See Notes to Condensed Consolidated Financial Statements.

See Notes to Condensed Consolidated Financial Statements.

See Notes to Condensed Consolidated Financial Statements.

See Notes to Condensed Consolidated Financial Statements.

J.B. HUNT TRANSPORT SERVICES, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should refer to the attached interim Condensed Consolidated Financial Statements and related notes and also to our Annual Report (Form 10-K) for the year ended December 31, 2023, as you read the following discussion. We may make statements in this report that reflect our current expectation regarding future results of operations, performance, and achievements. These are “forward-looking” statements as defined in the Private Securities Litigation Reform Act of 1995 and are based on our belief or interpretation of information currently available. When we use words like “may,” “plan,” “contemplate,” “anticipate,” “believe,” “intend,” “continue,” “expect,” “project,” “goals,” “strategy,” “future,” “predict,” “seek,” “estimate,” “likely,” “could,” “should,” “would,” and similar expressions, you should consider them as identifying forward-looking statements, although we may use other phrasing. Forward-looking statements are inherently uncertain, subject to risks, and should be viewed with caution. These statements are based on our belief or interpretation of information currently available. Shareholders and prospective investors are cautioned that actual results and future events may differ materially from these forward-looking statements as a result of many factors. Some of the factors and events that are not within our control and that could have a material impact on future operating results include the following: general economic and business conditions; competition and competitive rate fluctuations; excess capacity in the intermodal or trucking industries; a loss of one or more major customers; cost and availability of diesel fuel; interference with or termination of our relationships with certain railroads; rail service delays; disruptions to U.S. port-of-call activity; ability to attract and retain qualified drivers, delivery personnel, independent contractors, and third-party carriers; retention of key employees; insurance costs and availability; litigation and claims expense; determination that independent contractors are employees; new or different environmental or other laws and regulations; volatile financial credit markets or interest rates; terrorist attacks or actions; acts of war; adverse weather conditions; potential business or operational disruptions resulting from the effects of a national or international health pandemic; disruption or failure of information systems; inability to keep pace with technological advances affecting our information technology platforms; operational disruption or adverse effects of business acquisitions; increased costs for and availability of new revenue equipment; increased tariffs assessed on or disruptions in the procurement of imported revenue equipment; decreases in the value of used equipment; and the ability of revenue equipment manufacturers to perform in accordance with agreements for guaranteed equipment trade-in values. Additionally, our business is somewhat seasonal with slightly higher freight volumes typically experienced during August through early November in our full-load transportation business. You should also refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2023, for additional information on risk factors and other events that are not within our control. Our future financial and operating results may fluctuate as a result of these and other risk factors or events as described from time to time in our filings with the SEC. We assume no obligation to update any forward-looking statement to the extent we become aware that it will not be achieved for any reason.

GENERAL

We are one of the largest surface transportation, delivery, and logistics companies in North America. We operate five distinct, but complementary, business segments and provide a wide range of reliable transportation, brokerage, and delivery services to a diverse group of customers and consumers throughout the continental United States, Canada, and Mexico. Our service offerings include transportation of full-truckload containerized freight, which we directly transport utilizing our company-controlled revenue equipment and company drivers, independent contractors, or third-party carriers. We have arrangements with most of the major North American rail carriers to transport freight in containers or trailers, while we perform the majority of the pickup and delivery services. We also provide customized freight movement, revenue equipment, labor, systems, and delivery services that are tailored to meet individual customers’ requirements and typically involve long-term contracts. These arrangements are generally referred to as dedicated services and may include multiple pickups and drops, freight handling, specialized equipment, and freight network design. In addition, we provide or arrange for local and home delivery services, generally referred to as last-mile delivery services, to customers through a network of cross-dock and other delivery system locations throughout the continental United States. Utilizing thousands of reliable third-party carriers, we also provide comprehensive freight transportation brokerage and logistics services. In addition to dry-van, full-load operations, we also arrange for these unrelated outside carriers to provide flatbed, refrigerated, less-than-truckload (LTL), and other specialized equipment, drivers, and services. Also, we utilize a combination of company-owned and contracted power units to provide traditional over-the-road full truckload delivery services. Our customers, who include many Fortune 500 companies, have extremely diverse businesses. Many of them are served by J.B. Hunt 360°®, an online platform that offers shippers and carriers greater access, visibility and transparency of the supply chain. We account for our business on a calendar year basis, with our full year ending on December 31 and our quarterly reporting periods ending on March 31, June 30, and September 30. The operation of each of our five business segments is described in Note 10, Business Segments, in our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and in Note 13, Segment Information, of our Annual Report (Form 10-K) for the year ended December 31, 2023.

