-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WGPLX9L56041g5afhmfax7Phwk4TQiCEZodpzsk1MaO2sCufPUeKiPOtCTLJ83vl BfNr3KzMzUQEnhl7EjU/0w== 0000912057-96-005428.txt : 19960329 0000912057-96-005428.hdr.sgml : 19960329 ACCESSION NUMBER: 0000912057-96-005428 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960328 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARTEN TRANSPORT LTD CENTRAL INDEX KEY: 0000799167 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 391140809 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-15010 FILM NUMBER: 96540097 BUSINESS ADDRESS: STREET 1: 129 MARTEN ST CITY: MONDOVI STATE: WI ZIP: 54755 BUSINESS PHONE: 7159264216 MAIL ADDRESS: STREET 1: 3400 PLAZA VII STREET 2: 45 SOUTH SEVENTH ST CITY: MINNEAPOLIS STATE: MN ZIP: 55402 10-K405 1 10-K405 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: Commission file number: DECEMBER 31, 1995 0-15010
------------------------ MARTEN TRANSPORT, LTD. (Exact name of Registrant as specified in its charter) DELAWARE 39-1140809 (State of Incorporation) (I.R.S. Employer Identification No.) 129 MARTEN STREET 54755 MONDOVI, WISCONSIN (Zip Code) (Address of Principal Executive Offices)
Registrant's telephone number, including area code: (715) 926-4216 ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.01 PER SHARE ------------------------ 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 / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of March 7, 1996, 2,941,616 shares of Common Stock of the Registrant were outstanding, and the aggregate market value of the Common Stock of the Registrant (based upon the last reported sale price of the Common Stock at that date by the Nasdaq National Market), excluding shares owned beneficially by officers and directors was approximately $18,974,277. Part II of this Annual Report on Form 10-K incorporates by reference information (to the extent specific pages are referred to herein) from the Registrant's Annual Report to Shareholders for the year ended December 31, 1995 (the "1995 Annual Report"). Part III of this Annual Report on Form 10-K incorporates by reference information (to the extent specific sections are referred to herein) from the Registrant's Proxy Statement for its annual meeting to be held May 7, 1996 (the "1996 Proxy Statement"). - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS. Marten Transport, Ltd. ("the Company") is a long-haul truckload carrier providing protective service transportation, which is temperature controlled or insulated carriage of temperature sensitive materials and general commodities and carriage of time sensitive freight, pursuant to operating authority, both contract and common, granted by the Interstate Commerce Commission ("ICC") and currently regulated by the United States Department of Transportation ("DOT") and the Federal Highway Administration ("FHWA"). As of December 31, 1995, the Company operated a fleet consisting of 1,097 tractors and 1,438 trailers (all of which are protective service trailers). Of the total fleet, 955 tractors were Company-owned and 142 tractors and 3 trailers were under contract with independent contractors who also provide the services of a driver satisfactory to the Company. As of December 31, 1995, the Company had 1,254 employees, including 979 drivers, none of whom is represented by a collective bargaining unit. The Company was organized under Wisconsin law in 1970 as a successor to a sole proprietorship operated by Roger R. Marten since 1946. In 1988, the Company reincorporated under Delaware law. The Company's executive offices are located at 129 Marten Street, Mondovi, Wisconsin 54755, and its telephone number is (715) 926-4216. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Since its inception, the Company's revenue, operating profits and assets have been attributable primarily to one business segment--long-haul truckload carriage of temperature and time sensitive materials and general commodities. (c) NARRATIVE DESCRIPTION OF BUSINESS. The Company specializes in protective service transportation of foods, chemicals and other products that require temperature controlled or insulated carriage. The Company also provides carriage of dry freight for customers requiring the special services the Company offers. In 1995, the Company derived approximately 79% of its revenue from hauling products requiring protective service and 21% of its revenue from hauling dry freight. Most of the Company's dry freight loads require special services the Company offers or permit the Company to position its equipment for hauling protective service loads. The specialized transportation services offered by the Company include: - dependable, late model tractors which allow timely deliveries - late model temperature controlled trailers - scheduled pickups and deliveries - assistance in loading and unloading - the availability of extra trailers that can be placed for the convenience of customers - sufficient equipment to respond promptly to customers' varying requirements - an on-line computer system which allows customers to obtain information regarding the status of deliveries MARKETING AND CUSTOMERS Senior management and marketing personnel seek customers whose products require protective or other specialized services and who ship multiple truckloads per week. To minimize empty miles, the Company places special emphasis on soliciting customers whose shipping requirements allow the Company to balance the number of load originations and terminations in any given area. A key element of the Company's emphasis on service is its strong commitment to accommodating the individualized requirements of its customers. The Company has developed an electronic data interface ("EDI") system, through which the Company can provide its customers with current information regarding the location and status of shipments in transit. This system also allows customers to place orders, and the Company to bill customers, electronically. The Company also utilizes a satellite tracking system that enhances monitoring of truck and shipment locations. The Company maintains marketing offices in its Wisconsin headquarters, as well as other selected locations throughout the United States. Marketing personnel travel in their assigned regions to solicit new customers and maintain contact with existing customers. Once a customer relationship is established, the primary Company contact is one of the Company's customer service managers. Working from the Company's terminal in Mondovi, Wisconsin, the customer service managers regularly contact existing customers to solicit additional business on a load-by-load basis, particularly when equipment will be available nearby following a completed haul. Each customer service manager is assigned to particular customers and is responsible for monitoring overall transportation and service requirements as well as freight movements for each assigned customer. These efforts to coordinate shipper needs with equipment availability have been instrumental in maintaining an average empty mile factor of 7.1% in 1995. The Company sets its own freight rates instead of using those published by tariff publishing bureaus, which allows the Company to offer rates that are more responsive to market conditions and the level of service required by a particular customer. The Company's rate structure is designed to compensate the Company for the cost of protective service revenue equipment as well as hauling loads into areas that generate empty miles. The Company derived approximately 11% of its revenue from a single customer, The Pillsbury Company, in 1995. The Company derived approximately 12% of its revenue in 1994 and 14% of its revenue in 1993 from the Phillip Morris group of companies, which included 11 different accounts in 1994. OPERATIONS The Company's operations are designed for efficient use of equipment while maintaining the emphasis placed on providing individualized service to customers. The Company's computer system provides real-time, on-line information to track shipments and increase equipment utilization as well as to assist management in long-range planning and trend analysis. The Company maintains its dispatch operations in its Mondovi, Wisconsin, headquarters. The customer service managers are assigned to particular customers and regions and work closely with the Company's fleet managers, marketing personnel and drivers. Loads are assigned to drivers by load planners. Loads are then dispatched by fleet managers who are assigned a group of drivers regardless of load destination. Once a load has been dispatched, a fleet manager is responsible for its proper and efficient delivery and tracks the status and location of that load through daily contact with drivers. Customer service managers coordinate with the Company's marketing personnel to match customer needs with Company capacity and location of revenue equipment. Each driver is monitored daily on his/her location, load temperature and any problems by the appropriate fleet -2- manager. This information, along with information concerning available loads, is constantly updated on the Company's computer system. Computer-generated information is used to meet delivery schedules, respond to customer inquiries and match available equipment with loads. The Company's primary traffic lanes are between the Midwest and the West Coast, Pacific Northwest, Southwest, Southeast, East Coast and from California to the Pacific Northwest. The average length of a trip (one-way) was 1,145 miles during 1995, 1,132 miles during 1994 and 1,143 miles during 1993. The Company's loads generally move from