ARKANSAS BEST CORPORATION ANNOUNCES FOURTH QUARTER 2013 RESULTS AND FULL YEAR 2013 RESULTS

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

December 31

Year Ended

December 31

2013

2012

2013

2012

(Unaudited)

($ thousands, except share and per share data)

OPERATING REVENUES

$

578,549

$

537,042

$

2,299,549

$

2,065,999

OPERATING EXPENSES AND COSTS

565,047

548,058

2,280,479

2,080,567

OPERATING INCOME (LOSS)

13,502

(11,016)

19,070

(14,568)

OTHER INCOME (EXPENSE)

Interest and dividend income

182

185

681

808

Interest expense and other related financing costs

(903)

(1,409)

(4,183)

(5,273)

Other, net

1,114

(76)

3,893

2,041

393

(1,300)

391

(2,424)

INCOME (LOSS) BEFORE INCOME TAXES

13,895

(12,316)

19,461

(16,992)

INCOME TAX PROVISION (BENEFIT)

3,549

(4,387)

3,650

(9,260)

NET INCOME (LOSS)

$

10,346

$

(7,929)

$

15,811

$

(7,732)

EARNINGS (LOSS) PER COMMON SHARE⁽¹⁾

Basic

$

0.38

$

(0.31)

$

0.59

$

(0.31)

Diluted

$

0.38

$

(0.31)

$

0.59

$

(0.31)

AVERAGE COMMON SHARES OUTSTANDING

Basic

25,785,485

25,629,309

25,714,205

25,564,752

Diluted

25,793,366

25,629,309

25,714,205

25,564,752

CASH DIVIDENDS DECLARED
  PER COMMON SHARE

$

0.03

$

0.03

$

0.12

$

0.12

(1)  The Company uses the two-class method for calculating earnings per share. This method, as calculated below, requires an allocation of dividends paid and a portion of undistributed net income (but not losses) to unvested restricted stock for calculating per share amounts.

NET INCOME (LOSS)

$

10,346

$

(7,929)

$

15,811

$

(7,732)

EFFECT OF UNVESTED RESTRICTED
  STOCK AWARDS⁽¹⁾

(505)

(38)

(720)

(149)

ADJUSTED NET INCOME (LOSS) FOR

  CALCULATING  EARNINGS (LOSS)

  PER COMMON SHARE

$

9,841

$

(7,967)

$

15,091

$

(7,881)

ARKANSAS BEST CORPORATION

CONSOLIDATED BALANCE SHEETS

December 31

2013

December 31

2012

(Unaudited)

Note

($ thousands, except share data)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

105,354

$

90,702

Short-term investments

35,906

29,054

Restricted cash, cash equivalents, and short-term investments

1,902

9,658

Accounts receivable, less allowances (2013 – $4,533; 2012 – $5,249)

202,540

180,631

Other accounts receivable, less allowances (2013 – $1,422; 2012 – $1,334)

7,272

6,539

Prepaid expenses

19,016

17,355

Deferred income taxes

37,482

39,245

Prepaid and refundable income taxes

2,061

5,681

Other

6,952

7,185

TOTAL CURRENT ASSETS

418,485

386,050

PROPERTY, PLANT AND EQUIPMENT

Land and structures

245,805

243,699

Revenue equipment

589,902

589,729

Service, office, and other equipment

124,303

119,456

Software

110,998

103,164

Leasehold improvements

23,582

23,272

1,094,590

1,079,320

Less allowances for depreciation and amortization

700,193

635,292

394,397

444,028

GOODWILL

76,448

73,189

INTANGIBLE ASSETS, NET

75,387

79,561

OTHER ASSETS

52,609

51,634

$

1,017,326

$

1,034,462

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Bank overdraft and drafts payable

$

13,609

$

13,645

Accounts payable

89,091

84,292

Income taxes payable

1,782

59

Accrued expenses

173,622

158,668

Current portion of long-term debt

31,513

43,044

TOTAL CURRENT LIABILITIES

309,617

299,708

LONG-TERM DEBT, less current portion

81,332

112,941

PENSION AND POSTRETIREMENT LIABILITIES

26,847

104,673

OTHER LIABILITIES

15,041

12,832

DEFERRED INCOME TAXES

64,028

45,309

STOCKHOLDERS’ EQUITY

Common stock, $0.01 par value, authorized 70,000,000 shares;

    issued 2013: 27,507,241 shares; 2012: 27,296,285 shares

275

273

Additional paid-in-capital

296,133

289,711

Retained earnings

296,735

284,157

Treasury stock, at cost, 1,677,932 shares

(57,770)

(57,770)

Accumulated other comprehensive loss

(14,912)

(57,372)

