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Operator
Good morning. And welcome to the second quarter 2007 conference call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through August 7 by dialing 719-457-0820. The confirmation number for the replay is 8724709. The replay may also be accessed through August 26 at 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 third quarter and full year 2007. 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. 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 Chairman and Chief Executive Officer, Mr. Earl Congdon. Please go ahead, sir.
Earl Congdon - Chairman, CEO
Good morning. And welcome, everyone. Joining me today is David Congdon, our President and COO, and Wes Frye, our CFO. As usual, we each have some brief remarks about our second quarter performance and the company's outlook, and then we'll be glad to take your questions.
Old Dominion's earnings per diluted share for the second quarter exceeded our expectations even before the price issue resolution that added about $0.03 per diluted share to our bottom line. We were pleased with this performance in an industry environment that remains sluggish. Our results are an indication of our focus on cost control and continued productivity improvement. This focus was a major factor that produced an operating ratio for the quarter of 88.7, which is one of the best in our company's history.
Although the operating ratio increased 40 basis points from the second quarter of last year, which was the best OR in our public history, we think this performance for the latest quarter was still quite strong in light of the soft industry conditions.
The addition of 14 new service centers over the last 12 months has had a minimal negative effect on our operating ratio. We estimate that these 14 centers produced a drag on the OR of approximately 10 basis points YTD. But the fact that we have continued the steady expansion of our service center network despite three quarters of soft industry conditions is a clear demonstration of our long-term approach to our business and its inevitable cycles, as well as our commitment to balancing growth and profitability. We're continuing to seek out additional sites that will enable us to fill out our network toward a national footprint with 100% full state coverage.
In April, we closed the purchase of selected assets of Priority Freight Lines and fully integrated their operations into the OD network. We will continue to evaluate and pursue additional acquisitions that will help us achieve our goals.
In summary, I think our team has demonstrated that we have the knowledge, skill, and determination to operate through some rather challenging times. We are confident that Old Dominion remains well positioned to continue pursuing our profitable growth strategies to increase shareholder value.
Now I'll turn the floor over to David.
David Congdon - President, COO
Thanks, Earl. And good morning everyone. Let me begin by echoing Earl's comment that we feel good about Old Dominion's performance for the second quarter, especially relative to industry conditions and to our peer groups. The fact that we grew tonnage 7.4% with an improvement of almost 1% in revenue per hundred weight, even excluding the $2 million out of period revenue resolution indicates that we continued to expand market share during the quarter without sacrificing pricing discipline.
Until the recent announcement by FedEx regarding their fuel surcharge reduction, we have viewed the pricing environment as more competitive than a year ago, but not necessarily irrational. Our basic pricing philosophy is to meet competitive pricing levels that achieve our account profitability objectives and not knowingly or willingly initiate price cut or higher discounts to win new business.
Each account has different characteristics relating to the product being shipped, lanes being offered, density, handling characteristics, rate tariffs, et cetera. And the pricing offered must weigh all these factors. Over the last few years, base rates, discounts, and fuel surcharges have become very blurred and very diverse among our customer base. It all comes back to individual account profitability. This philosophy and our freight costing methodology have been integral to our long-term efforts to improve our revenue yield and have served us very well throughout a number of economic cycles. And we will continue to look at each individual account on its own merit.
It's interesting. We calculate that there is more leverage in maintaining pricing than using pricing to improve profitability through increased market share. Based on our cost structure, we estimate that every 1% improvement in revenue per hundred weight equals $0.06 in EPS. Conversely, for every 1% reduction in revenue per hundred weight requires almost a 5% increase in tonnage to realize that same $0.06 increase in EPS.
In last quarter's call, I reviewed a number of technology and operating initiatives focused on improving productivity and reducing claims. We continue to gain traction in pick up and delivery with approximately a 4% improvement in key metrics such as P&D shipments and stops per hour. This improvement resulted from a focus on about 30 key locations this year. And I feel that we have only scratched the surface in this area.
Productivity has also improved through the quarter with other leading metrics, one of which is the [line haul] latent load average has increased 3.5% and platform pounds per hour increased 6.9% during the quarter year-over-year. In our last call, we also talked about cargo claims as having been a problem area. I'm pleased to say that we have made great strides here as is evidenced in our financial statistics.
