奧多明尼昂貨運 (ODFL) 2012 Q1 法說會逐字稿

Please stand by.

We are about to begin.

Good morning!

And welcome to the First Quarter 2012 Conference Call for Old Dominion Freight Line.

Today's call is being recorded and will be available for replay beginning today and through May 10th, by dialing 719.457.0820.

The confirmation number for the replay is 7324822.

The replay may also be accessed through May 10th at the Company's website.

This conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements among others regarding Old Dominion's expected financial and operating performance.

For this purpose, any statements made during this call that are not statements of historical fact may be deemed to be "forward-looking statements."

Without limiting the foregoing, the words, "believes, anticipates, plans, expects," and similar expressions are intended to identify forward-looking statements.

You are hereby cautioned that these statements may be affected by the important factors among others set forth in Old Dominion's filings with the Securities & Exchange Commission, and in this morning's news release.

And consequently, actual operations and results may differ materially from the results discussed in the forward-looking statements.

The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

As a final note before we begin, we welcome your questions today, 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, sr.

Good morning.

Thanks for joining us today for our first-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'll be glad to take your questions.

Old Dominion got off to a great start in 2012; continuing the momentum we have been experiencing throughout the economic recovery.

We produced record quarterly revenues not only for this first quarter, but also with respect to any quarter in our Company's history.

We also had the best first-quarter operating ratio in our history, and a 42% growth in earnings-per-diluted-share.

Although our year-over-year revenue growth rate of 17.6% for the quarter was less than 20% for the first time since the second quarter of 2010, the comparison to the first quarter of 2011 was unusually tough.

Because we experienced a revenue growth rate of 33% during that quarter -- our highest quarterly growth rate ever.

Our revenue performance for our recently-completed first quarter was driven by a good mixture of tonnage growth and improved revenue yield.

And we were pleased to produce our first increase in weight-per-shipment since the end of 2010.

We believe Old Dominion is well-positioned to produce additional profitable growth as we proceed through 2012.

Our tonnage and pricing trends to date in April are positive, and we believe the continuing balanced capacity and margin focus in the LPL sector supports a good pricing environment.

Although the strength of the national economy has continued to be uncertain, we have not experienced significant reduced demand, or any meaningful downward pricing pressure.

During 2102, we expect to continue to use our substantial cash flow and strong financial position to expand our operating capacity, in preparation for continuing market share opportunities, through either organic growth or industry consolidation.

After saying last quarter that I had never seen as strong a financial position for Old Dominion in my 60-plus years at the Company, our significant profitable growth further enhanced our financial position during the first quarter of this year.

Our priority, moving forward into 2012, is to continue our focus on our differentiated value proposition that offers industry-leading service standards at a fair and equitable price.

In this regard, we have the utmost confidence in the OD Family of Employees who are responsible for Old Dominion's culture of customer service.

Our strong performance for the first quarter of 2012 once more demonstrates our ability not only to maintain, but also to enhance the highest quality service in the industry.

So thank you again for being with us today and for your interest in Old Dominion.

Now here's David Congdon to discuss our first-quarter operations in more detail.

Congdon: Thank you, Earl, and good morning!

I share Earl's outlook in an industry that is still recovering from a multi-year downturn.

We are strongly positioned to gain market share because of the strengths that have enabled us to continue to outperform the industry.

I also share his confidence that our outstanding team of employees will continue to consistently raise the bar with respect to the execution of our value proposition.

In the first quarter, the efforts of our Old Dominion Family produced a cargo-claim ratio of 0.47% of revenue, and an on-time delivery percentage of 99%.

Our success at driving density through increased market share and our existing service in our network, combined with our disciplined focus on revenue yield were primarily accountable for the increased operating leverage that produced a 190 basis-point improvement in our operating ratio.

Our operating ratio for the first quarter of '12 was a first-quarter record for our Company.

Which is particularly notable, since the comparison was against our previous first-quarter record, established in 2012.

We continued to enhance productivity and efficiency, as well.

For the first quarter, pickup and delivery shipments per-hour increased 2.2%.

