OLD DOMINION FREIGHT LINE, INC. [ODFL] Filings

10-Q 1 odfl-20240630.htm 10-Q 10-Q

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 June 30, 2024


☐	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

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 August 2, 2024 there were 214,296,552 shares of the registrant’s Common Stock ($0.10 par value) outstanding.

INDEX


Part I – FINANCIAL INFORMATION		1

Item 1	Financial Statements	1
	Condensed Balance Sheets – June 30, 2024 and December 31, 2023	1
	Condensed Statements of Operations – For the three and six months ended June 30, 2024 and 2023	3
	Condensed Statements of Changes in Shareholders’ Equity – For the three and six months ended June 30, 2024 and 2023	4
	Condensed Statements of Cash Flows – For the six months ended June 30, 2024 and 2023	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	19
Item 4	Controls and Procedures	19

Part II – OTHER INFORMATION		20

Item 1	Legal Proceedings	20
Item 1A	Risk Factors	20
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 6	Exhibits	21

Exhibit Index		22
Signatures		23

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

OLD DOMINION FREIGHT LINE, INC.

CONDENSED BALANCE SHEETS


	June 30,
	2024			December 31,
(In thousands, except share and per share data)	(Unaudited)			2023
ASSETS
Current assets:
Cash and cash equivalents	$	74,304		$	433,799
Short-term investments		30,271			—
Customer receivables, less allowances of $9,989 and $10,405, respectively		578,101			578,885
Income taxes receivable		6,823			18,554
Other receivables		19,414			17,884
Prepaid expenses and other current assets		98,200			94,211
Total current assets		807,113			1,143,333

Property and equipment:
Revenue equipment		2,670,203			2,590,770
Land and structures		3,192,073			3,021,447
Other fixed assets		655,854			623,164
Leasehold improvements		14,645			14,436
Total property and equipment		6,532,775			6,249,817
Accumulated depreciation		(2,254,955	)		(2,154,412	)
Net property and equipment		4,277,820			4,095,405

Other assets		258,163			273,655
Total assets	$	5,343,096		$	5,512,393

Note: The Condensed Balance Sheet at December 31, 2023 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)


	June 30,
	2024		December 31,
(In thousands, except share and per share data)	(Unaudited)		2023
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	112,606	$	112,774
Compensation and benefits		259,895		278,953
Claims and insurance accruals		61,271		63,346
Other accrued liabilities		73,015		69,585
Income taxes payable		25,967		—
Current maturities of long-term debt		20,000		20,000
Total current liabilities		552,754		544,658

Long-term liabilities:
Long-term debt		39,983		59,977
Other non-current liabilities		275,328		286,815
Deferred income taxes		363,132		363,132
Total long-term liabilities		678,443		709,924
Total liabilities		1,231,197		1,254,582

Commitments and contingent liabilities

Shareholders’ equity:
Common stock - $0.10 par value, 560,000,000 shares authorized, 214,758,093 and 217,930,932 shares outstanding at June 30, 2024 and December 31, 2023, respectively		21,476		21,793
Capital in excess of par value		186,584		231,449
Retained earnings		3,903,839		4,004,569
Total shareholders’ equity		4,111,899		4,257,811
Total liabilities and shareholders’ equity	$	5,343,096	$	5,512,393

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						Six Months Ended
	June 30,						June 30,
(In thousands, except per share data)	2024			2023			2024			2023
Revenue from operations	$	1,498,697		$	1,413,189		$	2,958,770		$	2,855,325

Operating expenses:
Salaries, wages and benefits		683,784			642,841			1,352,174			1,294,916
Operating supplies and expenses		161,020			165,373			333,492			357,757
General supplies and expenses		44,371			38,606			89,947			78,151
Operating taxes and licenses		36,282			36,890			72,120			73,591
Insurance and claims		17,141			15,381			35,335			31,409
Communications and utilities		10,158			11,515			21,153			22,532
Depreciation and amortization		84,563			79,784			169,094			155,731
Purchased transportation		32,010			28,596			62,720			59,211
Miscellaneous expenses, net		7,677			2,609			14,618			7,384
Total operating expenses		1,077,006			1,021,595			2,150,653			2,080,682