TOTAL STOCKHOLDERS’ EQUITY

520,461

458,999

$

1,017,326

$

1,034,462

Note: The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

ARKANSAS BEST CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended Ended

December 31

2013

2012

(Unaudited)

($ thousands)

OPERATING ACTIVITIES

Net income (loss)

$

15,811

$

(7,732)

Adjustments to reconcile net income (loss)
  to net cash provided by operating activities:

Depreciation and amortization

84,215

85,493

Amortization of intangibles

4,174

2,261

Pension settlement expense

2,111

–

Share-based compensation expense

5,494

6,068

Provision for losses on accounts receivable

2,065

1,524

Deferred income tax benefit

(10,367)

(10,359)

Gain on sale of property and equipment

(153)

(735)

Changes in operating assets and liabilities:

Receivables

(24,200)

508

Prepaid expenses

(1,670)

305

Other assets

(1,015)

961

Income taxes

8,468

2,630

Accounts payable, accrued expenses, and other liabilities

8,571

3,610

NET CASH PROVIDED BY OPERATING ACTIVITIES

93,504

84,534

INVESTING ACTIVITIES

Purchases of property, plant and equipment, net of financings

(26,369)

(37,278)

Proceeds from sale of property and equipment

2,194

6,397

Purchases of short-term investments

(39,605)

(55,858)

Proceeds from sale of short-term investments

32,718

60,730

Business acquisition, net of cash acquired⁽¹⁾

(4,146)

(180,039)

Capitalization of internally developed software and other

(7,668)

(7,218)

NET CASH USED IN INVESTING ACTIVITIES

(42,876)

(213,266)

FINANCING ACTIVITIES

Borrowing under credit facilities

–

100,000

Payments on long-term debt

(43,176)

(53,000)

Net change in bank overdraft and other

(37)

(7,190)

Net change in restricted cash, cash equivalents, and short-term investments

7,756

43,035

Deferred financing costs

(71)

(1,487)

Payment of common stock dividends

(3,233)

(3,219)

Proceeds from the exercise of stock options

2,785

–

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

(35,976)

78,139

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

14,652

(50,593)

Cash and cash equivalents at beginning of period

90,702

141,295

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

105,354

$

90,702

NONCASH INVESTING ACTIVITIES

Accruals for equipment received

$

324

$

301

Equipment financed

$

36

$

37,973

(1)   During second quarter 2013, the Company acquired a privately-held logistics business that has been reported within the Household Goods Moving Services segment.

ARKANSAS BEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Three Months Ended

December 31

Year Ended

December 31

2013

2012

2013

2012

(Unaudited)

($ thousands, except per share data)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Net Income (Loss)

Amounts on a GAAP basis

$

10,346

$

(7,929)

$

15,811

$

(7,732)

Collective bargaining agreement adjustments, after tax⁽¹⁾

(1,435)

–

–

–

Tax benefits⁽²⁾

(670)

529

(1,436)

(3,180)

Transaction costs, after-tax⁽³⁾

–

–

–

1,294

Pension settlement expense, after-tax⁽⁴⁾

169

–

1,290

–

Non-GAAP amounts

$

8,410

$

(7,400)

$

15,665

$

(9,618)

Diluted Earnings (Loss) Per Share

Amounts on a GAAP basis

$

0.38

$

(0.31)

$

0.59

$

(0.31)

Collective bargaining agreement adjustments, after tax⁽¹⁾

(0.06)

–

–

–

Tax benefits⁽²⁾

(0.02)

0.02

(0.06)

(0.12)

Transaction costs, after-tax⁽³⁾

–

–

–

0.05

Pension settlement expense, after-tax⁽⁴⁾

0.01

–

0.05

–

Non-GAAP amounts

$

0.31

$

(0.29)

$

0.58

$

(0.38)

ARKANSAS BEST CORPORATION – CONSOLIDATED

Earnings Before Interest, Taxes, Depreciation
   and Amortization

Net income (loss)

$

10,346

$

(7,929)

$

15,811

$

(7,732)

Interest expense

903

1,409

4,183

5,273

Income tax provision (benefit)

3,549

(4,387)

3,650

(9,260)

Depreciation and amortization

20,819

23,764

88,388

87,754

Amortization of share-based compensation

1,915

1,357

5,494

6,068

Amortization of actuarial losses and pension settlement expense

1,228

2,846

10,046

11,385

EBITDA

38,760

17,060

127,572

93,488

Transaction costs, pre-tax⁽³⁾

–

–

–

2,129

Adjusted EBITDA

$

38,760

$

17,060

$

127,572

$

95,617

(1)  The ABF collective bargaining agreement, which was implemented November 3, 2013, provided for certain reductions in annual compensated vacation that impacted amounts expensed but not paid in periods prior to fourth quarter 2013.

