Con-way Inc. on Thursday, April 23, reported a net loss for the first quarter of 2009 of $154.0 million, which included a goodwill impairment charge of $134.8 million. Excluding the impairment charge, and on a non-GAAP basis, Con-way’s net loss was $19.2 million. The results compared to first-quarter 2008 net income of $22.5 million.
The goodwill impairment charge was associated with Con-way Truckload, formerly Contract Freighters Inc., which the company purchased in August 2007. The charge was noncash in nature and does not impact the company’s revolving credit covenants.
Total Con-way revenue was $962.9 million, a decrease of 19.9 percent from $1.20 billion. The 2009 first quarter had an operating loss of $150.3 million, which excluding the goodwill impairment charge was an operating loss of $15.5 million; this compared to operating income of $54.0 million for the 2008 first quarter.
Results were affected by the recessionary economy, which drove the decline in revenue and resulted in an operating loss at Con-way Freight, the company’s less-than truckload carrier and largest subsidiary.
“The freight markets continued to suffer from excess capacity and intense price competition,” said Douglas W. Stotlar, president and chief executive officer of San Mateo, Calif.-based Con-way. “While Con-way Freight posted losses in January and February, it returned to profitability in March, as we saw the benefit of some seasonal upturn in business and modest market share gains.”
Stotlar said that the economy remains challenging. “There are some signs that our freight volumes may be nearing a bottom,” he said. “However, feedback from our customers, as well as trend data for industrial output and inventory levels, indicate that shipping volumes are likely to remain restrained, certainly for the short term.”
In response to economic conditions, the company instituted proactive measures to reduce costs and conserve cash, implemented work force reductions and network adjustments in the 2008 fourth quarter, and took additional measures in March this year. The March actions, which included salary and wage reductions, and suspension of certain 401(k) contributions, are effective mostly in April and are expected to produce cost savings in 2009 of between $100 million and $130 million.
“Until we see some balance restored between supply and demand in the freight markets, and a more stable pricing environment, we must be cautious about our outlook for 2009,” said Stotlar, who added that Menlo Worldwide Logistics, the company’s supply chain management subsidiary, provided a bright spot as tight cost controls and prudent business development strategies sustained profitability and delivered solid growth in customer wins.