odfl-10q_20190630.htm

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, 2019


☐	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 August 6, 2019 there were 80,006,284 shares of the registrant’s Common Stock ($0.10 par value) outstanding.

INDEX


Part I – FINANCIAL INFORMATION

Item 1	Financial Statements	1
	Condensed Balance Sheets – June 30, 2019 and December 31, 2018	1
	Condensed Statements of Operations – For the three and six months ended June 30, 2019 and 2018	3
	Condensed Statements of Changes in Shareholders’ Equity - For the three and six months ended June 30, 2019 and 2018	4
	Condensed Statements of Cash Flows – For the six months ended June 30, 2019 and 2018	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	17
Item 4	Controls and Procedures	18

Part II – OTHER INFORMATION

Item 1	Legal Proceedings	19
Item 1A	Risk Factors	19
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 6	Exhibits	19

Exhibit Index		20
Signatures		21

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

	June 30,
	2019			December 31,
(In thousands, except share and per share data)	(Unaudited)			2018
ASSETS
Current assets:
Cash and cash equivalents	$	228,960		$	190,282
Customer receivables, less allowances of $10,019 and $9,913, respectively		449,984			427,569
Other receivables		8,161			40,691
Prepaid expenses and other current assets		54,315			47,687
Total current assets		741,420			706,229

Property and equipment:
Revenue equipment		1,906,675			1,811,233
Land and structures		1,898,900			1,796,868
Other fixed assets		477,870			454,432
Leasehold improvements		11,008			10,619
Total property and equipment		4,294,453			4,073,152
Accumulated depreciation		(1,436,282	)		(1,318,209	)
Net property and equipment		2,858,171			2,754,943

Goodwill		19,463			19,463
Other assets		139,649			64,648
Total assets	$	3,758,703		$	3,545,283

Note: The Condensed Balance Sheet at December 31, 2018 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 BALANCE SHEETS

(CONTINUED)

	June 30,
	2019		December 31,
(In thousands, except share and per share data)	(Unaudited)		2018
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	85,125	$	78,518
Compensation and benefits		191,132		198,456
Claims and insurance accruals		50,803		53,263
Other accrued liabilities		45,897		26,495
Income taxes payable		13,148		—
Total current liabilities		386,105		356,732

Long-term liabilities:
Long-term debt		45,000		45,000
Other non-current liabilities		281,444		215,399
Deferred income taxes		247,669		247,669
Total long-term liabilities		574,113		508,068
Total liabilities		960,218		864,800

Commitments and contingent liabilities

Shareholders’ equity:
Common stock - $0.10 par value, 140,000,000 shares authorized, 80,138,666 and 81,231,131 shares outstanding at June 30, 2019 and December 31, 2018, respectively		8,014		8,123
Capital in excess of par value		144,938		142,176
Retained earnings		2,645,533		2,530,184
Total shareholders’ equity		2,798,485		2,680,483
Total liabilities and shareholders’ equity	$	3,758,703	$	3,545,283

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						Six Months Ended
	June 30,						June 30,
(In thousands, except share and per share data)	2019			2018			2019			2018
Revenue from operations	$	1,060,666		$	1,033,498		$	2,051,448		$	1,958,518

Operating expenses:
Salaries, wages and benefits		532,583			522,249			1,054,927			1,023,560
Operating supplies and expenses		122,410			126,566			243,767			242,502
General supplies and expenses		32,391			29,891			63,951			59,867
Operating taxes and licenses		29,384			28,165			58,455			54,953
Insurance and claims		11,587			11,342			22,759			22,441
Communications and utilities		6,134			7,439			13,973			14,485
Depreciation and amortization		62,571			56,235			125,644			109,716
Purchased transportation		24,468			26,044			45,155			47,784
Miscellaneous expenses, net		4,649			5,086			9,902			13,389
Total operating expenses		826,177			813,017			1,638,533			1,588,697

Operating income		234,489			220,481			412,915			369,821

Non-operating (income) expense:
Interest expense		160			11			282			22
Interest income		(1,769	)		(668	)		(3,252	)		(1,124	)
Other expense (income), net		524			(334	)		(76	)		1,965
Total non-operating (income) expense		(1,085	)		(991	)		(3,046	)		863

Income before income taxes		235,574			221,472			415,961			368,958

Provision for income taxes		61,502			58,038			108,566			96,191

Net income	$	174,072		$	163,434		$	307,395		$	272,767

Earnings per share:
Basic	$	2.16		$	1.99		$	3.81		$	3.32
Diluted	$	2.16		$	1.99		$	3.80		$	3.32

Weighted average shares outstanding:
Basic		80,522,276			82,067,872			80,776,296			82,160,159
Diluted		80,645,364			82,169,552			80,893,083			82,262,285

Dividends declared per share	$	0.17		$	0.13		$	0.34		$	0.26

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

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)	2019			2018			2019			2018
Common stock:
Beginning balance	$	8,107		$	8,229		$	8,123		$	8,238
Share repurchases		(93	)		(21	)		(115	)		(33	)
Share-based compensation and restricted share issuances, net of taxes		—			—			6			3
Ending balance		8,014			8,208			8,014			8,208

