What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-08 · 132 added, 104 removed, 474 unchanged (33% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

September 30,

(In thousands, except share information)

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192,000,000 shares authorized;

81,014,564 shares at June 30, 2022, and 83,034,404 shares at December 31, 2021, issued and outstanding

81,096,632 shares at September 30, 2022, and 83,034,404 shares at December 31, 2021, issued and outstanding

Additional paid-in capital

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended June 30,

Ended September 30,

(In thousands, except per share information)

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Diluted earnings per common share

Dividends paid per common share

Dividends declared per common share

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Share-based payment arrangement compensation expense

Dividends on common stock

Dividends paid on common stock

Balance at March 31, 2022

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Share-based payment arrangement compensation expense

Dividends on common stock

Dividends paid on common stock

Balance at June 30, 2022

Issuance of common stock from share-based payment arrangement exercises

Share-based payment arrangement compensation expense

Dividends paid on common stock

Balance at September 30, 2022

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

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Share-based payment arrangement compensation expense

Dividends on common stock

Dividends paid on common stock

Balance at March 31, 2021

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Share-based payment arrangement compensation expense

Dividends on common stock

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.  

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended June 30,

Ended September 30,

(In thousands)

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Repurchase and retirement of common stock

Dividends on common stock

Dividends paid on common stock

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

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Supplemental non-cash disclosure:

Dividends declared and not yet paid

Change in property and equipment not yet paid

Supplemental disclosure of cash flow information:

Cash paid for income taxes

Cash paid for:

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

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2022

NINE MONTHS ENDED SEPTEMBER 30, 2022

(1) Consolidated Condensed Financial Statements

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

Ended June 30,

Ended September 30,

(In thousands, except per share amounts)

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Diluted earnings per common share

Options totaling 486,000 and 495,500 equivalent shares for the three-month and six-month periods ended June 30, 2022, respectively, and 322,150 equivalent shares for each of the three-month and six-month periods ended June 30, 2021, 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, 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 each of the three-month and six-month periods ended June 30, 2022.

Options totaling 512,500 and 535,600 equivalent shares for the three-month and nine-month periods ended September 30, 2022, respectively, and 339,450 and 328,550 equivalent shares for the three-month and nine-month periods ended September 30, 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 16,590 equivalent shares for each of the three-month and nine-month periods ended September 30, 2022, and 66,912 equivalent shares for each of the three-month and nine-month periods ended September 30, 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.

(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 June 30, 2022, there was no outstanding principal balance on the facility.

In August 2022, we entered into a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $ 30.0 million which matures in August 2027.

The credit agreement amends, restates and continues in its entirety our previous credit agreement, as amended.

At September 30, 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 $ 16.1 million and remaining borrowing availability of $ 13.9 million.

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

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 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 4.25 % at June 30, 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.

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

This facility bears interest at a variable rate based on the Term SOFR Rate plus applicable margins.

The interest rate for the facility that would apply to outstanding principal balances was 6.25 % at September 30, 2022.

Our credit agreement effective in August 2022 prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of $ 150 million.

Our previous credit agreement prohibited us from making such payments 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 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 June 30, 2022 and December 31, 2021.

The current and previous credit agreements also contain 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, 2022 and December 31, 2021.

(4) Related Party Transactions

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

We paid BBI $ 252,000 in the first six months of 2022 and $ 140,000 in the first six months of 2021 for fuel, tires and related services.

In addition, we paid $ 790,000 in the first six months of 2022 and $ 1.0 million in the first six months of 2021 to tire manufacturers for tires that were provided by BBI.

We paid BBI $ 377,000 in the first nine months of 2022 and $ 234,000 in the first nine months of 2021 for fuel, tires and related services.

In addition, we paid $ 1.4 million in the first nine months of 2022 and $ 1.5 million in the first nine 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

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 Director s 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.

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 .0 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.

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.

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We repurchased and retired 1.3 million shares of common stock for $ 25.0 million in the first quarter of 2022, and 963,000 shares of common stock for $ 16.8 million in the second quarter of 2022.

