Arkansas Best Corporation Announces Third Quarter 2012 Results

- Net income of $6.5 million

- Diluted earnings per share of $0.24

- Panther Expedited Services enhances corporate service opportunities

- ABF labor contract negotiations to begin in December

News provided by

Arkansas Best Corporation

Nov 01, 2012, 03:00 ET

FORT SMITH, Ark., Nov. 1, 2012 /PRNewswire/ -- Arkansas Best Corporation (Nasdaq: ABFS) today announced third quarter 2012 net income of $6.5 million, or $0.24 per share, compared with net income of $12.3 million, or $0.46 per share, in the third quarter of 2011.

"Arkansas Best's results reflect weakness in the economy that contributed to reduced customer business levels and lower profitability at ABF. The slowing business environment also reduced the demand for expedited services at Panther," said Arkansas Best President and CEO Judy R. McReynolds. "However, at our emerging non-asset-based companies, we are encouraged by the continuation of strong revenue and improving profitability trends in the midst of a tenuous economy." 

ABF Freight System, Inc.
During the 2012 third quarter, business levels at ABF were below the same period last year by 1.4 percent. "This drop reflects the current, soft economic environment as well as the remaining effects of business declines resulting from pricing actions ABF implemented throughout most of last year and into the first quarter of this year," said Ms. McReynolds. "Industry pricing is stable and rational, consistent with ABF's third quarter 2012 experience.  ABF's recent yield improvement reflects positive retention of the late June general rate increase and better price levels on contractual agreements that renewed during the quarter.  ABF has added new, profitable customer relationships and remains focused on improving existing account pricing and managing its resources to available freight levels."

Throughout the third quarter, ABF experienced cost pressures whose unfavorable margin effects were amplified by the decline in quarterly revenue. The most significant costs affecting ABF are associated with our union labor contract. In addition, nonunion benefit costs were impacted by previously discussed increases in 2012 pension and retirement costs as well as a greater than expected increase in employee health care costs during the first two months of the quarter.  Purchased transportation costs increased due to a greater need for these services, both domestically and internationally, combined with higher rates charged by these service providers.  Finally, as previously reported, equipment depreciation costs are higher, on a year-over-year basis, because of the timing and increased cost of new tractor and trailer replacements during the last twelve months. 

"For some time now, we have remained diligent in our efforts to address ABF's high cost structure.  This includes numerous internal activities associated with the March 2013 expiration of ABF's union labor contract," said Ms. McReynolds. "As previously announced, we expect to begin negotiations with the Teamsters National Freight Industry Negotiating Committee, the negotiating arm of the International Brotherhood of Teamsters, on December 18.  ABF's next labor agreement offers an opportunity for us to work together with the Teamsters and our employees to ensure that ABF is viable in the marketplace and able to grow jobs and effectively compete for additional, profitable business."

Panther Expedited Services, Inc.
"As we complete the first full quarter of having our premium logistics provider Panther Expedited Services, Inc. as a subsidiary, we are excited about the long-term growth possibilities it offers our company.  We have identified opportunities for Panther to work together with our other subsidiaries to better serve customers, with a number of these opportunities already yielding positive benefits.  Moving forward, we believe the addition of Panther will be a key element in our development into a comprehensive logistics resource for our customers," said Ms. McReynolds.

"Third quarter results at Panther were impacted by a slower macroeconomic environment, both domestically and internationally.  Though total customer loads increased, the availability of business within the industries Panther serves varied.  The reduction in revenue per mile associated with changes in business mix had an unfavorable impact on Panther's profit margin." 

Other Non-Asset-Based Subsidiaries
Arkansas Best's emerging non-asset-based subsidiaries experienced revenue growth and operating income improvement throughout the quarter in spite of weaker macroeconomic factors.  The freight brokerage and emergency and preventative maintenance segments benefitted from new customer relationships that translated into additional business opportunities, with these segments growing revenues by 63% and 32%, respectively.  However, profit margins in these segments continued to be impacted by investments previously made in personnel and information technology.  As the benefits of those investments are fully realized, these subsidiaries will provide a platform for enhancing the logistics services Arkansas Best offers its customers.  This enables further penetration into the $200 billion portion of the transportation market the company now serves.  With the addition of Panther, Arkansas Best's non-asset-based businesses generated over 20% of third quarter consolidated revenues.

Capital Expenditures Update
Because of reduced business levels and improved network utilization ABF plans to reduce this year's new tractor replacements by eight percent.  This ABF change contributes to Arkansas Best's expected 2012 net capital expenditure total of approximately $75 million.  Earlier in the year the range of expected 2012 net capital expenditures was between $80 and $90 million.

Closing Comments
"The uncertain economic environment has impacted our recent performance and presents challenges in the near term," said Ms. McReynolds.  "However, we believe our company is better equipped for future success because of the combination of logistics services we now offer the marketplace.  As we seek to reduce ABF's cost structure as well as improve the flexibility of its network, the additional resources available within our company provide opportunities for solidifying existing customer relationships and gaining new business."

Conference Call
Arkansas Best Corporation will host a conference call with company executives to discuss the 2012 third quarter results.  The call will be today, Thursday, November 1, at 9:30 a.m. ET (8:30 a.m. CT).  Interested parties are invited to listen by calling (800) 618-4645.  Following the call, a recorded playback will be available through the end of the day on December 2, 2012.  To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers).  The conference call ID for the playback is 21607032.  The conference call and playback can also be accessed, through December 2, on Arkansas Best's website at arkbest.com.

Company Description
Arkansas Best Corporation, headquartered in Fort Smith, Arkansas, is a freight transportation services and solutions provider. Through its various subsidiaries, Arkansas Best offers a wide variety of logistics solutions including: domestic and global transportation of less-than-truckload ("LTL") and full load shipments, expedited ground and time-definite delivery solutions, freight forwarding services, freight brokerage, oversight of roadside assistance and equipment services for commercial vehicles, and household goods moving market services for consumers, corporations, and the military. More information is available at arkbest.com, abf.com and pantherexpedite.com.

Forward-Looking Statements
The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this report that are not based on historical facts are "forward-looking statements." Terms such as "anticipate," "believe," "estimate," "expect," "forecast," "intend," "plan," "predict," "prospects," "scheduled," "should," "would," and similar expressions and the negatives of such terms are intended to identify forward-looking statements. Such statements are by their nature subject to uncertainties and risk including, but not limited to, general economic conditions and related shifts in market demand that impact the performance and needs of industries served by Arkansas Best Corporation's subsidiaries and limit our customers' access to adequate financial resources; the successful integration of Panther; relationships with employees, including unions; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer pension plans; competitive initiatives, pricing pressures, the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates and the inability to collect fuel surcharges; availability of fuel; availability and cost of reliable third-party services; the timing and amount of capital expenditures; future costs of operating expenses such as fuel and related taxes; self-insurance claims and insurance premium costs; governmental regulations and policies; future climate change legislation; availability and cost of capital and financing arrangements; the cost and timing of growth initiatives; the impact of our brand and corporate reputation; the cost, integration, and performance of any future acquisitions; costs of continuing investments in technology and the impact of cyber incidents; weather conditions; and other financial, operational, and legal risks and uncertainties detailed from time to time in Arkansas Best Corporation's Securities and Exchange Commission ("SEC") public filings.

The following tables show financial data and operating statistics on Arkansas Best Corporation and its subsidiary companies.

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30

Nine Months Ended

September 30

2012

2011

2012

2011

(Unaudited)

($ thousands, except share and per share data)


OPERATING REVENUES

$

577,546

$

510,887

$

1,528,956

$

1,444,369










OPERATING EXPENSES AND COSTS

565,313

489,769

1,532,509

1,436,245










OPERATING INCOME (LOSS)

12,233

21,118

(3,553)

8,124










OTHER INCOME (EXPENSE)










Interest and dividend income

155

273

623

790

Interest expense and other related financing costs

(1,609)

(973)

(3,863)

(2,899)

Other, net

997

(1,345)

2,117

1,544

(457)

(2,045)

(1,123)

(565)










INCOME (LOSS) BEFORE INCOME TAXES

11,776

19,073

(4,676)

7,559










INCOME TAX PROVISION (BENEFIT)

5,258

6,808

(4,873)

2,630










NET INCOME

6,518

12,265

197

4,929










LESS:  NONCONTROLLING INTEREST IN

             NET INCOME OF SUBSIDIARY

–

–

–

174










NET INCOME ATTRIBUTABLE TO

  ARKANSAS BEST CORPORATION

$

6,518

$

12,265

$

197

$

4,755










EARNINGS PER COMMON SHARE(1)










Basic

$

0.24

$

0.46

$

–

$

0.18

Diluted

$

0.24

$

0.46

$

–

$

0.18










AVERAGE COMMON SHARES OUTSTANDING










Basic

25,613,315

25,421,887

25,535,969

25,388,174

Diluted

25,613,315

25,421,887

25,535,969

25,388,174










CASH DIVIDENDS DECLARED
  PER COMMON SHARE

$

0.03

$

0.03

$

0.09

$

0.09

(1)  The Company uses the two-class method for calculating earnings per share. This method, as calculated below, 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 ATTRIBUTABLE TO

  ARKANSAS BEST CORPORATION

$

6,518

$

12,265

$

197

$

4,755










EFFECT OF UNVESTED RESTRICTED
  STOCK AWARDS(1)

(309)

(532)

(113)

(191)










ADJUSTED NET INCOME FOR  CALCULATING

  EARNINGS PER COMMON SHARE

$

6,209

$

11,733

$

84

$

4,564










  

ARKANSAS BEST CORPORATION

CONSOLIDATED BALANCE SHEETS

September 30

2012

December 31

2011

(Unaudited)

Note

($ thousands, except share data)

ASSETS










CURRENT ASSETS




Cash and cash equivalents

$

71,341

$

141,295

Short-term investments


47,732

33,960

Restricted cash equivalents and short-term investments

9,798

52,693

Accounts receivable, less allowances (2012 – $4,790; 2011 – $5,957)

209,460

149,665

Other accounts receivable, less allowances (2012 – $1,246; 2011 – $1,226)

7,312

7,538

Prepaid expenses

13,808

11,363

Deferred income taxes

35,704

35,481

Prepaid and refundable income taxes

4,285

6,905

Other

8,599

6,186

TOTAL CURRENT ASSETS

408,039

445,086




PROPERTY, PLANT AND EQUIPMENT




Land and structures

243,395

242,120

Revenue equipment

598,947

569,303

Service, office, and other equipment

116,913

110,511

Software

100,896

64,229

Leasehold improvements

22,943

21,426

1,083,094

1,007,589

Less allowances for depreciation and amortization

622,888

592,171

460,206

415,418

GOODWILL

79,051

3,660




INTANGIBLE ASSETS, NET

80,604

2,822




OTHER ASSETS

52,130

49,234





$

1,080,030

$

916,220




LIABILITIES AND STOCKHOLDERS' EQUITY










CURRENT LIABILITIES




Bank overdraft and drafts payable

$

13,028

$

20,836

Accounts payable

90,245

66,517

Income taxes payable

430

169

Accrued expenses

159,378

151,887

Current portion of long-term debt

54,024

24,262

TOTAL CURRENT LIABILITIES

317,105

263,671




LONG-TERM DEBT, less current portion

132,355

46,750




PENSION AND POSTRETIREMENT LIABILITIES

93,491

106,578




OTHER LIABILITIES

12,628

13,751




DEFERRED INCOME TAXES

53,793

19,855




STOCKHOLDERS' EQUITY




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

    issued 2012: 27,294,724 shares; 2011: 27,099,819 shares

273

271

Additional paid-in-capital

288,468

286,408

Retained earnings

292,893

295,108

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

(57,770)

(57,770)

Accumulated other comprehensive loss

(53,206)

(58,402)

TOTAL STOCKHOLDERS' EQUITY

470,658

465,615





$

1,080,030

$

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

Nine Months Ended

September 30

2012

2011

(Unaudited)

($ thousands)

OPERATING ACTIVITIES




Net income

$

197

$

4,929

Adjustments to reconcile net loss to net cash provided by operating activities:




Depreciation and amortization

62,772

54,201

Amortization of intangibles

1,218

–

Share-based compensation expense

4,711

5,116

Provision for losses on accounts receivable

1,314

2,105

Deferred income tax benefit

(3,795)

(6,802)

Gain on sale of property and equipment

(582)

