UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

or

☐ Transition Report Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

For the Quarter ended March 31, 2022

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	715-926-4216
(Address of principal executive offices)	(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:	Trading symbol:	Name of each exchange on which registered:
COMMON STOCK, PAR VALUE	MRTN	THE NASDAQ STOCK MARKET LLC
$.01 PER SHARE		(NASDAQ GLOBAL SELECT MARKET)

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 ☒   No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒   No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒                     Accelerated filer ☐

Smaller reporting company ☐             Non-accelerated filer ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ☐   No ☒

The number of shares outstanding of the Registrant’s Common Stock, par value $.01 per share, was 81,946,496 as of April 25, 2022.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED BALANCE SHEETS

	March 31,			December 31,
(In thousands, except share information)	2022			2021
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	66,527		$	56,995
Receivables:
Trade, net		126,815			99,003
Other		4,317			6,971
Prepaid expenses and other		22,375			23,980
Total current assets		220,034			186,949
Property and equipment:
Revenue equipment, buildings and land, office equipment and other		955,760			956,476
Accumulated depreciation		(291,941	)		(274,199	)
Net property and equipment		663,819			682,277
Other noncurrent assets		1,545			1,464
Total assets	$	885,398		$	870,690
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	29,158		$	20,150
Insurance and claims accruals		42,592			42,014
Accrued and other current liabilities		37,632			31,395
Total current liabilities		109,382			93,559
Deferred income taxes		126,918			125,163
Noncurrent operating lease liabilities		336			291
Total liabilities		236,636			219,013
Stockholders’ equity:
Preferred stock, $.01 par value per share; 2,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $.01 par value per share; 192,000,000 shares authorized; 81,946,875 shares at March 31, 2022, and 83,034,404 shares at December 31, 2021, issued and outstanding		819			830
Additional paid-in capital		60,256			85,718
Retained earnings		587,687			565,129
Total stockholders’ equity		648,762			651,677
Total liabilities and stockholders’ equity	$	885,398		$	870,690

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months
	Ended March 31,
(In thousands, except per share information)	2022			2021
Operating revenue	$	287,281		$	223,046
Operating expenses (income):
Salaries, wages and benefits		89,349			72,998
Purchased transportation		57,310			40,765
Fuel and fuel taxes		44,368			28,937
Supplies and maintenance		12,313			11,015
Depreciation		26,143			25,687
Operating taxes and licenses		2,640			2,712
Insurance and claims		12,704			11,446
Communications and utilities		2,265			2,083
Gain on disposition of revenue equipment		(4,540	)		(1,984	)
Other		8,871			5,389
Total operating expenses		251,423			199,048
Operating income		35,858			23,998
Other		(7	)		(10	)
Income before income taxes		35,865			24,008
Income taxes expense		8,332			6,002
Net income	$	27,533		$	18,006
Basic earnings per common share	$	0.33		$	0.22
Diluted earnings per common share	$	0.33		$	0.22
Dividends declared per common share	$	0.06		$	0.04

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Common Stock						Additional Paid-In			Retained			Total Stock- holders’
(In thousands)	Shares			Amount			Capital			Earnings			Equity
Balance at December 31, 2020		82,705		$	827		$	85,070		$	534,436		$	620,333
Net income		-			-			-			18,006			18,006
Issuance of common stock from share-based payment arrangement exercises and vesting of performance unit awards		70			1			160			-			161
Employee taxes paid in exchange for shares withheld		-			-			(547	)		-			(547	)
Share-based payment arrangement compensation expense		-			-			336			-			336
Dividends on common stock		-			-			-			(3,311	)		(3,311	)
Balance at March 31, 2021		82,775			828			85,019			549,131			634,978
Net income		-			-			-			67,422			67,422
Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards		259			2			713			-			715
Employee taxes paid in exchange for shares withheld		-			-			(2,196	)		-			(2,196	)
Share-based payment arrangement compensation expense		-			-			2,182			-			2,182
Dividends on common stock		-			-			-			(51,424	)		(51,424	)
Balance at December 31, 2021		83,034			830			85,718			565,129			651,677
Net income		-			-			-			27,533			27,533
Repurchase and retirement of common stock		(1,307	)		(13	)		(24,987	)		-			(25,000	)
Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards		220			2			766			-			768
Employee taxes paid in exchange for shares withheld		-			-			(1,610	)		-			(1,610	)
Share-based payment arrangement compensation expense		-			-			369			-			369
Dividends on common stock		-			-			-			(4,975	)		(4,975	)
Balance at March 31, 2022		81,947		$	819		$	60,256		$	587,687		$	648,762

The accompanying notes are an integral part of these consolidated condensed financial statements.  

