MARTEN TRANSPORT LTD 10-Q

Item 1. Financial Statements. MARTEN TRANSPORT, LTD. CONSOLIDATED CONDENSED BALANCE SHEETS         September 30,     December 31,   (In thousands, except share information)   2022     2021       (Unaudited)           ASSETS                 Current assets:                 Cash and cash equivalents   $ 71,492     $ 56,995   Receivables:                 Trade, net     124,587       99,003   Other     4,443       6,971   Prepaid expenses and other     24,787       23,980   Total current assets     225,309       186,949                     Property and equipment:                 Revenue equipment, buildings and land, office equipment and other     1,046,476       956,476   Accumulated depreciation     ( 334,504 )     ( 274,199 ) Net property and equipment     711,972       682,277   Other noncurrent assets     1,421       1,464   Total assets   $ 938,702     $ 870,690                     LIABILITIES AND STOCKHOLDERS’ EQUITY                 Current liabilities:                 Accounts payable   $ 43,188     $ 20,150   Insurance and claims accruals     45,664       42,014   Accrued and other current liabilities     36,605       31,395   Total current liabilities     125,457       93,559   Deferred income taxes     130,594       125,163   Noncurrent operating lease liabilities     214       291   Total liabilities     256,265       219,013                     Stockholders’ equity:                 Preferred stock, $ .01 par value per share; 2,000,000 shares authorized; no shares issued and outstanding     -       -   Common stock, $ .01 par value per share; 192,000,000 shares authorized; 81,096,632 shares at September 30, 2022, and 83,034,404 shares at December 31, 2021, issued and outstanding     811       830   Additional paid-in capital     46,366       85,718   Retained earnings     635,260       565,129   Total stockholders’ equity     682,437       651,677   Total liabilities and stockholders’ equity   $ 938,702     $ 870,690     The accompanying notes are an integral part of these consolidated condensed financial statements.     1       MARTEN TRANSPORT, LTD. CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited)       Three Months     Nine Months       Ended September 30,     Ended September 30,   (In thousands, except per share information)   2022     2021     2022     2021                                     Operating revenue   $ 324,448     $ 251,280     $ 941,294     $ 706,768                                     Operating expenses (income):                                 Salaries, wages and benefits     99,773       81,091       285,582       229,385   Purchased transportation     64,403       52,861       189,193       138,629   Fuel and fuel taxes     57,299       33,909       163,004       94,853   Supplies and maintenance     14,855       11,685       40,520       33,867   Depreciation     28,381       25,371       81,389       76,598   Operating taxes and licenses     2,748       2,606       8,051       8,036   Insurance and claims     11,949       10,501       38,096       31,338   Communications and utilities     2,135       2,181       6,639       6,320   Gain on disposition of revenue equipment     ( 1,070 )     ( 4,536 )     ( 10,422 )     ( 11,859 ) Other     10,209       7,115       28,681       18,589                                     Total operating expenses     290,682       222,784       830,733       625,756                                     Operating income     33,766       28,496       110,561       81,012                                     Other     ( 264 )     ( 8 )     ( 307 )     ( 27 )                                   Income before income taxes     34,030       28,504       110,868       81,039                                     Income taxes expense     8,384       7,230       26,028       20,341                                     Net income   $ 25,646     $ 21,274     $ 84,840     $ 60,698                                     Basic earnings per common share   $ 0.32     $ 0.26     $ 1.04     $ 0.73                                     Diluted earnings per common share   $ 0.32     $ 0.26     $ 1.03     $ 0.73                                     Dividends paid per common share   $ 0.06     $ -     $ 0.18     $ 0.08                                     Dividends declared per common share   $ 0.06     $ 0.54     $ 0.18     $ 0.62     The accompanying notes are an integral part of these consolidated condensed financial statements.   2       MARTEN TRANSPORT, LTD. CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’ EQUITY (Unaudited)       Common Stock     Additional Paid-In     Retained     Total Stock- holders’   (In thousands)   Shares     Amount     Capital     Earnings     Equity                                             Balance at December 31, 2021     83,034     $ 830     $ 85,718     $ 565,129     $ 651,677   Net income     -       -       -       27,533       27,533   Repurchase and retirement of common stock     ( 1,307 )     ( 13 )     ( 24,987 )     -       ( 25,000 ) Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards     220       2       766       -       768   Employee taxes paid in exchange for shares withheld     -       -       ( 1,610 )     -       ( 1,610 ) Share-based payment arrangement compensation expense     -       -       369       -       369   Dividends paid on common stock     -       -       -       ( 4,975 )     ( 4,975 ) Balance at March 31, 2022     81,947       819       60,256       587,687       648,762   Net income     -       -       -       31,661       31,661   Repurchase and retirement of common stock     ( 963 )     ( 10 )     ( 16,743 )     -       ( 16,753 ) Issuance of common stock from share-based payment arrangement exercises     31       1       150       -       151   Share-based payment arrangement compensation expense     -       -       1,204       -       1,204   Dividends paid on common stock     -       -       -       ( 4,868 )     ( 4,868 ) Balance at June 30, 2022     81,015       810       44,867       614,480       660,157   Net income     -       -       -       25,646       25,646   Issuance of common stock from share-based payment arrangement exercises     82       1       844       -       845   Share-based payment arrangement compensation expense     -       -       655       -       655   Dividends paid on common stock     -       -       -       ( 4,866 )     ( 4,866 ) Balance at September 30, 2022     81,097     $ 811     $ 46,366     $ 635,260     $ 682,437     The accompanying notes are an integral part of these consolidated condensed financial statements.     3     MARTEN TRANSPORT, LTD. CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’ EQUITY (Unaudited)       Common Stock     Additional Paid-In     Retained     Total Stock- holders’   (In thousands)   Shares     Amount     Capital     Earnings     Equity                                             Balance at December 31, 2020     82,705     $ 827     $ 85,070     $ 534,436     $ 620,333   Net income     -       -       -       18,006       18,006   Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards     70       1       160       -       161   Employee taxes paid in exchange for shares withheld     -       -       ( 547 )     -       ( 547 ) Share-based payment arrangement compensation expense     -       -       336       -       336   Dividends paid on common stock     -       -       -       ( 3,311 )     ( 3,311 ) Balance at March 31, 2021     82,775       828       85,019       549,131       634,978   Net income     -       -       -       21,418       21,418   Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards     106       1       335       -       336   Employee taxes paid in exchange for shares withheld     -       -       ( 706 )     -       ( 706 ) Share-based payment arrangement compensation expense     -       -       930       -       930   Dividends paid on common stock     -       -       -       ( 3,315 )     ( 3,315 ) Balance at June 30, 2021     82,881       829       85,578       567,234       653,641   Net income     -       -       -       21,274       21,274   Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards     62       -       61       -       61   Employee taxes paid in exchange for shares withheld     -       -       ( 673 )     -       ( 673 ) Share-based payment arrangement compensation expense     -       -       573       -       573   Accrued dividends on common stock     -       -       -       ( 44,789 )     ( 44,789 ) Balance at September 30, 2021     82,943     $ 829     $ 85,539     $ 543,719     $ 630,087     The accompanying notes are an integral part of these consolidated condensed financial statements.     4       MARTEN TRANSPORT, LTD. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)       Nine Months       Ended September 30,   (In thousands)   2022     2021   Cash flows provided by operating activities:                 Operations:                 Net income   $ 84,840     $ 60,698   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation     81,389       76,598   Tires in service amortization     4,861       4,858   Gain on disposition of revenue equipment     ( 10,422 )     ( 11,859 ) Deferred income taxes     5,431       ( 409 ) Share-based payment arrangement compensation expense     2,228       1,839   Changes in other current operating items:                 Receivables     ( 24,657 )     ( 14,805 ) Prepaid expenses and other     ( 3,901 )     ( 3,076 ) Accounts payable     14,364       7,502   Insurance and claims accruals     3,650       1,533   Accrued and other current liabilities     5,438       5,030   Net cash provided by operating activities     163,221       127,909                     Cash flows used for investing activities:                 Revenue equipment additions     ( 110,535 )     ( 157,301 ) Proceeds from revenue equipment dispositions     28,527       58,525   Buildings and land, office equipment and other additions     ( 10,370 )     ( 3,330 ) Other     ( 38 )     ( 36 ) Net cash used for investing activities     ( 92,416 )     ( 102,142 )                   Cash flows used for financing activities:                 Repurchase and retirement of common stock     ( 41,753 )     -   Dividends paid on common stock     ( 14,709 )     ( 6,626 ) Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards     1,764       558   Employee taxes paid in exchange for shares withheld     ( 1,610 )     ( 1,926 ) Net cash used for financing activities     ( 56,308 )     ( 7,994 )                   Net change in cash and cash equivalents     14,497       17,773                     Cash and cash equivalents:                 Beginning of period     56,995       66,127   End of period   $ 71,492     $ 83,900                     Supplemental non-cash disclosure:                 Dividends declared and not yet paid   $ -     $ 44,789   Change in property and equipment not yet paid   $ 10,132     $ 692                     Supplemental disclosure of cash flow information:                 Cash paid for:                 Income taxes   $ 16,413     $ 17,214   Interest   $ 52     $ -     The accompanying notes are an integral part of these consolidated condensed financial statements.   5     MARTEN TRANSPORT, LTD. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS NINE MONTHS ENDED SEPTEMBER 30, 2022 (Unaudited)     (1) Consolidated Condensed Financial Statements   The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements, and therefore do not include all information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, such statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial condition, results of operations and cash flows for the interim periods presented. The results of operations for any interim period do not necessarily indicate the results for the full year. The unaudited interim consolidated condensed financial statements should be read with reference to the consolidated financial statements and notes to consolidated financial statements in our 2021 Annual Report on Form 10-K.     (2) Earnings per Common Share   Basic and diluted earnings per common share were computed as follows:       Three Months     Nine Months       Ended September 30,     Ended September 30,   (In thousands, except per share amounts)   2022     2021     2022     2021   Numerator:                                 Net income   $ 25,646     $ 21,274     $ 84,840     $ 60,698   Denominator:                                 Basic earnings per common share - weighted-average shares     81,061       82,907       81,889       82,835   Effect of dilutive stock options     286       465       266       545   Diluted earnings per common share - weighted-average shares and assumed conversions     81,347       83,372       82,155       83,380                                     Basic earnings per common share   $ 0.32     $ 0.26     $ 1.04     $ 0.73   Diluted earnings per common share   $ 0.32     $ 0.26     $ 1.03     $ 0.73     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   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 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.   6     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. 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   We purchase fuel and tires and obtain related services from Bauer Built, Inc., or BBI. Jerry M. Bauer, the chairman of the board and chief executive officer of BBI, is one of our directors. 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 .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. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.   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 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 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.     (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 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. The plan was an unfunded, nonqualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis. The termination was effective May 5, 2021. All shares of Company common stock within the plan were distributed by March 31, 2022.   7       (9) Fair Value of Financial Instruments   The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.       (10) Commitments and Contingencies   We are committed to new revenue equipment purchases of $ 19.8 million and building construction obligations of $ 6.0 million through the remainder of 2022. We also have commitments to purchase new revenue equipment of $ 47.3 million in 2023 and $ 13.0 million in 2024. Operating lease obligation expenditures through 2024 total $ 459,000 .   We self-insure, in part, for losses relating to workers’ compensation, auto liability, general liability, cargo and property damage claims, along with employees’ health insurance with varying risk retention levels. We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review, and reserve currently for the estimated cost of the uninsured portion of pending claims.   We are also involved in other legal actions that arise in the ordinary course of business. In the opinion of management, based upon present knowledge of the facts, it is remote that the ultimate outcome of any such legal actions will have a material adverse effect upon our long-term financial position or results of operations.     (11) Revenue and Business Segments   We account for our revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers . We combine our five current operating segments into four reporting segments (Truckload, Dedicated, Intermodal and Brokerage) for financial reporting purposes. These four reporting segments are also the appropriate categories for the disaggregation of our revenue under FASB ASC 606.   We have strategically transitioned from a refrigerated long-haul carrier to a multifaceted business offering a network of refrigerated and dry truck-based transportation capabilities across our five distinct business platforms – Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.   Our Truckload segment provides a combination of regional short-haul and medium-to-long-haul full-load transportation services. We transport food and other consumer packaged goods that require a temperature-controlled or insulated environment, along with dry freight, across the United States and into and out of Mexico and Canada. Our agreements with customers are typically for one year.   Our Dedicated segment provides customized transportation solutions tailored to meet individual customers’ requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States. Our agreements with customers range from three to five years and are subject to annual rate reviews.   Generally, we are paid by the mile for our Truckload and Dedicated services. We also derive Truckload and Dedicated revenue from fuel surcharges, loading and unloading activities, equipment detention and other accessorial services. The main factors that affect our Truckload and Dedicated revenue are the rate per mile we receive from our customers, the percentage of miles for which we are compensated, the number of miles we generate with our equipment and changes in fuel prices. We monitor our revenue production primarily through average Truckload and Dedicated revenue, net of fuel surcharges, per tractor per week. We also analyze our average Truckload and Dedicated revenue, net of fuel surcharges, per total mile, non-revenue miles percentage, the miles per tractor we generate, our fuel surcharge revenue, our accessorial revenue and our other sources of operating revenue.   Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.   8     Our Brokerage segment develops contractual relationships with and arranges for third-party carriers to transport freight for our customers in temperature-controlled trailers and dry vans within the United States and into and out of Mexico through Marten Transport Logistics, LLC, which was established in 2007 and operates pursuant to brokerage authority granted by the United States Department of Transportation, or DOT. We retain the billing, collection and customer management responsibilities. The main factors that affect our Brokerage revenue are the rate per mile and other charges that we receive from our customers.   Operating results of our MRTN de Mexico business which offers our customers door-to-door service between the United States and Mexico with our Mexican partner carriers is reported within our Truckload and Brokerage segments.   Our customer agreements are typically for one-year terms except for our Dedicated agreements which range from three to five years with annual rate reviews. Under FASB ASC 606, the contract date for each individual load within each of our four reporting segments is generally the date that each load is tendered to and accepted by us. For each load transported within each of our four reporting segments, the entire amount of revenue to be recognized is a single performance obligation and our agreements with our customers detail the per-mile charges for line haul and fuel surcharges, along with the rates for loading and unloading, stop offs and drops, equipment detention and other accessorial services, which is the transaction price. There are no discounts that would be a material right or consideration payable to a customer. We are required to recognize revenue and related expenses over time, from load pickup to delivery, for each load within each of our four reporting segments. 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 $ 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.   We account for revenue of our Intermodal and Brokerage segments and revenue on freight transported by independent contractors within our Truckload and Dedicated segments on a gross basis because we are the principal service provider controlling the promised service before it is transferred to each customer. We are primarily responsible for fulfilling the promise to provide each specified service to each customer. We bear the primary risk of loss in the event of cargo claims by our customers. We also have complete control and discretion in establishing the price for each specified service. Accordingly, all such revenue billed to customers is classified as operating revenue and all corresponding payments to carriers for transportation services we arrange in connection with brokerage and intermodal activities and to independent contractor providers of revenue equipment are classified as purchased transportation expense within our consolidated condensed statements of operations.   9     The following table sets forth for the periods indicated our operating revenue and operating income by segment. We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.       Three Months     Nine Months       Ended September 30,     Ended September 30,   (In thousands)   2022     2021     2022     2021   Operating revenue:                                 Truckload revenue, net of fuel surcharge revenue   $ 105,905     $ 86,889     $ 302,883     $ 254,441   Truckload fuel surcharge revenue     23,471       12,728       66,255       36,032   Total Truckload revenue     129,376       99,617       369,138       290,473                                     Dedicated revenue, net of fuel surcharge revenue     86,178       68,826       248,988       202,955   Dedicated fuel surcharge revenue     24,039       13,336       68,344       37,565   Total Dedicated revenue     110,217       82,162       317,332       240,520                                     Intermodal revenue, net of fuel surcharge revenue     24,303       22,716       77,589       64,193   Intermodal fuel surcharge revenue     7,600       4,031       22,923       10,150   Total Intermodal revenue     31,903       26,747       100,512       74,343                                     Brokerage revenue     52,952       42,754       154,312       101,432   Total operating revenue   $ 324,448     $ 251,280     $ 941,294     $ 706,768                                     Operating income:                                 Truckload   $ 14,319     $ 11,670     $ 45,978     $ 36,282   Dedicated     13,005       8,521       37,689       28,074   Intermodal     778       2,840       9,911       6,151   Brokerage     5,664       5,465       16,983       10,505   Total operating income   $ 33,766     $ 28,496     $ 110,561     $ 81,012     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   We must make estimates and assumptions to prepare the consolidated condensed financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in the consolidated condensed financial statements and the reported amount of revenue and expenses during the reporting period. These estimates are primarily related to insurance and claims accruals and depreciation. Ultimate results could differ from these estimates.   10       Item 2. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations.   The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part I, Item 1A for the year ended December 31, 2021. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.   