Arkansas Best Corporation Announces Third Quarter Results; ABF's Third Quarter Operating Ratio Improves to 91.9%
FORT SMITH, Ark., Oct 20, 2003 -- Arkansas Best Corporation (Nasdaq: ABFS) today announced third quarter 2003 net income of $17.0 million, or $0.67 per diluted common share. For the third quarter of 2002, net income was $18.3 million, or $0.73 per diluted common share. Excluding three items of note, third quarter 2002 earnings were $0.54 per diluted common share. The three items of note during the third quarter of 2002 included: an earnings increase of $0.12 per diluted common share related to a favorable settlement with the Internal Revenue Service, an earnings increase of $0.09 per diluted common share associated with the after-tax gains on sales of excess freight facilities at ABF and an earnings decrease of $0.02 per diluted common share relating to increased liability reserves associated with the liquidation of an insurer who provides excess workers' compensation insurance for claims that arose from 1993 through 1999. Arkansas Best's revenue, during the third quarter of 2003, was $402.9 million, an increase of 7.3% over the third quarter of 2002.
ABF Freight System, Inc.(R)
ABF Freight System, the company's largest subsidiary, had third quarter 2003 revenue of $360.6 million, a per-day increase of 7.5% compared to third quarter 2002 revenue of $335.5 million. ABF's third quarter 2003 operating ratio was 91.9% versus an operating ratio of 92.9% during the third quarter of 2002. This year's third quarter operating ratio at ABF was the third best for any third quarter in the last twenty-five years. Billed LTL revenue per hundredweight, including fuel surcharge, was $24.39, an increase of 6.5% over last year's third quarter figure of $22.91. Billed LTL revenue per hundredweight, excluding fuel surcharge, was $23.60, an increase of 5.4% over last year's third quarter figure of $22.39. Approximately one-half of the yield increase, excluding fuel surcharge, was a result of changes in the freight profile since the early September 2002 demise of Consolidated Freightways (CF). "We remain encouraged by the positive pricing environment currently experienced by our industry," said Robert A. Young III, Arkansas Best President and Chief Executive Officer. "ABF's increases on contracts and deferred pricing agreements continue to be favorable by historical standards and retention of the July 14 general rate increase has been good."
ABF's third quarter LTL tonnage per day increased 0.5% compared to the same period last year. Versus the second quarter of 2003, ABF's third quarter LTL tonnage per day increased 2.8%. "ABF's sequential LTL tonnage change compared to this year's second quarter was in line with expected changes given normal seasonal trends from the second quarter to the third quarter," said Mr. Young. Comparisons of third quarter 2003 LTL tonnage to the same figures in the third quarter of 2002 include additional business in September of both years associated with CF's closing. "Our business does not yet reflect much of a change in the overall economy of our country. I continue to be encouraged about the positive signs and comments from others regarding the improving economic environment. If the economy does improve, this should eventually translate into more business for ABF. Regardless of economic conditions, ABF will continue to emphasize excellent customer service while managing costs to provide superior value to its customers," said Mr. Young.
"ABF's third quarter operating ratio of 91.9% compares very favorably to this year's second quarter operating ratio of 95.7%," said Mr. Young. "This was due, primarily, to yield improvements but also reflects some positive operational effects from seasonal increases in tonnage and revenue without the addition of an equivalent amount of costs."
"Productivity measures at ABF were slightly below levels for the same period last year. These figures continue to be affected by additional shipment handling related to ABF's concentration on transit time improvements and premium services provided at pickup and delivery," said Mr. Young. "These measures were the same as in the second quarter of this year."
Recognition of Excellence at ABF
Continuing its long pattern of recognition for superior industry achievement, ABF and its employees were recently recognized with two more prestigious safety awards. In mid-September, the American Trucking Associations (ATA) named ABF as the winner of its 2003 President's Trophy for safety. This is the highest safety award in the motor carrier industry. ABF is the only carrier to have won this award five times.
Earlier this month, the ATA also named Jim McFarlin, director of safety and security for ABF, as the 2003 Safety Director of the Year. This award is presented annually to the motor carrier safety executive whose professional qualifications, safety programs and achievements are considered outstanding. Jim also won the Outstanding Service Award for safety in 2000. "Safety is a very high priority at ABF. It is gratifying to have our employees and safety programs continue to be recognized as the very best in the trucking industry," said Mr. Young.
