Jul 25, 2013
Executives
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
Analysts
Allison M. Landry - Crédit Suisse AG, Research Division Christian Wetherbee - Citigroup Inc, Research Division A.
Brad Delco - Stephens Inc., Research Division David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division Robert H.
Salmon - Deutsche Bank AG, Research Division Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division Todd C.
Fowler - KeyBanc Capital Markets Inc., Research Division Carol A. Krakowski - Wolfe Research, LLC Thomas S.
Albrecht - BB&T Capital Markets, Research Division Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division William J.
Greene - Morgan Stanley, Research Division Alex Scott David P. Campbell - Thompson, Davis & Company Thomas Kim - Goldman Sachs Group Inc., Research Division Jason H.
Seidl - Cowen Securities LLC, Research Division
Operator
Good morning, and welcome to the Second Quarter 2013 Conference Call for Old Dominion Freight Line. Today's call is being recorded and will be available for replay beginning today and through August 10 by dialing (719) 457-0820.
The replay passcode is 9910575. The replay may also be accessed through August 10 at the company's website.
This conference call may contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995, including statements, among others, regarding Old Dominion's expected financial and operating performance. For this purpose, any statements made during this call that are not statements of historical fact, may be deemed to be forward-looking statements.
Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify forward-looking statements. You are hereby cautioned that these statements may be affected by 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] 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.
Earl E. Congdon
Good morning. Thanks for joining us today for our second quarter conference call.
With me is: David Congdon, Old Dominion's President and CEO; and Wes Frye, the company's CFO. After some brief remarks, we'll be glad to take your questions.
Old Dominion's performance for the second quarter was strong, especially against a somewhat tepid economic environment. We again produced solid tonnage growth and a yield to drive a 140 basis point improvement in our year-over-year operating ratio, which is the best we have ever achieved.
As a result, our earnings per diluted share increased over 20% for the quarter on an 8% increase in revenue as compared to the same period last year. We expect that our performance will again be best-in-class among our LTL peers, as well as many other transportation sector performance averages.
We also believe our tonnage growth suggests a steady gain in market share. We believe our position as the industry's service leader was strengthened during the second quarter as we maintained a 99% on-time delivery percentage and produced our best cargo claims ratio ever at 0.31%.
By maintaining and enhancing our service metrics at such high levels, we have clearly reset our customers' expectations and established higher benchmarks within the sector. With our ongoing significant investment in equipment and technology, and in preparing our employees to optimize that investment, we expect to further differentiate ourselves from our industry peers through continued improvement in service performance.
While change remains a constant in our industry, driven by innovation and technology, we believe our proven business model positions us well to continue gaining market share as we move forward. We believe we have the resources, the discipline, the focused innovation, and most importantly, a talented and dedicated team of employees throughout our company to continue to execute our strategic initiatives.
We thank you for your interest in Old Dominion, and now here's David Congdon to discuss our second quarter operations in more detail.
David S. Congdon
Thank you, Earl, and good morning. Our second quarter results and especially our company record 83.5% operating ratio are further validation of our disciplined focus on density, yield and efficiency.
Earl has already mentioned our solid tonnage growth and yield performance for the quarter, which are key drivers for improved margins. With tonnage per day increasing 5.6% for the quarter and revenue per hundredweight excluding fuel surcharge increasing 3%, we exceeded both our expectations for the quarter and the growth rates for these metrics in the first quarter of 2013.
Due to our capital-intensive infrastructure, improved yield and density increases our inherent operating leverage. In addition to the benefits of higher operating leverage, our primary measures of productivity also improved for the second quarter, with the exception of a slight decline in line-haul laden load average.
Beyond these metrics, we worked to improve efficiency throughout the company in numerous ways, such as our investment in new tractors that contributed to our 20 basis point reduction in our maintenance cost and our sustainable fuel initiatives, which reduced our fuel expenses by 80 basis points. We believe that we are far from exhausting our ability to produce additional operating leverage in our business and to achieve further gains in efficiencies.
As a result, we continue to be confident that given increased density and yield in a stable operating environment, we should produce incremental margins in the 15% to 20% range over the long term. To achieve increased density and yield, especially in a slow growth economy, we will remain focused on delivering on-time, claim-free customer service at a fair and equitable price.
As we have discussed before, the investment required to successfully deliver this added value is primarily funded by having the discipline and knowledge to maintain pricing for superior service at a reasonable level. Through our execution of this value proposition over the years, we have developed an organization with an infrastructure, workforce, capital resources and capabilities that are truly differentiated, as our long-term out-performance of the industry continues to demonstrate.
