What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 102 added, 254 removed, 363 unchanged (50% of the section changed)

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CONSOLIDATED CONDENSED BALANCE SHEETS

September 30,

(In thousands, except share information)

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Other noncurrent assets

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Total liabilities

Stockholders’

Stockholders’ equity:

Preferred stock, $ .01 par value per share;

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192,000,000 shares authorized;

81,308,968 shares at September 30, 2023, and 81,115,132 shares at December 31, 2022, issued and outstanding

81,362,709 shares at March 31, 2024, and 81,312,168 shares at December 31, 2023, issued and outstanding

Additional paid-in capital

Retained earnings

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Ended September 30,

Ended March 31,

(In thousands, except per share information)

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MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’

holders’

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’ EQUITY

(In thousands)

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Dividends on common stock

Balance at June 30, 2023

Issuance of common stock from share-based payment arrangement exercises

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at September 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, 2023

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

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Balance at March 31, 2024

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

Issuance of common stock from share-based payment arrangement exercises

Share-based payment arrangement compensation expense

Dividends 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 CASH FLOWS

Ended September 30,

Ended March 31,

(In thousands)

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Dividends on common stock

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

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Change in property and equipment not yet paid

Operating lease assets and liabilities acquired

Supplemental disclosure of cash flow information:

Cash paid for:

Cash paid for income taxes

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

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 30, 2023

THREE MONTHS ENDED MARCH 31, 2024

(1) Consolidated Condensed Financial Statements

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(2) Earnings per Common Share

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

Ended September 30,

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

Ended March 31,

(In thousands, except per share amounts)

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Diluted earnings per common share

Options totaling 157,000 equivalent shares for each of the three-month and nine-month periods ended September 30, 2023, and 512,500 and 535,600 equivalent shares for the three-month and nine-month periods ended September 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 nine-month periods ended September 30, 2023, and 16,590 equivalent shares for each of the three-month and nine-month periods ended September 30, 2022, 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 524,900 and 122,000 equivalent shares for the three-month periods ended March 31, 2024 and 2023, 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 82,788 and 49,560 equivalent shares for the three-month periods ended March 31, 2024 and 2023, respectively, were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive.

(3) Long-Term Debt

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

At September 30, 2023, there was no outstanding principal balance on the facility.

At March 31, 2024, 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 $ 20.7 million and remaining borrowing availability of $ 9.3 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 8.5 % at September 30, 2023.

The interest rate for the facility that would apply to outstanding principal balances was 8.5 % at March 31, 2024.

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.

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, 2023 and December 31, 2022.

The current credit agreement also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at March 31, 2024 and December 31, 2023.

(4) Related Party Transactions

We purchase fuel and tires and obtain related services from Bauer Built, Inc., or BBI.

We purchase tires and obtain related services from Bauer Built, Inc., or BBI.

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

We paid BBI $ 194,000 in the first nine months of 2023 and $ 377,000 in the first nine months of 2022 for fuel, tires and related services.

In addition, we paid $ 1.6 million in the first nine months of 2023 and $ 1.4 million in the first nine months of 2022 to tire manufacturers for tires that were provided by BBI.

We paid BBI $ 2,000 in the first three months of 2024 and $ 89,000 in the first three months of 2023 for tires and related services.

In addition, we paid $ 438,000 in the first three months of 2024 and $ 436,000 in the first three months of 2023 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 or fourth quarters of 2022 or in the first nine months of 2023.

As of September 30, 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 first quarter of 2024, in 2023, or in the third or fourth quarters of 2022.

As of March 31, 2024, 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 three quarters of both 2023 and 2022, and totaled $ 14.6 million and $ 14.7 million in the first nine months of 2023 and 2022, respectively.

Quarterly cash dividends of $ 0.06 per share of common stock were paid in each of the first quarters of 2024 and 2023 which totaled $ 4.9 million in each quarter.

(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 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 nine months of 2023 and 2022 was $ 1.9 million and $ 2.2 million, 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 in May 2021.