ABF's Redesigned Web Site
In early August, ABF announced the launch of its re-engineered Web site at abf.com which offers a simpler graphical interface, streamlined applications and industry-first advances in automated personalization. This new design allows for the matching of the most relevant online tools and shipment information to the specific site user.
Clipper
For the third quarter of 2003, Clipper had revenues of $34.0 million compared to $32.4 million in the third quarter of 2002, an increase of 4.9%. Clipper's third quarter 2003 operating ratio was 98.2% versus 97.7% during the same period last year. "During the third quarter, the intermodal portion of Clipper's dry freight, full-load business continued to experience significant year-over-year increases in revenues and margins," said Mr. Young. "However, this was offset by revenues and profit declines at Clipper's temperature- controlled division. These declines were caused by continued softness in the demand for produce moving off the West Coast," said Mr. Young. "In addition, competition from truckload operators reduced the margins per load Clipper experienced during this year's third quarter as compared to the same period last year."
Common Stock Purchase
During the third quarter of 2003, Arkansas Best did not make any open market purchases of its common stock. In total, as a part of Arkansas Best's previously announced program to repurchase up to a maximum of $25 million of its common stock, the company has purchased 200,000 shares totaling $4.8 million during 2003.
Credit Agreement Extension
As previously reported, as of Friday, September 26, 2003, Arkansas Best amended and restated its existing $225 million Credit Agreement. The agreement was extended for two years and is now scheduled to mature on May 15, 2007. Arkansas Best continues to have a strong balance sheet and closed the third quarter with total debt below $20 million.
Conference Call
Arkansas Best Corporation will host a conference call with company executives to discuss the 2003 third quarter results. The call will be today, Monday, October 20, 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 the end of October. To listen to the playback, dial (800) 642-1687. The conference call ID for the playback is 3083550. The conference call and playback can also be accessed, through Friday, October 31, on Arkansas Best's Web site at 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
2003 2002 2003 2002
($ thousands, except share and per share data)
OPERATING REVENUES $402,878 $375,397 $1,140,330 $1,040,732
OPERATING EXPENSES
AND COSTS 374,233 351,450 1,088,291 998,710
OPERATING INCOME 28,645 23,947 52,039 42,022
OTHER INCOME (EXPENSE)
Net gains (losses) on
sales of property
and other (217) 3,721 (211) 3,721
Gain on sale - Wingfoot --- --- 12,060 ---
IRS interest settlement(A) --- 5,221 --- 5,221
Fair value changes and
payments on interest
rate swap(B) (51) --- (10,333) ---
Interest expense (434) (2,053) (2,941) (6,108)
Other, net 613 332 311 (178)
(89) 7,221 (1,114) 2,656
INCOME BEFORE INCOME
TAXES 28,556 31,168 50,925 44,678
FEDERAL AND STATE INCOME
TAXES
Current 8,034 12,811 11,895 10,828
Deferred 3,546 10 7,598 7,560
11,580 12,821 19,493 18,388
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 16,976 18,347 31,432 26,290
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE, NET OF
TAX BENEFITS
OF $13,580 (C) --- --- --- (23,935)
NET INCOME $16,976 $18,347 $31,432 $2,355
NET INCOME (LOSS) PER
COMMON SHARE
Basic:
Income before cumulative
effect of change in
accounting principle $0.68 $0.74 $1.26 $1.07
Cumulative effect of
change in accounting
principle, net of tax --- --- --- (0.97)
NET INCOME PER SHARE $0.68 $0.74 $1.26 $0.10
AVERAGE COMMON SHARES
OUTSTANDING (BASIC): 24,787,831 24,783,674 24,861,966 24,710,743
Diluted:
Income before cumulative
effect of change in
accounting principle $0.67 $0.73 $1.24 $1.04
Cumulative effect of
change in accounting
principle, net of tax --- --- --- (0.95)
NET INCOME PER SHARE $0.67 $0.73 $1.24 $0.09
AVERAGE COMMON SHARES
OUTSTANDING
(DILUTED): 25,287,271 25,296,694 25,339,629 25,312,753
CASH DIVIDENDS PAID
PER COMMON SHARE $0.08 $--- $0.24 $---
(A) In the third quarter of 2002, the Company recognized other income of
$3.1 million, net of taxes, due to a favorable settlement with the
Internal Revenue Service.
