Feb 6, 2014
Executives
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 William J.
Greene - Morgan Stanley, Research Division Christian Wetherbee - Citigroup Inc, Research Division Jason H. Seidl - Cowen and Company, LLC, Research Division Scott H.
Group - Wolfe Research, LLC Thomas Kim - Goldman Sachs Group Inc., Research Division Justin B. Yagerman - Deutsche Bank AG, Research Division David G.
Ross - Stifel, Nicolaus & Co., Inc., Research Division Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division Alexander K.
Johnson - JP Morgan Chase & Co, Research Division Matthew S. Brooklier - Longbow Research LLC A.
Brad Delco - Stephens Inc., Research Division David Pearce Campbell - Thompson, Davis & Company Matthew Young - Morningstar Inc., Research Division Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
Operator
Good morning, and welcome to the Fourth 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 February 20 by dialing (719) 457-0820.
The replay passcode is 5701390. The replay may also be accessed through February 20 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] At this time, for opening remarks, I would like to turn the conference over to the company's President and Chief Executive Officer, Mr. David Congdon.
Please go ahead, sir.
David S. Congdon
Good morning, and thanks for joining us today for our fourth quarter conference call. Earl Congdon who normally leads off our remarks is traveling today and unavailable for the call.
With me this morning is Wes Frye, our CFO. And after some brief remarks, we'll be glad to take your questions.
As you've seen from our news release issued this morning, Old Dominion produced record fourth quarter results to close out a record annual financial performance for 2013. For both the fourth quarter and full year of 2013, our revenues and earnings were the highest ever and our operating ratio for each period has never been better.
During the fourth quarter, we continued to gain market share, improve yield and deliver the high-quality service that our customers expect. In addition to our substantial operating momentum entering 2014, our balance sheet at the end of '13 has never been stronger.
While we expect to continue investing significant capital to expand our operating capacity and technology platform, we also expect to fund our capital investments almost entirely through operating cash flow. Our commitment to improving density, yield and productivity, combined with a positive economic environment, have resulted in sustained high performance and an operating ratio that leads the LTL industry.
During the first -- excuse me, during the fourth quarter, our 10.9% increase in tons per day resulted in record revenue per terminal, per door and per employee, which provided operating leverage to produce a record fourth quarter margin for the company. We haven't seen all the industry statistics yet for the quarter, but based on the reports of our peers to date, we are confident our increase in tons per day and our 9.4% growth in shipments represents another meaningful increase in our market share and density.
As we have also discussed for the past few quarters, changes in freight mix and other factors directly impact our yield. The company's revenue per hundredweight excluding fuel surcharge of 1% for the fourth quarter reflects, in part, the negative impact on this metric of a 1.4% increase in weight per shipment and a 0.9% decline in length of haul.
Wes will later discuss the impact of mix on our yield metrics, as well as reporting our tonnage and revenue per hundredweight data going forward. Our yield discipline and philosophy have not changed.
We analyze the cost of each customer and shipment and base our rates on our internal operating ratio targets for the services provided to that particular customer. We experienced slight declines in productivity in our dock and pickup and delivery and linehaul operations during the fourth quarter.
A portion of these declines were caused by inefficiencies associated with bringing on and training new employees in the third and fourth quarters, as hiring ramped up in the third quarter to address higher volume and more restrictive hours of service regulations. In addition, severe winter weather that began in December also had an impact on productivity as we act in these situations to protect our service standards even at the expense of productivity.
Our service performance remained best in class for the fourth quarter and included a 20% improvement in our cargo claim ratio to a 0.32% from a 0.40% of revenues in the fourth quarter of 2012. In addition, we continued to exceed 99% for our on-time delivery record.
On total, productivity losses due to our unfailing emphasis on best-in-class service cost us about 60 basis points on our operating ratio for the fourth quarter. While we expect to fully recover this lost productivity, the fact that we produced a company record fourth quarter operating ratio demonstrates the fundamental strength of our people and our operations strategies.
To summarize, Old Dominion had a strong fourth quarter and a great 2013. We entered the new year very well positioned to continue gaining market share and increasing density yield and productivity.
Our commitment to our value proposition is stronger than ever as is our commitment to investing in our people, capacity and technology infrastructure. I'll note the increase to $47 million in our 2014 CapEx budget for technology and other assets.
This increase reflects the beginning of a 3- to 5-year process to expand and enhance our technology platform to prepare for our anticipated growth trajectory over the next 10 to 20 years. As part of these growth expectations, we are positioning Old Dominion to expand its market share into the double digits from the mid-single digits today.
With our long-term record of profitable growth and strong market position, we are confident in our ability to leverage the growth opportunities before us, achieve our long-term operating and financial objectives and produce additional long-term growth and shareholder value. Thanks again for being with us.
And now I'll ask Wes to review our financial results for the fourth quarter in greater detail.
J. Wes Frye
Thank you, David, and good morning. Old Dominion produced its second consecutive quarter of double-digit growth in revenues for the fourth quarter of 2013 with revenues of $592.5 million, an increase of 11% from $533.8 million for the fourth quarter of 2012.
For the quarter, our revenue growth reflected a 10.9% increase in tonnage per day, a 9.4% increase in shipments per day and a weight per shipment increase of 1.4%. Revenue per hundredweight decreased 0.3% for the fourth quarter and the revenue for a hundredweight excluding fuel surcharge rose 1%, despite the increased weight per shipment and almost a 1% decline in length of haul.