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

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 three months of 2024, 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 2024 and 2023 was $ 353,000 and $ 354,000 , respectively.

(8) Fair Value of Financial Instruments

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(9) Commitments and Contingencies

We are committed to new revenue equipment purchases of $ 63.2 million and building construction obligations of $ 292,000 for the remainder of 2023.

We are committed to new revenue equipment purchases of $ 185.3 million and construction obligations of $ 1.6 million for the remainder of 2024.

Operating lease obligation expenditures through 2028 total $ 485,000 .

We self-insure, in part, for losses relating to workers’

compensation, auto liability, general liability, cargo and property damage claims, along with employees’

health insurance with varying risk retention levels.

We self-insure, in part, for losses relating to workers’ compensation, auto liability, general liability, cargo and property damage claims, along with employees’ health insurance with varying risk retention levels.

We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review, and reserve currently for the estimated cost of the uninsured portion of pending claims.

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These four reporting segments are also the appropriate categories for the disaggregation of our revenue under FASB ASC 606.

We have strategically transitioned from a refrigerated long-haul carrier to a multifaceted business offering a network of refrigerated and dry truck-based transportation capabilities across our five distinct business platforms –

Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.

We have strategically transitioned from a refrigerated long-haul carrier to a multifaceted business offering a network of time and temperature-sensitive and dry truck-based transportation and distribution capabilities across our five distinct business platforms – Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.

Our Truckload segment provides a combination of regional short-haul and medium-to-long-haul full-load transportation services.

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Our agreements with customers are typically for one year.

Our Dedicated segment provides customized transportation solutions tailored to meet individual customers’

requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States.

Our Dedicated segment provides customized transportation solutions tailored to meet individual customers’ requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States.

Our agreements with customers range from three to five years and are subject to annual rate reviews.

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We also analyze our average Truckload and Dedicated revenue, net of fuel surcharges, per total mile, non-revenue miles percentage, the miles per tractor we generate, our fuel surcharge revenue, our accessorial revenue and our other sources of operating revenue.

Our Intermodal segment transports our customers’

freight within the United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers.

Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers.

The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.

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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 $ 2.7 million as of each of September 30, 2023 and December 31, 2022.

We had no impairment losses on contract assets in the first nine 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 $ 2.9 million and $ 2.1 million as of March 31, 2024 and December 31, 2023, respectively.

We had no impairment losses on contract assets in the first three months of 2024 or in 2023.

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)

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Total operating income

Truckload segment depreciation expense was $ 15.3 million and $ 14.5 million, Dedicated segment depreciation expense was $ 11.5 million and $ 11.5 million, Intermodal segment depreciation expense was $ 1.7 million and $ 2.0 million, and Brokerage segment depreciation expense was $ 462,000 and $ 383,000 in the three-month periods ended September 30, 2023 and 2022, respectively.

Truckload segment depreciation expense was $ 45.9 million and $ 40.9 million, Dedicated segment depreciation expense was $ 35.2 million and $ 33.8 million, Intermodal segment depreciation expense was $ 5.5 million and $ 5.6 million, and Brokerage segment depreciation expense was $ 1.4 million and $ 1.1 million in the nine-month periods ended September 30, 2023 and 2022, respectively.

Truckload segment depreciation expense was $ 16.1 million and $ 15.3 million, Dedicated segment depreciation expense was $ 10.3 million and $ 11.8 million, Intermodal segment depreciation expense was $ 1.6 million and $ 1.9 million, and Brokerage segment depreciation expense was $ 521,000 and $ 449,000 in the three-month periods ended March 31, 2024 and 2023, respectively.

(11) Use of Estimates

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Ultimate results could differ from these estimates.

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations.

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

The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report.

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We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.

Our Truckload segment provides a combination of regional short-haul and medium-to-long-haul full-load transportation services.

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Our agreements with customers are typically for one year.

