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 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 under the heading "Risk Factors" beginning on page 6. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report. Overview We have strategically transitioned from a refrigerated long-haul carrier to a multifaceted business offering a network of refrigerated and dry truck-based transportation capabilities across our five distinct business platforms - Truckload, Dedicated, Intermodal, Brokerage and MRTN deMexico . 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, acrossthe United States and into and out ofMexico andCanada . Our agreements with customers are typically for one year. Our Dedicated segment provides customized transportation solutions tailored to meet each individual customer's requirements, utilizing temperature-controlled trailers, dry vans and other specialized equipment withinthe 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 withinthe United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. 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 withinthe United States and into and out ofMexico throughMarten Transport Logistics, LLC , which was established in 2007 and operates pursuant to brokerage authority granted by the DOT. We retain the billing, collection and customer management responsibilities. 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
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. 16 -------------------------------------------------------------------------------- Our operating revenue increased$290.2 million , or 29.8%, in 2022 from 2021. Our operating revenue, net of fuel surcharges, increased$197.5 million , or 23.1%, compared with 2021. Truckload segment revenue, net of fuel surcharges, increased 18.8% from 2021, primarily due to an increase in our average revenue per tractor. Dedicated segment revenue, net of fuel surcharges, increased 21.7% from 2021, primarily due to an increase in our average revenue per tractor. Intermodal segment revenue, net of fuel surcharges, increased 14.8% from 2021, primarily due to an increase in revenue per load. Brokerage segment revenue increased 40.8%, primarily due to an increase in the number of loads in 2022. Fuel surcharge revenue increased to$210.4 million in 2022 from$117.7 million in 2021, primarily due to higher fuel costs. 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 statements of operations. Our operating income improved 28.3% to$143.3 million in 2022 from$111.7 million in 2021. Our operating expenses as a percentage of operating revenue, or "operating ratio," was 88.7% in 2022 and 88.5% in 2021. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.4% in 2022 from 87.0% in 2021. Our net income improved 29.2% to$110.4 million , or$1.35 per diluted share, in 2022 from$85.4 million , or$1.02 per diluted share, in 2021. Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. AtDecember 31, 2022 , we had$80.6 million of cash and cash equivalents,$703.9 million in stockholders' equity and no long-term debt outstanding. In 2022, net cash flows provided by operating activities of$219.5 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$120.9 million , to repurchase and retire 2.3 million shares of our common stock for$41.8 million , to pay cash dividends of$19.6 million , and to construct and upgrade regional operating facilities in the amount of$11.2 million , resulting in a$23.6 million increase in cash and cash equivalents. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately$225 million in 2023. A quarterly cash dividend of$0.06 per share of common stock was paid in each quarter of 2022 which totaled$19.6 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 theUnited States EPA SmartWay Transport Partnership , in which freight shippers, carriers, logistics companies and other voluntary stakeholders partner with theEPA to measure, benchmark and improve logistics operations to reduce their environmental footprint. 17 -------------------------------------------------------------------------------- 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 withU.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. Stock Split OnAugust 13, 2020 , we effected a three-for-two stock split of our common stock,$.01 par value, in the form of a 50% stock dividend. Our consolidated financial statements, related notes, and other financial data contained in this report have been adjusted to give retroactive effect to the stock split for all periods presented. Results of Operations
The following table sets forth for the years indicated certain operating statistics regarding our revenue and operations:
