Arkansas Best Corporation Announces Third Quarter 2013 Results

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

September 30

Nine Months Ended

September 30

2013

2012

2013

2012

(Unaudited)

($ thousands, except share and per share data)

OPERATING REVENUES

$

623,414

$

577,546

$

1,720,999

$

1,528,956

OPERATING EXPENSES AND COSTS

602,912

565,313

1,715,431

1,532,509

OPERATING INCOME (LOSS)

20,502

12,233

5,568

(3,553)

OTHER INCOME (EXPENSE)

Interest and dividend income

167

155

499

623

Interest expense and other related financing costs

(993)

(1,609)

(3,279)

(3,863)

Other, net

1,328

997

2,778

2,117

502

(457)

(2)

(1,123)

INCOME (LOSS) BEFORE INCOME TAXES

21,004

11,776

5,566

(4,676)

INCOME TAX PROVISION (BENEFIT)

7,022

5,258

101

(4,873)

NET INCOME

$

13,982

$

6,518

$

5,465

$

197

EARNINGS PER COMMON SHARE⁽¹⁾

Basic

$

0.52

$

0.24

$

0.20

$

–

Diluted

$

0.52

$

0.24

$

0.20

$

–

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,736,810

25,613,315

25,690,184

25,535,969

Diluted

25,736,810

25,613,315

25,690,184

25,535,969

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

$

13,982

$

6,518

$

5,465

$

197

EFFECT OF UNVESTED RESTRICTED
  STOCK AWARDS⁽¹⁾

(585)

(309)

(243)

(113)

ADJUSTED NET INCOME FOR CALCULATING

  EARNINGS PER COMMON SHARE

$

13,397

$

6,209

$

5,222

$

84

ARKANSAS BEST CORPORATION

CONSOLIDATED BALANCE SHEETS

September 30

2013

December 31

2012

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

107,611

$

90,702

Short-term investments

28,573

29,054

Restricted cash, cash equivalents, and short-term investments

1,902

9,658

Accounts receivable, less allowances (2013 – $4,645; 2012 – $5,249)

212,946

180,631

Other accounts receivable, less allowances (2013 – $1,402; 2012 – $1,334)

9,532

6,539

Prepaid expenses

15,980

17,355

Deferred income taxes

47,038

39,245

Prepaid and refundable income taxes

2,186

5,681

Other

8,882

7,185

   TOTAL CURRENT ASSETS

434,650

386,050

PROPERTY, PLANT AND EQUIPMENT

Land and structures

245,207

243,699

Revenue equipment

591,367

589,729

Service, office, and other equipment

122,057

119,456

Software

109,111

103,164

Leasehold improvements

23,524

23,272

1,091,266

1,079,320

Less allowances for depreciation and amortization

691,730

635,292

399,536

444,028

GOODWILL

76,448

73,189

INTANGIBLE ASSETS, NET

76,431

79,561

OTHER ASSETS

51,058

51,634

$

1,038,123

$

1,034,462

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Bank overdraft and drafts payable

$

11,645

$

13,645

Accounts payable

95,609

84,292

Income taxes payable

2,868

59

Accrued expenses

181,197

158,668

Current portion of long-term debt

35,353

43,044

   TOTAL CURRENT LIABILITIES

326,672

299,708

LONG-TERM DEBT, less current portion

88,893

112,941

PENSION AND POSTRETIREMENT LIABILITIES

38,040

104,673

OTHER LIABILITIES

13,560

12,832

DEFERRED INCOME TAXES

71,275

45,309

STOCKHOLDERS' EQUITY

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

    issued 2013: 27,408,046 shares; 2012: 27,296,285 shares

274

273

Additional paid-in-capital

291,445

289,711

Retained earnings

287,204

284,157

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

(57,770)

(57,770)

Accumulated other comprehensive loss

(21,470)

(57,372)

   TOTAL STOCKHOLDERS' EQUITY

499,683

458,999

$

1,038,123

$

1,034,462

Note: The balance sheet at December 31, 2012 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

