Operating Ratio Improves to 77.8%
Old Dominion Freight Line, Inc. (Nasdaq: ODFL) today announced
financial results for the three-month and six-month periods ended
June 30, 2020.
All prior-period share and per share data in this release have
been adjusted to reflect the Company’s March 2020 three-for-two
stock split.
Three Months Ended
Six Months Ended
June 30,
June 30,
(In thousands, except per share
amounts)
2020
2019
% Chg.
2020
2019
% Chg.
Total revenue
$
896,210
$
1,060,666
(15.5
)%
$
1,883,574
$
2,051,448
(8.2
)%
LTL services revenue
$
884,069
$
1,047,208
(15.6
)%
$
1,858,500
$
2,023,771
(8.2
)%
Other services revenue
$
12,141
$
13,458
(9.8
)%
$
25,074
$
27,677
(9.4
)%
Operating income
$
199,166
$
234,489
(15.1
)%
$
382,336
$
412,915
(7.4
)%
Operating ratio
77.8
%
77.9
%
79.7
%
79.9
%
Net income
$
147,805
$
174,072
(15.1
)%
$
280,982
$
307,395
(8.6
)%
Diluted earnings per share
$
1.25
$
1.44
(13.2
)%
$
2.36
$
2.53
(6.7
)%
Diluted weighted average shares
outstanding
118,360
120,968
(2.2
)%
119,083
121,340
(1.9
)%
Greg C. Gantt, President and Chief Executive Officer of Old
Dominion, commented, “The second quarter of 2020 was one of the
most difficult periods we have experienced, although our team
responded quickly to efficiently manage our operations in this
environment. Given the circumstances with the domestic economy, the
decrease in our quarterly revenue was not entirely unexpected. Our
overall financial results for the quarter were solid, however, as
we continued to execute on the basic elements of our long-term
strategic plan. We improved our industry-leading service metrics
that support our revenue quality initiatives, and we also balanced
our operating costs with the decrease in volumes. We believe the
current environment has increased the importance of superior
customer service, and we were proud to establish a new
Company-record quarterly cargo claims ratio of 0.1% while
maintaining our on-time deliveries at 99% during the second
quarter.
“The decrease in revenue as compared to the second quarter of
2019 was primarily due to a 12.1% decrease in LTL tons per day and
a 3.8% decrease in LTL revenue per hundredweight. Revenue per
hundredweight was negatively affected by the significant decline in
the average price of diesel fuel and the 5.3% increase in our
average weight per shipment, which generally has the effect of
reducing revenue per hundredweight. Excluding fuel surcharges, LTL
revenue per hundredweight decreased 0.5% over the same period of
the prior year. While our yield metrics were negatively affected by
changes in the mix of our freight during the second quarter, our
underlying pricing performance remained consistent with prior
periods. We intend to maintain our long-term and consistent
approach to pricing, as we believe this approach supports our
ability to achieve long-term profitable growth.
“Our revenue per day decreased significantly in April 2020 due
primarily to the stay-at-home and similar orders issued throughout
the country. As these stay-at-home mandates were phased out and our
customers began to reopen their businesses, our revenue trend
improved on a sequential basis for the remaining months of the
quarter. Although year-over-year volumes decreased for both May and
June when compared to the same periods of 2019, we were encouraged
by the sequential improvement in our volumes that has also
continued into July.
“Our operating ratio improved slightly to 77.8% from 77.9% for
the second quarter of 2019 due primarily to the quality of our
revenue and increased efficiency in our operations, which allowed
us to improve our direct operating costs as a percent of revenue.
This improvement in our direct costs more than offset the increase
in overhead costs as a percent of revenue. We attribute the
increase in our overhead costs as a percent of revenue to the
deleveraging effect associated with the reduction in revenue,
despite our diligence in controlling our discretionary spending.
While we were pleased with the improvement in our operating ratio
during the quarter, we were careful to balance short-term cost
decisions in a challenging economic environment against the
long-term needs of our business. As a result, our service advantage
and available capacity position us to capitalize on future revenue
growth opportunities.”
Cash Flow and Use of Capital
Old Dominion’s net cash provided by operating activities was
$312.2 million for the second quarter of 2020 and $516.2 million
for the first half of the year. The Company had $518.6 million in
cash and cash equivalents at June 30, 2020.
