Arkansas Best Swings To $18 Million First Quarter Loss

Highlighting “a number of unusual items,” trucking giant Arkansas Best swung to an $18.2 million first quarter loss despite a modest revenue gain.

The Fort Smith trucking firm reported the loss on revenue of $440.87 million. One year ago, Arkansas Best lost $12.8 million on revenue of $434.93 million.

Officials said that a low corporate tax benefit rate and higher worker compensation costs impacted earnings by nearly 31 cents a share. It also said that despite sluggish business activity, the company was committed to making new investments in sales, customer service and IT for all subsidiaries in a “long-term” effort to position the company for success. The company’s largest subsidiary is its freight-hauling division, ABF.

Arkansas Best noted:

• The unusually low corporate tax benefit rate is below historical levels because of limitations on the amount of deferred tax assets that could be recorded during the quarter.
• Depending on the financial results during the remainder of the year, Arkansas Best’s quarterly tax rates will vary and the 2012 full year tax rate could be substantially lower than past, full year tax rates.
• Its workers’ compensation claims costs were significantly above ten-year historical averages due to unfavorable severity on new and existing claims and increases in loss development, driven by claims experience.

“In addition to the above-referenced unusual items, ABF results were also impacted by decisions to maintain customer service levels despite lower daily tonnage in the first quarter,” the company noted in its earnings release. “ABF’s daily tonnage levels were impacted by pricing actions taken throughout 2011, and an economic environment that was sluggish and inconsistent, despite some improvement throughout the first quarter. First quarter 2011 results included the effects of adverse weather which dampened that period’s tonnage growth by approximately two percent.”

CEO Judy McReynolds said much of the loss was a by-product of a longer-term corporate strategy.

“Although first quarter results do not meet our expectations, we are positioning our company for longer term success,” said McReynolds.  “The pricing measures we have taken have improved the incremental profitability of ABF’s account base for future periods.  Our deliberate actions of adding personnel and developing enhanced information technology systems, all designed to advance a high level of service and facilitate future growth, are essential investments for our company.”

Michael Tilley with our content partner, The City Wire, has more in this report.