2022 2021 2020 Truckload Segment: Revenue (in thousands)$ 500,462 $ 396,666 $ 379,148 Average revenue, net of fuel surcharges, per tractor per week(1)$ 4,898 $ 4,315 $ 3,926 Average tractors(1) 1,611 1,539 1,668 Average miles per trip 510 516 547 Total miles (in thousands) 149,868 147,192 165,267 Dedicated Segment: Revenue (in thousands)$ 429,092 $ 329,442 $ 309,784 Average revenue, net of fuel surcharges, per tractor per week(1)$ 3,963 $ 3,377 $ 3,316 Average tractors(1) 1,631 1,572 1,566 Average miles per trip 341 322 305 Total miles (in thousands) 136,310 128,256 132,597 Intermodal Segment: Revenue (in thousands)$ 129,765 $ 102,245 $ 88,733 Loads 31,862 32,987 36,444 Average tractors 175 143 106 Brokerage Segment: Revenue (in thousands)$ 204,559 $ 145,291 $ 96,709 Loads 95,615 66,512 58,986
(1) Includes tractors driven by both company-employed drivers and independent
contractors. Independent contractors provided 96, 93 and 143 tractors as of
December 31, 2022 , 2021 and 2020, respectively. 18
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Comparison of Year Ended
The following table sets forth for the years indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component: Dollar Percentage Change Change 2022 vs. 2022 vs. (Dollars in thousands) 2022 2021 2021 2021 Operating revenue: Truckload revenue, net of fuel surcharge revenue$ 411,448 $ 346,289 $ 65,159 18.8 % Truckload fuel surcharge revenue 89,014 50,377 38,637 76.7 Total Truckload revenue 500,462 396,666 103,796 26.2 Dedicated revenue, net of fuel surcharge revenue 336,973 276,883 60,090 21.7 Dedicated fuel surcharge revenue 92,119 52,559 39,560 75.3 Total Dedicated revenue 429,092 329,442 99,650 30.2 Intermodal revenue, net of fuel surcharge revenue 100,452 87,468 12,984 14.8 Intermodal fuel surcharge revenue 29,313 14,777 14,536 98.4 Total Intermodal revenue 129,765 102,245 27,520 26.9 Brokerage revenue 204,559 145,291 59,268 40.8 Total operating revenue$ 1,263,878 $ 973,644 $ 290,234 29.8 % Operating income: Truckload$ 59,392 $ 51,032 $ 8,360 16.4 % Dedicated 50,566 36,395 14,171 38.9 Intermodal 10,639 9,479 1,160 12.2 Brokerage 22,747 14,783 7,964 53.9 Total operating income$ 143,344 $ 111,689 $ 31,655 28.3 % Operating ratio: Truckload 88.1 % 87.1 % Dedicated 88.2 89.0 Intermodal 91.8 90.7 Brokerage 88.9 89.8 Consolidated operating ratio 88.7 % 88.5 % Operating ratio, net of fuel surcharges: Truckload 85.6 % 85.3 % Dedicated 85.0 86.9 Intermodal 89.4 89.2 Brokerage 88.9 89.8 Consolidated operating ratio, net of fuel surcharges 86.4 % 87.0 % Our operating revenue increased$290.2 million , or 29.8%, to$1.264 billion in 2022 from$973.6 million in 2021. Our operating revenue, net of fuel surcharges, increased$197.5 million , or 23.1%, to$1.053 billion in 2022 from$855.9 million in 2021. This increase in 2022 was due to a$65.2 million increase in Truckload revenue, net of fuel surcharges, a$60.1 million increase in Dedicated revenue, net of fuel surcharges, a$59.3 million increase in Brokerage revenue, and a$13.0 million increase in Intermodal revenue, net of fuel surcharges. Fuel surcharge revenue increased to$210.4 million in 2022 from$117.7 million in 2021 primarily due to higher fuel costs. 19 -------------------------------------------------------------------------------- Truckload segment revenue increased$103.8 million , or 26.2%, to$500.5 million in 2022 from$396.7 million in 2021. Truckload segment revenue, net of fuel surcharges, increased$65.2 million , or 18.8%, to$411.4 million in 2022 from$346.3 million in 2021 primarily due to an increase in our average revenue per tractor. The operating ratio increased to 88.1% in 2022 from 87.1% in 2021. Impacting the 2022 operating ratio were higher company driver compensation, driver recruitment and retention and fuel costs, partially offset by an increase in our average revenue per tractor due to increased rates with our customers. Dedicated segment revenue increased$99.7 million , or 30.2%, to$429.1 million in 2022 from$329.4 million in 2021. Dedicated segment revenue, net of fuel surcharges, increased 21.7% primarily due to an increase in our average revenue per tractor. The operating ratio in 2022 was positively impacted by an increase in our average revenue per tractor due to increased rates with our customers and reduced depreciation expense as a percentage of revenue, partially offset by higher company driver compensation costs. Intermodal segment revenue increased$27.5 million , or 26.9%, to$129.8 million in 2022 from$102.2 million in 2021. Intermodal segment revenue, net of fuel surcharges, increased 14.8% from 2021 primarily due to an increase in revenue per load. The operating ratio in 2022 was negatively impacted by higher company driver compensation, chassis rental and amounts payable to railroads as a percentage of our revenue, partially offset by increased rates with our customers. Brokerage segment revenue increased$59.3 million , or 40.8%, to$204.6 million