Critical Accounting Policies and Estimates

The preparation of our financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that impact the amounts reported in our Condensed Consolidated Financial Statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenues, expenses, and associated disclosures of contingent liabilities are affected by these estimates. We evaluate these estimates on an ongoing basis, utilizing historical experience, consultation with experts, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position, or results of operations resulting from revisions to these estimates are recognized in the accounting period in which the facts that give rise to the revision become known.

Information regarding our Critical Accounting Policies and Estimates can be found in our Annual Report (Form 10-K). The critical accounting policies that we believe require us to make more significant judgments and estimates when we prepare our financial statements include those relating to self-insurance accruals, revenue equipment, revenue recognition and income taxes. We have discussed the development and selection of these critical accounting policies and estimates with the Audit Committee of our Board of Directors. In addition, Note 2, Summary of Significant Accounting Policies, to the financial statements in our Annual Report (Form 10-K) for the year ended December 31, 2023, contains a summary of our critical accounting policies. There have been no material changes to the methodology we apply for critical accounting estimates as previously disclosed in our Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Comparison of Three Months Ended September 30, 2024 to Three Months Ended September 30, 2023

Total consolidated operating revenues were $3.07 billion for the third quarter 2024, a 3% decrease from $3.16 billion in the third quarter 2023. This decrease was primarily the result of decreased revenue per load in JBI and JBT, lower volumes in ICS, JBT, and DCS, and a decrease in stops in FMS when compared to the third quarter 2023. These decreases were partially offset by load volume growth in JBI and an increase in ICS revenue per load in the current quarter over the past year. Total consolidated operating revenue, excluding fuel surcharge revenue, decreased less than 1%.

JBI segment reported revenue of $1.56 billion during the third quarter 2024, which was flat compared to third quarter 2023, resulting from a 5% increase in load volume being fully offset by a 5% decrease in revenue per load, which is determined by the combination of customer rates, fuel surcharges, and freight mix. The increase in load volumes was primarily driven by increased customer demand, seasonal activity, and rail network improvements. Transcontinental loads increased 7% and eastern network load volume increased 3% compared to the third quarter 2023. Revenue per load, excluding fuel surcharge revenue, decreased 2% compared to the third quarter 2023. JBI segment operating income decreased 13% to $111.8 million in third quarter 2024 from $128.0 million in 2023. The decrease was primarily due to increased network imbalance and repositioning cost and higher driver wages to meet peak season customer demand as well as increased maintenance and equipment-related costs, higher insurance premium and claims expense, and higher other personnel-related expenses, compared to third quarter 2023. The current quarter ended with approximately 121,500 units of trailing capacity and 6,500 power units assigned to the dray fleet.

DCS segment revenue decreased 5% to $846 million in the third quarter 2024 from $892 million in 2023. Productivity, defined as revenue per truck per week, decreased 3% when compared to the third quarter 2023. Productivity, excluding fuel surcharge revenue, remained flat, primarily due to decreased asset utilization and increased idle equipment, offset by contractual index-based rate increases. On a net basis, revenue-producing trucks in the fleet at the end of the third quarter 2024 decreased by 498 trucks, or 4%, compared to the prior-year period. DCS segment operating income decreased 7% to $95.5 million in the third quarter 2024, from $102.4 million in 2023. The decrease is primarily due to decreased revenue, increased insurance premium and claims expense, and higher new account start-up costs, partially offset by lower maintenance and equipment-related costs, lower bad debt expense, and the maturing of new business onboarded over the past year when compared to the third quarter 2023. Customer retention rates are approximately 87%, primarily due to fleet downsizing and customer account losses.

ICS segment revenue decreased 7% to $278 million in the third quarter 2024, from $298 million in 2023. Overall volumes decreased 10% compared to the third quarter 2023, while revenue per load increased 3%, primarily due to higher contractual and spot rates and changes in customer freight mix. Contractual business represented approximately 62% of total load volume and 61% of total revenue in the third quarter 2024, compared to 68% and 67%, respectively, in 2023. Approximately $92 million of third quarter 2024 ICS revenue was executed through the Marketplace for J.B. Hunt 360, compared to $169 million in the third quarter 2023. ICS segment had an operating loss of $3.3 million in the third quarter 2024, compared to an operating loss of $9.4 million in 2023. The decrease in operating loss was driven primarily by a 31% increase in gross profit, lower cargo claims expense, and lower personnel-related expenses, partially offset by  integration and transition costs related to the purchase of the brokerage assets of BNSF Logistics, LLC (BNSFL). Gross profit margin increased to 17.9% in the third quarter 2024, compared to 12.8% in 2023, reflecting focused bid season yield management, improved capacity procurement, and certain project-related activity. ICS’s carrier base decreased 18% compared to third quarter 2023, primarily due to changes in carrier qualification requirements.

