Earl E. Congdon - Executive Chairman David S. Congdon - Chief Executive Officer, President and Director J. Wes Frye - Chief Financial Officer, Senior Vice President of Finance and Assistant Secretary.

Allison M. Landry - Crédit Suisse AG, Research Division Jason H. Seidl - Cowen and Company, LLC, Research Division William J. Greene - Morgan Stanley, Research Division Christian Wetherbee - Citigroup Inc, Research Division Scott H. Group - Wolfe Research, LLC A. Brad Delco - Stephens Inc., Research Division Robert H.

Salmon - Deutsche Bank AG, Research Division Thomas Kim - Goldman Sachs Group Inc., Research Division Todd Clark Fowler - KeyBanc Capital Markets Inc., Research Division David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division Thomas S.

Albrecht - BB&T Capital Markets, Research Division David Pearce Campbell - Thompson, Davis & Company Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division.

Good morning, and welcome to the Third Quarter 2014 Conference Call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through November 13 by dialing (719) 457-0820. The replay passcode is 8100135. The replay may also be accessed through November 13 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'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 statements.

The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. [Operator Instructions] Thanks for your cooperation. At this time, for opening remarks, I would 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 third quarter conference call. With me this morning are David Congdon, Old Dominion's President and CEO; and Wes Frye, our CFO. After some brief remarks, we will be glad to take your questions. We are pleased to report that Old Dominion had another quarter of strong profitable growth.

The comparable quarter revenue increasing over 20% and earnings per share growing 28.6% to $0.90 per diluted share. Our revenue earnings per share and tonnage set quarterly reference for us and the rate of growth has accelerated for each quarter throughout the year.

We continue to gain market share by providing a superior customer experience while also refining our business model primarily through the development of new services and the application of new technologies.

We have carved out a unique position in the LTL industry by consistently and successfully executing on school [ph], business, principles and strategies. Our long-term record of profitable growth drivers would not be possible without the high-quality and tremendous dedication of our employees.

Recognizing the performance of our team today, I'll mention our ongoing commitment to consist -- to continuous investment in equipment and infrastructure as well as continuous education and training of our employees.

We are investing in our people and providing them the tools and the resources they need to perform their jobs effectively is a significant cost for business, but it is absolutely essential to creating the quality organization that we enjoy today.

We're committed to continuing these investments necessary to deliver superior service, which will continue to drive our long-term growth in earnings and shareholder value, and thank you for joining our call today. And now here's David Congdon..

Good morning, everyone. We are pleased with our third quarter and year-to-date results for 2014. Our basic business model is delivering superior service at a fair price continues to consistently drive our long-term growth.

Furthermore, with favorable economic and pricing environment combined with improved density and continued focus on efficiency improvements continue to drive improvements at our operating ratio. The third quarter increase of 18.7% of LTL tons compared with the third quarter last year produced record density metrics virtually across the board.

At the same time, we had a slowly expanding but positive economy that contributed to a rational pricing environment.

We are pleased with the third quarter's LTL revenue per hundredweight, which increased 2.2%, excluding fuel surcharge especially considering the 2.5% increase in LTL weight per shipment and 1% decline in our average length of haul for the quarter, which negatively affect this metric.

We believe this performance in lieu of management combined with our strong growth in LTL tons highlights the strength of our business model. We discussed at our last call, we continued to expand our workforce in the third quarter in response to our strong growth in LTL tonnage.

We estimate that it takes 6 to 9 months for new employees to fully learn our processes and procedures and to make a positive contribution to productivity. Consequently, we continue to experience some negative pressure on our back productivity metrics.

Despite this, we are pleased to have produced a 22.3% incremental margin primarily driven by the increased density and yield I've already mentioned. As we look to the end of 2014 and beyond, we believe that Old Dominion remains well-positioned to continue outperforming our industry.

True to the discipline, execution and investment needed to operate our business model effectively and profitably, we believe we have created and have the ability to sustain a unique competitive position for the company and its shareholders.

