What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-10-31 compared with 2023-07-31 · 178 added, 160 removed, 565 unchanged (37% of the section changed)

4 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

67 unchanged sentences

22,317,671 and 22,293,687 shares issued;

22,035,245 and 22,166,450 shares outstanding at June 30, 2023 and December 31, 2022, respectively

22,021,341 and 22,166,450 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

2 unchanged sentences

Treasury stock, at cost;

271,396 and 127,237 shares at June 30, 2023 and December 31, 2022, respectively

296,330 and 127,237 shares at September 30, 2023 and December 31, 2022, respectively

( 8,736 )  

8 unchanged sentences

$ 749,162  

See notes to condensed consolidated financial statements.

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

OPERATING REVENUES:

22 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

OPERATING ACTIVITIES:

5 unchanged sentences

Gain on sale or disposition of equipment

Gain on sale of marketable equity securities

Changes in operating assets and liabilities:

9 unchanged sentences

Proceeds from disposition of equipment

Sales of marketable equity securities

Purchases of marketable equity securities, net of return of capital

8 unchanged sentences

Repurchases of common stock

Net cash (used in) / provided by financing activities

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Net cash used in financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH -Beginning of period

4 unchanged sentences

Purchases of property and equipment included in accounts payable

See notes to condensed consolidated financial statements.

TRANSPORTATION SERVICES, INC.

3 unchanged sentences

Shares / Amount

Paid-In Capital

Treasury Stock

Additional Paid-In Capital

Balance at January 1, 2023

7 unchanged sentences

Balance at June 30, 2023

Treasury stock repurchases

Restricted stock issued

Restricted stock net settlement

Stock based compensation

Balance at September 30, 2023

Shares / Amount

Paid-In Capital

Additional Paid-In Capital

Balance at January 1, 2022

6 unchanged sentences

Balance at June 30, 2022

Restricted stock issued

Restricted stock net settlement

Stock based compensation

Treasury stock repurchases

Balance at September 30, 2022

See notes to condensed consolidated financial statements.

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements (unaudited)

June 30, 2023

September 30, 2023

BASIS OF PRESENTATION

9 unchanged sentences

and its consolidated subsidiaries.

The consolidated financial results for the three and six months ended 

June 30, 2023, include the results of our recently formed subsidiaries, Met Express, Inc.

The consolidated financial results for the three and nine months ended 

September 30, 2023, include the results of our recently formed subsidiaries, Met Express, Inc.

and Costar Equipment, Inc., from June 14, 2022, the date of the acquisition of substantially all of the assets and certain liabilities of Metropolitan Trucking, Inc.

and its related entities, through 

June 30, 2023.

September 30, 2023.

All material intercompany items and transactions have been eliminated in consolidation.

3 unchanged sentences

The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

Operating results for the six -month period ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the nine -month period ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

For further information, refer to the consolidated financial statements and the footnotes thereto included in the Company’s annual report on Form 10 -K for the year ended December 31, 2022.

5 unchanged sentences

RECENT ACCOUNTING PRONOUNCEMENTS

The Company considered the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board ("FASB") to the Accounting Standards Codification ("ASC") and has determined there are no ASUs that have not already been adopted which require significant consideration for disclosure as of June 30, 2023.

Additionally, the Company did not adopt any new ASUs during the quarter ended June 30, 2023.

Additionally, the Company did not adopt any new ASUs during the quarter ended September 30, 2023.

REVENUE RECOGNITION

30 unchanged sentences

The fair value of marketable equity securities is determined based on quoted market prices in active markets, as described in Note J.

The following table sets forth market value, cost, and unrealized gains on equity securities as of June 30, 2023 and December 31, 2022.

June 30, 2023

The following table sets forth market value, cost, and unrealized gains on equity securities as of September 30, 2023 and December 31, 2022.

September 30, 2023

December 31, 2022

8 unchanged sentences

$ 11,378  

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of June 30, 2023 and December 31, 2022.

June 30, 2023

The following table sets forth the gross unrealized gains and losses on the Company’s marketable securities as of September 30, 2023 and December 31, 2022.

September 30, 2023

December 31, 2022

7 unchanged sentences

$ 11,378  

The Company did not sell any marketable equity securities and had no realized gains or losses during the six months ending on June 30, 2023 or 2022, respectively.

For the quarter ended June 30, 2023, the Company recognized dividends received of approximately $ 362,000 in non-operating income in its condensed consolidated statements of operations.

For the six months ended June 30, 2022, the Company recognized dividends received of approximately $ 357,000 in non-operating income in its condensed consolidated statements of operations.

The following table shows the Company’s net realized gains during the three and nine months ending on September 30, 2023 and 2022, respectively, on certain marketable equity securities.

