HUNT J B TRANSPORT SERVICES INC (JBHT) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our results of operations and financial condition should be read in conjunction with our financial statements and related notes in Item 8. This discussion contains forward-looking statements. Please see “Forward-looking Statements” and “Risk Factors” for a discussion of items, uncertainties, assumptions and risks associated with these statements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our financial statements in accordance with U.S. generally accepted accounting principles requires us to make estimates and assumptions that impact the amounts reported in our 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 third parties 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. We consider our critical accounting policies and estimates to be those that require us to make more significant judgments and estimates when we prepare our financial statements and include the following:
Workers’ Compensation and Accident Costs
We purchase insurance coverage for a portion of expenses related to employee injuries, vehicular collisions, accidents, and cargo damage. Certain insurance arrangements include a level of self-insurance (deductible) coverage applicable to each claim. We have umbrella policies to limit our exposure to catastrophic claim costs which may include certain coverage-layer-specific, aggregated reimbursement limits of covered excess claims. We are substantially self-insured for loss of and damage to our owned and leased revenue equipment.
The amounts of self-insurance change from time to time based on measurement dates, policy expiration dates, and claim type. For 2023 and 2024, we were self-insured for $500,000 per occurrence as well as subject to coverage-layer-specific, aggregated reimbursement limits of covered excess claims for personal injury and property damage. We were fully insured for workers’ compensation claims for nearly all states. We have policies in place for 2025 with substantially the same terms as our 2024 policies for personal injury, property damage, workers’ compensation, and cargo loss or damage.
Our claims accrual policy for all self-insured claims is to recognize a liability at the time of the incident based on our analysis of the nature and severity of the claims and analyses provided by third-party claims administrators, as well as legal, economic, and regulatory factors. Our safety and claims personnel work directly with representatives from the insurance companies to continually update the estimated cost of each claim. The ultimate cost of a claim develops over time as additional information regarding the nature, timing, and extent of damages claimed becomes available. Accordingly, we use an actuarial method to develop current claim information to derive an estimate of our ultimate personal injury and property damage claim liability. This process involves the use of expected loss rates, loss-development factors based on our historical claims experience, claim frequencies and severity, and contractual premium adjustment factors, if applicable. In doing so, the recorded liability considers future claims growth and provides a reserve for incurred-but-not-reported claims. We do not discount our estimated losses. At December 31, 2024, we had current accruals of approximately $232 million and long-term accruals of approximately $369 million for estimated claims. A significant increase in the volume of claims or amount of settlements exceeding our coverage-layer specific, aggregated reimbursement limits could result in a significant increase in our estimated liability for claims in future periods. In addition, we record receivables for amounts expected to be reimbursed for payments made in excess of self-insurance levels on covered claims. At December 31, 2024, we have recorded current assets of $237 million and long-term assets of $192 million of expected reimbursement for covered excess claims, other insurance deposits, and prepaid insurance premiums.
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Revenue Equipment
We operate a significant number of tractors, trucks, containers, chassis, and trailers in connection with our business. This equipment may be purchased or acquired under lease agreements. In addition, we may rent revenue equipment from various third parties under short-term rental arrangements. Purchased revenue equipment is depreciated on the straight-line method over the estimated useful life to an estimated salvage or trade-in value. We periodically review the useful lives and salvage values of our revenue equipment and evaluate our long-lived assets for impairment. We have not identified any impairment to these assets at December 31, 2024.
We have agreements with our primary tractor suppliers for residual or trade-in values for certain new equipment. We have utilized these trade-in values, as well as other operational information such as anticipated annual miles, in accounting for depreciation expense.
Revenue Recognition
We record revenues on the gross basis at amounts charged to our customers because we control and are primarily responsible for the fulfillment of promised services. Accordingly, we serve as a principal in the transaction. We invoice our customers, and we maintain discretion over pricing. Additionally, we are responsible for selection of third-party transportation providers to the extent used to satisfy customer freight requirements.
We recognize revenue from customer contracts based on relative transit time in each reporting period and as other performance obligations are provided, with related expenses recognized as incurred. Accordingly, a portion of the total revenue that will be billed to the customer is recognized in each reporting period based on the percentage of the freight pickup and delivery performance obligation that has been completed at the end of the reporting period.
Our trade accounts receivable includes accounts receivable reduced by an allowance for uncollectible accounts. Receivables are recorded at amounts billed to customers when loads are delivered or services are performed. The allowance for uncollectible accounts is calculated over the life of the underlying receivable and is based on historical experience; any known trends or uncertainties related to customer billing and account collectability; current economic conditions; and reasonable and supportable economic forecasts, each applied to segregated risk pools based on the business segment that generated the receivable. The adequacy of our allowance is reviewed quarterly.
Income Taxes
We account for income taxes under the liability method. Our deferred tax assets and liabilities represent items that will result in a tax deduction or taxable income in future years for which we have already recorded the related tax expense or benefit in our statement of earnings. Deferred tax accounts arise as a result of timing differences between when items are recognized in our Consolidated Financial Statements and when they are recognized in our tax returns. We assess the likelihood that deferred tax assets will be recovered from future taxable income or the reversal of temporary timing differences. To the extent we believe recovery does not meet the more likely than not threshold, a valuation allowance is established. To the extent we establish a valuation allowance, we include an expense as part of our income tax provision.
Significant judgment is required in determining and assessing the impact of complex tax laws and certain tax-related contingencies on our provision for income taxes. As part of our calculation of the provision for income taxes, we assess whether the benefits of our tax positions are at least more likely than not to be sustained upon audit based on the technical merits of the tax position. For tax positions that are not more likely than not to be sustained upon audit, we accrue the largest amount of the benefit that is not more likely than not to be sustained in our Consolidated Financial Statements. Such accruals require us to make estimates and judgments, whereby actual results could vary materially from these estimates. Further, a number of years may elapse before a particular matter for which we have established an accrual is audited and resolved. See Note 6, Income Taxes, in our Consolidated Financial Statements for a discussion of our current tax contingencies.
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RESULTS OF OPERATIONS
The following table sets forth items in our Consolidated Statements of Earnings as a percentage of operating revenues and the percentage increase or decrease of those items compared with the prior year.
| Percentage of Operating Revenues | Percentage Change Between Years | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||||||
| Operating revenues | 100.0 | % | 100.0 | % | (5.8 | )% | ||||||
| Operating expenses: | ||||||||||||
| Rents and purchased transportation | 44.5 | 45.8 | (8.4 | ) | ||||||||
| Salaries, wages and employee benefits | 26.7 | 25.4 | (0.8 | ) | ||||||||
| Depreciation and amortization | 6.3 | 5.8 | 3.1 | |||||||||
| Fuel and fuel taxes | 5.4 | 5.9 | (13.2 | ) | ||||||||
| Operating supplies and expenses | 4.1 | 4.0 | (2.7 | ) | ||||||||
| Insurance and claims | 2.6 | 2.5 | (0.6 | ) | ||||||||
| General and administrative expenses, net of asset dispositions | 2.5 | 2.0 | 11.6 | |||||||||
| Operating taxes and licenses | 0.6 | 0.6 | (3.3 | ) | ||||||||
| Communication and utilities | 0.4 | 0.3 | 3.9 | |||||||||
| Total operating expenses | 93.1 | 92.3 | (4.9 | ) | ||||||||
| Operating income | 6.9 | 7.7 | (16.3 | ) | ||||||||
| Net interest expense | 0.6 | 0.4 | 23.0 | |||||||||
| Earnings before income taxes | 6.3 | 7.3 | (18.8 | ) | ||||||||
| Income taxes | 1.6 | 1.6 | (8.7 | ) | ||||||||
| Net earnings | 4.7 | % | 5.7 | % | (21.6 | )% |
2024 Compared With 2023
Consolidated Operating Revenues
Our total consolidated operating revenues decreased 5.8% to $12.09 billion in 2024, compared to $12.83 billion in 2023. This decrease was primarily due to lower volume within DCS, ICS and JBT, decreased revenue per load within JBI and JBT, and decreased revenue and stop counts in FMS. Fuel surcharge revenues decreased 17.4% to $1.53 billion in 2024, compared to $1.85 billion in 2023. Revenues, excluding fuel surcharge revenues, decreased 3.8% from 2023.
Consolidated Operating Expenses
Our 2024 consolidated operating expenses decreased 4.9% from 2023, while year-over-year revenue decreased 5.8%, resulting in a 2024 operating ratio of 93.1% compared to 92.3% in 2023.
Rents and purchased transportation costs decreased 8.4% in 2024, primarily due to 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 year. Salaries, wages and employee benefit costs decreased 0.8% in 2024 from 2023. This decrease was primarily related to a decrease in employee headcounts, partially offset by an increase in group medical benefit expenses and wage increases.
