ArcBest Corp (ARCB) 2007 Q4 法說會逐字稿

Good morning. My name is Theres and I will be your conference operator today. At this time, I would like to welcome everyone to the Arkansas Best Corporation fourth-quarter '07 earnings conference call. (OPERATOR INSTRUCTIONS). Thank you. I would now like to turn the call over to Mr. David Humphrey, Director of Investor Relations.

Welcome to the Arkansas Best Corporation fourth-quarter 2007 earnings conference call. We will have a short discussion of the fourth-quarter results and then we will open up for a 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; 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 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 Ms. McReynolds.

Thank you, David. Thank you for joining us this morning. I will begin with an update of our fourth-quarter and full-year results and then I will turn it over to Bob for further discussion of the quarter. I will finish up with some additional items of interest.

Our fourth-quarter 2007 revenues were $459 million, representing a 1.1% per day increase over last year. For the fourth quarter, we reported diluted earnings per share of $0.54 a share, which was very close to the $0.56 per share we reported in the same quarter last year. For the full year 2007, Arkansas Best had revenues of 1.84 billion and that compared to $1.88 billion in 2006. We earned $2.26 a share this year versus $3.16 a share from continuing operations in 2006.

We finished 2007 with a strong financial position. At year end, our cash and short-term investments totaled $173 million. We had minimal debt and our stockholders' equity was $632 million. Our full-year after-tax return on capital employed was at 9.5%.

Moving on to ABF's results for the quarter, ABF reported fourth-quarter revenues of $441 million, which matched that of the revenue total they had in last year's fourth quarter. ABF tonnage declined 1.5% during the quarter, and the fourth-quarter operating ratio for ABF was a 95.5 compared to a 95.3 in last year's fourth quarter.

For the full year, ABF reported revenues of $1.77 billion versus $1.83 billion in 2006. Total tonnage per day in 2007 decreased 5.1% versus last year. And after adjusting for pension settlement expense, ABF's full-year 2007 operating ratio was a 95.1 compared to a 92.6 in 2006.

And now I will turn it over to Bob for some more comments on the fourth quarter.

Thanks, Judy and good morning, everyone. Last year was challenging for ABF. We managed through a period of lower business levels that we first began seeing in October 2006. Throughout the year of 2007, we continued to adjust our system, labor and equipment to match the level of business in the ABF network, and we also maintained our traditional discipline in a competitive pricing environment. Because of the negative operating leverage that resulted from ABF's tonnage decline, and with the impact of the startup investment of our RPM regional initiative, our profitability was below that of 2006. However, in the midst of a difficult period, the ABF team did an admirable job. Though the trade environment continues to be difficult, I'm encouraged by a few bright spots we saw during the fourth quarter. In each month of the quarter, year-over-year tonnage comparisons improved and in December, ABF tonnage was slightly above December of '06. That's also been the case so far in January. These positive trends are despite reduced reliance on spot volume shipments as we moved through the quarter and into January.

We've also seen a similar trend in ABF's LTL weight per shipment. Since October when it was down a couple of percent, it steadily improved and it's been positive in December and so far in January. We believe that LTL weight per shipment is a leading indicator of our business trends. However, until we see a consistent pattern in these statistics, we're cautious about reading too much into them. And I think we should all remember that we are still in a tough environment and the first quarter is typically the worst of the year.

ABF's billed revenue per 100 weight in the fourth quarter increased 2.5% over the previous year. For the full year, it increased 1.9%. This pricing measure continues to be affected by a variety of factors. For instance, because fuel costs were much higher in the fourth quarter than they were in the previous year, some of the yield increase comes from higher fuel surcharge. On the other hand, product mix and profile changes have an offsetting impact on nominal yields. Once again, our success in the regional markets resulted in a reduction of ABF's average haul, which declined by 2.7% during the quarter.

The higher than normal percentage of spot price truckload shipments also reduced our yield, especially earlier in the quarter.

