Forward-looking Statements
2
Today’s discussion may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Words
such as “expects,” “anticipates,” “intends,” “estimates” or similar expressions
are intended to identify these forward-looking statements. These statements
are based on Old Dominion Freight Line’s current plans and expectations and
involve risks and uncertainties that could cause future activities and results of
operations to be materially different from those set forth in the forward-looking
statements. For further information, please refer to Old Dominion Freight
Line’s filings with the Securities and Exchange Commission.
Talking Points & Thanks
Economic Landscape
Industry Points-of-Interest
Legislative Hurdles
Things to consider
OD Commercial
Thanks to: > Thom Albrechet- BB&T Capital
> Stifel
> Wolfe Research
> FOX Business
> ATA
Economic Outlook
Q-2 GDP increased at a 1.2 percent annual rate after rising by a downwardly
revised 0.8 percent pace in Q-1 (The Commerce Department Friday, 7-29-16)
> Forecast for GDP growth was 2.6 Q-2. => Miss!
Consumer spending responsible for almost all of the GDP growth in Q-2. – 4.2%> That rate of growth is probably unsustainable
> Economists say a tightening labor market, rising house prices and higher savings should underpin
spending for the rest of 2016
Inventory accumulation by businesses fell $8.1 billion Q-2, the first drop since
Q-3 2011, down from a $40.7 billion increase in the first quarter.
> Smaller inventory build is a good signal for growth in the coming quarters.=> Capacity?
Source: Fox Business.com 7/29/2016
Economic Outlook
Global Exports rose is Q-2> Despite the lingering effects of the dollar's rally and weak global demand helping to narrow the trade
deficit.
Business spending on equipment contracted > Third consecutive quarter, the longest stretch since the 2007-2009 recession - 3.5 percent rate after
declining at a 9.5 percent pace in the first quarter.
> Class 8 Trucks => July 2016 Class 8 orders declined 19% sequentially and 57% y/y vs. -36% and -31%
y/y the prior 2 months (Scott Group – Wolfe Research)
Business spending has been hurt by lower oil prices,
Source: Fox Business.com 7/29/16
-18%
What is the next hot item?
By 2025
How Do We Mange New Economy?
Overcome Capacity Hurdles
> Industry Equipment / Financial Hurdle
>People Hurdle
>Regulatory Hurdles
Source: ATA
35,000
At current trends, the shortage could balloon
to 240,000 – We are in big trouble if it gets
there.
The shortage is an OTR TL issue.
DRIVER SHORTAGE
Average Number of New Drivers Needed Per Year
Over the Next 10 Years: 96,178
Source: ATA Benchmarking Guide for Driver Recruitment & Retention
Industry Growth
36%
Retirements37%
Voluntary Non-Retirement Departures
11%
Non-Voluntary Departures
16%
Markets Do Work In Time!
Natural reaction is • Pay will go up to attract drivers -- we have seen that
• Consumer/shipper will have to compensate for that escalation
Life style adjustment will be made –• New generation will decided to accept the old life style of the truck driver
• Carriers may have to adjust to the new generation’s work style
• O/O will make move to carriers = cost, technology, business
requirements due to regulations, etc.
• Equipment MFGs will make more driver friendly equipment =
• Automatic Transmissions that serve the carrier’s needs operationally
• MPG
• Safety in City
Potential Upside!
Industry Image Improvement• Truck driver could potentially be seen as a viable option to college
• Good pay
• CDL => Cheap tuition
• Little to no education loans/debt
•ATA working to improve the image of the driver
position in the workplace and community
•As image improves, lifestyle improves and pay
evolves the supply of applicants should
increase
Potential Upside
Hours of Service
2003 – 34 Hour Restart Rule Initiated:> 60 hours in 7 days
> 70 hours in 8 days
2013 – Modified Restart Rule:
> Restart every 7 days
> Must be off 1:00 AM till 5:00 AM
> Two consecutive nights during the 34 hour Period
Dec. 2014 - Changed Again> Defunded 2013 Rule w/ “Comnibus Bill”
> Commissioned at VT Transportation Study:
> Rule had to demonstrate direct “Safety”
> correlation => did just the opposite.
Result• TL Capacity Tightened
• Some TL move to LTL
• FGT Rates went up
• Drivers got paid less
• OD=> Hired approx. 200 more drivers to
run the same schedules prior to
ruling. Cost went up 5-7% for the same
work in labor and equipment.
Results• Missing sentence in bill on how to operate after; Post 2003 or 2013
• Working under a “Undocumented Compromise”
• DOT likes 2013 Ruling but to date has not released study from VT
• ATA is pushing for definitive language via appropriations bill that
would re-instituted the 2003 rule with no compromises
• DOT would like to cap total hours at 73 in 8 days.
• Who knows where it will all end up and how it will affect capacity!
