Arkansas Best Reports Another Record Quarter; ABF Reports Fourth Quarter Operating Ratio of 89.9
(Fort Smith, Ark., Jan. 20) - Arkansas Best Corporation (Nasdaq: ABFS) today announced income from continuing operations for the 1999 fourth quarter of $16.5 million, or $0.68 per diluted common share, representing a 53.1% increase over 1998 fourth quarter income from continuing operations of $10.8 million, or $0.46 per diluted common share. For the full year of 1999, the company reported record income from continuing operations of $51.2 million, or $2.14 per diluted common share versus income from continuing operations of $31.3 million, or $1.32 per diluted common share for 1998. Arkansas Best's 1998 fourth quarter and 1998 full year net income included approximately $2.5 million or $0.11 per diluted common share due to the settlement of a dispute related to Treadco's former franchise relationship with Bandag, Incorporated.``For the second year in a row, Arkansas Best's full-year results reflect the highest income in the company's history,'' said Robert A. Young, III, Arkansas Best President and Chief Executive Officer. ``1999 income from continuing operations exceeded $50 million for the first time and represented an increase of 63.8% over last year's previous high.''
``For the fourth quarter, ABF had an operating ratio of 89.9% compared to a 93.4% operating ratio for the fourth quarter of 1998. This is the first time since 1978 that ABF has produced a quarterly operating ratio in the 80s and it is the best fourth quarter operating ratio since 1973,'' said Mr. Young. ``Clipper's 1999 fourth quarter improved versus last year by over four operating points and they returned to profitability for the year. Treadco's 1999 operating income improved $1.1 million versus last year. G.I. Trucking had a disappointing fourth quarter and showed only marginal improvement in its full-year 1999 operating ratio when compared to last year.''
ABF Freight System, Inc.
ABF's revenue for the 1999 fourth quarter was $340.7 million, an increase of 14.3% over the fourth quarter of 1998. ABF's operating income for the quarter was $34.4 million, a 75.8% increase over the same period last year. Fourth quarter 1999 LTL revenue per hundredweight was $20.33, an increase of 10.1% over last year's fourth quarter. This quarter's revenue figures reflect a 5.1% rate increase taken in mid-September and ABF's fuel surcharge. There was neither a fall rate increase nor a fuel surcharge that applied to the fourth quarter of 1998. Without the effects of the rate increase and the fuel surcharge, ABF's 1999 fourth quarter LTL revenue per hundredweight reflected an approximate 4.3% increase over the 1998 fourth quarter. LTL tonnage per day for the fourth quarter of 1999 was up 3.7% when compared to the same period a year ago. Fourth quarter productivity levels were down slightly below levels experienced during the first three quarters of the year.
``ABF improved its fourth quarter operating ratio over last year's fourth quarter by three and a half operating points,'' said Mr. Young. ``ABF's employees should be congratulated on such outstanding results.''
For 1999, ABF's operating ratio was 91.6% which reflects more than a two and a half point improvement over last year's figure of 94.2%. This year's operating ratio at ABF is the best in 23 years. ``ABF's 1999 operating income of $107.0 million surpassed the $100 million level for the first time and represented an increase of 58.2% over 1998,'' said Mr. Young. ABF's 1999 revenue reflects the addition of $102 million of new revenue over 1998. This is an increase of 8.7%. ABF's total tonnage per day for the full year of 1999 increased 1.9% versus the full year of 1998. This year-to-year tonnage change consists of a 1.8% increase in LTL tonnage and a 2.5% increase in truckload tonnage. After being essentially flat during the first half of the year, significant second half tonnage gains resulted in this increase for the entire year. ``ABF had a tremendous year and continues to distinguish itself as the profitability leader in the longhaul LTL industry,'' said Mr. Young. ``Two of the things that distinguish ABF are the recent service improvements in two-day transit time lanes and system enhancements related to eCommerce.''
ABF is having impressive success in the two-day transit time lanes. In the 1999 fourth quarter, two-day transit time lanes had a 12.0% increase in tonnage and a 20.1% increase in revenue over the prior year. This continues to significantly surpass the growth of the economy and ABF's remaining, longer haul business. Regional business, as defined by shipments moving 800 miles or less, accounts for 35.8% of ABF's current tonnage. ``As illustrated by these figures, our customers have been pleased with ABF's ability to provide competitive service in the shorthaul, regional markets,'' said Mr. Young. ``ABF will continue to improve its regional service offerings because we see opportunities for additional growth with this business.''