Sequentially through the fourth quarter, tonnage per day decreased 4.6% for October from September, increased 5.2% for November and decreased 8.4% from December compared to November. This trend was, on average, comparable to the 10-year sequential month change, which decreases about 2.5% for October, increases 2.9% for November and decreases about 8.4% for December.
Year-over-year tonnage per day during the quarter increased 8.5%, 10.3% and 15.4% for October, November and December, respectively. Year-over-year tonnage per day for our LTL transportation services in January was up 11.6%, and we expect tonnage for the first quarter of 2014 to increases in a range of 10% to 11% compared to the first quarter of 2013.
Both quarters have the same number of work days. Previously we discussed how revenue per hundredweight differences are impacted by change in freight mix and our non-LTL services, which include drayage, truckload brokerage, global forwarding, supply chain consulting and warehousing.
The revenue for the non-LTL services are predominantly determined on a mileage load or container basis unlike LTL revenue, which is more weight based. After excluding these non-LTL services from our calculations as reported, our LTL revenue per hundredweight excluding fuel surcharge actually increased 2.6% for the fourth quarter of 2013 compared to the same quarter of 2012, while LTL weight per shipment increased just barely 0.10% and length of haul declined a full 1%.
We believe this change in how we are discussing this will better reflect changes in the LTL yield. Our LTL transportation services make up 97% of our overall revenue.
And going forward, we will produce revenue per hundredweight and certain other operating metrics, which will exclude the non-LTL services, thereby eliminating this mix variable and the revenue per hundredweight equation. Revenue per hundredweight excluding fuel surcharge for our LTL transportation services increased approximately 2.4% in January, and we expect it to be in the range of 2% to 2.5% for the current quarter.
This range is consistent with our expectation for continued mix changes toward the higher-weighted contractual business and a decrease in the length of haul due to increased volume in our next day and 2-day regional lanes. Turning to our operating ratio.
We had a 40 basis point improvement for the fourth quarter of 2013 to an 87, which is our best fourth quarter margin performance ever. We had a second consecutive quarter with 150 basis point decline in operating supplies and expense, reflected continued savings from fuel purchase strategies, fuel efficiency and fleet maintenance cost.
In addition, we continued to benefit from the disposal of unused service centers due to our relocation to larger service centers, as well as reductions in leased service centers as we purchase new centers. However, these gains were mostly offset by 160 basis point increase in salary, wages and benefits, driven by slight productivity headwinds, increased group health costs, workers' compensation expense and required adjustments to our stock-based retirement plan.
Capital expenditures for the fourth quarter were $66.4 million and $295.6 million for the entire year of 2013. We estimate that CapEx for 2014 to total approximately $342 million, including planned expenditures of $132 million for real estate; $163 million for tractors, trailers and other equipment; and $47 million for technology and other assets.
We'd also expect sales of assets during 2014 to be approximately $9 million for a total net CapEx of approximately $333 million. 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 13.4% at the end of 2013, down from 19% at the end of 2012. Our effective tax rate for the fourth quarter of 2013 was 37.2% compared to 38.6% for the fourth quarter of 2012.
And we expect our effective tax rate for 2014 will be approximately 39%. This concludes our prepared remarks this morning.
And operator, we'll be happy to open the door for any questions at this time.
Operator
[Operator Instructions] We'll take our first question from Allison Landry with Crédit Suisse.
Allison M. Landry - Crédit Suisse AG, Research Division
I guess if you could just clarify what you're saying about yields excluding the non-LTL services being up 2.6%. Does that also exclude the changes in weight per shipment and length of haul?
Or does it include those changes?
J. Wes Frye
Well, Allison, what we'd normally reported is just total tonnage in total statistics for the entire company, which we include -- which includes our drayage application our brokerage and other, what we call, non-LTL. And really the yields or the revenue per hundredweights on those really aren't relative because they're not really weight based.
They're more of a mileage and load based, so we're just giving back -- we're just getting -- as those grow then the distortion of mix becomes more material. So we just decided to start doing what most of the other LTL companies do in reporting the LTL statistics only, without these non-LTL numbers.
So to answer your question, that 2.6% increase excludes those non-LTL, but it does include the effect of the length of haul and the weight per shipment of the LTL transportation services.
Allison M. Landry - Crédit Suisse AG, Research Division
Okay, that's what I was getting at. And could you quantify the negative effect or drag that it had on the 2.6%?
J. Wes Frye
What we reported -- we will be -- what we reported, if you'll recall is only a 1% increase in revenue per hundredweight for the total company. So when you exclude these non-LTL services, that becomes 2.6%.
So it has a tremendous effect on the mix. And that's obviously a big reason why we're making the change.
David S. Congdon
I think that her question is whether the length of haul and the weight per shipment, what amount of drag that have on the 2.6%? We did -- it's hard to...
J. Wes Frye
We don't have an algorithm to calculate that.
Allison M. Landry - Crédit Suisse AG, Research Division
Sorry for my confusing question.
J. Wes Frye
It does have a drag. Both -- because both of them, both the decreased length of haul and increased weight per shipment has a negative effect on revenue per hundredweight, but I'm not sure what that is.
Allison M. Landry - Crédit Suisse AG, Research Division
Okay, that's fair enough. That was very helpful.