P&D stops per hour rose 2%.

And platform pounds-per-hour increased 6.9%.

Only our laden-load average slipped a bit.

And although only down 1.2%, it reflects our ongoing commitment to maintaining and improving on-time service.

As we look forward, we expect the OD Family will continue to differentiate the Company through their execution of our proven business model.

On a longer-term basis, we expect to continue to build out our service-center network, invest to maintain ample equipment capacity, and refine and enhance the services we provide to our customers.

By focusing on service, density, yield and productivity, we expect to continue to benefit from the operating leverage inherent in our substantial infrastructure investment.

We are always alert to consolidation and other acquisition opportunities, but we are not dependent on them to drive our long-term growth.

We have steadily gained market share through our determination to be the service-quality leader.

And we believe we have successfully differentiated Old Dominion in the market through our commitment to our value proposition.

To deliver this proposition, we have refined the capital investment, the technology, the services, the geographic coverage, the integration, the expertise and the service-quality required to be competitive in today's LTL industry.

Our continued growth and success shows that our customers understand the value of our services.

By continuing to deliver these services consistently and effectively, we believe we are well-positioned competitively.

As a result, we are confident in our ability to expand our mid-single-digit share of the $40 billion-plus LTL market.

In doing so, we expect to achieve continued near- and long-term profitable growth, which in turn we expect will produce increased shareholder value.

Thanks 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.

Old Dominion produced a new Company record for quarterly revenues, with a 17.6% year-over-year increase, to $497 million for the first quarter of 2012.

The growth in revenue reflects a 10.7% comparable-quarter increase in tons, and a 5.5% increase in revenue-per-hundredweight.

Our total tonnage was comprised of a 9.5% increase in shipments and a 1% increase in weight-per-shipment.

Sequentially throughout the first quarter, the tonnage- growth per day was 14.2% for January, 10.4% for February, and against tougher comparisons 8.3% for March -- as compared to the prior-year periods.

Though April is not quite completed, we expect tonnage to be up approximately 10%, and be in the 9.5% to 10% range year-over-year for the second quarter, overall.

Revenue-per-hundredweight, excluding fuel surcharge, increased 3.6% for the first quarter.

As you would expect, the 1% increase in weight-per-shipment for the quarter and the 1.7% decline in length of haul had a negative impact on revenue-per-hundredweight.

We expect our revenue per hundredweight, excluding fuel surcharge, to increase year-over-year in a range of 2.5 to 3.5% for the second quarter.

Old Dominion's operating ratio for the first quarter was at 89.1; 190 basis points better than the first quarter of last year; and as David and Earl mentioned, were record quarters in 2011.

Salary and wages and benefits declined 50 basis points as a percent of revenue, despite a wage increase of 3% implemented in September of 2011, and a 70 basis-point year-over-year increase in our group health expenditures for the quarter.

Operational supplies and expense declined 50 basis points, largely due to lower equipment-repair cost, and a 3% improvement in our miles-per-gallon.

Insurance and claims declined 20 basis points as a percent of revenue, due to a favorable cargo-claim experience.

Capital expenditures for the first quarter totaled approximately $89.4 million, and 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 2011, we again expect to fund much of these expenditures through cash flow, our cash balance of $54 million at the end of the first quarter and our available borrowing capacity.

We had approximately $150 million of availability on our 5-year revolving credit facility at the end of the quarter.

As Earl mentioned, our already-strong financial position improved during the first quarter.

Total debt to total capitalization was 22.5% at the quarter's end; a 140 basis-point improvement, from 23.9% at the end of 2011.

With full implementation of our existing CapEx plan for 2012, which is subject to availability and timing of real estate, we currently expect our total-debt to total-capitalization to be in the range of 24 to 26%, at the end of the year ending 2012.

Our effective tax rate for the first quarter of 2012 was 39.5%.

And we anticipate an effective tax rate of 39.5% for the remainder of 2012.

And this concludes our prepared remarks this morning.

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

Thank you.

