Arkansas Best Corporation Announces Third Quarter Earnings of $1.07 Per Share; ABF®'s Operating Ratio is 89.2%
FORT SMITH, Ark., Oct. 21 /PRNewswire-FirstCall/ -- Arkansas Best Corporation (Nasdaq: ABFS - News) today announced third quarter 2004 net income of $27.4 million, or $1.07 per diluted common share. For the third quarter of 2003, net income was $17.0 million, or $0.67 per diluted common share. Arkansas Best's revenue during the third quarter of 2004 was $461.9 million, an increase of 12.6% over the third quarter of 2003.
ABF Freight System, Inc.®
ABF Freight System, Inc., the company's largest subsidiary, had third quarter 2004 revenue of $427.9 million, a per-day increase of 16.3% compared to third quarter 2003 revenue of $368.1 million. ABF's third quarter 2004 operating ratio was 89.2% versus an operating ratio of 92.0% during the third quarter of 2003. "By taking advantage of available operating leverage during a period of strong business levels, ABF produced outstanding third quarter results," said Robert A. Young III, Arkansas Best Chairman, President and Chief Executive Officer. "ABF's quarterly operating ratio was the second best of any third quarter in the last twenty-five years, surpassed only by the third quarter of the highly profitable year of 2000. ABF's operating income during this quarter exceeded that of the third quarter of 2000 by over twelve percent."
ABF's third quarter 2004 LTL tonnage per day increased 10.0% compared to the same period last year. "The third quarter began with an unusually strong July increase in year-over-year LTL tonnage that sustained the upward monthly trend of the second quarter," said Mr. Young. "Though the rate of LTL tonnage growth slowed somewhat in August and September, the overall third quarter increase in ABF's core business can certainly be categorized as strong. Versus the second quarter of 2004, ABF's third quarter LTL tonnage per day increased 4.9%. "This level of sequential, LTL tonnage growth is two percent better than the average increase between these same time periods during the previous five-year period," said Mr. Young.
"Through the first nineteen days of October, average daily tonnage figures in our core LTL business are slightly over nine percent higher than the comparable period last year. We continue to be encouraged by the positive tonnage pattern ABF is experiencing so far in the fourth quarter," said Mr. Young.
Billed LTL revenue per hundredweight, excluding fuel surcharge, was $24.50, an increase of 1.7% over last year's third quarter figure of $24.10. "ABF's average LTL shipment was approximately two percent larger than in last year's third quarter. LTL length of haul decreased by about two percent, when compared to the same period of 2003. Both of these profile changes have an adverse effect on nominal yield growth," said Mr. Young. "The LTL pricing environment remained firm as industry capacity continued to tighten during the historically busy third quarter. ABF is working with its customers to provide the best possible value in moving their goods."
ABF's truckload tonnage per day in the third quarter grew by 14.1% when compared to last year. Billed truckload revenue per hundredweight, excluding fuel surcharge, increased by 4.7% over last year's third quarter figure. "The shortage of available truckload capacity continued to provide ABF with opportunities to handle full-load, spot shipments at favorable prices," said Mr. Young. "In these situations however, ABF gives initial consideration to devoting available system resources to its core LTL customer base."
"As a result of improving business levels and recent employee retirements, ABF has experienced an increased demand for additional employees in specific locations, particularly for over-the-road drivers, city drivers and freight handlers. Although the ABF positions are highly desirable in the industry, our pace of hiring has been slower than we would have preferred, due to the improvement in the economy and to ABF's high employee standards related to safety and work experience. As a result, ABF used a higher-than-normal percentage of rail for linehaul movement and a greater level of overtime. Fortunately, our employment efforts are being successful. We expect to continue our recruitment efforts as freight volumes increase into 2005," said Mr. Young.
Productivity measures at ABF were generally equal to those experienced during the third quarter of last year. "In many cases, additional business enhances the productivity of ABF's dock and city employees," said Mr. Young. "However, in certain locations, productivity has been negatively impacted because of high freight volumes. During these busy times, ABF continues to emphasize the timeliness and efficiency of shipment handling in order to preserve established standards of customer service."
"ABF's third quarter LTL tonnage per day remains more than two percent below that of the same period of 2000. As a result, ABF still has some additional operating leverage in its terminal network. During the third quarter, ABF maintained its focus on strict control of overhead and fixed costs," said Mr. Young. "Going forward, ABF will prudently add both personnel and capital resources as required to profitably handle business levels."