Capital expenditures were $67.9 million for the second quarter
of 2020 and $120.1 million for the first half of the year. The
Company expects its aggregate capital expenditures for 2020 to
total approximately $265 million, including planned expenditures of
$195 million for real estate and service center expansion projects;
$20 million for tractors and trailers; and $50 million for
information technology and other assets.
Old Dominion returned $146.1 million of capital to its
shareholders in the second quarter of 2020 and $342.7 million for
the first half of the year. For the year-to-date period, this total
consisted of $306.8 million of share repurchases and $35.9 million
of cash dividends.
Summary
Mr. Gantt concluded, “Old Dominion’s second quarter results are
a testament to the resiliency of our business model and the
consistent execution of our strategic plan. We remain committed to
ensuring the safety and well-being of our OD Family of employees,
who in turn remain dedicated to providing our customers with
superior service at a fair price. This value proposition
differentiates us from our competition and is critical to our
ability to win market share. We are encouraged by recent trends and
will continue to invest in the necessary elements of capacity to
support our customers’ needs. Our long-term record of success
throughout the various stages of the economic cycle provides us
with confidence that executing on the fundamental aspects of our
business can deliver additional value to our shareholders.”
Old Dominion will hold a conference call to discuss this release
today at 10:00 a.m. Eastern Time. Investors will have the
opportunity to listen to the conference call live over the internet
by going to ir.odfl.com. Please log on at least 15 minutes early to
register, download and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will be
available at this website shortly after the call and will be
available for 30 days. A telephonic replay will also be available
through August 7, 2020, at (719) 457-0820, Confirmation Number
1718368.
Forward-looking statements in this news release are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We caution the reader 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, many of which will continue to be amplified by
the current COVID-19 pandemic: (1) the competitive environment with
respect to industry capacity and pricing, including the use of fuel
surcharges, which could negatively impact our total overall pricing
strategy and our ability to cover our operating expenses; (2) our
ability to collect fuel surcharges and the effectiveness of those
fuel surcharges in mitigating the impact of fluctuating prices for
diesel fuel and other petroleum-based products; (3) the negative
impact of any unionization, or the passage of legislation or
regulations that could facilitate unionization, of our employees;
(4) the challenges associated with executing our growth strategy,
including our ability to successfully consummate and integrate any
acquisitions; (5) changes in our goals and strategies, which are
subject to revision at any time at our discretion; (6) various
economic factors such as recessions, downturns in the economy,
global uncertainty and instability, changes in international trade
policies, changes in U.S. social, political, and regulatory
conditions or a disruption of financial markets, which may decrease
demand for our services or increase our costs; (7) public health
issues such as the current COVID-19 pandemic, that may negatively
affect the economy; (8) changes in relationships with our
significant customers; (9) the impact of changes in tax laws,
rates, guidance and interpretations, including those related to
certain provisions of the Tax Cuts and Jobs Act; (10) increases in
driver and maintenance technician compensation or difficulties
attracting and retaining qualified drivers and maintenance
technicians to meet freight demand; (11) our exposure to claims
related to cargo loss and damage, property damage, personal injury,
workers’ compensation, group health and group dental, including
increased premiums, adverse loss development, increased
self-insured retention or deductible levels and claims in excess of
insured coverage levels; (12) cost increases associated with
employee benefits, including costs associated with employee
healthcare plans; (13) the availability and cost of capital for our
significant ongoing cash requirements; (14) the availability and
cost of new equipment and replacement parts, including regulatory
