CH Robinson Worldwide (CHRW) Q3 2011 Earnings Call October 25, 2011 5:00 pm ET Executives John P. Wiehoff - Chairman, Chief Executive Officer and President Angela K. Freeman - Vice President of Investor Relations and Public Affairs Chad M. Lindbloom - Chief Financial Officer, Principal Accounting Officer and Senior Vice President Analysts William J. Greene - Morgan Stanley, Research Division Ken Hoexter - BofA Merrill Lynch, Research Division Anthony P. Gallo - Wells Fargo Securities, LLC, Research Division Jack Waldo - Stephens Inc., Research Division Matthew Troy - Susquehanna Financial Group, LLLP, Research Division Edward M. Wolfe - Wolfe Trahan & Co. Nathan Brochmann - William Blair & Company L.L.C., Research Division Alexander V. Brand - SunTrust Robinson Humphrey, Inc., Research Division Christian Wetherbee - Citigroup Inc, Research Division Thomas R. Wadewitz - JP Morgan Chase & Co, Research Division H. Peter Nesvold - Jefferies & Company, Inc., Research Division Jeffrey A. Kauffman - Sterne Agee & Leach Inc., Research Division Robert H. Salmon - Deutsche Bank AG, Research Division Presentation Operator
[Operator Instructions] Please note that there are presentation slides that accompany our call. The slides can be accessed through the webcast player in the Investor Relations section of our website, which is located at chrobinson.com. John and Chad will be referring to the slides in their prepared comments.The slides are a more visual representation of the information that is in our earnings release to facilitate our discussion today. 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. With that, I'll turn it over to John. John P. Wiehoff Thank you, Angie. So the prepared comments on the presentation deck that I'll be referencing the page numbers of, starting with Page 3, our consolidated financial results for the third quarter. That page highlights some the key metrics that we look at in terms of evaluating our overall results. Our total net revenues for the third quarter of 2011 grew 10.6%. Our income from operations also grew 10.6%, and our earnings per share were $0.70, a 12.9% increase from the third quarter of last year. Moving then to Page 4 and looking at our total transportation results for the quarter, these transportation results include all of our modes and services in the transportation category, and they, together, had net revenue growth of 11.3% for the third quarter of 2011. Our net revenue margin for the third quarter of 2011 was 16.4%, which compares to 16.6% from last year. If you look at the bottom of Page 4 and the graph that we've put together there, on past calls, we've spent a fair amount of time talking about the different aspects of our transportation margin percentages. I know that it's one of the more challenging aspects of our business to try to understand for us and everyone else to predict, because there are a lot of different factors that affect those margin percentages. After this page, we have some prepared comments on the more specific transportation services that we have, but I wanted to spend just a few minutes talking about these overall transportation margin percentages because I think it's very useful to understand the last several years and understand the variances in these margin percentages as a good foundation for the next couple of slides.
In the past, we've discussed the many factors that impact these transportation margin percentages and caused them to vary. And I would encourage everybody who's trying to understand our business to study this history a little bit, if that something that you haven't done previously. In the list of reasons why these margins fluctuate or why they change, some of the more significant ones are the timing and the variances of our price adjustments. Given our third-party business model, we're buying and selling services from tens of thousands of different customers and providers, and while we generally adjust with the markets on both sides, there are differences in timing with our contractual pricing and how we purchase various modes and services of transportation. So timings in a supply and demand relationship and timing in the variances of those pricings can make a difference.Fuel price changes can have a significant impact. Again, across the different services, it varies a little bit. But the price of fuel has a meaningful impact on these margin percentages. The mix of services, especially over time from quarter-to-quarter, that's not always raw material. But over a long period of time, the mix with the services that we're offering in the marketplace can have an impact. There is seasonality when you study it. From the fourth quarter to the first quarter, there's generally some pretty meaningful movement. And then there's the longer term secular things around competition and the network effects of our business around scale and the other things that we're doing. When you put those all together, it's really hard to quantify many of the impacts or understand exactly what's going to happen. But I think it's instructive to sort of think about all the reasons and look at the trends as we talk about our third quarter and going forward from here. Read the rest of this transcript for free on seekingalpha.com