in 2022 from$145.3 million in 2021 primarily due to an increase in the number of loads. The improvement in the operating ratio in 2022 was primarily due to increased rates with our customers. The following table sets forth for the years indicated the dollar and percentage increase or decrease of the items in our consolidated statements of operations, and those items as a percentage of operating revenue: Dollar Percentage Percentage of Change Change Operating Revenue 2022 vs. 2022 vs. (Dollars in thousands) 2021 2021 2022 2021 Operating revenue$ 290,234 29.8 % 100.0 % 100.0 % Operating expenses (income): Salaries, wages and benefits 72,342 22.8 30.9 32.7 Purchased transportation 56,571 29.3 19.8 19.8 Fuel and fuel taxes 87,283 66.5 17.3 13.5 Supplies and maintenance 10,241 22.5 4.4 4.7 Depreciation 8,452 8.2 8.8 10.5 Operating taxes and licenses 229 2.2 0.9 1.1 Insurance and claims 8,526 20.3 4.0 4.3 Communications and utilities 827 9.9 0.7 0.9 Gain on disposition of revenue equipment 2,916 17.9 (1.1 ) (1.7 ) Other 11,192 41.6 3.0 2.8 Total operating expenses 258,579 30.0 88.7 88.5 Operating income 31,655 28.3 11.3 11.5 Other (784 ) (1,823.3 ) (0.1 ) - Income before income taxes 32,439 29.0 11.4 11.5 Income taxes expense 7,513 28.6 2.7 2.7 Net income$ 24,926 29.2 % 8.7 % 8.8 % 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 increased$72.3 million , or 22.8%, in 2022 from 2021. This increase resulted primarily from additional company driver compensation expense of$53.8 million , a$7.1 million increase in non-driver compensation expense, a$3.8 million increase in employees' health insurance expense as a result of higher self-insured medical claims and a$2.5 million increase in bonus compensation expense for our non-driver employees. 20
-------------------------------------------------------------------------------- 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 increased$56.6 million in total, or 29.3%, in 2022 from 2021. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased$49.0 million to$170.1 million in 2022 from$121.1 million in 2021, primarily due to an increase in the cost per load within the tight freight market and growth in load volume. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased$9.5 million to$65.3 million in 2022 from$55.8 million in 2021 due to higher fuel surcharges paid to the railroads. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased$1.9 million in 2022. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments. Fuel and fuel taxes increased by$87.3 million , or 66.5%, in 2022 from 2021. 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$5.0 million , or 18.5%, to$31.9 million in 2022 from$26.9 million in 2021. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to$23.8 million from$13.3 million in 2021.The United States Department of Energy , orDOE , national average cost of fuel increased to$4.99 per gallon from$3.29 per gallon in 2021. Despite this increase, our net fuel expense was 3.8% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in both 2022 and 2021. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers' fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine. Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling. Our supplies and maintenance expense increased$10.2 million , or 22.5%, from 2021, primarily due to higher outside repair, parts and tire costs, along with increased loading/unloading and tolls costs. 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$8.5 million , or 20.3%, increase in insurance and claims in 2022 was primarily due to increases in our self-insured auto liability claim costs and in the cost of physical damage claims related to our revenue equipment. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims. Gain on disposition of revenue equipment was$13.4 million in 2022, down from$16.3 million in 2021 primarily due to a decrease in the number of units sold, partially offset by an increase in the average gain for our tractor and trailer sales. Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control. The$11.2 million increase in other operating expenses in 2022 was primarily due to increases in costs associated with driver recruitment and retention along with travel and meals expense. Our operating income improved 28.3% to$143.3 million in 2022 from$111.7 million in 2021 as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or "operating ratio," was 88.7% in 2022 and 88.5% in 2021. The operating ratio for our Truckload segment was 88.1% in 2022 and 87.1% in 2021, for our Dedicated segment was 88.2% in 2022 and 89.0% in 2021, for our Intermodal segment was 91.8% in 2022 and 90.7% in 2021, and for our Brokerage segment was 88.9% in 2022 and 89.8% in 2021. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.4% in 2022 from 87.0% in 2021.