origin directly to destination, thus eliminating any need for freight terminals. The Company operates maintenance facilities in Mondovi, Wisconsin; Ontario, California; Wilsonville, Oregon; and Jonesboro, Georgia. The Company has agreements with various fuel distributors which enable drivers to purchase fuel at a discount while in transit. The Company also purchases fuel in bulk in Mondovi and at its maintenance facilities. DRIVERS As of December 31, 1995, the Company employed 979 drivers and had contracts with independent contractors for the services of 142 tractors that provide both a tractor and a qualified driver for the Company's use. The Company recruits drivers from throughout the United States. The ratio of drivers to tractors as of December 31, 1995, was 1 to 1. None of the Company's drivers is represented by a collective bargaining unit. The Company's turnover of drivers was approximately 62% in 1995, which the Company believes is in line with turnover rates in the industry, based on industry surveys. Drivers, including independent contractors, are selected in accordance with specific Company guidelines relating to safety records, driving experience and personal evaluations. A new driver is trained in all phases of Company policies and operations as well as safety techniques and fuel-efficient operation of the equipment. All new drivers must also pass a road test prior to assignment to a vehicle. The Company maintains a toll-free number, satellite tracking and a staff of fleet managers to provide timely communication and support for drivers while on the road for extended periods. To retain qualified drivers and promote safe operations, the Company purchases premium quality tractors and equips them with optional comfort and safety features, including air ride suspension, air conditioning, high-quality interiors, power steering, engine brakes and double sleeper cabs. The Company maintains stringent screening, training and testing procedures for its drivers to reduce the potential for accidents and the corresponding cost of insurance and claims. Company-employed drivers receive a fixed rate per mile which is increased based on the driver's length of service. Drivers are also eligible for bonuses based upon safe, efficient driving. The Company believes that its compensation program provides an important incentive to attract and retain qualified drivers. The Company compensates independent contractors on the basis of a fixed rate per mile or a percentage of revenue from loads hauled. Independent contractors pay their own fuel, insurance, maintenance and repairs and other expenses. Independent contractors that have been under contract with the Company for at least six months are also eligible to purchase shares of Company Common Stock pursuant to a stock purchase plan sponsored by the Company, which provides that the Company will pay the brokerage commissions on purchases and the costs of administering the plan. -3- REVENUE EQUIPMENT The trucking industry requires significant capital investment in revenue equipment. The Company has elected to finance its revenue equipment purchases using long-term debt with significant current maturities, causing a working capital deficit. The Company has operated effectively with a working capital deficit due to a combination of operating profits, short turnover in accounts receivable and cash management. The Company's policy is to purchase tractors and trailers manufactured to Company specifications. The Company's tractors are generally manufactured by Freightliner or Kenworth, a subsidiary of PACCAR, Inc. Most of the Company's tractors are equipped with 365/400 horsepower Detroit Diesel or Cummins engines, which are designed to enable the equipment to maintain constant speed with optimum fuel economy under conditions often encountered by the Company's equipment, such as mountainous terrain and maximum weight loads. Most of the Company's single van trailers are manufactured by Utility or Great Dane and are equipped with Thermo-King cooling and heating equipment. The current cost of a temperature-controlled, protective service trailer is approximately $40,000. Standardization of equipment enables the Company to simplify driver training, control the cost of spare parts inventory, enhance its preventive maintenance program and increase fuel economy. The following table shows the type and age of equipment owned by the Company as of December 31, 1995:
MODEL YEAR TRACTORS SINGLE VAN TRAILERS ---------- -------- ------------------- 1996 179 162 1995 259 263 1994 164 243 1993 285 278 1992 67 109 1991 1 143 1990 --- 6 1989 --- 201 1988 --- 30 ___ _____ Total 955 1,435 ___ _____ ___ _____
The single van refrigerated trailers are 48 feet long (1,337 trailers) or 53 feet long (98 trailers) by 102 inches wide with a minimum of 102 inches of inside height. The Company's policy is to replace its tractors and trailers based on factors such as age, the market for used equipment and improvements in technology and fuel efficiency. During 1995, 46 tractors and 185 trailers were added, net of equipment trades. In 1996, the Company plans to purchase 369 tractors (for which 318 tractors will be traded) and 412 trailers (for which 162 trailers will be traded). The Company has a comprehensive maintenance program for its Company-owned tractors and trailers to minimize equipment downtime and enhance resale value. Inspections, repairs and maintenance are performed regularly at the Company's facilities in Mondovi, Wisconsin; Ontario, California; Jonesboro, Georgia; and Wilsonville, Oregon, and at independent contract maintenance facilities in the Company's service territory. The Company's tractors and trailers are washed regularly to enhance appearance and prolong equipment life. -4- EMPLOYEES As of December 31, 1995, the Company employed 1,254 people, of whom 979 were drivers, 111 were mechanics and maintenance personnel and 164 were support personnel, including management and administration. None of the Company's employees is represented by a collective bargaining unit, and the Company considers relations with its employees to be good. COMPETITION The trucking industry is highly competitive. The Company competes primarily with other protective service truckload carriers and with private carriage fleets. For freight that does not require protective service trailers, the Company also competes with dry freight truckload carriers and to a lesser extent with railroads. The Company competes primarily on the basis of its quality of service and its ability to provide protective service and other specialized services. Several other truckload carriers offering protective service have substantially greater financial resources than the Company, own more equipment and carry a larger volume of freight than the Company. REGULATION The Company is a motor common and contract carrier regulated by the DOT and the FHWA along with various state agencies. These regulatory authorities have broad powers, generally governing activities such as authority to engage in motor carrier operations, rates and charges, and certain mergers, consolidations and acquisitions. The Motor Carrier Act of 1980 (the "MCA") substantially increased competition among motor carriers and limited the level of regulation in the industry. The MCA enabled applicants to obtain ICC operating authority more easily and allowed interstate motor carriers such as the Company to change their rates without ICC approval. The law also allowed for the removal of many route and commodity restrictions on the transportation of freight. The Trucking Industry Regulatory Reform Act of 1994 (the "TIRRA") has further increased industry competition and limited industry regulation. The TIRRA repealed tariff filing for individually determined rates; simplified the granting of ICC operating authority; and pre-empted price, route and service regulation by the states. Effective January 1, 1996, the ICC Termination Act of 1995 abolished the ICC and transferred its regulatory authority to the DOT and the FHWA. Motor carrier operations are subject to safety requirements prescribed by the DOT governing interstate operations. Such matters as weight and dimensions of equipment are also subject to federal and state regulations. The Company also has operating authority in the Canadian Provinces of Alberta, British Columbia, Manitoba, Ontario, Quebec and Saskatchewan. ITEM 2. PROPERTIES The Company's executive offices and principal terminal are located on approximately seven acres in Mondovi, Wisconsin, which currently consists of approximately 28,000 square feet of office space and approximately 21,000 square feet of equipment repair and maintenance space. It was originally constructed in 1965 and was expanded in 1971, 1980, 1987 and 1993. The Company also maintains a maintenance facility in Ontario, California. This facility is currently leased from R & R Properties, a sole-proprietorship owned by Randolph L. Marten, for a period of 5 years terminating December 31, 1999. The current lease provides for rent of $126,000 per year from 1995 through 1999. This rent is based on the debt service of R & R Properties to finance this facility. The Company is required to bear the cost of insurance, maintenance and repairs, taxes, special assessments and utilities. In 1993, the Company remodeled this facility. This -5- facility includes approximately 2,700 square feet of office space and 8,000 square feet of equipment repair and maintenance space. The parking lot measures 150,000 square feet. The Company purchased a maintenance facility in Jonesboro, Georgia in 1993. The building at this facility measures approximately 12,500 square feet and consists of office space and a two and one-half bay service and repair space. This facility also has parking for up to forty tractors and trailers. The Company purchased a maintenance facility in Wilsonville, Oregon in 1995. The building at this facility, which is approximately 20,000 square feet, consists of office space and an eight-bay service and repair space. This facility also has an eight acre paved and fenced yard area. ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injury and property damage incurred in the transport of freight. The Company self-insures for property damage and cargo claims. The Company partially self-insures for losses related to automobile liability, general liability, workers' compensation claims and employees' group health benefits. The Company also maintains an insurance policy that limits annual aggregate Company losses to $9 million for automobile liability, workers' compensation and general liability claims. The Company believes that its current liability limit is reasonable under the circumstances. It is possible, however, that the Company could incur liability in excess of its policy limits, in which case its financial condition could be adversely affected. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this Report. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT The Company's executive officers and their ages along with the offices held as of March 1, 1996, are as follows:
NAME AGE POSITION ---- --- -------- Randolph L. Marten 43 Chairman of the Board, President, Chief Operating Officer and Director Darrell D. Rubel 50 Executive Vice President, Chief Financial Officer, Treasurer, Assistant Secretary and Director Timothy P. Nash 44 Vice President of Sales Franklin J. Foster 40 Vice President of Finance Robert G. Smith 52 Vice President of Operations
-6- Randolph L. Marten has been a full time employee of the Company since 1974. Mr. Marten has been a Director of the Company since October 1980, its President and Chief Operating Officer since June 1986 and its Chairman of the Board since August 1993. Mr. Marten was Vice President of the Company from October 1980 to June 1986. Darrell D. Rubel has been a Director of the Company since February 1983, its Chief Financial Officer since January 1986, its Treasurer since June 1986 and its Executive Vice President since May 1993. Mr. Rubel was also Secretary of the Company from June 1986 until August 1987 and Vice President from January 1986 until May 1993, and has been Assistant Secretary since August 1987. Timothy P. Nash has been Vice President of Sales since November 1990 and was Regional Sales Manager from July 1987 to November 1990. Mr. Nash was a regional sales manager for Overland Express, Inc., a long-haul truckload carrier, from August 1986 to July 1987. Franklin J. Foster has been Vice President of Finance since December 1991 and was Director of Finance from January 1991 to December 1991. Mr. Foster was a vice president in commercial banking for First Bank National Association from October 1985 to January 1991. Robert G. Smith has been Vice President of Operations since June 1993 and was Director of Operations from September 1989 to June 1993. Mr. Smith was director of operations for Transport Corporation of America, an irregular-route truckload carrier, from January 1985 to September 1989. Executive Officers of the Company are elected by the Board of Directors for one-year terms, commencing with their election at the first meeting of the Board of Directors immediately following the annual meeting of shareholders and continuing until the next such meeting of the Board of Directors. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information under the caption "Common Stock Data" on page 20 of the Company's 1995 Annual Report is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA The financial information under the caption "Five-Year Financial Summary" on page 9 of the Company's 1995 Annual Report is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 10 and 11 of the Company's 1995 Annual Report is incorporated herein by reference. -7- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Company's Financial Statements and the report of its independent public accountants on pages 12 through 19 of the Company's 1995 Annual Report are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT A. DIRECTORS OF THE REGISTRANT. The information under the captions "Election of Directors--Information About Nominees" and "Election of Directors--Other Information About Nominees" in the Company's 1996 Proxy Statement is incorporated herein by reference. B. EXECUTIVE OFFICERS OF THE REGISTRANT. Information concerning Executive Officers of the Company is included in this Report under Item 4A, "Executive Officers of the Registrant." C. COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The information contained under the caption "Section 16 Compliance" in the Company's 1996 Proxy Statement is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information under the captions "Election of Directors--Director Compensation" and "Compensation and Other Benefits" in the Company's 1996 Proxy Statement is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under the caption "Principal Stockholders and Beneficial Ownership of Management" in the Company's 1996 Proxy Statement is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under the caption "Certain Transactions" in the Company's 1996 Proxy Statement is incorporated herein by reference. -8- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) 1. Financial Statements: The following Financial Statements are incorporated herein by reference from the pages indicated in the Company's 1995 Annual Report: Report of Independent Public Accountants - page 19 Balance Sheets as of December 31, 1995 and 1994 - page 12 Statements of Operations for the years ended December 31, 1995, 1994 and 1993 - page 13 Statements of Changes in Shareholders' Investment for the years ended December 31, 1995, 1994 and 1993 - page 13 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 -page 14 Notes to Financial Statements - pages 15 - 19 2. Financial Statement Schedules: None. 3. Exhibits: The exhibits to this Report are listed in the Exhibit Index on pages 11 - 14 of this Annual Report on Form 10-K. A copy of any of the exhibits listed or referred to above will be furnished at a reasonable cost to any person who was a shareholder of the Company as of March 28, 1996, upon receipt from any such person of a written request for any such exhibit. Such request should be sent to Darrell D. Rubel, Executive Vice President and Chief Financial Officer, Marten Transport, Ltd., 129 Marten Street, Mondovi, Wisconsin 54755. The following is a list of each management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Annual Report on Form 10-K pursuant to Item 14(c): (1) Marten Transport, Ltd. 1986 Incentive Stock Option Plan, as amended. (2) Marten Transport, Ltd. 1986 Non-Statutory Stock Option Plan, as amended. (3) Employment Agreement, dated May 1, 1993, between the Company and Darrell D. Rubel. (4) Marten Transport, Ltd. 1995 Stock Incentive Plan. (b) Reports on Form 8-K: None during the fourth quarter of the fiscal year ended December 31, 1995. -9- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 28, 1996 MARTEN TRANSPORT, LTD. By /s/ RANDOLPH L. MARTEN ------------------------------ Randolph L. Marten Chairman of the Board, President and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below on March 28, 1996 by the following persons on behalf of the Registrant and in the capacities indicated. SIGNATURE TITLE --------- ----- /S/ RANDOLPH L. MARTEN Chairman of the Board, - ----------------------------------- President, Chief Operating Randolph L. Marten Officer (Principal Executive Officer) and Director /S/ DARRELL D. RUBEL Executive Vice President, Chief - ----------------------------------- Financial Officer, Treasurer, Darrell D. Rubel Assistant Secretary (Principal Financial and Accounting Officer) and Director /S/ ARNOLD P. SCHULTZ Director - ----------------------------------- Arnold P. Schultz /S/ LARRY B. HAGNESS Director - ----------------------------------- Larry B. Hagness /S/ THOMAS J. WINKEL Director - ----------------------------------- Thomas J. Winkel -10- MARTEN TRANSPORT, LTD. EXHIBIT INDEX TO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
ITEM NO. ITEM METHOD OF FILING - -------- ---- ---------------- 3.1 Certificate of Incorporation of the Company . . . . . . . . . . . Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (File No. 33-75648). 3.2 Bylaws of the Company. . . . . . . . Incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-8 (File No. 33-75648). 4.1 Specimen form of the Company's Common Stock Certificate. . . . . . . . . . . . . Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File No. 33-8108). 4.2 Certificate of Incorporation of the Company. . . . . . . . . . . . . See Exhibit 3.1 4.3 Bylaws of the Company. . . . . . . . See Exhibit 3.2 9.1 Voting Trust Agreement dated February 14, 1983, as amended . . . . . . . . . . . . . Incorporated by reference to Exhibit 9.1 to the Company's Registration Statement on Form S-1 (File No. 33-8108). 9.2 Agreement regarding Voting Trust Agreement, dated May 4, 1993 . . . . Incorporated by reference to Exhibit 19.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 0-15010). 10.1 Marten Transport, Ltd. 1986 Incentive Stock Option Plan, as amended . . . . . . . . . . Incorporated by reference to Exhibit 10.1 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1986 (File No. 0-15010).