We did not repurchase any shares in 2021.

As of June 30, 2022, future repurchases of up to $ 33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

We did not repurchase any shares in the third quarter of 2022 or in 2021.

As of September 30, 2022, future repurchases of up to $ 33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

(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 $ 0.06 per share of common stock was paid in each of the first two quarters of 2022 which totaled $ 9.8 million.

A quarterly cash dividend of $ 0.06 per share of common stock was paid in each of the first three quarters of 2022 which totaled $ 14.7 million.

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.

Accounting for Share-based Payment Arrangement Compensation

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.

(7) Accounting for Share-based Payment Arrangement Compensation

We account for share-based payment arrangements in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 718, Compensation –

Stock Compensation .

During the first six 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 six months of 2022 and 2021 was $ 1.6 million and $ 1.3 million, respectively.

Termination of Deferred Compensation Plan

During the first nine 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 nine months of 2022 and 2021 was $ 2.2 million and $ 1.8 million, respectively.

(8) Termination of Deferred Compensation Plan

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

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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 $ 3.5 million and $ 2.2 million as of June 30, 2022 and December 31, 2021, respectively.

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

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 $ 2.2 million as of September 30, 2022 and December 31, 2021, respectively.

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

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

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

Ended June 30,

Ended September 30,

(In thousands)

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Total operating income

Truckload segment depreciation expense was $ 13.5 million and $ 12.9 million, Dedicated segment depreciation expense was $ 11.2 million and $ 10.7 million, Intermodal segment depreciation expense was $ 1.9 million and $ 1.6 million, and Brokerage segment depreciation expense was $ 349,000 and $ 298,000 in the three-month periods ended June 30, 2022 and 2021, respectively.

Truckload segment depreciation expense was $ 26.4 million and $ 26.1 million, Dedicated segment depreciation expense was $ 22.3 million and $ 21.4 million, Intermodal segment depreciation expense was $ 3.6 million and $ 3.1 million, and Brokerage segment depreciation expense was $ 687,000 and $ 580,000 in the six-month periods ended June 30, 2022 and 2021, respectively.

Truckload segment depreciation expense was $ 14.5 million and $ 12.9 million, Dedicated segment depreciation expense was $ 11.5 million and $ 10.6 million, Intermodal segment depreciation expense was $ 2.0 million and $ 1.6 million, and Brokerage segment depreciation expense was $ 383,000 and $ 260,000 in the three-month periods ended September 30, 2022 and 2021, respectively.

Truckload segment depreciation expense was $ 40.9 million and $ 39.0 million, Dedicated segment depreciation expense was $ 33.8 million and $ 32.0 million, Intermodal segment depreciation expense was $ 5.6 million and $ 4.7 million, and Brokerage segment depreciation expense was $ 1.1 million and $ 840,000 in the nine-month periods ended September 30, 2022 and 2021, respectively.

(12) Use of Estimates

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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 $161.4 million, or 35.4%, in the first six months of 2022 from the first six months of 2021.

Our operating revenue, net of fuel surcharges, increased $112.6 million, or 28.0%, compared with the first six months of 2021.

Truckload segment revenue, net of fuel surcharges, increased 17.6% from the first six months of 2021 primarily due to an increase in our average revenue per tractor, despite a slight reduction in our average number of tractors.

Dedicated segment revenue, net of fuel surcharges, increased 21.4% from the first six months of 2021 primarily due to an increase in our average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, increased 28.5% from the first six months of 2021 primarily due to an increase in revenue per load.

Brokerage segment revenue increased 72.7% primarily due to increases in both the number of loads and in revenue per load in the first six months of 2022.

Fuel surcharge revenue increased to $102.4 million in the first six months of 2022 from $53.7 million in the first six months of 2021, primarily due to higher fuel costs.

Our operating revenue increased $234.5 million, or 33.2%, in the first nine months of 2022 from the first nine months of 2021.

