-----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, QTd+01JBJZOojnn6CxXjblLoTenuqtbIEMuL5pJhpmenGWUHU7W7N4SSAmyRHNrE lAMl108H5vOrqic/GdXl3A== 0001047469-99-018904.txt : 19990511 0001047469-99-018904.hdr.sgml : 19990511 ACCESSION NUMBER: 0001047469-99-018904 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990510 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-Q SEC ACT: SEC FILE NUMBER: 000-15010 FILM NUMBER: 99614908 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-Q 1 FORM 10-Q 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, 1999 Commission File Number 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, Mondovi, Wisconsin 54755 ------------------------------------------- (Address of principal executive offices) 715-926-4216 ------------------------------- (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 The number of shares outstanding of the registrant's Common Stock, par value $.01 per share, was 4,477,645 as of May 6, 1999. PART I: FINANCIAL INFORMATION Item 1. Financial Statements. MARTEN TRANSPORT, LTD. CONDENSED BALANCE SHEETS (In thousands, except share information)
MARCH 31, DECEMBER 31, 1999 1998 --------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents . . . . . . . . $ 623 $ 1,116 Receivables . . . . . . . . . . . . . . . 22,974 19,754 Prepaid expenses and other . . . . . . . . 6,748 7,850 Deferred income taxes . . . . . . . . . . 3,769 3,265 --------- --------- Total current assets . . . . . . . 34,114 31,985 --------- --------- Property and equipment: Revenue equipment, buildings and land, office equipment, and other . . . . . . 172,385 172,271 Accumulated depreciation . . . . . . . . . (47,017) (48,514) --------- --------- Net property and equipment . . . . 125,368 123,757 Other assets . . . . . . . . . . . . . . . . . . 958 967 --------- --------- TOTAL ASSETS . . . . . . . . . $ 160,440 $ 156,709 --------- --------- --------- --------- LIABILITIES AND SHAREHOLDERS' INVESTMENT Current liabilities: Accounts payable and accrued liabilities . $ 14,105 $ 11,777 Insurance and claims accruals . . . . . . 11,011 10,529 Current maturities of long-term debt . . . 7,929 8,899 --------- --------- Total current liabilities . . . . 33,045 31,205 Long-term debt, less current maturities. . . . . 46,572 47,232 Deferred income taxes. . . . . . . . . . . . . . 26,123 24,994 --------- --------- Total liabilities . . . . . . . . 105,740 103,431 --------- --------- 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 . . . . . . . . . . . . 44,721 43,299 --------- --------- Total shareholders' investment . . 54,700 53,278 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT . . . $ 160,440 $ 156,709 --------- --------- --------- ---------
The accompanying notes are an integral part of these balance sheets. MARTEN TRANSPORT, LTD. CONDENSED STATEMENTS OF INCOME (In thousands, except share information) (Unaudited)
THREE MONTHS ENDED MARCH 31, 1999 1998 -------- -------- OPERATING REVENUE . . . . . . . . . . . . . $ 48,731 $ 45,218 -------- -------- OPERATING EXPENSES: Salaries, wages and benefits . . . . . . 14,852 14,099 Purchased transportation . . . . . . . . 12,449 10,659 Fuel and fuel taxes . . . . . . . . . . 5,698 5,716 Supplies and maintenance . . . . . . . . 3,947 3,472 Depreciation . . . . . . . . . . . . . . 4,908 4,509 Operating taxes and licenses . . . . . . 934 898 Insurance and claims . . . . . . . . . . 1,114 998 Communications and utilities . . . . . . 658 584 Gain on disposition of revenue equipment . . . . . . . . . . . . . . (461) (153) Other . . . . . . . . . . . . . . . . . 1,431 1,242 -------- -------- Total operating expenses . . 45,530 42,024 -------- -------- OPERATING INCOME . . . . . . . . . . . . . 3,201 3,194 OTHER EXPENSES (INCOME): Interest expense . . . . . . . . . . . . 927 982 Interest income and other . . . . . . . (57) (55) -------- -------- INCOME BEFORE INCOME TAXES . . . . . . . . 2,331 2,267 PROVISION FOR INCOME TAXES . . . . . . . . 909 907 -------- -------- NET INCOME . . . . . . . . . . . . . . . . $ 1,422 $ 1,360 -------- -------- -------- -------- BASIC AND DILUTED EARNINGS PER COMMON SHARE . . . . . . . . . . . . $ 0.32 $ 0.30 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. MARTEN TRANSPORT, LTD. CONDENSED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
THREE MONTHS ENDED MARCH 31, 1999 1998 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Operations: Net income . . . . . . . . . . . . . . . . . . $ 1,422 $ 1,360 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation . . . . . . . . . . . . . . . 4,908 4,509 Gain on disposition of revenue equipment . . . . . . . . . . . . . . . . (461) (153) Deferred tax provision . . . . . . . . . . 625 119 Changes in other current operating items . . . . . . . . . . . . . 692 1,970 -------- -------- Net cash provided by operating activities . . . . . . . . 7,186 7,805 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Property additions: Revenue equipment, net . . . . . . . . . . . . . (5,876) (8,999) Buildings and land, office equipment, and other additions, net . . . . . . . . . . . (182) (133) Net change in other assets . . . . . . . . . . . . 