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Operator
Good morning, and welcome to the third-quarter 2005 conference call for Old Dominion Freight Lines. Today's call is being recorded and will be available for replay beginning today and through October 28 by dialing 719-457-0820. Confirmation number for the replay is 394-1108. The replay may also be accessed through November 21st on the Company's Website which is at ODFL.com.
This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance for the fourth quarter, full year 2005 and 2006. For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by the important factors, among others, set forth in Old Dominion's filings with the Securities and Exchange Commission and in today's news release, and consequently actual operations and results may differ materially from the results discussed in the forward-looking statements. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
At this time for opening remarks, I would like to turn the conference over to the Company's President and Chief Operating Officer, Mr. David Congdon. Please go ahead, sir.
David Congdon - President, COO
Good morning. Let me welcome you to our call and thank you for being with us today. Wes Frye, our CFO, is with me this morning in our corporate office; and Earl Congdon, our Chairman and CEO is not here because of travel plans and I'm out of the office also. So after our prepared remarks, when Wes and I open the discussion to your questions, pardon us if we stumble at all on who answers the question; we don't have our normal eye contact.
In the conference call last quarter, we spent some time outlining our belief that OD has a unique opportunity to continue gaining market share and achieving secular growth that is less dependent on economic cyclicality than ever before in our history. And once again, our third quarter produced tangible proof of this position, with record results in spite of the Hurricanes Katrina and Rita, which reduced our earnings per diluted share by $0.04 for the quarter.
We produced our sixth consecutive quarter of 20 plus percent growth, which lapped the prior year period that also grew over 20%. 86% of the revenue growth was generated through our service centers that have been in place more than one year, essentially our same-store sales. And we achieved this growth primarily through expanding our business with existing customers and adding new customers in existing areas, as well as launching new services and improving the quality of our service.
In addition during the quarter, we continued our steady geographic expansion into our 43rd and 44th states by opening new service centers in Sioux Falls, South Dakota and Burlington, Vermont. Plus we expanded our presence in Nebraska with a new center in Grand Island. While our geographic expansion over the last 12 months accounted for 14% of our revenue growth for the third quarter, it is important to note that much of the freight that originates in these new centers is destined to centers in our existing network and vice versa. Therefore, as our coverage of the U.S. has expanded to a critical mass, additional geographic expansion increasingly contributes to greater density in our existing network and improved margins.
Some further evidence of our successful growth is demonstrated by our 16th consecutive quarter of steady improvement in our operating ratio and growth in our net income in excess of 30%. Over the four years covered by these records, the economy has had clear ups and downs, but throughout OD has grown consistently and profitably well ahead of industry averages. As a result, we have also driven our operating ratio and our net profit margin to the best levels in the 14 years we have been a public company. We are obviously very pleased about our third-quarter results, and our outlook for the fourth quarter is looking good as well, which Wes will be discussing in greater detail.
While we will give some more detailed guidance regarding 2006 in our fourth-quarter conference call, our strategic growth plan calls for continued revenue growth of 20% or higher. In addition, after crossing the 1 billion revenue mark for 2005, our goal is to double the size of the company to over 2 billion in annual revenue during the next five years, while at the same time delivering incremental and sustainable improvements to our operating ratio.
Our primary growth strategy and opportunity for expanding revenues remain solidly focused on expanding our share of existing markets through enhancing the customer relationships we already enjoy and adding new ones. However, we do expect to continue expanding our service center network toward a national footprint, with additional centers in both new markets and to fill out existing territories.
In the fourth quarter, for instance, we plan to open new centers in Beaumont, Texas and Fort Myers, Florida; and in 2006, subject to the ever-present real estate constraints, we plan to open another 15 to 20 centers. In addition, we will continue to evaluate opportunities to achieve our growth objectives through accretive acquisitions.
So you can see that we are in a very exciting time for the Company and our shareholders, absolutely loaded with opportunities. We are convinced that we have the market positioning, the financial strength, the workforce and the management experience to achieve our goals.
Thank you for your interest in OD and I will now turn the floor over to Wes to discuss the third-quarter numbers and our guidance in more detail. Wes?
Wes Frye - CFO
Thank you, David. We are very pleased with our third-quarter financial performance, which exceeded our guidance in spite of the impact of Hurricanes Katrina and Rita. Our revenue growth for the quarter was again driven by substantial increase in LTL tonnage, which grew 21.8% for the quarter. LTL shipments increased 17.5% for the quarter, resulting in a 3.7% rise in our weight per shipment.