And ladies and gentlemen, if you would like to ask a question, you can do so by pressing the * key followed by the digit 1 on your telephone keypad.

If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Again, that is *1 if you'd like to ask a question.

We'll take our first question from Justin Yagerman of Deutschebank.

Hey -- good morning, guys!

Good morning, Justin.

Wes, just one quick housekeeping.

The 2.5 to 3.5% yield improvement that you talked to for Q2 -- that's net-of-gross, isn't that?

That is -- that's excluding fuel-surcharge, Justin.

That's net of fuel.

And I was hoping you could talk about the improvement of weight-per-shipment.

Anything that we can glean there?

Typically that's been at least some kind of harbinger of economic activity.

We've seen manufacturing data.

It seems strong in Q1.

Are you seeing those trends continuing to April?

And do you guys glean anything from that vis-à-vis the economy, or your business?

Yes.

Into April, we're still seeing a very steady economy.

I think not only is the weight-per-shipment still positive, but the frequency of shipments.

Our number of shipments are still strong.

And again, we have to say how much of that's the economy and how much of that is market share.

It's hard to distinguish.

But still, we still think that the economy, as David had mentioned in his comments, is still pretty steady.

And we get that same anecdotal feedback from our customers.

Okay.

Last question, and I'll turn it over.

Because I know you want to keep it a little tight.

A lot of talk with fuel prices having moved up as much as they have -- about increasing your sourcing and renaissance in US manufacturing -- and some stuff moving to Mexico.

You guys don't talk much about it, but do you do any cross-border business?

And do you see much activity coming in from Mexico?

Or can you talk to any near-sourcing trends that you guys are seeing impacting your business?

Justin, we're not seeing a lot of major shift in near-sourcing, yet.

But we do a more significant amount of cross-border business going to Canada.

And our Mexico business is growing at a better rate than it had in years-past.

It was kind of floundering for a while, but it actually is growing, at this point.

Better than we had seen.

Okay, great.

It's still not real significant to us, though.

Yes.

I know.

Understood.

Just curious on the call, here.

Thanks, guys.

Appreciate it.

And next we have Todd Fowler of KeyBanc Capital Markets.

Great.

Good morning.

Thanks for taking my question.

Dave or maybe Wes -- I think you touched on this in your prepared remarks.

The salaries and wages were a little bit higher than what we were looking for here this quarter.

I think that we would have had the wage increase.

But the comments on the healthcare.

Was that 70 basis points year-over-year or was that sequentially?

And is that something that's going to continue through 2012?

Yes, Todd.

That was year-over-year -- 70 basis points.

Whether it's a trend or an outlying month, we're just not sure, at this point.

We'll just have to keep watching it.

But it was well above what our expectations were for that particular cost.

As you probably know, we're self-insured for group health, so it does fluctuate, based on timing of expenditures; and of course, the health issues.

But it was a 70-basis-point effect in the first quarter.

Whether that will continue or not, we're not sure.

But we will deal with it, if it is.

We'll address that issue.

And when you say you'll address that, what are some of the things that you can do, from a cost-control standpoint?

Well, some of it is hard.

I think we have been putting a lot of emphasis into our wellness programs for a number of years.

And all of that has a long-term benefit.

And you can't really -- if all of a sudden you have five people or ten people experience a cancer or a heart attack and open-heart surgery, those huge doctor bills -- you can't stop them from happening.

There's no way you can really control it.

It just sort of is what it is.

And it was the large claims.

It was the large claims.

Yes.

We did have, for some reason, a significant number of larger claims -- what we call "major" claims -- that hit us in the first quarter.

Okay.

That helps.

I think I got that.

And then thinking about the incremental margins, here.

It was a good quarter from an OR standpoint.

Incremental margins, I still think, remain above the trend that you talked about.

Kind of in that 15 to 20% type range.

Is there any change to that expectation for the rest of the year, based on building up a network and some of the things that you're doing?

Or can we expect to see incremental margins at this level?

We don't give guidance on that, Todd.

But going into the second and third quarter, I think we produce results that are a different level.

