ARKANSAS BEST CORPORATION'S SECOND QUARTER RESULTS INCLUDE A 95.9% OPERATING RATIO AT ABF FREIGHT SYSTEM
FORT SMITH, Ark., July 18 -- Arkansas Best Corporation (Nasdaq: ABFS) today announced second quarter 2002 net income of $6.5 million, or $0.26 per diluted common share, compared to second quarter 2001 net income of $9.8 million, or $0.40 per diluted common share. Revenue during this year's second quarter was $345.1 million.
"Though business levels have not significantly improved, Arkansas Best Corporation performed well during the second quarter," said Robert A. Young, III, Arkansas Best President and Chief Executive Officer. "Total debt, including current maturities and net of temporary investments, was $110.2 million at the end of the quarter. This produced a debt-to-equity ratio of 0.34:1. Our financial position continues to be the strongest in the nationwide long-haul, LTL industry."
"While year-over-year tonnage comparisons remained down, ABF produced solid second quarter profitability. Clipper generated profitable results, though it continues to be adversely affected by reduced business levels," said Mr. Young.
ABF Freight System, Inc.
Second quarter revenue at ABF was $308.1 million versus $324.8 million in the second quarter of 2001. This represents a 5.2% decline in daily revenue when compared to last year. ABF's second quarter operating ratio was 95.9% versus 93.9% during the same period last year. Second quarter 2002 operating income at ABF was $12.5 million compared to $19.9 million in 2001.
LTL tonnage per day during the second quarter of 2002 decreased by 6.1% versus the comparable period last year. "However, we believe more accurate tonnage comparisons are made versus time periods prior to the third quarter of 2000, which is when ABF first began to experience tonnage declines," said Mr. Young. "In the first quarter of 2002, ABF's LTL tonnage per day was down approximately 14%, compared to the first quarter of 2000. During the second quarter of 2002, tonnage levels remained below those of the second quarter of 2000 by approximately 14%. In spite of these dramatic reductions in business, ABF has generated good profit margins, improved its revenue yields and has significant opportunities for handling a large amount of additional business without increasing fixed costs. Moving into the second half of the year, we are encouraged by positive economic indicators and by the fact that our customers say their orders are picking up."
Second quarter 2002 LTL revenue per hundredweight, excluding fuel surcharge, was $21.31, an increase of 3.1% over the second quarter 2001 figure of $20.67. "This was ABF's largest quarterly increase in yield, excluding fuel surcharge, since the first quarter of 2001," said Mr. Young. "This illustrates ABF's commitment to maintaining pricing discipline and to bringing value to its customers. For instance, the transit times in more than half of ABF's terminal-to-terminal lanes have been reduced since 1999. ABF's cargo claim ratio, a measure of net cash payouts to revenue, was only 0.77% of total revenue in the second quarter of 2002, significantly below the historical aggregate experience for other LTL carriers. ABF's best-in-class web technology helps reduce our customers' administrative expense."
LTL shipments per day moving in two-day transit time lanes declined by 3.3% while LTL shipments moving longer distances throughout ABF's network decreased 4.5%. ABF's productivity measures continue to show improvements despite declines in daily LTL tonnage levels. "ABF's employees remain committed to maximizing productivity during this period of reduced business levels," said Mr. Young.
"Last quarter I stated that ABF has the potential for more profitability momentum as its business increases," said Mr. Young. "This was illustrated with the normal seasonal pickup in freight that ABF experienced in the second quarter of this year compared with the first quarter. With additional business and sound pricing decisions, ABF's operating ratio improved over two points.
"ABF continues to focus on individual account profitability. This has made ABF successful, during periods of economic growth and decline," said Mr. Young. "In anticipation of a return to normal business levels, ABF is committed to sustaining its pricing discipline and closely monitoring costs in order to generate account profitability. Though our recent tonnage levels are less than we had hoped for, we will not sacrifice price and profitability to make short-term tonnage gains. For the long term, we believe this is the right thing to do. Doing so allows ABF to come out ahead while maintaining its status as the most profitable long-haul, LTL carrier in this country."
Clipper
Clipper's second quarter 2002 revenue was $30.4 million compared to revenues of $34.3 million during the second quarter of 2001. Operating income for the quarter was $811,000 versus $1.1 million during the same period last year. Clipper's second quarter operating ratio was 97.3% this year and was 96.7% during the second quarter of 2001.
"Clipper continued to struggle with declining volumes in most all of its business units," said Mr. Young. "This was particularly the case with Clipper's full container, intermodal business, which experienced reduced revenues from several customers. On a positive note, Clipper did benefit from expected seasonal strength in its temperature-controlled business. This included the movement of both eastbound produce and westbound non-produce commodities. Clipper's results improved throughout the second quarter, with a significant portion of operating income occurring in the month of June."