To second Earl's closing remarks, I believe Old Dominion is positioned to achieve substantial and profitable long-term growth as we execute on our strategic opportunities using our proven business model. We made a great start toward this objective through the first half of 2013, and we look forward to updating you on our progress on the third quarter call.
Thanks for being with us today, and now I'll turn it over to Wes to review our financial results for the quarter in greater detail.
J. Wes Frye
Thank you, David, and good morning. Old Dominion's revenues for the second quarter increased 8% to $590.2 million from $546.5 million for the second quarter of 2012.
As discussed in today's news release, our revenue growth was primarily the result of a 5.6% increase in tonnage per day and a 2.4% increase in revenue per hundredweight. Shipments also increased 5.6% for the quarter, due primarily to the weight per shipment being flat as compared to the second quarter last year.
In addition, length of haul was also flat compared to the second quarter of 2012. So with no particular bias from changes in weight per shipment or length of haul for the second quarter, revenue per hundredweight, excluding fuel surcharge increased 3% compared to the second quarter last year.
We believe our yield improvement is indicative of a stable pricing environment and consistent with our yield management process. Sequentially through the second quarter, tonnage per day increased 1.4% for April versus March, 4.2% for May and 2.1% for June.
This trend was better than expected, but in line with the 10-year average sequential month growth of 1.2%, 4.1% and 2.2%, respectively. We expect our year-over-year tonnage per day for July, which is one week left, obviously, to be approximately 6.5%, and remain in the range of 6% to 6.5% for the third quarter.
Please note that total tonnage for the quarter will be higher as a percentage due to an additional workday in the third quarter of this year compared to the third quarter of 2012. We expect revenue per hundredweight, excluding fuel surcharge, to increase approximately 4.5% for July, and expect revenue per hundredweight, excluding fuel surcharge, to increase in the range of 4% to 4.5% for the third quarter.
In todays' news release, we noted that we made an immaterial correction related to how we present cost of purchased transportation for certain truckload, brokerage and freight forwarding services, which were previously netted against revenue. And by the way, this is a traditional method for LTL sector to record interline transactions.
These costs will now be presented separately in our operating expenses. The result in adjustment increased revenue and increased purchased transportation expense, but had no effect on operating income, net income or earnings per share for any period presented.
Our operating ratio improved 140 basis points to 83.5% for the second quarter of 2013 compared to 84.9% for the second quarter last year. Salaries, wages and benefits accounted for 30 basis points of this improvement.
Somewhat similar to the first quarter, there was a 30% basis point increase in depreciation and amortization as a percent of revenue for the quarter, mainly due to the increased and replacement purchase of tractors, trailers and other equipment for the year. Much of this increase was again offset by reduced equipment repairs and maintenance cost, partially tied to the reduction in the average age of our tractor fleet, which contributed 20 basis points to the 100 basis points reduction in operating supply and expense as a percent of revenue for the quarter.
The majority of the reduction in operating supply and expense margin reflects reduced fuel expense to better fuel efficiency and purchasing methods. We also benefited from a 50 basis point, that's a 40 basis points net when you compare it to the second quarter of '12, but a 50% basis points improvement in net miscellaneous expenses, primarily due to the sale of unused service centers that became available after we relocated to expanded facilities.
Capital expenditures for the second quarter was $121.6 million and $147.7 million for the first 6 months of 2013. We have increased our expectations for CapEx, net of sales proceeds for the full year, to a total of approximately $305 million versus $270 million previously related, due to accelerating 5 real estate projects slated for 2014 into this year's CapEx budget.
Therefore, the total includes planned expenditures of $130 million for real estate, and that was increased from $95 million, $150 million for equipment and $25 million for technology and other assets. 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 improved to 16.9% at the end of the second quarter of 2013 from 17.1% at the end of the first quarter, and at 22.3% at the end of the second quarter of last year, and we expect this ratio to be in the range of 14% to 15% at the end of this year. Our effective tax rate for the second quarter of 2013 was at 38.6% compared to 39.5% for the second quarter of 2012.
We continue to expect our effective tax rate for the remaining quarters of 2013 to -- will average 38.6%. And this concludes our prepared remarks this morning.
Operator, we'll be happy to open the floor for any questions at this time.
Operator
[Operator Instructions] And we'll hear from Allison Landry, Credit Suisse.
Allison M. Landry - Crédit Suisse AG, Research Division
I noticed that shipments per terminal increased about 9.5% sequentially. So I just wanted to see if you could provide any color behind this, and then maybe how we should think about the capacity that you have left in terms of your service centers?
