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 Scott H. Group - Wolfe Research, LLC Thomas Kim - Goldman Sachs Group Inc., Research Division Christian Wetherbee - Citigroup Inc, Research Division William J. Greene - Morgan Stanley, Research Division Robert H. Salmon - Deutsche Bank AG, Research Division John L.

Barnes - RBC Capital Markets, LLC, Research Division A. Brad Delco - Stephens Inc., Research Division Matthew S. Brooklier - Longbow Research LLC Todd Clark Fowler - KeyBanc Capital Markets Inc., Research Division David G. Ross - Stifel, Nicolaus & Company, Incorporated, Research Division David Pearce Campbell - Thompson, Davis & Company Willard P.

Milby - BB&T Capital Markets, Research Division Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division.

Good morning, and welcome to the Fourth 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 February 19 by dialing (719) 457-0820. The replay passcode is 8650231. The replay may also be accessed through February 19 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 [indiscernible] 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] Thank you for your cooperation.

At this time, for opening remarks, I'd like to turn the conference over to the company's Executive Chairman, Mr. Earl Congdon. Please go ahead, sir..

Good morning. Thanks for joining us today for our fourth quarter conference call. With me 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.

Old Dominion completed 2014 with its strongest quarterly performance of the year, marking the third consecutive quarter in which the year-over-year growth in rate from revenues, tonnage and earnings per diluted share accelerated.

Demonstrating the significant operating leverage in our business, our second consecutive quarter of 20%-plus revenue growth drove a 260 basis point improvement in our operating ratio and a 47.3% increase in earnings per diluted share to $0.81.

We have no doubt that our nearly 20% growth in LTL tonnage for the fourth quarter was due primarily to the consistency and dependability of our outstanding service as we produced in excess of 99% on-time delivery for the quarter and a tonnage ratio of 0.39%.

Our long-term leadership in these categories is the intentional result of many factors, including our continuous investment in our people and technologies, combined with expanded capacity in our network and equipment.

While this investment strategy clearly differentiates Old Dominion among our industry peers, we believe it is the skill and commitment of our employees that ultimately makes the difference in our ability to sustain such high-quality service. Fourth quarter clearly demonstrates the strengths of the OD family.

Our service performance remained at extraordinary levels in the quarter despite the heavy and increasing volume experienced during the period but also poor global weather and a meaningful addition of new employees throughout the year to handle our increased volume.

Our fourth quarter performance validates our core commitment to providing our employees ongoing education and training, as well as our continuous investment to make sure our OD family of employees have all the tools they need to exceed our customers' expectations.

Our culture of service, innovation and flexibility supports our ability to provide superior service at a fair and equitable price. We expect it to continue contributing significantly to our long-term growth in earnings and shareholder value. So thank you for joining our call today. And now here is David Congdon..

Good morning. We are very pleased with Old Dominion's financial results for both the fourth quarter and the full year. Our rate of our top line growth accelerated for each period, driving substantial improvement in our operating ratio and strong growth in earnings per share.

The dynamics in our business model were abundantly clear during the fourth quarter.

A 19.8% increase in LTL tonnage highlighted our significant, continuing gains in market share, while our 3% increase in revenue per hundredweight, excluding fuel surcharge, again demonstrated that our customers value our superior service, sophisticated technology and comprehensive capabilities.

With virtually all our tonnage growth generated within our existing service center network, our freight density increased accordingly. This improved density, combined with stronger yields, was primarily responsible for the 260 basis point improvement in our OR to an 84.4% for the quarter.

Similar dynamics for the full year drove the 130 basis point improvement to a record 84.2% for 2014. This improved performance occurred even as the company increased our employee base by 16.8% in response to strong tonnage growth.

As a result, we continued to experience some negative pressure on our productivity metrics, particularly our dock operations. However, the combined impact of the strong improvement in density and yields more than offset these negative pressures, and our incremental margin rose to 27.6% for the quarter.

Our long-term and ongoing record of outperforming the LTL industry supports our belief that, as -- we enter 2015 in a strong, unique and sustainable, competitive position.

We are confident that through a clear focus on the execution of our proven business model, we can further leverage our leadership position for the benefit of our customers, our OD family of employees and our 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 increased by 21.7% for the fourth quarter of 2014 to $721 million from $592.5 million for the fourth quarter of 2013. Fourth quarter earnings per diluted share increased 47.3% to $0.81, $0.55 for the fourth quarter of 2003 (sic) [2013].

