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 September 30, 1998
[ ] 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 November 9, 1998, there were 8,312,196 shares of the registrant's
Common Stock ($.10 par value) outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ---------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
(In thousands, except share and per 1998 1997 1998 1997
share data) (Unaudited) (Unaudited) (Unaudited)(Unaudited)
- ------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue from operations $ 99,266 $88,275 $ 283,600 $246,356
Operating expenses:
Salaries, wages and benefits 59,463 51,792 168,990 144,266
Purchased transportation 3,547 4,209 11,968 11,306
Operating supplies and expenses 7,613 7,787 23,361 22,817
Depreciation and amortization 5,734 4,396 15,551 12,513
Building and office equipment rents 1,853 1,728 5,431 5,191
Operating taxes and licenses 4,365 3,625 12,206 10,520
Insurance and claims 3,105 2,455 8,859 7,659
Communications and utilities 1,757 1,623 5,148 4,529
General supplies and expenses 3,982 3,190 11,545 9,152
Miscellaneous expenses 1,112 968 2,939 2,626
---------- ---------- ---------- ----------
Total operating expenses 92,531 81,773 265,998 230,579
---------- ---------- ---------- ----------
Operating income 6,735 6,502 17,602 15,777
Other deductions:
Interest expense, net 1,129 932 3,002 2,654
Other expense, net 87 118 263 269
---------- ---------- ---------- ----------
Total other deductions 1,216 1,050 3,265 2,923
---------- ---------- ---------- ----------
Income before income taxes 5,519 5,452 14,337 12,854
Provision for income taxes 2,097 2,099 5,448 4,949
---------- ---------- ---------- ----------
Net income $ 3,422 $ 3,353 $ 8,889 $ 7,905
========== ========== ========== ==========
Basic and diluted earnings per share: $0.41 $0.40 $1.07 $0.95
Weighted average number of shares
outstanding:
Basic 8,312,196 8,308,287 8,311,633 8,311,968
Diluted 8,321,089 8,323,956 8,325,464 8,320,144
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(In thousands, except share data) (Unaudited) (Audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 744 $ 674
Customer receivables, less allowances
of $5,628 and $4,963, respectively 50,799 43,399
Other receivables 3,948 1,492
Tires on equipment 5,569 5,052
Prepaid expenses 5,598 7,273
Deferred income taxes 1,970 1,970
------------- -------------
Total current assets 68,628 59,860
Property and equipment:
Revenue equipment 172,240 144,926
Land and structures 47,683 42,572
Other equipment 31,862 19,675
Leasehold improvements 4,136 721
------------- -------------
Total property and equipment 255,921 207,894
Less accumulated depreciation and
amortization (94,801) (83,064)
------------- -------------
Net property and equipment 161,120 124,830
Other assets, including goodwill, less
insurance policy loans of $1,851 13,094 6,371
------------- -------------
Total assets $ 242,842 $ 191,061
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(In thousands, except share data) (Unaudited) (Audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,648 $ 14,161
Compensation and benefits 14,133 8,915
Claims and insurance accruals 11,314 9,275
Other accrued liabilities 3,159 1,587
Income taxes payable 44 -
Current maturities of long-term debt 8,326 5,146
------------- -------------
Total current liabilities 51,624 39,084
Long-term debt 68,095 42,155
Other non-current liabilities 9,376 7,704
Deferred income taxes 19,341 16,617
------------- -------------
Total long-term liabilities 96,812 66,476
Stockholders' equity:
Common stock - $.10 par value, 25,000,000
shares authorized, 8,312,196 and 8,310,596
shares outstanding, respectively 831 831
Capital in excess of par value 23,906 23,891
Retained earnings 69,669 60,779
------------- -------------
Total stockholders' equity 94,406 85,501
Commitments and contingencies - -
------------- -------------
Total liabilities and stockholders'
equity $ 242,842 $191,061
