ARKANSAS BEST CORPORATION REPORTS THIRD QUARTER RESULTS; ABF FREIGHT SYSTEMÒ HAS A 93.3% OPERATING RATIO
FORT SMITH, Ark., Oct. 18 /PRNewswire/ -- Arkansas Best Corporation (Nasdaq: "ABFS") today announced third quarter 2001 net income of $13.0 million, or $0.52 per diluted common share, compared to third quarter 2000 net income of $23.3 million, or $0.97 per diluted common share. This year's third quarter earnings per share figure includes an after- tax gain of $2.8 million, or $0.11 per diluted common share, resulting from the sale of G.I. Trucking Company.
``Considering the economic effects of a significant business downturn and the tragic events resulting from the September 11 terrorist attacks, I am pleased with our company's third quarter results,'' said Robert A. Young III, Arkansas Best President and Chief Executive Officer. ``ABF produced an operating ratio of 93.3%, once again leading the long-haul, LTL industry. Clipper had operating income of $249,000 in a highly competitive operating environment.''
``In addition to ABF's superior operating performance, Arkansas Best took a couple of steps, during the quarter, that strengthened its long-term financial position. First, net cash proceeds of approximately $33 million, resulting from the sale of G.I. Trucking, were used to further reduce long-term debt to a September 30, 2001 level of $115.1 million,'' said Mr. Young. ``G.I. Trucking's operations, prior to the sale, negatively affected this quarter's earnings by $0.02 per diluted common share. However, going forward, G.I.'s operations will not impact our results.''
``Second, on September 14, Arkansas Best announced the final results of its call for redemption of all outstanding shares of its $2.875 Series A Cumulative Convertible Exchangeable Preferred Stock. Over 99% of these shares were converted into shares of the company's common stock, resulting in the conversion of preferred stock into approximately $70 million of permanent common shareholders' equity. This conversion also eliminates approximately $4 million in annual preferred dividends that will add to free cash flow in future quarters,'' said Mr. Young.
``It is also important to remember that Arkansas Best has the right to sell its 19% interest in Wingfoot to Goodyear for a cash ''Put Price`` equal to approximately $73.5 million, which would be received on April 30, 2003. If Arkansas Best chooses to exercise its option, the resulting cash payment would further improve Arkansas Best's long-term financial position.''
``In my opinion, these steps, combined with the fact that ABF Freight System continues, quarter after quarter, to produce industry-leading margins and above-average returns, truly give Arkansas Best Corporation the strongest financial position of any of the long-haul, LTL companies,'' said Mr. Young.
ABF Freight System, Inc.
Third quarter 2001 revenues at ABF were $330 million compared to $358 million during the third quarter of 2000. Through the first nine months of this year, ABF's revenues have totaled $980 million versus $1.034 billion through the first nine months of last year. Third quarter operating income at ABF was $22.1 million compared to $41.2 million during the third quarter of 2000. ABF's third quarter 2001 operating ratio of 93.3% compares to a figure of 88.5% in last year's third quarter. ``Comparisons with last year's results appear to be generally unfavorable,'' said Mr. Young. ``However, it is important to remember that last year's third quarter provided one of the best operating environments our industry has ever experienced. In contrast, this year's third quarter was one of our industry's most difficult operating environments. Considering this, ABF's third quarter operating ratio was truly remarkable. Each of ABF's employees is to be commended for helping maintain solid profitability through these very challenging times.''
ABF's LTL revenue per hundredweight, including fuel surcharge, was $22.00, an increase of 1.4% over the same period last year. ``As reported in the second quarter, the LTL pricing environment continues to be relatively firm, especially considering the existing adverse economic conditions,'' said Mr. Young.
LTL tonnage per day for the 2001 third quarter declined by 9.5% when compared to last year. This represents a slight deterioration from the 9.0% decline experienced in this year's second quarter. This 2001 third quarter figure was negatively impacted by the effects of the September 11 terrorist attacks. Following September 11, the year-over-year decrease in average LTL tonnage per day accelerated an additional 2 to 3% below the levels of decline prior to the terrorist attacks. During the third quarter, truckload tonnage per day increased 1.9% versus last year. Year to date, LTL tonnage per day has decreased 8.4% while truckload tonnage per day increased 5.1%. In the third quarter of 2001, per day LTL shipments in two-day transit time lanes decreased 8.8% compared to a 10.9% shipment decrease in ABF's longer haul business. During the quarter, the productivity of ABF's dock employees and city drivers remained favorable.
