OLD DOMINION FREIGHT LINE INC/VA - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

o 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 incorporation or organization)		(I.R.S. Employer Identification No.)

500 Old Dominion Way
Thomasville, NC 27360
(Address of principal executive offices)

(336) 889-5000
(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes o

No x

As of May 12, 2003, there were 10,692,264 shares of the registrant’s Common Stock ($.10 par value) outstanding.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

	Quarter Ended

*(In thousands, except share data)*	March 31, 2003 (Unaudited)		March 31, 2002 (Unaudited)

Revenue from operations	$	152,865	$	127,147
Operating expenses:
Salaries, wages and benefits		91,857		78,761
Purchased transportation		4,904		4,336
Operating supplies and expenses		18,158		11,865
Depreciation and amortization		8,685		7,454
Building and office equipment rents		1,767		1,815
Operating taxes and licenses		6,289		5,445
Insurance and claims		4,007		3,961
Communications and utilities		2,371		2,402
General supplies and expenses		5,374		4,757
Miscellaneous expenses, net		787		1,271

Total operating expenses		144,199		122,067

Operating income		8,666		5,080
Other deductions:
Interest expense, net		1,433		1,321
Other expense, net		214		83

Total other deductions		1,647		1,404

Income before income taxes		7,019		3,676
Provision for income taxes		2,772		1,434

Net income	$	4,247	$	2,242

Basic and diluted earnings per share	$	0.40	$	0.27
Weighted average shares outstanding:
Basic		10,682,606		8,313,133
Diluted		10,698,008		8,317,825

The accompanying notes are an integral part of these financial statements.

OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS

*(In thousands, except share data)*	March 31, 2003 (Unaudited)			December 31, 2002 (Audited)

ASSETS
Current assets:
Cash and cash equivalents	$	6,549		$	19,259
Customer receivables, less allowances of $7,959 and $7,866, respectively		71,141			63,843
Other receivables		1,645			4,162
Tires on equipment		8,144			7,988
Prepaid expenses		10,525			15,623
Deferred income taxes		3,670			3,670

Total current assets		101,674			114,545
Property and equipment:
Revenue equipment		246,171			229,478
Land and structures		144,501			142,350
Other equipment		63,134			57,849
Leasehold improvements		1,491			1,267

Total property and equipment		455,297			430,944
Less accumulated depreciation and amortization		(179,659	)		(175,117	)

Net property and equipment		275,638			255,827
Other assets		19,912			19,106

Total assets	$	397,224		$	389,478

The accompanying notes are an integral part of these financial statements.

OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
(CONTINUED)

*(In thousands, except share data)*	March 31, 2003 (Unaudited)		December 31, 2002 (Audited)

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	17,764	$	16,841
Compensation and benefits		16,636		14,719
Claims and insurance accruals		17,554		17,143
Other accrued liabilities		4,487		3,288
Current maturities of long-term debt		17,798		11,139

Total current liabilities		74,239		63,130
Long-term liabilities:
Long-term debt		73,203		82,084
Other non-current liabilities		15,356		14,846
Deferred income taxes		25,855		25,855

Total long-term liabilities		114,414		122,785
Shareholders’ equity:
Common stock - $.10 par value, 25,000,000 shares authorized, 10,692,264 and 8,315,240 shares outstanding, respectively		1,069		1,065
Capital in excess of par value		72,892		72,135
Retained earnings		134,610		130,363

Total shareholders’ equity		208,571		203,563
Commitments and contingencies		—		—

Total liabilities and shareholders’ equity	$	397,224	$	389,478

The accompanying notes are an integral part of these financial statements.

OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Quarter Ended March 31,

*(In thousands)*	2003 (Unaudited)			2002 (Unaudited)

Cash flows from operating activities:
Net income	$	4,247		$	2,242
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,685			7,454
(Gain) loss on sale of property and equipment		(11	)		109
Changes in assets and liabilities:
Customer and other receivables, net		(4,781	)		(7,450	)
Tires on equipment		(156	)		(103	)
Prepaid expenses and other assets		4,290			5,057
Accounts payable		923			1,609
Compensation, benefits and other accrued liabilities		3,116			2,442
Claims and insurance accruals		784			1,873
Income taxes payable		—			824
Other liabilities		137			52

Net cash provided by operating activities		17,234			14,109

Cash flows from investing activities:
Purchase of property and equipment		(29,363	)		(11,795	)
Proceeds from sale of property and equipment		880			283

Net cash used in investing activities		(28,483	)		(11,512	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		2,650			—
Principal payments under long-term debt agreements		(4,872	)		(1,783	)
Net payments on revolving line of credit		—			(641	)
Proceeds from the conversion of stock options		761			24

Net cash used in financing activities		(1,461	)		(2,400	)

(Decrease) increase in cash and cash equivalents		(12,710	)		197
Cash and cash equivalents at beginning of period		19,259			761

Cash and cash equivalents at end of period	$	6,549		$	958

The accompanying notes are an integral part of these financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The accompanying unaudited consolidated interim financial statements reflect, in the opinion of management, 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. The preparation of financial statements in accordance with generally accepted accounting principles 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year.

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 2002 Annual Report to Stockholders and related annual report to the Securities and Exchange Commission on Form 10-K.

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard No. 146, Obligations Associated with Disposal Activities (“SFAS No. 146”), which is effective for disposal activities initiated after December 31, 2002. SFAS No. 146 requires that a liability for a disposal obligation should be recognized and measured at its fair value when it is incurred. The adoption of this standard did not have a material impact on our financial statements.

In December 2002, the FASB issued Statement of Financial Accounting Standard No. 148 (“SFAS No. 148”), Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment to FASB Statement No. 123, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and requiring revised disclosures in both interim and annual reports. We adopted SFAS No. 148 on January 1, 2003, and for the periods presented in this report, there was no difference between the intrinsic value method and the fair value method of measuring stock-based compensation; therefore, no additional disclosures are required under this statement.

Related Party Transactions

Transactions with Old Dominion Truck Leasing, Inc.

Old Dominion Truck Leasing, Inc. (“Leasing”), a North Carolina corporation whose voting stock is owned by the Earl E. Congdon Intangibles Trust, David S. Congdon, Trustee, the John R. Congdon Revocable Trust and members of Earl E. Congdon’s and John R. Congdon’s families, is engaged in the business of purchasing and leasing tractors, trailers and other vehicles. John R. Congdon is Chairman of the Board, and Earl E. Congdon is Vice Chairman of the Board of Leasing. Since 1986, we have combined our requirements with Leasing for the purchase of tractors, trailers, equipment, parts, tires and fuel. We believe that, by combining our requirements, we are often able to obtain pricing discounts because of the increased level of purchasing. While this is beneficial to us, our management believes that the termination of this relationship would not have a material adverse impact on our financial results.

We provide vehicle repair, maintenance and other services to Leasing at cost, and we rent vehicle repair facilities to Leasing at two of our service center locations for fair market value. For these services and use of these facilities, we charged Leasing $5,000 and $4,000 for the first quarter 2003 and 2002, respectively.

We purchased $61,000 and $91,000 of maintenance and other services from Leasing in the first quarter 2003 and 2002, respectively. We believe that the prices we pay for such services are lower than would be charged by unaffiliated third parties for the same quality of work, and we intend to continue to purchase maintenance and other services from Leasing, provided that Leasing’s prices continue to be

favorable to us. We did not lease any equipment from Leasing in the first quarter 2003 or for the entire year 2002.

On January 4, 2002, we purchased 91 1997 model pickup and delivery trailers from leasing for an aggregate purchase price of $774,000.

Transactions with E & J Enterprises

On July 29, 2002, our Board of Directors approved the purchase of 163 trailers for $1,200 each, or a total of $195,600, from E & J Enterprises, a Virginia general partnership of which Earl E. Congdon, our Chief Executive Officer and Chairman of our Board of Directors, and John R. Congdon, Vice Chairman of our Board of Directors, are each 50% owners. These trailers, which are approximately 20 years old, had been leased to us by E & J Enterprises si