What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-08 · 107 added, 215 removed, 391 unchanged (45% 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;

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

81,233,741 shares at March 31, 2023, and 81,115,132 shares at December 31, 2022, issued and outstanding

Additional paid-in capital

5 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended September 30,

Ended March 31,

(In thousands, except per share information)

15 unchanged sentences

Diluted earnings per common share

Dividends paid per common share

Dividends declared per common share

9 unchanged sentences

Share-based payment arrangement compensation expense

Dividends paid on common stock

Dividends on common stock

Balance at March 31, 2022

2 unchanged sentences

Share-based payment arrangement compensation expense

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.  

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

holders’

(In thousands)

Dividends on common stock

Balance at December 31, 2022

2 unchanged sentences

Share-based payment arrangement compensation expense

Dividends paid on common stock

Dividends on common stock

Balance at March 31, 2023

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

Employee taxes paid in exchange for shares withheld

Share-based payment arrangement compensation expense

Dividends paid on common stock

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.  

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended September 30,

Ended March 31,

(In thousands)

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Net cash provided by operating activities

Cash flows used for investing activities:

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

Revenue equipment additions

1 unchanged sentence

Buildings and land, office equipment and other additions

Net cash used for investing activities

Proceeds from buildings and land, office equipment and other dispositions

Net cash (used for)/provided by investing activities

Cash flows used for financing activities:

Dividends on common stock

Repurchase and retirement of 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

6 unchanged sentences

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:

Cash paid for income taxes

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

1 unchanged sentence

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2022

THREE MONTHS ENDED MARCH 31, 2023

(1) Consolidated Condensed Financial Statements

7 unchanged sentences

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

Ended September 30,

Ended March 31,

(In thousands, except per share amounts)

4 unchanged sentences

Diluted earnings per common share

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.

Options totaling 122,000 and 452,000 equivalent shares for the three-month periods ended March 31, 2023 and 2022, 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 49,560 equivalent shares for the three-month period ended March 31, 2023 were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

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

(3) Long-Term Debt

1 unchanged sentence

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.

At March 31, 2023, 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.

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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.

The interest rate for the facility that would apply to outstanding principal balances was 8.0 % at March 31, 2023.

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.

A waiver allowing stock redemptions and dividends in excess of the 25 % limitation in total amounts of up to $ 80 million in 2022 was obtained from the lender in March 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.

We were in compliance with all covenants at March 31, 2023 and December 31, 2022.

(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 $ 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.

We paid BBI $ 89,000 in the first three months of 2023 and $ 105,000 in the first three months of 2022 for fuel, tires and related services.

In addition, we paid $ 436,000 in the first three months of 2023 and $ 269,000 in the first three months of 2022 to tire manufacturers for tires that were provided by BBI.

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

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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 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.

We did not repurchase any shares in the third or fourth quarters of 2022 or in the first quarter of 2023.

As of March 31, 2023, 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

Quarterly cash dividends of $ 0.06 per share of common stock were paid in each of the first quarters of 2023 and 2022 which totaled $ 4.9 million and $ 5.0 million, respectively.

(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.

During the first three months of 2023, there were no significant changes to the structure of our stock-based award plans.

Pre-tax compensation expense related to stock options and performance unit awards recorded in the first three months of 2023 and 2022 was $ 354,000 and $ 369,000 , respectively.

(8) Termination of Deferred Compensation Plan

In May 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.

The termination was effective in May 2021.

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

3 unchanged sentences

We are committed to new revenue equipment purchases of $ 154.9 million and building construction obligations of $ 3.5 million through the remainder of 2023.

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 2028 total $ 691,000 .

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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.

A number of trucking companies, including us, have been subject to lawsuits alleging violations of various federal and state wage and hour laws.

A number of these lawsuits have resulted in the payment of substantial settlements or damages by the defendants.

The outcome of all litigation is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time.

The cost to defend litigation may also be significant.

Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute.

To the extent we experience claims that are uninsured, exceed our coverage limits or cause increases in future premiums, the resulting expense could have a materially adverse effect on our business and operating results.

Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves, is not likely to have a materially adverse effect on our consolidated condensed financial statements, however, any future liability claims or adverse developments in existing claims could impact this analysis.

(11) Revenue and Business Segments

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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 $ 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.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 2.5 million and $ 2.7 million as of March 31, 2023 and December 31, 2022, respectively.

We had no impairment losses on contract assets in the first three months of 2023 or in 2022.

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 September 30,

Ended March 31,

(In thousands)

13 unchanged sentences

Total operating income

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.

Truckload segment depreciation expense was $ 15.3 million and $ 13.0 million, Dedicated segment depreciation expense was $ 11.8 million and $ 11.1 million, Intermodal segment depreciation expense was $ 1.9 million and $ 1.7 million, and Brokerage segment depreciation expense was $ 449,000 and $ 338,000 in the three-month periods ended March 31, 2023 and 2022, 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 $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 operating revenue increased $10.7 million, or 3.7%, in the first three months of 2023 from the first three months of 2022.

