Con-Way's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Con-Way Inc. (CNW)

Q1 2012 Earnings Call

May 2, 2012 8:30 am ET


Patrick Fossenier – Vice President of Investor Relation

Douglas W. Stotlar – President & Chief Executive Officer

Stephen L. Bruffett – Executive Vice President & Chief Financial Officer

W. Gregory Lehmkuhl – President of Con-Way Freight

Robert L. Bianco, Jr., – President of Menlo Logistics

Herb Schmidt – President of Con-way Truckload

Saul Gonzalez – Chief Finacial Officer of Con-way Truckload


Chris Ceraso – Credit Suisse

Scott Group – Wolfe Trahan

Ken Hoexter – Bank of America/Merrill Lynch

Ben Hartford – Baird & Co.

John Godyn – Morgan Stanley

Sterling Adlakha – SunTrust Robinson Humphrey, Inc.

Robert Salmon – Deutsche Bank AG

Jason Seidl – Dahlman Rose & Co.

Chris Wetherbee – Citi

David Ross – Stifel Nicolaus & Company

Tom Wadewitz – JP Morgan

Ryan Cieslak – KeyBanc Capital Markets

Jeff Kauffman – Sterne Agee

Thom Albrecht – BB&T



Good morning. My name is Brandy and I will be your conference operator today. At this time, I would like to welcome everyone to Con-Way Inc.’s First Quarter 2012 Earnings 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. (Operator Instructions)

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

Patrick Fossenier

Thank you, Brandy. Welcome to the Con-Way First Quarter 2012 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 operation and financial condition constitute forward-looking statement 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 the future results of operations and financials 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

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 then return to the queue.

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

Douglas W. 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 from Con-Way Truckload President, Herb Schmidt and Chief Financial Officer, Saul Gonzalez. Steve will provide some commentary on our financial picture, and then in the Q&A portion of the call, Greg and Bob will review highlights at Freight and Menlo and Herb and Saul will comment on Truckloads results.

The first quarter reflected strong profits across to all of our business units. The consistent execution of our strategy is yielding the intended results. Our focus has been on the fundamentals improving safety performance, driving efficiency gains through wider adoption of lean practices, improving employee engagement, leveraging technology and increasing price. Our progress in these key areas has driven our margin expansion. These were the building blocks of a quarter’s results and will remain our strategic platform going forward.

Turning to our consolidated financial results for the first quarter of 2012, Con-way reported revenues of $1.37 billion, a 9.7% increase over last year’s first quarter revenues of $1.25 billion.

Our operating income was $55.7 million in the 2012 first quarter, a 51.8% improvement over the $36.7 million earned in the prior year period. Diluted earnings per share were $0.46 compared to $0.12 per share in the first quarter last year.

On a non-GAAP basis, earnings per diluted share in the 2012 first quarter were $0.45 compared to $0.24 in the prior year. The non-GAAP results exclude the effects of discrete tax adjustments.

Moving now to review of our business segments, I’ll start with Con-way Freight, our LTL Company and largest revenue segment. Con-way Freight posted first quarter operating income of $34.5 million, a 69.6% improvement over the $20.3 million earned in the same period a year-ago. Revenue was $831 million, an 8.2% increase over last year’s first quarter revenue of $767.7 million. Con-way Freight’s operating ratio this period was $95.8 million, improving from last year’s first quarter OR of $97.4 million.

Tonnage per day increased 1.5% over last year’s first quarter. Revenue per hundredweight or yield increased 6.1% in the quarter compared to the prior year. Excluding fuel surcharge, the increase in yield was 4.1% over last year’s first quarter. Con-way Freight made steady progress in its key focus areas during the quarter. Our journey to improve safety performance continues to produce encouraging results. This quarter accidents and injuries were down 20% and 35% respectively compared to the 2011 first quarter. We’re running a stable consistently performing network. We remain diligent in managing our cost and our lean continuous improvement practices or uncovering opportunities to increase the efficiencies on an ongoing basis.

Overall, the demand for LTL services remains steady throughout the quarter. As a result of this stable environment, we were successful in achieving mid-single digit price increases on contract renewals that came due during the quarter. The stable demand environment has continued through April, where we have seen daily tonnage record a modest uptick rising 2.1% year-over-year from last April and up 4% sequentially from March of this year. We remain confident in our strategy for Con-way Freight and in our ability to execute that strategy in ways that improve the customer experience increased efficiencies and further expand margins.

Read the rest of this transcript for free on