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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 September 30, 2024

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

 

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 November 1, 2024 there were 213,497,536 shares of the registrant’s Common Stock ($0.10 par value) outstanding.

 

 


 

INDEX

 

Part I – FINANCIAL INFORMATION

1

 

Item 1

Financial Statements

1

Condensed Balance Sheets – September 30, 2024 and December 31, 2023

1

Condensed Statements of Operations – For the three and nine months ended September 30, 2024 and 2023

3

 

Condensed Statements of Changes in Shareholders’ Equity – For the three and nine months ended September 30, 2024 and 2023

4

Condensed Statements of Cash Flows – For the nine months ended September 30, 2024 and 2023

5

Notes to the Condensed Financial Statements

6

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

Item 3

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4

Controls and Procedures

19

 

Part II – OTHER INFORMATION

20

 

Item 1

Legal Proceedings

20

Item 1A

Risk Factors

20

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

21

Item 5

Other Information

21

Item 6

Exhibits

21

 

Exhibit Index

22

Signatures

23

 

 


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

 

 

September 30,

 

 

 

 

 

 

2024

 

 

December 31,

 

(In thousands, except share and per share data)

 

(Unaudited)

 

 

2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

74,163

 

 

$

433,799

 

Customer receivables, less allowances of $9,563 and $10,405, respectively

 

 

545,746

 

 

 

578,885

 

Income taxes receivable

 

 

10,800

 

 

 

18,554

 

Other receivables

 

 

20,135

 

 

 

17,884

 

Prepaid expenses and other current assets

 

 

84,215

 

 

 

94,211

 

Total current assets

 

 

735,059

 

 

 

1,143,333

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

Revenue equipment

 

 

2,722,884

 

 

 

2,590,770

 

Land and structures

 

 

3,279,707

 

 

 

3,021,447

 

Other fixed assets

 

 

679,196

 

 

 

623,164

 

Leasehold improvements

 

 

14,914

 

 

 

14,436

 

Total property and equipment

 

 

6,696,701

 

 

 

6,249,817

 

Accumulated depreciation

 

 

(2,270,948

)

 

 

(2,154,412

)

Net property and equipment

 

 

4,425,753

 

 

 

4,095,405

 

 

 

 

 

 

 

Other assets

 

 

265,019

 

 

 

273,655

 

Total assets

 

$

5,425,831

 

 

$

5,512,393

 

 

Note: The Condensed Balance Sheet at December 31, 2023 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)

 

 

 

September 30,

 

 

 

 

 

 

2024

 

 

December 31,

 

(In thousands, except share and per share data)

 

(Unaudited)

 

 

2023

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

99,279

 

 

$

112,774

 

Compensation and benefits

 

 

283,817

 

 

 

278,953

 

Claims and insurance accruals

 

 

62,119

 

 

 

63,346

 

Other accrued liabilities

 

 

77,230

 

 

 

69,585

 

Income taxes payable

 

 

11,135

 

 

 

 

Current maturities of long-term debt

 

 

20,000

 

 

 

20,000

 

Total current liabilities

 

 

553,580

 

 

 

544,658

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

Long-term debt

 

 

39,985

 

 

 

59,977

 

Other non-current liabilities

 

 

281,708

 

 

 

286,815

 

Deferred income taxes

 

 

374,818

 

 

 

363,132

 

Total long-term liabilities

 

 

696,511

 

 

 

709,924

 

Total liabilities

 

 

1,250,091

 

 

 

1,254,582

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Common stock - $0.10 par value, 560,000,000 shares authorized, 213,794,691 and 217,930,932 shares outstanding at September 30, 2024 and December 31, 2023, respectively

 

 

21,379

 

 

 

21,793

 

Capital in excess of par value

 

 

186,985

 

 

 

231,449

 

Retained earnings

 

 

3,967,376

 

 

 

4,004,569

 

Total shareholders’ equity

 

 

4,175,740

 

 

 

4,257,811

 

Total liabilities and shareholders’ equity

 

$

5,425,831

 

 

$

5,512,393

 

 

Note: The Condensed Balance Sheet at December 31, 2023 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.

