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 endedDecember 31, 2020 . 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 . The primary source of our operating revenue is provided by our Truckload segment through 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 temperature-controlled trailers and, beginning inSeptember 2019 , our refrigerated containers, 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. 11 -------------------------------------------------------------------------------- Our operating revenue increased$24.5 million , or 5.7%, in the first six months of 2021 from the first six months of 2020. Our operating revenue, net of fuel surcharges, increased$14.4 million , or 3.7%, compared with the first six months of 2020. Truckload segment revenue, net of fuel surcharges, decreased 1.3% from the first six months of 2020 due to a reduction in our average number of tractors, despite an increase in our average revenue per tractor. Dedicated segment revenue, net of fuel surcharges, increased 2.2% from the first six months of 2020 primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor. Intermodal segment revenue, net of fuel surcharges, increased 6.0% from the first six months of 2020 primarily due to an increase in revenue per load. Brokerage segment revenue increased 24.2% primarily due to an increase in revenue per load in the first six months of 2021. Fuel surcharge revenue increased to$53.7 million in the first six months of 2021 from$43.6 million in the first six months of 2020, 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 condensed statements of operations. Our operating income improved 21.3% to$52.5 million in the first six months of 2021 from$43.3 million in the first six months of 2020. Our operating expenses as a percentage of operating revenue, or "operating ratio," improved to 88.5% in the first six months of 2021 from 90.0% in the first six months of 2020. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.9% in the first six months of 2021 from 88.8% in the first six months of 2020. Our net income improved 23.8% to$39.4 million , or$0.47 per diluted share, in the first six months of 2021 from$31.9 million , or$0.38 per diluted share, in the first six months of 2020. Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. AtJune 30, 2021 , we had$80.7 million of cash and cash equivalents,$653.6 million in stockholders' equity and no long-term debt outstanding. In the first six months of 2021, net cash flows provided by operating activities of$83.4 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$59.9 million , to pay cash dividends of$6.6 million , and to construct and upgrade regional operating facilities in the amount of$1.0 million , resulting in a$14.5 million increase in cash and cash equivalents. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately$74 million for the remainder of 2021. 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. 12 -------------------------------------------------------------------------------- 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 condensed 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 periods indicated certain operating statistics regarding our revenue and operations:
Three Months Six Months Ended June 30, Ended June 30, 2021 2020 2021 2020 Truckload Segment: Revenue (in thousands)$ 95,941 $ 94,200 $ 190,856 $ 189,332 Average revenue, net of fuel surcharges, per tractor per week(1)$ 4,146 $ 3,829 $ 4,101 $ 3,821 Average tractors(1) 1,552 1,727 1,580 1,710 Average miles per trip 513 557 524 558 Total miles (in thousands) 37,285 42,833 75,568 83,872 Dedicated Segment: Revenue (in thousands)$ 80,121 $ 75,427 $ 158,358 $ 150,464 Average revenue, net of fuel surcharges, per tractor per week(1)$ 3,268 $ 3,314 $ 3,241 $ 3,309 Average tractors(1) 1,582 1,557 1,601 1,525 Average miles per trip 323 307 315 306 Total miles (in thousands) 32,255 33,174 64,254 64,710 Intermodal Segment: Revenue (in thousands)$ 25,592 $ 20,301 $ 47,596 $ 43,981 Loads 8,646 8,693 16,628 18,430 Average tractors 148 98 141 99 Brokerage Segment: Revenue (in thousands)$ 30,788 $ 22,456 $ 58,678 $ 47,253 Loads 14,341 15,280 28,916 31,388
(1) Includes tractors driven by both company-employed drivers and independent
contractors. Independent contractors provided 118 and 124 tractors as of June
30, 2021 and 2020, respectively. 13
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Comparison of Three Months Ended