During the fourth quarter, ABF secured average price increases of 2.5% from our most price sensitive customers under contract in deferred pricing agreements. Even in the competitive freight environment, ABF seeks a fair price for the superior service and value that we offer to the marketplace. On February the 4th, ABF will implement a general rate increase of 5.45%. That's an amount and timing that's consistent with others in the industry and, of course, the impact of that increase will vary by lane, profile and customer.

We are encouraged by the progress we are making in the regional freight market as a result of ABF's RPM initiative. The revenue and tonnage growth in these shorter distant lanes continues to be better than those of the remaining business. We're now at a point where the fixed cost investment we made is in place, and we're concentrating on adding new shipments every day. We continue to be fully committed to this initiative, and our success so far confirms that our organic approach with its minimal investment was the right course and will ultimately pay off in significant freight growth with margins comparable to those of our long-haul shipments. This year, we expect to roll out regional service to the remaining Western one-third of the country, and that expansion will require some additional investment of equipment and labor. But other than when we initiate the expansion of RPM to the west, this will probably be the last time I will discuss the regional shipments separately. Moving forward, the superior service that ABF offers in the regional lanes will be a natural and indistinguishable part of ABF's overall value proposition.

Once again, both in the fourth quarter and throughout the full year of 2007, ABF excelled in some areas that benefit our customers and employees and the general public. We finished the year with the best cargo/claims ratio that we've had in over 25 years. Cargo care continues to be an important element of service that distinguishes ABF and it's a critical reason why many of our customers choose us or return to us. We believe that we are the best in the industry in handling shipments without incident and in a claim-free manner.

For the sixth consecutive year, ABF was ranked by Selling Power magazine among the top 10 service companies to sell for. Once again, we were the highest-ranking transportation company on the list. At ABF, we hire the best employees and focus on training to identify ways to meet the individual shipping needs of each customer that we serve, through superior technology and personalized attention. We are better than anyone else at doing the hard things and our customers appreciate our enthusiastic and innovative approach to finding customized solutions to their supply chain requirements.

In the fourth quarter and in all of 2007, ABF's combined costs associated with workers' compensation and third-party casualty claims were below the most recent five-year averages. In the fourth quarter, ABF's DOT recordable accidents per million miles for both road and city improved despite more difficult weather conditions. As you may recall, two of our drivers were recognized as National Champions at the 2007 National Truck Driving Championships, and we won the 2007 Excellence in Security Award from the American Trucking Association. ABF is one of the safest and most secure trucking companies on the highway, and our drivers and cargo handlers are true professionals with a commitment to excellence.

In the fourth quarter versus the same period last year, ABF's collection of receivables improved, and our exceptions on freight bills declined. These are positive results that just aren't typical of a weak week freight environment.

These are just a few examples of what makes ABF different for our customers and for our employees, and they help illustrate how the superb ABF ream can operate even in a challenging environment.

With that, I will let Judy finish up with some additional financial information.

We like to provide you with some information on our cash flows and capital expenditures and some other items you should consider.

Our operating cash flows for 2007 were $143 million, and that included depreciation and amortization of $77 million. Our net purchases of property and equipment totaled $85 million. We purchased treasury stock early in the year for nearly $5 million, and we paid dividends on our common stock of $15 million. As I mentioned to you before, our balance of cash and short-term investments was $173 million at year end. If you would like more details of our cash flows, please look at our press release and note the full detail there.

We anticipate our 2008 net capital expenditures to range from about $60 million to $70 million, and that includes road and city equipment replacements of about $40 million. This range compares to our net capital expenditures in 2007, as I mentioned, of $85 million. The 2008 range is lower than last year's levels because we are replacing fewer road tractors and trailers in light of the freight environment, although we do have the flexibility to buy additional equipment if economic conditions change. We expect our 2008 depreciation and amortization to be similar to what we had in 2007, ranging from about 75 to $80 million.

