What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-05 compared with 2021-11-08 · 100 added, 310 removed, 444 unchanged (48% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

September 30,

(In thousands, except share information)

33 unchanged sentences

31,395  

Accrued dividends

44,789  

Total current liabilities

14 unchanged sentences

192,000,000 shares authorized;

82,942,839 shares at September 30, 2021, and 82,705,005 shares at December 31, 2020, issued and outstanding

81,946,875 shares at March 31, 2022, and 83,034,404 shares at December 31, 2021, issued and outstanding

Additional paid-in capital

13 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended September 30,

Ended March 31,

(In thousands, except per share information)

9 unchanged sentences

Gain on disposition of revenue equipment

Gain on disposition of facility

Total operating expenses

4 unchanged sentences

Diluted earnings per common share

Dividends paid per common share

Dividends declared per common share

8 unchanged sentences

Share-based payment arrangement compensation expense

Dividends paid on common stock

Dividends on common stock

Balance at March 31, 2021

2 unchanged sentences

Share-based payment arrangement compensation expense

Dividends paid on common stock

Balance at June 30, 2021

Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards

Employee taxes paid in exchange for shares withheld

Share-based payment arrangement compensation expense

Accrued dividends on common stock

Balance at September 30, 2021

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

holders’

(In thousands)

Dividends on common stock

Balance at December 31, 2021

Repurchase and retirement of common stock

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

Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards

Employee taxes paid in exchange for shares withheld

Share-based payment arrangement compensation expense

Dividends paid on common stock

Dividends on common stock

Balance at March 31, 2022

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

Share-based payment arrangement compensation expense

Dividends paid on common stock

Balance at June 30, 2020

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

Share-based payment arrangement compensation expense

Dividends paid on common stock

Balance at September 30, 2020

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

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended September 30,

Ended March 31,

(In thousands)

3 unchanged sentences

Gain on disposition of revenue equipment

Gain on disposition of facility

Deferred income taxes

6 unchanged sentences

Net cash provided by operating activities

Cash flows used for investing activities:

Cash flows provided by/(used for) investing activities:

Revenue equipment additions

1 unchanged sentence

Buildings and land, office equipment and other additions

Proceeds from buildings and land, office equipment and other dispositions

Net cash used for investing activities

Net cash provided by/(used for) investing activities

Cash flows used for financing activities:

Dividends paid on common stock

Repurchase and retirement of common stock

Dividends on common stock

Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards

6 unchanged sentences

Supplemental non-cash disclosure:

Dividends declared and not yet paid

Change in property and equipment not yet paid

Operating lease assets and liabilities acquired

Supplemental disclosure of cash flow information:

Cash paid for:

Cash paid for income taxes

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

1 unchanged sentence

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2021

THREE MONTHS ENDED MARCH 31, 2022

( 1 ) Consolidated Condensed Financial Statements

7 unchanged sentences

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

Ended September 30,

Ended March 31,

(In thousands, except per share amounts)

$ 21,274  

$ 18,044  

$ 60,698  

$ 49,896  

Basic earnings per common share - weighted-average shares

82,907  

82,672  

82,835  

82,472  

Effect of dilutive stock options

Diluted earnings per common share - weighted-average shares and assumed conversions

83,372  

83,279  

83,380  

83,098  

Basic earnings per common share

$ 0.26  

$ 0.22  

$ 0.73  

$ 0.61  

Diluted earnings per common share

$ 0.26  

$ 0.22  

$ 0.73  

$ 0.60  

Options totaling 339,450 and 328,550 equivalent shares for the three -month and nine -month periods ended September 30, 2021, respectively, and 181,650 and 288,150 equivalent shares for the three -month and nine -month periods ended September 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 equivalent shares for each of the three -month and nine -month periods ended September 30, 2021, and 43,923 and 96,423 equivalent shares for the three -month and nine -month periods ended September 30, 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.

Options totaling 452,000 and 193,750 equivalent shares for the three -month periods ended March 31, 2022 and 2021, 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 equivalent shares for the three -month period ended March 31, 2021 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.

There were no such equivalent shares for the three -month period ended March 31, 2022.

( 3 ) Long-Term Debt

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

At March 31, 2022, 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.

