What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 85 added, 207 removed, 107 unchanged (73% of the section changed)

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Universal Logistics Holdings, Inc.

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.

is a holding company incorporated in Nevada on May 1, 2025 and previously incorporated in Michigan on December 11, 2001.

Our 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 with a broad scope of services across their entire supply chain, including truckload, brokerage, intermodal, dedicated and value-added 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 both our company-managed operations and through a network of agents who solicit freight business directly from shippers.

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 company-managed facilities, and through a contract 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 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.

Operations in our intermodal and trucking segments are associated with individual freight shipments coordinated by our agents and company-managed terminals.

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

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

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, 2024 and the unaudited Consolidated Financial Statements and related notes contained in this Quarterly Report on Form 10-Q.

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If the Company is unable to offset rising costs through corresponding customer rate increases, such increases could adversely affect our results of operations.

While operating cash flows may be negatively impacted by inflation-driven cost increases, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

New or increased tariffs on imported goods could also impose additional costs on our business or cause disruption in global supply chains.

Such disruptions could lead to a decrease in shipping volumes, which would have an adverse impact on our revenues and results of operations.

While operating cash flows may be negatively impacted by inflation-driven cost increases or reductions in shipping volumes, the Company believes we will be able to finance our near term needs for working capital over the next twelve months, as well as any planned capital expenditures during such period, with cash balances, cash flows from operations, and loans and extensions of credit under our credit facilities and on margin against our marketable securities.

Should the impact of inflation-driven cost increases last longer than anticipated, and/or our cash flow from operations decline more than expected, we may need to obtain additional financing.

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truckload services, brokerage services, intermodal services, dedicated services and value-added services.

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 thirty-nine weeks ended September 28, 2024 and September 30, 2023, presented as a percentage of total operating revenues:

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 provided to specific 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 ended March 29, 2025 and March 30, 2024, presented as a percentage of total operating revenues:

Thirteen Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Operating revenues:

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Results of Operations

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:

The following table sets forth items derived from our consolidated statements of income for the thirteen weeks ended March 29, 2025 and March 30, 2024:

Thirteen Weeks Ended

September 28,

September 30,

Percent Change in Dollar Amount

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Depreciation and amortization

Impairment expense

Total operating expenses

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Income tax expense

Thirteen Weeks Ended March 29, 2025 Compared to Thirteen Weeks Ended March 30, 2024

Operating revenues .

The overall increase in operating revenues was primarily due to an increase in our contract logistics segment revenues.

This increase was partially offset by decreases in our transactional transportation-related services.

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

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.

The overall decrease in revenue was attributable to decreases in both our transportation and our logistics operations.

Operating revenues in the first quarter 2025 included $56.4 million attributable to our recent acquisition of Parsec.

First quarter 2024 revenues included $95.3 million attributable to our specialty development project in Stanton, TN, which was completed last year, and $29.4 million of revenue attributable to our now closed company-managed brokerage operation.

First quarter 2025 operating revenues included separately-identified fuel surcharges of $20.9 million compared to $24.7 million in the first quarter 2024.

Also included in operating revenues were other accessorial charges such as detention, demurrage and storage, which totaled $8.8 million during the first quarter 2025 compared to $8.5 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 third quarter 2024, transactional transportation-related service revenues decreased 14.8% compared to the prior year.

In the first quarter 2025, transactional transportation-related service revenues decreased 29.1% 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 third quarter 2024 was due to a decrease in headcount in our intermodal business.

The increase in the first quarter 2025 was due to an increase in headcount in our contract logistics business due to the acquisition of Parsec.

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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Operating supplies and expenses include items such as fuel, maintenance, cost of materials, communications, utilities and other operating expenses, and generally relate to fluctuations in customer demand.

The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project.

The main elements driving the decrease were expenses incurred in the prior year in connection with the contract logistics specialty development project, which was completed in 2024.

Commission expense .

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General and administrative .

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 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.

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 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 decreased by $0.6 million in third quarter 2024.

Income tax expense .

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.

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

(Dollars in millions)

Operating revenues

Operating expenses:

Purchased transportation and equipment rent

Direct personnel and related benefits

Operating supplies and expenses

Commission expense

Occupancy expense

General and administrative

Insurance and claims

Depreciation and amortization

Impairment expense

Total operating expenses

Income from operations

Interest income (expense), net

Other non-operating income

Income before income taxes

Income tax expense

Operating revenues .

