ArcBest Corp (ARCB) 2007 Q3 法說會逐字稿

Good morning. My name is Beth and I will be your conference operator today. At this time I would like it welcome everyone to the Arkansas Best third quarter '07 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 session. (OPERATOR INSTRUCTIONS) Thank you.

Mr. Humphrey, you may begin your conference.

Welcome to the Arkansas Best Corporation third quarter 2007 earnings conference call. We'll have a short discussion of the third quarter results and then will open up for question-and-answer period. Our presentation this morning will be done by Mr. Robert A. Davidson, President and Chief Executive Officer of Arkansas Best Corporation; and Ms. Judy R. McReynolds, Senior Vice President, 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 more complete discussion of factors that could affect the Company's future results, please refer to the forward-looking statements section at the company's earnings press release and the company's most recent SEC published filings.

We will now begin with Ms. McReynolds.

Thank you for joining us this morning. I would like to update you on our third quarter results, and I will turn it over to Bob for further discussion of the quarter.

Arkansas Best's third quarter 2007 revenues were $480 million, down from last year's figure of $507 million. Our diluted earnings per share were $0.75 a share versus $1.24 a share last year. Arkansas Best's operating cash flows were $93 million year to date. Our net purchases of property and equipment totaled $69 million. So far this year, we purchased treasury stock for nearly $5 million we paid common stock dividends of $11 million. Our balance of cash and short-term investments was $147 million at the end of September and this compares to $136 million at the end of June and $140 million at the end of last year. Full details of our GAAP cash flows are attached to our earnings press release.

Our effective tax rate for the nine months ended in September was 38.1% which is below the 38.9% rate for the same period last year. The rate is lower because of our tax exempt income from short-term investments and life insurance policies and because we recorded a tax credit for using alternative fuel. This year's third quarter was the first time we have recognized this fuel tax credit.

Our reduced tax rate improved our third quarter earnings per share by $0.02 a share. We expect our fourth quarter and full year effective tax rate to be in the range of 38 to 38.5%. We are planning for further reductions in our 2007 capital expenditures. We now expect the net CapEx range to be between $80 and $90 million. This is down from the previously reduced range of $95 to $110 million that we shared with you in the second quarter.

Our current business levels are challenging, and we have continued to evaluate our capital needs relative to our business levels. Throughout this year we have been reducing the size of ABF's overall equipment fleet by taking advantage of option to sell older excess equipment and now, I would like to turn it over to Bob for his comments on the quarter.

Thanks, Judy, and good morning everyone. ABF's freight system, our largest subsidiary, reported third quarter revenue of $462 million that's down from last year's third quarter revenue of $494 million. ABF's third quarter operating ratio was a 93.8. That's compared to a 90 even in the third quarter of '06.

As this has been the case since October of last year, we've had a challenging LTL freight environment that continues to impact our operating margins. In addition, costs associated with ABF's regional investment has added approximately 130 basis points to ROR compared to last year. Beginning in the fourth quarter, the year-over-year operating ratio impact to the RPM should be less as we begin to compare back to periods with similar costs. Finally, the combination of higher costs associated with Workers' Comp claims and lower expenses on third-party casualty claims added nearly 100 basis points to ABF's operating ratio compared to the third quarter of '06. However, on a year-to-date basis and on the last four quarters basis, these costs are in line with previous periods. They're actually below our five-year historical average.

ABF's third quarter tonnage declined 5.8% compared to last year. Through this August, those tonnage levels had remained fairly consistent with no improvement but no further deterioration since we had the initial downturn in October of '06. However, beginning in September and continuing into October, we believe that we see some further weakness in the economy and that caused a downturn in our tonnage even comparing back against easier comps in the fall of '06. So far in October tonnage trends are running below the same period last year by about 4 to 4.5%. As a result, we're taking another look at our expenses. We're going to further reduce costs and we're going to continue to align the size of our network with the amount of business that we see out there.

In the third quarter ABF's total build revenue for 100 weight was essentially flat with the same period last year, and as we talked about last quarter, changes in freight mix and shipment profile also had an impact on the yield statistics that we reported. We're seeing additional shipments from our regional initiatives, so our third quarter length of hall declined by 1.8%, and also during the third quarter we increased the number of spot truckload shipment that moves through our network. These shipments helped to improve capacity utilization, but they also contribute to an increase in ABF's average shipment size. Without the impact of these and other profile mix, pure pricing on ABF's traditional LTL business was up about 2% versus last year's third quarter and that's about the same level of increase that we've seen throughout the year on our contract business. Regardless of the freight environment in which we're operating, ABF is going to offer value by meeting the individual needs of our customers, and we will be pricing on a case-by-case basis.

