UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM 10-Q
 _________________________________
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________ .

Commission File Number: 0-19582
_________________________________
OLD DOMINION FREIGHT LINE, INC.
(Exact name of registrant as specified in its charter)
 _________________________________
VIRGINIA
 
56-0751714
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
500 Old Dominion Way
Thomasville, North Carolina
 
27360
(Address of principal executive offices)
 
(Zip Code)
(336) 889-5000
(Registrant’s telephone number, including area code)
 _________________________________

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  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x     No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
o
 
 
 
 
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
 
 
 
Emerging growth company
o
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 Rule 12b-2 of the Exchange Act).    Yes  o    No  x
As of November 3, 2017 there were 82,375,945 shares of the registrant’s Common Stock ($0.10 par value) outstanding.



INDEX
Part I – FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
Part II – OTHER INFORMATION
 
 
 
 
 
 



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
 
September 30,
 
 
 
2017
 
December 31,
(In thousands, except share and per share data)
(Unaudited)
 
2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
78,091

 
$
10,171

Customer receivables, less allowances of $9,315 and $8,346, respectively
391,858

 
320,087

Other receivables
7,529

 
14,402

Prepaid expenses and other current assets
35,617

 
37,962

Total current assets
513,095

 
382,622

 
 
 
 
Property and equipment:
 
 
 
Revenue equipment
1,612,380

 
1,496,697

Land and structures
1,481,738

 
1,377,106

Other fixed assets
427,271

 
402,482

Leasehold improvements
8,654

 
8,699

Total property and equipment
3,530,043

 
3,284,984

Accumulated depreciation
(1,162,640
)
 
(1,043,582
)
Net property and equipment
2,367,403

 
2,241,402

 
 
 
 
Goodwill
19,463

 
19,463

Other assets
56,209

 
52,760

Total assets
$
2,956,170

 
$
2,696,247

 


Note: The Condensed Balance Sheet at December 31, 2016 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

















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

1


OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
(CONTINUED)
 
September 30,
 
 
 
2017
 
December 31,
(In thousands, except share and per share data)
(Unaudited)
 
2016
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
59,702

 
$
89,216

Compensation and benefits
151,406

 
129,170

Claims and insurance accruals
48,089

 
47,417

Other accrued liabilities
26,745

 
22,833

Income taxes payable
19,707

 

Current maturities of long-term debt
50,000

 

Total current liabilities
355,649

 
288,636

 
 
 
 
Long-term liabilities:
 
 
 
Long-term debt
45,000

 
104,975

Other non-current liabilities
194,091

 
178,879

Deferred income taxes
274,414

 
272,599

Total long-term liabilities
513,505

 
556,453

Total liabilities
869,154

 
845,089

 
 
 
 
Commitments and contingent liabilities


 


 
 
 
 
Shareholders’ equity:
 
 
 
Common stock - $0.10 par value, 140,000,000 shares authorized, 82,375,945 and 82,416,657 shares outstanding at September 30, 2017 and December 31, 2016, respectively
8,238

 
8,242

Capital in excess of par value
137,533

 
135,466

Retained earnings
1,941,245

 
1,707,450

Total shareholders’ equity
2,087,016

 
1,851,158

Total liabilities and shareholders’ equity
$
2,956,170

 
$
2,696,247



Note: The Condensed Balance Sheet at December 31, 2016 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.










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

2


OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
(In thousands, except share and per share data)
 
2017
 
2016
 
2017
 
2016
Revenue from operations
 
$
872,987

 
$
782,611

 
$
2,466,995

 
$
2,245,779

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Salaries, wages and benefits
 
461,799

 
425,076

 
1,320,207

 
1,234,369

Operating supplies and expenses
 
95,543

 
83,197

 
275,110

 
238,904

General supplies and expenses
 
28,785

 
22,010

 
79,940

 
65,930

Operating taxes and licenses
 
24,547

 
22,714

 
73,530

 
69,368

Insurance and claims
 
10,700

 
10,185

 
28,804

 
29,792

Communications and utilities
 
6,490

 
7,025

 
20,945

 
21,357

Depreciation and amortization
 
51,934

 
49,041

 
152,670

 
140,293

Purchased transportation
 
22,739

 
18,907

 
61,596

 
55,579

Building and office equipment rents
 
2,018

 
2,050

 
6,114

 
6,487

Miscellaneous expenses, net
 
4,557

 
5,002

 
15,650

 
13,312

Total operating expenses
 
709,112

 
645,207

 
2,034,566

 
1,875,391

 
 
 
 
 
 
 
 
 
Operating income
 
163,875

 
137,404

 
432,429

 
370,388

 
 
 
 
 
 
 
 
 
Non-operating expense (income):
 
 
 
 
 
 
 
 
Interest expense
 
555

 
1,131

 
1,792

 
3,378

Interest income
 
(228
)
 
(10
)
 
(332
)
 
(38
)
Other (income) expense, net
 
(977
)
 
6

 
(999
)
 
782

Total non-operating (income) expense
 
(650
)
 
1,127

 
461

 
4,122

 
 
 
 
 
 
 
 
 
Income before income taxes
 
164,525

 
136,277

 
431,968

 
366,266

 
 
 
 
 
 
 
 
 
Provision for income taxes
 
62,211

 
50,696

 
165,444

 
139,012

 
 
 
 
 
 
 
 
 
Net income
 
$
102,314

 
$
85,581

 
$
266,524

 
$
227,254

 
 
 
 
 
 
 
 
 
Earnings per share:
 
 
 

 
 
 
 