Moving forward, we maintain our commitment to improving our operating efficiency and productivity. Our history over the past decade is evidence of the consistent implementation of our growth strategies by our management team and dedicated employees. We continue to see a bright future with many profitable growth opportunities that will benefit our company and shareholders. We appreciate your confidence and investment in OD.
And now I'll ask Wes to review our financials.
Wes Frye - CFO
Thank you, David. Old Dominion produced record revenue of $360 million for the second quarter of 2007, which was up 8.7% from the second quarter last year. The increase in revenue reflected a 7.4% increase in tons for the quarter and a 1.1% increase in revenue per hundred weight, despite the impact of a 2.5% increase in weight per shipment. Our revenue for the latest quarter also included approximately $2 million from the resolution of a pricing issue that derived from prior periods.
As Earl mentioned, we are pleased with the impact of our cost control efforts as well as a continued focus on productivity for the quarter, which contributed to an operating ratio of an 88.7 and a quarter with single-digit revenue growth, compared to 88.3 for the second quarter last year when revenue increased 25.1%.
In addition to substantial productivity improvements, one area of particular focus has been our cargo loss and damage claim, and our improvement in this area led to 100 basis point drop in interest expense to 2.5% of revenue for the second quarter, from 3.5% for the first quarter of this year. Offsetting these improvements, we experienced an increase in depreciation and amortization and interest expense as a percent of revenue, both reflecting our planned capital expenditures which, YTD, is almost $137 million.
As we mentioned in the release, we have scaled back our CapEx budget to approximately $200 million for the year from $245 million. Much of this reduction is related to real estate due to delayed construction and/or availability timelines, and will simply be delayed until 2008. Currently, our CapEx budget for 2007 includes $99 million for tractors and trailers, about 90% of which we've already spent in the first half of this year, about $92 million for real estate, and about $10 million for IT initiatives.
Turning back to the P&L, our tax rate was in line with the expectations for the quarter at 39.5%, and we expect this rate to also be the same for the remainder of the year. Net income increased 4.3% for the second quarter to $22.5 million, or $0.60 per diluted share. Of this total, $0.03 per diluted share is attributed to the pricing issue resolution.
Through the second quarter, we continued to fund our capital expenditures from operating cash flow and cash on hand. Because of our significant cash flow, our ratio of net debt to total capitalization was 35.6% at the quarter's end, and we continue to expect to fund these capital expenditures while keeping the ratio in the 35% range by year end 2007.
Looking ahead, we today are affirming a range of expected earnings per diluted share for the full year of 2007 in a range of $2.00 to $2.05, adding that this is the same guidance we presented at the beginning of this year. This guidance reflects a current industry environment that remains challenging due to an ongoing pricing pressure, although we continue to be optimistic that growth in tons will improve for the second half from the first half. Consistent with this outlook, we today establish our guidance for earnings per diluted share for the third quarter of 2007 in a range of $0.53 to $0.56.
And this concludes our prepared remarks. Operator, we'll be happy to open the floor for any questions at this time.
Operator
Our question-and-answer session is conducted electronically. (OPERATOR INSTRUCTIONS) We'll go first to John Larkin with Stifel Nicolaus.
John Larkin - Analyst
Good morning gentlemen. Nice quarter in light of the tough environment. With respect to your guidance for the second half of the year, Wes, I just wanted to get a little more clarity on what type of economics, an area you are envisioning there. I wasn't sure whether you were envisioning a bit of an increase in the growth rate of tonnage year-over-year as we might experience more of a normal peak in the second half, or what exactly your assumptions were.
Wes Frye - CFO
We think that our tonnage will return to either the high single or low double digits growth. However, we think that the pricing environment will still remain competitive and resume very little growth, even if it would be slightly negative to flat on the pricing side.
John Larkin - Analyst
That's very helpful. The revenue discrepancy with the customer, was that a weight issue? Did you discover that he was perhaps underweighing the shipments, or what exactly was going on there?