FMS segment revenue decreased 3% to $218 million in the third quarter 2024 from $226 million in 2023, primarily due to general weakness in customer demand, partially offset by the addition of multiple new customer contracts implemented over the past year as well as internal efforts to improve revenue quality across certain accounts. FMS segment operating income decreased to $12.0 million in the third quarter of 2024 compared to $13.0 million in 2023. This decrease was primarily due to decreased revenue, higher purchased transportation costs and higher insurance premiums expense, partially offset by decreased personnel-related expenses compared to the third quarter 2023.

JBT segment revenue decreased 12% to $173 million in the third quarter 2024, from $196 million in 2023. Revenue, excluding fuel surcharge revenue, decreased 9% primarily due to a 6% decrease in load volume and a 3% decrease in revenue per load, excluding fuel surcharge revenue, compared to third quarter 2023. JBT average effective trailer count in third quarter 2024 decreased 2% to 12,588, compared to third quarter 2023. Trailer turns in third quarter 2024 decreased 4% compared to third quarter 2023, due to weakened overall customer demand. At the end of third quarter 2024, the JBT power fleet consisted of 1,989 tractors. JBT segment operating income increased to $8.2 million in 2024, compared with $7.7 million during third quarter 2023. The increase is primarily due to improved network balance, decreased trailing capacity costs, and overall cost management initiatives, partially offset by higher insurance premiums expense.

Consolidated Operating Expenses

The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.

Total operating expenses decreased 2.7%, while operating revenues decreased 3.0% during the third quarter 2024 from the comparable period 2023. Operating income decreased to $224.1 million during the third quarter 2024 from $241.7 million in 2023.

Rents and purchased transportation costs decreased 4.4% in the third quarter 2024. This decrease was primarily the result of a decrease in rail and truck carrier purchased transportation rates within JBI, ICS, and JBT segments and decreased ICS and JBT load volumes, which decreased services provided by third-party rail and truck carriers during the third quarter 2024 compared to 2023.

Salaries, wages and employee benefits costs increased 0.8% during the third quarter 2024, compared with 2023. This increase was primarily due to increased group medical benefit expenses, partially offset by a decrease in non-driver employee headcounts.

Depreciation and amortization expense increased 0.1% in third quarter 2024 compared with 2023, primarily due to the addition of trailing equipment within JBI and additional depreciation and amortization expense resulting from the recent business acquisition, partially offset by the impact of the change in expected useful lives of our container fleet and equipment reductions within DCS. Fuel costs decreased 19.0% in the third quarter 2024, compared with 2023, due primarily to a decrease in the price of fuel and decreased road miles.

Operating supplies and expenses decreased 2.3%, driven primarily by decreased tolls expense, lower towing costs, and decreased other operating supply costs, partially offset by higher equipment maintenance costs. Insurance and claims expenses increased 25.2% in 2024 compared with 2023, primarily due to higher insurance policy premiums expense. General and administrative expenses increased 4.3% for the current quarter from the comparable period in 2023, primarily due to higher building and yard rental expense and increased professional services expense, partially offset by a decrease in net loss from sale or disposal of assets and lower bad debt expense. Net loss from sale or disposal of assets was $0.8 million in 2024, compared to a net loss from sale or disposal of assets of $7.7 million in 2023.

Net interest expense increased 64.9% in 2024 due to an increase in effective interest rates on our debt and an increase in our average debt balance compared to third quarter 2023. In addition, third quarter 2023 interest expense included an interest component of a discrete income tax benefit recognized in the quarter. Income tax expense increased 23.0% in 2024, compared with 2023, primarily due to a higher effective income tax rate in the third quarter 2024 compared with 2023, which included the recording of a discrete benefit, partially offset by lower taxable earnings. Our effective income tax rate was 25.2% for the third quarter of 2024, compared to 18.2% in 2023. Our annual tax rate for 2024 is expected to be approximately 24.5.%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items.  This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Comparison of Nine Months Ended September 30, 2024 to Nine Months Ended September 30, 2023

Total consolidated operating revenues were $8.94 billion for the first nine months of 2024, a 6% decrease from $9.53 billion for the comparable period 2023. Fuel surcharge revenue decreased to $1.16 billion during the first nine months of 2024, compared with $1.39 billion in 2023. Total consolidated operating revenue, excluding fuel surcharge revenue, decreased 5% for the first nine months of 2024 compared to the prior-year period.

