奧多明尼昂貨運 (ODFL) 2010 Q4 法說會逐字稿

Good morning, welcome to the fourth quarter 2010 conference called for Old Dominion Freight Line.

Today's call is being recorded and will be available for replay beginning today and through February 12, by dialing 719-457-0820.

The confirmation number for the replay is 1417472.

The replay may also be accessed through March 2, 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 Reform Act of 1995 including statements among others regarding Old Dominion's expected financial and operating performance.

For this purpose any statements made during the 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 this morning's news release.

And consequentially, 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.

As a final note before we begin, we welcome your questions today but ask in fairness to all that you limit yourself to just a couple of questions at a time before returning to the queue.

Thank you for your cooperation.

At this time for opening remarks, I'd like to turn the conference over to the Company's Executive Chairman, Mr.

Earl Congdon.

Please go ahead, sir.

Good morning.

Thanks for joining us today for our fourth quarter conference call.

With me is David Congdon, Old Dominion's President and CEO, and Wes Frye the Company's CFO.

After some brief remarks, we will be glad to take your questions.

Old Dominion completed a year of strong performance with an exceptional fourth quarter.

Our comparable quarter tonnage growth accelerated for the fourth consecutive quarter, and for the second quarter in a row, grew in excess of 20%.

With increased industry demand and shrinking industry excess capacity, pricing also strengthened after the pricing inflection evident in the third quarter.

Primarily as a result of these two trends, we produced revenue growth in the high 20% range as well as our third consecutive quarter of triple digit gains in earnings per diluted share.

Since the economic downturn gathered force nearly three years ago, we have discussed our strategic commitment to providing superior service for a fair and equitable price.

Our performance further demonstrated the increasing competitive need to provide fully integrated high quality comprehensive and dependable services.

While pricing continues to be an important consideration for customers, our market share growth over the last several years of intense price competition is strong evidence that simply offering the lowest rates is not a productive strategy.

Second factor contributing to our growth for 2010 was our willingness and ability to create and maintain the capacity to respond to opportunities to gain market share.

We have long said that we must balance our needs for growth and profitability in any given economic environment and our expansion slowed in response to the economic downturn.

However, throughout the downturn we continued to add new service centers, increase service center doors through service center additions or relocations and maintain equipment levels that enabled us to respond to market opportunities.

The third factor is the tremendous commitment to our customer service and productivity of our employees which have literally enabled OD to accomplish more with less.

Unlike most of the industry, we refuse to cut wages or benefits during the downturn reflecting our commitment to the OD family.

While it's hard to quantify the impact of high morale and loyalty, we are confident that this was the right decision.

In closing, let me say we are encouraged that the market improvements that contributed to our fourth quarter results continued in January.

Obviously a strengthening economy enhances our ability to produce profitable growth.

Considering our relatively low market share of less than 6% plus a number of small but rapidly growing value added services, we believe we have ample head room for substantial long-term growth.

However, it is our performance throughout the weaker economic environment of the last few years that we believe truly demonstrates our ability to achieve our long-term growth objectives.

Thank you again for being with us today and now here is David Congdon to discuss our fourth quarter operations.

Thank you, Earl, and good morning.

Old Dominion has been well positioned to benefit from a strengthening economy because of decisions made by us and our competitors.

By maintaining equipment and service center capacity as others cut theirs and by adhering to both our service standards and yield management discipline as others sacrificed theirs, we anticipated gaining significant market share as others focused on increasing their yield.

While a direct cause and effect is hard to quantify, we believe that the 20.5% increase in tonnage we produced for the fourth quarter was driven incrementally by customers seeking industry leading service combined with our rate increase that was lower and later than those announced by most of our peers.

Our strong revenue growth for the fourth quarter generated very substantial operating leverage and a 340 basis point improvement in our operating ratios on a comparable quarter basis.

This operating leverage more than offset a 2% Company-wide salary and wage increase that was effective in September as well as the efficiencies related to expanding our work force by approximately 10% during 2010, most of which occurred in the second half of the year.

In spite of this expansion, we maintained or improved our service standards with a 10.6% decrease in our industry leading cargo claim ratio of only 0.5% of revenue for the fourth quarter versus the fourth quarter of 2009 and an on-time delivery ratio of 98.5%.

We are encouraged, as we look forward, by continued substantial growth in tonnage and continued improvement in pricing during January.

While the rate of comparable quarter growth in tonnage is below the fourth quarter increase primarily due to severe weather in January, pricing continued to improve on a sequential month basis.

As our capital expenditure budget for 2011 indicates, we intend to continue to expand our service center network, either through newly constructed acquired or enlarged service centers.

