Marten Transport, Mondovi, Wis., is dealing with the economic downturn by increasing its logistics business, growing its regional business, "right-sizing" its fleet, and investing in APUs to help with fuel costs.
Marten reported that operating revenue from truckload and logistics operations increased 15.3% to $160 million in the second quarter of 2008 from $138.8 million in the 2007 quarter.
For the six-month period of 2008, operating revenue increased 12.3% to $303.4 million from $270.2 million for the 2007 period.
Truckload revenue increased 8.4% to $134.1 million from $123.7 million in the 2007 quarter. For the six-month period of 2008, truckload revenue increased 5.5% to $255.2 million from $241.9 million for the 2007 period.
Logistics revenue, which consists of revenue from brokerage and intermodal operations, increased 71.5% to $25.9 million from $15.1 million in the 2007 quarter. For the six-month period of 2008, logistics revenue increased 69.7% to $48.2 million from $28.4 million for the 2007 period.
Operating revenue included fuel surcharges of $40.1 million and $68.1 million for the second quarter and six-month period of 2008, compared with $21.1 million and $38.5 million for the second quarter and six-month period of 2007. Operating revenue, net of fuel surcharges, increased 1.8% to $119.9 million in the 2008 quarter and 1.5% to $235.2 million in the 2008 six-month period.
For the second quarter ended June 30, 2008, net income was $3.5 million, or 16 cents per diluted share, compared with $4.3 million, or 20 cents per diluted share, for the same quarter of 2007. For the six-month period of 2008, net income was $6.1 million, or 28 cents per diluted share, compared with $8.9 million, or 41 cents per diluted share, for the 2007 period.
"During the second quarter we continued the disciplined execution of our business model by focusing on freight selection in our asset-based truckload operations and increasing the scope and penetration of our asset-light logistics and intermodal operations," said Chairman and CEO Randy Marten.. "As a result, operating revenue increased 15.3% compared with the same quarter of 2007 (1.8% increase excluding fuel surcharge revenue) despite a decrease in the average size of our truckload fleet. Our average fleet size decreased by 185 tractors compared with the second quarter of 2007, but remained essentially the same as the end of 2007. As with the first quarter, we are not satisfied with our results; however, we are confident that Marten is well-positioned to grow and improve in our markets.
"In our truckload operations, we improved our average truckload revenue per tractor per week, net of fuel surcharges, to $3,128 in the 2008 quarter from $3,108 in the 2007 quarter. The combination of our freight mix, reduced average length of haul, and an apparent reduction in overall truckload industry capacity contributed to an approximately 2.7 cents per total mile increase in average truckload revenue, net of fuel surcharges. This increase in freight rates more than offset a 1.2% reduction in average miles per tractor.
"The changes in our operating statistics are consistent with growth of our regional temperature-controlled operations. 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 5% reduction in average length of haul to 865 miles. As evidence to our tight operating controls and contrary to normal assumptions, we were able to combine a shorter length of haul with a slight reduction in non-revenue miles percentage, to 7.7% for the quarter.
"Our logistics operations expanded to nearly 20% of our total operating revenue, excluding fuel surcharge revenue from both truckload and intermodal operations. Logistics revenue, net of intermodal fuel surcharges, grew to $23.4 million in the second quarter, an increase of 62.4% over the 2007 quarter. Logistics revenue consists of revenue from our internal brokerage and intermodal operations and from revenue associated with our 45% interest in MW Logistics, LLC, a third-party provider of logistics services. Consistent with the growth of our logistics business, purchased transportation expense increased 26.8% in the 2008 quarter compared with the 2007 quarter, as growth in our logistics business more than offset a decrease in the percentage of our fleet provided by independent contractors.
"The cost of fuel soared to record levels during the second quarter. Our average cost per gallon was $4.21, compared with $2.73 in the second quarter of 2007. Our gross cost of fuel increased approximately $14.7 million, or 39.5%, compared with the same quarter of 2007. We addressed this unprecedented challenge by investing nearly $15.0 million in auxiliary power units (APUs), improving our volume purchasing arrangements with national fuel centers, focusing on shorter lengths of haul, and tightly managing non-revenue miles. At the end of the second quarter of 2008, we had installed APUs in nearly 87% of our company-owned tractors. These units provide heat, air conditioning and electrical power for our drivers without running the tractor engine. By managing the use of APUs, we reduced idling time for the 2008 quarter beyond our original expectations and beyond the lowest level projected by the manufacturers. Together with an effective fuel surcharge program, these initiatives allowed us to reduce our net fuel expense (fuel and fuel taxes less fuel surcharges, net of surcharges passed through to independent contractors) to 15.5% of truckload and intermodal revenue, net of fuel surcharges, in the second quarter of 2008, compared with 17.7% in the 2007 quarter.
