Con-way Inc. incurs smaller 1Q net loss


Con Way1

Con-way Inc. on Wednesday, May 5, reported a net loss for the first quarter of 2010 of $4.0 million compared compare to a first-quarter 2009 net loss of $154.0 million. The net loss included a $2.3 million tax charge related to recently-enacted healthcare legislation and a $2.8 million pre-tax charge for the write-off of a customer-relationship intangible asset related to the 2007 acquisition of Chic Logistics.

First-quarter 2009 results included a goodwill-impairment charge at Con-way Truckload of $134.8 million and a $2.7 million tax benefit from a now-expired fuel-related tax credit. Revenue for the 2010 first quarter was $1.16 billion, a 20.7 percent increase. Operating income was $14.4 million compared to an operating loss of $150.3 million, primarily reflecting the prior-year goodwill-impairment charge.

Douglas W. Stotlar, president and chief executive officer of San Mateo, Calif.-based Con-way, said that the freight and logistics markets improved each month in the quarter as the economy continued its recovery.

Con-way Freight, the company’s less-than-truckload operation, reported:
• Revenue of $725.0 million, a 26.3 percent increase over $573.8 million.
• Operating loss of $3.2 million compared to an operating loss of $23.4 million. Results were affected adversely by persistently weak LTL industry pricing, but benefited from employee-related cost-saving initiatives implemented in April 2009.
• Tonnage per day increased 34.8 percent.
• Yield declined 7.8 percent, primarily reflecting continued pressure on pricing in the competitive LTL market, and the effect of a 9.3 percent increase in weight per shipment. Excluding the fuel surcharge, yield declined 11.2 percent.
• Operating ratio was 100.4 compared to 104.1.

“Con-way Freight experienced sequential tonnage gains month-to-month that were stronger than historical seasonal data would indicate,” Stotlar said. “The LTL supply/demand equation is undergoing a slow but steady shift, which should lead to stronger pricing, but it will take some time for capacity to fully rationalize, dampening our expectations for significant expansion of LTL operating margins in the near term.”

Menlo Worldwide Logistics, the company’s global logistics and supply chain management operation, reported:
• Revenue of $355.2 million, up 12.2 percent from $316.5 million. Revenue growth was from both transportation management and warehouse management services.
• Net revenue of $144.2 million, which increased 15.2 percent from $125.2 million. The improvement reflects contributions from warehouse management services as well as transportation management revenue, which due primarily to higher performance- based revenue grew by a larger amount than purchased transportation expense.
• Operating income of $12.9 million (including the $2.8 million expense for the acquisition-related write-off), a record for quarterly profit and a 158.5 percent increase from $5.0 million. The record operating income reflects the increase in net revenue and improved operating margins on both warehouse and transportation management services.

Menlo Worldwide Logistics continued to build on a strong 2009 with a record profit in the 2010 first quarter, Stotlar said. “Menlo is benefiting from strong current project activity across its full portfolio of transportation and logistics management services,” he said. “With the combination of solid contributions from maturing new accounts, a return to growth in transactional volumes from existing customers and good cost controls, Menlo performed well.”

Con-way Truckload, the company’s full-truckload transportation operation, reported:
• Revenue of $140.6 million, a 4.3 percent increase from $134.8 million. The increase primarily reflects higher fuel-surcharge revenue, partially offset by the effects of a smaller fleet and lower revenue per loaded mile.
• Operating income of $3.0 million compared to an operating loss of $132.7 million, which included the goodwill-impairment charge of $134.8 million. Excluding the charge, operating income increased 39.3 percent from $2.1 million. The current quarter benefited from improved asset utilization and lower empty miles, but was affected negatively by lower revenue per loaded mile and higher fuel costs.
• Operating ratio was 97.5 compared to 98.3. The ratios are exclusive of fuel surcharges and the prior-year goodwill impairment charge.

Con-way Truckload was successful at realizing efficiency and utilization gains as it reduced empty miles and improved the operating productivity of its fleet, which is somewhat smaller than this time last year. “Profits were restrained primarily due to higher fuel prices and lower revenue per loaded mile,” Stotlar said. “With the recovering economy, demand is increasing in a market with less capacity than a year ago. That’s strengthening spot pricing, although longer-term contract rate increases have been slower to gain traction.”

The company’s Road Systems Inc. trailer-manufacturing unit, as well as other corporate activities, produced operating income of $1.7 million compared to $0.8 million.