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