0001564590-20-051868.txt : 20201106 0001564590-20-051868.hdr.sgml : 20201106 20201106140959 ACCESSION NUMBER: 0001564590-20-051868 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 42 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201106 DATE AS OF CHANGE: 20201106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLD DOMINION FREIGHT LINE, INC. CENTRAL INDEX KEY: 0000878927 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 560751714 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19582 FILM NUMBER: 201293752 BUSINESS ADDRESS: STREET 1: 500 OLD DOMINION WAY CITY: THOMASVILLE STATE: NC ZIP: 27360 BUSINESS PHONE: 3368895000 MAIL ADDRESS: STREET 1: 500 OLD DOMINION WAY CITY: THOMASVILLE STATE: NC ZIP: 27360 FORMER COMPANY: FORMER CONFORMED NAME: OLD DOMINION FREIGHT LINE INC/VA DATE OF NAME CHANGE: 19930328 10-Q 1 odfl-10q_20200930.htm FORM 10-Q odfl-10q_20200930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 

 

 

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

For the quarterly period ended September 30, 2020

or

 

 

 

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, North Carolina

 

27360

(Address of principal executive offices)

 

(Zip Code)

(336) 889-5000

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock ($0.10 par value)

ODFL

The Nasdaq Stock Market LLC

(Nasdaq Global Select Market)

 

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 4, 2020 there were 117,331,447 shares of the registrant’s Common Stock ($0.10 par value) outstanding.

 


INDEX

 

Part I – FINANCIAL INFORMATION

 

 

 

 

Item 1

Financial Statements

1

 

Condensed Balance Sheets – September 30, 2020 and December 31, 2019

1

 

Condensed Statements of Operations – For the three and nine months ended September 30, 2020 and 2019

3

 

Condensed Statements of Changes in Shareholders’ Equity - For the three and nine months ended September 30, 2020 and 2019

4

 

Condensed Statements of Cash Flows – For the nine months ended September 30, 2020 and 2019

5

 

Notes to the Condensed Financial Statements

6

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

11

Item 3

Quantitative and Qualitative Disclosures about Market Risk

20

Item 4

Controls and Procedures

21

 

 

Part II – OTHER INFORMATION

 

 

 

 

Item 1

Legal Proceedings

22

Item 1A

Risk Factors

22

Item 6

Exhibits

22

 

 

Exhibit Index

23

Signatures

24

 

 


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

 

 

 

September 30,

 

 

 

 

 

 

 

2020

 

 

December 31,

 

(In thousands, except share and per share data)

 

(Unaudited)

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

420,396

 

 

$

403,571

 

Short-term investments

 

 

205,294

 

 

 

 

Customer receivables, less allowances of $10,286 and $8,866, respectively

 

 

453,346

 

 

 

397,579

 

Other receivables

 

 

9,578

 

 

 

10,586

 

Prepaid expenses and other current assets

 

 

49,882

 

 

 

55,098

 

Total current assets

 

 

1,138,496

 

 

 

866,834

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

Revenue equipment

 

 

1,892,005

 

 

 

1,898,999

 

Land and structures

 

 

2,167,557

 

 

 

2,039,937

 

Other fixed assets

 

 

495,268

 

 

 

482,425

 

Leasehold improvements

 

 

12,043

 

 

 

11,709

 

Total property and equipment

 

 

4,566,873

 

 

 

4,433,070

 

Accumulated depreciation

 

 

(1,631,398

)

 

 

(1,464,235

)

Net property and equipment

 

 

2,935,475

 

 

 

2,968,835

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

19,463

 

 

 

19,463

 

Other assets

 

 

180,254

 

 

 

140,436

 

Total assets

 

$

4,273,688

 

 

$

3,995,568

 

 

Note: The Condensed Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

1


OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

(CONTINUED)

 

 

 

September 30,

 

 

 

 

 

 

 

2020

 

 

December 31,

 

(In thousands, except share and per share data)

 

(Unaudited)

 

 

2019

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

59,229

 

 

$

70,254

 

Compensation and benefits

 

 

217,154

 

 

 

192,524

 

Claims and insurance accruals

 

 

54,493

 

 

 

54,330

 

Other accrued liabilities

 

 

60,141

 

 

 

46,130

 

Income taxes payable

 

 

13,271

 

 

 

2,847

 

