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American Commercial Lines CEO Discusses Q3 2010 Results - Earnings Call Transcript

American Commercial Lines CEO Discusses Q3 2010 Results - Earnings Call Transcript

American Commercial Lines Inc. (

ACLI

)

Q3 2010 Earnings Call

October 28, 2010 10:00 am ET

Executives

David Parker - VP, IR

Mike Ryan - President and CEO

Tom Pilholski - SVP and CFO

Analysts

Alex Brand - Stephens Inc.

Kevin Sterling - BB&T Capital Markets

John Parker - Jefferies & Company

Jimmy Gibert - Rice Voelker

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the American Commercial Lines Incorporated third quarter 2010 conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today's call Mr. Dave Parker, Vice President of Investor Relations.

Dave Parker

Thank you, Mary. Good morning. Thank you for joining us. Today, we will be discussing our financial results for the quarter and nine months ended September 30, 2010. Before we begin our discussion, I want to remind you that statements made during this conference call with respect to the future are forward-looking statements.

Forward-looking statements involve risks and uncertainties. Our actual results may differ materially from those anticipated as a result of various factors. A list of some of these factors can be found in our SEC filings, including our Form 10-K for the year ended December 31, 2009 and our most recent 10-Q, and other such risk factors as maybe included from time to time in the company's reports filed with the Securities and Exchange Commission.

During the conference call, we may refer to certain non-GAAP or adjusted financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is available on our website at aclines.com in the Investor Relation sections under non-GAAP financial data.

Also, as a reminder, you can follow along today via a live webcast featuring a slide presentation which can also be accessed at aclines.com. I'll remind you that if you plan on viewing the slide presentation please listen to the call via your computer speakers rather than dialing in by telephone in order to avoid a time lapse between the slide presentation and the audio.

As you may know, on October 18, we announced the signing on an agreement to be acquired by Platinum Equity. We will not comment on the transaction this morning, nor will we be taking any questions regarding the transaction and the conclusion of the call. Background information on the transaction is covered comprehensively in our SEC filings that are now available to all of you for review. There can be no assurance that the transaction with Platinum Equity will be completed. At the conclusion of the call we will take questions on the quarterly results and limit the questions to only that topic.

Additionally, in today's presentation and in the slides references to year-to-date, those are intended to refer to the nine months ended September 30, 2010. Joining me on the call today we have Mike Ryan, our President and CEO; and Tom Pilholski our Senior Vice President and CFO.

With that, I'll now turn the call over to Mike.

Mike Ryan

Thanks, David and welcome to everyone on the phone. We just completed a good financial quarter at ACL. Year-to-date through September, we are now in a positive earnings position for 2010, erasing our first half losses.

Compared to prior year, third quarter transportation segment revenues increased by $21.6 million, while cost declined by $3.8 million, that is a good formula. Approximately one-third of the increase in revenue was driven by higher rates on grain shift this year, with the remainder attributable to higher demurrage and 7% and 16% increases in bulk and liquid ton miles.

While we are pleased to have a normal harvest season this year and the rate strength that a normal harvest season brings with it, we are also pleased with the results of the continuing progress and reducing cost and improving efficiency.

As we have shared with you in the past, our goal is building and maintaining an operating program, which is always profitable. A program which allows us to remain at least moderately profitable in the weakest of economic times, and highly profitable when the economy is strong. We are making progress with our strategic initiatives in cost reductions.

A noteworthy component of our Q3 earnings is that our gains from asset sales were $10.1 million lower in Q3 this year than last year. Last year in Q3 we sold three large horse power boats, which did not fit our power model. Despite the lower level of gains from asset sales, our third quarter transportation operating income was still $10.8 million higher than the prior year, with an operating ratio of 87.3%, which was 5.7 points better than last year.

We see the same improvement and year-over-year progress within our transportation segment operating income, when we look at the first nine months of 2010. Such progress is fueled by item such as the $5.1 million impact of non-comparable severance and other charges we saw in the first nine months of 2009, which we did not have in 2010. And in the 2010 year-to-date numbers, we do not rely as heavily on asset sales for our positive financial trends.

Our asset management gains were $6.5 million lower year-to-date, yet the transportation segments operating income for the first nine months improved by $27.4 million over the prior year, again driven by the improvement in business mix, rates, and our cost and efficiency initiatives.

In our manufacturing segment both in the quarter and year-to-date, we sold fewer total barges than in the prior year and had a different mix of hoppers, deck and tank barges. Those details are in earnings release and are in the appendix of today's presentation.

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