We have identified additional expansion opportunities in which we will add service centers that will be a source of further growth and market penetration.

In addition, our capital budget calls for substantial expenditures on equipment in addition to the $19 million advanced purchase in December.

We will also continue our long-term investments in technology which have not only contributed to increased productivity through the years, but also enabled us to provide our customers with tremendous transparency and connectivity to our operations.

We remain optimistic about our growth potential into 2011 and beyond.

We continue to believe we have important inherent structural advantages compared with both our national and regional competitors.

We are very well positioned to leverage continuing industry consolidation and increasing demand for high quality, integrated and comprehensive transportation services.

Thank you, and I'll now ask Wes to review our financial results in greater detail.

Thank you and good morning.

Old Dominion's revenue increased 28.3% to $399 million for the fourth quarter of 2010 and also rose sequentially versus the third quarter for the first time since 2005.

This increase was primarily driven by a 20.5% increase in tons and a 5.9% increase in revenue per hundredweight or 3.4% excluding the effect of fuel surcharges.

Our tonnage growth reflected comparable quarter growth of almost 20% in shipments and seven-tenths of 1% in weight per shipment.

The 1% decline in weight per shipment sequentially from the third quarter is the first since the third quarter of 2009.

We believe this decline is related in part to mix changes as industry price increase slowed volume on the spot market which are heavier shipments.

In addition, as indicated by the increase in shipments, we believe shippers are now disaggregating shipments into more frequent albeit smaller shipments, reversing their practice of aggregating shipments into one as the recession deepened.

Sequentially throughout the quarter, tonnage growth year over year was 21.7% in October, 21.6% in November, and 18.3% for December.

You'll recall that our comps got tougher for December of 2009 as tonnage turned positive for the month, and we also experienced some bad weather in December of 2010.

Revenue per hundredweight during the fourth quarter of 2010 was up 3.9% sequentially compared to the third quarter and 2.7% excluding fuel surcharge.

Year-over-year our revenue per hundredweight excluding fuel surcharge improved each month sequentially throughout the fourth quarter.

Increasing 2% in October, 3.8% in November, and 4.9% in December.

The relatively small increase in weight per shipment in the quarter would not have a material negative impact on revenue per hundredweight while the1.5% increase in length of haul had a positive impact.

Including the effects of excessive bad weather in January, our tonnage growth per day year over year increased just under 15%, again on a tougher comparison.

And revenue per hundredweight was up 9.7% or 6.2% excluding fuel surcharge.

A combination of strong growth in tonnage for the fourth quarter of 2010 with improved pricing contributed to an operating ratio of a 90.5%, a 340 basis point improvement.

While salary, wages, and benefit as percent of revenue declined 220 basis points even as -- even with the 2% pay increase David mentioned earlier, operating supplies expense increased 170 basis points largely due to increased fuel expense.

Purchase transportation rose 90 basis points resulting from a greater use of this resource to meet the surge in tonnage for the quarter.

But most other expense categories improved as a percentage of revenue.

We did experience a 20 basis point increase in insurance and claims which reflects increased costs related to the expansion of the work force.

As detailed in the press release, capital expenditures for the fourth quarter totaled $37.2 million, including $19 million in cost of accelerated equipment purchases.

CapEx for the year was $106.3 million which was funded with cash provided by operating activities.

Total debt to total capitalization improved to 29.9% at the end of 2010, from 29.1% at the end of the third quarter and 34% at end of 2009.

We currently expect total CapEx for 2011 in the range of $265 million to $300 million including $120 million to $140 million for real estate, $130 million to $140 million for purchase of equipment, and $15 million to $20 million for investments in technology.

Consistent with past performance, we expect to fund most of these expenditures through cash flow and available borrowing capacity for the remainder.

Old Dominion issued $95 million in senior notes at attractive long-term rates in early January.

We used most of the proceeds to pay off the remaining balance of our $225 million revolving credit facility which matures in August of this year, and we are working with our lenders to renew this facility.

Today we also announced the filing of a prospective supplement under our self registration for an at-the-market offering program through which we may sell up to $100 million of the Company's common stock through February 1st of 2012.

We intend to use the proceeds from this offering to finance long-term capital expenditures and future acquisitions, if any, as well as for general corporate purposes.

We will not be taking questions related to the ATM offerings so please refer to the prospective supplement for additional information.

Our effective tax rate for the quarter was 37.2% with a 37.5% for the fourth quarter of last year.

We also estimate our effective tax rate for the first -- for the year of 2011 to be 39.5%.

And this concludes our prepared remarks this morning.

Operator, we will be happy to open the floor for any questions at this time.

(Operator Instructions)And we will hear first from David Ross with Stifel Nicolaus.

Yes, good morning gentleman.

