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