We view pricing as steady during the quarter. LTL revenue per hundredweight increased 5.4% for the quarter and was slightly positive at 1/10 of 1%, excluding fuel surcharge. This metric was impacted by the increased weight per shipment and a decrease in the average length of haul, both of which decreases the revenue per hundredweight. The decrease in the average length of haul was a result of a continued growth in our next-day regional market, which increased 31% during the quarter compared to 28% for our overall growth.
The LTL revenue per shipment increase of 9.3% combined with the 17.5% growth in the LTL number of shipments gave us our close to 28% revenue growth for the quarter. LTL revenue per shipment excluding fuel surcharge was up 3.7%, meaning that we still expanded our business at a rate in excess of 20%, excluding the impact of fuel surcharge, and we have done this now for the sixth consecutive quarter.
We have also been pleased with the continued operating leverage our revenue growth has produced, as evidenced by the improvement in our operating ratio to an 89.5 for the third quarter. As we discussed with you before, the steady improvement in our operating ratio for the 16th consecutive quarter strongly validates our strategy of focusing primarily on growth within the existing service center network to continue to improve margin. It further suggests that we have been successfully balancing that strategy with a moderate geographic expansion as a secondary strategy to produce top-line growth and further economic economies of scale.
Our financial results also reflect that we are successfully managing our growth through our ongoing CapEx investment to stay ahead of what has continued to be an unprecedented period of growth for Old Dominion. Our capital expenditures for the first nine months of 2005 total 131 million, and we still expect to spend 145 to 155 million for the entire year of 2005, including the cost of the Wichita Southeast Kansas Transit acquisition. Our debt to total capital, while rising through 2005 due to the CapEx program, remains below 30%, coming in at a 29.7 at the end of the quarter.
Our long-term growth objectives that David mentioned earlier will continue to require investment, particularly in real estate, which mandates outlays in advance of the anticipated growth. As we have stated frequently, our number one focus is on growth in our existing network, which produced the highest incremental margins. And looking at our long-term growth plans, we have identified 30 to 40 service centers that need to be expanded in the next couple of years. And as such, in 2006, our needs for real estate CapEx will be in the 100 to $110 million range, depending on availability. 85 to 90% of this expenditure is to enlarge or spin off service centers in our existing network.
Even though we expect our return on invested capital to improve slightly in 2006 and our debt to total capital to remain at 35% or below, CapEx for our trailers and tractors and our IT will be comparable next year to the levels that we've expended this year.
Before closing my remarks, let me review our guidance with you as we presented in the release. Based upon exceeding our third-quarter guidance by $0.03 per diluted share and our outlook for the fourth quarter, we have raised our guidance for the full year 2005 to $2.11 to $2.14 per diluted share, compared with the earlier guidance of $2.05 to $2.10. Doing the math, this puts our guidance for the fourth quarter in a range of $0.53 to $0.56.
Our confidence in this guidance is supported by a continued healthy pace of business during the fourth quarter today, which as David mentioned reflects tonnage growth in the 15 to 18% range and revenue growth of about 20%. We will provide guidance for the first quarter and the full year of 2006, as well as further details on our expansion plans and CapEx budget, during our fourth-quarter conference call.
This concludes our prepared remarks. Operator, we will be happy to open the floor for any questions at this time.
Operator
Thank you. (OPERATOR INSTRUCTIONS) Ed Wolfe with Bear Stearns.
Mr. Wolfe, your line is open. We are unable to hear you, sir. Please check your mute button.
Ed Wolfe - Analyst
Hi, guys. Sorry about that. I got in a little bit late. I apologize. Terrific looking quarter. Can you talk a little bit about the demand metrics throughout the quarter -- when you look at the last three months and then October, what you are seeing out there with demand across the country? Are there certain regions, certain customers that feel better, different, that kind of stuff?
Wes Frye - CFO
When we look at our growth by length of haul segment, as I mentioned in the conference call, we were very strong growth in the regional next-day market, up 31%. But still, in each of the markets we were up in the high 20s. So we saw demand strong throughout the quarter.
In terms of weight per shipment, we saw an increase in weight per shipment on the LTL throughout the quarter rise. As I mentioned, it averaged 3.7 for the quarter but got as high as 5% increase year-over-year in September. So we saw good demand in those terms throughout the quarter.
Ed Wolfe - Analyst
And what is the equivalent number to that 5% in September in October so far?
Wes Frye - CFO
So far in October -- and it is hard to compare a partial month to a full month, because typically the weight per shipment rises during the course of the month. But as we stand now, it's 4%.
Ed Wolfe - Analyst
Okay. And were there any verticals that showed more strength versus others, end users?
Wes Frye - CFO
Not offhand. It seemed to be all of our -- we had growth in each vertical sector.
