UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2021March 31, 2022
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________ .
Commission File Number: 0-19582
OLD DOMINION FREIGHT LINE, INC.
(Exact name of registrant as specified in its charter)
| ||
|
|
|
Virginia |
| 56-0751714 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
| ||
|
|
|
500 Old Dominion Way Thomasville, North Carolina |
| 27360 |
(Address of principal executive offices) |
| (Zip Code) |
(336) 889-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock ($0.10 par value) | ODFL | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| |||
|
|
|
|
Large accelerated filer | ☒ | Accelerated filer | ☐ |
|
|
|
|
Non-accelerated filer | ☐ | Smaller reporting company | ☐ |
|
|
|
|
|
| Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of AugustMay 3, 20212022 there were 115,810,083113,353,760 shares of the registrant’s Common Stock ($0.10 par value) outstanding.
INDEX
Part I – FINANCIAL INFORMATION |
| |
|
|
|
1 | ||
| Condensed Balance Sheets – | 1 |
| 3 | |
| 4 | |
| 5 | |
| 6 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| |
| ||
| ||
|
| |
Part II – OTHER INFORMATION |
| |
|
|
|
| ||
| ||
| ||
| ||
|
| |
| ||
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
|
| June 30, |
|
|
|
|
|
| March 31, |
|
|
|
|
| ||
|
| 2021 |
|
| December 31, |
|
| 2022 |
|
| December 31, |
| ||||
(In thousands, except share and per share data) |
| (Unaudited) |
|
| 2020 |
|
| (Unaudited) |
|
| 2021 |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 484,204 |
|
| $ | 401,430 |
|
| $ | 262,122 |
|
| $ | 462,564 |
|
Short-term investments |
|
| 165,254 |
|
|
| 330,274 |
|
|
| 279,183 |
|
|
| 254,433 |
|
Customer receivables, less allowances of $9,915 and $8,979, respectively |
|
| 548,749 |
|
|
| 444,653 |
| ||||||||
Customer receivables, less allowances of $12,118 and $9,855, respectively |
|
| 669,042 |
|
|
| 567,474 |
| ||||||||
Income taxes receivable |
|
| — |
|
|
| 19,218 |
| ||||||||
Other receivables |
|
| 51,307 |
|
|
| 9,569 |
|
|
| 12,347 |
|
|
| 12,410 |
|
Prepaid expenses and other current assets |
|
| 61,601 |
|
|
| 57,413 |
|
|
| 58,263 |
|
|
| 67,688 |
|
Total current assets |
|
| 1,311,115 |
|
|
| 1,243,339 |
|
|
| 1,280,957 |
|
|
| 1,383,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue equipment |
|
| 1,991,845 |
|
|
| 1,885,649 |
|
|
| 2,156,600 |
|
|
| 2,146,205 |
|
Land and structures |
|
| 2,297,101 |
|
|
| 2,218,290 |
|
|
| 2,508,592 |
|
|
| 2,463,949 |
|
Other fixed assets |
|
| 493,870 |
|
|
| 475,264 |
|
|
| 530,304 |
|
|
| 512,340 |
|
Leasehold improvements |
|
| 12,904 |
|
|
| 12,226 |
|
|
| 13,486 |
|
|
| 13,131 |
|
Total property and equipment |
|
| 4,795,720 |
|
|
| 4,591,429 |
|
|
| 5,208,982 |
|
|
| 5,135,625 |
|
Accumulated depreciation |
|
| (1,796,993 | ) |
|
| (1,677,398 | ) |
|
| (1,983,674 | ) |
|
| (1,919,939 | ) |
Net property and equipment |
|
| 2,998,727 |
|
|
| 2,914,031 |
|
|
| 3,225,308 |
|
|
| 3,215,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets |
|
| 224,604 |
|
|
| 212,040 |
|
|
| 216,385 |
|
|
| 222,071 |
|
Total assets |
| $ | 4,534,446 |
|
| $ | 4,369,410 |
|
| $ | 4,722,650 |
|
| $ | 4,821,544 |
|
Note: The Condensed Balance Sheet at December 31, 20202021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.
The accompanying notes are an integral part of these condensed financial statements.
1
OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
(CONTINUED)
|
| June 30, |
|
|
|
|
|
| March 31, |
|
|
|
|
| ||
|
| 2021 |
|
| December 31, |
|
| 2022 |
|
| December 31, |
| ||||
(In thousands, except share and per share data) |
| (Unaudited) |
|
| 2020 |
|
| (Unaudited) |
|
| 2021 |
| ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 90,956 |
|
| $ | 68,511 |
|
| $ | 117,850 |
|
| $ | 82,519 |
|
Compensation and benefits |
|
| 245,762 |
|
|
| 191,303 |
|
|
| 223,096 |
|
|
| 257,905 |
|
Claims and insurance accruals |
|
| 55,620 |
|
|
| 53,092 |
|
|
| 63,229 |
|
|
| 61,822 |
|
Other accrued liabilities |
|
| 89,680 |
|
|
| 51,513 |
|
|
| 91,135 |
|
|
| 61,988 |
|
Income taxes payable |
|
| — |
|
|
| 8,711 |
|
|
| 83,286 |
|
| — |
| |
Total current liabilities |
|
| 482,018 |
|
|
| 373,130 |
|
|
| 578,596 |
|
|
| 464,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
| 99,939 |
|
|
| 99,931 |
|
|
| 99,951 |
|
|
| 99,947 |
|
Other non-current liabilities |
|
| 329,901 |
|
|
| 349,851 |
|
|
| 292,078 |
|
|
| 328,838 |
|
Deferred income taxes |
|
| 220,210 |
|
|
| 220,210 |
|
|
| 248,718 |
|
|
| 248,718 |
|
Total long-term liabilities |
|
| 650,050 |
|
|
| 669,992 |
|
|
| 640,747 |
|
|
| 677,503 |
|
Total liabilities |
|
| 1,132,068 |
|
|
| 1,043,122 |
|
|
| 1,219,343 |
|
|
| 1,141,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock - $0.10 par value, 280,000,000 shares authorized, 115,810,083 and 117,057,696 shares outstanding at June 30, 2021 and December 31, 2020, respectively |
|
| 11,581 |
|
|
| 11,706 |
| ||||||||
Common stock - $0.10 par value, 280,000,000 shares authorized, 113,761,155 and 115,011,172 shares outstanding at March 31, 2022 and December 31, 2021, respectively |
|
| 11,376 |
|
|
| 11,501 |
| ||||||||
Capital in excess of par value |
|
| 160,204 |
|
|
| 226,451 |
|
|
| 133,172 |
|
|
| 174,445 |
|
Retained earnings |
|
| 3,230,593 |
|
|
| 3,088,131 |
|
|
| 3,358,759 |
|
|
| 3,493,861 |
|
Total shareholders’ equity |
|
| 3,402,378 |
|
|
| 3,326,288 |
|
|
| 3,503,307 |
|
|
| 3,679,807 |
|
Total liabilities and shareholders’ equity |
| $ | 4,534,446 |
|
| $ | 4,369,410 |
|
| $ | 4,722,650 |
|
| $ | 4,821,544 |
|
Note: The Condensed Balance Sheet at December 31, 20202021 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by U.S. generally accepted accounting principles for complete financial statements.
The accompanying notes are an integral part of these condensed financial statements.
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| Three Months Ended | ||||||
|
| March 31, | ||||||
(In thousands, except share and per share data) |
| 2022 |
|
| 2021 |
| ||
Revenue from operations |
| $ | 1,497,280 |
|
| $ | 1,126,515 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Salaries, wages and benefits |
|
| 680,189 |
|
|
| 545,659 |
|
Operating supplies and expenses |
|
| 191,357 |
|
|
| 124,156 |
|
General supplies and expenses |
|
| 35,513 |
|
|
| 31,168 |
|
Operating taxes and licenses |
|
| 35,076 |
|
|
| 31,266 |
|
Insurance and claims |
|
| 16,107 |
|
|
| 12,922 |
|
Communications and utilities |
|
| 9,876 |
|
|
| 8,196 |
|
Depreciation and amortization |
|
| 67,340 |
|
|
| 63,987 |
|
Purchased transportation |
|
| 52,500 |
|
|
| 34,714 |
|
Miscellaneous expenses, net |
|
| 3,704 |
|
|
| 4,790 |
|
Total operating expenses |
|
| 1,091,662 |
|
|
| 856,858 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 405,618 |
|
|
| 269,657 |
|
|
|
|
|
|
|
|
|
|
Non-operating expense (income): |
|
|
|
|
|
|
|
|
Interest expense |
|
| 73 |
|
|
| 507 |
|
Interest income |
|
| (129 | ) |
|
| (286 | ) |
Other expense, net |
|
| 605 |
|
|
| 128 |
|
Total non-operating expense |
|
| 549 |
|
|
| 349 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
| 405,069 |
|
|
| 269,308 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| 105,318 |
|
|
| 69,949 |
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 299,751 |
|
| $ | 199,359 |
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
Basic |
| $ | 2.62 |
|
| $ | 1.71 |
|
Diluted |
| $ | 2.60 |
|
| $ | 1.70 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
| 114,418,703 |
|
|
| 116,497,893 |
|
Diluted |
|
| 115,172,776 |
|
|
| 117,255,740 |
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
| $ | 0.30 |
|
| $ | 0.20 |
|
The accompanying notes are an integral part of these condensed financial statements.
