Marten Transport Ltd: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part I, Item 1A for the year ended December 31, 2024. 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 time and temperature-sensitive and dry truck-based transportation and distribution capabilities across our six distinct business platforms – Temperature-Sensitive and Dry Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico. As discussed in Note 10, our Intermodal operations were sold effective September 30, 2025.

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

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

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 transported our customers’ freight within the United States utilizing our refrigerated containers on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affected our Intermodal revenue were the rate per mile and other charges we received from our customers. As discussed in Note 10, our Intermodal operations were sold effective September 30, 2025.

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

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

In addition to the factors discussed above, our operating revenue is also affected by, among other things, the United States economy, inventory levels, the level of truck and rail capacity in the transportation market, a contracting driver market, severe weather conditions and specific customer demand.

Our operating revenue decreased $59.7 million, or 8.1%, in the first nine months of 2025 from the first nine months of 2024. Our operating revenue, net of fuel surcharges, decreased $43.6 million, or 6.8%, compared with the first nine months of 2024. Truckload segment revenue, net of fuel surcharges, decreased 4.1% from the first nine months of 2024, primarily due to a decrease in our average fleet size, partially offset by an increase in our average revenue per tractor. Dedicated segment revenue, net of fuel surcharges, decreased 10.7% from the first nine months of 2024, primarily due to a decrease in our average fleet size, partially offset by an increase in our average revenue per tractor. Intermodal segment revenue, net of fuel surcharges, decreased 24.8% from the first nine months of 2024, primarily due to decreases in both our number of loads and our revenue per load. Brokerage segment revenue decreased 0.7% from the first nine months of 2024, primarily due to a decrease in our revenue per load, partially offset by an increase in our number of loads. Fuel surcharge revenue decreased to $80.0 million in the first nine months of 2025 from $96.1 million in the first nine months of 2024.

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

Our operating income declined 30.8% to $18.3 million in the first nine months of 2025 from $26.5 million in the first nine months of 2024. Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 97.3% in the first nine months of 2025 and 96.4% in the first nine months of 2024. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, increased to 96.9% in the first nine months of 2025 from 95.8% in the first nine months of 2024. Our net income declined 35.4% to $13.7 million, or $0.17 per diluted share, in the first nine months of 2025 from $21.3 million, or $0.26 per diluted share, in the first nine months of 2024.

Our business requires substantial ongoing capital investments, particularly for new tractors and trailers. At September 30, 2025, we had $54.5 million of cash and cash equivalents and an escrow deposit, $768.2 million in stockholders’ equity and no long-term debt outstanding. In the first nine months of 2025, net cash flows provided by operating activities of $87.9 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $32.4 million, to pay cash dividends of $14.7 million and to purchase other assets in the amount of $3.3 million, resulting in a $37.2 million increase in cash and cash equivalents and an escrow deposit. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $28 million for the remainder of 2025. Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first three quarters of 2025 which totaled $14.7 million. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

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

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

Results of Operations

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

(1) Includes tractors driven by both company-employed drivers and independent contractors. Independent contractors provided 83 and 94 tractors as of September 30, 2025 and 2024, respectively.

Comparison of Three Months Ended September 30, 2025 to Three Months Ended September 30, 2024

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

(Dollars in thousands)

Our operating revenue decreased $16.9 million, or 7.1%, to $220.5 million in the 2025 period from $237.4 million in the 2024 period. Our operating revenue, net of fuel surcharges, decreased $13.9 million, or 6.7%, to $194.0 million in the 2025 period from $207.9 million in the 2024 period. This decrease in the 2025 period was due to a $6.2 million decrease in Dedicated revenue, net of fuel surcharges, a $3.9 million decrease in Intermodal revenue, net of fuel surcharges, a $3.1 million decrease in Truckload revenue, net of fuel surcharges, and a $632,000 decrease in Brokerage revenue. Fuel surcharge revenue decreased to $26.5 million in the 2025 period from $29.5 million in the 2024 period.

Truckload segment revenue decreased $3.6 million, or 3.3%, to $104.8 million in the 2025 period from $108.4 million in the 2024 period. Truckload segment revenue, net of fuel surcharges, decreased $3.1 million, or 3.4%, to $90.1 million in the 2025 period from $93.3 million in the 2024 period, primarily due to a decrease in both our average fleet size and average revenue per tractor. The operating ratio was 101.9% in the 2025 period and 100.1% in the 2024 period. Impacting the 2025 period operating ratio was lower average revenue per tractor, along with higher depreciation and fuel costs, both as a percentage of revenue.

