Con-Way's CEO Discusses Q4 2011 - Earnings Call Transcript

Con-Way Inc. ( CNW)

Q4 2011 Earnings Call

February 3, 2012 8:30 am ET

Executives

Douglas Stotlar – President, Chief Executive Officer

Stephen Bruffett – Executive Vice President, Chief Financial Officer

Greg Lehmkuhl – President, Con-Way Freight

Herb Schmidt – President, Con-Way Truckload

Robert Bianco – President, Menlo Logistics

Patrick Fossenier – Vice President, Investor Relations

Analysts

Jason Seidl – Dahlman Rose

Todd Fowler – Keybanc Capital Markets

Bascome Majors – Susquehanna

John Barnes – RBC Capital Markets

Justin Yagerman – Deutsche Bank

Scott Group – Wolfe Trahan

Chris Wetherbee – Citi

John Godyn – Morgan Stanley

Ken Hoexter – Merrill Lynch

Chris Ceraso – Credit Suisse

David Ross – Stifel Nicolaus

Presentation

Operator

Good morning. My name is Brandy and I will be your conference operator today. At this time I would like to welcome everyone to the Con-Way Inc. Fourth Quarter and Year-End 2011 Review conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. At that time, if you would like to ask a question, press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key.

Thank you. I would now like to turn the call over to Patrick Fossenier, Vice President of Investor Relations. Please go ahead, sir.

Patrick Fossenier

Thank you, Brandy. Welcome to the Con-Way Fourth Quarter and Year-End 2011 conference call for shareholders and the investment community. In a minute I’ll turn it over to Con-Way President and CEO, Doug Stotlar.

Before we get into the call, I would like to offer a few reminders. First, certain statements in this conference, including statements regarding anticipated results of operations and financial condition, constitute forward-looking statements and are subject to a number of risks and uncertainties and should not necessarily be relied upon as predictions of future events. Actual results of operations and financial condition might differ materially from those projected in such forward-looking statements, and no assurance can be given as to future results of operation and financial condition. Additional information concerning factors that could cause actual results and other matters to differ materially from those in the forward-looking statements and the inherent limitations of such forward-looking statements is contained in our Forms 10-K and 10-Q and other filings with the SEC.

Second, today’s prepared remarks contain non-GAAP financial measures. Reconciliations of GAAP to non-GAAP financial measures are found within the financial tables of our earnings release, which is available on our website at con-way.com. Our financial and operating statistics are also available on our website in the Investors section.

I’d also like to note that we have a lot of people on the call today, so we’d appreciate it if you’d limit yourself to a couple questions and then return to the queue.

Now without further ado, I am pleased to turn it over to Doug Stotlar.

Dougla s Stotlar

Good morning. On the call today, I’m joined by members of our senior leadership team, including Con-Way’s CFO, Steve Bruffett; Con-Way Freight President, Greg Lehmkuhl; Menlo Logistics President, Bob Bianco; and Con-Way Truckload President, Herb Schmidt. Steve will provide some commentary on our financial picture, and Greg, Bob and Herb will participate in the Q&A portion of the call.

The fourth quarter results capped a year of improvement driven by operating discipline in all of Con-Way’s core businesses. Our employees are executing well against a consistent strategy which is delivering results as we continue to focus on our fundamentals of safety, service, and margin expansion.

Turning to our financial results for the fourth quarter of 2011, Con-Way reported consolidated revenues of 1.32 billion, up 8.7% over last year’s 1.21 billion. On an operating income basis, we earned 49.9 million in the 2011 fourth quarter, which included a 10 million gain from the settlement of a dispute related to Chic Logistics. This compared to the 15.8 million we reported in the fourth quarter of last year.

Diluted earnings per share were $0.41 compared to $0.04 per share in the prior year period. On a non-GAAP basis, earnings per diluted share in the 2011 fourth quarter were $0.26 compared to $0.02 in the prior year. Looking at the full year for 2011, Con-Way reported revenue of 5.29 billion, a 6.8% increase from 2010. Net income for 2011 was $1.58 per diluted share or 88.4 million compared to $0.07 per share or 4 million in 2010. On a non-GAAP basis, 2011’s full-year earnings came in at $1.53 per share compared to $0.47 in 2010.

Moving now to a review of our business segments, I’ll start with Con-Way Freight, our LTL company and largest revenue segment. Con-Way Freight posted fourth quarter operating income of 19.6 million compared to 1.8 million earned in the fourth quarter a year ago. Operating discipline improved network balance, prudent cost management and steady increases in pricing all contributed to the quarter’s results. Revenue was 796.2 million, an 8.2% increase over last year’s revenue of 736 million. This increase was mostly the result of improved pricing and higher fuel surcharge revenue. Con-Way Freight’s operating ratio this period was 97.5 compared to 99.8 in last year’s fourth quarter.

Tonnage per day, which increased 8/10ths of a percent over last year’s fourth quarter, reflected normal seasonal trends. Revenue per hundredweight or yield increased 8.3% in the quarter compared to the prior year. Excluding fuel surcharge, the increase in yield was 4.3%.

Over the past few quarters, we’ve provided a view into tonnage and yield trends for the first month of the current quarter. For January 2012, we kicked off the new year with an uptick in tonnage as our weight per day rose 3.3% compared to last year. On the yield side, we saw improvement here as well with January’s yield, excluding fuel surcharge, up 4% compared to January 2011.

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