奧多明尼昂貨運 (ODFL) 2011 Q4 法說會逐字稿

Good morning and welcome to the fourth quarter 2011 conference call 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 5684951.

The replay may also be accessed through February 12 at the Company's website.

This conference call may contain forward-looking statements within in 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 this purpose, any statements made during his 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.

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.

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.

Pardon me for the demotion there David.

(laughter) Wes Frye the Company's, CFO.

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

Our results for the fourth quarter continued the strong trends we produced throughout the first nine months of 2011 and enabled us to close out the strongest year in our 20 year history as a public Company, as well as in the 77 years the Company has been in operation.

With over 20% growth in revenues, for the sixth consecutive quarter, our fourth quarter earnings per diluted share rose 77%.

For the full year we significantly surpassed our previous records for revenues, margins, and earnings per share.

We completed the year with the strongest financial position Old Dominion has enjoyed in my 60-plus years at the Company.

Our service standards are outstanding.

Our productivity continues to increase and our performance has continued to set the standards in the LTL industry.

As a result, we brought a lot of momentum into 2012 and we are pleased to say that we are getting the year off to a good start.

While the economic environment remains constrained, we are continuing to gain market share and produce profitable growth.

Because of our promise to provide a strongly differentiated value proposition, the outstanding execution by our entire team of business -- of a business model that combines continuous investment in technology and capacity.

And our long-term yield management strategy that has enabled our customers to understand the value that the Company's high-quality services bring to their supply chain.

In addition to the strengths of our organization, industry fundamentals also remain favorable.

As a result of tonnage growth, industry consolidation and under investment by many of our peers during the economic downturn, the industry has limited excess capacity and equipment, facilities and drivers.

This balance of supply and demand supports a favorable pricing environment.

Based on these industry dynamics and the outstanding operating execution by all members of the OD family, we are optimistic about our prospects for further growth in earnings and shareholder value in 2012 and the years ahead.

Thank you for interest in Old Dominion and your support.

Now, here's David Congdon to discuss our fourth quarter operations in more detail.

Thank you, Earl and good morning.

Old Dominion had a great fourth quarter and a truly historic year.

The strength of our performance for 2011 reflects both a day-to-day execution by people throughout Old Dominion with a value proposition and a business model that had been many years in the making.

We believe we are well-positioned to continue outperforming industry in 2012 and beyond.

The foundation of our success remains our promise to provide on time, claim free service at a fair and equitable price.

While enhancement and refinement of our capabilities never ceases, we are committed to executing our proven established business model in 2012 and beyond by focusing on service, density, yield and efficiency.

In terms of service, we believe we continue to lead the industry during 2011, with 99% on-time delivery and approximately 50 basis points for our cargo claim ratio.

Our ability, not only to sustain this best in class performance over a multi-year period, but also to improve it as we did in the fourth quarter and for the full year 2011, reflects our ongoing Company-wide promise to providing customers with the highest quality service.

Our focus on improving density was a key factor in producing a 2011 operating ratio that was a 220 base -- basis point improvement over our previous record operating ratio of 89.8 in 2006.

The increase in our CapEx plans for 2012 is a direct result of the continuing market share gains, as well as opportunities we see within our service center network for continued density improvements and profitable growth.

Our long-term commitment to the highest quality service also drives and supports our focus on yield management, because, one cannot be sustained without the other.

Rather than pursue a short-term strategy of maximizing yield, our long-term focus is to optimize yield by agreeing with each customer on a fair and equitable price for the value we provide through our service offerings.

While we believe the industry pricing environment will remain favorable in 2012, we expect to adhere to our yield management strategies regardless of the environment.

Our focus on efficiency gain contributed to the improvement in our [OR] for the fourth quarter as pick up and delivery shipments per hour increased 2.2%, laden load average increased 1.7% and platform pounds per hour gained 5.4%.

We believe our long-term investment and technology, combined with the continued education of our employees, has resulted in a culture among the OD family that embraces technology in pursuit of improved productivity.

Our ability to drive further gains for the foreseeable future.

We also have the financial strength to expand the capacity of our operations to enable us to act on opportunities to gain further market share, either organically or through industry consolidation.

In addition, we plan to continue to invest in our relatively small but rapidly growing logistics and international businesses, while continuing to evaluate opportunities to grow or supplement these value-added services.

To summarize my comments today, we continue to see ample opportunity for near and long-term growth at Old Dominion and we're confident in our Company's ability to leverage these opportunities for the benefit of customers, employees and to deliver superior investment returns for our shareholders.

Thank you for being with us today.

Now, I'll ask Wes to review our financial results for the quarter in greater detail.

Thank you, David and good morning to all.

For the fourth quarter of 2011 Old Dominion's revenues was $485.1 million, representing an increase of 21.6% compared with the fourth quarter of 2010.