The overall increase in operating revenues was primarily due to an increase in our contract logistics segment revenues.

This increase was partially offset by decreases in our transactional transportation-related services.

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

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 .

Purchased transportation and equipment rent generally increases or decreases in proportion to the revenues generated through owner-operators and other third party providers.

These fluctuations are generally correlated with changes in demand for transactional transportation-related services.

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

Operating supplies and expenses .

The main element driving the change was an increase in the expenses incurred in connection with the recently awarded contract logistics specialty development project.

Commission expense .

Commission expense decreased due to decreased brokerage 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.

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.

Insurance and claims .

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

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

Depreciation and amortization .

The increase in depreciation and amortization expense resulted from a $14.1 million increase in depreciation expense and a $0.7 million increase in amortization expense.

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

As of March 29, 2025, our outstanding borrowings were $740.0 million compared to $418.4 million at March 30, 2024.

Other non-operating income .

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.

Other non-operating income for the first quarter 2025 includes a $0.5 million pre-tax holding gain on marketable securities due to changes in fair value recognized in income compared to $1.0 million of pre-tax holding gains in the first quarter 2024.

Income tax expense .

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.

Our effective income tax rate was 25.1% in the first quarter 2025 compared to 25.2% in the first quarter 2024.

The decrease in income tax expense is primarily the result of a decrease in taxable income.

Segment Financial Results

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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 thirty-nine week periods ended September 28, 2024 and September 30, 2023 (in thousands):

The following tables summarize information about our reportable segments for the thirteen weeks ended March 29, 2025 and March 30, 2024 (in thousands):

Operating Revenues

Thirteen Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Contract logistics

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Thirteen Weeks Ended

Thirty-nine Weeks Ended

September 28,

September 30,

September 28,

September 30,

Contract logistics

Total income from operations

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 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 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 thirty-nine weeks ended September 28, 2024 was (7.7)%, compared to 0.9% one year earlier.

Thirteen Weeks Ended March 29, 2025 Compared to Thirteen Weeks Ended March 30, 2024

In the contract logistics segment, which includes our value-added and dedicated services, operating revenues decreased 18.4%.

Operating revenues in the first quarter 2025 included $56.4 million from the recent acquisition of Parsec.

First quarter 2024 revenues included $95.3 million attributable to our specialty development project in Stanton, TN, which was completed last year.

At the end of the first quarter 2025, we managed 87 value-added programs, compared to 71 in the first quarter 2024.

Included in contract logistics segment revenues for the thirteen weeks ended March 29, 2025, were $8.6 million in separately identified fuel surcharges from dedicated transportation services, unchanged from the same period last year.

Income from operations decreased $57.6 million and operating margin, as a percentage of revenue was 9.3% for the first quarter 2025, compared to 26.0% in the first quarter 2024.

Operating revenues in the intermodal segment decreased 9.8% primarily due to a decrease in the number of loads hauled and in the average operating revenue per load, excluding fuel surcharges.

Included in intermodal segment revenues for the first quarter 2025 were $8.2 million in separately identified fuel surcharges, compared to $10.7 million in the same period last year.

Intermodal segment revenues also include other accessorial charges such as detention, demurrage and storage, which totaled $8.8 million during the first quarter 2025 compared to $8.5 million in the first quarter 2024.

Load volumes declined 3.4%, while the average operating revenue per load, excluding fuel surcharges, decreased 8.7% on a year-over-year basis.

As a percentage of revenue, operating margin in the intermodal segment for the first quarter 2025 was (15.1)%, compared to (10.6)% one year earlier.

In the trucking segment, operating revenues decreased 20.2% 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.

This decrease was partially offset by an increase in the average operating revenue per load, excluding fuel surcharges.

First quarter 2025 trucking segment revenues included $18.0 million of brokerage services compared to $28.6 million during the same period last year.

Also included in our trucking segment revenues were $3.5 million in separately identified fuel surcharges during the first quarter 2025 compared to $5.4 million in fuel surcharges in the first quarter 2024.

On a year-over-year basis, load volumes declined 31.3%;

however, the average operating revenue per load, excluding fuel surcharges, increased 24.3%, supported by our specialty, heavy-haul wind business.

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.

