FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
1730 WESTCHESTER DRIVE
HIGH POINT, NC 27262
(Address of principal executive offices)
TELEPHONE NUMBER (336) 889-5000
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 .
--- ---
As of May 9, 2000, there were 8,312,840 shares of the registrant's Common
Stock ($.10 par value) outstanding.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTER ENDED
---------------------------------------
MARCH 31, March 31,
2000 1999
(In thousands, except share data) (UNAUDITED) (Unaudited)
- ----------------------------------------------------------------------------------------------------------
Revenue from operations $ 112,799 $ 99,346
Operating expenses:
Salaries, wages and benefits 67,744 60,878
Purchased transportation 4,750 3,319
Operating supplies and expenses 12,497 8,011
Depreciation and amortization 6,455 6,314
Building and office equipment rents 1,909 1,854
Operating taxes and licenses 4,626 4,426
Insurance and claims 2,770 2,548
Communications and utilities 2,100 1,925
General supplies and expenses 4,206 3,755
Miscellaneous expenses 1,019 828
----------------- -----------------
Total operating expenses 108,076 93,858
----------------- -----------------
Operating income 4,723 5,488
Other deductions:
Interest expense, net 899 1,261
Other expense, net 9 245
----------------- -----------------
Total other deductions 908 1,506
----------------- -----------------
Income before income taxes 3,815 3,982
Provision for income taxes 1,488 1,513
----------------- -----------------
Net income $ 2,327 $ 2,469
================= =================
Basic and diluted earnings per share $ 0.28 $ 0.30
Weighted average shares outstanding:
Basic 8,312,840 8,312,196
Diluted 8,316,555 8,315,057
The accompanying notes are an integral part of these financial statements.
2
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, December 31,
2000 1999
(In thousands, except share data) (UNAUDITED) (Audited)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 950 $ 781
Customer receivables, less allowances of $6,561
and $6,495, respectively 58,291 55,077
Other receivables 641 1,067
Tires on equipment 6,144 6,428
Prepaid expenses 6,720 10,631
Deferred income taxes 2,270 2,270
------------------ --------------------
Total current assets 75,016 76,254
Property and equipment:
Revenue equipment 179,323 178,301
Land and structures 67,149 68,972
Other equipment 40,161 31,557
Leasehold improvements 4,392 4,381
------------------ --------------------
Total property and equipment 291,025 283,211
Less accumulated depreciation and amortization (122,011) (116,249)
------------------ --------------------
Net property and equipment 169,014 166,962
Other assets 14,691 14,363
------------------ --------------------
Total assets $ 258,721 $ 257,579
================== ====================
The accompanying notes are an integral part of these financial statements.
3
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
MARCH 31, December 31,
2000 1999
(In thousands, except share data) (UNAUDITED) (Audited)
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,164 $ 22,944
Compensation and benefits 12,446 11,352
Claims and insurance accruals 12,364 12,548
Other accrued liabilities 3,642 2,927
Income taxes payable 1,202 -
Current maturities of long-term debt 24,083 21,811
------------------ --------------------
Total current liabilities 72,901 71,582
Long-term debt 40,731 43,059
Other non-current liabilities 10,926 11,102
Deferred income taxes 20,798 20,798
------------------ --------------------
Total long-term liabilities 72,455 74,959
Stockholders' equity:
Common stock - $.10 par value, 25,000,000 shares
authorized, 8,312,840 outstanding 831 831
Capital in excess of par value 23,907 23,907
Retained earnings 88,627 86,300
------------------ --------------------
Total stockholders' equity 113,365 111,038
Commitments and contingencies - -
------------------ --------------------
Total liabilities and stockholders' equity $ 258,721 $ 257,579
================== ====================
The accompanying notes are an integral part of these financial statements.