1 unchanged sentence

As of that date, we also had outstanding standby letters of credit of $ 18.5 million on the facility.

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 September 30, 2021.

This facility bears interest at a variable rate based on the Term SOFR 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 1.15 % at March 31, 2022.

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.

Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $ 80 million in 2021 and of up to $ 60 million in 2020 were obtained from the lender in August 2021 and November 2020, respectively.

Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $ 80 million in each of 2022 and 2021 were obtained from the lender in March 2022 and August 2021, respectively.

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 September 30, 2021 and December 31, 2020.

We were in compliance with all covenants at March 31, 2022 and December 31, 2021.

( 4 ) 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 $ 234,000 in the first nine months of 2021 and $ 166,000 in the first nine months of 2020 for fuel, tires and related services.

In addition, we paid $ 1.5 million in the first nine months of 2021 and $ 1.7 million in the first nine months of 2020 to tire manufacturers for tires that were provided by BBI.

We paid BBI $ 105,000 in the first three months of 2022 and $ 76,000 in the first three months of 2021 for fuel, tires and related services.

In addition, we paid $ 269,000 in the first three months of 2022 and $ 396,000 in the first three months of 2021 to tire manufacturers for tires that were provided by BBI.

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

( 5 ) Share Repurchase Program

( 5 ) Share Repurchase Program and Subsequent Event

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $ 34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three -for- two stock split effected in the form of a stock dividend on August 13, 2020.

2 unchanged sentences

The repurchase program does not have an expiration date.

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 nine months of 2021.

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

We repurchased and retired 1.3 million shares of common stock for $ 25.0 million in the first quarter of 2022.

We did not repurchase any shares in 2021.

As of March 31, 2022, future repurchases of up to $ 8.4 million, or approximately 1.3 million shares, were available in the share repurchase program.

On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $ 50.0 million, or approximately 3.1 million shares of our common stock.

( 6 ) 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 paid in each of the first two quarters of 2021 which totaled $ 6.6 million.

We declared cash dividends in August 2021 which were paid in October 2021 totaling $ 44.8 million which consisted of a special dividend of $ 0.50 per common share, along with a quarterly cash dividend of $ 0.04 per share of common stock.

In 2020, we paid quarterly cash dividends of $ 0.027 per share of common stock in each of the first two quarters and of $ 0.04 per share of common stock in the third quarter which totaled $ 7.7 million.

A quarterly cash dividend of $ 0.06 per share of common stock was paid in the first quarter of 2022 which totaled $ 5.0 million.

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

( 7 ) Accounting for Share-based Payment Arrangement Compensation

1 unchanged sentence

Stock Compensation .

During the first nine 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 nine months of 2021 and 2020 was $ 1.8 million and $ 1.4 million, respectively.

During the first three months of 2022, 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 2022 and 2021 was $ 369,000 and $ 336,000 , respectively.

( 8 ) Termination of Deferred Compensation Plan

2 unchanged sentences

The termination was effective May 5, 2021.

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

All shares of Company common stock within the plan were distributed by March 31, 2022.

( 9 ) Fair Value of Financial Instruments

1 unchanged sentence

( 10 ) Commitments and Contingencies

We are committed to new revenue equipment purchases of $ 16.5 million and a building construction obligation of $ 2.9 million through the remainder of 2021.

We are committed to new revenue equipment purchases of $ 38.6 million and building construction obligations of $ 5.8 million through the remainder of 2022.

We also have commitments to purchase $ 23.1 million of new revenue equipment in 2023.

Operating lease obligation expenditures through 2024 total $ 583,000 .

35 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 $ 2.6 million and $ 1.5 million as of September 30, 2021 and December 31, 2020, respectively.

We had no impairment losses on contract assets in the first nine months 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 $ 3.4 million and $ 2.2 million as of March 31, 2022 and December 31, 2021, respectively.

We had no impairment losses on contract assets in the first three months of 2022 or in 2021.