And just sort of as a follow-up question in terms of pricing, did you see any irrational behavior by any of your competitors during the fourth quarter just given some of the financial and union troubles at one of your competitors? Was anyone behaving a little bit differently?
David S. Congdon
Allison, the answer is no. We continue to see relatively stable pricing environment.
Operator
We'll take our next question from Bill Greene with Morgan Stanley.
William J. Greene - Morgan Stanley, Research Division
Wes, can I ask for just a little bit of clarification on thinking through kind of sequential changes in OR? Should we be adding -- or sorry, subtracting out 60 basis points from the OR in fourth quarter to use or a base that adjusts for some of these productivity headwinds?
And then when we think about the weather impact in first quarter, how will that affect how this sequential -- the historical sequential change, I think, is about 170 basis point. So I just want to make sure we think about that kind of re-basing for all these moving parts.
J. Wes Frye
Yes, I mean there was -- the 60 basis points that David mentioned includes not only the headwinds from weather but it includes complying with the hours of service regulation. And so that's -- that would be ongoing.
What's relative to weather obviously wouldn't be ongoing except for, as you well know, January and starting in February still has pretty significant weather issues. So there could be some drag in the first quarter on our productivity as we still try to maintain a 99% on-time service.
We don't -- we're not discussing the first quarter in that level of detail at this point.
William J. Greene - Morgan Stanley, Research Division
Yes, I understand. Now in the past, when we saw hours of service rules change, didn't it benefit you from a tonnage growth standpoint?
Do you think it's doing so this time, even though it's causing, of course, some productivity headwinds? When it nets out, is it a net negative for you?
J. Wes Frye
The hours of service change, what it basically did is it took away some income from our road drivers and our city drivers who historically have made extra trips on the weekends. They'd be able to reset their time and be able to go back into their normal schedule beginning on Monday.
And so consequently, we ended up having to hire some number of additional people in the third quarter that carried on into the fourth quarter to pick up the slack, to run those extra trips on the weekend. So -- but from a linehaul standpoint, that didn't necessarily cause linehaul cost to go up.
It's more of the fact that we're providing benefits to those -- and training to those excess people that are picking up the slack to move our freight. That's the primary result of the hours of service change.
William J. Greene - Morgan Stanley, Research Division
Right. But you didn't get any benefit on the tonnage side, you don't think?
Or you can't measure it?
J. Wes Frye
No. I mean, when we look at our spot quotes, which you know is not really truckload, it's really 8,000 to 9,000 pounds there's no real change there.
And we -- since we're not a truckload carrier, we manage that very -- on a very fine basis to make sure we don't get a lot of it. And if we do get a lot of it, we make sure it's priced profitably.
Operator
We'll take our next question from Chris Wetherbee with Citi.
Christian Wetherbee - Citigroup Inc, Research Division
Just one more point of clarification, just on the pricing side. If I look at that 2.6% pricing in the fourth quarter for the LTL business x fuel, how does that compare to maybe the last couple of quarters of 2013?
So thinking about second and third quarter going into fourth quarter. I just want to get a rough sense of how that compares.
J. Wes Frye
I'll remind you, Chris, that, that's yield, not pricing. I think we reported a number of about -- in the fourth quarter, I think it was about 3.8%, so it was up.
Christian Wetherbee - Citigroup Inc, Research Division
Okay. I'm just trying to get a rough sense of sort of apples-to-apples looking at LTL versus the non-LTL.
J. Wes Frye
To you tell the truth, at this point, I haven't recalculated going back in what the increase over 2012 was for those other quarters. But it would be obviously a little bit higher than what we reported because of that.
In the fourth quarter, we actually reported 3.6%. And if you take the same spread, it would have been definitely higher than 3.6%.
I'm not sure what -- exactly what that number is at this point.
Christian Wetherbee - Citigroup Inc, Research Division
Sure, okay. No, that's helpful.
I appreciate it. And then when you think about the continued push on market share and sort of the further expansion of the company over the next several years as you grow that share into double digits, I guess, I just want to get a rough sense, how do you think about that potentially impacting your ability to sort of keep pace with incremental margin guidance that you've historically given us?
Is there any -- does there become a point where that changes at all? It doesn't seem like that's something we should be thinking about for 2014.
But I guess, that's, I guess, sort of bigger picture, just kind of get a rough sense as to how I think about the ability to translate that growth into profitable operating income.
David S. Congdon
Keep in mind, Chris, that we've never discussed our incremental margins in terms of what they have been in the last couple of years, which had been in the 25% to 30% range depending on the quarter. We've always discussed the incremental margins should fall in the range of 15% to 20%.
So we're obviously mindful going forward that as we grow and take more market share that clearly your margins might drop some, although 15% to 20%, still that's allowing for improved margins overall. So -- and the other thing I'll point out again, I think I've shared this numerous times in the past, but there's 3 or 4 key ingredients to having good incremental margins.
One is improving density across the network. Two is a stable yield environment.
Three is continuously improving efficiencies in your operations. And the fourth one would be a generally decent economy.
Because if the economy goes south, it will tend to have impacts on those ingredients. But -- so going forward, we see the continued ability to gain market share and density.
There is no doubt that we believe we're seeing it happen, and we believe that will continue. The yield environment is stable right now.
We're getting good pricing. I think the way that we're looking at the yield or at least presenting it to you now and going forward will give a better reflection of how we're doing with our yield.
