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Con-way reports lower 3Q net income, revenue
By CCJ Staff
Con-way Inc. on Tuesday, Nov. 3, reported net income for the third quarter of 2009 of $13.5 million compared to $38.8 million during the same period in 2008. The company said the 2009 third quarter included the effect of a change in accounting estimate related to revenue adjustments at Con-way Freight and a charge for certain discrete tax items, while the 2008 third-quarter results reflected the effect of preferred stock dividends. The company subsequently converted its preferred stock to common stock on June 30 this year.
Operating income was $41.1 million compared to $78.9 million. Revenue was $1.13 billion, down from $1.37 billion as the recessionary economy curtailed demand for services.
"Our operating companies have adjusted to the resetting economy," said Douglas W. Stotlar, president and chief executive officer of Con-way, based in San Mateo, Calif. "Overall, the business environment continues to present formidable challenges, characterized by weak demand, excess capacity and pricing pressure. We expect these conditions to persist in the near term, diminishing the prospects for earnings growth."
Con-way Freight continued to post sequential quarter-to-quarter 2009 tonnage growth, while yield and profits declined due to several factors. For the quarter, Con-way Freight reported:
Operating income of $22.8 million, a decrease of 62.7 percent from $61.1 million. Profitability was diminished from lower pricing driven by overcapacity in the LTL market, and higher variable operating costs due to increased tonnage levels. The 2009 third quarter also was affected by a change in accounting estimate related to revenue adjustments, which decreased income by $5.4 million. The current-quarter comparison to prior year also was affected by employee cost reductions implemented in April 2009;
Revenue of $692.8 million, a 14.3 percent decline from $808.3 million;
Tonnage per day increased 5.1 percent; and
Yield declined 19.4 percent, primarily reflecting the weak pricing environment from industry overcapacity. Excluding the fuel surcharge, yield declined 10.5 percent. Con-way Freight recorded an operating ratio of 96.8, including the earlier-mentioned charge for the accounting estimate change.
"We made a strategic decision, implemented over the past two quarters, to improve network utilization, and we met this objective," Stotlar said. "Profits were constrained due to pricing levels, higher variable operating costs associated with the tonnage growth and lower fuel surcharge revenues. While pricing is likely to remain under pressure, we believe the increased network volumes put us in a better position competitively. We are now instituting specific measures to improve operating efficiency."
Menlo Worldwide Logistics produced a second consecutive quarter of solid operating results. For the quarter, Menlo reported:
Operating income of $9.5 million, a 159 percent increase from $3.7 million. The results reflected effective cost controls, ongoing improvements in operating efficiency, and gain-share income;
Revenue of $344.4 million, down 18.0 percent from $419.9 million. The decrease reflects a decline in fuel-surcharge revenue from previous levels, and significantly lower costs for purchased transportation sourced by Menlo's transportation-management group as the company continued to leverage pricing opportunities with third-party trucking service providers; and
Net revenue of $129.3 million, a slight increase from $127.9 million, reflecting higher gain-share revenues.
"Menlo did a superb job managing its costs," Stotlar said. "These results speak to the consistent, successful execution of its business model, particularly in the 4PL segment and with its multiclient warehousing operations. Menlo continues to enjoy a strong sales pipeline and an excellent win rate on new projects, which has helped offset business declines from existing clients."
Con-way Truckload performed well in the quarter, effectively managing near-term market challenges while expanding its service portfolio. For the quarter, Con-way Truckload reported:
Operating income of $10.6 million, a decrease of 30.1 percent compared to $15.2 million. Results included a $2.3 million charge related to the disposition of 150 tractors that will be replaced during the fourth quarter. Excluding the charge, operating income was $13.0 million;
Revenue of $95.7 million, after the elimination of $50.6 million in intercompany revenues, compared to $140.9 million, after the elimination of $42.7 million in intercompany revenues; and
Operating ratio before intercompany eliminations and exclusive of fuel surcharges was 91.7 compared to 88.6.
"Profits were reduced by an asset disposition loss," Stotlar said. "Excluding this, Con-way Truckload turned in a commendable operating profit in a soft market. Costs remain well-controlled, asset utilization is improving, and our new regional truckload operation is gaining traction. Con-way Truckload continues to be recognized for its premium service value, which is an excellent foundation for growth."
Con-way's Road Systems Inc. trailer manufacturing unit, as well as other corporate activities, produced a loss of $1.8 million compared to a loss of $1.1 million. |
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