Good morning, and welcome to the Q2 2015 Conference Call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through August 14 by dialing 719-457-0820. The replay passcode is 78358 68. The replay may also be accessed through August 14 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 some similar expressions are intended to identify forward looking statements. You're 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 consequently, actual operations and results may differ materially from the results discussed in the forward looking statement. 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 Vice Chairman and Chief Executive Officer, Mr. David Congdon. Please go ahead, sir.
Good morning, and thanks for joining us today for our Q2 conference call. With me this morning is Wes Frey, our CFO and Adam Satterfield, our Vice President and Treasurer. After some brief remarks, we'll be glad to take your questions. Full Dominion continued its record setting pace during the Q2 of 2015, achieving our best quarterly results for revenue, operating ratio and earnings per diluted share. We achieved these results despite reduced fuel surcharge revenue and a second consecutive quarter in which weight per shipment declined.
Nevertheless, the growth in shipments and tons per day for the quarter increased our freight density and a stable pricing environment reported a 5.3% increase in revenue per 100weight excluding fuel surcharge. A record operating ratio of 81.5 represents the 5th consecutive quarterly improvement in our OR of 100 basis points or better. Also, our OR has now improved for 21 of the past 22 quarters. These consistent improvements in OR have also driven our double digit growth in earnings per diluted share for the same 21 quarters as evidenced by our 16.3% increase to $1 for our Q2 completed. Old Dominion continued to operate at a high level for the 2nd quarter.
Even with 13.4% growth in shipments for the quarter, we again provided an on time delivery ratio of over 99% and a cargo claim ratio of just 0.33%. We also responded well to the increase in LTL shipments with relatively strong improvements in our productivity metrics for P and D shipments per hour and platform shipments per hour. While other productivity metrics such as platform pounds per hour and long haul laden load average were pressured by the 3.8% decrease in LTL weight per shipment. Ensure capacity in a capacity constrained industry, we are continuing our long term strategy of differentiating Old Dominion through consistent and sizable investment in our infrastructure, equipment and technology. We also continue to invest in the training and education of our Old Dominion family of employees to optimally leverage our capital investment.
We continue to focus on price discipline to ensure an appropriate return on each account. As a result, we have created the strongest financial position that the company has ever experienced, which enables the investment required to sustain the service standards that set us apart in our industry. Many factors have contributed to Old Dominion's long term performance, but the overriding key continues to be our successful delivery of on time claims free service at a fair price. Our performance record reflects the growing demand in the marketplace for this value We expect our strong competitive market position to enable us to further increase our market share, earnings and shareholder value. Thanks for joining us today and your interest in Old Dominion.
And now, Wes will review our results for the Q2 in greater detail.
Thank you, David, and good morning. Old Dominion's revenue was $762,200,000 for the 2nd quarter, an increase of 8.4 percent from $703,000,000 for the Q2 of 2014. Our operating ratio improved 100 basis points to an 81.5 for the 2nd quarter and earnings per diluted share grew 16.3 percent to $1 from $0.86 for the Q2 of last year. Our financial results were driven by a 1.2% increase in LTL tonnage for the quarter comprised primarily of a 13.4% increase in LTL shipments, a 3.8% decrease in LTL weight per shipment. LTL revenue per 100weight decreased 0.8 percent 0.8 percent for the quarter and revenue per 100weight excluding fuel surcharge increased 5.3%.
Revenue per 1008 was favorably affected by the decrease in weight per shipment, while the length of haul was relatively flat. On a monthly basis, LTL tonnage per day decreased sequentially by 1.1% for April March, increased 3.3% for May and increased 1.6% for June. This performance compares with our 10 year average sequential month trends that show an increase of 0.9% for April, an increase of 4.2% for May and an increase of 2.2% for June. On a comparable quarter and 7.8% for June. These sequential results were downly influenced by the reduction in the weight per shipment.