Our Dedicated segment provides customized transportation solutions tailored to meet each individual customer’s requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States.

Our agreements with customers range from three to five years and are subject to annual rate reviews.

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Our Intermodal segment transports our customers’

The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.

Our Brokerage segment develops contractual relationships with and arranges for third-party carriers to transport freight for our customers in temperature-controlled trailers and dry vans within the United States and into and out of Mexico through Marten Transport Logistics, LLC, which was established in 2007 and operates pursuant to brokerage authority granted by the DOT.

We retain the billing, collection and customer management responsibilities.

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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 decreased $78.1 million, or 8.3%, in the first nine months of 2023 from the first nine months of 2022.

Our operating revenue, net of fuel surcharges, decreased $41.2 million, or 5.3%, compared with the first nine months of 2022.

Truckload segment revenue, net of fuel surcharges, decreased 0.9% from the first nine months of 2022, primarily due to a decrease in our average revenue per tractor, despite an increase in our fleet size.

Dedicated segment revenue, net of fuel surcharges, increased 3.3% from the first nine months of 2022, primarily due to an increase in our fleet size.

Intermodal segment revenue, net of fuel surcharges, decreased 22.3% from the first nine months of 2022, primarily due to decreases in both our number of loads and our revenue per load.

Brokerage segment revenue decreased 19.0% from the first nine months of 2022, primarily due to decreases in both our revenue per load and our number of loads.

Fuel surcharge revenue decreased to $120.6 million in the first nine months of 2023 from $157.5 million in the first nine months of 2022.

Our operating revenue decreased $48.4 million, or 16.2%, in the first three months of 2024 from the first three months of 2023.

Our operating revenue, net of fuel surcharges, decreased $39.2 million, or 15.4%, compared with the first three months of 2023.

Truckload segment revenue, net of fuel surcharges, decreased 7.1% from the first three months of 2023, primarily due to a decrease in our average revenue per tractor, despite an increase in our average fleet size.

Dedicated segment revenue, net of fuel surcharges, decreased 17.4% from the first three months of 2023, primarily due to decreases in both our average fleet size and our average revenue per tractor.

Intermodal segment revenue, net of fuel surcharges, decreased 43.2% from the first three months of 2023, primarily due to decreases in both our number of loads and our revenue per load.

Brokerage segment revenue decreased 15.7% from the first three months of 2023, primarily due to a decrease in our revenue per load.

Fuel surcharge revenue decreased to $33.9 million in the first three months of 2024 from $43.1 million in the first three months of 2023.

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 declined 32.7% to $74.5 million in the first nine months of 2023 from $110.6 million in the first nine months of 2022.

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

was 91.4% in the first nine months of 2023 and 88.3% in the first nine months of 2022.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, increased to 90.0% in the first nine months of 2023 from 85.9% in the first nine months of 2022.

Our net income declined 31.7% to $58.0 million, or $0.71 per diluted share, in the first nine months of 2023 from $84.8 million, or $1.03 per diluted share, in the first nine months of 2022.

Our operating income declined 57.8% to $12.3 million in the first three months of 2024 from $29.0 million in the first three months of 2023.

Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 95.1% in the first three months of 2024 and 90.3% in the first three months of 2023.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, increased to 94.3% in the first three months of 2024 from 88.6% in the first three months of 2023.

Our net income declined 57.1% to $9.6 million, or $0.12 per diluted share, in the first three months of 2024 from $22.5 million, or $0.28 per diluted share, in the first three months of 2023.

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

At September 30, 2023, we had $68.1 million of cash and cash equivalents, $749.4 million in stockholders’

equity and no long-term debt outstanding.

In the first nine months of 2023, net cash flows provided by operating activities of $126.3 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $116.9 million, to pay cash dividends of $14.6 million, and to construct and upgrade regional operating facilities in the amount of $7.6 million, resulting in a $12.5 million decrease in cash and cash equivalents.