The revenue figures we are reporting now in our financials reflect a reclassification associated with shipments involving interline carriers and brokerage shipments, where ABF is primarily responsible for providing services to the customer. This revenue was previously reported on a net basis and will now be reported on a gross basis with the expenses paid to the other carriers showing up in purchased transportation expense.

As a result of this, ABF's full-year 2007 revenue increased by $23 million and our full-year 2006 revenue increased by $21 million. These changes had no impact on ABF's operating income and only a slight impact on our operating ratio. We can provide you with a spread sheet with full details of this that shows the effect of this change for previous periods.

Our effective tax rate for 2007 was 37.4%, which is below that of last year's rate, 38.8%. As I mentioned in our third-quarter call, this rate was lower than last year because of our tax-exempt income from our short-term investments and because we recorded a tax credit for the first time in the third quarter for using alternative fuel. Going forward, we expect our 2008 effective tax rate to be in an approximate range of 39 to 40%, which is consistent with recent historical rates. Our actual rate will be affected by our income levels and by the amount of tax-exempt income that we have this year.

During the fourth quarter, we began moving our cash out of option rate securities, which were mostly tax-exempt into shorter-term taxable investments. Currently, we like the liquidity offered by money-market funds.

And now, I think we're ready to take some questions.

(OPERATOR INSTRUCTIONS). Tom Wadewitz.

Good morning, it's Alex Johnson for Tom. I think you mentioned that fuel surcharge contributed to and the pricing yields, but I'm not sure that you specified by exactly how much. Could you do that?

No. We no longer break out fuel surcharge. And we're at a point where that's becoming an indistinguishable part of the yield. There's a substitution effect with other portions of the yield and we mentioned it because fuel prices were up, but I think more and more you ought to start thinking about it as part of the price.

Okay. And then in terms of LTL tonnage X the spot truckload business that you had, can you tell me what the LTL tonnage growth rate was?

We also don't break out LTL and tonnage because we actually measure it in a different way then you would based on how it's rated rather than on shipment size. We gave you the fact that directionally, the tonnage was up and the LTL contributed more than the volume as you move forward in the quarter, and that's all we were trying to make.

Okay, thanks.

Justin Yagerman.

I was pleased to see that RPM didn't have a drag on the O/R this quarter or only had a minimal drag. But as you go through and you expand on the West Coast, and the western third of the country, do you expect that O/R drag to reaccelerate a little bit? And if so, you didn't quantify, but how much of an impact do you think that's going to have on next year's operations or this year's operations?

We're still designing the network, but I think you can expect the impact to be significantly less than what we saw in the Eastern two-thirds of the United States. Because of the distances out there, we will actually be using different operating techniques, more over the road and less real estate investment.

That makes a lot of sense actually. Can you give us a sense of how fast it's growing relative to the overall business or the core business? I know you guys don't want to break it out and consider it part of it, but just generally, two times as fast, three times as fast? Is it comparable? How can we get a feel for how this is transitioning -- what your core business actually is or the length of haul in your core business?

Well Justin, it's obviously growing faster than the rest of the business. That's why the length of haul fell by 2.7%. I guess I would tell you that it is core business at this point.

We are continuing to emphasize it. We are encouraged by the progress we see. We are well short of our growth objectives, but we are encouraged by what we see so far. I won't be more specific than that.

Okay. I guess asked another way that maybe you could answer is, what percentage of your business right now is two days or less?

I think we prefer to answer that in terms of length of haul because that makes more sense. We are continuing to cut our transit times in various lanes, and so when we take three-day lanes and make them two-day lanes, suddenly that percentage increases, but you haven't learned anything. The freight that's under 800 miles is now 46%. In the fourth quarter of '06, it was 44.5%.

And that's in terms of tonnage.

Yes, in tonnage. Exactly. So maybe that gives you a little color.

Yes, that's helpful. Can you remind us again -- the debate has always been whether or not you can run a regional network within a long-haul network. What kind of the philosophy is that's taking place because it seems like you guys are doing this successfully and it's something that a lot of people have argued you can't do.