Source: Arkansas Trucking Report Issue 2- 2016
Doing Business in California
Cal-Peculiarities 1. Environmental
2. Employment
• Pre-employment, termination, etc
3. Meals & Rest-Breaks
4. Computer Professionals Exemptions
5. White Collar Overtime Exemptions
6. Mandated Leaves
7. OT Premiums
8. Timely Paychecks & Wage Statements
9. Alternative Workweek Schedule
10. Vacation accrual & payment rules
11. Worker’s Compensation
12. Protected Disability Exceptions
13. Unique Harassment & Training
14. Noncompeting Agreements
15. Layoffs & Closings
“The main sources of challenge in California are the complexities of laws and how they differ from federal laws on the same subjects. Virtually every aspect of the
day-to-day employment relationship in California is codified or governed by administrative agency orders. Most California laws and regulations are more convoluted
than their federal counterparts, and California’s own legislative and judicial branches, as well as its administrative agencies, often interpret the same statute or
regulation inconsistently”
Doing Business in California
RJ Cervantes
Director of Legislative Affairs
California Trucking Association
4148 E Commerce Way,
Sacramento, CA 95834
(916) 373-3500
Going Forward
Think Strategic: Its about inventory and the end customer> Its not about Freight Rates! Inventory Carrying Cost is > Freight Spend!
> Understand the customer’s buying habits are crucial to Inventory Management; What-How-When-Where-
Why?
> Optimization/Planning is critical- requires good data & good long term partners!
> e-Commerce and younger buyers are having an effect!
> Stockouts at the store level drive customers online! (B-2-C world)
> Stockouts in the e-commerce world drive customers to another site or supplier! (B-2-C & B-2-B)
Data is a key “BUT”, data doesn’t always mean good data> Data can be “King” or “Kill”
> Who owns the data and how is it used?
> Who’s systems are talking to who/what systems?
> Is the data helping to drive effective solutions and strategies?
Does your partners know your strategies and can they deliver on
them?> Are your logistics partners involved in your strategic discussions or is it a simple price play?
> Do that have the capacity/scope to deliver long term?
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17,934 Full-Time
Employees
7,688 Tractors
30,204 Trailers
225 Service Centers in
48 States
Serving over 85,000
Customers
OD Commercial
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• Regional,
inter-regional
and long-haul
LTL from
single
platform
• Customizable,
on-demand
delivery services
• LTL
• Container Drayage
Full Menu of Services & Capacity
• Warehousing & Distribution
• Truckload Brokerage
OD SERVICES
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Single Integrated LTL Network –
That delivers in every US segment
Market Percent of 2015 Shipments
Overnight
2nd Day
3rd Day
4+ Days
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Focus on Growing Markets
68%
87% 3rd Day or Less
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Superior On-Time Service
99% on-time service while standards consistently tighten
On-Time Deliveries as % of Total(2000 – 2015)
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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Exceptional Cargo Claims Ratio
Highly trained workforce and operational best practices result in positive
claims trends
Cargo Claims as % of Revenue(2000 – 2015)
0.00%
0.50%
1.00%
1.50%
2.00%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
An Eye On
Capacity
Significant real estate purchases from 2006-2015 of over $900 million to expand & improve network.
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ODFL Continued Investment in Infrastructure
Capital Expenditures(2002 – 2016P)
$-
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
200220032004200520062007200820092010201120122013201420152016
(mill
ions
)
OtherIT SystemsReal EstateEquipment
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Service Center Capacity
Terminals Terminals Actual %
Public Carriers: 12/31/05 12/31/14 Change vs. 2005 Change
YRC 901 384 (517) -57.4%
FedEx 330 370 40 12.1%
Con-Way 340 297 (43) -12.6%
ARC Best 287 247 (40) -13.9%
UPS Freight 281 198 (83) -29.5%
SAIA 128 150 22 17.2%
TOTAL 2,267 1,646 (621) -27.4%
ODFL 154 222 68 44.2%
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Index Change in Tractors
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
2009 2010 2011 2012 2013 2014
Index No. ofTractors
ODFL SAIA YRCW CNW ABFS
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Index Change in Trailers
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
2009 2010 2011 2012 2013 2014
Index Trailers
ODFL SAIA YRCW CNW ABFS
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Consistent Financial Stability & Capacity
(1) Public LTL Sector includes ABFS, XPO/CNW, FDX (Freight segment), SAIA, RRTS (LTL segment), YRC National, and YRC
Regional. UPS excluded from analysis as operating ratio is not reported for LTL operations.
Operating Margin vs. Public LTL Sector
(1Q07 – 4Q15) 1
-15%
-10%
-5%
0%
5%
10%
15%
20%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
Public LTL Sector ODFL
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Don’t just take our word for it!
Mastio Quality Award - #1 National Carrier for sixth
straight year
Forbes List of America’s 100 Most Trustworthy
Companies for second straight year
Fortune Magazine – Top 100 Fastest Growing
Companies
Forbes List of America’s Best Employers in 2015
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Logistics Has Never Been Easy!
Thank You!
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