Thanks for being with us today, and now Wes will review our financial results for the quarter in greater detail..

Thank you, David, and good morning. Old Dominion's revenue expanded to a new quarterly record of $743.6 million for the third quarter of 2014, up 20.6% and $616.5 million for the third quarter of 2013. Net earnings increased 28.6% to $0.90 per diluted share from $0.70 per diluted share.

The strong growth was driven by an 18.7% increase in LTL tons comprised of a 15.8% increase in LTL shipments and a 2.5% increase in the LTL weight per shipment. Our revenue performance also reflects a 1.6% increase in revenue per hundredweight or a 2.2% increase if you exclude the effect of fuel surcharge.

As David mentioned, our quarterly revenue per hundredweight was negatively impacted by increased weight per shipment and decline in average length of haul.

The directional changes in weight per shipment and length of haul have been -- will now be consistent for 11 consecutive quarters reflecting the ongoing shift in our freight mix to a higher weighted contractual business and increased volume in our next day and 2 days regional lanes.

For the third quarter of 2014, monthly LTL tons per day decreased sequentially by 1.1% from June -- July to June both -- an increase by 2% and 2.8% for August and September, respectively. Historically, sequential trends declined 2.5% for July, and increased by 0.5% and 3.3% for August and September, respectively.

On a comparable quarter basis, LTL tons per day increased 18.8% for July, 19% for August and 18% for September. We estimate our October LTL tonnage to be up approximately 21% versus the same prior year period against the following easy comparison.

For the third quarter of 2014, assuming normalized sequential trends, we expect the LTL tons per day to increase in a range of 19% to 19.5% compared with the third quarter of 2013. Monthly, year-over-year tonnage increases during the fourth quarter of 2013 compared to 2012 were 8.5% in October, 10.3% in November and 13.4% in December.

We expect revenue per hundredweight, excluding fuel surcharge, to be in a range of 2% to 2.5% for the fourth quarter compared with the fourth quarter of last year.

Old Dominion's operating ratio improved 110 basis points to an 83.0% for the third quarter from an 84.1% for the third quarter of 2013, driven primarily by our increased freight density and yield.

We also continue to benefit from savings from fuel purchasing strategies and fuel efficiencies, which contributed to a 70-basis point reduction in operating supplies and expense.

Capital expenditures were $93.4 million for the third quarter of 2014 and $312 million for the first 9 months of the year, and we estimate CapEx for the entirety of 2014 will total approximately $385 million, including planned expenditures of $132 million for real estate, $206 million for tractors, trailers and other equipment and $47 million for technology and other assets.

We expect the sale of assets during 2014 to be approximately $20 million for a total net CapEx of approximately $365 million, and we expect to fund these expenditures primarily through operating cash flow as well as our available borrowing capacity, if necessary.

Total debt to total capitalization was 11.4% at the end of the third quarter of 2014 compared with 13.4% at the end of 2013. Our effective tax rate for the third quarter of 2014 was 37.1% compared with 36.9% for the third quarter of 2013, and we expect an effective tax rate of 38.6% for the fourth quarter of 2014.

This concludes our prepared remarks this morning. Operator, we'll be happy to open the floor for any questions at this time..

[Operator Instructions] And we'll take our first question from Allison Landry with Crédit Suisse..

So the first question I had -- so consolidation has been a pretty hot topic across almost every sector in transports recently. So I just wanted to sort of get the LTL perspective on this whether or not you've seen any recent changes in your sector, and if there's any incremental opportunities you're seeing for tuck-in acquisitions..

Allison, this is David. We haven't really seen any consolidation activity occurring recently, as far as acquisitions are concerned. We really don't have any on our radar as far as LTL companies or anything for that matter at this point in time.

We don't need a LTL acquisition because we are already currently in all 48 states and we're successfully growing organically, so an LTL acquisition would not be important to us..