And just kind of an analogy, if you compare it to a sprinter, once you get to a 9-second hundred meter, to get to an 8.9 becomes incrementally tougher.

But given the fact that if the pricing environment remains steady and we still have density improvements that we can get into their system, there's no reason why we can't continue to improve or to produce those results.

But it is a tougher and tougher comparison, as the year progresses in the 2nd and 3rd quarter.

Sure.

Yes.

And that makes sense.

And I was just asking relative to some of the specific investments that you're doing in the network.

The last one I have, and I'll turn it over.

I think one of your major competitors made some adjustments to their network earlier this month.

I was curious if you've seen any impact on market share or freight shifts as a result of that.

Which major competitor was that?

We have a lot of them!

I was thinking of YRC.

I think Earl addressed that last quarter.

When you said they got out of the next-day lanes?

Right.

Exactly.

And then taking down some of the end-of-line terminals, and shrinking the network a little bit here early in April.

We haven't seen any major shifts occurring there.

Okay.

Fair enough.

Thanks for the time.

And next we have Scott Group of Wolfe Trahan.

Thanks!

Good morning, guys!

How are you doing, Scott?

Good.

So clearly, you guys are still taking share.

But UPS talked today on their call this morning they felt like LTL is getting a little bit more competitive from a pricing standpoint.

Can you talk about what you're seeing out there in the market?

How you think that's impacting your share of growth?

Just because the tonnage was a little less than we thought in the quarter.

And how the environment out there impacts your ability to get some pricing.

Well, let's start off.

Our tonnage growth at 10.7% was up against 18.4% last year.

So remember, that was a very tough comparison.

We're not seeing the yields or the pricing competiveness become stronger in any big way.

There's always been spotty competiveness and spotty irrationality in our industry for the last 20 years.

But we feel like the pricing environment remains stable and good.

And also believe that it will remain so, going forward.

David, do you have a sense on just pricing?

If we exclude the impact of length-of-haul and weight-per-shipment.

Well, you know our 3.6, which is the revenue -- which is a yield -- was negatively impacted by both of those two metrics.

Such that if we have an algorithm to calculate what the actual pricing was, we would expect it to be above that.

And certainly anecdotally, the price increases we're getting for most contractual renewals are in a range that might be above that.

The other comment I would make about pricing is that in I'd say the third quarter of 2011 -- I might be getting my years mixed up -- of 2011 and fourth quarters -- those were periods of time when just after a couple of our large competitors changed their tune on pricing, and started raising prices significantly.

No, that was '10.

I'm sorry.

I've got my years mixed up.

But that was in the third and fourth quarters of '10.

And so therefore, we were seeing dramatic improvements in yield during the fourth quarter of '10, the first and second quarters of '11.

So we've got some pretty tough comparisons on a year-over-year basis.

Just to be specific.

And in 2011, we were seeing revenue-per-hundredweights, excluding fuel surcharge in the second quarter, up 8% in the second and third quarter.

And up 7% in the fourth quarter.

So we've got really tough comparisons.

Because the anchors on pricing were removed.

And so settling back down into a pricing environment that's ex-fuel that's in the say 3 to 4 or 5% range is pretty strong yield improvement, in my opinion.

That's very helpful; great color.

And just last quick thing.

You guys seem to be very good at quantifying things.

How should we think about the impact of weather in the quarter?

Both on tonnage and margins?

Well it's difficult to measure.

Because even in 2011, you know, we had miserable weather -- as you would probably recall, having experienced it yourself in January and February of 2011.

And then we had a very strong sequential March, where our tonnage came back about 8% sequentially.

Which was at least twice what we expected.

So the bottom line for the quarter overall is how much net-net did the weather impact us?

Now I know it impacted us from a cross standpoint, because we had probably about 20 basis points with snow removal and wrecker services and all those kinds of things.

But in terms of the revenue, it's hard to quantify that, compared to this year.

And that's one reason January was so strong at 14%, and February was fairly strong.

And then we had a comparison of March against a very strong recovery in March of last year.

