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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
[ ] 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 (I.R.S. Employer
incorporation or organization) Identification No.)
1730 WESTCHESTER DRIVE
HIGH POINT, NC 27262
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER (336) 889-5000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK ($.10 PAR VALUE)
(Title of class)
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 [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
registrant as of March 9, 1998, was $25,254,945.
As of March 9, 1998, the registrant had outstanding 8,310,596 shares of
Common Stock ($.10 par value).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the 1998 Annual Meeting of
Stockholders are incorporated by reference into Part III.
PART I
ITEM 1. BUSINESS
GENERAL
Old Dominion Freight Line, Inc. ("Old Dominion", the "Company" or the
"Registrant", as appropriate for this report), is an inter-regional and regional
motor carrier transporting primarily less-than-truckload ("LTL") shipments of
general commodities, including consumer goods, textiles and capital goods to a
diversified customer base. The Company serves regional markets in the Southeast,
Northeast, Midwest and West regions of the country. Old Dominion connects these
geographic regions with high quality inter-regional service.
Old Dominion's operating strategy is to provide high quality and timely
service, including time definite and expedited delivery services, at competitive
prices, while maintaining low operating costs. Along key inter-regional lanes,
Old Dominion maintains published service standards that generally provide for
delivery time schedules that are faster than those of its principal national
competitors, in part, because of its more efficient service center network. The
Company's service standards provide for delivery times of between two and three
days along key inter-regional lanes between 500 and 1,500 miles. The Company
generally provides for one or two-day delivery along regional lanes of less than
500 miles, which Old Dominion believes is highly competitive.
The Company seeks to reduce unit operating costs and improve service by
building freight volume, or density, in its markets. Increasing density reduces
unloading and reloading at breakbulk facilities, resulting in faster transit
times and reduced cargo claims, and also improves equipment utilization. Old
Dominion also lowers its cost structure and reduces cargo claims by using twin
28-foot trailers exclusively in its linehaul operations. Use of twin 28-foot
trailers permits the Company to transport freight directly from its point of
origin to destination with minimal unloading and reloading, and permits more
freight to be hauled behind a tractor than could be hauled if the Company used
one larger trailer. Approximately 60% of the Company's LTL tonnage moves
directly from the origination service center to its destination without being
reloaded to another trailer at a breakbulk facility, with a substantial majority
of the remaining tonnage experiencing no more than one breakbulk handling per
shipment. Further, management believes that it gains an operating advantage by
maintaining flexible work force rules among its nonunion labor force, which
permits service center employees to perform several functions that result in
reliable delivery and a higher level of customer satisfaction.
The Company also transports shipping containers between several port
cities and inland points in its core southeastern service area. For the year
ended December 31, 1997, container services accounted for 3.0% of the Company's
operating revenue. Old Dominion also provides assembly and distribution services
primarily to its retail customers.
THE LTL INDUSTRY
Old Dominion transports primarily LTL shipments, which are defined as
shipments weighing less than 10,000 pounds. Generally, LTL carriers transport
freight from multiple shippers to multiple consignees through a service center
network, based on standard transit times.
Deregulation of the trucking industry in 1980 created a new operating
environment for motor carriers, permitting them to choose, for the first time,
their operating routes and pricing policies. Since deregulation, most LTL
carriers have focused on providing service in either a single regional market or
the national market. Furthermore, the overall trucking industry currently is
undergoing changes that affect both shippers and carriers. Shippers are seeking
to reduce the number of carriers they use and to establish service-based,
long-term relationships with a small group of preferred or "core carriers." This
trend toward the use of "core carriers" offers significant growth opportunities
for carriers that possess financial stability and can provide both regional and
inter-regional, high quality service with low costs. The Company believes that
this trend has created an opportunity for it to increase lane and
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service center density along key inter-regional lanes in which a relatively
small number of carriers offer high quality service. Old Dominion's strategy is
to continue to capitalize on the opportunities provided by deregulation by
building its market share in key inter-regional and regional lanes. From time to
time, certain national carriers have sought to compete in selected
inter-regional markets and along selected inter-regional lanes and may seek to
do so in the future as national markets mature, but the Company believes that it
holds a key competitive advantage over its principal national competitors due to
its more efficient service center network.
LTL companies are generally categorized as regional, inter-regional or
national motor carriers, based upon length of haul. Carriers with average
lengths of haul less than 500 miles are referred to as regional carriers.
Carriers with average lengths of haul between 500 and 1,000 miles are referred
to as inter-regional carriers. National carriers generally have average lengths
of haul that exceed 1,000 miles. For the year ended December 31, 1997, Old
Dominion had an average length of haul of 869 miles.
In the motor carrier industry, revenue is primarily a function of
weight, length of haul and commodity class, and is frequently described in terms
of revenue per hundredweight. The Company tracks revenue per hundredweight as a
measure of pricing, commodity mix and rate trends.
LTL carriers can improve profitability by increasing lane and service
center density. Increased lane density lowers unit operating costs and improves
service. Increased service center density, by increasing the amount of freight
handled at a given service center location, improves utilization of assets and
other fixed costs.
REVENUE EQUIPMENT AND MAINTENANCE
At December 31, 1997, the Company operated 1,761 tractors. The Company
uses new tractors in linehaul operations for approximately three to four years
and then transfers those tractors to pickup and delivery operations for the
remainder of their useful lives. In a number of Company service centers,
tractors perform pickup and delivery functions during the day and linehaul
functions at night to maximize tractor utilization.
At December 31, 1997, the Company operated a fleet of 7,467 trailers.
As the Company has expanded and its needs for equipment have increased, the
Company has purchased new trailers as well as trailers meeting its
specifications from other trucking companies that have ceased operations. These
purchases of pre-owned equipment, though providing an excellent value, have the
effect of increasing the trailer fleet's average age; however, the Company
believes the age of its trailer fleet compares favorably with its competitors.
The Company develops certain specifications for revenue equipment, the
production and purchase of which are negotiated with several manufacturers.
These purchases are planned well in advance of anticipated delivery dates in
order to accommodate manufacturers' production schedules. The Company believes
that there is sufficient capacity among suppliers to ensure an uninterrupted
flow of equipment.
The table below reflects, as of December 31, 1997, the average age of
Old Dominion's revenue equipment:
Type of Equipment Number
(Categorized by Primary Use) of Units Average Age
- ---------------------------- -------- -----------
Linehaul tractors 1,402 2.8 years
Pickup and delivery tractors 359 6.4 years
Pickup and delivery trucks 21 6.4 years
Linehaul 28-foot trailers 6,223 6.4 years
Pickup and delivery trailers 1,244 11.6 years
3
The Company currently has major maintenance operations at its service
centers in Atlanta, Georgia; Chicago, Illinois; Morristown and Memphis,
Tennessee; Los Angeles, California; Columbus, Ohio; and Greensboro, North
Carolina. In addition, six other service center locations are equipped to
perform routine and preventive maintenance checks and repairs on the Company's
equipment.
The Company has an established scheduled maintenance policy and
procedure that is administered by the Vice President - Equipment and
Maintenance. Linehaul tractors are routed to appropriate maintenance facilities
at designated mileage intervals ranging from 10,000 to 12,500 miles, depending
upon how the equipment was utilized. Pickup and delivery tractors and trailers
are scheduled for maintenance at designated time intervals ranging from 60 to 90
days.
The table below sets forth the Company's capital expenditures for
certain revenue equipment during 1995, 1996 and 1997:
Year Service Centers Tractors Trailers Total
- ---- --------------- -------- -------- -----
1995 $ 485,000 $ 9,727,000 $12,918,000 $23,130,000
1996 $12,513,000 $13,116,000 $10,120,000 $35,749,000
1997 $ 6,371,000 $17,529,000 $ 4,889,000 $28,789,000
SERVICE CENTER OPERATIONS
At December 31, 1997, Old Dominion conducted operations through 79
service center locations, of which it owns 28 and leases 51. The Company
operates major breakbulk facilities in Atlanta, Georgia; Columbus, Ohio;
Morristown, Tennessee; Jersey City, New Jersey; Los Angeles, California; and
Greensboro, North Carolina, while using some smaller service centers for limited
breakbulk activity. Old Dominion's service centers are strategically located to
permit the Company to provide the highest quality service and minimize freight
rehandling costs.
Each service center is responsible for the pickup and delivery of
freight for its own service area. All inbound freight received by the service
center in the evening or at night is scheduled for local delivery the next
business day, unless a customer requests a different delivery schedule. Each
service center loads the freight by destination the day it is picked up.
Management reviews the productivity and service performance of each service
center on a daily basis in order to ensure quality service.
The Company also has established primary responsibility for customer
service at the local level. Service center employees trace freight movements
using the Company's automated tracing systems which provides for immediate
response to customer requests for delivery information. While the Company
maintains primary accountability for customer service at the local service
center, the Company has established a customer service function at the corporate
offices to offer additional customer support.
The Company plans to expand capacity at existing service centers as
well as expand the number of service centers geographically as opportunities
arise that provide for profitable growth and fit the needs of its customers.
LINEHAUL TRANSPORTATION
The Company's Transportation Department is responsible for directing
the movement of freight among the Company's service centers. Linehaul
dispatchers monitor the movement of freight among service centers with an
on-line automated dispatch system that operates continuously. Each morning, the
Company's senior management reviews the prior day's freight movements, transit
times, load factors, empty miles and other key statistics to monitor the
Company's performance.