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended Sept. 30,
--------------------------
1998 1997
(In thousands) (Unaudited) (Unaudited)
- --------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,889 $ 7,905
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,551 12,513
Deferred income taxes 2,724 3,364
Net effect of restricted stock
distribution - 511
Loss (Gain) on sale of property and
equipment 3 (227)
Changes in assets and liabilities:
Customer and other receivables, net (4,662) (7,874)
Tires on equipment (244) (190)
Prepaid expenses and other assets 2,452 2,127
Accounts payable 487 (2,229)
Compensation, benefits and other
accrued liabilities 6,140 4,454
Claims and insurance accruals 1,839 718
Income taxes payable 44 -
Other liabilities 1,672 1,037
---------- ----------
Net cash provided by operating
activities 34,895 22,109
---------- ----------
Cash flows from investing activities:
Acquisition of business assets, net (19,299) -
Purchase of property and equipment (38,871) (31,127)
Proceeds from sale of property and equipment 1,224 1,540
---------- ----------
Net cash used in investing activities (56,946) (29,587)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 20,990 9,000
Principal payments under debt and capital lease
agreements (3,485) (3,746)
Net proceeds from line of credit 4,600 1,665
Proceeds from conversion of stock options 16 4
---------- ----------
Net cash provided by financing
activities 22,121 6,923
---------- ----------
Increase (Decrease) in cash and cash
equivalents 70 (555)
Cash and cash equivalents at beginning of
period 674 1,353
---------- ----------
Cash and cash equivalents at end of period $ 744 $ 798
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The consolidated 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, 1997. The results of operations for the quarter
ended September 30, 1998, are not necessarily indicative of the results for the
entire fiscal year ending December 31, 1998.
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 1997 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. The Company's earnings per share ("EPS"),
under Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share, for both basic and diluted EPS was $.41 and $.40 for the quarters ended
September 30, 1998 and 1997, respectively, and $1.07 and $.95 for the nine
months ended September 30, 1998 and 1997, respectively.
SUBSEQUENT EVENTS
None
RECENT ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
which provides a comprehensive, consistent standard for the recognition and
measurement of derivatives and hedging activities. The new statement requires
all derivatives to be recorded on the balance sheet at fair value and
establishes special accounting for hedges. The statement is required to be
adopted by June 15, 1999 but early adoption is encouraged. The Company adopted
Statement No. 133 in the third quarter of 1998 with no impact.
ACQUISITIONS
On January 27, 1998, Old Dominion Freight Line completed an agreement to
purchase selected assets of Fredrickson Motor Express Corporation
("Fredrickson"), a Charlotte, North Carolina based common carrier which provided
LTL trucking services, primarily in the southeastern United States.
On August 24, 1998, the Company completed an agreement to purchase selected
assets, principally revenue equipment, of Goggin Truck Line Company, Inc.
("Goggin"), a regional less-than-truckload carrier based in Shelbyville,
Tennessee. Goggin operated 44 service centers in 11 states, primarily in the
Southeast. The Company currently operates eight of the previous Goggin Service
Centers as new locations and has consolidated the remaining Goggin Service
Centers into existing Company operations.
The purchase price for these acquisitions was $26,935,000, which was paid with
existing cash, borrowings on the line of credit, and assumption of debt and
capital lease obligations. Excess assets totaling $7,539,000, acquired as a
result of the asset purchases, were subsequently sold or liquidated.