Ed Wolfe - Analyst
David, in your thoughts, where you were talking about growing and doubling the size but still incrementally improving the margin, that is a little bit of a change in take I've heard -- maybe I'm wrong. I thought that in the past it was more about the growth and the margin is kind of a new thing that is going on here as you get fuller.
Can you talk a little bit about that? Am I hearing that right? It sounds like you have more conviction. How good can a margin get?
David Congdon - President, COO
Ed, well, I think you can look at some of the other carriers who have as much as 30 to 40% higher revenue per service center than we do that have operating ratios in the 85 to 88 range. So you would think that as we build our density per terminal -- I guess we are a little north of 6 million per service center now, and some of these other carriers, if you look at them, they are north of 8 million. And if you take $2 billion and divide it by say 230 or 250 service centers, that would put us north of 8 million in today's revenue dollars.
So you would think that we could continue to knock the ratio down with that added density. At least that is how things have played out for us over the last four years. If you look at our ratio four years ago and how we've had this continuous improvement, our revenue per terminal four years ago was just slightly north of 4 million, and now we are north of 6 million.
So this growth strategy really goes back to 1997 when we decided how we wanted to position ourselves in the marketplace. And we were bound and determined to not let our operating ratio go up. We have been working real diligently to make it go down and that certainly the resolve that our management team has going forward.
Ed Wolfe - Analyst
Just as a follow-up to that. When I look in the last four years, obviously you've had a nice combination of tonnage, of growth and also of yield growth. And we saw the yield flatten out net of fuel this quarter a bit. Is that a concern, that if the yields stay flat or if the economy were to slow and they got a little even less than that, that you could still increase your margin into that? Or do you think that the mix is okay, there is enough tonnage and utilization to overcome that?
David Congdon - President, COO
Wes, do you want to try to take that?
Wes Frye - CFO
Yes, the flattage in revenue -- and I'm not sure what is going on in the industry yet -- I think Conway is reporting their yield net of fuel surcharges is flat to down.
Ed Wolfe - Analyst
Yes, absolutely.
Wes Frye - CFO
We view the pricings not obviously as robust as it has been in the last couple of years, but certainly steady. Our reports from the national accounts folks and some of our sales is that it is fairly steady. We always have pockets of aggressive pricing and that is kind of normal. And it is the case today.
But keep it in mind that this is over a fairly robust increase that we're comparing to a year ago. So having it at the same or slightly above -- and then that is including the mix -- there is no question our mix of shorter haul business and the weight per shipment has a lowering effect on that -- we are still seeing it as steady.
Ed Wolfe - Analyst
Okay. While I got you, Wes, can you give us some of the cash flow numbers, the cash flow from operations and CapEx this quarter?
Wes Frye - CFO
Well, I'm not sure for the quarter what it was, but for the year to date, it's pretty much on track with our forecast, which is we spent 131 million for the nine months and we still expect to spend 145 to 155 for the year.
Ed Wolfe - Analyst
Do you have a cash flow for operations for nine months or should I wait for the Q?
Wes Frye - CFO
Wait for the Q on that.
Ed Wolfe - Analyst
Okay, and then just --
Wes Frye - CFO
Ed, I want to add something to that last question. I just got back with the economic forecast and the things that I have been hearing on the economy is we are still looking at a positive growth economy next year in the 2.5 to 3% range. And the other concerns there at ATA were that the capacity in this industry over the next ten years is going to continually be constrained by the driver shortage, the (technical difficulty) and so forth, and that we're going to have more freight than we can say grace over in a 5 to 10-year timeframe.
So we certainly think that the demand in the marketplace will be exceeding the supply and that should bode well for pricing. We are continuing to be in a consolidating industry that takes capacity out of the industry. And so we think that that demand is going to exceed supply and price will be good.
Ed Wolfe - Analyst
Okay. And just when you look at the WSKT acquisition that is in there, can you break out for us or give us a sense what the tonnage contribution was?
Wes Frye - CFO
It is still about 2 to 3% of our tonnage growth.
Ed Wolfe - Analyst
Is there anything different about the mix of that freight that makes the yield look different or is it pretty similar?
Wes Frye - CFO
Well, yes, obviously much of the WSKT business was regional, which would be a shorter length of haul, and therefore would affect the revenue per hundredweight.
Ed Wolfe - Analyst
Okay, that makes sense. And are you feeling any pressure on the longer haul business or even the regional business from Yellow and Arkansas Best and their recent -- ?
Wes Frye - CFO
Well, I'm not sure that can say that wholesale, other than the fact that our length of haul over 1500 miles grew at 29% during the quarter.
