Arkansas Best Corporation Announces Second Quarter 2012 Results

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

June 30

Six Months Ended

June 30

2012

2011

2012

2011

(Unaudited)

($ thousands, except share and per share data)

OPERATING REVENUES

$

510,543

$

498,550

$

951,410

$

933,481

OPERATING EXPENSES AND COSTS

503,342

489,552

967,196

946,475

OPERATING INCOME (LOSS)

7,201

8,998

(15,786)

(12,994)

OTHER INCOME (EXPENSE)

Interest and dividend income

215

273

469

516

Interest expense and other related financing costs

(1,112)

(932)

(2,255)

(1,927)

Other, net

(220)

281

1,120

2,892

(1,117)

(378)

(666)

1,481

INCOME (LOSS) BEFORE INCOME TAXES

6,084

8,620

(16,452)

(11,513)

INCOME TAX PROVISION (BENEFIT)

(5,757)

3,169

(10,131)

(4,177)

NET INCOME (LOSS)

11,841

5,451

(6,321)

(7,336)

LESS:  NONCONTROLLING INTEREST IN

             NET INCOME OF SUBSIDIARY

–

153

–

174

NET INCOME (LOSS) ATTRIBUTABLE TO

  ARKANSAS BEST CORPORATION

$

11,841

$

5,298

$

(6,321)

$

(7,510)

EARNINGS (LOSS) PER COMMON SHARE⁽¹⁾

Basic

$

0.44

$

0.20

$

(0.25)

$

(0.30)

Diluted

$

0.44

$

0.20

$

(0.25)

$

(0.30)

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,544,455

25,411,339

25,496,871

25,358,130

Diluted

25,544,455

25,411,942

25,496,871

25,358,130

CASH DIVIDENDS DECLARED

  PER COMMON SHARE

$

0.03

$

0.03

$

0.06

$

0.06

(1)

The Company uses the two-class method for calculating earnings per share. This method requires an allocation of dividends paid and a portion of undistributed net income (but not losses) to unvested restricted stock for calculating per share amounts.

NET INCOME (LOSS) ATTRIBUTABLE TO

  ARKANSAS BEST CORPORATION

$

11,841

$

5,298

$

(6,321)

$

(7,510)

EFFECT OF UNVESTED RESTRICTED

  STOCK AWARDS⁽¹⁾

(549)

(213)

(75)

(60)

ADJUSTED NET INCOME (LOSS) FOR

  CALCULATING EARNINGS

  PER COMMON SHARE

$

11,292

$

5,085

$

(6,396)

$

(7,570)

ARKANSAS BEST CORPORATION

CONSOLIDATED BALANCE SHEETS

June 30

2012

December 31

2011

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

53,618

$

141,295

Short-term investments

46,619

33,960

Restricted cash equivalents and short-term investments

21,025

52,693

Accounts receivable, less allowances

(2012 – $4,484; 2011 – $5,957)

201,668

149,665

Other accounts receivable, less allowances

(2012 – $1,429; 2011 – $1,226)

7,541

7,538

Prepaid expenses

15,818

11,363

Deferred income taxes

36,129

35,481

Prepaid and refundable income taxes

6,317

6,905

Other

9,805

6,186

        TOTAL CURRENT ASSETS

398,540

445,086

PROPERTY, PLANT AND EQUIPMENT

Land and structures

242,170

242,120

Revenue equipment

595,542

569,303

Service, office and other equipment

117,285

110,511

Software

99,310

64,229

Leasehold improvements

23,000

21,426

1,077,307

1,007,589

Less allowances for depreciation and amortization

614,335

592,171

462,972

415,418

GOODWILL

82,604

3,660

INTANGIBLE ASSETS, NET

71,222

2,822

OTHER ASSETS

51,693

49,234

$

1,067,031

$

916,220

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Bank overdraft and drafts payable

$

15,327

$

20,836

Accounts payable

94,561

66,517

Income taxes payable

220

169

Accrued expenses

163,159

151,887

Current portion of long-term debt

46,282

24,262

TOTAL CURRENT LIABILITIES

319,549

263,671

LONG-TERM DEBT, less current portion

133,796

46,750

PENSION AND POSTRETIREMENT LIABILITIES

91,869

106,578

OTHER LIABILITIES

12,630

13,751

DEFERRED INCOME TAXES

46,820

19,855

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares;

    issued 2012: 27,262,457 shares; 2011: 27,099,819 shares

273

271

Additional paid-in-capital

287,678

286,408

Retained earnings

287,182

295,108

Treasury stock, at cost, 1,677,932 shares

(57,770)