Actually, the number of shipments for the quarter, number of shipments that is, was sequentially above the 10 year average trend. Believe the decline in our weight per shipment for the 2nd consecutive quarter reflects, among other things, the increased number of truckload shipments split into LTL shipments last year as well as a reduced demand for customer products this year. In addition, we believe some customers are modifying their LTL shipping patterns to smaller, more frequent shipment, which is reflected in our higher shipment volume with reduced weight per shipment. Beginning this quarter, we will stop providing forward quarter estimates of year over year tons per day and revenue per hundredweight excluding fuel surcharge. Instead, we will provide a real time estimate for the 1st month of the new quarter on the earnings call as I will today for the prior quarter.
We will also publicly update this information with actual results for the 2nd month of the quarter, which will be released early in the 3rd month and we will report the full quarter results at the time of our normal release and call. Accordingly, these 2 work with 2 workdays remaining in July, we expect LTL tons per day for July to increase approximately 8% versus 2014. Sequentially, this represents a 1% decrease in tons per day compared to June versus a 2.4% decrease for the 10 year average. Increased tons include 13.6% increase in the number of shipments, offset by a 5% decrease in the weight per shipment. Sequential 10 year average in tons per day for August September as a note is 0.6ten of 1% for August from July and 3.2% increase for September versus August.
We also expect revenue per monthly year over year LCL tons per day increased during the Q3 of 2014 compared to 2013 18.8% for July, 19% for August, 18% for September, much tougher comparison. Q3 of 2015 has the same number of working days as the Q3 of 2014. 100 basis point improvement in Old Dominion's operating ratio primarily reflected our increased freight density, stronger yield and some improvements in productivity. A significant decline in fuel prices resulted in a 3.40 basis point reduction in operating supplies and expense. However, the decline in fuel prices also decreased our fuel surcharge revenue.
As we saw last quarter, other expenses expressed as a percent of revenue were higher during the 2nd quarter, which is partially attributable to the lower denominator due to the decline in fuel surcharge revenue. For example, salary and wages and benefits increased 2 40 basis points, despite some gains in productivity and improvements in certain employee benefit expenses. Capital expenditures for the Q2 of 2015 were 159 point $1,000,000 We estimate CapEx for the full year of 2015 will total approximately $469,300,000 including land expenditures of $164,700,000 for real estate, $277,800,000 for tractors and trailers and other equipment and $26,800,000 for technology and other assets. After anticipated asset sales, we expect total net CapEx of approximately $450,000,000 which we plan to fund primarily to operating cash flow as well as our available borrowing capacity if necessary. During the Q2, we repurchased approximately 407,000 shares of the company's common stock for $29,100,000 under our previously authorized $200,000,000 share repurchase program.
Since the November 2014 announcement of our share repurchase program, we have purchased approximately 658,000 shares for 47,900,000 Effective tax rate for the Q2 of 2015 was 38.6% compared to 39% for the Q2 of 2014. At this point, we expect an effective tax rate of 38.6 percent for the Q3 of 2015. This concludes our prepared remarks this morning. And operator, we'll be happy to open the floor for any questions at this time.
Thank you. And we will take the first question today from Alex Vecchio with Morgan Stanley. Please go ahead.
Hey there. Wes, I just wanted to kind of get a little bit more color on the rationale behind removing a quarterly guidance. It seems you guys have actually had a fairly good track record with respect to kind of being reasonably close to what you've guided to. So I just wanted to get a little bit more color there. Is there more uncertainty this quarter than there has been in the past in terms of how trends might evolve going forward?
Or is there anything to read into that?
I think you said it. I think with uncertainty in this economy that seems to go up and down, etcetera, we thought it would be better color just to give you actual numbers. And at the same time, as I provided to you sequential trends over the 10 year average, which would help you forecast what the remaining quarter is. But we thought it was more instructive to give maybe a little more detail when we are than we do just on those two guidance, but give you some additional statistics as we update the quarter for obviously July at this conference call and then August we'll submit an 8 ks and update August and then As
well as the actual for July, which yes, as of today, we only have 2 days remaining.
Yes, we'll talk about it. July action turned out, right? So that's true. So that's the rationale for us.