The growth in revenue is driven by a 9.7% comparable quarter increase in tons and a 10.7% increase in revenue per hundred rate.

Our tonnage growth was comprised of a 9.8% increase in shipments and a 0.2% decline in weight per shipment.

Weight per shipment declined each quarter in 2011, primarily due to changes in freight mix, especially the reduction of volume shipments.

Earlier in 2011 we also experienced shippers disaggregating shipments at the smaller more frequent deliveries in a reversal of the trend in the economic downturn toward shipping consolidation.

It is worth noting the comparable period weight per shipment increased in December, as well as January of this year 2012, the only monthly increase since the slight increase that we had in February of 2011.

Sequentially throughout the fourth quarter tonnage growth per day was 10.3% for October, 9.4% for November, and 9.2% for December as compared to the prior year's periods, which each month facing tough comparisons in the high teens to low 20s during 2010.

For January 2012, tonnage has increased 14.2% compared to a 14.9% increase in January of 2011.

We expect tonnage to increase in 13% to 14% range year-over-year for all of the first quarter against sequentially tougher comparisons.

Revenues per hundred weight, excluding fuel surcharge, increased 6.4% for the fourth quarter.

A bit below the 7% to 8% range that we originally anticipated.

The revenue per hundred weight had an upward influence during the quarter by 0.2% decline in weight per shipment, although the 0.7% decline in length of haul had a negative impact.

Against sequentially higher revenue per hundred weight in each month for the quarter in 2011, revenue per hundred weight, excluding fuel surcharge, increased 7.5% for October of 2011, 6.1% for November, and 6% for December.

For the fourth quarter of 2010, the month revenue per hundred weight, excluding fuel surcharge, increased 2%, 4% and 5% sequentially.

Influenced by a 2% increase in weight per shipment for January 2012, and a 2% decline in length of haul, revenue per hundred weight including fuel surcharge was up 4.5% and 1.7% excluding fuel surcharge.

We expect our revenue per hundred weight to trend up by between 4% and 5% for the quarter, as we lap an improving rate environment the previous year and recognize an increase in weight per shipment and decrease in length of haul.

Excluding fuel surcharge, we expect revenue per hundred weight to range between 1.5% and 2% higher.

Old Dominion's operating ratio for the fourth quarter was 86.9%, representing a 360 basis point improvement in the fourth quarter of 2010.

Salary, wages and benefits declined 360 basis points as a percent of revenue despite a wage increase of 3% implemented in September.

While operating supplies and expense increased 120 basis points, largely due to the increased fuel expense.

Insurance and claims declined both in dollars and percentage terms due to a favorable adjustment from claims experience.

Capital expenditures for the fourth quarter totaled approximately $40.3 million, bringing our total CapEx for 2011 to $250.2 million.

We currently expect total CapEx for 2012 to be in the range of $300 million to $350 million, including real estate expenditures of $90 million to $120 million, equipment expenditures of $195 million to $210 million, and technology expenditures of $15 million to $20 million.

For 2012 we expect to fund much of these expenditures through cash flow and the remainder through our cash balance of $76 million at the end of 2011, and also from our available borrowing capacity.

We had approximately $150 million of availability on our five-year revolving credit facility at the end of the fourth quarter.

We can expand this facility by an additional $100 million.

At the end of 2011 our financial position with strong with total debt to total capitalization of 23.9%, a 500 basis points improvement from 28.9% at the end of 2010.

With full implementation of our existing CapEx planned for 2012, which is subject to availability and timing of real estate, as always.

We currently expect our total debt to capitalization to be in the range of 24% to 26% at the end of 2012.

Our effective tax rate for the fourth quarter of 2011 was 34.2% which was lower than expected due to an alternate -- alternative energy tax credit received from outfitting one of our new buildings with solar energy system.

We anticipate an effective tax rate of 40% for the current quarter and for all of 2012.

This concludes our prepared remarks this morning.

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

(Operator Instructions).

We will go first to David Ross from Stifel Nicolaus.

David, you talked in the last quarter about an increase in maintenance cost due to some of the equipment that you had requiring an advancement of the replacements.

Can you talk about what maintenance costs did yea-over-year in the quarter, and whether the accelerated replacements kept that down?

I will let Wes Frye reflect on those numbers.

I think he has them in front of him.

Yes, our maintenance costs was up slightly, only 10 basis points.

While a little bit higher still, fairly reasonable.

And as far as the pricing in the marketplace for LTL right now, are you seeing any pockets of irrational competitors anywhere?

Or, is it pretty level in terms of the rate structures?

It seems to be pretty rational right now.

And no real pockets of irrationality.

Last question just regarding the tonnage growth you are seeing, which is great, and unusual actually, for the Company's reporting so far, have you increased the size of your sales force recently and is there any anticipation of doing so in 2012?