(B) The nine months ended September 30, 2003 includes a pre-tax non-cash
charge of $8.9 million, due to no longer forecasting interest
payments on $110.0 million of borrowings.
(C) In the first quarter of 2002, the Company recognized a non-cash
impairment loss of $23.9 million, net of taxes, due to the write-off
of Clipper goodwill.
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS
Sept. 30 Dec. 31
2003 2002
(Unaudited) Note
($ thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $2,988 $39,644
Accounts receivable, less
allowances (2003 - $3,264;
2002 - $2,942) 140,845 130,769
Prepaid expenses 11,454 7,787
Deferred income taxes 26,798 26,443
Federal and state income
taxes prepaid 612 ---
Other 3,119 3,729
TOTAL CURRENT ASSETS 185,816 208,372
PROPERTY, PLANT AND EQUIPMENT
Land and structures 223,135 223,107
Revenue equipment 371,319 343,100
Service, office and other equipment 106,656 91,054
Leasehold improvements 12,977 12,983
714,087 670,244
Less allowances for depreciation
and amortization 350,475 330,841
363,612 339,403
INVESTMENT IN WINGFOOT --- 59,341
PREPAID PENSION COSTS 35,669 29,017
OTHER ASSETS 65,597 53,225
ASSETS HELD FOR SALE 5,641 3,203
GOODWILL, less accumulated
amortization (2003 and 2002 - $32,037) 63,861 63,811
$720,196 $756,372
Note: The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
ARKANSAS BEST CORPORATION
CONSOLIDATED BALANCE SHEETS - continued
Sept. 30 Dec. 31
2003 2002
(Unaudited) Note
($ thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft and drafts payable $10,588 $7,808
Accounts payable 70,279 58,442
Federal and state income taxes --- 5,442
Accrued expenses 130,253 123,294
Current portion of long-term debt 340 328
TOTAL CURRENT LIABILITIES 211,460 195,314
LONG-TERM DEBT, less current portion 19,561 112,151
FAIR VALUE OF INTEREST RATE SWAP 7,743 9,853
OTHER LIABILITIES 65,391 59,938
DEFERRED INCOME TAXES 32,605 23,656
FUTURE MINIMUM RENTAL COMMITMENTS, NET
(as of September 30, 2003 - $50,142) --- ---
OTHER COMMITMENTS AND CONTINGENCIES --- ---
STOCKHOLDERS' EQUITY
Common stock, $.01 par value,
authorized 70,000,000 shares;
issued 2003: 25,071,141; 2002:
24,972,086 shares 251 250
Additional paid-in capital 212,839 211,567
Retained earnings 179,929 154,455
Treasury stock, at cost, 2003:
259,782 shares; 2002: 59,782 shares (5,807) (955)
Accumulated other comprehensive loss (3,776) (9,857)
TOTAL STOCKHOLDERS' EQUITY 383,436 355,460
$720,196 $756,372
Note: The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date, but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30
2003 2002
($ thousands)
OPERATING ACTIVITIES
Net income $31,432 $2,355
Adjustment to reconcile net income
to net cash provided by operating
activities:
Change in accounting principle,
net of tax --- 23,935
Depreciation and amortization 37,483 36,972
Other amortization 259 189
Provision for losses on
accounts receivable 1,057 1,189
Provision for deferred income taxes 7,598 7,560
Fair value of interest rate swap 7,743 ---
(Gain) loss on sales of assets
and other 183 (3,664)
Gain on sale of Wingfoot (12,060) ---
Changes in operating assets
and liabilities:
Receivables (11,106) (26,418)
Prepaid expenses (3,668) (4,308)
Other assets (19,280) (2,254)
Accounts payable, bank drafts
payable, taxes payable,
accrued expenses and other
liabilities 16,494 22,829
NET CASH PROVIDED BY OPERATING
ACTIVITIES 56,135 58,385
INVESTING ACTIVITIES
Purchases of property, plant and
equipment, less capitalized leases
and notes payable (63,935) (49,130)