Basic
 
$
1.24

 
$
1.03

 
$
3.24

 
$
2.73

Diluted
 
$
1.24

 
$
1.03

 
$
3.23

 
$
2.73

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
82,286,295

 
82,742,070

 
82,317,244

 
83,357,449

Diluted
 
82,380,936

 
82,811,371

 
82,417,557

 
83,389,824

 
 
 
 
 
 
 
 
 
Dividends declared per share
 
$
0.10

 
$

 
$
0.30

 
$



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

3


OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Nine Months Ended
 
September 30,
(In thousands)
2017
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
266,524

 
$
227,254

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
152,670

 
140,293

Loss on sale of property and equipment
705

 
542

Share-based compensation
2,416

 
944

Other operating activities, net
(34,302
)
 
41,095

Net cash provided by operating activities
388,013

 
410,128

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchase of property and equipment
(288,840
)
 
(351,121
)
Proceeds from sale of property and equipment
9,637

 
4,571

Other investing, net
2,139

 

Net cash used in investing activities
(277,064
)
 
(346,550
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Principal payments under long-term debt agreements

 
(26,488
)
Net (payments) proceeds on revolving line of credit
(9,975
)
 
85,812

Payments for share repurchases
(8,013
)
 
(119,022
)
Dividends paid
(24,697
)
 

Other financing activities, net
(344
)
 
(338
)
Net cash used in financing activities
(43,029
)
 
(60,036
)
 
 
 
 
Increase in cash and cash equivalents
67,920

 
3,542

Cash and cash equivalents at beginning of period
10,171

 
11,472

Cash and cash equivalents at end of period
$
78,091

 
$
15,014














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

4


NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Significant Accounting Policies

Business

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services, which include ground and air expedited transportation and consumer household pickup and delivery, through a single integrated organization. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage, supply chain consulting and warehousing. We have one operating segment and the composition of our revenue is summarized below:
 
 
Three Months Ended 
 
Nine Months Ended
 
 
September 30,
 
September 30,
(In thousands)
 
2017
 
2016
 
2017
 
2016
LTL services
 
$
859,832

 
$
769,854

 
$
2,426,419

 
$
2,206,642

Other services
 
13,155

 
12,757

 
40,576

 
39,137

Total revenue
 
$
872,987

 
$
782,611


$
2,466,995


$
2,245,779


Basis of Presentation

The accompanying unaudited, interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and, in management’s opinion, contain all adjustments (consisting of normal recurring items) necessary for a fair presentation, in all material respects, of the financial position and results of operations for the periods presented. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.

The preparation of condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our operating results are subject to seasonal trends; therefore, the results of operations for the interim period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the subsequent quarterly period or the year ending December 31, 2017.

The condensed financial statements should be read in conjunction with the financial statements and related notes, which appear in our Annual Report on Form 10-K for the year ended December 31, 2016. There have been no significant changes in the accounting principles and policies, long-term contracts or estimates inherent in the preparation of the condensed financial statements of Old Dominion Freight Line, Inc. as previously described in our Annual Report on Form 10-K for the year ended December 31, 2016, other than those disclosed in this Form 10-Q.

Certain amounts in prior years have been reclassified to conform prior years’ financial statements to the current presentation.

Unless the context requires otherwise, references in these Notes to “Old Dominion,” the “Company,” “we,” “us” and “our” refer to Old Dominion Freight Line, Inc.


5



NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

Fair Values of Financial Instruments

The carrying values of financial instruments in current assets and current liabilities approximate their fair value due to the short maturities of these instruments. The carrying value of our revolving credit facility approximates fair value due to the variable interest rates of the facility that correlate with current market rates. The carrying value of our total long-term debt, including current maturities, was $95.0 million and $105.0 million at September 30, 2017 and December 31, 2016, respectively. The estimated fair value of our total long-term debt, including current maturities, was $98.2 million and $108.3 million at September 30, 2017 and December 31, 2016, respectively. The fair value measurement of our senior notes was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under our credit profile. Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2 under the three-level fair value hierarchy as established by the Financial Accounting Standards Board (the “FASB”).

Recent Accounting Pronouncements

In August 2016, the FASB issued Accounting Standards Update ("ASU") 2016-15, "Classification of Certain Cash Receipts and Cash Payments" (Topic 230) to address how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This ASU is intended to reduce diversity in practice in the classification of certain transactions on the statement of cash flows. The ASU is effective for public companies for fiscal years beginning after December 15, 2017, and early adoption is permitted. We early adopted the provisions of ASU 2016-15 in the third quarter of 2017 with retrospective application beginning January 1, 2017. The adoption resulted in proceeds from company-owned life insurance policies being classified as cash flows from investing activities, rather than cash flows from operating activities on our Condensed Statements of Cash Flows. The adoption did not have a material impact on our financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606). This ASU supersedes the previous revenue recognition requirements in ASC Topic 605-Revenue Recognition. In August 2015, the FASB issued ASU 2015-14, "Revenue from Contracts with Customers", which deferred the effective date for ASU 2014-09 by one year to fiscal years beginning after December 15, 2017 and also provided for the option to early adopt for fiscal years beginning after December 15, 2016. Transition methods under ASU 2014-09 must be through (i) retrospective application to each prior reporting period presented, or (ii) modified retrospective application with a cumulative effect adjustment at the date of initial application.

We are continuing to evaluate the impact of ASU 2014-09 on our financial reporting and disclosures, including but not limited to our accounting policies, internal controls and processes. We expect to complete our evaluation during the fourth quarter of 2017. We intend to adopt ASU 2014-09 beginning in 2018 using the modified retrospective transition method. Based on our current assessment, we do not anticipate ASU 2014-09 to have a material impact on our financial statements.