There's been no major increase in the size of our sales force.

Excellent, thank you very much.

Thank you, Dave.

We will move onto Tom Wadewitz with JPMorgan.

Good morning.

Wanted to ask David a little bit more on the pricing topic, as well.

Your comments earlier on the call were pretty constructive in terms of competitors under investing in capacity, and it sounded like maybe you thought the market would be reasonably tight.

But then, later on you talked about the deceleration in pricing going into 2012.

And I was wondering if you could explain that a little bit further, and why you think there is the deceleration in pricing if capacity would appear to reasonably tight.

I wouldn't call it, Tom, a deceleration in pricing, I would call it facing -- as I mentioned in my comments, facing tougher comparisons as we're beginning to circle around what we see was an improving rate environment in the first quarter of 2011.

Okay.

So, is it just a first quarter comp or --

2011.

Pricing was up.

Not pricing yield was up, revenue per hundred weight was up for the whole year about 6%.

Actually about 7% for the whole year.

So, we've got some really good yields in 2011, but you can't expect, and I don't think the economy will permit you to do that continuously.

But we are successful in continuing to get price increases.

And I would say on average between in the 3% or 4% range.

So, a lot of the increase yields or the revenue per hundred weight lowering in 2012, some of that's due to mix, But you don't expect your -- we would love for it to happen, but we don't really expect pricing to continue in the 6% to 7% range this year.

Okay.

But just to make sure I understand it.

You're saying 2011 you got something like7% in revenue per hundred weight ex-fuel.

And for first quarter you're looking at 1.5% to 2% ex-fuel?

Correct.

The first quarter of last year, we were up almost 6%.

Okay.

Is it comparison such that 1.5% to 2% potentially would accelerate when you look at second or third, or is the comparison similar in first, second, third quarters?

The answer is yes.

When -- the only visibility we have right now into the first quarter is January.

So, much of our forward-looking information that we are projecting against the entire first quarter is based upon what we are seeing in January.

And as you might imagine, that can change, yes.

Tom, I would also like to add that yield is not just all about revenue per hundred weight.

That is just an indicator, and it's really all about managing the operating ratio that you have with each and every account and the profitability.

And as we stated before, we believe that the pricing environment is still good and is favorable.

And we will continue to adhere to our philosophies of arriving at a fair and equitable price for the services rendered that results in an appropriate level of profitability.

Right.

It seems like you don't -- others need price a lot more than you do.

Your margins are pretty impressive.

Anyways, thank you for the time I appreciate it.

Thank you Tom.

Next from SunTrust Robinson and Humphrey, Alex Brand.

Good morning, guys.

I just wanted to get your thoughts on driver pay this year and if you could tie that into kind of a year that you're stepping up the investment.

Is this a year where maybe it's not as realistic for you to drive down your OR in a step function like you did in 2011?

I would say that the 3% that we gave in September were more than offset, or at least substantially offset, by the fact that our employees continued to improve productivity.

So, we look at all of those factors.

It would seem logical too that the lower the operating ratio gets, the tougher it is to add as many basis points as we added last year.

Goodness gracious.

Otherwise we will be operating like the railroads.

What about -- what percentage of revenue is logistics or International now and what affect does that have on the overall Company operating ratio?

Our overall value-added services which includes our global division, our expedited and our logistics division comprises about 8.5% of total revenue this year, and last year it was about 7.6% in the same quarter.

We don't provide a breakdown of the profitability of those versus the LTL division, and we don't have those numbers.

Don't provide those numbers, I should say.

Does the $200 million of CapEx for equipment, this year, does that completely -- does that get you full replacement of the '04 engine?

No.

I don't believe so.

Are you referring to some comments we made at the last quarter?

Yes.

Yes.

I did not bring that back with me, exactly what percentage of the '04 images will be cycled out with this year's CapEx.

But I do not believe that it is all of them.

Okay.

I appreciate the time guys.

Next we will hear from Chris Wetherbee of Citi.

Good morning, guys.

Was wondering if you could talk a little bit about the tonnage growth that you're seeing in the first quarter.

It seems like a nice acceleration from the fourth quarter rate of growth.

I just wanted to get a sense of kind of where you're seeing some of this come from.

I know it's a little bit difficult to delineate what's share gains versus what is economic growth activity, but if you could give us a sense of how you think about that and maybe why we are seeing that step up in the first month at least.

First thing is, is the weather effect.

We have not been hammered this year with weather like we were in the first quarter of last year.

We've seen some daily year-over-year increases that shocked us and then we were reminded that the entire Midwest and Northeast was shut down this same day last year.

But that has been the greatest change factor, has been more favorable weather this year.

And as far as where our growth is coming from, we have really, across the board in all of our non-operating regions, pretty strong growth occurring.

