Arkansas Best takes $11M 4Q net loss

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Arkansas Best Corporation today, Jan. 29, announced a fourth-quarter 2008 net loss of $11.0 million compared to net income of $13.5 million in the fourth quarter of 2007. “Arkansas Best’s fourth-quarter results reflect the profitability effects of ABF’s decelerating tonnage levels and competitive pricing pressures in the midst of a freight environment of unprecedented weakness,” said Robert A. Davidson, president and chief executive officer of the Fort Smith, Ark.-based company.

Davidson said ABF’s fourth-quarter and full-year results also reflect the company’s continuing commitment to maintaining customer service levels, including its strategically-important regional initiative. “We are now over 27 months into a freight recession that is the worst I have seen during my 37 years in this industry,” Davidson said. “Fourth-quarter freight declines of this magnitude, in addition to those ABF has experienced during the previous two years, have made it more and more difficult to adequately reduce network costs in step with business declines without impacting the service to our customers. The resulting negative operating leverage has adversely influenced profitability.”

Davidson said the company’s “current results are obviously unacceptable. Since the fourth quarter of 2006, when ABF first experienced dramatic declines in business, we have been committed to taking the necessary actions to directly respond to the ongoing decline in business. Since that time, we have taken the following steps to reduce ABF’s network capacity and cost structure. Some of these actions took place in the fourth quarter of 2008 and in January 2009.”

Davidson said these recent changes will have a greater impact in reducing costs beginning in 2009:

  • An 18 percent reduction of ABF employees, including about 1,100 that occurred in the fourth quarter of 2008. Half of the company’s employee reductions from the last two years occurred in the fourth quarter of 2008, with additional employee reductions of about 350 in January 2009;
  • Fleet reductions that include a 14 percent decrease in road tractors and a 9 percent decrease in road trailers, with additional tractor and trailer reductions planned later in 2009;
  • Closure of facilities and consolidation of various service areas throughout the ABF network in order to improve efficiencies and lower costs;
  • Realignment of the structure of ABF’s field management organization to 10 nationwide regions from 12 regions, thus eliminating four field officer positions, other employee jobs and the associated overhead costs;
  • Reductions of employee positions in the corporate office;
  • Institution of health insurance premiums and increases in deductibles for nonunion employees;
  • Elimination of 2009 cost-of-living and merit pay increases for nonunion employees;
  • Elimination of pay increases and annual incentive payments to company executives; and
  • Companywide travel limitations.
  • “Our strong financial position, with ample cash reserves and very little debt, affords us the ability to continue a high level of service to our customers despite lower tonnage and declining prices,” Davidson said. “In addition, we remain able to take advantage of the unique opportunities that present themselves in this environment. Meanwhile, we will continue to respond in a prudent and resolute manner to the challenges in our industry by making the necessary changes to our cost structure.”

    For the fourth quarter, Arkansas Best Corp. reported revenue of $391.2 million, a per-day decrease of 14.1 percent from the prior-year quarter of $459.3 million. For the full year, the company posted revenue of $1.83 billion, a slight per-day decrease from 2007 revenue of $1.84 billion; and net income of $1.15 per diluted common share compared to income of $2.26 per diluted common share.

    For the fourth quarter, ABF Freight System reported revenue of $375.2 million compared to $441.3 million in 2007, a per-day decrease of 14.3 percent; a tonnage per-day decrease of 11.5 percent; and an operating loss of $15.2 million compared to operating income of $19.8 million. For the full year, the division reported revenue of $1.76 billion compared to $1.77 billion in 2007, a per-day decrease of 0.9 percent; a tonnage per-day decrease of 4.2 percent; and operating income of $48.4 million compared to $84.5 million.

    Arkansas Best also recently engaged an advisory firm to help develop a formal strategic plan and to assist in the identification of potential acquisition opportunities. In the fourth quarter of 2008, charges associated with this initiative were about $0.8 million pre-tax, according to the company; additional expenses associated with this review will occur over the next three to four months. “Although ABF and the freight industry are in the midst of a significant decline, we believe this timely process is very important in determining a future path that maximizes shareholder value,” Davidson said.