10-QPeriod: Q1 FY2010

OLD DOMINION FREIGHT LINE, INC. Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:ODFL

Summary

Old Dominion Freight Line, Inc. (ODFL) reported a solid first quarter for 2010, demonstrating a significant recovery from the challenging environment of 2009. Revenue increased by 7.7% year-over-year, driven by a 5.8% rise in tonnage and improved revenue per hundredweight. This growth was achieved through enhanced operational efficiency, including increased weight per shipment and improved asset utilization, alongside a focus on yield management. The company also benefited from a favorable shift in operating expenses as a percentage of revenue, notably in salaries, wages, and benefits, and a reduction in insurance and claims costs. A change in accounting policy to extend the useful lives of certain equipment also provided a boost to net income. Despite rising fuel costs, ODFL managed its business effectively, resulting in a substantial improvement in its operating ratio and a near doubling of net income and earnings per share compared to the prior year. The company maintained a strong liquidity position, supported by operating cash flows and available credit facilities, and projected capital expenditures for 2010 remain focused on service center expansion and equipment modernization.

Financial Highlights

22 data points
Beta

Revenue

$317.80M

Net Income

$7.70M

2.4% Net Margin

EPS (Diluted)

$0.03

Cash & Equivalents

$9.47M

Free Cash Flow

$35.04M

Financial Statements
Beta
Revenue$317.80M
Operating Expenses$301.42M
Operating Income$16.38M
Net Income$7.70M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)251.67M
Shares Outstanding (Diluted)251.67M

Key Highlights

  • 1Revenue increased 7.7% to $317.8 million for the first quarter of 2010 compared to $295.1 million in the prior year, indicating a recovery in business levels.
  • 2Net income surged by 93.8% to $7.7 million ($0.21 per diluted share) from $3.97 million ($0.11 per diluted share) in the first quarter of 2009.
  • 3Tonnage increased by 5.8% and weight per shipment rose by 5.7%, reflecting improved customer demand and freight mix.
  • 4Operating ratio improved significantly to 94.8% from 96.6% in the prior year, driven by revenue growth and cost management efficiencies.
  • 5A change in accounting policy, extending useful lives of tractors and trailers, increased net income by $1.3 million ($0.03 per diluted share) in the quarter, with further benefits expected.
  • 6Cash provided by operating activities increased to $35.0 million, demonstrating strong cash generation capabilities.
  • 7The company maintained a healthy liquidity position with $9.5 million in cash and cash equivalents and $94.7 million in available borrowing capacity under its credit facility.

Frequently Asked Questions

Revenue growth was primarily driven by a 7.7% increase in total revenue, fueled by a 5.8% increase in tonnage shipped and a 2.1% rise in revenue per hundredweight. This improvement in tonnage was a result of a 5.7% increase in weight per shipment and a slight increase in the number of shipments, reflecting a stronger operating environment and improved customer demand compared to the prior year.

The company improved its operating ratio to 94.8% through a combination of strategies. Salaries, wages, and benefits decreased as a percentage of revenue due to increased employee productivity and a reduction in workforce size, despite higher performance-based pay. Operating supplies and expenses increased as a percentage of revenue, primarily due to higher diesel fuel costs, but were offset by significant reductions in insurance and claims expenses due to improved cargo claims ratios. Depreciation also decreased as a percentage of revenue due to changes in estimated equipment useful lives.

Effective January 1, 2010, Old Dominion extended the estimated useful lives of its tractors (from 7 to 9 years) and trailers (from 12 to 15 years), and adjusted salvage values. This change reduced depreciation expense by $2.1 million in the first quarter of 2010, increasing net income by $1.3 million ($0.03 per diluted share). The company anticipates a total increase in net income of approximately $7.6 million ($0.20 per diluted share) for the full year 2010 as a result of this policy change.

Old Dominion has a strong liquidity position, with $9.5 million in cash and cash equivalents at the end of the quarter and $94.7 million in available borrowing capacity under its $225 million revolving credit facility. The company generated $35.0 million in cash from operations. Capital expenditures for 2010 are projected at $95.0 million, primarily for service center improvements and equipment, to be funded by operations and available credit.