Wes Frye - CFO
John, we don't want to give a lot of details. It was during a period of 2004 to 2006 that came to light in late 2006. We were under negotiations just to come up with the right rate, and knew that it would probably happen sometime this year. So it was already in the year guidance to know exactly what quarter that would come to a resolution, and it turned out to be the second quarter.
John Larkin - Analyst
What type of an audit process do you have to make sure that your customers are not underweighing the shipments? I know some LTL carriers will have actual scales on the forklifts, et cetera to track that [fairly annually].
David Congdon - President, COO
We have a very vigorous weigh in and inspection process at each terminal, so that we have people looking at that. But you're assuming it was a weight issue and it was not.
John Larkin - Analyst
I think you now have 100% service in 38 states, is that correct?
Earl Congdon - Chairman, CEO
Yes, that's correct.
John Larkin - Analyst
And you have partial service in how many additional states? That wasn't mentioned in the press release.
Wes Frye - CFO
In the remaining nine. We're in 47 of the 48 continental states.
John Larkin - Analyst
Which is the one you're not in?
Wes Frye - CFO
Montana.
John Larkin - Analyst
Do you have a relationship with a carrier there so that you can essentially present yourself as an all-points carrier to most big nationwide shippers?
David Congdon - President, COO
Yes we do, John. We have coverage in all 48 states, either full coverage within the 38, and all the rest of them, we have agents and/or inter line carriers, that's actually agents that serve the points that we do not serve.
John Larkin - Analyst
And then just jumping back to the issue that kind of captured everybody's attention at the beginning of the week, the drop in the FedEx fuel surcharge, could you give us a sense, maybe, for how their competitive positioning and perhaps even Conway's competitive positioning might differ from yours? Do you feel like you're going at the market in a different way, perhaps, looking for a different type of customer with different service requirements, different pricing requirements to begin with, so that you perhaps don't compete with them head to head as much as some people might think?
Earl Congdon - Chairman, CEO
I would think, John-- it's Earl-- that we do compete with them. We just don't feel that we need to match this reduction in this fuel surcharge because of the statement that David made a few minutes ago that it's the bottom line that really counts, the cost to the customer. And there are so many factors involved there that we're going to handle that on an individual basis.
John Larkin - Analyst
Would you generally think, though, that perhaps their transit times are better in some lanes, and their on-time reliability is a little bit better, or do you think Old Dominion competes with them head-to-head on those metrics?
Earl Congdon - Chairman, CEO
We think we compete head-to-head with them on those metrics.
John Larkin - Analyst
Would it be safe to say that perhaps you're viewed by shippers as offering perhaps more value for that same service, historically?
Wes Frye - CFO
Well, maybe that's the evidence of our gains in market share, that customers recognize the value that they are receiving from OD and are rewarding us with more business.
John Larkin - Analyst
That sounds terrific. And is it too early to tell in July how the second half is shaping up? Have you seen any evidence that maybe the rate of tonnage growth is, in fact, beginning to ramp up for what would be more of a traditional peak season?
Wes Frye - CFO
John, this is Wes. July, as I have said for the second half, we're already seeing that in July. Our tonnage growth is in the high single digits to low double digits. Pricing sequentially is perhaps improved slightly, But still flat to maybe slightly down is what we are looking at for July.
John Larkin - Analyst
Thank you very much. That's very helpful.
Operator
And we'll go next to Tom Albrecht with Stephens, Incorporated.
Tom Albrecht - Analyst
Good morning, everyone. Terrific quarter. As soon as you get to breathe a sigh of relief, then you've got to deal with Wall Street for the next quarter. But I wanted to follow up on a couple of issues here. First off, Wes, can you give us a feel on the tonnage month by month?
Wes Frye - CFO
Yes. For the second quarter, we saw tonnage fairly consistently. And I think I gave some of these numbers. But anyway, in April we were up 6% in tonnage. It went up to 8.6 in May, and then kind of stabilized at about almost 8 in June.
David Congdon - President, COO
And those were against an accelerating tonnage growth rate of --.
Wes Frye - CFO
Of last year of 17% plus.
David Congdon - President, COO
Of '06 over '05.
Tom Albrecht - Analyst
Yes. I recall that from the last conference call, so yes, that's impressive that you held your own. Have you guys looked at your own field surcharges yet to determine approximately how many of the your customer -- the surcharges are yours versus your customers'?