Overview   We have strategically transitioned from a refrigerated long-haul carrier to a multifaceted business offering a network of refrigerated and dry truck-based transportation capabilities across our five distinct business platforms – Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.   Our Truckload segment provides a combination of regional short-haul and medium-to-long-haul full-load transportation services. We transport food and other consumer packaged goods that require a temperature-controlled or insulated environment, along with dry freight, across the United States and into and out of Mexico and Canada. Our agreements with customers are typically for one year.   Our Dedicated segment provides customized transportation solutions tailored to meet each individual customer’s requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States. Our agreements with customers range from three to five years and are subject to annual rate reviews.   Generally, we are paid by the mile for our Truckload and Dedicated services. We also derive Truckload and Dedicated revenue from fuel surcharges, loading and unloading activities, equipment detention and other accessorial services. The main factors that affect our Truckload and Dedicated revenue are the rate per mile we receive from our customers, the percentage of miles for which we are compensated, the number of miles we generate with our equipment and changes in fuel prices. We monitor our revenue production primarily through average Truckload and Dedicated revenue, net of fuel surcharges, per tractor per week. We also analyze our average Truckload and Dedicated revenue, net of fuel surcharges, per total mile, non-revenue miles percentage, the miles per tractor we generate, our fuel surcharge revenue, our accessorial revenue and our other sources of operating revenue.   Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.   Our Brokerage segment develops contractual relationships with and arranges for third-party carriers to transport freight for our customers in temperature-controlled trailers and dry vans within the United States and into and out of Mexico through Marten Transport Logistics, LLC, which was established in 2007 and operates pursuant to brokerage authority granted by the DOT. We retain the billing, collection and customer management responsibilities. The main factors that affect our Brokerage revenue are the rate per mile and other charges that we receive from our customers.   Operating results of our MRTN de Mexico business which offers our customers door-to-door service between the United States and Mexico with our Mexican partner carriers is reported within our Truckload and Brokerage segments.   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.   11     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. The variable costs include fuel expense, driver-related expenses, such as wages, benefits, training, and recruitment, and independent contractor costs, which are recorded under purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs relate to the acquisition and subsequent depreciation of long-term assets, such as revenue equipment and operating terminals. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment, along with any increases in fleet size. Although certain factors affecting our expenses are beyond our control, we monitor them closely and attempt to anticipate changes in these factors in managing our business. For example, fuel prices have significantly fluctuated over the past several years. We manage our exposure to changes in fuel prices primarily through fuel surcharge programs with our customers, as well as through volume fuel purchasing arrangements with national fuel centers and bulk purchases of fuel at our terminals. To help further reduce fuel expense, we have installed and tightly manage the use of auxiliary power units in our tractors to provide climate control and electrical power for our drivers without idling the tractor engine, and also have improved the fuel usage in the temperature-control units on our trailers. For our Intermodal and Brokerage segments, our profitability is impacted by the percentage of revenue which is payable to the providers of the transportation services we arrange. This expense is included within purchased transportation in our consolidated condensed statements of operations.   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 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 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 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 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. 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.   12     We continue to invest considerable time and capital resources to actively implement and promote long-term environmentally sustainable solutions that drive reductions in our fuel and electricity consumption and decrease our carbon footprint. 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 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; Truckload, Dedicated and Intermodal revenue, net of fuel surcharge revenue; operating expenses as a percentage of operating revenue, each net of fuel surcharge revenue; and net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads). We provide these additional disclosures because management believes these measures provide a more consistent basis for comparing results of operations from period to period. These financial measures in this report have not been determined in accordance with U.S. generally accepted accounting principles (GAAP). Pursuant to Item 10(e) of Regulation S-K, we have included the amounts necessary to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures of operating revenue, operating expenses divided by operating revenue, and fuel and fuel taxes.   