David S. Congdon
Obviously, we would expect shipments per terminal to sequentially increase over the first quarter, just because of just normal seasonality. And also, I think we saw a little bit improvement overall in the economy on a macro basis in the second quarter compared to the first.
So without going to a lot of detail or I'm not sure about your detailed question, that would be the main reasons we saw the increase in the second quarter compared to the first. Much of that is, it would be a normal sequential trend.
J. Wes Frye
And to the second half of the question, about our capacity, we have been adding capacity as indicative of our CapEx budget for the last 6 or 7 years, and we continue to have adequate capacity in the network for continued profitable growth.
David S. Congdon
Yes. I'd say on average, from a service center standpoint, we have in the range of 20% to 25% capacity.
And that range is from no capacity at some service centers, which we are in the process of expanding, and much higher capacity, and some others that we've expanded already.
Allison M. Landry - Crédit Suisse AG, Research Division
Okay, that's great color. And then just a follow-up question.
In the press release, you talked about an improving pricing environment for the industry. And I was just wondering what you're seeing that's causing that improvement.
David S. Congdon
Well, I think generally speaking, I would think it's generally discipline, understanding that all of us have to invest capital, and to do that, we have to improve our margins to be able to justify that and get an appropriate return. So obviously, we haven't heard from our -- the public LTL peers.
And so we're assuming based upon what we have seen from our own increases, that we are seeing the same discipline from the other carriers. So I think it's just the fact that supply-demand is in somewhat of a balance, economic picture, while not too awfully rosy, is still positive.
And that, with the idea that we all have to improve margins to justify significant investments in equipment and infrastructure, are the reasons why -- that we expect the improving pricing to have been here in the second quarter and to continue.
Operator
Chris Wetherbee with Citi.
Christian Wetherbee - Citigroup Inc, Research Division
I wondered maybe if you could talk a little bit about kind of the tonnage progression. It seems, on the margin, like things are accelerating a little bit into the third quarter.
We've heard some kind of, I guess, mixed commentary from other folks within transportation. I guess I just wanted to get a rough sense, is it that market share gains are accelerating from anywhere in particular within the market, or if just the market overall is picking up a little bit.
I know you have easier comps, but it seems like there's a bit of a pickup here.
J. Wes Frye
Yes. If you look at each month in the quarter, Chris, it was almost to the 1/10 of a point the same.
We had this 5.7% increase in tonnage in April year-over-year, 5.8% in May, and a 5.7% in June. And sequentially, it turned out to be about pretty much on par with the 10-year average on each of those months, as I mentioned in the comments.
Originally, we were expecting it not to get there because we were a little bit uncertain about the have -- the economic picture. But still, we would have to conclude that although it was fairly strong for us, it was still only on a 10-year average.
Now in July, we're seeing some good growth. As I had mentioned in my comments, we expect tonnage year-over-year to be up about 6.5%.
And that's -- in tonnage last year, I'm not sure I have that information up at this point, but tonnage last year, in July was up 8.9%, so it's still a fairly healthy comparison. It's still up another 6.6%.
At this point, we still figured that's market share, and we're not certain what the macro is doing, whether we have some acceleration of the seasonal shipments in July and they would temper down, we're not sure how that will play out. But we are seeing a fairly -- we saw a very strong end of June and seeing a pretty strong July at this point.
Christian Wetherbee - Citigroup Inc, Research Division
Sure, okay. That's very helpful.
And then just a follow-up. When I think about the sequential progression of profitability in the business, the addition of an extra day, I don't know if that necessarily has a significant impact in, kind of the normal seasonal improvement that you would see, generally speaking.
I guess it's relatively closer to flattish between second and third quarter, but just any thoughts about how we think about that extra day, relative to the normal sequential progression of profitability of the business?
David S. Congdon
Well, I mean, assuming your costs are all relative and remained comparable, one more day will have some minor effect. It wouldn't be material, it will have some minor positive effect, depending on what you do with it.
Operator
Next we'll hear from Brad Delco of Stephens.
A. Brad Delco - Stephens Inc., Research Division
Wes, I guess I wanted to focus on the balance sheet a little bit. I think, clearly, you see that continue to improve, and you're calling for debt-to-cap to be closer to 14% to 15%.
Any longer-term thoughts on where the goal is there? Do you eventually want to be a debt-free company?
Or any plans down the road to return value to shareholders? Just what are your high-level thoughts on that?
J. Wes Frye
So I -- we certainly don't have an objective that we must be debt-free. In fact, we hope that we have continued investment opportunities.
And we have a strong balance sheet to be able to take on to that. So we'll look at the balance sheet relative to opportunities, and are willing to take on more debt if there's opportunities will provide an adequate return on capital.