Our operating revenue, net of fuel surcharges, increased $9.6 million, or 3.9%, compared with the first three months of 2022.

Truckload segment revenue, net of fuel surcharges, increased 7.5% from the first three months of 2022, primarily due to an increase in our fleet size, partially offset by a decrease in our average revenue per tractor.

Dedicated segment revenue, net of fuel surcharges, increased 10.7% from the first three months of 2022, primarily due to increases in each of our fleet size and average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, decreased 8.6% from the first three months of 2022, primarily due to a decrease in our number of loads, partially offset by an increase in our revenue per load.

Brokerage segment revenue decreased 8.1% from the first three months of 2022, primarily due to a decrease in our revenue per load, partially offset by an increase in our number of loads.

Fuel surcharge revenue increased to $43.1 million in the first three months of 2023 from $42.0 million in the first three months of 2022.

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 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 income declined 19.1% to $29.0 million in the first three months of 2023 from $35.9 million in the first three months of 2022.

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.

was 90.3% in the first three months of 2023 and 87.5% in the first three months of 2022.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, increased to 88.6% in the first three months of 2023 from 85.4% in the first three months of 2022.

Our net income declined 18.3% to $22.5 million, or $0.28 per diluted share, in the first three months of 2023 from $27.5 million, or $0.33 per diluted share, in the first three months of 2022.

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’

At March 31, 2023, we had $96.3 million of cash and cash equivalents, $721.5 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.

In the first three months of 2023, net cash flows provided by operating activities of $49.2 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $26.1 million, to pay cash dividends of $4.9 million, and to construct and upgrade regional operating facilities in the amount of $2.1 million, resulting in a $15.7 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $197 million for the remainder of 2023.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in the first three months of 2023 which totaled $4.9 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 September 30,

Ended March 31,

Truckload Segment:

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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.

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

Independent contractors provided 95 and 87 tractors as of March 31, 2023 and 2022, respectively.

Comparison of Three Months Ended March 31, 2023 to Three Months Ended March 31, 2022

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 $9.6 million, or 3.9%, to $254.9 million in the 2023 period from $245.3 million in the 2022 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.

This increase in the 2023 period was due to an $8.4 million increase in Dedicated revenue, net of fuel surcharges, and a $7.2 million increase in Truckload revenue, net of fuel surcharges, partially offset by a $2.2 million decrease in Intermodal revenue, net of fuel surcharges, and a $3.7 million decrease in Brokerage revenue.

Fuel surcharge revenue increased to $43.1 million in the 2023 period from $42.0 million in the 2022 period.

In addition to the factors discussed below, our profitability across each segment in the 2023 period was impacted by widespread severe winter weather and a freight market which has considerably softened from the exceptionally tight conditions during the 2022 period.

Truckload segment revenue increased $7.8 million, or 6.9%, to $120.6 million in the 2023 period from $112.8 million in the 2022 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.

Truckload segment revenue, net of fuel surcharges, increased $7.2 million, or 7.5%, to $102.3 million in the 2023 period from $95.2 million in the 2022 period primarily due to an increase in our fleet size, partially offset by a decrease in our average revenue per tractor.

The operating ratio increased to 91.7% in the 2023 period from 86.2% in the 2022 period.

Impacting the 2023 period operating ratio were higher company driver compensation, depreciation, maintenance and net fuel costs as a percentage of revenue.

Dedicated segment revenue increased $9.7 million, or 10.0%, to $106.4 million in the 2023 period from $96.8 million in the 2022 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.

Dedicated segment revenue, net of fuel surcharges, increased 10.7% primarily due to increases in each of our fleet size and average revenue per tractor.

The operating ratio in the 2023 period improved to 87.1% from 89.0% in the 2022 period.

The 2023 period was positively impacted by the increase in our average revenue per tractor and lower net fuel and driver recruiting and retention costs, partially offset by higher maintenance and insurance and claims costs.

Intermodal segment revenue decreased $3.1 million, or 9.6%, to $28.6 million in the 2023 period from $31.6 million in the 2022 period.

Intermodal segment revenue, net of fuel surcharges, decreased 8.6% from the 2022 period primarily due to a decrease in our number of loads, partially offset by an increase in our revenue per load.

The operating ratio in the 2023 period increased to 97.2% from 84.1% in the 2022 period.

Impacting the 2023 period operating ratio were higher net fuel, company driver compensation, purchased transportation, chassis rental and depreciation costs as a percentage of our revenue.

Brokerage segment revenue decreased $3.7 million, or 8.1%, to $42.4 million in the 2023 period from $46.1 million in the 2022 period primarily due to a decrease in our revenue per load, partially offset by an increase in our number of loads.