Note 2. Earnings Per Share

Basic earnings per share of the Company is computed by dividing net income by the daily weighted average number of shares of common stock outstanding for the period, excluding unvested restricted stock. Unvested restricted stock is included in common shares outstanding in the balance sheets. Diluted earnings per share is computed using the treasury stock method and includes the impact of shares of unvested restricted stock.

The following table provides a reconciliation of the number of common shares used in computing basic and diluted earnings per share:
 
 
Three Months Ended 
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
 
2017
 
2016
 
2017
 
2016
Weighted average shares outstanding - basic
 
82,286,295

 
82,742,070

 
82,317,244

 
83,357,449

Dilutive effect of share-based awards
 
94,641

 
69,301

 
100,313

 
32,375

Weighted average shares outstanding - diluted
 
82,380,936

 
82,811,371


82,417,557


83,389,824


6



NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


Note 3. Shareholders' Equity

Stock Repurchase Program

During the second quarter of 2016, we completed our stock repurchase program, previously announced on November 10, 2014, to repurchase up to an aggregate of $200.0 million of our outstanding common stock. On May 23, 2016, we announced that our Board of Directors had approved a new two-year stock repurchase program authorizing us to repurchase up to an aggregate of $250.0 million of our outstanding common stock (the “2016 Repurchase Program”). Under the 2016 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase program are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.

We repurchased 9,305 shares of our common stock for $0.9 million and 91,921 shares of our common stock for $8.0 million during the three and nine months ended September 30, 2017, respectively. As of September 30, 2017, we had $192.0 million remaining authorized under the 2016 Repurchase Program.

Dividends

On February 2, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on March 20, 2017 to shareholders of record at the close of business on March 6, 2017. On May 17, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on June 20, 2017 to shareholders of record at the close of business on June 6, 2017. On July 31, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on September 20, 2017 to shareholders of record at the close of business on September 6, 2017.

Note 4. Long-Term Debt

Long-term debt consisted of the following:
(In thousands)
September 30,
2017
 
December 31,
2016
Senior notes
$
95,000

 
$
95,000

Revolving credit facility

 
9,975

Total long-term debt
95,000

 
104,975

Less: Current maturities
(50,000
)
 

Total maturities due after one year
$
45,000

 
$
104,975


We had one unsecured senior note agreement with an amount outstanding of $95.0 million at each of September 30, 2017 and December 31, 2016. Our unsecured senior note agreement calls for two scheduled principal payments of $50.0 million and $45.0 million on January 3, 2018 and January 3, 2021, respectively. Interest rates on the January 3, 2018 and January 3, 2021 scheduled principal payments are 4.00% and 4.79%, respectively. The effective average interest rate on our outstanding senior note agreement was 4.37% at each of September 30, 2017 and December 31, 2016.

On December 15, 2015, we entered into an amended and restated credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") serving as administrative agent for the lenders (the "Credit Agreement"). The Credit Agreement originally provided for a five-year, $250.0 million senior unsecured revolving line of credit and a $100.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $350.0 million.

On September 9, 2016, we exercised a portion of the accordion feature and entered into an amendment to the Credit Agreement to increase the aggregate commitments from existing lenders by $50.0 million to an aggregate of

7



NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

$300.0 million. Of the $300.0 million line of credit commitments under the Credit Agreement, as amended, up to $100.0 million may be used for letters of credit and $30.0 million may be used for borrowings under the Wells Fargo Sweep Plus Loan Program (the "Sweep Program"). We utilize the Sweep Program to manage our daily cash needs, as it automatically initiates borrowings to cover overnight cash requirements primarily for working capital needs.

At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.0% to 1.50%; or (ii) a Base Rate plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.0% to 0.5%. Loans under the Sweep Program bear interest at the LIBOR plus applicable margin rate. Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.125% to 0.2% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement. Wells Fargo, as administrative agent, also receives an annual fee for providing administrative services.

For each of the three- and nine-month periods ended September 30, 2017 and 2016, the applicable margin on LIBOR loans was 1.0% and commitment fees were 0.125% under the Credit Agreement. There were $71.4 million and $74.6 million of outstanding letters of credit at September 30, 2017 and December 31, 2016, respectively. Letter of credit fees remained at 1.0% during each of the three- and nine-month periods ended September 30, 2017 and 2016.

Note 5. Commitments and Contingencies

We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance.  Certain of these matters include class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.


8


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services, which include ground and air expedited transportation and consumer household pickup and delivery, through a single integrated organization. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage, supply chain consulting and warehousing. More than 97% of our revenue has historically been derived from transporting LTL shipments for our customers, whose demand for our services is generally tied to industrial production and the overall health of the U.S. domestic economy.

In analyzing the components of our revenue, we monitor changes and trends in our LTL services using the following key metrics, which exclude certain transportation and logistics services where pricing is generally not determined by weight, commodity or distance:

LTL Revenue Per Hundredweight - This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc. Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight. Fuel surcharges, accessorial charges, revenue adjustments and revenue for undelivered freight are included in this measurement. Revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy; however, we believe including it in our revenue per hundredweight metrics results in a better indicator of changes in this metric by matching total billed revenue with the corresponding weight of those shipments.

Revenue per hundredweight is a commonly-used indicator of pricing trends, but this metric can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment, length of haul and the class, or mix, of our freight. As a result, changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates.

LTL Weight Per Shipment - Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand for our customers' products and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload and intermodal, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.
  
