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Old Dominion Freight Line Inc. Reports Operating Results (10-Q)

August 06, 2010 | About:
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10qk

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Old Dominion Freight Line Inc. (ODFL) filed Quarterly Report for the period ended 2010-06-30.

Old Dominion Freight Line Inc. has a market cap of $1.4 billion; its shares were traded at around $37.45 with a P/E ratio of 28.1 and P/S ratio of 1.2. Old Dominion Freight Line Inc. had an annual average earning growth of 15.1% over the past 10 years. GuruFocus rated Old Dominion Freight Line Inc. the business predictability rank of 4.5-star.ODFL is in the portfolios of Steven Cohen of SAC Capital Advisors, Columbia Wanger of Columbia Wanger Asset Management, Columbia Wanger of Columbia Wanger Asset Management, Bruce Kovner of Caxton Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The 16.5% and 12.2% increases in revenue for the second quarter and the first six months of 2010, respectively, resulted from both increases in tonnage and revenue per hundredweight. Tonnage increased 13.4% and 9.7% for the three and six months ended June 30, 2010, respectively, when compared to the same periods of 2009. The increases in tonnage were due to increased shipments and increased weight per shipment for both of the quarter and year-to-date periods compared. The growth in shipments per day accelerated during the second quarter, which we believe reflects our gain in market share as well as general economic improvement. Weight per shipment increased 6.0% and 5.9% for the second quarter and first half of 2010, respectively, as compared to the same periods of 2009. While we continue to experience some shift in the mix of our freight to higher volume shipments, we also believe the broad increase we experienced in most of our weight per shipment metrics in 2010 is an early indicator of an improving economy.

Revenue per hundredweight increased 3.0% to $12.91 from $12.53 in the second quarter of 2009 and increased 2.5% to $12.87 from $12.55 for the first six months of 2009. The increase in revenue per hundredweight for both of these periods primarily reflects increases in fuel surcharges, which are charged to offset increased costs of petroleum-based products. Fuel surcharge revenue increased to 12.5% of revenue in the second quarter of 2010 from 8.7% in the prior-year quarter and increased to 12.0% of revenue in the first half of 2010 from 8.5% in the comparable prior-year period. Excluding fuel surcharges, revenue per hundredweight declined 1.1% and 1.3% for the three and six months ended June 30, 2010, respectively, primarily due to the increases in weight per shipment.

Salaries, wages and benefits decreased to 53.3% and 54.9% of revenue for the second quarter and first half of 2010, respectively, from 57.3% and 58.6% in the comparable periods of the prior year. While revenue increased 16.5% and 12.2% for the second quarter and first half of 2010, respectively, improvements in the productivity of our workforce and increased density within our network allowed us to leverage the additional volumes at lower unit costs. Our P&D shipments per hour increased 0.5% for the second quarter and first half of 2010, while P&D stops per hour increased 0.6% and 0.7% for the same respective periods. In our linehaul operations, our laden load average increased 2.7% and 1.8% for the second quarter and first six months of 2010, respectively. Platform pounds per hour increased 0.9% for the first half of 2010 but decreased 1.3% for the second quarter due to the increased cost of hiring and training new platform employees to support our growth.

Operating supplies and expenses increased to 16.2% of revenue from 13.9% for the second quarter of 2009 and increased to 16.4% of revenue from 13.8% for the first six months of 2009. The increase for both periods is primarily due to the increase in diesel fuel costs, excluding fuel taxes, which is the largest component of operating supplies and expenses. In the second quarter of 2010, diesel fuel costs, excluding fuel taxes, increased 48.3% from the comparable prior-year period due to a 29.3% increase in our average price per gallon, as well as a 7.6% increase in gallons consumed. Diesel fuel costs, excluding fuel taxes, increased 49.0% from the first six months of 2009 due primarily to a 31.9% increase in our average price per gallon, as well as a 5.0% increase in gallons consumed. We do not use diesel fuel hedging instruments and are therefore subject to market price fluctuations.

Depreciation and amortization expense decreased to 5.3% and 6.0% of revenue for the second quarter and first half of 2010, respectively, from 7.6% and 7.7% of revenue for the same periods of 2009. While our capital expenditure requirements have been reduced for 2010 due to the available capacity in our fleet and service center network, the improvement as a percent of revenue is attributable to the operating leverage associated with the increase in tonnage. The improvement as a percent of revenue for the quarter and year-to-date periods is also attributable to a reduction in depreciation expense resulting from changes in the estimated useful lives and salvage values of certain equipment, effective January 1, 2010. The changes we made are described in more detail under Critical Accounting Policies below. The impact of these changes to useful lives and salvage values resulted in decreases in depreciation expense of approximately $3.9 million and $6.0 million for the second quarter and first six months of 2010, respectively.

Our effective tax rate was 40.0% for the second quarter and first six months of 2010, as compared to 40.1% and 39.9% for the second quarter and first six months of 2009, respectively. The effective tax rate exceeded the federal statutory rate of 35% primarily due to the impact of state taxes and, to a lesser extent, certain non-deductible items.

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