On September 30 of this year, the U.S. Congress voted to extend the current Hours of Service regulations until no later than September 30, 2005. This followed a mid-July 2004 ruling, by the U.S. Court of Appeals for the District of Columbia, that vacated those rules. "ABF believes that the existing rules have had a positive impact on highway safety and the welfare of our employees," said Mr. Young.
Clipper
For the third quarter of 2004, Clipper had revenues of $24.6 million. Excluding the revenue associated with Clipper's LTL freight business, the sale of which was closed on December 31, 2003, Clipper's revenue in the third quarter of 2003 was $24.9 million. Clipper's third quarter 2004 operating ratio was 99.2% compared to a third quarter 2003 operating ratio, excluding LTL, of 96.4%. "Revenue increases in Clipper's brokerage and temperature- controlled divisions were offset by lower revenue in the intermodal portion of Clipper's dry freight business," said Mr. Young. "Because of tight capacity, Clipper's rail suppliers increased their per-mile charges despite providing poor linehaul service and causing increases in Clipper's claims costs due to extended holding of reefer equipment. As a result, the profitability of Clipper's intermodal and temperature-controlled divisions suffered significantly. In addition, tightened truckload capacity negatively impacted the profitability of Clipper's brokerage division as potential loads greatly exceeded the number of trucks available to move them."
Credit Ratings Outlook
On October 15, Standard & Poor's revised its outlook on Arkansas Best Corporation to positive from stable. At the same time, Standard & Poor's affirmed Arkansas Best's BBB+ corporate credit rating. In its press release announcing this change, Standard & Poor's stated, "The change to a positive outlook was driven by the company's continued strong operating performance, which has resulted from increased tonnage levels, improved pricing and management initiatives to control costs and improve productivity." In addition, Standard & Poor's stated, "Ratings on Arkansas Best Corporation reflect the company's solid competitive position, moderate financial policies and strong financial profile."
Common Stock Purchase
During the third quarter of 2004, Arkansas Best did not make any open market purchases of its common stock. Since February 2003, as a part of a previously announced program to repurchase up to a maximum of $25 million of its common stock, Arkansas Best has purchased a total of 471,500 shares totaling $12.4 million. 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 2004 third quarter results. The call will be today, Thursday, October 21, at 12:00 Noon EDT (11:00 a.m. CDT). Interested parties are invited to listen by calling (877) 275-1257. Following the call, a recorded playback will be available through the end of October. To listen to the playback, dial (800) 642-1687. The conference call ID for the playback is 1162464. The conference call and playback can also be accessed, through Sunday, October 31, on Arkansas Best's Internet Web site at http://www.arkbest.com .
Company Description
Arkansas Best Corporation, headquartered in Fort Smith, Arkansas, is a diversified transportation holding company with two primary operating subsidiaries. ABF Freight System, Inc., in continuous service since 1923, provides national transportation of less-than-truckload ("LTL") general commodities throughout North America. Clipper is an intermodal marketing company that provides domestic freight services utilizing rail and over-the- road transportation.
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 and 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 the Company'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 (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2004 2003 2004 2003
($ thousands, except share and per share data)
OPERATING REVENUES (B) $461,888 $410,362 $1,261,224 $1,161,295
OPERATING EXPENSES AND
COSTS (B) 417,663 381,717 1,176,715 1,109,256
OPERATING INCOME 44,225 28,645 84,509 52,039
OTHER INCOME (EXPENSE)
Net gains (losses) on sales
of property and other 248 (217) 433 (211)
Gain on sale - Wingfoot --- --- --- 12,060
Fair value changes and
payments on interest
rate swap (A) 300 (51) 449 (10,333)
Interest expense (102) (434) (388) (2,941)
Other, net 745 613 210 311
1,191 (89) 704 (1,114)
INCOME BEFORE INCOME TAXES 45,416 28,556 85,213 50,925
FEDERAL AND STATE INCOME
TAXES
Current 15,725 8,034 29,483 11,895
Deferred 2,322 3,546 4,602 7,598
18,047 11,580 34,085 19,493
NET INCOME $27,369 $16,976 $51,128 $31,432
Basic:
NET INCOME PER SHARE $1.09 $0.68 $2.04 $1.26
AVERAGE COMMON SHARES
OUTSTANDING (BASIC): 25,067,784 24,787,831 25,077,859 24,861,966
Diluted:
NET INCOME PER SHARE $1.07 $0.67 $2.00 $1.24
AVERAGE COMMON SHARES
OUTSTANDING (DILUTED): 25,546,370 25,287,271 25,501,009 25,339,629
CASH DIVIDENDS PAID PER
COMMON SHARE $0.12 $0.08 $0.36 $0.24
(A) The nine months ended September 30, 2003 includes a pre-tax noncash
charge of $8.9 million due to no longer forecasting interest
payments on $110.0 million of borrowings.
