Old Dominion Freight Line Inc. Reports Operating Results (10-Q)
Old Dominion Freight Line Inc. is an inter-regional and multi-regional motor carrier transporting primarily less-than-truckload shipments of general commodities including consumer goods textiles and capitalgoods to a diversified customer base. Old Dominion Freight Line Inc. has a market cap of $1.31 billion; its shares were traded at around $35.24 with a P/E ratio of 26.5 and P/S ratio of 0.9. Old Dominion Freight Line Inc. had an annual average earning growth of 14.6% over the past 10 years. GuruFocus rated Old Dominion Freight Line Inc. the business predictability rank of 2.5-star. Highlight of Business Operations: The decrease in revenue for the second quarter and the first six months of 2009 consisted of both decreases in tonnage and revenue per hundredweight. Tonnage declined 14.6% and 13.6% for the three and six months ended June 30, 2009, respectively, when compared to the same periods of 2008. The second quarter decrease in tonnage resulted from a 16.6% decrease in shipments that was partially offset by a 2.5% increase in weight per shipment. The tonnage decrease for the first six months of 2009 resulted from a 17.0% decrease in shipments that was partially offset by a 4.2% increase in weight per shipment. We attribute the decline in our tonnage primarily to the effect of the recessionary economy on freight demand, as we believe we have maintained our market share thus far in 2009. Although we experienced a seasonal increase in freight demand as compared to the first quarter of 2009, we believe freight demand in the LTL industry will not improve until there is a general recovery in the domestic economy or a significant decrease in capacity resulting from industry consolidation. Until one or both of these events occur, we could experience additional quarter-over-quarter declines in shipments and tonnage in the third and fourth quarters of 2009.
decreased to 8.7% of revenue in the second quarter of 2009 from 19.3% of revenue in the prior-year quarter and decreased to 8.5% of revenue from 17.5% in the first half of 2008. Excluding fuel surcharges, revenue per hundredweight declined only 0.1% and 0.5% for the three and six months ended June 30, 2009, respectively, when compared to the same periods of 2008, which further reflects our commitment to maintain pricing in the current competitive environment. Revenue per hundredweight was also negatively impacted by the increase in our weight per shipment for both comparable periods.
Salaries, wages and benefits increased to 57.3% and 58.6% of revenue for the second quarter and first six months of 2009, respectively, from 49.8% and 52.1% in the comparable periods of the prior year. These increases, as a percent of revenue, are primarily the result of the deleveraging effect of the decline in revenue as we maintained our service schedules and on-time performance. As a result, driver wages increased to 23.3% of revenue from 20.0% in the second quarter of 2008 and increased to 23.5% from 20.8% in the first six months of 2008. Platform wages as a percentage of revenue increased to 6.8% of revenue from 6.5% in the second quarter of 2008 and increased to 6.9% from 6.7% in the first six months of 2008.
While our salaries, wages and benefits increased as a percent of revenue, the $26,952,000 and $51,752,000 overall decreases for the three and six months ended June 30, 2009, respectively, are attributable to a 13.5% reduction in the total number of full-time employees from June 30, 2008 to June 30, 2009 and the improved productivity of our employees. Our P&D shipments per hour increased 3.9% and 3.4% for the second quarter and first half of 2009, respectively. Platform pounds per hour increased 18.5% and 19.4% for the second quarter and first half of 2009, respectively. Our linehaul laden load average decreased 0.7% for the second quarter of 2009 but increased 1.3% for the first six months of 2009. These factors partially offset the impact on our operating ratio of the annual wage increase provided to our workforce in September 2008.
Employee benefit costs increased to 31.9% of salaries and wages from 28.9% in the second quarter of 2008 and increased to 33.3% of salaries and wages from 31.4% in the first half of 2008. These increases are the result of higher costs for our employees group health and dental coverage. Group health and dental costs increased to 12.5% and 12.8% of total salary and wages in the second quarter and first half of 2009, respectively, from 10.1% and 10.6% in respective periods of 2008, due primarily to an increase in the number of claims paid for participants under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), and the increased severity of health insurance claims. Legislation passed in 2009 increased the period of coverage for eligible COBRA participants who were involuntarily terminated between September 1, 2008 and December 31, 2009 and also reduced their premium payments. As a result, we could experience additional increases in our group health and dental claims costs.
diesel fuel as well as a 14.9% decrease in gallons consumed. Diesel fuel costs decreased 60.1% in the first half of 2009, which was also due to the significant decrease in price and a 16.0% decrease in gallons consumed. The reduction in our gallons consumed is the result of a decrease in the number of miles driven and an increase of 3.4% and 3.5% in our miles per gallon for the second quarter and first half of 2009, respectively. The decreased consumption of diesel fuel also lowered our fuel tax expenses and was the primary reason for the $1,409,000 and $2,838,000 reductions in Operating taxes and licenses for the three and six months ended June 30, 2009, respectively. We do not use diesel fuel hedging instruments and are therefore subject to market price fluctuations.
Read the The complete Report