Note 11 - Revenue and Business Segments

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

(11) Revenue and Business Segments

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

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

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

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

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

Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers 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 within the United States and into and out of Mexico through Marten Transport Logistics, LLC, which was established in 2007 and operates pursuant to brokerage authority granted by the United States Department of Transportation, or DOT. We retain the billing, collection and customer management responsibilities. The main factors that affect our Brokerage revenue are the rate per mile and other charges that we receive from our customers.

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

Our customer agreements are typically for one-year terms except for our Dedicated agreements which range from three to five years with annual rate reviews. Under FASB ASC 606, the contract date for each individual load within each of our four reporting segments is generally the date that each load is tendered to and accepted by us. For each load transported within each of our four reporting segments, the entire amount of revenue to be recognized is a single performance obligation and our agreements with our customers detail the per-mile charges for line haul and fuel surcharges, along with the rates for loading and unloading, stop offs and drops, equipment detention and other accessorial services, which is the transaction price. There are no discounts that would be a material right or consideration payable to a customer. We are required to recognize revenue and related expenses over time, from load pickup to delivery, for each load within each of our four reporting segments. We base our calculation of the amount of revenue to record in each period for individual loads picking up in one period and delivering in the following period using the number of hours estimated to be incurred within each period applied to each estimated transaction price. Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $2.2 million and $2.7 million as of June 30, 2023 and December 31, 2022, respectively. We had no impairment losses on contract assets in the first six months of 2023 or in 2022. We bill our customers for loads after delivery is complete with standard payment terms of 30 days.

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

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

	Three Months					Six Months
	Ended June 30,					Ended June 30,
(In thousands)	2023			2022		2023		2022
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	101,268		$	101,808	$	203,588	$	196,978
Truckload fuel surcharge revenue		15,870			25,164		34,176		42,784
Total Truckload revenue		117,138			126,972		237,764		239,762
Dedicated revenue, net of fuel surcharge revenue		87,437			84,389		174,268		162,810
Dedicated fuel surcharge revenue		17,548			25,966		37,166		44,305
Total Dedicated revenue		104,985			110,355		211,434		207,115
Intermodal revenue, net of fuel surcharge revenue		18,754			27,681		42,155		53,286
Intermodal fuel surcharge revenue		3,611			9,286		8,799		15,323
Total Intermodal revenue		22,365			36,967		50,954		68,609
Brokerage revenue		41,184			55,271		83,543		101,360
Total operating revenue	$	285,672		$	329,565	$	583,695	$	616,846
Operating income:
Truckload	$	9,569		$	16,088	$	19,610	$	31,659
Dedicated		14,173			14,039		27,857		24,684
Intermodal		(165	)		4,097		622		9,133
Brokerage		4,636			6,713		9,134		11,319
Total operating income	$	28,213		$	40,937	$	57,223	$	76,795

Truckload segment depreciation expense was $15.3 million and $13.5 million, Dedicated segment depreciation expense was $11.9 million and $11.2 million, Intermodal segment depreciation expense was $1.8 million and $1.9 million, and Brokerage segment depreciation expense was $454,000 and $349,000 in the three-month periods ended June 30, 2023 and 2022, respectively.

Truckload segment depreciation expense was $30.6 million and $26.4 million, Dedicated segment depreciation expense was $23.7 million and $22.3 million, Intermodal segment depreciation expense was $3.7 million and $3.6 million, and Brokerage segment depreciation expense was $903,000 and $687,000 in the six-month periods ended June 30, 2023 and 2022, respectively.