But, as has been the case over the last couple of years, our strongest growth has tended to be in the Northeast across the Ohio Valley, Midwest and central states, and the South and Southeast where our -- where we are the most mature has been a lower growth rate.

I will say that our South has had pretty strong growth in the fourth quarter.

Stronger than it had been.

So, we are very encouraged about that.

Okay.

That's helpful.

Just as a follow-up, when you think about the capacity level you talked about some of the CapEx additions you are looking to do, how do you feel about where you are, as far as available capacity in the network, and then maybe geographically where you looking to allocate that capital in 2012?

Our story on network capacity is about the same as we have relayed to you in the past several calls.

We will have -- we have service centers who might have 50% or 60% capacity as you look at their pounds per door per day compared to the service centers who are at 100% and out of capacity.

When you look at the pounds per door per day, our overall capacity in the network is probably on average 25% to 30% of capacity in our network.

But we would like to have excess capacity because freight flows more fluidly when you're not having to swap your doors between -- around the dock and rehandle your freight because you don't have enough room or doors to process your freight.

So, that is basically the network capacity, and as far as equipment is concerned, I would say we have 5% to 10% there now.

And geographically, how do you think about allocating some of the capital in '12?

We basically, on the real estate, the capital is being allocated where we have the highest growth and where we have outgrown our facilities.

So, it is not -- it could be -- it is in a lot of different places.

It is not necessarily one region of the county or another.

Okay great.

That's very helpful.

I appreciate the time.

Thank you.

Moving onto Todd Fowler with Keybanc Capital Markets

Thank you.

Good morning everyone.

Dave, to your comments in the prepared remarks about improving density and some of the benefits that you're seeing there.

Is that a function of some of the growth that you have had in the past couple of years that you have got the opportunity to improve the density?

Is that some of the initiatives just with the network and what you're doing with trailers?

Can you talk about where you're at on a density initiative, or how you think about that going forward?

Well, we have built a Company that started with an interregional-type network and we have grown to serve every point in the United States.

We have next day and two day service within each geographic region of the country.

Next day to third day service between contiguous regions, and best in class long-haul service.

That service product, combined with all of our value-added services, our on-time service ratio, our cargo claim ratio, this gives us a network and a service capacity that customers like today.

That is what is winning market share.

That is all done at a fair and equitable price.

I guess as far as specifically, some of the benefits that I think that are probably surfacing in the incremental margins from things on a density side.

Is that something that -- does that continue into 2012?

Is there still more opportunity on improving the density within the network from where you ended the year?

Our density improvement has been pretty significant.

One of the numbers I watch everyday is what our average daily shipment count is and what our average daily tonnage is.

And for the last half of this year, we have been running nearly 3,000 shipments a day and 5 million pounds a day more freight through the network.

And that leverages your fixed cost.

If it's your pick up and delivery stops closer together.

And the density improvements are evident in our operating ratio improvement.

So, it's a combination of density and yield management that are the primary -- and efficiency improvement too that are the primary drivers of that operating ratio improvement.

And the incremental margins.

To be specific, Todd.

We had our revenue per service center, even if you exclude fuel surcharge, was up 11% in the fourth quarter.

That is despite the fact that we added 6% to a number of doors through expansion.

We we're still -- had significant density advantage, and that has been one of our focuses.

Even looking at shipments per terminal, it was up 8%.

So, we had very, very good density improvements in the fourth quarter and for the year for that matter.

Our tonnage increase compared with our headcount increase is another measure of improved productivity primarily.

And we have added much -- a smaller percentage of headcount, as compared with what our tonnage has grown.

Okay.

All of that makes sense.

Just for my follow-up.

Wes, of the $195 million to $200 million of CapEx for tractors and trailers, did you give a breakout for how much of that would be growth versus replacement?

And do you have an estimate for where the fleet age is now and where it will be at the end of '12?

Yes, Todd we haven't given that breakout, simply because we're not giving guidance on tonnage growth.

Okay.

What about the fleet age piece of that?

We haven't -- we haven't computed the effect of that CapEx on the fleet age, but our intent is to somewhat reduce what our average fleet age has been over the last couple of years, because we have postponed some replacements during the downturn.

And part of our CapEx is getting back to a replacement cycle that -- what we feel is a more appropriate average age.

And during the downturn we retained some old trucks and parked them against the fence to have excess capacity in the event of a potential consolidation event.

Okay, that's right.

Okay, well thanks for the time and congratulations again.

We will talk to you soon.

Thanks, Todd.

We'll go next to Scott Group with Wolfe Trahan

I just wanted to get back to the margin discussion from earlier.

And you said it's unreasonable to expect a similar pace of margin improvement this year like we saw in 2011.

