How did Old Dominion perform financially in 1998?

Revenue grew 16.5% to $383.1 million and net income rose 10.8% to $11.1 million, or $1.34 per diluted share. Operating income increased to $22.6 million, while the operating ratio slipped slightly to 94.1% from 93.9%.

Why did the operating ratio deteriorate slightly in 1998?

Salaries, wages and benefits increased to 59.8% of revenue from 58.9%, along with higher depreciation and general supplies expenses. These increases were largely offset by lower fuel costs, which fell with a 23.9% drop in average fuel price per gallon, and reduced purchased transportation as the company replaced cartage agents with its own personnel.

How is Old Dominion financing its growth and how leveraged is it?

Growth has been funded by a mix of internal cash flow (about 74% of 1998 capex) and debt. Long-term debt rose to $70.6 million, including a $20 million private placement of senior notes at 6.35% and 6.59%. Management stated that about 88% of its debt carries fixed rates and that it has no interest rate derivatives or fuel hedges in place.

What are the main risks investors should consider?

Key risks include the ability to maintain a nonunion workforce, driver shortages, fuel price and availability, competitive pricing pressure, insurance and claims costs, and the company's capacity to raise capital on satisfactory terms. Year 2000 compliance across customers and suppliers is also an uncertainty, though the company reported its own internal systems were substantially remediated at about $610,000 in cost.

Does Old Dominion pay dividends, and how is the stock traded?

The company has not paid dividends on its common stock. Its debt agreements limit dividends to $9.6 million at year-end 1998. The stock trades on the Nasdaq National Market under the symbol ODFL, with a 1998 price range from a high of $20.25 to a low of $8.00, and about 125 holders of record.

ODFL 10-K FY1998 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 26, 1999. Cited figures are marked; the original filing is the authoritative source.

Old Dominion Freight Line (ODFL) reported solid 1998 results as a inter-regional less-than-truckload (LTL) carrier.

Revenue from operations rose 16.5% to $383.1 million^a (from $328.8 million), driven by increased market share, the opening of 13 service centers in upstate New York in early 1998, and the acquisitions of selected assets of Fredrickson Motor Express and Goggin Truck Line. Net income grew 10.8% to $11.1 million, or $1.34 per diluted share, versus $1.21 in 1997. The operating ratio edged up slightly to 94.1% from 93.9%, as higher wages, depreciation and general supplies offset lower fuel costs (fuel expense fell to 3.3% of revenue) and reduced purchased transportation.

Average length of haul declined to 853 miles from 869 miles, which pressured revenue per hundredweight by 0.8%. The balance sheet expanded meaningfully. Total assets grew to $241.8 million^b and long-term debt including current maturities rose to $70.6 million from $47.3 million, reflected in a $20 million private placement of senior notes in February 1998 at fixed rates of 6.35% and 6.59%.

Capital expenditures were heavy, with net capex of $59.7 million^c, of which internally generated cash covered 74.2%. Management guided to $55-57 million of capex for 1999, mostly for service center expansion and revenue equipment replacement. Stockholders' equity reached $96.6 million, and the company paid no dividends, with debt covenants capping dividend capacity at $9.6 million.

For investors, the story is steady top-line growth and network expansion funded largely by debt, with margins roughly flat and a modest earnings increase. Key watch items include rising leverage, the company's reliance on a nonunion, flexible workforce, driver availability risk, and Year 2000 readiness, which management described as substantially complete with about $610,000^d spent to date.

02—Key points

Key Highlights

Revenue from operations increased 16.5% to $383.1 million in 1998, driven by market share gains and network expansion, including 13 new service centers in New York and two asset acquisitions.
Net income rose 10.8% to $11.1 million, or $1.34 per diluted share, up from $1.21 in 1997.
Operating ratio was 94.1%, slightly worse than 93.9% in 1997, as higher salaries, wages and benefits (59.8% of revenue) offset lower fuel and purchased transportation costs.
Long-term debt including current maturities increased to $70.6 million from $47.3 million, with 88% at fixed rates, following a $20 million senior note placement in February 1998.
Net capital expenditures were $59.7 million in 1998; 2000-era capex guidance for 1999 is $55-57 million, mainly for service centers and revenue equipment.
Average length of haul fell to 853 miles from 869 miles, reducing LTL revenue per hundredweight by 0.8%, and inter-regional revenue represented 71% of total revenue.
No dividends were paid; stockholders' equity grew to $96.6 million and the company is self-insured for most liability and cargo claims, with a nonunion workforce of 5,287 employees.

03—Questions

Frequently Asked Questions

How did Old Dominion perform financially in 1998?
Revenue grew 16.5% to $383.1 million and net income rose 10.8% to $11.1 million, or $1.34 per diluted share. Operating income increased to $22.6 million, while the operating ratio slipped slightly to 94.1% from 93.9%.
Why did the operating ratio deteriorate slightly in 1998?
Salaries, wages and benefits increased to 59.8% of revenue from 58.9%, along with higher depreciation and general supplies expenses. These increases were largely offset by lower fuel costs, which fell with a 23.9% drop in average fuel price per gallon, and reduced purchased transportation as the company replaced cartage agents with its own personnel.
How is Old Dominion financing its growth and how leveraged is it?
Growth has been funded by a mix of internal cash flow (about 74% of 1998 capex) and debt. Long-term debt rose to $70.6 million, including a $20 million private placement of senior notes at 6.35% and 6.59%. Management stated that about 88% of its debt carries fixed rates and that it has no interest rate derivatives or fuel hedges in place.
What are the main risks investors should consider?
Key risks include the ability to maintain a nonunion workforce, driver shortages, fuel price and availability, competitive pricing pressure, insurance and claims costs, and the company's capacity to raise capital on satisfactory terms. Year 2000 compliance across customers and suppliers is also an uncertainty, though the company reported its own internal systems were substantially remediated at about $610,000 in cost.
Does Old Dominion pay dividends, and how is the stock traded?
The company has not paid dividends on its common stock. Its debt agreements limit dividends to $9.6 million at year-end 1998. The stock trades on the Nasdaq National Market under the symbol ODFL, with a 1998 price range from a high of $20.25 to a low of $8.00, and about 125 holders of record.

04—Continue

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