# PAMT CORP (PAMT) FY 2025 MD&A Verbatim Item 7 Management's Discussion and Analysis from PAMT CORP's 10-K for fiscal year 2025. SEC filing source: https://www.sec.gov/Archives/edgar/data/798287/000143774926007960/ptsi20251231_10k.htm Accession: 0001437749-26-007960 Filing date: 2026-03-12 Report date: 2025-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/PAMT/ All MD&A years: /company/PAMT/mda/ Previous year: /company/PAMT/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Business Overview The Company's administrative headquarters are in Tontitown, Arkansas. From this location we manage operations in the continental United States, Mexico, and Canada conducted through our wholly-owned subsidiaries. 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. Both our truckload operations and our brokerage and logistics operations have similar economic characteristics and are impacted by virtually the same economic factors as discussed elsewhere in this report. 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 are aggregated into a single motor carrier segment. For both operations, substantially all of our revenue is generated by transporting freight for customers and is predominantly affected by the rates per mile received from our customers, equipment utilization, and our percentage of non-compensated miles. These aspects of our business are carefully managed and efforts are continuously underway to achieve favorable results. Truckload services revenues, excluding fuel surcharges, represented 68.3%, 67.1% and 65.3% of total revenues, excluding fuel surcharges for the twelve months ended December 31, 2025, 2024 and 2023, respectively. The main factors that impact our profitability on the expense side are costs incurred in transporting freight for our customers. Currently, our most challenging costs include fuel, driver recruitment, training, wage and benefit costs, independent broker costs (which we record as purchased transportation), insurance and claims, maintenance, and capital equipment costs. 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. The accounting policies of the motor carrier segment are the same as those described in the summary of accounting policies found in this report. For purposes of this report, net income reflects the profitability of our operations by calculating the total earnings after deducting operating expenses, interest expense, income taxes and any other applicable costs from total revenue. The measure of net income is reported on the consolidated statement of operations as consolidated net (loss) income. Operating ratio is the measure of our efficiency in managing operating expenses relative to revenue generation and is calculated as total operating expenses as a percentage of total operating revenue. In discussing our results of operations we use revenue, before fuel surcharge (and operating supplies and 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 2025, 2024 and 2023, approximately $71.5 million, $85.6 million, and $104.7 million, respectively, of the Company's total revenue was generated from fuel surcharges. We 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 high variable cost nature of certain expenses makes a comparison of changes in expenses as a percentage of revenue more meaningful than absolute dollar changes. - 21 - Table of Contents 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. Operating supplies and expenses are shown net of fuel surcharges. [[GREPCENT_TABLE]] [["","","Years Ended December 31,"],["","","2025","","","2024","","","2023"],["Operating revenues, before fuel surcharge","","","100.0","%","","","100.0","%","","","100.0","%"],["Operating expenses:"],["Salaries, wages and benefits","","","42.0","","","","38.9","","","","37.8"],["Operating supplies and expenses, net of fuel surcharge","","","12.9","","","","11.8","","","","11.8"],["Rent and purchased transportation","","","27.4","","","","26.1","","","","23.5"],["Depreciation","","","22.6","","","","23.3","","","","13.8"],["Impairment Loss","","","-","","","","1.5","","","","-"],["Insurance and claims","","","12.9","","","","4.6","","","","6.7"],["Other","","","4.9","","","","4.8","","","","4.4"],["Gain(loss) on sale or disposal of property","","","(4.3",")","","","0.2","","","","(0.3",")"],["Total operating expenses","","","118.4","","","","111.2","","","","97.7"],["Operating (loss)income","","","(18.4",")","","","(11.2",")","","","2.3"],["Non-operating income","","","2.8","","","","1.9","","","","1.2"],["Interest expense","","","(4.7",")","","","(2.9",")","","","(1.6",")"],["Income before income taxes","","","(20.3%",")","","","(12.2%",")","","","1.9","%"]] [[/GREPCENT_TABLE]] 2025 Compared to 2024 For the year ended December 31, 2025, truckload services revenue, before fuel surcharges, decreased 14.8% to $359.6 million as compared to $422.0 million for the year ended December 31, 2024. The decrease relates primarily to an 8.3% decrease in total miles travelled from 178.6 million during the year ended December 31, 2024 to 163.8 million for the year ended December 31, 2025 and to a 3.8% decrease in our rate per mile, from $2.10 for the year ended December 31, 2024 to $2.02 for the year ended December 31, 2025. The reduction in total miles was primarily