What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 186 added, 63 removed, 402 unchanged (38% of the section changed)

27 unchanged sentences

192,000,000 shares authorized;

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

81,414,959 shares at June 30, 2024, and 81,312,168 shares at December 31, 2023, 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)

29 unchanged sentences

Dividends on common stock

Balance at June 30, 2024

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS ’ EQUITY

(In thousands)

Balance at December 31, 2022

4 unchanged sentences

Balance at March 31, 2023

Issuance of common stock from share-based payment arrangement exercises

Share-based payment arrangement compensation expense

Dividends on common stock

Balance at June 30, 2023

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)

28 unchanged sentences

Change in property and equipment not yet paid

Operating lease assets and liabilities acquired

Supplemental disclosure of cash flow information:

3 unchanged sentences

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2024

SIX MONTHS ENDED JUNE 30, 2024

(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 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.

Options totaling 543,500 and 533,400 equivalent shares for the three-month and six-month periods ended June 30, 2024, respectively, and 132,000 equivalent shares for each of the three-month and six-month periods ended June 30, 2023, 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 148,520 equivalent shares for each of the three-month and six-month periods ended June 30, 2024, and 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.

(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, 2024, there was no outstanding principal balance on the facility.

At June 30, 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 $ 23.1 million and remaining borrowing availability of $ 6.9 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 8.5 % at March 31, 2024.

The interest rate for the facility that would apply to outstanding principal balances was 8.5 % at June 30, 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.

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.

We were in compliance with all covenants at June 30, 2024 and December 31, 2023.

(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 $ 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.

We paid BBI $ 14,000 in the first six months of 2024 and $ 141,000 in the first six months of 2023 for tires and related services.

In addition, we paid $ 1.2 million in the first six months of 2024 and $ 1.1 million in the first six months of 2023 to tire manufacturers for tires that were provided by BBI.

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

We paid Durand Builders Service, Inc.

$ 7,000 in the first six months of 2024 for building repairs and had no transactions with that company in the first six months of 2023.

Hagness, one of our directors, is the chief executive officer and the principal stockholder of Durand Builders Service, Inc.

(5) Share Repurchase Program

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 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.

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

As of June 30, 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 quarters of 2024 and 2023 which totaled $ 4.9 million in each quarter.

Quarterly cash dividends of $ 0.06 per share of common stock were paid in each of the first two quarters of 2024 and 2023 which totaled $ 9.8 million in each period.

(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 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.

During the first six 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 each of the first six months of 2024 and 2023 was $ 1.4 million.

(8) Fair Value of Financial Instruments

1 unchanged sentence

(9) Commitments and Contingencies

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

We are committed to new revenue equipment purchases of $ 119.1 million and construction obligations of $ 308,000 for the remainder of 2024.

Operating lease obligation expenditures through 2028 total $ 512,000 .

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 renewed our liability insurance policies effective June 1, 2024 and are responsible for the first $ 2.0 million on each auto liability claim with an annual $ 5.0 million aggregate for claims between $ 10.0 million and $ 20.0 million.

For the policy years effective June 1, 2022 and June 1, 2023, we are responsible for the first $ 1.0 million on each auto liability claim with no aggregates.

We continue to be responsible for the first $ 750,000 on each workers’ compensation claim.

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.

34 unchanged sentences

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 $ 2.9 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 had no impairment losses on contract assets in the first six months of 2024 or in 2023.

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 $ 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.

Truckload segment depreciation expense was $ 16.2 million and $ 15.3 million, Dedicated segment depreciation expense was $ 9.9 million and $ 11.9 million, Intermodal segment depreciation expense was $ 1.6 million and $ 1.8 million, and Brokerage segment depreciation expense was $ 509,000 and $ 454,000 in the three-month periods ended June 30, 2024 and 2023, respectively.

Truckload segment depreciation expense was $ 32.3 million and $ 30.6 million, Dedicated segment depreciation expense was $ 20.3 million and $ 23.7 million, Intermodal segment depreciation expense was $ 3.1 million and $ 3.7 million, and Brokerage segment depreciation expense was $ 1.0 million and $ 903,000 in the six-month periods ended June 30, 2024 and 2023, respectively.

