CNF EARNINGS FALL 15 PERCENT ON WEAK EMERY RESULTS
CNF Inc. said its third quarter net income declined 15 percent to $42.1 million before non-recurring charges, due to lower operating profits at Emery Worldwide.
Net income including non-recurring charges for the sale of certain assets of Con-Way Truckload Services and losses for terminal aircraft leases at Emery Worldwide was $25.6 million.
“Emery's U.S. domestic business results remain below expectations, more than offsetting good results posted by its international group,” said Gregory L. Quesnel, CNF's president and chief executive officer.
Emery's third-quarter operating income, before non-recurring charges, was $6.1 million, compared with $22.6 million in the third quarter of 1999. Including non-recurring charges for the losses on aircraft leases, Emery reported a loss from operations of $5.8 million. Revenues were up 7 percent to $657.5 million.
Emery's North American air freight revenue declined 7 percent in the third quarter, while international revenue rose 15 percent. North American air freight tonnage was down 9 percent while international tonnage grew 10 percent.
“Emery's results reflect a slowdown in the U.S. domestic demand for heavyweight air freight shipments and higher-than-normal operating and maintenance costs for its North American aircraft fleet,” Quesnel said.
CNF's Menlo Logistics subsidiary reported third-quarter operating income of $8.6 million, up 37 percent over the year-earlier quarter. Revenue was $225.6 million, up 26 percent.
Con-Way Transportation Services reported a third-quarter operating income before recurring charges of $57.6 million, up 1 percent. Including the charge for the sale of the truckload assets and third-quarter operating income was $52.2 million. Revenues were a record $518.1 million, up 6 percent from the year earlier. CTS carrier tonnage and less-than-truckload tonnage in the third quarter was essentially unchanged from the year-earlier period.
CNF's other operations, which includes the company's Priority Mail contract and Road Systems, a trailer manufacturing subsidiary, reported operating income of $360,000.
Emery Worldwide Airlines has been receiving an increased provisional rate from the U.S. Postal Service for transportation and sortation of the Priority Mail, as conditions of a August 25 ruling on a lawsuit between EWA and USPS. The Postal Service had been paying a provisional rate below EWA's cost of operating under the contract. The two sides are working to resolve the issue, Quesnel said.
EWA has only been recognizing unbilled revenue to recover costs. The company recognized $21 million of unbilled revenue in the third quarter. The total amount recognized by EWA as unbilled revenue since the beginning of the contract was $194.4 million as of Sept. 30.
For the first nine months of 2000, CNF reported net income of $115.3 million, up slightly from $114.1 million for the year-earlier period. Operating income was $233.7 million, compared to $237.1 million in 1999, while revenue rose 12 percent to $4.53 billion.
CNF anticipates Emery's fourth-quarter margin will be similar its third quarter. Menlo's revenue and operating income are expected to grow at about 20 percent, while Con-Way's yield is expected to be flat compared to the fourth quarter of 1999.