4
The Company uses scheduled runs, and schedules additional runs as
necessary, to meet its published service standards. The Company uses twin
trailers exclusively in its linehaul operations to reduce breakbulk handling and
to increase linehaul productivity.
MARKETING AND CUSTOMERS
At December 31, 1997, the Company had a sales staff of 237 employees.
The Company compensates its sales force, in part, based upon revenue generated,
which the Company believes helps motivate its marketing employees.
The Company utilizes a computer modeling program to determine the price
level at which a particular shipment of freight will be profitable. Elements of
the pricing model may be modified, as necessary, to simulate the actual
conditions under which the freight will be moved. From time to time, the Company
also competes for business by participating in bid solicitations. Customers
generally solicit bids for relatively large numbers of shipments for a period of
from one to two years and typically choose to enter into a contractual
arrangement with a limited number of motor carriers based upon price and
service.
For the year ended December 31, 1997, Old Dominion's largest 20, 10,
and 5 customers accounted for approximately 21.8%, 16.4% and 11.8%,
respectively, of the Company's operating revenue. The Company's largest customer
for 1997 accounted for approximately 3.6% of operating revenue. While the
Company is not dependent upon one customer, a reduction or termination of
services provided by the Company to a large group of customers could have an
adverse effect on the Company's business and operating results.
COMPETITION
The transportation industry is highly competitive on the basis of both
price and service. Old Dominion competes with regional, inter-regional and
national LTL and truckload carriers and, to a lesser extent, with air freight
carriers and railroads, a number of which have greater financial resources,
operate more equipment and have larger freight capacity than the Company. The
Company believes that it is able to compete effectively in its markets by
providing high quality and timely service at competitive prices.
SAFETY AND INSURANCE
The Company's Vice President - Safety and Personnel, Director of Claims
and Director of Claims Prevention implement and monitor its safety and loss
prevention programs with the assistance of ten field supervisors. As a result of
the Company's emphasis on safety, the accident frequency, as defined by the
National Safety Council (including minor and unavoidable accidents), has
decreased from 12.5 accidents per million miles for the year ended December 31,
1989, to 7.3 accidents per million miles for the year ended December 31, 1997.
The Company is self-insured for bodily injury and property damage
claims up to $250,000 per occurrence and for cargo claims up to $50,000 per
occurrence. The Company also is self-insured for workers' compensation in
certain states and has first dollar or high deductible plans in the other
states. The Company believes that its policy of self-insuring up to set limits,
together with its safety and loss prevention programs, is an effective means of
managing insurance costs.
Old Dominion believes that its current insurance coverage is adequate
to cover its liability risks.
FUEL AVAILABILITY AND COST
The motor carrier industry is dependent upon the availability of diesel
fuel. Increases in fuel prices and fuel taxes, to the extent not offset by rate
increases or fuel surcharges to customers,
5
shortages of fuel or rationing of petroleum products could have a material,
adverse effect on the operations and profitability of the Company. The Company
has not experienced difficulties in maintaining a consistent and ample supply of
fuel. In periods of extreme price increases, the Company has implemented a fuel
surcharge which is consistent with other competitors. Management believes that
the Company's operations and financial condition are susceptible to the same
fuel price increases or fuel shortages as those of its competitors. Fuel costs
normally fluctuate between three and five percent of operating revenue. Fuel
expense was 4.4% of revenue in 1997.
EMPLOYEES AND DRIVERS
At December 31, 1997, the Company employed 4,486 persons in the
following categories:
Number of
Category Employees
- -------- ---------
Salaried and clerical 1,160
Drivers 2,190
Platform 760
Mechanics 139
Sales (corporate and field) 237
At December 31, 1997, the Company employed 1,025 road drivers and 1,165
city drivers. All drivers hired by the Company are selected based upon driving
records and experience. Drivers are required to pass drug tests at employment
and are later required to take such tests periodically, by random selection.
Competition for drivers is intense within the trucking industry, and the Company
periodically experiences difficulties in attracting and retaining qualified
drivers. There can be no assurance that the Company's operations will not be
affected by a shortage of qualified drivers in the future which could result in
temporary under-utilization of revenue equipment, difficulty in meeting shipper
demands and increased compensation levels for drivers. Difficulty in attracting
or retaining qualified drivers could require the Company to limit growth and
have a materially adverse effect on the Company's operations.
To help fulfill driver needs, the Company offers employees the
opportunity to become drivers as the need arises. Since 1988, the Company has
operated its own driver training program. In management's opinion, driver
qualification programs, which are required to be taken by all drivers, have been
an important factor in improving the Company's safety record. Drivers with safe
driving records are rewarded with bonuses of up to $1,000 annually. Driver
safety bonuses paid for 1997 were approximately $375,000.
None of the Company's employees are currently represented by a
collective bargaining unit, and management believes that relations with its
employees are excellent. From time to time there have been efforts to organize
Company employees at various service centers, none of which have been
successful. However, there can be no assurance that the Company's employees will
not unionize in the future, which could increase the Company's operating costs
and force it to alter its operating methods, which could in turn have a
materially adverse effect on the Company's operating results.
REGULATION
The Motor Carrier Act of 1980 significantly deregulated the trucking
industry and increased competition among motor carriers. Following enactment of
the Motor Carrier Act, applicants have obtained operating authority more easily,
and interstate motor carriers such as Old Dominion have been able to change
their rates more freely with less regulatory scrutiny and delay. The law also
removed many route and commodity restrictions on transportation of freight.
6
Effective January 1, 1995, the passage by the U.S. Congress of Section
601 of the Federal Aviation Administrative Authorization Act and the Trucking
Industry Regulatory Reform Act ("TIRRA") deregulated intrastate operating
authority. Prior to TIRRA, the Company maintained intrastate authority in the
states of North Carolina, Virginia, South Carolina, Georgia and California. The
states of Florida and New Jersey had already eliminated their restrictions on
operating authority. The passage of TIRRA provides additional intrastate growth
opportunities in the states in which the Company operates.
The Company was regulated by the Interstate Commerce Commission (the
"ICC") until passage of the ICC Termination Act of 1995, which abolished the ICC
on December 31, 1995. The Surface Transportation Board, an independent entity
within the United States Department of Transportation ("DOT"), assumed many of
the responsibilities of the ICC. The Company is also regulated by various state
agencies. These regulatory authorities have broad powers, generally governing
matters such as authority to engage in motor carrier operations, rates, certain
mergers, consolidations and acquisitions, and periodic financial reporting. The
motor carrier industry is subject to regulatory and legislative changes that can
affect the economics of the industry by requiring changes in operating practices
or influencing the demand for, and the costs of providing services to, shippers.
Interstate motor carrier operations are subject to safety requirements
prescribed by the DOT. Such matters as weight and dimensions of equipment are
also subject to federal and state regulation. The Company is subject to federal,
state and local environmental laws and regulations, particularly relating to
underground fuel storage tanks ("USTs"). The Company believes it is in
compliance with applicable environmental laws and regulations, including those
relating to USTs, and does not believe that the cost of future compliance should
have a material adverse effect on the Company's operations or financial
condition.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information regarding the present
executive officers of the Company:
Name and Age Positions and Offices with the Company
- ------------ --------------------------------------
Earl E. Congdon (67) Chairman of the Board of Directors and Chief
Executive Officer
John R. Congdon (65) Vice Chairman of the Board of Directors
John A. Ebeling (60) Vice Chairman of the Board of Directors
David S. Congdon (41) President, Chief Operating Officer
John B. Yowell (46) Executive Vice President
J. Wes Frye (50) Sr. Vice President - Finance, Treasurer, Chief
Financial Officer and Assistant Secretary
Joel B. McCarty, Jr. (60) Sr. Vice President, General Counsel and Secretary
Earl E. Congdon has been with the Company since 1950 and has served as
Chairman of the Board and Chief Executive Officer since 1985 and as a director
since 1952. He is a son of E. E. Congdon, one of the founders of Old Dominion.
7
John R. Congdon has been with the Company since 1953 and has served as
Vice Chairman of the Board since 1985 and as a director since 1955. He is also
the President of Old Dominion Truck Leasing, Inc., a North Carolina corporation
that is engaged in the full service leasing of tractors, trailers and other
equipment, to which he devotes more than half of his time. He is a son of E. E.
Congdon, one of the founders of Old Dominion, and the brother of Earl E.
Congdon.
John A. Ebeling has been a Vice Chairman of the Board of Directors
since May of 1997. He formerly served as President and Chief Operating Officer
from August of 1985 to May of 1997 and was first elected a director in August of
1985. Mr. Ebeling was previously employed by ANR Freight Systems from 1978 to
1985, holding the positions of Chairman and Chief Executive Officer.
David S. Congdon has been employed by the Company since 1978 and, since
May 1997, has served as President and Chief Operating Officer. He has held
various positions in the Company including Vice President - Quality and Field
Services, Vice President - Quality, Vice President - Transportation, President -
Dominion Furniture Xpress ( a division of Old Dominion that specialized in
furniture transportation) and held other positions in operations and
engineering. He is the son of Earl E. Congdon.
John B. Yowell has been employed by the Company since February 1983 and
was promoted to Executive Vice President in May of 1997. He has held the
position of Vice President - Corporate Services, Vice President - Central
Region, Vice President - South Central Area, Assistant to the President and Vice
President - Management Information Systems. He is a son-in-law of Earl E.
Congdon.