4
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTER ENDED MARCH 31,
----------------------------------
2000 1999
(In thousands) (UNAUDITED) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 2,327 $ 2,469
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,455 6,314
Deferred income taxes - 756
Loss (gain) on sale of property and equipment 11 (51)
Changes in assets and liabilities:
Customer and other receivables, net (2,788) (1,603)
Tires on equipment 284 216
Prepaid expenses and other assets 3,473 3,275
Accounts payable (3,780) (10,627)
Compensation, benefits and other accrued liabilities 1,809 5,946
Claims and insurance accruals (453) 446
Income taxes payable 1,202 343
Other liabilities 93 173
--------------- ---------------
Net cash provided by operating activities 8,633 7,657
--------------- ---------------
Cash flows from investing activities:
Acquisition of business assets, net - (1,100)
Purchase of property and equipment (8,467) (2,035)
Proceeds from sale of property and equipment 59 854
--------------- ---------------
Net cash used in investing activities (8,408) (2,281)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - -
Principal payments under long-term debt agreements (2,431) (3,062)
Net proceeds (payments) on revolving line of credit 2,375 (2,310)
--------------- ---------------
Net cash used in financing activities (56) (5,372)
--------------- ---------------
Increase in cash and cash equivalents 169 4
Cash and cash equivalents at beginning of period 781 659
--------------- ---------------
Cash and cash equivalents at end of period $ 950 $ 663
=============== ===============
The accompanying notes are an integral part of these financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The consolidated interim financial statements are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto contained in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999. The results of
operations for the quarter ended March 31, 2000, are not necessarily indicative
of the results for the entire fiscal year ending December 31, 2000.
There have been no significant changes in the accounting policies of the
Company, or significant changes in the Company's commitments and contingencies
as previously described in the 1999 Annual Report to Shareholders and related
annual report to the Securities and Exchange Commission on Form 10-K.
EARNINGS PER SHARE
Net income per share of common stock is based on the weighted average number of
shares outstanding during each period
SUBSEQUENT EVENTS
None
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1999
EXPENSES AS A PERCENTAGE OF REVENUE FROM OPERATIONS
THREE MONTHS ENDED
MARCH 31,
------------------------------------------------
2000 1999
------------------------------------------------
Revenue from operations 100.0% 100.0%
-------------------- -------------------
Operating expenses:
Salaries, wages and benefits 60.1 61.3
Purchased transportation 4.2 3.3
Operating supplies and expenses 11.1 8.1
Depreciation and amortization 5.7 6.3
Building and office equipment rents 1.7 1.9
Operating taxes and licenses 4.1 4.5
Insurance and claims 2.4 2.6
Communications and utilities 1.9 1.9
General supplies and expenses 3.7 3.8
Miscellaneous expenses .9 .8
-------------------- -------------------
Total operating expenses 95.8 94.5
-------------------- -------------------
Operating income 4.2 5.5
Interest expense, net .8 1.3
Other expense, net - 0.2
-------------------- -------------------
Income before income taxes 3.4 4.0
Provision for income taxes 1.3 1.5
-------------------- -------------------
Net income 2.1% 2.5%
==================== ===================
7
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Net revenue for the first quarter of 2000 was $112,799,000, an increase of 13.5%
from $99,346,000 for the first quarter of 1999. Less than truckload ("LTL")
tonnage increased 6.9% from the prior-year quarter while total tonnage increased
2.3%. Throughout the quarter, the Company continued to implement its strategy to
build market share in existing areas of operation, improve revenue yield,
enhance operating efficiencies and pursue selected geographic expansion.
Consistent with this strategy, on January 1, 2000, the Company implemented full
state coverage for 16 states, primarily in the northeast, mid-Atlantic and
southeast regions of the country, and announced its plans to expand full state
coverage to a total of 22 states in 2000. To support this goal, the Company
opened one new service center in the first quarter of 2000 and has opened three
service centers to date in 2000. These new facilities will complement the
Company's existing service center network in those states where full state
coverage will be offered.
In addition to increases in freight volume, average LTL revenue per shipment
increased 5.8% to $132.44 from $125.21. This increase was a result of an 8.4%
increase in LTL revenue per hundredweight that was partially offset by a 2.3%
decrease in LTL weight per shipment. In addition, the Company's average length
of haul increased 2.3% to 857 miles from 838 miles, which generally increases
both LTL revenue per hundredweight and LTL revenue per shipment.
LTL revenue per hundredweight for the quarter improved to $12.56 compared to
$11.59 for the first quarter of 1999. This increase in revenue yield is
primarily the result of the Company's focus on improving pricing, specifically
on unprofitable or marginal business. Net revenue and revenue yield also
improved as a result of a fuel surcharge that was assessed during the quarter to
partially offset the rising cost of fuel. The fuel surcharge accounted for
approximately 2.6% of net revenue for the first quarter of 2000.