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) 2021 2020 2021 vs. 2020 2021 vs. 2020 Operating revenue: Truckload revenue, net of fuel surcharge revenue$ 83,633 $ 85,966 $ (2,333 ) (2.7 )% Truckload fuel surcharge revenue 12,308 8,234 4,074 49.5 Total Truckload revenue 95,941 94,200 1,741 1.8 Dedicated revenue, net of fuel surcharge revenue 67,227 67,076 151 0.2 Dedicated fuel surcharge revenue 12,894 8,351 4,543 54.4 Total Dedicated revenue 80,121 75,427 4,694 6.2 Intermodal revenue, net of fuel surcharge revenue 22,031 18,542 3,489 18.8 Intermodal fuel surcharge revenue 3,561 1,759 1,802 102.4 Total Intermodal revenue 25,592 20,301 5,291 26.1 Brokerage revenue 30,788 22,456 8,332 37.1 Total operating revenue$ 232,442 $ 212,384 $ 20,058 9.4 % Operating income: Truckload$ 13,197 $ 11,036 $ 2,161 19.6 % Dedicated 10,617 11,452 (835 ) (7.3 ) Intermodal 1,850 954 896 93.9 Brokerage 2,854 1,814 1,040 57.3 Total operating income$ 28,518 $ 25,256 $ 3,262 12.9 % Operating ratio(1): Truckload 86.2 % 88.3 % Dedicated 86.7 84.8 Intermodal 92.8 95.3 Brokerage 90.7 91.9 Consolidated operating ratio 87.7 % 88.1 % (1) Represents operating expenses as a percentage of operating revenue. Our operating revenue increased$20.1 million , or 9.4%, to$232.4 million in the 2021 period from$212.4 million in the 2020 period. Our operating revenue, net of fuel surcharges, increased$9.6 million , or 5.0%, to$203.7 million in the 2021 period from$194.0 million in the 2020 period. This increase was due to an$8.3 million increase in Brokerage revenue, a$3.5 million increase in Intermodal revenue, net of fuel surcharges, and a$151,000 increase in Dedicated revenue, net of fuel surcharges, partially offset by a$2.3 million decrease in Truckload revenue, net of fuel surcharges. Fuel surcharge revenue increased by$10.4 million to$28.8 million in the 2021 period from$18.3 million in the 2020 period. 14
-------------------------------------------------------------------------------- Truckload segment revenue increased$1.7 million , or 1.8%, to$95.9 million in the 2021 period from$94.2 million in the 2020 period. Truckload segment revenue, net of fuel surcharges, decreased$2.3 million , or 2.7%, to$83.6 million in the 2021 period from$86.0 million in the 2020 period. During the 2021 period, an increase in our average revenue per tractor was more than offset by a reduction in our average number of tractors. The improvement in the operating ratio in the 2021 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, a reduction in insurance and claims expense and an increase in gain on disposition of revenue equipment, partially offset by increased net fuel expense. Dedicated segment revenue increased$4.7 million , or 6.2%, to$80.1 million in the 2021 period from$75.4 million in the 2020 period. Dedicated segment revenue, net of fuel surcharges, increased 0.2% primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor. The operating ratio was negatively impacted in the 2021 period by a decrease in our average revenue per tractor and higher net fuel and depreciation costs. Intermodal segment revenue increased$5.3 million , or 26.1%, to$25.6 million in the 2021 period from$20.3 million in the 2020 period. Intermodal segment revenue, net of fuel surcharges, increased 18.8% from the 2020 period primarily due to an increase in revenue per load. The improvement in the operating ratio in the 2021 period 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$8.3 million , or 37.1%, to$30.8 million in the 2021 period from$22.5 million in the 2020 period primarily due to an increase in revenue per load. The improvement in the operating ratio in the 2021 period was primarily due to decreases in various cost components across the segment and increased rates with our customers. The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our unaudited consolidated condensed statements of operations, and those items as a percentage of operating revenue: Dollar Percentage Percentage of Change Change Operating Revenue Three Months Three Months Three Months Ended Ended Ended June 30, June 30, June 30, (Dollars in thousands) 2021 vs. 2020 2021 vs. 2020 2021 2020 Operating revenue$ 20,058 9.4 % 100.0 % 100.0 % Operating expenses (income): Salaries, wages and benefits 1,820 2.5 32.4 34.6 Purchased transportation 8,838 24.4 19.4 17.0 Fuel and fuel taxes 11,139 53.4 13.8 9.8 Supplies and maintenance (666 ) (5.6 ) 4.8 5.6 Depreciation (432 ) (1.7 ) 11.0 12.2 Operating taxes and licenses 103 3.9 1.2 1.2 Insurance and claims (2,242 ) (19.3 ) 4.0 5.5 Communications and utilities 79 4.0 0.9 0.9 Gain on disposition of revenue equipment (3,123 ) (140.9 ) (2.3 ) (1.0 ) Other 1,280 26.6 2.6 2.3 Total operating expenses 16,796 9.0 87.7 88.1 Operating income 3,262 12.9 12.3 11.9 Other 4 30.8 - - Income before income taxes 3,258 12.9 12.3 11.9 Income taxes expense (26 ) (0.4 ) 3.1 3.4 Net income$ 3,284 18.1 % 9.2 % 8.5 % 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$1.8 million , or 2.5%, in the 2021 period from the 2020 period. Along with other smaller increases in the components of salaries, wages and benefits, employees' health insurance expense increased by$939,000 in the 2021 period as a result of higher self-insured medical claims. 