MARTEN TRANSPORT, LTD.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months
	Ended March 31,
(In thousands)	2022			2021
Cash flows provided by operating activities:
Operations:
Net income	$	27,533		$	18,006
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		26,143			25,687
Tires in service amortization		1,562			1,642
Gain on disposition of revenue equipment		(4,540	)		(1,984	)
Deferred income taxes		1,755			1,085
Share-based payment arrangement compensation expense		369			336
Changes in other current operating items:
Receivables		(26,256	)		(4,241	)
Prepaid expenses and other		886			1,445
Accounts payable		5,572			677
Insurance and claims accruals		578			2,117
Accrued and other current liabilities		6,338			(1,200	)
Net cash provided by operating activities		39,940			43,570
Cash flows provided by/(used for) investing activities:
Revenue equipment additions		(9,352	)		(30,226	)
Proceeds from revenue equipment dispositions		12,365			13,896
Buildings and land, office equipment and other additions		(2,566	)		(1,050	)
Other		(38	)		(37	)
Net cash provided by/(used for) investing activities		409			(17,417	)
Cash flows used for financing activities:
Repurchase and retirement of common stock		(25,000	)		-
Dividends on common stock		(4,975	)		(3,311	)
Issuance of common stock from share-based payment arrangement exercises, deferred compensation plan distributions and vesting of performance unit awards		768			161
Employee taxes paid in exchange for shares withheld		(1,610	)		(547	)
Net cash used for financing activities		(30,817	)		(3,697	)
Net change in cash and cash equivalents		9,532			22,456
Cash and cash equivalents:
Beginning of period		56,995			66,127
End of period	$	66,527		$	88,583
Supplemental non-cash disclosure:
Change in property and equipment not yet paid	$	4,392		$	5,505
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	872		$	1,350

The accompanying notes are an integral part of these consolidated condensed financial statements.

MARTEN TRANSPORT, LTD.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2022

(Unaudited)

(1) Consolidated Condensed Financial Statements

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements, and therefore do not include all information and disclosures required by U.S. 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 consolidated 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 consolidated condensed financial statements should be read with reference to the consolidated financial statements and notes to consolidated financial statements in our 2021 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)	2022		2021
Numerator:
Net income	$	27,533	$	18,006
Denominator:
Basic earnings per common share - weighted-average shares		82,938		82,758
Effect of dilutive stock options		308		601
Diluted earnings per common share - weighted-average shares and assumed conversions		83,246		83,359
Basic earnings per common share	$	0.33	$	0.22
Diluted earnings per common share	$	0.33	$	0.22

Options totaling 452,000 and 193,750 equivalent shares for the three-month periods ended March 31, 2022 and 2021, respectively, were outstanding but were not included in the calculation of diluted earnings per share because including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares, due to their exercise prices exceeding the average market price of the common shares, or because inclusion of average unrecognized compensation expense in the calculation would cause the options to be antidilutive.

Unvested performance unit awards totaling 40,263 equivalent shares for the three-month period ended March 31, 2021 were considered outstanding but were not included in the calculation of diluted earnings per share because inclusion of average unrecognized compensation expense in the calculation would cause the performance units to be antidilutive. There were no such equivalent shares for the three-month period ended March 31, 2022.

(3) Long-Term Debt

We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2023. At March 31, 2022, there was no outstanding principal balance on the facility. As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $18.5 million and remaining borrowing availability of $11.5 million. At December 31, 2021, there was also no outstanding principal balance on the facility. As of that date, we also had outstanding standby letters of credit of $18.5 million on the facility. This facility bears interest at a variable rate based on the Term SOFR Rate or the lender’s Prime Rate, in each case plus/minus applicable margins. The interest rate for the facility that would apply to outstanding principal balances was 1.15% at March 31, 2022.

 

Our credit facility prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25% of our net income from the prior fiscal year. Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in each of 2022 and 2021 were obtained from the lender in March 2022 and August 2021, respectively. This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios. We were in compliance with all covenants at March 31, 2022 and December 31, 2021.

(4) Related Party Transactions

We purchase fuel and tires and obtain related services from Bauer Built, Inc., or BBI. Jerry M. Bauer, the chairman of the board and chief executive officer of BBI, is one of our directors. We paid BBI $105,000 in the first three months of 2022 and $76,000 in the first three months of 2021 for fuel, tires and related services. In addition, we paid $269,000 in the first three months of 2022 and $396,000 in the first three months of 2021 to tire manufacturers for tires that were provided by BBI. BBI received commissions from the tire manufacturers related to these purchases.

(5) Share Repurchase Program and Subsequent Event

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend on August 13, 2020. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.

We repurchased and retired 1.3 million shares of common stock for $25.0 million in the first quarter of 2022. We did not repurchase any shares in 2021. As of March 31, 2022, future repurchases of up to $8.4 million, or approximately 1.3 million shares, were available in the share repurchase program.

On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $50.0 million, or approximately 3.1 million shares of our common stock.

(6) Dividends

In 2010, we announced that our Board of Directors approved a regular cash dividend program to our stockholders, subject to approval each quarter. A quarterly cash dividend of $0.06 per share of common stock was paid in the first quarter of 2022 which totaled $5.0 million. A quarterly cash dividend of $0.04 per share of common stock was paid in the first quarter of 2021 which totaled $3.3 million.

Our ability to pay cash dividends is currently limited by restrictions contained in our revolving credit facility, which prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25% of our net income from the prior fiscal year. Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in each of 2022 and 2021 were obtained from the lender in March 2022 and August 2021, respectively.

(7) Accounting for Share-based Payment Arrangement Compensation

We account for share-based payment arrangements in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, 718, Compensation – Stock Compensation. During the first three months of 2022, there were no significant changes to the structure of our stock-based award plans. Pre-tax compensation expense related to stock options and performance unit awards recorded in the first three months of 2022 and 2021 was $369,000 and $336,000, respectively.

 

(8) Termination of Deferred Compensation Plan

On May 5, 2020, our Compensation Committee and Board of Directors approved the termination of our Deferred Compensation Plan. The plan was an unfunded, nonqualified deferred compensation plan designed to allow board elected officers and other select members of our management designated by our Compensation Committee to save for retirement on a tax-deferred basis. The termination was effective May 5, 2021. All shares of Company common stock within the plan were distributed by March 31, 2022.

(9) Fair Value of Financial Instruments

The carrying amounts of cash equivalents, accounts receivable and accounts payable approximate fair value because of the short maturity of these instruments.  

(10) Commitments and Contingencies

We are committed to new revenue equipment purchases of $38.6 million and building construction obligations of $5.8 million through the remainder of 2022. We also have commitments to purchase $23.1 million of new revenue equipment in 2023. Operating lease obligation expenditures through 2024 total $583,000.

We self-insure, in part, for losses relating to workers’ compensation, auto liability, general liability, cargo and property damage claims, along with employees’ health insurance with varying risk retention levels. We maintain insurance coverage for per-incident and total losses in excess of these risk retention levels in amounts we consider adequate based upon historical experience and our ongoing review, and reserve currently for the estimated cost of the uninsured portion of pending claims.

We are also involved in other legal actions that arise in the ordinary course of business. In the opinion of management, based upon present knowledge of the facts, it is remote that the ultimate outcome of any such legal actions will have a material adverse effect upon our long-term financial position or results of operations.

(11) Revenue and Business Segments

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

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

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

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

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

 

Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.

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

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

Our customer agreements are typically for one-year terms except for our Dedicated agreements which range from three to five years with annual rate reviews. Under FASB ASC 606, the contract date for each individual load within each of our four reporting segments is generally the date that each load is tendered to and accepted by us. For each load transported within each of our four reporting segments, the entire amount of revenue to be recognized is a single performance obligation and our agreements with our customers detail the per-mile charges for line haul and fuel surcharges, along with the rates for loading and unloading, stop offs and drops, equipment detention and other accessorial services, which is the transaction price. There are no discounts that would be a material right or consideration payable to a customer. We are required to recognize revenue and related expenses over time, from load pickup to delivery, for each load within each of our four reporting segments. We base our calculation of the amount of revenue to record in each period for individual loads picking up in one period and delivering in the following period using the number of hours estimated to be incurred within each period applied to each estimated transaction price. Contract assets for this estimated revenue which are classified within prepaid expenses and other within our consolidated condensed balance sheets were $3.4 million and $2.2 million as of March 31, 2022 and December 31, 2021, respectively. We had no impairment losses on contract assets in the first three months of 2022 or in 2021. We bill our customers for loads after delivery is complete with standard payment terms of 30 days.

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

 

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

	Three Months
	Ended March 31,
(In thousands)	2022		2021
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	95,170	$	83,919
Truckload fuel surcharge revenue		17,620		10,996
Total Truckload revenue		112,790		94,915
Dedicated revenue, net of fuel surcharge revenue		78,421		66,902
Dedicated fuel surcharge revenue		18,339		11,335
Total Dedicated revenue		96,760		78,237
Intermodal revenue, net of fuel surcharge revenue		25,605		19,446
Intermodal fuel surcharge revenue		6,037		2,558
Total Intermodal revenue		31,642		22,004
Brokerage revenue		46,089		27,890
Total operating revenue	$	287,281	$	223,046
Operating income:
Truckload	$	15,571	$	11,415
Dedicated		10,645		8,936
Intermodal		5,036		1,461
Brokerage		4,606		2,186
Total operating income	$	35,858	$	23,998

Truckload segment depreciation expense was $13.0 million and $13.2 million, Dedicated segment depreciation expense was $11.1 million and $10.7 million, Intermodal segment depreciation expense was $1.7 million and $1.5 million, and Brokerage segment depreciation expense was $338,000 and $282,000 in the three-month periods ended March 31, 2022 and 2021, respectively.