As a percentage of revenue, operating margin in the trucking segment for the thirteen weeks ended March 29, 2025, was 3.9% compared to 5.3% for the thirteen weeks ended March 30, 2024.

Liquidity and Capital Resources

Our primary sources of liquidity are funds generated by operations, loans and extensions of credit under our credit facilities, on margin against our marketable securities and from installment notes, and proceeds from the sales of marketable securities.

We use secured asset lending to fund a substantial portion of purchases of tractors, trailers and material handling equipment.

We employ a flexible operating strategy which we believe lowers our capital expenditure requirements.

In general, our facilities used in our value-added services are leased on terms that are either substantially matched to our customer’s contracts, are month-to-month or are provided to us by our customers.

We also utilize owner-operators and third-party carriers to provide a significant portion of our transportation and specialized services.

A significant portion of the tractors and trailers used in our business are provided by our owner-operators.

In addition, our use of agents reduces our overall need for large terminals.

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

Our primary uses of cash are working capital requirements, capital expenditures, dividend payments, share repurchases, and debt service requirements.

Additionally, we may use cash for acquisitions and other investment and financing activities.

Working capital is required principally to ensure we are able to run the business and have sufficient funds to satisfy maturing short-term debt and operational expenses.

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

Historically, our primary source of liquidity has been cash flow from operations.

In addition, we have a $400 million revolving credit facility maturing in September 30, 2027, and we may increase the available capacity by $200 million upon our request.

At March 29, 2025, $74.6 million was available for borrowing.

Our UACL subsidiaries have credit facility maturing in September 30, 2027, which includes a $10 million revolver.

At March 29, 2025, $10.0 million was available for borrowing.

We also finance the purchase of transportation and certain operating equipment with promissory notes.

The notes are secured by liens on the specific equipment and are generally payable in 60 to 72 monthly installments.

We also have a $165.4 million term loan facility that matures in April 2032, and it is secured by first-priority mortgages on specific parcels of owned real estate.

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

We did not have any amounts advanced against the line as of March 29, 2025, and the maximum available borrowings were $6.0 million.

We anticipate that cash generated from operations, together with amounts available under our credit facilities, will be sufficient to meet our requirements for the foreseeable future.

To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that we will obtain these funds through additional borrowings, equity offerings, or a combination of these potential sources of liquidity.

Our ability to fund future operating expenses and capital expenditures, as well as our ability to meet future debt service obligations or refinance our indebtedness, will depend on our future operating performance, which will be affected by general economic, financial, and other factors beyond our control.

In the thirteen weeks ended March 29, 2025, our capital expenditures totaled $52.6 million.

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

Our flexible business model depends somewhat on the customized solutions we implement for specific customers.

As a result, our capital expenditures will depend on specific new contracts and the overall age and condition of our owned transportation equipment.

Through the remainder of 2025, we expect our capital expenditures to be in the range of $100 million to $135 million.

We expect to make these capital expenditures for the acquisition of transportation equipment, to support new and existing value-added service operations, to expand our owned terminal network, and for improvements to our existing terminal yard and container facilities.

We have a cash dividend policy that anticipates a regular dividend of $0.42 per share of common stock, payable in quarterly increments of $0.105 per share of common stock.

After considering the regular quarterly dividends made during the year, the Board of Directors also evaluates the potential declaration of an annual special dividend payable in the first quarter of each year.

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

The availability of financing or equity capital will depend upon our financial condition and results of operations as well as prevailing market conditions.

If such additional borrowing, lease financing, or equity capital is not available at the time we need it, then we may need to borrow more under the Revolving Credit Facility (if not then fully drawn), extend the maturity of then-outstanding debt, or rely on alternative financing arrangements.

There can be no assurance that we will be able to obtain additional debt under our existing financial arrangements to satisfy our ongoing capital requirements.

However, we believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

We also continually evaluate business development opportunities, including potential acquisitions that fit our strategic plans.

There can be no assurance that we will identify any opportunities that fit our strategic plans or will be able to execute any such opportunities on terms acceptable to us.

Depending on prospective consideration to be paid for an acquisition, any such opportunities would be financed first from available cash and cash equivalents and availability of borrowings under our credit facilities.

Revolving Credit, Promissory Notes and Term Loan Agreements

Our Revolving Credit Facility provides for a $400 million revolver at a variable rate of interest based on index-adjusted SOFR or a base rate and matures on September 30, 2027.

