<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended March 31, 1998
Commission File Number 0-15010
MARTEN TRANSPORT, LTD.
(Exact name of registrant as specified in its charter)
Delaware 39-1140809
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(State of incorporation) (I.R.S. Employer
Identification No.)
129 Marten Street, Mondovi, Wisconsin 54755
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(Address of principal executive offices)
715-926-4216
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(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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The number of shares outstanding of the registrant's Common Stock, par value
$.01 per share, was 4,477,645 as of May 4, 1998.
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements.
MARTEN TRANSPORT, LTD.
CONDENSED BALANCE SHEETS
(In thousands, except share information)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . $ 2,765 $ 2,052
Receivables . . . . . . . . . . . . . . . 17,407 18,872
Prepaid expenses. . . . . . . . . . . . . 6,844 6,921
Deferred income taxes . . . . . . . . . . 4,371 4,170
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Total current assets. . . . . . . . . 31,387 32,015
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Property and equipment:
Revenue equipment, building and land,
office equipment, and other. . . . . . 160,095 155,051
Accumulated depreciation. . . . . . . . . (42,643) (42,375)
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Net property and equipment. . . . . . 117,452 112,676
Other assets. . . . . . . . . . . . . . . . 544 575
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TOTAL ASSETS. . . . . . . . . . . . $149,383 $145,266
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current liabilities:
Accounts payable and accrued liabilities. $ 13,144 $ 13,045
Insurance and claims accruals . . . . . . 11,967 11,638
Current maturities of long-term debt. . . 22,277 21,628
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Total current liabilities. . . . . . . 47,388 46,311
Long-term debt, less current maturities . . 32,023 30,663
Deferred income taxes . . . . . . . . . . . 22,908 22,588
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Total liabilities. . . . . . . . . . . 102,319 99,562
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Shareholders' investment:
Common stock, $.01 par value per
share, 10,000,000 shares authorized,
4,477,645 shares issued
and outstanding . . . . . . . . . . . . 45 45
Additional paid-in capital. . . . . . . . 9,934 9,934
Retained earnings . . . . . . . . . . . . 37,085 35,725
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Total shareholders' investment . . . . 47,064 45,704
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TOTAL LIABILITIES AND
SHAREHOLDERS' INVESTMENT. . . . . . $149,383 $145,266
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</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
MARTEN TRANSPORT, LTD.
CONDENSED STATEMENTS OF INCOME
(In thousands, except share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997
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<S> <C> <C>
OPERATING REVENUE. . . . . . . . . . . . $45,218 $38,553
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OPERATING EXPENSES:
Salaries, wages and benefits . . . . . 14,099 12,465
Purchased transportation . . . . . . . 10,659 6,854
Fuel and fuel taxes. . . . . . . . . . 5,716 6,472
Supplies and maintenance . . . . . . . 3,472 3,260
Depreciation . . . . . . . . . . . . . 4,509 4,202
Operating taxes and licenses . . . . . 898 803
Insurance and claims . . . . . . . . . 998 1,100
Communications and utilities . . . . . 584 521
Gain on disposition of revenue
equipment. . . . . . . . . . . . . . (153) (63)
Other. . . . . . . . . . . . . . . . . 1,242 1,180
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Total operating expenses. . . . . 42,024 36,794
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OPERATING INCOME . . . . . . . . . . . . 3,194 1,759
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OTHER EXPENSES (INCOME):
Interest expense . . . . . . . . . . . 982 1,028
Interest income and other. . . . . . . (55) (20)
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INCOME BEFORE INCOME TAXES . . . . . . . 2,267 751
PROVISION FOR INCOME TAXES . . . . . . . 907 301
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NET INCOME . . . . . . . . . . . . . . . $ 1,360 $ 450
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BASIC AND DILUTED EARNINGS
PER COMMON SHARE . . . . . . . . . . . $ 0.30 $ 0.10
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</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTEN TRANSPORT, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Operations:
Net income. . . . . . . . . . . . . . . . . . . . . . . $1,360 $ 450
Adjustments to reconcile net
income to net cash flows
from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . 4,509 4,202
Gain on disposition of revenue
equipment. . . . . . . . . . . . . . . . . . . . (153) (63)
Deferred tax provision . . . . . . . . . . . . . . 119 455
Changes in other current
operating items. . . . . . . . . . . . . . . . . 1,970 (661)
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Net cash provided by
operating activities. . . . . . . . . . . . 7,805 4,383
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CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions:
Revenue equipment, net. . . . . . . . . . . . . . . . . (8,999) (6,611)
Building and land, office equipment,
and other additions, net. . . . . . . . . . . . . . . (133) (105)
Net change in other assets . . . . . . . . . . . . . . . . 31 -
------ ------
Net cash used for investing
activities. . . . . . . . . . . . . . . . . (9,101) (6,716)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings . . . . . . . . . . . . . . . . . . . 8,577 7,795