(B) Beginning in the first quarter 2004, there has been a
reclassification between revenue and expense associated with certain
shipments where ABF utilizes a third-party carrier for pickup or
delivery of freight but remains the primary obligor. The amounts
reclassified for the three months ended September 30, 2004 and 2003
were $7.5 million in each period. The amounts reclassified for the
nine months ended September 30, 2004 and 2003 were $21.3 million and
$21.0 million, respectively.
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30 December 31
2004 2003
(Unaudited) Note
($ thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $45,282 $5,251
Accounts receivable, less allowances
(2004 - $4,129; 2003 - $3,558) 162,039 132,320
Prepaid expenses 10,123 8,600
Deferred income taxes 30,121 27,006
Other 3,535 3,400
TOTAL CURRENT ASSETS 251,100 176,577
PROPERTY, PLANT AND EQUIPMENT
Land and structures 222,218 215,476
Revenue equipment 395,626 370,102
Service, office and other equipment 112,123 107,066
Leasehold improvements 13,377 13,048
743,344 705,692
Less allowances for depreciation
and amortization 375,170 358,564
368,174 347,128
PREPAID PENSION COSTS 26,945 32,887
OTHER ASSETS 71,109 68,572
ASSETS HELD FOR SALE 3,616 8,183
GOODWILL, less accumulated amortization
(2004 and 2003 - $32,037) 63,883 63,878
$784,827 $697,225
Note: The balance sheet at December 31, 2003 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS - continued
September 30 December 31
2004 2003
(Unaudited) Note
($ thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft and drafts payable $13,061 $8,861
Accounts payable 66,573 55,764
Federal and state income taxes 9,541 2,816
Accrued expenses 147,117 125,148
Current portion of long-term debt 383 353
TOTAL CURRENT LIABILITIES 236,675 192,942
LONG-TERM DEBT, less current portion 1,491 1,826
FAIR VALUE OF INTEREST RATE SWAP 2,035 6,330
OTHER LIABILITIES 64,331 66,284
DEFERRED INCOME TAXES 36,819 29,106
FUTURE MINIMUM RENTAL COMMITMENTS, NET
(2004 - $48,613; 2003 - $49,615) --- ---
OTHER COMMITMENTS AND CONTINGENCIES --- ---
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, authorized
70,000,000 shares; issued 2004:
25,675,556 shares; 2003: 25,295,984 shares 257 253
Additional paid-in capital 225,859 217,781
Retained earnings 234,747 192,610
Treasury stock, at cost, 2004:
531,282 shares; 2003: 259,782 shares (13,334) (5,807)
Accumulated other comprehensive loss (4,053) (4,100)
TOTAL STOCKHOLDERS' EQUITY 443,476 400,737
$784,827 $697,225
Note: The balance sheet at December 31, 2003 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30
2004 2003
($ thousands)
OPERATING ACTIVITIES
Net income $51,128 $31,432
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 40,533 37,483
Other amortization 219 259
Provision for losses on accounts receivable 974 1,057
Provision for deferred income taxes 4,602 7,598
Fair value of interest rate swap (4,294) 7,743
(Gain) loss on sales of assets and other (2,046) 183
Gain on sale of Wingfoot --- (12,060)
Changes in operating assets and liabilities:
Receivables (30,712) (11,106)
Prepaid expenses (1,524) (3,668)
Other assets 1,363 (19,280)
Accounts payable, bank drafts payable,
taxes payable, accrued expenses and
other liabilities 40,431 16,494
NET CASH PROVIDED BY OPERATING ACTIVITIES 100,674 56,135
INVESTING ACTIVITIES
Purchases of property, plant and equipment (63,779) (63,935)
Proceeds from asset sales 12,333 2,525
Proceeds from sale of Wingfoot --- 71,309
Capitalization of internally developed
software and other (3,020) (2,854)
NET CASH (USED) PROVIDED BY INVESTING
ACTIVITIES (54,466) 7,045
FINANCING ACTIVITIES
Borrowings under revolving
credit facilities 34,300 207,200
Payments under revolving credit facilities (34,300) (299,500)
Payments on long-term debt (305) (278)
Net increase in bank overdraft 4,256 2,796
Dividends paid on common stock (8,991) (5,958)
Purchase of treasury stock (7,527) (4,852)
Proceeds from the exercise of stock options 6,390 1,273
Other, net --- (517)
NET CASH USED BY FINANCING ACTIVITIES (6,177) (99,836)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 40,031 (36,656)
Cash and cash equivalents at
beginning of period 5,251 39,644
CASH AND CASH EQUIVALENTS AT END OF PERIOD $45,282 $2,988
ARKANSAS BEST CORPORATION
FINANCIAL STATEMENT OPERATING SEGMENT DATA
AND OPERATING RATIOS (Unaudited)
Three Months Ended
September 30
2004 2003
($ thousands)
OPERATING REVENUES
ABF Freight System, Inc.(A)(B)
LTL $390,929 $338,453
TL 36,982 29,640
Total 427,911 368,093
Clipper 24,610 33,980
Other revenues and
eliminations 9,367 8,289
Total consolidated
operating revenues $461,888 $410,362
OPERATING EXPENSES AND COSTS
ABF Freight System, Inc. (A)
Salaries and wages $250,820 58.6% $229,552 62.4%
Supplies and expenses 53,495 12.5 45,097 12.3
Operating taxes and
licenses 10,909 2.6 9,840 2.7
Insurance 6,911 1.6 6,158 1.7
Communications and
utilities 3,427 0.8 3,516 1.0
Depreciation and
amortization 12,138 2.8 11,116 3.0
Rents and purchased
transportation(B) 43,657 10.2 32,699 8.9
Other 912 0.2 1,055 0.2
(Gain) on sale of
equipment (573) (0.1) (228) (0.2)
381,696 89.2% 338,805 92.0%
Clipper
Cost of services 22,419 91.1% 29,292 86.2%
Selling, administrative
and general 1,985 8.1 4,064 12.0
Loss on sale of
equipment 15 --- 6 ---
24,419 99.2% 33,362 98.2%
Other expenses and
eliminations 11,548 9,550
Total consolidated operating
expenses and costs $417,663 $381,717
OPERATING INCOME (LOSS)
ABF Freight System, Inc.(A) $46,215 $29,288
Clipper 191 618
Other loss and
eliminations (2,181) (1,261)
Total consolidated
operating income $44,225 $28,645
Nine Months Ended
September 30
2004 2003
($ thousands)
OPERATING REVENUES
ABF Freight System, Inc.(A)(B)
LTL $1,067,350 $961,627
TL 97,706 81,317
Total 1,165,056 1,042,944
Clipper 70,551 95,446
Other revenues and
eliminations 25,617 22,905
Total consolidated
operating revenues $1,261,224 $1,161,295
OPERATING EXPENSES AND COSTS
ABF Freight System, Inc.(A)
Salaries and wages $719,886 61.8% $671,782 64.4%
Supplies and expenses 150,405 12.9 133,323 12.8
Operating taxes and
licenses 31,645 2.7 29,568 2.8
Insurance 18,190 1.6 17,801 1.7
Communications and
utilities 10,728 0.9 10,985 1.1
Depreciation and
amortization 35,240 3.0 31,788 3.0
Rents and purchased
transportation(B) 109,568 9.4 90,009 8.6
Other 2,346 0.3 2,758 0.3
(Gain) on sale of
equipment (673) (0.1) (28) ---
1,077,335 92.5% 987,986 94.7%
Clipper
Cost of services 63,914 90.6% 82,480 86.4%
Selling, administrative
and general 6,274 8.9 12,108 12.7
Loss on sale of
equipment 17 --- 1 ---
70,205 99.5% 94,589 99.1%
Other expenses and
eliminations 29,175 26,681
Total consolidated operating
expenses and costs $1,176,715 $1,109,256
OPERATING INCOME (LOSS)
ABF Freight System, Inc.(A) $87,721 $54,958
Clipper 346 857
Other loss and eliminations (3,558) (3,776)
Total consolidated
operating income $84,509 $52,039
(A) Includes U.S., Canadian, and Puerto Rican operations of ABF
affiliates.