We obviously remained optimistic about the success we're seeing from ABF's regional performance model. With this operation ABF offers improved next day and second day service throughout the eastern two-thirds of the United States. While the addition of these shipments is obviously affected by the existing freight environment, we're making progress. During the third quarter tonnage trends for the shipments were clearly better than those in ABF's traditional long haul markets.

Over the long-term, we believe the opportunities to gain significant penetration into the regional business is well worth the initial investment that we're making. Our organic approach to adding regional business minimizes the risk in this important venture. ABF's RPM initiative allows us to be competitive in the regional market from the transit time and cost standpoint, and we believe that ABF's superior service and our attention to meeting specific customer requirements will contribute towards growth and success in this important market. The current freight environment is difficult. It is pretty clear, but we continue to pursue new initiatives to grow our company and during times like this it is especially important to do things correctly and efficiently in order to maintain your existing customer relationships. We believe we got the best employees in our industry and their success and attention to detail have a positive impact on our reputation in the marketplace and on our ability to deliver a superior product.

As we saw during the first half of the year, the ABF team continues to excel in claims of free cargo handling. ABF year-to-date claims ratio is a percent of revenue remained at 0.7%. That's on our lowest level in the last 25 years. We also continue to give excellent transit time reliability in the marketplace, and we think that's especially important in a freight downturn.

During 2007 in the National Truck Driving Championships, two of ABF's finest were recognized as best of the best in their respective driving categories. John Hazlett, who operates in ABF's Vincentown New Jersey service center, took top honors in the three Axle Class, and Scott Harris in our Albany New York facility was the national champion in the five Axle Classification. John Hazlett also won the ATA award for professional excellence which recognizes the contestant who most exemplifies the best attributes of a professional truck driver. We think that John and Scott are just two of the 15 ABF drivers who competed in the national competition this year but they're good examples of the fine ABF drivers all across the system. Consistent record of superior cargo care and drivers who are just the best in the industry are a couple of examples of what distinguishes ABF, and that's going to help us in good times and in tough times. With that, I think we're ready to take some questions.

As a reminder, ladies and gentlemen, if you would like to ask a question, (OPERATOR INSTRUCTIONS). We will pause for just a moment to compile the Q&A roster.

Your first question comes from Justin Yagerman with Wachovia.

Hey, good morning guys and Judy.

Good morning.

Hello again, Justin.

Wanted to get a sense with taking on more of the spot truckload freight, how does fuel surcharge work on that? That does that go onto a regular, you know, LTL fuel surcharge system or are you taking that on from brokers where you're maybe getting dinged a little on the fuel side?

We do almost no business with brokers. The spot volume business is subject to our normal fuel surcharge at lower weights and at larger weights, there is a larger fuel surcharge which is competitive with the truckload carriers. Obviously, when we quote that business, we're quoting a rate including the fuel surcharge and we try to be competitive in the marketplace, so you can say that the bottom line price is competitive and it probably influences what the fuel surcharge number is, but we -- it's on there and we're assessing it.

Okay. So on the higher weights, if I just got it right, it is for like TL fuel surcharge on the lower weights, you know, it's pretty comparable to what you're getting on typical LTL shipments.

Justin, if you look at the dominal schedule above a certain size, the fuel surcharge percentage actually doubles.

Got it. Okay. And just, I guess, I don't know if you mentioned this or I didn't catch it. What was your weight per shipment up year-over-year in the the quarter or down?

It was up 1.2%.

Okay. Can you talk about the mix and how it has changed I guess now in the quarter between truck truckload and LTL, how much more truckload freight are you picking up? Was your tonnage actually up in that year-over-year?

Well, that would depend upon what definition you have for truckload and LTL. I think it is just fair to say that we had more of the larger spot volume shipments than we did in the third quarter of last year, but pretty consistent with what you saw in our second quarter for this year.

Okay and then I - looking at the RPM rollout, I know you guys obviously saw some OR degradation from that. You expect that to improve as you start to lap the rollout but can you talk a little bit about what you're seeing in that market and what the progress is and the brand recognition is starting to feel like out there?