The Revolving Credit Facility, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions.

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

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.

The UACL Credit Agreement, which is secured by cash, deposits, accounts receivable, and selected other assets of the applicable borrowers, includes customary affirmative and negative covenants and events of default, as well as financial covenants requiring minimum fixed charge coverage and leverage ratios, and customary mandatory prepayments provisions.

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

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.

The notes are secured by liens on specific titled vehicles, are generally payable in 60 monthly installments and bear interest at fixed rates ranging from 2.25% to 7.31%.

Certain wholly owned subsidiaries entered into a $165.4 million term loan facility to repay outstanding balances under a then-existing term loan and certain other real estate notes.

The facility matures on April 29, 2032 and is secured by first-priority mortgages on specific parcels of real estate owned by the Company, including all land and real property improvements, and first-priority assignments of rents and related leases of the loan parties.

The facility includes customary affirmative and negative covenants, and principal and interest is payable on the facility on a monthly basis, based on an annual amortization of 10%.

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

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.

It bears interest at Term SOFR plus 1.10%.

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 September 28, 2024, and the maximum available borrowings were $5.9 million.

The following table presents our cash and cash equivalents, marketable securities, and outstanding debt and the present value of our operating lease liabilities as of March 29, 2025 and December 31, 2024 (in thousands):

Cash and cash equivalents

Marketable securities

Outstanding debt

Present value of operating lease liabilities

At March 29, 2025, we were in compliance with all financial covenants under our credit agreements and the agreements governing our promissory notes.

For additional information on our financing arrangements, see Item 1, Note 6 to the Unaudited Consolidated Financial Statements

Discussion of Cash Flows

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 $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.

The primary drivers behind the increase in working capital were principal reductions in operating lease liabilities during the period, increases in contract assets, trade and other receivables, and decreases in other long-term liabilities and income taxes payable.

These were partially offset increases in trade accounts payable, accrued expenses and other current liabilities, and accruals for insurance and claims.

Affiliate transactions decreased net cash provided by operating activities by $2.8 million.

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 $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.

At March 29, 2025, we had cash and cash equivalents of $20.6 million compared to $19.4 million at December 31, 2024.

Operating activities provided $84.3 million in net cash while we used $51.5 million in investing activities and an additional $25.4 million in financing activities.

The $84.3 million in net cash provided by operations was primarily attributed to $6.0 million of net income, which reflects non-cash depreciation and amortization, noncash lease expense, gains on marketable equity securities, losses on equipment sales, amortization of debt issuance costs, stock-based compensation, provisions for credit losses, and a change in deferred income taxes totaling $40.9 million, net.

Net cash provided by operating activities also reflects an aggregate decrease in net working capital totaling $37.4 million.

The primary drivers behind the decrease in working capital were decreases in trade accounts receivable and contract assets, and increases in trade accounts payable, accruals for insurance and claims, and in income taxes payable.

These were partially offset by principal reductions in operating lease liabilities during the period, increases in prepaid expenses and other receivables and decreases in accrued expenses and other current liabilities and in other long-term liabilities.

Affiliate transactions increased net cash provided by operating activities by $1.2 million.

The increase in net cash resulted from an increase in accounts payable to affiliates of $0.9 million and a decrease in accounts receivable from affiliates of $0.3 million.

The $51.5 million in net cash used in investing activities consisted of $52.6 million in capital expenditures, which was partially offset by $0.9 million in proceeds from the sale of equipment and $0.1 million in proceeds from the sale of marketable securities.

Financing activities used $25.4 million in net cash during the thirteen weeks ended March 29, 2025.

We had outstanding borrowings totaling $740.0 million at March 29, 2025 compared to $762.6 million at December 31, 2024.

During the period, we made payments on term loan and equipment and real estate notes totaling $42.4 million, borrowed $5.3 million for new equipment and had net borrowings on our revolving lines of credit totaling $14.5 million.

During the period, we also paid cash dividends of $8.3 million and purchased $0.1 million of treasury stock.

During the period, we also paid cash dividends of $2.8 million.

Off Balance Sheet Arrangements

As of March 29, 2025, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies

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, 2024.

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

There have been no changes in our accounting policies during the thirteen weeks ended March 29, 2025.

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 September 28, 2024.

There have not been any material changes to the Company’s market risk during the thirteen weeks ended March 29, 2025.

For additional information, please see the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

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