(B) Beginning in the first quarter 2004, there has been a
reclassification between revenue and expense associated with certain
shipments where ABF utilizes a third-party carrier for pickup or
delivery of freight but remains the primary obligor. The amounts
reclassified for the three months ended September 30, 2004 and 2003
were $7.5 million in each period. The amounts reclassified for the
nine months ended September 30, 2004 and 2003 were $21.3 million and
$21.0 million, respectively.
ARKANSAS BEST CORPORATION
FINANCIAL STATISTICS AND GAAP EARNINGS RECONCILIATIONS (Unaudited)
Rolling
Twelve Months Ended
September 30, 2004
FINANCIAL STATISTICS
After-Tax Return on Stockholders' Equity
(net income / average equity) 15.92%
Debt to Equity Ratio 0.00 : 1
After-Tax Return on Capital Employed (A) 15.65%
(A) (Net income + interest after tax) / (average total debt + average
equity)
RECONCILIATIONS OF GAAP EARNINGS
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
Operating Operating
Income Income
Revenue (Loss) O.R.% Revenue (Loss) O.R.%
Clipper - Pre-tax ($ thousands)
Clipper GAAP $33,980 $618 98.2% $95,446 $857 99.1%
Less Clipper LTL 9,108 (268) 102.9 26,741 (990) 103.7
Clipper, excluding
LTL $24,872 $886 96.4% $68,705 $1,847 97.3%
ABF FREIGHT SYSTEM, INC.
OPERATING STATISTICS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
Three Months Ended September 30
2004 2003 % Change
Billed Revenue*/CWT LTL $26.04 $24.89 4.6%
TL $9.92 $9.11 8.9%
Total $22.84 $21.84 4.6%
Billed Revenue*/CWT LTL $24.50 $24.10 1.7%
(without fuel surcharge) TL $9.22 $8.81 4.7%
Total $21.47 $21.15 1.5%
Billed Revenue*/Shipment LTL $259.83 $243.82 6.6%
TL $1,613.55 $1,489.78 8.3%
Total $280.14 $261.43 7.2%
Billed Revenue*/Shipment LTL $244.49 $236.06 3.6%
(without fuel surcharge) TL $1,500.11 $1,441.42 4.1%
Total $263.33 $253.09 4.0%
Tonnage LTL 749,781 681,485 10.0%
(tons) TL 186,170 163,158 14.1%
Total 935,951 844,643 10.8%
Shipments LTL 1,502,977 1,391,605 8.0%
TL 22,896 19,946 14.8%
Total 1,525,873 1,411,551 8.1%
Nine Months Ended September 30
2004 2003 % Change
Billed Revenue*/CWT LTL $25.35 $24.32 4.2%
TL $9.38 $8.75 7.2%
Total $22.18 $21.36 3.8%
Billed Revenue*/CWT LTL $24.04 $23.45 2.5%
(without fuel surcharge) TL $8.86 $8.53 3.9%
Total $21.03 $20.61 2.0%
Billed Revenue*/Shipment LTL $250.48 $236.98 5.7%
TL $1,538.84 $1,423.61 8.1%
Total $269.40 $253.45 6.3%
Billed Revenue*/Shipment LTL $237.53 $228.47 4.0%
(without fuel surcharge) TL $1,452.82 $1,387.04 4.7%
Total $255.37 $244.56 4.4%
Tonnage LTL 2,116,305 1,983,958 6.7%
(tons) TL 523,345 466,184 12.3%
Total 2,639,650 2,450,142 7.7%
Shipments LTL 4,283,408 4,072,283 5.2%
TL 63,825 57,323 11.3%
Total 4,347,233 4,129,606 5.3%
* Billed Revenue does not include revenue deferral required for financial
statement purposes under the Company's revenue recognition policy.
There were 64 workdays in the three months ended September 30, 2004 and in
the three months ended September 30, 2003.
There were 192 workdays in the nine months ended September 30, 2004 and 191
workdays in the nine months ended September 30, 2003.
Includes U.S., Canadian and Puerto Rican operations of ABF affiliates.
Contact: Mr. David E. Loeffler, Senior Vice President, Chief Financial Officer and Treasurer
Telephone: (479) 785-6157
Mr. David Humphrey, Director of Investor Relations
Telephone (479) 785-6200