Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good day everyone and welcome to the U.S. Xpress Enterprises, Inc. conference call. Today's conference is being recorded.
At this time, for opening remarks I'd like to introduce Mr. Tripp Sullivan of Corporate Communications. Please go ahead.
TRIPP SULLIVAN, CORPORATE COMMUNICATIONS, U.S. XPRESS ENTERPRISES, INC.: Thank you. Good morning. Thank you for joining the U.S. Xpress 2004 second quarter conference call. On the call today will be Max Fuller, Co-Chairman; Ray Harlin, Chief Financial Officer; and Jeff Wardeberg, Chief Operating Officer.
Before we begin, I'd like to cover the Safe Harbor language. This conference call contains certain forward-looking information that is subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Without limitation, these risks and uncertainties include economic recession or downturns in customers' business cycles, rapid fluctuations in fuel pricing or availability, increase in interest rates, and the availability of qualified drivers. We urge you to carefully review and consider the various disclosures made by the Company in its press releases and periodic reports on Forms 10-K and 10-Q.
I'll now turn the call over to Ray Harlin to summarize the operating results for the quarter.
RAY HARLIN, EVP, CFO, U.S. XPRESS ENTERPRISES, INC.: Good morning. We will briefly discuss the results of our operations for the quarter, and following my comments we will be available to respond to any questions.
We are pleased that we continued our trend of quarterly earnings improvements during the second quarter of 2004. This represents the 10th consecutive quarter of year-over-year quarterly increases in revenue and earnings, and we expect this positive trend to continue throughout the remainder of 2004 and into 2005.
For the quarter, consolidated revenue increased 16.5% to 270.3 million. Excluding the effect of fuel surcharges, consolidated revenue increased 15.1% to 257.4 million. Truckload revenue, excluding the effect of fuel surcharges, increased 13.6% to 223.8 million, driven by a record increase in revenue per loaded mile of 11%.
As we stated in our discussion of the first quarter results, recognizing that we and the entire industry were facing significant increases in operating costs, we initiated an aggressive campaign beginning in the latter half of 2003, to improve our rates and replace business that did not allow us to receive a reasonable financial return. In certain cases, we have exited unprofitable lanes and business. Other factors contributing to the increase in rates include our regional and dedicated operations, which generally provide for lower length of haul and higher rate per mile, continue to grow as a percent of our truckload revenues. Together, these operations generated 26.8% of our truckload revenue in the second quarter, versus 20.3% in the 2003 second quarter.
Overall for the quarter, the average length of haul of our truckload operations declined 7.2% to 728 miles.
The shortage of truck capacity in many geographic markets has dramatically increased spot market rates for non competitive capacity. And finally, improved freight demand and improvement in our internal processes designed to allow us to make better decisions regarding freight solicitation and selection have resulted in better yields.
Net income for the second quarter increased 91.4% to 4.2 million, or 30 cents per diluted share, from 2.2 million or 16 cents per diluted share in the second quarter of 2003. The improvement in net income was driven by a 72.4% increase in our truckload operating income to 9.9 million, representing a 150-basis-points improvement in our truckload operating ratio. From an overall perspective, this improvement in truckload operating income was driven by the increase in rate per mile and our ability to continue to shift our operating assets to more profitable segments of our truckload business, as evidenced by our 62% growth in our dedicated business.
Also contributing to our improved results was the growth in our expedited rail program, which was virtually nonexistent a year ago and now represents over 10% of our truckload revenue. This program has enabled us to improve returns in many long-haul freight lanes, increase capacity to our customer base, and mitigate the impact of the hours of service change.
The improved operating results in our truckload operations were achieved in the face of absorbing significant increases in operating costs. The average cost per mile of our truckload operations during the quarter increased 8% over the second quarter of 2003. These increases included an approximate 10.5% increase in cost per mile for driver wages and benefits, primarily as a result of an 8% increase in driver pay initiated late in the first quarter of 2004. An approximately 8.4% increase in cost per mile for purchase transportation reflected an approximately 5 cent per mile increase in independent contractor compensation initiated during the first quarter of 2004.
Revenue cost -- revenue equipment costs have increased as the cost of new tractors has increased primarily due to the new EPA-compliant engines and lower residual guarantees. At June 30, 2004, approximately …