2
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In thousands, except share and per share data) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenue from operations |
| $ | 1,319,409 |
|
| $ | 896,210 |
|
| $ | 2,445,924 |
|
| $ | 1,883,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits |
|
| 611,518 |
|
|
| 460,906 |
|
|
| 1,157,177 |
|
|
| 985,389 |
|
Operating supplies and expenses |
|
| 137,577 |
|
|
| 75,412 |
|
|
| 261,733 |
|
|
| 183,105 |
|
General supplies and expenses |
|
| 34,427 |
|
|
| 25,881 |
|
|
| 65,595 |
|
|
| 59,489 |
|
Operating taxes and licenses |
|
| 33,256 |
|
|
| 27,043 |
|
|
| 64,522 |
|
|
| 56,357 |
|
Insurance and claims |
|
| 14,983 |
|
|
| 10,910 |
|
|
| 27,905 |
|
|
| 20,760 |
|
Communications and utilities |
|
| 8,390 |
|
|
| 7,262 |
|
|
| 16,586 |
|
|
| 15,453 |
|
Depreciation and amortization |
|
| 63,947 |
|
|
| 65,735 |
|
|
| 127,934 |
|
|
| 131,170 |
|
Purchased transportation |
|
| 43,927 |
|
|
| 18,983 |
|
|
| 78,641 |
|
|
| 39,783 |
|
Miscellaneous expenses, net |
|
| 5,340 |
|
|
| 4,912 |
|
|
| 10,130 |
|
|
| 9,732 |
|
Total operating expenses |
|
| 953,365 |
|
|
| 697,044 |
|
|
| 1,810,223 |
|
|
| 1,501,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 366,044 |
|
|
| 199,166 |
|
|
| 635,701 |
|
|
| 382,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
| 465 |
|
|
| 765 |
|
|
| 972 |
|
|
| 865 |
|
Interest income |
|
| (196 | ) |
|
| (231 | ) |
|
| (482 | ) |
|
| (1,479 | ) |
Other expense (income), net |
|
| 1,387 |
|
|
| (373 | ) |
|
| 1,515 |
|
|
| 3,244 |
|
Total non-operating expense |
|
| 1,656 |
|
|
| 161 |
|
|
| 2,005 |
|
|
| 2,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
| 364,388 |
|
|
| 199,005 |
|
|
| 633,696 |
|
|
| 379,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| 94,812 |
|
|
| 51,200 |
|
|
| 164,761 |
|
|
| 98,724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 269,576 |
|
| $ | 147,805 |
|
| $ | 468,935 |
|
| $ | 280,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| $ | 2.33 |
|
| $ | 1.26 |
|
| $ | 4.04 |
|
| $ | 2.37 |
|
Diluted |
| $ | 2.31 |
|
| $ | 1.25 |
|
| $ | 4.01 |
|
| $ | 2.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 115,820,522 |
|
|
| 117,610,178 |
|
|
| 116,157,336 |
|
|
| 118,330,176 |
|
Diluted |
|
| 116,561,242 |
|
|
| 118,359,884 |
|
|
| 116,906,572 |
|
|
| 119,082,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share |
| $ | 0.20 |
|
| $ | 0.15 |
|
| $ | 0.40 |
|
| $ | 0.30 |
|
The accompanying notes are an integral part of these condensed financial statements.
3
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
| Three Months Ended |
|
| Six Months Ended |
| |||||||||||||||
| June 30, |
|
| June 30, |
| |||||||||||||||
(In thousands) | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| |||||||||
Common stock: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Beginning balance | $ | 11,596 |
|
| $ | 11,813 |
|
| $ | 11,706 |
|
| $ | 11,953 |
| |||||
Share repurchases |
| (16 | ) |
|
| (80 | ) |
|
| (129 | ) |
|
| (223 | ) | |||||
Share-based compensation and share issuances |
| 1 |
|
|
| 1 |
|
|
| 6 |
|
|
| 7 |
| |||||
Taxes paid in exchange for shares withheld |
| — |
|
|
| — |
|
|
| (2 | ) |
|
| (2 | ) | |||||
Cash paid for fractional shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) | |||||
Ending balance |
| 11,581 |
|
|
| 11,734 |
|
|
| 11,581 |
|
|
| 11,734 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Capital in excess of par value: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Beginning balance |
| 156,126 |
|
|
| 217,187 |
|
|
| 226,451 |
|
|
| 218,462 |
| |||||
Share-based compensation and share issuances |
| 4,078 |
|
|
| 2,208 |
|
|
| 7,042 |
|
|
| 4,275 |
| |||||
Taxes paid in exchange for shares withheld |
| — |
|
|
| — |
|
|
| (4,539 | ) |
|
| (2,731 | ) | |||||
Forward contract for accelerated share repurchases |
| — |
|
|
| (37,500 | ) |
|
| (68,750 | ) |
|
| (37,500 | ) | |||||
Cash paid for fractional shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (611 | ) | |||||
Ending balance |
| 160,204 |
|
|
| 181,895 |
|
|
| 160,204 |
|
|
| 181,895 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Retained earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Beginning balance |
| 3,024,195 |
|
|
| 2,787,049 |
|
|
| 3,088,131 |
|
|
| 2,850,302 |
| |||||
Share repurchases |
| (39,984 | ) |
|
| (128,417 | ) |
|
| (280,086 | ) |
|
| (306,568 | ) | |||||
Cash dividends declared |
| (23,194 | ) |
|
| (17,598 | ) |
|
| (46,387 | ) |
|
| (35,877 | ) | |||||
Net income |
| 269,576 |
|
|
| 147,805 |
|
|
| 468,935 |
|
|
| 280,982 |
| |||||
Ending balance |
| 3,230,593 |
|
|
| 2,788,839 |
|
|
| 3,230,593 |
|
|
| 2,788,839 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total shareholders' equity | $ | 3,402,378 |
|
| $ | 2,982,468 |
|
| $ | 3,402,378 |
|
| $ | 2,982,468 |
|
(In thousands) |
| Common Stock |
|
| Capital in Excess of Par Value |
|
| Retained Earnings |
|
| Total |
| ||||
Balance as of December 31, 2021 |
| $ | 11,501 |
|
| $ | 174,445 |
|
| $ | 3,493,861 |
|
| $ | 3,679,807 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 299,751 |
|
|
| 299,751 |
|
Share repurchases, including settlements under accelerated share repurchase programs |
|
| (127 | ) |
|
| 62,500 |
|
|
| (400,725 | ) |
|
| (338,352 | ) |
Forward contract for accelerated share repurchases |
|
| — |
|
|
| (100,000 | ) |
|
| — |
|
|
| (100,000 | ) |
Cash dividends declared |
|
| — |
|
|
| — |
|
|
| (34,128 | ) |
|
| (34,128 | ) |
Share-based compensation and share issuances, net of forfeitures |
|
| 5 |
|
|
| 4,286 |
|
|
| — |
|
|
| 4,291 |
|
Taxes paid in exchange for shares withheld |
|
| (3 | ) |
|
| (8,059 | ) |
|
| — |
|
|
| (8,062 | ) |
Balance as of March 31, 2022 |
| $ | 11,376 |
|
| $ | 133,172 |
|
| $ | 3,358,759 |
|
| $ | 3,503,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
| Common Stock |
|
| Capital in Excess of Par Value |
|
| Retained Earnings |
|
| Total |
| ||||
Balance as of December 31, 2020 |
| $ | 11,706 |
|
| $ | 226,451 |
|
| $ | 3,088,131 |
|
| $ | 3,326,288 |
|
Net income |
|
| — |
|
|
| — |
|
|
| 199,359 |
|
|
| 199,359 |
|
Share repurchases |
|
| (113 | ) |
|
| — |
|
|
| (240,102 | ) |
|
| (240,215 | ) |
Forward contract for accelerated share repurchases |
|
| — |
|
|
| (68,750 | ) |
|
| — |
|
|
| (68,750 | ) |
Cash dividends declared |
|
| — |
|
|
| — |
|
|
| (23,193 | ) |
|
| (23,193 | ) |
Share-based compensation and share issuances, net of forfeitures |
|
| 5 |
|
|
| 2,964 |
|
|
| — |
|
|
| 2,969 |
|
Taxes paid in exchange for shares withheld |
|
| (2 | ) |
|
| (4,539 | ) |
|
| — |
|
|
| (4,541 | ) |
Balance as of March 31, 2021 |
| $ | 11,596 |
|
| $ | 156,126 |
|
| $ | 3,024,195 |
|
| $ | 3,191,917 |
|
The accompanying notes are an integral part of these condensed financial statements.