Dedicated segment revenue decreased $8.0 million, or 10.7%, to $67.0 million in the 2025 period from $75.0 million in the 2024 period. Dedicated segment revenue, net of fuel surcharges, decreased 9.9%, primarily due to a decrease in our average fleet size, partially offset by an increase in our average revenue per tractor. The operating ratio improved to 94.9% in the 2025 period from 95.9% in the 2024 period. Impacting the 2025 period operating ratio was improved average revenue per tractor, along with lower company driver compensation, as a percentage of revenue.

Intermodal segment revenue decreased $4.7 million, or 32.1%, to $9.9 million in the 2025 period from $14.5 million in the 2024 period. Intermodal segment revenue, net of fuel surcharges, decreased 31.9% from the 2024 period, primarily due to decreases in both our number of loads and our revenue per load. The operating ratio in the 2025 period improved to 103.0% from 110.6% in the 2024 period. Impacting the 2025 period operating ratio was a decrease in our depreciation expense, partially offset by higher purchased transportation costs, both as a percentage of revenue, and by the decrease in our revenue per load.

Brokerage segment revenue decreased $632,000, or 1.6%, to $38.8 million in the 2025 period from $39.4 million in the 2024 period, primarily due to a decrease in our revenue per load, partially offset by an increase in our number of loads. The operating ratio in the 2025 period of 95.9% was up from 92.6% in the 2024 period. This increase was primarily due to higher insurance and claims costs and an increase in the amounts payable to carriers for transportation services which we arranged, both as a percentage of revenue.

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

(Dollars in thousands)

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits. These expenses vary depending upon the size of our Truckload, Dedicated and Intermodal tractor fleets, the ratio of company drivers to independent contractors, our efficiency, our experience with employees’ health insurance claims, changes in health care premiums and other factors. Salaries, wages and benefits expense decreased $4.5 million, or 5.4%, in the 2025 period from the 2024 period. This decrease resulted primarily from a reduction in company driver compensation expense of $4.7 million.

Purchased transportation consists of amounts payable to railroads and carriers for transportation services we arrange in connection with Brokerage and Intermodal operations and to independent contractor providers of revenue equipment. This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors. Purchased transportation expense decreased $2.6 million in total, or 5.7%, in the 2025 period from the 2024 period. Amounts payable to carriers for transportation services we arranged in our Brokerage segment were $33.3 million in each of the 2025 and 2024 periods. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $5.9 million in the 2025 period from $8.0 million in the 2024 period, primarily due to a decrease in our number of loads. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased by $481,000 in the 2025 period.

Fuel and fuel taxes decreased by $2.3 million, or 6.3%, in the 2025 period from the 2024 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 $36,000, or 0.4%, to $8.8 million in the 2025 period from $8.7 million in the 2024 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $1.7 million from $2.4 million in the 2024 period. The United States Department of Energy, or DOE, national average cost of fuel increased to $3.76 per gallon from $3.69 per gallon in the 2024 period. Our net fuel expense was 5.6% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2025 period, up from 5.2% in the 2024 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 $879,000, or 5.3%, from the 2024 period, primarily due to lower tire and outside repair costs.

Depreciation relates to owned tractors, trailers, containers, auxiliary power units, communication units, terminal facilities and other assets. The $1.9 million, or 7.1%, decrease in depreciation in the 2025 period was primarily due to a decrease in our average tractor, trailer and refrigerated container fleet size, partially offset by higher prices of new equipment. We expect our annual cost of tractor and trailer ownership will increase in future periods as a result of continued higher prices of new equipment, which will result in greater depreciation over the useful life.

Insurance and claims consist of the costs of insurance premiums and accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’ compensation claims. These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance. The $2.4 million, or 17.3%, decrease in insurance and claims in the 2025 period was primarily due to decreases in our self-insured costs of physical damage claims related to our revenue equipment, workers’ compensation claims and insurance premiums, partially offset by higher self-insured auto liability claim costs. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims.

