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Old Dominion Freight Line reported gains in fourth-quarter profit and revenue and, despite the COVID-19 pandemic, finished 2020 with a rise in net income.
The Thomasville, N.C.-based less-than-truckload carrier said net income rose 31.8% to $189.8 million from $144 million in the same period a year earlier. Diluted earnings per share rose to $1.61 from $1.20.
Fourth-quarter revenue climbed 6.4% to $1.07 billion from just more than $1 billion a year earlier.
The motor carrier’s fourth-quarter results included $9.6 million in special employee bonus payments to nonexecutive employees made in December as a reward for their efforts working through the pandemic.
The fourth-quarter financial gains resulted from an improving domestic economy and increased freight demand, CEO Greg Gantt said in a Feb. 4 conference call with industry analysts.
For the year, Old Dominion’s net income rose 9.3% to $672.7 million from $615.5 million in the prior year. Revenue dipped 2.3% to $4 billion from $4.1 billion.
“We’re encouraged by our recent revenue trends and believe that we can take advantage of the momentum in our business to increase our earnings and shareholder value in 2021,” Gantt said.
Much of the Q4 gain came from a 4.9% increase in less-than-truckload tonnage and a 1.1% rise in revenue per hundredweight for the business segment.
The first quarter is off to a good start, Chief Financial Officer Adam Satterfield said, noting that less-than-truckload tons per day rose 11.9% in January year-over-year.
That shows that tonnage is better than expected given the normal seasonal pattern in the first quarter, he said.
We're encouraged by our recent trends.
Old Dominion Freight Line CEO Greg Gantt
The company’s operating ratio — the percentage expenses represent of revenue — fell to 76.3, a fourth-quarter record, and hit 77.4 for the year, Gantt said. It stood at 81.3 in the fourth quarter of 2020. The results demonstrated that Old Dominion was getting closer to reaching its operating ratio target of 75.0, he said.
Satterfield said the current economic environment is far improved over the early stages of the pandemic and that Old Dominion is positioned for expansion and market share gains.
“Our customers are getting healthier, business trends are improving, and you are seeing the advantage of our business model coming through for us. We are in a good spot right now and look forward to this playing out in 2021,” Satterfield said.
Strong freight demand, tight trucking capacity and an improving economy have created a favorable pricing environment, he said.
A key component of the carrier’s strategy is to increase the density of its service network, Gantt said. Old Dominion opened eight facilities in 2020 and expects to open six more this year. It has 245 service centers.
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“Building out our service network will pay off for us this year with the volume increases we expect now and in 2022,” Satterfield said.
The company has a target list of 30 to 40 properties.
One limiting factor is finding drivers and employees to staff the centers and routes, he said. But so far, Old Dominion is having slow but steady success increasing its workforce size. An increased headcount would reduce the company’s need to pay third parties to haul goods. Its purchased transportation costs rose about 3% in the last quarter. The company likes to see that reduced to 2%, an amount that allows it to keep its network fully booked but doesn’t push purchased transportation costs too high.
Old Dominion said it plans to spend $605 million on capital expenditures this year. It expects to pay $275 million for real estate and service center expansion projects, $290 million for tractors and trailers and $40 million for information technology and other assets.
The company ended the fourth quarter with $401 million in cash, down slightly from the third quarter.
Old Dominion Freight Line ranks No. 8 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
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