Pamt Corp: Form 10-Q for the period ended Sep 30, 2025

FORWARD-LOOKING INFORMATION

Certain information included in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may relate to expected future financial and operating results, prospects, plans or events, and are thus prospective. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, excess capacity in the trucking industry; surplus inventories; general inflation, recessionary economic cycles and downturns in customers' business cycles; a significant reduction in or termination of the Company's trucking service by a key customer, including as a result of recent or future labor or international trade disruptions; increases or rapid fluctuations in fuel prices, interest rates, fuel taxes, tolls, and license and registration fees; potential economic, business or operational disruptions or uncertainties that may result from any future public health crises; the resale value of the Company's used equipment; the price and availability of new equipment consistent with anticipated acquisitions and replacement plans; increases in compensation for and difficulty in attracting and retaining qualified drivers and owner-operators; increases in insurance premiums and deductible amounts relating to accident, cargo, workers' compensation, health, and other claims; increases in the number or amount of claims for which the Company is self-insured; inability of the Company to continue to secure acceptable financing arrangements; seasonal factors such as harsh weather conditions that increase operating costs; competition from trucking, rail, and intermodal competitors including reductions in rates resulting from competitive bidding; the ability to identify acceptable acquisition candidates, consummate acquisitions, and integrate acquired operations; our ability to develop and implement suitable information technology systems and prevent failures in or breaches of such systems; the impact of pending or future litigation; general risks associated with doing business in Mexico, including, without limitation, exchange rate fluctuations, inflation, import duties, tariffs, quotas, political and economic instability and terrorism; the potential impact of new laws, regulations or policy, including, without limitation, rules regarding the classification of independent contractors as employees, tariffs, import/export, trade and immigration regulations or policies; and other factors, including risk factors, included from time to time in filings made by the Company with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update or revise forward-looking statements, whether due to new information, future events or otherwise. Considering these risks and uncertainties, the forward-looking events and circumstances discussed above and in company filings might not transpire.

CRITICAL ACCOUNTING ESTIMATES

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Form 10-K for the fiscal year ended December 31, 2024.

BUSINESS OVERVIEW

The Company is a holding company that owns subsidiaries engaged in providing truckload dry van carrier services transporting general commodities throughout the continental United States, as well as in certain Canadian provinces. The Company’s consolidated operating subsidiaries also provide transportation services in Mexico through its gateways in Laredo and El Paso, Texas under agreements with Mexican carriers. Unless the context otherwise requires, this report presents information regarding the Company and its subsidiaries on a consolidated basis. The Company’s administrative headquarters are in Tontitown, Arkansas. From this location we manage operations conducted through our wholly owned subsidiaries based in various locations around the United States and in Mexico and Canada.

The operations of these subsidiaries can generally be classified into either truckload services or brokerage and logistics services. This designation is based primarily on the ownership of the asset that performed the freight transportation service. Truckload services are performed by Company divisions that generally utilize Company-owned trucks, long-term contractors, or single-trip contractors to transport loads of freight for customers, while brokerage and logistics services coordinate or facilitate the transport of loads of freight for customers and generally involve the utilization of single-trip contractors.

The operations of the Company and its subsidiaries are all in the motor carrier segment and are aggregated into a single reporting segment in accordance with the aggregation criteria under Generally Accepted Accounting Principles (“GAAP”). The Company has carefully considered the segment reporting requirements under Accounting Standards Codification (“ASC”) 280 and has determined that both our truckload operations and our brokerage/logistics operations have similar qualitative and quantitative economic characteristics and are impacted by virtually the same economic factors, such as rates per mile, equipment utilization and the percentage of non-compensated miles. Based on the Company’s segment identification, interpretation of the aggregation criteria outlined in ASC 280-10-50-11, and the similar qualitative and quantitative economic characteristics of the Company’s operating segments, the operations of the Company is aggregated into a single motor carrier segment. The Company’s chief operating decision maker, the Chief Executive Officer, utilizes the metrics of net income and operating ratio to evaluate company performance and in competitive analysis when comparing to competing companies.

Truckload services revenues, excluding fuel surcharges, represented 68.6% and 68.8% of total revenues, excluding fuel surcharges, for the quarters ended September 30, 2025, and 2024, respectively. The remaining operating revenues, before fuel surcharges, for the same periods were generated from brokerage and logistics services, representing 31.4% and 31.2%, respectively.

