Fort Smith-based Arkansas Best Corp. posted a second quarter net income loss of $15.4 million, marking the third consecutive quarter the company posted a loss — and with those losses adding up to about $44.5 million in the past nine months.
It’s the economy.
The nationwide depression in the freight industry began in October 2006 and, obviously, continues. Arkansas Best Corp., whose primary subsidiary is ABF Freight System, a nationwide less-than-truckload carrier, posted second quarter revenue of $362.6 million, a per day decrease of 26.7% from the $498.5 million in the 2008 period.
The number of ABF shipments in the first six months of 2009 is down 16.2% compared to the same period in 2008, and the company’s tonnage shipped is down 17.3% in the first half of 2009 compared to the first half of 2008.
“The effects of lower freight levels and a competitive pricing environment that has intensified since the first quarter were the main challenges faced by our company in the second quarter,” Robert Davidson, Arkansas Best president and CEO, said in the earnings statement released Wednesday morning (July 22). “In addition, our results were affected by unusual increases in nonunion healthcare and pension, workers’ compensation and third-party casualty insurance claims costs versus last year.”
For the first six months of 2009, Arkansas Best has lost $33.6 million, compared to a net income of $24.6 million in the first six months of 2008.
Bob Costello, an economist with the American Trucking Associations, said in a June 29 report that the worst of the freight depression is over, but the trucking sector may not see improving conditions.
“I am hopeful that the worst is behind us, but I just don’t see anything on the economic horizon that suggests freight transportation is ready to explode,” ATA Chief Economist Bob Costello said in a statement. “The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.”
Despite the previous quarterly losses, Arkansas Best has little long-term debt and a $325 million line of credit. More importantly, the company has $191.4 million in cash or cash equivalents, down slightly from the about $200 million at the beginning of the year.
The company, with its relatively strong cash position, continues to investigate acquisition possibilities. The recession is creating fire-sale prices at transportation-related companies, Davidson told The City Wire in an April interview.
“This is the best buying opportunity I’ll ever have,” Davidson said.
However, the company continues to cut costs — personnel and equipment — to manage the downturn.
“ABF continues to manage its network resources, especially labor and equipment, to the level of freight moving throughout its network. As needed, additional reductions in system resources and costs have been made in the last few months,” Davidson said in the earnings statement.