2013

2012

(Unaudited)

($ thousands)

OPERATING ACTIVITIES

Net income

$

5,465

$

197

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

Depreciation and amortization

64,439

62,772

Amortization of intangibles

3,130

1,218

Pension settlement expense

1,834

–

Share-based compensation expense

3,579

4,711

Provision for losses on accounts receivable

1,658

1,314

Deferred income tax benefit

(5,770)

(3,795)

Gain on sale of property and equipment

(486)

(582)

Changes in operating assets and liabilities:

   Receivables

(36,513)

(28,956)

   Prepaid expenses

1,768

2,940

   Other assets

(1,557)

(591)

   Income taxes

6,868

938

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

21,836

7,942

NET CASH PROVIDED BY OPERATING ACTIVITIES

66,251

48,108

INVESTING ACTIVITIES

Purchases of property, plant, and equipment, net of financings

(13,078)

(31,923)

Proceeds from sale of property and equipment

1,857

5,126

Purchases of short-term investments

(21,230)

(38,708)

Proceeds from sale of short-term investments

21,713

25,018

Business acquisition, net of cash acquired⁽²⁾

(4,146)

(180,793)

Capitalization of internally developed software and other

(5,959)

(5,379)

NET CASH USED IN INVESTING ACTIVITIES

(20,843)

(226,659)

FINANCING ACTIVITIES

Borrowing under credit facilities

–

100,000

Repayments on long-term debt

(31,775)

(22,606)

Net change in bank overdraft and other

(2,002)

(7,808)

Change in restricted cash, cash equivalents, and short-term investments

7,757

42,895

Deferred financing costs

(61)

(1,472)

Payment of common stock dividends

(2,418)

(2,412)

(28,499)

108,597

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS     

16,909

(69,954)

Cash and cash equivalents at beginning of period

90,702

141,295

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

107,611

$

71,341

NONCASH INVESTING ACTIVITIES

Accruals for equipment received

$

264

$

34

Equipment financed

$

36

$

37,973

ARKANSAS BEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Three Months Ended

September 30

Nine Months Ended

September 30

2013

2012

2013

2012

(Unaudited)

($ thousands, except per share data)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Net Income (Loss)

Amounts on a GAAP basis

$

13,982

$

6,518

$

5,465

$

197

Tax benefits⁽¹⁾

(550)

(396)

(766)

(3,729)

Transaction costs, after-tax⁽²⁾

–

–

–

1,294

Pension settlement expense, after-tax⁽³⁾

1,115

–

1,115

–

$

14,547

$

6,122

$

5,814

$

Diluted Earnings (Loss) Per Share

Amounts on a GAAP basis

$

0.52

$

0.24

$

0.20

$

–

Tax benefits⁽¹⁾

(0.02)

(0.02)

(0.03)

(0.15)

Transaction costs, after-tax⁽²⁾

–

–

–

0.05

Pension settlement expense, after-tax⁽³⁾

0.04

–

0.04

–

Non-GAAP amounts

$

0.54

$

0.22

$

0.21

$

(0.10)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Earnings Before Interest, Taxes, Depreciation
   and Amortization

Net income

$

13,982

$

6,518

$

5,465

$

197

Interest expense

993

1,609

3,279

3,863

Income tax provision (benefit)

7,022

5,258

101

(4,873)

Depreciation and amortization

21,569

23,820

67,569

63,990

Amortization of share-based compensation

1,095

1,369

3,579

4,711

Amortization of actuarial losses and pension settlement expense

2,994

2,846

8,818

8,539

EBITDA

47,655

41,420

88,811

76,427

Transaction costs, pre-tax⁽²⁾

–

–

–

2,129

Adjusted EBITDA

$

47,655

$

41,420

$

88,811

$

78,556

(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)

Settlement expense related to the Company's nonunion defined benefit pension plan which was frozen effective July 1, 2013.

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 generally accepted accounting principles. Other companies may calculate EBITDA differently, and therefore the Company's EBITDA may not be comparable to similarly titled measures of other companies.

