Old Dominion Freight Line(ODFL) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited condensed financial statements, reflecting declines in Q2 and H1 2025 revenue, net income, and EPS due to a soft economy and decreased LTL volumes Condensed Balance Sheets Provides a snapshot of the company's assets, liabilities, and shareholders' equity as of June 30, 2025, and December 31, 2024 Condensed Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $24,057 | $108,676 | $(84,619) | (77.9)% | | Total current assets | $698,143 | $720,683 | $(22,540) | (3.1)% | | Net property and equipment | $4,590,436 | $4,505,431 | $85,005 | 1.9% | | Total assets | $5,551,096 | $5,491,395 | $59,701 | 1.1% | | Total current liabilities | $506,863 | $540,529 | $(33,666) | (6.2)% | | Long-term debt | $149,992 | $39,987 | $110,005 | 275.1% | | Total liabilities | $1,320,465 | $1,246,807 | $73,658 | 5.9% | | Total shareholders' equity | $4,230,631 | $4,244,588 | $(13,957) | (0.3)% | - Long-term debt significantly increased by $110.0 million, or 275.1%, from December 31, 2024, to June 30, 2025, primarily due to net borrowings under the credit agreement[14][40][72] Condensed Statements of Operations Details the company's financial performance, including revenue, operating expenses, net income, and EPS for Q2 and the first six months of 2025 and 2024 Condensed Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Revenue from operations | $1,407,724 | $1,498,697 | (6.1)% | $2,782,582 | $2,958,770 | (6.0)% | | Total operating expenses | $1,049,829 | $1,077,006 | (2.5)% | $2,086,632 | $2,150,653 | (3.0)% | | Operating income | $357,895 | $421,691 | (15.1)% | $695,950 | $808,117 | (13.9)% | | Net income | $268,626 | $322,045 | (16.6)% | $523,286 | $614,349 | (14.8)% | | Diluted earnings per share | $1.27 | $1.48 | (14.2)% | $2.46 | $2.82 | (12.8)% | | Operating ratio | 74.6% | 71.9% | 2.7 ppt | 75.0% | 72.7% | 2.3 ppt | | Dividends declared per share | $0.28 | $0.26 | 7.7% | $0.56 | $0.52 | 7.7% | - The operating ratio increased to 74.6% for Q2 2025 (from 71.9% in Q2 2024) and to 75.0% for the first six months of 2025 (from 72.7% in the same period of 2024), indicating a decrease in profitability[18][61] Condensed Statements of Changes in Shareholders' Equity Outlines changes in shareholders' equity, including net income, share repurchases, and cash dividends, for the six months ended June 30, 2025, and 2024 Changes in Shareholders' Equity (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Balance as of December 31 | $4,244,588 | $4,257,811 | | Net income | $523,286 | $614,349 | | Share repurchases, including transaction costs | $(419,299) | $(602,851) | | Cash dividends declared | $(118,497) | $(112,557) | | Total Shareholders' Equity (June 30) | $4,230,631 | $4,111,899 | - Share repurchases decreased to $419.3 million for the first six months of 2025, compared to $602.9 million in the same period of 2024[20][72] - Cash dividends declared increased to $0.56 per share for the first six months of 2025, up from $0.52 per share in the same period of 2024[18][20][80] Condensed Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Condensed Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change | | :----------------------------------- | :--------- | :--------- | :------- | | Net cash provided by operating activities | $622,366 | $811,748 | $(189,382) | | Net cash used in investing activities | $(268,151) | $(382,809) | $114,658 | | Net cash used in financing activities | $(438,834) | $(788,434) | $349,600 | | Decrease in cash and cash equivalents | $(84,619) | $(359,495) | $274,876 | | Cash and cash equivalents at end of period | $24,057 | $74,304 | $(50,247) | - Net cash provided by operating activities decreased by $189.4 million, or 23.3%, for the first six months of 2025, primarily due to lower net income and changes in working capital[22][71] - Net cash used in investing activities decreased by $114.7 million, or 30.0%, mainly due to a reduction in capital expenditures for 2025 compared to 2024[22][72] - Net cash used in financing activities decreased by $349.6 million, or 44.3%, driven by lower share repurchases and increased net borrowings under the credit agreement[22][72] Notes to the Condensed Financial Statements Provides detailed information on accounting policies, EPS, long-term debt, commitments, fair value, and segment operations, including updates on stock repurchases and credit capacity Note 1. Significant Accounting Policies Outlines the company's core accounting principles