So it's hard to tell from a revenue impact what the bottom-line was.

And we see our growth settling in on tonnage for April and maybe for the second quarter, the guidance we gave just a moment ago was 9.5 to 10.5.

Right.

Okay.

Great.

Thanks for the time, guys.

All right.

Thank you.

And we'll move on to our next caller from John Godyn of Morgan Stanley.

Hey, thanks.

I want to follow up on the comment in the press release about how your tonnage growth is mostly driven by market share as opposed to economic improvement.

I know the market share gains you've been seeing are mostly due to your superior value proposition.

But I was wondering if you could talk about how you think the current elevated fuel and slugging macro environment might be amplifying how much that resonates with customers, compared to your competitors.

Do you find that you almost have extra leverage on market share gains to a rising-fuel and sluggish-macro backdrop?

John, I think we're not exactly sure what you're asking.

I think our market share and our superior service, as you appropriately described, is pretty much there in any market.

In fact, sometimes in a down market.

Our view was, and why we continue to invest in service, was that if the demand is lower, that means it may be even more important to get those goods there on time, undamaged.

So we think that serves us well both in down markets and up markets.

I'm not sure if that answers your question.

If it doesn't, please let us know.

Yes.

That's helpful.

And you've been great about leveraging your value proposition to grow tonnage way in-excess of the industry.

Instead of kind of leveraging it to grow price above the industry.

But do you worry that taking so much share, instead of growing earnings through price, might eventually backfire and put so much volume pressure on competitors that they start acting a bit more irrationally on price?

We don't even look at it that way.

We don't see a balance between --

I know that there is a relationship between tonnage growth and pricing.

And it could be negative.

It depends on where it is.

But we look at pricing on an individual customer basis and a profitability basis; not on trying to increase tonnage by reducing price.

We just don't look at it that way.

Okay.

Thanks a lot.

And we have Jason Seidl of Dahlman Rose for the next question.

Morning, guys!

How are you?

Good.

Couple quick things.

One -- could you give a little more color around the insurance in the quarter?

And how much that was?

I think you said there were some abnormal hits that you guys took on the health insurance.

Could you give us some numbers around that?

Well, the insurance on the group health; the effect of it was about $3 million more than what we would've expected, in what our normal trends in that cost would be.

Again, as I mentioned and reiterate, we hope that that was an outlying with just a lot of large claims coming in, and the contact time.

But we can't be totally sure of that.

But that was the net impact in the first quarter.

Okay.

So that was actually a decent amount more than you guys had thought.

Okay.

Yes.

That's good color.

Also, Wes -- when you look at sort of your margin gains going forward, obviously posting records every quarter seems great.

But you did have a little bit of benefit in this quarter in that there were not the weather expenses.

And who knows where the revenue is going to whack out, in terms of more favorable conditions.

Do you guys see it sort of settling out at some point in your ability to grow the margins in this business?

Or do you still think that you guys can still push margin gains, going forward, through density in pricing?

I'd like to answer that.

This is David.

We think that we can continue to improve margins as we are pursuing the growth in our overall market share.

We have roughly 5 to 6% of the LTL market today, with our stated goal of achieving $3 billion in sales by 2015.

That should push our percentage up closer to 10% of the market.

And that extra density across the network, which is essentially paid for, I'm sure we'll still have to expand some service centers.

But we've made some significant investments over the last couple of years in major hub service-centers, and major end-of-the-line sectors that we can leverage as we grow into that additional freight across the LTL network.

And also, by leveraging our OD Global and OD expedited business, those opportunities will help feed the network, as well.

We're implementing additional technologies to improve operating costs, and also believe that the yield environment going forward is going to be positive for our industry.

Because the cost of staying in the game this day and age is really tough.

And the barriers to entry are there to where no one's going to enter the LTL business.

So with capacity constraints going forward and continued improvement in demand for our services, I think it's going to bode for a good pricing environment for many years to come.

So density improvements with good pricing should enable -- and improvements in operations, in technology and so forth -- should allow us to keep improving our margins.