Our operating revenue, net of fuel surcharges, increased $160.8 million, or 25.8%, compared with the first nine months of 2021.

Truckload segment revenue, net of fuel surcharges, increased 19.0% from the first nine months of 2021, primarily due to an increase in our average revenue per tractor.

Dedicated segment revenue, net of fuel surcharges, increased 22.7% from the first nine months of 2021, primarily due to an increase in our average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, increased 20.9% from the first nine months of 2021, primarily due to an increase in revenue per load.

Brokerage segment revenue increased 52.1%, primarily due to increases in both the number of loads and in revenue per load in the first nine months of 2022.

Fuel surcharge revenue increased to $157.5 million in the first nine months of 2022 from $83.7 million in the first nine 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.

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

Our operating income improved 46.2% to $76.8 million in the first six months of 2022 from $52.5 million in the first six months of 2021.

Our operating income improved 36.5% to $110.6 million in the first nine months of 2022 from $81.0 million in the first nine months of 2021.

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

improved to 87.6% in the first six months of 2022 from 88.5% in the first six months of 2021.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.1% in the first six months of 2022 from 86.9% in the first six months of 2021.

Our net income improved 50.1% to $59.2 million, or $0.72 per diluted share, in the first six months of 2022 from $39.4 million, or $0.47 per diluted share, in the first six months of 2021.

improved to 88.3% in the first nine months of 2022 from 88.5% in the first nine months of 2021.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.9% in the first nine months of 2022 from 87.0% in the first nine months of 2021.

Our net income improved 39.8% to $84.8 million, or $1.03 per diluted share, in the first nine months of 2022 from $60.7 million, or $0.73 per diluted share, in the first nine months of 2021.

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

At June 30, 2022, we had $68.4 million of cash and cash equivalents, $660.2 million in stockholders’

At September 30, 2022, we had $71.5 million of cash and cash equivalents, $682.4 million in stockholders’

equity and no long-term debt outstanding.

In the first six months of 2022, net cash flows provided by operating activities of $98.7 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $30.3 million, to repurchase and retire 2.3 million shares of our common stock for $41.8 million, to pay cash dividends of $9.8 million, and to construct and upgrade regional operating facilities in the amount of $3.8 million, resulting in an $11.4 million increase in cash and cash equivalents.

In the first nine months of 2022, net cash flows provided by operating activities of $163.2 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $82.0 million, to repurchase and retire 2.3 million shares of our common stock for $41.8 million, to pay cash dividends of $14.7 million, and to construct and upgrade regional operating facilities in the amount of $8.7 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 $68 million for the remainder of 2022.

A quarterly cash dividend of $0.06 per share of common stock was paid in each of the first two quarters of 2022 which totaled $9.8 million.

A quarterly cash dividend of $0.06 per share of common stock was paid in each of the first three quarters of 2022 which totaled $14.7 million.

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

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

Ended June 30,

Ended September 30,

Truckload Segment:

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

Independent contractors provided 85 and 118 tractors as of June 30, 2022 and 2021, respectively.

Comparison of Three Months Ended June 30, 2022 to Three Months Ended June 30, 2021

Independent contractors provided 90 and 101 tractors as of September 30, 2022 and 2021, respectively.

Comparison of Three Months Ended September 30, 2022 to Three Months Ended September 30, 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)

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Our operating revenue, net of fuel surcharges, increased $48.2 million, or 21.8%, to $269.3 million in the 2022 period from $221.2 million in the 2021 period.

This increase in the 2022 period was due to a $24.5 million increase in Brokerage revenue, an $18.2 million increase in Truckload revenue, net of fuel surcharges, a $17.2 million increase in Dedicated revenue, net of fuel surcharges, and a $5.7 million increase in Intermodal revenue, net of fuel surcharges.

This increase in the 2022 period was due to a $19.0 million increase in Truckload revenue, net of fuel surcharges, a $17.4 million increase in Dedicated revenue, net of fuel surcharges, a $10.2 million increase in Brokerage revenue, and a $1.6 million increase in Intermodal revenue, net of fuel surcharges.

