Q3 2012 Earnings Call
November 01, 2012 8:30 am ET
Patrick J. Fossenier - Vice President of Investor Relations
Douglas W. Stotlar - Chief Executive Officer, President and Director
Stephen L. Bruffett - Chief Financial Officer and Executive Vice President
Walter Gregory Lehmkuhl - Executive Vice President and President of Con-Way Freight Inc
Todd C. Fowler - KeyBanc Capital Markets Inc., Research Division
Jason H. Seidl - Dahlman Rose & Company, LLC, Research Division
Allison M. Landry - Crédit Suisse AG, Research Division
Benjamin J. Hartford - Robert W. Baird & Co. Incorporated, Research Division
John L. Barnes - RBC Capital Markets, LLC, Research Division
Arthur W. Hatfield - Raymond James & Associates, Inc., Research Division
Scott H. Group - Wolfe Trahan & Co.
William J. Greene - Morgan Stanley, Research Division
Justin B. Yagerman - Deutsche Bank AG, Research Division
Christian Wetherbee - Citigroup Inc, Research Division
Good morning. My name is Brandy, and
conference operator today. At this time, I would like to welcome everyone to Con-way Inc.'s Third Quarter Earnings Review Conference Call. [Operator Instructions] Thank you.
I would now like to turn the call over to Patrick Fossenier, Vice President of Investor Relations. Please go ahead, Sir.
Patrick J. Fossenier
Thank you, Brandy. Welcome to the Con-way Third 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'd 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 statements and are subject to a number of risks and uncertainties. Actual results of operation and financial condition might differ materially from those projected in such forward-looking statements, and no assurance can be given as to future results.
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 statements is contained in our Forms 10-K, 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.
We understand that there are other industry calls today, so we'll be sure not to go over an hour on this call. I'd also like to note that we have a lot of people on this call, so we'd appreciate it if you'd limit yourself to a question or 2 then return to the queue.
Now, without further ado, I'm pleased to turn it over to Doug Stotlar.
Douglas W. Stotlar
Good morning, before we begin this morning, we want to extend our heartfelt thoughts and prayers to those who have been affected by Hurricane Sandy. For those of you with us on the call this morning from the Northeast, we hope that you and your families have come through these past few days without incident and are starting to get your lives back to normal.
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, Saul Gonzalez.
Steve will provide some commentary on our financial picture, and then in the Q&A portion of the call, Greg, Bob and Saul will be available to answer questions about their business units.
While we continue to be encouraged by the service performance and consistent operational execution of our businesses, operating income results for the third quarter of 2012 fell short of our expectations, a lower operating income was due in large part to higher than anticipated expenses for employee benefits, primarily healthcare costs at Con-way Freight and Menlo.
Results also were affected by investments in technology that support our 3-year continuous improvement roadmap for Con-way Freight. These investments are key to our strategy and are positioning Con-way Freight with the foundational capabilities for continuous operational improvement and progress toward net margin expansion.
Turning to our consolidated financial results for the third quarter of 2012, Con-way recorded consolidated revenues of $1.4 billion, a 2% increase over last year's third quarter revenues of $1.38 billion. Our operating income was $55.2 million in the 2012 third quarter, a 9.7% decrease from the $61.1 million earned in the prior-year period.
Diluted earnings per share were $0.45, compared to $0.52 per share in the third quarter last year.
Moving now to a review of our business segments, I'll start with Con-way Freight, our LTL operation and largest revenue segment. Con-way Freight posted third quarter operating income of $34.4 million, down 15.4% from the $40.7 million earned in the same period a year ago. Revenue was $858.3 million, a 1.8% increase over last year's third quarter revenue of $843.3 million. While improved yield contributed to the increased revenues, we did have to deal with the effect of one last workday in this year's third quarter compared to last year.
Con-way Freight's operating ratio this period was 96.0 compared to last year's third quarter operating ratio of 95.2. Third quarter revenue per hundredweight or yield increased 3.5% from the previous year third quarter. Excluding fuel surcharge, yield rose 3.4%, and when adjusted for length of haul and weight per shipment, yield ex fuel was up 3.5% in the third quarter compared to last year.
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