(11) Use of Estimates

27 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 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 operating revenue decreased $87.8 million, or 15.0%, in the first six months of 2024 from the first six months of 2023.

Our operating revenue, net of fuel surcharges, decreased $74.3 million, or 14.8%, compared with the first six months of 2023.

Truckload segment revenue, net of fuel surcharges, decreased 6.1% from the first six 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 20.1% from the first six 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 38.5% from the first six months of 2023, primarily due to decreases in both our number of loads and our revenue per load.

Brokerage segment revenue decreased 12.5% from the first six months of 2023, primarily due to a decrease in our revenue per load.

Fuel surcharge revenue decreased to $66.6 million in the first six months of 2024 from $80.1 million in the first six 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.

10 unchanged sentences

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

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 operating income declined 61.2% to $22.2 million in the first six months of 2024 from $57.2 million in the first six months of 2023.

Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 95.5% in the first six months of 2024 and 90.2% in the first six months of 2023.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, increased to 94.8% in the first six months of 2024 from 88.6% in the first six months of 2023.

Our net income declined 60.5% to $17.5 million, or $0.22 per diluted share, in the first six months of 2024 from $44.4 million, or $0.55 per diluted share, in the first six months of 2023.

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

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.

At June 30, 2024, we had $77.2 million of cash and cash equivalents, $766.8 million in stockholders’ equity and no long-term debt outstanding.

In the first six months of 2024, net cash flows provided by operating activities of $81.5 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $44.2 million, to pay cash dividends of $9.8 million and to construct and upgrade regional operating facilities in the amount of $3.3 million, resulting in a $24.0 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $102 million for the remainder of 2024.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first two quarters of 2024 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.

13 unchanged sentences

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:

16 unchanged sentences

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

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

Independent contractors provided 90 and 98 tractors as of June 30, 2024 and 2023, respectively.

Comparison of Three Months Ended June 30, 2024 to Three Months Ended June 30, 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:

26 unchanged sentences

The operating ratio increased to 99.0% in the 2024 period from 91.8% in the 2023 period.

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.

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

Dedicated segment revenue decreased $23.7 million, or 22.6%, to $81.3 million in the 2024 period from $105.0 million in the 2023 period.

1 unchanged sentence

The operating ratio increased to 91.8% in the 2024 period from 86.5% 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.

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

Intermodal segment revenue decreased $7.3 million, or 32.6%, to $15.1 million in the 2024 period from $22.4 million in the 2023 period.

1 unchanged sentence

The operating ratio in the 2024 period increased to 104.5% from 100.7% in the 2023 period.

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.

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

Brokerage segment revenue decreased $3.8 million, or 9.2%, to $37.4 million in the 2024 period from $41.2 million in the 2023 period, primarily due to a decrease in our revenue per load.

The operating ratio in the 2024 period of 92.3% was up from 88.7% 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.

This increase was primarily due to an increase in amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue.

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

19 unchanged sentences

Salaries, wages and benefits expense decreased $9.8 million, or 10.2%, in the 2024 period from the 2023 period.

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.

This decrease resulted primarily from lower company driver compensation expense of $8.3 million and a $1.1 million 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.

1 unchanged sentence

Purchased transportation expense decreased $5.1 million in total, or 10.5%, in the 2024 period from the 2023 period.

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, decreased $68,000 in the 2024 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $2.2 million to $31.3 million in the 2024 period from $33.5 million in the 2023 period, primarily due to a decrease in our cost per load.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $7.9 million in the 2024 period from $11.1 million in the 2023 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 $277,000 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 $3.4 million, or 8.1%, 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) decreased $380,000, or 4.3%, to $8.4 million in the 2024 period from $8.8 million in 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 $155,000, or 1.8%, to $8.7 million in the 2024 period from $8.6 million in the 2023 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $2.6 million from $3.4 million in the 2023 period.

8 unchanged sentences

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 $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.

The $78,000, or 0.6%, increase in insurance and claims in the 2024 period was primarily due to increases in our insurance premiums, partially offset by decreases in both our self-insured auto liability and cargo claim costs.

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

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.