Fuel surcharge revenue increased by $25.0 million to $55.1 million in the 2022 period from $30.1 million in the 2021 period primarily due to higher fuel costs.

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Truckload segment revenue, net of fuel surcharges, increased $19.0 million, or 21.9%, to $105.9 million in the 2022 period from $86.9 million in the 2021 period.

During the 2022 period, an increase in our average revenue per tractor was partially offset by a slight reduction in our average number of tractors.

The higher operating ratio in the 2022 period was primarily due to increased insurance and claims expense and driver recruiting costs, partially offset by an increase in our average revenue per tractor due to increased rates with our customers.

During the 2022 period, an increase in our average revenue per tractor was coupled with an increase in our average number of tractors.

The operating ratio in the 2022 period was adversely impacted by a decrease in gain on disposition of revenue equipment.

Dedicated segment revenue increased $28.1 million, or 34.1%, to $110.2 million in the 2022 period from $82.2 million in the 2021 period.

Dedicated segment revenue, net of fuel surcharges, increased 25.5% primarily due to an increase in our average revenue per tractor.

The operating ratio was negatively impacted in the 2022 period by increases in company driver compensation expense, insurance and claims 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.

Dedicated segment revenue, net of fuel surcharges, increased 25.2%, primarily due to an increase in our average revenue per tractor, along with growth in our fleet.

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

Intermodal segment revenue increased $5.2 million, or 19.3%, to $31.9 million in the 2022 period from $26.7 million in the 2021 period.

Intermodal segment revenue, net of fuel surcharges, increased 7.0% from the 2021 period, primarily due to an increase in revenue per load.

The improvement in the operating ratio in the 2022 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.

The operating ratio in the 2022 period was adversely impacted by a decrease in our intermodal volumes and margins resulting from weakness in rail service aggravated by the threat of a rail labor strike in mid-September 2022.

Brokerage segment revenue increased $10.2 million, or 23.9%, to $53.0 million in the 2022 period from $42.8 million in the 2021 period, primarily due to an increase in the number of loads.

The improvement in the operating ratio in the 2022 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 operating ratio in the 2022 period was negatively impacted by an increase in the amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue.

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:

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Operating Revenue

September 30,

(Dollars in thousands)

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Salaries, wages and benefits expense increased $18.7 million, or 23.0%, in the 2022 period from the 2021 period.

This increase resulted primarily from additional company driver compensation expense of $15.0 million, a $1.7 million increase in bonus compensation expense for our non-driver employees and a $930,000 increase in employees’

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

This increase resulted primarily from additional company driver compensation expense of $14.5 million in the period.

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.

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Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $2.3 million to $16.4 million in the 2022 period from $14.1 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 $1.1 million in the 2022 period.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased $114,000 in the 2022 period.

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

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The United States Department of Energy, or DOE, national average cost of fuel increased to $5.15 per gallon from $3.36 per gallon in the 2021 period.

Despite this increase, our net fuel expense was 3.8% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, down from 3.9% in the 2021 period.

Despite this increase, our net fuel expense was 4.0% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, down slightly from 4.1% in the 2021 period.

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

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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 increased $2.2 million, or 19.6%, from the 2021 period primarily due to higher outside repair, parts and tires costs, along with increased tolls and loading/unloading 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’

compensation claims.

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 $4.1 million, or 43.1%, increase in insurance and claims in the 2022 period was primarily due to increases in our self-insured auto liability claim costs and in the cost of physical damage claims related to our revenue equipment.

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.

Our supplies and maintenance expense increased $3.2 million, or 27.1%, from the 2021 period, primarily due to higher parts, outside repair and tire costs, along with increased loading/unloading costs.

Gain on disposition of revenue equipment was $1.1 million in the 2022 period, down from $4.5 million in the 2021 period primarily due to a decrease in the number of units sold, partially offset by an increase in the average gain for our tractor and trailer 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 $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.