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 September 30,

Ended March 31,

(In thousands)

3 unchanged sentences

$ 83,919  

$ 254,441  

$ 254,897  

Truckload fuel surcharge revenue

1 unchanged sentence

10,996  

28,058  

Total Truckload revenue

1 unchanged sentence

94,915  

290,473  

282,955  

Dedicated revenue, net of fuel surcharge revenue

1 unchanged sentence

66,902  

202,955  

200,237  

Dedicated fuel surcharge revenue

1 unchanged sentence

11,335  

28,564  

Total Dedicated revenue

1 unchanged sentence

78,237  

240,520  

228,801  

Intermodal revenue, net of fuel surcharge revenue

1 unchanged sentence

19,446  

64,193  

59,127  

Intermodal fuel surcharge revenue

10,150  

Total Intermodal revenue

1 unchanged sentence

22,004  

74,343  

65,957  

Brokerage revenue

1 unchanged sentence

27,890  

101,432  

69,328  

Total operating revenue

1 unchanged sentence

$ 223,046  

$ 706,768  

$ 647,041  

Operating income:

2 unchanged sentences

10,645  

$ 28,367  

11,024  

28,074  

31,009  

10,505  

Total operating income

1 unchanged sentence

$ 23,998  

$ 81,012  

$ 67,688  

Truckload segment depreciation expense was $ 12.9 million and $ 13.4 million, Dedicated segment depreciation expense was $ 10.6 million and $ 10.5 million, Intermodal segment depreciation expense was $ 1.6 million and $ 1.4 million, and Brokerage segment depreciation expense was $ 260,000 and $ 271,000 in the three -month periods ended September 30, 2021 and 2020, respectively.

Truckload segment depreciation expense was $ 39.0 million and $ 41.3 million, Dedicated segment depreciation expense was $ 32.0 million and $ 30.7 million, Intermodal segment depreciation expense was $ 4.7 million and $ 4.1 million, and Brokerage segment depreciation expense was $ 840,000 and $ 939,000 in the nine -month periods ended September 30, 2021 and 2020, respectively.

Truckload segment depreciation expense was $ 13.0 million and $ 13.2 million, Dedicated segment depreciation expense was $ 11.1 million and $ 10.7 million, Intermodal segment depreciation expense was $ 1.7 million and $ 1.5 million, and Brokerage segment depreciation expense was $ 338,000 and $ 282,000 in the three -month periods ended March 31, 2022 and 2021, respectively.

( 12 ) Use of Estimates

4 unchanged sentences

Ultimate results could differ from these estimates.

( 13 ) Subsequent Event

On October 3, 2021, we detected a cyberattack that accessed and encrypted files on servers utilized in the provision of our business.

The unauthorized access also included the download of certain data files.

Promptly upon discovery of the incident, we launched an investigation and engaged legal counsel and industry-leading incident response professionals.

We have notified law enforcement and will provide any notices that may be required by applicable law.

While the investigation of the incident is ongoing, we have implemented a series of containment and remediation measures to address this situation and reinforce the security of our information technology systems.

As a result, we were able to restore full functionality to our information technology systems quickly with minimal disruptions to our operations.

Based on our preliminary assessment and on the information currently known, we do not believe the incident will have a material impact on our business, operations or financial results.

Nonetheless, the investigation indicates that certain employee data may have been at risk during the event and, out of an abundance of caution, we are offering our employees with credit monitoring and identity restoration services at no cost for two years.

Management ’

24 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 $59.7 million, or 9.2%, in the first nine months of 2021 from the first nine months of 2020.

Our operating revenue, net of fuel surcharges, increased $39.4 million, or 6.8%, compared with the first nine months of 2020.

Truckload segment revenue, net of fuel surcharges, decreased 0.2% from the first nine 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 1.4% from the first nine months of 2020 primarily due to an increase in our average number of tractors.

Intermodal segment revenue, net of fuel surcharges, increased 8.6% from the first nine months of 2020 primarily due to an increase in revenue per load.

Brokerage segment revenue increased 46.3% primarily due to an increase in revenue per load in the first nine months of 2021.

Fuel surcharge revenue increased to $83.7 million in the first nine months of 2021 from $63.5 million in the first nine months of 2020, primarily due to higher fuel costs.

Our operating revenue increased $64.2 million, or 28.8%, in the first three months of 2022 from the first three months of 2021.

