One of Fort Smith’s largest and prominent employers noted Wednesday in a federal filing that “business levels remained depressed” nationwide, but that the company has the financial reserves to withstand the economic storm.
Arkansas Best Corp., the parent company of ABF Freight System, filed Wednesday its quarterly form 10Q with the U.S. Securities and Exchange Commission. In that report, company officials said the trucking operations “year-over-year monthly tonnage levels declined at an increasing rate each month of third quarter 2008, resulting in a 5.1% decrease in total third quarter tonnage per day.”
Further, the company said such drop in tonnage is “representative of the weakening domestic and global economies due, in part, to turmoil in the financial markets and the related effects on industrial production and the residential and commercial construction and retail sectors.” In October, the beginning of the fourth fiscal quarter, the company reported that average daily total tonnage fell 7 percent compared to October 2007.
“There can be no assurances,” the company noted, that the significant downward trend will stop anytime soon.
The drop in tonnage nationwide also creates an environment in which trucking companies more aggressively compete for business by lowering rates. Arkansas Best has historically refused to “chase freight” by lowering rates below the cost of providing the service. If tonnage levels continue to fall, company officials said the competitive rate environment could pose a larger financial problem.
“It is difficult to allow business to go away but we are willing to do that, on both existing customers or on prospective customers, if that decision is best for our company,” wrote Wesley Kemp, president and chief operating officer of ABF Freight System, during an October interview with the Arkansas Trucking Association.
The good news is that Arkansas Best operates in the tough economy from a position of relative financial strength. Its revenue for the first nine months of 2008 was $1.44 billion, up 4.6 percent over the same period in 2007. Net income in the nine months was $40.14 million, down just 7 percent in a period of high fuel costs, slowing tonnage and slightly higher labor costs.
Also, the company has improved its cash position to $231.4 million as of Sept. 30. That cash and $273.19 million in borrowing capacity give the company a decent cushion.
“At this point in time, the Company’s liquidity has not been significantly impacted by the current credit environment, and due, in part, to the Credit Agreement maturing in May 2012, management does not expect that liquidity will be materially impacted in the near future,” the company noted in the filing.
The company’s shares (NASDAQ: ABFS) took a hit in Wednesday trading, falling more than 11 percent to close at $26.33. During the past 52 weeks, the share price has ranged from a $45.13 high to a $17.94 low.