Good morning, David.

Can you talk a little bit about the acceleration of equipment purchases into 2011.

Was that to buy some of the I guess pre-2010 engines?

Or is there any need you had before the end of the year?

David, we were able to take advantage of some price opportunities on trucks if we took some of our 2011 trucks early and that's the main reason for it.

We also had our eye on why our YRCW -- we would try to stay prepared for any contingencies and thought that in addition to the price held that it might not hurt to have some extra equipment available just in case.

So can you talk a little bit about the average age of your fleet right now, and then once you get through next year what you think the average age of the tractor fleet should be?

Our average age pretty much holds around the seven to seven-and-a-half years on the tractor fleet.

As you know, that age is based on the fact that we demote, so to speak, our line haul equipment into the pick up and delivery operation, and actually get economic value of 10 to 12 years, tractors.

Trailers in the neighborhood of 12 to -- 12 years average age.

And again as you probably realize, trailers economically can last a very long time if they are well maintained which ours are.

So they didn't get, I guess, older this year and you didn't have significant increase in maintenance costs?

Well, yes Dave, in 2010, we -- our equipment purchases were a little bit slim, and I'd say we took a little bit of time off on our replacement cycle during 2010.

So we are playing some catch-up on our replacement cycle in 2011.

So with the higher D&A from the new trucks, do you think that it will offset by lower maintenance cost and lower transportation going forward?

To some extent it will, yes.

And then, could you talk just a little bit about the pricing environment, what you're hearing from shippers on fuel surcharges and how that's playing into the negotiations on price?

At this point the issue of fuel surcharges has not risen to the top as a major issue with our price renegotiations.

It's not near what it was a few years ago.

So as always, fuel surcharge negotiation is part of the total package that we offer to a customer.

But for the most part, we've always tried to cover our excess fuel cost with fuel surcharges and maintain adequate base rates to cover the cost of moving the freight.

Thank you very much.

We'll take our next question from Chris Wetherbee with Citigroup.

Great, thanks.

Good morning, guys.

Good morning.

I was wondering on the capacity side, as you add a service center and increase head count a little bit, where do you think you are relative to capacity, and obviously seeing opportunities for potential growth and market share, as you go forward, of the overall network?

When you look at our service centers across the board from -- at all of them, you may find some service centers that have as much as 60% or 70% capacity in them.

And then you still have some on the other end of the spectrum that are 90%, 95% of capacity, or 100%.

And those would be some of the ones that we are currently have in our Cap Ex for expanding the doors or where we're considering service centers that hit the market due to consolidation in the industry.

But an overall average capacity in the service center network is still probably 25%, I'd say.

Okay, that's helpful.

And then when you think about the allocation of the CapEx geographically is there any specific area in general that you can point to as being a little more of a pinch point where you need to deploy the capital?

Chris, I assume that is the service center network you are speaking of?

Yes, absolutely.

Okay, equipment is pretty much [rateable] throughout.

Of course.

I would say Midwest --

The Midwest is probably an area where we've been experiencing significant growth and we have a couple of pinch points up there that we are addressing this year in our CapEx.

That's helpful, appreciate it.

And then when you think about where you stand, and obviously the update on January was helpful, is there any variation in the pricing environment as you've moved into January that would imply any material change relative to the growth you were able to achieve in the fourth quarter?

You know, as our numbers indicate and Wes gave guidance for January, our revenue per hundredweight in January was up 9.7% including fuel charges and 6.2% excluding fuel charges, which is a better trend than what we experienced in the fourth quarter.

So it appears the overall pricing environment and acceleration in pricing is continuing to improve.

I think overall industry capacity is tight and there's a lot of movement out there upward in prices because of the capacity is just not there.

Great, that's very helpful.

Thanks very much for your time, guys.

And we'll hear next from Chris Ceraso with Credit Suisse.

Good morning, this is Allison Landry in for Chris.

You guys mentioned earlier that you believe you have ample room to meet your long-term growth objectives.

And I was wondering if you could give us a sense how fast you expect to grow operating profit over the next three to five years.

We are not giving that forward looking guidance, Allison.

Okay.And then in terms of the CapEx, it seems like it's obviously at the higher end of the range historically.

Can you talk about how much of the decision to raise CapEx is a result of bonus depreciation, and how long do you think you will run that as high level of CapEx?

Well, the bonus depreciation really was part of the reason that we accelerated some equipment in December, and had no influence on the equipment this year.

It comes down to you have to have the equipment in order to fund the growth.

And this is the, as David mentioned earlier, perhaps some of the equipment was an additional catch-up by extending [lines].

But also in this CapEx, at least on the equipment side, is obviously a growth element.