9 31 -------- -------- Net cash used for investing activities . . . . . . . . . . . . . (6,049) (9,101) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Long-term borrowings . . . . . . . . . . . . . . . 15,900 8,577 Repayment of long-term borrowings . . . . . . . . (17,530) (6,568) -------- -------- Net cash provided by (used for) financing activities . . . . . . . . . . . . . (1,630) 2,009 -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . (493) 713 CASH AND CASH EQUIVALENTS: Beginning of period . . . . . . . . . . . . . . . 1,116 2,052 -------- -------- End of period . . . . . . . . . . . . . . . . . . $ 623 $ 2,765 -------- -------- -------- -------- CASH PAID FOR: Interest . . . . . . . . . . . . . . . . . . . . . $ 938 $ 961 -------- -------- -------- -------- Income taxes . . . . . . . . . . . . . . . . . . . $ 344 $ 169 -------- -------- -------- --------
The accompanying notes are an integral part of these statements. 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 adjustments) considered necessary to fairly present our financial condition, results of operations and cash flows for the interim periods presented. 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 1998 Annual Report on Form 10-K. (2) Earnings Per Common Share Basic and diluted earnings per common share were computed as follows:
THREE MONTHS ENDED MARCH 31, (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS) 1999 1998 ---- ---- Numerator: Net income . . . . . . . . . . . . . . . . $1,422 $1,360 ------ ------ Denominator: Basic earnings per common share - weighted-average shares . . . . . . . . 4,478 4,478 Effect of dilutive stock options . . . . . 19 45 ------ ------ Diluted earnings per common share - weighted-average shares and assumed conversions . . . . . . . . . . 4,497 4,523 ------ ------ ------ ------ Basic and diluted earnings per common share . $ 0.32 $ 0.30 ------ ------ ------ ------
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.
THREE MONTHS ENDED MARCH 31, 1999 1998 ---- ---- Number of option shares . . . . . . . . . . . 18,750 -- Weighted-average exercise price . . . . . . . $15.95 -- ------ ---
(3) Accounting for Derivative Instruments and Hedging Activities Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (Statement No. 133) was issued in June 1998 and will be effective in our first quarter of 2000. Statement No. 133 requires companies to record the fair value of derivatives as either assets or liabilities on the balance sheet. The accounting for gains or losses from changes in the fair value of derivatives depends on the intended use of the derivatives and whether the criteria for hedge accounting have been satisfied. We have entered into commodity swap agreements to partially hedge our exposure to diesel fuel price fluctuations. Statement No. 133 is expected to have minimal impact on our results of operations and financial position because we did not hold significant derivative instruments as of March 31, 1999. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. RESULTS OF OPERATIONS Operating revenue for the first quarter of 1999 increased 7.8 percent over the first quarter of 1998. This increase was primarily the result of transporting additional freight associated with moderate additions to our fleet. Average freight rates increased slightly in 1999, which were offset by a slight decrease in equipment utilization. Our contracts with customers require fuel rebates and surcharges based on significant fluctuations in the price of diesel fuel. Operating revenue for the first quarter of 1999 was reduced by fuel rebates of $376,000 due to a decrease in the price of diesel fuel. Fuel rebates and surcharges for the first quarter of 1998 were insignificant. We expect operating revenue for the remainder of 1999 to exceed 1998 levels due to planned additions to our fleet. Operating expenses for the first quarter of 1999 were 93.4 percent of operating revenue, compared with 92.9 percent for the same period in 1998. Most expense categories increased in 1999 due to the transportation of additional freight and expansion of our fleet. Purchased transportation expense increased significantly due to a planned increase in the number of independent contractor-owned vehicles in our fleet. Our use of independent contractor-owned vehicles reduces the following expenses relative to revenue: salaries, wages and benefits expense, fuel and fuel taxes expense, and supplies and maintenance expense. The independent contractors assume these expenses. Fuel and fuel tax expense also decreased due to lower diesel fuel prices in the first quarter of 1999 compared with the same period in 1998. Insurance and claims expense for the first quarter of 1999 was consistent with the same period in 1998, reflecting our continued emphasis on driver safety and training. Our gain on disposition of revenue equipment for the first three months of 1999 increased from the same period of the prior year due to an increase in the market value received for used revenue equipment along