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, 2001
[ ] 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 8, 2001, 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,
2001 2000
(In thousands, except share data) (Unaudited) (Unaudited)
- ----------------------------------------------------------------------------------------------------------
Revenue from operations $ 120,270 $ 112,799
Operating expenses:
Salaries, wages and benefits 74,107 67,744
Purchased transportation 4,602 4,750
Operating supplies and expenses 12,702 12,497
Depreciation and amortization 7,288 6,455
Building and office equipment rents 1,968 1,909
Operating taxes and licenses 5,233 4,626
Insurance and claims 2,871 2,770
Communications and utilities 2,569 2,100
General supplies and expenses 4,157 4,206
Miscellaneous expenses 1,568 1,019
----------------- -----------------
Total operating expenses 117,065 108,076
----------------- -----------------
Operating income 3,205 4,723
Other deductions:
Interest expense, net 1,494 899
Other expense, net 70 9
----------------- -----------------
Total other deductions 1,564 908
----------------- -----------------
Income before income taxes 1,641 3,815
Provision for income taxes 640 1,488
----------------- -----------------
Net income $ 1,001 $ 2,327
================= =================
Basic and diluted earnings per share $ 0.12 $ 0.28
Weighted average shares outstanding:
Basic 8,312,840 8,312,840
Diluted 8,312,840 8,316,555
The accompanying notes are an integral part of these financial statements.
2
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
(In thousands, except share data) (Unaudited) (Audited)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,089 $ 585
Customer receivables, less allowances of $6,022
and $6,068, respectively 58,295 54,273
Other receivables 4,169 4,450
Tires on equipment 6,894 6,912
Prepaid expenses 9,693 12,499
Deferred income taxes 1,477 1,477
------------------ --------------------
Total current assets 81,617 80,196
Property and equipment:
Revenue equipment 199,654 198,131
Land and structures 93,176 90,469
Other equipment 42,598 38,430
Leasehold improvements 4,339 4,338
------------------ --------------------
Total property and equipment 339,767 331,368
Less accumulated depreciation and amortization (136,677) (130,018)
------------------ --------------------
Net property and equipment 203,090 201,350
Other assets 18,405 15,045
------------------ --------------------
Total assets $ 303,112 $ 296,591
================== ====================
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,
2001 2000
(In thousands, except share data) (Unaudited) (Audited)
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,756 $ 26,515
Compensation and benefits 12,936 11,298
Claims and insurance accruals 14,142 14,128
Other accrued liabilities 3,969 2,434
Income taxes payable 109 -
Current maturities of long-term debt 9,051 9,035
------------------ --------------------
Total current liabilities 58,963 63,410
Long-term debt 84,549 74,507
Other non-current liabilities 12,220 12,295
Deferred income taxes 21,645 21,645
------------------ --------------------
Total long-term liabilities 118,414 108,447
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 100,997 99,996
------------------ --------------------
Total stockholders' equity 125,735 124,734
Commitments and contingencies - -
------------------ --------------------
Total liabilities and stockholders' equity $ 303,112 $ 296,591
================== ====================
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,
----------------------------------
2001 2000
(In thousands) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 1,001 $ 2,327
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,288 6,455
Loss on sale of property and equipment 100 11
Changes in assets and liabilities:
Customer and other receivables, net (3,741) (2,788)
Tires on equipment 18 284
Prepaid expenses and other assets 2,317 3,473
Accounts payable (7,759) (3,780)
Compensation, benefits and other accrued liabilities 3,173 1,809
Claims and insurance accruals (118) (453)
Income taxes payable 109 1,202
Other liabilities 57 93
--------------- ---------------
Net cash provided by operating activities 2,445 8,633
--------------- ---------------
Cash flows from investing activities:
Acquisition of business assets, net (6,434) -
Purchase of property and equipment (5,592) (8,467)
Proceeds from sale of property and equipment 27 59
--------------- ---------------
Net cash used in investing activities (11,999) (8,408)
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,563 -
Principal payments under long-term debt agreements (2,705) (2,431)
Net proceeds from revolving line of credit 10,200 2,375
--------------- ---------------
Net cash provided by (used in) financing activities 10,058 (56)
--------------- ---------------
Increase in cash and cash equivalents 504 169
Cash and cash equivalents at beginning of period 585 781
--------------- ---------------
Cash and cash equivalents at end of period $ 1,089 $ 950
=============== ===============
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, 2000. The results of
operations for the quarter ended March 31, 2001, are not necessarily indicative
of the results for the entire fiscal year ending December 31, 2001.