On the service center side, we're just looking at -- that's more longer term, not only where we see capacity being constrained in the short term, but also in the next two or three years in the time horizon for service centers can be two or three years.

So you just plan and put those CapEx plans in place early on.

Okay.

So should we model for something that's high teens over the next few years?

Does that seem like a fair run rate?

High teens of --?

As a percent of sales, sorry.

You talking about sales growth?

CapEx as a percent of sales.

I would say that it would tend to, assuming we have growth, it would tend to average out pretty much what our historical trends would be over the last ten years.

Okay.

And then just one last question.

You mentioned, or one of the questions mentioned, also thinking it wouldn't hurt to have more equipment in case something happens with Yellow.

Is there any reason that you are still keeping an eye on them?

Has anything changed over the last several months to make you think that?

Things have been very quiet since December.

We just wait and watch just like everyone else.

But we're trying to be ready for whatever the contingency might be.

Okay, great.

Thank you so much.

Thank you.

Our next question comes from Jon Langenfeld with Robert W.

Baird.

Good morning.

If you think about pricing over the next couple of years, if the industry pricing is at the a certain level, would you expect your pricing growth to be at or above or below?

And I guess I could make the case for any direction given you've held your prices higher.

But how do you think about that over the next several years?

If you look back historically, Jon, before the freight recession started really in 2007, we were probably averaging 3% to 4% improvement in revenue per hundredweight -- for, heck, what, a five or six year period of time.

Industry capacity versus demand for our services stays in the balance that it's in now and we don't go back into a recession, I would hope that we can return to the years of 3% or 4% real price improvement per year.

So you expect it to, even though you maintained your price point, you think on the way up, you'd still be able to keep pace with the rate of increase of your competitors?

I don't think we will have any problem keeping up with rate of increase of competitors over the long run.

Right now, what you might see, is that the competitors who dug a deeper hole than we did in price may have larger percentage increases in their revenue per hundredweight than what you might see with our numbers.

If it looks on the surface like we're not keeping up with competitors, just remember how deep their hole is.

Oh, yes.

I don't think people will forget that.

Okay, good.And then second question I had was just relative your personnel expenses as a percent of revenue.

Can you talk a little bit about how you expect that to trend as you start to accelerate hiring?

Should we see that flatten or maybe even go up as a percent of revenue here in the short-term as you accelerate hiring?

As a percent of revenue, some of that will depend upon our growth and pricing, whether those offset any additional expense.

But just eliminating the effect of that, we would expect it to level out and maintain a good ratio.

We had a history of managing our labor and employee costs quite well and we expect to do that going forward as well.

Okay, thank you very much.

Our next question comes from Tom Wadewitz of JPMorgan.

Good morning.

It's Alex Johnson in for Tom Wadewitz.

Good morning, Alex.

Good morning.

First question I wanted to ask is if we can get into maybe a little bit more granularity in terms of when the 10% increase in the work force occurred in the second half of 2010.

Did that -- was that spread evenly between third and fourth quarter?

Did it accelerate into fourth quarter?

Where would you say you are currently in terms of productivity of those workers?

Most of that increase would have come in the third quarter as we started seeing our tonnage increase in high double digits.

But we would have maintained that workforce throughout the second fourth quarter.

Throughout the fourth quarter, yes.

Throughout the fourth quarter -- because the level of that increase had already occurred sequentially.

Okay.

And the second question I wanted to ask, I'm sorry if I missed this, but I know you talked about the yield performance in January.

Did you give a tonnage number for January?

It was up just under 15%, year over year.

Okay.

And finally, what type of long-term CapEx would you fund, or that wouldn't be funded with cash flow or available borrowing capacity?

I'm sorry, I'm not sure I follow the question, Alex.

So I know you're not taking questions on the equity offering, but you suggested the use of proceeds would be long-term CapEx in future acquisitions, but then you also talked about funding CapEx through cash flow and available borrowing capacity.

So what type of long-term CapEx wouldn't be funded with cash flow and available borrowing capacity?

Well, that depends on the cash flow generated and the CapEx requirement, but we anticipate a great portion of our CapEx, that is CapEx for the existing domestic operation to be funded through flow from operations.

I think the things that are outside of the norm would be acquisitions and would be the influx of service centers that are becoming available because of industry consolidation, where we're choosing to go and buy some facilities in the normal course of business where you don't have those opportunities, our normal cash flows should take care of our capital normal cash flow and existing borrowings should take care of our capital needs.

It's just those extra dollars we need for real estate and acquisitions and that sort of thing.

Okay.

Thank you very much.

Your next question comes from Ed Wolfe with Wolfe Trahan.

Thanks.

Hey, good morning guys.

