Trucking Firm CNF Posts Loss on Unit Sale
CNF Inc., owner of the largest U.S. regional trucker, on Monday posted a $214-million third-quarter loss on costs for the pending sale of its Menlo Worldwide Forwarding unit that arranges air-freight shipments.
Palo Alto-based CNF’s stock fell after it forecast that fourth-quarter profit would be lower than analysts’ average estimate. The shares lost $2.56, or 5.5%, to $44.21 on the New York Stock Exchange.
The company said higher fuel costs and higher wages for truckers were squeezing margins.
The third-quarter net loss was $3.90 a share, contrasted with net income of $26.8 million, or 46 cents, a year earlier.
Excluding costs of $260.5 million, or $4.70 a share, from selling the Menlo unit to United Parcel Service Inc. and earnings of $4.4 million, or 8 cents, from the unit, profit would have been $39.8 million, or 72 cents a share.
Excluding the loss from the sale, CNF was expected to earn 77 cents a share, the average estimate in a Thomson First Call survey.
Sales rose 16% to $973.6 million, including a 19% increase to $684.8 million at the Con-Way Transportation trucking unit. The unit boosted profit before interest and taxes 31% to $70.6 million, as it raised shipping rates 3.5%.
Profit before interest and taxes at the company’s logistics unit, which manages distribution and supply networks, fell 11% to $5.8 million.
CNF could be going through a “transition phase” as it detaches the forwarding business from the logistics business, said Jason Seidl, an Avondale Partners analyst in Nashville.
CNF agreed this month to sell the Menlo freight-forwarding unit for $150 million. The unit was known as Emery Worldwide Airlines until CNF grounded its planes in 2001 after a fatal crash and switched the freight to contractors. Menlo Worldwide Forwarding accounted for 37% of CNF’s 2003 sales of $5.1 billion.
The company and UPS expect to complete the sale by the end of this year. The unit had an $8.8-million loss before interest and taxes in the first half.
CNF said fourth-quarter operating profit would be 62 cents to 72 cents a share, including costs of 4 cents that previously were included in results for the unit being sold. Excluding those expenses, analysts had expected profit of about 79 cents a share.
The company has about $600 million in cash, before the $150 million it will get from the Menlo Forwarding sale, Chief Financial Officer Chutta Ratnathicam said on a conference call.
CNF’s board is “looking at an array of options of how to return value to shareholders after the sale,” Chief Executive Keith Kennedy said on the call. One possibility is a share buyback, Kennedy said, but he did not talk about other options.
Kennedy, also the company’s chairman, has been interim CEO since June, with the retirement of Gregory Quesnel. He said CNF might choose a new chief executive by year-end.