We also will evaluate, based upon our free cash flow, and our cash flow going forward, if whether we should consider returning some of that to the stockholders, whether it be in the form of a dividend or a stock repurchase, it still remains up for discussion and consideration.
A. Brad Delco - Stephens Inc., Research Division
Got you. Then maybe just a follow-up question, to go back on pricing.
If I remember all the details correctly, I thought originally, you guys thought pricing x fuel would be up 1.5% to 2%. Clearly, you guys exceeded that.
And I think Wes, you said you expect pricing to be 4% to 4.5% in the third quarter. What is it that you're seeing in the market that's causing this kind of acceleration and expectations on pricing?
Is it purely supply-demand? Is it the industry just being very disciplined?
Or is there anything specific that you guys are focused on that's driving that sort of rate performance?
J. Wes Frye
Yes, you will recall, hopefully, last quarter, we talked about some mix changes that were negatively impacted our comparison of revenue per hundredweight year-over-year. And what we were talking about that, it obviously was as at our first quarter conference call in April.
And in April, we were having really, quite a negative type implication on a mix change that kind of rode out itself as the quarter progressed, so that the revenue per hundredweight x fuel surcharge in April was only up 1.4% because of this mix. Then that mix started -- that comparison started to disappear somewhat in May, plus that May was up 2.9%.
And then it was -- it totally became ineffective from -- and it became comparable in June such that in June, our revenue per hundredweight x fuel surcharge was up 5%. So now we're just seeing the continuation of that.
As I mentioned, July, expected to be up in somewhere in the range of 4.5%. So all of those were initiatives of -- and by the way, June also had a reduction in weight per shipment as opposed to April or May, which would have an increasing effect on that revenue per hundredweight.
So July, we're just kind of seeing a continuation of June without these mix comparisons. And the other thing is obviously, we -- effective, we had the increase in our GRI effective in early July, which has a positive effect on that as well.
So we see that as playing out, and we're assuming that the economy or that the competitive landscape of pricing and discipline that I just discussed on another question plays out and we'll be able to see that revenue per hundredweight x fuel surcharge stay in that range. That's still indicative of the fact that we think the price at the environment for yields is still pretty disciplined out there.
We will see that manifest itself over the next few days and weeks, as we see some of the other peers report.
Operator
David Ross, Stifel.
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
Can you talk a little bit about the average age of your fleet? You mentioned that you've been replacing tractors, actually adding new tractors for growth, which should be bringing the age down.
Is that where you want it to be, and should it get any younger from here?
Earl E. Congdon
Yes. We actually peaked at our average age of our tractors back in '08 and '09, and even in '10 as we were delaying some replacements due to the economic environment.
And then we had, as you recall, our CapEx for equipment in 2012 was about $210 million, and part of that was getting back to what we thought was a better replacement cycle, and we continue to do that this year, such that at the end of 2012, our average tractor fleet reduced about 4.2 years. And now it's running about 4 years, which I think is getting close to more of an optimum replacement cycle.
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
And then, as far as your growth is concerned, has driver recruiting been an issue in terms of you want to add more trucks, you want to grow the tonnage in certain regions, but you can't find the drivers?
David S. Congdon
This is David. The driver recruitment has not been a real issue for us.
As most of you know, the LTL industry driving job is -- tends to be more attractive than a full truckload driving job, with the drivers being home every night for the pickup and delivery drivers, and 70% of our line-haul drivers are scheduled. So recruiting and retaining drivers is pretty good for us, and we haven't had much trouble finding them.
We are still running our driving school as we have since 1988, generating a couple of 300 drivers a year out of that. And also, we just haven't had much trouble with that.
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
And last question is just on the other services that you've been adding, freight forwarding, brokerage, OD household services. How's the growth there, profitability?
What is your, I guess, favorite of those other services?
Earl E. Congdon
Obviously, we're earning. At an 83.5% ratio overall, they would have to be a pretty compensatory as well, and the growth there has been strong in double-digit.
We don't -- we're not giving specific guidance on that growth at this time, but it's been good growth in all those added value services.
Operator
And next we'll hear from Justin Yagerman of Deutsche Bank.
Robert H. Salmon - Deutsche Bank AG, Research Division
It's Rob Salmon on for Justin. Wes, we're clearly seeing the benefits from increased density, as well as the solid yield environment.
And David, you sounded pretty confident about Old Dominion's ability to expanded margins further, as you continue to build density in your network. How much room do you think there is to expand margins in the current backdrop?
And kind of thinking about a little bit differently as we look out with your growth plan. How should we be thinking about EPS growth coming from top line expansion, versus some continued improvement in the OR?