At March 31, 2024, we had $73.7 million of cash and cash equivalents, $762.4 million in stockholders’ equity and no long-term debt outstanding.

In the first three months of 2024, net cash flows provided by operating activities of $45.7 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $18.4 million, to pay cash dividends of $4.9 million and to construct and upgrade regional operating facilities in the amount of $1.6 million, resulting in a $20.5 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $135 million for the remainder of 2024.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first three quarters of 2023 which totaled $14.6 million.

Quarterly cash dividends of $0.06 per share of common stock were paid in the first three months of 2024 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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We continue to invest considerable time and capital resources to actively implement and promote long-term environmentally sustainable solutions that drive reductions in our fuel and electricity consumption and decrease our carbon footprint.

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

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

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

Truckload, Dedicated and Intermodal revenue, net of fuel surcharge revenue;

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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 99 and 90 tractors as of September 30, 2023 and 2022, respectively.

Comparison of Three Months Ended September 30, 2023 to Three Months Ended September 30, 2022

Independent contractors provided 96 and 95 tractors as of March 31, 2024 and 2023, respectively.

Comparison of Three Months Ended March 31, 2024 to Three Months Ended March 31, 2023

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, decreased $39.2 million, or 15.4%, to $215.7 million in the 2024 period from $254.9 million in the 2023 period.

This decrease in the 2023 period was due to an $11.5 million decrease in Brokerage revenue, a $9.4 million decrease in Truckload revenue, net of fuel surcharges, a $6.2 million decrease in Intermodal revenue, net of fuel surcharges, and a $3.2 million decrease in Dedicated revenue, net of fuel surcharges.

This decrease in the 2024 period was due to a $15.1 million decrease in Dedicated revenue, net of fuel surcharges, a $10.1 million decrease in Intermodal revenue, net of fuel surcharges, a $7.3 million decrease in Truckload revenue, net of fuel surcharges, and a $6.7 million decrease in Brokerage revenue.

Fuel surcharge revenue decreased to $33.9 million in the 2024 period from $43.1 million in the 2023 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.

In addition to the factors discussed below, our profitability across each segment in the 2024 period was impacted by a freight market which has considerably softened from the conditions during the 2023 period.

Truckload segment revenue decreased $9.1 million, or 7.5%, to $111.6 million in the 2024 period from $120.6 million in the 2023 period.

Truckload segment revenue, net of fuel surcharges, decreased $9.4 million, or 8.9%, to $96.5 million in the 2023 period from $105.9 million in the 2022 period primarily due to a decrease in our average revenue per tractor, despite an increase in our fleet size.

Truckload segment revenue, net of fuel surcharges, decreased $7.3 million, or 7.1%, to $95.0 million in the 2024 period from $102.3 million in the 2023 period, primarily due to a decrease in our average revenue per tractor, despite an increase in our average fleet size.

The operating ratio increased to 99.6% in the 2024 period from 91.7% in the 2023 period.

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

Impacting the 2024 period operating ratio was a decrease in our average revenue per tractor along with higher company driver compensation, depreciation, maintenance, net fuel costs and a lower gain on disposition of revenue equipment, as a percentage of revenue.

Dedicated segment revenue decreased $20.0 million, or 18.8%, to $86.5 million in the 2024 period from $106.4 million in the 2023 period.

Dedicated segment revenue, net of fuel surcharges, decreased 3.7% primarily due to a decrease in our average revenue per tractor coupled with a slight decrease in our fleet size.

The operating ratio in the 2023 period increased to 88.9% from 88.2% in the 2022 period.

The 2023 period was impacted by a decrease in our average revenue per tractor along with higher maintenance, net fuel and depreciation costs as a percentage of revenue.

Dedicated segment revenue, net of fuel surcharges, decreased 17.4%, primarily due to decreases in both our average fleet size and our average revenue per tractor.

The operating ratio increased to 89.3% in the 2024 period from 87.1% in the 2023 period.