Wes Frye - CFO
Well, let me just put out a couple statistics if I could, Tom. If you look at FedEx's 10-K they just recently filed for the year ending May '07, they showed a revenue per hundred weight of $18.65. Now, this included Watkins for about seven or eight months. And Watkins was a longer haul carrier and had a revenue per hundred weight of around 24-something, is what I estimate. And so that kind of skewed that number up. But overall, I would still say even with Watkins, that their average length of haul was still probably less than ours.
When you look at the same 12-month period ending May for ours, our revenue per hundred weight was $15.94, so well under theirs on a longer length of haul. As you know, the longer the length of haul, the more your revenue per hundred weight should be. During that same period, they reported that their fuel surcharge as a percent of their revenue was almost 18%. During that same period ours is around 12%. It appears they had room to reduce their fuel surcharge.
Tom Albrecht - Analyst
Sure sounds like it. That's very helpful commentary, Wes. Also, I know this is just a real small question, but on your reaffirmed annual guidance, that's including the $0.03 benefit in that $2.00 to $2.05?
Wes Frye - CFO
We did anticipate that early in the year that there would be some benefit from that. We just didn't know which quarter, so we somewhat just spread it over the year just to have it in there. But it actually went into, as you know, the second quarter.
Tom Albrecht - Analyst
And David and Wes, really both, you both have commented that the pricing environment has gotten more competitive. We know from many carriers volumes are disappointing. I guess what I'm looking for is why would it be getting more aggressive in summer, ahead of whatever kind of peak season we have, whether it's a mini peak or an old fashioned peak. Seems like that used to be more of an end of year, first quarter phenomena, the pricing pressures. Do you have any thoughts why here in mid-summer, that's such an issue?
David Congdon - President, COO
Well, Tom, I would say that the pricing competitiveness has been building this year. It really started at the tail end of the fourth quarter and in the first parts of the second quarter. Our tonnage, as Wes has indicated, is fairly strong. It does not show up in the year-over-year percentage numbers like we used to have, but still, we think that there's a slight hint that the economy is fairly strong. And our VP of Sales yesterday was telling me he doesn't feel that the price competitiveness is nearly as strong today, in the last, say, three to four weeks, as what we were feeling earlier in this year. So that's what he said yesterday.
Tom Albrecht - Analyst
And then lastly, I know you gave some good color on pricing versus tonnage at the beginning and made some strong statements, whereas most of the LTL carriers, it seems like they're even afraid to comment on the FedEx situation. But have you actually had enough customer feedback to know what their line of thinking is? Because I'm sort of envisioning that they're digesting things just like carriers are.
Wes Frye - CFO
We haven't had a lot of feedback about this situation from customers yet.
Tom Albrecht - Analyst
And based on your experience, does that take three, four, five weeks? Or is it typically instantaneous when a competitor does something aggressive?
Wes Frye - CFO
I expect over the next couple of weeks we'll hear some things, but so far it's been fairly quiet this week.
Tom Albrecht - Analyst
Okay. Guys, keep up the good work. Thanks for your help.
Operator
And we'll go next to Tom Wadewitz with J.P. Morgan.
Tom Wadewitz - Analyst
Good morning. I wanted to see if you could comment a little bit further on the view of the tonnage pickup in the second half. Is that really a view on the economy and the market picking up, or is that something specific to Old Dominion that you're doing that you're just going to, in terms of share gain, is going to accelerate?
Wes Frye - CFO
It's more mathematical, I think, Tom. What we're looking at for the second half of the year, we go back and look at our sequential trends, month-to-month, and we're basically forecasting similar sequential trends that we would normally have from a July into August, into September, October, November. We're not forecasting a drop off in October like we experienced last year. And last year was strange, so we're assuming somewhat normal sequential trends. And then mathematically it will give us stronger tonnage growth in the fourth quarter.
Tom Wadewitz - Analyst
So essentially you're facing easier comps and that is a significant factor in the acceleration. That makes sense. On the CapEx change, would we think then that the '08 CapEx would be pretty significantly above your forecast for '07 CapEx because you've got the carryover of what you're pushing into '08? Or is it not fair to conclude that?