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Three Months Ended |
| |||||
|
| March 31, |
| |||||
(In thousands) |
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 299,751 |
|
| $ | 199,359 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 67,344 |
|
|
| 63,991 |
|
(Gain) Loss on disposal of property and equipment |
|
| (1,205 | ) |
|
| 603 |
|
Other, net |
|
| 8,115 |
|
|
| 6,124 |
|
Changes in operating assets and liabilities, net |
|
| 14,720 |
|
|
| 40,231 |
|
Net cash provided by operating activities |
|
| 388,725 |
|
|
| 310,308 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (93,713 | ) |
|
| (50,953 | ) |
Proceeds from sale of property and equipment |
|
| 10,455 |
|
|
| 7,656 |
|
Purchase of short-term investments |
|
| (75,162 | ) |
|
| (89,965 | ) |
Proceeds from maturities of short-term investments |
|
| 49,966 |
|
|
| 110,190 |
|
Net cash used in investing activities |
|
| (108,454 | ) |
|
| (23,072 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Payments for share repurchases |
|
| (338,352 | ) |
|
| (240,215 | ) |
Forward contract for accelerated share repurchases |
|
| (100,000 | ) |
|
| (68,750 | ) |
Dividends paid |
|
| (34,196 | ) |
|
| (23,232 | ) |
Other financing activities, net |
|
| (8,165 | ) |
|
| (4,569 | ) |
Net cash used in financing activities |
|
| (480,713 | ) |
|
| (336,766 | ) |
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
| (200,442 | ) |
|
| (49,530 | ) |
Cash and cash equivalents at beginning of period |
|
| 462,564 |
|
|
| 401,430 |
|
Cash and cash equivalents at end of period |
| $ | 262,122 |
|
| $ | 351,900 |
|
The accompanying notes are an integral part of these condensed financial statements.
4
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
(In thousands) |
| 2021 |
|
| 2020 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 468,935 |
|
| $ | 280,982 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 127,942 |
|
|
| 131,170 |
|
Loss on disposal of property and equipment |
|
| 701 |
|
|
| 140 |
|
Other, net |
|
| 15,352 |
|
|
| (9,118 | ) |
Changes in operating assets and liabilities, net |
|
| (104,639 | ) |
|
| 113,042 |
|
Net cash provided by operating activities |
|
| 508,291 |
|
|
| 516,216 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchase of property and equipment |
|
| (206,109 | ) |
|
| (120,128 | ) |
Proceeds from sale of property and equipment |
|
| 15,512 |
|
|
| 2,570 |
|
Purchase of short-term investments |
|
| (89,965 | ) |
|
| — |
|
Proceeds from maturities of short-term investments |
|
| 255,072 |
|
|
| — |
|
Net cash used in investing activities |
|
| (25,490 | ) |
|
| (117,558 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of long-term debt |
|
| — |
|
|
| 99,923 |
|
Payments for share repurchases |
|
| (280,215 | ) |
|
| (306,791 | ) |
Forward contract for accelerated share repurchases |
|
| (68,750 | ) |
|
| (37,500 | ) |
Dividends paid |
|
| (46,408 | ) |
|
| (35,892 | ) |
Other financing activities, net |
|
| (4,654 | ) |
|
| (3,345 | ) |
Net cash used in financing activities |
|
| (400,027 | ) |
|
| (283,605 | ) |
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
| 82,774 |
|
|
| 115,053 |
|
Cash and cash equivalents at beginning of period |
|
| 401,430 |
|
|
| 403,571 |
|
Cash and cash equivalents at end of period |
| $ | 484,204 |
|
| $ | 518,624 |
|
The accompanying notes are an integral part of these condensed financial statements.
5
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Significant Accounting Policies
Business
We are one of the largest North American less-than-truckload (“LTL”) motor carriers. We provide regional, inter-regional and national LTL services through a single integrated, union-free 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, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting. We have 1 operating segment and the composition of our revenue is summarized below:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
| |||||||||||||||
|
| June 30, |
|
| June 30, |
|
| March 31, |
| |||||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
LTL services |
| $ | 1,299,760 |
|
| $ | 884,069 |
|
| $ | 2,409,382 |
|
| $ | 1,858,500 |
|
| $ | 1,475,781 |
|
| $ | 1,109,622 |
|
Other services |
|
| 19,649 |
|
|
| 12,141 |
|
|
| 36,542 |
|
|
| 25,074 |
|
|
| 21,499 |
|
|
| 16,893 |
|
Total revenue from operations |
| $ | 1,319,409 |
|
| $ | 896,210 |
|
| $ | 2,445,924 |
|
| $ | 1,883,574 |
|
| $ | 1,497,280 |
|
| $ | 1,126,515 |
|
Basis of Presentation
The accompanying unaudited, interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and, in management’s opinion, contain all adjustments (consisting of normal recurring items) necessary for a fair presentation, in all material respects, of the financial position and results of operations for the periods presented. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.
The preparation of condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our operating results are subject to seasonal trends; therefore, the results of operations for the interim period ended June 30, 2021March 31, 2022 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 2021.2022.
The condensed financial statements should be read in conjunction with the financial statements and related notes, which appear in our Annual Report on Form 10-K for the year ended December 31, 2020.2021. There have been no significant changes in the accounting principles and policies, long-term contracts or estimates inherent in the preparation of the condensed financial statements of Old Dominion Freight Line, Inc. as previously described in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, other than those disclosed in this Form 10-Q.
Unless the context requires otherwise, references in these Notes to “Old Dominion,” the “Company,” “we,” “us” and “our” refer to Old Dominion Freight Line, Inc.
Stock Repurchase Program
On May 1, 2020, we announced that our Board of Directors had approved a two-year stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020. On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”). The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program in January 2022.
Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.
On February 25, 2021, weWe entered into an accelerated share repurchase agreement (the “ASR Agreement”)agreements with a third-party financial institution as parton each of our 2020 Repurchase Program. February 25, 2021 (the “February 2021 ASR Agreement”), August 26, 2021 (the “August 2021 ASR Agreement”) and February 24, 2022 (the “February 2022 ASR Agreement”).
Under the February 2021 ASR Agreement, we paidmade a prepayment of $275.0 million to the third-party financial institution $275.0 million and received an initial delivery of 960,330 shares of our common stock valued at $206.3 million. The remaining balance of $68.7 million was settled during the third quarter of 2021, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the February 2021 ASR Agreement, we repurchased 1,101,046 shares for $206.3$275.0 million.
Under the August 2021 ASR Agreement, we made a prepayment of $250.0 million to the financial institution and received an initial delivery of 655,365 shares of our common stock valued at $187.5 million. The remaining balance of $62.5 million was settled during the first quarter of 2022, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the August 2021 ASR Agreement, we repurchased 778,775 shares for $250.0 million.
Under the February 2022 ASR Agreement, we paid the third-party financial institution $400.0 million and received an initial delivery of 1,018,157 shares of our common stock for $300.0 million, representing approximately 75% of the total value of shares to be received by us under the February 2022 ASR Agreement. The remaining shares are expected to settlebalance of $100.0 million was settled during the third quarter of 2021. At final settlement, we may receive additional shares of our common stock, or, under certain circumstances, we may be required to provide the third-party financial institution additional shares or may elect to make a cash payment to the third-party financial institution as part ofApril 2022, with the final settlement. The totalnumber of shares repurchased will bereceived based on the daily volume-weighted average share price of our common stock duringover the term of the ASR Agreement,agreement, less a negotiated discount.
6
The Under the February 2022 ASR Agreement, waswe repurchased 1,390,966 shares for $400.0 million.
The Company’s accelerated share repurchase agreements are each accounted for as a settled treasury stock purchase and a forward stock purchase contract. The par value of the initial share delivery wasis recorded as a reduction to common stock, with the excess purchase price recorded as a reduction to retained earnings. The forward stock purchase contract is accounted for as a contract indexed to our own stock and is classified within capital in excess of par value on our Condensed Statements of Changes in Shareholders’ Equity. Balance Sheets.
During the three and six months ended June 30, 2021,March 31, 2022, we repurchased 159,485utilized cash of $438.4 million for repurchases of shares in the open market and under the February 2022 ASR Agreement. We received total shares of our common stock1,273,060 during the first quarter of 2022, including 123,410 shares for $40.0 million and 1,286,517 sharesthe settlement of our common stock for $280.2 million under our 2020 Repurchase Program, respectively, including shares repurchased under the August 2021 ASR Agreement. At June 30,March 31, 2022, we had $1.62 billion remaining available under the 2021 our 2020 Repurchase Program, had $275.0 million remaining available, including $68.7$100.0 million that iswas deferred until the third quarter when the final settlement occursoccurred on our currentthe February 2022 ASR Agreement, leaving $206.3 million$1.52 billion remaining available and uncommitted.
