Old Dominion Freight Line(ODFL) - 2022 Q2 - Quarterly Report

Part I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements for Q2 and H1 2022, including balance sheets, operations, equity, and cash flows, reflecting significant growth Condensed Balance Sheets As of June 30, 2022, total assets decreased slightly to $4.79 billion, while total liabilities increased to $1.24 billion, leading to a decrease in shareholders' equity to $3.56 billion Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total current assets | $1,209,090 | $1,383,787 | | Net property and equipment | $3,378,732 | $3,215,686 | | Total assets | $4,793,867 | $4,821,544 | | Total current liabilities | $628,178 | $464,234 | | Total liabilities | $1,238,038 | $1,141,737 | | Total shareholders' equity | $3,555,829 | $3,679,807 | Condensed Statements of Operations For Q2 2022, revenue grew 26.4% to $1.67 billion and net income rose 39.5% to $376.1 million, with similar strong growth for the first six months Key Performance Indicators (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | YoY Change | H1 2022 | H1 2021 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,667,448 | $1,319,409 | +26.4% | $3,164,728 | $2,445,924 | +29.4% | | Operating Income | $508,705 | $366,044 | +39.0% | $914,323 | $635,701 | +43.8% | | Net Income | $376,078 | $269,576 | +39.5% | $675,829 | $468,935 | +44.1% | | Diluted EPS | $3.30 | $2.31 | +42.9% | $5.90 | $4.01 | +47.1% | - Dividends declared per share increased to $0.30 in Q2 2022 from $0.20 in Q2 2021, a 50% increase[14] Condensed Statements of Changes in Shareholders' Equity Shareholders' equity decreased to $3.56 billion by June 30, 2022, primarily due to $632 million in share repurchases offsetting net income - For the six months ended June 30, 2022, the company executed share repurchases totaling $631.9 million and paid cash dividends of $67.9 million[16] Condensed Statements of Cash Flows Net cash from operating activities significantly increased to $816.1 million for H1 2022, while increased investing and financing activities led to a net decrease in cash of $266.4 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $816,053 | $508,291 | | Net cash used in investing activities | ($274,248) | ($25,490) | | Net cash used in financing activities | ($808,235) | ($400,027) | | (Decrease) Increase in cash | ($266,430) | $82,774 | Notes to the Condensed Financial Statements Notes detail the company's primary LTL business, ongoing $2.0 billion stock repurchase program with $1.22 billion remaining, $100.0 million in long-term debt, and no material impact from legal proceedings - The company's business is predominantly LTL services, which generated $3.12 billion of the $3.16 billion total revenue for the first six months of 2022[22] - A new $2.0 billion stock repurchase program began in January 2022. As of June 30, 2022, $1.22 billion remained authorized under this program[27][30] - Total long-term debt stood at $99.96 million as of June 30, 2022, primarily from senior notes maturing in 2027. The company also has a $250 million revolving credit facility, which was undrawn[34][37][38] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes record Q2 and H1 2022 revenue and profitability to market share gains and yield management, with the operating ratio improving to 69.5% and $835 million in planned capital expenditures - The company achieved record revenue and profitability for Q2 and H1 2022, with the operating ratio improving by 280 basis points to 69.5% for the second quarter[54] - Q2 2022 revenue growth of 26.4% was driven by a 2.8% increase in LTL tonnage per day and a 22.6% increase in LTL revenue per hundredweight[53][55][56] - Excluding fuel surcharges, LTL revenue per hundredweight increased 9.3% in Q2 2022, reflecting the company's focus on yield management to offset rising costs and fund investments[56] - The company estimates total capital expenditures for 2022 to be approximately $835 million, allocated towards service centers ($300 million), tractors and trailers ($485 million), and technology ($50 million)[70] Results of Operations Q2 2022 revenue grew 26.4% to $1.67 billion with an improved operating ratio of 69.5%, while expenses rose due to increased employees and a 99.8% surge in diesel fuel costs Key Operating Metrics (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | % Change | | :--- | :--- | :--- | :--- | | LTL tonnage per day | 41,746 | 40,600 | +2.8% | | LTL shipments per day | 53,096 | 51,672 | +2.8% | | LTL revenue per hundredweight | $30.78 | $25.10 | +22.6% | | Operating ratio | 69.5% | 72.3% | -280 bps | - Salaries, wages, and benefits rose to $705.7 million in Q2 2022, driven by a 15.1% increase in the average number of active full-time employees and an annual wage increase from September 2021[58][59] - Operating supplies and expenses increased significantly, primarily due to a 99.8% year-over-year increase in the average cost per gallon of diesel fuel in Q2 2022[62] Liquidity and Capital Resources The company maintains strong liquidity with $816.1 million in H1 2022 operating cash flow, plans $835 million in 2022 capital expenditures, and returned $731.9 million to shareholders via repurchases and dividends - Primary sources of liquidity are cash from operations, cash and cash equivalents, short-term investments, a $250 million credit agreement, and a $350 million note agreement[67][68] - The 2022 capital expenditure plan is approximately $835 million, intended to support long-term market share growth[70] - The Board of Directors declared a cash dividend of $0.30 per share for each of the first two quarters of 2022, a 50% increase from the $0.20 per share paid in each quarter of 2021[74] - As of June 30, 2022, the company had $211.2 million in available borrowing capacity under its revolving credit facility and was in compliance with all debt covenants[81][82] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company reports no material changes to market risk exposures since December 31, 2021, with interest rate exposure limited to its Credit Agreement - There have been no material changes to the company's market risk exposures since December 31, 2021[92] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[93] - No changes occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[94] Part II – OTHER INFORMATION Item 1. Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse effect, with a $1.36 million consent judgment resolving a California environmental investigation - The company does not believe that the resolution of any current legal matters will have a material adverse effect on its financial position, results of operations, or cash flows[97] - On July 26, 2022, a consent judgment was entered to resolve claims regarding waste handling practices in California, requiring an aggregate payment of $1.36 million[99] Item 1A. Risk Factors No material changes have occurred to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have been identified to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[101] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,530,454 shares at an average price of $257.17 in Q2 2022, with approximately $1.22 billion remaining under the repurchase program Issuer Purchases of Equity Securities (Q2 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | | April 1 - 30, 2022 | 372,867 | $268.24 | $1,517,917,158 | | May 1 - 31, 2022 | 514,383 | $260.22 | $1,384,087,047 | | June 1 - 30, 2022 | 643,204 | $248.30 | $1,224,399,170 | | Total | 1,530,454 | $257.17 | N/A | - The repurchases were made under the $2.0 billion 2021 Repurchase Program, which does not have an expiration date[104] Item 6. Exhibits This section lists exhibits filed with the quarterly report, including CEO and CFO certifications and financial data in iXBRL format - The report includes certifications from principal officers pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[108]