-11- 10.2 Marten Transport, Ltd. 1986 Non-Statutory Stock Option Plan, as amended. . . . . . . Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 0-15010). 10.3 Real Estate Lease dated November 29, 1994 between the Company, as Lessee, and R & R Properties and Randolph L. Marten, as Lessor. . . . Incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-15010). 10.4 Stock Restriction Agreement among Roger R. Marten, Randolph L. Marten and Darrell D. Rubel . . . . . . . . . . Incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form S-1 (File No. 33-8108). 10.5 Agreement on Credit Terms dated as of January 5, 1990 between the Company and First Bank National Association. . . . . . . . . . . . . Incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (File No. 0-15010). 10.6 Amendment to Agreement on Credit Terms dated as of July 31, 1990 between the Company and First Bank National Association . . . . . . . . Incorporated by reference to Exhibit 10.10 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (File No. 0-15010). 10.7 Lease Agreement and Supplement No. 1 to Lease Agreement dated April 1, 1990 between the Company and Barclays Leasing, Inc. . . . . . . . . . . . . . . . . Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (File No. 0-15010). 10.8 Lease Agreement dated September 12, 1990 between the Company and Truck Country of WI, Inc.. . . . . . Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (File No. 0-15010).
-12- 10.9 Security Agreement dated January 12, 1990, as amended, between the Company and First Bank National Association . . . . . . . . Incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (File No. 0-15010). 10.10 Second Amendment to Agreement on Credit Terms dated May 31, 1991 between the Company and First Bank National Association. . . . . . . . . . . . . Incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992 (File No. 0-15010). 10.11 Amendment No. 3 to Agreement on Credit Terms dated May 17, 1993 between the Company and First Bank National Association . . . . . . . . Incorporated by reference to Exhibit 19.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 0-15010). 10.12 Employment Agreement dated May 1, 1993 between the Company and Darrell D. Rubel. . . . . . . . . . . . . . . . Incorporated by reference to Exhibit 19.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 (File No. 0-15010). 10.13 Stock Redemption Agreement dated June 21, 1994 between the Company and Darrell D. Rubel, as Personal Representative of the Estate of Roger R. Marten. . . . . . . . . . . Incorporated by reference to Exhibit 10.16 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-15010). 10.14 Marten Transport, Ltd. 1995 Stock Incentive Plan . . . . . . . . . . . Incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 0-15010).
-13- 13.1 1995 Annual Report to Shareholders - pages 9-21. . . . . . Filed herewith. 23.1 Consent of Arthur Andersen LLP . . . . . . . . . . . . Filed herewith. 27.1 Financial Data Schedule. . . . . . . Filed herewith.
-14- EX-13.1 2 EXHIBIT 13.1 FIVE-YEAR FINANCIAL SUMMARY
Years ended December 31, (DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) 1995 1994 1993 1992 1991 --------------------------------------------------------------------- FOR THE YEAR Operating revenue. . . . . . . . . . . . . . . . . $ 137,704 $ 122,730 $ 112,180 $ 98,194 $ 87,763 Operating income . . . . . . . . . . . . . . . . . 11,378 13,015 11,359 7,678 5,846 Income before extraordinary item and cumulative effect of change in accounting principle. . . . 5,009 6,375 5,462 3,434 2,108 Net income . . . . . . . . . . . . . . . . . . . . 5,009 6,375 6,345(1) 3,434 1,965(2) PER-SHARE DATA Income before extraordinary item and cumulative effect of change in accounting principle. . . . $ 1.69 $ 2.00 $ 1.58 $ 1.00 $ .62 Net income . . . . . . . . . . . . . . . . . . . . 1.69 2.00 1.84(1) 1.00 .57(2) AT YEAR END Total assets . . . . . . . . . . . . . . . . . . . $ 123,141 $ 105,648 $ 96,776 $ 81,434 $ 69,973 Long-term obligations. . . . . . . . . . . . . . . 27,079 24,917 21,117 20,523 17,734 Shareholders' investment . . . . . . . . . . . . . 38,242 33,104 34,729 28,384 24,835
(1) Includes extraordinary item, proceeds of $883,000 ($.26 per share) from life insurance policy on Roger Marten, founder of Marten Transport. (2) Includes charge of $143,000 for the cumulative effect of change in accounting principle related to revenue recognition. MARTEN 1995 ANNUAL REPORT 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operating revenue for the year ended December 31, 1995, increased 12 percent over 1994, compared with increases of 9 percent in 1994 and 14 percent in 1993. The primary reason for these increases was the transportation of additional freight associated with moderate additions to the company's fleet each of the last three years. Marten's average freight rates also increased in 1995 and 1994 after remaining level in 1993. Operating revenue in 1995 was adversely impacted by lower-than-expected customer demand, causing average miles traveled per tractor to decline from 1994 and 1993 levels. Management anticipates that customer demand will remain at 1995 levels during 1996. Operating expenses were 91.7 percent of operating revenue in 1995, compared with 89.4 percent in 1994 and 89.9 percent in 1993. This ratio increased in 1995 primarily due to reduced equipment utilization and less-than-expected revenue growth. Operating expenses increased 15 percent in 1995, 9 percent in 1994 and 11 percent in 1993. All expense categories increased during the three years ended December 31, 1995, due to the transportation of additional freight and expansion of the company's fleet. Purchased transportation expense also increased due to a higher number of independent contractor-owned vehicles. Use of independent contractors reduces salaries, wages and benefits expense and fuel and fuel tax expense relative to revenue, since these expenses are assumed by the independent contractor. Additionally, the increase in fuel and fuel tax expense was partially offset the last three years by the replacement of the company's fleet with new, more fuel-efficient revenue equipment. The average price of diesel fuel remained relatively stable during this period. Insurance and claims expense in 1995 represented 4.8 percent of revenue, which is comparable to 5.0 percent in 1994 and 4.7 percent in 1993. Total depreciation expense has increased the last three years due to the continued expansion of the company's fleet. The increase in 1995 was partially offset by a $290,000 reduction in depreciation expense due to a change in the estimated useful life of the company's satellite tracking equipment, effective July 1, 1995. In 1994, Marten also changed the estimated salvage value of other revenue equipment, resulting in a decrease to depreciation expense of $554,000 in 1994. The 1994 depreciation adjustment was made due to a change in market value realized for used equipment and the resulting gains on the disposition of revenue equipment. Management anticipates that 1996 operating expenses, as a percentage of revenue, will remain at current levels. Interest expense in 1995 represented 2.3 percent of revenue, compared with 2.1 percent in 1994 and 2.2 percent in 1993. Interest expense increased in 1995 due to additional long-term debt associated with equipment purchases and the June 1994 repurchase of 500,000 shares of the company's common stock. Interest expense in 1996 is expected to exceed 1995 levels due to additional long-term debt associated with new revenue equipment purchases. The company's effective tax rate for the last three years was 40 percent. 