Okay, that's fair. That makes sense. And then as a follow-up question, so -- how would you describe your overall capacity right now from an equipment and a terminal or door [ph] perspective? And I guess, sort of what I'm trying to get at there is sort of your initial thoughts on CapEx expectations for 2015..

As history have shown, Old Dominion has been perhaps the only LTL carrier to continuously invest in CapEx for real estate. So maybe we've been the best significant investor in CapEx for real estate.

We have -- we keep an eye on our capacity at all times, and we have invested where we've seen where our growth has been the strongest and where our growth is projected to be the strongest. So if you look at 224 service centers across the country, you'll find some that have 30% to 50% capacity.

And then, you'll find some that might have 10% or 15% capacity, and those are the ones who will probably be looking at for expanding our capital going forward. But we have not yet completed our estimates for CapEx for next year. We will plan to announce our 2015 CapEx budget on our call in -- at the latest, late January or early February..

That our fourth quarter call..

Our fourth quarter call, we will announce our CapEx in '15..

We'll take our next question from Jason Seidl with Cowen and Company..

You talked a little bit about declining or just some of the productivity on the dock side.

Is this a function of you having to hire just new people? Or is it a function of your tonnage growth as far outpacing the industry or a little bit of both?.

Well, it's a little bit of both, but we definitely had to add our warehousing. I believe that the press release indicated that we have added nearly 2,000 employees over the last year, and 800 and some odd were added just in the third quarter.

So in response to this strong and accelerating tonnage growth, we've added a considerable number of warehouse office in dollars..

So that should probably -- that pressure should probably continue at least for the fourth quarter..

Yes. The number of people that we have now, once you reach your sort of peak tonnage in shipment per day in September, that carries out through October, November and all up to the week before Christmas.

So we should not have to add any new people appreciably on our -- during the rest of this year, and we should be good with our headcount going into the first quarter of next year. So we should -- we anticipate getting some of that productivity lost back as the people get their feet on the ground and get up to maximum productivity.

It takes -- today, with all the technology that we have on our docks and methods of operation on the dock and loading trailers, we believe it takes 6 to 9 months for a dock worker to get to a productive and to start making any contribution toward improved productivity..

All right, that's actually a very helpful color. I guess, a follow-up on, David, the rest of the industry has just started doing another round of economic [ph] increases, and I do realize that you guys historically have done it a little bit later than your peers.

Do you think the market can handle this? Do you think we're going a little bit too much to the low with the GRI customers? I'd love to hear thoughts..

Well, it will be interesting to see how this all shakes out. I was frankly a little surprised how early some of the other carriers [ph] came out with the GRI. It was a surprise to all of us at management, along David, that, that happened. But we have accurate company [ph] specific decision that they made.

We are still in the process of steadying our cost and our numbers and have not yet determined when or how much rate increase we plan to take this year..

We'll take our next question from Bill Greene with Morgan Stanley..

And I'm -- I wanted to just follow-up on this whole idea of productivity here in the fourth quarter. Maybe, Wes, when you think about the sequential change, you talked about it from a tonnage standpoint. We like to think about it on the OR basis.

Is there anything in a cost structure that makes looking at sequential changes in OR fourth quarter or third not useful this time around?.

Well, obviously, we're not giving guidance for the fourth quarter of any incremental margins or any margins at all.

But I guess, we have had an incremental margins above 20% for every quarter this year, and so we all can say as long as the pricing bubble remains stable and once the economic -- the macro is in a regional position, and we still have, I think, the ability to improve our operations and efficiency through, as David mentioned in the fourth quarter, we should see some productivity improvement.

We should certainly be out of our -- cap at the high-end of our range of 15% of 20% given those conditions..

Yes. Okay.

And when you look at what's going on with your tonnage growth, I assume that some of what we see going on with the rails, of course, with the truckload companies as well with their capacity being as tight as it is, and with the aggressiveness we're seeing from some peers on pricing efforts that all of this is combining to driving some pretty terrific tonnage growth rate for you.

