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CH Robinson Worldwide Q3 2010 Earnings Call Transcript

CH Robinson Worldwide Q3 2010 Earnings Call Transcript

CH Robinson Worldwide (CHRW)

Q3 2010 Earnings Call

October 26, 2010 5:00 pm ET

Executives

TST Recommends

Angela Freeman - Director of Investor Relations

Chad Lindbloom - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

John Wiehoff - Chairman, Chief Executive Officer and President

Analysts

Thomas Wadewitz - JP Morgan Chase & Co

Scott Malat - Goldman Sachs Group Inc.

David Campbell - Thompson Davis & Co

Robert Salmon

Anthony Gallo - Wells Fargo Securities, LLC

Jon Langenfeld - Robert W. Baird & Co. Incorporated

John Barnes - RBC Capital Markets Corporation

Edward Wolfe - Bear Stearns

Nathan Brochmann - William Blair & Company L.L.C.

Scott Flower - Macquarie Research

Matthew Brooklier - Piper Jaffray Companies

Alexander Brand - Stephens Inc.

Adam Longson - Morgan Stanley

Presentation

Operator

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Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Third Quarter 2010 Conference Call. [Operator Instructions] I would now like to turn the conference over to Angie Freeman, C.H. Robinson Vice President of Investor Relations. Please go ahead, Ms. Freeman.

Angela Freeman

Thank you. On our call today will be John Wiehoff, CEO; and Chad Lindbloom, Senior Vice President and CFO. John and Chad will provide some prepared comments on the highlights of our third quarter performance and we will follow that with a question-and-answer session.

I would like to remind you that comments made by John, Chad or others representing C.H. Robinson 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's expectations.

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

John Wiehoff

Thank you, Angie, and thanks to everybody who's taken the time to listen to our third quarter call. About an our ago we issued a press release sharing our third quarter results for 2010. I'm going to start by highlighting just a few of the key financial results on that release.

For the third quarter ended September 30 of 2010, our total revenues increased 23.8% to $2.4 billion. Net revenues increased 8.5% to $382 million. Our income from operations increased 7.4% to $166 million. And net income increased 7.5% $102.6 million and fully diluted EPS increased 8.8% to $0.62 a share.

For the year-to-date results for the third quarter ended September 30, our total revenues increased 24.8% to $6.9 billion. Net revenues were up 3.5% to $1.1 billion. Income from operations increased 3.8% to $458 million. Net income up 3.9% to $283 million and fully diluted EPS up 6.2% to $1.71 per share. In addition to those overall results, our press release gives more detailed growth percentages by our various service offerings.

Starting with some prepared comments, for Transportation services, during the third quarter of 2010 we were able to grow our Transportation volumes for all of our modes and services. This growth represents the combination of a marketplace that continues to recover from the recession of the year ago, as well as our successful efforts to sell our services and expand our relationships in the market place.

As you'd expect, during this part of the market cycle, volume increases contributed to more challenging access to capacity, price increases and margin compression. Overall, we were relatively happy with our Transportation results for the quarter. It was very difficult to predict what the environment would be like as we started in 2010, given the strengthening volume and price increases throughout the year, when we look at our volumes and gross margins we feel like our business model and approach is working to grow our Transportation business similar to past cycles.

Our Truckload Transportation volume increased by roughly 40%. Truckload pricing for the third quarter compared to the third quarter last year was up approximately 8%, excluding the estimated impact of fuel. Truckload capacity has continued to tighten throughout the third quarter of 2010. While demand increases have made the truckload marketplace much tighter than a year ago, a lot of discussion and planning the past couple quarters has been focused on how the capacity markets will respond to these demand increases.

When you think about all the variables that factor into the decisions of investing in truckload equipment there's a pretty high degree of uncertainty today that makes the decisions challenging. Those issues include the ability to hire qualified drivers, anticipated rule changes such as CSA 2010 and hours of service, financing, insurance, fuel economy and emissions rules and the rising cost of new equipment. All those issues are on top of the core issue of if the freight demand and pricing will be there to generate the return on your capital investment. Supply and demand will eventually adjust over time just like most markets however, the uncertainty in the decision-making to add truckload capacity does seem to be having an impact on most companies.

While every company estimates unique supply-chain decisions around these questions, one strategy that we think is relevant for most shippers to at least consider today would be to ensure flexible, variable cost access to as much truckload as possible. We think we can help with that strategy as well as anyone in the marketplace today. While the uncertainty levels maybe high in some of the industry variables, we're investing in the people, relationships and operating systems to ensure that our access to capacity is high-quality and helps to meet our customers needs. The environment is challenging in some ways for all of us and we hope to make investments that our customers and carriers can benefit from.

For the LTL component of our truck revenues, our volume increased by 17%. Price comparisons are much more difficult for us to make an LTL given all the variations and tariffs. However, LTL pricing has also increased versus a year-ago. The demand and supply dynamics in LTL are obviously much different than truckload principally due to the capacity decisions being based on network investments and choices versus a single piece of equipment for truckload.

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