15 -------------------------------------------------------------------------------- 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$8.8 million in total, or 24.4%, in the 2021 period from the 2020 period. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased$1.4 million to$14.8 million in the 2021 period from$13.3 million in the 2020 period, primarily due to increased fuel surcharges from the railroads. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased$7.0 million to$25.7 million in the 2021 period from$18.7 million in the 2020 period, primarily due to an increase in the cost per load within the tight freight market. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased$438,000 in the 2021 period. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments. Fuel and fuel taxes increased by$11.1 million , or 53.4%, in the 2021 period from the 2020 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$2.1 million , or 44.2%, to$6.8 million in the 2021 period from$4.7 million in the 2020 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to$3.5 million from$2.2 million in the 2020 period.The United States Department of Energy , orDOE , national average cost of fuel increased to$3.21 per gallon from$2.43 per gallon in the 2020 period. Net fuel expense increased to 3.9% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 2.7% in the 2020 period. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers' fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine. Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling. Our supplies and maintenance expense decreased$666,000 , or 5.6%, from the 2020 period primarily due to lower outside repair and loading/unloading costs. Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets. The$432,000 , or 1.7%, decrease in depreciation in the 2021 period was primarily due to a decrease in the size of our fleet of tractors. 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. 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$2.2 million , or 19.3%, decrease in insurance and claims in the 2021 period was primarily due to decreases in the cost of our physical damage claims related to our revenue equipment and our self-insured auto liability claims, partially offset by increased insurance premiums. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims. Gain on disposition of revenue equipment was$5.3 million in the 2021 period, up from$2.2 million in the 2020 period primarily due to an increase in the number of tractors and trailers sold along with an increase in the average gain for the 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$1.3 million increase in other operating expenses in the 2021 period was primarily due to increased costs associated with driver recruitment and chassis rental. Our operating income improved 12.9% to$28.5 million in the 2021 period from$25.3 million in the 2020 period as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or "operating ratio," improved to 87.7% in the 2021 period from 88.1% in the 2020 period. The operating ratio for our Truckload segment was 86.2% in the 2021 period and 88.3% in the 2020 period, for our Dedicated segment was 86.7% in the 2021 period and 84.8% in the 2020 period, for our Intermodal segment was 92.8% in the 2021 period and 95.3% in the 2020 period, and for our Brokerage segment was 90.7% in the 2021 period and 91.9% in the 2020 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.0% in the 2021 period from 87.0% in the 2020 period. 16 -------------------------------------------------------------------------------- Our effective income tax rate decreased to 24.9% in the 2021 period from 28.2% in the 2020 period. The 2020 period included additional income tax expense of$1.1 million to adjust for certain discrete tax benefit reserves, which we evaluate based on the current facts, circumstances and information available. As a result of the factors described above, net income improved 18.1% to$21.4 million , or$0.26 per diluted share, in the 2021 period from$18.1 million , or$0.22 per diluted share, in the 2020 period.
