Dear Fellow Shareholders,
2012 can be best characterized as a year of progress in which we built the foundation for continued improvement at Con-way Freight and strengthened the positions of Menlo Worldwide Logistics and Con-way Truckload in their respective markets.
In 2012, the markets for our services continued to face economic uncertainty. Despite these challenges, we achieved growth in both revenues and operating income, and concluded the year with a solid balance sheet and the financial resources to continue investing strategically in our core businesses.
As a result of the foundational work that was completed in 2012, we are now positioned to implement major initiatives in 2013 – particularly at Con-way Freight. In addition, we have other initiatives planned for 2014 and 2015 that we believe will build on our progress.
The story at our less-than-truckload company is one of focus, pace and sustained results. Con-way Freight grew revenues and improved operating income in 2012, completing the first year of our three-year improvement plan. We made substantial progress as our teams designed and built the foundation for two transformative initiatives: lane-based pricing and dynamic line-haul optimization. Training and deployment with these multi-stage initiatives is on track, and we expect incremental gains as the various stages are implemented.
We expect those gains will be sustained through our journey to world-class safety and our lean-based culture, both of which are founded in respect for all employees and continuous improvement. Safety is our No. 1 core value. This non-negotiable priority demonstrates the commitment we make every day to the well-being of our employees through a focus on safety above all else. Coming off a record year in 2011, we again reduced both injuries and accidents, respectively, by 23 and 11 percent in 2012. At the same time, operating efficiencies increased, freight damage claims declined and our customer satisfaction scores improved.
Con-way Freight has a solid market position going into 2013. We are excited about the prospects of our LTL company because:
Our logistics and supply chain management company recorded gains in revenues and net revenues in 2012. Operating income declined from the previous year, which benefited from a one-time gain from a legal settlement.
Menlo’s five-year global safety plan, launched in 2011, continued to improve safety performance as the workplace injury rate in 2012 declined 7 percent. Menlo effectively navigated the challenges of 2012, overcoming a weak economy, and the resulting competitive and margin pressures. Moving into 2013, new project sales are off to a good start. Strategic initiatives for Menlo include enhancing business development resources, and advancing lean continuous improvement efforts to further reduce costs and increase customer value. Overall, Menlo is well-positioned with a proven portfolio of logistics technologies and services delivered by an experienced team focused on excelling for customers globally.
Disciplined operations, stable demand, despite an unsettled economic environment, and improved pricing resulted in higher revenues and operating income for Con-way Truckload in 2012. Safety improved as both vehicular accidents and workplace injuries declined. Revenue per loaded mile, fleet fuel efficiency and empty miles all improved. The addition of 900 new replacement tractors further reduced fleet age, aiding operating efficiency and driver recruitment. Proceeding into 2013, we continue to benefit from driver turnover rates at historic lows. Our investments in new trucks this year will include a suite of advanced safety technologies to improve driver awareness and prevent accidents. We also look forward to our lean journey at Con-way Truckload, and as we expand these tools and practices with employees, opportunities for efficiencies will increase. With good cost control, a modern, efficient fleet and superior service, Con-way Truckload expects profitable growth in 2013.
In 2012 our primary focus was on implementing the first year of our three-year strategic plan at Con-way Freight. Having successfully made required investments in foundational, enabling technologies and management tools, we are working towards improved operational performance and financial results. And over the next two years we have planned additional investments that we believe will drive further efficiencies and competitive differentiation.
We proceed into 2013 with clear and consistent strategies to guide us, proven abilities to turn plans into results, and confidence in a team of dedicated, engaged employees who are focused on safety and continuous improvement.
Douglas W. Stotlar
President and Chief Executive Officer,
March 25, 2013