Our effective income tax rate was 23.5% in each of 2022 and 2021.
21 -------------------------------------------------------------------------------- As a result of the factors described above, net income improved 29.2% to$110.4 million , or$1.35 per diluted share, in 2022 from$85.4 million , or$1.02 per diluted share, in 2021.
Comparison of Year Ended
The following table sets forth for the years indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component: Dollar Percentage Change Change 2021 vs. 2021 vs. (Dollars in thousands) 2021 2020 2020 2020 Operating revenue: Truckload revenue, net of fuel surcharge revenue$ 346,289 $ 342,357 $ 3,932 1.1 % Truckload fuel surcharge revenue 50,377 36,791 13,586 36.9 Total Truckload revenue 396,666 379,148 17,518 4.6 Dedicated revenue, net of fuel surcharge revenue 276,883 271,550 5,333 2.0 Dedicated fuel surcharge revenue 52,559 38,234 14,325 37.5 Total Dedicated revenue 329,442 309,784 19,658 6.3 Intermodal revenue, net of fuel surcharge revenue 87,468 79,944 7,524 9.4 Intermodal fuel surcharge revenue 14,777 8,789 5,988 68.1 Total Intermodal revenue 102,245 88,733 13,512 15.2 Brokerage revenue 145,291 96,709 48,582 50.2 Total operating revenue$ 973,644 $ 874,374 $ 99,270 11.4 % Operating income: Truckload$ 51,032 $ 39,637 $ 11,395 28.7 % Dedicated 36,395 40,909 (4,514 ) (11.0 ) Intermodal 9,479 5,730 3,749 65.4 Brokerage 14,783 6,970 7,813 112.1 Total operating income$ 111,689 $ 93,246 $ 18,443 19.8 % Operating ratio: Truckload 87.1 % 89.5 % Dedicated 89.0 86.8 Intermodal 90.7 93.5 Brokerage 89.8 92.8 Consolidated operating ratio 88.5 % 89.3 % Operating ratio, net of fuel surcharges: Truckload 85.3 % 88.4 % Dedicated 86.9 84.9 Intermodal 89.2 92.8 Brokerage 89.8 92.8 Consolidated operating ratio, net of fuel surcharges 87.0 % 88.2 % Our operating revenue increased$99.3 million , or 11.4%, to$973.6 million in 2021 from$874.4 million in 2020. Our operating revenue, net of fuel surcharges, increased$65.4 million , or 8.3%, to$855.9 million in 2021 from$790.6 million in 2020. This increase was due to a$48.6 million increase in Brokerage revenue, a$7.5 million increase in Intermodal revenue, net of fuel surcharges, a$5.3 million increase in Dedicated revenue, net of fuel surcharges, and a$3.9 million increase in Truckload revenue, net of fuel surcharges. Fuel surcharge revenue increased by$33.9 million to$117.7 million in 2021 from$83.8 million in 2020 primarily due to higher fuel costs. 22 -------------------------------------------------------------------------------- Truckload segment revenue increased$17.5 million , or 4.6%, to$396.7 million in 2021 from$379.1 million in 2020. Truckload segment revenue, net of fuel surcharges, increased$3.9 million , or 1.1%, to$346.3 million in 2021 from$342.4 million in 2020. During 2021, an increase in our average revenue per tractor was partially offset by a reduction in our average number of tractors. The improvement in the operating ratio in 2021 was primarily due to an increase in our average revenue per tractor due to increased rates with our customers and an increase in gain on disposition of revenue equipment, partially offset by increased company driver compensation expense. Dedicated segment revenue increased$19.7 million , or 6.3%, to$329.4 million in 2021 from$309.8 million in 2020. Dedicated segment revenue, net of fuel surcharges, increased 2.0% primarily due to an increase in our average revenue per tractor. The operating ratio was negatively impacted in 2021 by increases in both company driver compensation expense and driver recruiting costs. Intermodal segment revenue increased$13.5 million , or 15.2%, to$102.2 million in 2021 from$88.7 million in 2020. Intermodal segment revenue, net of fuel surcharges, increased 9.4% from 2020 primarily due to an increase in revenue per load. The improvement in the operating ratio in 2021 was primarily due to increased rates with our customers and a decrease in the amounts payable to railroads as a percentage of our revenue. Brokerage segment revenue increased$48.6 million , or 50.2%, to$145.3 million in 2021 from$96.7 million in 2020 primarily due to increases in both the number of loads and in revenue per load. The improvement in the operating ratio in 2021 was primarily due to increased rates with our customers and a