Operating income		421,691			391,594			808,117			774,643

Non-operating (income) expense:
Interest expense		131			89			168			289
Interest income		(5,961	)		(2,368	)		(13,333	)		(5,179	)
Other expense, net		1,075			1,947			1,954			3,458
Total non-operating income		(4,755	)		(332	)		(11,211	)		(1,432	)

Income before income taxes		426,446			391,926			819,328			776,075

Provision for income taxes		104,401			99,564			204,979			198,675

Net income	$	322,045		$	292,362		$	614,349		$	577,400

Earnings per share:
Basic	$	1.49		$	1.33		$	2.83		$	2.63
Diluted	$	1.48		$	1.33		$	2.82		$	2.61

Weighted average shares outstanding:
Basic		216,369			219,042			216,981			219,475
Diluted		217,541			220,398			218,174			220,877

Dividends declared per share	$	0.26		$	0.20		$	0.52		$	0.40

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)



	Three Months Ended June 30, 2024 and 2023
							Capital in
	Common Stock						Excess of			Retained
(In thousands)	Shares			Amount			Par Value			Earnings			Total
Balance as of March 31, 2024		217,599		$	21,760		$	225,497		$	4,154,380		$	4,401,637
Net income		—			—			—			322,045			322,045
Share repurchases		(2,868	)		(287	)		—			(516,612	)		(516,899	)
Forward contract for accelerated share repurchases		—			—			(40,000	)		—			(40,000	)
Cash dividends declared ($0.26 per share)		—			—			—			(55,974	)		(55,974	)
Share-based compensation and share issuances, net of forfeitures		37			4			2,952			—			2,956
Taxes paid in exchange for shares withheld		(10	)		(1	)		(1,865	)		—			(1,866	)
Balance as of June 30, 2024		214,758		$	21,476		$	186,584		$	3,903,839		$	4,111,899

Balance as of March 31, 2023		219,662		$	21,966		$	228,517		$	3,496,016		$	3,746,499
Net income		—			—			—			292,362			292,362
Share repurchases		(1,003	)		(100	)		—			(161,962	)		(162,062	)
Cash dividends declared ($0.20 per share)		—			—			—			(43,780	)		(43,780	)
Share-based compensation and share issuances, net of forfeitures		34			3			1,868			—			1,871
Taxes paid in exchange for shares withheld		(18	)		(2	)		(2,853	)		—			(2,855	)
Balance as of June 30, 2023		218,675		$	21,867		$	227,532		$	3,582,636		$	3,832,035


	Six Months Ended June 30, 2024 and 2023
							Capital in
	Common Stock						Excess of			Retained
(In thousands)	Shares			Amount			Par Value			Earnings			Total
Balance as of December 31, 2023		217,931		$	21,793		$	231,449		$	4,004,569		$	4,257,811
Net income		—			—			—			614,349			614,349
Share repurchases		(3,290	)		(329	)		—			(602,522	)		(602,851	)
Forward contract for accelerated share repurchases		—			—			(40,000	)		—			(40,000	)
Cash dividends declared ($0.52 per share)		—			—			—			(112,557	)		(112,557	)
Share-based compensation and share issuances, net of forfeitures		170			17			6,273			—			6,290
Taxes paid in exchange for shares withheld		(53	)		(5	)		(11,138	)		—			(11,143	)
Balance as of June 30, 2024		214,758		$	21,476		$	186,584		$	3,903,839		$	4,111,899

Balance as of December 31, 2022		220,446		$	22,045		$	233,086		$	3,397,786		$	3,652,917
Net income		—			—			—			577,400			577,400
Share repurchases		(1,864	)		(186	)		—			(304,776	)		(304,962	)
Cash dividends declared ($0.40 per share)		—			—			—			(87,774	)		(87,774	)
Share-based compensation and share issuances, net of forfeitures		158			15			5,652			—			5,667
Taxes paid in exchange for shares withheld		(65	)		(7	)		(11,206	)		—			(11,213	)
Balance as of June 30, 2023		218,675		$	21,867		$	227,532		$	3,582,636		$	3,832,035

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

OLD DOMINION FREIGHT LINE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six Months Ended
	June 30,
(In thousands)	2024			2023
Cash flows from operating activities:
Net income	$	614,349		$	577,400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		169,100			155,738
Loss (Gain) on disposal of property and equipment		1,300			(6,431	)
Other, net		15,005			14,871
Changes in operating assets and liabilities, net		11,994			(38,371	)
Net cash provided by operating activities		811,748			703,207

