Celadon Group, Inc. (CGI)
F3Q10 Earnings Conference Call
April 27, 2010 10:00 AM ET
Steve Russell – Chairman and CEO
Paul Will – Vice Chairman and CFO
Jon Russell – EVP
Chris Hines – President and COO
Mike Adewin – Wolfe Research
Todd Fowler – KeyBanc Capital Market
Jack Waldo – Stephens Incorporated
Chaz Jones – Morgan Keegan
Mike Baudendistel – Stifel Nicolaus
Jeff Coffman – Strom
Barry Haimes – Sage Asset Management
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Good day, ladies and gentleman, and welcome to the quarter three 2010 Celadon Group earnings conference call. My name is (Medusta) and I will be your operator for today. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.
I would now like to turn the conference over to your host for today, Steve Russell, Chairman and Chief Executive Officer, please proceed.
Thank you very much (Medusta). Welcome to the third fiscal quarter of 2010 fiscal year press release teleconference. And I am joined here in Indianapolis by Paul Will, our Vice Chairman and CFO; Chris Hines, President and COO; and John Russell, our Executive Vice President, in-charge of our non-asset based businesses. I would like to remind you that my comments and those of others representing Celadon may contain forward-looking statements which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management expectations.
From the $0.10 a share loss that we incurred in the March '09 quarter, our results improved to a $0.02 profit in the March '010 quarter, therefore an increase of $0.12 in earnings per share. As indicated in our press release, our increase in loaded miles accounted for a pickup of $0.17 per share. Loaded miles improved by 18% year-over-year. Domestic business group driven by new customers and growth with existing customers changes in our sales force was a key factor in our success with new customers.
Our business between the US and Mexico grew significantly as Mexico has become more competitive with China and elsewhere as the Peso went from 10 to the dollar in September of '08 to roughly 8 to the dollar at this point, reducing Mexican labor and other costs by 20% when expressed in US dollars or in Euros or other currencies.
Although, the average rate per loaded mile improved marginally from the December 2009 quarter, which by the way is the first consecutive quarter increase in many quarters and a $1.39 per mile, it was down about $0.057 cents from the March '09 quarter and $0.15 for the peak in December of '06. The adverse impact of the $0.06 rate reduction was a decline of $0.10 in earnings per share. So the net impact of the increase in loaded miles and the lower average rate is a net positive of $0.07 March '010 versus March '09. The other $0.05 were principally other factors including the effect of a series of cost reduction actions that we took early in the 2009 calendar year, which more than offset higher fuel costs and certain other factors.
The impact to the drop of $0.152 in rate per loaded mile compared with the average rate in December '06 cost us $0.27 per share in the March '010 quarter. Utilization was 842 miles per truck per week in March '010, compared to 1962 in March '07 quarter three years ago. The affect of the 120 mile per week decline had an adverse impact of about $0.07, so essentially rate and utilization cost us a total of $0.34 compared with the prior periods.
Before opening for questions, a couple of other points. Our non-asset based business has continued to expand profitably with the only negative relating to a decline in truckers B2B results as a consequence of the pain, the smaller and midsized fleets have experienced particularly with the relative inability for those fleets who obtained bank lending or capital.
Dedicated logistics and intermodal continued to grow. Although brokerage is growing, margins have contracted due to the overall supply and demand situation in the industry. No bank debt and just under $10 million in cash evidence our positive financial position. Further, our average truck is about 1.4 years old at this time and so we have no plans to place orders for any new tractors or trailers for some time but at least a year.
On Friday, April 23
, we celebrated the 25th Birthday of Celadon by ringing the opening bell at the New York Stock Exchange. Early last week, we received what I considered a similarly wonderful event when we received Wal-Mart's top carrier award for 2009 as we received the Diamond Award for Carrier of the Year demonstrating outstanding service. We felt quite honored in receiving that award. Last week, we were also named as one of the 10 best places to work in the State of Indiana.
(Medusta) we would be happy to open the floor for questions.
(Operator Instructions). Your first question comes from the line of Edward Wolfe, please proceed.
Thank you, Ed.
Hey guys, this is (Mike Adewin) for Ed. Ed's going to be in a little bit. Just quick question, if you can discuss the amount of off balance sheet operating leases versus CapEx going forward? And how should we think about that in terms of the impact on the OR versus pretax earnings as you decrease CapEx and you utilize more of these leases?