Since first placing its general pricing schedules on the Internet in 1995, ABF has continually upgraded its Internet web site with updated information and new services. Earlier this month, ABF introduced several new enhancements to its Internet eCenter(SM) tools that facilitate the eCommerce business of its customers. A few of these include Dynamic Rerouting which permits on-line customers to redirect freight to a new destination and Transparent Links which integrates ABF information into the customer's supply chain information system. With the introduction of myABF(SM), which allows customers to create personalized web pages, each ABF customer can customize the use of information they find essential for the successful movement of goods through the supply chain. The offering of these electronic support tools, unmatched in the transportation industry, allows ABF to be well positioned to provide the fulfillment link in business-to-business eCommerce. ABF's recent press release of January 7 provides a complete list of ABF's current eCenter features.
However, providing these tools through its web site is only the first step in ABF's becoming a transportation leader in the new world of eCommerce. ABF's existing franchise of locations provides the framework for seamless delivery of on-line orders across North America. ABF's employees are being trained and equipped with an understanding of how these new trends are going to affect customers. A study by Forrester Research shows that business-to- business eCommerce will grow at a rapid pace, far exceeding that of business- to-consumer fulfillment channels. Shippers in these new ventures want high visibility and control of their freight as it moves throughout the ABF system. ABF is empowering its customers with this information and knowledge. ``As the shipping environment undergoes transformation, ABF will continue to be flexible in providing new tools and information that will facilitate the new business models of its customers,'' said Mr. Young. ``ABF believes this will enable it to successfully participate in the growth of the business-to- business segment of eCommerce.''
G.I. Trucking Company
G.I.'s fourth quarter 1999 operating ratio was 100.7% compared to a 100.3% during the fourth quarter of last year. For the full year of 1999, G.I.'s operating income was $2.0 million compared to 1998 full-year operating income of $1.6 million. During the 1999 fourth quarter, G.I.'s revenue grew 13.3% compared to last year. This quarter's tonnage per day improved 12.5% over the 1998 fourth quarter. Fourth quarter 1999 revenue per hundredweight, including fuel surcharge, was $11.01, an increase of 2.4% when compared to the 1998 fourth quarter.
``G.I. continues to work on improving revenue yields and reducing purchased transportation costs,'' said Mr. Young. ``In order to improve its revenue yields, G.I. is taking pricing action on existing customers and analyzing prospective accounts using the monthly profitability data available in its costing model. Results from this process can be slow in developing but we feel that G.I.'s operating margins should improve using this course of action,'' said Mr. Young. ``In the area of purchased transportation, G.I. has identified several factors that are currently under review and revision. Reorganization of administrative functions, along with analysis of existing dispatch and freight-flow activity, should contribute toward lowering costs through reduction of miles and increases in load average. We expect to see improvement in G.I.'s performance in 2000.''
Treadco, Inc.
Treadco had fourth quarter 1999 sales of $45.0 million. Treadco's operating income in this year's fourth quarter was $563,000 compared to $161,000 of operating income during the fourth quarter of 1998. For the full year of 1999, Treadco's revenues of $186.6 million produced operating income of $3.6 million compared to 1998's full-year operating income of $2.5 million. Truck tire service revenues for the 1999 fourth quarter equaled $5.3 million, a 12.8% increase over the fourth quarter of 1998. ``Though currently only 11.8% of Treadco's revenue, management will continue to emphasize growth in the service segment. Improved utilization of service trucks and personnel will be an important factor in the success of this business,'' said Mr. Young.
``Though 1999 sales growth slowed from the previous year, Treadco emphasized the addition of more profitable business,'' said Mr. Young. ``Reductions on the cost side reflect the benefits of fundamental changes made within the company to improve systems, better manage inventory and personnel and increase retread capacity utilization. In the coming year, Treadco has opportunities to realize further improvements in each of these areas that should translate into increased profit.''
Clipper
Fourth quarter 1999 revenues for Clipper were $31.4 million, an increase of 8.8% over the fourth quarter of 1998. This represents the first quarterly year-over-year revenue increase for Clipper since the third quarter of 1997. Clipper's fourth quarter 1999 operating ratio was 98.4% compared to 102.6% in the fourth quarter of 1998. For the full year of 1999, Clipper's operating ratio was 98.7%, an improvement of more than two points over the previous year.
``Compared to last year, we are very pleased with the turnaround in Clipper's fourth quarter profitability,'' said Mr. Young. ``As a result of improved rail service, Clipper's rail utilization has steadily increased since the 1999 first quarter. It is now at its highest point in over two years. In addition, Clipper successfully reduced its overhead costs during periods of declining revenues,'' said Mr. Young. ``In 1999, the employees of Clipper achieved our goal of returning the company to profitability. We anticipate even greater progress during 2000.''
Capital Expenditures
In 2000, Arkansas Best forecasts net capital expenditures to be between $85 and $95 million. Virtually all of the increase over 1999 is for ABF. The majority of ABF's increase is in the areas of real estate and structures. ABF's increases are in response to current capacity issues and operational inefficiencies associated with past growth, as well as a need for the creation of new capacity for future growth. The $10 million range in this figure is related to uncertainties regarding the availability of real estate and land for purchase and the timing of construction projects. Arkansas Best's depreciation and amortization for 2000 is forecasted to be approximately $55 to $60 million.