Well, we're not going to break out specific numbers for you, but I think you can tell from the tenor of our remarks that we are pleased with our success so far. We're obviously not satisfied but we're pleased we're making a difference.

I think it is pretty interesting that we've had a good brand as a consistent, reliable, long-haul carrier, and we are getting people to think of us as a regional carrier or actually a full service carrier and that process is proceeding. It is obviously easier to do that with existing customers but we're beginning to break that long-haul loan weight distinction. I was meeting with some of our field executives this week and they told kind of an interesting story of how this reliable service in the next day market is actually helping to brand us more favorably on all the products, so I think ultimately they all work together. We're going to have to sell this business account at account, and the most difficult shipment to give is the first shipment. That first Olive out of the bottle is hardest but once customers see that we do really perform like we say we're doing, we're getting some enthusiastic participation there.

Do you think you can get this business to break even in 2008 even, you know, without cooperation from the economy?

I don't know. You know, we're spending as you know 100 to 130 basis points, and as business grows, we obviously we'll begin to recoup that investment. Answer to that would require me to forecast what's going to happen not only in overall tonnage but in the regional market then I don't think we're capable of doing that.

Okay. Last question. You know, as you move forward, pricing comparisons get a little bit easier just on a year-over-year basis but , you know, it feels like things have gotten more competitive. Do you think the revenue per hundred weight from here when you factor in the need for truckload spot business and the rest stays negative at least through the first quarter of next year or how do you think about that kind of on a

Well, first of all, I don't feel like pricing is negative. You know, I'd love to be getting 3 and 4% rate increases, and we're not. Over the long haul, you know, we need more than the 2% we're getting, but I think that's positive if you factor out the change in the length of haul haul and you factor out the effect of these spot volume shipments, which we can eliminate when the LTL tonnage returns, so you know if you focused on the fact that even in this environment during the third quarter and on the year-to-date basis, we got 2.8% rate increase on the most price sensitive customers we have which are the onces we contract for pricing, those aren't bad numbers. They're certainly not negative numbers.

I appreciate it. Thanks, guys.

Thank you, Justin.

Your next question is from Tom Wadewitz with the J.P. Morgan

Yes, good morning.

Hello, Tom.

Good morning, Tom.

Let see, I have one -- I guess, two different primary questions I want to focus on. On the first one, you know, your outlook on tonnage and demand, this is - the things are getting a little bit weaker even than they were already. Does it feel like this is pretty comparable period to the, you know, '01, '02 weakness in LTL, and I guess if it is, does that lead us to believe that, you know, that the margin might be on, you know - you might be operating at another year of margin pressure in 2008?

Well, certainly the 2001 era was a tough period. I think we had individual quarter declines which were on the order of more, I am thinking like someone just put me a chart here that shows in the fourth quarter of '01 versus fourth quarter of 2000 our pounds per day were off by 13.6%, and we don't see this environment being that tough. If you look at full year '01 over full year 2000 tonnage was off 7.7% which again is probably a little worse than what we've seen. I think it is interesting to look at how our OR deterioration in this current period compares with that period. If you strip out the effect of RPM and if you use Workers' Comp and BIPD on a full year basis, the effect of our negative operating leverage is about half of what it was in the prior period, so we're, you know, while we're not really happy with these results, we think have done a pretty good job of cost control and account management.

So I guess in terms of the way you think the market is going to work, and you definitely are showing some, you know - some good control on the cost side, is it that the LTL market work such that you would expect to have two years of weakness or is there some chance that you can see it bounce back in a meaningful way in '08? Because it looks like in, you know, ''01 and '02 you had pretty much two years of weakness. It wasn't like one year followed by a quick bounceback.

Certainly with what happened after 9-11, maybe that was an unusual circumstance that was compounded, and in this particular cycle, you know, the turkey market usually leads the rest of the economy, and it would appear that we led the economy for about twelve months. I think we typically lead by by six months. I got a little doubt that the trucking industry will rebound before the general economy will, but the question is when will that happen, and I don't have better insight on that than you do, Tom.

Sure. That's fair enough. In the press release this morning you commented on the Teamster liability for the withdrawal from the pension funds that that new estimate had increased, I think, it's about a 30% increase, a little over that. Was that much of an increase does that put at risk your objective of trying to withdraw from the funds or is that a very manageable increase in, you know, what would essentially be converted from a contingent to our balance sheet liability?

