Old Dominion Freight Line, Inc. — 2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013. The filing also reports unaudited fourth-quarter results. Old Dominion is a union-free less-than-truckload carrier offering regional, inter-regional and national freight services, plus related logistics services. More than 90% of revenue comes from LTL transportation.
Financial and operating highlights
| Metric | FY 2013 | FY 2012 | Change |
|---|---|---|---|
| Revenue | $2,337.6 million | $2,134.6 million | +9.5% |
| Operating income | $338.4 million | $285.3 million | +18.6% |
| Net income | $206.1 million | $169.5 million | +21.6% |
| Diluted EPS | $2.39 | $1.97 | +21.3% |
| Operating ratio | 85.5% | 86.6% | Improved 1.1 percentage points |
| Operating margin | 14.5% | 13.4% | Improved |
| Operating cash flow | $350.7 million | $328.1 million | +6.9% |
| Capital expenditures, net of asset-sale proceeds | $291.0 million | $362.3 million | Lower |
| Long-term debt, including current maturities | $191.4 million | $240.4 million | Lower |
Cash and equivalents were $30.2 million at year-end, versus $12.9 million a year earlier. Current assets were $333.0 million and current liabilities $232.1 million. No revolver borrowings were outstanding; after letters of credit, reported borrowing capacity was $142.3 million. Shareholders’ equity was $1,232.1 million.
Shipment volume supported growth: tonnage rose 7.4%, shipments 6.6%, and revenue per hundredweight 2.1% to $15.85. Diesel fuel costs were 13.2% of revenue, down from 14.3% in 2012. The company reported no dividends for 2013 and no current plan to pay them in 2014.
Fourth-quarter results
Q4 2013 revenue was $592.5 million, versus $533.8 million in Q4 2012 (up 11.0%). Operating income was $76.8 million versus $67.5 million, net income was $47.2 million versus $39.5 million, and diluted EPS was $0.55 versus $0.46.
Changes, outlook and notable items
- Management attributed annual growth primarily to market-share gains, pricing and shipment growth. It said improved yield management and operating efficiencies helped produce the company’s best annual operating ratio to date.
- Management projected 2014 capital expenditures of approximately $342 million: $132 million for service-center facilities, $163 million for tractors, trailers and other equipment, and $47 million for technology and other assets. It expected to fund this primarily with operating cash flow, existing cash and, if needed, the revolver. No earnings or revenue guidance was provided.
- Driver hours-of-service rule changes took effect in 2013. The company hired additional drivers to address resulting operating inefficiencies and said the added costs were not material to operating costs; future regulatory changes could raise costs further.
- Fuel prices and supply remain risks. Fuel surcharges offset some increases, but recovery can lag price movements and does not cover all fuel use; the company does not hedge diesel prices. Other key risks include economic or freight-demand weakness, pricing competition, driver availability and compensation, healthcare and insurance claims, equipment costs, weather, and environmental and safety regulation.
- A presentation correction reclassified certain purchased-transportation costs from netted revenue to operating expense, increasing reported 2012 and 2011 revenue and expense by $24.1 million and $21.3 million, respectively, with no effect on operating income, net income, EPS or cash flow.
- 2013 results included a $3.4 million gain on a nonmonetary exchange of property and increased gains on sales of operating assets. Management said ordinary-course legal proceedings were not expected to have a material adverse effect. The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Whether shipment, tonnage and pricing growth continue, and whether yield gains reflect underlying rates rather than fuel surcharges or freight mix.
- Whether operating-ratio improvement is sustained as labor, healthcare, insurance, depreciation and capacity costs rise.
- Execution and funding of the $342 million 2014 capital plan, including the resulting depreciation and liquidity impact.
- Debt maturities and covenant compliance: $35.7 million of debt was due within 12 months, and the company reported compliance at year-end.
- Exposure to fuel-price recovery lags, driver availability, hours-of-service rules, and potential changes in environmental and safety requirements.
- Potential effect of claims and insurance reserves, related-party transactions, and the disclosed property-sale and exchange gains on future comparisons.