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Sales proceeds

Cost of securities sold

Realized gain

For the quarter ended September 30, 2023, the Company recognized dividend income of approximately $ 419,000 in non-operating income in its condensed consolidated statements of operations.

For the nine months ended September 30, 2023, the Company recognized dividend income of approximately $ 1,158,000 in non-operating income in its condensed consolidated statements of operations.

The Company’s equity securities are periodically used as collateral against any outstanding margin account borrowings.

As of June 30, 2023, and December 31, 2022, the Company had outstanding borrowings of approximately $ 739,000 and $ 914,000 , respectively, under its margin account.

As of September 30, 2023, and December 31, 2022, the Company had outstanding borrowings of approximately $ 0 and $ 914,000 , respectively, under its margin account.

Margin account borrowings are used for the purchase of marketable equity securities and as a source of short-term liquidity and are included in accrued expenses and other liabilities on our condensed consolidated balance sheets.

Our marketable equity securities portfolio had a net unrealized pre-tax loss in market value of approximately $ 165,000 during the second quarter of 2023, and a net unrealized pre-tax loss in market value of approximately $ 3,349,000 during the second quarter of 2022, which were reported as non-operating income in its condensed consolidated statements of operations for the respective periods.

Our marketable equity securities portfolio had a net unrealized pre-tax gain in market value of approximately $ 119,000 during the third quarter of 2023, and a net unrealized pre-tax loss in market value of approximately $ 2,387,000 during the third quarter of 2022, which were reported as non-operating income in its condensed consolidated statements of operations for the respective periods.

STOCK-BASED COMPENSATION

5 unchanged sentences

This stock award had a grant date fair value of $ 23.95 per share, based on the closing price of the Company’s stock on the date of grant, and vested immediately.

The total grant date fair value of stock vested during the first six months of 2023 was approximately $ 400,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first six months of 2023, was approximately $ 242,000 and includes approximately $ 55,000 recognized as a result of the grant of shares to certain non-employee directors.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.01 during the first six months of 2023.

As of June 30, 2023, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,482,000 , which is being amortized on a straight-line basis over the remaining vesting period.

The total grant date fair value of stock vested during the first nine months of 2023 was approximately $ 576,000 .

The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the first nine months of 2023, was approximately $ 387,000 and includes approximately $ 55,000 recognized as a result of the grant of shares to certain non-employee directors.

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.01 during the first nine months of 2023.

As of September 30, 2023, the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,687,000 , which is being amortized on a straight-line basis over the remaining vesting period.

As a result, the Company expects to recognize approximately $ 552,000 in additional compensation expense related to unvested stock awards during the remainder of 2023 and to recognize approximately $ 728,000 , $ 777,000 , $ 493,000 , and $ 136,000 in additional compensation expense related to unvested stock awards during the years 2024, 2025, 2026, and 2027, respectively.

The total grant date fair value of stock vested during the first six months of 2022 was approximately $ 93,000 . The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the 

six  months of 

The total grant date fair value of stock vested during the first nine months of 2022 was approximately $ 269,000 . The total pre-tax stock-based compensation expense, recognized in salaries, wages and benefits during the 

nine  months of 

2022,  was approximately $ 528,000 .

The recognition of stock-based compensation expense decreased both diluted and basic earnings per common share by approximately $ 0.01  during the 

six  months of 

nine  months of 

 As of 

June 30, 2022, 

September 30, 2022, 

the Company had stock-based compensation plans with total unvested stock-based compensation expense of approximately $ 2,601,000 , which was being amortized on a straight-line basis over the remaining vesting period.

A summary of the status of the Company’s non-vested restricted stock as of June 30, 2023, and changes during the six months ended June 30, 2023, is as follows:

A summary of the status of the Company’s non-vested restricted stock as of September 30, 2023, and changes during the nine months ended September 30, 2023, is as follows:

Restricted Stock

8 unchanged sentences

( 32,954 )  

Non-vested at June 30, 2023

Non-vested at September 30, 2023

198,860  

5 unchanged sentences

Truckload Services revenues and Brokerage and Logistics Services revenues, each before fuel surcharges, were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

15 unchanged sentences

TREASURY STOCK

The Company’s stock repurchase program has been extended and expanded several times, most recently in November 2021, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization.

As of June 30, 2023, there remain 186,994 shares of common stock authorized for repurchase under this plan.

The Company’s stock repurchase program has been extended and expanded several times, most recently in July 2023, when the Board of Directors reauthorized 500,000 shares of common stock for repurchase under the initial September 2011 authorization.

As of September 30, 2023, there remain 475,066 shares of common stock authorized for repurchase under this plan.

