Pricing Power
Q: Can you maintain pricing levels and margins amid competition and cost inflation?
A: Adam Satterfield expressed confidence in maintaining their historic 1 to 1.5 point spread above cost inflation, focusing on consistent, cost-based pricing and long-term customer relationships. Despite expectations for reported yield metrics to compress to around 6.5% growth in the first half and 5.5% by the fourth quarter, they anticipate consistent rate increases as bids renew. Satterfield acknowledged that the macroeconomic environment masks the full impact of Yellow's exit, suggesting that pricing benefits may become more apparent as the economy improves.

Impact of Yellow's Closure
Q: How has Yellow's closure affected industry capacity, competition, and your market share?
A: Adam Satterfield believes the industry will remain capacity-constrained as not all of Yellow's service centers will remain in the market. ODFL expects some exit of capacity from when Yellow was operating. Competitors who acquired Yellow's assets may face increased costs, potentially affecting pricing dynamics, but ODFL will continue with its proven strategy. They have consistently won market share based on superior service at a fair price and feel better positioned than ever to capitalize on future opportunities.

Volume and Demand Outlook
Q: What are your expectations for volume trends and underlying demand?
A: Shipments per day are trending in line with expectations, but volume recovery depends on economic improvement. Weight per shipment is seen as an early indicator; January's weight per shipment is about 1,515 pounds, a smaller than usual seasonal drop. They anticipate a potential second wave of freight entering LTL as the economy recovers. However, they remain cautious after missing expectations in Spring 2023.

Operating Ratio Expectations
Q: How do you see your operating ratio trending in the near term?
A: The normal increase in operating ratio from Q4 to Q1 is about 100 basis points, but it may deteriorate by 170 to 220 basis points due to normalization of insurance and claims expenses and the absence of certain gains. Once volumes and revenue return, they expect to recover OR loss and leverage the cost structure.

Capex and Capacity Expansion
Q: What are your plans for capacity expansion and capital expenditures?
A: ODFL has line of sight into adding 4 or 5 service centers this year, but expansion will depend on the volume environment. They will control when and where to add facilities, continuing their strategy of investing ahead of growth.

Labor and Headcount Planning
Q: How are you approaching labor additions and meeting hiring needs?
A: ODFL is cautiously increasing headcount in anticipation of volume growth, adding positions such as platform workers and preparing drivers through their schools. They are not experiencing difficulties meeting hiring needs currently and aim to stay ahead to efficiently handle growth without sacrificing service.

Capital Allocation and Share Buybacks
Q: How are you thinking about share buybacks and capital allocation this year?
A: Satterfield stated they will maintain their approach, considering cash from operations, capital expenditures, and fixed dividends to determine buyback amounts. They target returning net cash balance to shareholders through buybacks, buying more when the stock is lower and less when it's higher.

Service Differentiation
Q: How can you further improve customer experience and stay differentiated?
A: Satterfield emphasized striving for perfection in on-time performance and claims ratio, while focusing on the 28 service and value attributes measured by Mastio quality data. They were #1 in 25 of 28 Mastio categories, and continue investing in technology to enhance customer connections and drive automation.

Insurance Actuarial Adjustments
Q: Can you clarify the impact of the insurance and claims expense adjustments?
A: The insurance and claims expense was 1.9% of revenue in Q4, higher than the average 1.2% to 1.3% in previous quarters due to an unfavorable actuarial adjustment. They expect this expense to normalize to 1.3% to 1.4% of revenue in Q1 2024.