MARTEN TRANSPORT LTD [MRTN] Filings

10-Q 1 mrtn20240630_10q.htm FORM 10-Q mrtn20240630_10q.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

☐ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarter ended June 30, 2024

Commission File Number 0-15010

MARTEN TRANSPORT, LTD.

(Exact name of registrant as specified in its charter)

Delaware		39-1140809
(State of incorporation)		(I.R.S. employer identification no.)

129 Marten Street
Mondovi, Wisconsin 54755		715-926-4216
(Address of principal executive offices)		(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading symbol:	Name of each exchange on which registered:
COMMON STOCK, PAR VALUE	MRTN	THE NASDAQ STOCK MARKET LLC
$.01 PER SHARE		(NASDAQ GLOBAL SELECT MARKET)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒

Smaller reporting company ☐

Emerging growth company ☐

Accelerated filer ☐

Non-accelerated filer ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐ No ☒

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, was 81,414,959 as of July 25, 2024.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

	June 30,			December 31,
(In thousands, except share information)	2024			2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	77,199		$	53,213
Receivables:
Trade, net		99,926			105,501
Other		11,450			10,356
Prepaid expenses and other		30,995			27,512
Total current assets		219,570			196,582

Property and equipment:
Revenue equipment, buildings and land, office equipment and other		1,149,771			1,162,336
Accumulated depreciation		(360,974	)		(370,103	)
Net property and equipment		788,797			792,233
Other noncurrent assets		1,520			1,524
Total assets	$	1,009,887		$	990,339

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	47,214		$	36,516
Insurance and claims accruals		44,296			47,017
Accrued and other current liabilities		27,466			26,709
Total current liabilities		118,976			110,242
Deferred income taxes		123,938			122,462
Noncurrent operating lease liabilities		220			249
Total liabilities		243,134			232,953

Stockholders’ equity:
Preferred stock, $.01 par value per share; 2,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $.01 par value per share; 192,000,000 shares authorized; 81,414,959 shares at June 30, 2024, and 81,312,168 shares at December 31, 2023, issued and outstanding		814			813
Additional paid-in capital		51,385			49,789
Retained earnings		714,554			706,784
Total stockholders’ equity		766,753			757,386
Total liabilities and stockholders’ equity	$	1,009,887		$	990,339

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months						Six Months
	Ended June 30,						Ended June 30,
(In thousands, except per share information)	2024			2023			2024			2023

Operating revenue	$	246,238		$	285,672		$	495,910		$	583,695

Operating expenses (income):
Salaries, wages and benefits		86,519			96,332			175,281			194,848
Purchased transportation		43,235			48,299			85,049			102,402
Fuel and fuel taxes		38,809			42,215			78,370			89,011
Supplies and maintenance		16,472			17,408			32,542			33,395
Depreciation		28,206			29,427			56,733			58,957
Operating taxes and licenses		2,539			2,756			5,114			5,524
Insurance and claims		12,559			12,481			24,216			27,551
Communications and utilities		2,297			2,510			4,668			5,041
Gain on disposition of revenue equipment		(2,532	)		(3,550	)		(3,703	)		(8,796	)
Other		8,160			9,581			15,416			18,539

Total operating expenses		236,264			257,459			473,686			526,472

Operating income		9,974			28,213			22,224			57,223

Other		(1,014	)		(1,077	)		(1,810	)		(1,921	)

Income before income taxes		10,988			29,290			24,034			59,144

Income taxes expense		3,099			7,416			6,499			14,768

Net income	$	7,889		$	21,874		$	17,535		$	44,376

Basic earnings per common share	$	0.10		$	0.27		$	0.22		$	0.55

Diluted earnings per common share	$	0.10		$	0.27		$	0.22		$	0.55

Dividends declared per common share	$	0.06		$	0.06		$	0.12		$	0.12

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Additional Paid-In			Retained			Total Stock- holders’
(In thousands)	Shares		Amount		Capital			Earnings			Equity

