UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
Name of each exchange on which registered |
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(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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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
As of May 3, 2022 there were
INDEX
Part I – FINANCIAL INFORMATION |
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Condensed Balance Sheets – March 31, 2022 and December 31, 2021 |
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Condensed Statements of Operations – For the three months ended March 31, 2022 and 2021 |
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Condensed Statements of Cash Flows – For the three months ended March 31, 2022 and 2021 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Part II – OTHER INFORMATION |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OLD DOMINION FREIGHT LINE, INC.
CONDENSED BALANCE SHEETS
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March 31, |
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2022 |
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December 31, |
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(In thousands, except share and per share data) |
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(Unaudited) |
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2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Customer receivables, less allowances of $ |
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Income taxes receivable |
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— |
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Other receivables |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment: |
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Revenue equipment |
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Land and structures |
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Other fixed assets |
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Leasehold improvements |
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Total property and equipment |
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Accumulated depreciation |
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Net property and equipment |
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Other assets |
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Total assets |
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$ |
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$ |
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Note: The Condensed Balance Sheet at December 31, 2021 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)
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March 31, |
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2022 |
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December 31, |
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(In thousands, except share and per share data) |
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(Unaudited) |
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2021 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Compensation and benefits |
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Claims and insurance accruals |
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Other accrued liabilities |
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Income taxes payable |
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— |
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Total current liabilities |
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Long-term liabilities: |
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Long-term debt |
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Other non-current liabilities |
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Deferred income taxes |
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Total long-term liabilities |
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Total liabilities |
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Commitments and contingent liabilities |
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Shareholders’ equity: |
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Common stock - $ |
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Capital in excess of par value |
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Retained earnings |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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Note: The Condensed Balance Sheet at December 31, 2021 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)
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Three Months Ended |
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March 31, |
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(In thousands, except share and per share data) |
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2022 |
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2021 |
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Revenue from operations |
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$ |
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$ |
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Operating expenses: |
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Salaries, wages and benefits |
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Operating supplies and expenses |
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General supplies and expenses |
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Operating taxes and licenses |
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Insurance and claims |
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Communications and utilities |
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Depreciation and amortization |
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Purchased transportation |
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Miscellaneous expenses, net |
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Total operating expenses |
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Operating income |
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Non-operating expense (income): |
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Interest expense |
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Interest income |
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Other expense, net |
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Total non-operating expense |
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Income before income taxes |
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Provision for income taxes |
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Net income |
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$ |
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$ |
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Earnings per share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted average shares outstanding: |
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Basic |
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Diluted |
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Dividends declared per share |
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$ |
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$ |
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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)
(In thousands) |
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Common Stock |
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Capital in Excess of Par Value |
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Retained Earnings |
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Total |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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Share repurchases, including settlements under accelerated share repurchase programs |
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Forward contract for accelerated share repurchases |
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— |
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— |
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Cash dividends declared |
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— |
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— |
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Share-based compensation and share issuances, net of forfeitures |
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— |
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Taxes paid in exchange for shares withheld |
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— |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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(In thousands) |
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Common Stock |
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Capital in Excess of Par Value |
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Retained Earnings |
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Total |
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Balance as of December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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Share repurchases |
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— |
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Forward contract for accelerated share repurchases |
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— |
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— |
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Cash dividends declared |
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— |
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— |
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Share-based compensation and share issuances, net of forfeitures |
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— |
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Taxes paid in exchange for shares withheld |
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— |
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Balance as of March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed financial statements.
4
OLD DOMINION FREIGHT LINE, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Three Months Ended |
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March 31, |
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(In thousands) |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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(Gain) Loss on disposal of property and equipment |
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Other, net |
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Changes in operating assets and liabilities, net |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Proceeds from sale of property and equipment |
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Purchase of short-term investments |
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Proceeds from maturities of short-term investments |
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Net cash used in investing activities |
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Cash flows from financing activities: |
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Payments for share repurchases |
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Forward contract for accelerated share repurchases |
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Dividends paid |
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( |
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Other financing activities, net |
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( |
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Net cash used in financing activities |
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( |
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Decrease in cash and cash equivalents |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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$ |
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$ |
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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.