I just want to understand if you're still confident there's at least some margin improvement this year, or if you think it is more fair to expect strong revenue growth, kind of flattish margins and continued earnings growth that way more from the top line?

Scott, currently we are not giving forward-looking guidance on those metrics.

Okay.

Worth a shot.

In terms of the weight per shipment you talked about inflecting positive in December, what's driving that and how do we think about weight per shipment going forward in 2012?

Well, we still don't have visibility for the entire year.

We have shown over the last two months, those months being December and January, that our weight per shipment is again up.

And while some of that could be due to mix, we are seeing that is up both in our LTL and -- we are not sure what to make of that yet from an economic standpoint.

Typically an increase weight per shipment, as long as it's not -- doesn't coincide with the number shipments declining, I think it's a fairly still positive term on the economy.

But I do now want to give you the impression that it's a tremendous increase in weight per shipment.

It's up, as I mentioned, in January it was up 2% year-over-year.

And we've had a fairly healthy increase in number of shipments.

So, I still think that's a kind of a positive statement from our view.

Okay that makes sense.

In terms of the CapEx, the 300 to 350, I think I remember last quarter you talked about preliminary expectations of 350.

Now we just have a bit of a range.

Can you talk about what's changed?

We're a little bit less on CapEx relative to the initial plan.

We always hedge the number because sometimes the timeline of getting these service centers, especially if -- what we normally do is we put the list of the service centers we need to expand and we put those on a list of CapEx.

Sometimes it takes longer, especially if you are constructing new facilities, to find the land or to get the timeline of construction completed.

That is where the hedge is.

I think the equipment is pretty much a done deal.

But the range is really caused by the uncertainty about timeline of the real estate.

Got you.

Okay, thanks for the time.

From Deutsche Bank we will move onto Justin Yagerman.

It's Rob Salmon on for Justin.

Can you talk a little bit about incremental margins?

Historically we have thought about the LTL business as generating 10% to 20% incremental margins, and you guys are talking to right now accelerating tonnage growth while we are seeing the yield improvement slowing off much tougher comparisons.

How should we think about those two balancing out as we think about incrementals for 2012?

We are not giving guidance on incremental margins either, other than the fact that we've always stated where we can grow an existing network that it should range anywhere from 10% to 15%.

Depending on pricing, it could be a little bit better than that.

And so, I will leave it at that.

Obviously, it was much better than that for the whole of 2011, but we did have a fairly substantial increase in our yields, excluding revenue -- excluding field surcharge.

Understand.

Same with that range of 10% to 20%.

That's fair.

I was just trying to get at the same OR question that Scott was try to get out and see if we could attack it at a different way.

When I'm thinking about the Northeast, you guys called that out as being a very strong, strong growth that you had seen there.

Have you guys been seeing any sort of dramatic tonnage gains as a result of the shale plays?

Any extent you could comment on that would be helpful.

I'm sorry, Rob, say again?

I see, I got you.

We don't have a gauge on that right now.

We don't haul any oil, we use it.

I figured you guys might bring in a little bit of heavier equipment in there, but most of that stuff, to us, felt like it would be coming on flat bed.

We are just trying to dot I's, cross T's.

Can you guys give us quarter ending headcount and service center numbers for 2012, sorry 2011?

I will circle back to that once I get it.

I will come back to that.

Okay, appreciate the time.

Stay on the line, Rob, and I will mention it when I find it.

Fair enough.

Next we'll move onto John Godyn with Morgan Stanley.

I was hoping you could elaborate on your comments on productivity, and the fact that productivity during the fourth quarter improved, even at a significantly stronger rate than what you achieved for the full year.

When we think about modeling another year of potentially significant volume growth in 2012, is additional volume growth here associated with higher, lower or similar incremental costs versus the trend that you had at the end of 2011?

I'm just trying to understand the productivity comments.

This is David.

I will make one comment about the productivity improvements.

We have a lot of efforts going on improving productivity, but one of the numbers in particular that stood out was our dock productivity being up, I think it was 5.4% in the fourth quarter.

And, last year, in 2010, we were seeing a lot of acceleration in our business from the second -- in the second and third quarters.

And we added a number of people on the docks in the third and fourth quarters of 2010.

And those employees were not as productive during their initial time with the Company, which put a damper on our productivity statistics in the fourth quarter.

Now, as we've had stability in our workforce and less hiring this year, of the year-over-year comparisons, especially on the dock, are reflective of that.

Does that answer your question or would you like further -- do you want to ask again?

No.

That's helpful.

If I could just ask a follow-up on just your comments on revenue per hundred weight excluding fuel surcharge in the first quarter.

I know you guys don't give full-year revenue per hundred weight guidance, but just with where it is and what the comps look throughout the year, does it seem impossible that towards the end of the year you might see negative price excluding fuel surcharge growth?