and operational structure as a major North American LTL motor carrier - Old Dominion Freight Line, Inc. operates as one of the largest North American less-than-truckload (LTL) motor carriers, providing regional, inter-regional, and national LTL services, along with value-added services like container drayage and truckload brokerage[25][54] Revenue from Operations (in thousands) | Service Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | LTL services | $1,395,112 | $1,484,967 | $2,755,951 | $2,931,700 | | Other services | $12,612 | $13,730 | $26,631 | $27,070 | | Total revenue | $1,407,724 | $1,498,697 | $2,782,582 | $2,958,770 | - The 2021 Repurchase Program was completed in May 2024, and the new 2023 Repurchase Program, authorizing up to $3.0 billion, began thereafter with $1.85 billion remaining authorized at June 30, 2025[30][33][77][78] - New accounting pronouncements (ASU 2023-09 and ASU 2024-03/2025-01) will require additional disclosures but are not expected to impact financial condition, results of operations, or cash flows[34][35] Note 2. Earnings Per Share Details the calculation of basic and diluted earnings per share, reflecting the impact of share repurchases on weighted average shares outstanding Weighted Average Shares Outstanding (in thousands) | Share Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Weighted average shares - basic | 211,083 | 216,369 | 211,739 | 216,981 | | Dilutive effect of share-based awards | 1,081 | 1,172 | 1,082 | 1,193 | | Weighted average shares - diluted | 212,164 | 217,541 | 212,821 | 218,174 | - Basic and diluted weighted average shares outstanding decreased year-over-year for both the three and six-month periods ended June 30, 2025, reflecting the impact of share repurchases[18][39] Note 3. Long-Term Debt Provides details on the company's long-term debt composition, including senior notes and credit agreement borrowings, and recent changes in borrowing capacity Long-Term Debt Composition (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Senior notes | $39,992 | $59,987 | | Credit agreement borrowings | $130,000 | — | | Total long-term debt | $169,992 | $59,987 | | Less: Current maturities | $(20,000) | $(20,000) | | Total maturities due after one year | $149,992 | $39,987 | - The company exercised an accordion feature on May 23, 2025, increasing its Credit Agreement borrowing capacity by $150.0 million to an aggregate of $400.0 million, with $231.8 million available at June 30, 2025[43][46][84][87] - The Series B Notes bear interest at 3.10% per annum and mature on May 4, 2027, with remaining $40.0 million to be paid in two equal annual installments[42][83] Note 4. Commitments and Contingencies Addresses the company's involvement in legal proceedings and claims, assessing their potential financial impact - The company is involved in various legal proceedings and claims but does not believe their resolution will have a material adverse effect on its financial position, results of operations, or cash flows[48] Note 5. Fair Value Measurements Explains the methodologies used to determine the fair value of the company's long-term debt instruments Fair Value of Long-Term Debt (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Carrying value of total long-term debt | $170,000 | $60,000 | | Estimated fair value of total long-term debt | $168,400 | $56,500 | - The fair value of Credit Agreement borrowings approximates carrying value due to variable interest rates, while Series B Notes fair value is determined using discounted cash flow analysis (Level 2 hierarchy)[49] Note 6. Segment Information Clarifies the company's operational structure as a single reportable segment and how the chief operating decision maker utilizes financial information - The company operates as a single operating and reportable segment, providing LTL services across North America[50] - The President and CEO, as the chief operating decision maker, reviews company-wide financial information and uses Net Income to make capital allocation decisions, prioritizing capital expenditures for growth, followed by share repurchases, dividends, and acquisitions[51] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance, liquidity, and capital resources, highlighting economic impact on revenue and profitability, operating cost changes, and capital allocation strategies Overview Introduces the company's business model as a leading LTL motor carrier and its key operational and financial objectives - The company is a major North American LTL motor