Okay. That makes sense. And then secondly, you mentioned there's the decline in the wafer shipment seems to be about at least partly a function of customers seeking to refine to smaller and more frequent shipments. What do you do you think this is a function of kind of the macro or what's kind of driving that change do you think? And what are the implications for kind of your density and your ability to kind of expand margins to the extent you have in the past?
Is this kind of a good thing, a bad thing or neutral? Or how should we sort of think about that change in customer behavior if it continues, if you think it will continue?
Well, I'll say that those three reasons that I gave were a little bit anecdotal although we actually talked to some of our top 50 national accounts about what they were seeing and why the weight per shipment that they were seeing were less than they were last year. And that was the 3 responses and the biggest overriding response maybe 30% to 40% of the responses were in fact because of lack of truckload capacity last year, they were diverting some loads and slipping them down into LTL. 2nd reason, they just said the macro is that our demand for our widgets are just a little bit less. And then the third one, they were citing the fact that we have just moved to a trend of more frequent shipments and smaller. All of the things are I guess, you could call it indirectly and directly macro oriented.
Whether the smaller, more frequent shipments is a continuing trend, we'll just have to wait and see. It was the opposite back in 2009 where we saw larger less frequent shipments combining. But the fact that our number of shipments and I know it's some of its market share, but it's still in our view economy that we're still seeing a lot of velocity of shipments. As far as the weight per shipment, when we gave guidance of the 9.5% to 10.5%, we were seeing pretty good sequential trends into June and then it just kind of fizzled out. And the difference between the 9.1% that we report at 9.5 really isn't that much based upon the thousands of shipments that we haul.
In fact, it's like a 20 pound difference, which is about the weight of a bag of cat litter. So it sounds like it, but it really was close. And quite frankly, we expect June to build and it just didn't build up to expectations this year. But my commentary into July is our sequential is actually better than 10 year average and our growth is in shipments is still very strong.
Okay, great. Thanks very much for the time.
Next is Scott Group with Wolfe Research.
Hey, guys. Good morning. So Wes, just wanted to follow-up on that last point. So looks like when the monthly sequentials in the second quarter were maybe a little bit worse than the sequential average in terms of most of the months, but July now better. And what do you make of that?
Is that is this a sign that the macro is starting to pick up a little bit again? Or do you think it's just kind of like, hey, it was an easy comp versus the Q2? Just curious on your thoughts on why July now starting to feel better.
It feels better, but not great. I think it's too early to see if we had any from our standpoint any significant change in the macro. Yes.
The weakness in the second quarter of volume trends per day was primarily related to the lower rate per shipment. And as Wes also pointed out in his commentary, our actual shipments per day trended greater than our 10 year sequential. So that's primarily the market share wins that we're having.
Okay. And then just your thoughts on the pricing environment overall. There's concern out there when you see several of the carriers with negative tonnage that at some point something is going to give and the pricing environment is going to start to be a little less rational. What's your outlook for pricing back half of this year kind of early views on next year? Are you seeing anything out there that gets you worried about pricing momentum?
The only worry we have is amnesia, other carriers. But honestly, we haven't seen a reaction to the negative tonnage yet. Time will tell whether we will or won't. But so far, it sounds like everyone is really focused on their yield management as they should be.
Okay, great. All right. Thank you, guys.
Next up is Chris Wetherbee with Citi.
Great. Thanks. Good morning, guys. Wes, can I trouble you to repeat the sequential trends for the Q3? I just want to make sure I caught them now that you've changed sort of the structure here.
Yes. Let me find it. The sequential trends for the second quarter
For the 3rd.
Historical solentials.
Yes. The sequential trends for the Q3 on a 10 year average on tonnage would be July would be 2.4% reduction June. August is a 0.6% increase compared to July and September is a 3.2% increase from August.
Okay. That's very helpful. I appreciate you doing that. I guess when you think about sort of the weight per shipment and sort of what you're seeing there, I guess I wanted to sort of hone in a little bit on the 3PL business that you do. It's obviously a reasonably large piece of your business.