Well, you may recall that we are -- we have integrated it into the Company. The only difference is the line haul network. The long haul freight goes through hub and spoke operation, and the regional freight goes through what we call next day change points. But the pickup, the sales, the back office the delivery, are all integrated with the rest of the business.

So I think it's -- what's really helped us, Justin, is the fact that we have technology on the street that allows us to identify this freight early in the day. It goes through what we call an optimizer model to essentially redesign the network on a daily basis. And the technology wasn't available before, which is, perhaps, one of the obstacles to doing this, but it's -- it just looks like freight; the only difference is the over-the-road network is different.

Is it the same [P&D] network?

Yes, it is.

Okay. You mentioned that things were positive from a tonnage standpoint in December and so far in January. Can you give a little more color around that, taking us from October through January and what the year-over-year comparisons looked like?

Justin, let me give you the month-by-month in the fourth quarter. October was down 3.9% year over year in terms of tonnage. November was down 0.5%. December was up about 0.3%. And January is a little bit -- trending a little bit better than December.

Got it. Okay. Any update from the pension plans on what the contingent liability is at this point?

We don't have a new update. It will take them some time now that they have closed the year 2007, to do their actuarial valuations and that sort of thing. So we don't have any new information there.

Okay. I guess -- without getting a sense of how much fuel impacted pricing, it would be interesting to hear from you guys how much mix impacted pricing as your mix has shifted. I mean, I would imagine that the shorter length of haul carries a lower revenue per hundredweight, so being up as you were, is that actually a bigger number than what's showing or is a large percentage of that fuel?

I think directionally, we said fuel surcharge increased the nominal yield. Certainly the lower length of haul decreased it. The higher weight per shipment decreased it. I think the freight classification actually failed too, which would have decreased it and it's hard to be more specific than that.

Okay. I can follow up with you on that. And then I just I guess lastly before I turn it over to someone else, have you guys announced a general rate increase? And if so, how much?

I mentioned one a little earlier. 5.45% on February the 4th.

5.4%?

5.45.

5.45 on February 4th. Thanks a lot. Appreciate the time.

Edward Wolfe.

Can you talk a little bit about the tonnage feeling a little bit better? How much of this is just pure easy comps? How much of this do you think it sounds like based on the weight of shipment there is some hope that maybe the demand has bottomed and is improving. And how much of this is you are starting to get some traction in the RPM and it's market share?

To remind you of the comps, fourth quarter '06 versus '05, October was off 7.5. November was off 7.6. December was off 6. So I'm not sure there's that much difference in the comp against that (multiple speakers) previous year. I would say the story is a lot about RPM, which is certainly contributing.

If we look at the non RPM business, is that business tonnage flat up or down right now?

Again, Ed, we're not going to provide those separation details as far as RPM. I think we told you that the RPM as a percentage of total tonnage is 46% versus 44.5% last year, so it certainly grew as a percentage of the whole, which gives you somewhat of a picture of what's happening.

Well that's 800 miles. Could you do that picture for say 300 or 400 miles?

No, I don't have that detail.

Okay. (multiple speakers)

We're just trying to communicate that (multiple speakers)

Certain geographies, certain types of customers that are feeling stronger or weaker than others?

Well, we believe that construction, particularly residential construction, hurt us during the whole year and I don't see a lot of recovery there. We are -- we are seeing some strength in some areas that are kind of surprising, like the upper Midwest, where you would expect to it have been suffering more than average. It's a mixed story.

And our purpose in talking about the monthly tonnage is just basically to give you some direction. I think we would all remember that one robin does not a string make, but there's some encouraging signs.

Well, one of your large competitors seems to be going through some more restructuring after some write-downs. Do you think some of this could be market share as well?

We all swap freight around and we are all out there calling on the same accounts, so I imagine that we got some of their business and they got some of ours.