Russell 2000® Index
On July 9, the Frank Russell Company announced that for the third year in a row, Arkansas Best will be included in the Russell 2000® Index. This index measures the performance of the smallest 2,000 securities included in the Russell 3000® Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. As described by the Frank Russell Company, the Russell 2000® Index is widely regarded in the industry as the premier measure of small capitalization stocks.
Conference Call
Arkansas Best Corporation will host a conference call with company executives to discuss the 2002 second quarter results. The call will be today, Thursday, July 18, at 9:00 a.m. CDT. Interested parties are invited to listen by calling (888) 695-0612. Following the call, a recorded playback will be available through Wednesday, July 31. To listen to the playback, dial (888) 203-1112. The passcode for the playback is 315820. The conference call and playback can also be accessed on Arkansas Best's Internet Web site at www.arkbest.com through Wednesday, July 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 following tables show financial data on Arkansas Best Corporation and its subsidiary companies.
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
($ thousands, except per share data)
OPERATING REVENUES
Transportation
operations (C) $338,415 $401,147 $652,918 $797,103
Service and other 6,722 5,430 12,417 10,050
345,137 406,577 665,335 807,153
OPERATING EXPENSES AND COSTS
Transportation
operations (C) 325,525 381,052 635,554 757,057
Service and other 6,355 5,628 11,706 10,135
331,880 386,680 647,260 767,192
OPERATING INCOME 13,257 19,897 18,075 39,961
OTHER INCOME (EXPENSE)
Net gains on sales of
property and other --- 628 --- 628
Interest expense (2,006) (3,470) (4,054) (7,135)
Other, net (207) (283) (512) (1,182)
(2,213) (3,125) (4,566) (7,689)
INCOME BEFORE
INCOME TAXES 11,044 16,772 13,509 32,272
FEDERAL AND STATE
INCOME TAXES 4,550 6,939 5,566 13,360
INCOME BEFORE CUMULATIVE
EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 6,494 9,833 7,943 18,912
CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX (D) --- --- (23,935) ---
NET INCOME (LOSS) 6,494 9,833 (15,992) 18,912
Preferred stock
dividends --- 999 --- 1,998
NET INCOME (LOSS) FOR
COMMON STOCKHOLDERS $6,494 $8,834 $(15,992) $16,914
NET INCOME (LOSS) PER
COMMON SHARE
Basic:
Income before cumulative
effect of change in
accounting
principle (A) $0.26 $0.43 $0.32 $0.83
Cumulative effect of
change in accounting
principle, net of tax --- --- (0.97) ---
NET INCOME (LOSS) (A) $0.26 $0.43 $(0.65) $0.83
AVERAGE COMMON SHARES
OUTSTANDING (BASIC): 24,760,978 20,454,699 24,673,329 20,402,187
Diluted:
Income before cumulative
effect of change in
accounting
principle (B) $0.26 $0.40 $0.32 $0.76
Cumulative effect of
change in accounting
principle, net of tax --- --- (0.95) ---
NET INCOME (LOSS) (B) $0.26 $0.40 $(0.63) $0.76
AVERAGE COMMON SHARES
OUTSTANDING
(DILUTED) 25,311,665 24,834,232 25,324,727 24,764,011
CASH DIVIDENDS PAID
PER COMMON SHARE $--- $--- $--- $---
(A) Gives consideration to preferred stock dividends of $1.0 million and
$2.0 million for the three and six months ended June 30, 2001.
(B) For the three and six months ended June 30, 2001, conversion of
preferred shares into common is assumed.
(C) Includes three and six months of G.I. Trucking Company's operations
for the three and six months ended June 30, 2001. G.I. Trucking was
sold on August 1, 2001.
(D) In the first quarter of 2002, the Company recognized a non-cash
impairment loss of $23.9 million, net of taxes, due to the write-off
of Clipper goodwill.