We've been modeling our internal proposals on the basis of the new number. We've been modeling that for some time because we had expected some change in that range.

Okay. So that's still a central goal of your negotiation would be to withdraw from those plans?

It is. The withdrawal of UPS parcel from the central states fund puts a lot of money in there, and we think it reduces the short-term risk of funding deficiency, but it really doesn't change the long-term status of the fund, and in fact the elimination of a large stable contributor may be introduced with some additional uncertainty over the longer term.

We've got a real opportunity with our balance sheet to provide comparable benefits to our employees at more competitive prices, more competitive benefit costs, and result of that say is a win for the company, it is a win for our employees and it is a win for customers, so that's the central focus of our ongoing negotiations and honestly, we're getting a lot of resonants in that message from our employees.

Okay and you still think that the UPS' success kind of makes it easier for you to follow that path and perhaps have some success in that withdrawal as well?

Well, you know, I point to the explanations for that withdrawal and I agree with those explanations, and they apply to us as just they do for UPS parcel.

Right. Okay. Great. Thank you for the time.

Thank you, Tom.

Your next question comes from Ed Wolfe with Bear Stearns.

Good morning.

Good morning, Ed.

Hi, Ed.

Hey Bob and Judy. Just to follow up on Tom's question, if I take the middle range and assume that you're successful and you have to pay an $825 million, you got to fund that. I am guessing you fund that with debt and the debt ratio goes up to call it, you know, near 60% and you're confident you can then pay down cash with your cash flows, is that how to think about it?

Ed, we've done a lot of modeling. There are a lot of different scenarios. We've honestly got a lot of levers at our disposal. We're not going to focus too much on that until we get down to seeing what we have to work with and we're obviously not going to spend a lot of time talking externally about that, but let me just say that withdrawal from the pension funds is something that we can manage and be comfortable in doing so.

Okay. And in negotiating with the Teamsters just generally, is there anything you've learned in the last two or three years rolling out RPM that you can go to them and say, hey, this is what's not working and this is what's working and is there more flexibility or something to work on that side?

Ed, that's a pretty good point. You know, we've had some informal and preliminary discussions with the IBT, and we pointed to the fact and in fact I think he they pointed out to us that the places where we see business growth and job growth are the places where we're doing things differently. We have approached the regional market with increased flexibility, done so in a fairly revolutionary manner. We've got some other markets where we're doing things differently, and those are the places we we're seeing growth, and I think that's a model for what ABF and the IBT can do together. I have got no doubt that we can extend the successes that we've seen in the regional market all across our system, and we're -- that's a message that's pretty clear.

Thanks. Judy, if I just look at 130 basis points and more RPM costs, that backs into 6.2 million incremental costs year-over-year. What's the absolute amount of extra costs in the quarter?

Are you talking about in the third quarter of '07?

Yeah.

It was 5.7 million.

So, I'm missing something that if it is 6.2 year-over-year, you had a negative 500 impact a year ago?

Well, excuse me, I gave you the gross number for the third quarter of '07. It was about $2 million in the third quarter of '06.

So its 5.7 versus 2?

Yes.

Okay and in fourth quarter of '06, how much was it?

Well, let's see. In the fourth quarter of '06 we had about $5 million, and let me say this, in the third quarter of '06 we had about $2 million of incremental costs over the previous period, in the fourth quarter of '06 we had about $5 million, and the third quarter of '07 we had about $5.7 million.

So the 5.7 million was the absolute expense, it'is not the year-over-year, it's the absolute.

No, it is the year-over-year expense change.

So, what was the absolute number?

It would be about let's see, about $7 million.

Okay. That's (inaudible).

Yes.

Okay. That's helpful.

Okay.

Okay. That's all I got. Thanks a lot. I appreciate the time.

Okay. Thank you.

Thank you, Ed.

Your next question comes from Tom Albrecht with Bear -- I am sorry, with Stephens Incorporated.

Hey, good morning everyone.

Thought you moved, Tom.

(Laughing)

Yeah, we've done that a couple times in our career but not lately. Let me get a couple factual questions out of the way, and I want to go to a couple bigger picture questions. What's the number of work days for the fourth quarter of '07?

Hold on a second. David is getting that for us.

Okay. And then, can you give me the length of haul? You mentioned the change but kind of [fanatical] about tracking numbers like that.

It is 61 days in the fourth quarter.

Okay.

And the length of haul change was a decline of about 1.8%.