Average Length of Haul - We consider lengths of haul less than 500 miles to be regional traffic, lengths of haul between 500 miles and 1,000 miles to be inter-regional traffic, and lengths of haul in excess of 1,000 miles to be national traffic. This metric is used to analyze our tonnage and pricing trends for shipments with similar characteristics, and also allows for comparison with other transportation providers serving specific markets. By analyzing this metric, we can determine the success and growth potential of our service products in these markets. Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight.

Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle. We are committed to a disciplined yield management process that focuses on individual account profitability. We believe yield management and improvements in efficiency are key components in our ability to produce profitable growth.

9



Our primary cost elements are direct wages and benefits associated with the movement of freight, operating supplies and expenses, which include diesel fuel, and depreciation of our equipment fleet and service center facilities. We gauge our overall success in managing costs by monitoring our operating ratio, a measure of profitability calculated by dividing total operating expenses by revenue, which also allows for industry-wide comparisons with our competition.

We continually upgrade our technological capabilities to improve our customer service and lower our operating costs. Our technology provides our customers with visibility of their shipments throughout our network, increases the productivity of our workforce and provides key metrics that we use to monitor and enhance our processes.

The following table sets forth, for the periods indicated, expenses and other items as a percentage of revenue from operations:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Revenue from operations
100.0
 %
 
100.0
%
 
100.0
 %
 
100.0
%
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
Salaries, wages and benefits
52.9

 
54.3

 
53.5

 
55.0

Operating supplies and expenses
11.0

 
10.6

 
11.2

 
10.6

General supplies and expenses
3.3

 
2.8

 
3.2

 
2.9

Operating taxes and licenses
2.8

 
2.9

 
3.0

 
3.1

Insurance and claims
1.2

 
1.3

 
1.2

 
1.3

Communications and utilities
0.7

 
0.9

 
0.9

 
1.0

Depreciation and amortization
6.0

 
6.3

 
6.2

 
6.2

Purchased transportation
2.6

 
2.4

 
2.5

 
2.5

Building and office equipment rents
0.2

 
0.3

 
0.2

 
0.3

Miscellaneous expenses, net
0.5

 
0.6

 
0.6

 
0.6

Total operating expenses
81.2

 
82.4

 
82.5

 
83.5

 
 
 
 
 
 
 
 
Operating income
18.8

 
17.6

 
17.5

 
16.5

 
 
 
 
 
 
 
 
Interest expense, net *
0.0

 
0.2

 
0.1

 
0.2

Other (income) expense, net
(0.1
)
 
0.0

 
(0.1
)
 
0.0

 
 
 
 
 
 
 
 
Income before income taxes
18.9

 
17.4

 
17.5

 
16.3

 
 
 
 
 
 
 
 
Provision for income taxes
7.2

 
6.5

 
6.7

 
6.2

 
 
 
 
 
 
 
 
Net income
11.7
 %
 
10.9
%
 
10.8
 %
 
10.1
%
*
For the purpose of this table, interest expense is presented net of interest income.




10


Results of Operations

Key financial and operating metrics for the three- and nine-month periods ended September 30, 2017 and 2016 are presented below:
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
%
Change
 
2017
 
2016
 
%
Change
Work days
63

 
64

 
(1.6
)%
 
191

 
192

 
(0.5
)%
Revenue (in thousands)
$
872,987

 
$
782,611

 
11.5
 %
 
$
2,466,995

 
$
2,245,779

 
9.9
 %
Operating ratio
81.2
%
 
82.4
%
 


 
82.5
%
 
83.5
%
 


Net income (in thousands)
$
102,314

 
$
85,581

 
19.6
 %
 
$
266,524

 
$
227,254

 
17.3
 %
Diluted earnings per share
$
1.24

 
$
1.03

 
20.4
 %
 
$
3.23

 
$
2.73

 
18.3
 %
LTL tons (in thousands)
2,190

 
2,049

 
6.9
 %
 
6,308

 
5,997

 
5.2
 %
LTL shipments (in thousands)
2,774

 
2,641

 
5.0
 %
 
8,039

 
7,727

 
4.0
 %
LTL weight per shipment (lbs.)
1,579

 
1,551

 
1.8
 %
 
1,569

 
1,552

 
1.1
 %
LTL revenue per hundredweight
$
19.47

 
$
18.79

 
3.6
 %
 
$
19.28

 
$
18.44

 
4.6
 %
LTL revenue per shipment
$
307.45

 
$
291.51

 
5.5
 %
 
$
302.52

 
$
286.23

 
5.7
 %
Average length of haul (miles)
919

 
925

 
(0.6
)%
 
918

 
930

 
(1.3
)%

Our financial results for the third quarter and first nine months of 2017 benefited from growth in our revenue. We believe our results were positively impacted by the strengthening economy and an upward trend in the pricing environment during a period of tightening industry capacity.  We believe our consistent investments in our service center network and equipment provide us with the capacity needed to serve our customers’ increasing freight demands and win market share. The increased freight density in our service center network and improvement in yield, combined with our continued focus on managing our costs, led to the 120 and 100 basis-point improvements in our operating ratio for the third quarter and first nine months of 2017, respectively, over the same periods of 2016. As a result, our net income and earnings per diluted share each increased by double-digit percentages in the third quarter and first nine months of 2017 as compared to the third quarter and first nine months of 2016.

Revenue

Revenue increased $90.4 million and $221.2 million in the third quarter and first nine months of 2017, respectively, as compared to the third quarter and first nine months of 2016, due primarily to increases in LTL tons and LTL revenue per hundredweight, despite one less workday in the third quarter and first nine months of 2017. The increases in LTL tons during the third quarter and first nine months of 2017 were due to increases in LTL shipments and LTL weight per shipment as compared to the respective periods of 2016. LTL tonnage per day increased 8.6% and 5.7% in the third quarter and first nine months of 2017, respectively. We believe these increases were driven by an improving economic environment and increased demand for the consistent levels of premium service that we provide to our customers.

LTL revenue per hundredweight increased 3.6% and 4.6% in the third quarter and first nine months of 2017, respectively, as compared to the third quarter and first nine months of 2016, despite the downward pressure on these metrics created by the increase in our LTL weight per shipment and the decline in our average length of haul. We believe these increases in LTL revenue per hundredweight reflect our focus on yield management and an increase in fuel surcharges between the periods compared. Excluding fuel surcharges, LTL revenue per hundredweight increased 2.4% and 2.9% in the third quarter and first nine months of 2017, respectively, as compared to the same periods in 2016.

Most of our tariffs and contracts provide for a fuel surcharge that is generally indexed to the diesel fuel prices published by the U.S. Department of Energy ("DOE") that reset each week. Our fuel surcharges are designed to offset fluctuations in the cost of petroleum-based products and are one of the many components included in the overall negotiated price we charge for our services. As a percent of revenue, fuel surcharges increased to 10.8% for

11


the third quarter and first nine months of 2017, as compared to 9.8% and 9.4% for the same periods of 2016. These increases were due primarily to an increase in the average price per gallon for diesel fuel during the third quarter and first nine months of 2017 from the comparable periods of 2016. We regularly monitor the components of our pricing, including base freight rates and fuel surcharges. We also address any individual account profitability issues with our customers as part of our effort to minimize the negative impact on our profitability that would likely result from a rapid and significant change in any of our operating expenses.

Fourth Quarter 2017 Update

LTL tons per day increased 13.7% in October 2017 due primarily to an 11.1% increase in LTL shipments per day and a 2.3% increase in LTL weight per shipment as compared to October 2016. For October 2017, LTL revenue per hundredweight increased approximately 4.4% as compared to the same month last year.

Operating Costs and Other Expenses

Salaries, wages and benefits for the third quarter of 2017 increased $36.7 million, or 8.6%, over the prior-year comparable quarter due to a $29.0 million increase in the costs attributable to salaries and wages and a $7.7 million increase in benefit costs. Salaries, wages and benefits for the first nine months of 2017 increased $85.8 million, or 7.0%, over the prior-year comparable period due to a $65.6 million increase in the costs attributable to salaries and wages and a $20.2 million increase in benefit costs. We intend to hire additional employees during the fourth quarter of 2017 to support our continued growth, which is expected to drive additional increases in employee-related costs.

The increase in the costs attributable to salaries and wages was due primarily to increases in the number of full-time employees and increases in our employees’ wage rates.  Our average number of full-time employees increased 4.4% and 1.3% in the third quarter of 2017 and the first nine months of 2017, respectively, as compared to the same periods of 2016, to support our shipment growth. We also provided annual wage increases to our employees at the beginning of both September 2016 and 2017. Although our costs increased, our productive labor improved as a percent of revenue to 27.9% and 28.1% of revenue in the third quarter and first nine months of 2017, respectively, from 28.5% and 28.9% of revenue for the same periods of 2016.

The increase in the costs attributable to employee benefits for the third quarter and first nine months of 2017 was due primarily to the increases in our average number of full-time employees and higher wage rates in 2017 as compared to 2016. Our employee benefit costs also included increased workers' compensation expense, partially offset by lower group health and dental plan costs as compared to the third quarter and first nine months of 2016. Our employee benefit costs, as a percent of salaries and wages, decreased to 33.7% and 33.4% for the third quarter and first nine months of 2017, respectively, from 34.4% and 33.6% for the comparable periods of 2016.

Operating supplies and expenses increased $12.3 million and $36.2 million in the third quarter and first nine months of 2017, respectively, as compared to the same prior-year periods. The cost of diesel fuel, excluding fuel taxes, represents the largest component of operating supplies and expenses, and can vary based on both average price per gallon and consumption. The increase in diesel fuel costs, excluding fuel taxes, was due primarily to a 17.0% and 23.3% increase in our average cost per gallon of diesel fuel in the third quarter and first nine months of 2017, respectively, as compared to the same periods of 2016. In addition, our gallons consumed increased 4.2% and 2.0% in the third quarter and first nine months of 2017, respectively, as compared to the same prior-year periods due primarily to increases in miles driven. We do not use diesel fuel hedging instruments and our costs are therefore subject to market price fluctuations.

General supplies and expenses increased $6.8 million and $14.0 million in the third quarter and first nine months of 2017, respectively, as compared to the same prior-year periods. These increases were due primarily to an increase in our advertising and marketing costs and higher costs for technology and related support.

Depreciation and amortization increased $2.9 million and $12.4 million in the third quarter and first nine months of 2017, respectively, as compared to the same prior-year periods due primarily to the assets acquired as part of our 2017 capital expenditure plan. We believe depreciation will continue to increase in future periods as we execute upon the remainder of our 2017 capital expenditure program. While our investments in real estate, equipment and technology can increase our costs in the short-term, we remain committed to investing in our business to support our continued long-term growth strategy.


12


Our effective tax rate for the third quarter and first nine months of 2017 was 37.8% and 38.3%, respectively, as compared to 37.2% and 38.0%, respectively, for each of the same prior-year periods. Our effective tax rate generally exceeds the federal statutory rate of 35% due to the impact of state taxes.

Liquidity and Capital Resources

A summary of our cash flows is presented below:
 
Nine Months Ended
 
September 30,
(In thousands)
2017
 
2016
Cash and cash equivalents at beginning of period
$
10,171

 
$
11,472

Cash flows provided by (used in):
 
 
 
Operating activities
388,013

 
410,128

Investing activities
(277,064
)
 
(346,550
)
Financing activities
(43,029
)
 
(60,036
)
Increase in cash and cash equivalents
67,920

 
3,542

Cash and cash equivalents at end of period
$
78,091

 
$
15,014


Cash flows provided by operating activities decreased during the first nine months of 2017 as compared to 2016 due primarily to fluctuations in accounts receivable and other working capital accounts. The net decrease from these fluctuations was partially offset by the increase in net income.

The change in cash flows used in investing activities during the first nine months of 2017 as compared to 2016 was due to the timing of equipment purchases under our capital expenditure plans. Changes in our capital expenditures are more fully described below in “Capital Expenditures.”

The change in cash flows used in financing activities during the first nine months of 2017 as compared to 2016 was due primarily to fluctuations in capital returned to shareholders and fluctuations in our long-term debt, which includes our senior unsecured revolving line of credit. Our return of capital to shareholders is more fully described below under "Stock Repurchase Program" and "Dividends to Shareholders," respectively.

We have three primary sources of available liquidity: cash and cash equivalents, cash flows from operations and available borrowings under our senior unsecured revolving credit agreement, which are described below. We believe we also have sufficient access to debt and equity markets to provide other sources of liquidity, if needed.

Capital Expenditures

The table below sets forth our net capital expenditures for property and equipment, including capital assets obtained through capital leases, for the nine-month period ended September 30, 2017 and the years ended December 31, 2016, 2015 and 2014:
 
September 30,
 
December 31,
(In thousands)
2017
2016
 
2015
 
2014
Land and structures
$
109,257

 
$
161,646

 
$
153,460

 
$
117,487

Tractors
117,924

 
114,166

 
128,911

 
91,750

Trailers
27,227

 
94,040

 
114,209

 
80,853

Technology
13,309

 
18,428

 
32,044

 
38,264

Other equipment and assets
21,123

 
29,661

 
36,987

 
39,326

Proceeds from sales
(9,637
)
 
(10,541
)
 
(24,442
)
 
(21,866
)
Total
$
279,203

 
$
407,400

 
$
441,169

 
$
345,814


Our capital expenditures varied based upon the projected increase in the number and size of our service center facilities necessary to support our plan for long-term growth, our planned tractor and trailer replacement

13


cycle and forecasted tonnage and shipment growth. Expenditures for land and structures can be dependent upon the availability of land in the geographic areas where we are looking to expand. We expect to continue to maintain a high level of capital expenditures in order to support our long-term plan for market share growth.

We currently estimate capital expenditures will be approximately $400 million for the year ending December 31, 2017. Approximately $185 million is allocated for the purchase of service center facilities, construction of new service center facilities or expansion of existing service center facilities, subject to the availability of suitable real estate and the timing of construction projects; approximately $170 million is allocated for the purchase of tractors and trailers; and approximately $45 million is allocated for investments in technology and other assets. We expect to fund these capital expenditures primarily through cash flows from operations and our existing cash and cash equivalents. We believe our current sources of liquidity will be sufficient to satisfy our expected capital expenditures.

Dividends to Shareholders

On February 2, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on March 20, 2017 to shareholders of record at the close of business on March 6, 2017. On May 17, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on June 20, 2017 to shareholders of record at the close of business on June 6, 2017. On July 31, 2017, we announced that our Board of Directors had declared a quarterly cash dividend of $0.10 per share, which was paid on September 20, 2017 to shareholders of record at the close of business on September 6, 2017.

Although we intend to pay a quarterly cash dividend on our common stock for the foreseeable future, the declaration of any future dividend is subject to approval by our Board of Directors, and is restricted by applicable state law limitations on distributions to shareholders, as well as certain covenants under our revolving credit facility. We anticipate that any future quarterly cash dividends will be funded through cash flows from operations and, if needed, borrowings under our revolving credit facility. We did not declare or pay a dividend on our common stock in 2016 or 2015.

Stock Repurchase Program

During the second quarter of 2016, we completed our stock repurchase program, previously announced on November 10, 2014, to repurchase up to an aggregate of $200.0 million of our outstanding common stock. On May 23, 2016, we announced that our Board of Directors had approved a new two-year stock repurchase program authorizing us to repurchase up to an aggregate of $250.0 million of our outstanding common stock (the “2016 Repurchase Program”). Under the 2016 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase program are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock. As of September 30, 2017, we had $192.0 million remaining authorized under the 2016 Repurchase Program.

Financing Agreements

We had one unsecured senior note agreement with an amount outstanding of $95.0 million at each of September 30, 2017 and December 31, 2016. Our unsecured senior note agreement calls for two scheduled principal payments of $50.0 million and $45.0 million on January 3, 2018 and January 3, 2021, respectively. Interest rates on the January 3, 2018 and January 3, 2021 scheduled principal payments are 4.00% and 4.79%, respectively. The effective average interest rate on our outstanding senior note agreement was 4.37% at each of September 30, 2017 and December 31, 2016.

On December 15, 2015, we entered into an amended and restated credit agreement with Wells Fargo Bank, National Association ("Wells Fargo") serving as administrative agent for the lenders (the "Credit Agreement"). The Credit Agreement originally provided for a five-year, $250.0 million senior unsecured revolving line of credit and a $100.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $350.0 million.

On September 9, 2016, we exercised a portion of the accordion feature and entered into an amendment to the Credit Agreement to increase the aggregate commitments from existing lenders by $50.0 million to an aggregate of $300.0 million. Of the $300.0 million line of credit commitments under the Credit Agreement, as amended, up to

14


$100.0 million may be used for letters of credit and $30.0 million may be used for borrowings under the Wells Fargo Sweep Plus Loan Program (the "Sweep Program"). We utilize the Sweep Program to manage our daily cash needs, as it automatically initiates borrowings to cover overnight cash requirements primarily for working capital needs.

The amounts outstanding and available borrowing capacity under the Credit Agreement are presented below:

(In thousands)
September 30,
 
December 31,
 
2017
 
2016
Facility limit
$
300,000

 
$
300,000

Line of credit borrowings

 
(9,975
)
Outstanding letters of credit
(71,368
)
 
(74,611
)
Available borrowing capacity
$
228,632


$
215,414


With the exception of borrowings pursuant to the Credit Agreement, interest rates are fixed on all of our debt instruments. Therefore, short-term exposure to fluctuations in interest rates is limited to our line of credit facility. We do not currently use interest rate derivative instruments to manage exposure to interest rate changes.

Our senior note agreement and Credit Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. Any future wholly-owned material domestic subsidiaries of the Company would be required to guarantee payment of all of our obligations under these agreements. The Credit Agreement also includes a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default are ongoing (or would be caused by such restricted payment).

A significant decrease in demand for our services could limit our ability to generate cash flow and affect profitability. Most of our debt agreements have covenants that require stated levels of financial performance, which if not achieved could cause acceleration of the payment schedules. As of September 30, 2017, we were in compliance with these covenants. We do not anticipate a significant decline in business levels or financial performance that would cause us to violate any such covenants in the future, and we believe the combination of our existing Credit Agreement along with our additional borrowing capacity will be sufficient to meet foreseeable seasonal and long-term capital needs.

Critical Accounting Policies

In preparing our condensed financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2016 that affect judgments and estimates of amounts recorded for certain assets, liabilities, revenue and expenses.

Seasonality

Our tonnage levels and revenue mix are subject to seasonal trends common in our industry, although other factors, such as macroeconomic or freight mix changes, could cause variation in these trends. Operating margins in the first and fourth quarters are typically lower than those during the second and third quarters due to fewer shipments during the winter months. Harsh winter weather or natural disasters, such as hurricanes, tornadoes and floods, can also adversely impact our performance by reducing demand and increasing operating expenses. We believe seasonal trends will continue to impact our business.

Environmental Regulation

We are subject to various federal, state and local environmental laws and regulations that focus on, among other things: the emission and discharge of hazardous materials or waste into the environment or their presence at our properties or in our vehicles; fuel storage tanks; transportation of certain materials; and the discharge or retention of storm water. Under specific environmental laws, we could also be held responsible for any costs relating to contamination at our past or present facilities and at third-party waste disposal sites, as well as costs associated with clean-up of accidents involving our vehicles. We do not believe that the cost of future compliance with current environmental laws or regulations will have a material adverse effect on our operations, financial condition,

15


competitive position or capital expenditures for the remainder of 2017 or fiscal year 2018. However, future changes to laws or regulations may adversely affect our operations and could result in unforeseen costs to our business.

Forward-Looking Information

Forward-looking statements appear in this report, including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other written and oral statements made by or on behalf of us. These forward-looking statements include, but are not limited to, statements relating to our goals, strategies, expectations, competitive environment, regulation, availability of resources, future events and future financial performance. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements typically can be identified by such words as “anticipate,” “estimate,” “forecast,” “project,” “intend,” “expect,” “believe,” “should,” “could,” “may” or other similar words or expressions. We caution readers that such forward-looking statements involve risks and uncertainties, including, but not limited to, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2016 and in other reports and statements that we file with the SEC. Such forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied herein, including, but not limited to, the following:

the competitive environment with respect to industry capacity and pricing, including the use of fuel surcharges, which could negatively impact our total overall pricing strategy and our ability to cover our operating expenses;
our ability to collect fuel surcharges and the effectiveness of those fuel surcharges in mitigating the impact of fluctuating prices for diesel fuel and other petroleum-based products;
the negative impact of any unionization, or the passage of legislation or regulations that could facilitate unionization, of our employees;
the challenges associated with executing our growth strategy, including our ability to successfully consummate and integrate any acquisitions;
changes in our goals and strategies, which are subject to change at any time at our discretion;
various economic factors such as recessions, downturns in the economy, global uncertainty and instability, changes in U.S. social, political, and regulatory conditions or a disruption of financial markets, which may decrease demand for our services;
increases in driver compensation or difficulties attracting and retaining qualified drivers to meet freight demand;
our exposure to claims related to cargo loss and damage, property damage, personal injury, workers' compensation, group health and group dental, including increased premiums, adverse loss development, increased self-insured retention levels and claims in excess of insured coverage levels;
cost increases associated with employee benefits, including costs associated with employee healthcare plans;
the availability and cost of capital for our significant ongoing cash requirements;
the availability and cost of new equipment and replacement parts, including regulatory changes and supply constraints that could impact the cost of these assets;
decreases in demand for, and the value of, used equipment;
the availability and cost of diesel fuel;
the costs and potential liabilities related to compliance with, or violations of, existing or future governmental laws and regulations, including environmental laws, engine emissions standards, hours-of-service for our drivers, driver fitness requirements and new safety standards for drivers and equipment;
the costs and potential liabilities related to various legal proceedings and claims that have arisen in the ordinary course of our business, some of which include class-action allegations;
the costs and potential liabilities related to governmental proceedings, inquiries, notices or investigations;
the costs and potential liabilities related to our international business relationships;
the costs and potential adverse impact of compliance with, or violations of, current and future rules issued by the Department of Transportation, the Federal Motor Carrier Safety Administration (the “FMCSA”) and other regulatory agencies;
the costs and potential adverse impact of compliance associated with addressing interoperability between legacy electronic automatic on-board recording devices and electronic logging devices (“ELDs”) that comply with FMCSA’s ELD regulations and guidance;
seasonal trends in the less-than-truckload industry, including harsh weather conditions and disasters;
our dependence on key employees;
the concentration of our stock ownership with the Congdon family;