Balance at December 31, 2023		81,312	$	813	$	49,789		$	706,784		$	757,386
Net income		-		-		-			9,646			9,646
Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards		51		1		306			-			307
Employee taxes paid in exchange for shares withheld		-		-		(382	)		-			(382	)
Share-based payment arrangement compensation expense		-		-		353			-			353
Dividends on common stock		-		-		-			(4,881	)		(4,881	)
Balance at March 31, 2024		81,363		814		50,066			711,549			762,429
Net income		-		-		-			7,889			7,889
Issuance of common stock from share-based payment arrangement exercises		52		-		308			-			308
Share-based payment arrangement compensation expense		-		-		1,011			-			1,011
Dividends on common stock		-		-		-			(4,884	)		(4,884	)
Balance at June 30, 2024		81,415	$	814	$	51,385		$	714,554		$	766,753

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Additional Paid-In			Retained			Total Stock- holders’
(In thousands)	Shares		Amount		Capital			Earnings			Equity

Balance at December 31, 2022		81,115	$	811	$	47,188		$	655,920		$	703,919
Net income		-		-		-			22,502			22,502
Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards		119		1		535			-			536
Employee taxes paid in exchange for shares withheld		-		-		(926	)		-			(926	)
Share-based payment arrangement compensation expense		-		-		354			-			354
Dividends on common stock		-		-		-			(4,874	)		(4,874	)
Balance at March 31, 2023		81,234		812		47,151			673,548			721,511
Net income		-		-		-			21,874			21,874
Issuance of common stock from share-based payment arrangement exercises		67		1		507			-			508
Share-based payment arrangement compensation expense		-		-		1,005			-			1,005
Dividends on common stock		-		-		-			(4,878	)		(4,878	)
Balance at June 30, 2023		81,301	$	813	$	48,663		$	690,544		$	740,020

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

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months
	Ended June 30,
(In thousands)	2024			2023
Cash flows provided by operating activities:
Operations:
Net income	$	17,535		$	44,376
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		56,733			58,957
Tires in service amortization		3,543			3,584
Gain on disposition of revenue equipment		(3,703	)		(8,796	)
Deferred income taxes		1,476			(4,304	)
Share-based payment arrangement compensation expense		1,364			1,359
Changes in other current operating items:
Receivables		9,185			13,087
Prepaid expenses and other		(5,675	)		(3,633	)
Accounts payable		2,885			(1,450	)
Insurance and claims accruals		(2,721	)		1,918
Accrued and other current liabilities		921			(6,897	)
Net cash provided by operating activities		81,543			98,201

Cash flows used for investing activities:
Revenue equipment additions		(91,884	)		(118,294	)
Proceeds from revenue equipment dispositions		47,658			34,000
Buildings and land, office equipment and other additions		(3,758	)		(4,311	)
Proceeds from buildings and land, office equipment and other dispositions		8			11
Other		(49	)		(45	)
Net cash used for investing activities		(48,025	)		(88,639	)

Cash flows used for financing activities:
Dividends on common stock		(9,765	)		(9,752	)
Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards		615			1,044
Employee taxes paid in exchange for shares withheld		(382	)		(926	)
Net cash used for financing activities		(9,532	)		(9,634	)

Net change in cash and cash equivalents		23,986			(72	)

Cash and cash equivalents:
Beginning of period		53,213			80,600
End of period	$	77,199		$	80,528

Supplemental non-cash disclosure:
Change in property and equipment not yet paid	$	3,109		$	5,870
Operating lease assets and liabilities acquired	$	88		$	-

Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	2,362		$	6,809

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

MARTEN TRANSPORT, LTD.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2024

(Unaudited)

(1) Consolidated Condensed Financial Statements

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements, and therefore do not include all information and disclosures required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, such statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our consolidated financial condition, results of operations and cash flows for the interim periods presented. The results of operations for any interim period do not necessarily indicate the results for the full year. The unaudited interim consolidated condensed financial statements should be read with reference to the consolidated financial statements and notes to consolidated financial statements in our 2023 Annual Report on Form 10-K.