Our operating revenue, net of fuel surcharges, increased $47.1 million, or 23.8%, compared with the first three months of 2021.

Truckload segment revenue, net of fuel surcharges, increased 13.4% from the first three months of 2021 primarily due to an increase in our average revenue per tractor, despite a reduction in our average number of tractors.

Dedicated segment revenue, net of fuel surcharges, increased 17.2% from the first three months of 2021 primarily due to an increase in our average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, increased 31.7% from the first three months of 2021 primarily due to an increase in revenue per load.

Brokerage segment revenue increased 65.3% primarily due to increases in both the number of loads and in revenue per load in the first three months of 2022.

Fuel surcharge revenue increased to $42.0 million in the first three months of 2022 from $24.9 million in the first three months of 2021, 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 19.7% to $81.0 million in the first nine months of 2021 from $67.7 million in the first nine months of 2020.

Our operating income improved 49.4% to $35.9 million in the first three months of 2022 from $24.0 million in the first three months of 2021.

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

improved to 88.5% in the first nine months of 2021 from 89.5% in the first nine months of 2020.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.0% in the first nine months of 2021 from 88.4% in the first nine months of 2020.

Our net income improved 21.6% to $60.7 million, or $0.73 per diluted share, in the first nine months of 2021 from $49.9 million, or $0.60 per diluted share, in the first nine months of 2020.

improved to 87.5% in the first three months of 2022 from 89.2% in the first three months of 2021.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.4% in the first three months of 2022 from 87.9% in the first three months of 2021.

Our net income improved 52.9% to $27.5 million, or $0.33 per diluted share, in the first three months of 2022 from $18.0 million, or $0.22 per diluted share, in the first three months of 2021.

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

At September 30, 2021, we had $83.9 million of cash and cash equivalents, $630.1 million in stockholders’

At March 31, 2022, we had $66.5 million of cash and cash equivalents, $648.8 million in stockholders’

equity and no long-term debt outstanding.

In the first nine months of 2021, net cash flows provided by operating activities of $127.9 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $98.8 million, to pay cash dividends of $6.6 million, and to construct and upgrade regional operating facilities in the amount of $2.4 million, resulting in a $17.8 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $35 million for the remainder of 2021.

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

We declared cash dividends in August 2021 which were paid in October 2021 totaling $44.8 million which consisted of a special dividend of $0.50 per common share, along with a quarterly cash dividend of $0.04 per share of common stock.

In the first three months of 2022, net cash flows provided by operating activities of $39.9 million were primarily used to repurchase and retire 1.3 million shares of our common stock for $25.0 million, to pay cash dividends of $5.0 million, and to construct and upgrade regional operating facilities in the amount of $2.5 million, resulting in a $9.5 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $153 million in the remainder of 2022.

A quarterly cash dividend of $0.06 per share of common stock was paid in the first quarter of 2022 which totaled $5.0 million.

We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months.

2 unchanged sentences

These initiatives include (i) reducing idle time for our tractors by installing and tightly managing the use of auxiliary power units, which are powered by solar panels and provide climate control and electrical power for our drivers without idling the tractor engine, (ii) improving the energy efficiency of our newer, more aerodynamic and well-maintained tractor and trailer fleets by optimizing the equipment’s specifications, weight and tractor speed, equipping our tractors with automatic transmissions, converting the refrigeration units in our refrigerated trailers to the new, more-efficient CARB refrigeration units along with increasing the insulation in the trailer walls and installing trailer skirts, and using ultra-fuel efficient and wide-based tires, and (iii) upgrading all of our facilities to indoor and outdoor LED lighting along with converting all of our facilities to solar power.

Additionally, we are an active participant in the United States EPA SmartWay Transport Partnership, in which freight shippers, carriers, logistics companies and other voluntary stakeholders partner with the EPA to measure, benchmark and improve logistics operations to reduce their environmental footprint.

Additionally, we are an active participant in the United States Environmental Protection Agency, or EPA, SmartWay Transport Partnership, in which freight shippers, carriers, logistics companies and other voluntary stakeholders partner with the EPA to measure, benchmark and improve logistics operations to reduce their environmental footprint.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes discussions of operating revenue, net of fuel surcharge revenue;

8 unchanged sentences

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

Ended September 30,

Ended March 31,

Truckload Segment:

16 unchanged sentences

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

Independent contractors provided 101 and 132 tractors as of September 30, 2021 and 2020, respectively.

