odfl-10q_20220331.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 March 31, 2022

☐	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 May 3, 2022 there were 113,353,760 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 – March 31, 2022 and December 31, 2021	1
	Condensed Statements of Operations – For the three months ended March 31, 2022 and 2021	3
	Condensed Statements of Changes in Shareholders’ Equity - For the three months ended March 31, 2022 and 2021	4
	Condensed Statements of Cash Flows – For the three months ended March 31, 2022 and 2021	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	18
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	20
Item 6	Exhibits	20

Exhibit Index		21
Signatures		22

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

	March 31,
	2022			December 31,
(In thousands, except share and per share data)	(Unaudited)			2021
ASSETS
Current assets:
Cash and cash equivalents	$	262,122		$	462,564
Short-term investments		279,183			254,433
Customer receivables, less allowances of $12,118 and $9,855, respectively		669,042			567,474
Income taxes receivable		—			19,218
Other receivables		12,347			12,410
Prepaid expenses and other current assets		58,263			67,688
Total current assets		1,280,957			1,383,787

Property and equipment:
Revenue equipment		2,156,600			2,146,205
Land and structures		2,508,592			2,463,949
Other fixed assets		530,304			512,340
Leasehold improvements		13,486			13,131
Total property and equipment		5,208,982			5,135,625
Accumulated depreciation		(1,983,674	)		(1,919,939	)
Net property and equipment		3,225,308			3,215,686

Other assets		216,385			222,071
Total assets	$	4,722,650		$	4,821,544

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.

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS

(CONTINUED)

	March 31,
	2022		December 31,
(In thousands, except share and per share data)	(Unaudited)		2021
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	117,850	$	82,519
Compensation and benefits		223,096		257,905
Claims and insurance accruals		63,229		61,822
Other accrued liabilities		91,135		61,988
Income taxes payable		83,286	—
Total current liabilities		578,596		464,234

Long-term liabilities:
Long-term debt		99,951		99,947
Other non-current liabilities		292,078		328,838
Deferred income taxes		248,718		248,718
Total long-term liabilities		640,747		677,503
Total liabilities		1,219,343		1,141,737

Commitments and contingent liabilities

Shareholders’ equity:
Common stock - $0.10 par value, 280,000,000 shares authorized, 113,761,155 and 115,011,172 shares outstanding at March 31, 2022 and December 31, 2021, respectively		11,376		11,501
Capital in excess of par value		133,172		174,445
Retained earnings		3,358,759		3,493,861
Total shareholders’ equity		3,503,307		3,679,807
Total liabilities and shareholders’ equity	$	4,722,650	$	4,821,544

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

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended
	March 31,
(In thousands, except share and per share data)	2022			2021
Revenue from operations	$	1,497,280		$	1,126,515

Operating expenses:
Salaries, wages and benefits		680,189			545,659
Operating supplies and expenses		191,357			124,156
General supplies and expenses		35,513			31,168
Operating taxes and licenses		35,076			31,266
Insurance and claims		16,107			12,922
Communications and utilities		9,876			8,196
Depreciation and amortization		67,340			63,987
Purchased transportation		52,500			34,714
Miscellaneous expenses, net		3,704			4,790
Total operating expenses		1,091,662			856,858

Operating income		405,618			269,657

Non-operating expense (income):
Interest expense		73			507
Interest income		(129	)		(286	)
Other expense, net		605			128
Total non-operating expense		549			349

Income before income taxes		405,069			269,308

Provision for income taxes		105,318			69,949

Net income	$	299,751		$	199,359

Earnings per share:
Basic	$	2.62		$	1.71
Diluted	$	2.60		$	1.70

Weighted average shares outstanding:
Basic		114,418,703			116,497,893
Diluted		115,172,776			117,255,740

Dividends declared per share	$	0.30		$	0.20

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

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In thousands)	Common Stock			Capital in Excess of Par Value			Retained Earnings			Total
Balance as of December 31, 2021	$	11,501		$	174,445		$	3,493,861		$	3,679,807
Net income		—			—			299,751			299,751
Share repurchases, including settlements under accelerated share repurchase programs		(127	)		62,500			(400,725	)		(338,352	)
Forward contract for accelerated share repurchases		—			(100,000	)		—			(100,000	)
Cash dividends declared		—			—			(34,128	)		(34,128	)
Share-based compensation and share issuances, net of forfeitures		5			4,286			—			4,291
Taxes paid in exchange for shares withheld		(3	)		(8,059	)		—			(8,062	)
Balance as of March 31, 2022	$	11,376		$	133,172		$	3,358,759		$	3,503,307