Great!

That's fantastic color, David.

My last one, here.

You guys in the past have talked about adding sort of some ancillary services.

Maybe such as warehousing in the past.

Is that something that's still on the docket and where do you guys stand with that?

Sure is.

We launched Vault Logistics as an independent operating division of Old Dominion in August of 2011.

It's underway and we're growing our warehousing business as we speak; our managed transportation, our truckload brokerage and things like that, that are part of Vault Logistics.

And we'll continue to focus on that.

Now David, does the warehousing operation drive business directly to the OD trucks?

Or is it actually a carrier-neutral type of business?

Well, it's both.

To the extent that it makes sense for the customer to put freight coming out of the warehouse on an OD truck, we do that.

But to the extent that it makes more sense to use another carrier to move the freight, we do it that way.

It all depends on each situation, with each individual customer.

But yes, we're carrier-neutral.

All right.

Fantastic.

Listen -- thanks for the time, as always, guys.

Okay.

Jason.

And next we have Tom Wadewitz of JP Morgan.

Good morning.

It's Alex Johnson on for Tom.

I wanted to ask you, I think Chicago is an area where you've mentioned in the past having some capacity constraint.

Just wanted to check on where you see capacity constraints in your network at the present time.

And then just looking back to the press release, you mention that investments are subject to the availability of suitable real estate.

Do you see anything breaking free that allows you to reduce any capacity constraints that you have?

Chicago remains a capacity constraint.

And we're right on the verge of getting our permits to build a new facility out in the Bolingbrook area to relieve that.

But that will take roughly 8 or 9 months, following the permits.

Our other couple of capacity-constrained areas -- one of which was Indianapolis -- we expect to be complete with about a $20 million upgrade and addition to that facility moving in, in late September, I think.

That's the target date now.

Or by mid-September.

So that was the other, the second-worst capacity constraint.

And we're just now completing an addition of 100 doors in Morristown Tennessee, which is adding capacity for further growth in that market.

And that is really the only capacity constraint that we have.

Okay.

Thank you very much.

And next we have Chris Wetherbee of Citi.

Great.

Thanks.

Good morning, guys.

Maybe another question just on the weight-per-shipment.

I just want to get a sense of how you think about the margin impact of weight-per-shipment.

I know obviously it's a headwind from a total-yield perspective.

Do you get any benefit of that consolidated type of movement?

It could be someone.

You know, 1%'s not a lot.

But one positive is that if the weight-per-shipment is heavier, that means that the revenue-per-shipment is also heavier.

And that's what pays the bill, so to speak.

So our revenue-per-shipment was up 6.5%; excluding fuel surcharge.

I think that was right.

Excuse me -- 4.7.

So that's the positive, from the increased weight-per-shipment.

And of course that also implies that the weight-per-shipment -- then you have less handling, as opposed to two shipment, as opposed to one bigger shipment.

Sure.

And when you think about the guidance for Q2, at least, from a core pricing perspective, ex-fuel surcharge, how do you think about weight-per-shipment?

Do you have an assumption baked into that?

Do you expect continued modest year-over-year gains as you go forward?

Well, the weight-per-shipment, implying higher revenue-per-shipment.

But the fuel surcharge is tied to the revenue-per-shipment.

So yes, it would be a slightly higher fuel surcharge.

Okay.

But I mean I guess for when you're looking out for Q2.

I think you mentioned 2.5 to 3.5% price-per-hundredweight -- ex-fuel surcharge.

Just trying to get a sense of what the maybe implied weight-per-shipment dynamic is.

That weight-per-shipment implied is kind of flattish at this point.

Maybe up very slightly.

A few -- 10 to 20 basis points.

But basically flat.

Okay.

And you know, the weight-per-shipment is significantly influenced by the mix of the freight.

And also by the region.

And then I guess that's actually a good transition to my next question.

You mentioned just on the last call -- the last question -- about the regional kind of issues as far as capacity constraint.

I know it's difficult to do, but when you think about the network I guess holistically, do you have a sense of what type of utilization levels you are, on average?

