NEWS RELEASE
Contacts:
Investor: Patrick Fossenier 1+ 650-378-5353
News Media: Gary Frantz 1+ 650-378-5335
CON-WAY INC. REPORTS THIRD-QUARTER 2007 RESULTS
SAN MATEO, Calif.-October 23, 2007 -- Con-way Inc. (NYSE:CNW) today reported
net income available to common shareholders for the third quarter of 2007 of
$37.3 million, or 78 cents per diluted share. The results compared with
third-quarter 2006 net income available to common shareholders of $63.0
million, or $1.24 per diluted share.
Earnings available to common shareholders for the 2007 third quarter were
affected by restructuring costs related to acquisition and business
transformation initiatives conducted in the quarter, which totaled $7.0
million, or 9 cents per diluted share. Results for the 2006 third quarter
included a gain from the sale of a subsidiary of $6.2 million, or 8 cents per
diluted share, and the effect of discrete tax items which reduced the tax
provision in the quarter by $2.9 million, adding 6 cents per diluted share to
the 2006 third quarter.
Revenue was $1.11 billion, an increase of 3.2 percent from last year's third-
quarter revenue of $1.08 billion. Operating income in the 2007 third quarter
was $67.7 million, down 33.8 percent from $102.3 million earned in the third
quarter a year ago.
Commenting on the results, Con-way President and CEO Douglas W. Stotlar noted
that soft customer shipping volumes continued to be a challenge for the
highly competitive less-than-truckload (LTL) market, where Con-way Freight
recorded a modest increase in tonnage for the quarter. "While we are
encouraged with customer response to Con-way Freight's growth initiatives,
the market continues to be very price sensitive. Tonnage per day had a
respectable gain over last year's third quarter; however, yields remain under
pressure, a market dynamic that we expect will continue to dampen profit
growth in LTL freight through the remainder of the year."
The quarter saw Menlo Worldwide, LLC complete the acquisition of Singapore-
based Cougar Holdings Pte Ltd, increasing its market share and footprint in
South Asia and Singapore as well as extending it into new vertical markets.
"In addition to successfully executing on its acquisition strategy, Menlo
made excellent progress in the quarter toward its business goals, improving
operational metrics and securing major new project wins. Our logistics unit
is on track to achieve double-digit growth in net revenues and margins for
the year," Stotlar said.
On October 17, Menlo Worldwide, LLC also completed its previously announced
acquisition of Chic Holdings Ltd. of Shanghai, China, which extends the
company into China's domestic transportation and logistics management market.
"These international acquisitions, combined with our earlier-concluded
purchase of Contract Freighters, Inc. have transformed our capabilities for
truckload services in North America as well as for logistics solutions in the
Asia Pacific. These become excellent platforms for growth that present
substantial opportunities to bring increasing value to our customers and
shareholders," Stotlar concluded.
The effective tax rate for the 2007 third quarter was 37.1 percent compared
to 34.2 percent in the same period of 2006, which included the effect of the
previously mentioned discrete tax items that reduced the tax provision.
Segment results in the 2007 third quarter for Con-way's principal operations
were as follows:
FREIGHT
For the 2007 third quarter, the company's regional less-than-truckload
operations reported:
* Operating income of $60.0 million, a decrease of 36.0 percent from the
$93.7 million earned in the year-ago period. The 2007 third quarter
included a charge of $5.5 million for reorganization costs related to
Con-way Freight's business transformation initiative while the previous-
year third quarter benefited from a $6.2 million gain from the sale of
Con-way Expedite.
* Revenues of $740.8 million, 1.3 percent above last year's third-quarter
revenues of $731.0 million.
* Tonnage per day handled by Con-way Freight increased 5.1 percent over
the previous-year third quarter.
* Yield for Con-way Freight was down 2.8 percent from the previous-year
third quarter. Excluding the fuel surcharge, yield declined 1.9 percent.
* Con-way Freight recorded an operating ratio of 92.0 in the 2007 third
quarter compared to 88.0 in third-quarter 2006. Excluding the earlier
mentioned reorganization costs, the 2007 third quarter operating ratio
was 91.4, reflecting higher employee wage and benefit expense and $3.2
million of rebranding expense. The 2006 third quarter operating ratio
excludes the gain on the sale of Con-way Expedite.
LOGISTICS
For the third quarter of 2007, the company's global logistics and supply
chain management operations reported:
* Operating income of $6.2 million, a 13.3 percent increase from $5.5
million in the third quarter of 2006.
* Revenue of $312.6 million, down 8.3 percent from the previous-year
third-quarter revenue of $340.9 million.
* Net revenue of $109.6 million, a 9.8 percent increase compared to $99.8
million in the previous-year third quarter.
Menlo's revenues consist of freight transportation services purchased and
managed on behalf of customers, as well as warehousing and transportation
network management fees. The difference between revenue and net revenue
growth reflects Menlo's efforts to reduce purchased transportation costs for
its customers, and its continued strategy of maximizing net revenues and
margins through a focus on high-value transportation and distribution network
management, multi-client warehouse operations and opportunities for supply
chain reengineering solutions.