J. Wes Frye
Rob, I'll take a shot at it. Here, we sit with a network that's pretty efficient, obviously.
And we're continuing to improve efficiencies in a lot of different areas. So you can couple improved efficiencies with a stable pricing environment and market share gains.
We think that we can continue to improve our margins. So we have not peaked out yet.
And if the economy flips out in a way or goes bad, things in that formula change. But the way that our network is structured right now, and with a good, diversified mix of customers and good geographic diversity and decent density, but improving density, we think we can continue to improve margins, but we're not giving any guidance on how low the margins can -- or how high those margins can get.
Robert H. Salmon - Deutsche Bank AG, Research Division
Understand. And as my follow-up, I noticed the OD logo at Fenway Park this past week, and it's been consistently showing up in industry regs and financial publications.
Could you discuss your advertising and marketing strategy, and how that fits into OD's 5-year plan of getting to $3 billion in revenue by 2016?
Earl E. Congdon
Well, to some extent, I'd say the our marketing strategies are proprietary and confidential. And so what you're seeing out there is what everyone is seeing.
So I'd really rather not discuss it much, but I would say that it is integral to our overall long-range strategic plans.
Operator
Tom Wadewitz, JPMorgan.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
I wanted to ask you. I know you've had a lot on price here, but wanted to go back for that just for it to try to parse it a little bit further, I guess.
When Wes, when you're talking about the mix effect and how that kind of changed during the quarter, are you saying that the, I guess, the increase in revenue per hundredweight x fuel, or the acceleration that is primarily driven by mix or is there actually some taking out mix? Is there also some acceleration on what you're seeing on pricing?
And maybe, I don't know if that would show up in what you're asking for in your contracts, what you're receiving in contract pricing. But wanted to see if you could talk a little bit more of that kind of, what's actually peer-based price increase, relative to your mix.
J. Wes Frye
I want to take a shot at this, because revenue per hundredweight honestly, is an end result of a whole lot of things that we do within our yield management processes. And just because we had a change of mix that we're obviously, we had a high revenue per hundredweight last year, we have a lower one in April this year, did not necessarily mean anything with respect to how much money we've made, or what our end result operating ratio was, as you can see from our results that we put up.
So we just had some changes and some things that business that we were handling last year, that we just didn't have this year, which was the change in the mix. But as we manage yield, we look at each and every customer on their own merit, and try to arrive at a fair and equitable price that for the services and the value that we're delivering.
And so I know we always watch revenue per hundredweight and revenue per hundredweight changes and we call that pricing, but is -- but pricing is more about managing yields on a customer-by-customer basis.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
So there's a noise within the numbers, but it's not like you're changing your approach and being purposely more aggressive on what you asked for in rate increases?
J. Wes Frye
Not as -- it has no implication whatsoever on any changes in our strategies.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Okay. And then, the second question, I guess, on the incrementals, you tend to do better on the incrementals than your 15% to 20% guidance, so that's fair enough.
But I guess if you're getting more of your revenue growth, looking to the second half, maybe is driven by the revenue per hundredweight, which we think of as price, are there -- is there a reason why the incrementals shouldn't also be a little stronger? I mean, we think incrementals on prices are greater than incrementals on volume.
So how do you think about that, just in terms of incrementals in the second half?
Earl E. Congdon
We certified that 15% to 20% in terms of long run in the long term, certainly haven't had incremental margins that had exceeded that over the last few quarters. And that could be the case in the short term.
But again, that depends on pricing, economic density added, and all those other variables. But that's just a long-term guidance that we give.
And I had stated before, some of this incremental margin is mathematical, and how much of your increase is due to pricing, how much is -- what's the level of your increase, all those things mathematically affect it. If our growth would've been double-digit in the second quarter as opposed to 8%, that incremental margin would've been a lot lower.
So you just kind of play all that, and not take it literally, necessarily, depends on a lot of conditions of how you got to look at that. But we still give that number, because as David mentioned, we still believe that we can improve margins.
And obviously, to improve margins, your revenue growth has to have an incremental margin that's better than what your existing one is. And that's all we're really saying, is we still think we have the potential to continue improving our margins.
Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division
Okay, but then if there's not an offset then you'd say, "Okay, price is accelerating a little bit, but our margin, incremental margins couldn't get better." I guess there's not a reason to think that, that logic can't apply?
Earl E. Congdon
Obviously, if all of your increased in revenue was all due to pricing, your incremental margins would be really good.
Operator
Todd Fowler, KeyBanc Capital Markets.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
I seem to remember that the third quarter is generally when you do something on the wage side. I guess I'm curious if you have any initial thoughts on potential wage increases here this year, if you can remind us what it was last year, that would be helpful.