Right. Do you have the actual length, I guess, is what I am asking?

It's 1165 in the third quarter of '07.

What was the year ago number?

1186.

Okay. Then, all right, and then how about the kind of month-by-month tonnage comps July, August, September? Just how - what were the monthly declines that you went through in the quarter?

In July and August, our tonnage was down about 5%, and in September, it was down close to 7.

Okay and then, you know, on this whole pension discussion here, I want to make sure, you know, I understand this a little bit. Do you - what's your current cost of debt and if you were to borrow let's say $700 million because you do have some cash on hand, do you have an estimate what your cost of debt might be in that situation?

Well, you know, we really don't. You know, the market is changing so much that I would hesitate, you know, to provide that to you. You know, certainly at higher levels of debt, you know, I think that our cost of money would be impacted. It would be higher but, you know, we have seen estimates of that but I would hesitate to give them to you because the market is changing so much.

Can you refresh my memory, Judy, on your average cost of debt right now?

Well, it is a little bit above 5% because, you know, we have a really good financing facility with our credit agreement and our incremental margin above LIBOR is not much but, you know, we're in a good situation there but I wouldn't, you know, say that's a good benchmark for what you would have in a bigger borrowing scenario, and again, I would hesitate to give that to you because the market is changing so much.

You also need to keep in mind that those numbers are pre-tax numbers and on a post ex basis, the numbers get a lot smaller.

You mean in terms of the impact to earnings?

No, the impact of the borrowing requirements.

But you're (inaudible) on the balance sheet. You know, initially you might have some amount that would be like that in the scenario where you withdrawal from the all funds, but very quickly you would get the tax benefits back.

Right. Do you have an estimate if you were successful in getting out of the central states fund if how much your annual pension expense? How much lower it might be in a new pension plan that you established?

We do know those numbers but we're not prepared to disclose them.

Okay. I will keep asking.

(Laughing)

One thing to remember is it is a part of negotiations.

I can imagine. I just want to make sure the 800 to 850, that's a figure that would encompassed what, all 27 or 28 of the Teamster plans?

Yes.

And how much that approximately is just the central states, 50% or --

No. Its about, of the withdrawal number about 80%.

Okay. And what is the correct number, 27 or 28 that you're part of?

27.

Okay. All right. And then, well, just save the other for later. So the 2008 tax rate, do you have an estimate on that as a result of the, I guess, you know the energy tax credit you talked about for the fourth quarter but how about next year?

Well, I do think that that would, you know, continue to be there but I don't have an estimate yet. We'll probably disclose some range on our fourth quarter conference call in January.

All right. And then any chance that a new pension plan that you would establish would actually be a defined contribution as opposed to a defined benefit or is that like fat chance?

Those are all subject to negotiations.

Okay. Can you talk, Bob, even a little bit theoretically how that would work? I mean, you've got a bunch of retirees and money through the central states plan and yet, you set up some sort of a new plan going forward. Whose covered under the old? Whose covered under the new? Is there some sort of wrap around agreement?

I can appreciate your persistence, but we're not going to talk about elements of that negotiation with anyone other than the IBT.

Okay. I know. Once and for all said and done, we'll get some color on that.

Exactly.

Is there, I guess - is there any reason to belive that you would reach an agreement separate from the labor agreement? I mean, one ahead of the other or at this point, it makes sense to assume that there there will be simultaneous agreements?

Are you talking about reaching an agreement on the benefits...

On the regular Teamster contract.

On the benefits issue as opposed to the other provisions of the contract?

Yeah. I mean are they going to be done hand-in-hand?

They're all folded together. You know, we have two goals in our labor negotiation. One is to secure benefits for employees, and the other is to develop a contract that allows us to grow business and grow jobs, and both of those are folded together. They're part of the same negotiation, so I see us working on those simultaneously and reaching agreement at the same time.

Okay. And then I guess lastly will the Board consider the possibility that your next round of peak earnings potential would be less even though you would get rid of an open-ended liability and, you know, the potential loss market cap if you're only able to make $3 next cycle versus $4? Is that part of the whole thought process as well, you know, In light of the added interest expense?

I think that question is way too hypothetical for this point where we are.

Okay (Laughing).

(Laughing)

Okay. Well, that's all I've got for now. Thank you very much.

Thank you, Tom.

Thank you, Tom.

Your next question comes from David Roth with Stifel Nicolaus.