How do you think about are there any differences between sort of how you think about the growth in that business and what that may do to the weight per shipment relative to sort of what's coming your core customers. Just want to get a sense of maybe how that kind of stacks up?
We treat our 3PLs from a profitability standpoint and it's obvious from our results that we do as we would any. We don't look at the 3PL on its own. We look at the customers underneath that 3PL and we do the same pricing and analysis of their shipments that we would if it were direct. And that's what we base our pricing on is to the individual customers underlying the 3PL business.
But there's no meaningful mix difference relative to sort of your regular book of customers?
Well, a lot most of those are on contracts and we did see a lot of reduced weight per shipment among shippers within our 3PL group.
Okay. Okay. That's helpful. That's sort of what I was wondering. And then I guess sticking on sort of that topic, when you think about that market, you guys have been very successful there.
Are you seeing any increased level of competition among some of the other asset based guys pushing into that market or trying to compete from some of that business. Just kind of curious how the dynamics of that specific market looks?
We just don't have that visibility, Chris. We don't
have no real change from the norm.
Okay. Okay. Well, that's helpful. Thanks very much for the time, guys. I appreciate it.
We'll now go to Brad Delco with Stephens.
Yes. Good morning, gentlemen. And Wes, I think congrats on your upcoming retirement.
Thank you.
Wes, I wanted to ask you maybe a broader question on the industry and whether or not you think the LTL industry as a whole and David this may be for you as well is prepared for upcoming electronic logs in the truckload industry. And I'm trying to figure out do you think the LTL industry is prepared for tightening capacity in using 3rd party line haul? And obviously you guys would be in a unique position there. So just curious to in your opinion, how that's going to play out for you going forward?
Okay. Brad, I'll shoot I'll try to answer all that. First of all, as far as we are concerned, we implemented onboard recorders and logging electronic logging like almost 5 years ago. So that's not going to be any major factor as far as we're concerned. As far as the truckload industry is concerned, most of the large truckload carriers already have the electronic launches.
I think it's going to primarily affect the smaller LTL fleets where it may cause some capacity to come out from the smaller fleets. Is the LTL industry or are we in particular prepared for tightened capacity, especially from a line haul. You mentioned line haul. We don't do any line haul with purchase transportation to speak of. We're just occasionally for balance purposes.
It's but it's a very small part of our line haul. So we don't see that as a problem for us. The motor carriers who rely on purchase transportation line haul might see that you need to ask them what their plan is. But it's not going to affect us.
Yes. That's exactly kind of where I was going. My thought was you'd see purchase transportation costs go up for LTLs that rely on 3rd party line haul. But because you do most of it yourself or if not all of it yourself, you won't see that as a headwind, but you may benefit from what happens with industry pricing in that event?
Yes. I think that's probably a fair guess on your part.
Okay. All right, guys. That's it for me. Thanks for the time.
And Allison Landry with Credit Suisse is next. Good morning. So sort of another question on pricing. So last quarter you indicated that core price ex all of the noise from fuel and mix was about 5%. Was that tracking at a similar pace in the second quarter?
Yes, Alice, could you repeat the question? I was diverted doing something else.
Sure. So during the Q1, you had talked about a core pricing number, which exclusive of fuel and the impact from wafer shipment and length of haul that that figure was about 5%. So I was wondering if that was similar in the second quarter?
Adjusted for length of haul.
Adjusting for length of haul maybe a little bit lower than the Q1. But on the other hand, in the Q1, overall, we had the GRI on the tariff business and that was lapped in the Q2. So that would explain some of that reduction. But I can say that pricing just anecdotally feedback from our pricing people, we are successful in getting increased rates from our national accounts anywhere from 3% to 5%. So and that's on a very fairly consistent basis.
Okay. And on the productivity side, I know that you were expecting some incremental improvement on several metrics. So maybe if you could run through some of those in the quarter that would be helpful. Thanks.