On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock. The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2020 Repurchase Program.
Note 2. Earnings Per Share
Basic earnings per share is computed by dividing net income by the daily weighted average number of shares of our common stock outstanding for the period, excluding unvested restricted stock. Unvested restricted stock is included in common shares outstanding on our Condensed Balance Sheets.
Diluted earnings per share is computed using the treasury stock method. The denominator used in calculating diluted earnings per share includes the impact of unvested restricted stock and other dilutive, non-participating securities under our equity award agreements. The denominator excludes contingently-issuable shares under performance-based award agreements when the performance target has not yet been deemed achieved.
The following table provides a reconciliation of the number of shares of common stock used in computing basic and diluted earnings per share:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended | ||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| March 31, | ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Weighted average shares outstanding - basic |
|
| 115,820,522 |
|
|
| 117,610,178 |
|
|
| 116,157,336 |
|
|
| 118,330,176 |
|
|
| 114,418,703 |
|
|
| 116,497,893 |
|
Dilutive effect of share-based awards |
|
| 740,720 |
|
|
| 749,706 |
|
|
| 749,236 |
|
|
| 752,552 |
|
|
| 754,073 |
|
|
| 757,847 |
|
Weighted average shares outstanding - diluted |
|
| 116,561,242 |
|
|
| 118,359,884 |
|
|
| 116,906,572 |
|
|
| 119,082,728 |
|
|
| 115,172,776 |
|
|
| 117,255,740 |
|
Note 3. Long-Term Debt
Long-term debt, net of unamortized debt issuance costs, consisted of the following:
(In thousands) |
| June 30, 2021 |
|
| December 31, 2020 |
|
| March 31, 2022 |
|
| December 31, 2021 |
| ||||
Senior notes |
| $ | 99,939 |
|
| $ | 99,931 |
|
| $ | 99,951 |
|
| $ | 99,947 |
|
Revolving credit facility |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Total long-term debt |
|
| 99,939 |
|
|
| 99,931 |
|
|
| 99,951 |
|
|
| 99,947 |
|
Less: Current maturities |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Total maturities due after one year |
| $ | 99,939 |
|
| $ | 99,931 |
|
| $ | 99,951 |
|
| $ | 99,947 |
|
Senior Note Agreement
On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential (the “Note Agreement”). The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through May 4, 2023. Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”), the proceeds of which are available for capital expenditures, share repurchases, dividends, acquisitions, or general corporate purposes. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.
The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027. The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our Credit Agreement or Note Agreement.
7
Credit Agreement
On November 21, 2019, we entered into a second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”).or Note Agreement.
Credit Agreement
On November 21, 2019, we entered into the Credit Agreement. The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million. Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.
At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%. Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement.
For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.
There were $39.2$40.8 million and $42.1$39.2 million of outstanding letters of credit at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively.
General Debt Provisions
The Credit Agreement and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. The Credit Agreement and Note Agreement also include a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default are ongoing (or would be caused by such restricted payment).
Note 4. Commitments and Contingencies
We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance. Certain of these matters include collective and/or class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.
Note 5. Fair Value Measurements
Short-term Investments
A summary of the fair value of our short-term investments as of June 30,March 31, 2022 and December 31, 2021 is shown in the tabletables below.
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Certificates of deposit |
| $ | 45,062 |
|
| $ | — |
|
| $ | 45,062 |
|
| $ | — |
|
| $ | 40,034 |
|
| $ | — |
|
| $ | 40,034 |
|
| $ | — |
|
U.S. government securities |
|
| 50,211 |
|
|
| 50,211 |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Commercial paper |
|
| 69,981 |
|
|
| — |
|
|
| 69,981 |
|
|
| — |
|
|
| 239,149 |
|
|
| — |
|
|
| 239,149 |
|
|
| — |
|
Total |
| $ | 165,254 |
|
| $ | 50,211 |
|
| $ | 115,043 |
|
| $ | — |
| ||||||||||||||||
|
| $ | 279,183 |
|
| $ | — |
|
| $ | 279,183 |
|
| $ | — |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
(In thousands) |
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||||||||||||||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Certificates of deposit |
| $ | 40,014 |
|
| $ | — |
|
| $ | 40,014 |
|
| $ | — |
| ||||||||||||||||
Commercial paper |
|
| 214,419 |
|
|
| — |
|
|
| 214,419 |
|
|
| — |
| ||||||||||||||||
|
| $ | 254,433 |
|
| $ | — |
|
| $ | 254,433 |
|
| $ | — |
|
Our certificates of deposit are measured at carrying value including accrued interest, which approximates fair value due to their short-term nature. Our commercial paper is valued using broker quotes that utilize observable market inputs.
Long-term Debt
8
The carrying value of our total long-term debt was $100.0 million and $99.9 million at June 30, 2021March 31, 2022 and December 31, 2020.2021, respectively. The estimated fair value of our total long-term debt was $104.0$98.1 million million and $105.4$104.5 million at June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The fair value measurement of our Series B Notessenior note was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under our credit profile. Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2 under the three-level fair value hierarchy as established by the Financial Accounting Standards Board.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are one of the largest North American less-than-truckload (“LTL”) motor carriers. We provide regional, inter-regional and national LTL services through a single integrated, union-free 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, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting. More than 98% of our revenue has historically been derived from transporting LTL shipments for our customers, whose demand for our services is generally tied to industrial production and the overall health of the U.S. domestic economy.
In analyzing the components of our revenue, we monitor changes and trends in our LTL volumes and LTL revenue per hundredweight. While LTL revenue per hundredweight is a yield measurement, it is also a commonly-used indicator for general pricing trends in the LTL industry. This yield metric is not a true measure of price, however, as it can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul. As a result, changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates. LTL revenue per hundredweight and the key factors that can impact this metric are described in more detail below:
| • | LTL Revenue Per Hundredweight - Our LTL transportation services are generally priced based on weight, commodity, and distance. This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc. Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight. Fuel surcharges, accessorial charges, revenue adjustments and revenue for undelivered freight are included in this measurement. Revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy; however, we believe including it in our revenue per hundredweight metrics results in a more accurate representation of the underlying changes in our yields by matching total billed revenue with the corresponding weight of those shipments. |
| • | LTL Weight Per Shipment - Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand for our customers’ products and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload and intermodal, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight. |
| • | Average Length of Haul - We consider lengths of haul less than 500 miles to be regional traffic, lengths of haul between 500 miles and 1,000 miles to be inter-regional traffic, and lengths of haul in excess of 1,000 miles to be national traffic. This metric is used to analyze our tonnage and pricing trends for shipments with similar characteristics, and also allows for comparison with other transportation providers serving specific markets. By analyzing this metric, we can determine the success and growth potential of our service products in these markets. Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight. |
| • | LTL Revenue Per Shipment - This measurement is primarily determined by the three metrics listed above and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue. |
Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology. We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges. The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S. Department of Energy, which reset each week. We believe our yield management process focused on individual account profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to produce profitable growth.
Our primary cost elements are direct wages and benefits associated with the movement of freight, operating supplies and expenses, which include diesel fuel, and depreciation of our equipment fleet and service center facilities. We gauge our overall success
9
in managing costs by monitoring our operating ratio, a measure of profitability calculated by dividing total operating expenses by revenue, which also allows for industry-wide comparisons with our competition.
We regularly upgrade our technological capabilities to improve our customer service and lower our operating costs. Our technology provides our customers with visibility of their shipments throughout our network, increases the productivity of our workforce, and provides key metrics that we use to monitor and enhance our processes.