(57,770)

Accumulated other comprehensive loss

(54,996)

(58,402)

TOTAL STOCKHOLDERS' EQUITY

462,367

465,615

$

1,067,031

$

916,220

Note: The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

June 30

2012

2011

(Unaudited)

($ thousands)

OPERATING ACTIVITIES

Net loss

$

(6,321)

$

(7,336)

Adjustments to reconcile net loss to net cash

provided by operating activities:

Depreciation and amortization

39,970

35,971

Amortization of intangibles

200

–

Share-based compensation expense

3,342

3,699

Provision for losses on accounts receivable

729

1,122

Deferred income tax benefit

(8,520)

(6,569)

Gain on sale of property and equipment

(516)

(873)

Changes in operating assets and liabilities:

Receivables

(20,885)

(25,756)

Prepaid expenses

1,363

836

Other assets

(452)

269

Income taxes

522

2,417

Accounts payable, accrued expenses and other liabilities⁽¹⁾

4,740

29,352

NET CASH PROVIDED BY OPERATING ACTIVITIES

14,172

33,132

INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

(18,401)

(18,766)

Proceeds from sales of property and equipment

2,692

3,370

Purchases of short-term investments

(22,143)

(12,250)

Proceeds from sales of short-term investments

9,555

14,125

Business acquisition, net of cash acquired

(180,793)

–

Capitalization of internally developed software and other

(3,435)

(2,183)

NET CASH USED IN INVESTING ACTIVITIES

(212,525)

(15,704)

FINANCING ACTIVITIES

Borrowings under credit facilities

100,000

–

Payments on long-term debt

(12,303)

(6,994)

Net change in bank overdraft and other

(5,510)

2,797

Change in restricted cash equivalents and

short-term investments

31,668

(20)

Deferred financing costs

(1,574)

(133)

Payment of common stock dividends

(1,605)

(1,585)

Proceeds from the exercise of stock options

–

763

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

110,676

(5,172)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               

(87,677)

12,256

Cash and cash equivalents at beginning of period

141,295

102,578

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

53,618

$

114,834

NONCASH INVESTING ACTIVITIES

Accruals for equipment received

$

7,416

$

5,358

Equipment financed under capital leases and notes payable

$

21,370

$

3,882

(1)  Includes $18.0 million in contributions to the Company's nonunion pension plan for 2012.

ARKANSAS BEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Three Months Ended

June 30

Six Months Ended

June 30

2012

2011

2012

2011

(Unaudited)

($ thousands, except per share data)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Net Income (Loss) Attributable to Arkansas Best Corporation

Amounts on a GAAP basis

$

11,841

$

5,298

$

(6,321)

$

(7,510)

Tax benefits⁽¹⁾

(7,973)

–

(3,333)

–

Transaction costs, after-tax⁽²⁾

1,294

–

1,294

–

Non-GAAP amounts

$

5,162

$

5,298

$

(8,360)

$

(7,510)

Diluted Earnings (Loss) Per Share

Amounts on a GAAP basis

$

0.44

$

0.20

$

(0.25)

$

(0.30)

Tax benefits⁽¹⁾

(0.31)

–

(0.13)

–

Transaction costs, after-tax⁽²⁾

0.05

–

0.05

–

Non-GAAP amounts

$

0.18

$

0.20

$

(0.33)

$

(0.30)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Earnings Before Interest, Taxes, Depreciation and Amortization

Net income (loss) attributable to

Arkansas Best Corporation

$

11,841

$

5,298

$

(6,321)

$

(7,510)

Interest expense

1,112

932

2,255

1,927

Income taxes (benefits)

(5,757)

3,169

(10,131)

(4,177)

Depreciation and amortization

20,850

18,053

40,170

35,971

Amortization of share based

compensation

1,900

2,253

3,342

3,699

Amortization of actuarial losses

2,846

1,840

5,693

3,680

EBITDA

32,792

31,545

35,008

33,590

Transaction costs, pre-tax⁽²⁾

2,129

–

2,129

–

Adjusted EBITDA

$

34,921

$

31,545

$

37,137

$

33,590

PREMIUM LOGISTICS & EXPEDITED FREIGHT SERVICES⁽³⁾

Earnings Before Interest, Taxes, Depreciation and Amortization

Operating income

$

480

$

–

$

480

$

–

Depreciation and amortization

473

–

473

–

EBITDA

$

953

$

–

$

953

$

–

(1)

Tax benefit adjustments related to deferred tax asset valuation allowances.