(In thousands)	Common Stock			Capital in Excess of Par Value			Retained Earnings			Total
Balance as of December 31, 2020	$	11,706		$	226,451		$	3,088,131		$	3,326,288
Net income		—			—			199,359			199,359
Share repurchases		(113	)		—			(240,102	)		(240,215	)
Forward contract for accelerated share repurchases		—			(68,750	)		—			(68,750	)
Cash dividends declared		—			—			(23,193	)		(23,193	)
Share-based compensation and share issuances, net of forfeitures		5			2,964			—			2,969
Taxes paid in exchange for shares withheld		(2	)		(4,539	)		—			(4,541	)
Balance as of March 31, 2021	$	11,596		$	156,126		$	3,024,195		$	3,191,917

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

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Three Months Ended
	March 31,
(In thousands)	2022			2021
Cash flows from operating activities:
Net income	$	299,751		$	199,359
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		67,344			63,991
(Gain) Loss on disposal of property and equipment		(1,205	)		603
Other, net		8,115			6,124
Changes in operating assets and liabilities, net		14,720			40,231
Net cash provided by operating activities		388,725			310,308

Cash flows from investing activities:
Purchase of property and equipment		(93,713	)		(50,953	)
Proceeds from sale of property and equipment		10,455			7,656
Purchase of short-term investments		(75,162	)		(89,965	)
Proceeds from maturities of short-term investments		49,966			110,190
Net cash used in investing activities		(108,454	)		(23,072	)

Cash flows from financing activities:
Payments for share repurchases		(338,352	)		(240,215	)
Forward contract for accelerated share repurchases		(100,000	)		(68,750	)
Dividends paid		(34,196	)		(23,232	)
Other financing activities, net		(8,165	)		(4,569	)
Net cash used in financing activities		(480,713	)		(336,766	)

Decrease in cash and cash equivalents		(200,442	)		(49,530	)
Cash and cash equivalents at beginning of period		462,564			401,430
Cash and cash equivalents at end of period	$	262,122		$	351,900

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

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
	March 31,
(In thousands)	2022		2021
LTL services	$	1,475,781	$	1,109,622
Other services		21,499		16,893
Total revenue from operations	$	1,497,280	$	1,126,515

Basis of Presentation

The accompanying unaudited, interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and, in management’s opinion, contain all adjustments (consisting of normal recurring items) necessary for a fair presentation, in all material respects, of the financial position and results of operations for the periods presented. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements.

The preparation of condensed financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Our operating results are subject to seasonal trends; therefore, the results of operations for the interim period ended 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 $700.0 million of our outstanding common stock (the “2020 Repurchase Program”). The 2020 Repurchase Program became effective upon the termination of our $350.0 million repurchase program on May 29, 2020. On July 28, 2021, we announced that our Board of Directors had approved a new stock repurchase program authorizing us to repurchase up to an aggregate of $2.0 billion of our outstanding common stock (the “2021 Repurchase Program”). The 2021 Repurchase Program, which does not have an expiration date, began after the completion of the 2020 Repurchase Program in January 2022.

Under our repurchase programs, we may repurchase shares from time to time in open market purchases or through privately negotiated transactions. Shares of our common stock repurchased under our repurchase programs are canceled at the time of repurchase and are classified as authorized but unissued shares of our common stock.

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”).

Under the February 2021 ASR Agreement, we made a prepayment of $275.0 million to the financial institution and received an initial delivery of 960,330 shares of our common stock valued at $206.3 million. The remaining balance of $68.7 million was settled during the third quarter of 2021, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the February 2021 ASR Agreement, we repurchased 1,101,046 shares for $275.0 million.

Under the August 2021 ASR Agreement, we made a prepayment of $250.0 million to the financial institution and received an initial delivery of 655,365 shares of our common stock valued at $187.5 million. The remaining balance of $62.5 million was settled during the first quarter of 2022, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the August 2021 ASR Agreement, we repurchased 778,775 shares for $250.0 million.

Under the February 2022 ASR Agreement, we paid the third-party financial institution $400.0 million and received an initial delivery of 1,018,157 shares of our common stock for $300.0 million, representing approximately 75% of the total value of shares to be received by us under the February 2022 ASR Agreement. The remaining balance of $100.0 million was settled during April 2022, with the final number of shares received based on the daily volume-weighted average share price of our common stock over the term of the agreement, less a negotiated discount. Under the February 2022 ASR Agreement, we repurchased 1,390,966 shares for $400.0 million.

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 $438.4 million for repurchases of shares in the open market and under the February 2022 ASR Agreement. We received total shares of 1,273,060 during the first quarter of 2022, including 123,410 shares for the settlement of the August 2021 ASR Agreement. At March 31, 2022, we had $1.62 billion remaining available under the 2021 Repurchase Program, including $100.0 million that was deferred until final settlement occurred on the February 2022 ASR Agreement, leaving $1.52 billion remaining available and uncommitted.