Gain on disposition of revenue equipment increased to $1.9 million in the 2025 period from $881,000 in the 2024 period due to increases in the average gain for our tractor and trailer sales and in the number of units sold. Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

Our operating income declined 35.9% to $2.7 million in the 2025 period from $4.3 million in the 2024 period as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 98.8% in the 2025 period and 98.2% in the 2024 period. The operating ratio for our Truckload segment was 101.9% in the 2025 period and 100.1% in the 2024 period, for our Dedicated segment was 94.9% in the 2025 period and 95.9% in the 2024 period, for our Intermodal segment was 103.0% in the 2025 period and 110.6% in the 2024 period, and for our Brokerage segment was 95.9% in the 2025 period and 92.6% in the 2024 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 98.6% in the 2025 period and 97.9% in the 2024 period.

Other non-operating income decreased to $213,000 from $922,000 in the 2024 period due to decreased interest income earned on our cash and cash equivalents.

Our effective income tax rate was 24.6% in the 2025 period and 27.7% in the 2024 period. The 2025 period includes a discrete tax benefit related to a return-to-provision true-up, resulting from the finalization of the prior year tax returns. The benefit was partially offset by increases in per diem and other non-deductible expenses as a percentage of projected earnings.

As a result of the factors described above, net income declined 40.7% to $2.2 million, or $0.03 per diluted share, in the 2025 period from $3.8 million, or $0.05 per diluted share, in the 2024 period.

Comparison of Nine Months Ended September 30, 2025 to Nine Months Ended September 30, 2024

The following table sets forth for the periods indicated our operating revenue, operating income and operating ratio by segment, along with the change for each component:

(Dollars in thousands)

Our operating revenue decreased $59.7 million, or 8.1%, to $673.5 million in the 2025 period from $733.3 million in the 2024 period. Our operating revenue, net of fuel surcharges, decreased $43.6 million, or 6.8%, to $593.5 million in the 2025 period from $637.1 million in the 2024 period. This decrease in the 2025 period was primarily due to a $21.7 million decrease in Dedicated revenue, net of fuel surcharges, an $11.6 million decrease in Truckload revenue, net of fuel surcharges, and a $9.5 million decrease in Intermodal revenue, net of fuel surcharges. Fuel surcharge revenue decreased to $80.0 million in the 2025 period from $96.1 million in the 2024 period.

Truckload segment revenue decreased $16.8 million, or 5.1%, to $315.7 million in the 2025 period from $332.5 million in the 2024 period. Truckload segment revenue, net of fuel surcharges, decreased $11.6 million, or 4.1%, to $272.7 million in the 2025 period from $284.3 million in the 2024 period, primarily due to a decrease in our average fleet size, partially offset by an increase in our average revenue per tractor. The operating ratio was 100.0% in the 2025 period and 99.6% in the 2024 period. Impacting the 2025 period operating ratio was higher insurance and claims and depreciation costs, partially offset by lower company driver compensation, all as a percentage of revenue, along with improved average revenue per tractor.

Dedicated segment revenue decreased $30.2 million, or 12.5%, to $212.5 million in the 2025 period from $242.7 million in the 2024 period. Dedicated segment revenue, net of fuel surcharges, decreased 10.7%, primarily due to a decrease in our average fleet size, partially offset by an increase in our average revenue per tractor. The operating ratio increased to 93.5% in the 2025 period from 92.2% in the 2024 period. Impacting the 2025 period operating ratio was higher insurance and claims costs, as a percentage of revenue, partially offset by increased average revenue per tractor.

Intermodal segment revenue decreased $11.9 million, or 26.1%, to $33.7 million in the 2025 period from $45.5 million in the 2024 period. Intermodal segment revenue, net of fuel surcharges, decreased 24.8% from the 2024 period, primarily due to decreases in both our number of loads and our revenue per load. The operating ratio in the 2025 period increased to 105.6% from 105.3% in the 2024 period. Impacting the 2025 period operating ratio was the decrease in our revenue per load along with higher purchased transportation costs, partially offset by lower company driver compensation and depreciation expense, all as a percentage of revenue.