carrier, with over 98% of revenue from LTL shipments, closely tied to industrial production and the U.S. domestic economy[54] - Primary revenue focus is to increase density (shipment and tonnage growth) to maximize asset utilization and labor productivity, alongside a yield-management philosophy to offset cost inflation and support investments[56] - Key metrics monitored include LTL revenue per hundredweight (influenced by fuel surcharges, weight per shipment, length of haul), LTL weight per shipment, average length of haul, and LTL revenue per shipment[55][57] - The operating ratio (total operating expenses divided by revenue) is used to gauge overall success in managing costs and for industry comparisons[58] Results of Operations Analyzes the company's financial and operating performance for Q2 and the first six months of 2025 compared to the prior year, detailing revenue, expenses, and key LTL metrics Key Financial and Operating Metrics (Q2 and 6 Months Ended June 30) | Metric | Q2 2025 | Q2 2024 | % Change | 6M 2025 | 6M 2024 | % Change | | :------------------------------------ | :------ | :------ | :------- | :------ | :------ | :------- | | Revenue (in thousands) | $1,407,724 | $1,498,697 | (6.1)% | $2,782,582 | $2,958,770 | (6.0)% | | Operating ratio | 74.6% | 71.9% | 2.7 ppt | 75.0% | 72.7% | 2.3 ppt | | Net income (in thousands) | $268,626 | $322,045 | (16.6)% | $523,286 | $614,349 | (14.8)% | | Diluted earnings per share | $1.27 | $1.48 | (14.2)% | $2.46 | $2.82 | (12.8)% | | LTL tons per day | 33,178 | 36,560 | (9.3)% | 33,157 | 35,970 | (7.8)% | | LTL shipments per day | 44,907 | 48,444 | (7.3)% | 44,738 | 47,687 | (6.2)% | | LTL revenue per hundredweight | $32.84 | $31.77 | 3.4% | $32.76 | $31.87 | 2.8% | | LTL revenue per hundredweight (excl. fuel surcharges) | N/A | N/A | 5.3% | N/A | N/A | 4.7% | | Average length of haul (miles) | 912 | 918 | (0.7)% | 914 | 919 | (0.5)% | - Revenue decreased due to lower LTL volumes (tonnage per day down 9.3% in Q2 2025), reflecting continued softness in the domestic economy[61][62] - LTL revenue per hundredweight increased by 3.4% in Q2 2025 (5.3% excluding fuel surcharges), driven by the company's yield management strategy to offset cost inflation[63] - Salaries, wages, and benefits decreased due to a 4.8% reduction in average active full-time employees, balancing the workforce with current shipping trends, but productive labor costs as a percent of revenue increased due to decreased network density[65][66] - Operating supplies and expenses decreased due to lower diesel fuel costs (average cost per gallon down 10.9% in Q2 2025) and reduced maintenance and repair costs from fleet improvements[68] - Depreciation and amortization costs increased by 7.2% in Q2 2025, primarily due to assets acquired through 2024 and 2025 capital expenditure programs, with further increases expected[69] - For July 2025, revenue per day decreased 4.5%, LTL tons per day decreased 8.3%, while LTL revenue per hundredweight increased 4.2% (4.6% excluding fuel surcharges) compared to July 2024[64] Liquidity and Capital Resources Discusses the company's sources of liquidity, capital expenditure plans, dividend policy, and compliance with financial covenants - Primary liquidity sources include cash flows from operations, existing cash, and available borrowings under the Credit Agreement and Note Agreement[73] Net Capital Expenditures for Property and Equipment (in thousands) | Category | Six Months Ended June 30, 2025 | Year Ended December 31, 2024 | Year Ended December 31, 2023 | | :---------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Land and structures | $120,613 | $373,416 | $291,070 | | Tractors | $104,949 | $218,682 | $203,417 | | Trailers | $20,784 | $103,919 | $181,534 | | Technology | $8,283 | $28,037 | $44,358 | | Other equipment and assets | $20,684 | $47,264 | $36,930 | | Less: Proceeds from sales | $(7,062) | $(20,124) | $(48,637) | | Total | $268,251 | $751,194 | $708,672 | - Estimated capital expenditures for 2025 are approximately $450 million, allocated to service center facilities ($210 million), tractors and trailers ($190 million), and technology/other assets ($50 million)[76] - The company intends to pay a quarterly cash dividend, with the 2025 dividend declared at $0.28 per share, an increase from $0.26 per share in 2024[80][81] - The Credit Agreement and Note Agreement contain financial covenants, including a maximum debt to total capital ratio and a minimum fixed charge coverage ratio, with the company