Cash flows from investing activities:
Purchase of property and equipment		(357,638	)		(479,396	)
Proceeds from sale of property and equipment		4,829			17,610
Purchase of short-term investments		(30,000	)		—
Proceeds from maturities of short-term investments		—			48,852
Net cash used in investing activities		(382,809	)		(412,934	)

Cash flows from financing activities:
Payments for share repurchases		(597,113	)		(302,195	)
Forward contract for accelerated share repurchases		(40,000	)		—
Principal payments under debt agreements		(20,000	)		(20,000	)
Dividends paid		(112,584	)		(87,827	)
Other financing activities, net		(18,737	)		(11,422	)
Net cash used in financing activities		(788,434	)		(421,444	)

Decrease in cash and cash equivalents		(359,495	)		(131,171	)
Cash and cash equivalents at beginning of period		433,799			186,312
Cash and cash equivalents at end of period	$	74,304		$	55,141

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				Six Months Ended
	June 30,				June 30,
(In thousands)	2024		2023		2024		2023
LTL services	$	1,484,967	$	1,397,815	$	2,931,700	$	2,822,187
Other services		13,730		15,374		27,070		33,138
Total revenue from operations	$	1,498,697	$	1,413,189	$	2,958,770	$	2,855,325

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 June 30, 2024 are not necessarily indicative of the results that may be expected for the subsequent quarterly periods or the year ending December 31, 2024.

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, 2023. 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, 2023, unless otherwise disclosed in this Form 10-Q.

Certain amounts in prior years have been reclassified to conform prior years’ financial statements to the current presentation.

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.

Common Stock Split

On February 16, 2024, we announced that our Board of Directors approved a two-for-one split of our common stock for shareholders of record as of the close of business on the record date of March 13, 2024. On March 27, 2024, those shareholders received one additional share of common stock for every share owned.

All references in this report to shares outstanding, weighted average shares outstanding, earnings per share, and dividends per share amounts have been restated retroactively to reflect this stock split.

Stock Repurchase Program

On July 28, 2021, we announced that our Board of Directors had approved a 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 began after completion of our prior repurchase program in January 2022 and was completed in May 2024.

On July 26, 2023, we announced that our Board of Directors had approved a stock repurchase program authorizing us to repurchase up to an aggregate of $3.0 billion of our outstanding common stock (the “2023 Repurchase Program”). The 2023 Repurchase Program, which does not have an expiration date, began after the completion of the 2021 Repurchase Program in May 2024.

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.

On May 28, 2024, we entered into an accelerated share repurchase agreement (the "ASR Agreement") with a third-party financial institution. The ASR Agreement is accounted for as a settled treasury stock purchase and a forward stock purchase contract. The par value of the initial shares received 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. The ASR Agreement is settled 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 ASR Agreement, we paid the third-party financial institution $200.0 million and received an initial delivery of 923,201 shares of our common stock for $160.0 million, representing approximately 80% of the total value of shares to be received by us under the ASR Agreement. The remaining shares are expected to settle no later than November 2024.

At June 30, 2024, our 2023 Repurchase Program had $2.63 billion remaining available. The amount available and uncommitted is $2.59 billion, which reflects the $40.0 million forward stock purchase contract under the ASR Agreement.

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				Six Months Ended
	June 30,				June 30,
(In thousands)	2024		2023		2024		2023
Weighted average shares outstanding - basic		216,369		219,042		216,981		219,475
Dilutive effect of share-based awards		1,172		1,356		1,193		1,402
Weighted average shares outstanding - diluted		217,541		220,398		218,174		220,877

Note 3. Long-Term Debt

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


(In thousands)	June 30, 2024			December 31, 2023
Notes	$	59,983		$	79,977
Credit agreement		—			—
Total long-term debt		59,983			79,977
Less: Current maturities		(20,000	)		(20,000	)
Total maturities due after one year	$	39,983		$	59,977

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 (as subsequently amended on March 22, 2023, 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 March 22, 2026. On May 4, 2020, we issued $100.0 million aggregate principal amount of senior promissory notes (the “Series B Notes”). 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. The second principal payment of $20.0 million was paid on May 4, 2024. The remaining $60.0 million will be paid in three equal annual 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 third amended and restated credit agreement, dated March 22, 2023, with Wells Fargo Bank, National Association serving as administrative agent for the lenders (the “Credit Agreement”) or other senior promissory notes issued pursuant to the Note Agreement.