Okay. Judy, did you give the cost for RPM this quarter?

We commented in the release and I think Bob had in his comments that from a year-over-year standpoint, there is no additional impact on operating ratio.

Okay. And the comment when Justin asked about the rollout in the West was you don't really expect any change or should it get better or worse (multiple speakers)

Well, we will have the additional investment out there, but it will be small relative to what we've already invested.

So if anything, that year-over-year comp should be in your favor as you go out a little bit? (multiple speakers)

Certainly as we continue to grow the business, we would expect that to happen, but again, that means remains to be seen.

Okay. Can you talk -- you had an uptick in the gains on sales of equipment. What is it that you are selling and can you talk about that versus the pricing in the market and why we had this? Is it real estate or is it all rolling stock?

Ed, we -- I think if you look at that figure that we had, about half of it was a real estate (technical difficulty). About half of it related to real estate and about half of it related to equipment. We, as a -- (technical difficulty) hold on one second.

The equipment gains part of that just is a reflection of continuing to sell excess equipment. As I think we've mentioned many times, our equipment tends to sell very well in the marketplace because we maintain it so well. And so we typically have conservative depreciation policies and in a downturn, you're going to have a greater number of units that you are selling both road tractors and trailers and some city equipment; and that's what's included in those numbers. But when I look at those numbers, it's a part of our overall result that we get, and somewhat in an environment that's weaker whenever we have to take those actions.

Is there any near-term more real estate you're aware of that we should think about?

Not that I'm aware of, but we wouldn't have that kind of information that we would give other than just in terms of our total capital dollars. We make decisions all the time as we go through the year on those kinds of things, but nothing specific comes to mind right now.

Okay. It says in the release you're going to be reducing CapEx in '08. Can you talk to that and what kind of tonnage are you forecasting with a reduction in CapEx? And how flexible are you to increase that if the economy picks up?

Well, we are reflecting a reduction in our capital dollar range. I gave 60 to 70 million and that compares to 85 million. The biggest part of this decrease relates to our revenue equipment. We are replacing fewer raod tractors and trailers than we did last year, and really the rest is all pretty similar.

The beauty of our fleet and the way we maintain it is it gives us a lot of flexibility. And we utilize that when we can to address the needs that we have, for the needs that we have at different freight levels. And we certainly recognize the conditions that the economy is in and made appropriate adjustments.

I mentioned in my comments that we have the ability to upsize those orders and we feel pretty good about where we are with respect to that if we see more of an upturn.

One last question on the pricing side. If I just do the math and I look at your fuel surcharge averaging 23.3 versus 16.4 a year ago, that's up 42% and I assume fuel is 10% give or take. We've got about 4% benefit arguably from fuel. The reported yield was up 2.5. There is some mix disadvantages. Or -- how should I think about where real pricing is? Is it positive, negative, flat?

Well, as I indicated earlier, I think increasingly, you have to consider fuel surcharge as part of the price and I certainly believe that as it goes up, it's harder to get core price increases; as it goes down it's easier. And customers tend to look at the overall price of a freight bill. So I think you should increasingly think of it as just one -- as another expression of the overall price. (multiple speakers)

I didn't follow all your math, but I wouldn't want to comment on it.

Okay, I mean I guess the reason we struggle with that is as long as fuel keeps going up that works, but at some point if it doesn't, does that -- until you reset your pricing, there is a lag there I guess.

Do you remember about a year ago when that actually happened and we had this conversation, where I explained that our ability to get a -- more increases on the contracts in -- deferreds -- was related to the fact that fuel had gone down. There is a lag, and you've actually got to go out and do that. But I'm comfortable that when fuel goes down, the general price increases will get easier.

And are you comfortable as you go out this year that contractual rates are more likely to improve versus a year ago, stay relative to where they were or are they going the other direction? How do you think about that directionally?