The Company accounts for treasury stock using the cost method.

As of June 30, 2023, 271,396 shares were held in the treasury at an aggregate cost of approximately $ 8,095,000 .

As of September 30, 2023, 296,330 shares were held in the treasury at an aggregate cost of approximately $ 8,736,000 .

EARNINGS PER SHARE

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands, except per share data)

$ 9,319  

$ 24,182  

$ 14,550  

$ 48,124  

Basic weighted average common shares outstanding

22,036  

22,268  

22,092  

22,283  

Dilutive effect of common stock equivalents

Diluted weighted average common shares outstanding

22,182  

22,445  

22,253  

22,474  

Basic earnings per share

$ 0.42  

$ 1.09  

$ 0.66  

$ 2.16  

Diluted earnings per share

$ 0.42  

$ 1.08  

$ 0.65  

$ 2.14  

The Company and its subsidiaries are subject to U.S.

3 unchanged sentences

If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance.

As of June 30, 2023, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

As of September 30, 2023, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the position will be sustained on examination by taxing authorities, based on the technical merits of the position.

As of June 30, 2023, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws.

As of September 30, 2023, an adjustment to the Company’s condensed consolidated financial statements for uncertain tax positions has not been required as management believes that the Company’s tax positions taken in income tax returns filed or to be filed are supported by clear and unambiguous income tax laws.

The Company recognizes interest and penalties related to uncertain income tax positions, if any, in income tax expense.

During the six months ended June 30, 2023 and 2022, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 26.7 % and 24.1 % for the six months ended June 30, 2023 and 2022, respectively.

Our effective tax rate for the six months ended June 30, 2023 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax benefits related to stock compensation.

During the nine months ended September 30, 2023 and 2022, the Company has not recognized or accrued any interest or penalties related to uncertain income tax positions.

The Company’s effective income tax rates were 27.0 % and 23.6 % for the nine months ended September 30, 2023 and 2022, respectively.

Our effective tax rate for the nine months ended September 30, 2023 differs from amounts computed by applying the United States federal statutory rates to pre-tax income primarily due to state income taxes and the tax treatment of non-deductible expenses, including but not limited to driver meals and per diem expenses.

FAIR VALUE OF FINANCIAL INSTRUMENTS

10 unchanged sentences

The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

At June 30, 2023, the following items are measured at fair value on a recurring basis:

At September 30, 2023, the following items are measured at fair value on a recurring basis:

(in thousands)

Marketable equity securities

$ 41,274  

The Company’s investments in marketable securities are recorded at fair value based on quoted market prices.

2 unchanged sentences

For long-term debt other than the lines of credit, the fair values are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

The carrying value and estimated fair value of this other long-term debt at June 30, 2023 was as follows:

The carrying value and estimated fair value of this other long-term debt at September 30, 2023 was as follows:

(in thousands)

Long-term debt

$ 229,969  

$ 220,060  

The Company has not elected the fair value option for any of its financial instruments.

NOTES PAYABLE

During the first six months of 2023, the Company’s subsidiaries did not enter into any new installment obligations.

During the first nine months of 2023, the Company’s subsidiaries entered into installment obligations totaling approximately $ 12.3 million for the purpose of purchasing revenue equipment and other assets.

These obligations are payable in monthly installments and are recorded in long-term debt and current maturities on the condensed consolidated balance sheets.

The terms of these obligations are 60 months.

We are involved in certain claims and pending litigation arising from the ordinary conduct of business.

8 unchanged sentences

On October 7, 2022, the parties submitted to the court an executed Settlement Agreement and Release, to resolve and release all claims asserted in the litigation from January 1, 2020, through July 31, 2022, for $ 4,750,000 . We did not admit liability for any claim. The District Court granted preliminary approval of the settlement on November 14, 2022. 

Notice of the settlement has been sent to class and collective action members. A final settlement approval hearing is scheduled for October 11, 2023.

Notice of the settlement has been sent to class and collective action members. A final settlement approval hearing was held, and the settlement was approved, on October 11, 2023.

Management has determined that any losses under this claim will not be covered by existing insurance policies.

11 unchanged sentences

The Company is party to operating leases which include initial terms ranging from three to five years and which do not include an option for early cancellation.

In accordance with the provisions of ASC Topic 842, these leases resulted in the recognition of right-of-use assets and corresponding operating lease liabilities, respectively, valued at $ 0.4 million as of June 30, 2023.

These assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date, using the Company’s incremental borrowing rate as of the respective dates of lease inception, as the rate implicit in each lease is not readily determinable.

2 unchanged sentences

While these lease agreements may contain provisions to extend after the initial term for an additional five years, the Company is not reasonably certain these extension options will be exercised.

