CNF earnings plunge
CNF Inc. said its earnings dropped 60% to $13.5 million, or 26 cents a share, in the first quarter as the economic slowdown took a toll on all of its businesses. The Palo Alto, Calif.-based transportation conglomerate earned $33.4 million, or 62 cents a share, in the first quarter of 2000, which included the effects of an accounting change.
CNF also warned that the present trends are likely to continue in the second quarter, with Emery Worldwide, its airfreight subsidiary, expected to post a larger operating loss, and Con-Way Transportation Services, its regional less-than-truckload business, likely to show a drop in earnings.
Operating income for CNF was $33.7 million, compared with $71.5 million, while revenue was $1.28 billion, down from $1.32 billion in first-quarter of 2000. Revenue in the most recent quarter included one less working day than the first quarter of 2000.
Emery lost $6.5 million in the quarter, compared with an operating profit of $6.8 million a year ago. Revenue totaled $583.2 million, down two percent.
"The decline in airfreight business for Emery's North America segment has been steep and significant. The decline is primarily attributable to the economy," said Gregory L. Quesnel, president and chief executive
"Emery is focusing on managing its cost structure to meet the challenges presented by the current economy and is considering alternatives for solving the longer-term issues facing the company," he added.
CNF spokesman Jim Allen declined to specify what those alternatives might be, but analysts have speculated that they could include the sale of Emery or a sharp reduction in the carrier's fleet of aircraft. That would force it to increase its reliance on overnight trucks for deliveries, as other integrated air carriers such as BAX Global have done.
The economic downturn comes at a time when Emery is also suffering from the loss of two contracts with the U.S. Postal Service to FedEx. "It's like a double-whammy," said Emery spokeswoman Nancy Colvert.
Emery's North America airfreight revenue per day was down 12% in the first quarter while international revenue per day increased by three percent. North America tonnage per day fell 19%, while international tonnage per day dropped four percent.
Con-Way reported operating income of $36.7 million, down from $56.7 million. It had revenue of $469 million, down from $508.4 million in first-quarter 2000, which was Con-Way's record first quarter and included $24 million from Con-Way's truckload operation, which was sold last August.
"Con-Way's drop in earnings was attributable to tonnage declines from the faltering U.S. economy. Despite those declines, Con-Way improved its productivity during the quarter," Quesnel said.
Con-Way's total and LTL regional carrier tonnage per day declined four percent.
During the quarter, Con-Way announced the formation of Con-Way Air Express, a domestic air freight forwarding company that is scheduled to begin operations on May 14.It will compete directly with Emery, which operates as an integrated carrier within North America and as a freight forwarder internationally, but there will be some overlap, the company says.
Menlo Logistics reported first-quarter operating income of $8.2 million, up seven percent. Revenue at Menlo was $222.6 million, up seven percent.
"While Menlo was not immune to the economic slowdown, it succeeded in increasing both revenue and profits." Quesnel said. "We have maintained for some time that our less-asset-intensive businesses provide somewhat of a hedge against cyclical downturns and Menlo has demonstrated that."
As for the future, CNF noted that tonnage levels at both Con-Way and Emery have deteriorated from the prior year more steeply each month through April. The company said it sees no evidence that this trend is changing.