Proceeds from asset sales 2,525 11,641
Proceeds from sale of Wingfoot 71,309 ---
Capitalization of internally
developed software and other (2,854) (3,528)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES 7,045 (41,017)
FINANCING ACTIVITIES
Borrowings under revolving
credit facilities 207,200 61,200
Payments under revolving credit
facilities (299,500) (61,200)
Payments on long-term debt (278) (15,142)
Retirement of bonds --- (4,983)
Net increase (decrease) in
bank overdraft 2,796 (1,471)
Dividends paid on common stock (5,958) ---
Purchase of preferred stock (4,852) ---
Other, net 756 1,918
NET CASH USED BY FINANCING ACTIVITIES (99,836) (19,678)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (36,656) (2,310)
Cash and cash equivalents at
beginning of period 39,644 14,860
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $2,988 $12,550
ARKANSAS BEST CORPORATION
FINANCIAL STATEMENT OPERATING SEGMENT DATA
AND OPERATING RATIOS (Unaudited)
Three Months Ended
September 30
2003 2002
($ thousands)
OPERATING REVENUES
ABF Freight System, Inc. (A)
LTL $331,571 $307,553
TL 29,038 27,963
Total 360,609 335,516
Clipper 33,980 32,399
Other revenues and
eliminations 8,289 7,482
Total consolidated
operating revenues $402,878 $375,397
OPERATING EXPENSES AND COSTS
ABF Freight System, Inc. (A)
Salaries and wages $229,552 63.7% $217,987 65.0%
Supplies and expenses 45,097 12.5 40,926 12.2
Operating taxes and licenses 9,840 2.7 10,070 3.0
Insurance 6,158 1.7 5,862 1.7
Communications and utilities 3,516 1.0 3,545 1.1
Depreciation and amortization 11,116 3.1 10,391 3.1
Rents and purchased transportation 25,215 7.0 21,836 6.5
Other 1,055 0.3 1,217 0.3
(Gain) on sale of equipment (228) (0.1) (31) ---
331,321 91.9% 311,803 92.9%
Clipper
Cost of services 29,292 86.2% 27,634 85.3%
Selling, administrative
and general 4,064 12.0 4,029 12.4
Loss on sale of equipment 6 --- 3 ---
33,362 98.2% 31,666 97.7%
Other expenses and eliminations 9,550 7,981
Total consolidated operating
expenses and costs $374,233 $351,450
OPERATING INCOME (LOSS)
ABF Freight System, Inc. (A) $29,288 $23,713
Clipper 618 733
Other loss and eliminations (1,261) (499)
Total consolidated operating income $28,645 $23,947
Nine Months Ended
September 30
2003 2002
($ thousands)
OPERATING REVENUES
ABF Freight System, Inc.(A)
LTL $942,313 $855,057
TL 79,666 77,160
Total 1,021,979 932,217
Clipper 95,446 88,634
Other revenues and eliminations 22,905 19,881
Total consolidated
operating revenues $1,140,330 $1,040,732
OPERATING EXPENSES AND COSTS
ABF Freight System, Inc. (A)
Salaries and wages $671,782 65.7% $626,412 67.2%
Supplies and expenses 133,323 13.0 115,131 12.4
Operating taxes and licenses 29,568 2.9 29,923 3.2
Insurance 17,801 1.7 17,008 1.8
Communications and utilities 10,985 1.1 10,283 1.1
Depreciation and amortization 31,788 3.1 31,137 3.3
Rents and purchased
transportation 69,044 6.8 58,001 6.2
Other 2,758 0.3 2,812 0.3
(Gain) on sale of equipment (28) --- (255) ---
967,021 94.6% 890,452 95.5%
Clipper
Cost of services 82,480 86.4% 76,121 85.9%
Selling, administrative
and general 12,108 12.7 11,645 13.1
Loss on sale of equipment 1 --- 67 0.1
94,589 99.1% 87,833 99.1%
Other expenses and eliminations 26,681 20,425
Total consolidated operating
expenses and costs $1,088,291 $998,710
OPERATING INCOME (LOSS)
ABF Freight System, Inc. (A) $54,958 $41,765
Clipper 857 801
Other loss and eliminations (3,776) (544)
Total consolidated operating income $52,039 $42,022
(A) Includes U.S., Canadian, and Puerto Rican operations of ABF
affiliates.
