Con-way Inc. on Thursday, Feb. 4, reported a net loss applicable to common shareholders for the fourth quarter of 2009 of $1.9 million compared to a fourth-quarter 2008 net loss of $43.0 million. The net loss for 2009 included expenses related to an administrative outsourcing initiative, while last year’s fourth quarter included operational restructuring costs at Con-way Freight, impairment and acquisition related charges at Menlo Worldwide Logistics and a net gain from discontinued operations. Revenue of $1.12 billion was essentially even with last year’s fourth quarter.
Operating income was $17.3 million compared to an operating loss of $35.2 million, primarily reflecting the prior-year operating losses associated with the special items described above. Excluding these special items, declines in operating income at Con-way Freight and Con-way Truckload were partially offset by improved operating income at Menlo Worldwide Logistics.
In the fourth quarter, income tax expense of $3.1 million was recognized on $1.1 million of income before taxes, reflecting changes in numerous permanent tax items. In the fourth quarter of 2008, an income tax benefit of $1.6 million was reported on $49.6 million of loss before taxes, primarily reflecting no tax deduction on the impairment and acquisition-related charges and the effect of discrete items.
For the full year, Con-way reported a net loss of $110.9 million compared to full-year 2008 net income of $67.0 million. Results for full-year 2009 included the earlier mentioned administrative outsourcing expenses, a first-quarter goodwill impairment charge at Con-way Truckload and a third-quarter charge for a change in Con-way Freight’s accounting estimate for revenue adjustments. The 2008 full-year period included the impairment and acquisition related charges noted previously, two operational restructuring charges at Con-way Freight and a gain from discontinued operations. Revenues declined to $4.27 billion from $5.04 billion, primarily reflecting the effect of weak pricing driven by surplus trucking industry capacity.
The operating loss of $25.9 million compares to operating income of $192.6 million, with both periods affected by the special items described above. Excluding these special items, declines in operating income at Con-way Freight and Con-way Truckload were offset partially by improved operating income at Menlo Worldwide Logistics. Income tax expense of $17.5 million was recognized on $90.3 million of loss before taxes, and in 2008, income tax expense of $69.5 million was reported on $134.9 million of income before taxes. Both periods primarily reflect no tax deduction on impairment charges and the effect of discrete items.
“Excess capacity remains a problem for the LTL and truckload markets, which continues to suppress profit recovery,” said Douglas W. Stotlar, president and chief executive officer of San Mateo, Calif.-based Con-way. “It will be incumbent upon us to maintain strong liquidity and vigilant cost control while we invest prudently for the strategic needs of our business and customers going forward.”
Con-way Freight, the company’s less-than-truckload operation, saw pricing stabilize somewhat in the fourth quarter, albeit at a lower level:
• Operating income was $2.8 million compared to an operating loss of $9.4 million. Results were affected adversely by $2.6 million of costs for the administrative outsourcing initiative, and from continued weak LTL industry pricing, but benefited from employee-related cost-saving initiatives implemented earlier in the year. Operating income in the same period of 2008 was lower due to $21.3 million of operational restructuring charges.
• Revenue was $683.9 million, a 6.8 percent increase over $640.3 million.
• Tonnage per day increased 20.6 percent.
• Yield declined 14.4 percent, primarily reflecting the supply/demand imbalance and the resulting impact on pricing. Excluding the fuel surcharge, yield declined 11.7 percent.
• Operating ratio was 99.6 compared to 101.4. Excluding the operational restructuring charges in the 2008 fourth quarter, the operating ratio for this period was 98.2.
“While yields were down compared to last year, our increased tonnage levels have enabled better utilization of rolling stock capacity,” Stotlar said. “With the LTL market’s persistent oversupply, opportunities to improve margin will be difficult.” Stotlar added that Con-way Freight will continue to refine its network to drive cost savings and service improvements through initiatives such as the line-haul re-engineering announced last month that accelerated transit times for 460 U.S. cities while reducing operating expense.
Menlo Worldwide Logistics culminated the year with a solid fourth-quarter performance:
• Operating income was $5.9 million compared to an operating loss of $38.6 million. The 2008 period included $42.7 million for impairment and acquisition-related charges.
• Revenue was $338.2 million, down 9.4 percent from $373.1 million. The decrease primarily reflects lower transportation management revenues.
• Net revenue was $133.1 million, a 2.9 percent increase from $129.3 million. The increase primarily reflects higher net revenue from warehouse management services.
“2009 was an excellent year for Menlo,” Stotlar said. “Menlo’s service portfolio and solution approach clearly were on target with customer demand as the company grew both new and existing customer business in 2009. That success, coupled with operational improvements and efficiency gains, provided a strong finish for the year and positions Menlo with good momentum heading into 2010.”
Con-way Truckload weathered difficult market conditions to turn in a commendable performance for the quarter:
• Operating income was $8.2 million, a decrease of 43.3 percent compared to $14.5 million, primarily reflecting lower recovery of fuel surcharge revenue and weaker pricing due to excess industry capacity during the quarter.
• Revenue was $93.6 million after the elimination of $46.1 million in intercompany revenues compared to revenue of $110.9 million after elimination of $38.4 million in intercompany revenues, reflecting lower fuel surcharge recovery and the ongoing effects of the competitive pricing environment experienced throughout the year.
• Operating ratio before intercompany eliminations and exclusive of fuel surcharges was 93.2 compared to 88.1.
“Our truckload company benefited from several strategic decisions that have improved asset utilization and strengthened its position as a premium service provider,” Stotlar said. “Its expansion into regional operations is showing good early returns. We continue to see capacity being rationalized in the truckload industry. Early bid activity in January shows prices firming and demand strengthening. Those are encouraging signals that a recovery is beginning to take hold in this market segment.”
Con-way’s Road Systems Inc. trailer manufacturing unit, as well as other corporate activities, produced a small amount of income in the fourth quarter compared to a $1.7 million loss.