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

Independent contractors provided 87 and 133 tractors as of March 31, 2022 and 2021, respectively.

Comparison of Three Months Ended March 31, 2022 to Three Months Ended March 31, 2021

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:

September 30,

(Dollars in thousands)

18 unchanged sentences

Our operating revenue, net of fuel surcharges, increased $47.1 million, or 23.8%, to $245.3 million in the 2022 period from $198.2 million in the 2021 period.

This increase was due to a $20.7 million increase in Brokerage revenue, a $2.7 million increase in Intermodal revenue, net of fuel surcharges, and a $1.8 million increase in Truckload revenue, net of fuel surcharges, partially offset by a $176,000 decrease in Dedicated revenue, net of fuel surcharges.

Fuel surcharge revenue increased by $10.2 million to $30.1 million in the 2021 period from $19.9 million in the 2020 period.

This increase in the 2022 period was due to an $18.2 million increase in Brokerage revenue, an $11.5 million increase in Dedicated revenue, net of fuel surcharges, an $11.3 million increase in Truckload revenue, net of fuel surcharges, and a $6.2 million increase in Intermodal revenue, net of fuel surcharges.

Fuel surcharge revenue increased by $17.1 million to $42.0 million in the 2022 period from $24.9 million in the 2021 period primarily due to higher fuel costs.

Truckload segment revenue increased $17.9 million, or 18.8%, to $112.8 million in the 2022 period from $94.9 million in the 2021 period.

1 unchanged sentence

During the 2022 period, an increase in our average revenue per tractor was partially 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 and an increase in gain on disposition of revenue equipment, partially offset by increased company driver compensation expense.

The improvement in the operating ratio in the 2022 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, along with a decrease in depreciation expense and an increase in gain on disposition of revenue equipment, partially offset by increases in both company driver compensation expense and driver recruiting costs.

Dedicated segment revenue increased $18.5 million, or 23.7%, to $96.8 million in the 2022 period from $78.2 million in the 2021 period.

Dedicated segment revenue, net of fuel surcharges, decreased 0.3% primarily due to a decrease in our average number of tractors partially offset by an increase in our average revenue per tractor.

The operating ratio was negatively impacted in the 2021 period by increases in both company driver compensation expense and driver recruiting costs.

Dedicated segment revenue, net of fuel surcharges, increased 17.2% primarily due to an increase in our average revenue per tractor.

The operating ratio was negatively impacted in the 2022 period by increases in both company driver compensation expense and driver recruiting costs, which were partially offset by an increase in our average revenue per tractor due to increased rates with our customers.

Intermodal segment revenue increased $9.6 million, or 43.8%, to $31.6 million in the 2022 period from $22.0 million in the 2021 period.

2 unchanged sentences

Brokerage segment revenue increased $18.2 million, or 65.3%, to $46.1 million in the 2022 period from $27.9 million in the 2021 period primarily due to increases in both the number of loads and 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 carriers for transportation services which we arranged as a percentage of our Brokerage revenue.

The improvement in the operating ratio in the 2022 period was primarily due to 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:

1 unchanged sentence

Operating Revenue

September 30,

(Dollars in thousands)

9 unchanged sentences

Gain on disposition of revenue equipment

Gain on disposition of facility

Total operating expenses

7 unchanged sentences

Salaries, wages and benefits expense increased $16.4 million, or 22.4%, in the 2022 period from the 2021 period.

This increase resulted primarily from additional company driver compensation expense of $5.1 million.

Other smaller increases in the components of salaries, wages and benefits, were partially offset by a decrease in employees’

health insurance expense of $415,000 in the 2021 period as a result of lower self-insured medical claims.

This increase resulted primarily from additional company driver compensation expense of $11.8 million, a $1.5 million increase in employees’

health insurance expense as a result of higher self-insured medical claims and a $1.5 million increase in bonus compensation expense for our non-driver employees.

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.