driven by a 10.4% reduction in the average number of trucks operated offset by a 2.7% improvement in average miles driven by each truck during the year ended December 31, 2025 compared to the year ended December 31, 2024. The reduction in truck count and miles resulted from a less favorable freight market year over year, characterized by an oversupply of available trucks in the market compared to available freight. Salaries, wages and benefits increased from 38.9% of revenues, before fuel surcharges, during 2024 to 42.0% of revenues, before fuel surcharges, during 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. Rent and purchased transportation increased from 26.1% of revenues, before fuel surcharges, during 2024 to 27.4% of revenues, before fuel surcharges, during 2025. The increase was primarily due to an increase in the percentage of miles driven by third-party owner-operators as opposed to company-employed drivers for the year ended December 31, 2025 compared to the year ended December 31, 2024. Depreciation expense decreased from 23.3% of revenues, before fuel surcharges, for the year ended December 31, 2024 to 22.6% of revenues, before fuel surcharges, for the year ended December 31, 2025. The decrease is primarily attributable to the absence of the incremental depreciation recognized in 2024 resulting from the Company’s change in accounting estimates related to the useful lives and salvage values of revenue equipment. As previously disclosed, 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, which increased depreciation expense in that period. Depreciation expense in 2025 reflects the continued application of those revised estimates but does not include a comparable incremental impact from an additional change in estimate. Although depreciation decreased as a percentage of revenue year over year, it remains elevated relative to 2023 due to the ongoing effect of the shorter estimated useful lives and lower salvage values established in 2024, as well as the continued replacement of revenue equipment at costs that remain above historical levels. In addition, the fixed-cost nature of depreciation expense, combined with lower operating revenues in 2025, affects period-over-period comparability of depreciation as a percentage of revenue. - 22 - Table of Contents Impairment loss accounted for 0% of revenues, before fuel surcharges, during 2025, compared to 1.5% of revenues, before fuel surcharges, during 2024. Although management continues to believe that market conditions for used revenue equipment have deteriorated since their peak in 2022, the Company performed a recoverability analysis of its long-lived asset groups during the year ended December 31, 2025 and concluded that the carrying amounts of all applicable asset groups were recoverable, as the estimated future undiscounted cash flows for each asset group exceeded its respective carrying value. Accordingly, no impairment loss was recognized during 2025. In contrast, during the year ended December 31, 2024, management determined that certain asset groups of trucks and trailers were impaired, resulting in an impairment loss of approximately $6.4 million, or $0.22 loss per share, net of tax. Insurance and claims increased from 4.6% of revenues, before fuel surcharges, during 2024 to 12.9% of revenues, before fuel surcharges, during 2025. The increase is attributable to an increase in the Company’s auto-liability reserve during the fourth quarter of 2025. This increase in auto-liability reserve is due to an agreement in principle to settle a significant auto-liability claim in which the Company was a named defendant. The total settlement amount is $30.0 million, of which $26.5 million represents the Company’s net exposure after consideration of applicable insurance coverage. Gains (losses) on disposition of equipment increased from a loss of 0.2% of revenues, before fuel surcharges, for the year ended December 31, 2024 to a gain of 4.3% of revenues, before fuel surcharges, for the year ended December 31, 2025. The Company recognized a net loss on disposition of equipment of approximately $0.8 million during 2024, compared to net gains of approximately $15.5 million during 2025. The increase was primarily attributable to higher disposition volumes in 2025, including the sale of approximately 650 additional trailers and 250 additional trucks compared to 2024, as well as the sale of certain equipment whose carrying values had been reduced in 2024 as a result of impairment charges. The increased volume of disposals was driven in part by the reduction in estimated useful lives of trailers implemented in 2024, which accelerated the planned retirement and disposal of certain assets that were not previously expected to be sold in 2025. Non-operating income increased from 1.9% of revenues, before fuel surcharges, during 2024 to 2.8% of revenues, before fuel surcharges, during 2025. This increase resulted primarily from an increase in the market value of our marketable equity securities portfolio and an increase in the Company’s net realized gains from the sale of certain marketable equity securities during the year-ended December 31, 2025 as compared to the year ended December 31, 2024. Interest expense increased from 2.9% of revenues, before fuel surcharges, for the year ended December 31, 2024 to 4.7% of revenues, before fuel surcharges, for the year ended December 31, 2025. The increase was primarily attributable to a net increase in long-term debt of approximately $8.3 million, consisting of $91.9 million of equipment financing obtained during 2025, partially offset by $83.6 million of long-term debt repayments. The weighted-average interest rate on debt incurred during 2025 was 5.71%, compared to 5.17% for debt incurred prior to 2025 that remained outstanding as of December 31, 2025, meaning the Company experienced a higher overall cost of new borrowings. The repayment of lower-rate debt and issuance of new debt at higher prevailing interest rates further contributed to the increase in interest expense. The fixed-cost nature of interest expense, combined with lower operating revenues in 2025, also increased interest expense as a percentage of revenue. The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased to 118.4% for 2025 from 111.2% for 2024. 2024 Compared to 2023 For the year ended December 31, 2024, truckload services revenue, before fuel surcharges, decreased 8.4% to $422.0 million as compared to $460.9 million for the year ended December 31, 2023. The decrease relates primarily to a 5.7% decrease in total miles travelled from 189.5 million during the year ended December 31, 2023 to 178.6 million for the year ended December 31, 2024 and to a 3.2% decrease in our rate per mile, from $2.17 for the year ended December 31, 2023 to $2.10 for the year ended December 31, 2024. The reduction in total miles was primarily driven by a 3.1% reduction in the average number of trucks operated combined with a 3.5% reduction in average miles driven by each truck during the year ended December 31, 2024 compared to the year ended December 31, 2023. The reduction in truck count and miles resulted from a less favorable freight market year over year, characterized by an oversupply of available trucks in the market compared to available freight. - 23 - Table of Contents Salaries, wages and benefits increased from 37.8% of revenues, before fuel surcharges, during 2023 to 38.9% of revenues, before fuel surcharges, during 2024. The percentage-based increase relates primarily to the interaction of a decrease in operating revenues with the fixed-cost nature of employing human capital. Rent and purchased transportation increased from 23.5% of revenues, before fuel surcharges, during 2023 to 26.1% of revenues, before fuel surcharges, during 2024. 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 and to a lesser extent increased rates paid to third-party carriers for the year ended December 31, 2024 compared to the year ended December 31, 2023. Depreciation increased from 13.8% of revenues, before fuel surcharges, during 2023 to 23.3% of revenues, before fuel surcharges, during 2024. 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. During 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 increased depreciation expense by approximately $24.7 million and increased basic and diluted loss per share by $0.86, net of tax, for the year ended December 31, 2024. In addition to the Company’s change in accounting estimate, the year-over-year increase can also be attributed to an increase in the cost for replacement revenue equipment compared to the cost of retired equipment and to the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense. Impairment loss accounted for 1.5% of revenues, before fuel surcharges, during 2024. The Company has not previously recognized an impairment loss on long-lived assets. Management determined that market conditions for used revenue equipment had deteriorated since its peak in 2022. This decline in market conditions prompted the requirement for a recoverability test and subsequent impairment charge against certain asset groups of used trucks and trailers. Management tested all applicable asset groups and determined specific asset groups of trucks and trailers to be impaired beyond their carrying value. The impairment of these asset groups resulted in an impairment loss of approximately $6.4 million, or $0.22 loss per share, net of tax, during the year ended December 31, 2024. No impairment loss was incurred during the year ended December 31, 2023. Insurance and claims decreased from 6.7% of revenues, before fuel surcharges, during 2023 to 4.6% of revenues, before fuel surcharges, during 2024. The decrease is primarily attributable to a decrease in auto liability claims incurred during the year ended December 31, 2024 compared to the year ended December 31, 2023. This decrease was slightly offset by an increase in the rate per mile paid for auto liability insurance during 2024 compared to 2023. Non-operating income increased from 1.2% of revenues, before fuel surcharges, during 2023 to 1.9% of revenues, before fuel surcharges, during 2024. This increase resulted primarily from an increase in the market value of our marketable equity securities portfolio and an increase in the Company’s net realized gains from the sale of certain marketable equity securities during the year-ended December 31, 2024 as compared to the year ended December 31, 2023. Interest expense increased from 1.6% of revenues, before