I'm pretty bad at forecasting and predicting. It's just like we don't really have a good prediction of what the tonnage levels are. We're going to stay on top of things and react to whatever environment we find ourselves in.

Okay. Thanks for the time. I appreciate it.

David Ross.

On pricing environment again, would you say that the pricing environment remains competitive; I think the wording in the text was very competitive. But in January, is it more or less competitive than it was in the fourth quarter? How do you see the market being right now?

David, we don't have any realistic way to assess the pricing environment in January.

Okay. You also commented that you are seeing some strength in the upper Midwest. Is that in general in the upper Midwest or was it more on the regional side than the long haul side?

I was speaking more to the regional success.

Okay. And as far as the spot truckload business goes, you had I guess the bulk of it at the beginning of the quarter. You said it's above-average levels. Would you characterize it then as being more than '06 but maybe less than you had in '05 and '04?

I don't have the comparison against those earlier years. I do remember that '04 was a banner year for it. We did have more in the fourth quarter of '07 than we did in '06, but those percentages declined during the quarter.

Okay. And as far as your fleet is concerned, what's the average age right now in your line haul tractors?

That's in the order of 18 months or so.

Okay.

We still trade on a three-year cycle.

Okay. And last question is just on the teamster negotiations, any update there where you are and any word from the customers about how nervous they are or how much they are sticking with you?

Well, obviously we're not going to comment on the negotiations. We are in negotiations. But we don't have any comment beyond that. We're not seeing any indication of freight diversion at all. We're not hearing about it from customers. In fact, our tonnage is running above what we would expect sequentially in January rather than seeing any decline.

Okay, thank you very much.

John Barnes.

Real quick, the CapEx number that you gave, is that all [sum plussing] and includes any investments you're going to make on the Western regional rollout?

Well, I think Bob mentioned to you before that that probably would be minimal, the Western rollout would be minimal. But certainly we have a range that we presented of 60 to 70 million. And a part of that range would be what we decide to do on real estate investments.

Okay. And then, in terms of headcount additions for that, can you give us an idea of how many more bodies you are talking about as you roll that Western expansion now?

We're continuing to put together the operational plans. Again, I will tell you that it will be smaller in relation to the total, and that's about all I can add to it.

Okay, very good. And lastly on pricing, when we visited with you guys, back in December, there were some comments made that you felt like this was probably the most rational pricing environment you had seen given a downturn in the economy. Do you still kind of believe that, that LTL pricing has held up better in this downturn than it has in prior ones? Or do you think it's gotten more severe here lately? Or just trying to gauge your view on just industry pricing and how you fit into that.

Well, I think it's fair to say that '07 was tougher than '06, but it's also clear that if you provide a service that's differentiatable and then charged for that, you can be successful. And I think that's our story, is that this is really not a commodity market. This is a market where differences matter, and I've talked about a few of those things.

And the reason I mentioned those things is to make a point that trucking services vary and we do a good job on things that matter to customers and they are willing to pay for it.

Okay. On the regional business, just the growth there. As you look at it thus far, where is the growth mostly coming from? Is it selling that original product into your existing customer base? Has that been the bulk of the growth thus far? Or are you capturing incremental new customers as a result? And is that -- and I'm trying to gauge which is kind of contributing the bulk of the growth at this point.

We began with existing customers. That's where the early success came. Now we are seeing some newer customers, but I just tell you again while we're encouraged by the results, we are far from having spectacular results. And we are far from what our market share goals are.

Okay.

We're seeing acceptance first with the existing client base and now we've got a story to tell to some new customers.

Okay. And then in terms of not breaking out kind of regional versus the historical core business, is the reason when you sell into an existing customer, does it just become more and more difficult to discern really what's being sold into the regional network and what's being sold -- obviously there's probably going to be a little bit of cannibalization of that business as it moves around some. Does it become too difficult to separate out the freight types by the product?

First of all, I don't think, if I understood your comment correctly, I don't think there is any cannibalization of all. In fact, if anything, there is some synergistic effect. The fact that we can serve regional markets now makes us attractive for -- as a long haul provider -- for some customers.

