Freight shipper bounces back big

Arkansas Best Corp. reported Thursday net income of $10.3 million in the fourth quarter, reversing a $7.9 million loss in the same quarter a year ago.

In a conference call with investors, the Fort Smith-based company said that for the final three months of 2013 it earned 38 cents per share on fourth-quarter revenue of $578.5 million. Earnings across major segments of Arkansas Best reported positive results for the end of 2013, including ABF Freight System Inc., the company’s trucking business.

Improvement in the final quarter came without the benefit of a fully implemented National Master Freight Agreement between ABF and the Teamsters. Delays in supplement ratification kept the contract - and cost-saving measures - from going into effect until November. ABF is expecting between $55 million and $65 million in annual savings thanks to the new five-year contract.

Arkansas Best lost $7.9 million in the final three months of 2012.

Encouraged by the quarter’s success and total 2013 revenue of $2.3 billion, Chief Executive Officer Judy McReynolds said the company is on solid footing.

“We’re energized by the growth prospects,” McReynolds told investors during the call.

Negotiations with the Teamsters overshadowed much of what the company did in 2013, executives said.

Nonasset-based businesses, essentially segments other than ABF Freight System Inc., generated 43 percent more revenue in the fourth quarter of 2013 than they did in the same quarter a year ago. Panther Expedited Services, which Arkansas Best purchased for $180 million in 2012, enjoyed a strong close to 2013 with $3.1 million in profit.

Approximately 25 percent of Arkansas Best’s fourth-quarter revenue was generated by nonasset-based segments of the company, McReynolds said. Revenue in those segments will continue to increase, she said.

“Over time, you’ll see those become a greater part of our revenue and profit,” McReynolds said. “Really, that’s the longer-term objective. That balance and ability to collaborate for the betterment of our customers is what we’re trying to accomplish.”

Future growth in those emerging segments could come through acquisitions. McReynolds pointed to Arkansas Best’s logistics division as one that could benefit from acquisition.

While the company will consider purchases, Arkansas Best is counting on continued success in-house, McReynolds said.

“I also want to suggest we have organic opportunities as well,” McReynolds said. “We’ll be using those to advance the growth plans we have as well. It’s not about one approach.”

Arkansas Best has budgeted up to $100 million in capital expenditures for 2014. As much as $60 million will be spent on equipment for ABF Freight, and additional expenses will be focused on real-estate improvements and technology.

Outside opinion of Arkansas Best’s final quarter of 2013 also was strong.

“I think we’re starting to see Arkansas Best turn the corner in terms of getting to a point of sustainable profitability,” Stephens analyst Brad Delco said. “We’re starting to see a lot of the earnings power of the business now that their cost structure is at a level where they can effectively compete with the nonunion [companies].”

Investors reacted positively to the earnings report. Shares of Arkansas Best stock traded between $32 and $34.18 on Thursday, ending the day at $33.40.

Business, Pages 27 on 01/31/2014

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