Impacting the 2024 period operating ratio was a decrease in our average revenue per tractor along with higher depreciation costs and a lower gain on disposition of revenue equipment, as a percentage of revenue.

Intermodal segment revenue decreased $12.6 million, or 44.1%, to $16.0 million in the 2024 period from $28.6 million in the 2023 period.

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The operating ratio in the 2024 period increased to 101.2% from 97.2% in the 2023 period.

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

Brokerage segment revenue decreased $11.5 million, or 21.7%, to $41.5 million in the 2023 period from $53.0 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 89.7% from 89.3% was primarily due to a decrease in our revenue per load along with increased compensation expense as a percentage of revenue.

Impacting the 2024 period operating ratio was a decrease in our revenue per load along with higher depreciation and maintenance costs, as a percentage of revenue.

Brokerage segment revenue decreased $6.7 million, or 15.7%, to $35.7 million in the 2024 period from $42.4 million in the 2023 period, primarily due to a decrease in our revenue per load.

The operating ratio in the 2024 period of 92.4% was up from 89.4% in the 2023 period.

This increase was primarily due to an increase in amounts payable to carriers for transportation services which we arranged, along with higher salaries and wages, as a percentage of our Brokerage revenue.

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

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Operating Revenue

September 30,

(Dollars in thousands)

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Income taxes expense

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’

health insurance, 401(k) plan contributions and other fringe benefits.

These expenses vary depending upon the size of our Truckload, Dedicated and Intermodal tractor fleets, the ratio of company drivers to independent contractors, our efficiency, our experience with employees’

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

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits.

Salaries, wages and benefits expense decreased $9.8 million, or 9.9%, in the 2024 period from the 2023 period.

This decrease resulted primarily from a $4.9 million decrease in company driver compensation expense along with a $1.9 million decrease in bonus compensation expense for our non-driver employees.

This decrease resulted primarily from lower company driver compensation expense of $6.6 million, a $1.9 million decrease in employees’ health insurance expense due to lower self-insured medical claims and a $763,000 decrease 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.

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Purchased transportation expense decreased $12.3 million in total, or 22.7%, in the 2024 period from the 2023 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $10.2 million to $34.1 million in the 2023 period from $44.3 million in the 2022 period, primarily due to decreases in both our cost per load and number of loads.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $5.0 million to $29.8 million in the 2024 period from $34.9 million in the 2023 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 $8.1 million in the 2024 period from $15.3 million in the 2023 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 $281,000 in the 2023 period.

The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased $68,000 in the 2024 period.

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

Fuel and fuel taxes decreased by $7.2 million, or 15.5%, in the 2024 period from the 2023 period.

Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $3.6 million, or 41.5%, to $12.1 million in the 2023 period from $8.6 million in 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) decreased $380,000, or 4.3%, to $8.4 million in the 2024 period from $8.8 million in the 2023 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $2.8 million from $5.1 million in the 2023 period.

The United States Department of Energy, or DOE, national average cost of fuel decreased to $3.96 per gallon from $4.41 per gallon in the 2023 period.

Despite this price decrease, our net fuel expense increased to 6.1% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2023 period from 4.0% in the 2022 period, primarily due to the record heat in the 2023 period.

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

fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers.

Despite this price decrease, our net fuel expense increased to 4.7% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2024 period from 4.1% in the 2023 period.

We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers.

Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.

Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling.

Our supplies and maintenance expense increased $3.0 million, or 20.5%, from the 2022 period primarily due to higher outside repair, loading/unloading and parts costs.

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

The $636,000, or 2.2%, increase in depreciation in the 2023 period was primarily due to an increase in our average tractor and trailer fleets along with higher prices of new equipment.

The $1.0 million, or 3.4%, decrease in depreciation in the 2024 period was primarily due to a decrease in our average tractor fleet size, partially offset by 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’

compensation claims.

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

The $1.3 million, or 10.9%, 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 insurance premiums, partially offset by a decrease in our self-insured auto liability claim costs.