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
	March 31,
	2022		2021
Weighted average shares outstanding - basic		114,418,703		116,497,893
Dilutive effect of share-based awards		754,073		757,847
Weighted average shares outstanding - diluted		115,172,776		117,255,740

Note 3. Long-Term Debt

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

(In thousands)	March 31, 2022		December 31, 2021
Senior notes	$	99,951	$	99,947
Revolving credit facility		—		—
Total long-term debt		99,951		99,947
Less: Current maturities		—		—
Total maturities due after one year	$	99,951	$	99,947

Senior Note Agreement

On May 4, 2020, we entered into a Note Purchase and Private Shelf Agreement with PGIM, Inc. (“Prudential”) and certain affiliates and managed accounts of Prudential (the “Note Agreement”). The Note Agreement, which is uncommitted and subject to Prudential’s sole discretion, provides for the issuance of senior promissory notes with an aggregate principal amount of up to $350.0 million through May 4, 2023. Pursuant to the Note Agreement, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”), the proceeds of which are available for capital expenditures, share repurchases, dividends, acquisitions, or general corporate purposes. Borrowing availability under the Note Agreement is reduced by the outstanding amount of the existing Series B Notes, and all other senior promissory notes issued pursuant to the Note Agreement.

The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, unless prepaid. Principal payments are required annually beginning on May 4, 2023 in equal installments of $20.0 million through May 4, 2027. The Series B Notes are senior unsecured obligations and rank pari passu with borrowings under our second amended and restated credit agreement with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”) or Note Agreement.

Credit Agreement

On November 21, 2019, we entered into the Credit Agreement. The Credit Agreement provides for a five-year, $250.0 million senior unsecured revolving line of credit and a $150.0 million accordion feature, which if fully exercised and approved, would expand the total borrowing capacity up to an aggregate of $400.0 million. Of the $250.0 million line of credit commitments under the Credit Agreement, up to $100.0 million may be used for letters of credit.

At our option, borrowings under the Credit Agreement bear interest at either: (i) LIBOR (including applicable successor provisions) plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin (based on our ratio of net debt-to-total capitalization) that ranges from 0.000% to 0.375%. Letter of credit fees equal to the applicable margin for LIBOR loans are charged quarterly in arrears on the daily average aggregate stated amount of all letters of credit outstanding during the quarter. Commitment fees ranging from 0.100% to 0.175% (based upon the ratio of net debt-to-total capitalization) are charged quarterly in arrears on the aggregate unutilized portion of the Credit Agreement.

For periods covered under the Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees were 1.000% and commitment fees were 0.100%.

There were $40.8 million and $39.2 million of outstanding letters of credit at March 31, 2022 and December 31, 2021, respectively.

General Debt Provisions

The Credit Agreement and Note Agreement contain customary covenants, including financial covenants that require us to observe a maximum ratio of debt to total capital and a minimum fixed charge coverage ratio. The Credit Agreement and Note Agreement also include a provision limiting our ability to make restricted payments, including dividends and payments for share repurchases, unless, among other conditions, no defaults or events of default are ongoing (or would be caused by such restricted payment).

Note 4. Commitments and Contingencies

We are involved in or addressing various legal proceedings and claims, governmental inquiries, notices and investigations that have arisen in the ordinary course of our business and have not been fully adjudicated, some of which may be covered in whole or in part by insurance. Certain of these matters include collective and/or class-action allegations. We do not believe that the resolution of any of these matters will have a material adverse effect upon our financial position, results of operations or cash flows.

Note 5. Fair Value Measurements

Short-term Investments

A summary of the fair value of our short-term investments as of 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	$	40,034	$	—	$	40,034	$	—
Commercial paper		239,149		—		239,149		—
	$	279,183	$	—	$	279,183	$	—

(In thousands)	Total		Level 1		Level 2		Level 3
December 31, 2021
Certificates of deposit	$	40,014	$	—	$	40,014	$	—
Commercial paper		214,419		—		214,419		—
	$	254,433	$	—	$	254,433	$	—

Our certificates of deposit are measured at carrying value including accrued interest, which approximates fair value due to their short-term nature. Our commercial paper is valued using broker quotes that utilize observable market inputs.

Long-term Debt

The carrying value of our total long-term debt was $100.0 million and $99.9 million at March 31, 2022 and December 31, 2021, respectively. The estimated fair value of our total long-term debt was $98.1 million and $104.5 million at March 31, 2022 and December 31, 2021, respectively. The fair value measurement of our senior note was determined using a discounted cash flow analysis that factors in current market yields for comparable borrowing arrangements under our credit profile. Since this methodology is based upon market yields for comparable arrangements, the measurement is categorized as Level 2 under the three-level fair value hierarchy as established by the Financial Accounting Standards Board.

