Operating Ratio Improves 60 Basis Points to
81.4%
Old Dominion Freight Line, Inc. (Nasdaq: ODFL) today announced
financial results for the three-month period ended March 31, 2020.
The financial results for the first quarter of 2020 include $10.1
million of expense related to special employee bonus payments made
in March. These bonus payments were provided to non-executive
employees in appreciation for their extraordinary effort in
responding to the COVID-19 pandemic.
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
March 31,
(In thousands,
except per share amounts)
2020
2019
% Chg.
Total revenue
$
987,364
$
990,782
(0.3
)%
LTL services revenue
$
974,431
$
976,563
(0.2
)%
Other services revenue
$
12,933
$
14,219
(9.0
)%
Operating income
$
183,170
$
178,426
2.7
%
Operating ratio
81.4
%
82.0
%
Net income
$
133,177
$
133,323
(0.1
)%
Diluted earnings per share
$
1.11
$
1.10
0.9
%
Diluted weighted average shares
outstanding
119,806
121,715
(1.6
)%
“Old Dominion produced solid financial results in the first
quarter of 2020, which included a new first-quarter Company record
for our operating ratio,” said Greg C. Gantt, President and Chief
Executive Officer of Old Dominion. “We were pleased to improve our
operating ratio and increase earnings per diluted share despite the
slight decrease in revenue. While revenue was lower, our results
for most of the first quarter were in line with the expectations we
had at the beginning of 2020. Demand for our services declined in
the last half of March, however, due to the widespread effects of
the COVID‑19 pandemic on the domestic economy.
“The decrease in revenue in the first quarter was due to a 3.9%
decrease in LTL tons per day that was partially offset by a 2.6%
increase in LTL revenue per hundredweight. Excluding fuel
surcharges, LTL revenue per hundredweight increased 3.3% over the
same period of the prior year. The decrease in LTL tons per day
reflects a 5.1% decrease in LTL shipments per day that was
partially offset by a 1.3% increase in LTL weight per shipment. As
the domestic economy changed in the last half of March, so did our
mix of business. We experienced a significant increase in our
average weight per shipment and this trend has also continued into
April. While this helped offset the decline in shipments per day,
an increase in average weight per shipment generally has the effect
of reducing revenue per hundredweight. Our revenue per
hundredweight trends may continue to be affected by changes in our
business mix, but they do not indicate a change in our pricing
philosophy. We intend to maintain our long-term and consistent
approach to pricing, as we believe our disciplined approach has
been one of the key elements in improving profitability and
continues to support our long-term growth initiatives.
“Our operating ratio improved 60 basis points to 81.4% from
82.0% for the first quarter of 2019 despite the decrease in revenue
and extra expense related to the special employee bonus payments
made in March 2020. While a decrease in revenue generally has a
deleveraging effect on our operating costs, the quality of our
revenue and increased operating efficiencies allowed us to improve
our direct operating costs as a percent of revenue. This
improvement more than offset the slight deterioration in our
overhead costs as a percent of revenue.
“As the economy declined due to the unprecedented stay-at-home
and similar orders issued throughout the country, we have quickly
adapted to the decrease in our business levels. We are also well
positioned to respond to increases in customer demand that may
occur once these orders are terminated or become less restrictive.
Regardless of the economic environment, we will continue to focus
on managing our variable costs while also diligently controlling
discretionary spending. Rest assured, however, that our focus will
remain on the long-term potential of our business to help ensure
that we have all elements of capacity available to support our
customers when their business levels return to normal.”
Cash Flow and Use of Capital
Old Dominion’s net cash provided by operating activities was
$204.0 million for the first quarter of 2020. The Company had
$357.0 million in cash and cash equivalents and a ratio of
debt-to-total capitalization of 1.5% at March 31, 2020.
Capital expenditures were $52.2 million for the first quarter of
2020. The Company reduced its planned expenditures for real estate
during the first quarter by approximately $50 million, as certain
projects will be deferred to a future period due to the current
trend for shipments. The Company now 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 $196.6 million of capital to its
shareholders in the first quarter of 2020, consisting of $178.3
million of share repurchases and $18.3 million of cash
dividends.