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Three Months Ended |
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March 31, |
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(In thousands) |
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2022 |
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2021 |
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LTL services |
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$ |
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$ |
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Other services |
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Total revenue from operations |
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$ |
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$ |
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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 March 31, 2022 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 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, 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, 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 $
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.
We entered into accelerated share repurchase agreements with a third-party financial institution on each of 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”).
6
Under the
Under the
Under the
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 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.
During the three months ended March 31, 2022, we utilized cash of $
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:
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Weighted average shares outstanding - basic |
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Dilutive effect of share-based awards |
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Weighted average shares outstanding - diluted |
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7
Note 3. Long-Term Debt
Long-term debt, net of unamortized debt issuance costs, consisted of the following:
(In thousands) |
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March 31, 2022 |
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December 31, 2021 |
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Senior notes |
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$ |
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$ |
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Revolving credit facility |
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Total long-term debt |
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Less: Current maturities |
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Total maturities due after one year |
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$ |
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$ |
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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 $
Credit Agreement
On November 21, 2019, we entered into the Credit Agreement. The Credit Agreement provides for a five-year, $
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
For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were
There were $
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).
8
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 March 31, 2022 and December 31, 2021 is shown in the tables below.
(In thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
March 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Commercial paper |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands) |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit |
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
Commercial paper |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
— |
|
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
The carrying value of our total long-term debt was $
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. 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
10
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 |
||||||
|
|
March 31, |
||||||
|
|
2022 |
|
|
2021 |
|
||
Revenue from operations |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Salaries, wages and benefits |
|
|
45.4 |
|
|
|
48.4 |
|
Operating supplies and expenses |
|
|
12.8 |
|
|
|
11.0 |
|
General supplies and expenses |
|
|
2.4 |
|
|
|
2.8 |
|
Operating taxes and licenses |
|
|
2.3 |
|
|
|
2.8 |
|
Insurance and claims |
|
|
1.1 |
|
|
|
1.2 |
|
Communications and utilities |
|
|
0.7 |
|
|
|
0.7 |
|
Depreciation and amortization |
|
|
4.5 |
|
|
|
5.7 |
|
Purchased transportation |
|
|
3.5 |
|
|
|
3.1 |
|
Miscellaneous expenses, net |
|
|
0.2 |
|
|
|
0.4 |
|
Total operating expenses |
|
|
72.9 |
|
|
|
76.1 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
27.1 |
|
|
|
23.9 |
|
|
|
|
|
|
|
|
|
|
Interest (income) expense, net |
|
|
(0.0 |
) |
|
|
0.0 |
|
Other expense, net |
|
|
0.1 |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
27.0 |
|
|
|
23.9 |
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
7.0 |
|
|
|
6.2 |
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
20.0 |
% |
|
|
17.7 |
% |
Key financial and operating metrics for the three-month periods ended March 31, 2022 and 2021 are presented below:
|
|
Three Months Ended |
||||||||||
|
|
March 31, |
||||||||||
|
|
2022 |
|
|
2021 |
|
|
% Change |
||||
Work days |
|
|
64 |
|
|
|
63 |
|
|
|
1.6 |
% |
Revenue (in thousands) |
|
$ |
1,497,280 |
|
|
$ |
1,126,515 |
|
|
|
32.9 |
% |
Operating ratio |
|
|
72.9 |
% |
|
|
76.1 |
% |
|
|
|
|
Net income (in thousands) |
|
$ |
299,751 |
|
|
$ |
199,359 |
|
|
|
50.4 |
% |
Diluted earnings per share |
|
$ |
2.60 |
|
|
$ |
1.70 |
|
|
|
52.9 |
% |
LTL tons (in thousands) |
|
|
2,653 |
|
|
|
2,332 |
|
|
|
13.8 |
% |
LTL tonnage per day |
|
|
41,454 |
|
|
|
37,010 |
|
|
|
12.0 |
% |
LTL shipments (in thousands) |
|
|
3,340 |
|
|
|
2,904 |
|
|
|
15.0 |
% |
LTL shipments per day |
|
|
52,190 |
|
|
|
46,090 |
|
|
|
13.2 |
% |
LTL weight per shipment (lbs.) |
|
|
1,589 |
|
|
|
1,606 |
|
|
|
(1.1 |
)% |
LTL revenue per hundredweight |
|
$ |
28.13 |
|
|
$ |