What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-07 compared with 2023-05-05 · 182 added, 83 removed, 415 unchanged (39% of the section changed)

27 unchanged sentences

192,000,000 shares authorized;

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

81,301,468 shares at June 30, 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 March 31,

Ended June 30,

(In thousands, except per share information)

22 unchanged sentences

Balance at December 31, 2022

Repurchase and retirement of common stock

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

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

Employee taxes paid in exchange for shares withheld

2 unchanged sentences

Balance at March 31, 2023

Repurchase and retirement of common stock

Issuance of common stock from share-based payment arrangement exercises

1 unchanged sentence

Dividends on common stock

Balance at June 30, 2023

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

holders’

(In thousands)

Balance at December 31, 2021

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

Repurchase and retirement of common stock

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

2 unchanged sentences

Balance at March 31, 2022

Repurchase and retirement of common stock

Issuance of common stock from share-based payment arrangement exercises

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at June 30, 2022

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

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Ended March 31,

Ended June 30,

(In thousands)

11 unchanged sentences

Net cash provided by operating activities

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

Cash flows used for investing activities:

Revenue equipment additions

2 unchanged sentences

Proceeds from buildings and land, office equipment and other dispositions

Net cash (used for)/provided by investing activities

Net cash used for investing activities

Cash flows used for financing activities:

15 unchanged sentences

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2023

SIX MONTHS ENDED JUNE 30, 2023

(1) Consolidated Condensed Financial Statements

7 unchanged sentences

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

Ended March 31,

Ended June 30,

(In thousands, except per share amounts)

4 unchanged sentences

Diluted earnings per common share

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.

Options totaling 132,000 equivalent shares for each of the three-month and six-month periods ended June 30, 2023, and 486,000 and 495,500 equivalent shares for the three-month and six-month periods ended June 30, 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 106,582 equivalent shares for each of the three-month and six-month periods ended June 30, 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 each of the three-month and six-month periods ended June 30, 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 March 31, 2023, there was no outstanding principal balance on the facility.

At June 30, 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 $ 19.5 million and remaining borrowing availability of $ 10.5 million.

2 unchanged sentences

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 8.0 % at March 31, 2023.

The interest rate for the facility that would apply to outstanding principal balances was 8.25 % at June 30, 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.

2 unchanged sentences

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 March 31, 2023 and December 31, 2022.

We were in compliance with all covenants at June 30, 2023 and December 31, 2022.

(4) Related Party Transactions

1 unchanged sentence

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

We paid BBI $ 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.

We paid BBI $ 141,000 in the first six months of 2023 and $ 252,000 in the first six months of 2022 for fuel, tires and related services.

In addition, we paid $ 1.1 million in the first six months of 2023 and $ 790,000 in the first six months of 2022 to tire manufacturers for tires that were provided by BBI.

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

6 unchanged sentences

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 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.

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

As of June 30, 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.

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.

Quarterly cash dividends of $ 0.06 per share of common stock were paid in each of the first two quarters of both 2023 and 2022, and totaled $ 9.8 million in each of the six-month periods.

(7) Accounting for Share-based Payment Arrangement Compensation

1 unchanged sentence

Stock Compensation .

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.

During the first six 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 six months of 2023 and 2022 was $ 1.4 million and $ 1.6 million, respectively.

(8) Termination of Deferred Compensation Plan

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

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 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.

Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $ 2.2 million and $ 2.7 million as of June 30, 2023 and December 31, 2022, respectively.

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

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

6 unchanged sentences

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

Ended March 31,

Ended June 30,

(In thousands)

13 unchanged sentences

Total operating income

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.

Truckload segment depreciation expense was $ 15.3 million and $ 13.5 million, Dedicated segment depreciation expense was $ 11.9 million and $ 11.2 million, Intermodal segment depreciation expense was $ 1.8 million and $ 1.9 million, and Brokerage segment depreciation expense was $ 454,000 and $ 349,000 in the three-month periods ended June 30, 2023 and 2022, respectively.

Truckload segment depreciation expense was $ 30.6 million and $ 26.4 million, Dedicated segment depreciation expense was $ 23.7 million and $ 22.3 million, Intermodal segment depreciation expense was $ 3.7 million and $ 3.6 million, and Brokerage segment depreciation expense was $ 903,000 and $ 687,000 in the six-month periods ended June 30, 2023 and 2022, respectively.

(12) Use of Estimates

30 unchanged sentences

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

Our operating revenue increased $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 operating revenue decreased $33.2 million, or 5.4%, in the first six months of 2023 from the first six months of 2022.

Our operating revenue, net of fuel surcharges, decreased $10.9 million, or 2.1%, compared with the first six months of 2022.