Efficiency improvement is a continuous process in our company, so we're gaining there. And the economy is predicted to be a little stronger for '14 than it was in '13.
So I think that, that bodes for good incremental margins in '14. We have a lot of slack, a lot of excess capacity we were filling over the last 2 or 3 years, which helped contribute to the very strong incremental margins that we posted.
But as Wes said, we -- going forward, 15% to 20% is a good range, and hopefully, we'll exceed that range.
Operator
[Operator Instructions] We'll now take our next question from Jason Seidl with Cowen.
Jason H. Seidl - Cowen and Company, LLC, Research Division
When I think about your growth, obviously you're far exceeding your peers in terms of tonnage and you guys are taking market share. Can you talk to us about the terminal network?
And are there any pinch points that are going to be coming up that will keep your CapEx a little bit higher to accommodate all those growth?
David S. Congdon
Jason, our network right now is in really good shape with good excess capacity. Our breakbulks are in great shape.
We don't have any pinch points in the network today. You -- as we announced, we are continuing to invest about $132 million in real estate this year, and so it's -- a lot of different projects across the network.
But that's just a result of the growth that we've been experiencing. And we have outgrown some centers, but we don't have any services pinches in the network right now.
J. Wes Frye
I'll mention, Jason, that the $132 million, when you've got $220 million and you own about almost 80% of them, you've got a lot of also maintenance and upkeep that are capital in nature even on your existing facilities. That is paving, reroofing and things you've got to do to maintain it in best-in-class service.
And we -- and that $132 million includes a lot of just capitalized improvements in our existing facility, not necessarily new facilities. And those LTL carriers that aren't spending very much on real estate, you wonder -- sometimes you wonder why that they aren't maintaining.
But we keep our facilities in tip-top shape, in beautiful order. And I know you've seen them -- some of them and know just how nice they look.
And that cost you something. But on the other hand, it's a good motivating factor for the employees that work in that environment.
Jason H. Seidl - Cowen and Company, LLC, Research Division
I am not so sure I'd eat off the floor, but it's pretty close, Wes. When I think about weather, you had Con-way go this morning, and they had some very dire forecast in terms of just what weather hit them for January.
I just want to be clear sort of about some of the near-term headwinds for you guys with weather and what you are inferring on the OR. Were you talking about another 60 point -- basis point hit for 1Q?
Or is that sort of up in the air? And could that be higher based on how February started?
J. Wes Frye
Well, as I mentioned earlier, we're not giving any guidance on January other than our growth. I think I -- it will have an effect, just as December had an effect.
And so, I mean, there will be an effect. We're not sure ultimately what it is because, as you know, weather issues hurt you while it's happening.
But a lot of that freight comes back; and therefore, helps density when it comes back and should provide you some good positive results going forward. If we ever get out of the weather situation, which sometimes it might be until April, who knows.
Jason H. Seidl - Cowen and Company, LLC, Research Division
Well, I hope not, Wes.
J. Wes Frye
What the ultimate effect on that is still not determined. The fact -- if you recall, the fact that we were up 11.6% in tonnage for LTL transportation in January, you -- and includes the weather effect is pretty strong.
Operator
We'll take our next question from Scott Group with Wolfe Research.
Scott H. Group - Wolfe Research, LLC
So, Wes, just wanted to follow up on that last point about the tonnage in January. What -- do you have any idea what weather cost you per tonnage?
And I'm a little surprised that you're expecting full quarter tonnage to be less than January given that weather probably hurt January and the comp doesn't seem to be much tougher in February, March. Is there something we're missing on the tonnage guidance?
J. Wes Frye
You're not missing it. It is what it is.
And we were up 11.6%. At -- how much we lost, it was kind -- I think probably there was about 7 or 8 really bad days around the system that we lost and it would come back fairly strongly a couple of days after that.
So what the net-net is -- but probably cost us at least a couple of million in January just on revenue, just due to the weather. I don't -- we don't -- we're not sure what to expect in February, March.
March, if you'll recall, was kind of a strange month with the Easter falling on the last day of the month in the quarter. So in some sense, that might be a fairly -- an easier comparison but we'll just have to wait and see.
Scott H. Group - Wolfe Research, LLC
Yes. I guess, that's why I was surprised you're expecting 10 to 11 for the quarter when you're already up 12 despite weather in January.
J. Wes Frye
Are you saying it's conservative?
Scott H. Group - Wolfe Research, LLC
I'm just wondering if it's conservative or if there's something we're missing that is causing it to accelerate in the next few months?
J. Wes Frye
I -- well, I'll say that probably during January when YRC was in their negotiations and lost the first teamster vote, we did get some transition of revenue during that January month that has probably been, I guess...
David S. Congdon
That may or may not stick.
J. Wes Frye
That may or may not stick as they are getting closer and closer to an agreement into a refinancing.
Scott H. Group - Wolfe Research, LLC
Okay, that makes sense. And then I don't know if I missed this, did you guys give some numbers around the incentive comp and the health and benefit costs in fourth quarter?
Do you have a view on what kind of year-over-year change we should expect on those 2 lines in 2014?
J. Wes Frye
Yes. The group health has been a headwind going forward.
Now -- we're not clear at this point whether group health will continue into the first quarter or even into 2014. We're thinking possibly to avoid some of the increased cost in 2014 that we had a lot of our employees to accelerate any health issues.