Is that reasonable, or am I missing something in the comparisons?

As long as the industry overall remains disciplined, which we think that they will, we can't envision that the revenue per -- the pricing would become negative.

Okay, thanks.

And just last question, can you give us a sense of what you're hearing from customers regarding inventory levels in the economy?

Of course some other carriers have cited some weakness, are you seeing that, as well?

Honestly we don't -- we don't run a survey like that about inventory levels, so we don't have a real good feel on that.

We would rely more on the economists who produce that kind of data to tell us.

Okay great.

Thanks a lot guys.

To Rob, your answer.

At the end of the quarter 216 service centers, and 12,026 full-time employees.

We'll move onto Jack Waldo with Stephens.

Morning guys.

Nice quarter.

David, I'm sorry you got demoted.

I thought you were doing a decent job.

Wes, my two questions focus on the CapEx side.

First off, how it impacts D&A, Wes, what should we be expecting for D&A in '12?

It would be higher.

As a percent of revenue, probably not too much higher.

But, obviously, when you put that much CapEx, especially on the equipment.

The real estate doesn't have nearly the effect, because you're depreciating that over 20 years and you're taking out the cost -- and you don't appreciate the cost of land when you have residual on the structure.

But, I would say it would run at least a little higher from the dollar standpoint, but not so much higher as percent of revenue.

Okay.

My other question is on the insurance side.

Was there anything abnormal about insurance this quarter?

No.

We go through the same calculations in actuarial that we do at the end of every year.

We did have a favorable impact on our cargo BIPD.

We had some unfavorable impact on our group health, which is not in the insurance line, it's up in fringes.

All of those things -- that goes -- every quarter.

It's all trued up at the end of every quarter.

Nothing unusual, it is just the normal course of how you evaluate those reserves.

Okay.

I will hop back in queue.

Thank you.

Moving on to Thom Albrecht with BB&T.

Fantastic quarter.

Most of my questions have been answered.

Wes or David, I did want to explore a little bit more on the weight per shipment.

I know you talked about it, as well.

Wes, did you say you are seeing both truckload and LTL shipments increase slightly, or was it just concentrated on the LTL side?

Across the board predominantly.

I know that last year when we saw a significant, or a fairly sizable, decrease in weight per shipment, much of that was mix.

Where we saw the -- our percent -- where we saw our spot quotes actually decline, in terms of shipments and tonnage year-over-year.

So, just from a mathematical weighting that would happen.

We're not seeing so much of that this year.

And it's kind of across the board that we are seeing slight increases in weight per shipment.

With the mix not changing quite so much.

How about the trends?

I've forgotten where you break it off.

Let's say about 5,000 or above 10,000 pounds, which are always a little bit of a read through for the truckload tightening.

Do you have a figure there you can share on maybe, not so much the change in weight, but maybe the growth in shipment count?

For heavyweight shipments.

I don't have it in front of me.

I can get back to you on that.

I would love to get that color.

And off-line is fine.

Okay.

That's all I've got guys.

Thank you.

From Wells Fargo, we'll hear from Anthony Gallo.

I'll echo the congratulations.

One housekeeping item and then a question about market share.

Wes, the $521,000 of Other income, can you tell us what that is?

If you recall in the third quarter, we had a negative number in that line.

And it has to do with our phantom stock.

Not phantom stock -- non-qualified deferment, salary deferment plans.

It is tied to indexes of stock, because that is where the participants have got the money.

So, we had an improvement in the stock performance of those portfolios in the fourth quarter.

Consequently there was a positive reflection of that in the fourth quarter.

There had been offset some of the negative reflections that happened in the third quarter.

Okay that's helpful.

Thank you.

I want to go back to the comment about market share gains, which we think is at play here, as well.

Can you provide a little bit of insight?

You don't have to name carriers obviously, but is it mid market accounts, is it national accounts, is it by region?

We are, obviously, just trying to get a handle on it, as well looking at some pretty sub par tonnage growth at a lot of the bigger players, not necessarily drawing a direct line to them, but do want to better understand where you think the share gains are coming?

We think that it is coming from really all types of customers from the small mom-and-pop to the larger national accounts, as well.

And from all carriers.

And from all carriers.

And all geographies.

Just sort of an across-the-board phenomenon.

Okay.

Then I did notice -- I think I saw an announcement on OD home.

Home deliveries, is that correct?

Yes.

Is that is tied to specific e-commerce initiatives or is that an extension of some things you have been historically doing?

It's a new initiative that we think will complement our existing LTL business.

And help fill some empty or light lanes.

And actually, it will leverage the network, because there is no investment in tractors or trailers.

And we see a lot of potential in growing that business to a sizable figure over the next two or three years.

Okay, I will leave it there and pass it along.