David S. Congdon
Todd, last year, we were right around 3%. We have not announced our pay increases for this year, so we're going to have to defer on that question.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
And what was the timing of the 3% last year? Was it in the middle of the quarter or was it...
David S. Congdon
We normally have a wage increase that's effective the first Friday in September.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay. And then David, if you can talk about the decision to pull forward some of the facility investment this year.
What drives that? Is that basically what's happening from the capacity side within the network and you've got some pinch points?
Is it more opportunistic with, either real estate that comes available? And then, how do we think about legacy coming at to the point where you want to give CapEx numbers for 2014, but with the expectation being that it's truly a pull forward?
Or will there be more investment that comes in 2014, based on how the network's operating?
David S. Congdon
That's a lot of questions. Try to answer them.
Honestly, we -- for the first time in a long time, we got ahead of ourselves with some of the projects during 2013. And instead of having delays in building projects, we got them done a little early.
And it looked like we could accelerate some of the ones that we had on slate for next year. And due to some permitting opportunities and things like that, we decided to pull some forward into this year.
That should come out of next year's planned CapEx, which we obviously have not -- we wouldn't be announcing our 2014 CapEx until January, as is customary. But that $35 million acceleration into this year does come out of what we thought -- what we've been thinking we're going to spend next year.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay, that helps. And then just one last one, kind of along the same line.
I mean, when you think about your ability to grow, the economy doesn't feel like it's recovered, I think to the extent that a lot of us were expecting a couple of years ago. Some of your competitors seem like that they're maybe being, or maybe that they're a little bit more financially stable.
What's your outlook for your ability to grow over maybe the intermediate term, relative to the past couple of years?
J. Wes Frye
I think we've always kind of looked at a spread of our growth relative to the ATA Trucking Index and also CPI. And at one point, we were probably 1,000 basis points over that, as we were coming out of the downturns.
And more recently, we're averaging anywhere from -- in the 500 basis points to 300. And we think that with our business model and our superior service, going forward, that whatever the predictions are with ATA Freight Indexes or GDP or other measurements, we should be able to have a spread in the 300 to 500 basis points above that.
Operator
Scott Group, Wolfe Research.
Carol A. Krakowski - Wolfe Research, LLC
It's Carol on for Scott. I just want to dig a little bit more into margins, if you'll let me.
I know you had mentioned that fuel efficiencies, that was a benefit for you this quarter and contributed to kind of the reduction that we saw in general supplies and expenses. Can you quantify that?
And then also looking forward into 3Q, I know you don't give guidance. But what -- we have the extra day, which is probably going to be a positive.
We've got a slightly easier tonnage comp. Is there anything else that maybe in this quarter, that we should be thinking about being there, or not being there for third quarter?
J. Wes Frye
Well, we did quantify in our comments, the fuel efficiency as it relates to our fuel expense. Even in due of the DOT prices being either flat to flattish, that we're able to reduce our fuel expense as a percent of revenue by 80 basis points, which was the major part of our operating supplies and expense improvement of about 100 basis points.
So that was fuel efficiency, and also efficiently purchasing fuel in the market. So there's no reason why, that we should -- there's no reason why that should -- that efficiency shouldn't continue into the third quarter.
Now all that would be relative to what happens to fuel prices, and of course, we've seen some upticks in the last couple of weeks on that. And we're as unclear on where that will go for all of the third quarter as anyone else.
But certainly, how efficiently and how we buy and use fuel should remain in effect through the third quarter and even through the fourth quarter. I think those are definitely sustainable, the gains that we've had there.
[indiscernible] I -- we just -- nothing that comes to mind. We did report, as I mentioned in my comments, the gain on sale of real estate.
That had a 50 basis points improvement in the quarter. By the way, we have excess terminals continually as we continue to move into larger facilities, and put the existing facilities on the market.
So we have fairly routinely gains on sale of real estate. Whether that will be 50 basis points, probably not, in the third quarter, at least, that's our thoughts at this point.
So that's something that's happened in the second quarter that likely will not reoccur in the third quarter.
Carol A. Krakowski - Wolfe Research, LLC
Great. And then just one question on hours of service.
I know it's early still, and it's not usually of much of an LTL issue generally, but have you seen any impact to your own local end haul operations? And then, I know it sounds like July, you did touch about this a little bit, has been pretty strong standing so far, could that possibly be some of the spillover from the truckload market?
J. Wes Frye
We haven't really seen an uptick on our spot quotes which would kind of be where that would fall into. So I can't say that we've seen any of that convergence to the LTL carriers from truckload on the concerns of that.