(2)

Transaction costs associated with the June 15, 2012 acquisition of Panther Expedited Services, Inc.

(3)

Includes the results of Panther Expedited Services, Inc., for the period of June 16 to June 30, 2012.

Non-GAAP Financial Measures. The company reports its financial results in accordance with generally accepted accounting principles ("GAAP"). However, management believes that certain non-GAAP performance measures and ratios utilized for internal analysis provide financial statement users meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Certain information discussed in the scheduled conference call could be considered non-GAAP measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results. Management believes EBITDA to be relevant and useful information as EBITDA is a standard measure commonly reported and widely used by analysts, investors and others to measure financial performance and ability to service debt obligations. However, these financial measures should not be construed as better measurements than operating income, operating cash flow, net income or earnings per share, as defined by GAAP. Other companies may calculate Adjusted EBITDA differently, and therefore the Company's Adjusted EBITDA may not be comparable to similarly titled measures of other companies. As Panther's net income is not presented, EBITDA has been reconciled to operating income, which is the reported GAAP measure.

     On June 15, 2012, Arkansas Best completed the acquisition of Panther Expedited Services, Inc.  The following table summarizes the preliminary fair values of the acquired assets and liabilities for Panther.

Preliminary

Allocation

($ millions)

Fair value of assets acquired:

Accounts receivable

$

31.8

Deferred income taxes

0.6

Other current assets

5.8

Property, plant and equipment (other than acquired software)

7.4

Intangible assets (including acquired software)

101.0

Goodwill

78.9

Other assets

4.3

Total assets acquired

229.8

Fair value of liabilities assumed:

Accounts payable

(12.3)

Other current liabilities

(4.5)

Deferred income taxes on acquired assets

(32.2)

Total liabilities

(49.0)

Cash paid, net of cash acquired

$

180.8

The above purchase price allocation was based on preliminary information regarding the fair values of acquired assets and liabilities for Panther and the amount of goodwill recognized as of June 15, 2012. With the assistance of a third-party valuation firm, Arkansas Best is conducting an assessment of the fair values of acquired assets and liabilities for Panther and the amount of goodwill recognized as of June 15, 2012. This assessment requires a significant amount of judgment, and Arkansas Best has not completed this analysis as it relates to the valuation of Panther. Based on the preliminary purchase price allocation, amortization of intangible assets, including software, is estimated to total approximately $8 million per year.

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended

June 30

Six Months Ended

June 30

2012

2011

2012

2011

(Unaudited)

($ thousands)

OPERATING REVENUES

Freight Transportation⁽¹⁾

$

445,740

$

452,126

$

846,295

$

849,398

Premium Logistics & Expedited

   Freight Services⁽²⁾

10,835

–

10,835

–

Truck Brokerage & Management⁽³⁾

10,021

6,411

18,060

11,511

Emergency and Preventative

   Maintenance⁽⁴⁾

30,101

23,341

52,479

45,618

Household Goods Moving
   Services⁽⁵⁾

20,479

25,241

35,531

41,112

Total non-asset-based segments

71,436

54,993

116,905

98,241

Other revenues and eliminations

(6,633)

(8,569)

(11,790)

(14,158)

Total consolidated
   operating revenues

$

510,543

$

498,550

$

951,410

$

933,481

OPERATING EXPENSES AND COSTS

Freight Transportation⁽¹⁾

Salaries, wages and benefits

$

269,488

60.5%

$

273,065

60.4%

$

535,005

63.2%

$

535,365

63.0%

Fuel, supplies and expenses

82,893

18.6

88,010

19.5

163,658

19.3

167,127

19.7

Operating taxes and licenses

10,823

2.4

11,572

2.6

21,623

2.6

22,993

2.7

Insurance

5,587

1.3

6,511

1.4

10,471

1.2

12,991

1.5

Communications and utilities

3,464

0.8

3,723

0.8

7,268

0.9

7,697

0.9

Depreciation and amortization

19,477

4.4

17,341

3.8

38,058

4.5

34,542

4.1

Rents and purchased transportation

44,285

9.9

43,170

9.5

81,043

9.6

81,525

9.6

Gain on sale of property

   and equipment

(231)