13     Results of Operations   The following table sets forth for the periods indicated certain operating statistics regarding our revenue and operations:       Three Months     Nine Months       Ended September 30,     Ended September 30,       2022     2021     2022     2021   Truckload Segment:                                 Revenue (in thousands)   $ 129,376     $ 99,617     $ 369,138     $ 290,473   Average revenue, net of fuel surcharges, per tractor per week (1)   $ 4,889     $ 4,411     $ 4,980     $ 4,202   Average tractors (1)     1,648       1,499       1,560       1,553   Average miles per trip     508       502       512       516   Total miles (in thousands)     38,441       35,945       110,565       111,513                                     Dedicated Segment:                                 Revenue (in thousands)   $ 110,217     $ 82,162     $ 317,332     $ 240,520   Average revenue, net of fuel surcharges, per tractor per week (1)   $ 4,006     $ 3,438     $ 3,977     $ 3,305   Average tractors (1)     1,637       1,523       1,605       1,574   Average miles per trip     337       328       340       319   Total miles (in thousands)     34,513       31,511       101,400       95,765                                     Intermodal Segment:                                 Revenue (in thousands)   $ 31,903     $ 26,747     $ 100,512     $ 74,343   Loads     7,610       8,257       24,607       24,885   Average tractors     182       139       173       140                                     Brokerage Segment:                                 Revenue (in thousands)   $ 52,952     $ 42,754     $ 154,312     $ 101,432   Loads     24,896       18,251       69,902       47,167     (1) Includes tractors driven by both company-employed drivers and independent contractors. Independent contractors provided 90 and 101 tractors as of September 30, 2022 and 2021, respectively.   14     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:                       Dollar     Percentage                       Change     Change       Three Months     Three Months     Three Months       Ended     Ended     Ended       September 30,     September 30,     September 30,   (Dollars in thousands)   2022     2021     2022 vs. 2021     2022 vs. 2021   Operating revenue:                                 Truckload revenue, net of fuel surcharge revenue   $ 105,905     $ 86,889     $ 19,016       21.9 % Truckload fuel surcharge revenue     23,471       12,728       10,743       84.4   Total Truckload revenue     129,376       99,617       29,759       29.9                                     Dedicated revenue, net of fuel surcharge revenue     86,178       68,826       17,352       25.2   Dedicated fuel surcharge revenue     24,039       13,336       10,703       80.3   Total Dedicated revenue     110,217       82,162       28,055       34.1                                     Intermodal revenue, net of fuel surcharge revenue     24,303       22,716       1,587       7.0   Intermodal fuel surcharge revenue     7,600       4,031       3,569       88.5   Total Intermodal revenue     31,903       26,747       5,156       19.3                                     Brokerage revenue     52,952       42,754       10,198       23.9                                     Total operating revenue   $ 324,448     $ 251,280     $ 73,168       29.1 %                                   Operating income:                                 Truckload   $ 14,319     $ 11,670     $ 2,649       22.7 % Dedicated     13,005       8,521       4,484       52.6   Intermodal     778       2,840       (2,062 )     (72.6 ) Brokerage     5,664       5,465       199       3.6   Total operating income   $ 33,766     $ 28,496     $ 5,270       18.5 %                                   Operating ratio:                                 Truckload     88.9 %     88.3 %                 Dedicated     88.2       89.6                   Intermodal     97.6       89.4                   Brokerage     89.3       87.2                   Consolidated operating ratio     89.6 %     88.7 %                                                   Operating ratio, net of fuel surcharges:                                 Truckload     86.5 %     86.6 %                 Dedicated     84.9       87.6                   Intermodal     96.8       87.5                   Brokerage     89.3       87.2                   Consolidated operating ratio, net of fuel surcharges     87.5 %     87.1 %                   15     Our operating revenue increased $73.2 million, or 29.1%, to $324.4 million in the 2022 period from $251.3 million in the 2021 period. 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 $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.   Truckload segment revenue increased $29.8 million, or 29.9%, to $129.4 million in the 2022 period from $99.6 million in the 2021 period. 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 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 25.2%, 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 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 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.   