Ed Wolfe - Analyst
So maybe there is some opportunity there. How about what you are seeing with consolidation? Is there anything that is different? Last time I think you said that Dugan down in the Southeast, you are seeing some stuff, but not a lot of stuff. Has that changed?
Wes Frye - CFO
David?
David Congdon - President, COO
No, I don't think -- there's not a whole lot more going on right now, I don't think. We picked up a little bit of Dugan, but I think that has really spread itself out pretty evenly among all the competition.
Ed Wolfe - Analyst
Yes, that's what we are hearing. Thanks a lot guys. I appreciate the time as always.
Operator
Jason Seidl with CSFB.
Jason Seidl - Analyst
Wes, David, how are you guys this morning? Listen, good-looking quarter here. We have a couple quick questions for you. You guys mentioned that your fastest-growing lanes are your regional ones. Is that on an apples-to-apples or is that including some of the growth from WSKT?
David Congdon - President, COO
That would include some of the growth from WSKT, but that being said, it is what it is. And it is good growth. Which was --.
Jason Seidl - Analyst
Right. So you are pretty much -- if you exclude WSKT, then your growth was pretty much even across the board in all different lanes, right?
David Congdon - President, COO
I would say that would be true, yes, Jason.
Jason Seidl - Analyst
Wes, you also gave us a look at next year's CapEx for the fleet -- for the tractors and trailers - they going to be about the same as this year. What portion of this year's CapEx, the 245 to 255, is just trucks and trailers?
Wes Frye - CFO
This year, we will spend about 108 million -- 105 to 110 million this year. We haven't finalized that, so I don't want to give any specific numbers, other than it looks like it will be at the same level. Obviously, that is anticipating some growth in there, which we indicated would be in excess of 20%. So that would be in that number.
Jason Seidl - Analyst
Okay. If I'm looking at the yields for a quick second, to get back to them, with adding back in the impact the length of haul and your increasing weight per shipment, it feels like you guys are getting pricing in the 3 to 4% range. Is that about right?
Wes Frye - CFO
When you say in the 4% range, is that excluding fuel surcharge?
Jason Seidl - Analyst
Yes, pricing -- if we just look at pricing in general.
Wes Frye - CFO
Yes, it is hard to say -- we reported it being just up slightly -- what effect the length -- the other metrics have on that. But certainly it is greater than 1 and 2%.
Jason Seidl - Analyst
Okay.
Wes Frye - CFO
I can't know if I can verify your 4%. But it obviously better than it looks because of the other metrics that tend to bring it down.
Jason Seidl - Analyst
Okay. Are you guys seeing any more freight leak out from the Texas area with the struggling carrier that we have down there?.
Wes Frye - CFO
Well, we are growing in all of our regions including the South Central, the Gulf state regions. And our regions that overlays that, we are growing at a percentage growth that is probably higher than our overall average. So I guess you can take that to mean that possibly we are.
Jason Seidl - Analyst
Okay, fair enough.
Jason Seidl - Analyst
Okay, fair enough. My final question before I pass the baton -- Wes, you mentioned you have 30 to 40 service centers that need expansion. Are a large percentage in a certain area or are these completely spread out in your network?
Wes Frye - CFO
These are in all regions. And we bit the bullet and just looking at our five-year plans and what service center capacity we might need to cover our growth plans. And went ahead and identified them now and have started the process to make plans to expand those. Many of them are expansion -- in other words, we will stay in the existing service center and simply expand it.
But many of them, we don't have the opportunity to expand it because of constraints on acreage, etc., and we will be selling that and moving to a larger facility. What isn't in this number is the potential fair market value of the real estate we will be abandoning, and that is not in this number. But again, as I mentioned, I'll give further details in our fourth-quarter conference call (multiple speakers).
Jason Seidl - Analyst
Okay. We could have high CapEx again, but what we don't have is that you're going to be swapping out of some of those facilities and that's going to be a gain on sale subtracting from it, so your net number might not be as high as we expect?
Wes Frye - CFO
Quite likely. But I don't have those numbers to give you --.
Jason Seidl - Analyst
Right, you haven't done the analysis yet. I completely understand. Okay, gentlemen, thanks a lot.
Operator
Jack Wilson (ph) with Stephens.
Jack Waldo - Analyst
Good morning, guys. How are you doing?
David Congdon - President, COO
Good morning, Jack.
Jack Waldo - Analyst
Great quarter.
David Congdon - President, COO
Thank you.
