Transportation service provider Con-way Inc. has reported net income for the second quarter of 2010 of $13.9 million (26 cents per diluted share). The results compared to second-quarter 2009 net income of $31.5 million (64 cents per diluted share).
Revenue in the second quarter of 2010 was $1.31 billion, a 23.7% increase from last year's second quarter. Operating income in the 2010 second quarter was $35.4 million, compared to $66.0 million in the second quarter a year ago.
Commenting on the quarter's results, Douglas W. Stotlar, Con-way's president and CEO, notes that seasonally stronger demand and rebounding economic activity supported revenue growth in all reporting segments, particularly at Con-way Freight. "The second quarter saw Con-way Freight's business levels surge to record volumes, resulting in higher variable operating costs," Stotlar notes. "The quarter's results also reflect the effect of wage increases implemented in January this year and resumption of accruals in April for paid time off benefits."
Stotlar adds that efforts to improve pricing showed modest progress in the quarter. "Yield each month in the quarter improved sequentially. However, managing the balance between price and volume while bringing costs into alignment will take time, which restrains our expectations for near-term improvement."
Menlo Worldwide Logistics produced another strong quarter. "Menlo's core warehousing and transportation management operations turned in significant growth in both revenues and profits," Stotlar notes.
In line with its earlier-announced strategy to shift a portion of its assets away from affiliate company business in favor of external market-based traffic, Con-way Truckload made significant progress repositioning and rebalancing its network during the quarter, according to Stotlar. "Our Truckload team was successful in meeting this strategic objective," he says. "We are confident that by redeploying some of the fleet at this inflection point in the demand environment, we will be able to take advantage of higher-margin traffic as supply continues to tighten."
Stotlar adds that spot pricing strength seen in the first quarter has now begun to show up in longer-term truckload contract pricing, as customers take steps to ensure access to capacity.
Operating results in the 2010 second quarter for Con-way's reporting segments were as follows:
Freight
For the 2010 second quarter, Con-way Freight, the company's less-than-truckload (LTL) operation, reported:
● Revenue of $817.0 million, a 25.8% increase over last year's second-quarter revenue of $649.3 million.
● Yield declined 2.1% from the previous-year second quarter. Excluding the fuel surcharge, yield declined 6.4%.
● Weight per day increased 29.2% over the previous-year second quarter.
● Operating income of $17.2 million, compared to $49.0 million in the year-ago period. Results were adversely affected by higher labor, equipment rental and purchased transportation costs as network volumes remained at record levels. Also, increased payroll costs from partial reinstatement of employee wage and benefit reductions taken last year reduced current-quarter operating income by approximately $15 million.
● Operating ratio of 97.9 in the 2010 second quarter compared to 92.5 in the previous-year period.
Logistics
For the second quarter of 2010, Menlo Worldwide Logistics, the company's global logistics and supply chain management operation, reported:
● Revenue of $385.8 million, up 17.8% from the prior-year second-quarter revenue of $327.6 million.
● Net revenue of $142.8 million, which increased 12.1% from $127.4 million in the same period of last year.
● Operating income of $13.0 million, a 66.8% increase from the $7.8 million earned in the second quarter of 2009.
● Both of Menlo’s core operations of warehousing and transportation management services realized year-over-year improvements in revenue, net revenue and operating income.
Truckload
For the second quarter of 2010, Con-way Truckload, the company's full-truckload transportation operation, reported:
● Revenue of $145.5 million, a 1.5% increase from the prior-year second-quarter revenue of $143.3 million. The increase was attributable to higher fuel surcharges and improved revenue per loaded mile. Partially 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 of $5.1 million compared to the $6.9 million earned in last year's second quarter. Included in the results was a $7.6 million increase in vehicular claims expense, resulting from substantially higher-than-plan expense in the current quarter, compared to a historically low expense in the prior-year quarter. The previous-year quarter also included a $2.5 million loss from the sale of tractors and a $1.0 million write-down related to the 2007 CFI acquisition.
● Operating ratio on revenue, exclusive of fuel surcharges, was 95.7 in the second quarter of 2010, compared to 94.7 in the second quarter of 2009.
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 break-even results in the 2010 second quarter compared to prior-year second-quarter operating income of $2.3 million, which relates primarily to corporate reinsurance activities.
