What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 266 added, 98 removed, 547 unchanged (40% of the section changed)

53 unchanged sentences

192,000,000 shares authorized;

82,774,936 shares at March 31, 2021, and 82,705,005 shares at December 31, 2020, issued and outstanding

82,880,930 shares at June 30, 2021, and 82,705,005 shares at December 31, 2020, issued and outstanding

Additional paid-in capital

13 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended March 31,

Ended June 30,

(In thousands, except per share information)

2 unchanged sentences

$ 212,384  

$ 455,488  

$ 431,030  

Operating expenses (income):

2 unchanged sentences

73,476  

148,294  

146,237  

Purchased transportation

1 unchanged sentence

36,165  

85,768  

76,610  

Fuel and fuel taxes

1 unchanged sentence

20,868  

60,944  

49,165  

Supplies and maintenance

3 unchanged sentences

24,061  

25,540  

25,972  

51,227  

51,399  

Operating taxes and licenses

2 unchanged sentences

20,837  

23,917  

Communications and utilities

Gain on disposition of revenue equipment

11,474  

10,908  

Total operating expenses

1 unchanged sentence

187,128  

402,972  

387,742  

Operating income

1 unchanged sentence

25,256  

52,516  

43,288  

Income before income taxes

1 unchanged sentence

25,269  

52,535  

43,398  

Income taxes expense

1 unchanged sentence

11,546  

$ 21,418  

$ 18,134  

$ 39,424  

$ 31,852  

Basic earnings per common share

1 unchanged sentence

$ 0.22  

$ 0.48  

$ 0.39  

Diluted earnings per common share

1 unchanged sentence

$ 0.22  

$ 0.47  

$ 0.38  

Dividends declared per common share

1 unchanged sentence

$ 0.027  

$ 0.08  

$ 0.053  

The accompanying notes are an integral part of these consolidated condensed financial statements.

10 unchanged sentences

18,006  

Repurchase and retirement of common stock

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

10 unchanged sentences

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

Employee taxes paid in exchange for shares withheld

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at June 30, 2021

82,881  

$ 85,578  

$ 567,234  

$ 653,641  

The accompanying notes are an integral part of these consolidated condensed financial statements.  

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

holders’

(In thousands)

Balance at December 31, 2019

5 unchanged sentences

13,718  

Repurchase and retirement of common stock

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

7 unchanged sentences

609,380  

18,134  

Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at June 30, 2020

82,662  

$ 83,816  

$ 544,755  

$ 629,398  

The accompanying notes are an integral part of these consolidated condensed financial statements.  

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended March 31,

Ended June 30,

(In thousands)

10 unchanged sentences

Changes in other current operating items:

14,764  

Prepaid expenses and other

9 unchanged sentences

38,995  

19,788  

Buildings and land, office equipment and other additions

8 unchanged sentences

14,545  

43,862  

Cash and cash equivalents:

8 unchanged sentences

$ 10,585  

$ 11,107  

Operating lease assets and liabilities acquired

5 unchanged sentences

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2021

SIX MONTHS ENDED JUNE 30, 2021

( 1 ) Consolidated Condensed Financial Statements

7 unchanged sentences

Basic and diluted earnings per common share were computed as follows:  

Ended March 31,

Ended June 30,

(In thousands, except per share amounts)

1 unchanged sentence

$ 18,134  

$ 39,424  

$ 31,852  

Basic earnings per common share - weighted-average shares

1 unchanged sentence

82,527  

82,799  

82,371  

Effect of dilutive stock options

2 unchanged sentences

83,133  

83,384  

83,018  

Basic earnings per common share

1 unchanged sentence

$ 0.22  

$ 0.48  

$ 0.39  

Diluted earnings per common share

1 unchanged sentence

$ 0.22  

Options totaling 193,750 and 294,450 equivalent shares for the three -month periods ended March 31, 2021 and 2020, respectively, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares, or because inclusion of average unrecognized compensation expense in the calculation would cause the options to be antidilutive.

Unvested performance unit awards totaling 40,263 and 77,066 equivalent shares for the three -month periods ended March 31, 2021 and 2020, respectively, were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

$ 0.47  

$ 0.38  

Options totaling 322,150 equivalent shares for each of the three -month and six -month periods ended June 30, 2021, and 280,950 and 301,350 equivalent shares for the three -month and six -month periods ended June 30, 2020, respectively, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares, or because inclusion of average unrecognized compensation expense in the calculation would cause the options to be antidilutive.

Unvested performance unit awards totaling 66,912 and 109,371 equivalent shares for the three -month and six -month periods ended June 30, 2021, respectively, and 99,987 equivalent shares for each of the three -month and six -month periods ended June 30, 2020, were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

( 3 ) Stock Split

3 unchanged sentences

We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $ 30.0 million which matures in August 2023.

At March 31, 2021, there was no outstanding principal balance on the facility.

At June 30, 2021, there was no outstanding principal balance on the facility.

As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $ 18.5 million and remaining borrowing availability of $ 11.5 million.

2 unchanged sentences

This facility bears interest at a variable rate based on the London Interbank Offered Rate or the lender’s Prime Rate, in each case plus/minus applicable margins.

The interest rate for the facility that would apply to outstanding principal balances was 0.78 % at March 31, 2021.

The interest rate for the facility that would apply to outstanding principal balances was 0.78 % at June 30, 2021.

Our credit facility prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25 % of our net income from the prior fiscal year.

1 unchanged sentence

This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at March 31, 2021 and December 31, 2020.

We were in compliance with all covenants at June 30, 2021 and December 31, 2020.

( 5 ) Related Party Transactions

1 unchanged sentence

Bauer, the chairman of the board and chief executive officer of BBI, is one of our directors.

We paid BBI $ 76,000 in the first three months of 2021 and $ 90,000 in the first three months of 2020 for fuel, tires and related services.

In addition, we paid $ 396,000 in the first three months of 2021 and $ 917,000 in the first three months of 2020 to tire manufacturers for tires that were provided by BBI.

We paid BBI $ 140,000 in the first six months of 2021 and $ 124,000 in the first six months of 2020 for fuel, tires and related services.

In addition, we paid $ 1.0 million in the first six months of 2021 and $ 1.2 million in the first six months of 2020 to tire manufacturers for tires that were provided by BBI.

BBI received commissions from the tire manufacturers related to these purchases.

5 unchanged sentences

We repurchased and retired 53,064 shares of common stock for $ 597,000 in the first quarter of 2020.

We did not repurchase any shares in the rest of 2020 or in the first quarter of 2021.

As of March 31, 2021, future repurchases of up to $ 33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

We did not repurchase any shares in the rest of 2020 or in the first six months of 2021.

As of June 30, 2021, future repurchases of up to $ 33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

( 7 ) Dividends

In 2010, we announced that our Board of Directors approved a regular cash dividend program to our stockholders, subject to approval each quarter.

A quarterly cash dividend of $ 0.04 per share of common stock was declared in the first quarter of 2021 which totaled $ 3.3 million.

A quarterly cash dividend of $ 0.027 per share of common stock was declared in the first quarter of 2020 which totaled $ 2.2 million.

A quarterly cash dividend of $ 0.04 per share of common stock was declared in each of the first two quarters of 2021 which totaled $ 6.6 million.

A quarterly cash dividend of $ 0.027 per share of common stock was declared in each of the first two quarters of 2020 which totaled $ 4.4 million.

Our ability to pay cash dividends is currently limited by restrictions contained in our revolving credit facility, which prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25 % of our net income from the prior fiscal year.

3 unchanged sentences

Stock Compensation .

During the first three months of 2021, there were no significant changes to the structure of our stock-based award plans.

Pre-tax compensation expense related to stock options and performance unit awards recorded in the first three months of 2021 and 2020 was $ 336,000 and $ 246,000 , respectively.

During the first six months of 2021, there were no significant changes to the structure of our stock-based award plans.

Pre-tax compensation expense related to stock options and performance unit awards recorded in the first six months of 2021 and 2020 was $ 1.3 million and $ 972,000 , respectively.

( 9 ) Termination of Deferred Compensation Plan

On May 5, 2020, our Compensation Committee and Board of Directors approved the termination of our Deferred Compensation Plan.

The plan is an unfunded, nonqualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis.

The termination is effective May 5, 2021.

The plan was an unfunded, nonqualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis.

The termination was effective May 5, 2021.

All shares of Company common stock within the plan will be distributed by May 5, 2022.

( 10 ) Fair Value of Financial Instruments

39 unchanged sentences

We base our calculation of the amount of revenue to record in each period for individual loads picking up in one period and delivering in the following period using the number of hours estimated to be incurred within each period applied to each estimated transaction price.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 2.4 million and $ 1.5 million as of March 31, 2021 and December 31, 2020, respectively.

We had no impairment losses on contract assets in the first quarter of 2021 or in 2020.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 2.5 million and $ 1.5 million as of June 30, 2021 and December 31, 2020, respectively.

We had no impairment losses on contract assets in the first six months of 2021 or in 2020.

We bill our customers for loads after delivery is complete with standard payment terms of 30 days.

6 unchanged sentences

We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.

Ended March 31,

Ended June 30,

(In thousands)

3 unchanged sentences

$ 85,966  

$ 167,552  

$ 169,823  

Truckload fuel surcharge revenue

1 unchanged sentence

23,304  

19,509  

Total Truckload revenue

1 unchanged sentence

94,200  

190,856  

189,332  

Dedicated revenue, net of fuel surcharge revenue

1 unchanged sentence

67,076  

134,129  

131,235  

Dedicated fuel surcharge revenue

1 unchanged sentence

24,229  

19,229  

Total Dedicated revenue

1 unchanged sentence

75,427  

158,358  

150,464  

Intermodal revenue, net of fuel surcharge revenue

1 unchanged sentence

18,542  

41,477  

39,136  

Intermodal fuel surcharge revenue

2 unchanged sentences

20,301  

47,596  

43,981  

Brokerage revenue

1 unchanged sentence

22,456  

58,678  

47,253  

Total operating revenue

1 unchanged sentence

$ 212,384  

$ 455,488  

$ 431,030  

Operating income:

1 unchanged sentence

$ 11,036  

$ 24,612  

$ 17,821  

10,617  

11,452  

19,553  

19,985  

Total operating income

1 unchanged sentence

$ 25,256  

Truckload segment depreciation expense was $ 13.2 million and $ 13.8 million, Dedicated segment depreciation expense was $ 10.7 million and $ 9.9 million, Intermodal segment depreciation expense was $ 1.5 million and $ 1.4 million, and Brokerage segment depreciation expense was $ 282,000 and $ 362,000 in the three -month periods ended March 31, 2021 and 2020, respectively.

$ 52,516  

$ 43,288  

Truckload segment depreciation expense was $ 12.9 million and $ 14.0 million, Dedicated segment depreciation expense was $ 10.7 million and $ 10.3 million, Intermodal segment depreciation expense was $ 1.6 million and $ 1.3 million, and Brokerage segment depreciation expense was $ 298,000 and $ 306,000 in the three -month periods ended June 30, 2021 and 2020, respectively.

Truckload segment depreciation expense was $ 26.1 million and $ 27.8 million, Dedicated segment depreciation expense was $ 21.4 million and $ 20.2 million, Intermodal segment depreciation expense was $ 3.1 million and $ 2.7 million, and Brokerage segment depreciation expense was $ 580,000 and $ 667,000 in the six -month periods ended June 30, 2021 and 2020, respectively.

( 13 ) Use of Estimates

30 unchanged sentences

In addition to the factors discussed above, our operating revenue is also affected by, among other things, the United States economy, inventory levels, the level of truck and rail capacity in the transportation market, a contracting driver market, severe weather conditions and specific customer demand.

Our operating revenue increased $4.4 million, or 2.0%, in the first three months of 2021 from the first three months of 2020.

Our operating revenue, net of fuel surcharges, increased $4.8 million, or 2.5%, compared with the first three months of 2020.

Truckload segment revenue, net of fuel surcharges, increased 0.1% from the first three months of 2020 due to an increase in our average revenue per tractor, substantially offset by a reduction in our average number of tractors.

Dedicated segment revenue, net of fuel surcharges, increased 4.3% from the first three months of 2020 primarily due to fleet growth driven by an increase in the number of Dedicated contracts we have with our customers.

Intermodal segment revenue, net of fuel surcharges, decreased 5.6% primarily due to decreased load volume.

Brokerage segment revenue increased 12.5% primarily due to an increase in revenue per load in the first three months of 2021.

Fuel surcharge revenue decreased slightly to $24.9 million in the first three months of 2021 from $25.2 million in the first three months of 2020.

Our operating revenue increased $24.5 million, or 5.7%, in the first six months of 2021 from the first six months of 2020.

Our operating revenue, net of fuel surcharges, increased $14.4 million, or 3.7%, compared with the first six months of 2020.

Truckload segment revenue, net of fuel surcharges, decreased 1.3% from the first six months of 2020 due to a reduction in our average number of tractors, despite an increase in our average revenue per tractor.

Dedicated segment revenue, net of fuel surcharges, increased 2.2% from the first six months of 2020 primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, increased 6.0% from the first six months of 2020 primarily due to an increase in revenue per load.

Brokerage segment revenue increased 24.2% primarily due to an increase in revenue per load in the first six months of 2021.

Fuel surcharge revenue increased to $53.7 million in the first six months of 2021 from $43.6 million in the first six months of 2020, primarily due to higher fuel costs.

Our profitability is impacted by the variable costs of transporting freight for our customers, fixed costs, and expenses containing both fixed and variable components.

10 unchanged sentences

This expense is included within purchased transportation in our consolidated condensed statements of operations.

Our operating income improved 33.1% from $18.0 million in the first three months of 2020 to $24.0 million in the first three months of 2021, a period in which we overcame the impact of the severe winter weather in February 2021.

Our operating income improved 21.3% to $52.5 million in the first six months of 2021 from $43.3 million in the first six months of 2020.

Our operating expenses as a percentage of operating revenue, or “operating ratio,”

improved to 89.2% in the first three months of 2021 from 91.8% in the first three months of 2020.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.9% in the first three months of 2021 from 90.7% in the first three months of 2020.

Our net income improved 31.3% to $18.0 million, or $0.22 per diluted share, in the first three months of 2021 from $13.7 million, or $0.17 per diluted share, in the first three months of 2020.

improved to 88.5% in the first six months of 2021 from 90.0% in the first six months of 2020.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.9% in the first six months of 2021 from 88.8% in the first six months of 2020.

Our net income improved 23.8% to $39.4 million, or $0.47 per diluted share, in the first six months of 2021 from $31.9 million, or $0.38 per diluted share, in the first six months of 2020.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers.

At March 31, 2021, we had $88.6 million of cash and cash equivalents, $635.0 million in stockholders’

At June 30, 2021, we had $80.7 million of cash and cash equivalents, $653.6 million in stockholders’

equity and no long-term debt outstanding.

In the first three months of 2021, net cash flows provided by operating activities of $43.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $16.3 million, to pay cash dividends of $3.3 million, and to upgrade regional operating facilities in the amount of $591,000, resulting in a $22.5 million increase in cash and cash equivalents.

In the first six months of 2021, net cash flows provided by operating activities of $83.4 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $59.9 million, to pay cash dividends of $6.6 million, and to construct and upgrade regional operating facilities in the amount of $1.0 million, resulting in a $14.5 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $74 million for the remainder of 2021.

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Our consolidated condensed financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented.

COVID-19 Update

The demand that our customers have from their customers within the COVID-19 pandemic for the food, beverages and other consumer goods that we transport and distribute varies significantly for each customer across their individual products, by region and in total –

with the level of demand by freight lane also subject to significant fluctuations.

Our continual redeployment of our drivers to match the changing freight demand by lane while minimizing empty miles has been and will continue to be imperative to the utilization of our revenue equipment and our operating revenue through this environment.

Our execution of our unique multifaceted business model across our diverse customer base, including our ability to quickly make data-driven decisions and adjustments utilizing our in-house operating technology, has and will continue to be one of our key strengths as we proactively navigate through this fast-changing landscape in providing our essential service.

Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we believe we are well-positioned for the sustainability of our business from a balance sheet perspective.

We fully embrace our responsibility to keep our valued employees safe, healthy and informed and have implemented measures including the following:

Throughout our headquarters and regional operating facilities, we are applying the social distancing guidelines by having a number of our office employees work from their homes and by staggering shift and break times for our maintenance personnel.

We have increased the frequency and extent of disinfecting and cleaning of each of our facilities and thoroughly disinfect all tractors prior to assignment to our drivers.

We provide hand sanitizer and masks to all of our employees.

When hand sanitizer was not available in March 2020, we purchased the components and prepared and distributed over 6,000 bottles.

We provide clear communication to our employees promoting essential healthy hygiene habits and assist in responsibly responding to potential symptoms including self-quarantining and testing.

Results of Operations

The following table sets forth for the periods indicated certain operating statistics regarding our revenue and operations:

Ended March 31,

Ended June 30,

Truckload Segment:

16 unchanged sentences

Includes tractors driven by both company-employed drivers and independent contractors.

Independent contractors provided 133 and 106 tractors as of March 31, 2021 and 2020, respectively.

Comparison of Three Months Ended March 31, 2021 to Three Months Ended March 31, 2020

Independent contractors provided 118 and 124 tractors as of June 30, 2021 and 2020, respectively.

Comparison of Three Months Ended June 30, 2021 to Three Months Ended June 30, 2020

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

19 unchanged sentences

Our operating revenue, net of fuel surcharges, increased $9.6 million, or 5.0%, to $203.7 million in the 2021 period from $194.0 million in the 2020 period.

This increase was due to a $3.1 million increase in Brokerage revenue, a $2.7 million increase in Dedicated revenue, net of fuel surcharges, and a $62,000 increase in Truckload revenue, net of fuel surcharges, partially offset by a $1.1 million decrease in Intermodal revenue, net of fuel surcharges.

Fuel surcharge revenue decreased slightly to $24.9 million in the 2021 period from $25.2 million in the 2020 period.

Truckload segment revenue decreased $217,000, or 0.2%, to $94.9 million in the 2021 period from $95.1 million in the 2020 period.

Truckload segment revenue, net of fuel surcharges, increased $62,000, or 0.1%, and was $83.9 million in each of the 2021 and 2020 periods.

During the 2021 period, an increase in our average revenue per tractor was substantially offset by a reduction in our average number of tractors.

The improvement in the operating ratio in the 2021 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers.

This increase was due to an $8.3 million increase in Brokerage revenue, a $3.5 million increase in Intermodal revenue, net of fuel surcharges, and a $151,000 increase in Dedicated revenue, net of fuel surcharges, partially offset by a $2.3 million decrease in Truckload revenue, net of fuel surcharges.

Fuel surcharge revenue increased by $10.4 million to $28.8 million in the 2021 period from $18.3 million in the 2020 period.

Truckload segment revenue increased $1.7 million, or 1.8%, to $95.9 million in the 2021 period from $94.2 million in the 2020 period.

Truckload segment revenue, net of fuel surcharges, decreased $2.3 million, or 2.7%, to $83.6 million in the 2021 period from $86.0 million in the 2020 period.

During the 2021 period, an increase in our average revenue per tractor was more than offset by a reduction in our average number of tractors.

The improvement in the operating ratio in the 2021 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, a reduction in insurance and claims expense and an increase in gain on disposition of revenue equipment, partially offset by increased net fuel expense.

Dedicated segment revenue increased $4.7 million, or 6.2%, to $80.1 million in the 2021 period from $75.4 million in the 2020 period.

Dedicated segment revenue, net of fuel surcharges, increased 4.3% primarily due to fleet growth driven by an increase in the number of Dedicated contracts we have with our customers.

The operating ratio was consistent in both the 2021 and 2020 periods.

Intermodal segment revenue decreased $1.7 million, or 7.1%, to $22.0 million in the 2021 period from $23.7 million in the 2020 period.

Intermodal segment revenue, net of fuel surcharges, decreased 5.6% from the 2020 period primarily due to a decrease in load volume.

The improvement in the operating ratio in the 2021 period was primarily due to a decrease in the amounts payable to railroads as a percentage of our revenue.

Dedicated segment revenue, net of fuel surcharges, increased 0.2% primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor.

The operating ratio was negatively impacted in the 2021 period by a decrease in our average revenue per tractor and higher net fuel and depreciation costs.

Intermodal segment revenue increased $5.3 million, or 26.1%, to $25.6 million in the 2021 period from $20.3 million in the 2020 period.

Intermodal segment revenue, net of fuel surcharges, increased 18.8% from the 2020 period primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2021 period was primarily due to increased rates with our customers and a decrease in the amounts payable to railroads as a percentage of our revenue.

Brokerage segment revenue increased $8.3 million, or 37.1%, to $30.8 million in the 2021 period from $22.5 million in the 2020 period primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2021 period was primarily due to a decrease in the amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue and increased rates with our customers.

The improvement in the operating ratio in the 2021 period was primarily due to decreases in various cost components across the segment and increased rates with our customers.

The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our unaudited consolidated condensed statements of operations, and those items as a percentage of operating revenue:

20 unchanged sentences

health insurance claims, changes in health care premiums and other factors.

Salaries, wages and benefits expense increased $237,000, or 0.3%, in the 2021 period from the 2020 period.

Bonus compensation expense for our non-driver employees increased by $1.1 million in the 2021 period.

This increase, along with other smaller increases in the components of salaries, wages and benefits, were partially offset by a $1.4 million decrease in employees’

health insurance expense as a result of lower self-insured medical claims.

Salaries, wages and benefits expense increased $1.8 million, or 2.5%, in the 2021 period from the 2020 period.

Along with other smaller increases in the components of salaries, wages and benefits, employees’

health insurance expense increased by $939,000 in the 2021 period as a result of higher self-insured medical claims.

Purchased transportation consists of amounts payable to railroads and carriers for transportation services we arrange in connection with Brokerage and Intermodal operations and to independent contractor providers of revenue equipment.

This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors.

Purchased transportation expense increased $320,000 in total, or 0.8%, in the 2021 period from the 2020 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased $3.2 million to $12.6 million in the 2021 period from $15.8 million in the 2020 period, primarily due to a decrease in the volume of loads moved on the rail.

Purchased transportation expense increased $8.8 million in total, or 24.4%, in the 2021 period from the 2020 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $1.4 million to $14.8 million in the 2021 period from $13.3 million in the 2020 period, primarily due to increased fuel surcharges from the railroads.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $7.0 million to $25.7 million in the 2021 period from $18.7 million in the 2020 period, primarily due to an increase in the cost per load within the tight freight market.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $1.1 million in the 2021 period as the number of independent contractors rose.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $438,000 in the 2021 period.

We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.

Fuel and fuel taxes increased by $640,000, or 2.3%, in the 2021 period from the 2020 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $332,000, or 5.3%, to $6.6 million in the 2021 period from $6.3 million in the 2020 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $2.6 million from $3.2 million in the 2020 period.

The United States Department of Energy, or DOE, national average cost of fuel increased slightly to $2.91 per gallon from $2.88 per gallon in the 2020 period.

Fuel and fuel taxes increased by $11.1 million, or 53.4%, in the 2021 period from the 2020 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $2.1 million, or 44.2%, to $6.8 million in the 2021 period from $4.7 million in the 2020 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $3.5 million from $2.2 million in the 2020 period.

The United States Department of Energy, or DOE, national average cost of fuel increased to $3.21 per gallon from $2.43 per gallon in the 2020 period.

Net fuel expense increased to 3.9% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 2.7% in the 2020 period.

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Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling.

Our supplies and maintenance expense decreased $1.2 million, or 9.9%, from the 2020 period primarily due to lower parts, tires and outside repair costs.

Our supplies and maintenance expense decreased $666,000, or 5.6%, from the 2020 period primarily due to lower outside repair and loading/unloading costs.

Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets.

The $432,000, or 1.7%, decrease in depreciation in the 2021 period was primarily due to a decrease in the size of our fleet of tractors.

We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment, which will result in greater depreciation over the useful life.

Insurance and claims consist of the costs of insurance premiums and accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’

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These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance.

The $838,000, or 6.8%, decrease in insurance and claims in the 2021 period was primarily due to a decrease in the cost of our self-insured auto liability claims, partially offset by increased insurance premiums.

The $2.2 million, or 19.3%, decrease in insurance and claims in the 2021 period was primarily due to decreases in the cost of our physical damage claims related to our revenue equipment and our self-insured auto liability claims, partially offset by increased insurance premiums.

Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims.

Gain on disposition of revenue equipment was $2.0 million in the 2021 period, up from $1.6 million in the 2020 period primarily due to an increase in the number of tractors and trailers sold.

Gain on disposition of revenue equipment was $5.3 million in the 2021 period, up from $2.2 million in the 2020 period primarily due to an increase in the number of tractors and trailers sold along with an increase in the average gain for the sales.

Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

The $714,000 decrease in other operating expenses in the 2021 period was primarily due to decreased costs associated with travel and entertainment.

Our operating income improved 33.1% to $24.0 million in the 2021 period from $18.0 million in the 2020 period as a result of the foregoing factors and by overcoming the impact of the severe winter weather in February 2021.

The $1.3 million increase in other operating expenses in the 2021 period was primarily due to increased costs associated with driver recruitment and chassis rental.

Our operating income improved 12.9% to $28.5 million in the 2021 period from $25.3 million in the 2020 period as a result of the foregoing factors.

Our operating expenses as a percentage of operating revenue, or “operating ratio,”

improved to 87.7% in the 2021 period from 88.1% in the 2020 period.

The operating ratio for our Truckload segment was 88.0% in the 2021 period and 92.9% in the 2020 period, for our Dedicated segment was 88.6% in each of the 2021 and 2020 periods, for our Intermodal segment was 93.4% in the 2021 period and 94.5% in the 2020 period, and for our Brokerage segment was 92.2% in the 2021 period and 94.3% in the 2020 period.

The operating ratio for our Truckload segment was 86.2% in the 2021 period and 88.3% in the 2020 period, for our Dedicated segment was 86.7% in the 2021 period and 84.8% in the 2020 period, for our Intermodal segment was 92.8% in the 2021 period and 95.3% in the 2020 period, and for our Brokerage segment was 90.7% in the 2021 period and 91.9% in the 2020 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.0% in the 2021 period from 87.0% in the 2020 period.

Our effective income tax rate increased to 25.0% in the 2021 period from 24.3% in the 2020 period.

Our effective income tax rate decreased to 24.9% in the 2021 period from 28.2% in the 2020 period.

The 2020 period included additional income tax expense of $1.1 million to adjust for certain discrete tax benefit reserves, which we evaluate based on the current facts, circumstances and information available.

As a result of the factors described above, net income improved 18.1% to $21.4 million, or $0.26 per diluted share, in the 2021 period from $18.1 million, or $0.22 per diluted share, in the 2020 period.

Comparison of Six Months Ended June 30, 2021 to Six Months Ended June 30, 2020

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

(Dollars in thousands)

Operating revenue:

Truckload revenue, net of fuel surcharge revenue

Truckload fuel surcharge revenue

Total Truckload revenue

Dedicated revenue, net of fuel surcharge revenue

Dedicated fuel surcharge revenue

Total Dedicated revenue

Intermodal revenue, net of fuel surcharge revenue

Intermodal fuel surcharge revenue

Total Intermodal revenue

Brokerage revenue

Total operating revenue

Operating income:

Total operating income

Operating ratio (1) :

Consolidated operating ratio

Represents operating expenses as a percentage of operating revenue.