Depreciation and amortization expense increased 3.1% in 2024, primarily due to the addition of tractors and trailing equipment within JBI and additional depreciation and amortization expense resulting from the recent business acquisition of BNSF Logistics, LLC (BNSFL), partially offset by the impact of the change in expected useful lives of our container fleet and equipment reductions within DCS.
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Fuel and fuel taxes expense decreased 13.2% in 2024 compared with 2023, due primarily to a decrease in the price of fuel during 2024 and decreased road miles. We have fuel surcharge programs in place with the majority of our customers. These programs typically involve a specified computation based on the change in national, regional, or local fuel prices. While these programs may address fuel cost changes as frequently as weekly, most also reflect a specified miles-per-gallon factor and require a certain minimum change in fuel costs to trigger a change in fuel surcharge revenue. As a result, some of these programs have a time lag between when fuel costs change and when this change is reflected in revenues. Due to these programs, this lag negatively impacts operating income in times of rapidly increasing fuel costs and positively impacts operating income when fuel costs decrease rapidly. It is not meaningful to compare the amount of fuel surcharge revenue or the change in fuel surcharge revenue between reporting periods to fuel and fuel taxes expense, or the change of fuel expense between periods, as a significant portion of fuel cost is included in our payments to railroads, dray carriers and other third parties. These payments are classified as purchased transportation expense.
Operating supplies and expenses decreased 2.7% in 2024 compared with 2023, driven primarily by lower equipment maintenance costs, decreased towing expenses, lower tolls expense, and decreased other operating supply costs compared to 2023. Insurance and claims expense decreased 0.6% in 2024, primarily due to lower reserve expense for claims subject to insurance coverage-layer-specific aggregated limits and lower claim volume, partially offset by increased cost per claim and higher insurance policy premium expense. General and administrative expenses increased 11.6% from 2023, primarily due to an increase in building and yard rental expense, higher agent 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 $14.6 million in 2024, compared to a net loss from sale or disposal of assets of $27.8 million in 2023.
Net interest expense for 2024 increased by 23.0% compared with 2023, due primarily to an increase in effective interest rates on our debt and an increase in our average debt balance. Income tax expense decreased 8.7% in 2024, due primarily to decreased taxable earnings in 2024, partially offset by a higher effective income tax rate. Our effective income tax rate was 24.8% in 2024 and 22.1% in 2023. The increase in rate was primarily due to discrete tax items recorded in 2023 that were not incurred in 2024.
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Segments
We operated five business segments during 2024. The operation of each of these businesses is described in our Notes to Consolidated Financial Statements. The following tables summarize financial and operating data by segment:
| Operating Revenue by Segment | ||||||||
|---|---|---|---|---|---|---|---|---|
| Years Ended December 31, (in millions) | ||||||||
| 2024 | 2023 | |||||||
| JBI | $ | 5,956 | $ | 6,208 | ||||
| DCS | 3,396 | 3,543 | ||||||
| ICS | 1,141 | 1,390 | ||||||
| FMS | 910 | 918 | ||||||
| JBT | 702 | 789 | ||||||
| Total segment revenues | 12,105 | 12,848 | ||||||
| Intersegment eliminations | (18 | ) | (18 | ) | ||||
| Total | $ | 12,087 | $ | 12,830 |
| Operating Income by Segment | ||||||||
|---|---|---|---|---|---|---|---|---|
| Years Ended December 31, (in millions) | ||||||||
| 2024 | 2023 | |||||||
| JBI | $ | 430 | $ | 569 | ||||
| DCS | 376 | 405 | ||||||
| ICS | (56 | ) | (44 | ) | ||||
| FMS | 60 | 47 | ||||||
| JBT | 21 | 16 | ||||||
| Total | $ | 831 | $ | 993 |
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Operating Data by Segment
| Years Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2024 | 2023 | |||||||
| JBI | ||||||||
| Loads | 2,090,732 | 2,044,980 | ||||||
| Average length of haul (miles) | 1,692 | 1,673 | ||||||
| Revenue per load | $ | 2,849 | $ | 3,035 | ||||
| Average tractors during the period(1) | 6,368 | 6,488 | ||||||
| Tractors (end of period) | 6,502 | 6,380 | ||||||
| Trailing equipment (end of period) | 122,272 | 118,171 | ||||||
| Average effective trailing equipment usage | 104,103 | 99,374 | ||||||
| DCS | ||||||||