ARKANSAS BEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30 December 31
2002 2001
($ thousands)
ASSETS
Current assets $183,721 $166,960
Property, plant and equipment (net) 336,978 334,177
Investment in Wingfoot 59,341 59,341
Other assets 74,616 61,351
Goodwill (A) 63,825 101,324
$718,481 $723,153
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $194,874 $193,138
Long-term debt, less current portion 112,343 115,003
Fair value of interest rate swap 6,738 5,383
Other liabilities 52,919 40,097
Deferred income taxes 25,713 31,736
Stockholders' equity 325,894 337,796
$718,481 $723,153
(A) In the first quarter of 2002, the Company recognized a non-cash
impairment loss of $23.9 million, net of taxes, due to the write-off
of Clipper goodwill.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months Ended
June 30
2002 2001
($ thousands)
OPERATING ACTIVITIES
Net cash provided by operating activities $34,389 $23,344
INVESTING ACTIVITIES
Purchases of property, plant and
equipment, less capitalized
leases and notes (26,621) (44,413)
Proceeds from asset sales 2,814 6,540
Other (2,707) (542)
NET CASH USED BY INVESTING ACTIVITIES (26,514) (38,415)
FINANCING ACTIVITIES
Borrowings under revolving
credit facilities 60,500 44,300
Payments under revolving
credit facilities (60,500) (21,300)
Payments on long-term debt (11,214) (16,695)
Retirement of bonds (4,983) (23,048)
Net increase (decrease) in bank overdraft 1,889 (2,454)
Dividends paid --- (1,998)
Other, net 1,765 3,233
NET CASH USED BY FINANCING ACTIVITIES (12,543) (17,962)
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,668) (33,033)
Cash and cash equivalents at
beginning of period 14,860 36,742
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,192 $3,709
ARKANSAS BEST CORPORATION
REVENUES AND OPERATING RATIOS (Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2002 2001 2002 2001
($ thousands)
REVENUES
ABF Freight
System, Inc. (A) $308,060 $324,836 $596,701 $650,349
Clipper 30,366 34,319 56,235 65,147
G.I. Trucking
Company (B) --- 41,994 --- 82,532
OPERATING INCOME
ABF Freight
System, Inc. (A) $12,508 $19,868 $18,051 $40,819
Clipper 811 1,124 68 774
G.I. Trucking
Company (B) --- 296 --- 638
OPERATING RATIOS
ABF Freight
System, Inc. (A) 95.9% 93.9% 97.0% 93.7%
Clipper 97.3% 96.7% 99.9% 98.8%
G.I. Trucking
Company (B) --- 99.3% --- 99.2%
(A) Includes U.S., Canadian and Puerto Rican operations of ABF
affiliates.
(B) Includes three and six months of G.I. Trucking Company's operations
for the three and six months ended June 30, 2001. G.I. Trucking
Company was sold on August 1, 2001.
ABF FREIGHT SYSTEM, INC.
COMBINED FINANCIAL INFORMATION
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002
(Includes Fuel Surcharge Revenue, unless otherwise noted)
Three Months Ended June 30 Six Months Ended June 30
2002 2001 % Change 2002 2001 % Change
Operating
Revenue* $308,060 $324,836 (5.2)% $596,701 $650,349 (8.2)%
Operating
Income* $12,508 $19,868 $18,051 $40,819
Operating Ratio 95.9% 93.9% 97.0% 93.7%
Three Months Ended June 30 Six Months Ended June 30
2002 2001 % Change 2002 2001 % Change
Revenue* LTL $282,656 $295,805 (4.4)% $547,506 $591,226 (7.4)%
TL 25,404 29,031 (12.5)% 49,195 59,123 (16.8)%
Total 308,060 324,836 (5.2)% 596,701 650,349 (8.2)%
Tonnage LTL 650,390 692,627 (6.1)% 1,272,494 1,382,388 (7.9)%
(tons) TL 167,379 190,974 (12.4)% 322,975 386,216 (16.4)%
Total 817,769 883,601 (7.5)% 1,595,469 1,768,604 (9.8)%
Shipments LTL 1,313,649 1,372,270 (4.3)% 2,553,864 2,726,145 (6.3)%
TL 20,512 23,433 (12.5)% 39,616 47,458 (16.5)%
Total 1,334,161 1,395,703 (4.4)% 2,593,480 2,773,603 (6.5)%
Revenue/
CWT LTL $21.73 $21.35 1.8% $21.51 $21.38 0.6%
TL $7.59 $7.60 (0.1)% $7.62 $7.65 (0.4)%
Total $18.84 $18.38 2.5% $18.70 $18.39 1.7%
Revenue/
CWT LTL $21.31 $20.67 3.1% $21.20 $20.67 2.6%
(without
fuel surcharge)
Revenue /
Shipment Total $230.90 $232.74 (0.8)% $230.08 $234.48 (1.9)%
Revenue /
Shipment Total $226.58 $225.61 0.4% $226.89 $226.98 0.0%
(without
fuel surcharge)
Cost /
Shipment Total $221.53 $218.50 1.4% $223.12 $219.76 1.5%
*Note: Values rounded to thousands ($000)
There were 64 workdays in the three months ended June 30, 2002 and in the three months ended June 30, 2001.
There were 127 workdays in the six months ended June 30, 2002 and 128 workdays in the six months ended June 30, 2001.
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