(2) Earnings per Common Share

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

	Three Months				Six Months
	Ended June 30,				Ended June 30,
(In thousands, except per share amounts)	2024		2023		2024		2023
Numerator:
Net income	$	7,889	$	21,874	$	17,535	$	44,376
Denominator:
Basic earnings per common share - weighted-average shares		81,381		81,263		81,365		81,236
Effect of dilutive stock options		65		149		77		158
Diluted earnings per common share - weighted-average shares and assumed conversions		81,446		81,412		81,442		81,394

Basic earnings per common share	$	0.10	$	0.27	$	0.22	$	0.55
Diluted earnings per common share	$	0.10	$	0.27	$	0.22	$	0.55

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

In August 2022, we entered into a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2027. The credit agreement amends, restates and continues in its entirety our previous credit agreement, as amended. 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. At December 31, 2023, there was also no outstanding principal balance on the facility. As of that date, we had outstanding standby letters of credit of $20.7 million on the facility. 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 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 June 30, 2024 and December 31, 2023.

(4) Related Party Transactions

We purchase tires and obtain related services from Bauer Built, Inc., or BBI. Jerry M. Bauer, the chairman of the board and chief executive officer of BBI, is one of our directors. 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. Larry B. Hagness, one of our directors, is the chief executive officer and the principal stockholder of Durand Builders Service, Inc.

(5) Share Repurchase Program

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34.0 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend on August 13, 2020. On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $50.0 million, or approximately 3.1 million shares of our common stock. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.

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 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 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 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

The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.

(9) Commitments and Contingencies

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.

We are also involved in other legal actions that arise in the ordinary course of business. A number of trucking companies, including us, have been subject to lawsuits alleging violations of various federal and state wage and hour laws. A number of these lawsuits have resulted in the payment of substantial settlements or damages by the defendants.

The outcome of all litigation is difficult to assess or quantify, and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. The cost to defend litigation may also be significant. Not all claims are covered by our insurance, and there can be no assurance that our coverage limits will be adequate to cover all amounts in dispute. To the extent we experience claims that are uninsured, exceed our coverage limits or cause increases in future premiums, the resulting expense could have a materially adverse effect on our business and operating results. Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves, is not likely to have a materially adverse effect on our consolidated condensed financial statements, however, any future liability claims or adverse developments in existing claims could impact this analysis.

(10) Revenue and Business Segments

We account for our revenue in accordance with FASB ASC 606, Revenue from Contracts with Customers. We combine our five current operating segments into four reporting segments (Truckload, Dedicated, Intermodal and Brokerage) for financial reporting purposes. These four reporting segments are also the appropriate categories for the disaggregation of our revenue under FASB ASC 606.

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

Our Truckload segment provides a combination of regional short-haul and medium-to-long-haul full-load transportation services. We transport food and other consumer packaged goods that require a temperature-controlled or insulated environment, along with dry freight, across the United States and into and out of Mexico and Canada. Our agreements with customers are typically for one year.

Our Dedicated segment provides customized transportation solutions tailored to meet individual customers’ requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States. Our agreements with customers range from three to five years and are subject to annual rate reviews.

Generally, we are paid by the mile for our Truckload and Dedicated services. We also derive Truckload and Dedicated revenue from fuel surcharges, loading and unloading activities, equipment detention and other accessorial services. The main factors that affect our Truckload and Dedicated revenue are the rate per mile we receive from our customers, the percentage of miles for which we are compensated, the number of miles we generate with our equipment and changes in fuel prices. We monitor our revenue production primarily through average Truckload and Dedicated revenue, net of fuel surcharges, per tractor per week. We also analyze our average Truckload and Dedicated revenue, net of fuel surcharges, per total mile, non-revenue miles percentage, the miles per tractor we generate, our fuel surcharge revenue, our accessorial revenue and our other sources of operating revenue.

Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.

Our Brokerage segment develops contractual relationships with and arranges for third-party carriers to transport freight for our customers in temperature-controlled trailers and dry vans within the United States and into and out of Mexico through Marten Transport Logistics, LLC, which was established in 2007 and operates pursuant to brokerage authority granted by the United States Department of Transportation, or DOT. We retain the billing, collection and customer management responsibilities. The main factors that affect our Brokerage revenue are the rate per mile and other charges that we receive from our customers.

Operating results of our MRTN de Mexico business which offers our customers door-to-door service between the United States and Mexico with our Mexican partner carriers is reported within our Truckload and Brokerage segments.

Our customer agreements are typically for one-year terms except for our Dedicated agreements which range from three to five years with annual rate reviews. Under FASB ASC 606, the contract date for each individual load within each of our four reporting segments is generally the date that each load is tendered to and accepted by us. For each load transported within each of our four reporting segments, the entire amount of revenue to be recognized is a single performance obligation and our agreements with our customers detail the per-mile charges for line haul and fuel surcharges, along with the rates for loading and unloading, stop offs and drops, equipment detention and other accessorial services, which is the transaction price. There are no discounts that would be a material right or consideration payable to a customer. We are required to recognize revenue and related expenses over time, from load pickup to delivery, for each load within each of our four reporting segments. 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 June 30, 2024 and December 31, 2023, respectively. 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.

We account for revenue of our Intermodal and Brokerage segments and revenue on freight transported by independent contractors within our Truckload and Dedicated segments on a gross basis because we are the principal service provider controlling the promised service before it is transferred to each customer. We are primarily responsible for fulfilling the promise to provide each specified service to each customer. We bear the primary risk of loss in the event of cargo claims by our customers. We also have complete control and discretion in establishing the price for each specified service. Accordingly, all such revenue billed to customers is classified as operating revenue and all corresponding payments to carriers for transportation services we arrange in connection with brokerage and intermodal activities and to independent contractor providers of revenue equipment are classified as purchased transportation expense within our consolidated condensed statements of operations.

The following table sets forth for the periods indicated our operating revenue and operating income by segment. We do not prepare separate balance sheets by segment and, as a result, assets are not separately identifiable by segment.

	Three Months						Six Months
	Ended June 30,						Ended June 30,
(In thousands)	2024			2023			2024			2023
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	96,046		$	101,268		$	191,068		$	203,588
Truckload fuel surcharge revenue		16,477			15,870			33,006			34,176
Total Truckload revenue		112,523			117,138			224,074			237,764

Dedicated revenue, net of fuel surcharge revenue		67,444			87,437			139,182			174,268
Dedicated fuel surcharge revenue		13,822			17,548			28,544			37,166
Total Dedicated revenue		81,266			104,985			167,726			211,434

Intermodal revenue, net of fuel surcharge revenue		12,660			18,754			25,941			42,155
Intermodal fuel surcharge revenue		2,404			3,611			5,095			8,799
Total Intermodal revenue		15,064			22,365			31,036			50,954

Brokerage revenue		37,385			41,184			73,074			83,543
Total operating revenue	$	246,238		$	285,672		$	495,910		$	583,695

Operating income/(loss):
Truckload	$	1,115		$	9,569		$	1,604		$	19,610
Dedicated		6,650			14,173			15,908			27,857
Intermodal		(684	)		(165	)		(878	)		622
Brokerage		2,893			4,636			5,590			9,134
Total operating income	$	9,974		$	28,213		$	22,224		$	57,223

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

We must make estimates and assumptions to prepare the consolidated condensed financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in the consolidated condensed financial statements and the reported amount of revenue and expenses during the reporting period. These estimates are primarily related to insurance and claims accruals and depreciation. Ultimate results could differ from these estimates.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part I, Item 1A for the year ended December 31, 2023. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

Overview

Our Dedicated segment provides customized transportation solutions tailored to meet each individual customer’s requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment within the United States. Our agreements with customers range from three to five years and are subject to annual rate reviews.