We got good productivity increases. If you look at productivity and David's comments in shipments per hour and in platform per hour, with a large increase in the number of shipments that we had 13.4%, Typically that would result in more labor to move those as opposed to a shipment that's heavier. In our case, it was a positive because what we saw was is a lot of those increased shipments were from an increased number of multiple shippers. In other words, that was shippers that we picked up multiple shipments from. In fact, we had 6% increase in the number of multiple shippers.
And within those multiple shippers, we also had an increase in the number of shipments that they tendered to us by 7.5%. So those two things are getting leverage on that debt from a density standpoint on those increased number of shipments. And that's why we were seeing productivity in the shipments per hour, both on platform and dock. Now on the pounds per hours, David also mentioned, that was influenced by the fact that our weight per shipment was down 3.8%. But the mortality, I mean, we after all, we do haul shipments, not necessarily weight and that was a positive sign from our and helped us in the second quarter.
Okay. That's helpful. And then just as a quick follow-up, was there in terms of the trend that you just mentioned with increase the number of shippers and the shipments that they're moving, is there any specific end market that you saw more or less of this in, like for example retail versus manufacturing?
Not really, Allison. It's pretty much across the board where we're seeing this growth in multiple shippers.
Great. Thank
you. We'll
go to Bob Sandlin with Deutsche Bank.
Hey, thanks. As a follow-up to
Allison's question, could you give a
little bit more color in terms
of the multiple shipments that you're picking up? Are these going to kind of different warehouses or different distribution centers across the country? Or is it just kind of multiple shipments to the same storm? I'm just trying to get a better understanding of this mix that's going on between tonnage and shipments that's bifurcated?
Multiple shipment shippers are usually shipping out of a distribution center going to their end customer. But we also track and look at multiple shipment cons in these and how many shipments we deliver to a multiple shipment consignee. We're seeing some growth in those areas as well. So but it's more pronounced on the shipper side, which is a clear indication to us of winning additional market share.
Typically, when we think about that growth in terms of shipments, it's a positive for the economy. The kind of feedback from customers is it's a little bit more macro. What do you think is going on with the shift to the breakdown in terms of the smaller shipment size? Is there something we should be reading more broadly in terms of from a supply chain standpoint or from a macro with regard to this trend?
Well, we don't to be honest, we don't really know why it's happening. And the anecdotal feedback has not given us much to go on there. But is there more demand for just in time or are people ordering smaller shipments more frequently to keep their own inventory levels down? There may be some correlation with average inventory levels out there in the macro, but we haven't tried to draw that correlation, but that thought comes to my mind.
That makes sense. And Wes,
as a piece of clarification, were the shipment trends rough in terms of year over year growth rates roughly constant throughout the quarter? You had indicated, I think, they were up north of 13% in July. I was just curious if that trend was sequentially?
They were in April, it
was up 13.4%, 13 point 6% in May 13.2%
in June.
Perfect. Thanks so much guys.
Next up is David Ross with Stifel. Please go ahead.
Yes. Good morning, gentlemen.
Good morning.
Yes. As you continue to grow and add personnel to handle the increased shipment volume, are you seeing any pinches in terms of driver availability or any driver wage pressure that could cause rates to go up more than average this year?
We've been pretty successful finding drivers. I mean, we've got some tight markets, David. But in general, we've been able to fill the positions that we've had. And from a wage standpoint, we're not seeing any pressure that our wages are out of line. Actually, they're pretty much up at the pretty close to the top of the industry most everywhere that we operate.
So no real problems there.
And then just a little nit, Wes, the other expense line item on the income statement, what was driving that? And is that more of kind of a one time issue rather than anything that should be
Necessarily.
In that number is bad debts and consulting fees. We were in our modernization and converting to the Oracle data platforms at the startups, especially during last year, we were using some consultants and that was going some of that was going through that line and as that rolls out, those are not less, but are start to get capitalized as you start to develop. So that's probably one of the big reasons of that reduction. Okay.
So that should maybe continue at a few 100,000 a quarter for the next few quarters as you roll this out?
Right. Thank you.
Welcome.
And we'll go to Tom Kim with Goldman Sachs.