Results of Operations
The following table sets forth, for the periods indicated, expenses and other items as a percentage of revenue from operations:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended | ||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| March 31, | ||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||||
Revenue from operations |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
| 100.0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries, wages and benefits |
|
| 46.4 |
|
|
| 51.4 |
|
|
| 47.3 |
|
|
| 52.3 |
|
|
| 45.4 |
|
|
| 48.4 |
|
Operating supplies and expenses |
|
| 10.4 |
|
|
| 8.4 |
|
|
| 10.7 |
|
|
| 9.7 |
|
|
| 12.8 |
|
|
| 11.0 |
|
General supplies and expenses |
|
| 2.6 |
|
|
| 2.9 |
|
|
| 2.7 |
|
|
| 3.2 |
|
|
| 2.4 |
|
|
| 2.8 |
|
Operating taxes and licenses |
|
| 2.5 |
|
|
| 3.0 |
|
|
| 2.6 |
|
|
| 3.0 |
|
|
| 2.3 |
|
|
| 2.8 |
|
Insurance and claims |
|
| 1.2 |
|
|
| 1.2 |
|
|
| 1.2 |
|
|
| 1.1 |
|
|
| 1.1 |
|
|
| 1.2 |
|
Communications and utilities |
|
| 0.6 |
|
|
| 0.8 |
|
|
| 0.7 |
|
|
| 0.8 |
|
|
| 0.7 |
|
|
| 0.7 |
|
Depreciation and amortization |
|
| 4.9 |
|
|
| 7.4 |
|
|
| 5.2 |
|
|
| 7.0 |
|
|
| 4.5 |
|
|
| 5.7 |
|
Purchased transportation |
|
| 3.3 |
|
|
| 2.1 |
|
|
| 3.2 |
|
|
| 2.1 |
|
|
| 3.5 |
|
|
| 3.1 |
|
Miscellaneous expenses, net |
|
| 0.4 |
|
|
| 0.6 |
|
|
| 0.4 |
|
|
| 0.5 |
|
|
| 0.2 |
|
|
| 0.4 |
|
Total operating expenses |
|
| 72.3 |
|
|
| 77.8 |
|
|
| 74.0 |
|
|
| 79.7 |
|
|
| 72.9 |
|
|
| 76.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
| 27.7 |
|
|
| 22.2 |
|
|
| 26.0 |
|
|
| 20.3 |
|
|
| 27.1 |
|
|
| 23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (income), net |
|
| 0.0 |
|
|
| 0.1 |
|
|
| 0.0 |
|
|
| (0.1 | ) | ||||||||
Other expense (income), net |
|
| 0.1 |
|
|
| (0.1 | ) |
|
| 0.1 |
|
|
| 0.2 |
| ||||||||
Interest (income) expense, net |
|
| (0.0 | ) |
|
| 0.0 |
| ||||||||||||||||
Other expense, net |
|
| 0.1 |
|
|
| 0.0 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
| 27.6 |
|
|
| 22.2 |
|
|
| 25.9 |
|
|
| 20.2 |
|
|
| 27.0 |
|
|
| 23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
| 7.2 |
|
|
| 5.7 |
|
|
| 6.7 |
|
|
| 5.3 |
|
|
| 7.0 |
|
|
| 6.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
| 20.4 | % |
|
| 16.5 | % |
|
| 19.2 | % |
|
| 14.9 | % |
|
| 20.0 | % |
|
| 17.7 | % |
Key financial and operating metrics for the three- and six-monththree-month periods ended June 30,March 31, 2022 and 2021 and 2020 are presented below:
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended | |||||||||||||||||||||||||||||
|
| June 30, |
|
|
| June 30, |
|
| March 31, | ||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| % Change |
|
|
| 2021 |
|
| 2020 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change | ||||||||||
Work days |
|
| 64 |
|
|
| 64 |
|
|
| — |
|
|
| 127 |
|
|
| 128 |
|
|
| (0.8 | )% |
|
| 64 |
|
|
| 63 |
|
|
| 1.6 | % | |
Revenue (in thousands) |
| $ | 1,319,409 |
|
| $ | 896,210 |
|
|
| 47.2 | % |
| $ | 2,445,924 |
|
| $ | 1,883,574 |
|
|
| 29.9 | % |
| $ | 1,497,280 |
|
| $ | 1,126,515 |
|
|
| 32.9 | % | |
Operating ratio |
|
| 72.3 | % |
|
| 77.8 | % |
|
|
|
|
|
| 74.0 | % |
|
| 79.7 | % |
|
|
|
|
|
| 72.9 | % |
|
| 76.1 | % |
|
|
|
| |
Net income (in thousands) |
| $ | 269,576 |
|
| $ | 147,805 |
|
|
| 82.4 | % |
| $ | 468,935 |
|
| $ | 280,982 |
|
|
| 66.9 | % |
| $ | 299,751 |
|
| $ | 199,359 |
|
|
| 50.4 | % | |
Diluted earnings per share |
| $ | 2.31 |
|
| $ | 1.25 |
|
|
| 84.8 | % |
| $ | 4.01 |
|
| $ | 2.36 |
|
|
| 69.9 | % |
| $ | 2.60 |
|
| $ | 1.70 |
|
|
| 52.9 | % | |
LTL tons (in thousands) |
|
| 2,598 |
|
|
| 2,028 |
|
|
| 28.1 | % |
|
| 4,930 |
|
|
| 4,181 |
|
|
| 17.9 | % |
|
| 2,653 |
|
|
| 2,332 |
|
|
| 13.8 | % | |
LTL tonnage per day |
|
| 40,600 |
|
|
| 31,688 |
|
|
| 28.1 | % |
| $ | 38,819 |
|
| $ | 32,664 |
|
|
| 18.8 | % |
|
| 41,454 |
|
|
| 37,010 |
|
|
| 12.0 | % | |
LTL shipments (in thousands) |
|
| 3,307 |
|
|
| 2,478 |
|
|
| 33.5 | % |
|
| 6,211 |
|
|
| 5,194 |
|
|
| 19.6 | % |
|
| 3,340 |
|
|
| 2,904 |
|
|
| 15.0 | % | |
LTL shipments per day |
|
| 51,672 |
|
|
| 38,719 |
|
|
| 33.5 | % |
|
| 48,903 |
|
|
| 40,578 |
|
|
| 20.5 | % |
|
| 52,190 |
|
|
| 46,090 |
|
|
| 13.2 | % | |
LTL weight per shipment (lbs.) |
|
| 1,571 |
|
|
| 1,636 |
|
|
| (4.0 | )% |
| $ | 1,588 |
|
| $ | 1,610 |
|
|
| (1.4 | )% |
|
| 1,589 |
|
|
| 1,606 |
|
|
| (1.1 | )% | |
LTL revenue per hundredweight |
| $ | 25.10 |
|
| $ | 21.85 |
|
|
| 14.9 | % |
| $ | 24.56 |
|
| $ | 22.28 |
|
|
| 10.2 | % |
| $ | 28.13 |
|
| $ | 23.96 |
|
|
| 17.4 | % | |
LTL revenue per shipment |
| $ | 394.49 |
|
| $ | 357.65 |
|
|
| 10.3 | % |
|
| 389.94 |
|
|
| 358.69 |
|
|
| 8.7 | % |
| $ | 446.86 |
|
| $ | 384.76 |
|
|
| 16.1 | % | |
Average length of haul (miles) |
|
| 930 |
|
|
| 919 |
|
|
| 1.2 | % |
|
| 929 |
|
|
| 919 |
|
|
| 1.1 | % |
|
| 939 |
|
|
| 928 |
|
|
| 1.2 | % |
10
Our financial results for the secondfirst quarter and first six months of 20212022 include Company recordsrecord revenue and diluted earnings per share. The 32.9% increase in revenue net incometo $1.5 billion reflects higher shipment volumes and earnings per diluted share.further improvements in our yield, both of which were supported by a favorable domestic economy. We believe our consistent investments in our service center network have provided us with capacity to support additional revenue growth andthese increases were driven by the ability to providecontinued demand for our superior service at a fair price toand our customers. Our results also benefited from the strengthening domestic economy and an upward trend in the pricing environment during a period of tightening industryavailable network capacity. The increases in ourincreased freight density and yield contributed tooperating leverage created by our robust revenue growth, coupled with our ongoing focus on controlling discretionary spending, created a 550 and 570320 basis-point improvement in our operating ratio to 72.3%72.9% for the first quarter of 2022 as compared to the first quarter of 2021. As a result, our net income and 74.0%diluted earnings per share increased by 50.4% and 52.9%, respectively, for the secondfirst quarter and first six months of 20212022 as compared to the same periods last year. Our net income and earnings per diluted share increased by 82.4% and 84.8%, respectively, for the second quarter of 2021 and 66.9% and 69.9%, respectively, for the first six months of 2021 as compared to the same periods last year.
Revenue
Revenue increased $423.2$370.8 million, or 47.2%32.9%, and $562.4 million, or 29.9%, induring the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periodsfirst quarter of 2020,2021, due primarily to increases in both our LTL tonnagetons and LTL revenue per hundredweight. The increased tonnage resulted fromincrease in LTL tons during the first quarter of 2022 was due to higher LTL shipments, which wasshipment volumes that were partially offset by a slight decrease in LTL weight per shipment. shipment as compared to the first quarter of 2021. We believe the increase in LTL tonnagetons was drivensupported by a strong economic environmentfavorable domestic economy and increased demand for theour continued focus on providing our customers with superior service that our outstanding team of employees continues to provide our customers.at a fair price.
