Con-way reported net income in the fourth quarter of 2013 was $11.7 million, slipping 0.9 percent year-over-year from $11.8 million, ending the year in a dip after two previous quarters of growth.
Quarterly revenue for the motor carrier, No. 5 on JOC’s list of Top 50 Trucking Companies, was $1.358 billion, sliding 0.4 percent from $1.364 billion in the fourth quarter of 2012.
The results were in line with the company’s fourth quarter update, which was issued in mid-January and predicted flat earnings because of problems at subsidiaries Con-way Freight and Menlo Worldwide Logistics.
“These results were not indicative of the overall progress made in 2013 to position our company for long-term success, notably at Con-way Freight and Menlo Logistics,” said Douglas W. Stotlar, Con-way’s president and CEO, in a written statement.
Revenue for Con-way Freight, No. 2 in JOC’s ranking of Top 25 Less-Than-Truckload Companies, was $847.0 million in the fourth quarter, up 2.7 percent year-over-year from $824.7 million, driven primarily by tonnage levels and improved yield, according to Con-way.
According to Stifel Transportation & Logistics Research Group, Con-way Freight “failed to show the margin improvement expected and has barely improved at all through two years of the company’s three-year turnaround plan.”
Stotlar commented: “At our less-than-truckload company, we deployed foundational capabilities including lane-based pricing, line-haul optimization tools and the broader rollout of lean methodologies. We expect these foundational initiatives to contribute to improved results in 2014.”
In November 2013, Con-way Freight named Stephen F. Dean senior vice president of sales. During the fourth quarter earnings call, transcribed by Seeking Alpha, Gregory Walter Lehmkuhl, executive vice president and president of Con-way Freight, mentioned that Jeff Rivera has also been named vice president of sales. He said that these new management changes will reenergize and change the focus of Con-way Freight’s sales force “a little bit.”
Revenue from Menlo Worldwide Logistics, the company’s supply chain management division, was $397.1 million, falling 7.9 percent year-over-year from $431.2 million. The drop was mainly the result of a decline in transportation management services, partially offset by an increase in warehousing, Con-way said. Operating income, which fell year-over-year to $2.7 million from $8.6 million, was negatively impacted by losses from two new warehouse accounts, as well as a bad debt write-off from a customer bankruptcy, according to the company.
Despite the revenue decline, Stifel said Menlo was “still the star of the outfit” as it reported a record number of new business wins in 2013 and had an 18 percent year-over-year net revenue increase.
“With last year’s surge in start-up expenses largely behind us, we expect Menlo to deliver improved results in 2014,” Stotlar said.
Con-way Truckload’s revenue was $155.8 million in the fourth quarter, versus $155.2 million in the fourth quarter of 2012. The higher revenue in 2013 included the effects of a 1.2 percent increase in loaded miles and a 0.8 percent increase in revenue per loaded mile, excluding fuel surcharge, partially offset by lower fuel surcharge revenue, Con-way said.
Stifel noted that the truckload division’s U.S.-Mexico business increased “only modestly” in the fourth quarter, after it was “relatively flat” in the first nine months of 2013, in line with results from other major cross-border players. More growth is expected in 2014, as Mexican production grows, although it is not expected to surge as it is a long-term trend, Stifel said.
“Our truckload company delivered a solid fourth quarter, despite some declines in productivity due to the adverse weather in December,” Stotlar said. “Demand picked up as the quarter progressed, which aided asset utilization and network density. With improving demand trends adding stability to the pricing environment, Con-way Truckload is well positioned going into 2014.”
Stotlar noted during the fourth quarter earnings call that weather in the fourth quarter was a “huge” issue and it has been the worst winter since 1908.
For the full year of 2013, Con-way posted net income of $99.2 million, dropping 5.2 percent from $104.5 million in 2012. Annual revenue was $5.473 billion, down 1.9 percent from $5.580 billion in 2012.