Current maturities of long-term debt

 

 

45,000

 

 

 

 

Total current liabilities

 

 

449,288

 

 

 

366,085

 

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt

 

 

99,927

 

 

 

45,000

 

Other non-current liabilities

 

 

316,831

 

 

 

241,802

 

Deferred income taxes

 

 

236,809

 

 

 

261,964

 

Total long-term liabilities

 

 

653,567

 

 

 

548,766

 

Total liabilities

 

 

1,102,855

 

 

 

914,851

 

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock - $0.10 par value, 280,000,000 shares authorized, 117,331,447 shares outstanding at September 30, 2020 and 140,000,000 shares authorized, 119,532,534 shares outstanding at December 31, 2019

 

 

11,733

 

 

 

11,953

 

Capital in excess of par value

 

 

185,991

 

 

 

218,462

 

Retained earnings

 

 

2,973,109

 

 

 

2,850,302

 

Total shareholders’ equity

 

 

3,170,833

 

 

 

3,080,717

 

Total liabilities and shareholders’ equity

 

$

4,273,688

 

 

$

3,995,568

 

 

Note: The Condensed Balance Sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

2


OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands, except share and per share data)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue from operations

 

$

1,058,166

 

 

$

1,048,457

 

 

$

2,941,740

 

 

$

3,099,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

 

524,658

 

 

 

533,451

 

 

 

1,510,047

 

 

 

1,588,378

 

Operating supplies and expenses

 

 

90,269

 

 

 

117,343

 

 

 

273,374

 

 

 

361,110

 

General supplies and expenses

 

 

27,383

 

 

 

33,633

 

 

 

86,872

 

 

 

97,584

 

Operating taxes and licenses

 

 

29,923

 

 

 

29,117

 

 

 

86,280

 

 

 

87,572

 

Insurance and claims

 

 

11,821

 

 

 

11,280

 

 

 

32,581

 

 

 

34,039

 

Communications and utilities

 

 

7,622

 

 

 

8,098

 

 

 

23,075

 

 

 

22,071

 

Depreciation and amortization

 

 

64,983

 

 

 

63,493

 

 

 

196,153

 

 

 

189,137

 

Purchased transportation

 

 

25,405

 

 

 

23,063

 

 

 

65,188

 

 

 

68,218

 

Miscellaneous expenses, net

 

 

5,858

 

 

 

11,452

 

 

 

15,590

 

 

 

21,354

 

Total operating expenses

 

 

787,922

 

 

 

830,930

 

 

 

2,289,160

 

 

 

2,469,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

270,244

 

 

 

217,527

 

 

 

652,580

 

 

 

630,442

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

1,071

 

 

 

3

 

 

 

1,936

 

 

 

285

 

Interest income

 

 

(123

)

 

 

(1,714

)

 

 

(1,602

)

 

 

(4,966

)

Other expense, net

 

 

961

 

 

 

844

 

 

 

4,205

 

 

 

768

 

Total non-operating expense (income)

 

 

1,909

 

 

 

(867

)

 

 

4,539

 

 

 

(3,913

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

268,335

 

 

 

218,394

 

 

 

648,041

 

 

 

634,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

66,467

 

 

 

54,295

 

 

 

165,191

 

 

 

162,861

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

201,868

 

 

$

164,099

 

 

$

482,850

 

 

$

471,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.72

 

 

$

1.37

 

 

$

4.09

 

 

$

3.91

 

Diluted

 

$

1.71

 

 

$

1.37

 

 

$

4.07

 

 

$

3.90

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

117,188,398

 

 

 

119,820,422

 

 

 

117,946,805

 

 

 

120,711,513

 

Diluted

 

 

117,933,440

 

 

 

119,984,153

 

 

 

118,696,836

 

 

 

120,882,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.15

 

 

$

0.11

 

 

$

0.45

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

 

 

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

3


OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

(In thousands)

2020

 

 

2019

 

 

2020

 

 

2019

 

Common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

$

11,734

 

 

$

12,020

 

 

$

11,953

 

 

$

12,185

 

Share repurchases

 

 

 

 

(38

)

 

 

(223

)

 

 

(211

)

Share-based compensation and restricted share issuances, net of forfeitures

 

(1

)

 

 

 

 

 

6

 

 

 

10

 

Taxes paid in exchange for shares withheld

 

