- Revenue rises to $576.9 million from $510.5 million
- Second quarter 2013 profit of $4.9 million, or $0.18 per share
- Six-month 2013 net loss of $8.5 million
- All emerging, non-asset-based businesses generate second quarter operating income on revenue growth
- ABF labor contract recently ratified; work continues on approval of remaining supplemental agreements
FORT SMITH, Ark., Aug. 9, 2013 -- Arkansas Best Corporation (Nasdaq: ABFS) today reported second quarter 2013 net income but continued to sustain losses for the first six months of the year as costs for salaries, wages and benefits at LTL carrier subsidiary ABF Freight System, Inc. offset improving revenue and tonnage trends. Arkansas Best's emerging businesses continued to see growth and improved margins.
Arkansas Best's second quarter 2013 revenue was $576.9 million compared to revenue of $510.5 million in the second quarter of 2012. Second quarter 2013 net income was $4.9 million, or $0.18 per share, compared to second quarter 2012 net income of $11.8 million, or $0.44 per share.
The second quarter 2012 results included a tax benefit of $8.0 million, or $0.31 per share, related to the reversal of previously established deferred tax asset valuation allowances, and transaction costs of $2.1 million ($1.3 million, after tax), or $0.05 per share, associated with the June 15, 2012 acquisition of Panther Expedited Services, Inc. Excluding both of these items, Arkansas Best had second quarter 2012 net income of $5.2 million, or $0.18 per share.
For the first half of 2013, Arkansas Best's net loss was $8.5 million or $0.33 per share on revenue of $1.1 billion compared to a net loss of $6.3 million, or $0.25 per share on revenue of $951.4 million during the first half of 2012. Excluding the tax and transaction items mentioned above, Arkansas Best's net loss was $0.33 per share in the first six months of both years.
ABF's second quarter 2013 revenue rose slightly, but higher costs for salaries, wages and benefits continued to weigh on results, as has been the case in recent quarters. For the first six months of 2013, ABF's operating loss was$17.1 million compared to $14.2 million in the first half of 2012. The June 27, 2013 ratification of the ABF National Master Freight Agreement by its Teamster employees is a major step toward returning the company to consistent profitability. Once the new contract is implemented, following the ratification of the remaining supplements, the combined effect of immediate cost reductions plus lower cost increases in affected areas should put ABF on a path to improved financial performance.
"We achieved a major milestone for our company in recent weeks with the ratification of a national five-year labor contract at ABF and most supplemental agreements. We expect to obtain employee ratification of all remaining supplements in the coming weeks," said Arkansas Best President and Chief Executive Officer Judy R. McReynolds. "Once this important process is concluded, it will represent a pivotal moment for Arkansas Best, as we will be able to turn our undivided attention to driving improved profitability at ABF, while continuing the expansion and growth of our emerging businesses. As our customers look to us for total solutions to their complex supply chain needs, we are now better positioned than at any time in our history to fulfill those requirements."
At ABF, total second quarter revenue per hundredweight equaled that of the same period last year. However, when considering year-over-year changes in freight profile and account mix, ABF's pricing improved, reflecting the positive effects of the general rate increase ABF implemented in late May.
As in the first quarter 2013, Arkansas Best's emerging, non-asset-based businesses continued to show revenue growth, operating profit and cash flow generation. These businesses represented 23% of total corporate revenue during the quarter, and are on track to account for a greater proportion of total revenue going forward. The company's freight brokerage segment led the emerging businesses in revenue gains, with a 63% increase. Emergency and preventive maintenance increased second quarter revenue by more than 9% and improved its operating income by nearly 17%. The household goods moving services segment raised its second quarter operating income by nearly five times on a small increase in revenue. Though Panther Expedited Services, Inc. continued to be affected by reduced customer demand for expedited services and the effects of ongoing investments made in sales and service locations for future growth, revenue and margin trends improved throughout the quarter. On a combined basis, Panther and all of the other non-asset-based businesses generated second quarter 2013 earnings before interest, taxes, depreciation and amortization ("EBITDA") of $7.1 million, versus $2.8 million of EBITDA in the second quarter of 2012.
Status of ABF Labor Contract
As previously announced, the five-year ABF National Master Freight Agreement was approved by ABF employees represented by the International Brotherhood of Teamsters. The full contract will be implemented once the remaining supplemental agreements are approved. It will run through March 31, 2018. The agreement achieves the stated goals of lowering ABF's costs and better serving its customers while putting it on a path for improved profitability. With the new labor contract, ABF also continues to provide the best-paying jobs and benefits package for its Teamster employees when compared with their union and non-union counterparts.