(2) Tax benefit adjustments related to deferred tax asset valuation allowances.

(3) Transaction costs associated with the June 15, 2012 acquisition of Panther Expedited Services, Inc.

(4) Settlement expense related to the company’s nonunion defined benefit pension plan which was frozen effective July 1, 2013.

Non-GAAP Financial Measures. The company reports its financial results in accordance with generally accepted accounting principles (“GAAP”).  However, management believes that certain non-GAAP performance measures and ratios utilized for internal analysis provide financial statement users meaningful comparisons between current and prior period results, as well as important information regarding performance trends. Certain information discussed in the scheduled conference call could be considered non-GAAP measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company’s reported results. Management believes EBITDA to be relevant and useful information as EBITDA is a standard measure commonly reported and widely used by analysts, investors and others to measure financial performance and ability to service debt obligations. However, these financial measures should not be construed as better measurements than operating income, operating cash flow, net income or earnings per share, as defined by generally accepted accounting principles. Other companies may calculate EBITDA differently, and therefore the company’s EBITDA may not be comparable to similarly titled measures of other companies.

ARKANSAS BEST CORPORATION

RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES

Three Months Ended

December 31

2013

Three Months Ended

December 31

2012

Operating

Income

Depreciation and Amortization

EBITDA

Operating Income

Depreciation and Amortization

EBITDA

Premium Logistics & Expedited Freight Services⁽¹⁾

$

3,211

$

2,707

$

5,918

$

1,118

$

2,473

$

3,591

Domestic & Global Transportation Management

1,409

191

1,600

1,357

119

1,476

Emergency & Preventative Maintenance

907

141

1,048

505

125

630

Household Goods Moving Services

(702)

367

(335)

(107)

242

135

Total non-asset-based segments

$

4,825

$

3,406

$

8,231

$

2,873

$

2,959

$

5,832

Year Ended

December 31

2013

Year Ended

December 31

2012

Operating

Income

Depreciation and Amortization

EBITDA

Operating Income

Depreciation and Amortization

EBITDA

Premium Logistics & Expedited Freight Services⁽¹⁾

$

6,956

$

10,516

$

17,472

$

2,402

$

5,438

$

7,840

Domestic & Global Transportation Management

2,973

640

3,613

3,013

364

3,377

Emergency & Preventative Maintenance

3,274

540

3,814

1,935

497

2,432

Household Goods Moving Services

1,850

1,247

3,097

692

769

1,461

Total non-asset-based segments

$

15,053

$

12,943

$

27,996

$

8,042

$

7,068

$

15,110

1. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software, which were acquired in conjunction with the purchase of Panther Expedited Services, Inc. on June 15, 2012. Amounts for the year ended December 31, 2012 reflect the period from the date of acquisition, June 15, to December 31.

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS

Three Months Ended

December 31

Year Ended

December 31

2013

2012

2013

2012

(Unaudited)

($ thousands)

OPERATING REVENUES

Freight Transportation

$

436,654

$

414,475

$

1,761,716

$

1,701,495

Premium Logistics & Expedited

   Freight Services⁽¹⁾

67,316

61,046

246,849

132,326

Domestic & Global Transportation

   Management

30,668

21,477

105,223

66,431

Emergency & Preventative

   Maintenance

35,042

30,704

137,546

115,968

Household Goods Moving
   Services

16,811

16,377

82,169

77,619

Total non-asset-based segments

149,837

129,604

571,787

392,344

Other revenues and eliminations

(7,942)

(7,037)

(33,954)

(27,840)

Total consolidated
   operating revenues

$

578,549

$

537,042

$

2,299,549

$

2,065,999

OPERATING EXPENSES AND COSTS

Freight Transportation

Salaries, wages, and benefits

$

258,757

59.3%

$

264,926

63.9%

$

1,075,259

61.0%

$

1,071,084

62.9%

Fuel, supplies, and expenses

81,946

18.8

82,171

19.8

332,433

18.9

329,284

19.4

Operating taxes and licenses

11,072

2.5

10,823

2.6

43,865

2.5

43,336

2.5

Insurance

4,413

1.0

5,334

1.3

21,823

1.2

20,742

1.2

Communications and utilities

3,492

0.8

3,644

0.9

15,027

0.9

14,713

0.9

Depreciation and amortization

16,810

3.8

20,269

4.9

72,971

4.1

78,672

4.6

Rents and purchased transportation

47,453

10.9

39,897

9.6

180,689

10.3

156,810

9.2

Gain on sale of property

   and equipment

(90)

–

(132)

–

(576)

–

(711)