And as David mentioned, our revenue growth reflected a 19.8% increase in LTL tonnage comprised of a 17.1% increase in LTL shipments and a 2.3% increase in the LTL weight per shipment. In addition, fourth quarter revenue per hundredweight increased 1.5% versus the same-period prior year quarter.

And revenue per hundredweight, excluding fuel surcharge, increased 3%.

Revenue per hundredweight was negatively impacted by a 2.3% increase in weight per shipment and a 0.2% decline in our average length of haul, both of which are long-term positive trends driven by ongoing shifts in our freight mix to higher-weighted contractual business and increased volume in our next-day and 2-day regional lanes.

Holding this weight per shipment and length of haul constant, we believe our increase in the yield was just over 5%. On a monthly basis, the LTL tonnage per day decreased sequentially by 2.3% for October into [ph] September, increased 4.4% for November and decreased 10.2% for December.

This performance generally compared with our 10-year average sequential monthly trend that shows a decrease of 2.9% for October, an increase of 2.9% for November and a decrease of 8.8% for December. On a comparable quarter basis, LTL tonnage increased 20.8% for October, 20.6% for November and 18.5% for December.

January 2015 LTL tonnage per day increased by 15.3% versus January of 2014. In the first quarter of 2015, assuming normalized sequential trends, we expect LTL tonnage per day to increase in a range of 12% to 13% compared with the first quarter of 2014.

Monthly year-over-year tonnage increases during the first quarter of 2014 compared to 2013 were 10.1% in January, 11.7% in February and 19.7% in March. First quarter of 2015 has the same number of working days as the first quarter of 2014.

We expect revenue per hundredweight, excluding fuel surcharge, to be in a range of 4.5% to 5.5% for the first quarter compared with the first quarter last year.

Old Dominion's operating ratio improved 260 basis points to an 84.4% for the fourth quarter from 87% for the fourth quarter of 2013, driven primarily by our increased freight density and stronger yields.

We also benefited from improvements in our group health and workers' compensation costs; and savings from lower fuel prices, fuel purchasing strategies and fuel efficiencies, which primarily accounted for the 200 basis point reduction in operating supplies and expense.

Capital expenditures for the fourth quarter of 2014 were $56 million, and $368 million for the full year of 2014.

Consistent with our strong growth in 2014, we estimate CapEx for 2015 will total approximately $463 million, including planned expenditures of $165 million for real estate; $272 million for tractors, trailers and other equipment; and $26 million for technology and other assets.

We expect the sales of assets during the year of 2015 to be approximate $5 million, for a total net CapEx of approximately $458 million. We expect to fund these expenditures primarily through operating cash flow as well as our available borrowing capacity, if necessary.

Effective tax rate for the fourth quarter of 2014 was 36.7% compared to 37.2% for the fourth quarter of 2013. And we expect the effective tax rate of 38.6% [ph] for the first quarter of 2015. And this concludes our prepared remarks this morning. And 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..

Just to clarify, Wes, you mentioned your expectation for first quarter revenue per hundredweight to be up 4.5% to 5.5% year-over-year.

Was that on an x fuel basis?.

It was, yes..

Okay.

So how do we think about that in -- sort of in conjunction with lower fuel and some of the mix headwinds? Does that imply that pricing is sequentially getting stronger? Or are you expecting some of the mix headwinds to subside relative to Q4?.

Well, I mean that's just our indication of what we experienced in January and our continued emphasis and focus on overall customer profitability and looking to adjust base rates where that profitability yet isn't up to our expectations. So fuel was only a portion of how we look at that by customer.

We also are looking and we're getting meaningful increases just in our bench rate as well..

Okay.

And what does that imply for incremental margins? Should we see you sort of continue to trend above your sort of longer-term range of 15% to 20%?.

Well, that implies we'll have incremental margin. We're not giving guidance on that. And I know it's been strong, but we still say, long term, with our margins where they are, that 15% to 20% range. We'll just have to see how pricing, how the economy and other factors that influence that present themselves during the course of the year..

And we'll go next to Scott Group with Wolfe Research..

So Wes, I think you mentioned that the December tonnage was up a little bit more sequentially than normal seasonality.

What about January, was that better or worse than normal sequential?.

It was slightly worse but not that materially so..

So what's your take on that? Is that changing in the economy in some of your end markets? Or is that some of the spillover from truckloads starting to reverse? I know it's just 2 months, but what do you make of that?.