J. Wes Frye has been the Sr. Vice President - Finance since May of
1997. He has been Chief Financial Officer and Treasurer since joining the
Company in February of 1985 and has served as Assistant Secretary since December
of 1987. Mr. Frye served as the Vice President of Finance of Builders Transport,
Inc., from 1982 to 1985, and in various positions, including Vice President -
Controller of Johnson Motor Lines from 1975 to 1980. Mr. Frye is a Certified
Public Accountant.
Joel B. McCarty, Jr., has been a Sr. Vice President since May of 1997
and has served as General Counsel and Secretary since joining the Company in
June of 1987. Before joining Old Dominion, he was Assistant General Counsel of
McLean Trucking Company and was in private law practice prior to 1985.
Information concerning the Company's other significant employees is as
follows:
Name and Age Position
------------ --------
Ernest Brantley (61) Senior Vice President - Operations
J. Timothy Turner (42) Senior Vice President - Sales and Marketing
John P. Booker, III (41) Vice President - Controller
Robert M. Delgado (59) Vice President - Western Area
Kevin M. Freeman (38) Vice President - Field Sales
Gregory C. Gantt (42) Vice President - Southern Area
Terry L. Hutchins (39) Vice President - Quality and Field Services
Richard F. Keeler (48) Vice President - Corporate Services
Mark M. Madden (46) Vice President - Northern Area
Buddy S. McBride (52) Vice President - Transportation
Hugh N. Morris Jr. (34) Vice President - Midwest Area
J. Edward Richardson (53) Vice President - Equipment and Maintenance
Brian J. Stoddard (50) Vice President - Safety and Personnel
Michael A. Wood (44) Vice President - Central Area
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Ernest Brantley, Senior Vice President - Operations since January 1992,
joined the Company as Vice President - Operations in January of 1990. He was
previously with Thurston Motor Lines for 35 years where he served in various
capacities, including Executive Vice President from 1981 to 1987. Following its
acquisition by Brown Transport Co., Inc., Mr. Brantley served as Senior Vice
President of Brown Transport from 1987 to 1990.
J. Timothy Turner has been employed by the Company since July 1981 and
was promoted to Sr. Vice President - Sales and Marketing in May of 1997. He has
also served as Vice President - Sales and Marketing, Vice President - National
Accounts, Director of Sales, Central Area Director of Sales and District Sales
Representative prior to 1986. He was employed by McLean Trucking Company from
1977 to 1981.
John P. Booker, III, joined the Company in April 1987 and was promoted
to Vice President - Controller in May of 1997. He previously served as Assistant
Vice President and Controller. Between 1979 and 1987 he was employed by RJR
Nabisco, Inc. and Monsanto Company where he held various accounting positions.
Mr. Booker is a Certified Management Accountant.
Robert M. Delgado joined the Company in December 1985 and was promoted
to Vice President - Western Area in October 1996. He has also served as the
Director of the Western Area and as the Los Angeles Service Center Manager.
Prior to joining the Company, he held several management positions with Watkins
Motor Lines and American Freightways.
Kevin M. Freeman joined the Company in 1988 and was promoted to Vice
President - Field Sales in May of 1997. He previously served as Director of
Field Sales, Central Sales Director and as an area sales representative. Prior
to joining Old Dominion, he was employed in the air freight industry as a
National Sales Representative.
Gregory C. Gantt joined the Company in November 1994 as Vice President
- - South Central Area and assumed responsibility for the Southern Area in January
1996. From 1978 to 1994 he was employed by Carolina Freight Carriers where he
held various positions including Vice President - Southern Region, Regional
Manager and Operations Director.
Terry L. Hutchins joined the Company in December 1992 and was promoted
to Vice President - Quality and Field Services in December 1997. Previously he
served as Vice President - Southern Area and Vice President - Central Area.
Prior to joining the Company, he held several terminal manager and sales
positions with Carolina Freight Carriers and McLean Trucking Company between
1980 and 1992.
Richard F. Keeler joined the Company in 1993 and was promoted to Vice
President - Corporate Services in May of 1997. He has previously served as Vice
President - Midwest Area, Vice President - Northern Area, and as Director of
Pickup and Delivery Operations. Formerly, he was employed by Standard Trucking
Company where he served in various senior management positions.
Mark M. Madden joined Old Dominion in January 1986 and was promoted to
Vice President - Northern Area in April 1995. He has also served as the Area
Manager - Metro Area and as a Service Center Manager in the Northern Area.
Buddy S. McBride joined the Company in 1977 and held various positions
prior to becoming Vice President - Central Area in 1991. In December 1992, he
was promoted to Vice President - Transportation.
Hugh N. Morris joined the Company in 1986 and was promoted to Vice
President - Midwest Area in May of 1997. He previously served as Manager of
Sales and Service at the Charlotte, Atlanta and Tampa Service Centers, Southern
Area Sales Director and held various management positions at the Chattanooga
Service Center. Prior to joining Old Dominion he was employed by both
ARA/Smith's Transfer and Apex/Humboldt Express where he held several management
positions.
9
J. Edward Richardson joined Old Dominion in December 1986 and has been
Vice President Equipment and Maintenance since March of 1990. From 1986 to 1990,
he was Director of Maintenance.
Brian J. Stoddard joined the Company in 1969 and was promoted to Vice
President - Safety and Personnel in May 1997. He previously served as Director -
Safety and Personnel, Corporate Safety Manager, Service Center Manager -
Dominion Furniture Xpress, Service Center Manager at both the Newport News and
Norfolk Service Centers and as a supervisor, dockworker and driver.
Michael A. Wood joined the Company in 1991 and was promoted to Vice
President - Central Area in December 1997. He previously served as Manager of
Sales and Service - Atlanta, and as both the Manager of Sales and Service and
Assistant Manager of Sales and Service - Charlotte. Prior to joining Old
Dominion he was employed by PIE Nationwide from 1979 to 1991.
ITEM 2. PROPERTIES
The Company owns its general offices located in High Point, North
Carolina, consisting of a four-story office building of approximately 56,500
square feet on 10.3 acres and an office building of approximately 15,000 square
feet located near the general office. The Company also owns operating service
center facilities in Baltimore, Maryland; Richmond, Manassas, Martinsville and
Norfolk, Virginia; Charlotte, Hickory, Wilson and Fayetteville, North Carolina;
Atlanta, Georgia; Columbia and Greenville, South Carolina; Orlando,
Jacksonville, and Tampa, Florida; Tupelo, Mississippi; Morristown, Memphis,
Nashville and Chattanooga, Tennessee; Cincinnati and Columbus, Ohio; Kansas
City, Missouri; Los Angeles, California; Minneapolis, Minnesota; Dallas and
Houston, Texas; and Milwaukee, Wisconsin.
The Company also owns non-operating properties in Memphis and
Nashville, Tennessee; Jacksonville, Florida; Los Angeles, California; St. Louis,
Missouri; Wilson, Hickory and Fayetteville, North Carolina; New Orleans,
Louisiana; Greenville, Mississippi; Baltimore, Maryland; and an office and
maintenance facility in Birmingham, Alabama, all of which are held for lease.
Currently the Los Angeles and Fayetteville properties are not under lease; the
Birmingham, Wilson, New Orleans, Greenville and Baltimore properties are leased
until September 2001; the Nashville property is leased until June 1998; the
Jacksonville property is leased until February 1999; the Memphis property is
leased until December 1998; and the St. Louis and Hickory properties are on
month-to-month leases.
Old Dominion leases 51 of its 79 service centers. The length of the
leases range from month-to-month to a lease that expires on July 31, 2004. The
Company believes that its leased facilities are adequate for its existing needs
and that, as current leases expire, it will be able either to renew them or find
comparable facilities without incurring any material negative impact on service
to customers or its operating results.
The Company believes that all of its properties are in good repair and
are capable of providing the level of service required by current business
levels and customer demands.
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Company is a party or of
which any of its property is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
COMMON STOCK AND DIVIDEND INFORMATION
The common stock of Old Dominion Freight Line, Inc. is traded on the Nasdaq
Stock Market (National Market) under the symbol ODFL. At March 9, 1998, there
were approximately 798 holders of the common stock, including 115 stockholders
of record. No dividends have been paid on the common stock. The information
concerning restrictions on dividend payments required by Item 5 of Form 10-K
appears in Note 2 of the Notes to Consolidated Financial Statements appearing in
Item 8 of this report.
MARKET PRICES OF COMMON STOCK:
1997
-------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
- ----------------------------------------------------------------------------
HIGH $ 12.375 $ 14.25 $ 19.75 $ 19.25
LOW $ 9.50 $ 11.75 $ 13.50 $ 14.00
1996
-------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------
High $ 12.50 $ 12.25 $ 10.50 $ 11.25
Low $ 7.50 $ 9.25 $ 7.50 $ 8.50
MARKET MAKERS:
BT Alex Brown & Sons, Inc.; Herzog, Heine, Geduld, Inc.; Wheat, First
Securities, Inc.; William Blair & Co.; Furman Selz Inc.; and Mayer & Schweitzer
Inc.