fuel surcharges, during 2023 to 2.9% of revenues, before fuel surcharges, during 2024. The increase is attributed to the Company’s increased long-term debt from $261.7 million at December 31, 2023 to $325.6 million at December 31, 2024, coupled with an increase in interest rates as the Company’s weighted average interest rate increased from 4.20% in 2023 to 5.00% in 2024. The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased to 111.2% for 2024 from 97.7% for 2023. - 24 - Table of Contents 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. Rent and purchased transportation, which includes costs paid to third-party carriers, are shown net of fuel surcharges. [[GREPCENT_TABLE]] [["","","Years Ended December 31,"],["","","2025","","","2024","","","2023"],["Operating revenues, before fuel surcharge","","","100.0","%","","","100.0","%","","","100.0","%"],["Operating expenses:"],["Salaries, wages and benefits","","","5.6","","","","5.1","","","","4.9"],["Rent and purchased transportation","","","89.3","","","","86.6","","","","84.6"],["Other","","","3.8","","","","3.2","","","","2.4"],["Total operating expenses","","","98.7","","","","94.9","","","","91.9"],["Operating income","","","1.3","","","","5.1","","","","8.1"],["Non-operating income","","","0.7","","","","0.2","","","","0.8"],["Interest expense","","","(0.4",")","","","(0.4",")","","","(0.7",")"],["Income before income taxes","","","1.6","%","","","4.8","%","","","8.2","%"]] [[/GREPCENT_TABLE]] 2025 Compared to 2024 For the year ended December 31, 2025, logistics and brokerage services revenues, before fuel surcharges, decreased 19.3% to $167.0 million as compared to $207.0 million for the year ended December 31, 2024. The decrease relates to a reduction in the average rates charged to customers year to year, coupled with a 25.4% decrease in brokered loads year over year. The brokerage market continued to be negatively impacted by downward rate pressure driven by the challenging truckload rate environment. Rent and purchased transportation increased from 86.6% of revenues, before fuel surcharges, in 2024 to 89.3% of revenues, before fuel surcharges, in 2025. The increase results from paying third-party carriers a larger percentage of customer revenue, coupled with the interaction of a decrease in operating revenues with the need for purchased transportation. 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 to 98.7% for 2025 from 94.9% for 2024. 2024 Compared to 2023 For the year ended December 31, 2024, logistics and brokerage services revenues, before fuel surcharges, decreased 15.6% to $207.0 million as compared to $245.2 million for the year ended December 31, 2023. The decrease relates to a reduction in the average rates charged to customers year to year, while total brokered loads remained flat, as the brokerage market was negatively impacted by downward rate pressure driven by the challenging truckload rate environment. Rent and purchased transportation increased from 84.6% of revenues, before fuel surcharges, in 2023 to 86.6% of revenues, before fuel surcharges, in 2024. The increase results from paying third-party carriers a larger percentage of customer revenue, coupled with the interaction of a decrease in operating revenues with the need for purchased transportation. 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 to 94.9% for 2024 from 91.9% for 2023. - 25 - Table of Contents Results of Operations - Combined Services 2025 Compared to 2024 Income tax benefit was approximately $17.7 million in 2025, resulting in an effective rate of 25.2%, as compared to income tax benefit of approximately $9.8 million, or an effective tax rate of 23.5% in 2024. The effective tax rate is impacted by the effect of state taxes and other factors. As of December 31, 2025, management conducted a tax asset valuation allowance as described above and determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary. Additionally, s of December 31, 2025, an adjustment to the Company’s consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During 2025 and 2024, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions. The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which we operate generally provide for a deficiency assessment statute of limitation period of three years and as a result, the Company’s tax years 2022 and forward remain open to examination in those jurisdictions. The combined net loss for all divisions was $52.6 million, or 10.0% of revenues, before fuel surcharge, for 2025 as compared to the combined net loss for all divisions of $31.8 million, or 5.1% of revenues, before fuel surcharge, for 2024. Diluted loss per share decreased to ($2.48) for the year ended December 31, 2025 from ($1.45) for the year ended December 31, 2024. 