The pro forma impact of these acquisitions on the Company's financial results
are not material; however, the Company believes the strategic value of these
improvements to its intra-regional infrastructure will provide a basis for
growth and additional density in its intra-regional markets.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations for the Three Months and Nine Months Ended
September 30, 1998, Compared to September 30, 1997
Expenses as a Percentage of Revenue from Operations
---------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
----------------------- -----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue from operations 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ----------
Operating expenses:
Salaries, wages and benefits 59.9 58.7 59.6 58.6
Purchased transportation 3.6 4.8 4.2 4.6
Operating supplies and expenses 7.7 8.8 8.2 9.3
Depreciation and amortization 5.8 5.0 5.5 5.1
Building and office equipment
rents 1.9 1.9 1.9 2.1
Operating taxes and licenses 4.4 4.1 4.3 4.3
Insurance and claims 3.1 2.8 3.1 3.1
Communications and utilities 1.8 1.8 1.8 1.8
General supplies and expenses 4.0 3.6 4.1 3.7
Miscellaneous expenses 1.0 1.1 1.1 1.0
---------- ---------- ---------- ----------
Total operating expenses 93.2 92.6 93.8 93.6
---------- ---------- ---------- ----------
Operating income 6.8 7.4 6.2 6.4
Interest expense, net 1.2 1.1 1.1 1.1
Other expense, net 0.1 0.1 0.1 0.1
---------- ---------- ---------- ----------
Income before income taxes 5.5 6.2 5.0 5.2
Provision for income taxes 2.1 2.4 1.9 2.0
---------- ---------- ---------- ----------
Net income 3.4% 3.8% 3.1% 3.2%
========== ========== ========== ==========
</TABLE>
7
<PAGE>
RESULTS OF OPERATIONS
- ---------------------
Three Months Ended September 30, 1998, Compared to Three Months Ended
September 30, 1997
Net revenue for the third quarter of 1998 was $99,266,000, an increase of 12.5%,
compared to $88,275,000 for the same quarter of 1997. Less-than-truckload
("LTL") tonnage increased 12.7% during the quarter while total tonnage increased
14.2%. LTL and total shipments increased 7.5% and 7.6%, respectively, compared
to the same quarter of 1997. The increase in tonnage is attributed to the
continued focus on improving market share and density within existing markets
and the addition of 15 service centers since the third quarter of 1997.
Average LTL revenue per shipment increased .5% to $116.89 in the current quarter
compared to $116.32 for the same quarter of 1997. Average LTL revenue per
hundredweight was $11.14 for the current quarter compared to $11.63 for the
third quarter of 1997, a decrease of 4.2%. The decrease in LTL revenue per
hundredweight was offset by a 4.6% increase in LTL weight per shipment to 1,049
lbs. from 1,000 lbs. The average weight per shipment for the third quarter of
1997 was somewhat lower due to additional small shipments received by the
Company during the sixteen day Teamsters strike against United Parcel Service in
August of 1997. Generally, revenue per hundredweight has an inverse relationship
to weight per shipment; therefore, an increase in the weight per shipment will
usually cause a reduction in revenue per hundredweight. The Company believes
that the 4.6% increase in weight per shipment contributed to the decline in
revenue per hundredweight for the quarter.
The average length of haul decreased to 848 miles from 872 in the comparable
period of 1997. This decrease is attributed to a year to date 19.8% growth in
the Company's regional, or next day delivery, markets compared to an overall
revenue growth of 12.5%. Some of this short-haul regional growth resulted from
the Company's acquisition of selected assets of Fredrickson Motor Express and
Goggin Truck Line in January and August 1998, respectively. This regional growth
has occurred primarily in the North and Southeast regions of the country.
The operating ratio, defined as operating expenses as a percentage of net
revenue, was 93.2% for the third quarter of 1998 compared to 92.6% for the same
quarter of 1997. The increase in operating ratio was due primarily to increases
in salaries, wages and benefits and depreciation and amortization, which
combined were 2.0 operating points higher than the comparable quarter of 1997.
In addition, operating taxes and licenses, insurance and claims and general
supplies and expenses increased to 11.5% of revenue compared 10.5% for the same
period the previous year.
Salaries, wages and benefits increased to 59.9% of revenue from 58.7% for the
previous quarter of 1997. The expansion of the service center network allowed
the Company to deliver more shipments directly with Company personnel and
equipment, which increased wages and depreciation expense, while decreasing
reliance on the use of outside purchased transportation. In addition, 36 new
sales personnel were added as a result of the acquisitions when compared to the
third quarter of 1997. The increased sales force is expected to generate
additional revenue in strategic lanes as the year progresses, which is
consistent with the Company's focus on increasing market share in existing
lanes.
Depreciation and amortization increased to 5.8% of revenue from 5.0% for the
same quarter of 1997. The increase in depreciation was due primarily to
increased capital expenditures for expansion of existing service centers,
purchases of new service centers which were previously leased, investments and
upgrades to the Company's information systems and the acquisition of selected
assets of Fredrickson and Goggin.