Our operating revenue increased $24.5 million, or 5.7%, to $455.5 million in the 2021 period from $431.0 million in the 2020 period.

Our operating revenue, net of fuel surcharges, increased $14.4 million, or 3.7%, to $401.8 million in the 2021 period from $387.4 million in the 2020 period.

This increase was due to an $11.4 million increase in Brokerage revenue, a $2.9 million increase in Dedicated revenue, net of fuel surcharges, and a $2.3 million increase in Intermodal revenue, net of fuel surcharges, partially offset by a $2.3 million decrease in Truckload revenue, net of fuel surcharges.

Fuel surcharge revenue increased to $53.7 million in the 2021 period from $43.6 million in the 2020 period, primarily due to higher fuel costs.

Truckload segment revenue increased $1.5 million, or 0.8%, to $190.9 million in the 2021 period from $189.3 million in the 2020 period.

Truckload segment revenue, net of fuel surcharges, decreased $2.3 million, or 1.3%, to $167.6 million in the 2021 period from $169.8 million in the 2020 period.

The decrease was due to a reduction in our average number of tractors, despite an increase in our average revenue per tractor.

Dedicated segment revenue increased $7.9 million, or 5.2%, to $158.4 million in the 2021 period from $150.5 million in the 2020 period.

Dedicated segment revenue, net of fuel surcharges, increased 2.2% primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor.

The increase in the operating ratio was primarily due to a decrease in our average revenue per tractor and higher net fuel and depreciation costs in the 2021 period.

Intermodal segment revenue increased $3.6 million, or 8.2%, to $47.6 million in the 2021 period from $44.0 million in the 2020 period.

Intermodal segment revenue, net of fuel surcharges, increased 6.0% from the 2020 period primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2021 period was primarily due to increased rates with our customers and a decrease in the amounts payable to railroads as a percentage of our revenue.

Brokerage segment revenue increased $11.4 million, or 24.2%, to $58.7 million in the 2021 period from $47.3 million in the 2020 period primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2021 period was primarily due to decreases in various cost components across the segment and increased rates with our customers.

Percentage of

Operating Revenue

(Dollars in thousands)

Operating revenue

Operating expenses (income):

Salaries, wages and benefits

Purchased transportation

Fuel and fuel taxes

Supplies and maintenance

Operating taxes and licenses

Insurance and claims

Communications and utilities

Gain on disposition of revenue equipment

Total operating expenses

Operating income

Income before income taxes

Income taxes expense

Salaries, wages and benefits expense increased $2.1 million, or 1.4%, in the 2021 period from the 2020 period.

Bonus compensation expense for our non-driver employees increased by $797,000 and company driver compensation expense increased by $621,000 in the 2021 period.

These increases, along with other smaller increases in the components of salaries, wages and benefits, were partially offset by a $450,000 decrease in employees’

health insurance expense as a result of lower self-insured medical claims.

Purchased transportation expense increased $9.2 million in total, or 12.0%, in the 2021 period from the 2020 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased $1.8 million to $27.3 million in the 2021 period from $29.1 million in the 2020 period, primarily due to a decrease in the volume of loads moved on the rail.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $9.4 million to $49.3 million in the 2021 period from $39.9 million in the 2020 period, primarily due to an increase in the cost per load within the tight freight market.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $1.5 million in the 2021 period as the rates paid for independent contractors’

services rose.

We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.

Fuel and fuel taxes increased by $11.8 million, or 24.0%, in the 2021 period from the 2020 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $2.4 million, or 21.9%, to $13.4 million in the 2021 period from $11.0 million in the 2020 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $6.1 million from $5.4 million in the 2020 period.

The DOE national average cost of fuel increased to $3.06 per gallon from $2.66 per gallon in the 2020 period.

Net fuel expense increased to 3.9% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.2% in the 2020 period.

Our supplies and maintenance expense decreased $1.9 million, or 7.8%, from the 2020 period primarily due to lower parts, tires, outside repair and loading/unloading costs.

Our depreciation expense decreased $172,000, or 0.3%, in the 2021 period primarily due to a decrease in the size of our fleet of tractors.

Our insurance and claims expense decreased $3.1 million, or 12.9%, in the 2021 period primarily due to decreases in the cost of our self-insured auto liability claims and our physical damage claims related to our revenue equipment, partially offset by increased insurance premiums.

Gain on disposition of revenue equipment was $7.3 million in the 2021 period, up from $3.8 million in the 2020 period primarily due to an increase in the number of tractors and trailers sold along with an increase in the average gain for the sales.

Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

Our operating income improved 21.3% to $52.5 million in the 2021 period from $43.3 million in the 2020 period as a result of the foregoing factors.

Our operating expenses as a percentage of operating revenue, or “operating ratio,”

improved to 88.5% in the 2021 period from 90.0% in the 2020 period.

The operating ratio for our Truckload segment was 87.1% in the 2021 period and 90.6% in the 2020 period, for our Dedicated segment was 87.7% in the 2021 period and 86.7% in the 2020 period, for our Intermodal segment was 93.0% in the 2021 period and 94.9% in the 2020 period, and for our Brokerage segment was 91.4% in the 2021 period and 93.2% in the 2020 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.9% in the 2021 period from 88.8% in the 2020 period.

Our effective income tax rate decreased to 25.0% in the 2021 period from 26.6% in the 2020 period.

As a result of the factors described above, net income improved 23.8% to $39.4 million, or $0.47 per diluted share, in the 2021 period from $31.9 million, or $0.38 per diluted share, in the 2020 period.

Liquidity and Capital Resources  

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The table below reflects our net cash flows provided by operating activities, net cash flows used for investing activities and net cash flows used for financing activities for the periods indicated.

Ended March 31,

Ended June 30,

(In thousands)

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We repurchased and retired 53,064 shares of common stock for $597,000 in the first quarter of 2020.

We did not repurchase any shares in the rest of 2020 or in the first quarter of 2021.

As of March 31, 2021, future repurchases of up to $33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

In the first three months of 2020, net cash flows provided by operating activities of $43.5 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $34.6 million, to pay cash dividends of $2.2 million, and to upgrade regional operating facilities in the amount of $983,000, resulting in a $4.7 million increase in cash and cash equivalents.

We did not repurchase any shares in the rest of 2020 or in the first six months of 2021.

As of June 30, 2021, future repurchases of up to $33.4 million, or approximately 2.6 million shares, were available in the share repurchase program.

In the first six months of 2020, net cash flows provided by operating activities of $104.1 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $55.7 million, to pay cash dividends of $4.4 million, and to upgrade regional operating facilities in the amount of $2.2 million, resulting in a $43.9 million increase in cash and cash equivalents.

Beginning in 2018, our net cash flows have been increased by the new tax laws established by the Tax Cuts and Jobs Act of 2017, which reduces the federal corporate statutory income tax rate and establishes bonus depreciation that allows for full expensing of qualified assets.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $74 million for the remainder of 2021.

A quarterly cash dividend of $0.04 per share of common stock was declared in the first quarter of 2021 which totaled $3.3 million.

A quarterly cash dividend of $0.027 per share of common stock was declared in the first quarter of 2020 which totaled $2.2 million.

A quarterly cash dividend of $0.04 per share of common stock was declared in each of the first two quarters of 2021 which totaled $6.6 million.

A quarterly cash dividend of $0.027 per share of common stock was declared in each of the first two quarters of 2020 which totaled $4.4 million.

We currently expect to continue to pay quarterly cash dividends in the future.

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We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2023.

At March 31, 2021, there was no outstanding principal balance on the facility.

At June 30, 2021, there was no outstanding principal balance on the facility.

As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $18.5 million and remaining borrowing availability of $11.5 million.

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This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at March 31, 2021 and December 31, 2020.

The following is a summary of our contractual obligations as of March 31, 2021.

We were in compliance with all covenants at June 30, 2021 and December 31, 2020.

The following is a summary of our contractual obligations as of June 30, 2021.

Payments Due by Period

(In thousands)

Remainder of 2021

Purchase obligations for revenue equipment

Operating lease obligations

The obligation to issue shares of our common stock under our nonqualified deferred compensation plan at March 31, 2021 of 394,985 shares of Company common stock with a value of $6.7 million has been excluded from the above table.

The obligation to issue shares of our common stock under our nonqualified deferred compensation plan at June 30, 2021 of 296,957 shares of Company common stock with a value of $4.9 million has been excluded from the above table.

Off-balance Sheet Arrangements

Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of $17.0 million along with purchase obligations and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements at March 31, 2021.

Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of $18.5 million along with purchase obligations and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements at June 30, 2021.

Inflation and Fuel Costs

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in our Annual Report on Form 10-K for the year ended December 31, 2020.

We have reviewed and determined that those critical accounting policies remain our critical accounting policies as of and for the three months ended March 31, 2021, and that there have been no material changes to our critical accounting policies during this period.

We have reviewed and determined that those critical accounting policies remain our critical accounting policies as of and for the six months ended June 30, 2021, and that there have been no material changes to our critical accounting policies during this period.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements