ArcBest Corp (ARCB) 2005 Q3 法說會逐字稿

At this time, I would like to welcome everyone to the Arkansas Best Corporation third-quarter 2005 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (OPERATOR INSTRUCTIONS) I will now turn the conference over to Mr. David Humphrey, Director of Investor Relations. Please go ahead, sir.

Welcome to the Arkansas Best Corporation third-quarter 2005 earnings conference call. We will have a short discussion of the third-quarter results, and then we will open it up for a question-and-answer period. Mr. Robert A. Young, our chairman and Chief Executive Officer of Arkansas Best Corporation, is not available today because he is attending the funeral of a close friend. Therefore, our presentation this afternoon will be done by Mr. Bob Davidson, President and Chief Operating Officer of Arkansas Best Corporation, and President and CEO of ABF Freight System, Incorporated; and Mr. David E. Loeffler, Senior Vice President and Chief Financial Officer, and Treasurer of Arkansas Best Corporation.

We thank you for joining us today. In order to help you better understand Arkansas Best Corporation and its results, some forward-looking statements could be made during this call. As we all know, forward-looking statements by their very nature are subject to uncertainties and risks. For a more complete discussion of factors that could affect the Company's future results, please refer to the forward-looking statements section of the Company's earnings press release and the Company's most recent SEC public filings. We will now begin with Mr. Loeffler.

Thanks, David. I would like to start by looking at the overall corporate results for the third quarter. Our revenues were just under $490 million, an increase of 6.1% from the third quarter last year. Our operating income was $50.1 million, versus 44.2 million in the same quarter a year ago. Our GAAP earnings per share on a diluted basis were $1.59, excluding the sale on the gain of the GI properties, our earnings per share were $1.21 compared to $1.07 for the same quarter a year ago.

Our revenues for the third quarter this year compared to the third quarter last year, for ABF our per-day revenue increased 5.6%, and for Clipper increased 8.5%. For our cash flows for the nine months ended September 30, this year, I would like to refer you to our GAAP cash-flow statement attached to our press release. I would now like to highlight the following significant cash flow items.

Our net income before depreciation and amortization was $119 million. We had net purchases of property and equipment $50 million; the capitalization of software of about $3.5 million; an increase in accounts receivable of just under $17 million; and we had net changes in other assets and liabilities of $2.6 million. We had an increase in bank float, $3.3 million. We purchased Treasury stock in the first nine months of this year of $12.6 million. And we issued common stock, which is the exercise of stock options, of just under $3 million; and we paid cash dividends on common stock of just under $10 million. So we had a net increase in cash and short-term investments of a little over $34 million.

At the end of the third quarter, we basically had no debt and in excess of $105 million in cash and short-term investments. Our after-tax return on capital deployed for the 12 months ended September 30 this year was 20.6%, compared to our minimum acceptable level of 10%. So we were quite pleased with that.

Our net capital expenditures for this year were originally forecasted to be just under $94 million. We're now revising that downward to a little bit over $77 million. The primary reason (technical difficulty) is in 3 areas. We are delaying several real estate projects until next year because our business levels of this year are not quite what we had anticipated; that is about $11 million. We are not expanding the size of our city (ph) fleet by 110 tractors this year; and that is a reduction of a little over $1 million. We are delaying other equipment purchases until next year, things like forklifts, PCs, office equipment, that type of thing, again due to lower business levels than we originally anticipated; that is a little over $4 million.

Our total depreciation and amortization for the third quarter was $15.4 million, and we are forecasting depreciation and amortization for the full year of 2005 to be a little over $60.6 million. I would now like to turn it over to Bob Davidson.

Thanks, Dave. As Dave mentioned, our revenue for the quarter was 452 million. That includes a record day at September 30, the last day of the quarter, where we billed $10 million. We were certainly pleased about that.

Our total tonnage per-workday for the quarter declined 4/10 of a point, but it improved steadily during the quarter. Our pounds per day in July was off 3%; in August it was off 1%; and it September it was up almost 3%. Month-to-date in October, we are slightly ahead of last year.

The operating income improved 12.5%, and the operating ratio improved to an 88 5. That is the highest operating income in ABF's history, and on a comparable basis it is the best quarterly operating ratio in over 25 years.

