Arkansas Best reports $63.5 million income loss in 2009

It’s a certainty that the national trucking sector is in bad economic shape when one of the most financially stable trucking companies reduces employee benefit contributions and cuts its quarterly dividend from 15 cents to 3 cents per share.

Those are just two actions reported Thursday (Jan. 28) by Fort Smith-based Arkansas Best Corp. in reporting a fourth-quarter net income loss of $22.1 million. The company, which operates ABF Freight System, has reported a combined loss of $72.27 million in the past five fiscal quarters. Fourth quarter revenue was $371.63 million, a 5% dip from the fourth quarter of 2008.

In 2009, the company posted a net income loss of $127.52 million, compared to a $29.168 gain in 2008. However, the 2009 income loss includes a non-cash accounting charge of $64 million for the impairment of goodwill. Total revenue in 2009 was $1.472 billion, a 19.6% dip from 2008 revenue of $1.833 billion.

“Arkansas Best’s fourth quarter results illustrate the impact of an extremely weak and uncertain freight environment that has continued now for forty months,” Judy McReynolds, Arkansas Best president and CEO, said in the earnings statement. “This economic recession has been unprecedented in its length and depth. Its impact on the LTL industry has accelerated the level of price competition throughout 2009, and the fourth quarter was no exception.”

To cut costs and preserve cash, the company said it will suspend its 401(k) company match, reduce costs associated with post-retirement plans, reduce employee health care benefit plans and realign “executive compensation with the performance of the company.”

Those changes could save the company up to $18 million annually.

Also, the dividend reduction could save the company about $12 million a year — based on the company’s reporting of a little more than 25 million shares outstanding. The dividend reduction is the first since the company began to issue dividends in January 2003. The first dividend rate of 8 cents per share was boosted to 12 cents per share in January 2004, and up to 15 cents per share in July 2005.

“This is one of several steps we have taken recently to preserve our capital resources in order to respond to an uncertain time. We believe this dividend reduction is a responsible course of action and in the best interest of our company and our shareholders,” McReynolds said.

Preservation of capital is important for a company that saw its cash flow (net cash from operating activities) fall from $105.33 million in 2008 to $11.79 million in 2009. It’s also important because the company is not too optimistic about better economic conditions in 2010.

“Our 2010 operating performance will continue to be challenged until some positive change occurs such as a better freight economy, improved pricing or some other industry catalyst,” McReynolds noted.

Capital preservation is also an important part of the company’s longer term plan to purchase transportation-related operations. With the national freight recession lasting more than 40 months, company officials have said in the past that the deep and lengthy national freight recession may present opportunities to buy transportation sector operations at greatly reduced prices. In January 2009, the company entered into an $800,000 contract with an advisory firm to conduct a strategic review of possible acquisition targets. Company spokesman David Humphrey confirmed that an acquisition(s) continue to be “part of our long-term plans.”

As expected, the earnings report pushed the company’s share price (NASDAQ: ABFS) down more than 8% in early morning trading. The share price closed Wednesday (Jan. 27) at $25.96. For the past 52 weeks, the share price has ranged from a $34.56 high to a $15.84 low.