JBI segment revenue decreased 5% to $4.36 billion during the first nine months of 2024, compared with $4.58 billion in 2023. Load volume during the first nine months of 2024 increased 1% and revenue per load decreased 6%, compared to a year ago. Revenue per load, excluding fuel surcharge revenue, decreased 5% compared to the first nine months of 2023. JBI segment operating income decreased 29% to $312.9 million in the first nine months of 2024, from $439.5 million in 2023. The decrease is primarily due to decreased revenue and higher driver wages and benefits, increased maintenance and equipment-related costs, and higher insurance premiums expense.

DCS segment revenue decreased 4% to $2.56 billion during the first nine months of 2024, from $2.66 billion in 2023. Productivity, defined as revenue per truck per week, decreased 2% from a year ago. Productivity, excluding fuel surcharge revenue, for the first nine months of 2024 decreased 1% from a year ago. The decrease in productivity was primarily due to decreased utilization of equipment, partially offset by contractual index-based rate increases during the current period. Operating income of our DCS segment decreased to $285.6 million in the first nine months of 2024, from $318.6 million in 2023. The decrease is primarily due to decreased revenue, higher insurance premiums expense, and higher new account start-up costs, partially offset by decreased equipment-related costs, lower personnel costs, decreased loss on equipment sales, and the maturing of new business onboarded over the past year, when compared to the first nine months of 2023.

ICS revenue decreased 19% to $834 million during the first nine months of 2024, from $1.03 billion in 2023. Overall volumes decreased 20%, while revenue per load increased 1% compared to 2023. Approximately $302 million of ICS revenue for the first nine months of 2024 was executed through the Marketplace for J.B. Hunt 360 compared to $644 million in 2023. ICS segment had an operating loss of $34.1 million in the first nine months of 2024 compared to an operating loss of $19.2 million in 2023, primarily due to decreased gross profit and integration and transition costs related to the purchase of the brokerage assets of BNSFL. These items were partially offset by lower salary, wages, and benefits expenses and reduced equipment rental expense during the first nine months of 2024. Gross profit margin increased to 15.7% in the current period compared to 13.1% in 2023, reflecting our focused bid season yield management and improved capacity procurement.

FMS revenue increased 1% to $683 million during the first nine months of 2024, from $675 million in 2023, primarily due to the addition of multiple new customer contracts implemented over the past year, partially offset by internal efforts to improve revenue quality across certain accounts and general weakness in customer demand. FMS segment had operating income of $46.9 million in the first nine months of 2024 compared to $34.4 million in 2023. This increase was primarily due to increased revenue and decreased personnel expenses as well as a $4.2 million net benefit from offsetting claim settlements, partially offset by higher insurance premiums expense compared to the first nine months of 2023.

JBT segment revenue decreased 13% to $519 million for the first nine months of 2024, from $594 million in 2023. Revenue, excluding fuel surcharge revenue, decreased 12%, primarily due to a 5% decrease in revenue per load, excluding fuel surcharge revenue, and a 7% decrease in load volume compared to the first nine months of 2023. Operating income of our JBT segment decreased to $12.9 million in the first nine months of 2024, from $16.5 million in 2023. The decrease in operating income was driven primarily by the decrease in revenue and higher insurance premiums expense, partially offset by overall cost management initiatives.

Consolidated Operating Expenses

The following table sets forth items in our Condensed Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items as compared with the prior period.

Total operating expenses decreased 4.8%, while operating revenues decreased 6.1%, during the first nine months of 2024, from the comparable period of 2023. Operating income decreased to $624.2 million during the first nine months of 2024, from $789.9 million in 2023.

Rents and purchased transportation costs decreased 8.8% in 2024. This decrease was primarily the result of a decrease in rail and truck carrier purchased transportation rates within JBI, ICS, and JBT segments and decreased ICS and JBT load volume, which decreased services provided by third-party rail and truck carriers during the current period.

Salaries, wages and employee benefits costs decreased 1.2% in 2024 from 2023. This decrease was primarily due to a decrease in driver and office employee headcounts, partially offset by an increase in group medical benefit expenses.