Comparison of Six Months Ended
The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component: Dollar Percentage Change Change Six Months Six Months Six Months Ended Ended Ended June 30, June 30, June 30, (Dollars in thousands) 2021 2020 2021 vs. 2020 2021 vs. 2020 Operating revenue: Truckload revenue, net of fuel surcharge revenue$ 167,552 $ 169,823 $ (2,271 ) (1.3 )% Truckload fuel surcharge revenue 23,304 19,509 3,795 19.5 Total Truckload revenue 190,856 189,332 1,524 0.8 Dedicated revenue, net of fuel surcharge revenue 134,129 131,235 2,894 2.2 Dedicated fuel surcharge revenue 24,229 19,229 5,000 26.0 Total Dedicated revenue 158,358 150,464 7,894 5.2 Intermodal revenue, net of fuel surcharge revenue 41,477 39,136 2,341 6.0 Intermodal fuel surcharge revenue 6,119 4,845 1,274 26.3 Total Intermodal revenue 47,596 43,981 3,615 8.2 Brokerage revenue 58,678 47,253 11,425 24.2 Total operating revenue$ 455,488 $ 431,030 $ 24,458 5.7 % Operating income: Truckload$ 24,612 $ 17,821 $ 6,791 38.1 % Dedicated 19,553 19,985 (432 ) (2.2 ) Intermodal 3,311 2,260 1,051 46.5 Brokerage 5,040 3,222 1,818 56.4 Total operating income$ 52,516 $ 43,288 $ 9,228 21.3 % Operating ratio(1): Truckload 87.1 % 90.6 % Dedicated 87.7 86.7 Intermodal 93.0 94.9 Brokerage 91.4 93.2 Consolidated operating ratio 88.5 % 90.0 %
(1) Represents operating expenses as a percentage of operating revenue.
17 -------------------------------------------------------------------------------- Our operating revenue increased$24.5 million , or 5.7%, to$455.5 million in the 2021 period from$431.0 million in the 2020 period. Our operating revenue, net of fuel surcharges, increased$14.4 million , or 3.7%, to$401.8 million in the 2021 period from$387.4 million in the 2020 period. This increase was due to an$11.4 million increase in Brokerage revenue, a$2.9 million increase in Dedicated revenue, net of fuel surcharges, and a$2.3 million increase in Intermodal revenue, net of fuel surcharges, partially offset by a$2.3 million decrease in Truckload revenue, net of fuel surcharges. Fuel surcharge revenue increased to$53.7 million in the 2021 period from$43.6 million in the 2020 period, primarily due to higher fuel costs. Truckload segment revenue increased$1.5 million , or 0.8%, to$190.9 million in the 2021 period from$189.3 million in the 2020 period. Truckload segment revenue, net of fuel surcharges, decreased$2.3 million , or 1.3%, to$167.6 million in the 2021 period from$169.8 million in the 2020 period. The decrease was due to a reduction in our average number of tractors, despite an increase in our average revenue per tractor. The improvement in the operating ratio in the 2021 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, a reduction in insurance and claims expense and an increase in gain on disposition of revenue equipment, partially offset by increased net fuel expense. Dedicated segment revenue increased$7.9 million , or 5.2%, to$158.4 million in the 2021 period from$150.5 million in the 2020 period. Dedicated segment revenue, net of fuel surcharges, increased 2.2% primarily due to an increase in our average number of tractors partially offset by a decrease in our average revenue per tractor. The increase in the operating ratio was primarily due to a decrease in our average revenue per tractor and higher net fuel and depreciation costs in the 2021 period. Intermodal segment revenue increased$3.6 million , or 8.2%, to$47.6 million in the 2021 period from$44.0 million in the 2020 period. Intermodal segment revenue, net of fuel surcharges, increased 6.0% from the 2020 period primarily due to an increase in revenue per load. The improvement in the operating ratio in the 2021 period 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$11.4 million , or 24.2%, to$58.7 million in the 2021 period from$47.3 million in the 2020 period primarily due to an increase in revenue per load. The improvement in the operating ratio in the 2021 period was primarily due to decreases in various cost components across the segment and increased rates with our customers. 