11
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
For the Year Ended December 31,
-----------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
AND OPERATING STATISTICS) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
OPERATING DATA:
Revenue from operations $ 328,844 $ 293,006 $ 248,079 $ 243,547 $ 205,399
Operating expenses:
Salaries, wages and benefits 193,523 163,490 141,163 131,138 109,135
Purchased transportation 15,494 21,435 18,933 21,897 20,878
Operating supplies and expenses 30,311 30,288 22,945 21,716 18,206
Depreciation and amortization 17,173 16,091 13,630 11,781 10,119
Building and office equipment rents 6,921 6,874 5,991 5,292 4,162
Operating taxes and licenses 13,968 12,867 10,393 9,628 7,939
Insurance and claims 10,033 10,118 8,503 8,758 6,709
Communications and utilities 6,152 5,687 5,014 4,509 3,655
General supplies and expenses 11,976 10,444 10,195 9,406 8,658
Miscellaneous expenses 3,282 2,762 1,671 1,798 1,399
-----------------------------------------------------------
Total operating expenses 308,833 280,056 238,438 225,923 190,860
-----------------------------------------------------------
Operating income 20,011 12,950 9,641 17,624 14,539
Interest expense, net 3,547 2,903 1,510 1,107 1,099
Other expense, net 273 137 329 110 226
-----------------------------------------------------------
Income before income taxes and
cumulative effect of changes in
accounting principles 16,191 9,910 7,802 16,407 13,214
Provision for income taxes 6,153 3,766 2,995 6,399 4,947
-----------------------------------------------------------
Income before cumulative effect of
changes in accounting principles $ 10,038 $ 6,144 $ 4,807 $ 10,008 $ 8,267
-----------------------------------------------------------
EARNINGS PER SHARE:
Basic $1.21 $0.74 $0.58 $1.20 $0.99
Diluted $1.21 $0.74 $0.58 $1.19 $0.99
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 8,312 8,346 8,354 8,362 8,370
Diluted 8,322 8,347 8,357 8,378 8,388
OPERATING STATISTICS:
Operating ratio 93.9% 95.6% 96.1% 92.8% 92.9%
LTL revenue per hundredweight $11.37 $11.00 $10.87 $10.80 $10.43
Revenue per intercity mile $3.00 $2.92 $2.93 $3.04 $2.96
Intercity miles (in thousands) 109,681 100,447 84,715 79,985 69,326
LTL tonnage (in thousands) 1,334 1,221 1,037 1,024 883
Shipments (in thousands) 2,607 2,388 2,084 2,034 1,740
Average length of haul (miles) 869 - - - -
As of December 31,
-----------------------------------------------------------
BALANCE SHEET DATA: 1997 1996 1995 1994 1993
-----------------------------------------------------------
Current assets $59,860 $56,264 $50,465 $45,643 $46,613
Current liabilities 39,084 35,865 31,861 34,538 35,056
Total assets 191,061 170,726 143,346 124,035 110,696
Long-term debt 47,301 43,141 30,216 18,625 18,989
Stockholders' equity 85,501 74,928 68,784 63,726 53,676
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth, for the years indicated, expenses and other
items as a percentage of revenue from operations:
1997 1996 1995
- -----------------------------------------------------------------------------
Revenue from operations 100.0% 100.0% 100.0%
----------- ----------- -----------
Salaries, wages and benefits 58.9 55.8 56.9
Purchased transportation 4.7 7.3 7.6
Operating supplies and expenses 9.2 10.3 9.3
Depreciation and amortization 5.2 5.5 5.5
Building and office equipment rents 2.1 2.4 2.4
Operating taxes and licenses 4.2 4.4 4.2
Insurance and claims 3.1 3.5 3.4
Communication and utilities 1.9 1.9 2.0
General supplies and expenses 3.6 3.6 4.1
Miscellaneous expenses 1.0 0.9 0.7
----------- ----------- -----------
Total operating expenses 93.9 95.6 96.1
----------- ----------- -----------
Operating income 6.1 4.4 3.9
Interest expense, net 1.1 1.0 0.6
Other expense, net 0.1 0.0 0.2
----------- ----------- -----------
Income before income taxes 4.9 3.4 3.1
Provision for income taxes 1.8 1.3 1.2
----------- ----------- -----------
Net income 3.1% 2.1% 1.9%
=========== =========== ===========
1997 COMPARED TO 1996
Revenue from operations for 1997 was $328,844,000, an increase of 12.2%,
compared to $293,006,000 for 1996. This revenue growth was a direct result of
the Company's focus on improving both revenue per hundredweight, or revenue
yield, and market share in existing areas of operations, or market density. Less
than truckload ("LTL") tonnage increased 9.3% during the year and total tonnage
increased 7.2%. These tonnage increases reflect increased market share in
existing areas of operation, as well as the impact of opening five new service
centers in 1997 and six new service centers in 1996, which primarily expanded
and enhanced direct service in existing regions of operations.
Average LTL revenue per shipment increased 3.4% to $119.73 in the current year
compared to $115.83 for 1996. This increase was a result of a 3.4% increase in
LTL revenue per hundredweight to $11.37 in 1997 from $11.00 for the previous
year. The improvement in LTL revenue per hundredweight reflects a general rate
increase on public tariffs implemented on January 1, 1997, as well as increases
on private tariffs which were negotiated throughout the year. The average weight
per LTL shipment was 1,053 lbs. for both 1997 and 1996 and thus had no impact on
the increase in average LTL revenue per shipment from 1996 to 1997.
Operating expense as a percentage of net revenue, or the operating ratio, was
93.9% for 1997 compared to 95.6% for the prior year. This improvement resulted
primarily from decreases in purchased transportation and operating supplies and
expenses, which combined were 3.7 operating points lower in 1997 than in 1996.
Purchased transportation decreased to 4.7% of revenue from 7.3% in the prior
year as a result of the Company's continuing effort to replace cartage agents
with Company
13
personnel and equipment. Operating supplies and expenses decreased to 9.2% of
revenue from 10.3% in 1996 due to (1) a reduction in vehicle repair and
maintenance costs to 2.0% of revenue from 2.2% for the previous year, (2) a $.05
reduction in the average price per gallon of fuel in 1997 and (3) improved fleet
fuel efficiency to 6.5 miles per gallon in 1997 from 6.3 for the previous year.
The reduced repair and maintenance costs resulted, in part, from a reduction in
the average age of the linehaul tractor fleet to 2.8 years in 1997 from 3.0
years for the previous year and a comparatively milder winter season in 1997.
Building and office equipment rents decreased to 2.1% of revenue in 1997
compared to 2.4% in 1996 as a result of the Company's purchase of seven service
center facilities. Insurance and claims decreased to 3.1% from 3.5% in the
previous year. This decrease is primarily attributed to a reduction in cargo
claims expense to 1.6% of revenue from 2.1% for 1996. This reduction reflects an
ongoing Company-wide focus on continuous improvement in freight handling
processes and equipment.
Depreciation and amortization decreased to 5.2% of revenue from 5.5% in 1996 and
operating taxes and licenses decreased to 4.2% from 4.4% in 1996 as a result of
the Company leveraging higher revenue against these relatively fixed operating
costs in 1997.
These reductions in expenses were somewhat offset by an increase in salaries,
wages and benefits to 58.9% of revenue from 55.8% for 1996. In 1997, the Company
continued to replace cartage agents used for pickup and delivery services in
remote areas with Company personnel and equipment, which primarily led to the
increase in salaries, wages and benefits. As part of the overall strategy to
increase density and market share in existing markets, the Company added 45 new
field sales personnel in 1997, an increase of 23.4% over the prior year. In
addition, the Company added five new service centers in 1997 which expanded
direct coverage in regions already served. Linehaul and pickup and delivery
wages tend to be higher in the expanded areas as the Company is committed to
providing superior service while building service center and lane density.
The Company's net interest expense increased slightly as a percent of revenue to
1.1% in 1997 from 1.0% in 1996, due to an increase in average outstanding debt.
Net income was $10,038,000 for the year ended December 31, 1997, an increase of
63.4%, compared to $6,144,000 for 1996. The effective tax rate was approximately
38% in both 1997 and 1996.
1996 COMPARED TO 1995
Revenue from operations for 1996 was $293,006,000, an increase of 18.1%,
compared to $248,079,000 for 1995. Less than truckload tonnage increased 17.7%
during the year, and total tonnage increased 12.9%. During 1995, the Company
opened 15 new service centers in ten additional states, and the increased
tonnage reflects improved market share in 1996 in both the expanded areas as
well as the service center network existing prior to the expansion. To a lesser
degree, the tonnage increase was also a result of six new service centers that
were opened by the Company in 1996, which enhanced service in existing major
metropolitan markets rather than expand geographical coverage.
Average LTL revenue per shipment increased 3.8% to $115.83 in the current year
compared to $111.62 for 1995. This increase was caused by two factors. First,
the average LTL revenue per hundredweight was $11.00 in 1996 compared to $10.87
for the previous year, an increase of 1.2%. This improvement reflects a general
rate increases on public tariffs implemented on January 1, 1996. In addition,
the increase in LTL revenue per shipment was also due to an increase in LTL
weight per shipment, which increased 2.5% to 1,053 lbs. for the current year
from 1,027 lbs. for the previous year. Generally, revenue per hundredweight
tends to decrease as shipment size increases; however, the Company's focus on
improving revenue yield caused an opposite effect during the year, resulting in
a higher revenue per hundredweight and a higher weight per shipment.
Operating expense as a percentage of net revenue, or the operating ratio, was
95.6% for 1996 compared to 96.1% for the prior year. This decrease was primarily
a result of decreases in salaries,
14
wages and benefits, purchased transportation and general supplies and expenses
to 66.7% of revenue in 1996 from 68.6% in 1995. Salaries, wages and benefits
decreased to 55.8% of revenue in the current year from 56.9% for the previous
year. This improvement was primarily a result of lower fringe benefit costs as a
percent of revenue, which decreased to 10.2% in 1996 from 11.8% in 1995. This
decrease was due to a reduction in workers' compensation and group health
expenses, which decreased as a percent of payroll to 7.8% in 1996 from 9.7% for
the previous year. In addition, salaries decreased to 9.5% of revenue for the
current year from 10.0% for 1995. Purchased transportation was reduced to 7.3%
of revenue from 7.6% in 1995 as the Company continued to replace cartage agents
with Company personnel and equipment. The Company reduced general and
administrative expenses to 3.6% of revenue for 1996 compared to 4.1% for the
previous year.