How long do you think this is sustainable? I know that's tough to sort of answer, and I know you don't give a guidance. But I would assume next year, as we think about it, we should see slower tonnage growth. But I don't know what your thoughts are. It would be helpful to hear your perspective..

So it's for sure that we are seeing some spillover, but what we're doing strategically and to maintain our high -- very high levels of customer service especially in the Pacific Northwest where, as you know, the rail service is not good. And even in some other lanes, we are actually putting on our own drivers and equipment. So we're investing.

In fact, we've already invested $10 million to $15 million in additional tractors, and additional trailers and additional drivers, replacing the rail service with our own equipment. And I don't know anyone else is actually going to that investment to do that and we -- because what's important to us is to maintain the high levels of customer service.

And you saw that our CapEx went up somewhat in the -- from our last guidance, and that will be one of the reasons is just making sure that we are properly invested to maintain high level of customer service..

And Bill, I have a little bit more than this. Clearly, there has been an increase in demand for trucking services in -- across all sectors of transportation with the intermodal, truckload, there's been increases with -- of demand for the LTL. I'm curious as well, and those clearly a -- are a lot of constraints on growing capacity.

The capital side of it is very intense. The driver shortage is real. The cost of doing business, the taxes, our regulation, all of that is putting a damper on growth and capacity. So I believe that we'll just wait for -- and this is not something that's going to go away next year or the next year.

I'm thinking a long-term cap on capacity growth and increased demand. So to go with that probably means is that it's going to probably keep a new [ph] management and then branching -- pretty do it [ph] for the trucking industry..

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

I wanted to ask a question just sort on driver and pay and potential sort of unionization threats that we're seeing at some of the other LTL nonunionzed LTL carriers in the space. Just want to get your sense on just sort of maybe how you see the driver wage inflation going forward.

You'd obviously done a lot of hiring, been very successful getting bodies into the business. Just kind of curious about your thoughts, not just for the fourth quarter but also maybe for 2015..

Chris, among the LTL carriers, I think, Old Dominion has a very, very competitive, if not on the high-end of wages and benefits. And then, so we're in -- when compared with the truckload industry, we're significantly higher with that industry.

Also, our wage inflation is going to be roughly what we guided this year, which is about, on the average wage, it was....

2.5%..

About 3.5% or so. So it's not a significant upside in terms of cost probably in this traffic [ph]. I think you could see the biggest amount of wage inflations can be on the truckload industry..

Okay, okay. That's helpful color, appreciate it. And just a quick follow-up just sort of looking at the line items on the expense side. Just curious, it looks like miscellaneous expense kind of jumped up a little bit higher than our number. I noticed 1 point but just kind of curious what your thoughts for there.

Is there something a little bit more isolated for the third quarter? That maybe a sort of way to think about things going forward..

Yes. I guess, we did have a few things. We had some goods -- that losses that were settled [ph] that went into the quarter that went into that number. Another thing is it included some of our modernization cost, the consultants that are in that number. So those are the 2 other costs that predominantly make up that increase..

Can you just give us a rough sense of maybe what the lawsuit piece of that was? Or maybe what the ongoing piece might be for the modernization?.

We prefer not to give any details on that. In terms of the overall company, it's fairly immaterial..

We'll take our next question from Scott Group with Wolfe Research..

So I wanted to just follow-up on the tonnage question of how sustainable this is, and where can we go from here. Maybe just from your perspective, you guys have talked about getting to a double-digit market share target over a few years.

Do you think that happens? Is that, in your mind, not going to happen sooner than you would have thought as -- can you -- I guess, I'm asking, can you maintain that's kind of low teens? Your upper teens' 20% now, but do you think low teens is a sustainable run rate for tonnage going forward?.

Well, I think, when we convinced that -- we gave that guidance, of course, and so obviously, we believe that it is. The time frame, we don't give because of our other influences that maybe the macro et cetera, but obviously, we think that we can get into those low teens.