(0.1)

(784)

(0.2)

(513)

(0.1)

(883)

(0.1)

Other

2,277

0.5

1,920

0.5

3,982

0.5

3,501

0.4

438,063

98.3%

444,528

98.3%

860,595

101.7%

864,858

101.8%

Premium Logistics & Expedited

Freight Services⁽²⁾

Purchased transportation

$

8,247

76.1%

$

–

–

$

8,247

76.1%

$

–

–

Depreciation and amortization

473

4.4

–

–

473

4.4

–

–

Other

1,635

15.1

–

–

1,635

15.1

–

–

10,355

95.6%

–

–

10,355

95.6%

–

–

Truck Brokerage & Management⁽³⁾

9,366

5,843

17,011

10,558

Emergency and Preventative

   Maintenance⁽⁴⁾

29,407

22,424

51,921

43,779

Household Goods Moving
   Services⁽⁵⁾

20,314

24,293

36,157

40,028

Total non-asset-based segments

69,442

52,560

115,444

94,365

Other expenses and eliminations

(4,163)

(7,536)

(8,843)

(12,748)

Total consolidated operating

   expenses and costs

$

503,342

$

489,552

$

967,196

$

946,475

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS – Continued

Three Months Ended

June 30

Six Months Ended

June 30

2012

2011

2012

2011

(Unaudited)

($ thousands)

OPERATING INCOME (LOSS)

Freight Transportation⁽¹⁾

$

7,677

$

7,598

$

(14,300)

$

(15,460)

Premium Logistics & Expedited

   Freight Services⁽²⁾

480

–

480

–

Truck Brokerage & Management⁽³⁾

655

568

1,049

953

Emergency and Preventative

   Maintenance⁽⁴⁾

694

917

558

1,839

Household Goods Moving

   Services⁽⁵⁾

165

948

(626)

1,084

Total non-asset-based segments

1,994

2,433

1,461

3,876

Other income (loss) and

   eliminations

(2,470)

(1,033)

(2,947)

(1,410)

Total consolidated operating

   income (loss)

$

7,201

$

8,998

$

(15,786)

$

(12,994)

(1)

This segment includes the results of operations of Arkansas Best's largest subsidiary, ABF Freight System, Inc.®.

(2)

This segment includes the results of operations of Arkansas Best's expedited services operating as Panther Expedited Services, Inc. for the period of June 16 to June 30, 2012.

(3)

This segment includes the results of operations of Arkansas Best's transportation brokerage services operating as FreightValue®.

(4)

This segment includes the results of operations of Arkansas Best's roadside vehicle assistance and commercial equipment services subsidiary FleetNet America, Inc.

(5)

This segment includes the results of operations of Arkansas Best's subsidiaries Albert Companies, Inc. and Moving Solutions, Inc. which provide services to the consumer, corporate, and military household goods moving market.

ABF FREIGHT SYSTEM, INC.

OPERATING STATISTICS

Three Months Ended

Six Months Ended

June 30

June 30

2012

2011

% Change

2012

2011

% Change

(Unaudited)

Freight Transportation ⁽¹⁾

Workdays

63.5

63.5

127.5

127.0

Billed Revenue ⁽²⁾ / CWT           

$

27.88

$

26.64

4.7%

$

27.75

$

25.72

7.9%

Billed Revenue ⁽²⁾ / Shipment     

$

378.35

$

363.10

4.2%

$

373.04

$

349.41

6.8%

Shipments                                  

1,173,964

1,247,783

(5.9)%

2,269,122

2,443,050

(7.1)%

Shipments / Day

18,488

19,650

(5.9)%

17,797

19,237

(7.5)%

Tonnage (tons)                           

796,486

850,209

(6.3)%

1,525,295

1,659,207

(8.1)%

Tons / Day

12,543

13,389

(6.3)%

11,963

13,065

(8.4)%

(1)

Operating statistics for the Freight Transportation segment do not include the results from ABF's Global Supply Chain Services.

(2)

Billed Revenue does not include revenue deferral required for financial statement purposes under the company's revenue recognition policy.

Contact:

Mr. David Humphrey, Vice President, Investor Relations and Corporate Communications

Telephone: (479) 785-6200