1 unchanged sentence

Purchased transportation expense increased $16.5 million in total, or 40.6%, in the 2022 period from the 2021 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $182,000 to $14.1 million in the 2021 period from $13.9 million in the 2020 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $15.2 million to $38.8 million in the 2022 period from $23.6 million in the 2021 period, primarily due to an increase in the cost per load within the tight freight market and growth in load volume.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased $613,000 in the 2021 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $2.6 million to $15.2 million in the 2022 period from $12.6 million in the 2021 period.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased $1.3 million in the 2022 period.

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

3 unchanged sentences

The United States Department of Energy, or DOE, national average cost of fuel increased to $4.24 per gallon from $2.91 per gallon in the 2021 period.

This increase was a primary factor in our net fuel expense increasing to 4.1% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.8% in the 2020 period.

Despite this increase, our net fuel expense was 3.5% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, down from 3.9% in the 2021 period.

We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’

2 unchanged sentences

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 $755,000, or 6.1%, 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 $209,000, or 0.8%, decrease in depreciation in the 2021 period was primarily due to a decrease in the size of our fleet of tractors partially offset by increased depreciation for our refrigerated containers.

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.

Our supplies and maintenance expense increased $1.3 million, or 11.8%, from the 2021 period primarily due to higher outside repair, tires and parts costs.

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’

1 unchanged sentence

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 $742,000, or 6.6%, 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 workers’

compensation claims.

The $1.3 million, or 11.0%, increase in insurance and claims in the 2022 period was primarily due to increases in our self-insured auto liability, workers’

compensation and cargo claim costs.

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 $4.5 million in the 2021 period, up from $2.1 million in the 2020 period primarily due to an increase in the average gain for the tractor and trailer sales along with an increase in the number of trailers sold.

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

Gain on disposition of facility was $1.7 million in the 2020 period.

The disposition of the facility, located in Forest Park, GA, was part of our long-term program to expand and update the footprint of our facilities throughout the United States.

We held the facility as rental property since 2011 after constructing a larger facility in the area.

The $1.8 million increase in other operating expenses in the 2021 period was primarily due to increased costs associated with driver recruitment and retention.

Our operating income improved 16.8% to $28.5 million in the 2021 period from $24.4 million in the 2020 period as a result of the foregoing factors.

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

were 88.7% in each of the 2021 and 2020 periods.

The operating ratio for our Truckload segment was 88.3% in the 2021 period and 88.7% in the 2020 period, for our Dedicated segment was 89.6% in the 2021 period and 85.9% in the 2020 period, for our Intermodal segment was 89.4% in the 2021 period and 94.1% in the 2020 period, and for our Brokerage segment was 87.2% in the 2021 period and 93.1% in the 2020 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.1% in the 2021 period from 87.6% in the 2020 period.

Our effective income tax rate decreased to 25.4% in the 2021 period from 26.1% in the 2020 period.

As a result of the factors described above, net income improved 17.9% to $21.3 million, or $0.26 per diluted share, in the 2021 period from $18.0 million, or $0.22 per diluted share, in the 2020 period.

Comparison of Nine Months Ended September 30, 2021 to Nine Months Ended September 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:

September 30,

(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 $59.7 million, or 9.2%, to $706.8 million in the 2021 period from $647.0 million in the 2020 period.

Our operating revenue, net of fuel surcharges, increased $39.4 million, or 6.8%, to $623.0 million in the 2021 period from $583.6 million in the 2020 period.

This increase was due to a $32.1 million increase in Brokerage revenue, a $5.1 million increase in Intermodal revenue, net of fuel surcharges, and a $2.7 million increase in Dedicated revenue, net of fuel surcharges, partially offset by a $456,000 decrease in Truckload revenue, net of fuel surcharges.

Fuel surcharge revenue increased to $83.7 million in the 2021 period from $63.5 million in the 2020 period, primarily due to higher fuel costs.

Truckload segment revenue increased $7.5 million, or 2.7%, to $290.5 million in the 2021 period from $283.0 million in the 2020 period.

Truckload segment revenue, net of fuel surcharges, decreased $456,000, or 0.2%, to $254.4 million in the 2021 period from $254.9 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.

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, along with reductions in insurance and claims expense, supplies and maintenance expense, depreciation expense and an increase in gain on disposition of revenue equipment, partially offset by increased company driver compensation expense and net fuel expense.