Good morning, Ed.

I guess what a lot of people in the stock right now are trying to digest is it seems like the balance sheet is in a great place and CapEx is going up and everybody always trust that you guys know how to spend it appropriately.

But it's hard to spend enough to come up with a reason to dilute yourselves of equity.

Can we talk a little about what your maintenance CapEx is, how you see it going forward?

I would say, Ed, that our maintenance CapEx, just looking at equipment, is anywhere in the $80 million to $100 million range.

Of course, depending on the cost of equipment.

Real estate is probably in the $40 million to $50 million range and IT in the $10 million to $15 million range.

So when I add that all up, I'm getting $130 million to $165 million kind of range?

That's probably a reasonable range, yes.

Okay.

So in the $260 million to $265 million to $300 million, where are you growing?

What are you adding?

What's the thought process in terms of new terminals or expansion?

What are you thinking?

On the terminal side, most of that is not -- is slated for expanding terminals and in some cases buying additional terminals in markets that we're already in.

Okay, and so should we think -- when because obviously you can do this from cash flows in your borrowings that you just worked on bringing your rates down on.

Should we think in terms of the equity deal that this is going to be an ongoing multiple year kind of above normal maintenance CapEx in your own heads?

Again, we're not addressing questions specifically related to the ATM.

But as David mentioned, we would expect to fund most of our CapEx requirements through cash flow.

However, we continue to look at other opportunities whether it come from acquisitions or as he said an excess number of service centers that would come on the market that would be appealing to us.

Okay.

Fair enough.

I'll back off of that.

Just if we could talk a little bit and change gears, Wes.

When you talk about the 2% wage increase that went into effect in September, is there a dollar number, a way to quantify what the quarterly impact from that is, and then separately 10% increase in head count?

Well, the 2% would be a simple calculation probably if you take the third quarter salaries and wages and add 2% to that, but annualized I'll tell you that increase is probably in the $12 million to $14 million range.

On a full run rate, a full 12 months?

That is an annualized number.

Yes and then how do I think about the 10% increase in head count as kind of a hard dollar number going forward?

Think about the 10% increase in head count versus 15% to 20% increase in tonnage.

It's obvious that we are bringing on a whole lot more tonnage in revenue versus the heads that are coming back.

We are still down from peak employment by, I think around 600 people, from our peak of 12,000 full time employees in the September of '08.

Okay.

How do I think about the impacts you talked about bringing all those people on that's had a negative impact in terms of having to train them and them being less productive.

I mean, when I think about your margin expanding sequentially -- or your yield expanding 2.7% sequentially and tonnage being up, I would have thought to see more margin improvement but I'm guessing there was a bit of a drag from all these people.

Is that a fair way to think about it?

And is there any way to quantify that?

There is a way to quantify it, but we choose not to discuss that level of detail.

Okay.

Do you feel like the operating ratio for this year of 90.7% has got material room for improvement?

Or is that a fair number and we should expect to see some solid continued growth in tonnage and over time the OR is what it is?

Ed, as you know, we're not giving guidance on the OR.

We have operated historically at a sub-90% OR I think in 2006.

It's certainly achievable and there has been several other companies in the past that operate at sub-90%, so it's definitely achievable.

The good news is we are bringing on tonnage with improved pricing and we haven't seen that in a long time.

So we're getting the double benefit of increasing our density and increasing our price at the same time.

Reducing the operating ratio is certainly a goal of ours.

Well, I guess that's the question.

We haven't seen both of these going the right direction.

It feels very positive.

So I would guess if both of those go the right direction, in theory, you should see OR improvement.

Is there anything I'm missing or something that's a drag that I'm missing like fuel or something else that could change that math equation?

No.

No, I think your discussion has some logic to it.

Okay.

This -- can we look at the D&A because of the change in the schedule this year and then the big ramp up in CapEx next year; 80.4% for this year, directionally where should that look like going forward next year?

It will increase next year by virtue of the fact that we're adding $300 million of CapEx plus the equipment per tractor is costing us at least $10,000 more a unit.

So we do expect that our depreciation in dollars and as a percent of revenue would increase next -- in 2011.

You want to give us any guidance range or anything on that?

Not at this time.

Okay.

That's all I got.

Thanks a lot.

I appreciate the time.

Thank you.

Our next question comes from Jack Waldo with Stephens.

Hey, good morning guys.

Good morning, Jack.

I wanted to ask you, David, on the last conference call I thought you did a pretty good job of explaining why the incremental margin, if you will, might start to trend more towards historical norms of roughly 20%, which you kind of came pretty close to in the fourth quarter.