with additional planned revenue equipment trades. We expect operating expenses as a percent of revenue to remain at current levels for the remainder of 1999. Interest expense represented 1.9 percent of operating revenue for the first quarter of 1999, compared with 2.2 percent for the same period of 1998. This improvement reflects the lower interest rates associated with the Series A Senior Unsecured Notes and the unsecured committed credit facility we entered into during our fourth quarter of 1998. We expect interest expense as a percent of revenue to remain at current levels. Our effective income tax rate was 39 percent for the first quarter of 1999, compared with 40 percent for the prior year. We expect the effective income tax rate to remain at 39 percent for the remainder of 1999. In 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as discussed in Note 3 to the financial statements. This statement, effective in our first quarter of 2000, is expected to have minimal impact on our results of operations and financial position because we did not have significant derivative instruments as of March 31, 1999. CAPITAL RESOURCES AND LIQUIDITY Net cash provided by our operating activities during the first three months of 1999 was $7,186,000. Net cash of $6,049,000 was used to invest in property and equipment and other assets, while financing activities used $1,630,000 during this period. We continued to update and expand our fleet with new, more efficient revenue equipment in 1999 and 1998. We are committed to purchase approximately $20 million of new revenue equipment, net of trade-in allowances, in 1999. These purchases have been, and are expected to be, made using cash flows from operations and proceeds from long-term debt. Our operating profits, short turnover in accounts receivable and cash management practices allow us to effectively meet our working capital needs. We have not used, and do not expect to use, short-term borrowings to meet working capital requirements. We believe our liquidity is adequate to meet expected near-term operating needs. IMPACT OF YEAR 2000 Computer programs have historically been written to abbreviate dates by using two digits instead of four digits to identify a particular year. The so-called "Year 2000 problem" is the inability of computer software or hardware to recognize or properly process dates ending in "00" and dates after the Year 2000. As the Year 2000 approaches, significant attention is being focused on updating or replacing such software and hardware in order to avoid system failures, miscalculations or business interruptions that might otherwise result. We are taking the steps we believe are necessary to insure that this potential problem does not adversely affect our operating results in the future. We are continuing our as-yet incomplete assessment of the impact of the Year 2000 problem. We have reviewed our internal information systems and believe that the costs and efforts to address the Year 2000 problem will not be material to our business, financial condition or results of operations, and may be resolved through replacements and upgrades to our software or hardware. The Year 2000 problem may, however, adversely impact us by affecting the business and operations of parties with which we transact business, although we are unable to precisely determine the likelihood or potential impact of any such event. There can be no assurance that we will be able to effectively address Year 2000 issues in a cost-efficient manner and without interruption to our business, or that Year 2000 problems encountered by our suppliers, customers or other parties will not have a material impact on our business, financial condition and results of operations. Our state of readiness for the Year 2000, our estimated costs associated with Year 2000 issues, the risks we face associated with Year 2000 issues and our Year 2000 contingency plans are summarized below. STATE OF READINESS. Internally, we have implemented a three-phase process to assess Year 2000 compliance of our systems and remediate any material non-compliance. The phases are (1) to identify and test our material computer software and hardware in order to determine whether they are Year 2000 compliant; (2) to correct or replace those software or hardware systems in which we determine there is a material problem with Year 2000 compliance; and (3) to internally test the corrected or upgraded systems in order to determine whether they are Year 2000 compliant. We have completed all three phases with respect to most of our material internally written and purchased information technology (IT) systems and non-IT systems and believe the systems are Year 2000 compliant. However, we also utilize a sales and marketing system, an insurance claims management system and a maintenance tracking system, all of which are in the second phase. We expect these three systems will be through phase three and achieve Year 2000 compliance during our third quarter of 1999. Externally, we have implemented a three-phase process to assess Year 2000 compliance of the systems