Good morning and thanks for your time. I wanted to ask where is your market share today? And it
doesn't seem
like there's anything that's going to really impede your share growth. But I'm wondering, what are some of the risks that we should be mindful of?
It depends whose denominator you use for the market share, But we're and if you use an ATA number that's up up in the $45,000,000,000 to $50,000,000,000 category, we're at 7% of that. And then if you use some of the other databases and maybe a $37,000,000 market, where are we there, Wes, about 8.5%. 8%. So I didn't quite understand the question.
Yes. So what I was basically driving at is that I know that you're aiming to hit the double digit share and it doesn't look like there's anything that's going to impede that based on what we're hearing from your competitors. And so I'm just wondering are there is there anything that we should be mindful of? Or is the runway here really pretty straightforward?
We are delivering a really strong value proposition in the marketplace and a strong service value to the market. And the customers are recognizing this and they are continuing to reward us with additional business and lanes and so forth. And we're winning new customers as well because of the service value that we deliver. And so as long as we are perceived by the marketplace as delivering superior service value, we think that we can continue winning share.
The other component to that is making sure we've got the capacity to be able to grow into. And I you've seen that we've made significant investments to ensure that we've got the service center capacity as well as on the equipment side as well.
That's a good point, Adam.
No doubt. I mean yes, I mean and no doubt. I mean it's impressive that you guys continue to reinvest at such profitable rates of return. Just with regard to some of the comments around weight per shipment shifts, is there really a material difference when we're talking about, let's say, for example, shifts between your B2C versus your B2C customers?
No, not really. Just keep in mind on the weight per shipment, when you go when you take 15 weight per shipment and compare that to 2013, it's kind of in line. So we just had an unusual last year with the splits of the truckload into LTL. Now that's not to say that won't happen again because some of those capacity issues I think are still looming on the truckload market. But it's not as if that's the weight per shipment this year is a trend forever.
We've been it's kind of in line with what was normal prior to that. So we'll just see how that goes. Okay.
That's very helpful. Thanks guys.
And we'll go to Todd Fowler with KeyBanc Capital Markets.
Great. Thanks. Good morning, everyone. David, I know you've been asked this when you guys were at 84 OR, 83 OR, 82 OR. But can you talk a little bit about now being in the 81 OR kind of your confidence and continue to be able to show margin expansion?
If I think about your longer term incremental guidance of 15% to 20%, not all the freight coming into the network would be at an OR higher than where you're running here in the Q2. So just kind of some high level thoughts on the ability to continue to expand the OR from where you're at right now?
Todd, I'm going to take part of that question and then David can jump in. Everyone focuses on incremental margin and we've given a range of 15% to 20%, assuming that the macro is behaving pricing is somewhat disciplined in the sector and we still have density improvements. Don't want to make a comment on all this focus on incremental margin. It's influence the incremental margin, in other words, mathematically, the less percent that you grow, less improvement in OR it takes to get an incremental margin of say 30%. In other words, if you cut your growth in half, it takes half of the incremental improvement in OR to get that same OR incremental margin.
So if someone reports an incremental margin of 30% like we did in the Q2 and our growth was 8%, If we grew it at 16%, it would take a 200 basis point improvement in OR to get that same incremental margin. So going forward, you need to consider that. And therefore, as we get larger and percent of growth may drop, then it influences how much of that improvement OR that you get to get to that incremental margin. So we still maintain 15% to 20% given those three qualifications and it's been stronger than that. But keep in mind, with those three things more or less, we are confident we'll certainly get up to the 20%.
Obviously, that implies an ADOR. So I think that's good. And we're of course, we're at 81.5% for the 2nd quarter, which typically is a bet with a close second being the 3rd quarter. But we've still got the full year and how we look at that. Todd, anything to add David on that?
No. It's just all about density, all about yield discipline in the industry. Have a little help from the economy is good and continuously improve your efficiencies, which we do that as well.
So we could maintain the 30 OR if we just reduce our growth to say 3% and improve our OR by 0.5 basis point.
