Arkansas Best Corporation Announces Second Quarter Income From Continuing Operations of $1.13 per Share; ABF®'s Operating Ratio Is 90.1%
FORT SMITH, Ark., July 24 /PRNewswire-FirstCall/ -- Arkansas Best Corporation (Nasdaq: ABFS - News) today announced second quarter 2006 net income of $32.3 million, or $1.26 per diluted common share. Income from continuing operations was $29.0 million, or $1.13 per diluted common share, compared to second quarter 2005 income from continuing operations of $22.6 million, or $0.88 per diluted common share. Arkansas Best's second quarter 2006 revenue was $479.3 million, an increase of 12.0% over second quarter 2005 revenue of $427.9 million.
As previously announced, in June 2006 Arkansas Best completed the sale of Clipper Exxpress, its former intermodal transportation subsidiary. Arkansas Best's discontinued operations include an after-tax gain on the sale of Clipper of $0.12 per common share, which is subject to adjustments based on the final closing balance sheet as of June 14, 2006. In addition, discontinued operations include after-tax income of $0.01 per common share associated with Clipper's second quarter operating results through the closing date.
ABF Freight System, Inc.®
ABF Freight System, Inc. had second quarter 2006 revenue of $466.9 million, a per-day increase of 11.8% over second quarter 2005 revenue of $417.5 million. Second quarter 2006 operating income at ABF was $46.4 million compared to $38.1 million during the second quarter of 2005. ABF's second quarter 2006 operating ratio was 90.1% versus an operating ratio of 90.9% in the second quarter of 2005. "During a period of healthy revenue and tonnage growth, the employees of ABF enhanced customer satisfaction levels and cargo care, further improving the industry's best loss and damage experience," said Robert A. Davidson, Arkansas Best President and Chief Executive Officer. "Our balance of growth and disciplined yield management resulted in an improvement in ABF's operating profit and the best second quarter operating ratio in over twenty-eight years."
ABF's second quarter 2006 total weight per day increased by 6.4% compared to last year. "ABF experienced solid tonnage increases throughout the quarter as the year-over-year increase in total tonnage grew during each successive month of the second quarter," said Mr. Davidson. "Second quarter tonnage comparisons were dampened slightly by the timing of the Easter holiday, just as they were helped in this year's first quarter. When adjusted for the Easter effect, ABF's second quarter total tonnage per day increased about 7%."
"Our year-over-year tonnage trends in July are running at or slightly behind those of the second quarter, although comparisons for this short period are complicated by calendar differences," said Mr. Davidson.
Total billed revenue per hundredweight was $25.22, an increase of 5.5% over last year's second quarter figure of $23.91. Total billed revenue per hundredweight, excluding fuel surcharge, increased by 1.9%. "The industry pricing environment is competitive but firm, consistent with recent quarters. The retention of the April 3rd general rate increase is in line with our expectations, and price increases on contract renewals are acceptable," said Mr. Davidson. During the second quarter of 2006, ABF continued to experience significant and positive freight profile changes that reduced the reported revenue per hundredweight. Compared to last year, ABF's second quarter 2006 total weight per shipment increased by 4.7% while total length of haul declined by 1.6%. The combination of higher weight per shipment and shorter length of haul reduce the reported revenue per hundredweight without a corresponding reduction in effective pricing or shipment profitability.
"Once again, ABF experienced higher growth rates in freight traveling 800 miles or less. In this year's second quarter, this freight increased by 10.4% compared to last year. As in the past, most of these short-haul shipments are moving in existing network lanes," said Mr. Davidson. "In April of this year, ABF announced new operating procedures in 52 additional customer service facilities. As a result, ABF's more flexible regional capabilities are in place in nearly 25% of the locations in its network. In addition, these new regional operating procedures have improved reliability in longer haul lanes. ABF is beginning to market its new next-day and second-day services, branded as the Regional Performance Model or RPM, throughout the East Coast, from Maine to South Carolina. Despite the initial success ABF has experienced with these operational changes, resulting freight is not expected to have a meaningful impact on ABF's operating results until late this year or early 2007."
"ABF's second quarter productivity, as measured by total weight per labor hour, improved by 1.8% compared to last year's second quarter. During the quarter, this productivity figure was at its highest level since the third quarter of last year. "Freight-handling productivity continues to be positively impacted by increases in ABF's total weight per shipment," said Mr. Davidson. "While freight-handling productivity has improved, ABF has continued to maintain one of the best cargo claims ratios in the LTL industry. During the second quarter, ABF's cargo claim ratio, a measure of net cash payouts to revenue, was 0.67%. This compares to ABF's cargo claims ratio of 0.78% for the combined years of 2004 and 2005. Also, as we expected, ABF's year-to-date workers' compensation expenses as a percent of revenue returned to historical levels."
Common Stock Purchase
During the second quarter of 2006, Arkansas Best purchased 200,000 shares of its common stock in the open market for an aggregate cost of $8.3 million. These common shares were added to the company's treasury stock. Since January 2003, Arkansas Best has purchased 1,143,150 shares totaling $37.6 million. Under a program announced in July 2005, Arkansas Best currently has authorization to purchase up to an additional $37.4 million of its common stock. Arkansas Best plans to continue making open-market purchases of its stock on an opportunistic basis.
Conference Call
Arkansas Best Corporation will host a conference call with company executives to discuss the 2006 second quarter results. The call will be today, Monday, July 24, at 11:00 a.m. EDT (10:00 a.m. CDT). Interested parties are invited to listen by calling (877) 275-1257. Following the call, a recorded playback will be available through Thursday, August 24. To listen to the playback, dial (800) 642-1687. The conference call ID for the playback is 2284429. The conference call and playback can also be accessed through Thursday, August 24, on Arkansas Best's Internet Web site at http://www.arkbest.com .
Company Description
Arkansas Best Corporation, headquartered in Fort Smith, Arkansas, is a transportation holding company. ABF Freight System, Inc., Arkansas Best's largest subsidiary, has been in continuous service since 1923. ABF provides transportation of less-than-truckload ("LTL") general commodities throughout North America. More information is available at http://www.arkbest.com and http://www.abf.com .
Forward-Looking Statements
The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this press release that are not based on historical facts are "forward-looking statements." Terms such as "estimate," "forecast," "expect," "predict," "plan," "anticipate," "believe," "intend," "should," "would," "scheduled," 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, union relations; availability and cost of capital; shifts in market demand; weather conditions; the performance and needs of industries served by Arkansas Best's subsidiaries; actual future costs of operating expenses such as fuel and related taxes; self-insurance claims; union and non-union employee wages and benefits; actual costs of continuing investments in technology; the timing and amount of capital expenditures; competitive initiatives and pricing pressures; general economic conditions; and other financial, operational and legal risks and uncertainties detailed from time to time in Arkansas Best'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 INCOME Three Months Ended Six Months Ended June 30 June 30 2006 2005 2006 2005 (Unaudited) ($ thousands, except share and per share data) OPERATING REVENUES $479,254 $427,929 $904,216 $821,743 OPERATING EXPENSES AND COSTS 432,799 390,460 849,910 766,827 OPERATING INCOME 46,455 37,469 54,306 54,916 OTHER INCOME (EXPENSE) Short-term investment income 1,206 549 2,215 891 Interest expense and other related financing costs (299) (1,089) (541) (1,478) Other, net (1) 145 950 104 906 (395) 2,624 (483) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 47,361 37,074 56,930 54,433 FEDERAL AND STATE INCOME TAXES Current 19,120 19,148 25,842 32,019 Deferred (721) (4,661) (3,700) (10,662) 18,399 14,487 22,142 21,357 INCOME FROM CONTINUING OPERATIONS 28,962 22,587 34,788 33,076 DISCONTINUED OPERATIONS, NET OF TAX Income from operations 234 820 530 795 Gain from disposal 3,063 --- 3,063 --- 3,297 820 3,593 795 NET INCOME $32,259 $23,407 $38,381 $33,871 BASIC EARNINGS PER SHARE: Income from continuing operations $1.15 $0.90 $1.38 $1.31 Income from discontinued operations 0.13 0.03 0.14 0.03 NET INCOME $1.28 $0.93 $1.52 $1.34 AVERAGE COMMON SHARES OUTSTANDING (BASIC) 25,224,486 25,296,462 25,232,438 25,364,969 DILUTED EARNINGS PER SHARE: Income from continuing operations $1.13 $0.88 $1.36 $1.28 Income from discontinued operations 0.13 0.03 0.14 0.03 NET INCOME $1.26 $0.91 $1.50 $1.31 AVERAGE COMMON SHARES OUTSTANDING (DILUTED) 25,599,728 25,613,400 25,622,238 25,773,623 CASH DIVIDENDS PAID PER COMMON SHARE $0.15 $0.12 $0.30 $0.24 Note: Certain prior year amounts have been reclassified to conform to the current year presentation. ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS June 30 December 31 2006 2005 (Unaudited) Note ($ thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $14,576 $5,767 Short-term investment securities 143,063 121,239 Accounts receivable, less allowances (2006 -- $4,404; 2005 -- $4,643) 155,161 149,551 Other accounts receivable, less allowances (2006 -- $1,267; 2005 -- $1,536) 8,835 8,568 Prepaid expenses 11,403 13,830 Deferred income taxes 38,508 34,859 Prepaid income taxes 1,680 3,346 Other 6,404 7,821 Assets of discontinued operations --- 23,901 TOTAL CURRENT ASSETS 379,630 368,882 PROPERTY, PLANT AND EQUIPMENT Land and structures 229,090 228,329 Revenue equipment 458,061 413,609 Service, office and other equipment 123,143 121,488 Leasehold improvements 17,030 15,686 827,324 779,112 Less allowances for depreciation and amortization 410,905 397,036 416,419 382,076 PREPAID PENSION COSTS 20,074 25,855 OTHER ASSETS 62,264 80,331 GOODWILL, less accumulated amortization (2006 and 2005 -- $32,037) 63,936 63,916 $942,323 $921,060 Note: The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. ARKANSAS BEST CORPORATION CONSOLIDATED BALANCE SHEETS - continued June 30 December 31 2006 2005 (Unaudited) Note ($ thousands, except share data) LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft and drafts payable $22,739 $18,851 Accounts payable 68,356 54,137 Income taxes payable 10,291 12,239 Accrued expenses 164,899 173,293 Current portion of long-term debt 277 317 Liabilities of discontinued operations --- 10,193 TOTAL CURRENT LIABILITIES 266,562 269,030 LONG-TERM DEBT, less current portion 1,184 1,433 OTHER LIABILITIES 47,775 59,265 DEFERRED INCOME TAXES 40,324 37,251 FUTURE MINIMUM RENTAL COMMITMENTS, NET (2006 - $39,888; 2005 - $43,654) --- --- OTHER COMMITMENTS AND CONTINGENCIES --- --- STOCKHOLDERS' EQUITY Common stock, $.01 par value, authorized 70,000,000 shares; issued 2006: 26,365,480 shares; 2005: 26,281,801 shares 264 263 Additional paid-in capital 247,223 242,953 Retained earnings 377,786 347,051 Treasury stock, at cost, 2006: 1,202,932 shares; 2005: 902,932 shares (38,513) (25,955) Unearned compensation - restricted stock --- (5,103) Accumulated other comprehensive loss (282) (5,128) TOTAL STOCKHOLDERS' EQUITY 586,478 554,081 $942,323 $921,060 Note: The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation. ARKANSAS BEST CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30 2006 2005 (Unaudited) ($ thousands) OPERATING ACTIVITIES Net income $38,381 $33,871 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,805 29,318 Other amortization 106 139 Settlement accounting expense 9,083 --- Share-based compensation expense 2,079 230 Provision for losses on accounts receivable 54 1,067 Deferred income tax benefit (3,700) (10,054) Fair value of interest rate swap --- (873) Gain on disposal of discontinued operations, net of taxes (3,063) --- Gain on sales of assets and other (1,415) (661) Excess tax benefits from share-based compensation (1,086) --- Changes in operating assets and liabilities: Receivables (9,432) (5,691) Prepaid expenses 2,390 4,373 Other assets 21,250 (2,928) Accounts payable, taxes payable, accrued expenses and other liabilities (13,004) 14,492 NET CASH PROVIDED BY OPERATING ACTIVITIES 74,448 63,283 INVESTING ACTIVITIES Purchases of property, plant and equipment (60,214) (35,600) Proceeds from asset sales 7,956 5,026 Proceeds from disposal of discontinued operations 21,450 --- Purchases of short-term investment securities (216,829) (145,924) Proceeds from sales of short-term investment securities 195,005 112,855 Capitalization of internally developed software and other (2,119) (2,196) NET CASH USED BY INVESTING ACTIVITIES (54,751) (65,839) FINANCING ACTIVITIES Payments on long-term debt (289) (267) Net change in bank overdraft 3,266 (2,061) Payment