And depending on how quickly that is will depend upon the macro, the industry itself, in particular with consolidation. But we think, from our standpoint, that we'll continue to take appropriate market share going forward..

Okay. And historically, I think, with the higher fuel is actually a good thing for LTLs from an earnings perspective and in other fuel maybe not so much.

Do you think that thought still applies today?.

Well, we manage our -- I mean, today without the fuel surcharge, as we continuously indicate, we don't depend on fuel surcharge to improve our performance one way or another, and what we do would depend on is just the efficiency and not only how we buy fuel but how we operate our equipment, and we're extremely efficient.

So much of our improvement is coming from the efficiencies with the -- of our fuel strategies, and whether it has nothing directly to do with fuel surcharges. But right now, we were still seeing very good incremental margins, and fuel surcharges have been relatively flat..

We'll take our next question from Brad Delco with Stephens..

Wes, just wanted to touch base on that wage inflation pressure. When I look at your salaries, wages and benefits in the quarter, it was up 19%. You said you lost a little bit of dock worker productivity. Your tonnage was up close to 19%, but you also said you had about 3.5% inflation.

How do we reconcile that? I guess, where are you seeing improved productivity? Or how are you able to keep your salaries, wages and benefits essentially below what you would assume?.

So Brad, obviously, salary, wages and benefits includes the whole company, including salaries. So we've lost some productivity on the direct labor side, and that would indicate that in our wages. But most of the improvement in our wage category is coming from the fact that our benefits is in pretty good shape.

And also, the salaries -- those fixed salaries, we're getting some leverage in the [ph] growth on that. So that -- those 2 things are causing that wage and salary benefit number to drop..

Got you.

And then, is there any way you can sort of quantify in dollars what the dock worker productivity loss was?.

There is a way, we just don't want to discuss that detail..

Got you. It makes sense. And then maybe my last one looks to maybe help me kind of back me on a little bit. But the 2,000 workers or the 800 and change that you added in the quarter.

What's your total dock workforce number? And can you kind of give us an idea what kind of percentage increase you had in that workforce?.

Well, we had about a 23% increase of -- we had about a 23% increase in our dock employees since the beginning of the year..

We'll take our next question from Rob Salmon with Deutsche Bank..

You've got a lot of thoughts in terms of entering into ancillary services, which kind of add-ons to the Old Dominion value that you're offering the customers. And one of your competitors has been talking a little bit about their foray in their last mile and kind of a derivative play on e-commerce.

Could you give us a sense to what extent is the last mile a portion of what Old Dominion does today? And how do guys are thinking about capitalizing on the growth in e-commerce longer term?.

If we're referring to last mile as home deliveries, it is not a large focus at Old Dominion. Residential deliveries are probably one of the most costly type of deliveries we operate.

And so -- and also, if you're talking about e-commerce and people buying things off the Internet and taking them to their homes, you're talking primarily about small parcel and package and things like that, that are just not suitable in an LTL truck line, unless you have to -- -- unless you make an investment in a whole new period of panel [ph] vans and things like that.

And rather try to compete with the postal service, and FedEx and UPS. So it's not a big focus for us in the future..

That's such great color, David. It's just one of your private LTL competitors are saying that last mile is about 10% of their other shipments this year, which frankly, it surprised me. I guess they're using a little bit more on the third party PT for that delivery.

But I guess, kind of switching gears, could you give us a little bit of an update with regard to the developments within Washington? Any sort of thoughts or what you're hearing from your contacts in Washington about potentially getting pup [ph] trailers as well as what the -- if there's any change to the hours of service with regards to the 1 a.m.

to 5 a.m. requirement kind of doing lights off to get the restart, and what that would mean if you got it..

Okay. We -- I'll start with the 33 foot trailers. I believe we're making some headway. There is a coalition of the LTL carriers plus American Trucking Association focused on this matter. And yet, a big part of that is this the -- it's a perception game. We clearly believe that 33 foot trailers are safe.