Depreciation and amortization expense increased 2.2% in 2024 primarily due to equipment purchases related to the addition of tractors and trailing equipment within JBI and additional depreciation and amortization expense resulting from the recent business acquisition, partially offset by the impact of the change in expected useful lives of our container fleet and equipment reductions within DCS. Fuel costs decreased 11.9% in 2024, compared with 2023, due primarily to a decrease in the price of fuel and decreased road miles.

Operating supplies and expenses decreased 4.4% primarily due to lower equipment maintenance costs, decreased towing expenses, lower tolls expense, decreased other operating supply costs, and lower travel and entertainment expenses. Insurance and claims expense increased 15.5% in 2024 compared with 2023, primarily due to higher insurance policy premium expense, partially offset by decreased cost per claim and lower claim volume in the current period. General and administrative expenses increased 17.0% from the comparable period in 2023, primarily due to an increase in building and yard rental expense, higher professional services expense, increased technology costs, and higher bad debt expense, partially offset by lower advertising costs and lower net losses from sale or disposal of assets. Net loss from sale or disposal of assets was $13.3 million in 2024, compared to a net loss from sale or disposal of assets of $17.2 million in 2023.

Net interest expense increased 34.8% in 2024, due primarily to an increase in effective interest rates on our debt and an increase in our average debt balance. Income tax expense decreased 12.1% during the first nine months of 2024 compared with 2023, primarily due to decreased taxable earnings, partially offset by a higher effective income tax rate in the first nine months of 2024. Our effective income tax rate was 26.8% for the first nine months of 2024, compared to 23.2% in 2023 due to discrete tax items. Our annual tax rate for 2024 is expected to be approximately 24.5.%. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, adjusted for discrete items.  This rate is based on our expected annual income, statutory tax rates, best estimate of nontaxable and nondeductible items of income and expense, and the ultimate outcome of tax audits.

Liquidity and Capital Resources

Cash Flow

Net cash provided by operating activities totaled $1.17 billion during the first nine months of 2024, compared with $1.53 billion for the same period 2023. Operating cash flows decreased primarily due to decreased earnings, partially offset by the timing of general working capital activities. Net cash used in investing activities totaled $477.5 million in 2024, compared with $1.40 billion in 2023. The decrease resulted primarily from a decrease in equipment purchases, net of proceeds from the sale of equipment in the current period. Net cash used in financing activities was $621.3 million in 2024, compared with $101.4 million in 2023. This increase resulted primarily from the retirement of long-term debt that matured in the first quarter of 2024 and an increase in treasury stock purchased during the current period.

Liquidity

Our need for capital has typically resulted from the acquisition of containers and chassis, trucks, tractors, and trailers required to support our growth and the replacement of older equipment, as well as periodic business acquisitions and real estate transactions. We are frequently able to accelerate or postpone a portion of equipment replacements or other capital expenditures depending on market and overall economic conditions. In recent years, we have obtained capital through cash generated from operations, revolving lines of credit, and long-term debt issuances. We have also periodically utilized operating leases to acquire revenue equipment. For our senior credit facility term loans maturing in 2025, it is our intent to pay the entire outstanding balances in full, on or before the maturity dates, using our existing cash balance, revolving line of credit or other sources of long-term financing.

We believe our liquid assets, cash generated from operations, and revolving line of credit will provide sufficient funds for our operating and capital requirements for the foreseeable future. At September 30, 2024 we were authorized to borrow up to $1.5 billion through a revolving line of credit and committed term loans, which is supported by a credit agreement with a group of banks. The revolving line of credit authorizes us to borrow up to $1.0 billion under a five-year term expiring September 2027 and allows us to request an increase in the revolving line of credit total commitment by up to $300 million and to request two one-year extensions of the maturity date. The committed term loans authorized us to borrow up to an additional $500 million during the nine-month period beginning September 27, 2022, due September 2025, which we exercised in June 2023. The applicable interest rates under this agreement are based on either the Secured Overnight Financing Rate (SOFR), or a Base Rate, depending upon the specific type of borrowing, plus an applicable margin and other fees. At September 30, 2024, we had a cash balance of $120.0 million. Under our senior credit facility, we had a $335 million outstanding balance on the revolving line of credit and a $500 million outstanding balance of term loans at an average interest rate of 6.07%.

We continue to evaluate the possible effects of current economic conditions and reasonable and supportable economic forecasts on operational cash flows, including the risks of declines in the overall freight market and our customers' liquidity and ability to pay. We regularly monitor working capital and maintain frequent communication with our customers, suppliers and service providers. A large portion of our cost structure is variable. Purchased transportation expense represents more than half of our total costs and is heavily tied to load volumes. Our second largest cost item is salaries and wages, the largest portion of which is driver pay, which includes a large variable component.