| Loads | 3,985,221 | 4,274,677 | ||||||
| Average length of haul (miles) | 181 | 175 | ||||||
| Revenue per truck per week(2) | $ | 5,075 | $ | 5,184 | ||||
| Average trucks during the period(3) | 12,988 | 13,290 | ||||||
| Trucks (end of period) | 12,647 | 13,252 | ||||||
| Trailing equipment (end of period) | 32,046 | 32,600 | ||||||
| Average effective trailing equipment | 32,639 | 32,408 | ||||||
| ICS | ||||||||
| Loads | 609,854 | 764,839 | ||||||
| Revenue per load | $ | 1,872 | $ | 1,818 | ||||
| Gross profit margin | 16.1 | % | 13.4 | % | ||||
| Employee count (end of period) | 590 | 861 | ||||||
| Approximate number of third-party carriers (end of period) | 110,000 | 122,100 | ||||||
| Marketplace for J.B. Hunt 360 revenue (millions) | $ | 395.8 | $ | 765.6 | ||||
| FMS | ||||||||
| Stops | 4,316,578 | 4,596,715 | ||||||
| Average trucks during the period(3) | 1,373 | 1,540 | ||||||
| JBT | ||||||||
| Loads | 389,832 | 410,091 | ||||||
| Revenue per load | $ | 1,800 | $ | 1,925 | ||||
| Average length of haul | 629 | 652 | ||||||
| Tractors (end of period) | ||||||||
| Company-owned | 2 | 27 | ||||||
| Independent contractor | 1,917 | 1,931 | ||||||
| Total tractors | 1,919 | 1,958 | ||||||
| Trailers (end of period) | 12,895 | 13,561 | ||||||
| Average effective trailing equipment usage | 12,552 | 13,000 |
| Column 1 | Column 2 |
|---|---|
| (1) | Includes company-owned and independent contractor tractors |
| Column 1 | Column 2 |
|---|---|
| (2) | Using weighted workdays |
| Column 1 | Column 2 |
|---|---|
| (3) | Includes company-owned, independent contractor, and customer-owned trucks |
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JBI Segment
JBI segment revenue decreased 4% to $5.96 billion in 2024, from $6.21 billion in 2023. This decrease in revenue was primarily a result of a 6% decrease in revenue per load, which is the combination of changes in freight mix, customer rate changes, and fuel surcharge revenue, partially offset by a 2% increase in load volume. Eastern network load volumes decreased 1% and transcontinental loads increased 5% compared to 2023. Revenue per load excluding fuel surcharges decreased 4% compared to 2023.
Operating income of the JBI segment decreased to $430 million in 2024, from $569 million in 2023. The decrease is primarily due to decreased revenue, increased maintenance and equipment-related costs, increased insurance premiums expense, and higher driver wages and benefits, partially offset by lower rail and third-party dray purchased transportation expense. In addition, JBI incurred $16 million in expense for the segment’s portion of an additional casualty claims reserve in 2023.
DCS Segment
DCS segment revenue decreased 4% to $3.40 billion in 2024, from $3.54 billion in 2023. Productivity, defined as revenue per truck per week, decreased 2% compared to 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. Customer retention rates were approximately 90%.
Operating income of our DCS segment decreased to $376 million in 2024, from $405 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. In addition, DCS incurred $20 million in expense for the segment’s portion of an additional casualty claims reserve in 2023.
ICS Segment
ICS segment revenue decreased 18% to $1.14 billion in 2024, from $1.39 billion in 2023. Overall volumes decreased 20%, while revenue per load increased 3%, primarily due to higher contractual and spot rates and changes in customer freight mix when compared to 2023. The decrease in revenue was partially offset by additional revenue from the acquisition of the brokerage assets of BNSFL in the third quarter 2023. Contractual business was 61% of the total load volume and 61% of the total revenue in 2024, compared to 64% of the total load volume and 63% of the total revenue in 2023.
Our ICS segment had an operating loss of $56 million in 2024 compared to an operating loss of $44 million in 2023, primarily due to decreased revenue and integration costs related to the BNSFL acquisition, which included the impairment or accelerated amortization of certain acquired intangible, information system, and lease assets totaling $26 million. These items were partially offset by lower personnel expenses and reduced equipment rental expense during 2024. Gross profit margin increased to 16.1% in the current year versus 13.4% in 2023. Approximately $396 million of ICS revenue for 2024 was executed through the Marketplace for J.B. Hunt 360 compared to $766 million in 2023. ICS’s carrier base decreased 10% when compared to 2023, primarily due to changes in carrier qualification requirements. In addition, ICS incurred $10 million in expense for the segment’s portion of an additional casualty claims reserve in 2023.
