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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, which reduced net income by 7 cents and 5 cents per diluted share, respectively. Excluding these items, 2009 third-quarter earnings per diluted share were 39 cents.
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 in the 2009 third quarter was $41.1 million compared to $78.9 million earned in the third quarter a year ago. Revenue in the 2009 third quarter was $1.13 billion, down from last year's third-quarter revenue of $1.37 billion as the recessionary economy curtailed demand for services.
Commenting on the quarter, Con-way President and CEO Douglas W. Stotlar said, "Our operating companies have adjusted to the resetting economy. 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. "We made a strategic decision, implemented over the past two quarters, to improve network utilization and we met this objective," noted Stotlar. "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. "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 multi-client 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. "Profits were reduced by an asset disposition loss. Excluding this, Con-way Truckload turned in a commendable operating profit in a soft market," Stotlar noted. "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," he concluded.
The effective tax rate for the 2009 third quarter was 46.1 percent compared to 36.5 percent in the same period of 2008. The 2009 tax rate was affected by discrete tax items that increased the effective tax rate, while the 2008 tax rate also included discrete tax items, which reduced the effective tax rate.
FREIGHT
For the 2009 third quarter, Con-way Freight, the company's less-than-truckload operation, reported:
-- Operating income of $22.8 million, a decrease of 62.7 percent from the
$61.1 million earned in the year-ago period. 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 last year's
third-quarter revenue of $808.3 million.
-- Tonnage per day increased 5.1 percent over the previous-year third
quarter.
-- Yield declined 19.4 percent from the previous-year third quarter,
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 in the 2009 third
quarter, including the earlier-mentioned charge for the accounting
estimate change.
LOGISTICS
For the third quarter of 2009, Menlo Worldwide Logistics, the company's global logistics and supply chain management operations, reported:
-- Operating income of $9.5 million, a 159 percent increase from $3.7
million earned in the third quarter of 2008. 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 the previous-year
third-quarter revenue of $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.
-- Net revenue of $129.3 million, a slight increase from $127.9 million in
the previous-year third quarter, reflecting higher gain-share revenues.
TRUCKLOAD
For the third quarter of 2009, Con-way Truckload, the company's full-truckload transportation operation, reported:
-- Operating income of $10.6 million, a decrease of 30.1 percent compared
to $15.2 million in the previous-year period. 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 in the 2009 third quarter was $13.0 million.
-- Revenue of $95.7 million, after the elimination of $50.6 million in
inter-company revenues. This compares to 2008 third-quarter revenue of
$140.9 million (after elimination of $42.7 million in inter-company
revenues).
-- Operating ratio before inter-company eliminations and exclusive of fuel
surcharges was 91.7, compared to 88.6 in the third quarter of 2008.
CON-WAY OTHER
Con-way Other includes the company's Road Systems, Inc. trailer manufacturing unit as well as other corporate activities. These activities produced losses of $1.8 million and $1.1 million, respectively, in the 2009 and 2008 third quarters.
INVESTOR CONFERENCE CALL
Con-way will host a conference call for the investment community tomorrow, Wednesday, November 4 at 8:30 a.m. Eastern Standard Time (5:30 a.m. Pacific).
The call can be accessed by dialing (866) 264-3634 or (706) 643-3632 (for international callers) and is expected to last approximately one hour. Callers are requested to dial in at least five minutes before the start of the call. The call will also be available through a live internet webcast at www.con-way.com, in the investor relations section.
An audio replay will be available for two weeks following the call by dialing (800) 642-1687 or (706) 645-9291 (for international callers) and using access code 32526465. An Internet replay of the presentation will also be available at the Con-way site.
About Con-way -- Con-way Inc. (NYSE:CNW) is a $4.3 billion freight transportation and logistics services company headquartered in San Mateo, Calif. A diversified transportation company, Con-way delivers industry-leading services through three primary operating companies: Con-way Freight, Con-way Truckload and Menlo Worldwide Logistics. These operating units provide high-performance, day-definite less-than-truckload and full truckload and multimodal freight transportation, as well as logistics, warehousing and supply chain management services, and trailer manufacturing. Con-way Inc. and its subsidiaries operate from more than 500 locations across North America and in 20 countries. For more information about Con-way, visit us on the Web at www.con-way.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute "forward-looking statements" and are subject to a number of risks and uncertainties and should not be relied upon as predictions of future events. All statements other than statements of historical fact are forward-looking statements, including: any projections of earnings, revenues, weight, yield, volumes, income or other financial or operating items, all statements of the plans, strategies, expectations or objectives of Con-way's management for future operations or other future items, any statements concerning proposed new products or services, any statements regarding Con-way's estimated future contributions to pension plans, any statements as to the adequacy of reserves, any statements regarding the outcome of any legal and other claims and proceedings that may be brought against Con-way, any statements regarding future economic conditions or performance, any statements regarding strategic acquisitions, any statements of estimates or belief, and any statements or assumptions underlying the foregoing. Specific factors that could cause actual results and other matters to differ materially from those discussed in such forward-looking statements include: changes in general business and economic conditions, increasing competition and pricing pressure, the creditworthiness of Con-way's customers and their ability to pay for services rendered, changes in fuel prices or fuel surcharges, the possibility that Con-way may, from time to time, be required to record impairment charges for goodwill, in tangible assets and other long-lived assets, the possibility of defaults under Con-way's $400 million credit agreement and other debt instruments (including without limitation defaults resulting from unusual charges), uncertainty in the credit markets, including the effect on Con-way's ability to refinance indebtedness as and when it becomes due, labor matters, enforcement of and changes in governmental regulations or legislation which potentially could result in an adverse impact on the company, environmental and tax matters, matters relating to the 1996 spin-off of Consolidated Freightways Corporation ("CFC"), and matters relating to Con-way's defined benefit pension plans, including the effect on the plans of changes in discount rates and in the value of plan assets. The factors included herein and in Item 7 of Con-way's 2008 Annual Report on Form 10-K as well as other filings with the Securities and Exchange Commission could cause actual results and other matters to differ materially from those in such forward-looking statements. As a result, no assurance can be given as to future financial condition, cash flows, or results of operations.
