First quarter ugly for Arkansas Best Corp.

by The City Wire staff ([email protected]) 93 views 

A high tax rate and ongoing costs to upgrade information technology pushed Fort Smith-based Arkansas Best Corp. to a surprising first quarter 2012 loss of $18.2 million — an ugly quarter that put a halt to recent quarterly gains for the struggling trucking company.

The per share loss of 71 cents was also greater than the consensus estimate of an 18 cent per share loss. Shares of Arkansas Best (NASDAQ: ABFS) closed Thursday at $17.38, down 42 cents. During the past 52 weeks, the share price has ranged from a $27.44 high to a $14.22 low. The earnings report was released Friday morning before the markets opened.

The company, which operates less-than-truckload carrier ABF Freight System as its primary subsidiary, posted a $12.787 million loss during the first quarter of 2011.

Total revenue for the first quarter was $440.867 million, ahead of the $434.931 million during the 2011 period.

First quarter losses were almost three times the amount the company earned in all of 2011. Net income for 2011 reached $6.159 million, a huge swing from the $32.693 million loss during 2010. The company posted a net income loss of $127.522 million loss in 2009, with $64 million representing an accounting charge for the impairment of goodwill. The company posted net income of $29.168 million in 2008.

The company said a low corporate tax rate — which resulted in an 18 cent per share expense — was caused by limits on the amount of deferred tax assets that could be recorded during the quarter. Higher worker’s comp costs kicked in another 13 cents per share expense hit, and the companywide improvements to information technology boosted expenses by another 12 cents per share during the quarter.

Adding further to the financial pain is a loss of some customers who balked at price increases Arkansas Best implemented in 2011.

"Although first quarter results do not meet our expectations, we are positioning our company for longer term success," Arkansas Best President and CEO Judy McReynolds said in the statement. "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."

Not particulary supportive for Arkansas Best was Mother Nature and the overall economy. A 2% drop in tonnage during the first quarter was blamed on “adverse weather.”

“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,” the company noted in the statement.

Other company notes in the Arkansas Best earnings report include:
• First quarter 2012 tonnage is effectively below last year by more than 12.5%.

• “It is typical in the first quarter of each year for ABF to have lower business levels and changes in freight mix that reduce capacity utilization and cause a higher portion of ABF's cost structure to become fixed in nature, relative to the seasonally stronger periods of the year. However, the level of daily tonnage declines in this year's first quarter exacerbated that effect.”

• “On a sequential basis versus the same period in March, tonnage trends in April 2012 are the best ABF has experienced in over 20 years. The recent strength in business is associated with freight from new customers, additional shipments from existing accounts and the return of previously lost customers in response to service failures by competitors.”

• Changes to the company’s labor contract with the Teamsters should provide “improved efficiencies, more flexible utilization of employees and enhancements in ABF's on-time delivery service.”

The company’s freight sector — which includes ABF Freight System — posted revenue of $400.6 million, up from $397.3 million during the first quarter of 2011. The sector had an operating loss of $22 million compared to an operating loss of $23.1 million during the 2011 quarter.

Emergency and preventative maintenance revenue was $22.3 million during the first quarter, up 0.5% compared to the 2011 period. The sector had an operating loss of about $100,000 compared operating income of $900,000 during the 2011 quarter.

The company’s logistics division generated revenue of $15.9 million during the first quarter, down 5.2% compared to the 2011 quarter. The sector had an operating loss of about $800,000 compared operating income of $100,000 during the 2011 quarter.

The company’s truck brokerage division generated revenue of $8 million during the quarter, up from $5.1 million during the 2011 quarter. Operating income in the sector was roughly $400,000, unchanged from the 2011 period.