Three Months Ended

September 30

2012

Depreciation and Amortization

EBITDA

Operating Income

Depreciation and Amortization

EBITDA

Premium Logistics & Expedited Freight Services⁽¹⁾

$

3,102

$

2,665

$

5,767

$

804

$

2,491

$

3,295

Domestic & Global Transportation Management

541

171

712

671

91

762

Emergency & Preventative Maintenance

845

138

983

872

124

996

Household Goods Moving Services

1,835

354

2,189

1,425

169

1,594

Total non-asset-based segments

$

6,323

$

3,328

$

9,651

$

3,772

$

2,875

$

6,647

Nine Months Ended

September 30

2013

Nine Months Ended

September 30

2012

Operating

Income

Depreciation and Amortization

EBITDA

Operating Income

Depreciation and Amortization

EBITDA

Premium Logistics & Expedited Freight Services⁽¹⁾

$

3,745

$

7,809

$

11,554

$

1,284

$

2,965

$

4,249

Domestic & Global Transportation Management

1,564

449

2,013

1,657

245

1,902

Emergency & Preventative Maintenance

2,367

400

2,767

1,430

373

1,803

Household Goods Moving Services

2,552

880

3,432

798

527

1,325

Total non-asset-based segments

$

10,228

$

9,538

$

19,766

$

5,169

$

4,110

$

9,279

(1)

Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software, which were acquired in conjunction with the purchase of Panther Expedited Services, Inc. on June 15, 2012. Amounts for the nine months ended September 30, 2012 reflect the period from the date of acquisition, June 15, to September 30.

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended

September 30

Nine Months Ended

September 30

2013

2012

2013

2012

(Unaudited)

($ thousands)

OPERATING REVENUES

Freight Transportation

$

471,031

$

450,156

$

1,325,062

$

1,287,020

Premium Logistics & Expedited

   Freight Services⁽¹⁾

65,851

60,445

179,533

71,280

Domestic & Global Transportation

   Management

28,669

17,342

74,554

44,954

Emergency & Preventative

   Maintenance

37,047

32,785

102,504

85,264

Household Goods Moving
   Services

30,530

25,702

65,358

61,233

Total non-asset-based segments

162,097

136,274

421,949

262,731

Other revenues and eliminations

(9,714)

(8,884)

(26,012)

(20,795)

Total consolidated
   operating revenues

$

623,414

$

577,546

$

1,720,999

$

1,528,956

OPERATING EXPENSES AND COSTS

Freight Transportation

Salaries, wages, and benefits

$

276,683

58.7%

$

272,102

60.4%

$

816,502

61.6%

$

806,158

62.6%

Fuel, supplies, and expenses

84,714

18.0

83,777

18.6

250,486

18.9

247,113

19.2

Operating taxes and licenses

10,864

2.3

10,890

2.4

32,793

2.5

32,514

2.5

Insurance

6,858

1.5

4,942

1.1

17,410

1.3

15,408

1.2

Communications and utilities

3,724

0.8

3,811

0.8

11,535

0.9

11,069

0.9

Depreciation and amortization

17,621

3.7

20,366

4.5

56,162

4.2

58,403

4.5

Rents and purchased transportation

50,507

10.7

44,015

9.8

133,236

10.1

116,912

9.1

Gain on sale of property

   and equipment

(93)

–

(65)

–

(487)

–

(578)

–

Pension settlement expense

1,612

0.3

–

–

1,612

0.1

–

–

Other

1,325

0.3

1,841

0.5

5,649

0.4

5,781

0.4

453,815

96.3%

441,679

98.1%

1,324,898

100.0%

1,292,780

100.4%

Premium Logistics & Expedited

Freight Services⁽¹⁾

Purchased transportation

$

50,220

76.3%

$

46,260

76.5%

$

137,489

76.6%

$

54,507

76.5%

Depreciation and amortization⁽¹⁾

2,665

4.0

2,491

4.1

7,809

4.3

2,965

4.2

Salaries, benefits, insurance,

   and other

9,864

15.0

10,890

18.1

30,490

17.0

12,524

17.5

62,749

95.3%

59,641

98.7%

175,788

97.9%

69,996

98.2%

Domestic & Global Transportation

   Management

28,128

16,671

72,990

43,297

Emergency & Preventative

   Maintenance

36,202

31,913

100,137

83,834

Household Goods Moving
   Services

28,695

24,277

62,806

60,435

Total non-asset-based segments

155,774

132,502

411,721

257,562

Other expenses and eliminations

(6,677)