There are several areas that contributed to ABF's improvement. First of all was yield. Our total revenue per hundredweight increased by a little over 1%. On the surface, that may sound like a low number; but it was actually pretty good yield improvement. Our average haul declined by 0.8%, and weight per shipment increased a lot. It increased by 3.6%. As you know, both of those factors would tend to depress the nominal revenue per hundredweight without affecting true yield.

During the quarter we were also able to swap some freight. We dropped some freight with some high operating costs and we added some better freight. In addition, TimeKeeper, our time definite offering, while the results are not material, it did help on the margin.

On the operating side, we were able to reduce the use of rail, especially in some high-cost lanes. We used less local cartage for local shipment pickup and delivery; and we reduced employee overtime. In addition, in the third quarter, our cargo claims cost was over half $1 million less than third quarter of last year. Our workers compensation expense in the third quarter improved by almost $2 million.

ABF continued to receive a string of best-in-class awards in cargo safety, in security, in technology. In fact almost every area of the Company, and I won't read a rather long list, but I would like to mention a couple. In the National Truck Driving Championships this year, we had 16 ABF drivers that competed. ABF was listed among the World's Top 100 Companies by CIO Magazine. This was for the second consecutive year. In fact we have gotten three awards from CIO Magazine in the last 18 months.

ABF was recognized by the American Trucking Associations as the top motor carrier in both claims and loss prevention and also in security. ABF is the only carrier to ever win both of these awards in the same year, and we have done it twice. In fact, we have one each of these awards three times in the past five years. That is an example of the value that ABF is providing, and customers appreciate that and are willing to pay for it.

Clipper also had a good quarter. Their revenue increased by 8.6%. Notably, their operating ratio improved from a 99 2 to a 97 8. Clipper is benefiting from some of the same market forces that are helping ABF. Issues in the truckload sector like fuel, and hours of service, and driver availability are allowing Clipper to be more selective on the quality of the freight. To us these trends look long-term, if not permanent.

Okay; I think we're ready for Q&A session.

(OPERATOR INSTRUCTIONS) Jack Waldo of Stephens Inc.

Congratulations and great quarter. David, given your pending retirement, is this the last time we are going to hear you on an earnings conference call?

Probably so.

Well, congratulations.

Thank you.

I had a few questions here. The first one is on the truckload business. In FY '04 it seemed like the new hours of service led to some diversion from traditional truckload carriers. Do you think that is happening right now as well, with the amended rule?

Jack, this is Bob. Yes I do, Jack. In fact, I just returned from the American Trucking Associations meetings; and I guess I was surprised by how much the new sleeper berths restriction is affecting the truckload carriers. So certainly you have a lot of factors going on in the truckload sector that are affecting those carriers and are pushing freight to us and to Clipper.

But there is something broader going on. In the past we have had a lot of discussion about LTL and truckload. But in the future, we're going to talk more about total business. The LTL bucket is defined as less than 10,000 pounds, and I presume that is because of the definition in the obsolete ICC reporting requirements. But discussing LTL and truckloads separately has probably gotten to the point where it is misleading, because it implies that LTL less than 10 is our core product and that is no longer true.

In today's market, we have at least a dozen market segments that don't fit neatly into that old definition. An example, we have some time-definite shipments that are 20,000 pounds; these are high yielding goods. And we have got some low-priced spot-priced, backhaul volume that is 8,000 pounds. So this is probably why all but one of our competitors stopped reporting LTL; and after this quarter we plan to discontinue reporting LTL at that artificial weight break (ph) as well.

Instead we're going to talk about, in qualitative terms, about the notable market segments that are contributing to our results. But having said that, Jack, you are right on target in the fact that there are larger shipments that are being pushed our way.

If you look at the trends that are doing that, if you look at hours of service, it's a permanent thing. If you look at fuel, probably a permanent thing. If you look at driver availability, certainly a permanent trend. So I think all of those trends are going to mean that our average shipment size, which has increased, probably is going to stay higher; and that freight is at least as profitable as the lower weighted shipments.

Could you share with us how much greater, I guess, the average shipment size is for TL relative to your traditional LTL? Also, what is the difference in the average length of haul?

The length of haul I think is about the same. I'm not sure we track that separately. The weight per shipment? Let's see.

I think it is up 3.6%, but I think that is LTL.

I think that is overall. Jack, I think it probably is telling that internally we don't measure those numbers. Because of that, again that artificial LTL truckload is irrelevant in managing the business.

Jack, our total length of haul -- we don't have it broken down by TL and LTL, on the information that I have anyway -- is down 8/10 of a percent; and our LTL length haul was down 1.1%.

They are fairly compatible. I guess.

Yes. Our total weight per shipment is up 3.6%, and our LTL weight per shipment is up 3%.

Okay. Fair enough. David, when you talked about the CapEx guidance for the remainder of FY '05, on a few instances you indicated that business was a little bit less than your initial forecast. What do you attribute this to? Is it more of a macroeconomic issue, or do you see something going on within the industry, be it additional capacity or things of that nature?

The aberration is not this year. The aberration, as we have talked about it for a couple of quarters, the aberration is really last year. We had some tough comparables in '04. But if you compare it back against '03, ABF tonnage -- and that is taking it LTL or truckload or total -- tonnage is up against '03 quarter-over-quarter. In fact the percentage increase gets higher as we have gone through this year.

So we have -- the tonnage levels on an absolute basis are high. We had a super year last year that made the comparables tough. But if you pull out '04, you will see increases and an accelerating increase.

Last question, on kind of the heart of the matter in my opinion or a lot of it. You have done an amazing job of not letting declining LTL tonnage negatively impact some of your operating leverage. My question is, just looking out further, how long do you think you can continue to improve the OR with such a great rate that we have seen the last couple quarters? You know, with tonnage down 1% to 3% on the LTL side?

Certainly, we believe that if we grow tonnage with the right kind of freight, it is going to make these kind of numbers easier to achieve. But there is something that is taking place in the industry that most people overlook. This industry is different than it was in the '80s and early '90s. If you look at the period from 1980 to 1994, ABF's OR averaged 96.5. You know, we went through an acquisition there in the mid '90s. But if you go from '97 to 2000, our OR has averaged 92.9, including two of the biggest downturn years in my 33-year memory. 1997 to 2005 it is has averaged 92.9.

This is a 3.6% average OR improvement. I suggest to you that that represents a new reality. There has been a sea change in our industry where consolidation has meant that competitors are smarter. They are competing routinely on value rather than price. So I would hesitate to predict what the OR is going to be next quarter or next year. In a general sense this industry, including ABF, just operates better than it used to.

Fair enough. Well, congrats on a good quarter.

Ken Hoexter of Merrill Lynch.

Dave, can you talk a little bit about -- I guess you kind of started in the release talking about how the volume environment has improved on a month-to-month basis, especially through the quarter. But it looks like you are talking on your CapEx targets that it is a little bit -- that may be it was (technical difficulty) you had forecast. Can you talk a little bit about what your outlook for the freight environment is?

Ken, we don't give an outlook. We don't give any projections.

But yet, what are your expectations, since you're pulling back your CapEx relative to your target? Can you talk about what they were?

We don't disclose that. I simply was pointing out that it's a little bit below what we had expected. But we don't disclose forecast, internal forecast either, before or after a period.

All right, Dave, you're not making it easy on me here.

I'm sorry.

All right. Thank you. I will come back later. Thank you.

Jordan Alliger of Deutsche Bank.

I think you had mentioned mix had had an effect on the yield environment with length of haul and weight per shipment. Can you give some sense for how the pricing looked, if you sort of normalize for mix, and of course ex the fuel surcharge impact?

Jordan, it was my responsibility to do exactly that for about 20 years, and I was never able to develop a really reliable profile-neutral model. We just simply point out that, obviously, both of those factors depressed. Maybe one measure of that is what we are getting on our rollover contracts and deferred pricing. That number on our most process-sensitive accounts is a little less than 4%. So I don't have a profile-neutral number for you. I can just tell you that I have got a lot of experience in the pricing area, and the number we have feels pretty good to us.

Okay. Just obviously, you had capped your fuel surcharges post the hurricane. I think you're back letting it float with fuel, but checking in on that. Secondly, assuming that it is back up and running, do you feel that the fuel surcharge program that you have in place adequately keeps you neutral for fuel?

You're correct in that we did cap our fuel surcharge for about a month. But since early October, the program has been restored to float with the market. I have seen some references to the fact that there may have been pricing issues associated with that, and that is not true. Our cap was solely in response to the price volatility after Katrina. It was not clear that the DOE index adequately reflected the prices. There were pipeline disruptions that were not affecting us.

So it is simply to avoid even the appearance of taking advantage of a fuel spike coming from Katrina. We just chose to cap it. Then after a month it was clear that the market had stabilized, albeit at a high level. We let it float again. But we have really not gotten pushback on that issue.

So speaking to the fuel surcharge, it is covering our costs. The mechanism works because it moves up and down with price. It has got very high customer acceptance and for that, honestly, we are appreciative to our customer base.

Thank you.

John Larkin of Legg Mason.

Question for you on hurricane Wilma, which I guess cut across South Florida this morning. Any word from your outpost in South Florida in terms of what the impact might be there?

John, I got an e-mail this morning that we have got five or six terminal facilities that are closed. That is probably mostly preventative. As you know, we have had quite a few hurricanes in Florida in the last two years, and the impact has not been material to us. Given what we now know about Wilma, I don't expect to see anything unusual from this one as well.

You mentioned that the 88 5 operating ratio was the lowest in 25 years. Is it safe to say that it is the lowest in the history of the Company, or is that too much of a stretch?

During regulated days, we had some numbers that were better than that, but they are far beyond what we keep records on today.

This is the lowest since 1980 then. Terrific. Another question on the truckload side of the business, which you by ICC definition call truckload. I got the impression from reading the press release that that was more or less for what I would call backhaul lanes, where you would fill up the empty capacity, improve your load factor with the bigger shipments.

But as I heard you talk at the beginning of the presentation today, I guess I developed a different view. It sounds like you are expecting this to be more of a mainstream-type size of shipment going forward. I just would like to hear a little more detail in how you go about identifying this type of freight and what types of customers it comes from.

Sure. I think the whole point is that there is no one definition that fits what we used to call truckload freight. Certainly we have some backhaul spot volume in that mix. But I think it is really important to remember that an awful lot of that freight is less than 10,000 pounds, so it kind of gums up the LTL definition.

At the same time, a lot of the freight that is over 10,000 pounds is not your traditional spot-volume market. I mentioned earlier our time-definite product. I was astonished at how much full topload we have in the expedited business that -- it pays well. In all other respects it certainly looks like what we would otherwise call LTL.

At the same time, we have got a dozen markets of different sizes and materiality, and some are less than 10,000, some are greater than 10,000. So I think the point of all that discourse, John, is it's probably a mistake to think of core ABF as less than 10.

I don't think that is particularly true just of ours. Back in those historic days, carriers served point A to point B in three days; in now we service in three days, and in two days, and next day, and next day before noon. And once we get it there we provide a wide variety of services. It is just no longer adequate to think of LTL as the core ABF business.

I understand. Now if we were to go back to the core longhaul LTL business as we thought about it before, with an average shipment size of, say, 1,000 pounds, it appears this particular quarter that quite a few of the non-union carriers have suggested that their fastest-growing segment is their longhaul segment.

That may be true, but I have only seen one carrier who has reported an increase in the length of haul. The rest of them have reported like us (technical difficulty) on length of haul.

But there were three or so carriers that have suggested that that is the case, that their longer haul business is growing. I guess the question for you is, are you feeling any of that pressure. Is the movement into the larger shipments and the 12 different service classes a response to that?

We have -- like the definition of LTL and truckload, (technical difficulty) definition of regional carriers, longhaul carriers is also losing its meaning. There are a number of former regional carriers that are attempting to handle longer haul freight, with varying degrees of success. At the same time, the traditional longhaul carriers like ABF are developing operating models that will allow us to be successful in the regional markets. You will begin to see us play in each other's backyard more and more.

Having said that, it is difficult for a longhaul carrier to operate in the regional marketplace without an entirely new operating model. We are in the process of working to develop those. Well, it is also true that it's very difficult for a regional carrier to use their traditional operating models to handle longhaul freight. It takes a really good hub and spoke operation, and we are not feeling a lot of pressure because you don't develop those overnight.

Got it; thank you very much, Bob.

Chad Bruso of Morgan Stanley.

Bob, it sounded like you started to touch on your efforts in the next-day market there in the Northeast. I was wondering if you could just give us more of an update there on maybe some of your efforts during the quarter, and where you are in terms of volumes or revenue, and whether or not that business is profitable just yet.

Sure. We reported last quarter on the implementation of a pilot program in 13 terminals built around our premium service employee application. We reported last quarter that those results were going to be deliberate and that you should not expect results immediately. And that is true.

We are refining that operation. The results are not material to ABF. But we are learning how to operate in the world with new operating models. We are at least please anecdotally with the kind of freight that we have been able to attract. I went into that world thinking that we would probably be successful in getting second-day business. About a third of our tonnage is already second day or less. So I thought that we would be able to attract even more of that. I think that is true, but we are even getting a lot of next-day and same-day business.

But having said that, we're not buying a lot of equipment to handle that yet, because it is still a pilot. Probably the thing that pleases me most is the enthusiastic reception from our local employees who see the kind of business that we are now competitive on. So I would encourage you to kind of keep that market for us in your sights, but expect results over, say, an 18-month or 24-month time frame.

Now along with that, I assume you want to expand that business. Have you seen anything in the last quarter here that would put you either ahead of schedule or behind schedule in terms of expanding that next year?

You would expect us to move forth deliberately. We are not going to do bet the Company on one good idea. But we're going to move forward; and again I would look for a longer time frame rather than a shorter one.

Great, thanks for the time.

(OPERATOR INSTRUCTIONS) Brannon Cook of JPMorgan.

Solid quarter. I had a question. You talked about tonnage trends were up stronger year-over-year in September and October versus earlier in the quarter. I was curious, what was the driver of that in your view? Did you see demand pick up at all? Maybe some large account wins? Or were comps a little easier?

I think it is a comp issue. Certainly you see increasing demand as you move forward into the fall, which is historically our peak period. But if you look at the year-to-year numbers, again, there are more influenced by the exceptional numbers in '04 than what happened in '05.

Okay.

It is a comparable thing.

So it sounds like the demand environment has been somewhat static in your view, then?

Well, I did point out that if you look at '05 versus '03, we're up each quarter; and the percentage that we're up is higher each quarter during the year.

Okay. I had a question on fuel surcharge. I guess, it sounds like you are pretty comfortable with your fuel surcharge that you have in place right now. When you're going out and talking to larger customers and renewing large contracts, are you seeing more customers look to build in a higher base rate increase, versus perhaps take away some of the fuel surcharge that was built in? I.e., are you seeing some switch on stronger price and reduced fuel surcharge?

I don't recall seeing any of that. Customers embrace the idea that the prices move up and down with fuel. I have not honestly seen anyone who is interested in building into the base rates.

Okay, thanks for the time.

Edward Wolfe of Bear Stearns.

You gave some -- at the beginning of your remarks you said that the tonnage trends for October were modestly up. Did I hear that right?

I think the press release says slightly ahead of last year.

Is that LTL or is that total?

That was total.

Can you give me a sense, are LTL up as well, tonnage?

Our trends for both LTL and truckload in October month-to-date are consistent with September.

And in September LTL was down a little bit, is that what it was?

September was off 7/10 of a point in LTL and up mid -- well, up about 15% for truckload.

What is your sense of the pricing environment as you see it? If we look at net of fuel you are still positive a couple percent. But it's decelerated a little bit. Can you give you a sense of, as you look out over the next six or 12 months, how you see the pricing market?

Again, I point to you that the number you are looking at doesn't include profile. While we don't have a perfect measure, you have got to consider profile in those numbers. The environment is still competitive. But at the same time, when we -- what we talk about on a day-to-day basis, pricing is not as high as you might think. This is a market that really embraces value more than it ever has.

So pricing is always going to be a factor in our market, but when I read analyst reports that seem to -- the analyst reports have predicted, like economists, nine out of the last five pricing downturns. I would suggest to you I haven't seen a lot of change over the last year.

Well, it's interesting. Because you guys captured fuel surcharge and brought it back. But FedEx and CNF did not bring it back right away, which leads one to believe that maybe on the regional side there is a little bit more of an issue than you're feeling. Did you get a sense that maybe some of your tonnage trends got better as a result of reducing the cap? Or you think there's no relation there at all as you see it?