I mean I know it's going to vary region-by-region.

You kind of highlighted the ones that are particularly constrained from a capacity perspective.

But just overall, a sense of how much more capacity you do have for volume growth, going forward.

That's a real hard question to answer, because it does vary from some service centers, based on weight-per-door, per day.

And that's the only way we've ever tried to measure the capacity of centers.

And when we look at the centers that are at-capacity, where we're busting at the seams, we tend to see somewhere in the 17,000- to 18,000-pounds-per-door per-day category.

But we have some centers that are in the 2,000- and 3,000-pound-per-day.

It might be a little place like St.

George, Utah, that's got loads of capacity.

And then some in the middle that might be doing 8,000- or 9,000-pounds-per-day.

Which would imply they have 50% to go.

And the last time I did the math on it, I think the average was about the average of all service centers of the peak, which is the top, which is 18,000 pounds a day, and we were somewhere around 65 or 70%.

Okay.

That's very, very helpful.

And that's not a perfect science, believe me.

Yes.

Sure.

Obviously suffice it to say there are going to be capacity constraints in some certain geographies.

But on average, it's 65 to 70 of the peak.

Yes.

And it also depends on whether you're a big in-bound location or an out-bound location.

Because if you're in Florida and you're heavier in-bound, it requires more doors to process an in-bound operation than it does an out-bound.

A heavy out-bound operation.

That's why it's not a perfect science.

But that's how we look at it.

Okay.

That's very helpful.

I appreciate the time.

Thank you.

Okay.

And we'll move next to Chris Ceraso of Credit Suisse.

Thanks.

Good morning.

This is Patrick [Ikyon] for Chris, this morning.

I have two questions for you.

The first one.

You had mentioned that productivity improvements during the first quarter occurred at a faster rate than you guys had initially anticipated.

Did that momentum kind of carry forward or continue into the first quarter and then into April of this year?

The answer is yes.

We had some very good productivity metrics that we experienced in the first quarter.

And so far in April, we are still seeing those metrics being positive, as well.

Were they stronger than normal?

Or just --

I think they're pretty much at expectation.

And then on the second question.

I wonder if you guys could provide any color on what changed in the marketplace to have your tonnage growth come in a little bit below your revised tonnage guidance.

Was January and February stronger and you thought March would carry the momentum?

To tell the truth, we gave the first guidance on our fourth-quarter conference call.

And as you know, we were seeing 14% in January at that time.

So being what we thought was conservative, we reduced it to I think that guidance was 11 to 12 -- 13.

And then maybe we didn't fully realize that as the quarter proceeded, the comparisons got much, much tougher.

That's when we reduced the guidance to 11 to 12, and came in.

I mean you could round up to 10.7 to 11.

So we came in pretty much on track.

On the other hand, we were too conservative on the ranges-per-hundredweight, initially, in January.

Indicating 1.5 to 2.5, and revised that upward to 2.5 to 3.5, and exceeded that upper range.

So that came in better than we expected.

So all in all, if you look at the tonnage growth and the pricing, overall, if you average the two, it actually is a slight positive.

Okay.

Great.

Thank you, guys.

And next we have David Ross of Stifel Nicholas.

Yes.

Good morning, gentlemen.

Good morning, David.

Could you talk a little bit about the market share gains?

Whether they're coming in specific regions?

Or in specific lengths of the haul?

David, it really comes from all over the board.

As we've discussed before, when we're working with customers, the fact that we do and can do regional and inter-regional long-haul service all under one company, we see where the customer's hurting spot is.

So we may be picking up long-haul business and long-haul market share from one customer, and medium-haul or short-haul from another.

The key point is to make sure that you know what your costs are, so that you price it right to make a profit.

But our growth -- the last several quarters, I had seen more growth occurring across the top half of the country.

But I was looking specifically today at how we're doing in April, and we're seeing a growth pretty much uniform across the country.

It's maybe a little bit stronger across the top, but we've got some strong growth across the bottom half of the country, as well.