 

 

 

 

 

 

(2

)

 

 

(2

)

Cash paid for fractional shares

 

 

 

 

 

 

 

(1

)

 

 

 

Ending balance

 

11,733

 

 

 

11,982

 

 

 

11,733

 

 

 

11,982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital in excess of par value:

 

 

 

 

 

 

 

 

 

Beginning balance

 

181,895

 

 

 

140,970

 

 

 

218,462

 

 

 

138,210

 

Share-based compensation and restricted share issuances, net of forfeitures

 

4,096

 

 

 

1,147

 

 

 

8,371

 

 

 

5,353

 

Taxes paid in exchange for shares withheld

 

 

 

 

 

 

 

(2,731

)

 

 

(1,446

)

Forward contract for accelerated share repurchases

 

 

 

 

 

 

 

(37,500

)

 

 

 

Cash paid for fractional shares

 

 

 

 

 

 

 

(611

)

 

 

 

Ending balance

 

185,991

 

 

 

142,117

 

 

 

185,991

 

 

 

142,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

2,788,839

 

 

 

2,645,495

 

 

 

2,850,302

 

 

 

2,530,088

 

Share repurchases

 

 

 

 

(40,576

)

 

 

(306,568

)

 

 

(205,135

)

Cash dividends declared

 

(17,598

)

 

 

(13,589

)

 

 

(53,475

)

 

 

(41,018

)

Net income

 

201,868

 

 

 

164,099

 

 

 

482,850

 

 

 

471,494

 

Ending balance

 

2,973,109

 

 

 

2,755,429

 

 

 

2,973,109

 

 

 

2,755,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders' equity

$

3,170,833

 

 

$

2,909,528

 

 

$

3,170,833

 

 

$

2,909,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4


OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(In thousands)

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

482,850

 

 

$

471,494

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

196,157

 

 

 

189,137

 

Loss on disposal of property and equipment

 

 

255

 

 

 

5,624

 

Share-based compensation

 

 

8,377

 

 

 

5,363

 

Provision for deferred income taxes

 

 

(25,155

)

 

 

 

Other operating activities, net

 

 

23,974

 

 

 

75,897

 

Net cash provided by operating activities

 

 

686,458

 

 

 

747,515

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(166,459

)

 

 

(370,310

)

Proceeds from sale of property and equipment

 

 

3,411

 

 

 

2,598

 

Purchase of short-term investments

 

 

(205,301

)

 

 

 

Other investing, net

 

 

(100

)

 

 

 

Net cash used in investing activities

 

 

(368,449

)

 

 

(367,712

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt

 

 

99,923

 

 

 

 

Payments for share repurchases

 

 

(306,791

)

 

 

(205,346

)

Forward contract for accelerated share repurchases

 

 

(37,500

)

 

 

 

Dividends paid

 

 

(53,471

)

 

 

(41,005

)

Other financing activities, net

 

 

(3,345

)

 

 

(1,448

)

Net cash used in financing activities

 

 

(301,184

)

 

 

(247,799

)

 

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

 

16,825

 

 

 

132,004

 

Cash and cash equivalents at beginning of period

 

 

403,571

 

 

 

190,282

 

Cash and cash equivalents at end of period

 

$

420,396

 

 

$

322,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

5


NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Significant Accounting Policies

Business

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting. We have one operating segment and the composition of our revenue is summarized below:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

LTL services

 

$

1,044,640

 

 

$

1,035,093

 

 

$

2,903,140

 

 

$

3,058,864

 

Other services

 

 

13,526

 

 

 

13,364

 

 

 

38,600

 

 

 

41,041

 

Total revenue from operations

 

$

1,058,166

 

 

$

1,048,457

 

 

$

2,941,740

 

 

$

3,099,905

 

 

Basis of Presentation

The accompanying unaudited, interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and, in management’s opinion, contain 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. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.

The preparation of condensed financial statements in accordance with U.S. GAAP 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 condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our operating results are subject to seasonal trends; therefore, the results of operations for the interim period ended September 30, 2020 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 2020.

The condensed financial statements should be read in conjunction with the financial statements and related notes, which appear in our Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes in the accounting principles and policies, long-term contracts or estimates inherent in the preparation of the condensed financial statements of Old Dominion Freight Line, Inc. as previously described in our Annual Report on Form 10-K for the year ended December 31, 2019, other than those disclosed in this Form 10-Q.