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 $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. The variable costs include fuel expense, driver-related expenses, such as wages, benefits, training and recruitment, and independent contractor costs, which are recorded under purchased transportation. Expenses that have both fixed and variable components include maintenance and tire expense and our cost of insurance and claims. These expenses generally vary with the miles we travel, but also have a controllable component based on safety, fleet age, efficiency and other factors. Our main fixed costs relate to the acquisition and subsequent depreciation of long-term assets, such as revenue equipment and operating terminals. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment, along with any increases in fleet size. Although certain factors affecting our expenses are beyond our control, we monitor them closely and attempt to anticipate changes in these factors in managing our business. For example, fuel prices have significantly fluctuated over the past several years. We manage our exposure to changes in fuel prices primarily through fuel surcharge programs with our customers, as well as through volume fuel purchasing arrangements with national fuel centers and bulk purchases of fuel at our terminals. To help further reduce fuel expense, we have installed and tightly manage the use of auxiliary power units in our tractors to provide climate control and electrical power for our drivers without idling the tractor engine, and also have improved the fuel usage in the temperature-control units on our trailers. For our Intermodal and Brokerage segments, our profitability is impacted by the percentage of revenue which is payable to the providers of the transportation services we arrange. This expense is included within purchased transportation in our consolidated condensed statements of operations.

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 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 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. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

We continue to invest considerable time and capital resources to actively implement and promote long-term environmentally sustainable solutions that drive reductions in our fuel and electricity consumption and decrease our carbon footprint. These initiatives include (i) reducing idle time for our tractors by installing and tightly managing the use of auxiliary power units, which are powered by solar panels and provide climate control and electrical power for our drivers without idling the tractor engine, (ii) improving the energy efficiency of our newer, more aerodynamic and well-maintained tractor and trailer fleets by optimizing the equipment’s specifications, weight and tractor speed, equipping our tractors with automatic transmissions, converting the refrigeration units in our refrigerated trailers to the new, more-efficient CARB refrigeration units along with increasing the insulation in the trailer walls and installing trailer skirts, and using ultra-fuel efficient and wide-based tires, and (iii) upgrading all of our facilities to indoor and outdoor LED lighting along with converting all of our facilities to solar power. Additionally, we are an active participant in the United States Environmental Protection Agency, or EPA, SmartWay Transport Partnership, in which freight shippers, carriers, logistics companies and other voluntary stakeholders partner with the EPA to measure, benchmark and improve logistics operations to reduce their environmental footprint.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes discussions of operating revenue, net of fuel surcharge revenue; Truckload, Dedicated and Intermodal revenue, net of fuel surcharge revenue; operating expenses as a percentage of operating revenue, each net of fuel surcharge revenue; and net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads). We provide these additional disclosures because management believes these measures provide a more consistent basis for comparing results of operations from period to period. These financial measures in this report have not been determined in accordance with U.S. generally accepted accounting principles (GAAP). Pursuant to Item 10(e) of Regulation S-K, we have included the amounts necessary to reconcile these non-GAAP financial measures to the most directly comparable GAAP financial measures of operating revenue, operating expenses divided by operating revenue, and fuel and fuel taxes.