Our LTL revenue per hundredweight increased 14.9% and 10.2%17.4% in the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periods in 2020. first quarter of 2021. We believe these increasesthis increase in LTL revenue per hundredweight werewas driven by our ongoing commitment to our long-term yield management strategy, which is focused on obtaining price increases necessary to offset our cost inflation and support our regular investments in capacity and technology. Our LTL revenue per hundredweight wasand yield were also impacted by the positive effect on this metric of the decline in our LTL weight per shipment and increaseshigher due to an increase in fuel surcharges.surcharges resulting from higher diesel fuel prices in the first quarter of 2022 as compared to the same prior-year period. Excluding fuel surcharges, LTL revenue per hundredweight increased 10.3% and 8.0%10.0% in the secondfirst quarter and first half of 2021, respectively, as2022 compared to the same periods in 2020.first quarter of 2021.
July 2021April 2022 Update
Revenue per day increased 36.7%29.1% in July 2021April 2022 compared to the same month last year. LTL tons per day increased 18.66.4%, primarily due primarily to a 23.86.4% increase in LTL shipments per day, that was partially offset by a 4.2% decrease inwhile LTL weight per shipment.shipment remained consistent as compared to the same month last year. LTL revenue per hundredweight increased approximately 14.821.5% as compared to the same month last year. LTL revenue per hundredweight, excluding fuel surcharges, increased approximately 9.59.7% as compared to the same month last year.
Operating Costs and Other Expenses
Salaries, wages and benefits increased $150.6$134.5 million, or 32.7%24.7%, in the secondfirst quarter of 20212022 as compared to the secondfirst quarter of 2020,2021, due primarily to a $106.3$95.6 million, or 23.3%, increase in salaries and wages and a $44.3$38.9 million, or 28.6%, increase in employee benefit costs. Salaries, wages and benefits increased $171.8 million, or 17.4%, for the first six months of 2021 as compared to the same period of 2020, due primarily to a $119.9 millionThe increase in salaries and wages and a $51.9 millionwas primarily due to the 18.5% increase in employee benefit costs.
The increases in salaries and wages for both the second quarter and first six months of 2021 was due primarily to increases in the average number of active full-time employees as compared to the same periods of 2020. Our average number of active full-time employees increased 3,710, or 20.7%, and 2,120, or 11.2%, for the second quarter and first six months of 2021, respectively.prior-year quarter. We believe our full-time employee headcountcount will continue to increase as we hire additional employees to balance our workforce with growing demand and shipment trends. Salaries and wages also increased as a result of an annual wage increase provided to our employees in September 2020,2021, as well as higher performance-based and discretionary bonus compensation.
Our productive labor costs, which include wages for drivers, platform employees, and fleet technicians, improved as a percent of revenue to 24.8% and 25.5%24.3% in the secondfirst quarter andof 2022 as compared to 26.3% in the first halfquarter of 2021, respectively, from 27.5% and 28.3% for the same periods of 2020. We increased the efficiency of our operations with improvements2021. The improvement in our linehaul laden load average and P&D shipments per hour whileproductive labor costs, as a percentage of revenue, reflects continued operating efficiencies provided by the increased freight density across our network of service centers, as well as the leveraging effect of the increases in yield. While we operated with great efficiency during the first quarter, we experienced a decline in our platform shipments per hour declined as we trainedcontinued to onboard and train our new employees. Our other salaries and wages as a percent of revenue also decreased to 9.4% and 9.7% of revenue in the secondfirst quarter andof 2022 as compared to 10.0% in the first halfquarter of 2021, respectively, from 10.9% and 11.0% of revenue for the same periods of 2020, respectively.2021.
The increase in employee benefit costs reflects the impact of the increase in the number of full-time employees eligible for our benefits. Our employee benefit costs attributable to employee benefits for both the second quarter and first half of 2021 was primarilyincreased due to increases in certain retirement benefit planbenefits costs directly linked to our net income as well asand higher costs per claim for employee group health costs resulting from an increase in the number of claims per employee. Our employee benefit costs were also higher due to our increased headcount.benefits. As a result of these cost increases, our employee benefit costs as a percent of salaries and wages increased to 35.5% and 34.4% for the second quarter and first six months of 2021, respectively,34.6% in 2022 from 33.6% and 33.0% for the comparable periods of 2020.33.2% in 2021.
Operating supplies and expenses increased $62.2$67.2 million, and $78.6 millionor 54.1%, in the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periodsfirst quarter of 2020,2021, due primarily to an increase in our costs for diesel fuel used in our vehicles.vehicles, as well as other petroleum-based products. Our diesel fuel costs, excluding fuel taxes, represents the largest component of operating supplies and expenses, and can vary based on
11
both the average price per gallon and consumption. Our average cost per gallon of diesel fuel increased 97.5% and 42.3%65.9% in the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periods last year.first quarter of 2021. In addition, our gallons consumed increased 25.7% and 14.1%13.3% in the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periods last yearfirst quarter of 2021 due to increasesa 13.2% increase in miles driven. We do not use diesel fuel hedging instruments; therefore, our costs are subject to market price fluctuations. Our other operating supplies and expenses remained relatively consistentdecreased slightly as a percent of revenue between the periods compared.
Depreciation and amortization costs decreased slightlyincreased $3.4 million, or 5.2%, in the secondfirst quarter and first six months of 20212022 as compared to the same periods in 2020. These decreases reflect our planned reduction in capital expenditures for revenue equipment in 2020first quarter of 2021, due primarily to the assets acquired as we balanced our fleet with volumes, as well as delays in receiptpart of certain revenue equipment included in our 2021 capital expenditure plan. program. We believe depreciation costs will increase in future periods as we continue to executebased on our 20212022 capital expenditure plan. While our investments in real estate, equipment, and technology can increase our costs in the short-term, we believe these investments are necessary to support our continued long-term growth and strategic initiatives.
Purchased transportation expense increased $24.9$17.8 million, and $38.9 millionor 51.2%, in the secondfirst quarter and first six months of 2021, respectively,2022 as compared to the same periodsfirst quarter of 2020.2021. The increase in purchased transportation expense wasis due to an increase in our usehigher utilization of third-party transportation providers in our domestic linehaul network to supplement our equipment and our workforce as demand for our services increased. We expect to continue to purchase supplementalutilize purchased transportation until the capacity of our teamworkforce and our fleet can fully support our anticipated growth.
Our effective tax rate for both the secondfirst quarter of 2022 and first six monthsquarter of 2021 was 26.0%, as compared to 25.7% and 26.0%, respectively, for the same periods in 2020.. Our effective tax rate generally exceeds the federal statutory rate due to the impact of state taxes and, to a lesser extent, certain other non-deductible items.
Liquidity and Capital Resources
A summary of our cash flows is presented below:
|
| Six Months Ended |
|
| Three Months Ended | |||||||||||
|
| June 30, |
|
| March 31, | |||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Cash and cash equivalents at beginning of period |
| $ | 401,430 |
|
| $ | 403,571 |
|
| $ | 462,564 |
|
| $ | 401,430 |
|
Cash flows provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
| 508,291 |
|
|
| 516,216 |
|
|
| 388,725 |
|
|
| 310,308 |
|
Investing activities |
|
| (25,490 | ) |
|
| (117,558 | ) |
|
| (108,454 | ) |
|
| (23,072 | ) |
Financing activities |
|
| (400,027 | ) |
|
| (283,605 | ) |
|
| (480,713 | ) |
|
| (336,766 | ) |
Increase in cash and cash equivalents |
|
| 82,774 |
|
|
| 115,053 |
| ||||||||
Decrease in cash and cash equivalents |
|
| (200,442 | ) |
|
| (49,530 | ) | ||||||||
Cash and cash equivalents at end of period |
| $ | 484,204 |
|
| $ | 518,624 |
|
| $ | 262,122 |
|
| $ | 351,900 |
|
The decrease change in our cash flows provided by operating activities during the first six monthsquarter of 20212022 as compared to the first six monthsquarter of 20202021 was due toimpacted by our increase in income before taxes of $135.8 million. This increase was partially offset by fluctuations in certain working capital accounts, primarily income taxes and accounts receivable which were substantially offset by the increase in our net income.and other liabilities.
The decrease change in our cash flows used in investing activities during the first six monthsquarter of 20212022 as compared to the first six monthsquarter of 20202021 was due primarily toimpacted by the timing of maturities of our short-term investments, in excess of purchases, partially offset by fluctuationsas well as an increase in our capital expenditure plansplan for 2022 and the timing of these expenditures during the year. Changes in our capital expenditures are more fully described below in “Capital Expenditures”“Capital Expenditures”.
The increasechange in our cash flows used in financing activities during the first six monthsquarter of 20212022 as compared to the first six monthsquarter of 20202021 was due primarily to reductionsincreased payments under our share repurchase programs, as well as an increase in proceeds from long-term debt issuances and higher cash dividends paiddividend payments to our shareholders. Our financing arrangements are more fully described below under “Financing Arrangements”. Our return of capital to shareholders is more fully described below under “Stock“Stock Repurchase Program”Program” and “Dividends“Dividends to Shareholders”Shareholders”.