Truckload segment revenue, net of fuel surcharges, increased 3.4% from the first six 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 7.0% from the first six months of 2022, primarily due to an increase in our fleet size.

Intermodal segment revenue, net of fuel surcharges, decreased 20.9% from the first six months of 2022, primarily due to decreases in both our number of loads and our revenue per load.

Brokerage segment revenue decreased 17.6% from the first six months of 2022, primarily due to decreases in both our revenue per load and our number of loads.

Fuel surcharge revenue decreased to $80.1 million in the first six months of 2023 from $102.4 million in the first six 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.

10 unchanged sentences

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

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 income declined 25.5% to $57.2 million in the first six months of 2023 from $76.8 million in the first six months of 2022.

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

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.

was 90.2% in the first six months of 2023 and 87.6% in the first six 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 six months of 2023 from 85.1% in the first six months of 2022.

Our net income declined 25.0% to $44.4 million, or $0.55 per diluted share, in the first six months of 2023 from $59.2 million, or $0.72 per diluted share, in the first six months of 2022.

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

At March 31, 2023, we had $96.3 million of cash and cash equivalents, $721.5 million in stockholders’

At June 30, 2023, we had $80.5 million of cash and cash equivalents, $740.0 million in stockholders’

equity and no long-term debt outstanding.

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.

In the first six months of 2023, net cash flows provided by operating activities of $98.2 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $84.3 million, to pay cash dividends of $9.8 million, and to construct and upgrade regional operating facilities in the amount of $4.3 million, resulting in a $72,000 decrease in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $116 million for the remainder of 2023.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first two quarters of 2023 which totaled $9.8 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 March 31,

Ended June 30,

Truckload Segment:

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

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

Independent contractors provided 98 and 85 tractors as of June 30, 2023 and 2022, respectively.

Comparison of Three Months Ended June 30, 2023 to Three Months Ended June 30, 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:

18 unchanged sentences

Consolidated operating ratio, net of fuel surcharges

Our operating revenue increased $10.7 million, or 3.7%, to $298.0 million in the 2023 period from $287.3 million in the 2022 period.

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 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 $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.

Our operating revenue decreased $43.9 million, or 13.3%, to $285.7 million in the 2023 period from $329.6 million in the 2022 period.

Our operating revenue, net of fuel surcharges, decreased $20.5 million, or 7.6%, to $248.6 million in the 2023 period from $269.1 million in the 2022 period.

This decrease in the 2023 period was due to a $14.1 million decrease in Brokerage revenue, an $8.9 million decrease in Intermodal revenue, net of fuel surcharges, and a $540,000 decrease in Truckload revenue, net of fuel surcharges, partially offset by a $3.0 million increase in Dedicated revenue, net of fuel surcharges.

Fuel surcharge revenue decreased to $37.0 million in the 2023 period from $60.4 million in the 2022 period.

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

Truckload segment revenue decreased $9.8 million, or 7.7%, to $117.1 million in the 2023 period from $127.0 million in the 2022 period.

Truckload segment revenue, net of fuel surcharges, decreased $540,000, or 0.5%, to $101.3 million in the 2023 period from $101.8 million in the 2022 period primarily due to a decrease in our average revenue per tractor despite an increase in our fleet size.

The operating ratio increased to 91.8% in the 2023 period from 87.3% 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 10.7% primarily due to increases in each of our fleet size and average revenue per tractor.

Impacting the 2023 period operating ratio was a decrease in our average revenue per tractor along with higher company driver compensation, depreciation and maintenance costs as a percentage of revenue.

Dedicated segment revenue decreased $5.4 million, or 4.9%, to $105.0 million in the 2023 period from $110.4 million in the 2022 period.

Dedicated segment revenue, net of fuel surcharges, increased 3.6% primarily due to an increase in our fleet size.

The operating ratio in the 2023 period improved to 86.5% from 87.3% 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.

The 2023 period was positively impacted by a reduction in driver recruiting costs and non-driver bonus compensation expense, partially offset by higher maintenance costs as a percentage of revenue.

Intermodal segment revenue decreased $14.6 million, or 39.5%, to $22.4 million in the 2023 period from $37.0 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.

Intermodal segment revenue, net of fuel surcharges, decreased 32.2% from the 2022 period primarily due to decreases in both our number of loads and our revenue per load.

The operating ratio in the 2023 period increased to 100.7% from 88.9% 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.

Impacting the 2023 period operating ratio was a decrease in our revenue per load along with higher company driver compensation, net fuel, chassis rental and depreciation costs as a percentage of revenue.

Brokerage segment revenue decreased $14.1 million, or 25.5%, to $41.2 million in the 2023 period from $55.3 million in the 2022 period primarily due to decreases in both our revenue per load and our number of loads.