These reductions in expenses were somewhat offset by increases in both operating
supplies and expenses and operating taxes and licenses to 14.7% of revenue in
1996 from 13.5% for 1995. The increase in operating supplies and expenses was
primarily due to increased fuel costs experienced in 1996 to 4.9% of revenue up
from 4.0% in 1995. The increased fuel cost was partially offset by a fuel
surcharge implemented in mid-May of 1996 that is reflected in net revenue. The
slight increase in operating taxes and licenses was due to increased state fuel
tax liabilities.
The Company's net interest expense increased as a percent of revenue to 1.0% in
1996 from .6% in 1995, due to an increase in average outstanding debt.
Net income was $6,144,000 for the year ended December 31, 1996, an increase of
27.8%, compared to $4,807,000 for 1995. The effective tax rate was approximately
38% in both 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
Expansion in both the size and number of service center facilities, as well as
the routine tractor and trailer turnover cycle, has required continued
investment in property and equipment. In order to accommodate this growth, the
Company incurred capital expenditures of $34,223,000 during the year ended
December 31, 1997, which includes $6,371,000 of outlays for service centers that
replaced smaller or previously leased facilities at various locations. Cash
flows generated internally were sufficient to fund 88.0% of the required capital
expenditures during the year. The remaining capital needs were achieved through
borrowings on the Company's line of credit, of which $6,730,000 was outstanding
at year-end December 31, 1997, compared to $5,890,000 in the prior year. In
addition, $9,000,000 of term financing payable over four years was obtained at
interest rates ranging from fixed rates of 6.65% to LIBOR plus .60%. At December
31, 1997, long-term debt including current maturities increased to $47,301,000
from $43,141,000 at December 31, 1996.
The Company estimates capital expenditures to be approximately $60,000,000 to
$65,000,000 for the year ending December 31, 1998. Of that, approximately
$28,000,000 will be used to purchase additional revenue equipment, $30,000,000
is for purchases of larger replacement service centers or expansion of existing
service centers and the remaining balance is to be used for investments in other
assets and technology.
The Company generally meets its working capital needs with cash generated from
operations. On April 22, 1997, the Company amended the $32,500,000
uncollateralized committed agreement to consist of a $17,500,000 line of credit
facility and a $15,000,000 letter of credit facility. The Company previously had
a $15,000,000 line of credit facility and a $17,500,000 letter of credit
facility. Interest on the line of credit is charged at rates that vary based
upon a certain financial performance ratio and the stated period of time the
borrowings are outstanding. The applicable interest rate for 1997 was based upon
LIBOR plus .75% for periods of 30-180 days and prime minus 1% for periods less
than 30 days. The Company has also entered into a separate agreement with First
Union National Bank that fixes the interest rate on a portion of the outstanding
amount on the credit line over a specified term. Pursuant to this agreement, as
of December 31, 1997, the Company has fixed $3,500,000 of the outstanding credit
line at a rate of 6.54% through June 19, 1998. A fee of .25% is charged on the
unused portion of the $32,500,000 line of credit and letter of credit facility,
and a fee of .75% is charged on outstanding
15
letters of credit. At December 31, 1997, there were $6,730,000 outstanding
borrowings on the line of credit and $7,891,000 outstanding on the letter of
credit facility, which is required for self-insured retention reserves for
bodily injury, property damage and workers' compensation insurance. The Company
believes that it has sufficient credit lines and capacity to meet seasonal and
long-term financial needs.
On February 27, 1998, the Company entered into a $20,000,000 private placement
of debt through a Note Purchase Agreement with two insurance companies. The Note
Purchase Agreement consists of $10,000,000 of Senior Notes maturing in seven
years bearing an interest rate of 6.35% and $10,000,000 of Senior Notes maturing
in ten years bearing an interest rate of 6.59%. The proceeds from this private
debt agreement will be used to replace the outstanding borrowings on the line of
credit facility with long term, fixed rate obligations and will also be used to
finance 1998 planned capital expenditures for service center facilities and
revenue equipment.
IMPACT OF THE YEAR 2000
Some of the Company's older software applications were written using two digits
rather than four to define the applicable year. As a result, that software may
interpret a date using "00" as the year 1900 rather than the year 2000. This
could possibly cause a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in normal business activities.
The Company has completed an assessment and will have to modify or replace
portions of its software to ensure that its computer systems will function
properly with respect to dates in the year 2000 and thereafter. The total cost
of this year 2000 project is expected to be immaterial to the Company. The
project is currently underway, with several of the affected systems having
already been modified or replaced. The project is expected to be completed in
its entirety by the first quarter of 1999. The Company believes that with the
necessary modifications to existing software and any necessary conversions to
new software, the year 2000 issue does not pose significant operational problems
for its computer systems.
The cost of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes and similar uncertainties.
The Company has not completed an evaluation of its major customers and suppliers
to determine if they have taken adequate measures to ensure that necessary
modifications are made to their software prior to the year 2000. While the
Company is not dependent on any one customer or supplier, failure to make
necessary year 2000 modifications by any large groups of customers or suppliers
could result in a material adverse impact on the Company.
INFLATION
Most of the Company's expenses are affected by inflation, which generally result
in increased costs. During 1997, the effect of inflation on the Company's
results of operations was minimal.
SEASONALITY
The Company's operations are subject to seasonal trends common in the motor
carrier industry. Operating results in the first and fourth quarters are
normally lower due to reduced shipments during the winter months. Harsh winter
weather can also adversely impact the Company's performance by reducing demand
and increasing operating expenses. The second and third quarters are stronger
due to increased demand for services during the spring and summer months.
16
ENVIRONMENTAL
The Company is subject to federal, state and local environmental laws and
regulations, particularly relating to underground storage tanks ("USTs"). The
Company believes it is in compliance with all current applicable environmental
laws and regulations including those relating to USTs, and does not believe that
the cost of future compliance would have a material adverse effect on the
Company's operations or financial condition.
FORWARD-LOOKING INFORMATION
Forward-looking statements relating to future events or the future financial
performance of the Company appear in the preceding Management's Discussion and
Analysis of Financial Condition and Results of Operations and in other written
and oral statements made by or on behalf of the Company, including without
limitation, statements relating to the Company's goals, strategies,
expectations, competitive environment, regulation and availability of resources.
Such forward-looking statements are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Investors are cautioned
that such forward-looking statements involve risks and uncertainties that could
cause actual events and results to be materially different from those expressed
or implied herein, including, but not limited to, the following: (1) changes in
the Company's goals, strategies and expectations, which are subject to change at
any time at the discretion of the Company; (2) the Company's ability to maintain
a nonunion, qualified work force; (3) the competitive environment with respect
to industry capacity and pricing; (4) the availability and cost of fuel,
additional revenue equipment, service centers and other significant resources;
(5) the impact of various regulatory bodies; (6) various economic factors such
as insurance costs, liability claims, interest rate fluctuations, the
availability of qualified drivers or owner-operators, fluctuations in the resale
value of revenue equipment, increases in fuel or energy taxes, economic
recessions and downturns in customers' business cycles and shipping
requirements; (7) the Company's inability to raise capital or borrow funds on
satisfactory terms, which could limit growth and require the Company to operate
its revenue equipment for longer periods of time; and (8) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission.