16     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:       Dollar Change     Percentage Change     Percentage of Operating Revenue       Three Months Ended September 30,     Three Months Ended September 30,     Three Months Ended September 30,   (Dollars in thousands)   2022 vs. 2021     2022 vs. 2021     2022     2021                                     Operating revenue   $ 73,168       29.1 %     100.0 %     100.0 % Operating expenses (income):                                 Salaries, wages and benefits     18,682       23.0       30.8       32.3   Purchased transportation     11,542       21.8       19.9       21.0   Fuel and fuel taxes     23,390       69.0       17.7       13.5   Supplies and maintenance     3,170       27.1       4.6       4.7   Depreciation     3,010       11.9       8.7       10.1   Operating taxes and licenses     142       5.4       0.8       1.0   Insurance and claims     1,448       13.8       3.7       4.2   Communications and utilities     (46 )     (2.1 )     0.7       0.9   Gain on disposition of revenue equipment     3,466       76.4       (0.3 )     (1.8 ) Other     3,094       43.5       3.1       2.8   Total operating expenses     67,898       30.5       89.6       88.7   Operating income     5,270       18.5       10.4       11.3   Other     (256 )     (3,200.0 )     (0.1 )     -   Income before income taxes     5,526       19.4       10.5       11.3   Income taxes expense     1,154       16.0       2.6       2.9   Net income   $ 4,372       20.6 %     7.9 %     8.5 %   Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits. These expenses vary depending upon the size of our Truckload, Dedicated and Intermodal tractor fleets, the ratio of company drivers to independent contractors, our efficiency, our experience with employees’ health insurance claims, changes in health care premiums and other factors. 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 $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. This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors. Purchased transportation expense increased $11.5 million in total, or 21.8%, in the 2022 period from the 2021 period. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $9.4 million to $44.3 million in the 2022 period from $34.9 million in the 2021 period, primarily due to growth in load volume. 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 $114,000 in the 2022 period. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.   17     Fuel and fuel taxes increased by $23.4 million, or 69.0%, in the 2022 period from the 2021 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 $1.3 million, or 17.6%, to $8.6 million in the 2022 period from $7.3 million in the 2021 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $6.4 million from $3.5 million in the 2021 period. 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 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’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.   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 $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 $3.1 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. Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 89.6% in the 2022 period and 88.7% in the 2021 period. 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, 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.   18     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:                       Dollar     Percentage                       Change     Change       Nine Months     Nine Months     Nine Months       Ended     Ended     Ended       September 30,     September 30,     September 30,   (Dollars in thousands)   2022     2021     2022 vs. 2021     2022 vs. 2021   Operating revenue:                                 Truckload revenue, net of fuel surcharge revenue   $ 302,883     $ 254,441     $ 48,442       19.0 % Truckload fuel surcharge revenue     66,255       36,032       30,223       83.9   Total Truckload revenue     369,138       290,473       78,665       27.1                                     Dedicated revenue, net of fuel surcharge revenue     248,988       202,955       46,033       22.7   Dedicated fuel surcharge revenue     68,344       37,565       30,779       81.9   Total Dedicated revenue     317,332       240,520       76,812       31.9                                     Intermodal revenue, net of fuel surcharge revenue     77,589       64,193       13,396       20.9   Intermodal fuel surcharge revenue     22,923       10,150       12,773       125.8   Total Intermodal revenue     100,512       74,343       26,169       35.2                                     Brokerage revenue     154,312       101,432       52,880       52.1                                     Total operating revenue   $ 941,294     $ 706,768     $ 234,526       33.2 %                                   Operating income:                                 Truckload   $ 45,978     $ 36,282     $ 9,696       26.7 % Dedicated     37,689       28,074       9,615       34.2   Intermodal     9,911       6,151       3,760       61.1   Brokerage     16,983       10,505       6,478       61.7   Total operating income   $ 110,561     $ 81,012     $ 29,549       36.5 %                                   Operating ratio:                                 Truckload     87.5 %     87.5 %                 Dedicated     88.1       88.3                   Intermodal     90.1       91.7                   Brokerage     89.0       89.6                   Consolidated operating ratio     88.3 %     88.5 %                                                   Operating ratio, net of fuel surcharges:                                 Truckload     84.8 %     85.7 %                 Dedicated     84.9       86.2                   Intermodal     87.2       90.4                   Brokerage     89.0       89.6                   Consolidated operating ratio, net of fuel surcharges     85.9 %     87.0 %                   19     Our operating revenue increased $234.5 million, or 33.2%, to $941.3 million in the 2022 period from $706.8 million in the 2021 period. 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 $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 $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 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. Intermodal segment revenue, net of fuel surcharges, increased 20.9% 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.   