Results of Operations

The following table sets forth for the periods indicated certain operating statistics regarding our revenue and operations:

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2024		2023		2024		2023
Truckload Segment:
Revenue (in thousands)	$	112,523	$	117,138	$	224,074	$	237,764
Average revenue, net of fuel surcharges, per tractor per week⁽¹⁾	$	4,093	$	4,472	$	4,044	$	4,521
Average tractors⁽¹⁾		1,805		1,742		1,817		1,742
Average miles per trip		528		505		533		507
Total miles (in thousands)		40,847		39,321		80,550		77,558

Dedicated Segment:
Revenue (in thousands)	$	81,266	$	104,985	$	167,726	$	211,434
Average revenue, net of fuel surcharges, per tractor per week⁽¹⁾	$	3,754	$	3,986	$	3,768	$	3,973
Average tractors⁽¹⁾		1,382		1,687		1,421		1,696
Average miles per trip		323		332		326		332
Total miles (in thousands)		28,231		34,833		57,311		68,909

Intermodal Segment:
Revenue (in thousands)	$	15,064	$	22,365	$	31,036	$	50,954
Loads		4,464		6,267		9,053		13,544
Average tractors		121		170		123		175

Brokerage Segment:
Revenue (in thousands)	$	37,385	$	41,184	$	73,074	$	83,543
Loads		22,700		22,718		42,761		43,406

(1)	Includes tractors driven by both company-employed drivers and independent contractors. 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:

							Dollar			Percentage
							Change			Change
	Three Months						Three Months			Three Months
	Ended						Ended			Ended
	June 30,						June 30,			June 30,
(Dollars in thousands)	2024			2023			2024 vs. 2023			2024 vs. 2023
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	96,046		$	101,268		$	(5,222	)		(5.2	)%
Truckload fuel surcharge revenue		16,477			15,870			607			3.8
Total Truckload revenue		112,523			117,138			(4,615	)		(3.9	)

Dedicated revenue, net of fuel surcharge revenue		67,444			87,437			(19,993	)		(22.9	)
Dedicated fuel surcharge revenue		13,822			17,548			(3,726	)		(21.2	)
Total Dedicated revenue		81,266			104,985			(23,719	)		(22.6	)

Intermodal revenue, net of fuel surcharge revenue		12,660			18,754			(6,094	)		(32.5	)
Intermodal fuel surcharge revenue		2,404			3,611			(1,207	)		(33.4	)
Total Intermodal revenue		15,064			22,365			(7,301	)		(32.6	)

Brokerage revenue		37,385			41,184			(3,799	)		(9.2	)

Total operating revenue	$	246,238		$	285,672		$	(39,434	)		(13.8	)%

Operating income/(loss):
Truckload	$	1,115		$	9,569		$	(8,454	)		(88.3	)%
Dedicated		6,650			14,173			(7,523	)		(53.1	)
Intermodal		(684	)		(165	)		(519	)		(314.5	)
Brokerage		2,893			4,636			(1,743	)		(37.6	)
Total operating income	$	9,974		$	28,213		$	(18,239	)		(64.6	)%

Operating ratio:
Truckload		99.0	%		91.8	%
Dedicated		91.8			86.5
Intermodal		104.5			100.7
Brokerage		92.3			88.7
Consolidated operating ratio		95.9	%		90.1	%

Operating ratio, net of fuel surcharges:
Truckload		98.8	%		90.6	%
Dedicated		90.1			83.8
Intermodal		105.4			100.9
Brokerage		92.3			88.7
Consolidated operating ratio, net of fuel surcharges		95.3	%		88.7	%