The improvement in the operating ratio in the 2023 period to 89.4% from 90.0% was primarily due to a decrease in purchased transportation amounts payable to carriers as a percentage of our 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:

1 unchanged sentence

Operating Revenue

September 30,

(Dollars in thousands)

18 unchanged sentences

Salaries, wages and benefits expense increased $9.2 million, or 10.3%, in the 2023 period from the 2022 period.

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

This increase resulted primarily from additional company driver compensation expense of $7.4 million and a $2.4 million increase in non-driver compensation expense, partially offset by a $2.3 million decrease in bonus compensation expense for our non-driver employees.

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

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.

Purchased transportation expense decreased $3.2 million in total, or 5.6%, in the 2023 period from the 2022 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $4.0 million to $34.9 million in the 2023 period from $38.8 million in the 2022 period, primarily due to a decrease in the cost per load.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment were $15.3 million in the 2023 period and $15.2 million in the 2022 period.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $655,000 in the 2023 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 $4.41 per gallon from $4.24 per gallon in the 2022 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.

Our net fuel expense increased to 4.1% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2023 period from 3.5% in the 2022 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 $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.

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)

Operating revenue:

Truckload revenue, net of fuel surcharge revenue

Truckload fuel surcharge revenue

Total Truckload revenue

Dedicated revenue, net of fuel surcharge revenue

Dedicated fuel surcharge revenue

Total Dedicated revenue

Intermodal revenue, net of fuel surcharge revenue

Intermodal fuel surcharge revenue

Total Intermodal revenue

Brokerage revenue

Total operating revenue

Operating income:

Total operating income

Operating ratio:

Consolidated operating ratio

Operating ratio, net of fuel surcharges:

Consolidated operating ratio, net of fuel surcharges

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.

Percentage of

Operating Revenue

September 30,

(Dollars in thousands)

Operating revenue

Operating expenses (income):

Salaries, wages and benefits

Purchased transportation

Fuel and fuel taxes

Supplies and maintenance

Operating taxes and licenses

Insurance and claims

Communications and utilities

Gain on disposition of revenue equipment

Total operating expenses

Operating income

Income before income taxes

Income taxes expense

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.

Our supplies and maintenance expense increased $3.7 million, or 29.8%, from the 2022 period, primarily due to higher outside repair, parts, tires and loading/unloading costs.

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

The $3.4 million, or 13.0%, increase in depreciation in the 2023 period was primarily due to an increase in the size of our tractor and trailer fleets along with higher prices of new equipment.

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

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

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

The $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.

The $2.4 million, or 18.6%, increase in insurance and claims in the 2023 period was primarily due to increases in the cost of physical damage claims related to our revenue equipment and in our self-insured auto liability claim costs.

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

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.

Gain on disposition of revenue equipment was $5.2 million in the 2023 period, up from $4.5 million in the 2022 period primarily due to an increase in the number of units sold, partially offset by a decrease 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.

Our operating income declined 19.1% to $29.0 million in the 2023 period from $35.9 million in the 2022 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.

was 90.3% in the 2023 period and 87.5% in the 2022 period.

The operating ratio for our Truckload segment was 91.7% in the 2023 period and 86.2% in the 2022 period, for our Dedicated segment was 87.1% in the 2023 period and 89.0% in the 2022 period, for our Intermodal segment was 97.2% in the 2023 period and 84.1% in the 2022 period, and for our Brokerage segment was 89.4% in the 2023 period and 90.0% in the 2022 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 88.6% in the 2023 period and 85.4% in the 2022 period.

Other non-operating income increased to $844,000 from $7,000 in the 2022 period due to increased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 24.6% in the 2023 period from 23.2% in the 2022 period primarily due to increases in per diem and other non-deductible expenses.

As a result of the factors described above, net income declined 18.3% to $22.5 million, or $0.28 per diluted share, in the 2023 period from $27.5 million, or $0.33 per diluted share, in the 2022 period.

Liquidity and Capital Resources  

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

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

Ended September 30,

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

Ended March 31,

(In thousands)

Net cash flows provided by operating activities

Net cash flows (used for) investing activities

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

Net cash flows (used for) financing activities

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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 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 did not repurchase any shares in the third or fourth quarters of 2022 or in the first quarter of 2023.

As of March 31, 2023, future repurchases of up to $33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

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

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $197 million for the remainder of 2023.

This amount includes commitments to purchase $154.9 million of new revenue equipment and $3.5 million in building construction through the remainder of 2023.

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 $691,000 through 2028.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first quarters of 2023 and 2022 which totaled $4.9 million and $5.0 million, respectively.

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

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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.

At March 31, 2023, 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.

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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.

The interest rate for the facility that would apply to outstanding principal balances was 8.0% at March 31, 2023.

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.

A waiver allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in 2022 was obtained from the lender in March 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.

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.

We were in compliance with all covenants at March 31, 2023 and December 31, 2022.

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

5 unchanged sentences

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