Well, it wasn't a material-enough change that we associated with the detailed dynamics. It's, I mean, the 10-year average is an average, so that means that there's variance with each year around that. And as long as they're in a reasonable variation of that, then it's just an expectation.

But generally, January being down compared to December is typical. And the fact that it was down a little bit more, I don't know at this point if it's very clear that we can make a statement about that..

Okay, that makes sense. And then just wanted to take your take on fuel and what's your -- any sensitivity you can give us in terms of the potential margin drag or operating income drag could be from lower fuel. And I don't know if you guys have updated your fuel surcharge tables yet.

Are you planning to do so? And if you're not, why not?.

When you say drag or hitting in a tailwind or whatever it was, I assume -- are you referring to the fourth quarter? Because we really aren't in a position to indicate or wouldn't give guidance on what we expect for the first quarter for the year, as you asked.

But for the fourth quarter, with the fuel costs declining as they did in [indiscernible], specifically in the last few weeks of the quarter, we think we got a little bit of the benefit but not a lot, maybe 20 to 30 basis points of benefit. How that goes into the first quarter is still early to determine..

But our general view, Scott, is that things will stabilize. And we've thankfully seen the bottom of fuel prices and they'll probably start gradually increasing during the year.

And our fuel surcharge mechanisms are merely one of many components of the pricing equation, and we'll keep an eye on that on a customer-by-customer basis so as to maintain a fair and equitable pricing arrangement with our customers..

Which is what we've always done is taking the yield, the customer profitability and not being reactionary, necessarily, with what's going on in the market. We take it on a one-on-one basis and make sure that we're credible with our customers and our pricing still produces a fair and equitable price..

And we'll take our next question from Tom Kim with Goldman Sachs..

I had a couple of questions around the CapEx side.

Is this, increase in your CapEx just as an expression of your confidence in the cycle? Or is it more a function of your own idiosyncratic risk opportunities?.

It's a little bit of both. Our CapEx, as you see, is quite a bit. And I think, to keep expanding our network, obviously, that's anticipating continuing taking market share, which we think that we're able to do.

The other thing the CapEx includes, with all of the rail problems, and we use some rail, not a lot, no more than 1% of our cost, specifically in the Pacific Northwest and some of those other lanes that will have been, as you well know, negatively impacted from a service standpoint.

To the extent in order for us to protect our customer service and maintain our 99% on-time service, we actually put our own equipment and our own drivers. And so some of that additional CapEx is just investing in our own equipment and drivers so we can maintain service..

That's really helpful.

And then just with regard to the track to CapEx, can you give us a sense of what percent is the growth versus replacement?.

We don't give that detail, Tom. I'm sorry..

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

I just wanted to come really quick back to fuel and fuel surcharges for a second, just kind of curious, as you've been generally speaking about fuel. In a lower fuel environment, does that have any natural pressure on account profitability? I guess I just want to sort of understand that, if possible, a little bit better..

Well, every single customer has a unique pricing situation based upon their freight and their freight characteristics. And over the years, fuel surcharge versus base rates, versus discounts, and this unique price/mix of each customer, it all boils down to the profitability and the operating ratios that we have with each account.

So there's no way to make any kind of a blanket statement regarding where fuel prices are and fuel surcharges are in general for us. We'll take it all on an account-by-account basis..

Okay, okay, no, that's helpful. And I guess, just thinking sort of broadly about the end-market demand and sort of how you're seeing strength or weakness in any one of the individual end markets that you serve. I guess there's some concern about sort of the industrial economy and potential deceleration of growth in those end markets.

I just want to get a rough sense of kind of how you're seeing any of that. I know it's early in the first quarter, but any color will be helpful..

Well, yes, yes, it's too early in the first quarter. Obviously, for the year in general, around 75% [ph] of our business is industrial.

So the fact that, for the year, we were up almost 20% in revenue; and for the quarter, nearly, almost 21%, it -- well, of course, what [indiscernible] is market share, so it's hard to make a statement on what's going on in the macro overall. But I think it's roughly steady.

We don't see any end markets that's really greatly growth -- or any regions or by country, that's kind of an outlier in terms of growth. It's all fairly consistent across the board..

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

I wanted to ask you a little bit about what we see going on overall in the marketplace on pricing. Of course, there's efforts on geo-rising [ph] and raising fuel -- or rebasing fuel surcharges, I should say.

