UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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(Nasdaq Global Select Market) |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of November 4, 2020 there were
INDEX
Part I – FINANCIAL INFORMATION |
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1 |
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Condensed Balance Sheets – September 30, 2020 and December 31, 2019 |
1 |
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Condensed Statements of Operations – For the three and nine months ended September 30, 2020 and 2019 |
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4 |
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Condensed Statements of Cash Flows – For the nine months ended September 30, 2020 and 2019 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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21 |
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Part II – OTHER INFORMATION |
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24 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
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September 30, |
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2020 |
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December 31, |
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(In thousands, except share and per share data) |
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(Unaudited) |
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2019 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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— |
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Customer receivables, less allowances of $ |
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Other receivables |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment: |
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Revenue equipment |
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Land and structures |
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Other fixed assets |
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Leasehold improvements |
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Total property and equipment |
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Accumulated depreciation |
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Net property and equipment |
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Goodwill |
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Other assets |
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Total assets |
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$ |
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$ |
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Note: The Condensed Balance Sheet at December 31, 2019 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)
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September 30, |
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2020 |
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December 31, |
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(In thousands, except share and per share data) |
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(Unaudited) |
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2019 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Compensation and benefits |
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Claims and insurance accruals |
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Other accrued liabilities |
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Income taxes payable |
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Current maturities of long-term debt |
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— |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Other non-current liabilities |
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Deferred income taxes |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingent liabilities |
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Shareholders’ equity: |
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Common stock - $ |
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Capital in excess of par value |
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Retained earnings |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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Note: The Condensed Balance Sheet at December 31, 2019 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)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(In thousands, except share and per share data) |
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2020 |
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2019 |
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2020 |
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2019 |
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Revenue from operations |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Salaries, wages and benefits |
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Operating supplies and expenses |
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General supplies and expenses |
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Operating taxes and licenses |
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Insurance and claims |
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Communications and utilities |
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Depreciation and amortization |
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Purchased transportation |
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Miscellaneous expenses, net |
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Total operating expenses |
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Operating income |
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Non-operating expense (income): |
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Interest expense |
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Interest income |
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Other expense, net |
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Total non-operating expense (income) |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Dividends declared per share |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
3
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(In thousands) |
2020 |
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2019 |
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2020 |
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2019 |
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Common stock: |
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Beginning balance |
$ |
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$ |
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$ |
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$ |
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Share repurchases |
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— |
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( |
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( |
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Share-based compensation and restricted share issuances, net of forfeitures |
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— |
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Taxes paid in exchange for shares withheld |
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— |
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— |
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( |
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Cash paid for fractional shares |
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— |
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— |
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( |
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— |
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Ending balance |
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Capital in excess of par value: |
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Beginning balance |
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Share-based compensation and restricted share issuances, net of forfeitures |
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Taxes paid in exchange for shares withheld |
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— |
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— |
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( |
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Forward contract for accelerated share repurchases |
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— |
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— |
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( |
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— |
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Cash paid for fractional shares |
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— |
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— |
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( |
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— |
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Ending balance |
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Retained earnings: |
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Beginning balance |
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Share repurchases |
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— |
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( |
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( |
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( |
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Cash dividends declared |
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( |
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( |
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( |
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Net income |
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Ending balance |
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Total shareholders' equity |
$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
4
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Nine Months Ended |
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September 30, |
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(In thousands) |
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2020 |
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2019 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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Loss on disposal of property and equipment |
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Share-based compensation |
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Provision for deferred income taxes |
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( |
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— |
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Other operating activities, net |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
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Proceeds from sale of property and equipment |
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Purchase of short-term investments |
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( |
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— |
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Other investing, net |
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( |
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— |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Proceeds from issuance of long-term debt |
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— |
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Payments for share repurchases |
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( |
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( |
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Forward contract for accelerated share repurchases |
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( |
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— |
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Dividends paid |
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( |
) |
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( |
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Other financing activities, net |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Increase in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
5
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 through a single integrated organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting.
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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(In thousands) |
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2020 |
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2019 |
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2020 |
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2019 |
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LTL services |
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$ |
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$ |
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$ |
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$ |
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Other services |
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Total revenue from operations |
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$ |
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$ |
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$ |
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$ |
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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, 2020 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 2020.
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, 2019. 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, 2019, 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.
