Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. Con-way Inc. (23675) 10-Q published on Jul 29, 2015 at 4:24 pm
Reporting Period: Jun 29, 2015
In May 2015, the FASB issued ASU No. 2015-09, "Disclosures about Short-Duration Contracts." This ASU, codified in the "Financial Services - Insurance" topic of the FASB Accounting Standards Codification, requires insurance entities to disclose additional information about the liability for unpaid claims and claim adjustments. This standard is effective for fiscal years beginning after December 15, 2015 and interim periods within annual periods beginning after December 15, 2016 and will be applied retrospectively by providing comparative disclosures for each period presented. Con-way is currently evaluating the applicability of this standard to the activities of its captive insurance companies.
In May 2015, the FASB issued ASU No. 2015-07, "Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)." This ASU, codified in the "Fair Value Measurements" topic of the FASB Accounting Standards Codification, removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. This ASU is effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted. This standard will have an impact on Con-way's notes to consolidated financial statements; however, it will not have an effect on the consolidated balance sheets or the statements of consolidated income.
Con-way's consolidated operating income decreased 18.2% in the second quarter and was essentially flat in the first half of 2015. Second quarter operating income decreased due to lower operating income at Freight and Truckload, partially offset by higher operating income at Logistics. For the first half of 2015, operating income increased slightly due to higher operating income at Freight and Logistics, partially offset by lower operating income at Truckload. Freight's operating income in the second quarter of 2015 included the effects of higher driver wages and benefits from the earlier announced driver pay increase and $8.3 million in higher vehicular claims expense, contributing to the overall decrease in consolidated operating income.
Freight's revenue decreased 2.5% in the second quarter and 0.9% in the first half of 2015, due to decreases in fuel-surcharge revenue and weight per day, partially offset by increases in yield excluding fuel surcharges. In the second quarter, fuel-surcharge revenue decreased to 13.3% of revenue from 17.6% in 2014, and in the first half, decreased to 13.4% of revenue from 17.7% in 2014. Declines in fuel-surcharge revenue were largely due to decreased cost per gallon of diesel fuel. Weight per day decreased 3.0% in the second quarter and 2.3% in the first half of 2015, reflecting declines in both shipments per day and weight per shipment. Yield excluding fuel surcharges increased 5.5% in the second quarter and 7.0% in the first half of 2015. Improved yield excluding fuel surcharges benefited from revenue-management initiatives, including lane-based pricing, intended to increase operating margins by improving the composition of freight in the network. Improved yields also benefited from general rate increases.
Truckload's revenue decreased 13.0% in the second quarter of 2015 primarily due to a 43.5% decrease in fuel-surcharge revenue and a 3.4% decrease in freight revenue. Fuel-surcharge revenue decreased primarily due to decreased cost per gallon of diesel fuel and fewer loaded miles. The decrease in freight revenue is due to a 6.0% decrease in loaded miles, partially offset by a 2.8% increase in revenue per loaded mile. In the first half of 2015, Truckload's revenue decreased 12.1% primarily due to a 41.8% decrease in fuel-surcharge revenue and a 3.1% decrease in freight revenue. Fuel-surcharge revenue decreased primarily due to decreased cost per gallon of diesel fuel and fewer loaded miles. The decrease in freight revenue is due to a 5.7% decrease in loaded miles, partially offset by a 2.7% increase in revenue per loaded mile. The decreases in loaded miles for both periods were partially attributable to increases in the number of unassigned tractors, which reflect the impact of an industry-wide driver shortage. Although improving each month of the second quarter of 2015, the number of unassigned tractors increased from the same periods of the prior year.
In the second quarter, expenses for salaries, wages and employee benefits decreased by 5.7% due to a 3.3% decrease in salaries and wages (excluding variable compensation) and a 13.2% decrease in employee benefits. In the first half of 2015 salaries, wages and employee benefits decreased 3.6% primarily due to a 2.9% decrease in salaries and wages (excluding variable compensation) and a 6.8% decrease in employee benefits. In the second quarter and first half of 2015, the decrease in salaries and wages (excluding variable-compensation) was due to fewer miles driven by company drivers, partially offset by wage rate increases. In the second quarter of 2015, employee benefits decreased due to a decrease in workers' compensation costs. Workers' compensation costs decreased due to a decrease in expense per claim, partially offset by an increase in the number of
claims. In the first half of 2015, employee benefits decreased primarily due to decreased employee medical costs. Employee medical costs decreased due to a decrease in participant headcount, partially offset by an increase in claim cost per participant.