Second quarter net income at Con-way is down

Second quarter results for transportation and logistics services provider Con-way Inc. were a bit of a mixed bag, according to the company’s earnings announcement today.

By ·

Second quarter results for transportation and logistics services provider Con-way Inc. were a bit of a mixed bag, according to the company’s earnings announcement today.

Net income of $13.9 million—or $0.26 per share—was off 55.8 percent year-over-year, while revenue—at $1.31 billion—was up 23.7 percent. Operating income—at $35.4 million—was down 46.6 percent.

Con-way President and CEO Douglas W. Stotlar said on an investor conference call today that each of the company’s business segments was impacted differently by a generally improving economic environment.

This was particularly evident, he said, for Con-way Freight, the company’s less-than-truckload (LTL) unit.

“Demand significantly exceeded our forecast [for Con-way Freight] as the result of an unexpectedly strong economy,” said Stotlar. “Our volumes reached record levels starting in March and continuing through the second quarter. This presented several challenges, most notably the pace at which volumes came on created a significant hiring need.”

In the second quarter, Con-way Freight hired 3,200 new employees, whom were on-boarded, coupled with labor costs associated with higher volumes increasing, as well as higher costs due to overtime, rental expenses, and purchased transportation.

Quarterly revenue at Con-way Freight—at $817 million—was up 25.8 percent, with yield down 2.1 percent year-over-year—6.4 percent excluding fuel surcharge. Tonnage per day increased 29.2 percent, and operating income of $17.2 million was down compared to $49 million last year.

“One of our goals during the quarter was to relieve some of the pressure on our system while working to moderate our record volumes,” said Stotlar. “As we progressed through the quarter on a year-over-year basis, April tonnage per day was up 37 percent, May was up 28 percent, and June was up 23 percent. We expect to see sequential volumes moderate through the rest of this year, as we continue to focus on increasing price.”

Stotlar said that Con-way is seeing modest improvement, due to stronger demand, industry actions, and Con-way’s own specific initiatives. He added that benefits, strong demand, and improving pricing were offset by increased operating costs related to record volumes in the Con-way Freight network. And the task of moderating record volume while increasing price will take time to resolve and will curtail expectations for operating margin expansion in the near-term.

Other unit results: Quarterly revenue at Menlo Worldwide, Con-way’s third-party logistics unit—at $385.8 million—was up 17.8 percent, and net revenue of $142.8 million was up 12.1 percent. Menlo’s operating income of $13.0 million was up 66.8 percent year-over-year.

Quarterly revenue at Con-way Truckload—at $145.5 million—was up 1.5 percent year-over-year, and Con-way officials said the annual increase was due to higher fuel surcharges and improved revenue per loaded mile. But they noted that offsetting the increase was the negative effect of lower total miles in the quarter, which reduced revenue (excluding fuel surcharges), and a higher proportion of empty miles resulting from fleet repositioning activities. Operating income at Con-way Truckload—at $5.1 million—was down compared to $6.9 million last year.

“Con-way’s efforts in 2009 to build network density through a more aggressive pricing strategy has produced undesirable results, with 2Q Freight margins hampered with low-yielding freight and excessive costs absorbed to support record business levels,” wrote Robert W. Baird analyst Jon Langenfeld in a research note. “Encouragingly, Con-way has begun to focus its efforts on improving yields, which we view as positive for the company and the industry. We expect the effects from 2009’s pricing decisions to remain a headwind to Con-way’s yield growth, as efforts to trim unprofitable freight will likely take multiple quarters.”


About the Author

Jeff Berman, Group News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Latest Whitepaper
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Details Key to Cross-border Ease
Ever-changing regulations are making it risky for U.S. companies engaged in cross-border trade...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo