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Marten Transport Ltd. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 8, 2012 06:16AM

Marten Transport Ltd. (MRTN) filed Quarterly Report for the period ended 2012-06-30. Marten Transport, Ltd has a market cap of $401.5 million; its shares were traded at around $18.34 with a P/E ratio of 14.8 and P/S ratio of 0.7. The dividend yield of Marten Transport, Ltd stocks is 0.6%. Marten Transport, Ltd had an annual average earning growth of 4.5% over the past 10 years. GuruFocus rated Marten Transport, Ltd the business predictability rank of 2.5-star.



Highlight of Business Operations:

Our operating revenue increased $19.4 million, or 6.7%, in the first six months of 2012. Our operating revenue, net of fuel surcharges, increased $15.5 million, or 6.6%, compared with the first six months of 2011. Truckload segment revenue, net of fuel surcharges, increased 6.8% primarily due to an increase in our average truckload revenue, net of fuel surcharges, per tractor per week of 5.0%, along with an increase in our average fleet size of 27 tractors, or 1.3%, in the first six months of 2012. Fuel surcharge revenue increased by $4.0 million, or 7.2%, which was caused by higher fuel prices in the first six months of 2012. The changes in our operating statistics are primarily the result of the continued growth of our regional temperature-controlled operations, which we have increased to 69.0% of our truckload fleet as of June 30, 2012 from 60.7% as of June 30, 2011. By focusing on shorter lengths of haul in certain defined areas, we are addressing customer trends toward regional distribution to lower their transportation expense, furthering our own objectives of reducing fuel consumption per load, and matching some of our drivers desires to stay closer to home. The concentration of a portion of our fleet in these markets is evident in a 2.4% reduction from the first six months of 2011 in average length of haul to 621 miles. Logistics segment revenue, net of intermodal fuel surcharges, increased 6.0% compared with the first six months of 2011. The increase in logistics revenue primarily resulted from volume growth in each of our internal brokerage and intermodal services. Logistics revenue represented 23.9% of our operating revenue in the first six months of 2012 compared to 24.1% in the first six months of 2011.

Our business requires substantial, ongoing capital investments, particularly for new tractors and trailers. At June 30, 2012, we had approximately $5.2 million of cash and cash equivalents, $334.4 million in stockholders equity and no long-term debt outstanding. In the first six months of 2012, net cash flows provided by operating activities of $40.0 million and cash and cash equivalents of $15.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $48.3 million and to partially construct and acquire regional operating facilities in the amount of $6.1 million. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $30 million for the remainder of 2012. We paid quarterly cash dividends of $0.02 and $0.025 per share of common stock in March and May 2012, respectively, totaling $993,000. 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.

As a result of the foregoing factors, our operating expenses as a percentage of operating revenue, or “operating ratio,” improved to 92.6% in the 2012 period from 93.4% in the 2011 period. The operating ratio for our Truckload segment was 92.3% and 93.2% in the 2012 and 2011 periods, respectively. The operating ratio for our Logistics segment was 93.6% and 94.2% in the 2012 and 2011 periods, respectively. Operating expenses as a percentage of operating revenue, with both amounts net of fuel surcharge revenue, improved to 90.9% for the 2012 period from 91.9% for the 2011 period.

In the first six months of 2012, net cash flows provided by operating activities of $40.0 million and cash and cash equivalents of $15.6 million were primarily used to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $48.3 million and to partially construct and acquire regional operating facilities in the amount of $6.1 million. In the first six months of 2011, net cash flows provided by operating activities of $42.5 million were primarily used to repay $19.3 million of long-term debt, to purchase new revenue equipment, net of proceeds from dispositions, in the amount of $6.2 million, to partially construct two regional operating facilities in the amount of $3.6 million, and to increase cash and cash equivalents by $9.7 million. We estimate that capital expenditures, net of proceeds from dispositions, will be approximately $30 million in the remainder of 2012. We paid quarterly cash dividends of $0.02 and $0.025 per share of common stock in March and May of 2012, respectively, totaling $993,000, and dividends of $0.02 per share of common stock in each of March and May of 2011 totaling $878,000. 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. As current federal and state bonus depreciation provisions expire, we expect an increase in our current income tax payments as a portion of our deferred tax liability for property and equipment reverses. 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.

In the first six months of 2012, we replaced most of our company-owned tractors within approximately 4.5 years and our trailers within approximately 5.5 years after purchase. Our useful lives for depreciating tractors is five years and trailers is seven years, with a 25% salvage value for tractors and a 35% salvage value for trailers. These salvage values are based upon the expected market values of the equipment after five years for tractors and seven years for trailers. Depreciation expense calculated in this manner approximates the continuing declining value of the revenue equipment, and continues at a consistent straight-line rate for units held beyond the normal replacement cycle. Calculating tractor depreciation expense with a five-year useful life and a 25% salvage value results in the same depreciation rate of 15% of cost per year and the same net book value of 32.5% of cost at the 4.5-year replacement date as using a 4.5-year useful life and 32.5% salvage value. As a result, there is no difference in recorded depreciation expense on a quarterly or annual basis with our five-year useful life and 25% salvage value compared with a 4.5-year useful life and 32.5% salvage value. Similarly, calculating trailer depreciation expense with a seven-year useful life and a 35% salvage value results in the same depreciation rate of 9.3% of cost per year and the same net book value of 48.9% of cost at the 5.5-year replacement date as using a 5.5-year useful life and 48.9% salvage value. As a result, there is no difference in recorded depreciation expense on a quarterly or annual basis with our seven-year useful life and 35% salvage value compared with a 5.5-year useful life and 48.9% salvage value.

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