Dive Brief:

• Despite the COVID-19 pandemic hitting the nation hard in March, Old Dominion Freight Line's performance in Q1 2020 barely changed from Q1 2019, with only slight downticks in revenue and profits, the company reported on Thursday during an earnings call. The LTL fleet reported a 0.3% drop in revenue to $987.4 million, and net income was down 0.1% to $133.1 million, year over year.
• Old Dominion reported its best-ever, first-quarter operating ratio, 81.4%. That is down from 82% from Q1 2019. Greg Gantt, Old Dominion CEO, told analysts that as the domestic economy changed in the last half of March, so did Old Dominion's mix of business. "We experienced a significant increase in our average weight per shipment and this trend has also continued into April," Gantt said. This helped offset the decline in shipments per day, he said.
• Gantt said Old Dominion only began to feel the effects of the viral outbreak in the final weeks of March. But even as shipments decreased in the final weeks of Q1 2020, shipping weight went up 10% in that same time period.

Dive Insight:

Rate cuts and competition could plague carriers along with COVID-19 problems. But Old Dominion said it has not seen anything extraordinary from rivals. For now, LTL market competition is "rational," said CFO Adam N. Satterfield, in response to a question.

Old Dominion's rate structure and pricing discipline helped Old Dominion build terminals and service centers, Satterfield said, making them important to maintain. In the past, competitors have financed rate cuts by cutting wages, but Satterfield said he hasn't seen any of that. The LTL competitive environment is more similar to the later months of 2019 than the Great Recession, he said.

If anything, he said, one LTL competitor offered bonuses to employees to compensate drivers and terminal workers during the coronavirus crisis. XPO Logistics announced Wednesday it would offer employees extra pay and bonuses for working on the "front lines."

Under the XPO program, hourly employees in XPO distribution centers will receive $2 per hour more per hour. Salaried employees in XPO sites will receive weekly lump-sum payments ranging from $100 to $250. And field employees working in XPO centers within the LTL unit will receive a one-time bonus of $500 for all full-time employees, and $250 for all part-time employees.

"Hopefully, the other companies will be just as disciplined with respect to their yield management process as we are," said Satterfield.

Satterfield said he is not witnessing any market share loss in any part of the United States. As for shippers pushing back on rates in the current environment, Satterfield said he did not think it was out of the ordinary.

"Customers, or certain customers, are always pushing back on price regardless of the environment," said Satterfield. Satterfield said the 20% decrease in diesel prices has led to lower fuel surcharges, thus giving customers some indirect rate cuts.

The company is also hopeful the economic downturn has hit the bottom, but it did not articulate broad expectations for the rest of 2020.

"We'd like to think that the worst is behind us," said Satterfield. "We've kind of gone through this initial period. We're trying to figure out which customers are open, which of our customers' customers are also open so that we're not picking up freight that can't be delivered."

He said Old Dominion's cash flow from operations totaled $204 million for the first quarter. Old Dominion's cash at the end of Q1 2020 was $357 million, with debt of $45 million. Satterfield said Old Dominion has about $200 million of borrowing capacity on its revolving line of credit.