TRUCKLOAD
Con-way completed its acquisition of Contract Freighters, Inc. (CFI) on
August 23. Segment results include operations for Con-way Truckload for the
full quarter, as well as operating results for CFI from August 23 through
September 30. For the third quarter of 2007, the company's full-truckload
transportation segment reported:
* Operating income of $3.0 million. The results included an operating loss
of $4.7 million related to Con-way Truckload, $1.5 million of which was
for the shutdown of Con-way Truckload's Memphis office.
* Revenue of $52.0 million in 2007 compared with $2.6 million in 2006
reflecting the acquisition of CFI.
* Operating ratio of 87.3, excluding losses from Con-way Truckload in the
quarter.
CON-WAY OTHER
Con-way Other includes the company's Road Systems, Inc. trailer manufacturing
unit as well as other corporate activities. These activities resulted in a
$1.5 million net loss during the 2007 third quarter, primarily from
environmental remediation at an unused location.
2007 OUTLOOK
The company expects full-year 2007 earnings from continuing operations to be
between $3.07 and $3.17 per diluted share. Current 2007 guidance includes for
the first time 17 cents per diluted share for costs related to acquisition
integration and business transformation initiatives in the third and fourth
quarters, and the previously disclosed 10 cents per diluted share effect for
the settlement from litigation of a vehicular casualty claim, noted in the
second quarter. The 2007 full-year earnings guidance is based on an expected
average number of diluted shares outstanding of 48.0 million for the year.
Con-way's effective tax rate is expected to be approximately 38 percent for
the fourth quarter. Current guidance for the full year has been updated to
reflect the inclusion of operating results for CFI, as well as Menlo's recent
acquisitions.
INVESTOR CONFERENCE CALL
Con-way will hold a conference call for the investment community to discuss
its third-quarter financial results tomorrow, Wednesday, October 24 at 11:00
a.m. Eastern Daylight Time (8:00 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. Callers are requested to dial in at least five minutes before the start
of the call. The call will also be available through a live internet webcast
at www.con-way.com, in the investor relations section.
An audio replay will be available for two weeks following the call by dialing
(800) 642-1687 or (706) 645-9291 (for international callers) and using access
code 17957308. An Internet replay of the presentation will also be available
at the Con-way web site, www.con-way.com.
About Con-way Inc. -- Con-way Inc. (NYSE:CNW) is a $4.7 billion freight
transportation and logistics services company headquartered in San Mateo,
Calif. Named FORTUNE magazine's "Most Admired Company" in transportation and
logistics for 2007, Con-way delivers industry-leading services through
primary operating companies Con-way Freight, CFI and Con-way Truckload and
Menlo Logistics. These operating units provide high-performance, day-definite
less-than-truckload and full truckload and intermodal freight transportation,
as well as logistics, warehousing and supply chain management services, and
trailer manufacturing. 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 us on the Web at 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 and objectives of management for future operations, any
statements concerning proposed new products or services, any statements
regarding Con-way's estimated future contributions to pension plans, any
statements as to the adequacy of reserves, any statements regarding the
outcome of any claims that may be brought against Con-way, any statements
regarding future economic conditions or performance, any statements of
estimates or belief, any statements regarding the acquisition of
Transportation Resources, Inc. and its subsidiaries, including Contract
Freighters, Inc. (collectively, "CFI"), and related financing, 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, the creditworthiness of Con-way's customers
and their ability to pay for services rendered, increasing competition and
pricing pressure, changes in fuel prices or fuel surcharges and the effect of
recently-filed litigation alleging that Con-way engaged in price fixing of
fuel surcharges in violation of Federal antitrust laws, the effects of the
cessation of the air carrier operations of Emery Worldwide Airlines, the
possibility that Con-way may, from time to time, be required to record
impairment charges for long-lived assets, the acquisition of CFI and related
financing (including without limitation risks relating to the financing,
integration risks and risks that acquisition synergies are not realized), the
possibility of defaults under Con-way's $400 million credit agreement, $500
million bridge credit agreement, and other debt instruments (including
without limitation defaults resulting from unusual charges), and the
possibility that Con-way may be required to repay certain indebtedness in the
event that the ratings assigned to its long-term senior debt by credit rating
agencies are reduced, labor matters, enforcement of and changes in
governmental regulations, environmental and tax matters, matters relating to
the 1996 spin-off of Consolidated Freightways Corporation ("CFC"), including
the possibility that CFC's multi-employer pension plans may assert claims
against Con-way, matters relating to the sale of Menlo Worldwide Forwarding,
Inc., including Con-way's obligation to indemnify the buyer for certain
losses in connection with the sale, and matters relating to Con-way's defined
benefit pension plans. The factors included herein and in Item 7 of Con-way's
2006 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.
Con-way Inc.