"Our progress on fuel expense was partially offset by increases in depreciation, supplies and maintenance and insurance and claims expense, which were primarily due to the additional depreciation costs associated with our investment in APUs, the increased percentage of company-owned tractors in our fleet, an increase in the average age of our tractor and trailer fleets, and an increase in the cost of self-insured accident claims.
"Salaries, wages and benefits expense decreased 2.1% in the 2008 quarter compared with the 2007 quarter, which primarily resulted from a reduction in our fleet size and the adoption of a per diem expense reimbursement program for our drivers in the first quarter of 2008. These savings were partially offset by a $746,000 increase in our self-insured medical claims and a decrease in our ratio of tractors to non-driver personnel associated with growth in our logistics business.
"As expected, a softer market for used equipment, which we believe was driven by capacity reductions in the industry, led to a decrease of $341,000 in gain on disposition of revenue equipment compared with the second quarter of 2007 despite an increase in the number of tractors sold.
"Our operating ratio (operating expenses as a percentage of operating revenue) was 96.0% for the second quarter of 2008 compared with 94.2% for the second quarter of 2007. Our operating ratio improved, however, from 96.2% for the first quarter of 2008, despite the rapid run-up in fuel prices.
"Our effective tax rate increased to 41.6% in the 2008 quarter from 38.3% in the 2007 quarter due to the nondeductible effect of the per diem pay structure in 2008.
"At June 30, 2008, our balance sheet reflected approximately $242.8 million in stockholders' equity and $18.2 million in debt, for a debt-to-capitalization ratio of approximately 7.0%. In the first half of 2008, we retired approximately $26.4 million in debt. We recently negotiated additional equipment purchase agreements with our tract
Marten reported that operating revenue from truckload and logistics operations increased 15.3% to $160 million in the second quarter of 2008 from $138.8 million in the 2007 quarter.
For the six-month period of 2008, operating revenue increased 12.3% to $303.4 million from $270.2 million for the 2007 period.
Truckload revenue increased 8.4% to $134.1 million from $123.7 million in the 2007 quarter. For the six-month period of 2008, truckload revenue increased 5.5% to $255.2 million from $241.9 million for the 2007 period.
Logistics revenue, which consists of revenue from brokerage and intermodal operations, increased 71.5% to $25.9 million from $15.1 million in the 2007 quarter. For the six-month period of 2008, logistics revenue increased 69.7% to $48.2 million from $28.4 million for the 2007 period.
Operating revenue included fuel surcharges of $40.1 million and $68.1 million for the second quarter and six-month period of 2008, compared with $21.1 million and $38.5 million for the second quarter and six-month period of 2007. Operating revenue, net of fuel surcharges, increased 1.8% to $119.9 million in the 2008 quarter and 1.5% to $235.2 million in the 2008 six-month period.
For the second quarter ended June 30, 2008, net income was $3.5 million, or 16 cents per diluted share, compared with $4.3 million, or 20 cents per diluted share, for the same quarter of 2007. For the six-month period of 2008, net income was $6.1 million, or 28 cents per diluted share, compared with $8.9 million, or 41 cents per diluted share, for the 2007 period.
"During the second quarter we continued the disciplined execution of our business model by focusing on freight selection in our asset-based truckload operations and increasing the scope and penetration of our asset-light logistics and intermodal operations," said Chairman and CEO Randy Marten.. "As a result, operating revenue increased 15.3% compared with the same quarter of 2007 (1.8% increase excluding fuel surcharge revenue) despite a decrease in the average size of our truckload fleet. Our average fleet size decreased by 185 tractors compared with the second quarter of 2007, but remained essentially the same as the end of 2007. As with the first quarter, we are not satisfied with our results; however, we are confident that Marten is well-positioned to grow and improve in our markets.
"In our truckload operations, we improved our average truckload revenue per tractor per week, net of fuel surcharges, to $3,128 in the 2008 quarter from $3,108 in the 2007 quarter. The combination of our freight mix, reduced average length of haul, and an apparent reduction in overall truckload industry capacity contributed to an approximately 2.7 cents per total mile increase in average truckload revenue, net of fuel surcharges. This increase in freight rates more than offset a 1.2% reduction in average miles per tractor.
"The changes in our operating statistics are consistent with growth of our regional temperature-controlled operations. 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 5% reduction in average length of haul to 865 miles. As evidence to our tight operating controls and contrary to normal assumptions, we were able to combine a shorter length of haul with a slight reduction in non-revenue miles percentage, to 7.7% for the quarter.
"Our logistics operations expanded to nearly 20% of our total operating revenue, excluding fuel surcharge revenue from both truckload and intermodal operations. Logistics revenue, net of intermodal fuel surcharges, grew to $23.4 million in the second quarter, an increase of 62.4% over the 2007 quarter. Logistics revenue consists of revenue from our internal brokerage and intermodal operations and from revenue associated with our 45% interest in MW Logistics, LLC, a third-party provider of logistics services. Consistent with the growth of our logistics business, purchased transportation expense increased 26.8% in the 2008 quarter compared with the 2007 quarter, as growth in our logistics business more than offset a decrease in the percentage of our fleet provided by independent contractors.
"The cost of fuel soared to record levels during the second quarter. Our average cost per gallon was $4.21, compared with $2.73 in the second quarter of 2007. Our gross cost of fuel increased approximately $14.7 million, or 39.5%, compared with the same quarter of 2007. We addressed this unprecedented challenge by investing nearly $15.0 million in auxiliary power units (APUs), improving our volume purchasing arrangements with national fuel centers, focusing on shorter lengths of haul, and tightly managing non-revenue miles. At the end of the second quarter of 2008, we had installed APUs in nearly 87% of our company-owned tractors. These units provide heat, air conditioning and electrical power for our drivers without running the tractor engine. By managing the use of APUs, we reduced idling time for the 2008 quarter beyond our original expectations and beyond the lowest level projected by the manufacturers. Together with an effective fuel surcharge program, these initiatives allowed us to reduce our net fuel expense (fuel and fuel taxes less fuel surcharges, net of surcharges passed through to independent contractors) to 15.5% of truckload and intermodal revenue, net of fuel surcharges, in the second quarter of 2008, compared with 17.7% in the 2007 quarter.
"Our progress on fuel expense was partially offset by increases in depreciation, supplies and maintenance and insurance and claims expense, which were primarily due to the additional depreciation costs associated with our investment in APUs, the increased percentage of company-owned tractors in our fleet, an increase in the average age of our tractor and trailer fleets, and an increase in the cost of self-insured accident claims.
"Salaries, wages and benefits expense decreased 2.1% in the 2008 quarter compared with the 2007 quarter, which primarily resulted from a reduction in our fleet size and the adoption of a per diem expense reimbursement program for our drivers in the first quarter of 2008. These savings were partially offset by a $746,000 increase in our self-insured medical claims and a decrease in our ratio of tractors to non-driver personnel associated with growth in our logistics business.
"As expected, a softer market for used equipment, which we believe was driven by capacity reductions in the industry, led to a decrease of $341,000 in gain on disposition of revenue equipment compared with the second quarter of 2007 despite an increase in the number of tractors sold.
"Our operating ratio (operating expenses as a percentage of operating revenue) was 96.0% for the second quarter of 2008 compared with 94.2% for the second quarter of 2007. Our operating ratio improved, however, from 96.2% for the first quarter of 2008, despite the rapid run-up in fuel prices.
"Our effective tax rate increased to 41.6% in the 2008 quarter from 38.3% in the 2007 quarter due to the nondeductible effect of the per diem pay structure in 2008.
"At June 30, 2008, our balance sheet reflected approximately $242.8 million in stockholders' equity and $18.2 million in debt, for a debt-to-capitalization ratio of approximately 7.0%. In the first half of 2008, we retired approximately $26.4 million in debt. We recently negotiated additional equipment purchase agreements with our tract
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