ABF Freight System, Inc., and the Teamsters reached another contract extension that runs through August 31, 2013. The extension will allow for the conclusion of the voting process for the remaining six supplemental agreements to the ABF National Master Freight Agreement. Ballots for the remaining supplemental agreements were mailed earlier this week and they will be counted on August 28, 2013. After full ratification of the new labor contract and all supplements is achieved, further details on expected future cost savings at ABF will be provided.
Nonunion Defined Benefit Pension Plan Freeze
As previously announced, Arkansas Best amended its nonunion defined benefit pension plan in June 2013 to freeze the accrual of future benefits beginning July 1, 2013. The changes to the plan were accounted for as a plan curtailment at the end of second quarter 2013, resulting in a $46.3 million reduction in the pension liabilities, a $28.3 million increase to equity, and an $18.0 million decrease in related deferred tax assets. The change to the plan had no effect on second quarter nonunion pension expense. Beginning in third quarter 2013, nonunion pension expense will decrease as a result of the plan freeze. However, these savings may be offset, in part, by discretionary contributions to Arkansas Best's nonunion defined contribution plan.
"As economic growth remains moderate and inconsistent, Arkansas Best continues to make progress in positioning each of its companies for future success," said McReynolds. "ABF now looks toward a better future with lower costs and greater operational flexibility. Investments made in emerging, non-asset-based businesses are positively impacting our bottom line by improving the way we go to market as customers seek more end-to-end logistics solutions. We are excited about the upcoming prospects for Arkansas Best and the future opportunity we have to benefit our customers, employees and shareholders."
Arkansas Best Corporation will host a conference call with company executives to discuss the 2013 second quarter results. The call will be today, Friday August 9, at 9:30 a.m. ET (8:30 a.m. CT). Interested parties are invited to listen by calling (800) 893-3796. Following the call, a recorded playback will be available through the end of the day on September 8, 2013. To listen to the playback, dial (800) 633-8284 or (402) 977-9140 (for international callers). The conference call ID for the playback is 21661649. The conference call and playback can also be accessed, through September 8, on Arkansas Best's website at arkbest.com.
Arkansas Best Corporation, headquartered in Fort Smith, Arkansas, is a freight transportation services and solutions provider. Through its various subsidiaries, Arkansas Best offers a wide variety of logistics solutions including: domestic and global transportation of less-than-truckload ("LTL") and full load shipments, expedited ground and time-definite delivery solutions, freight forwarding services, freight brokerage, oversight of roadside assistance and equipment services for commercial vehicles, and household goods moving market services for consumers, corporations, and the military. More information is available at arkbest.com, abf.com and pantherexpedite.com.
The following is a "safe harbor" statement under the Private Securities Litigation Reform Act of 1995: Statements contained in this report that are not based on historical facts are "forward-looking statements." Terms such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "intend," "on track," "plan," "predict," "prospects," "scheduled," "should," "would," 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, a workforce stoppage by our employees covered under our collective bargaining agreement or unfavorable terms of future collective bargaining agreements; relationships with employees, including unions; general economic conditions and related shifts in market demand that impact the performance and needs of industries served by Arkansas Best Corporation's subsidiaries and/or limit our customers' access to adequate financial resources; union and nonunion employee wages and benefits, including changes in required contributions to multiemployer pension plans; competitive initiatives, pricing pressures and the effect of volatility in fuel prices and the associated changes in fuel surcharges on securing increases in base freight rates and the inability to collect fuel surcharges; availability of fuel; default on covenants of financing arrangements and the availability and terms of future financing arrangements; availability and cost of reliable third-party services; disruptions or failures of services essential to the use of information technology platforms in our business; availability, timing, and amount of capital expenditures; future costs of operating expenses such as fuel and related taxes; self-insurance claims and insurance premium costs; governmental regulations and policies; future climate change legislation; potential impairment of goodwill and intangible assets; the impact of our brand and corporate reputation; the cost, timing, and performance of growth initiatives; the cost, integration, and performance of any future acquisitions; the costs of continuing investments in technology, a failure of our information systems, and the impact of cyber incidents; weather conditions; and other financial, operational, and legal risks and uncertainties detailed from time to time in Arkansas Best Corporation's Securities and Exchange Commission public filings.
Investors: Mr. David Humphrey, Vice President, Investor Relations
Telephone: (479) 785-6200
Media: Ms. Kathy Fieweger, Vice President, Marketing and Corporate Communications
Telephone: (479) 719-4358
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