American Commercial Lines Inc. Q1 2010 Earnings Call Transcript

American Commercial Lines Inc. Q1 2010 Earnings Call Transcript
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American Commercial Lines Inc. (ACLI)

Q1 2010 Earnings Call

April 28, 2010 10:00 a.m. ET

Executives

Dave Parker – Vice President, Investor Relations

Mike Ryan – President & CEO

Tom Piholski – Senior Vice President & CFO

Analysts

Sterling Adlakha – Stephens

John Larkin – Stifel, Nicolaus

Scott Weaver – Merrill Lynch/Bank of America

Chaz Jones – Morgan Keegan

John Parker – Jefferies

Presentation

Operator

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Good day ladies and gentlemen and welcome to the First Quarter 2010 American Commercial Lines Incorporated Earnings Conference Call. My name is Kiesha [ph] and I'll be your coordinator for today.

At this time all participants are in listen-only mode. Later, we will be conduct a question and answer session, towards the end of this conference. (Operator Instructions).

I would now like to turn the call over to Mr. David Parker, Vice President, Investor Relations and Corporate Communications. Please proceed

Dave Parker

Thank you, Keisha [ph]. Good morning to everyone and thank you for joining us. Today, we will be discussing our financial results for the first quarter ended December March 31, 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 on file 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 live webcast featuring a slide presentation which can also be accessed at aclines.com. If you plan on viewing the slide presentation, I'll remind you to 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.

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, we will now proceed and I'll now turn the call over to Mike

Mike Ryan

Thanks David and good morning. The economy in Q1 still presented us with freight volume and pricing challenges, a continuation of the lower demand levels for the freight services which existed during the recession years of 2008 and 2009. While we do see some positive volume activity in certain sectors of our liquid and dry markets, these positive volume trends still only represent a fraction of what we need to return to pre-recession levels, but we welcome good news in any size or shape.

As we have stated in previous call, we use this recession period to realign our organization to eliminate cost and to focus on increasing productivity. This would have been a path we traveled with or without the recession, but the recession certainly gave us a greater sense of urgency for focusing on the removal of obstacles, which were keeping us from achieving greater levels of profitability.

I will cover many of these efficiency enhancement steps in our strategic initiative section in a few minutes. In the first quarter of 210, our transportation segments operating income increased by $6.2 million reflecting tighter cost control and higher gains from our asset management actions. Our manufacturing segments operating income was at a breakeven level down $4.1 million versus Q1 of last year.

Jeffboat delivered 33 dry covered barges for ACL internal use in Q1. This new build activity for ACL's transportation segment marks the beginning of our fleet reinvestment strategic initiative. Approximately one half of the cost of the new barges for ACL was offset in the quarter by the proceeds of assets sales.

In the first quarter, Jeffboat also had 25 weather related loss production days. With this economy we still need to see greater freight volume and pricing before we will achieve sustained profitability. But we are not waiting for the economy to come back to work on improving our systems.

Focusing on improving our cost and productivity not only positions us to whether this current challenging economic times, it positions us for much greater financial performance when the freight levels return to pre-recession levels. The April federal reserve base book analysis continues to report increases in economic activity in almost all districts with improvement in manufacturing mining and energy activity.

The army core of engineer's industry tonnage statistics also report small positive year-over-year trends. However, these signs of a directional change for the economy have not yet produced enough in overall freight level increases and pricing strength revitalize all of the transportation market.

While some volume increases in truck, rail and barge sectors are appearing. Overall barge rate demand remains less than the current barge supply. The army core of engineers industry statistics also show that bulk and liquid volumes continue to run approximately 24% and 14% below the average volume of the previous five years.

ACL has not yet seen strong demand return to the transportation market. We did have higher liquid ton-mile volume in Q1 but that was in comparison to last years extremely low levels. The metals markets also rose slightly in volume. Though we are encouraged by a quarterly uptick in shipments of metals products and liquid cargos, these are still modest sequential volume improvements overall.

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