The $3.1 million increase in other operating expenses in the 2022 period was primarily due to increases in costs associated with driver recruitment and retention, travel and meals, and chassis rental.

Our operating income improved 18.5% to $33.8 million in the 2022 period from $28.5 million in the 2021 period as a result of the foregoing factors.

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The operating ratio for our Truckload segment was 88.9% in the 2022 period and 88.3% in the 2021 period, for our Dedicated segment was 88.2% in the 2022 period and 89.6% in the 2021 period, for our Intermodal segment was 97.6% in the 2022 period and 89.4% in the 2021 period, and for our Brokerage segment was 89.3% in the 2022 period and 87.2% in the 2021 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 84.8% in the 2022 period from 86.0% in the 2021 period.

Our effective income tax rate decreased to 22.7% in the 2022 period from 24.9% in the 2021 period due to a change in unrecognized tax benefits for prior periods resulting from resolution of an IRS audit, along with decreases in per diem and other non-deductible expenses.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 87.5% in the 2022 period and 87.1% in the 2021 period.

Our effective income tax rate decreased to 24.6% in the 2022 period from 25.4% 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 20.6% to $25.6 million, or $0.32 per diluted share, in the 2022 period from $21.3 million, or $0.26 per diluted share, in the 2021 period.

Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021

Comparison of Nine Months Ended September 30, 2022 to Nine Months Ended September 30, 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)

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Our operating revenue, net of fuel surcharges, increased $160.8 million, or 25.8%, to $783.8 million in the 2022 period from $623.0 million in the 2021 period.

This increase in the 2022 period was due to a $42.7 million increase in Brokerage revenue, a $29.4 million increase in Truckload revenue, net of fuel surcharges, a $28.7 million increase in Dedicated revenue, net of fuel surcharges, and an $11.8 million increase in Intermodal revenue, net of fuel surcharges.

This increase in the 2022 period was due to a $52.9 million increase in Brokerage revenue, a $48.4 million increase in Truckload revenue, net of fuel surcharges, a $46.0 million increase in Dedicated revenue, net of fuel surcharges, and a $13.4 million increase in Intermodal revenue, net of fuel surcharges.

Fuel surcharge revenue increased by $73.8 million to $157.5 million in the 2022 period from $83.7 million in the 2021 period primarily due to higher fuel costs.

Truckload segment revenue increased $78.7 million, or 27.1%, to $369.1 million in the 2022 period from $290.5 million in the 2021 period.

Truckload segment revenue, net of fuel surcharges, increased $29.4 million, or 17.6%, to $197.0 million in the 2022 period from $167.6 million in the 2021 period.

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 2022 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, partially offset by increases in company driver compensation expense, driver recruiting costs and insurance and claims expense.

Truckload segment revenue, net of fuel surcharges, increased $48.4 million, or 19.0%, to $302.9 million in the 2022 period from $254.4 million in the 2021 period, primarily due to an increase in our average revenue per tractor.

The operating ratio was 87.5% in each period.

Dedicated segment revenue increased $76.8 million, or 31.9%, to $317.3 million in the 2022 period from $240.5 million in the 2021 period.

Dedicated segment revenue, net of fuel surcharges, increased 22.7%, 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.

The operating ratio slightly improved in the 2022 period.

Intermodal segment revenue increased $26.2 million, or 35.2%, to $100.5 million in the 2022 period from $74.3 million in the 2021 period.

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Brokerage segment revenue increased $52.9 million, or 52.1%, to $154.3 million in the 2022 period from $101.4 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 2022 period was primarily due to increased rates with our customers.

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Operating Revenue

September 30,

(Dollars in thousands)

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Despite this increase, our net fuel expense was 3.7% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, down from 4.0% in the 2021 period.

Our supplies and maintenance expense increased $3.5 million, or 15.7%, from the 2021 period primarily due to higher outside repair, parts and tires costs, along with increased tolls and loading/unloading costs.