Capital in excess of par value:
Beginning balance		143,123			138,921		$	142,176			138,359
Share-based compensation and restricted share issuances, net of taxes		1,815			636			2,762			1,198
Ending balance		144,938			139,557			144,938			139,557

Retained earnings:
Beginning balance		2,619,141			2,211,601		$	2,530,184			2,130,257
Share repurchases		(134,043	)		(30,074	)		(164,617	)		(47,361	)
Cash dividends declared		(13,637	)		(10,675	)		(27,429	)		(21,377	)
Net income		174,072			163,434			307,395			272,767
Ending balance		2,645,533			2,334,286			2,645,533			2,334,286

Total shareholders' equity	$	2,798,485		$	2,482,051		$	2,798,485		$	2,482,051

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

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six Months Ended
	June 30,
(In thousands)	2019			2018
Cash flows from operating activities:
Net income	$	307,395		$	272,767
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		125,644			109,716
Loss on sale of property and equipment		718			785
Share-based compensation		4,216			2,275
Other operating activities, net		23,910			39,148
Net cash provided by operating activities		461,883			424,691

Cash flows from investing activities:
Purchase of property and equipment		(229,956	)		(292,269	)
Proceeds from sale of property and equipment		366			528
Net cash used in investing activities		(229,590	)		(291,741	)

Cash flows from financing activities:
Principal payments under long-term debt agreements		—			(50,000	)
Payments for share repurchases		(164,732	)		(47,394	)
Dividends paid		(27,435	)		(21,373	)
Other financing activities, net		(1,448	)		(1,074	)
Net cash used in financing activities		(193,615	)		(119,841	)

Increase in cash and cash equivalents		38,678			13,109
Cash and cash equivalents at beginning of period		190,282			127,462
Cash and cash equivalents at end of period	$	228,960		$	140,571

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

NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Significant Accounting Policies

Business

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, 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				Six Months Ended
	June 30,				June 30,
(In thousands)	2019		2018		2019		2018
LTL services	$	1,047,208	$	1,018,491	$	2,023,771	$	1,929,545
Other services		13,458		15,007		27,677		28,973
Total revenue from operations	$	1,060,666	$	1,033,498	$	2,051,448	$	1,958,518

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, 2019 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 2019.

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, 2018. 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, 2018, other than those 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.

Fair Values of Financial Instruments

The carrying values of financial instruments in current assets and current liabilities approximate their fair value due to the short maturities of these instruments. The carrying value of our total long-term debt was $45.0 million at each of June 30, 2019 and December 31, 2018. The estimated fair value of our total long-term debt was $46.2 million and $45.6 million at June 30, 2019 and December 31, 2018, respectively. The fair value measurement of our senior 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 (the “FASB”).

Stock Repurchase Program

During the second quarter of 2019, we completed our stock repurchase program, previously announced on May 17, 2018, to repurchase up to an aggregate of $250.0 million of our outstanding common stock. On May 16, 2019, we announced that our Board of Directors had approved a new two-year stock repurchase program authorizing us to repurchase up to an aggregate of $350.0 million of our outstanding common stock (the “2019 Repurchase Program”). Under the 2019 Repurchase Program, which became effective upon the expiration of our prior stock repurchase 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.

During the three and six months ended June 30, 2019, we repurchased 930,105 shares of our common stock for $134.1 million and 1,151,914 shares of our common stock for $164.7 million under our repurchase programs, respectively. As of June 30, 2019, we had $317.0 million remaining authorized under the 2019 Repurchase Program.

Recent Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-02, “Leases” (Topic 842). This ASU requires a lessee to recognize a right-of-use asset and a lease liability on its balance sheet for most operating leases. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which provided companies with an additional optional transition method to apply the new standard to leases in effect at the adoption date through a cumulative effect adjustment. We adopted the new lease standard on January 1, 2019 using this optional transition method.

We elected the package of practical expedients referenced in ASU 2016-02, which permits companies to retain original lease identification and classification without reassessing initial direct costs for existing leases. We also elected (i) the practical expedient that exempts leases with an initial lease term of twelve months or less, (ii) the practical expedient that allows companies to select, by class of underlying asset, not to separate lease and non-lease components, and (iii) the practical expedient that allows companies to apply hindsight in determining lease terms. Our adoption of this standard resulted in the recognition of right-of-use assets and corresponding lease liabilities of $68.0 million and $69.1 million, respectively, as of January 1, 2019. There were no material impacts to our results of operations or our cash flows. Disclosures related to the amount, timing, and uncertainty of cash flows arising from our leases are included in Note 4.