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of June 30, 2023.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at June 30, 2023, are:

Therefore, potential lease payments that might occur under this extension period are not included in amounts recorded in our condensed consolidated balance sheets as of September 30, 2023.

Scheduled amounts and timing of cash flows arising from future right-of-use operating lease payments at September 30, 2023, are:

Maturity of Lease Liabilities

13 unchanged sentences

Weighted-average discount rate for operating leases

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the six months ended June 30, 2023.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.2 million during the six months ended June 30, 2023, and is included in operating cash flows within the condensed consolidated statement of cash flows.

No new right-of-use assets were recognized as a non-cash asset addition that resulted from new operating lease liabilities during the nine months ended September 30, 2023.

Cash paid for amounts included in the present value of operating lease liabilities was $ 0.1 million during the nine months ended September 30, 2023, and is included in operating cash flows within the condensed consolidated statement of cash flows.

Operating Lease Costs

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

12 unchanged sentences

In the event that an independent contractor defaults on their lease, the Company generally leases the truck to another independent contractor.

As of June 30, 2023, the gross carrying value of trucks underlying these leases was $ 67.6 million and accumulated depreciation was $ 36.9 million.

As of September 30, 2023, the gross carrying value of trucks underlying these leases was $ 54.8 million and accumulated depreciation was $ 25.1 million.

Depreciation is calculated on a straight-line basis over the estimated useful life of the equipment, down to an estimated salvage value.

1 unchanged sentence

In other cases, where salvage values are not guaranteed, estimates of salvage value are based on the expected market values of equipment at the time of disposal.

During the quarter ended June 30, 2023, the Company incurred $ 1.2 million of depreciation expense for these assets.

During the quarter ended September 30, 2023, the Company incurred $ 0.6 million of depreciation expense for these assets.

The Company leases dock space to a related party at our Laredo, Texas terminal.

2 unchanged sentences

Lease Receivables

Future minimum operating lease payments receivable at June 30, 2023:

Future minimum operating lease payments receivable at September 30, 2023:

(in thousands)

5 unchanged sentences

NONCASH INVESTING AND FINANCING ACTIVITIES

The Company did not finance any equipment purchases during the first six months of 2023 utilizing noncash financing.

The Company financed approximately $ 12.3 million in equipment purchases during the first nine months of 2023 utilizing noncash financing.

ACQUISITION OF METROPOLITAN TRUCKING

12 unchanged sentences

The Asset Purchase Agreement contains customary representations, warranties, covenants, escrow and indemnification provisions.

The results of the acquired business have been included in the condensed consolidated financial statements since the date of acquisition and represented 9.0 % of consolidated total assets as of June 30, 2023 and 10.0 % of revenues excluding fuel surcharge for the quarter ended June 30, 2023.

The results of the acquired business have been included in the condensed consolidated financial statements since the date of acquisition and represented 12.4 % of consolidated total assets as of September 30, 2023 and 9.3 % of revenues excluding fuel surcharge for the quarter ended September 30, 2023.

The allocation of the purchase price is detailed in the tables below.

54 unchanged sentences

These aspects of our business are carefully managed, and efforts are continuously underway to achieve favorable results.

Truckload services revenues, excluding fuel surcharges, represented 66.0% and 66.4% of total revenues, excluding fuel surcharges, for the quarters ended June 30, 2023, and 2022, respectively.

Truckload services revenues, excluding fuel surcharges, represented 64.4% and 67.0% of total revenues, excluding fuel surcharges, for the quarters ended September 30, 2023, and 2022, respectively.

The remaining revenues, excluding fuel surcharges, were generated from brokerage and logistics services.

2 unchanged sentences

In discussing our results of operations, we use revenue before fuel surcharge (and fuel expense, net of fuel surcharge), because management believes that eliminating the impact of this sometimes-volatile source of revenue allows a more consistent basis for comparing our results of operations from period to period.

During the three months ended June 30, 2023 and 2022, approximately $25.3 million and $34.4 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the six months ended June 30, 2023 and 2022, approximately $53.6 million and $57.8 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the three months ended September 30, 2023 and 2022, approximately $27.2 million and $36.2 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

During the nine months ended September 30, 2023 and 2022, approximately $80.8 million and $93.9 million, respectively, of the Company’s total revenue was generated from fuel surcharges.

We may also discuss certain changes in our expenses as a percentage of revenue, before fuel surcharge, rather than absolute dollar changes.

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(percentages)

11 unchanged sentences

Income before income taxes

THREE MONTHS ENDED JUNE 30, 2023 VS.

THREE MONTHS ENDED JUNE 30, 2022

During the second quarter of 2023, truckload services revenue, before fuel surcharges, decreased 10.7% to $120.2 million as compared to $134.7 million during the second quarter of 2022.