And whether that is kind of a -- was a spike in -- especially the latter half of 2013, we're not sure at this point. We'll have to wait and see.
So I can't really answer that question, whether that will be -- the group health would be an issue going forward. But I expect it will not decrease materially.
Now on the retirement benefits, that was about $3 million accrual in the fourth quarter and that changes each quarter based on the stock price. And so while that was a negative in the fourth quarter, may be -- may or may not be in the first quarter.
But it was pretty much an offset to the real estate gains that we had. So that was kind of a wash against that.
Operator
We'll take our next question from Thomas Kim with Goldman Sachs.
Thomas Kim - Goldman Sachs Group Inc., Research Division
Let me just start off with one quick question on the real estate gains. Can you specify how much you earned in the fourth quarter related to that?
And to what extent can you provide guidance as to further asset disposals during the course of this year?
J. Wes Frye
The gain on real estate was a large gain that we had on one particular facility. It was about $3 million.
We do have obviously still unused facilities that we will be selling in the -- in 2014. But at this point, we're not totally clear about the gains.
Though more likely, there will be some gains. In what quarter and how much, we're not disclosing or maybe not even know the number at this point.
Thomas Kim - Goldman Sachs Group Inc., Research Division
Okays. And just to follow on with one of the earlier questions on your long-term margin opportunity.
Obviously, these share gains are going to invariably lead to earnings growth. And I'm just wondering you obviously can achieve earnings growth through both top line and margin expansion.
But I'm wondering to what extent would you be willing to accept lower margin instead of the expense of faster revenue growth as you potentially have the opportunity to increase your volumes a little bit more sort of quickly.
David S. Congdon
Tom, we have a value proposition in -- at Old Dominion of delivering a really strong service product, and it costs money to deliver that product. We're not going to compromise our yield management processes to deliver -- to be able to arrive at a fair and equitable price for the services we provide to our customers, so that we can continue investing in the business, to continue to give -- to deliver this high-value service.
So the answer is, no, we're not going to compromise yield just for the sake of tonnage.
Operator
We'll take our next question from Justin Yagerman with Deutsche Bank.
Justin B. Yagerman - Deutsche Bank AG, Research Division
I wanted to just get a housekeeping question out of the way. The 2% to 2.5% revenue per hundredweight guidance that you gave for Q1, Wes, that compares to the 2.6%, that adjusted number?
Or does that compare to the 1%...
J. Wes Frye
No, that compares to the adjusted number, for just the LTL transportation, Justin.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Okay. And just curious why you think that, that takes a little bit of a step-back here.
It feels like the spot market was tight in the fourth quarter, at least on the truckload side, should kind of have a psychological impact as we go through bid season and with this weather, if we ever get some catch-up going on, you'd think that capacity is going to tighten across the board a little bit. Maybe I'm being wildly optimistic here.
But I mean, I'm a little unclear as to why you think you would take a step-back, so just kind of curious.
J. Wes Frye
No, I mean, what we did see in January is 2.4%, so we gave a range. What we don't see, which could be a better environment going forward into February, March, could be, but that's just a range that we're giving.
We don't see it as a step-back. You've got year-over-year comparisons as well.
And so sometimes a percentage increase is comparable against a period that has a more robust increase in yield. So...
David S. Congdon
The difference is 0.5%.
J. Wes Frye
Yes. The difference between 2.6% and 2.5% at the high end is a lot of...
Justin B. Yagerman - Deutsche Bank AG, Research Division
Yes. All right, maybe I'm splitting hairs there a little bit.
In terms of the hours of service commentary. Where is that really impacting you guys?
Why is that an LTL issue?
David S. Congdon
The biggest issue with it, Justin, is take city drivers that work 5-day week and they want to run an extra trip on the weekend to boost their income, they are then able to reset their time, if you will, to go back for work on Monday. And the same thing is the case for a lot of our road drivers.
City drivers that get into that has been the ones that are required to log based on going [Technical Difficulty] night and Monday morning. And they go back out on their linehaul schedule Monday night.
But they're not now not able to do that because of the 34-hour restart provisions that the new law put in place, requiring the 2 consecutive periods off. And so these guys have lost income and we've had to replace them and had to hire additional road drivers and rework various of these other schedules to be able to pick up the slack.
When we -- when this thing first went into place, on the first 2 weekends of it going into place back in July, we lost nearly 250 weekend dispatches that were being handled by city drivers and/or road drivers picking up those extra -- that extra slack. So we had to cover 250 dispatches on weekends with additional people on the payroll.
Justin B. Yagerman - Deutsche Bank AG, Research Division
This administration seems good at destroying jobs. Looking at the market share commentary you guys made and the step-up in CapEx, Wes, kind of curious how you think about the way that market share should proceed on an ongoing basis.
I mean, at 10% or so revenue growth, you guys are probably 7 or 8 percentage points above industrial production, when I think about trying to benchmark what a market is doing for LTL. What do you think is sustainable for you guys in terms of if the market's x, we can do x plus y?
What's that y number?
J. Wes Frye
Well, we've historically -- our tonnage growth has exceeded the sector anywhere from 300 to 500 basis points. So I think we can still sustain that with our business model and our best-in-class service going forward.