10 [LOGO] Management expects that the effective tax rate will remain at 40 percent during 1996. In 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based Compensation," as discussed in Note 1 to the financial statements. This statement, effective in 1996, is expected to have no impact on the company's results of operations or financial position. Inflation can be expected to affect most of the company's operating expenses. The impact of inflation, however, was minimal during the three years ended December 31, 1995. CAPITAL RESOURCES AND LIQUIDITY The company's business requires significant capital expenditures to replace and expand its fleet with new, more efficient revenue equipment. In addition, the company purchased a maintenance facility in Oregon for approximately $1.6 million in July 1995. During 1994, the company repurchased 500,000 shares of its common stock from the estate of its former chairman and chief executive officer, Roger R. Marten, for $16 per share. The company has retired these shares, reducing shareholders' investment by $8 million. These expenditures were funded using cash flow from operations and long-term debt collateralized by equipment. Long-term debt at December 31, 1995, increased $5.1 million from December 31, 1994, compared with an increase of $3.6 million in 1994. Marten has committed to purchase an additional $31 million of new revenue equipment, net of trade-in allowances, during 1996. Management expects to fund these acquisitions with additional long-term debt and cash flow from operations. Historically, Marten has operated effectively with a working capital deficit. This deficit is primarily caused by current maturities of long-term debt related to the acquisitions of revenue equipment. Working capital requirements have been funded by cash flow provided by the company's operating profits, short turnover in accounts receivable and cash management practices. The working capital deficit at December 31, 1995, increased to $10.8 million, compared with $6.9 million at December 31, 1994. This increase is primarily the result of additional insurance and claims reserves and an increase in current maturities of long-term debt. The company has not used short-term borrowings to meet working capital needs, and does not anticipate the use of short-term borrowings in 1996. Management believes the company's liquidity is adequate to meet expected near-term operating requirements. SEASONALITY Marten experiences seasonal fluctuations in revenue and expenses, particularly after the winter holiday season as customers reduce shipments. Operating expenses temporarily increase in the winter due to reduced fuel efficiency and additional maintenance costs. These patterns are consistent with the trucking industry in general. MARTEN 1995 ANNUAL REPORT 11 BALANCE SHEETS
December 31, (IN THOUSANDS, EXCEPT SHARE INFORMATION) 1995 1994 ------------------------ ASSETS CURRENT ASSETS: Cash and cash equivalents (Notes 1 and 7). . . . . . . . . $ 3,330 $ 3,129 Receivables: Trade, less allowances of $438 and $600. . . . . . . . . 13,718 13,281 Other. . . . . . . . . . . . . . . . . . . . . . . . . . 3,745 3,216 Prepaid expenses (Note 1). . . . . . . . . . . . . . . . . 5,949 5,057 Deferred income taxes (Note 5) . . . . . . . . . . . . . . 2,766 2,260 ------------------------ Total current assets . . . . . . . . . . . . . . . . 29,508 26,943 ------------------------ PROPERTY AND EQUIPMENT (Notes 1, 2, 3 and 4): Revenue equipment. . . . . . . . . . . . . . . . . . . . . 123,722 110,724 Building and land. . . . . . . . . . . . . . . . . . . . . 4,934 3,249 Office equipment and other . . . . . . . . . . . . . . . . 4,238 3,539 Less accumulated depreciation and amortization . . . . . . (39,261) (38,807) ------------------------ Net property and equipment . . . . . . . . . . . . . 93,633 78,705 ------------------------ $ 123,141 $ 105,648 ------------------------ ------------------------ LIABILITIES AND SHAREHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 3,225 $ 3,106 Insurance and claims accruals (Note 1) . . . . . . . . . . 11,794 9,639 Accrued liabilities. . . . . . . . . . . . . . . . . . . . 7,412 6,103 Current maturities of long-term debt (Notes 2 and 7) . . . 17,914 14,963 ------------------------ Total current liabilities. . . . . . . . . . . . . . 40,345 33,811 LONG-TERM DEBT, less current maturities (Notes 2 and 7). . . 27,079 24,917 DEFERRED INCOME TAXES (Note 5) . . . . . . . . . . . . . . . 17,475 13,816 ------------------------ Total liabilities. . . . . . . . . . . . . . . . . . 84,899 72,544 ------------------------ COMMITMENTS (Notes 1, 3 and 10) SHAREHOLDERS' INVESTMENT (Notes 1, 4 and 6): Common stock, $.01 par value per share, 10,000,000 shares authorized, 2,941,616 and 2,929,950 shares issued and outstanding . . . . . . . . . . . . . . . . . 29 29 Additional paid-in capital . . . . . . . . . . . . . . . . 9,410 9,281 Retained earnings. . . . . . . . . . . . . . . . . . . . . 28,803 23,794 ------------------------ Total shareholders' investment . . . . . . . . . . . 38,242 33,104 ------------------------ $ 123,141 $ 105,648 ------------------------ ------------------------
The accompanying notes are an integral part of these balance sheets. 12 [LOGO] STATEMENTS OF OPERATIONS
For the years ended December 31, (IN THOUSANDS, EXCEPT SHARE INFORMATION) 1995 1994 1993 ---------------------------------------- OPERATING REVENUE. . . . . . . . . . . . . . $ 137,704 $ 122,730 $ 112,180 ---------------------------------------- OPERATING EXPENSES: Salaries, wages and benefits . . . . . . . 50,040 44,900 40,873 Purchased transportation . . . . . . . . . 10,402 5,431 3,963 Fuel and fuel taxes. . . . . . . . . . . . 24,332 22,462 20,765 Supplies and maintenance . . . . . . . . . 14,042 11,826 10,889 Depreciation and amortization. . . . . . . 14,458 12,660 12,530 Operating taxes and licenses . . . . . . . 3,192 2,781 2,517 Insurance and claims . . . . . . . . . . . 6,550 6,081 5,246 Communications and utilities . . . . . . . 1,650 1,550 1,137 Gain on disposition of revenue equipment . (2,927) (2,220) (1,208) Other. . . . . . . . . . . . . . . . . . . 4,587 4,244 4,109 ---------------------------------------- 126,326 109,715 100,821 ---------------------------------------- OPERATING INCOME . . . . . . . . . . . . . . 11,378 13,015 11,359 ---------------------------------------- OTHER EXPENSES (INCOME): Interest expense . . . . . . . . . . . . . 3,219 2,516 2,447 Interest income and other. . . . . . . . . (189) (126) (186) ---------------------------------------- 3,030 2,390 2,261 ---------------------------------------- INCOME BEFORE ITEMS BELOW. . . . . . . . . . 8,348 10,625 9,098 PROVISION FOR INCOME TAXES (Note 5). . . . . 3,339 4,250 3,636 ---------------------------------------- INCOME BEFORE EXTRAORDINARY ITEM . . . . . . 5,009 6,375 5,462 EXTRAORDINARY ITEM - PROCEEDS OF LIFE INSURANCE POLICY (Note 9). . . . . . . . . - - 883 ---------------------------------------- NET INCOME . . . . . . . . . . . . . . . . $ 5,009 $ 6,375 $ 6,345 ---------------------------------------- ---------------------------------------- EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE DATA: Income before extraordinary item . . . . . $ 1.69 $ 2.00 $ 1.58 Extraordinary item . . . . . . . . . . . . - - .26 ---------------------------------------- Net income . . . . . . . . . . . . . . . . $ 1.69 $ 2.00 $ 1.84 ---------------------------------------- ----------------------------------------
The accompanying notes are an integral part of these statements. STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
Common Stock Additional Retained (IN THOUSANDS, EXCEPT SHARE INFORMATION) Shares Amount Paid-In Capital Earnings Total -------------------------------------------------------------------------- Balance at January 1, 1993 . . . . . . . . . 3,429,950 $ 34 $ 10,865 $ 17,485 $ 28,384 Net income . . . . . . . . . . . . . . . . - - - 6,345 6,345 -------------------------------------------------------------------------- Balance at December 31, 1993 . . . . . . . . 3,429,950 $ 34 $ 10,865 $ 23,830 $ 34,729 Net income . . . . . . . . . . . . . . . . - - - 6,375 6,375 Repurchase of common stock (Note 4). . . . (500,000) (5) (1,584) (6,411) (8,000) -------------------------------------------------------------------------- Balance at December 31, 1994 . . . . . . . . 2,929,950 $ 29 $ 9,281 $ 23,794 $ 33,104 Net income . . . . . . . . . . . . . . . . - - - 5,009 5,009 Issuance of common stock . . . . . . . . . 11,666 - 129 - 129 -------------------------------------------------------------------------- Balance at December 31, 1995 . . . . . . . . 2,941,616 $ 29 $ 9,410 $ 28,803 $ 38,242 -------------------------------------------------------------------------- --------------------------------------------------------------------------
The accompanying notes are an integral part of these statements. MARTEN 1995 ANNUAL REPORT 13 STATEMENTS OF CASH FLOWS