I was wondering if following up on Ed's question and your response to it, when you see these type of price increases that we haven't seen before in a sequential basis, and then you factor that with a tonnage growth that you referenced, do you think that could have an impact on incremental margins relative to -- you were saying we were going to return to a more normalized rate going forward on the last conference call.

I'll go back -- we had such tremendous incremental margins in the second and third quarter and a lot that was due to the fact that we had strong growth in tonnage and density and we were just beginning to have to add -- in some cases in the second quarter added no people.

But that only goes so far.

You've got to add resources and equipment.

So I think the 20% is still a very good incremental margin.

If you did that forever, eventually mathematically you would get down to an 80% OR.

So I think we've always said that where we can grow in existing territory, that we'd have an incremental margin we've always used 10% to 15%.

But as pricing gets -- continues to get traction, it should be above that and I would be comfortable in a 15% to 20%.

But certainly, we should not expect incremental margins that we had in the second or third quarter.

Got you.

And then I wanted to understand, too, Wes, could you just kind of describe the war chest of funds that you have available.

What you ended the quarter with in cash?

I guess you guys completed the $95 million private placement on January 3.

Is that right?

Correct.

And then how much available room do you have on the revolver?

Well, the proceeds of that $95 million, as we mentioned in our comments, paid off all of the outstandings on the revolver which at the time was about $60 million.

So that revolver which is a $225 million facility of which $50 million of it is pretty much consumed with letters of credit obligations.

So that leaves $175 million of availability and that's where that stands right now.

Plus, of the $95 million proceeds, we applied that first, to paying off the revolver and secondly, to start funding the CapEx specifically on tractors, trailers, and in real estate that we're already getting into the system.

And so now our cash excess is only around $15 million.

Okay.

And does that include your current cash balance?

Yes.

Okay, makes sense.

Have you guys announced a -- or do you have any plans for a GRI in the first quarter?

No plans for that.

We did our GRI in the fourth quarter.

Okay, okay.

And then on the last note, I just like to pass along our condolences for your guys loss.

I know how much Mr.

Yowell meant to your guy's family and I was terribly sorry to hear that.

Thank you, Jack.

Have a good one, thanks.

Thank you.

Our next question comes from Matt Brooklier with Piper Jaffray.

Hey, thanks.

Good morning, guys.

I just wanted to circle back to head count.

And I know we've had a couple of questions, but if we heard you correctly, head count in first quarter is up roughly 10% year over year?

Yes, that sounds right.

Okay, so it sounds like you didn't add that many heads from Q4 into the first quarter.

With expectations for expanding your network and it sounds more like current terminal expansion with the addition of doors and maybe some new terminals added to the network, how should we think about head count in '11?

Do you have enough people at this point in time to kind of grow the way you want to grow?

Or do you need to bring more people on to support that growth, and if so how many heads would you need to add on a go-forward basis?

Typically right now we're in the bottom of the economic cycle from the December and January levels of business, and we normally increase our levels of business from January to February to March, with March being the peak month of the first quarter.

And as we are accelerating from our current levels, we would anticipate, in our planning, to hire additional people during the first quarter.

Once we get up to a certain level of employment, say by the end of the first quarter, we should be able to stay with that level of people through the second -- maybe a few more in the second quarter, but I do anticipate adding some more people.

Okay.

So it sounds like those head count additions will be front end loaded.

Do you have a sense or want to potentially quantify that number?

It will be -- as we always have, it will be relative to our tonnage growth in shipment growth.

I mean, we manage that pretty much according to those factors.

Of course, and we haven't given guidance on that, other than mentioning January was up year-over-year at 15%.

Okay.

You mentioned weather in the quarter, a negative impact.

Any way to quantify what that was for Q4 and maybe speak a little bit more to the weather that we've seen consecutively thus far in January?

I would suggest that the weather in January affected our revenue growth anywhere from 2% to 3%.

Okay.

What about in fourth quarter?

Less because most of the weather only affected late December.

Okay.

And we haven't quantified exactly what that is, but it was basically the last two weeks of December.

Okay.

And just a final question, your operating supplies and expenses were up a little bit more than we had anticipated.

I'm assuming that is volume related, but any anomalies in terms of that expense being up a little bit more than it should be and how do we look at the expense line as we move out into '11?

Virtually all of that increase in operating supplies and expense was due to fuel cost.

All the other operating cost was pretty much, pretty relative to the revenue levels.

So it would be volume related.

The cost of fuel in the fourth quarter was higher year over year and sequentially.

Okay, so more fuel versus -- more the change in fuel, if you will versus volume.

Very good.

Thank you.

Our next question comes from David Campbell withThompson Davis & Company.

Yes, thank you.

Good morning.

Good morning, David.