Revenue growth in the first quarter was also impacted by the harsh winter
weather experienced early in the quarter, which affected approximately 68% of
the Company's markets. The Company estimates that the conditions created by snow
and ice during January and February resulted in the loss of approximately
$2,000,000 in revenue for the quarter.
The operating ratio, operating expenses as a percentage of revenue, increased to
95.8% in the first quarter of 2000 from 94.5%. This increase in the Company's
operating costs were primarily a result of three factors. First, severe winter
weather hampered operating efficiencies and productivity in the Northeast,
Mid-Atlantic, South and Midwest regions of the Company for an extended period of
time. The Company attempted to maintain its highest levels of service during
this period, despite the disruptions in shipment patterns, difficult driving
conditions and additional maintenance costs, which resulted in higher operating
costs as a percent of revenue.
Second, the Company opened a 247-door breakbulk facility in Morristown,
Tennessee on January 17th and incurred certain start-up and training costs that
accompanied the reconfiguration of the Company's linehaul operations. While
these short-term costs effected the first quarter of 2000, the Company has
improved its service and operating capabilities significantly, which should
result in improved efficiencies and productivity in future periods.
Third, the dramatic increase in petroleum products compared to the first quarter
of 1999 resulted in an increase in operating supplies and expenses as a percent
of revenue to 11.1% from 8.1%. While the Company implemented a fuel surcharge to
offset these costs, the rising price of petroleum products outpaced the
additional fuel surcharge revenue for much of the quarter.
Purchased transportation increased to 4.2% of revenue from 3.3% for the quarter.
This increase was a result of the Company utilizing more purchased linehaul
services and cartage agents in lieu of Company equipment and personnel as
reflected in the decrease in salaries, wages and benefits to 60.1% of revenue
from 61.3% for the first quarter of 1999. Use of purchased linehaul services was
primarily a result of an imbalance in transcontinental traffic patterns
experienced during the quarter. The increase in cartage expense was a result of
the initial startup of full state coverage in 16 states and expanded
8
coverage to certain remote locations. As market share builds in these areas,
Company personnel and equipment will replace these outside expenditures.
For the quarter, the Company experienced favorable cost trends in many areas,
particularly depreciation and amortization, which decreased to 5.7% of revenue
from 6.3%, and operating taxes and licenses, which decreased to 4.1% of revenue
from 4.5% for the first quarter of 1999. These improvements are the result of
increases in asset utilization as reflected in the improvement in revenue per
intercity mile to $3.32 from $3.19 for the first quarter of 1999.
Net interest expense decreased to .8% of revenue from 1.3% for the prior-year
period. This decrease was a result of a lower average level of debt outstanding
during the quarter compared to the first quarter of 1999 and the capitalization
of certain interest costs relating to construction projects.
Net income for the first quarter of 2000 was $2,327,000, a 5.8% decrease from
$2,469,000 for the prior-year period. The effective tax rate was 39% and 38.0%
for the first quarters of 2000 and 1999, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Continued investment in property and equipment has resulted from expansion in
the size and number of service center facilities, the planned tractor and
trailer replacement cycle and revenue growth. In order to support these
requirements, the Company incurred net capital expenditures of $8,408,000 during
the first quarter of 2000. Cash flows generated internally were sufficient to
fund the required capital expenditures for the quarter. At March 31, 2000,
long-term debt including current maturities decreased to $64,814,000 from
$64,870,000 at December 31, 1999.
The Company estimates net capital expenditures to be approximately $64,000,000
to $68,000,000 for the year ending December 31, 2000. Of that, approximately
$27,000,000 is allocated for purchases of larger replacement service centers or
expansion of existing service centers, $29,000,000 is allocated for purchases of
revenue equipment, $6,000,000 is allocated for enhancements to information
systems and the remaining balance is allocated for purchases of other assets.
The Company plans to fund these expenditures through cash flows from operations
supplemented by additional borrowings.
During 1999 and early 2000, the Company maintained a $32,500,000
uncollateralized credit facility that consisted of a $17,500,000 line of credit
commitment and a $15,000,000 letter of credit commitment. Interest on the line
of credit was charged at rates that vary based upon a certain financial
performance ratio and the stated period of time that the borrowings were
outstanding. On January 14, 2000, the Company amended this credit facility to
consist of a $22,000,000 line of credit commitment and a $12,500,000 letter of
credit commitment under the same terms and conditions as the previous agreement.