(1,934)

Changes in operating assets and liabilities:




Receivables

(28,956)

(20,244)

Prepaid expenses

2,940

1,144

Other assets

(591)

2,470

Income taxes

938

8,457

Accounts payable, accrued expenses, and other liabilities(1)

7,942

22,836

NET CASH PROVIDED BY OPERATING ACTIVITIES

48,108

72,278




INVESTING ACTIVITIES




Purchases of property, plant and equipment, net of financings

(31,923)

(32,127)

Proceeds from sale of property and equipment

5,126

5,678

Purchases of short-term investments


(38,708)

(27,930)

Proceeds from sale of short-term investments


25,018

36,175

Business acquisition, net of cash acquired

(180,793)

–

Capitalization of internally developed software and other

(5,379)

(3,735)

NET CASH USED IN INVESTING ACTIVITIES

(226,659)

(21,939)




FINANCING ACTIVITIES




Borrowings under credit facilities

100,000

–

Payments on long-term debt

(22,606)

(10,886)

Acquisition of noncontrolling interest

–

(4,084)

Net change in bank overdraft and other

(7,808)

1,608

Change in restricted cash equivalents and short-term investments

42,895

(662)

Deferred financing costs

(1,472)

(174)

Payment of common stock dividends

(2,412)

(2,383)

Proceeds from the exercise of stock options

–

763

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

108,597

(15,818)




NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               


(69,954)

34,521

Cash and cash equivalents at beginning of period

141,295

102,578

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

71,341

$

137,099




NONCASH INVESTING ACTIVITIES




Accruals for equipment received

$

34

$

5,117

Equipment financed under capital leases and notes payable

$

37,973

$

21,307

(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

September 30

Nine Months Ended

September 30

2012

2011

2012

2011

(Unaudited)

($ thousands, except per share data)

ARKANSAS BEST CORPORATION – CONSOLIDATED










Net Income Attributable to Arkansas Best Corporation










Amounts on a GAAP basis

$

6,518

$

12,265

$

197

$

4,755

Tax benefits(1)

–

–

(3,333)

–

Transaction costs, after-tax(2)

–

–

1,294

–

Non-GAAP amounts

$

6,518

$

12,265

$

(1,842)

$

4,755










Diluted Earnings Per Share










Amounts on a GAAP basis

$

0.24

$

0.46

$

–

$

0.18

Tax benefits(1)

–

–

(0.13)

–

Transaction costs, after-tax(2)

–

–

0.05

–

Non-GAAP amounts

$

0.24

$

0.46

$

(0.08)

$

0.18










ARKANSAS BEST CORPORATION – CONSOLIDATED


Earnings Before Interest, Taxes, Depreciation,
   and Amortization










Net income attributable to Arkansas Best Corporation

$

6,518

$

12,265

$

197

$

4,755

Interest expense

1,609

973

3,863

2,899

Income taxes (benefits)

5,258

6,808

(4,873)

2,630

Depreciation and amortization

23,820

18,230

63,990

54,201

Amortization of share based compensation

1,369

1,417

4,711

5,116

Amortization of actuarial losses

2,846

1,840

8,539

5,520

EBITDA

41,420

41,533

76,427

75,121










Transaction costs, pre-tax(2)

–

–

2,129

–

Adjusted EBITDA

$

41,420

$

41,533

$

78,556

$

75,121










PREMIUM LOGISTICS & EXPEDITED FREIGHT SERVICES(3)






















Earnings Before Interest, Taxes, Depreciation,
   and Amortization










Operating income

$

804

$

–

$

1,284

$

–

Depreciation and amortization

2,491

–

2,965

–

EBITDA

$

3,295

$

–

$

4,249

$

–










(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 September 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.
















ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS



Three Months Ended

September 30

Nine Months Ended

September 30





2012

2011

2012

2011

(Unaudited)

($ thousands)

OPERATING REVENUES














Freight Transportation(1)

$

455,997

$

459,325

$

1,302,292

$

1,308,723

Premium Logistics & Expedited

   Freight Services(2)

60,445


–


71,280


–

Truck Brokerage & Management(3)

11,395


6,977


29,455


18,488

Emergency and Preventative

   Maintenance(4)

32,785


24,801


85,264


70,419

Household Goods Moving
   Services(5)

25,702


27,768


61,233


68,879

Total non-asset-based segments

130,327


59,546


247,232


157,786
















Other revenues and eliminations

(8,778)


(7,984)


(20,568)


(22,140)

Total consolidated
   operating revenues

$

577,546

$

510,887

$

1,528,956

$

1,444,369
















OPERATING EXPENSES AND COSTS

Freight Transportation(1)















Salaries, wages, and benefits

$

272,680

59.8%

$

271,775

59.2%

$

807,685

62.0%

$

807,140

61.7%

Fuel, supplies, and expenses

83,989

18.4

86,260

18.8

247,646

19.0

253,387

19.4

Operating taxes and licenses

10,891

2.4

11,343

2.5

32,514

2.5

34,336

2.6

Insurance

4,944

1.1

5,139

1.1

15,415

1.2

18,130

1.4

Communications and utilities

3,816

0.8

3,771

0.8

11,084

0.9

11,468

0.9

Depreciation and amortization

20,381

4.5

17,502

3.8

58,440

4.5

52,044

4.0

Rents and purchased transportation

49,061

10.8

43,871

9.6

130,105

10.0

125,396

9.6

Gain on sale of property

   and equipment

(65)

–

(1,060)

(0.2)

(578)

–

(1,943)

(0.1)

Other

1,858

0.3

2,995

0.5

5,839

0.3

6,496

0.3

447,555

98.1%

441,596

96.1%

1,308,150

100.4%

1,306,454

99.8%














Premium Logistics & Expedited

Freight Services(2)















Purchased transportation

$

46,260

76.5%

$

–

$

54,507

76.5%

$

–

Depreciation and amortization

2,491

4.1

–


2,965

4.2

–

Salaries, benefits, insurance,

   and other

10,890

18.1

–


12,524

17.5

–


59,641

98.7%

–


69,996

98.2%

–
















Truck Brokerage & Management(3)

10,689


6,364


27,700


16,922

Emergency and Preventative

   Maintenance(4)

31,913


23,795


83,834


67,574

Household Goods Moving
   Services(5)

24,277


26,086


60,435


66,113

Total non-asset-based segments

126,520


56,245


241,965


150,609
















Other expenses and eliminations

(8,762)


(8,072)


(17,606)


(20,818)

Total consolidated operating

   expenses and costs

$

565,313

$

489,769

$

1,532,509

$

1,436,245



















ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS – Continued

Three Months Ended

September 30

Nine Months Ended

September 30


2012

2011

2012

2011





(Unaudited)











($ thousands)




OPERATING INCOME (LOSS)













Freight Transportation(1)

$

8,442

$

17,729

$

(5,858)

$

2,269

Premium Logistics & Expedited
   Freight Services(2)

804


–


1,284


–

Truck Brokerage & Management(3)

706


613


1,755


1,566

Emergency and Preventative

   Maintenance(4)

872


1,006


1,430


2,845

Household Goods Moving
   Services(5)

1,425


1,682


798


2,766

Total non-asset-based segments

3,807


3,301


5,267


7,177













Other income (loss) and
   eliminations

(16)


88


(2,962)


(1,322)

Total consolidated operating
   income (loss)

$

12,233

$

21,118

$

(3,553)

$

8,124















(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 September 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

Nine Months Ended

September 30

September 30

2012

2011

% Change

2012

2011

% Change

(Unaudited)






Freight Transportation (1)














Workdays

63.0

64.0

190.5

191.0








Billed Revenue (2) / CWT           

$

28.60

$

28.17

1.5%

$

28.04

$

26.52

5.7%










Billed Revenue (2) / Shipment    

$

393.47

$

379.49

3.7%

$

379.88

$

359.32

5.7%










Shipments                                  


1,141,325

1,200,461

(4.9)%

3,410,447

3,643,511

(6.4)%










Shipments / Day

18,116

18,757

(3.4)%

17,903

19,076

(6.2)%










Tonnage (tons)                           


785,172

808,660

(2.9)%

2,310,467

2,467,866

(6.4)%










Tons / Day

12,463

12,635

(1.4)%

12,128

12,921

(6.1)%











(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

SOURCE Arkansas Best Corporation