The decrease in revenue was primarily the result of a decrease in the average rate per mile charged to our customers during the second quarter of 2023 compared to the second quarter of 2022.

The decrease in rate per mile was partially offset by increases in total loads and total miles during the second quarter of 2023 compared to the second quarter of 2022.

Salaries, wages and benefits increased from 29.6% of revenues, before fuel surcharges, in the second quarter of 2022 to 37.1% of revenues, before fuel surcharges, during the second quarter of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in total miles and related driver pay in the second quarter of 2023 compared to the second quarter of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 6.6% of revenues, before fuel surcharges, during the second quarter of 2022 to 11.7% of revenues, before fuel surcharges, during the second quarter of 2023.

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

During the third quarter of 2023, truckload services revenue, before fuel surcharges, decreased 22.6% to $112.3 million as compared to $145.0 million during the third quarter of 2022.

The decrease in revenue was primarily the result of a market driven decrease in the average rate per mile charged to our customers during the third quarter of 2023 compared to third quarter 2022.

Also contributing to the revenue reduction was a 150 truck decrease in the average number of trucks operated by the Company during the third quarter 2023 compared to the third quarter 2022 as the company aligned fleet size to decreased demand from customers.

To a lesser extent, revenue was negatively impacted by the United Auto Workers strike that began in mid-September of 2023 against a group of our automotive customers.

Salaries, wages and benefits increased from 32.8% of revenues, before fuel surcharges, in the third quarter of 2022 to 38.2% of revenues, before fuel surcharges, during the third quarter of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in proportion of total miles driven by drivers employed by the Company, as opposed to transportation purchased from third parties, in the third quarter of 2023 compared to the third quarter of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 8.1% of revenues, before fuel surcharges, during the third quarter of 2022 to 13.3% of revenues, before fuel surcharges, during the third quarter of 2023.

The increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which was a result of decreased fuel surcharge collections from customers.

2 unchanged sentences

These categorizations have the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category.

Rent and purchased transportation decreased from 25.5% of revenues, before fuel surcharges, during the second quarter of 2022 to 21.7% of revenues, before fuel surcharges, during the second quarter of 2022.

The decrease was primarily due to a decrease in the rates charged by third-party carriers during the second quarter of 2023 compared to the second quarter of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the second quarter of 2023, compared to the second quarter of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 79.7% for the second quarter of 2022 to 92.7% for the second quarter of 2023.

Non-operating income (expense) increased from a loss of 1.6% of revenues, before fuel surcharges, during the second quarter of 2022 to income of 0.7% of revenues, before fuel surcharges, during the second quarter of 2023.

Rent and purchased transportation decreased from 25.2% of revenues, before fuel surcharges, during the third quarter of 2022 to 22.6% of revenues, before fuel surcharges, during the third quarter of 2023.

The decrease was primarily due to a decrease in the rates charged by third-party carriers during the third quarter of 2023 compared to the third quarter of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the third quarter of 2023, compared to the third quarter of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation increased from 11.0% of revenues, before fuel surcharges, during the third quarter of 2022 to 13.6% of revenues, before fuel surcharges, during the third quarter of 2023.

This percentage-based increase is primarily a result of the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

Due to the fixed-cost nature of depreciation, a decrease in operating revenues, before fuel surcharge, without a corresponding proportional decrease in depreciation, increases depreciation expense as a percentage of operating revenues.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 82.6% for the third quarter of 2022 to 95.8% for the third quarter of 2023.

Non-operating income (expense) improved from a loss of 0.9% of revenues, before fuel surcharges, during the third quarter of 2022 to income of 1.0% of revenues, before fuel surcharges, during the third quarter of 2023.

This increase primarily resulted from the change in the market values of our portfolio of marketable equity securities.

The Company recorded a $0.2 million increase in the market value of our marketable equity securities in non-operating income (expense) during the second quarter of 2023, compared to a $3.3 million decrease in the market value of our marketable equity securities during the second quarter of 2022.

SIX MONTHS ENDED JUNE 30, 2023 VS.

SIX MONTHS ENDED JUNE 30, 2022

For the six months ended June 30, 2023, truckload services revenue, before fuel surcharges, decreased 5.5% to $245.4 million as compared to $259.7 million for the six months ended June 30, 2022.

The decrease in revenue was primarily the result of a decrease in the average rate per mile charged to our customers during the first six months of 2023 compared to the first six months of 2022.

The decrease in rate per mile was partially offset by increases in total loads and total miles during first six months of 2023 compared to the first six months of 2022.