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 2000 Annual Report to Stockholders and related
annual report to the Securities and Exchange Commission on Form 10-K.
ACQUISITION OF BUSINESS ASSETS
On January 26, 2001 the Company entered into an agreement to purchase selected
assets, consisting primarily of revenue equipment and real estate, from Carter &
Sons Freightways, Inc. of Carrollton, Texas. While not all provisions of the
purchase agreement have been fully executed and the purchase price has not been
fully allocated, the Company anticipates cash outlays and the present value of
assumed equipment leases to approximate $9,300,000. The pro forma effects of the
acquisition are not material to the operations of the Company.
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, 2001 Compared to the
Three Months Ended March 31, 2000
Expenses as a Percentage of Revenue from Operations
Three Months Ended
March 31,
--------------------------------------------------
2001 2000
--------------------------------------------------
Revenue from operations 100.0 % 100.0%
--------------------- ---------------------
Operating expenses:
Salaries, wages and benefits 61.6 60.1
Purchased transportation 3.8 4.2
Operating supplies and expenses 10.6 11.1
Depreciation and amortization 6.1 5.7
Building and office equipment rents 1.6 1.7
Operating taxes and licenses 4.4 4.1
Insurance and claims 2.4 2.4
Communications and utilities 2.1 1.9
General supplies and expenses 3.4 3.7
Miscellaneous expenses 1.3 .9
--------------------- ---------------------
Total operating expenses 97.3 95.8
--------------------- ---------------------
Operating income 2.7 4.2
Interest expense, net 1.2 .8
Other expense, net .1 -
--------------------- ---------------------
Income before income taxes 1.4 3.4
Provision for income taxes .6 1.3
--------------------- ---------------------
Net income .8 % 2.1 %
===================== =====================
7
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000
Revenue from operations for the first quarter of 2001 was $120,270,000, an
increase of 6.6% over $112,799,000 for the first quarter of 2000. First quarter
revenue growth was achieved through a 7.1% increase in net revenue per
hundredweight offset slightly by a .5% decrease in total tonnage. The growth in
revenue, despite a decrease in total tonnage, was a result of an increase in
less-than-truckload ("LTL") tonnage, which generally is priced at a higher rate
per hundred weight than truckload shipments weighing over 10,000 lbs. LTL
tonnage increased 4.1% for the quarter to 71.7% of total tonnage compared to
68.5% for the previous year comparable quarter.
LTL revenue per LTL shipment increased to $137.90 from $132.44 for the first
quarter of 2000, or 4.1%, as a result of a 2.6% increase in LTL revenue per
hundredweight and a 1.4% increase in LTL weight per shipment. In addition, the
Company's average length of haul increased .6% to 862 miles from 857 miles,
which generally increases both LTL revenue per hundredweight and LTL revenue per
shipment.
While the Company experienced the normal cyclical decline in demand for its
transportation products in the first quarter of the year, the slowing national
economy also had a significant impact on both revenue growth and pricing.
Pricing, as reflected in LTL revenue per hundredweight, decreased 2.6% from the
fourth quarter of 2000, a trend that has continued through April 2001. As demand
for transportation services continues to decline, pricing generally softens as
carriers compete for tonnage that maintains their capacity and optimal operating
efficiencies. The severity and length of the current economic slowdown could
impact the Company's ability to achieve its targeted revenue growth rate for the
year of between 10% to 15%.