17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
--------------------------------
(IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996
- ----------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 674 $ 1,353
Customer receivables, less allowances of $4,963 and
$5,699, respectively 43,399 39,983
Other receivables 1,492 890
Tires on equipment 5,052 4,514
Prepaid expenses 7,273 6,899
Deferred income taxes 1,970 2,625
------------- --------------
Total current assets 59,860 56,264
Property and equipment:
Revenue equipment 144,926 127,443
Land and structures 42,572 36,459
Other equipment 19,675 15,718
Leasehold improvements 721 479
------------- --------------
Total property and equipment 207,894 180,099
Less accumulated depreciation and amortization (83,064) (70,924)
------------- --------------
Net property and equipment 124,830 109,175
Other assets, less insurance policy loans of $1,851
and $1,815, respectively 6,371 5,287
------------- --------------
Total assets $ 191,061 $ 170,726
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,161 $ 14,860
Compensation and benefits 8,915 6,919
Claims and insurance accruals 9,275 8,918
Other accrued liabilities 1,587 1,509
Current maturities of long-term debt 5,146 3,659
------------- --------------
Total current liabilities 39,084 35,865
Long-term debt 42,155 39,482
Other non-current liabilities 7,704 7,074
Deferred income taxes 16,617 13,377
------------- --------------
Total long-term liabilities 66,476 59,933
Stockholders' equity:
Common stock - $.10 par value, 25,000,000 shares
authorized, 8,310,596 and 8,345,608 shares outstanding,
respectively 831 835
Capital in excess of par value 23,891 23,352
Retained earnings 60,779 50,741
------------- --------------
Total stockholders' equity 85,501 74,928
Commitments and contingencies - -
------------- --------------
Total liabilities and stockholders' equity $ 191,061 $ 170,726
============= ==============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
18
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995
- ----------------------------------------------------------------------------------------
Revenue from operations $ 328,844 $ 293,006 $ 248,079
Operating expenses:
Salaries, wages and benefits 193,523 163,490 141,163
Purchased transportation 15,494 21,435 18,933
Operating supplies and expenses 30,311 30,288 22,945
Depreciation and amortization 17,173 16,091 13,630
Building and office equipment rents 6,921 6,874 5,991
Operating taxes and licenses 13,968 12,867 10,393
Insurance and claims 10,033 10,118 8,503
Communications and utilities 6,152 5,687 5,014
General supplies and expenses 11,976 10,444 10,195
Miscellaneous expenses 3,282 2,762 1,671
-------------- -------------- ---------------
Total operating expenses 308,833 280,056 238,438
-------------- -------------- ---------------
Operating income 20,011 12,950 9,641
Other deductions:
Interest expense, net 3,547 2,903 1,510
Other expense, net 273 137 329
-------------- -------------- ---------------
Total other deductions 3,820 3,040 1,839
-------------- -------------- ---------------
Income before income taxes 16,191 9,910 7,802
Provision for income taxes 6,153 3,766 2,995
-------------- -------------- ---------------
Net income $ 10,038 $ 6,144 $ 4,807
============== ============== ===============
Basic and diluted earnings per share $ 1.21 $ 0.74 $ 0.58
============== ============== ===============
Weighted average shares outstanding:
Basic 8,312 8,346 8,354
Diluted 8,322 8,347 8,357
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
19
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Capital in
Common excess of Retained
(IN THOUSANDS) stock par value earnings Total
- -------------------------------------------------------------------------------------------------------
Balance as of December 31, 1994 $836 $23,100 $39,790 $63,726
Net income - - 4,807 4,807
Release of common stock under Restricted Stock Agreement,
net of tax charge of $22 (1) 252 - 251
--------------------------------------------
Balance as of December 31, 1995 835 23,352 44,597 68,784
Net income - - 6,144 6,144
--------------------------------------------
Balance as of December 31, 1996 835 23,352 50,741 74,928
NET INCOME - - 10,038 10,038
EXERCISE OF STOCK OPTIONS - 24 - 24
RELEASE OF COMMON STOCK UNDER RESTRICTED STOCK AGREEMENT,
NET OF TAX CHARGE OF $74 (4) 515 - 511
--------------------------------------------
BALANCE AS OF DECEMBER 31, 1997 $831 $23,891 $60,779 $85,501
============================================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
20
OLD DOMINION FREIGHT LINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
--------------------------------------------
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 10,038 $ 6,144 $ 4,807
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 17,173 16,091 13,630
Deferred income taxes 3,895 3,355 2,536
Net effect of restricted stock distribution 511 - 251
(Gain) Loss on sale of property and equipment (178) 91 (635)
Changes in assets and liabilities:
Customer and other receivables, net (4,018) (3,453) (6,808)
Tires on equipment (538) (575) (180)
Prepaid expenses and other assets (1,458) (2,148) (1,432)
Accounts payable (699) 4,356 1,730
Compensation, benefits and other accrued liabilities 2,074 1,910 117
Claims and insurance accruals 357 273 (2,290)
Income taxes payable - - (1,722)
Other liabilities 630 (1,309) 3,489
------------ ------------- -------------
Net cash provided by operating activities 27,787 24,735 13,493
------------ ------------- -------------
Cash flows from investing activities:
Purchase of property and equipment (34,223) (38,324) (27,757)
Proceeds from sale of property and equipment 1,573 1,031 1,266
------------ ------------- -------------
Net cash used by investing activities (32,650) (37,293) (26,491)
------------ ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 9,000 38,112 6,000
Principal payments under debt and capital lease agreements (5,680) (13,577) (7,209)
Net proceeds (payments) on short-term revolving line of credit 840 (11,610) 12,800
Proceeds from conversion of stock options 24 - -
------------ ------------- -------------
Net cash provided by financing activities 4,184 12,925 11,591
------------ ------------- -------------
(Decrease) Increase in cash and cash equivalents (679) 367 (1,407)
Cash and cash equivalents at beginning of period 1,353 986 2,393
------------ ------------- -------------
Cash and cash equivalents at end of period $ 674 $ 1,353 $ 986
============ ============= =============
Supplemental disclosure of non-cash activities:
The Company released 76,668 and 38,334 shares of common stock for the years
ended December 31, 1997 and December 31, 1995, respectively, under a
Restricted Stock Agreement.
Cash paid for interest was approximately $4,565,000, $1,990,000 and $1,570,000
for the years ended December 31, 1997, 1996 and 1995, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
BUSINESS
The Company is an inter-regional and regional motor carrier transporting
primarily less-than-truckload shipments of general commodities, such as consumer
goods, textiles and capital goods, to a diversified customer base. The Company
serves regional markets in the Southeast, Northeast, Midwest and West regions of
the country. Old Dominion connects these geographic regions with high quality
inter-regional service
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiary. All significant intercompany balances and transactions are
eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Estimates made by the Company relate primarily to self insurance accruals and
allowances for uncollectible accounts. Actual results could differ from these
estimates.
REVENUE AND EXPENSE RECOGNITION
Operating revenue is recognized on a percentage of completion method based on
average transit time. Expenses associated with the operating revenue are
recognized when incurred.
CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of customer receivables. Credit risk is
generally diversified due to the large number of entities comprising the
Company's customer base and their dispersion across many different industries
and geographic regions. As noted on the consolidated balance sheets, the Company
maintains an allowance for doubtful accounts to cover estimated credit losses.
CASH AND CASH EQUIVALENTS
The Company considers cash on hand and deposits in banks along with certificates
of deposit and short-term marketable securities with original maturities of
three months or less as cash and cash equivalents for the purpose of the
statements of cash flows.
TIRES ON EQUIPMENT
The cost of tires on equipment is amortized over the estimated tire life of 18
to 24 months.
FUEL AND SUPPLIES
Fuel and operating supplies are valued at the lower of cost or market using the
first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major additions and improvements are
capitalized, while maintenance and repairs that do not improve or extend the
lives of the respective assets are charged to expense as incurred. Gain or loss
on retirement or disposal of assets is recorded in income or expense. The
Company periodically assesses the net realizable value of its long-lived assets
and evaluates such assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
22
Depreciation and amortization are provided by the straight-line method over the
following estimated useful lives:
Structures 5 to 25 years
Revenue equipment 3 to 12 years
Other equipment 3 to 10 years
Leasehold improvements Lesser of 10 years or life of lease
CLAIMS AND INSURANCE ACCRUALS
Claims and insurance accruals reflect the estimated ultimate cost of claims for
cargo loss and damage, bodily injury and property damage, workers' compensation,
long-term disability and group health not covered by insurance. These costs are
charged to insurance and claims expense except for workers' compensation,
long-term disability and group health, which are charged to employee benefits
expense.
EARNINGS PER SHARE
Net income per common share is computed using the weighted average number of
common shares outstanding during the period. The weighted average number of
common shares outstanding was 8,311,521, 8,345,608 and 8,353,830 for the years
ended December 31, 1997, 1996 and 1995, respectively.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER
SHARE, which requires companies to present basic earnings per share ("EPS") and
diluted earnings per share, instead of the primary and fully diluted EPS that
was previously required. The new standard requires additional informational
disclosures and also makes certain modifications to the formerly applicable EPS
calculations defined in Accounting Principles Board No. 15. The new standard was
required to be adopted by all public companies for reporting periods ending
after December 15, 1997, and required restatement of EPS for all prior periods
reported. The Company's restated earnings per share under SFAS No. 128 for both
basic and diluted earnings per share was $1.21, $.74 and $.58 for 1997, 1996 and
1995, respectively. The effect of dilutive employee stock options in Note 7 is
immaterial to the calculation of diluted earnings per share for the years ended
December 31, 1997, 1996 and 1995.
FAIR VALUES OF FINANCIAL INSTRUMENTS
At December 31, 1997, and 1996, the carrying value of financial instruments such
as cash and cash equivalents, customer and other receivables, trade payables and
long-term debt approximated their fair values. Fair value is determined based on
expected future cash flows, discounted at market interest rates, and other
appropriate valuation methodologies.
STOCK BASED COMPENSATION
Stock based compensation expense for the Company's employee stock option plan is
recognized under the provisions of Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25"), and related
interpretations. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized. Pro forma information
regarding net income and earnings per share required by Financial Accounting
Standards Board Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, is
not significant.
RECLASSIFICATIONS
Certain amounts in prior periods have been reclassified to conform with the
current period presentation.
23
PENDING ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, REPORTING COMPREHENSIVE INCOME,
which establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The Company expects to adopt SFAS No. 130 in the first quarter of 1998.
In June 1997, the FASB issued SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION, which requires that a publicly-held company
report financial and descriptive information about its operating segments in
financial statements issued to shareholders for interim and annual periods. The
SFAS also requires additional disclosures with respect to products and services,
geographic areas of operations and major customers. The Company will adopt SFAS
No. 131 in 1998.
The impact of the adoption of these statements is not expected to be material.
NOTE 2 - LONG-TERM DEBT
Long-term debt consisted of the following:
December 31,
----------------------------
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------------------
Borrowings under bank revolving credit agreement $ 6,730 $ 5,890
Equipment obligations, principal payable in monthly installments
plus interest ranging from 5.2% to 7.0% 9,994 6,283
Senior notes payable 30,000 30,000
Capitalized lease obligations 577 968
----------------------------
47,301 43,141
Less current maturities 5,146 3,659
----------------------------
$42,155 $39,482
============================
Equipment and capitalized lease obligations are collateralized by property and
equipment with a net book value of $14,644,000 at December 31, 1997.