But I think the whole point that we've been making is that at some point, and I think perhaps we're there, ABF provides LTL services for the North American continent. And we are -- we think it's no longer material to carve out a regional piece of business and talk about it. There was a story there because we spent money on it last year and we thought it should be disclosed because it was affecting our results. But going forward, we provide 50-state service, and that's just kind of -- it's LTL trucking from now on.

Okay very good. Thanks for your time, guys.

Ken Hoexter.

It's Ken Hoexter from Merrill. If I can just jump into a question on the -- I know you don't want to comment on the union negotiations, but if I look at UPS, the decision to withdraw from the pension plan seemed to separate than the actual negotiations. So just using that as a model, I just want to know is that something that is still on the table? Or is that something that's been pulled off because I've just heard conflicting things in the market.

We're not going to comment on the negotiations, Ken.

But can you comment if it's even something that's still on the table or --?

Ken, we're not going to comment on the negotiations.

Okay. And then on the regional model, I think you mentioned, Bob, in your discussion that you thought it would get the same margins as the long haul business. I just wanted to kind of follow up on that. Is that kind of what you are -- aren't your peers kind of seeing a bit better margins, or is that tied more to your union agreements as far as the costs?

No. From what we see so far, we -- we are running some light loads and when you factor that out, I don't see any reason why the margins will be distinguishably different in the long haul. It won't be exactly the same, but I also don't think it will be materially different.

Okay. And then, in the past, I think you had noted that in your quarterly and annual filings, your K's, that you've made profits on the fuel surcharge. Do you still feel that way since you don't break them out, out of revenues? Can you talk about that?

Ken, I don't think that's what we said. I think what we said was that if you take the isolated category fuel line and if you take the fuel surcharge change, there's a difference. But fuel, the higher energy costs are spread all throughout the Company in a lot of lines that don't split out separately. And it's very difficult to analyze. We are -- because of higher fuel prices, we are paying our salesmen higher car allowances. How do you factor that in? We are seeing higher utility bills. We are seeing a host of higher costs and it becomes a real accounting challenge to try to spread it all out. And at the end of the day, it doesn't really matter.

Right. It's still all revenue. And my last one is on -- I just want to understand though -- on a customer's bill, when you talk about the fuel surcharge, it is still a separate line item. You are just choosing not to inform us as far as what percent that fuel is. You are saying we should look at a price because that's a negotiation with the customer. But you still break it out to the customer?

In some of our markets. In fact, in most of our markets, we do. In some of our markets we do not. For a general LTL trucking services, you will find it as a separate line item. And that's good for customers. When it fuel prices go up, that goes up, but when fuel prices come down, it automatically comes down. And we think that that's the fair way to account for the higher fuel costs. I think it would be a real problem for customers if the higher fuel costs were baked into the base price because when fuel prices went down, customers would not get that automatic benefit.

I fully understand that. I guess what's confusing meet is I thought in your discussions with a prior analyst, you were saying that there would be the benefit that even when fuel prices came down, you would be able to show I guess the core pricing gains.

That's true. The customer looks at the bottom line. The point of this, Ken, is the customer looks at the bottom line, and when fuel prices come down, our ability to get general rate increases will go up. Now it won't be one for one, but there will be some ability because there is some substitution effect there.

Understood. Great job. Thanks a lot.

Tom Albrecht.

Let me just get a couple of numerical clarifications and then I want to ask a couple of bigger picture questions. First off, what was the actual length of haul? I heard a 2.7% decline, but did not get the actual numbers. And I'm just interested in the fourth quarter.

It was 1150 in the fourth quarter.

Okay. And actually, might as well fill in the full year '07, '06.

Tom, what we have in front of us is really just the fourth quarter; so fourth quarter '06 would be 1180.