Salaries, wages and benefits increased from 29.2% of revenues, before fuel surcharges, in the first six months of 2022 to 36.6% of revenues, before fuel surcharges, during the first six months of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in total miles and related driver pay in the first six months of 2023 compared to the first six months of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 6.5% of revenues, before fuel surcharges, during the first six months of 2022 to 11.0% of revenues, before fuel surcharges, during the first six months of 2023.

The Company recorded a $0.1 million increase in the market value of our marketable equity securities in non-operating income (expense) during the third quarter of 2023, compared to a $2.4 million decrease in the market value of our marketable equity securities during the third quarter of 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

For the nine months ended September 30, 2023, truckload services revenue, before fuel surcharges, decreased 11.6% to $357.7 million as compared to $404.7 million for the nine months ended September 30, 2022.

The decrease in revenue was primarily the result of a decrease in the average rate per mile charged to our customers during the first nine months of 2023 compared to the first nine months of 2022.

The decrease in revenue during the first nine months of 2023, as compared to the first nine months of 2022, was intensified by the United Auto Workers strike that began in September of 2023.

To a lesser extent, revenue was negatively impacted by the United Auto Workers strike that began in mid-September of 2023 against a group of our automotive customers.

Salaries, wages and benefits increased from 30.5% of revenues, before fuel surcharges, in the first nine months of 2022 to 37.2% of revenues, before fuel surcharges, during the first nine months of 2023.

This percentage-based increase is primarily a result of a decrease in the average rate per mile charged to our customers, coupled with an increase in total miles and related driver pay in the first nine months of 2023 compared to the first nine months of 2022, as well as the result of the interaction of expenses with fixed-cost characteristics, such as general and administrative wages, maintenance wages, and operations wages with a decrease in revenues for the periods compared.

Operating supplies and expenses increased from 7.1% of revenues, before fuel surcharges, during the first nine months of 2022 to 11.7% of revenues, before fuel surcharges, during the first nine months of 2023.

The percentage-based increase relates primarily to an increase in the average surcharge-adjusted fuel price paid per gallon of diesel fuel, which increased as a result of decreased fuel surcharge collections from customers.

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These categorizations have the effect of increasing our net operating supplies and expenses while decreasing the rent and purchased transportation category.

Rent and purchased transportation decreased from 25.9% of revenues, before fuel surcharges, during the first six months of 2022 to 23.2% of revenues, before fuel surcharges, during the first six months of 2023.

The increase was primarily due to a decrease in the rates charged by third-party carriers during the first six months of 2023 compared to the first six months of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the first six months of 2023, compared to the first six months of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Insurance and claims expense increased from 5.4% of revenues, before fuel surcharges, during the first six months of 2022 to 8.2% of revenues before fuel surcharges, during the first six months of 2023.

This increase relates primarily to an increase in accident reserves recognized in the first quarter of 2023, as compared to the first quarter of 2022.

Rent and purchased transportation decreased from 25.7% of revenues, before fuel surcharges, during the first nine months of 2022 to 23.0% of revenues, before fuel surcharges, during the first nine months of 2023.

The decrease was primarily due to a decrease in the rates charged by third-party carriers during the first nine months of 2023 compared to the first nine months of 2022.

Also contributing to the decrease was a decrease in the average number of owner-operators under contract during the first nine months of 2023, compared to the first nine months of 2022, as well as a decrease in the average rate per mile, including fuel surcharges, paid to owner-operators during the respective periods.

Depreciation increased from 11.2% of revenues, before fuel surcharges, during the first nine months of 2022 to 13.1% of revenues, before fuel surcharges, during the first nine months of 2023.

This percentage-based increase is primarily a result of the interaction of a decrease in operating revenues with the fixed-cost nature of depreciation expense.

Insurance and claims expense increased from 4.8% of revenues, before fuel surcharges, during the first nine months of 2022 to 7.0% of revenues before fuel surcharges, during the first nine months of 2023.

This increase relates primarily to an increase in accident reserves recognized in the first quarter of 2023.

During the quarter ended March 31, 2023, the Company recorded a $10.0 million liability for claims expected to settle in excess of insurance limits, specific to an accident in February 2022.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 80.5% for the first six months of 2022 to 96.1% for the first six months of 2023.

The truckload services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 81.3% for the first nine months of 2022 to 96.0% for the first nine months of 2023.

RESULTS OF OPERATIONS –

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(percentages)

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Income before income taxes

THREE MONTHS ENDED JUNE 30, 2023 VS.

THREE MONTHS ENDED JUNE 30, 2022

During the second quarter of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 9.1% to $61.9 million as compared to $68.0 million during the second quarter of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the second quarter of 2023 as compared to the second quarter of 2022.