Thank you gentlemen.

Moving onto Ben Hartford with Robert W Baird.

I wanted to discuss the logistics side.

It sounded like in the prepared remarks you left the door open to potential acquisitions when you were talking about evaluating opportunities.

Obviously, the LTL network has been built organically.

To what extent are acquisitions a part of the strategy on the logistics side, and how comfortable are you with identifying targets and feeling comfortable with being able to absorb potential acquisitions?

We always -- It's Earl.

We are always interested in acquisitions.

When the propositions are run by us we take a look at them.

It's not anything that we really can comment on at this time.

But we may do one if one gets attractive for us and we may not.

We probably turn down a zillion of them.

But we look every time one comes across the board.

And we continue to pursue our organic growth strategies in the value-added services arena.

Sure.

I guess, when you are evaluating those potential targets, do have a bias towards small tuck-ins that compliment the organic growth that you are executing?

Are you interested in doing a bigger one that would allow you to accelerate developing scale on that segment?

We are not interested and I will bet the Company anything -- I will bet the Company size, we could tell you that.

But the smaller ones would be of more interest to us.

Okay good.

Thanks for the time guys.

Next we will hear from Jason Seidl with Dahlman Rose.

Earl, David, Wes, how are all you guys today?

Just a couple of quick ones.

Wes, your brought up the weather comparisons, and I think that is pretty apt from one from 1Q '11.

Can you talk about what weather probably cost you in the quarter last year so we can get a better feel for margins, at least in the near term?

I can't give you specifics on what it cost us for the quarter because it is sometimes hard to grasp.

Although the weather, if you will recall last year, we were socked very heavily with weather in January and February, but March came back fairly strongly.

And that sequential strength coming back, we're not sure how much catch-up that was.

For the quarter, some of it nets out, we just don't know how much.

I do know that we operated -- for us in January of last year with not -- with margins that we weren't pleased with.

But they came back strongly as the quarter proceeded.

So, to answer your question, I really can't tell you exactly what the weather cost us last year.

Because I don't know how much it was netted out as we proceeded through March.

You still had very, very strong OR margin gains there.

I was just trying to figure it out when I was looking at it, so I could get a feel for where I think you could come out this quarter.

You never recover 100% of the freight that you lose, right?

It's always something less than, but probably above 75%?

It is really hard to measure that total impact of the weather.

There was one other question asked earlier about our maintenance costs.

And I will point out again that we have a lot of equipment parked against the side of the fence during 2009.

And also, during the -- by the first half of 2010 we still had a considerable amount of equipment parked.

As we started seeing business ramp-up in the third and fourth quarters of 2010 and into the first half of 2011, we start pulling this equipment off the fence that had been sitting for nearly two years.

And our maintenance cost was through the roof during that period of time.

We are not faced with that same maintenance cost -- those costs levels this year like we had last year.

So, that has helped some of that margin improved, but I cannot put a pencil -- or I can't tell you right this minute how much that was.

Okay, that's fair enough.

Wes, one more quick follow-up here on that tax gain in the fourth quarter.

Do you have a dollar amount that, that was for us?

It was about $1 million of credit.

So, we are very green in the fourth quarter.

No pun intended.

Fantastic guys.

Thanks for the time as always, I appreciate it.

And next John Barnes from RBC Capital Markets.

Thanks for taking my question.

If I think about the margin improvement that you've shown, I'm kind of curious as to where that stands versus your volume levels.

What I mean is, we've had an economy creeping along, you have picked up some market share.

Would you see -- would you expect to see some erosion in the margin in the event that the economy took off at a little bit faster pace, and all of a sudden you started to fill up some of that excess capacity?

Would you anticipate seeing a little bit of margin erosion, at least initially, as you ramp up headcount or anything like that?

I will say no.

Okay, I will take that.

And then secondly, if I look back at my model that I have got built back into the mid-1990s, we see kind of a trend where you go through a five-year period where it would be a fairly -- improving but a fairly stable margin.

Mid -- in the mid '90s up until 2000 it was kind of the mid 90% range.

Then we went to a four- or five-year period where it got down into the low 90s.

Do you feel like you are on that same kind of stair step function that we've got a multi-year where you are at this margin level before you can stair step it again?

I go back to your comment about some points you're operating at a rail margin, which I don't think anybody here is going to argue with, but do you think you are at a kind of multi-year period where you can sustain this level of margin?

We are not giving that guidance.

But all the past year history, whether they repeat themselves will depend upon the nature of economy, the nature of the pricing and a lot of variables.

We really don't know what those variables are going forward.

Our management team has a bearing on that too.

We have a superior management team on board today.

Okay.

Again, great quarter.

Thanks for your time.

Next we will hear from David Campbell with Thompson Davis and Company.

Good morning everybody.