2


 

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands, except per share data)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue from operations

 

$

1,470,211

 

 

$

1,515,277

 

 

$

4,428,981

 

 

$

4,370,602

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

 

681,238

 

 

 

663,810

 

 

 

2,033,412

 

 

 

1,958,726

 

Operating supplies and expenses

 

 

156,177

 

 

 

180,653

 

 

 

489,669

 

 

 

538,410

 

General supplies and expenses

 

 

46,040

 

 

 

41,745

 

 

 

135,987

 

 

 

119,896

 

Operating taxes and licenses

 

 

36,733

 

 

 

36,527

 

 

 

108,853

 

 

 

110,118

 

Insurance and claims

 

 

17,209

 

 

 

16,004

 

 

 

52,544

 

 

 

47,413

 

Communications and utilities

 

 

10,056

 

 

 

10,724

 

 

 

31,209

 

 

 

33,256

 

Depreciation and amortization

 

 

86,666

 

 

 

84,055

 

 

 

255,760

 

 

 

239,786

 

Purchased transportation

 

 

30,941

 

 

 

30,835

 

 

 

93,661

 

 

 

90,046

 

Miscellaneous expenses, net

 

 

3,290

 

 

 

5,905

 

 

 

17,908

 

 

 

13,289

 

Total operating expenses

 

 

1,068,350

 

 

 

1,070,258

 

 

 

3,219,003

 

 

 

3,150,940

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

401,861

 

 

 

445,019

 

 

 

1,209,978

 

 

 

1,219,662

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

19

 

 

 

90

 

 

 

187

 

 

 

379

 

Interest income

 

 

(1,775

)

 

 

(2,308

)

 

 

(15,108

)

 

 

(7,487

)

Other expense, net

 

 

523

 

 

 

861

 

 

 

2,477

 

 

 

4,319

 

Total non-operating income

 

 

(1,233

)

 

 

(1,357

)

 

 

(12,444

)

 

 

(2,789

)

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

403,094

 

 

 

446,376

 

 

 

1,222,422

 

 

 

1,222,451

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

94,514

 

 

 

107,089

 

 

 

299,493

 

 

 

305,764

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

308,580

 

 

$

339,287

 

 

$

922,929

 

 

$

916,687

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.44

 

 

$

1.55

 

 

$

4.27

 

 

$

4.18

 

Diluted

 

$

1.43

 

 

$

1.54

 

 

$

4.25

 

 

$

4.16

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

214,089

 

 

 

218,387

 

 

 

216,010

 

 

 

219,108

 

Diluted

 

 

215,227

 

 

 

219,670

 

 

 

217,185

 

 

 

220,469

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

 

$

0.26

 

 

$

0.20

 

 

$

0.78

 

 

$

0.60

 

 

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 September 30, 2024 and 2023

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

 

 

(In thousands)

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Total

 

Balance as of June 30, 2024

 

214,758

 

 

$

21,476

 

 

$

186,584

 

 

$

3,903,839

 

 

$

4,111,899

 

Net income

 

 

 

 

 

 

 

 

 

 

308,580

 

 

 

308,580

 

Share repurchases

 

(976

)

 

 

(98

)

 

 

 

 

 

(189,401

)

 

 

(189,499

)

Forward contract for accelerated share repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared ($0.26 per share)

 

 

 

 

 

 

 

 

 

 

(55,642

)

 

 

(55,642

)

Share-based compensation and share issuances, net of
      forfeitures

 

23

 

 

 

2

 

 

 

2,293

 

 

 

 

 

 

2,295

 

Taxes paid in exchange for shares withheld

 

(10

)

 

 

(1

)

 

 

(1,892

)

 

 

 

 

 

(1,893

)

Balance as of September 30, 2024

 

213,795

 

 

$

21,379

 

 

$

186,985

 

 

$

3,967,376

 

 

$

4,175,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of June 30, 2023

 

218,675

 

 

$

21,867

 

 

$

227,532

 

 

$

3,582,636

 

 

$

3,832,035

 

Net income

 

 

 

 

 

 

 

 

 

 

339,287

 

 

 

339,287

 

Share repurchases

 

(329

)

 

 

(33

)

 

 

 

 

 

(66,461

)

 

 

(66,494

)

Cash dividends declared ($0.20 per share)

 

 

 

 

 

 

 

 

 

 

(43,689

)

 

 

(43,689

)

Share-based compensation and share issuances, net of
      forfeitures

 

16

 

 

 

2

 

 

 

2,736

 

 

 

 

 

 

2,738

 

Taxes paid in exchange for shares withheld

 

(4

)

 

 

 

 

 

(754

)

 

 

 

 

 

(754

)

Balance as of September 30, 2023

 

218,358

 

 

$

21,836

 

 

$

229,514

 

 

$

3,811,773

 

