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Con-way Inc. Reports First-Quarter 2009 Results

SAN MATEO, Calif. - April 23, 2009

Con-way Inc. (NYSE:CNW) today reported a net loss to common shareholders for the first quarter of 2009 of $154.0 million ($3.35 per share), which included a goodwill impairment charge of $134.8 million ($2.93 per share).  Excluding the impairment charge, and on a non-GAAP basis, Con-way’s first-quarter 2009 net loss to common shareholders was $19.2 million (42 cents per share). The results compared to first-quarter 2008 net income to common shareholders of $22.5 million (47 cents per diluted share).

The goodwill impairment charge was associated with Con-way Truckload, formerly Contract Freighters Inc., which the company purchased in August 2007. The charge was non-cash in nature and does not impact the company’s revolving credit covenants.

Total Con-way revenue was $962.9 million, a decrease of 19.9 percent from last year’s revenue of $1.20 billion. The 2009 first quarter had an operating loss of $150.3 million, which excluding the goodwill impairment charge was an operating loss of $15.5 million. This compared to operating income of $54.0 million earned in the first quarter a year ago. 

First-quarter 2009 results were affected by the recessionary economy, which drove the decline in revenue and resulted in an operating loss for the quarter at Con-way Freight, the company’s less-than truckload (LTL) carrier and largest subsidiary.

“The freight markets continued to suffer from excess capacity and intense price competition,” commented Douglas W. Stotlar, Con-way’s president and CEO. “While Con-way Freight posted losses in January and February, it returned to profitability in March, as we saw the benefit of some seasonal upturn in business and modest market share gains.”

Stotlar noted that that economy remains challenging. “There are some signs that our freight volumes may be nearing a bottom. However, feedback from our customers as well as trend data for industrial output and inventory levels indicate that shipping volumes are likely to remain restrained, certainly for the short term,” he said.

In response to economic conditions, the company instituted proactive measures to reduce costs and conserve cash, implemented workforce reductions and network adjustments in the 2008 fourth quarter, and took additional measures in March this year. The March actions, which included salary and wage reductions, and suspension of certain 401(k) contributions, are effective mostly in April and are expected to produce cost savings in 2009 of between $100 million and $130 million.

“Until we see some balance restored between supply and demand in the freight markets, and a more stable pricing environment, we must be cautious about our outlook for 2009,” Stotlar said.  He added that Menlo Worldwide Logistics, the company’s supply chain management subsidiary, provided a bright spot as tight cost controls and prudent business development strategies sustained profitability and delivered solid growth in customer wins.

The effective tax benefit rate for the 2009 first quarter was 8.1 percent compared to an effective tax provision rate of 39.4 percent in the same period of 2008. There was no tax benefit from the goodwill impairment charge in the 2009 first quarter.

FREIGHT

For the 2009 first quarter, Con-way Freight, the company’s regional less-than-truckload operations, reported:

• An operating loss of $23.4 million compared to operating income of $36.1 million in the year-ago period.

• Revenue of $559.7 million, down 24.7 percent from last year’s first quarter revenue of $743.3 million. The decrease was attributable to recession-driven business declines and significantly lower fuel surcharge revenue.

• Tonnage per day decreased 12.4 percent from the previous-year first quarter. 

• Yield (revenue-per-hundredweight) decreased 12.1 percent from the previous-year first quarter. Excluding the fuel surcharge, yield was down 4.3 percent, reflecting the influence of excess market capacity and resulting pricing pressure.

• An operating ratio of 104.1 in the 2009 first quarter compared to 95.2 in first-quarter 2008, reflecting the earlier-mentioned tonnage declines and pricing pressures.

LOGISTICS

For the first quarter of 2009, Menlo Worldwide Logistics, the company’s global logistics and supply chain management operations, reported:

• Operating income of $5.0 million, a 20.6 percent decrease from $6.3 million in the first quarter of 2008, related to increased margin pressures somewhat offset by cost reduction actions.

• Revenue of $316.5 million, down 7.3 percent from the previous-year first-quarter revenue of $341.5 million.

• Net revenue of $125.2 million, compared to $126.0 million in the previous-year first quarter.  New contract revenue offset declines due to increasing margin pressures as market conditions continued to affect pricing.

TRUCKLOAD

For the first quarter of 2009, Con-way Truckload, the company’s full-truckload transportation operations, reported:

• An operating loss of $132.7 million, including the impairment charge of $134.8 million, which was triggered by a first quarter decline in truckload market values due to current economic conditions.  Excluding the impairment charge, operating income was $2.1 million for the 2009 first quarter. This compared to operating income of $10.3 million in the year-ago period.  Operating income in the 2009 first quarter also reflected increasing pricing pressure and significantly higher vehicular casualty costs.

• Revenue of $86.0 million, down 25.8 percent compared to revenue of $116.0 million in the 2008 first quarter, reflecting soft demand, market overcapacity and lower fuel surcharge levels. Both figures are after the elimination of inter-company revenue.

• Yield (Revenue-per-loaded mile) decreased 1.9 percent from the previous-year first quarter, reflecting the competitive pricing environment and decreased fuel surcharges.

• Operating ratio on total revenue (without the goodwill impairment charge, before inter-company eliminations and exclusive of fuel surcharges) of 98.3, compared to an operating ratio of 91.4 in the previous-year first 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 produced income of $779,000 during the 2009 first quarter compared to income of $1.4 million in the year-ago period. 

Con-way’s effective tax rate, excluding the non-deductible impairment charge, is expected to be 36.5 percent for the year.

INVESTOR CONFERENCE CALL

Con-way will host a conference call for the investment community tomorrow morning, Friday, April 24 at 8:30 a.m. Eastern Daylight 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. 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 91980239. An Internet replay of the presentation will also be available at the Con-way site.

About Con-way Inc. Con-way Inc. (NYSE:CNW) is a $5 billion freight transportation and logistics services company headquartered in San Mateo, Calif. 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) and full truckload and multimodal 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 www.con-way.com.

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