decrease in the amounts payable to carriers for transportation services which we arranged as a percentage of our Brokerage revenue. The following table sets forth for the years indicated the dollar and percentage increase or decrease of the items in our consolidated statements of operations, and those items as a percentage of operating revenue: Dollar Percentage Percentage of Change Change Operating Revenue 2021 vs. 2021 vs. (Dollars in thousands) 2020 2020 2021 2020 Operating revenue$ 99,270 11.4 % 100.0 % 100.0 % Operating expenses (income): Salaries, wages and benefits 17,807 5.9 32.7 34.3 Purchased transportation 38,608 25.0 19.8 17.7 Fuel and fuel taxes 33,155 33.8 13.5 11.2 Supplies and maintenance (2,356 ) (4.9 ) 4.7 5.5 Depreciation (331 ) (0.3 ) 10.5 11.8 Operating taxes and licenses (306 ) (2.8 ) 1.1 1.2 Insurance and claims (5,467 ) (11.5 ) 4.3 5.4 Communications and utilities 339 4.2 0.9 0.9
Gain on disposition of revenue equipment (7,562 ) (86.6 )
(1.7 ) (1.0 ) Gain on disposition of facility 1,718 100.0 - (0.2 ) Other 5,222 24.1 2.8 2.5 Total operating expenses 80,827 10.3 88.5 89.3 Operating income 18,443 19.8 11.5 10.7 Other 97 69.3 - - Income before income taxes 18,346 19.6 11.5 10.7 Income taxes expense 2,418 10.1 2.7 2.7 Net income$ 15,928 22.9 % 8.8 % 7.9 % Salaries, wages and benefits expense increased$17.8 million , or 5.9%, in 2021 from 2020. This increase resulted primarily from additional company driver compensation expense of$12.6 million and a$2.7 million increase in bonus compensation expense for our non-driver employees. Other smaller increases in the components of salaries, wages and benefits were partially offset by a decrease in employees' health insurance expense of$1.7 million in 2021 as a result of lower self-insured medical claims. 23 -------------------------------------------------------------------------------- Purchased transportation expense increased$38.6 million in total, or 25.0%, in 2021 from 2020. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased$39.5 million to$121.1 million in 2021 from$81.6 million in 2020, primarily due to an increase in the cost per load within the tight freight market and growth in load volume. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased$236,000 to$55.8 million in 2021 from$56.0 million in 2020. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased$673,000 in 2021. Fuel and fuel taxes increased by$33.2 million , or 33.8%, in 2021 from 2020. Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased$2.9 million , or 11.9%, to$26.9 million in 2021 from$24.1 million in 2020. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to$13.3 million from$9.7 million in 2020. TheDOE national average cost of fuel increased to$3.29 per gallon from$2.55 per gallon in 2020. This increase was a primary factor in our net fuel expense increasing to 3.8% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.5% in 2020. 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.
Our supplies and maintenance expense decreased
Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets. The$331,000 , or 0.3%, decrease in depreciation in 2021 was primarily due to a decrease in the size of our fleet of tractors partially offset by increased depreciation for our refrigerated containers. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of higher prices of new equipment, which will result in greater depreciation over the useful life. The$5.5 million , or 11.5%, decrease in insurance and claims in 2021 was primarily due to decreases in the cost of our self-insured physical damage claims related to our revenue equipment and our self-insured auto liability and workers' compensation claims, partially offset by an increase in our insurance premiums. Gain on disposition of revenue equipment was$16.3 million in 2021, up from$8.7 million in 2020 primarily due to an increase in the average gain for our tractor and trailer sales along with an increase in the number of units sold. Gain on disposition of facility was$1.7 million in 2020. The disposition of the facility, located inForest Park, GA , was part of our long-term program to expand and update the footprint of our facilities throughoutthe United States . We held the facility as rental property since 2011 after constructing a larger facility in the area.