18 -------------------------------------------------------------------------------- The following table sets forth for the periods indicated the dollar and percentage increase or decrease of the items in our unaudited consolidated condensed statements of operations, and those items as a percentage of operating revenue: Dollar Percentage Percentage of Change Change Operating Revenue Six Months Six Months Six Months Ended Ended Ended June 30, June 30, June 30, (Dollars in thousands) 2021 vs. 2020 2021 vs. 2020 2021 2020 Operating revenue$ 24,458 5.7 % 100.0 % 100.0 % Operating expenses (income): Salaries, wages and benefits 2,057 1.4 32.6 33.9 Purchased transportation 9,158 12.0 18.8 17.8 Fuel and fuel taxes 11,779 24.0 13.4 11.4 Supplies and maintenance (1,879 ) (7.8 ) 4.9 5.6 Depreciation (172 ) (0.3 ) 11.2 11.9 Operating taxes and licenses 176 3.3 1.2 1.2 Insurance and claims (3,080 ) (12.9 ) 4.6 5.5 Communications and utilities 177 4.5 0.9 0.9 Gain on disposition of revenue equipment (3,552 ) (94.2 ) (1.6 ) (0.9 ) Other 566 5.2 2.5 2.5 Total operating expenses 15,230 3.9 88.5 90.0 Operating income 9,228 21.3 11.5 10.0 Other 91 82.7 - - Income before income taxes 9,137 21.1 11.5 10.1 Income taxes expense 1,565 13.6 2.9 2.7 Net income $ 7,572 23.8 % 8.7 % 7.4 % Salaries, wages and benefits expense increased$2.1 million , or 1.4%, in the 2021 period from the 2020 period. Bonus compensation expense for our non-driver employees increased by$797,000 and company driver compensation expense increased by$621,000 in the 2021 period. These increases, along with other smaller increases in the components of salaries, wages and benefits, were partially offset by a$450,000 decrease in employees' health insurance expense as a result of lower self-insured medical claims. Purchased transportation expense increased$9.2 million in total, or 12.0%, in the 2021 period from the 2020 period. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased$1.8 million to$27.3 million in the 2021 period from$29.1 million in the 2020 period, primarily due to a decrease in the volume of loads moved on the rail. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased$9.4 million to$49.3 million in the 2021 period from$39.9 million in the 2020 period, primarily due to an increase in the cost per load within the tight freight market. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, increased$1.5 million in the 2021 period as the rates paid for independent contractors' services rose. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments. Fuel and fuel taxes increased by$11.8 million , or 24.0%, in the 2021 period from the 2020 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$2.4 million , or 21.9%, to$13.4 million in the 2021 period from$11.0 million in the 2020 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to$6.1 million from$5.4 million in the 2020 period. TheDOE national average cost of fuel increased to$3.06 per gallon from$2.66 per gallon in the 2020 period. Net fuel expense increased to 3.9% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, from 3.2% in the 2020 period.
Our supplies and maintenance expense decreased
Our depreciation expense decreased
19 -------------------------------------------------------------------------------- Our insurance and claims expense decreased$3.1 million , or 12.9%, in the 2021 period primarily due to decreases in the cost of our self-insured auto liability claims and our physical damage claims related to our revenue equipment, partially offset by increased insurance premiums. Gain on disposition of revenue equipment was$7.3 million in the 2021 period, up from$3.8 million in the 2020 period primarily due to an increase in the number of tractors and trailers sold along with an increase in the average gain for the 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. Our operating income improved 21.3% to$52.5 million in the 2021 period from$43.3 million in the 2020 period as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or "operating ratio," improved to 88.5% in the 2021 period from 90.0% in the 2020 period. The operating ratio for our Truckload segment was 87.1% in the 2021 period and 90.6% in the 2020 period, for our Dedicated segment was 87.7% in the 2021 period and 86.7% in the 2020 period, for our Intermodal segment was 93.0% in the 2021 period and 94.9% in the 2020 period, and for our Brokerage segment was 91.4% in the 2021 period and 93.2% in the 2020 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 86.9% in the 2021 period from 88.8% in the 2020 period. Our effective income tax rate decreased to 25.0% in the 2021 period from 26.6% in the 2020 period. The 2020 period included additional income tax expense of$1.1 million to adjust for certain discrete tax benefit reserves, which we evaluate based on the current facts, circumstances and information available. As a result of the factors described above, net income improved 23.8% to$39.4 million , or$0.47 per diluted share, in the 2021 period from$31.9 million , or$0.38 per diluted share, in the 2020 period.