And I'm curious if you think that, that puts you in a much, much stronger position because you can sort of do this approach which is much more sort of regular and you don't kind of try to react as quickly.

And so should we expect that, that could actually result in even better market share gains looking forward? Or is this something that, oh, you'll react over time and so maybe you won't be that far off what the rest of the market is doing on price for very long?.

Bill, we have never, again, endured this [ph] and especially during the downturn that started to 2006 with us. We have never been reactionary. We've always wanted to make sure that we maintain credibility with our customer base and do things as we see them on a customer-by-customer basis. So yes.

And the fact that that's manifest in our previous market share increases. We think that the fact that we are consistent in how we look at that world could still benefit us from a market share standpoint..

That makes sense. Let me, Wes, also ask you. Obviously, you've been enjoying significant tonnage growth, and even the comments that you've made so far about this year suggests continuation of that trend. And so we've had a step-up in CapEx, and some of that's for service, some of that presumably for capacity.

Is the -- how would you manage a situation whereby demands changes in a way that surprises us to the downside? Could you adjust the cost structure? Are you going to find yourself with too much capacity because you got a little bit ahead of yourselves given the growth you've enjoyed?.

Well, we measured our capacity growth, and this kind of the fixed growth is in service centers. And we're committed to keep on expanding our network. Had we not, then we wouldn't be enjoying the growth of the market share that we're achieving.

And we're probably the only LTL carrier that's actually, over the last, for certain, decade, have been investing in network growth as opposed to network reduction. We'll continue to do that in terms of, I mean, there could be a downturn in the economy, for whatever reason, growth but we still will have been committed to expanding our network.

On the equipment side, we can adjust the equipment fairly rapidly if we have to on the capacity on that, and that's how we'll look at it. But we are committed to continuing to grow the network from a service and net [ph] capacity..

And you don't feel like you'll get caught with too much capacity..

Keep in mind, this gets me to put my accounting hat on, that the effect on your -- obviously, it's a cash effect, which we have tremendous borrowing capacity, but on the income effect, our service center acquisition really does have a minimal effect.

Keep in mind that this $10 million on a service center, the land portion of that and which will be extended depending on the area of the country, could be 25% to 50% of that cost, which does not appreciate, so there's no impact on your income statement.

And when you take the structure and you put a residual on that, and then you depreciate the net of that over 20 years. So that has much less of an impact by investing in the structure than it would be if you leased it. Leasing always has a direct effect, but most leases have CPI inflators every year, so it increases accordingly.

And I'd now mention that we own almost 80% of our service centers now and close to 9% of the normal number of doors, so from that standpoint, we are somewhat insulated, because we own those facilities going forward, on the impact of our income statement..

Bill, as far as feeling like if we had a downturn in the economy, have we overinvested and had too much capacity and whatnot? My answer to that would be we are -- we see the LTL industry as a very viable industry for the long-term future of our country. And we are committed to our growing our position as the leader in the LTL industry.

And I don't think we'll ever feel like we overinvested because we're here to continue to grow and be a very strong player.

And so if there's a real a downturn in the economy, we will adjust our variable expenses, as we did in the last downturn, but it sure is nice to adjust your expenses from an 84 operating ratio, as opposed to the rest of the industry of a 95..

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

As a follow-up to kind of one of Bill's question, Wes, with regard to the tonnage guidance of 12% to 13% in Q1, are you assuming any impact from some of the competitor adjustments to the fuel surcharge programs? As I haven't seen any adjustments to date on your website..

All right, since we are not geniuses on how that's affected, we have not assumed that. And so we just look in, as I mentioned in my comments, at what would be a normal sequential trend as the quarter progresses. And that's what we based on.

Keep in mind, I also mentioned in my comments, we're 15% up in gain way [ph] but I've only given guidance 12% to 13%, is that as the quarter progressed, the year-over-year percentage growth was stronger such that almost 20% in March of last year. But it's a couple....

Okay, that makes sense. That color is helpful.

And in terms just kind of us better understanding kind of the puts and takes of the fuel expense, can you give us a sense of how big that is as a percentage of the operating supplies and expense category?.

We're not giving that detail currently..

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

Wes, I'm thinking about longer term in terms of the market share. It seems like Old Dominion has done a great job of capturing market share with a better-quality freight, the stuff for their high service demand, where you're getting paid literally well to move that kind of freight.