Dedicated segment revenue increased $11.7 million, or 5.1%, to $240.5 million in the 2021 period from $228.8 million in the 2020 period.

Dedicated segment revenue, net of fuel surcharges, increased 1.4% primarily due to an increase in our average number of tractors.

The increase in the operating ratio was primarily due to higher company driver compensation expense, increased driver recruiting costs and higher net fuel expense, partially offset by lower insurance and claims expense in the 2021 period.

Intermodal segment revenue increased $8.4 million, or 12.7%, to $74.3 million in the 2021 period from $66.0 million in the 2020 period.

Intermodal segment revenue, net of fuel surcharges, increased 8.6% 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 $32.1 million, or 46.3%, to $101.4 million in the 2021 period from $69.3 million in the 2020 period primarily due to an increase in revenue per load.

Percentage of

Operating Revenue

September 30,

(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

Gain on disposition of facility

Total operating expenses

Operating income

Income before income taxes

Income taxes expense

Salaries, wages and benefits expense increased $8.4 million, or 3.8%, in the 2021 period from the 2020 period.

This increase resulted primarily from additional company driver compensation expense of $5.7 million and bonus compensation expense for our non-driver employees of $1.2 million.

These increases, along with other smaller increases in the components of salaries, wages and benefits, were partially offset by a $865,000 decrease in employees’

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

Purchased transportation expense increased $25.0 million in total, or 22.0%, in the 2021 period from the 2020 period.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased $1.6 million to $41.4 million in the 2021 period from $43.0 million in the 2020 period, primarily due to a decrease in the volume of loads moved on the rail, partially offset by higher fuel surcharges from the railroads.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $25.7 million to $84.2 million in the 2021 period from $58.5 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 $914,000 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 $21.4 million, or 29.2%, 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 $3.1 million, or 17.5%, to $20.7 million in the 2021 period from $17.6 million in the 2020 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $9.6 million from $7.6 million in the 2020 period.

The DOE national average cost of fuel increased to $3.16 per gallon from $2.58 per gallon in the 2020 period.

This increase was a primary factor in our net fuel expense increasing to 4.0% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.4% in the 2020 period.

Our supplies and maintenance expense decreased $2.6 million, or 7.2%, from the 2020 period primarily due to lower parts, outside repair and loading/unloading costs.

Our depreciation expense decreased $381,000, or 0.5%, in the 2021 period primarily due to a decrease in the size of our fleet of tractors partially offset by increased depreciation for our refrigerated containers.

Our insurance and claims expense decreased $3.8 million, or 10.9%, 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 $11.9 million in the 2021 period, up from $5.9 million in the 2020 period primarily due to an increase in the average gain for the tractor and trailer sales and an increase in the number of tractors and trailers sold.

Gain on disposition of revenue equipment was $4.5 million in the 2022 period, up from $2.0 million in the 2021 period primarily due to an increase in the average gain for our tractor and trailer sales, despite a decrease in the number of units sold.

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

Gain on disposition of facility was $1.7 million in the 2020 period.

The disposition of the facility, located in Forest Park, GA, was part of our long-term program to expand and update the footprint of our facilities throughout the United States.

We held the facility as rental property since 2011 after constructing a larger facility in the area.

The $2.4 million increase in other operating expenses in the 2021 period was primarily due to increased costs associated with driver recruitment and retention.

The $3.5 million increase in other operating expenses in the 2022 period was primarily due to increases in costs associated with driver recruitment and retention along with travel and meals expense.

Our operating income improved 49.4% to $35.9 million in the 2022 period from $24.0 million in the 2021 period as a result of the foregoing factors.

3 unchanged sentences

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.4% in the 2022 period from 87.9% in the 2021 period.

Our effective income tax rate decreased to 25.1% in the 2021 period from 26.4% 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.

Our effective income tax rate decreased to 23.2% in the 2022 period from 25.0% in the 2021 period primarily due to decreases in per diem and other non-deductible expenses.

As a result of the factors described above, net income improved 52.9% to $27.5 million, or $0.33 per diluted share, in the 2022 period from $18.0 million, or $0.22 per diluted share, in the 2021 period.