The applicable interest rate for the first quarter of 2000 was based upon LIBOR
plus .60% for periods of 30-180 days and prime minus 1% for periods less than 30
days. A fee of .25% was charged on the unused portion of the line of credit and
letter of credit facility, and a fee of .60% to .75% was charged on outstanding
letters of credit. At March 31, 2000, there were $13,950,000 outstanding
borrowings on the line of credit and $11,385,000 outstanding on the letter of
credit facility. Letters of credit are primarily issued as collateral for
self-insured reserves for bodily injury, property damage and workers'
compensation claims. The Company believes that it has sufficient credit lines
and capacity to meet seasonal and long-term financial needs.
The Company has limited exposure to changes in interest rates from its long-term
debt arrangements as approximately 78% of that debt has fixed interest rates.
The Company does not currently use interest rate derivative instruments to
manage exposure to interest rate changes. Also, the Company is not using any
fuel hedging instruments as its tariff provisions generally allow for fuel
surcharges to be implemented in the event that fuel prices exceed stipulated
levels.
INFLATION
Most of the Company's expenses are affected by inflation, which will generally
result in increased costs. For the quarter ending March 31, 2000, the effect of
inflation on the Company's results of operations was minimal.
9
SEASONALITY
The Company's operations are subject to seasonal trends common in the motor
carrier industry. Operating results in the first and fourth quarters are
normally lower due to reduced shipments during the winter months. Harsh winter
weather can also adversely impact the Company's performance by reducing demand
and increasing operating expenses. The second and third quarters are stronger
due to increased demand for services during the spring and summer months.
ENVIRONMENTAL
The Company is subject to federal, state and local environmental laws and
regulations, particularly relative to underground storage tanks. The Company
believes it is in compliance with applicable environmental laws and regulations,
including those relating to underground storage tanks, and does not believe that
the cost of future compliance will have a material adverse effect on the
Company's operations or financial condition.
FORWARD-LOOKING INFORMATION
Forward-looking statements in this report, including, without limitation,
statements relating to future events or the future financial performance of the
Company appear in the preceding 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 the Company, including, without limitation,
statements relating to the Company's goals, strategies, expectations,
competitive environment, regulation and availability of resources. Such
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such forward-looking statements involve risks and uncertainties that could
cause actual events and results to be materially different from those expressed
or implied herein, including, but not limited to, the following: (1) changes in
the Company's goals, strategies and expectations, which are subject to change at
any time at the discretion of the Company; (2) the Company's ability to maintain
a nonunion, qualified work force; (3) the competitive environment with respect
to industry capacity and pricing; (4) the availability and cost of fuel,
additional revenue equipment, service centers and other significant resources;
(5) the impact of regulatory bodies; (6) various economic factors such as
insurance costs, liability claims, interest rate fluctuations, the availability
of qualified drivers or owner-operators, fluctuations in the resale value of
revenue equipment, increases in fuel or energy taxes, economic recessions and
downturns in customers' business cycles and shipping requirements; (7) the
Company's inability to raise capital or borrow funds on satisfactory terms,
which could limit growth and require the Company to operate its revenue
equipment for longer periods of time; (8) the Company's ability to purchase,
build or lease facilities suitable for its operations; and (9) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The information called for by this item is provided under the caption "Liquidity
and Capital Resources" under Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
10
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 2000 Annual Meeting of Stockholders on April 24, 2000. The
only item on the agenda was the election of directors for which votes were cast
or withheld as follows:
Nominee For Withheld
------- --- --------
Earl E. Congdon 6,182,034 42,100
John R. Congdon 6,182,034 42,100
John A. Ebeling 6,211,934 12,200
Harold G. Hoak 6,211,934 12,200
Franz F. Holscher 6,211,934 12,200
David S. Congdon 6,211,934 12,200
John R. Congdon, Jr. 6,211,934 12,200
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended March 31, 2000.
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: May 9, 2000 J. WES FRYE
-------------------------- -----------
J. Wes Frye
Senior Vice President - Finance
(Principal Financial Officer)
DATE: May 9, 2000 JOHN P. BOOKER III
---------------------------- ------------------
John P. Booker III
Vice President - Controller
(Principal Accounting Officer)
11