–

Pension settlement expense

219

0.1

–

–

1,831

0.1

–

–

Other

2,713

0.5

1,583

0.4

8,361

0.4

7,365

0.5

426,785

97.7%

428,515

103.4%

1,751,683

99.4%

1,721,295

101.2%

Premium Logistics & Expedited

Freight Services⁽¹⁾

Purchased transportation

$

51,072

75.9%

$

47,052

77.1%

$

188,561

76.4%

$

101,559

76.7%

Depreciation and amortization⁽¹⁾

2,707

4.0

2,473

4.1

10,516

4.3

5,438

4.1

Salaries, benefits, insurance,

   and other

10,326

15.3

10,403

17.0

40,816

16.5

22,927

17.4

64,105

95.2%

59,928

98.2%

239,893

97.2%

129,924

98.2%

Domestic & Global Transportation

   Management

29,259

20,120

102,250

63,418

Emergency & Preventative

   Maintenance

34,135

30,199

134,272

114,033

Household Goods Moving
   Services

17,513

16,484

80,319

76,927

Total non-asset-based segments

145,012

126,731

556,734

384,302

Other expenses and eliminations

(6,750)

(7,188)

(27,938)

(25,030)

Total consolidated operating

   expenses and costs

$

565,047

$

548,058

$

2,280,479

$

2,080,567

1. Depreciation and amortization consists primarily of amortization of intangibles, including customer relationships and software, which were acquired in conjunction with the purchase of Panther Expedited Services, Inc. on June 15, 2012. Amounts for the year ended December 31, 2012 reflect the period from the date of acquisition, June 15, to December 31.

Note:  See the following page for description of segments.

ARKANSAS BEST CORPORATION

FINANCIAL STATEMENT OPERATING SEGMENT DATA AND OPERATING RATIOS – Continued

Three Months Ended

December 31

Year Ended

December 31

2013

2012

2013

2012

(Unaudited)

($ thousands)

OPERATING INCOME (LOSS)

Freight Transportation

$

9,869

$

(14,040)

$

10,033

$

(19,800)

Premium Logistics & Expedited
   Freight Services

3,211

1,118

6,956

2,402

Domestic & Global Transportation

   Management

1,409

1,357

2,973

3,013

Emergency & Preventative

   Maintenance

907

505

3,274

1,935

Household Goods Moving
   Services

(702)

(107)

1,850

692

Total non-asset-based segments

4,825

2,873

15,053

8,042

Other income (loss) and
   eliminations⁽¹⁾

(1,192)

151

(6,016)

(2,810)

Total consolidated operating
   income (loss)

$

13,502

$

(11,016)

$

19,070

$

(14,568)

Description of Segments:

• Freight Transportation includes the results of operations of Arkansas Best’s largest subsidiary, ABF Freight System, Inc.^®.
• Panther Expedited Services, Inc., which was acquired on June 15, 2012, is reported as Premium Logistics & Expedited Freight Services.
• Domestic & Global Transportation Management includes the company’s transportation brokerage services, ocean container transport, and warehousing services operating as ABF Logistics.
• Emergency & Preventative Maintenance includes the roadside vehicle assistance and commercial equipment services subsidiary FleetNet America, Inc.
• Household Goods Moving Services includes Albert Companies, Inc. and Moving Solutions, Inc. which provide services to the consumer, corporate, and military household goods moving market.

Certain reclassifications have been made to the prior year’s operating segment data to conform to the current year presentation. The operating results of Global Supply Chain Services and Supply Chain Services, businesses which provide ocean container transport and warehousing services, have been reclassified from the Freight Transportation segment to the Domestic & Global Transportation Management segment. There was no impact on consolidated amounts as a result of these reclassifications.

ARKANSAS BEST CORPORATION

OPERATING STATISTICS

Three Months Ended

Year Ended

December 31

December 31

2013

2012

% Change

2013

2012

% Change

(Unaudited)

Freight Transportation ⁽¹⁾

Workdays

             61.5

              61.5

           251.5

            252.0

Billed Revenue ⁽²⁾ / CWT           

$

28.46

$

27.83

2.3%

$

27.94

$

27.90

0.1%

Billed Revenue ⁽²⁾ / Shipment     

$

377.65

$

379.63

(0.5)%

$

380.25

$

378.55

0.4%

Shipments                                  

1,143,813

1,083,479

5.6%

4,632,150

4,493,491

3.1%

Shipments / Day

18,599

17,618

5.6%

18,418

17,831

3.3%

Tonnage (tons)                           

758,987

738,947

2.7%

3,152,042

3,048,336

3.4%

Tons / Day

12,341

12,015

2.7%

12,533

12,097

3.6%