Jack Waldo - Analyst
I wanted to ask a little bit about your growth assumptions for '06. 20% top-line growth would be on par, I guess, with recent trends. Do you think there will be a change in how you get there between the pricing mix and the tonnage mix?
David Congdon - President, COO
I wouldn't think there is a significant change in the elements.
Wes Frye - CFO
Much of our growth plans are centered specifically and targeted to those areas that we have low market share with capacity. So that will be our focus, as it has been our focus, is to focus on existing markets where we have the greatest opportunity for continuing to improve our margins.
Jack Waldo - Analyst
I was just trying to get to the point if the pricing environment -- or if you projected that the pricing environment will get a little tougher next year and you might get a little bit more tonnage to offset that. Is there any comment you can have on that?
David Congdon - President, COO
Wes?
Wes Frye - CFO
No, we don't really have a comment on that at this point, Jack.
Jack Waldo - Analyst
Okay. David, you mentioned 230 to 240 terminals earlier through a question. Is that the total number of terminals you think you will need to provide 48 state coverage?
Wes Frye - CFO
Actually, Jack, I mentioned that. The 30 to 40 is those service centers we've identified that are existing service centers that we will need to expand in order to support the growth. And just so you will know, obviously when you add our real estate, the impact on earnings isn't terribly great, because first of all you don't depreciate land, second of all, the terminal itself is depreciated over 20 years. So it has a fairly small incremental impact.
But it could have a very detrimental impact if you get bottlenecked because you don't have capacity in the service center to handle the volumes. And that impact actually would be greater than the impact of adding the real estate upfront. And that a something we want to avoid based upon our growth plans, is to make sure we have capacity in our service centers in anticipation of our growth objectives.
David Congdon - President, COO
Jack, the total footprint I think you might have been asking about also, is right now we have a list of about 80 places. And it could be 100 more than what we have today to have an adequate footprint.
Jack Waldo - Analyst
Okay. Last question, just talking about capacity. If you look at your laundry list of troubled carriers that you might see out there, how big is that list? How does that compare to maybe the list you were looking at this time last year? Can you identify five potential companies that would exit the marketplace?
Wes Frye - CFO
I don't think we prefer to address that question, Jack.
Jack Waldo - Analyst
Okay. Fair enough. Thank you very much and I will pass the baton.
Operator
Brannon Cook with JP Morgan.
Brannon Cook - Analyst
Good morning guys. Good quarter. Had a question from a demand perspective. You talked about this a little bit. Would you say your demand was fairly constant through the quarter, maybe give us an update of how things are so far in October?
Wes Frye - CFO
It depends on how you characterize demand. As I'd mentioned, if you characterize the demand in terms of what size shipments that we get on the LTL basis, I had mentioned to Ed Wolfe that we had an increasing demand and year-over-year our shipment size increased throughout the quarter on the LTL side. So we saw a good sequential demand throughout the quarter.
Brannon Cook - Analyst
On a year-over-year basis, things were pretty solid looking into October as well?
Wes Frye - CFO
Both sequentially and year-over-year.
Brannon Cook - Analyst
Okay. I guess you talked about your need to expand some of the terminals and add 15 to 20 service centers next year. I guess you've done a good job of managing growth with OR improvement; you did that again this quarter. As you look through your entire network, right now how close to kind of maximum capacity would you say you are? Obviously you have certain chokepoints in the system, but would you say you have 20% spare capacity through your terminal network? Is that a fair number?
David Congdon - President, COO
It really varies. Each location is different and we don't have a good average, if you will. It is hard to answer that question.
Brannon Cook - Analyst
Okay. I guess Katrina, you mentioned, was a $0.04 impact in the quarter. Not very large percentage basis. Should that go away in the fourth quarter? Is that not a big deal in terms of looking at your assets down there?
Wes Frye - CFO
Yes, most of the impact on Katrina had to do with the self-retention portion of our catastrophic loss coverage, particularly on equipment and in some terms the impact was related also to the loss of revenue and its contribution to overhead. And first of all, New Orleans itself was only half of 1% of our revenue. But as that revenue somewhat has come back, it is being handled by our Baton Rouge facility, but at obviously a higher cost. So all of those costs were part of that $0.04 for the most part.
Brannon Cook - Analyst
Okay, that is helpful. Thank you.
Operator
David Roth (ph) with Legg Mason.
David Roth - Analyst
Good morning, gentlemen. You have a stated goal of doubling revenue in five years to 2 billion while improving the operating ratio. I was just wondering what you expect to be I guess an average annual CapEx budget in order to get there. Obviously, it is going to be more front-end loaded as you have to buy the real estate up front.
