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Roadway Slashes 2Q Outlook

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Roadway Corp., parent of the nation's largest LTL carrier, is pre-reporting bad news that could be reflected in other trucking company's second-quarter earnings.

Roadway said it expects second quarter earnings of 33 cents per share, or 50 percent below the low end of the range of analysts' expectations previously set for the quarter. The primary causes are revenue shortfalls driven by "softer than anticipated tonnage levels, pricing pressures and a shift in freight mix," Roadway said.

Increased business activity in March resulted in a strong finish for the first quarter. But that has not kept up in the current quarter, which has seen increased discounting, Roadway officials said.

"Volumes to date in the second quarter have not kept pace with March's seasonal recovery," Roadway said in its June 5 announcement. "That has resulted in lower revenues and negatively impacted freight rates."

Following the September 2002 closure of Consolidated Freightways, Roadway Express experienced two quarters of significantly increased tonnage and stable pricing. It appears the longevity of the weak economy and excess capacity that still remains in the industry "have begun to dilute those gains." Roadway said.

Although the long-haul industry has experienced significant capacity contraction, regional markets remain extremely competitive and Roadway Express's volumes and rates for its business in those segments have also been "negatively impacted," the carrier said. Roadway Corp. also operates Northeast regional carrier New Penn Motor Express.

Additionally, early in the second quarter, Roadway Express said it began to experience a shift in its freight mix. This was particularly evident in the retail segment where the motor carrier saw some loss of higher-yielding time-critical freight and changes in shipment size and length-of-haul that resulted in yield deterioration.

The demise of Consolidated Freightways has proven to be a "double-edged sword," according to Roadway Corp. President and CEO James D. Staley.

"The business made available was welcome, but quickly absorbed due to surplus capacity," Staley said. "Consolidated's departure brought a new wave of 'carrier shopping' into the marketplace. That activity gained momentum in the second quarter with detrimental impact. We are committed to compensatory rate levels and will readjust our pricing through a mid-July implementation of Roadway Express' annual general freight rate increase."

Looking forward, Roadway's revised expectations are that second quarter 2003 revenue growth will be near 13 percent over the same period in 2002. The second quarter's earnings-per-share from continuing operations are anticipated to be 33 cents per share, an increase of 32 percent compared to last year. For full-year 2003, earnings-per-share from continuing operations are now expected to be in the range of $2.36 to $2.60 compared to $1.85 per share in 2002, the carrier said.

Roadway's second quarter is for a 12-week period from March 30 through June 21. It said it expects to report its second-quarter financials on July 8.

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