Brokerage segment revenue decreased $828,000, or 0.7%, to $111.7 million in the 2025 period from $112.5 million in the 2024 period, primarily due to a decrease in our revenue per load, partially offset by an increase in our number of loads. The operating ratio in the 2025 period of 94.2% was up from 92.5% in the 2024 period. This increase was primarily due to higher insurance and claims costs and an increase in the amounts payable to carriers for transportation services which we arranged, both as a percentage of revenue.

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

(Dollars in thousands)

Salaries, wages and benefits expense decreased $22.4 million, or 8.7%, in the 2025 period from the 2024 period. This decrease resulted primarily from reductions in company driver compensation expense of $17.7 million and employees’ health insurance expense due to lower self-insured medical claims of $1.9 million.

Purchased transportation expense decreased $6.8 million in total, or 5.3%, in the 2025 period from the 2024 period. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $118,000 to $94.5 million in the 2025 period from $94.4 million in the 2024 period. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment decreased to $18.8 million in the 2025 period from $24.0 million in the 2024 period, primarily due to a decrease in the number of loads. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased by $1.8 million in the 2025 period.

Fuel and fuel taxes decreased by $14.9 million, or 13.1%, in the 2025 period from the 2024 period. Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) decreased $1.1 million, or 4.4%, to $24.7 million in the 2025 period from $25.9 million in the 2024 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads decreased to $5.5 million from $7.8 million in the 2024 period. The DOE national average cost of fuel decreased to $3.65 per gallon from $3.83 per gallon in the 2024 period. Despite this price decrease, our net fuel expense was up slightly to 5.1% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, in the 2025 period from 4.9% in the 2024 period.

Our supplies and maintenance expense decreased $2.3 million, or 4.7%, from the 2024 period primarily due to lower tire, tolls and loading/unloading costs.

The $3.9 million, or 4.6%, decrease in depreciation in the 2025 period was primarily due to a decrease in our average tractor, trailer and refrigerated container fleet size, partially offset by higher prices of new equipment.

The $2.6 million, or 6.9%, increase in insurance and claims in the 2025 period was primarily due to increases in our self-insured auto liability claim costs and insurance premiums, partially offset by lower self-insured costs of physical damage claims related to our revenue equipment and workers’ compensation claims.

Gain on disposition of revenue equipment increased to $8.8 million in the 2025 period from $4.6 million in the 2024 period due to increases in the average gain for our tractor and trailer sales and in the number of units sold.

Our operating income declined 30.8% to $18.3 million in the 2025 period from $26.5 million in the 2024 period as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or “operating ratio,” was 97.3% in the 2025 period and 96.4% in the 2024 period. The operating ratio for our Truckload segment was 100.0% in the 2025 period and 99.6% in the 2024 period, for our Dedicated segment was 93.5% in the 2025 period and 92.2% in the 2024 period, for our Intermodal segment was 105.6% in the 2025 period and 105.3% in the 2024 period, and for our Brokerage segment was 94.2% in the 2025 period and 92.5% in the 2024 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, was 96.9% in the 2025 period and 95.8% in the 2024 period.

Other non-operating income decreased to $998,000 from $2.7 million in the 2024 period due to decreased interest income earned on our cash and cash equivalents.

Our effective income tax rate increased to 28.9% in the 2025 period from 27.2% in the 2024 period primarily due to increases in per diem and other non-deductible expenses as a percentage of projected earnings.

As a result of the factors described above, net income declined 35.4% to $13.7 million, or $0.17 per diluted share, in the 2025 period from $21.3 million, or $0.26 per diluted share, in the 2024 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.

(In thousands)

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34.0 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend in August 2020. In May 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 Securities Exchange Act of 1934, as amended. 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 have not repurchased any shares since the second quarter of 2022. As of September 30, 2025, future repurchases of up to $33.2 million, or approximately 2.2 million shares, were available in the share repurchase program.

In the first nine months of 2025, net cash flows provided by operating activities of $87.9 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $32.4 million, to pay cash dividends of $14.7 million and to purchase other assets in the amount of $3.3 million, resulting in a $37.2 million increase in cash and cash equivalents and an escrow deposit. In the first nine months of 2024, net cash flows provided by operating activities of $111.0 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $102.3 million, to pay cash dividends of $14.7 million and to construct and upgrade regional operating facilities in the amount of $3.9 million, resulting in a $10.2 million decrease in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $28 million for the remainder of 2025. This amount includes commitments to purchase $32.9 million of new revenue equipment, prior to considering proceeds from dispositions. Additionally, operating lease obligations total $613,000 through 2028. Quarterly cash dividends of $0.06 per share of common stock were paid in each of the first three quarters of 2025 and 2024 which totaled $14.7 million in each period. 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.

