CON-WAY INC ANN ARBOR, Mich., July 29, 2015 /PRNewswire/ -- Con-way Inc. (NYSE: CNW) today announced second-quarter 2015 net income of $44.0 million, or 76 cents per diluted share. In the second quarter of 2014, Con-way reported net income of $53.7 million, or 93 cents per diluted share.
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On a non-GAAP basis, earnings per diluted share were 76 cents in the second quarter of 2015, compared to 91 cents in the same period of the prior year. Non-GAAP items, consisting of pension income/expense and tax-related adjustments in both years and a gain from the sale of property in the prior year, are detailed in the attached reconciliation.
Operating income for the second quarter of 2015 was $84.0 million, an 18.2 percent decrease from the $102.7 million earned in the same period a year ago. Second-quarter 2015 operating income included $8.3 million of higher vehicular claims expense (9 cents per diluted share), reflecting an uncommon spike in accident severity at Con-way Freight.
Revenue of $1.43 billion for the 2015 second quarter decreased 4.4 percent from last year's second-quarter revenue of $1.49 billion.
Con-way's effective tax rate for the 2015 second quarter was 38.4 percent, compared to 40.9 percent in the same period of the prior year. Both GAAP tax rates include the effect of discrete and other tax adjustments (presented in the attached reconciliation).
During the quarter, Con-way repurchased 460,000 shares of common stock under the company's $150 million stock repurchase program, bringing the year-to-date 2015 total of shares repurchased to 830,000. As of June 30, approximately $98 million in available share repurchase authority remains under this program.
Segment results for Con-way's principal operations were as follows:
FREIGHT
For the second quarter of 2015, Con-way Freight reported:
-- Revenue of $916.9 million, a 2.5 percent decrease from $940.5 million in
the second quarter of the prior year. The revenue decline was primarily
attributable to lower fuel surcharges and lower tonnage, partially
offset by improved pricing.
-- Revenue per hundredweight, or yield, increased 0.4 percent compared to
the second quarter of the prior year. Excluding the fuel surcharge,
yield rose 5.5 percent.
-- Tonnage per day decreased 3.0 percent compared to last year's second
quarter, reflecting softer demand as well as the effects of earlier
lane-based pricing and network optimization activities.
-- Operating income of $69.5 million, a 16.3 percent decrease from $83.0
million in the second quarter of the prior year. Operating income
results included the effects of higher driver wages and benefits from
earlier announced driver pay increases, as well as the previously
mentioned $8.3 million increase in vehicular claims expense, primarily
related to accident severity. The prior year second quarter included a
$3.4 million gain from the sale of property.
-- Operating ratio of 92.4 compared to 91.2 in the second quarter of the
prior year.
"Yield management and operating efficiencies mitigated much of the impact of increased driver wages in the quarter," said Douglas W. Stotlar, Con-way president and CEO. "Daily tonnage was lower due to softer demand from industrial shippers and the impact of earlier efforts to improve pricing and increase density in the network. Our focus going forward is on continuing to drive benefit from revenue management activities and executing on initiatives for long-term profitable growth."
LOGISTICS
For the second quarter of 2015, Menlo Logistics reported:
-- Revenue of $405.9 million, a 6.4 percent decrease from $433.7 million in
the second quarter of the prior year. The revenue decline was primarily
the result of customer-directed changes in operations, as well as
decreases in fuel surcharge revenue.
-- Net revenue of $187.2 million, a slight increase over $186.7 million in
the second quarter of the prior year. The mix between transportation
management and warehouse management revenues remained relatively
consistent in the quarter.
-- Operating income of $8.0 million, a 24.7 percent increase from $6.4
million in the second quarter of the prior year. The increase was
primarily attributable to better pricing and strong cost controls.
"Menlo's focus on margin improvement delivered a solid quarter," said Stotlar. "Our logistics company's lean expertise and continuous improvement processes are a clear competitive advantage. Menlo has secured several wins this year and has a strong prospect pipeline. New projects now moving through start-up are expected to begin revenue and profit contribution early next year."
TRUCKLOAD
For the second quarter of 2015, Con-way Truckload reported:
-- Revenue of $142.7 million, a 13.0 percent decrease from $164.1 million
in last year's second quarter. Results were impacted primarily by lower
fuel surcharge revenues and lower total loaded miles, somewhat offset by
increased base rates.
-- Operating income of $9.3 million, a 31.0 percent decrease from $13.5
million in the second quarter of the prior year. Increased driver
pay-per-mile coupled with lower asset utilization was largely
responsible for the decline in operating income.