The
Our operating income improved 19.8% to$111.7 million in 2021 from$93.2 million in 2020 as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or "operating ratio," improved to 88.5% in 2021 from 89.3% in 2020. The operating ratio for our Truckload segment was 87.1% in 2021 and 89.5% in 2020, for our Dedicated segment was 89.0% in 2021 and 86.8% in 2020, for our Intermodal segment was 90.7% in 2021 and 93.5% in 2020, and for our Brokerage segment was 89.8% in 2021 and 92.8% in 2020. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 87.0% in 2021 from 88.2% in 2020.
Our effective income tax rate decreased to 23.5% in 2021 from 25.6% in 2020 primarily due to decreases in per diem and other non-deductible expenses and in state income taxes.
As a result of the factors described above, net income improved 22.9% to$85.4 million , or$1.02 per diluted share, in 2021 from$69.5 million , or$0.84 per diluted share, in 2020. 24
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Liquidity and Capital Resources
Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. Our primary sources of liquidity are funds provided by operations and our revolving credit facility. A portion of our tractor fleet is provided by independent contractors who own and operate their own equipment. We have no capital expenditure requirements relating to those drivers who own their tractors or obtain financing through third parties.
The table below reflects our net cash flows provided by operating activities, net cash flows used for investing activities and net cash flows used for financing activities for the years indicated.
(In thousands) 2022 2021
2020
Net cash flows provided by operating activities$ 219,489 $ 171,204 $ 189,598 Net cash flows used for investing activities (134,958 ) (123,734 ) (106,325 ) Net cash flows used for financing activities (60,926 ) (56,602 ) (48,607 ) InAugust 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 inAugust 2020 to reflect the three-for-two stock split effected in the form of a stock dividend onAugust 13, 2020 . OnMay 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 third or fourth quarters of 2022 or in 2021. We repurchased and retired 53,064 shares of common stock for$597,000 in the first quarter of 2020. As ofDecember 31, 2022 , future repurchases of up to$33.2 million , or approximately 2.2 million shares, were available in the share repurchase program. In 2022, net cash flows provided by operating activities of$219.5 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$120.9 million , to repurchase and retire 2.3 million shares of our common stock for$41.8 million , to pay cash dividends of$19.6 million , and to construct and upgrade regional operating facilities in the amount of$11.2 million , resulting in a$23.6 million increase in cash and cash equivalents. In 2021, net cash flows provided by operating activities of$171.2 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$118.3 million , to pay cash dividends of$54.7 million , and to construct and upgrade regional operating facilities in the amount of$4.3 million , resulting in a$9.1 million decrease in cash and cash equivalents. In 2020, net cash flows provided by operating activities of$189.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$102.2 million , to pay cash dividends of$52.4 million , and to upgrade and acquire regional operating facilities in the amount of$5.4 million , resulting in a$34.7 million increase in cash and cash equivalents. 25
-------------------------------------------------------------------------------- We estimate that capital expenditures, net of proceeds from dispositions, will be approximately$225 million in 2023. This amount includes commitments to purchase$164.3 million of new revenue equipment and$4.7 million in building construction in 2023. Additionally, operating lease obligations total$774,000 through 2028. A quarterly cash dividend of$0.06 per share of common stock was paid in each quarter of 2022 which totaled$19.6 million . We paid cash dividends totaling$54.7 million in 2021 which consisted of a special dividend of$0.50 per share of common stock in October, along with quarterly cash dividends of$0.04 per share of common stock in March, June, October and December. We paid cash dividends totaling$52.4 million in 2020 which consisted of a special dividend of$0.50 per share of common stock in December, along with quarterly cash dividends of$0.04 per share of common stock in the third and fourth quarters and of$0.027 per share of common stock in the first and second quarters. We currently expect to continue to pay quarterly cash dividends in the future. The payment of cash dividends in the future, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, and certain corporate law requirements, as well as other factors deemed relevant by our Board of Directors. 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. InAugust 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 inAugust 2027 . The credit agreement amends, restates and continues in its entirety our previous credit agreement, as amended. AtDecember 31, 2022 , 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$16.1 million and remaining borrowing availability of$13.9 million . AtDecember 31, 2021 , there was also no outstanding principal balance on the facility. As of that date, we had outstanding standby letters of credit of$18.5 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 7.5% atDecember 31, 2022 . Our credit agreement effective inAugust 2022 prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of$150 million . Our previous credit agreement prohibited us from making such payments in excess of 25% of our net income from the prior fiscal year. Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to$80 million in each of 2022 and 2021 were obtained from the lender inMarch 2022 andAugust 2021 , respectively. A similar waiver of up to$60 million in 2020 was obtained from the lender inNovember 2020 . The current and previous credit agreements also contain restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios. We were in compliance with all covenants atDecember 31, 2022 andDecember 31, 2021 . Other than our obligations for revenue equipment and building construction purchases and operating lease expenditures, along with our outstanding standby letters of credit to guarantee settlement of self-insurance claims, which are each mentioned above, we did not have any material off-balance sheet arrangements atDecember 31, 2022 . Seasonality Our tractor productivity generally decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments. At the same time, operating expenses generally increase, with harsh weather creating higher accident frequency, increased claims, lower fuel efficiency and more equipment repairs. Critical Accounting Estimates The preparation of financial statements in conformity withU.S. generally accepted accounting principles requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses in our consolidated financial statements and related notes. We base our estimates, assumptions and judgments on historical experience, current trends and other factors believed to be relevant at the time our consolidated financial statements are prepared. However, because future events and their effects cannot be determined with certainty, actual results could differ from our estimates and assumptions, and such differences could be material. We believe that the following area involves critical accounting estimates due to the levels of subjectivity and judgment that are necessary to account for its highly uncertain matters, the susceptibility of such matters to change, and the potentially material impact these estimates and assumptions could have to our financial condition and operating performance. 26
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Auto Liability and Workers' Compensation Claims Reserves. We self-insure for our portion of claims exposure resulting from auto liability and workers' compensation claims. We are responsible for the first$1.0 million on each auto liability claim and for the first$750,000 on each workers' compensation claim. Additionally, we have$16.1 million in standby letters of credit to guarantee settlement of claims under agreements with our insurance carriers and regulatory authorities. We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review. However, we could suffer a series of losses within our self-insured retention limits or losses over our policy limits, which could negatively affect our financial condition and operating results. Our auto liability and workers' compensation claims expense and the related claims reserves will vary primarily based upon the frequency and severity of our accident experience. The total auto liability and workers' compensation claims reserves within the insurance and claims accruals in our consolidated balance sheets were$39.3 million and$36.8 million as ofDecember 31, 2022 and 2021, respectively. The excess of the insurance and claims accruals over these amounts relates to general liability, cargo and property damage claims, along with reserves for physical damage to our equipment and outstanding employees' health insurance claims. We reserve for the estimated cost of the uninsured portion of pending auto liability and workers' compensation claims, including legal costs. These case reserves are periodically evaluated and adjusted based on our continuing evaluation of the nature and severity of each individual claim. Claims development factors are applied to the total amount of the individual claims' case reserves by year incurred to estimate future claims development based on our historical experience. Our claims development factors phase down each year over nine years for auto liability claims and eleven years for workers' compensation claims from the year incurred. We also ensure that our total recorded auto liability and workers' compensation claims reserves are within a range of reasonable amounts determined in an independent actuarial analysis. There were no changes to our methodology used to estimate our ultimate claims losses in 2022 or 2021. Projection of losses is subject to a high level of estimation uncertainty and actual results could differ from these current estimates. Our estimates require judgments concerning the nature and severity of each claim, historical trends, consultation with actuarial experts, settlement patterns, jury awards, litigation trends, and legal interpretations, which are difficult to predict.
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