges in the third quarter 2023.

On a year-over-year basis, load volumes declined 16.1%;

however, the average operating revenue per load, excluding fuel surcharges, increased 9.3%, supported by our specialty, heavy-haul wind business.

As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended June 29, 2024, was 4.8% compared to 5.4% for the thirteen weeks ended July 1, 2023.

Operating revenues in the company-managed brokerage segment decreased 4.9% primarily due to a decrease in the average operating revenue per load.

On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 21.9%.

This was partially offset by a 20.1% increase in load volumes.

As a percentage of revenue, operating margin for the second quarter 2024 was (7.9)% compared to (2.7)% during the same period last year.

Twenty-six Weeks Ended June 29, 2024 Compared to Twenty-six Weeks Ended July 1, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 37.4%.The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the first half 2024, we managed 68 value-added programs, unchanged from the first half 2023.

Included in contract logistics segment revenues for the twenty-six weeks ended June 29, 2024, were $16.6 million in separately identified fuel surcharges from dedicated transportation services, compared to $18.3 million in the same period last year.

Income from operations increased $73.8 million and operating margin, as a percentage of revenue was 23.3% for the first half 2024, compared to 14.4% in the first half 2023.

As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended September 28, 2024, was 8.2% compared to 6.8% for the thirteen weeks ended September 30, 2023.

Thirty-nine Weeks Ended September 28, 2024 Compared to Thirty-nine Weeks Ended September 30, 2023

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues increased 30.9%.

The increase in operating revenues was primarily due to our recently awarded specialty development project.

At the end of the third quarter 2024, we managed 70 value-added programs compared to 73 in the prior year.

Included in contract logistics segment revenues for the thirty-nine weeks ended September 28, 2024, were $23.7 million in separately identified fuel surcharges from dedicated transportation services, compared to $27.4 million in the same period last year.

Income from operations increased $84.3 million and operating margin, as a percentage of revenue was 21.9% for the thirty-nine weeks ended September 28, 2024, compared to 15.2% in the thirty-nine weeks ended September 30, 2023.

Operating revenues in the intermodal segment decreased 20.3% primarily due to a decrease in the average operating revenue per load and the number of loads hauled.

Included in intermodal segment revenues for the first half 2024 were $21.5 million in separately identified fuel surcharges, compared to $30.7 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $16.6 million during the first half 2024 compared to $39.4 million in the first half 2023.

Included in intermodal segment revenues for the thirty-nine weeks ended September 28, 2024 were $31.5 million in separately identified fuel surcharges, compared to $43.4 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $23.3 million during the thirty-nine weeks ended September 28, 2024 compared to $47.5 million in the thirty-nine weeks ended September 30, 2023.

Load volumes declined 10.6%, while the average operating revenue per load, excluding fuel surcharges, fell 1.4% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the first half 2024 was (10.6)%, compared to (3.2)% one year earlier.

In the trucking segment, operating revenues increased 0.1% primarily due to an increase in the average revenue per load, excluding fuel surcharges.

First half 2024 trucking segment revenues included $54.1 million of brokerage services compared to $65.4 million during the same period last year.

Also included in our trucking segment revenues were $11.1 million in separately identified fuel surcharges during the first half 2024 compared to $13.5 million in fuel surcharges in the first half 2023.

As a percentage of revenue, operating margin in the intermodal segment for the thirty-nine weeks ended September 28, 2024 was (7.7)%, compared to 0.9% one year earlier.

In the trucking segment, operating revenues decreased 3.8% primarily due to a decrease in the number of loads hauled.

Trucking segment revenues included $78.4 million of brokerage services compared to $94.2 million during the same period last year.

Also included in our trucking segment revenues were $15.9 million in separately identified fuel surcharges during the thirty-nine weeks ended September 28, 2024 compared to $19.9 million in fuel surcharges in the thirty-nine weeks ended September 30, 2023.

On a year-over-year basis, load volumes declined 11.4%;

however, the average operating revenue per load, excluding fuel surcharges, increased 10.1%, supported by our specialty, heavy-haul wind business.

As a percentage of revenue, operating margin in the trucking segment for the twenty-six weeks ended June 29, 2024, was 5.0% compared to 5.1% for the twenty-six weeks ended July 1, 2023.

Operating revenues in the company-managed brokerage segment decreased 6.9% primarily due to a decrease in the average operating revenue per load.

On a year-over-year basis, average operating revenue per load in the company-managed brokerage segment decreased 20.3%.

This was partially offset by a 13.7% increase in load volumes.

As a percentage of revenue, operating margin for the first half 2024 was (8.0)% compared to (1.8)% during the same period last year.

As a percentage of revenue, operating margin in the trucking segment for the thirty-nine weeks ended September 28, 2024, was 6.1% compared to 5.7% for the thirty-nine weeks ended September 30, 2023.

Liquidity and Capital Resources

7 unchanged sentences

As a result, our capital expenditure requirements are limited in comparison to most large transportation and logistics service providers, which maintain significant properties and sizable fleets of owned tractors and trailers.

During the twenty-six weeks ended June 29, 2024, our capital expenditures totaled $145.7 million.

During the thirty-nine weeks ended September 28, 2024, our capital expenditures totaled $210.8 million.

These expenditures primarily consisted of transportation equipment, investments in support of our value-added service operations and the expansion of our terminal network.