Rents and purchased transportation increased from 79.7% of revenues, before fuel surcharges, during the second quarter of 2022 to 84.4% of revenues, before fuel surcharges, during the second quarter of 2023.

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

During the third quarter of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 13.2% to $62.1 million as compared to $71.5 million during the third quarter of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the third quarter of 2023 as compared to the third quarter of 2022.

Rents and purchased transportation increased from 80.4% of revenues, before fuel surcharges, during the third quarter of 2022 to 86.8% of revenues, before fuel surcharges, during the third quarter of 2023.

The increase resulted from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 86.2% for the second quarter of 2022 to 91.8% for the second quarter of 2023.

SIX MONTHS ENDED JUNE 30, 2023 VS.

SIX MONTHS ENDED JUNE 30, 2022

During the first six months of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 6.5% to $130.1 million as compared to $139.2 million during the first six months of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the first six months of 2023 as compared to the first six months of 2022.

Rents and purchased transportation increased from 81.0% of revenues, before fuel surcharges, during the first six months of 2022 to 83.4% of revenues, before fuel surcharges, during the first six months of 2023.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 85.7% for the third quarter of 2022 to 93.3% for the third quarter of 2023.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

During the first nine months of 2023, logistics and brokerage services revenue, before fuel surcharges, decreased 8.8% to $192.2 million as compared to $210.6 million during the first nine months of 2022.

The decrease relates to a decrease in the average rates charged to customers, offset by an increase in the number of loads serviced during the first nine months of 2023 as compared to the first nine months of 2022.

Rents and purchased transportation increased from 81.5% of revenues, before fuel surcharges, during the first nine months of 2022 to 85.1% of revenues, before fuel surcharges, during the first nine months of 2023.

The increase resulted from paying third-party carriers a larger percentage of customer revenue.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 87.4% for the first six months of 2022 to 90.2% for the first six months of 2023.

The logistics and brokerage services division operating ratio, which measures the ratio of operating expenses, net of fuel surcharges, to operating revenues, before fuel surcharges, increased from 86.9% for the first nine months of 2022 to 91.2% for the first nine months of 2023.

RESULTS OF OPERATIONS –

COMBINED SERVICES

THREE MONTHS ENDED JUNE 30, 2023 VS.

THREE MONTHS ENDED JUNE 30, 2022

Net income for all divisions was approximately $9.3 million, or 5.1% of revenues, before fuel surcharges for the second quarter of 2023 as compared to net income of $24.2 million, or 11.9% of revenues, before fuel surcharges for the second quarter of 2022.

The decrease in net income resulted in diluted earnings per share of $0.42 for the second quarter of 2023 as compared to diluted earnings per share of $1.08 for the second quarter of 2022.

SIX MONTHS ENDED JUNE 30, 2023 VS.

SIX MONTHS ENDED JUNE 30, 2022

Net income for all divisions was approximately $14.6 million, or 3.9% of revenues, before fuel surcharges for the first six months of 2023 as compared to net income of $48.1 million, or 12.1% of revenues, before fuel surcharges for the first six months of 2022.

The decrease in net income resulted in a diluted earnings per share of $0.65 for the first six months of 2023 as compared to diluted earnings per share of $2.14 for the first six months of 2022.

THREE MONTHS ENDED SEPTEMBER 30, 2023 VS.

THREE MONTHS ENDED SEPTEMBER 30, 2022

Net income for all divisions was approximately $6.1 million, or 3.5% of revenues, before fuel surcharges for the third quarter of 2023 as compared to net income of $24.6 million, or 11.3% of revenues, before fuel surcharges for the third quarter of 2022.

The decrease in net income resulted in diluted earnings per share of $0.28 for the third quarter of 2023 as compared to diluted earnings per share of $1.09 for the third quarter of 2022.

NINE MONTHS ENDED SEPTEMBER 30, 2023 VS.

NINE MONTHS ENDED SEPTEMBER 30, 2022

Net income for all divisions was approximately $20.6 million, or 3.8% of revenues, before fuel surcharges for the first nine months of 2023 as compared to net income of $72.7 million, or 11.8% of revenues, before fuel surcharges for the first nine months of 2022.

The decrease in net income resulted in a diluted earnings per share of $0.93 for the first nine months of 2023 as compared to diluted earnings per share of $3.24 for the first nine months of 2022.

LIQUIDITY AND CAPITAL RESOURCES

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Our primary sources of liquidity have been funds provided by operations, proceeds from the sales of revenue equipment, and borrowings under our credit facilities, installment notes, and investment margin account.

During the first six months of 2023, we generated $67.5 million in cash from operating activities.

Investing activities used $4.4 million in cash in the first six months of 2023.

Financing activities used $39.1 million in cash in the first six months of 2023.