They are certainly fuel-efficient, they offer 18% additional of accrued [ph] maneuverability. Is it there? We're not asking for any increase in gross weight limit of 80,000 pounds, and we believe we have a good chance of getting that through.

With that said, the other key thing is a highway deal, and we're really anticipating a long-term highway deal to go through the floors of Congress for approval sometime in the spring -- by the spring because the current highway [indiscernible] deal, I believe it ends by the 1st of May or somewhere of whereabouts.

And so hopefully, we will have the language in that bill to include the allowance of 32 and 33-foot trailers. We have -- on the issue of the hours of service, the 2 things we work on there, and one is the -- looking at the restart provision, this from our aspect, in our company, we think that it's still a couple of things.

One, it's causing us to have to add a couple of hundred additional drivers to cover work that rural drivers and city drivers will be performing on the weekends to be able to be able to keep our freight moving through the system.

It's also the raising -- we're gaining some extra work because they could restart the clock after an extra weekend trip and go back to work on Monday, but it's a reduced with compensation. But they're able to make those certain drivers have lost 10% to 15% of their compensation as -- and it's caused us to have to add some additional tractors as well.

So we certainly want to see that restart provision changed. The other side of it is the split [indiscernible] provisions.

I mean, with distinct difference between single drivers using a restart and team of drivers having a split [indiscernible], we run primarily on teams across the country that would use that split seat [indiscernible] provision, and we will see it go back to where we can allow that to take 5 hours on, 5 hours off, 5 hours on, 5 hours off.

Right now, they happen to be behind the wheel for 10 hours now, they've only been up for 10 hours. So it's a -- we've been operating my leg for a number of years but it's not the most ideal way. So hopefully, we can get those push or get those provisions changed back..

We'll take our next question from Thomas Kim with Goldman Sachs..

Wes, you mentioned earlier in your prepared remarks that you've seen an increase in your contractual base business.

Can you provide a little more color on that comment, whether it's a contract durations increasing, the overall percentage of growth in your multiyear contracts versus the transactional side?.

Overall -- yes, overall, we finished in the quarter was as we disclosed is about 21%, and we saw an increase in revenue for contractual business for the quarter up 24%. And so that's obviously -- and if you know, Tom, or maybe you don't know, but the rate per shipment for that contractual business, it is higher than it is for our other business.

It's about 16 -- about almost 1,700 pounds compared to a tariff-tied [ph] business, it's only about 1,200 pounds. So mathematically, you can see that is one reason why we have seen an increase in our weight per shipment..

Absolutely. And then, just with regard to the overall pricing, obviously, doesn't mention the fact that you're talking about the dampening way, the head mining of [indiscernible].

Can you give us a sense of what your pricing would look like on an apples-to-apples basis?.

Well, we don't have an algorithm for pricing specifically, but we do kind of look at if the weight per shipment and the length of haul were the same between the quarters. Just those 2 variables being fixed, we recorded a 2.2% increase. It would have been around 3.2% to 3.5% if those 2 numbers were the same in both quarters.

So that's just the factor on just those 2 variables that, as you know, there is many other variables. And that still doesn't really indicate price. It just indicates yield. And the yield certainly would have been higher, had those 2 metrics been the same in both quarters..

We'll take our next question from Todd Fowler with KeyBanc Capital Markets..

David, I was hoping kind of high-level you can give us some sense of where you would classify the tonnage growth coming from -- I don't want to give you options because I think you'll say yes to all of the above.

But I mean, is it that the 3PL channel? Do you think it's truckload? I mean, if you can just kind of give us a sense of where you really think that -- areas where you're seeing the biggest tonnage growth..

Tonnage growth is really coming from all the above. We have 9 regions that we look at across the country, and we're seeing growth in revenue anywhere from 17% on the low-end to 26% on the high-end. And you tend to see a little bit stronger growth across the top half in the country, and the West Coast right now is good.