We have five primary sources of available liquidity: cash flows from operations, our existing cash and cash equivalents, short-term investments, available borrowings under our second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders, which we entered into on November 21, 2019 (the “Credit Agreement”), and our Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential, which we entered into on May 4, 2020 (the “Note Agreement”). Our Credit Agreement and the Note Agreement are described in more detail below under “Financing Arrangements“Financing Arrangements.”. We believe we also have sufficient access to debt and equity markets to provide other sources of liquidity, if needed.
12
Capital Expenditures
The table below sets forth our net capital expenditures for property and equipment, including those obtained through noncash transactions, for the six-monththree-month period ended June 30, 2021March 31, 2022 and the years ended December 31, 20202021 and 2019:2020:
|
| June 30, |
|
| December 31, |
|
| March 31, |
|
| December 31, |
| ||||||||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2019 |
|
| 2022 |
|
| 2021 |
|
| 2020 |
| ||||||
Land and structures |
| $ | 72,280 |
|
| $ | 181,221 |
|
| $ | 250,387 |
|
| $ | 55,793 |
|
| $ | 252,155 |
|
| $ | 181,221 |
|
Tractors |
|
| 61,846 |
|
|
| 17,518 |
|
|
| 75,418 |
|
|
| 1,444 |
|
|
| 130,772 |
|
|
| 17,518 |
|
Trailers |
|
| 51,039 |
|
|
| 2,151 |
|
|
| 88,115 |
|
|
| 9,372 |
|
|
| 140,595 |
|
|
| 2,151 |
|
Technology |
|
| 8,922 |
|
|
| 11,925 |
|
|
| 30,424 |
|
|
| 8,837 |
|
|
| 17,139 |
|
|
| 11,925 |
|
Other equipment and assets |
|
| 12,022 |
|
|
| 12,266 |
|
|
| 34,981 |
|
|
| 10,767 |
|
|
| 25,450 |
|
|
| 12,266 |
|
Proceeds from sales |
|
| (15,512 | ) |
|
| (3,690 | ) |
|
| (5,686 | ) |
|
| (10,455 | ) |
|
| (19,548 | ) |
|
| (3,690 | ) |
Total |
| $ | 190,597 |
|
| $ | 221,391 |
|
| $ | 473,639 |
|
| $ | 75,758 |
|
| $ | 546,563 |
|
| $ | 221,391 |
|
Our capital expenditures vary based upon the projected increase in the number and size of our service center facilities necessary to support our plan for long-term growth, our planned tractor and trailer replacement cycle, and forecasted tonnage and shipment growth. Expenditures for land and structures can be dependent upon the availability of land in the geographic areas where we are looking to expand.expand. We expect to continue to maintain a high level of capital expenditures in order to support our long-term plan for market share growth.
We currently estimate capital expenditures will be approximately $605$825 million for the year ending December 31, 2021.2022. Approximately $275$300 million is allocated for the purchase of service center facilities, construction of new service center facilities or expansion of existing service center facilities, subject to the availability of suitable real estate and the timing of construction projects; approximately $290$485 million is allocated for the purchase of tractors and trailers; and approximately $40 million is allocated for investments in technology and other assets. We expect to fund these capital expenditures primarily through cash flows from operations, our existing cash and cash equivalents, short-term investments and, if needed, borrowings available under our Credit Agreement or Note Agreement. We believe our current sources of liquidity will be sufficient to satisfy our expected capital expenditures.
Stock Repurchase Program
On May 1, 2020, we announced that our Board of Directors had approved a two-year stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020. On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”). The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program in January 2022.
Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.stock.
On July 28, 2021, we announced thatAt March 31, 2022, our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0had $1.62 billion of our outstanding common stock. The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2020 Repurchase Program. At June 30, 2021, our 2020 Repurchase Program had $275.0 million remaining available, including $68.7$100.0 million that is was deferred until the third quarter when the final settlement occursoccurred on our current accelerated share repurchase agreement,the February 2022 ASR Agreement in April 2022, leaving $206.3 million$1.52 billion remaining available and uncommitted.
Dividends to Shareholders
Our Board of Directors declared a cash dividend of $0.20$0.30 per share for both the first and second quartersquarter of 20212022 and declared a cash dividend of $0.15$0.20 per share for each quarter of 2020.2021.
Although we intend to pay a quarterly cash dividend on our common stock for the foreseeable future, the declaration and amount of any future dividend is subject to approval by our Board of Directors, and is restricted by applicable state law limitations on distributions to shareholders as well as certain covenants under our Credit Agreement and Note Agreement. We anticipate that any future quarterly cash dividends will be funded through cash flows from operations, our existing cash and cash equivalents, short-term investments, and, if needed, borrowings under our Credit Agreement andor Note Agreement.
13
Financing ArrangementsAgreements
Senior Note Agreement
On May 4, 2020, we entered into the Note Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential. The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through May 4, 2023. Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”) on May 4, 2020, the proceeds of which are available for capital expenditures, share repurchases, dividends, acquisitions, or general corporate purposes.2020. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.
TheThe Series B Notes bear an annual interest rate of 3.10% and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027. The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our Credit Agreement andor other senior promissory notes issued pursuant to the Note Agreement.
Credit Agreement
On November 21, 2019, we entered into our Credit Agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders. The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million. Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.
At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate,, as defined in the Credit Agreement, plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%. Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement.
For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.
The amounts outstanding and available borrowing capacity under the Credit Agreement are presented below:
|
| June 30, |
|
| December 31, |
|
| March 31, |
| December 31, | ||||||
(In thousands) |
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Facility limit |
| $ | 250,000 |
|
| $ | 250,000 |
|
| $ | 250,000 |
|
| $ | 250,000 |
|
Line of credit borrowings |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Outstanding letters of credit |
|
| (39,169 | ) |
|
| (42,134 | ) |
|
| (40,836 | ) |
|
| (39,169 | ) |
Available borrowing capacity |
| $ | 210,831 |
|
| $ | 207,866 |
|
| $ | 209,164 |
|
| $ | 210,831 |
|
General Debt Provisions
The Credit Agreement and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. The Credit Agreement and Note Agreement also include a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default are ongoing (or would be caused by such restricted payment). We were in compliance with all covenants in our outstanding debt instruments for the period ended June 30, 2021.
The interest rate is fixed on the Note Agreement. Therefore, short-term exposure to fluctuations in interest rates is limited to our Credit Agreement. We do not currently use interest rate derivative instruments to manage exposure to interest rate changes.March 31, 2022.
We do not anticipate financial performance that would cause us to violate any such covenants in the future, and we believe the combination of our existing Credit Agreement and Note Agreement along with our additional borrowing capacity will be sufficient to meet foreseeable seasonal and long-term capital needs.
14The interest rate is fixed on the Note Agreement. Therefore, short-term exposure to fluctuations in interest rates is limited to our Credit Agreement. We do not currently use interest rate derivative instruments to management exposure to interest rate changes.
Critical Accounting Policies
In preparing our condensed financial statements, we applied the same critical accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 20202021 that we believe affect our judgments and estimates of amounts recorded in certain assets, liabilities, revenue and expenses.
Seasonality
Our tonnage levels and revenue mix are subject to seasonal trends common in our industry, although other factors, such as macroeconomic changes, could cause variation in these trends. Our revenue and operating margins in the first and fourth quarters are typically lower than those during the second and third quarters due to reduced shipments during the winter months; however, the effects of the COVID-19 pandemic on the domestic economy has impacted, our normal seasonal trends during 2020 and may continue to impact, our normal seasonal trends in future periods.trends. Harsh winter weather, hurricanes, tornadoes, floods and other natural disasters can also adversely impact our performance by reducing demand and increasing operating expenses. We believe seasonal trends will continue to impact our business.
Environmental Regulation
We are subject to various federal, state and local environmental laws and regulations that focus on, among other things: the disposal, emission and discharge of hazardous waste, hazardous materials, or other materials into the environment or their presence at our properties or in our vehicles; fuel storage tanks; transportation of certain materials; and the discharge or retention of storm water. Under specific environmental laws, we could also be held responsible for any costs relating to contamination at our past or present facilities and at third-party waste disposal sites, as well as costs associated with clean-up of accidents involving our vehicles. We do not believe that the cost of future compliance with current environmental laws or regulations will have a material adverse effect on our operations, financial condition, competitive position or capital expenditures for the remainder of 20212022 or fiscal year 2022.2023. However, future changes to laws or regulations may adversely affect our operations and could result in unforeseen costs to our business.