Repayment of long-term borrowings. . . . . . . . . . . . . (6,568) (5,623)
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Net cash provided by
financing activities. . . . . . . . . . . . 2,009 2,172
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INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . 713 (161)
CASH AND CASH EQUIVALENTS:
Beginning of period. . . . . . . . . . . . . . . . . . . . 2,052 3,028
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End of period. . . . . . . . . . . . . . . . . . . . . . . $2,765 $2,867
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CASH PAID (RECEIVED) FOR:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . $ 961 $1,012
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Income taxes . . . . . . . . . . . . . . . . . . . . . . . $ 169 $ (23)
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</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
(1) Financial Statements
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements, and therefore do not include all information and
disclosures required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such statements reflect
all adjustments (consisting of normal recurring accruals) considered
necessary to fairly present our financial condition, results of operations,
and cash flows as of and for the three month periods ended March 31, 1998 and
1997. The results of operations for any interim period do not necessarily
indicate the results for the full year. The unaudited interim financial
statements should be read with reference to the financial statements and
notes to financial statements in our 1997 Annual Report on Form 10-K.
(2) Earnings Per Common Share
Basic and diluted earnings per common share were computed as follows:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
(In thousands, except per-share amounts) 1998 1997(a)
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<S> <C> <C>
Numerator:
Net income. . . . . . . . . . . . . . . . . $ 1,360 $ 450
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Denominator:
Basic earnings per common share -
weighted-average shares . . . . . . . . . 4,478 4,439
Effect of dilutive stock options. . . . . . 45 15
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Diluted earnings per common share -
weighted-average shares and
assumed conversions . . . . . . . . . . . 4,523 4,454
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Basic and diluted earnings per common share. . $ 0.30 $ 0.10
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</TABLE>
The following options were outstanding, but were not included in the
calculation of diluted earnings per share because their exercise prices were
greater than the average market price of the common shares, and therefore
including the options in the denominator would be antidilutive, or decrease
the number of weighted-average shares.
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997(a)
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<S> <C> <C>
Number of option shares . . . . . . . . . . . . . - 240,000
Weighted-average exercise price . . . . . . . . . - $ 13.13
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</TABLE>
(a) 1997 information has been retroactively adjusted to reflect a three-
for-two stock split effective for shareholders of record as of December 15,
1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Operating revenue for the first quarter of 1998 increased 17.3 percent over
the first quarter of 1997 due primarily to an increase in the freight
transported associated with an increase in our fleet, improved equipment
utilization, and stronger customer demand. Average freight rates also
increased in 1998. We charged customers a fuel surcharge through the fourth
quarter of 1997 due to a significant increase in the price of diesel fuel.
These fuel surcharges totaled $648,000 in the first quarter of 1997. We
expect operating revenue for the remainder of 1998 to exceed 1997 levels
given the planned expansion of our fleet.
Operating expenses for the first quarter of 1998 were 92.9 percent of
operating revenue, compared with 95.4 percent for the same period in 1997.
This improved ratio reflects the more efficient utilization of our revenue
equipment. Most expense categories increased in 1998 due to the
transportation of additional freight and additions to our fleet. Purchased
transportation expense increased significantly due to a planned increase in
independent contractor-owned vehicles. The increase in purchased
transportation expense reduced the following expenses relative to revenue
since the independent contractors assume these expenses: salaries, wages and
benefits expense, fuel and fuel tax expense, and supplies and maintenance
expense. A significant decrease in the price of diesel fuel in the first
quarter of 1998 caused a further decrease in our fuel and fuel tax expense.
Insurance and claims expense declined due to improved accident experience
associated with our emphasis on driver safety and training. We expect that
operating expenses as a percent of revenue will remain at current levels for
the remainder of 1998.
Interest expense represented 2.2 percent of revenue for the first quarter of
1998, compared with 2.7 percent for the first quarter of 1997. This
improvement was caused by a decrease in our long-term debt during the
comparable periods. We expect interest expense as a percent of revenue to
remain at current levels.
We recorded net income of $1,360,000, or 30 cents per diluted share, for the
first quarter of 1998. This compares with net income of $450,000, or 10
cents per diluted share, for the first quarter of 1997. Earnings per share
for 1997 have been retroactively adjusted to reflect a three-for-two stock
split effective for shareholders of record as of December 15, 1997.