Wes Frye - CFO
That is a statement that I don't think we want to address at this point, for CapEx over the next years. Obviously, we will have to increase our CapEx relative to the growth and we will have a certain fixed replacement cycle. But we're just not prepared to comment on the long-term CapEx as of yet.
David Roth - Analyst
Then if I look at the Katrina-Rita impact again, would it be fair to say that you would have run at an 89.0 OR were it not for that $0.04 hit?
Wes Frye - CFO
I will let you make that calculation.
David Roth - Analyst
All right. And then you talked about the growth of the different business segments, but what is I guess your current mix of business split between next-day, second-day and three-day plus?
Wes Frye - CFO
Yes. Our next day is about 25% of our business and then it grows to about -- second-day is about roughly another 25%. So we have roughly 50% in the first- and second-day. Obviously, when we're growing in the next-day at 30% relative to overall, that should continue to -- that mix should continue to trend toward the next second day. But we still have pretty good significant growth in the longer haul markets as well.
David Roth - Analyst
All right. And then finally, I was hearing from some of the LTL carriers that is hard to get city drivers in certain metropolitan areas like Atlanta, Dallas, Miami. Are you experiencing any of this? Truckload market, obviously, is much harder to get drivers, but are you seeing any difficulty hiring drivers and is that a possible threat to your growth plans?
David Congdon - President, COO
It is kind of spotty, and we would agree in some of the larger markets. However, we are continuing to have a strong recruiting effort with the truck driver schools. And we are fortunate to get some of the drivers from the truckload carriers. And we have our in-house driving school that is furnishing drivers.
So even with this unprecedented level of growth we are experiencing this year, our on-time service is at all-time high levels. So we obviously have enough drivers to get the job done.
David Roth - Analyst
Actually one more question. Looking out to 2006, obviously the more volume you get through your network, the more you expand margins. But what do you view as the biggest cost pressure out there, whether it be drivers, health care, fuel, that they limit your margin expansion potential?
Wes Frye - CFO
Well, I guess all of the above are potential, but one thing is that we keep increasing our self retention on insurance and that is a risk -- a risk which we think we can manage, but that is always a potential on our BIPD coverage. Fuel is always an issue, most of which, as you well know, we pass on through fuel surcharges. I guess I would characterize those two as the biggest.
David Congdon - President, COO
It is anyone's guess what we're going to see in inflation as it relates to things that are not covered by the fuel surcharge, power bills and buying tires and any other petroleum related products and LP gas and electric and heat bills and things like that.
David Roth - Analyst
Thank you very much.
Operator
Art Hatfield with Morgan Keegan.
Art Hatfield - Analyst
Good morning, guys. Pretty much all of my questions have been answered. I just want to congratulate you on a great quarter. And just to follow up on one thing you said, Wes. You had mentioned the 30 to 40 service centers you had identified that would need to be expanded as you guys work on doubling the size of the company. Are any of those getting real close to the point where you are kind of potentially seeing chokepoints in those centers?
Wes Frye - CFO
I wouldn't think that we are at that point yet. But as I'd mentioned, you don't do that when you get a chokepoint. We try to anticipate those chokepoints that might come up and put in the investment now, so that you don't reach that. As I had also mentioned on one of the questions, if you do have a lot of chokepoints, it really does have a very detrimental effect on your service levels and therefore on your cost.
We experienced that several years ago, that we just did not have the capacity to process the freight efficiently through the system. And it makes it very inefficient and very costly, and we just don't want to get to that point. We'd rather anticipate that rather than do that in hindsight.
Art Hatfield - Analyst
That is great and that is helpful. Just a thought popped up. Historically, have you seen a certain percentage of your service centers that you've felt you've grown into or were going to grow out of over the next 12 months that you've had to upsize over time?
David Congdon - President, COO
It used to be 8 two 10 a year, but that was back when our network was smaller. And the network is larger and that we are experiencing the growth levels that you see. And with the anticipated growth, I think we are growing out of some service centers faster than we used to.
Wes Frye - CFO
And another thing, Art. We really do try to -- when we look at especially new real estate and new construction -- is to try to anticipate in terms of acreage that we can expand the service center. But sometimes, depending on the availability of real estate, you just can't do that.
We also, our first priority, rather than add capacity to the industry, we would just as soon buy an existing facility if it exists, which is kind of a transfer of capacity. But sometimes you just can't do that and the only alternative is to build a new service center. But we do try to make suspect (ph) that service center that it can be expanded so we don't have to move and find one elsewhere.
David Congdon - President, COO
Art, as we have been considering our needs for the future, we asked, I think, a pretty pertinent question of ourselves. We said, looking back over the last five years, have we screwed up in any of the investments that we've made? Have we bought too big or anything like that?