 

$

4,063,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2024 and 2023

 

 

 

 

 

 

 

 

Capital in

 

 

 

 

 

 

 

 

Common Stock

 

 

Excess of

 

 

Retained

 

 

 

 

(In thousands)

Shares

 

 

Amount

 

 

Par Value

 

 

Earnings

 

 

Total

 

Balance as of December 31, 2023

 

217,931

 

 

$

21,793

 

 

$

231,449

 

 

$

4,004,569

 

 

$

4,257,811

 

Net income

 

 

 

 

 

 

 

 

 

 

922,929

 

 

 

922,929

 

Share repurchases

 

(4,266

)

 

 

(427

)

 

 

 

 

 

(791,923

)

 

 

(792,350

)

Forward contract for accelerated share repurchases

 

 

 

 

 

 

 

(40,000

)

 

 

 

 

 

(40,000

)

Cash dividends declared ($0.78 per share)

 

 

 

 

 

 

 

 

 

 

(168,199

)

 

 

(168,199

)

Share-based compensation and share issuances, net of
      forfeitures

 

193

 

 

 

19

 

 

 

8,566

 

 

 

 

 

 

8,585

 

Taxes paid in exchange for shares withheld

 

(63

)

 

 

(6

)

 

 

(13,030

)

 

 

 

 

 

(13,036

)

Balance as of September 30, 2024

 

213,795

 

 

$

21,379

 

 

$

186,985

 

 

$

3,967,376

 

 

$

4,175,740

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2022

 

220,446

 

 

$

22,045

 

 

$

233,086

 

 

$

3,397,786

 

 

$

3,652,917

 

Net income

 

 

 

 

 

 

 

 

 

 

916,687

 

 

 

916,687

 

Share repurchases

 

(2,193

)

 

 

(219

)

 

 

 

 

 

(371,237

)

 

 

(371,456

)

Cash dividends declared ($0.60 per share)

 

 

 

 

 

 

 

 

 

 

(131,463

)

 

 

(131,463

)

Share-based compensation and share issuances, net of
      forfeitures

 

174

 

 

 

17

 

 

 

8,388

 

 

 

 

 

 

8,405

 

Taxes paid in exchange for shares withheld

 

(69

)

 

 

(7

)

 

 

(11,960

)

 

 

 

 

 

(11,967

)

Balance as of September 30, 2023

 

218,358

 

 

$

21,836

 

 

$

229,514

 

 

$

3,811,773

 

 

$

4,063,123

 

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

4


 

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

(In thousands)

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

922,929

 

 

$

916,687

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

255,768

 

 

 

239,797

 

Gain on disposal of property and equipment

 

 

(1,860

)

 

 

(7,446

)

Deferred income taxes

 

 

12,226

 

 

 

37,404

 

Other, net

 

 

21,530

 

 

 

22,401

 

Changes in operating assets and liabilities, net

 

 

47,631

 

 

 

(76,401

)

Net cash provided by operating activities

 

 

1,258,224

 

 

 

1,132,442

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(600,399

)

 

 

(651,363

)

Proceeds from sale of property and equipment

 

 

16,150

 

 

 

22,226

 

Purchase of short-term investments

 

 

(30,000

)

 

 

 

Proceeds from maturities of short-term investments

 

 

30,000

 

 

 

48,852

 

Net cash used in investing activities

 

 

(584,249

)

 

 

(580,285

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Payments for share repurchases

 

 

(784,772

)

 

 

(368,095

)

Forward contract for accelerated share repurchases

 

 

(40,000

)

 

 

 

Principal payments under debt agreements

 

 

(20,000

)

 

 

(20,000

)

Dividends paid

 

 

(168,206

)

 

 

(131,492

)

Other financing activities, net

 

 

(20,633

)

 

 

(12,281

)

Net cash used in financing activities

 

 

(1,033,611

)

 

 

(531,868

)

 

 

 

 

 

 

(Decrease) increase in cash and cash equivalents

 

 

(359,636

)

 

 

20,289

 

Cash and cash equivalents at beginning of period

 

 

433,799

 

 

 

186,312

 

Cash and cash equivalents at end of period

 

$

74,163

 

 

$

206,601

 

 

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 one operating segment and the composition of our revenue is summarized below:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

LTL services

 

$

1,457,108

 

 

$

1,501,266

 

 

$

4,388,808

 

 

$

4,323,453

 

Other services

 

 

13,103

 

 

 

14,011

 

 

 

40,173

 

 

 

47,149

 

      Total revenue from operations

 

$

1,470,211

 

 

$

1,515,277

 

 

$

4,428,981

 

 

$

4,370,602

 

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 September 30, 2024 are not necessarily indicative of the results that may be expected for the subsequent quarterly period or the year ending December 31, 2024.