Continued increases in revenue, improved utilization of revenue equipment,
and our control of expenses caused our improved operating results.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Net cash flows from operations provided $7,805,000 during the first quarter
of 1998. Financing activities provided net cash of $2,009,000, while
investments in property and equipment used $9,101,000 during this period.
Marten continued to update and expand our fleet with new, more efficient
revenue equipment in 1998 and 1997. We have committed to purchase
approximately $15 million of revenue equipment, net of trade-in allowances,
for the remainder of 1998. Marten has paid, and expects to pay, for these
purchases using cash flow from operations and long-term debt collateralized
by revenue equipment. We also have committed to purchase approximately
$450,000 of diesel fuel at a fixed price through mid-1998, to be paid for
using cash flow from operations.
Our operating profits, short turnover in accounts receivable and cash
management practices allow us to effectively meet our working capital needs
despite a working capital deficit. The working capital deficit is caused by
current maturities of long-term debt associated with additions to our fleet.
We have not used, and do not expect to use, short-term borrowings to meet
working capital requirements. We believe our liquidity will adequately
satisfy expected near-term operating needs.
YEAR 2000
Compliance with year 2000 is a concern of substantially all companies since
many computer programs require updating or replacing to avoid system
failures. We do not expect significant operating issues relating to year
2000 based on an evaluation of our internally-programmed and purchased
computer systems. Remaining expenses for system changes are expected to be
immaterial to our financial condition, results of operations and cash flows.
Year 2000 issues affecting the parties with which we transact business may
impact Marten.
FORWARD-LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains certain forward-looking
statements. Any statements in this report that are not statements of
historical fact may be considered to be forward-looking statements. Written
words such as "may," "will," "expect," "believe," "anticipate," "estimate" or
"continue," or other variations of these or similar words, identify
forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, and actual results may differ
materially, depending on a variety of factors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
There are currently no material pending legal, governmental,
administrative or other proceedings to which we are a party or of
which any of our property is subject which are unreserved.
ITEM 2. Changes in Securities and Use of Proceeds.
None
ITEM 3. Defaults Upon Senior Securities.
None
ITEM 4. Submission of Matters to a Vote of Security Holders.
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits and Reports on Form 8-K.
a) Exhibit 27.1 Financial Data Schedule.
b) No reports on Form 8-K have been filed during the quarter
ended March 31, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
MARTEN TRANSPORT, LTD.
(Registrant)
Dated: May 6, 1998 By: /s/ Darrell D. Rubel
---------------------------------
Darrell D. Rubel
Executive Vice President and Treasurer
(Chief Financial Officer)
<PAGE>
MARTEN TRANSPORT, LTD.
EXHIBIT INDEX TO QUARTERLY REPORT
ON FORM 10-Q
For the Quarter Ended March 31, 1998
Item No. Item Method of Filing
---------- -------- ----------------
27.1 Financial Data
Schedule . . . . . Filed with this report
electronically.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED STATEMENTS OF INCOME AND THE CONDENSED BALANCE SHEETS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,765,000
<SECURITIES> 0
<RECEIVABLES> 17,407,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,387,000
<PP&E> 160,095,000
<DEPRECIATION> 42,643,000
<TOTAL-ASSETS> 149,383,000
<CURRENT-LIABILITIES> 47,388,000
<BONDS> 32,023,000
0
0
<COMMON> 45,000
<OTHER-SE> 47,019,000
<TOTAL-LIABILITY-AND-EQUITY> 149,383,000
<SALES> 45,218,000
<TOTAL-REVENUES> 45,218,000
<CGS> 0
<TOTAL-COSTS> 42,024,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 982,000
<INCOME-PRETAX> 2,267,000
<INCOME-TAX> 907,000
<INCOME-CONTINUING> 1,360,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,360,000
<EPS-PRIMARY> 0.30<F1>
<EPS-DILUTED> 0.30<F1>
<FN>
<F1>OUR BOARD OF DIRECTORS AUTHORIZED A THREE-FOR-TWO STOCK SPLIT OF OUR COMMON
STOCK, $.01 PAR VALUE, EFFECTIVE FOR SHAREHOLDERS OF RECORD AS OF DECEMBER 15,
1997. THE FINANCIAL DATA SCHEDULE FOR THE THREE MONTH PERIOD ENDED MARCH 31,
1997, HAS NOT BEEN RESTATED TO REFLECT THE STOCK SPLIT.
</FN>
</TABLE>
