FORT SMITH — Arkansas’ second-largest freight carrier, Arkansas Best Corp. of Fort Smith, reported Thursday that its profits declined by nearly half in the third quarter of this year compared with 2011, even as revenue climbed 13 percent.
The company reported third-quarter net income of$6.5 million, or 24 cents per share, compared with $12.3 million and 46 cents per share in last year’s third quarter. Revenue rose 13 percent, to $577.5 million.
In a conference call with industry analysts Thursday, company executives said weakness in the economy, decline in business demand and higher costs hurt the company’s biggest segment, ABF Freight System Inc.
Expedited transportation provider Panther Expedited Services, Inc., purchased by Arkansas Best in June for $180 million, was also affected by the economy, executives said. But Arkansas Best is encouraged by the third-quarter performance and prospects of Panther, which recorded revenue of $60.4 million, and other segments outside ABF,said Judy McReynolds, president and chief executive officer of the parent company.
Those smaller operations contributed about 20 percent of Arkansas Best’s earnings in the third quarter this year, compared with about 10 percent last year.
Analyst Jack Waldo of Stephens Inc. in Little Rock said the report reflects a slowing business climate in the trucking industry and Arkansas Best’s efforts to diversify earnings beyond ABF, a less than-truckload company that specializes in transporting smaller loads of several customers in a single truck.
One important unknown for the company is ABF Freight’s contract negotiations with the International Brotherhood of Teamsters set to start later this year, Waldo said in a research report Thursday. The current union contract agreement expires March 31. Negotiations are to begin Dec. 18. Waldo does not own any Arkansas Best stock.
Discussing the company’s operating segments, McReynolds told analysts Thursday:
ABF Freight System saw business fall 1.4 percent during the third quarter compared with the previous year. She cited the sluggish economy as well as company price increases through most of the last year and into the first quarter of this year.
She also talked about the freight hauler’s high cost structure. “The most significant costs affecting ABF are associated with our union labor contract,” McReynolds said. Future contract negotiations offer “an opportunity for us to work together with the Teamsters and our employees to ensure that ABF is viable in the marketplace and able to grow jobs and effectively compete for additional, profitable business.”
ABF is appealing a federal judge’s decision in a lawsuit against the Teamsters and other parties. The suit claims the union awarded concessions to a competitor, YRC Worldwide Inc., giving that company an unfair advantage.
Other contributors to high costs for ABF were a greater than-expected rise in employee health-care costs and expected increases in 2012 pension and retirement costs, she said.
ABF accounted for $456 million in revenue for the third quarter this year, down from $459 million for the quarter last year, according to the company’s earnings report.
Smaller segments of Arkansas Best, including Panther Expedited, accounted for $130 million in revenue for the quarter. Revenue for smaller operations in the same quarter last year totaled $59.5 million, but did not include Panther Expedited.
Those segments also include Freight Value, a transportation brokerage service, and a roadside vehicle assistance operation, FleetNet America Inc.
Arkansas Best has about 10,800 full-time employees and operates about 3,800 tractors and 20,100 trailers. It is ranked as the 13th-largest for-hire carrier in the nation by trucking publication Transport Topics.
ABC stock on Thursday closed at $8.40 per share, up 4.4 percent for the day.
The stock has traded in the past year from $7.32 to $22.79.
Business, Pages 29 on 11/02/2012