16


the costs and potential adverse impact associated with future changes in accounting standards or practices;
potential costs associated with cyber incidents and other risks, including system failure, security breach, disruption by malware or other damage;
failure to keep pace with developments in technology, any disruption to our technology infrastructure, or failures of essential services upon which our technology platforms rely, which could cause us to incur costs or result in a loss of business;
the costs and potential adverse impact associated with transitional challenges in upgrading or enhancing our technology systems;
damage to our reputation through unfavorable publicity;
the costs and potential adverse impact of compliance with anti-terrorism measures on our business;
dilution to existing shareholders caused by any issuance of additional equity;
the impact of a quarterly cash dividend or the failure to declare future cash dividends;
fluctuations in the market value of our common stock;
the impact of certain provisions in our articles of incorporation, bylaws, and Virginia law that could discourage, delay or prevent a change in control of us or a change in our management; and
other risks and uncertainties described in our most recent Annual Report on Form 10-K and other filings with the SEC.

Our forward-looking statements are based upon our beliefs and assumptions using information available at the time the statements are made. We caution the reader not to place undue reliance on our forward-looking statements (i) as these statements are neither a prediction nor a guarantee of future events or circumstances and (ii) the assumptions, beliefs, expectations and projections about future events may differ materially from actual results. We undertake no obligation to publicly update any forward-looking statement to reflect developments occurring after the statement is made, except as otherwise required by law.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to our market risk exposures since our most recent fiscal year end. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Item 4. Controls and Procedures

a)
Evaluation of disclosure controls and procedures

As of the end of the period covered by this quarterly report, our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation of the effectiveness of our disclosure controls and procedures in accordance with Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, and (b) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

b)
Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


17


PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance.  Certain of these matters include class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.

Item 1A. Risk Factors

In addition to the other information set forth in this report and in our other reports and statements that we file with the SEC, including our quarterly reports on Form 10-Q, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, which could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.

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

The following table provides information regarding our repurchases of our common stock during the third quarter of 2017:
 ISSUER PURCHASES OF EQUITY SECURITIES
 
 
 
 
 
 
 
 
 
 
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of Publicly Announced Programs
 
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
 
 
July 1-31, 2017
 
1,651
 
$
94.81

 
1,651

 
$
192,680,542

August 1-31, 2017
 
7,654
 
$
94.21

 
7,654

 
$
191,959,458

September 1-30, 2017
 
 
$

 

 
$
191,959,458

Total
 
9,305
 
$
94.32

 
9,305

 
 
 
On May 23, 2016, we announced that our Board of Directors had approved a two-year stock repurchase program authorizing us to repurchase up to an aggregate of $250.0 million of our outstanding common stock (the “2016 Repurchase Program”). Under the 2016 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase program are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.


18


Item 6. Exhibits
Exhibit No.
Description
 
 
31.1
 
 
31.2
 
 
32.1
 
 
32.2
 
 
101
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 6, 2017, formatted in XBRL (eXtensible Business Reporting Language) includes: (i) the Condensed Balance Sheets at September 30, 2017 and December 31, 2016, (ii) the Condensed Statements of Operations for the three and nine months ended September 30, 2017 and 2016, (iii) the Condensed Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (iv) the Notes to the Condensed Financial Statements
 
 
 
 
 

Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 0-19582.

19


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.
 
 
 
 
 
 
 
 
 
OLD DOMINION FREIGHT LINE, INC.

 
 
 
 
 
DATE:
November 6, 2017
 
 
/s/  ADAM N. SATTERFIELD    
 
 
 
 
Adam N. Satterfield
 
 
 
 
Senior Vice President - Finance and Chief Financial Officer
(Principal Financial Officer)
 
 
 
 
 
DATE:
November 6, 2017
 
 
/s/  KIMBERLY S. MAREADY       
 
 
 
 
Kimberly S. Maready
 
 
 
 
Vice President - Accounting and Finance
(Principal Accounting Officer)

20


EXHIBIT INDEX
TO QUARTERLY REPORT ON FORM 10-Q
Exhibit No.
Description
 
 
31.1
 
 
31.2
 
 
32.1
 
 
32.2
 
 
101
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed on November 6, 2017, formatted in XBRL (eXtensible Business Reporting Language) includes: (i) the Condensed Balance Sheets at September 30, 2017 and December 31, 2016, (ii) the Condensed Statements of Operations for the three and nine months ended September 30, 2017 and 2016, (iii) the Condensed Statements of Cash Flows for the nine months ended September 30, 2017 and 2016, and (iv) the Notes to the Condensed Financial Statements
 
 
 
 
 

Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 0-19582.


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