-- Operating ratio, exclusive of fuel surcharges, of 92.4 compared to 89.4
in the second quarter of the prior year.
"We made consistent progress during the quarter increasing the number of seated tractors in the fleet, however, the market for new drivers remains challenging," said Stotlar. "As we continue to improve asset utilization and complete annual rate negotiations with customers, we expect Con-way Truckload's performance to improve."
CORPORATE AND ELIMINATIONS
Corporate and Eliminations primarily consists of certain corporate activities for which related income or expense was not allocated to the reporting segments. These include the company's defined benefit pension plans, reinsurance operations, corporate properties and results from Con-way's trailer manufacturing unit. These activities produced an operating loss of $2.8 million in the 2015 second quarter, compared to an operating loss of $0.2 million in the second quarter of the prior year, primarily due to higher pension expense.
INVESTOR CONFERENCE CALL
Con-way will host a conference call for the investment community tomorrow, Thursday July 30, beginning at 8:30 a.m. Eastern Time. The call can be accessed by dialing (877) 874-4749 or (706) 643-3632 (for international callers). Please reference access code 78322087. The call is expected to last approximately one hour, and will also be available through a live Internet webcast at www.con-way.com, in the Investors section.
An Internet replay and podcast of the presentation will also be available at the Con-way web site.
About Con-way Inc. -- Con-way Inc. (NYSE:CNW) is a $5.8 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 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 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 www.con-way.com.
FORWARD-LOOKING STATEMENTS
Certain statements in this press release constitute "forward-looking statements" and are subject to a number of risks and uncertainties and should not be relied upon as predictions of future events. All statements other than statements of historical fact are forward-looking statements, including: any projections of earnings, revenue, capital and software expenditures, weight, yield, volumes, income or other financial or operating items, any statements of the plans, strategies, expectations or objectives of Con-way's management for future operations or other future items, any statements concerning proposed new products or services, any statements regarding Con-way's estimated future contributions to pension plans, any statements regarding the payment of future dividends, any statements as to the adequacy of reserves, any statements regarding the outcome of any legal, administrative and other claims and proceedings that may be brought by or against Con-way, any statements regarding future economic conditions or performance, any statements regarding strategic acquisitions, any statements of estimates or belief, and any statements or assumptions underlying the foregoing. Specific factors that could cause actual results and other matters to differ materially from those discussed in such forward-looking statements include: changes in general business and economic conditions, increasing competition and pricing pressure, enforcement of and changes in governmental regulations or taxes that could impact the company, environmental, tax and other matters, disruptions or volatility in capital markets, including the effect on Con-way's ability to refinance indebtedness as and when it becomes due, changes in fuel prices or fuel surcharges, increasing competition for qualified drivers or increases in driver compensation and benefits, cyber attacks, data losses and security breaches or business interruption due to a catastrophic event, labor matters, the possibility that Con-way may, from time to time, be required to record impairment charges for goodwill and other long-lived assets, matters relating to Con-way's defined benefit pension plans, including the effect on the plans of changes in discount rates and in the value of plan assets, changes in liability for Con-way's self-retained insurance claims, a significant loss of business from one of Menlo's major customers, the creditworthiness of Con-way's customers and their ability to pay for services rendered, and the possibility of defaults under Con-way's revolving credit agreement and other debt instruments. The factors included herein and in Item 1A of Con-way's 2014 Annual Report on Form 10-K as well as other filings with the Securities and Exchange Commission could cause actual results and other matters to differ materially from those in such forward-looking statements. As a result, no assurance can be given as to future financial condition, cash flows or results of operations. Any forward-looking statements speak as of July 29, 2015, and are subject to change. Con-way does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law.