Good morning, everyone.

Good morning, David.

Hi, David.

Last year in the fourth quarter, I remember everyone was a little caught off guard by the lack of peak season and your labor management was suboptimal due to the unexpected flat tonnage that continued from third quarter of '06. Have you been handling that better this quarter or I guess what should we be expecting in the fourth quarter in terms of labor management?

I agree with your premise, David, and I think it is fair to say that we again are not seeing a peak season but you also can assume that we are no longer listening to those who tell us that good times are just around the corner. Not only have obviously - have we reconciled our business to that downturn but we're continuing to look at the amount of tonnage that we have in the fourth quarter, and we're making further adjustments based on the 4 to 4.5% decline that we're talking about.

You said that you've been reducing the size of the ABF's fleet. By how much is it down year-over-year?

Well, you know, we have continued to match our equipment fleet, you know, to our tonnage levels, and I think whenever we close the year we're anticipating having that matched up really well, so there is various reductions in various categories, but the goal that we have is to make sure we have it right sized with our business levels, and giving you those percentages might be a little confusing to you because we have reduced our rail utilization, and that's involved in the mix here, but just suffice it to say that we have reduced our fleet and we're going to continue to do that so we have it (inaudible) with our business levels including this shift away from rail.

And do you have the percent of rail miles in this quarter versus last quarter?

Yes, It was 13.6% this quarter versus about 17 - yeah, 17 last quarter.

Okay. And then, as far as the RPM model is concerned, have you had to be a little bit more aggressive on price in this market to get volume? I know it has never really been your thing but from what we're hearing from other carriers, the regional is more competitive than the long haul and can it be the best time to try to get into that market?

We're finding that we need to make sure that our rates are competitive - our base rates are competitive with those players that are in that market, and our pricing analysis is more around making sure that we have base rates comparable to those other players in the market. As you might imagine, our rates historically were based upon the a lot of (inaudible) in those regional lanes, and now that we are have more direct service, different set of rates are appropriate, but in terms of the effective discount, I believe the effective discount is actually a little lower in that market than it is in the longer market, and we expect margin that are comparable to our long haul business.

And last question with along semantics where you talk in the release about the pricing environment being very competitive yet it is still being rational. At what point does pricing stop, you know, being very competitive and turn to extremely competitive and irrational? Where do you draw the line?

(Laughing)

Just give a little more color on your comments there.

Somewhere we ought to publish definitions and quantify what those adjectives mean. Your know, you probably heard us speak out in the financial community, and we talked about an environment which is much different than the pricing environment was in the 80s and early 90s, and I think those comments apply especially in a freight downturn. Our company used to operate between 95 and 100 based between the business cycle. The good time we would operate 95 and occasionally a little better, and then during downturns like we're seeing now, we would approach 100 operating ratio.

In the period after the mid-90s, we've operated in a better neighborhood. We can approach an 90 operating ratio in good times and you see the numbers we post this year and on what are really disappointed -- disappointing tonnage numbers, and I think it really speaks to the environment we find ourselves in which is honestly more rational. I think I guess I would point to a major carrier who earlier announced a pretty significant cut in their rates through the fuel surcharge mechanicism, and I think it probably speaks a lot to the rational environment we have on what didn't happen. You see that that's had not a lot of apparent effect in the marketplace and not a lot of carriers have jump odd the band wagon. It is pretty clear that 15 years ago in this industry that would not have happened. So, I think you got to interpret our pricing comments in terms of the fact that our 2.8% increase on contracts in deference is not a number we're happy with in the long-term, but in the scheme of things it is a pretty good number for the environment we find ourselves in.

Thank you all very much.

Thank you, David.

Your next question is from Ken Hoexter with Merrill Lynch.

Hi good [aft] - good morning.

Good morning, Ken.

Can you talk a bit about the -- just one clarification on the Teamster thing if we can jump back to that for a second. Is it - am I right that you want to withdraw from all of them or is there a chance you would negotiate to just do the central states?

We believe that all of the multi-employer pension plans suffer for the same deficiencies. They're all at various stages of disrepair, central states being the worst case of that, but all of them are chaotic and do not represent an efficient way of delivering good benefits for our employees and therefore, we're going to pursue withdrawal from all of those funds.

Okay. Great. Can you - you ran through a volume growth this year. I know last year in the fourth quarter we kind of deteriorated as you mentioned earlier. Can you run through what October, November, December looked like last year?

