CH Robinson Worldwide's CEO Discusses Q4 2011 Results - Earnings Call Transcript

CH Robinson Worldwide (CHRW)

Q4 2011 Earnings Call

January 31, 2012 5:00 pm ET

Executives

Angela K. Freeman - Vice President of Investor Relations and Public Affairs

John P. Wiehoff - Chairman, Chief Executive Officer and President

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

Analysts

Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division

William J. Greene - Morgan Stanley, Research Division

Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division

Scott H. Group - Wolfe Trahan & Co.

Nathan Brochmann - William Blair & Company L.L.C., Research Division

Christopher J. Ceraso - Crédit Suisse AG, Research Division

Christian Wetherbee - Citigroup Inc, Research Division

Justin B. Yagerman - Deutsche Bank AG, Research Division

Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division

Presentation

Operator

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Good afternoon, ladies and gentlemen. Welcome to the C.H. Robinson Fourth Quarter 2011 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, Tuesday, January 31, 2012. I would now like to turn the conference over to Ms. Angie Freeman, C.H. Robinson Vice President of Investor Relations. Please go ahead, ma'am.

Angela K. Freeman

Thank you. On our call today will be John Wiehoff, CEO; and Chad Lindbloom, CFO. John and Chad will provide some prepared comments on the highlights of our fourth quarter and full-year performance, and we will follow that with a question-and-answer session. [Operator Instructions] Please note that there are presentation slides that accompany our call to facilitate our discussion today. The slides can be accessed in the Investor Relations section of the website, which is located at chrobinson.com. John and Chad will be referring to the slides in their prepared comments.

Finally, 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 risk and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations.

And with that, I'll turn it over to John.

John P. Wiehoff

Thank you, Angie, and thanks to everybody who's taken the time to listen to our fourth quarter call today. As Angie referenced, I'm going to start on our presentation deck with Slide 3, which has our high-level fourth quarter and year-to-date results.

For the fourth quarter of 2011, consolidated net revenues grew 3.4%, income from operations grew 4.8% and EPS was $0.67, up 8.1% from last year. As you can see for the year-to-date numbers for the year ended December 31, 2011, our growth rates were more consistent, which is generally the case in our business model as a big component of our cost structure is based on annual programs. So there you see the net revenue income from operations and net income all up 11% with EPS up 12.4%.

One of the other items that I wanted to highlight on the year-to-date results is that total revenues for 2011 were $10.3 billion. One of the goals we set for ourselves when we became a public company 14 years ago was to reach that $10 billion in gross revenues, and it's kind of a fun milestone for us and we're proud of being able to achieve that in 2011.

I'm going to make some comments now about each of our individual revenue service lines. So moving onto Slide 4, starting with the consolidated transportation results. The transportation net revenues grew 4.9% for the quarter, 13.4% for the year. I'll get more specific on each of the individual service lines, but in general, we had volume growth in most all of our services with varied pricing impacts that I'll talk about given each of the individual services.

On Page 4, one of the things that we like to highlight is the history of margins. And one of the more difficult things to predict or sometimes understand in our business is the fluctuations in the transportation margin percentage. For the fourth quarter of 2011, we had 16.3% net revenue margins on our total transportation. We've talked at length in the past about all of the different variables that cause those margins to fluctuate, including fuel and our supply and demand conditions, our account management decisions around how we price and the delays and timing of customer and provider pricing, and maybe more importantly, the business mix by lane and by type of service. And again, there's a lot of moving parts in there, but I guess the way we would evaluate 2011, is that while the fourth quarter, our 16.3% compared to 17.6% last year and caused some net revenue margin compression in our growth rate year-over-year, if you look at that 10-year history and as we analyze our business model, we feel like those gross margin or transportation margin percentages are within a typical range of our business model during the fourth quarter.

Moving on to the truck results category. As a reminder, our truck net revenues include both full truckload and less-than-truckload net revenues. For the fourth quarter, the combined net revenue grew 5.5%, just under 15% net revenue growth for the year. We do see -- we did have 7% volume growth in the fourth quarter, which increased from the last couple of quarters and year-to-date volume growth on the truckload side of 5%. The truckload net revenue margin declined during the quarter for the reasons that I described before, as truckload is the most significant portion of the overall transportation. So it's indicative of the percentages that I talked about on the previous page.

In our LTL business, we continue to have strong double-digit volume growth with 14% growth for the quarter. I've talked in the last couple of quarters about how our LTL service offering and systems continues to hit well in the marketplace in terms of providing the types of values that a lot of shippers are looking for now, and we continue to be pleased with our volume growth and success in the LTL services.

Moving on to Page 6, our intermodal services. Net revenues grew 7.9% for the quarter, 12% for the year. We did have double-digit volume growth in our intermodal services. But again, that was offset by some net revenue compression. I think our overall feeling towards the intermodal business is through the longer-term secular trend of intermodal growth and taking some share. We feel like we're participating in that, even though it's a smaller component of our business. We feel good about our operational and execution capabilities. We've talked in the past about how we've ordered some dedicated equipment that we've integrated into that business, and we feel very comfortable about our execution capability and the success that we're having in driving that intermodal business.

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