Our supplies and maintenance expense increased $6.7 million, or 19.6%, from the 2021 period, primarily due to higher parts, outside repair and tire costs, along with increased loading/unloading costs.

compensation claims.

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 $6.8 million, or 21.6%, increase in insurance and claims in the 2022 period was primarily due to increases in our self-insured auto liability claim costs and in the cost of physical damage claims related to our revenue equipment.

Gain on disposition of revenue equipment was $9.4 million in the 2022 period, up from $7.3 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.

The $7.0 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.

The $10.1 million increase in other operating expenses in the 2022 period was primarily due to increases in costs associated with driver recruitment and retention, travel and meals, and chassis rental.

Our operating income improved 36.5% to $110.6 million in the 2022 period from $81.0 million in the 2021 period as a result of the foregoing factors.

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improved to 88.3% in the 2022 period from 88.5% in the 2021 period.

The operating ratio for our Truckload segment was 86.8% in the 2022 period and 87.1% in the 2021 period, for our Dedicated segment was 88.1% in the 2022 period and 87.7% in the 2021 period, for our Intermodal segment was 86.7% in the 2022 period and 93.0% in the 2021 period, and for our Brokerage segment was 88.8% in the 2022 period and 91.4% in the 2021 period.

The operating ratio for our Truckload segment was 87.5% in each of the 2022 and 2021 periods, for our Dedicated segment was 88.1% in the 2022 period and 88.3% in the 2021 period, for our Intermodal segment was 90.1% in the 2022 period and 91.7% in the 2021 period, and for our Brokerage segment was 89.0% in the 2022 period and 89.6% in the 2021 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.9% in the 2022 period from 87.0% in the 2021 period.

Our effective income tax rate decreased to 23.0% in the 2022 period from 25.0% in the 2021 period due to a change in unrecognized tax benefits for prior periods resulting from resolution of an IRS audit, along with decreases in per diem and other non-deductible expenses.

Our effective income tax rate decreased to 23.5% in the 2022 period from 25.1% in the 2021 period, primarily due to a change in unrecognized tax benefits for prior periods resulting from resolution of an IRS audit, along with decreases in per diem and other non-deductible expenses.

As a result of the factors described above, net income improved 39.8% to $84.8 million, or $1.03 per diluted share, in the 2022 period from $60.7 million, or $0.73 per diluted share, in the 2021 period.

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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 June 30,

Ended September 30,

(In thousands)

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We repurchased and retired 1.3 million shares of common stock for $25.0 million in the first quarter of 2022, and 963,000 shares of common stock for $16.8 million in the second quarter of 2022.

We did not repurchase any shares in 2021.

As of June 30, 2022, future repurchases of up to $33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

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 did not repurchase any shares in the third quarter of 2022 or in 2021.

As of September 30, 2022, future repurchases of up to $33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

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 $68 million for the remainder of 2022.

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Additionally, operating lease obligations total $459,000 through 2024.

A quarterly cash dividend of $0.06 per share of common stock was paid in each of the first two quarters of 2022 which totaled $9.8 million.

A quarterly cash dividend of $0.06 per share of common stock was paid in each of the first three quarters of 2022 which totaled $14.7 million.

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.

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

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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 do not anticipate any significant liquidity constraints in the foreseeable future.

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 June 30, 2022, there was no outstanding principal balance on the facility.

In August 2022, we entered into a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2027.

The credit agreement amends, restates and continues in its entirety our previous credit agreement, as amended.

At September 30, 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 $16.1 million and remaining borrowing availability of $13.9 million.

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.

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

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

This facility bears interest at a variable rate based on the Term SOFR Rate plus applicable margins.

The interest rate for the facility that would apply to outstanding principal balances was 6.25% at September 30, 2022.

Our credit agreement effective in August 2022 prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of $150 million.

Our previous credit agreement prohibited us from making such payments 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 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 June 30, 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 June 30, 2022.

The current and previous credit agreements also contain 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, 2022 and December 31, 2021.

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

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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