And we really haven't seen any effect of the change at this point. And don't expect to at least, from our standpoint, since we have -- we are, for the most part, 80% of our runs are scheduled, and already encompass those regulations.
Operator
Tom Albrecht, BB&T.
Thomas S. Albrecht - BB&T Capital Markets, Research Division
Most of my questions have been answered. I did want to ask, Wes, given the slight changes in the financials, are we going to get some restatements for Q1 of '12, Q3 and Q4, especially on the yield front because those, with what you did with PT and all that, it changed a year ago revenue per hundredweight, and revenue per shipment figures just slightly.
J. Wes Frye
Yes, Tom. I should have already indicated that, but we are working on revising all those numbers so you'll have apples-to-apples comparisons.
Thomas S. Albrecht - BB&T Capital Markets, Research Division
When do you think that might be available?
J. Wes Frye
Soon.
Operator
Anthony Gallo, Wells Fargo.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
I was hoping you could maybe touch on what influence the brokers are having in this business. There seems to be more of them and they certainly seem to be more active in the LTL market.
And I'm wondering if they had any influence on the Q1 mix issue.
Earl E. Congdon
The answer to your last question is no. I mean, we are -- we've been working with third-party logistics and brokers for a number of years.
And I think I fashioned a reasonable and profitable process to do that. So we don't see any real problems of continuing to work with those.
Given that we understand that we still want to price their customer base, based on the profitability that we need from each of their customers, and so we'll continue to do that. I think they make up about 25% of our base at this point.
And if that grows, it will be grown as a result of us -- of them wanting a best-in-class carrier for their customers, and we based upon a reasonable and profitable pricing for us.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
Where might that have been a couple of years ago, that 8% of base?
Earl E. Congdon
It'd have been lower. I don't know.
Just off the top of my head, but I would say 15% to 20%. Obviously, years ago, starting from 0.
Operator
Bill Greene, Morgan Stanley.
William J. Greene - Morgan Stanley, Research Division
Can I just ask you, Wes, to sort of come back to the comments you were making just on the growth rate spread over the industry? We see some of the competitors trying to do different things on pricing, and maybe their cost and maybe to some extent try to mimic what you guys have done so successfully.
Have you not noticed that at all in the market? Do you not see any sort of market impact from what folks at some of the competitors are trying to do on lane-based pricing or costs?
J. Wes Frye
Well, obviously we do. But we all are assuming that they are progressing and we're standing still, and I think that we steal opportunities to keep improving our operations.
Although as David already mentioned, we're pretty darn efficient. But we don't plan on standing still, so in terms of not only our efficiency, but on our focus on customer service.
William J. Greene - Morgan Stanley, Research Division
Yes, okay. And then the second question is, we're seeing obviously a lot of growth in industrial productivity or production, I should say, going into places like Mexico.
Can you talk at all about your ability to tap into some of that growth?
Earl E. Congdon
Yes, we have a service into Mexico for at least a dozen years. And that's a lane that's growing for us, but it's not a very big one, but we're doing okay in there.
We haven't really seen a big -- any major changes, though, on -- as it relates to more production taking place in Mexico.
Operator
Next we'll hear from Art Hatfield at Raymond James.
Alex Scott
This is Alex in for Art today. If I could circle back to your comments on the too big economic environment, just curious if you're seeing any pockets of strength geographically or maybe any markets where you're seeing outsized market share gains?
Earl E. Congdon
I can't say there are due when we look at our growth geographically by region, it's pretty healthy across the region. Obviously, the percentage will be different as the maturity of different regions are at different levels, but still, we're seeing pretty good growth across all regions.
Operator
David Campbell of Thompson, Davis & Company.
David P. Campbell - Thompson, Davis & Company
I just have a couple of questions. First one is when -- what about yields per pound?
Is there some point in -- from your history that you can feel like that -- the potential loss of traffic to other modes of transportation or truckload transportation, because the yields go up so much, and the customers are saying no more, we'll find some other way to transport it. Do you ever get to that point?
Earl E. Congdon
Well, David, I think that the segments of the transportation industry are going to -- will be here forever. You're always going to have parcel.
I think you're always going to have LTL, you're going to always have full truckload. To the extent, over the years, there's been some mobile shift that occurs all the time.
I think the parcel carriers have upped the weight limits that they handle shipments. Some of the truckload carriers try to pick off on the higher-weighted LTL shipments and then put together multi-stop truckloads.
And over time, those shifts occur. But I'd say that's something natural that's been occurring and will continue to occur, but not everyone can buy a full truckload of product, so they're going to buy in LTL quantities.