The main factors that impact our profitability on the expense side are the costs incurred in transporting freight for our customers. Currently, our most challenging costs include capital equipment, wage and benefits costs, driver recruitment, training, independent broker costs (which we record as purchased transportation), maintenance, fuel and insurance costs.

In discussing our results of operations, we use revenue, before fuel surcharge (and fuel expense, net of fuel surcharge), because management believes that eliminating the impact of this sometimes volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period. During the three months ended September 30, 2025 and 2024, approximately $17.3 million and $21.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges. During the nine months ended September 30, 2025 and 2024, approximately $53.3 million and $66.1 million, respectively, of the Company’s total revenue was generated from fuel surcharges. We may also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes. We do this because we believe the variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes.

RESULTS OF OPERATIONS – TRUCKLOAD SERVICES

The following table sets forth, for truckload services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Fuel costs are reported net of fuel surcharges.

THREE MONTHS ENDED SEPTEMBER 30, 2025 VS. THREE MONTHS ENDED SEPTEMBER 30, 2024

During the third quarter of 2025, truckload services revenue, before fuel surcharges, decreased 17.6% to $91.2 million as compared to $110.6 million during the third quarter of 2024. The decrease relates primarily to a 10.7% decrease in total miles travelled from 46.5 million for the third quarter of 2024 to 41.5 million for the third quarter of 2025 and to a 2.4% decrease in our rate per mile, from $2.10 for the third quarter of 2024 to $2.06 for the third quarter of 2025. The reduction in total miles was primarily driven by a 10.0% reduction in the average number of trucks operated while the average miles driven by each truck for the third quarter of 2025 compared to the third quarter of 2024 remained relatively flat. The reduction in truck count and miles is a result of the ongoing freight recession, characterized by an oversupply of available trucks in the market compared to available freight.

Salaries, wages and benefits increased from 38.2% of revenues, before fuel surcharges, in the third quarter of 2024 to 40.9% of revenues, before fuel surcharges, during the third quarter of 2025. The percentage-based increase relates primarily to the interaction of a decrease in operating revenues with the fixed-cost nature of employing human capital.

Operating supplies and expenses increased from 11.7% of revenues, before fuel surcharges, during the third quarter of 2024 to 12.6% of revenues, before fuel surcharges, during the third quarter of 2025. The increase relates primarily to the interaction of expenses with fixed-cost characteristics, such as rents, driver training schools and operating taxes and licenses with a decrease in revenue.

Rent and purchased transportation decreased slightly to 26.2% of revenues, before fuel surcharges for the quarter ended September 30, 2025, from 26.7% of revenues, before fuel surcharges during the third quarter of 2024. The decrease was primarily attributable to reduced use of third-party carriers within the Truckload division, as the Company hauled a higher proportion of freight with Company equipment and contracted owner-operators.

Depreciation increased from 15.8% of revenues, before fuel surcharges, during the third quarter of 2024 to 21.3% of revenues, before fuel surcharges, during the third quarter of 2025. The increase is primarily attributed to management’s change in accounting estimates related to the salvage values and useful lives of revenue equipment during the quarter ended December 31, 2024. During the fourth quarter of 2024, the Company conducted a review of its revenue equipment and determined that changes in market conditions and expected asset usage warranted a revision to the estimated useful lives and salvage values of certain equipment. As a result, during the year ended December 31, 2024, the Company reduced the estimated useful lives of its trailer equipment and lowered the estimated salvage values of revenue equipment to better reflect their expected residual values at the end of their service periods. This change in accounting estimates shortened the depreciable life and increased the depreciable base for a significant portion of the company’s revenue equipment, thus increasing future monthly depreciation expense for the affected assets. In addition to the effect from the Company’s previous change in accounting estimate, the year-over-year increase can also be attributed to the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

Gain on disposition of equipment increased from 0.2% of revenues, before fuel surcharges, during the third quarter of 2024 to 4.4% of revenues, before fuel surcharges, during the third quarter of 2025. The increase was primarily due to the disposition of revenue equipment effected by management’s change in accounting estimates related to the salvage value and useful lives of revenue equipment during the year ended December 31, 2024. The reduced estimated salvage values had a direct impact on gains recognized when disposing revenue equipment during the nine months ended September 30, 2025.