Software Capitalization
As a result of new accounting rules effective January 1, 1999, Arkansas Best capitalized internal software development costs amounting to approximately $671,000, before income taxes, or $0.02 per diluted common share, in the fourth quarter of 1999.
Conference Call
Arkansas Best Corporation will be hosting a conference call with company executives to discuss the 1999 fourth quarter and full year results. The call will be today, Thursday January 20, at 10:00 a.m. CST. Interested parties are invited to listen by calling (800) 946-0786. Following the call, a recorded playback will be available for one week. To listen to the playback, dial (888) 203-1112. The passcode for the playback is 867991. The conference call and playback can also be accessed on Arkansas Best's Internet web site at www.arkbest.com.
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; the accuracy of assessments and estimates relating to Year 2000 computer issues; 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 OPERATIONS (Unaudited)
Three Months Ended Year Ended
December 31 December 31
1999 1998 1999 1998
($ thousands, except per share data)
CONTINUING OPERATIONS:
OPERATING REVENUES
Transportation operations $406,886 $357,319 $1,521,967 $1,414,920
Tire operations 44,422 43,938 184,315 178,982
Service and other 4,148 3,195 15,304 13,501
455,456 404,452 1,721,586 1,607,403
OPERATING EXPENSES AND COSTS
Transportation operations 373,090 338,537 1,414,085 1,346,236
Tire operations 44,097 43,923 181,585 177,165
Service and other 4,429 3,085 16,209 14,025
421,616 385,545 1,611,879 1,537,426
OPERATING INCOME 33,840 18,907 109,707 69,977
OTHER INCOME (EXPENSE)
Net gains (losses) on sales
of property and non-revenue
equipment (100) 541 871 1,694
Settlement of litigation --- 9,124 --- 9,124
Interest expense (4,527) (4,757) (18,395) (18,146)
Minority interest
in Treadco, Inc. --- (2,786) 245 (3,257)
Other, net (1,003) (926) (4,791) (4,949)
(5,630) 1,196 (22,070) (15,534)
INCOME FROM CONTINUING
OPERATIONS
BEFORE INCOME TAXES 28,210 20,103 87,637 54,443
FEDERAL AND STATE INCOME TAXES 11,678 9,304 36,455 23,192
INCOME FROM CONTINUING
OPERATIONS 16,532 10,799 51,182 31,251
DISCONTINUED OPERATIONS:
Loss from discontinued
operations (net of tax benefits
of $78 and $680 for the three
months ended December 31,
1999 and 1998, respectively,
and $472 and $1,287 for the
years ended December 31, 1999
and 1998, respectively. (122) (1,236) (786) (2,576)
LOSS FROM
DISCONTINUED OPERATIONS (122) (1,236) (786) (2,576)
NET INCOME 16,410 9,563 50,396 28,675
Preferred stock dividends 1,075 1,075 4,298 4,298
NET INCOME FOR COMMON
SHAREHOLDERS $15,335 $8,488 $46,098 $24,377
ARKANSAS BEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) -- Continued
Three Months Ended Year Ended
December 31 December 31
1999 1998 1999 1998
($ thousands, except per share data)
NET INCOME (LOSS) PER COMMON SHARE
Basic:
Continuing operations (A) $ 0.78 $ 0.49 $ 2.38 $ 1.37
Discontinued operations --- (0.06) (0.04) (0.13)
NET INCOME (A) $ 0.78 $ 0.43 $ 2.34 $ 1.24
AVERAGE COMMON SHARES
OUTSTANDING (BASIC) 19,746,666 19,610,213 19,671,130 19,608,963
Diluted:
Continuing operations (B) $ 0.68 $ 0.46 $ 2.14 $ 1.32
Discontinued operations --- (0.05) (0.03) (0.11)
NET INCOME (B) $ 0.68 $ 0.41 $ 2.11 $ 1.21
AVERAGE COMMON SHARES
OUTSTANDING (DILUTED) 24,265,481 23,440,637 23,932,821 23,692,922
CASH DIVIDENDS PAID PER
COMMON SHARE $ --- $ --- $ --- $ ---
(A) Gives consideration to preferred stock dividends of $1.1 million per
quarter.
(B) For the three months and years ended December 31, 1999 and 1998,
conversion of preferred shares into common is assumed.