ARKANSAS BEST CORPORATION
FINANCIAL STATISTICS AND GAAP NET INCOME RECONCILIATION (Unaudited)
Rolling
Twelve Months Ended
September 30, 2003
FINANCIAL STATISTICS
After-Tax Return on Stockholders' Equity
(net income / average equity) 12.65%
Debt to Equity Ratio 0.05:1
After-Tax Return on Capital Employed (A) 13.01%
(A) (Net income + interest after tax) / (average total debt + average
equity)
Three Months Ended
September 30, 2002
Net Income
Net Per Share
Income (Diluted)
RECONCILIATION OF GAAP NET INCOME
AND NET INCOME PER SHARE
GAAP net income $18,347 $0.73
Less IRS interest settlement (3,070) (0.12)
Less gains on sales of excess
freight facilities (2,188) (0.09)
Plus workers' compensation excess
liability increase 529 0.02
Net income, excluding above items
(non-GAAP financial measure) $13,618 $0.54
ABF FREIGHT SYSTEM, INC.
OPERATING STATISTICS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003
Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 % 2003 2002 %
Change Change
Billed Revenue* LTL $ 24.39 $ 22.91 6.5% $ 23.83 $ 22.06 8.0%
/CWT TL $ 8.92 $ 8.23 8.4% $ 8.58 $ 7.85 9.3%
Total $ 21.40 $ 19.94 7.3% $ 20.93 $ 19.19 9.1%
Billed Revenue* LTL $ 23.60 $ 22.39 5.4% $ 22.96 $ 21.68 5.9%
/CWT TL $ 8.63 $ 8.13 6.2% $ 8.35 $ 7.77 7.5%
(without fuel Total $ 20.70 $ 19.51 6.1% $ 20.18 $ 18.87 7.0%
surcharge)
Billed Revenue* LTL $238.87 $227.06 5.2% $232.23 $219.81 5.6%
/Shipment TL $1,459.53 $1,345.74 8.5% $1,394.78 $1,281.42 8.8%
Total $256.12 $243.96 5.0% $248.37 $236.00 5.2%
Billed Revenue* LTL $231.11 $221.94 4.1% $223.73 $216.02 3.6%
/Shipment TL $1,411.17 $1,328.99 6.2% $1,358.21 $1,269.01 7.0%
(without fuel Total $247.78 $238.67 3.8% $ 239.47 $232.07 3.2%
surcharge)
Tonnage LTL 681,485 677,891 0.5% 1,983,958 1,950,385 1.7%
(tons) TL 163,158 171,595 (4.9)% 466,184 494,570(5.7)%
Total 844,643 849,486 (0.6)% 2,450,142 2,444,955 0.2%
Shipments** LTL 1,391,605 1,367,868 1.7% 4,072,283 3,914,823 4.0%
TL 19,946 20,984 (5.0)% 57,323 60,600(5.4)%
Total 1,411,551 1,388,852 1.6% 4,129,606 3,975,423 3.9%
* Billed Revenue does not include revenue deferral required for
financial statement purposes under the Company's revenue recognition
policy. Prior to the third quarter 2002, the Company reported
revenue-per-hundredweight statistics using financial statement revenue
recognized on a relative transit time basis.
** LTL and total shipment counts for the nine months ended
September 30, 2002 reflect the correction of an insignificant
reporting error that appeared in the second quarter 2002.
There were 64 workdays in the three months ended September 30, 2003 and in the three months ended September 30, 2002.
There were 191 workdays in the nine months ended September 30, 2003 and in the nine months ended September 30, 2002.
Includes U.S., Canadian and Puerto Rican operations of ABF affiliates.
Contact: Mr. David E. Loeffler, Vice President, Chief Financial Officer
and Treasurer
Telephone: (479) 785-6157
Mr. David Humphrey, Director of Investor Relations
Telephone: (479) 785-6200