(12) Use of Estimates

We must make estimates and assumptions to prepare the consolidated condensed financial statements in conformity with U.S. generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities in the consolidated condensed financial statements and the reported amount of revenue and expenses during the reporting period. These estimates are primarily related to insurance and claims accruals and depreciation. Ultimate results could differ from these estimates.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with the selected consolidated financial data and our consolidated condensed financial statements and the related notes appearing elsewhere in this report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to those included in our Form 10-K, Part I, Item 1A for the year ended December 31, 2021. We do not assume, and specifically disclaim, any obligation to update any forward-looking statement contained in this report.

Overview

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

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

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

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

Our Intermodal segment transports our customers’ freight within the United States utilizing our refrigerated containers and our temperature-controlled trailers, each on railroad flatcars for portions of trips, with the balance of the trips using our tractors or, to a lesser extent, contracted carriers. The main factors that affect our Intermodal revenue are the rate per mile and other charges we receive from our customers.

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

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

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

Our operating revenue increased $64.2 million, or 28.8%, in the first three months of 2022 from the first three months of 2021. Our operating revenue, net of fuel surcharges, increased $47.1 million, or 23.8%, compared with the first three months of 2021. Truckload segment revenue, net of fuel surcharges, increased 13.4% from the first three months of 2021 primarily due to an increase in our average revenue per tractor, despite a reduction in our average number of tractors. Dedicated segment revenue, net of fuel surcharges, increased 17.2% from the first three months of 2021 primarily due to an increase in our average revenue per tractor. Intermodal segment revenue, net of fuel surcharges, increased 31.7% from the first three months of 2021 primarily due to an increase in revenue per load. Brokerage segment revenue increased 65.3% primarily due to increases in both the number of loads and in revenue per load in the first three months of 2022. Fuel surcharge revenue increased to $42.0 million in the first three months of 2022 from $24.9 million in the first three months of 2021, primarily due to higher fuel costs.

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

Our operating income improved 49.4% to $35.9 million in the first three months of 2022 from $24.0 million in the first three months of 2021. Our operating expenses as a percentage of operating revenue, or “operating ratio,” improved to 87.5% in the first three months of 2022 from 89.2% in the first three months of 2021. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.4% in the first three months of 2022 from 87.9% in the first three months of 2021. Our net income improved 52.9% to $27.5 million, or $0.33 per diluted share, in the first three months of 2022 from $18.0 million, or $0.22 per diluted share, in the first three months of 2021.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. At March 31, 2022, we had $66.5 million of cash and cash equivalents, $648.8 million in stockholders’ equity and no long-term debt outstanding. In the first three months of 2022, net cash flows provided by operating activities of $39.9 million were primarily used to repurchase and retire 1.3 million shares of our common stock for $25.0 million, to pay cash dividends of $5.0 million, and to construct and upgrade regional operating facilities in the amount of $2.5 million, resulting in a $9.5 million increase in cash and cash equivalents. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $153 million in the remainder of 2022. A quarterly cash dividend of $0.06 per share of common stock was paid in the first quarter of 2022 which totaled $5.0 million. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

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

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

Results of Operations

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

	Three Months
	Ended March 31,
	2022		2021
Truckload Segment:
Revenue (in thousands)	$	112,790	$	94,915
Average revenue, net of fuel surcharges, per tractor per week(1)	$	4,977	$	4,057
Average tractors(1)		1,487		1,609
Average miles per trip		520		534
Total miles (in thousands)		35,372		38,283
Dedicated Segment:
Revenue (in thousands)	$	96,760	$	78,237
Average revenue, net of fuel surcharges, per tractor per week(1)	$	3,851	$	3,214
Average tractors(1)		1,584		1,619
Average miles per trip		341		307
Total miles (in thousands)		32,753		31,999
Intermodal Segment:
Revenue (in thousands)	$	31,642	$	22,004
Loads		8,294		7,982
Average tractors		162		134
Brokerage Segment:
Revenue (in thousands)	$	46,089	$	27,890
Loads		19,684		14,575

(1) Includes tractors driven by both company-employed drivers and independent contractors. Independent contractors provided 87 and 133 tractors as of March 31, 2022 and 2021, respectively.

Comparison of Three Months Ended March 31, 2022 to Three Months Ended March 31, 2021