The $3.4 million, or 22.6%, decrease in insurance and claims in the 2024 period was primarily due to decreases in our self-insured auto liability claim costs and in our self-insured cost of physical damage claims related to our revenue equipment, partially offset by higher insurance premiums.

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 $3.0 million in the 2023 period, up from $1.1 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 $1.2 million in the 2024 period, down from $5.2 million in the 2023 period primarily due to decreases in both the average gain for our tractor and trailer sales and 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.

Our operating income declined 57.8% to $12.3 million in the 2024 period from $29.0 million in the 2023 period as a result of the foregoing factors.

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

was 93.8% in the 2023 period and 89.6% in the 2022 period.

The operating ratio for our Truckload segment was 97.6% in the 2023 period and 88.9% in the 2022 period, for our Dedicated segment was 88.9% in the 2023 period and 88.2% in the 2022 period, for our Intermodal segment was 104.9% in the 2023 period and 97.6% in the 2022 period, and for our Brokerage segment was 89.7% in the 2023 period and 89.3% in the 2022 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 92.8% in the 2023 period and 87.5% in the 2022 period.

Other non-operating income increased to $1.0 million from $264,000 in the 2022 period due to increased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 25.5% in the 2023 period from 24.6% 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 47.0% to $13.6 million, or $0.17 per diluted share, in the 2023 period from $25.6 million, or $0.32 per diluted share, in the 2022 period.

Comparison of Nine Months Ended September 30, 2023 to Nine Months Ended September 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:

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/(loss):

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 $78.1 million, or 8.3%, to $863.2 million in the 2023 period from $941.3 million in the 2022 period.

Our operating revenue, net of fuel surcharges, decreased $41.2 million, or 5.3%, to $742.6 million in the 2023 period from $783.8 million in the 2022 period.

This decrease in the 2023 period was due to a $29.3 million decrease in Brokerage revenue, a $17.3 million decrease in Intermodal revenue, net of fuel surcharges, and a $2.8 million decrease in Truckload revenue, net of fuel surcharges, partially offset by an $8.2 million increase in Dedicated revenue, net of fuel surcharges.

Fuel surcharge revenue decreased to $120.6 million in the 2023 period from $157.5 million in the 2022 period.

Truckload segment revenue decreased $17.1 million, or 4.6%, to $352.0 million in the 2023 period from $369.1 million in the 2022 period.

Truckload segment revenue, net of fuel surcharges, decreased $2.8 million, or 0.9%, to $300.1 million in the 2023 period from $302.9 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 93.7% in the 2023 period from 87.5% in the 2022 period.

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

Dedicated segment revenue decreased $4.1 million, or 1.3%, to $313.2 million in the 2023 period from $317.3 million in the 2022 period.

Dedicated segment revenue, net of fuel surcharges, increased 3.3% primarily due to an increase in our fleet size.

The operating ratio in the 2023 period improved to 87.5% 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 $27.5 million, or 27.4%, to $73.0 million in the 2023 period from $100.5 million in the 2022 period.

Intermodal segment revenue, net of fuel surcharges, decreased 22.3% 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 100.6% from 90.1% 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, depreciation, purchased transportation, maintenance and chassis rental costs as a percentage of revenue.

Brokerage segment revenue decreased $29.3 million, or 19.0%, to $125.0 million in the 2023 period from $154.3 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 89.3% was up slightly from 89.0% in the 2022 period.

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 $1.9 million, or 0.7%, in the 2023 period from the 2022 period.

This increase resulted primarily from additional company driver compensation expense of $4.1 million and a $5.0 million increase in non-driver compensation expense, partially offset by a $7.4 million decrease in bonus compensation expense for our non-driver employees.

Purchased transportation expense decreased $37.1 million in total, or 19.6%, in the 2023 period from the 2022 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $26.3 million to $102.4 million in the 2023 period from $128.7 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 $37.9 million in the 2023 period from $49.9 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 $1.2 million 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 $25.3 million, or 15.5%, 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 $6.0 million, or 25.6%, to $29.5 million in the 2023 period from $23.5 million in the 2022 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $12.4 million from $18.0 million in the 2022 period.