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 shares of unvested restricted stock and contingently-issuable shares. Unvested restricted stock is included in shares of common stock 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 shares of unvested restricted stock, but excludes contingently-issuable shares under performance-based award agreements because 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
	June 30,				June 30,
	2019		2018		2019		2018
Weighted average shares outstanding - basic		80,522,276		82,067,872		80,776,296		82,160,159
Dilutive effect of share-based awards		123,088		101,680		116,787		102,126
Weighted average shares outstanding - diluted		80,645,364		82,169,552		80,893,083		82,262,285

Note 3. Long-Term Debt

Long-term debt consisted of the following:

(In thousands)	June 30, 2019		December 31, 2018
Senior notes	$	45,000	$	45,000
Revolving credit facility		—		—
Total long-term debt		45,000		45,000
Less: Current maturities		—		—
Total maturities due after one year	$	45,000	$	45,000

We had one unsecured senior note agreement with an amount outstanding of $45.0 million at each of June 30, 2019 and December 31, 2018. Our unsecured senior note agreement calls for a scheduled principal payment of $45.0 million due on January 3, 2021. The interest rate on the January 3, 2021 scheduled principal payment is 4.79%.

On December 15, 2015, we entered into an amended and restated credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”) serving as administrative agent for the lenders (the “Credit Agreement”). The Credit Agreement originally provided for a five-year, $250.0 million senior unsecured revolving line of credit and a $100.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $350.0 million.

On September 9, 2016, we exercised a portion of the accordion feature and entered into an amendment to the Credit Agreement to increase the aggregate commitments from existing lenders by $50.0 million to an aggregate of $300.0 million. Of the $300.0 million line of credit commitments under the Credit Agreement, as amended, 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 plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.0% to 1.50%; or (ii) a Base Rate plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.0% to 0.5%. 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 0.125% to 0.2% (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 1.0% and commitment fees were 0.125%. There were $49.0 million and $61.5 million of outstanding letters of credit at June 30, 2019 and December 31, 2018, respectively.

Note 4. Leases

We lease certain assets under operating leases, which at June 30, 2019 primarily consist of real estate leases for 30 of our 233 service center locations and automotive leases for our Company-owned vehicles. Certain operating leases provide for renewal options, which can vary by lease and are typically offered at their fair rental value. We have not made any residual value guarantees related to our operating leases; therefore, we have no corresponding liability recorded on our Condensed Balance Sheets.

The right-of-use assets and corresponding lease liabilities on our Condensed Balance Sheet represent payments over the lease term, which includes renewal options for certain real estate leases that we are likely to exercise. These renewal options begin in 2020 and continue through 2033, and range from one to ten years in length. Short-term leases, which have an initial term of 12 months or less, are not included in our right-of-use assets.

Of our total lease liabilities, $10.5 million is classified as current and is presented within “Other accrued liabilities,” and $57.9 million is classified as non-current and is presented within “Other non-current liabilities,” on our Condensed Balance Sheet as of June 30, 2019. Our right-of-use assets totaled $67.3 million and are presented within “Other assets,” which is classified as long-term, on our Condensed Balance Sheet as of June 30, 2019.

Future lease payments for assets under operating leases, as well as a reconciliation to our total lease liabilities as of June 30, 2019, are as follows:

(In thousands)	Lease Payments ^(a)
Remainder of 2019	$	6,795
2020		12,073
2021		9,460
2022		7,037
2023		5,771
Thereafter		47,256
Total lease payments		88,392
Less: Imputed interest		(19,948	)
Total lease liabilities	$	68,444

(a)

Lease payments include lease extensions that are reasonably certain to be exercised and exclude $44.8 million in lease payments for leases that have been executed but not yet commenced.

The weighted average lease term for our operating leases was 9.4 years as of June 30, 2019. The discount rate used in the calculation of our right-of-use assets and corresponding lease liabilities was determined based on the stated rate within each contract when available, or our collateralized borrowing rate from lending institutions. The weighted average discount rate for our operating leases was 4.2% as of June 30, 2019.

For the three- and six-month periods ended June 30, 2019, cash paid for amounts included in the measurement of our operating leases was $3.7 million and $7.2 million, respectively, while the aggregate lease expense under operating leases was $3.7 million and $7.3 million, respectively. Certain operating leases include rent escalation provisions, which we recognize as expense on a straight-line basis. Lease expense is presented within “Operating supplies and expenses” or “General supplies and expenses,” depending on the nature of the use of the leased asset.

Note 5. 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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We are a leading, less-than-truckload (“LTL”), union-free motor carrier providing regional, inter-regional and national LTL services through a single integrated organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, 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 97% 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 services using the following key metrics, which exclude certain transportation and logistics services where pricing is generally not determined by weight, commodity or distance:

•

LTL Revenue Per Hundredweight - 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 better indicator of changes in this metric by matching total billed revenue with the corresponding weight of those shipments.

Revenue per hundredweight is a commonly-used indicator of pricing trends, but this metric can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment, length of haul and the class, or mix, of our freight. As a result, changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates.

•

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.

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 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.

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
	June 30,						June 30,
	2019			2018			2019			2018
Revenue from operations		100.0	%		100.0	%		100.0	%		100.0	%

Operating expenses:
Salaries, wages and benefits		50.2			50.5			51.4			52.3
Operating supplies and expenses		11.5			12.3			11.9			12.4
General supplies and expenses		3.1			2.9			3.1			3.1
Operating taxes and licenses		2.8			2.7			2.9			2.8
Insurance and claims		1.1			1.1			1.1			1.1
Communications and utilities		0.6			0.7			0.7			0.7
Depreciation and amortization		5.9			5.5			6.1			5.6