A fourth-quarter net loss of $3.11 million reported Thursday (Feb. 3) by Fort Smith-based Arkansas Best Corp. is yet more proof that the weak economic recovery is more weak than recovery.
Arkansas Best, which employs about 9,500 nationwide, posted a 2010 net loss of $32.421 million, an improvement compared to a $127.522 million net loss in 2009. The 2009 income loss included a non-cash accounting charge of $64 million for the impairment of goodwill.
ABF Freight System is the largest subsidiary of Arkansas Best, and is one of the largest less-than-truckload carriers in the U.S.
Total revenue in 2010 was $1.657 billion, a 12.55% gain over 2009 revenue of $1.472 billion, but still less than the $1.833 billion total revenue in 2008.
For the fourth quarter of 2010, the net loss of $3.11 million was an improvement over the net operational loss of $22.1 million in the 2009 period. Total revenue in the fourth quarter was $441.096 million, an impressive gain of $69.46 million, or 18.7%, over the 2009 period.
“Arkansas Best’s fourth quarter and full year results compared to last year reflect improvement associated with increased business levels and an LTL pricing environment that began improving in the fall," Judy McReynolds, Arkansas Best president and CEO, said in the earnings statement. "As we move into a new year we must work hard to achieve our goal of returning to healthy profitability levels through consistent business growth and improved account pricing."
The fourth quarter per share loss of 12 cents missed the consensus 9 cent per share loss among 18 analysts surveyed by Thomson Financial.
Despite the headline loss, the company reported consistent gains in freight demand during the last three months of 2010. Tonnage per day was up 14.8% in the fourth quarter compared to the 2009 period. The percentage tonnage increase during the second and third quarters of 2010 compared to the 2009 periods were 11.9% and 13.9%, respectively.
The ABF tonnage gains reflect advances in the recent truck tonnage index released by the American Trucking Associations. The closely watched index posted a 2.2% gain in December freight. For all of 2010, tonnage recorded by the index was up 5.7% compared with 2009. In 2009, the index plunged 8.7%.
“Fleets continue to tell me that freight volumes are very choppy – up one week, but down the next. That is a trend that is likely to continue this year as the economy is not growing across the board yet,” said ATA Chief Economist Bob Costello.
ABF’s fourth quarter operating ratio was 101.8%, an improvement over the 109.3% ration in the 2009 quarter, but still a reflection that the company is losing money for every dollar of revenue.
However, the company was able in 2010 to stop bleeding cash. At the end of 2010, the company had $141.86 million in cash or cash equivalents, up from the $133.19 million at the end of 2009. Several factors helped restore the cash reserve, including a 122.9% improvement in 2010 cash flow — net cash provided by operating activities.
Noting that 2010 was a “period of modest economic improvement,” McReynolds said in the statement that price increases and better pricing in the industry has proven beneficial through January.
“Several positive signs indicate that industry pricing is improving and is moving toward a more appropriate level. At the beginning of October, ABF implemented a general rate increase of 5.9%, the second general rate increase of 2010. Through the end of January 2011, this October general rate increase was holding well, thus positively influencing ABF’s revenue and its bottom line,” McReynolds said.
Costello, in the tonnage index statement, predicted that 2011 will see more stable recovery for a trucking sector that entered a freight recession in the fall of 2006.
“I continue to expect truck freight tonnage to grow modestly during the first half of 2011 and accelerate in the later half of the year into 2012,” Costello said.
Based on the company’s expected 2011 capital expenditure budget, McReynolds and other company execs agree with Costello’s assessment. Arkansas Best plans to spend about $47 million on “revenue equipment,” up over the $31 million spent in 2010. A big part of that planned spending is on 35 new tractors and 400 trailers to replace aging equipment. The top line for possible capital expenditures in 2011 is $85 million.
“The high-end of this range reflects the flexibility of adding more trailers as business levels dictate,” the company noted in the earnings report.
Shares of Arkansas Best (NASDAQ: ABFS) were set to open Thursday at $24.95. During the past 52 weeks, the share price has ranged from a $33.52 high to an $18.84 low.