changes and supply constraints that could impact the cost of these
assets; (15) decreases in demand for, and the value of, used
equipment; (16) the availability and cost of diesel fuel; (17) the
costs and potential liabilities related to compliance with, or
violations of, existing or future governmental laws and
regulations, including environmental laws, engine emissions
standards, hours-of-service for our drivers, driver fitness
requirements and new safety standards for drivers and equipment;
(18) the costs and potential liabilities related to various legal
proceedings and claims that have arisen in the ordinary course of
our business, some of which include collective and/or class action
allegations; (19) the costs and potential liabilities related to
governmental proceedings, inquiries, notices or investigations;
(20) the costs and potential liabilities related to our
international business relationships; (21) the costs and potential
adverse impact of compliance with, or violations of, current and
future rules issued by the Department of Transportation, the
Federal Motor Carrier Safety Administration (the “FMCSA”) and other
regulatory agencies; (22) the costs and potential adverse impact of
compliance associated with FMCSA’s electronic logging device
(“ELD”) regulations and guidance, including the operation of our
fleet and safety management systems on the ELD hardware and
software platform; (23) seasonal trends in the less-than-truckload
(“LTL”) industry, including harsh weather conditions and disasters;
(24) our ability to retain our key employees and continue to
effectively execute our succession plan; (25) the concentration of
our stock ownership with the Congdon family; (26) the costs and
potential adverse impact associated with future changes in
accounting standards or practices; (27) potential costs and
liabilities associated with cyber incidents and other risks with
respect to our systems and networks or those of our third-party
service providers, including system failure, security breach,
disruption by malware or ransomware or other damage; (28) failure
to comply with data privacy, security or other laws and
regulations; (29) failure to keep pace with developments in
technology, any disruption to our technology infrastructure, or
failures of essential services upon which our technology platforms
rely, which could cause us to incur costs or result in a loss of
business; (30) the costs and potential adverse impact associated
with transitional challenges in upgrading or enhancing our
technology systems; (31) legal, regulatory or market responses to
climate change concerns; (32) damage to our reputation through
unfavorable perceptions or publicity, including those related to
environmental, social and governance issues, cybersecurity and data
privacy concerns; (33) failure to adapt to new technologies
implemented by our competitors in the LTL and transportation
industry; (34) the costs and potential adverse impact of compliance
with anti-terrorism measures on our business; (35) dilution to
existing shareholders caused by any issuance of additional equity;
(36) the impact of a quarterly cash dividend or the failure to
declare future cash dividends; (37) fluctuations in the amount and
frequency of our stock repurchases; (38) recent and future
volatility in the market value of our common stock; (39) the impact
of certain provisions in our articles of incorporation, bylaws, and
Virginia law that could discourage, delay or prevent a change in
control of us or a change in our management; and (40) other risks
and uncertainties described in our most recent Annual Report on
Form 10-K and other filings with the SEC. Our forward-looking
statements are based upon our beliefs and assumptions using
information available at the time the statements are made. We
caution the reader not to place undue reliance on our
forward-looking statements as (i) these statements are neither a
prediction nor a guarantee of future events or circumstances and
(ii) the assumptions, beliefs, expectations and projections about
future events may differ materially from actual results. We
undertake no obligation to publicly update any forward-looking
statement to reflect developments occurring after the statement is
made, except as otherwise required by law.
Old Dominion Freight Line, Inc. is a leading,
less-than-truckload (“LTL”), union-free motor carrier providing
regional, inter-regional and national LTL services through a single
integrated organization. Our service offerings, which include
expedited transportation, are provided through an expansive network
of service centers located throughout the continental United
States. Through strategic alliances, the Company also provides LTL
services throughout North America. In addition to its core LTL
services, the Company offers a range of value-added services
including container drayage, truckload brokerage and supply chain
consulting.
OLD DOMINION FREIGHT LINE,
INC.
Statements of
Operations
Second Quarter
Year to Date
(In thousands, except per share
amounts)
2020
2019
2020
2019
Revenue
$
896,210
100.0
%
$
1,060,666
100.0
%
$
1,883,574
100.0
%
$
2,051,448
100.0
%
Operating expenses:
Salaries, wages & benefits
460,906
51.4
%
532,583
50.2
%
985,389
52.3
%
1,054,927
51.4
%
Operating supplies & expenses
75,412
8.4
%
122,410
11.5
%
183,105
9.7
%
243,767
11.9
%
General supplies & expenses
25,881
2.9
%
32,391
3.1
%
59,489
3.2
%
63,951
3.1
%
Operating taxes & licenses
27,043
3.0
%
29,384
2.8
%
56,357
3.0
%
58,455
2.9
%
Insurance & claims
10,910
1.2
%
11,587
1.1
%
20,760
1.1
%
22,759
1.1
%
Communications & utilities
7,262
0.8
%
6,134
0.6
%
15,453
0.8
%
13,973
0.7
%
Depreciation & amortization
65,735
7.4
%
62,571
5.9
%
131,170
7.0
%
125,644
6.1
%
Purchased transportation
18,983
2.1
%
24,468
2.3
%
39,783
2.1
%
45,155
2.2
%
Miscellaneous expenses, net
4,912
0.6
%
4,649
0.4
%
9,732
0.5
%
9,902
0.5
%
Total operating expenses
697,044
77.8
%
826,177
77.9
%
1,501,238
79.7
%
1,638,533
79.9
%
Operating income
199,166
22.2
%
234,489
22.1
%
382,336
20.3
%
412,915
20.1
%
Non-operating expense (income):
Interest expense
765
0.1
%
160
0.0
%
865
0.0
%
282
0.0
%
Interest income
(231
)
(0.0
)%
(1,769
)
(0.2
)%
(1,479
)
(0.1
)%
(3,252
)
(0.2
)%
Other (income) expense, net
(373
)
(0.1
)%
524
0.1
%
3,244
0.2
%
(76
)
(0.0
)%
Income before income taxes
199,005
22.2
%
235,574
22.2
%
379,706
20.2
%
415,961
20.3
%
Provision for income taxes
51,200
5.7
%
61,502
5.8
%
98,724
5.3
%
108,566
5.3
%
Net income
$
147,805
16.5
%
$
174,072
16.4
%
$
280,982
14.9
%
$
307,395
15.0
%
Earnings per share:
Basic
$
1.26
$
1.44
$
2.37
$
2.54
Diluted
1.25
1.44
2.36
2.53
Weighted average outstanding
shares:
Basic
117,610
120,783
118,330
121,164
Diluted
118,360
120,968
119,083
121,340
OLD DOMINION FREIGHT LINE,
INC.
Operating Statistics
Second Quarter
Year to Date
2020
2019
% Chg.
2020
2019
% Chg.
Work days
64
64
–
128
127
0.8
%
Operating ratio
77.8
%
77.9
%
79.7
%
79.9
%
LTL intercity miles (1)
141,417
163,884
(13.7
)%
297,366
323,539
(8.1
)%
LTL tons (1)
2,028
2,306
(12.1
)%
4,181
4,512
(7.3
)%
LTL tonnage per day
31,688
36,031
(12.1
)%
32,664
35,528
(8.1
)%
LTL shipments (1)
2,478
2,970
(16.6
)%
5,194
5,789
(10.3
)%
LTL shipments per day
38,719
46,406
(16.6
)%
40,578
45,583
(11.0
)%
LTL revenue per intercity mile
$
6.27
$
6.40
(2.0
)%
$
6.27
$
6.25
0.3
%
LTL revenue per hundredweight
$
21.85
$
22.72
(3.8
)%
$
22.28
$
22.42
(0.6
)%
LTL revenue per hundredweight, excluding
fuel surcharges
$
19.64
$
19.73
(0.5
)%
$
19.77
$
19.50
1.4
%
LTL revenue per shipment
$
357.65
$
352.88
1.4
%
$
358.69
$
349.54
2.6
%
LTL revenue per shipment, excluding fuel
surcharges
$
321.47
$
306.37
4.9
%
$
318.31
$
304.03
4.7
%
LTL weight per shipment (lbs.)
1,636
1,553
5.3
%
1,610
1,559
3.3
%
Average length of haul (miles)
919
917
0.2
%
919
918
0.1
%
Average active full-time employees
17,911
20,735
(13.6
)%
18,930
20,890
(9.4
)%
(1)
In thousands
Note:
Our LTL operating statistics exclude
certain transportation and logistics services where pricing is
generally not determined by weight. These statistics also exclude
adjustments to revenue for undelivered freight required for
financial statement purposes in accordance with our revenue
recognition policy.
OLD DOMINION FREIGHT LINE,
INC.
Balance Sheets
June 30,
December 31,
(In thousands)
2020
2019
Cash and cash equivalents
$
518,624
$
403,571
Other current assets
449,946
463,263
Total current assets
968,570
866,834
Net property and equipment
2,955,083
2,968,835
Other assets
156,375
159,899
Total assets
$
4,080,028
$
3,995,568
Current maturities of long-term debt
$
45,000
$
–
Other current liabilities
449,174
366,085
Current liabilities
$
494,174
$
366,085
Long-term debt
99,923
45,000
Other non-current liabilities
503,463
503,766
Total liabilities
$
1,097,560
914,851
Equity
2,982,468
3,080,717
Total liabilities & equity
$
4,080,028
$
3,995,568
Note: The financial and operating
statistics in this press release are unaudited
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005224/en/
Adam N. Satterfield Senior Vice President, Finance and Chief
Financial Officer (336) 822-5721
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