2024 Compared to 2023 Income tax benefit was approximately $9.8 million in 2024, resulting in an effective rate of 23.5%, as compared to income tax expense of approximately $10.2 million, or an effective tax rate of 35.6% in 2023. The effective tax rate is impacted by the effect of state taxes and other factors. As of December 31, 2024, management conducted a tax asset valuation allowance as described above and determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary. - 26 - Table of Contents Additionally, as of December 31, 2024, management determined that an adjustment to the Company’s consolidated financial statements for uncertain tax positions was not required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws. The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense. During 2023, the Company did not recognize or accrue any interest or penalties related to uncertain income tax positions. The combined net loss for all divisions was $31.8 million, or 5.1% of revenues, before fuel surcharge, for 2024 as compared to the combined net income for all divisions of $18.4 million or 2.6% of revenues, before fuel surcharge, for 2023. Diluted (loss) earnings per share decreased to ($1.45) for the year ended December 31, 2024 from $0.83 for the year ended December 31, 2023. 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 2025, we generated $17.3 million in cash from operating activities compared to $59.0 million and $114.6 million in 2024 and 2023, respectively. Investing activities generated $18.4 million in cash during 2025 compared to using $100.2 million and $11.3 million in 2024 and 2023, respectively. Financing activities used $68.6 million in cash during 2025 compared to generating $8.6 million during 2024 and using $76.8 million during 2023. See the Consolidated Statements of Cash Flows in Item 8 of this Report. Our primary use of funds is for the purchase of revenue equipment. We typically use installment notes, our existing lines 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 2025 and 2024, we utilized cash on hand, long-term debt, and our lines of credit to finance purchases of revenue equipment and other assets of approximately $40.7 million and $195.7 million, respectively. In addition, we acquired approximately $61.9 million and $50.0 million of revenue equipment through vendor-direct financing arrangements during 2025 and 2024, respectively. 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. We often finance the acquisition of revenue equipment through installment notes with fixed interest rates. At December 31, 2025, the Company’s subsidiaries had combined outstanding indebtedness under such installment notes of $333.9 million. These installment notes are payable in monthly installments, ranging from 60 monthly installments to 84 monthly installments, at a weighted average interest rate of 5.31%. At December 31, 2024, the Company’s subsidiaries had combined outstanding indebtedness under such installment notes of $325.6 million. These installment notes were payable in monthly installments, ranging from 36 to 84 months at a weighted average interest rate of 5.00%. In order to maintain an adequate pool of available equipment, it is often necessary to purchase replacement equipment and place them in service before trucks and trailers scheduled for replacement are removed from service. The timing of this process often requires the Company to pay for new equipment before receiving any proceeds from retired equipment, or without any reduction in price for trade units. In this situation, the Company later receives payment for the equipment scheduled for replacement once they are delivered to the buyer and have passed inspection. During the twelve months ended December 31, 2025 and 2024, the Company received approximately $58.3 million and $36.9 million, respectively, for disposed revenue equipment. - 27 - Table of Contents During 2025, we maintained a revolving line of credit with a borrowing limit of $60.0 million. Under this credit facility, amounts outstanding under the line bear interest at Term SOFR plus 3.35% (7.22% at December 31, 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 December 31, 2025, we had no outstanding borrowings against the line of credit and approximately $0.3 million of outstanding letters of credit, with availability to borrow $59.7 million. Trade accounts receivable decreased by approximately $13.1 million from $80.0 million as of December 31, 2024 to $66.9 million as of December 31, 2025. The decrease is attributed to a general decrease in freight revenue and fuel surcharge revenue, which flows through the accounts receivable account, during the fourth quarter of 2025 as compared to the freight revenue and fuel surcharge revenue generated during the fourth quarter of 2024. Marketable equity securities at December 31, 2025 increased approximately $5.9 million as compared to December 31, 2024. The increase resulted from the unrealized appreciation in the fair value of the portfolio by $4.8 million coupled with the purchase of $4.2 million in marketable equity securities, partially offset by the sales of marketable equity securities approximating $3.1 million. At December 31, 2025, the remaining marketable equity securities have a combined cost basis of approximately $28.2 million and a combined fair market value of approximately $48.5 million. The Company has developed a strategy to invest in securities from which it expects to receive dividends that qualify for favorable tax treatment, as well as appreciate in value. During 2025, the Company received dividends of approximately $1.6 million. The holding term of these securities depends largely on the general economic environment, the equity markets, borrowing