Old Dominion Freight Line(ODFL) - 2023 Q2 - Quarterly Report

Part I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed financial statements for the period ended June 30, 2023, showing a decrease in revenue and net income compared to the prior year due to a softer economic environment Condensed Balance Sheets As of June 30, 2023, total assets increased to $4.98 billion and shareholders' equity grew to $3.83 billion, while total liabilities slightly decreased Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $4,978,932 | $4,838,610 | | Total current assets | $730,609 | $933,740 | | Net property and equipment | $4,001,099 | $3,687,068 | | Total Liabilities | $1,146,897 | $1,185,693 | | Total current liabilities | $503,018 | $529,793 | | Total Shareholders' Equity | $3,832,035 | $3,652,917 | Condensed Statements of Operations Q2 2023 revenue decreased to $1.41 billion and net income fell to $292.4 million, with similar declines for the six-month period and diluted EPS Key Performance Indicators (Q2 & H1 2023 vs 2022) | Metric (in thousands, except per share) | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $1,413,189 | $1,667,448 | $2,855,325 | $3,164,728 | | Operating Income | $391,594 | $508,705 | $774,643 | $914,323 | | Net Income | $292,362 | $376,078 | $577,400 | $675,829 | | Diluted EPS | $2.65 | $3.30 | $5.23 | $5.90 | Condensed Statements of Changes in Shareholders' Equity Shareholders' equity increased to $3.83 billion by June 30, 2023, driven by net income, partially offset by $305.0 million in share repurchases and $87.8 million in cash dividends - For the six months ended June 30, 2023, the company returned capital to shareholders through $305.0 million in share repurchases and $87.8 million in cash dividends[17] Condensed Statements of Cash Flows Net cash from operating activities decreased to $703.2 million in H1 2023, while cash used in investing activities increased and cash used in financing activities decreased, ending with $55.1 million in cash and cash equivalents Cash Flow Summary (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $703,207 | $816,053 | | Net cash used in investing activities | ($412,934) | ($274,248) | | Net cash used in financing activities | ($421,444) | ($808,235) | | Decrease in cash and cash equivalents | ($131,171) | ($266,430) | | Cash and cash equivalents at end of period | $55,141 | $196,134 | Notes to the Condensed Financial Statements The notes detail the company's predominant LTL services, the approval of a new $3.0 billion stock repurchase program, and $80.0 million in long-term debt as of June 30, 2023 - The company's revenue is dominated by LTL services, which generated $2.82 billion in the first six months of 2023, compared to $33.1 million from other services[22] - On July 26, 2023, the Board of Directors approved a new $3.0 billion stock repurchase program, which will become effective after the completion of the 2021 Repurchase Program. As of June 30, 2023, $376.9 million remained authorized under the 2021 program[30][31] - Total long-term debt, including current maturities, was $80.0 million as of June 30, 2023, down from $100.0 million at the end of 2022[35][46] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the decline in Q2 and H1 2023 revenue and profitability to a soft domestic economy, while maintaining disciplined pricing and investing in long-term growth Results of Operations Q2 2023 revenue decreased 15.2% to $1.41 billion due to lower LTL tons, leading to an increased operating ratio despite disciplined pricing and lower salary expenses Key Operating Metrics (Q2 2023 vs Q2 2022) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue (in thousands) | $1,413,189 | $1,667,448 | (15.2)% | | Operating Ratio | 72.3% | 69.5% | +280 bps | | LTL tons (in thousands) | 2,296 | 2,672 | (14.1)% | | LTL shipments (in thousands) | 3,008 | 3,398 | (11.5)% | | LTL revenue per hundredweight | $30.44 | $30.78 | (1.1)% | | LTL rev/cwt (ex-fuel) | N/A | N/A | +7.6% | - The decline in revenue was primarily due to decreases in LTL shipments per day and LTL weight per shipment, attributed to a challenging macroeconomic environment[55] - Operating costs were impacted by a 9.9% decrease in average full-time employees in Q2 2023, which lowered salary expenses. However, depreciation costs rose due to ongoing capital expenditure programs[60][64] Liquidity and Capital Resources The company's liquidity is supported by cash from operations, which decreased to $703.2 million in H1 2023, with planned $700 million in capital expenditures and a new $3.0 billion share repurchase program - The company estimates total capital expenditures for 2023 to be approximately $700 million, funded primarily through cash from operations and existing cash[71][72] 2023 Estimated Capital Expenditures (in millions) | Category | Amount | | :--- | :--- | | Service center facilities | ~$260 | | Tractors and trailers | ~$365 | | Technology and other assets | ~$75 | | Total | ~$700 | - The company continues to return capital to shareholders, declaring a quarterly dividend of $0.40 per share in 2023 (up from $0.30 in 2022) and authorizing a new $3.0 billion share repurchase program[74][76] Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to the company's market risk exposures since the fiscal year ended December 31, 2022 - There have been no material changes to the company's market risk exposures since its most recent fiscal year-end[93] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting during the last quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[94] - No changes occurred in the company's internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls[95] Part II – OTHER INFORMATION Item 1. Legal Proceedings Ongoing legal proceedings are not expected to have a material adverse effect on the company's financial position, results of operations, or cash flows - Ongoing legal proceedings are not expected to have a material adverse effect on the company's financial position, results of operations, or cash flows[98] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors identified in the company's Annual Report on Form 10-K for the year ended December 31, 2022[101] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 501,471 shares at an average price of $320.18 per share in Q2 2023 and approved a new $3.0 billion stock repurchase program Share Repurchases (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | 139,931 | $335.77 | | May 2023 | 198,395 | $309.29 | | June 2023 | 171,964 | $320.06 | | Total Q2 | 510,290 | $320.18 | - As of June 30, 2023, approximately $376.9 million remained available for repurchase under the 2021 Repurchase Program[103] - On July 26, 2023, the Board of Directors approved a new $3.0 billion stock repurchase program, which will begin after the completion of the current program[104] Item 5. Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2023 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended June 30, 2023[105] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q report, including CEO and CFO certifications and iXBRL formatted financial data - The report includes certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as well as financial statements formatted in iXBRL[109]