As of December 31, 1997, aggregate maturities of long-term debt are as follows:
(In thousands)
- ---------------------------------------------------------------------------
1998 $ 5,146
1999 4,968
2000 7,211
2001 5,960
2002 5,857
Thereafter 11,429
--------------
40,571
Borrowings outstanding under the revolving credit agreement 6,730
--------------
$47,301
==============
The Company generally meets its working capital needs with cash generated from
operations. On April 22, 1997, the Company amended its $32,500,000
uncollateralized committed agreement to consist of a $17,500,000 line of credit
facility and a $15,000,000 letter of credit facility. The Company previously had
a $15,000,000 line of credit facility and a $17,500,000 letter of credit
facility. Interest on the line of credit is charged at rates that vary based
upon a certain financial performance ratio and the
24
stated period of time the borrowings are outstanding. The applicable interest
rate for 1997 was based upon LIBOR plus .75% for periods of 30-180 days and
prime minus 1% for periods less than 30 days. The Company has also entered into
a separate agreement with First Union National Bank that fixes the interest rate
on a portion of the outstanding amount on the credit line over a specified term.
Pursuant to this agreement, as of December 31, 1997, the Company has fixed
$3,500,000 of the outstanding credit line at a rate of 6.54% through June 19,
1998. A fee of .25% is charged on the unused portion of the $32,500,000 line of
credit and letter of credit facility, and a fee of .75% is charged on
outstanding letters of credit. At December 31, 1997, there were $6,730,000
outstanding borrowings on the line of credit and $7,891,000 outstanding on the
letter of credit facility, which is required for self-insured retention reserves
for bodily injury, property damage and workers' compensation insurance.
On June 15, 1996, the Company entered into a $30,000,000 private placement of
debt through a Note Purchase Agreement. The Note Purchase Agreement consists of
a $10,000,000, 7.3% Senior Note due December 15, 2002, and a $20,000,000, 7.59%
Senior Note due June 15, 2006. The Company believes that it has sufficient
credit lines and capacity to meet seasonal and long-term financial needs.
The Company's Credit Agreement and Senior Notes limit the amount of dividends
that may be paid to stockholders pursuant to or limited by certain financial
ratios, necessary corporate action and all applicable laws.
NOTE 3 - LEASES
The Company leases revenue equipment under a capital lease that expires in 1999.
These assets are included in property and equipment as follows:
December 31,
-----------------------------------
(IN THOUSANDS) 1997 1996
- ---------------------------------------------------------------------
Revenue equipment $ 1,112 $ 1,112
Less accumulated amortization 525 154
-------------- -------------
$ 587 $ 958
============== =============
Future minimum annual lease payments as of December 31, 1997, are as follows:
Capital Operating
(IN THOUSANDS) Lease Leases Total
- --------------------------------------------------------------------------------------------------------------
1998 $ 407 $ 7,005 $ 7,412
1999 202 3,345 3,547
2000 - 1,855 1,855
2001 - 926 926
2002 - 691 691
Thereafter - 1,128 1,128
-------------- -------------- -------------
Total minimum lease payments 609 $ 14,950 $ 15,559
============== =============
Less amount representing interest 32
--------------
Present value of capitalized lease obligations $ 577
==============
Aggregate expense under operating leases approximated $9,093,000, $8,841,000 and
$7,580,000 for 1997, 1996 and 1995, respectively.
25
NOTE 4 - INCOME TAXES
The components of the provision for income taxes are as follows:
Year ended December 31,
-----------------------------------------
(IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------------------------
Current:
Federal $ 2,116 $ 395 $ 839
State 142 16 (380)
-----------------------------------------
2,258 411 459
-----------------------------------------
Deferred:
Federal 3,307 2,857 2,118
State 588 498 418
-----------------------------------------
3,895 3,355 2,536
-----------------------------------------
Total provision for income taxes $ 6,153 $ 3,766 $ 2,995
=========================================
Net cash paid (refunds received) for income taxes during 1997, 1996 and 1995
aggregated $2,972,000, ($987,000) and $4,036,000, respectively.
A reconciliation of the statutory federal income tax rates with the Company's
effective income tax rates for 1997, 1996 and 1995 is as follows:
Year ended December 31,
-----------------------------------------
(IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------------------------------------------------------
Tax provision at statutory rate on income before income taxes $ 5,505 $ 3,369 $ 2,653
State income taxes, net of federal benefit 476 122 8
Meals and entertainment disallowance 257 229 219
Other, net (85) 46 115
-----------------------------------------
Total provision for income taxes $ 6,153 $ 3,766 $ 2,995
=========================================
Deferred tax assets and liabilities consist of the following:
December 31,
----------------------------
(IN THOUSANDS) 1997 1996
- ------------------------------------------------ ----------------------------
Deferred tax assets:
Claims and insurance reserves $ 6,200 $ 5,957
Allowance for doubtful accounts 1,936 2,223
Property and equipment 694 694
Accrued vacation 931 684
Other 559 714
----------------------------
$ 10,320 $ 10,272
============================
Deferred tax liabilities:
Depreciation and amortization $ 20,297 $ 16,983
Tires on equipment 1,971 1,761
Employee benefits 1,293 1,243
Other 1,406 1,037
----------------------------
$ 24,967 $ 21,024
============================
26
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company leases revenue equipment and service center facilities from certain
stockholders, employees and affiliates under both capital and operating leases.
Future minimum lease commitments to affiliates at December 31, 1997, are as
follows:
(In thousands) Operating lease Capital lease Total
- --------------------------------------------------------------------------------------------
1998 $ 366 $ 407 $ 773
1999 373 202 575
2000 188 - 188
2001 - - -
2002 - - -
--------------------------------------------
Total minimum lease payments $ 927 609 $1,536
========= =========
Less amount representing interest 32
--------
Present value of capitalized lease obligations $ 577
========
Lease payments to affiliates of the Company were $775,000, $826,000 and $891,000
in 1997, 1996 and 1995, respectively.
The Company purchased fuel, equipment repairs and other services from an
affiliate for which it paid $365,000, $401,000 and $333,000 in 1997, 1996 and
1995, respectively. Charges to the affiliate for rent, equipment repairs, fuel
and other services provided by the Company aggregated $480,000, $1,009,000 and
$865,000 during 1997, 1996 and 1995, respectively.
NOTE 6 - EMPLOYEE RETIREMENT PLAN CONTRIBUTION EXPENSE
Substantially all employees meeting certain service requirements are eligible to
participate in the Company's 401(k) employee retirement plan. Employee
contributions are limited to a percentage of their compensation, as defined in
the plan. The Company makes contributions based upon the greater of a percentage
of employee contributions or ten percent of net income. Company contributions
for 1997, 1996 and 1995 were $1,004,000, $753,000, and $576,000, respectively.
27
NOTE 7 - STOCK OPTIONS
In 1991, the Board of Directors and stockholders adopted the 1991 Employee Stock
Option Plan ("Plan") under which 250,000 shares of common stock are reserved for
stock option grants to certain officers and employees. Options granted under the
Plan may be incentive stock options or nonqualified stock options. The Plan
provides that options may be granted at prices not less than the fair market
value on the date the option is granted, which means the closing price of a
share of common stock as reported on the Nasdaq Stock Market (National Market)
on such day or the preceding day if the shares are not traded in the Nasdaq
system on the grant day. The Stock Option Plan Committee of the Board of
Directors will determine the period during which an option may be exercised on
the date the option is granted; however, under the terms of the Plan, the option
period cannot extend more than ten years from the date on which the option is
granted. Options may not be granted under the Plan after August 31, 2001. A
summary of the changes in the number of common shares under option during the
years ended December 31, 1997, 1996 and 1995 follows:
Number of Per share Options reserved
options option price for future grant
- -----------------------------------------------------------------------------------------------------
Balance as of December 31, 1994 169,000 $13.875 - $19.25 68,000
Granted 27,500 $10.00 (27,500)
Exercised - - -
Canceled - - -
----------------------------------------------------------
Balance as of December 31, 1995 196,500 $10.00 - $19.25 40,500
Granted - - -
Exercised - - -
Canceled (15,000) $10.00 - $19.25 15,000
----------------------------------------------------------
Balance as of December 31, 1996 181,500 $10.00 - $19.25 55,500
GRANTED - - -
EXERCISED (2,400) $10.00 -
CANCELED - - -
----------------------------------------------------------
BALANCE AS OF DECEMBER 31, 1997 179,100 $10.00 - $19.25 55,500
============== ===================
Shares exercisable at December 31, 1997, were 144,940.
NOTE 8 - RESTRICTED STOCK
In 1991, the Board of Directors and stockholders approved a Restricted Stock
Agreement with an officer of the Company. Pursuant to that agreement, 153,336
shares of the Company's common stock were issued and reserved for release to the
officer in four equal, biannual installments originally scheduled for January 1,
1994, 1996, 1998 and 2000. On January 28, 1997, the Board of Directors
authorized the release of 76,668 shares, the total remaining unreleased shares
under the agreement. Compensation expense was recognized ratably over the
vesting period, unless that vesting period was modified by the Board of
Directors, based on the stock price as of October 24, 1991, the date of the
initial public offering. Compensation expense recognized pursuant to this
agreement was $697,000, $232,000 and $232,000 for the years 1997, 1996 and 1995,
respectively.
