10-QPeriod: Q3 FY2009

OLD DOMINION FREIGHT LINE, INC. Quarterly Report for Q3 Ended Sep 30, 2009

Filed November 9, 2009For Securities:ODFL

Summary

Old Dominion Freight Line, Inc. (ODFL) reported its third-quarter and year-to-date results for 2009, reflecting the challenging economic environment. Revenue significantly declined by 22.4% in the third quarter and 22.3% for the first nine months compared to the prior year, primarily due to a substantial drop in tonnage (down 14.0% and 13.7% respectively) and lower fuel surcharges. Despite these revenue pressures, the company focused on operational efficiencies and cost management. However, the decline in tonnage and yield pressure outpaced cost savings, leading to a significant increase in the operating ratio to 93.8% for Q3 2009 and 94.5% for the nine months, up from 89.8% and 91.2% respectively in 2008. Consequently, net income dropped by 55.1% to $10.5 million in Q3 and 56.3% to $25.2 million year-to-date.

Financial Highlights

20 data points
Beta

Revenue

$322.76M

Net Income

$10.49M

3.3% Net Margin

EPS (Diluted)

$0.04

Cash & Equivalents

$3.64M

Free Cash Flow

$37.27M

Financial Statements
Beta
Revenue$322.76M
Operating Expenses$302.81M
Operating Income$19.95M
Net Income$10.49M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)251.67M
Shares Outstanding (Diluted)251.67M

Key Highlights

  • 1Revenue declined significantly by 22.4% in Q3 2009 and 22.3% year-to-date due to reduced tonnage and lower fuel surcharges.
  • 2Tonnage dropped by 14.0% in Q3 and 13.7% year-to-date, driven by a decrease in the number of shipments.
  • 3Operating ratio deteriorated to 93.8% in Q3 2009 and 94.5% year-to-date, indicating reduced profitability due to cost pressures exceeding savings.
  • 4Net income saw a substantial decrease of 55.1% in Q3 2009 and 56.3% year-to-date, reflecting the impact of the economic downturn.
  • 5The company continued strategic investments in property and equipment, including service center expansion, totaling $180.6 million year-to-date.
  • 6Liquidity remains supported by operating cash flows and a $225 million revolving credit facility, with $101 million available at the end of Q3 2009.

Frequently Asked Questions

The primary reason for the revenue decrease is the challenging economic environment leading to a substantial decline in freight tonnage, down 14.0% in the third quarter and 13.7% year-to-date. This was exacerbated by a significant drop in fuel surcharges due to lower diesel fuel prices and intense price competition within the LTL industry.

Old Dominion focused on improving operational efficiencies and workforce productivity, as well as managing variable costs diligently. Specific improvements noted include increased P&D shipments per hour and platform pounds per hour, along with reductions in operating supplies and expenses due to lower fuel costs. However, these cost savings were not enough to offset the impact of declining tonnage and yield pressures.

Management believes that industry conditions will likely not improve until there is sustained growth in the domestic economy or significant capacity reduction through industry consolidation. The company anticipates continued pressure on shipments, tonnage, and yields for the remainder of 2009 due to the prolonged impact of overcapacity and aggressive pricing competition.

Capital expenditures, amounting to $180.6 million year-to-date, are being funded through a combination of operating cash flows, liquidation of short-term investments, and the use of its senior unsecured revolving credit facility. The company has increased its projected capital expenditures for 2009 to approximately $200 million, with a focus on service center expansion and equipment purchases.