Our operating revenue decreased $39.4 million, or 13.8%, to $246.2 million in the 2024 period from $285.7 million in the 2023 period. Our operating revenue, net of fuel surcharges, decreased $35.1 million, or 14.1%, to $213.5 million in the 2024 period from $248.6 million in the 2023 period. This decrease in the 2024 period was due to a $20.0 million decrease in Dedicated revenue, net of fuel surcharges, a $6.1 million decrease in Intermodal revenue, net of fuel surcharges, a $5.2 million decrease in Truckload revenue, net of fuel surcharges, and a $3.8 million decrease in Brokerage revenue. Fuel surcharge revenue decreased to $32.7 million in the 2024 period from $37.0 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 $4.6 million, or 3.9%, to $112.5 million in the 2024 period from $117.1 million in the 2023 period. Truckload segment revenue, net of fuel surcharges, decreased $5.2 million, or 5.2%, to $96.0 million in the 2024 period from $101.3 million in the 2023 period, primarily due to a decrease in our average revenue per tractor, despite an increase in our average fleet size. The operating ratio increased to 99.0% 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, 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. Dedicated segment revenue, net of fuel surcharges, decreased 22.9%, primarily due to decreases in both our average fleet size and our average revenue per tractor. 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 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. Intermodal segment revenue, net of fuel surcharges, decreased 32.5% 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 104.5% from 100.7% in the 2023 period. 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 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:

	Dollar Change			Percentage Change			Percentage of Operating Revenue
	Three Months Ended June 30,			Three Months Ended June 30,			Three Months Ended June 30,
(Dollars in thousands)	2024 vs. 2023			2024 vs. 2023			2024			2023

Operating revenue	$	(39,434	)		(13.8	)%		100.0	%		100.0	%
Operating expenses (income):
Salaries, wages and benefits		(9,813	)		(10.2	)		35.1			33.7
Purchased transportation		(5,064	)		(10.5	)		17.6			16.9
Fuel and fuel taxes		(3,406	)		(8.1	)		15.8			14.8
Supplies and maintenance		(936	)		(5.4	)		6.7			6.1
Depreciation		(1,221	)		(4.1	)		11.5			10.3
Operating taxes and licenses		(217	)		(7.9	)		1.0			1.0
Insurance and claims		78			0.6			5.1			4.4
Communications and utilities		(213	)		(8.5	)		0.9			0.9
Gain on disposition of revenue equipment		1,018			28.7			(1.0	)		(1.2	)
Other		(1,421	)		(14.8	)		3.3			3.4
Total operating expenses		(21,195	)		(8.2	)		95.9			90.1
Operating income		(18,239	)		(64.6	)		4.1			9.9
Other		63			5.8			(0.4	)		(0.4	)
Income before income taxes		(18,302	)		(62.5	)		4.5			10.3
Income taxes expense		(4,317	)		(58.2	)		1.3			2.6
Net income	$	(13,985	)		(63.9	)%		3.2	%		7.7	%

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits. These expenses vary depending upon the size of our Truckload, Dedicated and Intermodal tractor fleets, the ratio of company drivers to independent contractors, our efficiency, our experience with employees’ health insurance claims, changes in health care premiums and other factors. Salaries, wages and benefits 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 $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. This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors. Purchased transportation expense 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 $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) 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. The United States Department of Energy, or DOE, national average cost of fuel decreased to $3.86 per gallon from $3.94 per gallon in the 2023 period. Despite this price decrease, our net fuel expense increased to 5.0% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2024 period from 4.1% in the 2023 period. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.

Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets. The $1.2 million, or 4.1%, decrease in depreciation in the 2024 period was primarily due to a decrease in our average tractor fleet size, partially offset by higher prices of new equipment. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of continued higher prices of new equipment, which will result in greater depreciation over the useful life.

Insurance and claims consist of the costs of insurance premiums and accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’ compensation claims. These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance. The $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 $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.

Our operating income declined 64.6% to $10.0 million in the 2024 period from $28.2 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 95.9% in the 2024 period and 90.1% in the 2023 period. The operating ratio for our Truckload segment was 99.0% in the 2024 period and 91.8% in the 2023 period, for our Dedicated segment was 91.8% in the 2024 period and 86.5% in the 2023 period, for our Intermodal segment was 104.5% in the 2024 period and 100.7% in the 2023 period, and for our Brokerage segment was 92.3% in the 2024 period and 88.7% in the 2023 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 95.3% in the 2024 period and 88.7% in the 2023 period.

