Con-way, Inc. reported net income from continuing operations for the first quarter of 2008 of $22.5 million (after preferred stock dividends), or 47 cents per diluted share. The results compared to first-quarter 2007 net income from continuing operations (after preferred stock dividends) of $24.9 million, or 51 cents per diluted share.
Revenue was $1.20 billion, an increase of 19.9 percent from last year’s revenue of $1.00 billion, reflecting acquisitions completed during 2007. Operating income in the 2008 first quarter was $54.0 million, an increase of 10.0 percent compared to $49.1 million earned in the first quarter a year ago.
Net income to common shareholders in the 2008 first quarter was $22.5 million, or 47 cents per diluted share, which included expenses of $5.2 million, or 7 cents per diluted share, associated with completion of organizational transformation initiatives at Con-way Freight. This compares to previous-year net income of $27.8 million, or 57 cents per diluted share. The 2007 first quarter included discontinued operations which had a net gain of $2.9 million, or 6 cents per diluted share.
First quarter results in both 2008 and 2007 also were affected by worse-than-expected winter weather conditions. These weather-related effects reduced first-quarter diluted earnings per share in both years by an estimated 4 cents.
Excluding the Con-way Freight organizational transformation costs in 2008, the company’s first-quarter diluted earnings per share were 54 cents in 2008, compared to 51 cents in 2007.
Describing the business climate as “lackluster at best,” Douglas W. Stotlar, Con-way’s president and CEO, said, “We’re operating in a challenging and uncertain economic environment, which continues to restrain demand and place pressure on pricing and margins. Based on current economic data and feedback from our customers, there appear to be few catalysts to accelerate demand in the freight markets, at least in the short term,” he said.
“The current economy notwithstanding, I was encouraged by modest growth at Con-way Freight in the quarter as targeted, customer-specific sales initiatives produced results and increased market share,” Stotlar added. “We also began to see some early results from our synergy initiatives as Con-way Truckload was able to leverage business opportunities with Menlo and Con-way Freight to improve asset utilization and reduce empty miles.”
Commenting on Menlo Worldwide Logistics, Stotlar noted that trends toward outsourcing of logistics operations, both geographically and functionally across the supply chain, continued to benefit Menlo. “Menlo has a solid pipeline across all of its principal industry groups,” said Stotlar. “Our pace of new business wins is tracking with expectations, particularly in Europe and Asia. The challenge for Menlo will be margin improvement and cost management as new business wins are implemented.”
The effective tax rate for the 2008 first quarter was 39.4 percent compared to 41.8 percent in the same period of 2007. Both the 2008 and 2007 tax rates were affected by discrete tax adjustments which increased the effective tax rate.
Con-way is revising its outlook for 2008 full-year earnings and now expects diluted earnings per share from continuing operations to be between $3.00 and $3.40 based on an assumed number of diluted shares outstanding of 48.1 million. The company’s previous 2008 annual guidance was for diluted earnings per share from continuing operations to be between $3.40 and $3.80.
“Given the weak demand environment and the inflationary effect of unprecedented energy costs, we believe pricing will remain under pressure for some time. Until such time as we have tangible evidence of improving economic conditions we believe a cautious, measured approach to the outlook for earnings is warranted,” concluded Stotlar.