Combined, operating taxes and licenses, insurance and claims and general
supplies and expenses increased to 11.5% of revenue from 10.5% for the
comparable period of 1997. These increases are attributed to administrative
costs associated with the addition of new sales personnel in 1998, improvements
in the Company's infrastructure, increased vehicle license and registration
fees, and property taxes attributed to the recent acquisition of selected assets
of Goggin Truck Line.
8
<PAGE>
The Company experienced decreases in purchased transportation, operating
supplies and expenses and miscellaneous expenses to 12.3% of revenue in the
third quarter of 1998 from 14.7% for the same quarter last year. The decrease in
purchased transportation was the result of higher use of Company personnel and
equipment for pickup and delivery operations previously performed by cartage
agents. Operating supplies and expenses decreased to 7.7% of revenue from 8.8%,
primarily due to a 13.1% decrease in fuel prices from the third quarter 1997.
Net interest expense was 1.2% of revenue compared with 1.1% for the third
quarter of 1997 due to an increase in average outstanding debt. Net income was
$3,422,000 for the quarter, an increase of 2.1% over $3,353,000 for the same
quarter of the previous year. The effective tax rate was 38.0% and 38.5% for the
third quarters of 1998 and 1997, respectively.
Nine Months Ended September 30, 1998, Compared to Nine Months Ended
September 30, 1997
Net revenue for the nine months ended September 30, 1998, was $283,600,000, an
increase of 15.1%, compared to $246,356,000 for the same period of 1997. LTL
tonnage increased 13.9% during the same comparable periods. These increases
reflect the Company's focus in 1998 to improve the yield of the revenue base and
increase market share in existing areas of operations.
Average LTL revenue per shipment decreased 1.0% to $118.08 during current the
nine-month period compared to $119.22 for the same period of 1997. This decrease
was caused by a reduction in LTL revenue per hundredweight and a decrease in the
Company's average length of haul. Average LTL revenue per hundredweight
decreased 1.6% to $11.20 compared to $11.38. Revenue per hundredweight generally
has an inverse relationship to LTL weight per shipment, which increased .6% to
1,055 lbs. from 1,048 lbs. through the third quarter of 1997. Average length of
haul decreased to 851 miles from 864 in the comparable period of 1997. This
decrease is attributed to the regional short-haul characteristics of the
additional freight contributed by the Fredrickson and the Goggin asset purchases
in January and August 1998, respectively. Year to date, the shorter haul
regional business has increased 19.8% compared to 15.1% for the overall Company.
Most of this intra-regional growth has occurred in the North and Southeast
regions.
The operating ratio was 93.8% for the nine months ended September 30, 1998,
compared to 93.6% for the same period of 1997. The slight increase in operating
ratio was primarily due to increases in salaries, wages and benefits,
depreciation and amortization and general supplies and expenses. Combined, these
expenses increased to 69.2% of revenue from 67.4% in the same period of 1997.
Salaries, wages and benefits increased to 59.6% of revenue as compared to 58.6%
for the same period of 1997. This increase reflects the start up costs and the
Company's commitment to provide superior service in the new markets created
through the expansion into upstate New York, and the Fredrickson and Goggin
asset purchases. The increase in depreciation was due primarily to increased
capital expenditures for expansion of existing service centers, purchases of new
service centers which were previously leased, investments and upgrades to the
Company's information systems and the Fredrickson and Goggin asset purchases.
The increase in general supplies and expenses is attributed to the start up and
administrative costs related to the upstate New York expansion as well as the
Fredrickson and Goggin asset purchases.
These increases were offset by decreases in purchased transportation, operating
supplies and expenses and building and office equipment rents. The decrease in
purchased transportation was the result of the Company continuing to replace
cartage agents with Company equipment and personnel. The decrease in operating
supplies and expenses was due primarily to a 14.3% reduction in the average
price per gallon of fuel combined with a slight increase in fuel efficiency for
the first nine months of 1998. Building and office equipment rents decreased to
1.9% of revenue from 2.1% for the same period of 1997 as a result of the
Company's purchase of service centers that were previously leased.