Wes Frye - CFO
Well, we haven't got our final CapEx, but we would not expect our CapEx to be, at this point, higher than the '07.
Tom Wadewitz - Analyst
Than the revised '07.
Wes Frye - CFO
In the revised '07, right.
Tom Wadewitz - Analyst
Then one question for you on the cost side. It sounds like you've got a couple specific things you mentioned on the call where you focus on productivity and efficiency and to drive some cost improvement, which is good to see. What about the comp and benefits line item? If things are slow in terms of customer pricing, do you consider a lower wage increase for the workforce in a slower year, or is the way that that's set up pretty much you just match what the union carriers do, and it's the same wage increase regardless of whether your demand and pricing is strong or weak?
Wes Frye - CFO
The overall wage increase is a little less this year, or what we're anticipating is a little less than what we did. Not significantly. Still exceeding the CPI index. And we don't follow what the Teamster carriers do, we do what we need to do and probably compare ourselves more so with our non-union competition.
Tom Wadewitz - Analyst
So is it a function of what you're seeing in terms of your financial performance on the customer side and what you can do on pricing, or is it a function of, just assume supply and demand for the labor market and you kind of respond to that?
Wes Frye - CFO
All of the above.
Tom Wadewitz - Analyst
Okay. Thank you for the time.
Operator
Our next question is from David Campbell with Thompson Davis.
David Campbell - Analyst
Thank you very much. On this FedEx surcharge change, do you think there's anything to the fact that they're very aggressively increasing their rates for overnight express and ground package business? At the same time, they're essentially decreasing their net yields on freight. It looks like they may be trying to get more weight in their freight and therefore making the pricing more competitive.
Wes Frye - CFO
Your guess is as good as mine, Dave. I think you ought to ask them.
David Campbell - Analyst
I will, but they're probably not going to say anything, so I was just wondering whether you had any opinion.
Wes Frye - CFO
It would be total speculation on our part. We'd rather not comment.
David Campbell - Analyst
I understand. So anyway, thank you. I think most of my questions have been asked. One more question. Do you expect any improvement in your insurance rates going forward, or is this pretty much as good as it can be in the second quarter?
Wes Frye - CFO
We don't anticipate it being lower than that. We anticipate it being pretty much centering around what our long-term experience has been, which is back in the (multiple speakers) 2.8 to 3%.
David Campbell - Analyst
Okay, great. Thanks again. Appreciate your help.
Operator
We'll go to Ed Wolfe with Bear Stearns.
Ed Wolfe - Analyst
Good morning, guys. Just trying to understand better the $2 million. Maybe it's just me, I don't quite understand. What is it, and where is it in your report? In other words, if we wanted to take this out as not continuing, is it in freight revenue?
Wes Frye - CFO
Yes.
Ed Wolfe - Analyst
So just take $2 million out of freight revenue is the way to look at that? I'm guessing this isn't continuing, and can you talk a little bit about what it is?
Wes Frye - CFO
It's a customer-specific issue, Ed, and we cannot speak --.
Ed Wolfe - Analyst
It's not going to happen again with this customer, or it could continue?
Wes Frye - CFO
No, it will not happen again. And that $2 million belongs in periods back over a two to three year period.
Ed Wolfe - Analyst
Okay. When I look at your operating statistics, the tonnage and yields of 7.4 tonnage and 1.7 for yields, is that in those numbers? Is the $11.81 --?
Wes Frye - CFO
It's not in tonnage numbers. It has no relation to tonnage.
Ed Wolfe - Analyst
Okay. But in the $11.81 revenue per hundred weight net of fuel, is that in that or removed from that? And if it's not, can we get it without that?
Wes Frye - CFO
It is in that number. If you looked for the quarter, at the revenue per hundred without that instead of a 1.1% increase, it would be about 0.5%. If you looked at the revenue per hundred weight excluding fuel surcharge, excluding that resolution, it would be about 1%.
Ed Wolfe - Analyst
That's what I was asking. Okay. And so the 1.7, the $11.81 includes that too.
Wes Frye - CFO
It does, yes.