For the years ended December 31, (IN THOUSANDS) 1995 1994 1993 -------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Operations: Income before extraordinary item . . . . . . . . . . . . . . . . . . $ 5,009 $ 6,375 $ 5,462 Adjustments to reconcile income before extraordinary item to net cash flows from operating activities: Depreciation and amortization. . . . . . . . . . . . . . . . . . . 14,458 12,660 12,530 Gain on disposition of revenue equipment . . . . . . . . . . . . . (2,927) (2,220) (1,208) Deferred tax provision . . . . . . . . . . . . . . . . . . . . . . 3,153 3,325 2,321 Changes in other current operating items: Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . (966) (1,284) (3,838) Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . (892) (306) (1,621) Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 119 480 728 Other current liabilities. . . . . . . . . . . . . . . . . . . . 3,464 2,732 1,319 -------------------------------------- Net cash provided by operating activities before extraordinary item. . . . . . . . . . . . . . . . . . 21,418 21,762 15,693 Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . - - 883 -------------------------------------- Net cash provided by operating activities. . . . . . . . . . . 21,418 21,762 16,576 -------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Revenue equipment additions. . . . . . . . . . . . . . . . . . . . . . (37,320) (27,168) (27,648) Revenue equipment dispositions . . . . . . . . . . . . . . . . . . . . 13,309 8,435 7,893 Building and land, office equipment and other additions, net . . . . . (2,448) (849) (1,901) -------------------------------------- Net cash used for investing activities . . . . . . . . . . . . (26,459) (19,582) (21,656) -------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . 129 - - Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . . - (8,000) - Long-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 22,559 21,139 19,236 Repayment of long-term borrowings. . . . . . . . . . . . . . . . . . . (17,446) (17,529) (14,692) -------------------------------------- Net cash provided by (used for) financing activities . . . . . 5,242 (4,390) 4,544 -------------------------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . 201 (2,210) (536) CASH AND CASH EQUIVALENTS: Beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,129 5,339 5,875 -------------------------------------- End of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,330 $ 3,129 $ 5,339 -------------------------------------- -------------------------------------- CASH PAID (RECEIVED) FOR: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,144 $ 2,552 $ 2,423 -------------------------------------- -------------------------------------- Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (135) $ 820 $ 2,257 -------------------------------------- --------------------------------------
The accompanying notes are an integral part of these statements. 14 [LOGO] NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS: Marten Transport, Ltd. (the company) is a long-haul truckload carrier providing protective service transportation of temperature-sensitive materials and general commodities pursuant to operating authority, both contract and common, granted by the Interstate Commerce Commission (ICC). Effective January 1, 1996, the ICC was abolished and its regulatory authority was transferred to the United States Department of Transportation and the Federal Highway Administration. The company derived approximately 11 percent of its revenue from a single customer in 1995, 12 percent in 1994 and 14 percent in 1993. CASH EQUIVALENTS: The company invests available funds in short-term cash equivalents, principally mutual funds containing U.S. government-backed securities which have an original maturity of three months or less. These investments are stated at cost, which approximates market value. PREPAID EXPENSES: As of December 31, prepaid expenses consisted of the following:
(IN THOUSANDS) 1995 1994 ----------------------- License fees . . . . . . . . . . $ 1,912 $ 1,612 Tires in service . . . . . . . . 1,708 1,418 Parts and tires inventory. . . . 1,457 1,135 Insurance. . . . . . . . . . . . 232 301 Other. . . . . . . . . . . . . . 640 591 ----------------------- $ 5,949 $ 5,057 ----------------------- -----------------------
PROPERTY AND EQUIPMENT: Additions and improvements to property and equipment are capitalized at cost, while maintenance and repair expenditures are charged to operations as incurred. Gains and losses on revenue equipment dispositions are included in operations. Certain facilities are leased from an entity owned by the company's chairman of the board (see Notes 3 and 4). Depreciation is computed based on the cost of the asset, reduced by its estimated salvage value, using the straight-line method for financial reporting purposes and accelerated methods for income tax reporting purposes. Following is a summary of estimated useful lives:
YEARS ----- Revenue equipment: Tractors . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Trailers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Satellite tracking . . . . . . . . . . . . . . . . . . . . . . 7 Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Office equipment and other . . . . . . . . . . . . . . . . . . . 3-15 -----
The company changed the estimated useful life of satellite tracking equipment as of July 1, 1995. The change resulted in a decrease in depreciation expense of $290,000 and an increase in net income of $174,000, or $.06 per share, in 1995. The company changed the estimated salvage value of certain revenue equipment effective January 1, 1994, to reflect a change in the market value realized for used equipment. The change resulted in a decrease in depreciation expense of $554,000 and an increase in net income of $333,000, or $.10 per share, in 1994. TIRES IN SERVICE: The cost of original equipment and replacement tires placed in service is capitalized. Amortization is computed based on cost, less estimated salvage value, using the straight-line method over a period of 24 months. The current portion of tires in service is included in prepaid expenses in the accompanying balance sheets. The cost of tires amortized beyond one year, along with the estimated salvage value of tires in service, are included in revenue equipment in the accompanying balance sheets. The cost of recapping tires is charged to expense as incurred. INSURANCE AND CLAIMS: The company self-insures for property damage and cargo and self-insures, in part, for losses related to workers' compensation claims, auto liability, general liability and employees' group health benefits. Insurance coverage is maintained for per-incident and cumulative liability losses in amounts the company considers sufficient based upon ongoing review and historical experience. The company provides currently for estimated self-insured and partially self-insured losses. Under arrangements with its insurance carriers and regulatory authorities, the company has arranged for approximately $6.4 million in letters of credit to guarantee settlement of claims. REVENUE RECOGNITION: The company recognizes revenue and related expenses on the date shipment of freight is completed. EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE: Earnings per share have been computed based on the weighted average number of shares outstanding during each period as adjusted for the effect of the issuance of stock options to certain employees and directors. Weighted average common and common equivalent shares outstanding were 2,964,947 in 1995, 3,192,140 in 1994 and 3,451,932 in 1993. MARTEN 1995 ANNUAL REPORT 15 NOTES TO FINANCIAL STATEMENTS ACCOUNTING FOR STOCK-BASED COMPENSATION: Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (Statement No. 123), issued in October 1995 and effective for fiscal years beginning after December 15, 1995, encourages, but does not require, a fair value based method of accounting for employee stock options or similar equity instruments. It also allows an entity to elect to continue to measure compensation cost under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), but requires pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The company expects to adopt Statement No. 123 in 1996. While the company is still evaluating Statement No. 123, it currently expects to elect to continue to measure compensation cost under APB No. 25 and comply with the pro forma disclosure requirements. If the company makes this election, this statement will have no impact on the company's results of operations or financial position because the company's plans are fixed stock option plans which have no intrinsic value at the grant date under APB No. 25. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. These estimates are primarily related to insurance and claims accruals and depreciation. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain amounts in the 1994 and 1993 financial statements have been reclassified to conform to the 1995 presentation. These reclassifications had no effect on previously reported net income or shareholders' investment. 2. LONG-TERM DEBT Long-term debt consists of notes payable collateralized by specific revenue equipment. The notes are payable in monthly principal and interest installments. Interest rates range from 6 percent to 9.1 percent. The debt agreements contain various restrictive covenants which, among other matters, require the company to maintain certain financial ratios. The company was in compliance with all debt covenants at December 31, 1995. Maturities of long-term debt at December 31, 1995, are as follows:
(IN THOUSANDS) Amount ----------- 1996 $ 17,914 1997 13,702 1998 9,781 1999 3,596 ----------- $ 44,993 ----------- -----------
3. LEASES The company acquired certain revenue equipment in 1990 under the terms of capital leases which were included within long-term debt and capital leases. Payments made under these leases amounted to $1,382,000 in 1994 and $2,488,000 in 1993. The payments made in 1994 satisfied remaining capital lease obligations. The company leases facilities and office equipment under operating leases with terms ranging from one to five years (see Note 4). Under most of these arrangements, the company pays maintenance and other expenses related to the leased property. Minimum future obligations under operating leases in effect at December 31, 1995, are as follows:
(IN THOUSANDS) Amount ------ 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 ------ $ 813 ------ ------
Lease-related expenses were as follows:
(IN THOUSANDS) 1995 1994 1993 -------------------------- Operating lease rentals. . . . . . . . $ 458 $ 436 $ 493 Capital lease amortization . . . . . . - 81 867 Capital lease interest expense . . . . - 20 288 --------------------------
4. RELATED PARTY TRANSACTIONS During the three years ended December 31, 1995, the company engaged in the following related party transactions: (a) The company repurchased 500,000 shares of its common stock from the estate of its former chairman and chief executive officer, Roger R. Marten, in 1994 for $16 per share. 16 [LOGO] (b) The company leases equipment, office and terminal facilities under a non-cancelable operating lease with an entity owned by its chairman of the board and previously with a partnership in which its current and former chairmen of the board were partners. Total rental expense charged to operations relating to this lease was $126,000 during 1995, $175,000 during 1994 and $175,000 during 1993. Future minimum rental payments under the lease are $126,000 per year from 1996 through 1999. (c) During 1993, the company made payments of $629,000 to a construction company owned by a director of Marten Transport for additions to the Mondovi, Wisconsin, headquarters and a maintenance facility in Ontario, California. (d) During the three years ended December 31, 1995, the company has maintained checking, savings and investment accounts at banks controlled by its former chairman of the board and a non-shareholder/officer of the company. 5. INCOME TAXES The company utilizes the liability method of accounting for income taxes whereby deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. The components of the provision for income taxes consisted of the following:
(IN THOUSANDS) 1995 1994 1993 -------------------------- Current: Federal. . . . . . . . . . . . . . . $ 150 $ 765 $1,150 State. . . . . . . . . . . . . . . . 36 160 165 -------------------------- 186 925 1,315 -------------------------- Deferred: Federal. . . . . . . . . . . . . . . 2,552 2,708 1,909 State. . . . . . . . . . . . . . . . 601 617 412 -------------------------- 3,153 3,325 2,321 -------------------------- Total provision. . . . . . . . . . . $3,339 $4,250 $3,636 -------------------------- --------------------------
The statutory federal income tax rate is reconciled to the effective income tax rate as follows:
1995 1994 1993 ------------------------ Statutory federal income tax rate. . . . . . . . . . . 34% 34% 34% Increase in taxes arising from: State income taxes, net of federal income tax benefit . . . . 5 4 4 Permanent differences . . . . . . . - 2 2 Other, net . . . . . . . . . . . . . 1 - - ------------------------ Effective tax rate . . . . . . . . . . 40% 40% 40% ------------------------ ------------------------
As of December 31, the net deferred tax liability consisted of the following:
(IN THOUSANDS) 1995 1994 ---------------------- Deferred tax assets: Reserves and accrued liabilities for financial reporting in excess of tax . . . . . . $ 5,404 $ 4,463 State income tax deduction for financial reporting in excess of tax . . . . . . 879 644 Alternative minimum tax credit . . . . . . . . . . 41 104 ---------------------- 6,324 5,211 ---------------------- Deferred tax liabilities: Tax depreciation in excess of depreciation for financial reporting . . . . . . 18,354 14,459 Prepaid tires, licenses and use tax expensed for income tax purposes and capitalized for financial reporting. . . . . . . 2,505 2,134 Other . . . . . . . . . . . . . . . . . . . . . . 174 174 ---------------------- 21,033 16,767 ---------------------- Net deferred tax liability . . . . . . . . . . . $14,709 $11,556 ---------------------- ----------------------
6. SHAREHOLDERS' INVESTMENT Under the company's Stock Incentive Plan adopted in 1995, officers, directors and key employees may be granted incentive stock options at prices not less than the fair market value on the date of grant and non-statutory stock options at prices not less than 85 percent of the fair market value on the date the option is granted. Incentive stock options expire within 10 years after the date of grant. The Stock Incentive Plan also provides for the issuance of stock appreciation rights, restricted stock awards, performance units and stock bonuses, none of which have been awarded as of December 31, 1995. The maximum number of shares of common stock available for issuance under the Stock Incentive Plan is 500,000 shares. The company adopted in 1986 an Incentive Stock Option Plan and a Non-Statutory Stock Option Plan providing for the grant of options to purchase, at prices not less than the fair market value on the date of grant, up to an aggregate of 250,000 shares of common stock to officers, directors and key employees. Options under the Incentive Stock Option Plan expire within 10 years after the date of grant while options under the Non-Statutory Stock Option Plan expire within 10 years and one month after the date of grant. MARTEN 1995 ANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS As of December 31, incentive stock option activity under the Stock Incentive Plan and the Incentive Stock Option Plan was as follows:
1995 1994 1993 --------------------------------- Outstanding, beginning of year . . . . 59,500 47,500 41,500 Granted: $13.25/share . . . . . . . . . . . . - - 15,000 $17.50/share . . . . . . . . . . . . - 15,000 - $20.50/share . . . . . . . . . . . . 80,000 - - Exercised: $3.75/share. . . . . . . . . . . . . - (3,000) (9,000) $6.75/share. . . . . . . . . . . . . (5,000) - - Terminated: $17.50/share . . . . . . . . . . . . (15,000) - - $20.50/share . . . . . . . . . . . . (20,000) - - --------------------------------- Outstanding, end of year . . . . . . . 99,500 59,500 47,500 --------------------------------- --------------------------------- Exercisable, end of year: $3.75-$20.50/share . . . . . . . . . 27,500 23,500 17,500 --------------------------------- ---------------------------------