The DOE national average cost of fuel decreased to $4.20 per gallon from $4.96 per gallon in the 2022 period.

Despite this price decrease, our net fuel expense increased to 4.8% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2023 period from 3.7% in the 2022 period, primarily due to the record heat in the third quarter of 2023.

Our supplies and maintenance expense increased $10.8 million, or 26.6%, from the 2022 period primarily due to higher outside repair, loading/unloading, parts and tires costs.

The $6.6 million, or 8.1%, increase in depreciation in the 2023 period was primarily due to an increase in our average tractor and trailer fleets along with higher prices of new equipment.

The $2.7 million, or 7.1%, 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, workers’

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

Gain on disposition of revenue equipment was $11.8 million in the 2023 period, up from $10.4 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.

Our operating income declined 32.7% to $74.5 million in the 2023 period from $110.6 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 91.4% in the 2023 period and 88.3% in the 2022 period.

Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 95.1% in the 2024 period and 90.3% in the 2023 period.

The operating ratio for our Truckload segment was 99.6% in the 2024 period and 91.7% in the 2023 period, for our Dedicated segment was 89.3% in the 2024 period and 87.1% in the 2023 period, for our Intermodal segment was 101.2% in the 2024 period and 97.2% in the 2023 period, and for our Brokerage segment was 92.4% in the 2024 period and 89.4% in the 2023 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 94.3% in the 2024 period and 88.6% in the 2023 period.

Other non-operating income increased to $2.9 million from $307,000 in the 2022 period due to increased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 25.1% in the 2023 period from 23.5% in the 2022 period primarily due to increases in per diem and other non-deductible expenses.

Our effective income tax rate increased to 26.1% in the 2024 period from 24.6% in the 2023 period.

As a result of the factors described above, net income declined 57.1% to $9.6 million, or $0.12 per diluted share, in the 2024 period from $22.5 million, or $0.28 per diluted share, in the 2023 period.

Liquidity and Capital Resources  

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

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

Ended September 30,

Ended March 31,

(In thousands)

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

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

As of September 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 nine months of 2022, net cash flows provided by operating activities of $163.2 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $82.0 million, to repurchase and retire 2.3 million shares of our common stock for $41.8 million, to pay cash dividends of $14.7 million, and to construct and upgrade regional operating facilities in the amount of $8.7 million, resulting in a $14.5 million increase in cash and cash equivalents.

We did not repurchase any shares in the first quarter of 2024, in 2023, or in the third or fourth quarters of 2022.

As of March 31, 2024, 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 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 $135 million for the remainder of 2024.

This amount includes commitments to purchase $63.2 million of new revenue equipment and $292,000 in building construction for the remainder of 2023.

This amount includes commitments to purchase $185.3 million of new revenue equipment, prior to considering proceeds from dispositions, and construction obligations of $1.6 million.

Additionally, operating lease obligations total $485,000 through 2028.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first three quarters of both 2023 and 2022, which totaled $14.6 million and $14.7 million in the first nine months of 2023 and 2022, respectively.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first quarters of 2024 and 2023 which totaled $4.9 million in each quarter.

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

At March 31, 2024, 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 $20.7 million and remaining borrowing availability of $9.3 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 8.5% at September 30, 2023.

The interest rate for the facility that would apply to outstanding principal balances was 8.5% at March 31, 2024.

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.

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, 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 September 30, 2023.

The current credit agreement also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios.

We were in compliance with all covenants at March 31, 2024 and December 31, 2023.

Other than our obligations for revenue equipment and 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, 2024.

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

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

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

Critical Accounting Estimates contained in the Annual Report on Form 10-K for the year ended December 31, 2022.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates contained in the Annual Report on Form 10-K for the year ended December 31, 2023.

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