Con-way Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(Dollars in
thousands, except
per share data) 2015 2014 2015 2014
---- ---- ---- ----
Revenue
Freight $916,906 $940,503 $1,772,518 $1,788,530
Logistics 405,936 433,650 823,006 840,015
Truckload 142,748 164,064 281,473 320,074
Corporate and
Eliminations (38,276) (45,868) (77,252) (87,427)
$1,427,314 $1,492,349 $2,799,745 $2,861,192
========== ========== ========== ==========
Operating Income (Loss)
Freight [a] $69,516 $83,021 $106,892 $101,586
Logistics 8,004 6,418 16,620 12,592
Truckload 9,313 13,499 16,874 19,879
Corporate and
Eliminations (2,827) (238) (4,453) 1,705
------ ---- ------ -----
84,006 102,700 135,933 135,762
Other Income
(Expense) (12,553) (11,932) (28,085) (25,772)
------- ------- ------- -------
Income before
Income Tax
Provision 71,453 90,768 107,848 109,990
Income Tax
Provision 27,418 37,101 42,021 43,430
------ ------ ------ ------
Net Income $44,035 $53,667 $65,827 $66,560
======= ======= ======= =======
Weighted-Average Common Shares
Outstanding
Basic 57,419,971 57,128,379 57,526,585 57,043,378
Diluted 57,805,354 57,694,691 58,013,169 57,577,373
Earnings per Common Share
Basic $0.77 $0.94 $1.14 $1.17
===== ===== ===== =====
Diluted $0.76 $0.93 $1.13 $1.16
===== ===== ===== =====
[a] Includes a $3.4 million
prior-year second-
quarter gain from the
sale of property.
Con-way Inc.
Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
(Dollars in thousands,
except per share data) 2015 2014 2015 2014
---- ---- ---- ----
Net Income and Earnings per Common Share:
Net Income (GAAP) $44,035 $53,667 $65,827 $66,560
Before-Tax Reconciling Items
Gain on sale of property - 3,397 - 3,397
Defined benefit pension
income (expense) [b] (1,211) 679 (2,333) 1,174
(1,211) 4,076 (2,333) 4,571
Tax-Related Reconciling Items
Tax effect of items above 464 (1,626) 894 (1,819)
Discrete and other tax
adjustments [c] 1,092 (1,066) 865 294
----- ------ --- ---
1,556 (2,692) 1,759 (1,525)
Net Income (Adjusted Non-
GAAP) $43,690 $52,283 $66,401 $63,514
======= ======= ======= =======
Diluted Shares Outstanding 57,805,354 57,694,691 58,013,169 57,577,373
Earnings per Diluted Common
Share (Adjusted Non-GAAP) $0.76 $0.91 $1.14 $1.10
===== ===== ===== =====
Logistics' Net Revenue:
Revenue (GAAP) $405,936 $433,650 $823,006 $840,015
Purchased transportation
expense (218,715) (246,963) (445,630) (470,838)
Net revenue (Adjusted Non-
GAAP) $187,221 $186,687 $377,376 $369,177
======== ======== ======== ========
[b] Pension income (expense) is excluded from
net income to determine non-GAAP results
as the defined benefit pension plans are
frozen and pension income (expense) is
predominately driven by long-term
discount rates and, to a lesser degree,
corporate decisions regarding future
funding and asset allocation. The related
results are not relevant to the ongoing
operations of Con-way's businesses.
[c] The "Discrete and other tax adjustments"
line quantifies the variance in the
income tax provision or benefit resulting
from differences in the actual effective
tax rate for the period from the
effective tax rate forecasted at the
beginning of the period.
Information About Non-GAAP
Financial Measures:
Con-way provides financial
measures such as adjusted net
income, adjusted earnings per
share and net revenue as
additional information to
investors. These measures are not
in accordance with generally
accepted accounting principles in
the United States ("GAAP"). Con-
way's non-GAAP financial measures
are intended to supplement, but
not substitute for, the most
directly comparable GAAP measures.
Con-way believes that the non-
GAAP financial measures provide
meaningful information to assist
management, investors and analysts
in understanding Con-way's
financial results because they
exclude items that may not be
indicative or are unrelated to
Con-way's core operating results.
However, because non-GAAP
financial measures are not
standardized, it may not be
possible to compare these
financial measures across
companies. Investors are strongly
encouraged to review Con-way's
financial statements and publicly
filed reports in their entirety
and not to rely on any single
financial measure.
Con-way Inc.
Consolidated Condensed Balance Sheets
June 30, December 31,
2015 2014
---- ----
(Dollars in thousands) (Unaudited)
Assets
Current assets $1,282,553 $1,261,400
Property, plant and equipment,
net 1,647,568 1,654,211
Other assets 421,600 420,007
------- -------
Total Assets $3,351,721 $3,335,618
========== ==========
Liabilities and Shareholders'
Equity
Current liabilities $778,058 $742,120
Long-term debt and capital
leases 728,192 729,890
Other long-term liabilities
and deferred credits 642,577 667,770
Shareholders' equity 1,202,894 1,195,838
--------- ---------
Total Liabilities and
Shareholders' Equity $3,351,721 $3,335,618
========== ==========
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SOURCE Con-way Inc.