in compliance as of June 30, 2025[47][88] Critical Accounting Policies States that the company continues to apply the same critical accounting policies as outlined in its previous annual report - The company applied the same critical accounting policies as described in its Annual Report on Form 10-K for the year ended December 31, 2024[91] Seasonality Explains how the company's tonnage levels, revenue mix, and operating margins are affected by seasonal trends, particularly during winter months - The company's tonnage levels and revenue mix are subject to seasonal trends, with lower revenue and operating margins typically in the first and fourth quarters due to reduced shipments during winter months[92] Environmental Regulation Addresses the company's compliance with environmental laws and regulations and the expected financial impact of future compliance costs - The company is subject to various federal, state, and local environmental laws and regulations but does not believe the cost of future compliance will have a material adverse effect on its operations or financial condition for fiscal year 2025[93] Forward-Looking Information Highlights that the report contains forward-looking statements subject to risks and uncertainties, advising caution against undue reliance - The report contains forward-looking statements subject to risks and uncertainties, including those detailed in the Annual Report on Form 10-K, such as economic downturns, changes in customer relationships, and increased operating costs[94][95] - The company cautions readers not to place undue reliance on forward-looking statements, as actual results may differ materially from expectations, and undertakes no obligation to update them[97] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes to the company's market risk exposures have occurred since the most recent fiscal year-end - No material changes to market risk exposures have occurred since the fiscal year ended December 31, 2024[98] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[99] - There were no material changes in internal control over financial reporting during the last fiscal quarter[100] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in legal proceedings but does not expect a material adverse effect on its financial condition, with no significant environmental sanctions disclosed - The company does not believe that the resolution of current legal proceedings and claims will have a material adverse effect on its financial position, results of operations, or cash flows[103] - No environmental legal proceedings with potential monetary sanctions of $1.0 million or more were disclosed as of June 30, 2025[104] Item 1A. Risk Factors No material changes to the risk factors identified in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to the risk factors identified in the Annual Report on Form 10-K for the year ended December 31, 2024[106] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,362,457 shares in Q2 2025 at an average of $157.98 per share, with $1.85 billion remaining under the 2023 Repurchase Program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs | | :--- | :--- | :--- | :--- | | April 1-30, 2025 | 524,230 | $153.22 | $1,981,442,081 | | May 1-31, 2025 | 466,063 | $161.03 | $1,906,723,150 | | June 1-30, 2025 | 372,164 | $160.86 | $1,847,200,093 | | Total | 1,362,457 | $157.98 | | - As of June 30, 2025, $1.85 billion remained authorized under the 2023 Repurchase Program, which has no expiration date[109] Item 5. Other Information No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by Board members or Section 16 officers in Q2 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by Board members or Section 16 officers during the three months ended June 30, 2025[110] Item 6. Exhibits Lists all exhibits filed with the report, including credit agreement amendments, stock incentive plans, and certifications Exhibit Index Provides an index of key documents filed as exhibits, such as credit agreement amendments and stock incentive plans - Key exhibits include the Second Amendment to Third Amended and Restated Credit Agreement (May 23, 2025), Old Dominion Freight Line, Inc. 2025 Stock Incentive Plan, and related award agreements[114] Signatures The report was signed on August 6, 2025, by the Executive Vice President and CFO, and the Vice President - Accounting and Finance - The report was signed on August 6, 2025, by Adam N. Satterfield (EVP and CFO) and Clayton G. Brinker (VP - Accounting and Finance)[118]