Gain on disposition of revenue equipment was $2.5 million in the 2024 period, down from $3.6 million in the 2023 period due to decreases in the average gain for our tractor and trailer sales, despite 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.

5 unchanged sentences

As a result of the factors described above, net income declined 63.9% to $7.9 million, or $0.10 per diluted share, in the 2024 period from $21.9 million, or $0.27 per diluted share, in the 2023 period.

Comparison of Six Months Ended June 30, 2024 to Six Months Ended June 30, 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:

(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 $87.8 million, or 15.0%, to $495.9 million in the 2024 period from $583.7 million in the 2023 period.

Our operating revenue, net of fuel surcharges, decreased $74.3 million, or 14.8%, to $429.3 million in the 2024 period from $503.6 million in the 2023 period.

This decrease in the 2024 period was due to a $35.1 million decrease in Dedicated revenue, net of fuel surcharges, a $16.2 million decrease in Intermodal revenue, net of fuel surcharges, a $12.5 million decrease in Truckload revenue, net of fuel surcharges, and a $10.5 million decrease in Brokerage revenue.

Fuel surcharge revenue decreased to $66.6 million in the 2024 period from $80.1 million in the 2023 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 $13.7 million, or 5.8%, to $224.1 million in the 2024 period from $237.8 million in the 2023 period.

Truckload segment revenue, net of fuel surcharges, decreased $12.5 million, or 6.1%, to $191.1 million in the 2024 period from $203.6 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 99.3% in the 2024 period from 91.8% in the 2023 period.

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

Dedicated segment revenue decreased $43.7 million, or 20.7%, to $167.7 million in the 2024 period from $211.4 million in the 2023 period.

Dedicated segment revenue, net of fuel surcharges, decreased 20.1%, primarily due to decreases in both our average fleet size and our average revenue per tractor.

The operating ratio increased to 90.5% in the 2024 period from 86.8% in the 2023 period.

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

Intermodal segment revenue decreased $19.9 million, or 39.1%, to $31.0 million in the 2024 period from $51.0 million in the 2023 period.

Intermodal segment revenue, net of fuel surcharges, decreased 38.5% from the 2023 period, primarily due to decreases in both our number of loads and our revenue per load.

The operating ratio in the 2024 period increased to 102.8% from 98.8% in the 2023 period.

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

Brokerage segment revenue decreased $10.5 million, or 12.5%, to $73.1 million in the 2024 period from $83.5 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 89.1% in the 2023 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 decreased $19.6 million, or 10.0%, in the 2024 period from the 2023 period.

This decrease resulted primarily from lower company driver compensation expense of $15.0 million, a $1.9 million decrease in non-driver compensation expense and a $1.5 million decrease in employees’ health insurance expense due to lower self-insured medical claims.

Purchased transportation expense decreased $17.4 million in total, or 16.9%, in the 2024 period from the 2023 period.

Amounts payable to carriers for transportation services we arranged in our Brokerage segment decreased $7.2 million to $61.1 million in the 2024 period from $68.3 million in the 2023 period, primarily due to a decrease in our cost per load.

Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $16.0 million in the 2024 period from $26.3 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 $209,000 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 $10.6 million, or 12.0%, 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) decreased $226,000, or 1.3%, to $17.1 million in the 2024 period from $17.4 million in the 2023 period.

Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $5.4 million from $8.5 million in the 2023 period.

The DOE national average cost of fuel decreased to $3.91 per gallon from $4.18 per gallon in the 2023 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 2024 period from 4.1% in the 2023 period.

The $2.2 million, or 3.8%, 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.

The $3.3 million, or 12.1%, decrease in insurance and claims in the 2024 period was primarily due to decreases in our self-insured auto liability claim costs, in our self-insured cost of physical damage claims related to our revenue equipment and in our self-insured workers’ compensation claim costs, partially offset by higher insurance premiums.

Gain on disposition of revenue equipment was $3.7 million in the 2024 period, down from $8.8 million in the 2023 period due to decreases in the average gain for our tractor and trailer sales, despite an increase in the number of units sold.

Our operating income declined 61.2% to $22.2 million in the 2024 period from $57.2 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 95.5% in the 2024 period and 90.2% in the 2023 period.