Throughout this year, ABF has been implementing the NetLink communications and management system in numerous freight-handling facilities throughout its network. One of the major components of the NetLink system is the use of a handheld communications device commonly known as a microbrowser. The microbrowser is a cost-effective, portable device, much like a cell phone, that ABF employees carry in order to input and receive shipment and equipment information. The ABF freight-handling facilities utilizing this technology have experienced significant productivity improvements. Some of the benefits resulting from the use of microbrowsers include an increased number of shipments being loaded more directly from origin to destination, a reduction in the number of dock handlings per shipment at ABF distribution centers and improved shipment transit times. By the end of this year, ABF expects to have microbrowsers fully operational in 50 of its largest facilities and in all nine of its distribution centers. In 2002, ABF plans to add over 1,000 of these devices at additional locations throughout its nationwide network.
Clipper
Third quarter 2001 revenue at Clipper was $32.4 million versus revenue of $34.5 million during the third quarter of 2000. This quarter's operating income of $249,000 compares to $888,000 in last year's third quarter. Clipper's third quarter 2001 operating ratio was 99.2% compared to 97.4% during the same period of 2000.
``During the quarter, Clipper's business was adversely affected by a number of factors. These included a reduction in the shipping levels of Clipper's customer base; increased competition for business resulting from unused capacity in the over-the-road truckload industry and the negative effects of the September 11 terrorist attacks on Clipper's northeastern operations,'' said Mr. Young. ``In spite of this, quarterly revenues in Clipper's intermodal and temperature-controlled operating units experienced double-digit revenue increases when compared to last year. In the existing tight operating environment, Clipper must continue to seek revenue growth and margin improvements through management of individual account profitability.''
G.I. Trucking
Arkansas Best's sale of G.I. Trucking Company was announced on August 1. The sale resulted in cash proceeds, net of costs and income taxes, of approximately $33 million. Arkansas Best retained ownership of three California terminal facilities and has agreed to lease them back to G.I. for a period of up to four years. These properties have a book value of approximately $6 million. G.I. has the option to purchase these terminals for approximately $20 million, which equates to their estimated current market value.
Reliance Insurance Company Declared Insolvent
Reliance Insurance Company insured Arkansas Best's workers' compensation claims in excess of $300,000 for the period from 1993 through 1999. According to an Official Statement by the Pennsylvania Insurance Department on October 3, 2001, Reliance was determined to be insolvent, with total admitted assets of $8.8 billion and liabilities of $9.9 billion, or a negative surplus position of $1.1 billion, as of March 31, 2001. As of September 30, 2001, Arkansas Best estimates its workers' compensation claims insured by Reliance to be approximately $5.4 million. Based upon the limited available Reliance financial information, Arkansas Best estimates its current exposure to Reliance to be $500,000, for which it established reserves in the third quarter of 2001. In evaluating that same financial information, Arkansas Best anticipates receiving, through orderly liquidation, reimbursement for future claims payments, a process that could take several years.
Attack Against Our Country
``On Tuesday, September 11, 2001, a horrible, unprovoked terrorist attack was carried out against the citizens of the United States. Thousands of innocent people lost their lives. As a result, Americans will forever be changed and the world in which we live will never be the same. All of the employees of Arkansas Best Corporation extend our deepest sympathies and heartfelt prayers to the many families, friends and co-workers who were directly affected by these cowardly acts and who are now left to cope with the aftermath of this national tragedy. As in past times of crisis, America will once again rise up to triumphantly respond to this great challenge. We at Arkansas Best Corporation are proud to have a small part in helping make our great country even stronger than it was before that fateful day.'' - Robert A. Young III.
Conference Call
Arkansas Best Corporation will be hosting a conference call with company executives to discuss the 2001 third quarter results. The call will be today, Thursday, October 18, at 10:00 a.m. CDT. Interested parties are invited to listen by calling (800) 263-8506. Following the call, a recorded playback will be available through Wednesday, October 31. To listen to the playback, dial (888) 203-1112. The passcode for the playback is 791687. The conference call and playback can also be accessed on Arkansas Best's Internet web site at www.arkbest.com through Wednesday, October 31.