of our vendors and third-party servicers, and remediate any material non-compliance. The phases are (1) to identify the vendors and other third parties with whom we transact business and determine whether they are significant to our business ("core" parties); (2) to contact the vendors and other third parties with whom we do business by, among other methods, sending them letters and questionnaires designed to solicit information relating to the Year 2000 problem; and (3) to evaluate the responses received from the vendors and other third parties. The questionnaire we are using asks vendors and other third parties such questions as (i) whether they have a documented Year 2000 compliance plan, (ii) whether they are aware of any Year 2000 readiness issues that could affect us, (iii) whether, if such an issue exists, they have plans in place to ensure compliance, (iv) what their target date is for Year 2000 compliance and (v) whether they have any contingency plans. We have substantially completed all three phases with respect to our vendors and third-party service providers. We plan to follow up with our core vendors and third parties with whom we do business to update our information regarding the Year 2000 problem. COSTS ASSOCIATED WITH YEAR 2000 ISSUES. We estimate that the future costs associated with implementing all phases of our Year 2000 assessment and resolving any Year 2000 problems will be between $100,000 and $200,000. This estimated range includes expenditures for both repairs and upgrades. We believe that these costs, assuming this estimate is accurate, would not have a material effect on our business, financial condition and results of operations. We estimate our costs to date associated with Year 2000 issues to be less than $50,000. We anticipate that cash flow from operations will be used to pay the costs to address Year 2000 issues. All Year 2000 costs are expensed as incurred. RISKS ASSOCIATED WITH YEAR 2000 ISSUES. We are unaware of any material risk to us associated with Year 2000 issues at the present time. We believe that the reasonably likely worst case Year 2000 scenario is a decrease in the efficiency with which we procure and deliver loads, and a decrease in the efficiency with which we receive payment for services rendered. A decrease in efficiency, however, would not necessarily result in a decrease in business. We expect that load procurement, load delivery and billing all could be achieved through alternative methods within a relatively short period of time. Any disruption, however, could result in some lost revenue. We face the additional risk of experiencing an increase in claims and litigation relating to the Year 2000 problem because, among other reasons, there is no uniform definition of Year 2000 "compliance" and because all vendor and third-party situations cannot be anticipated, particularly those involving third-party products. Such claims, if successful, could have a material adverse effect on future results. Moreover, the costs of defending us against such claims, even if ultimately resolved in our favor, could have a material adverse effect on future results. CONTINGENCY PLANS. We have completed a specific contingency plan for the Year 2000 problem. This contingency plan identifies alternate vendors and service providers to decrease the impact on us if one or more of the core parties with whom we do business suffers a significant Year 2000 problem. FORWARD-LOOKING INFORMATION This Quarterly Report on Form 10-Q contains certain forward-looking statements. Any statements not of historical fact may be considered forward-looking statements. Written words such as "may," "expect," "believe," "anticipate" or "estimate," or other variations of these or similar words, identify such statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially, depending on a variety of factors, such as the industry driver shortage, the market for revenue equipment, fuel prices and general weather and economic conditions. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable. 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 the 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, 1999. 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, thereunto duly authorized. MARTEN TRANSPORT, LTD. (Registrant) Dated: May 10, 1999 By: /s/ Darrell D. Rubel -------------------------------------- Darrell D. Rubel Executive Vice President and Treasurer (Chief Financial Officer) MARTEN TRANSPORT, LTD. EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q For the Quarter Ended March 31, 1999 Item No. Item Method of Filing 27.1 Financial Data Schedule . . . . . . . . . . Filed with this report electronically. EX-27.1 2 EXHIBIT 27.1
5 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. 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 623,000 0 22,974,000 0 0 34,114,000 172,385,000 47,017,000 160,440,000 33,045,000 46,572,000 0 0 45,000 54,655,000 160,440,000 48,731,000 48,731,000 0 45,530,000 0 0 927,000 2,331,000 909,000 1,422,000 0 0 0 1,422,000 0.32 0.32
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