As you start to look at capturing share maybe in the next bands of freight, does it carry with it risk to pricing or risk to the margin at all to capture, maybe once you've exhausted the opportunity, in kind of the higher levels of freight? Is that a risk at all?.

Well, it's for sure that the LTL market, from when you say that's $35 billion, $40 billion or $50 billion, depends on who you're talking to.

There's a certain portion of that market that's very price sensitive, but obviously, there's a significant and growing portion of that market that is servicing communities as well, and that's the market that we play in so that we continue to get service. There's no reason to think that we won't continue to achieve growth in market share.

And we've given guidance that we expect to reach double-digit market share in the next 3 to 5 years, and that depends on what your denominator is..

Okay, all right. All right, very good. And then one other question, just on the labor front. Obviously, a couple of your competitors have been distracted by labor issues.

Can you just talk at all, has it cropped up with you guys at all? Have you seen any kind any attempts anywhere? Because thus far, it certainly seems isolated to a couple of your competitors..

We have had -- it's Earl. We have had no labor problems. We have an excellent relationship with all of our employees. We work on it day and night. And we have -- yes, we call it the Old Dominion family spirit. But our people feel like they're part of that -- of the company family.

And we treat them so well that we would be mighty surprised if the teamsters were able to gain a foothold in Old Dominion..

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

Wes, I wanted to ask you a little bit about the meaningful acceleration in your -- in pricing, based on your comments. The revenue per hundredweight, x fuel, is up 3% in the fourth quarter. And you guided to 4.5% to 5.5%.

Can you just talk about how that sort of progressed? And is that a function of more aggressive pricing actions you started taking last year? Or is there some mix impact of that? Or just help me understand a little bit why we're seeing that acceleration..

Yes, Brad. If you remember what I said in my comments, I indicated the 2.3% increase in weight per shipment and the reduction in length of haul were fixed at really that yield. And the fourth quarter was more like 5%, so maybe a little above that.

So if you guys compare to 5% now, I'll have to say that we're expecting the weight per shipment and the length of haul in the first quarter to be well -- relatively flat. So you'll have year-over-year in the first quarter and compared to '14, to 2014, so therefore we're not expecting quite that pressure on the revenue per hundredweight.

So when you look at it that way, the 4.5% to 5% and compare it to the adjusted 5% in the fourth quarter, it becomes fairly constant..

I mean, furthermore, Brad, to answer your question, which was, are we taking any different action, and the answer is no. We continue to as we've always done, look at each and every account. And it's on there. And I think it's mostly just more of a mathematical thing whenever you're changing strategy or direction.

We're staying consistent with our strategies..

Got you. And maybe more of a higher-level question but kind of piggybacks off the last one. Are you seeing any pressure, inflationary pressure on wages? It seems like some of your competitors have raised wages in order to try to put to bed some of those labor issues.

As a result, are you seeing any pressure on that line? Or what in general would you expect your inflationary bucket to be this year on your cost line items?.

Well, Brad, we're not seeing any pressure because we've been consistently in how -- in giving wage increases all during the downturn and currently, meaningful wage increases. And so we believe that we should give wage increases that are based upon the productivity and the motivation that are really the family [ph].

We're -- we've been very consistent in that. So no, we're not getting any pressure on wages..

We'll take our next question from Matt Brooklier with Longbow Research..

So just a follow-up on the CapEx budget, which is pretty robust for '15. I'm trying to get a sense for if you can provide more color in terms of service centers and potentially the number of service centers that you plan to open in '15 and then maybe also talk about expanding capacity at some of the existing centers in your network..

I won't get too detailed, but if you'll notice just looking at our service center account, it really hasn't increased that much in the last 3 or 4 years. So most of our CapEx is either replacing an existing service center that we've outgrown with a larger one or expanding an existing service center. And 80% of that $165 million is for that purpose.

So we continue to invest on increasing or buying -- building larger facilities. For example, we spent $30 million building a new Memphis facility that's state-of-the-art last year, in 2014. So you still have some of those projects that were included in that addition line [ph]..

And as far as opening any additional service centers, my guess is it will be less than 5..

Yes..

Yes, for the next coming year. But we've got our eyes on a couple of cities where we might expand and open a new service center.

And it all kind of hinges on, and always has, on finding either land which you can build on, with the local people will allow you to build a [indiscernible] terminal, or finding a facility that we can either renovate or expand to meet our needs..