And if anything, we can't see a place where we have gone too large in what we have built in the past. If anything, they've worked out to be just about the right size or maybe even could have been a tad bit larger. But for the most part, we are doing a real well with our decisions on what we are investing in.
It is kind of a daunting CapEx to start thinking about this real estate going forward, but we think it is necessary to continue building out our company to the national footprint and to achieve our five-year growth plan.
Art Hatfield - Analyst
Great. Thanks. One last thing. And that is very helpful. Related to this, are you finding it any more difficult these days than you have in the past to find the real estate that you need? I understand that anytime you are doing something like this, it is always not that easy. But is it any more difficult today than it has been in the past?
David Congdon - President, COO
I will say, Art, it has been continually getting worse year after year, it seems. The non-in-my-backyard people don't want you to build a service center and some people don't want you to even buy an existing center and use it. We had an example of that was our Indianapolis -- they gave us a little bit of a hard time getting an occupancy permit and wanted us to put up all these sound barriers and berms and close off our indoors and different things that we've been fighting that. It is a real struggle on real estate.
And that too is part of why the future of the trucking industry on the supply side of the equation, our side of the equation, I think demand will outstrip supply because of the difficulty we have adding capacity. There are significant barriers to entry into our marketplace. You know, it is just -- I think we are going to have a good situation going forward in the supply/demand environment.
Art Hatfield - Analyst
Great. Thank you very much. Great quarter again, guys.
Operator
(indiscernible) with Carlson Capital.
Unidentified Speaker
Just wanted to clarify something that you guys said earlier. How much did your tonnage grow for LTL business over 1500 miles?
Wes Frye - CFO
We didn't indicate a tonnage growth; we indicated a revenue growth, and it was around 29%.
Unidentified Speaker
So in line with the --?
Wes Frye - CFO
In line with the other segments by length of haul.
Unidentified Speaker
Okay, thank you.
Operator
(OPERATOR INSTRUCTIONS) David Mack (ph) with J. Goldman (ph) & Company.
David Mack - Analyst
Hey, guys. Great quarter.
David Mack - Analyst
Hey, guys, great quarter. I had a question a little bit on the growth side and the pricing side and share. Your length of haul is up, your tonnage is up considerably --
Wes Frye - CFO
I think the haul is down, actually.
David Mack - Analyst
Okay, then that helps me on one of the things I was wondering about. What are the discussions you have with the customers when you go in and you're winning a new piece of business? What are some of the aspects that you are winning some business on?
David Congdon - President, COO
Well, the biggest aspect is probably the fact that we can handle their next-day regional business and their long haul business all under one management team & company. And we also have our value-added services of expedited global, our technology and truckload brokerage and all these other features that allow us to be considered a single source provider.
David Mack - Analyst
But isn't that -- I mean, there are a number of competitors that, and some are larger, that could do those same services. I mean, because you are smaller than some of your competitors, you are able to give more individualized service? Because, I mean, those are offerings that a number of other people have in their portfolio as well.
Wes Frye - CFO
David, you've got to define "others can do it as well." Keep in mind what David said -- under one roof, under one management. Truly one source, one truck backing up to the dock as opposed to potentially two or three others with some of the other companies that can do it all within the company -- the corporate umbrella.
David Mack - Analyst
I see. So you feel you are seeing some diversification away from some of those players that "we can do it, but it's going to be a different truck and it's a different service, maybe even a different sales guy." So you are seeing people kind of gravitate towards your system where it is just one point of contact, one truck and fairly individualized service?
David Congdon - President, COO
That is pretty much true.
David Mack - Analyst
What about on the pricing side? I mean, we see the yield, but can you give us a little more color on what are the key concerns that customers have these days? When you go in to discuss price, what are some of the more sensitive areas there?
David Congdon - President, COO
The main thing is they want better service and more for less -- for less cost. Actually, we find that we try to just be competitive with the price; that is the main thing that they want, is to be competitive.
David Mack - Analyst
Are you finding them pushing a little harder on that button than say a year, year and a half ago? Or when you mix in fuel, is it the same discussion?
Wes Frye - CFO
It seems, David -- I mean, anyone can see what the price of fuel is doing and that is kind of an understandable and accepted thing, that not only are we achieving but also the LTL and truckload space. On the other issues, on just normal price increases and looking at our contractual, we have been successful in going in and getting 2 to 3% rate increases. So they understand that with our investment, which is significant, and (indiscernible) will provide their top flight of service, that we have to continually invest in the company and they're sensitive to that.