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 periods indicated.
Six Months Ended June 30, (In thousands) 2021 2020
Net cash flows provided by operating activities
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 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 . 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 53,064 shares of common stock for$597,000 in the first quarter of 2020. We did not repurchase any shares in the rest of 2020 or in the first six months of 2021. As ofJune 30, 2021 , future repurchases of up to$33.4 million , or approximately 2.6 million shares, were available in the share repurchase program. 20
-------------------------------------------------------------------------------- In the first six months of 2021, net cash flows provided by operating activities of$83.4 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$59.9 million , to pay cash dividends of$6.6 million , and to construct and upgrade regional operating facilities in the amount of$1.0 million , resulting in a$14.5 million increase in cash and cash equivalents. In the first six months of 2020, net cash flows provided by operating activities of$104.1 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of$55.7 million , to pay cash dividends of$4.4 million , and to upgrade regional operating facilities in the amount of$2.2 million , resulting in a$43.9 million increase in cash and cash equivalents. Beginning in 2018, our net cash flows have been increased by the new tax laws established by the Tax Cuts and Jobs Act of 2017, which reduces the federal corporate statutory income tax rate and establishes bonus depreciation that allows for full expensing of qualified assets. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately$74 million for the remainder of 2021. A quarterly cash dividend of$0.04 per share of common stock was declared in each of the first two quarters of 2021 which totaled$6.6 million . A quarterly cash dividend of$0.027 per share of common stock was declared in each of the first two quarters of 2020 which totaled$4.4 million . 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. We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of$30.0 million which matures inAugust 2023 . AtJune 30, 2021 , 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$18.5 million and remaining borrowing availability of$11.5 million . This facility bears interest at a variable rate based on the London Interbank Offered Rate or the lender's Prime Rate, in each case plus/minus applicable margins. Our credit facility prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25% of our net income from the prior fiscal year. A waiver allowing stock redemptions and dividends in excess of the 25% limitation in a total amount of up to$60 million in 2020 was obtained from the lender inNovember 2020 . This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios. We were in compliance with all covenants atJune 30, 2021 andDecember 31, 2020 . The following is a summary of our contractual obligations as ofJune 30, 2021 . Payments Due by Period 2022 2024 Remainder And And (In thousands) of 2021 2023 2025 Thereafter Total Purchase obligations for revenue equipment$ 52,055 $ - $ - $ -$ 52,055 Operating lease obligations 245 471 116 - 832 Total$ 52,300 $ 471 $ 116 $ -$ 52,887
The obligation to issue shares of our common stock under our nonqualified
deferred compensation plan at
Off-balance Sheet Arrangements
Other than standby letters of credit maintained in connection with our self-insurance programs in the amount of$18.5 million along with purchase obligations and operating leases summarized above in our summary of contractual obligations, we did not have any other material off-balance sheet arrangements atJune 30, 2021 . Inflation and Fuel Costs Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the last two years, the most significant effects of inflation have been on revenue equipment prices, accident claims, health insurance and employee compensation. We attempt to limit the effects of inflation through increases in freight rates and cost control efforts. 21
-------------------------------------------------------------------------------- In addition to inflation, fluctuations in fuel prices can affect our profitability. We require substantial amounts of fuel to operate our tractors and power the temperature-control units on our trailers. Substantially all of our contracts with customers contain fuel surcharge provisions. Although we historically have been able to pass through a significant portion of long-term increases in fuel prices and related taxes to customers in the form of fuel surcharges and higher rates, such increases usually are not fully recovered. These fuel surcharge provisions are not effective in mitigating the fuel price increases related to non-revenue miles or fuel used while the tractor is idling. 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 Policies Our critical accounting policies are described in "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for the year endedDecember 31, 2020 . We have reviewed and determined that those critical accounting policies remain our critical accounting policies as of and for the six months endedJune 30, 2021 , and that there have been no material changes to our critical accounting policies during this period.
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