Con-way Inc.
Statements of Operating Results
(Dollars in thousands except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
REVENUES
Freight $692,750 (b) $808,326 $1,890,434 (b) $2,375,654
Logistics (a) 344,361 419,896 987,793 1,138,494
Truckload 95,681 140,932 271,490 394,264
Other 649 1,015 2,989 3,023
--- ----- ----- -----
$1,133,441 $1,370,169 $3,152,706 $3,911,435
========== ========== ========== ==========
OPERATING
INCOME (LOSS)
Freight $22,816 (b) $61,107 $48,423 (b) $174,559 (d)
Logistics 9,532 3,678 22,305 14,895
Truckload 10,620 15,195 (115,179)( c ) 37,907
Other (1,834) (1,063) 1,239 424
------ ------ ----- ---
41,134 78,917 (43,212) 227,785
Other Expense,
net 16,110 15,169 48,204 43,247
------ ------ ------ ------
Income (Loss) before
Income Tax
Provision 25,024 63,748 (91,416) 184,538
Income Tax
Provision 11,532 23,264 14,402 71,136
------ ------ ------ ------
Income (Loss)
from Continuing
Operations 13,492 40,484 (105,818) 113,402
------ ------ -------- -------
Discontinued
Operations,
net of tax
Gain from
Disposal - - - 1,609
--- --- --- -----
- - - 1,609
Net Income (Loss) 13,492 40,484 (105,818) 115,011
Preferred Stock
Dividends - 1,655 3,189 5,028
--- ----- ----- -----
NET INCOME (LOSS)
APPLICABLE
TO COMMON
SHAREHOLDERS $13,492 $38,829 $(109,007) $109,983
======= ======= ========= ========
NET INCOME
(LOSS) FROM
CONTINUING
OPERATIONS
APPLICABLE
TO COMMON
SHAREHOLDERS $13,492 $38,829 $(109,007) $108,374
======= ======= ========= ========
Weighted-Average
Common Shares
Outstanding
Basic 48,862,692 45,499,208 47,009,642 45,367,459
Diluted 49,497,740 48,336,200 47,009,642 48,256,429
Earnings (Loss)
Per Common
Share
Basic
Net Income
(Loss) from
Continuing
Operations $0.28 $0.85 $(2.32) $2.39
Gain from
Disposal - - - 0.03
--- --- --- ---
$0.28 $0.85 $(2.32) $2.42
===== ===== ====== =====
Diluted
Net Income
(Loss) from
Continuing
Operations $0.27 $0.81 $(2.32) $2.26
Gain from
Disposal - - - 0.04
--- --- --- ----
$0.27 $0.81 $(2.32) $2.30
===== ===== ====== =====
(a)Logistics'
net
revenues
Revenues $344,361 $419,896 $987,793 $1,138,494
Purchased
Transpor-
tation
expense (215,048) (291,964) (606,544) (757,923)
-------- -------- -------- --------
Net
revenues $129,313 $127,932 $381,249 $380,571
(b) The three and nine months ended September 30, 2009 include a change
in accounting estimate at the Freight segment, which increased the
allowance for revenue adjustments and decreased both revenue and
operating income by $5.4 million ($0.07 per diluted share).
( c )The nine months ended September 30, 2009 include a goodwill
impairment charge of $134.8 million ($2.86 per share) in the first
quarter of 2009.
(d) The nine months ended September 30, 2008 include $5.2 million
($0.07 per diluted share) of first-quarter expense associated with
restructuring activities at Freight.
Con-way Inc.
Condensed Balance Sheets
(Dollars in thousands)
September 30, December 31,
2009 2008
------------ ----------
ASSETS
Current assets $1,097,468 $951,082
Property, plant and
equipment, net 1,365,572 1,471,956
Other assets 447,451 648,669
------- -------
Total Assets $2,910,491 $3,071,707
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $829,717 $658,077
Long-term debt and
guarantees 718,074 926,224
Other long-term
liabilities
and deferred credits (a) 628,359 861,814
Shareholders' equity (a) 734,341 625,592
------- -------
Total Liabilities and
Shareholders' Equity $2,910,491 $3,071,707
========== ==========
(a) Effective April 30, 2009, Con-way amended its primary defined
benefit pension plan to permanently curtail benefits associated
with future increases in employee compensation. In connection with
the curtailment, Con-way re-measured its plan-related assets and
liabilities as of April 30, 2009. Accordingly, as of the
re-measurement date, Con-way recorded a $299.9 million decrease to
the plan obligation, a $116.9 million decrease in long-term deferred
tax assets, and a $182.9 million net increase to shareholders' equity
(to reflect a reduction in the accumulated other comprehensive loss).
SOURCE Con-way Inc.
http://www.con-way.com
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