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The Board of Directors did not declare a special dividend in the first quarter of 2024.

On July 25, 2024, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable October 1, 2024 to shareholders of record at the close of business on September 2, 2024.

On October 24, 2024, our Board of Directors did declare the regular quarterly cash dividend of $0.105 per share of common stock payable January 2, 2025 to shareholders of record at the close of business on December 2, 2024.

During the year ended December 31, 2023, we paid a total of $0.42 per common share, or $11.0 million.

Future dividend policy and the payment of dividends, if any, will be determined by the Board of Directors in light of circumstances then existing, including our earnings, financial condition and other factors deemed relevant by the Board of Directors.

On September 30, 2024, we acquired all of the outstanding shares of Parsec, LLC, OB Leasing, LLC, and Parsec Intermodal of Canada Ltd.

(collectively, “Parsec”).

The cash purchase price was $193.6 million, subject to customary post-closing adjustments.

We borrowed funds from our existing Revolving Credit Facility to finance the acquisition.

After giving effect to the borrowings under the credit facility, the Company’s subsidiaries were in compliance with all of the facility’s covenants and approximately $81.7 million was available for borrowing on the revolver.

We continually evaluate our liquidity requirements and capital structure in light of our operating needs, growth initiatives and capital resources.

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Our Revolving Credit Facility includes an accordion feature which allows us to increase availability by up to $200 million upon our request.

At June 29, 2024, we were in compliance with all its covenants, and $337.0 million was available for borrowing.

At September 28, 2024, we were in compliance with all its covenants, and $291.0 million was available for borrowing.

Our UACL Credit Agreement provides for maximum borrowings of $90 million in the form of an $80 million term loan and a $10 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027.

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Our UACL Credit Agreement includes an accordion feature which allows us to increase availability by up to $30 million upon our request.

At June 29, 2024, we were in compliance with all its covenants, and $5.0 million was available for borrowing.

At September 28, 2024, we were in compliance with all its covenants, and $5.0 million was available for borrowing.

A wholly owned subsidiary issued a series of promissory notes in order to finance transportation equipment.

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The facility bears interest at Term SOFR, plus an applicable margin equal to 2.12%.

At June 29, 2024, we were in compliance with all covenants under the facility.

At September 28, 2024, we were in compliance with all covenants under the facility.

We also maintain a short-term line of credit secured by our portfolio of marketable securities.

1 unchanged sentence

The amount available under the margin facility is based on a percentage of the market value of the underlying securities.

We did not have any amounts advanced against the line as of June 29, 2024, and the maximum available borrowings were $5.8 million.

We did not have any amounts advanced against the line as of September 28, 2024, and the maximum available borrowings were $5.9 million.

Discussion of Cash Flows

At June 29, 2024, we had cash and cash equivalents of $7.5 million compared to $12.5 million at December 31, 2023.

At September 28, 2024, we had cash and cash equivalents of $11.8 million compared to $12.5 million at December 31, 2023.

Operating activities provided $52.6 million in net cash, financing activities provided an additional $166.4 million, and we used $219.0 million in investing activities.

The $46.4 million in net cash provided by operations was primarily attributed to $83.2 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gains on marketable equity securities, gains on equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for credit losses totaling, and a change in deferred income taxes totaling $93.2 million, net.

The $52.6 million in net cash provided by operations was primarily attributed to $109.7 million of net income, which reflects non-cash depreciation and amortization, impairment expense, noncash lease expense, gains on marketable equity securities, losses on equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for credit losses totaling, and a change in deferred income taxes totaling $141.1 million, net.

Net cash provided by operating activities also reflects an aggregate increase in net working capital totaling $198.2 million.

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The decrease in net cash resulted from a decrease in accounts payable to affiliates of $2.2 million and an increase in accounts receivable from affiliates of $0.6 million.

The $144.6 million in net cash used in investing activities consisted of $145.7 million in capital expenditures, which was partially offset by $1.1 million in proceeds from the sale of equipment.

Financing activities provided $95.8 million in net cash during the twenty-six weeks ended June 29, 2024.

We had outstanding borrowings totaling $487.8 million at June 29, 2024 compared to $386.4 million at December 31, 2023.

The $219.0 million in net cash used in investing activities primarily consisted of $210.8 million in capital expenditures and $10.0 million for the acquisition of East Texas Heavy Haul.

These expenditures were partially offset by $1.8 million in proceeds from the sale of equipment.

Financing activities provided $166.4 million in net cash during the period.

We had outstanding borrowings totaling $561.2 million at September 28, 2024 compared to $386.4 million at December 31, 2023.

During the period, we made payments on term loan and equipment and real estate notes totaling $79.9 million, borrowed $162.7 million for new equipment and had net borrowings on our revolving lines of credit totaling $92.1 million.

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A summary of critical accounting policies is presented in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies,” of our Form 10-K for the year ended December 31, 2023.

There have been no changes in our accounting policies during the thirteen weeks ended June 29, 2024.

There have been no changes in our accounting policies during the thirteen weeks ended September 28, 2024.

Generally, demand for our value-added services delivered to existing customers increases during the second calendar quarter of each year as a result of the automotive industry’s spring selling season.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have not been any material changes to the Company’s market risk during the thirteen weeks ended June 29, 2024.

There have not been any material changes to the Company’s market risk during the thirteen weeks ended September 28, 2024.

For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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