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

Overview

We are one of the largest North American less-than-truckload (“LTL”) motor carriers. We provide regional, inter-regional and national LTL services through a single integrated, union-free organization. Our service offerings, which include expedited transportation, are provided through an expansive network of service centers located throughout the continental United States. Through strategic alliances, we also provide LTL services throughout North America. In addition to our core LTL services, we offer a range of value-added services including container drayage, truckload brokerage and supply chain consulting. More than 98% of our revenue has historically been derived from transporting LTL shipments for our customers, whose demand for our services is generally tied to industrial production and the overall health of the U.S. domestic economy.

In analyzing the components of our revenue, we monitor changes and trends in our LTL volumes and LTL revenue per hundredweight. While LTL revenue per hundredweight is a yield measurement, it is also a commonly-used indicator for general pricing trends in the LTL industry. This yield metric is not a true measure of price, however, as it can be influenced by many other factors, such as changes in fuel surcharges, weight per shipment and length of haul. As a result, changes in revenue per hundredweight do not necessarily indicate actual changes in underlying base rates. LTL revenue per hundredweight and the key factors that can impact this metric are described in more detail below:

•

LTL Revenue Per Hundredweight - Our LTL transportation services are generally priced based on weight, commodity, and distance. This measurement reflects the application of our pricing policies to the services we provide, which are influenced by competitive market conditions and our growth objectives. Generally, freight is rated by a class system, which is established by the National Motor Freight Traffic Association, Inc. Light, bulky freight typically has a higher class and is priced at higher revenue per hundredweight than dense, heavy freight. Fuel surcharges, accessorial charges, revenue adjustments and revenue for undelivered freight are included in this measurement. Revenue for undelivered freight is deferred for financial statement purposes in accordance with our revenue recognition policy; however, we believe including it in our revenue per hundredweight metrics results in a more accurate representation of the underlying changes in our yields by matching total billed revenue with the corresponding weight of those shipments.

•

LTL Weight Per Shipment - Fluctuations in weight per shipment can indicate changes in the mix of freight we receive from our customers, as well as changes in the number of units included in a shipment. Generally, increases in weight per shipment indicate higher demand for our customers’ products and overall increased economic activity. Changes in weight per shipment can also be influenced by shifts between LTL and other modes of transportation, such as truckload and intermodal, in response to capacity, service and pricing issues. Fluctuations in weight per shipment generally have an inverse effect on our revenue per hundredweight, as a decrease in weight per shipment will typically cause an increase in revenue per hundredweight.

•

Average Length of Haul - We consider lengths of haul less than 500 miles to be regional traffic, lengths of haul between 500 miles and 1,000 miles to be inter-regional traffic, and lengths of haul in excess of 1,000 miles to be national traffic. This metric is used to analyze our tonnage and pricing trends for shipments with similar characteristics, and also allows for comparison with other transportation providers serving specific markets. By analyzing this metric, we can determine the success and growth potential of our service products in these markets. Changes in length of haul generally have a direct effect on our revenue per hundredweight, as an increase in length of haul will typically cause an increase in revenue per hundredweight.

•

LTL Revenue Per Shipment - This measurement is primarily determined by the three metrics listed above and is used in conjunction with the number of LTL shipments we receive to evaluate LTL revenue.

Our primary revenue focus is to increase density, which is shipment and tonnage growth within our existing infrastructure. Increases in density allow us to maximize our asset utilization and labor productivity, which we measure over many different functional areas of our operations including linehaul load factor, pickup and delivery (“P&D”) stops per hour, P&D shipments per hour, platform pounds handled per hour and platform shipments per hour. In addition to our focus on density and operating efficiencies, it is critical for us to obtain an appropriate yield, which is measured as revenue per hundredweight, on the shipments we handle to offset our cost inflation and support our ongoing investments in capacity and technology. We regularly monitor the components of our pricing, including base freight rates, accessorial charges and fuel surcharges. The fuel surcharge is generally designed to offset fluctuations in the cost of our petroleum-based products and is indexed to diesel fuel prices published by the U.S. Department of Energy, which reset each week. We believe our yield management process focused on individual account profitability, and ongoing improvements in operating efficiencies, are both key components of our ability to produce profitable growth.

Our primary cost elements are direct wages and benefits associated with the movement of freight, operating supplies and expenses, which include diesel fuel, and depreciation of our equipment fleet and service center facilities. We gauge our overall success

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		$