Okay. All right. And then I know rail usage has been coming down, but what was the approximate amount during this year's fourth quarter and last year's fourth quarter?

We utilized 12.9% of our miles on the rail this year's fourth quarter versus 14.2 last year.

Okay. All right. And then, Bob, just sort of an industry question. Your GRI of course takes effect February 4th. If you go back a decade or so ago, the industry was still locked into GRIs that were in the first quarter. And the industry came to realize how foolish that was because you discounted away in January/February and somewhere in the mid '90s, GRI started to be put in place in September and then it became August. And the last decade has been about a month earlier every year. And here we are, we've come full circle. Industry GRIs are back in the first quarter. During a still slow period, you've got an annual wage increase that goes into effect April 1st. Why is the industry doing this again?

Well, Tom, I guess I would say that while what you said is historically true, our industry has different players and perhaps a little different discipline than it had, so I wouldn't automatically expect the same results.

As far as timing, ABF is not a price leader in the industry. We suffer the same cost increases that other carriers do. I think there's no secret that we are paying substantially more for our equipment than we have in previous years, and those are -- a lot of other things impact our bottom line. Other carriers are feeling those same cost increases. I think that there is not an appetite to delay recovering some of those cost increases.

And I realize you have to respond to what others are doing. It just seems like waiting till April or May when you are past the seasonally worst quarter and this is directed at the industry, you still have a better chance of hanging onto those -- more of those GRIs than putting them out in February. That's just my $0.02 worth.

Yes, I would agree that 20 years ago that probably was true. I don't think it's necessarily true now. I think with our most price sensitive customers, we did a pretty decent job in the fourth quarter in getting increases. And I think shippers understand that cost increases are out there. We're starting to see numbers in the general economy that we haven't seen in many years, and I think there's a realization of that. I'm not too worried about retaining this increase.

Okay, okay. And then, Judy, can you refresh my memory on the financing that you have in place? I think your full credit facility is about $350 million, but you have the ability to raise that quickly to $550 million if you were to move forward with a pension buyout. First of all, are those accurate numbers? And then any thoughts on how you might bridge the last couple hundred million? I'm sure you'd use some of your cash for part of that, but let's say you financed or had to do a $700 million price tag out of the $850 million.

Tom, your numbers are close to accurate on the credit agreement. The agreement is $325 million. And really I can't comment. We're not commenting on negotiations or terms or anything really associated with that at this point.

Okay. How about factually though? Don't you have the ability to just with a phone call raise that by $200 million from $325 million?

Well, I think it requires approval and a willingness by the participating bank.

Okay. And what's the rate on that? Is that LIBOR plus what?

It's about 30 -- I think it's about 30 bips -- 30 basis points.

All right. And I don't want this to be taken the wrong way, but it seems to me even though it's encouraging that you are finding a bottom with freight volumes, if you were a little bit more positive, wouldn't you probably have CapEx about flat year over year rather than down? Or is that just prudent here at the beginning of the year, given all the mixed signals with the economy?

I think the story that Judy was telling you is that we have considerable flexibility to expand the fleet if we find our self in that environment.

I think I would point you back to 2004, where there was just a dramatic surprising increase in tonnage available and we managed. We got all of that freight on system and delivered. And if we find ourselves in that environment, we will be able to do that again this year. But I think we are managing the labor force and the equipment fleet in the current environment and I think the numbers that we're talking about in the CapEx reflect the current environment. If business gets better, we have considerable flexibility.

Okay. Bob and Judy, thanks for the color.

At this time there no further questions.

Okay. Well, we thank you for joining us this morning. We appreciate your interest in Arkansas Best Corporation and that ends our conference call.

Mr. Humphrey?

Yes?

Mr. Hatfield just came in. Is it okay to take that question?

I think not. We will just end the call at this point.

Okay, thank you.

Thanks.

You're welcome. This concludes today's Arkansas Best Corporation fourth-quarter '07 earnings conference call. Thank you for your participation. You may now disconnect.