And it's a little slower through the Gulf Coast region, South and Mid-south regions, but they're not appreciably slow. And we have a relatively strong growth in every service centers. So tonnage is coming across the board in every single location from a variety of sources..

And to the last caller's question, I mean, the increase that you're seeing in the contractual side, what do you attribute that to? And what's driving that sort of increase this year versus prior years?.

Well, the contractual is primarily with the largest accounts, and I think these largest accounts recognize that OD has depth and breath of services and coverage, and we're able to serve them in so many different ways, all with one company, and with top-of-the-line technology, and the best in service and the lowest claims ratio.

And so we make it easy for them to do business for us, and so we're seeing we have large accounts just as [indiscernible] as with any accounts, but still trying in [indiscernible] and then some more business. And then they rally some more business and, they're just tending to grow with these larger accounts..

Okay. I guess I just gave you a free commercial on that one.

But the follow-up that I had was the holiday impact in the fourth quarter this year, how do you think about that from an operational standpoint with where holidays falls as a positive or negative from an operational standpoint this year?.

The holiday business had -- has pretty much moved by now in terms of stocking the shelves. There'll be a continuous stocking through the fall, but retail for us only comprises about 20% to 25% of our business. So it's not something where we used together.

It used to be 40%, 45% of our business, and it caused quite a level of freight in the prior to Christmas. So we're a lot smoother this day and age with only 20%, 25% in the retail or so.

It's a -- what we see now in terms of tonnage and the growth we're seeing, it's -- we got retail in there, but we got to anticipate any major surge for the rest of the year in that category..

But with the 2016 on a Friday, does that count for a half-day for you guys or a full-day from a cost standpoint?.

Somewhere between a half- and a full-day..

We'll take our next question from David Ross with Stifel..

The density-based pricing is being rolled out -- at least one of your competitors as an option for customers.

Given your use of dimensioners and your view of the freight, is that something that you're also offering customers? And any other thoughts you have on density-based pricing?.

We have had a density-based tariff in place for a number of years, at least 5 or maybe 8 to 10 years. So we haven't seen a lot of demand, but honestly, for folks to use it, more selling with our global customers, bringing product here and it's a density-based pricing coming from a foreign country in the U.S.

And that it may be able to use our density carrier to price from door-to-door. So we've had one, and we're from -- it's out there. We had to have a tariff with that..

We'll take our next question from Tom Albrecht with BB&T..

Really, most of my questions have been answered. But while I got you, I want to make sure I heard something right.

The sequential tonnage changes in July, Wes, did you say that was off 0.5%?.

It was 0.5% through the -- to the positive. It's typically down, that's not us [ph]. It was typically down 2.5% and this year, it was only down 1.1%. That was July from June. Yes, July from June..

Right. Okay. All right. And then, I asked this with someone else earlier, but on the GRI, the whole philosophy there. Wall Street loves to see these headlines. But I just wonder if it doesn't undercut your relationships for some small- and mid-sized shippers a little bit, pushing them more directly to 3PLs.

What is your view on GRIs in that respect?.

Well, as our cost of doing business continues to rise, we need to take rate increases of both the GRI as well as contractual increases. I think that the advanced timing of the GRIs that were announced, thus far, perhaps is undercutting the relationships a little bit at.

It's those sort of things that will [indiscernible] it's surprised how soon some of the other carriers have come out with another GRI..

Well, typically, the GRIs tend to get discounted away during the year. We don't know that anecdotally whether that's the case this year, and then we're just trying to replenish this. Is that the GRIs that were implemented in March or April whenever that was. Does that imply that those GRIs were already discounted away? We won't know.

We only think -- to me, it'll be much wiser just to hold on to what you have. And of course, if you compound the 4% or the 5% and -- earlier in the year and the 5% now, that's over a 12-month period of compounded to 10% or more.

And yes, I think that could have the 10% to hasten their transition to a logistics company, and that's been happening for several years. But for us, we price a smaller company just like we price a larger company. At least we look at the profitability and based the rates accordingly.