Certain amounts in prior years have been reclassified to conform prior years’ financial statements to the current presentation.

Unless the context requires otherwise, references in these Notes to “Old Dominion,” the “Company,” “we,” “us” and “our” refer to Old Dominion Freight Line, Inc.

 

Common Stock Split

On February 21, 2020, we announced that our Board of Directors approved a three-for-two split of our common stock for shareholders of record as of the close of business on the record date of March 10, 2020. On March 24, 2020, those shareholders received one additional share of common stock for every two shares owned. In lieu of fractional shares, shareholders received a cash payment based on the average of the high and low sales prices of our common stock on the record date.

All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect this stock split. Split-adjusted quarterly per-share metrics may not recalculate precisely due to rounding.

6


    

Short-term Investments

The Company’s investments in certificates of deposit, U.S. government securities, and commercial paper with an original maturity of greater than three months have been classified and accounted for as trading securities, and are reported in “Short-term investments” on our Condensed Balance Sheet. These investments are measured at fair value each reporting period, with gains or losses recorded in “Non-operating expense (income)” on our Condensed Statement of Operations.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The levels of inputs used to measure fair value are:

Level 1 — Quoted prices for identical instruments in active markets;

Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets; and

Level 3 — Valuations based on inputs that are unobservable, generally utilizing pricing models or other valuation techniques that reflect management’s judgment and estimates.

 

Our short-term investments and our long-term debt, including current maturities, are measured at fair value on a recurring basis, and are further described in Note 6. Our other financial securities in current assets and current liabilities approximate their fair value due to the short maturities of these instruments.

Stock Repurchase Program

 On May 1, 2020, we announced that our Board of Directors had approved a new two-year stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020, as of which date $21.5 million remained authorized under the prior program. Under the 2020 Repurchase Program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.

On May 29, 2020, we entered into an accelerated share repurchase agreement (the “ASR Agreement”) with a third-party financial institution as part of our 2020 Repurchase Program. Under the ASR Agreement, we paid the third-party financial institution $125.0 million and received an initial delivery of 511,427 shares of our common stock for $87.5 million, representing approximately 70% of the total value of shares to be received under the ASR Agreement. The remaining expected shares are scheduled to settle during the fourth quarter of 2020. At final settlement, we may receive additional shares of our common stock, or, under certain circumstances, we may be required to provide the third-party financial institution additional shares or may elect to make a cash payment to the third-party financial institution. The total shares repurchased will be based on the daily volume-weighted average share price of our common stock during the term of the ASR Agreement, less a negotiated discount.

The ASR Agreement was accounted for as a settled treasury stock purchase and a forward stock purchase contract. The par value of the initial share delivery was recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings. The forward stock purchase contract is accounted for as a contract indexed to our own stock and is classified within capital in excess of par value on our Condensed Statements of Changes in Shareholders’ Equity.

During the three months ended September 30, 2020, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2020, we repurchased 2,237,320 shares of our common stock for $306.8 million under our repurchase programs, including shares repurchased under the ASR Agreement. As of September 30, 2020, we had $612.5 million remaining authorized under the 2020 Repurchase Program.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses – Measurement of Credit Losses on Financial Statements” (Topic 326). This ASU modified the loss methodology for establishing a provision against financial assets, including customer receivables, to include an expected

7


future performance component. We adopted ASU 2016-13 on January 1, 2020. The adoption did not have a material impact to our financial position, results of operations, or cash flow.

We maintain an allowance for uncollectible accounts for estimated losses resulting from the inability of our customers to make required payments. We estimate this allowance by analyzing the aging of our customer receivables, our historical loss experience and other trends and factors affecting the credit risk of our customers, including anticipated changes to future performance. Write-offs occur when we determine an account to be uncollectible and could differ from our allowance estimate as a result of factors such as changes in the overall economic environment or risks surrounding our customers. Additional allowances may be required if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments. We periodically review the underlying assumptions in our estimate of the allowance for uncollectible accounts to ensure that the allowance reflects the most recent trends and factors.

Our allowance for uncollectible accounts was $4.9 million at September 30, 2020. There were no material write-offs to our allowance for uncollectible accounts during the third quarter of 2020.