I wanted to ask you about any sales of equipment in 2011 offsetting some of the CapEx that you've announced.

Is there any way to predict what those sales might be?

In dollars, the sale of our equipment proceeds is very minor, simply because we utilized the equipment almost to the scrap value.

So it's really not a meaningful number, David.

It never has been, I just wanted to make sure that there's any change there.

And is there any possibility that these rate increases or higher rates on tonnage is losing you some traffic or -- I know you're not going to lose any for competitive reasons, or have you heard any shippers telling you that, well, that's too much or we're going to ship some other way, or use somebody else or anything like that?

No.

We continue, David, to find shippers believing in their value proposition, and supportive of price increases that we need given the level of service that we're providing.

One more question.

And that is, what about your Expedited business?

You mentioned last time that your Expedited business was one of your fastest growing services.

Is that still very strong in the fourth quarter?

Yes.

Okay.

Thank you.

Thank you.

Our next question comes from Anthony Gallo with Wells Fargo Securities.

Thank you.

Two questions, please.

First on acquisitions, is it fair to say that acquisitions could potentially offset some of your otherwise growth CapEx?

No.

The CapEx is pretty much for our Domestic acquisitions that we bring in probably would not be LTL related and would not offset that.

Okay, fantastic.

That's helpful.

And then back to -- I think it was Earl's earlier comments where you framed the opportunity at least for 2011.

Is it fair to say that a lot of your peers seem to be internally focused right now, and with your house in order yield, network, et cetera, that the market share opportunities are quite good.

I'm just curious if you could expand on that a little bit?

How much time do you think you have before your larger peers become re-engaged, if that's the right way to think about it?

Thank you.

Well, we're hoping it will take a long time.

Do you want to guess at that, David?

I don't know that -- Anthony, we're running the company really well right now.

Our service levels are the best they've ever been.

We've got great relationships with our customers.

I don't really want to comment on any of the peers, but it does appear to us that we are gaining some market share back, maybe some that we did not gain during the recession because of price.

We're regaining business that we lost due to prices, where people way undercut our rates and the levels were so low that it was just highly unprofitable, where we're getting customers back.

And so, now you're seeing some of that acceleration in tonnage in the numbers that we reported today.

And we feel like our position in the market is still very good and we're very well positioned to continue gaining market share.

That's helpful.

Thank you.

Our next question comes from Todd Fowler with Keybanc Capital Markets.

Great, thank you.

Good morning.

Just a last one here on the personnel side.

Do you have plans at this point for wage increases in 2011, and how do you feel from a competitive standpoint that your wages are versus where the industry is at?

On the competitiveness of wages we're very, very competitive in the marketplace.

We normally give a pay increase of some sort in September.

We anticipate giving one, where it's too early to say what that will be at this point in time.

Okay.

So if we saw anything here this year, we could expect it to be given in September.

So nothing in the first half of the year?

No, nothing in the first half.

Okay.

And my second question, can you talk a little bit about the timing of your contractual book and when that reprices.

Is that rateable over the next couple of quarters?

Or do we see more of that come through during the first half of the year.

It's pretty rateable over the year.

It's maybe a little bit heavier in the months of March through June for us, but not appreciable enough to make a difference.

Our contracts really spread themselves fairly well across the year.

And the 6% price improvement here in January, is that representative of where some contractual fray is repricing in the current environment?

Yes.

Okay.

Thank you very much.

We'll take our next question from John Barnes with RBC Capital Markets.

Hey, good morning, guys.

Two things.

One, when you talked about acquisitions or a large number of service centers that may come available, are you seeing anything specifically on the real estate side that you're looking to act on, maybe sooner rather than later?

Well, with FedEx's announcement of combining national and freight together and putting 100 service centers on the market, we've got some visibility to what that is now which we didn't have a month or two ago.

And we're seeing opportunities within that real estate portfolio of facilities that makes sense for us for our future growth.

And the YRC properties are basically out there and I think we pretty well looked at most of those that are of interest to us.

Okay.

So you do have maybe more clarity in the last 30 to 60 days than you had prior?

Yes.

Okay, alright.

In terms of going back to the question about funding and that type of thing, do you have -- are you concerned at all about credit availability or something like that?

I'm trying to balance the source of funds here between various buckets and was there any concern that you couldn't upsize the size of your bank facilities and pursue it that way?

Or --

We just choose -- we're in negotiations for that credit facility so all of that is under discussion.

Okay.

So that could also play into this -- that you could see a ramp up in the availability under your current facilities?

I would suggest that probably not.

We'll keep the facility as is, but still that is still under discussion.

Okay, very good.

Thanks for your time.

I appreciate it.

Thank you.

Our next question comes from Justin Yagerman with Deutsche Bank.