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) the Secured Overnight Financing Rate (SOFR) plus the Term SOFR Adjustment, as defined in the Credit Agreement, equal to 0.100%, plus an applicable margin that ranges from 1.000% to 1.375%; or (ii) a Base Rate, as defined in the Credit Agreement, plus an applicable margin that ranges from 0.000% to 0.375%. The applicable margin for each of the foregoing options is dependent upon our consolidated debt to consolidated total capitalization ratio. Letter of credit fees equal to the applicable margin for SOFR 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 0.090% to 0.175% (based upon our consolidated debt to total consolidated capitalization ratio) 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 SOFR loans and letter of credit fees were 1.000% and commitment fees were 0.090%.

The Credit Agreement replaced our previous five-year, $250.0 million senior unsecured revolving credit agreement dated as of November 21, 2019 (the “Prior Credit Agreement”). For periods in 2023 covered under the Prior Credit Agreement, the applicable margin on LIBOR loans and letter of credit fees was 1.000% and commitment fees were 0.100%.

There were $38.1 million and $40.0 million of outstanding letters of credit at June 30, 2024 and December 31, 2023, 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 June 30, 2024 is shown in the table below. We held no short-term investments as of December 31, 2023.


(In thousands)	Total		Level 1		Level 2		Level 3
June 30, 2024
Certificates of deposit	$	30,271		-	$	30,271		-

Our certificates of deposit are measured at carrying value including accrued interest, which approximates fair value due to their short-term nature.

Long-term Debt

The carrying value of our total long-term debt, including current maturities, was $60.0 million and $80.0 million at June 30, 2024 and December 31, 2023, respectively. The estimated fair value of our total long-term debt, including current maturities, was $56.0 million and $75.4 million at June 30, 2024 and December 31, 2023, respectively. The fair value measurement of our Series B Notes 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, and we regularly monitor the components that impact our pricing. 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. 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.

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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.

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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.

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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. We focus on the profitability of each customer account and generally seek to obtain an appropriate yield to offset our cost inflation and support our ongoing investments in capacity and technology. We believe the continued execution of this

yield-management philosophy, continued increases in density, and ongoing improvements in operating efficiencies are the key components of our ability to produce further improvement in our operating ratio and long-term 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						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Revenue from operations		100.0	%		100.0	%		100.0	%		100.0	%

Operating expenses:
Salaries, wages and benefits		45.6			45.5			45.7			45.4
Operating supplies and expenses		10.7			11.7			11.3			12.5
General supplies and expenses		3.0			2.8			3.0			2.7
Operating taxes and licenses		2.4			2.6			2.5			2.6
Insurance and claims		1.2			1.1			1.2			1.1
Communications and utilities		0.7			0.8			0.7			0.8
Depreciation and amortization		5.6			5.6			5.6			5.4
Purchased transportation		2.2			2.0			2.1			2.1
Miscellaneous expenses, net		0.5			0.2			0.6			0.3
Total operating expenses		71.9			72.3			72.7			72.9

Operating income		28.1			27.7			27.3			27.1

Interest (income) expense, net		(0.5	)		(0.1	)		(0.5	)		(0.2	)
Other expense, net		0.1			0.1			0.1			0.1

Income before income taxes		28.5			27.7			27.7			27.2

Provision for income taxes		7.0			7.0			6.9			7.0

Net income		21.5	%		20.7	%		20.8	%		20.2	%

Key financial and operating metrics for the three- and six-month periods ended June 30, 2024 and 2023 are presented below:


	Three Months Ended									Six Months Ended
	June 30,									June 30,
	2024			2023			% Change			2024			2023			% Change
Work days		64			64			—	%		128			128			—	%
Revenue (in thousands)	$	1,498,697		$	1,413,189			6.1	%	$	2,958,770		$	2,855,325			3.6	%
Operating ratio		71.9	%		72.3	%					72.7	%		72.9	%
Net income (in thousands)	$	322,045		$	292,362			10.2	%	$	614,349		$	577,400			6.4	%
Diluted earnings per share	$	1.48		$	1.33			11.3	%	$	2.82