Okay, very helpful, kind of helping along with thinking about density as we move on and you guys grow. And then the second question, relating to headcount. You guys ramped up headcount at a pretty quick pace to support the strong tonnage growth that you had within your network.

It looks like tonnage is coming down a little bit in the first quarter, part of that just on the more difficult comps. But just trying to think about headcount and how you're thinking about headcount additions during this year..

So obviously, we're in a slower period of time but -- in this first -- part of the first quarter.

And we will anticipate needing a little more headcount as we get into March, but one good thing about our moderation, if you will, in our growth rate is that it should allow us to regain some of that productivity that we lost and continue also to maintain and improve our claim ratio where it is now.

So a little bit of moderating growth rate is not bad right now to give us a slight breather in that it could actually help us out with our bottom line there. So we look at where we see our sequential trend is going with shipments and tonnage going forward.

And we will obviously add headcount as we deem fit, going forward, to be able to handle whatever shipment and tonnage levels we will anticipate..

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

David, just on that last point, is there a way for us to think about where the employee productivity is? I mean it's -- the numbers are obviously very strong. The incremental margins are good, so it's difficult to really see kind of where the employee productivity is coming through, or maybe it isn't.

But I mean is there a way to think about the average tenure of the employee or where -- how the employees are today versus how you think about it from a normalized level?.

Well, obviously, with the fact that we hired over 2,000 employees this year, we have some relatively young tenured people on payroll right now. Aside from the new people, our general tenure and turnover, tenure is long and turnover is low with our workforce.

But as far as the productivity side, I don't know, maybe Wes, do you have an operating comment on that?.

We maintain pretty good productivity considering the almost 17% addition to our employee base, but we did have some headwinds, especially on the docks, on the platforms. We saw productivity drop there because there were so many new adds. And it's -- and the claim period is 60 to 90 days, and we've been going through that all year.

So we expect to see some improvements in productivity in 2015 on that and in pickup and delivery. We actually have some improvement in our laden load average, which is our linehaul productivity measure, last year. So we hope to improve on that more. So -- but we did have some headwinds with the new employees, and we expect that to improve..

Wes, do you have a sensitivity from an OR standpoint, I mean, how many basis points of margin that might have been?.

We do have a sensitivity, but we are not going to give you that here..

Okay, that's fair enough. And then I'll ask you another one kind of along the same lines. But it seems like, maybe in 2014, your purchased transportation was suboptimal given some things outside of your control that was the rail service or elevated third-party costs.

How do we think about purchased transportation given the investment that you're making in the fleet and maybe some normalization in rail service as we move forward?.

So I'm not sure what you mean when you say our purchased transportation was suboptimal. Purchased transportation as in the report it -- keep in mind that there's 3 categories with that purchased transportation.

There's all this, that purchased transportation that we use all in the -- in certain lanes, on rail and truckload and with the LTL, and that's really only about 2%.

And the rail portion of that, which, historically, has been 1%, has dropped to only 0.5% because we've been putting our own equipment and drivers in those lanes that are -- with which the rail service has been, as you know, very poor. So we started mixing that with our own equipment.

And the other 2 pieces, we have 2 other segments of our service and products, which is truckload brokerage and also our freight forwarding, global freight forwarding. So as you know -- and that means it's our purchased transportation as well. And those 2 segments have had meaningful growth.

So mathematically, as that grows, so will they as a percentage, but....

Exactly..

And I'm sorry. Yes. And our dredge operation is currently all of these operators as well, which so recorded in purchased transportation..

Okay, that's good color, yes. I was thinking about the piece that should be moving on rail but haven't been. And it seems like that's less than 1% or something like that..

Currently, we have no shipments moving on rail because of the service, but we all are using -- utilizing our own drivers and equipment for that. And we have no rail on our purchased transportation currently. And it dropped to almost nothing by the end of the fourth quarter..

But you would expect to resume that as you move through '15 if the rail service can get back to more normalized levels..

Not necessarily. Right now, we've only already invested in our own equipment to provide superior service. So we may tune up to keep that cost down and continue to grow market share in those lanes, is what we are currently doing because of that, the service we're providing in those lanes..

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

David, I got a question on the hours of service rollback. You mentioned last year that the changes to some of the provisions were costing you a little bit of productivity in the linehaul network.