Our financing arrangements require us to maintain certain covenants and financial ratios. At September 30, 2024, we were compliant with all covenants and financial ratios.

Our net capital expenditures were approximately $488.1 million during the first nine months of 2024, compared with $1.32 billion for the same period 2023. Our net capital expenditures include net additions to revenue equipment and non-revenue producing assets that are necessary to contribute to and support the future growth of our various business segments. Capital expenditures in 2024 were primarily for tractors, intermodal containers and chassis and other trailing equipment. We expect to spend approximately $625 million for net capital expenditures during the full calendar year 2024. We are currently committed to spend approximately $385 million, net of proceeds from sales or trade-ins, during the years 2024 and 2025, as well as an additional $237 million thereafter. These expenditures will relate primarily to the acquisition of tractors, containers and chassis, and other trailing equipment. At September 30, 2024, our aggregate future minimum lease payments under operating lease obligations totaled $370 million, related primarily to the rental of maintenance and support facilities, cross-dock and delivery system facilities, office space, parking yards, and equipment.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements, other than our net purchase commitments of $622 million, as of September 30, 2024.

Risk Factors

You should refer to Part I, Item 1A of our Annual Report (Form 10-K) for the year ended December 31, 2023, under the caption “Risk Factors” for specific details on the following factors and events that are not within our control and could affect our financial results.

Risks Related to Our Industry

Risks Related to Our Business

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk can be quantified by measuring the financial impact of a near-term adverse increase in short-term interest rates on variable-rate debt outstanding. Our total long-term debt consists of both fixed and variable interest rate facilities. Our senior notes have a fixed interest rate of 3.875%. These fixed-rate facilities reduce the impact of changes to market interest rates on future interest expense. Our senior credit facility has variable interest rates, which are based on either SOFR or a Base Rate, depending upon the specific type of borrowing, plus an applicable margin and other fees. At September 30, 2024, the average interest rate under our senior credit facility was 6.07%. Our earnings would be affected by changes in these short-term variable interest rates. At our current level of borrowing, a one-percentage-point increase in our applicable rate would reduce annual pretax earnings by $8.4 million.

Although we conduct business in foreign countries, foreign currency transaction gains and losses were not material to our results of operations for the nine months ended September 30, 2024. Accordingly, we are not currently subject to material foreign currency exchange rate risks from the effects that exchange rate movements of foreign currencies would have on our future costs or on future cash flows we would receive from our foreign investment. As of September 30, 2024, we had no foreign currency forward exchange contracts or other derivative financial instruments to hedge the effects of adverse fluctuations in foreign currency exchange rates.

The price and availability of diesel fuel are subject to fluctuations due to changes in the level of global oil production, seasonality, weather, and other market factors. Historically, we have been able to recover a majority of fuel price increases from our customers in the form of fuel surcharges. We cannot predict the extent to which high fuel price levels may occur in the future or the extent to which fuel surcharges could be collected to offset such increases. As of September 30, 2024, we had no derivative financial instruments to reduce our exposure to fuel price fluctuations.

ITEM 4.    CONTROLS AND PROCEDURES

We maintain controls and procedures designed to ensure that the information we are required to disclose in the reports we file with the SEC is recorded, processed, summarized and reported, within the time periods specified in the SEC rules, 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. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.

There were no changes in our internal control over financial reporting during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II.    Other Information

ITEM 1.    LEGAL PROCEEDINGS

We are involved in certain claims and pending litigation arising from the normal conduct of business. Based on present knowledge of the facts and, in certain cases, opinions of outside counsel, we believe the resolution of these claims and pending litigation will not have a material adverse effect on our financial condition, results of operations or liquidity.

ITEM 1A.  RISK FACTORS

Information regarding risk factors appears in Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report on Form 10-Q and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities

The following table summarizes purchases of our common stock during the three months ended September 30, 2024:

(1)       On July 20, 2022, our Board of Directors authorized the purchase of up to $500 million of our common stock. On August 16, 2024, our Board of Directors authorized the purchase of up to an additional $1 billion of our common stock to be effective upon our purchase of the remaining balance under the July 2022 authorization. These stock repurchase programs have no expiration date.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 6.    EXHIBITS

Index to Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, in the city of Lowell, Arkansas, on the 25th day of October 2024.