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,'' ``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 SEC public filings.
The tables on the following pages show financial data 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
2001 2000 2001 2000
($ thousands, except per share data)
OPERATING REVENUES
Transportation
operations (D) $375,362 $432,099 $1,172,465 $1,249,788
Tire operations (C) --- 51,801 --- 140,266
Service and other 6,192 4,568 16,242 13,416
381,554 488,468 1,188,707 1,403,470
OPERATING EXPENSES
AND COSTS
Transportation
operations (D) 354,393 389,668 1,111,450 1,146,411
Tire operations (C) --- 49,372 --- 136,931
Service and other 5,954 5,033 16,089 14,361
360,347 444,073 1,127,539 1,297,703
OPERATING INCOME 21,207 44,395 61,168 105,767
OTHER INCOME (EXPENSE)
Net gains on sales of
property and other --- 437 628 2,006
Gain on sale of G.I.
Trucking Company 4,642 --- 4,642 ---
Interest expense (2,932) (4,144) (10,067) (13,007)
Other, net (898) (1,221) (2,079) (2,352)
812 (4,928) (6,876) (13,353)
INCOME BEFORE
INCOME TAXES 22,019 39,467 54,292 92,414
FEDERAL AND STATE
INCOME TAXES 8,999 16,142 22,360 38,168
NET INCOME 13,020 23,325 31,932 54,246
Preferred stock dividends 489 999 2,487 3,123
NET INCOME FOR COMMON
SHAREHOLDERS $12,531 $22,326 $29,445 $51,123
NET INCOME PER COMMON SHARE
Basic:
NET INCOME (A) $0.57 $1.12 $1.41 $2.58
AVERAGE COMMON SHARES
OUTSTANDING (BASIC): 21,947,611 19,882,056 20,917,328 19,810,063
Diluted:
NET INCOME (B) $0.52 $.97 $1.28 $2.27
AVERAGE COMMON SHARES
OUTSTANDING
(DILUTED): 25,141,502 24,081,674 24,889,829 23,901,158
CASH DIVIDENDS PAID
PER COMMON SHARE $--- $--- $--- $---
(A) Gives consideration to preferred stock dividends of $0.5 million and
$1.0 million per quarter for the three months ended
September 30, 2001 and 2000, respectively, and $2.5 million and
$3.1 million for the nine months ended September 30, 2001 and 2000,
respectively.
(B) For the three and nine months ended September 30, 2000, conversion of
preferred shares into common is assumed. For the three and nine
months ended September 30, 2001, conversion of preferred shares into
common shares is assumed for the period prior to the September 14
preferred redemption date.
(C) Tire operations for the three months and nine months ended
September 30, 2000 included the operations of Treadco, Inc.
("Treadco"). Treadco's operations became a part of Wingfoot
Commercial Tire Systems, LLC on November 1, 2000.
(D) Includes one month of operations for G.I. Trucking for the quarter
ended September 30, 2001 and seven months of operations for the
nine-month period ended September 30, 2001. G.I. Trucking Company
was sold on August 1, 2001.