rates, and the Company's cash requirements. Property and equipment decreased by approximately $44.1 million from $836.5 as of December 31, 2024 to $792.4 million as of December 31,2025. This decrease is primarily attributable to the disposal of aging trucks and trailers totaling $160.2 million during 2025. This was partially offset by the purchase of new trucks and trailers approximating $108.2 million and the remodel of our corporate headquarters and a driver training facility at our corporate headquarters in Tontitown, Arkansas during 2025. Accounts payable remained relatively flat year over year with a balance of $32.8 million at December 31, 2025 compared to a balance of $31.2 million at December 31, 2024. Accrued expenses and other liabilities increased from $14.6 million at December 31, 2024 to $41.1 million at December 31, 2025. The increase is primarily attributable to an increase in the Company’s auto-liability reserve during the fourth quarter of 2025. This increase in auto-liability reserve is due to an agreement in principle to settle a significant auto-liability claim in which the Company was a named defendant totaling $26.5 million after consideration of applicable insurance coverage. For 2026, we expect to purchase 570 new trucks and 700 trailers while continuing to sell or trade equipment that has reached the end of its life cycle. Management believes we will be able to finance our existing needs for working capital over the next twelve months, as well as acquisitions of revenue equipment and any other asset acquisitions or capital transactions during such period, with cash balances, cash flows from operations, and borrowings believed to be available from financing sources. We will continue to have significant capital requirements over the long-term, which may require us to incur debt or seek additional equity capital. The availability of additional capital will depend upon prevailing market conditions, the market price of our common stock and several other factors over which we have limited control, as well as our financial condition and results of operations. Nevertheless, based on our anticipated future cash flows and sources of financing that we expect will be available to us, we do not expect that we will experience any significant liquidity constraints in the foreseeable future. Inflation Inflation has an impact on most of our operating costs. Over the past three years, the effect of inflation has been significant. If the current rate of inflation persists, inflation, coupled with supply chain issues and international events, such factors could continue to result in increased costs for drivers, employee wages, equipment, fuel and other costs. - 28 - Table of Contents Adoption of Accounting Policies See “Item 8. Financial Statements and Supplementary Data, Note 1 to the Consolidated Financial Statements – Accounting Policies, Recent Accounting Pronouncements.” Critical Accounting Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to adopt accounting policies and make significant judgments and estimates that impact the amounts reported in our consolidated financial statements and accompanying notes. Therefore, the reported amounts of assets, liabilities, revenue, expenses, and associated disclosures of contingent assets and liabilities are affected by judgments and estimates. In some cases, there are alternative assumptions, policies, or estimation techniques that could be used. Management evaluates its assumptions, policies, and estimates on an ongoing basis, utilizing historical experience, and other methods considered reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates and assumptions, and it is possible that materially different amounts would be reported using differing estimates or assumptions. Management considers our critical accounting estimates to be those that require more significant judgments and estimates when we prepare our consolidated financial statements. Note 1 in Part II, Item 8 of this Annual Report describes the Company's accounting policies. The following discussion of accounting estimates should be read in conjunction with Note 1, as it provides additional insight into critical accounting estimates. Our critical accounting estimates include the following: Depreciation and Amortization. Depreciation of trucks and trailers is calculated by the straight-line method over the assets’ estimated useful lives, which generally range from three to ten years, down to an estimated salvage value at the end of the assets’ estimated useful lives. Management must use its judgment in the selection of estimated useful lives and salvage values for purposes of this calculation. In some cases, the Company has agreements in place with certain manufacturers whereby salvage values are guaranteed by the manufacturer. In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal. The depreciation of trucks and trailers over their estimated useful lives and the determination of any salvage value also require management to make judgments about future events. Therefore, the Company’s management periodically evaluates whether changes to estimated useful lives or salvage values are necessary to ensure these estimates accurately reflect the economic reality of the assets. This