Our effective income tax rate increased to 28.2% in the 2024 period from 25.3% in the 2023 period.

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:

							Dollar			Percentage
							Change			Change
	Six Months						Six Months			Six Months
	Ended						Ended			Ended
	June 30,						June 30,			June 30,
(Dollars in thousands)	2024			2023			2024 vs. 2023			2024 vs. 2023
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	191,068		$	203,588		$	(12,520	)		(6.1	)%
Truckload fuel surcharge revenue		33,006			34,176			(1,170	)		(3.4	)
Total Truckload revenue		224,074			237,764			(13,690	)		(5.8	)

Dedicated revenue, net of fuel surcharge revenue		139,182			174,268			(35,086	)		(20.1	)
Dedicated fuel surcharge revenue		28,544			37,166			(8,622	)		(23.2	)
Total Dedicated revenue		167,726			211,434			(43,708	)		(20.7	)

Intermodal revenue, net of fuel surcharge revenue		25,941			42,155			(16,214	)		(38.5	)
Intermodal fuel surcharge revenue		5,095			8,799			(3,704	)		(42.1	)
Total Intermodal revenue		31,036			50,954			(19,918	)		(39.1	)

Brokerage revenue		73,074			83,543			(10,469	)		(12.5	)

Total operating revenue	$	495,910		$	583,695		$	(87,785	)		(15.0	)%

Operating income/(loss):
Truckload	$	1,604		$	19,610		$	(18,006	)		(91.8	)%
Dedicated		15,908			27,857			(11,949	)		(42.9	)
Intermodal		(878	)		622			(1,500	)		(241.2	)
Brokerage		5,590			9,134			(3,544	)		(38.8	)
Total operating income	$	22,224		$	57,223		$	(34,999	)		(61.2	)%

Operating ratio:
Truckload		99.3	%		91.8	%
Dedicated		90.5			86.8
Intermodal		102.8			98.8
Brokerage		92.4			89.1
Consolidated operating ratio		95.5	%		90.2	%

Operating ratio, net of fuel surcharges:
Truckload		99.2	%		90.4	%
Dedicated		88.6			84.0
Intermodal		103.4			98.5
Brokerage		92.4			89.1
Consolidated operating ratio, net of fuel surcharges		94.8	%		88.6	%

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.

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. 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.

	Dollar Change			Percentage Change			Percentage of Operating Revenue
	Six Months Ended June 30,			Six Months Ended June 30,			Six Months Ended June 30,
(Dollars in thousands)	2024 vs. 2023			2024 vs. 2023			2024			2023

Operating revenue	$	(87,785	)		(15.0	)%		100.0	%		100.0	%
Operating expenses (income):
Salaries, wages and benefits		(19,567	)		(10.0	)		35.3			33.4
Purchased transportation		(17,353	)		(16.9	)		17.2			17.5
Fuel and fuel taxes		(10,641	)		(12.0	)		15.8			15.2
Supplies and maintenance		(853	)		(2.6	)		6.6			5.7
Depreciation		(2,224	)		(3.8	)		11.4			10.1
Operating taxes and licenses		(410	)		(7.4	)		1.0			0.9
Insurance and claims		(3,335	)		(12.1	)		4.9			4.7
Communications and utilities		(373	)		(7.4	)		0.9			0.9
Gain on disposition of revenue equipment		5,093			57.9			(0.7	)		(1.5	)
Other		(3,123	)		(16.8	)		3.1			3.2
Total operating expenses		(52,786	)		(10.0	)		95.5			90.2
Operating income		(34,999	)		(61.2	)		4.5			9.8
Other		111			5.8			(0.4	)		(0.3	)
Income before income taxes		(35,110	)		(59.4	)		4.8			10.1
Income taxes expense		(8,269	)		(56.0	)		1.3			2.5
Net income	$	(26,841	)		(60.5	)%		3.5	%		7.6	%

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 decreas