Maybe you ought to get greener in 2012.

Put some more of those solar panels in.

Get the tax rate down again.

Might as well take advantage of all those tax breaks.

I guess nothing in the plans at this point?

Not at this point.

In my comments, I mentioned that our tax rate that we are using this year is 40%.

So, we are -- the propane credit is gone and whether we use any more of the solar, it hasn't been decided.

As you can see, in that number, 40%, we are definitely paying our fair share of taxes.

I know that is not any good.

That is not fair.

You ought to get lower taxes.

I agree.

One question.

One last question is, you mentioned the fee-based added, value-added services in there, inclusion in the revenues.

That percentage is growing.

Much of that doesn't have any tonnage associated with it.

So, doesn't that by itself increase your so-called yields per ton?

Well a lot of it does have tonnage involved in it, because we are including our North America LTL business which is all tonnage.

We are including our container drayage operations, which also is part of the reason why -- when we give you our overall weight per shipment, includes those heavier weighted container shipments.

Yes.

Right.

So, there's not a lot of it that does not have tonnage associated with it?

Not a material amount now.

We have our truckload brokerage which does not have tonnage, and we have our logistics business which has some tonnage associated with it.

But not --

Right, right.

But you are using a lot of this, this fee-based business, I gather, as a way of getting into new business, getting into some tonnage business of accounts?

Or, not so much of that?

Well.

Everything that we do with our value-added services, we look for ways to complement our network and complement the mothership LTL business.

Yes.

Right.

Thank you very much.

I appreciate it.

Okay, David.

And Matt Young from Morningstar has our next question.

Thanks for taking my call.

Looking at the regional business, primary the next day and second day, I was wondering if there was much of a difference in the magnitude of yield gains or your pricing power in the regional versus the longer haul national freight, just to get a feel for the competitive dynamics there.

I think what we've seen over time is that regional business tends to be priced a little more aggressively than the interregional and long-haul business, primarily because there remains some smaller regional carriers who, that's all they do is the regional business, and they tend to offer lower prices in order to get that business and hold that business.

Fair enough.

I know you guys have been kind of perfecting or integrating that business for more than a decade or so while some of the larger, other larger competitors have been a bit more recent in their efforts.

Wondering if you think some of the other -- some of your key competitors in that market have been getting their act together, in terms of competing there?

One of them that is coming out of it.

YRC, I believe has announced that they are coming out of the next day market.

That is true.

Any other trends for some of the other carriers, that some of your other close competitors have been doing that you feel like they are getting better?

I don't know.

That's for you to judge.

Okay.

Fair enough.

I think that's all I've got.

Thanks.

Thank you.

Next we'll hear from Dan Moore with Scopus.

Hi, guys.

Great quarter.

Are you ready to have this call over with?

We are having fun.

Real quick.

Just curious can you talk a little bit about pricing.

Normal pricing trends -- or better yet, normal pricing trends from fourth-quarter to first quarter, in the context of seasonality?

So, the sequential change?

I really don't know how to answer that question.

We don't really track seasonality from a pricing standpoint.

Don't know if it is a seasonal -- you just don't adjust pricing because of seasons.

Sure.

Well, I guess I am thinking normally there is some drop-off, but I could be wrong.

Or you could be right.

Contract pricing.

Could you talk a little bit about what you're seeing on existing contract renewals currently, and what you saw in the fourth quarter?

Yes, we continue to be successful in getting some increases from our contractual customers.

I'd say probably in the 3% to 4% range.

Okay.

Again, what was that experience last year?

Probably in a similar range, maybe a little bit more.

Okay.

Maybe a 1% difference, or do you think that is fair?

I would say into the 4% to 5% range.

Okay.

Fair enough.

I think that's all I've got.

Thanks again, guys.

All right, Dan.

David Ross from Stifel Nicolaus.

My questions have been answered.

Thank you very much, gentlemen.

We will go back to Scott.

I am actually all good, as well.

Have a good day guys.

And then Jason Seidel.

I actually do have a question.

You talked a little bit about YRCW getting out of the next day business.

Do you think you're seeing any of those market share gains, in terms of the tonnage reacceleration of growth due to that fact?

Just announced it yesterday, I think.

Or the day before yesterday.

We don't know how much they have.

Okay, so it's too early to tell, but that could keep up your tonnage growth going forward if you see some of that business then?

There won't be enough of it to fill a teaspoon, I'll bet.

Fair enough guys.

I appreciate the time.

Gentlemen, there are no further questions at this time.

I'll turn the conference back over to Earl.

Please go ahead.

Listen guys, as always, we certainly thank you for your participation and we appreciate your questions and your support of Old Dominion.

Please feel free to give us a call if you have any further questions.

Bye.

Ladies and gentlemen, that does concludes today's conference.

Thank you for joining.