In August 2022, we entered into a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2027. The credit agreement amends, restates and continues in its entirety our previous credit agreement, as amended. At September 30, 2025, 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 $24.1 million and remaining borrowing availability of $5.9 million. At December 31, 2024, there was also no outstanding principal balance on the facility. As of that date, we had outstanding standby letters of credit of $23.1 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 7.25% at September 30, 2025.

Our credit agreement effective in August 2022 prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of $150 million. The current credit agreement also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios. We were in compliance with all covenants at September 30, 2025 and December 31, 2024.

Other than our obligations for revenue equipment and operating lease expenditures, along with our outstanding standby letters of credit to guarantee settlement of self-insurance claims, which are each mentioned above, we did not have any material off-balance sheet arrangements at September 30, 2025.

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

There have been no material changes in the critical accounting estimates disclosed by us under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates contained in the Annual Report on Form 10-K for the year ended December 31, 2024.

We are exposed to a variety of market risks, most importantly the effects of the price and availability of diesel fuel. We require substantial amounts of diesel fuel to operate our tractors and power the temperature-control units on our trailers. The price and availability of diesel fuel can vary, and are subject to political, economic and market factors that are beyond our control. Significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our fuel consumption in the first nine months of 2024, a 5% increase in the average cost of diesel fuel would have increased our fuel expense by $5.6 million. Based upon our fuel consumption in the first nine months of 2025, a 5% increase in the average cost of diesel fuel would have increased our fuel expense by $4.8 million. There were no material quantitative changes in market risk since the first nine months of 2024.

We have historically been able to pass through a significant portion of long-term increases in diesel fuel prices and related taxes to customers in the form of fuel surcharges. Fuel surcharge programs are widely accepted among our customers, though they can vary somewhat from customer-to-customer. These fuel surcharges, which adjust weekly with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase. 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. In addition, 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 our trailers’ refrigeration units.

While we do not currently have any outstanding hedging instruments to mitigate this market risk, we may enter into derivatives or other financial instruments to hedge a portion of our fuel costs in the future.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chairman of the Board and Chief Executive Officer and our Executive Vice President and Chief Financial Officer. Based upon that evaluation, our Chairman of the Board and Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2025. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We intend to periodically evaluate our disclosure controls and procedures as required by the Exchange Act Rules.

There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the year ended December 31, 2024, except for an update of the following risk factor:

Our business is subject to general economic and business factors that are largely beyond our control, any of which could have a materially adverse effect on our operating results. Our business is dependent on a number of general economic and business factors that may have a materially adverse effect on our results of operations, many of which are beyond our control. These factors include excess capacity in the trucking industry, strikes or other work stoppages, and significant increases or fluctuations in interest rates, fuel taxes, fuel prices and license and registration fees. We are affected by recessionary economic cycles and downturns in customers’ business cycles, particularly in market segments and industries where we have a significant concentration of customers. Economic conditions may adversely affect our customers and their ability to pay for our services.

During the first nine months of 2025, the Trump administration has imposed new and increased tariff rates on imported goods from a number of countries. Although it is difficult to forecast the depth and duration of the resulting impact since the tariff policies are rapidly evolving and changing, such trade policies and tariff implementations, and any related retaliatory trade policies and tariff implementations by foreign governments, may result in decreased shipping volumes and have an adverse impact on our revenue and results of operations. In addition, the imposition of additional tariffs or quotas or changes to certain trade agreements, or retaliatory trade policies could, among other things, increase the cost of the materials used by our suppliers to produce new revenue equipment, limit the availability of new revenue equipment, or increase the price of fuel. Such cost increases for our revenue equipment suppliers would likely be passed on to us, and to the extent fuel prices increase, we may not be able to fully recover such increases through rate increases or our fuel surcharge programs, either of which could have an adverse effect on our business.

Lastly, it is not possible to predict the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against any foreign state, heightened security requirements or other related events and the subsequent effects on the economy or on consumer confidence in the United States, or the impact, if any, on our future results of operations.