And then as you're seeing the proliferation of more people buying things over the Internet, you might see an increase in personal traffic. But everywhere that people order this stuff online from distribution warehouses, those warehouses are receiving LTL inbound, they're receiving truckload inbound, I mean, there will be a shift, but there will clearly be an LTL marketplace out there for us for the future, as we see it.
David P. Campbell - Thompson, Davis & Company
But you have not seen -- I mean, you would see it in your customers requesting, for some reason, either a truckload shipment or combining 2 or 3 less-than-truckload shipments into 1, you haven't seen any of that, in general?
Earl E. Congdon
I think you may see it more the other way, as some of these CSA rules and hours of work rules become effective. And it'll be the truckload carriers that will get pinched more than LTL but you might see some of that divergence the other way, that you might see what would be normally truckload shipments being split up into LTL shipments to get it moved because of lack of capacity in the truckload sector.
David P. Campbell - Thompson, Davis & Company
And the last question is, number of employees, can you give us the number of employees in the second quarter?
Earl E. Congdon
Yes. You have another question until I find it?
David P. Campbell - Thompson, Davis & Company
Not really but...
Earl E. Congdon
13, 3
J. Wes Frye
Yes, hold on a second, I'll give it to you.
David P. Campbell - Thompson, Davis & Company
You have done a good job of answering all the other questions so there's nothing much left, at least that I have.
J. Wes Frye
Our -- at the end of the quarter, you're right. Earl already said, it was 13,303.
Operator
Thomas Kim of Goldman Sachs.
Thomas Kim - Goldman Sachs Group Inc., Research Division
If I could just piggyback off the last comment on e-commerce. To what extent is your business already enjoying some of the benefits of the growth in that industry?
And then, could you perhaps talk about how you see e-commerce possibly -- or how your company's considering strategic developments around that business or that vertical showing your long-term structural growth prospects?
David S. Congdon
Well, as far as the long-term view on it, and we're going to play in the market, that's yet to be determined, but it's certainly something that we have to consider. I don't think that, as -- that we've seen a tremendous change in our business because of the increases in e-commerce over the last few years.
I think one thing that -- people want their product quickly, and we've had a proliferation of more and more regional distribution centers. So the regional side of our business, the next day and 2-day freight has been growing.
And we've, had positioned ourselves in end markets, regional markets all over the country because of that. So to some extent, we've, I think, enjoyed some of the benefits of e-commerce.
Thomas Kim - Goldman Sachs Group Inc., Research Division
And if I could just dig a little bit deeper into the market share gain commentary. Obviously, it's very impressive.
I was wondering if you could give us a sense of how much of those gains are coming from existing customers, versus winning new business? And then as we look further forward, as you continue to gain share, do you expect that additional market share gain to come incrementally, at maybe a higher costs?
Do you think you need to spend a little bit more on whether it's marketing or more salespeople, or in terms of just other operations that might sort of incur incremental additional cost and what incremental impact that might have on margins, going forward.
David S. Congdon
Well, Thomas, our -- obviously, when you're gaining market share, it's a good mix of both, between winning new customers and growing with existing customers. We see that in our numbers as we track customer activity.
So it's just a good mix of both. I'm not sure I quite got the second half of the question, in terms of -- were you asking was there going to be any additional cost involved?
Thomas Kim - Goldman Sachs Group Inc., Research Division
Yes, just so -- as you gain share, I was wondering to what extent the share gains may come at, sort of an incremental additional cost, whether you need to hire more salespeople, or whether there's more possibly sort of incentives in terms of pricing or whatnot, that might result in possibly dampening impact on margins, going forward.
David S. Congdon
Not really. I would say this, our overall cost of our network, our business model, the cost of winning market share is already embedded in the costs that you see, within the 83.5% operating ratio.
And we wouldn't see any major or anything out of the ordinary costs that we would have to increase to continue winning market share. It's just pretty much inherent in our business model now.
Operator
Jason Seidl, Cowen and Company.
Jason H. Seidl - Cowen Securities LLC, Research Division
At this stage, Wes, I just have a clarification. You said 6.5% tonnage growth in 3Q.
Is that a tonnage per day growth number, or total for the quarter?
J. Wes Frye
That range was 6% to 6.5%, Jason, and that is per day.
Operator
And it appears there are no further questions at this time. I'll turn the conference back over to Earl Congdon.
Earl E. Congdon
Well fellas, as always, we thank you for your participation today, and we appreciate those great questions and your support of Old Dominion. Please give us a call if you have any further questions and have a great day.
Goodbye.
Operator
And that does conclude today's conference. Thank you all for your participation.