Summary
Mr. Gantt concluded, “Old Dominion’s first quarter results once
again proved the value of our team and their consistent execution
of our long-term strategic plan of providing superior service at a
fair price. This plan has differentiated us from our competition
over the years and provided us with the foundation to win long-term
market share. While we have faced many challenges in the current
environment, our commitment to our employees and their dedication
to servicing the needs of our customers have not wavered. We are
confident that we can continue to deliver our value proposition
even as we deal with ongoing economic uncertainty. Our balance
sheet is strong, as is the dedication and resiliency of our
employees. As a result, we believe that we can effectively manage
through an economic downturn while positioning the Company for
long-term success once the economic recovery begins.”
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 May 1, 2020, at (719) 457-0820, Confirmation Number
1502975.
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: (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; (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
First Quarter
(In thousands,
except per share amounts)
2020
2019
Revenue
$
987,364
100.0
%
$
990,782
100.0
%
Operating expenses:
Salaries, wages & benefits
524,483
53.1
%
522,344
52.7
%
Operating supplies & expenses
107,693
10.9
%
121,357
12.2
%
General supplies & expenses
33,608
3.4
%
31,560
3.2
%
Operating taxes & licenses
29,314
3.0
%
29,071
2.9
%
Insurance & claims
9,850
1.0
%
11,172
1.1
%
Communications & utilities
8,191
0.8
%
7,839
0.8
%
Depreciation & amortization
65,435
6.6
%
63,073
6.4
%
Purchased transportation
20,800
2.1
%
20,687
2.1
%
Miscellaneous expenses, net
4,820
0.5
%
5,253
0.6
%
Total operating expenses
804,194
81.4
%
812,356
82.0
%
Operating income
183,170
18.6
%
178,426
18.0
%
Non-operating expense (income):
Interest expense
100
0.0
%
122
0.0
%
Interest income
(1,248
)
(0.1
)%
(1,483
)
(0.1
)%
Other expense (income), net
3,617
0.4
%
(600
)
(0.1
)%
Income before income taxes
180,701
18.3
%
180,387
18.2
%
Provision for income taxes
47,524
4.8
%
47,064
4.7
%
Net income
$
133,177
13.5
%
$
133,323
13.5
%
Earnings per share:
Basic
$
1.12
$
1.10
Diluted
1.11
1.10
Weighted average outstanding
shares:
Basic
119,050
121,550
Diluted
119,806
121,715
OLD DOMINION FREIGHT LINE,
INC.
Operating Statistics
First Quarter
2020
2019
% Chg.
Work days
64
63
1.6
%
Operating ratio
81.4
%
82.0
%
LTL intercity miles (1)
155,949
159,654
(2.3
)%
LTL tons (1)
2,153
2,206
(2.4
)%
LTL tonnage per day
33,641
35,016
(3.9
)%
LTL shipments (1)
2,716
2,818
(3.6
)%
LTL shipments per day
42,438
44,730
(5.1
)%
LTL revenue per intercity mile
$
6.26
$
6.11
2.5
%
LTL revenue per hundredweight
$
22.68
$
22.10
2.6
%
LTL revenue per hundredweight, excluding
fuel surcharges
$
19.89
$
19.26
3.3
%
LTL revenue per shipment
$
359.64
$
346.02
3.9
%
LTL revenue per shipment, excluding fuel
surcharges
$
315.43
$
301.56
4.6
%
LTL weight per shipment (lbs.)
1,586
1,566
1.3
%
Average length of haul (miles)
919
918
0.1
%
Average full-time employees
19,948
21,044
(5.2
)%
(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
March 31,
December 31,
(In
thousands)
2020
2019
Cash and cash equivalents
$
356,972
$
403,571
Other current assets
474,034
463,263
Total current assets
831,006
866,834
Net property and equipment
2,953,990
2,968,835
Other assets
149,990
159,899
Total assets
$
3,934,986
$
3,995,568
Current maturities of long-term debt
$
45,000
$
-
Other current liabilities
383,295
366,085
Current liabilities
$
428,295
$
366,085
Long-term debt
-
45,000
Other non-current liabilities
490,642
503,766
Total liabilities
$
918,937
914,851
Equity
3,016,049
3,080,717
Total liabilities & equity
$
3,934,986
$
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/20200423005158/en/
Adam N. Satterfield Senior Vice President, Finance and Chief
Financial Officer (336) 822-5721
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