A substantial portion of the net loss reported by Con-way Inc. was the result of a one-time, non-cash goodwill impairment charge. The company said $134.8 million of the first-quarter loss of $154.0 million was a result of the good will impairment charge associated with Con-way Truckload, formerly Contract Freighters Inc.
Total revenue for Con-way was $962.9 million, a decrease of 19.9% from last year's revenue of $1.20 billion. The 2009 first quarter had an operating loss of $150.3 million, which excluding the goodwill impairment charge, was an operating loss of $15.5 million, said Con-way. This compared to operating income of $54.0 million earned in the first quarter a year ago.
"The freight markets continued to suffer from excess capacity and intense price competition,” commented Douglas W. Stotlar, Con-way's president and CEO. "While Con-way Freight posted losses in January and February, it returned to profitability in March, as we saw the benefit of some seasonal upturn in business and modest market share gains.”
Stotlar noted, "There are some signs that our freight volumes may be nearing a bottom. However, feedback from our customers as well as trend data for industrial output and inventory levels indicate that shipping volumes are likely to remain restrained, certainly for the short term.”
In response to economic conditions, the company instituted proactive measures to reduce costs and conserve cash, implemented workforce reductions and network adjustments in the 2008 fourth quarter, and took additional measures in March 2009. The company reported the March actions, which included salary and wage reductions, and suspension of certain 401(k) contributions, are effective mostly in April and are expected to produce cost savings in 2009 of between $100 million and $130 million.
"Until we see some balance restored between supply and demand in the freight markets, and a more stable pricing environment, we must be cautious about our outlook for 2009,” Stotlar said.
Menlo Worldwide Logistics, the company's supply chain management subsidiary, provided a bright spot as “tight cost controls and prudent business development strategies sustained profitability and delivered solid growth in customer wins,” according to the company. Operating income in the logistics group was $5.0 million, a 20.6% decrease from $6.3 million in the first quarter of 2008, related to increased margin pressures somewhat offset by cost reduction actions. Revenue of $316.5 million was down 7.3% from the previous-year first-quarter revenue of $341.5 million. Net revenue of $125.2 million, compared to $126.0 million in the previous-year first quarter. New contract revenue offset declines due to increasing margin pressures as market conditions continued to affect pricing, said Con-way.
Con-way Freight, the company's regional less-than-truckload operation and its biggest division, reported an operating loss of $23.4 million compared to operating income of $36.1 million in the year-ago period. Revenue was $559.7 million, down 24.7% from last year's first quarter revenue of $743.3 million. The decrease was attributable to recession-driven business declines and significantly lower fuel surcharge revenue, said the company. Tonnage per day decreased 12.4% from the previous-year first quarter, and yield (revenue-per-hundredweight) decreased 12.1%. Excluding the fuel surcharge, yield was down 4.3%, reflecting the influence of excess market capacity and resulting pricing pressure. An operating ratio of 104.1 in the 2009 first quarter compared to 95.2 in first-quarter 2008, reflecting the tonnage declines and pricing pressures.Con-way Truckload, the company's full truckload transportation operations, reported an operating loss of $132.7 million, including the impairment charge of $134.8 million, which was triggered by a first quarter decline in truckload market values due to current economic conditions. Excluding the impairment charge, operating income was $2.1 million for the 2009 first quarter. This compared to operating income of $10.3 million in the year-ago period. Operating income in the 2009 first quarter also reflected increasing pricing pressure and significantly higher vehicular casualty costs. Revenue of $86.0 million was down 25.8% compared to revenue of $116.0 million in the 2008 first quarter, reflecting soft demand, market overcapacity and lower fuel surcharge levels. Both figures are after the elimination of inter-company revenue. Yield (Revenue-per-loaded mile) decreased 1.9% from the previous-year first quarter, reflecting the competitive pricing environment and decreased fuel surcharges. The operating ratio on total revenue (without the goodwill impairment charge, before inter-company eliminations and exclusive of fuel surcharges) of 98.3, compared to an operating ratio of 91.4 in the previous-year first quarter.
Con-way's other activities, including the company's Road Systems, Inc. trailer manufacturing unit and other corporate activities produced income of $779,000 during the 2009 first quarter compared to income of $1.4 million in the year-ago period.
