Fort Smith-based Arkansas Best Corp. posted second quarter net income of $11.8 million thanks to an $8 million tax benefit and a $1.3 million after-tax cost related to the acquisition of Panther Expedited Services.
Excluding the one-time items, Arkansas Best posted second quarter income of $5.2 million, or 18 cents per share. The per share earnings beat the consensus analyst estimate of 17 cents. The company posted second quarter 2011 income of $5.3 million, and had a first quarter 2012 loss of $18.2 million.
For the first half of 2012, Arkansas Best has lost $6.321 million, an improvement over the $7.51 million loss during the same period of 2011.
Total revenue for the quarter was $510.543 million, ahead of the $498.55 million in the 2011 period. For the first half of 2012, total revenue reached $951.410 million, 1.9% higher than the first half of 2011.
The earnings report noted that daily tonnage levels during the second quarter were below those of 2011 “as the U.S. economy remained inconsistent.”
“A number of significant developments occurred during the second quarter, including closing the acquisition of Panther, our premium logistics provider,” Arkansas Best President and CEO Judy McReynolds said in the earnings report released early Tuesday (July 31).
Arkansas Best purchased in mid-June Panther Expedited Services in a $180 million deal that ABC officials say will help them better tap the $700 billion transportation and logistics market. They are also hoping the acquisition begins to add to the bottom line as early as the third quarter.
“This transaction represents a major step in our long-term strategy to grow our non-asset-based businesses. If Panther had been included, total 2011 revenues for Arkansas Best's non-asset businesses would have exceeded $400 million,” McReynolds explained. “The addition of Panther and the services provided by our other non-asset-based subsidiaries complement our offerings at ABF and allow us to strengthen customer relationships.”
Tuesday’s quarterly report shows that Panther generated $10.835 million in operating revenue during the second quarter.
ABF Freight System, the largest subsidiary of Arkansas Best and a less-than-truckload carrier, implemented a 6.9% rate increase June 25, 2012. Company officials, who have along had a history of not “chasing freight” just to generate revenue, began implementing rate increases in the second quarter of 2011.
“As a result, the incremental profitability of ABF's account base has improved,” noted the earnings report.
ABF posted second quarter operating revenue of $445.74 million, ahead of the $452.126 during the 2011 period. However, operating revenue for the first half of 2012 is $846.295 million, down slightly from the $849.398 million during the 2011 period.
Jack Waldo, a transportation industry analyst with Little Rock-based Stephens Inc., said after the Panther deal was finalized that the move would help Arkansas Best diversify its revenue base. He also said the deal is “not a cure-all for ABFS' ailments,” adding that the company’s “traditional LTL business is still faced with an outdated cost structure that is materially more burdensome than that of its competition.”
Arkansas Best will need an improved second half of 2012 if it is to build on recent financial improvements. The company posted 2011 net income of $6.159 million, a huge swing from the $32.693 million loss during 2010. The 2011 financials marked the end of two consecutive years of income losses.
“While we are encouraged by ABF's yield initiatives, we continue to focus on various paths to reduce ABF's overall cost structure,” McReynolds said in the statement. “On-going efforts that offer opportunities to reduce ABF's cost structure include ABF's labor contract lawsuit, collaborative work to develop a permanent solution to correct our payment of non-ABF multiemployer pension benefits and preparations for negotiation of a new April 2013 labor contract.”
Shares of Arkansas Best (NASDAQ: ABFS) were set to open Tuesday trading at $12.25. During the past 52 weeks the share price has ranged from a $25.27 high to a $10.38 low.