ARKANSAS BEST CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
December 31
1999 1998
($ thousands)
ASSETS
Current assets $ 243,099 $ 223,254
Property, plant and equipment (net) 337,094 319,873
Other assets 42,351 39,228
Goodwill (less amortization) 109,385 124,975
$ 731,929 $ 707,330
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 282,139 $ 260,928
Long-term debt, less current portion 173,702 196,079
Other liabilities 29,845 20,577
Deferred income taxes 25,191 22,319
Minority interest --- 33,512
Shareholders' equity 221,052 173,915
$ 731,929 $ 707,330
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Year Ended
December 31
1999 1998
($ thousands)
OPERATING ACTIVITIES
Net cash provided by operating
activities $ 114,400 $ 72,272
INVESTING ACTIVITIES
Purchases of property, plant and equipment
less capitalized leases (52,590) (60,866)
Purchase of Treadco, Inc. stock (23,673) (1,132)
Proceeds from asset sales and other 14,470 16,415
NET CASH USED BY INVESTING ACTIVITIES (61,793) (45,583)
FINANCING ACTIVITIES
Deferred financing costs and expenses (137) (731)
Borrowings under revolving credit facilities 428,750 557,975
Payments under revolving credit facilities (448,300) (551,925)
Payments on long-term debt (26,116) (22,175)
Payments under term loan facilities --- (13,000)
Dividends paid (4,298) (4,298)
Other, net (2,730) 4,805
NET CASH USED BY FINANCING ACTIVITIES (52,831) (29,349)
NET DECREASE IN CASH AND CASH EQUIVALENTS (224) (2,660)
Cash and cash equivalents at beginning
of period 4,543 7,203
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,319 $ 4,543
ARKANSAS BEST CORPORATION
REVENUES AND OPERATING RATIOS (Unaudited)
Three Months Ended Year Ended
December 31 December 31
1999 1998 1999 1998
($ thousands)
REVENUES
ABF Freight System, Inc. (A) $ 340,672 $ 298,130 $1,277,093 $1,175,213
G.I. Trucking Company 36,058 31,830 137,409 124,547
Clipper 31,369 28,842 112,237 122,528
Treadco, Inc. 45,041 44,558 186,602 181,293
OPERATING RATIOS
ABF Freight System, Inc. (A) 89.9% 93.4% 91.6% 94.2%
G.I. Trucking Company 100.7% 100.3% 98.5% 98.7%
Clipper 98.4% 102.6% 98.7% 100.9%
Treadco, Inc. 98.8% 99.6% 98.1% 98.6%
OPERATING INCOME (LOSS)
ABF Freight System, Inc. (A) $ 34,442 $ 19,593 $ 106,969 $ 67,609
G.I. Trucking Company (266) (100) 2,035 1,631
Clipper 508 (755) 1,456 (1,074)
Treadco, Inc. 563 161 3,590 2,492
(A) Includes U.S., Canadian and Puerto Rican operations of ABF
affiliates.
ABF FREIGHT SYSTEM, INC.
COMBINED FINANCIAL INFORMATION
FOR THE QUARTER AND YEAR ENDED December 31, 1999
Three Months Ended December 31 Full Year
1999 1998 % 1999 1998 %
Change Change
Operating Revenue* $340,672 $298,130 14.3% $1,277,093 $1,175,213 8.7%
Operating Income* $ 34,442 $ 19,593 $ 106,969 $ 67,609
Operating Ratio 89.9% 93.4% 91.6% 94.2%
Three Months Ended December 31 Full Year
1999 1998 % 1999 1998 %
Change Change
Revenue* LTL $ 307,023 $ 268,740 14.3% $1,158,479 $1,064,063 8.9%
TL 33,649 29,390 14.5% 118,614 111,150 6.7%
Total $ 340,672 $ 298,130 14.3% $1,277,093 $1,175,213 8.7%
Tonnage* LTL 755,056 728,005 3.7% 2,959,960 2,908,302 1.8%
(tons) TL 210,606 198,181 6.3% 772,235 753,354 2.5%
Total 965,662 926,186 4.3% 3,732,195 3,661,656 1.9%
Shipments LTL 1,483,439 1,449,779 2.3% 5,911,629 5,758,795 2.7%
TL 26,007 24,361 6.8% 95,932 93,950 2.1%
Total 1,509,446 1,474,140 2.4% 6,007,561 5,852,745 2.6%
Revenue/CWT
LTL $ 20.33 $ 18.46 10.1% $ 19.57 $ 18.29 7.0%
TL 7.99 7.41 7.8% 7.68 7.38 4.1%
Total $ 17.64 16.09 9.6% $ 17.11 $ 16.05 6.6%
Revenue /Shpt
Total $ 225.69 $ 202.24 11.6% $ 212.58 $ 200.80 5.9%
Cost/Shipment
Total $ 202.88 $ 188.95 7.4% $ 194.78 $ 189.25 2.9%
*Note: Value rounded to thousands ($000)
There were 62 workdays in the fourth quarter of 1999 due to customers'
observance of the Christmas and New Year's holidays; 62 workdays in the
fourth quarter of 1998.
Includes U.S., Canadian and Puerto Rican operations of ABF affiliates.
END OF RELEASE
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