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ABFS > SEC Filings for ABFS > Form 10-Q on 8-May-2013All Recent SEC Filings

Show all filings for ARKANSAS BEST CORP /DE/ | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for ARKANSAS BEST CORP /DE/


8-May-2013

Quarterly Report


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

General

Arkansas Best Corporation (the "Company") is a freight transportation services and integrated logistics solutions provider with five reportable operating segments. The Company's principal operations are conducted through its Freight Transportation segment, which consists of ABF Freight System, Inc. and certain other subsidiaries of the Company (collectively "ABF"). The Company's other reportable operating segments are the following non-asset-based businesses:
Premium Logistics and Expedited Freight Services, Truck Brokerage and Management, Emergency and Preventative Maintenance, and Household Goods Moving Services. The Company's non-asset-based segments represent emerging lines of business which provide a complementary set of transportation, logistics, and related solutions to the Freight Transportation segment. (See additional segment description in Note K to the Company's consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.)

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain reclassifications have been made to the prior year's operating segment data and statistics to conform to the current year presentation. Financial and operating information of Global Supply Chain Services and Supply Chain Services, businesses which provide ocean container transport and warehousing services, respectively, have been reclassified from the Freight Transportation segment to "Other and eliminations." There was no impact on consolidated amounts as a result of these reclassifications.

Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") describes the principal factors affecting results of operations, liquidity and capital resources, and critical accounting policies of the Company. This discussion should be read in conjunction with the accompanying quarterly unaudited condensed consolidated financial statements and the Company's Annual Report on Form 10-K for the year ended December 31, 2012. The Company's 2012 Annual Report on Form 10-K includes additional information about significant accounting policies, practices, and the transactions that underlie the Company's financial results, as well as a detailed discussion of the most significant risks and uncertainties to which its financial and operating results are subject. One of those risk factors disclosed in the 2012 Form 10-K is as follows:

We depend on our employees to support our operating business and future growth opportunities. If we are unable to reach agreement on a new collective bargaining agreement or our relationship with our employees deteriorates, we could be faced with labor disruptions or stoppages, which could have a material adverse effect on our business, reduce our operating results, and place us at a further disadvantage relative to our competitors.

ABF represented approximately 78% of the Company's total revenues before other revenues and intercompany eliminations for the three months ended March 31, 2013. As of March 2013, approximately 75% of ABF's employees were covered under a collective bargaining agreement, the National Master Freight Agreement (the "NMFA"), with the International Brotherhood of Teamsters (the "IBT"), which extended through March 31, 2013. Prior to expiration of the collective bargaining agreement, ABF and the IBT agreed to a 30-day extension of the contract under the same terms and conditions of the existing NMFA. A subsequent and similar extension was agreed to which is effective through May 31, 2013.

On May 3, 2013, ABF and the IBT reached a tentative five-year collective bargaining agreement which is currently subject to ratification by a majority of ABF's IBT member employees who choose to vote. In the event ABF's union employees do not ratify the tentative collective bargaining agreement, a work stoppage, the loss of customers, or other events could occur that could have a material adverse effect on the Company's competitive position, results of operations, cash flows, and financial position in 2013 and subsequent years.

In the event of a temporary work stoppage, the Company plans to meet its liquidity needs primarily through existing liquidity, cash flows from its non-asset-based operations, available net working capital, funds from the sale or financing of other assets, reduction of spending levels, and elimination of dividends. The Company is also evaluating adjustments to the ABF network that would reduce operating costs on an ongoing basis as further discussed in the ABF Overview section of MD&A.


Table of Contents

Results of Operations



Consolidated Results



                                                     Three Months Ended
                                                          March 31
                                                      2013        2012
                                                       (in thousands)
OPERATING REVENUES
Freight Transportation                             $  407,281   $ 396,513
Premium Logistics and Expedited Freight Services       53,252           -
Truck Brokerage and Management                         14,604       8,039
Emergency and Preventative Maintenance                 32,522      22,378
Household Goods Moving Services                        13,576      15,052
Other and eliminations                                   (548 )    (1,115 )
Total consolidated operating revenues              $  520,687   $ 440,867

OPERATING INCOME (LOSS)
Freight Transportation                             $  (22,549 ) $ (21,858 )
Premium Logistics and Expedited Freight Services         (864 )         -
Truck Brokerage and Management                            767         394
Emergency and Preventative Maintenance                    711        (137 )
Household Goods Moving Services                          (231 )      (792 )
Other and eliminations                                 (1,184 )      (594 )
Total consolidated operating loss                  $  (23,350 ) $ (22,987 )

NET LOSS                                           $  (13,395 ) $ (18,162 )

DILUTED LOSS PER SHARE                             $    (0.52 ) $   (0.71 )

Consolidated revenues for the three months ended March 31, 2013 increased 18.1% compared to the same prior-year period, primarily reflecting the revenues of Panther Expedited Services, Inc. which was acquired by the Company on June 15, 2012 and is reported as the Premium Logistics and Expedited Freight Services segment. Higher volume-driven revenues reported by the Truck Brokerage and Management segment and the Emergency and Preventative Maintenance segment also contributed to the consolidated revenue growth. Total non-asset-based segments generated approximately 22% of first quarter 2013 total revenues before other revenues and intercompany eliminations. Freight Transportation revenues were 2.7% higher for the first quarter of 2013, despite fewer workdays in the period, compared to first quarter 2012. On a per-day basis, Freight Transportation revenues were 5.2% higher in first quarter 2013 compared to the same prior-year period. The Freight Transportation revenue improvement reflects the impact of an increase in tonnage per day, partially offset by a decrease in billed revenue per hundredweight, including fuel surcharges.

The consolidated operating loss, net loss, and per share amounts for first quarter 2013 and 2012 primarily reflect the operating results of the Freight Transportation segment which are discussed in further detail within the Freight Transportation Segment sections of Results of Operations. The consolidated net loss comparison was impacted by unusually high workers' compensation claims costs in the Freight Transportation segment and an unusually low corporate tax benefit rate which together negatively impacted first quarter 2012 consolidated net loss by approximately $0.31 per share.


Table of Contents

Consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization
("EBITDA")

Consolidated EBITDA more than doubled for the three months ended March 31, 2013 versus the same prior-year period, primarily reflecting the cash flow from Panther's operations and improved operating results of the other non-asset-based segments.

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