SECURITIES AND EXCHANGE COMMISSION

Washington D.C.  20549

Form 10-Q

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For the Quarter ended June 30, 2001

Commission File Number 0-15010

MARTEN TRANSPORT, LTD.
(Exact name of registrant as specified in its charter)

Delaware	39-1140809
(State of incorporation)	(I.R.S. Employer  Identification No.)
129 Marten Street, Mondovi, Wisconsin 54755
(Address of principal executive offices)
715-926-4216
(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ý               No o

The number of shares outstanding of the registrant’s Common Stock, par value $.01 per share, was 4,182,145 as of August 8, 2001.

PART I:  FINANCIAL INFORMATION

Item 1.  Financial Statements.

MARTEN TRANSPORT, LTD.
CONDENSED BALANCE SHEETS
(In thousands, except share information)

					June 30,			December 31,
					2001			2000
					(Unaudited)
ASSETS
	Current assets:
		Receivables			$	33,120		$	33,487
		Prepaid expenses and other			6,512			8,195
		Deferred income taxes			2,322			2,276
			Total current assets		41,954			43,958
	Property and equipment:
		Revenue equipment, buildings and land, office equipment, and other			232,836			228,322
		Accumulated depreciation			(70,675		)	(61,937		)
			Net property and equipment		162,161			166,385
	Other assets				2,146			1,730
				TOTAL ASSETS	$	206,261		$	212,073
LIABILITIES AND SHAREHOLDERS’ INVESTMENT
	Current liabilities:
		Accounts payable and accrued liabilities			$	15,707		$	13,490
		Insurance and claims accruals			7,598			8,819
		Current maturities of long-term debt			406			1,685
			Total current liabilities		23,711			23,994
	Long-term debt, less current maturities				76,716			88,216
	Deferred income taxes				36,500			34,018
			Total liabilities		136,927			146,228
	Shareholders’ investment:
		Common stock, $.01 par value per share, 10,000,000 shares authorized, 4,180,145 shares issued and outstanding			42			42
		Additional paid-in capital			9,934			9,934
		Retained earnings			59,439			55,869
		Accumulated other comprehensive loss			(81		)	-
			Total shareholders’ investment		69,334			65,845
				TOTAL LIABILITIES AND SHAREHOLDERS’ INVESTMENT	$	206,261		$	212,073

The accompanying notes are an integral part of these balance sheets.

MARTEN TRANSPORT, LTD.
CONDENSED STATEMENTS OF INCOME
(In thousands, except share information)
(Unaudited)

			Three Months Ended June 30,						Six Months Ended June 30,
			2001			2000			2001			2000
OPERATING REVENUE			$	71,653		$	64,811		$	141,620		$	125,104
OPERATING EXPENSES:
	Salaries, wages and benefits		21,303			18,459			42,530			35,645
	Purchased transportation		15,756			15,489			31,253			30,925
	Fuel and fuel taxes		11,945			9,939			23,450			18,714
	Supplies and maintenance		5,546			4,687			11,070			9,024
	Depreciation		6,693			6,039			13,288			12,104
	Operating taxes and licenses		1,247			1,182			2,430			2,345
	Insurance and claims		2,472			1,333			4,316			2,565
	Communications and utilities		753			757			1,553			1,497
	Gain on disposition of revenue equipment		(203		)	(234		)	(342		)	(273		)
	Other		1,824			1,730			3,638			3,301
		Total operating expenses	67,336			59,381			133,186			115,847
OPERATING INCOME			4,317			5,430			8,434			9,257
OTHER EXPENSES(INCOME):
	Interest expense		1,322			1,531			2,874			2,808
	Interest income and other		(104		)	(85		)	(197		)	(154		)
INCOME BEFORE INCOME TAXES			3,099			3,984			5,757			6,603
PROVISION FOR INCOME TAXES			1,177			1,514			2,187			2,509
NET INCOME			$	1,922		$	2,470		$	3,570		$	4,094
BASIC AND DILUTED EARNINGS PER COMMON SHARE			$	0.46		$	0.58		$	0.85		$	0.96

The accompanying notes are an integral part of these statements.

MARTEN TRANSPORT, LTD.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT
(In thousands, except share information)
(Unaudited)

							Additional     Paid-In Capital		Retained Earnings			Accumulated Other Compre- hensive Income (Loss)			Total Share- holders’ Investment			Compre- hensive Income (Loss)
		Common Stock
		Shares		Amount
Balance at December 31, 1999		4,300,145		$	43		$	9,934	$	49,628		$	-		$	59,605
	Net income	-		-			-		4,094			-			4,094			$	4,094
	Repurchase of common stock	(120,000	)	(1		)	-		(1,687		)	-			(1,688		)
	Comprehensive income																	$	4,094
Balance at June 30, 2000		4,180,145		$	42		$	9,934	$	52,035		$	-		$	62,011
	Net income	-		-			-		3,834			-			3,834			$	3,834
	Comprehensive income																	$	3,834
Balance at December 31, 2000		4,180,145		$	42		$	9,934	$	55,869		$	-		$	65,845
	Net income	-		-			-		3,570			-			3,570			$	3,570
	Transition adjustment related to change in accounting for derivative instruments and hedging activities, net of tax	-		-			-		-			(173		)	(173		)	(173		)
	Unrealized gain on qualifying cash flow hedges, net of tax	-		-			-		-			92			92			92
	Comprehensive income																	$	3,489
Balance at June 30, 2001		4,180,145		$	42		$	9,934	$	59,439		$	(81	)	$	69,334

The accompanying notes are an integral part of these statements.

MARTEN TRANSPORT, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

					Six Months
					Ended June 30,
					2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Operations:
		Net income			$	3,570		$	4,094
		Adjustments to reconcile net income to net cash flows from operating activities:
			Depreciation		13,288			12,104
			Gain on disposition of revenue equipment		(342		)	(273		)
			Deferred tax provision		2,436			2,527
			Other comprehensive loss		(81		)	-
			Changes in other current operating items		3,046			686
				Net cash provided by operating activities	21,917			19,138
CASH FLOWS FROM INVESTING ACTIVITIES:
	Property additions:
		Revenue equipment, net			(8,624		)	(31,520		)
		Buildings and land, office equipment, and other additions, net			(98		)	(1,701		)
	Net change in other assets				(416		)	(659		)
				Net cash used for investing activities	(9,138		)	(33,880		)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Long-term borrowings				30,600			63,650
	Repayment of long-term borrowings				(43,379		)	(47,220		)
	Common stock repurchased				-			(1,688		)
				Net cash provided by (used for) financing activities	(12,779		)	14,742
NET CHANGE IN CASH AND CASH EQUIVALENTS					-			-
CASH AND CASH EQUIVALENTS:
	Beginning of period				-			-
	End of period				$	-		$	-
CASH PAID (RECEIVED) FOR:
	Interest				$	3,131		$	2,394
	Income taxes				$	(378	)	$	362

The accompanying notes are an integral part of these statements.

NOTES TO FINANCIAL STATEMENTS
(Unaudited)

(1) Financial Statements

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements, and therefore do not include all information and disclosures required by generally accepted accounting principles for complete financial statements.  In the opinion of management, such statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present our financial condition, results of operations and cash flows for the interim periods presented.  The results of operations for any interim period do not necessarily indicate the results for the full year.  The unaudited interim financial statements should be read with reference to the financial statements and notes to financial statements in our 2000 Annual Report on Form 10-K.

(2) Earnings Per Common Share

Basic and diluted earnings per common share were computed as follows:

		Three Months				Six Months
		Ended June 30,				Ended June 30,
(In thousands, except per-share amounts)		2001		2000		2001		2000
Numerator:
	Net income	$	1,922	$	2,470	$	3,570	$	4,094
Denominator:
	Basic earnings per common share - weighted-average shares	4,180		4,226		4,180		4,250
	Effect of dilutive stock options	42		22		24		19
	Diluted earnings per common share - weighted-average shares and assumed conversions	4,222		4,248		4,204		4,269
Basic and diluted earnings per common share		$	0.46	$	0.58	$	0.85	$	0.96

The following options were outstanding but were not included in the calculation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares and, therefore, including the options in the denominator would be antidilutive, or decrease the number of weighted-average shares.

	Three Months				Six Months
	Ended June 30,				Ended June 30,
	2001		2000		2001		2000
Number of option shares	73,750		78,750		81,250		78,750
Weighted-average exercise price	$	15.28	$	15.06	$	15.17	$	15.06

(3) Accounting for Derivative Instruments and Hedging Activities

On January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” issued by the Financial Accounting Standards Board in 1998.  Statement No. 133, as amended, establishes accounting and reporting standards requiring the recording of each derivative instrument in the balance sheet as either an asset or liability measured at fair value.  Changes in the derivative instrument’s fair value must be recognized currently in earnings unless specific hedge accounting criteria are met.  For hedges which meet the criteria, the derivative instrument’s gains and losses, to the extent effective, may be recognized in accumulated other comprehensive income (loss) included in shareholders’ investment, rather than current earnings.

We have entered into commodity swap agreements to partially hedge our exposure to diesel fuel price fluctuations.  These agreements meet the specific hedge accounting criteria and have been designated as cash flow hedges.  The effective portion of the cumulative gain or loss on the derivative instruments has been reported as a component of accumulated other comprehensive loss and will be recognized into current earnings in the same period or periods during which the hedged transactions affect current earnings.  The ineffective portion, if any, will be recognized in current earnings during the period of change.  No ineffectiveness was recognized in current earnings during the first six months of 2001.

The adoption of Statement No. 133 on January 1, 2001, resulted in a pretax accumulated other comprehensive loss of $279,000 ($173,000 net of income tax benefit) for derivative instruments that were issued, acquired or modified after December 31, 1998.  The accumulated other comprehensive loss was attributable to losses on effective cash flow hedges.  During 2001, approximately $223,000 of the net derivative loss included in accumulated other comprehensive loss as of January 1, 2001, is being reclassified into current earnings.  All amounts currently recorded in accumulated other comprehensive loss will be reclassified into current earnings by March 31, 2002, the termination date for all current swap agreements.

Derivative liabilities relating to commodity swap agreements totaling $130,000 have been recorded in accounts payable and accrued liabilities in the balance sheet as of June 30, 2001.  The remaining notional amount as of June 30, 2001, is 4,050,000 gallons.  The fair value of commodity swap agreements is based upon the difference between the contractual strike prices and the futures prices as of the valuation date applied to the remaining notional amount.

(4) Accounting for Business Combinations, Goodwill and Other Intangible Assets

In July 2001, the Financial Accounting Standards Board issued Statement No. 141, “Business Combinations,” and Statement No. 142, “Goodwill and Other Intangible Assets.”  Statement No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001.  Statement No. 142 requires that, effective January 1, 2002, goodwill and intangible assets with indefinite lives no longer be amortized to earnings, but instead be reviewed for impairment.  Statement No. 142 also requires that separable intangible assets deemed to have definite lives continue to be amortized over their useful lives.  These statements are expected to have no impact on our results of operations or financial position.

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

Results of Operations

Operating revenue for the second quarter of 2001 increased 10.6 percent over the second quarter of 2000.  Operating revenue for the first six months of 2001 increased 13.2 percent over the same period of 2000.  The primary reason for these increases was the transportation of additional freight associated with our larger fleet.  These increases in operating revenue were also impacted by additional fuel surcharges to our customers associated with a higher average price of diesel fuel, and an improvement in our equipment utilization.  Our contracts with customers provide for fuel surcharges based upon significant fluctuations in the price of diesel fuel.  Diesel fuel prices were higher in the first six months of 2001 than in the same period last year.  As a result, fuel surcharges increased operating revenue for the first half of 2001 by $6.3 million, compared with an increase of $4.4 million for the first half of 2000.  We anticipate our operating revenue for the remainder of 2001 will exceed 2000 levels due primarily to our planned revenue equipment additions.

Operating expenses as a percentage of operating revenue for the second quarter of 2001 were 94.0 percent, compared with 91.6 percent for the second quarter of 2000.  This ratio for the first six months of 2001 was 94.0 percent compared with 92.6 percent for the same period of 2000.  The transportation of additional freight and additions to our fleet, along with the items discussed below, caused most expense categories to increase in 2001.  Purchased transportation expense increased slightly in the first six months of 2001.  The average number of independent contractors decreased from the first six months of 2000 to 2001, which was offset by an increase in the rate per mile paid to independent contractors.  Independent contractors are responsible for their own salaries, wages and benefits expense, fuel and fuel taxes expense, and supplies and maintenance expense.  Therefore, our expenses in these categories increased relative to revenue from the first six months of 2000 to the first six months of 2001 due to the decrease in independent contractors.  The average price of diesel fuel was higher in the first six months of 2001 than in the same period of 2000, causing fuel and fuel taxes expense to increase.  Higher insurance premiums and an increase in the frequency of accident and cargo claims caused insurance and claims expense for the first six months of 2001 to increase from the same period last year.  We expect our operating expenses as a percentage of revenue to remain at current levels for the remainder of 2001.

Interest expense in 2001 decreased for the second quarter and increased slightly for the first six months, compared with similar periods of 2000.  These fluctuations were caused by lower interest rates combined with a decrease for the second quarter and an increase for the first six months in our average long-term debt outstanding.  Our long-term debt is required to finance our planned revenue equipment additions.  We expect interest expense to remain at current levels for the remainder of 2001.

Our effective income tax rate was 38 percent for the first six months of 2001 and the prior year.  We expect our effective income tax rate to remain at 38 percent for the remainder of 2001.

We adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, on January 1, 2001 (see Note 3 to the financial statements).  The effect of this change as of January 1, 2001, was a pretax accumulated other comprehensive loss of $279,000 ($173,000 net of income tax benefit).  During the first six months of 2001, other comprehensive loss decreased by $149,000 ($92,000 net of income taxes) to reflect an unrealized gain on our swap agreements from January 1, 2001 to June 30, 2001.

In July 2001, the Financial Accounting Standards Board issued Statement No. 141, “Business Combinations,” and Statement No. 142, “Goodwill and Other Intangible Assets,” as discussed in Note 4 to the financial statements.  These statements are expected to have no impact on our results of operations or financial position.

Capital Resources and Liquidity

Net cash provided by our operating activities during the first six months of 2001 was $21,917,000.  We used $12,779,000 of the net cash to reduce long-term debt, along with $9,138,000 of the net cash to invest in revenue equipment and other assets during this period.  We have continued to invest in new, more efficient revenue equipment in 2001 and 2000.  Our cash management practice utilizes our unsecured committed credit facility to minimize both cash and debt balances.  Our operating profits, short turnover in accounts receivable and cash management practices allow us to effectively meet our working capital requirements.  We have not used and do not anticipate using short-term borrowings to satisfy working capital needs.  We believe our liquidity is adequate to meet expected near-term operating requirements.

Forward-Looking Information

This Quarterly Report on Form 10-Q contains certain forward-looking statements.  Any statements not of historical fact may be considered forward-looking statements.  Written words such as “may, ” “expect, ” “believe, ” “anticipate” or “estimate,” or other variations of these or similar words, identify such statements.  These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially, depending on a variety of factors, such as the industry driver shortage, the market for revenue equipment, fuel prices and general weather and economic conditions.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Effective January 1, 2001, we began recognizing unrealized gains and losses on commodity swap agreements used to hedge our exposure to diesel fuel price fluctuations.  The swap agreements are marked to market.  The effect of this change as of January 1, 2001, was a pretax accumulated other comprehensive loss of $279,000 ($173,000 net of income tax benefit).  During the first six months of 2001, other comprehensive loss decreased by $149,000 ($92,000 net of income taxes) to reflect an unrealized gain on our swap agreements from January 1, 2001 to June 30, 2001.

There have been no other significant changes since December 31, 2000, in market risk or market risk factors as discussed in the 2000 Annual Report to Shareholders.

PART II.  OTHER INFORMATION

ITEM 1.	Legal Proceedings.
	There are currently no material pending legal, governmental, administrative or other proceedings to which we are a party or of which any of our property is the subject which are unreserved.
ITEM 2.	Changes in Securities and Use of Proceeds.
	None
ITEM 3.	Defaults Upon Senior Securities.
	None
ITEM 4.	Submission of Matters to a Vote of Security Holders.
	Our annual meeting of stockholders was held on May 8, 2001.  The following items were voted upon at the annual meeting:
	(a)         Six incumbent directors were elected to serve one-year terms expiring at the annual meeting of stockholders to be held in 2002.  The following summarizes the votes cast for, votes cast against, and broker non-votes for each nominee:
	Nominee	Votes For	Votes Against	Broker Non-Votes
	Randolph L. Marten	3,996,828	36,297	-0-
	Darrell D. Rubel	3,996,961	36,164	-0-
	Larry B. Hagness	4,029,925	3,200	-0-
	Thomas J. Winkel	4,029,925	3,200	-0-
	Jerry M. Bauer	4,029,811	3,314	-0-
	Christine K. Marten	4,029,825	3,300	-0-
	(b)        The stockholders also approved the appointment of Arthur Andersen, LLP as our independent auditors for the year ending December 31, 2001, by a vote of 4,030,870 shares in favor, 826 shares opposed, and 1,429 shares abstaining.
ITEM 5.	Other Information.
	None
ITEM 6.	Exhibits and Reports on Form 8-K.
	a)          No exhibits are filed with this report.
	b)          No reports on Form 8-K have been filed during the quarter ended June 30, 2001.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	MARTEN TRANSPORT, LTD.
	(Registrant)
Dated:  August 10, 2001	By:	/s/ Darrell D. Rubel
		Darrell D. Rubel
		Executive Vice President and Treasurer
		(Chief Financial Officer)