Interest expense was 1.1% of revenue for the nine months ended September 30,
1998 and 1997. Net income was $8,889,000 for the nine-month period, an increase
of 12.4%, compared to $7,905,000 for the
9
<PAGE>
previous year. The effective tax rate was 38.0% for the current period compared
to 38.5% for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Expansion in both the size and number of service center facilities, as well as
the routine tractor and trailer turnover cycle, have required continued
investment in property and equipment. The Company anticipates capital
expenditures of between $55,000,000 and $60,000,000 for the year ending December
31, 1998. This investment will be financed principally by internally generated
cash flows, supplemented with borrowings. Capital expenditures were
approximately $23,786,000 and $53,068,000 during the quarter and nine months
ended September 30, 1998, respectively. Capital expenditures through the third
quarter of 1998 included approximately $14,197,000 as a result of the
Fredrickson and Goggin asset purchases. Long-term debt, including current
maturities, increased $29,120,000 to $76,421,000 at September 30, 1998, from
$47,301,000 at December 31, 1998.
The Company generally meets its working capital needs with cash generated from
operations, supplemented by credit lines. Working capital requirements are
generally higher during the first and fourth quarters because of seasonal
declines in revenue and annual payments of property taxes, equipment tags and
licenses. The Company currently maintains a $32,500,000 uncollateralized
committed credit agreement that provides a $17,500,000 line of credit and a
$15,000,000 letter of credit facility. Interest on the line of credit is charged
at rates that can vary based upon a certain financial performance ratio and the
stated period of time borrowings are outstanding. The applicable interest rate
is based upon LIBOR plus .75% for periods of 30-180 days and prime minus 1% for
periods less than 30 days. A fee of .25% is charged on the unused portion of the
$32,500,000 line of credit and letter of credit facility, and a fee of .75% is
charged on the outstanding letters of credit. At September 30, 1998, there was
$11,330,000 outstanding on the line of credit and $7,891,000 outstanding on the
letter of credit facility, which is required for self-insured retention reserves
for bodily injury, property damage and workers' compensation insurance. The
Company believes that it has sufficient credit lines and capacity to meet
seasonal and long-term financing needs.
On February 27, 1998, the Company entered into a $20,000,000 private placement
of debt through a Note Purchase Agreement. The debt consists of $10,000,000 of
Senior Notes maturing in seven years bearing an interest rate of 6.35% and
$10,000,000 of Senior Notes maturing in ten years bearing an interest rate of
6.59%. The 2005 note provides for semi-annual interest payments with increasing
annual principal payments beginning February 25, 2000. The 2008 note provides
for semi-annual interest payments with increasing annual principal payments
beginning February 25, 2001. The proceeds from this private debt agreement were
used to replace the outstanding borrowings on the line of credit facility with
long term, fixed rate obligations with the excess proceeds used to finance 1998
planned capital expenditures for service center facilities and revenue
equipment.
IMPACT OF THE YEAR 2000
- -----------------------
Some of the Company's internally generated software, third party software,
information technology ("IT") systems and non-IT systems were written or
designed using two digits rather than four to define the applicable year. As a
result, that software or system is likely to interpret a date using "00" as the
year 1900 rather than the year 2000. This could possibly cause a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in normal business activities.
The Company has completed an assessment of its software to ensure that its
computer systems will function properly with respect to dates in the year 2000
and thereafter. As of this filing date, the Company has successfully completed
modifications to all internally generated software and is currently utilizing
the modified software in production. The total cost to complete this phase of
the year 2000 project was approximately $500,000. All third party software
requiring modification has been identified and those modifications have been
completed and tested.
10
<PAGE>
During the third quarter of 1998, the Company completed modifications to its IT
hardware for year 2000 compliance at a cost of approximately $100,000.
Old Dominion is currently performing an evaluation of its non-IT systems, such
as telephone switches and security systems, to identify systems that require
modification. The cost of these modifications or upgrades, if any, is expected
to be less than $50,000. This evaluation and subsequent compliance plan is
approximately 25% complete and should be finalized by year-end 1998.