As David had mentioned, we think that certainly within -- in some finite time frame, we'll get from the mid-single-digit market share to double digit.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Okay. And the last question, sorry to ask a few here, what's the deferred tax headwind that you're going to face in '14 if bonus depreciation isn't renewed?
J. Wes Frye
It's not -- the biggest thing is the fact that the propane credits, which were available to us in 2013, we don't think that they'll be available to us in 2014. In fact at this point, they won't be unless something changes in Congress or with the regulations.
Justin B. Yagerman - Deutsche Bank AG, Research Division
Okay. So do you have any kind of -- is that part of the reason the tax rate is up where it is?
Or...
J. Wes Frye
It is, yes.
Operator
We'll take our next question from David Ross with Stifel.
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
As you look out for that future growth and are expanding the network, it sounds like you're planning on growing all organically. But would acquisitions potentially play a part in any of the growth?
Or you had decided now where it really doesn't make a lot of sense?
David S. Congdon
On the LTL company, we are basically covering the entire United States with 223 service centers now and 100% coverage in the 48 states. So we do not need an LTL acquisition to help us expand geography or to help us expand any real coverage.
So therefore, we'll be looking primarily at organic growth and we still have that 35 or 40 service centers that we would add in various states to enhance our coverage in those states and enhance our ability to increase out our market share in certain areas. So I see it primarily that way.
Our businesses outside of the U.S., we have agency relationships in Canada, in Mexico, Alaska, Hawaii that out of those, there could be an acquisition perhaps in those areas would be a possibility. But we're very happy with the relationships we have and the service levels that we have to and from those market.
So today -- so acquisitions oftentimes come across our desk in our asset-light areas and in our -- the drayage and perhaps warehousing and freight forwarding and things like that, that we look at and it makes sense, strategic sense and financial sense for us to pursue one of those, we will.
David G. Ross - Stifel, Nicolaus & Co., Inc., Research Division
Sounds great, also sounds like you're not losing any customers because you don't have those other services. As far as average fleet age is concerned, where is your tractor fleet today?
Do you think it's going to go any lower? How are you managing that?
David S. Congdon
The -- the fleet replacement program is pretty well stable along the lines of what we have been discussing for years. We -- during the downturn in the economy, we continued our replacement cycles through that period.
And now that we're back into a little bit more of a stable economy, I'd say we're just -- we're right on with our replacement cycle. Our team trucks will run 4 to 5 years and 1 million miles.
And our conventional non-sleeper equipment, we run them and linehaul for 4 to 6 years. And then we go into city operations for another 4 to 6 years.
And the trucks that we sell, the conventionals are -- will have -- will be anywhere from 10 to 12 years old and 800,000 to 1 million miles. So we get all the goodie out of them, and that's where we are.
J. Wes Frye
Dave, our average age just on our linehaul fleet is probably around 2.5, 2.6 years. So that's what we think is fairly optimal.
And that's where we're at. We got a little bit higher than that during the downturn in '08 and '09 to maybe 3 years, and then we spent 2010, 2011 getting that back down.
So we're pretty pleased with our average age and think it's pretty close to optimal.
David S. Congdon
And it's showing up in our maintenance expenses, too. We've had a real stable maintenance cost per mile for the last 3 years, and a lot of that is attributable to good management.
I'd throw that in for our VP of Maintenance and all of his team. But also the fleet age, we think, is pretty much in an optimal state.
Operator
[Operator Instructions] We'll now take our next question from Todd Fowler with Keybanc Capital Markets.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
David, your comments on the IT CapEx and the beginning of a 3- to 5-year process, is that 3- to 5-years to roll out the new technology platform? Or is that 3- to 5-years of investing in the entire network, so technology terminals, everything else you need to hit those market share targets that you have?
David S. Congdon
What we announced today is $47 million for technology and other assets and $38 million of that $47 million is for our technology platform. Our general run rate over the last several years for technology has been $15 million to $20 million.
Therefore, what we're looking at for 2014 is an additional $20 million over and above a normal run rate, and here's why: As you all know, our historical growth over the last 10 to 15 years has been quite significant. Now the systems that we have in place today and have had over this period of time are excellent and have definitely facilitated the growth of the company.
But much of our legacy software was written 10, 20 and even 30 years ago. And as we look at our vision for the next 5, 10 and 20 years, we see a need to continue building a platform to support that growth.
So we are embarking on a process to modernize our systems, which involves the following: First of all is a change in our mainframe platform. I'm not at liberty to discuss that any further, what it is exactly.
We will be increasing our scalability, so that we can accommodate our growth. We will be enhancing our redundancy and our speed.
We will be -- as we go along with this process, we'll be improving the efficiency of our business processes. We will enhance management tools for improving service and efficiency.
And lastly, enhancing our customers' experience. And that's where -- but this initial outlay this year of this $20 million is the investment in the new platform that we are migrating to.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
And so does that imply that there's going to be -- I mean, so if it's $20 million higher than your normal IT spend in '14, is there going to be another $20 million over the next couple of years? Or is this the big chunk of it?
David S. Congdon
This is the big chunk of it. And we should return back to an annual spend in the $15 million to $20 million range for IT going forward.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay. And then just my follow up, Wes, what does that do to your depreciation numbers?
I guess, maybe -- and if you have a number for depreciation in '14, I'm not sure if you gave it or I just missed it. But what does that do for...
J. Wes Frye
We haven't given that as yet, Todd.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Do you want to do it now? Or...