David Mack - Analyst
Some of your competitors have talked about how some shippers, when they talk about rates, they want to talk about the surcharge along with the rates and try to negotiate them all as one package. How do you guys look at that or do you just let the customer dictate how you want to talk about it? Are you still differentiating between the surcharge and the base rates or is that all one discussion?
David Congdon - President, COO
We try to talk the surcharge is different than the rate. But some of what you are saying is true, that some customers want to lump it all together. And every customer is different; there is no real pattern that we could share with you on that.
David Mack - Analyst
Okay. Great quarter and I will see you soon.
Operator
Jason Seidl with CSFB.
Jason Seidl - Analyst
Hey, David, Wes, real quick here. A while ago, we saw some multistock truckload freight migrate to the LTL industry and then some of it started to disperse back to the truckload players. We're hearing that capacity is starting to tighten up some more in the truckload market place with fuel spiking up and driving the little guys out of the marketplace. Do you think you guys could see that phenomenon start happening again, maybe you get a little bit more truckload business?
Wes Frye - CFO
I think so, yes. We characterized that segment as upload (ph) between 10 and 20,000 pounds. It could be smaller. But we see pretty good growth, in excess of 30% in that sector. So that could give prima facie evidence that we are growing in that partial truckload sector.
Jason Seidl - Analyst
Okay. Did I hear you correctly -- you said 2 to 3% rate increases from customers right now that you are getting?
Wes Frye - CFO
Yes.
Jason Seidl - Analyst
What were you getting last year?
David Congdon - President, COO
We get more from some -- it all depends on the profitability of the account.
Jason Seidl - Analyst
If that on average, Dave?
David Congdon - President, COO
That is the average. That is on average.
Jason Seidl - Analyst
What were you averaging last year?
David Congdon - President, COO
About the same, maybe a little bit higher.
Jason Seidl - Analyst
So maybe 3 to 3.5?
David Congdon - President, COO
Possibly, yes.
Jason Seidl - Analyst
Okay. Thanks a lot, guys.
Operator
Jack Wilson with Stephens.
Jack Waldo - Analyst
Hey, guys, quick follow-up. Is a good rule of thumb that your business mix measured by tonnage of revenue is about a third, a third, a third between what you could categorize as regional, interregional and long haul?
Wes Frye - CFO
No, no. We are still a little bit heavier in the longer haul business because the more recent expansion into regional is more, in fact, more recent. So we are increasing market share in that sector faster, but the medium haul is still -- I mean with the 920 roughly length of haul, it kind of gives you a gauge on that.
Jack Waldo - Analyst
Okay, so if you broke into next-day shipments, two- to the three-day shipments and three-days plus, is that how you guys look at it?
David Congdon - President, COO
Let me answer that, Wes, because you know, the graphs that we were using in our presentations before, it was 25 in next-day, it was --.
Wes Frye - CFO
35.
David Congdon - President, COO
36 in second-day, because it took us to 61 between one and two. And then the next, the third day, took us up to about 85% of total. So another -- what 19% in third day and 15% in 4th day and longer. That is what it was when we were doing those graphs before.
So I would think with the higher growth rate in our next day lanes that maybe our next and two is a little more than 61%. And that is looking by transit days that we sell, as opposed to Wes was quoting earlier looking at length of haul segments that we were -- the first segment was zero to 650, the second segment, Wes, was what 650 to --?
Wes Frye - CFO
1000.
David Congdon - President, COO
1000. The numbers he gave you earlier were on length of haul and the numbers I'm giving you are on transit days that we sell.
Jack Waldo - Analyst
Okay. Okay, Wes, when you were talking about growing at -- was it a 29% rate in shipments 1500 miles or longer --?
Wes Frye - CFO
Yes.
Jack Waldo - Analyst
That would be all fifth day with little bit of fourth day, is that correct?
Wes Frye - CFO
No, that could be some third day and longer at 1500 miles.
Jack Waldo - Analyst
Okay.
Wes Frye - CFO
Because we do second day -- typically get you almost up to 1500 miles -- it's maybe 14, 1500 miles.
Jack Waldo - Analyst
I was just trying to back into how much revenue growth you are posting in those lanes. I think that helps. Thank you.
Operator
And at this time, gentlemen, we have no further questions standing by. I'd like to turn the conference back to you for any additional or closing comments.
David Congdon - President, COO
All right. Thank you, everyone, for participating today. It was some great questions. And we appreciate your interest in OD. Please fill free to give us a call if you have any further questions. Wes will be in the office this afternoon. And we look forward to talking to you again after the fourth quarter. Good day.
Operator
Thank you for your participation on today's conference call. You may disconnect at this time.