There is no relation. In fact, we instructed our salespeople not to use it in a pricing sense, because we didn't think it made sense to do that. Sometimes things are just as simple as we explain them; and in this particular case, we did not cap our fuel surcharge for pricing reasons. We capped it because our customers have been fair with us on fuel surcharge, and we wanted to be sure we were being fair with them.

Okay. Switching gears for a second, one of your competitors noted that Katrina and Rita impacted them about a nickel in the quarter. Is there any way to quantify what the impacts were to you from those hurricanes?

Ed? This is Dave. The impacts were very minimal. We really don't want to get into the numbers, because they are just not significant.

Okay. In terms of Clipper, it is starting to do what I guess you had hoped when you divorced some of the business from it. Just trying to get a sense, longer-term you have always said if we don't get the return up then we got to get rid of the business. Now the returns are starting to improve. Is there any strategic reason why you need to have Clipper? Or is it to a point where maybe someday starts to look at the improvement and maybe you can sell this at some point?

Well, we have said really three different things. One is we have to get the returns up, which -- the returns are very good right now. But secondly, over time it has to become significant to the total Corporation. If we can't accomplish both of those, then it is not a good fit for the long haul. But we're still assessing both of those situations.

So nothing in the near to intermediate term to expect from there?

Not that I am aware of right now, anyway.

Bob, just a follow-up. Somebody had asked the question earlier and I have asked it of you before; but I would just like to get your thoughts on it right now. It is pretty impressive that the margin year-over-year improved 70 basis points; and more like 120 I guess if you had not capped the fuel. Yet the tonnage was down for the second quarter in a row.

How long can you go improving margin while tonnage is not positive? Is there some time frame that you -- at some point it compounds and you've got to start to grow again?

Well, as I said a few minutes ago, certainly growth with profitable freight makes all our jobs easier. There is freight and then there is freight. You can be flat, and yet if you swap one account which is a high piece count account, for another account that is easier to handle, your operation will improve even though your revenue per hundredweight might actually go down.

So we were able to do some of that. But as I mentioned before, clearly we know that there is a need to grow. We are not going to take freight that doesn't contribute to the bottom line at the expense of growth. But we're also aggressively going to be going out trying to attract new business, and we have got a number of initiatives underway to do that. Some of them are longer term in focus but there's a lot of talk here about profitable growth, and we're certainly focused on doing that.

This is Dave. A couple other points. I think you also have to keep in mind that even though our business levels are pretty much flat in total right now, we're still operating at a very high level. So we're not looking at low levels of freight. That's -- I think that is part of the equation and that is very encouraging to us.

I guess that's the question I'm asking. At what point would you consider that you are not at high levels? Is it 5% down from here, 10% down from here? Where is kind of where the network needs to get freight refresh, because this stuff has to compound if it stays negative over a period of time?

Well, keep in mind our focus is growing operating profit. Now, to some extent you have to grow the top line to do that, but our internal measures that we look at -- we look at a number of things, but our primary focus is growing the operating profit and getting above-average returns. So there is no simple answer to the question.

Okay. The next-day product, can you give us just an update of how many facilities you're at and whether that has been growing as you thought it was?

I presume you are talking about the regional operation, which is not only next-day focused but also today. We still have 13 pilot terminals and we are continuing to hone the operation in those terminals, and with the terminals that they serve.

Has there been significant revenue at this point? If so, whether it is or not, is it growing the way you kind of envisioned it would? Is it a success at this point?

Yes, I would say characterize it as a success. The results are not material to the Company or even to that area of the country yet. But we are seeing the kind of freight we hoped we would see, and we're seeing some freight that we didn't really anticipate.

What kind of freight didn't you anticipate, and where does this go next? Is there like you go from here to the Midwest or you go from here to more terminals in the same area? What is the growth projection that you look in it?

Well, the kind of freight that I did not anticipate was even same-day freight, and it is kind of interesting how the market is for that kind of business. Where we go from here is something that we talk about internally, but we don't have anything externally to report.

Okay. Thanks a lot, guys, appreciate it. Good luck, Dave.

(OPERATOR INSTRUCTIONS) Tom Albrecht of Stephens, Inc. There is no response.

John Barnes of BB&T Capital Markets.

Hey, guys. Good afternoon. Real quick, could you -- I heard in your prepared comments you talked about reducing employee overtime. I noticed as a percentage of revenue that was in a line item that came down pretty sharply, the salaries and wages. Is there anything else besides employee overtime? Could you just go through what you did on that line item in particular?