J. Wes Frye
No. That's a forward-looking information we're not providing at this point.
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Okay. Well, let me ask it this way: Is there something that you know where it's just going to be the investment on the IT side and then once the system goes live, you'll start depreciating at some point going forward.
J. Wes Frye
Correct. I mean, we obviously will start depreciating that as we take on this additional $20 million this year.
And so that will affect the depreciation -- increased depreciation, obviously, for the next 3 to 5 years for IT. So I mean, that's a fact.
We typically depreciate IT over 3 to 5 years. But since this is a longer-term investment for the longer term, then we may find that we'll be able to depreciate that over a more -- a greater length of time.
We're still in process of evaluating that.
Operator
We'll take our next question from Tom Wadewitz with JP Morgan.
Alexander K. Johnson - JP Morgan Chase & Co, Research Division
It's Alex Johnson on for Tom. The question I wanted to ask, there was an earlier question about impact from one of your union -- competitors and their labor negotiations.
One of the other unionized carriers is going to be going through a network change here in the first quarter, and you guys know the balance between service and price really better than anyone. So I guess, I'm curious whether you think there is an opportunity to maybe pick up some share as that process is ongoing at one of your competitors?
David S. Congdon
I -- that remains to be seen. We don't know if and when or what that would be at this point.
Alexander K. Johnson - JP Morgan Chase & Co, Research Division
Okay. Well, have you -- I don't know.
Historically, have you seen when some of your competitors have closed terminals that maybe some of the customer base will look to migrate to Old Dominion?
David S. Congdon
Well, generally speaking, any time any of our competitors have operational issues or network change issues or things that impact their service in a negative way presents opportunities for us to pick up market share.
Alexander K. Johnson - JP Morgan Chase & Co, Research Division
Okay. And I asked this question on the Con-way call earlier in terms of weather impact -- I guess, naturally, we think of the winter weather.
But there's also a significant drought going on in the West. I don't know, with your market share gains over the years, kind of what your market share would be in the West or what kind of impact there could be.
But I thought I would ask if there is -- if you see any impact, if you're hearing anything from maybe any agricultural type of customers that you have, if there's anything to be considered there.
David S. Congdon
I'll give you the same answer they gave you: We've seen nothing.
Operator
We'll take our next question from Matt Brooklier with Longbow Research.
Matthew S. Brooklier - Longbow Research LLC
So, Wes, do you have a sense for the number of potential new service center opening? Is that -- that could unfold this year and maybe talk to some of the geographies that you would be getting into that are potentially new for the company?
David S. Congdon
We don't discuss where we're opening up specifically on these calls. But whatever our openings are, they might be 3 or 4.
And generally speaking, there would be opening in areas where we already have freight being delivered. Maybe on a long pedal run, so that the P&L impact of opening a handful of service centers is not even measurable or anything that you need to be concerned about the cost impacts.
J. Wes Frye
Most of our CapEx, Matt, is really expanding or replacing a smaller facility that we're already in for a larger capacity. Very, very little of our CapEx is for additional service centers that expanded.
In fact, some of the -- those 4, there are 5 that David mentioned maybe, in fact, leased instead of owned.
Matthew S. Brooklier - Longbow Research LLC
Okay, that's good color. And then, I guess, with higher percentage of your CapEx going towards terminal expansion versus new service center openings, do you have any bigger expansion projects in the pipeline?
I know you guys did a good amount of 2 or bigger brake bolt facility expansions in the past couple of years. Is any of that ahead of us?
Or are these terminal expansion plans smaller in scale?
David S. Congdon
There are still -- within the $132 million, I think there are 2 -- I don't have the list in front of me. There are 2 or 3 that are fairly sizable facilities that we're expanding.
But as Wes said earlier, continuing to keep our capacity of our network is we will always have an ongoing expense for expanding service center facilities and -- but the $132 million this year still is a little bit higher than maybe what our maintenance CapEx will be going forward.
Operator
We'll take our next question from Brad Delco with Stephens Inc.
A. Brad Delco - Stephens Inc., Research Division
Wes, talking about capacity, is there any way that you could -- I know you said 3 or 4 additional terminals. Can you identify what your terminal door growth may be this year?
And maybe what it was last year?
J. Wes Frye
Last year it was around 4.5% and it probably is somewhere in that range this year as well, 4.5% to 5% [indiscernible]. Obviously expanding current facilities, either by expanding the existing facility or replacing a smaller facility with a larger facility.
A. Brad Delco - Stephens Inc., Research Division
Got you. And then I feel like I need to ask a balance sheet question here because the metrics continue to improve.
How much more thought have you guys given to dividend and/or share repurchase given that you'll be able to likely fund most of your CapEx with cash flow. And what are sort of some of the parameters around that thought process?
J. Wes Frye
We've given that additional thought and formal attention with the board. And then when we see what makes sense from a shareholder standpoint, we will look at either stock buyback or dividends, whichever may be appropriate.
But that's still in evaluation and is on our minds.
Operator
We'll take our next question from David Campbell with Thompson, Davis & Company.
David Pearce Campbell - Thompson, Davis & Company
I just had 2 questions. One is can you tell me, the expedited growth in the LTL services in the fourth quarter?
Or was it -- do you have the percentage of was it better or worse than the rest of the business?
J. Wes Frye
Yes. We're not giving that level of detail, David, but it was a good growth and are expedited.