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

							Dollar		Percentage
							Change		Change
	Three Months Ended						Three Months Ended		Three Months Ended
	March 31,						March 31,		March 31,
(Dollars in thousands)	2022			2021			2022 vs. 2021		2022 vs. 2021
Operating revenue:
Truckload revenue, net of fuel surcharge revenue	$	95,170		$	83,919		$	11,251		13.4	%
Truckload fuel surcharge revenue		17,620			10,996			6,624		60.2
Total Truckload revenue		112,790			94,915			17,875		18.8
Dedicated revenue, net of fuel surcharge revenue		78,421			66,902			11,519		17.2
Dedicated fuel surcharge revenue		18,339			11,335			7,004		61.8
Total Dedicated revenue		96,760			78,237			18,523		23.7
Intermodal revenue, net of fuel surcharge revenue		25,605			19,446			6,159		31.7
Intermodal fuel surcharge revenue		6,037			2,558			3,479		136.0
Total Intermodal revenue		31,642			22,004			9,638		43.8
Brokerage revenue		46,089			27,890			18,199		65.3
Total operating revenue	$	287,281		$	223,046		$	64,235		28.8	%
Operating income:
Truckload	$	15,571		$	11,415		$	4,156		36.4	%
Dedicated		10,645			8,936			1,709		19.1
Intermodal		5,036			1,461			3,575		244.7
Brokerage		4,606			2,186			2,420		110.7
Total operating income	$	35,858		$	23,998		$	11,860		49.4	%
Operating ratio(1):
Truckload		86.2	%		88.0	%
Dedicated		89.0			88.6
Intermodal		84.1			93.4
Brokerage		90.0			92.2
Consolidated operating ratio		87.5	%		89.2	%

(1) Represents operating expenses as a percentage of operating revenue.

Our operating revenue increased $64.2 million, or 28.8%, to $287.3 million in the 2022 period from $223.0 million in the 2021 period. Our operating revenue, net of fuel surcharges, increased $47.1 million, or 23.8%, to $245.3 million in the 2022 period from $198.2 million in the 2021 period. This increase in the 2022 period was due to an $18.2 million increase in Brokerage revenue, an $11.5 million increase in Dedicated revenue, net of fuel surcharges, an $11.3 million increase in Truckload revenue, net of fuel surcharges, and a $6.2 million increase in Intermodal revenue, net of fuel surcharges. Fuel surcharge revenue increased by $17.1 million to $42.0 million in the 2022 period from $24.9 million in the 2021 period primarily due to higher fuel costs.

Truckload segment revenue increased $17.9 million, or 18.8%, to $112.8 million in the 2022 period from $94.9 million in the 2021 period. Truckload segment revenue, net of fuel surcharges, increased $11.3 million, or 13.4%, to $95.2 million in the 2022 period from $83.9 million in the 2021 period. During the 2022 period, an increase in our average revenue per tractor was partially offset by a reduction in our average number of tractors. The improvement in the operating ratio in the 2022 period was primarily due to an increase in our average revenue per tractor due to increased rates with our customers, along with a decrease in depreciation expense and an increase in gain on disposition of revenue equipment, partially offset by increases in both company driver compensation expense and driver recruiting costs.

Dedicated segment revenue increased $18.5 million, or 23.7%, to $96.8 million in the 2022 period from $78.2 million in the 2021 period. Dedicated segment revenue, net of fuel surcharges, increased 17.2% primarily due to an increase in our average revenue per tractor. The operating ratio was negatively impacted in the 2022 period by increases in both company driver compensation expense and driver recruiting costs, which were partially offset by an increase in our average revenue per tractor due to increased rates with our customers.

Intermodal segment revenue increased $9.6 million, or 43.8%, to $31.6 million in the 2022 period from $22.0 million in the 2021 period. Intermodal segment revenue, net of fuel surcharges, increased 31.7% from the 2021 period primarily due to an increase in revenue per load. The improvement in the operating ratio in the 2022 period was primarily due to increased rates with our customers and a decrease in the amounts payable to railroads as a percentage of our revenue.

Brokerage segment revenue increased $18.2 million, or 65.3%, to $46.1 million in the 2022 period from $27.9 million in the 2021 period primarily due to increases in both the number of loads and in revenue per load. The improvement in the operating ratio in the 2022 period was primarily due to increased rates with our customers.

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

	Dollar Change			Percentage Change			Percentage of Operating Revenue
	Three Months Ended March 31,			Three Months Ended March 31,			Three Months Ended March 31,
(Dollars in thousands)	2022 vs. 2021			2022 vs. 2021			2022			2021
Operating revenue	$	64,235			28.8	%		100.0	%		100.0	%
Operating expenses (income):
Salaries, wages and benefits		16,351			22.4			31.1			32.7
Purchased transportation		16,545			40.6			19.9			18.3
Fuel and fuel taxes		15,431			53.3			15.4			13.0
Supplies and maintenance		1,298			11.8			4.3			4.9
Depreciation		456			1.8			9.1			11.5
Operating taxes and licenses		(72	)		(2.7	)		0.9			1.2
Insurance and claims		1,258			11.0			4.4			5.1
Communications and utilities		182			8.7			0.8			0.9
Gain on disposition of revenue equipment		(2,556	)		(128.8	)		(1.6	)		(0.9	)
Other		3,482			64.6			3.1			2.4
Total operating expenses		52,375			26.3			87.5			89.2
Operating income		11,860			49.4			12.5			10.8
Other		3			30.0			-			-
Income before income taxes		11,857			49.4			12.5			10.8
Income taxes expense		2,330			38.8			2.9			2.7
Net income	$	9,527			52.9	%		9.6	%		8.1	%