Well, I wasn't suggesting that and I appreciate the help in thinking through it. It was more along the lines of in the environment that you're in the things that you need to continue to show the margin improvement. And obviously, it's a good problem to be comping up against. So all that's helpful. The follow-up I wanted to ask Weston, I'm not sure if you addressed this, but thinking about the OR sequentially into the Q3, I think historically it's gone up by about 50 basis points or so.
What are the things we should be thinking about second quarter versus Q3 in 2015 that could make the ORR change either greater or worse than what we've seen historically?
I mean, the Q3 historically is always includes wage increase. And just the normal, I mean the normal sequential things, I think last year we had a 50 basis point increase in ARR in the 3rd quarter compared to the second. But we had about $3,000,000 gain on real estate in the Q2 of 2014 that didn't repeat itself. So you've got all these moving parts that can influence either quarter.
But I guess in 2015 specifically, I mean, you have the wage increase every year. I mean, was there anything maybe in 2Q that was a fuel benefit or anything like that? I think you mentioned to one of the earlier questions about the operating expenses, but there's nothing or is there anything else I guess that we should be thinking about Q3 from Q2 that would be dramatically different than what we've seen historically?
Not offhand.
Okay. Thanks for the time this morning guys.
We'll go to John Barnes with RBC Capital Markets.
Hey, thank you guys for taking my question. First on Wes, your comments around just the shift towards smaller but more frequent shipments and having to take a wait and see approach. From an operations and planning perspective, is there much you have to do? I mean, if this becomes a more consistent trend and you see this as kind of the new norm, what are the major changes you have to make in operations? Is it just the labor side, more personnel to handle the more shipment the increase in shipments?
Or is there something else you have to do?
John, I want to be clear. We got feedback from the shippers. That was one of the reasons and that was the last of the three reasons that were cited. I don't want to give the impression that that's a clear trend that's going to apply materially. That was just one of the reasons.
And when I said wait and see, we'll have to see if that's for some reason will be a continuing trend, an increasing trend or become just kind of neutral. We'll just have to wait and see.
But obviously, we'll gear up for whatever happens. Right. And from an operations or planning perspective, there are no major changes that have to be made if this is some kind of ongoing trend. It's just you're handling slightly less heavy pallets, but you still have to move them across the dock the same way you always have.
Okay. All right.
All right. That's what I was looking for. And then going back to the conversation about the OR, can you talk a little bit about how you balance I know you want margin improvement, but obviously you still view yourselves very much of a growth company. If you think about taking that market share, whatever it is today and say you take it 1.5, 2 points, 3 points higher and you continue to take on that share, How wet are you to I've got to have margin improvement as I do this because there's going to be investment that needs to be made. So how do you balance those 2, that pursuit of growth versus do you just let the OR kind of shake out where it does as you gain that density and all?
Or is it, hey, I've got to pay attention to both the growth and where that OR shakes out?
We pay attention to both all the time because we focus on every account to reach a targeted operating ratio. And it's never been our practice to trade off growth for less margin or cheaper prices. We don't that's not the way we think. But so we will we've been on the right course as you can see from our numbers and our performance. We're going to stay on the course we're on with the yield management philosophies that we have and with the service product that we've been building.
And but we're not going to you won't see us start trading off margin to try
to get growth. John, here's the deal and it's probably unlike most of the other LTL carriers. First of all, we price the shipments to be profitable to us. That's the key. And of course, to do that, you need to have accurate costing to do that.
And then if we see that our growth is more than anticipated instead of trying to quote call some freight out to match that capacity, we simply invest in more capacity. And that's why you see our CapEx continue to grow up. And why do we do that? And the big answer is because we can. We have the margins, we have internal invested capital that can that gives us the power to do that.
And that's as David pointed out, that's what we'll continue to do. And with this continued
growth in our CapEx and our investing in the company, all of the cost of those investments is embedded in the 81.5 operating ratio. And the other thing to think about is that we have really fine tuned operations in this company and we are very efficient. Otherwise, we would not be operating at 81.5. And when we go to price and account, because we're so efficient, the price that we charge is fair and perceived as a darn good value in the market because we don't have to charge as much as somebody else that doesn't operate as efficiently. But and still achieve the results we're looking for.