Hey, good morning, guys.

It's Rob Salmon on for Justin.

When you'd mentioned about the contractual -- the pricing being up over 6% thus far in January, if I'm running the math, you had the GRI which is up 4.9% on a smaller piece of the business that would imply you guys saw some nice yield improvement on the contractual rates.

Could you give us an update of what sort of increases you guys saw in Q4?

Rob, first of all, of the 6.2% that I suggested is not all pricing.

Some of that is demographics of the freight.

The fact that the weight per shipment is down and length of haul is up.

So I'm not suggesting that the 6% is all pricing.

So now you relate that -- what portion of that is pricing and what portion of that relative to the 4.9%.

But we were successful even on the contractual of getting some reasonable rate increases.

On that portion as well.

Okay.

With the contractual, are you seeing that relatively in line with that 4.9% you guys looked to -- that you sought out on the GRI?

Is it better, worse just directionally?

Rob, it depends on the customer.

They're all individual -- looked at individually, and we have to look back at what happened over the last two or three years during the recession.

And some of the price decreases that we had to take in order to retain customers.

And as we look at the operating ratios of certain accounts we may be taking 10%, 15%, 20% increases on some.

And on some others it could be just depending on the account, it could be anywhere from 0% to 5%.

So each account has to be looked at individually.

Yes, understand completely.

I know it's been a long call.

I might have missed it, but did you give an update on the productivity metrics that guys you follow?

We did not.

Could you run through a few of those, kind of pick up and delivery?

I'll just say our productivity in the fourth quarter was in line with what it has been sequentially.

Year over year we saw very little improvement but at some point that will level out.

So we saw good productivity in the fourth quarter and in line with what we were seeing in the third quarter.

Okay.

I guess before I turn it over to someone else, when you're thinking strategically about potential acquisitions, what other services, kind of non-LTL related, do you believe would be additive to the Old Dominion brand at this point that you guys might consider at some point in the future?

Yes, we really don't want to discuss that at this point, Rob.

Understand completely.

Thanks a lot for the time.

Thank you.

We'll take our next question from Jason Seidl with Dahlman Rose.

Hello, David, Wes.

How are you guys this morning?

Fine, Jason.

Some quick ones here, just kind of piggy backs off the last one.

Earl, I think in your comments you mentioned your domestic business.

Are there more international opportunities that Old Dominion can explore in 2011?

We're continuing to focus on our OD Global business which entails freight forwarding, our ocean container operations, our North America LTL between the US and Canada, Mexico, Hawaii, Alaska, and the Caribbean.

And that segment of our business is growing and has an above average growth rate, and we will continue to pursue opportunities there that are -- that continue to complement our Domestic LTL business.

So that would include potential acquisitions as well as organic growth?

It could.

Remember, with only a 6% penetration in the domestic US market, we've got a lot of opportunities there.

Well, Earl, would you -- if you had your druthers, would you pick filling out your full state before you picked ancillary services?

We've pretty much got our full state coverage fleshed out now.

Fair enough.

Wes, you mentioned you're just below 15% tonnage growth with January with a little bit of weather impact and also little bit tougher comps.

February is obviously started out here with this big storm sweeping through the country.

Could you talk about maybe some of the early impacts of the storm and also could you remind us how the comps look year over year in February and in March?

Well, first of all, I'll say that the effect of the storm in February is not good.

(Laughter)

The comps in last year continued to improve.

I think tonnage for the most part was up by 5.6% roughly for the 2010 over 2009 for the first quarter, and sequentially it was getting stronger.

It was up 3.9% in January, 4.5% in February, and up to 8% in March.

So the comps do get tougher as the quarter proceeds.

So on an actual growth basis given the weather and difficult comps, it wouldn't be surprised to see that year over year growth rate deteriorate some from where it's at now?

Yes, we haven't given that guidance.

Okay.

I'll make my own assumptions.

Gentlemen listen, you've been kind with your time as always.

Thank you very much.

Our next question comes from Neal Deaton with BB&T Capital Markets.

Hey, guys.

Actually my questions have all been answered.

So I will spare you any more.

Thanks.

Thank you, Neal.

Our final question then comes from Thom Albrecht with BB&T.

Same thing, guys.

Let's have mercy and go enjoy the day.

Thank you, Thom.

There are no further questions holding at this time.

I'd like now turn the call back to you, Mr.

Congdon for additional or closing remark.

Thanks to you all for participating today.

You asked some good questions and we appreciate your support for Old Dominion, and Wes and David will be here the rest of the day in case you've got any further questions.

Thank you.

Ladies and gentlemen, that will conclude today's presentation.

Thank you so much for your attendance.

Have a great day.