And with the rollback at least of that kind of start-stop times, are you getting any more productivity back? Or are you just assuming that those provisions eventually are going to come back in and then leaving the network as if it was changed last year?.

Well, it did create a little bit of a headwind back when they made that change last summer, but it should increase our flexibility a little bit now where we see the drivers can run a linehaul trip on the weekend now with -- today with -- to that, under that, during that period of time.

And also, some of our road drivers will be able to get an extra trip in as well. Some of the scheduled guys that want to run an extra trip on the weekend are going to being able to use the 34-hour restart for all the huge days [ph]. So it's not a material thing, to be honest with you..

And then any update on the LCV push in D.C.?.

Well, hopefully, David, we're making some progress on the Hill educating members of the Congress on the Senate and the House side. And we're hopeful that we will get some language saying you'll allow 33-foot trailers, so the LTL trailers, in this highway bill if we get the highway bill, okay? First objective is to get the highway bill.

And I think that the Congress is working diligently on making that happen, so -- and if that happens, we're hopeful to get some productivity improvements with train 33s..

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

I just want to ask how many service centers there are. I had 230 in the fourth quarter. I don't know if that's right..

It's not right. We had 222..

222 in the fourth quarter, up. That's from the beginning of the year. There wasn't any increase. It's like we got, we had a decrease, but....

That's 221 at the beginning of the year, I believe. I don't have my numbers in front of me. So that's an addition of 1, thinking my math is correct, Dave..

And you may increase it as many as to the -- as many as 5 new ones this year..

As David mentioned, subject to being able to find land and getting the appropriate approvals, we may add anywhere from 3 to 5..

And if it didn't do that, would you expand the existing facilities?.

If we could expand them, likely we would -- that's what we'd already be doing. But in some cases, we had -- recall that the density of the metro area. It's more efficient to add service centers in certain metro areas rather than to expand..

And David, our CapEx for this upcoming year is $165 million toward real estate. And to be honest with you, the majority of those projects are on the smaller-scale size. And they're really dedicated toward expanding some capacity at various centers, service centers..

Was -- most of that is -- was not in the -- it's not for new centers..

There may be 1 or 2 new ones in that list, that's all, but the majority of it is expansion and renovations of existing facilities..

So if you open up 5 or begin work on 5, CapEx might be more..

We don't anticipate CapEx being any more than what we've budgeted because we've looked at that very closely..

We'll take our next question from Willard Milby with BB&T Capital Markets..

Just wanted to see if you all could provide a couple of figures that you normally give with the Qs and Ks, starting off with, I guess, fuel surcharge as a percent of revenues both for Q4 and the year, then the diesel fuel expense for the year as a percentage of revenues..

I don't know where you get that from our Ks and Qs. We do not disclose that..

Not the fuel expense you have but the surcharge dollars as a percent of revenue..

No, we do not disclose that. I mean you can calculate it and we'll let you do that by looking at certain statistics, but we do not....

Maybe just surcharge dollars then..

We do not disclose that..

Okay. All right, moving on. The propane tax credit, I guess, for -- that other LTLs are seeing, were you all affected by that this year? And what was that after the, I guess....

Well, we don't know that it'll be extended into 2015. We did have a positive number on that in our tax -- bulk tax in the fourth quarter..

And what was that fourth quarter?.

Well, it's all embedded in our effective tax rate, which could include others and -- but that was one of the reasons our effective tax rate was lower than what we originally guided to..

We'll take our next question from Ben Hartford with Robert Baird..

Real quick, Wes, just want to get your perspective on weather and the impact in the first quarter of '15 versus '14. Obviously, we have the Northeast storms recently, but I'm assuming that you're modeling the weather-related expense and impact in this year's fourth quarter to be below prior year.

Is that right?.

Somewhat. And obviously, we don't know what the weather will entail for us for the rest of the quarter, but certainly, last year, especially in January and February, as you -- I'm sure, and you'll recall, as you're sitting there, laughing. I did all the way through.

And so obviously, January, we have negative impact January this year, not sure how the overall are compared to the January of last year but with both years. So I -- we're just kind of fashioning that the weather will at least be fair for the rest of the quarter and that sequential trends will be very normalized..

It appears there are no further questions at this time. I'd like to turn the conference over to Mr. Earl Congdon for any additional or closing remarks..

Thank you. Well, guys, as always, we thank you all for your participation today. We appreciate your questions and your support of Old Dominion. And feel free to give us a call later if you have further questions and good day..

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