On January 26, 2001, the Company entered into an agreement to purchase selected
assets of Carter & Sons Freightways, Inc. of Carrollton, Texas. Carter & Sons
operated a regional LTL network of 23 service centers in Texas, Oklahoma,
Missouri, Colorado, Illinois and Minnesota. As a result of that acquisition, the
Company opened 13 new service centers on February 12, 2001, and expanded its
100% state coverage to 23 states to include both Texas and Oklahoma. At the same
time, the operations of the remaining 10 service centers formally operated by
Carter & Sons were merged into the Old Dominion service centers in markets where
duplicate facilities existed. This acquisition added approximately $2,400,000,
or 2.0% of total revenue for the quarter. The Company's decision to expand
coverage in the South Central region is consistent with its long-term objectives
to develop both regional and interregional markets in the continental United
States.
The Company's operating results for the first quarter of 2001 were impacted by
two significant events, the slowing national economy and startup costs
associated with the integration of the Carter & Sons operations. The operating
ratio, operating expenses as a percentage of revenue, increased to 97.3%
compared to 95.8% for the first quarter of 2000. Net income for the quarter was
$1,001,000 compared to $2,327,000 for the first quarter of 2000, a reduction of
57.0%.
Since the end of the first quarter 2000, the Company has increased its tractor
fleet 10.6%, its trailer fleet 9.6% and has expanded its service center network
to 117 locations from 102. This increase in capacity, when combined with a
decrease in demand, has caused certain costs to increase as a percentage of
revenue. Depreciation and amortization expenses increased to 6.1% of revenue
from 5.7% in the prior year quarter. Operating taxes and licenses increased to
4.4% of revenue from 4.1%, which reflects increases in real and personal
property taxes.
The decrease in tonnage also increased certain variable costs, such as driver
payroll expenses, as the Company continued to provide its published service
standards without the benefit of full trailer capacity. Driver wages increased
.6% of revenue over the previous year quarter levels. The Company also
experienced increases in employee benefit costs, particularly group health and
workers compensation costs, which when combined, increased to 5.6% of revenue
from 4.9%. In response to those trends, the Company has initiated changes in the
administration of those benefit programs to keep costs from escalating further.
8
The downturn in the economy also impacted the Company's ability to collect its
trade receivables. Uncollectible revenue expense, which is recorded in
miscellaneous expenses, increased to 1.0% of revenue from .7% for the comparable
quarter of 2000. The Company's credit risk is diversified over a significant
number of customers, industries and geographic regions, with no single customer
exceeding 3% of revenue. However, the Company experienced increases in the
number and severity of business closures and bankruptcy filings by its customers
during the quarter, particularly in the retail and transportation sectors.
By having additional capacity in the quarter, the Company reduced its purchased
transportation expenses to 3.8% of revenue from 4.2% for the first quarter of
2000. Both rail and purchased linehaul services were practically eliminated
during the quarter as the Company utilized its equipment and labor force to
perform linehaul services.
The Company also experienced certain startup costs associated with the
consolidation of the Carter & Sons acquisition. Communications and utilities
expense increased to 2.1% of revenue from 1.9% for the first quarter of 2000, as
the Company incurred one-time start-up costs associated with establishing
communication systems at its new facilities. Due to the uncertainty of freight
flows between these new locations, the Company did not maintain its normal level
of operating efficiency in the initial phases of the consolidation. As these
traffic patterns stabilize, the Company anticipates these efficiencies to
return. The Company also incurred one-time orientation and training costs
associated with its new employees as it ensures all employees are properly
indoctrinated into its quality and safety programs.
Net interest expense for the quarter increased to 1.2% of revenue for the first
quarter of 2001 from .8% for the prior year comparable period, primarily as a
result of an increase in the amount of debt outstanding between the quarters.
Outstanding debt was $93,600,000 at March 31, 2001 compared to $64,814,000 at
March 31, 2000, an increase of 44.4%.
The effective tax rate for both the first quarter of 2001 and 2000 was 39.0%.
LIQUIDITY AND CAPITAL RESOURCES
Expansion in both the size and number of service center facilities, the planned
tractor and trailer replacement cycle and revenue growth have required continued
investment in property and equipment. In order to support these requirements and
to fund the purchase of selected assets from Carter and Sons Freightways, Inc.,
the Company incurred net capital expenditures of $11,999,000 during the first
quarter of 2001. Cash flows generated internally funded 20.4% of the required
capital expenditures for the quarter while the remainder was funded through
additional borrowings. At March 31, 2001, long-term debt including current
maturities increased to $93,600,000 from $83,542,000 at December 31, 2000.
The Company estimates net capital expenditures to be approximately $35,000,000
to $40,000,000 for the year ending December 31, 2001. Of that, approximately
$25,000,000 is planned to be used for purchases of larger replacement service
centers or expansion of existing service centers, $5,000,000 is planned to be
used to purchase revenue equipment, $9,000,000 is planned to be used for
investments in technology and the balance is planned to be used to purchase
other assets. The Company plans to fund these expenditures through cash flows
from operations supplemented by additional borrowings.
On May 31, 2000 the Company entered into a $62,500,000 uncollateralized
committed credit facility that consists of a $50,000,000 line of credit and a
$12,500,000 line to support standby letters of credit. This facility has a term
of three years that expires on May 31, 2003. Interest on the line of credit is
charged at rates that vary based upon a certain financial performance ratio. The
applicable interest rate for the first quarter of 2001 under this agreement was
based upon LIBOR plus .70%. A fee of .20% was charged on the unused portion of
the line of credit and fees ranging between .60% to .71% were charged on
outstanding standby letters of credit. At March 31, 2001, there were $49,450,000
outstanding borrowings on the line of credit and $6,040,000 outstanding on the
standby letter of credit facility. Standby letters of credit are primarily
issued as collateral for self-insured retention reserves for bodily injury,
property damage and workers' compensation claims. On February 1, 2001 this
credit agreement was amended to increase the line of credit facility to
$55,000,000 through April 30, 2001, and thereafter decrease to $50,000,000 for
the remainder of the term.
9
The Company's exposure to changes in interest rates is limited to the
outstanding balance of its line of credit facility, which represents 52.8% of
total long-term debt at March 31, 2001. 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. In response to the rising cost of petroleum products,
particularly diesel fuel, the Company has implemented a fuel surcharge in its
tariffs and contractual agreements. The fuel surcharge is designed to offset the
cost of fuel above a base price and increases as fuel prices escalate over the
base. For the quarter ending March 31, 2001, the net effect of inflation on the
Company's results of operations was minimal.
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 reflect
increased demand for services during the spring and summer months, which
generally result in improved operating margins.
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 and other significant resources; (5) the ability to
impose and maintain fuel surcharges to offset increases in fuel prices; (6) the
impact of regulatory bodies; (7) 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; (8) the
Company's ability 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; (9) the Company's ability to purchase, build or lease
facilities suitable for its operations; and (10) other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
10
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.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 2001 Annual Meeting of Stockholders on May 7, 2001. 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 7,981,229 102,526
John R. Congdon 7,981,229 102,526
David S. Congdon 7,981,229 102,526
John R. Congdon, Jr. 8,050,455 33,300
John A. Ebeling 8,050,455 33,300
Harold G. Hoak 8,050,455 33,300
Franz F. Holscher 8,050,355 33,400
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: No reports on Form 8-K were filed during the
quarter ended March 31, 2001.
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 8, 2001 J. WES FRYE
---------------------- --------------------------------------
J. Wes Frye
Senior Vice President - Finance
(Principal Financial Officer)
DATE: May 8, 2001 JOHN P. BOOKER III
------------------------ --------------------------------------
John P. Booker III
Vice President - Controller
(Principal Accounting Officer)
11