So -- and we'll do the same with the GRI this year -- is to evaluate the profitability of that as we continue to evaluate..

Well, if they couldn't hold on to GRIs this year, then other folks have problems, but my own soapbox. But let me just expand the whole 3PL then.

I think you're very disciplined in how you price to the 3PLs, but is there a part of that business that's more or less blanket pricing as opposed to really specific to the customers the 3PL is representing?.

We have very little on a blanket price. Our philosophy has always been to look at each individual account that our 3PL manages and to evaluate that on account based on what's selling there and the productivity -- I mean, the profitability of that specific account.

And for us to put your account where the customer goes direct, then we look at the characteristics and then generate a price based on a desired operating ratio. It's the same, same, same with the 3PL venture to us. You got to a differentiate. So we'll manage on that specific account..

We'll take our next question from David Campbell with Thompson, Davis & Company..

I just wanted to ask, we all are -- I mean, it looks like March is going to be very strong. Demand is going to be very strong. Tonnage is going to be up substantially. You've added a lot of employees.

What would happen next year if the tonnage market for whatever reason didn't increase as much as your buoys [ph] were up? Would you think that the yields would go down on tonnage? Is that how you'd maintain the growth? Or just what would happen?.

We manage our business day-by-day and week-by-week, and we have a really good handle on our label compared with the business levels. And so if things toughen up [ph], we will adjust our labor accordingly. So I guess, that's the answer.

But as we've mentioned earlier, we've lost some productivity because of the new employees are still learning our systems and our processes and our methodologies, and we anticipate getting some improvement in productivity going forward.

So if the tonnage did not increase, we should have an improvement in productivity because if we don't add any people that will -- the people we have, in 6 to 9 months, will become more and more and more productive..

The second question is what -- how is your expedited business in the third quarter and cottage [ph] business?.

The expedited and the cottage [ph] is doing just fine..

You mean, it's growing as fast as the rest of the business?.

Yes..

And we'll take our next question from Ben Hartford with Robert W. Baird..

I'm just wondering as you've gone through 2014 tonnage growth and the LTL business had accelerated, you've had success penetrating the national accounts. I'm just wondering what effect it does have on the previous questions. Of some of the ancillary businesses that you've targeted for growth longer term.

I mean, does that -- the opportunity that's developed on the LTL side, allow you to reduce some of the emphasis that you might have on the non-LTL business and just go capture this LTL share opportunity while it's immediately in front of you? Or as you penetrated some of these national accounts, do you find them concerned about capacity? And therefore, more amenable to broadening the sales effort beyond just LTL?.

Well it's not mutually exclusive, Ben. We can certainly focus our strategy on both at the same time as far as capital. As David mentioned earlier, we are one of the few LTL carriers and maybe the only one that's actually invested in capacity, at least on the network side.

So -- and we will -- we continue to do that going forward because we expect to continue to take market share, and we'll need capacity to be able to do that.

And one of the reasons we, in fact, are taking market share is we have invested in capacity, we have the equipment, we have the drivers and we have the real estate to be able to handle the additional market share. And we'll continue to do that..

So the conclusion is the acceleration in LTL volume growth here year-to-date has not changed your focus on developing those non-LTL services?.

No, not at all. We're -- we focus on all of the guided [ph] value-added services, alongside of our LTL services, and we do find that these larger contractual accounts have some businesses in all categories.

And that's what they like about it is that we can serve all of these different non-LTL that specialized services while we serve the LTL as well, along with the grand corporate headquarters and that management team..

And with no further questions, I'd like to turn the call back to Earl Congdon for any additional or closing remarks..

Ladies and gentlemen, as we thank you for your participation today. We enjoyed your questions, and thank you for your support of Old Dominion. If you have any further questions, give us a call, and we'll try to answer them. Thank you again, and good day..

And this does conclude today's conference. Thank you for your participation..