Well, you've got several things impacting that line item. That is where the workers' compensation is that, but the casualty claims are in insurance as opposed to salaries and wages. Those percentages are impacted by the higher percent of revenue, particularly the fuel surcharge. That does impact the percentages anyway. And our non-union health claims were down some in the fourth -- excuse me, in the third quarter, although year-to-date they're still trending up quite a bit.

That was down year-over-year or sequentially?

Third quarter to third quarter.

Okay, year-over-year, okay. Is there anything in the quarter that was somewhat deferred? Was there any kind of bonus program that was deferred or anything like that? With your returns and the way you pay bonuses, I am assuming this catches everything, correct? I mean, there is nothing else standing out of this line item?

There is -- we never defer anything, John.

Okay, all right. I just wanted to make sure.

We true-up the bonuses each quarter on a year-to-date basis.

Okay. All right, very good. In terms of the workers' comp, is a $2 million year-over-year improvement, is that sustainable, or is there something you're doing on that front to get the number down? Or is this just a little bit better incident quarter than you have had or something like that?

John, I think once again, the aberration on workers' comp isn't this year. It was the last couple of years. The current year kind of brings us more in line with what our history was. Certainly, we have spent a lot of attention on reducing workers' comp for a lot of the right reasons, and perhaps we have had some success in that. But what you may be also seeing is kind of a return to a rational level after a couple of years. At the time, we said these numbers were out of line, and it turns out they were.

Okay, all right. As you go forward, you indicated that you're not going to after this quarter provide any kind of breakdown between TL and LTL tonnage; that you are just going to provide a total tonnage number. Is that correct?

Right.

So going forward, are we going to see -- I guess the total, I guess, revenue per hundredweight will reflect that as well, right? It's going to reflect more of a total -- are you not going to break down the yield by total in LTL as well?

That's true. John, I have to tell you that internally, we never use those numbers. You could go through this company and try to find breakdowns on LTL at 10 or truckload at 10, and the only place you will find them is on the material that we've reported externally. And the reason for that is that they are no longer reflective of the business.

Okay.

We think not only are they nonmeaningful, they have gotten to the point where they may be misleading because of this crossover effect I talked about.

Okay, very good. Lastly, you guys talked pretty extensively about your TimeKeeper product in your press release. Just out of curiosity, what percentage of your freight today is moving under some time definite program?

John, we don't disclose those numbers for competitive reasons. I think I said earlier that the numbers probably are not material to the overall results, but we don't disclose individual market segments.

Okay, thanks, guys.

Jack Waldo of Stephens, Inc.

Hi, guys, just a few follow-ups here, more modeling purposes. Is there any reason to think that the tax rate will change significantly from recent trends?

We're looking at a tax rate of 39.2 for the year.

Okay. Then the fourth quarter of last year, was there an abnormally high insurance expense that you might recall?

I don't recall.

Okay, I had written down a $3.9 million kind of abnormally high expense there. That doesn't ring a bell?

No, sure doesn't.

Then you had indicated that fuel surcharge -- that capping the fuel surcharge cost what, $2.2 million in revenue and about $0.05 in earnings?

Yes.

What was the aggregate number for the quarter of fuel surcharge revenue and then the impact of that to earnings?

Just a second. I'm going to give you the fuel surcharge percentage, and then you can do the math and see. Fuel surcharge percentage for the third quarter this year was 11.2%, and for the third quarter last year was 6%.

Okay. Then your operating supplies in the expenses line would be where your fuel expenses fall; is that correct?

Yes.

Okay.

You've got to keep in mind, Jack, that higher fuel costs impact almost all of our costs, including the cost of our new equipment as well.

Okay, so if you looked at the delta in the operating supplies and expenses line, what you're saying is that that doesn't 100% reflect the full impact of rising fuel prices?

That's correct.

Okay, thank you very much.

Ladies and gentlemen, we have reached the end of allotted time for questions and answers. Gentlemen, are there any closing remarks?

We just want to thank you for joining us this afternoon, and we appreciate your interest in Arkansas Best Corporation. Thanks a lot.

This concludes today's conference. Thank you for your participation. You may now disconnect.