Common Stock Split
All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect this stock split. Split-adjusted quarterly per-share metrics may not recalculate precisely due to rounding.
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Short-term Investments
The Company’s investments in certificates of deposit, U.S. government securities, and commercial paper with an original maturity of greater than three months have been classified and accounted for as trading securities, and are reported in “Short-term investments” on our Condensed Balance Sheet. These investments are measured at fair value each reporting period, with gains or losses recorded in “Non-operating expense (income)” on our Condensed Statement of Operations.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:
•Level 1 — Quoted prices for identical instruments in active markets;
•Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and
•Level 3 — Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.
Our short-term investments and our long-term debt, including current maturities, are measured at fair value on a recurring basis, and are further described in Note 6. Our other financial securities in current assets and current liabilities approximate their fair value due to the short maturities of these instruments.
Stock Repurchase Program
On May 1, 2020, 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 $
On May 29, 2020, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution as part of our 2020 Repurchase Program. Under the ASR Agreement, we paid the third-party financial institution $
The ASR Agreement was accounted for as a settled treasury stock purchase and a forward stock purchase contract. The par value of the initial share delivery was recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings. The forward stock purchase contract is accounted for as a contract indexed to our own stock and is classified within capital in excess of par value on our Condensed Statements of Changes in Shareholders’ Equity.
During the three months ended September 30, 2020, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2020, we repurchased
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Statements” (Topic 326). This ASU modified the loss methodology for establishing a provision against financial assets, including customer receivables, to include an expected
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future performance component. We adopted ASU 2016-13 on January 1, 2020. The adoption did not have a material impact to our financial position, results of operations, or cash flow.
We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability of our customers to make required payments. We estimate this allowance by analyzing the aging of our customer receivables, our historical loss experience and other trends and factors affecting the credit risk of our customers, including anticipated changes to future performance. Write-offs occur when we determine an account to be uncollectible and could differ from our allowance estimate as a result of factors such as changes in the overall economic environment or risks surrounding our customers. Additional allowances may be required if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments. We periodically review the underlying assumptions in our estimate of the allowance for uncollectible accounts to ensure that the allowance reflects the most recent trends and factors.
Our allowance for uncollectible accounts was $
Note 2. Earnings Per Share
Basic earnings per share is computed by dividing net income by the daily weighted average number of shares of our common stock outstanding for the period, excluding unvested restricted stock. Unvested restricted stock is included in common shares outstanding on our Condensed Balance Sheets.
Diluted earnings per share is computed using the treasury stock method. The denominator used in calculating diluted earnings per share includes the impact of unvested restricted stock and other dilutive, non-participating securities under our equity award agreements. The denominator excludes contingently-issuable shares under performance-based award agreements when the performance target has not yet been deemed achieved.
The following table provides a reconciliation of the number of shares of common stock used in computing basic and diluted earnings per share:
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2020 |
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2019 |
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2020 |
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2019 |
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Weighted average shares outstanding - basic |
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Dilutive effect of share-based awards |
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Weighted average shares outstanding - diluted |
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Note 3. Long-Term Debt
Long-term debt, net of unamortized debt issuance costs, consisted of the following:
(In thousands) |
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September 30, 2020 |
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December 31, 2019 |
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Senior notes |
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$ |
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$ |
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Revolving credit facility |
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Total long-term debt |
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Less: Current maturities |
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Total maturities due after one year |
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$ |
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$ |
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Senior Note Agreements
We had an unsecured senior note agreement with a principal amount outstanding of $
On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential (the “Note Agreement”). The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $
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acquisitions, or general corporate purposes. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Senior Note, the Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.
Credit Agreement
On November 21, 2019, we entered into a second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement provides for a five-year, $
At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from
For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were
The Credit Agreement replaced our previous five-year, $
There were $
General Debt Provisions
The Senior Note, Credit Agreement, and Note 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. The Credit Agreement and Note Agreement also include 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).
Note 4. 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 collective and/or 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.
Note 5. Leases
Our right-of-use assets totaled $
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Note 6. Fair Value Measurements
Short-term investments
A summary of the fair value of our short-term investments as of September 30, 2020 is shown in the table below.
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September 30, 2020 |
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Level 1 |
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Level 2 |
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Level 3 |
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Certificates of deposit |
$ |
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$ |
— |
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$ |
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$ |
— |
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U.S. government securities |
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