Note 2. Earnings Per Share

Basic earnings per share is computed by dividing net income by the daily weighted average number of shares of our common stock outstanding for the period, excluding unvested restricted stock. Unvested restricted stock is included in common shares outstanding on our Condensed Balance Sheets.

Diluted earnings per share is computed using the treasury stock method. The denominator used in calculating diluted earnings per share includes the impact of unvested restricted stock and other dilutive, non-participating securities under our equity award agreements. The denominator excludes contingently-issuable shares under performance-based award agreements when the performance target has not yet been deemed achieved.

The following table provides a reconciliation of the number of shares of common stock used in computing basic and diluted earnings per share:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Weighted average shares outstanding - basic

 

 

117,188,398

 

 

 

119,820,422

 

 

 

117,946,805

 

 

 

120,711,513

 

Dilutive effect of share-based awards

 

 

745,042

 

 

 

163,731

 

 

 

750,031

 

 

 

171,323

 

Weighted average shares outstanding - diluted

 

 

117,933,440

 

 

 

119,984,153

 

 

 

118,696,836

 

 

 

120,882,836

 

 

Note 3. Long-Term Debt

Long-term debt, net of unamortized debt issuance costs, consisted of the following:

 

(In thousands)

 

September 30,

2020

 

 

December 31,

2019

 

Senior notes

 

$

144,927

 

 

$

45,000

 

Revolving credit facility

 

 

 

 

 

 

Total long-term debt

 

 

144,927

 

 

 

45,000

 

Less: Current maturities

 

 

(45,000

)

 

 

 

Total maturities due after one year

 

$

99,927

 

 

$

45,000

 

 

Senior Note Agreements

 

We had an unsecured senior note agreement with a principal amount outstanding of $45.0 million at each of September 30, 2020 and December 31, 2019 (the “Senior Note”). The agreement for the Senior Note calls for a scheduled principal payment of $45.0 million, with an interest rate of 4.79%, on January 3, 2021.

 

On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential (the “Note Agreement”). The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through May 4, 2023. Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”), the proceeds of which are available for capital expenditures, share repurchases, dividends,

8


acquisitions, or general corporate purposes. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Senior Note, the Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.

 

The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027. The Series B Notes are senior unsecured obligations and rank pari passu with our other senior unsecured indebtedness.

 

Credit Agreement

 

On November 21, 2019, we entered into a second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million. Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.

 

At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%. Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement.

 

For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.    

 

The Credit Agreement replaced our previous five-year, $300.0 million senior unsecured revolving credit agreement dated as of December 15, 2015, as amended on September 9, 2016 (the “Prior Credit Agreement”). For periods in 2019 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.125%.

 

There were $42.1 million and $48.9 million of outstanding letters of credit at September 30, 2020 and December 31, 2019, respectively.

 

General Debt Provisions

 

The Senior Note, Credit Agreement, and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. The Credit Agreement and Note Agreement also include a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default are ongoing (or would be caused by such restricted payment).

Note 4. Commitments and Contingencies

We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance.  Certain of these matters include collective and/or class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.

Note 5. Leases

Our right-of-use assets totaled $100.2 million and $65.3 million as of September 30, 2020 and December 31, 2019, respectively, and are presented within “Other assets,” which is classified as long-term, on our Condensed Balance Sheets. Our corresponding lease liabilities consist of a current and a non-current portion. The current lease liability was $12.3 million and $10.4 million as of September 30, 2020 and December 31, 2019, respectively, and is presented within “Other accrued liabilities” on our Condensed Balance Sheets. The non-current lease liability was $89.5 million and $56.1 million as of September 30, 2020 and December 31, 2019, respectively, and is presented within “Other non-current liabilities” on our Condensed Balance Sheets. During the three-months ended September 30, 2020, we added $41.0 million in new right-of-use assets in exchange for corresponding lease liabilities, which includes leases that were executed prior to December 31, 2019 and commenced in the quarter ended September 30, 2020.

 

9


Note 6. Fair Value Measurements

 

Short-term investments

 

A summary of the fair value of our short-term investments as of September 30, 2020 is shown in the table below.

 

 

September 30, 2020

 

Level 1

 

Level 2

 

Level 3

 

Certificates of deposit

$

55,000

 

$

 

$

55,000

 

$

 

U.S. government securities

 

75,367