Ed Wolfe - Analyst
All right, that makes sense. And the guidance, just to be clear, excluding that, so kind of continuing that, then you just take the $0.03 out. So $1.97 to $2.0 --.
Wes Frye - CFO
No. The guidance of the $2.00 to $2.05, when we gave it at the beginning of the year and it confirmed that throughout the year, already includes some benefit from that resolution.
Ed Wolfe - Analyst
Oh. So it is just my mistake, I didn't realize that. Had you announced that already?
Wes Frye - CFO
Well, we didn't announce anything because we didn't resolve it until the second quarter.
Ed Wolfe - Analyst
But just to be clear. So in other words, if we count this quarter with the $0.03 at $0.60, then we're talking $2.00 to $2.05. But if we count it as $0.57 then it's $1.97 to $2.02. Is that right, Wes?
Wes Frye - CFO
Right. Without that benefit, yes.
Ed Wolfe - Analyst
Okay. I just want to make sure it's apples-to-apples. You said some things, I think it was you, David, that I thought was very interesting in your comments. And you guys have done an amazing job of kind of growing tonnage when the market allows you to do tonnage and then kind of focus on the yields. And you made the comments about a point of yield is worth five tonnage points. Is that the right thing we should take away from your report, is that in that balance right now where maybe three or four quarters ago you were more focused on tonnage and not so much thinking about yield, you're now always focused on tonnage, but really focusing on maintaining those yields and not doing something silly in the market?
Wes Frye - CFO
Absolutely. We're going to maintain our pricing discipline. If you would think about last year this time, when we were probably generating 2 to 3% yield improvements, if we could be generating 3% yield improvements today, what we're saying is that that might be worth $0.18 a share. 3% times $0.06 is $0.18 a share. But the pricing environment is a pretty major impact on us today.
Ed Wolfe - Analyst
If, for instance, FedEx presses market share, your instinct would be to give them freight and keep the yield versus maybe a year ago it would have been the other way around, it feels like.
Earl Congdon - Chairman, CEO
We are going to handle that on an individual customer basis. We don't expect to yield a lot of freight.
David Congdon - President, COO
It's like we said in the previous calls that we look at each account individually. And we will defend our turf up to a point, depending on the profitability of the account.
Ed Wolfe - Analyst
Okay. Just switching gears, the Priority acquisition that closed at the end of April, what did that add to tonnage and revenue in the last two months of the quarter?
Wes Frye - CFO
Very little, about 1%. 1 to 2%.
Ed Wolfe - Analyst
On tonnage?
Wes Frye - CFO
No. It's hardly measurable, to tell the truth, for the quarter. It didn't become effective until May, so it's two quarters, and their revenue for a whole year was $17 million. So a quarter it was less than $4 million.
Ed Wolfe - Analyst
Okay, but if I look at tonnage, it went from 6 to 8.5 then 8. I'm guessing one or two of that in May and June might be related to this. Is that fair?
Wes Frye - CFO
No. It really isn't that much Ed. We haven't even measured, to tell the truth, because it has such little impact overall. Strategically, it added a full state coverage to us and got us more embedded in the northeast, specifically Washington. But as far as tonnage and revenue, it added very little during the second quarter.
Ed Wolfe - Analyst
Strategically, I'm guessing that if the market remains tough, maybe there'll be some more opportunities. Are you seeing that in the marketplace, any strategic areas that you're looking at? How should we think of that over the next 6 or 12 months?
Earl Congdon - Chairman, CEO
There's nothing that you should think about in that area.
Ed Wolfe - Analyst
Thank you very much. Appreciate the time, and always the comments.
Operator
(OPERATOR INSTRUCTIONS) We'll go to Justin Yagerman with Wachovia Securities.
Justin Yagerman - Analyst
Good morning, gentlemen. How are you? Can you remind us what the tonnage counts are from a year ago in Q3 and how they trend as we go through July, August, September?
Wes Frye - CFO
Last year the tonnage growth for the second quarter, as David had mentioned, was increasing. If you looked at April, our tonnage growth last year was almost 16%, increasing to almost 18% in May, and in June, increasing to 19%. So we had sequentially increasing year-over-year of tonnage percentage growth.