The operating ratio for our Truckload segment was 99.3% in the 2024 period and 91.8% in the 2023 period, for our Dedicated segment was 90.5% in the 2024 period and 86.8% in the 2023 period, for our Intermodal segment was 102.8% in the 2024 period and 98.8% in the 2023 period, and for our Brokerage segment was 92.4% in the 2024 period and 89.1% in the 2023 period.

Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 94.8% in the 2024 period and 88.6% in the 2023 period.

Our effective income tax rate increased to 27.0% in the 2024 period from 25.0% in the 2023 period.

As a result of the factors described above, net income declined 60.5% to $17.5 million, or $0.22 per diluted share, in the 2024 period from $44.4 million, or $0.55 per diluted share, in the 2023 period.

Liquidity and Capital Resources

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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 March 31,

Ended June 30,

(In thousands)

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

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

As of June 30, 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 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 $102 million for the remainder of 2024.

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.

This amount includes commitments to purchase $119.1 million of new revenue equipment, prior to considering proceeds from dispositions, and construction obligations of $308,000.

Additionally, operating lease obligations total $512,000 through 2028.

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.

Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first two quarters of 2024 and 2023 which totaled $9.8 million in each period.

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 March 31, 2024, there was no outstanding principal balance on the facility.

At June 30, 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 $23.1 million and remaining borrowing availability of $6.9 million.

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

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

The interest rate for the facility that would apply to outstanding principal balances was 8.5% at June 30, 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.

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.

We were in compliance with all covenants at June 30, 2024 and December 31, 2023.

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

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Critical Accounting Estimates

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

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

The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated condensed financial statements and related notes.

We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated condensed financial statements are prepared.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material.

We believe that the following area involves critical accounting estimates due to the levels of subjectivity and judgment that are necessary to account for its highly uncertain matters, the susceptibility of such matters to change and the potentially material impact these estimates and assumptions could have to our financial condition and operating performance.

Auto Liability and Workers ’ Compensation Claims Reserves.

We self-insure for our portion of claims exposure resulting from auto liability and workers’ compensation claims.

We renewed our liability insurance policies effective June 1, 2024 and are responsible for the first $2.0 million on each auto liability claim with an annual $5.0 million aggregate for claims between $10.0 million and $20.0 million.

For the policy years effective June 1, 2022 and June 1, 2023, we are responsible for the first $1.0 million on each auto liability claim with no aggregates.

We continue to be responsible for the first $750,000 on each workers’ compensation claim.

Additionally, we have $23.1 million in standby letters of credit to guarantee settlement of claims under agreements with our insurance carriers and regulatory authorities.

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.

However, we could suffer a series of losses within our self-insured retention limits or losses over our policy limits which could negatively affect our financial condition and operating results.

Our auto liability and workers’ compensation claims expense and the related claims reserves will vary primarily based upon the frequency and severity of our accident experience.

The total auto liability and workers’ compensation claims reserves within the insurance and claims accruals in our consolidated condensed balance sheets were $37.7 million and $40.3 million as of June 30, 2024 and December 31, 2023, respectively.

The excess of the insurance and claims accruals over these amounts relates to general liability, cargo and property damage claims, along with reserves for physical damage to our equipment and outstanding employees’ health insurance claims.

We reserve for the estimated cost of the uninsured portion of pending auto liability and workers’ compensation claims, including legal costs.

These case reserves are periodically evaluated and adjusted based on our continuing evaluation of the nature and severity of each individual claim.

Claims development factors are applied to the total amount of the individual claims’ case reserves by year incurred to estimate future claims development based on our historical experience.

Our claims development factors phase down each year over nine years for auto liability claims and eleven years for workers’ compensation claims from the year incurred.

We also ensure that our total recorded auto liability and workers’ compensation claims reserves are within a range of reasonable amounts determined in an independent actuarial analysis.

There were no changes to our methodology used to estimate our ultimate claims losses in the first six months of 2024 or in 2023.

Projection of losses is subject to a high level of estimation uncertainty and actual results could differ from these current estimates.

Our estimates require judgments concerning the nature and severity of each claim, historical trends, consultation with actuarial experts, settlement patterns, jury awards, litigation trends and legal interpretations, which are difficult to predict.

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