Operating income in the 2012 third quarter was $55.2 million, a 9.7 percent decrease from the $61.1 million earned in the third quarter a year ago. Revenue for the 2012 third quarter was $1.40 billion, a 2.0 percent increase over last year's third-quarter revenue of $1.38 billion.
Commenting on the quarter, Douglas W. Stotlar, Con-way's President and CEO said, "Consolidated third quarter results for 2012 fell short of our expectations, due largely to higher-than-anticipated employee benefit expense, primarily healthcare, at Con-way Freight, and technology costs incurred in support of our three-year improvement roadmap."
Stotlar added that volume trends so far in the fourth quarter at Con-way Freight have declined compared to last year. "Tonnage levels in October, prior to the effects of Hurricane Sandy, were about three percent below those of October 2011, so we expect the fourth quarter of 2012 to be challenging as well."
Stotlar emphasized that Con-way Freight has developed and begun implementing key elements of its multi-year strategy to improve margins and operating efficiencies. "We have invested in foundational initiatives at our LTL business during 2012, and we expect the benefits from these investments to begin accruing in early 2013 and build throughout the year," he noted.
Menlo Worldwide Logistics, the company's global logistics and supply chain management operation, maintained consistent growth in revenues and net revenues but saw a modest decline in operating income. "Gains in core transportation management services were somewhat offset by lower warehouse management revenues," Stotlar said. "Menlo continued to benefit from its international operations and their pipeline of opportunities."
Con-way Truckload recorded an increase in operating income compared to last year's third quarter. "Con-way Truckload did a commendable job increasing margins," Stotlar noted. "Increased revenue per loaded mile was the primary contributor to the improved operating income, and they are maintaining their emphasis on premium service, margin improvement and network efficiency."
The third-quarter effective tax rate was 38.5 percent in 2012, compared to 38.8 percent in third quarter of 2011.
Segment results in the third quarter for Con-way's principal operations were as follows:
FREIGHT
For the third quarter of 2012, Con-way Freight reported:
· Revenue of $858.3 million, a 1.8 percent increase over last year's third-quarter revenue of $843.3 million. The increase was primarily attributable to higher yields from improved pricing, partially offset by the effect of one less workday.
· Operating income of $34.4 million, down 15.4 percent compared to $40.7 million earned in the year-ago period. The decline in operating income was largely attributable to higher employee benefit expense, primarily healthcare.
· Yield increased 3.5 percent from the previous-year third quarter. Excluding the fuel surcharge, yield rose 3.4 percent. Improved pricing drove the higher yields.
· Tonnage per day declined 0.2 percent compared to the 2011 third quarter.
· Operating ratio was 96.0 in the 2012 third quarter compared to 95.2 in the previous-year period.
LOGISTICSFor the third quarter of 2012, Menlo Worldwide Logistics reported:
· Revenue of $427.8 million, an increase of 2.6 percent from the prior year third-quarter revenue of $417.1 million. The quarter benefited from increased revenue from transportation management services, partially offset by lower warehouse management services revenue.
· Net revenue (revenue less purchased transportation) of $159.8 million, a 3.3 percent increase from $154.7 million in the previous year third quarter.
· Operating income of $11.0 million, a 13.3 percent decline from last year's third quarter operating income of $12.7 million. Lower operating income in the third quarter was due to increased employee-related expense, and higher other operating expenses associated with certain warehouse management customers.
TRUCKLOAD
For the third quarter of 2012, Con-way Truckload reported:
· Revenue of $160.1 million, a 0.9 percent increase over last year's third-quarter revenue of $158.7 million. Revenue per loaded mile, excluding fuel surcharge, was up 2.0 percent from the third quarter of 2011.
· Operating income of $11.3 million, a 43.3 percent increase over operating income of $7.9 million in the previous-year period. The increase in third-quarter operating income resulted largely from improved pricing and lower workers' compensation claims.
· Loaded miles declined 1.1 percent compared to the 2011 third quarter.
· Empty miles were essentially unchanged from last year's third quarter at 9.5 percent.
· Operating ratio exclusive of fuel surcharges was 90.9, compared to 93.6 in the third quarter of 2011.
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 an operating loss of $1.5 million in the third quarter of 2012 compared to an operating loss of $0.1 million in the third quarter of 2011.
INVESTOR CONFERENCE CALL
Con-way will host a conference call for the investment community tomorrow, Thursday, November 1, beginning at 8:30 a.m. Eastern Time (5:30 a.m. Pacific).
The call can be accessed by dialing (866) 264-3634 or (706) 643-3632 (for international callers) and is expected to last approximately one hour. The call will also be available through a live internet webcast at http://www.con-way.com/, in the investors section.
An audio replay will be available for two weeks following the call by dialing (855) 859-2056 or (404) 537-3406 (for international callers) and using access code 34902612. An Internet replay and podcast of the presentation will also be available at http://www.con-way.com/.
ABOUT CON-WAY INC. -- Con-way Inc. (NYSE:CNW) is a $5.3 billion freight transportation and logistics services company headquartered in Ann Arbor, Mich. Con-way delivers industry-leading services through its primary operating companies of Con-way Freight, Con-way Truckload and Menlo Worldwide Logistics. These operating units provide high-performance, day-definite less-than-truckload (LTL), full truckload and multimodal freight transportation, as well as logistics, warehousing and supply chain management services. Con-way also operates Road Systems Inc., a trailer refurbishing and manufacturing company which supplies trailing equipment to the company's trucking fleets. Con-way Inc. and its subsidiaries operate from more than 500 locations across North America and in 20 countries. For more information about Con-way, visit http://www.con-way.com/.
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