Operating revenue, consisting of revenue from truckload and logistics operations, increased 12.7% to $163.4 million in the third quarter of 2008 from $145 million in the 2007 quarter. For the nine-month period of 2008, operating revenue increased 12.4% to $466.7 million from
$415.2 million for the 2007 period.
Truckload revenue increased 9.2% to $137.0 million from $125.5 million in the 2007 quarter. For the nine-month period of 2008, truckload revenue increased 6.8% to $392.2 million from $367.4 million for the 2007 period. Logistics revenue, which consists of revenue from brokerage and intermodal operations, increased 35.2% to $26.3 million from $19.5 million in the 2007 quarter. For the nine-month period of 2008, logistics revenue increased 55.7% to $74.5 million from $47.9 million for the 2007 period.
Operating revenue included fuel surcharges of $41.3 million and $109.4 million for the third
quarter and nine-month period of 2008, compared with $22.6 million and $61.1 million for the
third quarter and nine-month period of 2007. Operating revenue, net of fuel surcharges,
decreased 0.3% to $122.1 million in the 2008 quarter and increased 0.9% to $357.3 million in the 2008 nine-month period.
For the third quarter, net income was $6.1 million, or 28 cents per diluted share, compared with $3.1 million, or 14 cents per diluted share, for the same quarter of 2007. For the nine-month period of 2008, net income was $12.2 million, or 56 cents per diluted share, compared with $12.0 million, or 55 cents per diluted share, for the 2007 period.
"In the third quarter we were able to demonstrate the strength of our business model and our team's ability to execute in a difficult freight environment," said Chairman and CEO Randy Marten. "Our major investments in developing regional operations to help optimize our customers' supply chains, growing intermodal capacity to gain efficiency, using our
logistics operation to cover additional freight while satisfying customers' needs, and installing
auxiliary power units to save fuel and reduce emissions all paid off. We picked up a boost from
diesel fuel prices that decreased during the quarter, but even without that benefit our results
would have improved compared with the third quarter of 2007 or with the second quarter of
The company continued its strategy of constraining the size of its asset-based truckload fleet and growing its asset-light logistics and intermodal operations.
Within the truckload operations, the company focused on providing superior customer service to ensure our fleet was kept loaded with the most profitable freight available. This strategy, along with the growth of regional operations, contributed to a 4.9 cents per total mile increase in average truckload revenue, net of fuel surcharges, to $1.531 in the third quarter of 2008 from $1.482 in the third quarter of the prior year. As a result of these initiatives, average truckload revenue per tractor per week, net of fuel surcharges, improved by 2.8% to $3,231 in the 2008 quarter from $3,142 in the 2007 quarter. This was despite reducing average miles per trip by 7.2% as a result of intentionally reducing length of haul in certain lanes and seeing an increase in our non-revenue miles percentage.
"Our truckload operations continue to evolve as we search for expanded and more efficient ways
to serve our customers," Marten said. "To that end, we opened a new regional facility in Dallas, Texas earlier this year and have also recently opened another regional facility in Richmond, Va., along with a facility in Laredo, Texas to service our customers' freight needs in the Golden Triangle area of Mexico, where about 65% of Mexico's population resides. Expanding our regional capability affords us additional flexibility in allocating loads more efficiently between truck and rail intermodal service. Also, the additional locations enable us to open up new business opportunities with existing and prospective customers who would have otherwise used another carrier."
Marten's logistics operations continue to expand at a rapid pace. Logistics revenue, net of
intermodal fuel surcharges, grew to $23.5 million in the third quarter, an increase of 26.3% over
the 2007 quarter. Logistics revenue consists of revenue from the company's internal brokerage and intermodal operations and from revenue associated with its 45% interest in MW Logistics, LLC, a third-party provider of logistics services. Consistent with the growth of the logistics business, purchased transportation expense increased 4.4% in the 2008 quarter compared with the 2007 quarter after taking into account a 36.8% decrease in the number of miles driven by independent contractors.
"Our net fuel expense, after fuel surcharges, improved significantly compared with the third
quarter of 2007, despite much higher average diesel fuel prices," Marten noted. "Our average cost per gallon was $4.01, compared with $2.83 in the third quarter of 2007. Over the past year, we have worked diligently to control fuel costs and usage by improving our volume purchasing arrangements with national fuel centers, focusing on shorter lengths of haul, managing the miles for which we do not receive fuel surcharges, and installing and tightly managing the use of auxiliary power units in 94% of our tractors to minimize engine idling."
Fuel expense was also affected by a decrease in company truck miles and declining fuel prices throughout the quarter. As a result of these factors, net fuel expense (fuel and fuel taxes net of fuel surcharge revenue and surcharges passed through to independent contractors, outside drayage carriers and railroads) improved by nearly $5.7 million compared with the third quarter of 2007.
"Moreover, we receive fuel surcharges on a delayed basis, which caused our third quarter results to benefit disproportionately from the decline in fuel prices," Marten said. "Accordingly, assuming no further declines in the cost of fuel in the fourth quarter, we would expect our net cost of fuel as a percentage of revenue to be higher in the fourth quarter than it was in the third quarter.
Marten's operating ratio (operating expenses as a percentage of operating revenue) was 93.6% for the third quarter of 2008 compared with 96.1% for the third quarter of 2007.
As of Sept. 30, Marten's balance sheet reflected approximately $249.8 million in stockholders' equity and $7.3 million in debt, for a debt-to-capitalization ratio of approximately 2.9%. In the third quarter, the company retired approximately $10.9 million in debt. With anticipated net capital expenditures of approximately $20 million for the remainder of 2008, the company expects to finish the year "with a well-maintained fleet and a very strong balance sheet," Marten said.
Looking forward at the balance of 2008, Mr. Marten offered the following comments: "For the fourth quarter of 2008, we expect freight demand to continue to decline as compared to the fourth quarter of 2007. The start of October has been relatively soft and, due to economic conditions, we do not expect our customers in the consumer retail business to build or refresh their inventories to historical fourth-quarter levels. Furthermore, we believe that the recent improvements in fuel prices have negatively impacted the capacity situation, as some weak carriers avoided failing or were encouraged to bring on capacity that had been idled. With those expectations in mind, our strategy is to continue to protect our truckload rate structure by providing superior customer service, to appropriately size our fleet to existing demand, to expand our logistics, intermodal, and regional operations and to aggressively control our costs and expl