(8,868)

(21,188)

(17,833)

Total consolidated operating

   expenses and costs

$

602,912

$

565,313

$

1,715,431

$

1,532,509

(1)

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS – Continued

Three Months Ended

September 30

Nine Months Ended

September 30

2013

2012

2013

2012

(Unaudited)

($ thousands)

OPERATING INCOME (LOSS)

Freight Transportation

$

17,216

$

8,477

$

164

$

(5,760)

Premium Logistics & Expedited
   Freight Services

3,102

804

3,745

1,284

Domestic & Global Transportation

   Management

541

671

1,564

1,657

Emergency & Preventative

   Maintenance

845

872

2,367

1,430

Household Goods Moving
   Services

1,835

1,425

2,552

798

Total non-asset-based segments

6,323

3,772

10,228

5,169

Other income (loss) and
   eliminations⁽¹⁾

(3,037)

(16)

(4,824)

(2,962)

Total consolidated operating
   income (loss)

$

20,502

$

12,233

$

5,568

$

(3,553)

(1)

Other income (loss) and eliminations for 2013 includes a $1.4 million reserve adjustment related to workers' compensations claims associated with an insolvent insurance carrier.

Description of Segments:

• Freight Transportation includes the results of operations of Arkansas Best's largest subsidiary, ABF Freight System, Inc.^®.
• Panther Expedited Services, Inc., which was acquired on June 15, 2012, is reported as Premium Logistics & Expedited Freight Services.
• Domestic & Global Transportation Management includes the company's transportation brokerage services, ocean container transport, and warehousing services operating as ABF Logistics.
• Emergency & Preventative Maintenance includes the roadside vehicle assistance and commercial equipment services subsidiary FleetNet America, Inc.
• Household Goods Moving Services includes Albert Companies, Inc. and Moving Solutions, Inc. which provide services to the consumer, corporate, and military household goods moving market.

Certain reclassifications have been made to the prior year's operating segment data to conform to the current year presentation. The operating results of Global Supply Chain Services and Supply Chain Services, businesses which provide ocean container transport and warehousing services, have been reclassified from the Freight Transportation segment to the Domestic & Global Transportation Management segment. There was no impact on consolidated amounts as a result of these reclassifications.

ARKANSAS BEST CORPORATION

OPERATING STATISTICS

Three Months Ended

Nine Months Ended

September 30

September 30

2013

2012

% Change

2013

2012

% Change

(Unaudited)

Freight Transportation ⁽¹⁾

Workdays

63.5

63.0

190.0

190.5

Billed Revenue ⁽²⁾ / CWT           

$

28.67

$

28.46

0.7%

$

27.78

$

27.92

(0.5)%

Billed Revenue ⁽²⁾ / Shipment    

$

390.44

$

391.47

(0.3)%

$

381.11

$

378.21

0.8%

Shipments                                  

1,201,981

1,141,168

5.3%

3,488,337

3,410,012

2.3%

Shipments / Day

18,929

18,114

4.5%

18,360

17,900

2.6%

Tonnage (tons)                           

818,471

784,713

4.3%

2,393,055

2,309,390

3.6%

Tons / Day

12,889

12,456

3.5%

12,595

12,123

3.9%

(1)

Based on the previously described reclassifications that have been made to the prior year's operating segment data and statistics to conform to the current year presentation, operations of Global Supply Chain Services and Supply Chain Services are excluded from key operating statistics for the Freight Transportation Segment.

(2)

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