ARKANSAS BEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30 December 31
2001 2000
($ thousands)
ASSETS
Current assets $187,252 $234,453
Property, plant and equipment (net) 343,268 346,019
Investment in Wingfoot 59,341 59,341
Other assets 59,667 51,893
Goodwill (less amortization) 102,339 105,418
$751,867 $797,124
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $231,212 $281,366
Long-term debt, less current portion 115,131 152,997
Other liabilities 44,395 31,052
Deferred income taxes 35,362 39,519
Shareholders' equity 325,767 292,190
$751,867 $797,124
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30
2001 2000
($ thousands)
OPERATING ACTIVITIES
Net cash provided by operating activities $48,599 $94,792
INVESTING ACTIVITIES
Purchases of property, plant and equipment (70,417) (86,938)
Proceeds from asset sales 7,578 9,000
Proceeds from the sale of G.I. Trucking Company 40,455 ---
Other (1,710) (2,112)
NET CASH USED BY INVESTING ACTIVITIES (24,094) (80,050)
FINANCING ACTIVITIES
Borrowings under revolving credit facilities 88,400 106,600
Payments under revolving credit facilities (88,400) (97,900)
Payments on long-term debt (21,461) (13,197)
Dividends paid (2,487) (3,123)
Net increase (decrease) in bank overdraft (7,103) 2,639
Retirement of bonds (23,087) (4,781)
Purchase of preferred stock (380) (3,924)
Other, net 6,405 1,464
NET CASH USED BY FINANCING ACTIVITIES (48,113) (12,222)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (23,608) 2,520
Cash and cash equivalents at beginning of period 36,742 4,319
CASH AND CASH EQUIVALENTS AT END OF PERIOD $13,134 $6,839
ARKANSAS BEST CORPORATION
REVENUES AND OPERATING RATIOS (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 2001 2000
($ thousands)
REVENUES
ABF Freight System, Inc. (A) $329,996 $357,786 $980,346 $1,034,294
G.I. Trucking Company (C) 12,946 41,198 95,477 121,694
Clipper 32,426 34,521 97,573 98,279
Treadco, Inc. (B) --- 52,415 --- 141,971
OPERATING RATIOS
ABF Freight System, Inc. (A) 93.3% 88.5% 93.6% 90.2%
G.I. Trucking Company (C) 104.4% 96.7% 99.9% 97.4%
Clipper 99.2% 97.4% 99.0% 98.2%
Treadco, Inc. (B) --- 94.8% --- 97.1%
OPERATING INCOME
ABF Freight System, Inc. (A) $22,057 $41,158 $62,876 $101,021
G.I. Trucking Company (C) (565) 1,354 73 3,207
Clipper 249 888 1,023 1,726
Treadco, Inc. (B) --- 2,737 --- 4,133
(A) Includes U.S., Canadian and Puerto Rican operations of ABF
affiliates.
(B) Tire operations for the three and nine months ended
September 30, 2000 included the operations of Treadco, Inc.
("Treadco"). Treadco's operations became a part of Wingfoot
Commercial Tire Systems, LLC on November 1, 2000.
(C) Includes one month of operations for G.I. Trucking for the quarter
ended September 30, 2001 and seven months of operations for the
nine-month period ended September 30, 2001. G.I. Trucking Company was
sold on August 1, 2001.
ABF FREIGHT SYSTEM, INC.
COMBINED FINANCIAL INFORMATION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 % Change 2001 2000 % Change
Operating Revenue* $329,996 $357,786 (7.8)% $980,346 $1,034,294 (5.2)%
Operating Income* $22,057 $41,158 $62,876 $101,021
Operating Ratio 93.3% 88.5% 93.6% 90.2%
Three Months Ended Nine Months Ended
September 30 September 30
2001 2000 % Change 2001 2000 % Change
Revenue* LTL $301,004 $327,912 (8.2)% $892,222 $945,791 (5.7)%
TL 28,992 29,874 (3.0)% 88,124 88,503 (0.4)%
Total 329,996 357,786 (7.8)% 980,346 1,034,294 (5.2)%
Tonnage LTL 683,990 755,762 (9.5)% 2,066,378 2,266,558 (8.8)%
(tons) TL 179,376 175,995 1.9% 565,592 540,828 4.6%
Total 863,366 931,757 (7.3)% 2,631,970 2,807,386 (6.2)%
Shipments LTL 1,356,998 1,515,214 (10.4)% 4,083,143 4,520,159 (9.7)%
TL 22,252 22,084 0.8% 69,710 68,068 2.4%
Total 1,379,250 1,537,298 (10.3)% 4,152,853 4,588,227 (9.5)%
Revenue/CWT LTL $ 22.00 $ 21.69 1.4% $ 21.59 $ 20.86 3.5%
TL $ 8.08 $ 8.49 (4.8)% $ 7.79 $ 8.18 (4.8)%
Total $ 19.11 $ 19.20 (0.5)% $ 18.62 $ 18.42 1.1%
Revenue/
Shipment Total $239.26 $232.74 2.8% $236.07 $225.42 4.7%
Cost/
Shipment Total $223.27 $205.96 8.4% $220.93 $203.41 8.6%
* Note: Values rounded to thousands ($000)
There were 63 workdays in the third quarter of 2001 and 2000.
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