The Company is currently 25% complete in its evaluation of its major customers
and suppliers to determine if they have taken adequate measures to ensure that
necessary modifications are made to their software and hardware prior to the
year 2000. In addition, the Company is actively assisting customers in achieving
year 2000 compliance in their electronic data interchange applications that are
used to communicate with the Company in their normal course of business. The
process of monitoring customers and suppliers for year 2000 compliance may well
extend until 2000; however, the Company plans to take appropriate actions, such
as utilizing alternative suppliers of critical supplies, to minimize any
negative impact from noncompliance by third parties. In addition, the Company's
existing systems could be used to provide customers with freight tracing and
documentation requirements if their systems fail. While the Company is not
dependent on any one customer or supplier, failure to make necessary year 2000
modifications by any large groups of customers or suppliers could result in a
material adverse impact on the Company.
In order to avoid problems that could arise in the year 2000, all modifications
to internally generated software were simulated in a year 2000 test environment
and subjected to comprehensive quality standards prior to being placed into
production. Similar IT hardware testing, to the extent possible, has been
performed. The Company does, however, plan to have its internal IT staff and
external IT support resources available in early 2000 to address any software or
hardware failures that might arise.
The cost of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer code, the ability of the Company's customers
and suppliers to address their year 2000 compliance problems and similar
uncertainties.
INFLATION
- ---------
Most of the Company's expenses are affected by inflation, which will generally
result in increased costs. During the second quarter and for the nine months
ended September 30, 1998, the 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 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 ("UST's"). The
Company believes it is in compliance with applicable environmental laws and
regulations, including those relating to UST's, and does not believe that the
cost
11
<PAGE>
of future compliance will have a material adverse effect on the Company's
operations or financial condition.
FORWARD-LOOKING INFORMATION
- ---------------------------
Forward-looking 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 availability and cost of personnel
trained in the year 2000 compliance problem, the Company's ability to locate and
correct relevant IT and non-IT problems and the ability of the Company's
customers and suppliers to address their year 2000 compliance problems; and (9)
other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
Exhibit No. Description
----------- -------------------------------------------------
27 Financial Data Schedule
b) Reports on Form 8-K: The Company filed one report on Form 8-K during
the quarter ended September 30, 1998, as follows:
Date of Report Item
-------------- ----
September 4, 1998 Item 5. Other Information
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.
<TABLE>
<CAPTION>
<S> <C>
DATE: November 9, 1998 J. WES FRYE
----------------------------- -------------------------------------
J. Wes Frye
Sr. V.P. - Finance and Chief Financial Officer
(Principal Financial Officer)
DATE: November 9, 1998 JOHN P. BOOKER III
----------------------------- -------------------------------------
John P. Booker III
V.P. - Controller (Principal Accounting Officer)
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 APR-01-1998 JUL-01-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 8,885 5,407 744
<SECURITIES> 0 0 0
<RECEIVABLES> 51,819 51,969 56,427
<ALLOWANCES> (4,882) (5,112) (5,628)
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 68,942 66,599 68,628
<PP&E> 222,840 235,145 255,921
<DEPRECIATION> (87,563) (91,417) (94,801)
<TOTAL-ASSETS> 211,159 216,607 242,842
<CURRENT-LIABILITIES> 43,577 44,795 51,624
<BONDS> 0 0 0
831 831 831
0 0 0
<COMMON> 0 0 0
<OTHER-SE> 86,583 90,153 93,575
<TOTAL-LIABILITY-AND-EQUITY> 211,159 216,607 242,842
<SALES> 88,694 95,640 99,266
<TOTAL-REVENUES> 88,694 95,640 99,266
<CGS> 0 0 0
<TOTAL-COSTS> 84,605 88,862 92,531
<OTHER-EXPENSES> 91 85 87
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 913 960 1,129
<INCOME-PRETAX> 3,085 5,733 5,519
<INCOME-TAX> 1,172 2,179 2,097
<INCOME-CONTINUING> 1,913 3,554 3,422
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 1,913 3,554 3,422
<EPS-PRIMARY> 0.23 0.43 0.41
<EPS-DILUTED> 0.23 0.43 0.41
</TABLE>