So I think our gains are coming from all angles.

That's helpful.

And then is truckload competition for heavier-weight LTL shipments either getting more intense or are they backing off taking the heavier shipments from you guys?

Well, we kind of intentionally backed off several quarters ago from stock quotes and volume.

Consequently, our volume tonnage is down about 15%, year-over-year.

But that was intentional.

If you look at the pricing of that, it's up 15%, even including fuel surcharge.

So what we're getting is profit.

We haven't seen any real moves one way or the other, other than what our expectations have been.

And that's at this point.

Excellent.

And then on the equipment side of things.

David, can you talk a little bit about the tractor technologies?

The fuel-efficiencies on the new trucks that you're bringing into the fleet versus kind of the former model years you've been using.

Then any thoughts you have on natural-gas vehicles.

David, I don't have any specifics on the fuel-economy of the new tractors versus the old.

I can tell you, and I think we've reported earlier -- within our discussion earlier on this call -- that our fuel-mileage had improved [less than] 3% year-over-year.

And the new tractors, I think, are performing relatively well.

So that's all I can really say about that.

And as far as natural gas, we're not doing any natural-gas trucks, at this time, and we don't have any plans to do any in the near-future, either.

Excellent.

Thank you very much.

And as a reminder, everyone, that is *1 if you would like to ask a question.

We have Jack Waldo of Stephens Inc, next.

Good morning, guys.

Good morning, Jack.

Good morning, Jack.

I wanted to ask two questions.

One, what is your goal for or where do you expect terminals to come in by the end of the year?

Our goal for what by the end of the year?

The number of terminals or service centers?

We're slated to add about five terminals this year.

Okay.

And then how much business do you guys -- do three PLs; third-parties -- currently represent?

Probably in the 30% range.

Probably around 30.

Is that up?

Yes, it is up.

It isn't obviously growing.

But we manage as if.

We manage it according to all of the customers that they bring to the table.

Not overall.

So we don't look at logistics as logistics.

We look at the profitability of the customers underlying their business.

Gotcha; gotcha.

And have you guys announced or have any thoughts on a GRI?

We haven't discussed that or have no plans at this time.

Okay.

Thank you guys very much.

All right, Jack.

And once again everyone, that is *1 if you want to ask a question.

We'll go now to Thom Albrecht of BB&T Capital Markets.

Hey, guys.

Another great quarter.

Thanks, Thom.

Wanted to try to understand something here.

Why was your laden-load average down when your weight-per-shipment was up?

It shows you why we're in Wall Street and not in trucking.

Well, as we mentioned, the laden-load average is a major metric, which is a by-product of the service that you're getting.

So in a normal seasonal down period, your tendency could be to effect service by maintaining laden-load average.

And of course during this whole downturn, we haven't done that.

So in order to make sure that we improve service to 99% on time, in some cases, obviously your loads and your schedules may not be as full as you'd like.

But you've got to get it there when you say you got to get it there.

So a 1.2% reduction isn't major.

It does affect your line-haul costs, obviously.

But it still is important if you're going to provide 99% on service.

That's a commitment you have to make.

Okay.

And I guess the other factor besides just speed and commitments would be if you're growing share maybe a little bit more in the shorter-haul market, too, where you've got tighter cut times.

Yes.

Our laden-load average in the longer-haul lanes I think is better than the short-haul lanes.

Because the short-haul lanes you have less of a window, and it has to go.

So in the longer-haul lanes, our laden-load average typically not only is higher, but also may have improved.

The laden-load that we give is a combination of the two.

But it's obviously more impacted in the shorter-haul lanes where you've got less of a window from a service standpoint.

Okay.

That makes sense.

Thank you.

And at this time it appears that we have no further questions.

I'd like to turn the conference back over to Earl Congdon for any additional or closing remarks.

Thank you.

Well guys, as always, thank you all for your participation today.

We appreciate your questions and your support of Old Dominion.

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

And we look forward to helping the world keep promises.

Good day.

And again, that does conclude today's conference call.

We'd like to thank you for your participation.