28
NOTE 9 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter
-----------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) First Second Third Fourth Total
- ----------------------------------------------------------------------------------------------
1997
- ----
REVENUE $73,591 $84,490 $88,275 $82,488 $328,844
OPERATING INCOME 3,214 6,061 6,502 $4,234 20,011
NET INCOME 1,399 3,153 3,353 $2,133 10,038
NET INCOME PER SHARE - BASIC AND DILUTED 0.17 0.38 0.40 0.26 1.21
1996
- ----
Revenue $68,262 $74,862 $77,279 $72,603 $293,006
Operating income 1,696 3,393 4,509 3,352 12,950
Net income 657 1,643 2,180 1,664 6,144
Net income per share - Basic and Diluted 0.08 0.20 0.26 0.20 0.74
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings and claims that have arisen
in the ordinary course of its business that have not been fully adjudicated.
Many of these are covered in whole or in part by insurance. These actions, when
finally concluded and determined, will not, in the opinion of management, have a
material adverse effect upon the financial position or results of operations of
the Company. As of the date of this report, the Company had purchase commitments
of $8,059,000 for the acquisition of additional revenue equipment and service
center facilities.
29
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Old Dominion Freight Line, Inc.
We have audited the accompanying consolidated balance sheets of Old Dominion
Freight Line, Inc. and its subsidiary as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1997. Our audits also included the financial statement schedule listed in Item
14(a). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Old Dominion
Freight Line, Inc. and its subsidiary at December 31, 1997, and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Winston-Salem, North Carolina
January 21, 1998
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Company's directors required by Item 10
of Form 10-K is incorporated by reference to the Company's proxy statement for
the 1998 Annual Meeting of its Stockholders under the caption's "Election of
Directors" and "Principal Stockholders - Compliance with Beneficial Ownership
Reporting Rules", reference to which is hereby made, and the information there
is incorporated herein by reference.
The information concerning the Company's executive officers required by
Item 10 of Form 10-K appears in Item 1 of this report under the heading
"Executive Officers of the Company".
30
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K appears in the
Company's proxy statement for the 1998 Annual Meeting of its Stockholders under
the caption "Executive Compensation", reference to which is hereby made, and the
information there is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Form 10-K appears in the
Company's proxy statement for the 1998 Annual Meeting of its Stockholders under
the captions "Election of Directors" and "Principal Stockholders", reference to
which is hereby made, and the information there is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 of Form 10-K appears in the
Company's proxy statement for the 1998 Annual Meeting of its Stockholders under
the caption "Executive Compensation - Compensation Committee Interlocks and
Insider Participation", reference to which is hereby made, and the information
there is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
The following consolidated financial statements of Old Dominion Freight
Line, Inc., are included in Item 8:
Consolidated Balance Sheets - December 31, 1997, and December 31, 1996
Consolidated Statements of Operations - Years ended December 31, 1997,
December 31, 1996, and December 31, 1995
Consolidated Statements of Changes in Stockholders' Equity - Years
ended December 31, 1997, December 31, 1996, and December 31, 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997,
December 31, 1996, and December 31, 1995
Notes to the Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
The following financial statement schedule of Old Dominion Freight
Line, Inc., is included in response to Item 14(d):
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the instructions or are inapplicable and, therefore, have been omitted.
31
The documents listed below are filed under subsection (d) of Item 14:
(a)(3) Exhibits Filed. The exhibits listed in the accompanying Exhibit Index are
filed as a part of this report.
(b) Reports on Form 8-K. None filed during the last quarter of the period
covered by this report.
(c) Exhibits. See Exhibit Index.
(d) Financial Statement Schedules.
SCHEDULE II
OLD DOMINION FREIGHT LINE, INC.
VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS
--------------------------------------------------------------------
ADDITIONS AMOUNTS
BEGINNING CHARGED WRITTEN ENDING
DESCRIPTION BALANCE TO EXPENSE OFF BALANCE
- ---------------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31, 1995 $ 4,286,000 $ 1,954,000 $ 1,157,000 $ 5,083,000
YEAR ENDED
DECEMBER 31, 1996 $ 5,083,000 $ 2,345,000 $ 1,729,000 $ 5,699,000
YEAR ENDED
DECEMBER 31, 1997 $ 5,699,000 $ 2,852,000 $ 3,588,000 $ 4,963,000
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OLD DOMINION FREIGHT LINE, INC.
Dated: March 9, 1998 By: EARL E. CONGDON
---------------
Earl E. Congdon
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
Name and Signature Position Date
- ------------------- ----------- ------
EARL E. CONGDON Chairman of the Board and March 9, 1998
- ------------------
Earl E. Congdon Chief Executive Officer
JOHN R. CONGDON Vice Chairman of the Board March 9, 1998
- ------------------
John R. Congdon and Director
JOHN A. EBELING Vice Chairman of the Board March 9, 1998
- ------------------
John A. Ebeling and Director
HAROLD G. HOAK Director March 9, 1998
- ---------------
Harold G. Hoak
FRANZ F. HOLSCHER Director March 9, 1998
- ------------------
Franz F. Holscher
DAVID S. CONGDON President and Chief Operating March 9, 1998
- ------------------
David S. Congdon Officer
J. WES FRYE Senior Vice President - Finance March 9, 1998
- ------------------
J. Wes Frye (Principal Financial Officer)
JOHN P. BOOKER III Vice President - Controller March 9, 1998
- -------------------
John P. Booker III (Principal Accounting Officer)
33
EXHIBIT INDEX
TO ANNUAL REPORT ON FORM 10-K
OLD DOMINION FREIGHT LINE, INC.
FOR YEAR ENDED DECEMBER 31, 1997
Exhibit No. Description
- ------------- -------------
3.1.1(a) Articles of Incorporation (as amended and restated September 18, 1991)
3.2(a) Bylaws of Old Dominion Freight Line, Inc.
4.1(a) Specimen certificate of Common Stock
4.3(b) ISDA Master Agreement and Schedule between First Union National Bank of North Carolina and
Old Dominion Freight Line, Inc., dated June 15, 1995
4.4(b) Credit Agreement between First Union National Bank of North Carolina and Old Dominion
Freight Line, Inc., dated June 14, 1995
4.4.1(b) Form of note issued by Company pursuant to the Credit Agreement between First Union National
Bank of North Carolina and Old Dominion Freight Line, Inc., dated June 14, 1995
4.4.2(c) First Amendment to Credit Agreement between First Union National Bank of North Carolina and
Old Dominion Freight Line, Inc., dated February 2, 1996
4.4.3(d) Second Amendment to the Credit Agreement between Old Dominion Freight Line, Inc. and
First Union National Bank of North Carolina, dated April 29, 1996
4.4.4(d) Third Amendment to the Credit Agreement between Old Dominion Freight Line, Inc.
and First Union National Bank of North Carolina, dated June 15, 1996
4.4.5(f) Fourth Amendment to the Credit Agreement between Old Dominion Freight Line, Inc. and First
Union National Bank of North Carolina, dated April 22, 1997
4.5(d) Note Purchase Agreement between Nationwide Life Insurance Company, New York
Life Insurance Company and Old Dominion Freight Line, Inc., dated June 15, 1996
4.5.1(d) Forms of notes issued by Company pursuant to Note Purchase Agreement between
Nationwide Life Insurance Company, New York Life Insurance Company and Old Dominion
Freight Line, Inc., dated June 15, 1996
4.6 Note Purchase Agreement between Nationwide Life Insurance Company, New York
Life Insurance Company and Old Dominion Freight Line, Inc., dated February 27, 1998
4.6.1 Forms of notes issued by Company pursuant to Note Purchase Agreement between
Nationwide Life Insurance Company, New York Life Insurance Company and Old Dominion
Freight Line, Inc., dated February 27, 1998
10.1(a) Employment Agreement Between Old Dominion Freight Line, Inc., and John A.
Ebeling (as amended April 7, 1988)
10.3(a) Restricted Stock Agreement between Old Dominion Freight Line, Inc., and John A.
Ebeling, dated August 19, 1991
10.4(a) 1991 Employee Stock Option Plan of Old Dominion Freight Line, Inc.
10.5(a) Stock Option Agreement pursuant to the 1991 Employee Stock Option Plan of Old Dominion
Freight Line, Inc. (included in Exhibit 10.4)
10.9(a) E & J Enterprises Trailer Lease Agreement, effective August 1, 1991
34
10.9.1(e) Extension of E & J Trailer Lease Agreement, effective August 1, 1996
10.15(c) Lease Agreement between Robert A. Cox, Jr., Trustee, and Old Dominion Freight
Line, Inc., dated as of October 31, 1995
23.1 Consent of Ernst & Young LLP
27 Financial Data Schedule
- --------------------------------------------------
(a) Incorporated by reference to the exhibit of the same number contained in
the Company's registration statement on Form S-1 filed under the
Securities Act of 1933 (SEC File: 33- 42631)
(b) Incorporated by reference to the exhibit contained in the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
(c) Incorporated by reference to the exhibit of the same number contained in
the Company's Annual Report on Form 10-K for the year ended December 31,
1995
(d) Incorporated by reference to the exhibit of the same number contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996
(e) Incorporated by reference to the exhibit of the same number contained in
the Company's Annual Report on Form 10-K for the year ended December 31,
1996
(f) Incorporated by reference to the exhibit of the same number contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997