periodic evaluation may result in changes in the estimated lives and/or salvage values used by the Company to depreciate its assets, which can affect the amount of periodic depreciation expense recognized and, ultimately, the gain or loss on the disposal of an asset. Future changes in our estimated useful life or salvage value estimates, or fluctuations in market value that are not reflected in current estimates, could have a material effect on the Company’s consolidated financial statements. During the year ended December 31, 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. In accordance with ASC 250-10-45-17, this change is considered a change in accounting estimate and has been applied prospectively during the year ended December 31, 2024. The effect of this change increased depreciation expense by $24.7 million and increased basic and diluted loss per share by $0.86 net of tax, for the year ended December 31, 2024. The impact of this change on depreciation expense and earnings per share for the year ended December 31, 2025 was not material. Impairment of Long-Lived Assets. We review our property, plant, and equipment and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Indicators of impairment may include, but are not limited to, declining operating performance, adverse changes in market conditions, regulatory developments, or planned asset dispositions. - 29 - Table of Contents When an indicator of impairment is identified, we perform a recoverability test by comparing the undiscounted future cash flows expected to be generated by the asset group to its carrying amount. If the carrying amount exceeds the undiscounted cash flows, we recognize an impairment loss equal to the excess of the carrying amount over the asset’s fair value. Fair value is typically estimated using a combination of market prices (if available), appraisals, or discounted cash flow analyses. The determination of fair value involves significant management judgment, including assumptions about future revenue growth, operating costs, asset utilization, and discount rates. During the year ended December 31, 2025, management evaluated its long-lived assets for impairment and performed recoverability testing where indicators were present. Based on these analyses, management concluded that all asset groups were recoverable and no impairment charges were recorded in 2025. During the year ended December 31, 2024, management determined that the market conditions for used revenue equipment had deteriorated since its peak in 2022. This decline in market conditions prompted the requirement for a recoverability test and subsequent impairment charge against certain asset groups of used trucks and trailers. Management tested all applicable asset groups and determined certain asset groups of used trucks and trailers to be impaired beyond their carrying value. The impairment of these asset groups resulted in an impairment loss of approximately $6.4 million, or $0.22 loss per share, net of tax, during the year ended December 31, 2024. If our business is negatively impacted by prolonged economic downturns, the market for used equipment may decline and our ability to generate cash from the utilization of our equipment could decrease, necessitating future impairment charges. Conversely, an improvement in market conditions or operational performance may reduce the likelihood of future impairments. Management will continue to monitor our property, plant, and equipment and other long-lived assets for impairment as necessary. Additional impairment charges, if any, could have a material impact on our financial position and results of operations. Claims accruals. The Company is self-insured for health and workers' compensation benefits up to certain stop-loss limits. Such costs are accrued based on known claims and an estimate of incurred but not reported (IBNR) claims. IBNR claims are estimated using historical lag information and other data either provided by outside claims administrators or developed internally. Actual claims payments may differ from management’s estimates as a result of a number of factors, including evaluation of severity, increases in legal or medical costs, and other case-specific factors. The actual claims payments are charged against the Company’s recorded accrued claims liabilities and have been historically reasonable with respect to the estimates of the liabilities made under the Company’s methodology. However, the estimation process is generally subjective, and to the extent that future actual results materially differ from original estimates made by management, adjustments to recorded accruals may be necessary which could have a material effect on the Company’s consolidated financial statements. Based upon our 2025 health and workers' compensation expenses, a 10% increase in both claims incurred and IBNR claims would increase our annual health and workers' compensation expenses by approximately $0.8 million. On September 1, 2020, the Company elected to become self-insured for certain layers of auto liability claims in excess of $2.0 million. The Company specifically reserves for claims that are expected to exceed $2.0 million when fully developed, based on the facts and circumstances of those claims.