STATEMENTS OF OPERATING RESULTS
(Dollars in thousands except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
REVENUES
Freight $740,769 $730,960 $2,165,381 $2,175,349
Truckload [d] 51,991 2,622 54,228 5,274
Logistics [a] 312,572 340,869 956,962 1,036,430
Other 5,961 2,356 10,630 5,798
----------- ----------- ----------- -----------
$1,111,293 $1,076,807 $3,187,201 $3,222,851
=========== =========== =========== ===========
OPERATING INCOME (LOSS)
Freight $60,029 [b] 93,740 [c] 186,412 [b] 259,841[c]
Truckload [d] 2,975 1,398 6 3,704
Logistics 6,188 5,462 19,659 17,740
Vector - 1,999 (2,699) 10,858
Other (1,510) (284) (2,402) (87)
----------- ----------- ----------- -----------
67,682 102,315 200,976 292,056
----------- ----------- ----------- -----------
Other Expense, Net 5,756 3,873 11,585 6,060
----------- ----------- ----------- -----------
Income Before Taxes 61,926 98,442 189,391 85,996
Income Tax Provision 22,961 33,664 [e] 70,257 97,273[e]
----------- ----------- ----------- -----------
Income from Continuing
Operations 38,965 64,778 119,134 188,723
----------- ----------- ----------- -----------
Discontinued Operations,
net of tax
Loss from Discontinued
Operations - - - (1,929)
Gain (Loss) from
Disposal - - 1,609 (4,850)
----------- ----------- ----------- -----------
- - 1,609 (6,779)
Net Income 38,965 64,778 120,743 181,944
Preferred Stock Dividends 1,693 1,748 5,172 5,319
----------- ----------- ----------- -----------
NET INCOME AVAILABLE
TO COMMON SHAREHOLDERS $37,272 $63,030 $115,571 $176,625
=========== =========== =========== ===========
NET INCOME FROM CONTINUING
OPERATIONS AVAILABLE TO
COMMON SHAREHOLDERS $37,272 $63,030 $113,962 $183,404
=========== =========== =========== ===========
Weighted-Average Common
Shares Outstanding
Basic 44,976,482 47,601,175 45,414,155 49,717,418
Diluted 48,007,691 50,857,496 48,492,037 53,092,636
Earnings (Loss) Per Common Share
Basic
Net Income from
Continuing Operations $0.83 $1.32 $2.51 $3.69
Loss from Discontinued
Operations - - - (0.04)
Gain (Loss) from Disposal - - 0.03 (0.10)
----------- ----------- ----------- -----------
$0.83 $1.32 $2.54 $3.55
=========== =========== =========== ===========
Diluted
Net Income from
Continuing Operations $0.78 $1.24 $2.37 $3.47
Loss from Discontinued
Operations - - - (0.04)
Gain (Loss) from Disposal - - 0.03 (0.09)
----------- ----------- ----------- -----------
$0.78 $1.24 $2.40 $3.34
=========== =========== =========== ===========
[a] Menlo Logistic's net revenue
Revenues $312,572 $340,869 $956,962 $1,036,430
Purchased transportation (203,015) (241,097) (637,371) (745,687)
_________________________________________________
Net Revenues $109,557 $ 99,772 $319,591 $ 290,743
[b] Includes a $5.5 million third-quarter loss ($0.07 per diluted share)
related to the reorganization initiative at Con-way Freight.
[c] Includes a $6.2 million third-quarter gain ($0.08 per diluted share) from
the sale of assets related to Con-way Expedite.
[d] Effective August 23, 2007, Con-way acquired Contract Freighters, Inc. and
affiliated companies (collectively, "CFI"). Under purchase-method
accounting, CFI's operating results are included in Con-way's statements
of operating results only for periods subsequent to the acquisition.
[e] Includes a $2.9 million third-quarter tax benefit related to the
utilization of a tax-loss carry-forward.
Con-Way Inc.
CONDENSED BALANCE SHEETS
(Dollars in thousands)
September 30, December 31,
2007 2006
------------ ------------
ASSETS
Current assets $ 917,616 $1,090,484
Property, plant and equipment, net 1,476,269 1,117,975
Other assets [a] 557,016 93,430
------------ ------------
Total Assets $2,950,901 $2,301,889
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $724,649 $559,802
Long-term debt and guarantees 957,099 557,723
Other long-term liabilities and deferred
credits 484,039 443,585
Shareholders' equity [b] 785,114 740,779
------------ ------------
Total Liabilities
and Shareholders' Equity $2,950,901 $2,301,889
============ ============
[a] Under purchase-method accounting, Con-way's consolidated balance sheet
at September 30, 2007 includes the estimated fair value of CFI's and
Cougar's acquired assets and liabilities, including goodwill
of $475.2 million.
[b] Effective January 1, 2007, Con-way adopted the measurement-date provisions
of SFAS 158, "Employers' Accounting for Defined Benefit Pension Plans - an
amendment of SFAS 87, 88, 106 and 123R." In connection with the revision
of its measurement date to December 31 from November 30, Con-way recorded
a $13.0 million net increase to shareholders equity, consisting of a
$15.6 million reduction in the accumulated other comprehensive loss and a
$2.6 million decrease to beginning retained earnings.