Forward-Looking Information
Forward-looking statements appear in this report, including, but not limited to, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other written and oral statements made by or on behalf of us. These forward-looking statements include, but are not limited to, statements relating to our goals, strategies, expectations, competitive environment, regulation, availability of resources, future events and future financial performance. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements typically can be identified by such words as “anticipate,” “estimate,” “forecast,” “project,” “intend,” “expect,” “believe,” “should,” “could,” “may” or other similar words or expressions. We caution readers that such forward-looking statements involve risks and uncertainties, including, but not limited to, the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 20202021 and in other reports and statements that we file with the Securities and Exchange Commission (“SEC”). Such forward-looking statements involve risks and uncertainties that could cause actual events or results to differ materially from those expressed or implied herein, including, but not limited to, the following, many of which are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the current COVID-19 pandemic:
| • | the challenges associated with executing our growth strategy, and developing, marketing and consistently delivering high-quality services that meet customer expectations; |
| • | various risks related to public health epidemics, pandemics and similar |
| • | changes in our relationships with significant customers; |
| • | our exposure to claims related to cargo loss and damage, property damage, personal injury, workers’ compensation and healthcare, increased self-insured retention or deductible levels or premiums for |
| • | the availability and cost of new equipment, including regulatory changes and supply constraints that could impact the cost of these assets; |
| • | the availability and cost of third-party transportation used to supplement our workforce and equipment needs; |
• | the availability and price of diesel fuel and 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; |
| • | seasonal trends in the LTL industry, including harsh weather conditions and disasters; |
15
| • | the availability and cost of capital for our significant ongoing cash requirements; |
| • | decreases in demand for, and the value of, used equipment; |
| • | our ability to successfully consummate and integrate acquisitions; |
| • | the costs and potential liabilities related to our international business relationships; |
| • | the costs and potential adverse impact of compliance with anti-terrorism measures on our business; |
| • | the competitive environment with respect to our industry, including pricing pressures; |
| • | 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; |
| • | the negative impact of any unionization, or the passage of legislation or regulations that could facilitate unionization, of our employees; |
| • | increases in |
| • | our ability to retain our key employees and continue to effectively execute our succession plan; |
| • | potential costs and liabilities associated with cyber incidents and other risks with respect to our information technology systems or those of our third-party service providers, including system failure, security breach, disruption by malware or ransomware or other damage; |
| • | the failure to adapt to new technologies implemented by our competitors in the LTL and transportation industry, which could negatively affect our ability to compete; |
| • | 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; |
| • | the Compliance, Safety, Accountability initiative of the Federal Motor Carrier Safety Administration (“FMCSA”) could adversely impact our ability to hire qualified drivers, meet our growth projections and maintain our customer relationships; |
| • | the costs and potential adverse impact of compliance with, or violations of, current and future rules issued by the Department of Transportation, the FMCSA and other regulatory agencies; |
| • | the costs and potential liabilities related to compliance with, or violations of, existing or future governmental laws and regulations, including environmental laws; |
| • | the effects of legal, regulatory or market responses to climate change concerns; |
| • | the increase in costs associated with healthcare legislation |
| • | the costs and potential liabilities related to |
| • | the impact of changes in tax laws, rates, guidance and interpretations; |
| • | the concentration of our stock ownership with the Congdon family; |
| • | the ability or the failure to declare future cash dividends; |
| • | fluctuations in the amount and frequency of our stock repurchases; |
| • | volatility in the market value of our common stock; |
16
| • | 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 |
| • | 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to our market risk exposures since our most recent fiscal year end. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021.
Item 4. Controls and Procedures
a) | Evaluation of disclosure controls and procedures |
As of the end of the period covered by this quarterly report, our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation of the effectiveness of our disclosure controls and procedures in accordance with Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (a) accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, and (b) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
b) | Changes in internal control over financial reporting |
There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance. Certain of these matters include collective and/or class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.
Consistent with SEC Regulation S-K Item 103, we have elected to disclose those environmental legal proceedings with a governmental authority if management reasonably believes that the proceedings may involve potential monetary sanctions of $1.0 million or more. The following matter is disclosed in accordance with that requirement. We do not believe that any possible loss that may be incurred in connection with the matter will be material to our financial position, results of operations or cash flows.
On May 12, 2017, we received a letter from the Orange County California District Attorney’s Office concerning suspected violations of California laws with respect to waste handling practices. As part of the civil investigation conducted in coordination with other California counties, we have shared information about our waste handling practices at our facilities throughout the state. We are in discussions concerning resolution of this matter.
Item 1A. Risk Factors
In addition to the other information set forth in this report and in our other reports and statements that we file with the SEC, including our quarterly reports on Form 10-Q, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which could materially affect our business, financial condition and future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.
There have been no material changes to the risk factors identified in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information regarding our repurchases of our common stock during the secondfirst quarter of 2021:2022:
|
| ISSUER PURCHASES OF EQUITY SECURITIES |
| |||||||||||||
|
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Programs |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs |
| ||||
April 1 - 30, 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 315,018,030 |
|
May 1 - 31, 2021 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 315,018,030 |
|
June 1 - 30, 2021 |
|
| 159,485 |
|
| $ | 250.80 |
|
|
| 159,485 |
|
| $ | 275,018,788 |
|
Total |
|
| 159,485 |
|
| $ | 250.80 |
|
|
| 159,485 |
|
|
|
|
|
|
| ISSUER PURCHASES OF EQUITY SECURITIES |
| |||||||||||||
|
| Total Number of Shares Purchased |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Programs |
|
| Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs |
| ||||
January 1 - 31, 2022 (1) (2) |
|
| 124,278 |
|
| $ | 505.41 |
|
|
| 123,410 |
|
| $ | 1,956,268,862 |
|
February 1 - 28, 2022 (3) (4) |
|
| 1,175,902 |
|
| $ | 294.33 |
|
|
| 1,149,650 |
|
| $ | 1,617,917,198 |
|
March 1 - 31, 2022 |
|
| - |
|
| $ | - |
|
|
| - |
|
| $ | 1,617,917,198 |
|
Total |
|
| 1,300,180 |
|
| $ | 314.50 |
|
|
| 1,273,060 |
|
|
|
|
|
(1) | The total number of shares purchased includes the final settlement of 123,410 shares of our common stock under the August 2021 ASR Agreement. The final number of shares received was based on the daily volume-weighted average share price during the term of agreement, less a negotiated discount. Under the August 2021 ASR Agreement, we repurchased 778,775 shares for $250.0 million, at an average price of $321.02 per share. |
(2) | This amount includes 868 shares of our common stock surrendered by employees to satisfy tax withholding obligations in connection with the vesting of employee equity awards granted under our 2016 Stock Incentive Plan. |
(3) | The total number of shares purchased includes the initial delivery of 1,018,157 shares of our common stock under the February 2022 ASR Agreement, representing approximately 75% of the total value of shares to be received by us under the agreement. The remaining balance was settled during April 2022, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the February 2022 ASR Agreement, we repurchased 1,390,966 shares for $400.0 million, at an average price of $287.57 per share. |
(4) | This amount includes 26,252 shares of our common stock surrendered by employees to satisfy tax withholding obligations in connection with the vesting of employee equity awards granted under our 2016 Stock Incentive Plan. |
On May 1, 2020,July 28, 2021, we announced that our Board of Directors had approved a two-yearnew stock repurchase program authorizing us to repurchase up to an aggregate of $700.0 million$2.0 billion of our outstanding common stock (the “2020“2021 Repurchase Program”). The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020.in January 2022. Under our repurchase programs,program, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.
On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock. The new repurchase program, which does not have an expiration date, will be effective upon the completion of our 2020 Repurchase Program. At June 30, 2021, our 2020 Repurchase Program had $275.0 million remaining available, including $68.7 million that is deferred until the third quarter when the final settlement occurs on our current accelerated share repurchase agreement, leaving $206.3 million remaining available and uncommitted.
Item 6. Exhibits
The exhibits listed in the accompanying Exhibit Index are filed as a part of this report.
18
EXHIBIT INDEX
TO QUARTERLY REPORT ON FORM 10-Q
Exhibit No. |
| Description |
| ||
|
|
|
31.1 |
| |
|
|
|
31.2 |
| |
|
|
|
32.1 |
| |
|
|
|
32.2 |
| |
|
|
|
101 |
| The following financial information from our Quarterly Report on Form 10-Q for the quarter ended |
|
|
|
104 |
| The cover page from our Quarterly Report on Form 10-Q for the quarter ended |
Our SEC file number reference for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 0-19582.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
| OLD DOMINION FREIGHT LINE, INC. |
|
|
|
|
|
DATE: |
|
|
| /s/ ADAM N. SATTERFIELD |
|
|
|
| Adam N. Satterfield |
|
|
|
| Senior Vice President - Finance and Chief Financial Officer (Principal Financial Officer) |
|
|
|
|
|
DATE: |
|
|
| /s/ KIMBERLY S. MAREADY |
|
|
|
| Kimberly S. Maready |
|
|
|
| Vice President - Accounting and Finance (Principal Accounting Officer) |
2022