Salaries, wages and benefits consist of compensation for our employees, including both driver and non-driver employees, employees’ health insurance, 401(k) plan contributions and other fringe benefits. These expenses vary depending upon the size of our Truckload, Dedicated and Intermodal tractor fleets, the ratio of company drivers to independent contractors, our efficiency, our experience with employees’ health insurance claims, changes in health care premiums and other factors. Salaries, wages and benefits expense increased $16.4 million, or 22.4%, in the 2022 period from the 2021 period. This increase resulted primarily from additional company driver compensation expense of $11.8 million, a $1.5 million increase in employees’ health insurance expense as a result of higher self-insured medical claims and a $1.5 million increase in bonus compensation expense for our non-driver employees.

Purchased transportation consists of amounts payable to railroads and carriers for transportation services we arrange in connection with Brokerage and Intermodal operations and to independent contractor providers of revenue equipment. This category will vary depending upon the amount and rates, including fuel surcharges, we pay to third-party railroad and motor carriers, the ratio of company drivers versus independent contractors and the amount of fuel surcharges passed through to independent contractors. Purchased transportation expense increased $16.5 million in total, or 40.6%, in the 2022 period from the 2021 period. Amounts payable to carriers for transportation services we arranged in our Brokerage segment increased $15.2 million to $38.8 million in the 2022 period from $23.6 million in the 2021 period, primarily due to an increase in the cost per load within the tight freight market and growth in load volume. Amounts payable to railroads and drayage carriers for transportation services within our Intermodal segment increased $2.6 million to $15.2 million in the 2022 period from $12.6 million in the 2021 period. The portion of purchased transportation expense related to independent contractors within our Truckload and Dedicated segments, including fuel surcharges, decreased $1.3 million in the 2022 period. We expect our purchased transportation expense to increase as we grow our Intermodal and Brokerage segments.

Fuel and fuel taxes increased by $15.4 million, or 53.3%, in the 2022 period from the 2021 period. Net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) increased $236,000, or 3.6%, to $6.9 million in the 2022 period from $6.6 million in the 2021 period. Fuel surcharges passed through to independent contractors, outside drayage carriers and railroads increased to $4.5 million from $2.6 million in the 2021 period. The United States Department of Energy, or DOE, national average cost of fuel increased to $4.24 per gallon from $2.91 per gallon in the 2021 period. Despite this increase, our net fuel expense was 3.5% of Truckload, Dedicated and Intermodal segment revenue, net of fuel surcharges, down from 3.9% in the 2021 period. We have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in the temperature-control units on our trailers. Auxiliary power units, which we have installed in our company-owned tractors, provide climate control and electrical power for our drivers without idling the tractor engine.

Supplies and maintenance consist of repairs, maintenance, tires, parts, oil and engine fluids, along with load-specific expenses including loading/unloading, tolls, pallets and trailer hostling. Our supplies and maintenance expense increased $1.3 million, or 11.8%, from the 2021 period primarily due to higher outside repair, tires and parts costs.

Insurance and claims consist of the costs of insurance premiums and accruals we make for claims within our self-insured retention amounts, primarily for personal injury, property damage, physical damage to our equipment, cargo claims and workers’ compensation claims. These expenses will vary primarily based upon the frequency and severity of our accident experience, our self-insured retention levels and the market for insurance. The $1.3 million, or 11.0%, increase in insurance and claims in the 2022 period was primarily due to increases in our self-insured auto liability, workers’ compensation and cargo claim costs. Our significant self-insured retention exposes us to the possibility of significant fluctuations in claims expense between periods which could materially impact our financial results depending on the frequency, severity and timing of claims.

Gain on disposition of revenue equipment was $4.5 million in the 2022 period, up from $2.0 million in the 2021 period primarily due to an increase in the average gain for our tractor and trailer sales, despite a decrease in the number of units sold. Future gains or losses on dispositions of revenue equipment will be impacted by the market for used revenue equipment, which is beyond our control.

The $3.5 million increase in other operating expenses in the 2022 period was primarily due to increases in costs associated with driver recruitment and retention along with travel and meals expense.

Our operating income improved 49.4% to $35.9 million in the 2022 period from $24.0 million in the 2021 period as a result of the foregoing factors. Our operating expenses as a percentage of operating revenue, or “operating ratio,” improved to 87.5% in the 2022 period from 89.2% in the 2021 period. The operating ratio for our Truckload segment was 86.2% in the 2022 period and 88.0% in the 2021 period, for our Dedicated segment was 89.0% in the 2022 period and 88.6% in the 2021 period, for our Intermodal segment was 84.1% in the 2022 period and 93.4% in the 2021 period, and for our Brokerage segment was 90.0% in the 2022 period and 92.2% in the 2021 period. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharges, improved to 85.4% in the 2022 period from 87.9% in the 2021 period.