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, 2023. 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, 2023, unless otherwise disclosed in this Form 10-Q.

Certain amounts in prior years have been reclassified to conform prior years’ financial statements to the current presentation.

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.

Common Stock Split

On February 16, 2024, we announced that our Board of Directors approved a two-for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024. On March 27, 2024, those shareholders received one additional share of common stock for every share owned.

All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect this stock split.

 

 

6


 

Stock Repurchase Program

On July 28, 2021, we announced that our Board of Directors had approved a 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 began after completion of our prior repurchase program in January 2022 and was completed in May 2024.

On July 26, 2023, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock (the “2023 Repurchase Program”). The 2023 Repurchase Program, which does not have an expiration date, began after the completion of the 2021 Repurchase Program in May 2024.

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 May 28, 2024, we entered into an accelerated share repurchase agreement (the "ASR Agreement") with a third-party financial institution. The ASR Agreement is accounted for as a settled treasury stock purchase and a forward stock purchase contract. The par value of the initial shares received is 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 Balance Sheets. The ASR Agreement is settled 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 ASR Agreement, we paid the third-party financial institution $200.0 million and received an initial delivery of 923,201 shares of our common stock for $160.0 million, representing approximately 80% of the total value of shares to be received by us under the ASR Agreement. The remaining shares are expected to settle no later than November 2024.

At September 30, 2024, our 2023 Repurchase Program had $2.44 billion remaining available. The amount available and uncommitted is $2.40 billion, which reflects the $40.0 million forward stock purchase contract under the ASR Agreement.

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

(In thousands)

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Weighted average shares outstanding - basic

 

 

214,089

 

 

 

218,387

 

 

 

216,010

 

 

 

219,108

 

Dilutive effect of share-based awards

 

 

1,138

 

 

 

1,283

 

 

 

1,175

 

 

 

1,361

 

Weighted average shares outstanding - diluted

 

 

215,227

 

 

 

219,670

 

 

 

217,185

 

 

 

220,469

 

 

7


 

Note 3. Long-Term Debt

Long-term debt, net of unamortized debt issuance costs, consisted of the following:

(In thousands)

 

September 30,
2024

 

 

December 31,
2023

 

Notes

 

$

59,985

 

 

$

79,977

 

Credit agreement

 

 

 

 

 

 

Total long-term debt

 

 

59,985

 

 

 

79,977

 

Less: Current maturities

 

 

(20,000

)

 

 

(20,000

)

Total maturities due after one year

 

$

39,985

 

 

$

59,977

 

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 (as subsequently amended on March 22, 2023 and August 28, 2024, 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 March 22, 2026. On May 4, 2020, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”). 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. The second principal payment of $20.0 million was paid on May 4, 2024. The remaining $60.0 million will be paid in three equal annual 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 third amended and restated credit agreement, dated March 22, 2023, with Wells Fargo Bank, National Association serving as administrative agent for the lenders (as subsequently amended on August 28, 2024, the “Credit Agreement”) or other senior promissory notes issued pursuant to the Note Agreement.

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) the Secured Overnight Financing Rate (SOFR) plus the Term SOFR Adjustment, as defined in the Credit Agreement, equal to 0.100%, plus an applicable margin that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin that ranges from 0.000% to 0.375%. The applicable margin for each of the foregoing options is dependent upon our consolidated debt to consolidated total capitalization ratio. Letter of credit fees equal to the applicable margin for SOFR 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 0.090% to 0.175% (based upon our consolidated debt to total consolidated capitalization ratio) 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 SOFR loans and letter of credit fees were 1.000% and commitment fees were 0.090%.

The Credit Agreement replaced our previous five-year, $250.0 million senior unsecured revolving credit agreement dated as of November 21, 2019 (the “Prior Credit Agreement”). For periods in 2023 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000% and commitment fees were 0.100%.

There were $37.7 million and $40.0 million of outstanding letters of credit at September 30, 2024 and December 31, 2023, respectively.

8


 

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

We held no short-term investments as of September 30, 2024 or December 31, 2023.