The increase in the operating ratio in the 2023 period to 88.7% from 87.9% was primarily due to a decrease in our revenue per load along with increased compensation expense as a percentage of revenue.

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

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

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 $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.

Salaries, wages and benefits expense decreased $128,000, or 0.1%, in the 2023 period from the 2022 period.

This decrease resulted primarily from multiple items including a $3.2 million decrease in bonus compensation expense for our non-driver employees, partially offset by additional company driver compensation expense of $1.7 million and a $1.8 million increase in non-driver compensation expense.

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

1 unchanged sentence

Purchased transportation expense decreased $19.2 million in total, or 28.4%, 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.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $12.1 million to $33.5 million in the 2023 period from $45.6 million in the 2022 period, primarily due to decreases in both our cost per load and number of loads.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $11.1 million in the 2023 period from $18.4 million in the 2022 period, primarily due to decreases in both our number of loads and cost per load.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $259,000 in the 2023 period.

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

Fuel and fuel taxes increased by $2.4 million, or 5.5%, in the 2023 period from the 2022 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 $1.9 million, or 27.5%, to $8.8 million in the 2023 period from $6.9 million in the 2022 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $5.1 million from $4.5 million in the 2022 period.

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.

Fuel and fuel taxes decreased by $19.1 million, or 31.2%, in the 2023 period from the 2022 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 $559,000, or 7.0%, to $8.6 million in the 2023 period from $8.0 million in the 2022 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $3.4 million from $7.1 million in the 2022 period.

The United States Department of Energy, or DOE, national average cost of fuel decreased to $3.94 per gallon from $5.49 per gallon in the 2022 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 3.8% in the 2022 period.

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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 $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.

The $962,000, or 7.2%, decrease in insurance and claims in the 2023 period was primarily due to a decrease in our self-insured auto liability claim costs, partially offset by increases in our workers’

compensation 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.

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.

Gain on disposition of revenue equipment was $3.6 million in the 2023 period, down from $4.8 million in the 2022 period primarily due to a decrease in the average gain for our tractor and trailer sales, partially offset by an increase in the number of units sold.

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

4 unchanged sentences

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 88.7% in the 2023 period and 84.8% 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.

Other non-operating income increased to $1.1 million from $36,000 in the 2022 period due to increased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 25.3% in the 2023 period from 22.7% 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 30.9% to $21.9 million, or $0.27 per diluted share, in the 2023 period from $31.7 million, or $0.39 per diluted share, in the 2022 period.

Comparison of Six Months Ended June 30, 2023 to Six Months Ended June 30, 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:

(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 decreased $33.2 million, or 5.4%, to $583.7 million in the 2023 period from $616.8 million in the 2022 period.

Our operating revenue, net of fuel surcharges, decreased $10.9 million, or 2.1%, to $503.6 million in the 2023 period from $514.4 million in the 2022 period.

This decrease in the 2023 period was due to a $17.8 million decrease in Brokerage revenue and an $11.1 million decrease in Intermodal revenue, net of fuel surcharges, partially offset by an $11.5 million increase in Dedicated revenue, net of fuel surcharges, and a $6.6 million increase in Truckload revenue, net of fuel surcharges.

Fuel surcharge revenue decreased to $80.1 million in the 2023 period from $102.4 million in the 2022 period.

Truckload segment revenue decreased $2.0 million, or 0.8%, to $237.8 million in the 2023 period from $239.8 million in the 2022 period.

Truckload segment revenue, net of fuel surcharges, increased $6.6 million, or 3.4%, to $203.6 million in the 2023 period from $197.0 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 91.8% in the 2023 period from 86.8% in the 2022 period.

Dedicated segment revenue increased $4.3 million, or 2.1%, to $211.4 million in the 2023 period from $207.1 million in the 2022 period.

Dedicated segment revenue, net of fuel surcharges, increased 7.0% primarily due to an increase in our fleet size.

The operating ratio in the 2023 period improved to 86.8% from 88.1% in the 2022 period.

The 2023 period was positively impacted by a reduction in driver recruiting costs and non-driver bonus compensation expense, partially offset by higher maintenance costs as a percentage of revenue.

Intermodal segment revenue decreased $17.7 million, or 25.7%, to $51.0 million in the 2023 period from $68.6 million in the 2022 period.

Intermodal segment revenue, net of fuel surcharges, decreased 20.9% from the 2022 period primarily due to decreases in both our number of loads and our revenue per load.

The operating ratio in the 2023 period increased to 98.8% from 86.7% in the 2022 period.

Impacting the 2023 period operating ratio was a decrease in our revenue per load along with higher net fuel, company driver compensation, purchased transportation, chassis rental and depreciation costs as a percentage of revenue.