of common stock dividends (7,646) (6,102) Purchases of treasury stock (12,558) (5,548) Excess tax benefits from share-based compensation 1,086 --- Proceeds from the exercise of stock options and other 5,253 1,808 NET CASH USED BY FINANCING ACTIVITIES (10,888) (12,170) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,809 (14,726) Cash and cash equivalents at beginning of period 5,767 32,359 CASH AND CASH EQUIVALENTS AT END OF PERIOD $14,576 $17,633 ARKANSAS BEST CORPORATION FINANCIAL STATEMENT OPERATING SEGMENT DATA, OPERATING RATIOS AND FINANCIAL STATISTICS Three Months Ended June 30 2006 2005 (Unaudited) ($ thousands) OPERATING REVENUES ABF Freight System, Inc.(A) $466,884 $417,539 Other revenues and eliminations 12,370 10,390 Total consolidated operating revenues $479,254 $427,929 OPERATING EXPENSES AND COSTS ABF Freight System, Inc.(A) Salaries, wages and benefits $267,626 57.3% $250,435 60.0% Supplies and expenses 74,425 15.9 61,306 14.7 Operating taxes and licenses 11,848 2.6 10,873 2.6 Insurance 7,605 1.6 6,411 1.5 Communications and utilities 3,737 0.8 3,372 0.8 Depreciation and amortization 15,282 3.3 13,050 3.1 Rents and purchased transportation 39,824 8.5 33,396 8.0 Other 685 0.2 1,133 0.3 Settlement accounting expense 645 0.1 --- --- Gain on sale of property and equipment (1,231) (0.2) (546) (0.1) 420,446 90.1% 379,430 90.9% Other expenses and eliminations 12,353 11,030 Total consolidated operating expenses and costs $432,799 $390,460 OPERATING INCOME (LOSS) ABF Freight System, Inc.(A) $46,438 $38,109 Other income and eliminations 17 (640) Total consolidated operating income $46,455 $37,469 Six Months Ended June 30 2006 2005 (Unaudited) ($ thousands) OPERATING REVENUES ABF Freight System, Inc.(A) $880,534 $801,608 Other revenues and eliminations 23,682 20,135 Total consolidated operating revenues $904,216 $821,743 OPERATING EXPENSES AND COSTS ABF Freight System, Inc.(A) Salaries, wages and benefits $525,377 59.7% $495,056 61.8% Supplies and expenses 141,999 16.1 117,693 14.7 Operating taxes and licenses 23,213 2.6 21,435 2.7 Insurance 14,074 1.6 12,869 1.6 Communications and utilities 7,864 0.9 7,152 0.9 Depreciation and amortization 30,033 3.4 25,825 3.2 Rents and purchased transportation 74,214 8.4 64,881 8.1 Other 1,323 0.2 2,055 0.2 Settlement accounting expense 9,083 1.1 --- --- Gain on sale of property and equipment (1,487) (0.2) (661) (0.1) 825,693 93.8% 746,305 93.1% Other expenses and eliminations 24,217 20,522 Total consolidated operating expenses and costs $849,910 $766,827 OPERATING INCOME (LOSS) ABF Freight System, Inc.(A) $54,841 $55,303 Other income and eliminations (535) (387) Total consolidated operating income $54,306 $54,916 Rolling Twelve Months Ended June 30, 2006 FINANCIAL STATISTICS After-Tax Return on Capital Employed (B) 19.4% (A) Includes U.S., Canadian, and Puerto Rican operations of ABF affiliates. (B) (Net income from continuing operations + interest after tax) / (average total debt + average equity) Note: Certain prior year amounts have been reclassified to conform to the current year presentation. ABF FREIGHT SYSTEM, INC. OPERATING STATISTICS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006 Three Months Ended June 30 Six Months Ended June 30 2006 2005 % Change 2006 2005 % Change Billed Revenue* / CWT $25.22 $23.91 5.5% $24.54 $23.41 4.8% Billed Revenue* / CWT (without fuel surcharge) $21.97 $21.55 1.9% $21.55 $21.22 1.6% Billed Revenue* / Shipment $326.99 $296.14 10.4% $313.80 $287.68 9.1% Tonnage (tons) 936,942 880,439 6.4% 1,816,297 1,723,086 5.4% Shipments 1,445,288 1,421,446 1.7% 2,841,367 2,804,590 1.3% Workdays 64 64 128 128 *Billed revenue does not include revenue deferral required for financial statement purposes under the company's revenue recognition policy. Includes U.S., Canadian and Puerto Rican operations of ABF affiliates.
Contact: Ms. Judy R. McReynolds, Senior Vice President, Chief Financial Officer and Treasurer
Telephone: (479) 785-6281
Mr. David Humphrey, Director of Investor Relations
Telephone (479) 785-6200