Con-Way Disappoints; No Surprise With Today's Winter Storm (CNW)

It should come as no surprise that horrible winter weather across the nation this season accompanies a disappointing earnings result for transportation company Con-Way CNW. Con-Way reported Q4 (December) earnings of $0.02 per share, $0.07 worse than Street consensus estimates of $0.09. Con-Way revenues rose 9.0% year-over-year but missed Street consensus estimates. Con-way Inc. CNW today reported net income for the fourth quarter of 2010 of $2.4 million, or 4 cents per diluted share. The results compare to a fourth-quarter 2009 net loss of $1.9 million, or 4 cents per diluted share. (Logo: http://photos.prnewswire.com/prnh/20060418/SFTU007LOGO) On a non-GAAP basis, earnings per diluted share were 2 cents in the 2010 fourth quarter compared to 6 cents in 2009, excluding the following: 2010 – $1.1 million of costs associated with the consolidation of Con-way's executive offices, and a $2.0 million positive tax adjustment resulting primarily from a recent change in tax legislation that reduced the annual effective tax rate. 2009 – $3.4 million of expenses for an administrative outsourcing initiative, and $2.6 million of increased tax expense due to the effect of adjustments for discrete and other tax items. Revenue for the 2010 fourth quarter was $1.21 billion, an 8.7 percent increase from last year's fourth quarter. Operating income in the 2010 fourth quarter was $15.8 million compared to $17.3 million in the fourth quarter a year ago. In the 2010 fourth quarter, the company recognized an income tax benefit of $1.7 million, including the earlier-mentioned $2.0 million adjustment, on $0.7 million of income before taxes. In the 2009 fourth quarter, income tax expense of $3.1 million, including the earlier-mentioned $2.6 million adjustment, was reported on $1.1 million of income before taxes, primarily related to discrete tax adjustments and changes in other items that increased the annual effective tax rate. FULL-YEAR 2010 RESULTS For the full-year 2010, Con-way reported net income of $4.0 million, or 7 cents per diluted share. This compares to a full-year 2009 net loss to common shareholders of $110.9 million, or $2.33 per diluted share. On a non-GAAP basis, full-year 2010 earnings per diluted share were 47 cents in 2010 compared to 61 cents per diluted share in 2009, excluding the following: 2010 – goodwill and intangible-asset impairment charges of $19.2 million related to the 2007 acquisition of Chic Logistics, $5.0 million of charges for administrative outsourcing and executive office consolidation, and $3.9 million for other employee-separation costs. 2009 – a $134.8 million goodwill-impairment charge at Con-way Truckload, a $5.4 million charge for a change in Con-way Freight's accounting estimate for revenue adjustments, and $3.4 million of costs related to administrative outsourcing. Both years also included discrete tax adjustments and changes to other items that affected the annual effective tax rate (as detailed in the attached GAAP reconciliation table). Revenue for the full-year 2010 was $4.95 billion, a 16.0 percent increase from 2009. Operating income of $78.2 million in 2010 was improved from the operating loss of $25.9 million in 2009, with both periods affected by the special items described above. In 2010, the company recognized $12.6 million of income tax expense on $16.6 million of income before taxes and, in 2009, $17.5 million of income tax expense was reported on $90.3 million of loss before taxes. Both periods primarily reflect the earlier mentioned tax adjustments, and no tax deduction on impairment charges. Excluding the effect of these items, the annual effective tax rate was 39.0 percent in 2010 compared to 40.8 percent in 2009. "Con-way's principal business units managed through an unsettled economy in 2010, concluding the year with solid operating discipline," said Douglas W. Stotlar, Con-way president and CEO. In the fourth quarter, Con-way Freight, the company's less-than-truckload unit, saw yield improve as a combination of pricing actions and proactive account management increased revenue per hundredweight, and helped maintain network volumes at more efficient levels. "We were disappointed with Con-way Freight's fourth quarter profits, which were affected by a spike in health care costs. That issue aside, we were encouraged with results of our operating cost reduction initiatives begun last August," Stotlar noted. "In less than 5 months, we've reversed the negative trajectory in primary operating cost and efficiency metrics, which are returning to historical norms. As we move into 2011, our focus will be on vigilant cost control, network efficiency and yield management." Menlo Worldwide Logistics turned in a solid fourth quarter, successfully navigating a changing market for outsourced logistics services. "Menlo completed a commendable year, executing well against its plan, managing costs and exceeding customer goals," Stotlar said. He added that headed into 2011, "Menlo remains well positioned in its markets with a global footprint and service portfolio that is aligned with customer needs." In the fourth quarter, Con-way Truckload saw key operating and productivity measures improve compared to the third quarter. "Our truckload unit operated well, reducing empty miles and increasing average loaded miles in the fourth quarter," said Stotlar. "We have good balance in the network and are well positioned to increase asset utilization as we refine the business mix and expand opportunities for dedicated teams. If the apparent firming of market demand continues, prospects for profitable growth should be encouraging," he concluded. Segment results in the 2010 fourth quarter for Con-way's principal operations were as follows: FREIGHT For the 2010 fourth quarter, Con-way Freight, the company's less-than-truckload operation, reported: Operating income of $1.8 million compared to $2.8 million earned in the year-ago period. The current period decline was primarily due to higher employee-related costs, which included approximately $18 million for the partial reinstatement of 2009's employee wage and benefit reductions and a $10.7 million increase in costs for workers' compensation and employee medical benefits. The 2009 fourth quarter included $2.6 million (Con-way Freight's share of the previously noted $3.4 million) of employee-separation costs and expense associated with the implementation of the administrative outsourcing initiative. Revenue of $736.0 million, a 5.7 percent increase over last year's fourth-quarter revenue of $696.4 million. Yield increased 7.1 percent from the previous-year fourth quarter. Excluding the fuel surcharge, yield rose 4.9 percent. Tonnage per day was essentially flat compared to the previous-year fourth quarter. Operating ratio was 99.8 in the 2010 fourth quarter compared to 99.6 in the previous-year period.