Our effective income tax rate decreased to 23.2% in the 2022 period from 25.0% in the 2021 period primarily due to decreases in per diem and other non-deductible expenses.

As a result of the factors described above, net income improved 52.9% to $27.5 million, or $0.33 per diluted share, in the 2022 period from $18.0 million, or $0.22 per diluted share, in the 2021 period.

Liquidity and Capital Resources 

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. Our primary sources of liquidity are funds provided by operations and our revolving credit facility. A portion of our tractor fleet is provided by independent contractors who own and operate their own equipment. We have no capital expenditure requirements relating to those drivers who own their tractors or obtain financing through third parties.

The table below reflects our net cash flows provided by operating activities, net cash flows provided by/used for investing activities and net cash flows used for financing activities for the periods indicated.

	Three Months Ended March 31,
(In thousands)	2022			2021
Net cash flows provided by operating activities	$	39,940		$	43,570
Net cash flows provided by/(used for) investing activities		409			(17,417	)
Net cash flows (used for) financing activities		(30,817	)		(3,697	)

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend on August 13, 2020. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.

We repurchased and retired 1.3 million shares of common stock for $25.0 million in the first quarter of 2022. We did not repurchase any shares in 2021. As of March 31, 2022, future repurchases of up to $8.4 million, or approximately 1.3 million shares, were available in the share repurchase program.

On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $50.0 million, or approximately 3.1 million shares of our common stock.

In the first three months of 2022, net cash flows provided by operating activities of $39.9 million were primarily used to repurchase and retire 1.3 million shares of our common stock for $25.0 million, to pay cash dividends of $5.0 million, and to construct and upgrade regional operating facilities in the amount of $2.5 million, resulting in a $9.5 million increase in cash and cash equivalents. In the first three months of 2021, net cash flows provided by operating activities of $43.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $16.3 million, to pay cash dividends of $3.3 million, and to upgrade regional operating facilities in the amount of $591,000, resulting in a $22.5 million increase in cash and cash equivalents.

We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $153 million in the remainder of 2022. This amount includes commitments to purchase $38.6 million of new revenue equipment and $5.8 million in building construction through the remainder of 2022. We also have commitments to purchase $23.1 million of new revenue equipment in 2023. Additionally, operating lease obligations total $583,000 through 2024. A quarterly cash dividend of $0.06 per share of common stock was paid in the first quarter of 2022 which totaled $5.0 million. A quarterly cash dividend of $0.04 per share of common stock was paid in the first quarter of 2021 which totaled $3.3 million. We currently expect to continue to pay quarterly cash dividends in the future. The payment of cash dividends in the future, and the amount of any such dividends, will depend upon our financial condition, results of operations, cash requirements, and certain corporate law requirements, as well as other factors deemed relevant by our Board of Directors. We believe our sources of liquidity are adequate to meet our current and anticipated needs for at least the next twelve months. Based upon anticipated cash flows, existing cash and cash equivalents balances, current borrowing availability and other sources of financing we expect to be available to us, we do not anticipate any significant liquidity constraints in the foreseeable future.

We maintain a credit agreement that provides for an unsecured committed credit facility with an aggregate principal amount of $30.0 million which matures in August 2023. At March 31, 2022, there was no outstanding principal balance on the facility. As of that date, we had outstanding standby letters of credit to guarantee settlement of self-insurance claims of $18.5 million and remaining borrowing availability of $11.5 million. This facility bears interest at a variable rate based on the Term SOFR Rate or the lender’s Prime Rate, in each case plus/minus applicable margins.

Our credit facility prohibits us from paying, in any fiscal year, stock redemptions and dividends in excess of 25% of our net income from the prior fiscal year. Waivers allowing stock redemptions and dividends in excess of the 25% limitation in total amounts of up to $80 million in each of 2022 and 2021 were obtained from the lender in March 2022 and August 2021, respectively. This facility also contains restrictive covenants which, among other matters, require us to maintain compliance with cash flow leverage and fixed charge coverage ratios. We were in compliance with all covenants at March 31, 2022 and December 31, 2021.

Other than our obligations for revenue equipment and building construction purchases and operating lease expenditures, along with our outstanding standby letters of credit to guarantee settlement of self-insurance claims, which are each mentioned above, we did not have any material off-balance sheet arrangements at March 31, 2022.

Seasonality

Our tractor productivity generally decreases during the winter season because inclement weather impedes operations and some shippers reduce their shipments. At the same time, operating expenses generally increase, with harsh weather creating higher accident frequency, increased claims, lower fuel efficiency and more equipment repairs.

Critical Accounting Estimates

There have been no material changes in the critical accounting estimates disclosed by us under Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates contained in the Annual Report on Form 10-K for the year ended December 31, 2021.

Item 3. Quantitative and Qualitative Disclosures about Market Risk. 

We are exposed to a variety of market risks, most importantly the effects of the price and availability of diesel fuel. We require substantial amounts of diesel fuel to operate our tractors and power the temperature-control units on our trailers. The price and availability of diesel fuel can vary, and are subject to political, economic and market factors that are beyond our control. Significant increases in diesel fuel costs could materially and adversely affect our results of operations and financial condition. Based upon our fuel consumption in the first three months of 2022, a 5% increase in the average cost of diesel fuel would have increased our fuel expense by $2.2 million.

We have historically been able to pass through a significant portion of long-term increases in diesel fuel prices and related taxes to customers in the form of fuel surcharges. Fuel surcharge programs are widely accepted among our customers, though they can vary somewhat from customer-to-customer. These fuel surcharges, which adjust weekly with the cost of fuel, enable us to recover a substantial portion of the higher cost of fuel as prices increase. These fuel surcharge provisions are not effective in mitigating the fuel price increases related to non-revenue miles or fuel used while the tractor is idling. In addition, we have worked diligently to control fuel usage and costs by improving our volume purchasing arrangements and optimizing our drivers’ fuel purchases with national fuel centers, focusing on shorter lengths of haul, installing and tightly managing the use of auxiliary power units in our tractors to minimize engine idling and improving fuel usage in our trailers’ refrigeration units.

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

Item 4. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Executive Vice President and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and our Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2022. There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting. We intend to periodically evaluate our disclosure controls and procedures as required by the Exchange Act Rules.

PART II. OTHER INFORMATION

Item 1A. Risk Factors.

There have been no material changes in the risk factors disclosed by us under Part I, Item 1A. Risk Factors contained in the Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In August 2019, our Board of Directors approved and we announced an increase from current availability in our existing share repurchase program providing for the repurchase of up to $34 million, or approximately 1.8 million shares, of our common stock, which was increased by our Board of Directors to 2.7 million shares in August 2020 to reflect the three-for-two stock split effected in the form of a stock dividend on August 13, 2020. The share repurchase program allows purchases on the open market or through private transactions in accordance with Rule 10b-18 of the Exchange Act. The timing and extent to which we repurchase shares depends on market conditions and other corporate considerations. The repurchase program does not have an expiration date.

We repurchased and retired 1.3 million shares of common stock for $25.0 million in the first quarter of 2022. We did not repurchase any shares in 2021. As of March 31, 2022, future repurchases of up to $8.4 million, or approximately 1.3 million shares, were available in the share repurchase program.

On May 3, 2022, our Board of Directors approved and we announced an additional increase from current availability in our existing share repurchase program providing for the repurchase of up to $50.0 million, or approximately 3.1 million shares of our common stock.

The following table shows our share repurchase activity during the three months ended March 31, 2022:

							Maximum Dollar Amount
					Total Number of		of Shares that may
	Total Number				Shares Purchased		yet be Purchased
	of Shares		Average Price		as Part of a Publicly		Under the Program
Period	Purchased		Paid per Share		Announced Program		(in thousands)
January 1, 2022- January 31, 2022		-	$	-		-	$	33,403
February 1, 2022-February 28, 2022		-		-		-		33,403
March 1, 2022-March 31, 2022		1,306,811		19.13		1,306,811		8,403
Total		1,306,811	$	19.13		1,306,811	$	8,403

Item 6. Exhibits.

Item No.	Item	Method of Filing
10.29	Twelfth Amendment to Credit Agreement, dated as of March 1, 2022, by and among Marten Transport, Ltd., as borrower, the banks party thereto as lenders, and U.S. Bank National Association, as agent for the lenders	Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 2, 2022.
31.1	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Timothy M. Kohl, the Registrant’s Chief Executive Officer (Principal Executive Officer)	Filed with this Report.
31.2	Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by James J. Hinnendael, the Registrant’s Executive Vice President and Chief Financial Officer (Principal Financial Officer)	Filed with this Report.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed with this Report.
101	The following financial information from Marten Transport, Ltd.’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, filed with the SEC on May 5, 2022, formatted in iXBRL, or Inline eXtensible Business Reporting Language: (i) Consolidated Condensed Balance Sheets, (ii) Consolidated Condensed Statements of Operations, (iii) Consolidated Condensed Statements of Stockholders’ Equity, (iv)  Consolidated Condensed Statements of Cash Flows, and (v) Notes to Consolidated Condensed Financial Statements	Filed with this Report.
104	The cover page from Marten Transport, Ltd.’s Quarterly Report on Form 10-Q for the period ended March 31, 2022, formatted in iXBRL, included in Exhibit 101	Filed with this Report.

SIGNATURES

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.
Dated: May 5, 2022	By:	/s/ Timothy M. Kohl
		Timothy M. Kohl
		Chief Executive Officer
		(Principal Executive Officer)
Dated: May 5, 2022	By:	/s/ James J. Hinnendael
		James J. Hinnendael
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)