David Congdon - President, COO
That was the next quarter, the third quarter.
Wes Frye - CFO
In the third quarter, we saw in July a 16%, it went up to about 19% in August of last year over the previous year and then dropped to 17% in September.
Justin Yagerman - Analyst
Okay, that's very helpful. Thanks. David, Earl, I know you guys are involved with the ATA Executive Committee. Can you guys talk at all about hours of service and ATA reaction to it, and maybe your own?
David Congdon - President, COO
ATA is going to fight very hard to maintain the 11 hour drive time rule as well as the 34 hour reset provision. And they're also fighting for the reinstatement of the split sleeper berth time. And we are in favor of all three of those things.
Justin Yagerman - Analyst
Do you see any impact from hours of service on your business if you're not able to maintain the rules as they stood before this change?
David Congdon - President, COO
Well, we think that the rules have helped us. For one thing they -- our safety record has improved about 11% in terms of accidents per million miles during the period of time that we've had these current rules in place. And how much of that is the effect of just our general safety program or these new hours of service -- but we think the current rules have been a positive thing for the industry and that's why we want to fight for them and for maintaining what we've got. But we have not quantified what effect it might have on us. It's helped us operationally improve some service standards and things like this, but we think that we need to keep the rules as they are, and ATA is hopeful that we can do so.
Justin Yagerman - Analyst
Great. You guys in the past couple of quarters have talked about some operational improvements, and obviously, they're showing. As you have been going back through the line items in this slower growth environment, are there any areas that you're excited about as we head into the second half? You've done a good job on some of the line items. Is there anything that you're particularly targeting to keep costs down in this kind of environment?
David Congdon - President, COO
I would say that we will continue focusing on T&D like we have, and expand our focus on improving efficiencies in that area. We have a few more ideas and things that we're working on on our dock productivity that we hope to be able to improve in that area. And our recent trends in cargo claims are very positive, and we believe that we can continue improving in those areas. So it's just continuing to focus more of the same, and looking at our staff that's out there helping drive these initiatives and making sure we've got enough people to drive them.
Justin Yagerman - Analyst
You guys have also talked about some of the non asset-based things that you're doing and potentially making an entry into the warehousing business. When should we start to see any of those things making more of a material contribution, and how should we be thinking about those as we head into the back half and maybe the asset-based environment?
David Congdon - President, COO
At this point, I think you should not even think about it right now. We're still in the infancy stages of our planning processes, and we'll let you know when we think it's material enough to consider.
Justin Yagerman - Analyst
Got it. And then two more items before I turn off to someone else. On the weight per shipment going up year-over-year, was that a factor of anything in the economy, or was that more going after some spot quote business in the truckload market?
David Congdon - President, COO
I would say the spot quote had minimal effect on that. And I'm not sure it's equated to the economy or just additional market share. And I would have to put it more on the latter, on additional market share. It seems that most of the other carriers are reporting weight per shipment being down and for the quarter ours was up, so I guess just by default I would have to assume it's for the most part market share and additional coverage, and more shipments we're getting from existing carriers as a result of that.
Justin Yagerman - Analyst
Are customers talking at all about the back half of the year? Weight per shipment being up and market share gains it kind of makes out for that. But what are you hearing from your customers, then, as you're going out there? That is confusing. Sorry.
David Congdon - President, COO
Nothing in particular, to answer that question.
Justin Yagerman - Analyst
You guys usually talk about a growth rate in service centers that you have had in your network for a year or more. What was that in the quarter, or a percentage of your growth that came from those?
Wes Frye - CFO
95% of our growth was from existing service centers.
Justin Yagerman. All right, thanks a lot, guys.
Operator
There are no other questions in our queue. At this time I would like to turn the conference back over to Mr. Earl Congdon for any additional or closing comments.
David Congdon - President, COO
Well, it'll be David Congdon, because Earl had to step out for an appointment. So we thank all of you for participating today. We appreciate your questions and your interest in OD. Please feel free to give us a call. Wes and I will be in this afternoon if you have any follow up. Thank you very much.
Operator
And this does conclude today's conference. Thank you for your participation. You may disconnect at this time.