Sure, just...

From a tonnage standpoint?

Yes.

Okay. October and November were down about 7.5%, and December was down about 6.

Okay.

Total fourth quarter was down 6.9.

Okay. And then when you talked about moving more into the truckload -- some of the business, are you talking kind of the tonnage or are you talking about using some of your pops to go kind of long haul? I am trying to understand what you mean by supplementing the tonnage by moving into some of the truckload sector. Is that more just the weight of shipments you're taking?

Well, Ken, our LTL business is what drives the bus at this company. It is what we focus on but in periods where we have empty trucks moving (cut voice) in highway, we will go out and find larger shipments that we'll try to take away from the truckload sector and we'll do so in a way that provides incremental return to us. That's a good thing because it does not disrupt our LTL pricing, our LTL relationship, and it provides us an opportunity to supplement the -- you may recall earlier in '06 we were actually discouraging that traffic. We raised prices a lot to run it off because we wanted to protect our service on our LTL product. As you got into the fourth quarter and beyond, we began to reattract that business, and it is very useful in terms of balancing our operation, not only from empty mouth standpoint but also from a capacity utilization standpoint.

It allows us to provide stability to our LTL customers but also more closely optimized our overall results. It is spot business in the true sense of the work.

But your talking about the - not any of the P&D equipment. You're talking about the stuff that would have been moving between your service centers to carry freight if it went one-way, it is more balancing of the loads?

Yes, that's true.

Okay. Lastly if I can come over to pricing, I just want to understand, I guess, in this weakening environment there is still tons of smaller companies out there, you know, with revenues, $100 million and less. Do you see -- I guess is it just the increased focus of the fewer larger carriers like FedEx, UPS, yourself, YRC, that are more dominant in the network now than they were 10, 15 years ago that's enabling this kind of continued price increase because of the consolidation or I am just trying to understand why in a freight environment that it is down are the smaller companies also not getting more aggressive recognizing that bankruptcies would start to creep up faster?

Well, it certainly has always been a good bet in this industry to bet on some of the smaller players going out of business, and I expect that this downturn will be no different. Probably may see more that in the truck load sector than you see in the LTL sector because our field has already been narrowed pretty close, but you'll see that going on, but I think there is probably more than that a real fundamental misunderstanding externally about the nature of this business. It's viewed as a commodity business where price is all that matters and price is important but there are a lot of other things that are really important to customers, and I pointed to a few of them and I could point to more. There are very fundamental differences among trucking companies and most of the ones that are left in this industry honestly are pretty good. We have to think we do things better than the field, but the whole field is so much better than it used to be, and there are differences among carrier that shippers appreciate and are willing to pay for, it and you saw that kind of sea change beginning in the mid-90s, and it continues through good times and bad.

Great answer. I understand and appreciate that.

Judy, just a quick question on the revenue side. Do you think you get to a point where you can I guess break out the regional model or do you think there is too much overlap of the actual assets and network infrastructure that it's too tough to decipher?

We just haven't planned to break that out because that is a part of our business, part of part of our LTL business, and we really feel like that you should observe the growth in that business as you look at our total numbers. We just haven't plan to do even from the beginning do that. We actually have broken out these costs because we think you have a need to understand what's going on with expenses, but it is not our favorite thing to actually have to report on an initiative that isn't fully flushed out and you know, fully implemented across the whole network and then also we still have a lot of work to do in the sales area and with our customer base to grow it.

That makes sense and a quick question, and if I remember over night when they were public for that brief period also had kind of different lines, right, they had the regional intermediate and long haul that kind of give a percentage of revenues that were attributed to each. Is that something you think you can provide?

Well, I think, you know, we have said that our business that's 800 miles or less is about 44, 45% of our business. Actually, the comparison is 45% of our business in the third quarter of '07 compared to 43.7 in the third quarter of '06, so you know, it it has grown, and that's a percentage that we have given in past periods, and we can continue to report on that.

All right, very help. Thanks for the time.

Thank you, Ken.

Your next question is from Ed Wolfe with Bear Stearns.

Hi, Ed.

Hi, Ed.

Ed, your line is open. There is no response coming from that line. (OPERATOR INSTRUCTIONS)

I think that's probably it then.

At this time there are no further questions.

Okay, well we thank you for joining us this morning. We appreciate your interest in Arkansas Best Corporation. This concludes our call.

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