Long-term Debt

The carrying value of our total long-term debt, including current maturities, was $60.0 million and $80.0 million at September 30, 2024 and December 31, 2023, respectively. The estimated fair value of our total long-term debt, including current maturities, was $57.3 million and $75.4 million at September 30, 2024 and December 31, 2023, respectively. The fair value measurement of our Series B Notes 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.

9


 

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, and we regularly monitor the components that impact our pricing. 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. 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. We focus on the profitability of each customer account and generally seek to obtain an appropriate yield to offset our cost inflation and support our ongoing investments in capacity and technology. We believe the continued execution of this

10


 

yield-management philosophy, continued increases in density, and ongoing improvements in operating efficiencies are the key components of our ability to produce further improvement in our operating ratio and long-term 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 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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenue from operations

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

 

46.3

 

 

 

43.8

 

 

 

45.9

 

 

 

44.8

 

Operating supplies and expenses

 

 

10.6

 

 

 

11.9

 

 

 

11.1

 

 

 

12.3

 

General supplies and expenses

 

 

3.1

 

 

 

2.8

 

 

 

3.1

 

 

 

2.7

 

Operating taxes and licenses

 

 

2.6

 

 

 

2.4

 

 

 

2.5

 

 

 

2.5

 

Insurance and claims

 

 

1.2

 

 

 

1.1

 

 

 

1.2

 

 

 

1.1

 

Communications and utilities

 

 

0.7

 

 

 

0.7

 

 

 

0.6

 

 

 

0.8

 

Depreciation and amortization

 

 

5.9

 

 

 

5.5

 

 

 

5.8

 

 

 

5.5

 

Purchased transportation

 

 

2.1

 

 

 

2.0

 

 

 

2.1

 

 

 

2.1

 

Miscellaneous expenses, net

 

 

0.2

 

 

 

0.4

 

 

 

0.4

 

 

 

0.3

 

Total operating expenses

 

 

72.7

 

 

 

70.6

 

 

 

72.7

 

 

 

72.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

27.3

 

 

 

29.4

 

 

 

27.3

 

 

 

27.9

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest (income) expense, net

 

 

(0.1

)

 

 

(0.2

)

 

 

(0.3

)

 

 

(0.2

)

Other expense, net

 

 

0.0

 

 

 

0.1

 

 

 

0.0

 

 

 

0.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

27.4

 

 

 

29.5

 

 

 

27.6

 

 

 

28.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

6.4

 

 

 

7.1

 

 

 

6.8

 

 

 

7.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

21.0

%

 

 

22.4

%

 

 

20.8

%

 

 

21.0

%

 

11


 

Key financial and operating metrics for the three- and nine-month periods ended September 30, 2024 and 2023 are presented below:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2024

 

 

2023

 

 

%
Change

 

 

2024

 

 

2023

 

 

%
Change

 

Work days

 

 

64

 

 

 

63

 

 

 

1.6

%

 

 

192

 

 

 

191

 

 

 

0.5

%

Revenue (in thousands)

 

$

1,470,211

 

 

$

1,515,277

 

 

 

(3.0

)%

 

$

4,428,981

 

 

$

4,370,602

 

 

 

1.3

%

Operating ratio

 

 

72.7

%

 

 

70.6

%

 

 

 

 

 

72.7

%

 

 

72.1

%

 

 

 

Net income (in thousands)

 

$

308,580

 

 

$

339,287

 

 

 

(9.1

)%

 

$

922,929

 

 

$

916,687

 

 

 

0.7

%

Diluted earnings per share

 

$

1.43

 

 

$

1.54

 

 

 

(7.1

)%

 

$

4.25

 

 

$

4.16

 

 

 

2.2

%

LTL tons (in thousands)

 

 

2,266

 

 

 

2,342

 

 

 

(3.2

)%

 

 

6,870

 

 

 

6,977

 

 

 

(1.5

)%

LTL tonnage per day

 

 

35,408

 

 

 

37,181

 

 

 

(4.8

)%

 

 

35,783

 

 

 

36,529

 

 

 

(2.0

)%

LTL shipments (in thousands)

 

 

3,070

 

 

 

3,129

 

 

 

(1.9

)%

 

 

9,174

 

 

 

9,155

 

 

 

0.2

%

LTL shipments per day

 

 

47,967

 

 

 

49,670

 

 

 

(3.4

)%

 

 

47,781

 

 

 

47,932

 

 

 

(0.3

)%

LTL weight per shipment (lbs.)

 

 

1,476

 

 

 

1,497

 

 

 

(1.4

)%

 

 

1,498