FMS Segment
FMS segment revenue decreased 1% to $910 million in 2024 from $918 million in 2023, primarily due to general weakness in customer demand and loss of business due to internal efforts to improve revenue quality across certain accounts, partially offset by improved revenue quality at underperforming accounts and the addition of multiple new customer contracts implemented over the past year.
Operating income of our FMS segment increased to $60 million in 2024, from $47 million in 2023. The increase in operating income was primarily due to improvements in revenue quality, lower personnel expenses, a $4.2 million net benefit from offsetting claim settlements, and overall cost management, partially offset by higher purchased transportation expense. In addition, FMS incurred $3 million in expense for the segment’s portion of an additional casualty claims reserve in 2023.
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JBT Segment
JBT segment revenue decreased 11% to $702 million in 2024, from $789 million in 2023. Excluding fuel surcharges, revenue for 2024 decreased 9% compared to 2023, primarily due to a 5% decrease in revenue excluding fuel surcharge revenue per load and a 5% decrease in load volume compared to 2023. Total average effective trailer count in 2024 was 12,552 compared to 13,000 in 2023. At the end of 2024, JBT operated 1,919 tractors, predominantly independent contractors, compared to 1,958 at the end of 2023.
Operating income of our JBT segment increased to $21 million in 2024, from $16 million in 2023. The increase in operating income was driven primarily by lower personnel expenses, lower equipment-related costs and overall cost management initiatives, partially offset by higher insurance premiums expense. In addition, JBT incurred $4 million in expense for the segment’s portion of an additional casualty claims reserve in 2023.
This management's discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 2024 and 2023. For a comparison of the years ended December 31, 2023 and 2022, refer to Management's Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the year ended December 31, 2023.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $1.48 billion in 2024, compared to $1.74 billion in 2023. The decrease was primarily due to decreased earnings of approximately $157 million and the timing of general working capital activities.
Net cash used in investing activities totaled $664 million in 2024, compared with $1.69 billion in 2023. The decrease resulted primarily from a decrease in equipment purchases, net of proceeds from the sale of equipment.
Net cash used in financing activities was $826 million in 2024, compared with $58 million in 2023. This increase resulted primarily from an increase in current year treasury stock purchases, retirement of long-term debt, and lower net borrowings from revolving lines of credit in 2024.
Our dividend policy is subject to review and revision by the Board of Directors, and payments are dependent upon our financial condition, liquidity, earnings, capital requirements, and other factors the Board of Directors may deem relevant. We paid a $0.42 per share quarterly dividend in 2023 and a $0.43 per share quarterly dividend in 2024. On January 23, 2025, we announced an increase in our quarterly cash dividend from $0.43 to $0.44 per share, which was paid February 21, 2025, to shareholders of record on February 7, 2025. We currently intend to continue paying cash dividends on a quarterly basis. However, no assurance can be given that future dividends will be paid.
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 December 31, 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 December 31, 2024, we had a cash balance of $47 million. Under our senior credit facility, we had a $280.0 million outstanding balance on the revolving line of credit and a $500.0 million outstanding balance of term loans at an average interest rate of 5.48%.
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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 senior notes consist of $700 million of 3.875% senior notes due March 2026, issued in March 2019. Interest payments under these notes are due semiannually in March and September of each year, beginning September 2019. These senior notes were issued by J.B. Hunt Transport Services, Inc., a parent-level holding company with no significant tangible assets or operations. The notes are guaranteed on a full and unconditional basis by our wholly-owned operating subsidiary. All other subsidiaries of the parent are minor. We registered these offerings and the sale of the notes under the Securities Act of 1933, pursuant to a shelf registration statement filed in January 2019. These notes are unsecured obligations and rank equally with our existing and future senior unsecured debt. We may redeem for cash some or all of the notes based on a redemption price set forth in the note indenture. Our $250 million of 3.85% senior notes matured in March 2024. The entire outstanding balance was paid in full at maturity.
Our financing arrangements require us to maintain certain covenants and financial ratios. At December 31, 2024, we were in compliance with all covenants and financial ratios.
We are currently committed to spend approximately $677 million, net of proceeds from sales or trade-ins, during the years 2025 and 2026, as well as an additional $89 million thereafter. These expenditures will relate primarily to the acquisition of tractors, containers, chassis, and other trailing equipment. We had no other off-balance sheet arrangements as of December 31, 2024.