During the first nine months of 2023, we generated $93.8 million in cash from operating activities.

Investing activities used $10.9 million in cash in the first nine months of 2023.

Financing activities used $54.7 million in cash in the first nine months of 2023.

Our primary use of funds is for the purchase of revenue equipment.

We typically use installment notes, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt.

During the first six months of 2023, we utilized cash on hand and our line of credit to finance purchases of revenue equipment and other assets of approximately $13.0 million.

We commonly finance the acquisition of revenue equipment through installment notes with fixed interest rates and terms ranging from 36 to 84 months.

During the first six months of 2023, the Company did not enter into any new installment obligations.

We typically use installment notes with fixed interest rates and terms ranging from 36 to 84 months, our existing line of credit on an interim basis, proceeds from the sale or trade of equipment, and cash flows from operations to finance capital expenditures and repay long-term debt.

During the first nine months of 2023, we utilized cash on hand, installment notes, and our line of credit to finance purchases of revenue equipment and other assets of approximately $26.8 million.

During the remainder of 2023, we expect to purchase approximately 330 trucks and 1,130 trailers while continuing to sell or trade older equipment, which we expect to result in net capital expenditures of approximately $90.8 million.

We currently intend to retain our future earnings to finance our growth and do not anticipate paying cash dividends in the foreseeable future.

During the first six months of 2023, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at Term SOFR plus 1.35% (6.42% at June 30, 2023), are secured by our trade accounts receivable and mature on July 1, 2024.

During the first nine months of 2023, we maintained a revolving line of credit.

Amounts outstanding under the line bear interest at Term SOFR plus 1.35% (6.65% at September 30, 2023), are secured by our trade accounts receivable and mature on July 1, 2024.

An “unused fee”

of 0.25% is charged if average borrowings are less than $18.0 million.

At June 30, 2023 outstanding advances on the line of credit were approximately $0.4 million, consisting of letters of credit, with availability to borrow $59.6 million.

Trade accounts receivable decreased from $134.7 million at December 31, 2022 to $100.8 million at June 30, 2023.

The decrease resulted from a decrease in freight revenues, which flow through accounts receivable, during the first six months of 2023 as compared to the fourth quarter of 2022.

Prepaid expenses and deposits decreased from $15.7 million at December 31, 2022 to $11.9 million at June 30, 2023.

At September 30, 2023 borrowings against the line of credit were $0, but there were letters of credit of approximately $0.4 million which reduced the availability to borrow against the line of credit to $59.6 million.

Trade accounts receivable decreased from $134.7 million at December 31, 2022 to $96.5 million at September 30, 2023.

The decrease resulted from a decrease in freight revenues, which flow through accounts receivable, during the third quarter of 2023 as compared to the fourth quarter of 2022.

Prepaid expenses and deposits decreased from $15.7 million at December 31, 2022 to $10.9 million at September 30, 2023.

The decrease relates to the normal amortization of items prepaid as of December 31, 2022.

Revenue equipment decreased from $637.5 million at December 31, 2022 to $618.6 million at June 30, 2023.

The decrease is primarily due to the disposition of aging trucks and trailers during the first six months of 2023.

Accounts payable decreased from $48.9 million at December 31, 2022 to $41.0 million at June 30, 2023.

This decrease was primarily attributable to a decrease in the amount due to third-party carriers as of June 30, 2023.

Accrued expenses and other liabilities decreased from $34.2 million at December 31, 2022 to $20.8 million at June 30, 2023.

Revenue equipment decreased from $637.5 million at December 31, 2022 to $634.2 million at September 30, 2023.

The decrease is primarily due to the disposition of aging trucks and trailers during the first nine months of 2023.

Accounts payable increased from $48.9 million at December 31, 2022 to $57.7 million at September 30, 2023.

This increase was primarily attributable to accruals for fixed asset purchases during the first nine months of 2023.

Accrued expenses and other liabilities decreased from $34.2 million at December 31, 2022 to $22.1 million at September 30, 2023.

The decrease is primarily due to the payment of claims reserves that were accrued at December 31, 2022.

Long-term debt and current maturities of long term-debt are reviewed on an aggregate basis, as the classification of amounts in each category are typically affected merely by the passage of time.

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $264.3 million at December 31, 2022 to $230.0 million at June 30, 2023.

The decrease was primarily related to not financing the acquisition of additional revenue equipment during the first six months of 2023.

Long-term debt and current maturities of long-term debt, on an aggregate basis, decreased from $264.3 million at December 31, 2022 to $227.6 million at September 30, 2023.

The decrease was primarily related to a decrease in the financing of additional revenue equipment during the first nine months of 2023.

NEW ACCOUNTING PRONOUNCEMENTS

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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