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.   20     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:       Dollar Change     Percentage Change     Percentage of Operating Revenue       Nine Months Ended September 30,     Nine Months Ended September 30,     Nine Months Ended September 30,   (Dollars in thousands)   2022 vs. 2021     2022 vs. 2021     2022     2021                                     Operating revenue   $ 234,526       33.2 %     100.0 %     100.0 % Operating expenses (income):                                 Salaries, wages and benefits     56,197       24.5       30.3       32.5   Purchased transportation     50,564       36.5       20.1       19.6   Fuel and fuel taxes     68,151       71.8       17.3       13.4   Supplies and maintenance     6,653       19.6       4.3       4.8   Depreciation     4,791       6.3       8.6       10.8   Operating taxes and licenses     15       0.2       0.9       1.1   Insurance and claims     6,758       21.6       4.0       4.4   Communications and utilities     319       5.0       0.7       0.9   Gain on disposition of revenue equipment     1,437       12.1       (1.1 )     (1.7 ) Other     10,092       54.3       3.0       2.6   Total operating expenses     204,977       32.8       88.3       88.5   Operating income     29,549       36.5       11.7       11.5   Other     (280 )     (1,037.0 )     -       -   Income before income taxes     29,829       36.8       11.8       11.5   Income taxes expense     5,687       28.0       2.8       2.9   Net income   $ 24,142       39.8 %     9.0 %     8.6 %   Salaries, wages and benefits expense increased $56.2 million, or 24.5%, in the 2022 period from the 2021 period. This increase resulted primarily from additional company driver compensation expense of $41.3 million, a $3.8 million increase in bonus compensation expense for our non-driver employees and a $1.7 million increase in employees’ health insurance expense as a result of higher self-insured medical claims.   Purchased transportation expense increased $50.6 million in total, or 36.5%, in the 2022 period from the 2021 period. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $44.5 million to $128.7 million in the 2022 period from $84.2 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. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $8.5 million to $49.9 million in the 2022 period from $41.4 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 $2.5 million in the 2022 period. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.   Fuel and fuel taxes increased by $68.2 million, or 71.8%, in the 2022 period from the 2021 period. Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $2.8 million, or 13.5%, to $23.5 million in the 2022 period from $20.7 million in the 2021 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $18.0 million from $9.6 million in the 2021 period. The DOE national average cost of fuel increased to $4.96 per gallon from $3.16 per gallon in the 2021 period. 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 $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.   21     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 $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. 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.   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. Our operating expenses as a percentage of operating revenue, or “operating ratio,” improved to 88.3% in the 2022 period from 88.5% 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 23.5% 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.   22     Liquidity and Capital Resources     Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. Our primary sources of liquidity are funds provided by operations and our revolving credit facility. A portion of our tractor fleet is provided by independent contractors who own and operate their own equipment. 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.       Nine Months Ended September 30,   (In thousands)   2022     2021   Net cash flows provided by operating activities   $ 163,221     $ 127,909   Net cash flows (used for) investing activities     (92,416 )     (102,142 ) Net cash flows (used for) financing activities     (56,308 )     (7,994 )   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. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.   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 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 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. 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. This amount includes commitments to purchase $19.8 million of new revenue equipment and $6.0 million in building construction through the remainder of 2022. We also have commitments to purchase new revenue equipment of $47.3 million in 2023 and $13.0 million in 2024. 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 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. The payment of cash dividends in the future, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, and certain corporate law requirements, as well as other factors deemed relevant by our Board of Directors. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. 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.   23     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 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. 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.   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 September 30, 2022.   Seasonality   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 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.