The company also has granted non-statutory stock options under the Stock Incentive Plan and the Non-Statutory Stock Option Plan to purchase 118,500 shares of common stock. During 1995 and 1993, options were exercised for 6,666 shares at $5.87 per share and 10,000 shares at $5.00 per share, respectively. At December 31, 1995, options for 98,500 shares were outstanding, including 16,833 shares exercisable at $7.00 to $20.50 per share. An Employee Stock Purchase Plan and an Independent Contractor Stock Purchase Plan (the Purchase Plans) were adopted in 1995 as a means to encourage employee and independent contractor ownership of company common stock. Eligible participants designate the amount of regular payroll or contract payment deductions and voluntary cash contributions that are used to purchase shares of the company's common stock at the market price on the open market. The broker's commissions and administrative charges related to purchases of common stock under the Purchase Plans are paid by the company. The company repurchased 500,000 shares of its common stock on June 21, 1994, for $16 per share (see Note 4). The shares have been retired, reducing shareholders' investment by $8 million. The company repurchased, at fair market value, the 3,000 shares of stock issued in 1994 and the 19,000 shares issued in 1993 upon exercise of the options noted above. 7. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments: CASH AND CASH EQUIVALENTS: The carrying amount approximates fair value due to the short maturity of these instruments. LONG-TERM DEBT: The fair value of the company's long-term debt is estimated to be $45,266,000 at December 31, 1995, using discounted cash flow analysis, based on the company's current incremental borrowing rates for similar arrangements. 8. RETIREMENT SAVINGS PLAN Effective January 1, 1993, the company adopted a defined contribution retirement savings plan, in accordance with Section 401(k) of the Internal Revenue Code, covering all employees who meet a minimum service requirement. Each participant can make contributions of up to 15 percent of compensation. The company's contribution of 25 percent of each participant's contribution to the plan for up to 4 percent of compensation vests at the rate of 20 percent per year from the second through sixth years of service. In addition, the company may make elective contributions which are determined by resolution of the board of directors. No elective contributions were made in 1995, 1994 or 1993. Total expense recorded in connection with the plan was $182,000 in 1995, $167,000 in 1994 and $166,000 in 1993. 9. EXTRAORDINARY ITEM On August 9, 1993, the company's former chairman and chief executive officer, Roger R. Marten, passed away. The company was the beneficiary of a $1 million life insurance policy on Mr. Marten. These proceeds, net of previously recorded cash surrender value of $117,000, were recorded in 1993 as an extraordinary credit with no income tax effect. 10. COMMITMENTS The company has commitments to purchase approximately $31 million of additional revenue equipment, net of trade-in allowances, in 1996. 18 [LOGO] 11. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of the quarterly results of operations for 1995 and 1994:
1995 QUARTERS (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) FIRST SECOND THIRD FOURTH TOTAL --------------------------------------------------------------------- Operating revenue. . . . . . . . . . . . . . . . $31,961 $34,827 $35,889 $35,027 $137,704 Operating income . . . . . . . . . . . . . . . . 3,310 2,683 3,023 2,362 11,378 Net income . . . . . . . . . . . . . . . . . . . 1,531 1,198 1,339 941 5,009 Net income per share . . . . . . . . . . . . . . .52 .40 .45 .32 1.69 --------------------------------------------------------------------- 1994 Quarters (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) First Second Third Fourth Total --------------------------------------------------------------------- Operating revenue. . . . . . . . . . . . . . . . $29,220 $30,483 $31,443 $31,584 $122,730 Operating income . . . . . . . . . . . . . . . . 2,566 3,434 3,644 3,371 13,015 Net income . . . . . . . . . . . . . . . . . . . 1,200 1,742 1,788 1,645 6,375 Net income per share . . . . . . . . . . . . . . .35 .51 .60 .56 2.00 ---------------------------------------------------------------------
The company changed the estimated useful life of satellite tracking equipment as of July 1, 1995 (see Note 1). The change resulted in a decrease in depreciation expense of $144,000 and an increase in net income of $86,000, or $.03 per share, for the third quarter of 1995. The company changed the estimated salvage value of certain revenue equipment effective January 1, 1994 (see Note 1). The change resulted in a decrease in depreciation expense of $405,000 through the third quarter of 1994. The effect of this change in estimate was recorded in the third quarter of 1994, which increased net income by $243,000, or $.08 per share, of which $.05 per share related to the first and second quarters of 1994. The net income per share for the 1994 quarters exceeded the net income per share for the year due to changes in the weighted average number of shares outstanding during the year. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Marten Transport, Ltd.: We have audited the accompanying balance sheets of Marten Transport, Ltd. (a Delaware corporation) as of December 31, 1995 and 1994, and the related statements of operations, changes in shareholders' investment and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Marten Transport, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Minneapolis, Minnesota January 24, 1996 MARTEN 1995 ANNUAL REPORT 19 CORPORATE INFORMATION CORPORATE HEADQUARTERS 129 Marten Street Mondovi, Wisconsin 54755 Telephone: (715) 926-4216 Fax: (715) 926-4530 SHAREHOLDER INFORMATION A copy of the company's 1995 Annual Report on Form 10-K as filed with the Securities and Exchange Commission is available by writing to: Darrell D. Rubel, executive vice president and chief financial officer, at Marten's corporate headquarters. ANNUAL MEETING Shareholders, employees and friends are invited to attend Marten Transport's annual meeting on Tuesday, May 7, 1996, at 4:00 p.m. at the Roger Marten Community Center, 120 S. Franklin Street, Mondovi, Wisconsin. STOCK LISTING Nasdaq National Market symbol: MRTN LEGAL COUNSEL Oppenheimer Wolff & Donnelly 45 South Seventh Street Suite 3400 Minneapolis, Minnesota 55402 INDEPENDENT PUBLIC ACCOUNTANTS Arthur Andersen LLP 45 South Seventh Street Minneapolis, Minnesota 55402 TRANSFER AGENT AND REGISTRAR Chemical Mellon Shareholder Services, L.L.C. 85 Challenger Road Overpeck Centre Ridgefield Park, New Jersey 07660 Telephone: (800) 288-9541 TDD: (800) 231-5469 Communications concerning change of address or stock certificates should be directed to the transfer agent. PUBLIC/FINANCIAL RELATIONS COUNSEL Padilla Speer Beardsley Inc. 224 Franklin Avenue West Minneapolis, Minnesota 55404 COMMON STOCK DATA The company's quarterly stock price data, as reported by the Nasdaq National Market, were as follows:
1995 1994 Quarter HIGH LOW High Low -------------------------------------------------------- First. . . . . . . $ 20 1/2 $ 18 1/2 $ 18 3/4 $ 16 3/4 Second . . . . . . 21 19 1/2 19 17 Third. . . . . . . 20 16 15/16 19 1/2 17 1/2 Fourth . . . . . . 17 1/2 15 20 18
The foregoing prices do not include adjustments for retail mark-ups, mark-downs or commissions. On December 31, 1995, there were 311 shareholders of record, as well as approximately 325 beneficial shareholders. The company has not paid any cash dividends on its common stock since it became publicly held in September 1986, and management does not anticipate cash dividend payments in the foreseeable future. 20 [LOGO] EXECUTIVE OFFICERS AND DIRECTORS Randolph L. Marten Chairman of the Board, President, Chief Operating Officer and Director Darrell D. Rubel Executive Vice President, Chief Financial Officer, Treasurer, Assistant Secretary and Director Timothy P. Nash Vice President of Sales Franklin J. Foster Vice President of Finance Robert G. Smith Vice President of Operations Arnold P. Schultz Director Retired Superintendent of Schools, Goodhue, Minnesota Larry B. Hagness Director President, Durand Builders Service, Inc., Durand, Wisconsin Thomas J. Winkel Director Management Consultant, Eagan, Minnesota Mark A. Kimball Secretary Partner, Oppenheimer Wolff & Donnelly, Minneapolis, Minnesota "MARTEN HAS BEEN A GOOD PARTNER. THEY'VE COME THROUGH FOR US. AND, IN TIMES OF CRUNCH AND CRISIS, THEY STEP IN AND HELP; YOU CAN'T ASK FOR MORE THAN THAT." Stan Hirshman, Director of Transportation Pricing KRAFT FOODS, INC. [RECYCLE LOGO] This document is recyclable. The paper is manufactured using 100% Elemental Chlorine Free (ecf) pulp. Design: Eaton & Associates [LOGO] 129 Marten Street Mondovi, Wisconsin 54755 Telephone: (715) 926-4216 Fax: (715) 926-4530 EX-23.1 3 EXHIBIT 23.1 CONSENT OF ARTHUR ANDERSEN LLP As independent public accountants, we hereby consent to the incorporation by reference of our report dated January 24, 1996 included or incorporated by reference in this Form 10-K into Marten Transport, Ltd.'s previously filed Form S-8 dated February 23, 1994. /s/ Arthur Andersen LLP Minneapolis, Minnesota March 28, 1996 EX-27 4 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENTS OF OPERATIONS AND THE BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 3,330,000 0 17,463,000 438,000 0 29,508,000 132,894,000 39,261,000 123,141,000 40,345,000 27,079,000 0 0 29,000 38,213,000 123,141,000 137,704,000 137,704,000 0 126,326,000 0 0 3,219,000 8,348,000 3,339,000 5,009,000 0 0 0 5,009,000 1.69 1.69
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