Very good, very good. West, because we can, it is probably the best answer I've heard this entire earnings season. So thanks for that. Thanks for taking the questions.
Thanks, Jeff.
We'll go to Jason Segal with Cowen and Company.
Hey, guys. Good morning. At this stage of the call, just one quick one from me. If the log situation starts tightening up truckload capacity again, how should we start looking at LTL pricing? Could it take an upwards turn again?
Or do you think it will just maintain sort of where we're at?
The LTL capacity is aside from ourselves, we have more capacity than any other LTL out there. But general LTL capacity is fairly balanced right now or perhaps tight. And so if the electronic logs cause field capacity to tighten and freight comes the way of the LTL carriers In general, you would think that pricing would be more positive than it is now. Should we see more volume coming the way of LTL. One other point that we failed to mention earlier talking about these electronic logs is the effect that they may have on the overall owner operator truckload market.
We think that EOBRs are going to really put a squeeze on the owner operators. They're pretty well squeezed as we speak and it's going to put more of a squeeze which reduces truckload some truckload capacity out there. I don't know personally, I don't know what percentage of truckload is hauled by owner operators this day and age, but it's that's going to be a squeeze unless of course you're a big maybe a big company that already uses them with younger operators.
Thanks for the color, guys.
We'll go to Ben Hartford with Baird.
Hey, Wes. Real quick follow-up question on gains on sale this quarter. What is the number and is there a way to allow us to think about what gains on sale should be through the balance of the year?
Hard to tell at the balance of the year. This quarter was about $1,600,000
Okay, great. Thanks.
And we'll go to David Campbell with Thompson Davis and Company.
Yes, thanks. Good morning. I just wanted to ask if you could give us give me the number of employees on June 30 versus March 30?
Total full time employees was 17,319 at the end of the quarter.
Okay. And March was what?
End of March, we had $16,835.
Okay, thanks. And my second question is, do you have last year's sequential tonnage gains for July, August and September?
Yes, I gave them to you. I'll give them to you.
You gave us last year. Yes, you did. I got them. Yes, I got them. I didn't get September.
September sequential the 10 year average for sequential in September for tonnage is 3.2%
over August.
Yes, okay. I got it. I'm sorry. I got it. Yes, I got it.
Thank you for your help. I really appreciate it.
All right, David.
And we'll have Willard Milby with BB and P Capital Markets.
Hey, good morning, guys. Real quick on the I guess gains on sales show up in that miscellaneous expenses. Is that correct?
Yes.
And we've kind of been developing a trend in the past couple of years of Q2 being the low mark for the year for miscellaneous expenses. Is that a trend we can expect to continue 2016, 2017 versus the past 3 years kind of unique with sales and just timing?
Well, we don't give that guidance. And right now, to the extent that gain is in there, it's hard to predict what those will be.
Sometimes we have a large real estate gain just because we sold a big service center and we always have some equipment disposals coming and going, but it varies a lot.
Okay. I was just curious if there's something special about Q2. I mean, it's kind of been that way
for the past 3 years. Yes. We've been very consistently selling some excess real estate that was there because of investments in larger facilities as part of our growth.
Okay, fair enough. That's all I had. Thanks for the time.
And we'll go back to Scott Group with Wolfe Research.
Hey, guys. Thanks for the follow-up. Wes, just one quick thing. Now that you're giving us the monthly revenue per hundredweight, do you have what yield growth net of fuel was by month in Q3 last year just so we can think about the comps?
I don't have those off hand.
Okay.
I can give
a follow-up offline.
Okay. Thank you.
And at this time, I would like to turn the call back over to David Coglin for any additional or closing remarks.
Okay. As always, thank you all for your participation today. We appreciate your questions. We appreciate your support of Old Dominion and feel free to give us a call if you have any further questions. Thank you and good day from all of us.
Thank you very much. And that does conclude our conference for today. I'd like to thank everyone for your participation and have a great day.