Brokerage segment revenue decreased $17.8 million, or 17.6%, to $83.5 million in the 2023 period from $101.4 million in the 2022 period primarily due to decreases in both our revenue per load and our number of loads.

The operating ratio in the 2023 period of 89.1% was up slightly from 88.8% in the 2022 period.

Percentage of

Operating Revenue

(Dollars in thousands)

Operating revenue

Operating expenses (income):

Salaries, wages and benefits

Purchased transportation

Fuel and fuel taxes

Supplies and maintenance

Operating taxes and licenses

Insurance and claims

Communications and utilities

Gain on disposition of revenue equipment

Total operating expenses

Operating income

Income before income taxes

Income taxes expense

Salaries, wages and benefits expense increased $9.0 million, or 4.9%, in the 2023 period from the 2022 period.

This increase resulted primarily from additional company driver compensation expense of $9.0 million and a $4.3 million increase in non-driver compensation expense, partially offset by a $5.5 million decrease in bonus compensation expense for our non-driver employees.

Purchased transportation expense decreased $22.4 million in total, or 17.9%, in the 2023 period from the 2022 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $16.1 million to $68.3 million in the 2023 period from $84.4 million in the 2022 period, primarily due to decreases in both our cost per load and number of loads.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $26.3 million in the 2023 period from $33.6 million in the 2022 period primarily due to a decrease in our number of loads.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased $913,000 in the 2023 period.

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

Fuel and fuel taxes decreased by $16.7 million, or 15.8%, in the 2023 period from the 2022 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 $2.5 million, or 16.5%, to $17.4 million in the 2023 period from $14.9 million in the 2022 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $8.5 million from $11.6 million in the 2022 period.

The United States DOE national average cost of fuel decreased to $4.18 per gallon from $4.87 per gallon in the 2022 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 3.6% in the 2022 period.

Our supplies and maintenance expense increased $7.7 million, or 30.1%, from the 2022 period primarily due to higher outside repair, parts, tires and loading/unloading costs.

The $5.9 million, or 11.2%, 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.

The $1.4 million, or 5.4%, 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 workers’

compensation claim costs, partially offset by a reduction in our self-insured auto liability claim costs.

Gain on disposition of revenue equipment was $8.8 million in the 2023 period, down from $9.4 million in the 2022 period primarily due to a decrease in the average gain for our tractor and trailer sales, despite an increase in the number of units sold.

Our operating income declined 25.5% to $57.2 million in the 2023 period from $76.8 million in the 2022 period as a result of the foregoing factors.

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

was 90.2% in the 2023 period and 87.6% in the 2022 period.

The operating ratio for our Truckload segment was 91.8% in the 2023 period and 86.8% in the 2022 period, for our Dedicated segment was 86.8% in the 2023 period and 88.1% in the 2022 period, for our Intermodal segment was 98.8% in the 2023 period and 86.7% in the 2022 period, and for our Brokerage segment was 89.1% in the 2023 period and 88.8% 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 85.1% in the 2022 period.

Other non-operating income increased to $1.9 million from $43,000 in the 2022 period due to increased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 25.0% in the 2023 period from 23.0% 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 25.0% to $44.4 million, or $0.55 per diluted share, in the 2023 period from $59.2 million, or $0.72 per diluted share, in the 2022 period.

Liquidity and Capital Resources  

3 unchanged sentences

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

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

Ended March 31,

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

Ended June 30,

(In thousands)

Net cash flows provided by operating activities

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

Net cash flows (used for) investing activities

Net cash flows (used for) financing activities

5 unchanged sentences

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

As of June 30, 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 six months of 2022, net cash flows provided by operating activities of $98.7 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $30.3 million, to repurchase and retire 2.3 million shares of our common stock for $41.8 million, to pay cash dividends of $9.8 million, and to construct and upgrade regional operating facilities in the amount of $3.8 million, resulting in an $11.4 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $116 million for the remainder of 2023.

1 unchanged sentence

Additionally, operating lease obligations total $674,000 through 2028.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first two quarters of both 2023 and 2022, which totaled $9.8 million in each of the six-month periods.

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

4 unchanged sentences

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

At March 31, 2023, there was no outstanding principal balance on the facility.

At June 30, 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 $19.5 million and remaining borrowing availability of $10.5 million.

2 unchanged sentences

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 8.0% at March 31, 2023.

The interest rate for the facility that would apply to outstanding principal balances was 8.25% at June 30, 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.

2 unchanged sentences

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 March 31, 2023 and December 31, 2022.

Other than our obligations for revenue equipment and building construction purchases and operating lease expenditures, along with our outstanding standby letters of credit to guarantee settlement of self-insurance claims, which are each mentioned above, we did not have any material off-balance sheet arrangements at March 31, 2023.

We were in compliance with all covenants at June 30, 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