Arkansas Best posts $18.2 million quarterly loss

Arkansas Best Corp.’s first-quarter net income loss of $18.2 million is a clear reminder that the national trucking sector is in the midst of a tough freight recession.

The Fort Smith-based transportation holding company announced Wednesday morning (April 22) that the company lost $18.2 million in the first quarter, a wide swing from the $8.5 million earned in the same quarter of 2008.

Total revenue for the quarter was $339.7 million, down 24% from the 2008 quarter. ABF Freight System is the largest subsidiary of Arkansas Best and is one of the nation’s largest less-than-truckload carriers.

“Our first quarter results continue to be hurt by the poor economy and the resulting decline in profitable business,” Robert A. Davidson, Arkansas Best President and CEO, said in the earnings statement. “ABF’s first quarter results reflect significantly lower freight levels, a very competitive industry pricing environment and our efforts to maintain a high level of customer service.”

The company is responding to the freight slowdown by cutting staff and equipment. More than 625 jobs will be cut — in addition to the 2,000 cut in 2008 — and 326 trucks and 488 trailers will leave the fleet, resulting in a 20% decrease in trucks since the fourth quarter of 2006. The company has cut its workforce 23% since the fourth quarter of 2006. As of Dec. 31, 2008, the company had 10,512 active employees.

Arkansas Best spokesman David Humphrey said most of the job cuts are in terminals and other areas, and not at the Fort Smith corporate headquarters.

Although the job and equipment cuts are similar to the declines in tonnage shipped, factors of the national recession prevent the company from generating revenues that cover expenses.

“Though ABF’s customers have benefited from reduced fuel surcharges related to a consistent decline in diesel fuel prices since July 2008, the competitive freight environment has prevented ABF from obtaining sufficient base rate increases to cover non-fuel related cost increases. As a result, despite the significant reduction in labor and other operating costs, ABF’s profitability has suffered,” the company noted in the statement.

However, the company is saying its cash (short-term investments) balance of $209 million and very little debt will allow the company to survive the downturn and position for economic recovery.

Part of that positioning includes the company’s Regional Performance Model (RPM) that allows the company to compete in the next-day or same-day delivery market. Another part of that includes completing an analysis of potential acquisitions that might allow the company to benefit from acquiring transportation-industry related assets and historic low prices.

“Internally, in anticipation of improving business levels, ABF will focus on sustaining our superior customer service and attention to specific customer requirements while working to maximize the profitability of individual accounts,” Davidson said in the statement. “In addition, this month will conclude the formal strategic analysis that began in the fourth quarter and which was designed to validate our corporate strengths and identify future external opportunities for maximizing shareholder value.”

Figures from the earnings report include:
• Tonnage per-day decrease of 15.7% versus 2008

• Total billed revenue per hundredweight of $23.85 compared to $26.32, a decrease of 9.4% that is primarily attributable to the steep decline in fuel surcharge compared to the first quarter of 2008

• Operating ratio of 108.3% compared to 97.0% in 2008

• RPM initiative impacted the operating ratio by 1.9% compared to 1.0% in the prior year period reflecting additional operational changes implemented in the third quarter of 2008

• Linehaul velocity, a measure of the average time required for linehaul movement of trailers between cities, improved by 8%. In addition, the ratio of miles with empty trailers declined by 7%.