David Pearce Campbell - Thompson, Davis & Company
Okay. And what about the growth of the non-LTL services containers, freight forwarding, et cetera, do you have any number on that?
David S. Congdon
We don't break out and give any specifics on that. But the container growth has been a higher percentage growth than the overall LTL.
It's been a higher growth rate. And that's part of the reason why we want to portray our revenue per hundredweight just on our LTL operations going forward.
Because it's -- as we -- in the fourth quarter, our revenue per hundredweight growth excluding fuel surcharges in total was up 1%. But as Wes pointed out, if you pull out those non-LTL services, the revenue per hundredweight growth was 2.6% for the fourth quarter.
And therein lies the reason for pulling those out because we think it's really those services and the growth that we've had in container division, for example, distorted the numbers. And it makes our yield management practices look like something's going wrong with them, and it absolutely is not changed.
David Pearce Campbell - Thompson, Davis & Company
There's no reason to think that won't continue, that is -- continue the growth, exceeding the rest of the company?
David S. Congdon
Yes. Well -- yes it's still a very small, as we said, 97% of our revenues today are in LTL.
So the container and other services are only 3%. So it's still a fairly immaterial segment of our total business.
Operator
We'll take our next question from Matt Young with Morningstar.
Matthew Young - Morningstar Inc., Research Division
Just a quick follow-up on the tractor refresh. I think you said $163 million this year.
Could you remind us what that was in '13? And would that be about what you would expect in terms of a normalized maintenance run rate?
I know you said the refresh cycle is pretty normalized at this point.
J. Wes Frye
Well, that $163 million is not just tractors. It includes trailers, it includes other operating equipment, like forklifts, switchers and other.
So it's not just tractors. But our CapEx in 2013 was...
Matthew Young - Morningstar Inc., Research Division
I just meant equipment in general, so it doesn't have to be just tractors and trailers together.
J. Wes Frye
Our equipment in 2013 was about $152 million. It probably just, in our view, it takes 6% to 8% of revenues just to keep a replacement cycle.
So you have to be in the $120 million to $130 million, and the rest would have been for just handle the growth tonnage.
Matthew Young - Morningstar Inc., Research Division
Okay. So it probably wouldn't change all that much from here, I guess, is the bottom line?
J. Wes Frye
I think if you want to keep a replacement cycle, you've got to spend somewhere in that percentage range.
David S. Congdon
If we grow another 10% in '14, and that is not guidance. But if we were to grow 10%, you would expect equipment to be somewhere in between the $3 million range.
Matthew Young - Morningstar Inc., Research Division
That's fair, right, on a relative basis. And then just one more quick one here.
Do you guys use the rail as much for a portion of your linehaul moves? I know it's something -- or is it something maybe you'll do in the future?
Not sure about the service trade-off for top-tier carrier like yourselves, but I know that some of your competitors have talked about it in the past and found it beneficial.
David S. Congdon
Well our use of the rail -- our only planned use of the rail that we have in the network involves Chicago to Pacific Northwest. However, we have stepped up some rail use this year to the West Coast from a variety of locations because we've seen a change in the East Coast, West Coast balance situation, where our tonnage and shipments heading west bound are stronger.
There's been a weakness coming eastbound off the West Coast. I think a lot of manufacturers and shippers in California are tired of higher taxes and regulations and so forth, and they've moved.
And I think as we go into -- and secondly, I think there's been a pickup in activity on East Coast ports, where people that have sourced in China had moved to India. And so the product has moved to the U.S.
through the Suez Canal and across the Atlantic as opposed to coming in on the West Coast. Nonetheless, the bottom line of it is that we've seen some weakness coming off the West Coast to the East, which has caused us to buy more purchase transportation rail and linehaul heading westbound.
Operator
We'll take our next question from Anthony Gallo with Wells Fargo.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
You mentioned a number of steps that you're taking, obviously technology being a big one, to make sure that the foundation is in place to continue this growth over multi-years. I'm wondering if there's anything that needs to be done differently or enhancements to your employee training and recruiting program?
Obviously, it's a different dynamic for LTL drivers versus TL. But just broadly speaking, is there anything different that you need to be doing on the recruiting side for either drivers, dock workers or even salesmen as this growth continues?
David S. Congdon
You're very perceptive. We're very much in the people business.
And our attention to employee development has been a pretty strong emphasis for many years, and it will continue to be so -- going forward. But we don't have any, I'd say, monumental tasks ahead of us or anything major that we're going to be doing differently going forward.
It will be a continuation and tweaking -- continued tweaking of some of the practices that we've had in place for years.
Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division
And along those lines, can you remind us -- because I think there was a pickup in employee count in this quarter, and that was some of the expense headwinds. Typically, what -- how long does it take for a new hire either dock or driver to reach the productivity of the average employee in that role?
David S. Congdon
Probably several months, I'd say, 3 -- at least a quarter -- 3 to 4 months probably to get up to a maximum productivity level.
Operator
We have no further questions in queue at this time. I would now like to turn the conference back over to Mr.
David Congdon for any closing remarks.
David S. Congdon
Well, thank you all for your participation today, and we appreciate your questions and your support of Old Dominion. And feel free to give us a call if you have any further questions.
Have a great day, and let's hope it quits snowing.
Operator
And this does conclude today's conference call. Thank you all for your participation.