4 unchanged sentences

We have no capital expenditure requirements relating to those drivers who own their tractors or obtain financing through third parties.

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 September 30,

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

Ended March 31,

(In thousands)

Net cash flows provided by operating activities

Net cash flows used for investing activities

Net cash flows provided by/(used for) investing activities

Net cash flows (used for) financing activities

3 unchanged sentences

The repurchase program does not have an expiration date.

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 nine months of 2021.

As of September 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 nine months of 2020, net cash flows provided by operating activities of $154.7 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $91.6 million, to pay cash dividends of $7.7 million, and to upgrade regional operating facilities in the amount of $3.3 million, resulting in a $56.8 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 $35 million for the remainder of 2021.

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

We declared cash dividends in August 2021 which were paid in October 2021 totaling $44.8 million which consisted of a special dividend of $0.50 per common share, along with a quarterly cash dividend of $0.04 per share of common stock.

In 2020, we paid quarterly cash dividends of $0.027 per share of common stock in each of the first two quarters and of $0.04 per share of common stock in the third quarter which totaled $7.7 million.

We repurchased and retired 1.3 million shares of common stock for $25.0 million in the first quarter of 2022.

We did not repurchase any shares in 2021.

As of March 31, 2022, future repurchases of up to $8.4 million, or approximately 1.3 million shares, were available in the share repurchase program.

On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $50.0 million, or approximately 3.1 million shares of our common stock.

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.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $153 million in the remainder of 2022.

This amount includes commitments to purchase $38.6 million of new revenue equipment and $5.8 million in building construction through the remainder of 2022.

We also have commitments to purchase $23.1 million of new revenue equipment in 2023.

Additionally, operating lease obligations total $583,000 through 2024.

A quarterly cash dividend of $0.06 per share of common stock was paid in the first quarter of 2022 which totaled $5.0 million.

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

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

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

At March 31, 2022, 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.

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.

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

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.

Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in 2021 and of up to $60 million in 2020 were obtained from the lender in August 2021 and November 2020, respectively.

Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in each of 2022 and 2021 were obtained from the lender in March 2022 and August 2021, respectively.

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 September 30, 2021 and December 31, 2020.

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

Payments Due by Period

(In thousands)

Purchase obligations for revenue equipment

Building construction obligation

Operating lease obligations

The obligation to issue shares of our common stock under our nonqualified deferred compensation plan at September 30, 2021 of 197,970 shares of Company common stock with a value of $3.1 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 $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 September 30, 2021.

Inflation and Fuel Costs

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations.

During the last two years, the most significant effects of inflation have been on revenue equipment prices, accident claims, health insurance and employee compensation.

We attempt to limit the effects of inflation through increases in freight rates and cost control efforts.

In addition to inflation, fluctuations in fuel prices can affect our profitability.

We require substantial amounts of fuel to operate our tractors and power the temperature-control units on our trailers.

Substantially all of our contracts with customers contain fuel surcharge provisions.

Although we historically have been able to pass through a significant portion of long-term increases in fuel prices and related taxes to customers in the form of fuel surcharges and higher rates, such increases usually are not fully recovered.

These fuel surcharge provisions are not effective in mitigating the fuel price increases related to non-revenue miles or fuel used while the tractor is idling.

We were in compliance with all covenants at March 31, 2022 and December 31, 2021.

Other than our obligations for revenue equipment and building construction purchases and operating lease expenditures, along with our outstanding standby letters of credit to guarantee settlement of self-insurance claims, which are each mentioned above, we did not have any material off-balance sheet arrangements at March 31, 2022.

Our tractor productivity generally decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments.

At the same time, operating expenses generally increase, with harsh weather creating higher accident frequency, increased claims, lower fuel efficiency and more equipment repairs.

Critical Accounting Policies

Our critical accounting policies are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Critical Accounting Policies”

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 nine months ended September 30, 2021, and that there have been no material changes to our critical accounting policies during this period.

Critical Accounting Estimates

There have been no material changes in the critical accounting estimates disclosed by us under Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Critical Accounting Estimates contained in the Annual Report on Form 10-K for the year ended December 31, 2021.

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