Non-operating income decreased from 3.3% of revenues, before fuel surcharges, during the third quarter of 2024 to 2.8% of revenues, before fuel surcharges, during the third quarter of 2025. The decrease was primarily attributable to smaller unrealized gains reflecting slower market appreciation in the value of the Company’s marketable equity securities, partially offset by higher realized gains from sales of marketable equity securities during the third quarter of 2025 compared to the same period in 2024.

Interest expense increased from 2.5% of revenues, before fuel surcharges, during the third quarter of 2024 to 4.8% of revenues, before fuel surcharges, during the third quarter of 2025. The increase is attributed to the Company’s increased long-term debt from $288.7 million at September 30, 2024 to $342.4 million at September 30, 2025, coupled with an increase in interest rates as the Company’s weighted average interest rate increased from 4.73% in 2024 to 5.19% in 2025.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 100.5% for the third quarter of 2024 to 106.7% for the third quarter of 2025.

NINE MONTHS ENDED SEPTEMBER 30, 2025 VS. NINE MONTHS ENDED SEPTEMBER 30, 2024

For the nine months ended September 30, 2025, truckload services revenue, before fuel surcharges, decreased 13.4% to $276.4 million as compared to $319.4 million for the nine months ended September 30, 2024. The decrease relates primarily to an 11.8% decrease in total miles travelled from 139.5 million during the first nine months of 2024 to 123.1 million for the first nine months of 2025 and to a 2.6% decrease in our rate per mile, from $2.10 for the first nine months of 2024 to $2.05 for the first nine months of 2025. The reduction in total miles was primarily driven by an 8.1% reduction in the average number of trucks operated while the average miles driven by each truck remained relatively flat when comparing the nine months ending September 30, 2025 to the nine months ending September 30, 2024. The reduction in truck count and miles is a result of the ongoing freight recession, characterized by an oversupply of available trucks in the market compared to available freight.

Salaries, wages and benefits increased from 39.0% of revenues, before fuel surcharges, in the first nine months of 2024 to 41.3% of revenues, before fuel surcharges, during the first nine months of 2025. The percentage-based increase relates primarily to the interaction of a decrease in operating revenues with the fixed-cost nature of employing human capital.

Operating supplies and expenses increased from 11.9% of revenues, before fuel surcharges, in the first nine months of 2024 to 12.8% of revenues, before fuel surcharges, during the first nine months of 2025. The increase relates primarily to the interaction of expenses with fixed-cost characteristics, such as rents, driver training schools and operating taxes and licenses with a decrease in revenue.

Rent and purchased transportation increased from 25.3% of revenues, before fuel surcharges, in the first nine months of 2024 to 27.4% of revenues, before fuel surcharges, during the first nine months of 2025. The increase was primarily due to a year-over-year increase in the percentage of miles driven by third-party owner-operators as opposed to company-employed drivers.

Depreciation increased from 17.1% of revenues, before fuel surcharges, during the first nine months of 2024 to 22.7% of revenues, before fuel surcharges, during the first nine months of 2025. The increase is primarily attributed to management’s change in accounting estimates related to the salvage values and useful lives of revenue equipment during the year ended December 31, 2024. In addition to the effect from the Company’s previous change in accounting estimate, the year-over-year increase can also be attributed to the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

Gain on disposition of equipment increased from 0.0% of revenues, before fuel surcharges, during the first nine months of 2024 to 4.1% of revenues, before fuel surcharges, during the first nine months of 2025. The increase was primarily due to the disposition of revenue equipment effected by management’s change in accounting estimates related to the salvage value and useful lives of revenue equipment during the year ended December 31, 2024. The reduced estimated salvage values had a direct impact on gains recognized when disposing revenue equipment during the nine months ended September 30, 2025.

Non-operating income increased from 2.3% of revenues, before fuel surcharges, during the first nine months of 2024 to 2.6% of revenues, before fuel surcharges, during the first nine months of 2025. Although gains on marketable equity securities were relatively consistent year over year, the increase in non-operating income as a percentage of revenue reflects lower operating revenues in 2025 compared to the prior-year period.

Interest expense increased from 2.6% of revenues, before fuel surcharges, during the first nine months of 2024 to 4.4% of revenues, before fuel surcharges, during the first nine months of 2025. The increase is attributed to the Company’s increased long-term debt from $288.7 million at September 30, 2024 to $342.4 million at September 30, 2025, coupled with an increase in interest rates as the Company’s weighted average interest rate increased from 4.73% in 2024 to 5.19% in 2025.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 102.8% for the first nine months of 2024 to 110.0% for the first nine months of 2025.

RESULTS OF OPERATIONS – LOGISTICS AND BROKERAGE SERVICES

The following table sets forth, for logistics and brokerage services, the percentage relationship of expense items to operating revenues, before fuel surcharges, for the periods indicated. Brokerage service operations occur specifically in certain divisions; however, brokerage operations occur throughout the Company in similar operations having substantially similar economic characteristics.

THREE MONTHS ENDED SEPTEMBER 30, 2025 VS. THREE MONTHS ENDED SEPTEMBER 30, 2024

During the third quarter of 2025, logistics and brokerage services revenue, before fuel surcharges, decreased 16.8% to $41.8 million as compared to $50.2 million during the third quarter of 2024. The decrease was primarily related to a 28.8% decrease in the number of brokered loads during the third quarter 2025 as compared to 2024.

Rents and purchased transportation increased from 86.8% of revenues, before fuel surcharges, during the third quarter of 2024 to 90.2% of revenues, before fuel surcharges, during the third quarter of 2025. The increase results from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 94.3% for the third quarter of 2024 to 99.1% for the third quarter of 2025.

NINE MONTHS ENDED SEPTEMBER 30, 2025 VS. NINE MONTHS ENDED SEPTEMBER 30, 2024

During the first nine months of 2025, logistics and brokerage services revenue, before fuel surcharges, decreased 21.9% to $127.0 million as compared to $162.6 million during the first nine months of 2024. The decrease was primarily related to a 29.8% decrease in the number of brokered loads during the first nine months of 2025 as compared to the first nine months of 2024.

Rents and purchased transportation increased from 86.4% of revenues, before fuel surcharges, during the first nine months of 2024 to 89.4% of revenues, before fuel surcharges, during the first nine months of 2025. The increase results from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 94.0% for the first nine months of 2024 to 98.6% for the first nine months of 2025.

RESULTS OF OPERATIONS – COMBINED SERVICES

THREE MONTHS ENDED SEPTEMBER 30, 2025 VS. THREE MONTHS ENDED SEPTEMBER 30, 2024

Net loss for all divisions was approximately $5.6 million, or 4.2% in excess of revenues, before fuel surcharges, for the third quarter of 2025 as compared to net income of $2.4 million, or 1.5% of revenues, before fuel surcharges, for the third quarter of 2024. The decrease in net income resulted in diluted loss per share of $0.27 for the third quarter of 2025 as compared to diluted earnings per share of $0.11 for the third quarter of 2024.

NINE MONTHS ENDED SEPTEMBER 30, 2025 VS. NINE MONTHS ENDED SEPTEMBER 30, 2024

For the first nine months of 2025, net loss for all divisions was approximately $23.4 million, or 5.8% in excess of revenues, before fuel surcharges as compared to net loss of $0.2 million, or 0.1% in excess of revenues, before fuel surcharges for the first nine months of 2024. The decrease in net income resulted in a diluted loss per share of $1.10 for the first nine months of 2025 as compared to diluted loss per share of $0.01 for the first nine months of 2024.

LIQUIDITY AND CAPITAL RESOURCES

Our business has required, and will continue to require, a significant investment in new revenue equipment. Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, borrowings under our lines of credit, installment notes, investment margin account, and issuances of equity securities.

During the first nine months of 2025, we generated $23.1 million in cash from operating activities. Investing activities generated $21.9 million in cash in the first nine months of 2025. Financing activities used $44.4 million in cash in the first nine months of 2025.

Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes with fixed interest rates and terms ranging from 36 to 84 months, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt. During the first nine months of 2025, we utilized cash on hand and long-term debt to finance purchases of revenue equipment and other assets of approximately $21.6 million. In addition, we acquired approximately $46.3 million of revenue equipment through vendor-direct financing arrangements. These non-cash financing arrangements provide an additional source of liquidity for acquiring new equipment but do not result in cash inflows or outflows and, accordingly, are not reflected in the consolidated statement of cash flows.

During the remainder of 2025, we expect to purchase approximately 94 new trucks and 650 new trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $33.0 million.

On April 3, 2025, we commenced a tender offer to repurchase up to 435,000 shares of our outstanding common stock at a price of not greater than $17.00 nor less than $14.00 per share. On April 11, 2025, we amended the terms of the tender offer to increase the minimum purchase price for shares purchased in the tender offer to $14.50 per share. Following the expiration of the tender offer on May 1, 2025, we accepted 870,000 shares of our common stock for purchase at $17.00 per share, at an aggregate purchase price of approximately $14.8 million, excluding fees and expenses related to the offer. The number of shares we purchased reflects our right to purchase additional shares in the tender offer up to an additional 2% of our outstanding shares. We funded the purchase of the accepted shares tendered with available cash.

We currently intend to retain our future earnings to finance our growth and do not anticipate paying cash dividends in the foreseeable future.

During the first nine months of 2025, we maintained a revolving line of credit with a borrowing limit of $60.0 million. Under this credit facility, amounts outstanding bear interest at Term SOFR plus 3.35% (7.70% at September 30, 2025), are secured by our trade accounts receivable, and mature on July 1, 2027. The credit facility also establishes an “unused fee” of 0.25% if average borrowings are less than $18.0 million. At September 30, 2025, we had no outstanding borrowings under the line of credit and approximately $0.2 million of outstanding letters of credit, with availability to borrow $59.8 million.

Prepaid expenses and deposits decreased from $11.6 million at December 31, 2024 to $8.0 million at September 30, 2025. The decrease relates to the normal amortization of items prepaid as of December 31, 2024.

Our marketable equity securities portfolio grew $4.2 million during the first nine months of 2025 from $42.6 million at December 31, 2024 to $46.8 million at September 30, 2025. The increase was driven entirely by unrealized gains due to favorable market value changes in the underlying equity holdings.

Revenue equipment decreased from $733.2 million at December 31, 2024 to $681.7 million at September 30, 2025. The decrease is primarily due to the disposition of aging trucks and trailers during the first nine months of 2025, partially offset by purchases of new trucks and trailers during the first nine months of 2025.

During the first nine months of 2025, the Company’s current income tax position remained a net refundable asset of $2.5 million at September 30, 2025 compared a net refundable asset of $2.3 million at December 31, 2024. The refundable current tax asset is a product of significant temporary differences recognized in the current year, most notably those related to accelerated depreciation.

The Company’s deferred income tax liability decreased from $92.5 million at December 31, 2024 to $84.0 million at September 30, 2025. In July 2025, the federal government enacted new tax legislation, the One Big Beautiful Bill Act (the “OBBBA”), applicable to tax years beginning after December 31, 2024. While the enactment of the OBBBA restored 100% bonus depreciation for qualifying capital assets and reinstated the EBITDA-based limitation on interest deductibility under Section 163(j)—both of which increased temporary differences and, all else equal, would have increased deferred tax liabilities—the overall decrease reflects the offsetting effect of net operating losses generated in the period. As a result, the deferred tax liability decreased despite these legislative changes.

The OBBBA’s restoration of 100% bonus depreciation for qualifying capital assets acquired and placed in service after January 19, 2025 is expected to increase near-term deductions for fleet and facility investments and may reduce cash tax obligations in future periods. The reinstatements of the EBITDA-based limitation on the deductibility of business interest under Section 163(j), replacing the prior EBIT-based calculation is expected to enhance the Company’s ability to deduct interest expense and reduce future cash tax liabilities. The Company continues to evaluate the impact of this legislation on its deferred and current tax positions, including potential effects on future periods.

Accounts payable and accrued expenses remained relatively flat over the quarter, with balances of $33.1 million and $15.7 million, respectively at September 30, 2025 compared to $31.2 million and $14.6 million, respectively, at December 31, 2024.

Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis, as the classification of amounts in each category are typically affected merely by the passage of time. Long-term debt and current maturities of long-term debt, on an aggregate basis, increased from $325.6 million at December 31, 2024 to $342.4 million at September 30, 2025. The increase was attributed entirely to the financing of additional revenue equipment during the first nine months of 2025.

NEW ACCOUNTING PRONOUNCEMENTS

See Note B to the condensed consolidated financial statements for a description of the most recent accounting pronouncements and their impact, if any, on the Company.

Our primary market risk exposures include equity price risk, interest rate risk, commodity price risk (the price paid to obtain diesel fuel for our trucks), and foreign currency exchange rate risk. The potential adverse impact of these risks is discussed below. While the Company has used derivative financial instruments in the past to manage its interest rate and commodity price risks, the Company does not currently enter into such instruments for risk management purposes or for speculation or trading.

The following sensitivity analyses do not consider the effects that an adverse change may have on the overall economy, nor do they consider additional actions we may take to mitigate our exposure to such changes. The actual results of changes in prices or rates may differ materially from the hypothetical results described below.

Equity Price Risk

We hold certain actively traded marketable equity securities, which subjects the Company to fluctuations in the fair market value of its investment portfolio based on the current market price of such securities. The recorded value of marketable equity securities increased to $46.8 million at September 30, 2025 from $42.6 million at December 31, 2024. A 10% decrease in the market price of our marketable equity securities would cause a corresponding 10% decrease in the carrying amounts of these securities, or approximately $4.7 million. For additional information with respect to the marketable equity securities, see Note D to our condensed consolidated financial statements.

Interest Rate Risk

Our line of credit bears interest at a floating rate equal to SOFR plus a fixed percentage. Accordingly, changes in SOFR, which are affected by changes in interest rates, or a change to a new index rate, will affect the interest rate on, and therefore our costs under the line of credit. Assuming $12.0 million of variable rate debt was outstanding under our line of credit for a full fiscal year, a hypothetical 100 basis point increase in SOFR would result in approximately $120,000 of additional interest expense.

Commodity Price Risk

Prices and availability of all petroleum products are subject to political, economic, and market factors that are generally outside of our control. Accordingly, the price and availability of diesel fuel, as well as other petroleum products, can be unpredictable. Because our operations are dependent upon diesel fuel, significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our 2024 fuel consumption, a 10% increase in the average annual price per gallon of diesel fuel would increase our annual fuel expenses by $6.4 million.

Foreign Currency Exchange Rate Risk

We are exposed to foreign currency exchange rate risk related to the activities of our branch office located in Mexico. Currently, we do not hedge our exchange rate exposure through any currency forward contracts, currency options, or currency swaps as all of our revenues, and substantially all of our expenses and capital expenditures, are transacted in U.S. dollars. However, certain operating expenditures and capital purchases related to our Mexico branch office are incurred in or exposed to fluctuations in the exchange rate between the U.S. dollar and the Mexican peso. Based on 2024 expenditures denominated in pesos, a 10% increase in the exchange rate would increase our annual operating expenses by $0.9 million.

Evaluation of disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting. We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Except as set forth below, there have been no material changes to the Company’s risk factors as previously disclosed in Item 1A to Part I of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.

The imposition of tariffs on Mexico, Canada and other countries, and any retaliatory actions by such countries, may have a negative impact on our operations and profitability.

The United States has recently initiated implementation of significant new tariffs on imports from Canada, Mexico, China and other countries, and a number of these countries have announced or initiated retaliatory tariffs on exports from the United States. While certain tariffs have been suspended and/or modified on more than one occasion, the outlook remains uncertain as to what tariffs may ultimately be implemented and for how long they may be in effect. Additionally, it is uncertain the extent to which resulting retaliatory tariffs on U.S. exports may ultimately be imposed by other countries and for how long they may be in effect. There is the potential that any tariffs that have been or may be implemented could adversely affect our business operations and financial results. In particular, the imposition and enforcement of tariffs on goods imported from Mexico or Canada, or vice versa, could adversely affect our business operations and financial results because of our business in those countries. A significant portion of our business is dependent on the automotive manufacturing industry and its suppliers, which have substantial operations in Mexico and Canada. Any increases in current tariffs or the implementation of new tariffs could lead to higher costs and reduced availability and consumer demand for automotive and other products sold by our customers that are imported or exported to or from the United States. This, in turn, may result in reduced demand for our transportation services, particularly our cross-border and Mexico freight business, as customers seek to mitigate increased expenses by reducing production, sourcing components from alternative locations, or modifying their supply chain strategies. This could reduce the volume of goods transported by us, thereby affecting our operational efficiency and financial performance. In addition to the direct impact on our customers, the broader economic implications of tariffs could lead to further fluctuations in cross-border or general freight volumes and affect our operations and our ability to maintain consistent service levels. Any such disruptions could necessitate adjustments in our operational strategies, increase our costs and negatively impact our revenue and profitability.